By the numbers
Q4 net sales for flexibles: $2.77B
Down 6.4% year over year; full-year sales were flat at $11.15B
Q4 net sales for rigids: $897M
Down 4.8% year over year; full-year sales rose 4.3% to $3.54B
Q4 net income: $184M
Up 64.3% year over year; full-year net income rose 30.2% to $1.05B
- Fiscal Q4 readout: In the recent quarter, Amcor’s volumes were at the lower end of its expected range, down 7%, CEO Ron Delia said on Wednesday’s fiscal Q4 and full-year earnings call. Amcor pointed to a mix of effects from inflation, destocking and lower demand. Delia said that the greatest sequential declines continue to show up in North America and Europe.
- Destocking: Amcor particularly felt destocking effects in the second half of its fiscal year. Volumes in all regions were impacted by that and slower demand, particularly in North America, said CFO Michael Casamento. Some categories affected by customer destocking include premium coffee, protein and healthcare. Delia explained that of a 7% drop in volumes during the quarter, the company estimates about two-thirds of the decline could be attributed to “the market and our customer performance,” with the remainder attributed to destocking — “that will have less of a negative headwind on our growth rates going forward,” Delia said.
- Cost-cutting: Delia said the company attained more than $200 million in annual cost savings through “a reduction” of more than 1,200 full-time employees. Structural initiatives, including plant closures, are projected to result in $35 million in savings during FY 2024 and FY 2025. Demand remains depressed, so there are opportunities to do more plant closures, Delia said, although “we want to make sure that we’ve got the productive assets available when demand normalizes.”
- M&A and other spending: Amcor anticipates spending $70 million on stock buybacks in FY 2024. Casamento said that the company now is allocating a bit more spending to M&A; Amcor has been pursuing smaller deals recently, including four in the last 12 months, such as the $20 million play for Phoenix Flexibles in India announced last week. “They’re all of the small variety and single plant deals,” Delia said. “I think sellers are more likely to bring things to market now than they would have been, let’s say, two years ago. So the pipeline is relatively robust.”
- Guidance: Delia said that in FY 2024, the company does not expect the “challenging market dynamics we’ve seen in the last two quarters to meaningfully improve in the near term,” and he foresees volume declines in the first half. Amcor’s guidance does not assume improved demand. Guidance for the fiscal year ending June 30, 2024, expects adjusted free cash flow to grow over FY 2023 to between $850 million and $950 million.
- Outlook: Amcor expects a negative impact of 3% related to the December 2022 sale of its three plants in Russia. The second half of the fiscal year will then face weaker volume comparisons. “While it’s more difficult to predict consumer demand, we do expect customer inventories will have largely normalized by the time we enter the second half of the fiscal year,” Delia said.
