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By the numbers
Flexibles net sales: $2.57B
Down 7.6% year over year
Rigids net sales: $875M
Down 6.2% year over year
Q4 net income attributable to Amcor: $152M
Down from $232M in Q1 FY2023
- Q1 readout: Amcor saw year-over-year business declines in line with its expectations in the first quarter of its fiscal year 2024, which ended Sept. 30. During an earnings call Tuesday, CEO Ron Delia discussed “continued weak consumer demand and ongoing customer destocking,” while striking a more positive tone for the second half of the fiscal year.
- Pricing: Amcor’s pricing strategy “has been first and foremost to compensate for inflation,” Delia said, as inflation has inflicted cost pressure for the past 12 to 18 months. The company has prioritized price and inflation recovery over volume, Delia said. “The rate of inflation has eased and so our pricing, the pace of our pricing, will ease as a result.” Going forward, industry pricing changes will hinge on inflation, Delia added. Over the years, “it's been an industry that [has] compensated for inflationary cost pressures and I think that's kind of where we're at right now.”
- Destocking: During the quarter, customer destocking, or inventory reductions, across regions came in tandem with lower consumer demand. Amcor attributes one-third of total volume declines in the flexibles business to destocking — similar to the previous quarter — with affected categories including protein, coffee, liquid beverage and healthcare, and particularly medical devices. The company expects the trend will abate in the second half of its fiscal year.
- Cutting costs: On the previous quarter’s earnings call, executives discussed more than $200 million in annual cost savings through “a reduction” of more than 1,200 full-time employees. They also projected that structural initiatives, including plant closures, would result in $35 million in savings during FY 2024 and FY 2025. Delia reported Tuesday that such cost actions “actually accelerated” in the first quarter, and earnings leverage improved, Delia said.
- M&A: Amcor expects to continue to do bolt-on deals. Over the past year or so, the company has done four small deals, Delia said. “A lot of the value that comes out of those deals is cost synergies. I think that's where most of the value is going to come from in this, particularly in this type of environment, and we're going to be active participants in the M&A space,” he said.
- Outlook: Amcor reaffirmed its fiscal 2024 guidance. It expects between $850 million and $950 million on the year ending June 30. Adjusted earnings per share in the first half of the fiscal year are expected to be down by a mid-teens percentage versus the same period the year prior, due to lower volumes and “residual headwinds related to the sale of the Russia plants and higher interest expense.” The situation is expected to improve in the second half of the fiscal year, when adjusted EPS is expected to be up year over year by a mid-single digits percentage. The company expects to see improved earnings leverage stemming from “price and cost actions taken in fiscal 2023 and 2024.”
