Shares punished as Amcor profits rise on sales slip

The suits were unimpressed with packaging giant Amcor achieving a 3.1 per cent increase in its half year EBIT over the same time last year, on sales that slipped by 3.8 per cent in the six months to December, punishing its share price.

On the results CEO Ron Delia signalled the company is “Investing in our core business, paying a compelling dividend, buying back shares, and growing through acquisitions.”

In constant currency terms EBIT was even better at 4.4 per cent more than last year, with sales down by 2.4 per cent. Net sales for the six months came in at $6.18bn, with a $699m EBIT.

Both flexibles and rigid plastics were down in net sales, flexibles coming in at $4.85bn, rigids at $1.34bn, but EBIT to sales ratio increased from 10.6 per cent in the corresponding period last year to 11.3 per cent this time around.

The results prompted the company to improve its outlook for the full year, Amcor is expecting EPS growth of between 7 per cent and 10 per cent for the full 2020 fiscal year – it was previously a range of 5-10 per cent.

The share market though was not so impressed, the Amcor stock price dropping by 7 per cent back down to its $15.20 price of a year ago, after a stellar four month run since the beginning of October saw it rise by 20 per cent from a year low of $13.60.

The integration of the US flexible packaging outfit Bemis which Amcor bought in June last year continues and has contributed to the half-year results. The acquisition was finalised in June.

Amcor CEO Ron Delia said the integration of the Bemis business is “on track” and the business has achieved mid-single digit organic growth in addition to the delivery of synergy benefits.

“We are making very good progress capturing synergies with momentum building ahead of our initial expectations, and we are excited by the opportunities for the combined business as we look ahead,” Delia said

“With over $1bn of annual free cash flow, we are well placed to generate strong returns for shareholders.” Amcor has already spent $223m on a share buyback strategy, and will take that to $500m in the coming year.