Global packaging major Amcor has raised the outlook for the financial year ending June 2021 after it reported a net income of $684 million, up 58% year on year in the nine months ending March 2021.
For the twelve months ending June 30, 2021, the company expects adjusted constant currency EPS growth of approximately 14 to 15% (previously 10 to 14%), compared with adjusted EPS of 64.2 US cents per share in fiscal 2020.
Amcor’s guidance contemplates a range of factors, including the COVID-19 pandemic, which creates a higher degree of uncertainty and additional complexity when estimating future financial results. However, Amcor said its business had demonstrated resilience, given that it plays a vital role in the supply of essential consumer goods.
“While this is expected to continue, the level of earnings and free cash flow generated across the business could be impacted by COVID-19 related factors such as the extent and nature of any future operational disruptions across the supply chain, government-imposed restrictions on consumer mobility, and the pace of macroeconomic recovery in key global economies. The ultimate magnitude and duration of the pandemic’s future impact on the business remain uncertain at this time,” it said.
The strong performance of Amcor in the nine months
The nine months net sales for the Amcor Group of $9,407 million were 2% higher than the same period last year on a comparable, constant currency basis. Overall year-to-date volumes were 2% higher than the same period the previous year.
The flexible business nine months net sales were 1% higher than the prior period, driven by higher volumes. “Year to date segment volume growth of 1% reflects strength across a broad range of end markets, partially offset by an unfavorable impact from lower volumes in certain healthcare end markets driven by fewer elective surgeries and lower prescription trends during the COVID-19 pandemic,” the company said.
The rigid packaging business nine months net sales were 7% higher than the prior period. Additionally, overall year-to-date volumes were 4% higher than the prior period, with growth in both North America and Latin America, Amcor said.
In North America, year-to-date beverage volumes were 7% higher than the prior period, with hot-fill container volumes up 13%. The company said consumer demand has continued to be strong, particularly in hot-fill juices, hot-fill ready-to-drink tea, and hot-fill sports drinks.
“Strong consumer demand reflects higher at-home consumption of packaged beverages supported by higher retail sales in multi-pack formats across a range of product categories. Growth was also driven by brand extensions and the introduction of new health and wellness-oriented products in PET containers. Specialty container volumes were also higher than the prior period with growth in certain categories including spirits, personal care, and home cleaning,” it said.
Bemis cost synergies
Amcor acquired the Bemis flexible packaging business through an all-stock transaction in June 2019. Amcor said it has continued to execute well against overhead, procurement, and footprint initiatives and has delivered approximately $55 million (pre-tax) of incremental cost synergies year to date. Of this amount, approximately $45 million was recognized in the flexibles segment and $10 million in others.
Amcor expects incremental cost synergy benefits of approximately $70 million (pre-tax) in fiscal 2021, which is unchanged from previous guidance. Combined with the $80 million delivered in fiscal 2020, cumulative cost synergies of approximately $150 million (pre-tax) will result at the end of fiscal 2021 and leaves the business well-positioned to deliver at least $180 million (original target) by the end of fiscal 2022.
