Amcor (AMC) This morning, the world’s largest consumer packaging company announced its results for the half year of 2024, which came in above market consensus due to a more challenging macroeconomic environment. The HNW Portfolios have a 4.5% weight to AMC.

Key Points:

    • Profits Down: First-half earnings were down 10% to US$0.313, driven by lower volumes in the half from selling their Russian plant and continued destocking in North American beverages and pharmaceuticals. Volumes for both Rigid and Flexible packaging fell by 9%. Still, volume growth and macroeconomic conditions are set to improve in the second half of 2024 after rolling off the now-divested Russian plant sales, which now look in 2024 to be a genius move that netted €370 million vs the zero that other Western companies received for their assets.
    • Strong Second Half Catalysts: Amcor is turning a corner going into the second half as it is set to benefit from a $35 million structural cost initiative and further cost optimisations regarding operating and overhead costs. Amcor has guided to mid-single-digit growth in both volumes and earnings per share as they cycle off volume declines from selling 3 Russian packaging plants.
    • Passing on Raw Material Costs: During the first half, AMC gave back $85 million in raw material savings (aluminium & resin) to customers. This is a small amount of savings to give back to customers after passing on over $1.1 billion of raw material cost inflation last year and reflects the nature of AMC’s contracts with their customers.
    • Dividend: AUD$0.39 for the first half, representing a +5.4% increase in the dividend for Australian investors benefiting from a weaker AUD.
    • Guidance: AMC reaffirmed their full-year 2024 earnings guidance of 67-71 US cents per share, with $850-950 million in adjusted free cash flow.

Portfolio Strategy: Amcor is the largest global packaging company with operations in 43 countries. While packaging is not the most exciting of industries, Amcor exposes the portfolio to global growth in consumer and medical goods and manufacturer demands for increasingly sophisticated packaging. 95% of AMC’s customer base is in consumer staples, such as packaging for meat, cheese, sauces and condiments, beverages, coffee, pet food, healthcare and personal care products, all of which have stable defensive characteristics. AMC trades on a PE of 13x with a full-year dividend yield of 5.5%, which is cheap for a high-quality company and a discount to the wider ASX.

Amcor finished up +1.2% to $14.49.