Net profit at the world’s biggest packaging business, Amcor, fell by almost 60 per cent in the first half of the financial year, leading to the company axeing 2000 jobs, about five per cent of its workforce, as it seeks to reduce costs.
Volumes dropped by a record-breaking ten per cent, as Amcor saw its sales figures fall by nine per cent to US$6.69bn, from US$7.35bn in the same period last year, while net profit fell to US$286m, down from US$691m in the prior corresponding period.
The company's share price in morning trade on the ASX rose by 4.75 per cent to $14.92, its highest number in six months, with investors buoyed by CEO Ron Delia’s confidence that the company would deliver on its full year guidance and growth intentions. Amcor’s share price had fallen by 15 per cent in the past 12 months.
Delia said, “We will continue to invest in the business for organic growth, including in faster growing, higher margin markets, pursue acquisitions and return cash to shareholders through a compelling and growing dividend.” The quarterly dividend to December increased to 12.5 cents, and $30m worth of shares were repurchased.
Amcor already has a stake in ePac, the world’s biggest and fastest growing short-run and on-demand digital flexible packaging producer.
For the half year, EBITDA was down by eight per cent, EBIT by ten per cent, and net income by 17 per cent. Delia said the market conditions were “challenging” and said continued post-Covid destocking was accelerating, particularly in healthcare, with demand “remaining soft” as customers work through the high inventories they built up during the pandemic to ensure they would be able to supply product. Cost-of-living pressures were sending consumers to value-pack beverage cans rather than Amcor's PET bottles.
Flexibles sales dropped by ten per cent to US$5bn, while Rigids were down by seven per cent to US$1.66bn. In Flexibles, healthcare, meat and beverage packaging all dropped, while it seems consumers turned to comfort food, with snacks, confectionery and condiments all up. Rigids saw a significant drop in beverage volumes. Amcor is not expecting a strong rebound in volumes.
Delia said, “Second quarter volumes were slightly lower than we anticipated. Against this backdrop our teams responded by proactively taking actions to further reduce cost.
“We have seen volumes improve in January relative to the first half, and we expect the business to build momentum in the second half. Confidence in our earnings outlook is based on known second half benefits related to the elimination of earnings headwinds from the sale of our Russia business, a lower interest expense headwind, and our structural cost reduction and productivity initiatives.”
Amcor’s interest bill rose by US$35m to US$153m on higher interest rates. The company’s tax rate stayed at 18 per cent, although the actual amount paid dropped by 22 per cent to US$99m on its lower results.
Now that it has exited Russia, Amcor has 210 factories in 43 countries.