Earnings Highlights

Amcor Q2 Earnings Call Highlights

Wed 05 Feb 25, 9:41am (AEDT)
industrial packaging

Amcor (ASX: AMC) shares hit a one-month high after reporting a largely in-line Q2 result and full-year guidance.

Q2 Earnings Summary

  • Net sales flat at US$3.24bn but a 2% miss against consensus

  • EBITDA flat at US$453m and 2% below consensus

  • Underlying NPAT up 3% to US$233m and in-line with consensus

  • Dividend of 12.75 US cents per share is in-line with Q1 and consensus

  • Net debt was US$6.4bn, leverage at 3.3x

  • FY25 guidance reaffirmed, including EPS guidance of US$0.72-0.76, representing 3-8% growth on a constant currency basis

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Earnings Call Highlights

The below topics have been answered by CEO Peter Konieczny and CFO Michael Casamento.

1H25 earnings: “Q2 results were in line with expectations we set in October as we continued to execute and deliver across key financial metrics. We are pleased to report our fourth consecutive quarter of sequential volume improvement and a return to sales growth, albeit marginal.”

Q2 performance: “Margins also continue to improve, helping drive a 5% increase in both adjusted EBITDA and EPS on a comparable basis.”

Segment performance:

  • Flexibles: “Q2 volumes were up 3% compared with last year, reflecting ongoing solid growth across all key geographies and a number of important end markets.”

  • Rigid Packaging: “The Rigid business continues to advance its performance, and the trajectory of overall segment volumes improved for the fourth consecutive quarter.”

Divestiture: “Berry's recent divestitures of its HHNF and Tapes businesses have significantly enhanced their product mix while reducing cyclicality.”

Consumer demand comments: “Overall, volumes grew by 2.3%, improving on the first quarter and offsetting an unfavorable impact of price mix. As expected, destocking continued in healthcare, and demand remained soft in the North American beverage business.”

Outlook: “This solid performance, along with our confidence in the second half, leaves us on track to deliver against our full-year guidance, which we are reaffirming again today.”

Volume performance and guidance: “We continue to assume overall volumes will increase in the low- to mid-single-digit range for the year, with trading performance through January in line with this expectation.”

Integration with Berry: “We are focused on building our teams, filling key roles, ensuring we’ll make a fast start upon close with clearly defined plans for the first 100 days, in line with our proven integration playbook.”

Berry acquisition comments: “Including synergies, this combination is expected to deliver significant cash EPS accretion of over 35% and annual cash flow in excess of $3 billion.”

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Analyst Q&A Highlights

Do you expect divestitures to impact synergy targets or timelines? Are they likely to involve Berry or Amcor assets: “With the combination with Berry, we have embarked on a work stream that essentially puts the whole portfolio on the table… It’s a little early for us to say where we land and what we’re going to do… I’m not sure it will have an impact on accelerating synergies. I think it’s really just about organic growth and making business more attractive in terms of margin quality.”

Has consumer demand changed, and do you see price/mix improvements in Flexibles?

  • “We always talk about the consumer demand sort of in the range of being flat to slightly down, and that is essentially what we’ve seen now… We are up in the second quarter versus the first quarter. And sequentially, we’ve almost seen a 1-point growth between Q1 and Q2. Flexibles is up 3%. Rigids is up overall 1%.”

  • “As healthcare is improving, we are going to see an improved mix exposure in the back half. We’re also pretty confident that healthcare will overall return back to growth.”

What is the volume and EBIT outlook for Flexibles, and how is it tracking into Q3?

  • “We’re confirming the volume guidance of low- to mid-single digits for the full year, and that’s across the categories that we see, so Flexibles and Rigid.”

  • “We continue to see good leverage through the P&L from that volume improvement to the EBIT improvement. And as we said earlier, we’re still trailing a bit of negative mix, particularly on the healthcare side of things. So that will certainly improve.”

What is the latest outlook on raw material costs and the impact of tariffs?

  • “The first half was really pretty benign… actually, the raw material number for the first half was flat… Q2, again, was a similar trend to Q1. It was a little bit of pop through in Q2, but less than 1% in the top line and no impact in the earnings.”

  • “Our business is very regional … so we don’t really see a lot of impact on our business just because of the regional or local nature from any tariffs impacting the cost base.”

How does Berry globalise Amcor’s rigids business: Our rigids business… is about a $3 billion business. And the Berry business has a containers and closures business, which is about a $7 billion business. Hence, the combination will get us to a really scaled player and multi-regions.

How should we think about the first-half/second-half earnings split and confidence in second-half performance?

  • “We’re basing the phasing on the historical average … as we've exited the first half, we're right in line with our expectations, volumes in that low single-digit range. And the margins were continuing to expand. And we saw the EPS growing at 5%.”

  • “The second half [will see] low-single-digit to mid-single-digit volume growth, that’s going to be a key driver… we don’t need a lot of volume improvement to really see strong leverage through the P&L, particularly in Q4, where the cost base is well covered off.”

  • “We're expecting the mix improvement in the second half as a result of the healthcare business returning to growth and lapping that peak period of destocking last year.”

This article was generated with the support of AI and reviewed by an editor.

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