10-QPeriod: Q3 FY2023

Amcor plc Quarterly Report for Q3 Ended Mar 31, 2023

Filed May 3, 2023For Securities:AMCRAMCCF

Summary

Amcor plc (AMCR) reported its third-quarter results for the fiscal year 2023, showing a net sales decrease of 1% to $3.67 billion for the quarter, largely influenced by the pass-through of raw material costs and currency impacts, though underlying sales showed a modest increase. Net income attributable to Amcor plc declined by 34% to $177 million, primarily due to lower gross profit, increased restructuring costs associated with the 2023 Restructuring Plan, and higher interest expenses resulting from rising interest rates. For the nine-month period, net sales increased by 4% to $11.02 billion. Net income attributable to Amcor plc saw a significant increase of 25% to $868 million, bolstered by a substantial pre-tax net gain of $215 million from the sale of its Russian business and lower income tax expenses. However, this was partially offset by a decrease in gross profit and higher net interest expenses. The company continues to navigate inflationary pressures and supply chain challenges, while also executing strategic initiatives like the 2023 Restructuring Plan and managing its capital structure, including share repurchases and debt management.

Financial Highlights

53 data points
Beta

Revenue

$3.67B

18.4% Gross Margin

Net Income

$177.00M

4.8% Net Margin

EPS (Diluted)

$0.59

Total Assets

$17.28B

Cash & Equivalents

$564.00M

Free Cash Flow

$184.00M

Financial Statements
Beta
Revenue$3.67B
Cost of Revenue$2.99B
Gross Profit$673.00M
R&D Expenses$27.00M
SG&A Expenses$317.00M
Operating Income$282.00M
Interest Expense$86.00M
Net Income$177.00M
EPS (Basic)$0.60
EPS (Diluted)$0.59
Shares Outstanding (Diluted)295.20M

Key Highlights

  • 1Net sales for the third quarter decreased by 1% to $3.67 billion, impacted by raw material cost pass-through and currency headwinds, though underlying sales showed a 1% increase.
  • 2Net income attributable to Amcor plc for the quarter decreased by 34% to $177 million, driven by lower gross profit, increased restructuring costs, and higher interest expenses.
  • 3For the nine-month period, net sales increased by 4% to $11.02 billion.
  • 4Net income attributable to Amcor plc for the nine months significantly increased by 25% to $868 million, largely due to a $215 million pre-tax gain from the sale of the Russian business.
  • 5The company recognized $50 million in restructuring and other related activities in the third quarter, primarily related to the 2023 Restructuring Plan.
  • 6Interest expense more than doubled to $86 million for the quarter and increased by 95% to $224 million for the nine-month period, driven by higher interest rates on variable debt.
  • 7Amcor completed the acquisition of MDK Packaging Materials Co., Ltd. in China during the quarter, bolstering its medical device packaging capabilities.

Frequently Asked Questions

The primary reasons for the 34% decrease in net income attributable to Amcor plc for the third quarter were a $58 million decrease in gross profit, an increase of $41 million in restructuring and related costs (primarily due to the 2023 Restructuring Plan), and a $50 million increase in net interest expense due to higher interest rates on variable debt. These factors were partially offset by a $38 million decrease in income tax expense and a $9 million decrease in selling, general, and administrative expenses.

The sale of the Russian business significantly boosted the nine-month results, contributing a pre-tax net gain of $215 million. This gain, combined with lower income tax expenses, led to a 25% increase in net income attributable to Amcor plc for the nine-month period, reaching $868 million. Without this gain, the overall profitability would have been considerably lower due to increased interest expenses and other operational challenges.

Amcor continues to experience intermittent supply shortages and price volatility for resins and raw materials due to inflation impacting energy, fuel, and labor costs. While the company is working to mitigate these effects through supplier and customer collaborations, cost-saving initiatives, and passing through raw material costs, there's a potential time lag in realizing benefits, and no assurance that these measures will fully offset ongoing inflation. Rising interest rates also increase borrowing costs.

In the third quarter, the Flexibles segment saw net sales decrease by 2%, with Adjusted EBIT down 11%, impacted by unfavorable volumes and increased plant costs, despite favorable price/mix. The Rigid Packaging segment experienced a 1% increase in net sales but a 10% decrease in Adjusted EBIT, also affected by unfavorable volumes and inflation on operating costs like energy and labor.