01—Abstract
Summary
Summary of the 10-Q filed November 1, 2023. Cited figures are marked; the original filing is the authoritative source.
Amcor plc (AMCR) reported a decrease in net sales and net income for the third quarter of fiscal year 2024 compared to the same period last year.
Net sales declined by 7% to $3,443 milliona, primarily due to unfavorable volume changes and the pass-through of lower raw material costs, partially offset by price/mix benefits and positive currency impacts. Net income attributable to Amcor plc fell by 34% to $152 million, impacted by lower gross profit, increased restructuring expenses, and higher net interest expense due to rising interest rates. The company is navigating a challenging market characterized by continued customer destocking, soft consumer demand, and inflationary pressures.
Management is focused on price and cost actions to mitigate these headwinds and expects performance to improve in the latter half of fiscal year 2024. Despite the current headwinds, Amcor maintains a strong liquidity position with significant undrawn credit facilities and believes it has sufficient resources to fund operations, capital expenditures, and shareholder returns.
02—Key points
Key Highlights
- Net sales decreased by 7% to $3,443 million for the three months ended September 30, 2023, compared to $3,712 million in the prior year period, driven by a 6% unfavorable volume and the pass-through of lower raw material costs.
- Net income attributable to Amcor plc decreased by 34% to $152 million ($0.105 diluted EPS) compared to $232 million ($0.155 diluted EPS) in the prior year period.
- Gross profit margin improved to 18.7% from 18.0%, driven by favorable price/mix and better operating cost performance, despite the overall decline in gross profit.
- Restructuring and related expenses increased significantly to $28 million from $1 million, primarily due to the ongoing 2023 Restructuring Plan.
- Interest expense rose by 44% to $85 million from $59 million, reflecting higher interest rates on the company's variable rate debt.
- The company has a strong liquidity position with $1.0 billion in undrawn credit facilities and $6.6 billion in net debt as of September 30, 2023.
- Amcor completed a small acquisition in India for $14 million, adding to its Flexibles segment, and continues to manage its business through challenging market conditions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Amcor plc kept $0.04.
- Revenue$3.44B100.0%
- Cost of revenue−$2.80B81.3%
- Gross profit$645.0M18.7%
- Operating costs−$375.0M10.9%
- Operating income$270.0M7.8%
- Interest, other & tax−$118.0M3.4%
- Net income$152.0M4.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed November 1, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.44B$3.71B | −7.2% |
| Cost of Revenue | $2.80B$3.04B | −8.1% |
| Gross Profit | $645.00M$668.00M | −3.4% |
| R&D Expenses | $27.00M$25.00M | +8.0% |
| SG&A Expenses | $302.00M$302.00M | 0.0% |
| Operating Income | $270.00M$342.00M | −21.1% |
| Interest Expense | $85.00M$59.00M | +44.1% |
| Net Income | $152.00M$232.00M | −34.5% |
| EPS (Basic) | $0.52$0.78 | −32.7% |
| EPS (Diluted) | $0.52$0.77 | −32.3% |
| Shares Outstanding (Diluted) | 287.80M297.20M | −3.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of Amcor's revenue decline in the third quarter?
Amcor's net sales decreased by 7% primarily due to a 6% decrease in volumes and the pass-through of lower raw material costs. This was partially offset by a 2% benefit from price/mix and positive currency impacts.
Why did Amcor's net income decrease significantly?
Net income attributable to Amcor plc decreased by 34% due to a $23 million decrease in gross profit, a $27 million increase in restructuring and related expenses, and a $26 million rise in interest expense resulting from higher interest rates. Additionally, 'Other income/(expenses), net' shifted unfavorably by $20 million due to highly inflationary accounting in Argentina and net foreign exchange losses.
What is the status of Amcor's restructuring initiatives?
Amcor incurred $28 million in restructuring and related expenses in the quarter, up from $1 million in the prior year, primarily related to the 2023 Restructuring Plan. This plan involves cost-saving initiatives aimed at offsetting divested earnings from the Russian business. The company has initiated projects with an expected net cost of approximately $170 million and expects to realize an annualized pre-tax benefit of approximately $50 million from these structural cost reductions by the end of fiscal year 2025.
How is Amcor managing its debt and liquidity?
Amcor maintains a liquidity of $1.0 billion in undrawn credit facilities and has a net debt of $6.6 billion as of September 30, 2023. The company is actively managing its debt structure, including hedging variable interest rate exposure through interest rate swaps. Despite challenging market conditions, management believes its cash flows, credit facilities, and access to commercial paper markets provide sufficient liquidity for its ongoing operations and commitments.
06—Continue