01—Abstract
Summary
Summary of the 8-K filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Amcor plc reported third-quarter and first nine months fiscal 2024 results (quarter ended March 31, 2024) that came in ahead of management's expectations, with the company returning to year-over-year adjusted EBIT growth one quarter earlier than planned.
March quarter net sales were $3,411 milliona, down 7% reported and 6% on a comparable constant currency basis, driven by roughly 4% lower volumes, weakness in healthcare categories and North America beverage, and an unfavorable price/mix impact. Despite the top-line decline, adjusted EBIT rose 3% on a comparable constant currency basis to $397 million, with adjusted EPS of 17.8 cents, up 1% on the same basis. Management attributed the earnings resilience to strong cost performance, more than $130 million of cost and restructuring benefits, and improving operating leverage, while volumes improved sequentially from the prior quarter.
For the nine months, net sales were $10,105 millionb (down 8% reported, 7% comparable constant currency), adjusted EBIT was $1,106 million, and adjusted EPS was 49.1 cents. Adjusted free cash flow of $115 million was roughly $100 million ahead of the prior year, mainly due to better working capital performance, and the company returned about $570 million to shareholders through dividends and buybacks. Leverage stood at 3.4x net debt to adjusted trailing EBITDA and is expected to return to approximately 3x by June 30, 2024.
Amcor raised its fiscal 2024 adjusted EPS guidance to 68.5-71 cents from 67-71 cents, while reaffirming adjusted free cash flow guidance of $850c-950 million. The quarterly dividend was increased to 12.5 cents per share from 12.25 cents. Key risks for investors include continued volume softness in healthcare and North America beverage, a negative impact of up to 6% from higher interest and tax expense, and the leadership transition, as Peter Konieczny is serving as interim CEO.
Net interest expense for fiscal 2024 is guided to $310d-320 million pre-tax. The company also reported that its fourth quarter adjusted EPS is expected to rise mid-single digits on a comparable constant currency basis, which signals management's confidence in building momentum into fiscal 2025.
02—Key points
Key Highlights
- Q3 FY24 adjusted EBIT of $397 million rose 3% on a comparable constant currency basis, marking a return to earnings growth one quarter earlier than expected.
- Q3 FY24 GAAP diluted EPS was 12.9 cents and GAAP net income was $187 million; adjusted EPS was 17.8 cents, up 1% on a comparable constant currency basis.
- Q3 net sales fell 7% reported to $3,411 million, with volumes down about 4%, reflecting healthcare destocking and weakness in North America beverage, though volumes improved sequentially.
- Fiscal 2024 adjusted EPS guidance was raised to 68.5-71 cents from 67-71 cents; adjusted free cash flow guidance of $850-950 million was reaffirmed.
- Nine-month adjusted free cash flow of $115 million was about $100 million higher than the prior year, driven primarily by improved working capital.
- Quarterly dividend increased to 12.5 cents per share from 12.25 cents; roughly $570 million returned to shareholders year to date.
- Net debt was $6,729 million with leverage at 3.4x, expected to return to approximately 3x by June 30, 2024.
03—Questions
Frequently Asked Questions
Why did Amcor raise its fiscal 2024 adjusted EPS guidance?
Amcor raised the low end of its adjusted EPS range to 68.5-71 cents from 67-71 cents because third-quarter results were ahead of expectations. Volume trends improved sequentially, and strong cost performance and restructuring benefits drove better earnings leverage than planned.
Is Amcor's top-line performance still declining?
Yes. Net sales fell 7% on a reported basis in the March quarter and 8% year to date, mainly due to lower volumes. Management said volumes improved significantly from the prior quarter, but volumes in healthcare and North America beverage remain weak, and the company is still in a period of destocking.
What are the main risks to the fiscal 2024 outlook?
Key headwinds include up to a 6% negative impact from higher estimated net interest and tax expense, roughly 3% from the Russian business divestiture (concentrated in the first half), and continued softness in healthcare and North America beverage volumes. Currency translation is a partial offset, with a benefit of up to 2% assuming current rates persist.
How strong is Amcor's cash generation and balance sheet?
Adjusted free cash flow for the nine months was $115 million, about $100 million better than last year, mainly from working capital gains. Leverage is 3.4x, above the target, but management expects it to fall to about 3x by June 30, 2024, and the company remains committed to an investment-grade credit rating.
What does the dividend increase signal about capital allocation?
The quarterly dividend rose to 12.5 cents from 12.25 cents, and the company repurchased about $30 million of shares year to date with roughly $70 million planned for the fiscal year. Management emphasized that it will continue to balance organic investment, acquisitions, share repurchases, and dividends.
04—Continue