Amcor is tipping a return to growth in late fiscal 2024

The world’s largest packaging company predicts a return to growth in 2024 after inflation and cost of living pressures saw demand for its bottles and food packaging fall.

The boss of Amcor, the world’s largest packaging company, believes it can reclaim its growth credentials after a year tarnished by a profit downgrade and sliding share price, with the manufacturer now recast to hit solid earnings growth no matter the wider economic settings.

Chief Ron Delia has successfully passed through $US1.2bn ($A1.87bn) in higher costs to its customers, mostly coming from inflationary raw materials, removing more than $US200m in costs from the business with a further $US50m in costs reductions to come.

This had set Amcor up for a stronger 2024 and to return to its once blue-chip credentials among investors, with it aiming for high single-digit earnings growth from the second half of 2024.

“We are expecting to build momentum from here and return to solid earnings growth in the second half of fiscal 2024 which is not at all dependent on any improvement in the demand environment,” Mr Delia said as Amcor on Thursday reported flat annual net sales of $US14.69bn, while net profit fell 11 per cent to $US1.09bn.

Amcor boss Ron Delia is bullish about the outlook.

Amcor said adjusted earnings per share for 2023 was US73.3c, which was in line with a profit warning issued earlier this year when the packaging giant said it expected EPS of US72c to US74c a share, against a previously forecast range of the lower end of US77c to US81c a share.

Amcor, which operates 220 packaging manufacturing factories spread across 43 countries, is a good litmus test for the strength of the global economy with its packaging used in most consumer packaged goods from coffee and meat packs to pharmaceuticals and tobacco.

Mr Delia said the segments that had done the best for Amcort in 2023 were petcare and healthcare where categories which had been weaker, such as meat, ready meals and coffee, had suffered from destocking by its buyers as they in turn saw a pullback by consumers as cost of living pressures hit household spending.

“I think that consumers have been weary of big price increases for 12 to 18 months and that is softening consumer demand as a result and on top of that there is a lot of excess inventory in the supply chain around certain categories, especially categories that suffered from shortages of key raw materials over the last year or two.”

Mr Delia said his optimism about the second half for Amcor however did not depend on consumer demand, and he expected Amcor to hit mid-single digit earnings growth in the second half of 2024 and then exit 2024 at the higher single-digit range – which is historically what investors had seen.

“We expect to be back on track as we exit fiscal 2024 and growing at the long term trend of high single digits that we are used to growing at.”

He said this would be also underwritten by a “self-help agenda” of cost-cutting, efficiency and other internal restructures that would set it up for a better year.

The company saw volatile trading across its portfolio of packaging products through 2023 as soaring inflation, cost of living pressures for households, a slowing economy in China and brittle consumer confidence caused shoppers to pull back spending and subsequently Amcor customers order less packaging for their manufactured goods.

Although some bellwether categories remained strong, with volumes higher in the healthcare, pet care, cheese, and home and personal care categories in North America, but offset by lower volumes in categories including condiments, meat, and ready meals.

In Europe, net sales for Amcor grew in the low single digit range driven by price/mix benefits, partly offset by lower volumes in the coffee, home and personal care, yoghurt and confectionary categories.

Amcor said net sales were in line with the prior year across the Asia Pacific region, while volumes were lower in China, where demand was unfavourably impacted by Covid-19 related lockdowns.

For its key flexibles packaging division, sales were flat at $US11.15bn, while adjusted earnings slipped slightly to $US1.429bn. There were higher volumes in packaging for pet care and pharmaceuticals, while categories such as in food condiments and ready meals.

At its rigid packaging arm, sales rose 4 per cent to $US3.54bn and earnings fell 8 per cent to $US265m. In North America, overall beverage volumes were 6 per cent lower than last year.

A quarterly dividend of US12.25c will be paid on September 27, raising its fiscal 2023 payout to US49c. ASX CDI holders will receive an unfranked dividend of $A18.77c per share. Its share buyback program continues, with $US70m allocated for buybacks in the current fiscal.

Amcor shares fell 2.9 per cent to $14.17 in a lower market.

Amcor is tipping a return to growth in 2024.

Originally published as Amcor is tipping a return to growth in late fiscal 2024