Amcor lifts earnings guidance, declares Q1 dividend

Packaging giant Amcor has lifted earnings guidance and declared a 16.55c a share dividend for the first quarter.

Amcor now has its primary listing on the New York Stock Exchange. Picture; AFP

Amcor chief executive Ron Delia says the company is back on the hunt for acquisitions, after the packaging giant lifted earnings guidance and declared a 16.55c a share dividend for the first quarter of its fiscal year.

The lift came as the coronavirus pandemic boosted home consumption as households across the globe stayed home.

Amcor shifted its primary listing to the US last year after its merger with Bemis, and told the US and Australian markets on Friday it had booked earnings before interest and tax of $US358m ($492m) for the three months to the end of September, on revenue of $US3.1bn. That was up 9 per cent from EBIT of $US335m in the corresponding period last year.

The company flagged improved earnings per share growth of 7 to 12 per cent in constant currency terms, up from earlier guidance of a 5 to 10 per cent lift.

The company declared a dividend of 16.55c a share for its Australian holders and said it would launch a $US150m stock buyback.

Mr Delia told analysts on Friday morning the company was cashed up and on the hunt for growth, particularly in the rigid packaging market — where Amcor already has a large business providing plastic bottles for soft drinks — and Asian markets for its flexible packing business for foodstuffs, and other consumer goods.

Amcor CEO Ron Delia. Picture: John Feder

“We will keep our eyes out for deals,” he said. “I wouldn’t expect us to go outside of our current segment participation, our segment mix, to the extent that we can build out the flexibles portfolio in Asia and bolt on in some of the bigger markets.

“The rigid business in North America outside of beverage is a place that we find pretty attractive. And we’ve been on the diversification path of our rigid business for the last five, seven years, so I’d like to be more active there.”

Mr Delia said Amcor expected free cashflow of more than $US1bn for the year, giving it “substantial capacity” to reinvest in its existing business and to pursue acquisitions.

But he warned there were few bargains out in the market for Amcor to snap up, as its peers also benefited from the boom in stay-home spending.

“I think the big constraint is likely to be valuations, valuations are quite high. And that doesn’t seem to be abating. So we’ll continue to be on the lookout and we’ll be active,” he said.

Amcor is still digesting its $9bn buyout of US rival Bemis last year, with Amcor operating more than 250 packaging plants across the globe. But Mr Delia said the company had realised $US100m of the $US180m in promised cost savings from combining the businesses, with another $US30m to $US50m to be delivered across the remainder of the fiscal year.

Amcor’s flexible packaging division, its largest arm, posted earnings of $US312m on the back of strong growth in the US markets as consumers stayed home rather than eating out amid a snowballing pandemic.

“In North America, volumes grew in the mid single digit range, mainly driven by strength in the meat, cheese, condiments, pet food and home and personal care end markets as well as specialty folding cartons,” Amcor said.

Before tax earnings also grew in its rigid packaging arm, up 4 per cent to $US72m.

Amcor CDIs traded on the Australian market closed up 63c, or $16.07 on Friday.