Amcor cashes in as working from home drives demand for consumer goods

Global packaging giant Amcor continues to cash in on the new COVID world order, with working from home driving demand for consumer products.

Amcor lifted its profit guidance for the 2021 financial year after delivering a 6 per cent rise in interim earnings.

Global packaging giant Amcor continues to cash in on the new COVID world order, with working from home driving demand for consumer products.

Amcor lifted its profit guidance for the 2021 financial year after delivering a 6 per cent rise in interim earnings boosted by strong food and beverage growth as millions of consumers in North America and Europe remain in lockdown a year after the pandemic first hit.

Ready made meals, juices, coffee and pet food products using Amcor packaging have helped drive earnings for the company, which traces its origins to establishing Victoria’s first paper mill on the banks of the Yarra River in the 1860s.

Amcor runs 230 packaging factories spanning more than 40 countries and said the pandemic had worsened in many of its markets during the last three months of 2020.

“We saw a pick-up in COVID impacts in the second quarter of our fiscal year, particularly in Europe and North America,” chief executive Ron Delia said.

“The complexity and challenges of operating in that environment became much more pronounced and much more difficult to navigate. There has been pockets of the business that have benefited from at-home consumption, including beverage (products) in North America.”

Amcor upgraded its outlook for 2021 adjusted earnings per share growth to 10-14 per cent in constant currency terms from 7-12 per cent previously, and compared with consensus at 11.5 per cent.

It delivered a 6 per cent lift in interim earnings before interest and tax to $US743m from $US699m, in line with estimates.

Amcor spent $US6.8bn buying out one of its main rival, Bemis, in 2018 to boost its global clout and is looking ahead at smaller deals once it completes the Bemis integration this year.

“We have done 30 acquisitions in the past 10 years so we understand their value and we would like to be active going forward. Our first priority right now is completing this Bemis integration. We’ll then start to turn our attention to deals as this calendar year rolls on,” Mr Delia said.

Its flexibles unit, which drives the bulk of earnings, recorded 2 per cent growth on the same ­period last year driven by food, pet food and beverage sales but offset by weakness in some healthcare markets due to reduced elective surgery and fewer prescriptions. Rigid packaging grew by 6 per cent on the prior period.

Still, the stay-at-home dynamic also worked against Bemis with fewer convenience store sales.

“A lot of plastic containers we make for beverages are sold through the convenience channel and at gas stations,” Mr Delia said. “And those sales are down. People are just out less and they’re on the road less and they’re commuting less to work, and so there are less sales through those channels.”

Amcor said it was difficult to forecast how any vaccine might change consumer behaviour.

“The vaccine rollout is absolutely welcome by Amcor because it will make the ability to run our 230 factories around the world easier. As for as the consumption side, we would expect continued three per cent growth on sales, so I’m not sure that will change much on the other side of the vaccine rollout.”

It is also playing a role in the Covid vaccine rollout by providing packaging for diagnostic and testing kits and is making components used in vials.

“It’s a priority absolutely and demand is strong and there are a lot of new products around the diagnostic space in particular.”

The company declared a quarterly dividend of US11.75c, slightly higher than last year‘s US11.5c payout.

Amcor surged by over 7 per cent in intraday trading and closed up 4.5 per cent to $15.03.