Amcor lifts annual guidance after US virus hoarding

Amcor says ‘pantry loading’ from US consumers during COVID-19 lockdowns has helped lift its annual earnings guidance.

Lessons learnt: Amcor CEO Ron Delia.

Packaging giant Amcor says “pantry loading” from US consumers during COVID-19 helped lift its annual earnings guidance, with strong demand for healthcare, food and drink staples keeping its 250 manufacturing plants all running through the pandemic.

Amcor — dual-listed in Australia and New York following the $9bn takeover of American-based food packaging firm Bemis last year — said US people in particular flocked to staples as lockdown measures took hold.

“It’s what you’ve seen all over the TV and the media. The US consumer tends to pantry load like no one else, so sales were particularly strong in March,” Amcor chief executive Ron Delia said.

Amcor lifted its 2020 earnings per share growth forecast to 11-12 per cent, from a prior 7-10 per cent range, implying a constant currency EPS range of US64.6c to US65.2c per share.

Consumer products have proved resilient even in the face of the global health crisis.

“Our business is very defensive and it’s exposed to the same segments in China as it is to other parts of the world: it’s food, personal care, pharmaceutical and medical packaging. And they tend to be quite resilient and defensive through all this,” Mr Delia said.

Amcor has seen first hand the accelerating spread of COVID-19 as it was forced to juggle its 50,000 staff across more than 40 countries and continue to deliver products given its status as an essential provider.

“I think everybody has been surprised and I also think it was surprising just how quickly the world was mobilised to deal with it. If you think about it, it was only two months really since things intensified in Europe and North America and it certainly seems like the world has changed in that period.”

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While the global economy faces an uncertain path ahead, with fears of a second wave of the pandemic possible, Amcor said it expects to trade through any downturn.

“We’ve been through different economic cycles before and for the most part in defensive segments like food, beverages and healthcare you see demand holding up. And we expect it to hold up going forward.”

Its North American business saw strong demand for healthcare, pet care, protein and liquids packaging, with low single-digit growth in its flexibles unit in the third quarter, while Europe grew at similar levels from coffee, ready meals, dairy and pet care.

China bounced back strongly in March after a weaker January and February and is back to pre-COVID operating levels, while India suffered a weak March with its economy largely shut down due to coronavirus measures.

“The biggest lessons that we were able to benefit from in Asia were just how to deal with the situation operationally. So in China in February we had disruptions at a number of sites and we learned pretty quickly about the protocols to get plants up and running. Everything from how to set up printing lines that ensured physical distancing to how to process hundreds of employees through temperature checks and personal protective equipment,” Mr Delia said.

“All of that we learned through the 11 plants we had in China in the earlier part of the quarter and those lessons were built on in Europe and then carried through to North America and Latin America.”

Amcor lifted its third quarter net income by 23 per cent to $US433m and expects $US1bn of free cash flow for the 2020 financial year.

“A solid result from underlying trading and on synergy delivery,” Morgan Stanley said. “We view the upgrade to guidance as a clear positive, implying upside to both our forecasts and consensus. We think Amcor has demonstrated its quality and defensiveness with this result.”