Amcor talks up sustainability, lifts earnings growth outlook

Amcor has highlighted its defensive appeal in an uncertain economic enviroment as it lifted annual guidance.

Amcor has raised its annual earnings outlook. Picture: AFP

Amcor has talked up its sustainability agenda as it highlighted its growth potential and defensive appeal in an uncertain global economic environment by upgrading its annual profit guidance for the year ahead.

Chief executive Ron Delia on Wednesday played down the impact of the coronavirus on the company’s Chinese operations, where it operates 12 plants but which only represent 4 per cent of its total sales.

“Our plants are all operating ... Our businesses our functioning ... The impact on the business in the second half remains to be seen,’’ he said, noting the situation in China was changing by the day.

“It is not overly material in the scheme of Amcor itself.”

The packaging giant, which is dual-listed in Australia and New York following the $9bn takeover of American-based food packaging firm Bemis which was completed last year, reported net profit of $US252m ($374m) and earnings per share (EPS) of US15.5c per share for the half, in line with analysts’s forecasts.

While net sales for the group fell 1.4 per cent to $US6.2bn in constant currency terms, EBIT rose 8 per cent to $US699m, underpinned by lower costs and synergy benefits related to the Bemis acquisition.

Amcor said it now expects earnings per share growth of between 7 per cent and 10 per cent in the year to June 30, implying a constant currency EPS range of US62-64c per share

This compares to a prior forecast of prior forecast of around 5-10 per cent growth, or a range of US61-64 cents per share.

“We feel pretty good about the full year. We don’t see anything markedly changing about the business in the second half,’’ Mr Delia said.

“What you can take away from today is we have minimised the downside risk on the financial year.”

Amcor shares on the Nasdaq have been trading in a range of $US9.18- $11.77 in the past one year, which has been mirrored in its Australian listing. On Wednesday in Australia they closed 2 per cent lower at $15.76.

Mr Delia said the company’s financial profile remained strong and would be enhanced further as it realised the full financial benefits from the Bemis acquisition.

Amcor said $US30m of the pre-tax synergy benefits of Bemis were delivered in the first half, and the company increased its outlook for fiscal 2020 pre-tax synergy benefits to $US80m from the forecast $US65m.

Mr Delia said the Bemis acquisition remained on track to deliver $US180m of total pre-tax synergy benefits over three years.

Amcor declared a quarterly dividend of US11.5c, which translates to an unfranked dividend of 17.1c per share for its Australian shareholders who hold CDIs trading on the ASX.

The company said it had returned total cash to shareholders over the past year of more than $600m, including the buyback of 21.9 million shares. It expects to complete a $US500m buy-back program by the end of fiscal 2020.

Mr Delia said the company’s move towards recyclable packaging and its focus on sustainability was paying dividends with its customer base.

“It is becoming more and more of an opportunity for us as we get into it further,’’ he said, noting there had been a number of new product launches by global customers using PET plastic bottle formats over the past six months.

“Over the last six months there has been an increasingly balanced dialogue with customers on use of plastic in packaging,’’ he said.

He said consumers also needed to be more proactive in making use of compost, reuse or recycling facilities.