Amcor takes $288m writedown on Russian exit but earnings up

Packaging giant Amcor will exit Russia and take a $US200m ($288m) writedown after delivering a rise in 2022 earnings, with further profit growth expected this year.

Packaging giant Amcor now runs 225 factories across more than 40 countries.

Packaging giant Amcor will exit Russia and take a $US200m ($288m) writedown after delivering a rise in 2022 earnings, with further profit growth expected this year as its defensive consumer staples base withstands high inflation and economic turbulence.

Amcor will sell its three factories in Russia after a review of all strategic options and said it was undertaking “proactive initiatives” to offset an earnings hit.

Impairments of $US200m for its Russia and Ukraine operations were included in the June quarter and Amcor expects a negative impact of 2 per cent on its 2023 earnings due to the Russian sale.

“We think it will become increasingly untenable to operate there as a Western multinational,” Amcor chief executive Ron Delia said. “We just believe that the right thing for us to do at this stage is to exit through a sales process. We think there’ll be better owners of those assets.”

The company delivered a 7 per cent rise in 2022 earnings before interest and tax to $US1.7bn and will pay an annual dividend of US48c. It has forecast adjusted earnings per share of US80-84c a share for 2023 with growth of 3-8 per cent on a comparable constant currency basis.

Its flexibles unit, which drives the bulk of earnings, lifted adjusted earnings before interest and tax by 9 per cent to $US1.51bn.

The company, which traces its origins to establishing Victoria’s first paper mill on the banks of the Yarra River in the 1860s, now runs 225 packaging factories spanning more than 40 countries, with many locations recording record levels of inflation in recent months.

Amcor said it remained in good shape despite the headwinds.

Amcor chief executive Ron Delia: ‘I think we’ll be in good shape regardless of the economic cycle.’ Picture: John Feder

“Prices of many consumer products at retail are increasing so it looks like prices are being passed along to the consumer,” Mr Delia said on Thursday. “So far we have not seen that result in very high levels of elasticity. But it’s early days and it’s the early part of the inflationary cycle.

“I would just re-emphasise the defensiveness of our exposure. We have a more defensive revenue base now than we ever have had with no industrial exposure and no consumer durables exposure … all of our sales into consumer staples and healthcare.”

Asked if the business would suffer from a potential global recession, Mr Delia said: “It’s difficult for us to comment on what will happen economically and whether there will actually be recessions that arise in countries. I think we’ll be in good shape regardless of the economic cycle.”

UBS equities analysts described it as a solid result, with Amcor delivering to expectations.

“We think market focus will be centred around composition of the 2023 EPS guidance, with known headwinds offsetting a very solid 5-10 per cent organic EPS growth outlook,” UBS said.

Amcor spent $US6.8bn acquiring one of its main rivals, Bemis, in 2018 to boost its global clout.

Bemis makes flexible packaging for healthcare companies and consumer packaged goods providers such as Kraft Heinz.

The Bemis buyout increased Amcor’s footprint from 30 countries to 40 and led to the company listing on the New York Stock ­Exchange.

Amcor fell 1.2 per cent – or 22c – to $18.55 on Thursday but has gained 12 per cent so far this year compared with a 6 per cent fall in the ASX 200 index.

Amcor passed on $US1.5bn of raw material price increases to customers over the year, representing a 12 per cent jump on the prior 12 months.

“There’s no question we see accelerating inflation in almost all the countries that we operate in,” Mr Delia said.

“And we’ve been really active both commercially – in terms of price increases through to cover those inflationary costs – but also operationally to take cost out of the business as best we can.”