Amcor to ‘keep moving’ as CEO Ron Delia quits for health reasons

A replacement search is underway for departing Amcor boss Ron Delia, who has led the world’s largest packaging company for nine years and notched up a place as one of the ASX’s top paid executives.

Amcor CEO Ron Delia has enjoyed a more than 18-year career with the packaging group.

A former Amcor boss once described the company as “boring and uninteresting”. Three decades on, the subdued market reaction to the sudden exit of current leader Ron Delia on Wednesday suggests the same may still hold true.

Mr Delia may be one of Australia’s most highly paid executives, but his departure due to health issues barely caused a ripple among investors.

“It’s not as if Pepsi will suddenly stop buying from them or Nestle won’t want their coffee pods anymore,” said Hugh Dive from Atlas Funds Management, which is overweight on Amcor. “It will still keep moving along.”

Mr Delia has helmed the dual ASX and NYSE-listed packaging giant for nine years and is leaving for health reasons.

He finishes up as CEO next month with a pay package of about $11m for 2024 – similar to last years, which made him one of the highest paid ASX chief executives – plus an extra $3m in 2025 if the company meets performance targets.

The move surprised key investors, who said Mr Delia’s health issues weren’t flagged at the February results briefings but pointed out that his departure was not related to poor performance or bad acquisitions and that Amcor did not suffer from key-man risk.

In contrast, Mr Dive said the stability of a company like Mineral Resources would be in serious question if founder and CEO Chris Ellison departed. “That would be massive. Amcor can handle the retirement of its CEO. It’s like Transurban.”

Transurban’s former CEO Scott Charlton departed in 2023 after 11 years at the top, and his successor Michelle Jablko stepped in without a share price decline.

Amcor shares fell 3.5 per cent to $13.93 during trade on the ASX on Wednesday and are down 1.6 per cent for the year to date.

Amcor is the world’s biggest packaging company and currently faces flagging sales and margins because of soft market conditions in healthcare and beverages, and a general trend for companies to run down their existing supplies of packaging.

The group on Wednesday reaffirmed its fiscal 2024 guidance, expecting adjusted earnings per share of US67c to US71c a share, which would be down on the previous year. But adjusted free cash flow is set to rise to $850m to $950m.

Mr Delia will step down next month, with Peter Konieczny, Amcor’s current chief commercial officer, announced as interim CEO.

Mr Dive said the outgoing CEO had made some strong business decisions during his tenure and viewed Mr Konieczny as a safe bet going forward.

“They made some good moves, like getting out of Russia when they did. The COO is a good communicator with the markets and knows the numbers. He is a safe pair of hands,” said Mr Dive.

Mr Konieczny will receive a base salary of CHF$1,580,190 ($2.7m) in line with what Mr Delia was paid, plus a bonus of $3.27m and long term incentive plan worth $5.5m – which is about the equivalent to what Mr Delia earned, and an additional $2.4m worth of shares.

Mr Delia thanked his team for their support.

“We have created a stronger global packaging leader and laid the foundations for an exciting future as the business has substantial potential and is building near-term momentum,” said Mr Delia. “I have complete confidence in the strength and capabilities of Amcor’s leadership team, and Peter will do an outstanding job as Interim CEO during the transition period.”

Amcor is still wading through the impact of selling its Russian assets and said on Wednesday there would be a negative impact of about 3 per cent on earnings per share related to the sale of the Company’s Russian business on December 23, 2022.

The Zurich-headquartered company sold its three plants in Russia for $US365m after its invasion of Ukraine, and took a $US200m writedown on the sales as a result.

Amcor, is banking on continued improvements in global sales and ongoing cost-cutting programs to maintain its full-year profit forecast.

Mr Delia said in February that “December was the low point,” and issued a higher-than-expected dividend – of more than 5 per cent in Australia dollar terms – for the dual listed company.

The group reaffirmed its full-year guidance of earnings per share of between US67c and US71c a share, and announced an increased quarterly dividend of US12.5c per share – up from US12.25c in the previous corresponding period – for US stock, and an unfranked dividend of 18.98c per share for the ASX-listed securities.

Amcor operates 218 packaging manufacturing factories in 41 countries, and is considered a litmus test for the strength of the global economy, as its packaging is used in most consumer goods – from coffee and meat packs to pharmaceuticals and tobacco.

The company has cut costs including a $US200m reduction in the first half by retrenching 1000 workers. None of the cuts were in Australia, and were predominantly from Europe and the US.

The cuts came on top of 1000 workers losing their jobs in the previous half, and the combined number equated to about 5 per cent of Amcor’s workforce.