Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amcor PLC (AMCCF, Financial) reported strong financial results for Q4, driven by solid performance and a return to volume growth.
- The company experienced a 12% reduction in injuries compared to fiscal '23, reinforcing its industry leadership in safety.
- Adjusted earnings per share (EPS) grew by 9% on a comparable constant currency basis, exceeding mid-single digit growth expectations.
- Amcor PLC (AMCCF) delivered adjusted free cash flow of $952 million, up more than $100 million from the previous year.
- The company continues to invest in organic growth and strategic M&A, maintaining a compelling and growing dividend.
Negative Points
- Consumer demand remains muted, with expectations for low-single digit declines continuing into fiscal '25.
- Destocking in healthcare categories continued, negatively impacting overall volumes by approximately 2%.
- North American beverage volumes were down 8%, reflecting lower consumer demand and unfavorable customer mix.
- The company faces an EPS headwind of approximately 4% related to normalization of incentives.
- Restructuring costs are expected to continue into fiscal '25, with an additional $60 million anticipated.
Q & A Highlights
Q: Can you give us a sense as to what you're seeing as it relates to true market conditions?
A: Peter Konieczny, Interim CEO: Consumer demand continues to be muted, with low-single digit declines. However, our customers are starting to do better, balancing volumes and price. We are seeing benefits from cycling out of last year's destocking, although healthcare destocking continues to impact us.
Q: What is driving the volume growth in FY25?
A: Peter Konieczny, Interim CEO: The growth is not primarily from consumer demand, which remains weak. Instead, it comes from our customers' improved performance and our ability to win with them. We also benefit from the end of destocking in most categories, except healthcare.
Q: Can you provide more clarity on the healthcare end market and its impact on volumes?
A: Peter Konieczny, Interim CEO: Healthcare is a valuable part of our portfolio, but it is currently normalizing after a major dislocation. We expect destocking to end by the end of the calendar year, with better volume performance in the second half of FY25. Historically, healthcare has grown at mid-single digits.
Q: Why has the Board chosen to refrain from share buybacks at this point?
A: Michael Casamento, CFO: We have a good M&A pipeline and prefer to invest in opportunities that offer the greatest return. While we have some buyback capacity left, our focus remains on strategic investments and maintaining strong cash flow.
Q: What kind of cost inflation and raw material assumptions are baked into the FY25 guidance?
A: Michael Casamento, CFO: Inflation is abating but remains elevated, particularly in labor costs, which we expect to be in the mid-single digit range. Raw materials are in a benign environment, with overall costs being neutral for the year.
Q: Can you comment on the outlook for beverage in North America and when you expect volumes to turn more positive?
A: Peter Konieczny, Interim CEO: Beverage volumes are impacted by the discretionary nature of the category and underperforming customers. We are cautious about expecting a turnaround in the near future, given the current consumer demand environment.
Q: How much spare capacity do you have in the existing manufacturing footprint to respond to demand growth?
A: Peter Konieczny, Interim CEO: We have some headroom in machine capacity due to recent volume declines. However, we need to flex our labor capacity to match demand, which we manage tactically.
Q: Are there any regulatory changes in the European market that could provide challenges going forward?
A: Peter Konieczny, Interim CEO: We welcome regulatory developments like the packaging and packaging waste regulations in Europe. These initiatives align with our sustainability goals and help move the industry towards circularity.
Q: What is the expected drag on cash from restructuring costs in FY25?
A: Michael Casamento, CFO: We expect to spend around $60 million in FY25 to complete our restructuring program, which will be reflected in our adjusted cash flow.
Q: How much spare capacity do you have in the existing manufacturing footprint to respond to demand growth?
A: Peter Konieczny, Interim CEO: We have some headroom in machine capacity due to recent volume declines. However, we need to flex our labor capacity to match demand, which we manage tactically.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
