Shoppers fighting cost of living pressures by buying in bulk caused an 11 per cent downturn in profits at packaging giant Amcor, on revenues that were largely unchanged from last year.
Amcor said the second half of the year proved challenging, as consumer demand softened and customers continued destocking after the end of Covid restrictions. It expects the first half of the new financial year to remain flat, but says growth will return in the second half of the new financial year.
Growth in net profit after tax for the world’s largest consumer packaging company fell to US$1.09bn, on revenues of US$14.69bn, up slightly on the prior year’s US$14.54bn.
Flexibles sales were virtually identical to last year at US$11.15bn, although EBIT decreased, as Amcor battled inflationary cost pressures, down to US$1.43bn from $1.52bn last year.
Revenue from rigids increased to US$3.54bn from US$3.39bn, but again EBIT decreased, to US$265m from US$289m last year. Overall EBIT for Amcor fell by almost US$100m to US$1.6bn.
Sales growth in Flexibles remained strong in Australia, India and the pan-Asian healthcare and meat end markets. Net sales were in line with the prior year across the Asia Pacific region, with price/mix benefits offset by lower volumes. Volumes were lower in China where demand was unfavourably impacted by Covid-19 related lockdowns.
Amcor managed to increase its prices by US$1.1bn as it fought inflationary pressures on its raw materials and transport costs. Amcor CEO Ron Delia said, “Throughout fiscal 2023, our teams did an excellent job proactively recovering inflation and reducing costs in a highly challenging environment.”
Delia said, “While we expect current market conditions to continue in the near-term, we have visibility to a number of controllable factors we believe will support a return to solid earnings growth in the second half of fiscal 2024 and leave us well placed to grow at our long term trend of high-single digit rates thereafter. We are pricing to compensate for inflation and we expect benefits from our cost reduction and productivity initiatives.”
Amcor has some 220 factories in 43 different countries, with its main product lines including bottles, plastic pouches, wrappers and containers for food, beverages and healthcare products.
Commenting on Amcor's exit from its Russian operations earlier in the year, Delia said, "We expect the headwinds from the sale of our Russian plants, and higher interest expense, will be largely limited to the first half."
Delia said, “We remain focused on our long-term growth strategy and will continue to pursue opportunities to invest in the business, particularly through innovation and sustainability initiatives in faster growing, higher value markets. We will also continue pursuing value-creating M&A and returning cash to shareholders through share repurchases and a compelling and growing dividend."
