Amcor plc (AMCR) Bundle
Understanding Amcor plc (AMCR) Revenue Streams
Understanding Amcor plc’s Revenue Streams
Amcor plc operates primarily within two segments: Flexibles and Rigid Packaging. The company generates revenue through a variety of products tailored for the food, beverage, pharmaceutical, medical, home and personal care industries.
Revenue Breakdown by Segment
| Segment | Net Sales (Q3 2024) | Net Sales (Q3 2023) | Year-over-Year Change |
|---|---|---|---|
| Flexibles | $2,552 million | $2,568 million | -1% ($16 million decrease) |
| Rigid Packaging | $801 million | $875 million | -8% ($74 million decrease) |
| Total | $3,353 million | $3,443 million | -3% ($90 million decrease) |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, Amcor reported a total net sales decrease of 3%, translating to a reduction of $90 million compared to the same period in 2023. This decline was impacted by negative currency effects of $16 million and lower raw material pass-through costs of $20 million.
Geographic Revenue Contribution
| Region | Flexibles (Q3 2024) | Rigid Packaging (Q3 2024) | Total (Q3 2024) | Total (Q3 2023) |
|---|---|---|---|---|
| North America | $1,032 million | $605 million | $1,637 million | $1,700 million |
| Latin America | $271 million | $196 million | $467 million | $484 million |
| Europe | $838 million | $0 million | $838 million | $858 million |
| Asia Pacific | $411 million | $0 million | $411 million | $401 million |
| Total | $2,552 million | $801 million | $3,353 million | $3,443 million |
Significant Changes in Revenue Streams
The revenue decline is primarily attributed to unfavorable price/mix impacts of approximately 3% and a 4% decrease in sales volumes in the Rigid Packaging segment. The Flexibles segment saw a slight decrease in sales volume of 3%, which was partially offset by favorable volumes leading to a minor overall sales decrease.
Overall, the total revenue for Amcor in Q3 2024 was $3,353 million, down from $3,443 million in Q3 2023, indicating a challenging market environment characterized by softer consumer demand and increased customer order volatility.
A Deep Dive into Amcor plc (AMCR) Profitability
A Deep Dive into Amcor plc's Profitability
Gross Profit: For the three months ended September 30, 2024, the gross profit was $659 million, representing a 2% increase from $645 million in the same period of 2023. The gross profit margin improved to 19.7% compared to 18.7% in 2023.
Operating Profit: The operating income for the same period was $312 million, up from $270 million in 2023, marking an increase of 15.6%. This translates to an operating margin of 9.3%, an increase from 7.8% in the prior year.
Net Profit: The net income attributable to the company increased to $191 million, a rise of 26% from $152 million in 2023. The diluted earnings per share also saw growth, reaching $0.132 compared to $0.105 in the previous year.
Profitability Metrics Table
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit | $659 million | $645 million | +2% |
| Gross Margin | 19.7% | 18.7% | +1.0 pp |
| Operating Income | $312 million | $270 million | +15.6% |
| Operating Margin | 9.3% | 7.8% | +1.5 pp |
| Net Income | $191 million | $152 million | +26% |
| Diluted EPS | $0.132 | $0.105 | +26% |
Trends in Profitability Over Time
The trends in profitability metrics indicate a positive trajectory for the company. The gross profit increased due to cost savings initiatives, driving the gross margin up. The operating income and margin also improved significantly, reflecting better cost management and operational efficiency.
Comparison of Profitability Ratios with Industry Averages
When comparing these profitability ratios with industry averages, the company’s operating margin of 9.3% is competitive against the industry average of approximately 8.5%. The gross margin is also slightly above the industry average of 19%, indicating better efficiency in managing production costs.
Analysis of Operational Efficiency
The operational efficiency has been enhanced through various cost management strategies that have effectively reduced selling, general, and administrative expenses, which were $315 million in Q3 2024, up from $302 million in Q3 2023. This indicates a 4% increase, but the overall percentage of these expenses relative to net sales has improved, reflecting efficiency gains.
Furthermore, restructuring and related expenses decreased significantly to $6 million from $28 million, contributing positively to net income. The effective tax rate also improved, decreasing to 18.2% from 20.1%, further enhancing net profitability.
Conclusion
In summary, the company showcases strong profitability metrics, with significant improvements in gross, operating, and net income margins, alongside effective cost management strategies that enhance operational efficiency.
Debt vs. Equity: How Amcor plc (AMCR) Finances Its Growth
Debt vs. Equity: How Amcor plc Finances Its Growth
As of September 30, 2024, the company's total debt stood at $7.304 billion, which includes $115 million in short-term debt and $7.176 billion in long-term debt . The current portion of long-term debt was $13 million .
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the debt-to-equity ratio was approximately 1.83, calculated from total debt of $7.304 billion against total equity of $3.993 billion . This ratio is higher than the industry average of around 1.5, indicating a more leveraged position compared to peers .
Recent debt activity has included the issuance of several senior notes, including:
- $500 million in 4.000% Guaranteed Senior Notes due 2025
- $300 million in 3.100% Guaranteed Senior Notes due 2026
- $600 million in 3.625% Guaranteed Senior Notes due 2026
- $500 million in 4.500% Guaranteed Senior Notes due 2028
- $500 million in 2.630% Guaranteed Senior Notes due 2030
- $800 million in 2.690% Guaranteed Senior Notes due 2031
- €500 million in 1.125% Guaranteed Senior Notes due 2027
- €500 million in 3.950% Guaranteed Senior Notes due 2032
- $500 million in 5.625% Guaranteed Senior Notes due 2033
- $500 million in 5.450% Guaranteed Senior Notes due 2029
The company's credit ratings from major agencies remain solid, reflecting its strong financial practices. As of September 30, 2024, it maintained an investment-grade credit rating, which facilitates issuing debt at favorable interest rates .
Amcor has engaged in refinancing activities, including extending the maturity of its $1.9 billion three-year syndicated facility until April 2026 . The company also has $1.9 billion in undrawn credit facilities available for future financing needs .
In balancing debt and equity financing, Amcor has maintained a focus on operational efficiency and cost management. The company’s net debt as of September 30, 2024, was $6.872 billion, up from $6.111 billion in June 2024 . This increase is attributed to higher drawdowns of commercial paper and other financing activities .
| Debt Type | Amount (in billions) | Interest Rate | Due Date |
|---|---|---|---|
| Short-term Debt | $0.115 | Variable | Within 12 months |
| Long-term Debt | $7.176 | Various rates | 2025-2033 |
| Total Debt | $7.304 | N/A | N/A |
| Net Debt | $6.872 | N/A | N/A |
| Total Equity | $3.993 | N/A | N/A |
In summary, the company effectively balances its debt financing and equity funding strategies to support growth while managing its financial health within industry benchmarks .
Assessing Amcor plc (AMCR) Liquidity
Assessing Amcor plc's Liquidity
Current and Quick Ratios
The current ratio for Amcor plc as of September 30, 2024, is 1.29, calculated as total current assets of $5,238 million divided by total current liabilities of $4,068 million. The quick ratio, which excludes inventory, is approximately 0.96. This is derived from current assets minus inventories ($3,210 million) over current liabilities.
Analysis of Working Capital Trends
Amcor plc's working capital, defined as current assets minus current liabilities, stands at $1,170 million as of September 30, 2024. This is an increase from $704 million in the same period of the previous year, indicating improved liquidity and operational efficiency.
Cash Flow Statements Overview
The cash flow statements for the three months ended September 30, 2024, reveal the following trends:
| Cash Flow Type | 2024 ($ millions) | 2023 ($ millions) |
|---|---|---|
| Net cash used in operating activities | (269) | (135) |
| Net cash used in investing activities | (155) | (142) |
| Net cash provided by financing activities | 237 | 141 |
Net cash used in operating activities increased by $134 million, primarily due to higher working capital outflows. The net cash used in investing activities increased by $13 million due to higher expenditures on property, plant, and equipment. Financing activities saw an increase of $96 million, mainly from higher drawdowns of commercial paper.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, Amcor plc's total debt stands at $7,304 million, with a net debt of $6,872 million after accounting for cash and cash equivalents of $432 million. The company has available undrawn credit facilities amounting to $1.9 billion, providing significant liquidity support. Additionally, the company has maintained compliance with all financial covenants, including a leverage ratio not exceeding 3.9 times.
Is Amcor plc (AMCR) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio for Amcor plc is 16.5, based on a stock price of $2.18 and earnings per share (EPS) of $0.132 for the most recent quarter ended September 30, 2024.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is calculated as 2.1, with the current stock price at $2.18 and the book value per share at $1.04.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio stands at 10.2, with an enterprise value of approximately $7.0 billion and EBITDA of $685 million for the last twelve months.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated from a high of $2.75 to a low of $1.85. Currently, it is trading at $2.18, which represents a -5% decline year-to-date.
Dividend Yield and Payout Ratio
The dividend yield is 5.7%, with an annual dividend of $0.125 per share. The payout ratio is approximately 95%, calculated based on the earnings per share.
Analyst Consensus
According to the latest analyst ratings, the consensus is a Hold, with 10 analysts rating it as Hold, 2 as Buy, and 1 as Sell.
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 16.5 |
| Price-to-Book (P/B) Ratio | 2.1 |
| Enterprise Value-to-EBITDA (EV/EBITDA) Ratio | 10.2 |
| Current Stock Price | $2.18 |
| 12-Month Price Range | $1.85 - $2.75 |
| Dividend Yield | 5.7% |
| Payout Ratio | 95% |
| Analyst Consensus | Hold |
Key Risks Facing Amcor plc (AMCR)
Key Risks Facing Amcor plc
Amcor plc faces several internal and external risks that could significantly impact its financial health and operational performance. These risks can be categorized into industry competition, regulatory changes, market conditions, and operational challenges.
Industry Competition
The packaging industry is highly competitive, with numerous players vying for market share. Amcor competes with companies such as Sealed Air Corporation and Ball Corporation, which pressurize pricing and margins. As of September 30, 2024, Amcor's net sales decreased by $90 million, or 3%, compared to the same period in 2023, indicating potential competitive pressures.
Regulatory Changes
Regulatory scrutiny surrounding packaging materials, especially regarding sustainability and recycling, poses risks. Compliance with evolving regulations can lead to increased operational costs. The company has committed to making packaging that is increasingly recyclable, reusable, and made from recycled content, which may require significant investment.
Market Conditions
Fluctuations in market demand can adversely affect sales. In recent periods, softer consumer demand and customer order volatility have been reported. For instance, net cash used in operating activities increased by $134 million, driven by higher working capital outflows. Additionally, geopolitical tensions and inflationary pressures have impacted consumption patterns.
Operational Risks
Operational risks include supply chain disruptions and raw material price volatility. The company's policy to mitigate commodity price risks involves passing through costs to customers, but this strategy can lead to decreased sales if customers resist price increases. For example, the company reported unfavorable price/mix impacts of approximately 3% in net sales.
Financial Risks
As of September 30, 2024, Amcor's total debt stood at $7.304 billion, with net debt at $6.872 billion, reflecting an increase from $6.111 billion as of June 30, 2024. The company's reliance on debt financing exposes it to interest rate risks, particularly given the mixed fixed and floating interest rates on its borrowings. The company entered into an interest rate swap contract for $500 million at a fixed rate of 4.30%, effective from August 12, 2024.
Strategic Risks
The strategic decision to divest from the Russian market in December 2022, while necessary, has financial implications. The company expects to invest between $110 million and $130 million in cost-saving initiatives to offset the loss from this divestiture. Furthermore, the 2023 Restructuring Plan aims to achieve annualized pre-tax benefits of approximately $50 million by the end of fiscal year 2025.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures. | Net sales decreased by $90 million (3%) in Q3 2024. |
| Regulatory Changes | Compliance with sustainability regulations increases costs. | Potential for increased operational costs. |
| Market Conditions | Soft consumer demand and market volatility. | Net cash used in operating activities increased by $134 million. |
| Operational Risks | Supply chain disruptions and raw material price volatility. | Unfavorable price/mix impacts of approximately 3%. |
| Financial Risks | Total debt of $7.304 billion, with net debt at $6.872 billion. | Interest rate swap for $500 million at a fixed rate of 4.30%. |
| Strategic Risks | Divestiture from Russia impacting earnings. | Investment of $110 million to $130 million in cost-saving initiatives. |
Future Growth Prospects for Amcor plc (AMCR)
Future Growth Prospects for Amcor plc
Analysis of Key Growth Drivers
Amcor plc is positioned to capitalize on several growth drivers that can enhance its market share and profitability. These drivers include:
- Product Innovations: The company has been focusing on developing sustainable packaging solutions, which are increasingly demanded by consumers and regulatory bodies. In fiscal year 2024, Amcor generated approximately $13.6 billion in sales, partly due to its innovative product lines.
- Market Expansions: Amcor has been expanding its operations into emerging markets. For instance, in Latin America, net sales for the three months ended September 30, 2024, were $467 million, compared to $484 million in the same period of 2023.
- Acquisitions: The company has actively pursued acquisitions to enhance its capabilities and market presence. Notably, Amcor's acquisition strategies have been aimed at acquiring firms that specialize in flexible packaging, which is a high-growth segment.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that Amcor's revenue will grow in the coming years, driven by its strategic initiatives and market demand for sustainable packaging solutions. For the fiscal year 2025, revenue growth is expected to be in the range of 3% to 5%, with earnings per share (EPS) estimated to reach approximately $0.55.
Strategic Initiatives or Partnerships
Amcor has entered into several strategic partnerships aimed at enhancing its product offerings and operational efficiencies. These initiatives include:
- Sustainability Partnerships: Collaborations with suppliers to increase the use of recycled materials in packaging have been a focus area, aligning with global sustainability trends.
- Technological Advancements: Investments in advanced manufacturing technologies are expected to improve production efficiency and product quality.
Competitive Advantages
Amcor's competitive advantages include:
- Global Presence: With operations in 40 countries and 212 locations, Amcor has a broad market reach that allows it to serve diverse customer needs.
- Strong Brand Relationships: The company has established long-term relationships with major global brands, which provides a steady stream of revenue.
- Innovation Capability: Amcor's commitment to research and development has led to numerous innovative products, enhancing its market position.
Financial Overview
The financial performance of Amcor reflects its ongoing efforts to enhance profitability while navigating market challenges. The following table summarizes key financial metrics for the three months ended September 30, 2024, compared to the same period in 2023:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Sales | $3,353 million | $3,443 million |
| Gross Profit | $659 million | $645 million |
| Operating Income | $312 million | $270 million |
| Net Income | $191 million | $152 million |
| Diluted Earnings Per Share | $0.132 | $0.105 |
Amcor's focus on sustainability, innovation, and strategic partnerships positions it well for future growth amidst evolving market dynamics.
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Article updated on 8 Nov 2024
Resources:
- Amcor plc (AMCR) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Amcor plc (AMCR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Amcor plc (AMCR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.