Ardagh Metal Packaging: Stubbornly Maintaining Its 10% Dividend Yield

Core Viewpoint - Ardagh Metal Packaging (AMBP) is experiencing a potential turnaround with signs of volume growth and improved cash flow, despite previous capital losses and concerns over capital allocation priorities [2][4][15] Financial Performance - AMBP reported a total revenue increase of 1% to $1.14 billion, with a gross profit increase of nearly 10$134 million, a 3% increase year-over-year, with guidance for Q2 2024 set at $170 million, indicating a potential 25$338 million, primarily due to a $423 million investment in working capital [9][10] - After adjustments, the underlying sustaining free cash flow was positive at$39 million, or $0.065 per share, although this is insufficient to cover dividend payments [10] - The company anticipates sustaining capex of around$120 million for the year, which is less than half of the depreciation expenses, leading to a projected net sustaining free cash flow of approximately $236 million [10][12] Debt Management - AMBP has a net debt of$3.35 billion, approximately six times the lease-adjusted EBITDA, with no immediate pressure on funding as the first bond matures in 2027 [14] - The company is encouraged to utilize free cash flow to buy back bonds trading below par to accelerate debt reduction [14] Investment Outlook - The company is expected to meet its adjusted EBITDA guidance for the current quarter, with a strong volume momentum continuing into April [15] - Despite concerns over capital allocation and corporate governance, the stock remains reasonably priced, and a lower debt ratio could enhance market confidence in AMBP's recovery [15]