Amcor(AMCR) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Amcor reported a 1% increase in adjusted EBIT for fiscal 2023, with full-year adjusted EBIT of $1.6 billion [10][11] - Reported net sales for the year were up 1%, impacted by a 3% unfavorable currency effect and approximately$ 775 million in pricing to recover higher raw material costs [10][11] - Adjusted EPS for the year was $0.733 per share, down 2% on a comparable constant currency basis [11][13] Business Line Data and Key Metrics Changes - In the Flexibles segment, reported sales were in line with last year, with a 5% sales growth attributed to raw material cost recovery, but volumes were down 3% [16][17] - Rigid Packaging saw a 4% increase in reported net sales, but organic sales declined by 3% due to a 4% drop in volumes [19][20] - Adjusted EBIT for Flexibles was up 1% on a comparable constant currency basis, while Rigid Packaging's adjusted EBIT was down 7% [17][21] Market Data and Key Metrics Changes - The North American and European markets experienced high single-digit volume declines in the June quarter, consistent with soft retail scanner data [18][21] - Emerging markets showed better volume performance, with Asia's volumes flat and Latin America down mid-single digits [81] Company Strategy and Development Direction - Amcor is focused on long-term growth through innovation and sustainability initiatives, particularly in high-value markets [9][30] - The company is pursuing value-creating M&A opportunities, including the recent acquisition of Phoenix flexible packaging in India [9][30] - Amcor aims to return to mid-single-digit earnings growth in the second half of fiscal 2024, supported by cost reduction initiatives and cycling easier volume comparatives [8][28] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing inflation, softening consumer demand, and customer destocking as significant challenges [6][12] - The expectation for fiscal 2024 includes adjusted EPS of approximately$ 0.67 to $0.71 per share, with organic growth anticipated to be low-single-digit [24][25] - Management expressed confidence in returning to solid earnings growth without relying on significant changes in demand [28] Other Important Information - Amcor returned approximately$ 1.2 billion to shareholders through dividends and share repurchases during the year [13][14] - The company has reduced its inventory balances by over $400 million from peak levels in November 2022 [23] Q&A Session Summary Question: What are the assumptions for fiscal year '24 in context of the 3% decline reported in fiscal year '23? - Management expects first half volumes to be down mid to high single digits, with the second half potentially flat to low single digits, assuming no further destocking [40] Question: Can you provide insight into the destocking across major regions? - Destocking has been broad, with early signs in meat and premium coffee categories, and management anticipates it will largely be behind by the end of the calendar year [42][43] Question: What is the outlook for interest expense in fiscal '24? - Interest expense is expected to be in the range of$ 320 million to $340 million due to rising global rates [45][46] Question: How is the company addressing SKU rationalization from major customers? - SKU rationalization is seen as beneficial, simplifying the business and aligning with sustainable formats [77][78] Question: What is the company's strategy regarding the protein packaging market? - Amcor is well-positioned with a comprehensive product portfolio and recent acquisitions to drive growth in the protein category [30][32][66]