Q1 2025 Earnings Summary
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Ongoing volume growth momentum | Volumes improved from -10% in Q2 to -4% in Q3 FY24. Destocking in health care and NA beverage still weighed on results, but momentum was better. | Volumes up 2% in Q1 2025, marking the third consecutive quarter of sequential improvement. Flexibles grew 3%, while Rigid declined 4%. | Continuing improvement |
Healthcare and pharma destocking | Double-digit volume declines persisted in Q3 FY24, driven by destocking in North America and Europe. Marginal improvement from Q2, but still weak. | Medical destocking ended in Q1 2025; pharma destocking persists, expected to abate by end of Q2 FY25. Healthcare volumes were a 2% drag. | Stabilizing, but still ongoing |
New focus categories (dairy, liquids) | Mentioned as priority categories driving low single-digit growth (e.g., cheese, meat). Less detail provided on liquids, but recognized as a focus area. | Dairy and liquids each generate $800M–$1B in revenue, posting mid-single-digit growth. Amcor plans to leverage these categories globally. | Increasing emphasis |
Consumer demand trends | Sequentially better in Q3 FY24; weak NA beverage and health care remained drags, but other segments stabilized or grew modestly. | Muted consumer demand remains, described as “flat or slightly down,” but broad-based improvement as destocking ends in most segments. | Gradual improvement |
Rising net debt leverage | Leverage around 3.4x in Q3 FY24, expected to drop to ~3x on stronger cash flow later in the year. | Net debt leverage at 3.5x, up from 2.3x last year, mainly from FX and inventory build. Targeting 3x or lower by FY25 year-end. | Still elevated |
Uncertain organic growth targets | Projected low-single-digit organic growth for FY24, factoring in share repurchases, FX benefits, and headwinds like Russia exit and higher costs. | No specific medium-term targets given; aims to exceed pre-COVID low-single-digit growth. Focus on improving volumes consistently. | Largely unchanged |
Restructuring cost savings | Program about two-thirds complete in Q3 FY24 with $110M spent. Yielded $15M in Q3 cost savings, targeting $50M annual benefit. | $170M total cash spend, 7 plant closures planned. $35M of the $50M annual savings already delivered, more expected by end of calendar 2024. | On track |
Potential margin pressure with higher volumes | No specific mention in Q3 FY24 earnings call. | Company sees potential to lift 20–30 bps historic improvement to 30–40 bps given leaner cost structure. Will adjust costs as volumes rise. | Newly discussed |
Weak demand in key segments | Health care volumes down double digits; NA beverage down 11%, though improving from earlier quarters. | Pharma (within health care) and NA beverage remain weak. Pharma volumes down low double digits; beverage down high single digits. | Slightly better vs. prior |
EPS guidance updates | Raised full-year FY24 EPS to $0.685–$0.71; expected mid-single-digit Q4 YoY EPS growth on improving volumes. | Reaffirmed $0.72–$0.76 range for FY25; Q2 EPS expected to be in line with Q1 at ~$0.162. | Maintaining outlook |
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Volume Growth and Outlook
Q: Are Q1 volumes as expected, and what's the outlook?
A: Volumes in Q1 grew by 2%, up 100 basis points from last quarter. Excluding healthcare and North American beverage, which comprise 25% of sales, the rest of the portfolio grew 4%. Flexibles increased 3%, and when excluding healthcare, they were up 5%. Medical destocking has ended, with growth returning, but pharma destocking continues and is expected to abate after Q2, setting up a better second half. We're pleased with the volume performance and expect sequential improvement in Q2. -
Innovation and New Products
Q: How are AmFiber and AmPrima performing?
A: AmPrima, our recyclable plastic-based product, is a sizable and growing part of our portfolio. AmFiber, a sustainable fiber-based packaging, is also growing but from a smaller base. These products are developed to meet regulatory trends like Europe's packaging waste regulation, offering recyclable solutions that align with consumer sustainability demands. -
Joint Venture Unwind
Q: What's the rationale behind unwinding the Bericap joint venture?
A: We unwound the joint venture due to differences with our partner over capital investment needed for growth and acceptable returns. We believe we can allocate capital more effectively elsewhere in the business. The closure business contributed about $190 million in annual sales and $19 million in EBIT, but the impact on net income will be minor after reinvesting proceeds to reduce debt. -
Margin Improvement Expectations
Q: Can margin improvement exceed 20–30 basis points?
A: While we've developed a leaner cost structure, we believe the 20–30 basis point annual margin improvement algorithm remains appropriate long term. We continue to drive efficiencies and manage costs tightly, but margins may vary with the business cycle. -
Net Debt and Leverage
Q: Why is net debt higher, and how will it change?
A: Leverage peaked at 3.5x, higher due to FX impacts and inventory build. We've increased inventories to meet strong demand signals and mitigate supply chain disruptions. We expect leverage to decrease, aided by cash flows of $900 million to $1 billion and proceeds from the Bericap disposal, bringing leverage down to 3x or below by June 2025. -
Organic Growth Targets
Q: What's the new target for organic growth?
A: We aim to outperform our pre-COVID expectations and achieve higher growth consistently going forward. While not specifying a number, we believe we can do better than the prior low single-digit top-line growth. -
Consumer Trends Impact
Q: How are consumer trends affecting key markets?
A: Consumer spending is flat or slightly down, and we don't expect much improvement. However, customers are balancing price and volumes better, with increased promotional activities benefiting us. Destocking is over, except in healthcare and North American beverages. We're seeing some market share gains, with momentum increasing. -
Rigid Packaging Outlook
Q: When will Rigid Packaging improve in profit and volume?
A: Rigid Packaging has returned to earnings growth over the past few quarters by adjusting costs and capacities. Volume improvement depends on consumer demand in discretionary categories like ready-to-drink teas and juices. As consumer sentiment improves, we expect better volumes and profitability in Rigids. -
Dairy and Liquids Opportunities
Q: What's the opportunity in dairy and liquids?
A: We have a strong position in North America, with annual revenues of $800 million to $1 billion in each category. By leveraging successful products globally, we see significant growth potential. -
Restructuring Costs
Q: What's behind the $13 million restructuring impact?
A: This relates to our cost-saving program following the disposal of the Russian business. We've announced 7 plant closures and 4 restructures, aiming for $170 million in total costs and $50 million in annualized benefits. We're on track to complete the program by end of calendar 2024.