Amcor plc

AMC Details
 
Strategic Collaboration to Aid Stronger Value Proposition:Amcor plc (ASX: AMC) is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home and personal-care, and other products. The company focuses on making packaging that is increasingly light-weighted, recyclable and reusable, and made using a rising amount of recycled content. The company has three reporting segments namely flexibles, rigid packaging and other. During June 2019, AMC successfully acquired Bemis Company Inc.

FY19 Performance Highlights:Amcor PLC declared its annual results for the year ended June 2019 wherein, the company posted sales at US$9,458.2 million, up ~1.5% y-o-y while adjusted net income came in at US$729.5 million, up ~4.6% on FY18. During FY19, both top-line and bottom-line witnessed a negative currency impact of 4% and 4.4%, respectively.  AMC reported EBIT growth of ~1.8% on y-o-y at US$1,075.4 during the year. The business witnessed sales increase in Europe, driven by growth across healthcare, pet care, coffee and ready meals segments while, product mix within the snacks and confectionary and fresh food segments were unfavorable during the period. Both Europe and Americas witnessed a strong growth in the healthcare business. In the North America business, beverage volumes were up ~1% on y-o-y while combined preform and cold fill container volumes were 4% lower than the prior year. Volume growth across smaller regional customers remained strong in FY19. Rigid packaging volumes across Latin America grew by ~3% on y-o-y which includes lower volumes in Argentina. Excluding Argentina, volumes were ~10% higher on yoy in Mexico, Colombia and Brazil. Economic conditions in Argentina was adversely impacted due to low consumer demand throughout the period. Asia Pacific, on the other hand reported higher sales aided by growth across the emerging markets. During FY19, operating and overhead expenses came significantly lower than last year due to included benefits from prior period cost savings initiatives.
 

FY19 Financial Highlights (Source: Company Reports)
 
The Board of Directors declared an unfranked dividend of USD0.12000000 for each ordinary share held, payable on 8 October 2019. Annualized dividend yield for the stock stands at 4.4%.
 
Outlook:As per the Management guidance, FY20 EPS is expected to see a growth in the range of 5% to 10% on adjusted constant currency at 61.0 to 64.0 US cents. This guidance range is including pre-tax synergy benefits associated with the Bemis acquisition of U$65 million. The company expects Cash flow after dividends to be in the range of US$200 million to US$300 million, after deducting approximately US$100 million of cash integration costs. Further, the management expects general corporate expenses to be in the range of U$160 to U$170 million in constant currency terms. Net interest costs is forecasted between U$230 million to U$250 million on constant currency terms, followed by adjusted effective tax rate range at 21% to 23%.

Stock Recommendation: The stock of AMC is trading at $14.280 with a market capitalization of $23.79 billion. The 52-week trading range of the stock stands at $12.665 to $16.740 and currently, the stock is trading below the average of its 52-week high and low prices. The stock has generated a negative return of 6.87% and 1.28% in the last three-months and six-months, respectively. The stock is available at an Enterprise Value to EBITDA multiple of 7.1x on Trailing Twelve Months (TTM) basis as compared to the industry median of 7.8x. Enterprise Value to Sales multiple for the stock stood at 1.1x as compared to industry median of 1.2x. Strategic collaboration with Bemis Company, Inc establishes Amcor as the global leader in consumer packaging with a comprehensive global footprint, scale in every region and industry leading R&D capabilities. Combining the above factors, we believe the company possesses substantial differentiation in the packaging industry which underpin a stronger value proposition for the shareholders and clients. Considering the aforesaid facts, valuations and business prospects, we recommend a 'Buy' rating on the stock at the current market price of $14.280; while the stock was down 2.392% as on 17 September 2019 owing to market's bearish sentiment on future volume growth in view of changing stance on use of plastics.

 
Daily Price Chart (Source: Thomson Reuters)

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