Home / Opinion / Amcor (ASX:AMC) bags a dividend increase

Amcor Plc (ASX: AMC) has announced its FY21 half-year result, revealing further profit growth.

Amcor is a large manufacturer of packaging for food, beverage, pharmaceuticals and so on. It makes both flexible and rigid packaging.

HY21 growth for Amcor

Amcor said that its net income increased by 65 per cent to US$417 million ($548.7 million) while profit/earnings per share (EPS) went up 71 per cent, to 26.5 cents.

However, Amcor also reports some ‘adjusted’ results which exclude items that management consider as not representative of ongoing operations.

The packaging business said that in constant-currency terms, its net sales increased by 3% to US$6.2 billion ($8.1 billion).

Amcor’s adjusted EBITDA and EBIT went up by 4% and 6% respectively (EBITDA and EBIT explained) to US$948 million ($1.2 billion) and US$743 million ($978 million). Net profit grew by 10% to US$522 million ($687 million) and adjusted EPS rose 14 per cent to US 33.3 cents.

The only decrease in the numbers was an 11 per cent fall in free cashflow, to US$276 million ($363 million).

Amcor made a few comments about the Bemis business, which it acquired in June 2019. It has continued to integrate the business and it has delivered approximately US$35 million of pre-tax cost synergies. Amcor is expecting cost synergy benefits of around US$70 million for FY21, there had previously been expectations of a range from US$50 million to US$70 million.

Amcor thinks it can deliver total cost synergies of US$180 million by the end of FY22.

Amcor Dividend

The Amcor board decided to declare a quarterly cash dividend of 11.75 US cents (15.21 cents) per share, up 2.2%.

Management comments and outlook

Amcor CEO Ron Delia said: “We have built momentum in both operating segments resulting in adjusted EBIT growth of 9% in flexibles and 10% in rigid packaging in constant currency terms. That momentum translates into higher expectations for the full year with adjusted EPS growth now forecast at 10% to 14% in constant-currency terms, as well as an increased dividend and additional share repurchases.

“Amcor’s investment case remains as strong as ever. We are well-positioned to continue generating growth from attractive consumer and healthcare end-markets, our leadership and scale in emerging markets and our extensive innovation capabilities. With annual free cashflow of more than $1 billion, we have substantial capacity to create value for shareholders by reinvesting in the business, pursuing acquisitions, and returning capital through a compelling and growing dividend and share repurchases.”

Summary thoughts

If I were trying to outline a bullish case for Amcor, I don’t think I could do it better than how the Amcor CEO said it.

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