Here’s why Amcor (ASX:AMC) should be on investors’ radar

Summary

  • Amcor PLC has reported GAAP net income of $417 million in 1H FY21.
  • The company has delivered an approximately $35 million (pre-tax) of incremental cost synergies, owing to Bemis acquisition.
  • The board has approved the repurchase plan of further $200 million of ordinary shares.

On 3 February 2021, Amcor PLC (ASX:AMC) released its business update and half-yearly result for the period ended 31 December 2020. The company has reported GAAP net income of $417 million which is up by 65 per cent over the previous corresponding year (pcp).

Image Source: © Kalkine Group 2021

GAAP earnings per share (EPS) has also seen an uptick of 71 per cent to 26.5 cents per share (cps), compared to the previously reported 15.5 cps in 1H FY20. The GAAP net sales remained almost unchanges at $6.2 billion, compared to $6.18 billion in 1H FY20.

Image Source: Amcor’ ASX update, dated 3 February 2021

Bemis cost synergies

The company had acquired Bemis business way back in June 2019 through an all-stock transaction. Amcor has delivered approximately $35 million (pre-tax) of incremental cost synergies during the reported period.

As a result of this strong performance, Amcor expects to deliver circa $70 million (pre-tax) of cost synergies in fiscal 2021.

Read More: Amcor Stands tall amid COVID-19 outbreak, Continues Business Securing Supplies for the Global Population

Share repurchase

The company has substantial capacity to reinvest in the business simultaneously, aim new acquisitions, and return cash to the shareholders through attractive dividends and share repurchases.

The board has approved the repurchase plan of further $200 million of ordinary shares and CDIs, totalling to $350 million of approved cash return via share repurchase in fiscal 2021.

Cash flow Update

Image Source: Amcor’ ASX update, dated 3 February 2021

For the reported period, the free cash flow stood at $276 million. This excludes an unfavourable impact of almost $50 million related to the US cash tax payment, which was deferred from the fourth quarter of fiscal 2020.

FY21 Guidance

For the FY21, the company estimates to clock free cash flow of approximately $1 billion to $1.1 billion. The EPS growth is estimated at 10 per cent – 14 per cent over the fiscal 2020 EPS of 64.2 US cents. Assuming the current currency exchange rate, the company does not see any material impact on EPS.

The company’s guidance contemplates a range of factors, including the pandemic situation, which pose a high degree of uncertainty.  

Stock Performance

Amcor’s share price closed at A$14.39 (as of 2 February 2021). The stock has been in a mild downtrend for the last three months, delivering a negative return of almost 7 per cent. The one-year return is also a negative 9.4 per cent.  

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