Positive effect on Amcor stock as the company’s net income and free cash flow increase

Flattering exposure to the growth of both emerging and developed markets.
A well-defined strategy for increasing shareholder value.
Acquisitions that are bolt-ons provide an opportunity to supplement organic growth.
A strong balance sheet.
Leveraged against a falling AUD/USD
Advantages from the recently finished Bemis acquisition will begin to flow.
Capital management initiatives include a $500 million share buyback currently underway.

Key Risks

The following are the key challenges to the investment thesis:

Management fails to realise the proposed synergies in the Bemis transaction.
Increasing competition causing margin erosion and potential balance-sheet stress (e.g. reduced earnings leading to potential debt covenant breaches).
Cost constraints on inputs that the company is unable to pass on to customers (even though the Company does pass through input costs).
Global economic growth has slowed.
Value-destroying acquisition.
The risk of emerging markets.
Unfavorable movements in the AUD/USD.

Highlights of key FY21 results

EBIT increased by 8% to $1,621 million, with margins enhancing by +60 basis points to 12.6 percent.
GAAP net income of $939 million, a +53 percent increase, translates to GAAP EPS of 60.2 cents, a +58 percent increase (or adjusted EPS of 74.4 cents, a +16 percent increase on a CC basis, above guidance range).
Adjusted FCF of $1.1bn, flat -9.9 percent over pcp (albeit at the upper end of guidance range), effected by rising capex on organic growth projects, lower working capital benefit, and adverse tax payment timing compared to pcp.
Return on average funds employed of 15.4 percent, an increase of +140 basis points over the pcp.
The Board declared a final dividend of 11.75 cents per share, bringing the full-year dividend to 47 cents per share, and repurchased $350 million (2% ) of outstanding shares.

Company Description

Amcor Limited (AMC) is an international integrated packaging company offering packing and related services. Amcor primarily produces a wide range of packaging products which include corrugated boxes, cartons, aluminum and steel cans, flexible plastic packaging, PET plastic bottles and jars, and multi-wall sacks. The company has operations in Australasia, North America, Latin America, Europe and Asia.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.