The Amcor (ASX:AMC) share price has lost 8% in 4 weeks. What’s happening?

Are global supply chain issues at fault?

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a woman looks disappointed with a package she has unpacked holding her arms up at a box with bubble wrap beside it.

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Investors watching the Amcor plc (ASX: AMC) share price probably want to pack it up and send it away. Over the past month, shares in the blue-chip company have fallen hard – losing 7.87% in that time. The S&P/ASX 200 Index (ASX: XJO), meanwhile, is only 2.89% lower.

By the end of trade on Tuesday, shares in the packaging manufacturer were 0.24% lower to $16.33 despite the ASX 200 ending 0.35% higher.

While the company hasn’t made any price-sensitive announcements in that time, something is clearly spooking investors.

Let’s take a closer look.

Amcor FY21 results

While announced just over a month ago, investors may still be analysing the entrails of the Amcor FY21 results. It’s possible they could still be affecting the Amcor share price.

To recap, for the 12 months to 30 June, Amcor declared the following:

  • Net income of $939 million (up 53%).
  • Earnings per share (EPS) of 60.2 cents (up 58%).
  • Adjusted free cash flow of $1.1 billion, which was at the upper end of its guidance.
  • An annual dividend of 47 cents per share, including a final dividend of 11.75 cents per share.

Looking forward, Amcor says it expected a strong financial year but that COVID-19 created “a high degree of uncertainty” for the company. It forecast EPS to grow between 7% to 11% by the end of FY22, which would be somewhere between 79 to 81 cents.

Amcor is also looking to purchase $400 million worth of shares off the market this financial year.

This predicted uncertainty may be one reason for the lagging Amcor share price.

Is the delta variant affecting the Amcor share price?

Being a global packaging company, supply chain logistics for most industries, but especially consumer goods, are crucial for Amcor’s financial performance. More goods being shipped means more packaging needed which, in turn, means more revenue for Amcor and potentially a better Amcor share price.

However, there are currently constraints in the global supply chain.

As Alastair MacLeod of Wheelhouse Partners wrote:

“Historically the global supply chain, and the shipping industry that underpins it, operates in an orderly market with a relatively smooth flow of containers and ships around the world. However, due to the stop-start nature of the current economy, this orderly flow has been majorly impacted.”

MacLeod goes on to list several examples where the delta variant has caused supply issues – such as the shutdown of China’s third busiest port, Ningbo, and a shortage of truck drivers in the US.

As well as a shortage in supply, MacLeod argues there has been a spike in demand in “durable goods” such as vehicles and white goods because of the pandemic. Consumers haven’t been able to spend their money on holidays and leisure and so have turned to purchasing products, usually online.

“Pre-pandemic supply chains were not designed for this level of sharp demand shift and this imbalance and demand for containers is impacting the traditional flow of goods in every other global market,” according to MacLeod.

These supply chain issues may be another reason for the falling Amcor share price.

Amcor share price snapshot

Over the past 12 months, the Amcor share price has risen 5.76%. This is a 19-point underperformance of the ASX 200. Year-to-date, it is 6.45% higher. This also falls short of the performance of the benchmark index.

The company has a market capitalisation of around $25 billion.

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Motley Fool contributor Marc Sidarous owns shares of Amcor Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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