The Amcor (ASX: AMC) share price is falling following the release of its half year update.
At the time of writing, the packaging company's shares are down 1.5% to $16.75.
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Amcor share price falls despite reporting solid growth
- Net sales up 12% to US$6,927 million
- Adjusted earnings before interest and tax (EBIT) up 5% to US$769 million
- Adjusted earnings per share (EPS) up 9% to 35.8 US cents
- Quarterly dividend of 12 US cents declared
- Additional US$200 million share buyback announced, bringing total to US$600 million in FY 2022
- Full year guidance for adjusted EPS growth of 7% to 11% in constant currency reaffirmed
What happened during the first half?
For the six months ended 31 December, Amcor delivered a 12% increase in sales to US$6,927 million. This reflects Flexibles sales growth of 10% to US$5,347 million and Rigid Packaging sales growth of 17% to US$1,580 million. Management advised that the majority of its sales growth was driven by price increases, which related to the pass through of higher raw material costs.
As for its earnings, Amcor's EBIT rose 5% to US$769 million. This reflects Flexibles EBIT growth of 6% to US$691 million, which offset a 13% decline in Rigid Packaging EBIT to US$117 million. The latter was caused by supply chain disruptions and raw material shortages.
In light of its positive form, management has increased its FY 2022 share buyback by US$200 million to US$600 million. However, it advised that the additional share repurchases are not expected to benefit EPS growth until FY 2023 as there will be no material impact on the weighted average number of shares outstanding in FY 2022.
Management commentary
Amcor's CEO, Ron Delia, was pleased with the company's performance given the challenging operating environment.
He said: "Amcor delivered a solid first half result as our teams continue to successfully navigate a persistently challenging and dynamic operating environment. Across the business we continued to prioritize our customers and our scale and operational agility enabled us to service demand in key segments, driving growth and sales mix improvements."
"At the same time, we implemented a broad range of actions to recover higher input costs and manage through general inflation. As a result, sales grew 12% and we delivered 9 percent adjusted EPS growth year to date. We remain confident in the outlook for fiscal year 2022, enabling us to reaffirm guidance and increase cash returns to shareholders."
Outlook
Although Mr Delia acknowledges that operating conditions remain volatile, he remains confident on the future.
He said: "While the external environment will continue to evolve, we remain focused on executing our strategy for long-term value creation from the strong foundation established over the last several years. The Amcor investment case has never been stronger and we are increasing investments in premium segments like healthcare and protein, in emerging markets and in our innovation capabilities to drive growth and margin expansion."
The company has reaffirmed its FY 2022 guidance for earnings per share growth in the range of 7% to 11% and adjusted free cash flow of US$1.1 billion to US$1.2 billion.
