The Amcor (ASX: AMC) share price is under pressure on Thursday.
In morning trade, the packaging company's shares are down 3% to $14.11 following the release of its FY 2023 results.
Amcor share price lower on profit decline
- Net sales up 1% to US$14,694 million
- Net income down 11% (4% on constant currency) to US$1,048 million
- Adjusted earnings per share of 73.3 US cents
- Annual dividend increased to 49 US cents per share
- Guidance: Adjusted earnings per share of 67 to 71 US cents per share
What happened in FY 2023?
For the 12 months ended 30 June, Amcor reported a 1% increase in sales to US$14,694 million. This comprises flat Flexibles sales and a 4% lift in Rigid Packaging sales. Supporting its top line were price increases totalling approximately US$775 million related to the pass through of higher raw material costs.
Things weren't quite as positive for Amcor's earnings, with its net income falling 11% to US$1,048 million. It's also worth noting that this includes a US$215 million gain on the sale of Amcor's business in Russia, which partially offset margin weakness caused by higher costs.
Management commentary
Amcor's CEO, Ron Delia, acknowledged that FY 2023 was a tough year for the company. He said:
Throughout fiscal 2023, our teams did an excellent job proactively recovering inflation and reducing costs in a highly challenging environment. Adjusted EBIT grew modestly in comparable constant currency terms and we returned $1.2 billion of cash to shareholders. After delivering earnings growth of 8% in the first half, demand softened considerably and customer destocking persisted through the last two quarters of the year.
Outlook
Management is expecting its adjusted earnings per share to fall to 67 to 71 US cents per share in FY 2024. Though, it is worth noting that this guidance assumes a big recovery in the second half. Delia said:
While we expect current market conditions to continue in the near-term, we have visibility to a number of controllable factors we believe will support a return to solid earnings growth in the second half of fiscal 2024 and leave us well placed to grow at our long term trend of high-single digit rates thereafter.
We are pricing to compensate for inflation and we expect benefits from our cost reduction and productivity initiatives will have a favorable and sustainable impact on operating leverage. In addition, we expect the headwinds from the sale of our Russian plants and higher interest expense will be largely limited to the first half.
