Amcor announces job cuts and plant closures

Company News

by Glenn Dyer

For thousands of Amcor (ASX:AMC) employees, the company's exposure to world economic activity took a harsh turn in the six months leading to December, as confirmed by Wednesday's quarterly and interim results.

The company disclosed that it had axed 2,000 jobs and is progressing towards closing up to 10 plants globally in a cost-cutting effort to combat sluggish consumer demand for beverages and meat, alongside de-stocking by pharmaceutical customers in the aftermath of the pandemic.

CEO Ron Delia reported a record 10% decline in volumes across the Amcor business in the three months to December, with sales plummeting by 9% to $US6.69 billion ($A10.25 billion) for the six months ending December 31. Interim net profit also saw a significant drop to $US286 million, down from $US691 million a year earlier.

Despite the grim outlook, the company raised its dividend for the quarter to 12.5 US cents a share, unchanged from the September quarter but up from the 12.25 US cents paid in the same quarter of 2022.

Amcor's Flexibles packaging business experienced a 10% decrease in sales, with gains in categories like condiments, snacks, and confectionary offset by declines in healthcare, meat, and liquid beverage volumes. Similarly, its Rigid Packaging business reported a 7% sales decline, primarily due to a sharp drop in beverage volumes.

In a statement, Mr. Delia acknowledged the challenging market conditions but expressed confidence in achieving full-year earnings and cash flow guidance for the 2024 fiscal year. He highlighted proactive cost reduction measures and anticipated improvements in volume and momentum in the second half, including mid-single-digit adjusted earnings growth in the fiscal fourth quarter.

Despite challenges, Amcor remains optimistic about its long-term value creation strategy, intending to invest in organic growth, pursue acquisitions or share repurchases, and maintain a compelling dividend for shareholders.

Amcor shares surged 2% following the announcement, reflecting investor confidence in the company's margin protection strategies and prospects for a better June quarter. While shares are up 3% year-to-date, they remain down more than 15% over the past year.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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