AmcorAMCR

Key highlights

• Profit drop from intangible assets: Reported earnings were $0.52 per share, which includes a $0.30 per share charge for the non-cash cost of spreading out the value of brands and patents bought in acquisitions. After removing these and other one-time items, underlying earnings were $0.95 per share, showing the core business is slightly behind the $0.97 earned a year ago.
• Volume growth returns: The company sold 1% more packaging by volume this quarter, a turnaround from the 1.5% decline seen earlier this year. This growth was led by the rigid packaging division, which saw volumes rise 4% when excluding businesses the company has sold or is closing.
• Energy and distribution headwinds: Higher costs for moving goods and powering factories reduced profit growth, even as the company saved $50 million through its merger with Berry Global. These expenses were a primary reason adjusted profit stayed flat at $689 million compared to the same period last year.
• Cash flow deficit deepens: The company reported a free cash outflow of $820 million, which is more than double the $343 million outflow from a year ago. This was driven by spending $1.17 billion on working capital, meaning money tied up in daily operations, largely due to volatile prices for resin, which is the raw plastic used for packaging.
• Earnings outlook lowered: Management lowered its adjusted earnings guidance to a range of $1.70 to $1.80 per share for the current six month transition period, down from the previous $1.80 to $1.90. The cut is due to a delay in passing higher energy and shipping costs on to customers, though the company expects to fix this by the 2027 calendar year.

Our take: This was a soft quarter despite the improvement in sales volumes. While it is good to see customers buying more packaging again, higher shipping and energy costs are eating into the benefits of the Berry Global merger. The lowered outlook suggests these pressures will linger through the end of the year, keeping the recovery on hold.