Amcor reports year to date results and raises outlook for fiscal 2020 - 11.05.20 - News

ZURICH, May 11, 2020

Highlights - Nine Months Ended March 31, 2020⁽¹⁾

GAAP net income of $433 million and earnings per share (EPS) of 26.9 cents per share;
Adjusted EBIT of $1,059 million, up 6.9% in constant currency terms;
Adjusted EPS of 44.7 cents per share, up 13.7% in constant currency terms;
Bemis integration progressing well with year to date pre-tax synergy benefits of $55 million;
Adjusted free cash flow of $367 million, up $217 million;
Quarterly dividend of 11.5 cents per share declared;
3.2% of outstanding shares repurchased year to date; and
Fiscal 2020 outlook for adjusted EPS growth in constant currency terms increased to 11-12%.

Well positioned and demonstrating resilience

Amcor's CEO Mr. Ron Delia said: "During this period of unprecedented challenge, the vital role that primary packaging plays in the supply of essential food, beverage and healthcare products has never been clearer. Right now, consumers are especially focused on product safety, hygiene, shelf life and convenience, and Amcor is helping meet those needs around the world with packaging for consumer staples. I am extremely proud of the commitment and dedication our 50,000 co-workers are demonstrating every day to continue supplying our customers during these difficult times and we cannot thank them enough."

"While we are not immune from the current challenges, Amcor remains relatively well positioned and defensive, given our sales are almost entirely weighted to essential consumer staples end markets and we have broad geographic diversification and global scale. For the second consecutive quarter we have increased guidance for the 2020 fiscal year. Earnings growth has remained strong due to momentum in the base business and faster than expected synergies from our acquisition of Bemis last year. Amcor continues to deliver consistent cash flow and the Board remains committed to a compelling dividend."

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"While the near term environment remains uncertain, we are confident in the defensiveness and underlying potential of the business. We have visibility to organic growth from defensive end markets, cost synergies from the Bemis acquisition and the EPS benefits from shares repurchased this year. Amcor has a strong balance sheet and we expect to generate over $1 billion of annual free cash flow, enabling continued investment in the business and cash returns to shareholders."

Key Financials⁽¹⁾

			Nine Months Ended March 31,
GAAP results			2019	2020
Net sales			6,855	9,325
Net income			350	433
EPS (diluted US cents)			30.1	26.9

	Nine Months Ended March 31,		Reported ∆%	Constant Currency ∆%
Adjusted non-GAAP results	Combined 2019	2020
Net sales	9,663	9,325	(3.5)	(1.8)
EBITDA	1,346	1,378	2.4	4.0
EBIT	1,007	1,059	5.2	6.9
Net income	649	719	10.8	12.7
EPS (diluted US cents)	40.0	44.7	11.7	13.7
Free cash flow (before dividends)	150	367	144.7

(1) GAAP results for the prior year reflects the legacy Amcor business only. Adjusted non-GAAP results exclude items which management considers as not representative of ongoing operations. Adjusted non-GAAP combined results for the prior period are presented as if the Company's acquisition of Bemis had been consummated as of July 1, 2018 and also exclude items which management considers not representative of ongoing operations. See "Presentation of Prior Year Financial Information" for more information. In addition, reconciliations of these non-GAAP measures to their most comparable GAAP measures, including pro forma measures prepared in accordance with SEC Regulation S-X Article 11, are included in the "Reconciliation of Non-GAAP Measures" section of this release.
Note: All amounts referenced throughout this document are in US dollars unless otherwise indicated and numbers may not add up precisely to the totals provided due to rounding.

COVID-19 update

Amcor's operations have been recognized as 'essential' by governments and authorities around the world given the role the Company plays in the supply chains for critical food and healthcare products. In dealing with the exceptional challenges posed by COVID-19, Amcor has established three guiding principles:

Keeping our employees healthy - The health and safety of our co-workers is one of our values and always Amcor's first priority. Around the world, local teams have implemented a range of practices including more frequent cleaning and disinfection, increased physical distancing in work and break out spaces, restricted visitor access, temperature screening, protective masks and flexible working from home arrangements.
Keeping our operations running - To support our business partners, every Amcor plant and office has business continuity plans in place which address infection prevention measures, incident response, return to work protocols and supply chain risks.
Contributing to relief efforts in our communities - Amcor has launched a global program to help mitigate the impact of COVID-19 by donating food and healthcare packaging products and by funding local community initiatives to improve access to healthcare, education or food and other essential products.

From the start of the COVID-19 outbreak to the current point in time, the Company has operated its 250 plants around the world with minimal disruption and has not experienced significant business continuity issues related to accessing raw materials. To date, operating costs have also not been materially impacted.

The extent to which the global pandemic influenced overall demand for the Company's products in the third quarter is unclear as certain regions and segments appear to have benefited while others were constrained. For example, the Company has seen good demand for healthcare globally and most food and beverage end markets were relatively strong in the developed world but weaker in emerging markets including China and India. Volumes in the Flexibles North America business were 4% higher than the March quarter last year. In the Specialty Cartons and Flexibles Latin America businesses, volumes improved compared with the first six months of the year, but remain below the prior year on a year to date basis.

The ultimate near-term impact of the pandemic on the Company's businesses, including the fourth quarter, will depend on the extent and nature of any future disruptions across the supply chain, the duration of social distancing measures and other government imposed restrictions and the nature and pace of macroeconomic recovery in key global economies.

Longer term, notwithstanding the current uncertainty, Amcor's business is expected to remain defensive as the Company continues to play an important role in the supply chain for essential consumer goods. Combined with a strong balance sheet, a global plant network and dedicated workforce, the business is expected to continue demonstrating resilience and remain well positioned to generate value for all stakeholders.

Presentation of Prior Year Financial Information

On June 11, 2019, the all-stock acquisition of Bemis Company, Inc. was completed. Amcor was determined to be the acquirer for accounting purposes and, as a result, financial information prepared under U.S. generally accepted accounting principles ("U.S. GAAP") for periods prior to the completion date reflects the historical financial information for the legacy Amcor business only.

Financial information included in this release and described as "Combined" is being presented to allow shareholders to more easily compare the current year results with the prior year results. The Combined results represent non-GAAP measures that provide stakeholders with an additional perspective on the Company's financial and operational performance and trends. The Combined results are presented as if the Company's acquisition of Bemis had been consummated as of July 1, 2018 and exclude the impact of non-recurring acquisition and integration related costs, acquisition related amortization expenses, and other items management considers as not representative of ongoing operations.

The presentation of non-GAAP combined measures is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. Reconciliations of non-GAAP combined measures to their most comparable GAAP measures, including pro forma measures, prepared in accordance with SEC Regulation S-X Article 11, are included in the "Reconciliation of Non-GAAP Measures" section of this release.

Bemis Acquisition Update

Progress on the integration of Bemis, acquired in an all-stock transaction in June 2019, continues ahead of initial expectations for the first year.

The Company has delivered approximately $55 million (pre-tax) of cost synergies year to date, primarily from overhead and procurement initiatives, of which $40 million was recognized in the Flexibles segment and $15 million in Other. Amcor continues to expect synergy benefits of approximately $80 million (pre-tax) in fiscal 2020, and remains on track to achieve $180 million (pre-tax) in synergy benefits by the end of fiscal 2022.

Cash restructuring and integration costs of approximately $69 million have been incurred year to date out of approximately $100 million expected in fiscal 2020. Total cash integration costs by the end of fiscal 2022 are estimated to be $150 million.

Capital Returns to Shareholders

$500 Million On-Market Share Buy-Back

Amcor repurchased 51.5 million shares (3.2% of outstanding shares) during the nine months ended March 31, 2020 for a total cost of $478 million. The Company expects to complete the $500 million buy-back program by the end of fiscal 2020.

Dividend

The Amcor Board of Directors today declared a quarterly cash dividend of 11.5 cents per share. The dividend will be paid in US dollars to holders of Amcor's ordinary shares trading on the NYSE. Holders of CDIs trading on the ASX will receive an unfranked dividend of 17.7 Australian cents per share, which reflects the quarterly dividend of 11.5 cents per share converted at an average AUD:USD exchange rate of 0.6481 over the five trading days ended May 4, 2020.

The ex-dividend date will be May 27, 2020, the record date will be May 28, 2020 and the payment date will be June 17 2020. Amcor has received a waiver from the ASX's settlement operating rules, which will allow Amcor to defer processing conversions between its ordinary share and CDI registers from May 27, 2020 to May 28, 2020, inclusive.

Year-to-date results (nine months ended March 31, 2020)⁽¹⁾

Segment Information

Combined

Nine Months Ended March 31, 2019

Nine Months Ended March 31, 2020

Adjusted Result

Net sales

$ million

EBIT

$ million

EBIT /

Sales %

EBIT / Average
funds
employed %⁽²⁾

Net sales
$ million

EBIT

$ million

EBIT /
Sales %

EBIT / Average
funds
employed %⁽²⁾

Flexibles

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