Amcor plc FY2021 Form 10-K Summary
Reporting period: The supplied filing is Amcor plc’s annual report for the fiscal year ended June 30, 2021, filed August 24, 2021. It is not a 2020 Q4 filing; the requested period metadata does not match the source document. Comparisons below are primarily with fiscal year 2020.
Business Context
Amcor is a global packaging manufacturer serving food, beverage, pharmaceutical, medical, personal-care and other consumer-product markets. Its two reportable segments are Flexibles and Rigid Packaging, operating across more than 40 countries with approximately 46,000 employees and 225 significant manufacturing and support facilities.
- Flexibles represented approximately 78% of fiscal 2021 consolidated sales.
- Rigid Packaging represented approximately 22% of consolidated sales.
- Management’s strategy emphasizes a focused portfolio, differentiated capabilities, innovation, cash generation, acquisitions and sustainable packaging.
Financial Results and Key Metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $12.861 billion | $12.468 billion | Up 3.2% |
| Gross profit | $2.732 billion | $2.536 billion | Up 7.7% |
| Gross margin | 21.2% | 20.3% | Up 90 bps |
| Operating income | $1.321 billion | $994 million | Up 32.9% |
| Operating margin | 10.3% | 8.0% | Up 230 bps |
| Net income attributable to Amcor | $939 million | $612 million | Up 53.4% |
| Diluted EPS | $0.602 | $0.382 | Up 57.5% |
| Cash flow from operations | $1.461 billion | $1.384 billion | Up $77 million |
| Capital expenditures | $468 million | $400 million | Up $68 million |
| Total debt | $6.289 billion | $6.234 billion | Up $55 million |
| Net debt | $5.439 billion | $5.491 billion | Down $52 million |
Sales growth excluding disposed operations, currency effects and raw-material pass-through was 2.2%, driven by favorable volumes of 1.6% and favorable price/mix of 0.6%. The filing attributes the substantial profit improvement primarily to gross-margin improvement, Bemis-related synergies, the nonrecurrence of fiscal 2020 acquisition costs and lower interest expense.
- Flexibles: Sales increased 2.9% to $10.040 billion; adjusted EBIT increased 10.1% to $1.427 billion; adjusted EBIT margin improved to 14.2% from 13.3%.
- Rigid Packaging: Sales increased 3.9% to $2.823 billion; adjusted EBIT increased 5.3% to $299 million; adjusted EBIT margin improved to 10.6% from 10.5%.
- Liquidity: Cash and cash equivalents were $850 million, and $2.0 billion of revolving credit capacity was undrawn at June 30, 2021.
- Shareholder returns: Amcor paid $742 million in dividends and repurchased approximately $350 million of shares during fiscal 2021.
Material Changes Versus FY2020
- Operating income and margins improved materially, supported by volume growth, plant-cost performance, synergies and lower acquisition-related expenses.
- SG&A declined 6.7% to $1.292 billion, while restructuring and related expenses declined to $94 million from $115 million.
- Interest expense declined 26.1% to $153 million due to lower floating rates, commercial-paper usage and repayment of higher-cost debt.
- Operating cash flow increased 6%, although investing cash flow moved to a $233 million outflow from a $38 million inflow, reflecting higher capital spending and lower divestiture proceeds.
- The company issued $800 million of 10-year senior unsecured notes in May 2021 and canceled a $400 million term loan facility.
- Amcor sold its AMVIG equity investment for a $15 million net gain and completed additional non-core business disposals.
- The 2018 Rigid Packaging Restructuring Plan was completed by June 30, 2021. The Bemis integration plan remained in progress.
- Previously reported internal-control material weaknesses were remediated as of June 30, 2021; management and the auditor concluded that internal control over financial reporting was effective.
Guidance, Outlook, Risks and Unusual Items
- Management expects at least $180 million of annual pre-tax Bemis synergies by the end of fiscal 2022 and expects the integration plan to be substantially completed by then.
- Total pre-tax Bemis integration costs are estimated at $230 million to $240 million, with estimated net cash expenditures of $160 million to $170 million.
- Raw-material supply constraints and price volatility are expected to continue into at least the first half of fiscal 2022. Amcor generally seeks to pass higher input costs through to customers, but timing and recovery are not assured.
- COVID-19 disruptions were described as minimal to date because Amcor’s operations were generally treated as essential; however, future outbreaks, facility closures, supply-chain interruptions and demand volatility remain risks.
- Amcor identified risks from customer concentration, intense competition, acquisitions and integration, cyber incidents, labor disputes, environmental regulation, ESG expectations, foreign exchange, interest rates, LIBOR transition, commodity prices and credit ratings.
- Goodwill and other intangible assets totaled approximately $7.3 billion at June 30, 2021, including $5.419 billion of goodwill. No goodwill impairment was recorded, but the Flexibles Latin America goodwill assessment was identified as a critical audit matter because of sensitivity to projected growth, margins, terminal values and discount rates.
- Reported unusual or nonrecurring items included $88 million of material restructuring-program adjustments, $165 million of acquired-intangible amortization, a $19 million Brazil indirect-tax benefit, $19 million of Argentine hyperinflation impact and a $9 million net gain on disposals in the adjusted EBIT reconciliation.
- Subsequent to year-end, Amcor redeemed $400 million of 4.50% notes on July 15, 2021, declared a quarterly dividend of $0.1175 per share and authorized a new $400 million share-repurchase program on August 17, 2021.
Most Important Facts for Investors to Verify
- Confirm that the applicable period is FY2021 rather than 2020 Q4 and reconcile any analysis to the June 30, 2021 year-end.
- Assess whether the improved margins and earnings reflect sustainable operating improvements or temporary benefits from acquisition-cost normalization, restructuring, tax items and currency movements.
- Monitor execution of the Bemis integration plan, including the $180 million synergy target, remaining costs and expected cash expenditures.
- Evaluate leverage, refinancing requirements and sensitivity to interest rates, LIBOR replacement and credit-rating changes.
- Track raw-material availability, pass-through timing and potential margin pressure from resin, film, aluminum, energy and freight costs.
- Review goodwill and intangible-asset sensitivity, especially the Flexibles Latin America reporting unit.
- Consider the effect of COVID-19, environmental and plastics regulation, recycling requirements, ESG costs and geopolitical or foreign-exchange volatility.
- Review contingencies, including $64 million of recorded environmental remediation accruals, Brazilian tax matters and estimated reasonably possible Brazilian losses exceeding accruals by $17 million.