Amcor(US:AMCR)2023-11-01 10:22Part I Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended September 30, 2023, covering income, balance sheets, cash flows, equity, and notes on accounting policies, acquisitions, and restructuring activities Condensed Consolidated Statements of Income Amcor reported Q1 FY24 net sales of $3,443 million, down from $3,712 million, with net income attributable to Amcor plc decreasing to $152 million from $232 million, and diluted EPS falling to $0.105 from $0.155 Consolidated Income Statement Highlights (Q1 FY24 vs Q1 FY23) | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | 3,443 million | 3,712 million | -7.2 | | Gross Profit | 645 million | 668 million | -3.4 | | Operating Income | 270 million | 342 million | -21.1 | | Net Income Attributable to Amcor plc | 152 million | 232 million | -34.5 | | Diluted EPS | 0.105 | 0.155 | -32.3 | Condensed Consolidated Balance Sheets As of September 30, 2023, Amcor's total assets were $16,683 million, slightly down from $17,003 million, with total liabilities at $12,719 million and shareholders' equity at $3,964 million Balance Sheet Summary | Metric | September 30, 2023 ($) | June 30, 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | 5,085 million | 5,308 million | | Total Assets | 16,683 million | 17,003 million | | Total Current Liabilities | 4,005 million | 4,476 million | | Total Liabilities | 12,719 million | 12,913 million | | Total Shareholders' Equity | 3,964 million | 4,090 million | Condensed Consolidated Statements of Cash Flows In Q1 FY24, net cash used in operating activities improved to $135 million from $260 million, while net cash used in investing activities decreased to $142 million, resulting in a period-end cash balance of $524 million Cash Flow Summary (Q1 FY24 vs Q1 FY23) | Cash Flow Activity | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (135 million) | (260 million) | | Net Cash Used in Investing Activities | (142 million) | (240 million) | | Net Cash Provided by Financing Activities | 141 million | 326 million | | Net Decrease in Cash | (165 million) | (213 million) | | Cash and Cash Equivalents at End of Period | 524 million | 562 million | Notes to Condensed Consolidated Financial Statements The notes detail financial statements, covering new accounting guidance for supplier finance, recent acquisitions, 2023 Restructuring Plan costs, segment performance, contingencies, and subsequent events like dividend declarations - The company adopted new disclosure requirements for its voluntary supply chain financing (SCF) programs. As of September 30, 2023, amounts due to suppliers participating in these programs totaled $900 million, down from $1,100 million at June 30, 20232930 - In Q1 FY24, the company acquired a flexible packaging manufacturer in India for $14 million plus $10 million in assumed debt. This follows two acquisitions in FY23: a protein packaging machine manufacturer in New Zealand ($45 million) and a medical device packaging site in China ($60 million)333435 - The 2023 Restructuring Plan, funded by proceeds from the sale of the Russian business, is expected to cost $200-$220 million. As of September 30, 2023, the company has incurred $120 million in net expenses under this plan3943 - The company has contingencies related to tax claims in Brazil, with recorded accruals of $13 million and a reasonably possible additional loss exposure of $25 million. Environmental remediation accruals total $62 million ($9 million for waste disposal sites and $53 million for company-owned sites)107109 - Subsequent to the quarter's end, on October 31, 2023, the Board of Directors declared a quarterly cash dividend of $0.1250 per share113 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY24 financial results, noting a 7% net sales decrease and 34% net income drop due to market conditions and destocking, covering segment performance, restructuring impact, higher interest expenses, and increased net debt to $6.6 billion Significant Developments Affecting the Periods Presented The company faced challenging Q1 FY24 economic conditions, including customer destocking, soft demand, and inflation, leading to higher borrowing costs and the ongoing $200-$220 million 2023 Restructuring Plan - Market conditions remained challenging with continued customer destocking and soft consumer demand, which are expected to persist in the near term119 - The 2023 Restructuring Plan, funded by proceeds from the sale of the Russian business, is expected to have total net expenses of $200-$220 million. As of September 30, 2023, projects with an expected net cost of $170 million have been initiated122123 - Highly inflationary accounting for Argentine subsidiaries resulted in a negative impact of $17 million in Q1 FY24, compared to $8 million in the prior year period125 Results of Operations Consolidated net sales for Q1 FY24 fell 7% to $3.4 billion due to volume decline, with net income dropping 34% to $152 million, impacted by sales and Adjusted EBIT declines in both Flexibles and Rigid Packaging segments, alongside higher interest and restructuring costs Flexibles Segment Performance (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY2024 ($) | Q1 FY2023 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | 2,568 million | 2,779 million | -8 | | Adjusted EBIT | 322 million | 353 million | -9 | | Adjusted EBIT Margin | 12.5% | 12.7% | -0.2 p.p. | Rigid Packaging Segment Performance (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY2024 ($) | Q1 FY2023 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | 875 million | 933 million | -6 | | Adjusted EBIT | 62 million | 66 million | -5 | | Adjusted EBIT Margin | 7.1% | 7.1% | 0.0 p.p. | - Interest expense increased by 44% to $85 million in Q1 FY24 from $59 million in Q1 FY23, driven by higher interest rates136 - Restructuring expenses increased significantly to $28 million from $1 million in the prior year, mainly due to the 2023 Restructuring Plan134 Presentation of Non-GAAP Information This section reconciles GAAP to non-GAAP measures, showing Q1 FY24 Adjusted EBIT at $358 million (down from $392 million) and Adjusted net income at $226 million (compared to $271 million), after excluding items like amortization and restructuring costs Reconciliation of Net Income to Adjusted EBIT and Adjusted Net Income | Metric | Q1 FY2024 ($) | Q1 FY2023 ($) | | :--- | :--- | :--- | | Net income attributable to Amcor plc | 152 | 232 | | EBIT | 268 | 342 | | Adjustments | 90 | 50 | | Adjusted EBIT | 358 | 392 | | Adjusted net income | 226 | 271 | Liquidity and Capital Resources The company's liquidity is primarily from operating cash flow and borrowings, with net debt increasing to $6.6 billion from $6.1 billion, maintaining investment-grade ratings and $1.0 billion in undrawn credit facilities, while repurchasing $30 million in shares - Net debt increased to $6.6 billion as of September 30, 2023, from $6.1 billion as of June 30, 2023144165 - As of September 30, 2023, the company had $1.0 billion in undrawn credit facilities available and was in compliance with all debt covenants165166 - During the quarter, the company repurchased approximately $30 million of its shares as part of a $100 million buyback program announced in February 2023169 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk during Q1 FY24, encompassing interest rates, commodity prices, and currency fluctuations, which are managed via derivative instruments - There have been no material changes in the company's market risk during the first quarter of fiscal year 2024171 Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective173 - There were no material changes in internal control over financial reporting during the first quarter of fiscal year 2024174 Part II Legal Proceedings This section incorporates by reference legal proceedings and contingencies from Note 13 of the financial statements, including tax matters in Brazil and environmental remediation obligations - Information regarding legal proceedings is detailed in Note 13, "Contingencies and Legal Proceedings," of the financial statements176 Risk Factors The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2023 - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023177 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's Q1 FY24 share repurchase activities, totaling 6.65 million shares at an average price of $11.27, with 3.15 million shares under the public buyback program, leaving $39 million available Share Repurchase Activity (Q1 FY24) | Period | Total Shares Purchased (millions) | Avg. Price Paid Per Share ($) | Shares Purchased Under Program (millions) | Remaining Program Value ($ millions) | | :--- | :--- | :--- | :--- | :--- | | July 2023 | 0 | — | 0 | 69 | | August 2023 | 3.842 | 12.57 | 0.342 | 66 | | September 2023 | 2.809 | 9.49 | 2.809 | 39 | | Total | 6.651 | 11.27 | 3.151 | 39 | Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents