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    AMC   AU000000AMC4

AMCOR PLC

(AMC)
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AMCOR : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/06/2021 | 06:25am EDT
Management's Discussion and Analysis ("M,D&A") should be read in conjunction
with the Financial Statements and Notes to Condensed Consolidated Financial
Statements. Throughout the M,D&A, amounts and percentages may not recalculate
due to rounding.

Summary of Financial Results
                                                     Three Months Ended March 31,                                               Nine Months Ended March 31,
($ in millions)                                2021                                  2020                                 2021                                 2020
Net sales                        $      3,207            100.0  %        $ 3,141            100.0  %        $     9,407            100.0  %        $ 9,325            100.0  %
Cost of sales                          (2,525)           (78.7  %)        (2,489)           (79.2  %)            (7,420)           (78.9  %)        (7,509)           (80.5  %)

Gross profit                              682             21.3  %            652             20.8  %              1,987             21.1  %          1,816             19.5  %

Operating expenses:
Selling, general and
administrative expenses                  (325)           (10.1  %)          (354)           (11.3  %)              (962)           (10.2  %)        (1,034)           (11.1  %)
Research and development
expenses                                  (25)            (0.8  %)           (25)            (0.8  %)               (74)            (0.8  %)           (74)            (0.8  %)
Restructuring and related
expenses, net                              24              0.7  %            (20)            (0.6  %)               (22)            (0.2  %)           (62)            (0.7  %)
Other income, net                          17              0.5  %             18              0.6  %                 27              0.3  %             38              0.4  %

Operating income                          373             11.6  %            271              8.6  %                956             10.2  %            684              7.3  %

Interest income                             3              0.1  %              5              0.2  %                 10              0.1  %             18              0.2  %
Interest expense                          (36)            (1.1  %)           (46)            (1.5  %)              (113)            (1.2  %)          (158)            (1.7  %)
Other non-operating
income, net                                 1                -  %              6              0.2  %                  7              0.1  %             18              0.2  %

Income from continuing
operations before income
taxes and equity in income
of affiliated companies                   341             10.6  %            236              7.5  %                860              9.1  %            562              6.0  %

Income tax expense                        (71)            (2.2  %)           (56)            (1.8  %)              (187)            (2.0  %)          (123)            (1.3  %)
Equity in income of
affiliated companies, net
of tax                                      -                -                 3              0.1  %                 19              0.2  %              8              0.1  %

Income from continuing
operations                                270              8.4  %            183              5.8  %                692              7.4  %            447              4.8  %

Loss from discontinued
operations, net of tax                      -                -                 -                -                     -                -                (8)            (0.1  %)

Net income                       $        270              8.4  %        $   183              5.8  %        $       692              7.4  %        $   439              4.7  %

Net income attributable to
non-controlling interests                  (3)            (0.1  %)            (2)            (0.1  %)                (8)            (0.1  %)            (6)            (0.1  %)

Net income attributable to
Amcor plc                        $        267              8.3  %        $   181              5.8  %        $       684              7.3  %        $   433              4.6  %



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Overview


  Amcor is a global packaging company with total sales of approximately $12.5
billion in fiscal year 2020. We employ approximately 47,000 people across
approximately 230 principal manufacturing sites in more than 40 countries, and
are a leader in developing and producing a broad range of packaging products
including flexible and rigid packaging, specialty cartons and closures. In
fiscal year 2020, the majority of sales were made to the food, beverage,
pharmaceutical, medical device, home and personal care, and other consumer goods
end markets.


Significant Items Affecting the Periods Presented

Impact of COVID-19


  The 2019 Novel Coronavirus ("COVID-19") has resulted in a period of historic
uncertainty and challenges with the extent and severity of the pandemic
continuing to vary among the various regions in which we operate. Amcor's
business is almost entirely exposed to end markets which have demonstrated the
same resilience experienced through past economic cycles. Our scale and global
footprint has enabled us to collaborate with customers and suppliers to meet
volatile changes in demand and continue to service our customers. We believe we
are well-positioned to continue to meet the challenges of the COVID-19 pandemic.
However, we cannot reasonably estimate the duration and severity of this
pandemic or its ultimate impact on the global economy and our operations and
financial results. The ultimate near-term impact of the pandemic on our business
will depend on the extent and nature of any future disruptions across the supply
chain, government imposed restrictions on consumer mobility and the pace of
macroeconomic recovery in key global economies. Our priorities during the
COVID-19 pandemic continue to be protecting the health and safety of our
employees and effectively managing our operations and supply chains to meet the
needs of our customers.

  Amcor's commitment to the health and safety of its employees remains our first
priority. Our rigorous precautionary measures include the formation of global
and regional response teams that maintain contact with authorities and experts
to actively manage the situation, restrictions on company travel, quarantine
protocols for employees who may have had exposure or have symptoms, frequent
disinfecting of Amcor locations and other measures designed to help protect
employees, customers and suppliers. We expect to continue these measures until
the COVID-19 pandemic is adequately contained for our business.

Operations and Supply Chain


  While we have experienced isolated disruptions to our operations to date, our
manufacturing facilities have largely been deemed as providing essential
services and continue to supply our customers. We also have not experienced any
material disruptions in our supply chain to date as a result of COVID-19.
However, we have experienced continued volatility in customer order patterns and
could continue to experience significant volatility in the demand for our
products in the future. Our facilities have largely been exempt from government
mandated closure orders. While governmental measures may be modified, we expect
that our facilities will remain operational given the essential products we
supply. However, despite our best efforts to contain the impact in our
facilities, it remains possible that significant disruptions could occur as a
result of the pandemic, including temporary closures of our facilities.

During the third fiscal quarter of 2021, there were significant winter storms
across the southern United States and other global factors which resulted in
supply disruptions of certain resins and raw materials and increased price
volatility of certain raw materials across many of the regions in which we
operate for both of our reportable segments. We were able to work closely with
our suppliers and customers, leveraging our global capabilities and expertise to
work through supply and other resulting issues and the impact on our third
quarter fiscal 2021 results was not material. While we expect to continue to be
able to successfully navigate through any supply disruptions and raw material
price volatility during the fourth fiscal quarter of 2021, future weather events
and other factors, including disruption of transportation systems for our
products, are inherently uncertain and could have an adverse impact on our
operating results.

2019 Bemis Integration Plan


In connection with the acquisition of Bemis, the Company initiated restructuring
activities in the fourth quarter of 2019 aimed at integrating and optimizing the
combined organization. As previously announced, the Company continues to target
realizing approximately $180 million of pre-tax synergies driven by procurement,
supply chain, and general and administrative savings by the end of fiscal year
2022.

                                       31
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  The Company's total 2019 Bemis Integration Plan pre-tax integration costs are
expected to be approximately $200 million. The total 2019 Bemis Integration Plan
costs include approximately $160 million of restructuring and related expenses,
net, and $40 million of general integration expenses. The Company estimates that
net cash expenditures including disposal proceeds will be approximately $150
million, of which $40 million relates to general integration expense. As of
March 31, 2021, the Company has incurred $94 million in employee related
expenses, $28 million in fixed asset related expenses, $19 million in other
restructuring and $22 million in restructuring related expenses, partially
offset by a gain on disposal of a business of $52 million. The nine months ended
March 31, 2021, resulted in net cash inflows of $26 million, including $78
million of business disposal proceeds, offset by $52 million of cash outflows,
of which $45 million were payments related to restructuring and related
expenditures. Cash payments of approximately $20 million to $30 million are
expected for the balance of the fiscal year for restructuring and related
expenses. The 2019 Bemis Integration Plan relates to the Flexibles segment and
Corporate and is expected to be substantially completed by the end of fiscal
year 2022.

  Restructuring related costs are directly attributable to restructuring
activities; however, they do not qualify for special accounting treatment as
exit or disposal activities. General integration costs are not linked to
restructuring. The Company believes the disclosure of restructuring related
costs provides more information on the total cost of our 2019 Bemis Integration
Plan. The restructuring related costs relate primarily to the closure of
facilities and include costs to replace graphics, train new employees on
relocated equipment and anticipated loss on sale of closed facilities.

2018 Rigid Packaging Restructuring Plan


  On August 21, 2018, the Company announced a restructuring plan in Amcor Rigid
Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing
structural costs and optimizing the footprint. The Plan includes the closures of
manufacturing facilities and headcount reductions to achieve manufacturing
footprint optimization and productivity improvements as well as overhead cost
reductions.

  The Company's total 2018 Rigid Packaging Restructuring Plan pre-tax
restructuring costs are expected to be approximately $120 million with the main
component being the cost to exit manufacturing facilities and employee related
costs. The Company estimates that approximately $75 million of the $120 million
total costs will result in cash expenditures. Cash payments for the nine months
ended March 31, 2021 were $17 million, with less than $5 million expected during
the remainder of the fiscal year. The 2018 Rigid Packaging Restructuring Plan is
expected to be substantially completed during fiscal 2021.

For more information about our restructuring plans, refer to Note 4, "Restructuring Plans" of "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements".

High Inflation Accounting


  We have subsidiaries in Argentina that historically had a functional currency
of the Argentine Peso. As of June 30, 2018, the Argentine economy was designated
as highly inflationary for accounting purposes. Accordingly, beginning July 1,
2018, we began reporting the financial results of our Argentinean subsidiaries
with a functional currency of the Argentine Peso at the functional currency of
the parent, which is the U.S. dollar. Highly inflationary accounting in the
three months ended March 31, 2021 and 2020 resulted in a negative impact of
$7 million and $5 million, respectively, and $17 million and $23 million in the
nine months ended March 31, 2021 and 2020, respectively, in foreign currency
transaction losses that was reflected on the unaudited condensed consolidated
statements of income.

                                       32

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© Edgar Online, source Glimpses

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