The Amcor CDI (ASX: AMC) share price has stepped 3% into the green as the global packaging company reported its FY21 earnings.
Let's investigate further.
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Amcor share price jumps on strong net income and free cash flow growth
The Amcor share price is on the move after these investment highlights from its FY21 earnings report:
- Net income of $939 million (up 53%) with earnings per share (EPS) of 60.2 cents (up 58%)
- Adjusted free cash flow of $1.1 billion, at upper end of guidance range
- Bemis integration completed – approximately $75 million of cost synergies in FY21; total expected to exceed $180 million target by at least 10%
- Annual dividend increased to 47 cents per share, including a final 11.75 cents per share declared in its report
- $350 million shares repurchased in FY21
What happened in FY21 for Amcor?
Amcor grew net sales by 2% year on year to $12.8 billion, underscored by strong sales momentum and the pass-through of "higher raw material input costs".
The company also outlined the "cost synergies" obtained via the Bemis Company acquisition in June 2019.
In consequence of its execution strategy from the acquisition, Amcor has "delivered approximately $75 million of incremental cost synergies" during FY21.
The total "cumulative cost synergies" from the acquisition now totals around $155 million, as per the release.
As a result, Amcor managed to deliver "record full-year earnings" in FY21. Moreover, net income grew by 53% year over year, which came through to free cash flow of $1.1 billion.
Given its "significant and growing free cash flow," Amcor will return cash to its shareholders by way of dividend, declaring an 11.75 cents-per-share payment in its FY21 earnings.
This brings the FY21 dividend to US47 cents per share, payable on 28 September.
Furthermore, $350 million was used to repurchase its own shares in FY21. This reduces the total number of shares outstanding by approximately 2%.
Amcor estimates it will allocate approximately $400 million "of cash towards share repurchases" in FY22.
What did management say?
Amcor CEO Ron Delia said:
Amcor delivered record full year earnings in 2021, as our teams successfully executed against our strategy, delivered growth and increased EBIT margins while managing exceptionally well through steep raw material cost increases and supply constraints.
On cashflow, Delia added:
The strong cash flow also enabled significant cash returns to shareholders through a higher annual dividend and the repurchase of shares. Across the business we ended the year with good momentum and we expect another strong year in fiscal 2022.
Finally, regarding the Bemis acquisition:
In the two years following our transformational acquisition of Bemis, we have strengthened our financial profile and consistently built earnings momentum. The integration is essentially complete and we will exceed our original $180 million cost synergy target by at least 10% and Free Cash Flow for fiscal 2022 is expected to be almost double pre acquisition levels.
What's next for Amcor shares?
Management anticipates a strong year underlined by sales momentum, but acknowledges COVID-19 "creates a higher degree of uncertainty" in forecasts.
Amcor estimates adjusted EPS growth in the ranges of 7%–11%. This coupled with free cash flow generation of $1.1 billion to $1.2 billion. This calls for 79 to 81 cents per share, as per the company.
Moreover, as mentioned, it will allocate around $400 million to share repurchases in FY22.
Amcor shares have lagged the S&P/ASX 200 Index (ASX: XJO) this year, posting a return of 11.6%. This compares to the ASX 200's gain of 14%.
