Executive Summary / Key Takeaways

• Amcor's recent combination with Berry Global (BERY) is a transformational event, creating a packaging giant with enhanced scale, a broader portfolio, and significant synergy potential.
• The company has demonstrated improving underlying business momentum, with sequential volume recovery across most segments and effective cost control driving margin expansion despite challenging market conditions.
• Management has reaffirmed/narrowed fiscal year 2025 adjusted EPS guidance, signaling confidence in continued earnings growth, albeit with a noted headwind from normalized incentive compensation.
• The Berry merger provides clear visibility to substantial EPS accretion through identified synergies ($650 million total, $260 million in FY26), which are largely within Amcor's control and not dependent on macroeconomic improvement.
• Amcor's strategic focus on customer-centricity, sustainability leadership, portfolio optimization (including new focus categories like dairy and liquids), and leveraging its enhanced innovation capabilities positions it for higher levels of profitable organic growth and significant future cash flow generation.

A Global Packaging Leader Forges a New Path

Amcor plc, a company with a rich history spanning over 150 years across Australia and the United States, stands today as a global leader in developing and producing responsible packaging solutions. Serving diverse and essential end markets including food, beverage, pharmaceutical, medical, home, and personal care, Amcor's business model revolves around providing a wide range of flexible and rigid packaging, cartons, and closures. The company leverages its innovation excellence and global expertise to deliver solutions that are not only functional, appealing, and cost-effective for its customers but also increasingly sustainable. This foundational strength and broad market exposure position Amcor as a critical supply partner across the globe.

The packaging industry operates within a dynamic competitive landscape characterized by significant global and regional players. Major competitors like Silgan Holdings Inc. (SLGN), Crown Holdings Inc. (CCK), Ball Corporation (BALL), and Sealed Air Corporation (SEE) vie for market share across various segments. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Amcor holds an estimated 16.04% aggregate market share in key segments. The competitive environment is influenced by factors such as raw material price volatility, evolving consumer demands for sustainable packaging, and the need for efficient, reliable supply chains. Amcor strategically positions itself by emphasizing its unmatched scale, global reach, and the breadth of its sustainable packaging offerings, aiming to be the go-to solutions provider.

Amcor's overarching strategy, particularly under the leadership of its new CEO, Peter Konieczny, is centered on accelerating volume-driven organic growth and enhancing profitability. This involves instilling a stronger customer-first mindset, optimizing the organizational structure (such as appointing a Chief Operating Officer for global flexible packaging), and enhancing commercial capabilities to improve service quality and speed to market. A key pillar of this strategy is elevating Amcor's sustainability profile, advocating for solutions that eliminate waste, lower carbon footprint, and increase recycling rates, while leveraging innovation platforms like AmFiber and AmPrima. The company is also refining its portfolio focus, adding dairy and liquid applications to existing priority categories like healthcare, meat, pet care, and premium coffee, recognizing their significant global growth opportunities.

Central to Amcor's competitive differentiation are its material science and innovation capabilities. The company invests approximately $180 million annually in R&D, supported by over 1,500 professionals and a network of innovation centers. This investment fuels the development of next-generation packaging solutions designed to meet complex functionality and sustainability challenges. For instance, Amcor's flexible films are designed for efficiency, targeting waste reduction. The AmFiber™ platform explores fiber-based substrates, with AmFiber™ Performance Paper recently proven recyclable in Brazil, appealing to markets prioritizing readily recyclable materials. The AmPrima platform focuses on recyclable plastic-based products, gaining traction in the market. While direct quantitative comparisons on all technological advantages versus rivals are not always publicly detailed, Amcor's focus on developing solutions that offer benefits like faster processing speeds or improved recyclability aims to provide a competitive edge. Recent investments, such as the cutting-edge healthcare packaging coating facility in Malaysia, underscore the commitment to enhancing capabilities and supply chain security in key growth regions.

The broader industry landscape is shaped by significant trends. Environmental concerns and regulatory pressures, such as the packaging and packaging waste regulations in Europe, are driving demand for sustainable and recyclable packaging. The edible packaging market, though smaller, is growing rapidly (estimated $988.1 million in 2024, projected 5.6% CAGR to $1.4 billion by 2030), fueled by demand for eco-friendly alternatives and advancements in material science. Geopolitical tensions and changes in tariff frameworks contribute to market volatility, impacting consumption and supply chains. Amcor's regional manufacturing footprint and contractual pass-through mechanisms for raw material costs provide some resilience against these external factors.

Performance Trajectory and Financial Strength

Against this backdrop, Amcor has demonstrated a notable improvement in its underlying business performance. Following a period impacted by market dislocation and inventory destocking, particularly in fiscal year 2024 when overall volumes were down 5%, the company achieved sequential volume improvements for three consecutive quarters, returning to overall volume growth in the fourth quarter of fiscal year 2024 (up 1%) and continuing into the first quarter of fiscal year 2025 (up 2%). This recovery was broad-based across most geographies and categories, driven by improving customer performance, the cycling out of destocking in many segments (excluding healthcare), and modest share gains. Excluding the impact of healthcare and North American beverage, volumes were up approximately 4-5% in recent quarters.

However, recent financial results reflect the mixed demand environment and strategic portfolio adjustments. For the three months ended March 31, 2025, net sales decreased by $78 million to $3,333 million compared to the prior year, primarily due to negative currency impacts and disposals, partially offset by raw material pass-through and favorable pricemix. For the nine months ended March 31, 2025, net sales decreased by $178 million to $9,927 million, similarly impacted by currency and disposals, with higher volumes offset by unfavorable pricemix.

Despite the top-line pressure, profitability showed resilience. Net income attributable to Amcor plc increased to $196 million for the three months and $550 million for the nine months ended March 31, 2025, driven by lower operating expenses and higher other income, net. Gross profit decreased to $654 million for the three months but increased as a percentage of sales for the nine months (19.5% vs 19.4%), reflecting improved operating cost performance despite lower sales. Selling, general, and administrative expenses decreased significantly due to cost reduction initiatives and restructuring benefits. Adjusted EBIT margins expanded in recent quarters across both segments, driven by strong cost control and productivity initiatives, including benefits from the 2023 Restructuring Plan.

Segment performance varied. The Flexibles segment saw slight net sales increases for both periods, driven by volumes and pricemix despite currency headwinds. Adjusted EBIT for Flexibles decreased slightly in the three months but increased in the nine months, benefiting from volumes and cost control. The Rigid Packaging segment faced more significant challenges, with net sales down over 10% in the three months and over 8% in the nine months, primarily due to weaker demand in North American Beverage and the impact of disposals. Adjusted EBIT for Rigid Packaging decreased for both periods, impacted by lower volumes and unfavorable pricemix, although the business demonstrated consecutive quarters of earnings growth in the second half of fiscal '24 and into fiscal '25 by effectively managing costs.

Amcor maintains a solid financial position and strong cash flow generation. Adjusted free cash flow for fiscal year 2952 was $952 million, exceeding guidance, driven by improved working capital management. While net cash provided by operating activities decreased in the nine months ended March 31, 2025, due to higher inventories (a tactical build anticipating demand and supply chain tremors), the company expects strong adjusted free cash flow of $900 million to $1 billion for fiscal year 25. Net debt increased to $6.8 billion as of March 31, 2025, with leverage at 3.5x, partly due to currency impacts and higher inventories. However, leverage had improved sequentially in prior quarters and management remains confident in reducing it to approximately 3x by the end of fiscal year 2026. The company's investment-grade credit ratings are crucial for accessing debt markets, and it remains in compliance with its debt covenants. Amcor continues to return value to shareholders through a growing dividend, recently increasing its quarterly payout.

A Transformational Combination and Future Outlook

The most significant development shaping Amcor's future is the successful completion of the all-stock combination with Berry Global Group, Inc. on April 30, 2025. This merger is described as transformational, creating a combined entity with greater scale, enhanced product development capabilities, and expanded exposure to attractive markets and products. The strategic rationale is compelling: leveraging a broader and complementary portfolio, combining material science and innovation strengths (with a combined annual R&D investment of approximately $180 million), and positioning the company to refine its portfolio mix towards higher-value, faster-growing end markets.

The Berry merger provides clear visibility to substantial earnings growth through identified synergies. Amcor expects to realize $650 million in total synergies over three years, with approximately 40% or $260 million expected to benefit fiscal year 2026 earnings alone. Management has expressed high confidence in delivering these synergies, noting they are largely within their control and not dependent on macroeconomic improvement. This synergy capture is expected to drive significant cash EPS accretion, exceeding 35% by the end of fiscal year 2028. The combined entity is also anticipated to generate annual cash flow exceeding $3 billion by fiscal year 2028, providing substantial capacity for organic reinvestment, value-accretive M&A, and continued capital returns.

For the remainder of fiscal year 2025, Amcor has narrowed its adjusted EPS outlook range to $0.72 to $0.74 per share, reflecting the inclusion of two months of Berry's earnings and the impact of additional shares issued. This guidance implies continued underlying business growth, even accounting for a headwind from normalized incentive compensation. Management is taking a prudent approach to the near-term demand environment, not anticipating significant improvement in overall market conditions in the fourth quarter, particularly in North America, citing ongoing uncertainty around tariffs and sticky inflation impacting consumer demand. However, the early close of the Berry merger accelerates the timeline for synergy realization, providing a significant "self-help" opportunity for earnings growth in fiscal year 2026, independent of the macro environment.

Amcor's strategic initiatives, including enhancing customer focus, driving sustainability leadership, optimizing the portfolio (adding dairy and liquids as focus categories), and leveraging its expanded innovation capabilities, are expected to contribute to higher levels of profitable organic growth over the long term. The company's competitive positioning is strengthened by the Berry combination, particularly in areas like healthcare packaging (a combined $3 billion business with complementary offerings like multi-component delivery devices) and rigid packaging (scaling up the specialty containers business and gaining exposure to dispensing systems and pumps). While competition remains intense across segments, Amcor's scale, broad product range, and focus on sustainable solutions provide key advantages.

Risks and Challenges

Despite the positive outlook and strategic momentum, Amcor faces several risks and challenges. Macroeconomic uncertainty, including the impact of inflation and potential changes in tariff frameworks, continues to weigh on consumer demand and customer order patterns, particularly in discretionary categories like North American Beverage. Raw material price volatility remains a factor, although contractual pass-through mechanisms mitigate some of this risk.

The successful integration of Berry Global presents significant operational and financial challenges. Realizing the anticipated synergies and benefits requires complex integration of operations, systems, and cultures, with potential for unexpected costs or delays. Retaining key personnel and customers from both organizations is crucial. The merger has also led to litigation, and the company may face further legal challenges, incurring substantial costs and diverting resources.

Amcor is also exposed to ongoing legal and regulatory risks, including tax litigation in Brazil (with accruals and estimated possible losses) and potential environmental remediation obligations at various sites (with recorded accruals). While management believes these matters will not have a material adverse effect on liquidity or financial condition, outcomes are subject to uncertainty. Competitive pressures, including pricing dynamics and the need to continuously innovate to stay ahead of rivals in material science and product performance, remain constant factors influencing market share and profitability.

Conclusion

Amcor stands at a pivotal point, having completed a transformational merger that significantly reshapes its scale, capabilities, and future potential. While the near-term market environment remains challenging, marked by muted consumer demand and volatility, the underlying business has demonstrated resilience through sequential volume recovery and disciplined cost management, driving margin expansion. The combination with Berry Global provides a powerful catalyst for future earnings growth through substantial, identifiable synergies that are largely within Amcor's control and independent of macroeconomic conditions.

Amcor's strategic focus on enhancing customer relationships, driving sustainability leadership through innovation, and optimizing its portfolio is designed to deliver higher levels of profitable organic growth over the long term. The expanded scale and complementary offerings resulting from the merger strengthen its competitive position across key segments like healthcare and specialty rigid packaging. While integration risks and ongoing market uncertainties warrant careful monitoring, the clear path to synergy realization, coupled with strong cash flow generation and a commitment to shareholder returns, positions Amcor for accelerated earnings and value creation in the years ahead.