Executive Summary / Key Takeaways

• Amcor (AMCR) is executing a strategic transformation anchored by the recently completed merger with Berry Global (BERY), aiming to accelerate earnings growth through significant, controllable synergies totaling $650 million over three years, with $260 million expected in fiscal year 2026 alone.
• Despite a challenging macroeconomic backdrop characterized by muted consumer demand and market volatility, Amcor's underlying business demonstrated resilience and sequential volume improvement through fiscal year 2024, returning to overall volume growth in Q4 FY24 and carrying momentum into FY25.
• The company's differentiated technology portfolio, including AmFiber and AmPrima, and its global innovation network are key strategic pillars driving sustainable packaging solutions and supporting future organic growth, particularly in focus categories like healthcare, dairy, and liquids.
• Amcor maintains a disciplined capital allocation strategy, generating strong free cash flow ($900M-$1B guided for FY25) to fund organic investments, strategic M&A, and a compelling, growing dividend, while targeting leverage reduction to ~3x by the end of FY26.
• While integration risks and persistent soft consumer demand in certain segments (like North America Beverage) remain challenges, the combination with Berry Global significantly enhances Amcor's scale, capabilities, and competitive positioning, providing a clear path to accelerated value creation independent of external market improvements in the near term.

A Global Packaging Leader Forges a Transformed Future

Amcor plc, a company with roots stretching back over 150 years across Australia and the United States, stands today as a global leader in providing responsible packaging solutions. Serving essential end markets like food, beverage, pharmaceutical, medical, and personal care, Amcor has built a formidable presence through a combination of organic growth, strategic acquisitions, and a deep-seated expertise in packaging materials and applications. The company's journey has seen it adapt to evolving market dynamics, divest non-core assets, and undertake significant restructuring to optimize its operations and enhance its competitive standing. This long history culminates in a pivotal moment for the company, marked by a transformative strategic combination designed to redefine its scale, capabilities, and future growth trajectory.

At its core, Amcor's business is structured around two primary segments: Flexibles and Rigid Packaging. The Flexibles segment develops and produces flexible and film packaging across a wide array of materials, catering to diverse consumer goods and healthcare needs. This segment leverages innovation to create packaging that is not only functional and appealing but also increasingly sustainable. The Rigid Packaging segment focuses on rigid containers for predominantly beverage and food products, alongside plastic caps, serving markets from carbonated soft drinks to specialty containers for dairy and personal care. This dual-segment structure provides Amcor with broad market exposure, though each segment faces distinct market dynamics and competitive pressures.

The competitive landscape in the packaging industry is intense, populated by global players like Berry Global, Sealed Air Corporation (SEE), Crown Holdings (CCK), and Ball Corporation (BLL), alongside numerous regional and specialized competitors. Amcor has historically competed by leveraging its unmatched scale, global reach, and the breadth of its product and service offerings. Its direct sales network and established customer relationships position it as a critical supply partner. While competitors like SEE may hold an edge in certain technological aspects, such as faster processing speeds in some flexible film applications, Amcor differentiates itself through its global supply chain, which enhances cost leadership and customer loyalty, and its proprietary technology in areas like barrier films, offering quantifiable benefits in material efficiency and sustainability.

Central to Amcor's strategic vision and competitive moat is its commitment to technological differentiation and innovation. The company invests significantly in research and development, channeling approximately $180 million annually through a network of global innovation centers. These centers are crucial for collaborating closely with customers and developing next-generation packaging solutions. A key focus is on sustainability, driving the development of products that support circularity, reduce waste, lower carbon footprint, and increase recycling rates.

Among its notable technological platforms are AmFiber and AmPrima. AmFiber represents Amcor's foray into fiber-based packaging, offering solutions that are recyclable at scale today. While fiber's inherent porosity limits its application range for primary packaging requiring strong barrier properties, Amcor's development of performance paper products with integrated barrier technology differentiates its offering in this space. AmPrima, on the other hand, is a recyclable plastic-based product line that has gained significant traction in the market and continues to grow, aligning with the increasing demand for sustainable plastic alternatives. These technologies are not merely product lines; they are strategic tools that contribute to Amcor's competitive advantage by meeting evolving customer and regulatory demands for sustainable packaging, potentially commanding higher average selling prices or enabling lower manufacturing costs through material efficiency. The company's "Catalyst" process, involving direct innovation sessions with customers, exemplifies how technology is integrated into its customer-first strategy to drive growth.

Broad industry trends heavily influence Amcor's operating environment. Persistent inflation in many economies continues to impact consumer purchasing power, leading to softer demand and shifts in consumer behavior towards value-seeking, trading down, and purchasing in bulk or through different channels. Geopolitical tensions and changes in tariff frameworks add layers of uncertainty, potentially disrupting supply chains and increasing costs. Customer inventory destocking, a significant headwind in prior periods, has largely concluded across most categories by Q4 FY24, although the healthcare segment experienced a delayed and more prolonged destocking cycle expected to abate by the end of calendar year 2024. Regulatory developments, particularly packaging waste regulations in Europe, are accelerating the industry's transition towards circularity, a trend Amcor actively supports and is positioned to capitalize on through its sustainable packaging portfolio.

Recent Performance and Operational Execution

Against this complex backdrop, Amcor has demonstrated operational resilience and a building financial momentum. For the three months ended March 31, 2025, net sales were $3,333 million, a 2% decrease compared to the prior year period. However, excluding the impacts of currency fluctuations, disposed operations, and raw material pass-through, net sales saw a slight increase of approximately 1%, reflecting flat sales volumes and favorable price/mix. Net income attributable to Amcor plc for the quarter increased by 5% to $196 million, driven primarily by lower selling, general, and administrative (SG&A) expenses and higher other income, net, partially offset by a decrease in gross profit. Diluted earnings per share also grew by 5% to $0.14.

The nine-month period ended March 31, 2025, showed net sales of $9,927 million, down 2% year-over-year. Excluding external factors, net sales were down approximately 0.3%, reflecting a 1% increase in sales volumes offset by a 1% unfavorable price/mix. Net income attributable to Amcor plc for the nine months increased significantly by 16% to $550 million, benefiting from lower SG&A ($18 million decrease), reduced restructuring and transaction expenses ($11 million decrease), higher other income, net ($95 million change, driven by lower hyperinflationary accounting impacts and the Bericap divestiture gain), and lower net interest expense ($10 million decrease), partially offset by a decrease in gross profit ($19 million decrease) and higher income tax expense ($34 million increase). Diluted EPS for the nine months rose 16% to $0.38.

Segment performance reflected these dynamics. The Flexibles segment reported net sales of $2,605 million for the three months and $7,667 million for the nine months ended March 31, 2025, showing marginal increases year-over-year. Adjusted EBIT for Flexibles was $357 million in the quarter and $1,008 million for the nine months, with margins remaining relatively stable (13.7% in Q3, 13.1% for 9M). Volumes in Flexibles were up 1% in Q3, with modest share gains in healthcare and protein offsetting weaker consumer demand, particularly in North America. Volumes in Europe, Asia, and Latin America showed low-to-mid single-digit growth. Healthcare volumes improved sequentially in Q3, with medical up high single digits and pharma demand improving significantly as destocking neared completion.

The Rigid Packaging segment faced a more challenging period, with net sales decreasing 10.5% to $728 million in Q3 and 8.1% to $2,260 million for the nine months. Adjusted EBIT for Rigid Packaging decreased 22.5% to $55 million in Q3 and 7.1% to $171 million for the nine months. The segment's performance was significantly impacted by weaker-than-anticipated consumer and customer demand in North American Beverage, where volumes saw a high single-digit decline in Q3, a further weakening compared to prior quarters. This segment's comparable EBIT (excluding the divested Bericap JV contribution) was unfavorably impacted by lower volumes and price mix, partly offset by favorable cost performance, though sequentially higher labor costs in North American Beverage added pressure.

Operational efficiency remained a key focus. SG&A expenses decreased due to cost reduction initiatives and restructuring benefits. The 2023 Restructuring Plan, initiated following the sale of the Russian business, was largely completed by December 31, 2024, and is expected to yield approximately $50 million in annualized pre-tax benefits by the end of fiscal year 2025.

Liquidity and capital resources are managed to support operations and strategic growth. Net cash provided by operating activities decreased for the nine months ended March 31, 2025, primarily due to higher working capital outflows, mainly driven by increased inventories. This reflects a strategic decision to build raw material inventory in response to strong demand signals and some supply chain tremors, aiming to avoid missing customer opportunities. Net cash used in investing activities decreased, benefiting from the proceeds of the Bericap divestiture. Net cash provided by financing activities increased significantly, driven by the issuance of $2.2 billion in senior notes to fund the Berry merger debt repayment.

Net debt stood at $6.8 billion as of March 31, 2025, resulting in a leverage ratio of 3.5x, slightly higher than anticipated due to inventory build and FX impacts. Amcor maintains investment-grade credit ratings and was in compliance with its debt covenants, including the leverage ratio not exceeding 3.90:1 under its new $3.75 billion syndicated facility agreement. The company declared a quarterly dividend of $0.13 per share in April 2025, continuing its commitment to returning cash to shareholders.

Strategic Transformation and Outlook

The most significant strategic development is the completion of the merger with Berry Global Group, Inc. on April 30, 2025. This combination, finalized ahead of schedule, is positioned as a transformative event for Amcor, creating a combined entity with greater scale, enhanced product development capabilities, and expanded exposure to attractive markets. The merger is expected to yield substantial synergies totaling $650 million over three years, broken down into cost, growth, and financial synergies. Management has high confidence in delivering $260 million of these synergies in fiscal year 2026 alone, with a further $260 million in FY27 and the balance in FY28, projecting total EPS accretion exceeding 35% over this period. These synergies are viewed as controllable and not dependent on improvements in the macroeconomic environment, providing a significant "self-help" component to future earnings growth.

The combined company boasts a broader primary packaging portfolio, particularly enhancing Amcor's position in containers and closures, where Berry's business is largely complementary to Amcor's specialty containers segment and adds exposure to areas like dispensing systems and healthcare delivery devices. This expanded portfolio, coupled with combined R&D capabilities (over 1,500 professionals, ~$180M annual investment), allows for optimization and redirection of innovation spend towards solving complex functionality and sustainability challenges. Amcor is also undertaking a portfolio review of the combined entity to further orient its mix towards higher-value, faster-growing end markets, expecting this pruning to enhance average growth rates, margins, and cash generation.

For fiscal year 2025, Amcor has narrowed its adjusted EPS outlook to $0.72-$0.74 per share on a reported basis, reflecting the inclusion of two months of the legacy Berry business performance and the impact of additional shares issued (net accretion up to $0.01/share). This guidance implies continued strong performance from the underlying business, excluding an approximate 4% headwind from the normalization of incentive compensation. Overall volumes are expected to increase in the low-to-mid single-digit range for the year, building on the momentum from late FY24. The company forecasts strong adjusted free cash flow of $900 million to $1 billion for FY25 (including Berry's contribution), sufficient to fund increased CapEx ($40M-$60M higher than FY24) and support dividend payments. Management is confident in reducing leverage to approximately 3.4x by the end of FY25 (inclusive of acquisition impacts) and further to ~3x by the end of FY26. Including synergies, annual cash flow is projected to exceed $3 billion each year by fiscal year 2028, enabling higher levels of organic investment, M&A, and shareholder returns, and raising the outcomes under Amcor's shareholder value creation model.

Risks and Challenges

Despite the positive outlook and strategic advancements, Amcor faces notable risks. The successful integration of Berry Global is paramount, and failure to achieve expected synergies or encountering unexpected costs and complexities could significantly impact financial performance. The company is already facing litigation related to the merger. Persistent soft consumer demand, particularly in discretionary categories like North American Beverage, remains a challenge and could continue to pressure volumes and margins in those segments. Volatility in raw material and energy prices, while currently benign, could re-emerge as a risk. Geopolitical tensions and changes in tariff policies could negatively affect demand, supply chains, and costs. Operational risks include the ability to attract and retain a skilled workforce, manage labor disputes, and maintain effective IT systems. Environmental liabilities and litigation, though currently accrued for, present potential future exposures. Increased indebtedness from the merger and rising interest rates could impact financial flexibility and borrowing costs.

Competitively, while the Berry merger enhances scale, Amcor must effectively leverage its combined R&D capabilities to keep pace with rivals like Sealed Air in innovation speed and product performance. Maintaining cost efficiency against competitors like Crown Holdings will also be crucial, especially in price-sensitive markets. The shift towards alternative substrates like aluminum cans in certain beverage subsegments, driven by consumer value-seeking, poses a competitive dynamic that Amcor must navigate.

Conclusion

Amcor stands at the precipice of a new era, fundamentally reshaped by the Berry Global combination. The core investment thesis hinges on the successful integration of this transformative merger and the realization of the substantial, controllable synergies it promises. While the macroeconomic environment presents ongoing challenges, particularly in consumer demand and market volatility, Amcor's underlying business has demonstrated resilience, sequential volume recovery, and disciplined cost management.

The company's strategic focus on accelerating organic growth through a customer-first mindset, leveraging its enhanced technological capabilities in sustainable packaging (AmFiber, AmPrima), and optimizing its portfolio towards attractive, higher-margin categories provides a clear roadmap for future performance. The strong free cash flow generation, bolstered significantly by expected synergies, underpins a compelling capital allocation strategy focused on growth investments and shareholder returns, all while maintaining a solid investment-grade balance sheet. Investors should closely monitor the progress of the Berry integration, the pace of synergy realization, and the company's ability to navigate persistent softness in key end markets. If Amcor successfully executes on its integration and strategic priorities, the combined entity is well-positioned to deliver accelerated earnings growth and enhanced value creation, making the current period of transformation a critical phase to watch.