Specialist
Former VP at Amcor
Agenda
- Secular trends across rigid and speciality plastic packaging
- Supply chain constraints and expectations for relief, noting increasing energy costs in Europe
- Competitive dynamics in plastic and growth outlook for Amcor (NYSE: AMCR) by region and end market
- 2023 outlook, automation potential and efforts across ESG and sustainability
Questions
1.
What is your overview of the operating environment for Amcor and its peers? What 2-3 key trends or drivers should investors monitor?
2.
What potential substrate shifts across packaging do you broadly expect over the next 12-24 months? Who do you think is winning right now – whether with cans, rigids, flexible or glass – and why?
3.
How can Amcor manage the increasing energy costs in Europe? What impact do you expect on profitability and demand in the near-to-mid-term in Europe and the US?
4.
How does Amcor typically hedge positions for natural gas in Europe heading into a year and how much pricing would the company need to get to offset this? It has taken a lot of pricing of late, might this cause customers have to shift to other substrates?
5.
How is Amcor’s positioned within rigids and speciality packaging? What respective new products are likely to take market share for the company? Where might competitors have an edge?
6.
Amcor has leading positions in some higher growth segments such as healthcare, meat, cheese, coffee, pet food or hot fill. It highlights that these segments will be a higher proportion of its future mix, so do you expect it to perform better or worse in any of these segments?
7.
Across Amcor’s segments and markets, where are customers a bit more price-sensitive? The company’s FY22 earnings referred to below-average elasticity among its customers. Would you expect this to persist or might its mix shift? How are you assessing elasticity and where customers might be more or less sensitive?
8.
What do you view as the core differentiators across players in the plastic packaging industry? What makes Amcor, Graham Packaging, Berry Global or any other players unique and what are their respective competitive advantages?
9.
What’s your risk-assessment around customers starting to take more manufacturing in-house? You said big players will often threaten volumes whenever pricing is unfavourable for them. Where is it more feasible for customers to do this vs being more of an empty threat?
10.
Amcor cites its top priority as its working capital performance and how it has been able to maintain the 12-month average of keeping working capital as a percentage of sales below 8%. How did the company come up with that goal? Is it a benchmark vs other companies?
11.
Do you think keeping working capital as a percentage under 8% is attainable? What challenges and opportunities might Amcor have to improve or worsen working capital performance?
12.
Given the inflation and the supply chain issues we’ve had, how do those things make it easier or harder to achieve these goals? Given H2 typically is when more cash flows through the business, does keeping inventory elevated for the remainder of the year complicate things?
13.
Should we expect any unusual drags on cash flow in the next 12-24 months? What should investors pay close attention to over the next year or so as far as cash flow is concerned?
14.
How does Amcor typically evaluate projects? What does the process look like to deploy capital? How disciplined is the company and is there anything unique about its strategy vs other packaging players?
15.
Amcor recently decided to increase CAPEX to between 4% and 5% of sales, and it has been steadily rising for the last few years. Are there enough strong projects for the company to be raising its CAPEX? Where do you expect CAPEX will be focused? Will it be more on the sustainability side, given it talked about recycling infrastructure?
16.
How should we think about Amcor’s performance in an economic downturn? What cost-cutting can be done in the event of a recession, what levers does it have left to pull?
17.
Could you elaborate on the labour environment and whether things are improving or worsening within the packing industry in terms of labour? You mentioned recession could help on the labour cost structure.
18.
In what ways is Amcor using automation to drive efficiency given the labour challenges we’ve seen over the past two years? Where has the company seen success with automation vs been challenged?
19.
Could you elaborate on Amcor’s opportunities to further automate? How much margin improvement would there be if the company pursues the automation strategies that you mentioned ?
20.
When it comes to Amcor or plastic packaging, what is important for investors to monitor over the next 12-24 months?
21.
What is being done by Amcor and the general waste management players to improve the circularity of plastic? What else needs to be done to reach the point you highlighted?
22.
What’s your take on Amcor’s goal to get 10-15% shareholder return? What does the path to that look like? The company is increasing investment, improving mix and expanding to achieve this goal, but what milestones do you need to see to ensure it is tracking well within its 10-15% goal?
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