Taxbreak helps Amcor (AMC) results

Stock

Amcor Limited (ASX:AMC) $13.81 as at 21/08/2018

Event

Packaging maker Amcor has come under pressure today despite what looks to be a reasonable FY18 result. On first glance, their profit number is inline and dividend as expected, but much of the result is driven by a falling tax rate working to offset rising raw material costs. The company didn’t give specific guidance, only to say they expect solid growth which in our view likely implies mid-single digit growth which is below the market, although this is clearly not precise.

Amcor results and financial figures

The focus now turns to their acquisition on US packaging giant Bemis. Shares have come under pressure since this was announced earlier this month with the dilution on the back of the pending Bemis purchase expected to be completed in early 2019, where shares will be dual-listed on the NYSE and the ASX. Management remain positive on the acquisition looking for synergies and growth in the combined entity.

Amcor (AMC) Chart 

ASX:AMC Amcor chart

Market Matters Take/Outlook

A great deal of Amcor’s performance relies on two drivers – Bemis and input costs. We see the Bemis transaction as a great positive moving forward, and flagged synergies to be under-reported at this stage which will be a tailwind for the stock. Input prices however have been a headwind and this looks set to continue. AMC have been able to protect margins somewhat by passing some of these costs on to customers, however this is unlikely to make up the rising costs. We are somewhat neutral AMC here, looking for a price closer to $13 to be interested.