Amcor faces higher leverage after US$820 million free cash outflow

Amcor plc (NYSE:AMCR) has cut its six-month adjusted earnings outlook after higher energy and distribution costs began to bite, turning an otherwise solid quarter into a more complicated investor read. The packaging group now expects transition-period adjusted EPS of US$1.70 to US$1.80, down from US$1.80 to US$1.90.

The downgrade came alongside a 7% rise in net sales to US$6.129 billion for the three months ended September 30. Yet the revenue increase was helped heavily by US$435 million of raw-material cost pass-through, while adjusted EBITDA fell 3% to US$883 million and adjusted EPS declined 2% to US$0.95. On a GAAP basis, net income attributable to Amcor fell 8% to US$242 million and diluted EPS dropped 9% to US$0.52.

Higher Costs Force Transition-Period Outlook Cut

Amcor said energy and distribution costs accelerated late in the quarter. The company said actions to address the inflationary pressure were under way and that it did not expect the higher costs to affect 2027 results, but the timing of recovery is now central to the revised guidance.

The reporting period itself is unusual: Amcor is moving from a June 30 financial year-end to December 31, creating a six-month transition period covering July 1 to December 31, 2026. It now expects December-end leverage of approximately 3.6 times, compared with its previous estimate of 3.5 to 3.6 times. That outlook excludes potential portfolio optimisation actions that have not yet been announced.

Volume Growth and Berry Synergies Cushion Margin Pressure

Underlying operating signals were not uniformly weak. Organic volume increased 1%, led by 3% growth in focus categories, while volumes excluding non-core and divested businesses rose approximately 1.5%. Pet food, foodservice, beauty and wellness were among the stronger end markets, and volumes increased across all regions, led by emerging markets.

Amcor said Berry acquisition synergies contributed approximately US$50 million to the quarter and that it remained on track for its three-year US$650 million synergy target. Flexible packaging delivered US$414 million of adjusted EBIT, up 1%, while rigid packaging generated US$303 million, down 3%. Across the group, the reported adjusted EBIT margin of 11.2% was diluted by the accounting effect of passing through higher raw-material costs; excluding that effect, the comparable margin was 12.1%, up 10 basis points.

Cash Flow and Debt Add a Second Pressure Point

Cash conversion was considerably less reassuring than the income statement. Free cash outflow reached US$820 million, compared with US$343 million a year earlier, after US$31 million of Berry-related restructuring and integration costs. Amcor attributed the deterioration principally to working-capital effects linked to resin-price volatility related to the conflict in the Middle East.

Net debt rose to US$14.011 billion at September 30 from US$12.897 billion at June 30. The board nevertheless declared a quarterly dividend of US$0.66 per share, one cent higher than a year earlier. Holders of Amcor CDIs trading on the ASX are due to receive an unfranked dividend of A$0.94 per CDI, based on the company’s stated exchange-rate conversion.