When the going gets tough

RESULTS

Need To Know

• FY23 result in-line with expectations, with 4Q margin beating expectations on lower than expected corporate costs
• Soft FY24 guidance of 67-71cps is a mid-single digit downgrade to consensus expectations
• Volumes remain under pressure with destocking, and recovery set to be weighted to the 2H

FY23 Result Overview:

Revenue $14,694m vs $14,854m consensus

EBITDA $2,018m vs $1,999m consensus

NPAT $1,089m vs $1,080m consensus

EPS 73.3cps vs 72.8cps consensus

Dividend 49.0cps in-line with expectations

Investment Implications

Destocking and lower underlying demand volume continues to plague AMC, with volumes in the 4Q still deteriorating for both Flexibles and Rigids (down 7% and 6% respectively). This was in-line with volume performance in the March quarter, and no real improvement was seen across the 3 months to June. Management attributed 2/3 of the volume movement to underlying demand and 1/3 to destocking impacts.

Flexibles 4Q EBIT was fractionally ahead of consensus, with a 2% benefit from price/mix partly offsetting a 7% fall in volumes. Europe and North America were the worst performers, with Latin America and Asia faring better.

Rigids 4Q EBIT was 3% below consensus, with a 2% price/mix benefit not offsetting a 6% fall in volumes. North America was the main culprit, exhibiting both destocking and lower demand.

Net debt of $6,057m was up $342m on the prior period, with Net Debt/EBITDA now at ~3.0x, which is above the 2.25-2.75x target range. The $500m buyback was not fully completed, only reaching $431m, with management pushing the $70m deficit into FY24.

FY24 guidance was the key disappointment in the result, with higher net interest costs and weaker volume trajectory being key factors. AMC is expecting adjusted EPS of 67-71cps, below consensus expectations for ~73cps, and implying negative earnings growth. AMC noted that the result is likely to be weighted to the 2H as the demand and destocking outlook improves. 

Investment View

The outlook continues to deteriorate, where we would have expected to see some slight improvement across FY24. The going is certainly continuing to be tough for AMC after another downgrade, but with destocking set to ease at the end of CY23, the stage is set for AMC to deliver a fairytale 2H story. 

Lower corporate costs were a pleasant surprise, however the weak underlying volume demand and stretched balance sheet remain a slight concern, with higher interest costs set to bite. AMC remains inexpensive, though with negative earnings growth forecast into FY24, we prefer to retain our Hold rating.