We recently researched Amcor (ASX:AMC) in The Dynamic Investor. Market concerns about the integration of the Berry acquisition (a large acquisition) and subdued organic volume growth have weighed on the shares.
We took the view that the shares presented an opportunity. With the shares having gained slightly since our report, we assess whether current levels are still attractive.
About Amcor
Amcor is a global packaging manufacturer which has two operating divisions: Flexibles and Rigid Packaging (‘Rigids’). The Flexibles division has operations in North America and South America, Europe and the Asia Pacific region. The Flexibles division includes the Bemis business (acquisition completed in June 2019) and accounts for >80% of group earnings. Key end market exposures are defensive sectors, namely food, healthcare, home & personal and tobacco. The Rigids division is mostly exposed to the beverage and personal care markets in North America and Latin America.
The revenue profile is highly skewed to defensive end markets, in particular the Food, Beverage and Healthcare categories.
On 19 November 2024, the Company announced a merger agreement with Berry Global Group (‘Berry’) in an all-stock transaction. Following completion of the merger, Amcor shareholders will own 63% of the enlarged entity, with Berry to own the remaining 37%. The current CEO (Peter Konieczny) and Chairman (Graeme Liebelt) will become the CEO and Chairman, respectively, of the combined entity. The transaction is expected to close in the middle of calendar year 2025.
Key Fundamental Drivers
Strategic Rationale for Berry Merger Appears Sound
The combined entity is expected to have higher margins and focus on higher growth segments (i.e. healthcare, protein, pet food, liquids, beauty & personal care, and food service). The latter cohort is expected to account for ~40% of total revenue (up from 30%).
These factors underpin the Company’s expectations for revenue growth (on a CAGR basis) to be at least +1% above market over the next five years. AMC expect the transaction to deliver >35% EPS accretion (including synergies), assuming a full-year contribution from Berry in FY26.
Berry’s EBITDA margin is higher than AMC at 17%, compared to AMC’s 15% which reflects strong market positions in higher value segments (e.g., closures). EBITDA margin for the combined entity is expected to increase to 18% post synergies. The expectation for further expansion in EBITDA margin is also a function of continued improvement in volumes and ongoing benefits from existing cost out and restructuring initiatives.
It is worth noting that AMC has a solid track record of delivering on its synergy targets, based on the prior Bemis and Alcan acquisitions. Following the integration of the Bemis acquisition, AMC delivered ~$200m of cost synergies, which was ahead of its initial target of $180m.
Improvement in Operating Conditions Expected to Continue
Volume softness over the course of FY24, due to ongoing destocking in healthcare and North American beverages, has been a major overhang for AMC shares. The most recent results, for the three months to 30 September 2024 (1Q25), showed that group volumes had improved to +2%, compared to +1% in 4Q24, with AMC noting sequential improvement across its business. However, the improvement in volumes was driven by less negative volume growth for Rigids (-4% vs prior -5%), with Flexibles volumes (+3%) unchanged from 4Q24.
Group volume growth over the course of FY25 is expected to improve. This is in line with volumes across the major consumer retailers continuing to recover from lows. Flexibles volumes is expected to mid-single digit volume growth in core food & beverages. This is expected to offset ongoing declines in healthcare (which accounts for 15% of sales) due to destocking. However, destocking in the Healthcare segment is expected to end in 1H25.
In terms of rigids, volumes in 2Q25 are expected to be flat, as soft drinks demand in North America continues to fall by low single-digit %. The latter is partially offset by more stable demand in HPC and wine & spirits. However, sequential improvement in volumes is expected throughout FY25.
Balance Sheet Implications
Gearing (on a net debt to EBITDA basis) remains relatively stretched. This reflects the loss of earnings in prior periods from Russia and a broader loss of earning in line with softer volumes. Gearing increased to 3.5x as at 30 September 2024 from 3.1x as at 30 June 2024, however this was in line with seasonal trends.
The merged entity is targeting higher shareholder returns (~13-18% vs. Amcor ~10-15%), supported by a doubling in annual cash flows (>$3b vs. Amcor $1.5b). In addition, the merged entity is targeting a higher rate of EPS growth of 10-15%, and a dividend yield of 3-4%. As the realisation of these augmented targets require additional CAPEX (~$1b per annum compared to ~$500-600m previously), AMC expects leverage of 3.3x at completion of the transaction. However, management sees a path for gearing to fall below 3x within the first full year, as synergies flow through. This would bring the gearing level in line with the average gearing level of US packaging peers (~2.8x based on recently-reported results).
This level of gearing would be at the upper end of the Company’s target gearing range of 2.5-3.0x. However, it is possible that the latter could be revised lower over the medium, given that annual cashflow for the merged entity is expected to double.
The lower gearing profile also provides scope to purse Merger & Acquisition opportunities. Although management may be hesitant to begin M&A during the integration of the Berry acquisition, there is potential for the Company to build upon its leading share as well as pursue bolt-on acquisitions.
Fundamental View
Current levels still present an entry opportunity. Amcor shares are currently trading on a 1-year forward P/E multiple of ~13x, which is below the average multiple of ~14x over the past two years. The multiple is also not demanding in the context of an EPS growth profile (in US$ terms) of +7% over FY24-27 on a CAGR basis.
It is also worth noting that AMC’s share price performance improved during synergy realisation period for both the Bemis and Alcan acquisitions. There is also potential for a recovery in the 1-year forward P/E multiple on the back of upgrades to consensus EPS estimates. This is likely as the market begins to factor in the expected margin accretion from FY26 following completion of the integration of the Berry acquisition.
Charting View
After easing back over the past few months, Amcor then made a solid reversal at the start of January (circled). There now appears to be some good buying support at these levels and the stock should head higher. The first level of resistance is up near $16.50.

Michael Gable is managing director of Fairmont Equities.
CLICK HERE to read our Testimonials.
Current share prices available here.
You can learn more about technical analysis in this article.
An 8-week FREE TRIAL to The Dynamic Investor can be found HERE.
Would you like us to call you when we have a recommendation? Check out our services.
Disclaimer: The information in this article is general advice only. Read our full disclaimer HERE.
Like this article? Share it now on Facebook and X!