Amcor Earnings: Excess Supply and a Pullback in Consumer Spending Drive Lower Volumes

We modestly raise our fair value estimate for narrow moat Amcor by 2% to AUD 17.80 (USD 11.60), on the time value of money. In line with our expectations, first-half fiscal 2024 adjusted EBIT of USD 709 million was 6% lower than the previous corresponding period on a constant comparable currency basis. The key drag on earnings was a 9% decline in volumes. About half of this was due to customer destocking of excess inventory. The remainder was due to weaker end-customer demand as household budgets became stretched by high-interest rates. As a result, households are spending less on discretionary goods and switching to lower-cost or bulk items, which generally have less packaging. Despite this, we expect a stronger second half as destocking abates. Our fiscal 2024 forecast assumes volumes decline mid-single digits, with our earnings forecasts unchanged.