Spinning Off $2.5 Billion in Non-core Assets! What Key Changes Is Packaging Giant Amcor Cooking Up?

After the big acquisitions of Buma and the subsequent major merger with Berry Global, the global packaging giant Amcor has transformed into a mega industrial platform with annual revenues exceeding $20 billion.

However, in the face of the recent wild swings in crude oil and resin prices, the impact of geopolitical conflicts on global supply chains, and inflationary pressures on end consumers, how does this hundred-billion-dollar packaging powerhouse manage to seamlessly integrate its massive and complex assets?

At the Jefferies Global Industrials Conference, Amcor's Executive Vice President and CFO Stephen Schager tackled industry concerns head-on, providing an in-depth review of the integration progress a year after merging with Berry Global, the cost pass-through mechanisms, capital expenditure discipline, and the strategic direction for the next five years.

The first year of the merger delivered dividends exceeding expectations, with system-level cross-selling driving growth



In the second year of the merger with Berry International, the pace of integration has not slowed down; in fact, the core indicators have been slightly faster than initially expected.



When announcing the transaction, Amco set a cumulative synergy target of $650 million over three years, with a first-year assessment bottom line of $260 million. After one year of actual operation, the company delivered $285 million in synergies, with this portion of earnings directly at the bottom of the income statement, becoming a key driver for double-digit growth in earnings per share for the full fiscal year.



With the fiscal year adjusted to December 31, the company expects to lock in another $130 million in synergies during the next half-year transition period. The certainty of achieving $650 million over the three years is very high, and the team's internal pace is even faster.



On the cost side, Amco originally planned to invest $280 million to achieve the $650 million result, but has actually spent about $160 million, showing good fund utilization.



The smooth implementation of the collaboration largely depends on the extremely low overlap in business lines before the merger. The combination of the two has almost never caused business conflicts, nor has it caused major clients to actively divert orders due to market share concentration.



Over the past year, Amcor captured $140 million in brand-new pure incremental business that previously did not belong to either party. Over the next three years, the revenue synergy target from cross-selling is set at $280 million, corresponding to approximately $60 million in EBIT.



This incremental growth mainly comes from the "system-level combination punch."



In the past, Amcor might have only supplied yogurt cup bodies to customers, but now it can deliver it integrated with the top cap membrane; In the healthcare sector, it can supply aluminum-plastic blisters for single-dose applications as well as medical medicine bottles; For washing and care bottle bodies with pump heads, previously the two companies could only produce part of each, but now the entire system can be manufactured and delivered in-house.



This one-stop solution not only helps customers avoid supply chain frictions caused by multiple connections, but also gives customers greater confidence in entrusting integrated R&D to Amcor when responding to new regulations such as the European Packaging and Packaging Waste Regulation (PPWR) and Extended Producer Responsibility (EPR).



Raw material procurement reached $13 billion, with the transmission lag period compressed to a single month to address inflation



As an industrial buyer consuming over $13 billion in raw materials annually, Amcor's purchases of about $5 billion are concentrated in the plastic resin sector such as polyethylene and polypropylene.



Facing escalating Middle East tensions and crude oil fluctuations, Amcor's supply chain remains stable due to its highly fragmented and localized procurement layout.



Only about 4% of resin is directly purchased from the Middle East; the vast majority of raw materials rely on regional networks for localized long-term direct procurement, with very little involvement in uncontrollable spot speculative trading.



In recent years, the consumer goods supply chain has endured persistent inflation, and packaging manufacturing has not been spared.



To this end, Amco has passed on about $280 million in price increases to customers over the past few quarters, nearly matching the cost pressures the company faces on the procurement side.



This cost absorption is not simply a price hike, but is based on years of honed contract execution skills. In the past, the industry typically experienced a lag of about three months between raw material price increases and packaging box price adjustments.



During the extreme phase of severe external fluctuations, Amcor was able to work closely with customers to reduce the price adjustment lag to under one month, achieving high-frequency, small-scale synchronized linkage.



For thousands of brand customers, although this mechanism also requires absorbing costs, compared to stockouts or unpredictable sudden price hikes, it ensures stable supply of core materials and quickly returns to normal once the supply chain stabilizes, maintaining long-term business trust.



Moving away from pure price increases and returning to volume-price balance, emerging markets like China have seen consecutive quarters of increased volume



In terms of terminal shipments, over the past 2-3 years, whether it was large fast-moving consumer goods brands, chain restaurants, or supermarket private label customers, almost all have been continuously raising terminal retail prices to offset inflation, largely sacrificing physical sales.



By 2026, the market will begin to transition from simply using price to supplement volume to a more rational "volume-price balance."



This shift is directly reflected in Amcor's performance pace. Compared to a 1.5% year-on-year decline in sales volume in the previous quarter, the company's shipments improved by about 200 basis points quarter-on-quarter in the most recent quarter, achieving a positive slight increase of 0.5%.



This rebound demonstrates strong universality: in basic consumer categories closely related to mass lifestyles, customers' stocking pace has become more severe; while in high-profile sectors such as high-protein foods, catering services, healthcare and health, personal care, and pet food, the volume increase is even more pronounced.



Notably, emerging markets represented by China, India, Brazil, and Mexico have provided Amcor with robust growth momentum for several consecutive quarters.



Frontline feedback as of August indicates that expectations for shipments to remain stable or slightly positive in the second half of the year are being continuously verified, and the industry shows no signs of a second bottoming out.



By 2027, aiming for double-digit profit growth, capital expenditure will avoid rough and reckless expansion



Looking ahead to a more normalized 2027, Amcor's management has presented a clear business simulation model: as the final phase of synergy benefits is concentrated, the industry will gradually absorb earlier demand fluctuations, and global consumer goods will maintain stable first-party demand at the client.



Based on this benchmark, combined with cross-selling dividends and a tilt toward high-growth tracks, Amcor is confident in achieving low single-digit organic growth, driving mid-single-digit EBITDA growth and ultimately passing this into double-digit earnings per share (EPS) growth.



To support this long-term mechanism, Amcor has set a reasonable level of capital expenditure at around 5% of annual sales.



Breaking it down, 2%-3% is allocated to maintaining the healthy operation of existing plants and core production lines, while the remainder focuses on automation cost reduction, process efficiency improvement, and targeted expansion targeting high-quality customers.



Unlike the previous industry model of investing heavily in large-scale greenfield factories and then seeking order fulfillment, Amcor's current capital expenditures remain highly modular and customer-bound.



Each new investment directly corresponds to the specific client's deterministic incremental demand. Once the market environment changes, capital expenditure can be flexibly adjusted at any time to ensure free cash flow after production continues to outpace capital costs.



Recovery of working capital accelerates deleveraging, with a prudent push to divest $2.5 billion of non-core assets



Due to fluctuations in raw material prices and geopolitical factors, Amcor proactively expanded safety stock in recent periods and, in cooperation with some large clients, extended the payment period and settlement cycle, resulting in about $500 million in working capital temporarily stagnating in accounts receivable and raw material inventories.



As all links of the supply chain return to smooth operations, raw material prices have fallen from high levels, and the pace of customer payment collections has gradually normalized.



Management has clarified that this $500 million in working capital will be repatriated in an orderly manner over the next 12-18 months. Relying on abundant internal cash flow and ensuring long-term stable dividends, Amcor plans to reduce about $1 billion in interest-bearing debt by the end of 2027, steadily lowering the overall financial leverage ratio from the current approximately 3.5 times to around 3 times, firmly maintaining its investment-grade credit rating.



Only when debt levels return to a safe margin will the company reconsider whether to launch a new round of industry chain mergers or to reward shareholders through secondary market stock buybacks.



While optimizing its balance sheet, Amcor has already screened out about $2.5 billion in marginal assets from its massive $23 billion corporate portfolio that do not fit its long-term strategy, and initiated divestiture procedures. Currently, the company has successfully completed the first five small and medium-sized transactions, recovering about $500 million.



The most significant portion of the remaining assets to be disposed of is the beverage bottle manufacturing business in North America, mainly supplying bottles for well-known sports drinks such as Gatorade. Over the past year, management has conducted a thorough operational review of this previously underperforming asset, significantly improving its profit margin and self-financing capacity.



Due to the complex mechanisms involved in resin raw material fluctuations, Amcor has maintained a cautious approach in seeking a strategic buyer, ensuring a reasonable sale premium while avoiding undue dilution of overall earnings per share from asset off-balance-sheet sales. The entire divestiture process is proceeding as planned in substantive talks with potential buyers.



Established a dedicated team to break through its own brand, focusing on excess returns in six high-growth tracks



From a business perspective, Amcor is decisively correcting past structural shortcomings.



In its previous business landscape, the company's resources were overly concentrated on traditional multinational brands and large chain fast-food giants, with insufficient investment in supermarket own brands, which have rapidly risen in the global retail system in recent years.



Retail giants like Walmart and ALDI have private labels whose products and packaging craftsmanship are already on par with top mainstream brands.



In response to this market trend, Amcor broke away from the traditional sales structure divided by region or process, formed a private label commercial team led by a dedicated project leader, and redesigned the incentive and assessment mechanism.



Because the purchasing decision chain for private labels spans retailer access and numerous third-party contract manufacturers, the sales process is relatively unique, but its profit margins and technical barriers are no less than those of traditional customers. Currently, this new team has begun to show results in expanding its channel customer base and will become an important source of revenue synergy in the coming years.



In its core $20 billion main business, Amcor will strategically allocate more than half of its resources to six major tracks with mid-to-high single-digit compound annual growth: including high-protein food packaging driven by dietary changes, medical health packaging with a scale of $2.5 billion and deep moats, high value-added personal premium care, pet nutrition foods that keep pace with human living standards, and the fast food sector's comprehensive shift to environmentally friendly and recyclable polypropylene (PP) beverage cup manufacturing.



By combining the capacity and technology patents of its global factory network with its vast customer procurement database, Amcor is fully shifting its focus to these high-premium sectors. In the complex cycle of widespread stock competition in the industry, this packaging industry leader is building new barriers to navigate industry cycles through lean integration, strict capital constraints, and keen market positioning.