AMCOR the gift that keeps giving, page-3

AMCOR hardly gets any posts on Hot Copper, this is surprising when AMCOR is a gift that keeps giving.
Another dividend payday today, 4 times a year this time about 20cents/share.
From a $4 stock in 2008 to $18 today, AMCOR the quiet achiever.

@rocket973,

Well said!

Amcor wasn't always an always-giving gift, mind.

For many years it was an ASX ugly duckling.

But then there were two seminal acquisitions - Alcan Packaging in 2010 and Bemis in 2019 - which transformed the company very significantly, not just in terms of the meaningful synergy benefits that were harvested (and are still in the process of being harvested in the case of Bemis), but also in terms of operational scale benefits.

The step-function change in both the absolute level of EPS, as well as the EPS growth rate, is clearly seen in the chart below:



Prior to these two exceptional acquisitions, AMC was a pretty mediocre quality business, having a high fixed cost structure and lacking in scale, and organic EPS growth over the pre-2015 period was almost non-existent.

Additionally, capital allocation discipline during the late 1990s and early 2000s was sub-optimal, constraining returns to shareholders and dampening ROCE.

For many years, a standing form of entertainment in some investing circles in the early 2000s was to wager when AMC would finally earn EPS of 50 Au cents (AMC only started reporting in US$ functional currency from 2015, so the graph above shows EPS converted to US cents prior to 2015), or when it would generate ROCE above its cost of capital (ROE prior to 2015 barely got above 10%; today it is around 18%).

For many years taking odds against those two things happening was a safe bet(!)

But since the acquisition of Alcan Packaging acquisition, EPS has risen by a factor of 2.7 times (corresponding to a compound annual growth rate of 9%pa).

Going forward, the company will probably still be able to generate decent EPS growth for another year or two before the Bemis synergy lemon is squeezed dry.

It will be interesting to see what Amcor's board and management are able to deliver as an encore at that future point in time.

Amcor is now a very large global packaging player, so I suspect that all the big transformative deals are now done.

Which means that, instead of value accretion by mega-acquisition, the investment proposition will soon become one of deleveraging-and-accelerating-capital-returns.

Which is not at all a bad second prize.

.