Year to date net sales for Amcor of $9,325m were 1.8% lower than the prior period in constant currency terms, or 0.5% lower after excluding a 1.3% unfavorable impact from the pass through of lower raw material costs. Overall year to date volumes were 0.2% higher with the remaining 0.7% representing unfavorable price/mix.
The company has delivered approximately $55m (pre-tax) of cost synergies year to date, primarily from overhead and procurement initiatives, of which $40m was in the Flexibles segment and $15m in Other. Amcor continues to expect synergy benefits of approximately $80m (pre-tax) in fiscal 2020, and remains on track to achieve $180m (pre-tax) in synergy benefits by the end of fiscal 2022.
Cash restructuring and integration costs of approximately $69m have been incurred year to date out of approximately $100m expected in fiscal 2020. Total cash integration costs by the end of fiscal 2022 are estimated to be $150m.
Year to date net sales for the Flexibles segment were 1.4% lower than the prior period in constant currency terms, or 0.7% lower after excluding a 0.7% unfavorable impact from the pass through of lower raw material costs.
Overall year to date segment volumes were 0.2% lower than the prior year, with higher volumes in the Flexibles North America and Flexibles Europe, Middle East and Africa businesses offset by lower volumes in Flexibles Latin America and for specialty carton products. The remaining 0.5% represents unfavorable price/mix.
In North America, year to date volumes grew in the low single digit range, mainly driven by strength in the high value healthcare, pet care, protein, liquids and home and personal care end markets as well as specialty folding carton products.
In Europe, low single digit year to date volume growth was driven by higher volumes in dairy, pet care, coffee, medical, ready meal and snack products. Sales of specialty folding carton products in Europe improved sequentially in the third quarter but remained lower than the prior nine-month period, driven by weaker volumes in the first half of the fiscal year reflecting an increase in the prevalence of illicit trade and customer destocking in Eastern Europe.
In Asia Pacific, year to date volumes continued to grow across the Asian emerging markets notwithstanding lower volumes in China through January and February and lower volumes in India in March. In Latin America, volumes improved sequentially in the third quarter but were lower than the prior nine-month period reflecting challenging economic conditions across the region and the impact of volumes lost within the legacy Bemis business prior to the acquisition close in June 2019.
Year to date adjusted EBIT of $947m was 11.3% higher than last year in constant currency terms and includes approximately $40m of synergy benefits related to the Bemis acquisition. The remaining 7% organic growth primarily reflects strong cost and operational performance across all segments.
Adjusted EBIT margins of 13.0% increased 150 bps compared to the prior year period, while rigid Packaging adjusted EBIT grew 4% in the March quarter with growth in North America and Latin America.
Year to date net sales for the Rigid Packaging segment were 3.4% lower than the prior period in constant currency terms, or 0.2% higher than the prior period in constant currency terms after excluding a 3.6% unfavorable impact from the pass through of lower raw material costs. The 0.2% increase was driven by volume growth of 1.5% partly offset by unfavorable price/mix of 1.3%.
In North America, year to date beverage volumes were 1.7% higher than the same period last year with hot fill container volumes up 5%, driven by market growth and share gains as a range of customers launched new products in the PET format. In Latin America, year to date volumes were 3.4% higher compared with the prior period.
On a year to date basis and in constant currency terms, adjusted EBIT of $202m was 6.8% lower against a particularly strong comparative in the first half of last year primarily related to exceptionally strong mix in North America and the early recovery of cost inflation in Argentina.
Progress on the integration of Bemis Company Inc., acquired in an all-stock transaction in June 2019, continues ahead of initial expectations for the first year. Amcor’s combined results are presented as if the company's acquisition of Bemis had been consummated as of July 1, 2018 and exclude the impact of non-recurring acquisition and integration related costs, acquisition related amortization expenses, and other items management considers as not representative of ongoing operations.
Net debt was $5,984m at March 31, 2020, an increase from June 30, 2019 due primarily to the seasonality of cash flow generation and dividend payments. Leverage, measured as net debt divided by adjusted trailing 12-month EBITDA, was 3.1 times as of March 31, 2020, in line with 3.1 times in the prior year period.
Outlook
Amcor said the COVID-19 pandemic creates significantly higher degrees of uncertainty and additional complexity with regard to estimating future financial results.
Assuming the company and its supply chain partners and customers are able to continue operating with minimal disruption, Amcor said it expects adjusted constant currency EPS growth in fiscal 2020 of approximately 11-12% (previously 7-10%).
Compared with adjusted combined EPS of 58.2 US cents per share in fiscal 2019 and assuming fiscal 2019 average exchange rates, this implies a constant currency EPS range of 64.6 - 65.2 US cents per share (previously 62.0 - 64.0 US cents per share).
Amcor said assuming current exchange rates prevail for the remainder of the year, currency would have an unfavorable impact on reported EPS of approximately 1.0 to 1.5 US cents per share.
This range includes pre-tax synergy benefits associated with the Bemis acquisition of approximately $80m.
The company said it expects a free cash flow (before dividends) of more than $1bn before approximately $100m of cash integration costs.
The company also expects corporate expenses before synergies of $160 - $170m in constant currency terms; net interest costs of $190 - $200m (previously $210 - $230m) in constant currency terms; and an adjusted effective tax rate of 21% - 23%.
Amcor CEO, Ron Delia, said, "During this period of unprecedented challenge, the vital role that primary packaging plays in the supply of essential food, beverage and healthcare products has never been clearer. Right now, consumers are especially focused on product safety, hygiene, shelf life and convenience, and Amcor is helping meet those needs around the world with packaging for consumer staples. I am extremely proud of the commitment and dedication our 50,000 co-workers are demonstrating every day to continue supplying our customers during these difficult times and we cannot thank them enough.
"While we are not immune from the current challenges, Amcor remains relatively well positioned and defensive, given our sales are almost entirely weighted to essential consumer staples end markets and we have broad geographic diversification and global scale. For the second consecutive quarter we have increased guidance for the 2020 fiscal year. Earnings growth has remained strong due to momentum in the base business and faster than expected synergies from our acquisition of Bemis last year. Amcor continues to deliver consistent cash flow and the board remains committed to a compelling dividend.
"While the near-term environment remains uncertain, we are confident in the defensiveness and underlying potential of the business. We have visibility to organic growth from defensive end markets, cost synergies from the Bemis acquisition and the EPS benefits from shares repurchased this year. Amcor has a strong balance sheet and we expect to generate over $1bn of annual free cash flow, enabling continued investment in the business and cash returns to shareholders."