Amcor, a global leader in consumer packaging, has announced a major restructuring plan in response to a significant drop in consumer demand. The company has slashed 2,000 jobs, which equates to 5% of its worldwide workforce, and is in the throes of shutting down nearly 10 factories across the globe. This move comes on the heels of a steep 10% fall in business volumes during the December quarter, marking the biggest slump in the company's history.
Unveiling the Causes of the Dip
Amcor's Chief Executive, Ron Delia, traced approximately half of the sales downturn to North American consumers purchasing fewer soft drinks and bottled beverages. The remaining half of the sales slump is attributed to significant pharmaceutical and medical device customers paring down their stock levels. Despite witnessing a marginal surge in volumes in January, Delia does not foresee a hefty recovery in consumer spending.
The Silver Lining: Cost-Saving Measures
Amcor's stringent cost-reduction measures, encompassing the job cuts and factory closures, have led to savings of $200 million in the December half. The company also indicated that the period of passing on increased costs to customers via price hikes is likely drawing to a close, after the implementation of a cumulative $4 billion in price increases over the past two years.
Market Reactions and Future Prospects
Following the announcement of its cost-cutting initiatives, Amcor's shares rallied a 4.6% increase on the Australian Securities Exchange (ASX), where it trades as Chess Depositary Interests. The company, which primarily lists on the New York Stock Exchange, made headlines in 2019 by acquiring Bemis Co in the US for $9 billion, shifting its primary listing to the NYSE. Currently, Amcor operates around 210 factories in 43 countries, catering to the food, beverage, and healthcare sectors.