Amcor expects to be hit with its biggest earnings impact in seven years, as rising raw material costs weigh on its Flexibles business.
The company, which in February flagged a full-year hit of around $US25 million ($A33 million) to its Flexibles segment amid rising raw material costs, says prices have continued to rise with the pace of inflation and there are signs of further increases ahead.
It forecast an impact of at least $US15 million to its Flexibles segment in the second half of the financial year.
“This year’s earnings impact from these raw material increases will be the most significant in any year since FY11 and so it is clearly an unusual period,” Amcor said on Wednesday.
Amcor said the rising material costs also have a disproportionate impact on the 27 emerging markets which it operates in.
Chief executive Ron Delia said the company has reacted quickly to changing industry conditions, recovering higher input costs and slowing capital spending given the lower volumes.
He said while the Amcor has already bumped up prices across the business in response, the costs will take time to recover.
“Since December we have seen further increases in raw material costs in the high single digits,” Mr Delia said.
“As is always the case, we will recover these cost increases over time but there is a time lag between the impact of raw material cost movements and the related pricing actions.
“Of course, we always push for more but we have to be pleased with the resilience of our teams around the world and the proactive way they get after opportunities to improve the business.”
Amcor also said lower volumes from its Rigid Plastics segment will have a greater impact on earnings in the second half of the year, than it did in the first six months.