Alcan catalyst for Amcor growth

Amcor said the acquisition of Alcan Packaging has had a positive effect on the business as it plans for future growth.
 
Addressing Amcor’s 2011 annual general meeting (AGM) on Thursday, October 20, managing director and CEO Ken MacKenzie (pictured) said the integration of Alcan had brought about cost synergies exceeding the original targets by 25 per cent, 12 months ahead of schedule and with a lower investment cost.
 
The cost synergies derived from the integration of Alcan focus on overhead reductions, procurement savings and restructuring of the manufacturing footprint. The overhead reduction program was completed in June this year, accounting for nearly half of the cost synergies, while procurement benefits have exceeded expectations in both scale and timing in the two years since the acquisition, MacKenzie said.
 
Regarding manufacturing, 11 sites have been earmarked for closure, with operations ceased at nine already and the other two to close in the next six months.
 
MacKenzie said: ‘Our ability to deliver synergies in excess of targets, ahead of schedule and at a lower cost was one of the clear highlights of Amcor’s financial performance for 2011.’ Amcor achieved profit after tax for the 2011 financial year of AUS$570.3 million, up 39.4 per cent on the previous year.

He added: ‘The positive impact on earnings from cost synergies was AUS$140 million. Importantly, the run rate of cost synergies at June 30, 2011 was AUS$200 million per annum. As a result, the incremental benefit in the 2012 financial year, from cost savings already achieved, will be AUS$60 million. The businesses have continued to work on implementing new saving opportunities that will further enhance earnings this year and have a full-year impact in fiscal year 2013.
 
‘The advantage of having cost synergies as a key driver of earnings over the next two years is that Amcor is not dependent on improving global economic conditions to grow earnings and returns. In the 2012 financial year, the cash spend required to achieve synergy benefits will be completed. As a result, in fiscal year 2013 Amcor’s cash flow will reflect the impact of more than AUS$200 million in cost synergies, as well as an improved operating performance. The combination of these benefits will represent a significant improvement in Amcor’s cash generating capacity and be the ongoing legacy from the Alcan Packaging and Ball Plastics acquisitions.
 
‘The strategy is to leverage the improved cash flow to accelerate revenue and earnings growth, and deliver a step change in shareholder value creation. This will predominately be achieved in two ways. First, by using our global market leadership to create a differentiated position in product innovation and second, to expand our presence in emerging markets.’

MacKenzie also detailed how Amcor's Flexibles business will grow in 2012 in his presentation to the AGM.