Strong half sets Amcor on path to record year

Amcor posted record profit results for the first six months of the 2011-12 financial year, with profit after tax and before significant items up 14 per cent to an all-time high of AUS$304.7 million (US$328.5 million) in the six months to December 31, 2011.
 
Significant items, primarily relating to acquisitions and restructuring activities, were an after tax expense of AUS$99.8 million (US$107.6 million), compared with an after tax expense of AUS$41.3 million (US$44.6 million) in 2011. This increased cost meant profit after tax and significant items was AUS$204.9 million, down 9.4 percent on the year before. In addition, Amcor said the negative impact from translation of overseas earnings into Australian dollars on profit after tax and before significant items was approximately AUS$16 million.
 
Amcor managing director and chief executive officer Ken MacKenzie said: ‘The first half result represented a record underlying profit, record returns and a record interim dividend for the company.
 
‘These results are particularly pleasing given the backdrop of subdued economic conditions globally and an AUS$16 million adverse impact on reported earnings due to the appreciation of the Australian dollar.’
 
MacKenzie said much of the record performance was attributable to corporate acquisitions Amcor had made during the previous 36 months, such as that of Alcan Packaging.
 
He said: ‘The transformational acquisitions made in 2009 and 2010, during the global financial crisis, were significant contributors to achieving this record performance. These acquisitions have delivered substantial cost synergies and enabled the businesses to significantly improve [its] value proposition to customers. The benefits from the Alcan Packaging acquisition have considerably exceeded expectations in terms of both quantum and timing.’
 

'The business has undertaken substantial change over the past six years and following the transformational acquisitions during the global financial crisis has a strong platform for future growth'

By business segment, MacKenzie said flexibles had a strong half, with earnings up 24 percent and sales stable, particularly in Europe. This outcome is reflective of the defensiveness of the food, healthcare and tobacco packaging end markets, MacKenzie said. Asia was also a strong market for growth for Amcor’s flexibles business segment, and is said to be particularly attractive to Amcor due to rising per capita income, increasing populations and introduction by our customers of new product categories.
 
In its tobacco packaging operations, an agreement was reached to purchase a business in Argentina during the half. Amcor already has a presence in 11 different Latin American countries, and said this is an exciting opportunity for the tobacco packaging business to leverage its ‘technology expertise and manufacturing leadership’ into this market.
 
Rigid plastics and Australasian and packaging distribution delivered similarly strong results for Amcor during the first half.  
 

‘A key objective is to pursue growth opportunities in emerging markets, as well as in the more developed markets, through a combination of organic growth and acquisitions’

MacKenzie said: ‘During the half the businesses continued to invest in growth opportunities. In our Asian flexibles operations, capital expenditure was 150 percent of depreciation, with new capital focused on increasing capacity to meet the high growth we are experiencing in these markets. In addition to this new capital, we also reached agreement to buy out the minorities in two plants in China.’
 
Looking ahead, MacKenzie said: ‘The company is well positioned to continue to deliver improvements in underlying growth and overall earnings are expected to be well ahead of the same period last year,’ adding, ‘the business has undertaken substantial change over the past six years and following the transformational acquisitions during the global financial crisis has a strong platform for future growth.
 
‘The strong cash flow generated by the company will increase further over the next few years and create a number of options for shareholder value creation.
 
‘A key objective is to pursue growth opportunities in emerging markets, as well as in the more developed markets, through a combination of organic growth and acquisitions.’