Amcor Flexibles set for further growth

- Flexibles to achieve solid increase in earnings in 2012-13

 

- Global flexible operations perform well to June 30, 2012

 

Amcor is expecting growth in its Flexibles business segment over the next financial year, after reporting strong performance in the 12 months to June 30, 2012.

 

Amcor reported record profit results for the financial year 2011-12, with Flexibles having ‘an excellent year’, according to managing director and chief executive officer Ken MacKenzie.

 

The Amcor Flexibles business area includes the Flexibles Europe and Americas, Flexibles Asia Pacific and Tobacco Packaging businesses.

 

MacKenzie was pleased with performance in the area, with earnings up 16.9 percent and returns of 23.9 percent, described in the company’s results as a “particularly strong result achieved against a backdrop of subdued economic conditions in the developed markets”.

 

Amcor said that despite challenging economic conditions, underlying volumes were stable for the Flexibles Europe and Americas business.

 

In North America, volumes were modestly higher, driven by growth in pharmaceutical applications, and in Europe underlying volumes were generally stable.

 

As plants were closed in Europe the business chose to reduce volumes in order to optimize plant operations and improve mix.

 

During the second half, the business announced the closure of a small plant in Drammen, Norway. This plant is expected to cease operation in October. Closures announced in prior periods have proceeded as planned with benefits from the plant closure in Viersen, Germany being realised in the second half.

 

By combining its focus on innovation and advantaged cost position, the business is positioned to increase the value it creates for customers and further drive profit improvement.

 

The Flexibles Asia Pacific business holds a leading position in key markets and will capitalize on significant growth opportunities from its 34 plants.

 

Strong relationships with large multinational customers along with Amcor’s technology, scale and financial strength provide the capability to support customer growth objectives in the region.

 

The business had a strong year, with earnings and returns significantly higher than the prior year. This was driven by strong volume growth, excellent cost management and operating improvements.

 

In China, the operations consist of seven plants and hold market leading positions across China’s major regional centres.

 

Sales for the year increased by 13 percent, primarily due to the benefits of new capacity installed over the past 12 months.

 

There was solid growth in the healthcare and high barrier film segments and the business was successful in gaining share in targeted food end markets. Earnings for the year were significantly higher.

 

In addition to organic growth, agreement was reached to acquire shares held by minorities in the flexibles plants located in Beijing and Chengdu. Previously, Amcor held 75 percent and 40 percent interests in these plants respectively.

 

These acquisitions provide the business with additional leverage to the growth opportunities being pursued in the North and West of China.

 

The Australia and New Zealand operations had improved earnings. During the year overall volumes were flat with earnings improvements from cost reduction programs, particularly the closure of the Regents Park facility in New South Wales.

 

In May 2012 the AUS$238 million acquisition of the Aperio Group was completed. The business has 13 manufacturing facilities in Australia and New Zealand and sales of approximately AUS$350 million.

 

The acquisition brings together the two leaders in the Australasia flexibles market and is expected to deliver net synergy benefits of AUS$25 million with a net cash cost to achieve these benefits of AUS$25 million.

 

The integration is proceeding well with solid customer support and good progress across all components of talent placement and synergy capture.

 

The business has announced the closure of Coopers Plains, a small plant in Queensland, with the majority of the volume from that plant transferred to Amcor’s Acacia Ridge site also in Queensland.

 

The Thailand operations also business had a solid year, with increased sales and earnings. Amcor said this was an “outstanding outcome” given the significant challenges presented by severe flooding through the December 2011 quarter.

 

The business benefited from new investments that are directed at growing the higher value-added, high barrier products. The recent acquisition of the Aperio Group included a plant in Thailand. The assets of this newly acquired site complement the existing portfolio and with four plants in Thailand.

 

The business unit that comprises the operations in Indonesia, Singapore and India had a solid year. The four plants all have good positions in their local markets creating strong platforms for future growth. Off a relatively low base, earnings were substantially higher than last year.

 

The Tobacco Packaging business had another strong year with higher earnings driven by solid volumes, improved product mix, cost savings and ongoing operating improvements.

 

There was strong sales growth in both Western and Eastern Europe. In both regions volume growth was modest, however the ongoing trend from customers to introduce new pack shapes and more sophisticated design features drove significant sales growth.

 

The trend towards higher value-add products is continuing and with the improved operating performance across the European operations, the business is well positioned to service these increasingly complex customer requirements.

 

The operations in North America also had a strong year driven by an increase in market share and additional export volumes. The business is selectively moving into non-tobacco end markets where the packaging can be produced on the existing equipment and customers require high quality, large volume gravure printing.

 

The US$40 million acquisition of the Aluprint tobacco packaging plant in Monterrey, Mexico was completed in July 2012.

 

The business has sales of US$30 million and gives Amcor a local presence in Mexico, a large and strategically located market for tobacco packaging. Aluprint has an excellent management team and the opportunity exists for substantial growth by leveraging Amcor’s global customer relationships.

 

In July 2012, Amcor completed the further acquisition of International Playing Card & Label Company (IPC&L). Located near Buenos Aires, IPC&L is the largest tobacco packaging producer in Argentina.

 

The business is a key supplier to the market leader and has opportunities for growth within Argentina, as well as supplying surrounding countries.

 

For the 2012/13 year, Amcor said the Flexibles segment is expected to achieve a solid increase in earnings, expressed in local currency terms.

 

Volumes are likely to be stable in developed countries, have continued growth in emerging markets and benefit from the recent acquisitions in Australasia, Mexico, India and Argentina.

 

There will be continued acquisition synergies and ongoing operating improvements.

 

MacKenzie said: ‘Amcor has over 85 percent of its sales in the defensive end market segments of food, beverage and healthcare packaging.

 

‘Consumer demand in these segments was particularly stable during the global financial crisis in 2009 and this stability has continued over the ensuing three years. Growth in emerging markets continues to be strong with sales increasing 10 percent.

 

‘In the current year it is expected that volumes will again be resilient and that the benefits from recent acquisitions, growth in emerging markets, cost reduction initiatives and continued strong cash focus will combine to deliver another year of higher earnings, expressed in constant currency terms.’

 

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