In its first full year report since separating from Orora, Amcor has posted a profit of A$737m ($NZ821m) after tax, up 24.6 per cent from last year.
Ken McKenzie, chief executive at Amcor, says the rigid plastics and flexibles multinational, which now has 180 sites in 43 countries, has experienced improvements across all key metrics for the year. He says, “We have achieved another strong result, with higher earnings, margins, returns and cashflow. A key driver of this improvement was continued strong growth in emerging markets, and the benefit from recent acquisitions.
“The growth pipeline for both acquisition and organic projects remains robust. As the global leader in flexible and rigid packaging, Amcor is focused on being the innovator in these market segments. In short, we have had a good year.”
The demerger from Orora wrapped in December 2013 and saw Amcor divest its corrugated boxes, folding cartons, recycled paper linerboard, glass bottles and jars, paper sacks, closures, aluminium cans and bulk bags segments to focus on flexibles and rigid plastics. Operating cashflow was $890.6m, up 39.8 per cent, and sales margins also experienced a lift from 10.4 per cent to 10.8 per cent.
Ken MacKenzie, managing director and CEO of Amcor
While the North American rigid plastics market suffered headwinds with cool and wet weather battering beverage sales in FY14, McKenzie says the consumer’s preference for plastic bottles over cans and glass helped the business maintain its volumes, with a growth of around one per cent.
Internationally, across the board, rigid plastics saw earnings up four per cent, with sales margins also up. The introduction of its LiquiForm blowfill technology, which forms and fills plastics bottles on one machine and in one step, headlines high hopes for the future of the segment. McKenzie says, “Amcor owns this technology and over time it will change the growth trajectory of our rigid plastics business. LiquiForm is a demonstration of the benefits of focusing on innovation as a core competency, and is an example of the opportunity we believe exists across a number of our market segments. The benefits from this new process are significant and include a reduction in operating costs of 25 per cent.”
Flexible packaging, which makes up two-thirds of the business, saw profit up 7.1 per cent in constant currency terms after an improvement in the sales margin from 11.6 per cent to 12.1 per cent. McKenzie says the margin increase in flexibles was driven by innovation-led product mix improvements, better operating efficiencies and contributions from acquisitions.
Amcor made four acquisitions over the year, with a further $3bn of potential acquisition opportunities in its pipeline. McKenzie says, “We are interested in growing the business through acquisitions. We continue to be active and look for the right opportunities. The value of opportunities in our pipeline is in excess of $3bn. These are the ones that we are actively working on. Rigid plastics innovations: LiquiForm uses consumable pressurised liquid instead of compressed air to form plastic containers. “We are disciplined around the way we look at acquisitions, we have a 20 per cent pre-tax return on investment hurdle.”
In FY14, Amcor purchased two flexible packaging plants in China from the Shenda Group, bringing its flexible plant count up to nine in the country, with sales in the order of $500m. McKenzie says China is a standout in its steadily growing portfolio of emerging markets – its flexibles business in China saw 12 percent organic growth in 2014, 10 per cent through acquisitions – 22 per cent overall.
McKenzie says, “Amcor has been transformed over the past nine years and today is well positioned as the global leader in its chosen market segments. A highlight of the year was the continued strong growth in the emerging markets, which saw a profit growth of 9.8 per cent. This continues to be an exciting time for Amcor. We anticipate another year of improved earnings in 2015.”
