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PET packaging proving good earner for Amcor

By Jane Byrne , 21-Aug-2008
Last updated on 22-Aug-2008 at 15:19 GMT

Australian packaging company Amcor has announced a profit after tax and before significant items (PAT) of AUS $369m (€214m) for the year ended June 2008.

Commenting on the results, the company's managing director and chief executive officer Ken MacKenzie said: “The profit before interest and tax for the continuing businesses, expressed on a constant currency basis, was up 9.4 per cent. This increase continues the positive momentum established over the past 18 months."

He said that the company's polyethylene terephthalate (PET) packaging segment in particular had an outstanding year.

“The strategy for PET Packaging of focusing on the higher growth, custom containers segment, where it has a strong market position, supported by industry leading technology, has been correct with returns for the business increasing from 9.2 to 12 per cent over the past two years,” claims MacKenzie.

Amcor said that it continued to offset inflationary pressures resulting from oil price hikes through higher selling prices and that its growth in earnings demonstrates the success of these efforts. "We expect this trend to continue,” said MacKenzie.

Amcor consists of 5 business groups; PET packaging, Amcor Sunclipse, Amcor Australasia, Amcor Asia and Amcor Flexibles.

Amcor PET Packaging

PET packaging includes such products as bottles for sauces, cosmetics and drinks.

Profit before interest and tax (PBIT) on a continuing business basis and expressed in local currency terms was up 29.3 per cent to US$198.8m (€134m).

In June 2007, the group’s European PET business was closed.

The outlook for PET Packaging is for continued earnings improvement in the 2008-2009 year, claims the company.

North America

The company said its new US facility in Wytheville, Virginia, which supplies Gatorade containers, had its first full year of production. It has a capacity of over 1 billion units annually.

More than 20 brands of premium beverages have been introduced in PowerFlex, a new panel-less heat set container. The company said that this product "continues to gain momentum in the market place.”

However, Amcor said that higher inflationary costs are no longer able to be fully absorbed by productivity improvements or operating cost reductions in its PET packaging sites and need to be recovered through higher selling prices.

In the area of energy cost increases, the company said that “the business has made substantial progress in recovering these increases via contractual pass throughs”.

Latin America

Production volumes were up 6.8 per cent in Latin America, according to the report, with carbonated soft drinks and water showing an increase on the previous year of five per cent. Custom containers now comprise 18.1 per cent of the product mix, up 1.4 per cent on the 2006-2007 year.

The company said that the ongoing replacement of glass with PET is one of the factors continuing to support overall growth in the region.

Operations in Mexico, said the company, are now well positioned for future growth following improvements to operating efficiencies and extensive recruitment.

Amcor Flexibles

PBIT for the total Amcor Flexibles sector was down 2.8 per cent to €115.9m on a mixed year, but there was a stronger performance from the Amcor Flexibles Food arm, the company said.

Amcor Flexibles Food is a pan European business consisting of 26 plants in 13 countries serving major food market segments. The business also coordinates the wider strategy for flexible food packaging across other geographical regions.

The company said: "Earnings for the year were up strongly as the business continued to lower its cost base, improve product mix and recover raw material cost increases".

Amcor said that the prices increases it implemented to recover higher input costs were ‘well accepted’.

“The short term outlook for raw material input costs is for stability at the current high levels. In the medium term, lower cost polymer capacity is scheduled to commence production and it is likely resin supplier margins will reduce at that time,” said the company.

There is an ‘'extensive repositioning program" being undertaken called Flex 1. This has already entailed the closure of two plants, one in the UK and one in Germany in the 2006-2007 year.

The company said that number of film extrusion sites will be reduced from nine to three with new investment of €28m to upgrade the remaining plants.

Further plant rationalization occurred in June 2008 with the closure of the facilities in Lund, Sweden and Somerset, south-west England. The two facilities were primarily involved in the production of unprinted films for the meat and fish processing industries.

The company said that an important component of future growth is expansion into Central and Eastern Europe, supporting the increasingly number of multinational customers in the region.

A new plant in Poland, dedicated to PepsiCo for snack food products, commenced production in May 2008: "This plant will be a global leader in extrusion lamination and is ideally located in a high growth, low cost region," said the company.

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