This morning, 17 February, Amcor announced its results for the half year ended 31 December 2014. And the news is encouraging.
“The first half result represents another period of higher profits and returns. There continued to be good growth in emerging markets and acquisitions delivered the benefits anticipated,” Ken MacKenzie, managing director and chief executive officer Amcor, stated.
Highlights of Amcor results for half year ended 31 December 2014 – continuing operations:
- Profit after tax of US$321.3 million, up 6.7%;
- Earnings per share (EPS) was 26.6 US cents, up 6.8%. On a constant currency basis EPS was up 10.4%;
- Returns, measured as profit before interest and tax to average funds employed, for the first half of 19.2%;
- Returns, measured as profit before interest and tax to average funds employed, for CY14 of 20.4%;
- Operating cash flow, after net capital expenditure, of US$103.0 million, up 55.1%;
- Net cash from operating activities was US$205.0 million;
- Dividend per share (DPS) up 9.2% to 19.0 US cents, paid as 24.4 AUD cents; and
- US$500 million on-market share buy-back announced.
“Earnings per share increased 6.8%, expressed in US dollar terms, and were up 10.4% in constant currency terms. The dividend, which will be paid in Australian dollars, was up 25% to 24.4 cents.
“Over the past six months, there has been a number of exciting growth opportunities announced. We have continued our expansion in China, acquiring a business in Zhongshan that strengthens Amcor’s position as the flexible packaging leader in China. We have also announced construction of two new greenfield plants to expand our positions in Indonesia and the Philippines. Over the past four years we have completed 16 acquisitions and undertaken a number of organic growth investments. The company continues to have an extensive pipeline of opportunities, both organic and M&A that will continue to deliver future growth."
Highlights of Amcor Flexibles results for half year ended 31 December 2014:
“The Flexible Packaging segment had another solid half with earnings up 7% and margins increasing to 12.2%. The business benefited from recent acquisitions and solid growth in emerging markets. The Rigid Plastics business had a strong result with earnings up 8%. Volumes in the higher value-add, hot-fill segment were up 6% in North America and the Latin American operations had a strong result with volumes in that region up 8%.”
The Flexibles Asia Pacific business had sales of A$727 million, up 9.6% and earnings higher.
In China, the business had higher earnings. In line with the rest of the economy, growth in the overall Chinese flexible packaging market has slowed and in the December quarter there was considerable customer destocking that adversely impacted demand for that period. Offsetting this was the part period benefit of the Jiangsu Shenda Group acquisition completed in October 2013. For the period there was an earnings impact from the lag in passing on higher raw material costs to customers.
Across the rest of Asia, the businesses performed well. Organic volume growth remained strong in India, Singapore, the Philippines and particularly Indonesia, with volumes stable in Thailand. In November 2014 the A$27 million acquisition of Bella Prima Packaging, an Indonesian flexible packaging business was completed. Bella Prima has two plants in Jakarta and sales of approximately A$30 million. A new flexibles packaging plant to be built in the Philippines, was also announced in October 2014. This greenfield plant will be dedicated to a large multinational customer in the fast moving consumer goods segment, and provides an excellent opportunity to further expand the business in the Philippines and continue to improve the customer value proposition in the high growth South East Asian region.
In Australia, earnings were significantly higher predominately due to synergy benefits from the Aperio and Detmold acquisitions. The full benefits of these acquisitions are expected to be realised over the 2015 and 2016 financial years. Following a challenging year in FY14, with a decline in earnings, the business in New Zealand has implemented a comprehensive improvement plan, which stabilised earnings in the September quarter with an improving trend achieved in the December quarter. It is expected there will be further improvements in the second half.
The earnings outlook for the Flexibles business overall remains unchanged from the full year results in August. For the 2014/15 year, earnings are expected to be higher than the previous year. It is anticipated that conditions in developed markets will remain subdued and there will be continued growth in emerging markets. There will be benefits from recent acquisitions, product innovation and ongoing cost improvement programs.
