Amcor announced its half year results to December 2015 today, with MD & CEO Ron Delia declaring an “outstanding” first half result with strong growth in earnings driven by higher volumes in both the rigid plastics and tobacco packaging business units. There were also benefits from recent acquisitions and continued improvement in operating performance.
“Earnings per share, on a constant currency basis increased 10.2% reflecting strong profit growth and the benefit of a US$500 million share buy-back completed during the period. Cash generation was solid and returns remained above 20%,” Delia said.
Since 30 June 2015, the business has announced or completed six acquisitions in the USA [Encon Plastics and Deluxe Packages], South Africa [Nampak Flexibles], Brazil [BAT's in-house tobacco packaging plant], China [BPI China], and India [Packaging India private Limited].
“This is an important component of Amcor’s growth strategy and we continue to find opportunities that deliver strong value for shareholders.
“Amcor has a strong foundation to build on, and an excellent track record of ongoing improvement,” Delia said.
The acquisitions strengthen Amcor's footprint in emerging markets where it now has more than 80 plants in 27 countries. Emerging markets currently accounts for approximately 32% of the overall business.
The company's investment in new plants continues, with three major facilities currently under construction. In Indonesia, a new greenfield tobacco packaging plant is due for completion in the June 2016 half year, with a similar timing slated for a new greenfield flexible packaging plant in Philippines. Meanwhile, construction has commenced on a new rigid plastics dedicated facility in the USA.
In terms of performance by business division, Rigid Plastics led the way this half year, and Delia said the outlook is for strong earnings growth in Rigid Plastics and modest earnings growth in Flexible Packaging for FY16.
“The Flexible Packaging segment [which accounts for 65% of total revenue] delivered solid adjusted constant currency earnings growth of 6.1% and achieved returns of 24.6%. The key drivers of earnings growth were higher tobacco packaging volumes, benefits from prior period acquisitions and strong organic growth in emerging markets,” Delia said.
In a statement to investors, the company noted overall demand for flexibles in the Australian market remained subdued during the half year. “The recently acquired Detmold business continues to perform well and is delivering to expectations. The performance of the business in New Zealand has improved significantly following the implementation of a comprehensive improvement plan in the last financial year, and earnings were higher during the half which reflects improved mix and strong cost performance.”
The Rigid Plastics business [which accounts for 35% of revenue] saw an earning increase of 10% and returns above 20%. Delia noted there was strong volume growth in the North American operations with higher volumes in all the main product segments, and continued earnings growth in Latin America.
Overall, food and beverage are the biggest end market sectors for Amcor (66% combined), with tobacco packaging and health care packaging each at 14%, home and personal care at 3% and 'other' making up the balance.
“Amcor is well positioned in an increasingly dynamic world and has substantial opportunities to leverage the existing portfolio to generate growth,” Delia said.
“The full year outlook is for higher earnings than the 2014/15 year, expressed in constant currency terms.”
RESULTS SUMMARY:
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On a constant currency basis, earnings per share (EPS) was up 10.2% to 29.3 cents;
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On a constant currency basis PAT was up 6.6% to US$342.6 million;
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Profit after tax of US$305.5 million, including the negative translation impact from the higher US dollar of US$37 million;
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Returns, measured as profit before interest and tax to average funds employed of 20.2%;
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Operating cash flow, after net capital expenditure, of US$101.9 million; and
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Dividend per share (DPS) of 19.0 US cents. Paid as 26.7 AUD cents, up 9.5%.
