In an update on its Venezuelan operations, packaging giant Amcor has revealed it will face a US$350m impairment brought on by poor economic conditions in the country.
Amcor says its Venezuelan Rigid Plastics business has been impacted by the continued deterioration of the country’s economy, forcing it to take a one-off charge of $US350m as a result of cumulative foreign exchange translation losses and the value of the Venezuelan business.
Venezuela is currently in the midst of economic crisis as it struggles with a slump in oil prices which has led to skyrocketing inflation.
Despite the loss, Amcor CEO Ron Delia says the company will remain optimistic and continue to invest in emerging markets.
“Amcor invests in emerging markets with a long term view and for more than 20 years, talented local management teams have consistently delivered strong earnings and returns from these operations,” Delia says.
“We have more than 80 plants across 27 different emerging countries and from time to time we are faced with challenges in individual countries. However we firmly believe in the long term attractiveness, and in our ability to deliver value, from emerging markets.”
Amcor has revealed it plans to focus the Latin America region which it recently expanded to with its acquisition of Alusa. It is also planning initiatives to streamline and optimise its high performing Flexibles segment which includes tobacco packaging.
While the details of these initiatives are still being developed by Amcor, it says these are expected to generate a pre-tax return of approximately 35 per cent on the cash invested within three years, and also generate a profit before interest and tax benefit between US$40m and US$50m.
Delia says, “Amcor has strong flexible and tobacco packaging businesses in the developed markets with leading market positions which provide a solid platform for future growth.
“To build on that strong foundation, it is critical we continue to take decisive steps to align the organisation with market growth opportunities and customer needs.”
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