Amcor announces half year profitability

Earnings per share increased 3.3 per cent to 21.9 cents per share.

The interim dividend increased 6.7 per cent from 15 cents per share to 16 cents per share and follows a 7.1 per cent increase in the dividend for the previous year.

The rise in the Australian dollar negatively impacted earnings through the translation of foreign earnings back into Australian dollars, by approximately $17m. Without this impact, underlying earnings per share would have been up by around 13 per cent.

Amcor does not hedge its foreign currency earnings exposure and overseas profits are not currently repatriated to Australia. Hence the $17m foreign currency impact is not a realised loss.

Amcor’s cash flow from operations increased 1.1 per cent to $470.9m, which represents 54.9 cents per share. This figure is also negatively impacted by the rising Australian dollar.

Russell Jones, Amcor managing director, says, “To achieve a seven per cent increase in profit and a three per cent increase in earnings per share is a good result, given the translation impact of the rising Australian dollar on overseas earnings and generally poor economic conditions in a number of countries in which we operate.

“Returns for the group increased from 10.3 per cent to 11 per cent reflecting substantial improvement across many of the business units.

“The recent acquisitions of Rexam Healthcare Flexibles, Alcoa PET and Arca have all performed well in their first few months with the group and the 100-day plans for integration have been successfully implemented. Each of these acquisitions is expected to deliver strong earnings growth for its respective businesses and achieve its return targets in the coming 12 months.

“The PET operations achieved a sound profit increase of 10 per cent in US dollar terms on volume growth of 17 per cent. The recently acquired Schmalbach-Lubeca assets have had a very strong half with the North American plants achieving earnings growth of 15 per cent, while in Europe, earnings were up 40 per cent and in Latin America, earnings were up 39 per cent.

“In Canada the business was severely impacted by the 16 per cent increase in the Canadian dollar against the US dollar, which meant that water bottled in Canada and shipped to the US was less competitive.

“The Flexibles business continues to build on its growth of recent years with earnings up 11 per cent in Euro terms. The business continues to improve the product mix to higher value add products with margins increasing from 5.2 per cent to 5.6 per cent.

“The European economy remains difficult with volumes lower in many countries. The plants in Germany and the Nordic region have experienced particularly difficult trading conditions and earnings are lower for both these regions.

“Across most of the other plants, earnings and returns have increased substantially and the benefits of being a market leader are assisting in improved customer relationships and a more focused approach to product leadership.

“The business in Australia and New Zealand also had a strong half with earnings up 16 per cent and returns increasing from 15.7 per cent to 17.7 per cent. This business is benefiting from the ongoing focus on costs and manufacturing excellence. Currently the fibre packaging, folding cartons and flexible packaging operations are all undergoing further restructuring.

“The wine bottle plant in Gawler, South Australia continues to perform ahead of expectations and was a significant contributor to the profit growth in Australia. Strong customer support has underpinned the construction of a second furnace on the Gawler site with initial production anticipated in the first quarter of calendar 2005.

“Amcor Sunclipse had a difficult six months as the US economy slowly moved out of the low period of activity following the Iraqi war. Although the October through December period displayed some positive trends, especially in the lead up to Thanksgiving and Christmas, January and the early part of February have been disappointing with the activity level falling back to September 2003 levels. It is uncertain how the US economy will perform through the balance of the year.

“Amcor Rentsch & Closures had a very good half with returns well up from 7.3 per cent to 13.9 per cent. The tobacco carton business continues to perform well, especially in Russia, while the closures business had a satisfactory half helped by a solid performance from the Bericap joint venture.

“In Asia, the business showed solid improvement from the second half last year and this improving trend is expected to be maintained as the economies in Asia continue to recover.

“Overall the result was a sound performance and the improvement in returns for the group from 10.3 per cent to 11.0 per cent together with a 7 per cent increase in the dividend from 15.0 to 16.0 cents per share, is a reflection that the strategy is delivering value for shareholders.

“Although economic conditions and global currencies remain uncertain, the businesses are all well positioned to contribute to an improved profit for the full year”.

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