World’s largest soft drink bottle maker reports profit drop

Posted by Isobel Drake on 17th February 2009

Australian packaging giant Amcor has reported net profit for the first half fell 29.5 per cent on write-downs and the negative impact of currency changes. Profit fell 9.5% when one-off items were excluded.

“The first half result reflects the defensive nature of many of our businesses, combined with the benefit from translating overseas earnings into Australian dollars at a lower average exchange rate,” Amcor’s Managing Director and CEO, Mr Ken MacKenzie said. “The flexibles business had a strong half with earnings up 15.7%, in local currency terms. Within this segment, the food and healthcare operations successfully recovered rising raw material costs and the restructuring program in Western Europe progressed on schedule.”

“The PET packaging operations had a solid half with excellent operating performance partially offsetting the impact from lower volumes. During the first quarter, there was significant destocking in the supply chain that adversely impacted volumes. Since the end of October, volumes have more closely reflected underlying demand, particularly in the case of the higher value-add custom products,” he added. “The tobacco packaging operations had an excellent half. The new plant in the Ukraine continued to increase production and the new investments in Poland and Russia delivered the anticipated improvements.”

“In Australia and New Zealand, the glass wine bottle operations delivered another strong result. The $150 million investment in a third furnace will increase the capacity at the plant to 600 million wine bottles per year and is supported by long term customer supply arrangements.

The company has been linked with a purchase of part of the Rio Tinto-owned Alcan packaging business and is still looking into a possible deal.

“It is uncertain at this point if we will proceed to purchase any of the Alcan Packaging assets and any decisions relating to funding will be made once we know what assets, if any, we are purchasing,” Mr MacKenzie advised. “Any acquisition will be in our nominated growth segments of flexibles, tobacco packaging, custom PET or select segments in Australasia. It should also enhance our value proposition to customers and improve our cost position through operating synergies.”

Mr MacKenzie said that Amcor remained positive about the second half of the financial year as raw material costs have dropped from last year’s highs.

“Over the past six months, Amcor’s businesses have delivered solid performances in particularly difficult economic circumstances,” he suggested. “The businesses operate in the defensive product segments of food and beverages and this has resulted in underlying demand being relatively resilient against a backdrop of weaker economic conditions.”

“Second half earnings should benefit substantially from a combination of a weaker Australian dollar and lower costs for a number of key raw materials. These factors, together with the relatively defensive nature of the product segments we operate in, will help insulate earnings from the impact of any further weakening in economic conditions.”