Amcor's profit before interest and tax for the three months to 30 September has risen by a more than healthy 47 per cent. The company said that the increase was due to ongoing improvements in the European flexibles business, the inclusion of Schmalbach-Lubeca's PET and closure operations and solid earnings improvements at Amcor Australasia and Amcor Rentsch.
The Australian and New Zealand operations started the year well with profit before interest and tax up 21 per cent.Volumes have remained solid across most of the businesses with both operating margins and returns ahead of last year. The new wine bottle glass plant has been successfully commissioned and is currently supplying all the major Australian wine producers.
The PET operations headquartered in Michigan, US, had an increase in profit before interest and tax of 231 per cent. The company said that this increase was due to the inclusion of the recently acquired Schmalbach-Lubeca PET business as well as continued improvement in the previously existing Amcor PET business.
Overall volumes in the first quarter were up 10.2 per cent with volumes in North America substantially higher due to strong demand for carbonated soft drinks, bottled water and isotonic drinks, while a cooler summer in continental Europe impacted volume growth in that region.
Volumes in Latin America, although up on last year were impacted by the economic conditions in Argentina and Brazil. However, the company said that the businesses in Latin America continue to be well managed with profit before interest and tax substantially above last year.
The 100-day plan targeting synergy and integration issues has progressed well with all major projects on schedule and outcomes tracking expectations. As part of this plan, one of the plants in California will cease production in January 2003 with production relocated to other sites.
The closures business, based in Chicago, started the year well and is currently delivering to Amcor's expectations in terms of sales, volumes and earnings. Profit before interest and tax was up 494 per cent, reflecting particularly the inclusion of the Schmalbach-Lubeca closures business for the first time.
Volumes in North America, excluding the Bericap joint venture, were up on the same period last year for both metal and plastic closures. The Bericap plastic closure business continues to deliver strong growth with volumes well ahead of last year. The successful startup of the new plant in California has contributed to this volume growth.
In Europe and Latin America, the company said that both volumes and earnings are in line with expectations.
As part of a restructuring programme for the metal closures business in North America, the plant in Chicago is currently being decommissioned and will cease operation in the December quarter. This closure will significantly improve the cost base for the North American business. The restructuring costs associated with this closure, as previously indicated, have been provided for by the previous owners.
Synergy and restructuring benefits for the combined Schmalbach-Lubeca PET and closures operations are on schedule to achieve the target of $20 million (€20.4M) in the first year.
Amcor Flexibles Europe
The flexible operations in Europe continue to benefit from the rationalisation and restructuring undertaken over the past 15 months, with profit before interest and tax up 57 per cent.The company said that volumes remain solid, with most plants fully loaded. Resin price increases have been well managed with little or no impact on margins over the past six months.
The business continues to rationalise production across sites and is developing development centres for specific technologies to support its market strategies. The closure of a small plant in Belgium has been announced with production scheduled to cease in December 2002.
Amcor Sunclipse's profit before interest and tax was up 1 per cent on the same period last year. The US economy continues to show little sign of improvement, with Amcor Sunclipse's earnings increasing slightly each month since the low point of January this year.
Provided this trend continues, the company believes that earnings for Amcor Sunclipse will be higher year on year, although the first half will only show modest improvement. The business continues to manage costs well with gross margins unchanged from last year.
The European tobacco and specialty packaging business increased profit before interest and tax by 38 per cent. This business continues to benefit from strong growth in Russia and Eastern Europe and a third press in Russia, currently being installed, is already fully committed.
Amcor Asia has started the year in line with expectations with profit before interest and tax up 1 per cent on last year, although the economies of Asia continue to be impacted by the slowdown in the US, the company said.
Amcor currently has approximately 90 per cent of its sales directed to the food, beverage and consumer goods markets and has a broad geographic coverage with 218 plants in 36 countries.
The key market segments in which we operate continue to exhibit solid growth and this should translate into continued earnings growth for the company.
Amcor's managing director Russell Jones said: "The first quarter profit increase continues the trend of ongoing earnings improvements established over the past four years.
"The integration of Schmalbach-Lubeca is proceeding in line with expectations and we remain confident that this acquisition will be earnings per share positive this year, both pre and post goodwill amortisation.
He added: "The PET business delivered strong volume growth of 10 per cent reflecting both the industry leadership position that Amcor has, as well as the continued growth in the overall PET container market.
"The closures operations are also delivering as expected and this business has considerable earnings upside over the next two years as the benefits from the restructuring currently being undertaken are realised in improved earnings and returns.
"The European flexibles operations continue to benefit from the substantial rationalisation and restructuring undertaken over the past 18 months with earnings up substantially. Overall, the company is well placed for the balance of the year with all divisions on target to improve earnings."