The multinational packaging company Amcor Limited (ASX:AMC) recorded a 4.9% decline in Profit After Tax (PAT), compared to the previous interim period. However, on a constant currency basis, PAT increased 6.6% for the six months to December 2015.
Profits Suffered US$37 Million from Rise in USD
Profit after Tax of US$305.5 million included a negative translation impact of US$37 million from the higher US dollars. Consequently, sales revenue declined 5.4% to US$4.54 billion over the previous comparable period, while it rose 3.3% on a constant currency basis. Operating cash flow declined 1.1% to US$101.9 million.
Flexibles Segment Earnings Grew 6.1%
Amcor’s Flexibles segment has operations in regions such as the Europe, Middle East and Africa, Americas and Asia Pacific. This segment recorded 6.1% growth on constant currency Profit before Interest and Tax (PBIT). The rise reflected higher demand in the tobacco packaging business as customers built inventories ahead of tax increases and regulatory changes, while benefits from prior period acquisitions along with strong organic growth in emerging markets.
Nonetheless underlying demand in developed markets remained passive and the company faced an unfavourable impact on earnings from a shift in the Swiss Franc against the Euro of approximately €7 million.
Operating margins were unchanged from the previous period after adjusting for a one off gain of €9.2 million related to the sale of excess land in Turkey. Returns, when measured as PBIT over average funds employed, rose to 24.2%.
Rigid Plastics Recorded 10.4% Profit Growth
The Rigid Plastics business logged 10.4% growth in PBIT, to US$153.5 million. Returns increased from 17.4% to 20.3% while sales revenue remained unaffected from the previous year at US$1.56 billion.
CEO’s View on Results
Amcor’s Managing Director and CEO, Mr. Ron Delia commented on the results: “The business delivered an outstanding first half result with strong growth in earnings and returns. All Amcor business units performed well during the half year. The key drivers of strong earnings growth were higher volumes in both the Rigid Plastics and Tobacco Packaging businesses. Since 30 June 2015, the business has announced or completed six acquisitions in the USA, South Africa, Brazil, China and India. This is an important component of Amcor’s growth strategy and we continue to find opportunities that deliver strong value for shareholders.”
Dividend Up 9.5%
The board declared an unfranked interim dividend for 2016 of 19 US cents per share, which is in line with the 2015 interim dividend. However, the dividend will be paid in Australian dollars, translating to 26.7 cents, which is a 9.5% rise on the interim dividend paid in 2015.
AMC opened higher as at 10:11 AM (AEDT), trading at around $13.
Author: Simon Herrmann
Feb 15, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.