Armed with a $1bn (€604.2m) war chest, Amcor has signaled it is on the lookout for further acquisitions, indicating that the packaging industry's current round of consolidation is not about to end soon.
The company's full year results, released today, indicates the growth segments in the beverage and bakery markets. The company is the largest plastic bottle supplier in the world.
Amcor began reorganising after a 2005 review of the business targeted the North American PET market and flexible packaging as growth areas for the company.
Since the review the company has constructed a new $80m polyethylene terephthalate (PET) packaging plant at Wytheville, Virginia dedicated to PepsiCo for the manufacture of Gatorade bottles. The plant began production in March 2007 and has a capacity of one billion units production.
The company is also constructing a €30m flexibles manufacturing plant in Poland, dedicated to PepsiCo for the production of snack food packaging.
The plant will be operational in the second quarter of 2008, the company stated.
A second press at the company's flexibles plant in Russia has been installed and began operating this month.
Amvig, a Hong Kong publicly-listed company, in which Amcor has a 41 per cent share, announced apackaging acquisition in China that will increase its market share in that country to around 17 per cent.
As part of the reorganisation the company is due to complete the sale of its European PET operations to La Seda de Barcelona for about €425m by October 2007.
The company has made capital investments to support growth in the company's new panel-less heat-set container, PowerFlex. Currently 23 customers use the container for a range of applications, including iced teas and functional waters, Amcor reported.
"Additional capacity is being added to meet the ongoing growth in demand for this patented container," the company stated.
In April 2007, the company announced a major repositioning program for its flexible packaging operations in Europe. The company will close plants, cut 900 staff from its workforce and sell what it considers non-strategic operations.
So far the company's Amcor flexibles unit has closed a plant in the UK and another in Germany. About 70 per cent of the production from the two plants has been transferred to other manufacturing sites, the company reported.
The company reported its PET packaging business registered improved earnings across all regions. Operating profit for the PET business rose 12.4 per cent to US$205.6m.
The company said the increase reflected the benefits of reorganizing its PET business in Mexico, a strong second half in Europe and growth in custom containers in North America.
The company sold 2 per cent more by volume during the year, or 36.9 billion units. Custom containers, which account for 21.3 per cent of the total volumes sold, grew by 7.4 per cent during the year.
The company also reported that over the past 18 months, it has moved to include clauses to recover energy cost increases in new contracts with customers. About 70 per cent of the volumes manufactured, and a higher percentage of sales, are covered for rise and fall in energy costs, the company reported.
"Given the contracted volume now covered for movements in energy prices and the outlook for more stable prices in the current market, energy price movements are not anticipated to have a material impact on earnings in 2007/08," the company stated.
The company's aluminium can business reported a 6 per cent increase in volumes, attributed to growth in the carbonated soft drink multi-packs and the ready-to-drink alcohol segment.
The business is investing $33m to meet the ongoing market growth, and is producing new can sizes and designs.
The company's glass wine bottle business also had volume growth due to the full year operation of a second furnace. The business continued to develop new premium bottles, including the new diamond shaped bottle for Rosemount, the company stated.
Reporting by region, the company's North America business had steady sales by volumes for the year. In the carbonated soft drink and water segment, an unnamed "major" customer decided to manufacture its own PET containers from January 2006, resulted in a year-on-year reduction of around 350 million units.
Across the remaining carbonated soft drink and water businesses, volumes for the year were down slightly in North America, reflecting the ongoing strategy to realign the group's portfolio towards higher margin business.
In the custom beverage segment, volumes were up 7 per cent for the year and 18 per cent in the second half.
"The outlook for North America is for substantial growth in the custom hot fill business, driven predominately from the full year benefit of recent capital expenditure," the company stated. "A major component of this growth will come from the new plant at Wytheville, Virginia. The business will continue to be selective in the opportunities it pursues in the carbonated soft drink and water markets."
The company says it is likely that volumes in the carbonated soft drink segment will decrease as contracts relating to poor returning business will not be renewed.
In Latin America, overall volumes were up 4.1 per cent with custom containers up 8.3 per cent, and carbonated soft drink and water 3.5 per cent higher.
"Within the custom segment there was good growth in isotonic beverages across the region and solid growth in diversified products, particularly in Brazil for the food and healthcare markets," Amcor.
In Mexico, the company consolidated three plants, cut its workforce, and reduced its reliance on third party sourcing.
The European operations reported volumes sold rose 7.3 per cent.
Amcor's flexibles food unit registered a fall of 3 per cent in terms of volumes sold, as the company withdraws from unprofitable segments. The unit consists of a produce and bakery division which has plants in the UK and Portugal and a processed and chilled food division with operations across Europe, including Central and Eastern Europe.
The business also coordinates the wider strategy for food packaging across the flexibles operations in other regions.
For the third consecutive year, raw material input costs for the division increased. The company found it difficult to recover the costs in the marketplace.
"For the current year, input costs remain at record highs and the outlook is for these levels to continue to gradually increase through the remainder of the year," the company stated. "The business has continued to improve its commercial skills and is well prepared for the forecast increases."
In the produce and bakery division sales volumes were higher, attributed to improvements in the product mix and cost management.
Volumes sold in the processed and chilled food division were down, attributed to a decision not to retain the unprofitable business from the two plants closed.
The company plans to strengthen its market positions through a better leverage of its technology and manufacturing capabilities.
Source: packwire
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