Amcor expects stronger earnings

Packaging group Amcor Ltd says it expects stronger earnings this financial year on the back of price rises even though trading volumes at its Australasian operations will track lower during the first half.

Improved export prices for recycled papers and old corrugated cartons (OCC) should deliver higher earnings in 2009/10 for the Australian and New Zealand businesses, the packaging giant said in its 2009 annual report.

The local operations largely service the food and beverage sectors, and trading volumes for the initial weeks of 2009/10 were down on the previous year and are likely to remain lower for “at least” the first half, Amcor said.

Although rising labour cost would weigh on earnings, improved export prices for OCC and recycled papers and lower sales costs and administration overheads would lead to greater earnings if economic conditions remained stable, the company said.

Volumes for Amcor’s flexibles and North American manufacturing units are also running at lower levels in the weeks since June 30.Earnings for the first half 2009/10 in North America were likely to be lower than in the previous corresponding period, the company said.On August 18 Amcor reported an 18.2 per cent fall in net profit to $211.7 million for the year to June 30 on lower underlying demand as customers reduced stocks across the supply chain.

Annual profit for the Australasian operations declined from $188.5 million to $113.2 million, and profit for the North American operation dropped by around one-third to $39.1 million.Amcor unveiled a $2.44 billion acquisition of Rio Tinto’s packaging units on the same day as its profit result, which is expected to make the company a global packaging giant.

The deal will boost Amcor’s earnings by 40 per cent and means 85 per cent of earnings will come from off-shore.

The annual report’s publication on Friday comes three days after the company raised $407 million from small investors to help fund the purchase of key divisions of Rio Tinto Ltd’s Alcan Packaging business.

Together with the proceeds from an institutional component, the company has raised $1.611 billion.

Source: AAP

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