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Amcor: Alcan costs cut profits; but pharma flexibles unit boosts sales

By Gareth MacDonald+

26-Aug-2010
Last updated the 26-Aug-2010 at 13:16 GMT

The Flexibles packaging unit acquired in Alcan Packaging deal boost sales, but integration costs hit fiscal 2010 net profit at Australia’s Amcor.

Revenue from Amcor’s flexibles division, which included the contribution from Alcan’s pharmaceutical packaging business bought in February , was A$4.4bn ($3.9bn) up some 33 per cent on the previous financial year.

In contrast, Amcor said the Alcan Pharmaceutical plastics packaging business it also purchased, now part of its rigid plastics division which saw revenue for the year fall 21 per cent to A$2.6bn, had an “immaterial impact” on performance.

However, the main impact of the Alcan acquisition in the 12 months to June 30 was on Melbourne-headquartered Amcor’s net profits, which fell some 14 per cent to A$183m.

The firm attributed the decline to costs associated with melding the two businesses together, specifically “$108.2 million of after tax transaction and integration costs and $53.4 million of after tax costs to achieve synergies.”

Despite this CEO Ken MacKenzie was upbeat, explaining that: “Amcor took the opportunity to purchase Alcan Packaging at the right time, acquiring the business at bottom of the cycle earnings and at a bottom of the cycle multiple.

Understandably given the sales figures, MacKenzie highlighted integration of the Amcor and Alcan’s flexibles units as being the key achievement during the last six months.

In flexibles, the businesses have performed well and the integration of the former Alcan Packaging businesses is proceeding as anticipated,” adding that “culturally, the fit between the two organisations has been better than anticipated.”

Facility rationalisation

MacKenzie also spoke about the future shape of the combined Amcor-Alcan manufacturing network, which includes more than 300 plants in 44 countries, explaining that, in large part, it will be dictated by market demand.

He said that: “We are working collaboratively with our major customers to demonstrate the benefits of our new value proposition. The outcome from these customer discussions will be a key input into our plant rationalisation strategy.”

The other factor in Amcor’s facility plans are the requirements of global competition regulators which approved the Alcan deal. In terms of pharma flexibles, the rationalisation process began in July when Amcor agreed to sell its Spanish Tobepal business to Austria’s Constantia Packaging.

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