Amcor PET Packaging is headquartered in Ann Arbor, Michigan US and employs more than 5,000 people at 63 sites, including 33 on or near site manufacturing facilities in 12 countries. Amcor PET Packaging is one of the world’s largest producers of PET (polyethylene terephthalate) containers.

It produces PET containers and preforms for a wide variety of food and beverage applications, and supplies PET containers to the personal care, household chemical and agro-chemical industries.

PET PACKAGING GROUP

Amcor PET Packaging had a solid year given the challenging economic environment. Profit before interest and tax (PBIT), expressed in local currency terms, was 7% lower at US$184.8 million.

Total volumes for the year were 8.2% lower at 26.3 billion units.

Custom container volumes were down 7.3%. This reduction was due to significant customer destocking in the first half of the year and economic weakness throughout the full 12 months.

Carbonated soft drink (CSD), and water volumes were down 8.7%, mainly due to reduced demand for these products in the US and Canada.

The business continued to improve the product mix towards higher value-add custom container volumes, representing 32% of the sales volume and 48% of sales value.

During the year, the business continued to achieve excellent operating performance and there was a strong focus on cost control.

Returns, measured as PBIT over average funds employed, decreased from 12% to 11.5%.

Given the difficult economic circumstances that occurred during the year, it was an outstanding effort that returns declined by only 0.5%. This result demonstrates not only the defensive nature of many of the markets in which the business operates but also the ongoing improvements in all aspects of running the business that have been evident over the past few years. It also reinforces the strategy developed four years ago to focus on the higher value-add custom containers.

Capital expenditure was US$120.8 million, comprising US$97.2 million for base capital spending, net of disposals, and US$23.6 million for growth capital to expand capacity for custom containers in Latin America and diversified products and PowerFlex™ in North America. Total capital expenditure was 27.3% lower than the previous period and this trend is expected to continue in the near term.

Working capital continues to be well managed and average working capital to sales for the year was 6.1%. Working capital performance was favourably impacted during the second half by planned inventory reductions aligned with customer demand.

NORTH AMERICA

Total volumes were 13.1% lower, with CSD and water volumes down 15% and custom containers down 10%.

Volumes in the first half of the year were negatively impacted by customer destocking across the entire supply chain and lower underlying demand. During the second half of the year, underlying demand remained weak across most segments.

In the custom container segment, which represented 50.1% of the sales value, there were lower volumes for most major customers and across most products in the hot-fill beverage segment.

There was solid growth in the diversified products segment as this business broadened its customer base and benefited from continued conversion from glass to PET containers, particularly in the liquor segment.

The 15% decline in CSD and water volumes was a result of some customer destocking activities in the first half, and weak overall demand. As some customers continue to move to self-manufacturing of CSD and water containers, merchant supplier volumes are more affected in periods of weak demand as customers move to fully utilise their own assets.

During the year, the focus on improving manufacturing efficiencies and costs has resulted in the reduction in earnings being less than the overall reduction in volumes.

LATIN AMERICA

The business in Latin America had a solid year with total volumes up 1.2% and custom containers up 4.5%.

In Mexico, volumes were modestly lower as demand more closely mirrored the trends in the US. The business had a difficult first half with under-recovery of higher inflationary costs. There was a much stronger performance in the second half with improved pricing performance and a more favourable currency impact.

For the balance of Latin America, volumes were up 1.4%, including 10.7% growth in custom containers. Earnings were considerably stronger due to a more favourable product mix, improved pricing in some key markets and continued strong operational performance.

Given the relatively low penetration of a number of custom hot-fill products in many Latin American countries, there continues to be opportunities for ongoing growth in this segment.

BERICAP

The majority-owned joint venture, Bericap North America, is managed and reported within the PET Packaging segment. This business has plants in Ontario, Canada, and in the United States in California and South Carolina.

The CSD and water markets are important segments for this business. The business had a difficult year due to weaker consumer demand and the subsequent inability to absorb additional costs related to the new plant in South Carolina.

OUTLOOK

Volumes, particularly custom volumes, continue to be the key driver of profitability. Although there are indications that current volumes are forming a new base, it is too early to predict the future trend given the existing economic conditions.