Earnings for the 2009 year were $360.5 million (after tax and before significant items), down 2.3% on the previous year’s $369.1 million. Earnings per share (before significant items) were 43.1 cents, up 0.5% on the previous year’s 42.9 cents per share.

The modest increase in earnings per share was a solid performance given particularly difficult economic conditions. More than 80% of Amcor’s sales are to the food, beverage, healthcare and tobacco packaging industries. Although these market segments are not immune to broader economic conditions, they are substantially more resilient than many sectors.

The Company generated strong operating cash flow of $419.6 million for the year.

The solid earnings per share performance for the year, combined with the strong operating cash flow has enabled the Board to declare a final dividend of 17 cents per share, giving a full year dividend of 34 cents per share.

ALCAN PACKAGING ACQUISITION

On 18 August 2009, the Company announced that it had made a binding offer to acquire certain parts of the operations of Alcan Packaging. These businesses comprise:

• Alcan Packaging Food Europe;
• Alcan Packaging Global Pharmaceuticals;
• Alcan Packaging Food Asia; and
• Alcan Packaging Global Tobacco.

Sales of the operations to be acquired are $4.8 billion. This represents an increase of approximately 50% on Amcor’s current sales. The businesses to be acquired have 80 plants in 28 countries and 14,000 employees.

The headline purchase price is US$2,025 million which represents a 5.5 to 5.7 times multiple of earnings before interest, tax, depreciation and amortisation (EBITDA).

Following four years of The Way Forward, a get fit program, the Company is well positioned to undertake this acquisition.

The most critical component of The Way Forward was the development of the operating business model, The Amcor Way, which focuses on core capabilities relating to safety, customer and market focus, capital discipline, low cost and talent management.

Successfully embedding The Amcor Way into the Alcan Packaging operations will be a key focus following completion of the acquisition.

Another important part of The Way Forward was identifying flexible packaging, folding cartons for tobacco packaging, value-add custom PET containers and beverage packaging in Australasia as the nominated strategic growth markets.

The acquisition of parts of Alcan Packaging’s operations specifically targets these chosen growth areas. Amcor will be one of the global leaders in flexible packaging and folding carton packaging for tobacco.

This is an exciting opportunity that significantly enhances future growth opportunities.

In the short term, this growth will primarily result from the synergy benefits, estimated to be between $200 million and $250 million, obtainable from bringing the businesses together. In the medium term, there is the opportunity to benefit from the broader global reach and enhanced scale to deliver an improved customer value proposition.

The combination of a strong strategic rationale and an attractive purchase price creates the opportunity to generate value for shareholders.

REVIEW OF OPERATIONS

There is a more detailed review of operational performance later in this Review.

In summary, the PET Packaging operations had a solid year with earnings 7% lower. Volumes were down 8.2% due to a combination of significant customer destocking, particularly in the first half of the year, and economic weakness throughout the full 12 months which negatively impacted consumer demand.

The Australasian business had a difficult year with earnings down 39.9%. Volumes were lower across most business segments due to weaker economic conditions and supply chain destocking, particularly in the second half of the year.

The Flexibles operations had a strong year with earnings up 14.1% and returns increasing from 13.2% to 15.3%.

The Flexibles Healthcare and Tobacco Packaging businesses both had strong performances with improved earnings and returns. The Flexibles Food business had a more difficult year with weaker demand and customer destocking resulting in volumes being 5% lower.

The distribution business, Amcor Sunclipse, had a particularly difficult year due to its exposure to the slowing US economy.

The Asian operations had another good year with the investment in the Hong Kong publiclylisted company, AMVIG, continuing to deliver solid growth.

SUMMARY

The Company is well prepared for the acquisition of the Alcan Packaging businesses. The strong strategic fit and focus on the core growth segments underpins the ability to improve the customer value proposition, reduce costs and create shareholder value.

One of the key drivers for success will be embedding the culture, values and execution disciplines established via The Way Forward into the acquired businesses. There has been extensive planning to fast track this implementation following finalisation of the transaction.

The Board would like to thank all of Amcor’s stakeholders, including customers, shareholders, co-workers and suppliers for the continued support over the past 12 months and welcome the 14,000 plus new co-workers to the Company during the course of the year.

Chris Roberts
CHAIRMAN

Ken MacKenzie
MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER

 

'The Alcan Packaging acquisition is an exciting opportunity that will enable Amcor to create value for all of its stakeholders.'