Super synergies to insulate Amcor from economic downturn - CEO

By Rory Harrington

- Last updated on GMT

Related tags Better Investment Recession Amcor

Amcor has predicted it will see strong growth in 2013 thanks in part to an extra A$200m (€148m) in its coffers as result of synergies flowing from the recent acquisitions of Alcan and Ball Plastics.

This means the Australian-based company would be in a position to defy any economic slump over the next two years, said Ken MacKenzie, company CEO and managing director.

He added that the integration of Alcan had been swifter and cheaper than forecast – leading to a company-wide boost of earnings reaching A$140m in 2011.

“The advantage of having cost synergies as a key driver of earnings over the next two years is that Amcor is not dependent on improving global economic conditions to grow earnings and returns,”​ said MacKenzie at the firm’s annual general meeting yesterday.

Benefits and plant closures

Amcor completed the Alcan takeover in February 2010 for just under US$2bn. Since then it has been working to integrate the flexible packaging outfit into the firm, with MacKenzie declaring it had gone “considerably better than anticipated”.

Cost savings for the 2011 financial year had exceed expectations by 25% with benefits of this exercise expected to be felt 12 months ahead of schedule. These cost 10 per cent less than originally planned, with the spend to be completed in 2012.

“As a result, in fiscal year 2013 Amcor’s cash flow will reflect the impact of more than A$200m in cost synergies , as well as an improved operating performance,”​ added the CEO. “The combination of these benefits will represent a significant improvement in Amcor’s cash generating capacity.”

Savings had been realized through reducing overheads, procurement benefits and cutting its manufacturing footprint.

Some eleven plant closures had been announced over the past two years as a result of this drive – with nine already shuttered.

Emerging markets

MacKenzie highlighted the firm’s strong presence in emerging markets – with 65 plants in 24 countries, employing more than 8,000 workers.

Localised strategies and partnering with customers had delivered average annual growth of 18 per cent over the last decade, he said, while predicting accelerated growth in developing markets in future.

”Looking ahead, there is the opportunity to achieve organic growth of 10% to 15% in emerging markets and the possibility of enhancing this with further acquisitions,”​ said the Amcor chief.

Demonstrating the company’s intent, MacKenzie revealed it had recently taken over a tobacco packaging company in Argentina.

He acknowledge the deal was a small one but stressed it demonstrated the strategy to establish a “local presence in a growth market”.

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