Good news and not so good news from packaging giant, Amcor yesterday.
As the market suggested late Monday, it is paying $US2.025 billion ($2.44 billion) to buy parts of Rio Tinto’s Alcan Packaging unit and raising $1.611 billion in fresh capital to help that deal happen.
The poor news was that the company reported an 18.2% drop in net earnings, thanks to the global recession.
Profit for the year ended June 30 was $211.7 million down from $258.8 million in the previous year.
Amcor’s annual profit fell despite a 3.3% rise in revenue to $9.535 billion, as the company’s margins were hit by the slump.
The profit was boosted by the impact of the lower dollar during the year, compared with 2008.
Amcor said the translation benefit from the lower Australian dollar on profit after tax and before significant items was a positive $48.0 million.
Final dividend remains constant at 17 cents per share making a full year dividend of a steady 34 cents per share.
The company also said its net profit before one-offs was $360.5 million for the full year ended June 30, down 2.3% from $369.1 million a year earlier.
Amcor announced it had offered to acquire Rio Tinto’s Alcan Packaging food unit in Europe, global pharmaceuticals, Asia food unit, and global tobacco unit.
Amcor said the deal will be earnings per share accretive by full year 2011 and deliver strong operating cash flows from full year 2012.
"Following the acquisition, Amcor will be among the world’s largest packaging companies with leading positions in flexible packaging, custom PET containers and folding cartons for tobacco packaging," Amcor said in yesterday’s statement.
"The acquisition is being funded through a combination of underwritten equity and committed bank debt.
"The equity component is being funded by a fully underwritten offer of A$1,611 million via a 4-for-9 non-renounceable pro rata entitlement offer at A$4.30 per share."
Amcor shares were halted Monday at $5.65.
"Amcor expects to achieve EBITDA synergies of A$200 million to A$250 million per annum within three years following completion of the acquisition.
"These will be realised through reduced overhead costs, improved operating efficiencies, and procurement benefits.
"Approximately 35% of these synergies are expected to be achieved in the first 12 months following completion of the acquisition with a further 45% expected to be achieved in the second 12 months following completion of the acquisition.
"To integrate the acquisition and realise the expected synergies, Amcor expects to incur total one-off pre-tax cash restructuring costs of approximately A$300 million.
"These costs are expected to be incurred over a two year period following completion of the acquisition."
Amcor’s previous biggest purchase was the $US1.5 billion takeover of the PET bottling and container lid business of Germany’s Schmalbach- Lubeca AG in 2002.
