Incremental and highly confident could be three words you could use to sum up the 2016-17 results and outlook from the Melbourne-based global packaging giant, Amcor.
The company reported a 3.4% drop in revenues at US$9.1 billion but boosted its statutory net profit after tax to US$597 million compared with $244.1 million a year earlier. That includes a series of one off write losses in 2015-16
On an underlying basis, which strips out one-offs, such as restructuring and impairment costs, profit after tax was up nearly 10% to US$701.2 million on a constant currency basis.
And Amcor lifted its final dividend to 23.5 US cents from 22 US cents a year earlier. With the final of 19.5 US cents a share, the total for the year will be 43 US cents, up 2 US cents a share from 2015-17. Amcor shares edged up 0.7% to $16.12.
That’s incremental progress at its best and Amcor remains most bullish about its North American prospects – where sales topped $US3billion and market share is targeted at 3% growth.
And while that might indicate some caution (certainly) and an eye for the cents (certainly, again), CEO, Ron Delia is surprising bullish about the coming years for the company.
He said yesterday in a media interview Amcor will be untroubled by the structural shifts in e-commerce as online giants such as Amazon upend traditional business models, with demand picking up for”smart” packaging.
Mr Delia believes Amcor is largely immune to economic downturns and to big structural shifts such as digital disruption because the underlying demand for staple consumers goods wasn’t altering, no matter which channel the end products were delivered through.
His point was that Amcor is seeing consumer goods companies increasingly asking for more protective packaging, better authentification. And the company is also seeing growing demand for packaging for fast-moving consumer goods.
"We think that plays to our strengths," Mr Delia said. “E-commerce evolution, that’s still got a lot of room to unfold," he said.
He said Amcor was strongly positioned to keep delivering a 10% to 15% increase in annual returns even in a world where economic growth was struggling. “there’s not a lot of growth out there anywhere,” he said.
That is a strikingly confident outlook from a company where success is measured in cents and fractions of a cent on long production runs and small increases in demand for what is a very basic service these days.
Evidence of this was the way Amcor was able to lift profit margins in both of its main business units in 2016-17 of flexibles packaging and rigid plastics packaging.
Mr Delia said margins had been able to rise in both main business divisions because of restructuring and acquisitions, even though there was no top-line sales growth or pricing gains.
"“We expect another strong year in 2018, with after tax earnings growth in constant currency terms and strong cash flow. Amcor remains very well positioned to continue delivering against our value proposition for shareholders – the consistent delivery of 10 to 15 percent of additional value each year.”
“It’s very much a self-help type of agenda," he said.
“Balanced earnings growth from a variety of sources again demonstrated the resilience of Amcor’s business and management teams.Earnings were up strongly in both the Flexibles and Rigid Plastics segments, driven by organic growth and acquisitions,” he said.
"Across developed markets, earnings grew at rates which exceeded overall market growth. In emerging markets, we delivered increased earnings in the face of difficult conditions in several countries,” he said, underlining his point about the way Amcor is placed to ride out tough conditions (although Venezuela has caused some financial damage thanks to the slumping economy, growing instability and runaway inflation).
