Amcor packs rise in profits

But 2013 financial year earnings expected to be inline with previous year

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Paper and packaging group, Amcor Limited (ASX: AMC) has reported a net profit of $238 million for the six months to December 2012, up 16.3% over the previous year.

That's despite the high Australian dollar eating about $20 million of profits after tax, according to the company's chief executive Ken McKenzie. Amcor earns a significant amount of revenue offshore, and like Cochlear Limited (ASX: COH), CSL Limited (ASX: CSL) and Ansell Limited (ASX: ANN), a high Australian dollar means earnings are negatively affected by the high Aussie dollar.

Earnings per share (before significant items) grew just over 7%.

On an underlying basis, net profit came in at $322 million, a 5.7% increase over the previous year, before accounting for a $84 million charge from the closure of its Queensland cartonboard plant.

Mr McKenzie noted, "Volumes across a number of key market segments in developed countries continued to be stable and there was strong volume growth in emerging markets."

The company's largest division, Flexibles, posted a 4.7% increase in earnings before interest and tax (EBIT) to $344.6 million, while its Rigid Plastics division recorded an 8.8% rise in EBIT, to $123 million. Amcor's Australasia and Packaging Distribution let the company down, with EBIT falling 7.8%.

Full year earnings for the 2013 financial year are expected to be in line with the previous year.

The company declared an interim un-franked dividend of 19.5 cents, placing the company on a dividend yield of around 4%, around what you can get in a bank account. Earnings per share in 2012 are less than the company earned in 1999/2000, mainly thanks to an almost doubling in the number of shares on issue, and despite revenues doubling.

Foolish takeaway

Trading on a prospective P/E ratio of around 23, Amcor appears overpriced relative to its potential growth. Combined with a net debt to equity ratio of more than 110%, Foolish investors could be forgiven for giving this company a wide berth.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Cochlear and CSL.

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