Amcor Limited (ASX: AMC) has been one of the best and most consistent companies on the Australian share market over the last five years. The company's share price has risen almost uninterrupted from $6 in 2010 to over $12 today.
Happy Customers, Happy Shareholders
The company has proven to have an incredible ability to generate shareholder value by producing packaging products that are in high demand. Amcor's management has deliberately changed strategy from being a high-volume rigid and flexible packaging producer to concentrating on higher margin, higher quality products that add value to customers.
An example of this can be seen in the group's flexible division that produces a range of packaging products made from foil, paper and plastic. Margins have doubled over the last seven years because the company has developed innovative products that either increase the shelf life of fresh products, or improve useability and visual appeal. Also, by adding value for customers, Amcor has been able to lift net profit before abnormal items from $467 million in 2010 to $962 million last financial year.
2015 Outlook
The group has made some intelligent purchases and offloaded its lower-growth Australasian packaging and U.S. distribution businesses over the last 12 months. This helped push net profit up 25% last financial year, profit is expected to be even high this year.
Analysts expect a 10-14% rise, however the company has been reluctant to pin down a definite forecast. The recent presentation at the AGM highlighted that trading in the three months to September was in line with expectations, but net profit (in Australian dollars) is going to be difficult to predict.
Australian Dollar Upside
Amcor has one of the highest proportions of earnings from outside Australia of all companies listed on the ASX. The majority of group earnings are in Euros and US dollars. Analysts estimate that each one cent movement in the US dollar versus the Australian dollar could move earnings by around $3 million. A 10 cent drop could therefore improve earnings by 3%, not an insignificant amount.
Amcor's long, sustainable growth story and significant 'moat' characteristics make it the type of company that many long-term investors love.
