When abnormal means normal

Amcor records a fifth consecutive year of one-off items. Can they truly be one-off items?

Companies usually deem one-off items including acquisition expenses and restructuring activities as abnormal items. Investors generally want to know what the underlying performance of the business is, so highlighting these items allows investors to make comparisons with previous years. As an example, Monadelphous Group (ASX: MND) reported an $11m gain on the sale of shares in Norfolk Group Limited (ASX: NFK).

The problem for investors is what do you do when the company has reported these types of abnormal items for five years in a row? Amcor is one such company, this year reporting significant expenses of $213.6m after tax. The total of significant items over the past five years is a net expense of $939m. The best way to treat these significant items for Amcor then is to include them and use the statutory net profit data.

Including the significant items, Amcor Limited (ASX: AMC) has today reported a 16% increase in full year net profit to $413m – not bad considering revenues were down 2%. Amcor declared an unfranked final dividend of 19 cents, bringing the total for the year to 37 cents.

Cash flows were strong at over $1 billion, but were offset by capital expenditure, acquisition expenses, dividends and a $150 million share buy-back. No wonder then that the company’s debt has increased by around $500m to a total of $3.9 billion and now represents 105% of equity.

The company has flagged plans to grow by acquisition and expand into the developing Asian and South American markets, to offset flat volumes at home in Australia a la Australia and New Zealand Banking Group (ASX: ANZ)  and Insurance Australia Group (ASX: IAG) which are both making moves into Asia.

For the 2013 financial year, Amcor expects its flexible plastics business to achieve a solid increase in earnings (in constant currency terms), and continued growth in emerging markets.

The Foolish bottom line

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is 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. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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