Amcor delivers on growth

Global packaging giant Amcor (ASX: AMC) has delivered a full-year profit of 689.5 million in FY13, up 8.6% on FY12. This was achieved from a 1.9% rise in revenue to $12.425 billion, and has allowed the company to declare a final dividend of 20.5 cents, taking the full year dividend to 41 cents, or a yield of just under 4% at the current share price. Amcor achieved revenue and profit growth in two of its three divisions.

Flexible packaging was the best performing division, followed by rigid plastics and the soon-to-be-spun-off Australasia and Packaging Division (AAPD). Profit in the flexible packaging and rigid plastics divisions rose by 8.5% and 5.7%, respectively, as the company continued to grow market share in both developed and emerging markets. The AAPD generated 4% higher revenue than in FY12, however profit dropped by the same amount, as investment in IT infrastructure and higher raw material cost weighed on margins.

By revenue, flexible packaging was the greatest contributor, accounting for 51% of group revenue, followed by 25% from rigid plastics and 24% from AAPD. The AAPD is due to be spun off into a separately listed company in late 2013 as Amcor aims to focus on the company on higher-growth, higher-margin, flexible and rigid plastic and tobacco packaging business in overseas markets.

The AAPD has undergone a significant restructuring in recent years, as the company has invested heavily in a new paper mill in New South Wales and focussed on group efficiencies which are expected to generate $93 million in cost savings over time. It was reported that $12 million in savings were realised in the most recent results, while a further $30 to $40 million will be seen this financial year.

Amcor has given a positive outlook for FY14. Higher earnings are expected in its flexible packaging and rigid plastics divisions, based on growth in emerging markets and mildly positive conditions in developed markets.

Foolish takeaway

The world’s largest packaging company, Amcor has produced solid profit and revenue growth from its two largest divisions during FY13. FY14 promises to be an interesting year, with AAPD to be spun off into a separately listed company and the group forecasting growth in its remaining divisions.

The remaining divisions — flexible plastics and rigid packaging — are exposed to defensive industries in developed and emerging markets which helps the company pay a sustainable dividend, currently yielding around 4%, unfranked. Long-term, risk adverse investors may consider Amcor as an addition to their portfolio.

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Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned in this article.

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