The $12 billion global packaging giant Amcor Limited (ASX: AMC) is a different company to the entity of a couple of years ago, thanks to a number of key acquisitions and a demerger. The recent change to its corporate structure makes it an opportune time for investors to revisit the stock.
1) Tunnel Vision
In December last year Amcor demerged its Australasia and Packaging Distribution business – which operates in the fibre, glass and beverage can packaging markets in Australia and packaging distribution in North America and Australia – into the separately listed company Orora Ltd (ASX: ORA). This left the remaining flexibles and rigid plastics operations within the continuing Amcor business.
The benefit of the demerger of the $1.6 billion Orora business into a separately listed entity is that it allows Amcor’s management to focus its attention solely on the operations with the greatest growth potential.
2) Big Fish
Amcor has been an acquirer of significant competitors over the years. In 2010 the firm purchased the Alcan packaging business for approximately US$2 billion and later the same year purchased Ball Plastics Packaging Americas for US$280 million. As recently as December, Amcor opportunistically purchased the assets of Constar International, which has revenues of approximately US$190 million and was stated as an “attractive fit with Amcor Rigid Plastics.”
The global reach and balance sheet of Amcor make the outlook for further large and strategic acquisitions compelling.
Amcor had a relatively consistent operating history on a per share basis between financial-year (FY) 2005 and FY 2011. However, the past two years of operation have seen a spike in returns to shareholders. While in FY 2011 Amcor earned 46.5 cents per share (cps) and paid 35 cps in dividends; in FY 2013 Amcor earned 57.2 cps and paid 40 cps in dividends. Likewise, cash flows jumped from $785.8 million to $1.05 billion over the same time frame.
The outlook for further growth – particularly given its exposure to emerging markets – makes Amcor’s growth outlook appealing.
With the recent listing of Pact Group Holdings Ltd (ASX: PGH) there are now three large packaging companies available to investors. This is not only a positive in terms of the number of investment opportunities, but it is useful in providing comparative information to help formulate investment insights.