There certainly is money to be made in the packaging business. One of Australia's wealthiest families, the Pratts, have built a fortune out of the humble cardboard box.
For investors there are also a number of listed options for gaining exposure to the packaging industry, the largest of which is Amcor Limited (ASX: AMC).
At Amcor's recent Annual General Meeting (AGM) investors were provided with a review of the 2015 financial year (FY) performance and an update on the current year too.
In FY 2015, on a constant currency basis, Amcor grew earnings per share by 7.5%, returns on average funds employed increased by 1.1% to 20.5% and the dividend (thanks to movements in the exchange rate) jumped 23%.
Importantly, guidance on trading in the first quarter was sound…
For the flexibles business, acquisitions are expected to contribute at a lower level than in FY 2015, moderate organic growth is expected and modest constant currency earnings growth is expected in FY 2016 with a challenging first half comparative period.
For the rigid plastics business, management noted a solid start in North American beverage with volumes ahead of last year, a good start to the year in diversified products and Bericap businesses, while volume growth in Latin America has remained strong. Overall, solid growth in earnings expected in FY 2016.
Overall, the first quarter trading results are in line with management's expectations. On a constant currency basis, management is guiding towards higher earnings in FY 2016 than those achieved in FY 2015 with earnings per share to also benefit from an approximate 3% positive impact from the now completed US$500 million share buy-back.
The long term outlook for the group also remains positive…
Amcor continues to innovate including utilising the latest technologies to create lightweight plastic jars capable of withstanding heat and with a robust oxygen barrier.
Innovations such as this, coupled with acquisitions in China, Indonesia, Brazil, India and South Africa along with new plants in Indonesia and Philippines stand the company in good stead to continue to add value to shareholders over the longer term.
It's been a solid year for all three of the largest ASX-listed packaging companies. Amcor, its spin-off Orora Ltd (ASX: ORA) and Pact Group Holdings Ltd (ASX: PGH) have all significantly outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the past year with gains of 14%, 37.5% and 35% respectively.
Amcor's share price gains mean the stock now trades on a forward multiple of around 17.5x, that might be considered a reasonable price to pay relative to the overall market.
