Slide 1: Amcor
AMCOR WWW.amcor.com
Slide 2: Investor Presentation Full Year Results August 2004
Investor Presentation Full Year Results August 2004
Slide 3: Disclaimer
Disclaimer Disclaimer • This presentation contains forward-looking statements that involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to, Amcor. Forward-looking statements can gener
Slide 4: Investor Presentation
Investor Presentation • Review of 2003/04 results • Review by businesses • Financial analysis • Group outlook • General discussion © Amcor Ltd 2004
Slide 5: Full Year Results
Full Year Results* $m 02/03 03/04 Operating revenue 10,710 10,406 -2.8% Net profit (after goodwill) 379.1 387.4 +2.2% EPS (before goodwill) 61.7 59.4 -3.7% EPS (after goodwill) 45.3 44.7 -1.3% Dividend (cents) 30.0 32.0 +6.7% * Pre significant items © Amcor Ltd 2004
Slide 6: Earnings Per Share Growth
Earnings Per Share Growth Post Goodwill Amortisation Pre Goodwill Amortisation th 6.6% % grow th 10.3 pound grow Co m mpound Co 42.1 45.4 44.7 Cents / share 50.0 37.6 Cents / share 75.0 62.0 59.4 34.5 40.0 44.7 50.3 30.0 50.0 40.2 20.0 25.0 10.0 0.0 0.0 01 02 03 00 04 00 01 02 03 04 20 20 20 20 20 2
Slide 7: Review of the year
Review of the year • Earnings growth below targets • Results negatively impacted by: – $34 million currency translation profit after tax – Price and cost issues in the North American PET market – Operational underperformance in Flexibles – Difficult economic conditions in Europe – Other currency imp
Slide 8: Review of the year
Review of the year • Positives – Steady profit reflects defensive nature of the portfolio of businesses – Strong performances in Amcor Australasia, Amcor Rentsch & Closures and Amcor Asia – Excellent integration of the Rexam Healthcare acquisition – Strong operating cash flow of $891 million © Amcor
Slide 9: Focus for the next two years
Focus for the next two years • Improving returns on the existing assets – Focus on manufacturing and overhead costs – Selling prices reflecting the cost of capital – Continued development of product leadership – Strict management of capital • Growing the cash flow, which is available for – Dividend
Slide 10: Improving returns as pace of change is reduced
Improving returns as pace of change is reduced • Amcor Australasia – Relatively stable business portfolio – Continuous improvement mindset • Amcor Rentsch & Closures – Driving quality and service – Continuous operating improvements • Amcor Sunclipse – Diligent approach to lowering costs – Consistent
Slide 11: Outcomes
Outcomes • Eight plants or facilities closed – Six PET, two Flexibles • Headcount reduction approximately 900 • Cost of program in PET and Flexibles $160 million – Announced in April – Benefits of around $70 million – $90 million taken as a significant item in 2003/2004 year © Amcor Ltd 2004
Slide 12: Amcor PET Packaging
AMOOR PET PACKAGING
Slide 13: Amcor PET
Amcor PET 225 18 US$ 200 16 % 175 14 150 12 PBITA 125 10 RoAFI 100 8 75 6 50 4 25 2 0 0 02/03 03/04 Sales US$m 1,897 2,275 PBITA US$m 184.4 190.3 A.F.I. US$m 1,747 1,901 PBITA/AFI % 10.6 10.0 Employees 5,601 6,191 © Amcor Ltd 2004
Slide 14: Year-over-Year Volume Growth 17%
Year-over-Year Volume Growth 17% 02/03 27.7 billion units globally Custom Containers 16% CSD/Water Containers 84% 03/04 32.4 billion units globally Custom Containers 17% CSD/Water Containers 83% © Amcor Ltd 2004
Slide 15: Regional volume split
Regional volume split Europe/ Asia 31% North America 52% Latin America 19% Unit volume split by region © Amcor Ltd 2004
Slide 16: Custom growth by region
Custom growth by region Europe/Asia 11% growth Latin Am erica 36% growth US 17% growth 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Units (millions) 02/03 Volum e 03/04 Volum e Grow th Overall custom volume growth 22% © Amcor Ltd 2004
Slide 17: North American - overview
North American - overview • Overall volumes up 13.6% • Earnings down 13% – Impact of strong Canadian dollar and pricing pressure – Over US$10 million – Non recovery of higher costs – Healthcare, energy, insurances – Pricing pressure in the CSD and water markets © Amcor Ltd 2004
Slide 18: North American cost reduction program
North American cost reduction program • Combining the Canadian and US management and organisational structures • Two small facilities in the US north east have been closed • Two more plants are to close – One in the north east and one on the west coast • Extensive review of overhead costs • Restruct
Slide 19: North American pricing initiative
North American pricing initiative • Need to introduce pricing that better reflects value and cost across the US – Encouraging signs from large customers • Further plant closures depend upon the outcome of these discussions • Capital will not be invested unless returns are satisfactory © Amcor Ltd 20
Slide 20: Latin America
Latin America • Strong performance with earnings up 35% • Alcoa integration and benefits ahead of expectations • Brazil remains a difficult market • Arca acquisition below expectations – Higher customer volumes – Integration issues • Excellent results from remaining countries © Amcor Ltd 2004
Slide 21: Europe
Europe • Very strong performance with earnings up 42% (in US dollar terms) and 20% (in Euro terms) • Hot summer benefited all facilities • Beer volumes up substantially to more than 120 million units – Further strong growth this year • Strong growth in refillable containers in Germany • Recycling pl
Slide 22: PET Summary
PET Summary • Strong businesses in Europe and Latin America • Need to improve returns in North America – Plant closures and overhead reductions – Improved pricing – Capital management • Significant items overall are around A$60 million with benefits of around A$25 million • For 2004/2005 earnings gr
Slide 23: Amcor Australasia
AMCOR AUSTRALASIA
Slide 24: Amcor Australasia
Amcor Australasia $m 350 18 % 300 16 14 250 12 PBITA 200 10 RoAFI % 8 150 6 100 4 50 2 0 0 02/03 03/04 Sales $M 2,456 2,538 PBITA $M 282.9 316.5 A.F.I. $M 1,816 1,832 PBITA/AFI % 15.6 17.3 Employee’s 7,113 6,756 © Amcor Ltd 2004
Slide 25: Amcor Australasia – highlights
Amcor Australasia – highlights • Fifth consecutive year of improved results • Sales up 3% to $2.5 billion • PBITA up 12% to $316.5 million • Major projects successful: – Glass – Petrie Paper Mill Upgrade – Beverage Can 202 Superend • PBITA/AFI increased from 15.6% to 17.3% © Amcor Ltd 2004
Slide 26: Corrugated packaging
Corrugated packaging • Sound earnings growth & improved returns – Australia – Favourable sales mix – Volumes down slightly - drought related Dairy, fruit & produce segments – Benefits flowing from - Restructuring - Paper rationalisation - Selective price increases – New Zealand – Volume up 5% - meat
Slide 27: Paper
Paper • Paper Mills experienced a difficult year with earnings down • Lower domestic demand increased exports • Export paper prices fell due to strengthening A$ • Mills productivity levels sound • Paper rationalisation assisting productivity • Good results - Recycling & Functional Coatings businesse
Slide 28: Cartons
Cartons • Continued earnings improvement • Petrie Papermill – Successful mill upgrade (Capital $55m) – Excellent productivity levels maintained – Benefits from upgrade to flow in 2004/2005 – Improved board quality and import replacement • Converting – Volumes slightly down – Benefits flowed from the
Slide 29: Food can
Food can • Solid earnings improvement in mature market • Volumes flat – Drought effecting dairy and produce markets – Favourable sales mix – Full year benefits from Dandenong closure 2002/2003 • Sound results from New Zealand operations © Amcor Ltd 2004
Slide 30: Flexibles
Flexibles • Earnings ahead of last year • Sales volume up 2% – Drought affecting dairy and produce • Strengthening A$ affected export margins and increased import competitiveness in commodity films • Managed difficult raw material supply issues well – Moomba fire – Cost increases in the main recover
Slide 31: Glass
Glass • Excellent result with both earnings and returns exceeding expectations • Export wine still at double digit growth rate • Plant at full capacity and sold out • Excellent productivity levels • Continued strong customer support • Second furnace on schedule for production January 2005 © Amcor Lt
Slide 32: Beverage cans
Beverage cans • Increased volumes up 4% delivered earnings improvement • Growth from – Soft drink and ready to drink markets – Beer segment steady • Focus on product innovation with investment in – 202 low cost end a success – Shaped cans commercialised • Plant efficiencies negatively impacted by 20
Slide 33: Financial highlights since merger of Fibre Packaging and Containers in 1999/2000
Financial highlights since merger of Fibre Packaging and Containers in 1999/2000 • Sales up $308m or 14% • PBITA up $84m or 36% • ROAFI up from 12.9% to 17.3% • Capital investment of $750m (depreciation $400m) • Reduced working capital to sales ratio from 19% to 15% – Saving of $100m • Disposed of a
Slide 34: Capital Expenditure versus Depreciation
Capital Expenditure versus Depreciation $m 300 250 200 Dep'n 150 Capex Glass 100 50 0 00/01 01/02 02/03 03/04 © Amcor Ltd 2004
Slide 35: Financial highlights since merger of Fibre Packaging and Containers in 1999/2000
Financial highlights since merger of Fibre Packaging and Containers in 1999/2000 • Sales up $308m or 14% • PBITA up $84m or 36% • ROAFI up from 12.9% to 17.3% • Capital investment of $750m (depreciation $400m) • Reduced working capital to sales ratio from 19% to 15% – Saving of $100m • Disposed of a
Slide 36: Sales per employees
Sales per employees Sales per Employee $’000’s $265K +30% $345K EMPLOYEES 8600 2700 SALES 8400 2600 8200 2500 8000 7800 2400 EMPLOYEES SALES 7600 2300 7400 2200 7200 2100 7000 6800 2000 99/00 00/01 01/02 02/03 03/04 © Amcor Ltd 2004
Slide 37: Australasian Outlook
Australasian Outlook • Australian/New Zealand economies performing well • Mature market with increasing pressure on margins • Retail supply chain undergoing significant change • Uncertainty of drought recovery and exchange rate • Continued improvement in most businesses through: – Restructuring init
Slide 38: Amcor Flexibles
AMCOR FLEXIBLES
Slide 39: Amcor Flexibles
Amcor Flexibles € % 120 12 100 10 80 8 PBITA 60 6 RoAFI 40 4 20 2 0 0 02/03 03/04 Sales €m 1,219 1,336 PBITA €m 74.2 78.2 A.F.I. €m 679 819 PBITA/AFI % 11.0 9.6 Employees 6,766 7,606 © Amcor Ltd 2004
Slide 40: Fresh food
Fresh food • Consists of meat, cheese, dairy, produce, bakery • Solid performance with good volume growth in key segments – Benefits from general move to healthier food options • Substantial technology and product innovation in a number of the products • Strong EBIT growth © Amcor Ltd 2004
Slide 41: Healthcare
Healthcare • Consists of medical, pharmaceutical and personal care • Successful integration of Rexam Healthcare acquisition • Good volume growth across most product segments • The Americas performing ahead of expectations • Good profit potential and excellent growth prospects © Amcor Ltd 2004
Slide 42: Processed food
Processed food • Consists of confectionery, snack food, biscuits, coffee, pet food and tobacco • Some of these markets experienced soft demand • Sales were down around 7% – Mainly confectionery, snack food and biscuits • Operating issues at seven plants (out of 19) – Management changes and plant clo
Slide 43: Significant items
Significant items • Significant items estimated at A$100 million in total – A$75 million taken in 2003/2004 – A$45 million will be the total cash cost • Business targeting additional cost savings beyond those anticipated in April • Expected full year savings around A$45 million – Headcount reduction
Slide 44: Base Materials Purchasing Trend
Base Materials Purchasing Trend Jan 01- Jun 04 Index on average price/tonnes movement Index 120 110 100 90 80 70 60 50 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Representative Basket of AFE Base
Slide 45: Outlook
Outlook • Confident of recovering raw material price increases as they occur • Significant restructuring expenditure to deliver excellent returns • Recent volume trends promising • Targeting a good lift in earnings and returns over the next two years © Amcor Ltd 2004
Slide 46: Amcor Sunclipse North America
AMCOR_ SUNCLIPSE NORTH AMERICA
Slide 47: Amcor Sunclipse
Amcor Sunclipse 60 18 US$ 50 16 % 14 40 12 PBITA 10 30 RoAFI 8 20 6 4 10 2 0 0 02/03 03/04 Sales $m 761 822 PBITA $m 49.7 40.9 A.F.I. $m 333 323 PBITA/AFI % 15.0 12.6 Employees 2,367 2,204 © Amcor Ltd 2004
Slide 48: Operational review
Operational review • Corrugators – Solid performance with volumes improving in the fourth quarter – Two $50 per tonne increases for corrugated paper – Aggressive competition with some overcapacity still existing in the Californian market • Manufactured products – Difficult year as overcapacity meant
Slide 49: Operational review
Operational review • Distribution – Difficult year, especially for the first nine months – Broader product range helped achieve sales growth of 8% – Smaller startup operations improved profitability through the year • Outlook – Good fourth quarter of 2004 has continued in July and August – Economic
Slide 50: Amcor Rentsch Amcor Closures
AMCOR RENTSCH AMOOR CLOSURES
Slide 51: Amcor Rentsch and Closures
Amcor Rentsch and Closures € 90 14 % 75 12 60 10 PBITA 8 45 RoAFI 6 30 4 15 2 0 0 02/03 03/04 Sales $m 734 604 PBITA $m 47.1 60.0 A.F.I. $m 571 431 PBITA/AFI % 8.2 13.9 Employees 3,279 3,140 © Amcor Ltd 2004
Slide 52: Amcor Rentsch
Amcor Rentsch • Another strong year with good growth in volumes and sales • The fourth press in Russia fully loaded – Fifth press due for commissioning in December • Move to more graphic health warnings is increasing the technical difficulties – Ten colour printers • Business expects another good ye
Slide 53: Amcor Closures
Amcor Closures • Bericap had a strong year • Amcor White Cap had a difficult year – Good progress on cost reduction initiatives – Delay of commissioning the new plastic closures plant in Manila • A number of significant initiatives underway to ensure an improved result in 2004/2005 © Amcor Ltd 2004
Slide 54: Amcor Asia
Slide 55: Amcor Asia
Amcor Asia 20 Sing $ 40 18 % 16 30 14 12 PBITA 10 RoAFI 20 8 6 10 4 2 0 0 02/03 03/04 Sales $m 271 304 PBITA $m 33.0 37.2 A.F.I. $m 299 282 PBITA/AFI % 11.0 13.2 Employees 2,797 2,833 © Amcor Ltd 2004
Slide 56: Asia Summary
Asia Summary • Strong performance in tobacco across all countries • Continued growth in flexibles – New healthcare plant in Singapore • Corrugating down – Difficulties at the three plants in Malaysia • Business poised to grow in improving economic conditions • Targeting improved earnings and returns
Slide 57: Group Financials
GROUP FINANCIALS © Amcor Ltd 2004
Slide 58: Presentation Key Notes
Presentation Key Notes • Key financials & significant items • Borrowing costs and tax • Currency analysis • Returns and cashflow • Capital structure • Corporate costs • IFRS • Dividends • Summary © Amcor Ltd 2004
Slide 59: Key Results
Key Results $ mill (before significant items) Jun 03 Jun 04 Sales 10,710 10,406 -2.8% PBITDA 1,329 1,286 -3.2% PBITA 860 831 -3.4% PBIT 722 704 -2.5% PBT (pre PACRS) 575 571 -0.7% PAT (pre PACRS) 431 440 +2.0% PBT (post PACRS) 523 518 -0.9% PAT (post PACRS) 379 387 +2.1% EPS (post PACRS: cents) 45.3
Slide 60: Significant Items
Significant Items $ mill Jun 03 Jun 04 PET restructure (20) Flexibles market sector rationalisation (70) (90) Twinpak residual assets (10) (100) Initial acquisition restructuring (87) Tax effect 17 5 Net significant items (70) (95) © Amcor Ltd 2004
Slide 61: Interest and Borrowing Costs
Interest and Borrowing Costs Weighted Average Cost Jun 03 Jun 04 PACRS, PRIDES & Convertibles* 7.9% 7.9 % Other Debt Facilities - US 4.5% 4.2 % - European 3.2% 4.2 % - Australia 5.0% 5.3 % - New Zealand 5.7% 6.5 % - Asia 4.5% 4.6 % Weighted Average Interest Rate Cost 5.0% 5.3 % Other Borrowing Costs
Slide 62: Effective Tax Rate
Effective Tax Rate Jun 03 Jun 04 Tax-PACRS as interest 24.3% 22.5% Impact of PACRS (2.2)% (2.1)% Tax on Statutory Profit* 22.1% 20.4% * Before significant items Incurred tax rate is lower due to: • impact of PACRS • efficient offshore capital structures • use of tax losses, tax deductions for goodwi
Slide 63: Sensitivity to Currency
Sensitivity to Currency $A vs $USD $A vs EUR $A vs $SING .5861 to .7098 . 5592 to .5964 1.0283 to 1.2205 21% 7% 19% Amcor full year sensitivity Impact at PAT level in 03/04 • USD 1 cent =$1.8m p.a • EUR 1 cent=$2.0m p.a • SGD 1 cent=<$0.5m p.a FY 04 Impact on PAT $34 mill FY 04 Impact of SHF $65 mil
Slide 64: EPS Returns
EPS Returns 65 Compound earnings growth 6.6% pa 61.7 59.4 60 Compound earnings growth 10.3% pa 55 50.3 EPS 50 Cents 44.7 45.3 44.7 45 42.1 40.2 40 37.6 34.5 35 30 99/00 00/01 01/02 02/03 03/04 EPS Basic pre significant items (PACRS as interest) EPS Basic pre significant items and amortisation © Amco
Slide 65: PBITA to Average Funds Invested
PBITA to Average Funds Invested 16.0 15.0 8.9% Pre Tax WACC 14.0 12.9 12.8 12.2 12.0 11.2 11.1 11.1 10.0 10.0 % 8.0 6.0 4.0 2.0 0.0 97/98 98/99 * * 99/00 00/01 01/02 02/03 FY 03/04 •97/98 and 98/99 are PBIT to Average Funds Employed •All calculations before significant items © Amcor Ltd 2004
Slide 66: Cash Flow from Operations
Cash Flow from Operations 1000 Compound CFO growth 21.7% pa 945 891 Compound PAT growth 15.4% pa 800 694 600 526 $m 415 379 387 400 281 218 238 200 0 1999/00 2000/01 2001/02 2002/03 2003/04 Full Year Full Year Full Year Full Year* Full Year* PAT = Profit After Tax (and PACRs) CFO = Cash Flow from Op
Slide 67: Cash Flow from Operations per share
Cash Flow from Operations 1000 Compound CFO growth per share 12.3%% pa 1.4 1.13 1.2 800 1.05 1.03 945 1 0.84 891 600 $ share 0.8 $m 0.66 694 0.6 400 526 0.4 415 200 0.2 0 0 1999/00 2000/01 2001/02 2002/03 2003/04 Full Year Full Year Full Year Full Year* Full Year* CFO = Cash Flow from Operations (=
Slide 68: Cash Flow Summary
Cash Flow Summary $m Inflows Outflows $(117) Work Capital (decrease) $325 Sustaining Capex $137 Net Borrowing Costs PBITDA $101 Tax $1286 $225 Dividends (net) & PACRS $120 Other Debt* $266 $761 Growth Capex/Acq/Disposals *Net of refinancing lease on glass plant © Amcor Ltd 2004
Slide 69: Working Capital Performance
Working Capital Performance Working capital at period end Average p.a. Working capital/sales* Net Acquisitions 1300 16 133 410 78 1000 44 14 $m % 700 12 400 10 98/99 99/00 00/01 01/02 02/03 03/04 Full Year Full Year Full Year Full Year Full Year Full Year *After (i.e. net of) factoring and securitiz
Slide 70: Capital Expenditure Summary
Capital Expenditure Summary $ mill Jun 04 Capex 544 Maintenance Acquisitions 680 c.$325 Gross Expenditure 1224 Disposals (138) Growth $899 Net Capex 1086 Flexibles Minorities 165 Disposals (138) Rexam Flexibles 327 Alcoa PET 109 = Net Capex Other 79 $1086 Acquisitions 680 © Amcor Ltd 2004
Slide 71: Capital Structure with OBS Financing
Capital Structure with OBS Financing $ mill Jun 02 Jun 03 Jun 04 Equity & PACRS 4,567 4,636 4,708 Net Debt* (257) 0 1/ 02 2,297 2,689 4,310 6,933 7,397 OBS financings** 413 850 662 Total Capital 4,723 7,783 8,059 Gearing (3%) 40.4% 41.6% Interest cover: PBITA*** 3.7x 3.7x 4.1x Interest cover: PBITDA
Slide 72: Net Asset and Debt Currency Profile 30 June 2004
Net Asset and Debt Currency Profile 30 June 2004 As at 30 June 2004 (AUD billions equivalent) Pre-financing External Percentage Residual Currency net assets debt/(assets) hedged exposure & PACRS USD 1.9 1.7 89% 0.2 Euro 2.1 1.3 62% 0.8 GBP 0.3 0.1 33% 0.2 CAD 0.2 0.1 50% 0.1 Latin America 0.6 - - 0.
Slide 73: Corporate Costs
Corporate Costs $mill Jun 03 Jun 04 Change Financial Services Group 37.5 40.6 3.1 • worldwide tax, treasury, & internal audit • reporting & consolidation 0 1/ 02 • superannuation administration • company secretarial & share registry Board and Central Executive 21.9 26.9 5.0 • Board, CEO & EGMO • HR,
Slide 74: Dividend
Dividend • Final dividend 16c (32c FY - up 6.7% on pcp) • Final dividend franked 40% • No DRP discount • DRP satisfied via on market purchase of shares • DRP no longer dilutive to eps • Payout ratio 54+% on pre-goodwill basis • Dividend increases aligned to profit growth © Amcor Ltd 2004
Slide 75: Impact of IFRS
Impact of IFRS • Goodwill • Share based payments • Pensions • Leases and securitisations • Tax effect accounting • Equity: debt classifications • No overall economic or cash flow impact © Amcor Ltd 2004
Slide 76: Finance Summary
Finance Summary • Debt maturity profile longer (USPP & EMTN) • Matching assets & liabilities = reduced volatility • Tax rate sustainable: un-recouped losses • Cash flow remains strong • Next–step working capital improvement • Absorbing regulatory change © Amcor Ltd 2004
Slide 77: Group Summary
GROUP SUMMARY © Amcor Ltd 2004
Slide 78: Amcor today
Amcor today • The packaging industry has and will continue to consolidate as expected • Strong positions developed in chosen markets • Enables leveraging to obtain improving returns – Scale, technology and customer relationships • Decentralised organisational structure • Returns above cost of capita
Slide 79: Growth and yield are possible
Growth and yield are possible • The targets for the next phase of development are: – Grow earnings off the existing asset base – Targeting 20% earnings growth over the next two years – Generate sufficient cash to both – Increase the dividends in line with earnings – Reinvest in the business for both
Slide 80: Summary
Summary Reshaping & growing Optimizing 1998 2004 2006 Australian Leading Global Paper & Global Packaging Packaging Packaging Company Company Packaging Industry Leverage position to Company Consolidator improve returns Delivering good growth in both earnings and dividends © Amcor Ltd 2004
Slide 81: www.amcor.com
AMCOR WWW.amcor.com