Amcor Plc · NYSE:AMCR
Amcor — H1 2007 Earnings Presentation
62 slides from Amcor's earnings presentation, Feb 21, 2007
Slide 1: 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 generally be ident
Slide 2: Investor Presentation Agenda
Investor Presentation Overview of Results Ken MacKenzie The Way Forward Ken MacKenzie Australasian Review Lou Lachal Non-Australasian Reviews Ken MacKenzie Finance Peter Day Summary Ken MacKenzie Q & A All
Slide 3: Half Year Results Summary
Cash Flow A$ m Dec 05 Dec 06 PBITDA 637.3 580.6 Operating cash flow 61.3 124.6 Dividends (150.9) (156.6) Free cash flow (89.6) (32.0) Divestments - 39.0 Growth capital - (58.2) Movements in share capital 12.2 (123.3) Movement in net debt (68.9) (175.2) Profit Dec 05 Dec 06 % PBITDA (A$ m) 637.3 580.
Slide 4: The Way Forward
The Way Forward Comprehensive program All substantial elements announced Significant progress over the past six months Substantial improvement expected over the next two years Improve shareholder value EXECUTION FOCUS Strong market positions Low cost Customer & market focused Capital discipline CULT
Slide 5: The Way Forward – Strong Market Positions
The Way Forward – Strong Market Positions Fix PET Packaging Mexico Australasian Fibre European Flexibles Turnarounds on schedule EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Sell Completed $420 million White Cap Closures Asian corrugated Australasia
Slide 6: The Way Forward – Strong Market Positions
The Way Forward – Strong Market Positions Fix PET Packaging Mexico Australasian Fibre European Flexibles Turnarounds on schedule EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Sell Completed $420 million White Cap Closures Asian corrugated Australasia
Slide 7: Sale of European PET Packaging
Sale of European PET Packaging Current Position The business has: Excellent management Strong market positions Delivered sound earnings growth Excellent relationships with key customers Attractive growth opportunities The PET industry in Western Europe is poised for rationalisation and consolidation
Slide 8: The Way Forward – Strong Market Positions
The Way Forward – Strong Market Positions Fix PET Packaging Mexico Australasian Fibre European Flexibles Turnarounds on schedule EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Sell Completed $420 million White Cap Closures Asian corrugated Australasia
Slide 9: European Flexibles Restructuring
European Flexibles Restructuring Principles Improve alignment to customer needs and market trends Strengthen positions through better leveraging of technology and manufacturing capabilities Increase weighting in lower cost regions, particularly Eastern and Southern Europe EXECUTION FOCUS Strong mark
Slide 10: The Way Forward – Strong Market Positions
The Way Forward – Strong Market Positions Fix PET Packaging Mexico Australasian Fibre European Flexibles Turnarounds on schedule EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Sell Completed $420 million White Cap Closures Asian corrugated Australasia
Slide 11: The Way Forward – Capital Discipline
The Way Forward – Capital Discipline The focus is on: Capital expenditure Working capital Balance sheet structure Capital discipline is managing the cash flow and balance sheet to deliver optimal performance for shareholders EXECUTION FOCUS Strong market positions Low cost Customer and market focuse
Slide 12: The Way Forward – Capital Discipline
The Way Forward – Capital Discipline Gross capital spending in the first half of $213 million Proceeds from asset disposals of $58 million Depreciation and amortisation $230 million EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Base Capital $155 mill
Slide 13: The Way Forward – Capital Discipline
The Way Forward – Capital Discipline First half spending Custom PET plant at Wytheville Power Flex capacity EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Base Capital $155 million Forecast spending on announced growth capital projects for 2006/07 app
Slide 14: The Way Forward – Capital Discipline
The Way Forward – Capital Discipline Reinvestment of asset sale proceeds is targeting growth segments AND substantially strengthening market positions Substantial opportunities for continued growth Positioning businesses for the long term Custom PET in North America Flexibles Eastern Europe & Russia
Slide 15: Working Capital
Working Capital June to Dec up $66.9 mill Dec to Dec down $312 mill* The Way Forward – Capital Discipline EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Base Capital $155 million Targeting further reductions in the average working capital to sales rat
Slide 16: Improved Cash Flow
Improved Cash Flow A$ m Dec 05 Dec 06 PBITDA 637.3 580.6 Interest (106.5) (94.1) Tax (55.3) (34.5) Base Capex (193.7) (155.2) Significant items (cash component) - (79.2) Movement in working capital (162.0) (66.9) Other (58.5) (26.1) Operating cash flow 61.3 124.6 Dividends (150.9) (156.6) Free cash
Slide 17: The Way Forward – Cultural Change
The Way Forward – Cultural Change Customer focus Talent management process Performance management culture Constantly improving the talent pool and rigorously managing performance is changing the culture EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline C
Slide 18: The Way Forward – Summary
The Way Forward – Summary The major decisions have been made The company is in the process of substantial change Execution focus for the next two years Improve shareholder value EXECUTION FOCUS Strong market positions Low cost Customer & market focused Capital discipline CULTURAL CHANGE
Slide 19: Amcor Australasia Results
Cash Flow * A$ m Dec 06 PBITDA 187.8 Capital Expenditure (62.6) Movement in WC (82.1) Significant Items (45.7) Cash Flow (2.6) Sales A$ m Dec 05 Dec 06 Fibre 652 592 Flexibles 226 230 Rigid 443 472 TOTAL 1,321 1,294 A$ m % Amcor Australasia Sales A$ m 1,321 1,294 PBIT A$ m 153.8 121.7 AFE A$ m 1,864
Slide 20: Fibre Performance
Fibre Performance Volumes – Corrugated and Cartons Australia corrugated down 4% Seasonal Cyclone Larry in Queensland Frosts in Victoria affected fruit and produce sectors Drought Structural impact Customer relocation Returnable plastic crates Retailer strategies Market share stable New Zealand corru
Slide 21: Fibre Australasia – Improvement Plan
Fibre Australasia – Improvement Plan Recycled Paper Detailed feasibility study for the new mill at Botany, NSW is progressing Objective to be the low cost manufacturer Spearwood Mill in WA closed as planned September 2006. Headcount reduction 85 Corrugated Queensland Closure of West End complete by
Slide 22: Fibre Australasia – Improvement Plan
Fibre Australasia – Improvement Plan Cartons NSW reinvestment on schedule for June 2007 to lower costs and better service the beverage and wine markets Closure of Enfield NSW announced today Effective September 2007 Headcount reduction of 31 Cartonboard Petrie Mill restructuring plans to reduce boar
Slide 23: Flexibles and Rigid Packaging
Flexibles and Rigid Packaging Rigid Packaging Beverage cans Volumes up 4% Strong growth in soft drink and alcoholic ready to drink segments Food cans Results above expectations Domestic tinplate supplier exiting Improved efficiencies Glass Strong first half with plant at full capacity Good sales gro
Slide 24: Australasian Outlook
Australasian outlook Strategically Generally good industry structures Amcor number one or two in each segment Non-Fibre businesses well capitalised, strong market positions and low cost Fibre improvement plan will deliver: Low cost position in corrugated conversion Low cost position in recycled pape
Slide 25: Amcor PET Packaging Results
Volumes Billion Units Dec 05 Dec 06 North America 9.5 8.8 Europe 4.1 4.4 Latin America 4.2 4.3 TOTAL 17.8 17.5 CSD/Water 14.4 14.2 Custom 3.4 3.4 Sales USD m Dec 05 Dec 06 North America 815 754 Europe 292 337 Latin America 378 378 Other 35 40 TOTAL 1,520 1,509 Cash Flow * USD m Dec 06 PBITDA 168.7 C
Slide 26: Energy Costs Impact First Half 2006/07
Energy Costs Impact First Half 2006/07 Unrecovered cost increases were approximately USD 6 to 7 million Recovery of approximately 50% of energy cost increases in North America Issues Energy remains a key input cost pressure Prices were broadly steady for the half, although higher overall than for th
Slide 27: North America
North America Positives Excellent operational performance, in both manufacturing and capital management Continuing success in the commercialisation of the panel-less heat set bottle, PowerFlexTM New Gatorade plant on time and on budget for start-up in March 2007 Outlook 2006/07 Much stronger second
Slide 28: Latin America
Latin America Positives Excellent progress in operational performance in Mexico Costs and headcount reductions Remains on target for improvement of USD16 million over two years Brazil restructuring proceeding Good performance in most other South American countries, especially Argentina, Colombia and
Slide 29: Europe
Europe Positives Strong first half with volumes up 7% Strong PBIT performance Successful renegotiation of a number of supply agreements with major customers Outlook 2006/07 Improved earnings Divestment Very good business with strong market positions Well managed Western European market requires furt
Slide 30: PET Packaging – Summary
PET Packaging - Summary Outlook 2006/07 Second half earnings to be up substantially on the same period last year Solid improvement in full year earnings Operational Stronger volumes expected in the second half, compared to the same period last year Good improvement in Mexico to continue Initial bene
Slide 31: Amcor Flexibles Results
Sales * € m Dec 05 Dec 06 Food 481 479 Healthcare 248 249 Tobacco Pack & EE 178 171 Eliminations (9) (7) TOTAL 898 892 Cash Flow * € m Dec 06 PBITDA 81.5 Capital Expenditure (16.3) Movement in WC (30.2) Significant Items (18.5) Cash Flow 16.5 Growth Capital (0.5) Amcor Flexibles € m % Sales € m 898
Slide 32: Amcor Flexibles Raw Material Input Costs
Amcor Flexibles Raw Material Input Costs Raw material costs rose to record levels during the half against a backdrop of falling oil prices. Prices fell in November and have stabilised at historically high levels Raw Material Market Price Trends 90 95 100 105 110 115 120 Jan-03 Mar-03 May-03 Jul-03 S
Slide 33: Flexibles – Healthcare
Flexibles - Healthcare Outlook 2006/07 Solid performance for second half Positives Another solid performance in the Americas with sales in US dollars up 5% New press and laminator being commissioned Good recovery of cost increases in the Americas Ongoing progress in new product development to enhanc
Slide 34: Flexibles – Food
Flexibles - Food Outlook 2006/07 Continuing improvement in the second half with the benefits from restructuring Positives Improved performance in Produce and Bakery Plant closures completed and volumes relocated Improving industry structure Steady progress in Processed Food Sales growth in target ma
Slide 35: Flexibles – Tobacco Packaging and Eastern Europe
Flexibles – Tobacco Packaging and Eastern Europe Outlook 2006/07 Improved earnings in flexibles Eastern Europe and flat earnings for tobacco packaging in the second half Positives Ongoing operational improvements in Russia and Poland flexibles plants Continued strong demand in Russia for tobacco pac
Slide 36: Tobacco Packaging Expansion – New Plant in Ukraine
Tobacco Packaging expansion – New plant in Ukraine Brownfield investment in Kharkiv, second largest city in the Ukraine Project to be managed by Novgorod management Ukraine plant will be satellite site of Novgorod Location has close proximity to customers Production commencing September 2007 Total i
Slide 37: Flexibles Expansion – New Plant in Poland
Flexibles Expansion – New plant in Poland Plant Details A new dedicated customer facility in Poland Targeting high growth market segment of around 20% per annum Capital investment is €26 million Supported by long term contract Completed by March 2008 Strategy Investment in attractive market segment
Slide 38: Flexibles – Summary
Flexibles – Summary Outlook 2006/07 Second half ahead of the same period last year and full year earnings similar to last year Strategic Healthcare Leading position Good industry structure Strong growth Technology is a barrier to entry Food Good market position Expansion into growth regions Technolo
Slide 39: Amcor Sunclipse Results
Sales USD m Dec 05 Dec 06 Distribution 389 389 Man. Products 111 116 Corrugated 87 99 Eliminations (115) (105) TOTAL 472 499 Cash Flow * USD m Dec 06 PBITDA 32.9 Capital Expenditure (1.7) Significant items - Movement in WC 2.0 Cash Flow 33.2 Growth capital - Amcor Sunclipse Sales USD m 472 499 PBIT
Slide 40: Amcor Asia Results
Cash Flow * SGD m Dec 06 PBITDA 22.5 Capital Expenditure 1.3 Significant items - Movement in WC 1.6 Cash Flow 25.4 Growth Capital (23.3) Sales* SGD m Dec 05 Dec 06 Tobacco Pack 84 38 Flexibles 28 34 Other 18 4 TOTAL 130 76 *Continuing operations Amcor Asia Sales SGD m 130 76 PBIT SGD m 20 20 AFE SGD
Slide 41: Group Financials
Group Financials
Slide 42: Presentation Key Notes
Presentation Key Notes Key results and significant items Borrowing costs Cash flow and returns Capital structure and capital management Summary All data is on AIFRS basis unless indicated otherwise
Slide 43: Key Results for First Half Dec 2006 – All Operations
Key Results for First Half Dec 2006 All Operations – before significant items $Mill Dec 05 Dec 06 % Change Sales 5,750.1 5,472.1 (4.8) PBITDA 637.3 580.6 (8.9) PBIT 401.2 350.6 (12.6) Borrowing costs (incl PACRS) (124.0) (104.5) (15.7) PBT 277.2 246.1 (11.2) Tax and Minorities (62.8) (61.1) (2.7) PA
Slide 44: Key Results for First Half Dec 2006 – Continuing Operations
Key Results for First Half Dec 2006 Continuing Operations – before significant items $Mill Dec 05 Dec 06 % Change Sales 5,518.1 5,472.1 (0.8) PBITDA 614.2 580.6 (5.5) PBIT 391.0 350.6 (10.3) Borrowing costs (incl PACRS) (121.1) (104.5) (13.7) PBT 269.9 246.1 (8.8) Tax and Minorities (61.5) (61.1) (0
Slide 45: Bridge Presentation December 2006
Bridge Presentation 31 December 2006 $Mill Total Discontinued Continuing Operations Operations Amcor 185.0 - 185.0 Minorities 8.2 - 8.2 PAT Pre-Significants 193.2 - 193.2 Significant Items (98.0) 6.8 (104.8) Tax Effect 30.7 - 30.7 Net Significants (67.3) 6.8 (74.1) Amcor (67.3) 6.8 (74.1) Minorities
Slide 46: Significant Items
Significant Items $Mill Dec 06 Closures business gain on disposal 6.8 PET business integration and restructure (6.1) Flexibles market sector rationalisation (31.3) Fibre Packaging Australasia restructuring (67.4) Net significant items before tax (98.0) Tax effect 30.7 Net significant items (67.3) Be
Slide 47: Borrowing Costs Bridge
Borrowing Costs Bridge First Half 2005/06 to First Half 2006/07 $Mill Dec 06 % Change Interest costs in first half 2005/06 124.0 Higher rates on floating rate debt 1.2 Discontinued operations (3.0) PACRS interest (15.0) PACRS conversion discount and costs (2.7) Interest cost – first half 2006/07 104
Slide 48: Borrowing Costs – Exit Rates
Borrowing Costs – Exit Rates Weighted Average Cost at Period End Dec 06 PACRS 9.7% PRIDES - Other Debt Facilities US 5.8% Europe 4.2% Australia 7.0% New Zealand 8.0% Asia 6.1% Weighted Average Cost at 31 December 06 5.8% Other borrowing costs 30 bp
Slide 49: Group Cash Flow – All Operations
$Mill Dec 05 Dec 06 Comment PBITDA 637.3 580.6 Interest (106.5) (94.1) Lower debt & rate Tax (55.3) (34.5) Timing & profit Cash significant items - (79.2) Restructures Base capital expenditure (net) (193.7) (155.2) Sustained Movement in working capital (162.0) (66.9) Discipline Other (58.5) (26.1) P
Slide 50: Management / Statutory Cash Presentation
Management Format ($Mill) Statutory Format PBITDA 580.6 279.8 Net cash from operating Interest (94.1) Tax (34.5) Cash significant items (79.2) Base capital expenditure (net) (155.2) (174.4) Net cash from investing Movement in working capital (66.9) Other (26.1) Operating cash flow 124.6 Dividends (1
Slide 51: Working Capital Performance
Working Capital Performance Average working Capital/Sales (Before Factoring) % All operations 12.9 10.5 13.2 13.3 9.0 10.0 11.0 12.0 13.0 14.0 1H 03/04 1H 04/05 1H 05/06 1H 06/07
Slide 52: Return on Average Funds Employed
Return on Average Funds Employed PBIT/Average Funds Employed - Before significant items 02/03 and 03/04 AGAAP; thereafter AIFRS All Operations Pre Tax WACC Target 15% % 11.1 11.1 12.0 11.3 10.7 9.6 9.8 9.5 9.1 9.1 0 2 4 6 8 10 12 14 02/03 03/04 04/05 05/06 1H Dec 06
Slide 53: Amcor Asia – Movement in Average Funds Employed
Amcor Asia – Movement in Average Funds Employed Asia average funds employed (SGDm) 332 AMVIG carrying value 19 Other movements (profits/dividends) 109 Cash paid AMVIG investment comprises 48 157 Assets contributed (Qingdao / Beijing) 425 176 Total average funds employed 87 122 Operating assets 6 9 O
Slide 54: Amcor Asia – Returns Analysis
Amcor Asia – Returns Analysis 9.4 22.8 Reported returns RoAFE % 7.4 12.9 PAT return from associates – AIFRS % 20.0 20.0 Reported “PBIT” 12.5 3.5 PAT from share of associates 7.5 16.5 PBIT from operating business Dec 06 Dec 05 15.9 12.9 PAT return from associates – cost % Reported profits (SGDm)
Slide 55: Capital Structure
Capital Structure 5.1x 50.2% 46.7% 7,167 470 6,697 2,661 464 3,572 June 06 5.6x 49.4% 45.6% 6,962 484 6,478 2,737 220 3,521 Dec 06 June 05 A$m 5.9x Interest cover: PBITDA** 54.2% Gearing + OBS items* 50.7% Gearing on Balance Sheet 7,378 Total Capital 525 OBS items* 6,853 Balance Sheet Capital 2,574
Slide 56: PACRS2 – Timetable on Track
PACRS2 – Timetable on Track 23 Feb 19 Apr 27 Apr 30 Apr 1 May 23 Mar 28 Mar 12 Apr 1 Mar Record date for repurchase Record date for interest Last trading day Repurchase & interest payment Conversion Repurchase offer period Conversion pricing period Share buy back to extend
Slide 57: Financial Summary
Financial Summary PBITDA modestly down despite external challenges Cash flow remains strong Improved capital management Tax rate maintained Interest cover improved Financial flexibility and capital structure capacity Well positioned for The Way Forward initiatives
Slide 58: The Way Forward – Summary
The Way Forward - Summary Three year ‘get fit’ program 18 months in the key decisions have been announced Focus for next 18 months: Strengthening the portfolio Execution discipline Customers Cost Capital Discipline Culture EXECUTION FOCUS Strong market positions Low cost Customer and market focused
Slide 59: Summary of Portfolio Changes
Summary of Portfolio Changes Out of: Metal Closures Asian Corrugated and Sacks PET in Europe and Australasia EXECUTION FOCUS Strong market positions Low cost Customer and market focused Capital discipline Cultural Change Into: Flexibles Eastern Europe Russia Tobacco Packaging China Eastern Europe Cu
Slide 60: Improved Geographic Presence
Improved Geographic Presence Geographic Sales Split * Emerging markets are Asia, Eastern Europe, Russia and Latin America Emerging Markets Australasia North America Western Europe Emerging Markets Australasia North America Western Europe 2005 2009 (Approx)
Slide 61: Earnings Outlook
Earnings Outlook Short term The turnarounds will deliver in line with expectations The market environment remains challenging Cost pressures Difficult conditions in some markets Expect improved performance on a continuing business basis over the same period last year
Slide 62: Summary – A Key Milestone Has Been Reached
Summary – A Key Milestone Has Been Reached Good execution over the coming 18 to 24 months will enable Amcor to move forward with the next stage of development. All the key decisions have been made Programs to improve the operations and change the culture are underway For the next two years the organ