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Ken MacKenzie, managing director and CEO of Amcor, recently outlined the demerger of its packaging business Orora. In August, the company announced its intention to demerge its Australasia and Packaging Distribution (AAPD) business, with plans to list the global glass and beverage can unit on the Australian Securities Exchange by the end of the year.The move will allow the company to focus on its global plastics unit. The company will also retain its cigarette packaging unit.

Heather Caliendo

November 18, 2013

3 Min Read
Amcor discusses packaging demerger

"Amcor today comprises two very different packaging companies in terms of product segments and geographic focus," MacKenzie said in the company's general meeting. "Amcor post the demerger, has global leadership positions in the flexibles and rigid plastics segments, while Orora operates in the glass, beverage can and integrated fiber packaging markets in Australasia and packaging distribution in North America."

He said the company came to the conclusion that it should separate the two businesses, enabling each to focus on their own growth agendas and strategic priorities.

 "Going forward, Amcor post the demerger will have an even more focused portfolio with two thirds of its sales in flexible packaging and one third in rigid plastics," he said.

Approximately one third of group sales will be in each of North America and Western Europe and nearly 30% in emerging markets. The operating footprint will comprise 180 sites in 43 countries.

MacKenzie said that so far, the flexible business is experiencing an "excellent year" with profit before interest and tax up 11.9% to a record €589.1 million ($796 million).

The end markets for this segment are food, healthcare and tobacco packaging.

Amcor recently announced it will acquire Detmold Flexibles, a privately owned Australian flexible packaging business for $50 million. The business will be part of Amcor Flexibles Asia Pacific.

Detmold Flexibles operates two plants in Melbourne and has sales of approximately $55 million.

"From a strategic perspective Detmold Flexibles builds on the success of the 2012 Aperio Group acquisition," MacKenzie said. "It enables the Australian flexibles business to strengthen its manufacturing centers of excellence with plants focused on specific technologies and end market segments."

Given the manufacturing overlap in the businesses there is considerable opportunity for operational synergies and returns are expected to be more than 20%, he said.

"The outlook for the full year for the flexibles segment has not changed with earnings expected to be higher than last year, driven by ongoing growth in emerging markets, operating improvements and benefits from acquisitions," he said.

Rigid plastics

MacKenzie said the rigid plastics business had a solid year. Earnings were 5.2% higher at $286.8 million, and returns improved from 15.5% to 16.9%.

"The outlook for the full year for the rigid plastics segment has not changed with earnings expected to be higher than last year. The business will benefit from ongoing growth in both Latin America and diversified products, as well as the benefits from increased market share in North America," he said. "The magnitude of the full year increase will be dependent on economic and weather conditions for the remainder of the year."

In North America, MacKenzie said the volume for the first quarter reflected the declines in the overall beverage market, in part due to a relatively cool and wet summer. This reduction was largely offset by market share gains, however, there was an adverse shift in product mix.

"Today, within Amcor, there are two very different packaging companies and the decision to demerge Orora is the next logical step in the Amcor journey," he said. "Orora is well positioned to stand alone as a separately listed company, with strong positions in its market segments and exciting profit growth opportunities. Amcor, as a global leader in flexible and rigid plastics packaging has strong market positions and an excellent footprint in higher growth emerging markets."

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