Global packaging group, Amcor reported a 29.5% fall in net profit for the December half, due mainly to a difficult times in its Australasian operations.
The market didn’t like the result, selling down the shares by more than 6% yesterday to $4.76. They had traded higher after the result was released, but fell over the rest of the day as investors took a second look.
Amcor said net profit for the six months to December 31 was $108.5 million, down from $154 million in the same period last year.
Included in the profit was $58.9 million in restructure and asset impairment costs and a $14 million positive benefit from the slump in the value of the Australian dollar that will rise to an estimated $50 million this half.
The company said its Amcor Australasia had a "difficult half," with earnings hurt by a reduction in volumes of ready-to-drink alcoholic drinks due to increased taxes on that segment.
The corrugated business also suffered from significant cost increases, particularly in wastepaper.
Amcor said Australasian earnings were expected to be broadly in line with the second half of last year, with the exception of the recycled paper business, where lower export prices are expected to have a negative impact.(They will continue to have a negative impact this half).
That saw the company take an axe to costs.
There was a 10% cut in the number of salaried staff implemented this month, with savings estimated at $15 million a year and kicking in from August-September.
Across Amcor’s global business, the half was characterised by weaker and more volatile customer demand, lower raw material costs and fluctuations in foreign exchange rates, the company said.
It suffered from "substantial monthly demand variations with destocking through the supply chain. Demand weakened through the half and was particularly poor in the November and December period."
The PET Packaging division had a "solid first half given the challenging economic environment", Amcor said, even though volumes fell 9% on the previous corresponding period due to lower demand for carbonated soft drink and water and customer destocking.
"The weaker economic conditions, particularly in North America, will continue to be a challenge in the second half," Amcor said.
"The business remains committed to the strategy of shifting the mix to higher margin custom container markets and continuing to focus on cost control and cash management.
"In the second half of the year the business will continue to deliver strong operational performance and, with the supply chain destocking largely complete, there is cautious optimism for the balance of the year."
Amcor said there would be further volatility in its flexibles business, comprising food, healthcare and tobacco packaging.
"During the second half, demand is likely to remain volatile and economic conditions weak,” the company said.
The business was expected to benefit from lower raw material costs and improved operating costs due to restructuring, however.
Amcor said the performance of its Sunclipse division, which produces and distributes packaging in the US and Mexico, had been slow as customers took an extended break over the Christmas and New Year period.
Second half performance would depend upon economic conditions in North America, it said.
Meanwhile, Amcor said it is still in talks with miner Rio Tinto about the partial acquisition of its Alcan packaging business.
"It is uncertain at this point if Amcor will be successful in purchasing any of the Alcan packaging assets and any decisions relating to funding will be made once it is known which assets, if any, are being purchased,” Amcor said.
Amcor repeated that would be a patient and disciplined buyer and had previously walked away from over-priced deals.
Amcor declared an interim dividend of 17 cents, steady with previous payouts. That surprised some analysts, seeing other companies yesterday had cut dividends, such as OneSteel and GWA.
Building and industrial products company Crane Group Ltd has reported a near 16% fall in first half profit, thanks to the straitened times in the building sector and says the tough economic environment will affect its annual result.
Net profit for the six months to December 31 fell to $30.1 million, from $35.7 million in the previous corresponding period following a downturn in construction markets and falling commodity prices.
Net profit before significant items fell 6.9% to $33.2 million, after revenue eased 1% to $1.17 billion.
Directors warned that net profit after tax before significant items for the full year "is expected to be down approximately 10%".
"Volatility in the broader economy makes it difficult to definitively forecast future performance.
"Nonetheless, given the expectation that difficult trading conditions will persist for the balance of the financial year and the cost reduction plans currently in place across Crane Group, management expects that net profit after tax before significant items for the full year will be down approximately 10% compared with last year."
Despite this forecast, directors declared an unchanged interim dividend of 35c per share.
The shares eased 10 cents to $7.20 yesterday.
Crane said difficult trading conditions were expected to persist, with the current economic environment in Australia and New Zealand posing "significant" challenges to its business.<
