Packaging giant Amcor says its new recycled paper machine at its Botany mill in NSW and recent acquisitions, such as the Shorewood tobacco packaging business, will drive earnings in the short term.
Amcor also announced that 300 jobs are set to be axed at its Australian operations in response to the high Australian dollar and rising costs.
Amcor on Monday reported a net profit of $238 million for the six months ended December 31, up 16.3 from $205 million in the prior corresponding period.
Profit grew despite the high Australian dollar wiping $20 million off earnings.
Amcor also took a $83.7 million hit related to the pending closure of its cartonboard plant at Petrie in Queensland.
Amcor’s underlying profit of $322 million was up 5.7 per cent from the prior corresponding period.
Shares in Amcor were 23 cents higher at $9.14 on Monday.
Amcor chief executive Ken MacKenzie said Amcor expected another year of higher underlying profits for the full financial year.
He said he was extremely pleased with the first half performance, and there were a number of initiatives across the group that would contribute to ongoing earnings growth.
“In the short term, the benefit from the recent acquisitions (including Shorewood) and the successful commissioning of the new Botany mill will drive earnings,” Mr MacKenzie told reporters.
“In the longer term, our disciplined growth agenda will deliver ongoing improvements in shareholder returns.”
Mr MacKenzie said the start-up of the new paper recycling machine at the Botany mill was progressing as expected and the ramp-up to full production was expected to be completed by June 2014.
The mill will introduce into the Australian market higher-quality recycled paper for the corrugated box market.
Mr MacKenzie said the new facility would deliver $50 million in profit benefits over time.
He said the $US115 million acquisition of the Shorewood tobacco packaging assets, which was announced on Friday, was a “very good fit” with Amcor’s operations and gave it increased exposure to the growth markets of Asia and Latin America, and improved Amcor’s cost position in the US.
Targeted benefits from the acquisition were $US13 million.
Mr MacKenzie said that over the last three years, Amcor’s businesses had shown resilience to subdued economic conditions and delivered strong earnings growth.
But, he said there were two speeds out there.
“There’s the mature markets which tend to be, in our case, flat, but we’re getting double-digit (revenue) growth in emerging markets.”
China was leading the way in emerging markets.
In the first half, Amcor’s flexible packaging division’s profit before interest and tax rose 4.7 per cent to $344.6 million after benefiting from volume growth in emerging markets and the integration of the Aperio and Aluprint acquisitions.
The rigid plastics division also increased its profit, by eight per cent to $122.9 million, while the Australasian and packaging section had a 7.8 per cent drop to $82.8 million.
Morningstar analyst Nathan Zaia said Amcor’s 2013 first half earnings were a little below expectations, mainly due to lower profitability in flexible packaging compared to the second half of 2012.