MELBOURNE, AUSTRALIA (Sept. 22, 1:30 p.m. ET) — Severe flooding and a cyclone affecting eastern Australia adversely affected global packaging supplier Amcor Ltd.'s sales volumes for the financial year ended June 30.
In a report to investors, Melbourne-based Amcor reported its Australasia & Packaging Distribution business's profit before interest and tax decreased 0.9 percent to US$163 million. Sales increased only marginally by 1.3 percent to US$2.9 billion.
Amcor managing director Ken MacKenzie said it is a solid result given the “particularly difficult operating conditions in Australia.”
Severe flooding across a large portion of eastern Australia from November 2010 to February 2011 adversely affected volumes in the fruit, produce and meat end markets.
Three quarters of the state of Queensland alone was declared a disaster zone, with floods and Cyclone Yasi destroying more than 30,000 homes and killing 35 people. MacKenzie said several markets' volumes will not return to normal until the next growing season is completed.
Cyclone Yasi, a category 5 tropical cyclone, hit north Queensland on Feb. 3 and reached maximum wind speeds of 177 miles per hour. It caused an estimated US$1.03 billion in insured losses.
Queensland's banana crops were devastated. MacKenzie said crop recovery was expected to take up to a year and the negative impact of Cyclone Yasi for the corrugated business's volumes and earnings would continue into 2012.
Australian operations were also adversely affected by Australia's high dollar, which reduced customer volumes. Overall, Amcor lost $82 million on expected earnings due to the dollar's appreciation.
“Should the Australian dollar remain at current levels, there will be an ongoing impact on volumes,” MacKenzie said.
Despite operating against a backdrop of subdued global economic conditions and increasing resin costs, Amcor's profit increased 39 percent to US$582 million, and sales increased 26 percent to US$12.67 billion.
MacKenzie attributed earnings growth and higher returns to acquisitions. In early 2010, Amcor bought Rio Tinto Group's Paris-based Alcan Packaging for US$2.45 billion, and the acquisition has “exceeded expectations.”
Amcor's Rigid Plastics division's profit increased 14 percent to US$247.8 million and its Flexibles Plastics unit increased 56 percent to US$633.2 million.
MacKenzie said the outcome is partially offset by increased raw material costs. During the financial year, aggregate costs increases were more than US$821.5 million, mainly in PET products and aluminum.