Amcor stays bullish about China’s economy

Ron Delia says China and emerging markets are a ‘long-term game’ for the company. Photo: Paul JeffersThe boss of packaging giant Amcor remains “bullish” about China, despite increasing fears the country’s economy is slowing much faster than expected.

Concern about the health of the world’s second biggest economy has rattled global financial markets, souring views of other emerging economies.

But Amcor chief executive Ron Delia said while the company had a “difficult year” in China – with lower volumes in the second half of 2015 – he was upbeat about the country’s long-term prospects.

“Clearly growth around the world is below trend and I think nowhere is that more evident than in China,” Mr Delia said.

“But emerging markets in general for us are a long-term game.

“There is obviously going to be volatility, and slower than trend growth at the moment, but we believe in these markets, particularly in China.”

Mr Delia declined to weigh in to criticism that the Chinese government was doing too little to manage the country’s economic slowdown as well as deliver on its pledge to stabilise share markets.

“We focus on what we can do and taking care of our customers in China,” he said.

“[Government] policy will take care of itself. We will be agile and adapt to policy shifts around the world, including China.

“We have got a really good mix of big multinational customers … and big regional customers in China who values the same things as the multinationals – product safety, good quality and reliable supply and innovation to help them spur their own growth.”

Mr Delia’s upbeat assessment came after Amcor’s net profit firmed 0.4 per cent to $US680.3 million ($947 million) for the 12 months ending June 30, beating analysts estimates who were expecting $US670.4 million, according to Bloomberg.

Excluding currency swings from a strengthening US dollar, net profit jumped 7.2 per cent.

Revenue, however, dipped 3.5 per cent to $US9.61 billion.

Mr Delia expected higher earnings in the next 12 months. He said the company had a strong balance sheet and it had completed 60 per cent of its $US500 million buyback.

Investors welcomed the result. Amcor’s closed 4.3 per cent higher at $13.05

“Despite the challenge of lower than trend growth in many of the market we operate in, we are delivering strong profit growth and cash flow,” Mr Delia said.

In the 2014-2015 financial year, Mr Delia said the company’s flexible packaging and rigid plastics divisions delivered record returns of 25.5 per cent and 20 per cent respectively.

He attributed the gain the flexible packaging business to “growth in emerging markets, product mix improvements, better operating efficiencies and contributions from acquisitions”.

Continued growth in North and South America fuelled the gains in the rigid plastics division, with higher volumes in all the main product segments, Mr Delia said.

Mr Delia also said the company would continue to be based in Australia, despite it representing less than 5 per cent of its business and it moving half the staff at its head office to Switzerland.

He cited Amcor’s dominance in flexible packaging in Australia and New Zealand as well as its ASX listing for why the company would continue to operate from Melbourne.

“We have got a head office here which has less than 50 roles in total and about half of those roles will move to Switzerland.

“We trade on the ASX, which continues to be a great source of equity capital for the company. It’s a deep liquid market and has allowed us to raise capital very quickly.

“We see no reason to shift the listing of the company to any other place. Australia will remain very important to us.”

Amcor will pay a final dividend of US21¢ a share on September 30.