AMC058 AS9 Chairmans address 20/11/00 5:22 PM Page A

Transcription

1

2 Chairman s Address Annual General Meeting Friday, 20 October 2000 at am A leading global packaging company

3 Contents Chairman s Address Introduction 2 Review of E-commerce 4 Safety 4 Environment 5 Board and Senior Management 5 Outlook 7 Concluding Comments 8 Outcome of Meeting

4 20 October 2000 Ladies and Gentlemen The 12 months to June 30 was a year of both substantial change and ongoing improvement for Amcor. Earlier this year, the Board resolved that Amcor would become a focused packaging company operating across global markets. As a consequence, in April the company successfully separated its paper and packaging operations and created the listed paper company, PaperlinX. This separation of the packaging and paper operations was the most substantial event in the company s history and we were gratified to receive overwhelming shareholder support for the change. Against a background of a globalising and rationalising packaging industry, Amcor is now clearly an organisation with a focus and an ability to maximise its opportunities. As set out in this year s annual report, your Board and management have developed a vision for the company going forward. This vision contains three elements. Firstly, for Amcor to be a top five global packaging company. The impending changes in the packaging industry will inevitably lead to a small number of global leaders. Our customers are also rationalising and we are increasingly dealing with larger world-wide groups. These companies are requiring their major suppliers to have global reach and world s best practice manufacturing costs. Amcor is already a top ten global packaging company, as measured by market capitalisation, sales or profits. We aim to emerge as one of the core leaders in our industry. Stan Wallis Chairman Currently, Amcor operates in 23 countries and derives about 50% of its earnings from operations outside Australia and New Zealand. Importantly, these overseas businesses generate returns, as measured by profit before interest and tax to average funds employed, in excess of 16% which is well above our weighted average cost of capital and provides an excellent base from which to grow.

5 2 Chairman s Address 2000 The second component to our vision is to be a top three participant in our chosen markets. Customers increasingly want to be associated with market leaders and Amcor must be a major participant in terms of products and markets. For this reason, we have chosen to concentrate our efforts offshore in specific segments. These segments all exhibit the characteristics of high growth and high value add. We specifically wish to avoid products or markets that are commodity in nature or have low growth. Currently, our focus is on flexible plastic packaging, PET bottles and jars, specialty printed cartons and specialty plastic packaging, such as tubes, closures and thermoformed plastics. All of these products demonstrate growth substantially above the overall average for the packaging industry. We are already the global leader in specialty printed cartons for the tobacco industry and the leader in PET bottles in Canada. We are in the top ten companies in flexible plastic packaging in Europe. In Australasia we have a strong market position across a broad range of products and we are number one or number two in every segment. This broad range allows us to offer our customers packaging solutions that are unrivalled in the Australasian marketplace. As part of our vision to concentrate on high growth segments, we recently announced that we will build a glass plant in South Australia, specialising in wine bottle production. The wine industry in Australia has exhibited double digit growth for a number of years, and in view of planned expansion in the wine industry, we anticipate this will be an exciting market to be associated with going forward. The third element to our vision is to be a recognised brand across global markets. Increasingly, our customers will want to deal with global suppliers, and having a strong brand within the industry will be an increasing prerequisite. Underpinning all of these elements will be the need for Amcor to remain at the technological forefront of the industry. In this respect, we are creating centres of excellence within our product and regional groups, to undertake research and development close to our manufacturing facilities and close to our major customers. We are encouraged by our successes to date and by responses from our customers. Review of I would now like to comment on our main activities and results for the year to 30 June The year was one of ongoing improvements with all elements of the business contributing. Year on year comparisons are complicated as the company demerged in April and for the year there were only nine months of earnings from the paper operations. Operating profit of $277 million after tax, was somewhat lower than the overall financial result reported last year. However, profit before interest and tax was up 11% from $385 million to $428 million for the continuing packaging businesses. Importantly, our returns to shareholders improved significantly with our key measure of profit before interest and tax to average funds employed for the group, including the demerged paper operations, increasing from 11.3% to 12.5%. The return on shareholder

6 equity increased from 10.4% to 11.1%. This is the third successive year of improved returns and the company, in terms of cost of capital, is now achieving value creation for our shareholders. Our target for the group is to achieve a return of 15% per annum on profit before interest and tax to average funds employed. The dividend for the year was 38 cents, with franking at 27.5%. Those shareholders that retained their PaperlinX shares received a five cent dividend from that company. Therefore, for continuing shareholders, the combined dividends of Amcor and PaperlinX for the full year totalled 39.7 cents, an increase of 4% over the previous year. The level of franking will continue to be influenced by the growth of taxable profits earned in Australia, which will be enhanced by expansions such as the wine bottle plant, but offset by the extent of profits generated outside Australia. Our fibre packaging business in Australia and New Zealand had a good year with strong growth in corrugated boxes, cartons and packaging paper. Two new corrugators, one in Sydney and one in Melbourne, costing over $120 million, were commissioned during the year and the full benefit from these machines is expected to be realised over the coming years. Amcor Containers Packaging, our Australian and New Zealand metal and plastic packaging business, has undertaken significant rationalisation and restructuring over the past two years and the benefits from these initiatives began to emerge in the second half of the year. Profits are up considerably on the previous corresponding period and we anticipate further improvements from these businesses, which have now substantially reduced their cost base and improved their operating efficiencies. Amcor s three regional businesses in Europe, North America and Asia all had good years. In Europe, the tobacco packaging operations continued to gain the support of major customers and at the same time improved operating efficiencies. We acquired and successfully integrated Smurfit Tobacco Packaging based in Ireland, and since year end we have started up a new plant in Russia and purchased the Swiss based specialist folding carton manufacturer, Poly Laupen. Last year, our plant at Lodz, in Poland was awarded that country s most prestigious business award Best Company in Poland 1999 in the small to medium size companies category. This award illustrates the success of Amcor s decision to expand in the emerging markets of Eastern Europe. In North America, the company had an excellent year. The Canadian operations continued to grow strongly, with the bottled water market again achieving double digit growth. We have a large market share in Canada and invested $40 million to expand capacity to keep up with market demand. Amcor Sunclipse, our packaging manufacturing and distribution operations based in California, has been a consistent performer over an extended period and again improved both sales and earnings. This business is expanding outside California and now operates in 25 locations in 11 States in the US and at three locations in Mexico.

7 4 Chairman s Address 2000 Our Asian business had another very good year. The management was successful in growing profits under difficult circumstances where economic conditions, although improving, are still patchy. During the year we purchased a flexible packaging operation in Southern China which will complement our existing operations in Beijing. Across the group, Amcor is managed in a decentralised manner with a regional focus and strong local management expertise. This approach, which was implemented 2 1 /2 years ago, is a key reason for the solid improvement in profit. Local management is best equipped to handle their own specific issues and develop opportunities to grow their business. We believe this approach will continue to deliver improving returns for shareholders. E-commerce Amcor is at the forefront of e-business development and is committed to capturing new opportunities created by Internet technologies. During the past year, substantial progress has been made in e-business. Reduction of business transaction costs for customers and suppliers, improvements to supply chains and the development of new methods for bringing packaging design services to the market are all e-business opportunities presently being developed by Amcor. In Australia, Amcor is involved with 13 other major Australian based companies in the development of corprocure, an internet based multi-industry procurement exchange. This initiative will allow companies to trade goods and services online, creating transaction efficiencies and cost reductions. Safety Amcor is committed to making sure that no employee of the company is ever injured. Our No Injuries policy applies equally to employees, contractors, customers and visitors. The No Injuries program was launched in February 1997 and prior to the commencement of the program the lost time injury frequency rate was 23, an unacceptably high rate. This ratio measures the number of lost time injuries per million hours worked. Last year the lost time injury frequency rate was 4 which represents a very substantial decrease over the period. We are confident that by focusing upon all incidents, no matter how minor, we will be able to reduce injuries at our sites further and we are committed to our goal of No Injuries. Environment For many years Amcor has been committed to managing its operations in an environmentally responsible manner. Our commitment is supported by vigorous policies, procedures and auditing. The Amcor Environmental Management Manual provides a framework, based upon the international standard ISO 14001, for effective environmental management at all sites. The major manufacturing sites, or higher risk sites, are progressing well with their objective of achieving ISO certification. At present, four sites, three in Europe and one in Australia have obtained certification. One of the key environmental achievements in the past year has been the production of Amcor Australasia s action plan as required by the National Packaging Covenant. This action plan has identified over 70 initiatives that will be undertaken over the next 12 months to

8 meet obligations under the Covenant. These initiatives include specific actions in the areas of product development and research, support for recycling, education and resource utilisation. It should be noted that Amcor remains committed to the recovery and recycling of wastepaper and cardboard. As Australia s original recycling company, we have recycled in excess of 35 million tonnes of wastepaper and cardboard. Last year, the amount of wastepaper we recovered increased by 16% and we expect a further increase this year. Amcor is also continuing its Corridors of Green program. This three-year partnership with Landcare Victoria and Melbourne Water focuses upon replanting indigenous shrubs and trees along Melbourne s waterways. Board and Senior Management Some important changes in Board and senior management occurred during the year. This is the first Annual General Meeting for Dr Keith Barton. We welcome him and look forward to his contribution to the company. During the year, Mr David Meiklejohn retired from Amcor after 15 years as Executive Director and 19 years as Chief Financial Officer. Mr Meiklejohn contributed greatly to the success of the company and we thank him for his valued contribution. The company s corporate governance policies are set out in detail in our annual report. I can, however, report that your Board is working well together and also with management. Our Managing Director, Mr Russell Jones, is in his third year of office and is continuing to do an excellent job in delivering on his commitments to the Board and shareholders to lift Amcor s profitability, performance and growth. I will retire as a Director of Amcor on December 15, as announced in August this year. Mr Chris Roberts will be the new Chairman. Mr Roberts has been a Board member since February He is also Chairman of Ltd and a Director of Telstra Corporation and Petaluma. He is a former Chairman and Managing Director of Arnotts and former Managing Director of Orlando Wyndham Wines. His background and talent are admirably suited to the task of leading Amcor s Board and I am very pleased that Chris has been able to take on the role of Chairman of Amcor. Outlook Amcor has started the year well with profit before interest and tax for the first three months of the year up 7%, for the continuing packaging businesses. Profit before interest and tax for the Australian and New Zealand operations increased by 8%. The food can and flexibles operations continued to improve following major restructuring initiatives in recent years. This continues the strong trend evident in the last six months of the previous year. However, the results for the fibre packaging business were below expectations. While overall volumes were higher than the previous year, the Olympic games reduced demand in September. The recent start-ups of two new corrugators in Sydney and Melbourne affected operating efficiencies for the quarter. The benefits from these new machines will be realised over the balance of the year.

9 6 Chairman s Address 2000 Amcor Europe s profit before interest and tax although down 8%, was in line with expectations. Sales volumes in the European tobacco packaging operations, whilst strong, were less than last year when demand was exceptionally high due to a stock build for Y2K. The flexibles business in Europe continues to manage the impact of raw material price increases with only a modest impact on earnings. Amcor North America s profit before interest and tax was up 3%. Amcor Sunclipse continues to perform well, while Amcor Twinpak was impacted by an unusually cold summer in Canada and the Northeast coast of the United States resulting in lower than expected demand for PET containers for bottled water and carbonated soft drink. Amcor Asia has started the year well with profit before interest and tax up 17% reflecting substantial improvement in the corrugating operations. Kimberly-Clark Australia also contributed to the improved result with earnings for the quarter well ahead of last year. For the overall group, profit before interest and tax to average funds employed for the three months was 12.2% compared to 13.2% for the corresponding period last year. The returns for the quarter were affected by the unusually adverse weather conditions impacting demand for PET bottles in Canada, a return to pre Y2K levels of demand for tobacco packaging in Europe and the start-up of two new corrugators in Australia. Amcor is well placed to address a number of key issues currently facing many Australian companies. The increase in the oil price impacts us via rising raw material prices for plastic resins. Over the past 12 months we have successfully passed these movements onto our customers with only a modest impact on earnings. The nature of most of our contracts gives us confidence that further price movements will also be passed on without significantly impacting profits. The low Australian dollar impacts our profit predominately via the positive effect of the translation of our overseas earnings, particularly our US-based Amcor Sunclipse. We do not take hedging positions, but our overseas debt is naturally hedged against assets and earnings in the same country. Economic conditions, not just in Australia, but globally, are delicately poised with a slowdown in growth possible in a number of countries. However, over 70% of Amcor s sales are into the food, beverage and consumer goods industries, which are relatively resilient during economic slowdowns. Significant progress has been made over the past few years by the current management team and Amcor is well placed to respond to the changing conditions in the marketplace. Your Board believes that Amcor will continue to deliver profit growth and steadily improving returns for shareholders.

10 Concluding Comments In closing, can I say that I regard myself as very fortunate and privileged to have worked on behalf of Amcor s shareholders since I commenced full-time employment some forty years ago. Many people Amcor s employees, our customers, shareholders and suppliers, and many others in the community, have assisted me greatly over the years and I am very much indebted to all of them. In the last decade or so, Amcor has been transformed from a predominantly domestic pulp and paper manufacturer to a worldwide focused leader in the packaging industry. This industry has always been at the cutting edge of change and innovation in industrial and consumer product markets and provides Amcor with the ability to participate in global economic growth and rising standards of living across all countries. Whilst the company in recent years has had to contend with the forces of change which have dramatically increased the competitive pressures in the industry, Amcor has never been better placed in terms of its market and product opportunities, cost competitiveness and, most importantly, its people and management skills. I retire from the company confident about the abilities of the Board and management team, led by Chris Roberts and Russell Jones, to take the company forward for the benefit of Amcor shareholders and all its people. Stan Wallis Chairman

11 8 Chairman s Address 2000 Outcome of Meeting Ordinary Business At the meeting on 20 October 2000, the following items of ordinary business were approved by shareholders: To receive the accounts and the reports of directors and auditors for the year to 30 June To elect directors Elizabeth Anne Alexander, David Charles Keith Allen, Ronald Keith Barton and Tommie Carl-Erik Bergman. That the company approves the acquisition under an employee incentive scheme by the Managing Director and Chief Executive Officer, Mr R H Jones, of: ordinary shares in the capital of the company; and options to subscribe for ordinary shares in the capital of the company, each in accordance with the terms set out in the Explanatory Notes accompanying the Notice of Meeting. That the Constitution of the company be altered as follows: 1. By inserting a new Rule 45.6 immediately after Rule 45.5 as follows: 45.6 For the purposes of Rule 45.5, where a notice of meeting provides for electronic lodgement of proxies, a proxy lodged at the electronic address specified in the notice is taken to have been received at the office and validated by the shareholder if there is compliance with the requirements set out in the notice. 2. By deleting Rule 97 and substituting therefore the following: 97 Approval of Proportional Takeover Bids 97.1 If offers are made under a proportional takeover bid for securities of the company: (a) (b) (c) (d) (e) the registration of a transfer giving effect to a takeover contract resulting from the bid is prohibited unless and until a resolution (an Approving Resolution ) to approve the bid is passed in accordance with this Rule; a person (other than the bidder or an associate of the bidder) who, as at the end of the day on which the first offer under the bid was made, held bid class securities is entitled to vote on an Approving Resolution; a bidder or an associate of the bidder is not entitled to vote on an Approving Resolution; an Approving Resolution is to be voted on at a meeting, convened and conducted by the company, of the persons entitled to vote on the Approving Resolution; and an Approving Resolution that has been voted on in accordance with this Rule is taken to have been passed if the proportion that the number of votes in favour of the resolution bears to the total number of votes on the resolution is greater than one half, and otherwise is taken to have been rejected This Rule 97 ceases to apply on the third anniversary of the later of the date of adoption or last renewal of this Rule.

12 Amcor Limited ABN Victoria Street Abbotsford Victoria 3067 Australia or GPO Box 1643N Melbourne Victoria 3001 Australia Telephone: Facsimile: Website