Local packaging giant, Amcor, is bolstering its footing in the Chinese packaging market while lightening its load in Australia, with the company acquiring the packaging operations of China’s Jiangsu Shenda Group and selling off its Fairfield paper mill in Melbourne.
The Australian-listed packaging company revealed both deals to shareholders on 1 July, saying that the acquisition of the Chinese flexible packaging operations will enable Amcor to become the market leader in flexible packaging in Eastern China.
Ken MacKenzie (picture), Amcor’s managing director and CEO, said the ¥350 million (AU$62.4 million) acquisition reflects the strong growth in China’s packaging market.
“Continued strong growth in consumer spending makes China one of the most attractive markets globally,” said MacKenzie. “Amcor has a strong and successful position in the Chinese flexible packaging market with nine plants, covering all the key regions and sales of over AU$400 million.
“This acquisition establishes Amcor as the market leader in Eastern China, a region that represents approximately 40 per cent of China’s GDP. The business is a strong fit with our existing operations and offers considerable synergy opportunities,” he said.
According to Amcor, the acquired business has sales of approximately ¥440 million ($78.5 million), with expected returns – measured as earnings before interest, tax, depreciation and amortisation (EBITDA) – of over 20 per cent by financial year 2016.
The deal complements Amcor’s existing plant in the Eastern Chinese Jiangsu province, with two new manufacturing sites in the province, with two-thirds of the acquired business’s sales to the pharmaceutical, snacks and culinary markets.
Closer to home, Amcor is selling its Fairfield paper mill property in Melbourne for a consideration of $120 million, with proceeds to be paid over a fur year period. Amcor is receiving a $10 million deposit on exchange of contracts, with the profit on sale is anticipated to be approximately $60 million.
The Fairfield site is being bought by a consortium led by Alpha Partners, and a company associated with Glenvill Group, a Melbourne-based developer.
In February, Amcor said it would cut around 160 jobs with the closure of its Petrie recycled paperboard mill in Queensland, following the facility’s struggle to cover it’s own operational costs amid falling earnings and international competition in the sector.
In its half-yearly financial report, published on 18 February, the packaging giant said it would close the Queensland plant (pictured) by the end of December this year.
Amcor’s Australasia and Packaging Distribution division, which oversees the Petrie plant, recorded a 7.8 per cent drop, recording a profit before interest and tax (PBIT) of $82 million, just a few million shy of the previous year’s result of (AU)$89.8 million for the same period
Amcor’s sales revenue for the six-month period was down slightly by $50.4 million, or 0.8 per cent to just over $6 billion.