Australia's Amcor warns on outlook as shares slide

MELBOURNE - Amcor Ltd, the world's top maker of plastic bottles, reported a 5 per cent rise in nine-month profit today and warned that future profits might fall below target, sending its shares to an 11-month low.

It said volumes had fallen in its Australian and New Zealand business and that it might be difficult to meet its target of 20 per cent profit growth in the two years to June 2006 as economic growth slowed and customers resisted higher prices.

Analysts said the cautious outlook was no surprise in the face of softer economic activity and high oil prices, a key factor for resin used in making plastic packaging.

"It's to be expected. Their share price has been telling you that in recent times," said Shaw Stockbroking analyst Brent Mitchell.

Even so, Amcor's shares fell 4.7 per cent to A$6.51, ($7.07) underperforming the broad market and adding to a 7 per cent fall so far this year.

Amcor, which makes everything from wine bottles to meat packs, said it expected to name a new chief executive by the end of May to replace Russell Jones, sacked last December amid a probe into price fixing in Australia's corrugated box industry.

With uncertainty over the probe and the lack of a new chief, Amcor's stock is trading below its rivals at 10 times forecast 2006 earnings, compared with Bemis at 13.6 and Pepsi Bottling Group Inc. at 14.3.

Amcor does not report third-quarter earnings in dollar terms.

Before the nine-month update, six analysts were on average expecting Amcor to deliver profit growth of around 7 per cent in the year to June to A$413 million.

So far this year, the company has withstood margin pressure better than its rivals as job cuts and plant closures in Europe and North America helped it offset rising materials costs.

Food packaging maker Bemis Co. Inc. reported a 25 per cent fall in its March quarter profit and cut its full-year profit estimate, while Smurfit-Stone Container Corp. warned it would report a loss in the March quarter.

Amcor said it had managed to pass through 90 per cent of higher resin, fibre products and metals prices to customers in its plastic bottles business.

However, it was not as successful in passing through costs in its flexible packaging arm and its US Sunclipse box business.

Amcor warned that, with signs of an economic slowdown continuing into the fourth quarter, annual earnings from the Australasian business, its second-largest division, would be weaker than expected.

Amcor said the Australian and New Zealand competition watchdogs were continuing their probes into collusion in the box industry but it did not know when any action might be launched.

Corrugated boxes made up about 9 per cent of Amcor's revenue and 8 per cent of the group's earnings before interest, tax and amortisation last year.

- REUTERS