FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

 

For the month of August, 2004

 

Amcor Limited

(Translation of registrant’s name into English)

 

679 Victoria Street Abbotsford

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F.ý.  Form 40-F o

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes .ý.  No o

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- 0000869428

 

 

 

For Release: Thursday, August 19, 2004

 

AMCOR POSITIONED TO DELIVER 20% EARNINGS GROWTH
OVER THE NEXT TWO YEARS

 

Amcor announces today that profit after tax and before significant items was up 2% to $387 million.  The final dividend increased from 15 to 16 cents per share, giving a full year dividend of 32 cents per share, up 6.7% on the previous year.

 

The company continues to generate strong operating cash flow, which for the 2003/2004 year, was $891 million.

 

In announcing the result, Amcor’s Managing Director, Russell Jones, said: “Operationally the profit after tax was up around 11% expressed in constant currency terms, however when the impact of translating the overseas earnings back into higher Australian dollars is taken into account earnings were up 2%.

 

“Return on funds invested for the year remained steady at 11.1% which, although above our cost of capital, is not consistent with the improvements targeted.

 

“After nearly six years of reshaping and building the organisation, the next two years will be focused on optimising returns off the existing asset base.  We expect the programs we have in place to assist in growing earnings by around 20% over this period.

 

“As previously announced in April, there will be extensive rationalisation and restructuring undertaken in both the PET and Flexibles operations, as part of the ongoing review of the cost base of all the businesses. This will involve the closure of eight facilities and a combined headcount reduction of 900 people.

 

“The cost of this program is anticipated to be $160 million with benefits of around $65 million per annum. All plant closures and restructuring will be completed over the next six months ensuring that close to 50% of the benefits are achieved this year with the balance in the 2005/2006 year. The cost of this program will be spread over two years with $90 million incurred this year.

 

“Over the past three years there has been considerable progress in the development of new products and innovative packaging solutions.  The ongoing success in this area is a key enabler of building relationships with our major customers and remains a primary driver in improving returns.

 

Amcor Limited ABN 62 000 017 372
679 Victoria Street Abbotsford Victoria 3067  Australia
GPO Box 1643N Melbourne Victoria 3001  Australia
Tel: 61 3 9226 9000  Fax: 61 3 9226 9050
www.amcor.com

 

 

“This is an important period of growth for the company as the benefits are realised from building strong positions in our chosen markets. The strategy of being an industry consolidator focusing on specific sectors has delivered businesses with the size and strength in their respective markets to leverage scale, technology and customer relationships to further improve earnings and returns.

 

“Having built these market leading positions, it is no longer a strategic imperative to add further scale and for the next two years no large acquisitions will be contemplated.

 

“To ensure that profit growth is reflected in earnings per share growth and increased dividends, going forward, all shares issued, either via the Dividend Reinvestment Plan or Employee Share Option Schemes will be delivered from on market purchases. It is also planned that dividends will increase in line with earnings.

 

“The vision has been, and remains, to build a company that is focussed on the growth segments within the more defensive food and beverage packaging markets that can deliver strong cash flows, consistent earnings growth and superior returns.

 

“After six years of considerable change and development that have delivered earnings growth and improving returns, the company is well placed to build on this position.”

 

ENDS

 

For further information please contact:

 

Russell Jones	John Murray
Managing Director & CEO	Executive General Manager, Corporate Affairs
Amcor Limited	Amcor Limited
Ph: +61 3 9226 9001	Ph: +61 3 9226 9005

 

		$ million		EPS Cents per share
Operating profit after tax		387.4		44.7
Interest on PACRS (1)		53.0
Statutory profit before significant items		440.3		44.7
Significant items (2)		(94.6	)
Statutory profit after significant items		345.7		33.8

 

(1)          The interest payment on the Perpetual Convertible Reset Securities (PACRS) is treated as an equity distribution for statutory profit; however, for market analysis purposes, Amcor elects to treat it as an interest expense and hence reduce the reported operating profit by $53.0 million.  The EPS remains unchanged, as under the accounting standards, even though it is required to be treated as an equity distribution in the reported profit, it is required to be treated as interest in the EPS calculation.

 

(2)          The significant items relate to the PET business restructuring, the Flexibles market sector rationalisation and writedowns of residual Canadian business assets.

 

2

 

 

For Release: 19^th August, 2004

 

RESULTS FOR 12 MONTHS ENDED June 2004

 

A$m		2003		2004
Sales		10,710		10,406		-2.8	%
PBITA		860.4		831.1		-3.4	%
PAT – pre goodwill amortisation (1)		517.9		515.0		-0.6	%
PAT – post goodwill amortisation (1)		379.1		387.4		+2.2	%
Significant items (2)		(70.1	)	(94.6	)
PAT after significant items		309.0		292.8		-5.2	%
EPS-pre goodwill (3)		61.7		59.4		-3.7	%
EPS-post goodwill (3)		45.3		44.7		-1.3	%
Cash flow from operations		944.8		890.9		-5.7	%
Dividend (cents)		30.0		32.0		+6.7	%

 

(1)          Calculated after deducting the coupon payment of $53.0 million ($52.3 million last year) for the Perpetual Amcor Convertible Reset Securities (PACRS).

(2)          The significant items relate to the PET business restructuring, the Flexibles market sector rationalisation and writedowns of residual Canadian business assets.

(3)          EPS calculated after deducting the PACRS coupon from profit after tax and before significant items.

 

Key Ratios

 

		2003		2004
PBITA/Ave Funds Inv. (%)		11.1		11.1
Return on Ave Equity (%)		9.8		9.4
Net Debt/(Net Debt + Equity) (%)(1)		33		36
Net PBITA interest cover (times)(2)		4.2		4.5
NTA per share (A$)		2.68		2.52

 

(1)          Convertible notes treated as debt.

(2)          All hybrids treated as debt.

 

HIGHLIGHTS (1)

 

•             Profit after tax and pre significant items up 2.2% from $379.1 million to $387.4 million.

 

•             Earnings per share down 1.3% from 45.3 cents to 44.7 cents.

 

•             Earnings per share pre goodwill amortisation down 3.7% from 61.7 cents to 59.4 cents.

 

•             The full year profit after tax and significant items of $387.4 million was adversely impacted by $34 million due to the translation, for reporting purposes, of overseas earnings into Australian dollars.

 

•             Returns for Amcor remain above its weighted average cost of capital of 8.9% with PBITA/Average Funds Invested of 11.1%.

 

•             Strong operating cash flow of $891 million for the 12 months to June 2004.

 

•             Continued improvement in Australasia with returns increasing to 17.3%.

 

•             Strong growth in the high value add custom PET business of 22%.

 

•             Successful integration of the Rexam Healthcare acquisition.

 

•             Strong performance in Amcor Rentsch and Closures with earnings up 20.8% and returns increasing from 8.2% to 13.9%.

 

•             Good final quarter of the year at Amcor Sunclipse with improving economic conditions delivering improved earnings.

 

•             Continued strong growth from the China tobacco operations.

 

(1)     All figures are after the payment of PACRS interest and before significant items.

 

EARNINGS PER SHARE

 

Post Goodwill Amortisation		Pre Goodwill Amortisation
	Compound earnings growth over the past four years of 6.6%		Compound earnings growth over the past four years of 10.3%

 

For further information please contact:
Russell Joness		John Murray
Managing Director		Executive GM Corporate Affairs
Amcor Limited		Amcor Limited
Phone: 61 3 9226 9001		Phone: 61 3 9226 9005
	Amcor Limited ABN 62 000 017 372
	679 Victoria Street Abbotsford Victoria 3067 Australia
	GPO Box 1643N Melbourne Victoria 3001 Australia
	Telephone: 61 3 9226 9000 Facsimile: 61 3 9226 9050
	www.amcor.com

 

3

 

 

Consolidated  Statement of  Profit

 

A$m		2003		2004
Net sales		10,709.9		10,405.9
Profit from trading		1,328.8		1,286.2
• Dep’n & amort.		(607.2	)	(582.7	)
Profit before interest & tax		721.6		703.5
• Net interest (ex PACRS)		(146.3	)	(132.2	)
• PACRS interest		(52.3	)	(53.0	)
Profit before tax		523.0		518.3
• Income tax		(127.1	)	(116.5	)
• Minority interests		(16.8	)	(14.4	)
Profit after tax before Significant items		379.1		387.4

 

Consolidated Cash Flow Statement

 

A$m		2003		2004
Profit after tax		379.1		387.4
• Dep’n & amort.		607.2		582.7
• Change in provisions and other items		(41.5	)	(79.2	)
Cash Flow from Operations before significant items		944.8		890.9
Significant items		(32.6	)	(28.5	)
Net Capital Expenditure		832.2		507.0
Increase / (Decrease) in working Capital		89.8		(116.7	)

 

Consolidated Balance Sheet

 

A$m		2003		2004
Current Assets		2,950		3,052
Property, Plant & Equipment		4,296		4,745
Intangibles		1,957		2,063
Investments & Other Assets		359		426
Total Assets		9,562		10,286
Short-term debt		1,009		728
Long-term debt		1,004		1,776
Creditors & Provisions		2,467		2,742
Convertible Notes		446		332
Shareholder’s Equity (incl PACRS)		4,636		4,708
Total Liabilities & Shareholders’ Equity		9,562		10,286

 

Final Dividend

 

Directors have declared a final dividend of 16 cents per share, 40% franked at 30 cents in the dollar. The total dividend for the year is 32 cents compared with a total dividend of 30 cents last year. The record date for the final dividend is 9 September 2004 and will be paid to shareholders on 29 September 2004.

 

The Dividend Reinvestment Plan (DRP) remains in operation with a zero discount. The issue price of DRP shares will be determined from the arithmetic average of the daily weighted average market price for the nine business days September 13 to 23, 2004 inclusive.

 

Accounting Principles

 

The financial statements are based on the audited accounts of Amcor Limited and its controlled entities and have been prepared according to Australian Generally Accepted Accounting Principles.

 

In line with Australian GAAP, the Perpetual Amcor Convertible Reset Securities (PACRS) are treated as equity with distribution payments treated as an appropriation of profit. The amount of PACRS expensed for the year ended 30 June 2004 was $53.0 million compared with $52.3 million for the previous year.

 

Significant Items

 

Significant items after tax for the year ended 30 June 2004 total $94.6 million loss compared with $70.1 million loss last year.

 

Significant items for 2003/04 relate to PET business restructuring ($19.9 million), Flexibles market sector rationalisation ($66.9 million) and the write down of residual assets of the former Amcor Twinpak group ($7.8 million).

 

All significant items in 2002/03 related to restructuring and associated costs arising from the acquisition of Schmalbach-Lubeca’s PET and Closures operations.

 

Segmental Analysis

 

		2003										2004
		Sales		PBITA		Goodwill		PBIT		ROAFI		Sales		PBITA		Goodwill		PBIT		ROAFI
		($m)		($m)		($m)		($m)		(%)		($m)		($m)		($m)		($m)		(%)
Amcor Australasia		2,455.7		282.8		(15.7	)	267.1		15.6		2,537.9		316.5		(15.9	)	300.6		17.3
Amcor PET Packaging		3,236.2		301.6		(81.0	)	220.6		10.2		3,205.2		268.2		(68.3	)	199.9		10.0
Amcor Flexibles		2,170.3		132.6		(12.5	)	120.1		10.9		2,241.0		131.2		(17.7	)	113.5		9.6
Amcor Sunclipse		1,299.0		84.8		(16.3	)	68.5		15.0		1,158.1		57.6		(13.7	)	43.9		12.6
Amcor Rentsch & Closures		1,310.6		83.3		(12.5	)	70.8		8.2		1,012.3		100.6		(11.1	)	89.5		13.9
Amcor Asia		263.4		32.1		(0.6	)	31.5		11.0		249.5		30.5		(0.9	)	29.6		13.2
Divisional Total		10,735.2		917.2		(138.6	)	778.6				10,404.0		904.6		(127.6	)	777.0
Investments / Other				(56.8	)	(0.2	)	(57.0	)					(73.5	)	—		(73.5	)
Intersegmentals		(25.3	)									1.9
TOTAL		10,709.9		860.4		(138.8	)	721.6		11.1		10,405.9		831.1		(127.6	)	703.5		11.1

 

4

 

 

 

Amcor Australasia had another strong year with PBITA up 11.9% to $316.5 million and sales increasing by 3% to $2,538 million.  Continued sound asset management combined with the profit improvement resulted in the return on average funds invested increasing to 17.3% from 15.6% in 2003.

 

The improvement in earnings resulted from solid growth in glass, restructuring initiatives in fibre packaging, folding cartons and food can as well as cost reduction initiatives.  The one-off costs of restructuring throughout the year were offset by profit on the sale of properties.  The strengthening A$ had a directly unfavourable profit impact year on year of approximately $7 million, affecting export margins, particularly in Paper and Flexibles

 

In the fibre packaging segment, corrugated box volumes were down slightly in Australia and up 5% in New Zealand.  Amcor’s customers in the dairy, fruit and produce markets have been adversely affected by the drought in Australia, but this was partly offset by stronger demand in the meat segment in both Australia and New Zealand.  The business achieved sound earnings growth and improved returns.

 

The recycled paper mills experienced a difficult year with lower demand from the Australian fibre box business, lower pulp sales and the adverse impact of the strengthening Australian dollar on export pricing and therefore margins.  The mills continue to operate efficiently while both the functional coatings and recycling businesses produced sound results.  Overall earnings were down on last year.

 

The folding carton converting business experienced an improvement in earnings due to the restructuring of operations on the east coast of Australia resulting in a lower cost base and increased efficiencies. The significant upgrade of the Petrie Mill to improve board quality and create an opportunity for replacement of imported whiteboards was well executed and underpins earnings growth for the future.  Low margin export volumes were down which was in line with expectations due to the mill shutdown for the upgrade.  The Sacks business experienced a difficult year with the drought conditions in Australia severely impacting dairy volumes together with an extremely competitive market.  Restructuring of this business has commenced with benefits to flow in 2004/2005.

 

In metal packaging, the beverage can business had a sound year with volumes up 4% on last year, mainly in the soft and mixer drink segments.  The introduction of the new low cost 202 Superend was a success with all sites converted during the year.

 

The food can business continued to improve earnings despite flat volumes with full year benefits from the Dandenong plant closure establishing a lower cost base.

 

The aerosol can business experienced good growth in sales, in particular in aluminium cans, while the relocation of the steel can plant in NSW was completed on schedule in June, lowering the cost base for 2004/2005.

 

In plastics, the flexibles business experienced volumes slightly above last year while the strengthening Australian dollar meant that export margins deteriorated and pressure increased from commodity imports at lower margins.  During the year the rationalisation to one site in NSW was announced.  The acquisition of the Flexoprint business in New Zealand made a positive contribution. Polyethylene resin supply was affected by the ‘Moomba’ fire and necessitated importing resin and this had an unfavourable impact upon productivity.  Earnings were slightly up on last year while recent capital investment in extrusion and printing and product development initiatives, position the business well for future growth.

 

The PET business continues to experience an extremely competitive market with volume growth behind expectations.  The closures operation absorbed the acquisition of the ACI metal twist business and despite experiencing price pressures, managed to improve earnings through sales growth and productivity gains.

 

The glass wine bottle operation again exceeded expectations and is operating at full capacity.  Productivity was above forecast levels, as were sales volume with most major customers experiencing buoyant export markets.  The second furnace is on schedule for start up in January and, with strong customer support underpinning planned output, the investment will further lower a very competitive cost base.

 

Sales by Product Group

 

A$m		2003		2004
Fibre		1,077		1,096
Cartons		292		286
Flexibles / Plastic		426		433
Metals		535		563
Other		126		160
Total		2,456		2,538

 

5

 

 

		2003		2004		2003		2004
		A$		A$		US$		US$
Net Sales (mill)		3,236		3,205		1,897		2,275
Change (%)				(1.0	)			19.9
PBITA (mill)		314.6	*	268.2		184.4		190.3
Change (%)				(14.7	)			3.1
Operating Margin (%)		9.7		8.4		9.7		8.4
Average funds invested (mill)		2,962		2,678		1,747		1,901
PBITA/AFI (%)		10.6		10.0		10.6		10.0
Average exchange rate $A/US		0.59		0.71

 

*            The segmental PBITA is A$301.6 million.  The difference is a A$13 million, asset writedown in the business, mostly in Latin America.  The underlying operating result is A$314.6 million and it is this PBITA that is the most appropriate to look at when considering margins and returns.

 

Amcor PET Packaging had a mixed year with PBITA earnings in US dollars up 3.1% to US$190.3 million and return on average funds invested at 10.0%.

 

The business in Europe and Latin America had a strong year with earnings well up on last year, however this was partially offset by challenging conditions in North America.

 

Unit volumes grew by 17% to 32.4 billion of which just under 5% was due to acquisitions.  Strong volume growth was achieved in all three regions.  The custom segment, including higher margin custom containers and multilayer preforms, grew by over 22%.

 

The North American business, including Canada, experienced volume growth ahead of the market at 13.6%.  This growth came primarily from the continued strength of the bottled water and custom markets, the latter was up by 17% and driven by strong growth in the single serve juice and sports drinks categories.  Further growth is expected in the custom business from new contracts signed for the food and juice markets.

 

PBITA in North America was down 13%.  The higher Canadian dollar against the US dollar meant that Canadian prices were lower and in the US there was strong pricing pressure from the large customers.

 

In response, the business has undergone a complete review of its operations and implemented a number of cost saving initiatives.  The Canadian business, which was previously run as a separate division, has now been incorporated into the US operations, which will now be run as a single North American business.  This together with an examination of the SG&A expenses will reduce the North American headcount by around 100 people.

 

Two smaller facilities in the north east of the US have been closed and reductions in injection moulding at the Calgary plant are being implemented. The closures of two additional plants, one in the north east and one in the west, were recently announced.  There is an ongoing review of the manufacturing footprint on the west coast.

 

In conjunction with this rationalisation and restructuring program, the business has begun a review of pricing in the CSD/water segment.  In many cases prices are delivering unacceptable returns on the assets employed.  Until pricing returns to more reasonable levels, it is difficult to justify further investment in CSD/water segment and recognition of this will be the guiding principle as contracts are renewed.  The redeployment of assets from this market segment may also continue.

 

In Latin America volume growth, excluding the impact of acquisitions was 7.7%.  With the acquisitions of Alcoa and Arca volume growth was 45%. Custom volumes continued to deliver strong growth and were up 36%.

 

PBITA for Latin America was up 25%.  Strong performances in Argentina and Venezuela helped offset shortfalls in Brazil which remains an area of focus as market over-capacity and general economic conditions remain challenging.

 

For Mexico, the integration of the Arca acquisition proved more complex than originally anticipated.  However, the synergy benefits anticipated from the acquisition will be realised in the 2004/05 fiscal year.  All other countries in the region experienced increased volumes and earnings, with the small start-up operations in Central America and Ecuador fully meeting first year expectations.

 

The European operations had an excellent year with volumes up 9% and earnings up 42% in US dollar terms and up 20% in local currency terms.

 

The businesses in the UK, Spain and France all produced significant improvements in both volumes and earnings, helped by good summer weather in Europe.

 

The German operations benefited from strong growth in the refillable CSD container market with volumes up 75%.  It is anticipated that this higher volume level can be maintained in the current year.  While the environmental and recycling situation remain complex, the PET operation in Germany remains capable of providing whichever package – one-way or refillable – that the market requires.

 

The multilayer PET beer bottle continues to gain market acceptance with volumes increasing to around 120 million in the 2004 year.  The growth in the beer market was a significant contributor to the 11% growth achieved in the higher value-add segments, which includes custom containers and multilayer preforms.

 

The recycling plant continues to deliver ongoing improvements in terms of both volume and costs and is now making acceptable returns on the invested capital.

 

Capital expenditures, not including the two acquisitions in Latin America, were significantly less than the prior year and well under depreciation for the year.  Capital was invested primarily in strengthening the push into higher margin, custom markets, including juices, food and personal care products.

 

For the business as a whole, significant items relating to restructuring, plant closures, organisational changes and overhead reductions are expected to be around US$40 million, delivering benefits close to US$20 million per annum.  A key part of delivering these benefits is headcount reduction of around 250 people.  The amount booked in the 2003/2004 year as a significant item was US$14.1 million.

 

6

 

 

		2003		2004		2003		2004
		A$		A$		€		€
Net Sales (mill)		2,170		2,241		1,214		1,336
Change (%)				(3.3	)			10.0
PBITA (mill)		132.6		131.2		74.2		78.2
Change (%)				(1.0	)			5.4
Operating Margin (%)		6.1		5.9		6.1		5.9
Average funds invested (mill)		1,216		1,373		679		819
PBITA/AFI (%)		10.9		9.6		10.9		9.6
Average exchange rate $A/€		0.56		0.60

 

Amcor Flexibles achieved a 5% increase in PBITA in local currency terms to €78.2m and a 10% increase in sales.  Return on average funds invested was down from 10.9% to 9.6%.

 

The result for the 2003/2004 year was below expectations due to a decline in sales in the Processed Foods sector, operational underperformance at some plants, poor economic conditions across much of Europe and a strong Euro which impacted margins on export sales.

 

The poor result from the underperforming plants reduced earnings by around €18 million compared to 2002/2003 while the stronger Euro negatively impacted earnings by around €6 million.

 

In Europe, Amcor Flexibles is organised into three market sectors - Fresh Food (meat, cheese, dairy, produce, bakery), Healthcare (medical, pharmaceutical, personal care) and Processed Foods (confectionery, snacks, biscuits, coffee, pet food and tobacco).

 

The Fresh Food market sector, consisting of 11 plants performed well and benefited from increased demand from consumers for healthier food options, particularly in fresh produce, chilled foods and dairy products in the UK and Southern Europe.  The PBITA result for this division was a substantial improvement over last year.

 

The Healthcare business, with operations in Europe and the Americas had a strong year with good volume and profit growth.  In October 2003 the Rexam Healthcare Flexibles business was acquired which substantially strengthened Amcor’s position in the healthcare packaging market.  The results for the first eight months of trading from this acquisition were above expectations.  The integration is now complete and the business is on target to achieve the synergy benefits and returns as stated at the time of acquisition.

 

The Processed Foods sector had a difficult year both in terms of market conditions in certain market segments and in operational performance at a number of plants.

 

Sales were down around 7% primarily concentrated in the confectionery and snack food areas where market conditions have been soft.  In addition, overall volumes for the sector were impacted by economic conditions in Europe including a trend to more generic packaging as retail house brands gained market share.  Volumes have showed some signs of modest improvement recently although still at a lower level than 12 months ago.

 

In operational terms, seven out of the 19 plants in this sector had results significantly worse than last year due to a combination of market and operational performance leading to a Processed Foods sector result which was down by €15 million.

 

As a result, plans have been announced, and are being implemented, to restructure a number of plants, close the plant at Envi in The Netherlands and significantly reduce overheads.  This will lead to a substantial improvement in profitability in the 2004/2005 year.

 

As part of a longer-term plan to follow our customers and manufacture more flexible packaging for the processed food markets in the lower cost regions, a new €25 million flexibles plant in Novgorod, Russia has been announced.

 

The above restructuring, together with a business-wide review of both operations and overheads has enabled the business to identify additional costs savings.  In total the business is targeting cost savings of close to €30 million  per annum, a substantial portion of which will be obtained via a headcount reduction of 640 people.  The cost of this restructuring is approximately €60 million of which €41.3 million was taken up in the 2003/2004 year.

 

The forecast is for an improvement in European economic activity although as yet signs of improved demand for flexible packaging are modest.  In addition, oil prices have risen leading to higher input costs for resin and film suppliers as well as higher energy costs.  Whilst there is evidence of higher resin prices, Amcor Flexibles is committed to recovering all cost increases as they are incurred.

 

7

 

 

		2003		2004		2003		2004
		A$		A$		US$		US$
Net Sales (mill)		1,299		1,158		761		822
Change (%)				(17.4	)			8.0
PBITA (mill)		84.8		57.6		49.7		40.9
Change (%)				(35.4	)			(17.7	)
Operating Margin (%)		6.5		5.0		6.5		5.0
Average funds invested (mill)		567		456		333		323
PBITA/AFI (%)		15.0		12.6		15.0		12.6
Average exchange rate $A/US		0.59		0.71

 

Reflecting adverse economic conditions, Amcor Sunclipse experienced a difficult year with PBITA earnings in US dollars down 17.7% to US$40.9.

 

Volume growth was solid resulting in 8% sales growth, however substantial pricing pressure through the year meant that margins were reduced and the return on average funds invested was lower at 12.6%.

 

The second half result was negatively impacted by asset writedowns of around US$1 million and an increase in medical benefit costs of around US$2 million compared to the second half last year.

 

The business is divided into manufacturing and distribution.  Distribution concentrates on packaging, flexible packaging, packaging equipment as well as industrial and janitorial supplies.  Manufacturing produces corrugated sheets and is a box converter.  The businesses support a large customer base of small to medium sized manufacturing, assembly and distribution companies.  Amcor Sunclipse also has a number of top-tier manufacturing customers.

 

Manufacturing is concentrated in California which has been negatively impacted by overcapacity, pricing pressures and loss of business to Asia and Mexico.  Amcor Sunclipse consolidated one of its small Southern Californian box plants in late 2003.  For the year the business was able to hold volumes, but at lower margins.  With the economy expected to continue to recover, margins should improve in the 2004 -2005 year.

 

For the first time in more than 18 months, the corrugated paper companies implemented price increases, first in March for US$50 per tonne then again in June also for US$50 per tonne.  The latter increase is currently being passed through to the market through increases in both sheets and boxes.  These increases should have a positive effect on manufacturing earnings in an improving economy.

 

Distribution consists of 35 operations across 14 states in the US and four in Mexico.  A more complete full line selling approach improved sales by 7.6% to help offset the decline in margin and ensure a steady result for the year.

 

The first nine months of the year was characterised by inconsistent activity from month to month, however in the last three months an improving trend emerged and this has continued into July and early August.

 

Overall the business remains very well placed to benefit from the improving economic conditions.  The focus has been and will remain on reducing the cost base to ensure that improving sales are reflected in higher returns.

 

 

8

 

 

		2003		2004		2003		2004
		A$		A$		€		€
Net Sales (mill)		1,311		1,012		734		604
Change (%)				(22.8	)			(17.7	)
PBITA (mill)		83.3		100.6		46.6		60.0
Change (%)				20.8				28.7
Operating Margin (%)		6.3		9.9		6.3		9.9
Average funds invested (mill)		1,020		722		571		431
PBITA/AFI (%)		8.2		13.9		8.2		13.9
Average exchange rate $A/€		0.56		0.60

 

Amcor Rentsch

Amcor Rentsch, which produces folding cartons principally for the tobacco industry had another good year with sales up 6% to €325 million and PBITA up strongly.

 

In Russia, demand remains strong and the fourth line installed in the first half is now fully loaded.  A fifth machine is currently being installed and has a planned start-up of December this year.  The plant in Russia, which was first commissioned in 2000 will be the largest tobacco packaging plant in Europe after the completion of the fifth line and will supply product to all the major cigarette producers.

 

The ongoing growth in the Iberian region has meant a second line will be installed in Portugal and this will commence operation this month.

 

During the year the plant in Dublin was closed as customers continue to move production from the UK and Ireland to the growth regions of Asia.  The assets from the plant in Dublin have been relocated to Russia and Portugal.

 

Going forward the tobacco market complexity continues to increase as new health warnings are progressively introduced across Europe.  This is necessitating a move to 10 colour gravure printers and Amcor Rentsch’s present machines, which range from six to nine colour, will be upgraded over the next two to three years.

 

Amcor Closures

The Closures business, consisting of 11 metal and plastic closure plants in 11 countries and the Bericap joint venture, had a satisfactory year with volumes and earnings on a comparable basis ahead of last year.  Last year’s sales and earnings included the 65% owned North American plastic and metal closures operations that were sold in January 2003 to the joint venture partner Silgan Holdings.

 

In Europe the business undertook a number of significant projects that will help underpin earnings going forward.  These projects included the relocation of the plant in Turkey to new premises, the start-up of the new plastic closures plant in Poland and the commissioning of three new, in-house designed, manufacturing lines in Germany which set a new industry benchmark in productivity and output.

 

The new composite metal and plastic closure plant in Manilla experienced delays in commissioning, which resulted in higher costs and lower than anticipated sales volumes.

 

The Bericap joint venture had a good year and notwithstanding the higher Canadian dollar, achieved strong operational performance in the Canadian operations.  The new plant in California is performing well in its second year of operations and is now profitable.

 

The outlook for the current year is for improved earnings as the benefits from these new projects are realised.

 

Sales breakdown

 

€ Million		2003		2004
Amcor Rentsch		307		325
Amcor Closures		427		279
Total		734		604

 

9

 

 

		2003		2004		2003		2004
		A$		A$		Sing$		Sing$
Net Sales (mill)		263		250		271		304
Change (%)				(4.9	)			12.2
PBITA (mill)		32.1		30.5		33.0		37.2
Change (%)				(5.0	)			12.7
Operating Margin (%)		12.2		12.2		12.2		12.2
Average funds invested (mill)		291		232		299		282
PBITA/AFI (%)		11.0		13.2		11.0		13.2
Average exchange rate $A/Sing		1.03		1.22

 

Amcor Asia had a solid year with earnings up 12.7% in Singapore dollars to S$37.2 on a sales increase of 12.2% to S$304.1 million.  Return on funds invested improved from 11.0% to 13.2%.

 

The second half result of S$20.0 million was up 55% on the same period last year which was severely impacted by the SARS epidemic in the region.

 

The tobacco packaging business had a strong year with earnings and volumes up substantially.  The two plants in China continue to deliver good returns and there are further growth opportunites in that country.  Both the Malaysian and Singaporean operations achieved improved earnings and returns.

 

The corrguated business had a difficult year with overcapacity, aggressive pricing and paperboard price increases all impacting earnings.  In particular, the three plants in Malaysia had disappointing results and plans have been implemented to improve earnings.

 

The flexibles operations, which consists of two plants in China and the recently acquired Rexam Healthcare plant in Singapore, had a solid year with improvements in both earnings and returns.

 

The outlook for Asia is positive with improving global economic conditions assisting growth in the region.  It is anticipated this improvement will help deliver higher earnings and returns in the current year.

 

 

Sales by Product Group

 

Sing$m		2003		2004
Corrugated		123		127
Tobacco packaging		112		125
Flexibles and others		36		52
Total		271		304

 

10

 

Attachment G

CEO & CFO CERTIFICATION

 

ASXCG Principle 4 and Principle 7

 

Statement to the Board of Directors of Amcor Limited

 

The Chief Executive Officer and Executive General Manager Finance state that:

 

(a)          With regard to the integrity of the financial statements of Amcor Limited for the financial year, being the year ended 30 June 2004, that having made appropriate enquiries, in our opinion:

 

(i)             the financial records of the Company and of the entities whose financial statements are required to be included in its consolidated financial statements (the Consolidated Entity) for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; and

 

(ii)          the financial reports of the Company and of the Consolidated Entity, being the financial statements and notes, present a true and fair view of the financial position and performance of the Company and of the Consolidated Entity in accordance with section 267 of the Corporations Act 2001 and comply with relevant accounting standards

 

(b)         With regard to the risk management and internal compliance and control systems of the Consolidated Entity in operation as at 30 June 2004, that having made appropriate enquiries, within the context described in (c) below, to the best of our knowledge and belief:

 

(i)             the statements made in (a)(ii) above regarding the financial reports are founded on sound risk management and internal compliance and control systems which in all material aspects, implement the policies which have been adopted by the Board of Directors of the Company either directly or through delegation to senior executives; and

 

(ii)          the risk management and internal compliance and control systems adopted by the Company are operating effectively and efficiently, in all material respects.

 

(c)          The statements made in (b) above regarding the risk management and internal compliance and control systems of the Consolidated Entity in operation as at 30 June 2004 are made within the following context:

 

(i)             these statements provide a reasonable, but not absolute, level of assurance;

 

(ii)          the risk management and internal compliance and control systems of the Consolidated Entity were still in development during the year to 30 June 2004 and the design, operation and testing of controls has been assessed primarily through the use of declarations by process owners who are responsible for the operation of those controls. This assessment will be enhanced in the future as the risk management and internal compliance and control systems are further developed; and

 

(iii)       while a number of control deficiencies were identified during the year, in all such cases additional tests of procedures or tests of applicable account balances included in the financial statements have confirmed that there has been no material impact on the financial statements.

 

R H Jones	W P Day
Chief Executive Officer	Executive General Manager Finance
19-Aug-04	19-Aug-04

 

 

WPD		RHJ		CIR		KPMG

 

11

 

FINANCIAL REPORT

 

OF

 

A M C O R  L I M I T E D

(ABN 62 000 017 372)

 

AS AT 30 JUNE 2004

 

12

 

STATEMENTS OF FINANCIAL PERFORMANCE

 

				CONSOLIDATED				AMCOR LIMITED
For the year ended 30 June		Note		2004		2003		2004		2003
				$m		$m		$m		$m
Revenues from sale of goods		2		10,405.9		10,709.9		—		—
Other revenues from ordinary activities		2		175.0		248.1		406.8		382.2
Total revenue from ordinary activities		2		10,580.9		10,958.0		406.8		382.2
Expenses from ordinary activities excluding borrowing costs		33		(9,964.0	)	(10,313.1	)	(95.9	)	69.3
Borrowing costs		1(3),3		(145.4	)	(156.3	)	(179.8	)	(176.0	)
PROFIT FROM ORDINARY ACTIVITIES BEFORE RELATED INCOME TAX EXPENSE				471.5		488.6		131.1		275.5
Income tax (expense) / benefit relating to ordinary activities		5		(111.3	)	(110.5	)	46.9		(125.2	)
PROFIT FROM ORDINARY ACTIVITIES AFTER RELATED INCOME TAX EXPENSE				360.2		378.1		178.0		150.3
Net profit attributable to outside equity interests				(14.5	)	(16.8	)	—		—
NET PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY		24		345.7		361.3		178.0		150.3
NON-OWNER TRANSACTION CHANGES IN EQUITY
Net increase/(decrease) in retained profits on the intitial adoption of:		24
Revised AASB 1028 ‘Employee Benefits’				—		(1.5	)	—		—
AASB 1044 ‘Provisions, Contingent Liabilities and Contingent Assets’				—		101.5		—		115.2
Net exchange difference relating to self-sustaining foreign operations		23		(65.4	)	(285.6	)	—		—
Total revenues, expenses and valuation adjustments attributable to members of the parent entity recognised directly in equity				(65.4	)	(185.6	)	—		115.2
TOTAL CHANGES IN EQUITY FROM NON-OWNER RELATED TRANSACTIONS ATTRIBUTABLE TO THE MEMBERS OF THE PARENT ENTITY		26		280.3		175.7		178.0		265.5
NET OPERATING PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY:
• Before significant items				440.3		431.4		178.0		150.3
• After significant items		4		345.7		361.3		178.0		150.3

 

				cents		cents
EARNINGS PER SHARE
Basic earnings per share		38		33.8		37.0
Diluted earnings per share		38		33.7		36.7

 

The Statements of Financial Performance are to be read in conjunction with the notes to the financial statements set out on pages 7 to 70.

 

13

 

STATEMENTS OF FINANCIAL POSITION

 

				CONSOLIDATED				AMCOR LIMITED
As at 30 June		Note		2004		2003		2004		2003
				$m		$m		$m		$m
CURRENT ASSETS
Cash assets		6		131.0		141.5		7.5		6.5
Receivables		7		1,551.4		1,525.0		8,103.3		5,950.8
Inventories		8		1,369.6		1,284.0		—		—
TOTAL CURRENT ASSETS				3,052.0		2,950.5		8,110.8		5,957.3
NON-CURRENT ASSETS
Receivables		9		81.8		61.1		41.8		34.9
Other financial assets		10		12.9		21.5		3,647.9		3,558.3
Property, plant and equipment		11		4,745.0		4,295.6		5.6		1.7
Intangibles		12		2,062.7		1,956.9		5.0		—
Deferred tax assets		13		238.8		199.4		100.0		96.9
Other		14		93.2		77.3		13.4		8.3
TOTAL NON-CURRENT ASSETS				7,234.4		6,611.8		3,813.7		3,700.1
TOTAL ASSETS				10,286.4		9,562.3		11,924.5		9,657.4
CURRENT LIABILITIES
Payables		15		1,831.1		1,646.0		35.1		27.9
Interest-bearing liabilities		16		728.5		1,009.4		4,846.6		3,307.1
Current tax liabilities		17		77.4		74.1		23.6		42.7
Provisions		18		339.7		296.2		2.9		2.4
TOTAL CURRENT LIABILITIES				2,976.7		3,025.7		4,908.2		3,380.1
NON-CURRENT LIABILITIES
Payables		19		13.2		0.1		—		—
Interest-bearing liabilities		20		1,776.2		1,003.6		1,463.8		748.9
Deferred tax liabilities				388.5		345.5		169.2		159.3
Provisions		18		91.9		105.4		4.5		3.7
Undated subordinated convertible securities		21		332.3		446.2		332.3		446.2
TOTAL NON-CURRENT LIABILITIES				2,602.1		1,900.8		1,969.8		1,358.1
TOTAL LIABILITIES				5,578.8		4,926.5		6,878.0		4,738.2
NET ASSETS				4,707.6		4,635.8		5,046.5		4,919.2
EQUITY
Contributed equity		22		3,351.9		3,135.3		2,755.3		2,538.7
Reserves		23		(349.2	)	(210.8	)	40.9		40.9
Retained profits		24		1,614.3		1,515.3		2,250.3		2,339.6
Equity attributable to members of the parent entity				4,617.0		4,439.8		5,046.5		4,919.2
Outside equity interests in controlled entities		25		90.6		196.0		—		—
TOTAL EQUITY		26		4,707.6		4,635.8		5,046.5		4,919.2

 

The Statements of Financial Position are to be read in conjunction with the notes to the financial statements set out on pages 7 to 70.

 

14

 

STATEMENTS OF CASH FLOWS

 

				CONSOLIDATED				AMCOR LIMITED
For the year ended 30 June		Note		2004		2003		2004		2003
				$m		$m		$m		$m
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers				10,453.7		10,514.4		—		—
Payments to suppliers and employees				(9,222.8	)	(9,471.4	)	(64.8	)	(56.0	)
Dividends received				0.6		1.0		37.3		0.3
Interest received				14.7		9.6		350.2		315.2
Borrowing costs paid				(165.6	)	(155.6	)	(183.4	)	(175.8	)
Income taxes paid				(105.8	)	(86.6	)	(4.9	)	(0.3	)
Other (payments)/receipts				57.0		63.3		(38.9	)	10.4
NET CASH FROM OPERATING ACTIVITIES  (1)				1,031.8		874.7		95.5		93.8
CASH FLOWS FROM INVESTING ACTIVITIES
Loans repaid - controlled entities				—		—		(360.8	)	(1,812.9	)
Loans drawn / (repaid) by other persons				24.5		—		8.9		(7.0	)
Acquisition of:
Controlled entities and businesses		36(2)		(618.9	)	(2,857.9	)	(132.7	)	(622.5	)
Property, plant and equipment				(605.4	)	(890.1	)	(4.4	)	(0.9	)
Proceeds on disposal of:
Controlled entities and businesses (net of cash disposed)		36(3)		40.2		186.2		—		(9.1	)
Property, plant and equipment				98.3		57.9		—		0.1
NET CASH USED IN INVESTING ACTIVITIES				(1,061.3	)	(3,503.9	)	(489.0	)	(2,452.3	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends and other distributions paid				(225.0	)	(193.0	)	(172.9	)	(140.5	)
Proceeds from share issues, convertible securities and calls on partly-paid shares				13.2		27.8		13.2		27.8
Proceeds from borrowings				5,280.3		6,752.4		—		—
Repayment of borrowings				(4,817.1	)	(6,146.4	)	554.2		701.9
Principal lease repayments				(144.8	)	(43.1	)	—		—
NET CASH FROM FINANCING ACTIVITIES				106.6		397.7		394.5		589.2
NET INCREASE / (DECREASE) IN CASH HELD				77.1		(2,231.5	)	1.0		(1,769.3	)
CASH AT THE BEGINNING OF THE YEAR				46.1		2,287.4		6.5		1,775.8
Exchange rate changes on foreign currency cash balances				(2.1	)	(9.8	)	—		—
CASH AT THE END OF THE YEAR (2)				121.1		46.1		7.5		6.5

 

The Statements of Cash Flows are to be read in conjunction with the notes to the financial statements set out on pages 7 to 70.

 

15

 

			CONSOLIDATED								AMCOR LIMITED
For the year ended 30 June			2004				2003						2004				2003
			$m				$m						$m				$m
(1)	RECONCILIATION OF PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
	PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME TAX		360.2				378.1						178.0				150.3
	Add/(less) non-cash items and items classified as financing/investing activities:
	Depreciation of property, plant and equipment		459.4				453.5						0.5				0.5
	Amortisation of leased assets		13.2				14.9						—				—
	Amortisation of goodwill and other intangibles		131.2				138.8						0.3				—
	Interest capitalised		(4.5		)		(0.3			)			—				—
	Finance charges on capitalised leases		4.7				6.3						—				—
	Profit on disposal of non-current assets		(30.6		)		(13.3			)			—				—
	Profit on disposal of business/controlled entities		(4.1		)		(6.1			)			—				—
	Profit on disposal of investment		—				(1.5			)			—				—
	Unrealised foreign exchange (gain)/loss		—				—						42.4				(105.4		)
	Dividends from controlled entities		—				—						—				(44.5		)
	Increase/(decrease) in current and deferred taxes		10.7				3.3						(51.8		)		126.2
	Increase/(decrease) in provisions		(55.4		)		(15.1			)			1.4				1.5
	Non cash significant item		50.2				37.5						—				—
	Decrease in sundry assets		(19.9		)		(31.6			)			(6.1		)		(7.3		)
	CASH FLOWS FROM OPERATIONS BEFORE CHANGES IN ASSETS AND LIABILITIES		915.1				964.5						164.7				121.3
	Change in assets and liabilities excluding acquisitions/disposals of controlled entities and businesses:
	(Increase)/decrease in receivables		143.7				113.9						(40.1		)		(27.4		)
	Increase in inventories		(18.1		)		(23.3			)			—				—
	Decrease in payables		(8.9		)		(180.4			)			(29.1		)		(0.1		)
	NET CASH FROM OPERATING ACTIVITIES		1,031.8				874.7						95.5				93.8
(2)	RECONCILIATION OF CASH
	For the purposes of the Statements of Cash Flows, cash includes cash on hand and at bank and short-term money market investments, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Statements of Financial Position as follows:
	Cash - refer Note 6		131.0			141.5						7.5				6.5
	Short-term deposits - refer Note 7		17.3			20.5						—				—
	Bank overdrafts - refer Note 16		(27.2	)		(115.9			)			—				—
			121.1			46.1						7.5				6.5
(3)	NON-CASH FINANCING AND INVESTING ACTIVITIES
	During the year, the consolidated entity acquired property, plant and equipment with an aggregate value of $104.0 million (2003 $136.0 million) by means of finance leases. Dividends of $94.7 million (2003 $112.7 million) were paid for via the Dividend Reinvestment Plan and convertible securities of $99.9 million (2003 $34.4 million) were converted into fully paid ordinary shares.  These transactions are not reflected in the Statements of Cash Flows.

 

The Statements of Cash Flows are to be read in conjunction with the notes to the financial statements set out on pages 7 to 70.

 

16

 

INDEX

 

NOTE		DESCRIPTION
1		Accounting policies
2		Revenue
3		Profit from ordinary activities
4		Significant items
5		Income tax expense
6		Cash assets
7		Receivables
8		Inventories
9		Non-current receivables
10		Other financial assets
11		Property, plant and equipment
12		Intangibles
13		Deferred tax assets
14		Other non-current assets
15		Payables
16		Interest bearing liabilities
17		Current tax liabilities
18		Provisions
19		Non-current payables
20		Non-current interest bearing liabilities
21		Undated subordinated convertible securities
22		Contributed equity
23		Reserves
24		Retained profits
25		Outside equity interests in controlled entities
26		Total equity reconciliation
27		Capital expenditure commitments
28		Lease commitments
29		Other expenditure commitments
30		Contingent liabilities
31		Auditors’ remuneration
32		Directors and executives disclosures
33		Summary of expenses
34		Segment report
35		Employee benefits
36		Amcor’s controlled entities
37		Related party disclosures
38		Earnings per share
39		Additional financial instrument disclosure
40		Events subsequent to balance date

 

17

 

NOTES TO THE FINANCIAL STATEMENTS AT 30 JUNE 2004

 

Note 1.  ACCOUNTING POLICIES

 

The significant accounting policies which have been adopted by Amcor Limited (‘the company’) and its controlled entities (‘the consolidated entity’) in the preparation of this financial report are:

 

(1)   Accounting Standards

 

The consolidated entity adopts the currently applicable Accounting Standards and disclosure requirements of the professional accounting bodies in Australia.

 

(2)   Basis of Preparation

 

The financial report of the company and the financial report of the consolidated entity are general purpose financial reports prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

 

The financial report has been prepared on the basis of historical costs and, except where stated, do not take into account changing money values or current valuations of non-current assets.

 

These accounting policies have been consistently applied by each entity in the consolidated entity and, except where there is a change in accounting policy, are consistent with those of the previous year.

 

(3)   Reclassification of Financial Information

 

Borrowing cost comparatives have been restated to more appropriately classify debt factoring costs as general and administration expenditure.

 

(4)   Consolidated Financial Statements

 

The consolidated financial statements comprise the financial statements of the company, being the parent entity, and its controlled entities in accordance with Accounting Standard AASB 1024 ‘Consolidated Accounts’.  The financial statements of controlled entities are included in the consolidated financial statements from the date control commences until the date control ceases.

 

Investments in controlled entities are carried in the financial statements of the company at the lower of cost and recoverable amount and dividends are brought to account in the Statement of Financial Performance when they are declared.

 

In preparing the financial statements all balances and transactions between entities included in the consolidated entity have been eliminated.

 

(5)   Revenue Recognition

 

Sale of Goods

 

Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products to entities outside the consolidated entity.  Sales revenue is recognised when control of the goods passes to the customer.

 

18

 

Interest Income

 

Interest income is recognised as it accrues, taking into account the effective yield on the financial asset.

 

Sales of Non-Current Assets

 

The gross proceeds of asset sales are included as revenue of the consolidated entity.  The profit or loss on disposal of assets is brought to account at the date control of the asset passes to the buyer. The profit or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.

 

(6)   Taxaton

 

General

 

The consolidated entity adopts the accounting policy for treatment of company income tax as set out in Accounting Standard AASB 1020 ‘Tax Effect Accounting’ whereby the taxation benefits or liabilities which arise due to differences between the time when items are taken up in the consolidated entity’s financial statements and when they are to be taken up for income tax purposes are shown either as a deferred tax asset or as a deferred tax liability.  The deferred tax asset and deferred tax liability are taken up at tax rates applicable to the periods in which they are expected to reverse.

 

The deferred tax asset relating to tax losses is not carried forward as an asset unless the benefit can be regarded as being virtually certain of realisation.  These benefits will be brought to account as a reduction in income tax expense in the period in which they are recouped.  The tax effect of capital losses is not recorded unless realisation is virtually certain.

 

The company is the head entity in the tax-consolidated group comprising all the Australian wholly-owned subsidiaries set out in Note 36.  The implementation date for the tax-consolidated group was 1 July 2002.

 

The head entity recognises all of the current and deferred tax assets and liabilities of the tax-consolidated group (after elimination of intragroup transactions).

 

The tax-consolidated group has entered into a tax sharing agreement that requires wholly-owned subsidiaries to make contributions to the head entity for tax liabilities arising from external transactions occurring after the implementation of tax consolidation.  The contributions are calculated as a percentage of the tax-consolidated group’s current tax liability.  The contributions are payable annually.

 

The assets and liabilities arising under the tax sharing agreement are recognised as intercompany assets and liabilities with a consequential adjustment to income tax expense/revenue.

 

Capital Gains Tax

 

Capital gains tax, where applicable, is provided in the period in which an asset is sold.

 

19

 

Goods and Services Tax

 

Revenues, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except where the amount of GST incurred is not recoverable from the Australian Tax Office (‘ATO’).  In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

 

Receivables and payables are stated with the amount of GST included.

 

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Statements of Financial Position.

 

Cash flows are included in the Statements of Cash Flows on a gross basis.  The GST component of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

 

(7)   Depreciation

 

Property, plant and equipment, excluding freehold land, are depreciated at rates based upon their expected useful lives using the straight line method.

 

Depreciation rates used for each class of asset are as follows:

 

Land improvements between 1% - 3% (2003 1% - 3%)

Buildings between 1% - 5% (2003 1% - 5%)

Plant and equipment between 3% - 25% (2003 3% - 25%)

Finance leased assets between 4% - 20% (2003 4% - 20%)

 

(8)   Employee Entitlements

 

Wages, Salaries, Annual Leave and Sick Leave

 

Liabilities for employee benefits such as wages, salaries, annual leave, sick leave and other current employee entitlements represent present obligations resulting from employees’ service provided to reporting date, calculated at undiscounted amounts based on wage and salary rates that the company expects to pay as at reporting date including related on-costs.

 

Liabilities for employee entitlements include, where appropriate, forecast future increases in wages and salaries, grossed up for on-costs, and are based on the consolidated entity’s experience with staff departures.

 

Long Service Leave

 

Liabilities relating to long service leave and post-employment benefits have been calculated to represent the present value of estimated future cash outflows discounted to reporting date.

 

Liabilities which are not expected to be settled within twelve months are discounted using the rate attaching to those national government securities at reporting date which most closely match the terms of maturity of the related entitlements.

 

Profit Sharing and Bonus Plans

 

A liability is recognised for profit sharing and bonus plans, including benefits based on the future value of equity instruments and benefits under plans allowing the consolidated entity to settle in either cash or shares.

 

Entitlements under the Employee Bonus Payment Plan (‘EBPP’) are estimated and accrued at the end of the financial reporting period.

 

20

 

Employee Share and Option Plans

 

The company maintains two Employee Share Schemes, the Employee Share Purchase Plan (‘ESPP’) and the Employee Share/Option Plan (‘ESOP’).  Both schemes were introduced in 1985, and have been subsequently amended and approved by shareholders at Annual General Meetings.

 

The number of shares issued under the ESPP is dependent on the increase in the consolidated entity’s earnings per share (before significant items) for the year ended 30 June over those of the previous year.  Each year, only one issue can be made to employees in accordance with the rules governing the Scheme.

 

Shares relating to the ESOP are generally issued at the closing market price on the date of allotment.  Options are issued under the plan upon such terms and conditions as determined by the directors at the time of the invitation.

 

Issues relating to the ESPP and the ESOP are detailed in Note 35.

 

Loans to assist in the purchase of shares are shown as receivables.  Shares are held in trust until the loan is settled.  The loans can be paid off at any time and must be settled when an individual ceases to be employed by the consolidated entity.  No value is recognised at the time of the issue of options under the ESOP.  If exercised, contributions are recognised as equity.  Shares issued under the ESOP are treated as equity to the extent the shares are paid-up.  Shares issued under the ESPP are credited to equity at the discounted value at the time of allotment.

 

Superannuation Funds

 

The consolidated entity contributes to employee superannuation funds.  Contributions are charged against profit as and when they are incurred.  Further information is set out in Note 35.

 

(9)   Provisions

 

A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain.

 

If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation at a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability, being risk free rates on government bonds most closely matching the expected future payments, except where noted below.  The unwinding of the discount is treated as part of the expense related to the particular provision.

 

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the recovery receivable is recognised as an asset when it is probable that the recovery will be received and is measured on a basis consistent with the measurement of the related provision.

 

In the Statements of Financial Performance, the expense recognised in respect of a provision is presented net of the recovery.  In the Statements of Financial Position, the provision is recognised net of the recovery receivable only when the entity:

•  has a legally recognised right to set-off the recovery receivable and the provision; and

•  intends to settle on a net basis, or to realise the asset and settle the provision simultaneously.

 

21

 

Restructuring

 

A provision for restructuring, including employee termination benefits, related to an acquired entity or operation is recognised at the date of acquisition where:

•  the main features of the restructuring were announced, implementation of the restructuring commenced, or contracts were entered into by the date of acquisition

•  a detailed formal plan is developed by the earlier of three months after the date of acquisition and the completion of this financial report.

 

The provision only relates to costs associated with the acquired entity, and is included in the determination of the fair value of the net assets acquired.  The provision includes liabilities for termination benefits that will be paid to employees of the acquired entity as a result of the restructuring.

 

Other provisions for restructuring or termination benefits are only recognised when a detailed plan has been formally approved and the restructuring or termination benefits have either commenced or been publicly announced, or firm contracts related to the restructuring or the termination benefits have been entered into.  Costs related to ongoing activities are not provided for. The liabilities for termination benefits that will be paid as a result of these restructurings have been included in the provision for restructuring.

 

Dividends

 

A provision for dividends payable is recognised in the reporting period in which the dividends are declared, for the entire undistributed amount, regardless of the extent to which they will be paid in cash.

 

Onerous Contracts

 

A provision for onerous contracts is recognised after impairment losses on assets dedicated to the contract have been recognised and when the expected benefits are less than the unavoidable costs of meeting the contractual obligations.  A provision is recognised to the extent that the contract obligations exceed future economic benefits.

 

Insurance and Other Claims

 

Provisions for workers’ compensation, insurance and other claims are made for claims received and claims expected to be received in relation to incidents occuring prior to reporting date, based on historical claim rates.

 

Estimated net future cash flows are based on the assumption that all claims will be settled and the weighted average cost of historical claims adjusted for inflation will continue to approximate future costs.

 

(10) Borrowing Costs

 

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, foreign exchange differences on borrowings other than those designated as net investment hedges and lease finance charges.

 

Borrowing costs are brought to account in determining profit for the year, except to the extent the interest incurred relates to major capital items in which case interest is capitalised as a cost of the asset up to the time it is ready for its intended use and amortised over the expected useful economic life.

 

The total amount of interest capitalised during the year as part of the carrying amount of assets is shown in Note 3.

 

22

 

(11) Investments and Other Financial Assets

 

Investments in listed and unlisted securities, other than controlled entities and associates, in the financial report, are brought to account at cost and dividend income is recognised in the Statements of Financial Performance when receivable.

 

The consolidated entity follows the requirements of AASB 1016 ‘Accounting for Investments in Associates’ and applies the equity method of accounting for investments in associates.  Associates are those entities over which the consolidated entity exercises significant influence, but does not control.  The equity method requires the carrying amount of investments in associates to be adjusted by the consolidated entity’s share of associates’ net profit or loss after tax and other movements in reserves.  Investments in associates are carried at the lower of the equity accounted amount and the recoverable amount.  These amounts are recognised in the consolidated Statement of Financial Performance and consolidated reserves.

 

(12) Non-Current Assets

 

The recoverable amount of non-current assets carried at cost is reviewed at each reporting date using profit multiples and undiscounted cash flows. Non-current assets are written down to recoverable amount where the carrying value of any non-current asset exceeds recoverable amount.  The write-down is recognised as an expense in the Statements of Financial Performance in the reporting period in which it occurs.

 

(13) Inventories

 

Inventories are valued at the lower of cost (including an appropriate proportion of fixed and variable overheads) and net realisable value in the normal course of business.

 

(14) Foreign Currency Translation

 

The financial statements of overseas controlled entities which are classified as self-sustaining are converted to Australian currency at balance date using the current rate method as set out in Accounting Standard AASB 1012 ‘Foreign Currency Translation’.  Any exchange gains/losses arising from the effect of currency fluctuations on these investments are taken directly to the exchange fluctuations reserve on consolidation.

 

Prior to translation, the financial reports of self-sustaining operations in hyper-inflationary economies are restated to account for changes in the general purchasing power of the local currency, based on relevant price indices at reporting date.

 

For hyper-inflationary self-sustaining operations, the translated amounts for non-monetary assets, other than inventory, are compared to recoverable amounts translated at spot rates at reporting dates and any excess is expensed, unless a revaluation reserve balance exists for non-current assets carried at fair value.

 

Foreign exchange differences relating to foreign currency transactions hedging a net investment in a self-sustaining foreign operation, together with any related income tax, are transferred to the exchange fluctuations reserve on consolidation.

 

With the exception of transactions hedging a net investment in a self-sustaining foreign operation, all material net foreign currency exposures are subject to forward cover contracts and any exchange gains/losses arising from the effect of currency fluctuations on the underlying transactions are offset by the exchange gains/losses on the forward cover contract.

 

In this circumstance, hedged transactions are initially recorded at the relevant rate at the date of the transaction.  Hedges outstanding at reporting date are valued at the rates ruling on that date and gains or losses are brought to account in the Statements of Financial Performance.  Costs or gains arising at the time of entering into the hedge are deferred and amortised over the life of the hedge.

 

23

 

(15) Financial Instruments

 

Financial Instruments Included in Equity

 

Details of shares and other securities issued and the terms and conditions of options outstanding over ordinary shares at balance date are set out in Notes 22 and 35.

 

The issue of $400 million of Perpetual Amcor Convertible Reset Securities (‘PACRS’) and $210 million of 2002 Perpetual Amcor Convertible Reset Securities (‘PACRS2’) are classified as equity and the coupon interest payable on the PACRS and PACRS2 is treated as a distribution of shareholders’ equity.  The Consolidated Statement of Financial Performance does not include the coupon interest on the PACRS or PACRS2.

 

Financial Instruments Included in Liabilities

 

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

 

Bank overdrafts, bank loans, mortgage loans and other loans are carried at their principal amounts.  Interest is charged as an expense as it accrues other than for amounts capitalised.  Refer Note 1 (10).

 

Commercial paper is carried at the principal amount.  The discount interest is carried as a deferred expense and brought to account on an accruals basis.

 

US$ notes are carried at face value and translated at the rates ruling at reporting date. Interest is charged as an expense as it accrues.

 

Eurobond notes are carried at face value less their discount and amortised over the period to maturity. Interest is charged as an expense as it accrues.

 

Undated subordinated convertible securities were initially recorded at the amount of consideration received. Where applicable, these securities have been translated at the rate of exchange ruling at reporting date. Interest payable on these securities is recognised when entitlements accrue and is calculated in accordance with the terms of each issue.  The terms and conditions of undated subordinated convertible securities outstanding are set out in Note 21.

 

Financial Instruments Included in Assets

 

Trade debtors are carried at nominal amounts due less any provision for doubtful debts.  Collectability of overdue accounts is assessed on an ongoing basis.  Specific provision is made for all doubtful accounts.  A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable.

 

Receivables other than trade debtors are carried at nominal amounts due.

 

Derivatives

 

The company’s policy on interest rate risk management is to monitor and, where appropriate, hedge the company’s exposure to movements in interest rates through the use of various hedging products available in the financial markets.

 

The company enters into interest rate and cross currency swaps, forward rate agreements and interest rate options to hedge interest rate and foreign currency exposures.  These instruments are not held for speculative purposes.  Where hedge transactions are designated as a hedge of the anticipated purchase or sale of goods or services or an anticipated interest transaction, gains and losses on the hedge arising up to the date of the anticipated transactions are included in the measurement of the anticipated transaction when the transaction has occurred as designated. Any gains or losses on the hedge transaction after that date are included in the Statements of Financial Performance.

 

The net amounts receivable or payable under forward foreign exchange contracts and the associated deferred gains or losses are recorded on the Statements of Financial Position until the hedge transaction occurs.  When recognised, the net receivables or payables are revalued using the rate of exchange ruling at reporting date.

 

24