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Amcor to Launch US$500 Million Share Buyback

SYDNEY (From news reports) -- Amcor Ltd. said it would buy back shares worth up to US$500 million, offering investors a quick return on its acquisition of U.S. plastic food packaging company Bemis Co.

Amcor said it would fund the buyback with proceeds of asset sales demanded by regulators as they reviewed the all-stock deal for Bemis, which completed in June. Amcor's shares in Australia have risen around 10% since the transaction was first unveiled a year ago.

The share buyback was announced alongside net income of US$430.2 million for the 12 months through June. Management continues to expect to save US$180 million from integrating Bemis's assets, with US$65 million of those savings captured in the current fiscal year.

After stripping out the impact of currency swings, earnings before interest and tax improved by 5.7% to US$1.075 billion, reflecting a pickup in volumes in Amcor's North American beverages business and earlier mergers-and-acquisitions activity boosting its flexibles packaging business.

Directors declared a total dividend for fiscal 2019 of 45.5 U.S. cents.

Amcor's combination with Bemis expands its footprint to more than 40 countries. The deal was worth about US$5.26 billion when it was first announced a year ago.

In June, Amcor agreed to sell three flexible packaging plants in the U.K. and Ireland for US$394 million. The sale of those Bemis assets were required by the European Commission when approving the all-company transaction in February.

The three plants were bought by private-equity firm Kohlberg & Co. LLC, with the deal completing earlier this month. Kohlberg plans to integrate the plants with its Nelipak business that's focused on packaging for the medical device and pharmaceutical industries.

Amcor has grappled with higher raw-material prices in recent periods but these headwinds have begun to reverse. Cost inflation prompted management to save on plant construction and procurement, while also slowing capital spending.

Amcor said the pullback in raw-material prices boosted earnings in its flexible-packaging business by US$5 million. Analysts think the timing of product price increases means it should have a bigger profit impact this year.

Its flexibles business delivered a US$817.2 million annual profit before interest and tax, up 6.7% on a year earlier after stripping out the impact of currency swings. That improvement reflected earnings from acquired businesses and the benefits of an earlier restructuring effort.

Amcor also reported a US$308.2 million annual profit before interest and tax in its rigid-plastics business, up 4.8% at constant foreign-exchange rates.

Looking ahead, Amcor said it expects adjusted constant currency EPS growth of approximately 5-10% in the 2020 fiscal year. That compares to adjusted combined EPS of 58.2 U.S. cents per share in fiscal 2019.


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