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 February 2006

 

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

 

 



 

Amcor News Release

 

 

For release: Thursday, February 23, 2006

 

ANNOUNCEMENT OF INTERIM RESULTS, ASSET SALES AND
RESTRUCTURING

 

Amcor today announced that profit after tax and before significant items was $214.4 million.  The interim dividend remained unchanged at 17 cents per share and return on average funds invested was 11.7%.

 

Profit before interest and tax (PBIT) was $401.2 million, down 4.1% on the same period last year. On a constant currency basis, PBIT was 2% lower.

 

Interest expense was up 16%, or $16.8 million, largely a result of increased short term interest rates in the United States and non cash expenses relating to the transition to IFRS that was not included in the prior year.

 

Significant items charged against earnings were a loss of $12.5 million net of tax.  This predominately related to impairment of the White Cap Closures and Asian Corrugated businesses, partially offset by a one-time gain on the Vision Grande transaction.

 

Overall profit after tax was down 10.1% pre significant items and down 0.6% after significant items.

 

Other Key Announcements

Substantial progress has been made against the agenda outlined in August 2005 including:

 

                                          Sale of a number of non-core businesses including White Cap Closures and the Asian Corrugated, Sacks and Closures businesses for a combined total of approximately $400 million;

                                          European organisational restructure which will reduce overhead costs by $11 million per annum; and

                                          Investment in flexible and tobacco packaging projects in Poland and Russia.

 

Results

Amcor PET Packaging delivered a significantly improved result benefiting from strong growth in the hot fill custom segment and a hot summer in North America.  Amcor Sunclipse achieved substantially higher earnings than for the second half last year, driven through a focus on improving margins and timely recovery of cost increases.

 

Amcor Limited

ABN 62 000 017 372
679 Victoria Street
Abbotsford Victoria 3076 Australia
Tel: 61 3 9226 9000 Fax: 61 3 9226 6500
www.amcor.com

 



 

The Flexibles operations, including Tobacco Packaging, had a satisfactory performance under very difficult conditions. Amcor Asia and the non fibre Australasian business delivered sound results.

 

Earnings for the Australian Fibre Packaging operations were negatively impacted by lower volumes, lower Korean import prices for cartonboard and an increase of $6.6 million in the depreciation charge.

 

The lower volume was a result of poor crops in some key agricultural markets and weaker conditions in both the grocery and industrial markets, partially due to production of some food and industrial products moving offshore, as well as growth in returnable plastic crates.

 

“Although there are a number of factors that have had a negative impact on corrugated and carton volumes for the half, it is pleasing that the corrugated box gross margins have remained broadly in line with last year.” Mr MacKenzie said.

 

For the half, costs for a wide range of raw material inputs rose significantly.  However, the businesses overall, recovered over 95% of these cost increases in a timely fashion.

 

Other costs that relate specifically to energy or energy related areas, such as transport, also increased through the half but were more difficult to recover through increased prices.  The recovery of these energy related costs remains a substantial challenge for the businesses in the second half.

 

Restructuring and Growth

In August 2005, Amcor CEO and Managing Director, Mr Ken MacKenzie announced a strategic portfolio review as part of a process to refocus the business and improve operating performance.  Two of the key elements outlined at that time were:

 

                                          to ensure Amcor had strong market positions in those segments where it chooses to operate ; and

                                          to maintain a relentless focus on cost reduction.

 

Mr MacKenzie said: “The strategic portfolio review identified core growth markets as well as those businesses that Amcor believes are better owned by other industry participants.

 

“Our decision to dispose of these non-core businesses, represents the first action resulting from the strategic portfolio review.”

 

Asset Sales of $400 million

Amcor has entered into agreements to sell the White Cap metal closures, and Asian corrugated, closures and sacks businesses for a combined consideration of approximately $400 million.  These transactions are scheduled to settle over the next few months.

 

2



 

The strategic portfolio review is ongoing and Amcor expects to announce further asset sales over the next 12 to 18 months.

 

“This is a systematic process that will focus Amcor’s efforts where we see the most attractive opportunities and see the potential for the best returns”, Mr MacKenzie said.

 

European organisational restructure to reduce overhead costs by $11 million

In Europe, the Flexibles business is to undergo a substantial organisational change following the announcement that the current Managing Director of that business, Mr Graham James, will retire in June 2006.  Since July 2005, Mr James has had responsibility for the four Flexibles divisions and the Tobacco Packaging and White Cap Closures operations.

 

With effect from April 2006, these five divisions will be streamlined into three. These will be, Amcor Flexibles Healthcare to be headed by Mr Peter Brues, Amcor Flexibles Food to be headed by Mr Gerard Blatrix and Amcor Rentsch and Amcor Flexibles in Eastern Europe to be headed by Mr Jerzy Czubak.

 

The European PET business has also undertaken a review of its corporate structure and will be reducing its overhead costs during the next 12 months.

 

“The European organisational changes are an excellent example of how structure can follow strategy to simplify the business and reduce costs.  Moving from five operating divisions to three will reduce overhead costs by $11 million per year”, Mr Ken MacKenzie said.

 

Growth

As part of the strategic portfolio review, specific growth markets have been identified that will be targeted as a priority for capital allocation. These markets are flexibles and tobacco packaging in emerging markets, custom PET and some select market segments in Australasia.

 

Today, Amcor announced that it is expanding its Flexible operations in Eastern Europe with an additional press in both the Polish and Russian plants. The company is also adding an additional press to the Polish tobacco packaging operation. These three additional presses will position Amcor to take advantage of the growth opportunities in these emerging markets.

 

“The announcement of additional capacity in Poland and Russia, in both the flexibles and tobacco packaging markets, clearly demonstrates our belief in these growth markets. Amcor has a unique opportunity to build on our solid base established over the past few years in this region”, said Mr MacKenzie.

 

The tobacco packaging market in China has been identified as another growth opportunity and the current plans to increase ownership in Vision Grande, a Hong

 

3



 

Kong publicly listed company, to 44% is an important step forward in our growth aspirations for this region.

 

Summary

“Overall, Amcor has made substantial progress towards implementing our strategic and operational plans over the past six months.  There is considerable work yet to be done and the full benefits will take time, however I am confident that the upside potential is significant and we have a clear path to improving returns for shareholders”,   Mr MacKenzie said.

 

ENDS

 

For further information, please contact:

Ken MacKenzie

 

John Murray

Managing Director & CEO

 

Executive General Manager

Amcor Limited

 

Corporate Affairs

Ph: +61 (3) 9226 9001

 

Amcor Limited

 

 

Ph: +61 (3) 9226 9005

 

4



 

For Release: Thursday, February 23, 2006

 

RESULTS FOR SIX MONTHS ENDED DECEMBER 31, 2005

 

A$m

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Change
%

 

Sales

 

5,493.4

 

5,750.1

 

+4.7

 

PBIT

 

418.2

 

401.2

 

-4.1

 

PAT(1)

 

238.6

 

214.4

 

-10.1

 

 

 

 

 

 

 

 

 

Significant items (2)

 

(35.4

)

(12.5

)

 

 

PAT after significant items

 

203.2

 

201.9

 

-0.6

 

EPS (3)

 

27.2

 

24.4

 

-10.3

 

 

 

 

 

 

 

 

 

Cash flow from operations

 

466.7

 

459.2

 

-1.6

 

Dividend (cents)

 

17.0

 

17.0

 

0.0

 

 


(1)   Under AIFRS, the PACRS coupon payment is now treated as interest. The comparative period has been calculated on the same basis. Conversion discount of 5% on PACRS has been treated as interest in the current period only.

(2)   The significant items relate to impairments in the Asian Corrugated business and White Cap Closures, offset by an amount related to the right to subscribe to Vision Grande shares and minor adjustments to prior period impairments.

(3)   EPS is calculated before significant items, after deducting the PACRS coupon on a consistent basis.

 

PBIT by segment (local currency)

 

Million

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Amcor PET Packaging (US$)

 

80.8

 

97.7

 

Amcor Australasia (A$)

 

175.2

 

153.8

 

Amcor Flexibles (€)

 

63.2

 

59.3

 

Amcor Sunclipse (US$)

 

28.9

 

23.4

 

Amcor Asia (S$)

 

19.5

 

21.3

 

 

Key Ratios

 

 

 

Dec
2004

 

Dec
2005

 

PBIT/Ave Funds Emp. (%)

 

12.2

 

11.7

 

Return on Ave Equity (%)

 

13.5

 

12.5

 

Net Debt/(Net Debt + Equity) (%)(1)

 

46

 

51

 

Net PBIT interest cover (times)(2)

 

4.0

 

3.4

 

NTA per share (A$)

 

2.02

 

1.94

 

 


(1) Convertible notes treated as debt.

(2) All hybrids treated as debt.

 

KEY POINTS

Financial Results

                  Profit after tax and pre significant items down 10.1% from $238.6 million to $214.4 million.

                  Earnings per share down 10.3% from 27.2 cents to 24.4 cents.

                  Returns measured as profit before interest, tax and goodwill amortisation (PBIT) to average funds invested were 11.7% which is above the company’s weighted average cost of capital of 9.6% pre tax.

                  Operating cash flow was $459 million representing 52 cents per share for the half.

                  The dividend remained steady at 17 cents per share with franking at 15%.

                  Significant items for the half relate to the impairment of the Asian Corrugated business of $21.8 million, offset by a gain on the right to subscribe for Vision Grande shares of $16.2 million, the impairment of White Cap Metal Closures business of $9.2 million and adjustments to the prior period impairment write downs of $2.3 million.

 

Operational Performance

                  Amcor PET Packaging achieved earnings growth of 20.9%. Volumes overall were 8.8% higher and custom PET containers were up 25%.

                  Amcor Australasia experienced a difficult half with earnings A$21.4 million lower. Returns on average funds employed remained solid at 16.5%.

                  Amcor Flexibles performed creditably under the impost of rapidly rising costs, both raw material and energy related. Earnings for the half were 6.2% lower.

                  Amcor Sunclipse had a much improved half over the second half last year. Gross margins increased through the period and return on average funds employed were 18.3%

                  Amcor Asia had a solid six months with return on average funds employed at 16.2%.

 

Restructuring and Asset Sales

                  Announced asset sales of approximately $400 million, comprising White Cap Closures and the Asian Corrugated, Sacks and Closures businesses.

                  Management restructuring of the Flexibles and Tobacco Packaging business to reduce operating divisions from five to three, delivering savings of $11 million per annum.

                  Operational restructuring of Amcor Flexibles business through the proposed closure of two plants in the Processed Food sector in Western Europe.

                  Shareholders in Vision Grande, a Hong Kong listed company, are voting today on a proposal for Amcor to sell its Chinese Tobacco Packaging assets to Vision Grande in exchange for shares. If approved, Amcor will own 44% of Vision Grande.

 

Further enquires

 

 

Ken Mackenzie

 

John Murray

Managing Director & CEO

 

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

 



 

Consolidated Statement of Profit

 

A$m

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Net sales

 

5,493.4

 

5,750.1

 

Profit from trading

 

647.9

 

637.3

 

- Dep’n & amort.

 

(229.7

)

(236.1

)

Profit before interest & tax

 

418.2

 

401.2

 

- Net interest (including PACRS)

 

(107.2

)

(124.0

)

Profit before tax

 

311.0

 

277.2

 

- Income tax

 

(67.3

)

(59.6

)

- Minority interests

 

(5.1

)

(3.2

)

Profit after tax before significant items

 

238.6

 

214.4

 

 

Consolidated Cash Flow Statement  

 

A$m

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Profit after tax

 

238.6

 

214.4

 

- Dep’n & amort.

 

229.7

 

236.1

 

- Other

 

(1.6

)

8.7

 

Cash Flow from Operations before significant items

 

466.7

 

459.2

 

Significant items

 

(50.5

)

0.0

 

Change in Provisions/Assets

 

(39.1

)

(42.6

)

Acquisitions

 

(9.8

)

(6.0

)

Net capital expenditure

 

(244.4

)

(187.8

)

Working Capital (Increase)/decrease

 

(158.8

)

(161.6

)

 

Consolidated Balance Sheet  

 

A$m

 

Jun
2005

 

Dec
2005

 

Current Assets

 

3,494.6

 

3,704.7

 

Property, Plant & Equipment

 

4,426.8

 

4,426.5

 

Intangibles

 

1,998.0

 

2,058.8

 

Investments & Other Assets

 

539.7

 

586.4

 

Total Assets

 

10,459.1

 

10,776.4

 

 

 

 

 

 

 

Short-term debt

 

887.2

 

841.4

 

 

 

 

 

 

 

Long-term debt

 

1,917.3

 

2,109.3

 

 

 

 

 

 

 

Creditors & Provisions

 

3,376.2

 

3,361.3

 

Convertible Notes & PACRS

 

301.1

 

948.7

 

Shareholders Equity (incl PACRS June ‘05)

 

3,977.3

 

3,515.7

 

Total Liabilities & Shareholders Equity

 

10,459.1

 

10,776.4

 

 

Segmental Analysis

(Before significant items)

 

 

 

Jul/Dec 2004

 

Jul/Dec 2005

 

 

 

Sales
(A$m)

 

PBIT
(A$m)

 

ROAFE
(%)

 

Sales
(A$m)

 

PBIT
(A$m)

 

ROAFE
(%)

 

Amcor PET Packaging

 

1,715

 

110.6

 

9.1

 

2,026

 

130.3

 

10.1

 

Amcor Australasia

 

1,315

 

175.2

 

20.1

 

1,321

 

153.8

 

16.5

 

Amcor Flexibles

 

1,705

 

109.0

 

11.0

 

1,637

 

95.1

 

10.2

 

Amcor Sunclipse

 

625

 

39.6

 

23.4

 

630

 

31.2

 

18.3

 

Amcor Asia

 

133

 

15.9

 

14.8

 

138

 

16.9

 

16.2

 

Investments / Other

 

13

 

(32.1

)

 

9

 

(26.1

)

 

Intersegmental

 

(13

)

 

 

 

(11

)

 

 

 

TOTAL

 

5,493

 

418.2

 

12.2

 

5,750

 

401.2

 

11.7

 

 

Interim Dividend

Directors have declared an interim dividend of 17 cents per share, 15% franked at 30 cents in the dollar. This compares with an interim dividend of 17 cents per share, 28% franked at 30 cents in the dollar for the first half of the previous year. The record date is 8 March 2006 and the interim dividend will be paid on 31 March 2006.

 

The Dividend Reinvestment Plan (DRP) remains in operation with no discount. The arithmetic average of the daily weighted average market price for the nine ASX business days March 10 to 23, 2006 inclusive will be used to calculate the share price at which the shares are issued.

 

Accounting Principles

The condensed financial statements are the first reports of Amcor Limited and its controlled entities reports to be prepared in accordance with Australian International Financial Reporting Standards (AIFRS).

 

When preparing the report for the half-year ended 31 December 2005, management adopted certain changes to the accounting, valuation and consolidation methods applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the comparative figures were restated to reflect these adjustments. The consolidated entity has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.

 

In line with AIFRS and the exemption outlined above the Perpetual Amcor Convertible Reset Securities (PACRS) are treated as equity with distribution payments treated as an appropriation of profit in the comparative year - December 2004. However for the purpose of this release the distribution for December 2004 has been treated as part of the net interest expense.

 

Significant Items

The net after tax significant items for the six months ended 31 December 2005 total is a $12.5 million loss compared with a $35.4 million loss last year.

 

Significant items for the half relate to the impairment of the Asian Corrugated business of $21.8 million, offset by a gain on the right to subscribe for Vision Grande shares of $16.2 million, the impairment of White Cap Metal Closures business of $9.2 million and adjustments to the prior period impairment write downs of $2.3 million.

 

Segmentals

On 1 July 2005, the consolidated entity changed the identification of its segments to combine the previously reported “Rentsch and Closures” segment with Amcor Flexibles. Prior periods have been restated to reflect this change. This change in segments is a result of changes in the management structure and reporting to the CEO, (Amcor Rentsch management having responsibility for Flexibles in Eastern Europe) increasingly common infrastructure, including co-location, resource sharing and similar technologies.

 

It should also be noted that during the 6 months to 31 December 2005, a detailed review of the corporate costs of the consolidated entity was undertaken, and it was identified that $17.7 million (2004 restated: $16.6 million) of the total $44.4 million (2004: $48.5 million) are directly attributable to the results of the operating segments and as such have been allocated based on relevant cost and service drivers.

 

AIFRS

Amcor adopted AIFRS accounting with effect from July 1, 2004. The financial instruments component of AIFRS was adopted from July 1, 2005, with no restatement of comparative periods. Accordingly, the July/December 2005 results, balance sheet and cash flow statement, include the additional effects of certain adjustments required by the standards which are not included in the comparative periods.

 

These include:

 

Profit and Loss Accounts

                  PACRS distribution is treated as interest in both the current and previous comparative period.

                  Conversion discount of 5% on PACRS treated as interest in the current period only.

 

Balance Sheet

                  PACRS are treated as debt in the current period, but were treated as equity in the prior period.

 

Cash Flow

The overall cash flow does not change as a result of the adoption of AIFRS, however certain items are required to be reclassified between operating, investing and financing activities.

 

2



 

 

 

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Jul/Dec
2004

 

Jul/Dec
2005

 

 

 

A$m

 

A$m

 

US$m

 

US$m

 

Net Sales (mill)

 

1,715

 

2,026

 

1,253

 

1,520

 

Change (%)

 

 

 

18.1

 

 

 

21.3

 

PBIT (mill)

 

110.6

 

130.3

 

80.8

 

97.7

 

Change (%)

 

 

 

17.8

 

 

 

20.9

 

Operating Margin (%)

 

6.4

 

6.4

 

6.4

 

6.4

 

Average funds employed (mill)

 

2,443

 

2,575

 

1,785

 

1,931

 

PBIT/AFE (%)

 

9.1

 

10.1

 

9.1

 

10.1

 

Average exchange rate $A/US

 

.73

 

.75

 

 

 

 

 

 

Amcor PET Packaging achieved a good first half result with PBIT up 20.9% to US$97.7 million. Return on average funds employed improved from 9.1% to 10.1%.

 

Unit volumes were 17.8 billion units, up 8.8% over the prior year. A strong performance in North America and continued growth in Latin America helped offset declining volumes in Europe/Asia.

 

In North America, volumes were up 15.5% due mainly to a better summer than in the previous year and strong growth in the custom product category which was up 35%.

 

Much of this growth occurred in the Custom Beverage segment, primarily hot-fillable PET containers for juices and isotonics. Amcor PET Packaging has benefited from its market leadership position and its core competency in co-locating to deliver containers on-site with its customers. In keeping with the business group’s investment strategy, Amcor this year will add additional capacity in this technology-driven, value-added market segment.

 

Earnings for the North American business were ahead of the prior year as the benefits from 18 months of restructuring and the successful implementation of fair pricing initiatives were realised. The impact of rising energy and fuel costs were partially offset by the business ongoing focus on continuous improvement and cost reduction programs. However, rising energy costs are a more serious issue for the second half.

 

For Latin America, volumes grew by over 9% with good performance in all market categories. Custom volumes grew 47%, albeit off a low base, as the Latin American operation continues to expand its product offerings in custom categories including hot-fillable beverage bottles and food containers.

 

Despite the significant growth in volume, earnings were lower. The ongoing challenges of integrating the ARCA operations in Mexico continue to be a major negative and the operations in that country lost money for the half.

 

An experienced team from the North American operations has been seconded to provide assistance and expertise in many operational areas. Restructuring and cost improvement initiatives have been implemented to improve profitability and performance by the end of the fiscal year.

 

Last year the operations in Argentina had an outstanding first half helped by substantial export volumes to Brazil. For the first half this year, these volumes did not continue and in addition, a major customer commenced importing product from a neighbouring country to take advantage of cross-border tax benefits. Additionally, both Argentina and Brazil are experiencing inflationary cost pressures and unfavourable exchange rates.  Consequently, the earnings from the Argentinean operations were considerably lower.

 

The businesses in Peru and Venezuela continue to provide solid returns and strong growth opportunities.

 

For the European operations, volumes were marginally above the prior year on a continuing business basis. The CSD/Water category was 5% lower, offset by growth in the custom segment. Earnings for the half were up on last year.

 

The UK continues its strong operational performance with volumes and earnings exceeding the prior year. Results for other countries were mixed with the benefits from discontinued operation in Turkey offset by continued weaknesses in Central and Eastern Europe. In response to this, the company has commenced relocating excess and underperforming assets from these markets into those with more favourable returns.

 

For the current half, inflationary pressures continue to build, particularly in energy and transport and, although there is a determination to recover these increases as quickly as possible, there will be a lag in obtaining full recovery that will impact earnings in the second half.

 

Over the past 15 months, the new European management team has implemented a range of operational improvement programs. Additional programs and reorganisation will occur over the next 12 months, including a rationalisation of the regional overhead structures.

 

Summary

Amcor PET Packaging’s first half result was assisted by a hot summer in North America and the ability to generally offset most of the energy cost increases with productivity related cost improvements.

 

For the second half, there will be the full impact of rising energy and energy related cost increases that will not be able to be absorbed and needs to be passed onto customers. As contract conditions and windows for renegotiation allow, these additional costs will be recovered, however there is likely to be a lag that will impact earnings.

 

It is anticipated that second half earnings will not be higher than the same period last year.

 

3



 

 

 

 

Jul/Dec
2004

 

Jul/Dec
2005

 

 

 

A$m

 

A$m

 

Net Sales (mill)

 

1,315

 

1,321

 

Change (%)

 

 

 

(0.5

PBIT (mill)

 

175.2

 

153.8

 

Change (%)

 

 

 

(12.2

)

Operating Margin (%)

 

13.3

 

11.7

 

Average funds employed (mill)

 

1,743

 

1,864

 

PBIT/AFE (%)

 

20.1

 

16.5

 

 

Amcor Australasia had a difficult first half with the slower economic conditions of the second half last year continuing into the first half this year. The comparative with the first half in 04/05 is particularly demanding given the much stronger economic conditions prevailing at that time. Sales for the half were marginally higher than last year and PBIT earnings were down 12.2% to $153.8 million. Return on funds employed were 16.5%

 

The Fibre Packaging sector, which consists of the corrugated box and folding carton converting businesses, as well as the recycled paper and cartonboard mills, had a difficult half year. All four segments experienced lower earnings, predominately due to lower volumes in the converting operations, export volumes in the paper mills at lower prices and a reduction in domestic cartonboard prices, due to cheaper imported board. The accelerated depreciation of the Botany Paper Mill also negatively impacted earnings by $6.6 million.

 

In the Corrugated Box business, gross margins have remained broadly in line with last year with the reduction in earnings due to lower volumes and the inability to adjust the cost base quickly enough to match these lower volumes.

 

In Australia’s Corrugated Box business, volumes continue to be adversely impacted by poor crops affecting fruit and produce markets and a soft industrial segment. Growth in the meat segment in previous years partially reversed in this half with the lifting of bans of US meat sales into Japan affecting Australian exports, as well as the closure of a major customer. The market softness was compounded by the loss of some business to competitors, mostly at the smaller customer end of the market.

 

In New Zealand’s Corrugated Box business, volumes were in line with the previous year, with gains in the Meat segment offsetting losses in the Dairy and Fish segments.

 

In the Folding Carton business, volumes were lower due to reduced demand by customers, particularly in the grocery segment, and some loss of volume to competitors.

 

As a result of the lower volumes in Fibre Packaging, the Paper & Board segment experienced lower volumes in both Packaging Papers and Petrie Cartonboard. This volume was replaced with higher export tonnages at lower margins.

 

Development of higher grade boards following start up of the new wet-end at the Cartonboard mill has taken longer than anticipated. Domestic prices for cartonboard have also come under considerable pressure as imported board has fallen in price from around $1100 per tonne to $900 per tonne. With lower overall tonnes and a higher proportion of exports, profit was down on the same period last year.

 

With the new Fibre Packaging management structure in place, a renewed focus on Sales and Marketing, and an improved understanding of the operating costs, the business performance is expected to improve over the medium term. In the short term, volumes remain below last year in both the Folding Carton and Corrugated businesses and this will impact the full year result.

The Flexibles business, which includes multiwall sacks generated another sound result. Restructuring of the NSW laminations operation continued with the closure of the Enfield site in December and the commissioning of a new gravure printing machine at Regents Park with the benefits to flow in the second half. Volume was down slightly due to the slowing economic conditions especially in the confectionery segment. The multiwall sacks business continued to deliver improved earnings benefiting from restructuring initiatives.

 

The Rigid Packaging Group increased earnings in most business segments. The Beverage Can business experienced a buoyant market with volumes up 3% on last year mainly in the soft drink and ready to drink segments. The continued intense focus on productivity also contributed to the increased earnings. In the Food Can business volumes were affected by significantly higher tinplate pricing and the closure of a major customer in the dairy segment with volumes down 3%. Productivity was sound with earnings up on the corresponding period last year.  The Closures business performed well with earnings in line with last year.

 

The glass wine bottle operation performed strongly with sales growth exceeding expectations and sound productivity levels. The combination of these factors resulted in earnings up on last year.

 

Summary

The outlook for Australasia remains sound and solid improvement is expected over the medium term. For the current six months, the economic conditions are unlikely to improve and operational performance plans in place will not substantially impact earnings. At this stage, second half earnings are expected to be slightly behind the same period last year.

 

4



 

 

 

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Jul/Dec
2004

 

Jul/Dec
2005

 

 

 

A$m

 

A$m

 

€m

 

€m

 

Net Sales (mill)

 

1,705

 

1,637

 

989

 

1,021

 

Change (%)

 

 

 

(4.0

)

 

 

3.2

 

PBIT (mill)

 

109.0

 

95.1

 

63.2

 

59.3

 

Change (%)

 

 

 

(12.8

)

 

 

(6.2

)

Operating Margin (%)

 

6.4

 

5.8

 

6.4

 

5.8

 

Average funds employed (mill)

 

1,984

 

1,872

 

1,150

 

1,168

 

PBIT/AFE (%)

 

11.0

 

10.2

 

11.0

 

10.2

 

Average exchange rate $A/€

 

.58

 

.62

 

 

 

 

 

 

Amcor Flexibles, which for this reporting period consists of the previous flexibles segment plus the tobacco packaging and closures businesses, achieved PBIT earnings of €59.3 million, which was down 6.2%, compared to the same period last year. Return on average funds employed for the business were 10.2%.

 

Restructuring

Since the appointment of Ken MacKenzie as Managing Director of Amcor Limited, the tobacco packaging and closures operations have been reporting to Graham James the Managing Director of Amcor Flexibles.

 

Graham James has announced his intention to retire in June 2006 and a new organisational structure, comprising three new divisions will take effect from April 2006.

 

Amcor Flexibles Healthcare will be headed by Peter Brues, who is currently the President of the Flexibles Americas business. This business will incorporate the healthcare packaging plants in Europe and the Americas and coordinate strategy and commercial activity with the flexible healthcare operations in Asia.

 

Amcor Flexibles Food will be headed by Gerard Blatrix, who is currently the Managing Director of the European Fresh Food business. This business will consist predominantly of the processed food and fresh food plants in Western Europe and co-ordinate food packaging strategy with the Flexibles operations in other regions.

 

Amcor Rentsch, headed by Jerzy Czubak will have leadership for the global tobacco packaging business and the Amcor Flexibles operations in Eastern Europe.

 

As a result of this restructuring, the business will be simplified from six operating segments plus the Corporate office in Gloucester to three operating divisions with no overseeing head office.

 

Gerard Blatrix, Peter Brues and Jerzy Czubak will report directly to Ken MacKenzie.

 

This restructuring has a number of substantial benefits. First, as many of our customers become more global in their sourcing or manufacture, it is important that Amcor’s management structure reflects this and is able to respond to customers’ needs in a coordinated manner.

 

Second, from a strategic perspective, there will be an improved focus on the application of capital taking a global, rather than regional approach.

 

Finally, there is the opportunity to reduce overheads. This reorganisation combined with the streamlining of the European PET head office will result in an estimated saving of €7 million.

 

Plant Rationalisation

As part of the overall strategic portfolio review and specifically as part of the agenda to fix, sell or close underperforming operations, it is proposed to close two plants in Western Europe. Details will be made available once consultation procedures have commenced with the appropriate employee representatives.

 

It is proposed that the closures will take place over the next 12 months with the cost estimated to be €8 million in cash, together with non-cash items of €34 million, consisting mostly of asset write-downs. The benefits from this rationalisation are expected to be around €10 million per annum after the redeployment of assets and will be fully realised in the 07/08 year. The review of the flexibles business is ongoing.

 

Growth

There is a substantial opportunity for growth within the Flexibles Group in Eastern Europe. Amcor has developed a strong position in tobacco packaging in Poland and Russia and has been in flexible packaging in Poland since 1999. A new Flexibles plant has also just been commissioned in Russia.

 

As part of the new management reorganisation, Jerzy Czubak, who has led the growth of Amcor Rentsch in Eastern Europe, will be responsible for these flexibles operations.

 

With the successful start-up of the new Flexibles plant in Russia and the ongoing growth in the other parts of Eastern Europe, together with Amcor’s confidence in the future growth opportunities in the region, two additional gravure presses will be installed in early calendar 2007 - one in Poland and one in Russia.

 

Tobacco packaging also continues to show strong growth in Eastern Europe and as a result an additional press will be installed in the Polish plant to help ensure the business is in a position to participate in these growth opportunities.

 

5



 

Operations

 

Amcor Flexibles

Sales for the half were up 3% and earnings were behind the same period last year.

 

The major challenge for the half was the recovery of cost increases in both raw material, as well as energy and transport costs. The raw material cost increases were larger than anticipated and price movements more volatile than predicted in August.

 

The business was successful in recovering the vast majority of raw material cost increases through the period, although with a timing lag in some cases due to a number of customer contractual arrangements.

 

Recovery of non raw material cost increases has progressed and energy surcharges have been negotiated. However, there is still further work required to recover these costs and the short term trend with rising energy prices is not favourable.

 

Against this backdrop, gross margins were only marginally behind last year.  Although raw material costs have generally stabilised, further increases are forecast. Of particular concern is the rise in the aluminium price that will need to be recovered over the coming months.

 

From an operational perspective, good progress was made in Processed Foods and in the Americas whilst Fresh Food and Healthcare Europe were adversely impacted by operating issues at a small number of sites. Corrective actions are in place with improvements expected in the second half.

 

Processed Foods benefited from the restructuring program which started last year with profits substantially improved. The new plant in Novgorod, Russia started on schedule and is experiencing strong customer demand. The restructuring of the manufacturing footprint, to align with markets and customer trends, will continue in 2006.

 

Fresh Food results were below expectations with difficulties experienced bringing on new capacity quickly enough to meet very strong customer demand in certain markets. Additionally, raw material price rises impacted margins more than in other divisions, particularly in those businesses where films are a substantial component of the finished product. The second half is anticipated to be substantially better with new capacity on stream to help meet customer demand.

 

European Healthcare performance was good with the exception of one business where there have been problems associated with bringing on stream new capacity and, again, where there is a time lag in the recovery of substantial polymer price increases. Earnings should be stronger in this sector in the second half

 

The Americas continued to make excellent progress despite the difficulties arising from hurricanes Katrina and Rita and the resulting raw material, transport and energy cost increases. Significant sales growth was achieved which flowed through to operating profit.

 

Amcor Rentsch

Amcor Rentsch, which produces folding cartons principally for the tobacco industry, had a solid first half with sales up 6% and higher earnings.

 

Higher sales were the result of a general increase in demand in both Western and Eastern Europe, partly driven by planned tax increases in both regions.

 

In October 2004, Amcor Rentsch increased capacity in Russia and Portugal, and this helped to absorb part of the increased demand. As such, the current half year results benefit from the impact of this capacity being operational for the full six months.

 

The demand in Central and Eastern Europe continue to exceed the installed capacity.

 

The additional capacity installed in France successfully commenced operation in September 2005. The start up phase is continuing with full capacity expected in the last quarter of the financial year.

 

The business continues to prepare for the planned introduction of graphical health warnings on cigarette cartons, with Belgium being the first country to implement the EU directive with effect from 2007.

 

The outlook for the second half continues to be strong, although with demand slightly lower than the first half.

 

Amcor Closures

Amcor announced today the sale of the Closures business for €230 million. This business has undergone substantial management change over the past 12 months.

 

Amcor’s strategic portfolio review concluded that another industry participant was in the best position to improve value in this business going forward.

 

The Closures business recognised an impairment in the half year, representing the excess of its carrying amount over its recoverable amount.

 

6



 

 

 

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Jul/Dec
2004

 

Jul/Dec
2005

 

 

 

A$m

 

A$m

 

US$m

 

US$m

 

Net Sales (mill)

 

625

 

630

 

457

 

473

 

Change (%)

 

 

 

0.8

 

 

 

3.5

 

PBIT (mill)

 

39.6

 

31.2

 

28.9

 

23.4

 

Change (%)

 

 

 

(21.2

)

 

 

(19.1

)

Operating Margin (%)

 

6.3

 

5.0

 

6.3

 

5.0

 

Average funds employed (mill)

 

338

 

341

 

247

 

256

 

PBIT/AFE (%)

 

23.4

 

18.3

 

23.4

 

18.3

 

Average exchange rate $A/US

 

.73

 

.75

 

 

 

 

 

 

Amcor Sunclipse had a solid first half result with earnings of US$23.4 million. Although earnings were lower than for the same period last year, they were up considerably on the second half of the 04/05 year. Return on average funds employed for the half were 18.3%.

 

Earnings growth over the six months to December 2005 compared to the six months to June 2005 was across all divisions and predominately driven by:

 

                  Improving economic conditions, particularly in the second quarter;

                  Greater focus on recovering rising input costs, driven by improved training and awareness of the issue within the sales force;

                  Management changes in some key operations; and

                  Improved operating efficiencies in a number of manufacturing and support functions.

 

The business is divided into manufacturing and distribution. Distribution includes all types of industrial packaging including flexible packaging and janitorial supplies. Manufacturing, which is predominantly located in California, produces corrugated sheets and also converts the sheets into boxes.

 

The corrugated sheet making business had a good first half although earnings were below the same period last year. Last year the corrugators benefited from strong volume as a competitor was off line for two months. This year corrugated sheet volume was down 6.4%. Improved operating efficiencies, especially in lower waste, has helped offset some of this lower volume.

 

Mill closures in the containerboard industry and the severe hurricane season in the U.S. created production and delivery disruptions and general supply tightness. Both the corrugators and the box making manufactured products group passed on a US$30 per short tonne increase in November.

 

The manufactured products group finished with a strong second quarter. The first quarter was negatively impacted by the consolidation of two Southern California facilities into one new operation. For the six months, trading results were lower than last year, although overall margins and volume remain in line with last year.

 

Distribution, which consists of 36 operations across 13 states in the U.S. and four in Mexico, significantly improved earnings for the half. Margin improvement was achieved as unprofitable customers were eliminated and the sales force concentrated on getting paid for their full range of services and support. Product cost increases were proactively passed on to customers during the period.

 

Each of the business groups is well positioned for the second half compared to last year. Another corrugated price increase of US$40 per tonne is currently being implemented and other cost increases are expected, given the high price of energy. A key focus for the second half is the recovery of additional energy costs in a timely manner.

 

Summary

The start of the second half has continued the momentum of the past three months and in the short term the outlook remains favourable. Should these conditions continue through to June, Amcor Sunclipse should deliver improved earnings for the full year.

 

7



 

 

 

 

Jul/Dec
2004

 

Jul/Dec
2005

 

Jul/Dec
2004

 

Jul/Dec
2005

 

 

 

A$m

 

A$m

 

S$m

 

S$m

 

Net Sales (mill)

 

133

 

138

 

163

 

174

 

Change (%)

 

 

 

3.8

 

 

 

6.7

 

PBIT (mill)

 

15.9

 

16.9

 

19.5

 

21.3

 

Change (%)

 

 

 

6.3

 

 

 

9.2

 

Operating Margin (%)

 

12.0

 

12.2

 

12.0

 

12.2

 

Average funds employed (mill)

 

215

 

208

 

264

 

262

 

PBIT/AFE (%)

 

14.8

 

16.2

 

14.8

 

16.2

 

Average exchange rate $A/Sing

 

1.23

 

1.26

 

 

 

 

 

 

Amcor Asia achieved first half PBIT earnings of S$21.3 million, 9.2% higher than the corresponding period last year. The increase in PBIT was due to increased volumes in the Tobacco Packaging and Flexibles businesses, offset by lower corrugated earnings.

 

Sales increased by 6.7% to S$174 million and Return on Funds Employed was 16.2%.

 

Amcor Asia continues to remain focused on cost control, innovation and applying quality services to satisfy customers’ requirements.

 

For the Tobacco Packaging businesses, earnings increased on the same period last year with overall strong growth in China and continuing solid performances in Malaysia and Singapore. Growing the tobacco packaging business in the Asian region is a strategic priority and opportunities for organic growth or small acquisitions will be pursued.

 

The three Flexibles operations continue to deliver good growth assisted by additional capacity in China. The healthcare flexibles plant in Singapore also delivered improved performance. The flexibles business in Asia is also a strategic priority and opportunities for growth are being considered.

 

The corrugated segment remains disappointing with continued low margins due to severe competition.

 

Significant Items

Amcor Asia recognised an impairment of A$21.8 million in the first half, representing the excess of the carrying amount of the Asian Corrugated business over its recoverable amount. The increase in the fair value of the 96 million options to acquire shares in Vision Grande contributed A$16.2 million profit in the half year.

 

Asset sales

The paper sack operations in Malaysia and Indonesia, as well as the plastic closures business in Thailand have been sold. Since December, the business has also concluded a sales agreement for the corrugated box operations in Malaysia, Singapore, China and Indonesia. Total proceeds from these sales are expected to be approximately S$21 million.

 

Vision Grande

On December 27, Amcor and Vision Grande, a publicly listed company in Hong Kong, announced the restructuring of that company, whereby Amcor will inject its two tobacco packaging operations in China into Vision Grande in return for shares, as well as subscribe for additional shares in Vision Grande.

 

The transaction is before shareholders with a shareholder meeting scheduled for February 23. Should shareholders approve the transaction, Amcor will own 44% of Vision Grande, have majority Board control and the right to appoint the Chairman.

 

Summary

As a result of the asset sales and Vision Grande transactions, the Asian operations going forward will be clearly focused on Flexibles and Tobacco Packaging. The business will consist of the two tobacco packaging plants in Malaysia and Singapore, the three flexibles plants in Singapore and China as well as a 44% interest in the publicly listed company Vision Grande.

 

The primary focus for Asia will be to grow the Tobacco Packaging and Flexibles businesses with a specific emphasis on China. Growth in both these segments will be strategically aligned to Amcor’s global objectives for these business segments.

 

8



 

Appendix 4D

Half yearly report

 

Appendix 4D Rule 4.2A.3

 

Half yearly report

Half-year Ended 31 December 2005

 

AMCOR LIMITED

ABN 62 000 017 372

 

2. Results for announcement to the market

 

 

 

 

 

 

 

 

 

$ A mIllion

 

2.1 Revenues from ordinary activities

 

up

 

4.7

%

to

 

$

5,750.1

 

 

 

 

 

 

 

 

 

 

 

2.2 Profit (loss) after tax attributable to members

 

 

 

 

 

 

 

 

 

 

      Before significant items

 

down

 

19.1

%

to

 

$

214.4

 

 

      After significant items

 

down

 

12.1

%

to

 

$

201.9

 

 

 

 

 

 

 

 

 

 

 

2.3 Net profit (loss) for the period attributable to members

 

 

 

 

 

 

 

 

 

 

      Before significant items

 

down

 

19.1

%

to

 

$

214.4

 

 

      After significant items

 

down

 

12.1

%

to

 

$

201.9

 

 

Dividends

 

Amount per
security

 

Franked amount
per security

 

Current period 

 

 

 

 

 

 

 

 

 

 

 

2.4 Interim dividend

 

17.0 cents

 

2.6 cents

 

 

 

 

 

 

 

Previous corresponding period

 

 

 

 

 

 

 

 

 

 

 

2.4 Interim dividend

 

17.0 cents

 

4.8 cents

 

 

 

2.5 Record date for determining entitlements to the dividend

 

Interim dividend – 8 March 2006

 

 

2.6 Brief explanation of any figures in 2.1 to 2.4 – refer press release attached

 

Amcor Limited and its subsidiaries have taken the exemption available under AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards to only apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005.

 

Accordingly, the percentage changes for the profit (loss) after tax attributable to members and the net profit (loss) for the period attributable to members are based upon December 04 comparative information that is on a different calculation basis.

 

1



 

3. Net tangible assets

 

 

 

Current period

 

Previous
corresponding
Period

 

 

 

 

 

 

 

Net tangible asset backing per ordinary security

 

$

1.94

 

$

2.02

 

 

4.   Details of material entities over which control has been gained or lost

 

There have been no material entities over which control has been gained or lost

 

5.   Details of individual dividends and payment dates – refer attached half year financial statements.

 

6.   Details of dividend reinvestment plan

 

The Dividend Reinvestment Plan (DRP) is in operation.  The issue price is calculated on the arithmetic average of the daily weighted average price for the nine ASX business days commencing the 10th March and concluding 23rd March 2006 inclusive.  The last date for receipt of election notices for the dividend reinvestment plan is the 8th of March 2005.

 

7.   Not applicable

 

8.   Not applicable

 

9.   The accounts are not subject to audit dispute or qualification (a copy of the review report is included in the half year accounts attached).

 

2



 

Additional Information

 

Earnings per security (EPS)

 

 

 

Current period

 

Previous corresponding
period

 

 

 

 

 

 

 

Calculation of the following in accordance with AASB 1027:

 

 

 

 

 

Earnings per Share

 

 

 

 

 

(a)   Basic EPS

 

23.0

 

23.1

 

(b)   Diluted EPS

 

20.5

 

22.6

 

(c)   Weighted average number of ordinary shares outstanding during the period used in the calculation of the Basic EPS

 

879.2 million

 

878.8 million

 

 

 

 

 

Date: .23 February 2006

Julie McPherson

 

Company Secretary

 

 

3



 

 

A M C O R   L I M I T E D

A.B.N. 62 000 017 372

 

 

CONDENSED

HALF-YEAR REPORT

 

 

31 DECEMBER 2005

 



 

Directors’ report

 

The directors present their report together with the condensed consolidated financial report for the half-year ended 31 December 2005 and the auditor’s review report thereon.

 

Directors

 

The directors of the company at any time during or since the end of the half-year are:

 

Name

 

Period of directorship

C I (Chris) Roberts – Chairman

 

Director since 1999 – appointed Chairman 2000

K N (Ken) MacKenzie

 

Director since 2005

R K (Keith) Barton

 

Director since 1999

G J (John) Pizzey

 

Director since 2003

J G (John) Thorn

 

Director since 2004

G A (Geoff) Tomlinson

 

Director since 1999

E J J (Ernest) Pope

 

Appointed October 2005

E A (Elizabeth) Alexander

 

Director since 1994 - Resigned October 2005

D C K (Charles) Allen

 

Director since 1996 - Resigned October 2005

 

Review of Operations

 

A review of the operations of the consolidated entity during the half-year, and the results of those operations is contained in Amcor’s Statement to Stock Exchanges and Media dated 23 February 2006.

 

Lead Auditor’s Independence Declaration

 

A copy of the lead auditor’s independence declaration is set out on page 3 and forms part of the director’s report for the half-year ended 31 December 2005.

 

Rounding Off

 

The company is of a kind referred to in the Australian Securities and Investments Commission Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest $100,000 unless otherwise stated.

 

In accordance with a resolution of the directors, dated at Melbourne, this 23rd day of February 2006.

 

 

 

C I Roberts

 

Chairman

 

 

2



 

Lead auditor’s independence declaration under Section 307C of the Corporations Act 2001

 

To the directors of Amcor Limited

 

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2005 there have been:

 

(a)   no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

 

(b)   no contravention of any applicable code of professional conduct in relation to the review.

 

 

KPMG

 

 

P M Shannon

Partner

 

 

Melbourne

23rd February 2006

 

3



 

 

Amcor Limited and its Controlled Entities

Condensed consolidated income statement

For the half-year ended 31 December 2005

 

 

 

 

 

Consolidated

 

 

 

Note

 

2005

 

2004 (1)

 

 

 

 

 

$m

 

$m

 

 

 

 

 

 

 

 

 

Revenue from sale of goods

 

 

 

5,750.1

 

5,493.4

 

Cost of sales

 

 

 

(4,860.7

)

(4,594.0

)

 

 

 

 

 

 

 

 

Gross profit

 

 

 

889.4

 

899.4

 

 

 

 

 

 

 

 

 

Other income

 

 

 

25.3

 

55.9

 

Sales and marketing expenses

 

 

 

(155.8

)

(156.5

)

General and administration expenses

 

3

 

(365.4

)

(399.9

)

Research and development costs

 

 

 

(16.1

)

(21.1

)

Share of profit from associates

 

 

 

2.8

 

0.6

 

 

 

 

 

 

 

 

 

Profit from operations

 

 

 

380.2

 

378.4

 

 

 

 

 

 

 

 

 

Financial income

 

 

 

12.0

 

9.8

 

Financial expenses

 

 

 

(136.0

)

(90.6

)

 

 

 

 

 

 

 

 

Net finance costs

 

 

 

(124.0

)

(80.8

)

 

 

 

 

 

 

 

 

Profit before related income tax expense

 

 

 

256.2

 

297.6

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

(51.1

)

(62.9

)

 

 

 

 

 

 

 

 

Profit after related income tax expense

 

 

 

205.1

 

234.7

 

 

 

 

 

 

 

 

 

Net profit attributable to:

 

 

 

 

 

 

 

Members of Amcor Limited

 

 

 

201.9

 

229.6

 

Minority Interest

 

 

 

3.2

 

5.1

 

 

 

 

 

205.1

 

234.7

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

Cents

 

Cents

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

23.0

 

23.1

 

Diluted earnings per share

 

 

 

20.5

 

22.6

 

 


(1) – The consolidated entity has elected not to restate the condensed consolidated income statement for the half-year ended 31 December 2004 for financial instruments within the scope of AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement  as permitted on the first-time adoption of AIFRS.  Refer Note 1(a).

 

The above condensed consolidated income statement should be read in conjunction with the accompanying notes.

 

4



 

Amcor Limited and its Controlled Entities

Condensed consolidated balance sheet

As at 31 December 2005

 

 

 

 

 

Consolidated

 

 

 

Note

 

31 December
2005

 

30 June
2005 (1)

 

 

 

 

 

$m

 

$m

 

Current assets

 

 

 

 

 

 

 

Cash assets

 

 

 

209.7

 

210.8

 

Trade and other receivables

 

 

 

1,744.9

 

1,843.7

 

Inventories

 

 

 

1,583.2

 

1,440.1

 

Other current financial assets

 

 

 

166.9

 

 

Total current assets

 

 

 

3,704.7

 

3,494.6

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

49.5

 

45.1

 

Investments accounted for using the equity method

 

 

 

51.1

 

40.7

 

Other non-current financial assets

 

 

 

6.9

 

7.7

 

Property, plant and equipment

 

 

 

4,426.5

 

4,426.8

 

Intangible assets

 

 

 

2,058.8

 

1,998.0

 

Deferred tax assets

 

 

 

385.3

 

349.9

 

Other

 

 

 

93.6

 

96.3

 

Total non-current assets

 

 

 

7,071.7

 

6,964.5

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

10,776.4

 

10,459.1

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

 

1,936.6

 

1,995.0

 

Interest bearing liabilities

 

 

 

841.4

 

887.2

 

Other financial liabilities

 

 

 

55.2

 

 

Current tax liabilities

 

 

 

82.4

 

82.5

 

Provisions

 

 

 

294.1

 

291.0

 

Subordinated convertible securities

 

9

 

732.0

 

 

Total current liabilities

 

 

 

3,941.7

 

3,255.7

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

 

8.0

 

4.8

 

Interest bearing liabilities

 

 

 

2,109.3

 

1,917.3

 

Deferred tax liabilities

 

 

 

523.2

 

517.3

 

Provisions

 

 

 

123.7

 

126.7

 

Retirement benefit obligations

 

 

 

338.1

 

358.9

 

Subordinated convertible securities

 

 

 

216.7

 

301.1

 

Total non-current liabilities

 

 

 

3,319.0

 

3,226.1

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

7,260.7

 

6,481.8

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

3,515.7

 

3,977.3

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Issued capital

 

 

 

2,745.0

 

3,326.5

 

Reserves

 

 

 

(77.7

)

(147.3

)

Retained profits

 

 

 

777.4

 

720.1

 

Total equity attributable to equity holders of the parent

 

 

 

3,444.7

 

3,899.3

 

Minority interest

 

 

 

71.0

 

78.0

 

 

 

 

 

 

 

 

 

Total equity

 

7

 

3,515.7

 

3,977.3

 

 


(1) – The consolidated entity has elected not to restate the condensed consolidated balance sheet for the year ended 30 June 2005 for financial instruments within the scope of AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement as permitted on the first-time adoption of AIFRS. Refer Note 1(a).

 

The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.

 

5



 

Amcor Limited and its Controlled Entities

Condensed consolidated statement of recognised income and expense

For the half-year ended 31 December 2005

 

 

 

CONSOLIDATED

 

 

 

2005

 

2004 (1)

 

 

 

$m

 

$m

 

 

 

 

 

 

 

Adjustment on adoption of AASB 132 and AASB 139, net of tax:

 

 

 

 

 

Retained profits

 

0.7

 

 

Reserves

 

(29.2

)

 

Available for sale financial assets, net of tax

 

0.5

 

 

Cash flow hedges, net of tax

 

8.0

 

 

Exchange differences on translation of foreign operations

 

89.3

 

(159.7

)

Actuarial gains & losses on defined benefit plans

 

4.0

 

0.7

 

 

 

 

 

 

 

Net income recognised directly in equity

 

73.3

 

(159.0

)

Profit for the half-year

 

205.1

 

234.7

 

Total recognised income and expense for the half-year

 

278.4

 

75.7

 

 

 

 

 

 

 

Total recognised income and expense for the half-year is attributable to:

 

 

 

 

 

Members of Amcor Limited

 

276.5

 

73.8

 

Minority Interest

 

1.9

 

1.9

 

 

 

278.4

 

75.7

 

 


(1) – The consolidated entity has elected not to restate the condensed consolidated statement of recognised income and expense for the half-year ended 31 December 2004 for financial instruments within the scope of AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement as permitted on the first-time adoption of AIFRS. Refer Note 1(a).

 

The above condensed consolidated statement of recognised income and expense should be read in conjunction with the accompanying notes.

 

6



 

Amcor Limited and its Controlled Entities

Condensed consolidated cash flow statement

For the half-year ended 31 December 2005

 

 

 

Consolidated

 

 

 

2005

 

2004 (1)

 

 

 

$m

 

$m

 

Cash flows from operating activities

 

 

 

 

 

Receipts from customers

 

5,803.7

 

5,468.9

 

Payments to suppliers and employees

 

(5,415.3

)

(5,039.8

)

Dividends received

 

1.9

 

0.3

 

Finance income received

 

11.1

 

8.2

 

Finance costs paid

 

(117.6

)

(70.7

)

Income taxes paid

 

(55.3

)

(45.8

)

Other income received

 

26.4

 

33.2

 

 

 

 

 

 

 

Net cash provided by operating activities

 

254.9

 

354.3

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Repayment of loans by associated companies and other persons

 

0.2

 

1.4

 

Payments for controlled entities and businesses

 

(6.0

)

(9.8

)

Payments for property, plant and equipment

 

(210.3

)

(308.9

)

Proceeds on disposal of controlled entities and businesses

 

 

11.0

 

Proceeds on disposal of property, plant and equipment

 

22.4

 

53.4

 

 

 

 

 

 

 

Net cash used in investing activities

 

(193.7

)

(252.9

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from share issues, convertible securities and calls on partly-paid shares, net of share issue costs

 

12.2

 

9.2

 

Proceeds from borrowings

 

2,735.1

 

2,604.3

 

Repayment of borrowings

 

(2,727.8

)

(2,558.8

)

Principal lease repayments

 

(1.9

)

(9.0

)

Dividends and other equity distributions paid

 

(150.9

)

(171.5

)

 

 

 

 

 

 

Net cash used in financing activities

 

(133.3

)

(125.8

)

 

 

 

 

 

 

Net decrease in cash held

 

(72.1

)

(24.4

)

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the reporting period

 

213.8

 

121.1

 

Effects of exchange rate changes on cash

 

8.5

 

(6.0

)

 

 

 

 

 

 

Cash and cash equivalents at the end of the reporting period

 

150.2

 

90.7

 

 

RECONCILIATION OF CASH

 

For the purposes of the condensed consolidated cash flow statement, 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 condensed consolidated cash flow statement is reconciled to the related items in the Balance sheet as follows:

 

Cash assets

 

209.7

 

111.8

 

Short-term deposits

 

33.5

 

18.8

 

Bank overdrafts

 

(93.0

)

(39.9

)

 

 

150.2

 

90.7

 

 


(1) – The consolidated entity has elected not to restate the condensed consolidated cash flow statement for the half-year ended 31 December 2004 for financial instruments within the scope of AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement as permitted on the first-time adoption of AIFRS. Refer Note 1(a).

 

The above condensed consolidated cash flow statement should be read in conjunction with the accompanying notes.

 

7



 

Amcor Limited and its Controlled Entities

Notes to the condensed financial statements

For the half-year ended 31 December 2005

 

Note 1. Summary of significant accounting policies

 

This condensed general purpose financial report for the interim half-year reporting period ended 31 December 2005 has been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Interpretations adopted by the Australian Accounting Standards Board and the Corporations Act 2001. This condensed financial report is prepared in accordance with the requirements of Accounting Standard AASB 134 Interim Financial Reporting.

 

This condensed consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2005 and any public announcements made by Amcor Limited during the interim reporting period in accordance with the continuous disclosure requirements arising under the Corporations Act 2001.

 

(a) Basis of preparation of half-year financial report

 

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

 

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards

 

This condensed consolidated interim financial report is the first Amcor Limited and its controlled entities (the consolidated entity) interim financial report to be prepared in accordance with Australian International Financial Reporting Standards (AIFRS). AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements. The interim financial report of the consolidated entity also complies with the International Financial Reporting Standards and interpretations adopted by the International Accounting Standards Board.

 

Financial statements of Amcor Limited until 30 June 2005, had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the Amcor Limited interim financial report for the half-year ended 31 December 2005, management adopted certain changes to the accounting, valuation and consolidation methods applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the comparative figures were restated to reflect these adjustments. The consolidated entity has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005. Refer Note 1(y).

 

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRS on the consolidated entity’s equity and its profit are given in Note 10.

 

Early adoption of standard

 

The consolidated entity has elected to apply AASB 119 Employee benefits (issued in December 2004) and AASB 2004-3 Amendments to Australian Accounting standards to the reporting periods beginning 1 July 2005. This includes applying AASB 119 to the comparatives in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

 

The Australian Accounting Standards and UIG interpretations that will be effective or available for voluntary early adoption in the annual financial statements for the period ended 30 June 2006 are still subject to change and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period that are relevant to this interim financial information will be determined only when the first AIFRS financial statements are prepared at 30 June 2006.

 

8



 

Historical cost convention

 

These condensed financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, derivative financial instruments and financial assets and liabilities measured at fair value.

 

(b) Principles of consolidation

 

(i) Subsidiaries

 

The condensed financial statements incorporate the assets and liabilities of all subsidiaries of Amcor Limited (“parent entity”) as at 31 December 2005 and the results of all subsidiaries for the half-year then ended. Amcor Limited and its subsidiaries together are referred to as the Group or consolidated entity.

 

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than 50% of the voting rights.

 

Subsidiaries are fully consolidated from the date control commences until the date control ceases.

 

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Refer Note 1(h).

 

All balances and transactions between entities included in the consolidated entity have been eliminated.

 

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

 

(ii) Associates

 

Associates are all entities over which the Group has significant influence but not control. Investments in associates are accounted for by the consolidated entity using the equity method.

 

The consolidated entity recognises its share of its associates’ post-acquisition profits or losses in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the consolidated entity’s carrying amount of the investment.

 

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

9



 

(c) Foreign currency translation

 

(i) Functional and presentation currency

 

Items included in the condensed financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). These condensed financial statements are presented in Australian dollars, which is Amcor Limited’s functional and presentation currency.

 

(ii) Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses arising from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Refer Note 1(n)(ii) and 1(n)(iii).

 

Translation of differences on non-monetary items, such as equities held at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available for sale financial assets, are included in the fair value reserve in equity.

 

(iii) Group companies

 

The results and financial position of all the Group entities, excluding those in a hyperinflationary economy, that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

      assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

      income and expenses for each income statement are translated at average exchange rates, which approximates the exchange rates at the dates of the transactions; and

      all resulting exchange differences are recognised in the exchange fluctuation reserve.

 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to the exchange fluctuation reserve. When a foreign operation is sold, the cumulative exchange differences from 1 July 2004 are recognised in the income statement as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

 

(d) Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, allowances and discounts. Revenue is recognised as follows:

 

(i) 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 the risks and rewards of ownership have transferred to the customer.

 

(ii) Interest Income

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

 

10



 

(e) Government grants

 

Grants from governments are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

 

Grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the income statement on a straight line basis over the expected lives of the related assets.

 

(f) Income tax

 

(i) General

 

Income tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity.

 

Deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of an entity’s assets and liabilities in the balance sheet and their associated tax bases. The amount of deferred tax provided will be based on the expected manner of realisation of the asset or settlement of the liability, using tax rates enacted or substantively enacted at reporting date.

 

Deferred tax assets will be recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised.

 

The parent entity is the head entity in the tax-consolidated group comprising all the Australian wholly-owned subsidiaries. The head entity recognises all of the current tax liabilities of the tax-consolidated group (after elimination of intra-group 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 during the year. The contributions are calculated as if each subsidiary was a stand-alone entity. The contributions are payable annually.

 

(ii) Capital Gains Tax

 

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

 

(iii) 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.

 

11



 

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 balance sheet.

 

Cash flows are included in the cash flow statement 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.

 

(g) Leases

 

Leases under which the consolidated entity assumes substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.

 

Finance leases are capitalised at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in current and non current interest bearing liabilities. Each lease payment is allocated between the liability and the finance charges. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term, unless it is reasonably certain that ownership will be obtained by the end of the lease term where it is deprecated over the period of the expected use which is the useful life of the asset.

 

Payments made under operating leases are expensed on a straight-line basis over the term of the lease.

 

(h) Acquisition of assets

 

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published price at the date of exchange unless it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill (refer Note 1 (r)). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

 

(i) Impairment of assets

 

The recoverable amount of the consolidated entity’s assets, excluding deferred tax assets, defined benefit assets, and goodwill are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset is tested for impairment by comparing its recoverable amount to its carrying amount.

 

12



 

Goodwill and intangible assets that have an indefinite useful life and intangible assets not ready for use are tested for impairment at least annually.

 

The recoverable amount is estimated for the individual asset, or, if it is not possible to estimate the recoverable amount for the individual asset, the recoverable amount of the cash generating unit (CGU) to which the asset belongs is determined. CGUs have been determined as the smallest identifiable group of assets that generate cash inflows largely independent of the cash inflows of other assets or group of assets. Each CGU is no larger than a segment.

 

An impairment loss is recognised as an expense when the carrying amount of an asset or its CGU exceeds its recoverable amount. Recoverable amount is determined as the higher of fair value less costs to sell and value in use. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

 

In calculating value in use, the cash flows include projections of cash inflows and outflows from continuing use of the asset and cash flows associated with disposal of the asset. The cash flows are estimated for the asset in its current condition and therefore do not include cash inflows and outflows expected to arise from future restructurings which are not yet committed, or from improving or enhancing the asset’s performance. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the risks specific to the asset or CGU.

 

(j) Cash and cash equivalents

 

Cash and cash equivalents includes cash on hand and at bank, short-term money market investments included in trade and other receivables and bank overdrafts. Bank overdrafts are shown within interest bearing liabilities in current liabilities on the balance sheet.

 

(k) Trade and other receivables

 

Trade and other receivables are recognised at their cost less any impairment losses.

 

Collectibility of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An impairment loss is recognised when there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the receivables.

 

(l) 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.

 

After initial measurement of the cost of finished goods inventories, cost is determined using the most appropriate of either first-in, first-out (FIFO) or weighted average cost formula.

 

13



 

(m) Investments and other financial assets

 

From 1 July 2004 to 30 June 2005

 

The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 only from 1 July 2005. The Group has applied previous AGAAP to the comparative information on the financial instruments within the scope of AASB 132 and AASB 139. For further information on previous AGAAP, refer to the annual report for the year ended 30 June 2005.

 

From 1 July 2005

 

The Group classifies its investments into the following categories: financial assets at fair value through the profit or loss, loans and receivables, held-to-maturity investments, and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

 

At each reporting date, the Group makes an assessment as to the impairment of any financial asset or group of financial assets. This assessment is carried out, based on the existence of objective evidence of impairment. The amount of any impairment is calculated as the difference between the carrying amount of the asset, or group of assets and the estimated future cash flows. For financial assets carried at cost or amortised cost, the amount of any loss will be recognised in the income statement. For available-for-sale financial assets, the cumulative loss directly recognised in equity will be removed and recognised in the income statement.

 

(i) Financial assets at fair value through profit or loss

 

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term, or to generate short term profits, or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.

 

(ii) Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

 

(iii) Held-to-maturity investments

 

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

 

14



 

(iv) Available-for-sale financial assets

 

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

 

Purchases and sales of investments are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

 

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity in the available-for-sale fair value reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

 

The fair values of quoted investments are based on current bid prices.

 

(n) Derivatives

 

From 1 July 2004 to 30 June 2005

 

The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005. The Group has applied previous AGAAP to the comparative information on financial instruments within the scope of AASB 132 and AASB 139. For further information on previous AGAAP, refer to the annual report for the year ended 30 June 2005.

 

From 1 July 2005

 

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges); and (3) hedges of a net investment in a foreign operation.

 

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

 

15



 

(i) Fair value hedge

 

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

 

(ii) Cash flow hedge

 

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

 

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

 

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

 

(iii) Net investment in a foreign operation

 

Where effective, 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. The ineffective portion is recognised in the income statement.

 

(iv) Derivatives that do not qualify for hedge accounting

 

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

 

(o) Financial instruments included in liabilities

 

Bank overdrafts, bank loans, commercial paper, mortgage loans and other loans are initially recognised at their fair value, net of transaction costs incurred. Subsequent measurement is at amortised cost with any difference between the net proceeds and the maturity amount recognised in the income statement over the period of the borrowings using the effective interest rate method.

 

Eurobond notes and US$ notes are carried at amortised cost, translated at exchange rates ruling at reporting date. Any difference between amortised cost and their amount at maturity is recognised in the income statement over the period of the borrowing using the effective interest method.

 

16



 

Undated subordinated convertible securities are carried at amortised cost. These securities have been translated at the exchange rate ruling at reporting date. Any difference between amortised cost and their amount at maturity is recognised in the income statement over the period of the borrowing using the effective interest method. The terms and conditions of undated subordinated convertible securities outstanding are set out in the annual report for the year ending 30 June 2005.

 

From 1 July 2005

 

On transition to AIFRS, the Group reclassified the issue of $400 million of Perpetual Amcor Convertible Reset Securities (‘PACRS’) and $210 million of 2002 Perpetual Amcor Convertible Reset Securities (‘PACRS2’) from equity to liabilities. ‘PACRS’ and ‘PACRS2’ are carried at amortised cost. Any difference between amortised cost and their amount at maturity is recognised in the income statement over the period of the borrowing using the effective interest method. The recognition of the coupon payment, conversion discount and transaction costs will be recorded as a financing cost in the income statement rather than a distribution from retained earnings.

 

(p) Fair value estimation

 

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

 

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

 

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods, including discounted cash flows to calculate the fair value of financial instruments. These calculations are performed using current market inputs which may include the use of interest and forward exchange rates ruling at balance date. The Group makes assumptions concerning these valuations that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held.

 

The nominal value of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

 

(q) Property, plant and equipment

 

Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item.

 

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

 

17



 

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:

 

                  Leasehold land between 1% - 3% (2004 1% - 3%)

                  Land improvements between 1% - 3% (2004 1% - 3%)

                  Buildings between 1% - 5% (2004 1% - 5%)

                  Plant and equipment between 3% - 25% (2004 3% - 25%)

                  Finance leased assets between 4% - 20% (2004 4% - 20%)

 

The assets useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

 

Gains and losses on disposals are determined by comparing the proceeds of each disposed asset with its carrying amount, and are included in the income statement as other income.

 

(r) Intangible assets

 

(i) Goodwill

 

Goodwill represents the difference between the cost of a business combination over the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is allocated to CGUs and tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired.

 

(ii) Other intangible assets

 

Other intangible assets acquired are carried at cost less accumulated amortisation and impairment losses.

 

Expenditure on research associated with product research and development innovation is charged against net income in the year in which the expenditure is incurred.

 

Expenditure on development activities associated with product development innovation, is capitalised if the product is technically and commercially feasible and adequate resources are available to complete development. Capitalised development expenditure is amortised over the period of time during which the benefits are expected to arise.

 

Expenditure on significant commercial development, including major software applications and associated systems, is capitalised and amortised over the period of time during which the benefits are expected to arise, typically not exceeding ten years.

 

Expenditure on internally generated intangibles is charged against net income in the year in which the expenditure is incurred.

 

(s) Trade and other payables

 

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which were unpaid at the end of the financial year. These amounts are unsecured.

 

18



 

(t) Financing costs

 

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

 

Financing costs are brought to account in determining profit for the year, except to the extent the financing costs are directly attributable to the acquisition, construction or production of a qualifying asset. Such financing costs are capitalised as part of the cost of the asset up to the time it is ready for its intended use and amortised over the expected useful economic life.

 

(u) Provisions

 

A provision is recognised when there is a legal 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, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

 

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 virtually certain that the recovery will be received.

 

In the income statement, the expense recognised in respect of a provision is presented net of the recovery.

 

Restructuring

A provision for restructuring is recognised when there is:

 

a) a detailed formal plan for the restructuring at the commitment date, identifying at least: the business or part of a business concerned; the principal locations affected; and the location, function and approximate number of employees who will be compensated for terminating their services (for involuntarily terminated employees, the plan must also specifically identify the benefit formula to be used for determining individual employee involuntary termination payments, job classification and functions); and when the plan will be implemented; and the expenditures that will be made, and

 

b) the entity has announced the main features of the plan or started to implement the plan, to those affected so as to raise a valid expectation in them that the entity will carry out the restructuring.

 

Dividends

A provision for dividends payable is recognised in the reporting period in which the dividends are declared on or before the end of the financial period but not distributed at balance date.

 

Decommissioning

The present value of the estimated costs of dismantling and removing an asset and restoring the site on which it is located are recognised as an asset within property, plant and equipment and as a provision, where a legal or constructive obligation exists. At each reporting date, the liability is remeasured in line with changes in discount rates, timing and estimated cash flows. Any changes in the liability are added or deducted from the related asset, other than the unwinding of the discount, which is recognised as a financing cost in the income statement.

 

19



 

Onerous Contracts

A provision for onerous contracts is recognised when unavoidable costs under a contract, calculated as the lower of the cost of fulfilling the contract and any compensation or penalties arising from the failure to fulfil it, is loss-making, rather than simply unfavourable due to current prices. A provision is recognised only in respect of the onerous element of the contract. The provision is discounted to its present value, where the effect of discounting is material.

 

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 occurring 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.

 

(v) Employee benefits

 

(i) 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’ services provided to reporting date, and are measured at the amounts expected to be paid when the liabilities are settled.

 

(ii) Long Service Leave

Liabilities relating to long service leave are measured as the present value of estimated future cash outflows to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

 

Liabilities which are not expected to be settled within twelve months are discounted using market yields at the reporting date of high quality corporate bonds. In countries where there is no deep market for corporate bonds (such as Australia), the market yield on government bonds at the reporting date is used. The rate used reflects the terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

 

(iii) Retirement benefit obligations

The consolidated entity participates in a number of superannuation funds which were established to provide benefits for employees and their dependants. The funds cover company sponsored plans, industry/union plans, defined benefit plans and government plans.

 

Company Sponsored Plans

The principal benefits are pensions or lump sums for members on resignation, retirement, death or total permanent disablement. These benefits are determined on either a defined benefit or accumulation benefit basis.

 

Employee contribution rates are either determined by the rules of the fund or selected by members from a specified range of rates. In addition to legislative requirements, employer companies contribute to defined benefit funds as described below or, in the case of accumulation funds, the amounts set out in the appropriate fund rules.

 

20



 

Industry / Union Plans

Employer companies participate in industry and union plans on behalf of certain employees.

 

These plans operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement or death.

 

The employer company has a legally enforceable obligation to contribute at varying rates to these plans.

 

Contributions to these plans are charged to net income as and when they are incurred.

 

Government Plans

Employer companies participate in government plans, on behalf of certain employees, which provide pension benefits.

 

There exists a legally enforceable obligation on employer companies to contribute as required by legislation.

 

Defined Benefit Plans

The consolidated entity maintains several defined benefit superannuation arrangements world-wide. On a vested benefit basis, some arrangements are in actuarial surplus, others are in a position of actuarial deficiency. Surpluses and deficiencies depend on many diverse factors and can vary significantly over time having regard, for example, to movements in the investment markets, future salary increases and changes in employment patterns.

 

The consolidated entity’s current intention is to make annual contributions to defined benefit funds at a rate determined from time to time, following discussions with the funds’ actuaries or other competent authorities and advisers. The consolidated entity expects that the contribution rates will be determined after taking into account sound actuarial principles and would be designed to enable all Group defined benefit funds to meet retirement expectations and relevant regulatory requirements. The consolidated entity’s current intention is based on these assumptions.

 

A liability or asset in respect of defined benefit superannuation plans is recognised in the balance sheet, and is measured as the present value of the defined benefit obligation at the reporting date plus unrecognised actuarial gains (less unrecognised actuarial losses) less the fair value of the superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

 

Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

 

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity.

 

21



 

Past service costs are recognised immediately in income, unless the changes to the superannuation fund are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

 

Future taxes that are funded by the entity and are part of the provision of the existing benefit obligation (eg taxes on investment income and employer contributions) are taken into account in measuring the net liability or asset.

 

Defined contribution plans

Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

(iv) Share-based payments

 

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.

 

A number of sub-plans exist under the ESPP, including the Employee Incentive Share Plan (“EISP”), the Senior Executive Retention Share Plan (“SERSP”) and the Senior Executive Retention Payment Plan (“SERPP”). Under the EISP the number of shares issued to full-time employees is dependent on the percentage increase in the consolidated entity’s earnings per share (before significant items) for the year ended 30 June over those of the previous year. This sub-plan has been discontinued for the foreseeable future. Where loans are made to assist in the purchase of shares under this sub-plan, they are treated as a reduction in equity and not recognised as a receivable. Repayments are recorded as contributions to share capital. Shares are held in trust until the loan is settled.

 

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.

 

Share options granted before 7 November 2002 which have vested before 1 January 2005

 

No expense is recognised in respect of these options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital.

 

22



 

Share options granted after 7 November 2002 which have vested after 1 January 2005

 

The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date taking into account market performance conditions only, and spread over the vesting period during which the employees become unconditionally entitled to the options. The fair value of options granted is measured using the Black Scholes model. The amount recognised as an expense is adjusted to reflect the actual number of options that vest, except where forfeiture is due to market related conditions.

 

Upon exercise of the options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

 

(v) Profit Sharing and Bonus Plans

 

A liability and an expense 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.

 

(w) Issued capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

(x) Earnings per Share (EPS)

 

(i) Basic Earnings per Share

Basic earnings per share is calculated by dividing the net profit attributable to members of the company for the reporting period, by the weighted average number of ordinary shares of the company, adjusted for any bonus issue.

 

(ii) Diluted Earnings per Share

Diluted EPS is calculated by adjusting the basic EPS for the after tax effect of financing costs and the effect of conversion to ordinary shares associated with dilutive potential ordinary shares.

 

The diluted EPS weighted average number of shares includes the number of ordinary shares assumed to be issued for no consideration in relation to dilutive potential ordinary shares. The number of ordinary shares assumed to be issued for no consideration represents the difference between the number that would have been issued at the exercise price and the number that would have been issued at the average market price.

 

The identification of dilutive potential ordinary shares is based on net profit or loss from continuing ordinary operations and is applied on a cumulative basis, taking into account the incremental earnings and incremental number of shares for each series of potential ordinary shares.

 

23



 

(y) Change in accounting policies – financial instruments

 

The consolidated entity has elected not to restate comparative information for financial instruments within the scope of Accounting Standards AASB 132 Financial Instruments: Disclosure and presentation and AASB 139 Financial Instruments: Recognition and Measurement, as permitted on the first-time adoption of AIFRS. The effect of changes in the accounting policies for financial instruments on the balance sheet as at 1 July 2005 is shown below.

 

 

 

Note

 

30 June
2005

 

Effect of
adoption

 

01 July
2005

 

 

 

 

 

$m

 

$m

 

$m

 

Current assets

 

 

 

 

 

 

 

 

 

Cash assets

 

 

 

210.8

 

 

210.8

 

Trade and other receivables

 

(iii),(iv),(vii),(ix)

 

1,843.7

 

(120.8

)

1,722.9

 

Inventories

 

 

 

1,440.1

 

 

1,440.1

 

Other current financial assets

 

(iv),(vi)(vii)(viii)

 

 

109.6

 

109.6

 

Total current assets

 

 

 

3,494.6

 

(11.2

)

3,483.4

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

45.1

 

 

45.1

 

Investments accounted for using the equity method

 

(vi)

 

40.7

 

6.6

 

47.3

 

Other non-current financial assets

 

(iv)

 

7.7

 

4.0

 

11.7

 

Property, plant and equipment

 

 

 

4,426.8

 

 

4,426.8

 

Intangible assets

 

 

 

1,998.0

 

 

1,998.0

 

Deferred tax assets

 

(xi)

 

349.9

 

22.0

 

371.9

 

Other

 

(iii),(vi)

 

96.3

 

(15.6

)

80.7

 

Total non-current assets

 

 

 

6,964.5

 

17.0

 

6,981.5

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

10,459.1

 

5.8

 

10,464.9

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

(ii),(ix)

 

1,995.0

 

9.2

 

2,004.2

 

Interest bearing liabilities

 

(iii)

 

887.2

 

(1.3

)

885.9

 

Other financial liabilities

 

(vii),(viii)

 

 

7.5

 

7.5

 

Current tax liabilities

 

 

 

82.5

 

 

82.5

 

Provisions

 

(ii)

 

291.0

 

(8.7

)

282.3

 

Subordinated convertible securities

 

(i)

 

 

414.6

 

414.6

 

Total current liabilities

 

 

 

3,255.7

 

421.3

 

3,677.0

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

(vii),(viii)

 

4.8

 

5.6

 

10.4

 

Interest bearing liabilities

 

(iii),(v)

 

1,917.3

 

(10.2

)

1,907.1

 

Deferred tax liabilities

 

(xi)

 

517.3

 

(1.0

)

516.3

 

Provisions

 

 

 

126.7

 

 

126.7

 

Retirement benefit obligations

 

 

 

358.9

 

 

358.9

 

Subordinated convertible securities

 

(i)

 

301.1

 

215.2

 

516.3

 

Total non-current liabilities

 

 

 

3,226.1

 

209.6

 

3,435.7

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

6,481.8

 

630.9

 

7,112.7

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

3,977.3

 

(625.1

)

3,352.2

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Issued capital

 

(i)

 

3,326.5

 

(596.6

)

2,729.9

 

Reserves

 

(ix),(x)

 

(147.3

)

(29.2

)

(176.5

)

Retained profits

 

(iii),(v),(vi)

 

720.1

 

0.7

 

720.8

 

Total equity attributable to equity holders of the parent

 

 

 

3,899.3

 

(625.1

)

3,274.2

 

Minority interest

 

 

 

78.0

 

 

78.0

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

 

3,977.3

 

(625.1

)

3,352.2

 

 

24



 

The following financial assets and financial liabilities were designated at fair value through profit or loss from 1 July 2005.  These financial assets and financial liabilities were previously measured at cost:

 

 

 

 

 

Carrying

 

 

 

Fair value at

 

amount at 30

 

 

 

1 July 2005

 

June 2005

 

 

 

$m

 

$m

 

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

Derivatives hedging employee share plan

 

 

 

 

 

- Equity share options

 

1.5

 

2.9

 

- Equity share swaps

 

3.8

 

4.1

 

 

 

5.3

 

7.0

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest free loan

 

 

2.3

 

 

The following transitional provisions have an effect on future periods:

 

      On initial recognition, certain financial assets and liabilities were measured at fair value through profit and loss

      The effectiveness of hedging relationships was assessed at 1 July 2005.  As provided under AASB 1, assessment of effectiveness at hedge inception has not been undertaken where the hedge was entered into before 1 July 2005.

 

The adjustments made at 1 July 2005 to restate the opening balance sheet to comply with AASB 132 and 139 are listed below:

(i)            The Perpetual Amcor Convertible Reset Securities (PACRS) have been reclassified from issued capital of $596.6 million to current and non-current subordinated convertible securities of $414.6 million and $215.2 million respectively.  The conversion discount of $32.1 million and transaction issue costs of $13.3 million have been set off against the carrying value of the PACRS at amortised cost.  Over the life of the PACRS, these amounts will be reflected in the income statement using the effective interest method.

(ii)           The coupons on the PACRS from 1 July 2005 are recorded as a finance cost, rather than a distribution from retained earnings.  Therefore, the accrual of the coupons results in an increase to current payables of $8.7 million and was offset by a decrease in current provisions of $8.7 million.  The increase to finance costs for the 6 months to December is $26.6 million.

(iii)          Interest bearing liabilities have been measured at amortised cost which includes the netting of deferred finance costs previously recognised in assets.  The following adjustments were made:

      current receivables decreased by $1.3 million

      non-current other assets decreased by $8.4 million

      current interest bearing liabilities decreased by $1.3 million

      non-current interest bearing liabilities decreased by $7.9 million, and

      a decrease of $0.5 million to retained profits.

(iv)          Financial instruments in relation to various employee equity share and option plans have been measured at fair value and have resulted in a decrease of $7.0 million in current receivables and an increase of $1.3 million and $4.0 million in other current and non-current financial assets.

 

25



 

(v)           The measurement of interest bearing liabilities at fair value resulted in a decrease in non-current interest bearing liabilities of $2.3 million and an increase in retained profits of $2.3 million.

(vi)          The equity method investment in Vision Grande was remeasured to reflect the consideration for the option to purchase shares.  In addition the 96 million options to acquire shares in Vision Grande, held at 1 July 2005 were recorded at their fair value.  This resulted in an increase in the equity method investment of $6.6 million and an increase in other current financial assets of $29 million.

(vii)         Certain financial instrument derivative amounts previously recognised in current receivables and non-current payables have been reclassified to increase other current financial assets by $78.2 million and decrease other current financial liabilities by $5.0 million respectively.

(viii)        The recognition and measurement of all derivatives at fair value, resulting in:

      other current financial assets and liabilities of $1.1 million and $12.5 million, and

      non current trade and other payables of $0.6 million.

(ix)           The transfer of deferred hedging gains and losses relating to interest rate risk on various interest bearing liabilities.  These amounts were designated and accounted for as cash flow hedges. The effect of this adjustment is to:

      decrease current asset receivables by $35.5 million

      decrease current liability payables by $1.5 million, with

      the net decrease of $34.0 million recognised in reserves, and

      an increase of $10.2 million in reserves for the tax effect.

(x)            The deferral in equity of the effective portion of the fair value of derivatives designated and accounted for as a cash flow hedge of underlying forecast foreign exchange and commodity exposures.  This resulted in a decrease of $4.4 million in reserves.

(xi)           The recognition of deferred tax assets of $22 million and a reduction in deferred tax liabilities of $1 million in relation to the adjustments described above.

 

26



 

Note 2.           Segment reporting

 

 

 

Amcor

 

Amcor

 

Amcor

 

Amcor

 

Amcor

 

 

 

Inter- segment

 

 

 

 

 

PET

 

Australasia

 

Flexibles (1)