Amcor Flexibles Americas announces 5-10% price hike

16-Oct-2017 - Last updated on 16-Oct-2017 at 13:18 GMT

AFA makes packaging for confectionery. Pic: Amcor.

Amcor Flexibles Americas (AFA), which supplies flexible packaging for bread, dairy, confectionery, snacks and coffee, has implemented a 5-10% price increase on its products.

The increase will affect products in North and South America, which the company said is the result of recent spikes in raw material costs, the aftermath of natural disasters and supply chain disruptions.

16 plants

AFA contacted customers this month to implement the price adjustments.

The increases range from 5-10% in South America, with similar increases underway in North America.

“Recent natural disasters have caused resin and other raw material costs to rise significantly, and we, like our industry peers, are facing supply chain disruptions,” said Tom Cochran, president, AFA.

“We remain committed to finding solutions to minimize the disruption of these events to our customers and will continue to implement various contingency plans, leveraging Amcor’s global scale.”

AFA, a division of Amcor, operates 16 plants in six countries, covering the food, beverage, pharma, personal care, medical and industrial markets.

Despite the news, the company announced its 2017 financial year results in August claiming underlying PBIT and EPS grew 9% and 10%, respectively, on sales growth of 4% for the year.

“Amcor’s strong full-year results reflect the progress we have made on our strategic investments and the benefits of our broad mix of geographic exposures,” said Ron Delia, CEO, Amcor, at the time.

“Earnings were up strongly in both the Flexibles and Rigid Plastics segments, driven by organic growth and acquisitions. Across developed markets, earnings grew at rates which exceeded overall market growth. In emerging markets, we delivered increased earnings in the face of difficult conditions in several countries.

“Important progress was made against our strategic priorities with investments in the Alusa and Sonoco acquisitions and the proactive restructuring initiatives in the Flexibles segment. Together, these investments contributed around $60m to PBIT and they will underpin more than $100m of additional PBIT growth over the next three years, in addition to organic growth and further M&A.”

Protective-layer packaging

The report stated AFA sells into the protective-layer food and healthcare market segments and has a range of organic and acquisition growth opportunities across North and South America.

In the last 18 months, it said the acquired Alusa and Deluxe Packages businesses created a strong platform for continued growth in a region that accounts for approximately 30% of global flexible packaging consumption.

The $435m acquisition of Alusa in South America was completed in June 2016. The business has four plants in Chile, Peru, Argentina and Colombia. Its portfolio includes film extrusion, flexographic and gravure printing and lamination and produces flexible packaging for food, personal care and pet food.

“The Flexibles segment is expected to deliver another year of strong PBIT growth in the 2017/18 financial year, compared with PBIT of €738.8m achieved in the 2016/17 year,” added Cochran.

“This outlook takes into account: incremental restructuring benefits of approximately $25m to $30m (approximately €23m to €28m); incremental net synergy benefits of $10m to $15m related to the Alusa acquisition.

“In the first half of 2017/18, earnings will be impacted by integration costs of approximately $5m related to the Alusa and Hebei Qite businesses, and will be dependent on raw material cost development, including the timing of recovering higher raw material costs experienced in the fourth quarter of 2016/17.”