Following strong gains today the shares of packaging giant Amcor Limited (ASX: AMC) have now returned to the level they were trading at in June before the announcement of a US$350 million writedown on its Venezuelan packaging operations.
In the days following the write down announcement its shares dropped as low as $14.19, but after reporting its full year results today the bulls are well and truly back in control with its share price at one stage over 5% higher and touching on $16.14.
Although Amcor reported a 2% drop in sales revenue to US$9.4 billion and flat underlying net profit after tax of US$671.1 million, investors appear to be focusing on its constant currency result which removes currency fluctuations.
On a constant currency basis revenue would have been up a solid 3.7% and net profit after tax would have risen by 7.5% on last year's result. Profit before interest and tax rose 7% in constant currency terms, with management advising that 4% was attributable to organic growth and 3% as a result of acquisitions it made during the financial year.
In just over 12 months the company has made no less than eight acquisitions across the world. It is pleasing to see that collectively they have been accretive to earnings this year.
I was also pleased to see Amcor's Rigid Plastics and Flexibles segments posted solid earnings growth of 10% and 7% respectively. Even better was the fact that management provided a positive outlook on each segment for the year ahead. This was especially the case with the Flexibles segment which management expects will deliver particularly strong earnings growth in FY 2017.
Based on its underlying earnings per share of 57.7 US cents (75.6 Australian cents), its shares are changing hands at 21x full year earnings. This puts it in line with Orora Ltd (ASX: ORA), but at a slight discount to Pact Group Holdings Ltd (ASX: PGH).
Overall I would say this is a solid result and I can fully understand why investors have been driving the share price higher today. Whilst I have a slight preference for its spun-off Orora business, there's admittedly not much between the two in my opinion.
