MacKenzie reveals timeline for Amcor/Alcan cost savings

In an address to the Australian group’s AGM this morning, MacKenzie reported healthy first-quarter trading at the group and laid out a timeline for when he expected the company to realise annual savings of up to AUS$250m (around £140m) from the merger of the two businesses.

MacKenzie also said that he would aim to improve Alcan Packaging’s profitability, which, he said, was running at a pre-tax margin of 4.8% in the first half of 2009 compared to 9.4% for Amcor’s businesses.

In August, Amcor offered US$2.025bn to buy four of Alcan’s packaging businesses – Global Pharmaceuticals, Food Europe, Food Asia and Global Tobacco – in a deal that will create a group with around $12bn of sales and 300 factories across the globe.

At the time of the acquisition’s announcement, MacKenzie predicted that the integration of the two companies would create cost savings of AUS$200m-$250m.

This morning, he revealed that 45% of those savings would happen in the first year through “overhead reductions related to the removal of duplicated functions”.

Around 25% of the savings, he said, would come from improved procurement. “The assumption here is the harmonisation of lowest prices across the two businesses with the key area of opportunity in raw materials,” he said.

He said that operational synergies would account for the remaining 30% of the savings. However, he said that no decisions had been taken as yet on placnt closures and that normal processes with works councils would be observed before any final decisions were made.

On the benefits of the acquisition, MacKenzie said: “First, we will have broader geographic coverage and this will create greater manufacturing flexibility to respond to customer needs from multiple locations improving the security of supply.

“Second, the combined group will be capable of greater innovation and development of new technologies. For customers, this presents the opportunity to work with a supplier that has an enhanced breadth and depth of expertise to meet specific market requirements.

“Third, the combined Amcor and Alcan operations are well capitalised and the manufacturing footprint will be capable of absorbing the anticipated market growth over the next few years. At the same time the strong cash flows will allow the business to selectively invest to grow with our customers.”

Click here for a full transcript of MacKenzie’s speech to Amcor’s AGM

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