Amcor Limited is the Australian packaging company and various segments of the company include Amcor Flexibles, Amcor Rigid Plastics and other investments. The company is the global leader in producing and developing the responsible and high quality packaging for wide range of foods, pharmaceuticals, beverages, personal care, home products, medical devices, and various other packaging requirements (Amcor.com 2018). On the other hand, the main competitor of the company Bemis Company are well known for creating exceptional packaging for consumer product, food, industrial applications and healthcare products (Bemis Company 2018).
Profitability analysis and comparison with competitor
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Ratio
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Formula
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Amcor
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Bemis
|
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2017
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2016
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2017
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2016
|
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Gross profit
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Gross profit/sales*100
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21.01
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21.17
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19.41
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21.63
|
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Operating profit
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Operating profit/sales*100
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10.47
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6.11
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2.86
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10.22
|
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Net profit
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Net profit/Sales*100
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6.75
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2.90
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2.32
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5.90
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Looking into the financial statement of Amcor Limited it can be identified that the gross profit of the company has been reduced from 21.17% to 21.01% over the year from 2016 to 2017 whereas the gross profit of its competitor Bemis Company is reduced from 21.63% to 19.41% over the same period. If the operating profit of 2 companies are considered it can be observed that the where the operating profit of Amcor Limited is increased from 6.11% to 10.47%, the operating profit of Bemis company has been reduced from 10.22% to 2.86% over the last 2 years (Han, Yang and Zhou 2013). Finally, if the net profit of the companies are analysed it can be observed that the net profit of Amcor Limited has been increased from 2.90% to 6.75% whereas the net profit of Bemis company is reduced from 5.90% to 2.32% over the years from 2016 to 2017. Therefore, the overall profitability position of Amcor Limited has been improved in 2017 as compared to 2016. On the contrary, the profitability position of Bemis Company has been deteriorated in 2017 as compared to 2016.
Analysis of cash flow statement
Analysing the cash flow statement of Amcor Limited it is observed that the cash flow statement of the company is segregated into 3 parts – operating cash flows, cash flows from investing activities and cash flows from financing activities. It can be identified that the company’s main operating activities include dividend received, income taxes paid, interest received and paid, increase or decrease in the trade and other receivables, movement in operating assets, trade and other payables, provisions, employee benefits, foreign exchange gain or loss, non-cash retirement benefits, impairment, amortisation and depreciation losses, gain from non-current assets and expenses related to share based payments and other sundry items (Reid and Myddelton 2017). Amount of cash flows from operating activities for the year ended 2017 was $ 1027.40 million as against $ 1099.40 for 2016. Major activities included under the investing activities of the company are payment for taking over the controlled companies, associates and businesses, proceeds from the disposal of plant, property and equipment and payment made to the purchase of property, plant and equipments and the intangible assets. Net cash expensed for the investing activities for the year ended 2017 amounted to $ 632.60 million as against the amount of $ 997 million for the year ended 2016. If the financing activities are analysed it can be observed that the main activities included under the financing activities are the proceeds from issuance of shares, payment made for purchasing the on-market shares and settlement of the forward contracts, payment made for the treasury shares, buyouts of the non-controlling interests, proceeds received from the borrowings, repayment made towards borrowings, repayment made for principle lease and payments made for dividend and other distributions related to equity. Net payment made towards financing activities amounted to $ 337.0 million for the year ended 2017 as compared to $ 126.90 million for the year ended 2016. Therefore, the cash and the cash equivalents of the company for the year ended 2017 amounted to $ 561.50 million, out of which $ 3.8 million were paid as bank overdrafts. Therefore the final cash and cash equivalent of the company for the year ended 2017 amounted to $ 557.70 million. Hence, it can be stated that the company’s cash flow position is favourable as it was able to generate positive cash from the operating, investing and financing activities after making the associated payments related to those activities (Pavlovi? and Bogdanovi? 2013).
Analysis of balance sheet
Analysing the balance sheet of the company for the year ended 2017 it is identified that the total current assets of the company amounted to $ 3286.50 million as compared to the current liabilities of 4012.40 million for the same period. Therefore, it is observed that current assets of the company are not sufficient to pay off the current obligations. Thus the company shall pay off its short term obligations to make the balance among the current assets and current liabilities (Babalola and Abiola 2013). Further, it is identified that the amount of total liabilities of the company is $ 8191.80 million as against the equity of $ 891.5. It signifies that significant portion of the company’s assets are purchased through borrowing and very less amount is purchased through investors fund that is through equity. This ratio of debt and equity is also signifying that the capital structure of the company includes significantly high proportion of debt component as compared to the equity component (Delen, Kuzey and Uyar 2013). High debt proportion of debt signifies that the company is highly leveraged and is highly burdened with the interest payment obligation. Therefore, very high level of debt proportion can lead the company to a situation where the sustainability and going concern status of the company may fall under doubt as the company may not be in a position to pay off the claims of the lenders (Klettner, Clarke and Boersma 2014). Hence, it is suggested that Amcor Limited shall pay off its borrowing and for further requirement of additional fund it shall raise it through equity rather than obtaining through borrowings.
References
Amcor.com., 2018. Amcor - Global leader in developing and producing high-quality, responsible packaging. . [online] Available at: https://www.amcor.com/ [Accessed 11 May 2018].
Babalola, Y.A. and Abiola, F.R., 2013. Financial ratio analysis of firms: A tool for decision making. International journal of management sciences, 1(4), pp.132-137.
Bemis Company, I., 2018. Bemis Packaging Solutions | Bemis Company, Inc. . [online] Bemis.com. Available at: https://www.bemis.com/about-bemis [Accessed 11 May 2018].
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Han, Y., Yang, K. and Zhou, G., 2013. A new anomaly: The cross-sectional profitability of technical analysis. Journal of Financial and Quantitative Analysis, 48(5), pp.1433-1461.
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), pp.145-165.
Pavlovi?, M. and Bogdanovi?, J., 2013. Cash flow statement. Škola biznisa, (3-4), pp.129-147.
Reid, W. and Myddelton, D.R., 2017. Cash flow statement. In The Meaning of Company Accounts (pp. 16-16). Routledge.
