Amcor - Case Study

Essay by malaysiafarmerUniversity, Master'sB-, May 2006

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Executive Summary

Amcor is a major packaging company that has expanded its global business through various acquisitions worldwide. The strategy adopted by the company is in line with the vision of the company to gain competitive edge over its competitors. Besides being in the packaging industry, it has diversified into other market segments in order to avoid being tied down in one segment. After a series of acquisitions, Amcor has decided to consolidate its position so as to improve its financial viability. This can be owed to the fact that the Australian dollar appreciated against US and Euro currencies. As a result the profits have reduced and no further expansion is possible. The expansion has exposed the company to a greater liquidity risk.

So it is advisable for Amcor to avoid any further expansion because it can increase the interest rate risk, liquidity problems and expenditures. This could ultimately affect the cash flow.

Consolidation can help the company to repatriate its returns while profits are low due to exchange rate fluctuation. The gearing level has increased over time which is not advisable. The current ratio is not relatively high compared to the industry average. This is not a good sign since Amcor being a manufacturer has stocks of finished goods, raw materials and work in progress to be held. Amcor should maintain its efficiency of asset utilization in sales generation. The net profit margin should be increased in the future and thereby improve the profitability.

Through proper financial management the risk that rose from the acquisitions can be negated in the future. Amcor can definitely turn out to capture more market share and dominate over its competitors.

1.0 Introduction

Here in this paper, Amcor's acquisitions are being analyzed and whether its expansions are risk oriented and if returns can be...