Amcor Limited

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Amcor Limited

South Gate, South Melbourne
Victoria 3205
Australia
(03) 615 9000
Fax: (03) 614 2924

Public Company
Incorporated: 1926 as Australian Paper Manufacturers Ltd.
Employees 16,700
Sales: A$4.50 billion (US$3.48 billion)
Stock Exchange: Associated Australian Stock Exchanges

Amcor Limited is among the top 20 Australian companies with extensive interests in metal, plastic, and paper packaging. Amcor also has substantial interests in pulp and paper and other forest products, in tissue and personal-care markets, and in trading and distribution of paper, packaging, and other products, together with a large investment in Mayne Nickless Ltd., a major Australian transport services and security company.

Its head office is in Victoria’s capital, Melbourne, with which it has been associated since its earliest days. The group’s employees are now spread through 11 countries-Australia, New Zealand, the United States, the United Kingdom, Canada, France, Hong Kong, Singapore, Malaysia, the People’s Republic of China, and Papua New Guinea. It is the leader of the Australian packaging industry, is the largest integrated producer of pulp, paper, and other forest products, and is Australia’s largest private forest plantation owner with 85,000 hectares of land. Amcor adopted its current name in May 1985 and its major period of expansion and acquisition has taken place since that time.

Amcor began as a papermaking business—Australian Paper Manufacturers (APM). The origins of APM—although it was not incorporated under this name until many decades later-can be traced back to the 1860s and to some of the earliest of Australia’s ventures in this field.

In New South Wales and neighboring Victoria the 1860s were years of rapid industrial growth. The gold rushes brought an explosion in population—and thus, of the labor force—as well as rising prosperity, and the introduction in Victoria of a protection policy for manufacturers created a climate in which the number of factories increased. The papermaking industry was no exception to this trend.

In 1864 Murray built the Collingwood mill at Liverpool, New South Wales, for the Australian Paper Company. In Melbourne in 1868 Samuel Ramsden built his own mill and began production with the Number One Paper Machine. Approximately 70 people were employed at it, including about 40 women who spent their days sorting rags. In 1871 William Fieldhouse erected Melbourne Number Two Paper Machine adjacent to Ramsden’s mill; the following year Ramsden bought it from him. By 1895 when the Australian Paper Mills Company was formed and registered, it combined mills in Melbourne, Broadford, and Geelong; its capital was A$214,000 and its output approximately 730 tons per year. In 1896 it became the Australian Paper Mills Company Ltd.

Meanwhile, in the New South Wales capital of Sydney, in 1883, John Thomson Brown had begun a business trading in meat, grain, and farming, and household goods, which was to play an important role in APM/Amcor’s future. In 1885 David Henry Dureau became the business’s Melbourne partner.

Shortly after the new Australian federal government was inaugurated in 1901, it adopted the Victorian policies of protectionism. In the same year the Federal Paper Mills were established at Botany, New South Wales, with their Number One Paper Machine up and running by 1902.

Brown and Dureau’s company thrived. It adopted the name Brown & Dureau Ltd. in 1903 and was incorporated in 1910. Over the years, as general commission agents, Brown & Dureau handled a wide range of goods. It was the first exporter of Australian coal to Japan and the United Kingdom and also developed a flourishing export business in iron and steel products, metals, textiles, chemicals, and marine and general food products.

In the 1910s and 1920s Australian Paper Mills Company— like the country’s economy as a whole—entered a period of expansion as Australia’s overseas trade doubled within the first 30 years of the century. In 1920 Australian Paper Mills Company Ltd. amalgamated with Sydney Paper Mills Ltd. to form the Australian Paper and Pulp Company Ltd. in 1926, by amalgamation of Cumberland Paper Board Mills Ltd. with the Australasian Paper and Pulp Company Ltd., the operating company of Australian Paper Manufacturers Ltd. (APM) was formed—and was to continue to operate under this name, as the pulp and papermaking arm of Amcor, to the present day. The following March, APM Ltd. bought Commonwealth Board Mills and established Austral Waste Products, a waste paper collecting subsidiary at Abbotsford, Victoria, in buildings formerly owned by the Commonwealth Board Mills.

APM’s current wood intake is about 50% eucalyptus and 50% pine—both from domestic sources. Between 1900 and 1903 imported wood pulp was first used in Australia at the APM’s Barwon paper mill. In 1921 2.5 tons of paper were made from eucalyptus pulp at Botany. In 1936 an agreement was signed between APM Ltd. and the Victorian Forest Commission covering the procurement of wood pulp. On December 23 of that year the Wood Pulp Agreement Act 1936 was passed by the Victorian parliament and led to the establishment of the Mary vale pulp mill. The pilot mill went into semi-commercial production of eucalyptus kraft pulp in March of 1938 and the main mill started commercial production the following year. It is in operation to this day.

The year 1939 saw the outbreak of World War II and of the worst bush fires in Victoria’s history; APM’s mill buildings survived, but almost all of its prime source of pulp wood was destroyed. However, the company found that fire-killed timber could be used for pulping. With the advent of war, imports ceased abruptly, price controls were imposed by the federal government, a wartime profits tax was imposed, and Australian industries were urgently required to provide military equipment and meet defense needs. Within two years, 70% of APM’s total production was used directly in the manufacture of munitions and war equipment, and the rest for essential business and consumer uses. During this period, APM proved its strength as an innovator, supplying purified cellulose for the manufacture of smokeless cordite and other propellants for the Allied forces and developing special papers and boards to resist moisture penetration for the troops fighting in tropical regions.

Wartime conditions also prompted APM to increase its self-sufficiency, not only in pulp supplies—in 1938-1939 80% of APM’s total pulp requirements were imported, compared to the end of the war, when 80% of raw materials were from local sources—but also in fuel; in 1946, the company acquired a controlling interest in Maddingley Brown Coal Pty Ltd. which, with the purchase of further coal-bearing land, soon produced 10,000 tons of coal per week and supplied all of the Victoria mills together with other commercial and public enterprises. Maddingley Brown Coal was eventually sold in 1989.

APM, designated a “protected” industry by the federal government during the war, nevertheless saw 25% of its work force enlisted, and recruited women to work in the mills. However, despite this and other hardships—such as a coal strike in New South Wales and further bush fires in 1944—the company managed to continue the expansion of its mills and production grew dramatically from 92,000 tons in 1938, to 124,000 tons in 1941, and to 131,000 tons in 1942. Toward the end of the war, APM’s managing director Sir Herbert Gepp set up a Postwar Planning Committee to win back freedom from government control and wartime profit tax, and to prepare a case for reasonable tariff protection against the inevitable resurgence of competitive imports. The committee also discussed APC’s future strategy, which was to include the extension and expansion of operations in wrapping paper and board; expansion into converting, through the manufacturing of cartons and containers from APM’s paper and board; and the manufacture of allied products such as cellophane and tissues.

The war also resulted in major reorganizations, both financial and administrative; in the development of public relations at APM; and in a new emphasis on industrial relations. The company still had a monopoly on the country’s wrapping paper and board markets and was firmly established in mainland Australia as its largest paper and pulp company. In the 1950s APM made an initial foray into the corrugated packaging industry in which it was later to make significant acquisitions; the history of the packaging arm of the group is primarily a history of takeovers. Before 1940 there were four Australian companies operating in the field. J. Fielding & Co. was the earliest, in 1914 installing the first corrugator at Buckingham Street in Sydney, to produce the corrugating medium for packaging. In 1950 APM bought the first 96-inch corrugator, planning to install it on the Springvale wastepaper recycling site, but instead sold it to Fieldings.

In the 1960s APM extended its interests to the production of other paper products. In 1963 it established in partnership with Kimberly-Clark Corporation of the United States, the jointly owned Kimberly-Clark Australia Ltd., which produced all kinds of tissues.

In the 1970s Brown & Bureau acquired Eastern Tool Company, Lukey Mufflers, and Angus Hill Holdings, which were to form the nucleus of Amcor’s present-day automotive division. In the 1980s Amcor’s major acquisitions were Ingram Corporation Ltd. and Edwards Dunlop & Co. Ltd., a paper merchant and stationery manufacturer that went back to 1869. Out of this latter acquisition grew the present merchanting, stationery and designer products division.

In 1975 Stan Wallis became deputy managing director of APM. In 1977 he was appointed managing director. According to a retrospective ten years later in the Financial Times, he was “the strategist behind the programme”—the program which brought Amcor the strong balance sheet and prudent financial ratios with which it began the 1990s.

From the late 1970s, under Stan Wallis, APM began a process of diversification. One of the most important acquisitions was that of Brown & Dureau in the financial year 1978-1979; this brought Amcor substantial interests in the fields of international trading, automotive, retailing, and aviation.

Over the same period APM acquired first 20% and then 40% of James Hardie Containers, manufacturers of corrugated fiber boxes for packaging food and drink. In 1986 APM bought the balance of James Hardie Containers and an era of rationalization began. During this period plants were acquired from Reed Corrugated Containers, J. Fielding & Co., Tasman U.E.B., United Packages, Corrugated Paper, Fibreboard Containers, Fibre Containers, J. Gadsden Paper Products, Tasmanian Fibre Containers, and Cardboard Containers. In the 1980s APM Packaging established two plants at Smithfield, New South Wales, and at Scoresby, Victoria, and in the financial year 1988-1989 it bought 46% of Universal Containers, Sydney. APM Packaging has more than 25,000 employees in 14 corrugated box plants, as well as supporting sheet plants, and eight distribution centers throughout Australia. During the 1980s Amcor’s key objectives were to broaden its range of activities, particularly into packaging; to restructure its core pulp and paper businesses and integrate forward into paper converting in Australia; and to commence major overseas expansion.

In the 1980s Stan Wallis embarked on an ambitious program of capital investment in import-substituting plant and in reopening existing plant to supply growing export markets. In 1987 the Financial Times put a figure of A$700 million on the planned investment in plant and machinery. A subsequent source—Amcor’s annual report 1989-1990—recorded expenditure during the five years to June 1990 of A$2 billion on capital equipment and acquisitions. Yet for all the ambition of the program—in terms of value—funding for Amcor’s investments came principally from internal cash flow, also from the sale of assets and some borrowing. The program was financially conservative.

In 1982 APM acquired Containers Packaging—the fourth major wholly owned Amcor subsidiary. The same year New Zealand Forest Products (NZFP)—that country’s leading forestry group—and Amcor formed a joint venture company with 50% shares each, called Anfor. This was set up to develop a corrugated box plant in Hong Kong, with NZFP supplying liner board and Amcor the corrugating medium to make boxes to be sold to Chinese, South Korean, and Japanese customers. Anfor operates corrugated box plants with local partners in Singapore and Malaysia as well as in Hong Kong. In 1986-1987 Kiwi Packaging, New Zealand, became a wholly owned subsidiary of Amcor and runs five corrugating plants and two sheet plants. In 1989-1990 Sunclipse Incorporated was acquired. This is a California-based corrugated box manufacturer and distributor of packaging products. Amcor Packaging (Europe) Ltd. is one of the most recent developments and constitutes Amcor’s first direct investment in the United Kingdom—a corrugated box plant on a greenfield site in Cambridgeshire which currently employs about 130 people. A 49% share in SACOC, a French corrugated box manufacturer, was also acquired in 1989-1990.

How far Amcor succeeded in its objective of diversification can be judged from Chris Sherwell’s comment in the Financial Times, January 1987: “Some idea of where the company fits into Australian life can be gleaned from a single revealing picture in its latest annual report. It shows a small group enjoying a traditional outdoor barbecue picnic. Practically every item on the table—the beer and the soft-drink cans, plastic fruit juice bottles, cooler box, salt and pepper containers, bread and cheese wrappers and paper tissues—is an Amcor product.”

But not all of Stan Wallis’s plans were successful. In April 1987 a possible merger between New Zealand Forest Products and Amcor was announced. The proposed merger would cover only the pulp and paper production and marketing of the two companies. It would stop short of a full merger of operations. In August 1987 Amcor received the New Zealand Commerce Commission’s decision: the merger would not go ahead.

The principal reason for the commission’s rejection was that the proposed new entity would have a virtual monopoly of the manufacture and import of kraft paper and paperboard in New Zealand. The same obstacle did not impede Fletcher Challenge, Amcor’s main domestic rival. Amcor promptly sold its 11% stake in NZFP to the Rada Corporation as a defense, some thought, against a Fletcher Challenge takeover.

Amcor, under Stan Wallis, turned its eyes to offshore investment opportunities. In 1988, the year following the failed merger with NZFP, the group announced it was concentrating on overseas business expansion; as evidence it switched Don B. Macfarlane to the newly created post of general manager of international business development.

According to Amcor, the creation of Macfarlane’s new post signified its commitment to a structured and systematic approach to expansion outside Australia. He was to report directly to Stan Wallis.

In June 1989 Amcor bought Twinpak, the largest plastics containers producer in Canada with 13 plants spread across the country. The acquisition accounted for a significant proportion of the 32% increase in containers packaging sales in the financial year 1989-1990.

In June 1990 Amcor Fibre Packaging was formed to manage the group’s international corrugated box manufacturing and related activities. It includes APM Packaging, Kiwi Packaging, Sunclipse, Amcor Packaging (Europe), SACOC, and Anfor. In total it has the capacity to manufacture almost one million tons per year of corrugated products, more than half of which capacity is outside Australia.

In 1989 Amcor appointed a new chairman, Sir Brian Inglis. He replaced Alan Skurrie, who had held the office for five years and had an association of more than 55 years with Amcor.

Amcor set out to diversify in the 1980s. By 1990, paper— the business in which the group’s origins lay—accounted for only 19% of sales compared with 57% a decade earlier.

Amcor’s major challenges for the future are to become more internationally competitive and to adapt to vastly increased public awareness on environmental issues. Although they have already made great strides on the first objective, the withdrawal of incentives such as accelerated depreciation and investment allowances are likely to make the task harder in the future—especially in a climate of reduced tariff protection, high interest rates and a high exchange rate. The company is well aware of the importance of environmental issues.

Principal Subsidiaries

Australian Paper Manufacturers; Containers Packaging; Amcor Fibre Packaging; Brown and Dureau Ltd.; Transpak Industries Ltd.; Willander Holdings Ltd. (49%); Spicers Paper Ltd. (18.7%); National Paper Vuepack Ltd.; New Zealand Corp. Ltd.