re: amc is finished target is $4.50 Ratings agency downgrades...

re: amc is finished target is $4.50 Ratings agency downgrades Amcor

Ratings agency Standard & Poor's lowered on Friday its corporate credit ratings on global packager Amcor, saying the company's acquisitions had failed to perform.

S&P downgraded Amcor's ratings to BBB/A3 from BBB-plus/A2 and removed them from CreditWatch, where they had been placed with negative implications on December 7, 2004. The outlook is negative.

The subordinated debt rating was lowered to BBB-minus and the junior subordinated debt lowered to BB-plus.

"The downgrade reflects Amcor's challenges in delivering enhanced returns and performance from its sizeable, partly debt-funded acquisitions over the past three years," S&P credit analyst Craig Parker said.

Faced with intense competition in its packaging markets, Amcor was attempting to extract higher returns from its PET and Flexibles operations in the US and Europe, the ratings agency said.
As such, it expected Amcor to generate better cash flow from these businesses which, when married with the good returns from the Australasian businesses, would deliver performance and prudential frameworks consistent with a global BBB rated packaging company.

S&P said Amcor's cash flows from its consumer goods packaging should be relatively stable, reflecting its non-discretionary end markets.
Nevertheless, the company faced pressures in a number of areas: from industry overcapacity in certain sectors and geographies; technology-driven product substitution; end users' reduction of supplier bases; and volatile raw material costs.
Crucial to Amcor protecting it market position and boosting cash flow would be its cost competitiveness, investment in new technologies and products, and strengthening of its global customer alliances, it said