Moody's may cut Amcor

Moody's Investors Service said it placed on review for possible downgrade the Baa1 issuer rating and Baa1 senior unsecured rating of Amcor Ltd., along with Amcor Investments (New Zealand) Ltd.'s senior subordinated rating of Baa2. Moody's also affirmed the company's prime-2 short-term ratings.

The action follows the release of the company's 2007 half-year results, which indicated its credit profile had not improved during this period. The review will focus on the company's long-term strategic direction, including its financial policies, the operating outlooks in a number of its core markets and the likely impact of prospective asset sales on its operating and financial risk profile, Moody's said.

While Amcor enjoys strong operating risk diversity, the agency said, it is challenged by the impact on its margins of industry fragmentation, ongoing material rationalization costs and the need to maintain high capital investments to remain competitive. The company also continues to exhibit limited flexibility for generating free cash without reducing capital expenditure given that high returns to shareholder are likely to be maintained, the agency added.

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