Packager Orora will set aside $45m for innovation and modernisation over the next three years as it boosts profit by 26 per cent despite flat markets.
The fibre and beverage container giant made a $131.4m profit on 7.3 per cent higher sales as its new recycled paper mill ramps up and higher beverage sales. EBITDA climbed 11.1 per cent and dividend payouts to investors were 25 per cent higher than last year.
Inn June, Orora in June created a global innovation fund from the sale of its Petrie paper mill, which it will spend on innovation, modernisation and productivity projects in the next three years.
Australasian revenue was relatively flat as market conditions remain subdued, ticking up 1.2 per cent but EBIT jumped 11.8 per cent. Nigel Garrand, chief executive at Orora, says better efficiency, ahead of target benefits from business improvement programmes, and increased glass bottle market share drove the results. He says, “The glass division grew market share in the wine segment, offsetting slight underlying volume decline, and the scheduled rebuild of the G1 glass furnace at Gawler was delivered on time and on budget,” he says. Beverage can volumes were stable, and the business delivered higher earnings through increased manufacturing efficiency.”
Fibre packaging sales are generally stable with growth in the New Zealand corrugated business, but the country’s three cardboard sites will be consolidated to two with Wellington to close in 2016 and production moved to the other sites and Australia.
The Asia Pacific business also cut costs but both B9 and the glass business are expected to be hit by the rising cost of gas and soda ash during the next financial year.
Orora North Amercia was where most of the growth was, with sales up 16.6 per cent, closing in on the Australasian total, and EBIT up 25.4 per cent. Garrand says Landsberg Packaging Solutions was the standout, boosting sales by 8.7 per cent through higher sales to existing customers, winning market share and benefits from the integration of the World Wide Plastics acquisition. He says, “It had continued success in winning large corporate accounts within targeted markets of food, parma/health, IT, and automotive.”
Sales to these targeted markets grew 14 per cent and represent 40 per cent of revenue, while corporate account sales grew 10.5 per cent and represent 22 per cent of revenue. Garrand says these wins were from its transition to a ‘customised packaging solutions provider’ rather than just commodity products.
Orora also made another North American acquisition, buying Jakait, a Canadaian packaging, logistics services and label products supplier to the greenhouse produce sector, for $17.2m, plus up to another $5.7m over five years. Garrand says acquisition is consistent with Orora’s growth strategy for North America and that some cost and revenue synergies will be realised in the next two years as the business is integrated. He says, “It provides further capability in the large food and produce market and expands Orora’s geographic footprint into Canada.”
