Orora has posted a healthy half year profit after tax of A$113.7m, up 7.6 per cent on the prior corresponding period, as it integrates two 2018 North American acquisitions and wades through flat economic conditions.
Global sales revenue soared 9.9 per cent to A$2.2bn across its Australasian and North American operations, while earnings per share increased 6.8 per cent.. EBIT rose 5.9 per cent.
Orora managing director and chief executive officer Nigel Garrard says the growth fell in line with expectations, driven by organic growth and enhanced by the 2018 acquisitions of Texas companies Bronco Packaging and Pollock Packaging. He says, “It is pleasing to report that Orora has delivered another solid result despite what I would call less than buoyant market conditions across the group’s trading regions.
Orora Australasia notched a 5.4 per cent increase on EBIT from the previous corresponding period with businesses Fibre Packaging and Beverage delivering earnings growth despite flat market conditions and higher costs. Sales revenues rose 4.4 per cent.
Garrard says, “The B9 recycled paper mill continued its good performance and it had a very good first half and is continuing to produce above design capacity. The beverage business benefited from higher Can volumes and favourable product mix in both cans and glass.
“We are continuing to invest in the Australasian business to support organic growth and innovation and we are starting to see the successes from this that supports this process.
“During the half we invested a further A$57m in the Australasian business which is a continuation of asset refresh in the fibre business, the upgrade of some warehouses in our glass business, the commencement of building a new stand alone warehouse in Gawler for our glass business and a new small can format capability in New Zealand.”
One hurdle Orora’s point of sale business Orora Visual had to overcome was the collapse of US chain Toys ‘R’ Us which resulted in a loss of $US10-12m in 2018. North American Orora Packaging Solutions also faced margin pressure brought on by difficult market conditions. Garrard says, “Toys R Us were a significant part of that business so that was a hole we had to fill. I would argue we have been in tough economic times for the last couple of years but I don’t think necessarily it’s any worse than it has been but I don’t see any signs of it improving either. We certainly are not going to be driven by the economy, it’s going to be self help that drives it.”
In terms of outlook for Orora, Garrard expects organic growth the continue through investment in innovation.He says, “We expect to continue to drive organic growth and to continue to invest in innovation and growth during 2019. We expect constant currency earnings to be higher than those reported in the financial year of 2018 subject of course to global economic conditions.”
The company will continue to look into fibre packaging as a replacement for plastic. Garrard says, “We are doing trials with pre packed apples, berry fruit and mushroom punnets and there is a real opportunity over time to see fibre as a viable option for some of those and obviously the recycling benefits of that are attractive. I’m not saying success yet but we are certainly doing some trials.”