Orora posts a positive start to the year

19 February, 2021 by Dan Hughes

Global manufacturing company Orora Limited (ASX: ORA) announced an 18.9 per cent jump in net profit after tax compared to the prior corresponding period (pcp), at its half year results yesterday.

Underlying Earnings Before Interest and Tax (EBIT) was $140million, increasing 5.2 per cent on pcp while currency basis underlying EBIT was up 7.5 per cent on pcp.

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Sales revenue took a subtle hit, falling 1.2 per cent on pcp, totalling $144m. However, on a currency basis, sales revenue increased 3.1 per cent.

Orora Managing Director and CEO, Brian Lowe, said in Australasia, Orora expects the second half of the 2021 financial year EBIT to be negatively impacted by lower wine bottle exports to China and the smaller 2020 wine vintage.

He did however, predict that the full year EBIT is expected to be broadly in line with FY20.

Speaking at the results yesterday, Lowe (pictured left) said: “I’m really pleased to share with you that we have delivered a very solid set of results in the first half of our financial year 21. And this was despite some challenging operating conditions and environments, both in North America and in Australasia.

“In Australasia, Orora’s market leading Beverage business continued its track record of earnings growth. The earnings improvement was predominately driven by strong volumes across cans and closures. Volume gains were partially offset by an unfavourable mix in cans and glass driven by an increase in at home consumption and ongoing higher energy and insurance costs.

“Orora’s strong cash flow capability, combined with the strength of its balance sheet, continues to provide the Company with operating and strategic flexibility to invest in innovation, as well as organic and new growth opportunities that deliver long term, sustainable value.”

In anticipation of the lower wine bottle exports to China in the second half of the financial year, Orora is hoping to support its wine customers as it looks for alternate market destinations, while increasing attention to its smaller production customers to help seed its expected shortfalls.

Lowe explained: “Today, we supply about two-thirds of our volume to the wine industry and about a third to other being beer and other beverage formats. So we are obviously working with our key wine customers as they pursue alternate opportunities to sell their product, but we are also actively looking at what other opportunities we have, and we’ve got a good pipeline of opportunities, that would be non-wine for us to utilise that capacity.”

Commenting on strategy, Lowe added: “As previously communicated, the focus is on leveraging the Australasian Beverage capabilities via exploring footprint expansion and complementary products and services.

“A preliminary assessment of international beverage footprint expansion is underway, and we continue to actively assess and invest in our future requirements to meet customer and consumer needs. To this end, we have completed the rebuild of the G2 glass furnace at Gawler, we are increasing recycled content in glass, and we have commenced expansion into slim cans at Revesby.”