Following the demerger from Amcor Ltd in December 2013, Orora today announced its first result* as a stand-alone company.
Speaking at the media briefing, Nigel Garrard said, “Our overarching message is this: we did what we said we were going to do."
And this is what was achieved:
- Pro forma results (reflecting 12 months of operating results for year ended 30 June 2014)
- Pro forma net profit after tax (NPAT) before significant items of A$104.4 million, reflecting a full year underlying result
- Sales revenue up 7.9% to A$3,176.1 billion (on constant currency basis, sales up 3.5%)
- Pro forma earnings before interest and tax (EBIT) up 29.6% to A$192.1 million
- Operating cash flow was A$224.1 million, up from A$168.9 million
- Final ordinary dividend (unfranked) of 3.0 cents per share – total dividends 6.0 cents per share (approximately a 70% pay out ratio)
- Net debt at 30 June 2014 was reduced to A$636 million, representing leverage of 2.2 times
- Statutory Results (do not reflect a complete 12 months of operating results)
- Statutory net loss after tax of A$106.5 million which includes significant items of A$181.6 million. NPAT before significant items was A$75.1 million.
Commenting on the results, Garrard said the pro forma earnings growth of approximately 30% was achieved by “increasing sales revenue and continuing to successfully deliver on our cost reduction programs”.
“And we achieved this against what can best be described as benign economic conditions in Australia, New Zealand and North America.”
“It [earnings growth] was underpinned by on target delivery of our ‘self-help’ cost reduction programs, and market share gains and manufacturing efficiencies in both the Glass division and Orora’s North American business,” he said.
“Equally important, by maintaining strong financial discipline, we were able to convert earnings growth into cash and improve the strength of our balance sheet. This has enabled us to declare a final dividend of 3.0 cents per share, which is at the top of our indicated payout range and takes the full year dividend to 6.0 cents per share.”
Business Group Performance:
Orora Australasia delivered a 25.7% increase in pro forma EBIT to A$162.5 million.
In the Beverage group, volume in the Cans division was stable but the company gained market share in the Glass division. Garrard told PKN this was largely as a result of some of its bigger customers in the wine market, and some in beer, moving more of their business to Orora. The company has well over 50% share of the market for glass in wine. The company has invested significantly in its glass manufacturing operations, and the resulting cost-efficient, modern facility has allowed the delivery of benefits to customers, which is winning increased business.
The Fibre group generated increased earnings from successful delivery of cost reduction and footprint rationalisation initiatives. The incremental EBIT from cost reduction programs during the year was A$27.1 million.
The B9 recycled paper mill is now 18 months into an expected ramp-up period of two to three years and remains on track.
“Delivering on B9 remains a priority,” Garrard said. “We've focused on taking costs out and now will continue to leverage the benefits from the new technology.”
The paper’s increased strength and improved printability is better than expected and is being well received by customers in Australasia and North America. The mill produced 335,000 tonnes of recycled paper during the year with export successfully commencing to Orora North America in January.
The North American business had a strong year despite flat market conditions, with constant currency sales up 12.1% to US$1,159.7 million. Earnings were driven by strong sales growth to new and existing customers, market share gains, manufacturing efficiencies and a positive FX translational benefit of A$6.1 million.
The company has also just announced its first bolt-on acquisition in the North American market of a rigid plastics company called Worldwide Plastics.
Garrard noted that bolt-on acquisitions are part of the growth strategy across all the regions, but would only be considered where it was appropriate and would create an opportunity for real growth in the business.
Outlook:
“We will continue to invest in our core businesses and innovation to drive continuing growth as we strive to be a customer focused packaging company in our markets,” said Garrard.
“We expect the Group to continue to deliver on the cost reduction initiatives in 2015, with earnings expected to be higher than that reported on a pro forma basis in 2014, subject to global economic conditions”.
* Note: As a result of the restructure of Orora within Amcor and subsequent implementation of the demerger, the statutory accounts for Orora do not reflect the complete 12 months of results for Orora’s operations. Consequently, its announcement is focused on pro forma figures, which reflect 12 months’ results. Selected statutory results, however, are also shown for completeness.
