Cans were the standout Australian performer for Orora in the first half of the financial year, while soaring inflation kept a lid on beer and wine glass volumes. The US business performed strongly.
In the half year to December, Orora achieved sales revenue of $2.26bn, up 13.9 per cent (6.6 per cent on a constant currency basis) on the prior corresponding period. Statutory net profit after tax of $108.1m was up by 7.8 per cent per cent (2.9 per cent on a constant currency basis. Its EBIT of $165.8m was up 7.3 per cent (up 2.4 per cent on a constant currency basis).
North America had strong earnings growth, with EBIT up 20.2 per cent (10.2 per cent on a local currency basis), while the company described Australian earnings as ‘resilient’, with EBIT ‘in line with expectations’, down 3.5 per cent. Calling the results ‘solid’ and ‘pleasing’ CEO and managing director Brian Lowe said the double digit growth in the US was a key driver, and praised his team for achieving growth in an environment of high inflation and supply chain complexities.
Two thirds of the revenue came from the US business at $1.16bn, with Australasia contributing $534m, which was up by 26 per cent over the same period last year. Of this, three per cent came from increases in volume, ten per cent from passing on the costs of increased aluminium, and seven per cent from inflation costs it recovered. While beer and wine glass sales in Australia dipped, other glass sectors grew, including oil bottles. Its cans business is receiving significant investment, with the second line at Dandenong on course to open in June, which will add ten per cent to capacity, and a new can line planned for its Revesby site in NSW.
Looking to the full year in Australasia, Orora expects the second half EBIT to be up on last year, bringing the full year EBIT back to be broadly in line with last year.
The Orora Group earnings are expected to be higher in the full year, reflecting what the company says is the ‘resilience of the business in what is a challenging year of economic conditions’.
Commenting on Orora’s interim results, Lowe said, “Our results for the first half of fiscal year 2023 demonstrate the resilience of our business, as well as a steadfast commitment to delivering against our strategic priorities.
“The external environment continues to present challenges including rising inflationary pressures and supply chain complexities. Despite this, Orora has delivered a solid result in line with expectations. The Group reported an increase in EBIT and net profit after tax, driven by strong earnings growth in North America and another robust earnings performance in Australasia.
“Our Australasian business continues to deliver reliable and resilient earnings. An increase in revenue was supported by cans volume growth, and the pass-through impact of higher aluminium costs. Earnings were as expected, slightly down for the first half of FY23, largely reflecting the timing of inflationary impacts and lower wine and beer glass volumes.
“Our North America business performed strongly, delivering an increase in revenue and double-digit earnings growth, driven by performance in distribution, as the business retains its focus on driving cost-to-serve efficiencies as well as business optimisation, pricing discipline and customer account profitability.
“Commendably, the Orora team has deftly navigated challenging market conditions to deliver a solid half-year financial performance. Orora’s balance sheet and operating cash flow remain strong, positioning the Group firmly for future investment and growth.
Orora says it continues to make ‘good progress’ and is on track to achieve its sustainability goals aligned to the pillars of Circular Economy, Climate Change and Community. It says 'significant steps' have been made towards its 60 per cent recycled content target in manufactured glass products.
The Group’s new Cullet Beneficiation Plant at Gawler, South Australia, is now fully operational. This plant is helping to drive the average recycled content in manufactured glass containers above the 38 per cent achieved in last year.
Under the Climate Change pillar, Orora is on track to achieve a 40 per cent reduction in greenhouse gas emissions for Scope 1 and 2 by 2035. Orora signed a contract in December to construct an oxygen plant to upgrade the G3 glass furnace at Gawler to oxyfuel technology in 2024. This investment will enable a reduction of approximately 20 per cent in G3 glass furnace CO2 emissions, and will move the G3 glass furnace into the top 10 per cent of energy efficient furnaces worldwide.
Orora has appointed Kelly Barlow as its new CEO for its US business, with current incumbent Frank Pennisi moving to the CEO role at equipment supplier EFI. Its US display printing operation Orora Visual Solutions is being more closely aligned with Orora Packaging Solutions, to benefit from their commonalities.
