Earnings before interest and tax rose by 26 per cent at Orora for FY24, in what it says was a ‘transformative’ year, on sales which were up by 9.5 per cent. However, on a like-for-like basis, revenue excluding Saverglass was down by seven per cent. The results announcement came amid strong media attention around an unsolicited approach to buy the company from a US private equity firm, which the company has rejected.
Earnings in Orora's Australian glass business fell, as wine consumption dropped, but its booming Australian cans operation produced record volumes and earnings. The company has also started producing glass jars for the first time, at its Gawler site.
Its new Dandenong multi-size can line is now operating at full capacity 24/7, while construction has started on its new multi-size can line in Revesby, with commissioning expected next year. That line will also have a new digital printing system.
Orora says its cans business is in line to grow another 2.5 per cent in the coming year, and says glass will remain subdued in the first half of the new year, but predicts recovery in the second half.
The company is now looking at selling off its US-based Orora Packaging Solutions business, to focus solely on beverage container manufacturing, but says it will be selective about who it sells to.
Orora’s share price has just shot up by 19 per cent, on the back of an unsolicited approach by US private equity outfit Lone Star, reportedly offering US$3.3bn, which the Orora board has rejected as ‘opportunistic’. Orora says the approach from Lone Star materially undervalues the company.
Lone Star is a $140bn fund and is believed to want to break up the Orora group and sell off the Australasian business.
Orora and Lone Star were in a bidding contest for Saverglass last year. Saverglass was officially acquired by Orora on 1 December 2023, but the purchase has not been without its critics among Orora shareholders.
Orora described its earnings for 2023/24 as ‘resilient’ in ‘a challenging market’. Sales revenue for the year was $4.7bn, up 9.5 per cent, however excluding Saverglass, sales revenue was $3.99bn, down 7 per cent on the previous year.
Underlying EBIT was $404m, up 26 per cent, excluding Saverglass underlying EBIT was $323.4m, up 0.9 per cent. Underlying net profit after tax was $223.7m, up 10.2 per cent.
Orora Packaging Solutions (OPS) saw its EBIT dip by 2.7 per cent to US$109.5m. The global Beverage business EBIT was $237.0m, up by 54.6 per cent, excluding Saverglass. Australasia Beverage EBIT was $156.4m, up 2 per cent.
The company says the potential outcome of a divestment of Orora Packaging Solutions would be a specialised, value-added beverage packaging business with a strengthened balance sheet, supporting future growth and shareholder returns.
Commenting on Orora’s full year results, managing director and CEO Brian Lowe said, “The past financial year was a transformative period for Orora, as we completed the acquisition of premium global glass business Saverglass, one of the most significant milestones in the company’s history.
“While economic headwinds persisted across a number of regions, Orora has reported EBIT of $404.0m, up 26 per cent, which includes seven months of contribution from Saverglass, and was slightly ahead of our trading update issued in April.”
He said Orora has continued to navigate market challenges, including lower customer demand for commercial wine, craft beer and premium spirits, as well as some sustained higher costs across the supply chain. Despite these factors, he said, the team has demonstrated tremendous determination throughout the year to deliver a resilient result.
“Improvements undertaken in the OPS business in North America in recent years is evident in EBIT margins growing to 5.6 per cent, despite softness in the macroeconomic environment impacting volumes across the broader manufacturing industry.
“Across our global Beverage business, excluding Saverglass earnings contribution, underlying EBIT increased 2.0 per cent despite lower revenue. Earnings declined in Australasian Glass primarily due to a challenged commercial wine market, however this was offset by our Cans business, with record cans production delivering volume and earnings growth, and production capacity maximised across our sites.”
Lowe said the financial performance of Saverglass for the first seven months under Orora ownership was consistent with its trading update in April, considering continued customer destocking.
“Saverglass is a quality business with a compelling value proposition. Encouragingly, industry commentary, as well as our own inventory data, indicates improvement in the destocking issue, with trends expected to normalise in early calendar year 2025. We enter the new financial year with a newly formed Global Glass business unit, comprising Saverglass and our Gawler facility, and while the external environment remains challenging, we are well placed to capitalise on growth opportunities when market conditions improve.”
Commenting on discussions to potentially divest OPS, Lowe said, “Since the de-merger of Orora in 2013, we have steadily transformed the portfolio of businesses within the Orora Group. These decisions have been consistent with the creation of sustainable shareholder value and the company’s long-held strategic ambition to focus on beverage containers, given our strong view about the attractive long-term growth profile of this segment.
“Saverglass has provided the final building block in this strategic journey such that this focus can be materially accelerated. Therefore, we are currently in discussions to potentially divest the OPS business. Substantial work remains to finalise this divestment, and this will only proceed if the value and terms align to our own internal view of OPS’ value. The creation of value for our shareholders remains a priority.”
The acquisition of Saverglass has enabled the creation of a Global Glass business combining the Saverglass business with the Gawler facility in Australia. A new operating structure comprises three key regions (AsiaPacific, Europe and Americas) with P&L accountability, reporting to president Jean Marc Arrambourg. Capacity will be managed across seven manufacturing sites and four decoration sites, with volumes able to be ‘seamlessly’ shifted across locations depending on demand, utilisation and cost.
