Orora’s half year results reflected a challenging market, for a business which has now transformed itself into a what it says is solely a beverage packaging operation, with global glass and Australasian cans as its focus.
Excluding its Saverglass acquisition the company’s EBIT was down by 30.1 per cent, although Orora says this was largely due to the G3 furnace shutdown at Gawler, which was hampered by bad weather and equipment delays, impacting EBIT by $24m.
Total revenue was up by 64.8 per cent to $1.03bn, boosted by the full six months of Saverglass contribution. Excluding Saverglass, revenue was up by 3.6 per cent to $527.1m
Brian Lowe, managing director at CEO of Orora ruled out further acquisitions, he said, “We are now focused on organic growth opportunities, particularly through capacity expansion of the Cans business and leveraging our Global Glass network to cater for all segments of the beverage industry.”
Lowe said, “Market conditions remain challenging globally”, but added, “Against this backdrop, the Group reported EBIT of $120.8m, up 24.6 per cent, driven by the inclusion of six months of Saverglass earnings, compared to one month in the prior corresponding year.”
However, de-stocking continues across the Saverglass business continues, and while Orora sees “some encouraging signs” of improved order intake, it says the pace of recovery in Europe “remains uncertain” .
Orora sold its North American OPS business for $1.77bn during the first half, and offloaded its Closures business in January for $20m, leaving it with what it says is a “simplified” business of global glass and Australasian cans.
Cost pressures will see one of the three furnaces at Gawler shut down permanently, which will decrease capacity at the site by some 100,000 tonnes, with the transfer of some production to its facility in the United Arab Emirates. In addition, it is making a major upgrade it its glass manufacturing site in Belgium.
Lowe said, “Orora has managed softness in commercial wine and beer volumes in Australia for several years, and in light of this has undertaken a review of glass capacity across the Australasian market. This has resulted in the decision to move from a three furnace to two furnace operation at Gawler, and close our oldest furnace, the G1 furnace.”
Its Australasian Cans business achieved a 5.2 per cent increase in sales to $372.8m in the half year, and a 6.4 per cent increase in EBIT to $49.4m. Volumes rose by just 1.1 per cent, which Orora said reflected “subdued” consumer spending.
The new canning line at Revesby is beginning its commissioning process, and construction is commencing in Rocklea for a new canning line in Queensland. Orora also expects delivery and commissioning of its new digital printing capabilities for cans, with Helio technology, by June.
In the cans business, Orora's focus remains on increasing capacity. Total cans capacity has already risen by 30 per cent since 2023, which has added $50m to Cans EBIT.
Orora’s can production is split between 73 per cent non-alcoholic and 27 per cent alcoholic, with beer cans decreasing in volume.
The company says that with Cans and Glass as its focus, “[Financial] visibility [will be] provided into the Cans business for the first time.”
Revenue from its Saverglass business fell by 15.1 per cent in the half year to $501.2m, with volumes down by 13 percent with Orora citing prolonged global de-stocking. Underlying EBIT fell by 7.1 per cent to $62.4m.
The proposed rebuild and modernisation at its site in Ghlin, Belgium, will result in all its European wine and champagne bottle production being consolidated to Ghlin.
Orora may also be hit by Donald Trump’s tariffs, approximately 7 per cent of Saverglass revenue for the first half was for products manufactured in Mexico, and sold into the US.
Following the Saverglass acquisition, revenue for Glass was up 143.1 per cent to $655.5m with six months contribution from Saverglass, compared to one month in the prior corresponding period. Revenue for Gawler was flat, with volumes down 1 per cent, although Orora says the fall was offset by contracted price increases.
Glass EBIT was up 41.3 per cent to $71.4m, with the increased contribution from Saverglass partly offset by the impact of the G3 furnace rebuild. The furnace was shut down for the rebuild to be completed, which impacted EBIT by a larger than anticipated cost of $24m. The rebuild was successfully completed at the end of December.
Australian glass volumes were 1 per cent lower, with continued softness in commercial wine and beer partly offset by new products, including food jars. In ANZ Glass beer accounts for five per cent, wine for 42 per cent and spirits for 53 per cent.
According to Orora, the commercial wine market in Australia remains in structural decline, which led to the decision to close the G1 furnace, which will be carried out by June.
Looking ahead Lowe said, “Volumes are seasonally lower in the second half compared to the first with the structural challenges of commercial wine to remain.
“For Saverglass the pace of recovery in European demand remains uncertain, however, some recovery in the level of order intake indicates improvement in second half volumes.
“For our Cans business we expect an improved growth rate in second half volumes compared to the prior year. The focus remains on new capacity additions with Revesby commissioning and the commencement of the Rocklea expansion.”
