Reporting Season: Orora drives profit higher

By Trevor Hoey. Published at Aug 9, 2018, in Special Reports

Name: Orora Ltd (ASX:ORA)

Market Capitalisation: $4.3 billion

Last Closing Price: $3.59

Packaging group, Orora Ltd (ASX:ORA) has delivered an underlying net profit of $208.6 million in fiscal 2018, up 12% on 2017.

This was in slightly above consensus estimates of $207 million, and given management’s commentary regarding positive operational features and a buoyant outlook, the result could be well received by investors.

Management declared a final dividend of 6.5 cents per share, bringing the full year dividend to 12.5 cents, up 13.6% on fiscal 2017.

Orora referred to relatively flat trading conditions in its key markets, and given this environment management was happy with the result.

Margin improvement drives organic growth

The result included benefits from a sustained focus on driving organic growth and margin improvement in the core businesses, combined with the early-stage benefits from capital investments and the annualisation of earnings from Orora Visual acquisitions completed during fiscal 2017.

A full year contribution from a fully integrated Orora Visual in fiscal 2019 should be a growth driver as it performed well in the second half of fiscal 2018.

Consolidation and integration of investments was the underlying focus in fiscal 2018, with a number of asset refresh and innovation investments made across the business, including the Fibre Packaging New South Wales restructure and the introduction of two high speed digital printers to both the Australasian and North American operations.

Earnings growth in the beverage business was driven by higher can volumes and increased wine volumes in the glass division, a result of the capacity expansion at Gawler in South Australia and continued industry growth in bottled wine exports.

The company’s North American operations performed well.

In local currency terms, Orora North America (ONA) EBIT increased 5.9% to US$93.8 million (AU$126.3) and sales revenue grew 8.1% to US$1,661.2 million.

What these results will show is yet to be determined, so investors should take all publicly available information into account and seek professional financial advice before making an investment decision.

Capital investment to maintain growth momentum

Orora will be investing in programs and infrastructure that will increase productivity and capacity in fiscal 2019, and management expects that, along with organic growth similar to that which was achieved in fiscal 2018, to drive earnings higher in the next 12 months.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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