Orora’s Strategic Evolution and Focus on Beverage Packaging
Orora Limited (ASX: ORA) held its Annual General Meeting on October 16, 2024, where Chair Rob Sindel reviewed the company's strategic transformation and financial performance for FY24. Orora has continued to evolve, concentrating on its beverage packaging business following the sale of Orora Packaging Solutions (OPS) and the acquisition of Saverglass, a leader in luxury glass packaging. The AGM shed light on the company's robust financial results, sustainability progress, and strategic plans for the future.
Strategic Reshaping and Business Transformation
The sale of Orora Packaging Solutions (OPS) was a pivotal moment in the company's ongoing transformation, allowing Orora to focus exclusively on its beverage packaging business. The acquisition of Saverglass, finalized in December 2023, further strengthened Orora’s position in the global premium spirits and wine bottle market. These strategic decisions have set the company on a path toward a more streamlined and specialized business model.
Financial Performance for FY24 Reflects Growth and Strength
Orora delivered solid financial results for the fiscal year ending June 30, 2024, with underlying Earnings Before Interest and Tax (EBIT) rising by 26% to AUD $404 million. The acquisition of Saverglass played a significant role, contributing seven months of earnings, while excluding Saverglass, EBIT increased by 1% to AUD $323 million.
The company’s underlying Net Profit After Tax (NPAT) was up 10.2% to AUD $224 million. Despite a higher share count due to the Saverglass acquisition capital raise, underlying Earnings Per Share (EPS) decreased by 19.4% to 17.9 cents. Operating cash flow remained strong, increasing by 47% to AUD $397 million with an 80% cash conversion rate.
Orora declared a final dividend of 5 cents per share, unfranked, bringing the total FY24 dividend to 10 cents per share, representing a 60% payout ratio.
Sustainability Achievements and Future Commitments
During FY24, Orora made significant strides in its sustainability efforts, particularly in reducing greenhouse gas emissions and increasing the use of recycled materials. Emissions have been reduced by 17.8% since 2019, and the company remains on track to achieve its interim goal of a 40% reduction in emissions by 2035. Saverglass, which has a robust sustainability program of its own, will be fully integrated with Orora’s sustainability initiatives from FY25 onward.
The use of recycled glass (cullet) in production increased to 50%, with a goal of reaching 60% by 2025. Additionally, the construction of Orora's first oxygen-fuelled furnace at Gawler, expected to be completed in FY25, will reduce emissions by 20%, putting it among the most energy-efficient furnaces worldwide.
Binding Agreement for Sale of Orora Packaging Solutions
In September 2024, Orora announced a binding agreement to sell OPS to Veritiv Corporation, a subsidiary of CD&R, for an enterprise value of AUD $1.78 billion. The sale marks the final step in Orora’s transformation into a focused beverage packaging company, with the transaction expected to close by the end of 2024. The sale will strengthen Orora’s balance sheet, enabling further investment in its core business, particularly in the expansion of its cans production capacity in Rocklea, Queensland.
Outlook for FY25
Looking ahead to FY25, Orora expects continued growth in its beverage packaging business, driven by a full year of Saverglass earnings. However, some volume softness is anticipated in the first half of the year, particularly due to the rebuild of the G3 furnace. The company remains well-positioned for a broader recovery in the global beverage market, with strong growth expected in the second half of FY25 as new production capacity comes online.
The divestment of OPS is expected to be completed by the end of the calendar year, further simplifying Orora’s operations and focusing on its core strength in beverage packaging. The company will continue to explore organic growth opportunities and plans to return surplus capital to shareholders.
Conclusion and Strategic Vision
Orora’s transformation into a focused beverage packaging business positions the company as a leader in global premium glass bottles and Australasian cans. With a strong balance sheet and clear growth strategies in place, Orora is well-prepared to deliver long-term value to shareholders, despite ongoing challenges in global markets.
Rob Sindel concluded the AGM by expressing confidence in Orora’s future growth prospects, driven by its strategic reshaping, commitment to sustainability, and strong financial performance. He thanked the leadership team and global workforce for their dedication, as Orora continues to build on its success.
