Orora has posted strong growth for the year ended June 2018 with profit after tax up 12% to $208.6 million and sales revenue up 5.2% to $4.2 billion.
"Orora has continued its year-on-year track record of delivering earnings growth, strong cash generation and disciplined capital management to report double-digit profit growth, despite flat trading conditions in key markets," Orora MD and CEO Nigel Garrard said.
"Consolidation and integration of investments was the underlying focus in FY18, 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 state-of-the-art high speed digital printers to both the Australasian and North American markets,” he said.
Innovation focus
Garrard said the company's recent significant investment in digital printing capability – notably the two high speed, large format EFI Nozomi digital presses for corrugated (one installed in Victoria, one in its California operation) – is going to be a game changer for the business. Orora's digital printing capability on metal cans, he said, is enabling the beverage segment of the business to cater to the smaller runs and creative campaigns associated with the emerging and fast growing craft beer and artisan drinks sectors.
“Artisan is a big growth area across the board in FMCG, and digital printing is key to this.”
He said Orora is investing in changing its capabilities to be better positioned to cater to customers in this category.
In other news from the beverage side of the business, the company has invested $7m in small can format capacity in FY18, responding to customer demand for a slim line can to deliver a differentiated market offering.
Garrard said that the anti-sugar movement was not impacting demand for packaging, instead beverage manufacturers are innovating to bring to market no-sugar or low sugar alternatives, with predicted growth in non-carbonated soft drink products.
“We anticipate a good pipeline of this sort of innovation, and we're optimistic that volumes will grow,” he said.
Garrard noted too that the current plastic pollution backlash could lead to growth for metal and glass packaging, although that remains to be seen.
In glass packaging, growth in wine exports to Asia, particularly at the premium end, have increased sales of wine bottles. Orora has an estimated 65 per cent share of the wine packaging market, and supplies most major winemakers, including TWE, Accolade and Pernod Ricard.
At its Gawler facility last year, Orora produced just under a billion glass bottles for wine and beer. Garrard said he expected a small decline in demand for beer packaging sales in the year ahead, but this would be offset by growth in the wine industry.
Garrard commented that by not having all its “eggs in one basket”, Orora is resilient to fluctuations in demand, and changing market preferences for one packaging format over another.
Garrard noted too that the current plastic pollution backlash could lead to growth for metal and glass packaging, although that remains to be seen.
Asked what he thought of his former employer Amcor's big news this week [Orora was spun off from Amcor in 2013], Garrard said that it made strategic sense, that he was not surprised by the news and wished Amcor CEO Ron Delia and his team well in this move.
Investment
During the year, Orora invested $189 million in capital projects and innovation to drive growth, including: $30 million to boost capacity of its Australasian Fibre Packaging business; two new high speed large format printers (one each for Orora Packaging Solutions (OPS) and Fibre Packaging), which takes the cumulative investment under is Global Innovation Inititaive initiative to more than $45 million; a $7 million investment in new small format can capacity at Beverage Cans (NZ); and $8 million to complete a $23 million waste water treatment plant at the Botany B9 Recycled paper mill.
Sustainability
Garrard says the company continues to focus on a range of sustainability initiatives.
"Orora also announced two separate power purchase agreements (PPA) with renewable energy providers to supply wind-generated electricity to Orora’s operations in South Australia, Victoria and New South Wales, where the Company operates its largest and most energy intensive plants. Under the PPAs, Orora has secured competitive long-term supply of renewable energy for volumes equivalent to 80% of Orora’s total electricity requirements in Australia.
"The PPAs, together with Orora’s $23 million investment in a waste water treatment plant at the Botany B9 Recycled Paper Mill (B9) and the company’s status as one of Australia’s leading recyclers of glass and cardboard, provide a stable and sustainable foundation for the Australasian business over the long term."
