Orora MD & CEO Nigel Garrard delivered a positive message of strong earnings growth and a continued focus on customer driven innovation in the group's half year results announced today (see summarised results highlights below).
"Operationally the Group delivered underlying EBIT growth of 15.6% despite muted economic conditions in both Australasia and North America. This was driven primarily by benefits from group-wide business improvement and cost control programs, North American organic sales growth and the September 2015 acquisition in Ontario, Canada,” Garrard said.
On a constant currency basis, Orora North America delivered an 11% increase in EBIT to USD33.2 million on the back of a 7.5% increase in sales revenue and improved cost efficiency.
Orora Australasia delivered a 4.5% increase in EBIT to $105.5 million in flat market conditions, with underlying sales increasing 1.8%.
In Australia, the Fibre Business benefited from cost reductions at the B9 Paper mill and improved sales in Fibre Packaging.
Orora’s transition to the ‘go direct’ channel in the fruit and produce sector is on track with three new depots announced to be established in Queensland and a strategic partnership with a refrigerated transport company offering fruit and produce customers an integrated end-to-end packaging solution as previously reported by PKN.
In the Beverage business, sales and earnings were in line with the prior year, with improved operating cost control across the business partially offset by the impact of higher gas costs in the Glass division.
Garrard said that with the Glass business seeing increased future demand from the impact of a lower Australian dollar on wine customer volumes, both from export demand and repatriation of offshore bottling, management is in the final phase of assessing investment options to increase the capacity of glass forming lines at the Gawler operation.
To drive future growth, the company is continuing to invest in customer-focused innovation.
“In the six months since launching the $45 million Innovation Initiative as reported in the FY 15 results announced last August , approximately $12 million has been committed to projects across the group focused on delivering new innovative customer-led product solutions, modernising equipment, improving processes and productivity,” Garrard said. One such project involves a new label sleeving system at the glass facility.
“In conjunction with targeting profitable organic and market share growth, Orora continues to actively pursue acquisition opportunities in preferred markets to enhance our geographic footprint and customised product capability.”
“It is expected the group will continue to drive organic growth, deliver on the B9 self-help initiatives, and invest in innovation and growth during the remainder of the 2016 financial year, with earnings expected to be higher than reported in 2015, subject to global economic conditions” Garrard.said.
RESULT HIGHLIGHTS
Statutory Results
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Net profit after tax (NPAT) up 27.2% to $87.9 million
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Earnings per share (EPS) up 28.1% to 7.3 cents
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Sales revenue up 13.9% to $1.9 billion
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Earnings before interest and tax (EBIT) up 22.7% to $145.3 million
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Operating cash flow was $146.1 million, up from $117.6 million
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Interim ordinary dividend of 4.5 cents per share, 30% franked, up 28.6% and represents a payout ratio of 61.6%
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Net debt $593 million, down from $645 million at 31 December 2014
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Leverage was 1.7 times net debt to EBITDA, down from 2.1 times at 31 December 2014 and interest cover was 9.2 times, up from 7.9 times.
Underlying Earnings (excluding profit on sale of land at Petrie, Queensland)
Underlying EBIT was up 15.6% to $136.9 million
Underlying NPAT was up 18.7% to $82.0 million
Underlying EPS was up 19.3% to 6.8 cents
