In its FY17 results announced today, Orora has recorded its third consecutive year of double-digit underlying earnings growth since listing on the ASX in 2013, with the Australasia business maintaining its position as the engine room driving the company's earnings (result highlights below*).
Orora MD & CEO Nigel Garrard told PKN the investment the company is continuing to make in innovation and technology in the local business is driving growth and building the company's resilience in a market tempered by flat economic conditions and escalating input costs – notably energy.
Garrard said high energy costs were specifically impacting its South Australia glass manufacturing business and its Botany recycled paper mill.
He said it's taken a frustratingly long time for policy makers and politicians to hear the voice of industry on the extent of the problem.
Garrard urged politicians to put state and partisan politics aside and maintain the sense of urgency around resolving the crisis that affects industry and consumers nationwide.
Commenting on growth and innovation projects, Garrard pointed to the significant investments the company has made across a number of business divisions over the past year.
In Australia, these include:
- The successful completion of the $42.0 million investment to increase manufacturing output of the Gawler glass furnaces by 60 million bottles with the project expected to exit FY18 contributing EBIT in line with Orora’s return criteria
- $25 million investment to upgrade the plant and machinery -- with a strong focus on automation – at the Revesby, NSW Fibre Packaging plant which will be progressively commissioned in FY18. Garrard told PKN this project will involve shutting down the Smithfield, NSW facility and consolidating the operations at the new upgraded Revesby facility, which should be up and running by end June 2018. Garrard added that this $25m was part of a total $70m investment the company had made in the Fibre packaging division, which included investment in HP digital printing technology at its Scoresby, VIC corrugated plant, which is also soon to trial new laser cutting technology, a first for the Australian corrugated industry.
- A commitment to invest $23 million to construct a secondary water treatment plant at B9 that not only will reduce the impact on the environment by reducing regulated effluent discharges but will also generate renewable energy by converting biogas to electricity. This plant is expected to be commissioned in early calendar 2018.
- And a commitment of a further $15 million, as part of the $45 million Orora Global Innovation Initiative, to a range of projects that enhance innovation, modernisation and productivity, taking the cumulative approvals under this initiative to approximately $29 million.
In North America, the company's business has seen growth through acquisition in this reporting period, with a total investment of $141 million to acquire three further North American POP and visual communication businesses to establish a national footprint – Register (New Jersey), Garvey Group (Chicago and Los Angeles) and Graphic Tech (Los Angeles).
In closing, Garrard said the group's continued strong performance is due to its unwavering focus on its three key pillars: enhancing the core, innovating to lead, and investing to grow.
He said Orora would continue to look at acquisition opportunities, but these would most likely be in the North American market.
RESULT HIGHLIGHTS (as supplied by Orora).
Underlying Operating Results Highlights (Excluding significant item expense of $15.1 million in FY17 and significant item gain of $5.9 million in FY16.)
• Net profit after tax (NPAT) up 14.4% to $186.2 million
• Earnings per share (EPS) up 14.6% to 15.6 cents
• Sales revenue up 4.9% to $4,039.1 million
• Earnings before interest and tax (EBIT) of $302.3 million, up 11.1%
• Final ordinary dividend of 6.0 cents per share, 30.0% franked. Total dividend is 11.0 cents, up 15.8%
• Operating cash flow was $331.5 million, up from $313.8 million
• Net debt $674 million, up from $630 million at 30 June 2016
• Leverage is 1.6 times, down from 1.7 times at 30 June 2016
• Statutory net profit after tax (NPAT) was $171.1 million.
• Significant item expense of $15.1 million after tax related to additional Petrie Mill decommissioning costs. (This followed an interim project review and a reassessment of the estimated costs to complete. The increase in expected decommissioning costs is due to a range of factors including delays in the commencement of some works, the scope and complexity of remediation works required and increases in cost.)