Orora, the packaging company, has reported a net profit of 68.2 million Australian dollars for the six months through December, which is a decrease from A$108.1 million in the previous year. This decline in profit is primarily attributed to A$40.4 million in transaction costs related to Orora’s acquisition of Saverglass. Additionally, the interim dividend declared by the company is 5.0 cents a share, down from 8.5 cents in the previous year, reflecting a higher number of shares after the Saverglass deal.
However, it’s not all bad news for Orora as the company reported underlying earnings before interest and tax of A$184.1 million for the same period, showing a 9.5% increase compared to the previous year, after adjusting for currency fluctuations. On the revenue front, there was a decline of 7.3% to A$2.14 billion at constant exchange rates.
Despite these challenges, Orora remains confident about its full-year earnings growth. The company aims to improve margins in North America through cost-cutting measures and expects to benefit from its past investments in the cans business in Australasia, which are driving higher volumes.
However, there are some hurdles to overcome, especially in the glass business, with lower commercial wine volumes. The impact of China’s tariffs on Australian wine imports also remains uncertain, adding to the challenges in the market for Orora.
One recent development for Orora is its acquisition of Saverglass, a high-end glass bottle maker. Although the initial phase saw struggles, including customer destocking and soft consumer demand, Orora expects Saverglass’s earnings before interest, tax, depreciation, and amortization to align with the run rate for the 12 months through June 2023. However, this outlook could be affected if the current challenges persist beyond the first quarter of calendar 2024.
Overall, Orora’s earnings report reflects a mixed performance, with a decline in net profit but an increase in underlying earnings. The company remains optimistic about its future prospects, especially with its strategic initiatives in North America and investments in the cans business. However, the glass business presents challenges that need to be carefully managed.
Analyst comment
Negative news: Orora reported a decrease in net profit and a lower dividend payout. Revenue also fell, with challenges in the glass business due to lower wine volumes and uncertainty over Chinese tariffs. However, the company aims for full-year earnings growth through cost-cutting and investments in its cans business. The recent acquisition of Saverglass is expected to align with earnings expectations by June 2023, but challenges could affect this outlook beyond Q1 2024. The market is likely to respond cautiously to these mixed results and uncertain future prospects.
