Orora Growth: Saverglass Eyes North American Market for Expansion Amid Slump in U.S. Manufacturing
Amidst a slump in U.S. manufacturing, packaging company Orora remains steadfast in its growth strategy for its new Saverglass high-end glass-bottle business, focusing on the North American market. Orora's Chief Executive, Brian Lowe, believes that by aligning its market share in North America with its global average, they can effectively double the business of the Saverglass unit they acquired. Currently, Saverglass holds around a 33% share of the premium spirits market globally, but that figure drops significantly in North America.
Lowe expressed confidence in their ability to level the playing field and achieve substantial growth. Despite the broader softness in the North American manufacturing industry, Orora sees North America as the primary growth target for the Saverglass business. Lowe believes that refocusing their efforts in the region presents a significant opportunity for expansion.
While U.S. manufacturing experiences its longest slump in more than two decades, Orora's existing North American operations have faced a decline in revenue, with a 14% drop recorded for the fiscal first half. In response, Orora has been implementing cost-cutting measures to improve margins. Lowe attributes the softening demand for manufactured goods to a shift in consumer spending towards services rather than goods.
Economists anticipate a recovery in factory output following interest rate cuts by the Federal Reserve and the fading effects of the inventory backlog from 2022 and early 2023. Orora remains hopeful that the normalization of customer destocking and the softness in consumer demand will occur before the end of this financial year.
Despite the challenges faced globally, including customer destocking and demand fluctuations, Orora expects Saverglass's earnings before interest, tax, depreciation, and amortization for this fiscal year to align with the previous 12-month run rate through June 2023.
Overall, Orora's growth strategy for its Saverglass business centers on focusing efforts on the North American market, even as the manufacturing sector faces obstacles. With a determined approach and a goal to match its global market share, Orora aims to double its business in North America and cement its position in the region.
Analyst comment
Neutral news. Orora is focused on expanding its Saverglass business in North America despite a slump in the manufacturing industry. CEO Brian Lowe believes they can double their North American business and achieve market share on par with their global average. Although they have faced challenges from customer destocking and soft consumer demand, they expect normalization by the end of the fiscal year.
