Orora’s Net Profit Drops Due to Saverglass Acquisition Costs
Orora, the Australian packaging company, has reported a net profit of 68.2 million Australian dollars for the six months through December, a decrease from the previous year’s 108.1 million. The drop in profit can be attributed to 40.4 million Australian dollars in transaction costs related to Orora’s acquisition of Saverglass.
The company also declared an interim dividend of 5.0 cents per share, lower than the previous year’s 8.5 cents, reflecting an increase in shares following the Saverglass deal. Despite these challenges, Orora remains confident in achieving earnings growth for the full year by improving margins in North America through cost reduction and benefiting from investments in its Australasia cans business.
Interestingly, Orora is focusing on its wine business, despite challenges in the glass industry due to lower commercial wine volumes and speculation about potential tariffs on Australian wine imports from China. Orora recently acquired Saverglass, a high-end glass bottle maker from France, with the expectation that its earnings before interest, tax, depreciation, and amortization would align with the run rate for the 12 months through June 2023.
However, there are concerns about the strategic rationale and valuation of the Saverglass deal. Continuing issues such as customer destocking and softer consumer demand could also impact the business beyond the first quarter of calendar 2024.
In summary, Orora’s net profit decline can be attributed to the costs associated with the Saverglass acquisition. Despite these challenges, the company is optimistic about achieving earnings growth and is focusing on its wine business. However, concerns remain about the strategic rationale and valuation of the Saverglass deal.
Analyst comment
Neutral news: Orora reported a decrease in net profit and a lower dividend due to acquisition costs. However, underlying earnings before interest and tax rose and the company remains confident in achieving earnings growth. Challenges in the glass business and concerns about the Saverglass deal may impact the business beyond 2024. Market may remain stable with potential for growth if cost reduction measures are successful.
