Orora is reporting strong results for FY18, having generated sales of $4.2m, up 5.2 per cent from $4.03m from the year before along with double digit growth for net profit after tax (NPAT).
The company’s earnings before interest and tax (EBIT) was $324.4m, increasing by seven per cent from $302.3m in FY17. Earnings before interest, tax, depreciation and amortization (EBITDA) was $445.3m, up by 6.4 per cent from $418.4m in the prior corresponding period (pcp).
Underlying NPAT was $208.6m, increasing by 12 per cent from $186.2m in the pcp. Operating cash flow slipped by 1.9 per cent, going to $325.4m from 331.4m in the pcp.
The Australiasian divison of the business saw its EBIT rise by 8.7 per cent, to $232.2m from $213.6m in the pcp. Sales for the region were at $2.1bn, up 5.2 per cent from $2 in FY17. The North American sector had EBIT of $121m, 3 per cent higher than $117.5m in the pcp. Orora’s sales in the US were $2.14bn, up 5.2 per cent from $2.03bn the year before.
Nigel Garrard, CEO of Orora says, “Orora has continued its year-on-year track record of delivering earnings growth, strong cash generation and disciplined capital management to report double-digit profit growth, despite flat trading conditions in key markets.
“The result included benefits from the sustained focus on driving organic growth and margin improvement in the core businesses combined with incremental benefits now starting to flow from capital investments and the annualisation of earnings from Orora Visual acquisitions completed during FY17.
“We invested around $140m in Australasia, bringing it to a total of $500m since 2013. It shows we are confident in manufacturing in Australia and New Zealand.”
[Related: Orora launches EFI Nozomi]
Gross capex for the year was $155m, changing by 20 per cent from $124.6m. Capex for FY18 included spend on plant and equipment in the company’s Glass warehouse purchase, corrugated printing and converting equipment upgrades in its packaging division Fibre, a new small format can line in NZ, a secondary water waste treatment plant at its Botany site and projects under the company’s Global Innovation Initiative.
Garrard attributed some of the Orora’s success to its two new EFI Nozomi digital carton presses, purchased earlier this year. Orora’s Nozomi printer in Australia, installed at its Oakleigh South plant in Melbourne, was the first for the country. Orora says it expects the investments in Fibre to generate around 15 per cent of gross returns by the third year of operation.
Garrard says, “Consolidation and integration of investments was the underlying focus in FY18, with a number of asset refresh and innovation investments made across the business, including the Fibre Packaging New South Wales restructure and the introduction of two state-of-the-art high speed digital printers to both the Australasian and North American markets.
“The printers can run at full commercial speed, which was only available before in offset printing. We bought the third and fourth of the Nozomi devices in the world. They provide magazine quality printing, randomisation and other elements that were not available in the past.
“There is big growth in the beverage and FMCG markets, our new digital printing capabilities are key to that. We can deliver small runs for craft beer and other specialised products.
When asked about energy, Garrard says, “The issue with power is the uncertainty with pricing and the volatility of energy costs is severe. As a business we want we want a consistent supply, availability and predictable pricing.
[Related: Orora buys Nozomi as profit surges]
“Orora also is signing onto two separate power purchase agreements (PPA) with renewable energy providers to supply wind generated electricity to Orora’s operations in South Australia, Victoria and New South Wales, where the company operates its largest and most energy intensive plants. Under the PPAs, Orora has secured competitive long-term supply of renewable energy for volumes equivalent to 80 per cent of Orora’s total electricity requirements in Australia.
“Orora is not ambivalent around the National Energy Guarantee (NEG). There have been multiple years with no policy decisions made by the State or National governments for energy. The NEG will give people certainty with investments, so they are able to commit.
“I hope reason prevails and we get the NEG, as it is a sad state of affairs when Australia is one of the biggest exporters of Liquid Natural Gas (LNG), but is not reaping the benefits. Our gas supply is secured until the end of 2019, but we are looking at options, as our glass plant in SA relies on it for the high temperatures needed.
“The PPAs, together with Orora’s $23 million investment in a waste water treatment plant at the Botany B9 Recycled Paper Mill (B9) and the Company’s status as one of Australia’s leading recyclers of glass and cardboard, provide a stable and sustainable foundation for the Australasian business over the long term.”
The Botany recycled paper mill also was said to achieve production volumes above its design capacity of 400,000 tonnes for the first time, having produced 373,000 tonnes in the pcp.
In terms of outlook, Orora says it expects to continue to drive organic growth and invest in innovation in the next financial year.
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter