Orora (ASX: ORA) has announced a positive set of financial results for its half year results ending 31 December 2020, reporting an underlying net profit after tax (before significant items) of $91.1 million, up 18.9 per cent on the prior corresponding period.
Its Underlying Earnings Before Interest and Tax (EBIT) was $140.0 million, up 5.2 per cent on the previous corresponding period.
Orora managing director and CEO Brian Lowe said, “We are pleased to announce that all businesses reported an increase in underlying EBIT compared to the prior corresponding period as a result of disciplined execution against our revised strategy”.
In Australasia, Orora’s beverage business continued its track record of earnings growth. The earnings improvement, according to the company, was predominately driven by strong volumes across cans and closures.
“Volume gains were partially offset by an unfavourable mix in cans and glass driven by an increase in at home consumption and ongoing higher energy and insurance costs,” Lowe said.
“In North America, constant currency earnings were higher for both Orora Packaging Solutions (OPS) and Orora Visual (OV), following increased sales force effectiveness and a strong focus on cost control measures. OPS returned to revenue growth and is well positioned in a growing and diverse customer market. The impact of COVID-19 in North America was materially greater than that felt in Australasia, with many retailers remaining closed, negatively impacting OV revenue for the period.
“Orora’s strong cash flow capability, combined with the strength of its balance sheet, continues to provide the Company with operating and strategic flexibility to invest in innovation, as well as organic and new growth opportunities that deliver long term, sustainable value.”
Lowe also provided an update on Orora’s revised strategy which consists of a set of strategic pillars.
• Optimising and growing through operational improvement and execution
• Enhancing and expanding core products and services to enhance Orora’s customer value proposition
• Entering new segments that are complementary to Orora’s capability set
Commenting on strategy, Lowe said, “As previously communicated, the focus is on leveraging the Australasian beverage capabilities via exploring footprint expansion and complementary products and services.
“A preliminary assessment of international beverage footprint expansion is underway, and we continue to actively assess and invest in our future requirements to meet customer and consumer needs. To this end, we have completed the rebuild of the G2 glass furnace at Gawler, we are increasing recycled content in glass, and we have commenced expansion into slim cans at Revesby.
“In respect of North America, new results-focused leadership is steering both OPS and OV in a positive direction and is aligned to our revised strategy and strategic priorities. OPS is entering the second phase of our strategy as we position the business for sustainable growth. We will review the strategic direction of OV by the end of calendar year 2021.”
Moving forward, in Australasia, Orora expects second half FY21 EBIT to be negatively impacted by lower wine bottle exports to China and the smaller 2020 wine vintage. In North America, in a continuation of the improved operating and financial performance, Orora expects EBIT to be higher in second half FY21 compared to second half FY20 and for the full year.