Orora (ASX:ORA) has reported its full-year financial earnings for 2020, reporting an underlying net profit after tax (NPAT) of $127.7 million, down 22.8 per cent from the previous corresponding period, following the effects of COVID-19.
It reported an underlying earnings before interest and tax (EBIT) of $224.3 million, down 14.3 per cent from FY19.
The company’s full year results, ending 30 June 2020, was impacted by the effects of COVID-19, with a total net EBIT impact of about $25 million, with 90 per cent of the earnings disruption occurring in the US.
Orora Australasia delivered sales revenue of $785.9 million and an EBIT of $147.2 million – 7.4 per cent lower than the previous corresponding period. The company attributed the decline to the G2 build and COVID-19, where it lost about $8 million and $3 million respectively.
In the US, its sales revenue was reported to be more than US$1.86 billion, while its EBIT was reported at US$51.8 million – down 29.6 per cent from FY19.
Orora managing director and CEO Brian Lowe said the packaging giant has managed to adjust, adapt and target its operations to meet challenges presented by COVID-19.
“Orora maintained its strong focus on investment in the Australasian beverage business during the period with the successful rebuild of the G2 furnace and capacity expansion of the Gawler Glass site, which forms part of an estimated $200 million investment in this facility over the last five years,” he said.
“The business also introduced innovations relating to digital printing of cans and embossing of closures during the period.
“While the Australasian beverage business sae solid growth in cans volumes and was largely able to mitigate the impact of COVID-19, there was some unfavourable product mix across both glass (imported product) and cans and lower glass (wine exports) volumes, which combined with the adverse earnings impact from the G2 build, resulted in lower FY20 earnings.”
Lowe also explained how the trading conditions in the US impacted the business.
“The trading conditions in North America were already tough and the emergence of COVID-19 saw both Orora Packaging Solutions and Orora Visual results being further adversely impacted,” he said.
“As a result, earnings were down on the prior year.”
As the company responded to the impacts of COVID-19 during the second half of the financial year, Orora also completed the sale of its Australasian fibre business, finalised the review of its strategy, reduced debt, and returned $600 million to shareholders.
Orora has also announced a further return to shareholders via an on-market buy-back of up to 10 per cent of issued share capital, at an expected cost of $230 million, to commence in September.
The company expects the challenging and uncertain market conditions to persist for the foreseeable future.
Despite the pandemic, Orora’s business qualifies as an essential service in both Australasia and the US, and therefore is able to continue its operations.
“The focus is on leveraging the Australasia beverage capabilities via exploring footprint expansion and complimentary products and services. Separately, the medium-term priorities for the North American business will be to drive organic improvement initiatives including enhancing digital capabilities and productivity,” Lowe added.
At the time of publication, Orora’s shares were trading at $2.30.