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What Did Orora Announce Today In Their Annual Results?

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Orora Ltd (ASX: ORA) announced its annual results today, recording a 12.1% boost to revenue, along with a 4.0% increase in underlying profits. One piece of good news out of the result is that the difference between revenue and profit growth was largely due to decommissioning costs linked to their Petrie Mill site. Their EBIT margin actually increased by 50bps to 11.5% in Australasia, which was due to operational efficiency and cost improvement programs in fibre packaging. Margins did however deteriorate in the company’s North American business, owing to tough market conditions that the company’s cost reduction initiatives couldn’t counteract.

orora ltd-1

Orora opened new sites in Sydney for their fibre specialty packaging and WRS divisions. EBIT in Australia grew more than 10% organically, but the result was trimmed to 6.2% due to cost increases. The company has mentioned that they expect continued challenging market conditions in North America, which could weigh on earnings over the next year. Orora also expects internal cost headwinds from gas price increases, amounting to $3.5m for each half year period. They anticipate a $5.0m cost increase from Kraft prices and anticipate that the rebuild of G2, and project capex to sit at 120% of depreciation. Elevated levels of capex are, in the management team’s eyes, necessary to differentiate Orora’s product in a saturated market.

Orora delivers packaging solutions across Australasia and North America and is aiming to use innovation to counteract the lack of existing product differentiation in their core business. One example using IntegraColor to enhance their plant tags for a client. The company created more detailed labels that linked to an online site through a QR code which gave further information and promotional materials about the plant. Orora is also a large-scale recycler, being diversified across paper, class and cans, which helps attract clients to the business.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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