Orora Announced Decent 1H FY2019 Results - EBIT Increased By 5.9%

On 13 February 2019, Orora Limited (ASX:ORA), a company from the materials sector and into the business of supplying a broad range of fibre, metal and glass packaging solutions along with the packaging services including design and distribution, announced its 1HFY2019 financial highlights. During the period, the sales revenue of the company increased by 9.9% to $2,306 million as compared to the previous corresponding year. There was also an increase in the net profit after tax (NPAT) by 7.6% to $113.7. The earnings before interest and tax (EBIT) increased by 5.9% to $175.1 million. The underlying earnings per share (EPS) was up by 6.8% to 9.4 cents as compared to the previous corresponding period. Â

During the period, the sales increased by 3.7% after the aluminium price pass-through impact. There was an increase in the B9 production volume as compared to the previous corresponding period and is designed in such a manner that it will achieve design capacity in FY2019. Through the ongoing Asset Refresh Program, there was also an increase in the sales and earnings in Fibre Packaging. Due to an increase in the volumes in Cans and favorable product mix in Cans and Glass, ORA’s beverage sales and earnings got improved. Its RoAFE improved by 40 bps as a result of increased earnings and investments. RoAFE is calculated by dividing EBIT by Average funds employed. Its Australasia EBIT growth increased by 5.4%.

The 1H2019 North American financial highlights of ORA states that its sales revenue was up by 7.2% to US$882 million. There was an improvement in the cash flow due to improved working capital management as compared to the previous corresponding period. The USD EBIT decreased by 1.1% to $46.5 million as a result of steady local currency earnings in tough market conditions. As a result, the EBIT margin also reduced by 40 bps. ROAFE% decreased by 40 bps.

The company invested $14.7 million in the business. ORA’s operating cash flows increased by 191%.

In North America, the company acquired Pollock Packaging and Bronco Packaging which were high quality, accretive targets to focus on the large and growing Texas market. Both the acquisitions were in line with the M&A growth strategy of the company in the packaging solutions.

Through these acquisitions of Pollock and Bronco, ORA will have increased exposure to the attractive Texas market. There will also be opportunities for site consolidation and synergies. It would also be able to serve its long-term blue-chip customers. There will also be a concentration of well-balanced customer base. The company will have opportunities where it can create strong brand equity, supported by Pollock’s strong position in Facility Supplies across broader OPS footprint. Also, the company will have the experienced, stable and proven management teams in both organizations

During the period, operating cash flow decreased by 15.2% to $132.2 million. The working capital management remained steady. As a result of increased investment in Glass warehouse capacity expansions, upgradation of printing as well as the conversion of assets in Fibre Packaging, the capex was above depreciation. The balance sheet of the company remained strong, and it highlighted the scope of further growth investment. By the end of December 2018, total funds employed was A$2,552 million. The company had the net debt of A$872 million

ORA is committed to creating shareholder value. For this during FY2019, ORA expects that it will continue to drive organic growth, integrate recent North American acquisitions and invest in innovation. It also expects its constant currency earnings more than FY2018 which depends on the global economic conditions as well.

Since ORA got listed on ASX, the stock has given a positive performance of 164.75%. However, in the last six months, the stock gave a negative return of 7.71%. By the closure of the trading on 13 February 2019, the stock settled at A$3.290 which was up by 1.858% as compared to previous trading day’s closing price with the market capitalization of A$3.9 billion and approximately 1.21 billion outstanding shares.

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