Orora shares trading 14pc higher following bright first half

Shares in bottle maker and packaging company Orora are up nearly 15 per cent following a better than expected first half.

A better than expected first half sent Orora shares higher on Thursday, with the company shrugging off the challenges facing global supply chains with double-digit revenue growth and improved earnings.

The bottle maker and packaging company reported a 13.9 per cent increase in revenue to $2.3bn for the six months to December, driving a 7.8 per cent increase in net profit to $108.1m.

The improved result was led by strong earnings growth in North America, where EBIT was up 20.2 per cent to $84.7m, while EBIT in Australasia was down 3.5 per cent to $81.1m.

Total EBIT of $165.8m beat consensus estimates by 4 per cent.

Described by UBS as a “solid result” given the challenging macroeconomic conditions, the first half performance sent Orora’s shares 14.3 per cent higher in afternoon trade to $3.32.

The company’s chief executive Brian Lowe said the first half results reflected the “resilience of our business”.

“The external environment continues to present challenges, including rising inflationary pressures and supply chain complexities,” he said.

Orora chief executive Brian Lowe.

“Despite this, Orora has delivered a solid result in line with expectations. The group reported an increase in EBIT and net profit after tax, driven by strong earnings growth in North America and another robust earnings performance in Australasia.”

In Australia and New Zealand, a reduction in Orora’s glass bottling volumes was offset by an increase in can volumes.

The company is currently boosting its investment in new and upgraded canning facilities in Australia, to meet what the company describes as a “strong customer-led outlook for can volume growth”.

It spent $84.8m on capital projects in the first half, up from $43.9m in the previous corresponding period, and there are plans for a further $145m of capital expenditure in the second half.

A $30m upgrade of Orora’s can ends operation in Ballarat is expected to be completed next month, followed by completion of a second $80m canning line at the company’s Dandenong facility in June and an $85m investment in a second canning line at Revesby, Western Sydney.

Orora is also planning $130m worth of upgrades at its glass bottling plant in Gawler, north of Adelaide.

Meanwhile, in North America, the company is continuing to focus on packaging distribution acquisition opportunities in the US, in what is currently a highly fragmented market.

Orora shareholders will be paid an unfranked dividend of 8.5c on April 12, up from an 8c payment in the previous corresponding period.

The company reiterated its full-year guidance, with earnings for the full-year expected to exceed the previous year, driven by an improved EBIT result in North America and steady earnings in Australasia.

In a note to clients, UBS analyst Nathan Reilly described Orora’s performance as a “solid result”, putting it on track for EBIT growth of 7 per cent for the full year, compared to a consensus estimate of 5 per cent.

“The North American business is holding up better than expected despite the broader de-stocking trend, with 1H23 EBIT growth of 10 per cent in US dollars, reflecting prior period cost/price initiatives,” he says.

“Australasia remains resilient, albeit soft glass volumes continue to offset benefits from cans volumes.”

Originally published as Orora shares trading 14pc higher following bright first half