Orora notches first fall in annual profit since float, shares crushed

Orora shares have been crushed in early trade after it notched its first earnings drop since listing in 2013.

Orora’s managing director and CEO Nigel Garrard. Picture: Supplied

Shares in packaging company Orora have dived more than 12 per cent in early trade after it reported its first fall in statutory earnings since listing on the ASX in late 2013 as it absorbed extra decommissioning charges tied to its Petrie Mill site, restructuring and other impairment charges.

Orora (ORA) reported a net profit of $161.2 million for the 12 months through June, down from $212.2m a year earlier. Directors declared a final dividend of 6.5 cents a share, bringing the full-year payout to 13 cents, up 4 per cent on fiscal 2018.

Stripping out one-time charges, Orora’s annual profit rose by 4 per cent to $217m and earnings per share lifted by 3.7 per cent to 18 cents.

Chief executive Nigel Garrard said growth in annual underlying earnings was achieved despite “challenging economic and market conditions, particularly in North America.”

“Orora has been proactive in responding to the challenging market conditions by completing a group wide restructuring initiative which resulted in recording a significant item expense after tax of $20.8m,” Mr. Garrard said.

Orora’s footprint stretches from China to the US, including more than 44 factories making everything from cereal boxes to wine bottles and 90 distribution sites.

Acquisitions have been a key plank of Orora’s strategy to keep lifting earnings, especially in North America. The company unveiled the $US80.5m acquisition of Pollock Packaging in November, which added six distribution centres to the Orora Packaging Solutions division, including in Texas, North Carolina, and California.

Still, Orora’s profit growth has increasingly been challenged by higher input costs and flat market conditions in Australia. The company has long complained about rising energy costs in eastern Australia, as many natural gas producers prioritised sales to overseas buyers willing to pay high prices. In response, Orora signed power-purchase deals with renewable-energy suppliers to lock in supply.

Some analysts question whether Orora’s profits from selling empty bottles to beverages manufacturers will be able to withstand health-conscious consumers turning away from wine, beer and sodas.

“To help offset challenging market conditions and cost headwinds, in FY20 Orora will continue to invest in efficiency, growth and innovation, as well as integrate recent acquisitions,” the company said.

At 11.17am (AEST), shares in Orora were down 40 cents, or 12.5 per cent, at $2.80 apiece.

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