Orora to keep half of sale windfall for growth

Packaging company Orora is to only return half of a $1.2bn windfall to shareholders, keeping $600m for growth deals.

Packaging company Orora will only return half of a $1.2bn windfall to shareholders, keeping $600m for growth deals while also flagging a financial hit from the COVID-19 pandemic.

Shareholders will receive $600m following the sale of its Australasian fibre business despite Orora originally indicating a return double that size after selling the unit to Japan’s Nippon in ­October last year for $1.7bn.

Orora’s preference was to “pursue potential growth investment opportunities” and if deals were not struck then the return of the $600m balance would be considered by its board. Paying just half the return was appropriate given COVID-19 uncertainty, tightening liquidity in debt markets and the terms of Orora’s debt facilities, along with retaining a strong balance sheet and growth plans, the company said on Friday.

A special dividend of $450m will be paid, worth 37.3c a share, along with a $150m capital return at 12.4c a share on June 29 if a shareholder vote approves the payout. A consolidation of 0.8 of a share for every share held will be struck to adjust for the cash return.

Orora also said it would take a $25m hit in the second half from the pandemic due to weakness in its North American business and more broadly said operating earnings before interest and tax would decline in the 2020 financial year due to challenging conditions.

Earnings would also be pressured by the financial impact of the G2 glass furnace rebuild and North American initiatives taking time to be completed, as flagged at its half-year results in February.

The company suffered a 14.4 per cent fall in interim profit.

Its footprint stretches from China to the US, including more than 44 factories making everything from cereal boxes to wine bottles along 90 distribution sites.

Orora shares fell 1.65 per cent on Friday to $2.39.