Orora flags sale of US business to focus on whisky, liquor bottles

Takeover target Orora, which revealed it had rejected a $3.4bn bid from US private equity giant Lone Star on Tuesday, has flagged the sale of its US packaging business.

Orora chief executive Brian Lowe at the company's $25m recycling facility near Gawler. Picture: Andre Castellucci

Glass manufacturer Orora, which this week rejected a $3.4bn bid from US private equity firm Lone Star, has flagged the sale of its North American packaging business to concentrate on supplying high-end liquor bottle to brands including Glenfiddich and Hennessy.

Orora, which last year purchased French liquor bottle maker Saverglass, reported flat full-year profit amid high costs and lower demand for its premium wine and spirits bottles.

Underlying net profit after tax came in at $223.7m, up 10.2 per cent, but the statutory net profit after tax from continuing operations of $185.2m was flat compared to 2023.

The Saverglass acquisition helped sales revenue climb 9.5 per cent to $4.69bn. Excluding its recent buyout of Saverglass, sales revenue fell 7 per cent to $3.99bn.

Underlying earnings before interest and tax (EBIT) of $404.0m was up 26 per cent. Excluding Saverglass, underlying EBIT was $323.4m, up 0.9 per cent.

Orora chief executive Brian Lowe said the past financial year had been transformative period for the company as it completed the $2.2bn acquisition of Saverglass, which makes spirit bottles for Grey Goose, Glenfiddich and Hennessy.

Some investors have criticised the company, which also makes cans for beverages, for paying too much for the acquistion.

Mr Lowe said Saverglass the price paid was “comfortable” given its potential and position at the premiun end of the liquor and wine bottle market. “We paid a fair price for Saverglass,” said Mr Lowe. “We are excited by its long-term potential.”

He said the possible divestment of its North American OPS packaging business was part of the long-term transformation of the company into a pure beverage container manufacturer, where margins were generally higher.

“Saverglass has provided the final building block in this strategic journey,” said Mr Lowe. “Therefore, we are currently in discussions to potentially divest the OPS business.” He said substantial work remained to finalise the divestment, and “will only proceed if the value and terms align” to our view of value. The shares climbed 6.4 per cent on Wednesday to $2.42 after surging almost 20 per cent the previous day.

Orora has described the Lone Star $2.55per share bid as “opportunistic” and “conditional.” It said the offer, less any dividends declared or payable, had been carefully considered by the board and its advisers who determined it is “not in the best interests” of its shareholders to further engage with Lone Star on the basis of the bid that “materially undervalues Orora”.

The new Orora glass beneficiation plant at Kingsford, north of Adelaide.

Mr Lowe said that while economic headwinds persisted across a number of regions, Orora’s profit was slightly ahead of its trading update issued in April.

“We continued to navigate market challenges including lower customer demand for commercial wine, craft beer and premium spirits, as well as some sustained higher costs across the supply chain,” Mr Lowe said. He said current cost of living pressures and inflation had impacted discretionary spending, including alcohol sales. Citi analysts Samuel Seow and Aashita Bharadwaj said the result was “messy” but in line with expectations.

The analysts said risks facing the company included a stronger Australian dollar that could lead to a resumption of import pressure for Orora and negatively impact US dollar denominated earnings. Integration of new acquired operations could also take longer than anticipated while there also could be significant disruption from China tariffs on the Australian wine market.

The group, which was spun out of spun out of Amcor a decade ago, will pay a final dividend of 5c per share taking its full year payout to 10c.