Back in August, shares in packaging group Orora fell 17% after revealing weak earnings for 2018-19 and a weak outlook. Yesterday, the company got most of that back when it revealed it had sold a part of its Australian operations to a Japanese company for a gross $1.7 billion, with news that most of the money will go back to shareholders in some sort of capital management.
Orora (ORA) has deftly packaged broker confidence in its outlook, with FY16 results that were driven by strong organic growth, cost reductions and the contributions from recent acquisitions. FY17 earnings are forecast to be higher, with the company targeting organic growth as well as further investment in innovation.
Shares in packaging company, Orora (ORA) (a spin off from Amcor in 2013) jumped sharply yesterday after it surprised with very strong full year results with a 23.8% jump in underlying net profit after tax to $162.7 million for the year to June.
Orora (ORA) has ramped up its acquisition strategy, acquiring US specialist packaging business IntegraColor. Up until now the company had completed just three small acquisitions and this represents its first major branching out since the de-merger from Amcor ((AMC)).
The company's trading update was slightly weaker than Morgans expected. Orora has noted a slower start in 2019, primarily in North America. Challenging conditions are ongoing and the company is reviewing cost structures as appropriate.
Deutsche Bank considers the acquisition of Pollock Packaging for US$80.5m as a minor positive. The business appears to be a good fit strategically, although Orora will have to achieve the targeted synergies of US$6m to ensure it is accretive to value.
Orora’s result came in broadly in line with the broker, but required a 2% earnings beat from Australasia to offset a -5% miss from North America. The broker has trimmed FY19 forecasts and dropped its target to $3.70 from $3.87.
First half results were ahead of Deutsche Bank estimates. Australasian earnings were up 11% and ahead of estimates while North American earnings were up 9% and in line with estimates. FY18 guidance is reiterated.