ASX-listed printing, signage and packaging specialist Orora (ASX:ORA) has delivered several packaging solutions for Queensland avocado supplier, Simpsons Farms, while also announcing positive full year results.
For the full year ending 30 June 2019, Orora reported an underlying net profit after tax (NPAT) increase of 4.0 per cent to $217.0 million, an earnings before interest and tax (EBIT) increase of 3.7 per cent (to $335.2 million), and earnings per share (EPS) increase of 3.7 per cent (to $0.18 per share).
Orora Australasia delivered an EBIT of $246.6 million for the period, a 6.2 per cent increase. Its sales revenue was 2.1 per cent higher than the same time last year, recording at $2.15 billion.
However, Orora North America’s EBIT declined 3.6 per cent to $116.6 million. Its sales revenue was up 21.9 per cent, reaching $2.6 billion.
Orora managing director and CEO Nigel Garrard said the company has achieved another year of marked growth despite challenging economic and market conditions, particularly in North America.
“The positive result underlines the value of Orora’s portfolio of businesses, serving established market segments and spread across geographies in Australasia and North America, with solid profit growth in Australasia helping to offset lower earnings from North America,” he said.
“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 $20.8 million.
“This initiative impacts both Australasia and North America and aims to drive efficiency, as well as reset the cost base to better match expected market conditions.”
In terms of segment results, he said its Australasian fibre and beverage businesses continue to demonstrate strength and resilience, with revenue growth and earnings from a continued focus on operating efficiency, investments in assets, and innovation.
“Fibre earnings benefited from record production volumes, which again exceeded design capacity, sales growth in targeted market segments, benefits from recent organic and innovation investments and the continued focus on manufacturing and operating efficiencies,” Garrard said.
“Earnings growth in the beverage business was driven by higher can volumes, favourable product mix and continued improvement in operating efficiencies.”
Garrard said the company will increase its focus on sustainable packaging.
“Orora continues to invest in and trial new sustainable packaging products, with some innovations now in market, including fibre-based trays and punnets for fresh produce as well as supporting the trend in consumer preferences toward glass and aluminium substrates.”
Garrard also said he will be retiring from the position of managing director and CEO as of September 30, and will be succeeded by Brian Lowe, who currently leads the Fibre Packaging business group.
“Moving forward, I wish Brian and the team at Orora every success. Orora remains well positioned, with a strong balance sheet and cash flow capability that provides capacity and flexibility to invest with discipline in innovation as well as organic and new growth opportunities to deliver sustainable value for shareholders,” Garrard added.
Having worked with Simpson Farms for more than 20 years, Orora was recently approached by Simpson Farms to develop sustainable packaging solutions for its business.
It not only required sustainable packaging, but also reliable, high-quality, affordable and good protection for its products.
The sustainable solutions from Orora include the AccuLabel paper labeller and no-crush boxes.
“In the past, we’ve used plastic inserts but as Simpson Farms wants to become more sustainable, and also due to demand from our customers, Orora has provided us with paper inserts, which we’re now running commercially,” Simpson Farms finance and marketing manager John Walsh said.
“We’ve been in partnership for more than 20 years and all that while, Orora has provided us with great packaging solutions. Packaging for the Simpson Farms business is a means of getting the product to the consumer. So, it must be reliable, must be of good quality, and most of all, protect our product.
“Retail is now excited that we’re using the paper inserts on a commercial basis.”
As there is a wide range of uses for avocados in different sizes, Walsh said with Orora, the business can look at smaller take-home packs, capturing another segment of the market.
“Simpson Farms and Orora need to work together to stay innovative in presenting solutions to consumers to help increase consumption as well,” he added.
Orora regional territory manager Kel Treseder said as Simpson Farms moves towards sustainable packaging, Orora delivers on its needs and requirements.
“Orora, being a customer-led business listened to those needs to get Simpson Farms to the forefront of the market and ultimately, pushing what the customers require of the business today,” Treseder said.
“Simpson Farms is focused on sustainability across all of its business and Orora is a key part in that when it comes to packaging.”
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