Orora Boosts EBIT 24.6% with Strategic Sales and Capacity Expansions
Orora Limited reported a robust first half of FY25 with underlying EBIT rising 24.6%, driven by strategic portfolio simplification and organic growth investments despite challenges in the Australian wine market.
- Underlying EBIT up 24.6% to $120.8 million
- Sale of OPS and Closures streamlines portfolio, generating ~$1.7 billion net proceeds
- Gawler furnace closure and $84 million restructuring provision due to declining Australian wine market
- Australasian Cans segment shows 6.4% EBIT growth with capacity expansions underway
- Interim dividend declared at 5.0 cents per share and up to 10% share buyback announced
Strategic Portfolio Simplification and Financial Strength
Orora Limited has unveiled its financial results for the first half of FY25, showcasing a significant 24.6% increase in underlying EBIT to $120.8 million. This performance reflects the company’s strategic focus on simplifying its portfolio and strengthening its balance sheet, notably through the successful divestment of its OPS and Closures businesses. The OPS sale alone generated approximately $1.7 billion in net proceeds, enabling Orora to accelerate organic growth initiatives and maintain shareholder distributions.
The company’s streamlined focus now centers on global beverage packaging, with leading positions in Australasian cans and premium glass packaging markets. This repositioning aligns with Orora’s long-term strategy to optimize growth and operational efficiency across its core segments.
Operational Highlights and Market Challenges
Within the Global Glass segment, Orora integrated Saverglass for six months, contributing to a 143.1% revenue increase to $655.5 million and a 41.3% rise in EBIT to $71.4 million. However, excluding Saverglass, the segment experienced flat revenue and a decline in EBIT, impacted by a $24 million cost associated with the G3 furnace rebuild at Gawler. This rebuild, completed in December 2024, enhances furnace efficiency and reduces emissions but also underscores the operational complexities faced.
The Australasian Cans business demonstrated resilience with a 5.2% revenue increase and a 6.4% EBIT uplift to $49.4 million, supported by moderate volume growth and ongoing capacity expansions at Revesby and Rocklea. These expansions are expected to drive future earnings growth, with digital printing capabilities set to be introduced in the second half of FY25.
Restructuring Amid Structural Market Shifts
Orora is responding to a structural decline in the Australian commercial wine market by planning the closure of the G1 furnace at its Gawler facility in the second half of CY25. This decision avoids an estimated rebuild capital expenditure exceeding $100 million in 2029 and is expected to improve margins through higher furnace utilization. The company has set aside an $84 million restructuring provision and impairment charge for FY25 related to this closure.
Meanwhile, Saverglass is undertaking a modernization of its Ghlin plant in Belgium, consolidating European wine bottle production to improve cost efficiency amid softer market demand. The company is also redirecting some production capacity from the UAE to support Australian and North American markets, reflecting a flexible global footprint strategy.
Capital Allocation and Shareholder Returns
Orora maintains a disciplined capital allocation framework, targeting a leverage ratio between 2.0x and 2.5x EBITDA and an investment-grade balance sheet. Despite increased capital intensity post-OPS disposal, the company continues to invest in organic growth, particularly in cans capacity expansions and furnace efficiency improvements.
The interim dividend of 5.0 cents per share, unfranked, reflects a payout ratio of 114%, above the target range, influenced by the treatment of OPS earnings as discontinued operations. Additionally, Orora announced an on-market buyback program of up to 10% of issued shares, signaling confidence in its financial position and commitment to returning value to shareholders.
Sustainability and Safety Progress
Orora continues to advance its sustainability agenda, with the newly rebuilt G3 oxy-fuel furnace exceeding energy and greenhouse gas reduction targets. The company remains on track to meet its 60% recycled content goal for glass beverage containers by 2025 and is preparing new recycled content targets inclusive of Saverglass.
Safety performance has improved markedly, with lost time injury frequency rates halving compared to the prior period. Orora’s ongoing focus on high-risk activities and safety culture enhancement underpins these positive trends.
Outlook and Market Positioning
Looking ahead, Orora expects second-half FY25 EBIT to be broadly in line with the prior corresponding period, with improvements anticipated across all core businesses. While the Australian wine market remains structurally challenged, the company anticipates volume growth in cans and a recovery in premium spirits and wine demand globally. Capital expenditure for FY25 is forecast between $340 million and $360 million, supporting growth and efficiency projects.
Orora’s strategic execution, combined with a strong balance sheet and focused investments, positions it well to navigate market headwinds and capitalize on growth opportunities in beverage packaging.
Bottom Line?
Orora’s disciplined strategy and robust balance sheet set the stage for sustainable growth despite ongoing market challenges.
Questions in the middle?
- How will the closure of the G1 furnace impact Orora’s long-term cost structure and margins?
- What is the timeline and expected return on investment for the Saverglass Ghlin plant modernization?
- How will evolving consumer trends and tariff risks affect Orora’s premium beverage packaging segments?