Investment Thesis
- Trading on fair value relative to our valuation.
- Exposure to both developed and emerging markets’ growth.
- Near-term headwinds should be in the price.
- Revised strategy following recent strategic review.
- Bolt-on acquisitions (and associated synergies) provide opportunities to
- supplement organic growth.
- Leveraged to a falling AUD/USD.
- Potential corporate activity.
- Capital management (current on-market share buyback plus potential for
- additional initiatives).
Key Risks
- Competitive pressures leading to margin erosion.
- Input cost pressures which the company is unable to pass on to customers.
- Deterioration in economic conditions in US, EM and Australia.
- Emerging markets risk.
- Adverse movements in AUD/USD.
- Declining OCC prices.
1H22 Results Highlights
- Sales revenue increased +9.6% (+10.6% in CC).
- Underlying EBIT increased +10.4% (+11.1% in CC) driven by significantly improved performance in the North America segment.
- Operating cash flow increased +0.6% to $145.5m with cash conversion declining -400bps to 75%, with higher earnings offset by an increase in working capital.
- Net debt increased +13% over 2H21 to ~$512m, primarily reflecting the impact of increased debt arising from the on-market share buyback and increased capex partially offset by stronger earnings. ORA’s current leverage of 1.6x is below management’s targeted level of 2-2.5x EBITDA.
Company Profile
Orora Limited (ORA) provides packaging products and services. The Company offers fiber, glass and beverage can packaging materials in Australia and Asia and packaging distribution services in North America and Australia.
(Source: BanyanTree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.