Orora Ltd reports bumper profits: Is it a buy?

Packaging company Orora Ltd (ASX: ORA) looks likely to be a share to watch this morning after it posted strong full year results which saw a 23.8% jump in underlying net profit after tax to $162.7 million.

A few key highlights include:

  • Sales revenue increased 13% to $3.8 billion
  • Underlying earnings before interest and tax jumped 20.9% to $272.1 million
  • Underlying net profit after tax was up 23.8% to $162.7 million
  • Underlying earnings per share increased by 24.8% to 13.6 cents
  • Underlying operating cash flow was up 20% to $313.8 million
  • Final ordinary dividend of 5.0 cents per share, 30% franked.

I was very pleased to see that both its North American and Australasian operations performed well throughout the year despite subdued market conditions. Sales grew 11.9% to US$1,378.8 million in North America, with organic sales accounting for approximately 6% of growth. Its Australasian operations performed even better and posted sales growth of 28.6% year on year to $1,893.2 million.

Orora’s managing director and CEO, Nigel Garrard, had this to say on the results:

“Operationally the Group delivered underlying EBIT growth of 20.9% despite subdued economic conditions and some input cost headwinds in Australia. Higher earnings were driven by benefits from group-wide business improvement and cost control programs, organic volume growth and initial contributions from acquisitions made in North America during the year.”

Since Orora demerged from Amcor Limited (ASX: AMC) in 2013 it has been one of the best-performing shares on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with a massive share price gain of over 130% prior to today.

If these results are anything to go by, this rise in its share price has been more than justified in my opinion. Although management offered little by way of guidance for FY 2017, I feel confident that next year will be just as successful and its share price could yet keep climbing higher.

Based on these results its shares are changing hands at 20x earnings, which puts it in line with industry peers Amcor and Pact Group Holdings Ltd (ASX: PGH). Personally I believe Orora has superior growth prospects to its two rivals, which makes it the better long-term investment as far as I’m concerned.

Before making an investment I would highly recommend looking to see if you own one of these three rotten ASX shares. Each could be harming your portfolio as we speak and may be best swapped out.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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