In morning trade the Orora Ltd (ASX: ORA) share price has climbed 4% to $3.32 following the release of the packaging company's half-year results.
Here are key takeaways from the release:
- Half-year sales revenue increased 6.2% on the prior corresponding period to $2,097.8 million.
- First-half EBITDA came in 10.7% higher at $227.3 million.
- Net profit after tax before significant items was $105.7 million, up 14.8% on the prior corresponding period.
- Earnings per share increased 14.7% to 8.8 cents.
- Interim dividend of 20 cents per share has been declared, 20% higher than a year earlier.
- Outlook: Constant currency earnings expected to be higher year-on-year.
Overall I felt this was a strong result from the Amcor Limited (ASX: AMC) spin-off and far better than its former parent company's own result earlier this week.
Orora's growth was balanced across the company with both its Australasian and North American operations putting in a solid six months.
Sales revenue in the Australasian segment rose 5% to $1,042.4 million, with earnings before interest and tax (EBIT) growing 11.1% to $121.1 million.
Its North American segment delivered sales revenue growth of 7.4% to $1,055.4 million or 11.1% in constant currency terms. EBIT in the segment increased 9.4% on the prior corresponding period to $60.3 million.
A key driver of this growth came from higher volumes in Glass thanks to increased demand in the wine market. Treasury Wine Estates Ltd (ASX: TWE) is believed to be a major customer of Orora and its recent success will no doubt be a bonus for its Glass business.
Elsewhere, the company benefited from higher volumes in Fibre as a result of an improved season in certain fresh produce sectors.
Pleasingly, its increased earnings were successfully converted into cash, with operating cash flow of $155.9 million in line with the first-half of FY 2017.
Looking ahead, management expects to continue to drive organic growth and invest in innovation and growth during FY 2018. Subject to global economic conditions, constant currency earnings are expected to be higher than in FY 2017.
Should you invest?
I think this result demonstrates why Orora is regarded by many as the best packaging company on the Australian share market.
At the current share price Orora's shares are changing hands at approximately 18x annualised earnings.
While I don't think this is excessive based on the growth it exhibited in the first-half, I am slightly concerned by its soft outlook for the remainder of FY 2018. In light of this, I would class Orora as a hold.
