Orora share price slips despite $187 million profit

A solid jump in profits in FY22 wasn't enough to excite investors.

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Key points

  • The Orora share price ended Thursday in the red despite reporting positive developments in FY22
  • The company's guidance for FY23 is mixed, with earnings growth expected in its North American operating segment only
  • An unfranked dividend of 8.5 cents per share was declared

The Orora Ltd (ASX: ORA) share price closed lower today after the company announced its results for FY22

Shares of the global packaging manufacturer and distributor ended the day trading for $3.50 apiece, a fall of 0.85% from Wednesday's closing price.

Let's go over the key facts from the report.

What did Orora report?

  • Revenue up 15.6% year-on-year (YoY) to $4 billion
  • Net profit after tax (NPAT) up 36% YoY to $184.7 million
  • Underlying NPAT of $187.1 million, up 19.4% YoY
  • Underlying earnings before interest and tax (EBIT) up 14.6% YoY to $285.5 million
  • Underlying earnings per share (EPS) of 21.7 cents per share (cps), up 28.2% YoY
  • Operating cash flow up 10.8% YoY to $272.6 million
  • A final unfranked dividend of 8.5 cents per share, representing 76.2% of the group's NPAT

Orora's results were stimulated by growth primarily in its North American segment. The company said it achieved this through optimising its business processes and managing the cost of its inputs amid inflation and supply chain disruptions.

The North American segment grew its revenues 14.3% YoY to $2.3 billion and its EBIT 32.6% YoY to $97.9 million.

Meanwhile, the Australasian operating segment grew revenues 9% YoY to $909.1 million, and its EBIT grew 0.2% to $150.6 million.

A final unfranked dividend of 8.5 cents was declared, to be paid to shareholders on 10 October. Orora said the dividend was unfranked due to the company's "near-term capital investment programs and the tax benefits associated with Australia's instant asset write-off legislation for capital expenditure, plus other timing differences",

What else happened in FY22?

Orora bought 30.7 million shares as part of its share buyback program for a total of $109 million.

The company also said it's on track to deliver on its environmental, social, and governance (ESG) policies, including using recycled content in its glass packaging and reducing emissions.

Orora used 38% recycled content for its glass packaging, up 31% YoY. Headway was made in reducing emissions through the use of its oxyfuel technology, reportedly the first company to do so in Australia. Orora intends to reduce 40% of its emissions by 2035.

What did management say?

Commenting on the FY22 results, Orora managing director and chief executive officer Brian Lowe said:

I am incredibly proud of the entire team's performance — we have delivered against our corporate strategy while remaining agile in response to external challenges as they have emerged. With a strong balance sheet and operating cash flow we are making significant investments in initiatives that will continue to sustainably grow our business and deliver for shareholders in FY23.

What's next?

Orora gave guidance for FY23, and notes that it expects to be a "challenging year of economic conditions".

For the Australasia operating segment, EBIT is expected to be similar to the result observed for FY23. The first half of FY23 is expected to be more difficult than the last, with the company citing pressures from inflation and the recovery in prices it charges its customers.

The outlook for the North American segment is more positive, with growth in EBIT expected due to the price increases of its products due to its profit enhancement initiative.

Orora share price snapshot

The Orora share price is down by around 1% year to date and by a similar amount over the 12 months.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen by around 6% so far in 2022 and by almost 5% since this time last year.

Orora has a market capitalisation of $2.98 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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