Why is this ASX 200 stock crashing 16% to a 52-week low on Tuesday?

This stock is having a very red start to the week.

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The Orora Ltd (ASX: ORA) share price is having a very tough start to the week.

In morning trade, the ASX 200 stock is down 16% to a 52-week low of $2.28.

Why is this ASX 200 stock crashing?

Investors have been rushing to the exits in a hurry on Tuesday after the packaging giant released a trading update.

As you might have guessed from the share price reaction, that update revealed that trading conditions have been tough for Orora.

Following a review of business unit forecasts for the second half, Orora has now updated its FY 2024 earnings forecast.

At a group level, excluding the earnings contribution from the Saverglass acquisition for the seven months in FY 2024, the ASX 200 stock expects earnings before interest and tax (EBIT) to now be slightly lower versus FY 2023.

This compares to its previous expectation for EBIT to be higher year on year in FY 2024.

According to the release, its revised FY 2024 group EBIT forecast excluding Saverglass is between $307 million and $317 million. This compares unfavourably to the $320.5 million that it achieved in FY 2023.

What's going on?

Management advised that its North America business is largely to blame for its poor performance.

During the March quarter, the Orora Packaging Solutions (OPS) business has continued to experience volume softness, principally within Distribution, and the flow through impacts of price deflation to customers.

Furthermore, a decline in average daily sales during the February to March trading period means that the ASX 200 stock does not expect to see the normal seasonal uplift in June quarter daily sales.

As a result, second half revenue is forecast to be down ~3% versus the first half, with FY 2024 EBIT forecast to be in a range of US$102 million to US$107 million. This compares to US$112.6 million in FY 2023.

Another disappointment that could be weighing on the Orora share price today is the performance of the Saverglass business. Management notes that a weaker February and March trading result has confirmed that there is no noticeable improvement in forward customer demand as destocking is continuing. This is leading to a reduction in forecast sales tonnage in the second half, down ~11% versus the prior corresponding period.

Forecast Saverglass EBITDA for FY 2024 has been reduced to 88 million euros from the range of ~98 million euros to 84 million euros.

This ASX 200 stock is now down over 25% on a 12-month basis following today's selloff.

Motley Fool contributor James Mickleboro 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 recommended Orora. 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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