Orora Limited · ASX:ORA
Orora — H1 FY2020 Earnings Presentation
21 slides from Orora's earnings presentation, Feb 12, 2020
Slide 1: Half year results
Half year results Half year ending December 2019 12 February 2020 Presentation by Brian Lowe – Managing Director and CEO Stuart Hutton – CFO Orora Limited ABN 55 004 275 165 Authorised for release to the ASX by Orora’s Company Secretary, Ann Stubbings.
Slide 2: Important information
Important information Forward Looking Statements This presentation contains forward looking statements that involve subjective judgment and analysis and are subject to significant uncertainties, risks and contingencies, many of which are outside the control of, and are unknown to Orora. Forward look
Slide 3: 1H20 financial summary – continuing operations
1H20 financial summary – continuing operations SALES REVENUE EARNINGS BEFORE INTEREST • Earnings up in Australasia AND TAX (EBIT) • North America – improvement $1,835.2m $133.1m program in progress 13.3% INCREASE 4.1% DECREASE • Tough operating environments • Strong cash conversion and balance sheet
Slide 4: Orora safety performance
Orora safety performance Continuing Operations Safety is a priority • RCFR recorded a tangible improvement but LTIFR slightly increased – while positive progress, there is room for improvement June 2019 Dec 2019 – Global independent review was completed during the half – Review highlighted many area
Slide 5: 1H20 Australasian financial summary – continuing businesses
1H20 Australasian financial summary – continuing businesses • Underlying sales revenue increased approximately 5.2% driven by SALES REVENUE EBIT higher Can volumes while Glass volumes were flat. • Earnings were higher than pcp driven by the increased revenues $412.2m $82.6m partially offset by produ
Slide 6: Australasia EBIT growth
Australasia EBIT growth 1.8% EBIT growth (1.1% underlying EBIT growth) 6.1 5.1 0.5 81.1 82.6 (A$’M) 1H19 Organic Growth Cost Headwinds AASB16 Leases Impact 1H20 Orora Ltd “ Organic earnings benefits delivered through growth in Cans which more than offset cost headwinds and stable glass volumes ” 6
Slide 7: 1H20 North American financial summary
1H20 North American financial summary North American Group USD SALES REVENUE USD EBIT • Lower local currency earnings in tough market conditions. $974.1m $34.6m • Cash flow increased by 10.3% to $46.2M while cash conversion increased to ~74.0% (~58.0% in pcp). • RoAFE declined by 360bps to 11.7% wit
Slide 8: OPS underlying EBIT margins improving
OPS underlying(1) EBIT margins improving • OPS margins have continued to steadily improve since the reset encountered in the second half of FY19. • Underlying EBIT margins have improved from 3.1% in 2H19 to 3.5% in 6.0% 1H20. • OPS has developed a comprehensive improvement program. 5.0% • This is ac
Slide 9: North American EBIT
North American EBIT (12.5%) EBIT contraction 60 (17.2%) in constant currency 55 50 18.7 2.8 45 8.7 40 35 57.7 50.5 30 25 20 (A$’M) 15 1H19 Net Contraction AASB16 Leases Impact FX 1H20 (27.6%) underlying EBIT contraction (31.0%) in constant currency Orora Ltd “ Local currency earnings lower; impacted
Slide 10: Orora Corporate
Orora Corporate Corporate costs have been allocated to the continuing business segments, with prior years figures restated for comparison • Corporate costs are largely in-line with previous years. • Corporate costs are expected to reduce post the completion of the sale of Australasian Fibre from FY2
Slide 11: Operating cash flow in line with expectation
Operating cash flow in line with expectation A$ Million 1H19 1H20 Operating cash flow(5) decreased 8.9% to $127.2M EBITDA 176.1 194.8 • Decrease in cash EBITDA from lower earnings • Cash conversion was 72.0%, down from 75.0% in the pcp, largely driven by capital Leases (1) - (31.8) expenditure on th
Slide 12: Balance sheet and debt – Orora Group
Balance sheet and debt – Orora Group Balance Sheet Strong balance sheet to enable further growth investment A$ Million June 19 Dec 19 • Increased leverage with recent acquisitions, heightened capital investment and working capital build Funds Employed (period end) 1,283 1,254 • Leverage of 2.3x – up
Slide 13: Fibre divestment, strategy and perspectives for remainder of FY20
Fibre divestment, strategy and perspectives for remainder of FY20 Orora Limited ABN 55 004 275 165
Slide 14: Fibre divestment
Fibre divestment On 10 October 2019, Orora announced the sale of its Australasian Fibre business for A$1,720 million to Nippon Paper Industries Co., Limited Gross and net proceeds • Enterprise value - A$1,720 million Net gain on disposal • Net proceeds after tax and costs ~ A$1,550 million • Estimat
Slide 15: Future Outperformance at Orora
Future Outperformance at Orora PROFITABLE, OPTIMISE SUSTAINABLE RESET AND GROW GROWTH NOW NEXT FUTURE ORORA • Embed and leverage next • Shape strategy and culture to generation culture • Culture drives competitive support next generation Orora advantage • Invest to boost digital capability • Right s
Slide 16: Orora’s sustainability program
Orora’s sustainability program • By the end of 2019, Orora met all of its initial 5 year EcoTargets on CO2 Emissions, Waste to Landfill and Water use. • Orora has commenced work to implement the recommendations of the Taskforce on Climate Related Financial Disclosure (TCFD). The outcomes of this ana
Slide 17: Orora’s sustainability point of difference is a competitive advantage
Orora’s sustainability point of difference is a competitive advantage Glass Cans North America • Glass is working to increase the amount of • Orora sources coils of aluminium that • The OPS manufacturing business has used glass it recycles into new glass contain around 70% recycled aluminium to achi
Slide 18: Committed to creating shareholder value
Committed to creating shareholder value What we said we would do What we have done in 1H20 Shareholder value creation 1. Organic sales growth, profitable market share gain & 1. ANZ – delivered 5.2% underlying sales growth. OPS has developed • 6.5 cent dividend – higher than indicated improved effici
Slide 19: Perspectives for remainder of 2020
Perspectives for remainder of 2020 Current top priorities • The Australasian restructuring initiative announced in August 2019 almost exclusively • The clear priorities for the remainder of FY20 are to: related to the discontinued operations of the Fibre business. As such, no benefits are expected t
Slide 20: Appendix 1 – Like for like earnings
Appendix 1 – Like for like earnings Orora has initially applied AASB 16 Leases using the Financial Summary – Continuing business – Lease adjusted modified retrospective approach. Under this method, the A$ Million 1H19 1H20 Change % comparative information has not been restated. To assist the reader
Slide 21: Appendix 1 – Like for like earnings (continued)
Appendix 1 – Like for like earnings (continued) Australasia - Continuing business – Lease adjusted Australasia (A$ mil) 1H19 1H20 Change % • EBIT was $82.1M, up 1.2% on pcp. Sales Revenue 402.6 412.2 2.4% • EBIT Margin was 19.9%, down 0.2% on the pcp. EBIT 81.1 82.1 1.2% • RoAFE was 31.0%, down from