Company Reports

Orora's fiscal 2026 adjusted EBIT fell 5% on last year to AUD 248 million. Underlying EBIT fell 21% at Saverglass from lower selling prices and a glass furnace idling. This was partly offset by 13% growth in cans. Wine and spirit bottlemaker Saverglass suffered a AUD 740 million impairment.

Orora has three distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian can business, sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts, providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as multicolor can printing, leading to higher margins for these sales.

Orora has three distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian can business, sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts, providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as multicolor can printing, leading to higher margins for these sales.

Orora downgraded fiscal 2026 adjusted EBIT guidance for Saverglass by 17% at midpoint, driven by a mix shift to lower-margin products and weaker customer confidence following the Iran conflict. While guidance for other segments is unchanged, the share buyback is suspended. Shares fell 19%.

Orora's fiscal first-half revenue in constant currency was 6% higher than the prior year, primarily due to its Australian can business. Adjusted EBITDA of AUD 218 million, which was 10% higher, was a team effort, including contributions from cost savings in the glass businesses.

Orora has three distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian can business, sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts, providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as multicolor can printing, leading to higher margins for these sales.

Orora's outlook for fiscal 2026 is unchanged after management provided a trading update, including the completed first quarter of fiscal 2026. Volume growth was reported in Australian cans, while volumes were broadly flat in the international Saverglass segment.

Orora's fiscal 2025 adjusted EBIT of AUD 262 million increased 10% on last year. Growth reflected a full-year contribution from Saverglass and higher demand for Australian cans, supported by the commissioning of an extra plant, offsetting weakness in the Australian glass business.

Orora has two distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian business, sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts, providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as multicolor can printing, leading to higher margins for these sales.

Orora downgraded fiscal 2025 earnings expectations for its Saverglass segment, mostly due to mix shift to cheaper products and market uncertainty surrounding tariffs. Earnings expectations for all other segments are unchanged.

US President Trump temporarily lowered tariffs to 10% on most ex-China US imports for a three-month period while countries seek to negotiate. But China is facing an even higher 145% tariff. Most ANZ industrial shares rallied, returning to, or nearing, pre-"liberation day" prices.

Orora has two distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian business sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as in multi color can printing, leading to higher margins for these sales.

No-moat Orora’s first-half fiscal 2025 underlying EBIT of AUD 121 million was 25% higher than the same period last year, and largely supported by the acquisition of Saverglass. The Australian can business delivered 6% growth, but the Australian glass division remains troubled with earnings falling materially and leading to management shutting one of three furnaces. The result was as expected, with soft demand for discretionary alcoholic beverages such as spirits, wine, and beer, affecting Orora’s sales revenue.

We initiate coverage on Orora with an AUD 2.60 fair value estimate. Shares are slightly undervalued. The market is less optimistic about a near-term recovery in volumes in Saverglass, its premium and ultrapremium glass segment, which is currently producing below capacity. However, we expect the premiumization of beverage containers to support profit margin growth and revenue growth above nominal gross domestic product, as the firm benefits from a mix shift with specialized glass bottle and higher-price aluminum can designs. Our Uncertainty Rating for Orora is Medium, and we assign a Standard Capital Allocation Rating.

Orora has two distinct segments: cans and glass bottles in Australia, and Saverglass, its global premium and ultrapremium glass bottle segment. In the Australian business sales are mostly to its three main customers, Coca-Cola, Asahi, and Suntory. However, its enhanced focus on premiumization supports profit margins with additional sales to craft breweries and niche beverages such as kombucha and other small brands. We expect this to complement the firm’s existing contracts providing greater capacity utilization at its existing plants. Niche customers require a higher degree of customization, such as in multi color can printing, leading to higher margins for these sales.

As foreshadowed in our note on Oct. 13, 2021, we cease coverage on Orora. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to client demand, investor interest and staffing. The break in coverage of Orora is likely to be temporary and we look to reinitiate on the company in the future.

We notify clients of our proposal to cease coverage on Orora in early November 2021 and have placed its fair value estimate under review. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to client demand, investor interest, and staffing. The break in coverage of Orora is likely to be temporary and we look to reinitiate on the company in the future.

Orora’s performance in fiscal 2021 aligned with our expectations, with delivery of full-year group EBIT of AUD 249 million a slim 0.5% ahead of our forecast. Year-on-year, group EBIT rose a sizable 10% as the turnaround of Orora’s long beleaguered North American distribution and visual merchandising divisions gathered pace. While the introduction of Chinese wine import tariffs weighed on the Australasian segment, heightened at-home consumption amid the ongoing pandemic delivered an offsetting, albeit transitory, boost to aluminium can earnings. While the fiscal 2022 organic growth outlook for its Australasian segment appears challenged, our long-term expectations for the no-moat stock remain largely unchanged.

Orora maintains leading positions in the manufacture of aluminium can and glass beverage packaging in the Australasian market. Orora’s portfolio of businesses were demerged from global packaging giant Amcor and included Amcor’s North American packaging distribution operations. The North American distribution business purchases, warehouses, sells, and delivers a wide range of packaging and other related materials and is the fourth-largest player in a highly fragmented U.S. market. Orora divested its Australasian fibre manufacturing operations in 2020, following an unsolicited approach from Nippon Paper. Nippon Paper’s AUD 1.72 billion offer was a significant windfall for Orora’s shareholders.

The strength of the ongoing recovery of the global economy from the coronavirus pandemic supports near-term earnings for Australian packaging stocks. Set against global economic activity that is rebounding at its fastest post-recession pace in some 80 years, we still expect robust near-term demand for consumer packaging. Accordingly, we maintain our fiscal 2021 earnings estimates for narrow-moat Amcor and Pact Group and no-moat Orora.