Beer market bolsters Orora growth

Orora managing director Brian Lowe

Can and packaging supplier Orora today reported that strong growth in the beer market bolstered earnings and sales growth in Australasia.

ASX-listed company Orora saw sales grow 6.1 per cent to $834.1 million for the year in Australasia, with EBITDA for the region increasing 3.3 per cent to $197.8 million.

The company said that this was as a result of strong demand for cans in both the craft and mainstream beer segments, saying it had benefitted from the ongoing move from glass to cans and “increased levels of at-home consumption”. This is mirrored in the results of other ASX-listed businesses, most recently Coles Liquor.

“[The beer market in Australia] is very important for us, certainly for our cans business,” explained Orora managing director Brian Lowe on a media call following the announcement to the ASX this morning.

“We’re the predominant supplier of cans into the craft beer market, and we’re seeing good sustained growth in that area.”

This growth in the beer sector, which helped Orora ‘stabilise’ its performance last year despite concerns about can shortages, particularly in the US, has helped to offset declines in its glass business as a result of tariffs placed on Australian wine exports to China. To counter this decline Orora has been attempting to “redeploy capacity”.

“[We have] secured sales opportunities to replace 90 per cent of export volumes through new products and existing non-wine sales, including beer and water, albeit at lower margins,” Lowe said.

Volumes also increased in non-alcoholic beverages like still and sparkling water, as well as seltzers and RTDs.

According to Orora, strong customer-led demand for cans will allow expansion plans to progress, and if a number of customer contract extensions are secured, work will commence during 2022 on the installation of a $70 million can line at one of its Australasian sites.

In North America, where the effects of COVID were “materially greater than that felt in Australasia”, sales revenue declined 2.7 per cent to $2.7 billion from $2.8 billion the year before.

EBITDA however grew 9.2 per cent to $171.5 million, and Orora said that trading conditions have progressively improved over the second half of the year.

These challenges in the North American market meant that overall group revenue declined 0.8 per cent to $3.5 billion, however total group EBITDA rose 5.9 per cent to $369.3 million.

Lowe said that Orora was “putting its money where it’s mouth is” in regards to sustainability.

In Australasia, the packaging supplier increased its use of recycled glass, using the majority of recycled glass from Western Australian and South Australian container deposit schemes and accessing schemes in other states including New South Wales as well.

A new $25 million glass beneficiation plant is underway in South Australia with the help of $8 million in state and federal funding, and it hopes that as a result, it will be able to increase recycled glass content towards its 60 per cent target.

Overall, its Australasian business is next year expected to deliver earnings in line with this year and “positive momentum is expected to continue”.

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