Performance ‘stabilises’ at can supplier Orora
Half-year performance at can and bottle supplier Orora has ‘stabilised’ the company said in its half-year results this week, particularly in Australasia where supply chains were less affected by COVID.
Across the group, sales revenue declined 1.2 per cent to $1.8 billion. Profit before tax rose to $125.6 million for the half-year, up 18.8 per cent on the same period the year before.
In Australasia, higher earnings were predominantly driven by stronger volumes across cans and closures. Orora saw revenues rise 7.0 per cent to $441.2 million in the region. EBIT rose 4.2 per cent to $86.1 million.
There was no mention of the can shortages that have reportedly been affecting New Zealand brewers as well as US producers last after major manufacturer Ball Corp announced a deficit of 10 billion cans in the market and that it would be reliant on imports.
However, in an investor call, CEO Brian Lowe suggested that Orora was on top of the issue, if under pressure.
“We are running pretty much flat out, can demand is strong,” he told Brews News. “[That] can create some complexities whether it be in New Zealand or Australia. We’re heavily loaded on our can facilities, that’s why now we’re thinking about capacity expansion.”
Orora’s results also reported that volume gains across all businesses were “partially offset by an unfavourable mix in cans and glass”.
“A lot of it has to do with the particular product or SKUs we manufacture, a standard can is 375ml…and then when we make smaller or different configurations….all these varying sizes are generally smaller run sizes and different configurations,” Lowe said.
As a result, he said, they can be more expensive to produce, with higher margins.
In cans, the mix of product was skewed toward the supermarkets due to the continued strength of at home consumption, Orora said.
“Whilst volumes were higher, a shift in product mix towards the grocery channel due to changes in customer buying behaviour as a result of COVID-19 restrictions had an adverse impact on margins and impacted earnings,” according to a directors report published today.
“Rising energy and insurance costs also had an unfavourable impact on the earnings of [the Australasia] segment.”
Smaller 2020 wine vintages and the uncertainties as a result of Chinese tariffs on imported wine meant that glass volumes did not increase, but total tonnage was broadly in line with the previous corresponding period, although this was offset by growth in beer and other beverage categories.
“Orora is working with its customers to ensure continuity and quality of supply,” the reports said.
“Despite the initial impact of COVID-19, the businesses have adapted and performance has stabilised in 1H21.”