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Orora's 2022-23 annual results highlight push into US markets, mirroring Amcor's strategy

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2023-08-28

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The annual results for the fiscal year 2022-23 shed light on can and bottle maker Orora's strategic move to dive deeper into the US markets, echoing the path taken by its former parent company, Amcor.

Similar to Amcor's transformative acquisition of US competitor Bemis for $9.2 billion, Orora is charting a similar course for its expansion.

Reports surfaced on Sunday suggesting that Orora is contemplating raising approximately AUD 1 billion to fund the acquisition of an offshore glass business, with the United States being identified as the likely target market.

Orora's recently disclosed results for 2022-23 reveal a 4.9% increase in revenue (or a marginal 0.9% decline on a constant currency basis) amounting to AUD 4.9 billion.

Notably, the standout performer within these results was the company's US operations, defying the perception of an underperforming economy.

Orora reported robust earnings growth in North America, with EBIT surging by 15.0% on a local currency basis to USD 112.6 million (equivalent to over AUD 167 million), positioning the region as the primary profit generator for the company.

Despite a 5.1% revenue decrease to USD 2.1 billion, the double-digit EBIT growth in the US significantly outpaced the 3% inflation rate observed in the US over the year ending June.

Orora attributed this accomplishment to its North American division, stating, "Double-digit EBIT growth was delivered by OPS in North America, largely driven by strong performance in our Distribution business as a result of continued business optimization gains, further operating efficiencies, and active management of customer account profitability."

In contrast, the Australasian segment delivered resilient earnings, with EBIT aligning with expectations, registering a 1.8% rise to AUD 153.3 million, supported by a 14.1% revenue surge to AUD 1.037 billion. However, this growth pales in comparison to the 6% inflation rate experienced in the year ending June.

Orora's forward outlook provides insights into the allure of North America: "While global economic conditions remain uncertain, Orora Group earnings are expected to be higher in FY24. In North America, further margin accretion through account profitability programs and a continued focus on cost management is expected to be largely offset by ongoing volume softness."

"In Australasia, continued strength in Cans with incremental volume growth from recent investments is expected to offset the ongoing softness in Glass from lower commercial wine volumes."

Considering Amcor's historical move to spin off Orora in 2013, several years before its Bemis acquisition, speculation arises on whether Orora will adopt a similar strategy, potentially divesting its Australian operations as it executes its ambitious expansion plans in the US.

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