Orora Limited (ASX: ORA), among the ASX 200 Stocks, came out with the announcement of having entered into a binding agreement to sell Orora Packaging Solutions (OPS) to Veritiv Corporation, an investee company of Clayton, Dubilier & Rice, LLC.
Veritiv Corporation’s offer for an enterprise value of A$1.775 billion1 (US$1.2 billion) on a cash and debt-free basis fully values OPS and implies approximately 9.9x FY24A cash EBITDA.
A strategic review of OPS with the objective of unlocking value for shareholders was undertaken as the Transaction is expected to result in net cash proceeds of approximately A$1.687 billion after tax, transaction costs and purchase price adjustments.
The sale of OPS transforms Orora into a focused beverage packaging business, with market-leading positions and a defensive growth profile across beverage substrates and end-markets.
Orora, on its part, finds its place among Growing Companies to Invest in as it will get equipped with a strong balance sheet enabling it the flexibility to pursue value accretive organic growth opportunities.
The company had been intending to optimize its operations while evaluating the potential divestiture of its OPS segment. The strategic intent was to concentrate exclusively on its beverage packaging division, which has already proven to be a substantial asset for the company. Furthermore, with an increase in production capacity, the company becomes one of the Top Growth Stocks expecting to see growth in sales volumes for both Cans and Glass products.
Orora Limited in its annual financial results for the fiscal year ending 30 June 2024 had reported a sales revenue of $4,697.6 million, reflecting a 9.5% increase; however, when excluding Saverglass, the sales revenue decreased to $3,992.2 million, a decline of 7.0%.
The underlying earnings before interest and tax (EBIT) amounted to $404.0 million, representing a 26% increase, while the underlying EBIT, excluding Saverglass, was $323.4 million, showing a modest rise of 0.9%.
The underlying net profit after tax (NPAT) reached $223.7 million, an increase of 10.2%. The statutory NPAT from continuing operations stood at $185.2 million, remaining unchanged from the previous year. The underlying earnings per share (EPS) was reported at 17.9 cents.
The final ordinary dividend declared was 5.0 cents per share, culminating in a total annual dividend of 10.0 cents per share, which corresponds to an underlying payout ratio of 60.5%.
In terms of segment performance, Orora Packaging Solutions (OPS) recorded an EBIT of US$109.5 million, a decrease of 2.7%, while the Global Beverage segment achieved an EBIT of $237.0 million, a significant increase of 54.6%. Excluding Saverglass, the EBIT for Australasia Beverage was $156.4 million, up by 2.0%.
The company maintained a robust cash conversion rate of 80.5%, an improvement from 70.2%, with underlying operating cash flow increasing by 47.1% to $397.0 million.
Orora is well-positioned for considerable and sustained growth in the future, supported by a global production network that spans three continents. Its diverse product portfolio, which includes over 100 offerings, facilitates significant market expansion and ongoing financial growth for the organization. The company's strategic initiatives to pursue both organic and inorganic growth avenues contribute to notable enhancements in its operational fundamentals, while simultaneously bolstering its capabilities.
Source: Company’s Report
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