What does Orora do?
Orora Ltd [ASX:ORA] supplies packaging products for grocery and consumer goods. Typical items include cardboard boxes, glass wine bottles, aluminium cans, boxes and other packaging materials for industrial markets.
Orora is a spinoff company, resulting from a demerger from Amcor Ltd [ASX:AMC] in 2013.
This can be a very positive process for the demerged operation.
Often, an operation of the business can be a forgotten arm of a large conglomerate and can underperform in that environment. But when it’s demerged, new management can take full responsibility to grow the business with attention and capital that wasn’t previously available.
These reinvigorated operations can often go on to outperform their parent company, as this example shows. Since December 2013, Orora shares are up over 160%, while parent company Amcor is up by a far more modest amount.
What’s driving the share price?
If the best indicator for future performance is past performance, then the outlook looks good for this company.
In its full-year results in August, Orora lifted full-year profits by 28.3%, to $168.6 million, and predicted increased earnings for the year ahead.
Sales revenue increased 13%, to $3.85 billion, with Australasian pre-tax earnings up 10.4%, due to favourable growing seasons in some fruit and produce markets increasing demand for packaging.
And growth is coming from its US operations; their packaging solutions are attracting big customers there.
What now for Orora Ltd?
Orora has been able to increase profits in a subdued business environment. With roughly half of its revenue coming from its US operations, any rate rise from the Federal Reserve Bank may cause a favourable currency tailwind for Orora going forward.
The company said it expected higher earnings again for the 2017 financial year.
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