Orora Pays AUD600 Million To Shareholders | KOSEC

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Orora Pays AUD600 Million To Shareholders

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC - Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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On the 30th of April 2020, Orora Limited (ORA) sold its Australasian Fibre business to Japanese Nippon Paper Industries Co. Limited for AUD1.72 billion dollars with net proceeds after tax coming to AUD1.55 billion. This is exciting news for shareholders as a dividend from the sale has been announced, as well as a corporate policy geared towards new opportunities for growth investment.

Nippon Paper Industries Co. Ltd is a paper supplier that has 33 subsidiaries and 11 associate companies. The company offers synergistic value with the acquisition of the Australasian Fibre Business through existence in the same production environments. The deal is an example of responsible leadership which will benefit both companies, and supports Nippon Paper Industries growth goal of becoming a comprehensive biomass business.

Despite the uncertainty surrounding the pandemic, ORA has maintained a strong balance sheet, which opens the business up to new growth options. Due to the sale of the Australasian Fibre company, ORA’s financial position has been bolstered towards minimal debt; and as such there has been a decision to pay a special dividend of AUD600 million to shareholders. AUD450 million has been approved by directors to reward shareholders with 37.3 cents per share owned, which will be partially franked 50 per cent. A capital return of AUD150 million to shareholders with 12.4 cents per share will be ready to be sent out after shareholder approval on the 29th of June.

Zooming out to look at the macroeconomic environment, ORA has performed well during the COVID-19 pandemic with operations continuing to supply essential products and services. This has been achieved through new health measures and protocols developed to protect the health and safety of personnel. Moving a portion of the workforce to working from home environments has helped in maintaining safety. More broadly speaking, ORA is at the forefront of can, glass and wine bottle market in Australia and New Zealand. In the North American market, the firm is part of the top 5 companies in the packaging and distribution segment. These market positions have allowed for sustained operations, and by selling off Australasian Fibre, the business will be able to streamline their focus on the core business model.

Looking at the financials of the company, ORA has shown stable growth in earnings, return on equity, sales, and revenue since 2014. Cashflow has fluctuated only marginally as well as operating margin percentages. Long term debt spiked up from AUD7.53 to AUD959.3 million between 2018 and 2019 but is now a non-issue. Since a general meeting outlining the recent developments of the business position was held on 16 June, stock prices have reacted positively. ORA is a fundamentally sound business which has a long history of sustained growth. This recent announcement is an exciting development for shareholders receiving dividends, and also speaks to a robust position in uncertain times.

By Caroline Wong 

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