Orora to spend $45m on ‘out of the box thinking’, profit up 26pc

Orora chief executive Nigel Garrard says the company can no longer rely on a pick up in the US economy Photo: Supplied Packaging company Orora will spend $45 million on an innovation fund to encourage “out of the box thinking” to combat slower than expected growth in the world’s biggest economy, the US.

The company, spun-off from Amcor in 2013, posted a 25.9 per cent surge in net profit to $131.4 million for the year to June 30, despite subdued conditions in Australasia and North America. This excluded the cost of the Amcor demerger.

Orora chief executive Nigel Garrard said the company needed to invest in innovation to underpin further growth, saying it can no longer rely on a pick up in the US economy.

“[In] North America, there are signs of the economy beginning to improve,” Mr Garrard said.

“But events like the past week or two on the investment markets show that it’s still a period of uncertainty and our view is that we need to continue our own internal improvement activities and internal customer innovation rather than rely on the economy in either North America, Australia or New Zealand to drive any growth.” More ideas 

Most of the $45 million will come from the sale of the company’s land at Petrie in Queensland, Mr Garrard said.

He said Orora’s management had already approved one project under the fund – a “value-adding opportunity” to its glass business. Mr Garrard said the company was still finalising contractual arrangements and expected to announce more detail soon.

“That’s the type of thing we are looking at, that plus automation and improvement in our manufacturing processes are the two key drivers of the fund. Success for me would be that we have more than enough ideas that meet or exceed our hurdles,” he said.

Mr Garrard said Orora’s was also willing to inject 30-40 per cent more on top of the $45 million it committed to the fund if it generated enough ideas.

“We want to do that in a way that encourages our people to think differently, to look at what we do that’s outside the norm.

“If we can create the momentum and the out of the box thinking, if you excuse the pun, of those types of things, then for us I would be more than happy to increase the amount we would invest in that.” Steady growth 

Orora’s sales rose 7.3 per cent to $3.4 billion, while earnings per share jumped 25.9 per cent to 10.9 cents.

Mr Garrard said he expected further earnings improvement in the 2016 financial year, subject to swings in the global economy.

“The speed of any improvement in the US economy might be a little slower than the optimists thought, but for us I’m quite confident in our own business, and we have not seen any effect on core business in North America in the last weeks or months.

“I think we are going to have more steady growth there rather than a big pick up that some of the pundits were expecting six months ago.”

He said its B9 recycled paper mill in Botany Bay, which was completed in 2013, has exceeded expectations, with production increasing 10 per cent to 367,000 tonnes. Exports to North America rose 8500 tonnes to 55,300 tonnes in the past 12 months.

Orora’s shares were 0.5 per cent higher at $2.17 on Wednesday morning.

The company will pay a final dividend of 4 cents a share on October 13.