INVESTING
TO GROW
ANNUAL REPORT 2016
WHO WE ARE
AND WHAT WE DO
Orora works closely with its customers to provide an extensive range of tailored
packaging solutions. This includes the design and manufacture of packaging
products such as glass bottles, beverage cans, corrugated boxes, recycled paper,
cartons, multi-wall paper bags and point-of-purchase displays. The Company also
offers broad end-to-end packaging solutions, including global product sourcing,
distribution, design, printing and warehousing optimisation. Every day, millions
of consumers buy and use goods in packaging proudly designed, developed,
produced or supplied by Orora.
AN INNOVATIVE, CUSTOMER-FOCUSED
PROVIDER OF PACKAGING SOLUTIONS.
PRODUCTS
Glass bottles
Beverage cans
Corrugated boxes
Recycled paper
Cartons
Multi-wall paper bags
Specialty packaging
Closures
Point-of-purchase
retail displays
Visual communications
General packaging
supplies
Manufacturing,
distribution and
point-of-purchase
Procurement
sourcing operations
COUNTRIES
MANUFACTURING
PLANTS
DISTRIBUTION
SITES
TEAM MEMBERS
SHAREHOLDERS
7
40
87
6.2K
48K
ORORA LIMITED ABN 55 004 275 165
Our customer-led approach
A passion for innovation
Our customers are at the very core of our business, the centre
of all we do. In Australasia, we predominantly service defensive
end markets, with customers in the grocery, fast moving consumer
goods, agricultural and industrial markets. In North America,
we target the food, healthcare/pharmaceutical, information
technology and automotive industries.
We partner with our customers to constantly expand and improve
our offering, and invest in our business to help our customers grow
their business. Since listing on the Australian Securities Exchange
in 2013, Orora has invested approximately $225.0 million
in initiatives to grow our business, with more than $60.0 million
of this directly supporting customer-led growth initiatives.
In the financial year ended 30 June 2016, Orora completed
a $20.0 million upgrade at its dairy sack line in Victoria
which is underpinned by a supply agreement with Fonterra.
In February 2016, Orora announced that it would invest $42.0 million
to expand its glass manufacturing capacity in South Australia
by 60 million bottles each year, and opened two new distribution
centres in North America, supported by large corporate accounts.
We anticipate changing consumer preferences and trends,
and deliver innovative packaging solutions that help our
customers establish, maintain and grow leading positions
in their respective markets.
This customer-led approach ultimately drives our passion
for innovation and generates shareholder value.
In July 2015, Orora announced the establishment of the
Global Innovation Initiative, a program to invest $45.0 million
over three years in value-generating innovation, modernisation
and productivity initiatives.
In its first year, the Company has committed approximately
$20.0 million in funding to a range of product and process innovations.
During the period, Orora was also named in the BRW
Most Innovative Companies list for the second year running,
and was awarded the Best Process Innovation for proprietary
technology developed to enable cost-effective randomised
printing of beverage cans to support consumer promotions.
SERVICES
Printing
Distribution
Innovation & design
Testing & quality control
Packaging process consulting
Equipment automation & support
Packing & filling
Product sourcing
Data analytics
IN THIS ANNUAL REPORT
Who we are and what we do
Operating and financial highlights
Message to shareholders
Operating and financial review
• The Orora Way
• Our business strategy
• Board of Directors
IFC
2
3
6
6
8
10
• Executive leadership team
• Operational review
• Financial review summary
• Our approach to sustainability
• Principal risks
Directors’ Report
Financial Report
12
14
22
25
31
33
54
ORORA LIMITED ANNUAL REPORT 2016
1
OPERATING AND
FINANCIAL HIGHLIGHTS
• Underlying earnings per share up 24.8%
• Robust sales growth and double digit earnings growth in both regions —
despite flat economic conditions
• Through continued financial discipline, increased earnings were converted
into strong underlying operating cash flow — up 20.3%
• In excess of $190.0 million committed to drive future shareholder value —
via both organic growth capital and acquisitions
• Declared dividends up 26.7% and at the top end of the indicated payout range
SALES REVENUE (1) (AUD million)
EBIT (2) (3) (AUD million)
↑
13.0% $3.8b
Sales (AUD billion)[1]
↑
20.9% $272.1m
EBIT (AUD million)[1]
3,850
3,408
3,176
2,943
272.1
7.1%
225.1
6.6%
192.1
148.2
5.0% 6.0%
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
First half EBIT
Second half EBIT
EBIT margin %
EBIT TO SALES (3)
NET PROFIT AFTER TAX (3)
↑
from
6.6% 7.1%
↑
23.8% $162.7m
UNDERLYING OPERATING CASH FLOW
DIVIDEND (per share)
↑
20.3% $313.8m
↑
26.7%
9.5¢
(1) FY13 & FY14 represent pro forma sales.
(2) FY13 & FY14 represent pro forma EBIT.
(3) FY16 represents underlying earnings excluding the profit on sale of Petrie land, Queensland.
NOTE REGARDING NON-IFRS FINANCIAL INFORMATION
Throughout this report, Orora has included certain non-IFRS financial information. This information is presented to assist in making appropriate comparisons with prior
periods and to assess the operating performance of the business. Orora uses these measures to assess the performance of the business and believes that the information is
useful to investors. The following non-IFRS measures have not been audited but have been extracted from Orora’s audited Financial Statements: earnings before interest and
tax (EBIT) before significant items; earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items; significant items; average funds employed.
Performance measures such as Earnings per Share, Return on Average Funds Employed and EBIT Margins have been calculated using the non-IFRS measures listed above.
All other non-IFRS measures, unless otherwise stated, have not been extracted from Orora’s audited Financial Statements. References to earnings throughout this report
are references to EBIT before significant items.
NOTE REGARDING PRO FORMA INFORMATION
On 31 December 2013, the demerger of Orora Limited (‘Orora’ or the ‘Company’) and its controlled entities (collectively referred to as the ‘Group’ or the ‘Orora Group’)
from Amcor Ltd was implemented. Prior to the demerger, as at 31 October 2013, the Company and Amcor Ltd were required to undertake an internal corporate restructure.
Certain financial information contained within this Annual Report in respect of the financial year ended 30 June 2014 and prior have been presented on a pro forma basis
as if the internal corporate restructure and demerger had occurred at the beginning of period presented. Financial information presented on a pro forma basis has been
identified as such.
2
ORORA LIMITED ANNUAL REPORT 2016
TO ORORA’S
SHAREHOLDERS
CHRIS ROBERTS
Chairman
NIGEL GARRARD
Managing Director and Chief Executive Officer
The financial year ended 30 June 2016 has been another successful period
for Orora. The Company’s disciplined approach to executing against a proven,
value-creating strategy, has positioned it well. Since listing, Orora has
announced approximately $225.0 million of customer-focused capital
and innovation investments to underpin future shareholder growth.
Orora is pleased to present its 2016 Annual Report to
shareholders. It has been a successful period for the Company,
further developing and embedding its customer-led culture
of outperformance, delivering on its business objectives
and generating both strong earnings growth and increased
financial returns.
Over the period, Orora grew sales revenue by 13.0% to $3.8 billion
despite subdued market conditions in both its core markets:
Australasia and North America. The Company grew organic
volumes in both regions, delivered benefits from Group-wide
business improvement and cost reduction programs and saw initial
contributions from acquisitions made in North America during
the period. This culminated in underlying earnings before interest
and tax (EBIT) of $272.1 million, up 20.9% on the previous year,
and underlying net profit after tax (NPAT) of $162.7 million,
up 23.8% (both measures exclude the profit on sale of surplus
land in Petrie, Queensland – please see the Operational Review
section of this report for details on the land sale).
Through sustained financial discipline and ongoing sound balance
sheet management, Orora converted the increased earnings into
cash flow, which improved 20.3% to $313.8 million (excluding
Petrie land sale proceeds). This further strengthened Orora’s balance
sheet and enabled a reduction in leverage to 1.7 times, down
from 1.9 times in the prior year. This deleveraging has provided
a solid balance sheet platform for Orora to pursue future growth
opportunities to drive further shareholder value. Net debt during
the period increased to $629.6 million, compared to $606.9 million
at 30 June 2015.
Orora has announced a final dividend of 5.0 cents per share
partially franked to 30%. Combined with the interim dividend of
4.5 cents per share, the total dividends declared for the year were
9.5 cents per share, which is an increase of 26.7% over the prior
year. This represents a dividend payout ratio of approximately 67%
of NPAT, which is again at the top end of Orora’s indicated payout
range and reflects the Board’s continued confidence in the business.
ORORA LIMITED ANNUAL REPORT 2016
3
TO ORORA’S
SHAREHOLDERS
Operational review
A detailed review of operational performance for the financial
year ended 30 June 2016 can be found in the Operational Review
section of this report.
Overall, the business performed well during the year, considering
that economic conditions across Orora’s key markets remained
generally subdued.
Orora Australasia delivered a 10.4% increase in EBIT to $200.4 million,
with underlying sales increasing 2.5%.
Increased earnings in the Beverage business were driven by higher
Glass volumes, improved operating efficiency across the business
and the reversal of the adverse financial impact from the FY15 glass
furnace rebuild. This was partially offset by the impact of rising gas,
electricity and soda ash input costs within the Glass division.
With the Glass business seeing increased demand in customer
wine volumes led by the impact of the lower Australian dollar,
it was announced in February 2016 that $42.0 million would be
invested to increase the manufacturing capacity of Orora’s forming
lines by 60 million bottles. This additional volume is to replace
product currently imported and underpinned by existing customer
demand. The project will be completed progressively during FY17.
The Fibre Packaging business delivered increased sales driven
by organic growth, improved Australasian agriculture volumes
and higher sales to the grocery sector in Australia. Orora’s
“Go Direct” transition in the Queensland fruit and produce
sector is progressing well, with new depots already established
in Bundaberg and Mareeba, and a further site expected to open
in Innisfail in late 2016.
Incremental cost reduction and innovation benefits of $13.7 million
were delivered at the B9 Recycled Paper Mill, taking total cumulative
benefits to $35.1 million. The mill increased production by 15,000
tonnes to 382,000 tonnes and successfully exited FY16 at a run rate
equal to design production capacity of 400,000 tonnes. Export
of recycled paper to the Orora business and external customers
in North America increased from 55,300 tonnes to 79,500 tonnes
during the year.
The new $20.0 million state-of-the-art dairy sack line at the existing
Thomastown, Victoria facility, underpinned by a supply agreement
with Fonterra, is currently being commissioned and will become
fully operational in the second quarter of FY17.
ORORA LIMITED 2015—2016 AWARDS
Orora North America, which is now comprised of Orora Packaging
Solutions (Landsberg Packaging Solutions and Manufacturing)
and the recently acquired IntegraColor, delivered a 20.2% increase
in local currency EBIT to USD72.0 million on the back of a 6.0%
increase in organic sales revenue, margin improvement initiatives
and benefits from recent acquisitions.
Landsberg Packaging Solutions continued to execute on its market
growth strategy through leveraging its product breadth, uniform
service offering and national footprint to increase sales to existing
customers and win market share, largely from independent players.
The Manufacturing division delivered increased earnings through
higher volumes and improved efficiencies and cost control, despite
continued margin pressure.
In September 2015, Landsberg acquired Jakait, a specialised supplier
of packaging, logistics services and label products to the greenhouse
produce sector based in Ontario, Canada. The integration of Jakait
is on plan, as is the successful integration of the 2014 acquisition
of Worldwide Plastics, which met Orora’s targeted returns in FY16,
a full year ahead of schedule.
In March 2016, Orora acquired IntegraColor, a Texas based provider
of Point of Purchase (POP) retail display solutions. IntegraColor
aligns with Orora’s total packaging solutions customer proposition
and moves Orora North America further up the value curve, closer
to the brand owner and provides a platform for future bolt-on
acquisitions in the POP sector. The integration is on plan and the
business is performing in line with expectations.
The Orora Way driving outperformance
Organisational culture plays a critical role in driving operational
and financial success. From the beginning, the Orora Board and
leadership team recognised that the passion and goodwill of its
6,200 team members offered a compelling source of competitive
advantage. Orora’s team members have played a unique role
in shaping the Company’s culture and developing the proprietary
The Orora Way, which includes a belief statement, company
values and outperformance deliverables that will continue
to drive success.
During the year, the Company continued to build on The Orora Way,
uniting Orora team members across Australasia and North America
with a shared vision for the future and linking their day-to-day
efforts to the Company’s three strategic areas of focus – innovating
to lead in Orora’s chosen markets, enhancing core operations,
and investing to grow the business. The Company also announced
the inaugural winners of the Orora Heroes Awards, a global
recognition program that celebrates team members who role
model a commitment to outperformance in the areas of safety,
financial discipline, customer focus and Orora’s people.
2015 BRW Most Innovative Companies —
Best Process Innovation
Frucor Supplier of the Year Award (2015)
Point of Purchase Advertising International
(POPAI), the Global Association for Marketing
at Retail Temporary display category 2 Gold,
1 Silver, 1 Bronze
4
ORORA LIMITED ANNUAL REPORT 2016
FY16 has been a successful
period, further developing
and embedding the
Company’s customer-led
culture of outperformance,
delivering on its business
objectives and generating
both strong earnings
growth and increased
financial returns.
Innovating to lead
Innovation is one of Orora’s three strategic focus areas and
passion is one of the Company’s core values. Since announcing
the establishment of the $45.0 million Orora Global Innovation
Initiative in July 2015, approximately $20.0 million in funding has
been committed to innovative customer-led product solutions,
process improvement and productivity.
Some specific examples include, a digital printer which is to
be installed in the Australian Fibre Packaging division in late
2016 to step change Orora’s product offering and customer
value proposition; and the new Glass bottle sleeving line that
was successfully commissioned in Gawler, South Australia, during
July 2016. These demonstrate Orora’s willingness to invest and
jointly support Orora’s and Orora’s customers’ future growth.
To further drive and cultivate innovative thinking, an internal
crowd sourcing initiative was launched in July 2016 that provides
all team members with a platform to contribute and develop ideas
in relation to the Orora Global Innovation Initiative. The program
has received a very high level of participation company-wide.
Shareholders can also experience Orora’s passion for innovation
by downloading the new Orora app from the Apple App Store
or Google Play Store. This is a leading example of how innovation
can improve the way Orora connects with its shareholders,
customers and communities, as well as its 6,200 team members,
to help them keep up to date with company announcements,
achievements and celebrations.
Outlook
Orora looks forward to a period of accelerated innovation, ongoing
enhancements to Orora’s core business operations and further
strategic investments to continue to drive growth for shareholders.
The Board would like to thank all of Orora’s stakeholders, including
customers, shareholders, team members and suppliers, for their
support this year.
CHRIS ROBERTS
Chairman
NIGEL GARRARD
Managing Director and Chief Executive Officer
2015
AUSTRALIAN
PACKAGING
DESIGN
AWARDS
2016
Australian Packaging Design Awards (2015)
Silver Award and Highly Commended
Energy Efficiency Council and Conservation
Authority New Zealand (2016)
Pride in Print Awards New Zealand
7 Gold and 2 Highly Commended
ORORA LIMITED ANNUAL REPORT 2016
5
OPERATING AND FINANCIAL REVIEW
THE ORORA WAY
With a shared belief in what we do, values that guide us, and a culture
of outperformance, Orora team members are united in their determination
for Orora to be the industry-leading packaging solutions company
delivering on our promise every day.
OUR BELIEF
OUR VALUES
OUR
VISION
OUR STRATEGIC
FOCUS
OUR
OUTPERFORMANCE
OUR MEASURES
FOR SUCCESS
THE
WAY
AT ORORA WE BELIEVE PACKAGING TOUCHES LIVES.
TOGETHER WE DELIVER ON THE PROMISE OF WHAT’S INSIDE.
TEAMWORK
· Safety first
· One Orora
· In it together
PASSION
· Courageous
· Innovative
· Responsible
RESPECT
INTEGRITY
· For each other
· For the community
· For our customers
· Do what is right
· True to what we stand for
· True to our promise
TO BE THE INDUSTRY-LEADING PACKAGING SOLUTIONS COMPANY
DELIVERING ON OUR PROMISE EVERY DAY.
INNOVATE TO LEAD
ENHANCE THE CORE
INVEST TO GROW
· Customer solutions
· Technical leadership
· Digital enablement
· Doing better every day
· Best-in class capabilities —
people, process & systems
· Improving efficiency
· In partnership with customers
· Extending our reach (bolt-on M&A)
· Diversified solutions
(adjacent M&A)
SAFETY
CUSTOMER FOCUS
OUR PEOPLE
FINANCIAL DISCIPLINE
· Zero harm
· Injury frequency
· Sales growth
· Net Promoter Score
· Engagement
· Diversity
· Increasing earnings
& ROAFE
· Operating cash flow
CREATING SHAREHOLDER VALUE
6
ORORA LIMITED ANNUAL REPORT 2016
Alignment to our strategy
Orora’s vision is to be the industry-leading packaging solutions
company delivering on our promise every day.
To achieve this vision, Orora aligns its business activities and
its team members to three key strategic priorities – innovate
to lead, enhance the core and invest to grow. Every Orora
business initiative directly aligns to these key strategic priorities,
and, importantly, every Orora team member is motivated
by the direct link between their day-to-day efforts and helping
to achieve the Company’s vision.
Successfully executing initiatives aligned to these three priorities
demands a continued focus on delivering outperformance through
customer focus, safety, financial discipline and our people.
We will continue to build on this momentum in the year ahead.
With a proud heritage dating back more than 150 years, Orora
will soon celebrate its third anniversary as an independent, listed
public company. We believe that the investments we continue
to make in defining and embedding Orora’s culture drive high
performance and competitive advantage, and are generating
shareholder value.
Since listing on the Australian Securities Exchange (ASX) in December
2013, our people have developed and embraced a company culture
that unites our businesses and drives outperformance.
The talent and passion of Orora’s team members is critical to
our continued success. In early 2014, more than 300 of our team
members from across Orora worked together to develop
The Orora Way, comprising:
• a shared belief in what Orora does
• values against which we hold ourselves to account
• a disciplined operating framework that demands
outperformance.
Orora rewards and celebrates team members who go above
and beyond to deliver exceptional outcomes. In December 2015,
Orora announced the inaugural winners of the Group-wide reward
and recognition program, Orora Heroes, which is directly aligned
to our four categories of outperformance – safety, customer focus,
our people, and financial discipline. (See Celebrating Orora Heroes
case study.)
CASE STUDY
Celebrating Orora Heroes
In 2015, Damien Kelly, a team member from an Orora Fibre
Packaging manufacturing site in Queensland, Australia, received
the inaugural Orora Heroes Award for Safety. Damien’s passion
for the safety of his fellow team members motivated him to
invest more than 12 months of his own time to customise
an app that simplified and improved safety reporting. The app
is now being adopted across the Australasian Fibre Packaging
business and is being tested for broader application across
the Orora Group.
ORORA LIMITED ANNUAL REPORT 2016
7
OUR BUSINESS
STRATEGY
Successful execution against a proven strategy has positioned Orora well.
The Company now looks forward to a period of accelerated innovation,
continued enhancements to our core business operations, and strategic
investments to drive future growth for our shareholders.
Consistent delivery of the promise
Future strategic focus
Since its listing in December 2013, Orora has maintained
a disciplined focus on delivering in accordance with our stated
strategy. With a well-credentialed Board and an experienced
management team, the Company has delivered on its strategy
to focus the portfolio, ensure its businesses are well invested,
deliver a significant program of self-help earnings improvements
and generate strong cash flows, which are being used to fund
both organic growth and inorganic investment to generate
future returns.
This strategy included multiple divestment and footprint
rationalisation programs, which have been successfully executed
and delivery of these programs has resulted in a healthy balance
sheet. This has enabled disciplined returns-focused investments
in organic growth and acquisitions of approximately $225.0 million
since listing on the ASX.
Orora will continue to target end-market segments with appealing
growth and return characteristics to refine and focus our portfolio.
Orora’s vision is to be the industry-leading packaging solutions
company delivering on our promise every day. We will achieve
this by relentlessly aligning our business activities and our
people to our disciplined operating framework, The Orora Way
(see previous pages).
Underpinned by The Orora Way, our shareholder value creation
blueprint further articulates the value-creating activities that
will contribute to our success and provides a framework against
which we hold ourselves accountable to our shareholders.
Orora is well positioned for a period of accelerated innovation,
continued enhancements to our core business operations and
strategic investments to drive future growth for our shareholders.
Shareholder value creation blueprint
$
ORGANIC
GROWTH &
INNOVATION
$
$
$
RETURNS FOCUSED GROWTH
CAPITAL ALLOCATION
$
SUSTAINABLE
DIVIDEND
Orora
Australasia
GDP Sales
Growth
Orora
North
America
GDP+ Sales
Growth
GDP based
growth,
enhanced by
innovation
GDP based
growth
supple-
mented
by market
share gains
& increased
share of
wallet
Organic Growth
Capital
Bolt-on M&A
(North America Focused)
Adjacent
M&A
60—70%
Payout Ratio
Customer
backed
growth
investments
20% ROAFE
by Year 3
ONA
footprint
expansion/
increasing
product
capability
Most deals
< $50.0M
Targeted
20% ROAFE
by Year 3
Parallel
packaging
substrates/
markets
Targeted
20% ROAFE
by Year 5
Approximately
30% Franked
8
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Delivering shareholder value
Focus
What this means
Organic Growth –
Enhance the Core
Orora Australasia – GDP based
growth enhanced by innovation
Track record since ASX Listing
in December 2013
What we have achieved this
financial year (FY16)
Operating within good market structures
and primarily servicing the defensive
markets of food and beverage, Orora
Australasia has reliably delivered
underlying revenue growth broadly
in line with GDP
Underlying sales growth of 2.5% in Australasia
Orora North America – GDP based
growth supplemented by market
share gains and increased sales
to existing customers via solutions
offering and innovation
Through utilising its uniform product
and service offering and leveraging
a national footprint, Orora North
America has consistently delivered
revenue growth in excess of 5%
North American revenue growth of
11.9%, including organic sales growth
of approximately 6.0%
Efficiency,
Productivity &
Cost Reduction –
Enhance the Core
Optimise our cost base and
realise targeted benefits from
recent initiatives encompassing
approximately $85.0 million of net
total cost reduction and operating
improvement benefits
Realised approximately $64.0 million
in cumulative benefits from:
• cost reductions and product innovations
from the B9 recycled paper mill
• portfolio exits and plant closures
• other initiatives
Delivered a further $14.0 million
(approximately) of incremental cost reduction
and innovation benefits from B9 in FY16
Remaining $7.0 million (approximately)
on track for delivery in FY17
Continuous, company-wide
disciplined cost and efficiency focus
Perpetual emphasis on enhancing efficiency, productivity improvements and cost reduction
Innovation –
Innovate to lead
Innovation, modernisation and
productivity initiatives to drive
competitive advantage
Launched $45.0 million Orora Innovation
Initiative (July 2015)
Signed an exclusive distribution
licence for the XO™ resealable can
closure in Australia, New Zealand
and the Pacific region
Committed $20.0 million in funding from the
Orora Innovation Initiative to develop process
and product innovations, e.g. shrink sleeve
capability in Glass
Established a crowd sourcing initiative to
further drive and cultivate innovative thinking
Orora’s innovation achievements have
been recognised by external parties
and several Supplier of the Year awards
Launched the Orora communications app
to connect with the Company’s many
stakeholders, including all our team members
Introduced an innovative cold-chain
monitoring system called Xsense® to Australia
Entered an exclusive relationship with YBP
Group Limited to provide customers with
an anti-counterfeiting and consumer
engagement technology platform
Successfully commissioned Orora’s second
high-quality printer in Auckland, New Zealand
Named in BRW most innovative companies
list in 2015 for second consecutive year and
won Best Process Innovation
Returns-Focused
Growth Capital
Allocation –
Invest to Grow
Organic Growth Capital – Customer-
backed growth investments in our
business targeting 20% Return on
Average Funds Employed (RoAFE)
within three years
Bolt-on M&A – Acquisitions that
expand Orora North America’s
footprint and/or increase its product
capability. The value of most deals
will be less than $50.0 million and
target 20% RoAFE within three years
Adjacent M&A – Merger and
acquisition activities that expand
into parallel packaging substrates
or markets. All deals target 20%
RoAFE by year five
Sustainable
Dividend
Shareholder dividends targeting
a pay out ratio of between 60–70%
Aim to frank dividends to the
extent practicable (estimated
approximately 30%)
$20.0 million committed thus far from the Orora Global Innovation Initiative
$20.0 million dairy sack line in Victoria,
Australia, backed by a supply agreement
with Fonterra. Plant will be commissioned
in early FY17
$42.0 million glass capacity expansion in
South Australia, Australia (February 2016).
Expansion expected to be completed
by end of FY17
Opened a new Landsberg distribution
centre in Nashville, USA, supported
by a large corporate account
Opened two new Landsberg distribution
centres in Charlotte and Orlando, USA,
supported by corporate accounts
$62.0 million invested in customer-backed growth investments since ASX listing
Acquisition of Worldwide Plastics,
Texas-based packaging company targeting
agricultural market
Acquisition of Jakait, a Canada-based specialised
packaging supplier to the greenhouse produce
market (September 2015)
Acquired a small South Australian
fibre packaging distributor to enhance
Orora’s “Go Direct” model in the fruit
and produce sector
$35.0 million invested in enhancing Orora’s footprint and product capability through bolt-ons
Acquisition of IntegraColor, a North American
manufacturer of point of purchase retail
display solutions and other visual
communications services (March 2016)
$107.0 million invested in parallel packaging markets through adjacent M&A since ASX listing
Both annual dividends since listing
have been paid at the top of this
range – 70% in FY14 and 69% in FY15
Declared total dividends of 9.5 cents in FY16
– approximately 67% payout (30% franked)
ORORA LIMITED ANNUAL REPORT 2016
9
BOARD OF
DIRECTORS
10
ORORA LIMITED ANNUAL REPORT 2016
Chris Roberts
(BCom)
Independent
Non-Executive Director
and Chairman
Chris Roberts has significant knowledge of fast-moving consumer products,
where the packaging component is critical. He has gained this expertise through
executive roles internationally and in Australia as CEO of Reckitt & Colman,
Orlando Wyndham Wines and Arnotts Limited.
Previous directorships include Telstra Limited, MLC Life, Email Limited, Petaluma
Wines Limited and Australian Agricultural Company Limited.
Director and Chairman of Orora Limited since December 2013.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Director, Control Risks Group – UK (September 2006 to April 2015)
• Deputy Chairman, The Centre for Independent Studies (since August 2004)
• Director (1999 to 2013) and Chairman (2000 to 2013), Amcor Limited
Board committee membership
• Chair, Executive Committee and Nomination Committee
• Member, Human Resources Committee and Audit & Compliance Committee
Nigel Garrard
(BEc, CA, MAICD)
Managing Director and
Chief Executive Officer
Abi Cleland
(BA, BCom, MBA, GAICD)
Independent
Non-Executive Director
Nigel Garrard is a qualified chartered accountant with an extensive career
in the consumer goods industry.
In 2009, Nigel joined Amcor as President of the Australasia and Packaging
Distribution business group. Prior to Amcor, Nigel was Managing Director of
Coca-Cola Amatil’s Food and Services Division (2007–2009), Managing Director
of the publicly listed SPC Ardmona (2000–2009) and held a range of positions
in Australia and New Zealand with US-based Chiquita Brands International,
including as Managing Director of Chiquita Brands South Pacific Limited.
A former Chairman of National Food Industry Strategy Limited and former
Director of Australian Food & Grocery Council and Victorian Relief Foodbank
Limited, Nigel has been involved with a wide range of industry associations.
Director since May 2009. Appointed Managing Director and CEO of Orora Limited
in December 2013.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Director, Hudson Institute of Medical Research (since February 2016)
Board committee membership
• Member, Executive Committee
Abi Cleland has extensive global experience in strategy, M&A, digital and business
growth. This has been gained from 20 years of executive roles in the industrial,
retail, agriculture and financial services sectors, including with ANZ, Amcor,
Incitec Pivot, Caltex and BHP, as well as from smaller entrepreneurial companies.
Abi currently runs an advisory and management business, Absolute Partners, that
focuses on strategy, M&A and building businesses leveraging disruptive changes.
Director of Orora Limited since February 2014.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Director, Swimming Australia (Audit Chair) (since July 2015)
• Chairman (since June 2016) and Director (since January 2016),
Planwise Australia
• Managing Director, Absolute Partners (since September 2012)
Board committee membership
• Member, Audit & Compliance Committee and Human Resources Committee
OPERATING AND FINANCIAL REVIEW BOARD COMMITTEES
Executive
Committee
Chris Roberts, Chair
Nigel Garrard
Sam Lewis
John Pizzey
Secretary: Ann Stubbings
Nomination
Committee
Chris Roberts, Chair
John Pizzey
Jeremy Sutcliffe
Secretary: Ann Stubbings
Audit & Compliance
Committee
Sam Lewis, Chair
Abi Cleland
Chris Roberts
Jeremy Sutcliffe
Secretary: Ann Stubbings
Human Resources
Committee
John Pizzey, Chair
Abi Cleland
Chris Roberts
Jeremy Sutcliffe
Secretary: Ann Stubbings
Sam Lewis
(BA (Hons), CA, ACA, GAICD)
Independent
Non-Executive Director
John Pizzey
(BE. (Chem), Dip.Mgt., FTSE)
Independent
Non-Executive Director
Jeremy Sutcliffe
(LLB (Hons))
Independent
Non-Executive Director
Sam (Samantha) Lewis is a chartered accountant and has extensive financial
experience, including as lead auditor to a number of major Australian listed
entities. She has 24 years’ experience with Deloitte, where she was a partner for
14 years. In addition to external audits, Sam provided accounting and transactional
advisory services to major organisations in Australia, and has significant
experience working with manufacturing and consumer business organisations.
Sam holds a Bachelor of Arts, Economics from the University of Liverpool in
the UK, and is a member of the Institute of Chartered Accountants in Australia
and the Institute of Chartered Accountants in England and Wales.
Director of Orora Limited since March 2014.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Director, Aurizon Holdings Limited (since February 2015)
• APRA Audit Committee (Chairman) and APRA Risk Committee (Member)
(since June 2016)
Board committee membership
• Chair, Audit & Compliance Committee
• Member, Executive Committee
John Pizzey has extensive knowledge of the international resources industry
and global environmental management.
He was formerly Executive Vice President and Group President Primary Products
for Alcoa Inc. and Chairman of London Metal Exchange.
Director of Orora Limited since December 2013.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Chairman (since November 2011) and Director (since June 2007)
of Alumina Limited
• Director, Air Liquide Australia Limited (since April 2008)
• Chairman (May 2010 to December 2013) and Director (November 2005
to December 2013) of Iluka Resources Limited
• Director, Amcor Limited (September 2003 to December 2013)
• Member of the MonashHeart Strategic Advisory Board (since 2014)
Board committee membership
• Chair, Human Resources Committee
• Member, Executive Committee and Nomination Committee
Jeremy Sutcliffe has broad international corporate experience as CEO of two
ASX Top 100 companies and has extensive experience of businesses operating in
North America and Europe with diverse trading relationships in Asia. A qualified
lawyer in Australia and the UK, Jeremy previously held positions with Baker
& McKenzie Solicitors, London and Sydney, Sims Metal Management Limited
and associated companies (including Group CEO), and Interim Managing
Director & CEO of CSR Limited.
Director of Orora Limited since December 2013.
Directorships of listed entities within the past three years, other directorships
and offices (current and recent):
• Director, Amcor Limited (since October 2009)
• Chairman, CSR Limited (since July 2011) and Director (since December 2008)
• Member, Advisory Board of Veolia Environmental Services Australia
(since June 2010)
• Member, Australian Rugby League Commission Limited (since February 2012)
Board committee membership
• Member, Human Resources Committee, Audit & Compliance Committee and
Nomination Committee
ORORA LIMITED ANNUAL REPORT 2016
11
EXECUTIVE
LEADERSHIP TEAM
Nigel Garrard
(BEc, CA, MAICD)
Managing Director and
Chief Executive Officer
Please see page 10.
David Berry
(BSc, GDip AppSc (Business
Science))
Group General Manager,
Packaging and Distribution
David Berry joined Orora as Group General Manager, Packaging and Distribution
at the time of listing in December 2013. Prior to that, David was Group General
Manager, Cartons and Sacks with Amcor Australasia, having joined Amcor in 2006.
David brings more than 28 years’ experience in the packaging industry, including
four years with Visy Industries and 10 years in technical, operations, sales and
marketing roles at Southcorp Packaging and Containers Packaging.
Simon Bromell
(BSc, GDip Agribus, GAICD)
Group General Manager,
Beverage
Simon Bromell joined Orora in 2014 bringing 25 years’ experience in leadership
roles across the national food supply chain in consumer goods and agribusiness.
Prior to Orora, Simon was General Manager of Gold Coin Asia, and also spent
four years as Managing Director of Fonterra’s Australian Ingredients business.
Before this, he held senior management roles across a range of businesses and
functions at Mars from 1996 to 2009.
Peter de Hennin
(BBus (Marketing))
Group General Manager,
Paper and Recycling
Prior to joining Orora in 2014, Peter de Hennin was the Chief Executive Officer
(CEO) of Detmold Flexibles for five years. Peter brings more than 35 years’
experience in a wide variety of packaging mediums and manufacturing processes,
including two years as CEO of Steelbro Group, and three years as CEO of the
Finewrap Group of Companies.
Stuart Hutton
(BBus, CA)
Chief Financial Officer
Stuart Hutton joined Orora in December 2013, having previously served
as Chief Financial Officer (CFO) of Amcor’s Australasia and Packaging
Distribution business. Stuart brings more than 20 years’ experience in senior
finance roles, including five years with Orica as CFO for the Minova Group,
Chemical Services Division and Mining Services (North America) and four years
as CFO of WorldMark Holdings Pty Ltd. Stuart spent nine years during the early
part of his career with Deloitte Touche Tohmatsu in audit and corporate finance.
Craig Jackson
(BCom, MBA, CPA, GAICD)
Group General Manager,
Procurement and Supply
Prior to joining Orora, Craig Jackson was Group General Manager, Procurement
and Supply within Amcor’s Australasia and Packaging Distribution business,
a role he commenced in April 2013. Prior to this, Craig held the position
of General Manager Supply Chain and Operations at Fonterra Australia from
2009. Craig’s 20-year career in finance, procurement and supply chain roles
includes four years as Commercial Vice President at Mars Australia and
New Zealand, and three years as Commercial Director, Mars Food.
12
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Larry C King
Chief Executive Officer,
IntegraColor
Prior to joining Orora in 2016, through an acquisition of his company,
Larry C King was Chairman/CEO of IntegraColor, having joined that company
in 1980 and served in a number of roles, ultimately becoming its sole
shareholder and driving its growth and development.
IntegraColor serves as a single source, Point of Purchase and solutions provider
for various industries throughout North America. Larry was also a two-year
finalist for Entrepreneur of the Year.
David Lewis
(BCom (Hons))
Group General Manager,
Strategy
Prior to Orora’s listing on the ASX, David Lewis spent seven years with Amcor
Limited, initially as Vice President of Strategy and then as a Global Key Account
Director in Switzerland. Prior to joining Amcor, David had a nine-year career
in the investment banking industry. This included six years with UBS, followed
by three years at Goldman Sachs JBWere as Vice President, Investment Banking.
Brian Lowe
(MBA)
Group General Manager,
Fibre
Prior to taking on his current role, Brian Lowe was the Group General Manager
of Orora’s Beverage business. This followed two years in the same role with
Amcor’s Australasia and Packaging Distribution business. Before joining Amcor
in 2011, Brian spent eight years as Managing Director of Delphi Automotive
Systems, including four years as Managing Director for Asia Pacific Powertrain
in Shanghai. This followed a 10-year career at General Electric (GE), where his
last role was Managing Director of GE Plastics, Australia from 2001 to 2003.
Louise Marshall
(BBus)
Group General Manager,
Human Resources
Louise Marshall joined Orora in the role of Group General Manager, Human
Resources in July 2015. Louise brings more than 17 years’ Human Resources
experience, including five years at ASX-listed Tabcorp Holdings Limited, where
she was Executive General Manager – Human Resources. Prior to her time
at Tabcorp, Louise spent more than eight years at PricewaterhouseCoopers,
where she was Executive Director Human Capital for its Australian business.
Bernie Salvatore
(Dip Ind Mngt (Eng), MBA)
President,
Orora Packaging Solutions
Prior to taking on his current role, Bernie Salvatore was President of Amcor
Packaging Distribution, having joined the company in 2002. Bernie brings more
than 30 years’ experience in the North American packaging industry, working
for several publicly listed companies. Prior to Amcor, Bernie spent 20 years
with Sealed Air and Cryovac, primarily in sales and marketing roles. His last role
at Sealed Air was as Vice President Sales, North America from 2000 to 2002.
Ann Stubbings
(BA/LLB, MAICD)
Company Secretary and
Group General Counsel
Ann Stubbings has more than 20 years’ experience in corporate legal roles
across the manufacturing and financial services sectors, in governance
and company secretariat, regulatory matters, commercial law and dispute
resolution. Ann joined Orora at its listing on the ASX in December 2013.
Prior to her appointment as Orora’s Group General Counsel and Company
Secretary, Ann was Senior Group Legal Counsel at Amcor Limited from 2008
to December 2013, and Alternate Company Secretary from 2009. Ann spent
the early part of her career in private legal practice.
ORORA LIMITED ANNUAL REPORT 2016
13
OPERATIONAL
REVIEW
ORORA
AUSTRALASIA
Orora Australasia delivered a solid
operating result, with organic volume
growth and benefits from business
improvement and cost control programs.
BUSINESS SEGMENT
ORORA AUSTRALASIA
BUSINESS GROUP
FIBRE
BEVERAGE
DIVISION
FIBRE
PACKAGING
PAPER &
RECYCLING (B9)
PACKAGING &
DISTRIBUTION
BEVERAGE
CANS
GLASS
CLOSURES
AUSTRALIA
2
1
WA
1
NT
SA
4
4
29 Manufacturing Plants
36 Distribution Sites
3 10
QLD
NSW
5
7
NEW ZEALAND
VIC
7
6
1
1
TAS
5
4
2
2
COUNTRIES
2
MANUFACTURING
PLANTS
DISTRIBUTION
SITES
29
36
TEAM MEMBERS
3.6K
14
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW
SALES (AUD million)
EBIT (AUD million)
↑
1.1%
Sales (AUD million)[1]
$1,956.6m
↑
10.4%
EBIT (AUD million)[1]
$200.4m
1,956.6
1,935.6
1,935.5
1,912.9
FY13
FY14
FY15
FY16
AUD million
Key points
200.4
10.2%
181.6
9.4%
162.5
8.5%
FY14
FY15
FY16
129.3
6.7%
FY13
First half EBIT
Second half EBIT
EBIT margin %
• Overall, Australasia delivered increased Earnings before Interest
and Tax (EBIT) of $200.4 million, an increase of $18.8 million.
This was 10.4% higher than the prior year.
• Underlying sales increased by 2.5% after excluding pass through
of lower aluminium prices within Beverage Cans and the
progressive exit of export sales of surplus Old Corrugated
Cardboard (OCC).
• With benefits from previous large scale investments materialising
and Capital Expenditure (CapEx) tracking below depreciation,
higher earnings drove the return on average funds employed
(RoAFE) up 140 bps to 11.6%, from 10.2% in the prior year.
• Economic conditions in Australia were flat and are expected
to remain so. In general, organic growth remains muted and
broadly in line with GDP.
EARNINGS(1)
AUD million
Sales revenue
EBIT(2)
EBIT margin (%)
Average Funds Employed (AFE)
RoAFE (%)
SEGMENT CASH FLOW
AUD million
EBITDA(3)
Non-cash items
Movement in total working capital
Net capital expenditure
Underlying operating cash flow
Cash significant items
Operating free cash flow(1)
(1) As reported in the Segment Note contained within the Financial Statements, refer note 1.
(2) Earnings before interest, related income tax expense and significant items.
(3) Earnings before depreciation, amortisation, interest, related income tax expense and significant items.
2016
2015 Change (%)
1,956.6
200.4
10.2
1,724.4
1,935.5
181.6
9.4
1,777.2
11.6
10.2
1.1
10.4
(3.0)
2016
2015 Change (%)
286.1
29.6
(26.9)
(60.3)
228.5
(4.3)
224.2
261.9
21.2
(1.8)
(64.1)
217.2
(14.8)
202.4
9.2
5.2
ORORA LIMITED ANNUAL REPORT 2016
15
Fibre Business Group
Fibre earnings were higher than the prior year driven by cost
reduction and innovation benefits from the B9 Recycled Paper Mill
and improved sales and efficiencies in Fibre Packaging.
Fibre Packaging
Sales in Australia were higher driven by improved volumes across the
agriculture and grocery sectors. The “Go Direct” channel transition
in the fruit and produce sector is progressing well with new business
partially offsetting lost revenues from the distribution agreement
terminated in May 2015.
The business has continued to expand its “Go Direct” channel
to market. New depots in Queensland were opened in Bundaberg
and Mareeba in July 2016 and a new site in Innisfail is expected
to open in late calendar 2016. This expanded distribution network
complements the strategic partnership formed with Australia’s
largest refrigerated transport company, AHG Refrigerated Logistics.
Orora’s augmented end-to-end value proposition, encompassing
corrugated cartons and refrigerated logistics, is being well received
by fruit and produce customers in the region.
Sales in New Zealand were higher than the prior period, driven
by increased volumes in the agriculture sector led by a strong kiwi
fruit and apple growing season.
Ongoing cost improvement and sales margin initiatives contributed
to improved overall margins across the division.
Designed to improve product quality and output, the business
committed approximately $20.0 million during the year to a
continued asset upgrade program focusing on modernising printing
and converting equipment across Orora’s Australian and New Zealand
corrugating sites.
In line with its small and medium sized enterprise (SME) customer
strategy focusing on short run, customised corrugated packaging, the
Fibre Packaging business rebranded its network of smaller footprint
box converters to “Orora Specialty Packaging”. Underpinned by the
success of this SME initiative, an expanded Orora Specialty Packaging
site in Oakleigh, Victoria, was opened in July 2016.
Packaging and Distribution
Improved sales in the quick service restaurant sector were offset
by general softness in the grocery and industrial segments.
Sales in the dairy segment were broadly stable with the prior year.
OPERATIONAL
REVIEW
ORORA
AUSTRALASIA
Orora ChillFresh® is a unique
alternative solution to
expanded polystyrene
products for the packaging
and transportation of
products requiring low
temperature conditions.
CASE STUDY
World-class dairy bag facility
in Thomastown, Victoria
Investment in a new world-class dairy bag production line and
site upgrade for Orora’s facility in Thomastown, Victoria was
announced in December 2015. The transformation of the site
incorporates new digital pasting of bags and the latest tube
sealing technology, upgraded high hygiene facilities across the
total manufacturing site, the inclusion of automated guided
vehicles and a new warehouse. The new dairy bag machine is the
first of its kind in Australia and commenced commissioning in
mid-2016, with the full project on track for completion by the end
of 2016. The new production line is one of the leading dairy bag
manufacturing facilities in the world, with the latest bag-making
technology combined with the highest food safety standards.
16
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Innovation, growth and sustainability
Construction of the new $20.0 million state of the art dairy
sack line at the existing Thomastown, Victoria, facility is largely
completed with the project tracking on time and cost. The new
line is currently being commissioned and is expected to be fully
operational in the second quarter of FY17.
The Australasian business has continued to actively utilise the Orora
Global Innovation Initiative. Approximately $13.0 million of projects
have been approved to enhance innovation, modernisation and
productivity. As part of this program, to augment Orora’s product
offering, a new Glass bottle sleeving line was installed in Gawler
(South Australia) and was successfully commissioned in July 2016.
To enhance its customer value proposition through offering superior
print and visual display quality, the Fibre Packaging division has
committed to an investment in a new state of the art digital printer.
This new asset will position Orora at the forefront of digital
technology as it applies to the fibre packaging sector. The digital
printer is to be located at Scoresby, Victoria, and is expected
to be operational in late calendar 2016.
Orora established further relationships with specialist third party
vendors during the period to augment its offering of innovative
packaging concepts to customers.
• Through the Fibre Packaging business in Australia, Orora has
introduced an innovative cold-chain monitoring system called
Xsense® to Australia. The system proactively monitors, analyses
and disseminates temperature and relative humidity data –
optimising the quality of perishable products throughout the
cold chain. This technology complements Orora’s solution
portfolio for fresh produce, meat and other cold chain products.
• Orora has entered an exclusive relationship with YBP Group
Limited to provide customers with an anti-counterfeiting
and consumer engagement technology platform with initial
applications expected in the wine industry.
Orora has committed to the world’s largest corporate sustainability
initiative, the UN Global Compact (UNGC), which is both a framework
for action and a platform for demonstrating corporate commitment
and leadership. The UNGC establishes ten principles across issues
such as Bribery & Corruption, Human Rights, Labour Standards and
Environmental Performance.
Orora was awarded the Energy Efficiency & Conservation Council
Energy Efficiency Award for large businesses in New Zealand.
The Company also received a Highly Commended for specific
energy efficiency initiatives at its Wiri Beverage Cans plant,
New Zealand.
Botany Recycled Paper Mill (B9)
B9 produced 382,000 tonnes of recycled paper during
FY16 (367,000 tonnes in the prior period) and in line with
expectations, successfully exited FY16 at a run rate equal
to the design production capacity of 400,000 tonnes.
Manufacturing consistency continued to stabilise in the second
half of the year following the extended five day maintenance
shut in September 2015, which affected first half volumes.
During FY16, B9 exported 79,500 tonnes of recycled paper to
Orora North America and US-based customers (55,300 in FY15).
From January 2016, B9 commenced paying higher gas prices
due to the expiry of the previous long-term supply agreement.
The adverse EBIT impact in the second half of FY16 was
approximately $2.0 million.
Beverage Business Group
Beverage volumes were higher than the prior period. Earnings
were higher, with improved operating cost control across the
Business Group and the reversal of the adverse financial impact
from the FY15 glass furnace rebuild. These factors were partially
offset by the impact of higher input costs in the Glass business.
Beverage Cans
Volumes were in line with the prior period with improved operating
cost control and manufacturing efficiencies driving higher earnings.
A long-term customer agreement which expired in June 2016,
was renewed and extended for a further five years to June 2021.
Glass
Volumes were ahead of the prior year aided by an increase in market
share in beer and improving wine volumes through the period.
Operating efficiency improved and the majority of the adverse
financial impact from the FY15 glass furnace rebuild reversed,
although these upsides were largely offset by higher input costs
of approximately $6.0 million (energy and soda ash) and increased
depreciation resulting from the furnace rebuild.
With the Glass furnaces in an oversold position and Orora importing
bottles to meet demand, in February 2016, it was announced that
$42.0 million would be invested to expand the combined forming
capacity of two of the three furnaces by 60 million bottles.
During the year, the business successfully extended two major
wine customer contracts for multi-year terms.
CASE STUDY
A state-of-the-art glass bottle
facility at Gawler, South Australia
In February 2016, Orora announced a $42.0 million investment
in its Gawler facility in South Australia, to expand the combined
forming capacity of two of the three furnaces by 60 million
bottles, to meet increased customer demand. To supplement
its glass product offering, Orora also introduced a new glass
sleeving decoration line in July 2016. This innovation meets
a growing customer need to attractively package and label
their products, providing stand-out on shelf and customisation
of packaging for promotions. Once complete in early 2017,
Orora’s Gawler facility will be a market leader in producing
glass bottles for the Australian beverage market.
ORORA LIMITED ANNUAL REPORT 2016
17
OPERATIONAL
REVIEW
ORORA
NORTH AMERICA
Orora North America delivered strong
earnings growth on the back of a 6.0%
increase in organic sales revenue,
margin improvement initiatives and
benefits from recent acquisitions.
BUSINESS SEGMENT
ORORA NORTH AMERICA
BUSINESS GROUP
ORORA PACKAGING SOLUTIONS
INTEGRACOLOR
DIVISION
LANDSBERG
PACKAGING SOLUTIONS
MANUFACTURING
BC
AL
SA
MA
ON
2
CANADA
WA
1
MT
UNITED
STATES OF
AMERICA
OR
1
ID
WY
NV
1
UT
CO
1
CA
9
17
AZ
3
NM
WI
QC
VT
NH
NB
ME
NS
MA
RI
CT
1 NJ
DE
MD
MI
NY
IL
1
1
IN
1
OH
1
PA
1
KY
TN
3
MS
AL
WV
VA
1
1NC
SC
GA
3
FL
1
ND
SD
NE
KS
OK
TX
1
3
MN
IA
MO
1
AR
LA
6
MEXICO
11 Manufacturing Plants
51 Distribution Sites
1
1
UNITED KINGDOM
CHINA
COUNTRIES
5
MANUFACTURING
PLANTS
DISTRIBUTION
SITES
11
51
TEAM MEMBERS
2.6K
18
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW
SALES (USD million)
EBIT (USD million)
↑
Sales (USD million)[1]
11.9%
$1,378.8m
↑
EBIT (USD million)[1]
20.2%
$72.0m
1,378.8
1,231.7
1,159.7
1,034.5
72.0
5.2%
59.9
4.9%
52.5
44.7
4.3%
4.5%
FY13
FY14
FY15
FY16
USD million
FY13
FY14
FY15
FY16
First half EBIT
Second half EBIT
EBIT margin %
Key points
Following the March 2016 acquisition of IntegraColor, Orora North
America now comprises two Business Groups:
• Orora Packaging Solutions – encompassing the existing Landsberg
and Manufacturing divisions; and
• IntegraColor – the recently acquired point of purchase business.
Overall, North America’s reported earnings grew 38.1%
to $98.9 million.
In local currency terms, sales grew 11.9% to USD1,378.8 million and
earnings were up 20.2% to USD72.0 million. Excluding the impact
of acquisitions, organic sales growth was approximately 6.0%.
North America’s EBIT margin improved to 5.2% (versus 4.9% in the
prior year) reflecting improved efficiency and cost control in Orora
Packaging Solutions with a minor positive impact from IntegraColor
(acquired 1 March 2016).
Cash flow increased 33.0% to $90.2 million, representing a cash
conversion of 76% and RoAFE improved 210 bps to 24.7% through
higher earnings and improving balance sheet management.
The foreign exchange benefit on North American sales and
earnings was $218.9 million and $10.7 million, respectively.
EARNINGS(1)
AUD million
Sales revenue
EBIT(2)
EBIT margin (%)
Average Funds Employed (AFE)
RoAFE (%)
Local currency sales revenue (USD million)
Local currency EBIT(2) (USD million)
SEGMENT CASH FLOW
AUD million
EBITDA(3)
Non-cash items
Movement in total working capital
Net capital expenditure
Underlying operating cash flow
Cash significant items
Operating free cash flow(1)
(1) As reported in the Segment Note contained within the Financial Statements, refer note 1.
(2) Earnings before interest, related income tax expense and significant items.
(3) Earnings before depreciation, amortisation, interest, related income tax expense and significant items.
2016
2015 Change (%)
1,893.2
98.9
5.2
400.1
24.7
1,378.8
72.0
1,472.3
71.6
4.9
316.3
22.6
1,231.7
59.9
28.6
38.1
26.5
11.9
20.2
2016
2015 Change (%)
115.6
2.7
(1.4)
(26.7)
90.2
–
90.2
84.2
(0.1)
3.3
(19.6)
67.8
–
67.8
37.3
33.0
ORORA LIMITED ANNUAL REPORT 2016
19
The North American business imported 59,000 tonnes of B9 paper
(49,000 tonnes in FY15), which enables the business to market
an integrated fibre offering.
Roll out of the new Enterprise Resource Planning (ERP) system
commenced in January 2016. It remains on track with the revised
implementation schedule and eleven sites have now successfully
converted. Implementation at the remaining sites will be progressive
over the next 12 to 18 months. There is no change to the revised
capital cost estimate of USD25.0 million. The total cumulative spend
to date is approximately USD18.0 million.
IntegraColor
On 1 March 2016, Orora announced the acquisition of IntegraColor,
a Texas-based provider of Point of Purchase (POP) retail display
solutions and visual communication services, for USD77.0 million.
With sales of approximately USD100.0 million, IntegraColor provides
Orora with a new earnings stream in North America. The acquisition
aligns with Orora’s total packaging solutions customer proposition
and moves the North American business further up the value chain
and closer to the brand owner.
The vendor has continued with Orora post acquisition and,
in addition to overseeing the IntegraColor business, will focus
on executing Orora North America’s organic and inorganic growth
strategy for POP. The experienced local management team
will continue to run the day-to-day operations of IntegraColor.
Integration is tracking well, with good customer and employee
engagement and sound progress being made across all
integration components.
Financially, IntegraColor is performing in line with expectations.
The contribution to FY16 has been adversely impacted by acquisition
transaction costs of approximately $1.4 million (USD1.0 million),
which were expensed during the period.
OPERATIONAL
REVIEW
ORORA
NORTH AMERICA
Orora Packaging Solutions
Orora Packaging Solutions delivered strong sales growth and higher
earnings despite continued muted economic and market conditions.
Orora Packaging Solutions’ EBIT margin improved to 5.1% (versus
4.9% in the prior period) driven by an ongoing focus on enhancing
the value add service offering and improving efficiency, cost control
and procurement.
Despite flat market conditions, Landsberg increased revenue by
continuing to successfully execute on its market growth strategy.
Through its product breadth, uniform service offering and
leveraging its national footprint, the business generated higher
sales to existing customers and won market share largely from
independent players. The business benefited from a continued
focus on securing larger corporate accounts within the targeted
markets of food, IT, auto and pharmaceutical/health and by
sustained commission-only sales growth.
To further enhance the ongoing evolution to a “Total Packaging
Solutions Supplier”, Landsberg acquired a small Californian based
supplier of flexible packaging. The acquisition provides sourcing
lines for flexible packaging from Asia and assisted Landsberg to win
new business during the period, through augmenting its customer
value proposition.
The successful integration of the July 2014 acquisition of Worldwide
Plastics has delivered a 20% RoAFE in FY16 – a full year ahead
of return criteria. Meanwhile, integration of the 1 September 2015
acquisition of Jakait, a specialised supplier of packaging, logistics
services and label products to the greenhouse produce sector
based in Ontario (Canada), is on track.
Underpinned by support from existing corporate accounts,
two new distribution sites were opened in Orlando, Florida,
and Charlotte, North Carolina, during the second half of FY16,
further bolstering Landsberg’s geographic footprint.
The Manufacturing division increased earnings through higher
volumes, improved manufacturing efficiency and solid operating
cost control, despite continued margin pressure from surplus new
industry capacity entering the market.
CASE STUDY
IntegraColor, the latest addition to Orora
In March 2016, Orora announced the acquisition of
IntegraColor, a US provider of point of purchase (POP) retail
display solutions and other visual communications services for
corporate customers across the consumer (food and beverage),
healthcare/education and horticulture industries. IntegraColor
offers customers a broad range of value-added services,
from brand concepts through to design, production, data
management, fulfilment and logistics, complementing Orora’s
total packaging solutions capability. The company is based in
Texas and services over 3,200 customers across North America.
20
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Growth agenda
Whilst the bias remains slightly positive, the business is yet
to witness any tangible improvement in economic conditions
within North America.
The focus of Landsberg remains on securing large corporate accounts
and increasing sales with existing customers. This growth will be
driven organically through leveraging the national footprint, extensive
product breadth, uniform service offering and a customised
packaging solution value proposition.
Orora Packaging Solutions will continue to seek to capitalise
on the benefits of an integrated fibre operation through selling
the enhanced performance characteristics of B9 paper.
Thus far, approximately USD5.0 million of Orora North America
projects have been approved under the Orora Global Innovation
Initiative. This includes an investment in a business-to-consumer
offering to which Landsberg is already supplying packaging
and fulfilment services. The innovative online business provides
chilled fresh food to the customer’s home.
A pipeline of acquisition targets within the preferred market
segments continues to be developed in the Packaging Solutions
sector. These acquisitions either extend the geographic footprint
and/or enhance the business’s customised product capability.
The completion of the roll out of the new ERP system is a key
enabler to this acquisition growth opportunity.
Attracted by heavily customised product/service dynamics
of POP, a pipeline of national acquisition targets to be bolted onto
IntegraColor is also now being developed. These opportunities
are likely to be primarily focused on extending the geographic
footprint as well as augmenting the product and service capability.
Orora’s custom-made low-cost
virtual reality viewer transforms
a smartphone into an
immersive media headset.
CASE STUDY
Two new distribution sites for
Landsberg Packaging Solutions in 2016
The packaging market in south-eastern USA is rapidly growing,
as manufacturing companies continue to relocate there
in order to capture the benefits of a more favourable business
environment. Aligned with Orora’s growth strategy in this
region, two new locations have been added.
In Charlotte, North Carolina, a 60,000 square foot (5,600 square
metre) facility has been added with the capability of servicing
customers within a 450-kilometre radius. The location is anchored
with two long-term large corporate accounts and will provide
Orora with a growth platform to extend our business in North
and South Carolina.
In Orlando, Florida a 50,000 square foot (4,650 square metre)
facility has been added, which is ideally located to support
the growing fresh produce industry for the retail market.
The facility, initially supported by a large food processing
customer, has already allowed Orora to attract and support
a number of additional new customers.
ORORA LIMITED ANNUAL REPORT 2016
21
FINANCIAL REVIEW
SUMMARY
INCOME STATEMENT(1)
$ million
Sales revenue
Earnings before depreciation, amortisation, interest, related income tax expense and significant items
Depreciation and amortisation
Earnings before interest and related income tax expense
Net financing costs
Income tax expense
Profit for the financial period from continuing operations
BALANCE SHEET(2)
$ million
Cash
Other current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets
Interest-bearing liabilities
Payables and provisions
Total equity
Total liabilities and equity
CASH FLOW FOR THE YEAR ENDED 30 JUNE
$ million
Earnings before depreciation, amortisation, interest and related income tax expense
Non-cash items
Movement in total working capital
Net capital expenditure
Underlying Operating Cash Flow from continuing operations
Cash significant items
Operating Free Cash Flow from continuing operations
2016
2015
3,849.8
388.0
(107.5)
3,407.8
323.2
(98.1)
280.5
(41.1)
(70.8)
168.6
225.1
(37.9)
(55.8)
131.4
2016
2015
66.1
1,016.6
1,564.3
378.2
104.7
67.3
931.1
1,547.4
287.9
103.3
3,129.9
2,937.0
695.7
936.6
1,497.6
674.2
820.8
1,442.0
3,129.9
2,937.0
2016
2015
388.0
26.5
(23.5)
(77.2)(3)
313.8
(4.7)
323.2
20.0
(1.7)
(80.7)
260.8
(19.2)
309.1(3)
241.6(4)
(1) As reported in the Segment Note contained within the Financial Statements (refer note 1.1) with the exception of net financing costs and income tax expense which
are not included in the Segment Note.
(2) IFRS compliant information extracted from the audited Financial Statements.
(3) Adjusted to exclude the initial proceeds received from the sale of land at Petrie, Queensland.
(4) As reported per the Segment Note in the Financial Statements (refer note 1.1).
22
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Revenue
Cost reduction update
Sales revenue of $3,849.8 million was up 13.0% on the prior period.
The Australasian segment increased underlying sales by 2.5%
with the Fibre Packaging division delivering higher volumes across
key segments, including benefits from very strong kiwi fruit and
apple crops in New Zealand, and the net of the transition impact
of the “Go Direct” model in fruit and produce. The Glass business
delivered higher volumes aided by increased market share in beer
and improving wine volumes through the period.
These revenue gains were partially offset by lower export sales
of surplus Old Corrugated Cardboard (OCC) from ongoing OCC
collection footprint rationalisation and the pass through of lower
aluminium prices within Beverage Cans.
North America grew local currency revenue by 11.9% through
securing increased sales to existing customers, winning market
share and benefits from the acquisitions of IntegraColor
(effective 1 March 2016) and Jakait (effective 1 September 2015).
Excluding the impact of acquisitions, underlying organic local
currency North American sales growth was approximately 6.0%.
The foreign exchange benefit on US dollar denominated North
America sales was $218.9 million.
Earnings before interest and tax
During the period, EBIT increased by 24.6% to $280.5 million.
Excluding Petrie, underlying EBIT increased by 20.9% to
$272.1 million.
The Australasian segment increased earnings with the Fibre
Packaging division growing volumes and, together with B9,
delivered incremental cost reduction and innovation benefits.
The Beverage division improved operating efficiency, grew
Glass volumes and benefited from the reversal of the majority
of the adverse financial impact from FY15 glass furnace rebuild.
The North American business delivered increased earnings
from higher sales and procurement and cost efficiency benefits.
The business also benefited from acquisitions completed during
the period and the foreign exchange translation benefit from
US dollar denominated earnings of $10.7 million.
The business was not without headwinds and the increase
in earnings were partially offset by higher input costs within
the Glass division (gas, electricity and soda ash) and B9 (gas);
higher depreciation within the Glass division following the
furnace rebuild in the second half of FY15; the timing impact
from the transition to the “Go Direct” channel in the fruit and
produce sector in Fibre Australia; and tighter margins in the
North American Manufacturing business.
Orora delivered $13.7 million of incremental cost reduction and
innovation benefits from the B9 Recycled Paper Mill in FY16
(compared with FY15), taking the cumulative total to $35.1 million.
The incremental B9 benefits reflect $11.2 million from cost
reduction and $2.5 million from innovation/sales synergy benefits.
Balance sheet
The increase in other current assets is mainly a result of a rise in
capital receivables relating to the sale of land at Petrie, Queensland;
higher receivables within the Fibre Packaging division owing to
the New Zealand kiwi fruit and apple season; finished good stock
build in Glass ahead of output curtailments in relation to the FY17
capacity expansion; foreign exchange translation effect on North
American receivables and inventories and the impact of the North
American acquisitions of IntegraColor and Jakait. This was offset
by lower inventory in most Australasian divisions.
Net property, plant and equipment (PP&E) was higher with the
foreign exchange translation impact on Orora North America PP&E
and additions relating to the recent acquisitions offsetting the sale
of surplus land at Petrie, Queensland, and Botany, New South Wales.
Capital expenditure (CapEx) for FY16 included spend on the following
major items: plant and equipment for the new dairy sack line
at Thomastown, Victoria, initial payments in relation to the Glass
capacity expansion, corrugated converting equipment upgrades,
beverage can manufacturing equipment improvements, construction
of the new Auckland, New Zealand, Cartons site and payments
for projects approved under the Orora Global Innovation Initiative.
Depreciation and amortisation for the period was $107.5 million.
The increase in intangible assets reflects movement within the
North American business associated with the foreign exchange
translation effect on intangible assets, goodwill relating to
acquisitions and costs associated with the new ERP system.
Net debt increased by $22.7 million during the period with
investments in capital, acquisitions in North America and dividends
offsetting increased operating cash flows and proceeds from the sale
of surplus land. The adverse foreign exchange translation impact
on USD denominated net debt was $2.1 million. On a constant
currency basis, net debt would have been $20.6 million higher
than June 2015.
The increase in payables is mainly the result of an ongoing
improvement in trading terms with vendors, impact of the
North American acquisitions and the foreign exchange translation
effect of North American payables. There was also an increase
in provisions attributable to the decommissioning costs following
the sale of land at Petrie.
ORORA LIMITED ANNUAL REPORT 2016
23
FINANCIAL REVIEW
SUMMARY
Cash flow
Working capital
Earnings growth was successfully converted into cash with
operating cash flow increasing by $53.0 million to $313.8 million.
This excludes the initial proceeds on the sale of Petrie land.
During the period, average total working capital to sales decreased
to 9.6% (versus 10.3% in FY15) due to generally improved working
capital management across the Group.
Cash conversion was 76%, in line with the prior period and ahead
of Management’s indicated cash conversion target of 70%.
Main cash flow movements included:
• Increase in Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) of $64.8 million;
• Working capital was well managed across the Group.
The increase in working capital was mainly attributable
to the following timing related issues, which are all expected
to reverse during FY17:
– Inventory build at Glass ahead of the forthcoming
capacity expansion;
– Delay in transitioning to an import sourcing model for
aluminium; and
– Later fruit and produce season in New Zealand pushing
up receivables in the Fibre Packaging business;
• Gross CapEx totalled $87.8 million which includes
innovation projects;
At the start of FY16, inventory levels at Glass were lower than
the normal level following the furnace rebuild late in FY15 and
have progressively increased during the year, including building
inventories to cover downtime associated with the upcoming
capacity expansion.
Working capital management remains an on-going focus across
the Group and the management target for average total working
capital to sales is less than 10.0% in the medium term.
Corporate
Corporate costs were $18.8 million and include an $8.4 million
gain from the sale of surplus land in Petrie. Underlying Corporate
costs of $27.2 million were slightly lower than the prior period
($28.1 million).
Included in Corporate are reorganisation costs associated with
both the new dairy sack line and New Zealand Cartons business
partially offset by the profit on sale of surplus land at Botany.
• Net CapEx of $77.2 million includes the proceeds from the
sale of surplus land at Botany ($10.6 million) but excludes
the initial proceeds from the sale of Petrie land ($20.0 million)
for reporting consistency;
The Petrie site was sold for $50.5 million. Consideration of
$20.0 million was received during FY16. The balance of the
proceeds will be received as decommissioning of the site
progresses over the next two years.
• Cash significant items in FY16 relate to spend on onerous
recycling contracts and minor plant closures.
24
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW OUR APPROACH
TO SUSTAINABILITY
Orora’s values of teamwork, passion, respect and integrity underpin
our broad approach to sustainability. We aim to do what is right,
keep each other safe, and operate in a way that demonstrates respect
for each other, the community and our customers.
SUSTAINABILITY
AT ORORA
Orora’s values-led sustainability framework
Orora’s values-led sustainability framework addresses the impact of our operations on three key areas:
PEOPLE
PLANET
We work to keep each other safe and to operate in a way that demonstrates respect for each other,
the community and our customers.
We actively seek opportunities to reduce the environmental impact of our operations and products.
PROSPERITY
We find innovative ways to create sustainable value and mitigate risk.
Orora is dedicated to creating robust, responsible and respected operations that deliver value for our customers and operational value
for our Company. In 2016, we continued to support our customers’ need for innovative, quality and sustainable packaging solutions.
Our operations focused on the safety and development of our people, increased engagement with local communities on relevant issues
and continuing to improve our environmental performance by delivering on our previously announced 2019 Eco Targets.
ORORA LIMITED ANNUAL REPORT 2016
25
OUR APPROACH
TO SUSTAINABILITY
United Nations Global Compact
Ethical sourcing
Ethical sourcing is a risk that spans both the people and planet
pillars of Orora’s sustainability framework, and has both operational
and customer value implications.
Orora’s ethical sourcing risk can be described as the reputational
and supply chain risk arising from increased sourcing of materials
from developing countries that may not necessarily have the same
standards for governance, human rights, environmental protection
and quality as more established markets.
Orora’s current priority is the responsible sourcing of fibre for
our fibre and sack product range. Orora recognises the significant
and detrimental impact of illegal logging on the global economy,
society and the environment. Under Orora Australasia’s Sustainable
Fibre Sourcing Policy, all wood, pulp and reclaimed fibres used
in the manufacture of our paper and cartonboard products must
be sourced from socially and environmentally responsible and
controlled sources as defined by the Forest Stewardship Council®
(FSC®) 3. Orora’s Sustainable Fibre Sourcing Due Diligence
Framework also supports our compliance with the Illegal
Logging Prohibition Act and Amendment Regulations 4.
Extract from Orora Australasia’s Sustainable
Fibre Sourcing Policy
Orora Australasia is not and will not be directly or indirectly
involved in the following activities:
• illegal logging or the trade in illegal wood or forest products
• violation of traditional and human rights in forestry operations
• destruction of high conservation values in forestry operations
• significant conversion of forests to plantations or non-forest use
• introduction of genetically modified organisms in forestry
operations.
Moving forward, Orora will broaden its ethical sourcing focus
to consider other priority inputs and general enhancements
across our supplier base.
In April 2016, Orora’s Managing Director & CEO, Nigel Garrard,
was pleased to commit Orora to the United Nations Global
Compact (UNGC), a voluntary initiative to address global human
rights, labour, environment and anti-corruption issues. The UNGC
goals complement the Orora values, and particularly our focus
on ethical sourcing. We are committed to making the UNGC
principles part of Orora’s strategy and day-to-day operations.
We will submit an annual Communication on Progress report
to the UNGC and engage in collaborative projects which advance
the broader development goals of the United Nations, particularly
the Sustainable Development Goals.
Addressing sustainability risk
In 2015, Orora engaged external advisors to undertake an extensive
assessment of its external risk profile. This year, Orora undertook
an internal review of the findings of this assessment and has
again determined that it does not have a material exposure
to environmental or social sustainability risk at this time.
This reflects positively on our people and processes, and it is not
a statement we take lightly. Orora has undertaken a detailed
assessment of its exposure to material economic, environmental
and social sustainability risks in accordance with Recommendation
7.4 of the 3rd Edition of the ASX’s Corporate Governance Principles
and Recommendations 1. Orora’s approach to sustainability
risk profiling in 2015 was positively recognised in the ASX/KPMG
Corporate Governance Council report Adoption of the 3rd Edition
Corporate Governance Principles and Recommendations 2 by
ASX listed entities.
Building on our history of good operating practice, in the year
ended 30 June 2016, Orora developed response plans to address
our most significant potential impacts. While no material exposure
to environmental or social sustainability risk exists at this time,
Orora continues to actively monitor and address the other areas
of potential impact detailed in the 2015 assessment, including
ethical sourcing, safety, energy pricing and supply, innovation,
waste and recycling, climate and resource depletion risks.
Orora intends to carry out the sustainability materiality assessment
process on a periodic basis as part of the normal risk assessment
cycle and respond to new risks that emerge as required.
For information on Orora’s assessment of material risks, including
economic risks, refer to the Principal Risks section of this report.
CASE STUDY
Freedom of Association
UNGC Principle 3: Businesses should uphold the freedom
of association and the effective recognition of the right
to collective bargaining.
The majority of Orora’s production team members across
the Company’s Australian and New Zealand production sites
are believed to be members of a trade union. Additionally, and
irrespective of whether the team members are members of
a trade union, Orora bargains collectively with our production
site team members to agree terms and conditions of employment.
In recent years, Orora has forged a new, highly effective and
collaborative model of business change with our team members
and their union representatives at a number of our Australian
Fibre Packaging sites. This approach has been a significant
contributing factor to improved business performance and
the model has been recognised by academics and government
authorities as particularly progressive.
See https://www.fwc.gov.au/documents/documents/
engagement/case-studies/Orora-Case-Study-2015.pdf
26
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Safety
In line with our values-led sustainability approach, we treat our
fellow team members with respect, and work to keep our people
safe. Orora’s five-year occupational health and safety strategy
is guided by the following main objectives:
• Leadership – build on the existing commitment of leaders
throughout the business to deliver an enhanced safety culture
• Safety management system – continue the evolution of our
existing system to effectively manage safety risk
• Plant and equipment design – review and ensure all equipment
and plant is suitably designed and safeguarded to enable
safe operation
• Capability – continue to develop our team members so that they
are fully equipped to effectively manage safety within their areas
of responsibility.
To implement this strategy, we have safety action plans in place
across all of our businesses and have made good progress against
these over the course of the year.
Orora continues to focus on the mitigation of potential Serious Injury
or Fatality (SIF) risks, ensuring that resources are dedicated to
preventing safety incidents that pose the greatest potential impact
to our team members. To complement this, senior leadership
has continued to demonstrate its commitment to proactively
manage safety, and work collaboratively with all team members
to find the most effective engagement strategies. This is captured
and managed through Orora’s successful safety leadership tour
program, which now also targets the critical initiatives for SIF-level
risk mitigation.
Safety leadership is a critical element of any successful safety
culture. This year, we launched the Orora Safety Leadership
Program to better equip leaders to more effectively manage
safety in their areas of responsibility. The program examines
a range of strategic research and industry proven techniques
to instil discipline, commitment and an appreciation of the
personal value of safety leadership to our team members.
The facilitation of this course will continue to be a focus for
us in the financial year ending 30 June 2017.
During the financial year ended 30 June 2016, Orora also initiated
the global roll out of a newly developed risk profiling methodology
targeting SIF exposure risk. This process maps site-specific risk
exposures at a facilitated workshop at each Orora manufacturing
site, attended by a broad range of manufacturing team members
and health, safety and environment (HSE) experts from across
Orora’s businesses. The results then form the basis of that site’s
safety improvement plan, as well as generating leading risk
management metrics that we will use in the new financial year
to gauge the effectiveness of our management efforts.
Work also continued on the enhancement of Orora’s HSE
management system during the year. This has further focused
efforts in an objective risk-based fashion to augment Orora’s
assurance system in line with risk management principles.
Compliance with the management system will continue
to be monitored through both internal and external audits.
Our safety performance is measured using two key metrics –
Lost Time Injury Frequency Rate (LTIFR) and Recordable Case
Frequency Rate (RCFR).
LTIFR is measured by calculating the number of injuries resulting
in at least one full workday lost per million hours worked. In the
financial year ended 30 June 2016, the LTIFR was 1.5, which
corresponds to 21 cases across our business. This compares
with our previous year’s performance of 1.9 (26 cases).
RCFR is measured by calculating the number of medical treatment
cases and lost time injuries per million hours worked. This year,
the RCFR was 5.9, which corresponds to 81 cases across our
business. This compares with our previous year’s performance
of 5.9 (80 cases).
Orora Group Safety Performance
8.5
6.6
5.9
5.9
1.9
1.8
1.9
1.5
5.9
1.1
FY12
FY13
FY14
FY15
FY16
RCFR
LTIFR
Orora’s commitment to keeping its team members safe is ongoing.
In the year ahead, we will continue to implement existing and
new initiatives that align with the objectives of our five-year
safety strategy.
(1) Source: ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (3rd Edition, published March 2014) Recommendation 7.4:
A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages
or intends to manage those risks.
(2) ASX Corporate Governance Council Adoption of Third Edition Corporate Governance Principles and Recommendations, Analysis of disclosures for financial years
ended between 1 January 2015 and 31 December 2015, KPMG Australia.
(3) FSC-C128621; FSC-C129579; FSC-C113466.
(4) Illegal Logging Prohibition Act 2012 (Cth) and Illegal Logging Prohibition Amendment Regulations 2013 (Cth).
ORORA LIMITED ANNUAL REPORT 2016
27
OUR APPROACH
TO SUSTAINABILITY
ECO TARGETS
Orora actively seeks opportunities to reduce the environmental impact of our operations and products
on the planet, and continues to make significant progress towards achieving our 2019 Eco Targets.*
Process efficiency gains at Orora’s B9 Recycled Paper Mill at Botany, New South Wales, upgrades at our
glass manufacturing plant in Gawler, South Australia, and efficiency projects at smaller manufacturing
sites led to a significant reduction in CO2 emissions during the reporting period. We also reduced the
amount of waste sent to landfill, driven largely by improved processes at the B9 recycled paper mill.
In the coming year, Orora will increase its focus on improving its water usage at key manufacturing plants.
The Company will continue to report progress towards these targets each year.
ECO TARGETS
CO2 EMISSIONS
CO2
↓ 10%
by 30 June 2019
PROGRESS†
Orora Group CO2 Emissions Intensity
(tonnes CO2/AUD million Net Revenue]
297
229
198
181
FY13
FY14
FY15^
FY16
Target FY19
WASTE TO LANDFILL
Orora Group Waste To Landfill Intensity
(tonnes/AUD million Net Revenue]
↓ 25%
by 30 June 2019
14
13
12
6
WATER USE
↓ 10%
by 30 June 2019
FY13
FY14
FY15
FY16
Target FY19
Orora Group Water Use Intensity
(kilolitres/AUD million Net Revenue]
1,670
841
902
866
FY13
FY14
FY15
FY16
Target FY19
* Resource efficiency reductions from a baseline of calendar year 2013.
^ G1 rebuild during FY15 resulted in reduced energy usage during the period.
† New acquisitions during FY16 have been excluded due to unavailability of data. Data will be included within 24 months of acquisition.
28
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW Orora New Zealand Energy Efficiency Program
Following the implementation of several successful energy efficiency
initiatives in Australia, Orora has commenced implementing similar
initiatives in New Zealand as part of our strategic partnership with
the New Zealand Government’s Energy Efficiency Conservation
Authority. At the sites where these initiatives have been completed,
we have delivered a 26% saving in electricity and a 16% saving
in gas and fuel oil usage.
Orora’s program was recognised at the New Zealand Energy
Efficiency Awards as Winner (Large Business category) and
Highly Commended (Overall Program).
Carbon Disclosure Project
Orora voluntarily discloses information on climate change,
water and forest risk through the Carbon Disclosure Project
(CDP). The CDP provides information to investors, companies
and governments regarding carbon-related issues and the
preparedness of organisations to manage carbon impacts.
CDP feedback on Orora’s first submission (2015) was positive.
Orora performs well above the CDP supply chain average on the
quality and completeness of our disclosures, particularly on risk
and opportunity management.
Fostering gender diversity
As a values-led organisation, Orora strives to ensure an inclusive
and respectful environment for all team members. All decisions
on hiring, salary, benefits, advancement, termination or retirement
are based solely on each team member’s ability to do the job,
regardless of cultural background, disability, gender, family
responsibility, religious or political beliefs, age, sexual orientation
or any other non-relevant demographic characteristic.
Gender diversity is essential to Orora’s continued success and
a particular focus for the Company. During the reporting period,
we made significant progress towards the diversity targets set
during the financial year ended 30 June 2015.
Orora’s diversity targets state that by the financial year ending
30 June 2017, females will comprise 30% of new recruits in
leadership positions and across the organisation as a whole.
During the reporting period, the Company improved its gender
outcomes for each major team member category and increased
its overall female hiring rate by 20%.
CASE STUDY
Investment in innovation driving
improved resource efficiency
The last two years have seen a step change in resource
efficiency at Orora Australasia’s Fibre Packaging manufacturing
site in Scoresby, Victoria. Energy efficiency improvements in
compressed air management, lighting, insulation, automated
control systems and improved shut down systems have resulted
in CO2 emission reductions of 9% per unit of output since
2014. Investment in a new wastewater treatment system,
which optimises microbial digestion to significantly reduce
the volume of solids in the treatment process, has resulted
in significant savings in waste generation and water use.
Females as % of New Hires
30%
34%
22%
26%
21%
Leadership
Positions
Overall
FY15
FY16
Target
During the financial year ended 30 June 2016, Orora implemented
a range of both new and ongoing initiatives aimed at supporting
its female team members and improving the gender diversity
of its workforce including:
• formal networking and mentoring opportunities with senior
leaders and Board members
• Orora leadership and team member participation in industry
research programs by Melbourne Business School and University
of South Australia
• continuing to leverage our position as a founding and ongoing
corporate partner and sponsor of the National Association
of Women in Operations (NAWO), including key board and
committee appointments
• Orora Chairman Chris Roberts’ public commitment to female
board members making up a minimum of 30% of Orora’s Board
of Directors by 2018 in line with board diversity targets set by the
Australian Institute of Company Directors (also known as The 30%
Club). Although this target has already been met (currently 33%),
this public commitment remains an important component of our
Diversity Strategy
• team member events across Australia, New Zealand and North
America celebrating International Women’s Day attended by
approximately 500 female team members (an increase of almost
50% from 2015).
In the year ahead, Orora will continue to focus on improving gender
diversity within the Company and report openly on its progress.
Further information on Orora’s diversity initiatives can
be found in Orora’s Corporate Governance Statement
at www.ororagroup.com/investor-relations/governance
The site has achieved a 95% reduction in hazardous
waste generation, 20% reduction in general waste
to landfill and a 15% reduction in overall water use.
This case study shows that through the application
of innovative technology, improved environmental
performance can also deliver significant cost savings.
ORORA LIMITED ANNUAL REPORT 2016
29
OUR APPROACH
TO SUSTAINABILITY
Orora continues
to deliver innovative
decorative capabilities
with its glass shrink
sleeve decoration
as a value add product
to its bottles.
Community giving
In addition to Orora’s workplace giving programs, this year the
Company has also supported a number of community initiatives
relevant to Orora’s packaging expertise.
The Company has continued its long-term support of Foodbank,
a not-for-profit organisation providing food and nutrition for
vulnerable Australians, and has also teamed up with SecondBite,
an organisation that provides fresh, nutritious food to people
in need (see Orora teams up with SecondBite case study).
Engaging our team members
Orora recognises that the talent, passion and engagement of
our team members is critical to the Company’s ongoing success.
During the financial year ended 30 June 2016, Orora conducted
its first global engagement survey to measure engagement across
each Orora business and seek team member views on a range
of topics, including leadership, strategy, reward and team work.
Pleasingly, team member engagement had increased by 10%
since 2012, when the previous survey was conducted prior to the
Company’s demerger from Amcor Limited, and now sits above
the norm for manufacturing companies.
CASE STUDY
Orora teams up with SecondBite
Orora proudly supports SecondBite, an organisation that
provides fresh, nutritious food to people in need by rescuing
and redistributing surplus food. Orora supported SecondBite
with the provision of 1,600 boxes. These boxes were filled with
over 8,000 tonnes of rescued fresh produce, which is enough
fruit and vegetables to provide over 16,000 healthy meals for
people in need across Melbourne, saving community partners
$24,000 in food costs alone. Putting healthy food on empty
plates has significant community impact – socially, economically
and environmentally. By rescuing and redistributing food that
would otherwise go to landfill, Orora also helped SecondBite
save close to 600,000 litres of water, 50,000 kilowatts of
energy and 50,000 kilograms of CO2 emissions. Orora helped
SecondBite feed people not landfill. See www.secondbite.org.
30
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW PRINCIPAL
RISKS
Orora actively manages a range of principal risks and uncertainties with the potential
to have a material impact on the Orora Group and its ability to achieve its stated objectives.
While every effort is made to identify and manage material risks, additional risks
not currently known or detailed below may also adversely affect future performance.
Orora’s principal risks are outlined below in no particular order.*
Risk
Description
Mitigation Strategies
Economic
Conditions
Orora is susceptible to major changes in macro-economic
conditions in a single country, region or market. Sudden
and/or prolonged deterioration in the economy may
impact the value chain or industries on which Orora
is dependent and could have a material negative impact
on financial performance.
Country and
Regulatory
Risk
Customer
Consumer
Preferences
Orora predominantly operates in Australia, New Zealand
and the United States. Orora also operates in other
jurisdictions across a broad range of legal, accounting,
tax, regulatory and political systems, some of which
are subject to rapid change. The profitability of those
operations may be adversely impacted by changes in
the fiscal or regulatory regimes, difficulties in interpreting
or complying with the local laws of those countries and
reversal of current political, judicial or administrative
policies. Orora’s customers, many of which operate across
a broad range of countries, are subject to regulatory
risk in various jurisdictions, which may have an impact
on their operations and consequently Orora’s operations.
Orora has strong relationships with key customers
for the supply of packaging products and associated
packaging-related services. These relationships
are fundamental to Orora’s success, and the loss
of key customers may have a negative impact
on financial performance.
Changes in consumer preferences may result in some
of Orora’s existing product range becoming obsolete or
new products not meeting sales and margin expectations.
Orora may not be able to accurately predict demand,
end-user preferences and evolving industry standards,
and this may result in the inability to meet consumer
demand in a timely and cost effective manner.
Orora seeks to mitigate the severity of impact that
deterioration in macro-economic conditions in a single
country, region or market may have by:
• operating businesses that have a broad spread
of geographic locations, raw material inputs and
customers servicing a number of end markets
• deploying an operating model that focuses
on continually improving the value proposition
to customers
• creating and maintaining a high-performance culture
• remaining disciplined in cash and cost management
• continuing to invest in manufacturing capabilities
to improve cost positions.
Orora continually monitors changes or proposed changes
in regulatory regimes that may have an impact on Orora
and, where appropriate, engages consultants and advisors
to address specific issues. Where possible, Orora appoints
local management teams that bring a strong understanding
of the local operating environment and strong customer
relationships. Orora also has a global compliance training
program across the Orora Group and its business leaders
regularly review country risk.
Orora seeks to mitigate this risk by delivering a superior
value proposition to its customers by leveraging its
operating model. Key to the success of this strategy
is a continued drive on customer focus (delivery in full,
on time and within specification), low cost and innovation.
In addition, no single customer within an operating
segment generates revenue greater than 10% of total
revenue for the Orora Group.
Orora works closely with its customers and suppliers
to propose solutions that address evolving consumer
preferences. Orora also continues to build on its innovation
capability to achieve the objective of being the innovation
leader for the packaging industry.
Competition
Orora operates in highly competitive markets with
varying barriers to entry, industry structures and
competitor motivational patterns. The actions
of established or potential competitors may have
a negative impact on financial performance.
Orora is ideally placed to leverage both its regional
experience and insight, and its international footprint
and scale to deliver new ideas and value propositions
to customers to gain competitive advantage. Orora also
recognises innovation as a source of competitive advantage.
* Environmental and social sustainability risks that are not considered material are referred to in the ‘Sustainability’ section of this Annual Report.
ORORA LIMITED ANNUAL REPORT 2016
31
PRINCIPAL
RISKS
Risk
Supply
Chain
Description
Mitigation Strategies
Disruption to Orora’s supply chain caused by an
interruption to the availability of key components,
raw materials or by technology failure may adversely
impact sales and/or customer relations, resulting
in unexpected costs.
Orora’s businesses are sensitive to input price risks,
including energy and other commodities, in various
forms and with varying degrees of impact. Although Orora
seeks to mitigate these risks through various input pricing
strategies, there is no guarantee that Orora will be able to
manage all future commodity and input price movements.
Failure to do so may adversely affect Orora’s operations
and financial performance.
Orora’s approach to supply chain risk management
is multi-faceted and includes:
• implementing a multi-sourcing strategy for the supply
of raw materials
• customer contracts that provide for regular and timely
pass-through of movements in raw materials input costs
• supplier due diligence and risk management.
Financial
and Treasury
Orora faces a variety of risks arising from the
unpredictability of financial markets, including
the cost and availability of funds to meet its
business needs and movements in interest rates,
foreign exchange rates and commodity prices.
Mergers and
Acquisitions
(M&A)
Talent
Orora’s growth opportunities are dependent, in part,
on disciplined selection of suitable targets in the right
geographies with the right participation strategy.
Failure to be disciplined in selection, effective
at integration or focused on capturing value could
impact operations and have adverse consequences
for the achievement of expected financial benefits.
Orora’s operating and financial performance is largely
dependent on its ability to attract and retain talent
and, in particular, key personnel. Any loss of key
personnel could adversely affect operating and
financial performance.
Business
Interruption
and
Disruption
Orora operates numerous manufacturing plants across
a number of countries. Circumstances such as natural
disaster, cyber breaches, operational failure or industrial
disruption may occur, which may preclude key sites from
operating. In these circumstances, financial performance
may be negatively impacted.
Orora’s treasury function adopts financial risk management
policies approved by the Board. Appropriate commercial
terms are negotiated and derivative financial instruments
are used, such as foreign exchange contracts and interest
rate swaps, to hedge these risk exposures. In addition,
where possible, Orora plans to proportionally draw down
debt in currencies that align with the proportion of assets
in those same currencies, thereby creating a natural hedge.
Orora’s strategy team works with the Orora Group
businesses to identify suitable targets that are aligned
to Orora’s overall strategy. An M&A framework is in
place that imposes rigour in target selection, approval,
due diligence, integration preparation/planning and
post-merger value capture.
Orora’s human resource strategy is designed to ensure that:
• Orora has access to the widest possible pool of talent,
through its diversity framework
• recruitment, training and development, talent
identification and retention programs are in place
• a high-performance culture is delivered by setting
challenging objectives and rewarding high-performing
individuals
• remuneration is competitive in the relevant employment
markets in order to attract, motivate and retain talent,
and is aligned with business outcomes that deliver value
to shareholders.
Orora undertakes business continuity and disaster
preparedness planning for high value or strategically
important sites and functions. This includes continuously
monitoring and, as appropriate, enhancing our information
security capabilities to keep pace with the evolving nature
and sophistication of cyber threats. Orora also engages in
continuous identification, review and mitigation of property
risks, as well as independent loss prevention audits.
Litigation
As is the case with all businesses, Orora is exposed
to potential legal and other claims or disputes in the
ordinary course of business, including contractual
disputes and other claims.
Orora takes legal advice in respect of such claims and,
where relevant, makes provisions and disclosure regarding
such claims in its financial statements. There are no
current claims or disputes of a material nature.
32
ORORA LIMITED ANNUAL REPORT 2016
OPERATING AND FINANCIAL REVIEW DIRECTORS’
REPORT
The Directors of Orora Limited (‘the Company’) present
their report, together with the Financial Statements of the
Company and its controlled entities (collectively referred
to as ‘the consolidated entity’ or the ‘Orora Group’),
for the year ended 30 June 2016
IN THIS SECTION
IN THIS SECTION
Statutory Matters
Board of Directors
Company Secretary
Directors’ meetings
Operating and financial review
State of affairs
Principal activities
Events subsequent to the end of the financial year
Likely developments
Dividends
Environmental performance and reporting
Directors’ interests
Unissued shares under option
Shares issued on exercise of options
On-market share purchases to satisfy employee share plans
Indemnification and insurance of officers
Indemnification of auditors
Proceedings on behalf of the Company
Non-audit services
Rounding off
Loans to Directors and senior executives
Corporate Governance Statement
Remuneration Report
Auditor’s Independence Declaration
34
34
34
34
34
34
34
35
35
35
35
36
36
36
36
36
37
37
37
37
37
37
38
53
ORORA LIMITED ANNUAL REPORT 2016
33
STATUTORY
MATTERS
Board of Directors
The Directors of the Company in office as at the date of this report are:
C I (Chris) Roberts
N D (Nigel) Garrard
A P (Abi) Cleland
S L (Samantha) Lewis
G J (John) Pizzey
J L (Jeremy) Sutcliffe
All directors served on the Board for the period from 1 July 2015 to 30 June 2016.
The qualifications, experience and special responsibilities of the current Directors, and other directorships held by them during the previous
three years, are set out on pages 10 to 11 of this Annual Report.
Company Secretary
A L (Ann) Stubbings is the Company Secretary of the Company, having commenced the position on 25 September 2013.
Ms Stubbings’ qualifications and experience are set out on page 13 of this Annual Report.
Directors’ meetings held between 1 July 2015 and 30 June 2016
Scheduled Meetings
Unscheduled Meetings
A P Cleland
N D Garrard
S L Lewis
G J Pizzey
C I Roberts
J L Sutcliffe
Board
Audit and
Compliance
Committee
Executive
Committee
Human
Resources
Committee
Nomination
Committee**
11
4
B
15
15
15
15
15
15
A
15
15
15
15
15
15
4
–
B
4
–
4
–
4
4
A
4
4*
4
4*
4
4
2
–
B
–
2
2
2
2
–
A
2*
2
2
1
2
–
4
–
B
4
–
–
4
4
4
A
4
4*
4*
4
4
4
–
–
B
–
–
–
–
–
–
A
–
–
–
–
–
–
*
Indicates that although the Director is not a member of a specific committee, the Director attended the meeting. Due to the size of the Orora Board, it is the practice
of all of the Directors to attend the meetings of the Audit & Compliance and Human Resources Committee meetings.
** All Nomination Committee matters were dealt with by the full Board during the financial year.
A Number of meetings attended.
B Number of meetings held during the time the Director held office (in the case of Board meetings) or as a member of the committee during the year (in the case
of committee meetings).
Operating and financial review
An operating and financial review of the consolidated entity during the financial year and the results of these operations begins at page 6
of this Annual Report.
State of affairs
There have been no significant changes in the state of affairs of the consolidated entity during the financial year ended 30 June 2016.
Principal activities
The principal activities of the consolidated entity are set out in the ‘Who We Are and What We Do’ section of this Annual Report.
There were no significant changes in the nature of the principal activities of the consolidated entity during the year under review.
34
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT Events subsequent to the end of the financial year
There have been no matters or circumstances which have arisen between 30 June 2016 and the date of this report that have significantly
affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
Likely developments
The Operating and Financial Review section of this Annual Report contains information on the consolidated entity’s business strategies
and prospects for future financial years, and refers to likely developments in the consolidated entity’s operations and the expected results
of these operations in future financial years. Information on likely developments in the consolidated entity’s business strategies, prospects
and operations for future financial years and the expected results of those operations has not been included in this report where the
Directors believe it would likely result in unreasonable prejudice to the consolidated entity. Details that could give rise to material detriment
to the consolidated entity; for example, information that is commercially sensitive, confidential or could give a third party a commercial
advantage, have also not been included.
Dividends
Dividends paid or declared by the Company to members during the financial year ended 30 June 2016 are set out in the notes to the
Financial Statements.
On 16 February and 15 August 2016, the Board authorised management to issue a request to the Trustee of the Orora Employee Share Trust
to waive the entitlement of Treasury Shares held in the Trust to be paid the 2016 interim and final dividends. Refer to note 6.3 of the
Financial Statements.
Environmental performance and reporting
The Orora Group is committed to continuous improvement of its environmental performance by finding better ways to manufacture and
distribute its products. This is guided by the Orora Group’s Environmental Policy, a copy of which is available on the Orora Group’s website.
(a) Carbon emissions
The National Greenhouse and Energy Reporting (Safeguard Mechanism) Rule 2015 (“Rule”) made under the National Greenhouse and
Energy Reporting Act 2007 (Cth) (“NGER Act”) applies to facilities with direct CO2 emissions (scope 1) of greater than 100,000 tonnes per
year. These facilities are required to maintain their direct emissions below their historical peak level. Facilities that exceed their historical
peak CO2 emissions will be required to purchase CO2 credits to offset their increase in emissions.
The only Orora Group facility that exceeds the 100,000 tonnes per year CO2 threshold is the glass facility in Gawler, South Australia.
This facility will comply with its obligations under this Rule.
(b) Greenhouse gas requirements
In Australia, the Orora Group is subject to reporting obligations under the NGER Act.
The NGER Act requires the Company to report on its annual Australian greenhouse gas emissions and energy use. The Orora Group
has data gathering and management systems in place that comply with the NGER Act and the Clean Energy Regulator’s audit processes.
(c) Manufacturing
All of the Orora Group’s manufacturing sites are subject to significant environmental regulation, including, where applicable, specific
environmental licences. These licences require discharges to air, land and water to be below specified levels of contamination.
Compliance with these regulations and the Orora Group’s overall environmental performance is monitored by the Sustainability Team, which
liaises directly with divisional and site-based health, safety and environment professionals. The Orora Group’s environmental performance
and regulatory compliance is also discussed regularly at Executive Leadership Team meetings.
The Directors are not aware of any material breaches of environmental regulations or site-specific licences during or since the financial
year ended 30 June 2016.
ORORA LIMITED ANNUAL REPORT 2016
35
STATUTORY
MATTERS
Directors’ interests
The relevant interests of each Director in the share capital of the Company as at the date of this report are as follows:
Name
Directors of Orora Limited
A P Cleland
N D Garrard
S L Lewis
G J Pizzey
C I Roberts
J L Sutcliffe
Received during
the year on
the exercise
or rights
and options
Balance at
1 July 2015
Other changes
during the year
Balance
as at the date
of this report
141,186
1,534,563
88,000
114,628
1,077,001
150,000
–
–
–
–
–
–
3,296
110
1,595
15,343
38,927
144,482
1,534,673
89,595
129,971
1,115,928
–
150,000
Unissued shares under option
Unissued ordinary shares or interests of the Company under option as at the date of this report are as follows:
Options granted
19 Feb 2014
19 Feb 2014
19 Feb 2014
21 Oct 2014
21 Oct 2014
21 Oct 2014
30 Oct 2015
Expiry date
Issue price
Number
under option
30 Sep 2021
30 Sep 2022
30 Sep 2023
30 Sep 2021
30 Sep 2022
30 Sep 2023
30 Sep 2024
1.22
1.22
1.22
1.22
1.22
1.22
2.08
4,175,000
3,305,000
3,305,000
1,750,000
1,750,000
1,750,000
4,716,500
These options do not allow the holder to participate in any share or rights issue of the Company.
Shares issued on exercise of options
There were no ordinary shares of the Company issued during or since the financial year ended 30 June 2016 on the exercise of options
granted over unissued shares or interests.
On-market share purchases to satisfy employee share plans
During the financial year, 9,427,196 shares were purchased on-market and held in trust to satisfy obligations under the Company’s
employee incentive plans. The average price per security at which these shares were purchased was $2.25.
Indemnification and insurance of officers
In accordance with the Company’s Constitution, the Company has entered into agreements with each person who is, or has been, an officer
of the Company. This includes the directors in office at the date of this report, all former directors and other executive officers of the Company,
indemnifying them against any liability to any person other than the Company, or a related body corporate that may arise from their acting
as officers of the Company, notwithstanding that they may have ceased to hold office. There is an exception where the liability arises out
of conduct involving a lack of good faith, or is otherwise prohibited by law.
Due to the confidentiality obligations and undertakings set out in these agreements, no further details in respect of the premiums paid,
or the terms of the agreements, can be disclosed.
No indemnity payment has been made under any of the documents referred to above during or since the financial year ended 30 June 2016.
36
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT Indemnification of auditors
The Company’s auditor is PricewaterhouseCoopers (PwC). During and since the financial year ended 30 June 2016:
• no premium has been paid by the Company in respect of any insurance for PwC
• no indemnity has been paid by the Company in respect of PwC’s appointment as auditor
• no officers of the Company were partners or directors of PwC, while PwC undertook an audit of the Company.
Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court, nor has any application for leave
been made in respect of the Company, under section 237 of the Corporations Act 2001.
Non-audit services
During the year, PwC, the Company’s auditor, performed certain other services in addition to their statutory duties. The Board has
considered the non-audit services provided during the financial year by the auditor and, in accordance with written advice provided
by resolution of the Audit & Compliance Committee, is satisfied that the provision of those non-audit services during the financial year
by the auditors is compatible with the general standard of independence for auditors, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed
by the Audit & Compliance Committee to ensure they do not impact the impartiality and objectivity of the auditor. In particular,
all non-audit services are approved in accordance with the non-audit services delegations and approvals framework and reported
to the Audit & Compliance Committee at each meeting.
• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. A copy
of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 can be found at the end
of Remuneration Report within the Directors’ Report.
Details of the amounts paid to PwC and its related practices for audit and non-audit services provided during the financial year are set out
in note 7.2 to the Financial Statements. In each case, the engagement of PwC was made on its merits (based on service level, expertise,
cost, as well as geographical spread).
Rounding off
The Company is of a kind referred to in the Australian Investments and Securities Commission Instrument 2016/191. In accordance with
the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and except where otherwise stated, amounts in the
Financial Statements and Directors’ Report have been rounded off to the nearest $100,000 or to zero where the amount is $50,000 or less.
Loans to Directors and senior executives
There are no loans to Directors or senior executives to report.
Corporate Governance Statement
The key features of the Company’s corporate governance framework are set out in the Corporate Governance Statement, which is available
at: www.ororagroup.com/investor-relations/governance.
ORORA LIMITED ANNUAL REPORT 2016
37
REMUNERATION
REPORT
I am proud to be part of a company
that is investing for future growth,
and am excited to be part of this
continuing story in the year ahead.
Dear Fellow Shareholder,
On behalf of the Board, I am pleased to present Orora’s
Remuneration Report for the financial year ended 30 June 2016.
Strong company performance
Orora’s management team has continued its focus on
outperformance throughout the year, driving value for
shareholders. This was achieved by capitalising on growth
opportunities, investing for innovation and maintaining financial
discipline through self-help programs. In addition, a compelling
source of competitive advantage for Orora is its team members,
who have played a key role in shaping Orora’s culture and
developing The Orora Way – its belief statement, company values
and outperformance deliverables that set it apart.
Over the period, Orora has again delivered a solid set of financial
and non-financial results, including a 24.6% increase in earnings
before interest & tax (EBIT) to $280.5 million. This translates, from
a compound annual growth rate (CAGR) perspective, to a 24%
increase every year since the pro forma 30 June 2013 result
achieved shortly prior to Orora’s establishment in December 2013.
This Company performance is reflected in the short-term
incentive (STI) payments for the executive key management
personnel (Executive KMP), which were paid out between
73.5% – 81.8% of their maximum STI opportunity. Although,
this reflects a number of financial and non-financial metrics
(at a group and individual level), this STI result was primarily
driven by the achievement of earnings per share (EPS) at
14.1 cents (up 29.4% from FY15).
Improving value for shareholders
One of the key objectives of Orora’s remuneration strategy is
to drive long-term value for shareholders. Orora’s incentive plans
achieve this by aligning challenging and relevant performance
metrics with competitive and appropriate executive reward.
The Orora management team has delivered on its promise
to shareholders, and consistently delivered this value with
a cumulative total shareholder return (TSR) of 148.1%
since listing in December 2013. In the financial year ended
30 June 2016, TSR was 36.1%.
Remuneration changes during the financial year
Orora regularly reviews its approach to executive remuneration
to ensure it remains relevant, competitive, and appropriate in
the context of changing business and economic environments.
During the financial year, the Board approved a change in
the remuneration structure for Orora’s Other Executive KMP
(excludes the Managing Director and Chief Executive Officer)
to align them to a total fixed remuneration (TFR) approach.
Prior to FY16, the fixed remuneration for Orora’s Other Executive
KMP was split between base salary and other fixed remuneration
(OFR). Both short-term and long-term incentives were calculated
as a percentage of the base salary only. The move to TFR would
have resulted in an uplift in the total remuneration package,
therefore it was decided to recalibrate the potential outcome
by reducing the target short-term incentive opportunity from
52.5% of base salary to 50% of TFR for Other Executive KMP.
The Board recognised this approach to be consistent with market
practice for comparable organisations to Orora, and appropriate
for Orora’s Other Executive KMP. This also aligns their structure
to that of the Managing Director and Chief Executive Officer,
whose remuneration structure did not change during the period.
No other changes were made to Orora’s approach to remuneration
during the financial year ended 30 June 2016.
Role of the Human Resources Committee
As Chair of the Human Resources Committee, it is my role, together
with my fellow Committee members, to ensure that Orora’s Senior
Executives are motivated and incentivised to develop and successfully
execute against a long-term strategy that grows the business and
generates shareholder returns. The Committee is confident the
remuneration structure in place for Orora’s Senior Executives provides
the appropriate level and mix of both fixed remuneration and short
and long-term incentives to do so.
Successful execution against Orora’s strategy also relies on the
quality and engagement of all Orora team members. As such, the
Human Resources Committee is accountable for ensuring that all
aspects of Orora’s talent management program appeal to, attract
and retain the best possible talent and develop that talent as a key
differentiator for the Company.
The Committee is confident that Orora’s management team has
developed and adopted an appropriate talent, development and
diversity agenda that focuses on growing Orora’s bench strength,
identifying and accelerating the progression of high potential team
members, enhancing diversity and developing the core capabilities
of Orora’s people.
It has been my pleasure to serve on the Board of Orora Limited and
Chair the Human Resources Committee during the financial year
ended 30 June 2016. I am proud to be part of a company that
is investing for future growth, and am excited to be part of this
continuing story in the year ahead.
JOHN PIZZEY
Chair, Human Resources Committee
38
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORT Introduction
The Directors of Orora Limited (‘Orora’ or the ‘Company’) present the Remuneration Report (which forms part of the Directors’ Report)
prepared in accordance with section 300A of the Corporations Act 2001 for the Company and its controlled entities (collectively,
the ‘Group’ or ‘Orora Group’) for the financial year ended 30 June 2016.
Structure of this report
Orora’s 2016 Remuneration Report is divided into the following sections:
Section
Message from John Pizzey, Chair Human Resources Committee
1 Key management personnel (KMP)
2 Remuneration governance
3 Remuneration strategy and structure
4 FY16 Executive KMP remuneration
5 FY16 Non-Executive Directors’ remuneration
1. Key management personnel
Page No.
38
39
40
41
44
51
For the purposes of this Remuneration Report, key management personnel (KMP) includes each of the Directors, both executive and
non-executive, and nominated Senior Executives who have authority and responsibility for planning, directing and controlling the activities
of the Orora Group either directly or indirectly.
In this Remuneration Report, ‘Executive KMP’ refers to the KMP other than the Non-Executive Directors (and includes the Managing
Director and Chief Executive Officer). The use of the term ‘Senior Executives’ in this remuneration report is a reference to the Managing
Director and Chief Executive Officer and all of his direct reports (including the Other Executive KMP), not all of whom meet the definition
of a KMP. References to ‘Other Executive KMP’ means the Executive KMP excluding the Managing Director and Chief Executive Officer.
Non-Executive Directors have oversight of the strategic direction of the Orora Group but no direct involvement in the day-to-day
management of the business.
Particulars of KMP and Senior Executives’ qualifications, experience and special responsibilities are detailed on pages 10 to 13.
The KMP covered in this report are listed in Table 1.
Table 1
Name
Non-Executive Directors1
C I (Chris) Roberts
G J (John) Pizzey
J L (Jeremy) Sutcliffe
A P (Abigail) Cleland
S L (Samantha) Lewis
Executive KMP2
N D (Nigel) Garrard
S G (Stuart) Hutton
D J (David) Lewis
Title
Commencement as KMP
Independent Non-Executive Director and Chairman
17 December 2013
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Managing Director and Chief Executive Officer
Chief Financial Officer
Group General Manager, Strategy
17 December 2013
17 December 2013
1 February 2014
1 March 2014
17 December 2013
17 December 2013
1 January 2014
(1) Commencement date as KMP is the date of appointment to the Orora Limited Board.
(2) Commencement date as KMP is the date of appointment as an Orora KMP post demerger.
ORORA LIMITED ANNUAL REPORT 2016
39
1.1. Executive KMP service agreements
Orora formalises remuneration and other terms of employment for the Executive KMP in service agreements. Specific information relating
to the terms of service agreements is set out in Table 2.
Table 2
Name
N D Garrard
S G Hutton
D J Lewis
Term
Open
Notice period
Redundancy/termination payment
12 months
Greater of amount payable required by law and payment in lieu of notice (total
termination payment must not exceed 12 months’ Total Fixed Remuneration).
Open
6 months
Greater of amount payable required by law and payment in lieu of notice (total
termination payment must not exceed 12 months’ Total Fixed Remuneration).
2. Remuneration governance
2.1. Governance framework
THE ORORA BOARD
The Board maintains overall accountability for the oversight of Orora’s
remuneration approach for all Orora executives, having regard for the
recommendations made by the Human Resources Committee.
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HUMAN RESOURCES COMMITTEE
EXTERNAL ADVISORS
Responsible for reviewing and making recommendations to the Board
on matters including (but not limited to):
• remuneration of Non-Executive Directors
• remuneration of the Managing Director and Chief Executive Officer,
Other Executive KMP and other Senior Executives
• at-risk remuneration policies and guidelines for all Orora executives
• talent management processes and programs – including succession
planning for key leadership roles
• initiatives to deliver sustainable business success
• diversity across all Orora operations.
The Human Resources Committee may seek
advice from independent remuneration consultants
in determining appropriate Senior Executive
remuneration.
During the financial year ended 30 June 2016, the
Human Resources Committee did not receive any
remuneration recommendations from independent
remuneration consultants in relation to the KMP.
MANAGEMENT
INTERNAL ADVISORS
Responsible for making recommendations to the Human Resources
Committee on matters including (but not limited to):
• remuneration of the Other Executive KMP and other Senior Executives
• at-risk remuneration policies and guidelines for all Orora executives
• talent management processes and programs – including succession
planning for key leadership roles
• initiatives to deliver sustainable business success
• diversity across all Orora operations.
Orora employs in-house remuneration professionals
who provide data to the Human Resources
Committee on remuneration matters. This may
take into consideration market information from
external providers.
CORPORATE GOVERNANCE POLICIES RELATED TO EXECUTIVE KMP REMUNERATION
40
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT
2.2. Corporate governance policies related to Executive KMP remuneration
2.2.1. Minimum shareholding policy
To strengthen alignment of the interests of the Executive KMP and other Senior Executives with value creation for shareholders, they must
build and maintain a minimum shareholding of shares in the Company. The Managing Director and Chief Executive Officer is required
to build and maintain a shareholding equivalent to 100% of total fixed remuneration within six years of his/her appointment and Other
Executive KMP and other Senior Executives are required to build and maintain a shareholding equivalent to 50% of total fixed remuneration
within six years of their appointment.
Once the relevant minimum shareholding has been reached, the Executive KMP and other Senior Executives must not dispose of Orora
shares obtained from awards under Orora’s equity-based incentive schemes granted on or after 1 January 2014, where to do so would
result in them holding less than the relevant minimum shareholding. Further details can be found within the Corporate Governance section
of the Orora website at: http://media.ororagroup.com/documents/orora_minimum_shareholding_policy.pdf.
2.2.2. Share trading policy
The Board has implemented blackout periods during which all Orora team members (including Executive KMP and other Senior Executives)
and Non-Executive Directors are unable to trade in Orora shares. Further detail can be found within the Corporate Governance section
on the Orora website at: http://media.ororagroup.com/documents/orora-share-trading-policy.pdf.
Hedging of securities
Executive KMP and other Senior Executives are prohibited under the Share Trading Policy from engaging in hedging arrangements over unvested
securities issued under team member share plans. This prohibition extends to vested securities held by Executive KMP and other Senior
Executives to which the Minimum Shareholding Policy applies. Non-Executive Directors do not participate in Orora’s team member share plans.
2.2.3. Senior executive reward and evaluation policy
The Board has a policy which outlines its commitment to ensure the structure of Orora Group remuneration is aligned to business
outcomes that deliver value to shareholders. Further detail can be found within the Corporate Governance section on the Orora website
at: http://media.ororagroup.com/documents/orora_senior_executive_reward_evaluation_policy.pdf.
3. Remuneration strategy and structure
3.1. Remuneration strategy
Orora’s executive remuneration strategy is designed to drive a high performance culture, pay for performance, attract, motivate
and retain talent and, ultimately, create long-term value for shareholders.
Through plans that are
designed to reward for
the delivery of sustainable
returns for shareholders.
Through a significant
portion of remuneration
being delivered through
performance-based rewards.
CREATE LONG-TERM
VALUE FOR
SHAREHOLDERS
DRIVE A
HIGH-PERFORMANCE
CULTURE
ATTRACT, MOTIVATE
& RETAIN TALENT
PAY FOR
PERFORMANCE
Through market competitive
remuneration reflective of scope
of role, geographic location,
experience and performance.
Through strategy aligned
and challenging performance
measures being set for each
of its reward plans.
ORORA LIMITED ANNUAL REPORT 2016
41
3.2. Remuneration Framework for Executive KMP
The remuneration of Orora’s Executive KMP is delivered using both fixed and variable (at-risk) components as outlined in Table 3.
Specific outcomes and performance measures for the financial year ended 30 June 2016 are included in Section 4.
Table 3
Component
Payment vehicle
Performance measure/s
Link to strategy
Fixed Remuneration
Fixed remuneration for
the Executive KMP is set
by referencing the market
median remuneration
for similar roles in listed
companies of similar size
to Orora, competing in
comparable geographic
locations.
+
Short-Term Incentive
(at-risk)
Orora’s STI is designed
to reward Executive KMP
for the achievement
of the key short-term
performance measures
in each financial year.
+
Long-Term Incentive
(at-risk)
Orora’s LTI is designed
to reward Executive KMP
for the achievement
of long-term sustainable
business outcomes
and value creation for
shareholders.
=
Fixed remuneration
consists of cash salary
and retirement benefits1.
Individual fixed
remuneration is
reflective of scope
of role, geographic
location, skills,
responsibilities,
experience and
performance.
Market competitive fixed
remuneration is paid
to attract, motivate and
retain Executive KMP
with the appropriate
experience and talent
to drive Orora’s strategy.
Any award achieved will
be delivered, following the
release of the end of year
results, in the form of both
cash and deferred equity
(performance rights).
2/3 Cash Payment
1/3 Deferred Equity
(Performance Rights)
– deferred for two years
Executive KMP are
allocated both
Performance Rights (75%)
and Options (25%), with
vesting based on the
delivery of set performance
measures over a 4-year
performance period. Grants
are made using Market
Value (Performance Rights)
and Fair Value (Options) but
may be adjusted nominally
at the Board’s discretion.
A scorecard of performance
measures is used to
determine any STI award
payable. This is measured
at Orora Group level. This
scorecard represents the
key priority areas for the
current year and typically
include safety, strategic
initiatives and has a strong
weighting towards financial
growth and returns.
1. Compound Annual
Growth Rate in EPS
with a RoAFE gateway
(all Options and 1/3
of Performance Rights).
An exercise price also
applies to Options.
2. Relative Total
Shareholder
Return (2/3 of
Performance Rights).
The STI provides a reward
linked to the delivery
of short-term objectives,
and the equity deferral
both aligns overall reward
outcomes to longer-term
value creation for
shareholders, and acts
as a retention tool.
The LTI builds Executive
KMP equity ownership.
It also aligns the interests
of the Executive KMP
with our shareholders by
having an exercise price
for Options, as no Options
are earned unless earnings
and returns increase and
this is reflected in an
increased share price.
Total Remuneration
The sum of all fixed and variable (at-risk) elements of remuneration
Optional Component (used only on a limited basis)
Retention Share/Payment Plan (CEO Grant)
Time-restricted (up to five years) shares or cash, subject
to forfeiture in the event of voluntary termination
or termination for cause.
Used on a limited basis at recruitment to replace existing
entitlements from previous employers or as retention awards
to existing executives.
(1) Retirement benefits are delivered under defined contribution funds for all Executive KMP. Retirement benefits are set by reference to regulatory requirements
in the relevant employing jurisdictions.
42
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT 3.3. Remuneration mix
The current mix of remuneration components for Orora’s Executive KMP is shown below and clearly demonstrates the emphasis placed
on variable (at-risk) plans, designed to directly incentivise performance.
MD & CEO
Other Executive KMP
Fixed
STI
LTI
37%
26%
37%
Fixed
STI
LTI
47%
23%
30%
3.4. Reward delivery
Each remuneration component for Orora’s Executive KMP is delivered over a 1 to 4-year horizon. Chart 1 demonstrates the delivery of each
remuneration component from the commencement of the performance period for each component in Financial Year 1.
Chart 1
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Performance Period (1 year)
Salary paid during the year
Performance Period (1 year)
Two thirds paid in cash
2-year vesting period
One third deferred into Performance Rights
Performance Period (4 years)
Financial Year 1
Financial Year 2
Financial Year 3
Financial Year 4
Financial Year 5
Options and Rights vest subject to performance hurdles being met
ORORA LIMITED ANNUAL REPORT 2016
43
4. FY16 Executive KMP remuneration
Orora has a strong performance-based culture. The Board seeks to foster this through rewarding Senior Executives for the achievement
of the Group’s short-term and long-term strategy and business objectives, with a view to generating above-average, sustainable returns for
shareholders.
4.1. Shareholder return information
Table 4 summarises key indicators of the performance of the Orora Group and relevant shareholder returns over the financial year ended
30 June 2016. This table will be expanded in future years to include a five-year summary of the Orora Group’s financial results.
Table 4
Financial Summary for year ended 30 June
EBIT ($m)
Dividends per ordinary share (cents)
Closing share price (as at 30 June)
EPS Growth (%)
NPAT ($m)
Cumulative TSR (%)(3)
Operating Free Cash Flow(4) ($m)
RoAFE(5) (%)
2016(1)
2015
2014(2)
280.5
225.1
192.1
9.5
$2.76
29.4%
168.6
36.1%
313.8
12.7%
7.5
$2.09
25.9%
6.0
$1.43
–
131.4
104.4
51.2%
260.8
10.6%
–
218.9
9.3%
(1) EBIT and NPAT are as reported and include the one off profit on the sale of the Petrie land. EPS Growth has also been based on this NPAT number.
(2) Effective 17 December 2013, the Orora Group demerged from Amcor Ltd. The demerger was implemented on 31 December 2013. As a result of the corporate restructure
to effect the demerger, the Orora Group’s statutory financial information as at 30 June 2014 did not represent the performance of the Orora Group as it is currently
structured. Accordingly, the pro forma financial results of the Orora Group (which forms the base for future performance assessment) have been disclosed above
in respect of the financial year ended 30 June 2014 and are presented on a pre-significant items basis.
(3) Total shareholder return (TSR) is calculated as the change in share price for the year, plus dividends paid during the financial year, divided by opening share price.
(4) Operating Free Cash Flow excludes cash significant items that are considered to be outside the ordinary course of operations and non-recurring in nature but includes
net capital expenditure.
(5) Return on Average Funds Employed (RoAFE) is calculated as EBIT/average funds employed.
4.2. Pay for performance
The Board has set challenging financial and non-financial performance targets for Senior Executives and has directly aligned Senior Executive
incentives to the achievement of those targets for the financial year ended 30 June 2016.
The ‘Pay for Performance’ link is clear:
Target performance achieved = target rewards paid.
Above-target performance achieved = above-target rewards paid.
Where the Orora Group’s performance does not meet the Board’s performance targets, either reduced or no benefits are earned
from a Senior Executives’ at-risk short-term or long-term incentive components.
An outline of the Orora Executive KMP remuneration framework is set out in section 3.2.
A summary of the outcomes for each reward component in the financial year ended 30 June 2016 is provided in the section below in respect
of the Executive KMP.
4.3. Fixed remuneration
Fixed remuneration was reviewed for each of the Executive KMP by referencing the market median remuneration for similar roles in listed
companies, of similar size to Orora, competing in comparable geographic locations.
Appropriate adjustments were made for each of the Executive KMP giving consideration to their market position and individual performance.
44
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT 4.4. Short-term incentive (STI)
As outlined in section 3.2 the Orora STI consists of two components, a cash component and a deferred equity component. Two-thirds of any
STI award made annually is paid in the form of cash following the release of the end of year financial results, and one-third is deferred for
a period of two years into time-based performance rights.
Performance measures are carefully selected at the start of the financial year that align to the key short-term priority areas for the
Orora Group. An overview of achievements against each of the performance measures selected for the financial year ended 30 June 2016
is included in Table 5.
Table 5
KPI
Group Safety
Recordable Case Frequency Rate (RCFR)
Group Earnings
Earnings per Share (EPS)
Group Returns
Return of Average Funds Employed (RoAFE)
Group Asset Management
Average Working Capital (AWC) as a % of Sales
Group Cash Flow
Operating Free Cash Flow (OFCF)
Personal Strategic Measures
Performance against strategic measure/s
in area of strategic influence
Weighting
Overview of performance
5%
35% – 55%
10%
5%
5%
Safety performance (measured as RCFR) remained static
during FY16, with no improvement on FY15 outcomes.
Group earnings grew strongly in FY16 with reported
EPS being 29.4% ahead of the reported EPS for FY15.
With the increase in earnings, and close management
of cash, RoAFE grew from 10.6% in FY15 to 12.7% in FY16.
AWC management continued to be a priority and
improvement was achieved over the FY15 result.
Cash was managed closely, with cash conversion
of projects being in excess of expectations.
20% – 40%
The outcomes of these measures varied by individual
Executive KMP, and by individual objective, with assessments
ranging from ‘not achieved’ to ‘fully achieved’.
At the conclusion of the financial year ended 30 June 2016, the Board made an assessment on the performance of each Executive KMP against
each of the agreed performance measures, and determined any STI award outcome payable based on this assessment. In their assessment,
the Board also considered how the Executive KMP achieved performance:
• aligned to Orora’s company values
• how proactive they were in overcoming challenges in the delivery of the final outcome
• what their individual contribution was to the collective outperformance of Orora.
The Board has exercised their discretion on the final STI outcome for the Executive KMP to normalise results to reflect underlying business
performance (for example removing the translation benefit of earnings in foreign currency and the one off impacts from the sale of Petrie land),
therefore mitigating the risk of any unintended award outcomes.
For the financial year ended 30 June 2016, the average short-term incentive outcome for the Executive KMP was paid at above target levels,
which aligns with the Group’s overall performance, which on balance exceeded the targets for the performance measures that were set
at the beginning of the period. Details of the Executive KMP STI opportunity and actual payments received for the financial year ended
30 June 2016 are provided in Table 6.
Table 6
Name
STI % range
STI Target
% of TFR
Total STI
earned
($)
Total STI
earned as
% of TFR
% of
Maximum
STI forfeited
Cash STI
($)
Deferred
Performance Rights
($)
Number(1)
Executive Directors
N D Garrard(2)
Other Executive KMP
0% to 100% of TFR
70.0% 1,040,743
81.8%
18.2%
693,828
346,915
128,964
S G Hutton
D J Lewis
0% to 75% of TFR
50.0%
383,528
0% to 75% of TFR
50.0%
323,884
59.0%
55.1%
21.3%
255,685
127,843
47,525
26.5%
215,923
107,961
40,134
(1) The cash and deferred performance rights will be granted in September 2016 following the determination of the STI. Deferred performance right allocations will
be determined based on the volume-weighted average price of the Company’s shares for the five trading days prior to 30 June 2016 ($2.69 per share).
(2) An ASX waiver from the requirement of Listing Rule 10.14 to obtain separate shareholder approval for the grant of deferred performance rights to N D Garrard under
the STI was obtained at the time of the Orora Group’s demerger from Amcor Ltd. The Company intends that where deferred performance rights vest under the STI,
the right to acquire a share in respect of each deferred performance right will be satisfied by the Company arranging to acquire shares on behalf of N D Garrard
on market, however the Company may instead issue new ordinary shares to N D Garrard.
ORORA LIMITED ANNUAL REPORT 2016
45
STI deferred performance rights
The Board considers the use of time-restricted equity in the form of deferred performance rights to be a key component of Orora’s STI program.
Orora uses deferred performance rights to provide for greater talent retention and alignment with shareholders’ interests through exposure
to Orora’s share price movements.
The number of performance rights to be allocated under the STI to the Executive KMP is based on:
• one-third of the total STI award payable following the end of the performance period
• the volume-weighted average price of Orora shares for the five trading days prior to 30 June (the end of the performance period).
The vesting of deferred performance rights is subject to a continued service condition of two years (from the date of the grant). Each Executive
KMP’s allocation is subject to a risk of forfeiture if that member of the Executive KMP either voluntarily leaves Orora’s employment during
the restriction period, or if employment is terminated for cause. Board discretion regarding vesting and/or forfeiture applies in all cases
when an Executive KMP leaves Orora’s employment.
4.5. Long-term incentive (LTI)
This section summarises the LTI component of remuneration offered to the Executive KMP during the financial year ended 30 June 2016.
4.5.1. Incentive Securities
The FY16 grant was made up of two different incentive securities (Incentive Securities):
• 75% performance rights to acquire fully paid ordinary shares in the Company (Rights)
• 25% options over fully paid ordinary shares in the Company (Options).
4.5.2. Performance period and vesting
Performance will be assessed for the period from 1 July 2015 to 30 June 2019.
Vesting will occur following the release of the full year results for the financial year ended 30 June 2019, anticipated to be in August 2019.
Vesting will occur prior to the ex-dividend date for the full year dividend.
4.5.3. Performance hurdles
Two performance hurdles apply to the FY16 grant as detailed in Table 7, consisting of:
• Earnings per share (EPS) hurdle (based on the Company’s compound annual growth rate (CAGR) in EPS over the relevant Performance
Period), with a separate minimum ‘gateway’ based on return on average funds employed (RoAFE).
• Relative total shareholder return (TSR) hurdle, which compares the TSR performance of the Company with the TSR performance of each
of the entities in a comparator group, with no gateway.
The combination of RoAFE and EPS represents a strong measure of overall business performance. Having an exercise price for Options
ensures that this performance translates into value creation for shareholders, as no Options are earned unless the share price increases.
The use of a relative TSR condition for Rights provides a shareholder perspective of the Company’s relative performance against comparable
Australian ASX-listed companies.
Table 7
LTI hurdles
EPS hurdle (with a RoAFE gateway)
50% weighting
Options
(100% of Options)
Rights
(1/3 of Rights)
• EPS hurdle with RoAFE gateway
Relative TSR
50% weighting
Rights
(2/3 of Rights)
Incentive Securities subject to the EPS hurdle first need to meet a minimum RoAFE gateway in order to vest according to the EPS vesting
schedule in Chart 2.
RoAFE will be calculated as earnings before interest and tax (post significant items, subject to Board discretion) divided by the average funds
employed in each financial year at the 30 June testing date.
The RoAFE gateway, for the LTI grant for the financial year ended 30 June 2016 is 11.9%. If the RoAFE gateway is not met in the relevant
performance period set out above (Performance Period), all Incentive Securities in that grant subject to the EPS hurdle will lapse. If the RoAFE
gateway for the grant is met in the relevant Performance Period, the Incentive Securities subject to the EPS hurdle will vest in accordance with
the EPS vesting schedule in Chart 2.
EPS measures the earnings generated by the Company attributable to each Orora share. EPS is calculated based on net profit after tax (NPAT)
post significant items calculated on a constant currency basis (subject to Board discretion) for the relevant financial year, divided by the weighted
average number of Orora shares on issue.
46
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT The growth in the Company’s EPS over the relevant Performance Period will be calculated as the increase in audited EPS over the base
of 10.55 cents (the EPS outcome calculated on a constant currency basis for the financial year ended 30 June 2015). The compound growth
in EPS will be expressed as a cumulative percentage.
The percentage of Incentive Securities subject to the EPS hurdle (which vest subject to achievement of the RoAFE gateway) will be determined
based on the performance achieved against the EPS vesting schedule set out in Chart 2, subject to any adjustments for significant items that
the Board, in its discretion, considers appropriate.
Chart 2
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%
100%
75%
50%
25%
0%
• TSR hurdle
100% VESTING
100% of Options and 1/3 of total Rights will
vest if the CAGR in EPS is 10% or greater
Between 5% p.a. and 10% p.a. pro-rata
straight line vesting will occur between
50% and 100%
NO VESTING
If the CAGR in EPS is less than 5%, no incentive securities will vest
Less than 5% p.a.
5% p.a.
At 10% p.a. or greater
% compound annual growth in EPS over the Performance Period
TSR measures the growth in the Company’s share price together with the value of dividends declared and paid or any other returns
of capital during the Performance Period against companies ranked 50 to 150 on the S&P index as at 1 July 2015 (Comparator Group).
The share price used to calculate the TSR of the Company and each Comparator Group company for the Performance Period will be
measured as follows:
• the opening share price is the volume-weighted average price on the ASX of the Company, or the applicable Comparator Group company,
for the final five trading days of the previous financial year (up to 30 June 2015)
• to ensure the impact of share price volatility is minimised, the closing price will be the volume-weighted average price on the ASX of
the Company, or the applicable Comparator Group company, for the 20 trading days ending on the last day of the Performance Period
(up to 30 June 2019).
The percentage of Rights subject to the TSR hurdle that vest, if any, will be determined by reference to the percentile ranking achieved
by the Company, over the relevant Performance Period, compared to the other entities in the Comparator Group as outlined in Chart 3.
Chart 3
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R
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%
100%
75%
50%
25%
0%
100% VESTING
2/3 total Rights will vest if the TSR ranking
of Orora is at the 75th percentile of the
Comparator Group or above
Between 50th and 75th percentile pro-rata
straight line vesting will occur between
50% to 100%
NO VESTING
If the TSR ranking of Orora is below the 50th percentile
of the Comparator Group, no Rights will vest
Below 50th percentile
50th percentile
75th percentile or above
Relative TSR ranking of Orora
ORORA LIMITED ANNUAL REPORT 2016
47
Key features of the LTI
• The applicable rules for the LTI (Plan Rules) contain forfeiture and claw back provisions which will apply if an Executive KMP
member is proven to have acted fraudulently, dishonestly or in a manner that brings Orora, the Group or any company within
the Orora Group into disrepute.
• The Board retains discretion to alter the vesting conditions of Options and Rights in the event of a material event (such as an
acquisition, divestment or change of control) or other strategic initiative that affects the Company’s capital structure and the
relevance of the vesting conditions.
• Executive KMP are subject to the requirements of the Company’s Share Trading Policy when dealing with Incentive Securities.
Any dealing in respect of an unvested Right or unvested or unexercised Option is prohibited, unless the Board determines otherwise
or the dealing is required by law.
• Incentive Securities do not carry any dividend or voting rights prior to vesting and, where applicable, prior to exercise.
• Executive KMP are not obliged to participate in the LTI offer.
4.6. Grants of Options and Rights affecting remuneration
Chart 4 details awards granted that are still in progress (remain unvested) which impact Executive KMP remuneration for the financial year
ended 30 June 2016.
Chart 4
FY16(1)
FY15(2)
FY14(3)
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STI(4) Deferred
Performance Rights
1 Sept 2018
LTI Options
and Rights
Aug 2019
STI(4) Deferred
Performance Rights
1 Sept 2017
STI(4) Deferred
Performance Rights
1 Sept 2016
One third deferred into Performance Rights
Tranche 1: Aug 2016
LTI(5) Options
and Rights
Tranche 2: Aug 2017
Tranche 3: Aug 2018
Retention
Share/(6)
Payment
Plan (CEO
Grant)
Shares
or Cash
Tranche 1: 31 Dec 2015
Tranche 1 Awards fully vested
Tranche 2: 31 Dec 2016
30 Jun 2014
30 Jun 2015
30 Jun 2016
30 Jun 2017
30 Jun 2018
30 Jun 2019
(1) The STI deferred performance rights will be granted in September 2016. Vesting is subject to a continued service condition of two years (from the date of the grant).
The 2015 LTI for N D Garrard was granted during the financial year ended 30 June 2016 following shareholder approval at the 2015 Annual General Meeting.
Grants to all Other Executive KMP occurred on the same day, 30 October 2015. Vesting is subject to the EPS hurdle with a RoAFE gateway, Relative TSR hurdle and
the Company’s share price being greater than exercise price for Options. Vesting date will be following the announcement of the full year results for the financial
year ended 30 June 2019, and will occur prior to the ex-dividend date for the full year dividend. The Options may be exercised after vesting until their expiry date.
(2) The STI deferred performance rights were granted on 8 October 2015. Vesting is subject to a continued service condition of two years (from the date of the grant).
The cash component of this STI award was paid on 15 September 2015.
(3) The STI deferred performance rights were granted on 8 September 2014. Vesting is subject to a continued service condition of two years (from the date of the grant).
The cash component of this STI award was paid on 15 September 2014.
(4) An ASX waiver from the requirement in Listing Rule 10.14 to obtain separate shareholder approval for the grant of deferred performance rights to N D Garrard under
the STI was obtained at the time of the Orora Group’s demerger from Amcor Ltd. This waiver applies to the 2014, 2015 and 2016 STI grants, which have vesting dates
of 1 September 2016, 2017 and 2018 respectively.
(5) The LTI grant to N D Garrard occurred on 21 October 2014 (FY15) following shareholder approval at the 2014 Annual General Meeting. LTI grants for all Other Executive
KMP occurred on 1 May 2014 (FY14) as disclosed in the 2014 Annual Report. Vesting subject to EPS hurdle with RoAFE gateway, Relative TSR hurdle and the Orora share
price being greater than exercise price for Options. Award was split into three tranches as detailed in the 2014 and 2015 Annual Reports. Vesting date will be following
the announcement of the full year results for the financial years ended 30 June 2016 (Tranche 1), 30 June 2017 (Tranche 2) and 30 June 2018 (Tranche 3), and will occur
prior to the ex-dividend date in each year for the full year dividend. The Options may be exercised after vesting until their expiry date.
(6) The Retention Share/Payment Plan Award was granted on 1 January 2014 to S G Hutton and D J Lewis as a sign on award. Tranche 1 awards fully vested during the
financial year ended 30 June 2016. Vesting subject to continuous service.
48
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT
4.7. Summary of all remuneration received by Executive KMP
Details of the nature and amount of each element of remuneration of the Executive KMP are presented in Table 8. Executive KMP were
all employed for the full financial year ended 30 June 2016.
Table 8
$
Executive Director
N D Garrard
Managing Director and
Chief Executive Officer
2016
2015
Employee benefits
Short term
Long term
Post
employment
Value of share-based
payments(2)
Base
Salary
Other
Benefits(1)
Cash STI
Long
Service
Leave
Super-
annuation
Benefits
Retention
Share/
Payment
Plan
Options
and rights
Total employee
compensation
1,228,750
25,374
693,828
1,196,696
7,601
807,439
35,673
38,561
35,000
30,304
– 1,993,774
4,012,399
– 1,608,141
3,688,742
Other Executive KMP
S G Hutton
Chief Financial Officer
D J Lewis
Group General
Manager, Strategy
Total
2016
2015
2016
2015
2016
2015
611,400
586,396
559,375
547,500
–
–
–
255,685
261,949
215,923
3,000
245,413
2,399,525
25,374 1,165,436
2,330,592
10,601 1,314,801
21,513
12,472
22,435
13,252
79,621
64,285
30,000
83,395
481,647
1,483,640
25,304
118,522
348,625
1,353,268
25,000
25,000
69,495
439,363
1,331,591
98,408
325,903
1,258,476
90,000
152,890 2,914,784
6,827,630
80,608
216,930 2,282,669
6,300,486
(1) Other benefits include relocation costs, spousal travel and costs associated with employment (inclusive of any applicable fringe benefits tax).
(2) The figures in this column for share-based payments are not actually provided to the Executive KMP in the financial periods presented. The amounts represent the
accounting fair value of restricted shares, options, rights and performance rights granted, collectively referred to as the ‘grants’. In accordance with the Accounting
Standards the accounting fair value of the grants is recognised proportionally over the grant’s performance period. Refer to sections 4.4 and 4.6 for further details
of the grants, their performance conditions and performance periods.
The amounts presented above, for both 2015 and 2016, represent management’s best estimate, at the date of this report, of the likelihood that the performance
conditions of the grants will be met and will therefore vest, at which point the Executive KMP will be entitled to receive the share-based payment. Management’s
expectation of the grants vesting has changed since last year and as a result, the 2015 amounts have been restated for comparability purposes to reflect current
expectations of the employee benefit over the applicable performance period. If the performance conditions are not met, the Executive KMP will not be entitled
to the share-based payment. In addition, the amounts presented within options and rights for 2016 include an additional amount, compared to the prior period,
representing the LTI award granted during the current period. Refer section 4.5 and Table 9 below for information on the awards granted during the current period.
ORORA LIMITED ANNUAL REPORT 2016
49
4.8. Executive KMP: Ordinary shareholding and holding of Options and Rights over equity instruments
Table 9 shows the movements of Orora ordinary shares, and the Options and Rights over Orora ordinary shares, held directly, indirectly or
beneficially, by each Executive KMP, including their related parties during the financial year ended 30 June 2016 and for the comparative period.
Movements during the financial period(1)
Additional information
Opening
balance
Granted/
Received
on exercise(2) Exercised
Purchased
Closing
Balance
Vested
during the
year
Balance
vested and
not yet
exercised
Accounting
fair value of
grant yet
to vest ($)(3)
Table 9
Name and holding
Executive Director
N D Garrard
Ordinary Shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
467
1,547,731
40,409
1,547,264
–
–
292,019
97,923
– 6,633,500
– 5,250,000
– 2,677,500
– 2,218,500
–
328,980
63,000
328,980
–
–
95,693
32,725
– 2,189,500
– 1,725,000
–
–
874,000
720,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
580,715
149,822
2,782,405
2,187,500
3,709,740
2,943,210
–
–
189,858
50,069
607,985
408,250
883,580
626,400
2016
2015
1,547,264
1,506,855
–
–
Short Term Incentive Awards
Deferred Performance
Rights
2016
2015
Long Term Incentive Awards
Share Options
Performance Rights
Other Executive KMP
S G Hutton
Ordinary Shares
2016
2015
2016
2015
2016
2015
Short Term Incentive Awards
Deferred Performance
Rights
2016
2015
Long Term Incentive Awards
97,923
194,096(4)
–
97,923
5,250,000
1,383,500(5)
–
5,250,000(6)
2,218,500
459,000(5)
–
2,218,500(6)
328,980
265,980
–
–
32,725
62,968(4)
–
32,725
Share Options
Performance Rights
2016
2015
2016
2015
1,725,000
464,500(5)
1,725,000(6)
–
720,000
154,000(5)
720,000(6)
–
(Table continued over page)
50
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT Table 9 continued
Name and holding
Other Executive KMP
D J Lewis
Ordinary Shares
Movements during the financial period(1)
Additional information
Opening
balance
Granted/
Received
on exercise(2) Exercised
Purchased
Closing
Balance
Vested
during the
year
Balance
vested and
not yet
exercised
Accounting
fair value of
grant yet
to vest ($)(3)
2016
2015
548,134
548,134
–
–
Short Term Incentive Awards
Deferred Performance
Rights
2016
2015
Long Term Incentive Awards
30,381
58,993(4)
–
30,381
Share Options
Performance Rights
2016
2015
2016
2015
1,605,000
397,500(5)
1,605,000(6)
–
675,000
132,000(5)
675,000(6)
–
–
–
–
–
–
–
–
–
–
–
–
–
548,134
548,134
89,374
30,381
– 2,002,500
– 1,605,000
–
–
807,000
675,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
177,447
46,483
550,775
379,850
807,690
587,250
(1) The aggregate equity securities granted to/received by all participants in each of the equity incentive schemes (other than the Executive KMP), during the 2016
financial year are as follows: STI (deferred performance rights) 1,091,613; LTI (Options) 2,471,000; LTI (Rights) 819,500; and 708,124 restricted ordinary shares
granted under the CEO Grant.
(2) The accounting value of all awards granted during the financial year to the Executive KMP is as follows: N D Garrard $1,792,328; S G Hutton $596,704; and D J Lewis
$522,329. In respect of the LTI, awards are only exercisable upon satisfaction of performance conditions whilst the STI award is exercisable on 1 September 2017.
Each share option, performance right and deferred performance right entitles the holder to one fully paid Orora ordinary share.
(3) This represents the maximum accounting value of the STI awards (deferred performance rights) and the LTI awards (Options and Rights) as at their grant date.
The minimum possible total value of these grants is nil if the applicable performance/vesting conditions are not met.
(4) The STI awards were granted on 8 October 2015, have an accounting fair value of $2.22 as at the date of the grant and will expire on 1 September 2017.
No exercise price is applicable to the deferred performance rights granted. No awards granted during the period vested during the period.
(5) The LTI Options and Rights were granted on 30 October 2015. The Options have an exercise price of $2.08, an accounting fair value of $0.43 as at the date of the
grant and will expire on 30 September 2024. In respect of the Rights granted they have an accounting fair value of $1.67, no exercise price is payable in respect
of the Rights granted. No awards granted during the period vested during the period.
(6) The LTI Options and Rights granted to the Executive KMP in prior periods were made over three tranches each with different performance periods. In respect
of the Options granted, all three tranches have an exercise price of $1.22 and will expire in September 2021, September 2022 and September 2023 respectively.
5. FY16 Non-Executive Director remuneration
5.1. Fee Policy
The Non-Executive Director fee policy enables the Company to attract and retain high-quality Directors with relevant experience. The fee
policy is reviewed annually by the Human Resources Committee. The fees are set after consideration of fees in companies of comparable
size, complexity, industry, and geography, and reflect the qualifications and experience necessary to discharge the Board’s responsibilities.
The current Non-Executive Director aggregate fee limit is $1,900,000 as approved by shareholders at the 2015 Annual General Meeting.
Non-Executive Directors receive an annual fixed ‘base’ fee of $201,600 for their role as board members, plus additional fees for chairs
and members of Board Committees to reflect the additional time and responsibility required. The Chairman receives an annual fixed fee
of $403,200, but does not receive additional fees for his involvement with Committees. A 3% increase was applied in the financial year
ended 30 June 2016 to the fixed base fees and committee fees for Non-Executive Directors and the annual fixed fee for the Chairman.
5.2. Performance-based remuneration and minimum shareholding
Non-Executive Directors do not receive performance-based remuneration and are not granted equity instruments by Orora as part
of their compensation.
Non-Executive Directors are not subject to a minimum shareholding policy. This is consistent with the principles of independence and
impartiality adopted by the Board.
ORORA LIMITED ANNUAL REPORT 2016
51
5.3. Non-Executive Director remuneration outcomes
Table 10
$
C I Roberts
G J Pizzey
J L Sutcliffe
A P Cleland
S L Lewis
Total
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Base and
Committee Fees(1)
Other
Benefits(2)
Superannuation
Benefits
Total
Compensation
362,300
350,700
201,522
204,066
190,851
209,066
209,875
185,251
216,489
199,131
1,181,037
1,148,214
4,908
4,900
2,930
2,956
2,956
2,938
2,940
2,938
2,939
2,940
16,673
16,672
35,000
35,000
19,229
18,784
18,379
18,784
19,229
17,879
19,308
18,784
111,145
109,231
402,208
390,600
223,681
225,806
212,186
230,788
232,044
206,068
238,736
220,855
1,308,855
1,274,117
(1) Includes adjustments to committee fee payments made during the financial year ended 30 June 2016 for changes in Committee positions made during the financial
years ended 30 June 2014 and 30 June 2015.
(2) Other benefits include costs associated with directorship (inclusive of any applicable fringe benefits tax).
5.4 Non-Executive Directors’ ordinary shareholdings
Table 11
Number of shares
C I Roberts
G J Pizzey
J L Sutcliffe
A P Cleland
S L Lewis
DECLARATION
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Opening balance
Purchased
Closing balance
1,077,001
841,270
114,628
66,468
150,000
100,000
141,186
50,000
88,000
40,000
38,927
235,731
15,343
48,160
–
50,000
3,296
91,186
1,595
48,000
1,115,928
1,077,001
129,971
114,628
150,000
150,000
144,482
141,186
89,595
88,000
This Directors’ Report is made in accordance with a resolution of the Directors, dated at Melbourne, in the State of Victoria,
on 15 August 2016.
CHRIS ROBERTS
Chairman
52
ORORA LIMITED ANNUAL REPORT 2016
DIRECTORS’ REPORTREMUNERATION REPORT AUDITOR’S INDEPENDENCE
DECLARATION
As lead auditor for the audit of Orora Limited for the year ended 30 June 2016, I declare that to the best
of my knowledge and belief, there have been:
1. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
2. no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Orora Limited and the entities it controlled during the period.
LISA HARKER
Partner
PricewaterhouseCoopers
Melbourne
15 August 2016
ORORA LIMITED ANNUAL REPORT 2016
53
FINANCIAL
REPORT
This is the financial report of Orora Limited (the Company)
and its subsidiaries (collectively referred to as the Group).
The financial report has been prepared in a style that attempts
to make the report less complex and more relevant to shareholders.
We have grouped the note disclosures into a number of sections
with each section also including details of the accounting policies
applied in producing the relevant note, along with details of any
key judgements and estimates used.
Notes to the financial statements provide information required
by statute, accounting standards or Listing Rules to explain
a particular feature of the financial statements. The notes which
follow also provide explanation and additional disclosures
to assist readers in their understanding and interpretation
Annual Report and the financial statements.
IN THIS SECTION
Financial statements
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Cash Flow Statement
54
ORORA LIMITED ANNUAL REPORT 2016
55
56
57
58
59
Notes to the financial statements
About this report
Results for the year
1.1 Segment results
1.2 Earnings per share (EPS)
1.3 Income
1.4 Operating costs
Income tax
2.1 Income tax expense
2.2 Deferred tax balances
Assets and liabilities
3.1 Trade and other receivables
3.2 Inventories
3.3 Trade and other payables
3.4 Other assets
3.5 Property, plant and equipment
3.6 Intangible assets
3.7 Provisions
3.8 Impairment of non-financial assets
Capital structure and financing
4.1 Capital management
4.2 Dividends
4.3 Net debt
4.4 Equity
Financial risk management
5.1 Market risks
5.2 Credit risk
5.3 Liquidity risk and funding risk
5.4 Hedging instruments
Group structure
6.1 Principal subsidiary undertakings and investments
6.2 Acquisition of controlled entities
6.3 Orora Employee Share Trust
Other
7.1 Share-based compensation
7.2 Auditors’ remuneration
7.3 Commitments and contingent liabilities
7.4 Orora Limited
7.5 Deed of Cross Guarantee
7.6 Related party transactions
7.7 Key Management Personnel
7.8 New and amended accounting standards
and interpretations
60
62
62
65
65
66
67
67
68
70
70
71
72
72
73
74
76
78
80
80
81
82
83
85
86
88
88
90
94
94
94
96
97
97
100
100
101
102
105
105
105
INCOME STATEMENT
For the financial year ended 30 June 2016
$ million
Sales revenue
Cost of sales
Gross profit
Other income
Sales and marketing expenses
General and administration expenses
Profit from operations
Finance income
Finance expenses
Net finance costs
Profit before related income tax expense
Income tax expense
Profit for the financial period attributable to the owners of Orora Limited
Profit per share attributable to the ordinary equity holders of Orora Limited
Basic earnings per share
Diluted earnings per share
The above Income Statement should be read in conjunction with the accompanying notes.
Note
1.1
1.3
2016
2015
3,849.8
(3,135.2)
3,407.8
(2,799.1)
714.6
608.7
21.8
(191.1)
(264.8)
19.3
(163.1)
(239.8)
1.1
280.5
225.1
0.4
(41.5)
(41.1)
239.4
(70.8)
168.6
0.2
(38.1)
(37.9)
187.2
(55.8)
131.4
Cents
Cents
14.1
13.9
10.9
10.8
2.1
1.2
1.2
ORORA LIMITED ANNUAL REPORT 2016
55
STATEMENT OF COMPREHENSIVE INCOME
For the financial year ended 30 June 2016
$ million
Profit for the financial period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Available-for-sale financial assets
2016
2015
168.6
131.4
Net change in fair value of available-for-sale financial assets reclassified to profit or loss
–
(2.9)
Cash flow hedge reserve
Unrealised losses on cash flow hedges
Realised losses/(gains) transferred to profit or loss
Time value of options
Tax effect
Exchange fluctuation reserve
Exchange differences on translation of foreign operations
Net investment hedge of foreign operations
Tax effect
Other comprehensive income for the financial period, net of tax
(13.7)
(2.6)
(0.4)
4.9
5.2
8.3
(0.3)
1.4
(3.3)
2.9
–
(0.1)
20.0
(3.7)
0.3
13.2
Total comprehensive income for the financial period attributable to the owners of Orora Limited
170.0
144.6
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
56
ORORA LIMITED ANNUAL REPORT 2016
STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
$ million
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Other current assets
Current tax receivable
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Deferred tax assets
Goodwill and intangible assets
Derivatives
Other non-current assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Derivatives
Current tax liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Other payables
Interest-bearing liabilities
Derivatives
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Reserves
Retained earnings
TOTAL EQUITY
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Note
2016
2015
4.3
3.1
3.2
5.4
3.4
3.5
2.2
3.6
5.4
3.4
3.3
5.4
3.7
4.3
5.4
2.2
3.7
66.1
515.8
459.4
0.7
39.3
1.4
1,082.7
1,564.3
–
378.2
0.1
104.6
67.3
427.7
451.1
7.5
44.8
–
998.4
1,547.4
0.7
287.9
1.2
101.4
2,047.2
1,938.6
3,129.9
2,937.0
708.5
13.7
–
111.2
833.4
28.5
695.7
12.3
32.2
30.2
798.9
636.0
3.9
2.7
110.3
752.9
19.7
674.2
8.4
14.2
25.6
742.1
1,632.3
1,495.0
1,497.6
1,442.0
4.4.1
4.4.1
4.4.2
4.4.3
513.1
(31.3)
136.8
879.0
513.8
(11.1)
127.2
812.1
1,497.6
1,442.0
ORORA LIMITED ANNUAL REPORT 2016
57
STATEMENT OF CHANGES IN EQUITY
For the financial year ended 30 June 2016
$ million
Balance at 1 July 2014
Net profit for the
financial period
Other comprehensive
income/(loss):
Unrealised losses
on cash flow hedges
Realised losses/(gains)
transferred to profit or loss
Exchange differences
on translation of foreign
operations
Deferred tax
Total other comprehensive
income/(loss)
Transactions with owners
in their capacity as owners:
Purchase of treasury shares
Dividends paid
Settlement of options
and performance rights
Share-based payment expense
Balance at 30 June 2015
Net profit for the
financial period
Other comprehensive
income/(loss):
Unrealised losses
on cash flow hedges
Realised losses/(gains)
transferred to profit or loss
Time value of options
Exchange differences
on translation of foreign
operations
Deferred tax
Total other comprehensive
income/(loss)
Transactions with owners
in their capacity as owners:
Purchase of treasury shares
Dividends paid
Settlement of options
and performance rights
Share-based payment expense
Balance at 30 June 2016
4.4.3
4.4.1
4.2 & 4.4.3
4.4.1
7.1
4.4.3
–
–
–
–
–
–
(11.4)
–
0.7
–
502.7
–
–
–
–
–
–
–
4.4.1
4.2 & 4.4.3
4.4.1
7.1
(21.3)
–
0.4
–
481.8
Attributable to owners of Orora Limited
Contributed
equity
Note
Available-
for-sale
revaluation
reserve
Cash flow
hedge
reserve
Share-
based
payment
reserve
Demerger
reserve
Exchange
fluctuation
reserve
Retained
earnings
Total
equity
513.4
2.9
(3.1)
2.1
132.9
(25.6)
759.1
1,381.7
–
–
–
(3.3)(1)
(2.9)
2.9(1)
–
–
–
(0.1)
(2.9)
(0.5)
–
–
–
–
(3.6)
–
(13.7)(1)
(2.6)(1)
(0.4)
–
4.9
(11.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.7)
5.5
6.9
–
–
–
–
–
–
–
–
–
(0.4)
8.6
–
–
–
–
–
–
–
–
–
–
–
–
–
16.3
0.3
16.6
–
–
–
–
131.4
131.4
–
–
–
–
–
(3.3)
–
16.3
0.2
13.2
–
(78.4)
(11.4)
(78.4)
–
–
–
5.5
132.9
(9.0)
812.1
1,442.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13.5
(0.3)
13.2
168.6
168.6
–
–
–
–
–
–
(13.7)
(2.6)
(0.4)
13.5
4.6
1.4
–
–
–
–
–
(101.7)
(21.3)
(101.7)
–
–
–
8.6
(15.4)
15.1
132.9
4.2
879.0
1,497.6
(1) During the 12-months to 30 June 2016 losses relating to the valuation of forward exchange contracts and interest rate swap contracts of $13.3 million and
$0.4 million, respectively, were recognised in the cash flow hedge reserve (2015: gains of $5.6 million and losses of $8.9 million, respectively). In addition, gains
of $4.8 million (2015: losses of $2.8 million) relating to the forward exchange contracts and losses of $2.2 million (2015: losses of $0.1 million) relating to interest
rate swap contracts were transferred to profit or loss. Refer to note 5.4 for further information on these derivative instruments.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
58
ORORA LIMITED ANNUAL REPORT 2016
CASH FLOW STATEMENT
For the financial year ended 30 June 2016
$ million
Note
2016
2015
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
Profit for the financial period
Depreciation
Amortisation of intangible assets
Net impairment losses on property, plant and equipment, intangibles, receivables and inventory
Net finance costs
Net gain on disposal of non-current assets
Net gain on disposal of available-for-sale financial instrument
Fair value loss/(gain) on financial instruments at fair value through income statement
Dividends from other entities
Share-based payment expense
Other sundry items
Income tax expense
Operating cash inflow before changes in working capital and provisions
– (Increase)/Decrease in prepayments and other operating assets
– (Decrease)/Increase in provisions
– (Increase)/Decrease in trade and other receivables
– Decrease/(Increase) in inventories
– Increase/(Decrease) in trade and other payables
Dividends received
Interest received
Interest and borrowing costs paid
Income tax paid
Net cash inflow from operating activities
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Payments for acquisition of controlled entities and businesses, net of cash acquired
Payments for property, plant and equipment and intangible assets
Proceeds on disposal of non-current assets
Net cash flows used in investing activities
CASH FLOWS USED IN FINANCING ACTIVITIES
Payments for treasury shares
Proceeds from borrowings
Repayment of borrowings
Dividends paid and other equity distributions
Net cash flows used in financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial period(1)
(1) Refer to note 4.3 for details of the financing arrangements of the group.
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
1.4
1.4
1.3
1.3
1.4
2.1
1.1
4.4.1
4.2
168.6
101.2
6.3
6.6
41.1
(8.3)
–
1.7
(0.1)
8.6
19.5
70.8
416.0
(5.4)
(12.0)
(43.5)
2.7
28.8
386.6
0.1
0.4
(29.6)
(52.5)
305.0
131.4
92.6
5.5
2.6
37.9
(3.8)
(1.7)
(1.0)
(0.6)
5.5
26.8
55.8
351.0
(13.5)
(13.2)
(8.5)
(35.2)
41.2
321.8
0.6
0.1
(35.4)
(33.1)
254.0
(120.2)
(110.1)
30.6
(199.7)
(12.0)
(110.3)
25.4
(96.9)
(21.3)
2,648.9
(2,634.1)
(101.7)
(11.4)
1,857.6
(1,893.5)
(78.4)
(108.2)
(125.7)
(2.9)
67.3
1.7
66.1
31.4
30.5
5.4
67.3
ORORA LIMITED ANNUAL REPORT 2016
59
About this report
Basis of consolidation
Orora Limited (the Company) is a for-profit entity for the purposes
of preparing this financial report and is domiciled in Australia. The
Company and its subsidiaries (collectively referred to as the Group)
are primarily involved in the manufacture and supply of packaging
products and services to grocery, fast-moving consumer goods and
industrial markets.
This general purpose financial report for the Group for the year
ended 30 June 2016 was authorised for issue in accordance with
a resolution of the Directors on 15 August 2016. The Directors have
the power to amend and reissue the financial report.
This financial report is a general purpose financial report which:
• has been prepared in accordance with Australian Accounting
Standards (AASBs), including Australian Accounting Interpretations
adopted by the AASB, and the Corporations Act 2001. The financial
report of the Group also complies with International Financial
Reporting Standards (IFRSs) and Interpretations as issued by the
International Accounting Standards Board (IASB);
• has been prepared under the historical cost basis except for
financial instruments which have been measured at fair value.
Non-derivative financial instruments are measured at fair value
through the income statement;
• is presented in Australian dollars with values rounded to the
nearest $100,000 unless otherwise stated, in accordance with
the ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191;
• presents reclassified comparative information where required
for consistency with the current period presentation;
• adopts all new and amended Accounting Standards and
Interpretations issued by the AASB that are relevant to the
operations of the Group and effective for reporting periods
beginning on or after 1 July 2015;
• does not early adopt any Accounting Standards and Interpretations
that have been issued or amended but are not yet effective, with
the exception of AASB 9 Financial Instruments (December 2014),
including consequential amendments to other standards,
which was adopted on 1 July 2015. Refer to note 7.8 for further
details; and
• has applied the Group accounting policies consistently to all
periods presented.
Key judgements and estimates
The consolidated financial statements comprise the financial
statements of the Company and its controlled entities. Details of
the controlled entities (subsidiaries) of the Company are contained
in note 6.1.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that the Group
obtains control until the date that control ceases. The subsidiary
financial statements are prepared for the same reporting period
as the parent company, using consistent accounting policies and
all balances and transactions between entities included within
the Group are eliminated.
The acquisition of subsidiaries is accounted for using the acquisition
method of accounting when control is obtained by the Group.
Foreign currency
Items included in the financial statements of each of the entities
included within the Group are measured using the currency of the
economic environment in which the entity primarily generates and
expends cash (the ‘functional currency’). These financial statements
are presented in Australian dollars, which is the functional and
reporting currency of the Company, Orora Limited.
Transactions in foreign currencies are initially recorded in the
functional currency of the entity using the exchange rate prevailing
at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date. Foreign exchange gains
and losses arising from the translation of the monetary assets and
liabilities, or from the settlement of foreign currency transactions,
are recognised in the income statement, except when deferred
in equity as qualifying cash flow hedges or net investment hedges.
The amounts deferred in equity in respect of cash flow hedges are
recognised in the income statement when the hedged item affects
profit or loss and for net investment hedges when the investment
is disposed of.
As at the reporting date, the assets and liabilities of entities within
the Group that have a functional currency different from the
presentation currency, are translated into Australian dollars at
the rate of exchange at the balance sheet date and the income
statements are translated at the average exchange rate for the
year. The exchange differences arising on the balance sheet
translation are taken directly to a separate component of equity
in the Exchange Fluctuation Reserve.
The preparation of the financial statements requires management
to exercise judgement in applying the Group’s accounting policies.
It also requires the use of estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses.
The areas involving a higher degree of judgement or complexity
are set out below and in more detail in the related notes:
Other accounting policies
Significant and other accounting policies that summarise the
measurement basis used and are relevant to an understanding
of the financial statements are provided throughout the notes
to the financial statements.
Page
67
73
74
76
78
90
97
100
Note 2
Note 3.5
Note 3.6
Note 3.7
Note 3.8
Note 5.4
Note 7.1
Note 7.3
Income tax
Property, plant and equipment
Intangible assets
Provisions
Impairment of non-financial assets
Hedging instruments
Share-based compensation
Commitments and contingent liabilities
60
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 The notes to the financial statements
Jakait
On 1 September 2015, the Group acquired the assets and business
of Jakait, a supplier of packaging, logistics and label products to the
greenhouse produce sector based in Ontario, Canada. The initial
consideration was CAD16.5 million ($17.7 million) with an additional
returns based consideration, of up to CAD5.5 million ($5.9 million),
payable over the next five years. Goodwill of $15.7 million has been
recognised as a result of the acquisition.
Funding activities
During the year the Group successfully completed a US Private
Placement of notes issued by its wholly-owned US subsidiary,
raising USD250.0 million, of which USD100.0 million matures
in July 2023, and USD150.0 million in July 2025. In addition,
the Group also secured:
• a USD200.0 million five-year USD denominated revolving facility
maturing in April 2021; and
• two bilateral agreements for $50.0 million maturing in April 2018.
As a result of these refinancing activities the Group reduced the
revolving multicurrency facility to $400.0 million and extended the
maturity of the facility from December 2018 to December 2019.
Refer to note 4.3 for further details of the Group’s debt profile.
Australian land sale
On 20 July 2015, the Group reached an agreement to sell the former
cartonboard mill site in Petrie, Queensland, Australia for total
consideration of $50.5 million. The Group received $20.0 million
on the exchange of contracts and the balance of the proceeds
will be paid as decommissioning of the site progresses over the
next two years. The profit before tax on the sale of $8.4 million
(profit after tax $5.9 million) has been recognised in the period
to 30 June 2016.
The following notes include information which is material and
relevant to the operations, financial position and performance
of the Group. Information is considered material and relevant due
to its size or nature or the information:
• is important for understanding the Group’s current period results;
• provides an explanation of significant changes in the Group’s
business – for example, business acquisitions; or
• it relates to an aspect of the Group’s operations that are
important to its future performance.
The notes are organised into the following sections:
• Results for the year – provides details on the results and
performance of the Group for the year;
• Income tax – provides information on the Group’s tax position
and the current and deferred tax charges or credits in the year;
• Assets and liabilities – provides details of the assets used to
generate the Group’s trading performance and the liabilities
incurred as a result;
• Capital structure and financing – outlines how the Group
manages its capital structure and related financing activities;
• Financial risk management – provides information on how the
Group manages financial risk exposures associated with holding
financial instruments;
• Group structure – explains the characteristics of and changes
within the group structure during the year;
• Other – provides additional financial information required by
accounting standards and the Corporates Act 2001, including
details of the Group’s employee reward and recognition programs
and unrecognised items.
Current period highlights
Dividend
During the financial year, the Group paid a 30% franked dividend
of $101.7 million being 8.5 cents per ordinary share, representing
payment of the FY15 final dividend of 4.0 cents and the FY16
interim dividend of 4.5 cents.
Since 30 June 2016, the Directors have determined a final dividend
for FY16 of $60.3 million, 30% franked, of 5.0 cents per ordinary
share. Refer note 4.2 for further details.
Acquisitions
IntegraColor LLC
On 1 March 2016, the Group acquired 100% of the issued share
capital of IntegraColor LLC (IntegraColor). The initial consideration
of USD77.0 million ($100.4 million) includes a deferred payment
of USD7.0 million ($9.2 million) payable in two instalments over
the next eighteen months.
IntegraColor is a provider of point of purchase retail display
solutions and other visual communication services for customers
across consumer (food and beverage), healthcare/education
and horticulture industries. The operations are based in Dallas,
Texas, servicing customers across North America.
As at 30 June 2016, the acquisition accounting for IntegraColor
has been provisionally determined as the post-close adjustment
process remains in progress. Refer to note 6.2 for additional
information on the business acquisition.
ORORA LIMITED ANNUAL REPORT 2016
61
Section 1: Results for the year
IN THIS SECTION
This section focuses on the results and performance of the Group. On the following pages you will find disclosures explaining the
Group’s results for the year, segmental information and earnings per share. Earnings before interest and related income tax expense
(EBIT) is the key profit indicator for the segments, reflecting the way the business is managed and how the Directors assess the
performance of the Group.
This section also analyses the Group’s profit before tax by reference to the activities performed by the Group and an analysis of key
operating costs.
Financial highlights of the Group
• Sales revenue of $3,849.8 million, up 13.0%
• EBIT of $280.5 million, up 24.6%
• Operating free cash flow of $329.1 million, up 36.2%
• Earnings per share of 14.1 cents, up 29.4%
1.1 Segment results
The Group’s operating segments are organised and managed according to their geographical location. Each segment represents a strategic
business that offers different products and operates in different industries and markets. The Corporate Executive Team (the chief operating
decision-makers) monitor the operating results of the businesses separately for the purpose of making decisions about resource allocation
and performance assessment.
The following summary describes the operations of each reportable segment.
Orora Australasia
This segment focuses on the manufacture of fibre and beverage packaging products within Australia and New Zealand. The products
manufactured by this segment include glass bottles, beverage cans, wines closures, corrugated boxes, cartons and sacks, and the
manufacture of recycled paper.
Orora North America
This segment, predominately located in North America, purchases, warehouses, sells and delivers a wide range of packaging and other
related materials. The business also includes integrated corrugated sheet and box manufacturing and equipment sales capabilities and the
recently acquired point of purchase retail display solutions and other visual communication services provided by the IntegraColor business
(refer note 6.2).
Other
This segment includes the Corporate function of the Group.
Accounting policies
Segment performance is evaluated based on earnings before interest and related income tax expense (EBIT). This measure excludes the
effects of individually significant non-recurring gains/losses whilst including items directly attributable to the segment as well as those that
can be allocated on a reasonable basis.
Interest income and expenditure and other finance costs are not allocated to the segments, as this type of activity is managed at the
Group level. Transfer prices between segments are priced on an ‘arms-length’ basis, in a manner similar to transactions with third parties,
and are eliminated on consolidation.
62
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 The results of the reportable segments for the year ended 30 June 2016 and 30 June 2015 are set out below:
Australasia
North America
Other
Total Reported
$ million
2016
2015
2016
2015
2016
2015
2016
2015
Reportable segment revenue
Revenue from external customers
Inter-segment revenue
1,956.6
48.6
1,935.5
35.2
1,893.2
–
1,472.3
–
Total reportable segment revenue
2,005.2
1,970.7
1,893.2
1,472.3
–
–
–
–
–
–
3,849.8
48.6
3,407.8
35.2
3,898.4
3,443.0
Reportable segment earnings
Earnings before interest, tax,
depreciation and amortisation
Depreciation and amortisation
Earnings before interest and tax
Capital spend on the acquisition
of property, plant and equipment
and intangibles
Receivables
Inventory
Payables
Working capital
Inter-segment working capital
Total reportable segment
working capital
286.1
(85.7)
200.4
261.9
(80.3)
181.6
115.6
(16.7)
98.9
84.2
(12.6)
71.6
(13.7)
(5.1)
(18.8)
(22.9)
(5.2)
(28.1)
388.0
(107.5)
280.5
323.2
(98.1)
225.1
82.7
86.5
27.1
20.2
0.3
3.6
110.1
110.3
262.6
333.6
(381.6)
214.6
14.9
232.5
339.3
(364.0)
207.8
13.8
252.6
125.8
(271.8)
106.6
(14.9)
201.6
111.8
(234.6)
78.8
(13.8)
7.1
–
(50.5)
(43.4)
–
15.1
–
(35.7)
(20.6)
–
522.3
459.4
(703.9)
277.8
–
449.2
451.1
(634.3)
266.0
–
229.5
221.6
91.7
65.0
(43.4)
(20.6)
277.8
266.0
Average funds employed(1)
1,724.4
1,777.2
400.1
316.3
Operating free cash flow(2)
224.2
202.4
90.2
67.8
14.7
14.7
27.5
2,139.2
2,121.0
(28.6)
329.1
241.6
(1) Average funds employed represents total assets less net debt held at the beginning and end of the reporting period.
(2) Operating free cash flow represents the cash flow generated from Orora’s operating and investing activities, before interest, tax and dividends.
Geographical segments
In presenting information on the basis of geographical location, both segment revenue and non-current assets are based on the location
of the Orora business.
Revenue
$
Revenue
$
Non-current assets(1)
$
Non-current assets(1)
$
1,614.7 1,604.4
1,852.7
1,439.8
1,477.7 1,510.3
341.9
331.1
40.5
32.5
2016
2015
415.1
292.9
142.2
131.2
2016
2015
Australia
New Zealand United States
Other
Australia
New Zealand United States
Other
of America
of America
(1) Non-current assets exclude deferred tax assets and non-current
financial instruments.
ORORA LIMITED ANNUAL REPORT 2016
63
Section 1: Results for the year (continued)
1.1 Segment results (continued)
Revenue by product
$ million
Fibre and paper-based packaging
Beverage packaging
Traded packaging products
Total sales revenue
No single customer, within an operating segment, generates revenue greater than 10% of the Group’s total revenues.
Reconciliation of segmental measures
The following segmental measurements reconcile to the financial statements as follows:
Capital spend on the acquisition of property, plant and equipment and intangibles
$ million
Reported segment capital spend
Movement in capital creditors
Movement in prepaid capital items
Capitalised asset restoration costs
Other non-cash adjustments
Acquisition of property, plant and equipment and intangibles(1)
(1) Segment capital spend excludes balances acquired through business combinations. Refer notes 3.5 and 3.6.
Operating free cash flow
$ million
Reported segment operating free cash flow
Add back investing cash flow activities included in segment operating free cash flow
Less interest and tax paid excluded from segment operating free cash flow
Net cash flows from operating activities
Working capital
$ million
Reported segment working capital
Add/(Less) amounts included in working capital for management reporting purposes:
Derivatives
Add/(Less) amounts excluded from working capital for management reporting purposes:
Net capital receivables and payables
Loan receivables and other assets
Other payables
Reconciles to the financial statements as follows:
Trade receivables (note 3.1)
Current prepayments (note 3.4)
Inventories (note 3.2)
Trade and other payables (note 3.3)
64
ORORA LIMITED ANNUAL REPORT 2016
2016
2015
1,747.2
692.4
1,410.2
1,656.4
702.8
1,048.6
3,849.8
3,407.8
2016
2015
110.1
0.7
5.4
(1.0)
0.9
116.1
110.3
0.2
(5.3)
1.4
1.7
108.3
2016
2015
329.1
57.6
(81.7)
305.0
241.6
80.8
(68.4)
254.0
2016
2015
277.8
266.0
12.1
(3.6)
9.1
0.6
(8.3)
11.7
0.5
(3.5)
291.3
271.1
515.8
24.6
459.4
(708.5)
427.7
28.3
451.1
(636.0)
291.3
271.1
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 1.2 Earnings per share (EPS)
Earnings per share (EPS) is the amount of post-tax profit attributable to each share.
Basic EPS is calculated on the Group profit for the year attributable to ordinary shareholders of the Company of $168.6 million
(2015: $131.4 million) divided by the weighted average number of shares on issue during the reporting period, excluding ordinary
shares purchased by the Company and held as Treasury Shares, being 1,194.9 million (2015: 1,203.0 million).
Diluted EPS reflects any commitments made by the Group to issue shares in the future and so it includes the effect of the potential
conversion of share options and rights granted to employees. To calculate the impact it is assumed that all share options and rights
are exercised and new shares are issued.
Calculation of EPS
Calculation of basic and diluted earnings per share has been based on the following profit attributable to ordinary shareholders and
weighted average number of ordinary shares outstanding.
EPS attributable to the ordinary equity holders of Orora Limited
million
Profit for the financial period attributable to the owners of Orora Limited
Weighted average number of ordinary shares for basic earnings per share
Dilution due to share options and rights
Weighted average number of ordinary shares for diluted earnings per share
Basic earnings per share
Diluted earnings per share
1.3 Income
$ million
Revenue from sale of goods
Net gain on disposal of property, plant and equipment
Net gain on disposal of available-for-sale financial instruments
Net foreign exchange gains
Service income
Other
Total other income
Accounting policies
2016
2015
$168.6
$131.4
1,194.9
19.3
1,203.0
11.1
1,214.2
1,214.1
14.1c
13.9c
10.9c
10.8c
2016
2015
3,849.8
3,407.8
8.3
–
0.5
6.8
6.2
3.8
1.7
–
7.1
6.7
21.8
19.3
Revenue is measured at the fair value of the consideration received or receivable. Selecting the appropriate timing and amount of revenue
recognised requires some judgement.
Sale of goods
Revenue is recognised when the risks and rewards of ownership have transferred to the customer and it can be reliably measured. Risk and
rewards are considered passed to the customer at the time of delivery of the goods. Revenue from the sale of products is measured at fair
value of the consideration received or receivable, net of returns allowances and discounts. No revenue is recognised if:
• there is a risk of return of goods;
• there is continuing managerial involvement with the goods;
• there are significant uncertainties regarding recovery of the consideration due; or
• the costs incurred or to be incurred cannot be measured reliably.
Rendering of services
With respect to services rendered, revenue is recognised in the period in which the services are rendered. For fixed-price contracts revenue
is recognised depending on the stage of completion of the service to be provided.
ORORA LIMITED ANNUAL REPORT 2016
65
Section 1: Results for the year (continued)
1.4 Operating costs
Employee benefit expense
$ million
Wages and salaries
Workers’ compensation and other on-costs
Superannuation costs – accumulation funds
Other employment benefits expense
Share-based payments expense
– Options
– Performance rights and other plans
Total employee benefits expense
2016
2015
651.3
54.1
26.6
8.2
1.8
6.8
596.1
53.2
25.9
7.0
1.0
4.5
748.8
687.7
The Group’s accounting policy for liabilities associated with employee benefits is contained in note 3.7, whilst the policy for share-based
payments is set out in note 7.1.
Depreciation and amortisation
Depreciation in the year was $101.2 million (2015: $92.6 million), whilst the amortisation charge was $6.3 million (2015: $5.5 million).
Refer to notes 3.5 and 3.6 for the Group’s accounting policy and details on depreciation and amortisation.
Operating leases
The Group leases motor vehicles, plant and equipment and property which are classified as operating leases. The leases generally provide
the Group with a right of renewal at which time all terms are renegotiated. Payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the lease, while any material lease incentive is recognised as an integral part
of the total lease expense, over the term of the lease.
The minimum lease rental payments expensed during the year was $75.0 million (2015: $70.1 million). There were no contingent rental
payments (2015: nil).
Refer to note 7.3 for future operating lease commitments.
66
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Section 2: Income tax
IN THIS SECTION
This section sets out the Group’s tax accounting policies, the current and deferred tax charges or credits in the year (which together
make up the total tax charge or credit in the income statement), a reconciliation of profit before tax to the tax charge for the period
and the movements in the deferred tax assets and liabilities.
2.1 Income tax expense
The total taxation charge in the income statement is analysed as follows:
$ million
Current tax expense
Current period
Adjustments relating to prior periods
Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense
Deferred income tax expense included in income tax expense comprises:
(Decrease)/Increase in deferred tax assets
(Increase)/Decrease in deferred tax liabilities
Deferred income tax expense included in total income tax expense
The following table provides a numerical reconciliation of income tax expense to prima facie tax payable:
$ million
Profit before related income tax (expense)/benefit
Tax at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Net non-deductible/non-assessable for tax
Tax losses, net tax credits and temporary differences not recognised for book in prior years now recouped
Over/(Under) provision in prior period
Foreign tax rate differential
Total income tax expense
2016
2015
(50.1)
2.3
(47.8)
(23.0)
(70.8)
(3.8)
(19.2)
(23.0)
(35.1)
(0.6)
(35.7)
(20.1)
(55.8)
(5.2)
(14.9)
(20.1)
2016
2015
239.4
(71.8)
187.2
(56.2)
3.3
1.6
(66.9)
2.3
(6.2)
(70.8)
2.5
3.4
(50.3)
(0.6)
(4.9)
(55.8)
ORORA LIMITED ANNUAL REPORT 2016
67
2016
2015
1.1
10.0
44.7
16.3
7.6
–
6.5
86.2
(86.2)
–
73.2
20.1
25.1
118.4
(86.2)
32.2
0.7
12.0
42.7
14.7
1.1
1.5
11.3
84.0
(83.3)
0.7
57.5
17.6
22.4
97.5
(83.3)
14.2
2016
2015
14.8
(0.4)
2.1
2.2
(1.4)
(1.5)
(1.6)
1.6
7.2
23.0
17.2
1.3
1.3
0.2
(2.7)
3.7
0.7
5.3
(6.9)
20.1
Section 2: Income tax (continued)
2.2 Deferred tax balances
Deferred income tax in the balance sheet relates to the following:
$ million
Deferred tax assets
Trade receivable loss allowance provision
Valuation of inventories
Employee benefits
Provisions
Financial instruments at fair value
Tax losses carried forward
Accruals and other items
Tax set off
Deferred tax asset
Deferred tax liabilities
Property, plant and equipment
Intangible assets
Other items
Deferred tax liabilities
Tax set off
Deferred tax liability
Deferred income tax in the income statement relates to the following:
$ million
Property, plant and equipment
Trade receivable loss allowance provision
Intangible assets
Valuation of inventories
Employee benefits
Provisions
Financial instruments at fair value
Tax losses carried forward
Accruals and other items
Deferred tax expense
68
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Accounting policies
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised directly in equity or in other
comprehensive income respectively.
Current Tax
Current tax is the expected tax payable on taxable income for the period, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous periods. Current tax is also adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial
statements, and by the availability of unused tax losses.
Current tax assets and liabilities are offset where the Group has a legally enforceable right to offset and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Deferred Tax
Deferred tax is recognised using the balance sheet method in which temporary differences are calculated based on the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
• taxable temporary differences arising on the initial recognition of goodwill;
• taxable differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit; and
• temporary differences relating to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal
of the temporary difference and it is probable that they will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied when the temporary difference reverses, that is, when the asset
is realised or the liability is settled, based on the laws that have been enacted or substantively enacted at the reporting date.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only to the extent that it is probable that
future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and when the deferred tax balances relate
to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but the Group intends to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Unrecognised deferred tax assets and liabilities
Deferred tax liabilities have not been recognised in respect of temporary differences arising as a result of the translation of the financial
statements of the Group investments in subsidiaries. The deferred tax liability will only arise in the event of disposal of the subsidiary,
and no such disposal is expected in the foreseeable future.
Unremitted earnings of the Group’s international operations are considered to be reinvested indefinitely and relate to the ongoing operations.
Upon distribution of any earnings in the form of dividends or otherwise, the Group may be subject to withholding taxes payable to various
foreign countries, however, such amounts are not considered to be significant. As the Group controls when the deferred tax liability will
be incurred and is satisfied that it will not be incurred in the foreseeable future, the deferred tax liability has not been recognised. There are
no unrecognised deferred tax assets.
Key judgements and estimates
The Group is subject to income taxes in Australia and foreign jurisdictions and as a result the calculation of the Group’s tax charge
involves a degree of estimation and judgement in respect of certain items, including assumptions made in respect of the application
of tax legislation. There are many transactions and calculations relating to the ordinary course of business for which the ultimate
tax determination is uncertain. The Group recognises liabilities for uncertain tax positions based on management’s best estimate
of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially
recorded, these differences impact the current and deferred tax provisions in the period in which such determinations are made.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable profits are available to utilise those temporary differences and losses, and the tax losses continue to be available having
regard to the nature and timing of their origination and compliance with the relevant tax legislation associated with their
recoupment. The assumptions regarding the future realisation, and therefore the recognition of deferred tax assets, may change
due to future operating performance and other factors.
The assumptions made in respect of the recognised tax balances are subject to risk and uncertainty and there is a possibility that
changes in circumstances or differences in opinion will alter outcomes which may impact the amount of deferred tax assets and
deferred tax liabilities recognised and the amount of tax losses and timing differences not yet recognised.
ORORA LIMITED ANNUAL REPORT 2016
69
Section 3: Assets and liabilities
IN THIS SECTION
This section details the assets used to generate the Group’s trading performance and the liabilities incurred as a result.
On the following pages there are notes covering working capital, other assets, non-current assets and provisions.
Liabilities relating to the Group’s financing activities are set out in section 4, whilst the assets and liabilities recognised in respect
of derivative instruments, used to hedge financial risks, are contained in section 5. Information pertaining to deferred tax assets
and liabilities is provided in section 2.
3.1 Trade and other receivables
$ million
Trade receivables
Less loss allowance provision
Loans and other receivables(1)
Total current trade and other receivables
2016
2015
466.6
(4.2)
462.4
53.4
515.8
394.9
(2.4)
392.5
35.2
427.7
(1) These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the terms
of repayment exceed six months. Collateral is not normally obtained.
Accounting policies
Trade receivables and loans and other receivables are all classified as financial assets held at amortised cost.
Trade receivables
Trade receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method, less a
loss allowance provision. The carrying value of trade and other receivables, less impairment provisions, is considered to approximate fair
value, due to the short-term nature of the receivables.
Impairment of trade receivables
The collectability of trade and other receivables is reviewed on an ongoing basis. Individual debts which are known to be uncollectable
are written off when identified.
The Group recognises an impairment provision based upon anticipated lifetime losses of trade receivables. The anticipated losses are
determined with reference to historical loss experience and is regularly reviewed and updated.
The amount of the impairment loss is recognised in the income statement within ‘general and administration’ expense.
Loans and other receivables
Loans are non-derivative financial assets with fixed or determinable payments and are measured at their amortised cost using the effective
interest rate method and are usually interest-bearing.
Credit risks related to receivables
In assessing an appropriate provision for impairments of receivables, consideration is given to historical experience of bad debts, the ageing
of receivables, knowledge of debtor insolvency or other credit risk and individual account assessment.
Customer credit risk is managed by each business group in accordance with the procedures and controls set out in the Group’s credit
risk management policy. Credit limits are established for all customers based on external and internal credit rating criteria and letters
of credit or other forms of credit insurance cover are obtained where appropriate. In monitoring customer credit risk, customers are
grouped according to their credit characteristics, including whether they are an individual or a legal entity, whether they are a wholesale,
retail or end-user customer, their geographic location, industry and existence of previous financial difficulties.
For some trade receivables the Group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which
can be called upon if the counterparty is in default under the terms of the agreement. The Group does not otherwise require collateral
in respect of trade and other receivables.
70
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 The following table sets out the ageing of trade receivables, according to their due date:
$ million
Not past due
Past due 0–30 days
Past due 31–120 days
More than 121 days past due
Loss allowance provision
Gross carrying amount
2016
2015
2016
2015
–
0.5
2.0
1.7
4.2
–
0.3
0.6
1.5
2.4
333.2
94.3
35.7
3.4
466.6
265.8
95.6
31.6
1.9
394.9
The Group has recognised a net loss of $2.9 million (2015: $2.2 million) in respect of the trade receivables written off in the financial year.
The loss has been included in ‘general and administration’ expense in the income statement.
3.2 Inventories
$ million
At cost
Raw materials and stores
Work in progress
Finished goods
Total inventory carried at cost
At net realisable value
Raw materials and stores
Work in progress
Finished goods
Total inventory carried at net realisable value
Total inventories
Accounting policies
2016
2015
184.5
15.9
247.3
447.7
3.7
0.3
7.7
11.7
459.4
188.6
12.2
230.0
430.8
12.2
0.1
8.0
20.3
451.1
Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and selling expenses.
Costs incurred in bringing each product to its existing location and condition are accounted for as follows:
• Raw materials – purchase cost on a weighted average cost formula
• Manufactured finished goods and work in progress – cost of direct material and labour and an appropriate proportion of production and
variable overheads incurred in the normal course of business.
Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventory.
During the period, the Group recognised a net write-down of $3.9 million (2015: $1.4 million) with regard to the net realisable value
of inventories which has been recognised in ‘cost of sales’ expense in the income statement.
ORORA LIMITED ANNUAL REPORT 2016
71
Section 3: Assets and liabilities (continued)
3.3 Trade and other payables
$ million
Trade creditors
Other creditors and accruals
Total current trade and other payables
Accounting policies
2016
2015
466.1
242.4
708.5
433.1
202.9
636.0
Trade and other payables are all classified as financial liabilities held at amortised cost. Trade and other payables represent liabilities for
goods and services provided to the Group prior to the end of the financial year which were unpaid at the end of the financial year and these
amounts are unsecured.
The carrying value of trade and other payables is considered to approximate fair value due to the short-term nature of the payables.
Trade and other payables are included in current liabilities, except for those liabilities where payment is not due within 12 months from
reporting date which are classified as non-current liabilities.
3.4 Other assets
$ million
Current
Contract incentive payments(1)
Prepayments
Total other current assets
Non-current
Contract incentive payments(1)
Prepayments
Other non-current assets
Total other non-current assets
2016
2015
14.7
24.6
39.3
56.8
1.4
46.4
16.5
28.3
44.8
62.7
2.8
35.9
104.6
101.4
(1) Contract incentives are provided to customers to secure long-term sale agreements and are amortised over the period of the contractual arrangement.
72
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 3.5 Property, plant and equipment
The following note details the physical assets used by the Group to operate the business, generating revenues and profits.
The cost of these assets is the amount initially paid for them with a depreciation charge recognised in the income statement
to reflect the wear and tear of the assets as they are used which reduces the value of the asset over time.
Land
Land
improvements
Buildings
Plant and
equipment
$ million
Cost
At 1 July 2014
Additions for the period
Disposals during the period
Additions through business acquisitions
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2015
Additions for the period
Disposals during the period
Additions through business acquisitions
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2016
Accumulated depreciation and impairment
At 1 July 2014
Depreciation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2015
Depreciation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2016
Net book value
At 30 June 2015
At 30 June 2016
463.0
1.3
(1.5)
0.1
2.7
3.5
469.1
0.1
(15.0)
3.9
7.2
2.1
467.4
(117.6)
(9.6)
1.6
(1.4)
(127.0)
(10.7)
8.2
(1.4)
73.8
–
(2.8)
–
0.5
0.2
71.7
–
(9.3)
–
(0.1)
0.2
62.5
(0.4)
–
0.1
–
(0.3)
–
–
–
(0.3)
71.4
62.2
11.3
–
–
–
0.4
–
11.7
–
(0.5)
–
0.1
0.1
11.4
(3.4)
(0.2)
–
–
(3.6)
(0.3)
0.2
–
(3.7)
8.1
7.7
Total
3,300.9
87.6
(50.0)
1.1
–
30.2
3,369.8
107.8
(58.3)
19.1
–
26.8
3,465.2
(1,756.6)
(92.6)
43.7
(16.9)
2,752.8
86.3
(45.7)
1.0
(3.6)
26.5
2,817.3
107.7
(33.5)
15.2
(7.2)
24.4
2,923.9
(1,635.2)
(82.8)
42.0
(15.5)
(1,691.5)
(1,822.4)
(90.2)
31.2
(15.5)
(101.2)
39.6
(16.9)
(130.9)
(1,766.0)
(1,900.9)
342.1
336.5
1,125.8
1,157.9
1,547.4
1,564.3
At 30 June 2016, no property, plant and equipment was provided as security for any interest-bearing borrowings (2015: nil).
Accounting policies
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is
directly attributable to the acquisition of the item including borrowing costs that are related to the acquisition, construction or production
of an asset. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases
of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, only when it is probable that future
economic benefits associated with the item will flow to the Group. All other repairs and maintenance are charged to the income statement
during the financial year in which they are incurred.
Depreciation
Property, plant and equipment, excluding freehold land, is depreciated at rates based upon the expected useful lives, or in the case of
leasehold improvements and certain leased plant and equipment the lease term, using the straight-line method. Land is not depreciated.
Depreciation rates used for each class of asset for the current and comparative periods are as follows:
• Buildings 1% – 5%
• Land improvements 1% – 3%
• Plant and equipment 2.5% – 25%
ORORA LIMITED ANNUAL REPORT 2016
73
Section 3: Assets and liabilities (continued)
3.5 Property, plant and equipment (continued)
Key judgements and estimates
Depreciation is calculated by estimating the number of years the Group expects an asset to be used over. At each reporting date
depreciation methods, residual values and useful lives are reassessed and adjusted if necessary. In addition, assets subject to
depreciation are reviewed for impairment whenever events or changes in circumstances indicate that an asset carrying amount
may not be recoverable. If an asset’s value falls below its depreciated value, an additional one-off impairment charge is made
against profit. Refer note 3.8 for further details.
3.6 Intangible assets
The following note details the non-physical assets used by the Group to generate revenue and profits.
These assets include computer software and licences, customer relationships and goodwill. The cost of these assets is the amount that
the Group has paid or, where there has been a business combination, the fair value of the specific intangible assets identified. In the
case of goodwill, its cost is the amount the Group has paid for acquiring a business over and above the fair value of the individual assets
and liabilities acquired. The value of goodwill is ‘intangible’ value that comes from, for example, synergies available with the integration
of the acquired business into the Group, a skilled and knowledgeable assembled workforce, proprietary technologies and processes,
a uniquely strong market position and customer relationships.
$ million
Cost
At 1 July 2014
Additions for the period
Additions through business acquisitions
Disposals during the period
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2015
Additions for the period
Additions through business acquisitions
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2016
Accumulated amortisation and impairment
At 1 July 2014
Amortisation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2015
Amortisation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2016
Net book value
At 30 June 2015
At 30 June 2016
74
ORORA LIMITED ANNUAL REPORT 2016
Other intangible assets
Goodwill
Computer
software
Other
Total
213.0
–
10.1
–
–
27.5
250.6
–
80.6
–
6.8
338.0
(7.9)
–
–
–
(7.9)
–
–
–
146.9
20.7
–
(2.0)
1.0
10.0
176.6
8.3
0.5
(3.1)
1.5
183.8
(120.7)
(5.5)
2.0
(7.2)
(131.4)
(6.3)
3.1
(1.1)
(7.9)
(135.7)
6.6
–
–
–
(1.0)
1.3
6.9
–
–
–
0.2
7.1
(5.6)
–
–
(1.3)
(6.9)
–
–
(0.2)
(7.1)
366.5
20.7
10.1
(2.0)
–
38.8
434.1
8.3
81.1
(3.1)
8.5
528.9
(134.2)
(5.5)
2.0
(8.5)
(146.2)
(6.3)
3.1
(1.3)
(150.7)
242.7
330.1
45.2
48.1
–
–
287.9
378.2
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Accounting policies
Goodwill
The goodwill recognised by the Group has arisen as a result of business combinations and represents the future economic benefits that
arise from assets that are not capable of being individually identified and separately recognised.
Goodwill is initially measured as the amount the Group has paid in acquiring a business over and above the fair value of the individual
assets and liabilities acquired. Goodwill is not amortised but is instead tested annually for impairment, or more frequently if events or
changes in circumstances indicate that it might be impaired, and is carried at cost less any accumulated impairment losses.
For the purpose of impairment testing goodwill is allocated to cash generating units as follows. Refer to note 3.8 for further details.
CGU
Australasia
North America
$ million
2016
2015
94.2
235.9
330.1
92.5
150.2
242.7
Other intangible assets
Other intangible assets include computer software, customer relationships and software licences. The cost of these assets is the amount
that the Group has paid or, where there has been a business combination, their fair value at the date of acquisition. Internal spend on
computer software is only capitalised within the development phase, when the asset is separate and it is probable that future economic
benefits attributable to the asset will flow to the Group. Following initial recognition, other intangible assets are carried at cost less
amortisation and any impairment losses.
Other intangible assets are amortised on a straight line basis over their useful life and tested for impairment whenever there is an indication
that they may be impaired. Refer to note 3.8 for further details on impairment.
Computer software and licences are amortised over a period of between three to ten years whilst customer relationships are amortised
over a period of up to 20 years. The amortisation period and method is reviewed each financial year.
The Group does not hold any indefinite life other intangible assets.
Key judgements and estimates
The value of intangible assets, with the exception of goodwill, reduces over the number of years the Group expects to use the asset
via an annual amortisation charge to the income statement. The amortisation charge is calculated by estimating the number of years
the Group expects to benefit from the use of the asset. At each reporting date amortisation methods and useful lives are reassessed
and adjusted if necessary. In addition, assets subject to amortisation are reviewed for impairment.
Where there has been a technological change or decline in business performance a review of the value of the intangible assets,
including goodwill, is undertaken to ensure the assets have not fallen below their amortised value. Should an asset’s value fall below
its amortised value an additional one-off impairment charge is made against profit.
ORORA LIMITED ANNUAL REPORT 2016
75
Section 3: Assets and liabilities (continued)
3.7 Provisions
$ million
2016
Opening balance
Provisions made during the period
Payments made during the period
Released during the period
Additions through business acquisitions
Unwinding of discount
Effect of movement in foreign exchange rate
Closing balance
Current
Non-current
2015
Opening balance
Provisions made during the period
Payments made during the period
Released during the period
Additions through business acquisitions
Unwinding of discount
Effect of movement in foreign exchange rate
Closing balance
Current
Non-current
Accounting policies
A provision is recognised when:
Employee
entitlements
Workers’
compensation,
insurance and
other claims
Asset
restoration
Restructuring
Total
79.3
30.8
(26.5)
(0.4)
0.2
–
0.4
83.8
75.9
7.9
75.5
29.3
(26.1)
(0.5)
0.1
–
1.0
79.3
71.8
7.5
18.7
7.3
(7.5)
(2.8)
–
0.2
0.2
16.1
15.8
0.3
16.6
6.9
(5.8)
–
–
0.2
0.8
18.7
17.5
1.2
21.1
0.5
–
(1.2)
–
0.5
0.3
21.2
5.1
16.1
19.8
1.5
–
(1.0)
–
0.5
0.3
21.1
6.2
14.9
16.8
23.0
(18.5)
(1.2)
–
0.1
0.1
20.3
14.4
5.9
27.5
10.5
(21.6)
–
–
0.2
0.2
16.8
14.8
2.0
135.9
61.6
(52.5)
(5.6)
0.2
0.8
1.0
141.4
111.2
30.2
139.4
48.2
(53.5)
(1.5)
0.1
0.9
2.3
135.9
110.3
25.6
• the Group has a present legal or constructive obligation arising from past events;
• it is probable that cash will be paid to settle it; and
• a reliable estimate can be made of the amount of the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the
time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost in the income statement.
Employee entitlements
The provision for employee entitlements represents the obligation for annual leave, long service leave entitlements and incentives accrued
by employees.
Liabilities for employee benefits such as wages, salaries and other current employee entitlements represent present obligations arising from
employees’ services provided to the reporting date and are calculated at undiscounted amounts based on remuneration wage and salary
rates, including related on-costs, such as workers’ compensation insurance and payroll tax, and are presented in other payables.
The liability for annual leave and long service leave is measured as the present value of estimated future cash outflows to be made in respect
of services provided by the employee up to the reporting date. Consideration is given to expected future wage and salary levels, experience
of employee departures and period of service. Expected future payments that are not expected to be settled within 12 months are
discounted using market yields at the reporting date of high quality corporate bonds. The rates used reflect the terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
76
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Workers’ compensation, insurance and other claims
The Group self-insures for various risks including risks associated with workers’ compensation. Provisions are recognised for claims received
and expected to be received in relation to incidents occurring prior to reporting date and are measured based upon historical claim rates.
Estimated net future cash flows are based on the assumption that all claims will be settled and the weighted average cost of historical
claims adjusted for inflation will continue to approximate future costs.
Asset restoration
The Group is required to restore leased premises to their original condition at the end of the respective lease term. The restoration
requirements typically relate to excessive wear and tear or alterations that have been made to the lease property to accommodate the
operations of the business.
Where the Group has a legal or constructive obligation to restore a site on which an asset is located, either through make-good provisions
included in lease agreements or decommissioning of environmental risks, the present value of the estimated costs of dismantling and
removing the asset and restoring the site is recognised as a provision with a corresponding increase in the related item of property, plant
and equipment. At each reporting date, the liability is remeasured in line with changes in discount rates, estimated cash flows and the
timing of those cash flows. Any changes in the liability are added to or deducted from the related asset, other than the unwinding of the
discount, which is recognised as a financing cost in the income statement.
Restructuring
The restructuring provision primarily relates to cost reduction and reorganisation activities associated with the Australasia operations.
A provision for restructuring is recognised when the Group has a detailed formal restructuring plan and the restructuring has either
commenced or has been publicly announced, including discussions with affected personnel, with employee-related costs recognised over
the period of any required further service. Future operating costs in relation to the restructuring are not provided for. Payments falling due
greater than 12 months after reporting date are discounted to present value.
Key judgements and estimates
A provision is recognised by the Group where an obligation exists relating to a past event, it is probable that a cash payment will
be required to settle it, and the Group is not certain how much cash will be required to settle the liability. The value of that provision
is based upon estimates and assumptions with regards to the amount and timing of cash flows required to settle the obligation,
which are dependent on future events. The key assumptions applicable to the determination of the provisions are as follows:
Employee entitlements
The provision for employee entitlements is based on a number of management estimates, which include:
• future increase in salaries and wages and on-cost rates
• future probability of employee departures
• future probability of years of service (long service leave provision)
Workers’ compensation
The self-insured workers’ compensation provision is based on a number of management estimates including, but not limited to:
• future inflation
• claim administration expenses
• historical weighted average size of claims
• claim development
Asset restoration
Asset restoration provisions require assessments to be made of lease make-good conditions and decommissioning and environmental
risks. The provisions also require estimates to be made of costs to dismantle and remove equipment and to restore the site to the
condition required under the terms of the lease and required by environmental laws and regulations.
Restructuring
Restructuring provisions require assessments to be made regarding the timing of recognition, specifically are plans sufficiently
detailed, approved and communicated to support recognition at a point in time. The provisions also require estimates to be made
of the cost of restructuring and the timing of these cash outflows.
The judgements, estimates and assumptions used in the booking of all provisions are management’s best estimates based on current
and forecast operating and market conditions.
ORORA LIMITED ANNUAL REPORT 2016
77
Section 3: Assets and liabilities (continued)
3.8 Impairment of non-financial assets
No impairment of non-financial assets has been recognised during the year ended 30 June 2016 or 30 June 2015.
In accordance with the Group’s accounting policies impairment losses recognised in prior periods were reassessed at 30 June 2016
for any indications that the loss may have decreased or may no longer exist, no such indicators were identified.
Testing for impairment
The Group tests property, plant and equipment, intangibles and goodwill for impairment:
• where there is an indication that an asset may be impaired (which is assessed at least each reporting date);
• where there is an indication that previously recognised impairment (on assets other than goodwill) have changed; and
• at least annually for indefinite life intangibles and goodwill.
In testing for impairment, the recoverable amount is estimated for an individual asset or, if it is not possible to estimate the recoverable
amount for the individual asset, the recoverable amount of the cash generating unit (CGU) to which the asset belongs. CGUs are the smallest
identifiable group of assets that generate cash inflows that are largely independent from the cash flows of other assets or group of assets.
Each CGU is no larger than an operating segment.
Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is determined
as the higher of its fair value less costs of disposal or value in use.
An impairment loss is recognised in the income statement if the carrying amount of an asset or a CGU exceeds its recoverable amount.
Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU
(group of CGUs) and then, to reduce the carrying amount of the other assets in the CGU (group of CGUs).
Impairment calculations
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the
risks specific to the asset or CGU and the market’s current assessment of the time value of money.
Value in use is assessed using cash flow projections for five years using data from the Group’s latest internal forecasts and is management’s
best estimate of income, expenses, capital expenditure and cash flows for each CGU. Changes in selling prices and direct costs are based on
past experience and management’s expectation of future changes in the markets in which the Group operates. Cash flows beyond the five year
period are extrapolated using estimated growth rates which are determined with regard to the long-term performance of each CGU in their
respective markets and are not expected to exceed the long-term average growth rates for the industry in which each CGU operates.
The discount rate used in performing the value in use calculations reflects the Group’s weighted average cost of capital, as adjusted for
specific risks relating to each geographical region in which the CGU’s operate.
Reversal of impairment
Where there is an indication that previously recognised impairment losses may no longer exist or may have decreased, the asset is tested.
The impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount of the asset and is
reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, had no impairment loss been recognised. Impairments recognised for goodwill are not reversed.
78
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Goodwill impairment tests
For the purpose of impairment testing, goodwill is allocated to cash generating units or groups of cash generating units (CGUs) according
to the level at which management monitors goodwill. Goodwill is tested annually or more regularly if there are indicators of impairment.
The following table presents a summary of the goodwill allocation and the key assumptions used in determining the recoverable amount
of each CGU:
Goodwill allocation ($ million)
Pre-tax discount rate (%)
Growth rate (%)
Australasia CGU
North America CGU
2016
94.2
10.7
2.0
2015
92.5
10.4
2.0
2016
2015
235.9
11.8
2.0
150.2
10.3
2.0
The recoverable amounts of the CGUs were based on the present value of the future cash flows expected to be derived from the CGU
(value in use). Value in use is calculated from cash flow projections for five years using data from the Group’s latest internal forecasts.
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in earnings
during the initial five year period.
Key judgements and estimates
The determination of impairment involves the use of judgements and estimates that include, but are not limited to, the cause,
timing and measurement of the impairment.
Management is required to make significant judgements concerning the identification of impairment indicators, such as changes
in competitive positions, expectations of growth, increased cost of capital, and other factors that may indicate impairment such
as a business restructuring. In addition, management is also required to make significant estimates regarding future cash flows and
the determination of fair values when assessing the recoverable amount of assets (or groups of assets). Inputs into these valuations
require assumptions and estimates to be made about forecast earnings before interest and tax and related future cash flows,
growth rates, applicable discount rates, useful lives and residual values.
The judgements, estimates and assumptions used in assessing impairment are management’s best estimates based on current and
forecast market conditions. Changes in economic and operating conditions impacting these assumptions could result in changes
in the recognition of impairment charges in future periods.
ORORA LIMITED ANNUAL REPORT 2016
79
Section 4: Capital structure and financing
IN THIS SECTION
This section outlines how the Group manages its capital structure and related financing including its balance sheet liquidity and
access to capital markets.
The Directors determine the appropriate capital structure of the Group, specifically, how much is raised from shareholders (equity)
and how much is borrowed from financial institutions (debt) in order to finance the Group’s activities both now and in the future.
Maintaining capital discipline and balance sheet efficiency remains important to the Group, as seen through the issuance of the US
Private Placement notes during the year and other refinancing activities. Any potential courses of action, in respect of the Group’s
structure, take into account the Group’s liquidity needs, flexibility to invest in the business and impact on credit ratings.
The Directors consider the Group’s capital structure and dividend policy at least twice a year ahead of announcing results and do so
in the context of its ability to continue as a going concern, to execute the strategy and to invest in opportunities to grow the business
and enhance shareholder value.
4.1 Capital management
Capital is defined as the combination of shareholders’ equity, reserves and net debt. The key objective of the Group when managing
its capital is to safeguard its ability to continue as a going concern, so that the Group can continue to provide returns for shareholders
and benefits for other stakeholders, and maintain an optimal capital and funding structure.
The aim of the Group’s capital management framework is to maintain an investment grade credit profile, and the requisite financial
metrics, to secure access to alternate funding sources with a spread of maturity dates and sufficient undrawn committed facility
capacity; and optimise, over the long term and to the extent practicable, the weighted average cost of capital to reduce the cost
of capital to the Group while maintaining financial flexibility.
The Group uses a range of financial metrics to monitor the efficiency of its capital structure, including on-balance sheet gearing
and leverage ratios, and ensure that its capital structure provides sufficient financial strength to allow it to secure access to debt
finance at reasonable cost. At 30 June 2016, the Group’s on-balance sheet gearing and leverage ratios were 29.6% (2015: 29.6%)
and 1.6 times (2015: 1.9 times), respectively.
$ million
Net debt
Total interest-bearing liabilities
Less: Cash and cash equivalents
Equity and reserves
Contributed equity
Treasury shares
Reserves
Retained earnings
Net Capital
Note
2016
2015
4.3
4.3
4.4.1
4.4.1
4.4.2
4.4.3
695.7
(66.1)
629.6
513.1
(31.3)
136.8
879.0
674.2
(67.3)
606.9
513.8
(11.1)
127.2
812.1
1,497.6
1,442.0
2,127.2
2,048.9
In order to optimise the capital structure, the Group may:
• adjust the amount of ordinary dividends paid to shareholders
• maintain a dividend investment plan
• raise or return capital to shareholders; and
• repay debt or raise debt for working capital and capital expenditure requirements, or to facilitate acquisitions in line with the strategic
objectives and operating plans of the Group.
80
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Cents
per share
Total
$ million
4.0
4.5
3.0
3.5
48.0
53.7
101.7
36.2
42.2
78.4
5.0
60.3
4.0
48.3
4.2 Dividends
Declared and paid during the period
For the year ended 30 June 2016
Final dividend for 2015 (30% franked)
Interim dividend for 2016 (30% franked)
For the year ended 30 June 2015
Final dividend for 2014 (unfranked)
Interim dividend for 2015 (unfranked)
Proposed and unrecognised at period end(1)
For the year ended 30 June 2016
Final dividend for 2016 (30% franked)
For the year ended 30 June 2015
Final dividend for 2015 (30% franked)
Shareholder distributions —
(1) Estimated final dividend payable, subject to variations in the number of shares up to record date.
cents per share
Shareholder distributions – cents per share
5.0c
30%
franked
4.0c
30%
franked
3.0c
unfranked
3.0c
unfranked
3.5c
unfranked
4.5c
30%
franked
FY14
FY15
FY16
Dividend reinvestment plan
Final dividend (FY16: proposed)
Interim dividend
The Group operates a dividend reinvestment plan which allows eligible shareholders to elect to invest dividends in ordinary shares.
All holders of Orora Limited ordinary shares with Australian or New Zealand addresses registered with the share registry are eligible to
participate in the plan. The allocation price for shares is based on the average of the daily volume weighted average price of Orora Limited
ordinary shares sold on the Australian Securities Exchange, calculated with reference to a period of not less than ten consecutive trading
days as determined by the Directors.
Franking Account
Franking credits are available to shareholders of the Company at the 30.0% (2015: 30.0%) corporate tax rate. Both the interim and final
dividend for 2016 are 30.0% franked (2015: final dividend 30.0% franked, interim dividend unfranked). The balance of the franking credits
available as at 30 June 2016 is $5.5 million (2015: $0.4 million); it is estimated that this will reduce by $7.8 million (2015: $6.2 million)
after payment of the estimated final dividend on 17 October 2016. The Company is of the opinion that sufficient franking credits will arise
from tax instalments expected to be paid in the year ending 30 June 2017.
Conduit Foreign Income Account
For Australian tax purposes non-resident shareholder dividends will not be subject to Australian withholding tax to the extent that they are
franked or sourced from the Company’s Conduit Foreign Income Account. For the 2016 dividends, 70.0% of the dividend is sourced from the
Company’s Conduit Foreign Income account (2015: final dividend 70.0%, interim dividend 100.0%). As a result 100.0% of the 2016 dividends
paid to a non-resident will not be subject to Australian withholding tax. The balance of the Conduit Foreign Income Account as at 30 June 2016
is $100.9 million (2015: $116.9 million). It is estimated that this will reduce by $42.2 million (2015: $33.8 million) after payment of the
estimated final dividend on 17 October 2016.
ORORA LIMITED ANNUAL REPORT 2016
81
Section 4: Capital structure and financing (continued)
4.3 Net debt
During the period the Group successfully completed a US Private Placement of notes issued by its wholly-owned US subsidiary,
raising USD250.0 million, of which USD100.0 million matures in July 2023 and USD150.0 million in July 2025.
In addition to the above, the following facilities were also secured:
• a USD200.0 million five-year USD revolving facility, through a syndicate of domestic and international financial institutions,
maturing in April 2021, and
• two bilateral agreements for $50.0 million, each with separate domestic institutions, maturing in April 2018.
As at 30 June 2016, the Group also had access to a $400.0 million revolving multicurrency facility through a syndicate of domestic
and international financial institutions maturing in December 2019. This facility is unsecured and can be extended.
During both the current and comparative reporting period, Orora Limited has complied with the financial covenants of its
borrowing facilities.
$ million
Cash on hand and at bank
Total cash and cash equivalents
Bank loans due after one year
US Private Placement due after one year
Total debt
Net debt
Accounting policies
2016
66.1
66.1
361.9
333.8
695.7
629.6
2015
67.3
67.3
674.2
–
674.2
606.9
Cash and cash equivalents
Cash and cash equivalents include, cash at bank and on hand and short-term money market investments with an original maturity of three
months or less and are classified as financial assets held at amortised cost.
Cash at bank earns interest at floating rates based on daily bank deposits. Short-term deposits are made for varying periods, depending
on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
The carrying value of cash and cash equivalents is considered to approximate fair value due to the assets’ liquid nature.
Bank loans
All loans and borrowings are initially recognised at the fair value of the consideration received, less directly attributable transaction costs.
Subsequent to initial recognition, interest-bearing liabilities are measured at amortised cost using the effective interest rate method.
Interest-bearing liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires. The difference
between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid
is recognised in profit or loss.
Interest-bearing liabilities are classified as current liabilities, except for those liabilities where the Group has an unconditional right to defer
settlement for at least 12 months after the reporting period, which are classified as non-current liabilities.
The US Private Placement notes have a carrying value of $333.8 million, while the fair value of the notes is $370.5 million. For all other
borrowings, the fair values are not materially different to their carrying amount since the interest payable on those borrowings is either
close to current market rates or the borrowings are of a short-term nature.
82
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 4.3.1 Interest-bearing liabilities
Maturity profile of drawn debt by facility
The Group’s interest-bearing liabilities represent borrowings from financial institutions. The maturity profile of the Group’s borrowings
drawn down as at 30 June 2016 is illustrated in the following chart:
A$ million
Maturity profile of drawn debt by facility
276.9
201.4
134.3
67.1
20.0
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
FY25
FY26
Loans due after one year
At 30 June 2016 bank loans due after one year include:
Bank Debt
Private Placement
• $250.0 million and USD20.0 million drawn under a $400.0 million committed global syndicated multicurrency facility maturing in December
2019 (2015: $350.0 million drawn under a $500.0 million committed global syndicated multicurrency facility maturing in December 2016 and
USD249.3 million drawn under a $500.0 million committed global syndicated multicurrency facility maturing in December 2018)
• USD50.0 million drawn under a USD200.0 million committed USD syndicated facility maturing in April 2021 (2015: nil) and
• $20.0 million drawn under a $50.0 million committed AUD bilateral facility maturing in April 2018 (2015: nil).
The amounts have been drawn under Australian and US dollars and bear interest at the applicable BBSY and LIBOR rate plus an applicable
credit margin.
4.4 Equity
This section explains material movements in shareholders’ equity that are not explained elsewhere in the financial statements.
The movements in equity and the balance at 30 June 2016 are presented in the statement of changes in equity.
4.4.1 Contributed equity
At 1 July 2014
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Allocation of treasury shares to satisfy issue of CEO Grant
Restriction lifted on shares issued under the CEO Grant (note 7.1)
Exercise of performance rights under the Short Term Incentive Plan (note 7.1)
Treasury shares used to satisfy issue of CEO Grant (note 7.1)
Treasury shares used to satisfy exercise of rights under the Short Term Incentive Plan
(note 7.1)
At 30 June 2015
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Allocation of treasury shares to satisfy issue of CEO Grant
Restriction lifted on shares issued under the CEO Grant (note 7.1)
Treasury shares used to satisfy issue of CEO Grant (note 7.1)
At 30 June 2016
Ordinary shares
Ordinary shares
Treasury shares
No. ’000
$ million
No. ’000
$ million
1,206,685
–
–
–
53
–
513.4
–
–
0.6
0.1
(0.2)
(53)
(0.1)
1,206,685
513.8
–
–
–
–
–
–
0.4
(1.1)
–
(6,614)
100
–
–
–
53
(6,461)
(9,427)
708
–
–
1,206,685
513.1
(15,180)
–
(11.4)
0.2
–
–
–
0.1
(11.1)
(21.3)
1.1
–
–
(31.3)
Ordinary shares are classified as equity. The Company does not have authorised capital or par value in respect of its issued shares. All issued shares
are fully paid; all shares rank equally with regard to the Company’s residual assets. Ordinary shares entitle the holder to participate in dividends,
as declared from time to time, and are entitled to one vote per share at meetings of the Company. Incremental costs directly attributable to the
issue of new shares or the exercise of options are recognised as a deduction from equity, net of any related income tax benefit effects.
ORORA LIMITED ANNUAL REPORT 2016
83
Section 4: Capital structure and financing (continued)
4.4 Equity (continued)
4.4.1 Contributed equity (continued)
Treasury shares
Where the Orora Employee Share Trust purchases equity instruments in the Company that have been identified as treasury shares, the
consideration paid, including any directly attributable costs, is deducted from equity, net of any related income tax effects. When the treasury
shares are subsequently sold or reissued, any consideration received, net of any directly attributable costs and the related income tax effects,
is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in retained earnings. Refer to
note 6.3 for further information on the Orora Employee Share Trust.
4.4.2 Reserves
$ million
Cash flow hedge reserve
Share-based payment reserve
Demerger reserve
Exchange fluctuation reserve
Total reserves
2016
2015
(15.4)
15.1
132.9
4.2
136.8
(3.6)
6.9
132.9
(9.0)
127.2
Details of movements in each of the reserves is presented in the statement of changes in equity.
Accounting policies
Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred and the cumulative change in fair value arising from the time value of options
related to future forecast transactions. Refer to note 5.4 for more information on hedging instruments.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of options and rights recognised as an expense. The Company provides
benefits to employees of the Group in the form of share-based payments, whereby employees render services in exchange for options
or rights over shares. Refer to note 7.1 for further details of the Group’s share-based payment plans.
The fair value of options and rights granted is recognised as an employee benefit expense in the income statement with a corresponding
increase in the share-based payments reserve in equity and is spread over the vesting period during which the employees become
unconditionally entitled to the option or right. Upon exercise of the options or rights, the balance of the share-based payments reserve,
relating to the option or right, is transferred to share capital.
Demerger reserve
The demerger reserve represents the difference between the consideration paid by Orora under an internal corporate restructure and the
assets and liabilities acquired, which were recognised at their carrying value under a common control transaction.
Exchange fluctuation reserve
For controlled entities with a functional currency, that is not Australian dollars, their assets and liabilities are translated at the closing
exchange rate at reporting date while income and expenses are translated at year-to-date average exchange rates.
On consolidation all exchange differences arising from translation are recognised in other comprehensive income and accumulated in the
exchange fluctuation reserve. When a foreign operation is disposed of, the amount within the reserve related to that entity is transferred
to the income statement as an adjustment to the profit or loss on disposal.
4.4.3 Retained earnings
Retained earnings comprises profit for the year attributable to owners of the Company and other items recognised directly in equity
as presented on the statement of changes in equity.
$ million
Retained earnings at the beginning of the period
Net profit attributable to the owners of Orora Limited
Ordinary dividends:
– Interim paid (refer note 4.2)(1)
– Final paid (refer note 4.2)(2)
Retained earnings at the end of the period
(1) 2016 Interim dividend paid on 6 April 2016 (2015: 2015 Interim dividend paid on 9 April 2015)
(2) 2015 Final dividend paid on 13 October 2015 (2015: 2014 Final dividend paid on 8 October 2014)
84
ORORA LIMITED ANNUAL REPORT 2016
2016
2015
812.1
168.6
980.7
(53.7)
(48.0)
(101.7)
759.1
131.4
890.5
(42.2)
(36.2)
(78.4)
879.0
812.1
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Section 5: Financial risk management
IN THIS SECTION
The following section outlines how the Group manages the financial risks it is exposed to associated with holding financial
instruments that arise from the Group’s need to access financing (bank loans and overdrafts and unsecured notes), from the Group’s
operational activities (cash, trade receivables and payables) and instruments held as part of the Group’s risk management activities
(derivate financial instruments).
Financial risk management is carried out by Orora Group Treasury under policies that have been approved by the Board for managing
each of the below risks including principles and procedures with respect to risk tolerance, delegated levels of authority on the type
and use of derivative financial instruments and the reporting of these exposures. The treasury function reports regularly to the Audit
& Compliance Committee and treasury procedures are subject to periodic reviews.
In accordance with Board-approved policies the Group typically uses derivative financial instruments to hedge underlying exposures
arising from the Group’s operational activities relating to; changes in foreign exchange rates on foreign currency commercial transactions
(transaction risk), translation of balance sheet items of foreign subsidiaries (translation risk), exposure to changes in commodity prices,
changes in interest rates on net borrowings and changes in the Company’s share price.
The Group’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group’s financial performance as set out in the table below:
Risk
Exposure
Management
Market risks
• Foreign
exchange risk
The Group is exposed to foreign exchange risk because
of its international operations. These risks relate to
future commercial transactions, financial assets and
liabilities not denominated in A$ and net investments
in foreign operations.
• Interest rate risk
The Group is exposed to interest rate risk in respect
of short and long-term borrowings where interest
is charged at variable rates.
• Commodity
price risk
The Group is exposed to changes in commodity prices
in respect of the purchase of aluminium raw materials.
Where possible loans are drawn in foreign currency
by foreign entities to create a natural hedge of foreign
currency assets and liabilities. Where this is not possible
the Group’s policy is to hedge contractual commitments
denominated in a foreign currency by entering into
forward exchange contracts. Refer notes 5.1.1 and 5.4.
The Group mitigates interest rate risk primarily by
entering into fixed rate borrowing arrangements.
Where necessary the Group hedges interest rate risk
using derivative instruments – e.g. interest rate swaps.
Refer notes 5.1.2 and 5.4.
Where possible, the Group mitigates raw material
commodity price risk by contractually passing
rise and fall adjustments through to customers.
Refer notes 5.1.3 and 5.4.
• Employee
share plan risk
Credit risk
The Group’s employee share plans require the delivery
of shares to employees in the future when rights vest
or options are exercised. The Group currently acquires
shares on market to deliver these shares exposing the
Group to cash flow risk – i.e. as the share price increases
it costs more to acquire the shares on market.
The Group has established the Orora Employee Share
Trust, which manages and administers the Group’s
responsibilities under the employee share plans through
acquiring, holding and transferring shares or rights
to shares in the Company to participating employees.
Refer note 5.1.4.
The Group is exposed to credit risk from financial
instrument contracts and trade and other receivables.
The maximum exposure to credit risk at reporting
date is the carrying amount, net of any provision for
impairment, of each financial asset in the balance sheet.
The Group manages credit risk through a robust system
of counterparty approval, granting and renewal of credit
limits, regular monitoring of exposures against such
credit limits and assessing the overall financial stability
and competitive strength of the counterparty on an
ongoing basis. Refer to notes 5.2 and 3.1 for credit
risk exposures relating to trade and other receivables.
The Group only enters into financial instrument
contracts with high credit quality financial institutions
with a minimum long-term credit rating of A- or better
by Standard & Poor’s.
ORORA LIMITED ANNUAL REPORT 2016
85
Section 5: Financial risk management (continued)
Risk
Exposure
Management
Liquidity and
funding risk
The Group is exposed to liquidity and funding risk from
operations and from external borrowings, where the
risk is that the Group may not be able to refinance
debt obligations or meet other cash outflow obligations
when required.
The Group mitigates funding and liquidity risks
by ensuring that:
• a sufficient range of funds are available to meet
working capital and investment objectives;
• adequate flexibility within the funding structure
is maintained through the use of bank overdrafts,
bank loans and unsecured notes;
• through regular monitoring of rolling forecast of cash
inflows and outflows, the cost of funding is minimised
and the return on any surplus funds is maximised
through efficient cash management;
• there is a focus on improving operational cash flow
and maintain a strong balance sheet.
Refer note 5.3.
5.1 Market risks
5.1.1 Foreign exchange risk
The Group operates internationally and is therefore exposed to currency risk arising from movements in foreign currency rates, primarily
with respect to the US dollar and NZ dollar. The foreign exchange risk arises from:
• recognised monetary assets and liabilities held in a non-functional currency and net investments in foreign operations (translation risk); and
• differences in the dates foreign currency commercial transactions are entered into and the date they are settled (transaction risk).
Translation risk
To limit translation risk exposure, the Group’s borrowings are generally denominated in currencies that match the cash flows generated by the
underlying operations of the Group, which are primarily Australian and US dollars. Interest payable on those borrowings is denominated in the
currency of the borrowing. In respect of the US operations, this provides a natural economic hedge without requiring the entry into derivatives.
Exposure
The summary quantitative data about the Group’s exposure to translation currency risk, as reported to the management of the Group,
is as follows:
$ million
Funds employed
Net debt
Gearing
Transaction risk
2016
2015
USD
NZD
USD
NZD
434.8
(394.6)
160.5
28.6
304.0
(289.3)
90.8%
(17.8%)
95.2%
178.0
10.2
(5.7%)
To manage foreign currency transaction risk, the Group’s policy is to hedge material foreign currency denominated expenditure at the time
of commitment and to hedge a proportion of foreign currency denominated forecasted exposures (mainly relating to export sales and the
purchase of inventory) on a rolling 18 month basis, using either a natural hedge where one exists, or through the use of forward foreign
exchange contracts or foreign currency options taken out for up to two years from the forecast date.
Sensitivity
The following sensitivity illustrates how a reasonably possible change in the US dollar and NZ dollar would impact the fair value of the
derivative financial instruments (refer note 5.4) held for future commercial transactions as at 30 June 2016:
• if the Australian dollar had weakened by 10% against the US dollar with all other variables held constant, equity would have been
$8.2 million higher (2015: $3.3 million higher).
• if the Australian dollar had weakened by 10% against the NZ dollar with all other variables held constant, equity would have been
$15.3 million lower (2015: $10.1 million lower).
86
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Amounts recognised in profit or loss and other comprehensive income
During the year, the Group recognised a foreign currency gain of $3.4 million (2015: loss $3.6 million) and a loss of $1.7 million (2015: gain
$1.0 million) relating to foreign currency derivatives, that did not qualify as hedges, within general and administrative expenses in the
income statement.
In addition, a loss of $13.7 million (2015: $3.3 million loss) relating to cash flow hedges and a $13.5 million gain (2015: $16.3 million gain)
on the translation of foreign operations was recognised in other comprehensive income, whilst a $2.6 million gain (2015: $2.9 million loss)
relating to cash flow hedges was transferred from equity to operating profit. A loss relating to hedge ineffectiveness on interest rate swaps
contracts of $0.9 million (2015: nil) was recognised in finance costs.
5.1.2 Interest rate risk
The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate
risk. The Group’s Treasury risk management policy is to maintain an appropriate mix between fixed and floating rate borrowings, monitoring
global interest rates and, where appropriate, hedging floating interest rate exposures or borrowings at fixed interest rates through the use
of interest rate swaps and forward interest rate contracts.
The Group’s policy is to hold up to 85.0% fixed-rate debt. At 30 June 2016 approximately 83.0% (2015: 45.0%) of the Group’s debt is fixed rate.
Exposure
The Group had the following variable-rate borrowings and interest rate swap contracts outstanding at 30 June:
2016
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2015
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Weighted average
interest rate
Balance
$ million
2.8%
3.5%
2.4%
3.0%
361.9
250.0
111.9
674.2
300.0
374.2
All of the Group’s interest rate swaps are predominantly classified as cash flow hedges, so any movement in the fair value is recognised
directly in equity. The amounts accumulated in equity are transferred to the income statement in the period in which the hedged item affects
profit or loss. During the period a $0.4 million loss (2015: $8.9 million loss) was recognised directly in equity in relation to interest rate swaps.
Sensitivity
At 30 June 2016, if Australian and US interest rates had increased by 1.0%, post-tax profit for the year would have been $0.8 million lower
(2015: $3.8 million lower), net of derivatives. If Australian dollar interest rates had decreased by 1.0%, post-tax profit for the year would
have been $0.1 million higher (2015: $0.5 million higher), net of derivatives. US dollar debts have been excluded from the sensitivity for
interest rate decreases as rates are already below 1.0%.
5.1.3 Commodity price risk
The Group is exposed to commodity price risk arising from the purchase of aluminium. In managing commodity price risk, the Group is able
to pass on the price risk contractually to customers through rise and fall adjustments. In the case of aluminium, some hedging is undertaken
using fixed price swaps on behalf of certain customers. Hedging undertaken is upon customer instruction and all related benefits and costs
are passed through onto the customer on maturity of the transaction.
The movements in commodity hedges are recognised in equity and the cumulative amount of the hedge is recognised in the income
statement when the forecast transaction is realised. There is no impact on profit as a result of movements in commodity prices where
hedges have been put in place, as the Group passes the price risk contractually through to customers. As the Group ultimately passes
on the movement risk associated with commodity prices to customers, no sensitivity has been performed.
5.1.4 Employee Share Plan risk
The Group is exposed to movements in the value of ordinary shares of the Company in respect of the obligations under the Group’s
Employee Share Plans (refer note 7.1). To mitigate this risk the Group has established the Orora Employee Share Trust (the Trust) to manage
and administer the Group’s responsibilities under the Employee Share Plans through the acquiring, holding and transferring of shares,
or rights to shares, in the Company to participating employees.
As at 30 June 2016, the Trust held 15,179,750 treasury shares in the Company (2015: 6,460,678) and 1,199,190 allocated shares in respect
of the CEO Grant (2015: 932,132). Refer to note 6.3 for further details.
ORORA LIMITED ANNUAL REPORT 2016
87
Section 5: Financial risk management (continued)
5.2 Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. It arises principally from the Group’s receivables from customers, cash and cash equivalents and in-the-money derivatives.
There is also credit risk relating to the Group’s own credit rating as this impacts the availability and cost of future finance.
The Group manages credit risk through the maintenance of procedures such as the utilisation of systems of approval, granting and renewal
of credit limits, regular monitoring of exposures against such credit limits and assessing the overall financial stability and competitive
strength of the counterparty on an ongoing basis.
Trade and other receivables
Credit risk exposures related to trade and other receivables are discussed in note 3.1.
Cash and cash equivalents and derivatives
Credit risk related to balances with banks and financial institutions is managed by Orora Group Treasury in accordance with Group policy.
The policy only allows financial derivative instruments to be entered into with high credit quality financial institutions with a minimum
long-term credit rating of A- or better by Standard & Poor’s. In addition, the Board has approved the use of these financial institutions,
and specific internal guidelines have been established with regards to limits, dealing and settlement procedures.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, excluding the value of any
security held, is equivalent to the carrying amount and classification of the financial assets (net of any provisions) as presented in the
statement of financial position.
Guarantees
The Group’s policy is to provide financial guarantees only to certain parties securing the liabilities of subsidiaries, and are only provided
in exceptional circumstances (refer note 7.3).
5.3 Liquidity risk and funding risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s financing policy is to
fund itself for the long term by using debt instruments with a range of maturities and to ensure access to appropriate short-term facilities.
Orora Group Treasury aims to maintain flexibility within the funding structure through the use of bank overdrafts and bank loans.
Management manages liquidity risk through maintaining minimum undrawn committed liquidity of at least $175.0 million that can
be drawn upon at short notice and regularly monitoring rolling forecasts of cash inflows and outflows in relation to the Group’s activities.
This monitoring includes financial ratios to assess possible future credit ratings and headroom and takes into account the accessibility
of cash and cash equivalents.
Financing arrangements
At 30 June 2016, the Group had access to:
• a $400.0 million revolving multicurrency facility through a syndicate of domestic and international financial institutions maturing
in December 2019. This facility is unsecured and can be extended
• US Private Placement of notes USD250.0 million, of which USD100.0 million matures in July 2023 and USD150.0 million which
matures in July 2025
• a USD200.0 million five-year USD revolving facility, through a syndicate of domestic and international financial institutions,
maturing in April 2021
• two bilateral agreements for $50.0 million each with separate domestic institutions, maturing in April 2018.
88
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 The committed and uncommitted standby arrangements and unused facilities of the Group are set out below:
$ million
Committed
Uncommitted
Total
Committed
Uncommitted
Total
2016
2015
Financing facilities available:
Bank overdrafts
US Private Placement
Loan facilities and term debt
Facilities utilised:
Bank overdrafts
US Private Placement
Loan facilities and term debt
Facilities not utilised:
Bank overdrafts
US Private Placement
Loan facilities and term debt
–
335.7
768.5
1,104.2
–
335.7
364.0
699.7
–
–
404.5
404.5
6.3
–
83.7
90.0
–
–
–
–
6.3
–
83.7
90.0
6.3
335.7
852.2
1,194.2
–
–
1,000.0
1,000.0
–
335.7
364.0
699.7
6.3
–
488.2
494.5
–
–
676.6
676.6
–
–
323.4
323.4
6.1
–
82.4
88.5
–
–
–
–
6.1
–
82.4
88.5
6.1
–
1,082.4
1,088.5
–
–
676.6
676.6
6.1
–
405.8
411.9
Maturity of financial liabilities
The table below analyses the Group’s financial liabilities, including derivatives, into relevant maturity groupings based on the period remaining
until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest),
so will not always reconcile with the amounts disclosed in the statement of financial position.
$ million
2016
Non-derivative financial instruments
Trade and other payables
Borrowings
Total non-derivatives
Derivatives
Net settled (interest rate swaps and
commodity contracts)
Gross settled forward exchange contracts
– Inflow
– Outflow
Total gross settled forward exchange contracts
Total derivatives
1–2 years
2–5 years
More than
5 years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
11.5
42.4
53.9
15.8
396.7
412.5
1.2
372.5
373.7
737.0
834.5
737.0
695.7
1,571.5
1,432.7
1 year
or less
708.5
22.9
731.4
(5.7)
(4.1)
(4.5)
344.3
(353.0)
(8.7)
(14.4)
34.4
(35.9)
(1.5)
(5.6)
15.6
(16.3)
(0.7)
(5.2)
–
–
–
–
–
(14.3)
(14.4)
394.3
(405.2)
(10.9)
(25.2)
(10.8)
(25.2)
ORORA LIMITED ANNUAL REPORT 2016
89
Section 5: Financial risk management (continued)
5.3 Liquidity risk and funding risk (continued)
Maturity of financial liabilities (continued)
$ million
2015
Non-derivative financial instruments
Trade and other payables
Borrowings
Total non-derivatives
Derivatives
Net settled (interest rate swaps and
commodity contracts)
Gross settled forward exchange contracts
– Inflow
– Outflow
Total gross settled forward exchange contracts
Total derivatives
5.4 Hedging instruments
1 year
or less
636.0
20.8
656.8
5.9
367.2
373.1
9.2
341.2
350.4
(2.7)
(4.3)
(3.8)
293.5
(288.7)
4.8
2.1
29.7
(29.4)
0.3
(4.0)
11.3
(11.2)
0.1
(3.7)
1–2 years
2–5 years
More than
5 years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
4.7
–
4.7
–
–
–
–
–
655.8
729.2
655.7
674.2
1,385.0
1,329.9
(10.8)
(10.9)
334.5
(329.3)
5.2
(5.6)
7.3
(3.6)
Hedging activities and the use of derivatives
What is a derivative?
A derivative is a type of financial instrument typically used to manage risk. A derivative’s value changes over time in response
to underlying variables, such as exchange rates or interest rates, and is entered into for a fixed period of time. A hedge is where
a derivative is used to manage exposure in an underlying variable.
The Group is exposed to certain market risks which include foreign exchange risk, interest rate risk and commodity price risk. In accordance
with Board-approved policies, the Group manages these risks by using derivative financial instruments to hedge the underlying exposures.
Why do we need them?
The key market risks facing the Group:
• Foreign currency risk arises from:
– translation risk – the risk of adverse currency fluctuations in the translation of foreign currency profits, assets and liabilities
(balance sheet risk) and non-functional currency monetary assets and liabilities (income statement risk); and
– transaction risk – the risk that currency fluctuations will have a negative effect on the value of the Group’s future cash flows due
to changes in foreign currency between the date a commercial transaction is entered into and the date at which the transaction
is settled
• Interest rate risk arises from fluctuations in variable market interest rates impacting the fair value or future cash flows on
long-term borrowings
• Commodity price risk arises from significant changes in the price of key raw material inputs, in particular the purchase of aluminium.
How do we use them?
The Group employs the following derivative financial instruments when managing its foreign currency and interest rate risk:
• Forward exchange contracts and options are derivative instruments used to hedge transaction risk so they enable the sale or purchase
of foreign currency at a known fixed rate on an agreed future date. The Group holds forward exchange contracts and options
denominated in US dollar, Euro and NZ dollar to hedge highly probable forecast sale and purchase transactions (cash flow hedges);
• Interest rate swaps are derivative instruments that exchange a fixed rate of interest for a floating rate, or vice versa, or one type
of floating rate for another, and are used to manage interest rate risk. These derivatives are entered into to optimise the Group’s
exposure to fixed and floating interest rates arising from borrowings. These hedges incorporate cash flow hedges, which fix future
interest payments, and fair value hedges, which reduce the Group’s exposure to changes in the value of its assets and liabilities
arising from interest rate movements.
In respect of managing commodity price risk, the Group uses forward commodity contracts. Forward commodity contracts are derivatives
instruments used to hedge price risk so they enable the purchase of aluminium raw materials at a known fixed rate on an agreed
future date. On behalf of customers, aluminium hedging is undertaken using fixed price swaps. The Group passes on the price risk of
commodities contractually through to customers, including any benefits and costs relating to swaps upon their maturity (fair value hedge).
Analysis of the derivatives used by the Group to hedge its exposure and the various methods used to calculate their respective fair
values are detailed in this section.
90
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Derivative instruments
The following table sets out the fair value of derivative financial instruments analysed by type of contract.
$ million
Notional item
Level 2 fair value hierarchy
2016
Weighted
average
Asset
Liability
Notional item
2015
Weighted
average
Asset
Liability
Forward exchange contracts
Cash flow hedges
AUD/USD
AUD/NZD
AUD/EUR
NZD/USD
NZD/EUR
NZD/AUD
Fair value hedges
AUD/USD
AUD/NZD
Interest rate swap contracts
Cash flow hedge
Fair value hedge
Total derivatives in an
asset/(liability) position
Current asset/(liability)
Non-current asset/(liability)
USD79.3
NZD(6.7)
EUR16.7
USD9.2
EUR7.6
AUD100.8
0.7213
1.0849
0.6466
0.6712
0.6038
1.1013
USD40.0
NZD25.0
0.7378
1.0472
AUD300.0
floating to fixed
USD50.0
floating to fixed
USD47.3
NZD(7.8)
EUR12.4
USD11.1
EUR2.7
AUD88.0
0.7771
1.0697
0.6785
0.7276
0.6264
1.0871
USD44.0
NZD25.0
0.7780
1.1210
AUD300.0
floating to fixed
USD50.0
floating to fixed
0.4
0.2
0.1
–
–
0.1
–
–
–
–
0.8
0.7
0.1
(3.2)
(0.4)
(1.3)
(0.7)
(0.5)
(5.0)
(0.5)
–
(12.4)
(2.0)
(26.0)
(13.7)
(12.3)
3.0
0.6
0.1
1.2
0.2
3.6
–
–
–
–
8.7
7.5
1.2
(0.8)
(0.1)
(0.3)
–
(0.1)
(0.1)
–
–
(9.9)
(1.0)
(12.3)
(3.9)
(8.4)
All derivative financial instruments utilised by the Group are hedges of highly probable forecast transaction with a hedge ratio of 1:1,
therefore the change in the hedging instrument is equal to the change in the value of the underlying hedged item.
Derivative financial instruments are only undertaken if they relate to underlying exposures; the Group does not use derivatives to speculate.
As at 30 June 2016 and 30 June 2015, the Group only held derivative financial instruments (hedging instruments) whose fair values were
measured in accordance with level 2 of the fair value hierarchy.
There were no transfers between levels 1 and 2 for recurring fair value measurements during the year. The Group does not hold any level 3
derivative financial instruments.
Accounting policies
Derivative financial instruments are recognised initially at fair value on the date the instrument is entered into and are subsequently
remeasured at fair value or ‘marked to market’ at each reporting date. The gain or loss on remeasurement is recognised immediately in the
income statement unless the derivative is designated as a hedging instrument in which case the remeasurement is recognised in equity.
Hedge accounting
At the inception of the hedge relationship, the Group formally designates the relationship between hedging instruments and hedged items,
as well as its risk management objective for undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, as to whether the derivatives that are used in hedging transactions have been and will continue
to be highly effective in offsetting changes in fair values or cash flows of hedged items. Where option contracts are used to hedge forecast
transactions, only the intrinsic value of the option contract is designated as the hedging instrument.
For the purposes of hedge accounting, hedges are classified as:
• fair value hedges – hedges of the exposure to fair value changes in recognised assets or liabilities or firm commitments;
• cash flow hedges – hedges of the exposure to variability in cash flows attributable to a recognised asset or liability or highly probable
forecast transaction; or
• net investment hedges – hedges of net investments in foreign operations.
ORORA LIMITED ANNUAL REPORT 2016
91
Section 5: Financial risk management (continued)
5.4 Hedging instruments (continued)
Hedge accounting (continued)
Hedges that meet the criteria for hedge accounting are accounted for as follows:
Fair value hedge
Cash flow hedge
Net investment hedge
A derivative or financial instrument
designated as hedging the change
in fair value of a recognised asset
or liability or firm commitment.
A derivative or financial instrument
hedging the exposure to variability in
cash flow attributable to a particular
risk associated with an asset, liability
or forecasted transaction.
Financial instruments hedging changes
in foreign currency when the net assets
of a foreign operation are translated
from their functional currency into
Australian dollars.
What is it?
Movement
in fair value
Changes in the fair value of the
derivative are recognised in the
income statement, together with
the changes in fair value of the
hedged asset or liability attributable
to the hedged risk.
The gain or loss relating to the
effective portion of interest rate
swaps, hedging fixed rate borrowings,
is recognised in the income statement
within ‘finance costs’, together
with changes in the fair value of
the hedged fixed rate borrowings
attributable to interest rate risk.
The gain or loss relating to the
ineffective portion is recognised
in the income statement within
‘other income’ or ‘general and
administration expenses’.
The effective part of any gain or loss
on the derivative financial instrument
is recognised in other comprehensive
income and accumulated in equity
in the hedging reserve. The change
in the fair value that is identified as
ineffective is recognised immediately
in the income statement within
‘other income’ or ‘general and
administration expenses’.
On consolidation, foreign currency
differences arising on the translation
of financial assets and liabilities
designated as net investment hedges
of a foreign operation are recognised
in other comprehensive income and
accumulated in the foreign exchange
reserve, to the extent that the hedge
is effective. Any ineffective portion
is recognised in the income statement.
Amounts accumulated in equity are
transferred to the income statement
in the periods when the hedged
item affects profit or loss (for instance,
when the forecast sale that is hedged
takes place). However, when the
forecast transaction that is hedged
results in the recognition of a
non-financial asset (for example,
inventory), the gains and losses
previously deferred in equity are
transferred from equity and included
in the measurement of the initial
cost or carrying amount of the asset.
Where options are used, changes
in the fair value of the option are
recognised in other comprehensive
income depending on whether it is
designated as the hedging instrument
in its entirety, or its intrinsic value
only. If only the intrinsic value is
designated, the option’s time value
that matches the terms of the hedged
item is recognised in equity and
released to profit or loss over the
term of the hedged item.
When a hedging instrument expires
or is sold, terminated or exercised,
or when a hedge no longer meets
the criteria for hedge accounting,
any cumulative gain or loss existing
in equity at that time remains in
equity and is recognised when the
forecast transaction is ultimately
recognised in the income statement.
When a forecast transaction is
no longer expected to occur, the
cumulative gain or loss that was
reported in equity is immediately
transferred to the income statement.
Upon disposal of the foreign operation,
which is subject to the net investment
hedge, the cumulative amount that has
been recognised in equity in relation
to the hedged net investment is
transferred to the income statement
and recognised as part of the gain
or loss on disposal.
Discontinuation
of hedge
accounting
If the hedge no longer meets the
criteria for hedge accounting,
the adjustment to the carrying
amount of a hedged item, for which
the effective interest method is used,
is amortised to the income statement
over the period to maturity using
a recalculated effective interest rate.
92
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Rebalancing
If the hedging ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the
hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging
instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge
ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.
Key judgements and estimates
The Orora Group Treasury team performs the financial instrument valuations and reports directly to the Chief Financial Officer (CFO)
and the Audit & Compliance Committee. Discussions of valuation processes and results are held with the CFO and Orora Group
Treasury at least once every six months, in line with the Group’s half-yearly reporting requirements. Significant valuation issues are
reported to the Audit & Compliance Committee.
When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are
categorised into three levels as prescribed under accounting standards, with each of these levels indicating the reliability of the
inputs used in determining fair value. The levels in the fair value hierarchy are:
Level 1: fair value identified from quoted price traded in an active market for an identical asset or liability at the end of the reporting
period. The quoted market price used for assets is the last bid price.
Level 2: fair value determined using valuation techniques that maximise the use of observable market data and rely as little as possible
on entity-specific estimates. All significant inputs used in the valuation method are observable.
Level 3: one or more of the significant inputs in determining fair value for the asset or liability is not based on observable market
data (unobservable input).
Determining fair value
The specific valuation techniques used to value derivative financial instruments are as follows:
• the fair value of forward exchange contracts and currency options is determined by using the difference between the contract
exchange rate and the quoted exchange rate at the reporting date;
• the fair value of interest rate swaps calculated as the present value of the estimated future cash flows – i.e. the amounts that the
Group would receive or pay to terminate the swap at the reporting date, based on observable yield curves;
• the fair value of commodity forward contracts is determined by using the difference between the contract commodity price and
the quoted price at the reporting date.
ORORA LIMITED ANNUAL REPORT 2016
93
Section 6: Group Structure
IN THIS SECTION
This section provides information on those subsidiaries whose results principally affect the financial results of the Group,
including details of the acquisitions completed during the period.
Details of the Orora Employee Share Trust are also discussed below.
6.1 Principal subsidiary undertakings and investments
The ultimate parent of the Group is Orora Limited, a company incorporated in Australia. The companies listed below are those whose
results, in addition to the parent Company, principally affect the figures shown within the Annual Report.
Controlled entities
Country of incorporation
Specialty Packaging Group Pty Ltd
Orora Packaging New Zealand Ltd
Orora North America
Landsberg Orora
Australia
New Zealand
United States
United States
Orora Group’s effective interest
2016
100%
100%
100%
100%
2015
100%
100%
100%
100%
The Group did not dispose of any controlled entities during the 12-month period ending 30 June 2016 (2015: nil). Refer below for details
of acquisitions.
6.2 Acquisition of controlled entities
6.2.1 IntegraColor LLC
On 1 March 2016, the Group acquired 100% of the issued share capital of IntegraColor LLC (IntegraColor), a provider of point-of-purchase
retail display solutions and other visual communication services for customers across consumer (food and beverage), healthcare/education
and horticulture industries. The operations are based in Dallas, Texas and service customers across North America. The results of IntegraColor
are included in the North America segment from the date of acquisition.
The accounting for the IntegraColor acquisition has been provisionally determined as at 30 June 2016 as the post-close adjustment process
remains in progress. Management is continuing to assess the fair value of the opening balance sheet which may result in adjustments to the
fair value attributable to the net assets acquired as reported below.
Purchase consideration
$ million
Purchase consideration
Initial cash consideration paid
Cash paid for completion adjustments
Deferred consideration
Total purchase consideration
Deferred consideration
91.2
6.9
9.2
107.3
The deferred consideration attracts interest of 1.5% per annum and is payable in two instalments. The first instalment of $4.6 million is payable
March 2017, and the second instalment of $4.6 million is payable in September 2017.
94
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016
Fair value of net assets acquired and goodwill
$ million
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Trade and other payables
Fair value of net identifiable assets acquired
Add goodwill
Fair value of net assets acquired
Goodwill
Fair value
2.8
25.2
12.1
15.0
0.5
(12.9)
42.7
64.6
107.3
The goodwill is mainly attributable to the synergies expected to be achieved from integrating the company into the Group’s existing North
American business and the skills and talent of IntegraColor’s workforce.
Acquired receivables
The fair value of acquired trade receivables is $22.7 million. The gross contractual amount for trade receivables due is $22.8 million, of which
$0.1 million is expected to be uncollectable.
Purchase consideration and acquisition-related costs
$ million
Cash flows on acquisition
Cash consideration paid
Less: cash acquired
Outflow of cash
98.1
(2.8)
95.3
Acquisition-related costs of $1.4 million were recognised in general and administrative expenses in the income statement and in operating
cash flows in the cash flow statement.
6.2.2 Jakait
On 1 September 2015 the Group acquired the assets and business of Jakait, a supplier of packaging, logistics and label products to the
greenhouse produce sector based in Ontario, Canada.
The initial consideration was CAD16.5 million ($17.7 million) with an additional returns-based consideration of up to CAD5.5 million
($5.9 million), payable over the next five years and resulted in the recognition of $15.7 million goodwill. The results of the Jakait operations
are included in the North America segment from the date of acquisition.
ORORA LIMITED ANNUAL REPORT 2016
95
Section 6: Group Structure (continued)
6.3 Orora Employee Share Trust
The Group holds shares in itself as a result of shares purchased by the Orora Employee Share Trust (the Trust). The Trust was established
to manage and administer the Company’s responsibilities under the Group’s Employee Share Plans (refer note 7.1) through the acquiring,
holding and transferring of shares, or rights to shares, in the Company to participating employees. In respect of these transactions,
at any point in time the Trust may hold ‘allocated’ and ‘unallocated’ shares.
Allocated shares
Allocated shares represent those shares that have been purchased and awarded to employees under the CEO Grant (refer note 7.1). Shares
granted to an employee under the CEO Grant are restricted in that the employee is unable to dispose of the shares for a period of up to five
years (or as otherwise determined by the Board). The Trust holds these shares on behalf of the employee until the restriction period is lifted
at which time the Trust releases the shares to the employee. Allocated shares are not identified or accounted for as treasury shares.
Where the Orora Employee Share Trust purchases equity instruments in the Company, as a result of managing the Company’s responsibilities
under the Group’s CEO Grant Employee Share Plan award, the consideration paid, including any directly attributable costs, is deducted from
equity, net of any related income tax effects.
Unallocated shares
Unallocated shares represent those shares that have been purchased by the Trustee on-market to satisfy the potential future vesting
of awards granted under the Group’s Employee Shares Plans, other than the CEO Grant. As the shares are unallocated they are identified
and accounted for as treasury shares (Treasury Shares) refer note 4.4.1.
Accounting policies
As at 30 June 2016, the Trust held 15,179,750 Treasury Shares (unallocated shares) in the Company (2015: 6,460,678) and 1,199,190
allocated shares in respect of the CEO Grant (2015: 932,132).
Transactions with the Group-sponsored Trust are included in these financial statements. In particular, the Trust’s purchases of shares
in Orora Limited are debited directly to equity. The shares are held in the Trust until such time as they may be transferred to participants
of the various Group share schemes. In accordance with the Trust Deed, the Trustees have the power to exercise all voting rights in relation
to any investment (including shares) held within the Trust.
Subsequent to the end of the current reporting period, on 15 August 2016 the Board authorised management to issue a request to the
Trustee to waive all right and entitlement to be paid the final FY16 dividend in respect of Treasury Shares held by the Trust. As a result,
assuming the Trustee grants the request, the Treasury Shares will not receive a dividend payment in respect of the final FY16 dividend.
96
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Section 7: Other
IN THIS SECTION
This section includes additional financial information that is required by the accounting standards and the Corporations Act 2001 (Cth)
including details about the Group’s employee reward and recognition programs.
7.1 Share-based compensation
The Group provides benefits to employees (including senior executives) of the Group in the form of share-based incentives. The Orora
employee incentive plans have been established to ensure employees are motivated and incentivised to develop and successfully
execute against both short and long-term strategies that grow the business and generate shareholder returns. The plans provide
an appropriate level and mix of short and long-term incentives to appropriately recognise and reward employees creating a high
performance culture and Orora’s ability to attract and retain talent. Orora’s remuneration strategy is competitive in the relevant
markets to support the attraction and retention of talent.
The following information provides details of Orora’s employee incentive plans. During the period, the Group recognised
a share-based payment expense of $8.6 million (2015: $5.5 million). Employee expenses and employee provisions are shown
in notes 1.4 and 3.7 respectively.
This note should be read in conjunction with the Remuneration Report, as set out in the Directors’ Report, which contains detailed
information regarding the setting of remuneration for Key Management Personnel.
The following table details the total movement in the CEO Grant, Share Options, Performance Rights or Performance Shares issued by the Group:
Long Term Incentive Plans
Short Term Incentive Plan
CEO Grant
Share Options
Performance Rights
and Performance Shares
Deferred Equity(1)
No.
$(2)
No.
$(2)
No.
$(2)
No.
$(2)
2016
Outstanding at beginning of period
Granted during the period
Exercised during the period
932,132
708,124
(441,066)
Outstanding at end of period
1,199,190
Exercisable at end of period
–
2015
Outstanding at beginning of period
Granted during the period
Exercised during the period
Forfeited during the period
Outstanding at end of period
Exercisable at end of period
2,083,312
100,000
(1,251,180)
–
932,132
–
0.97
2.29
0.89
1.78
–
0.60
2.19
0.46
–
0.97
–
16,035,000
4,716,500
–
20,751,500
–
12,485,000
5,250,000
–
(1,700,000)
16,035,000
–
0.30
0.43
–
0.33
–
0.24
0.42
–
0.24
0.30
–
7,909,000
2,354,500
–
10,263,500
–
5,226,000
3,453,500
–
(770,500)
7,909,000
–
1.07
1.68
–
1.21
–
0.87
1.32
–
0.89
1.07
–
831,228
1,407,670
–
2,238,898
–
–
928,864
(52,808)
(44,828)
831,228
–
1.53
2.22
–
1.96
–
–
1.53
1.53
1.53
1.53
–
(1) The equity outcomes for the 2016, financial year short-term incentive will be determined and allocated in September 2016.
(2) The above weighted average fair value is determined in accordance with AASB 2 Share-based Payment in respect of recognising the share-based payment expense
of the award granted.
ORORA LIMITED ANNUAL REPORT 2016
97
Section 7: Other (continued)
7.1 Share-based compensation (continued)
The exercise price of the CEO Grant, Performance Rights and Performance Shares and Deferred Equity Awards are nil. The exercise price
of Share Options outstanding at the end of the year are set out below:
Grant date
Expiry date
Exercise price
19 Feb 2014
19 Feb 2014
19 Feb 2014
21 Oct 2014
21 Oct 2014
21 Oct 2014
30 Oct 2015
30 Sept 2021
30 Sept 2022
30 Sept 2023
30 Sept 2021
30 Sept 2022
30 Sept 2023
30 Sept 2024
1.22
1.22
1.22
1.22
1.22
1.22
2.08
Share options outstanding at end of period
Weighted average contractual life of options outstanding at end of period
Number
2016
2015
4,175,000
3,305,000
3,305,000
1,750,000
1,750,000
1,750,000
4,716,500
4,175,000
3,305,000
3,305,000
1,750,000
1,750,000
1,750,000
–
20,751,500
16,035,000
6.7 years
7.2 years
A description of the equity plans in place during the year ended 30 June 2016 is described below:
Retention/Share Payment Plan
Long-term incentives
Short-term incentive
CEO Grant
Share Options
Performance Rights
and Performance Shares
Deferred Equity
Overview
The Board endorses certain
employees as eligible to
receive ordinary shares
in part satisfaction of their
remuneration for the
relevant financial year.
The number of shares
issued is at the discretion
of the Board.
The restrictions on these
shares do not allow the
employee to dispose
of the shares within the
vesting/restriction period.
The shares subject to
the CEO Grant carry full
dividend entitlements
and voting rights.
Under the long term incentive plan, share options or
performance rights over ordinary shares in the Company,
or performance shares, may be issued to employees.
The exact terms and conditions of each award are
determined by the Directors of the Company at the
time of grant.
Give the employee the
right to acquire a share
at a future point in time
upon meeting specified
vesting conditions,
described below,
and require payment
of an exercise price.
The share options are
granted at no consideration
and carry no dividend
entitlement or voting
rights until they vest
and are exercised to
ordinary shares on
a one-for-one basis.
Give the employee the
right to receive a share at
a future point in time upon
meeting specified vesting
conditions, as described
below. No exercise price
is payable.
The rights are granted at
no consideration and carry
no dividend entitlement
or voting rights until
they vest and convert
to ordinary shares
on a one-for-one basis.
Vesting
conditions
Subject to alignment
of performance with
Orora’s Values as assessed
by the Board and the
employee remaining
in employment of the
Group at the vesting date.
Subject to meeting an
Earnings per Share (EPS)
hurdle, the satisfaction
of a Return on Average
Funds Employed (RoAFE)
gateway test, and the
employee remaining
in employment of the
Group at the vesting date.
Two-thirds are subject
to meeting a relative Total
Shareholder Return test;
the remaining one-third
is subject to meeting an EPS
hurdle and the satisfaction
of a RoAFE gateway test.
Vesting of the rights is
subject to the employee
remaining in employment
of the Group at vesting date.
Provides an additional
short-term incentive
opportunity to selected
employees, in the form
of rights to ordinary shares.
The number of rights that
are allocated to each eligible
employee is based on:
• 33.3% of the value of the
cash bonus payable under
the Short Term Incentive
Plan, following the end
of the performance period
• the volume weighted
average price of Orora
Limited ordinary shares for
the five trading days up
to and including 30 June,
being the end of the
performance period; and
• where cash bonuses are
determined in currencies
other than Australian
dollars, the average
foreign exchange rate for
the same five-day period.
Remain in employment
of the Group at vesting date.
98
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Retention/Share Payment Plan
Long-term incentives
Short-term incentive
CEO Grant
Share Options
Performance Rights
and Performance Shares
Up to 5 years
4 years
4 years
Deferred Equity
2 years
Restriction lifted
upon vesting
Vested share options will
remain exercisable until
the expiry date. On expiry,
any vested but unexercised
share options will lapse.
Shares are issued
upon vesting.
Shares issued upon vesting.
Unvested awards are forfeited if the employee voluntarily ceases employment or is dismissed for cause or poor performance.
Vesting
period
Vested
awards
Unvested
awards
Accounting policies
The cost of the share-based compensation provided to employees is measured using the fair value at the date at which the option or right
is granted and is recognised as an employee benefit expense in the income statement with a corresponding increase in the share-based
payments reserve in equity. The expense is spread over the vesting period, during which the employees become unconditionally entitled
to the option or right granted. Upon exercise of the option or right, the balance of the share-based payment reserve, relating to the option
or right, is transferred to share capital.
At each reporting period the Group revises the estimate of the number of options that are expected to vest based on the non-market
vesting conditions. Any impact to the revision of an original estimate is recognised in the income statement with a corresponding
adjustment to the share-based payment reserve. The employee expense, recognised each period, reflects the most recent estimate.
Key judgements and estimates
The fair value of options is measured at grant date taking into account market performance conditions, but excludes the impact of
any non-market conditions (e.g. profitability and sales growth targets). Non-market vesting conditions are included in the assumptions
about the number of options that are expected to be exercisable.
The fair value of each option granted is measured on the date of grant using the Black-Scholes option pricing model that takes into
account the exercise price, the vesting and performance criteria, and where applicable the market condition criteria, term of the
option, impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
The fair value of rights is measured at grant date using a Monte-Carlo valuation model which simulates the date of vesting, the
percentage vesting, the share price and total shareholder return. Once the simulated date of vesting is determined, a Black-Scholes
methodology is utilised to determine the fair value of the rights granted.
The following weighted average assumptions were used in determining the fair value of options and rights granted during the period:
Expected dividend yield (%)
Expected price volatility of the Company’s shares (%)
Share price at grant date ($)
Exercise price ($) – options only
Risk-free interest rate – options (%)
Expected life of options (years)
Risk-free interest rate – rights (%)
Expected life of rights (years)
2016
3.70
23.11
2.34
2.08
2.48
4.00
1.84
3.66
2015
4.20
24.00
1.66
1.22
3.00
3.50
2.55
3.35
The dividend yield reflects the assumption that the current dividend payout will continue with no anticipated changes. The expected life
of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility
reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
ORORA LIMITED ANNUAL REPORT 2016
99
Section 7: Other (continued)
7.2 Auditors’ remuneration
$ thousand
Auditors of the Company – PwC Australia
Audit and other assurance services
Audit and review of financial reports
Other assurance services
Other services
Taxation services and transaction related taxation advice
Other advisory services
Total PwC Australia
Network firms of PwC Australia
Audit and other assurance services
Audit and review of financial reports
Other services
Taxation services, transaction related taxation advice and due diligence
Total network firms of PwC Australia
Total Auditors’ remuneration
7.3 Commitments and contingent liabilities
Capital expenditure commitments
2016
2015
742.2
24.0
54.5
23.0
654.5
55.0
368.0
5.5
843.7
1,083.0
73.6
64.0
120.2
193.8
230.0
294.0
1,037.5
1,377.0
At 30 June 2016, the Group has capital commitments contracted but not provided for in respect of the acquisition of property, plant and
equipment of $31.7 million (2015: $6.0 million).
Other expenditure commitments
At 30 June 2016, the Group had other expenditure commitments of $66.4 million (2015: $82.6 million) in respect of other supplies and
services yet to be provided.
Operating lease commitments
The total undiscounted future minimum lease payments under non-cancellable operating leases fall due for payment as follows:
$ million
Within one year
Between one and five years
More than five years
Less sub-lease rental income
Contingent liabilities
2016
2015
83.6
222.1
105.1
410.8
(0.1)
72.4
178.3
114.0
364.7
(0.1)
410.7
364.6
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where uncertainty may exist
regarding the outcome of future events.
100
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Guarantees
The Group has issued a number of bank guarantees to third parties for various operational and legal purposes. In addition, Orora Limited
has guaranteed senior notes issued by Orora DGP in the US Private Placement market in 2015. The notes have maturities between 2023
and 2025 (see note 4.3). It is not expected that these guarantees will be called on.
Other
Certain entities in the Group are party to various legal actions and exposures that have arisen in the ordinary course of business. The actions
are being defended and the Directors are of the opinion that provisions are not required as no material losses are expected to arise.
Key judgements and estimates
Legal proceedings
The outcome of currently pending and future legal, judicial, regulatory and other proceedings of a litigious nature cannot be predicted
with certainty. Legal proceedings can raise difficult and complex issues and are subject to many uncertainties and complexities
including, but not limited to, the facts and circumstances of each particular case, issues regarding the jurisdiction in which each
proceeding is brought and differences in applicable law.
An adverse decision in a legal proceeding could result in additional costs that are not covered, either wholly or partially, under
insurance policies, which could significantly impact the business and the results of operations of the Group.
Each legal proceeding is evaluated on a case-by-case basis considering all available information, including that from legal counsel, to
assess potential outcomes. Where it is considered probable that a future obligation will result in an outflow of resources, a provision
is recognised in the amount of the present value of the expected cash outflows, if these are deemed to be reliably measureable.
7.4 Orora Limited
Summarised income statement and comprehensive income
$ million
Profit before related income tax expense
Income tax expense
Profit for the financial period
Total comprehensive income
Summarised balance sheet
$ million
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves:
Share-based payment reserve
Cash flow hedge reserve
Retained profits
Total equity
Orora Limited
2016
2015
111.9
(19.2)
92.7
80.7
183.8
(24.8)
159.0
156.7
Orora Limited
2016
2015
468.3
1,643.5
545.8
1,669.9
2,111.8
2,215.7
502.0
306.4
808.4
504.5
374.1
878.6
1,303.4
1,337.1
481.8
502.7
15.1
(14.9)
821.4
6.9
(2.9)
830.4
1,303.4
1,337.1
ORORA LIMITED ANNUAL REPORT 2016
101
Section 7: Other (continued)
7.4 Orora Limited (continued)
Orora Limited financial information
The financial information for the parent entity, Orora Limited, has been prepared on the same basis as the consolidated financial statements,
except as set out below.
Investments in subsidiaries
In the Company’s financial statements, investments in subsidiaries are carried at cost less, where applicable, accumulated impairment losses.
Tax consolidation regime
Orora Limited and its wholly-owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single
entity. The head entity within the tax-consolidated group is Orora Limited.
The Company, and the members of the tax-consolidated group, recognise their own current tax expense/income and deferred tax assets
and liabilities arising from temporary differences using the ‘stand alone taxpayer’ approach by reference to the carrying amounts of assets
and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.
In addition to its current and deferred tax balances, the Company also recognises the current tax liabilities (or assets), and the deferred
tax assets arising from unused tax losses and unused tax credits assumed from members of the tax-consolidated group, as part of the
tax-consolidation arrangement. Assets or liabilities arising as part of the tax consolidation arrangement are recognised as current amounts
receivable or payable from the other entities within the tax-consolidated group.
Nature of tax sharing agreement
Upon tax consolidation, the entities within the tax-consolidated group entered into a tax sharing agreement. The terms of this agreement
specify the methods of allocating any tax liability in the event of default by the Company on its group payment obligations and the treatment
where a subsidiary member exits the group. The tax liability otherwise remains with the Company for tax purposes.
Contingent liabilities of Orora Limited
Deed of Cross Guarantee
Pursuant to the terms of the ASIC Class Order 98/1418 (as amended) dated 13 August 1998, which relieved certain wholly-owned subsidiaries
from specific accounting and financial reporting requirements, Orora Limited and all of the Company’s Australian wholly-owned subsidiaries
entered into an approved deed for the cross guarantee of liabilities. No liabilities subject to the Deed of Cross Guarantee at 30 June 2016 are
expected to arise to Orora Limited and subsidiaries, as all such subsidiaries were financially sound and solvent at that date.
Details of the Deed and the consolidated financial position of the Company and the subsidiaries party to the Deed are set out in note 7.5.
Other guarantees
Orora Limited has guaranteed senior notes issued by Orora DGP in the US Private Placement Market in 2015. The notes have maturities
between 2023 and 2025 (see note 4.3). It is not expected that these guarantees will be called on.
7.5 Deed of Cross Guarantee
The Company, Orora Limited, and the subsidiaries listed below are subject to a Deed of Cross Guarantee (Deed) under which each company
guarantees the debts of the others:
Orora Packaging Australia Pty Ltd
Pak Pacific Corporation Pty Ltd
Fibre Containers (Queensland) Pty Ltd
Speciality Packaging Group Pty Ltd
ACN 002693843 Box Pty Ltd
ACN 089523919 CCC Pty Ltd
Rota Die International Pty Ltd
Orora Closure Systems Pty Ltd
PP New Pty Ltd
AP Chase Pty Ltd
Lynyork Pty Ltd
Chapview Pty Ltd
AGAL Holdings Pty Ltd
Rota Die Pty Ltd
Envirocrates Pty Ltd
Under the terms of ASIC Class Order 98/1418 (as amended), those wholly-owned subsidiaries that have entered into the Deed are granted
relief from the Corporations Act 2001 requirement to prepare and lodge audited Financial Reports and Directors’ Reports.
102
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 Financial statements for the Orora Limited Deed of Cross Guarantee
The consolidated income statement, statement of comprehensive income and statement of financial position of the entities party to the
Deed for the year ended and as at 30 June, are set out below.
Consolidated income statement, statement of comprehensive income and retained earnings
$ million
Sales revenue
Profit from operations
Net finance costs
Profit before related income tax expense
Income tax expense
Profit for the financial period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Available-for-sale financial assets
Realised gain transferred to profit or loss, net of tax
Cash flow hedge reserve
Unrealised losses on cash flow hedges, net of tax
Realised losses/(gains) transferred to profit or loss, net of tax
Time value of options
Tax on exchange differences on translating financial instruments
Other comprehensive expense, net of tax
Total comprehensive income for the financial period
Retained profits at beginning of financial period
Profit for the financial period
Dividends recognised during the financial period
Retained profits at end of the financial period
2016
2015
1,662.2
1,638.6
204.7
(12.2)
192.5
(23.8)
168.7
344.1
(22.3)
321.8
(27.9)
293.9
–
(2.9)
(9.8)
(1.8)
(0.4)
(0.3)
(12.3)
156.4
960.8
168.7
(101.7)
1,027.8
(2.3)
2.9
–
0.3
(2.0)
291.9
745.3
293.9
(78.4)
960.8
ORORA LIMITED ANNUAL REPORT 2016
103
Section 7: Other (continued)
7.5 Deed of Cross Guarantee (continued)
Financial statements for the Orora Limited Deed of Cross Guarantee (continued)
Consolidated Balance Sheet
$ million
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivatives
Other current assets
Total current assets
NON-CURRENT ASSETS
Investments in controlled entities
Property, plant and equipment
Deferred tax assets
Goodwill and intangible assets
Derivatives
Other non-current assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Interest-bearing liabilities
Derivatives
Current tax liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Other payables
Interest-bearing liabilities
Derivatives
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Reserves
Retained earnings
TOTAL EQUITY
104
ORORA LIMITED ANNUAL REPORT 2016
2016
2015
6.3
363.4
287.8
0.7
22.7
680.9
34.3
317.7
290.9
7.5
29.9
680.3
211.8
1,350.5
–
88.4
0.1
46.3
211.8
1,373.7
0.8
91.2
1.2
47.5
1,697.1
1,726.2
2,378.0
2,406.5
358.5
58.6
10.8
–
92.2
520.1
–
268.8
13.3
3.4
23.0
308.5
828.6
343.3
79.9
3.0
4.2
92.5
522.9
0.9
349.0
8.4
–
17.9
376.2
899.1
1,549.4
1,507.4
513.1
(31.3)
39.8
1,027.8
513.8
(11.1)
43.9
960.8
1,549.4
1,507.4
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 7.6 Related party transactions
The related parties identified by the Directors include investments and Key Management Personnel.
To enable users of our financial statements to form a view about the effects of related party relationships on the Group, we disclose
the related party relationship when control exists, irrespective of whether there have been transactions between the related parties.
Details of investment in subsidiaries are disclosed in note 6.1 and details of the Orora Employee Share Trust are provided in note 6.3.
The Group does not hold any interests in associates or joint ventures.
7.6.1 Parent entity
The ultimate parent entity within the Orora Group is Orora Limited, which is domiciled and incorporated in Australia. Transactions with
entities in the wholly-owned Orora Group are made on normal commercial terms and conditions and during the year included:
• purchases and sales of goods and services
• advancement and repayment of loans
• interest expense paid by Orora Limited for money borrowed
• transfer of tax related balances for tax consolidation purposes
• provision of transactional banking facilities on behalf of subsidiaries
• provision of payroll, superannuation, share-based remuneration and managerial assistance.
7.6.2 Other related parties
Contributions to superannuation funds on behalf of employees are disclosed in note 1.4.
7.7 Key Management Personnel
Key Management Personnel (KMP) consists of Orora Limited Executive and Non-Executive Directors, the Chief Financial Officer and the
Group General Manager, Strategy. Key Management Personnel compensation is as follows:
$ thousand
Short-term employee benefits
Long-term employee benefits
Post employment benefits
Share-based payment expense
2016
2015
4,785
80
201
3,067
8,133
4,821
64
190
2,500
7,575
Detailed remuneration disclosures are provided in the Remuneration Report section of the Directors’ Report. Apart from the information
disclosed in this note, no Director has entered into a material contract with the Group this financial year and there were no material
contracts involving Directors’ interests existing at year end (2015: nil).
At 30 June 2016, no individual KMP or related party holds a loan with the Group (2015: nil).
7.8 New and amended accounting standards and interpretations
7.8.1 Adopted from 1 July 2015
All new and amended Australian Accounting Standards mandatory as at 1 July 2015 to the Group have been adopted, including the early
adoption of AASB 9 Financial Instruments (Dec 2014).
Although the adoption of these standards has resulted in some changes to the accounting policies of the Group, they have not resulted in any
material adjustment to the amounts recognised in the financial statements. The adoption of AASB 9 (Dec 2014) is discussed further below.
AASB 9 Financial Instruments (Dec 2014)
Orora early adopted and applied all of the requirements of AASB 9 (2014) including consequential amendments to other standards,
from 1 July 2015.
The adoption of AASB 9 (Dec 2014) impacts the Group as follows:
Classification and measurement
The Group classified its financial assets and financial liabilities as subsequently measured at amortised cost or fair value in accordance
with AASB 9 (2014). The principal impact on Orora’s financial assets at 1 July 2015 is the reclassification of cash and cash equivalents and
trade and other receivables from ‘loans and receivables’ under AASB 139 to ‘financial assets at amortised cost’ under AASB 9 (Dec 2014).
There were no material changes in the measurement of the Group’s financial assets and financial liabilities as a result of the change
in classification.
ORORA LIMITED ANNUAL REPORT 2016
105
Section 7: Other (continued)
7.8 New and amended accounting standards and interpretations (continued)
7.8.1 Adopted from 1 July 2015 (continued)
AASB 9 Financial Instruments (Dec 2014) (continued)
Hedging
AASB 9 (2014) introduced a new hedge accounting model to simplify hedge accounting outcomes and more closely align hedge accounting
with risk management objectives. This has resulted in the following key changes to Orora’s hedge accounting:
• the intrinsic value of an option can now be designated as the hedging instrument, with the change in time value recognised in other
comprehensive income rather than in profit and loss. The amount recognised in other comprehensive income is then recycled to profit
or loss either over the period of the hedge, if the hedge is time-related, or when the hedged transaction affects profit or loss, if the hedge
is transaction related;
• effectiveness measurement testing will only be performed on a prospective basis with no defined numerical range of effectiveness applied
in the testing.
Upon adoption of AASB 9 (Dec 2014), on 1 July 2015, there was a continuation of the existing hedge relationships. As a result, there was
no material impact on the income statement, the statement of comprehensive income, balance sheet or statement of changes in equity.
The accounting policies for cash and cash equivalents (note 4.3), trade and other receivables (note 3.1) and derivative financial instruments
(hedging instruments) (note 5.4) have been updated and are applicable from 1 July 2015. The terminology in these policies has been
updated in accordance with the requirements of AASB 9 (Dec 2014). There has been no material change in the measurement and
recognition of these items.
7.8.2 Issued but not yet effective
The following new or amended accounting standards issued by the AASB are relevant to current operations and may impact the Group
in the period of initial application. They are available for early adoption but have not been applied in preparing this financial report.
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction Contracts, Interpretation 13
Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from
Customers and Interpretation 131 Revenue – Barter Transactions Involving Advertising Services. The new standard is based on the principle
that revenue is recognised when control of a good or service transfers to a customer. The notion of control under AASB 15 replaces the
existing notion of risks and rewards under the current accounting standards. The standard is applicable from 1 January 2018 with early
adoption permitted.
The Group is currently assessing the potential impact of the new standard upon the Group’s revenue recognition policy and at this stage are
unable to estimate the financial impact on adopting the standard. The standard is not however expected to have a material impact upon
the financial results of the Group.
AASB 16 Leases
AASB 16 replaces the current dual operating/finance lease accounting model for lessees under AASB 117 Leases and the guidance contained
in Interpretation 4 Determining whether an Arrangement contains a Lease. The new standard introduces a single, on-balance sheet accounting
model, similar to the current finance lease accounting. Under the new standard Orora will be required to recognise a ‘right-of-use’ asset and
a lease liability for all identified leased assets. The current operating lease expense will be replaced with a depreciation and finance charge.
The standard is applicable from 1 January 2019 with early adoption permitted with some targeted relief from the application of the lease
accounting model where a lease is for a term of 12 months or less and for low value items.
The Group is currently assessing the impact of the new standard upon the income statement and balance sheet.
AASB 2016-5 Amendments to Australian Accounting Standards — Classification and Measurement of Share-based
Payment Transactions
AASB 2016-5 amends the accounting for cash-settled share-based payments and equity-settled awards that include a ‘net settlement’
feature in respect of withholding taxes.
The amendment clarifies that the fair value of a cash-settled award is determined on a basis consistent with that used for equity-settled
awards with any modification to a cash-settled award reflected immediately in the measurement of fair value. Any incremental value
added to an equity-settled award is to be recognised over the remaining vesting period, any reduction in value is ignored.
In respect of net settlement features relating to withholdings taxes, the amendments require the entity to disclose an estimate of the
amount that it expects to pay to the tax authority in respect of the withholding tax obligations.
The amendments are applicable from 1 January 2018, with early adoption permitted. At the date of this report, the assessment of the
amendments made to AASB 2 by AASB 2016-5 indicate that there will be no impact upon the financial performance or position of Orora.
The Group has not granted any cash-settlement arrangements nor are there any net settlement features relating to tax obligations.
All current awards are accounted for as equity settled share based payments.
106
ORORA LIMITED ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTSFor the financial year ended 30 June 2016 DIRECTORS’
DECLARATION
1. In the opinion of the Directors of Orora Limited (the ‘Company’):
(a) the financial statements and notes, and the Remuneration Report within the Directors’ Report, are in accordance with the
Corporations Act 2001 including:
(i) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the Orora Group’s financial position as at 30 June 2016 and its performance for the year ended on
that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. Within the notes to the financial statements it is confirmed that the financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
3. At the date of this declaration, there are reasonable grounds to believe that the Company and the consolidated entities identified in
note 7.5 will be able to meet any obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross
Guarantee between the Company and those consolidated entities pursuant to ASIC Class Order 98/1418.
4. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 by the Managing Director and
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2016.
This declaration is made in accordance with a resolution of the Directors, dated at Melbourne, in the State of Victoria, on 15 August 2016.
C I ROBERTS
Chairman
ORORA LIMITED ANNUAL REPORT 2016
107
INDEPENDENT AUDITOR’S REPORT
FOR THE MEMBERS OF ORORA LIMITED
Report on the financial report
We have audited the accompanying financial report of Orora Limited (the company), which comprises
the statement of financial position as at 30 June 2016, income statement, statement of comprehensive
income, statement of changes in equity and cash flow statement for the year ended on that date,
a summary of significant accounting policies, other explanatory notes and the directors’ declaration
for Orora Limited Group (the consolidated entity). The consolidated entity comprises the company
and the entities it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In the notes, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the consolidated entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of Orora Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report and notes also comply with International Financial Reporting Standards
as disclosed in the notes.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
108
ORORA LIMITED ANNUAL REPORT 2016
Report on the Remuneration Report
We have audited the remuneration report included in pages 38 to 52 of the directors’ report for the year
ended 30 June 2016. The directors of the company are responsible for the preparation and presentation
of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Orora Limited for the year ended 30 June 2016 complies with
section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited financial report
This auditor’s report relates to the financial report and remuneration report of Orora Limited (the company)
for the year ended 30 June 2016 included on Orora Limited’s web site. The company’s directors are
responsible for the integrity of Orora Limited’s web site. We have not been engaged to report on the
integrity of this web site. The auditor’s report refers only to the financial report and remuneration report
named above. It does not provide an opinion on any other information which may have been hyperlinked
to/from the financial report or the remuneration report. If users of this report are concerned with the
inherent risks arising from electronic data communications they are advised to refer to the hard copy
of the audited financial report and remuneration report to confirm the information included in the audited
financial report and remuneration report presented on this web site.
PricewaterhouseCoopers
LISA HARKER
Partner
Melbourne
15 August 2016
ORORA LIMITED ANNUAL REPORT 2016
109
STATEMENT OF
SHAREHOLDINGS
Statement pursuant to Australian Securities Exchange official list requirements.
Top 20 shareholders as at 31 July 2016
Rank
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
AMP Life Limited
Pacific Custodians Pty Limited
BNP Paribas Nominees Pty Ltd
Australian Foundation Investment Company Limited
HSBC Custody Nominees (Australia) Limited
RBC Investor Services Australia Pty Limited
BNP Paribas Nominees Pty Ltd
Netwealth Investments Limited
RBC Investor Services Australia Nominees Pty Ltd
Sandhurst Trustees Ltd
UBS Nominees Pty Ltd
CS Fourth Nominees Pty Limited
Bond Street Custodians Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
Substantial shareholders as at 31 July 2016
Holder
Commonwealth Bank of Australia and its related bodies corporate
National Australia Bank Limited and its associated entities
Shares held
227,188,517
188,628,292
165,358,289
107,094,840
34,533,433
32,398,004
28,710,041
21,717,682
16,188,284
16,173,108
12,864,129
8,407,026
5,863,632
5,687,000
5,506,979
4,216,120
3,972,280
3,800,000
3,650,023
3,562,394
% of issued
capital
18.83
15.63
13.70
8.87
2.86
2.68
2.38
1.80
1.34
1.34
1.07
0.70
0.49
0.47
0.46
0.35
0.33
0.31
0.30
0.30
895,520,073
74.21
No. of shares
72,350,066
61,355,334
110
ORORA LIMITED ANNUAL REPORT 2016
Distribution of shareholdings
Fully paid ordinary shares as at 31 July 2016
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
Voting rights
No. of holders
No. of shares
% of issued
capital
213
971,572,017
5,566
125,344,591
6,476
46,916,978
22,177
55,396,279
13,735
7,455,058
48,167 1,206,684,923
1,539
97,410
80.51
10.39
3.89
4.59
0.62
100.00
0.01
Votes of shareholders are governed by Rules 45 to 50 of the Company’s Constitution. In broad summary, but without prejudice to the
provisions of these rules, on a show of hands every shareholder present in person shall have one vote and upon a poll every shareholder
present in person, or by proxy or attorney, shall have one vote for every fully paid share held.
Unquoted equity securities — Issued pursuant to various Orora Limited
Employee Incentive Plans as at 31 July 2016
Unquoted equity securities
Options over ordinary shares – exercise price $1.22
Options over ordinary shares – exercise price $2.08
Rights
No. of
employees
participating
14
11
66
No. of
securities
16,035,000
4,716,500
12,502,398
ORORA LIMITED ANNUAL REPORT 2016
111
SHAREHOLDER
INFORMATION
Shareholder Enquiries
Dividends
Shareholders seeking information about their shareholding or
dividends should contact Orora’s Share Registry, Link Market
Services Limited (Link). Contact details are opposite. For security
and privacy reasons, before contacting the Share Registry,
shareholders should have their Securityholder Reference
Number (SRN) or Holder Identification Number (HIN) available.
Shareholders can also access a wide variety of holding
information via Link’s website: www.linkmarketservices.com.au
and make changes either online or by downloading a form.
These changes include:
• choosing the preferred method of receiving the Annual Report,
Notice of Meeting and payment statements
• checking holding balances
• updating address details
• providing an email address
• updating bank details
• electing to participate in the DRP.
Stock Exchange Listing
Orora Limited shares are listed on the Australian Securities Exchange
(ASX) and are traded under the code ORA.
Annual General Meeting
The Annual General Meeting of Orora Limited will be held
at the Hawthorn Arts Centre, 360 Burwood Road, Hawthorn,
at 10.30 am (Melbourne Time) on 13 October 2016.
Formal notice of the meeting is sent to each shareholder.
Orora Publications and Communications
The Annual Report is mailed in mid-September only to those
shareholders who have previously requested to receive hard
copies of the document.
To view this report online, or to download a copy,
visit Orora’s website: www.ororagroup.com.
If you have previously requested a printed copy of the Annual
Report, but no longer require it in printed form, please update
your preference online with Link Market Services or advise
Link in writing.
Orora’s website, www.ororagroup.com, offers shareholders details
of the latest share price, announcements made to the ASX, including
half-year and full-year results, investor and analyst presentations
and many other publications that may be of interest.
You can also keep up-to-date with Orora news and announcements
by downloading the new Orora app. Visit the Apple App Store
or Google Play Store, search for ‘Orora’ and install the app onto
your device. The app is free and can be downloaded to most
smartphones or iPads. To access the newsfeed simply tap ‘Skip
to news’ on the bottom of the home screen.
The Company normally pays dividends around April and October
each year.
Shareholders should retain all remittance advice relating
to dividend payments for tax purposes.
Orora currently pays its dividends by direct deposit to an Australian
bank, building society or credit union account, or by cheque payable
to international shareholders.
1. By direct deposit to an Australian bank, building
society or credit union account
Shareholders can receive their dividends directly into a nominated
bank, building society or credit union account anywhere in Australia.
Payments are electronically credited on the dividend payment date
and confirmed by a payment advice sent to the shareholders.
Shareholders can provide, or update, banking details online
at Orora’s Share Registry at www.linkmarketservices.com.au.
2. By cheque payable to international shareholders
International shareholders who do not have an account with
an Australian financial institution will receive their dividends
by Australian dollar cheque.
Additional currencies available for dividend payments
Commencing with the FY17 interim dividend payment, shareholders
will be able to receive payments in AUD, USD and NZD.
Payments in any of the available currencies will be made in the
following way:
1. By direct deposit to a bank, building society or credit
union account
Shareholders can receive their dividends directly into a nominated
bank, building society or credit union account held in Australia,
the United States of America or New Zealand.
The currency selected must match the location of the financial
institution. For example, NZD can only be paid into an account
held with a financial institution located in New Zealand.
Shareholders can provide, or update, banking details online
at Orora’s Share Registry at www.linkmarketservices.com.au.
2. By cheque payable to international shareholders
International shareholders who do not have an account with
an Australian, United States or New Zealand financial institution
will receive their dividends by Australian dollar cheque.
Lost or stolen cheques should be reported, in writing,
immediately to Orora’s Share Registry to enable a ‘stop
payment’ and replacement.
In addition, eligible shareholders can choose to have their
dividend earnings reinvested in Orora shares.
Dividend Reinvestment Plan (DRP)
The DRP provides shareholders in Australia and New Zealand,
with the opportunity to reinvest their dividends to acquire
additional Orora shares. Shares acquired under the DRP rank
equally with existing fully paid ordinary shares.
Full details of the DRP and a DRP election form are available
from Orora’s Share Registry or from Orora’s website.
112
ORORA LIMITED ANNUAL REPORT 2016
CORPORATE
DIRECTORY
Orora Limited
Auditors
To view this report online,
or to download a copy,
visit Orora’s website:
www.ororagroup.com.
O
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ANNUAL REPORT 2016
PricewaterhouseCoopers
2 Southbank Boulevard
Southbank Victoria 3006
Australia
Telephone: +61 3 8603 1000
Facsimile: +61 3 8603 1999
Website: www.pwc.com.au
Orora share registry
Link Market Services Limited
Street address:
Tower 4, Collins Square
727 Collins Street
Melbourne Victoria 3008
Australia
Postal address:
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone: +61 1800 207 622
Facsimile: +61 2 9287 0303
Email: Orora@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Registered office and principal
administrative office
109–133 Burwood Road
Hawthorn Victoria 3122
Australia
Telephone: +61 3 9811 7111
Facsimile: +61 3 9811 7171
Website: www.ororagroup.com
ABN: 55 004 275 165
Chairman
Mr C I Roberts
Managing Director and
Chief Executive Officer
Mr N D Garrard
Chief Financial Officer
Mr S G Hutton
Company Secretary
Ms A L Stubbings
FINANCIAL
CALENDAR
2016—2017*
Financial year 2016 (FY16) ends
Announcement of full year results for FY16
Ex-dividend date for final dividend FY16
Record date for final dividend FY16
30 June 2016
15 August 2016
12 September 2016
13 September 2016
Record date for Dividend Reinvestment Plan (DRP) for FY16
14 September 2016
Annual General Meeting
Final dividend payment date and DRP allotment FY16
Financial half year 2017 ends
13 October 2016
17 October 2016
31 December 2016
Announcement of interim results for financial year 2017 (FY17)
February 2017
Ex-dividend date for interim dividend FY17
Record date for interim dividend FY17
Record date for DRP for FY17
Dividend payment date and DRP allotment FY17 – interim dividend
Financial year 2017 ends
* Dates are subject to change.
March 2017
March 2017
March 2017
April 2017
30 June 2017
Both the printer and the paper
used to produce this document
have Forest Stewardship Council®
(FSC®) and ISO 14001
environmental certification.
FSC® is a Chain of Custody
(COC) process. ISO 14001
is the international standard
of Environmental Management
Systems (EMS) designed to ensure
the continuous measurement and
reduction of environmental impacts.
This publication is printed using
vegetable-based soy inks.
www.ororagroup.com
ORORA LIMITED ABN 55 004 275 165