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ANNUAL
REPORT
2020
In a year shaped by the COVID-19 pandemic, Orora was recognised as an
essential service provider in the continued supply of packaging for food,
beverage and medical products.
Orora team members across all operating jurisdictions have demonstrated
courage, commitment and flexibility in adapting to new ways of working
while meeting the needs of customers safely and passionately.
Orora thanks all team members across Australia, New Zealand and North
America for their dedication. It is these efforts that have seen your
Company continue to deliver high-quality products and customer service
throughout the pandemic.
Thank you to all Orora shareholders for your ongoing support of Orora
as a leading sustainable packaging solutions provider.
To view this report online
or to download a copy,
visit Orora’s website:
www.ororagroup.com
ORORA
AT A GLANCE
Orora works closely with its customers to provide an extensive range of tailored
packaging and visual communications solutions. These include the manufacture,
design and supply of packaging products such as glass bottles, beverage cans,
corrugated boxes, recycled paper, and point of purchase displays. Orora also
offers broad end-to-end packaging solutions and complementary services,
including global product sourcing, distribution, design, printing and warehouse
optimisation. Every day, millions of consumers buy and use goods in packaging
proudly designed, developed, produced or supplied by Orora.
24
82
Manufacturing plants
Distribution sites
3.8K
Team members
52K
Shareholders
Manufacturing,
distribution and
point of purchase
Procurement
sourcing operations
Sales office
IN THIS ANNUAL REPORT
Orora at a glance
Operating and financial performance
A message to Orora shareholders
Orora corporate strategy
Investing in the future
1
2
3
6
8
7
Countries
Operating and financial review
• Operational review
• Financial review summary
• Principal risks
• Orora’s approach to sustainability
• Governance
• Board skills and experience
• Board of Directors
• Executive leadership team
Directors’ report
10
10
14
17
19
26
27
28
30
32
Financial report
Directors’ declaration
Independent auditor’s report to
the members of Orora Limited
Statement of shareholdings
Five year historical
financial information
Shareholder information
Financial calendar
Corporate directory
57
127
128
133
135
136
IBC
BC
ORORA LIMITED ANNUAL REPORT 2020
1
OPERATING AND
FINANCIAL PERFORMANCE(1)
• Businesses proved resilient despite a challenging year
• Beverage business continues to deliver strong returns
• North American financial performance has stabilised
• Successful sale of the Australasian Fibre business for an enterprise value of $1.72 billion
• $600.0 million of capital returned to shareholders
• Strong balance sheet maintained to provide future growth optionality
• Final ordinary dividend of 5.5 cps (unfranked) represents ~78.0% of Group NPAT(3) which
is at the top end of the revised indicated pay out range
• On-market buyback of up to 10% of issued capital to commence in September 2020
SALES REVENUE(2)
$3,390.2m
EBIT(2)
$261.8m
$3,566.2m
↑
5.2%
increase
FY19
FY20
7.7%
6.3%
FY19
FY20
First half EBIT
Second half EBIT
EBIT margin %
$224.3m
↓
14.3%
decrease
RoAFE(2)
16.0%
UNDERLYING NET PROFIT
AFTER TAX(2)(3)
UNDERLYING OPERATING
CASH FLOW
DIVIDEND (per share)(4)
$127.7m
$169.8m
12.0¢
↓
350bps
decrease
↓
22.8%
decrease
↓
30.0%
decrease
↓
7.7%
decrease
* Except as expressly defined in this Annual Report, $ refers to Australian Dollars.
(1) On 30 April 2020, the Group completed the sale of its Australasian Fibre business. The financial performance reflects the continuing operations only unless specified,
the comparative period FY19 has been restated to reflect FY20 presentation.
(2) The financial periods presented above represent underlying earnings excluding the impact of significant items. FY20 excludes a significant item expense of
$137.2 million relating to restructuring activities and recoverable asset impairment charges in North America. FY19 excludes a significant item expense relating
to restructuring costs associated with re-sizing of business groups and additional decommissioning costs associated with the Petrie Mill site. Further details
regarding the significant items can be found in the 2019 Annual Report.
(3) Net profit after tax before significant items and including discontinued operations.
(4) Not including special dividend of 37.3 cents per share paid on 29 June 2020.
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 before significant items (EBIT); earnings before interest, tax, depreciation and amortisation before significant items (EBITDA); return on average funds
employed (RoAFE). Performance measures such as Earnings per Share, RoAFE 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.
2
ORORA LIMITED ANNUAL REPORT 2020
A MESSAGE TO
ORORA SHAREHOLDERS
ROB SINDEL Chairman
BRIAN LOWE Managing Director and Chief Executive Officer
During a year like no other, Orora and
its team members have demonstrated
resilience, adaptability and agility as Orora
businesses qualified as essential service
providers in all jurisdictions. This meant
that Orora could safely continue to design,
manufacture and distribute products
to customers without significant
interruption despite the emergence
of the COVID-19 pandemic during the
financial year ended 30 June 2020.
Notwithstanding the global effect of the
pandemic, Orora successfully completed
the sale of its Australasian Fibre business,
finalised a review of strategy, significantly
reduced debt and returned $600.0 million
to shareholders. While the immediate
outlook remains difficult to predict, the
businesses have since adjusted to new
ways of working and are successfully
driving positive operating and financial
momentum across all geographies.
COVID-19
Orora team members have continued
to perform their duties throughout the
pandemic, helping to ensure that essential
food, beverage and medical packaging and
products continued to reach communities
across Australia, New Zealand and North
America. Orora demonstrated clear
organisational leadership by rapidly
separating production and non-production
team members, implementing staggered
shift times and increasing site sanitisation.
Orora responded to meet customer needs
and to preserve supply of key inputs as
well as PPE for team members globally.
Orora's businesses have taken it in their
stride and ensured that the needs of their
customers and the community were served
throughout this period.
While Orora worked hard to mitigate the
impact of COVID-19, the total attributable
net EBIT impact was ~$25.0 million,
with ~90.0% of the earnings disruption
occurring in North America.
Financial performance
At the Group level, Orora demonstrated
the underlying strength and resilience of
its businesses despite challenging market
and economic conditions, particularly in
North America, which was more severely
affected by the onset of COVID-19 during
the second half of the financial year ended
30 June 2020.
The Australasian Beverage business was
impacted by irregular volume profiles due
to consumer pantry stocking as COVID-19
“stay at home” orders came into effect in
March, before softening in April and May,
and returning to normal levels in June.
Orora Packaging Solutions (OPS) in North
America endured a challenging start to the
2020 calendar year which resulted in the
launch of a significant earnings improvement
and restructure program. The comprehensive
improvement program was supplemented
with further initiatives, with a focus on
adapting the product offering, preserving
and growing volume with existing and new
customers, margin improvement and cost
reductions. Many of these initiatives have
proven successful.
The impacts of COVID-19 were felt
immediately in Orora Visual North
America, a business that services
customer’s point of display and signage
needs, with retailers closing stores and
many promotions being deferred. The
immediate focus for this business is on
reducing costs and positioning to rebuild
revenue growth as markets recover.
Orora's continuing businesses grew
sales revenue by 5.2% to $3,566.2 million
while underlying earnings before interest
and tax (EBIT) decreased by 14.3% to
$224.3 million. Underlying net profit after
tax (NPAT) from continuing operations and
before significant items was $127.7 million,
a decrease of 22.8% on the prior year.
Underlying earnings per share (EPS)
was 13.2 cents per share.
Statutory NPAT for the year was
$239.9 million after significant items
and including discontinued operations.
Significant items during the year amounted
to net income after tax of $71.6 million
and consist of significant income after
tax of $171.7 million in respect of the
net profit recognised on the Australasian
Fibre business (including transaction
and restructuring costs) and a significant
expense after tax of $100.1 million
reflecting the reset of the North
American businesses.
Operating cash flow for the financial year
ended 30 June 2020 was $169.8 million,
$72.8 million down on the prior
corresponding period. Cash conversion
for the period was approximately 54.0%,
down from approximately 71.0% in the
prior year.
Leverage was 0.9 times down from
1.9 times at June 2019. Net debt for the
period decreased to $292.1 million down
from $890.0 million at June 2019 primarily
as a result of net proceeds of the sale of
the Australasian Fibre business, partially
offset by $600.0 million of capital
management and other factors including
the impact of foreign currency translation
on repayment of US denominated debt.
The Board declared a final ordinary
dividend of 5.5 cents per share, unfranked
and 100% sourced from the conduit
foreign income account. The final ordinary
dividend represents a total annual dividend
payout ratio of approximately 78.0% of
Group earnings before significant items
(including discontinued operations) which
is at the top end of the revised indicated
payout range – reflecting the strength of
the balance sheet and confidence in the
outlook of the continuing businesses.
A detailed review of Orora Group’s activity
in Australasia and North America is
presented in the Operating and Financial
Review section of this Annual Report.
ORORA LIMITED ANNUAL REPORT 2020
3
A MESSAGE TO
ORORA SHAREHOLDERS
Business review
The sale of Australasian Fibre
Following completion of the sale of the
Australasian Fibre business, Orora operates
a streamlined portfolio of manufacturing,
distribution and printing businesses.
These include the Australasian Beverage
business and North American OPS and
Orora Visual businesses.
Australasian Beverage
The Australasian Beverage business is
a leading supplier of Cans, Glass and Wine
Closures in Australia and New Zealand.
Beverage sales revenue of $785.9 million
was in line with the prior corresponding
period while EBIT was 7.4% lower at
$147.2 million mainly as a result of the
G2 glass furnace rebuild ($8.0 million)
and COVID-19 impact (net ~$3.0 million).
Orora maintained a strong focus on
investment into the Australasian Beverage
business during the period with the
successful rebuild of the G2 furnace and
capacity expansion of the Gawler Glass
site, which forms part of a $200.0 million
investment in the world class Glass facility
over the last five years. The business also
introduced innovations related to digital
printing of Cans, embossing of Closures
as well as continued the roll out of its
advanced manufacturing program.
While the Australasian Beverage
business saw solid growth in Can volumes
and was largely able to mitigate the impact
of COVID-19, there was some unfavourable
product mix across both Glass (imported
product) and Cans, and lower Glass
(wine exports) volumes. This, combined
with the adverse earnings impact of the
G2 furnace rebuild, resulted in slightly
lower earnings.
North America
Despite North American sales revenue
being steady at US$1,866.4 million,
EBIT declined 29.6% to US$51.8 million.
Trading conditions in North America were
already challenging before the emergence
of COVID-19, which saw both OPS and
Orora Visual results adversely impacted.
As a result, earnings were down on
the prior year. Both North American
businesses expanded and accelerated
their improvement programs during the
second half of the financial year ended
30 June 2020. This resulted in continued
improvement of the OPS gross margin and
the Pollock integration delivered revenue
opportunities in the Health and Safety
segment during the second half.
Separately, the Orora Visual business
has restructured and consolidated its site
footprint in California. The near to medium
term focus for both North American
businesses is to accelerate the
improvement programs, build capability
and execute on digital enhancements.
On 30 April 2020, Orora completed the
sale of the Australasian Fibre business to
a wholly owned subsidiary of Nippon Paper
Industries Co. Limited for $1,720.0 million,
with net proceeds after tax and costs of
approximately $1,550.0 million. The sale
has enhanced Orora’s strong balance sheet
while also providing the opportunity to
return significant proceeds to shareholders.
In determining the best use of the sale
proceeds, the Board considered the
Company’s strong balance sheet, longer
term uncertainty resulting from the
COVID-19 pandemic and a desire to preserve
optionality for potential growth initiatives.
Orora was pleased to return $600.0 million
to shareholders following its first virtual
general meeting held on 16 June 2020.
The return comprised a special, partially
franked (at a rate of 50%) dividend of
$450.0 million (37.3 cents per share)
and a capital return of $150.0 million
by way of cash payment (12.4 cents per
share) both completed during June 2020.
Orora also undertook a consolidation
of its shares, converting every share
to 0.80 shares (5 shares became 4),
following shareholder approval.
Reflective of the Board’s confidence
in Orora’s fundamental value and its
disciplined approach to capital
management, it was announced at the
2020 Full Year results that Orora would
undertake an on-market buyback of up
to 10 percent of issued share capital (~96.5
million shares) to commence in September
2020. The current expected cash cost of the
buyback is approximately $230.0 million.
Review of strategy
Orora completed a wide-ranging review
of its activities globally. The Company
is well-positioned for growth via
improvements in its core businesses,
increasing the focus on sustainability
and innovation, and continuing to invest
in initiatives that generate opportunity
and value for customers and shareholders.
Orora’s ambition is to be a leading
provider of sustainable packaging
solutions, leveraging the Group’s core
capabilities to target end-market
segments with appealing growth
and solid financial returns.
Divisionally, Orora is focused on expanding
the breadth and depth of its market
leading Australasian Beverage business.
This activity will leverage the combination
of the business’ technical expertise in
beverage container manufacturing and
strong customer relationships. Orora will
focus on enhancing and expanding its core
products and services through further
investment and innovation, as well as
4
ORORA LIMITED ANNUAL REPORT 2020
exploring entry into new market segments
in Australia and New Zealand that are
complementary to the current business.
Longer term, Orora will explore expansion
of the Beverage operating footprint into
new markets.
In North America, there is significant
market opportunity in both OPS and Orora
Visual. As previously identified, and to
manage the ongoing impact of COVID-19
on the US economy, the near-term focus
remains on optimising the respective
business models to drive efficiencies and
to further enhance the customer value
proposition, including through investment
in digital capabilities. A return to exploring
inorganic growth opportunities, to add
products and services over time, will only
occur once these businesses have returned
to a more stable and sustainable platform.
Orora’s strategy is expected to continue
to generate strong cash flows from the
core business operations. Further detail
as to the refreshed strategy, shareholder
value blueprint and Orora’s long-term
strategic ambition can be found on page
6 and 7 of this Annual Report.
Innovation is key
Orora is committed to operating in a way
that is safe, innovative and sustainable.
The Company’s investment in each of
these key areas is underpinned by team
member expertise, customer insight
and a view to long term value creation.
During the period, the business further
enhanced its best in class Beverage
manufacturing facility at Gawler, South
Australia. The expansion of the Gawler
Warehouse and inclusion of autonomous
guided vehicles and the G2 furnace
rebuild significantly enhances the
productivity of this facility and efficiency
of customer supply chains. The Beverage
business also commissioned new printing
and embossing technology in its Cans and
Closures businesses to better meet
customer desires for increased
premiumisation and tailored packaging.
The Company also made its first
investment in artificial intelligence
in the OPS business by partnering with
a Silicon Valley start up to build its first
internal IT bot. The bot has assisted
in reducing manual IT requests and shows
the potential for this type of partnership
to build other tailored solutions both
for team members and customers in
North America.
A sustainable future
Orora is committed to becoming
a leading sustainable packaging solutions
provider. Sustainability is core to Orora’s
approach for reducing its impact on society
and the environment, and maintaining the
respect and support of its people and the
communities in which it operates.
The Company’s efforts are guided by a
three pillar program of People, Planet and
Prosperity, which aligns to its obligations
as a signatory to the United Nations Global
Compact (UNGC). Further information can
be found in the Sustainability and Principal
Risks sections of this Report.
Orora is a leader in large scale industrial
recycling and continues to focus on ways
it can reduce its impact by sourcing higher
levels of recyclable and recycled product
inputs. During the financial year ended
30 June 2020, the Company also actively
engaged with State and Territory
Governments in Australia to gain access to
additional recycled glass at the Gawler Glass
plant. As an active participant in the circular
economy, which seeks to maximise the life
of products and resources by reusing them,
Orora’s principal substrates, glass and
aluminium, are inherently recyclable.
In addition, Orora continued to expand its
renewable energy mix with the installation
of several small-scale solar systems at its
Gawler (warehouse), Ballarat and Dudley
Park sites. The solar systems complement
the work already undertaken to secure
long-term power purchase agreements
to supply wind generated electricity
to Orora’s operations across the
South-Eastern states of Australia.
New five-year Eco Targets
This year, the Company was pleased to
introduce new Eco Targets, building upon
the initial five-year program to address
target areas across North America and
Australasia. The new targets will run until
30 June 2024 and continue to focus on
improvements in greenhouse gas
emissions, waste to landfill and water
usage. While the focus areas are consistent
with the previous Eco Targets that Orora
successfully achieved by 30 June 2019, the
new Eco Targets are measured as ratios
against production related metrics.
This reflects changes in stakeholder
AWARDS
expectations as to how companies report
on environmental performance and
ensures that Orora’s metrics are focused
on the specific attributes of each of its
divisions, providing greater scope for
effective management.
Positive momentum in safety
The events of this year have reinforced the
importance of safety, health and wellbeing
at Orora. Management teams continue
to monitor global government and health
advice to ensure the Company’s approach
remains up to date.
More broadly, and in response to a global
safety review completed in 2019, Orora
launched a three-year targeted program to
enhance safety, health and wellbeing across
its businesses. Orora will deliver improved
governance and safety management as well
as an enhanced Serious Injury or Fatality
Prevention Program.
This comprehensive focus has contributed
to a significant reduction in Orora’s global
injury frequency rates over the past 12
months, positive momentum that must be
maintained. Further information on the
Company’s approach to safety, health and
wellness can be found in the Sustainability
section of this Annual Report.
Helping those affected by the
Australian Bushfires
Orora is also a proud contributor to the
communities in which it operates. This is
exemplified by the generous spirit of team
members across all of Orora’s regions who
donated to the Orora Bushfire Appeal,
established in January to support the
rebuild and recovery of communities
directly impacted by these devastating
events in Australia. The team was pleased
to be able to make a total donation
of $179,042 to the Bushfire Appeal,
comprising both employee and Company
matching donations.
Board update
During the financial year ended 30 June
2020, the Board farewelled former Chair,
Mr Chris Roberts; Director and Chair
of the Human Resources Committee,
Mr John Pizzey; and Managing Director
and Chief Executive Officer, Mr Nigel
Garrard. The Orora Board thanks Chris,
John and Nigel for their stewardship of,
and significant contribution to, the Orora
business since listing in December 2013.
Mr Rob Sindel joined the Board in March
2019 and commenced as Chair of Orora
on 12 February 2020.
Mr Tom Gorman was appointed to the
Board on 2 September 2019 and has been
recently appointed Chair of the Human
Resources Committee.
Mr Brian Lowe commenced as Managing
Director and Chief Executive Officer
on 1 October 2019, having led both
the Australasian Beverage and Fibre
Packaging businesses since joining the
Company in 2011.
The Board has recently established a
new Safety, Sustainability & Environment
Committee, chaired by Ms Abi Cleland, a
reflection of the increasing significance and
oversight of these critical areas at Orora.
Looking ahead
Orora is in a strong position as it moves
beyond the sale of the Australasian Fibre
business, continues to mitigate the effect
of COVID-19 and sets a course for its new
strategic direction. While the year ended
30 June 2020 has certainly had its
challenges, the leadership and camaraderie
that has been demonstrated by Orora team
members gives great confidence in the
Company’s ability to meet and overcome
any future hurdles and to continue to
successfully deliver value for shareholders.
The Board wishes to sincerely thank Orora
team members for their contribution.
Thanks also to Orora’s shareholders,
customers and suppliers for their valued
support over the past year.
ROB SINDEL
Chairman
BRIAN LOWE
Managing Director and
Chief Executive Officer
Coca-Cola Amatil — 2020 Partner for
Growth Awards — Supply Continuity
Award — Orora Beverage
Allegion Management — 2019 Global Supplier
Conference — Power Through Partnership
Award Winner — Landsberg Orora
HP Mexico — 2019 Super Star Award for
Outstanding Support — Landsberg Orora
ORORA LIMITED ANNUAL REPORT 2020
5
ORORA CORPORATE
STRATEGY
Following the sale of its Australasian Fibre business, Orora
is embarking on a new journey with a revised business strategy.
The Company is well-positioned for growth through ongoing
enhancements in the core business, increasing the focus on
sustainability and innovation across the Company’s portfolio,
and continuing to invest in initiatives that generate additional
opportunity and value for customers and shareholders.
Led by an experienced Board and executive
team, Orora’s ambition is to be a leading
provider of sustainable packaging solutions,
leveraging the Group’s core capabilities
while maintaining a disciplined focus on
delivering value for all stakeholders. Every
day, Orora strives to deliver packaging
and visual communications solutions that
exceed customers’ expectations, and will
continue to target end-market segments
with appealing growth and financial
return characteristics.
Divisionally, Orora is focused on expanding
the breadth and depth of its market leading
Beverage business. There is a desire
to take further advantage of the Group’s
technical expertise in beverage container
manufacturing and strong customer
relationships by exploring expansion
of the division’s operating footprint.
Orora will evaluate organic and inorganic
initiatives to add new products and
capabilities that are complementary
to the Beverage group’s existing product
portfolio and/or customer base.
In North America, there is significant
market opportunity in both of Orora’s
operating businesses, namely OPS and
Orora Visual. In order to best position
these businesses to succeed in their
respective markets, there is a focus
on optimising their respective business
models, generating further operating
efficiencies and enhancing the customer
value proposition, largely through
investment in digital capabilities.
Orora’s strategy is expected to continue
to generate strong cash flows from the core
business operations. Deployment of this
cash flow will be a combination of
distributions to shareholders in the form
of dividends and share buybacks where
the Board (and shareholders, if applicable)
deems appropriate, investments in the
core businesses, as well as strategic
acquisitions that enhance Orora’s product
and service offering. Any future growth
initiatives will be assessed in the context
of a rigorous approach to capital allocation,
ensuring that only value-adding
investments that meet Orora’s return
criteria are pursued. To drive growth, this
investment is supplemented by an ongoing
focus on improving operational efficiency
and is supported by increased innovation
within the base businesses.
6
ORORA LIMITED ANNUAL REPORT 2020
Shareholder value blueprint
In Orora’s revised business strategy,
the Company has established three core
strategic pillars, namely Optimise & Grow,
Enhance & Expand and Enter New Segments,
to take Orora forward. These pillars provide
the basis for every aspect of strategic activity
within the business, enabling Orora to
capitalise on growth opportunities as they
emerge. Any strategic initiatives need to be
governed by continued discipline regarding
the deployment of Orora’s capital.
In executing on the Company’s strategy,
Orora is striving to generate top quartile
TSR performance for its shareholders.
The key elements which contribute
to Orora’s TSR performance are outlined
in the Company’s revised shareholder
value blueprint below. This includes being
disciplined in applying a return-focused,
risk-weighted investment (for both capital
projects and acquisitions) approach across
each of Orora’s three strategic pillars.
As the diagram shows, Orora will target
a return that represents an appropriate
premium to its weighted average cost
of capital (WACC) based on the risk
assessed with the investment. This forms
part of a rigorous approach to capital
allocation, allowing the Company to
appropriately make investment decisions
across each pillar.
T
N
E
N
O
P
M
O
C
R
A
L
L
I
P
R
S
T
I
C
G
E
T
A
R
T
S
T
N
E
M
E
L
E
$
ORGANIC
GROWTH
$
$
$
$
RETURNS-FOCUSED
INVESTMENT
CAPITAL
MANAGEMENT
OPTIMISE
& GROW
ENHANCE
& EXPAND
ENTER NEW
SEGMENTS
DISCIPLINED APPROACH
TO CAPITAL ALLOCATION
Australasia
North
America
Capital
investment
Acquisitions
Sustainable
dividend
• GDP sales
growth
• GDP sales
growth
• Enhanced
• Supplemented
by innovation
and customer
wins
by market
share gains
and increase
share of
wallet
• Beverage
footprint
expansion
in ANZ and
offshore
• Expand
aluminium
and glass
product
capability
in ANZ
• Enhance digital
capabilities,
particularly
in NA
• Enhance
capacity
and product
capabilities
across
portfolio
• Customer-
backed growth
projects
• Complementary
adjacencies —
near-term
focus in ANZ
• Revised
payout ratio
of 60—80%
(previously
60—70%)
• Franked to the
extent possible
RETURN TARGETS
Lower
Premium to WACC
Higher
Sensible
leverage
• Target
leverage
remains
unchanged
at 2.0—2.5x
EBITDA
Potential
additional
capital
returns
• Assessed
when
appropriate
• On or
off-market
buybacks
• Special
dividends/
capital returns
ORORA LIMITED ANNUAL REPORT 2020
7
DURING
A YEAR LIKE
NO OTHER,
ORORA
PROVED THE
RESILIENCE
OF ITS
BUSINESSES
At the beginning of 2020, the Orora team witnessed
and responded to circumstances unlike any
previously experienced.
With the emergence of the global COVID-19 pandemic,
Orora was recognised as an essential service provider
across Australia, New Zealand and North America.
Team members kept sites operating safely and ensured food,
beverage and medical supplies continued to reach people
around the globe.
Orora global team members working at sites implemented safety,
health and wellbeing initiatives to protect one another and their
communities. More than 2,000 of Orora's global team members
transitioned to remote working.
Despite these challenges, Orora continued to improve its business
by investing in capability and innovation by offering new and
enhanced product (including medical) solutions for customers.
8
ORORA LIMITED ANNUAL REPORT 2020
INVESTING
IN EXPANSION
Orora successfully completed construction of a new $35.0 million
warehouse, rebuilt the G2 glass furnace and upgraded the second
forming line at its state-of-the-art facility in Gawler, South Australia.
The new warehouse is equipped with autonomous Laser Guided
Vehicles (LGVs), which deliver optimal efficiency, accuracy and
enhanced safety. The LGVs operate by following over nine
kilometres of QR codes which guide their movement 24/7.
Orora now holds significantly greater inventory on-site,
reducing offsite pallet storage and transportation costs
as well as enhancing its responsiveness to customers.
Orora is positioned to deliver consistent, high-quality supply
from its Gawler facility to meet growing customer needs.
INVESTING IN
NEW TECHNOLOGY
A new standalone embossing and printing machine was
purchased and installed at the Closures Dudley Park site in South
Australia. The high speed machine can emboss and print more than
three times faster than prior models. The machine is equipped with
a high resolution camera that can automatically detect and reject
closures that do not meet Orora’s high-quality standards. Similar
investment was made at the Cans Dandenong site in Victoria,
which commissioned a new digital printer during the first half
of the financial year ended 30 June 2020. The investment enables
Orora customers to exact colour match their designs from an
increased range in colours, as well as print and refine within
minutes. These investments deliver high-quality end results for
customers and significantly enhance efficiency in production.
INVESTING IN
ARTIFICIAL INTELLIGENCE
Innovation is at the core of Orora. In the financial year ended 30 June 2020,
this underpinned the launch of the OPS Artificial Intelligence powered chatbot
and digital personal assistant, Olivia. Olivia is a helpful little bot capable of
performing many tasks. She can provide instant resolutions to many frequently
asked questions and offers digital forms to initiate system access or to procure
IT hardware/software, as well as serving as a concierge for IT requests. She can
also assist with autonomous resolutions of services like password resets and
is also able to assist with looking up information for co-workers. Olivia uses
machine learning to continually refine her ability to understand and learn
what you’re asking for, as well as providing the response that answers your
questions. Olivia loves to work 24/7 and will continue to learn more over
the coming months to provide OPS with better service. She is powered by
Moveworks, an exciting Silicon Valley tech start-up and complements Orora’s
experienced team by offering improved IT support.
9
OPERATING AND FINANCIAL REVIEW
OPERATIONAL REVIEW
ORORA AUSTRALASIA(1)
Following the successful sale of the Australasian Fibre
business on 30 April 2020, Orora Australasia’s ongoing
business comprises the Orora Beverage group including
Glass, Cans and Closures manufacturing.
SALES REVENUE (AUD million)
$778.7m
EBIT (AUD million)
$159.0m
$785.9m
↑
0.9%
increase
$147.2m
↓
7.4%
decrease
20.4%
18.7%
FY19
FY20
First half EBIT
Second half EBIT
EBIT margin %
FY19
FY20
Key points
EARNINGS(2)
• Overall, Australasia EBIT declined by $11.8 million to $147.2
AUD million
FY20
FY19 Change %
million, and was 7.4% lower than the previous year.
• The decline in EBIT reflected the previously announced second
half cost headwinds related to the G2 rebuild, increased gas
prices and higher annual insurance costs.
• COVID-19 led to consumer pantry stocking, which caused
volatility in volumes and unfavourable mix in both Glass and
Cans. This also contributed to the decline in earnings.
• Return on Average Funds Employed was 27.0%, down slightly
from 30.3% in the prior year, with lower earnings, recent capital
upgrades and higher inventories leading to the decline.
• Economic conditions in Australia remain weak and
uncertain, particularly in Victoria, due to the continuing
impact of COVID-19.
Sales Revenue
EBIT(3)
EBIT Margin %
RoAFE(4)
785.9
147.2
18.7%
27.0%
778.7
159.0
20.4%
30.3%
0.9%
(7.4%)
SEGMENT CASH FLOW
AUD million
FY20
FY19 Change %
EBITDA(5)
Leases
Non-cash Items
Movement in Total Working
Capital
Base Capex
Sale Proceeds
Operating Cash Flow
Cash Significant Items
Operating Free Cash Flow
Cash Conversion
192.3
(6.1)
21.0
(35.1)
(61.6)
9.5
120.0
(20.6)
99.4
57.9%
(4.3%)
201.0
–
14.3
(27.8)
(28.1)
–
159.4
(24.7%)
(25.0)
134.4
74.0%
(1) The financial information provided below represents Orora's continuing Australasia operating segment. The comparative period FY19 has been restated to reflect
FY20 presentation.
(2) As reported in the Segment Note contained within the Financial Statements, refer note 1.
(3) Earnings before interest, related income tax expense and significant items.
(4) Return on Average Funds Employed (RoAFE) is calculated as EBIT divided by average funds employed.
(5) Earnings before depreciation, amortisation, interest and related income tax expense and significant items.
10
ORORA LIMITED ANNUAL REPORT 2020
Impact of COVID-19
Beverage Glass
• Orora's Beverage businesses are
classified as essential services in both
Australia and New Zealand.
• In Cans, while volumes across the second
half were higher than last year, the
profile was different. This was driven by
stronger volumes in the grocery channel
in March/early April as the “stay at
home” orders led to consumer pantry
stocking. This demand slowed in late
April/May and recovered to more normal
levels in June.
• Glass sales volumes followed a very
similar trend to Cans, especially in the
beer segment. Overall, volumes in the
fourth quarter were slightly down on the
prior year, largely due to lower export
wine volumes.
Beverage Cans
Volumes were higher than the
previous year, underpinned by steady
volumes in carbonated soft drinks (CSD)
(including volumes transitioning from
other substrates), growth in both
mainstream (switch from glass) and
craft beer segments. Volumes continued
to increase in non-alcoholic beverages
such as still and sparkling water.
Earnings were higher due to the increased
sales volumes, however due to the
volatility in volumes, operational efficiency
was adversely impacted.
Overall volumes were down moderately
on the prior year. Volumes were lower
in some wine markets (largely export)
and beer, offset in part by new customer
wins in non-alcoholic beverages such
as kombucha.
While there is an ongoing focus on
operational cost improvement, this was
more than offset by unfavourable product
mix, the impact of increased insurance
and gas prices and the earnings impact
associated with the G2 rebuild. Earnings
were lower than the prior year.
Beverage Closures
Volumes were lower, reflecting softness
in some wine markets, resulting in a small
reduction in earnings.
Innovation and growth update
In continuing best in class decoration
and product differentiation, the Cans
business commissioned a new state-
of-the-art Digital Proofing Printer at
Dandenong, Victoria. The Digital Proofing
Printer materially improves the time
taken to produce prototype designs
and short run promotional products,
enabling greater customer engagement
and product customisation.
Investment has continued in the Industry
4.0 plant efficiency initiative. A data
analytics platform, which was successfully
piloted at a single site during the year, is
now being rolled out to all Cans body sites
to provide better data to problem solve
and improve efficiencies.
In 2018, the Glass business committed
~$35.0 million to build a new warehouse
at Gawler to enable Orora to hold
inventory onsite and further reduce
offsite pallet storage and transport costs.
The project was completed on time and
on budget in December 2019, with final
commissioning of autonomous pallet
stacking vehicles completed in the second
half of the financial year ended 30 June
2020. The investment will reduce the cost
of offsite storage and cartage. These
benefits were gradually realised through
the second half, with the full benefit to
be achieved in the financial year ending
30 June 2021.
While G2 was offline, the second
forming line (first line was upgraded in
2017) was also upgraded for a cost of
~$10.0 million. This will add approximately
10 million bottles of annual capacity.
Orora continues to invest in capacity
and innovation to produce best in
class products and services. At Glass,
approximately $200.0 million has been
invested in the world class Gawler
facility over the last five years, including
the G2 furnace rebuild, capacity
expansions, mould insourcing, system
upgrades and on-site, highly automated
warehouse capacity.
At Cans, lines have been upgraded in
Auckland to produce multi size products,
while the decoration and differentiation
capability is market leading. Cans
continues to explore several innovative
concepts in aluminium containers.
With the positive outlook for can volume
growth and with the support of customers
as appropriate, a range of plant upgrades
or capacity expansions are likely to be
made in the medium term.
ORORA LIMITED ANNUAL REPORT 2020
11
OPERATING AND FINANCIAL REVIEW
OPERATIONAL REVIEW
ORORA NORTH AMERICA
Orora North America had stable revenue in local
currency terms. EBIT was down due to generally
tough market conditions.
SALES REVENUE (USD million)
$1,867.8m
EBIT (USD million)
$73.6m
$1,866.4m
↓
0.1%
decrease
$51.8m
↓
29.6%
decrease
3.9%
2.8%
FY19
FY20
First half EBIT
Second half EBIT
EBIT margin %
FY19
FY20
Key points
EARNINGS(1)
• North America’s reported EBIT declined 25.0% to $77.1 million.
AUD million
FY20
FY19 Change %
• In local currency terms, EBIT declined 29.6% to US$51.8 million.
The estimated net impact of COVID-19 in North America was
~US$15.0 million. This is a result of market conditions impacting
volumes and EBIT margins in OPS while Orora Visual revenue
(excluding the closed LA site) declined ~35.0% in the fourth
quarter as retail customers were impacted by store closures.
These combined with other factors flowed through to the EBIT
margin which was lower at 2.8% (3.9% in the prior year).
• Sales were flat at US$1,866.4 million. Net organic sales were
down in OPS, while sales also declined in Orora Visual. The
acquisitions of Pollock Packaging (Pollock Orora) and Bronco
Packaging (Bronco) in the prior year provided all of the net
revenue growth for the year.
• Revenue synergy realisation from the Texas based Pollock Orora
was accelerated during COVID-19 by leveraging supply lines and
introducing a range of Health and Safety based products across
the broader Landsberg business.
• Operating Cash Flow was in line with expectations at $49.9
million, down from $83.1 million in the prior year, with cash
conversion also declining to ~47.0%. The decrease in cash
conversion was driven by increased working capital by electing
to pay suppliers early to take advantage of settlement discounts
(~US$30.0 million), offset by reduced capital spend as the
businesses focused on organic earnings improvement programs.
• RoAFE declined by 360bps to 9.0% in line with lower earnings.
Sales Revenue
EBIT(2)
EBIT Margin %
RoAFE(3)
USD million
Sales Revenue
EBIT
2,780.3
77.1
2.8%
9.0%
2,611.5
102.8
3.9%
12.6%
6.5%
(25.0%)
FY20
FY19 Change %
1,866.4
51.8
1,867.8
73.6
(0.1%)
(29.6%)
SEGMENT CASH FLOW
AUD million
FY20
FY19 Change %
EBITDA(4)
Leases
Non-cash Items
Movement in Total Working
Capital
Base Capex
Sale Proceeds
Operating Cash Flow
Cash Significant Items
Operating Free Cash Flow
Cash Conversion
157.5
(59.8)
8.5
(33.9)
(22.8)
0.4
49.9
(21.6)
28.3
46.9%
15.9%
135.9
–
(8.3)
(17.7)
(28.5)
1.7
83.1
(40.0%)
–
83.1
65.1%
(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) Return on Average Funds Employed (RoAFE) is calculated as EBIT divided by average funds employed.
(4) Earnings before depreciation, amortisation, interest and related income tax expense and significant items.
12
ORORA LIMITED ANNUAL REPORT 2020
COVID-19 impact
Examples included:
• Both OPS and Orora Visual are classified
as essential services.
• The impact of COVID-19 on North
America was materially greater than that
felt in Australasia.
• The businesses successfully managed
the safety of Orora’s people and continued
to provide effective service to customers
while focusing on a realignment of
operating costs commensurate with
prevailing volumes, with performance
recently stabilising across both businesses.
Orora Packaging Solutions
OPS delivered constant currency revenue
growth of approximately 3.4%, all from the
acquisitions of Pollock Orora and Bronco,
with underlying revenues down on the
prior year. This was largely a reflection
of challenging market conditions
experienced as a result of COVID-19.
EBIT was lower than the prior year.
Pleasingly, the gross margin percentage
continued to improve throughout the year,
however the reduction in volumes resulted
in lower earnings. Underlying EBIT margins
declined to 3.1% from 4.1% in the prior
year but were in line with the second half
of 2019, on lower revenue.
The EBIT margin decline compared to the
prior year was the result of generally tough
market conditions, exacerbated by the
revenue declines as a result of COVID-19.
OPS improvement program
The comprehensive OPS improvement
program announced in August 2019 was
supplemented with further initiatives
across all facets of the business with a
focus on adapting the product offering,
preserving and growing volume with
existing and new customers, margin
improvement and efficiency/cost
reduction. Many of these initiatives
have proven successful, with further
activity continuing.
• The total workforce was reduced by
approximately 200
• An OPS-wide price increase (mainly cost
recovery in nature) was implemented
with negligible customer resistance
• Sourcing and procurement of high
demand products such as masks, gloves,
sanitiser and janitorial products though
Pollock Orora
• Modified work schedules, access to the
Federal Government’s CARES program
(no EBIT impact), furlough of team
members and the elimination of all
overtime and discretionary spending
such as travel
• Gross margin improvement initiatives are
continuing to positively impact with the
exit rate percentage ~60 bps higher than
the prior corresponding period. This is
being enabled by the ongoing optimisation
of the ERP implementation, which has
enhanced decision making on price,
procurement and costs to serve.
Orora Visual
While Orora Visual's first 9 months of the
financial year were relatively consistent, the
impacts of COVID-19 were felt immediately
from late March, with retailers closing stores
and many promotional resets being deferred.
Fourth quarter revenue declined
by ~35.0% on the prior year and the
business recorded a loss of approximately
US$5.0 million for the year.
There are opportunities to drive profit
growth and improve returns, however the
immediate focus is on reducing costs while
simultaneously positioning to rebuild
revenue growth as end markets recover.
In addition to resetting costs across the
business, the Orora Visual Los Angeles
site has been closed. With the loss of
customers in the entertainment segment
during the first half of the financial year
ended 30 June 2020 and COVID-19 related
closure of cinemas nationwide, Orora
Visual has consolidated its west coast
operating footprint to Orange County.
The consolidation maintains consistent
capabilities across the country and will
create synergies for the Californian footprint.
In terms of revenues, Orora Visual has
been able to pivot and provide COVID-19
related signage and secured some new
customer wins in the large supermarkets
segment. Defensive end segments
including food, beverage, horticulture
and education now represent over 60%
of the revenue base.
Innovation and growth update
The OPS improvement program initiatives
will continue with incremental benefits
expected. The journey to previously
experienced EBIT margins will take
time, but the increase in gross margin
percentage, even during COVID-19,
supports the work undertaken to date.
OPS is investing in a new digital platform
to replace legacy web portals to encourage
better customer engagement by offering
customised products via digital channels.
This platform is expected to be live by the
third quarter of the financial year ending
30 June 2021. OPS has continued to
integrate new talent into the business with
new senior leaders recently joining and
more expected in the year ahead. While
temporarily disrupted by COVID-19, the
integration of Pollock Orora continues.
The delivery of revenue synergies in
the Health and Safety segment across
Landsberg ahead of schedule has
been positive.
Orora Visual continues to build its value
proposition to serve national customers
with a consistent point of purchase, visual
communications and fulfilment offering
across multiple locations. A new fabric line
was commissioned in Orange County
in the first half and a second line was
commissioned in New Jersey in the second
half to supplement the existing line at that
location. These fabric lines are gaining
traction, with high levels of utilisation
booked through the first half of the
financial year ending 30 June 2021.
Orora Visual continues to invest in digital
technology including Customer and
Consumer Engagement capability and
print on demand solutions.
ORORA LIMITED ANNUAL REPORT 2020
13
FINANCIAL REVIEW
SUMMARY
INCOME STATEMENT(1)
AUD million
Sales revenue
Earnings before depreciation, amortisation, interest, related income tax expense and significant items
Depreciation and amortisation
Earnings before interest, related income tax expense and significant items
Significant items
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)
AUD million
Cash
Other current assets
Property, plant and equipment(3)
Intangible assets
Investments and other assets
Total assets
Interest-bearing liabilities(3)
Payables and provisions
Total equity
Total liabilities and equity
CASH FLOW
AUD million
Earnings before depreciation, amortisation, interest, related income tax expense and significant items
Right-of-use asset lease payments(4)
Non-cash items
Movement in total working capital
Net capital expenditure
Underlying Operating Cash Flow
Cash significant items
Operating Free Cash Flow
2020
2019
3,566.2
3,390.2
349.8
(125.5)
224.3
(137.2)
87.1
(50.5)
(9.0)
27.6
2020
107.3
948.3
889.0
435.8
119.6
2,500.0
678.8
789.2
1,032.0
2,500.0
2020
349.8
(66.0)
29.5
(69.0)
(74.5)
169.8
(42.1)
127.7
336.9
(75.1)
261.8
(69.3)
192.5
(39.4)
(36.6)
116.5
2019
70.3
1,375.9
1,765.5
614.7
91.8
3,918.2
960.3
1,313.4
1,644.5
3,918.2
2019
336.9
–
6.0
(45.5)
(54.9)
242.5
(25.0)
217.5
(1) Represents continuing operations only, as reported in the Segment Note contained within the Financial Statements (refer note 1) with the exception of net
unallocated financing costs and income tax expense which is not included in the Segment Note.
(2) IFRS compliant information extracted from the audited Financial Statements.
(3) The Group has initially applied AASB 16 Leases from 1 July 2019, refer note 7.8 of the Financial Statements. As a result, property, plant and equipment for FY20
includes $217.3 million relating to right-of-use assets, interest-bearing liabilities includes $279.4 million of lease liabilities.
(4) Operating Free Cash Flow includes lease payments relating to right-of-use assets and is as reported per the Segment Note in the Financial Statements (refer note 1).
14
ORORA LIMITED ANNUAL REPORT 2020
OPERATING AND FINANCIAL REVIEW
Revenue
Sales revenue of $3,566.2 million was
up 5.2% on the prior financial year.
Sales in Australasia increased 0.9%.
Volume and revenue grew in Cans,
while Glass volumes and revenues were
marginally lower when compared to the
prior corresponding period.
OPS increased revenue by 3.4% in local
currency terms, primarily from the
acquisition of Pollock Orora, which
completed in December 2018. Underlying
sales volumes were down compared to the
prior corresponding period. Revenue
declined in Orora Visual.
There was a $170.7 million positive FX
impact on US dollar denominated North
American sales, on the prior financial year.
Earnings before interest
and tax
During the period, EBIT decreased by
14.3% to $224.3 million, excluding the
significant item expense comprising
restructuring and impairment charges
in North America.
The earnings decline was as a result of cost
headwinds in Australia and weak market
conditions and COVID-19 impacts in North
America, which were partially offset
by stronger Cans volumes and earnings,
delivery of profitability improvement
initiatives in OPS and acceleration
of synergies from Pollock Orora related
to the Health and Safety segment.
Significant item expense
Restructuring and impairment
In May 2020, the Group announced that
the COVID-19 pandemic was adversely
impacting the earnings of the business
by approximately $25.0 million, with
approximately 90.0% of the disruption
occurring in the Group’s operations
in North America, which supplies and
services retail, entertainment and
convenience markets.
While the Group worked hard to mitigate
the impact of COVID-19, and the majority
of Orora’s businesses have been resilient
during the pandemic, many of the
end market segments serviced by the
Orora Visual business were significantly
impacted with widespread closure of
retailers and many customers deferring
promotional activities. As a result, Orora
has recognised an asset impairment charge
of $106.2 million relating to the Orora
Visual business.
The Group has also recognised a significant
item expense of $31.0 million relating to
restructuring and impairment charges in
North America. This expense includes costs
associated with the closure of the Orora
Visual Los Angeles site as part of a
rationalisation of the Californian footprint.
Balance sheet
The decrease in other current assets was
largely driven by the receivables, inventory
and other current assets included in the
sale of the Australasian Fibre business.
Collections performance across the
continuing businesses improved, which
combined with lower sales activity
in North America in the fourth quarter,
reduced overall receivable balances.
These reductions were partially offset by
tax instalments paid in advance, inventory
builds to maintain continuity of supply
in COVID-19 environment as well as to
support growth in Cans and the unwinding
of some working capital financing. The
impact from foreign currency translation
was an increase of $9.6 million.
The decrease in net property, plant and
equipment (PP&E) was largely attributable
to the disposal of the Australasian Fibre
business. Capex for the continuing
operations was $112.4 million which
included spend on a new warehouse
development, the G2 rebuild and upgrade
of a forming line at Glass, a flexo folder
gluer in OPS and fabric printing equipment
in Orora Visual to harmonise and expand
the service offering. Depreciation for the
continuing business during the period was
$67.5 million. The impact of foreign currency
translation on PP&E was negligible.
Intangible assets decreased due to
impairments, largely at Orora Visual while
$78.7 million of intangible assets were
included with the sale of Australasian
Fibre business, this was partly offset
by investments in digital platforms and
software upgrades. The impact of foreign
currency translation was an increase
of $12.5 million.
The introduction of AASB16 Leases has
meant that Right of Use (ROU) Assets and
Lease Liabilities are now brought onto the
balance sheet (effective 1 July 2019). ROU
Assets of $217.3 million largely relates to
the North American businesses, with very
few leases in Australasia.
Net debt decreased by $597.9 million,
primarily as a result of the net proceeds
of the sale of Australasian Fibre business,
partially offset by ~$600.0 million of capital
management, heightened capital at Gawler,
FX on repayment of US denominated debt,
increased inventory to support the Cans
business, taking advantage of early
payment discounts in OPS, the unwinding
of some working capital financing
arrangements and working capital builds
in the divested Australasian Fibre business
which will largely be returned to Orora
during the financial year ending 30 June
2021. The impact of foreign currency
translation was an increase of $27.6 million.
The decrease in payables and provisions
was driven primarily by the sale of
Australasian Fibre business as well
as taking advantage of early payment
discounts in OPS. The impact of foreign
currency translation was an increase
of $8.3 million.
ROU Liabilities of $279.4 million largely
relates to the North American businesses,
with very few leases in Australasia.
Cash flow
Lower earnings were converted into
cash as forecast with operating cash flow
of $169.8 million, this was down 30.0%
on the comparative period.
Cash conversion of 54.2% was lower than
70.7% reported in the prior year.
A summary of the main cash flow
movements included:
• A decrease in cash EBITDA (sum of
EBITDA and non-cash items), in line
with lower earnings
• Inventory build to support the Cans
business volume growth and ensure
continuity of supply to customers in the
event of supply risk in light of COVID-19
• Early payment of payables in North
America to capture settlement discounts
and unwind of some supplier financing
arrangements in Australia
• Gross capex which was approximately
167.0% of underlying depreciation, with
the G2 rebuild of ~$50.0 million being
a major contributor to the heightened
capital investment.
Working capital
During the financial year ended 30 June
2020, the average total working capital
to sales was 8.3% (8.4% in the prior year),
with year-on-year sales moving in line with
average working capital.
The Management target for average total
working capital to sales is less than 10%
in the medium term and remains an area
of focus across the business.
ORORA LIMITED ANNUAL REPORT 2020
15
FINANCIAL REVIEW
SUMMARY
Capital management
Corporate
Orora returned ~$600.0 million, or 49.7cps
to shareholders in June 2020, comprising
two components:
• capital return of A$150.0 million –
12.4 cents per share
• special dividend of A$450.0 million –
37.3 cents per share (50% franked)
At the same time, an equal and
proportionate share consolidation of ~0.8
shares for every one share (i.e. 5 shares
became 4) was undertaken, to adjust
Orora's number of shares for the quantum
of the cash return.
Orora will commence an on-market
buyback in September of up to 10.0%
of total shares on issue (~96.5 million
shares), with an expected cost totalling
~$230.0 million.
Corporate costs have been allocated
to the continuing business segments
with prior year’s figures being restated
for comparison.
Ongoing Corporate costs are expected
to reduce commensurate with those
previously allocated to the Australasian
Fibre business. Accordingly, the
expectation is there will be minimal
stranded costs.
During the year, the Group entered several
new bilateral facilities:
• a $25.0 million bilateral facility due
to mature in March 2021
• a $35.0 million bilateral facility due
to mature in April 2021
• a $35.0 million bilateral facility due
to mature in January 2022.
There were no material changes to banking
counterparties or commercial terms across
these facilities.
A part repayment of US$7.0 million was
made to USPP debt holders.
After the completion of the sale of the
Australasian Fibre business, Orora also
cancelled or reduced several of its
facilities, including:
• cancelling a $50.0 million bilateral
facility that was due to mature in
September 2020
• reducing the USD revolving
facility due to mature in
April 2024 from US$300.0 million
to US$150.0 million
• reducing the revolving multicurrency
facility due to mature in April 2022
from $450.0 million to $350.0 million.
Orora has substantial headroom within
current facilities and does not have any
material maturities until April 2022.
Petrie decommissioning
The decommissioning of the Petrie site
is a significant and complex exercise
involving multiple government agencies.
The Group continues to use a specialist
environmental consulting firm to manage
the completion of the remaining
remediation works. At the date of this
Report, decommissioning work continues
on site, with the estimated costs to
complete the decommissioning contingent
on final remediation requirements.
Discontinued Business
Sale of the Australasian Fibre business
On 30 April 2020, Orora successfully
completed the sale of its Australasian Fibre
business to a wholly owned subsidiary of
Nippon Paper Industries Co., Limited for
an enterprise value of $1,720.0 million.
Completion marked a new era for Orora,
where it retained its market leading
Australasian Beverage business, with
a history of sustained growth, innovation
and profitability, and its North American
DISCONTINUED OPERATIONS
AUD million
Sales Revenue
EBIT(2)
EBIT Margin (%)
packaging solutions and visual businesses,
OPS and Orora Visual. The sale of the
Australasian Fibre business provides an
important opportunity for Orora to assess
and shape the strategic path ahead for
the Company. The details of the financials
for the discontinued Australasian Fibre
business and its operations are set out
on page 110 to 112 of this Report.
2020(1)
2019
1,092.9
64.8
5.9
1,371.3
73.5
5.4
(1) Represents the period 1 July 2019 to 30 April 2020
(2) Earnings before interest, related income tax expense and significant items
16
ORORA LIMITED ANNUAL REPORT 2020
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 strategic
and business 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.(1)
Area of Materiality
Risk
Mitigation and Monitoring Strategies
Workplace
Safety and
Health
Workplace safety and health events may have
the potential to adversely affect Orora’s team
members and operations.
Business
Interruption
and
Disruption
(including
cyber risk)
Orora operates numerous sites across a number
of countries. Circumstances such as natural
disaster, pandemic, cyber breaches, operational
failure or industrial disruption may occur, which
may preclude key sites from operating. In these
circumstances, operational and financial
performance may be negatively impacted.
Economic
Conditions
Orora is susceptible to major changes in
macro-economic conditions globally or 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 operational and
financial performance.
Orora’s commitment to keeping people safe and healthy is paramount
and is a core value. Orora’s senior leadership team and Board regularly
review safety performance and improvement strategies and activities
across the business. Further information regarding Orora’s commitment
to safety and health and response to COVID-19 is set out in the
Sustainability section of this Report.
Orora undertakes business continuity and disaster preparedness planning
for strategically important sites and functions. This includes continuously
monitoring and, as appropriate, enhancing information security
capabilities to keep pace with the evolving nature and sophistication
of cyber threats.
Orora's Information Security team, established in December 2018,
has been enhancing Orora’s preparedness for cyber attacks both
through implementing new tools and a cyber awareness program
to all team members.
The COVID-19 pandemic has provided a real opportunity to test the
robustness of Orora’s business continuity processes including safety,
supply chain, talent and customer preferences. It gave assurance that the
plans and processes in place are effective in responding to such risks.
Orora also engages in continuous identification, review and mitigation
of property risks, as well as independent loss prevention audits and has
a suitable insurance program in place. Insurances are reviewed annually.
Orora seeks to mitigate the severity of impact that deterioration in
macro-economic conditions 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 and innovation
to improve cost positions.
Competition
Supply Chain
Orora operates in highly competitive markets with
varying barriers to entry, industry structures and
competitor motivational patterns. The actions
of established, new or potential competitors may
have a negative impact on financial performance.
Orora is well-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 continuously focuses on quality and innovation as a source
of competitive advantage.
Disruption to Orora’s supply chain caused by an
interruption to the availability of key components,
raw materials, energy supply, 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, specifically 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 and
pass-through mechanisms, there is no guarantee
that Orora will be able to manage all future energy
and commodity 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 material input costs
• input pricing strategies including active monitoring of input prices
• supplier due diligence and risk management including a supplier
assurance framework and code of conduct
• a focus on innovation in sustainable energy sourcing and pricing including
entering long-term renewable energy power purchase agreements.
(1) Environmental and social sustainability risks that are not currently considered material are referred to in the Sustainability section of this Annual Report.
ORORA LIMITED ANNUAL REPORT 2020
17
PRINCIPAL RISKS
Area of Materiality
Risk
Mitigation and Monitoring Strategies
Climate
Change
Talent
Customers
and Consumer
Preferences
Mergers and
Acquisitions
(M&A)
Country and
Regulatory
Risk
The physical and non-physical impacts of climate
change may affect Orora's assets and productivity.
Climate change may present risks arising from
extreme weather events affecting business
operations and certain customer segments,
along with the introduction of new laws and
government policies designed to mitigate
climate change. These could impact the
future profitability and prospects of Orora.
Orora is mitigating its contribution to climate change through its CO2
emissions reduction Eco Targets focusing on energy efficiency and its
participation in renewable electricity markets and, where appropriate,
co-generation investments. Further information is available in the
Sustainability section of this Annual Report.
In addition, as set out above, Orora continuously reviews operating and
capital expenditure plans to mitigate its customer risk, and operating
businesses that have a broad geographic spread and customers serving
a number of end markets.
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.
Orora has strong relationships with key customers
for the supply of packaging and Point of Purchase
products and related services. These relationships
are critical to Orora’s success. The loss of a key
customer 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.
Consumer preferences may be influenced by
regulation change and climate risk (both these risks
are separately listed in this Principal Risks section).
Orora’s strategic Human Resources (HR) priorities aim to create an
inclusive culture that optimises diversity of background and thought,
by attracting and retaining the best talent in the market. A high-
performance culture is encouraged by setting challenging objectives and
rewarding high performers, while succession planning is undertaken to
develop leadership talent. Orora believes this strategic approach to HR
management provides a tangible source of competitive advantage.
Remuneration is competitive in the relevant employment markets
to attract, motivate and retain talent, and is aligned with business
outcomes that deliver value to shareholders.
The key to mitigating customer risk is Orora’s commitment to being
the industry-leading customer focused sustainable packaging solutions
company. This is embedded in Orora’s promise to its customers.
In addition, no single customer generates revenue greater than
10% of total revenue for the Orora Group.
Orora’s commitment to innovation, and its strong relationships
with its customers, seeks to address evolving consumer preferences.
Orora continuously reviews operating and capital expenditure
plans to mitigate customer risk or changing consumer preferences.
Orora’s growth opportunities are dependent,
in part, on disciplined selection and successful
integration of acquisition targets that are consistent
with the Group’s 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.
The Group has an established M&A framework that imposes rigour
in target selection, approval, due diligence, integration planning
and post-acquisition value capture.
In addition, Orora’s management team possess experience in
undertaking M&A activity and executing the integration process.
Where deemed necessary, the Group will utilise the services
of external advisers to supplement internal resourcing to successfully
execute and integrate acquisitions.
Orora predominantly operates in Australia,
New Zealand and the United States under a
broad range of legal, accounting, tax, regulatory
(including environmental) and political systems.
The profitability of Orora’s operations may
be adversely impacted by changes in fiscal
or regulatory regimes including tax policies,
difficulties in interpreting or complying with
the local laws of the countries in which Orora
operates and reversal of current political, judicial
or administrative policies, including as a result of
geopolitical tensions. 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 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 and
its business leaders regularly review country and regulatory risk.
Orora’s tax affairs are governed by a tax risk framework that is approved,
reviewed and reported against, by the Audit, Risk & Compliance
Committee of the Board. Tax risks are actively monitored and managed.
Litigation
Financial
and Treasury
As is the case with all organisations, 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 undisclosed claims or disputes of a
material nature.
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.
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 will proportionally draw down debt
in currencies that align with the proportion of assets in those same
currencies, thereby creating a natural hedge.
18
ORORA LIMITED ANNUAL REPORT 2020
OPERATING AND FINANCIAL REVIEW ORORA’S APPROACH
TO SUSTAINABILITY
During the financial year ended 30 June 2020, Orora continued to emphasise the three
pillars of its Sustainability program: People, Planet and Prosperity.
A central part of this approach is the launch of a new set of Eco Targets to build on the
success of the previous five year targets met in the financial year ended 30 June 2019.
The new Eco Targets are for the period 1 July 2020 to 30 June 2024 and will continue
to focus on greenhouse gas emissions, waste to landfill and water usage. Efficiency
improvement to better reflect expectations for environmental disclosure will be emphasised.
∙ Code of Conduct and Ethics
• Safety and Health
• Diversity and Inclusion
• Human Rights and
Responsible Sourcing
∙ Circular Economy
• Eco Targets
• Energy Efficiency
• Renewable Energy
• Fibre Sourcing
∙ Economic Contribution
• Value Creating Customer
Relationship
• Community Engagement
Orora’s approach
and governance
Orora’s approach to its People, Planet
and Prosperity pillars is framed by its
obligations as a signatory to the United
Nations Global Compact (UNGC), and
informed by work undertaken in 2015
and 2018 to understand the external
and internal sustainability risks and
opportunities for Orora’s activities.
Orora’s ongoing commitment to assessing
opportunities and exposure to material
risks is in accordance with the ASX
Corporate Governance Council’s
Recommendation 7.4, including any
exposure to environmental, social or
climate change risks, as recommended
by the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures
(TCFD)(1). The 2018 review, re-examined
in 2019, determined that Orora does not
have a material exposure to environmental,
social or climate change risks at this time.
Detail on the Company’s assessment of
material risks, including economic risks,
is set out separately in the Principal Risks
section of this Report.
Orora’s sustainability activity is overseen
by the Board of Directors, the newly formed
Safety, Sustainability & Environment
Committee and the Executive Leadership
Team, with regular updates provided to
the Board.
Reporting Orora’s approach
Orora reports on its annual sustainability
activity via Communication on Progress
to the UNGC, which outlines its activities
to further implement the Covenants
Principles on human rights, labour,
environment and anti-corruption. Orora
continued to support the CDP(2), voluntarily
disclosing information under the Climate,
Water and Forest Risk CDP sections.
As part of its commitment to sustainable
operations, Orora improved its scores from
the previous year, achieving a B for climate,
B- for water and B- for forest risk. As a
signatory to the Australian Packaging
Covenant (APC), Orora provided its annual
report during the financial year ended
30 June 2020 and was again assessed
as being in the Leader category.
(1) 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. Source: Corporate Governance Principles and Recommendations, Australian Securities Exchange Corporate
Governance Council (3rd edition), 2018 and (4th edition), 2019.
(2) CDP, formerly known as the Carbon Disclosure Project.
ORORA LIMITED ANNUAL REPORT 2020
19
ORORA’S APPROACH
TO SUSTAINABILITY
People
Code of Conduct, Ethics
and grievance mechanisms
During the financial year ended 30
June 2020, the Orora Code of Conduct
and Ethics Policy was refreshed to ensure
compliance with the Australian legislative
whistleblower protections regime.
The Code of Conduct emphasises a strong
culture of integrity and ethical conduct in
association with independent Anti-Bribery
and Anti-Corruption and Whistleblower
policies. The policies cover expectations
on a broad range of issues, including
environmental management, safety and
health, human rights, community
engagement, political donations and
participation, use of information and its
security, market disclosure, fraud, bribery,
corruption and the avoidance of conflicts
of interest. Team members and other third
parties (including suppliers) can report
reasonably suspected misconduct or an
improper state of affairs or circumstances
within the Company, including unethical/
illegal behaviour, coercion, harassment or
discrimination, fraud or corrupt practices,
or workplace safety or environmental
hazards through eligible recipients noted
in the Company’s Whistleblower policy,
including through an independent third
party integrity reporting service.
Safety and health
The safety, health and wellbeing of all
Orora team members and co-workers is
paramount and Orora continues to invest
in safety to drive improved performance
across the business. Particular areas of
focus have followed from the global safety
review, which was completed at the start
of the financial year ended 30 June 2020
by independent safety consultants,
which benchmarked Orora across a
range of criteria globally. As a result,
Orora commenced a three year program
to continue improvement in safety, health
and wellbeing across the business.
The program is initially focused on three
core areas across the entire business:
• broaden and focus the Governance System
• restructure the Safety Management System
• enhance the Serious Injury or Fatality
Prevention Program.
Positive progress is being made to
implement plans and actions for these
initiatives. Orora will roll out the third
element of its safety focus during the
current financial year, a re-energised Serious
Injury and Fatality Prevention program
across all sites and continue developing and
deploying high risk safety procedures which
include Traffic Management, Isolation, Plant
and Equipment, Permit to Work, Prevention
of Falls and Machine Guarding.
A further two initiatives will be
implemented as part of a second phase
focusing on knowledge and skills around
organisational safety transformation and
exposure management, and training on
“Making Safe Decisions”.
Injury rates reduced
With its focus on enhanced systems
and governance, Orora has achieved
a tangible reduction in its injury rates over
the past 12 months due to its continued
focus on its strategic safety priorities.
Orora Group Safety Performance(1)
6.8
6.9
6.8
1.6
1.6
FY
16
FY
17
RCFR
LTIFR
1.8
FY
18
8.1
2.3
FY
19
6.7
1.5
FY
20
Safety during COVID-19
During the second half of the financial year,
and with the emergence of the COVID-19
pandemic, Orora was swift to implement
a range of safety and health measures to
respond and mitigate any risk of transmission
into and at Orora's sites and workplaces.
These measures included a review of
policies and procedures, additional site
audits and the introduction of a safety
and health checklist to confirm that
enhanced safety and health measures
were being implemented and achieving
the intended outcomes.
CASE STUDY
LIVING THE ORORA VALUES —
ORORA BUSHFIRE DONATION
AND VOLUNTEER SUPPORT
Orora team members displayed generosity and compassion in
early 2020 by donating $64,521 to support communities affected
by the unprecedented Australian bushfires. Orora donated
a further $114,521, making a total company-wide contribution
of $179,042 to the Australian Red Cross Disaster Relief and Recovery
Fund. A significant employee and Company donation recognised
by the Australian Red Cross. Some Australian Orora team members
are also active members of their local firefighting services.
Orora is very proud to count them as members of the team.
One such team member is Pablo Anwandter – a Shift Supervisor
at Orora Beverage Cans in Revesby and a New South Wales Rural
Fire Service (RFS) Volunteer. Pablo has been a member of the
NSW RFS for six years as part of the Glenhaven Rural Fire Brigade
in the Hills District of Sydney. Orora is proud to offer team
members the flexibility to be able to serve their community
in times like these and recognises the immense efforts and
commitment that Pablo and others like him demonstrate.
(1) Orora’s injury rates are measured using two key metrics Recordable Case Frequency Rate (RCFR) and the Lost Time Injury Frequency Rate (LTIFR). LTIFR is measured
by dividing the total number of Lost Time Injuries in a 12 month period by the total number of hours worked in the same 12 month period, then multiplying
by 1,000,000. RCFR is measured by dividing the total number of Recordable Case Injuries (Lost Time Injury, Restricted Work Case & Medical Treatment Injury)
in a 12 month period by the total number of hours worked in the same 12 month period, then multiplying by 1,000,000.
20
ORORA LIMITED ANNUAL REPORT 2020
OPERATING AND FINANCIAL REVIEW To protect Orora team members who
continued to perform critical duties
in support of Orora’s role as an essential
services provider, the Company introduced
a number of additional safety and
protective measures in compliance with,
or to a higher standard than, government
and health advice, including:
• requiring team members to work from
home where possible and providing
additional protection for those involved
in critical on-site operations
• staggering shift breaks to maximise social
distancing between team members
• restricting visitor access at all Orora
locations unless there was a health,
safety or business critical issue that
required attendance
• requiring any critical site visitors to comply
with specific entry and egress processes
• developing flexible work practices and
enforcing social distancing.
A comprehensive safety, health and mental
wellbeing campaign and support program
was also implemented to encourage
team members to be active in protecting
themselves and their colleagues.
As at the date of this Report, Orora
continues to closely monitor site and
workplace activity with respect to social
distancing, hygiene, travel, visitation
and mental wellbeing. There have been
no positive cases of COVID-19 reported
in its Australasian operations, and a
number of positive cases have been
identified in its North American operations.
Orora has offered comprehensive and
appropriate support to those team
members in North America who tested
positive and ensured the effective
management of those cases to preserve
the safety of team members and reduce
the risk of further transmission.
Health and wellbeing
As part of Orora’s commitment to team
member safety and wellbeing, and
a zero-tolerance approach to alcohol
and other drugs (AOD) in the workplace,
Orora continued its alcohol and drug
policy, education, testing and support
program in Australasia. The results
of the first 12 months of AOD testing
has benchmarked Orora’s performance
at 10 times less than industry average
in regard to positive drug and alcohol test
results. The AOD program has highlighted
the importance of team member mental
health and wellbeing. As a result, Orora
piloted The Little Blue Book, a mental
health and wellbeing resource for
team leaders.
Diversity and inclusion
Orora is strongly committed to developing
an inclusive and respectful work environment
to optimise diversity of thought and
background. Bringing together people
with different backgrounds and ways
of thinking is a powerful source of
competitive advantage in driving better
decision-making, innovation and growth.
Gender equality
Throughout the financial year ended 30
June 2020, Orora has continued its
commitment to a gender diversity target of
30% female of all new team member hires.
At the end of the reporting period, this
target was again exceeded by achieving
34.9% of new female hires. 203 new
females have been recruited across all of
Orora in the past 12 months, 35.9% female
new hires for ANZ and 34.1% for North
America. The Orora Board has also
approved the following gender diversity
objectives for the financial year ending
30 June 2021:
• maintaining not less than 30%
of each gender in the composition
of Orora’s Board
• ensuring that Orora continues to employ
greater than 30% female of all external
new hires
• ensuring that Orora identifies and
attracts female talent for Board and
senior management vacancies.
These objectives are supported by
a continued commitment to:
• supporting the development of women
into leadership roles, including through
the Women in Leadership at Orora
(WILO) program
• using an objective process in valuing
roles and setting comparative male and
female remuneration for salaried
positions
• promoting holistic working practices,
including, but not limited to, continuing
to offer the employee assistance program
and supporting flexible working
arrangements, where practicable.
CASE STUDY
SAFETY FIRST
DURING COVID-19
During the pandemic, OPS created an agile Health and Safety
products team to leverage Orora’s unique ability to secure quality
protective supplies for customers. The combination of extensive
supplier relationships, which came to OPS with the acquisition
of the Pollock business in 2018, and its competitive position in
market meant that OPS was able to introduce this new product line
that includes facemasks, gloves, hand sanitisers and other similar
health related items. This was a result of excellent collaboration by
North American team members in Operations, Sales, Procurement,
Quality, and Marketing to offer high-quality products to their
current and prospective customers.
ORORA LIMITED ANNUAL REPORT 2020
21
ORORA’S APPROACH
TO SUSTAINABILITY
Women in Leadership
at Orora (WILO) program
Orora also conducted its fourth annual
WILO program during the financial year
ended 30 June 2020 across its North
American operations, building on the
North American program delivered in 2019
and two earlier programs across Australia
and New Zealand. This tailored
development and mentoring program aims
to support Orora’s ability to cultivate a
diverse leadership talent pipeline by
enabling women to build their confidence
and leadership skills. The WILO program
continues to receive very positive reviews
from participants, mentors and leaders.
Additionally, Orora continued to invest
in previous WILO participants by
conducting an ANZ Alumni event in
September 2019, refreshing goals and
aspirations and reinvigorating the WILO
network connections. The next WILO
program will be held during the current
financial year, however given international
and regional travel restrictions, for the first
time WILO will be run as a virtual and
global program led out of North America,
including participants from Australasia.
Supporting change
Of great focus this year was the support
and care for Orora's workforce dealing with
significant changes due to the sale of the
Australasian Fibre business and also
dealing with COVID-19 globally. Orora has
provided face to face learning and has
virtual/digital support mechanisms to
ensure that leadership is undertaken
with the Orora values in mind.
Human rights and
responsible sourcing
Orora is positioned to address its obligations
as a signatory to the UNGC and the
requirements of applicable modern slavery
legislation. Orora understands that
respecting and improving human rights
is fundamental to delivering value for
shareholders, customers and the broader
community. Orora is committed to having
frameworks and processes in place
to minimise the risk of modern slavery
in Orora’s business operations and
supply chain.
Supplier Assurance Framework
Orora continued to expand its Supplier
Assurance Framework Program during
the financial year ended 30 June 2020,
designed to identify and mitigate human
rights issues within its supply chain.
Assessing human rights risks is now a
standard procurement component of
on-boarding a new supplier. A supplier
identified as high-risk following assessment
is required to mitigate risks via an agreed
plan, with failure to do so resulting
in contract cancellation.
To understand Orora's progress, an online
survey was conducted of more than 1,500
North American co-workers who
transitioned to working remotely. The
outcome strongly demonstrated that team
members can successfully work remotely
and remain productive. Technology and
tools provided have increased
communication and connectivity, flexibility
to work remotely has significantly lowered
levels of stress, team members feel safer
and healthier, and it has improved
work-life balance. Similar feedback was
received from Australian team members
working remotely. Additionally, a global
culture review is being undertaken to
better understand employee experience
and build a revised policy and practices
regarding workplace flexibility.
Champions of Change
The Orora internal network of General
Managers continued to be a powerful
cohort of change agents who are driving
action at a local level across all business
groups. In March 2020, under the
leadership of the Orora Champions
of Change, team members celebrated
International Women’s Day (#eachforequal)
across Orora sites, with activities
shared across the Workplace internal
communications platform. The passion
and leadership of the Champions of
Change will be drawn upon again as the
new culture review progresses during the
first half of the current financial year.
CASE STUDY
MOTHER’S DAY DELIVERY —
A HAPPY MOTHER’S DAY
THANKS TO ORORA VISUAL
While social distancing was a strong part of responding to and
managing risk associated with COVID-19, Orora team members
at Orora Visual Dallas contributed to a Lowe’s initiative to deliver
US$1.0 million worth of flower baskets to mothers at more than
500 long-term care and senior living facilities in cities such as New
York, Seattle, Chicago, Boston, Houston, Miami and more. Orora
Visual Dallas supported these efforts by printing 100,000 special
Mother’s Day tags at short notice to have them delivered by
Mother’s Day. Despite the severity of COVID-19, the Orora Visual
Dallas team were pleased to be able to play their part in bringing joy
to some very well-deserving women.
22
ORORA LIMITED ANNUAL REPORT 2020
OPERATING AND FINANCIAL REVIEW Governance
Planet
This year, enhancements were made
to Orora’s human rights and responsible
sourcing governance by the establishment
of a Modern Slavery Working Group.
The Group is responsible for identifying
and implementing process improvements
to minimise the risk of modern slavery
in Orora’s business operations and supply
chain, and to ensure compliance with
applicable laws and standards. This
Working Group reports and provides
recommendations to the Safety,
Sustainability & Environment and Audit,
Risk & Compliance Committees, as
applicable, and the Board which oversee
modern slavery risks and ensure timely
disclosures and corporate reporting in
accordance with applicable laws and
Orora’s Risk Management Framework.
Supplier Code of Conduct and Ethics
Orora implemented a Supplier Code of
Conduct and Ethics Policy in the financial
year ended 30 June 2020. This
complements the Code of Conduct and
Ethics and sets minimum standards for
Orora’s suppliers and their supply chain in
line with Orora’s values and commitment
to the Ten Principles of the UNGC. Orora’s
Supplier Code of Conduct and Ethics is
supported by Orora’s Supplier Assurance
Framework.
Circular economy
Orora is an active participant in the circular
economy, which aims to maximise the
value of products and resources by reusing
them in supply chains for as long as
possible. Orora has a dual approach –
to ensure its manufactured packaging is
inherently recyclable and that it contains
recycled content. The main packaging
substrates manufactured by Orora, glass
and aluminium, are completely recyclable.
Orora works collaboratively with its
supply chain to increase the percentage
of recyclable content used in its packaging.
Orora’s Beverage plant located at Gawler
in South Australia consumes approximately
80% of recycled glass collected via the
South Australian Container Deposit
Scheme, transforming it into new wine
and beer containers. During the financial
year ended 30 June 2020, the Beverage
business has also been actively engaged
with the container deposit schemes in
other States and Territories to investigate
and gain access to interstate volumes
of recycled glass for use at Gawler.
Much of this work is anticipated to result
in increased volumes of recycled glass
being utilised in the financial year ending
30 June 2021 (current financial year).
Similarly, Orora’s Cans business continued
to work with its supply chain during the
financial year, ensuring the flat sheet
aluminium utilised in the production
of cans contained an average recycled
content of 63%. During the course of the
financial year ended 30 June 2020, Orora
again participated in working groups with
APC on ways to improve the operation
of the circular economy in Australia by
examining ways to improve glass recycling
and other packaging substrates.
In North America, OPS achieved 70%
recycled content in the manufacture of its
corrugated board and further sustainability
initiatives are being explored.
Eco Targets
Orora has launched a new set of Eco Targets
to run to 30 June 2024 that will continue to
aim at reducing CO2e emissions, waste to
landfill and water use. These Eco Targets
have the same focus areas as previous Eco
Targets that Orora successfully achieved by
30 June 2019, but unlike in previous years,
the new set of Eco Targets are measured
as ratios against production related metrics.
This reflects changes in stakeholder
expectations as to how companies report
on environmental performance, and
ensures that the metrics for Eco Targets are
focused on the specific attributes of each
of Orora’s business divisions, giving them
greater scope for effective management.
The Eco Target metrics reflect the primary
activity of each of the business units.
These are divided into Production of
packaging, which measures against tonnes
produced, and separately, the Distribution
of packaging, which adheres to floor space
square metres.
CASE STUDY
ORORA BEVERAGE —
OFFERING A SUSTAINABLE
PACKAGING CHOICE
Orora is proud to be a leading manufacturer of sustainable
packaging and continues to view this as a point of difference and
competitive advantage. Globally, consumers are increasingly
seeking out sustainable product alternatives. As a business, Orora
is fortunate to be on the right side of this trend, particularly in
Australasia where customers are switching to recyclable glass and
aluminium substrates. Glass and Cans both offer an infinitely
recyclable option to producers, customers and consumers.
Increasingly, cans are also viewed as a package that offers purity
of flavour, quality of product (100% airtight, light proof and
contamination free) and are environmentally sustainable.
ORORA LIMITED ANNUAL REPORT 2020
23
ORORA’S APPROACH
TO SUSTAINABILITY
The table below outlines the 2024 targets
for each of the Eco Target focus areas for
each of the Production and Distribution
division groupings.
During the financial year ended 30
June 2020, each of the Production and
Distribution groups had their performance
benchmarked to establish the baseline to
use in working towards the 30 June 2024
efficiency targets(1).
Orora expects positive efficiency progress
to be achieved on each of the new Eco
Targets during the financial year ending
30 June 2021.
As noted on page 16 of this Report, the
Australasian Fibre business was sold on
30 April 2020 to a subsidiary of Nippon
Paper Industries and is not included
in the new Eco Targets program.
During the financial year ended 30 June
2020, Orora continued to develop its
understanding of the potential impacts
of climate change on its operations,
an important activity in recognising the
Company’s obligations under Principle
7 of the UNGC and the ASX Corporate
Governance Principles and
Recommendations (4th edition). Orora’s
work on its CO2e Eco Target over the last
five years has been central to recognising
Principle 7, which requires businesses to
support a precautionary approach to
environmental challenges. The new Eco
Targets regime will continue to enhance
this work.
Renewable energy
Orora continued to examine ways of
increasing its use of renewable energy
through the installation of small scale
solar systems at a number of sites during
the financial year ended 30 June 2020.
Small scale solar electricity systems
were installed at Beverage sites at Gawler
(warehouse), Ballarat and Dudley Park
with a further implementation planned
for Revesby. There was also examination
of the potential for further small scale
solar system implementation at several
other Orora sites. Orora has long-term
power purchase agreements with
renewable energy providers to supply
wind-generated electricity to Orora’s
operations in New South Wales, South
Australia and Victoria. These agreements
secured the supply of renewable energy
for volumes equivalent to 80% of Orora’s
total electricity requirements in Australia.
Orora continues to review and implement
the findings of the TCFD with the support
of external consultants to better
understand the potential impacts of
climate change on Orora. It is expected
that this work will be completed during the
current financial year. Orora will again
address applicable TCFD disclosure
requirements as part of its CDP response
for the most recent reporting period(2).
Energy efficiency
Work continued during the financial year
ended 30 June 2020 on the installation of
new monitoring and measurement
equipment at many sites to verify energy
use to benchmark and ultimately reduce
energy consumption. Specific energy
efficiency initiatives involved Orora Visual
implementing weekend energy load
shedding at all of its facilities and painting
the roof of its Dallas facility white to
reduce heat ingress. The rebuild of the G2
furnace at Gawler will also improve energy
efficiency. There will be an increased focus
on energy efficiency for both gas and
electricity in terms of their contribution to
reducing greenhouse gas emissions under
the resetting of Orora’s CO2e Eco Target
over the period to 30 June 2024.
Eco Targets
The new Eco Targets are for a 5% improvement on each Eco Target ratio for the Production and Distribution businesses across CO2e,
Waste to Landfill, and Water Use by 2024.
CO2
CO2E EMISSIONS
WASTE TO LANDFILL
WATER USE
5% reduction in
emissions ratio intensity
FY24 from FY20 levels
Production Businesses
Tonnes CO2e/tonnes
of product
Distribution Businesses
Tonnes CO2e/fl oor space
square metres
5% reduction in waste
to landfi ll ratio intensity
by FY24 from FY20 levels
Production Businesses
Tonnes Waste to Landfi ll/
tonnes of product
Distribution Businesses
Tonnes Waste to Landfi ll/
fl oor space square metres
5% reduction in water use
ratio intensity FY24
from FY20 levels
Production Businesses
Kilolitres Water/tonnes
of product
Distribution Businesses
Kilolitres Water/fl oor
space square metres
(1) New acquisitions during the financial year ended 30 June 2019 have been excluded due to unavailability of data. Data will be included within 24 months of acquisition.
(2) The most recent period for CDP reporting is for the financial year ended 30 June 2019.
24
ORORA LIMITED ANNUAL REPORT 2020
OPERATING AND FINANCIAL REVIEW Fibre sourcing
Orora is committed to the use of fibre from
traceable, socially and environmentally
responsible sources in its ongoing North
American businesses. Throughout the
financial year ended 30 June 2020, the
Responsible Fibre Sourcing Policy,
refreshed in the financial year ended 30
June 2019, continued to be applied across
relevant areas of Orora’s activity (including
the discontinued Australasian Fibre
business), ensuring Orora did not directly
or indirectly contribute to:
• illegal logging or the trade in illegal wood
or forest products
• conflict timber or the trade in
conflict timber
• significant conversion of forests to
plantations or non-forest use
• destruction of high conservation values
in forestry operations
• introduction of genetically modified
organisms in forestry operations
• violation of traditional, indigenous and
human rights in forestry operations
• violation of any of the fundamental
International Labour Organisation
Conventions.
Orora’s approach to responsible fibre
sourcing is supported by a due diligence
framework giving preference to suppliers
with credible, independent chain of custody
certification based on international
standards and transparent and traceable
supply chains. In North America, Orora
continued the Sustainable Forestry Initiative
certification process for several of its sites.
Prosperity
Economic contribution
Orora has a proud history as an Australian
headquartered and listed product
manufacturing business, making significant
contributions to the communities in which
it operates. As discussed on page 1 and 2
of the Annual Report, Orora generates
$3,566.2 million in sales revenue, employs
approximately 3,800 team members and
operates 106 sites across seven countries.
Orora generates this prosperity in a
manner that is balanced with Orora’s
Planet and People Sustainability pillars.
Value creating customer
relationships
Sustainability is integral to Orora’s
customer relationships. Orora works with
its customers to reduce environmental
impacts with a commitment to using
packaging produced that is both recyclable
and contains recycled content. Programs
were also undertaken with ANZ Beverage
customers to examine and implement
light-weighting of packaging supplied.
Undertaking such activity is central to
Orora’s furthering of the Circular Economy
under the Planet pillar and is aligned
with Orora's strategic focus.
Community engagement
Orora aims to make a positive contribution
to the prosperity of the communities
in which it operates.
During the financial year ended 30 June 2020,
Orora partnered with a number of leading
universities to offer adult and junior
apprenticeships, an Industry 4.0 Cadetship
program and various internship programs.
The successful participants in the Swinburne
Industry 4.0 cadetship were offered
permanent employment with Orora in
November 2019, and continue to make
a valued contribution to innovative projects.
Partnerships like this reflect Orora’s
commitment to advancing jobs, skills and
people, addressing the sustainable energy
challenge, and recycling for a sustainable
future.
Orora also made a significant contribution
to the Australia Red Cross Disaster Relief
and Recovery Fund via its Orora Bushfire
Appeal in support of those impacted by
the tragic bushfires in Australia in early
2020. Orora team members globally
donated $64,521 with Orora donating
a further $114,521 making a total
company-wide contribution of $179,042.
In North America, OPS continued
to support Working Wardrobes,
a not-for-profit helping men, women,
military veterans and young adults to
overcome obstacles to enter or return
to the workforce. Separately, the Orora
Visual team worked closely with its
customers, including Lowes, to support
those in the community most at risk
of COVID-19 transmission.
CASE STUDY
SHARE A COKE
WITH THE FIRIES
During the height of the Australian bushfires, the Orora Beverage
team was proud to partner with long-term customer Coca-Cola
Amatil and Coca-Cola South Pacific by donating the cans free of
charge for their ‘Share a Coke with the Firies’ campaign to support
those affected by the bushfires. 100,000 of these unique cans were
produced and donated to firefighters and impacted communities.
ORORA LIMITED ANNUAL REPORT 2020
25
GOVERNANCE
The Board recognises the importance of having Directors
who possess a broad range of skills, backgrounds,
expertise, diversity and experience in order to facilitate
constructive decision making and facilitate good
governance processes and procedures.
The Board has determined that collectively
its Directors have the skills and experience
to oversee its strategic objectives,
including the key desired areas listed
below. The Board has unfettered access to
the Company’s senior management team
and external consultants for required
expertise, including in respect of digital
data and technology capabilities.
A regular assessment of the optimum mix
of these skills and experience is computed
and takes into account the strategic
positioning of the Group. Following the
sale of its Australasian Fibre business,
Orora is embarking on a new journey
with a revised business strategy, and a
continued focus on safety, sustainability
and innovation across the Group’s
portfolio. The Board established the Safety,
Sustainability & Environment Committee
on 3 August 2020 to provide it with advice
and assistance.
The Board will review the mix of its skills
and experience in conjunction with the
strategy review.
Director
Rob Sindel
Brian Lowe
Abi Cleland
Tom Gorman
Sam Lewis
Jeremy Sutcliffe
Board
Audit, Risk &
Compliance
Committee
Executive
Committee
Human
Resources
Committee
Nomination
Committee*
Safety, Sustainability
& Environment
Committee
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
● Chair ● Member
* All Nomination Committee matters were dealt with by the full Board during the financial year.
26
ORORA LIMITED ANNUAL REPORT 2020
BOARD SKILLS
BOARD SKILLS
AND EXPERIENCE
AND EXPERIENCE
The Board has identified the key skills required for the Board as a whole to meet its objectives. To assist the recruitment and selection of
new members, this skills matrix may be used to review the existing skills and capabilities of the Board and to identify any gaps/low current
coverage in skills and experience.
Skill/Experience
Directors with
Skill/Experience
Skill/Experience
Directors with
Skill/Experience
Strategic Thinking
Experience in developing and implementing
enterprise-wide successful strategies, and an
effective capital management framework,
including appropriately questioning and
challenging management on the delivery
of agreed strategic planning objectives.
Financial Acumen
Experience in financial accounting and reporting,
corporate finance and/or restructuring, corporate
transactions, including ability to evaluate the
adequacies of financial and risk controls and
understand key financial drivers of the business.
Remuneration, Reward, People and HR
Senior executive or substantial board experience
leading people, oversight of culture and
organisational design, remuneration frameworks
that attract and retain a high calibre workforce and
a culture that promotes inclusion and diversity.
Corporate Governance
Experience with a major organisation that is subject
to rigorous governance standards, a proven track
record of leadership and governance skills and
demonstrated behaviours consistent with Orora’s
values, and an awareness of global practices
and trends.
Risk Management
Senior executive or substantial board experience
in understanding, identifying and monitoring key
existing and emerging risks to an organisation and
implementing appropriate risk management
frameworks, procedures and controls.
6/6
6/6
5/6
6/6
6/6
Workplace Safety and Health
Senior executive or substantial board experience
in key workplace safety and health risks, including
management, performance and governance of
workplace safety and health.
Technology and Innovation
Experience in oversight, adoption and
implementation of technology and innovation to
support growth and drive competitive advantage,
the ability to understand key factors relevant to
Orora including digital disruption, opportunities
and risks.
Sustainability and Environment
Senior executive or substantial board experience
in management, performance and governance of
sustainability, environmental and social responsibility
initiatives, risks and opportunities including in relation
to sustainability and climate change.
Relevant Industry Experience
Senior executive or substantial board experience
in a number of relevant industries, including
packaging, manufacturing, FMCG, food and
beverage, recycling, industrials and logistics,
product or customer strategy.
4/6
3/6
4/6
5/6
BOARD GLOBAL EXPERIENCE
BOARD DIVERSITY
BOARD TENURE
US
Other segments
40%
60%
Male
Female
67%
33%
0–5 Years
5–10 Years
50%
50%
ORORA LIMITED ANNUAL REPORT 2020
27
BOARD OF DIRECTORS
Rob Sindel
(BEng, MBA, GAICD, FIEAust, CPEng)
Independent Non-Executive Director and
Chairman
Rob Sindel has extensive experience obtained from
executive management and leadership positions,
principally from his 30 year career in the
construction industry both in Australia and the
United Kingdom. Rob has particular insights
in manufacturing, sales and marketing in B2B
environments, strategic management and operating
in high-risk industries.
Rob was formerly the Managing Director and
Chief Executive Officer of CSR Limited for 8 years
from 2011 until 2019.
Director of Orora Limited since March 2019.
Appointed Chairman in February 2020.
Brian Lowe
(MBA)
Managing Director and Chief Executive
Officer
Prior to Orora, Brian Lowe spent eight years with
Delphi Technologies where he was Managing
Director of the Asia Pacific Powertrain business,
including five years based in Shanghai. This
followed a 10 year career at General Electric (GE),
where he held various leadership roles in sales and
marketing and supply chain. His last role was
Managing Director of GE Plastics, Australia from
2001 to 2003.
In his 8 years at Orora, Brian has been the Group
General Manager of the Beverage (2012-2015)
and Fibre (2016-2019) Business Groups. He was
appointed Managing Director and Chief Executive
Officer of Orora Limited in October 2019.
Abi Cleland
(BA, BCom, MBA, GAICD)
Independent Non-Executive Director
Abi Cleland has extensive global experience in
strategy, M&A, digital and running businesses.
This has been gained from senior executive roles
in the industrial, retail, agriculture and financial
services sectors, including with ANZ, Amcor,
Incitec Pivot and as Managing Director of 333
Management, after starting her career at BHP
working in Australia and Asia.
From 2012 to 2017, Abi set up and ran an advisory
and management business, Absolute Partners,
focusing on strategy and building businesses
leveraging disruptive change, for large corporates
and entrepreneurial businesses.
Director of Orora Limited since February 2014.
Directorships of listed entities and other
directorships and offices
Current:
• Director, Mirvac Group (since September 2020)
• Member, Yalari NSW Advisory Committee
(since August 2017)
Recent (last 3 years):
• Director, Australian Business and Community
Network (October 2013 to November 2019)
• Director, Green Building Council of Australia
(September 2013 to November 2019)
• Managing Director and Chief Executive Officer,
CSR Limited (January 2011 to September 2019)
and Director (December 2010 to September 2019)
• Member, UNSW Australian School of Business
Advisory Council (June 2013 to December 2019)
Board committee membership
• Chair, Executive Committee and
Nomination Committee
• Member, Safety, Sustainability
& Environment Committee
Board committee membership
• Member, Executive Committee
Directorships of listed entities and other
directorships and offices
Current:
• Director, Coles Group Ltd (since November 2018)
• Director, Computershare Limited
(since February 2018)
• Director, Swimming Australia (Audit Chair)
(since July 2015)
• Director, Sydney Airport Limited (since April 2018)
Recent (last 3 years):
• Chair, Planwise Australia (June 2016 to March
2020) and Director (January 2016 to March 2020)
• Director, BWX Limited (August 2017
to December 2017)
Board committee membership
• Chair, Safety, Sustainability
& Environment Committee
• Member, Human Resources Committee
and Nomination Committee
28
ORORA LIMITED ANNUAL REPORT 2020
Tom Gorman
(BA, MBA)
Independent Non-Executive Director
Tom Gorman brings a wealth of experience to
Orora, following a 30 year career in executive
positions at Ford Motor Company of Australia Ltd,
Chep International Inc and Brambles Limited, of
which he was Chief Executive Officer. He is currently
a Non-Executive Director of Worley Limited and
a Director of High Resolves, an Australian-based
non-profit focused on middle school education.
He has worked in multiple functions including
finance, operations, logistics, marketing, and
business development in England, France, Australia
and the United States (of which he is a resident).
Tom graduated, cum laude, from Tufts University
with degrees in Economics and International
Relations and obtained an MBA, with distinction,
from the Harvard Business School.
Director of Orora Limited since September 2019.
Sam Lewis
(BA(Hons), CA, ACA, GAICD)
Independent Non-Executive Director
Sam Lewis is a chartered accountant and has
extensive financial experience, including as lead
auditor to a number of major ASX-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.
Jeremy Sutcliffe
(LLB(Hons))
Independent Non-Executive Director and
Deputy Chairman
Jeremy Sutcliffe has broad international corporate
experience as CEO of two ASX Top 100 companies
and has extensive experience with 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, 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 and other
directorships and offices
Current:
• Director, Sims Limited (since June 2020)
• Director, Worley Limited (since December 2017)
Recent (last 3 years):
• Chief Executive Officer, Brambles Limited
(December 2009 to February 2017)
Board committee membership
• Chair, Human Resources Committee
• Member, Audit, Risk & Compliance Committee
Directorships of listed entities and other
directorships and offices
Current:
• Chair, APRA Audit and Risk Committee
(since June 2016)
• Director, Aurizon Holdings Limited
(since February 2015)
• Director, Nine Entertainment Co Holdings Limited
(since March 2017)
Board committee membership
• Chair, Audit, Risk & Compliance Committee
• Member, Executive Committee and Safety,
Sustainability & Environment Committee
Directorships of listed entities and other
directorships and offices
Current:
• Director, Amcor Limited (since October 2009)
Recent (last 3 years):
• Chairman, CSR Limited (July 2011 to May 2018)
and Director (December 2008 to May 2018)
• Member, Advisory Board of Veolia Environmental
Services Australia (June 2010 to December 2018)
• Member, Australian Rugby League Commission
Limited (February 2012 to March 2017)
Board committee membership
• Member, Audit, Risk & Compliance Committee,
Human Resources Committee
and Nomination Committee
ORORA LIMITED ANNUAL REPORT 2020
29
EXECUTIVE LEADERSHIP TEAM
Brian Lowe (MBA)
Managing Director and
Chief Executive Officer
Please see page 28.
Simon Bromell (BSc, GDip Agribus, GAICD)
Group General Manager, Beverage
Bob Firenze (BA)
President, Orora Visual
Stuart Hutton (BBus, CA)
Chief Financial Officer
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.
Robert (Bob) Firenze was appointed President,
Orora Visual in March 2020, bringing over
20 years of experience in sales and management
in the North American packaging industry.
Bob joined the Company in 2001 as a Division
Manager in Orora Packaging Solutions. He was
responsible for growing and expanding the
business in multiple North American regions
and served as Senior Vice President – East Region,
Orora Packaging Solutions immediately prior
to his appointment as President, Orora Visual.
Stuart Hutton joined Orora in December 2013,
having previously served as Chief Financial
Officer 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 Chief Financial
Officer of the Minova, Chemical Services and
Mining Services (North America) Divisions as
well as Investor Relations Manager. Stuart spent
nine years during the early part of his career
with Deloitte in audit and corporate finance.
30
ORORA LIMITED ANNUAL REPORT 2020
Bernie Salvatore (Dip Ind Mngt (Eng), MBA)
President, Orora Packaging Solutions
Ann Stubbings (BA/LLB, GAICD)
Company Secretary and
Group General Counsel
Matthew Wilson (LLB, BCom (Hons))
Group General Manager, Strategy
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 was appointed Company Secretary
and Group General Counsel upon Orora’s listing
on the ASX in December 2013. Ann leads the
Legal, Company Secretariat, Sustainability, Human
Resources, Corporate Affairs and Corporate Safety
teams. Prior to joining Orora, Ann was Senior Group
Legal Counsel at Amcor Limited (2008 to December
2013), and Alternate Company Secretary (2009 to
December 2013). Ann commenced her career in
private practice at Hall and Wilcox, and has held
senior in-house roles practising in corporate and
commercial law, insurance, dispute resolution,
governance and company secretariat across
manufacturing and financial services.
Matthew Wilson joined Orora in January 2020,
bringing over 20 years of experience in corporate
finance and strategy. Immediately prior to Orora,
Matthew was a Managing Director at independent
corporate advisory firm, Flagstaff Partners,
and previously spent 15 years at J.P. Morgan
in both Melbourne and Sydney where he led
the Australian investment banking division’s
coverage of healthcare, telecommunications,
technology, and private equity clients. Matthew
began his professional career in the investment
banking division of Macquarie Bank.
ORORA LIMITED ANNUAL REPORT 2020
31
DIRECTORS’
REPORT
The Directors of Orora Limited (Orora
or 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 financial
year ended 30 June 2020.
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
33
33
33
33
34
34
34
34
34
34
34
35
Directors’ interests
35
Unissued shares under option
Shares issued on exercise of options
35
On-market share purchases to satisfy 35
employee share plans
Indemnification and insurance
of officers
Indemnification of auditors
36
Proceedings on behalf of the Company 36
36
Non-audit services
36
Rounding off
36
Corporate Governance Statement
35
Remuneration report
37
Auditor’s Independence Declaration 56
32
ORORA LIMITED ANNUAL REPORT 2020
STATUTORY
MATTERS
Board of Directors
The Directors of the Company in office as at the date of this report are:
A R H (Rob) Sindel
B P (Brian) Lowe
A P (Abi) Cleland
T J (Tom) Gorman
S L (Sam) Lewis
J L (Jeremy) Sutcliffe
All Directors except Brian Lowe and Tom Gorman served on the Board for the period from 1 July 2019 to 30 June 2020. Tom Gorman was
appointed as a Director on 2 September 2019. Brian Lowe was appointed as a Director on 1 October 2019.
Mr C I (Chris) Roberts retired as Chairman and a Director of the Board with effect from 12 February 2020, Mr G J (John) Pizzey retired as a
Director with effect from 31 May 2020 and Mr N D (Nigel) Garrard retired as a Director with effect from 30 September 2019.
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 28 to 29 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 31 of this Annual Report.
Directors’ meetings
The following table sets out the number of Directors’ meetings (including meetings of Board Committees) held during the period from
1 July 2019 to 30 June 2020, and the number of meetings attended by each Director.
Scheduled Meetings
Unscheduled Meetings
A P Cleland
N D Garrard^
T J Gorman^
S L Lewis
B P Lowe^
G J Pizzey^
C I Roberts^
A R H Sindel
J L Sutcliffe
Board
11
11
Audit, Risk &
Compliance
Committee
4
–
Executive
Committee
Human Resources
Committee
Nomination
Committee**
2
2
4
–
–
–
A
21
5
19
22
17
18
14
22
22
B
22
5
20
22
17
20
14
22
22
A
4
1*
3*
4
3*
1*
3
4*
3
B
4
–
–
4
–
–
3
1
4
A
3*
2
–
2
2
2
3
2*
–
B
–
2
–
4
2
4
3
1
–
A
4
1*
3
4*
3*
3
3
4
4
B
4
–
3
–
–
4
3
4
4
A
–
–
–
–
–
–
–
–
–
B
–
–
–
–
–
–
–
–
–
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).
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, Risk & Compliance and Human Resources Committee meetings. Upon his appointment as Chairman, A R H
Sindel was appointed a member of the Audit, Risk & Compliance Committee.
** All Nomination Committee matters were dealt with by the full Board during the financial year.
*** The Board held a number of unscheduled meetings during the financial year to address matters related to the sale of the Australasian Fibre business. The Board may
from time to time establish ad hoc and temporary Committees to address specific needs at the time.
^ T J Gorman was appointed as a Director on 2 September 2019 and B P Lowe was appointed as a Director on 1 October 2019. C I Roberts retired as a Director with
effect from 12 February 2020, G J Pizzey retired as a Director with effect from 31 May 2020 and N D Garrard retired as a Director with effect from 30 September 2019.
ORORA LIMITED ANNUAL REPORT 2020
33
STATUTORY MATTERS
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 10
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 2020 other
than as disclosed in this Annual Report.
Principal activities
The principal activities of the consolidated entity at the date of this report are set out on page 1 of this Annual Report. Apart from the sale
of the Australasian Fibre business, disclosed as a discontinued operation on page 16 of this Annual Report, there were no significant
changes in the nature of the principal activities of the consolidated entity during the financial year ended 30 June 2020.
Events subsequent to the end of the financial year
There have been no matters or circumstances which have arisen between 30 June 2020 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 years.
Likely developments
The Operating and Financial Review section from pages 10 to 16 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 2020 are set out in note 2.2 to the
Financial Statements.
No waiver was sought from the Trustees of the Orora Employee Share Trusts in respect of the entitlement of Treasury Shares held in
the Trusts to be paid from the 2020 interim, final and special dividends, in compliance with Australian Tax Office Tax Determination
(TD 2019/13). The Trusts received dividends on unallocated shares and the Employee Share Trusts were subject to tax at the applicable
rate on dividends received in respect of the unallocated shares.
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 Orora’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.
Following the recent capacity expansion at this facility, Orora received approval from the Clean Energy Regulator for a new calculated
CO2 Baseline under section 22 of the Rule. This facility complies with its obligations under the 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. To comply
with this obligation, Orora provides a report to the Clean Energy Regulator each year.
34
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORT (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 Orora’s internal Sustainability
Team, which liaises directly with divisional and site-based health, safety and environment professionals. The Orora Group’s environmental
performance and material 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 2020.
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
T J Gorman
S L Lewis
B P Lowe
A R H Sindel
J L Sutcliffe
No. of shares(1)
128,574
56,000
91,705
670,191(2)
140,000
131,355
(1) Post 0.8 share consolidation (5 shares became 4).
(2) Details of rights and options over shares in the Company held by B P Lowe are set out in Table 9 of the Remuneration Report.
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
30 Oct 2015
20 Oct 2016
20 Oct 2017
22 Oct 2018
Expiry date
Issue price
Number
under option
30 Sep 2021
30 Sep 2024
29 Aug 2025
30 Aug 2026
31 Aug 2027
1.22
2.08
2.69
2.86
3.58
179,561
307,567
4,024,580
3,509,000
1,417,500
These options do not allow the holder to participate in any share or rights issue of the Company. Refer to the Remuneration Report for
further information.
Shares issued on exercise of options
There were no ordinary shares of the Company issued during or since the financial year ended 30 June 2020 on the exercise of options
granted over unissued shares or interests.
On-market share purchases to satisfy employee share plans
During the financial year ended 30 June 2020, 6,920,691 ordinary shares of the Company were purchased on-market and held on trust to
satisfy obligations under the Company’s employee incentive plans. The average price per security at which these shares were purchased
was $2.68.
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.
ORORA LIMITED ANNUAL REPORT 2020
35
STATUTORY MATTERS
During and since the end of the financial year ended 30 June 2020, the Company has paid or agreed to pay the premiums for an
insurance policy to insure current and previous Directors and other executive officers of the Company against certain liabilities incurred
in that capacity.
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 2020.
Indemnification of auditors
The Company’s auditor is PricewaterhouseCoopers (PwC). During and since the financial year ended 30 June 2020:
• 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 ended 30 June 2020 by the auditor and, in accordance with written
advice provided by resolution of the Audit, Risk & 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, Risk & 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, Risk & 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 the
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. Of note, during the financial year ended 30 June 2020, $821,800 of remuneration was provided to
the auditors related to the sale of the Australasian Fibre business for taxation and other related services. 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 ASIC Corporations (Rounding in Financial/Directors’ Reports) 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.
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/investors/corporate-governance-statement.
36
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORT REMUNERATION
REPORT
Orora’s remuneration framework balances short and
long term returns to shareholders as demonstrated
by the strong alignment between financial performance
and executive remuneration outcomes.
TOM GORMAN
Chair, Human Resources Committee
Dear Fellow Shareholder,
On behalf of the Orora Board of Directors, I am pleased to present Orora’s Remuneration Report for the financial year ended 30 June 2020.
With the retirement of John Pizzey from the Orora Board and from his role as Chairman of the Human Resources Committee (HRC) on 31 May
2020, the Orora Board has entrusted me with the leadership of the HRC. It is a privilege to follow John in this role. I will continue John’s legacy
of working with management and the other Directors to ensure Orora’s Human Resource policies and remuneration framework are structured
to support Orora’s long-term sustainability and continue to attract, retain, and motivate our employees. We will work to ensure our reporting
is transparent and our communications are clear and concise.
Overview
This has been an unprecedented year. In addition to the transition in executive leadership with Brian Lowe succeeding Nigel Garrard and
the sale of Orora’s Australasian Fibre business, the Orora team has been faced with the challenges presented by the COVID-19 pandemic.
Orora has focused on keeping Orora’s people safe, continuing to support Orora’s customers, and ensuring that Orora remains financially
strong to meet the challenges and opportunities ahead.
Leadership Change
Effective 1 October 2019, Brian Lowe replaced Nigel Garrard as Managing Director and Chief Executive Officer of Orora. As previously
announced, the Board set Mr. Lowe’s total fixed remuneration at $1,250,000 (including superannuation). Mr Lowe’s fixed remuneration
is lower than his predecessor, which the Board determined as an appropriate outcome for a new appointee, and this was supported
by comparable benchmark data. Mr Lowe also has a different notice period to his predecessor, with the Board determining that six months
was more appropriate than twelve.
To achieve an appropriate combination of fixed and variable remuneration, and to incentivise performance, the Board determined that
the maximum opportunity Mr Lowe could achieve under the short term incentive award in any one year is 100% of his fixed remuneration,
and his target long term incentive award would be 70% of fixed remuneration. The equity grants associated with these awards were approved
by shareholders at the 2019 Annual General Meeting. Further detail regarding Mr Lowe’s arrangements is set out in this Remuneration Report.
The Remuneration Report also contains information on the remuneration arrangements for the retirement of the former Managing Director
and Chief Executive Officer.
Sale of Australasian Fibre Business
On 30 April 2020, Orora completed the sale of its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper Industries
for $1,720.0 million, with net proceeds after tax and costs of approximately $1,550.0 million. The sale represents compelling value for
shareholders and enabled Directors to return $600.0 million to shareholders on 29 June 2020 on a pre-consolidated basis, following
the 16 June 2020 General Meeting. Shareholders also approved a consolidation of Orora shares at the General Meeting to adjust Orora’s
number of shares equivalent to the quantum of the cash return.
The capital return and share consolidation required the Orora Board to consider any potential impact on Orora’s employee equity incentive
plans, under the rules governing those plans, to minimise or eliminate any material advantage or disadvantage to employees resulting from
the return of capital and share consolidation. The Board determined there would be no change to performance rights, but the options on foot
were restructured. However, this resulted in no material change to the quantum or exercise price of options awarded. Further information
on treatment of options can be found on page 45 [4.2] and in the notice for the General Meeting held on 16 June 2020.
ORORA LIMITED ANNUAL REPORT 2020
37
Company Performance (Continuing Businesses only) and Financial Year 2020 Remuneration Outcomes
The Company’s results for the financial year ended 30 June 2020 for the continuing businesses reflect the more challenging economic and
market conditions, with underlying net profit after tax and EPS lower than the previous year. For the financial year ended 30 June 2020,
Orora has delivered earnings before significant items, interest and tax (EBIT) of $224.3 million.
Orora’s executives are rewarded for annual performance against challenging business plans as well as longer term returns for shareholders.
The short term incentive (STI) assessment includes a number of financial and non-financial metrics (at a Group and individual level).
This year’s STI outcomes reflect the more challenging economic and market conditions, demonstrating the strong alignment between
financial performance, executive remuneration outcomes and the challenging nature of the objectives. Of note, the Board did not exclude
any COVID-19 impact on the Group’s financial performance in the assessment of STI or LTI outcomes.
Achieving completion of a sale of the scale and complexity of the Australasian Fibre business, and doing so whilst at the same time addressing
the challenges associated with COVID-19, was a significant achievement by the Orora team. As a result, the Board has exercised its discretion
to award a one-off bonus to the Executive KMP who led the sale and completion process, as part of the STI program, equating to 20% of their
fixed remuneration. Including this one off bonus, STI payments for the Executive KMP were paid out between 50.8 – 54.7% of their maximum
STI opportunity. Excluding the Fibre sale bonus, the outcomes were between 24.2 – 28.0% of their maximum STI opportunity.
During the financial year ended 30 June 2020, the long-term incentive (LTI) grant awarded in the financial year ended 30 June 2017 was
tested. This grant had a performance period of 1 July 2016 to 30 June 2020. Disappointingly, the LTI grant did not vest, as it did not meet
the performance hurdles due to the outcomes being in line with lower Relative Total Shareholder Return and Earnings per Share over the
relevant performance period.
Reflecting challenging global economic conditions, the Board has assessed remuneration movements and, in line with market, the Board
has determined that there will be no remuneration increase for the Executive KMP for the new financial year.
Remuneration changes during the financial year
As disclosed in the 2019 Remuneration Report and in the Notice of Meeting for the 2019 Annual General Meeting, the Board made some
changes to Orora’s LTI plan which took effect from the start of the financial year ended 30 June 2020.
The Board decided to remove options from the LTI plan, to better align the LTI with market practice and meet the goals of Orora’s
remuneration framework. Performance rights are now the only form of grant under the LTI plan. Performance is measured across a three
year period, with an additional one year employment restriction before vesting.
The Board has deliberated the impact of the Australasian Fibre sale on the LTI awards that are on foot, to ensure fair and equitable treatment
to employees, aligned to shareholders’ interests. As a result, the Board has decided to make no change to the performance hurdles under
the LTI plans, but has decided it is appropriate to re-base the EPS calculations for LTI grants with a vesting date of August 2021 and beyond,
to exclude the Australasian Fibre business which has been sold.
Final Thoughts
It has been a very busy year for everyone at Orora. Achieving the sale of the Australasian Fibre business was a significant milestone and
represents compelling value for shareholders. In an unprecedented year and times, Orora has risen to the challenges presented and
continues to focus on keeping Orora’s team members safe, satisfying Orora’s customers, and ensuring the business remains strong.
On the following pages you will find the FY20 Remuneration Report in its entirety. I am pleased to engage with shareholders should
you require further clarification in respect of this Report.
Warm regards,
TOM GORMAN
Chair, Human Resources Committee
38
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION 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 (Cth) for the Company and its controlled entities (collectively,
the Group or Orora Group) for the financial year ended 30 June 2020.
Structure of this report
Orora’s 2020 Remuneration Report is divided into the following sections:
Section
Message from Tom Gorman, Chair Human Resources Committee
1 Key management personnel
2 Remuneration governance
3 Remuneration strategy and structure
4 FY20 Executive KMP remuneration
5 FY20 Non-Executive Director remuneration
1. Key management personnel
Page No.
39
40
41
44
53
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 28 to 31. The KMP
covered in this report are listed in Table 1 and were designated as KMP in the current year and comparative period unless otherwise stated.
Table 1
Name
Non-Executive Directors
A R H (Rob) Sindel(1)
C I (Chris) Roberts(2)
G J (John) Pizzey(3)
J L (Jeremy) Sutcliffe
A P (Abi) Cleland
S L (Sam) Lewis
TJ (Tom) Gorman(4)
Executive KMP
B P (Brian) Lowe(5)
N D (Nigel) Garrard(6)
S G (Stuart) Hutton
Title
Independent Non-Executive Director and Chairman
Independent Non-Executive Director and Chairman
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Managing Director and Chief Executive Officer
Managing Director and Chief Executive Officer
Chief Financial Officer
(1) Appointed Chairman on 12 February 2020.
(2) Retired as Independent Non-Executive Director and Chairman on 12 February 2020.
(3) Retired as Independent Non-Executive Director and Chair of the Human Resources Committee on 31 May 2020.
(4) Joined the Board on 2 September 2019, and appointed Chair of the Human Resources Committee on 31 May 2020.
(5) Succeeded Nigel Garrard as Managing Director and Chief Executive Officer on 1 October 2019.
(6) Retired as Managing Director and Chief Executive Officer on 30 September 2019.
ORORA LIMITED ANNUAL REPORT 2020
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 the Executive KMP’s service agreements is set out in Table 2.
Table 2
Name
B P Lowe(1)
Term
Open
Notice period
Redundancy/termination payment
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).
N D Garrard(1)
Open
12 months
S G Hutton
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).
Greater of amount payable required by law and payment in lieu of notice
(total termination payment must not exceed 12 months’ Total Fixed Remuneration).
(1) Mr Garrard retired as Managing Director and Chief Executive Officer on 30 September 2019 and was succeeded by Mr Brian Lowe on 1 October 2019.
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 to the
recommendations made by the Human Resources Committee.
S
R
E
D
L
O
H
E
K
A
T
S
R
E
H
T
O
&
S
R
E
D
L
O
H
E
R
A
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S
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T
I
W
N
O
I
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S
N
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C
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 and inclusion across all Orora operations.
The Human Resources Committee may seek
advice from independent remuneration consultants
in determining appropriate KMP and Senior
Executive remuneration.
During the financial year ended 30 June 2020,
the Human Resources Committee did not obtain
a recommendation from remuneration consultants
but did engage in discussions with external advisors
relating to the impact of the special dividend,
capital return and share consolidation approved by
shareholders at the General Meeting on 16 June 2020.
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 and inclusion 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 2020
DIRECTORS’ REPORTREMUNERATION REPORT
2.2. Corporate governance policies related to Executive KMP remuneration
2.2.1. 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. Systems of evaluation for performance of Senior Executives are based on predetermined key performance
indicators, including alignment with Orora’s strategic objectives and company values. The Board retains discretion on variable remuneration
outcomes to mitigate the risk of unintended award outcomes (including forfeiture or claw-back of grants in certain circumstances) and to alter
the vesting conditions of Performance Rights in certain circumstances.
Further detail can be found within the Corporate Governance Policies and Standards section of the Orora website at: www.ororagroup.com/
investors/policies-and-standards.
2.2.2. 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 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 Policies
and Standards section of the Orora website at: www.ororagroup.com/investors/policies-and-standards.
2.2.3. 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 Policies and
Standards section of the Orora website at: www.ororagroup.com/investors/policies-and-standards.
2.2.4. 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.
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 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 strategically
aligned and challenging
performance measures being
set for each of its reward plans.
ORORA LIMITED ANNUAL REPORT 2020
41
3.2. Remuneration Structure – the 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 2020 are included in Section 4.
Table 3
Component
Payment vehicle
Performance measure/s
Link to strategy
Fixed remuneration
consists of cash salary
and retirement benefits(1).
Individual fixed remuneration
is reflective of scope of
role, geographic location,
skills and responsibilities,
experience and performance.
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 (STI)
(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 (LTI)
(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.
Any award achieved will
be delivered following the
release of the end of year
results, as 2/3 cash payment
and 1/3 deferred equity
(Performance Rights)
– deferred for two years.
Executive KMP are allocated
Performance Rights with
vesting based on the
delivery of set performance
measures over a three-year
performance period, with
an additional one year
employment restriction
before vesting. Grants of
Performance Rights are
made using market value
and may be adjusted
nominally at the
Board’s discretion.
Market competitive fixed
remuneration is paid
to attract, motivate and
retain Executive KMP
with the appropriate
experience and talent
to drive Orora’s strategy.
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.
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 includes strategic
initiatives and has a strong
weighting towards financial
growth and returns.
A safety and performance
overlay also applies.
The LTI uses the following
performance hurdles –
• EPS with a RoAFE gateway
• Relative Total Shareholder
Return with an Absolute
Total Shareholder
Return gateway
The LTI builds Executive
KMP equity ownership,
linked to the delivery
of long-term objectives
to align with the interests
of shareholders and acts
as a retention tool.
=
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 specific 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 2020
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 (STI and LTI), designed to directly incentivise performance. The remuneration mix chart below shows remuneration
mix as fixed remuneration, target STI and LTI to be granted during the year for the Executive KMP.
MD & CEO
Other Executive KMP
Fixed
STI
LTI
42%
29%
29%
Fixed
STI
LTI
45%
23%
32%
3.4. Reward delivery
Effective from the start of the financial year ended 30 June 2020, each remuneration component for Orora’s Executive KMP is delivered over
a one to three-year horizon, with an additional one year employment restriction until vesting, on the LTI. 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
d
e
x
i
F
I
T
S
I
T
L
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
1-year employment restriction period
Performance Period (3 years), with an additional one year employment restriction
Rights vest subject to performance hurdles being met
Financial Year 1
Financial Year 2
Financial Year 3
Financial Year 4
Financial Year 5
LTI structure, vesting and performance period for prior financial years
2.
FY18 and FY19 LTI grants which have not yet vested comprised performance rights and options. These awards are subject to a four year
vesting period. Immediately following completion of the vesting period, the performance conditions applicable to the relevant financial year
are tested to determine whether, and to what extent, awards vest. Details of the vesting periods and performance conditions for these
financial years are outlined in section 4.6. To the extent that performance rights or options have not vested following testing, they will lapse
(i.e. participants forfeit their interests in the performance rights or options).
ORORA LIMITED ANNUAL REPORT 2020
43
On 30 April 2020, Orora completed the sale of its Australasian Fibre business. Following the sale and General Meeting held on 16 June 2020,
Orora completed a capital return of $600 million to shareholders on 29 June 2020 on a pre-consolidated basis. Shareholders approved
a consolidation of Orora shares at the general meeting to adjust Orora’s number of shares equivalent to the quantum of the cash return.
The capital return and share consolidation required the Orora Board to consider any potential impact on Orora’s employee equity incentive
plans, under the rules governing the Orora equity incentive plans, to minimise or eliminate any material advantage or disadvantage
to employees resulting from the return of capital and share consolidation. Options on foot under the LTI grants were restructured,
but this resulted in no material change to the quantum or exercise price of options awarded. Further information on this can be found
in the notice for the General Meeting held on 16 June 2020.
The Board has considered the impact of the Australasian Fibre sale on the LTI awards that are on foot, to ensure fair and equitable
treatment to employees, aligned to shareholders’ interests. As a result, the Board determined to make no change to the performance
hurdles under the LTI plans that are on foot, but has exercised its discretion to re-base the EPS calculation to exclude the Australasian Fibre
business which has been sold. This change applies to LTI grants with a vesting date of August 2021 and beyond. The Board determined that
this change would not apply to the FY17 LTI which had a performance period end date of 30 June 2020.
4. FY20 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 in a manner consistent with Orora’s company values and with
a view to generating above-average, sustainable returns for shareholders. The Board retains discretion on variable remuneration outcomes
to mitigate the risk of unintended award outcomes, and to alter the vesting conditions of Performance Rights in certain circumstances.
As noted above, the Board has exercised its discretion to re-base the EPS calculation for LTI awards for eligible employees to exclude the
Australasian Fibre business which has been sold. This change applies to LTI grants with a vesting date of August 2021 and beyond.
On the retirement of Mr Nigel Garrard as Managing Director and Chief Executive Officer on 30 September 2019, the Board determined that
Mr Garrard would be treated as a good leaver for the purposes of his entitlements upon termination. In accordance with the Equity Incentive
Plan rules, this resulted in the early vesting of Mr Garrard’s FY18 STI deferred performance rights, and the granting of the FY19 STI award
by way of a cash payment, rather than one third as deferred performance rights. The Board determined that Mr Garrard would not receive
an STI award for the year ended 30 June 2020. In respect of the LTI, the Board determined that Mr Garrard would retain 50% of the FY19 LTI
awards, and all of the FY17 and FY18 LTI awards, with the awards continuing to be subject to the performance conditions of the respective
grants. Following testing of the performance conditions of the FY17 LTI in August 2020, none of FY17 LTI grants vested. Mr Garrard ceased
to be an Executive KMP on 30 September 2019, but remained an employee until 31 March 2020, including to serve out his notice period,
and received annual and long service leave entitlements on termination. Further information is contained in Table 8.
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 2020. For the purposes of comparison to prior years, Table 4 shows total operations of the Group including the Australasian Fibre
business which was sold during the period, and which is presented in the Financial Report as a discontinued operation.
Table 4
Financial summary for year ended 30 June (Total Operations)
2020(1)
2019(2)
2018(2)
2017(2)
2016(2)
EBIT ($m)
Dividends per ordinary share (cents)
Closing share price (as at 30 June)
EPS growth (%)
NPAT ($m)
TSR (%)(3)
Operating cash flow(4) ($m)
RoAFE(5) (%)
AWC as a % of Sales (%)
289.2
12.0
$2.54
(22.4%)
168.3
335.2
13.0
$3.24
3.7%
217.0
(13.4%)
(5.6%)
59.1
12.1%
10.1%
268.9
13.0%
10.3%
323.4
12.5
$3.57
11.5%
214.1
29.0%
325.3
14.0%
9.1%
302.3
11.0
$2.86
14.6%
186.2
5.9%
331.4
13.6%
8.4%
272.1
9.5
$2.76
24.8%
162.7
36.1%
313.8
12.7%
9.6%
(1) EBIT, NPAT, EPS growth and RoAFE exclude the impact of the significant expense item of $137.2 million (after tax $100.1 million) in respect of restructuring and
asset recoverable amount impairment that have been identified through a review of the North American operations, and a significant item benefit of $164.0 million
(after tax $171.7 million) relating to the sale of Orora’s Australasian Fibre business to Nippon Paper Industries Co., Limited. Refer to Note 1.2 of the financial statements
for further details.
(2) EBIT, NPAT, EPS growth and RoAFE exclude the impact of the significant expense items as referred to in Note 1.2 of the financial statements, and in section 4.2.
Details of significant expense items excluded from these measures, for each year in the above table, can be found in the relevant 2016-2019 Annual Reports.
(3) Total shareholder return (TSR) is calculated as the change in share price for the financial year, plus dividends paid during the financial year, divided by the opening
share price for the financial year.
(4) Operating 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 excluding significant items divided by average funds employed.
44
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION REPORT 4.2. Pay for performance
The Board has set challenging financial and non-financial performance targets for Executive KMP and other Senior Executives and has directly
aligned incentives to the achievement of those targets for the financial year ended 30 June 2020.
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 an Executive KMP and other 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 2020 is provided in sections 4.3, 4.4 and 4.5
in respect of the Executive KMP.
4.3. Fixed remuneration
Fixed remuneration is 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.
A minor adjustment was made in October 2019 for Mr Stuart Hutton to reflect both individual performance and positioning against the
market. An adjustment was made for Mr Brian Lowe in October 2019 to reflect his appointment as Managing Director and Chief Executive
Officer, reflecting this position against the market. Reflecting challenging global economic conditions, the Board has assessed remuneration
movements and, in line with market, the Board has determined that there will be no remuneration increase for the executive KMP for the
financial year ending 30 June 2021.
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.
Orora’s executives are rewarded for annual performance against challenging business plans as well as longer term returns for shareholders.
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 2020 is included
in Table 5. The STI assessment includes a number of financial and non-financial metrics (at a Group and individual level). The EBIT and RoAFE
financial metrics were not met, with EBIT and RoAFE results below prior corresponding period and below the target for the financial year
ended 30 June 2020. This year’s STI outcomes reflect the more challenging economic and market conditions, demonstrating the strong
alignment between financial performance, executive remuneration outcomes and the challenging nature of the objectives. The Board did not
exclude the impact of COVID-19 on the Group’s financial performance in the assessment of STI outcomes.
Achieving completion of a sale of the scale and complexity of the Australasian Fibre business, and doing so whilst at the same time addressing
the challenges associated with COVID-19, was a significant achievement by the Orora team. As a result, the Board has exercised its discretion
to award a one-off bonus to the Executive KMP who led the sale and completion process as part of the STI program, equating to 20% of
their fixed remuneration. Including this one off bonus, STI payments for the Executive KMP were paid out between 50.8 – 54.7% of their
maximum STI opportunity. Excluding the one off bonus for the Australasian Fibre sale, the outcomes were paid out between 24.2 – 28.0%
of maximum STI opportunity.
Significant items (both positive and negative) are assessed each year by the Board to determine whether any significant items should
be included in the STI assessment, and in the past have been generally excluded for the purpose of measuring performance for STIs as they
are not part of ordinary trading results. The Board has determined that the impact of the significant item expenses and gains relating to
restructuring and impairment charges in North America and the sale of Orora’s Australasian Fibre business to Nippon Paper Industries Co.,
Limited will be excluded.
ORORA LIMITED ANNUAL REPORT 2020
45
Table 5(1)
KPI
Group earnings
Earnings before Interest and Tax (EBIT)
Group returns
Return on average funds employed (RoAFE)
Group asset management
Average working capital (AWC)
as a % of sales
Personal strategic measures
Performance against strategic measure/s
in area of strategic influence
Total Scorecard
Safety Overlay
Performance and leadership against
a selection of key safety metrics
Weighting
Overview of performance
50%(2)
10%
10%
30%
The challenging market conditions saw EBIT for the continuing
businesses(1) down 14.3% compared to the year ended 30 June 2019,
with underlying EPS(3) before significant items down from 17.2 cents
for the financial year ended 30 June 2019, to 13.2 cents.
In a difficult operating environment RoAFE fell from 19.5% to 16.0%
in the financial year ended 30 June 2020.
AWC continued to be a priority and the result for the financial year
ended 30 June 2020 was better than the medium/long-term goal
of being less than 10% of sales at 8.3%.
The outcome of these measures varied by individual Executive KMP,
and by individual objective, with assessments ranging from “partially
achieved/not achieved” to “partially achieved/fully achieved”
100%
If not met, may
reduce STI award
by up to 10%
Safety results for the financial year ended 30 June 2020 were positive,
reflecting a tangible improvement in performance. As such, no overlay
was applied but safety improvement initiatives continue across
the business.
(1) Table 5 shows results for the Continuing Businesses. The Continuing Businesses comprise the Beverage Business in Australasia and Orora Packaging Solutions and
Orora Visual in North America. The Australasian Fibre business, which was sold on 30 April 2020, has been treated as a discontinued operation, with earnings
disclosed separately in the FY20 financial statements.
(2) A stretch weighting of 100% applies.
(3) EPS is calculated on the basis that the share consolidation that was completed in June 2020, was in effect from 1 July 2018.
At the conclusion of the financial year ended 30 June 2020, 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 strategic objectives and company values;
• how proactive they were in overcoming challenges in the delivery of the final outcome; and
• what their individual contribution was to the collective outperformance of Orora.
Details of the Executive KMP STI opportunity and actual payments received for the financial year ended 30 June 2020 are provided in Table 6.
Table 6
Name
STI % range
STI Target
% of TFR
Total STI
earned(1)
($)
STI earned
as % of TFR
% of
Maximum
STI forfeited
Cash STI
($)
Deferred
Performance Rights
$
Number(2)
Executive Directors
B P Lowe(3)
N D Garrard(4)
Other Executive KMP
0% to 100% of TFR
70.0%
512,500
54.7%
45.3%
341,667
170,833
66,214
0% to 100% of TFR
70.0%
–
–
100%
–
–
–
S G Hutton
0% to 75% of TFR
50.0%
264,969
38.1%
49.2%
176,646
88,323
34,234
(1) The Total STI earned is calculated based on the Board’s assessment of the Executive KMP’s performance against the agreed STI performance measures. In addition,
during the financial year ended 30 June 2020, the Board exercised its discretion to award a one off contribution to the Executive KMP for their significant contribution
to the achievement of the Australasian Fibre business sale as part of the STI plan, equating to 20% of their fixed remuneration.
(2) The cash and deferred performance rights will be granted in September 2020. Deferred performance right allocations are determined based on the volume-weighted
average price of the Company’s shares for the five trading days prior to 30 June 2020 ($2.58 per share). 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 the recipient on market, however the Company may instead issue new ordinary shares to the recipient.
(3) Mr Brian Lowe was appointed Managing Director and Chief Executive Officer on 1 October 2019 and was designated a KMP from this date. The employee benefits
in the above table for Mr Lowe therefore represent the period over which he was identified as a KMP, being 1 October 2019 to 30 June 2020. Shareholder approval
was obtained at 2019 Annual General Meeting for the grant of deferred performance rights to Mr Lowe for the financial year ended 30 June 2020.
(4) Mr Nigel Garrard retired as Managing Director and Chief Executive Officer of the Company on 30 September 2019 and the Board exercised its discretion not to grant
any STI award to Mr Garrard for the year ended 30 June 2020.
46
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION REPORT 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 calculated as:
• one-third of the total STI award payable following the end of the performance period, divided by
• 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 they either voluntarily leave Orora’s employment during the restriction period,
or if employment is terminated for cause, and is subject to claw-back provisions which will apply if an Executive KMP member has acted
in a manner contrary to Orora values or in a manner that brings Orora, the Group or any company within the Orora Group into disrepute.
4.5. Long-term incentive (LTI)
This section summarises both the LTI component of remuneration offered, and prior year LTI offers that vested, for the Executive KMP,
during the financial year ended 30 June 2020.
4.5.1. LTI awarded during the year
Incentive Securities
The LTI grant during the financial year ended 30 June 2020 (FY20 LTI Grant) was made up of 100% performance rights to acquire fully paid
ordinary shares in the Company (Rights).
Performance period and vesting
Performance will be assessed for the period from 1 July 2019 to 30 June 2022.
Vesting will occur following the release of the full year results for the financial year ending 30 June 2022, anticipated to be in August 2022,
but will be subject to an additional one year employment restriction before vesting.
Performance hurdles
The performance hurdles that apply to the FY20 LTI Grant are detailed in Table 7, and consist of:
• EPS hurdle, with a separate minimum “gateway” based on return on RoAFE; and
• TSR hurdle, which compares the TSR performance of the Company with the TSR performance of each of the entities in a comparator
group (relative TSR), with a separate “gateway” based on absolute TSR (aTSR), which requires that aTSR must not be negative.
The combination of RoAFE and EPS represents a strong measure of overall business performance. The use of a relative TSR condition for
Rights provides a shareholder perspective of the Company’s relative performance against comparable ASX-listed companies, and actual
shareholder returns, with the introduction of an aTSR gateway.
Orora engages the services of an external provider to calculate TSR performance, to ensure independent TSR measurement.
Table 7
LTI hurdles
Managing Director & Chief Executive Officer and other Executive KMP
EPS (with RoAFE gateway)
50% weighting
Performance Rights
Relative TSR (with absolute TSR gateway)
50% weighting
Performance Rights
ORORA LIMITED ANNUAL REPORT 2020
47
• EPS hurdle with RoAFE gateway
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 is calculated as earnings before interest and tax (excluding 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 2020 is 12.5%. 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) excluding 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.
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 18 cents (the normalised EPS outcome for the financial year ended 30 June 2019). 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
t
s
e
v
l
l
i
w
l
t
a
h
t
e
d
r
u
h
S
P
E
o
t
j
t
c
e
b
u
s
s
e
ti
i
r
u
c
e
S
e
v
ti
n
e
c
n
I
f
o
%
100%
75%
50%
25%
0%
100% VESTING
All Incentive Securities subject to this
performance hurdle will vest if the
EPS is 8% p.a. or greater
If the EPS is between 4% p.a. and 8% p.a.,
pro-rata straight line vesting will occur
between 50% and 100%
NO VESTING
If the EPS is less than 4%, no Incentive Securities will vest
Less than 4% p.a.
4% p.a.
At 8% p.a. or greater
% CAGR in EPS over the Performance Period
• TSR hurdle with absolute TSR (aTSR) gateway
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/ASX index as at 1 July 2019 (Comparator Group) (relative TSR).
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 2019)
• 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 trading day of the Performance Period
(up to 30 June 2022).
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.
Rights subject to the TSR hurdle first need to meet a minimum aTSR gateway in order to vest according to the vesting schedule in Chart 3.
The aTSR gateway is a condition that Orora’s aTSR over the Performance Period must not be negative. If Orora’s aTSR over the Performance
Period is negative, no Rights subject to the TSR hurdle will vest, regardless of Orora’s relative TSR performance against the Comparator Group.
48
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION REPORT
Chart 3
t
s
e
v
l
l
i
w
l
t
a
h
t
e
d
r
u
h
R
S
T
o
t
j
t
c
e
b
u
s
i
s
t
h
g
R
f
o
%
100%
75%
50%
25%
0%
100% VESTING
All Rights subject to this performance
hurdle will vest if the TSR ranking of Orora
is at the 75th percentile of the Comparator
Group or above
If the TSR ranking is between the 50th
and 75th percentile, pro-rata straight line
vesting will occur between 50% and 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
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 has acted in a manner contrary to Orora values or in a manner that brings Orora, the Group or any company within
the Orora Group into disrepute.
• The Board also retains discretion to alter the vesting conditions of awards under the LTI where there is 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.
• The capital return and share consolidation required the Orora Board to consider any potential impact on Orora’s employee
equity incentive plans, under the rules governing those plans, to minimise or eliminate any material advantage or disadvantage
to participants resulting from the return of capital and share consolidation. There was no change to Performance Rights.
Information relating to options is set out on page 44.
• The Board has determined to retain the existing performance hurdles and vesting conditions for the on foot awards under the LTI
following the sale of the Australasian Fibre business, but has exercised its discretion to re-base the EPS calculation to continuing
businesses only for awards that remain on foot. This change only applies to grants with a vesting date of August 2021 and beyond.
It does not apply to the FY17 LTI which had a performance period end date of 30 June 2020.
• 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.
4.5.2. LTI outcomes for the year
The performance period for the FY17 LTI award granted to Executive KMP during the financial year ended 30 June 2017 was 1 July 2016
to 30 June 2020. The FY17 LTI award was tested following the end of the financial year ended 30 June 2020. The RoAFE gateway performance
hurdle was not met, therefore it was not necessary to test the EPS hurdle. The Relative TSR hurdle was not achieved. Accordingly, as the
performance hurdles were not achieved, the FY17 LTI award did not vest.
ORORA LIMITED ANNUAL REPORT 2020
49
4.6. Grants of Options and Rights affecting remuneration
Chart 4 details awards granted that have recently been tested or are still in progress (remain unvested) which impact Executive KMP
remuneration for the financial year ended 30 June 2020.
Chart 4
FY20(1)
FY19(2)
r
a
e
Y
t
n
a
r
G
FY18(3)
FY17(4)
FY16(5)
STI Deferred
Performance Rights
Sept
2022
LTI
Rights
Aug 2023
STI Deferred
Performance Rights
Sept
2021
LTI Options and Rights
Aug 2022
STI Deferred
Performance Rights
Sept
2020
LTI Options and Rights
Aug 2021
STI Deferred
Performance Rights
Sept
2019
Award fully vested
LTI Options and Rights
Aug 2020
Vesting conditions not met for
either Options or Rights granted
STI Deferred
Performance Rights
Sept
2018
Award fully vested
LTI Options and Rights
Aug 2019
Options fully vested
Rights 96.0% vested
30 Jun 2016
30 Jun 2017
30 Jun 2018
30 Jun 2019
30 Jun 2020
30 Jun 2021
30 Jun 2022
30 Jun 2023
Full service and performance conditions for rights and options granted in previous financial years are summarised in the Remuneration Report for the relevant year of grant.
(1) Following shareholder approval at the 2019 Annual General Meeting in respect of the grant of STI deferred performance rights to Mr Brian Lowe, the STI deferred
performance rights will be granted in September 2020 (as noted in Table 6, footnote 2). Vesting of STI deferred performance rights is subject to a continued service
condition of two years (from the date of grant). The cash component of the STI award to Mr Lowe will be paid in September 2020. Mr Nigel Garrard retired as
Managing Director and Chief Executive Officer on 30 September 2019. The Board determined that Mr Garrard would not receive an STI award for the year ended
30 June 2020, and was not granted an FY20 LTI award. The LTI for Mr Lowe was granted on 22 November 2019 following shareholder approval at the 2019 Annual
General Meeting. LTI grants to all Other Executive KMP (other than Mr Garrard) occurred on 4 October 2019. Vesting is subject to the EPS hurdle with a RoAFE
gateway and Relative TSR hurdle (comparator group: ASX 50-150) with aTSR gateway. Vesting date will be following the announcement of the full year results for the
financial year ending 30 June 2022, and prior to the ex-dividend date for the full year dividend, and is then subject to a one year post-vesting employment restriction.
(2) Shareholders approved a maximum grant of STI deferred performance rights to Mr Garrard at the 2018 AGM. The number of rights to ordinary shares for this grant
would be determined following the financial year ended 30 June 2019, and be subject to a continued service condition of two years (from the date of grant). On the
retirement of Mr Garrard as Managing Director and Chief Executive Officer of the Company on 30 September 2019, as a good leaver, the Board exercised its discretion
to grant the STI award by way of a cash payment rather than rights to ordinary shares. The amount paid to Mr Garrard was equivalent to the value of shares he would
have received based on a VWAP of Orora shares for the five trading days up to and including 30 June 2019 of $3.23. For all Other Executive KMP, vesting of STI deferred
performance rights granted is subject to a continued service condition of two years (from the date of grant). The FY19 LTI was granted on 22 October 2018. Vesting
is subject to the EPS hurdle with a RoAFE gateway, Relative TSR hurdle (comparator group: ASX 30-130) with aTSR gateway and the Company’s share price being greater
than the exercise price for Options. Vesting date will be following the announcement of the full year results for the financial year ending 30 June 2022, 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 (being five years from the date of vesting).
Upon the retirement of Mr Garrard, the Board determined to leave 50.0% of his FY19 LTI awards on foot, with the awards subject to the performance conditions
of the grant. The remaining 50.0% of the FY19 LTI awards have been forfeited.
(3) FY18 STI deferred performance rights granted to Mr Garrard were early vested upon the retirement of Mr Garrard as Managing Director and Chief Executive Officer
based on the exercise of Board discretion. For all Other Executive KMP, vesting of STI deferred performance rights granted is subject to a continued service condition
of two years (from the date of grant). The FY18 LTI was granted on 20 October 2017. Vesting is subject to the EPS hurdle with a RoAFE gateway, Relative TSR hurdle
(comparator group: ASX 30-130) with aTSR gateway and the Company’s share price being greater than the exercise price for Options. Vesting date will be following the
announcement of the full year results for the financial year ending 30 June 2021, 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 (being five years from the date of vesting). Upon his retirement, the Board determined that Mr Garrard would retain
his FY18 LTI awards, with the awards subject to the performance conditions of the grant.
(4) The FY17 LTI was granted on 30 October 2016. Following testing in August 2020 of the EPS hurdle with a RoAFE gateway, Relative TSR hurdle (comparator group:
ASX 30-130) none of the LTI grants vested.
(5) The FY16 LTI was granted on 30 October 2015. 96% of Rights and 100% of Options of LTI grants vested on 22 August 2019 following testing of the EPS hurdle with
RoAFE gateway, Relative TSR hurdle (comparator group: ASX 50-150) and the Company’s share price being greater than exercise price for the Options. The Options
vested may be exercised until their date of expiry (being five years from the date of vesting).
50
ORORA LIMITED ANNUAL REPORT 2020
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.
Table 8
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
Other
payments(4)
Options
and rights
Total
employee
compensation
Executive Director
B P Lowe
Managing Director and
Chief Executive Officer(3)
N D Garrard
Managing Director and
Chief Executive Officer(4)
Other Executive KMP
S G Hutton
Chief Financial Officer
Total
341,667
91,000
15,752
–
314,574
1,684,741
2020
921,748
2020
962,998
–
–
2019
1,284,468
246
303,739
–
19,772
32,053
15,752
23,138
520,065
676,529
2,195,116
–
1,348,571
2,992,215
2020
2019
670,247
655,718
2020
2,554,993
–
–
–
176,646
79,787
16,565
22,362
518,313
127,337
2019
1,940,186
246
383,526
54,415
25,000
25,000
56,504
48,138
–
–
348,461
1,236,919
486,299
1,269,166
520,065
1,339,564
5,116,776
–
1,834,870
4,261,381
(1) Other benefits include 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. Changes in the value of share-based payments is primarily due to awards being expensed over
their respective performance periods. The amounts presented above, for both 2019 and 2020, 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. If the performance conditions are not met, the Executive KMP will not be entitled to the share-based payment.
(3) Mr Brian Lowe was appointed Managing Director and Chief Executive Officer on 1 October 2019 and was designated a KMP from this date. The employee benefits
in the above table for Mr Lowe therefore represent the period over which he was identified as a KMP, being 1 October 2019 to 30 June 2020.
(4) Mr Nigel Garrard retired as Managing Director and Chief Executive Officer on 30 September 2019 and ceased to be designated as a KMP from this date. The employee
benefits above for Mr Garrard represent the period 1 July 2019 to 31 March 2020 which includes notice period. The amounts disclosed in other payments’ represent
the value of Mr Garrard’s annual and long service leave entitlements received on retirement. Mr Garrard remained an employee for six months during his notice
period to assist with the sale of the Australasian Fibre business but he was not a KMP. He was paid his salary for the duration of his additional employment.
Mr Garrard’s retirement arrangements do not exceed 12 months’ fixed remuneration.
ORORA LIMITED ANNUAL REPORT 2020
51
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 2020 and for the comparative period.
Table 9
Name and holding
Executive Director
B P Lowe(6)
Movements during the financial period
Opening
balance
Granted/
received on
exercise(1)
Sold/
exercised
Purchased
Forfeited/
Lapsed(2)
Other(3)
Closing
Balance
Other information
Vested
during
the year(4)
Accounting
fair value of
grant yet to
vest ($)(5)
100,054
–
(167,547)
670,191
Ordinary Shares
2020
737,684
Short Term Incentive Awards
– Deferred
2020
31,465
Performance Rights
Long Term incentive Awards
– Share Options
2020
1,251,500
–
–
–
– Performance Rights 2020
349,500
270,900(8)
N D Garrard(7)
–
–
–
–
Ordinary Shares
2020
2,914,571 2,018,852 (3,583,385)
2019
3,893,684 2,618,464 (3,598,464)
Short Term Incentive Awards
– Deferred
Performance Rights
2020
2019
Long Term incentive Awards
194,712
–
(194,712)(4)
248,493
75,183
(128,964)
–
–
–
510
887
–
–
–
–
–
–
–
–
–
–
31,465
– 1,251,500
–
620,400
– 1,350,548
– 2,914,571
–
–
–
–
–
–
–
97,604
684,000
1,342,957
–
–
–
–
194,712
194,712
128,964
593,023
– Share Options
2020
4,870,000
–
(1,383,500)(4)
– (333,000)
– 3,153,500 1,383,500
2,377,120
2019
5,954,000
666,000(9) (1,750,000)
–
–
– 4,870,000 1,750,000
2,503,660
– Performance Rights 2020
1,429,500
–
(440,640)(4)
– (155,110)
–
833,750
440,640
1,731,194
2019
1,895,500
273,500(9)
(739,500)
–
– 1,429,500
739,500
2,733,481
Other Executive KMP
S G Hutton
Ordinary Shares
2020
2019
Short Term Incentive Awards
– Deferred
Performance Rights
2020
2019
Long Term incentive Awards
966,948
862,525 (1,384,395)
62,934
12,350(7)
(34,375)(4)
81,900
28,559
(47,525)
445,078
646,715
(525,000)
82,033
(129,764)
519,062
445,078
–
–
–
–
40,909
34,375
122,688
62,934
47,525
192,398
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– Share Options
2020
1,714,500
–
(464,500)(4)
2019
2,046,500
243,000(9)
(575,000)
– Performance Rights 2020
502,500
150,600(8)
(147,840)(4)
2019
643,000
99,500(9)
(240,000)
– 1,250,000
464,500
683,430
– 1,714,500
575,000
833,165
(6,160)
–
–
–
499,100
147,840
990,698
502,500
240,000
994,117
(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 2020 financial
year are as follows: STI (deferred performance rights) 281,543 and LTI Rights 1,417,900. In respect of the LTI, awards are only exercisable on satisfaction of performance
conditions whilst the STI award vests on 1 September 2022. Each share option, performance right and deferred performance right entitles the holder to one fully paid
Orora ordinary share. The fair value of all Options exercised by the Executive KMP during the financial year ended 30 June 2020 is as follows: Mr Stuart Hutton $329,795.
(2) The amounts in this column represent shares lapsed as vesting conditions of the grant were not met, or shares forfeited upon early retirement.
(3) At the General Meeting held on 16 June 2020, the Shareholders approved a share consolidation which reduced the number of Orora’s ordinary shares on issue
by converting every one share to 0.8 shares (5 shares became 4). This column represents the reduction in the Executive KMP ordinary share holding as a result
of the share consolidation.
52
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION REPORT (4) Of the awards that vested during the period no price was payable in respect of the STI deferred performance rights or the LTI Rights, an exercise price of $2.08 per share
was paid in respect of the LTI Options that vested and were exercised. There are no amounts unpaid on shares provided as a result of the exercise of STI deferred
performance rights, LTI Rights or LTI Options during the financial year ended 30 June 2020. No LTI Options lapsed during the financial year ended 30 June 2020.
There are no grants that have vested but not yet been exercised.
(5) The amounts in this column represent 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.
(6) Mr Brian Lowe was appointed Managing Director and Chief Executive Officer effective 1 October 2019 and was designated as a KMP from this date. The opening
balance of Mr Lowe’s ordinary share holding, short term incentive awards and long term incentive awards in the above table represents the number of shares held
for the respective holding at the date he was designated as a KMP.
(7) Mr Nigel Garrard retired as Managing Director and Chief Executive Officer effective 30 September 2019 and ceased to be designated as a KMP from this date.
The closing balance of Mr Garrard’s ordinary share holding, short term incentive and long term incentive awards in the above table represents the number of shares
held for the respective holding at the date he ceased to be a KMP. Upon his resignation Mr Garrard forfeited 50.0% of the FY19 LTI awards (Options and Rights).
(8) The LTI Rights for Mr Hutton were granted on 4 October 2019, have an accounting fair value of $1.69. The LTI Rights for Mr Lowe were granted on 22 November 2019,
have an accounting fair value of $2.23. Subject to meeting performance hurdles, the LTI Rights will vest into ordinary shares with an additional one year employment
restriction. Any rights that do not vest will lapse. No exercise price is payable in respect of the Rights granted. No awards granted during the period vested during
the period.
(9) The LTI Options and Rights were granted on 22 October 2018. The Options have an exercise price of $3.58, an accounting fair value of $0.38 at the date of the grant
and will expire on 31 August 2027. The Rights granted have an accounting fair value of $1.72 for Mr Garrard and $1.91 for Mr Hutton, no exercise price is payable
in respect of the Rights granted.
5. FY20 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 paid by 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 for their role as Board members, plus additional fees for chair or membership
of certain Board Committees to reflect the additional time and responsibility required. Members of the Nomination Committee and Executive
Committee do not receive any additional fees. The Chair of the Board receives an annual fixed fee but does not receive additional fees for
his involvement with Committees. No increase was made to fixed base fees or committee fees, during the financial year ended 30 June 2020.
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.
The Board resolved in August 2020 to adopt an updated Board Charter that, amongst other things, specifies that Non-Executive directors
will be expected to purchase Orora shares (at times when they are permitted to trade) to achieve a shareholding equivalent in value to one
year’s base fee remuneration within 5 years of joining the Board, or going forward, for existing Non-Executive Directors, and thereafter
to maintain at least that level of shareholding throughout their tenure.
ORORA LIMITED ANNUAL REPORT 2020
53
5.3. Non-Executive Director remuneration outcomes
Table 10
$
A R H Sindel(1)
J L Sutcliffe
A P Cleland
S L Lewis
T J Gorman(2)
C I Roberts(3)
G J Pizzey(4)
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Base and
Committee Fees
Superannuation
Benefits
Total
Compensation
277,180
53,490
210,868
210,909
210,868
210,909
215,708
215,795
184,417
–
245,456
397,531
194,546
210,909
1,539,043
1,299,543
19,900
5,082
20,032
20,036
20,032
20,036
20,492
20,501
–
–
16,218
25,000
17,113
20,036
113,787
110,691
297,080
58,572
230,900
230,945
230,900
230,945
236,200
236,296
184,417
–
261,674
422,531
211,659
230,945
1,652,830
1,410,234
(1) Mr Sindel joined the Board on 26 March 2019 and was appointed Chair of the Board effective 12 February 2020.
(2) Mr Gorman joined the Board on 2 September 2019 and was appointed Chair of the Human Resources Committee on 31 May 2020.
(3) Mr Roberts retired from the Board and as Chairman of the Board effective 12 February 2020. Compensation reflects part year due to retirement.
(4) Mr Pizzey retired from the Board effective 31 May 2020. Compensation reflects part year due to retirement.
5.4. Non-Executive Directors’ ordinary shareholdings
Table 11
Number of shares
A R H Sindel(2)
J L Sutcliffe
A P Cleland
S L Lewis
T J Gorman(3)
C I Roberts(4)
G J Pizzey(5)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Opening balance
Purchased
Disposed
Other(1)
Closing balance
–
–
157,551
152,262
155,469
151,288
109,196
104,867
–
–
115,582
579,269
133,363
133,363
110,000
–
6,640
5,289
5,248
4,181
5,434
4,329
70,000
–
102,630
4,582
–
–
–
–
–
–
–
–
–
–
–
–
–
(468,269)
–
–
(22,000)
–
(32,836)
–
(32,143)
–
(22,925)
–
(14,000)
–
–
–
–
–
88,000
–
131,355
157,551
128,574
155,469
91,705
109,196
56,000
–
218,212
115,582
133,363
133,363
(1) At the General Meeting held on 16 June 2020, the Shareholders approved the Share Consolidation which reduced the number of Orora’s ordinary shares on issue by
converting every one share to 0.8 shares (5 shares became 4). This column represents the reduction in the Directors ordinary share holding as a result of the
Share Consolidation.
(2) Mr Sindel joined the Board on 26 March 2019 and was appointed Chair effective 12 February 2020.
(3) Mr Gorman joined the Board on 2 September 2019 and was appointed Chair of the Human Resources Committee on 31 May 2020.
(4) Mr Roberts retired from the Board and as Chairman effective 12 February 2020. The closing balance in the above table represents Mr Roberts’ shareholding at the
date of his retirement.
(5) Mr Pizzey retired from the Board effective 31 May 2020. The closing balance in the above table represents Mr Pizzey’s shareholding at the date of his retirement.
54
ORORA LIMITED ANNUAL REPORT 2020
DIRECTORS’ REPORTREMUNERATION REPORT Directors’ Declaration
This Directors’ Report is made in accordance with a resolution of the Directors.
A R Sindel
Chairman
17 September 2020
ORORA LIMITED ANNUAL REPORT 2020
55
Auditor’s Independence Declaration
As lead auditor for the audit of Orora Limited for the year ended 30 June 2020, I declare that to the best
of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(b) 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.
ANTON LINSCHOTEN
Partner
PricewaterhouseCoopers
Melbourne
17 September 2020
56
ORORA LIMITED ANNUAL REPORT 2020
AUDITOR’S INDEPENDENCE DECLARATION 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. The note disclosures
have been grouped 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.
IN THIS SECTION
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 the
interpretation of the Annual Report
and the financial statements.
Financial statements
Notes to the Financial statements
Financial risk management
Income Statement
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Cash Flow Statement
58
59
60
61
62
About this report
Results for the year
Capital structure and financing
2.1 Capital management
2.2 Dividends
2.3 Net debt
2.4 Equity
1.1 Segment results
1.2 Significant items
1.3 Earnings per share (EPS)
1.4 Income
1.5 Operating costs
63
66
66
70
71
73
74
75
75
76
77
80
83
83
3.1 Trade and other receivables
84
3.2 Inventories
85
3.3 Trade and other payables
3.4 Other assets
85
3.5 Property, plant and equipment 86
87
3.6 Leases
3.7 Intangible assets
91
3.8 Impairment of
Assets and liabilities
non-financial assets
3.9 Provisions
Income tax
4.1 Income tax expense
4.2 Deferred tax balances
92
94
97
97
98
5.1 Market risks
5.2 Credit risk
5.3 Liquidity and funding risk
5.4 Hedging instruments
Group structure
100
101
104
105
107
110
6.1 Principal subsidiary
undertakings and
investments
110
6.2 Business divestment
110
6.3 Orora Employee Share Trust 112
113
6.4 Business acquisitions
Other notes to the
financial statements
7.1 Share-based compensation
7.2 Auditors’ remuneration
7.3 Commitments and contingent
114
114
117
118
liabilities
119
7.4 Orora Limited
121
7.5 Deed of Cross Guarantee
7.6 Related party transactions
123
7.7 Key Management Personnel 123
7.8 New and amended
accounting standards
and interpretations
124
ORORA LIMITED ANNUAL REPORT 2020
57
INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
$ million
Continuing Operations
Sales revenue
Cost of sales
Gross profit
Other income
Sales and marketing expenses
General and administration expenses
Profit from operations(1),(2)
Finance income
Finance expenses(2)
Net finance costs
Profit before related income tax expense
Income tax expense
Profit from continuing operations
Discontinued Operations
Profit from discontinued operations, net of tax
Profit for the financial period attributable to the owners of Orora Limited
Earnings per share for profit from continuing operations attributable
to the ordinary equity holders of Orora Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders
of Orora Limited
Basic earnings per share
Diluted earnings per share
Note
2020
2019
1.1
1.4
1.4
4.1
6.2
1.3
1.3
1.3
1.3
3,566.2
(2,912.7)
3,390.2
(2,704.2)
653.5
686.0
4.8
(213.9)
(357.3)
3.4
(192.4)
(304.5)
87.1
192.5
0.6
(51.1)
(50.5)
36.6
(9.0)
27.6
0.4
(39.8)
(39.4)
153.1
(36.6)
116.5
212.3
239.9
44.7
161.2
Cents
Cents
2.9
2.8
24.9
24.7
12.1
12.0
16.7
16.6
On 30 April 2020, the Group completed the sale of its Australasian Fibre business, refer note 6.2. Accordingly, the financial result of this
business is presented separately as a discontinued operation within this consolidated income statement and the comparative period has
been restated to reflect the current period presentation.
(1) Profit for the current period, for continuing operations, includes a significant item expense of $137.2 million (after tax $100.1 million) relating to restructuring activities
and recoverable asset impairment charges in North America. Profit for the comparative period includes a significant item expense of $19.3 million (after tax $13.9 million)
in respect of restructuring costs associated with re-sizing the business and $50.0 million (after tax $35.0 million) for additional decommissioning costs associated with the
Petrie sale. Refer to note 1.2 for further details.
(2) The Group has initially applied AASB 16 Leases using the modified retrospective approach. Under this method, the comparative information has not been restated.
For the twelve months to 30 June 2020, profit from continuing operations of $87.1 million includes a depreciation charge of $46.4 million relating to right-of-use assets
recognised on application of the new standard. Lease payments for the twelve months in respect of these right-of-use assets totalled $65.9 million. Prior to adoption
of AASB 16 these payments would have been recognised as an expense in profit from operations. In addition, interest expense of $13.4 million has been recognised
within finance expenses with respect to lease liabilities recorded under the new accounting standard.
The above Income Statement should be read in conjunction with the accompanying notes.
58
ORORA LIMITED ANNUAL REPORT 2020
STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
$ million
Profit for the financial period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Cash flow hedge reserve
Unrealised (losses)/gains on cash flow hedges
Realised gains transferred to profit or loss
Realised gains transferred to non-financial assets
Income tax relating to these items
Exchange fluctuation reserve
Exchange differences on translation of foreign operations
Net investment hedge of foreign operations
Net investment hedge reclassified to profit or loss on disposal of foreign operation
Tax effect
Other comprehensive (expense)/income for the financial period, net of tax
Note
2020
239.9
2019
161.2
2.4.2
2.4.2
2.4.2
(5.0)
(0.9)
(0.1)
1.8
10.4
(35.6)
12.1
(3.8)
(21.1)
0.2
(4.6)
(0.1)
1.4
16.7
1.0
–
–
14.6
Total comprehensive income for the financial period attributable to the owners of Orora Limited
218.8
175.8
Total comprehensive income for the financial period attributable to the owners of Orora Limited
arises from:
Continuing operations
Discontinued operations
6.2
(1.2)
220.0
218.8
131.4
44.4
175.8
The consolidated statement of comprehensive income is presented on a total Group basis.
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
ORORA LIMITED ANNUAL REPORT 2020
59
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
$ 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
Right-of-use assets
Deferred tax assets
Goodwill and intangible assets
Derivatives
Other non-current assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Borrowings
Lease liabilities
Derivatives
Current tax liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Other payables
Borrowings
Lease liabilities
Derivatives
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Reserves
Retained earnings
TOTAL EQUITY
Note
2020
2019(1)
2.3
3.1
3.2
5.4
3.4
3.5
3.6
4.2
3.7
5.4
3.4
3.3
2.3
2.3,3.6
5.4
3.9
2.3
2.3,3.6
5.4
4.2
3.9
107.3
460.5
412.9
1.0
36.2
37.7
70.3
674.4
642.0
4.0
55.5
–
1,055.6
1,446.2
671.7
217.3
13.7
435.8
0.9
105.0
1,765.5
–
–
614.7
4.3
87.5
1,444.4
2,472.0
2,500.0
3,918.2
663.5
–
50.8
7.0
–
95.8
817.1
–
399.4
228.6
1.9
–
21.0
650.9
999.1
1.0
–
3.0
10.6
146.9
1,160.6
12.8
959.3
–
2.6
82.3
56.1
1,113.1
1,468.0
2,273.7
1,032.0
1,644.5
2.4.1
2.4.1
2.4.2
2.4.3
335.2
(1.6)
139.2
559.2
488.0
(3.9)
164.7
995.7
1,032.0
1,644.5
(1) The Group has initially applied AASB 16 Leases using the modified retrospective approach. Under this method, the comparative information has not been restated.
Refer to note 7.8 for further details of the impact of application of the new standard.
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
60
ORORA LIMITED ANNUAL REPORT 2020
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
Attributable to owners of Orora Limited
Note
Contributed
equity
Cash flow
hedge
reserve
Share-
based
payment
reserve
Demerger
reserve
Exchange
fluctuation
reserve
Retained
earnings
$ million
Balance at 1 July 2018
Impact of change in accounting policy(1)
Restated balance at 1 July 2018
Net profit for the financial period
Other comprehensive income/(loss):
Unrealised gains on cash flow hedges
Realised losses transferred
to profit or loss
Realised losses transferred
to non-financial assets
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
Proceeds received from employees
on exercise of options
Shares used to settle Team
Member Share Plan issue
Settlement of options and
performance rights
Share-based payment expense
Dividends paid
Balance at 30 June 2019
Impact of change in accounting policy(1)
Restated balance at 1 July 2019
Net profit for the financial period
Other comprehensive income/(loss):
Unrealised losses on cash flow hedges
Realised gains transferred
to profit or loss
Realised gains transferred
to non-financial assets
Exchange differences on
translation of foreign operations
Deferred tax
Total other comprehensive
income/(loss)
Transactions with owners
in their capacity as owners:
Capital return
Purchase of treasury shares
Proceeds received from employees
on exercise of options
Shares used to settle Team Member
Share Plan Issue
Settlement of options and
performance rights
Share-based payment expense
Dividends paid
Balance at 30 June 2020
7.8
2.4.3
2.4.2
2.4.2
2.4.2
2.4.1
2.4.1
2.4.1
2.4.1
7.1
2.2
7.8
2.4.3
2.4.2
2.4.2
2.4.2
2.4.1
2.4.1
2.4.1
2.4.1
2.4.1
7.1
2.2
479.9
–
479.9
–
–
–
–
–
–
–
(10.5)
5.4
1.3
8.0
–
–
484.1
–
484.1
–
–
–
–
–
–
–
(149.6)
(18.6)
8.0
0.7
9.0
–
–
2.9
–
2.9
–
0.2
(4.6)
(0.1)
–
1.4
(3.1)
–
–
–
–
–
–
(0.2)
–
(0.2)
–
(5.0)
(0.9)
(0.1)
–
1.8
(4.2)
–
–
–
–
–
–
–
333.6
(4.4)
17.5
–
17.5
–
132.9
–
132.9
–
–
–
–
–
–
–
–
–
–
–
–
–
132.9
–
132.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8.0)
6.0
–
15.5
–
15.5
–
–
–
–
–
–
–
–
–
–
–
(9.0)
4.6
–
11.1
Total
equity
1,630.5
(7.3)
1,623.2
161.2
0.2
(4.6)
(0.1)
17.7
1.4
14.6
(10.5)
5.4
1.3
–
6.0
(156.7)
1,644.5
(69.8)
1,574.7
239.9
(5.0)
(0.9)
(0.1)
(13.1)
(2.0)
(21.1)
(149.6)
(18.6)
8.0
0.7
998.5
(7.3)
991.2
161.2
–
–
–
–
–
–
–
–
–
–
–
(156.7)
995.7
(69.8)
925.9
239.9
–
–
–
–
–
–
–
–
–
–
(1.2)
–
(1.2)
–
–
–
–
17.7
–
17.7
–
–
–
–
–
–
16.5
–
16.5
–
–
–
–
(13.1)
(3.8)
(16.9)
–
–
–
–
–
–
–
–
–
(606.6)
–
4.6
(606.6)
132.9
(0.4)
559.2
1,032.0
The consolidated statement of changes in equity is presented on a total Group basis.
(1) The Group has initially applied AASB 16 Leases using the modified retrospective approach from 1 July 2019. Under this method, the comparative information has not
been restated. In the prior period the Group has initially applied AASB 15 Revenue from Contracts with Customers using the cumulative effect method from 1 July 2018.
Refer to note 7.8 for further information.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
ORORA LIMITED ANNUAL REPORT 2020
61
CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
$ million
Note
2020
2019
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
Restructuring, asset impairment and decommissioning costs (non-cash significant item expense)
Net gain on disposal of businesses and controlled entities
Net finance costs
Net (gain)/loss on disposal of non-current assets
Fair value loss on financial instruments at fair value through income statement
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
– Increase/(Decrease) in provisions
– (Increase)/Decrease in trade and other receivables
– (Increase)/Decrease in inventories
– Increase/(Decrease) in trade and other payables
Interest received
Interest and borrowing costs paid(1)
Income tax paid
Net cash inflow from operating activities(1)
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
Repayment/(granting) of loans to associated companies and other persons
Payments for acquisition of controlled entities and businesses, net of cash acquired
Payments for property, plant and equipment and intangible assets
Net proceeds on disposal of controlled entities and businesses
Proceeds on disposal of non-current assets
Net cash flows from/(used) in investing activities
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
Capital return
Payments for treasury shares
Proceeds from exercise of employee share options
Proceeds from borrowings
Repayment of borrowings
Principal lease repayments
Dividends paid
Net cash flows (used in)/from financing activities(1)
Net increase/(decrease) 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(2)
3.5,3.6
3.7
1.2
1.2
6.2
2.4.1
2.4.1
2.4.1
2.2
239.9
137.3
12.1
11.3
137.2
(164.0)
57.8
(0.3)
0.2
4.6
15.7
18.3
470.1
(3.0)
(42.2)
(71.2)
(26.2)
(115.3)
212.2
0.6
(57.8)
(136.1)
18.9
0.2
(8.0)
(167.5)
1,637.0
12.8
1,474.5
(149.6)
(18.6)
8.0
1,951.6
(2,557.8)
(80.6)
(606.6)
(1,453.6)
39.8
70.3
(2.8)
2.3
107.3
161.2
122.9
10.0
2.2
79.2
–
39.4
0.3
0.5
6.0
6.4
55.4
483.5
3.8
(33.3)
14.9
(39.4)
(36.9)
392.6
0.4
(43.6)
(51.5)
297.9
(0.2)
(144.1)
(190.2)
–
2.7
(331.8)
–
(10.5)
5.4
2,534.4
(2,358.4)
(0.8)
(156.7)
13.4
(20.5)
87.6
3.2
70.3
The consolidated cash flow statement is presented on a total Group basis. Refer to note 6.2 for further information on the cash flows of the
divested Australasian Fibre business.
(1) The Group has initially applied AASB 16 Leases using the modified retrospective approach. Under this method, the comparative information has not been restated.
As at 30 June 2020, the net cash inflow from operating activities includes an outflow of $20.6 million in respect of the interest expense relating to lease liabilities
recognised under the new standard whilst the net cash flows used in financing activities includes principal lease repayments of $79.7 million. In the comparative
period all cash flows relating to leasing activities were recognised in the net cash inflow from operating activities. Refer to note 7.8 for further information.
(2) For the purpose of the Cash Flow Statement, cash and cash equivalents includes cash on hand and at bank and short-term money market investments,
net of outstanding bank overdrafts. Refer to note 2.3 for details of the financing arrangements of the Group.
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
62
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020
About this report
Basis of consolidation
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.
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 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 2019;
• does not early adopt any Accounting
Standards and Interpretations that have
been issued or amended but are not
yet effective; and
• has applied Group accounting policies
consistently to all periods presented,
with the exception of AASB 16 Leases,
which is only applicable from 1 July 2019
(refer note 7.8).
This general purpose financial report for
the Group for the year ended 30 June 2020
was authorised for issue in accordance with
a resolution of the Directors on 20 August
2020. The Directors have the power to
amend and reissue the financial report.
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.
Judgements and
estimates
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:
Page
92
Note 3.8
Note 3.9
Note 4
94
97
110 Note 6.2
118 Note 7.3
Impairment of
non-financial assets
Provisions
Income tax
Business divestment
Commitments and
contingent liabilities
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.
ORORA LIMITED ANNUAL REPORT 2020
63
Current Period
Significant Events
Coronavirus (COVID-19) pandemic
The COVID-19 pandemic has developed
rapidly in 2020, with restrictions imposed
by the Australian, New Zealand and United
States governments to contain the virus
causing disruption to businesses and
impacting economic activity. The Group’s
response to the pandemic continues to
be guided by local government and health
advice across each jurisdiction in which
Orora operates.
The Group has implemented a number
of measures to mitigate the effects of
COVID-19 and the business continues
to monitor Orora’s response on the
key focus areas including: safety, health
and wellbeing of our people; ensuring
continuity of quality and supply with
customers and preserving ongoing supply
chains, and active financial management.
In May 2020, the Group announced that
the COVID-19 pandemic was adversely
impacting the earnings of the business
by approximately $25.0 million, of which
approximately 90.0% of the disruption
occurred in the Group’s operations in North
America which supplies and services retail,
entertainment and convenience markets.
While the Group has worked hard to
mitigate the impact of COVID-19, and the
majority of Orora’s businesses have been
resilient during the pandemic, many of the
end market segments serviced by the Orora
Visual business were significantly impacted
with widespread closure of retailers and
many customers deferring promotional
activities. The impact of COVID-19 upon the
earnings of Orora Visual, and the uncertainty
that remains over the timing of market
recovery, has contributed to the lower
estimation of future cash flows attributable
to this business. As a result the Group
has recognised an asset impairment charge
of $106.2 million relating to the Orora
Visual business, refer note 1.2 and 3.8.
The ongoing impact of COVID-19 has
increased the uncertainty around accounting
estimates applied in the preparation of
these financial statements. The Group has
developed various accounting estimates
based on current economic conditions
which reflect expectations and
assumptions as at 30 June 2020 about
future events that are believed to be
reasonable in the current economic
environment. There is a considerable
degree of judgement involved around the
impact of COVID-19 and uncertainty
around the timing of economic recovery.
Accordingly, actual economic conditions may
be different from those forecast and the
effect of those differences may significantly
impact accounting estimates included
in these financial statements, including
the recoverability of the Groups’ assets.
Dividend
During the financial year the Group paid
a 30% franked FY19 final dividend of
$78.2 million and a 30% franked FY20
interim dividend of $78.4 million,
both being 6.5 cents per ordinary share.
Upon completion of the sale of the
Australasian Fibre business the Directors
returned $450.0 million to shareholders
via way of a special dividend. This dividend,
paid on 29 June 2020, was 50% franked
and represented a return of 37.3 cents
per share.
Since 30 June 2020 the Directors have
determined a final dividend for FY20
of $53.1 million, unfranked, of 5.5 cents
per ordinary share. Refer note 2.2 for
further details.
Sale of Australasian Fibre business
On 30 April 2020, the Group completed
the sale of its Australasian Fibre business
to a wholly owned subsidiary of Nippon
Paper Industries Co., Limited for an
enterprise value of $1,720.0 million,
with net proceeds after tax and costs
of approximately $1,550.0 million.
As a result of the sale, the Australasian
Fibre business is classified as a discontinued
operation in the financial statements. The
comparative period has been restated to
reflect the current period presentation.
Upon completion of the sale the Directors
considered the capital structure and
related financing requirements of the
Group. A portion of the proceeds received
from the sale were used to repay drawn
borrowings under the Group’s debt
facilities. In determining the timing
and quantity of funds to return to
shareholders, and the method to be used,
the Directors considered a variety of
factors, including: COVID-19 pandemic
related uncertainty; tightening liquidity
in debt markets and the terms of the
Group’s debt facilities; retaining the
Group’s strong balance sheet; and
preserving flexibility to pursue potential
growth opportunities. The Directors
determined to return approximately
$600.0 million to shareholders through
payment of a special dividend and
a return of capital.
Special dividend
On 29 June 2020, $450.0 million was
returned to shareholders via the payment
of a special dividend franked at 50% and
represented a return of 37.3 cents per
share. The dividend reinvestment plan
was suspended and did not apply to the
special dividend.
Capital return and share consolidation
On 16 June 2020, the shareholders
approved a capital return of 12.4 cents
per share payable to each individual
holding shares in Orora as at the record
date of 22 June 2020. The payment
of the capital return of $150.0 million
occurred on 29 June 2020.
At the same time of approving the capital
return, the shareholders also approved
the share consolidation. Under the share
consolidation every ordinary share was
converted into 0.80 ordinary shares
(5 shares became 4).
Net financial impact of divestment
The net gain on disposal, before tax, of
$164.0 million ($171.7 million after tax)
has been recognised and is presented
in ‘profit from discontinued operations,
net of tax’ in the income statement.
Refer note 6.2 for further details
of the divestment.
Business restructuring and
impairment
Restructuring and asset impairment
The Group has recognised a significant
item expense of $31.0 million (after tax
$22.6 million) relating to restructuring
and impairment charges in North America.
This expense includes costs associated
with the closure of the Orora Visual Los
Angeles site as part of a rationalisation
of the Californian footprint, refer note 1.2.
The significant item has been presented
in ‘general and administration expenses’
in the income statement.
Recoverable amount impairment
The Group has recognised an impairment
to the carrying value of the Orora Visual
cash generating unit (CGU) of $106.2 million
($77.5 million after tax). The decrease in the
recoverable amount of the CGU is a result
of resetting the business to adjust to tough
market condition, which were compounded
by the impact of COVID-19 upon many end
market segments serviced by Orora Visual
and the uncertainty that remains in terms
of recovery of the market, refer note 1.2
and 3.8. The significant item has been
presented in ‘general and administration
expenses’ in the income statement.
64
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 The notes to the
financial statements
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;
• Capital structure and financing – outlines
how the Group manages its capital
structure and related financing activities;
• Assets and liabilities – provides details
of the assets used to generate the
Group’s trading performance and the
liabilities incurred as a result;
• Income tax – provides information on
the Group’s tax position and the current
and deferred tax charges or credits
in the year;
• 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 notes to the financial statements
– 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.
Refinancing
During the year, the Group entered into
several new bilateral facilities, most
of which matured, or were cancelled,
at or shortly after the completion of the
sale of the Australasian Fibre business.
The following three facilities that were
entered into during the year have been
retained at 30 June 2020:
• a $35.0 million bilateral facility due to
mature in January 2022 (reduced from
$50.0 million);
• a $35.0 million bilateral facility due
to mature in April 2021 (reduced from
$50.0 million); and
• a $25.0 million bilateral facility due to
mature in March 2021 (reduced from
$35.0 million).
There were no material changes to banking
syndicate counterparties or commercial
terms across these facilities.
On completion of the sale of the
Australasian Fibre business, Orora partly
repaid some of its US Private Placement
notes, reducing the total outstanding
indebtedness on the notes maturing
in July 2025 from USD150.0 million
to USD143.0 million.
After the completion of the sale of the
Australasian Fibre business, Orora also
cancelled or reduced several of its
facilities, including:
• cancelling a $50.0 million bilateral facility
due to mature in September 2020;
• reducing the USD revolving facility due
to mature in April 2024 from USD300.0
million to USD150.0 million; and
• reducing the revolving multicurrency
facility due to mature in April 2022
from $450.0 million to $350.0 million.
Subsequent Events
Share Buy-Back
On 20 August 2020, the Group announced
an on-market buy-back of up to 10.0%
of issued share capital. This represents
approximately 96.5 million shares.
The buy-back will commence in September
2020. The Dividend Reinvestment Plan
will be suspended while the on-market
buy-back is undertaken.
ORORA LIMITED ANNUAL REPORT 2020
65
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, significant items and earnings per share.
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. Earnings before significant items, interest and related income tax expense (EBIT) is a key profit indicator for the
Group. This measure excludes discontinued operations and the effects of individual significant non-recurring gains/losses that
may have an impact on the quality of earnings, and reflects the way the business is managed and how the Directors assess the
performance of the Group.
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.
On 30 April 2020, the Group completed the sale of its Australasian Fibre business. Accordingly, the financial performance and position
of these operations have been presented as discontinued operations within this financial report.
The following segment information has been presented for continuing operations only. Refer to note 6.2 for the financial results and
position of the divested Australasian Fibre business.
The following summary describes the operations of each reportable segment.
Orora Australasia
This segment focuses on the manufacture of beverage packaging products within Australia and New Zealand. The products manufactured
by this segment include glass bottles, beverage cans and wines closures.
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 point
of purchase retail display solutions and other visual communication services.
66
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 The results of the reportable segments for the year ended 30 June 2020 and 30 June 2019 are set out below:
$ million
Reportable segment revenue
Revenue from external customers
Total reportable segment revenue
from continuing operations(3)
Reportable segment earnings
Earnings before significant items, interest,
tax, depreciation and amortisation
Depreciation and amortisation
Earnings before significant items, interest and tax
Allocated finance expense – lease liabilities interest(1)
Earnings before significant items, unallocated 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
Average funds employed(4)
Operating free cash flow(5)
Australasia
North America
Total Reported
2020
2019(1)
2020
2019(1),(2)
2020
2019(1)
785.9
778.7
2,780.3
2,611.5
3,566.2
3,390.2
785.9
778.7
2,780.3
2,611.5
3,566.2
3,390.2
192.3
(45.1)
147.2
(0.9)
146.3
201.0
(42.0)
159.0
–
159.0
157.5
(80.4)
77.1
(12.5)
64.6
135.9
(33.1)
102.8
–
102.8
349.8
(125.5)
224.3
(13.4)
210.9
336.9
(75.1)
261.8
–
261.8
94.6
55.4
22.8
34.9
117.4
90.3
100.7
193.4
(237.8)
56.3
–
56.3
95.4
184.8
(241.7)
38.5
0.3
38.8
543.8
519.8
343.4
219.5
(393.4)
169.5
–
169.5
858.7
417.3
211.6
(484.0)
144.9
(0.3)
144.6
819.4
444.1
412.9
(631.2)
225.8
–
225.8
512.7
396.4
(725.7)
183.4
–
183.4
1,402.5
1,339.2
99.4
134.4
28.3
83.1
127.7
217.5
(1) The Group has initially applied AASB 16 Leases using the modified retrospective approach. Under this method, the comparative information has not been restated.
The depreciation and amortisation expense for the twelve months to 30 June 2020, for continuing operations, includes a depreciation charge of $46.4 million relating
to right-of-use assets recognised. Lease payments for the twelve months to 30 June 2020, in respect of these right-of-use assets, totalled $65.9 million. Prior to
adoption of AASB 16 these payments would have been recognised as an expense in ‘earnings before significant items, interest, tax, depreciation and amortisation’.
Refer note 7.8 for further details.
(2) For the period to 30 June 2019 the North America segment includes the results of Pollock Investments acquired in November 2018 and Bronco Packaging acquired
in August 2018 (refer note 6.3).
(3) Across all segments, in accordance with AASB 15 Revenue from contracts with Customers, the timing of revenue recognition materially occurs at a point in time.
(4) Average funds employed excludes intersegment balances and represents net assets less net debt and assets under construction, at the beginning and end of the
reporting period.
(5) Operating free cash flow represents the cash flow generated from the Group’s operating and investing activities, including lease payments but before interest,
tax and dividends. In the current period, the operating free cash flow of the Australasia segment, includes an outflow of $20.6 million representing expenditure
on the decommissioning of the Petrie site, refer note 1.2.
ORORA LIMITED ANNUAL REPORT 2020
67
Section 1: Results for the year (continued)
1.1 Segment results (continued)
Accounting policies
Segment performance is evaluated based on earnings before significant items, interest and related income tax expense (EBIT). This measure
excludes the effects of significant items which are typically gains or losses arising from events that are not considered part of the core operations
of the business 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, other than interest on lease liabilities, 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.
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. This information has been presented for continuing operations only.
Revenue
Revenue
$
$m
Non-current assets(1)
Non-current assets(1)
$
$m
2,633.0
2,493.5
774.1
703.1
522.7
386.9
683.6
685.4
102.4
93.3
147.2
118.0
2020
2019
71.6
77.8
27.8
20.5
2020
2019
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. Non-current assets in the current period include right-of-use
assets on application of AASB 16, refer note 7.8.
Revenue by product
$ million
Fibre and paper-based packaging
Beverage packaging
Traded packaging products
Total sales revenue
2020
2019
672.0
785.9
2,108.3
719.4
778.7
1,892.1
3,566.2
3,390.2
No single customer, within an operating segment, generates revenue greater than 10% of the Group’s total revenues.
68
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Reconciliation of segmental measures
The following segmental measurements reconcile to the financial statements as follows:
Profit before related income tax expense
$ million
Reported segment earnings
Significant items before related income tax (refer note 1.2)
Unallocated net finance costs
Profit before related income tax expense
Capital spend on the acquisition of property, plant and equipment and intangibles
$ million
Reported segment capital spend
Capital spend of discontinued operations
Total group 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 for total operations(1)
(1) Excludes balances acquired through business combinations. Refer notes 3.5 and 3.7.
Operating free cash flow
$ million
Reported segment operating free cash flow
Operating free cash flow of discontinued operations
Total group operating free cash flow
Add back capital expenditure activities included in segment operating free cash flow
Add back principal lease repayments included in segment operating free cash flow
Less operating activities excluded from operating free cash flow:
Interest received
Interest and borrowing costs paid
Income tax paid
Net cash flows from operating activities
2020
2019
210.9
(137.2)
(37.1)
36.6
2020
117.4
50.2
167.6
–
(0.7)
–
0.9
167.8
2020
127.7
(114.0)
13.7
117.9
80.6
0.6
(57.8)
(136.1)
261.8
(69.3)
(39.4)
153.1
2019
90.3
99.9
190.2
(4.1)
(2.3)
(0.7)
5.0
188.1
2019
217.5
25.9
243.4
149.2
–
0.4
(43.6)
(51.5)
18.9
297.9
ORORA LIMITED ANNUAL REPORT 2020
69
Section 1: Results for the year (continued)
1.1 Segment results (continued)
Working capital
$ million
Reported segment working capital
Add working capital of discontinued operations
Total group 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)
Inventories (note 3.2)
Trade and other payables (note 3.3)
Current prepayments (note 3.4)
1.2 Significant items
2020
225.8
–
225.8
2019
183.4
184.9
368.3
6.0
(1.1)
11.5
–
(6.3)
3.5
0.3
(11.7)
237.0
359.3
460.5
412.9
(663.5)
27.1
674.4
642.0
(999.1)
42.0
237.0
359.3
Significant items are typically gains or losses arising from events that are not considered part of the core operations of the business.
2020
Before
tax
Tax
(expense)/
benefit
Net
of tax
Before
tax
Tax
(expense)/
benefit
(31.0)
(106.2)
–
(137.2)
164.0
–
164.0
26.8
8.4
28.7
–
37.1
7.7
–
7.7
44.8
(22.6)
(77.5)
–
(100.1)
171.7
–
171.7
71.6
(19.3)
–
(50.0)
(69.3)
–
(9.9)
(9.9)
5.4
–
15.0
20.4
–
3.0
3.0
2019
Net
of tax
(13.9)
–
(35.0)
(48.9)
–
(6.9)
(6.9)
(79.2)
23.4
(55.8)
$ million
Continuing operations
Restructuring and asset impairment
Recoverable amount impairment
Decommissioning costs
Discontinuing operations
Net profit on sale of Australasian Fibre business
Restructuring activities
Total significant item income/(expense)
70
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 2020
Restructuring and asset impairments
The majority of the restructuring and asset impairment expense ($20.7 million before tax) is a result of the decision to close the Orora Visual
Los Angeles site as part of a rationalisation of the California footprint in response to the businesses performance being below expectations.
This includes impairments of property, plant and equipment of $9.4 million and provisions for redundancy, restructuring and relocation costs
of $11.3 million. The remainder of the restructuring and asset impairment charge relates to the write off of investments no longer considered
recoverable as a result of the impacts of COVID-19 and restructuring charges incurred to improve business performance. The significant item
has been presented in ‘general and administration expenses’ in the income statement.
Recoverable amount impairments
The Group has recognised an impairment to the carrying value of the Orora Visual cash generating unit (CGU) of $106.2 million ($77.5 million
after tax). The decrease in the estimated recoverable amount compared to prior years reflects the difficulty of management turnaround
initiatives, implemented to address the below expectations business performance, to gain traction in the current year which was materially
compounded by the impact of COVID-19. Whilst the majority of Orora’s businesses have been resilient during COVID-19, many of the end
market segments serviced by Orora Visual were more significantly impacted and uncertainty remains over the timing of recovery of these
markets. These factors have contributed to a lower estimation of future cash flows attributable to this business resulting in the impairment
charge. The impairment was recognised in respect of Orora Visual goodwill ($89.4 million), other intangible assets ($7.3 million) and property,
plant and equipment ($9.5 million). The significant item has been presented in ‘general and administration expenses’ in the income statement,
refer to note 3.8.
Net profit on sale of Australasian Fibre business
On 30 April 2020, the Group completed the sale of its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper Industries
Co., Limited for an enterprise value of $1,720.0 million, with net proceeds after tax and costs of approximately $1,550.0 million received.
The net gain on disposal, before tax, of $164.0 million ($171.7 million after tax) is presented net of transaction costs, exchange fluctuation
reserve reclassified on disposal, write-off of Group assets relating to the Australasian Fibre business, allowances for post close completion
accounts adjustments and provisions for indemnities. The net gain on disposal has been recognised and is presented in the ‘profit from
discontinued operations, net of tax’ in the income statement. Refer note 6.2 for further details of the divestment.
2019
Restructuring and asset impairment
In May 2019, the Group announced that in response to the slow start to earnings experienced early in calendar 2019, cost structures in both
Australasia and North America were reviewed. This review identified that certain parts of the business required restructuring to ensure
operations are optimised and the cost base aligns with the expected market outlook. As a result a significant item expense of $29.2 million
($20.8 million after tax) was recognised in respect of restructuring and impairment charges. This included the recognition of an impairment
charge of $5.2 million ($3.7 million after tax). This significant item expense is presented in ‘general and administration’ expense.
Decommissioning costs
In 2019 the Group recognised a significant item expense of $50.0 million (after tax $35.0 million) relating to additional costs associated
with the decommissioning of the former Petrie Mill site. This significant item expense is presented in ‘general and administration’ expense.
Refer note 3.9.
1.3 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 $239.9 million
(2019: $161.2 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 964.1 million (2019: 963.1 million)(1).
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.
Basic and Diluted EPS, before significant items, is presented below in order to show the business performance of the Group
in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. It is also a measure that
is considered by the Board in determination of dividend payments.
(1) The weighted average number of shares has been restated to reflect the change in the capital structure of the Company as a result the share consolidation,
as if the change had occurred at the beginning of the comparative period.
ORORA LIMITED ANNUAL REPORT 2020
71
Section 1: Results for the year (continued)
1.3 Earnings per share (EPS) (continued)
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
Continuing operations
Profit for the financial period from continuing operations before significant items
Significant items (refer note 1.2)
Discontinued operations
Profit for the financial period from discontinued operations before significant items
Significant items (refer note 1.2)
Profit for the financial period
Weighted average number of ordinary shares for basic earnings per share(1)
Dilution due to share options and rights
Weighted average number of ordinary shares for diluted earnings per share
Earnings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share, before significant items
Diluted earnings per share, before significant items
Earnings per share for continuing operations
Basic earnings per share
Diluted earnings per share
Basic earnings per share, before significant items
Diluted earnings per share, before significant items
2020
2019
$127.7
($100.1)
$165.4
($48.9)
$27.6
$116.5
$40.6
$171.7
$212.3
$239.9
964.1
6.9
971.0
24.9c
24.7c
17.4c
17.3c
2.9c
2.8c
13.2c
13.1c
$51.6
($6.9)
$44.7
$161.2
963.1
10.9
974.0
16.7c
16.6c
22.5c
22.3c
12.1c
12.0c
17.2c
17.0c
(1) The weighted average number of shares has been restated to reflect the change in the capital structure of the Company as a result the share consolidation
(refer note 2.4.1), as if the change had occurred at the beginning of the comparative period.
72
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 1.4 Income
The information presented in this note is for continuing operations only.
$ million
Revenue from sale of goods
Sub-lease income
Other
Total other income
External interest income
Total finance income
Accounting policies
2020
2019
3,566.2
3,390.2
1.3
3.5
4.8
0.6
0.6
0.7
2.7
3.4
0.4
0.4
The Group generates revenue primarily from the sale of packaging materials and products providing customers with an extensive range
of tailored packaging and visual communication solutions.
The Group provides standard packaging materials to its customers as well as customer specific (made-to-order) packaging products.
The Group also sources and provides packaging equipment/solutions to customers who enter into long-term agreements under bundled
contract arrangement.
Revenue is recognised when control of the goods or services are transferred to the customer and the Group’s right to payment arises.
Revenue is measured on the consideration to which the Group expects to be entitled to in a contract with a customer.
For certain customers the Group provides retrospective rebates once the quantity of product purchased during the period exceeds
a threshold specified in the contract. For contracts that include rebates the amount of revenue recognised is adjusted to the anticipated
rebates payable, which is based on the historical purchase history of the customer.
Standard packaging products
Customers obtain control of standard packaging products when the goods are delivered to and have been accepted at their premises.
Invoices are generated at that point in time with payment terms varying depending on the customer, ranging from 30 to 90 days.
Some contracts allow for volume discounts/rebates.
Made-to-order packaging products
Made-to-order packaging products are usually long-term contracts which contain several elements. In the vast majority of cases these
elements represent only one performance obligation to the customer.
In some cases the Group produces these products in advance of delivery. Typically control over these goods remain with the Group until
shipment or when the customer takes physical possession of the goods. The right to payment arises only at the point in time when control
over the good is transferred to the customer.
The Group has determined that for made-to-order products the customer obtains control of the products when the goods are delivered
to and have been accepted at their premises. This represents the point in time when invoices are generated as the right to payment arises.
Payment terms varying depending on the customer, ranging from 30 to 90 days.
Some contracts allow for volume discounts/rebates.
Bundled packaging solutions
The Group sources and provides packaging equipment/solutions to customers who enter into long term product supply arrangements.
The customer obtains control of the equipment and product when the goods are delivered to and have been accepted at their premises.
Invoices are generated at that point in time with payment terms varying depending on the customer, ranging from 30 days to 60 days.
ORORA LIMITED ANNUAL REPORT 2020
73
Section 1: Results for the year (continued)
1.5 Operating costs
The information presented in this note is for continuing operations only.
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
2020
540.2
31.3
7.7
–
0.8
3.8
2019
507.8
27.7
7.5
0.2
1.5
4.5
583.8
549.2
The Group’s accounting policy for liabilities associated with employee benefits is contained in note 3.9, whilst the policy for share-based
payments is set out in note 7.1.
Depreciation and amortisation
$ million
Depreciation
Amortisation of right-of-use assets
Amortisation of finance leased assets
Amortisation of intangibles
Total depreciation and amortisation
Refer to notes 3.5, 3.6 and 3.7 for the Group’s accounting policy and details on depreciation and amortisation.
Finance expenses
$ million
Interest paid/payable:
– Finance charges on right-of-use assets
– Unwinding of discount
– External interest expense
Amount capitalised
Total interest paid/payable
Borrowing costs
Total finance expenses
2020
66.9
46.4
0.5
11.7
125.5
2019
65.8
–
0.5
8.8
75.1
2020
2019
13.4
0.3
35.7
(1.3)
48.1
3.0
51.1
–
0.1
40.8
(1.7)
39.2
0.6
39.8
Refer to note 3.6 for the Group’s accounting policy and details on right-of-use assets and note 2.3 regarding the Group’s external borrowings.
74
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Section 2: 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 refinancing
activities undertaken during the year. 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.
2.1 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 to ensure that its capital structure provides sufficient financial strength to allow it to secure access to debt finance
at reasonable cost. At 30 June 2020, the Group’s on-balance sheet gearing and leverage ratios, excluding lease liabilities, were 22.1%
(2019: 35.1%) and 0.9 times (2019: 1.9 times), respectively.
Australasian Fibre divestment
On 30 April 2020, the Group completed the sale of its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper
Industries Co., Limited for an enterprise value of $1,720.0 million, with net proceeds after tax and costs of approximately
$1,550.0 million (refer note 6.2).
Upon completion of the sale the Directors considered the capital structure and related financing requirements of the Group.
In determining the timing and quantity of funds to return to shareholders, and the method to be used, the Directors considered
a variety of factors, including: COVID-19 pandemic related uncertainty; tightening liquidity in debt markets and the terms of the
Group’s debt facilities; retaining the Group’s strong balance sheet; and preserving flexibility to pursue potential growth opportunities.
In light of these factors the Directors determined to return $600.0 million to shareholders. This return included a special dividend
of $450.0 million (37.3 cents per share) and a capital return of $150.0 million (12.4 cents per share).
Further information regarding the special dividend and capital return can be found within this Annual Report and also in the
Notice of General Meeting lodged with the Australian Stock Exchange on 8 May 2020.
Subsequent Event – On-market Share Buy-Back
On 20 August 2020, the Group announced an on-market buy-back of up to 10.0% of issued share capital. This represents approximately
96.5 million shares. The buy-back will commence in September 2020. The Dividend Reinvestment Plan will be suspended while the
on-market buy-back is undertaken.
ORORA LIMITED ANNUAL REPORT 2020
75
Section 2: Capital structure and financing (continued)
2.1 Capital management (continued)
$ million
Financial borrowings
Total borrowings
Less: Cash and cash equivalents
Net debt
Lease liabilities
Net debt including lease liabilities
Equity and reserves
Contributed equity
Treasury shares
Reserves
Retained earnings
Net Capital
Note
2020
2019
2.3
2.3
2.3
2.4.1
2.4.1
2.4.2
2.4.3
399.4
(107.3)
292.1
279.4
571.5
335.2
(1.6)
139.2
559.2
960.3
(70.3)
890.0
–
890.0
488.0
(3.9)
164.7
995.7
1,032.0
1,644.5
1,603.5
2,534.5
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.
2.2 Dividends
Declared and paid during the period
For the year ended 30 June 2020
Final dividend for 2019 (30% franked)
Interim dividend for 2020 (30% franked)
Special dividend for 2020 (50% franked)
For the year ended 30 June 2019
Final dividend for 2018 (30% franked)
Interim dividend for 2019 (50% franked)
Proposed and unrecognised at period end(1)
For the year ended 30 June 2020
Final dividend for 2020 (unfranked)
For the year ended 30 June 2019
Final dividend for 2019 (30% franked)
(1) Estimated final dividend payable, subject to variations in the number of shares up to record date.
76
ORORA LIMITED ANNUAL REPORT 2020
Cents per
share
Total
$ million
6.5
6.5
37.3
6.5
6.5
5.5
6.5
78.2
78.4
450.0
606.6
78.3
78.4
156.7
53.1
78.4
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Shareholder distributions —
cents per share
Shareholder distributions – cents per share
6.5c
30%
franked
6.5c
30%
franked
5.5c
unfranked
6.0c
30%
franked
5.0c
30%
franked
4.5c
30%
franked
5.0c
30%
franked
6.0c
30%
franked
6.5c
50%
franked
6.5c
30%
franked
FY16
FY17
FY18
FY19
FY20
Final dividend (FY20: proposed)
Interim dividend
Special Dividend
On 30 April 2020, the Group completed the sale of its Australasian Fibre business, refer note 6.2, for an enterprise value of $1,720.0 million,
with net proceeds after tax and costs of approximately $1,550.0 million. The Directors determined to return $600.0 million to shareholders
upon the completion of this transaction which included the payment of a special dividend of $450.0 million.
The dividend was paid on 29 June 2020, represents a return of 37.3 cents per share and was partially franked at 50%. The dividend
reinvestment plan was suspended and did not apply to the special dividend.
Dividend reinvestment plan
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% (2019: 30%) corporate tax rate. The interim dividend for 2020 was
30% franked (2019 Interim: 50.0% franked), the special dividend paid on 29 June 2020 was 50% franked and the proposed final dividend for
2020 is unfranked (2019 final: 30% franked). The balance of franking credits available as at 30 June 2020 is nil (2019 $4.5 million).
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 (CFI) Account. For the 2020 dividends, 70% of the interim dividend,
and 50% the special dividend was sourced from the Company’s CFI account, with 100% of the 2020 final dividend (2019: 70%) to be
sourced from the CFI account. As a result all of the 2020 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 2020 is $69.4 million (2019: $141.5 million), and it is estimated that this
will reduce by $53.1 million (2019: $55.0 million) after payment of the estimated final dividend on 12 October 2020.
2.3 Net debt
In addition to the US Private Placement of notes of USD243.0 million, of which USD100.0 million matures in July 2023 and
USD143.0 million in July 2025, the Group had access to the following committed facilities as at 30 June 2020:
• a $350.0 million revolving multicurrency facility through a syndicate of domestic and international financial institutions,
maturing in April 2022;
• a USD150.0 million five-year USD revolving facility, through a syndicate of domestic and international financial institutions,
maturing in April 2024; and
• three bilateral agreements, one for $25.0 million and two for $35.0 million each, all with separate domestic institutions,
with one maturing in March 2021, one maturing in April 2021 and the other in January 2022.
These facilities are unsecured. During both the current and comparative reporting period Orora Limited has complied with the
financial covenants of its borrowing facilities.
ORORA LIMITED ANNUAL REPORT 2020
77
Section 2: Capital structure and financing (continued)
2.3 Net debt (continued)
$ million
Cash on hand and at bank
Deposits at call
Total cash and cash equivalents
Borrowings
Finance lease liabilities due within one year
Current borrowings
Finance lease liabilities due after one year
Bank loans due after one year
US Private Placement due after one year
Non-current borrowings
Total borrowings
Lease liabilities(1)
Due within one year
Due after one year
Total lease liability
Total debt
Net debt
2020
84.5
22.8
107.3
–
–
0.2
48.0
351.2
399.4
399.4
50.8
228.6
279.4
678.8
571.5
2019
70.2
0.1
70.3
1.0
1.0
0.3
604.1
354.9
959.3
960.3
–
–
–
960.3
890.0
(1) The Group has initially applied AASB 16 Leases using the modified retrospective approach. Refer to note 7.8 for further details of the impact of application
of the new standard.
Accounting policies
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 $352.1 million (excluding borrowing costs) while the fair value of the notes
is $386.0 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.
78
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 2.3.1 Net debt reconciliation
The following table illustrates the cash and non-cash movements of net debt:
$ million
Net debt at 1 July 2018
Business acquisitions
Cash flows
Other non-cash movements
Effect of movements in foreign exchange rates
Net debt at 30 June 2019
Impact of change in accounting policy (refer note 7.8)
Restated net debt at 1 July 2019
Cash flows
Disposal of businesses and controlled entities
Other non-cash movements
Effect of movements in foreign exchange rates
Net debt at 30 June 2020
2.3.2 Borrowings
Assets
Liabilities from financing activities
Cash and cash
equivalents
Lease
liabilities
Bank
loans
US Private
Placement
87.6
7.9
(28.4)
–
3.2
70.3
–
70.3
39.8
–
–
(2.8)
107.3
(1.7)
(0.3)
0.8
–
(0.1)
(1.3)
(595.3)
(596.6)
101.3
245.6
(29.0)
(0.9)
(279.6)
(415.3)
–
(176.0)
2.0
(14.8)
(604.1)
–
(604.1)
595.8
–
(2.9)
(36.8)
(338.1)
–
–
1.0
(17.8)
(354.9)
–
(354.9)
10.4
–
(0.3)
(6.4)
Total
(667.5)
7.6
(203.6)
3.0
(29.5)
(890.0)
(595.3)
(1,485.3)
747.3
245.6
(32.2)
(46.9)
(48.0)
(351.2)
(571.5)
The maturity profile of the Group’s external borrowings drawn down, excluding the impact of capitalised borrowing costs, as at 30 June 2020
is illustrated in the following chart:
Maturity profile of drawn debt by facility
A$ million
Maturity profile of drawn debt by facility – A$ million
207.2
144.9
48.0
FY21
FY22
FY23
FY24
FY25
FY26
Bank Loans
Private Placement
Loans due after one year
At 30 June 2020, bank loans due after one year include:
• $20.0 million and NZD30.0 million drawn under a $350.0 million committed global syndicated multicurrency facility maturing in April 2022
(2019: $295.0 million and USD19.0 million drawn under a $450.0 million committed global syndicated multicurrency facility maturing
in April 2022);
• nil drawings under the USD150.0 million committed syndicated facility maturing in April 2024 (2019: USD200.0 million drawn under
a USD300.0 million committed syndicated facility maturing in April 2024);
• nil drawings under the three bilateral agreements, one for $25.0 million maturing in March 2021, and two for $35.0 million each, one
maturing in April 2021 and the other in January 2022. Each bilateral agreement is held with a separate domestic financial institutions.
The amounts have been drawn under Australian, US dollars and NZ dollars and bear interest at the applicable BBSY, LIBOR and BKBM rate
plus an applicable credit margin.
The US Private Placement of notes of USD243.0 million, consists of USD100.0 million which matures in July 2023 and USD143.0 million
which matures in July 2025.
ORORA LIMITED ANNUAL REPORT 2020
79
Section 2: Capital structure and financing (continued)
2.4 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 2020 are presented in the statement of changes in equity.
2.4.1 Contributed equity
Ordinary shares
Treasury shares
No. ‘000
$ million
No. ‘000
$ million
At 1 July 2018
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Proceeds received from employees on exercise of options
Treasury shares used to settle Team Member Share Plan
Treasury shares used to satisfy issue of CEO Grant
Exercise of vested grants under Employee Share Plans
Treasury shares used to satisfy exercise of vested grants under Employee Share Plans
At 30 June 2019
Capital return and share consolidation(1)
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Proceeds received from employees on exercise of options
Treasury shares used to settle Team Member Share Plan
Treasury shares used to satisfy issue of CEO Grant
Exercise of vested grants under Employee Share Plans
Treasury shares used to satisfy exercise of vested grants under Employee Share Plans
1,206,685
–
–
–
–
8,233
(8,233)
1,206,685
(241,322)
–
–
–
–
6,785
(6,785)
499.7
–
5.4
–
(0.2)
8.0
(24.9)
488.0
(150.0)
–
8.0
–
(0.7)
9.0
(19.1)
At 30 June 2020
965,363
335.2
(6,767)
(3,000)
–
357
50
–
8,233
(1,127)
164
(6,920)
–
234
209
–
6,785
(655)
(19.8)
(10.5)
–
1.3
0.2
–
24.9
(3.9)
0.4
(18.6)
–
0.7
0.7
–
19.1
(1.6)
(1) On 16 June 2020, the shareholders approved a capital return of 12.4 cents per share payable to each individual holding shares in Orora as at the record date of 22 June 2020.
The payment of the capital return of $150.0 million return occurred on 29 June 2020. At the same time of approving the capital return the shareholders also approved
the share consolidation. Under the share consolidation every ordinary share was converted into 0.80 ordinary shares (5 shares became 4).
Ordinary shares
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.
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.
80
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 2.4.2 Reserves
$ million
Cash flow hedge reserve
Share-based payment reserve
Demerger reserve
Exchange fluctuation reserve
Total reserves
2020
2019
(4.4)
11.1
132.9
(0.4)
139.2
(0.2)
15.5
132.9
16.5
164.7
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.
During the 12 months to 30 June 2020 the following movements were recognised in the cash flow hedge reserve:
$ million
Unrealised (losses)/gains on cash flow hedges
Forward exchange contract (loss)/gain
Interest rate swap contracts (loss)/gain
Realised (gains)/losses transferred to profit or loss
Forward exchange contract loss/(gain)
Interest rate swap contracts loss/(gain)
Realised (gains)/losses transferred to non-financial assets
Forward exchange contract loss/(gain)
2020
2019
(5.0)
–
(5.0)
(0.9)
–
(0.9)
0.3
(0.1)
0.2
(6.9)
2.3
(4.6)
(0.1)
(0.1)
Refer to note 5.4 for further information on these derivative 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 Groups 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.
In addition, foreign exchange gains or losses are deferred in equity if they relate to qualifying cash flow hedges, qualifying net investment
hedges or are attributable to part of the net investment in a foreign operation. When a foreign operation is disposed of, the cumulative
amount recognised within the reserve relating to that foreign operation is transferred to the income statement as an adjustment to the
profit or loss on disposal.
ORORA LIMITED ANNUAL REPORT 2020
81
Section 2: Capital structure and financing (continued)
2.4 Equity (continued)
2.4.3 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
Impact of change in accounting policy (note 7.8)
Restated retained earnings at beginning of the period
Net profit attributable to the owners of Orora Limited
Ordinary dividends:
– Final paid (refer note 2.2)(1)
– Interim paid (refer note 2.2)(2)
– Special dividend (refer note 2.2)(3)
Retained earnings at the end of the period
(1) 2019 Final dividend paid on 12 October 2019 (2019: 2018 Final dividend paid on 15 October 2018).
(2) 2020 Interim dividend paid on 9 April 2020 (2019: 2019 Interim dividend paid on 11 April 2019).
(3) Special dividend was paid on 29 June 2020 representing 37.3 cents per ordinary share. Refer note 2.2 for further information.
2020
2019
995.7
(69.8)
925.9
239.9
998.5
(7.3)
991.2
161.2
1,165.8
1,152.4
(78.2)
(78.4)
(450.0)
(78.3)
(78.4)
–
(606.6)
(156.7)
559.2
995.7
82
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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 2, 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 4.
3.1 Trade and other receivables
$ million
Trade receivables
Less loss allowance provision
Other receivables(1)
Total current trade and other receivables
2020
2019
360.4
(3.3)
357.1
103.4
460.5
609.8
(3.2)
606.6
67.8
674.4
(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 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 Group, from time to time, enters into trade financing instruments in respect of trade receivables.
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.
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.
ORORA LIMITED ANNUAL REPORT 2020
83
Section 3: Assets and liabilities (continued)
3.1 Trade and other receivables (continued)
The following tables 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
2020
2019
–
–
–
3.3
3.3
–
0.1
0.5
2.6
3.2
2020
297.5
40.1
18.4
4.4
360.4
2019
511.8
65.0
27.8
5.2
609.8
The Group has recognised a net loss of $7.6 million (2019: $2.8 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
2020
2019
95.2
6.0
271.7
372.9
33.7
–
6.3
40.0
210.5
20.7
329.8
561.0
46.2
1.8
33.0
81.0
412.9
642.0
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 $9.4 million (2019: $4.5 million) with regard to the net realisable value
of inventories which has been recognised in ‘cost of sales’ expense in the income statement.
84
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 3.3 Trade and other payables
$ million
Trade creditors
Other creditors and accruals
Total current trade and other payables
Accounting policies
2020
436.3
227.2
663.5
2019
714.2
284.9
999.1
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 Group, from time to time, enters into trade financing instruments in respect of trade payables.
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 and other current assets
Total other current assets
Non-Current
Contract incentive payments(1)
Other non-current assets
Total other non-current assets
2020
2019
9.1
27.1
36.2
22.0
83.0
105.0
13.5
42.0
55.5
31.4
56.1
87.5
(1) Contract incentives are provided to customers to secure long-term sale agreements and are amortised over the period of the contractual arrangement.
ORORA LIMITED ANNUAL REPORT 2020
85
Section 3: Assets and liabilities (continued)
3.5 Property, plant and equipment
The following note details the physical assets used by the Group to operate the business to generate 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.
$ million
Cost
At 1 July 2018
Additions for the period
Disposals during the period
Additions through business acquisitions
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2019
Additions for the period
Disposals during the period
Disposal of businesses and controlled entities
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2020
Accumulated depreciation and impairment
At 1 July 2018
Depreciation charge
Disposals during the period
Impairment loss
Effect of movements in foreign exchange rates
At 30 June 2019
Depreciation charge
Disposals during the period
Disposal of businesses and controlled entities
Impairment loss(1)
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
Land
improvements
Land
Buildings
Plant and
equipment
Finance
leased assets
Total
51.9
–
(0.1)
–
0.2
0.1
52.1
–
(0.2)
(38.0)
–
–
13.9
(0.4)
(0.1)
0.1
–
–
(0.4)
–
–
0.4
–
–
–
–
51.7
13.9
12.9
–
–
–
0.2
0.1
13.2
–
–
(5.5)
0.7
(0.1)
8.3
(4.1)
(0.3)
–
–
–
(4.4)
(0.2)
–
1.9
–
–
–
(2.7)
8.8
5.6
491.0
4.4
(0.5)
0.1
14.3
3.2
512.5
0.5
(15.2)
(281.5)
31.1
–
247.4
(144.2)
(15.6)
0.3
–
(2.1)
(161.6)
(10.9)
15.3
79.2
–
(0.9)
(0.1)
(79.0)
2,886.9
177.1
(62.6)
2.2
(14.7)
33.3
3,022.2
161.5
(39.9)
(1,875.1)
(31.8)
(1.7)
1,235.2
(1,602.8)
(106.3)
60.2
(1.2)
(20.4)
(1,670.5)
(70.6)
34.5
973.2
(20.6)
0.9
1.4
(751.7)
350.9
168.4
1,351.7
483.5
3.5
–
–
0.9
–
0.2
4.6
–
(0.1)
–
–
0.1
4.6
(1.0)
(0.6)
–
–
(0.6)
(2.2)
(0.6)
–
–
(1.5)
–
–
(4.3)
2.4
0.3
3,446.2
181.5
(63.2)
3.2
–
36.9
3,604.6
162.0
(55.4)
(2,200.1)
–
(1.7)
1,509.4
(1,752.5)
(122.9)
60.6
(1.2)
(23.1)
(1,839.1)
(82.3)
49.8
1,054.7
(22.1)
–
1.3
(837.7)
1,765.5
671.7
(1) The impairment loss recognised during the period includes $9.5 million included in significant items relating to restructuring in North America, $9.4 million recoverable
amount impairments, and $3.1 million write-off of Group assets relating to the Australasian Fibre business refer note 1.2.
At 30 June 2020, no property, plant and equipment was provided as security for any interest-bearing borrowings (2019: nil).
86
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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%
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 Leases
During the period the Group adopted AASB 16 Leases, the new accounting standard for leases, which changed the Group’s accounting
policy in respect of leases. Refer to note 7.8 for details of the impact of the new accounting policy upon the Group.
The following note details leased right-of-use assets utilised used by the Group as a lessee to operate the business to generate revenues
and profits. This includes the lease of warehouse, office and factory facilities, vehicles and other items of plant and equipment.
The cost of these assets represents the net present value of the future lease payments with an amortisation charge recognised in the
income statement to reflect the utilisation of the right-of-use asset over the term of the lease arrangement.
Other than minor sub-lease arrangements, the Group is not a lessor of assets.
The lease for premises typically run for a period of 10 to 15 years with an option to renew the lease after that date. Lease payments for
premises are adjusted annually either through a fixed rental increase, typically 3.0% per annum, or are linked to changes in the consumer
price index or as a result of a market rent review process.
The leases for items of plant and equipment, which includes vehicles, typically run for periods of three to five years. In the majority
of instances when these lease contracts expire they are replaced by new leases for identical underlying assets.
ORORA LIMITED ANNUAL REPORT 2020
87
Section 3: Assets and liabilities (continued)
3.6 Leases (continued)
Right-of-use assets
$ million
Cost
At 1 July 2019
Impact of change in accounting policy (note 7.8)
Restated balance at 1 July 2019
Additions
Derecognition of right-of-use assets
Disposal of businesses and controlled entities
Effect of movements in foreign exchange rates
At 30 June 2020
Accumulated depreciation and impairment
At 1 July 2019
Impact of change in accounting policy (note 7.8)
Restated balance at 1 July 2019
Depreciation charge for the period
Derecognition of right-of-use assets
Reversal of impairment loss
Disposal of businesses and controlled entities
Effect of movements in foreign exchange rates
At 30 June 2020
Net book value
At 1 July 2019
At 30 June 2020
Amounted recognised in the income statement
The following amounts, for continuing operations, were recognised in the income statement:
$ million
Depreciation of right-of-use assets
Expenses relating to short-term leases
Expenses relating to low-value assets
Income from sub-leasing right-of-use assets
Interest on lease liabilities
Property
Plant and
Equipment
Total
–
470.0
470.0
2.7
(0.1)
(222.4)
(1.5)
248.7
–
(16.6)
(16.6)
(46.2)
0.1
2.1
7.4
1.1
(52.1)
–
34.7
34.7
5.0
(0.6)
(12.5)
1.1
27.7
–
–
–
(8.8)
0.5
–
1.1
0.2
(7.0)
–
504.7
504.7
7.7
(0.7)
(234.9)
(0.4)
276.4
–
(16.6)
(16.6)
(55.0)
0.6
2.1
8.5
1.3
(59.1)
453.4
196.6
34.7
20.7
488.1
217.3
2020
46.4
15.8
1.2
(1.3)
13.4
In the comparative period the expense recognised in the income statement for continuing operations, in accordance with AASB 117 Leases,
relating to operating leases was $70.4 million. Payments recognised in the income statement were recognised on a straight-line basis over
the term of the lease. There were no contingent rental payments.
88
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Lease liabilities
$ million
Current lease liabilities
Non-current lease liabilities
2020 1 July 2019
50.8
228.6
279.4
44.9
550.4
595.3
The following table sets out the maturity analysis of future lease payments. Lease liabilities are monitored within the Group’s Treasury function.
$ million
Within one year
Between one and five years
More than five years
2020
62.4
180.5
92.3
335.2
2019
103.7
299.3
88.3
491.3
Accounting policies
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liability
Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentive receivable
• variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date
• amounts expected to be payable by the group under residual value guarantees
• the exercise price of a purchase option if the group is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the group exercising that option.
Payments associated with short-term leases of equipment and vehicles and all low-value assets are recognised on a straight-line basis
as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow
the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms,
security and conditions.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use Asset
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability
• any lease payments made at or before the commencement date less any lease incentives received
• any initial direct costs; and
• restoration costs
Right-of-use assets are generally depreciated over the shorter of asset’s useful life and the lease term on a straight-line basis. If the Group
is reasonably certain to exercise a purchase option, the right-of-use asset is deprecated over the underlying asset’s useful life.
ORORA LIMITED ANNUAL REPORT 2020
89
Section 3: Assets and liabilities (continued)
3.6 Leases (continued)
Lease term
Extension and termination options are included in a number of property leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are
exercisable only by the Group and not the respective lessor.
Deferred tax
A lease transaction is considered a single transaction in which the recognition of the right-of-use asset and the lease liability are integrally
linked. As a result differences that arise between the settlement of the lease liability and the amortisation of the leased asset result in a net
temporary difference on which deferred tax is recognised in accordance with the Group’s deferred tax accounting policy.
Judgements and estimates
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise
an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included
in the lease term if the lease is reasonably certain to be extended (or not terminated).
For leases of properties and equipment, the following factors are normally the most relevant:
• if there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate)
• if any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend
(or not terminate)
• otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required
to replace the leased asset.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise
(or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change
in circumstances occurs, which affects this assessment, and that is within the control of the Group.
90
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 3.7 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 and uniquely strong market positions.
$ million
Cost
At 1 July 2018
Additions for the period
Additions through business acquisitions
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2019
Additions for the period
Disposals during the period
Disposal of businesses and controlled entities
Effect of movements in foreign exchange rates
At 30 June 2020
Accumulated amortisation and impairment
At 1 July 2018
Amortisation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2019
Amortisation charge
Disposals during the period
Disposal of businesses and controlled entities
Impairment loss(1)
Effect of movements in foreign exchange rates
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
Other intangible assets
Computer
software
Other
Goodwill
Total
201.3
6.6
–
(0.6)
4.5
211.8
5.8
(1.1)
(69.6)
0.8
23.0
–
5.2
–
1.2
29.4
–
–
(1.0)
0.6
426.2
–
95.8
–
19.1
541.1
–
–
(80.3)
7.4
650.5
6.6
101.0
(0.6)
24.8
782.3
5.8
(1.1)
(150.9)
8.8
147.7
29.0
468.2
644.9
(137.3)
(7.7)
0.6
(1.9)
(146.3)
(9.5)
1.1
63.9
(9.7)
1.0
(10.3)
(2.3)
–
(0.5)
(13.1)
(2.6)
–
0.4
(7.3)
0.2
(99.5)
(22.4)
(8.2)
–
–
–
(8.2)
–
–
7.9
(89.4)
2.5
(87.2)
(155.8)
(10.0)
0.6
(2.4)
(167.6)
(12.1)
1.1
72.2
(106.4)
3.7
(209.1)
65.5
48.2
16.3
6.6
532.9
381.0
614.7
435.8
(1) The impairment loss recognised during the period includes $96.7 million recoverable amount impairments, and $9.7 million write-off of Group assets relating to the
Australasian Fibre business refer note 1.2.
ORORA LIMITED ANNUAL REPORT 2020
91
Section 3: Assets and liabilities (continued)
3.7 Intangible assets (continued)
Accounting policies
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.
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.
Where there has been a change in the Group’s circumstances such as, technological changes or a decline in business performance, a review
of the value of the intangible assets, including goodwill, is undertaken to ensure the assets’ value has not fallen below its amortised value.
Should an assets’ value fall below its amortised value an additional impairment charge is made against profit and the carrying value of the
asset. Refer note 3.8.
3.8 Impairment of non-financial assets
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 each reporting date);
• where there is an indication that previously recognised impairments (on assets other than goodwill) have changed; and
• at least annually for 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.
92
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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
for impairment. 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.
Goodwill impairment tests
For the purpose of impairment testing, goodwill is allocated to CGUs or groups of CGUs according to the level at which management
monitors goodwill. Goodwill is tested annually or more regularly if there are indicators of impairment.
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 calculation). 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 the expected changes in earnings during the initial five-year period,
discount rates and growth rates applied to the extrapolated periods of the value in use calculation.
The following table presents a summary of the goodwill allocation and the key assumptions used in determining the recoverable amount
of each CGU:
2020
Goodwill allocation ($million)
Pre-tax discount rate (%)
Terminal growth rate (%)
2019
Goodwill allocation ($million)
Pre-tax discount rate (%)
Terminal growth rate (%)
Orora
Packaging
Solutions
Australasia
32.7
9.1
1.5
105.9
9.7
2.0
281.4
9.0
1.5
276.9
9.5
2.0
Orora
Visual
66.9
9.0
1.5
150.1
9.5
2.0
Orora Visual CGU
In applying the Group’s accounting policy in respect of reviewing for impairment of non-financial assets, management’s assessment has
identified an impairment to the carrying value of the Orora Visual CGU of $106.2 million (refer note 1.2).
The decrease in the estimated recoverable amount of this CGU compared to prior years reflects the difficulty of management turnaround
initiatives, implemented to address the below expectations business performance, to gain traction in the current year which was materially
compounded by the impact of COVID-19. Whilst the majority of Orora’s business have been resilient during COVID-19, many of the end
market segments serviced by Orora Visual were more significantly impacted and uncertainty remains over the timing of recovery of these
markets. These factors have resulted in a lower estimation of future cash flows resulting in the impairment charge.
The recoverable amount of the CGU is based on the present value of the future cash flows expected to be derived from the CGU (value in use
calculation). The key assumptions used in assessing the recoverable amount, as set out in the table above, include a pre-tax discount rate
of 9.0% and a terminal growth rate of 1.5%.
Within the value in use calculations, EBIT growth over the five year forecast period reflects management’s expectations that the markets that
Orora Visual serves will continue to be impacted by COVID-19 in the short term and then slowly recover. These market conditions, coupled with
the positive cost benefits from a program of approved business restructuring and improvement strategies, lead to an improved cash flow profit
but at lower levels than previously forecast. For the current period impairment assessment a terminal growth rate of 1.5% was applied beyond
the Groups’ five year internal forecast. This rate is based on market estimates of the long-term average growth rate in the market in which the
Orora Visual operates.
The cash flows of the Orora Visual CGU are sensitive to the uncertainty that remains around the impact and recovery of the market due
to COVID-19. This uncertainty, and any adverse movements in key assumptions, may lead to an additional impairment.
Other CGUs
Based on current economic conditions and performance of the Australasia and Orora Packaging Solutions CGUs, no reasonably possible change
in a key assumption used in the determination of the recoverable value of these CGUs would result in a material impairment to the Group.
ORORA LIMITED ANNUAL REPORT 2020
93
Section 3: Assets and liabilities (continued)
3.8 Impairment of non-financial assets (continued)
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.
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 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.
3.9 Provisions
$ million
2020
Opening balance
Provisions made during the period(1)
Payments made during the period
Released during the period
Disposal of businesses and controlled entities
Unwinding of discount
Effect of movement in foreign exchange rate
Closing balance
Current
Non-current
2019
Opening balance
Provisions made during the period(1)
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
Employee
entitlements
Workers’
compensation,
insurance and
other claims
Asset restoration,
restructuring and
decommissioning
90.5
34.9
(35.6)
(1.2)
(61.8)
–
0.1
26.9
24.9
2.0
87.7
31.6
(30.4)
(0.9)
1.7
–
0.8
90.5
82.4
8.1
6.2
3.3
(2.1)
(0.5)
–
–
–
6.9
6.9
–
10.0
0.8
(3.2)
(1.5)
–
–
0.1
6.2
6.2
–
106.3
28.0
(38.3)
(12.2)
(1.2)
0.2
0.2
83.0
64.0
19.0
60.8
74.9
(29.2)
(0.7)
–
0.4
0.1
106.3
58.3
48.0
Total
203.0
66.2
(76.0)
(13.9)
(63.0)
0.2
0.3
116.8
95.8
21.0
158.5
107.3
(62.8)
(3.1)
1.7
0.4
1.0
203.0
146.9
56.1
(1) During the period a significant item expense of $7.6 million in respect of restructuring charges in North America was recognised, of which the majority ($7.2 million)
is a result of the decision to close the Orora Visual Los Angeles site. In addition, included in the significant item profit on sale of the Australasian Fibre business
are provisions of $19.9 million regarding remaining transaction charges, transition costs and indemnities. In the comparative period a significant item expense
of $24.0 million was recognised in respect of restructuring charges that were identified through a review of the Group’s costs structures in both Australasia and
North America, as well as a significant item expense of $50.0 million for additional decommissioning costs associated with the Petrie site.
94
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Accounting policies
A provision is recognised when: 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.
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, restructuring and decommissioning
Asset restoration and decommissioning
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. If there is no related asset in respect of the restoration or decommissioning activity
changes in the liability are recognised in the income statement.
In the current period, the asset restoration provision includes amounts that have been recognised in respect of certain environmental
contamination indemnities provided under the Australian Fibre sale and purchase agreement. The indemnity relates to certain
pre-existing contamination that may exist at the Australasian Fibre sites as at 30 April 2020, where after this date the contamination
is either a) required to be remediated by a regulatory agency or b) the site is subject to regulatory enforcement action that is directly
related to pre-existing contamination.
At the date of this Report, the Group has recognised a provision for potential future costs that may be incurred in relation to any identified
environmental contamination using all currently available information, which requires significant judgement in respect of determining
a reliable estimate.
In the comparative period the Group recognised a significant item expense of $50.0 million relating to additional costs associated with the
decommissioning of the former Petrie Mill site (refer note 1.2).
The decommissioning of the Petrie site is a significant and complex exercise involving multiple government agencies. The Group continues
to use a specialist environmental consulting firm to manage the completion of the remaining remediation works.
At the date of this Report, decommissioning work continues on site with the estimated costs to complete the decommissioning contingent
on final remediation requirements which require significant judgement in respect of determining a reliable estimate.
Management have measured the Petrie decommissioning provision at 30 June 2020 using all currently available information and considering
applicable legislative and environmental regulations. However, given the complexity and multiple stakeholders involved in the decommissioning
of the Petrie site, there remains a risk of further currently unidentified costs in the future.
Restructuring
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. 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.
Costs totalling $7.6 million have been recognised in relation to the restructuring activities in North America of which the vast proportion
of this ($7.2 million) is a result of the decision to close the Orora Visual Los Angeles Site (refer note 1.2). The majority of the North American
restructuring initiatives will be implemented during the first half of FY21.
The restructuring provision in the current period includes $14.9 million relating to remaining transaction and transitions costs associated
with the sale of the Australasian Fibre business (refer note 6.2). The majority of the costs will be incurred during FY21 as the sale and
separation of the Australasian Fibre business is finalised.
ORORA LIMITED ANNUAL REPORT 2020
95
Section 3: Assets and liabilities (continued)
3.9 Provisions (continued)
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, 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 and decommissioning
Asset restoration and decommissioning provisions require assessments to be made of lease make-good conditions and decommissioning
and environmental risks. The provisions 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 or contract and as required by environmental laws and regulations.
The recognition and measurement of asset restoration and decommissioning provisions is a complex area and requires significant
judgement and estimates. The measurement of the provision can vary as a result of many factors, including, but not limited to:
• changes in the relevant legal or local/national government requirements and any other commitments made to stakeholders
• review of remediation and restoration options
• identification of additional remediation requirements identified during the restorative process
• the emergence of new restoration techniques
In determining an appropriate provision management gives consideration to the results of the most recently completed surveying
data in respect of the remediation process, current cost estimates and appropriate inclusion of contingency in cost estimates
to allow for both known and unknown residual risks.
Estimates can be impacted by the emergence of new restoration techniques and experience at other operations. This is compounded
by the fact that there has been limited restoration activity and historical precedent within the Group against which to benchmark
estimates of the costs to remediate.
All the uncertainties discussed above may result in future actual expenditure differing from the amounts currently provided for
in the balance sheet.
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 evaluated on an ongoing basis and are based
on historical experience and other factors, including expectation of future events that are believed to be reasonable under the
circumstance and are management’s best estimates based on currently available information, legislation and environmental laws
and regulations. The actual result may differ from these account estimates. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
96
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Section 4: 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.
4.1 Income tax expense
The total taxation charge in the income statement for continuing operations 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:
Increase/(Decrease) 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 for continuing operations to prima facie tax payable:
$ million
Profit before related income tax (expense)/benefit
Tax at the Australian tax rate of 30% (2019: 30%)
Net tax effect of amounts which are non-deductible/non-assessable for tax
Over provision in prior period
Foreign tax rate differential
Total income tax expense(1)
2020
36.6
(11.0)
2.0
(9.0)
1.7
(1.7)
(9.0)
(1) Total income tax expense in the current period includes an income tax benefit of $37.1 million in respect of the significant items recognised during the period.
The comparative period includes a net income tax benefit of $20.4 million relating to significant items (refer note 1.2).
ORORA LIMITED ANNUAL REPORT 2020
97
2020
2019
(32.5)
1.7
(30.8)
21.8
(9.0)
32.1
(10.3)
21.8
(42.3)
0.5
(41.8)
5.2
(36.6)
12.1
(6.9)
5.2
2019
153.1
(45.9)
5.5
(40.4)
0.5
3.3
(36.6)
Section 4: Income tax (continued)
4.2 Deferred tax balances
Deferred income tax in the balance sheet relates to the following:
$ million
Deferred tax assets
Net right-of-use lease accounting
Trade receivable loss allowance provision
Valuation of inventories
Employee benefits
Provisions
Financial instruments at fair value
Accruals and other items
Tax set off
Deferred tax asset
Deferred tax liabilities
Property, plant and equipment
Intangible assets
Other items
Tax set off
Deferred tax liability
Deferred income tax in the income statement from continuing operations relates to the following:
$ million
Property, plant and equipment
Net right-of-use lease accounting
Trade receivable loss allowance provision
Intangible assets
Valuation of inventories
Employee benefits
Provisions
Financial instruments at fair value
Accruals and other items
Deferred tax expense
2020
2019
16.9
0.4
14.7
27.3
22.9
2.7
–
84.9
(71.2)
13.7
57.6
4.6
9.0
71.2
(71.2)
–
0.9
14.6
44.2
31.1
1.5
11.9
104.2
(104.2)
–
134.2
24.3
28.0
186.5
(104.2)
–
82.3
2020
(3.9)
1.7
0.1
(19.7)
(4.2)
(1.4)
8.5
0.1
(3.0)
(21.8)
2019
6.9
–
1.1
3.6
(2.8)
(1.9)
(9.5)
–
(2.6)
(5.2)
98
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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.
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 2020
99
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,
Risk & 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), 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
• 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.
• 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.
• Commodity
price risk
The Group is exposed to changes in commodity prices
in respect of the purchase of aluminium raw materials
and the price of electricity.
• 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 – ie as the share price increases
it costs more to acquire the shares on market.
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 mitigates interest rate risk primarily by
maintaining an appropriate mix of fixed and floating rate
borrowing arrangements. Where necessary the Group
hedges interest rate risk using derivative instruments
– eg interest rate swaps. Refer notes 5.1.1 and 5.4.
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 5.1.2 and 5.4.
Where possible, the Group mitigates raw material
commodity price risk by contractually passing rise and
fall adjustments through to customers. To mitigate the
variability of wholesale electricity prices in Australia,
the Group utilises Power Purchase Arrangements (PPAs).
Refer notes 5.1.3 and 5.4.
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, 6.3 and 7.1.
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.
100
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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 that the return on any surplus funds is maximised
through efficient cash management;
• there is a focus on improving operational cash flow
and maintaining a strong balance sheet.
Refer note 5.3.
5.1 Market risks
5.1.1 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 2020, approximately 88.0% (2019: 39.6%) of the Group’s debt is fixed
rate. This is due to the sale of the Australasian Fibre business extinguishing almost all bank debt, while the fixed US Private Placement notes
remain outstanding.
Exposure
The Group had the following variable rate borrowings and interest rate swap contracts outstanding at 30 June:
2020
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2019
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Weighted average
interest rate
Balance
$million
1.6%
–
3.0%
3.7%
48.0
–
48.0
607.0
(25.0)
582.0
ORORA LIMITED ANNUAL REPORT 2020
101
Section 5: Financial risk management (continued)
5.1 Market risks (continued)
5.1.1 Interest rate risk (continued)
Interest rate derivatives used for hedging
The Group did not hold any derivative instruments as at 30 June 2020 in respect of hedging interest rate risk. The below carrying values
represent the fair value of instruments used to hedge interest rate risk together with the associated nominal volume as at 30 June 2019:
2019
Cash flow hedge
Total derivatives in a liability position
Notional item
Balance
$million
AUD25.0 floating to fixed
(0.1)
(0.1)
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 no amounts were recognised directly in equity in relation to interest rate swaps (2019: $0.1 million loss).
Sensitivity
At 30 June 2020, if Australian and US interest rates had increased by 1.0% (100 bps), post-tax profit for the year would have been $0.3 million
lower (2019: $4.2 million lower), net of derivatives. If interest rates on Australian and US dollar denominated borrowings had decreased
by 1.0% (100 bps), post-tax profit for the year would have been $0.3 million higher (2019: $4.2 million higher), net of derivatives.
Amounts recognised in profit or loss and other comprehensive income
During the year no amounts, relating to cash flow hedges on interest rate swaps were recognised in other comprehensive income
(2019: $0.1 million loss). In addition, during the period there were no amounts relating to cash flow hedges that were transferred
from equity to operating profit (2019: $2.3 million loss). During the period there was no amount recognised in the income statement
in respect of hedge ineffectiveness on interest rate swaps contracts (2019: nil).
5.1.2 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).
The Group’s exposure to foreign currency risk at the end of the reporting period in respect of foreign denominated monetary items,
expressed in Australian dollars, was as follows:
2020
Trade receivables
Trade payables
Foreign currency forwards
Cash flow hedges
Buy foreign currency
Sell foreign currency
Held for trading
Buy foreign currency
2019
Trade receivables
Bank loans
Trade payables
Foreign currency forwards
Cash flow hedges
Buy foreign currency
Sell foreign currency
Held for trading
Buy foreign currency
Sell foreign currency
102
ORORA LIMITED ANNUAL REPORT 2020
USD
25.4
(11.0)
88.2
–
1.6
USD
35.5
(312.0)
(19.7)
75.2
–
2.1
–
NZD
0.2
(0.4)
–
0.3
0.1
NZD
0.1
–
(0.3)
–
70.9
0.2
8.7
CAD
12.2
–
–
–
–
EUR
–
–
(16.5)
–
–
6.6
–
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 The following sensitivity illustrates how a reasonably possible change in the US dollar and NZ dollar would impact post-tax profit as at 30 June:
• if the Australian dollar had weakened by 10% against the US dollar with all other variables held constant, post tax profit would have been
$1.2 million higher (2019: post-tax profit $1.3 million higher, equity $34.7 million higher).
• if the Australian dollar had weakened by 10% against the NZ dollar with all other variables held constant, there would have been no impact
upon post tax profit (2019: $0.1 million lower)
Further details regarding foreign currency translation and translation risk is set out below.
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 derivatives
to be entered into.
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
Transaction risk
USD
791.8
(269.3)
2020
NZD
119.5
(23.3)
USD
806.7
(625.8)
2019
NZD
243.6
6.5
34.0%
19.5%
77.6%
(2.7%)
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 on a rolling 18-month basis (mainly relating
to export sales and the purchase of inventory), 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.
Forward exchange derivatives used for hedging
The below carrying values represent the fair value of instruments used to hedge foreign exchange risk together with the associated
nominal volume:
2020
Cash flow hedges
AUD/USD
NZD/USD
NZD/AUD
Total derivatives in an asset/(liability) position
2019
Cash flow hedges
AUD/USD
AUD/NZD
AUD/EUR
NZD/USD
NZD/EUR
NZD/AUD
Total derivatives in an asset/(liability) position
Notional
item
Weighted
Average
$million
Asset
Liability
USD69.3
USD20.5
AUD0.4
0.6600
0.6279
0.9555
USD63.7
NZD(1.7)
EUR22.6
USD13.6
NZD0.1
AUD82.7
0.7184
1.0834
0.6177
0.6784
0.5577
0.9398
0.5
0.2
–
0.7
1.8
–
0.3
0.2
–
0.1
2.4
(5.1)
(1.0)
–
(6.1)
(0.1)
(0.1)
(0.1)
(0.1)
–
(1.3)
(1.7)
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:
• if the Australian dollar had weakened by 10% against the US dollar with all other variables held constant, equity would have been
$6.5 million higher (2019: $11.8 million higher).
• if the Australian dollar had weakened by 10% against the NZ dollar with all other variables held constant, there would have been
no impact upon equity (2019: $0.2 million lower).
ORORA LIMITED ANNUAL REPORT 2020
103
Section 5: Financial risk management (continued)
5.1 Market risks (continued)
5.1.2 Foreign exchange risk (continued)
Amounts recognised in profit or loss and other comprehensive income
During the year, the Group recognised a foreign currency gain of $1.2 million (2019: $1.0 million loss) and a loss of $0.2 million
(2019: $0.5 million loss) 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 $5.0 million (2019: $0.3 million gain) relating to cash flow hedges and a $25.2 million loss (2019: $17.7 million gain)
on the translation of foreign operations was recognised in other comprehensive income. Gains of $0.9 million (2019: $6.9 million gain)
and a gain of $0.1 million (2019: $0.1 million gain), relating to cash flow hedges, were transferred from equity to operating profit and
non-financial assets, respectively.
Upon the divestment of the Australasian Fibre business a foreign currency loss of $12.1 million ($8.3 million after tax) relating to the net
investment hedge of the foreign operations of this disposed business was reclassified to profit on disposal. Refer note 6.2.
5.1.3 Commodity price risk
The Group is exposed to commodity price risk arising from the purchase of aluminium and the price of electricity.
Electricity prices
To manage the risk associated with the variability of wholesale electricity prices in Australia the Group utilises Power Purchase Arrangements
(PPAs). These contracts are entered into in order to economically hedge exposure to fluctuations in electricity prices by purchasing electricity
at predetermined prices.
These derivative instruments meet the requirements for hedge accounting. Settlement of the contracts require exchange of cash for the
difference between the contracted and spot market price. The contracts are measured at fair value and the resultant gains or losses that
effectively hedge designated risk exposures are deferred within the cash flow hedge reserve.
At 30 June 2020 the net carrying value, and fair value, of the instruments used to hedge commodity price risk in respect of electricity
prices is a net liability of $1.5 million (2019: net asset $2.1 million).
Aluminium purchases
In managing commodity price risk associated with aluminium purchases 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 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 2020, the Trust held 655,046 treasury shares in the Company (2019: 1,126,545), 168,000 allocated shares in respect of the
CEO Grant (2019: 264,040) and 180,600 allocated shares in respect of vested shares held on trust that contain a post-vesting holding lock
(2019: nil). Refer to note 6.3 for further details.
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.
104
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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 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 2020, the Group had access to:
• $350.0 million revolving multicurrency facility through a syndicate of domestic and international financial institutions maturing
in April 2022.
• US Private Placement of notes USD243.0 million of which USD100.0 million matures in July 2023 and USD143.0 million matures
in July 2025.
• USD150.0 million five-year USD revolving facility, through a syndicate of domestic and international financial institutions,
maturing in April 2024.
• Three bilateral agreements, one for $25.0 million and two for $35.0 million, each with separate domestic institutions,
with one maturing in March 2021, one maturing in April 2021 and the other in January 2022.
These facilities are unsecured.
The committed and uncommitted standby arrangements and unused facilities of the Group are set out below:
$ million
Committed
Uncommitted
Total
Committed
Uncommitted
Total
2020
2019
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
–
352.2
662.3
1,014.5
–
352.2
48.0
400.2
–
–
614.3
614.3
6.3
–
73.0
79.3
–
–
–
–
6.3
–
73.0
79.3
6.3
352.2
735.3
–
356.1
977.4
1,093.8
1,333.5
–
352.2
48.0
400.2
6.3
–
687.3
693.6
–
356.1
607.0
963.1
–
–
370.4
370.4
6.3
–
116.3
122.6
–
–
–
–
6.3
–
116.3
122.6
6.3
356.1
1,093.7
1,456.1
–
356.1
607.0
963.1
6.3
–
486.7
493.0
ORORA LIMITED ANNUAL REPORT 2020
105
Section 5: Financial risk management (continued)
5.3 Liquidity and funding risk (continued)
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
2020
Non-derivative financial instruments
Trade and other payables
Lease liabilities
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
2019
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 year
or less
663.5
62.7
14.2
740.4
(0.7)
130.2
(135.5)
(5.3)
(6.0)
999.1
32.8
1,031.9
1–2 years
2–5 years
More than
5 years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
–
53.4
61.6
115.0
(0.6)
6.8
(7.0)
(0.2)
(0.8)
8.8
30.6
39.4
–
128.0
171.8
299.8
(0.2)
0.2
(0.2)
–
(0.2)
–
93.3
207.5
300.8
663.5
337.4
455.1
663.5
279.4
399.4
1,456.0
1,342.3
–
–
–
–
–
(1.5)
(1.5)
137.2
(142.7)
(5.5)
(7.0)
(5.5)
(7.0)
3.5
817.1
820.6
0.5
221.3
221.8
1,011.9
1,101.8
2,113.7
1,011.9
960.3
1,972.2
0.5
0.5
209.1
(208.4)
0.7
1.2
18.9
(19.0)
(0.1)
0.4
1.0
1.6
(1.5)
0.1
1.1
–
–
–
–
–
2.0
2.0
229.6
(228.9)
0.7
2.7
0.7
2.7
106
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 5.4 Hedging instruments
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 transaction risk is 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 electricity and 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 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.
• Power Purchase Arrangements are derivative instruments that are used to hedge transaction risk associated with the variability
of wholesale electricity prices in Australia. These forward commodity contracts exchange a variable wholesale price of electricity
for a fixed electricity price.
In respect of managing commodity price risk associated with aluminium purchases the Group uses forward commodity contracts.
Forward commodity contracts are derivative 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).
All derivative financial instruments utilised by the Group are hedges of highly probable forecast transactions 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.
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.
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.
ORORA LIMITED ANNUAL REPORT 2020
107
Section 5: Financial risk management (continued)
5.4 Hedging instruments (continued)
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.
For the purposes of hedge accounting, hedges are classified as fair value hedges, cash flow hedges or net investment hedges and are accounted
for as set out in the table below.
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’.
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 it’s intrinsic value only.
If only the intrinsic value is designated,
the option’s time value that matches
the terms of the hedged item is be
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.
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.
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.
108
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Fair value measurement
The following table sets out the fair value of derivative financial instruments utilised by the Group, analysed by type of contract.
There were no transfers between level 1 and 2 for recurring fair value measurements during the year. The Group does not hold any
material level 3 financial instruments.
$ million
Cash flow hedges
Interest rate swap contracts
Foreign exchange derivative contracts
Electricity and commodity derivatives
Total derivatives in an asset/(liability) position
Current asset/(liability)
Non-current asset/(liability)
Level 2 Fair Value Hierarchy
2020
2019
Note
Asset
Liability
Asset
Liability
5.1.1
5.1.2
5.1.3
–
0.6
1.3
1.9
1.0
0.9
–
(6.1)
(2.8)
(8.9)
(7.0)
(1.9)
–
2.4
5.9
8.3
4.0
4.3
(0.1)
(1.7)
(3.8)
(5.6)
(3.0)
(2.6)
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, Risk & 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, Risk & 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: Financial instruments traded in an active market (such as publicly traded derivatives, and trading and available-for-sale
securities). Fair value is from a quoted price, for an identical asset or liability at the end of the reporting period, traded in an active
market. The quoted market price used for assets is the last bid price.
Level 2: Financial instruments that are not traded in an active market (for example over-the-counter derivatives). Fair value is
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: Financial instruments for which no market exists in which the instrument can be traded. Where 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),
the instrument is included in level 3.
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 – ie 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 electricity and aluminium 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 2020
109
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 divestments and acquisitions that occurred 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(1)
Orora Packaging Australia Pty Ltd
Orora Packaging New Zealand Ltd
Orora Packaging Solutions
Landsberg Orora
Orora Visual TX LLC
Orora Visual LLC
Pollock Investments Incorporated
Australia
Australia
New Zealand
United States
United States
United States
United States
United States
Ownership interest
2020
–
100%
100%
100%
100%
100%
100%
100%
2019
100%
100%
100%
100%
100%
100%
100%
100%
(1) The divestment of the Australasian Fibre business consisted of an asset sale and the disposal of a number of wholly owned subsidiaries including Specialty Packaging
Group Pty Ltd (refer note 6.2).
6.2 Business divestment
On 30 April 2020, the Group completed the sale of its Australasian Fibre business (Fibre) to a wholly owned subsidiary of Nippon Paper
Industries Co., Limited for an enterprise value of $1,720.0 million, with net proceeds after tax and costs of approximately $1,550.0 million.
The Fibre business is classified as a discontinued operation, accordingly the financial statements have been presented in the following manner:
• the consolidated income statement presents the Fibre business, and the profit on disposal of this business, as a discontinued operation.
As a consequence the financial results of the Fibre business are presented separately within the consolidated income statement.
The comparative period has been restated to reflect the current period presentation;
• the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow
statement have been presented on a total Group basis.
Financial information relating to the discontinued operation is set out below.
110
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Results of discontinued operation
The results of the Fibre business, which have been included in the profit for the year, were as follows:
$ million
External revenue
External expenses
Profit from operations
Income tax expense
Profit from operations, net of tax
Gain on sale of discontinued operation(1)
Income tax benefit on gain on sale of discontinued operation
Profit from discontinued operations, net of tax(2)
Total comprehensive income from discontinued operations(2)
Basic earnings per share
Diluted earnings per share
2020
2019
1,092.9
(1,035.3)
1,371.3
(1,307.7)
57.6
(17.0)
40.6
164.0
7.7
212.3
220.0
22.0c
21.9c
63.6
(18.9)
44.7
–
–
44.7
44.4
4.6c
4.6c
(1) The net gain on disposal, before tax, of $164.0 million is presented net of transaction costs, exchange fluctuation reserve reclassified on disposal, write-off of Group
assets relating to the Fibre business, allowances for post closed completion accounts adjustments and provisions for indemnities.
(2) The profit from discontinued operations, net of tax, and total comprehensive income from discontinued operations is entirely attributable to the owners of Orora Limited.
Cash flows from/(used in) discontinued operations
$ million
Net cash flow (used)/from operating activities
Net cash flows from/(used) in investing activities(1)
Net cash flow from in financing activities
Net cash inflow for the period
(1) The cash inflows from investing activities includes a net inflow of $1,637.0 million from the sale of the Fibre business.
Effect of disposal on the financial position of the Group
The following table sets out the carrying amounts of assets, liabilities and equity disposed of at 30 April 2020:
$ million
Property, plant and equipment
Right-of-use assets
Intangible assets
Inventories
Trade and other receivables
Other assets
Assets disposed
Trade and other payables
Lease liabilities
Provisions
Liabilities disposed
Exchange fluctuation reserve, net of tax
Reserve recycled to income statement on disposal
2020
2019
(87.1)
1,589.7
103.3
1,605.9
101.2
(100.7)
3.5
4.0
April 2020
1,145.4
226.4
78.7
245.3
243.0
26.5
1,965.3
177.2
245.6
63.0
485.8
(8.3)
(8.3)
ORORA LIMITED ANNUAL REPORT 2020
111
Section 6: Group structure (continued)
6.2 Business divestment (continued)
At 30 June 2020, the accounting for the divestment of the Fibre business has been provisionally determined as the customary post-close
completion accounts adjustment process remains in progress. This process may result in adjustments to the value attributable to the profit
on sale as reported above.
Included within the sale and purchase agreement is an indemnity with regards to potential environmental contamination. The indemnity
relates to certain pre-existing contamination that may exist at the Australasian Fibre sites as at 30 April 2020, where, after this date, the
contamination is either a) required to be remediated by a regulatory agency or b) the site is subject to regulatory enforcement action that
is directly related to pre-existing contamination.
The Group has recognised a provision for potential future costs that may be incurred in relation to any identified environmental contamination
as part of the net profit on sale of $164.0 million. The provision as at 30 June 2020 represents management’s best estimate of the potential
liability under the indemnity, using all currently available information and considering the scope of the indemnity.
Judgements and estimates
The determination of the outcomes of the post-close completion accounts adjustment processes and future indemnity claims
involves significant management judgement. The judgements, estimates and assumptions used in determining the profit on sale
as at 30 June 2020 are management’s best estimate based on currently available information.
The actual outcomes may differ from the accounting estimates made at 30 June 2020. Any revisions to accounting estimates will
be recognised in net profit/loss from discontinued operations in the period in which the estimate is revised.
The Group did not dispose of any controlled entities or businesses during the comparative period.
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.
As at 30 June 2020, the Trust held 655,046 treasury shares in the Company (2019: 1,126,545), 168,000 allocated shares in respect of the
CEO Grant (2019: 264,040) and 180,600 shares held on trust in respect of vested grants that contain a post-vesting holding lock (2019: nil).
Allocated shares
Allocated shares represent those shares that have been purchased and awarded to employees under the CEO Grant (refer note 7.1)
and shares that are held on trust in respect of vested grants that contain a post-vesting holding lock.
Shares granted to an employee under the CEO Grant, and vested shares that contain a post-vesting holding lock, 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 and for those vested shares with a post-vesting holding lock, 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 Groups 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 2.4.1.
Accounting policies
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.
112
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 6.4 Business acquisitions
The Group did not acquire any controlled entities or businesses during the 12-month period ending 30 June 2020. The following investments
were acquired in the comparative period and the accounting for these acquisitions has been completed.
Pollock Investments Incorporated
On 28 November 2018, the Group acquired 100% of the issued share capital of Pollock Investments Incorporated (Pollock), a market leading
provider of packaging and facility supplies head quartered in Texas, USA. In addition to six distribution centres located throughout Texas
the business has distribution centres in Georgia, North Carolina, New Jersey and California. Pollock predominantly services industrial,
retail and facility supplies market segments and also operates a corrugated box manufacturing plant and in-house packaging design service
in Dallas, Texas.
From the date of acquisition to 30 June 2020 consideration of $111.9 million (USD80.4 million) has been paid. This includes a deferred
consideration USD5.0 million indemnity holdback of which USD3.0 million was paid during the period to 30 June 2020, whilst USD2.0 million
was paid in the comparative period.
The fair value of the net identifiable assets acquired was $44.9 million (USD32.9 million). The resulting goodwill of $67.0 million
(USD47.8 million) is mainly attributable to the synergies expected to be achieved from integrating the business purchased into the
Group’s existing North American operations and the skills and talent of the workforce in the newly acquired businesses.
The results of Pollock are included in the North America segment from the date of acquisition.
Bronco Packaging
On 31 August 2018, the Group acquired the assets and operations of Bronco Packaging Corporation, a business which serves corporate
accounts in the fresh food and manufacturing industry and provides an ‘on-demand’ packaging delivery service to its customers which are
predominately located in Texas.
From the date of acquisition to 30 June 2020 consideration of USD20.6 million ($28.4 million) has been paid. This includes a deferred
consideration payment of USD1.6 million arising as a result of customary completion processes. The fair value of the net identifiable assets
acquired was USD1.9 million. The resulting goodwill recognised represents the synergies expected to be achieved from integrating the
Bronco business into the Group’s existing North American operations.
The results of the business are included in the North America segment from the date of acquisition.
Accounting policies
The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other
assets of a business are acquired.
In accordance with the acquisition method the Group measures goodwill, at acquisition date, as the fair value of the consideration transferred
less the fair value of the identifiable assets and liabilities acquired. The fair value of the consideration transferred comprises the initial cash paid
and an estimate for any future contingent or deferred payments the Group may be liable to pay.
The application of the acquisition method requires certain estimates and assumptions to be made particularly around the determination of
fair value of: any contingent or deferred consideration; the acquired intangible assets; property, plant and equipment; and liabilities assumed.
Such estimates are based on the information available at the acquisition date and valuation techniques which require considerable judgement
in forecasting future cash flows and developing other assumptions.
ORORA LIMITED ANNUAL REPORT 2020
113
Section 7: Other notes to the Financial Statements
IN THIS SECTION
This section includes additional financial information that is required by the accounting standards and the Corporations Act 2001,
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 $4.6 million (2019: $6.0 million). Employee expenses and employee provisions are shown
in note 1.5 and 3.9 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)
2020
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
2019
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
264,040
210,000
(306,040)
–
168,000
–
385,446
80,000
(171,406)
(30,000)
264,040
–
2.96
3.23
2.99
–
3.23
–
2.65
3.09
2.28
3.20
2.96
–
14,431,770
–
(3,937,062)
(1,056,500)
9,438,208
696,628
17,134,808
2,124,500
(4,405,185)
(422,353)
14,431,770
384,561
0.50
–
0.42
0.47
0.54
0.44
0.47
0.38
0.31
0.54
0.50
0.23
5,773,391
1,839,400
(1,882,916)
(839,537)
4,890,338
–
7,635,916
1,483,500
(2,819,166)
(526,859)
5,773,391
–
2.06
2.06
1.85
2.14
2.14
–
1.76
1.99
1.22
2.31
2.06
–
1,318,936
293,893
(977,671)
(53,469)
581,689
–
1,822,418
593,157
(1,009,022)
(87,617)
1,318,936
–
3.05
2.65
2.99
3.06
2.94
–
2.87
3.15
2.79
3.04
3.05
–
(1) The equity outcomes for the 2020 financial year short-term incentive will be determined and allocated in September 2020 and are therefore not included in the
above table.
(2) The above weighted average fair value is determined in accordance with AASB 2 Share-based Payments in respect of recognising the share-based payment expense
of the award granted.
114
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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
Vesting Date
Expiry date
Exercise price
19 Feb 2014
19 Feb 2014
30 Oct 2015
20 Oct 2016
20 Oct 2017
22 Oct 2018
30 Sept 2016
30 Sept 2018
30 Sept 2019
29 Aug 2020
30 Aug 2021
31 Aug 2022
30 Sept 2021
30 Sept 2023
30 Sept 2024
29 Aug 2025
30 Aug 2026
31 Aug 2027
1.22
1.22
2.08
2.69
2.86
3.58
Share options outstanding at end of period
Weighted average contractual life of options outstanding at end of period
Number
2020
2019
179,561
–
307,567
4,024,580
3,509,000
1,417,500
199,561
185,000
4,039,629
4,273,580
3,723,000
2,011,000
9,438,208
14,431,770
5.8 years
6.4 years
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
payment 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. 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
(eg 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.
ORORA LIMITED ANNUAL REPORT 2020
115
Section 7: Other notes to the Financial Statements (continued)
7.1 Share-based compensation (continued)
A description of the equity plans in place during the year ended 30 June 2020 is described below:
Retention/Share Payment plan
Long-term incentives
Short-term incentive
CEO Grant
Share Options
Performance Rights and
Performance Shares
Deferred Equity
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.
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.
The Group has ceased offering share options under the
long-term incentive plan. The last share option grant
was issued in FY19, with a vesting date of 30 June 2022.
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.
For grants issued FY20
onwards, 50% are subject
to meeting a relative Total
Shareholder Return (TSR)
and the satisfaction of an
absolute TSR gateway test,
and 50% are subject to
meeting an EPS hurdle and
the satisfaction of a RoAFE
gateway test.
For grants issued prior to
FY20, 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.
Vesting
period
Vested
awards
Unvested
awards
Up to 5 years
4 years
4 years
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.
116
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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(1)
Risk-free interest rate – options (%)(1)
Expected life of options (years)(1)
Risk-free interest rate – rights (%)
Expected life of rights (years)
(1) No options were granted during the period.
2020
4.10
23.00
2.98
–
–
–
0.62
3.31
2019
3.70
22.00
3.30
3.58
2.61
4.00
2.12
3.58
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 price volatility,
of the Company’s shares, reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily
be the actual outcome.
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 advice
Fibre divestment advisory services(1)
Total PwC Australia
Network firms of PwC Australia
Audit and other assurance services
Audit and review of financial reports
Other services
Taxation services and advice
Fibre divestment advisory services(1)
Total Network firms of PwC Australia
Total Auditors’ remuneration
(1) Taxation and other related services provided in respect of the sale of the Australasian Fibre business.
2020
2019
1,027.0
30.5
232.5
796.8
907.9
29.0
557.3
–
2,086.8
1,494.2
5.0
10.0
61.0
25.0
91.0
97.2
–
107.2
2,177.8
1,601.4
ORORA LIMITED ANNUAL REPORT 2020
117
Section 7: Other notes to the Financial Statements (continued)
7.3 Commitments and contingent liabilities
Capital expenditure commitments
At 30 June 2020, the Group has capital commitments contracted but not provided for in respect of the acquisition of property, plant and
equipment of $8.5 million (2019: $25.6 million).
Other expenditure commitments
At 30 June 2020, the Group had other expenditure commitments of $38.8 million (2019: $79.1 million) in respect of other supplies and
services yet to be provided.
Contingent liabilities
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.
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 Landsberg Orora in the US private placement market, the notes have maturities between 2023 and
2025 (see note 2.3). It is not expected that these guarantees will be called on.
Asset restoration and decommissioning
Asset decommissioning
The decommissioning of the Petrie site is a significant and complex exercise involving multiple government agencies. At the date of this
Report, decommissioning work continues on site with the estimated costs to complete the decommissioning contingent on final remediation
requirements which require significant judgement in respect of determining a reliable estimate. Refer to note 1.2 and 3.9 for further
information pertaining to the decommissioning process.
Environmental indemnity
The Australasian Fibre sale agreement includes an indemnity with regards to potential pre-existing environmental contamination that may exist
at the Australasian Fibre sites at the date of sale, 30 April 2020. The indemnity is in relation to the future requirement to either: a) remediate
a site by a regulatory agency; or b) the site is subject to regulatory enforcement action. Refer to note 3.9 and 6.2 for further information.
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.
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 measurable.
118
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 7.4 Orora Limited
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.
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.
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.
Summarised income statement and comprehensive income
$ million
Continuing Operations
Profit before related income tax expense
Income tax expense
Profit for the financial period from continuing operations
Discontinued Operations
Profit from discontinued operations, net of tax
Profit for the financial period
Comprehensive income for the financial period
Continuing operations
Discontinuing operations
Total comprehensive income
Orora Limited
2020
2019
474.8
(28.9)
445.9
8.8
454.7
441.2
9.3
450.5
121.8
(8.5)
113.3
30.8
144.1
112.3
28.6
140.9
On 30 April 2020, the Group completed the sale of its Australasian Fire business, refer note 6.2. Accordingly the financial results of this business
are presented separately as a discontinued operation and the comparative period has been restated to reflect the current period presentation.
ORORA LIMITED ANNUAL REPORT 2020
119
Section 7: Other notes to the Financial Statements (continued)
7.4 Orora Limited (continued)
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(1)
Total equity
Orora Limited
2020
2019
237.0
1,246.5
526.7
2,059.1
1,483.5
2,585.8
472.9
57.6
530.5
953.0
605.3
691.0
1,296.3
1,289.5
333.6
484.1
11.1
(3.7)
612.0
15.5
0.5
789.4
953.0
1,289.5
(1) In the current period the opening position for retained profits was reduced by $25.5 million as a result impact of the adoption of AASB 16 Leases. In the comparative
period the opening position for retained profits was reduced by $6.9 million as a result of the impact of the adoption of AASB 15 Revenue from Contracts with
Customers. Refer note 7.8 for more information.
Contingent liabilities of Orora Limited
Deed of Cross Guarantee
Pursuant to the terms of the ASIC Corporations (Wholly-Owned Companies) Instrument 2016/785, 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 2020 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 Landsberg Orora in the US private placement market, the notes have maturities between
2023 and 2025 (see note 2.3). 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(1)
ACN 002693843 Box Pty Ltd
ACN 089523919 CCC Pty Ltd
Rota Die International Pty Ltd(1)
Orora Closure Systems Pty Ltd
PP New Pty Ltd(1)
AP Chase Pty Ltd(1)
Lynyork Pty Ltd
Chapview Pty Ltd
AGAL Holdings Pty Ltd
Rota Die Pty Ltd
Envirocrates Pty Ltd
(1) These subsidiaries were disposed of on 30 April 2020 as part of the Australasian Fibre business divestment, refer note 6.2.
Under the terms of ASIC Corporations (Wholly-Owned Companies) Instrument 2016/785, 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.
120
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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
Continuing Operations
Sales revenue
Profit from operations
Net finance costs
Profit before related income tax expense
Income tax expense
Profit from continuing operations
Discontinued Operations
(Loss)/profit from discontinued operations, net of tax(1)
Profit for the financial period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Cash flow hedge reserve
Unrealised (losses)/gains on cash flow hedges, net of tax
Realised gains transferred to profit or loss, net of tax
Realised gains transferred to non-financial assets, net of tax
Other comprehensive loss, net of tax
Total comprehensive income for the financial period
Total comprehensive income/(loss) for the financial period attributable to:
Continuing operations
Discontinuing operations
Total comprehensive income for the financial period
Retained profits at beginning of financial period
Impact of change in accounting policy (refer 7.8)
Restated 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
2020
2019(1)
683.6
684.4
338.6
(22.4)
316.2
(35.1)
281.1
92.6
(15.3)
77.3
(12.4)
64.9
(5.0)
276.1
38.0
102.9
(3.4)
(0.6)
(0.1)
(4.1)
272.0
276.4
(4.4)
272.0
0.1
(3.2)
(0.1)
(3.2)
99.7
63.9
35.8
99.7
1,042.4
(27.5)
1,014.9
276.1
(606.6)
1,103.1
(6.9)
1,096.2
102.9
(156.7)
684.4
1,042.4
(1) On 30 April 2020, the Group completed the sale of its Australasian Fire business, refer note 6.2. Accordingly the financial results of this business are presented
separately as a discontinued operation and the comparative period has been restated to reflect the current period presentation.
ORORA LIMITED ANNUAL REPORT 2020
121
Section 7: Other notes to the Financial Statements (continued)
7.5 Deed of Cross Guarantee (continued)
Consolidated Balance Sheet
$ 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
Investments in controlled entities
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Goodwill and intangible assets
Derivatives
Other non-current assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Borrowings
Lease liabilities
Derivatives
Current tax liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Other payables
Borrowings
Lease liabilities
Derivatives
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Reserves
Retained earnings
TOTAL EQUITY
122
ORORA LIMITED ANNUAL REPORT 2020
2020
2019
19.4
45.0
174.3
1.0
11.8
32.6
284.1
567.7
469.9
20.3
16.8
20.0
0.9
46.1
26.3
247.1
350.0
4.0
26.2
–
653.6
687.0
1,446.1
–
–
100.9
4.3
19.2
1,141.7
2,257.5
1,425.8
2,911.1
212.4
4.2
5.6
7.0
–
71.2
300.4
–
19.0
20.2
1.9
–
19.4
60.5
462.2
47.3
–
3.0
9.0
115.2
636.7
3.4
604.2
–
2.6
31.5
50.7
692.4
360.9
1,329.1
1,064.9
1,582.0
335.2
(1.6)
46.9
684.4
488.0
(3.9)
55.5
1,042.4
1,064.9
1,582.0
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 7.6 Related party transactions
The related parties identified by the Directors include investments and key management personnel.
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 1.5.
7.7 Key Management Personnel
Key Management Personnel (KMP) consists of Orora Limited Executive and Non-Executive Directors and the Chief Financial Officer.
Key management personnel compensation is as follows:
$ thousand
Short-term employee benefits
Long-term employee benefits
Post employment benefits
Payments on retirement
Share-based payment expense
2020
4,613
127
170
520
1,340
6,770
2019
3,623
54
159
–
1,835
5,671
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 (2019: nil).
At 30 June 2020, no individual KMP or related party holds a loan with the Group (2019: nil).
ORORA LIMITED ANNUAL REPORT 2020
123
Section 7: Other notes to the Financial Statements (continued)
7.8 New and amended accounting standards and interpretations
7.8.1 Adopted from 1 July 2019
All new and amended Australian Accounting Standards and Interpretations mandatory as at 1 July 2019 to the Group have been adopted,
including AASB 16 Leases. The adoption of AASB 16 has resulted in a change to the Group’s accounting policies, more detail is provided
below and in note 3.6.
AASB 16 Leases
This note explains the impact of the adoption of AASB 16 upon the Group’s financial statements.
AASB 16 replaces the dual operating/finance lease accounting model for leases 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 finance lease accounting under AASB 117. Under the new standard the Group recognises a ‘right-of-use’ asset and
a lease liability for all identified leases, unless the lease term is 12 months or less or the underlying asset has a low value. The Group has had
to change its accounting policies as a result of adopting AASB 16. Refer to note 3.6 for the Group’s accounting policies on lease accounting.
The new lease standard impacts leases held by the Group that were classified under AASB 117 as operating leases, these are represented
mainly by leases over properties, equipment and vehicles.
Under AASB 16 the operating lease expense recognised in the income statement, in accordance with AASB 117, is replaced with a depreciation
charge in respect of the right-of-use assets recognised and an interest charge on the recognised lease liability. Short-term leasing costs will
continue to be recognised in the income statement. In addition, under AASB 16 lease payments are allocated between principal and finance
costs. The principal component of the lease payment is classified as a financing cash flow rather than the operating cash flow presentation
under AASB 117.
Impact on the adoption of AASB 16
The Group has elected to use the modified retrospective approach with respect to the adoption of AASB 16, as permitted under the specific
transition provisions within the standard. Under the modified retrospective approach the cumulative effect of adoption of AASB 16 is recognised
as an adjustment to the opening balance of retained earnings at 1 July 2019. There is no restatement of comparative information.
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• accounting for operating leases with a remaining lease term of less than 12 months at 1 July 2019 as short-term leases;
• excluding initial direct costs form the measurement of the right-of-use asset at the date of initial application; and
• using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
On transition to the new lease accounting standard the Group has applied the practical expedient to grandfather the definition of a lease.
This means that on transition the Group has retained the lease classifications of existing contracts under AASB 117 and Interpretation 4 and
has not reassessed whether existing contracts are or contain a lease.
Adjustments recognised in the statement of financial position on 1 July 2019
The impact upon the financial position of the Group of transition to AASB 16 is summarised as follows:
$ million
Right-of-use asset
Property
Plant and Equipment
Deferred tax asset
Total assets
Onerous lease provision
Other payables
Lease liabilities
Total liabilities
Retained earnings
124
ORORA LIMITED ANNUAL REPORT 2020
1 July 2019
453.4
34.7
29.6
517.7
0.8
7.0
(595.3)
(587.5)
69.8
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Measurement of lease liabilities
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of AASB 117. The liabilities were measured at the present value of the remaining lease payments, discounted, the weighted
average rate applied was 3.92%.
$ million
Operating lease commitments as at 30 June 2019
Discounted using the incremental borrowing rate at 1 July 2019
Less short-term or low-value leases not recognised as a liability
Add adjustments as a result of different treatment of extension options and rental increases(1)
Other
Lease liabilities recognised at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
1 July 2019
491.3
(37.9)
(8.9)
139.7
11.1
595.3
44.9
550.4
595.3
(1) The operating lease commitments recognised by the Group as at 30 June 2019 of $491.3 million represented the minimum future lease payments payable under the
Group’s lease arrangements, in most cases this represented the non-cancellable period of the lease. In addition to including the non-cancellable period, AASB 16 requires
option periods to extend to also be included in the computation of the lease liability, if it is reasonably certain that the Group will exercise that option.
Measurement of right-of-use assets
The Group has elected to measure the right-of-use asset for certain property leases on a retrospective basis, as if the new lease standard has
always been applied, whilst the lease liability is measured at the present value of future lease payments on the initial date of application,
being 1 July 2019. All other right-of-use assets were measured at the amount of the lease liability on adoption. Refer to note 3.6 for further
details of the amounts recognised at 30 June 2020 in respect of right-of-use assets.
Amounts recognised in the consolidated income statement for the twelve months to 30 June 2020
$ million
Depreciation charge of right-of-use assets
Property
Plant and Equipment
Interest expense (included in finance expenses)
Expenses relating to short-term or low-value assets
Continuing
Discontinuing(1)
38.7
7.7
46.4
13.4
17.0
7.5
1.1
8.6
7.2
4.6
Total
46.2
8.8
55.0
20.6
21.6
(1) In accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations, depreciation and amortisation of non-current assets ceases from the
date a disposal group is classified as held for sale. This includes depreciation of right-of-use assets recognised in accordance with AASB 16. Refer note 6.2 for further
information on the discontinued operations.
During the twelve months to 30 June 2020 lease payments of $100.3 million were paid by the Group in respect of leases recognised
in accordance with AASB 16, of which $65.9 million is attributable to continuing operations and $34.4 million to discontinued operations.
These payments are not recognised in the income statement but reduce the value of the lease liability recognised on balance sheet.
Upon adoption of AASB 16, the lease payments of $100.3 million previously recognised in the Group’s earnings before significant items, interest,
tax, depreciation and amortisation, is now replaced with a depreciation charge of $55.0 million and an interest expense of $20.6 million.
The following table illustrates the impact on current period results as a result of the accounting change.
$ million
Australasia
North America
Continuing
Discontinuing
Total
Increase in earnings before interest,
tax, depreciation and amortisation
Increase in earnings before interest and tax
Increase in net profit before tax
Increase in net profit after tax
6.1
1.1
0.2
0.1
59.8
18.4
5.9
4.2
65.9
19.5
6.1
4.3
34.4
25.8
18.6
13.0
100.3
45.3
24.7
17.3
ORORA LIMITED ANNUAL REPORT 2020
125
Section 7: Other notes to the Financial Statements (continued)
7.8 New and amended accounting standards and interpretations (continued)
7.8.2 Adopted from 1 July 2018
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced AASB
118 Revenue, AASB 111 Construction Contracts and related Interpretations. Under AASB 15 revenue is recognised when a customer obtains
control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement.
The Group adopted AASB 15 using the cumulative effective method in respect of initially applying this standard at the date of application
of 1 July 2018. The impact, net of tax, of transition to AASB 15 on retained earnings at 1 July 2018 was $7.3 million. In assessing the impact
of AASB 15 on contract incentives paid to customers and, with specific reference to individual customer contracts, it was identified that
in a limited number of instances, previous upfront incentives did not represent modifications of previous contracts and therefore should
not be carried forward and allocated to the transaction price under the terms of the current contract.
AASB 15 did not have a significant impact on the Group’s accounting policies with respect to other revenue streams. As allowed by AASB 15,
the Group did not provide information about remaining performance obligations at 30 June 2019 given its contracts with customers have an
expected duration of one year or less.
Refer note 7.8.1 of the Group’s Annual Report for 30 June 2019 for further information on the adoption of AASB 15.
7.8.3 Issued but not yet effective
There are a number of new and amending accounting standards issued by the AASB that are effective for annual reporting periods beginning
after 1 January 2020, with early adoption permitted. These standards have not been early adopted and have therefore not been applied
in preparing this financial report. The following amending standards are not expected to have a significant impact upon the Group’s
consolidated financial statements:
• AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
• AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
• AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
• AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
• AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia
• AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current
• AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments
• AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19 Related Rent Concessions
126
ORORA LIMITED ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 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 2020 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.
3.
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.
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
Corporations (Wholly-Owned Companies) Instrument 2016/785.
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 2020.
Signed in accordance with a resolution of the Directors.
A R SINDEL
Chairman
17 September 2020
ORORA LIMITED ANNUAL REPORT 2020
127
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORORA LIMITED
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Orora Limited (the Company) and its controlled entities (together the Group) is in accordance with the
Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
• the statement of financial position as at 30 June 2020
• the income statement for the year then ended
• the statement of comprehensive income for the year then ended
• the statement of changes in equity for the year then ended
• the cash flow statement for the year then ended
• the notes to the financial statements, which include a summary of significant accounting policies
• the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
128
ORORA LIMITED ANNUAL REPORT 2020
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements
may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial report.
Orora Limited is an Australian company listed on the Australian Stock Exchange. Orora manufactures and distributes a wide range of tailored
packaging solutions. The Group also offers end-to-end packaging solutions, including global product sourcing, distribution, design, printing
and warehousing optimisation.
Materiality
Key audit
matters
Audit scope
Materiality
Audit scope
• For the purpose of our audit we used overall Group materiality
of $11.2 million, which represents approximately 5% of the
Group’s profit from operations (being profit before net finance
costs and income tax expense), excluding significant items.
• We applied this threshold, together with qualitative
considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements on the financial report
as a whole.
• We chose Group profit from operations because, in our view,
it is the benchmark against which the performance of the Group
is most commonly measured. We also adjusted for significant
items as they are unusual or infrequently occurring items
impacting profit and loss.
• We utilised a 5% threshold based on our professional
judgement, noting it is within the range of commonly
acceptable thresholds.
• Our audit focused on where the Group made subjective
judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
• Orora operates across two operating segments, being Orora
Australasia and Orora North America, with its head office
functions based in Melbourne, Australia.
• We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial report
as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and
the industry in which it operates.
ORORA LIMITED ANNUAL REPORT 2020
129
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORORA LIMITED
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for
the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular
audit procedure is made in that context. We communicated the key audit matters to the Audit, Risk and Compliance Committee.
Key audit matter
How our audit addressed the key audit matter
Accounting for and presentation of the Australasian Fibre
business as discontinued operations
(Refer to Note 1.2 Significant items and Note 6.2
Business divestment)
During the financial year, the Group entered into and completed an
agreement to sell its Australasian Fibre business to a wholly owned
subsidiary of Nippon Paper Industries Co., Limited.
The carrying value of the assets disposed was $1,965.3 million
and the carrying value of the liabilities disposed was $485.8
million. A net gain on disposal, after tax, of $171.7 million has
been recognised.
We considered the accounting for and presentation of the
Australasian Fibre business as discontinued operations to be a key
audit matter due to the financial size of the net assets sold, and the
judgement involved in calculating the gain after tax recognised.
Impairment assessment of non-current assets including property,
plant and equipment, intangibles, and goodwill
(Refer to Note 3.5 Property, plant and equipment, Note 3.7
Intangible assets, and Note 3.8 Impairment of non-financial assets)
At 30 June 2020, Orora had property, plant and equipment assets of
$671.7 million and goodwill and intangible assets of $435.8 million.
These assets are tested for impairment using a discounted cash
flow model in accordance with Note 3.8, whereby goodwill is
tested at least annually, and property, plant and equipment is
tested where there is an indication that an asset may be impaired.
Recoverable amounts are estimated for an individual asset, or if it
is not possible to estimate for an 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 of group of assets.
We considered this to be a key audit matter because of the level of
judgement involved by the Group in determining the assumptions
used to perform impairment testing.
In undertaking impairment testing, the following assumptions
were judgemental:
• cash flow projections for five years using the Group’s latest
internal forecasts, with cash flows beyond the five-year period
extrapolated using a long term growth rate
• discount rates used to discount the estimated cash flows
• the long term growth rates to be applied to the forecast cash
flows in the terminal year which are determined with regard to
long term performance of each CGU in their respective markets.
130
ORORA LIMITED ANNUAL REPORT 2020
We read the associated sale agreements to develop an understanding
of the terms of the transaction and performed the following
procedures, amongst others:
• Evaluated if the profit and loss information disclosed as
discontinued operations was accurate, by testing on a sample basis
transactions recognised in the income statement, and related only
to the Australasian Fibre business that was sold.
• Together with PwC tax experts, tested the accuracy of the tax
expense recorded related to this transaction.
• Evaluated the calculation of the total gain recognised on the
sale including:
– agreeing the purchase price to the sale agreement
– agreeing proceeds on sale to the Group’s bank statement
– agreeing the value of the assets and liabilities derecognised
as a result of the sale to the balance sheet for the transaction
– comparing the key judgements applied by the Group in calculating
the provisional accounting for the business divestment to the sale
agreements, where applicable, and latest post-close completion
accounts negotiation documents
– agreeing the transaction and transition costs to supporting
documentation on a sample basis.
• Evaluated whether the disclosures were consistent with the
requirements of Australian Accounting Standards.
We evaluated Orora’s cash flow forecasts used to assess the carrying
value of cash generating units. This included updating our
understanding of how the budgets and forecasts were compiled and
comparing those used in the cash flow forecasts to the latest Board
approved FY21 budget and FY22 – FY24 strategic plan. We also tested,
on a sample basis, the calculations in the cash flow forecast model for
mathematical accuracy.
We assessed whether the division of the Group’s property, plant and
equipment, goodwill and intangible assets into cash generating units
(CGUs), which are the smallest identifiable groups of assets that can
generate largely independent cash inflows, was consistent with our
knowledge of the Group’s operations and internal Group reporting.
We assessed whether the CGUs included assets, liabilities and cash
flows directly attributable to each CGU and a reasonable allocation
of corporate assets and overheads.
We compared actual historical results to budget to assess the level
of the Group’s accuracy in forecasting cash flows.
With the assistance of PwC valuation experts, we evaluated the
appropriateness of Orora’s discount rate assumptions used in the
cash flow forecasts.
We evaluated the long term growth rates based on relevant external
market factors.
We compared recoverable amount calculations to the Group’s market
capitalisation and performed sensitivity calculations over a selection
of the forecast cash flows.
We also considered the adequacy of disclosures in light of the
requirements of Australian Accounting Standards.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORORA LIMITED
Key audit matter
How our audit addressed the key audit matter
Asset Impairment and Restructuring Activities
(Refer to Note 1.2 Significant items and Note 3.8 Impairment
of non-financial assets)
The Group recognised a significant item expense of $137.2 million
during the year. This comprised an impairment charge of $106.2
million in the Orora Visual CGU in relation to goodwill and other
assets (“recoverable amount impairments”) and restructuring and
asset impairment costs of $31.0 million.
In assessing the recoverable amount impairments, judgemental
assumptions outlined in the above Key Audit Matter were applied
to the Orora Visual CGU. Many of the end market segments
serviced by Orora Visual were significantly impacted by COVID-19
which has contributed to a lower estimation of future cash flows
attributable to this business resulting in the impairment charge.
Restructuring and asset impairment costs primarily relate to the
closure of the Los Angeles site in Orora Visual, and include
impairments of property, plant and equipment and provisions
for redundancy, restructuring and relocation costs. The remainder
of the restructuring and asset impairment charge relates to the
write off of investments no longer considered recoverable and
restructuring charges incurred to improve business performance.
We considered this to be a key audit matter because of the
financial significance of the expenses and the judgement and
complexity involved in calculating the impairment and
restructuring charges recognised in the financial year.
In addition to the procedures outlined in the above Key Audit Matter,
we performed the following procedures amongst others to assess the
impairment charge for the Orora Visual CGU:
• we compared the key assumptions used in the cash flow forecasts
to historical results, economic and industry forecasts
• tested the mathematical accuracy of the impairment model’s
calculations
• we assessed the appropriateness of recognising the impairment
charge in the current year
• we considered the current year performance, and in particular,
the performance over the period impacted by the COVID-19
pandemic, when considering the ability of the Group to achieve
short term forecasts.
For the remaining restructuring and asset impairment activities,
amongst others, we:
• considered the recognition criteria for restructuring provisions
in light of the requirements of Australian Accounting Standards
• read selected supporting documentation, including communications
with the impacted workforce and external quotes for asset relocations
• considered the recoverability of investments previously recognised
in the balance sheet, and the accuracy of the impairment in the
current year.
We also considered the adequacy of disclosures made in light of the
requirements of Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report for
the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board
website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor’s report.
ORORA LIMITED ANNUAL REPORT 2020
131
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORORA LIMITED
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 37 to 54 of the directors’ report for the year ended 30 June 2020.
In our opinion, the remuneration report of Orora Limited for the year ended 30 June 2020 complies with section 300A of the
Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
ANTON LINSCHOTEN
Partner
Melbourne
17 September 2020
132
ORORA LIMITED ANNUAL REPORT 2020
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORORA LIMITED
STATEMENT OF
SHAREHOLDINGS
Statement pursuant to Australian Securities Exchange official list requirements.
Top 20 shareholders as at 10 August 2020
Rank
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Pacific Custodians Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Netwealth Investments Limited
AMP Life Limited
HSBC Custody Nominees (Australia) Limited-Gsco Eca
BKI Investment Company Limited
Invia Custodian Pty Limited
HSBC Custody Nominees (Australia) Limited
The Manly Hotels Pty Ltd
Australian Executor Trustees Limited
Navigator Australia Limited
Pacific Custodians Pty 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 10 August 2020
Holder
Challenger Limited
Greencape Capital Pty Ltd
Perpetual Limited
Sumitomo Mitsui Trust Holdings, Inc.
The Vanguard Group, Inc.
Shares held
352,625,900
158,849,407
103,001,061
33,620,186
24,847,450
15,851,777
10,334,279
4,532,687
4,159,966
3,296,824
3,244,110
1,941,750
1,618,981
1,600,000
1,410,176
1,348,217
1,258,507
1,223,575
1,008,222
1,003,646
% of issued
capital
36.53
16.45
10.67
3.48
2.57
1.64
1.07
0.47
0.43
0.34
0.34
0.20
0.17
0.17
0.15
0.14
0.13
0.13
0.10
0.10
726,776,721
75.29
Last Notice of Substantial
Shareholding
No. of shares
29 May 2020
57,533,194(1)
8 July 2020
58,754,499
3 August 2020
102,090,467
2 June 2020
62,730,788(1)
18 December 2018
48,284,772(1)
(1) Calculated based on number of shareholding reported in the latest notice to ASX, on a basis of each five shares to be consolidated to four shares, fractions rounded
up to the next whole number.
ORORA LIMITED ANNUAL REPORT 2020
133
STATEMENT OF
SHAREHOLDINGS
Distribution of shareholdings
Fully paid ordinary shares as at 10 August 2020
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
129
751,915,358
4,858
101,705,109
6,646
46,754,198
22,949
56,821,997
16,408
8,166,194
50,990
965,362,856
3,145
319,863
77.89
10.54
4.84
5.89
0.84
100.00
0.03
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 10 August 2020
Unquoted equity securities
Options over ordinary shares – exercise price $1.22
Options over ordinary shares – exercise price $2.08
Options over ordinary shares – exercise price $2.69
Options over ordinary shares – exercise price $2.86
Options over ordinary shares – exercise price $3.58
Rights
No. of
employees
participating
1
2
7
7
6
No. of
securities
179,561
307,567
4,024,580
3,509,000
1,417,500
46
5,472,027
134
ORORA LIMITED ANNUAL REPORT 2020
FIVE YEAR HISTORICAL
FINANCIAL INFORMATION
Results shown for all operations before significant items in $ million (except where indicated)
For the years ended 30 June
2020(1)
2019
2018
2017
2016
Orora Consolidated Results
Net sales
Operating profit before interest and tax pre significant items
Operating profit before tax pre significant items
Net operating profit pre significant items
Net operating profit after significant items
Basic earnings per share (cents) pre significant items
Basic earnings per share (cents) after significant items
Dividend and distribution
Dividend per ordinary share (cents)
Dividend franking (% p.a)
Dividend cover (times)
Financial Ratios
Net tangible asset backing per share ($)
Net PBITDA interest cover pre significant items (times)
Gearing (net debt/net debt and shareholders’ equity) (%)
Return on average funds employed (%)(6)
Financial Statistics
Income from dividends and interest
Depreciation and amortisation provided during the year
Net finance costs
Cash flow from operations
Capital expenditure and acquisitions
Balance Sheet Data as at 30 June
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
Retained profits
Total shareholders’ equity
Other data as at 30 June:
Fully paid shares (000’s)
Orora share price
– year’s high ($)
– year’s low ($)
– close ($)
Market capitalisation
Employee numbers
Number of shareholders
4,659.1
289.2
231.4
168.3
239.9
17.4
24.9
606.6(2)
49.3(2)
30%/50%(3)
4.9
0.6(5)
7.6
22%
14.2%
0.6
149.4
57.8
18.9
175.5
1,055.6
1,444.4
2,500.0
817.1
650.9
4,761.5
335.2
295.8
217.0
161.2
18.0
13.4
156.7
13.0
30%(4)
12.4
0.85
11.9
29%
13.0%
0.4
132.9
39.4
297.9
334.3
4,248.0
323.4
288.9
214.1
212.2
17.8
17.7
144.2
12.5
30%
17.0
0.94
12.9
29%
14.0%
0.3
121.9
34.5
329.0
204.3
4,039.1
302.3
264.7
186.2
171.1
15.6
14.3
119.6
11.0
30%
15.6
0.91
11.1
30%
13.6%
0.2
116.1
37.6
351.2
292.0
3,849.8
272.1
231.0
162.7
168.6
13.6
14.1
101.7
9.5
30%
17.7
0.93
9.2
30%
12.7%
0.5
107.5
41.1
305.0
230.3
1,446.2
2,472.0
3,918.2
1,160.6
1,113.1
1,318.1
2,299.0
3,617.1
1,098.7
887.9
1,170.1
2,193.1
1,082.7
2,047.2
3,363.2
3,129.9
985.4
831.0
833.4
798.9
1,468.0
2,273.7
1,986.6
1,816.4
1,632.3
1,032.0
1,644.5
1,630.5
1,546.8
1,497.6
333.6
139.2
559.2
484.1
164.7
995.7
479.9
152.1
998.5
472.3
144.0
930.5
481.8
136.8
879.0
1,032.0
1,644.5
1,630.5
1,546.8
1,497.6
965,363 1,206,685 1,206,685 1,206,685 1,206,685
3.45
2.54
2.54
2,452.0
3,776
52,694
3.69
2.89
3.24
3,909.7
7,221
55,087
3.60
2.73
3.57
4,307.9
7,014
54,164
3.16
2.66
2.86
3,451.1
7,038
54,002
2.78
1.35
2.76
3,330.5
6,394
47,542
(1) FY20 has been presented on a total operations basis and therefore includes the financial results of the Australasian Fibre business up to the date of sale, 30 April 2020.
(2) A Special Dividend of 37.3 cents, 50% franked, was paid on 29 June 2020 (refer note 2.2).
(3) The FY20 final dividend was unfranked, FY20 special dividend was 50% franked, FY20 interim dividend was 30% franked.
(4) The FY19 final dividend was 30% franked, FY19 interim dividend was 50% franked.
(5) The net tangible asset backing per ordinary share is inclusive of right-of-use assets and liabilities. This measure would reduce to $0.38 if right-of-use assets
were excluded and right-of-use liabilities were included in the calculation.
(6) Return on average funds employed is calculated as EBIT divided by average funds employed.
ORORA LIMITED ANNUAL REPORT 2020
135
2. 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
immediately in writing 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.
SHAREHOLDER
INFORMATION
Shareholder enquiries
Shareholders seeking information about
their shareholding or dividends should
contact Orora’s Share Registry, Link Market
Services Limited (Link). Contact details can
be found on the back cover of this report.
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 10.30am
(Melbourne Time) on 21 October 2020.
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.
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.
To view this report online, or to
download a copy, visit Orora’s website:
www.ororagroup.com.
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.
Dividends
The Company normally pays dividends
around April and October each year.
Shareholders should retain all remittance
advice relating to dividend payments
for tax purposes.
1. 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.
136
ORORA LIMITED ANNUAL REPORT 2020
FINANCIAL CALENDAR
2020—2021
Financial year 2020 (FY20) ends
Announcement of full-year results for FY20
Ex-dividend date for final dividend FY20
Record date for final dividend FY20
Dividend payment date for FY20 final dividend
Annual General Meeting
Financial half year 2021 ends
Announcement of interim results
for financial year 2021 (FY21)
Ex-dividend date for interim dividend FY21
Record date for interim dividend FY21
Dividend payment date for FY21 interim dividend
Financial year 2021 ends
30 June 2020
20 August 2020
7 September 2020
8 September 2020
12 October 2020
21 October 2020
31 December 2020
February 2021
March 2021
March 2021
April 2021
30 June 2021
If any amendments are required to be made to this Annual Report,
they will be disclosed to the ASX and posted on the Company’s
website under the Investors section at ororagroup.com/investors
Orora Limited
Auditors
Registered office and principal
administrative office
109-133 Burwood Road
Hawthorn Victoria 3122
Australia
Telephone: +61 3 9116 1711
Website: www.ororagroup.com
ABN: 55 004 275 165
Chairman
Mr A R Sindel
Managing Director and
Chief Executive Officer
Mr B P Lowe
Chief Financial Officer
Mr S G Hutton
Company Secretary
Ms A L Stubbings
PricewaterhouseCoopers
2 Riverside Quay
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
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