19 August 2021
ASX Market Announcements Office
Australian Securities Exchange
20 Bridge Street
Sydney NSW 2000
Orora Limited (ORA) Appendix 4E and 2021 Annual Report
Orora Limited announces to the market its financial results for the year ended 30 June 2021.
The following documents are attached:
•
•
Appendix 4E – Preliminary Final Report given under Listing Rule 4.3A; and
Orora 2021 Annual Report including its financial statements and Corporate Governance
Statement,
for the year ended 30 June 2021.
Yours faithfully
Ann Stubbings
Company Secretary
This announcement has been authorised for release by the Board of Directors of Orora Limited.
Orora Limited 109 Burwood Road, Hawthorn, 3122 Victoria, Australia • +61 3 9116 1711• | www.ororagroup.com ABN 55 004 275 165
Appendix 4E Rule 4.3A
Preliminary Final Report
ORORA LIMITED
ABN 55 004 275 165
1. Details of the reporting period and the previous corresponding period
Reporting Period:
Previous Corresponding Period:
Year Ended 30 June 2021
Year Ended 30 June 2020
2. Results for announcement to the market
Key information
30 June 2021
A$ million
Statutory results
2.1 Revenue from ordinary activities
30 June 2020
A$ million
• From Continuing Operations
• From Discontinued Operations
3,538.0
-
Down
Down
0.8%
100%
from
from
3,566.2
1,092.9
2.2 Net profit/(loss) from ordinary activities after tax but before significant items, attributable to members
• From Continuing Operations
• From Discontinued Operations
156.7
-
Up
Down
23.7%
100%
2.3 Net profit/(loss) for the period, after significant items, attributable to members
• From Continuing Operations
• From Discontinued Operations
129.7
6.1
Up
387.6%
Down
97.1%
from
from
from
from
126.7
40.6
26.6
212.3
Dividends
Current period
2.4 Final dividend payable 11 October 2021
2.4 Interim dividend
Previous corresponding period
2.4 Final dividend
2.4 Special dividend
2.4 Interim dividend
Amount per
security
Franked amount per
security
7.5 cents
6.5 cents
5.5 cents
37.3 cents
6.5 cents
unfranked
unfranked
unfranked
50.0%
30.0%
2.5 Record date for determining entitlements to the dividend
Final dividend – 7 September 2021
2.6 Brief explanation of figures in 2.1 to 2.4:
i) The current period final dividend and interim dividend are unfranked.
ii) 100.0% of the current period final dividend and current period interim dividend were sourced from the Conduit
Foreign Income Account. Dividends to foreign holders are not subject to withholding tax.
iii) Profit for the current period, for continuing operations, includes a significant expense relating to additional
decommissioning costs associated with the Petrie site. Refer to Note 1.2 in the Annual Report lodged with the ASX on
19 August 2021. Profit in the comparative period includes a significant expense relating to restructuring activities and
recoverable asset impairment charges in North America.
iv) Refer to Annual Report lodged with the ASX on 19 August 2021 and the Investor Results Release for further details
relating to 2.1 to 2.4.
3. Income Statement and Statement of Comprehensive Income
Refer to the Annual Report lodged with the ASX on 19 August 2021.
4. Statement of Financial Position
Refer to the Annual Report lodged with the ASX on 19 August 2021.
5. Statement of Cash Flows
Refer to the Annual Report lodged with the ASX on 19 August 2021.
6. Statement of Retained Earnings
Refer to Note 2.4.3 Retained Earnings in the Annual Report lodged with the ASX on 19 August 2021.
7. Details of individual dividends and payment dates
Refer to Note 2.2 Dividends and Note 2.4.3 Retained Earnings in the Annual Report lodged with the ASX on 19 August 2021.
8. Details of dividend reinvestment plan
The Dividend Reinvestment Plan (DRP) is in operation. No discount is available under the DRP in respect of the FY21 final
dividend. The issue price for the FY21 final dividend will be calculated based on the arithmetic average of the weighted average
market price for the ten ASX trading days from 13 September 2021 to 24 September 2021, inclusive. The last date for receipt
of election notices for the DRP is 8 September 2021. Shares allotted under the DRP rank equally with existing fully paid
ordinary shares of Orora Limited.
9. Net tangible assets
Current period
30 June 2020
Net tangible asset backing per ordinary security
$0.37(1)
$0.60
(1) The net tangible asset backing per ordinary share of $0.37 presented above is inclusive of right-of-use assets and lease liabilities. The net tangible
asset backing per ordinary share, as at 30 June 2021, would reduce to $0.15 (2020: $0.38) if right-of-use assets were excluded, and right-of-use
liabilities were included, in the calculation.
10. Control gained or lost over entities during the period having a material effect
Refer to the Annual Report lodged with the ASX on 19 August 2021. No entities were acquired during the period having a
material effect. Refer Note 6.2 Business Divestments for details of businesses disposed that occurred in the comparative
period.
11. Details of associates and joint venture entities
Not applicable.
12. Significant information
Refer to the Annual Report lodged with the ASX on 19 August 2021 and the Investor Results Release.
13. For foreign entities, which set of accounting standards is used in compiling the report
International Financial Reporting Standards.
14. Commentary on results for the period
Refer to Note 1.3 Earnings per Share of the Annual Report lodged with the ASX on 19 August 2021, and the Investor Results
Release.
15 This report is based on accounts which have been audited
Refer to the Annual Report lodged with the ASX on 19 August 2021.
............................................................
Ann Stubbings
Company Secretary
Dated: 19 August 2021
Orora
Annual
Report
2021
Orora at a glance
We are global manufacturers and distributors of tailored packaging, products and
visual communication solutions to customers all around the world. An ASX-listed public
company with headquarters in Melbourne, Australia and over A$3.5 billion in sales in
FY21, Orora’s ambition is to be a leading sustainable packaging solutions provider.
WHAT WE DO
HOW WE DO IT
BEVERAGE AUSTRALASIA
The Orora Beverage team work across Australia
and New Zealand to provide state-of-the-art
design and manufacturing solutions to
packaging customers in the beverage industry.
We work within three specialist business units,
across Glass, Cans and Wine Closures, to craft
and produce the glass bottles, aluminium
cans, tabs and ends, closures and caps that
keep consumers’ favourite beverages safe for
transport and consumption.
OPS NORTH AMERICA
In Orora Packaging Solutions (OPS) our team
work across 11 business units to lead the US
market in custom packaging and supply chain
optimisation. From corrugated manufacturing,
equipment and automation, we create total
packaging solutions to serve a range of sectors
including food, beverage, automotive, industrial
and healthcare, offering complementary
services in global product sourcing, distribution,
design and printing.
ORORA VISUAL NORTH AMERICA
Orora Visual delivers cutting-edge visual
communication and Point-of-Purchase solutions
to customers across a range of sectors.
Our team provides print, finishing, displays,
packaging, creative services, fulfilment, and
distribution, plus value-add services in store
profiling, mobile technology, rapid prototyping
and vendor managed inventory.
22
Manufacturing plants
74
Distribution sites
3.7k
Team members
44k
Shareholders
CONTENTS
Orora at a glance
FY21 financial overview and highlights
Chair and CEO’s message to shareholders
1
2
4
7 Orora Group strategy update
10 Orora’s approach to sustainability
18 Financial review summary
20 Operational review Australasia
22 Operational review North America
24 Corporate Governance Statement
38 Board of Directors
40 Executive Leadership team
42 Directors’ report
47 Remuneration report
64
65 Auditor’s independence declaration
66 Financial report
Directors’ declaration (Directors’ report)
133 Directors’ declaration (Financial report)
134 Independent auditor’s report to the
members of Orora Limited
139 Statement of shareholdings
141 Five-year historical financial information
142 Shareholder information
143 Financial calendar
144 Corporate directory
ORORA LIMITED ABN 55 004 275 165
OUR APPROACH
Orora’s approach is founded on our values of Teamwork, Passion, Respect and
Integrity and is underpinned at all times by an unwavering commitment to safety,
sustainability and innovation.
WHERE WE ARE
7
Countries
SAFETY
Safety is a critical and ongoing priority
at Orora. Maintaining the safety, health
and wellbeing of our team is of paramount
importance, as everyone should return
home safely after working each day.
We continue to focus on developing our
safety culture and invest in driving safety
performance across our business.
SUSTAINABILITY
At Orora, sustainability is fundamental to
everything we do. We aim to lead the way in
sustainable business practices and provide
sustainable products and outcomes that
meet global standards. Orora’s approach to
sustainability is framed by our obligations
as a signatory to the United Nations
Global Compact.
INNOVATION
We have an intimate knowledge of our
markets and place a premium on innovation,
investing in digital capability and creative
ideas to drive efficiencies and incremental
growth. We identify opportunities through
consumer trends and insights using
this information to develop strategies,
approaches and products that create
long-term value for Orora, our people,
customers and shareholders.
1
INVESTOR CENTRE
ORORA AGM
To view this report online or to
download a copy, visit Orora’s website:
www.ororagroup.com
Orora’s Annual General Meeting (AGM)
will be held on Thursday, 21 October 2021.
To access more information, visit
www.ororagroup.com/investors/
downloads/annual-general-meeting
ORORA LIMITED ANNUAL REPORT 2021 FY21 financial overview
and highlights
Our financial year 2021
results reflect the
strength of Orora’s
business model, the
benefits of a continued
focus on delivering
against the core
strategies in each
business, and a balanced
and disciplined approach
to capital management.
FINANCIAL OVERVIEW1
Material improvement in underlying Group EBIT and NPAT,
up 11.6% and 23.7% respectively, or 17.3% and 34.1%
on a constant currency basis.
Significant 29.0% increase in underlying EPS.
North American performance significantly improved, with
local currency EBIT increasing 43.0% on the back of revenue
growth and margin improvement.
Solid Australasian result demonstrating the diversified
strength and resilience of the Beverage business.
Final dividend of 7.5cps (unfranked), taking the full year
dividend to 14cps and ~80% of NPAT — the top end of the
target payout range.
$256.2 million capital return via on-market share buyback.
Positioned for growth, with strong cash generation and
balance sheet position.
NOTE REGARDING NON-IFRS FINANCIAL INFORMATION: Throughout this report, we have included certain non-IFRS financial information. This information is
presented to assist in making appropriate comparisons with prior periods and to assess the operating performance of the business. We use these measures
to assess the performance of the business and believe that the information is useful to investors. The following non-IFRS measures have not been audited
but have been extracted from Orora’s audited Financial Statements: earnings before interest and tax before significant items (EBIT); earnings before
interest, tax, depreciation and amortisation before significant items (EBITDA); and return on average funds employed (RoAFE). Performance measures
such as earnings per share, RoAFE and EBIT margins have been calculated using the non-IFRS measures listed above. All other non-IFRS measures, unless
otherwise stated, have not been extracted from Orora’s audited Financial Statements. References to earnings throughout this report are references to
EBIT before significant items.
1
2
ORORA LIMITED ANNUAL REPORT 2021 FY21 HIGHLIGHTS1,2
Sales revenue2
($m)
$3,538.0m
FY21
FY20
3,538.0
3,566.2
(0.8)%
FY21
140.0
109.1
249.1
FY20
132.6
90.7
223.3
FY21
FY20
EBIT3
($m)
3,538.0
3,566.2
$249.1m
7.0%
FY21
140.0
109.1
249.1
FY20
132.6
90.7
223.3
6.3%
11.6%
First half EBIT Second half EBIT EBIT Margin%
RoAFE2
Underlying net profit
after tax3,4
Underlying operating
cash flow
Dividend
per share5
19.9%
410bps
$156.7m
$246.0m
23.7%
44.9%
14.0c
16.7%
1 Except as expressly defined in this Annual Report, $ refers to Australian dollars.
2
3
In FY20, the Group completed the sale of its Australasian Fibre business. The financial performance reflects the continuing operations of the Group only
and excludes the financial results of the Australasian Fibre business operations and the impact of the sale, unless otherwise specified.
The financial periods presented above represent underlying earnings excluding the impact of significant items. FY21 excludes a significant item expense
of $38.6 million recognised with respect to the decommissioning of the former Petrie mill site. Recent significant developments associated with
unprecedented rainfall levels and unforeseen complexities related to the remediation of the most technically complex remaining areas, have resulted
in increases to the estimated costs to complete. FY20 excludes a significant item expense of $137.2 million relating to restructuring activities and
recoverable asset impairment charges in North America — further detail can be found in the 2020 Annual Report.
4 Net profit after tax before significant items for continuing operations.
5 Not including special dividend of 37.3 cents per share paid on 29 June 2020.
3
ORORA LIMITED ANNUAL REPORT 2021 Chair and CEO’s message
to shareholders
ROB SINDEL CHAIR
BRIAN LOWE MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
OUR OPERATING CONTEXT
GROUP FINANCIAL PERFORMANCE
Throughout the 2021 financial year,
Orora’s businesses continued to operate
as essential service providers across
the globe.
While this enabled us to be resilient in the
face of the lingering pandemic, the health,
safety and wellbeing of our team, suppliers
and customers in the ever-changing
COVID environment has been an ongoing
and overriding concern.
We continued to put the safety of our
people first and harness our drive to
design, manufacture and distribute safe,
sustainable and innovative products
to our customers. Orora’s global team
adapted well and remained focused
on safely delivering essential food,
beverage and healthcare packaging
and products to communities, whatever
the prevailing conditions.
Our focus on financial discipline, the
execution of our strategy and improvement
programs has been unwavering —
particularly in North America, where
the effects of the pandemic have been
greatest. Our efforts in this segment
have been directed towards stabilising
and improving operating and financial
performance, whilst developing business
in more defensive end markets.
It’s pleasing to report that, despite the
external challenges, Orora has driven
positive momentum and improved
operating performance and financial
results this year.
We would like to thank everyone who has
helped to achieve our goal of supporting
our team members and our customers.
Orora delivered a strong improvement on
our financial year 2020 results, with an
increase in underlying EBIT that reflects
the diversified strength and resilience of
our business model.
Group revenue increased by 7.8% on a
constant currency basis during FY21,
with North America revenue up 8.2%
on the prior year in US dollar terms.
Orora’s underlying earnings before interest
and tax (EBIT) increased by 17.3% on a
constant currency basis, with reported
underlying EBIT of $249.1 million up 11.6%
on the prior year. Reported underlying net
profit after tax (NPAT) before significant
items was $156.7 million, an increase of
23.7% on FY20.
Underlying earnings per share (EPS) was
16.9 cents, with strong EPS growth of
29.0% driven by an increase in underlying
NPAT (before significant items) and the
impact of the on-market buyback, with
89.3 million shares having been purchased
during FY21. The buyback, which began in
September 2020, completed at 30 June
2021 at a cash cost of $256.2 million.
Statutory NPAT for the year was
$135.8 million after significant items
expense, which totalled $20.9 million
after tax. Additional costs of $38.6 million
($27.0 million after tax) were also
recognised during the year in respect
of estimated costs to complete the
decommissioning of the former Petrie
mill site.
Operating cash flow (before significant
items) for FY21 was $246.0 million,
$76.2 million higher than in FY20. Cash
conversion also increased to approximately
72.9%, up from 54.3% in the prior year.
All Orora businesses
have driven positive
momentum and
improved operating
performance and
financial results
this year.
4
ORORA LIMITED ANNUAL REPORT 2021 The Board and Executive team have
ensured we maintain a strong balance
sheet and liquidity, providing operating
and strategic flexibility. Our balanced
and disciplined approach to capital
management will continue, with an ongoing
focus on utilsing our strong financial
position to invest in both organic and
inorganic growth opportunities to generate
future shareholder returns.
The Board has declared a final ordinary
dividend of 7.5 cents per share, unfranked.
The final ordinary dividend represents a
total annual dividend payout ratio of 80%
of underlying Group earnings, reflecting our
confidence in the improved outlook
for performance.
BUSINESS REVIEW
Orora’s businesses include the Australasian
Beverage business and North American
OPS and Orora Visual businesses.
In Australasia
The Australasian Beverage business
delivered a solid result, and we continued
to demonstrate our diversified strength
and resilience as a leading supplier of Cans,
Glass and Wine Closures in Australia and
New Zealand.
Beverage sales revenue increased by 6.1%
to $834.1 million for FY21. This was driven
by volume increases across Cans and
Closures, and offset by weakness in Glass,
driven by a reduction in volumes as the
impact of lower Australian wine exports to
China crystallised. EBIT of $150.3 million
was up 2.5% on the prior year.
Strong growth in Cans across all
categories reflected increased levels of
at-home consumption. This was offset by
the weakness in Glass from lower wine
exports and a shift in mix to other lower
profit beverage categories, together with
the impact of cost headwinds related to
energy and insurance, which resulted in
lower margins.
The Beverage team continues to work
closely with Orora’s customers to address
the impacts of Chinese tariffs imposed
on bottled wine exports. Good progress
has been made to redeploy Glass capacity
into lower profit beverage categories,
shifting the mix to maximise recovery and
throughput, given expected lower volumes.
We expect the benefits of this activity
will be realised progressively throughout
FY22 and beyond.
Orora continued to maintain a strong
focus on investment into the Australasian
Beverage business. During FY21, we
completed the installation of small format
(slim) can capability at Revesby in New
South Wales. This further enhances our
capacity to manage demand and our
ability to meet customer preferences, and
complements our existing small format
can capabilities at Rocklea in Queensland
and Wiri in Auckland. With the support of
our customers, we will continue to invest
in similar capacity expansion initiatives
and anticipate the commencement of
work on the installation of a new can line
at an existing site in FY22, at a cost of
~$70.0—$80.0 million.
We also recently commenced construction
of an advanced glass beneficiation plant at
our Gawler site in South Australia at a cost
of ~$25.0 million. Funding of ~$8.0 million
has been secured by way of a grant from
the Commonwealth and South Australian
Governments through the Recycling
Modernisation Fund. This will support our
strategic priority to increase recycled
glass content in our products and further
progress towards our sustainability goals.
In North America
Orora’s North American businesses made
excellent progress this year despite
experiencing difficult trading conditions.
Our teams focused on stabilisation,
cost discipline, profit improvement and
execution of strategy to drive operating
and financial performance improvements
throughout FY21.
North American sales revenue grew by
8.2% to US$2,019.8 million, while
US dollar EBIT increased by 43.0% to
US$73.8 million.
In OPS there was a solid improvement in
both operating and financial performance,
as further benefits from our detailed profit
improvement program were realised.
The program is focused on adapting the
product offering, preserving and growing
volumes with existing and new customers,
stronger cost control measures, and
margin improvements through proactive
account management, enhanced sales
force effectiveness and leveraging of
data insights. The success of this work
is demonstrated in the OPS EBIT margin,
which increased to 4.4% for FY21, from
3.6% in the prior year. OPS remain on track
to achieve a greater than 5.0% EBIT margin
over the coming two to three years.
Despite significant deterioration in its
key end-markets during FY21, Orora
Visual delivered a notable improvement in
financial results, underpinned by a number
of customer wins, a focus on defensive
markets and continued discipline on cost
reduction initiatives. Revenue increased
against FY20 on a local currency basis,
while positive EBIT was also achieved,
following a loss in the prior year.
ORORA’S STRATEGY
Orora’s ambition remains to be a leading
provider of sustainable packaging
solutions. We will achieve this by
leveraging our capabilities to target
end-market segments with appealing
growth and solid financial returns.
We continue to be well-positioned for
growth via performance improvements in
our core businesses. The progress made
to optimise operations and stabilise our
businesses in North America is pleasing
as we prepare to deploy further capital in
this market.
We also continue to elevate our focus
on sustainability and innovation, and to
invest prudently to generate value for
our customers and shareholders.
Orora’s divisional strategies remain
consistent. We are focused on
expanding the breadth and depth of
the Australasian Beverage business,
leveraging our technical expertise in
container manufacturing combined with
our strong customer relationships. We
will continue to enhance and expand
our core products and services through
investment and innovation, exploring
entry into complementary new market
segments across Australia and New
Zealand in the near term and expansion of
the operating footprint into new markets
in the longer term.
In North America, there is significant
market opportunity in both OPS and Orora
Visual. Focus during FY21 was primarily
on optimising the respective business
models to drive efficiencies and to
enhance the customer value proposition,
including through investment in new
digital capabilities. With our business
platforms now stabilised and scaleable,
we expect to return to exploring inorganic
growth opportunities in OPS that expand
our product and service capabilities, and
further enhance our business models
and customer value propositions.
5
ORORA LIMITED ANNUAL REPORT 2021 Chair and CEO’s message
to shareholders
INNOVATION IS KEY
Orora’s investment in safety, innovation
and sustainability is matched by deep
focus and commitment. We operate in
a safe, innovative and sustainable way
from our manufacturing sites and creative
studios, to our distributors and offices.
This approach is underpinned by first class
expertise and customer insights, and aims
to deliver long-term value creation.
Investing in digital capabilities is a key
enabler of Orora’s growth strategy and
current initiatives across our businesses
will ensure we are well-positioned to
respond as our customers and suppliers
increasingly look to transact with us
via digital channels. Work is underway
to develop eCommerce platforms in our
businesses, which will drive increased
volume and lower costs, as we make it
easier and more efficient for our customers
to engage with us.
In Beverage, Orora Glass designed,
developed, manufactured and delivered
a new proprietary bottle range for South
Australian Kombucha pioneers, MOJO,
and worked closely with Treasury Wine
Estates to develop a closed loop system
for recycling glass from TWE’s packaging
centre in the Barossa Valley.
OUR SUSTAINABILITY FOCUS
Sustainability is at the very heart of
Orora’s operating model, as we aim to
reduce our impact on society and the
environment, and maintain the respect
and support of our people, customers and
the communities in which we operate.
Orora’s efforts and achievements to
date have been guided by a three-pillar
program comprised of People, Planet and
Prosperity, which aligns to our obligations
as a signatory to the United Nations
Global Compact (UNGC).
We proudly manufacture products made of
materials that are infinitely recyclable and
that positively contribute to our position
within the circular economy, which seeks
to maximise the life of products and
resources by recycling them. The glass
beneficiation plant at Gawler will enable
us to procure more glass cullet (crushed,
recycled glass) through established
sources and Container Deposit Schemes,
and will see us increase the amount of
recycled content in our glass packaging.
6
This is yet another step in Orora’s
sustainability journey, with benefits
including a reduction in the amount
of energy and virgin materials used to
manufacture glass in Australasia, resulting
in a reduction of CO2e emissions, as well
as diverting waste away from landfill. The
commissioning of the plant demonstrates
our commitment to leading innovation
and supports Government aims to build
Australia’s capacity to generate high
value recycled commodities, invest in
recycling and waste infrastructure, and
create new opportunities to recover
and reuse resources.
This drive is evident throughout all of our
businesses. In Beverage, we achieved an
average of 60% recycled content in the
aluminium flat sheet used to manufacture
cans during the financial year. In North
America, Orora Visual contributed to the
circular economy through the introduction
of a printable fabric comprised of 100%
recycled content derived from recycled
PET bottles for customers to use in
advertising campaigns. OPS maintained
70% average recycled content in the
manufacture of corrugated board.
In FY22, we move forward with our
sustainability agenda to further elevate our
focus across three redefined and distinct
pillars of Circular Economy, Climate Change
and Community. More information about
our sustainability approach and this new
chapter in our journey can be found in the
sustainability section of this Report from
page 10.
PROGRESS AGAINST ECO TARGETS
We continue to make progress against our
Eco Targets, which aim to reduce Orora’s
CO2e emissions, waste to landfill and water
use. This was the first full year of operation
where Orora worked towards our five-year
Eco Targets that run until 30 June 2024.
Pleasingly, we have demonstrated good
progress towards achieving our goals.
OUR COMMITMENT TO SAFETY
The ongoing global pandemic continued
to underline the significance of safety,
health and wellbeing at Orora. We evolved
our approach and guidelines to ensure
alignment with local government and
health advice, and focused on providing
clear direction and support to our teams.
Caring for the mental health of our team
members also remained an important
priority in the COVID-19 context.
While Lost Time Injuries increased slightly
over the past 12 months, we also saw a
reduction in total Recordable Cases. Our
extensive efforts to reduce the occurrence
of injuries at our sites and workplaces
will be unrelenting as we continue this
important work to keep our people safe.
You can read more about safety at Orora
on page 11 of this Report.
LOOKING AHEAD
While the external economic outlook
remains uncertain, Orora is well-positioned,
having delivered a strong increase in our
FY21 result, with sustained improvements
in financial and operational performance.
This provides a sound basis for the pursuit
of future growth and investment.
On behalf of the Board, we would like to
thank the Orora team for their dedicated
efforts and contributions throughout
this year, which have culminated in these
positive results. We are also extremely
grateful for the ongoing support of our
shareholders and customers, and we do
not take this support for granted.
We trust that Orora’s resilience and
the ongoing delivery of operational and
financial performance will continue to build
shareholders’ confidence in our strategy
and in the future success that Orora
will deliver.
ROB SINDEL
CHAIR
BRIAN LOWE
MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER
ORORA LIMITED ANNUAL REPORT 2021 Orora Group
strategy update
This year, Orora embarked
on a new journey as we
began to execute our
revised business strategy,
the culmination of a
review undertaken
in FY20.
In FY21, we continued to optimise and
position Orora for future growth, applying
a disciplined approach to refining and
maximising the effectiveness of our core
business, deepening our focus yet again
on sustainability and innovation, and
finding new and better ways to create
value for customers and shareholders.
ORORA’S STRATEGIC PILLARS
In Orora’s business strategy, we have
established three core strategic pillars
to take Orora forward:
1 Optimise & Grow
2 Enhance & Expand
3 Enter New Segments
The pillars provide a basis for strategic
decision making at Orora and help to
ensure every strategic activity that we
undertake is purposeful and enables Orora
to capitalise on growth opportunities as
they emerge.
As we work towards our ambition to be a
leading provider of sustainable packaging
solutions, we continue to leverage
the Group’s core capabilities while
maintaining our disciplined focus
on creating value for all stakeholders.
We generate strong cash flows from core
business operations and this is expected
to continue.
Deployment of cash flow will be a
prudent combination of distributions to
shareholders in the form of dividends,
investments in the core businesses, plus
strategic acquisitions that enhance our
product and service offering. Further ad
hoc returns of capital, such as the on-
market buyback undertaken during FY21,
may be undertaken in the future when
the Board deems appropriate. Any future
growth initiatives will be assessed in the
context of a rigorous approach to capital
allocation, ensuring only value-adding
investments that meet Orora’s return
criteria are pursued. We will continue
to target end-market segments with
appealing growth and financial return
characteristics.
To drive growth, investment is
supplemented by an ongoing focus on
improving operational efficiencies and is
supported by increasing innovation within
the base businesses.
ORORA’S STRATEGIC PILLARS
1
OPTIMISE AND GROW
2
ENHANCE AND
EXPAND
To be a leading
sustainable packaging
solu(cid:21) ons company
Delivering on the
promise of what’s inside
3
ENTER NEW SEGMENTS
ENABLERS
Safety
Diverse
talent
Customer
focus
Opera(cid:21) ng
excellence
Innova(cid:21) on
Financial
discipline
$
7
ORORA LIMITED ANNUAL REPORT 2021 Orora Group
strategy update
PROGRESS AGAINST STRATEGIC PRIORITIES
In FY21, we focused on a range of strategic priorities across our operating businesses to build a strong and stable foundation for
Orora to grow sustainably into the future. There was good progress achieved across a number of these priorities during the financial
year, as outlined below.
OPTIMISE
& GROW
ENHANCE
& EXPAND
ENTER NEW
SEGMENTS
FY21
PROGRESS
AUSTRALASIA
— Beverage
priorities
• Increase utilisation/
shifts to enhance
production volumes
• Continue i4.0 and
Integrated Work
System deployment
• Build capacity to meet
• Expand current
increased Cans customer
demand
substrates into new
categories
• Grow share of wallet
in current markets
• Explore potential
ANZ adjacencies
• Continue developments
• Explore potential
• Orora continues to proactively
assess future requirements
to meet customer needs and
growth in Cans demand
• Slim can expansion at Revesby
in New South Wales completed
• Drive supply chain
in light-weighting
offshore entry points
• G2 glass furnace rebuild
excellence
• Pursue further
automation
• Continue to lead digital
printing capability
• Enhance eCommerce
• Drive increased recycled
capability
content
completed on time and on
budget
• Announced construction of
cullet beneficiation plant at
Gawler to help drive increased
recycled content in glass
bottles
• Continued assessment of
M&A opportunities in ANZ
adjacencies and offshore
expansion
NORTH AMERICA
— OPS priorities
• Drive account
profitability
• Enhance sales force
effectiveness
• Integration of previous
M&A
• Digitisation of business
• Expand geographic
model (including refreshed
eCommerce platform)
footprint
• Expand product and
• New leadership appointed
in late 2020 delivering on
strategic priorities
• Expand engineering,
design and service
capabilities
service offering
• Material improvement in
• Consider scale
expansion
opportunities
(including M&A) in
2022 and beyond
financial performance and
operating discipline, with
corresponding lift in EBIT
margin
• Significant development
work on business model
enhancement
NORTH AMERICA
— Orora Visual
priorities
• Refine core business
processes
• Consolidate digital
client platforms
• Harmonise estimation
procedures
• Extend positions in fibre
printing and horticulture
• End-to-end review of
strategic direction by
the end of calendar
year 2021
• Enhance sales force
effectiveness
• New leadership has stabilised
the business, returning Orora
Visual to profit and growth
• Well-positioned to benefit
from improvements in local
trading conditions
• Critical business model
enhancements launched,
including improved digital
and customer interaction
Moving forward, we will continue to focus on these key priorities.
8
ORORA LIMITED ANNUAL REPORT 2021
Key strategic pillars were established to focus execution
in the near term on initiatives that support Orora’s ambition:
to be a leading sustainable packaging solutions company.
SHAREHOLDER VALUE BLUEPRINT
The strategic pillars also form a critical
part of Orora’s blueprint for shareholder
value creation.
We remain committed to achieving top
quartile Total Shareholder Return (TSR)
performance for our shareholders by
executing on our business strategy. Key
elements which contribute to Orora’s
TSR performance are outlined in the
blueprint (first released in FY20). These
include applying a returns-focused,
risk-weighted investment approach
(for capital projects and acquisitions)
across each of the three pillars.
As the diagram shows, we will target a
return that represents an appropriate
premium to Orora’s weighted average
cost of capital (WACC) based on the
risk assessed as associated with the
investment. This forms part of our
rigorous approach to capital allocation,
allowing us to appropriately make
investment decisions across each pillar.
Ongoing financial discipline governs the
deployment of Orora’s capital for any
strategic initiatives.
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
$
$
$
INVESTMENT
$
CAPITAL
MANAGEMENT
OPTIMISE
& GROW
ENHANCE
& EXPAND
ENTER NEW
SEGMENTS
BALANCED & DISCIPLINED APPROACH
TO CAPITAL ALLOCATION
Australasia
North
America
Capital
investment
Acquisitions
Sustainable
dividend
• Complementary
adjacencies —
near-term
focus in ANZ
• Payout ratio
of 60%—80%
• Franked to the
extent possible
• GDP sales
growth
• GDP sales
growth
• Enhanced
• Supplemented
by innovation
and customer
wins
by market
share gains
and increased
share of
wallet
• Enhance digital
capabilities,
particularly
in NA
• Enhance
sustainability,
capacity and
product
capabilities
across portfolio
• Customer-
backed growth
projects
• Beverage
footprint
expansion in
ANZ and
offshore
• Expand
aluminium and
glass product
capabilities
in ANZ
• Expand product
and service
capabilities in
North America
RETURN TARGETS
Lower
Premium to WACC
Higher
Sensible
leverage
• Target leverage
at 2.0—2.5x
EBITDA
(excluding
AASB 16)
Potential
additional
capital
returns
• Assessed
when
appropriate
• On- or
off-market
buybacks
• Special
dividends/
capital returns
9
ORORA LIMITED ANNUAL REPORT 2021
Orora’s approach
to sustainability
In financial year 2021,
we progressed Orora’s
sustainability program,
focused on our current
three pillars of People,
Planet and Prosperity,
while we also began work
to review and redefine our
approach to sustainability,
elevating our focus for
the future.
Sustainability activity continued to be
driven within Australasian Beverage, our
North American OPS and Orora Visual
businesses, and was given increased
emphasis by the Executive Leadership
team and the Board.
There were significant advances on
circular economy initiatives in the
Beverage and Orora Visual businesses,
and good progress was made towards
achieving our new five-year Eco Targets
launched last financial year, focused on
reducing greenhouse gas emissions,
waste to landfill and water usage.
OUR APPROACH AND GOVERNANCE
Orora’s approach to our People, Planet
and Prosperity pillars is framed by our
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 7.41, including any
exposure to environmental, social or
climate change risks. The 2018 review,
re-examined in 2019 and reviewed again
during this financial year, determined
that we do not have a material exposure
to environmental, social or climate
change risks at this time. Detail on our
assessment of material risks, including
economic risks, is set out separately in
the Corporate Governance Statement
on page 34 of this Annual Report.
Orora’s sustainability activity is overseen
by the Board, the Safety, Sustainability
& Environment Committee, and the
Executive Leadership team, with regular
updates and recommendations provided
to the Board.
During FY21, the Safety, Sustainability
& Environment Committee assisted
the Board to provide governance
and recommendations on all Orora
sustainability matters including
recommended approval of our first
Modern Slavery Statement and the review
and development of a redefined approach
to sustainability, which we will begin to
implement in FY22. Increased emphasis
on sustainability was incorporated into
Executive Leadership team meetings
with sustainability becoming a standard
agenda item.
REPORTING ON OUR APPROACH
We report on our annual sustainability
activity through Communication on
Progress (CoP) to the UNGC, which
outlines our activities to further
implement the Covenant’s Principles
on human rights, labour, environment
and anti-corruption. We continue to
support the CDP2, voluntarily disclosing
information under the Climate, Water
and Forest Risk CDP sections. As part
of our commitment to sustainable
operations, we improved our 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), we provided
an annual report during FY21 and were
again assessed as being in the ‘Leader’
category. In addition, we also received
a ‘Leading’ rating from the Australian
Council of Superannuation Investors
following its review of environmental,
social and governance reporting in the
ASX 200 for the period to 31 March 2021.
As detailed on page 13, during FY21,
Orora’s first Modern Slavery Statement
was submitted, in accordance with the
Commonwealth (Australian) Modern
Slavery Act 2018. The Statement is
available on the Orora website and forms
an important part of our sustainability
effort, aligned to our obligations as a
signatory to the UNGC.
1
2
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 (4th edition), 2019.
CDP, formerly known as the Carbon Disclosure Project.
10
ORORA LIMITED ANNUAL REPORT 2021 People
Ensuring the safety,
health and wellbeing
of our team is a
fundamental priority
for Orora.
SAFETY AND HEALTH
We continue to focus on developing
our safety culture and invest in driving
safety performance across our business,
supported by our Health Safety &
Wellbeing Policy and our Safety
Management System.
Following a global safety review by
independent consultants at the start of
FY20, which benchmarked Orora across a
range of criteria globally, we continued a
three-year program to drive improvement
in safety, health and wellbeing. The
program is focused on three core areas
and intends to:
broaden and focus the Safety
Governance System
restructure the Safety Management
System
enhance the Serious Injury and Fatality
(SIF) Prevention Program.
Positive progress has been made to
implement plans and actions for these
initiatives during the past financial year.
We have enhanced our safety governance
processes and implemented new high-risk
safety procedures for Plant & Equipment,
as well as developing new high-risk safety
procedures for Traffic Management and
Isolation that will soon be implemented. We
will continue this focus into next financial
year, developing and implementing further
high-risk safety procedures to better
protect our people. Work is ongoing to
refine the SIF Prevention Program, as we
continue our focus on managing high-risk
activities and improving the effectiveness
of critical controls.
Orora’s focus on safety and our Executive
Leadership team’s commitment to safety
leadership is also evident in the safety
overlay that is applied to the short-term
incentive (STI) component of all senior
executives’ remuneration.
While Lost Time Injuries increased
slightly in FY21, we saw a reduction in
total Recordable Cases. The increase
can largely be attributed to low severity
injuries such as minor sprains and strains,
and minor lacerations. Orora recorded
no serious injuries or fatalities during
the year and post-incident analysis
conducted via our Incident Reporting &
Investigation procedure demonstrates
a 43% improvement in the prevention of
incidents that may have escalated into
SIFs, a credit to Orora’s strong focus on
managing high-risk work activities. This
reduction was supported by the rollout
of several safety behaviour programs,
such as the Switch on Safety Leadership
Program in the Beverage business, safety
observation and near miss reporting
initiatives in Orora Visual, and hazard
and near miss reporting initiatives driven
by OPS.
ORORA GROUP SAFETY PERFORMANCE3
10
8
6
4
2
0
8.1
6.9
6.8
7.1
6.8
1.6
1.8
2.3
1.7
2.0
FY17
FY18
FY19
FY204
FY21
Lost Time Injury Frequency Rate (LTIFR)
Recordable Case Frequency Rate (RCFR)
3
4
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.
FY20 RCFR and LTIFR restated from as known and reported figures in August 2020, due to reclassification of injuries after year end reporting closed for FY20.
11
ORORA LIMITED ANNUAL REPORT 2021 Orora’s approach
to sustainability
Safety during COVID-19
We continue to implement and maintain
a range of health and safety measures
in response to the global pandemic, to
mitigate the risk of transmission into and
at Orora’s sites and workplaces. We have
closely monitored internal and external
data, and regularly reviewed and adjusted
risk controls where necessary to enhance
existing measures. Where needed,
we introduced additional safety and
protective measures, in compliance with
or to a higher standard than government
and health advice across our varied
geographies to further protect Orora
team members who continued to perform
critical duties in support of our role as an
essential services provider, including:
establishing crisis management teams
to regularly assess requirements and
respond to situations
developing and implementing COVID
Safe Plans (including protective
measures verified through regular
inspections)
updating Orora’s online Safety Incident
Management Platform to include current
COVID-19 reporting data
maintaining and embedding flexible
work options and arrangements
wherever possible
limiting general access at all sites and
workplaces unless there was a safety,
health or business critical reason for
in-person attendance, with entry
granted only on successful completion
of health assessment requirements.
12
Our organisational approach has been
complemented by a range of initiatives
within our businesses to address specific
requirements at our sites. In Australasia,
QR check-in codes and attendance
registers were introduced to support
record keeping for contact tracing efforts.
Across North America we developed
quarantine protocols, provided onsite
COVID testing, exposure notifications
and support. Teams onsite focused on
the `3W’s‘ — washing hands frequently,
wearing a face covering or mask and
watching for social distance. The OPS
team also developed an innovative
electronic wristband to alert team
members when they are too close to
others to support social distancing.
While a number of positive cases
of COVID-19 have been identified
at our operations, we have ensured
comprehensive support is provided to
any team member who tests positive
and we remain focused on effective case
management to preserve the safety of
close contacts and team members to
reduce the risk of further transmission.
Supporting change
As we experienced ongoing disruption due
to COVID-19 and it continued to impact
people’s lives at home and at work, the
support and care of our workforce was
still a significant focus for us during FY21.
Orora offered face-to-face learning where
possible and provided virtual/digital
support mechanisms to ensure that
leadership was undertaken with the
Orora values in mind.
Many team members across Orora worked
remotely and found this new flexibility
provided a better work-life balance. The
OPS team in North America adopted a
new approach, where each team member
is able to work in a mode appropriate for
their role — be it onsite, from home or for
the majority, a hybrid approach which
ensures connection and collaboration
while maintaining a sustainable
level of flexibility for the business. In
Australasia, ongoing flexible working
guidelines were also implemented to
support our team members to work
flexibly where appropriate for their roles,
individual circumstances and business
requirements.
HEALTH AND WELLBEING
Orora’s commitment to team member
health and wellbeing saw FY21 initiatives
focused on providing holistic education
and information to encompass all
areas of individual wellbeing — from
emotional and physical, to social and
financial. This culminated in virtual
webinars during Mental Health Week to
encourage connection, online tools such
as the Employee Assistance Program
LifeWorks App and Wellness portal launch,
and participation in physical activity
programs designed to increase health
and wellbeing through exercise and
movement.
Orora maintains a zero-tolerance
approach to alcohol and other drugs in the
workplace and continues to uphold this
position across the business, which plays
a critical role in reducing workplace risk.
DIVERSITY, EQUITY AND INCLUSION
At Orora, we are 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.
Throughout FY21, Orora expanded the
efforts of our Diversity, Equity, & Inclusion
(DE&I) Council to cover all North American
operations. DE&I plans were updated
and ‘Unconscious Bias’ training was
conducted for senior leaders. Refer to
the Corporate Governance Statement on
page 31 for further information on Orora’s
Diversity, Equity and Inclusion practices,
objectives and gender statistics.
As part of our DE&I approach, we
continued to build on the success
of Women in Leadership at Orora
(WILO) Programs delivered since 2018
across North America, Australia and
New Zealand, conducting our fifth annual
WILO Program during FY21. This was the
first Program that was both global and
virtual, including participants from five
different countries across North America
and Australasia.
ORORA LIMITED ANNUAL REPORT 2021 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.
The Statement forms an important
part of our global sustainability effort,
demonstrating that we are opposed to all
forms of modern slavery in our operations
and the operations of our suppliers, and
that we are committed to identifying,
assessing and mitigating human rights
impacts, providing access to effective
grievance or complaint mechanisms and
ensuring continuous improvement to
strengthen our actions over time.
We continued our human rights and
responsible sourcing governance regime
through the application of the Modern
Slavery Working Group established in
the previous financial year. The Working
Group continued to report and provide
recommendations to the Safety,
Sustainability & Environment Committee,
the Audit, Risk & Compliance Committee
and the Board.
SUPPLIER CODE OF CONDUCT
AND ETHICS
Orora continued to apply our Supplier
Code of Conduct and Ethics Policy,
which was implemented in FY20. This
Supplier Code complements Orora’s Code
of Conduct and Ethics Policy and sets
minimum standards for our suppliers and
their supply chains in line with our values
and our commitment to the Ten Principles
of the UNGC. Orora’s Supplier Code of
Conduct and Ethics Policy is supported
by our Supplier Assurance Framework,
which aims to identify and mitigate
potential human rights and environmental
issues within our supplier base across
our Australasian and North American
businesses.
Supplier Assurance Framework
and training
In partnership with external consultants,
we have reviewed our Supplier Assurance
Framework and are now implementing
improvements to support and assist
our procurement teams to examine any
potential human rights and modern
slavery risks. The priority focus of
our review was risks that may be
associated with Orora’s cleaning and
labour hire service providers. Human
rights and modern slavery training was
also developed and delivered to Orora’s
Board, Executive team and procurement
team members.
13
ORORA’S WOMEN IN LEADERSHIP
PROGRAM GOES GLOBAL
As part of our DE&I approach, we continued to
build on the success of Women in Leadership
at Orora (WILO) Programs delivered since
2018 across North America, Australia and
New Zealand, conducting our fifth annual
WILO Program during FY21. This was the first
Program that was both global and virtual.
73
participants
globally since
2016
33%
of WILO
graduates have
been promoted
to more senior or
leadership roles
The tailored development and coaching
program aims to support Orora’s ability
to cultivate a diverse leadership talent
pipeline by enabling women to build
their confidence and leadership skills,
and is designed to grow participants’
professional networks and create a spirit
of outreach amongst women at Orora.
WILO graduates have robust development
plans to help them apply their WILO
learnings to their career aspirations.
Orora continues to invest in previous
WILO participants by utilising WILO
graduates as coaches for current
participants, which also reinforces
WILO network connections.
We also continue to celebrate the
diversity of the LGBTIQ+ community
by educating and raising awareness of
challenges faced, as well as recognising
and celebrating the inherent and rich
diversity of our LGBTIQ+ team members
through the Orora Proud initiative.
GLOBAL CULTURE AND VALUES
Orora conducted a global survey with
our team to pulse check our cultural
alignment with our Values. The results
revealed great strengths in safety, pride,
commitment, customer focus, strong
values and a sense of hope, with safety
representing the highest score. The Orora
leadership team will continue to examine
how we can leverage these strengths to
further foster team member engagement
and a sense of purpose and belonging at
Orora. Pulse checks will continue to be
conducted to check cultural alignment
with our Values.
HUMAN RIGHTS, RESPONSIBLE
SOURCING AND OUR MODERN SLAVERY
STATEMENT
At Orora, we are committed to protecting
human rights and minimising the risk of
modern slavery in our operations and
supply chain. During FY21, we continued
to address our obligations as a signatory
to the UNGC and as noted on page 10, we
successfully submitted our first Modern
Slavery Statement in accordance with the
Commonwealth Modern Slavery Act 2018.
ORORA LIMITED ANNUAL REPORT 2021
Orora’s approach
to sustainability
Planet
Sustainability is core
to Orora’s approach
for reducing our
impact on society
and the environment,
and maintaining the
respect and support
of our people and the
communities in which
we operate.
14
CIRCULAR ECONOMY
The principles of the circular economy
are central to Orora’s operations as we
place a strong emphasis on ensuring our
manufactured packaging is recyclable
and that it contains recycled content. All
of our primary manufactured substrates
are recyclable and over the 2021 financial
year we have focused our efforts to
increase the recycled content of the
packaging we produce, particularly
within our Beverage and Orora Visual
businesses.
At our Beverage glass plant in Gawler,
South Australia, we continued to elevate
our use of recycled glass cullet derived
from government Container Deposit
Schemes operating in the various states
and territories across Australia. During
the year, we began importing recycled
glass cullet from the newly operational
Western Australian Container Deposit
Scheme, taking the glass recovered
from Perth’s metropolitan area and
feeding it into our furnaces at Gawler
to manufacture new glass beverage
containers for Orora customers. This
initiative has increased the recycled
content of glass containers produced
onsite by an average of 10% and builds
on our existing use of recycled glass
cullet imported from Container Deposit
Schemes in New South Wales and South
Australia. Orora will continue to use
approximately 80% of the recycled glass
cullet derived from the South Australian
scheme alone. We will also continue to
pursue and examine ways to maximise
recycled glass cullet use, working closely
with our customers and Container Deposit
Scheme operators around Australia.
Our drive to increase recycled content
was also evident in Beverage Cans, where
we achieved an average of 60% recycled
content in the aluminium flat sheet used
to manufacture cans during the financial
year. In North America, Orora Visual
initiated plans that contribute to the
circular economy through the introduction
of a printable fabric comprised of
100% recycled content derived from
recycled PET bottles for customers to
use in advertising campaigns. At OPS
we maintained 70% average recycled
content in the manufacture of our
corrugated board.
Energy efficiency
Under Orora’s CO2e Eco Target, we
focused on energy efficiency for both
gas and electricity in terms of their
contribution to reducing our greenhouse
gas emissions over the financial year.
In particular, the Beverage Closures
business continued to reduce its energy
consumption per unit of production and
the Glass business tracked to a best ever
yearly energy efficiency performance.
Renewable energy
We continued to prioritise use of
renewable energy via long-term power
purchase agreements with renewable
energy providers to supply wind-
generated electricity to our Beverage
operations in New South Wales, South
Australia and Victoria. These agreements
secure the supply of renewable energy for
volumes equivalent to 80% of our total
electricity requirements in Australia.
We have also joined the South Australian
hub-to-hub Hydrogen Technology
Cluster to examine the development
of a hydrogen industry in Australia
with a specific interest in how this
could be deployed to power Orora glass
manufacturing in the future.
ORORA LIMITED ANNUAL REPORT 2021 ORORA’S ECO TARGETS
CO2e EMISSIONS
5% reduction in emissions
ratio intensity FY24
from FY20 levels
WASTE TO LANDFILL
WATER USE
5% reduction in waste to
landfill ratio intensity by FY24
from FY20 levels
5% reduction in water use
ratio intensity FY24
from FY20 levels
Production businesses
Tonnes CO2e/tonnes of product
Distribution businesses
Tonnes CO2e/floor space square metres
Production businesses
Tonnes waste to landfill/tonnes of product
Distribution businesses
Tonnes waste to landfill/floor space square metres
Production businesses
Kilolitres water/tonnes of product
Distribution businesses
Kilolitres water/floor space square metres
ECO TARGETS
This financial year was the first full year
of operation where we worked towards
achieving our new five-year Eco Targets
that run until 30 June 2024. Our new Eco
Targets cover the same important areas
as the previous five-year Eco Targets
that Orora successfully achieved in June
2019, aiming to reduce CO2e emissions,
waste to landfill and water use. The Eco
Targets are measured as ratios against
metrics that reflect the primary activity
of each of our businesses and are divided
into metrics for production of packaging
(measured against tonnes produced), and
separately, the distribution of packaging
(measured against floor space square
metres). To date, we have demonstrated
solid progress towards the FY24 goals and
are currently on track to achieve them.
For the CO2e Eco Target the production
businesses achieved an 8% improvement
and the distribution businesses
achieved a 5% improvement. For
the waste to landfill Eco Target the
production businesses achieved a
13% improvement and the distribution
businesses achieved a 19% improvement.
In regards to the water Eco Target, the
production businesses achieved a 2%
improvement, while the distribution
businesses recorded a 4.3% decrease
in performance.
During FY21, we continued to develop our
understanding of the potential impacts
of climate change on Orora’s operations,
an important activity in recognising
our obligations under Principle 7 of the
UNGC and the ASX Corporate Governance
Principles and Recommendations
(4th edition). Orora’s work towards our
CO2e Eco Target over the past six years
has been crucial to recognising Principle
7, which requires businesses to support a
precautionary approach to environmental
challenges. The ongoing Eco Targets
regime will continue to enhance this work.
We continue to review and implement the
findings of the Financial Stability Board’s
Task Force on Climate related Financial
Disclosures (TCFD) with the support of
external consultants to better understand
the potential impacts of climate change
on Orora. The outcomes of this work will
be completed during the first quarter of
the next financial year. Orora will again
address applicable TCFD disclosure
requirements as part of our CDP response
for the most recent reporting period1.
FIBRE SOURCING
At Orora, we are committed to the use
of fibre from traceable, socially and
environmentally responsible sources
in our North American businesses.
Throughout FY21, our Responsible Fibre
Sourcing Policy, refreshed in FY19,
continued to be applied across our
relevant business activities, to ensure we
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, the Sustainable Forestry
Initiative certification process is ongoing
for several of Orora’s sites.
1 The most recent period for CDP reporting is for the financial year ended 30 June 2019.
15
ORORA LIMITED ANNUAL REPORT 2021 Orora’s approach
to sustainability
Prosperity
Orora generates
prosperity in a manner
that is balanced with
the current Planet and
People pillars of our
sustainability program.
16
ECONOMIC CONTRIBUTION
COMMUNITY ENGAGEMENT
We have a proud history as an
Australian headquartered and listed
product manufacturing business,
making significant contributions to
the communities in which we operate.
We generate over $3.5 billion in
sales revenue, employ approximately
3,700 team members and operate
96 sites across seven countries.
At Orora, we generate prosperity in
a manner that is balanced with the
current Planet and People pillars of
our sustainability program.
VALUE CREATING CUSTOMER
RELATIONSHIPS
Sustainability is integral to Orora’s
customer relationships. We work
constantly with our customers to
reduce environmental impacts with a
commitment to producing packaging that
is both recyclable and containing recycled
content. During FY21, programs were
undertaken with Beverage customers in
Australia and New Zealand to explore and
implement light-weighting of packaging,
including the introduction of the lightest
Sparkling glass bottle in the Australian
market at 580 grams, 100 grams lighter
than any competitor bottle, meaning
less glass is taken to market and
greenhouse gas emissions are reduced.
We also implemented a closed loop glass
recycling program with two major wine
customers, taking waste glass from the
production process and utilising it to
manufacture new bottles. Undertaking
these and similar initiatives is pivotal
to our commitment to develop the
circular economy.
At Orora, we aim to make a positive
contribution to the prosperity of the
communities in which we operate. In
FY21, we commenced our first intake
of mechanical engineering graduates at
Orora Glass. The graduates work onsite
at Gawler and Orora provides financial
support for them to attend University,
while they receive additional support
from a local technical training program.
Additionally, the Orora Cans team
distributed over 20,000 cans of water
to the Country Fire Authority and local
primary schools in Southeast Gippsland
in Victoria.
Across Australia and New Zealand,
we supported ‘R U OK?’ day to promote
awareness of the benefits of connection
for better mental health, encouraging
team members to check in with
colleagues, friends or family who may
be struggling with life’s ups and downs.
At OPS in North America, the Orora
Fresh team partnered with United Way
for their Summer Eats for Kids Program,
donating 4,500 boxes to help provide
low-income kids and families in Windsor,
Ontario with nutritious food during the
summer months when school nutrition
programs are closed. The Orora Visual
team conducted food drives around the
holidays in Chicago, New Jersey and
Dallas, to donate non-perishable items to
those in need in their local communities.
Partnerships like these reflect Orora’s
commitment to advancing jobs, skills
and people, addressing the sustainable
energy challenge, and recycling for a
sustainable future.
ORORA LIMITED ANNUAL REPORT 2021 In addition to our existing initiatives, further specific
initiatives and goals will elevate our focus on sustainability
and contribute to Orora’s achievements for the future.
A NEW CHAPTER IN SUSTAINABILITY
We have undertaken a comprehensive
review of our approach to sustainability,
in line with our ambition to be a leading
sustainable packaging solutions
company. The review involved
consultation with functional specialists
across all Orora businesses, as well as an
assessment of the sustainability areas
of greatest relevance and importance to
our customers, investors and industry
regulators. It was also informed by the
independent assessment of Orora’s
material risks referred to on page 10.
Using insights gathered from the review,
we are redefining the pillars forming
Orora’s sustainability program in FY22,
from People, Planet and Prosperity
to Circular Economy, Climate Change
and Community.
While many of the activities that form
each of our pillars remain consistent,
the redefined program presents a
broader and more aspirational approach
to sustainability by Orora and is more
closely aligned with the focus areas and
expectations of our customers, investors
and regulators, and of the broader
communities in which we operate. In
addition to our existing initiatives, further
specific initiatives and goals will elevate
our focus on sustainability and contribute
to Orora’s achievements for the future.
17
ORORA LIMITED ANNUAL REPORT 2021 GROUP OPERATING AND FINANCIAL REVIEW
Financial review
summary
INCOME STATEMENT1
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 SHEET2
AUD million
Cash
Other current assets
Property, plant and equipment
Right-of-use lease assets
Intangible assets
Other non-current assets
Total assets
Borrowings
Lease liabilities
Payables and provisions
Total equity
Total liabilities and equity
CASH FLOW3
AUD million
Earnings before depreciation, amortisation, interest, related
income tax expense and significant items
Right-of-use asset lease payments
Non-cash items
Movement in total working capital
Net base capital expenditure
Underlying operating cash flow
Cash significant items
Operating free cash flow
REVENUE
Reported sales revenue was $3,538.0
million, down 0.8% on FY20, but up 7.8%
on a constant currency basis.
In Australasia, revenue increased 6.1%,
driven by volume growth in Cans and
Closures. Strong revenue growth in Cans
was partially offset by declines in Glass.
In North America, revenue was up 8.2%,
in local currency terms, with OPS and
Orora Visual revenue up by 8.3% and 7.7%
respectively. Reported North American
revenue of $2,703.9 million was down
2.7%, with a $303.2 million negative
FX translational impact on US dollar
denominated North American sales.
EARNINGS BEFORE INTEREST AND TAX
Underlying earnings before interest
and tax (EBIT) was $249.1 million, up
11.6% on FY20 (up 17.3% on a constant
currency basis).
In the Australasian business, the increase
in EBIT was driven by stronger volumes
in Cans and Closures, partly offset by
declines in Glass and cost headwinds
associated with higher energy and
insurance costs.
The North American businesses
delivered significantly improved financial
performance, with reported EBIT
increasing 28.8% on the prior year to
$98.8 million (up 43.0% on a constant
currency basis). This was a result of
revenue growth and an ongoing focus on
profit improvement initiatives, with OPS
margins improving by 80bps to 4.4%.
US dollar earnings were translated at
AUD/USD ~74.7 cents in FY21, compared
to ~67.1 cents in the prior year.
2021
2020
3,538.0
3,566.2
369.3
348.6
(120.2)
(125.3)
249.1
223.3
(38.6)
210.5
(32.8)
(48.0)
129.7
2021
50.6
930.2
627.5
200.5
411.2
104.6
(137.2)
86.1
(50.5)
(9.0)
26.6
2020
107.3
948.1
671.7
217.3
434.0
119.8
2,324.6
2,498.2
503.5
252.8
799.7
768.6
399.4
279.4
789.2
1,030.2
2,324.6
2,498.2
2021
369.3
(59.4)
27.7
(61.6)
(30.0)
246.0
(33.8)
212.2
2020
348.6
(65.5)
29.5
(69.6)
(73.2)
169.8
(42.1)
127.7
1
2
3
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.
IFRS compliant information extracted from the audited Financial Statements.
Operating free cash flow includes principal lease and interest payments associated with right-of-use
assets as reported per the Segment Note in the Financial Statements (refer note 1).
18
ORORA LIMITED ANNUAL REPORT 2021 SIGNIFICANT ITEM EXPENSE
Orora recorded an after-tax significant
item expense of $20.9 million. This
comprised of:
An incremental net gain from the disposal
of the Australasian Fibre business
(“Fibre”) of $1.5 million ($6.1 million after
tax benefit) arising from the post 30 June
2020 completion accounts process
reported in the first half of FY21. The first
half gain after tax benefit of $12.8 million
was offset in the second half by the
recognition of additional costs and
obligations associated with the sale.
Following recent significant
developments associated with
unprecedented rainfall levels and
unforeseen complexities related to
the remediation requirements of the
former Petrie mill site, additional costs
of $38.6 million ($27.0 million after tax)
were recognised in FY21 in respect of
estimated costs to complete.
BALANCE SHEET
Total assets decreased by $173.6 million
or 6.9% in FY21.
A more centralised approach to cash
management designed to reduce cash
in offshore accounts and enable debt
reduction resulted in lower cash balances,
down $56.7 million to $50.6 million. On
an underlying basis, trade receivables
increased in North America and across
Australasia, reflecting increased sales,
while underlying inventory levels remained
relatively flat versus the prior year.
Net property, plant and equipment (“PP&E”)
decreased by $44.2 million, which includes
a foreign currency translation impact
(decrease) of ~$11.0 million. Capex for
FY21 was $57.1 million and included
spend on the Revesby small format can
line, preliminary work on the new glass
beneficiation plant at Gawler and a new
folder gluer in OPS. Depreciation for the
period was $68.1 million (excluding ROU
assets). A decrease in intangible assets
was largely driven by foreign currency
impacts ($30.0 million). Investments
of ~$20.0 million were made in digital
platforms and software upgrades,
and amortisation for the period was
$7.9 million.
Net debt increased by $160.8 million
during the year with the main driver being
$256.2 million spent on the buyback. This
was partially offset by increased operating
cash flow, the receipt of a tax refund
and settlement of the working capital
completion account adjustment process
in connection with the disposal of the
Australasian Fibre business (“Fibre”) in the
first half. The foreign currency translation
impact was a decrease of $26.0 million.
We remain well within all debt covenant
requirements.
The $10.5 million increase in payables
and provisions was driven primarily by an
increase in underlying payables across
the businesses and the recognition of
additional SI provisions during the year,
partially offset by foreign currency
translation impacts (a decrease of
$28.2 million). The net lease liability
position declined $9.8 million. The net
lease liability position remained broadly
in line year on year, with $4.3 million
of the net movement due to foreign
currency translation. ROU leases relate
predominantly to the North American
businesses, with very few leases in
Australasia.
CASH FLOW
Increased earnings were converted
into cash with operating cash flow of
$246.0 million, up by $76.2 million or
44.9%. Cash conversion of 72.9% was
stronger than 54.3% reported in the
prior year.
Main movements of note in cash flow
include an increase in cash EBITDA of
8.0% (sum of EBITDA and non-cash items),
broadly in line with lease adjusted earnings,
as well as an increase in trade receivables,
in line with increased sales.
Lower base capex of $31.9 million
compared to $83.2 million in FY20 reflects
the impact of the G2 rebuild at Gawler
of ~$50.0 million in FY20. Gross capex
(base and growth) was ~84% of underlying
depreciation for the year.
WORKING CAPITAL
During FY21, average total working capital
to sales was 6.4% (8.3% in FY20), with the
decrease largely attributable to increased
sales and reduced average working capital
balances.
The medium-term management target for
average total working capital to sales is
less than 10.0%.
DISCONTINUED OPERATIONS
On 30 April 2020, Orora completed the
disposal of the Australasian Fibre business
(“Fibre”) to a wholly owned subsidiary of
Nippon Paper Industries Co., Limited for
an enterprise value of $1,720.0 million.
Net proceeds received in FY20 were
$1,637.0 million. The finalisation of the
working capital completion account
adjustment process in FY21 resulted in
further net cash inflows of $20.7 million.
A further $32.2 million is to be received
in FY22 related to the deferred settlement
of two properties.
CAPITAL MANAGEMENT
During FY21, Orora purchased 89.3 million
shares (representing 9.3% of issued
capital) as part of an on-market buyback,
which was announced in August 2020.
Shares were bought back for a total outlay
of $256.2 million and a volume weighted
average price of $2.87 per share.
When combined with the capital return and
special dividend payments made during
FY20, the buyback brings the total returns
of capital made to shareholders since the
disposal of the Australasian Fibre business
(“Fibre”) to $856.2 million, in addition
to ordinary dividends. Consistent with a
focus on the disciplined pursuit of growth
and capacity enhancement investment
opportunities, we continue to maintain a
strong balance sheet, providing operating
and strategic flexibility.
CORPORATE
Corporate costs have been allocated
directly to the business segments.
In May 2021, Orora refinanced a
$350.0 million syndicated facility.
The refinanced facility will mature in
November 2024. Commercial terms and
composition of the lending syndicate
were not materially changed.
We have substantial headroom under our
existing debt facilities, with a $35.0 million
bilateral facility maturing in January 2022
(undrawn at 30 June 2021) and no material
maturities thereafter until July 2023.
Reflecting the strength of the Group’s
balance sheet and liquidity position, a
range of committed bilateral facilities
that were established during FY20 were
either not renewed upon maturity or were
converted to lower cost uncommitted lines
during FY21.
PETRIE DECOMMISSIONING
The decommissioning of the former Petrie
mill site is progressing but continues to
be a significant and complex exercise
involving multiple government agencies.
A further $38.6 million ($27.0 million
after tax) was recognised in respect
of estimated costs to complete during
FY21 ($29.3 million was expensed in the
second half of FY21 or $20.5 million after
tax). Approximately $28.4 million was
spent on decommissioning during the
year. Recent significant developments
associated with unprecedented rainfall
levels and unforeseen complexities related
to the remediation of the most technically
complex remaining areas have, resulted
in increases to the estimated costs
to complete.
19
ORORA LIMITED ANNUAL REPORT 2021 Operational review
Australasia1
The Australasian
Beverage business
delivered a solid result
in FY21 and continued to
demonstrate diversified
strength and resilience
as a leading supplier of
Cans, Glass and Wine
Closures in Australia
and New Zealand.
KEY POINTS
Sales were up by 6.1% to $834.1 million in Australasia.
EBIT increased by 2.5% from the prior year to $150.3 million — a solid
result in the face of significant headwinds, including the impact of
tariffs imposed on wine exports to China.
An increase in EBIT was driven primarily by stronger volumes across Cans,
with all sites moving to 24/7 operations in response to higher demand, and
partially offset by declines in Glass as a result of a reduction in volumes in
the second half as the impact of lower exports to China crystallised.
A continuing skew in product mix towards grocery channels and at-home
consumption, and increased energy and insurance costs impacted
sales margins.
Return on Average Funds Employed was down slightly to 25.4%,
with higher earnings offset by recent capital upgrades.
Cash conversion increased on the prior year at 72.2%, up from 58.1%.
EARNINGS2
AUD million
Sales revenue
EBIT3
EBIT margin %
RoAFE4
SEGMENT CASH FLOW
AUD million
EBITDA5
Leases
Non-cash items
Cash EBITDA
1
2
3
4
5
The financial information provided represents
Orora’s continuing Australasia operating
segment.
As reported in the Segment Note contained
within the Financial Statements, refer note 1.
Earnings before interest, related income tax
expense and significant items.
Return on Average Funds Employed (RoAFE) is
calculated as EBIT divided by average funds
employed.
Earnings before depreciation, amortisation,
interest and related income tax expense and
significant items.
Movement in total working capital
Base capex
Sale proceeds
Operating cash flow
Cash significant items
Operating free cash flow
Cash conversion
20
FY21
834.1
150.3
18.0%
25.4%
FY21
197.8
(6.0)
27.1
218.9
(41.7)
(18.9)
(0.3)
158.0
(28.5)
129.5
72.2%
Change %
6.1%
2.5%
Change %
3.3%
6.1%
31.7%
FY20
785.9
146.6
18.6%
27.0%
FY20
191.5
(6.1)
21.0
206.4
(35.1)
(60.8)
9.5
120.0
(20.6)
99.4
58.1%
ORORA LIMITED ANNUAL REPORT 2021 PERFORMANCE HIGHLIGHTS
Sales revenue
(AUD million)
$834.1m
FY21
FY20
834.1
785.9
FY21
FY20
EBIT3
(AUD million)
834.1
785.9
$150.3m
FY21
FY20
150.3
146.6
6.1%
2.5%
FY21
150.3
FY20
BEVERAGE CANS
Earnings grew strongly on the prior year,
with an increase in volumes across all
categories reflecting increased levels of
at-home consumption. All sites moved to
24/7 operations during the second half
of FY21 in response to strong demand,
with first and second half volumes both
up on their respective prior comparative
periods.
Strong volume growth was underpinned
by increased demand in carbonated
soft drinks, and both craft beer and
mainstream beer segments benefitted
from a preference shift from glass to
can format. Volumes also increased in
non-alcoholic beverages such as still
and sparkling water, and other alcoholic
beverages such as seltzers and wine.
BEVERAGE GLASS
Overall volumes in FY21 reflect the
reduced bottled wine exports to China,
with growth in beer and other beverage
categories providing a partial offset.
An ongoing focus on operational cost
improvement and the benefits of the
warehouses commissioned in FY20 have
flowed as anticipated in FY21. Glass
earnings were in line with expectations,
but down on the prior year due to a
reduction in volumes in the second
half as the impact of lower exports to
China crystallised, a shift in Glass mix
to other lower margin beer and beverage
categories, and the impact of increased
energy and insurance costs.
Good progress has been made to redeploy
Glass capacity into new segments,
diversify production capabilities and
expand customer portfolios.
146.6
We continue to work closely with our
customers to address the impacts of
Chinese tariffs on bottled wine exports.
BEVERAGE CLOSURES
Closure volumes were up on the prior year
reflecting increased levels of at-home
consumption, with earnings broadly in line
with FY20. Chinese tariffs have not had
an impact on closures, as exports to China
predominantly relate to cork closures.
INNOVATION AND GROWTH UPDATE
Investment in our Beverage business has
continued, with $34.2 million of growth
and base capital expenditure during
FY21. This included the installation of
small format can capability at Revesby,
which complements our existing small
format can capability at Rocklea and Wiri,
and further enhances our ability to meet
customer preferences and demand.
Reflecting a strong customer-led
outlook for can volume growth, capacity
expansion plans continue to progress.
Work is likely to commence during FY22
on the installation of a new can line at
an existing site at a cost of ~$70 million
to $80 million once customer contracts
are secured.
We continue to seek further opportunities
to source recycled content in our
Australasian business. In FY21, we began
utilising glass cullet from the new West
Australian Container Deposit Scheme.
This is in addition to cullet already used
from the South Australian and New
South Wales schemes. Construction of
an advanced glass beneficiation plant is
underway at Gawler at an estimated cost
of ~$25.0 million, with commissioning
expected in the second half of FY22.
Federal and State Government funding of
~$8 million has been received to support
this development through the Recycling
Modernisation Fund. The new plant will
enable us to increase recycled glass
content to ~60%, further progressing
Orora’s sustainability agenda.
Beverage Cans and Glass continue to
focus on operational excellence through
Advanced Manufacturing, including data
analytics and Integrated Work Systems
deployment. In line with this strategy,
investment has continued in the Industry
4.0 plant efficiency initiative. The
data analytics platform has now been
rolled out to all Cans sites and in Glass,
providing better data to problem solve
and improve efficiencies.
We continue to invest in capacity and
innovation to produce best in class
products and services. In Glass, we have
invested ~$250 million in the world-class
Gawler facility since the demerger in
FY14, including the G2 furnace rebuild,
capacity expansions, mould insourcing,
system upgrades and highly automated
onsite warehouse capacity. In Cans, we
maintain our market leading decoration
and differentiation capabilities while
we continue to explore a number of
innovative concepts in aluminium
containers. The Cans business has also
seen significant investment in capacity
and capability of ~$90 million since
the demerger.
Quality and service remain of paramount
importance for the Australian Beverage
team, and investments in eCommerce
enhancements continue to drive and
support customer engagement.
21
ORORA LIMITED ANNUAL REPORT 2021 Operational review
North America
Our North American
businesses, OPS and
Orora Visual delivered
strong improvements
in operating and
financial performance,
demonstrating the
benefits of a continued,
disciplined focus on the
execution of strategy.
KEY POINTS
Local currency sales revenue grew by 8.2% to US$2,019.8 million,
with year on year growth achieved by both OPS and Orora Visual
despite difficult retail conditions.
EBIT increased by a significant 43.0% in local currency terms, with
a continued focus on profit improvement programs, efficiency and
cost reduction resulting in North American EBIT margins growing
by 90bps to 3.7%.
Orora Visual delivered a positive full year EBIT result, comparing favourably
to a prior year loss.
A material and sustainable increase in OPS EBIT margins has put us on track
to achieve a greater than 5.0% EBIT margin over the next two to three years.
On the back of improved earnings, operating cash flow increased by 76.7%
to $88.0 million, with cash conversion also increasing significantly from
46.9% in FY20 to 74.1%.
RoAFE increased to 15.0%, up from 8.9% in the prior year in line with
higher earnings.
EARNINGS1
AUD million
Sales revenue
EBIT2
EBIT margin %
RoAFE3
USD million
Sales revenue
EBIT
SEGMENT CASH FLOW
AUD million
EBITDA4
Lease repayments
Non-cash items
Cash EBITDA
Movement in total working capital
Base capex
Sale proceeds
Operating cash flow
Cash significant items
Operating free cash flow
Cash conversion
FY21
2,703.9
98.8
3.7%
15.0
FY21
2,019.8
73.8
FY21
171.5
(53.4)
0.6
118.7
(19.9)
(13.0)
2.2
88.0
(5.3)
82.7
Change %
(2.7%)
28.8%
Change %
8.2%
43.0%
Change %
9.2%
11.8%
76.7%
FY20
2,780.3
76.7
2.8%
8.9%
FY20
1,866.4
51.6
FY20
157.1
(59.4)
8.5
106.2
(34.5)
(22.4)
0.5
49.8
(21.5)
28.3
74.1%
46.9%
1
2
3
As reported in the Segment Note contained
within the Financial Statements, refer note 1.
Earnings before interest, related income tax
expense and significant items.
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.
22
ORORA LIMITED ANNUAL REPORT 2021 PERFORMANCE HIGHLIGHTS
Sales revenue
(USD million)
$2,019.8m
FY21
FY20
2,019.8
1,866.4
8.2%
FY21
73.8
FY21
2,019.8
FY20
EBIT2
(USD million)
1,866.4
$73.8m
FY21
73.8
FY20
51.6
43.0%
FY20
IMPACT OF COVID-19
51.6
ORORA VISUAL
The impact of COVID-19 on North
America’s retail landscape during FY21
was significant. Both OPS and Orora Visual
were classified and operating as essential
services during the year and pleasingly,
both have returned to revenue growth, with
trading conditions progressively improving
over the course of the second half. Our
North American businesses continued to
successfully manage the safety of our
people and provide effective services to our
customers, while focusing on a realignment
of operating costs commensurate with
prevailing volumes.
ORORA PACKAGING SOLUTIONS
The OPS team delivered constant currency
revenue growth of ~8.3% compared to the
prior year. Both EBIT and EBIT margins were
higher than the prior comparative periods in
both the first and second halves of FY21.
On a full year basis, OPS EBIT margins
increased by 80bps to 4.4% from 3.6%,
noting the impact of seasonality between
the first and second half. This material
and sustainable increase is the result
of ongoing execution of the OPS profit
improvement program, focused on margin
recovery and efficiency/cost reduction.
This program continues to gain momentum
and will be ongoing throughout FY22.
Improved performance in FY21 was driven
by the full year benefit of headcount
reductions made in FY20; a detailed
focus on cost to serve and maintaining
pricing discipline, particularly in response
to upstream pricing changes; plus an
ongoing focus on further leveraging the
ERP and associated data analytics to
provide additional transparency to sales
representatives to enhance decision
making and effectiveness.
The Orora Visual team delivered a positive
full year EBIT result. This compared
favourably to a prior year loss and was
achieved together with a 7.7% increase
in revenue on a constant currency basis,
with second half performance more than
offsetting a constant currency revenue
decline in the first half, compared to the
prior comparative period.
These results reflect an ongoing focus on
the execution of cost control measures,
together with a shift in focus to defensive
markets such as food, beverage and
horticulture — segments which now
represent over 37% of the revenue base
at Orora Visual.
This improved operating performance has
offset the continuing impact of COVID-19,
which has created challenging trading
conditions, with retail store closures
and the deferral of promotional programs
— particularly in the first half of the
financial year.
INNOVATION AND GROWTH UPDATE
In both OPS and Orora Visual, the leadership
teams have been focused on establishing
platforms that facilitate a scalable value
proposition in their respective businesses.
Strategically, OPS continues to focus
on providing customised solutions that
enhance the value of our customers’
products and services whilst also reducing
the costs of their packaging. Our OPS
profit improvement program is being
well executed by the team with positive
momentum building. The improvement in
earnings on the prior year has been achieved
despite the ever-present impacts of the
pandemic. New initiatives will continue to
be implemented throughout FY22.
The path to historic EBIT margins also
continues to gain momentum, with OPS
on track to achieve a greater than 5.0%
EBIT margin in the next two to three years.
Success achieved to date highlights the
positive impact of the work undertaken,
with further benefits expected to be
realised over FY22 and beyond.
At OPS, we continue to invest in new digital
platforms to replace legacy web portals
and to enable customers to transact
digitally with customised product offerings
via digital channels. The OPS omnichannel
strategy is designed to integrate all
channels of customer engagement and
improve the overall customer experience.
It is now expected to launch in FY22 after
COVID-19 related delays this year.
Automation at Orora Fresh in Canada
continues, and will remove manual work
processes and drive out costs. We have
also committed capital to improving the
Pollock Manufacturing capability.
At Orora Visual, our strategy remains to
utilise the national footprint, creative
resources and breadth of in-house
services and manufacturing capabilities
to deliver impactful visual communication
solutions for our customers. New fabric
lines commissioned in Orange County and
New Jersey in FY20 supported fulfilment
of customer demand to drive an increase
in revenue across segments including
beauty, home and apparel during FY21.
These fabric lines continue to gain traction
with further increases in demand driving
even higher utilisation throughout the year.
Orora Visual also continues to invest in
digital technology including customer and
consumer engagement capability and
on demand print solutions.
23
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance
Statement
THE BOARD OF DIRECTORS
Role of the Board
The Board is responsible for the
governance of the Company and is
accountable to shareholders for guiding
and monitoring the effective management
and performance of the Company.
The Board has adopted a Board Charter
which sets out how its role, powers and
responsibilities are exercised, having
regard to principles of good corporate
governance, market practice and
applicable laws.
The Board operates in accordance with
the Company’s Constitution, the relevant
laws and ASX listing rules, and the
principles set out in its Board Charter,
which is publicly available on Orora’s
website.
Responsibilities of the Board
The Board’s responsibilities, as
summarised in the Board Charter, include:
defining the Company’s purpose and
approving and monitoring management’s
development and implementation of the
Group’s strategy, plans and core values
of the Group
setting the risk appetite within which the
Board expects management to operate
reviewing, approving and monitoring
the Company’s risk policy and risk
management systems (for both financial
and non-financial risks), including internal
compliance and control mechanisms
overseeing the Group’s accounting
and corporate reporting systems and
disclosures
approving the overall remuneration
policy and remuneration of Non-
Executive Directors, the CEO and senior
management, including any incentive
and/or equity plans
overseeing, with recommendations from
the Human Resources Committee, that
the remuneration policy is aligned with
the Company’s purpose, core values,
strategic objectives and risk appetite
receiving information regarding
material breaches of the Company’s
Code of Conduct and Ethics, Anti-
bribery and Anti-Corruption Policy and
reports of material incidents under the
Whistleblower Policy
determining the size, composition and
structure of the Board, and the process
for evaluating its performance
approving and removing the CEO and
Company Secretary, and approving
and reviewing succession plans for
the Non-Executive Directors, CEO
and senior management
satisfying itself that the Board reporting
framework is appropriate and, where
required, providing constructive
feedback to challenge the CEO and
senior management
ensuring provision of adequate,
accurate and timely information to the
market of all material information and
developments relating to the Company
adopting appropriate procedures
to ensure compliance with all laws,
governmental regulations and
accounting standards
reviewing and, to the extent necessary,
amending the Board and Committee
Charters.
Board composition and succession
The Board is committed to ensuring
that it is comprised of individuals who
collectively have the appropriate skills
and experience to develop and support
the Board’s responsibilities and Company
objectives. The Board’s composition is
determined based on criteria set out in
the Company’s Constitution and the Board
Charter, including:
a majority of Independent Non-Executive
Directors and a Non-Executive Director
as Chair
the Board having an appropriate mix
of skills, knowledge, experience,
independence and diversity necessary
to review and approve the strategic
directions of the Group, and to guide
and monitor management
re-election of Directors at least every
three years (except for the Managing
Director and Chief Executive Officer).
The Directors of the Company as at
the date of this Statement are set out
below. Details of each Director’s tenure,
experience, expertise and qualifications
are set out on page 38 of this Annual
Report and on Orora’s website.
A R H (Rob) Sindel (Chair) — Independent
Non-Executive Director
B P (Brian) Lowe — Managing Director
and Chief Executive Officer (CEO)
A P (Abi) Cleland — Independent
Non-Executive Director
T J (Tom) Gorman — Independent
Non-Executive Director
S L (Sam) Lewis — Independent
Non-Executive Director
J L (Jeremy) Sutcliffe — Independent
Non-Executive Director
The Board periodically reviews its
composition, and tenure and succession
of the Directors, upon input and
recommendation from the Nomination
Committee.
The Board is committed to achieving
and demonstrating standards of
corporate governance appropriate
to the operations and size of the
Company, and continuing to refine
and improve Orora’s governance
framework and practices to
ensure they meet the interests of
shareholders and other stakeholders.
The Board of Directors of Orora Limited
and its subsidiaries (Orora or the Company)
believe good corporate governance:
is an integral part of the culture and
business practices of the Company; and
will add to Orora’s performance to create
shareholder value, while having regard
to other stakeholders and an appropriate
risk and return framework.
The Board is committed to achieving and
demonstrating standards of corporate
governance appropriate to the operations
and size of the Company, and continuing
to refine and improve Orora’s governance
framework and practices to ensure they
meet the interests of shareholders and
other stakeholders.
The Board has adopted a suite of
Charters and key corporate governance
documents which articulate the policies
and procedures followed by Orora. These
documents are publicly available on
Orora’s website at www.ororagroup.com
under the “Investors” section. This
website is reviewed and updated regularly
to ensure that it reflects Orora’s most
recent governance information.
This statement summarises Orora’s
main corporate governance practices
for the reporting period, being the year
that ended 30 June 2021, which comply
with the Australian Securities Exchange
(ASX) Corporate Governance Council’s
Corporate Governance Principles and
Recommendations 4th Edition (ASX
Principles).
This Corporate Governance Statement is
current as at 19 August 2021 and has been
approved by the Board.
24
ORORA LIMITED ANNUAL REPORT 2021 BOARD SKILLS AND EXPERIENCE
Board skills matrix
The Board recognises the importance of having Directors with 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
Company has established a Board skills matrix relevant to the Company and currently represented on the Board. A regular
assessment of the optimum mix of these skills and experience is computed and takes into account the strategic positioning of
the Company. A summary of the main skills and experience of the Board as applicable to its strategic objectives is set out in the
skills matrix below.
The skills attributed to each Director recognise their experience acquired through previous executive or non-executive director
roles. 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. The Board considers that there are currently no significant gaps
in the skill set that it seeks to have represented on the Board, and that the skills and experience of the Directors are relevant and
appropriate to Orora.
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.
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.
Financial Acumen
Experience in financial accounting and reporting, corporate finance and
restructuring, corporate transactions, including ability to evaluate the
adequacies of financial and risk controls and understand key financial drivers
of the business.
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.
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.
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.
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.
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.
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
4/6
6/6
3/6
5/6
4/6
6/6
5/6
6/6
25
ORORA LIMITED ANNUAL REPORT 2021
Corporate Governance Statement
BOARD EXPERIENCE
Board Global Experience
60%
US
40%
Other
segments
Board Diversity
33%
Female
67%
Male
Board Tenure
50%
0-5
years
50%
5-10
years
26
Conflict of interest
Directors must keep the Board advised,
on an ongoing basis, of any interest that
could potentially conflict with their duties
to the Company. The Board has developed
procedures to assist Directors to disclose
potential conflicts of interest and, each
year, all Non-Executive Directors complete
independence declarations. Where the
Board believes that a significant conflict
exists for a Director on a Board matter,
the Director concerned does not receive
the relevant Board papers and is not
present at the meeting whilst the item is
considered.
The Chair
The Board Charter provides that the Chair
should be an Independent Director and
should not be the CEO. The Chair, Rob
Sindel, is considered by the Board to be
independent and his role is separate to
that of the CEO.
The Chair’s role and responsibilities are
outlined in the Board Charter and include:
leadership of the Board and assisting the
Board to work effectively and discharge
its responsibilities, and encouraging and
facilitating a culture of openness and
debate between Directors to foster a
high-performing and collegiate team
maintaining effective communication
and promoting constructive and
respectful relationships between
the Board and management
chairing general meetings of the
Company
setting the agenda for each Board
meeting in consultation with the
CEO and Company Secretary
representing the Board in
communications with shareholders
and other key stakeholders.
In accepting the position, the Chair has
acknowledged that the role will require
a significant time commitment and has
confirmed that other positions will not
hinder the effective performance of the
role of Chair.
As well as diversity amongst the skill
set of the Board, the Company aims
to have an appropriate mix of gender,
thought, age and cultural background
represented on the Board. Further details
of the Company’s diversity objectives
and Diversity and Inclusion Policy are
set out on page 31 of this Annual Report.
The current global experience, gender
diversity and tenure of the Board is shown
in the charts below.
Directors’ independence
The Board has adopted specific principles
in relation to Non-Executive Directors’
independence as set out in the Board
Charter.
The Board Charter states that the
Board shall consist of a majority of Non-
Executive Directors who are considered
by the Board to be independent.
Under the Charter, Directors must
immediately disclose to the Company
Secretary and the Chair any information,
facts or circumstances of which they
become aware, which may affect their
independence.
The Board undertakes an annual
review of the extent to which each
Non-Executive Director is independent,
having regard to the relationships
affecting the independent status of
a Director as described in the ASX
Principles and any other matters the
Board considers relevant. Each Director is
required to update the Board as soon as
reasonably practical if any event occurs
throughout the year which may affect the
independence of that Director. Where the
Board determines a Director is no longer
independent, an announcement will be
made to the market.
As at the date of this Statement, with the
exception of the CEO, the Board considers
that each Non-Executive Director (being
Rob Sindel, Abi Cleland, Tom Gorman,
Sam Lewis, and Jeremy Sutcliffe) is
independent.
The Board has agreed that, in the absence
of special circumstances, the tenure
for Non-Executive Directors should be
limited to a maximum of 10 years, to
ensure Directors remain demonstrably
independent, with a view to best
represent the interests of shareholders.
The Board Charter reflects this policy.
ORORA LIMITED ANNUAL REPORT 2021 The Board undertakes a performance evaluation to review its performance
and that of its Committees and each Director at least annually.
The Company Secretary
The Board has appointed Ann Stubbings as
Company Secretary. Details of the skills,
experience and expertise of the Company
Secretary are set out on Orora’s website.
The Company Secretary is accountable
to the Board through the Chair, and the
appointment or removal of the Company
Secretary is a matter for the Board as a
whole. Each Director is entitled to access
the advice and services of the Company
Secretary. The role of the Company
Secretary is set out in the Board Charter,
which is available on Orora’s website.
Checks and information on Directors
Before appointing or proposing a person
for election as a Director or senior
executive, Orora conducts all appropriate
background checks on the relevant person,
including reference checks and criminal
and bankruptcy record checks.
Prior to a Non-Executive Director’s
election or re-election by shareholders,
the Board provides shareholders with all
material information known to Orora which
is relevant to the decision of shareholders
to elect or re-elect the Director, in order
to assist their decision making process.
This information is generally contained
in the notice of meeting of the Annual
General Meeting at which the Director’s
appointment will be considered by
shareholders.
A candidate for election or re-election as
a Non-Executive Director will be required
to provide the Board or Nomination
Committee with all material information
and an acknowledgement that he or she
will have sufficient time to fulfil his or her
responsibilities as a Director.
Agreements with Directors
Non-Executive Directors are appointed
pursuant to a formal letter of appointment
and a deed of appointment, which
set out the key terms relevant to the
appointment, including the term of
appointment, the responsibilities and
expectations of Directors in relation
to attendance and preparation for all
Board meetings, appointments to other
boards, the procedures for dealing with
conflicts of interest, and the availability of
independent professional advice.
Non-Executive Directors are expected to
spend a reasonable amount of time each
year preparing for and attending Board
and Committee meetings and associated
activities. Other commitments of Non-
Executive Directors are considered
by the Nomination Committee prior
to appointment to the Board and are
reviewed each year as part of the annual
Board performance assessment.
Director induction and development
Orora has in place a formal process
to educate new Directors about
the operation of the Board and its
Committees, the Company’s purpose,
core values, Group strategy, any
financial, strategic, operational and risk
management issues, and the expectations
of performance of Directors. This
induction program includes providing
new Directors with access to previous
Board and Committee meeting minutes,
Orora’s policies and the strategic plan,
and facilitating meetings with senior
executives.
Directors visit Orora sites on an ongoing
basis, as COVID-19 travel restrictions
allow, and meet with management to
gain a better understanding of business
operations. These visits are conducted
either as a full Board, or Board Committee,
or with one or two Directors. During the
reporting period, the Australian-based
Directors collectively visited the Orora
Gawler and Revesby sites in Australia.
The CEO separately visited Orora’s sites in
Gawler, Revesby, Rocklea and Petrie, and
travelled to North America to visit Orora
Packaging Solutions head office, following
receipt of COVID-19 related government
approvals. The CEO undertook all required
quarantine arrangements related to these
interstate and international visits. Orora’s
North American based Non-Executive
Director, Tom Gorman, travelled on
several occasions to support Orora North
American related matters as COVID-19
restrictions permitted. Other Orora site
visits by Directors were contemplated
during the reporting period, but due to
COVID-19 travel restrictions these visits
were postponed. Directors are also
given access to continuing education
opportunities to update and enhance
their skills and knowledge.
Performance evaluation
The Board undertakes a performance
evaluation to review its performance and
that of its Committees and each Director
at least annually. The Chair reports to
the Board regarding the performance
evaluation process and the findings of
these reviews.
The evaluation may involve surveys by the
Directors and the Board, the assistance of
external facilitators and consideration of
the degree to which each Non-Executive
Director has demonstrated the skills
relevant to the position of Non-Executive
Director or Chair, as applicable.
During the reporting period, the Company
undertook an internal evaluation of the
Board, Committee and individual Director
performance (including in their capacity
as Chair, if applicable), having regard to
the ASX Principles.
This evaluation concluded that the
composition of the Company’s Non-
Executive Directors is appropriate
having regard to the skill set, expertise
and experience required for a company
of Orora’s size and geographic spread.
The evaluation further concluded that
the Company’s Committee structure is
effective and is well-led by appropriately
experienced and skilled Directors.
Independent professional advice and
access to information
Each Director has the right to access all
relevant Company information and the
senior executives and, subject to prior
consultation with and approval from the
Chair, may seek independent professional
advice from an advisor suitably qualified
in the relevant field at the Company’s
expense.
A copy of the advice received by the
Director will be made available for all
other Directors.
27
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance Statement
SENIOR MANAGEMENT
Delegations to management
Day-to-day management of the Group and
its businesses to achieve the Company’s
purpose are formally delegated to the
CEO, supported by senior management,
in accordance with the Board Charter
and the Company’s Delegated Authority
Policy. A summary of this policy is publicly
available on Orora’s website. A summary
of the key responsibilities delegated to
the CEO and senior management, as well
as those reserved to the Board, is set out
in the Board Charter. These delegations
are reviewed on a regular basis to ensure
that the division of functions remains
appropriate to the needs of the Company.
Senior executive appointments
and agreements
The Company conducts all appropriate
background checks on prospective senior
executives, including reference checks
and criminal and bankruptcy record
checks.
The Company also has in place a written
agreement with the CEO and each senior
executive, setting out the terms and
conditions of their employment and the
obligations they are required to fulfil in
their role. Each candidate is required
to accept all terms and obligations as a
condition of their employment. The key
terms of the CEO and Chief Financial
Officer’s (CFO) employment contracts are
set out in the Remuneration Report from
page 47 of this 2021 Annual Report.
Senior executive induction
and performance evaluation
The Company has an established
process for the induction of new senior
executives, which enables them to gain
an understanding of the Company’s
purpose, core values, Group strategy,
financial position, operations and risk
management policies, as well as to
actively participate in accordance with
their role, at the earliest opportunity
following appointment.
The performance of senior executives
is reviewed on an ongoing basis, and a
formal performance evaluation takes
place every six months in accordance
with the Company’s established
evaluation process. Senior executives and
the CEO are assessed against measurable,
short and long-term objectives which
are aligned with the Company’s business
strategy and operating plan, as well as
how they have demonstrated behaviours
that are consistent with Orora’s values.
The CEO performs the evaluations of the
other senior executives. An evaluation of
senior executives was last undertaken
in July/August 2021. The outcomes of
these assessments are then reported
to the Board.
The Board is responsible for approving
the objectives of the CEO and conducting
a formal annual evaluation of the
performance of the CEO, including an
assessment against these objectives
and the demonstration of behaviour
consistent with Orora’s values.
The outcomes of the performance
evaluations of the senior executives
and the CEO then contribute to the
determination of the senior executives’
and CEO’s remuneration.
The Company’s Senior Executive Reward
and Evaluation Policy is published on
Orora’s website.
Further information relating to the
performance evaluation of applicable
senior executives can also be found in the
Remuneration Report from page 47 of this
2021 Annual Report.
BOARD COMMITTEES
To increase its effectiveness, the
Board has established the following
Board Committees:
Audit, Risk & Compliance
Executive
Human Resources
Nomination
Safety, Sustainability and Environment.
The members of these Committees as at
the date of this Statement are set out in
the table below. Profiles of each member/
Director, including their relevant experience
and qualifications, are set out on pages
38–39 of this Annual Report and on the
Company’s website. The Company Secretary
is the Secretary of each Committee.
Each Committee has a Charter which
includes a more detailed description
of its role, responsibilities and specific
composition requirements. The Charters
are available on Orora’s website. The Board
may establish other Committees from
time to time to deal with matters of
special importance.
All Directors are welcome to attend
Committee meetings even though
they may not be a member.
The Committees have access to senior
executives and management, as well as
independent advisors. Committee agendas
and papers are available to all Directors
before the meetings. Copies of the minutes
of each Committee meeting are made
available to the full Board, and the Chair
of each Committee provides an update
on the outcomes at the Board meeting
that immediately follows the Committee
meeting.
Audit, Risk &
Audit, Risk &
Compliance Committee
Compliance Committee
Board
Board
Executive
Executive
Committee
Committee
Human Resources
Human Resources
Committee
Committee
Nomination
Nomination
Committee*
Committee*
Safety, Sustainability &
Safety, Sustainability &
Environment Committee
Environment Committee
BOARD COMMITTEES
Directors
Directors
Rob Sindel
Brian Lowe
Abi Cleland
Tom Gorman
Sam Lewis
Jeremy Sutcliffe
Chair
Member * All Nomination Committee matters were dealt with by the full Board during the financial year.
28
ORORA LIMITED ANNUAL REPORT 2021 Audit, Risk & Compliance Committee
Executive Committee
The Committee Charter provides that
all members of the Committee must be
Non-Executive Directors, the majority
of whom are independent, and the Chair
cannot be the Chair of the Board. At least
one member of the Committee must be
a qualified accountant or other finance
professional with relevant experience
of financial and accounting matters.
Current members including Chair of the
Committee are shown in the table on
page 28 of this Annual Report.
The Committee assists the Board in
fulfilling its responsibility for oversight
of the quality and integrity of the
accounting, auditing and financial
reporting of the Group, the Group’s
compliance with legal and regulatory
requirements and operations,
effectiveness of the enterprise risk
framework, including monitoring risk
parameters, of the Group, the Group’s
systems of internal control and its risk
management framework (for financial
and non-financial risks), including
elevated, new or emerging risks, and
such other duties as directed by the
Board. The Committee Charter provides
that the Committee has the authority
and resources necessary to discharge
its duties and responsibilities, including
meeting with the internal and/or external
auditors without management present.
The Committee approves the
appointment, or dismissal, of the head of
the Company’s internal audit function.
The head of the internal audit function
provides regular reports directly to the
Committee.
The Committee is responsible for the
appointment, compensation, retention
and oversight of the external auditor,
including the independence of the external
auditor, and review of any non-audit
services provided by the external auditor.
The Committee’s policy is to review the
performance of the external auditor
regularly regarding quality, costs and
independence. In discharging its role, the
Committee is empowered to investigate
any matter brought to its attention.
The internal and external auditors,
the CEO and the CFO are invited to the
Committee meetings at the discretion of
the Committee Chair.
The Committee is required under its
Charter to meet at least quarterly and
otherwise as necessary.
The Executive Committee deals with
matters referred to it by the Board or with
urgent matters that may not be deferred
until the next meeting of the Board. A
majority of the Committee members
must be independent. Current members,
including Chair, of the Committee are
shown in the table on page 28 of this
Annual Report.
Human Resources Committee
The Human Resources Committee assists
the Board in fulfilling its responsibilities
to shareholders and regulators in relation
to the Group’s people and culture policies
and practices, including overseeing
CEO and senior executive remuneration
and performance.
All members of the Committee are
required to be Non-Executive and
Independent Directors. The Committee
reviews the remuneration of the CEO and
other senior executives, taking advice
from external advisers where appropriate.
No individual is directly involved in
deciding their own remuneration.
Current members, including Chair, of the
Committee are shown in the table on page
28 of this Annual Report. The CEO is not
a member of this Committee, but attends
meetings by invitation, other than for
matters relating to his own remuneration.
The Committee meets at least quarterly
and, otherwise, as and when required.
Nomination Committee
The Nomination Committee oversees
the nomination and succession planning
processes for the Directors of the
Company, and reviewing or making
recommendations to the Board on
matters which the Committee considers
necessary, or are requested by the Board.
When a vacancy in the position of Non-
Executive Director exists or there is a
need for particular skills, the Committee,
in consultation with the Board, determines
the selection criteria based on the skills
deemed necessary, having regard to the
skills and experience of the Board as
referred to in the Board skills matrix.
The Committee identifies potential
candidates, with advice from an external
third party where appropriate. The
Board then appoints the most suitable
candidate. Board appointees must stand
for election at the next Annual General
Meeting of shareholders following
their appointment.
The Committee also makes
recommendations to the Board and
oversees implementation of the
procedure for evaluating the performance
of the Board, the Board Committees and
each Non-Executive Director, and also
oversees and makes recommendations
to the Board in respect of any ongoing
training requirements for Directors. The
Committee comprises three Independent
Non-Executive Directors, and the Chair of
the Board is the Chair of the Committee.
Current members of the Committee are
shown in the table on page 28 of this
Annual Report.
Committee members are not involved in
making recommendations to the Board
in respect of themselves. All Committee
matters were dealt with by the full
Board during the reporting period and
consequently there was no separate
meeting of the Committee.
Safety, Sustainability and
Environment Committee
The Safety, Sustainability and
Environment Committee was established
in August 2020 to provide advice and
assistance to the Board in reviewing and
recommending to the Board for approval,
appropriate Safety and Sustainability
goals and objectives, and monitoring the
decisions and actions of management.
This includes upholding the Company’s
commitment as a signatory to the United
Nations Global Compact (UNGC).
All members of the Committee are
required to be Non-Executive and
Independent Directors. Current members,
including Chair, of the Committee are
shown in the table on page 28 of this
Annual Report.
The Committee meets at least quarterly
and, otherwise, as and when required.
Attendance at Board and Committee
meetings during the reporting period
Details of Director attendance at Board
and Committee meetings held during
the financial year are provided on page 43
of this Annual Report.
29
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance Statement
ACTING ETHICALLY AND RESPONSIBLY
Code of Conduct and Ethics
Orora recognises the importance
of honesty, integrity and fairness
in conducting its business, and is
committed to increasing shareholder
value in conjunction with fulfilling its
responsibilities as a good corporate
citizen. All Directors, managers and team
members are expected to act with the
utmost integrity and objectivity, striving
at all times to enhance the reputation and
performance of the Company.
Orora believes that it is not only required
to abide by the laws in each country in
which it operates, but that it must also
conduct its business in accordance
with internationally accepted practices
and procedures. The Board and senior
management are committed to upholding
these core principles and Orora values,
which are captured in Orora’s Code of
Conduct and Ethics Policy (Code).
The Code 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, health
and safety, 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
anonymously through an independent
third party integrity reporting service.
The Whistleblower Policy emphasises
that Orora will not tolerate anyone being
discouraged from speaking up or being
adversely affected because they have
reported misconduct in accordance with
the policy. These policies are available on
Orora’s website.
Material breaches of the Code and
the Anti-Bribery and Anti-Corruption
policy, and reports of incidents under
the Whistleblower Policy, are reported
to the Board through either the Audit,
Risk & Compliance Committee or the
Human Resources Committee, and the
program is periodically reviewed for its
effectiveness, and promoted to team
members across the Orora Group.
Orora has a compliance training program
in place which is completed by team
members across the business. This
program supports the principles set
out in the Code and other applicable
policies. Orora also has a comprehensive
competition/anti-trust compliance
training program.
The Company’s Supplier Code of Conduct
and Ethics Policy (Supplier Code) sets
out the expectations of Orora’s suppliers,
and applies to all suppliers, including
all organisations and sub-contractors
providing goods and services to Orora,
globally. The Supplier Code is available
on Orora’s website.
There are also numerous activities and
compliance programs across the Group
designed to promote and encourage
the responsibility and accountability
of individuals for reporting unethical
practices. The Company continually
assesses and upgrades its policies and
procedures to ensure compliance with
corporate governance requirements.
The Directors and executive team
members are required to certify their
compliance with the policy at the end
of each financial year. The policy also
prohibits Directors, team members and
certain associates from engaging in
hedging arrangements over unvested
securities issued pursuant to any
employee option or share plans and
certain vested securities that are subject
to the Minimum Shareholding Policy.
The Share Trading Policy meets the
requirements of the ASX Listing Rules
on trading policies and is available on
Orora’s website. Minor changes were
recently made to the policy during the
reporting period to prohibit margin lending
by Directors and Executives (and their
Associates) in which a whole or part of
their Orora shareholding is provided as
security.
Fraud Policy
In addition to the Code, Anti-Bribery
and Anti-Corruption and Whistleblower
policies, the Orora Fraud Framework
and Policy outlines the responsibilities
and strategies to identify fraud within
the Orora Group, and the processes for
reporting fraud and recovering losses.
Other Policies
The Company has a number of other
governance policies which outline
expected standards of behaviour of
Directors and team members which are
available on the Company’s website.
Trading in Company securities by
Directors and team members
Modern Slavery
During the reporting period, the Company
and applicable reporting entities
submitted a Modern Slavery Statement
in accordance with the Commonwealth
Modern Slavery Act 2018. The Statement,
which can be viewed on the Company’s
website, addresses the Company’s key
modern slavery risks and how these risks
have been identified and assessed, as
well as information on the actions being
taken to mitigate these risks and how the
effectiveness of these mitigating actions
is assessed.
Orora has a Share Trading Policy that
outlines insider trading laws and prohibits
Directors, team members and certain
associates from trading in Orora’s
securities during specified “blackout
periods”.
The blackout periods are the period from
the close of trading on 31 December
each year until after the announcement
to the ASX of the Company’s half year
results, the period from the close of
trading on 30 June each year until after
the announcement of the Company’s full
year results and any other period that the
Board specifies from time to time. Trading
of securities during a blackout period can
only occur in exceptional circumstances
and with the approval of the Company
Secretary or, in some circumstances,
the Chair.
30
ORORA LIMITED ANNUAL REPORT 2021 At Orora, we are committed to being a leading provider of sustainable packaging
solutions and doing what’s right for our people, customers, investors, communities
in which we operate and other key stakeholders.
SAFETY, SUSTAINABILITY AND CULTURE
Orora is committed to being a leading
provider of sustainable packaging
solutions and doing what’s right for
our people, customers, investors,
communities in which we operate and
other key stakeholders.
Orora’s approach to sustainability is
framed by its obligations to the UNGC
and managed through three focus areas:
People, Planet and Prosperity. Through
these focus areas, Orora prioritises the
health and safety of team members,
contractors and visitors, and works
closely with customers to improve the
sustainability outcomes of the products
and services it provides.
Refer to the Sustainability section of
this Annual Report from page 10 for
more information on Orora’s approach
to sustainability, including in respect of
Orora’s safety and health performance
and key activities, culture and key
initiatives to ensure the sustainability of
its main packaging products (including
increased recycled content) to reduce
waste in the community and support
its customers in developing sustainable
packaging solutions during the reporting
period.
DIVERSITY, EQUITY AND INCLUSION
Orora’s major centres of operation,
in Australia, New Zealand and North
America, are in some of the most
demographically diverse countries. As
such, 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.
Decisions on hiring, salary, benefits,
career progression, termination or
retirement are based solely on each team
member’s ability to do the job regardless
of gender, age, cultural background,
disability, family responsibility, religious
or political beliefs, sexual orientation,
differences in background and life
experience, and interpersonal and
problem solving skills, or any other
area of potential difference.
Orora’s Diversity and Inclusion Policy,
available on Orora’s website, recognises
the positive differences each team
member brings to the business and how
Orora team members can connect and
work together to capture the benefits
of these differences.
Further information relating to Diversity,
Equity and Inclusion practices is included
in the Sustainability section of this
Annual Report on page 12—13.
Measurable objectives
Orora continues to be committed to
diversity, equity and inclusion. During the
reporting period, the Company’s activities
were aligned to three key focus areas:
building an inclusive culture that
supports diversity
attracting, recognising and rewarding
talent from diverse backgrounds
providing visible senior leadership
commitment and accountability on
diversity, equity and inclusion.
These focus areas are further
supported by a strong focus on gender
representation in talent acquisition by
the Executive Leadership team and a
wide range of initiatives to promote and
encourage diversity at Orora. Examples
in the reporting period include:
conducting a fifth annual Women in
Leadership at Orora (WILO) program,
designed to cultivate a diverse
leadership talent pipeline by enabling
women to build their confidence and
leadership skills, and designed to grow
participants’ professional networks
and create a spirit of outreach
amongst women at Orora. This was
the first program that was both global
and virtual, including participants
from five different countries across
North America and Australasia. Orora
continues to invest in previous WILO
participants by utilising WILO graduates
as coaches for current participants,
which also reinforces WILO network
connections
celebrating the diversity of the LGBTIQ+
community by educating and raising
awareness of issues faced, as well as
recognising and celebrating the inherent
and rich diversity of Orora team members
through the Orora Proud initiative.
Orora’s FY21 measurable objectives
approved by the Board, and progress
towards achieving those objectives is
shown in the table below.
The Orora Board has approved the
following gender diversity measurable
objectives for the financial year ending
30 June 2022:
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.
These objectives are supported by a
continued commitment to:
ensuring that Orora identifies and
attracts female talent for Board and
senior management vacancies
supporting the development of women
into leadership roles, including through
the 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.
Orora will also progressively add more
diversity, equity and inclusion goals as part
of its redefined sustainability program.
FY21 MEASURABLE OBJECTIVES APPROVED BY THE BOARD
FY21 Measurable Objective
FY21 Measurable Objective
Progress (as at 30 June 2021)
Progress (as at 30 June 2021)
Maintain not less than 30% of each
gender in the composition of our board
Ensure that Orora employs greater than
30% female of all external new hires
Ensure that Orora identifies and
attracts female talent for Board and
senior management vacancies
✔ 33% female and 67% male Directors
✔ 32% (179 new females have been
recruited across all of Orora in the
past 12 months)
✔ Orora continues to ensure that female
talent candidates are included in Board
and senior management succession
planning and vacancies — progress is
always within the context of hiring the
best talent available
31
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance Statement
Gender equality
A key component of Orora’s diversity
initiatives is increasing female
representation in the organisation. The
Company is committed to continuing to
improve its gender diversity across all
businesses in the Group.
The Company continues to have a
particular focus on gender equality, and
throughout the reporting period has
continued its commitment to a gender
diversity target of 30% female of all new
team member hires. At year end, this
target was again exceeded by achieving
32% and Orora continues to ensure that
progress is always within the context of
hiring the best talent available. 179 new
females have been recruited across all of
Orora in the past 12 months.
As at 30 June 2021, the percentage
of women employed by the Group as a
proportion of the total workforce was
27.4% and the proportion of women
employed at senior leadership levels was
35%. ‘Senior leadership’ for this purpose
includes all team members who are no
more than three levels below the CEO,
whose roles range from the initiation and
implementation of strategies, through
to the development and continuous
improvement of systems and practices
that deliver on these strategies and help
to realise organisational aims.
A breakdown of the percentage of female
representation at the Board and each
leadership level in the business is outlined
in the table below.
Female representation on the Board
remained the same throughout the
reporting period.
Orora is a “relevant employer” under
the Commonwealth Workplace Gender
Equality Act 2012 (WGE Act). As such,
Orora’s most recent “Gender Equality
Indicators”, as defined in the WGE Act,
will be made available on the Workplace
Gender Equality Agency’s website.
REMUNERATION
The Company’s policy is to reward
executives with a combination of fixed
remuneration and short and long-
term incentives structured to drive
improvements in shareholder value.
Details of the Company’s remuneration,
recruitment, retention and termination
policies and procedures and details of key
management personnel remuneration
and incentives are included in the
Remuneration Report from page 47 of
this Annual Report. Information regarding
the structure of Non-Executive Director
remuneration is also included in the
Remuneration Report. Non-Executive
Directors receive no incentive payments
and there are no retirement benefit
schemes in place.
FEMALE REPRESENTATION AT EACH EXECUTIVE LEVEL
%
40
35
30
25
20
15
10
5
0
32
33
33
31
32
32
36
35
32
17
17
Board
CEO 1
CEO 2
CEO 3
Total
FY20
FY21
RISK MANAGEMENT AND ASSURANCE
A range of factors, some of which are
beyond the Company’s control, can
influence performance across Orora’s
businesses.
The Company understands and
recognises that rigorous risk and
opportunity management is essential
for corporate stability and for sustaining
its competitive market position and
long-term performance. The following
objectives drive Orora’s approach to
risk management:
having a culture that is risk aware
and supported by high standards of
accountability at all levels
achieving a truly integrated risk
management approach in which risk
management forms part of all key
organisational processes
supporting more effective decision
making through better understanding
and consideration of risk exposures
enhancing shareholder value through
improved share price and earnings
growth in the short to medium term
whilst building a sustainable business
for the longer term
improving stakeholder confidence
and trust
enhancing organisational efficiencies
safeguarding the Company’s assets
— human, property, reputation and
knowledge
enabling the Board to fulfil its governance
and compliance requirements.
The Company has implemented an
enterprise risk management (ERM)
framework to improve its ability to meet
the above objectives and achieve the
desired outcomes, as well as defined
limits of authority for all levels of
management, which are periodically
reviewed by the Board. The ERM
incorporates the principles of effective
risk management, as set out in the Global
Risk Management Standard ISO 31000.
ERM seeks to apply risk management
across the entire organisation and
it does this so that all material risks
(both financial and non-financial) can be
identified, assessed and managed.
ORORA LIMITED ANNUAL REPORT 2021 Orora’s policy is to reward executives with a combination of fixed
remuneration and short and long-term incentives structured to drive
improvements in shareholder value.
In support of this approach, the Board
sets the risk appetite of the organisation
to take account of non-financial risks,
including safety, environment, reputation
and corporate governance risks, in
addition to financial risks. A summary
of Orora’s Risk Management Framework
can be found on Orora’s website.
In achieving effective risk management,
Orora recognises the importance of
leadership.
There are several layers that assist
the Board in ensuring the appropriate
focus is placed on the risk management
framework:
Audit, Risk & Compliance Committee
— provides assistance and advice to
the Board in fulfilling its responsibility
relating to the Company’s financial
reporting, internal control structure,
risk management systems, including the
risk management framework, and the
internal and external audit functions.
Safety, Sustainability & Environment
Committee — provides assistance and
advice to the Board on the management
of the Company’s safety, sustainability
and environment goals, objectives, legal
responsibilities and monitoring the
decisions and actions of management in
upholding the Company’s commitment
as a signatory to the UNGC and
achieving the Company’s goal to be a
sustainable organisation.
Human Resources Committee —
provides assistance and advice to the
Board on the Company’s people, culture
and remuneration policies and practices
as well as the Company’s involvement in
the communities in which it operates.
Executive Team — senior executives
have responsibility for driving and
supporting risk management across the
Orora Group. Each business group within
the Company then has responsibility
for implementing this approach and
adapting it, as appropriate, to its own
circumstances.
Orora’s Continuous Disclosure Committee
has responsibility for assessing any
potential material risk to Orora and any
consequent need for market disclosure.
Orora’s assurance function, which
includes the internal audit team, plays a
key role in reviewing the effectiveness
of Orora’s compliance and control
systems, including risk management.
Findings from reviews are communicated
in reports to the Board and the Audit,
Risk & Compliance Committee, and then
appropriate action is taken to support
the maintenance of a strong control
environment.
Risk management accountability
As part of the process of approving the
financial statements, at each reporting
date the CEO and other responsible
senior executives provide statements
in writing to the Board on the quality
and effectiveness of the Company’s risk
management and internal compliance
and control systems.
The Audit, Risk & Compliance
Committee reviews the Company’s risk
management framework on a regular
basis to ensure that it continues to be
sound. The framework was reviewed
during the reporting period. It remains
“fit for purpose” and will be reviewed
on an ongoing basis for continuous
improvement opportunities.
The Board has also received statements
from the CEO and the CFO certifying that,
having made all reasonable enquiries and
to the best of their knowledge and belief:
the statements made in relation to the
financial integrity of the Orora Group
financial reports are founded on a sound
system of effective and efficient risk
management and internal compliance
and control;
the system of risk management in
operation throughout the reporting
period was operating effectively; and
the systems relating to financial
reporting were operating effectively
in all material respects.
During the reporting period, the Board
received the relevant declarations
required under section 295A of the
Corporations Act 2001 from the CEO
and CFO as well as the relevant reports
and assurances that their opinions were
formed on the basis of a sound system
of risk management and internal controls
which are operating effectively.
Financial report accountability
The Audit, Risk & Compliance Committee
assists the Board in fulfilling its
responsibilities in overseeing the Group’s
processes which ensure the quality and
integrity of financial statements and
reporting, compliance with legal and
regulatory requirements, and reviewing
material changes in accounting or
reporting requirements and assessing
subsequent effects on the Group’s
policies and practices.
Orora’s CEO and CFO, who are present
for Board discussion of financial matters,
declare to the Board, in writing, that the
Company’s financial statements are in
accordance with relevant accounting
standards, give a true and fair view in
all material respects of the Company’s
and the Group’s financial condition and
operational results and comply with the
Corporations Act 2001 and associated
regulations. The CFO oversees a robust
internal process, where business unit
financial managers regularly meet with
representatives from the corporate
finance team to discuss the financial
aspects of each business. This includes a
review of the business unit profit and loss
statement, balance sheet and all other
relevant matters.
Non-financial report accountability
Applicable Board Committees, including
the Audit, Risk & Compliance Committee
and Safety, Sustainability & Environment
Committee are responsible for reviewing
the process to verify the integrity of any
periodic corporate report the Company
releases to the market that is not audited
or reviewed by the external auditor.
For those periodic corporate reports
that are not audited or reviewed by the
external auditor, a rigorous internal
review process is implemented. This
process is led by the internal subject
matter experts with reviews undertaken
by management and key internal
stakeholders. External advice is obtained
as required. Non-audited periodic
reports include the annual Modern
Slavery Statement and this Corporate
Governance Statement. These periodic
reports are approved by the Board.
33
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance Statement
Internal control
External Audit
The Board accepts responsibility for
oversight of the effectiveness of the
Company’s internal control environment,
with input and recommendation
from the Audit, Risk & Compliance
Committee. The Board’s policies
on internal control governance are
comprehensive, as noted earlier in this
Statement, and include clearly drawn
lines of accountability and delegation of
authority, as well as adherence to the
Code. In order to effectively discharge
these responsibilities, the Company
has a number of assurance functions
(including internal audit) to independently
review the control environment and
provide regular reports to the Board, the
Audit, Risk & Compliance Committee and
management committees. These reports
and associated recommendations are
considered and acted upon to maintain or
strengthen the control environment.
The assurance function assists the
Board to ensure compliance with the
internal controls and risk management
programs by regularly reviewing
the effectiveness of the Company’s
compliance and control systems. The
Group Manager, Risk and Assurance
(Internal Audit) reports directly to the
Audit, Risk & Compliance Committee and
may request any member of the Audit,
Risk & Compliance Committee to call a
meeting of the Committee. The Audit, Risk
& Compliance Committee is responsible
for approving the scope of the internal
audit plan, overseeing the performance
of the internal audit team and reporting
to the Board on the status of the risk
management system.
PricewaterhouseCoopers was appointed
as the external auditor of the Company
by the shareholders at the Company’s
Annual General Meeting in 2014. The
external auditor provides a declaration
of independence to the Audit, Risk &
Compliance Committee twice a year (refer
to page 65 of this Annual Report). Fees
paid to the external auditor, including a
breakdown of fees for non-audit services,
are noted in the Company’s Financial
Statements in this Annual Report.
The external auditor met with the Audit,
Risk & Compliance Committee without
management being present at each
Committee meeting held during the
reporting period.
Material risks, including economic,
environmental and social sustainability
risks
Orora’s ongoing commitment to
assessing opportunities and exposure
to material risks is in accordance with
the ASX Corporate Governance Council’s
Recommendation 7.41. Orora’s principal
risks that could have a material impact
on the Company, together with the
Company’s mitigation strategies for
those risks, were reviewed during the
period to 30 June 2021 and are described
on the following page.
Orora’s approach to sustainability is
framed by its obligations as a signatory to
the UNGC, together with work undertaken
in 2015, 2018 and 2019 by external
consultants to understand the external
and internal sustainability risks and
opportunities.
Subject to the material risks noted on the
following page, Orora has determined that
it does not, at this time, otherwise have
a material exposure to environmental or
social sustainability risks.
Orora will continue to monitor any
potential economic, environmental
and social sustainability risks, and will
continue to enhance response plans
to address any such risks. Orora has
developed and continues to implement
response plans to address its most
significant potential environmental and
social sustainability impacts. Details of
Orora’s continued approach to dealing
with potential impacts, including in
respect of safety and human rights and
responsible sourcing, are included from
page 11 of this Annual Report. Orora
intends to carry out a sustainability
materiality assessment process on
a periodic basis as part of the normal
internal risk assessment cycle, and
respond to new risks that emerge
as required.
Orora’s sustainability activity is
overseen by both the Board and the
Safety, Sustainability and Environment
Committee. Regular management
updates were provided to the Safety,
Sustainability and Environment
Committee and the Board during
the reporting period.
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 (4th edition), 2019.
34
ORORA LIMITED ANNUAL REPORT 2021 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.
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.
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 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.
Orora’s business continuity processes including safety, supply chain,
talent and customer preferences have proven to be effective in
responding to the COVID-19 pandemic.
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.
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.
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.
35
ORORA LIMITED ANNUAL REPORT 2021 Corporate Governance Statement
PRINCIPAL RISKS CONTINUED
Area of Materiality
Risk
Mitigation and Monitoring Strategies
Climate Change
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,
which could impact the future profitability and
prospects of Orora.
Talent
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 is mitigating its contribution to climate change through its
CO2e emissions reduction Eco Targets focusing on energy efficiency
and its participation in renewable electricity markets and, where
appropriate, co-generation investments. Orora’s sustainability
program noted in the Sustainability section of this Annual Report
refers to the Company’s focus on climate change, with further
initiatives to mitigate Orora’s contribution to climate change.
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 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 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 environmental risk, including
climate risk (both of these risks are separately
listed in this Principal Risks section).
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 advisors
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.
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.
Customers
and Consumer
Preferences
Mergers and
Acquisitions (M&A)
Country and
Regulatory Risk
Litigation
Financial and
Treasury
36
ORORA LIMITED ANNUAL REPORT 2021 The Board identifies and prioritises Orora’s key stakeholders and has
developed a strategy for engagement that supports management in engaging
with key stakeholders to understand, consider and respond to issues.
Participating in Orora’s investor
relations program, which includes
regularly holding investor roadshows
(following its results announcements)
in Australia, Asia and North America,
as well as additional ad-hoc investor
meetings and conference calls with
institutional investors, private investors
and sell-side analysts
Regularly releasing information to the
ASX market announcements platform,
including releasing the Annual Report
and full year and half year results
Providing through the Company’s
website up-to-date information about
the Company and its operations, the
Corporate Governance Framework,
the Board and management, ASX
announcements, the share price,
dividend distributions and other
relevant information
Submission of a Modern Slavery
Statement in accordance with the
Commonwealth Modern Slavery Act
2018, which is publicly available on
the Australian Government’s Modern
Slavery Register and published on the
Company’s website
Giving shareholders the option to
receive communications from, and send
communications to, Orora and its share
registry electronically.
All ASX announcements, media releases
and financial information are made
available on Orora’s website within
one day of public release.
Attendance of external auditors
at Annual General Meeting
The lead audit partner of
PricewaterhouseCoopers in charge of the
Company’s audit attends the Company’s
Annual General Meeting and is available at
the Annual General Meeting to answer any
shareholder questions about the conduct
of the audit and the preparation and
content of the auditor’s report.
ENGAGEMENT WITH STAKEHOLDERS
Orora has a number of stakeholders
including shareholders, employees,
customers, suppliers and local
communities. The Board identifies and
prioritises Orora’s key stakeholders,
develops a strategy for engagement with
stakeholders and supports management
to engage with key stakeholders to
understand, consider and respond
to issues.
Continuous disclosure
Orora is committed to complying with its
obligations relating to the disclosure of
market sensitive information in a timely
manner and providing shareholders and
the market with up-to-date information
about the Company’s activities. Orora’s
Market Disclosure and Communications
Policy is available on Orora’s website and
details the Company’s procedures to
ensure compliance with applicable legal
and regulatory requirements under the
Corporations Act and the ASX Listing
Rules, and is reviewed regularly to ensure
compliance with the ASX Listing Rules
and guidance on continuous disclosure.
The Board has responsibility for
compliance with Orora’s continuous
disclosure obligations to keep the
market fully informed of information
that may have a material effect on
the price or value of the Company’s
securities. Internal procedures and
guidelines for continuous disclosure and
communications have been developed.
These procedures align with Orora’s
Market Disclosure and Communications
Policy to ensure the Board and the
Continuous Disclosure Committee are
made aware of any information that
should be considered for release to
the market.
Orora’s Continuous Disclosure Committee
meets as required, and often on very
short notice, to ensure compliance
with disclosure requirements. The CEO
approves all disclosures before they
are released. The Board approves all
disclosures that are significant and
Directors receive a copy of all ASX
disclosures promptly following release.
The Company Secretary is responsible
for communications with the ASX.
Shareholder engagement
Shareholders and other stakeholders
are informed of all material matters
affecting the Company through
ASX announcements, periodic
communications and a range of forums
and publications, available on the
Company’s website.
Other shareholder engagement
activities include:
Encouraging its shareholders to
participate in its general meetings,
including the AGM, by attending,
exercising their voting rights and
asking questions of the Board.
Orora conducts all voting at general
meetings by a poll, ensuring that voting
outcomes reflect the proportionate
holdings of all shareholders who vote
(whether in person or by proxy or other
representative). The Company’s external
auditor will attend the AGM and will
be available to answer questions from
shareholders on the conduct of the audit
Seeking shareholder approval as
required by the Company’s Constitution,
the Corporations Act and the ASX
Listing Rules, or where otherwise
considered appropriate by Directors
37
ORORA LIMITED ANNUAL REPORT 2021
Board of
Directors
ROB SINDEL
(BEng, MBA, GAICD, FIEAust, CPEng)
BRIAN LOWE
(MBA)
ABI CLELAND
(BA, BCom, MBA, GAICD)
Independent Non-Executive Director
and Chair
Managing Director and Chief Executive
Officer
Independent Non-Executive Director
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
from 2011 until 2019.
Director of Orora Limited since March
2019. Appointed Chair of the Board in
February 2020.
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. He was
Managing Director of GE Plastics, Australia
from 2001 to 2003.
In his 10 years at Orora, Brian has been the
Group General Manager of the Beverage
(2011-2015) and Fibre (2016-2019)
businesses. He was appointed Managing
Director and Chief Executive Officer of
Orora Limited in October 2019.
Directorships of listed entities and other
directorships and offices
Board Committee membership
Current:
• Director, Boral Limited
(since September 2020)
• Director, Mirvac Group
(since August 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)
• Member, UNSW Australian School of
Business Advisory Council
(June 2013 to December 2019)
Board Committee membership
38
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
Australasia.
From 2012 to 2017, Abi established and
operated 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, Coles Group Ltd
(since November 2018)
• Director, Computershare Limited
(since February 2018)
• Director, Methodist Ladies College
Victoria (since January 2021)
• 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, Swimming Australia
(Audit Chair) (July 2015 to June 2021)
Board Committee membership
ORORA LIMITED ANNUAL REPORT 2021 KEY — Committee Member (Chair of each committee indicated by black circle outline)
Executive Committee
Human Resources Committee
Nomination Committee
Audit, Risk & Compliance Committee
Safety, Sustainability & Environment Committee
TOM GORMAN
(BA, MA, MBA)
SAM LEWIS
(BA (Hons), CA, ACA, GAICD)
JEREMY SUTCLIFFE
(LLB (Hons))
Independent Non-Executive Director
Independent Non-Executive Director
Thomas (Tom) Gorman brings a wealth of
experience to Orora, following a 30 year
career in executive positions at Ford Motor
Company and Brambles Limited, of which
he was Chief Executive Officer. Tom 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 BA degrees in Economics
and International Relations, obtained an
MA from the Fletcher School of Law and
Diplomacy, and an MBA, with distinction,
from the Harvard Business School.
Director of Orora Limited since
September 2019.
Directorships of listed entities and other
directorships and offices
Current:
• Director, Alcoa Corporation
(since May 2021)
• Director, Sims Limited (since June 2020)
• Director, Worley Limited
(since December 2017)
Board Committee membership
Samantha (Sam) Lewis is a chartered
accountant with extensive experience
in accounting, finance, auditing, risk
management, corporate governance,
capital markets and due diligence. Sam has
been a non-executive director since 2014.
Prior to becoming a non-executive director,
she spent 24 years with Deloitte, including
14 years as a Partner. In that role, she led
the audit of a number of major Australian
listed companies in the retail, FMCG,
manufacturing and industrial sectors. In
addition, Sam provided accounting and
transactional advisory services including
due diligence, IPOs and debt/equity
raisings.
Sam holds a Bachelor of Arts, Economics
from the University of Liverpool in the
UK, and is a member of the Institute of
Chartered Accountants in Australia and
the Institute of Chartered Accountants in
England and Wales.
Director of Orora Limited since
March 2014.
Directorships of listed entities 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
Independent Non-Executive Director
and Deputy Chair
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, Amcor Limited
(since October 2009)
Recent (last 3 years):
• Member, Advisory Board of Veolia
Environmental Services Australia
(June 2010 to December 2018)
Board Committee membership
39
ORORA LIMITED ANNUAL REPORT 2021 Executive
Leadership team
BRIAN LOWE
(MBA)
SIMON BROMELL
(BSc, GDip Agribus, GAICD)
BOB FIRENZE
(BA)
SHAUN HUGHES
(BComm, BA, GAICD, CA ANZ)
Managing Director and Chief
Executive Officer
Group General Manager,
Beverage
President, Orora Visual
Chief Financial 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. He was Managing
Director of GE Plastics,
Australia from 2001 to 2003.
In his 10 years at Orora, Brian
has been the Group General
Manager of the Beverage
(2011-2015) and Fibre (2016-
2019) businesses. He was
appointed Managing Director
and Chief Executive Officer of
Orora Limited in October 2019.
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’ 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.
Shaun Hughes was appointed
CFO at Orora in October
2020, having spent more
than 20 years leading the
finance, procurement and IT
teams for a range of ASX-
listed and multinational
companies operating across
diverse industries. Shaun
has extensive financial
management experience
in building and growing
organisations having held
global leadership roles with
Telstra, Elders and IBM.
Shaun was most recently the
CFO of ASX-listed EBOS Group
Limited. Shaun is a member
of the Institute of Chartered
Accountants of Australia and
New Zealand.
40
ORORA LIMITED ANNUAL REPORT 2021 FRANK PENNISI
(BS Eng, MS Eng)
ANN STUBBINGS
(BA/LLB, GAICD)
MATTHEW WILSON
(LLB, BCom (Hons))
President, Orora Packaging
Solutions
Chief People, Sustainability and
Governance Officer
Chief Strategy and Corporate
Development Officer
Frank Pennisi was appointed
President of Orora Packaging
Solutions in November 2020.
Prior to joining Orora, Frank was
the President of the Industrial
Technologies segment for
FLIR Systems, based in
Goleta, California. In this role
Frank accelerated the digital
transformation of the business
through automation of tools
and services. Frank has also
held leadership roles including
VP Strategy and Marketing
with Honeywell where he drove
a range of strategic digital and
commercial excellence growth
programs.
Frank began his career with GE
where he held several general
management and operational
roles.
Company Secretary and Group
General Counsel
Ann Stubbings leads the
Legal, Company Secretariat,
Sustainability, Human
Resources, Corporate Affairs
and Corporate Safety teams.
Ann was appointed Company
Secretary and Group General
Counsel upon Orora’s listing
on the ASX in December 2013.
Prior to joining Orora, Ann was
Senior Group Legal Counsel
at Amcor Limited (2008 to
2013) and Alternate Company
Secretary (2009 to 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’ experience in
corporate finance and strategy.
Prior to Orora, Matthew
was 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.
41
ORORA LIMITED ANNUAL REPORT 2021 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 2021.
IN THIS SECTION
Directors’ report
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 development
Dividends
Environmental performance
and reporting
Remuneration report
Directors’ declaration
Auditor’s independence declaration
47
64
65
45
45
45
45
45
46
42
Directors’ interests
Unissued shares under option
Shares issued on exercise of options
On-market share purchases to satisfy
employee share plans
Indemnification and insurance
of officers
Indemnification of auditors
Proceedings on behalf of the Company 46
Non-audit services
Rounding off
Corporate governance statement
46
46
46
43
43
43
43
44
44
44
44
44
44
44
42
ORORA LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
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 served on the Board for the period from 1 July 2020 to 30 June 2021.
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 38 to 39 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 41 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
2020 to 30 June 2021, and the number of meetings attended by each Director.
Board
10
2
A
12
11
12
12
12
12
B
12
12
12
12
12
12
Audit, Risk &
Compliance
Committee
4
-
A
4*
4
4
4*
4*
4
B
-
4
4
-
-
4
Executive
Committee
Human Resources
Committee
Nomination
Committee**
2
1
4
1
-
-
A
-
1*
3
3
3
-
B
-
-
3
3
3
-
A
5
5
5*
5*
5*
5
B
5
5
-
-
-
5
A
-
-
-
-
-
-
B
-
-
-
-
-
-
Safety,
Sustainability
& Environment
Committee
4
-
4
2*
4
4*
4
2*
4
-
4
-
4
-
Scheduled Meetings
Unscheduled Meetings
A P Cleland
T J Gorman
S L Lewis
B P Lowe
A R H Sindel
J L Sutcliffe
A
B
*
Number of meetings attended.
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. All Directors are welcome to attend Committee
meetings even though they may not be a member.
**
All Nomination Committee matters were dealt with by the full Board during the financial year.
ORORA LIMITED ANNUAL REPORT 2021
43
DIRECTORS’ REPORT
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 18 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 2021 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 in the “Orora at a Glance” section on page 1 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 2021.
EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
There have been no matters or circumstances which have arisen between 30 June 2021 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 18 to 23 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 2021 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 2021 interim or final 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.
44
ORORA LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Statutory
matters
(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 2021.
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
Number
of shares
128,574
56,000
91,705
538,634(1)
140,000
131,355
(1)
Details of rights and options over shares in the Company held by B P Lowe are set out in section 6.4 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
30 Oct 2015
20 Oct 2017
22 Oct 2018
Expiry date
Issue price
30 Sep 2024
30 Aug 2026
31 Aug 2027
2.08
2.86
3.58
Number
under option
226,567
3,183,125
1,226,125
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 2021 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 2021, 412,275 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 $2.29.
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 2021
45
DIRECTORS’ REPORT
Statutory
matters
During and since the end of the financial year ended 30 June 2021, 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 2021.
INDEMNIFICATION OF AUDITORS
The Company’s auditor is PricewaterhouseCoopers (PwC). During and since the financial year ended 30 June 2021:
• 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 2021 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 on page 65 of this
Annual Report.
• Details of the amounts paid to PwC and its related practices for audit and non-audit services provided during the financial year are set out
in note 7.2 to the Financial Statements. In each case, the engagement of PwC was made on its merits (based on service level, expertise,
cost, as well as geographical spread).
ROUNDING OFF
The Company is of a kind referred to in the 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 on
pages 24 to 37 of this Annual Report.
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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 2021. In
my role as Chair of the Human Resources Committee, I have continued to work with Committee members, Orora management and the other
Directors over the past year to ensure Orora’s Human Resources policies and remuneration framework are structured to support Orora’s long-
term sustainability and continue to attract, retain and motivate our employees. We remain committed to ensuring our reporting is transparent
and our communication is clear and concise.
OVERVIEW
This year, the Orora team was faced with another 12 months of challenges presented by the pandemic – particularly in North America where
the impacts of COVID-19 have been unrelenting. With all businesses still classified as essential services, Orora forged ahead focusing first and
foremost on the safety of our people, meeting the ever-evolving needs of Orora’s customers, and responding to fluctuating demands across
different segments. These measures helped to drive Orora’s solid performance and ensure Orora remains a robust and stable organisation that
can withstand these current challenges and, importantly, leverage the opportunities that lie ahead.
COMPANY PERFORMANCE (CONTINUING BUSINESSES ONLY) AND FINANCIAL YEAR 2021 REMUNERATION OUTCOMES
The Company’s results for the financial year ended 30 June 2021 reflect Orora’s resilience, improved execution of strategy and financial
discipline with strong performance in Australasian Beverage, and continued improvement in OPS and Orora Visual in North America despite
ongoing challenging conditions. For the financial year ended 30 June 2021, Orora has delivered earnings before significant items, interest and
tax (EBIT) of $249.1 million.
Orora’s executives are rewarded for annual performance against business plans as well as longer-term returns for shareholders. The short-term
incentive (STI) assessment includes financial and non-financial metrics (at a Group and individual level). The STI outcomes for this year reflect
the strong alignment between Orora’s financial performance, executive remuneration outcomes and the challenging nature of Orora’s business
objectives. As it is our belief that the organisation and its people must retain the agility to adapt and perform against a wide array of
challenging circumstances, the Board did not exclude any COVID-19 impact on the Group’s financial performance in the assessment
of STI or long-term incentive (LTI) outcomes.
STI payments for the current Executive KMP will be paid at 100% of their maximum STI opportunity.
On 30 June 2021, the LTI grant awarded for the financial year ended 30 June 2018 was tested. Return on Average Funds Employed (RoAFE) and
Absolute Total Shareholder Return (ATSR) gateways were met; however the threshold Earnings Per Share (EPS) and Relative Total Shareholder
Return (RTSR) were not, which resulted in the grant not vesting.
During FY21, reflecting challenging global economic conditions and in line with market, there were no Executive KMP remuneration increases.
For the new financial year, reflecting the overall performance of the Company, along with total compensation outcomes for this year, the
Board has decided that the Executive KMP will receive a fixed remuneration increase of 2.5%, in line with market increases.
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REMUNERATION CHANGES DURING THE FINANCIAL YEAR
As disclosed in 2019, the Board removed options from the LTI plan to better align the LTI with market practice and meet the goals of Orora’s
remuneration framework, with performance rights 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 LTI grant awarded in the financial year ended 30 June
2019 will be the final LTI vesting to include options.
The 2020 Remuneration Report outlined that while the Board had decided to make no change to the performance hurdles under the LTI
plans as a result of the sale of the Australasian Fibre business, it was deemed appropriate to update the RoAFE gateway and re-base the EPS
calculations for LTI grants prior to FY21 to exclude the discontinued Australasian Fibre business. This change has now been reflected in the
LTI plans.
FINAL THOUGHTS
I commend the Orora team for their resilience and commitment to continuing to keep Orora team members safe and deliver positive results in
these extraordinarily challenging times. On the following pages you will find the FY21 Remuneration Report for your perusal. I would be happy
to hear from shareholders to provide any further clarification you may need in respect of this Report. I would also like to thank shareholders
for their ongoing support of Orora.
Warm regards,
TOM GORMAN
CHAIR, Human Resources Committee
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INTRODUCTION
The Remuneration Report provides a summary of Orora’s remuneration policy and practice for Key Management Personnel (KMP) for the
financial year ended 30 June 2021. This report has been prepared as required by the Corporations Act 2001 (Cth) for the Company and its
controlled entities (collectively, the Group or Orora) and has been audited by Orora’s external auditor. This Remuneration Report forms part
of the Directors’ Report.
STRUCTURE OF THIS REPORT
Orora’s 2021 Remuneration Report is divided into the following sections:
Section
Message from Tom Gorman, Chair Human Resources Committee
u Key management personnel
v Overview of FY21 remuneration
w Remuneration framework
x Relationship between performance and remuneration outcomes
y Non-Executive Director remuneration
z Additional required disclosures
1. Key Management Personnel (KMP)
Page No.
47
49
50
52
54
59
59
For the purposes of this Remuneration Report, KMP include executive and non-executive directors and nominated senior executives who have
authority and responsibility for planning, directing and controlling the activities of the Group, either directly or indirectly. For the year ended 30
June 2021, the KMP were:
Table 1
Name
Non-Executive Directors
A R H (Rob) Sindel
A P (Abi) Cleland
T J (Tom) Gorman
S L (Sam) Lewis
J L (Jeremy) Sutcliffe
Executive Director
B P (Brian) Lowe
Executive
S C (Shaun) Hughes1
S G (Stuart) Hutton1
Position
Chairman
Director
Director
Director
Director
Term as KMP
Full year
Full year
Full year
Full year
Full year
Managing Director and Chief Executive Officer (CEO)
Full year
Chief Financial Officer (CFO)
Chief Financial Officer (CFO)
Partial year
Partial year
(1)
S C Hughes was appointed to the role of Chief Financial Officer on 15 October 2020; replacing S G Hutton, who ceased employment with Orora on 31 December 2020.
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2. Overview of FY21 remuneration
2.1. Summary of remuneration framework
Orora’s executive remuneration framework applies to the CEO and all of his direct reports of which the Executive KMP form a subset. This
framework was introduced in FY20. Refer to Section 3.1 for a detailed explanation of the current remuneration components. Refer to Section
6.3 for an explanation of performance hurdles used and the vesting schedule.
OUR VISION
TO BE A LEADING SUSTAINABLE PACKAGING SOLUTIONS PROVIDER
Our vision is supported by our remuneration principles and performance framework, overseen by the Board
REMUNERATION PRINCIPLES
Attract, motivate and
retain talent
Drive a high-
performance culture
Create long-term
shareholder value
REMUNERATION COMPONENTS1
Fixed remuneration (FR)
Short-Term Incentive (STI)
Long-Term Incentive (LTI)2
• A market-based reward for role.
• Delivered as cash salary and
• Rewards the achievement of Group and individual
• Reinforces focus on creating long-term value
goals over a 12-month period.
for shareholders.
contribution to retirement benefits.
• CEO has a target STI of 70% of FR and a maximum
• 50% to 70% of FR delivered as an upfront grant
opportunity of 100% of FR. The other Executives have a
target of 50% and a maximum opportunity of 75% of FR.
• 2/3 delivered in cash and 1/3 in Deferred Share
Rights (DSR) deferred for 2 years.
of Performance Rights (PR) with a 3-year
performance period and an additional 1-year
holding lock before vesting.
LINK TO PERFORMANCE
• Any increases in salary will consider the
market median remuneration for
similar roles and individual
performance.
• A scorecard of performance measures at a Group level is
used to determine STI award payable. The 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.
• Deferral of payment in equity aligns reward outcomes with
long-term value creation for shareholders.
The following performance hurdles apply to LTI
aligning executive and shareholder interests:
• Earnings per Share (EPS) growth with a Return
on Average Capital Employed (RoAFE) gateway.
• Relative Total Shareholder Return (RTSR)
with an Absolute Total Shareholder Return
(ATSR) gateway.
Supports alignment of Executive and Shareholder interests
Large proportion of remuneration
is at risk and delivered as equity
Clawback and malus provisions
apply to all equity
Use of EPS, RoAFE, RTSR and
ATSR performance hurdles for PR
Minimum shareholding
requirements
(1)
(2)
An award of shares or cash deferred up to five years is occasionally used at the time of recruitment to replace existing entitlements from previous employers or as a
specific retention award for existing executives.
FY18 grant which did not vest in 2021 and FY19 grant, which has a vesting date of August 2022, are comprised of performance rights and options. These awards are
subject to a four-year performance and vesting period.
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2.2. Snapshot of FY21 performance and remuneration outcomes
The Executive KMP remuneration outcomes for the financial year ended 30 June 2021 are summarised below. For more detailed information
on remuneration outcomes and link to performance, please refer to Section 4.
Remuneration
component
Description
Fixed
Remuneration (FR)
• The Fixed Remuneration of the current CFO at the time of commencing his position in October 2020 was
competitively positioned against similar roles in listed companies, of similar size and complexity.
• Reflecting the challenging global economic conditions and in line with the market, the Board did not increase
•
the CEO’s remuneration for the financial year ended 30 June 2021.
For the new financial year, reflecting the overall performance of the Company, the Board has decided that the
Executive KMP will receive a fixed remuneration increase of 2.5%, in line with market increases.
Short-Term
Incentive (STI)
FY21 Award
• Orora’s STI assessment includes several financial and non-financial metrics (at Group and individual level).
• The Earnings before Interest and Tax (EBIT) and Average Working Capital (AWC) as a % of sales exceeded the
targets set by the Board for the financial year ended 30 June 2021.
• As a result, STI payments for current Executive KMP will be paid out at 100% of their maximum STI
opportunity. This amount will be pro-rated for the current CFO for the period he was employed at Orora. 1/3
of the STI award will be delivered in DSR deferred over two years.
Award due to vest in FY21 and FY22
• DSR awarded as part of the STI payment for the financial year ended 30 June 2018 vested in September 2020.
The Board did not identify any performance or conduct factors that would warrant lapsing of unvested equity.
Accordingly, the Board approved full vesting of the FY18 DSR.
• DSR awarded as part of the STI payment for the financial year ended 30 June 2019 are due to vest in
September 2021. The Board did not identify any performance or conduct factors that would warrant lapsing of
unvested equity. Accordingly, the Board approved full vesting of the FY19 DSR. For this equity to vest, the
executive must remain employed till the vesting date (September 2021).
Long-Term
Incentive (LTI)
FY21 Award
• Executive KMP were awarded 70% of their FR as Performance Rights with a 3-year performance period (1 July
2020 to 30 June 2023) and an additional 1-year holding lock before vesting. The grant to the CEO was awarded
post shareholder approval at the 2020 AGM.
Award tested in FY21
• The FY18 LTI grant had a 4-year performance period which ended on 30 June 2021 and is due to vest in August
2021.
• 50% of the award had an EPS performance hurdle with a RoAFE gateway and 50% had a RTSR performance
hurdle with an ATSR gateway.
• Although the RoAFE and ATSR gateways were met, the EPS and RTSR performance was below the threshold
required for vesting.
• Accordingly, the FY18 LTI grant did not vest.
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3. Remuneration framework
3.1. Remuneration components
Remuneration
component
Description
Fixed
Remuneration (FR)
Includes Cash salary and contribution to retirement benefits.
•
• The Board sets the fixed remuneration for KMP based on market median remuneration for similar roles in
ASX-listed companies of similar size and geographical footprint. The annual review of fixed remuneration
takes into consideration market relativity, skills, experience, past performance and impact on total
remuneration.
Short-Term
Incentive (STI)
• Rewards the achievement of Group, and individual financial and non-financial goals over a 12-month period.
• 2/3 of the award is delivered annually in cash following the release of the end of year financial results.
• 1/3 of the award is delivered in DSR1 deferred over two years subject to malus conditions. Vesting after two
years is subject to continued service.
• The number of units is calculated as 1/3 of the STI award divided by the volume-weighted average share price
(VWAP) of Orora shares for the five trading days up to and including the end of the financial year (30 June).
• The CEO has a target STI of 70% of FR and a maximum opportunity of 100% of FR. Other executives have a
target of 50% and a maximum opportunity of 75% of FR.
Long-Term
Incentive (LTI)
• Aligns executive and shareholder interests by reinforcing executive focus on long-term sustainable
shareholder returns.
• 50% to 70% of FR delivered as PR1 subject to a three-year vesting period and an additional one-year
employment holding lock with the following performance hurdles:
- Growth in EPS hurdle with a RoAFE gateway – 50% weight
- RTSR hurdle with an ATSR gateway – 50% weight
• The combination of EPS and RoAFE represents a strong measure of overall business performance.
• The use of RTSR hurdle with an ATSR gateway focuses on growth of the Group and creating above average
value for shareholders. Refer to Section 6.3 for a more detailed explanation of the hurdles used.
• After considering internal and external benchmarks, the Board set the following performance hurdles for the
FY21 LTI grant:
- PR subject to EPS hurdle: RoAFE gateway of 12.5% must be met for the performance period for vesting to
occur. If the RoAFE gateway is met, EPS growth of 4% over the performance period will be required for
50% vesting, with 100% vesting requiring an EPS growth of 8%.
- PR subject to RTSR hurdle: Orora’s Absolute Total Shareholder return (ATSR) over the performance period
must not be negative for vesting to occur. If the ATSR gateway is met, RTSR over the performance period
must be at the 50th percentile of the comparator group for 50% vesting, with 100% vesting requiring RTSR
to be at the 75th percentile.
• The number of units granted is calculated as value of the grant (50% to 70% of FR) divided by the VWAP of
•
Orora shares for the five trading days prior to the start of the financial year (1 July).
For LTI grants from FY22, the share price used to calculate the ATSR of the Group and each of the comparator
companies for the performance period will use the 20 trading days VWAP for both the starting share price and
the closing share price. The previous approach used five trading days VWAP for the starting share price and
20 trading days VWAP for the closing share price. This change has been made to reduce the impact of share
price volatility and to improve consistency.
(1)
A Right (either DSR or PR) is the right to receive one Orora share (or cash of equivalent value) upon vesting and exercise at no cost, subject to adjustment for certain
capital actions. Rights do not carry any dividend entitlements or voting rights prior to exercise. Shares allocated upon exercise carry the same rights as any other Orora
share. For DSR and PR, forfeiture and clawback provisions apply for behaviour contrary to Orora’s values or any actions that bring the Group or any company within the
Group into disrepute. If employment ceases due to resignation or dismissal, any unvested DSR or PR will lapse. If employment ceases due to other reasons, the Board
has discretion with respect to unvested Rights, including to lapse any unvested DSR or PR fully or partially.
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3.2. Target remuneration mix and delivery
Orora’s executive remuneration framework provides an appropriate mix of short, medium and long-term incentives to attract, motivate and
retain talent and to drive high performance. Delivering a significant portion of remuneration in equity (1/3 of STI delivered as DSR deferred
over two years and LTI delivered as PR subject to a three-year vesting period and an additional one-year employment holding lock) aligns the
interests of executives and shareholders.
MD & CEO
OTHER EXECUTIVE KMP
Delivering a significant portion of remuneration as equity over a four-year period reinforces executive focus on achieving long-term objectives
and creating sustainable value for shareholders.
(1)
The grants to the CEO are awarded post shareholder approval at the 2020 AGM (for LTI) and 2021 AGM (for STI).
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4. Relationship between performance and remuneration outcomes
4.1. Performance framework
Orora’s executives are rewarded for annual performance against challenging business plans as well as longer term returns for shareholders.
Financial and non-financial performance measures that align to the key priority areas for the Group are carefully selected at the start of the
financial year by the Board. The performance measures selected for FY21 and assessment against these measures is summarised below:
4.2. Performance outcome
Achievement against the performance measures both at a Group and individual level is assessed every six months by the Human Resources
Committee (HRC), which provides recommendations to the Board. At the end of the financial year the Board determines the STI outcome for
executives based on their performance against the agreed measures.
The STI assessment includes a number of financial and non-financial metrics (at a Group and Individual level).
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 significant item expenses related to the decommissioning of
the Petrie Mill site and gains related to the finalisation of the post-close completion process of the Australasian Fibre divestment will be
excluded.
At the end of the financial year, the HRC also reviews Group performance against the LTI performance hurdles to confirm the vesting outcome
of any PR that have completed their performance period. The HRC also assesses if there are any significant Group or individual performance
factors that require the Board to apply discretion to clawback previously granted equity or reduce the quantum of LTI to be granted.
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4.2 Performance outcome (continued)
An overview of the performance measures for FY21 and achievement against these measures is summarised below.
KPI
Group earnings
Earnings before Interest and Tax (EBIT)
Outcome
Exceeded target.
Group asset management
Average working capital (AWC) as a % of sales
Exceeded target.
Individual strategic measures
Performance measures vary for each role and support
Orora’s strategy of expanding and optimising Group
outcomes
Assessed as fully achieved for
Executive KMP. Performance
outcomes varied for other executives.
Safety overlay
Performance and leadership against a
selection of key safety metrics
No overlay applied for Executive KMP.
Safety overlay varied for other
executives.
No overlay was applied.
Performance overlay
The Board also considers:
•
•
if performance was aligned to Orora’s values;
if the Executive was proactive in overcoming
challenges in the delivery of the final outcome
• what their individual contribution was to the
Group performance.
Performance outcome commentary
The focused execution of strategic priorities
has led to a 17.3% increase in constant
currency underlying EBIT and reported
underlying EPS of 16.9 cents—growth of 29%
before significant items.
AWC continued to be a priority and the result
for the financial year ended 30 June 2021 was
better than the medium/long-term goal of
being less than 10%.
For Executive KMP, outcomes were assessed
as fully achieved. Performance outcomes
varied for other executives with assessments
ranging from partially achieved to fully
achieved.
Safety results for the Group were satisfactory
despite the extraordinary demands due to
COVID safety requirements and remote
working. Safety improvement initiatives
continue across the business.
The Board considered how the executives
achieved performance and was satisfied that
the STI outcomes were appropriate, and no
further performance overlay was necessary.
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4.3. Group financial performance (Total Operations)
The table below summarises the key indicators of Orora’s performance and relevant shareholder returns for the five years to 30 June 2021. The
table below shows total operations of the Group including the Australasian Fibre business which was divested during the FY20 financial year,
and which is presented in the Financial Report as a discontinued operation.
Financial summary for year ended 30 June
EBIT ($m)
Dividends per ordinary share (cents)
Closing share price (as at 30 June)
EPS growth (%)
NPAT ($m)
TSR (%)(C)
Operating cash flow ($m)(D)
RoAFE (%)(E)
2021(A)
249.1
14.0
$3.33
(2.3%)
156.7
32.6%
245.9
19.9%
2020(B)
288.2
12.0
$2.54
(22.9%)
167.3
(13.4%)
57.9
12.0%
2019(B)
335.2
13.0
$3.24
3.7%
217.0
(5.6%)
268.9
13.0%
2018(B)
323.4
12.5
$3.57
11.5%
214.1
29.0%
325.3
14.0%
2017(B)
302.3
11.0
$2.86
14.6%
186.2
5.9%
331.4
13.6%
(A)
(B)
(C)
EBIT, NPAT, EPS growth and RoAFE exclude the impact of the significant item expense of $38.6 million (after tax $27.0 million) in respect of additional costs associated
with the decommissioning of the Petrie Mill site and a significant item income of $1.5 million (after tax $6.1 million) relating to the finalisation of the post-close
completion process of the Australasian Fibre divestment. Refer to Note 1.2 of the financial statements for further detail.
EBIT, NPAT, EPS growth and RoAFE exclude the impact of the significant item income and expense items. Details of the significant items excluded from these measures,
for each year in the table above, can be found in the relevant 2017-2020 Annual Reports.
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.
(D) 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.
(E)
RoAFE is calculated as Earnings Before Income and Tax (EBIT) excluding significant items divided by average funds employed.
4.4. Fixed remuneration
Reflecting the challenging global economic conditions, the Board assessed remuneration movements in line with market and determined that
there would be no remuneration increase for Executive KMP for the financial year ended 30 June 2021.
A minor adjustment was made in July 2021 for Executive KMP to align their superannuation with the increased Superannuation Guarantee rate
effective 1 July 2021.
For the new financial year, reflecting the overall performance of the Company, along with total compensation outcomes for this year, the
Board has decided that the Executive KMP will receive a fixed remuneration increase of 2.5%, in line with market increases.
4.5. Short-term incentive outcomes
FY21 STI award
An overview of Orora’s performance measures for FY21 and achievement against these measures can be found in Section 4.2. Orora’s EBIT and
AWC performance for FY21 exceeded the targets set by the Board. The FY21 STI outcomes reflect Orora’s resilience, improved execution of
strategy and financial discipline despite ongoing challenging conditions. After considering individual and business performance against the
financial and non-financial targets set by the Board, STI payments were paid as per the table below.
Executive KMP
Target STI as
% of FR
Maximum STI as
% of FR
$
% of FR
Cash STI ($)
DSR ($)
# of DSR
% of maximum STI
forfeited
B P Lowe
S C Hughes(2)
S G Hutton(3)
70%
50%
50%
100%
75%
75%
1,250,000
358,826
-
100%
75%
-
833,335
239,218
-
416,665
119,608
-
127,032
36,466
-
-
-
-
STI awarded(1)
(1)
(2)
(3)
56
The cash and deferred performance rights will be granted in September 2021. 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 2021 ($3.28 per share).
S C Hughes was appointed Chief Financial Officer effective 15 October 2020 and was designated as a KMP from this date. The STI award for Mr Hughes was pro-rated
for the period 15 October 2020 to 30 June 2021.
S G Hutton retired as Chief Financial Officer on 15 October 2020 and ceased to be designated as a KMP from this date. Mr Hutton was not awarded any short-term
incentive.
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STI Award due to vest in FY21 and FY22
DSR awarded as part of the STI payment for the financial year ending 30 June 2018 vested in September 2020. The Board did not identify any
performance or conduct factors that would warrant lapsing of unvested equity. Accordingly, the Board approved full vesting of the FY18 DSR.
DSR awarded as part of the STI payment for the financial year ended 30 June 2019 are due to vest in September 2021. The Board did not
identify any performance or conduct factors that would warrant lapsing of unvested equity. Accordingly, the Board approved full vesting of the
FY19 DSR. For this equity to vest, the executive must remain employed till the vesting date (September 2021).
4.6. Long-term incentive outcomes
FY21 LTI award
Details of the Executive KMP LTI opportunity and the actual award for FY21 are provided below:
Executive KMP
LTI as % of FR # of units granted
Face value of grant(1)
Performance hurdles associated with the grant
B P Lowe
S C Hughes
S G Hutton(2)
70%
70%
70%
339,147
183,000
188,500
912,305
488,610
459,940
50% CAGR EPS with minimum RoAFE gateway of 12.5%.
50% Relative Total Shareholder Return (TSR) with an absolute TSR
gateway.
A post-vesting holding lock applies until 31 August 2024.
Refer to Section 3.1 for further details.
(1)
(2)
Face value of grant reflects the share price at the date the award was granted. The award for Mr Lowe was granted on 28 October 2020 ($2.69 per share), for Mr
Hughes the award was granted on 6 November 2020 ($2.67 per share) and for Mr Hutton the award was granted on 7 October ($2.44 per share).
S G Hutton retired as Chief Financial Officer on 15 October 2020 and ceased to be designated as a KMP from this date. The PR granted to Mr Hutton in FY21 were
forfeited upon his retirement.
LTI tested in FY21
The FY18 grant was delivered as PR and Share Options (SO) with 100% of SO and 1/3 of PR subject to the EPS hurdle with RoAFE gateway and
2/3 of PR subject to the RTSR hurdle with ATSR gateway. Refer to Section 6.3 for a more detailed explanation of the hurdles used and the
vesting schedule. The performance period for the grant commenced on 1 July 2017 and concluded on 30 June 2021 and this grant is due to vest
in August 2021. The results are outlined below:
Performance hurdles and gateways
Result
Proportion vested
Proportion lapsed
RoAFE gateway
EPS hurdle
ATSR gateway
RTSR hurdle
Achieved
Not achieved
Achieved
Not achieved
N/A
0%
N/A
0%
100%
100%
As the performance hurdles were not met, the FY18 LTI grant did not vest.
During the end of the year review, the Board did not identify any individual or company performance or conduct factors that would warrant
lapsing of any unvested LTI.
ORORA LIMITED ANNUAL REPORT 2021
57
DIRECTORS’ REPORT
Remuneration
report
4.7. Total remuneration realised by Executive KMP during FY21
The table below summarises the remuneration realised by Executive KMP during the performance periods ended 30 June 2020 and 30 June
2021. This table has been included to increase transparency and provide shareholders greater clarity around remuneration outcomes. This
table differs from the statutory remuneration table in Section 6.2, which presents remuneration in accordance with accounting standards.
Remuneration realised by Executive KMP for FY20 and FY21 is explained below.
Remuneration component
Description
Fixed
Remuneration (FR)
• Comprises cash salary and contribution to retirement benefits for the relevant year.
Other benefits
• Comprises payments for notice period and annual and long service leave entitlements paid out on
retirement.
Cash Short-Term Incentive
(STI)
Deferred Share Rights
(DSR)
• Comprises the cash component of the STI earned in the relevant year which is paid after the issuance of
the relevant financial year’s annual report.
• Represents the value of DSR that were awarded as part of STI in previous years and vested in the relevant
year. For 2021, this comprises the value of DSR awarded as part of the STI payment for the financial year
ended 30 June 2018 that vested in September 2020. For 2020, this comprises the value of DSR awarded as
part of the STI payment for the financial year ended 30 June 2017 that vested in September 2019.
Performance Rights (PR)
• Represents the value of equity tested at the end of the performance period to 30 June and vesting is
approved by the Board. The value is based on the VWAP on the ASX for the five trading days up to and
including 30 June of the relevant year. The actual value realised will depend on the share price at exercise.
For this equity to vest, the executive must remain employed until the vesting date (and to the end of any
applicable holding lock periods). For 2021, this comprises the value of FY18 LTI that did not vest. For 2020,
this comprises the value of FY17 LTI that did not vest.
Executive KMP
B P Lowe(4)
S C Hughes(5)
S G Hutton(6)
Year
2021
2020
2021
2020
2021
2020
Fixed
Incentives realised
Remuneration Other benefits(1)
Cash STI
DSR(2)
PR(3)
1,250,000
937,500
480,683
-
358,347
695,247
-
-
-
-
596,392
833,335
341,667
239,217
-
-
-
176,646
64,465
-
-
-
191,137
34,372
-
-
-
-
-
-
Total
remuneration
2,147,800
1,279,167
719,900
-
1,145,876
906,265
(1) Other benefits include costs associated with employment (inclusive of any fringe benefits tax) and include payments for notice period and annual and long service
leave entitlements paid out on retirement for Mr S G Hutton.
(2)
(3)
(4)
(5)
(6)
58
The value of DSR was calculated using the VWAP on the ASX for the five trading days up to and including the vesting date. The VWAP for the DSR award that vested
during the period was $2.27 per share (2020: $2.73 per share). In addition to the current period DSR vesting, two additional DSR grants for Mr S G Hutton early vested
upon his retirement with a VWAP of $2.71 per share.
The value of PR was calculated using the VWAP on the ASX for the five trading days up to and including the end of the performance period. The VWAP for 30 June 2021
was $3.28 per share (2020: $2.58 per share)
B P Lowe was appointed Managing Director and Chief Executive Officer effective 1 October 2019 and was designated a KMP from this date. The employee benefits for
Mr Lowe in the comparative period therefore represent the period 1 October 2019 to 30 June 2020.
S C Hughes was appointed Chief Financial Officer effective 15 October 2020 and was designated as a KMP from this date. The employee benefits for Mr Hughes
therefore represent the period 15 October 2020 to 30 June 2021.
S G Hutton retired as Chief Financial Officer on 15 October 2020 and ceased to be designated as a KMP from this date. The employee benefits above for Mr Hutton
represent the period 1 July 2020 to 31 December 2020 which includes his notice period and include annual and long service leave entitlements paid out on retirement.
Mr Hutton remained an employee during his notice period to assist with the transition of the new Chief Financial Officer but he was not a KMP.
ORORA LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Remuneration
report
5. Non-executive director remuneration
The NED fee policy enables the Company to attract and retain high-quality Directors with relevant experience. The fee policy is reviewed
annually by the HRC. In setting and reviewing NED fees, the HRC considers fees paid by comparable companies and the qualifications and
experience necessary for the role, and provides recommendations to the Board.
NED receive a base fee for being a Director of the Board, and additional annual fees for either chairing the Audit, Risk and Compliance
Committee (ARCC) ($25,000), HRC or Safety, Sustainability or Environment Committee (SSEC) ($20,000). Where a NED is not a Chair of a
Committee, an additional $20,000 is paid for membership of two Committees, being membership of the ACC, HRC and/or SSEC. No additional
fees are payable to the Chairman of the Board for membership of Committees or other NEDs if they are already remunerated for Chairing the
ARCC, HRC or SSEC. No additional fees are paid for Chairing or membership of the Executive or Nomination Committees.
The current NED aggregate fee limit is $1,900,000 as approved by shareholders at the 2015 Annual General Meeting. Apart from slight
Committee fee adjustments disclosed above, no increase was made to fixed base fees or committee fees, during the financial year ended
30 June 2021.
A minor adjustment was made in July 2021 to superannuation for all NED located in Australia to align with the increased Superannuation
Guarantee rate effective 1 July 2021.
NED do not receive performance-based remuneration and are not granted equity instruments by Orora as part of their remuneration.
6. Additional required disclosures
6.1. Remuneration governance
The Board maintains overall accountability for the oversight of Orora’s remuneration approach for all Orora executives and NED, having regard
to the recommendations made by the HRC. The HRC reviews and makes recommendations to the Board on NED and executive remuneration
and at-risk remuneration policies for all Orora executives taking into account business strategy, corporate governance principles, market
practice and stakeholder interests. More information on the Board’s role and Orora’s corporate governance policies for KMP (including
minimum shareholding, share trading, and the prohibition of hedging or margin lending in respect of Orora securities) can be found on Orora’s
website at: https://www.ororagroup.com/investors/policies-and-standards.
During the reporting period, the HRC did not receive any remuneration recommendations (as defined by the Corporations Act 2001) from
external consultants.
ORORA LIMITED ANNUAL REPORT 2021
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6.2. Statutory remuneration disclosures
Executive KMP remuneration
Details of the Executive KMP remuneration prepared in accordance with statutory requirements and accounting standards during the reporting
period are given in the table below.
Executive KMP
Year
Base salary
benefits(1) Superannuation
Cash STI
Other
Long service
leave
Share-based
payments
(DSR/PR/SO)(2)
Total
remuneration
Performance
related
remuneration
B P Lowe(3)
S C Hughes(4)
S G Hutton(5)
2021
2020
2021
2020
2021
2020
1,228,306
921,748
465,234
-
-
-
-
-
21,694
833,335
15,752
341,667
15,449
239,217
-
-
-
336,653
342,612
21,694
670,247
-
25,000
176,646
25,300
91,000
8,908
-
6,872
16,565
229,340
314,574
99,847
-
2,337,974
1,684,741
828,655
-
(415,498)
292,333
45.5%
39.0%
40.9%
-
-
348,461
1,236,919
42.5%
(1) Other benefits include costs associated with employment (inclusive of any fringe benefits tax) and include notice period payments.
(2)
(3)
(4)
(5)
The value of the share-based payments represents 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. The amounts above represent management’s best estimate, at the date of this report, of the likelihood that the performance conditions of the grants being
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. The current period value of share-based payments includes negative amounts relating to options and
rights that did not vest during the period as non-market conditions were not met and for rights that were forfeited on retirement.
B P Lowe was appointed Managing Director and Chief Executive Officer effective 1 October 2019 and was designated a KMP from this date. The employee benefits for
Mr Lowe in the comparative period therefore represent the period 1 October 2019 to 30 June 2020.
S C Hughes was appointed Chief Financial Officer effective 15 October 2020 and was designated as a KMP from this date. The employee benefits for Mr Hughes
therefore represent the period 15 October 2020 to 30 June 2021.
S G Hutton retired as Chief Financial Officer on 15 October 2020 and ceased to be designated as a KMP from this date. The employee benefits above for Mr Hutton
represent the period 1 July 2020 to 31 December 2020 which includes his notice period. Mr Hutton remained an employee during his notice period to assist the
transition of the new Chief Financial Officer but he was not a KMP.
NED remuneration
Details of the NED remuneration during the reporting period are given in the table below.
NED
A R H Sindel(1)
A P Cleland
T J Gorman(2)
S L Lewis
J L Sutcliffe
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Base and Committee fees
Superannuation benefits
Total remuneration
396,606
277,180
210,868
210,868
230,900
184,417
215,434
215,708
210,868
210,868
21,694
19,900
20,032
20,032
-
-
20,466
20,492
20,032
20,032
418,300
297,080
230,900
230,900
230,900
184,417
235,900
236,200
230,900
230,900
(1)
(2)
A R H Sindel was appointed Chairman effective 12 February 2020.
T J Gorman joined the Board on 2 September 2019.
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ORORA LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT
Remuneration
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6.3. Terms of equity grants
FY20 and FY21 Performance Rights
The FY20 and FY21 PR were granted consistent with the terms described in Section 3.1.
PR subject to an EPS hurdle must first meet a minimum RoAFE gateway to vest. RoAFE is calculated as earnings before interest and tax
excluding significant items divided by the average funds employed in each financial year at the 30 June testing date. EPS measures the earnings
generated by the Group attributable to each Orora share. EPS is calculated based on the net profit after tax (NPAT) excluding significant items
calculated on a constant currency basis for the relevant financial year divided by the weighted average number of Orora shares on issue.
The growth in the Group’s EPS over the relevant performance period will be calculated as the increase in audited EPS over the base EPS (the
normalised EPS outcome for the previous financial year). The compound growth in EPS will be expressed as a cumulative percentage.
If the RoAFE gateway is not met in the relevant performance period, all PR subject to the EPS hurdle will lapse. If the RoAFE gateway is met, the
PR subject to the EPS hurdle will vest in accordance with the vesting schedule below.
RTSR measures the growth in the Group’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 the start of the performance period.
The share price used to calculate the TSR of the Group and each of the comparator companies for the performance period will be measured
as follows:
•
•
the opening share price is the VWAP on the ASX for the final five trading days of the previous financial year
the closing share price is the VWAP on the ASX for the final 20 trading days of the performance period.
PR subject to the RTSR hurdle must first meet a minimum ATSR gateway to vest. The ATSR gateway is a condition that Orora’s TSR over the
performance period must not be negative. If the ATSR gateway is not met in the relevant performance period, all PR subject to the RTSR hurdle
will lapse. If the ATSR gateway is met, the PR subject to the RTSR hurdle will vest in accordance with the vesting schedule below.
% CAGR in EPS over
performance period
% of PR subject to EPS
hurdle that will vest
RTSR over
performance period
% of PR subject to RTSR hurdle
that will vest
Below 4%
4%
Between 4% and 8%
0%
50%
Below 50th percentile
50th percentile
0%
50%
Pro-rata straight line vesting will
occur between 50% and 100%
Between 50th and 75th percentile
Pro-rata straight line vesting
will occur between 50% and
100%
8% or higher
100%
75th percentile or higher
100%
Orora engages the services of an independent external provider to calculate TSR performance.
Performance Rights and Share Options granted prior to FY20
PR granted prior to FY20 had similar terms to the FY20 grant. The main differences between the grants are:
• Grants prior to FY20 had a 4-year performance period
• Grants were delivered as PR and SO with 100% of SO and 1/3 of PR subject to the EPS hurdle with RoAFE gateway and 2/3rd of PR subject
to the RTSR hurdle with an ATSR gateway
• The comparator group used for the RTSR hurdle are companies ranked 30 to 130 on the S&P/ASX index as at the start of the performance
period
Rebasing Long-Term Incentive performance hurdles and gateways for grants on foot
On 30 April 2020, Orora completed the sale of its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper Industries Co.,
Limited. The subsequent capital return and share consolidation approved by shareholders, 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 this. The Board determined there would be no change to PR, but the options on foot would
be restructured. The restructure did not result in a material change to the quantum or exercise price of options awarded.
As indicated in the 2020 Remuneration Report, to ensure fair and equitable treatment to employees aligned to shareholders’ interests, the
Board exercised its discretion to re-base the EPS calculation for LTI grants with a vesting date of August 2021 and beyond to exclude the
divested Australasian Fibre business. In October 2020, the Board reviewed the performance hurdles and gateways associated with the LTI plan
and reset the RoAFE gateway and base EPS to an appropriate level for continuing businesses. The RoAFE gateway was reset from 12.5% to 15%
for grants prior to FY21 to balance performance targets for the continuing businesses with the need to find new growth opportunities. The
base EPS was reset to 15.2 cents (from 15.6 cents), 16.5 cents (from 17.4 cents) and 17.2 cents (from 18.0 cents) for the FY18, FY19 and FY20
grants respectively to reflect the size of Orora’s continuing businesses. There was no change made to the vesting schedule or the performance
thresholds required for vesting.
ORORA LIMITED ANNUAL REPORT 2021
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DIRECTORS’ REPORT
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There was no change made to the ATSR gateway and RTSR hurdle.
6.4. Options and Rights over equity instruments
The table below shows the DSR, PR and SO held by Executive KMP during the reporting period. Any rights that vest will automatically be
exercised at no cost on or around the time that Orora notifies the participant of vesting. During the period no share options vested nor were
any exercised by the Executive KMP.
Type of
equity
Grant
date
Number
granted
First date
exercisable
Expiry
date
Number
%
Number
%
Number
Fair value
at grant
Exercise
price
Vested
Lapsed
Unvested
15/09/2020
70,640 01/09/2022 01/09/2022
13/09/2019
3,022 01/09/2021 01/09/2021
-
-
-
-
14/09/2018
28,443 01/09/2020 01/09/2020
28,443
100%
B P Lowe(1)
DSR
DSR
DSR
PR
PR
PR
PR
PR
SO
SO
SO
28/10/2020
339,147 30/08/2024 01/09/2024
22/11/2019
270,900 31/08/2023 01/09/2023
22/10/2018
100,500 31/08/2022 30/08/2022
20/10/2017
122,000 30/08/2021 30/08/2021
20/10/2016
127,000 15/09/2020 15/09/2020
22/10/2018
244,500 30/8/2022 30/08/2027
20/10/2017
465,500 30/08/2021 30/08/2026
20/10/2016
541,500 15/09/2020 30/08/2025
S C Hughes
PR
06/11/2020
183,000 30/06/2024 01/09/2024
S G Hutton
DSR
DSR
DSR
PR
PR
PR
PR
PR
SO
SO
SO
15/09/2020
34,234 01/09/2022 01/09/2022
13/09/2019
12,350 01/09/2021 01/09/2021
14/09/2018
28,559 01/09/2020 01/09/2020
07/10/2020
188,500 30/06/2024 01/09/2024
04/10/2019
150,600 31/08/2023 01/09/2023
22/10/2018
99,500 30/08/2022 30/08/2022
20/10/2017
122,000 30/08/2021 30/08/2021
20/10/2016
127,000 15/09/2020 15/09/2020
22/10/2018
243,000 30/08/2022 30/08/2027
20/10/2017
465,500 30/08/2021 30/08/2026
20/10/2016
541,500 15/09/2020 30/09/2025
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34,234
12,350
28,559
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,640
$2.14
3,022
$2.65
-
$3.15
339,147
$1.81
270,900
$2.23
100,500
$1.91
122,000
$2.36
127,000
100%
-
$2.03
-
-
-
-
244,500
$0.38
465,500
$0.63
541,500
100%
-
$0.55
-
-
-
-
-
-
-
-
100%
100%
50%
25%
100%
50%
25%
100%
183,000
$1.78
-
-
-
-
-
$2.14
$2.65
$3.15
$1.54
$1.69
49,750
$1.91
91,500
$2.36
-
$2.03
121,500
$0.38
349,125
$0.63
-
$0.55
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
188,500
150,600
49,750
30,500
127,000
121,500
116,375
541,500
-
-
-
-
-
-
-
-
$3.58
$2.86
$2.08
-
-
-
-
-
-
-
-
-
$3.58
$2.86
$2.69
(1)
B P Lowe was appointed Managing Director and Chief Executive Officer effective 1 October 2019 and was designated a KMP from this date. Grants prior to this date
relate to his previous roles.
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ORORA LIMITED ANNUAL REPORT 2021
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report
6.5. Shareholdings
To strengthen alignment of the interests of Orora’s executives and NED with shareholders, there is a minimum shareholding requirement
(MSR).
Executive KMP shareholdings
The CEO and other executives are required to build and maintain a shareholding equivalent to 100% and 50% of FR respectively within six years
of their appointment. Once the relevant MSR has been attained, executives must not dispose of Orora equity granted as incentive on or after 1
January 2014, where it will result in them holding less than the MSR.
Executive
B P Lowe
S C Hughes
S G Hutton(1)
Balance on
1 July 2020
Received on
exercise of grant
Shares acquired
during reporting
period
Shares disposed of
during reporting period
Closing balance on
30 June 2021
Value of total holdings
as a % of FR
670,191
-
519,062
28,443
-
75,143
-
(160,000)
55,000
-
-
(512,515)
538,634
55,000
81,690
141.6%
37.6%
N/A
(1)
S G Hutton retired as Chief Financial Officer effective 15 October 2020 and ceased to be designated as a KMP from this date. The closing balance of Mr Hutton’s
ordinary share holding in the above table represents the number of shares held at the date he ceased to be KMP.
Non-executive director shareholdings
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 NED, and thereafter to maintain at least that level of
shareholding throughout their tenure.
NED
A R H Sindel
A P Cleland
T J Gorman
S L Lewis
J L Sutcliffe
Balance on
1 July 2020
Shares acquired during
reporting period
Shares disposed of
during reporting period
Closing balance on
30 June 2021
Value of total holdings
as a % of base fees
88,000
128,574
56,000
91,705
131,355
52,000
-
-
-
-
-
-
-
-
-
140,000
128,574
56,000
91,705
131,355
116.0%
200.3%
79.7%
139.8%
204.6%
6.6. Executive KMP service agreements
The details of the contract terms for the executive KMP are disclosed below:
Type of contract
Notice period
Termination payment
Permanent ongoing
6 months
Greater of amount payable required by law and payments
in lieu of notice (total termination payment must not
exceed 12 months’ FR)
6.7. Transactions with KMP
No other transactions occurred between KMP and the Group during the reporting period.
6.8. Loans to KMP or related parties
No loans to KMP or related parties were provided during the reporting period.
ORORA LIMITED ANNUAL REPORT 2021
63
DIRECTORS’ REPORT
Directors’
Declaration
This Directors’ Report is made in accordance with a resolution of the Directors.
A R SINDEL
CHAIR
19 August 2021
64
ORORA LIMITED ANNUAL REPORT 2021
Auditor’s Independence
Declaration
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of Orora Limited for the year ended 30 June 2021, 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
19 August 2021
Pricewaterhouse Coopers
2 Riverside Quay, SOUTHBANK VIC 3006, GOP Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
ABN 52 780 433 757
Liability limited by a scheme approved under Professional Standards Legislation.
ORORA LIMITED ANNUAL REPORT 2021
65
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.
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.
IN THIS SECTION
Financial report
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Cash flow statement
66
Notes to the financial statements
72
Financial risk management
67
68
69
70
71
About this report
Results for the year
1.1 Segment results
1.2 Significant items
1.3 Earnings per share (EPS)
1.4
Income
1.5 Operating costs
Capital structure and financing
2.1 Capital management
2.2 Dividends
2.3 Net debt
2.4 Equity
Assets and liabilities
3.1 Trade and other receivables
3.2
Inventories
3.3 Trade and other payables
3.4 Other assets
3.5 Property, plant and equipment
3.6 Leases
3.7
Intangible assets
3.8
Impairment of
non-financial assets
3.9 Provisions
Income tax
4.1
Income tax expense
4.2 Deferred tax balances
72
74
74
78
79
81
82
83
83
84
85
88
91
91
92
93
93
94
95
99
100
102
105
105
106
5.1 Market risks
5.2 Credit risk
5.3
Liquidity and funding risk
5.4 Hedging instruments
Group structure
6.1 Principal subsidiary
undertakings and
investments
6.2 Business divestment
6.3 Orora Employee Share Trust
Other notes to the
financial statements
7.1 Share-based compensation
7.2 Auditors’ remuneration
7.3 Commitments and contingent
liabilities
7.4 Orora Limited
7.5 Deed of Cross Guarantee
7.6 Related party transactions
7.7 Key Management Personnel
7.8 New and amended
accounting standards
and interpretations
108
109
112
113
115
118
118
118
120
121
121
124
125
126
127
130
130
131
66
ORORA LIMITED ANNUAL REPORT 2021
Income
Statement
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
$ million
Continuing Operations
Sales revenue
Cost of sales
Gross profit
Other income
Sales and marketing expenses
General and administration expenses
Profit from operations(2)
Finance income
Finance expenses
Net finance costs
Profit before related income tax expense
Income tax expense
Profit from continuing operations
Discontinued Operations(3)
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 (3)
Basic earnings per share
Diluted earnings per share
Note
2021
2020(1)
1.1
1.4
1.4
1.5
4.1
6.2
1.3
1.3
1.3
1.3
3,538.0
(2,863.8)
3,566.2
(2,912.7)
674.2
653.5
3.6
(201.5)
(265.8)
210.5
0.2
(33.0)
(32.8)
177.7
(48.0)
129.7
4.8
(213.9)
(358.3)
86.1
0.6
(51.1)
(50.5)
35.6
(9.0)
26.6
6.1
135.8
212.3
238.9
Cents
Cents
14.0
13.9
14.6
14.5
2.8
2.7
24.8
24.6
(1)
(2)
In response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision regarding the accounting of upfront configuration and
customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements the Group has revised its accounting policy in respect of the treatment of
these costs. The change in accounting policy has been applied retrospectively and the historical information restated to account for the impact of the change, refer
note 7.8.1 for further information.
Profit from continuing operations for the current period includes a significant item expense of $38.6 million (after tax $27.0 million) relating to additional expected
costs associated with the decommissioning of the Petrie site. In the comparative period the profit from 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. Refer note 1.2 for further
details of the significant items.
(3) On 30 April 2020, the Group completed the sale of its Australasian Fibre business, refer note 6.2. Accordingly, the financial results of this business are presented
separately as a discontinued operation within this income statement. The earnings per share includes the after tax net gain on sale of $6.1 million (2020: $171.7
million) recognised in respect of the sale of the Australasian Fibre business.
The above Income Statement should be read in conjunction with the accompanying notes.
ORORA LIMITED ANNUAL REPORT 2021
67
Statement of
Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
$ million
Profit for the financial period
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Cash flow hedge reserve
Unrealised gain/(losses) on cash flow hedges
Realised loss/(gain) 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 for the financial period, net of tax
Total comprehensive income for the financial period attributable to the owners of Orora Limited
Total comprehensive income for the financial period attributable to the owners of Orora Limited arises
from:
Continuing operations
Discontinued operations
Note
2021
2020
135.8
238.9
2.4.2
2.4.2
2.4.2
6.2
2.9
5.7
-
(2.4)
(42.9)
7.5
-
-
(29.2)
106.6
100.5
6.1
106.6
(5.0)
(0.9)
(0.1)
1.8
10.4
(35.6)
12.1
(3.8)
(21.1)
217.8
(2.2)
220.0
217.8
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
68
ORORA LIMITED ANNUAL REPORT 2021
Statement of
Financial Position
AS AT 30 JUNE 2021
$ 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
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
2021
2020(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, 3.6
5.4
3.9
3.3
2.3
2.3, 3.6
5.4
4.2
3.9
2.4.1
2.4.1
2.4.2
2.4.3
50.6
498.4
399.1
4.2
28.5
-
107.3
460.5
412.9
1.0
36.2
37.5
980.8
1,055.4
627.5
200.5
26.2
411.2
0.5
77.9
1,343.8
2,324.6
671.7
217.3
13.9
434.0
0.9
105.0
1,442.8
2,498.2
650.8
663.5
48.0
2.3
16.9
88.3
50.8
7.0
-
95.8
806.3
817.1
1.8
503.5
204.8
0.4
6.8
32.4
749.7
-
399.4
228.6
1.9
-
21.0
650.9
1,556.0
768.6
1,468.0
1,030.2
127.4
(46.6)
107.6
580.2
768.6
335.2
(1.6)
139.2
557.4
1,030.2
(1)
In response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision regarding the accounting of upfront configuration and
customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements the Group has revised its accounting policy in respect of the treatment of
these costs. The change in accounting policy has been applied retrospectively and the historical information restated to account for the impact of the change, refer
note 7.8.1 for further information.
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
ORORA LIMITED ANNUAL REPORT 2021
69
Attributable to owners of Orora Limited
Contributed
equity
Cash flow
hedge reserve
Note
Share-based
payment
reserve
Demerger
reserve
Exchange
fluctuation
reserve
Retained
earnings
Statement of
Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
$ million
Balance at 1 July 2019
Impact of change in intangible asset policy(1)
Impact of change in lease accounting policy(2)
Restated balance at 1 July 2019
Net profit for the financial period
Other comprehensive income/(expense):
Unrealised loss 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 expense
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
Net profit for the financial period
Other comprehensive income/(expense):
Unrealised gain on cash flow hedges
Realised losses transferred to profit or loss
Exchange differences on translation of foreign
operations
Deferred tax
Total other comprehensive income/(expense)
Transactions with owners in their capacity
as owners:
Share buy-back
Purchase of treasury shares
Proceeds received from employees on
exercise of options
Settlement of options and performance rights
Share-based payment expense
Dividends paid
Balance at 30 June 2021
7.8.1
7.8.2
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
2.4.3
2.4.2
2.4.2
2.4.1
2.4.1
2.4.1
2.4.1
7.1
2.2
484.1
-
-
484.1
-
-
-
-
-
-
-
(149.6)
(18.6)
8.0
0.7
9.0
-
-
333.6
-
-
-
-
-
-
(256.2)
(0.9)
1.0
3.3
-
-
80.8
(0.2)
-
-
(0.2)
-
(5.0)
(0.9)
(0.1)
-
1.8
(4.2)
-
-
-
-
-
-
-
(4.4)
-
2.9
5.7
-
(2.4)
6.2
-
-
-
-
-
-
1.8
15.5
-
-
15.5
132.9
-
-
132.9
16.5
-
-
16.5
-
-
-
-
(13.1)
(3.8)
(16.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
132.9
(0.4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(35.4)
-
(35.4)
-
-
-
-
-
-
132.9
(35.8)
-
-
-
-
-
-
-
-
-
-
-
(9.0)
4.6
-
11.1
-
-
-
-
-
-
-
-
-
(3.3)
0.9
-
8.7
Total
equity
1,644.5
(0.8)
(69.8)
1,573.9
995.7
(0.8)
(69.8)
925.1
238.9
238.9
-
-
-
-
-
-
-
-
-
-
-
-
(606.6)
557.4
135.8
-
-
-
-
-
-
-
-
-
-
(113.0)
580.2
(5.0)
(0.9)
(0.1)
(13.1)
(2.0)
(21.1)
(149.6)
(18.6)
8.0
0.7
-
4.6
(606.6)
1,030.2
135.8
2.9
5.7
(35.4)
(2.4)
(29.2)
(256.2)
(0.9)
1.0
-
0.9
(113.0)
768.6
(1)
In response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision regarding the accounting of upfront configuration and
customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements the Group has revised its accounting policy in respect of the treatment of
these costs. The change in accounting policy has been applied retrospectively and the historical information restated to account for the impact of the change, refer
note 7.8.1 for further information.
(2)
In the comparative period the Group initially applied AASB 16 Leases using the modified retrospective approach from 1 July 2019. Refer note 7.8.2 for further
information.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
70
ORORA LIMITED ANNUAL REPORT 2021
Cash Flow
Statement
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
$ million
Note
2021
2020(1)
Cash flows from/(used in) operating activities
Profit for the financial period from continuing operations
Depreciation
Amortisation of intangible assets
Net finance costs
Net gain on disposal of non-current assets
Fair value (gain)/loss on financial instruments at fair value through income statement
Share-based payment expense
Net impairment losses and other sundry items
Restructuring and decommissioning expense
Income tax expense
Operating cash inflow before changes in working capital and provisions
- (Increase)/Decrease in prepayments and other operating assets
- (Decrease)/Increase in provisions
- (Increase)/Decrease in trade and other receivables
- (Increase)/Decrease in inventories
- Increase/(Decrease) in trade and other payables
Interest received
Interest and borrowing costs paid
Income tax received/(paid)
Net cash inflow from continuing operating activities
Net cash used in discontinued operating activities
Net cash inflow from operating activities
Cash flows from/(used in) investing activities
(Granting)/repayment 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
Proceeds on disposal of non-current assets
Net cash flows used in continuing investing activities
Net cash flows from discontinued investing activities
Net cash flows (used in)/from investing activities
Cash flows from/(used in) financing activities
Capital return
Proceeds from exercise of employee share options
Share buyback
Payments for treasury shares
Proceeds from borrowings
Repayment of borrowings
Principal lease repayments
Dividends paid and other equity distributions
Net cash flows used in continuing financing activities
Net cash from discontinued financing activities
Net cash flows used in financing activities
Net (decrease)/increase in cash held
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial period (2)
1.5
1.5
7.1
1.2
6.2
6.2
2.4.1
2.4.1
2.4.1
2.4.1
2.2
6.2
2.3
129.7
112.3
7.9
32.8
1.9
(0.2)
0.9
24.4
38.6
48.0
396.3
17.1
(24.4)
(81.5)
(17.9)
12.0
301.6
0.2
(32.7)
1.5
270.6
-
270.6
(0.1)
(1.9)
(57.1)
1.9
(57.2)
20.7
(36.5)
-
1.0
(256.2)
(0.9)
1,165.6
(1,033.8)
(48.9)
(113.0)
(286.2)
-
(286.2)
(52.1)
107.3
(4.6)
50.6
26.6
113.8
11.5
50.5
1.0
0.2
4.6
30.3
137.2
9.0
384.7
(0.7)
(2.4)
20.9
(23.1)
(139.4)
240.0
0.6
(51.9)
(49.1)
139.6
(121.9)
17.7
0.2
(8.0)
(116.2)
10.0
(114.0)
1,589.7
1,475.7
(149.6)
8.0
-
(18.6)
1,826.4
(2,538.6)
(52.1)
(606.6)
(1,531.1)
77.5
(1,453.6)
39.8
70.3
(2.8)
107.3
(1)
In response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision regarding the accounting of upfront configuration and
customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements the Group has revised its accounting policy in respect of the treatment of
these costs. The change in accounting policy has been applied retrospectively and the historical information restated to account for the impact of the change, refer
note 7.8.1 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 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.
ORORA LIMITED ANNUAL REPORT 2021
71
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
ABOUT THIS REPORT
FOREIGN CURRENCY
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.
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.
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 2020 (refer note 7.8);
• 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.
This general purpose financial report for the Group for the year
ended 30 June 2021 was authorised for issue in accordance with a
resolution of the Directors on 19 August 2021. The Directors have
the power to amend and reissue the financial 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.
Transactions in foreign currencies are initially recorded in the
functional currency of the entity using the exchange rate prevailing
at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date. Foreign exchange gains
and losses arising from the translation of the monetary assets and
liabilities, or from the settlement of foreign currency transactions,
are recognised in the income statement, except when deferred in
equity as qualifying cash flow hedges or net investment hedges. The
amounts deferred in equity in respect of cash flow hedges are
recognised in the income statement when the hedged item affects
profit or loss and for net investment hedges when the investment is
disposed of.
As at the reporting date, the assets and liabilities of entities within
the Group that have a functional currency different from the
presentation currency, are translated into Australian dollars at
the rate of exchange at the balance sheet date and the income
statements are translated at the average exchange rate for the
year. The exchange differences arising on the balance sheet
translation are taken directly to a separate component of equity
in the Exchange Fluctuation Reserve.
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
95
100
102
105
115
125
Note 3.6
Leases
Note 3.8
Impairment of non-financial assets
Note 3.9
Provisions
Note 4
Income tax
Note 5.4
Hedging instruments
Note 7.3
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.
72
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
CURRENT PERIOD SIGNIFICANT EVENTS
Dividend
During the financial year the Group paid an unfranked FY20 final
dividend of $53.1 million at 5.5 cents per ordinary share and an
unfranked FY21 interim dividend of $59.9 million at 6.5 cents per
ordinary share.
Since 30 June 2021 the Directors have determined a final dividend
for FY21 of $65.7 million, unfranked, of 7.5 cents per ordinary
share. Refer note 2.2 for further details.
Share buyback
On 20 August 2020, the Group announced an on-market buyback of
up to 10.0% of issued share capital. This represented approximately
96.5 million shares. The buyback commenced in September 2020.
The share buyback ceased on 30 June 2021. During the period
ordinary shares totalling 89,337,073 were purchased on-market
through the share buyback for a total value of $256.2 million,
representing 9.3% of the share capital at the date the share
buyback was announced. Refer note 2.4. The Dividend
Reinvestment Plan was suspended while the on-market buyback
was undertaken.
Coronavirus (COVID-19) pandemic
The Group’s response to the COVID-19 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. The
business continues to prioritise key focus areas including: safety,
health and wellbeing of our people; ensuring continuity and quality
of supply with customers and preserving ongoing supply chains, and
active financial management.
Refinancing
During the year ended 30 June 2021, the Group successfully
refinanced its $350.0 million Global Syndicated Facility, that was
due to mature in April 2022. The refinanced facility will mature in
November 2024. There were no material changes to the banking
syndicate counterparties or commercial terms.
Reflecting the strength of the Group’s liquidity position, a
$25.0 million bilateral facility that had been established during the
year ended 30 June 2020, was allowed to lapse upon its maturity in
March 2021. In addition, a separate $35.0 million bilateral facility
that was due to mature in July 2021 has been converted to a
$50.0 million uncommitted credit line that will mature in May 2022.
Decommissioning costs
The Group has recognised a significant item expense of
$38.6 million (after tax $27.0 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. The decommissioning of the Petrie site is
progressing, but continues to be a significant and complex exercise
involving multiple government agencies. Recent significant
developments associated with the unprecedented rainfall levels
in Queensland and unforeseen complexities related to the
remediation of the remaining and most technically complex areas
of the site, have resulted in delays and caused estimated costs to
complete the remaining decommissioning to be higher than
previously contemplated. The Group continues to engage a
specialist environmental consulting firm to manage the completion
of the remaining remediation works. The provision at 30 June 2021
(refer note 3.9), represents management’s best estimate in respect
of the anticipated costs to complete the remediation, using all
currently available information and considering applicable
legislative and environmental regulations.
Change in accounting policy
In response to the International Financial Reporting Interpretation
Committee (IFRIC) agenda decision regarding the accounting of
upfront configuration and customisation costs incurred in
implementing Systems-as-a-Service (SaaS) arrangements, the Group
has revised its accounting policy in respect of the treatment of
these costs.
SaaS arrangements are service contracts providing the Group with
the right to access the cloud provider’s application software over
the contract period.
The change in accounting policy has been applied retrospectively
and historical financial information restated. The restatement
resulted in a reduction to intangible assets and retained earnings
of $0.8 million as at 1 July 2019; the net impact of the accounting
policy change on the comparative period income statement was
a reduction of $1.0 million, for the current reporting period a
reduction of $0.7 million. Refer note 7.8.1 for further information
regarding the accounting policy change.
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
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
Corporations Act 2001, including details of the Group’s
employee reward and recognition programs and unrecognised
items.
ORORA LIMITED ANNUAL REPORT 2021
73
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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, segment 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 (CODM), monitor the operating results of the business separately for the purpose of making decisions about resource
allocation and performance assessment.
The following segment information has been presented for continuing operations only. Refer 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 wine 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.
74
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
The results of the reportable segments for the year ended 30 June 2021 and 30 June 2020 are set out below:
$ million
Reportable segment revenue
Total reportable segment revenue from continuing operations (1)
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
Earnings before significant items, unallocated interest and tax
Australasia
2020
2021
`
North America
2020
2021
Total Reported
2020
2021
834.1
785.9
2,703.9
2,780.3
3,538.0
3,566.2
197.8
191.5
171.5
157.1
369.3
348.6
(47.5)
150.3
(0.7)
149.6
(44.9)
146.6
(0.9)
145.7
(72.7)
98.8
(9.8)
89.0
(80.4)
76.7
(12.5)
64.2
(120.2)
249.1
(10.5)
(125.3)
223.3
(13.4)
238.6
209.9
Capital spend on the acquisition of property, plant and
equipment and intangibles
34.2
93.4
22.9
22.8
57.1
116.2
Receivables
Inventory
Payables
Total reportable segment working capital
Average funds employed(2)
Operating free cash flow(3)
150.3
195.4
(262.7)
83.0
100.7
193.4
(237.8)
56.3
338.9
203.7
(380.7)
161.9
343.4
219.5
(393.4)
169.5
489.2
399.1
(643.4)
244.9
444.1
412.9
(631.2)
225.8
590.8
543.8
659.7
858.7
1,250.5
1,402.5
129.5
99.4
82.7
28.3
212.2
127.7
(1)
(2)
Represents total revenue from external customers. 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.
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.
(3) 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 $28.4 million (2020: $20.6 million) representing
expenditure on the decommissioning of the Petrie site, refer note 1.2.
ORORA LIMITED ANNUAL REPORT 2021
75
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 ‘arm’s-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
$m
Non-current assets(1)
$m
2,557.6
2,633.0
2021
2020
775.8
717.8
2021
2020
501.9
521.3
727.2
683.6
106.8
102.4
146.4
147.2
67.1
71.6
28.7
27.8
Australia
New Zealand
United States of
America
Other
Australia
New Zealand
United States of
America
Other
(1)
Non-current assets exclude deferred tax assets and non-current financial
instruments.
Revenue by product
$ million
Fibre and paper-based packaging
Beverage packaging
Traded packaging products
Total sales revenue
2021
2020
749.5
834.0
1,954.5
3,538.0
672.0
785.9
2,108.3
3,566.2
No single customer, within an operating segment, generates revenue greater than 10% of the Group’s total revenues.
76
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
Other non-cash adjustments
Acquisition of property, plant and equipment and intangibles for total operations(1)
(1)
Refer notes 3.5 and 3.7, excludes balances acquired through business combinations.
Operating free cash flow
$ million
Reported segment 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 received/(paid)
Net cash flows from operating activities
2021
2020
238.6
(38.6)
(22.3)
177.7
209.9
(137.2)
(37.1)
35.6
2021
2020
57.1
-
57.1
1.9
1.8
(3.5)
57.3
116.2
50.2
166.4
-
(0.7)
0.9
166.6
2021
2020
212.2
127.7
30.0
48.9
0.2
(22.2)
1.5
270.6
46.8
52.1
0.6
(38.5)
(49.1)
139.6
ORORA LIMITED ANNUAL REPORT 2021
77
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 1: Results for the year (continued)
1.1 Segment results (continued)
Working capital
$ million
Reported segment working capital
Add/(less) amounts included in working capital for management reporting purposes:
Derivatives
Add/(less) amounts excluded from working capital for management reporting purposes:
Net capital receivables and payables
Loan receivables and other assets
Other payables
Reconciles to the financial statements as follows:
Trade and other receivables (note 3.1)
Inventories (note 3.2)
Trade and other payables (note 3.3)
Current prepayments (note 3.4)
1.2. Significant items
2021
2020
244.9
225.8
(1.9)
6.0
30.3
0.1
(7.5)
265.9
498.4
399.1
(650.8)
19.2
265.9
11.5
-
(6.3)
237.0
460.5
412.9
(663.5)
27.1
237.0
Significant items are typically gains or losses arising from events that are not considered part of the core operations of the business.
$ million
Continuing operations
Restructuring and asset impairment
Recoverable amount impairment
Decommissioning costs
Discontinuing operations
Net profit on sale of Australasian Fibre businesses
Total significant item (expense)/income
2021
2021
2020
Before tax
Tax (expense)/
benefit
Net of tax
Before tax
Tax (expense)/
benefit
Net of tax
-
-
(38.6)
(38.6)
1.5
1.5
(37.1)
-
-
11.6
11.6
4.6
4.6
16.2
-
-
(27.0)
(27.0)
6.1
6.1
(20.9)
(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
Decommissioning costs
Following ongoing project review and reassessment of remediation requirements, additional costs associated with the decommissioning of the
former Petrie Mill site of $38.6 million ($27.0 million after tax) have been recognised in respect of estimated costs to complete. This expense
has been recognised as a significant item and is presented in ‘general and administration’ expense. The decommissioning of the Petrie site is
progressing, but continues to be a significant and complex exercise involving multiple government agencies. Recent significant developments
associated with the unprecedented rainfall levels in Queensland and unforeseen complexities related to the remediation of the remaining and
most technically complex areas of the site have resulted in delays and caused estimated costs to complete the remaining decommissioning to
be higher than previously contemplated. The Group continues to engage a specialist environmental consulting firm to manage the completion
of the remaining remediation works. The provision at 30 June 2021 (refer note 3.9) represents management’s best estimate in respect of the
anticipated costs to complete the remediation, using all currently available information and considering applicable legislative and
environmental regulations.
78
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Net profit on sale of Australasian Fibre business
On 29 September 2020, the Group finalised the post-close completion accounts process with regards to the divestment of the Australasian
Fibre business including finalisation of the tax position of the sale, resulting in the recognition of an incremental net gain on disposal of
$11.3 million (after tax $12.8 million). This gain has been offset by the recognition of additional costs and obligations associated with the sale
totalling $9.8 million (after tax $6.7 million).
2020
Restructuring and asset impairment
In the comparative period, the majority of the restructuring and asset impairment expense ($20.7 million before tax) was the 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 business’
performance being below expectations. This included 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 related 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
In the comparative period, the Group 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 reflected the difficulty of
management turnaround initiatives, implemented to address the below expectations business performance, to gain traction which was
materially compounded by the impact of COVID-19. Whilst the majority of Orora’s businesses were resilient during COVID-19, many of the end
market segments serviced by Orora Visual were more significantly impacted and uncertainty remained over the timing of recovery of these
markets. These factors 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
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, with net proceeds of $1,637.0 million received in the period to 30 June 2020. The net gain on disposal, before tax, of $164.0 million
($171.7 million after tax) was presented net of transaction costs, exchange fluctuation reserve reclassified on disposal, write-off of Group
assets relating to the Fibre business, allowances for post-close completion accounts adjustments and provisions for indemnities. The net gain
on disposal was recognised and presented in the ‘profit from discontinued operations, net of tax’ in the income statement. Refer note 6.2 for
further details of the divestment.
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 $135.8 million (2020:
$238.9 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 928.3 million (2020: 964.1 million).
Diluted EPS reflects any commitments made by the Group to issue shares in the future and so it includes the effect of the potential
conversion of share options and rights granted to employees. To calculate the impact it is assumed that all share options and rights are
exercised and new shares are issued.
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.
ORORA LIMITED ANNUAL REPORT 2021
79
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 (refer note 6.2)
Significant items (refer note 1.2)
Profit for the financial period
Weighted average number of ordinary shares for basic earnings per share
Dilution due to share options and rights
Weighted average number of ordinary shares for diluted earnings per share
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
Earnings per share
Basic earnings per share(1)
Diluted earnings per share(1)
Basic earnings per share, before significant items
Diluted earnings per share, before significant items
2021
2020
$156.7
($27.0)
$129.7
$126.7
($100.1)
$26.6
-
$6.1
$6.1
$40.6
$171.7
$212.3
$135.8
$238.9
928.3
5.3
933.6
964.1
6.9
971.0
14.0c
13.9c
16.9c
16.8c
14.6c
14.5c
16.9c
16.8c
2.8c
2.7c
13.1c
13.1c
24.8c
24.6c
17.4c
17.2c
(1)
Earnings per share includes the after-tax net gain on sale of $6.1 million (2020: $171.7 million) recognised in respect of the sale of the Australasian Fibre business, refer
note 6.2.
80
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
2021
2020
3,538.0
3,566.2
0.6
3.0
3.6
0.2
0.2
1.3
3.5
4.8
0.6
0.6
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
arrangements.
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 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 to 60 days.
ORORA LIMITED ANNUAL REPORT 2021
81
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 on accumulation funds
Other employment benefits expense
Share-based payments expense
- Options
- Performance rights and other plans
- Grants forfeited and failing to vest
Total employee benefits expense
2021
2020
529.5
25.7
6.6
0.1
0.2
3.3
(2.6)
540.2
31.3
7.7
-
0.8
3.8
-
562.8
583.8
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
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
2021
2020
68.0
44.2
0.1
7.9
66.9
46.4
0.5
11.5
120.2
125.3
2021
2020
10.5
-
18.6
-
29.1
3.9
33.0
13.4
0.3
35.7
(1.3)
48.1
3.0
51.1
Refer 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.
82
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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.
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.
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.
The Group’s capital management framework also aims to 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 2021, the Group’s on-balance sheet gearing and leverage ratios, excluding lease liabilities, were 37.1% (2020:
22.1%) and 1.5 times (2020: 0.9 times), respectively.
2BOn-market Share Buyback
On 20 August 2020, the Group announced an on-market buyback of up to 10.0% of issued share capital. This represented approximately
96.5 million shares. The buyback commenced in September 2020. The Dividend Reinvestment Plan was suspended whilst the on-market
buyback was undertaken.
The share buyback ceased on 30 June 2021. During the period ordinary shares totalling 89,337,073 were purchased on-market through
the share buyback for a total value of $256.2 million, representing 9.3% of the share capital at the date the share buyback was
announced.
3BAustralasian Fibre divestment
In the comparative period, the Group completed the sale of its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper
Industries Co., Limited, with net proceeds of $1,637.0 million received in the period to 30 June 2020 (refer note 6.2).
In determining the timing and quantity of funds to return to shareholders in respect of the funds received from the Fibre divestment, 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, in the comparative period, 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).
ORORA LIMITED ANNUAL REPORT 2021
83
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
2.2. Dividends
Declared and paid during the period
For the year ended 30 June 2021
Final dividend for 2020 (unfranked)
Interim dividend for 2021 (unfranked)
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)
Proposed and unrecognised at period end (1)
For the year ended 30 June 2021
Final dividend for 2021 (unfranked)
For the year ended 30 June 2020
Final dividend for 2020 (unfranked)
(1)
Estimated final dividend payable, subject to variations in the number of shares up to record date.
Note
2021
2020
2.3
2.3
2.3
2.4.1
2.4.1
2.4.2
2.4.3
503.5
(50.6)
452.9
252.8
705.7
127.4
(46.6)
107.6
580.2
768.6
399.4
(107.3)
292.1
279.4
571.5
335.2
(1.6)
139.2
557.4
1,030.2
1,474.3
1,601.7
Cents per
share
Total
$ million
5.5
6.5
6.5
6.5
37.3
7.5
5.5
53.1
59.9
113.0
78.2
78.4
450.0
606.6
65.7
53.1
84
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Shareholder distributions – cents per share (excludes special dividends)
13.0c
12.5c
12.0c
14.0c
6.5c
30%
franked
6.5c
30%
franked
7.5c
unfranked
5.5c
unfranked
6.0c
30%
franked
6.5c
50%
franked
6.5c
30%
franked
6.5c
unfranked
11.0c
6.0c
30%
franked
5.0c
30%
franked
FY17
FY18
FY19
FY20
FY21
Final dividend (FY21: proposed)
Interim dividend
2020 Special Dividend
On 30 April 2020, the Group completed the sale of its Australasian Fibre business, refer note 6.2, with net proceeds of $1,637.0 million received
in the period to 30 June 2020. 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 and represented 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 share 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.
On 20 August 2020, the Group announced an on-market share buyback of up to 10.0% of issued share capital. The buyback ceased on 30 June
2021 with 9.3% of issued share capital having been purchased. The Dividend Reinvestment Plan was suspended whilst the on-market buyback
was undertaken.
Franking Account
Franking credits for shareholders of the Company apply at corporate tax rate of 30% (2020: 30%). The interim dividend for 2021 was unfranked
(2020 Interim: 30% franked, and the special dividend paid on 29 June 2020 was 50% franked), the proposed final dividend for 2021 is unfranked
(2020 Final: unfranked). The balance of franking credits available as at 30 June 2021 is nil (2020: nil).
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 2021 dividends, 100% of the interim dividend and 100%
of the 2021 final dividend is to be sourced from the CFI account (2020: 70% of the interim dividend, 50% of the special dividend and 100% of
the 2020 final dividend were sourced from the Company’s CFI account). As a result, none of the 2021 dividends paid to a non-resident will be
subject to Australian withholding tax. The balance of the conduit foreign income account as at 30 June 2021 is $103.5 million (2020: $69.4
million), and it is estimated that this will reduce by $65.7 million (2020: $53.1 million) after payment of the estimated final dividend on 11
October 2021.
2.3. Net Debt
During the period the Group successfully refinanced the Global Syndicated Facility. 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 has access to the
following committed facilities as at 30 June 2021:
• a $350.0 million revolving multicurrency facility through a syndicate of domestic and international financial institutions, maturing in
November 2024;
• a USD150.0 million five-year USD revolving facility, through a syndicate of domestic and international financial institutions, maturing
in April 2024; and
• a $35.0 million bilateral agreement with a domestic institution, maturing 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 2021
85
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
Lease liabilities
Due within one year
Due after one year
Total lease liability
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
Total debt
Net debt
Accounting policies
2021
2020
44.3
6.3
50.6
48.0
204.8
252.8
0.1
180.0
323.4
503.5
503.5
98.3
9.0
107.3
50.8
228.6
279.4
0.2
48.0
351.2
399.4
399.4
756.3
678.8
705.7
571.5
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 $324.1 million (excluding borrowing costs) while the fair value of the notes is
$347.6 million. For all other borrowings, the fair values are not materially different to their carrying amounts since the interest payable on
those borrowings is either close to current market rates or the borrowings are of a short-term nature.
86
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 2019
Impact of change in lease accounting policy (refer note 7.8.2)
Restated net debt at 1 July 2019
Cash flows
Disposal of businesses and controlled entities
Change in lease arrangements
Unwinding of discounting
Other non-cash movements
Effect of movements in foreign exchange rates
Net debt at 30 June 2020
Cash flows
Change in lease arrangements
Unwinding of discounting
Other non-cash movements
Effect of movements in foreign exchange rates
Net debt at 30 June 2021
2.3.2. Borrowings
Assets
Liabilities from financing activities
Cash and cash
equivalents Lease liabilities
Bank loans
US Private
Placement
70.3
-
70.3
39.8
-
-
-
-
(2.8)
107.3
(52.1)
-
-
-
(4.6)
50.6
(1.3)
(595.3)
(596.6)
101.3
245.6
(9.3)
(20.6)
0.9
(0.9)
(279.6)
59.4
(42.1)
(10.5)
(0.2)
20.1
(252.9)
(604.1)
-
(604.1)
595.8
-
-
-
(2.9)
(36.8)
(48.0)
(131.8)
-
-
(0.1)
(0.1)
(180.0)
(354.9)
-
(354.9)
10.4
-
-
-
(0.3)
(6.4)
(351.2)
-
-
-
(0.2)
28.0
(323.4)
Total
(890.0)
(595.3)
(1,485.3)
747.3
245.6
(9.3)
(20.6)
(2.3)
(46.9)
(571.5)
(124.5)
(42.1)
(10.5)
(0.5)
43.4
(705.7)
The maturity profile of the Group’s external borrowings drawn down, excluding the impact of capitalised borrowing costs, as at 30 June 2021 is
illustrated in the following chart:
Maturity profile of drawn debt by facility
190.7
180.0
133.4
FY22
FY23
FY24
FY25
FY26
Bank Loans
Private Placement
Loans due after one year
At 30 June 2021, bank loans due after one year include:
• $180.0 million drawn under a $350.0 million committed global syndicated multicurrency facility maturing in November 2024 (2020:
$20.0 million and NZD30.0 million drawn under a $350.0 million committed global syndicated multicurrency facility maturing in April 2022);
• nil drawings under the USD150.0 million committed syndicated facility maturing in April 2024 (2020: nil);
• nil drawings under the $35.0 million bilateral agreement, maturing in January 2022 (2020: nil drawings under 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).
All drawings as at 30 June 2021 were denominated in Australian dollars and bore interest at the applicable BBSY plus an applicable credit
margin. Any drawings in US or New Zealand dollars would bear interest at the applicable 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 2021
87
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 2021 are presented in the statement of changes in equity.
2.4.1. Contributed equity
At 1 July 2019
Capital return and share consolidation(1)
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Proceeds received from employes on exercise of options
Treasury shares used to settle Team Member Share Plan
Treasury shares used to satisfy issue of CEO Grant (note 7.1)
Exercise of vested grants under Employee Share Plans
Treasury shares used to satisfy exercise of vested grants under Employee Share Plans
At 30 June 2020
Share buyback
Acquisition of shares by the Orora Employee Share Trust (note 6.3)
Acquisition of shares under share buyback program(2)
Proceeds received from employes on exercise of options
Restriction lifted on shares issued under the CEO Grant (note 7.1)
Exercise of vested grants under Employee Share Plans
Treasury shares used to satisfy exercise of vested grants under Employee Share Plans
At 30 June 2021
Ordinary shares
No. '000
$ million
Treasury shares
No. '000
$ million
1,206,685
(241,322)
-
-
-
-
6,785
(6,785)
965,363
(75,123)
-
-
-
-
841
(841)
890,240
488.0
(150.0)
-
8.0
-
(0.7)
9.0
(19.1)
335.2
(210.1)
-
-
1.0
0.2
3.1
(2.0)
127.4
(1,127)
164
(6,920)
-
234
209
-
6,785
(655)
-
(412)
(14,214)
-
-
-
841
(14,440)
(3.9)
0.4
(18.6)
-
0.7
0.7
-
19.1
(1.6)
-
(0.9)
(46.1)
-
-
-
2.0
(46.6)
(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)
(2)
As at 30 June 2021, 14,214,228 ordinary shares purchased on-market under the Share Buyback program announced by the Group had not been cancelled, these shares
have been presented as Treasury Shares. Subsequent to the end of the financial year the shares were cancelled.
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 note 6.3.
As at 30 June 2021, 14,214,228 ordinary shares purchased on-market under the Share Buyback program announced by the Group had not been
cancelled, these shares have been presented as Treasury Shares. Subsequent to the end of the financial year the shares were cancelled.
88
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
2.4.2. Reserves
$ million
Cash flow hedge reserve
Share-based payment reserve
Demerger reserve
Exchange fluctuation reserve
Total reserves
2021
2020
1.8
8.7
132.9
(35.8)
107.6
(4.4)
11.1
132.9
(0.4)
139.2
Details of movements in each of the reserves is presented in the statement of changes in equity.
Accounting policies
Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
During the 12 months to 30 June 2021 the following movements were recognised in the cash flow hedge reserve:
$ million
Unrealised gains/(losses) on cash flow hedges
Forward exchange contract gain/(loss)
Realised losses/(gains) transferred to profit or loss
Forward exchange contract loss/(gain)
Realised (gains)/losses transferred to non-financial assets
Forward exchange contract gain
2021
2020
2.9
(5.0)
5.7
(0.9)
-
(0.1)
Refer 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 note 7.1 for further details of the Group’s share-based payment plans.
The fair value of options and rights granted is recognised as an employee benefit expense in the income statement with a corresponding
increase in the share-based payments reserve in equity and is spread over the vesting period during which the employees become
unconditionally entitled to the option or right. Upon exercise of the options or rights, the balance of the share-based payments reserve,
relating to the option or right, is transferred to share capital.
Demerger reserve
The demerger reserve represents the difference between the consideration paid by Orora under an internal corporate restructure and the
assets and liabilities acquired, which were recognised at their carrying value under a common control transaction.
Exchange fluctuation reserve
For controlled entities with a functional currency that is not Australian dollars, their assets and liabilities are translated at the closing exchange
rate at reporting date, while income and expenses are translated at year to date average exchange rates.
On consolidation all exchange differences arising from translation are recognised in other comprehensive income and accumulated in the
exchange fluctuation reserve.
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 2021
89
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 intangible asset policy (refer note 7.8.1)
Impact of change in lease accounting policy (refer note 7.8.2)
Restated retained earnings at the 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)
(2)
(3)
2020 Final dividend paid on 12 October 2020 (2019: 2019 Final dividend paid on 21 October 2019).
2021 Interim dividend paid on 1 April 2021 (2020: 2020 Interim dividend paid on 9 April 2020).
Special dividend was paid on 29 June 2020 representing 37.3 cents per ordinary share. Refer note 2.2 for further information.
2021
2020
557.4
-
-
557.4
135.8
693.2
(53.1)
(59.9)
-
(113.0)
995.7
(0.8)
(69.8)
925.1
238.9
1,164.0
(78.2)
(78.4)
(450.0)
(606.6)
580.2
557.4
90
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
2021
2020
435.9
(3.2)
432.7
65.7
498.4
360.4
(3.3)
357.1
103.4
460.5
(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 2021
91
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
2021
2020
2021
2020
-
-
0.7
2.5
3.2
-
-
-
3.3
3.3
373.2
48.3
11.9
2.5
297.5
40.1
18.4
4.4
435.9
360.4
The Group has recognised a net loss of $2.4 million (2020: $7.6 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
Finished goods
Total inventory carried at net realisable value
Total inventories
Accounting policies
2021
2020
85.8
7.5
260.6
353.9
36.6
8.6
45.2
95.2
6.0
271.7
372.9
33.7
6.3
40.0
399.1
412.9
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 $30.5 million (2020: $9.4 million) with regard to the net realisable value of
inventories which has been recognised in ‘cost of sales’ expense in the income statement.
92
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
3.3. Trade and other payables
$ million
Current
Trade creditors
Other creditors and accruals
Total current trade and other payables
Non-current
Other creditors
Total non-current other payables
Accounting policies
2021
2020
364.7
286.1
650.8
436.3
227.2
663.5
1.8
1.8
-
-
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
2021
2020
9.3
19.2
28.5
17.7
60.2
77.9
9.1
27.1
36.2
22.0
83.0
105.0
(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 2021
93
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 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
Additions for the period
Disposals during the period
Additions through business acquisitions
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2021
Accumulated depreciation and impairment
At 1 July 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
Depreciation charge
Disposals during the period
Effect of movements in foreign exchange rates
At 30 June 2021
Net book value
At 30 June 2020
At 30 June 2021
Land
improvements
Land
Buildings
Plant and
equipment
Finance
leased assets
52.1
-
(0.2)
(38.0)
-
-
13.9
-
(0.6)
-
-
-
13.3
(0.4)
-
-
0.4
-
-
-
-
-
-
-
-
13.9
13.3
13.2
-
-
(5.5)
0.7
(0.1)
8.3
-
(0.1)
-
-
-
8.2
(4.4)
(0.2)
-
1.9
-
-
-
(2.7)
(0.1)
-
-
(2.8)
5.6
5.4
512.5
0.5
(15.2)
(281.5)
31.1
-
247.4
0.4
(6.5)
-
1.5
(4.5)
3,022.2
161.5
(39.9)
(1,875.1)
(31.8)
(1.7)
1,235.2
50.9
(24.0)
1.0
(15.3)
(27.2)
238.3
1,220.6
(161.6)
(1,670.5)
(10.9)
15.3
79.2
-
(0.9)
(0.1)
(79.0)
(8.1)
3.6
2.8
(80.7)
168.4
157.6
(70.6)
34.5
973.2
(20.6)
0.9
1.4
(751.7)
(59.8)
23.8
18.2
(769.5)
483.5
451.1
4.6
-
(0.1)
-
-
0.1
4.6
-
(0.6)
-
-
(0.4)
3.6
(2.2)
(0.6)
-
-
(1.5)
-
-
(4.3)
(0.1)
0.6
0.3
(3.5)
0.3
0.1
Total
3,604.6
162.0
(55.4)
(2,200.1)
-
(1.7)
1,509.4
51.3
(31.8)
1.0
(13.8)
(32.1)
1,484.0
(1,839.1)
(82.3)
49.8
1,054.7
(22.1)
-
1.3
(837.7)
(68.1)
28.0
21.3
(856.5)
671.7
627.5
(1)
The impairment loss recognised in the comparative 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 Fibre business refer note 1.2.
At 30 June 2021, no property, plant and equipment was provided as security for any interest-bearing borrowings (2020: nil).
94
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
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.
Leases 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 similar underlying assets.
ORORA LIMITED ANNUAL REPORT 2021
95
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 7.8.2)
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
Additions
Derecognition of right-of-use assets
Effect of movements in foreign exchange rates
At 30 June 2021
Accumulated amortisation and impairment
At 1 July 2019
Impact of change in accounting policy (note 7.8.2)
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
Depreciation charge for the period
Derecognition of right-of-use assets
Impairment loss
Reversal of impairment loss
Effect of movements in foreign exchange rates
At 30 June 2021
Net book value
At 1 July 2020
At 30 June 2021
Amounts recognised in the income statement
The following amounts, for continuing operations, were recognised in the income statement:
$ million
Amortisation 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
-
470.0
470.0
2.7
(0.1)
(222.4)
(1.5)
248.7
31.3
(5.2)
(17.6)
257.2
-
(16.6)
(16.6)
(46.2)
0.1
2.1
7.4
1.1
(52.1)
(36.8)
5.2
(3.6)
4.4
3.8
(79.1)
196.6
178.1
-
34.7
34.7
5.0
(0.6)
(12.5)
1.1
27.7
10.8
(1.4)
(2.2)
34.9
-
-
-
(8.8)
0.5
-
1.1
0.2
(7.0)
(7.4)
1.4
-
-
0.5
(12.5)
20.7
22.4
2021
44.2
12.4
1.2
(0.6)
10.5
Total
-
504.7
504.7
7.7
(0.7)
(234.9)
(0.4)
276.4
42.1
(6.6)
(19.8)
292.1
-
(16.6)
(16.6)
(55.0)
0.6
2.1
8.5
1.3
(59.1)
(44.2)
6.6
(3.6)
4.4
4.3
(91.6)
217.3
200.5
2020
46.4
15.8
1.2
(1.3)
13.4
96
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Lease liabilities
$ million
Current lease liabilities
Non-current lease liabilities
The following table sets out the undiscounted maturity analysis of future lease payments.
$ million
Within one year
Between one and five years
More than five years
Less sub-lease rental income
Accounting policies
2021
48.0
204.8
252.8
2021
56.9
190.1
49.4
296.3
(8.2)
288.2
2020
50.8
228.6
279.4
2020
62.4
180.5
92.3
335.2
-
335.2
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 the 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 2021
97
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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.
98
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 2019
Impact of change in accounting policy (note 7.8.1)
Restated balance at 1 July 2019
Additions for the period
Disposals during the period
Disposal of business and controlled entities
Effect of movements in foreign exchange rates
At 30 June 2020
Additions for the period
Disposals during the period
Other transfers
Effect of movements in foreign exchange rates
At 30 June 2021
Accumulated amortisation and impairment
At 1 July 2019
Impact of change in accounting policy (note 7.8.1)
Restated balance at 1 July 2019
Amortisation charge
Disposals during the period
Disposal of business and controlled entities
Impairment loss(1)
Effect of movements in foreign exchange rates
At 30 June 2020
Amortisation charge
Disposals during the period
Impairment loss
Effect of movements in foreign exchange rates
At 30 June 2021
Net book value
At 30 June 2020
At 30 June 2021
Other intangible assets
Computer
software
Other
Goodwill
Total
211.8
(0.8)
211.0
4.6
(1.1)
(69.6)
0.8
145.7
6.0
(30.2)
13.8
(7.1)
128.2
(146.3)
-
(146.3)
(9.3)
1.1
63.9
(9.7)
1.0
(99.3)
(7.3)
28.7
(3.0)
3.6
(77.3)
46.4
50.9
29.4
-
29.4
-
-
(1.0)
0.6
29.0
-
(0.3)
-
(2.1)
26.6
(13.1)
-
(13.1)
(2.6)
-
0.4
(7.3)
0.2
(22.4)
(0.6)
0.1
-
1.9
(21.0)
541.1
-
541.1
-
-
(80.3)
7.4
468.2
-
-
-
(33.2)
435.0
(8.2)
-
(8.2)
-
-
7.9
(89.4)
2.5
(87.2)
-
-
-
6.9
782.3
(0.8)
781.5
4.6
(1.1)
(150.9)
8.8
642.9
6.0
(30.5)
13.8
(42.4)
589.8
(167.6)
-
(167.6)
(11.9)
1.1
72.2
(106.4)
3.7
(208.9)
(7.9)
28.8
(3.0)
12.4
(80.3)
(178.6)
6.6
5.6
381.0
354.7
434.0
411.2
(1)
The impairment loss recognised in the comparative period includes $96.7 million recoverable amount impairments, and $9.7 million write-off of Group assets relating
to the Fibre business refer note 1.2.
ORORA LIMITED ANNUAL REPORT 2021
99
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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. Costs incurred in the customisation and configuration in the
implementation of a Software-as-a-Service arrangements are only capitalised when a unique customised software product controlled by the
Group is identified.
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 note 3.8 for further details on impairment.
Computer software and licences are amortised over a period of between three to 10 years whilst customer relationships are amortised over a
period of up to 20 years. The amortisation period and method is reviewed each financial year.
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.
Impairment of non-financial assets
3.8.
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.
100
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 CGUs operate.
Reversal of impairment
Where there is an indication that previously recognised impairment losses may no longer exist or may have decreased, the asset is tested 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:
2021
Goodwill allocation ($ million)
Pre-tax discount rate (%)
Terminal growth rate (%)
2020
Goodwill allocation ($ million)
Pre-tax discount rate (%)
Terminal growth rate (%)
Australasia
Orora Packaging
Solutions
Orora Visual
32.7
8.8
2.0
32.7
9.1
1.5
260.4
9.2
2.0
281.4
9.0
1.5
61.6
9.1
2.0
66.9
9.0
1.5
Whilst the outlook for the Group remains subject to the future potential impacts of the ongoing COVID pandemic, based on current economic
conditions and performance of the CGUs, no reasonable possible change in any of the key assumptions would be expected to result in a
material impairment to the Group using the value-in-use methodology.
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.
ORORA LIMITED ANNUAL REPORT 2021
101
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 3: Assets and liabilities (continued)
3.9. Provisions
$ million
2021
Opening balance
Provisions made during the period(1)
Payments made during the period
Released during the period
Additions through business acquisitions
Effect of movement in foreign exchange rate
Closing balance
Current
Non-current
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
Workers'
compensation,
insurance and
other claims
Asset restoration,
restructuring and
decommissioning
Employee
entitlements
26.9
15.1
(12.7)
(3.1)
0.1
(0.5)
25.8
23.7
2.1
90.5
34.9
(35.6)
(1.2)
(61.8)
-
0.1
26.9
24.9
2.0
6.9
10.0
(0.2)
-
-
(0.2)
16.5
14.2
2.3
6.2
3.3
(2.1)
(0.5)
-
-
-
6.9
6.9
-
83.0
48.6
(51.6)
(0.4)
-
(1.2)
78.4
50.4
28.0
106.3
28.0
(38.3)
(12.2)
(1.2)
0.2
0.2
83.0
64.0
19.0
Total
116.8
73.7
(64.5)
(3.5)
0.1
(1.9)
120.7
88.3
32.4
203.0
66.2
(76.0)
(13.9)
(63.0)
0.2
0.3
116.8
95.8
21.0
(1)
In respect of the asset restoration, restructuring and decommissioning provision during the period, following ongoing project review and reassessment of remediation
requirements, additional costs associated with the decommissioning of the former Petrie mill site of $38.6 million were recognised in respect of estimated costs to
complete. In addition, further costs and obligations associated with the sale of the Australasia Fibre business totalling $9.8 million were also recognised. (2020: a
significant item expense of $7.6 million was recognised in respect of restructuring charges in North America, of which the majority ($7.2 million) was
a result of the decision to close the Orora Visual Los Angeles site. Also included within the significant item profit on sale of the Australasian Fibre business were
provisions of $19.9 million regarding remaining transaction charges, transition costs and indemnities).
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.
102
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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.
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.
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.
ORORA LIMITED ANNUAL REPORT 2021
103
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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:
4BEmployee 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)
5BWorkers’ compensation
The self-insured workers’ compensation provision is based on a number of management estimates including, but not limited to:
•
•
• historical weighted average size of claims
•
future inflation
claim administration expenses
claim development
6BAsset 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.
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 as at 30 June 2021 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.
All the uncertainties discussed above may result in future actual expenditure differing from the amounts currently provided for in the
balance sheet.
7BRestructuring
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 recognition 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 accounting estimates. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
104
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 in deferred tax assets
Increase in deferred tax liabilities
Deferred income tax (benefit)/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% (2020: 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)
2021
177.7
(53.3)
(0.8)
(54.1)
3.0
3.1
(48.0)
(1)
Total income tax expense in the current period includes an income tax benefit of $11.6 million (2020: $37.1 million) in respect of significant items recognised during
the period, refer note 1.2.
ORORA LIMITED ANNUAL REPORT 2021
105
2021
2020
(50.8)
3.0
(47.8)
(0.2)
(48.0)
10.2
(10.4)
(0.2)
(32.5)
1.7
(30.8)
21.8
(9.0)
32.1
(10.3)
21.8
2020
35.6
(10.7)
2.0
(8.7)
1.7
(2.0)
(9.0)
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
Tax set-off
Deferred tax asset
Deferred tax liabilities
Property, plant and equipment
Intangible assets
Financial instruments at fair value
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 benefit/(expense)
Accounting policies
2021
2020
15.6
0.5
16.7
32.6
25.2
-
90.6
(64.4)
26.2
60.1
8.5
0.4
2.2
71.2
(64.4)
6.8
2021
5.4
0.7
(0.1)
4.2
(2.4)
(6.4)
(0.4)
0.7
(1.5)
0.2
16.9
0.4
14.7
27.3
22.9
2.7
84.9
(71.0)
13.9
57.4
4.6
-
9.0
71.0
(71.0)
-
2020
(3.9)
1.7
0.1
(19.7)
(4.2)
(1.4)
8.5
0.1
(3.0)
(21.8)
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.
106
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 2021
107
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 (derivative
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
• Foreign
exchange risk
• Commodity
price risk
• Employee
share plan
risk
Credit risk
The Group is exposed to interest rate risk in
respect of short and long-term borrowings where
interest is charged at variable rates.
The Group is exposed to foreign exchange risk
because of its international operations. These risks
relate to future commercial transactions (mainly
relating to export sales, the purchase of inventory
and capital expenditure), financial assets and
liabilities not denominated in A$ and net
investments in foreign operations.
The Group is exposed to changes in commodity
prices in respect of the purchase of aluminium raw
materials and the price of electricity.
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.
108
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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; and
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 2021, approximately 64.3% of the Group’s debt is fixed rate. In the
comparative period approximately 88.0% of the Group’s debt was fixed rate. The movement in fixed rate debt was a result of the sale of the
Australasian Fibre business which extinguished almost all bank debt, while the fixed US Private Placement notes remained outstanding.
Exposure
The Group had the following variable rate borrowings, there were no interest rate swap contracts outstanding at 30 June:
2021
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2020
Bank loans
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
Weighted average
interest rate
Balance
$million
1.4%
-
1.6%
-
180.0
-
180.0
48.0
-
48.0
ORORA LIMITED ANNUAL REPORT 2021
109
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 2021 (2020: nil) in respect of hedging interest rate risk.
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 (2020: nil).
Sensitivity
At 30 June 2021, if Australian and US interest rates had increased by 1.0% (100 bps), post-tax profit for the year would have been $1.3 million
lower (2020: $0.3 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 $1.3 million higher (2020: $0.3 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 (2020: nil)
and no amounts were recognised in the income statement in respect of hedge ineffectiveness on interest rate swaps (2020: nil). In addition,
during the period there were no amounts relating to cash flow hedges on interest rate swaps that were transferred from equity to operating
profit (2020: 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:
$ million
2021
Trade receivables
Trade payables
Foreign currency forwards
Cash flow hedges
Buy foreign currency
Sell foreign currency
Held for trading
Buy foreign currency
$ million
2020
Trade receivables
Trade payables
Foreign currency forwards
Cash flow hedges
Buy foreign currency
Sell foreign currency
Held for trading
Buy foreign currency
USD
NZD
EUR
10.1
(5.3)
140.2
-
4.1
0.6
(0.2)
-
2.8
0.4
-
(1.5)
-
3.9
0.3
USD
NZD
CAD
25.4
(11.0)
88.2
-
1.6
0.2
(0.4)
-
0.3
0.1
12.2
-
-
-
-
110
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
$0.4 million higher (2020: post-tax profit $1.2 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
material impact upon post-tax profit (2020: no impact upon post-tax profit)
Further details regarding foreign currency translation and transaction risk are 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
2021
USD
663.0
(300.8)
NZD
63.8
17.0
45.4%
(26.6%)
2020
USD
NZD
791.8
(269.3)
34.0%
119.5
(23.3)
19.5%
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, the purchase of inventory and capital expenditure), 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:
2021
Cash flow hedges
AUD/USD
AUD/EUR
AUD/GBP
NZD/USD
NZD/AUD
Total derivatives in an asset/(liability) position
2020
Cash flow hedges
AUD/USD
NZD/USD
NZD/AUD
Total derivatives in an asset/(liability) position
Notional
Item
Weighted
Average
$ million
Asset
Liability
USD118.5
EUR4.2
GBP4.4
USD27.2
NZD3.2
0.7619
0.6339
0.5448
0.7055
0.9293
USD69.3
USD20.5
AUD0.4
0.6600
0.6279
0.9555
3.0
0.1
-
0.8
-
3.9
0.5
0.2
-
0.7
(0.6)
-
-
(0.4)
-
(1.0)
(5.1)
(1.0)
-
(6.1)
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
$20.2 million higher (2020: $6.5 million higher).
if the Australian dollar had weakened by 10% against the NZ dollar with all other variables held constant, equity would have been
$0.8 million lower (2020: no impact upon equity).
ORORA LIMITED ANNUAL REPORT 2021
111
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
Within general and administrative expense in the income statement the Group recognised a net foreign exchange loss of $0.3 million (2020:
$1.2 million gain) and, in respect of foreign currency derivatives designated at fair value through profit or loss, a gain of $0.2 million (2020
$0.2 million loss).
In addition, a gain of $2.9 million (2020: $5.0 million loss) relating to cash flow hedges and a $35.4 million loss (2020: $25.2 million loss) on the
translation of foreign operations was recognised in other comprehensive income. Losses of $5.7 million (2020: $0.9 million gain) relating to
cash flow hedges were transferred from equity to operating profit. In the comparative period a $0.1 million gain was transferred from equity to
non-financial assets.
In the comparative period, 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 2021 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 $0.9 million (2020: $1.5 million net liability).
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 through to 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 2021, the Trust holds 306,567 treasury shares in the Company (2020: 655,046), 80,000 allocated shares in respect of the CEO
Grant (2020: 168,000). In the comparative period the Trust also held 180,600 allocated shares in respect of vested shares held on trust that
contain a post-vesting holding lock. Refer 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.
112
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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. These 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
In addition to a range of short-term uncommitted credit lines, as at 30 June 2021 the Group had access to the following committed
facilities:
• $350.0 million through a revolving multicurrency facility, provided by a syndicate of domestic and international financial institutions
maturing in November 2024.
• USD243.0 million via a US Private Placement of notes of which USD100.0 million matures in July 2023 and USD143.0 million matures
in July 2025.
• USD150.0 million through a USD revolving facility, provided by a syndicate of domestic and international financial institutions,
maturing in April 2024.
• $35.0 million through a bilateral agreement which matures in January 2022.
These facilities are unsecured.
The committed and uncommitted standby arrangements and unused facilities of the Group are set out below:
$ million
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
Committed
2021
Uncommitted
Total
Committed
2020
Uncommitted
Total
-
324.1
585.1
909.2
-
324.1
180.0
504.1
-
-
405.1
405.1
6.3
-
127.7
134.0
-
-
-
-
6.3
-
127.7
134.0
6.3
324.1
712.8
-
352.2
662.3
1,043.2
1,014.5
-
324.1
180.0
504.1
6.3
-
532.8
539.1
-
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
1,093.8
-
352.2
48.0
400.2
6.3
-
687.3
693.6
ORORA LIMITED ANNUAL REPORT 2021
113
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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:
1-2 years
2-5 years
More than
5 years
Total
contractual
cash flows
Carrying amount
(assets)/ liabilities
$ million
2021
Non-derivative financial instruments
Trade and other payables
Lease liabilities
Borrowings
Total non-derivatives
1 year
or less
650.8
66.6
14.8
732.2
0.3
61.7
14.5
76.5
1.5
142.2
522.2
665.9
Derivatives
Net settled (interest rate swaps and commodity contracts)
Gross settled forward exchange contracts
Inflow
Outflow
Total gross settled forward exchange contracts
Total derivatives
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
(0.8)
(0.1)
195.4
(192.7)
2.7
1.9
663.5
62.7
14.2
740.4
(0.7)
130.2
(135.5)
(5.3)
(6.0)
16.0
(15.8)
0.2
0.1
-
53.4
61.6
115.0
(0.6)
6.8
(7.0)
(0.2)
(0.8)
-
-
-
-
-
-
128.0
171.8
299.8
(0.2)
0.2
(0.2)
-
(0.2)
-
52.6
0.3
52.9
-
-
-
-
-
-
93.3
207.5
300.8
-
-
-
-
-
652.6
323.1
551.8
1,527.5
(0.9)
211.4
(208.5)
2.9
2.0
663.5
337.4
455.1
1,456.0
(1.5)
137.2
(142.7)
(5.5)
(7.0)
652.6
252.8
503.5
1,408.9
(0.9)
2.9
2.0
663.5
279.4
399.4
1,342.3
(1.5)
(5.5)
(7.0)
114
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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, interest rate and commodity price
risk:
•
•
Forward exchange contracts and options are derivative instruments used to hedge transaction risk. 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 Dollars, Euros, British Pounds and NZ Dollars to hedge highly probable forecast sale and purchase transactions
(cash flow hedges).
Interest rate swaps are derivative instruments used to manage interest rate risk. They enable the exchange of a fixed rate of interest
for a floating rate, or vice versa, or one type of floating rate for another. These derivatives are entered into to manage the Group’s
exposure to fixed and floating interest rates arising from borrowings. These hedges may 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.
ORORA LIMITED ANNUAL REPORT 2021
115
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 5: Financial risk management (continued)
5.4 Hedging instruments (continued)
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.
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.
116
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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)
JUDGEMENTS AND ESTIMATES
Level 2 Fair Value Hierarchy
2021
2020
Note
Asset
Liability
Asset
Liability
5.1.1
5.1.2
5.1.3
-
3.9
0.8
4.7
4.2
0.5
-
(1.0)
(1.7)
(2.7)
(2.3)
(0.4)
-
0.6
1.3
1.9
1.0
0.9
-
(6.1)
(2.8)
(8.9)
(7.0)
(1.9)
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 is determined by calculating 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; and
the fair value of electricity and aluminium commodity forward contracts is determined by using the difference between the contract
commodity price and the quoted commodity price at the reporting date.
ORORA LIMITED ANNUAL REPORT 2021
117
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
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
6.2. Business divestment
Country of
incorporation
Ownership interest
2021
2020
Australia
New Zealand
United States
United States
United States
United States
United States
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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 of $1,637.0 million received in the period to 30 June 2020.
In the comparative period, the Group recognised a gain on disposal, before tax, of $164.0 million. This gain is net of transaction costs, exchange
fluctuation reserve reclassified on disposal, write-off of Group assets relating to the Fibre business, allowances for post-close completion
accounts adjustments and provisions for indemnities.
On 29 September 2020, the Group finalised the post-close completion process with regards to the divestment including finalisation of the tax
position of the sale, resulting in the recognition of an incremental net gain on disposal of $11.3 million (after tax $12.8 million). During the
period, this gain has been offset by the recognition of additional costs and obligations associated with the sale totalling $9.8 million (after tax
$6.7 million). Deferred consideration of $32.2 million, relating to the disposal of land is anticipated to be received in the early part of calendar
2022. The deferred consideration is presented as a current other receivable in note 3.1.
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 provision recognised as at 30 June 2021 represents management’s best estimate of the
potential liability under the indemnity, using all currently available information and considering the scope of the indemnity.
The Fibre business is classified as a discontinued operation, accordingly the financial statements have been presented in the following manner:
•
•
the consolidated income statement and consolidate cash flow statement present 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 these
statements;
the consolidated statement of comprehensive income and the consolidated statement of changes in equity have been presented on a total
Group basis.
Financial information relating to the discontinued operation is set out below.
118
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Results of discontinued operation
The table below reflects the amounts that have been recognised in the current period in respect of the completion of the sale of the Fibre
business. The comparative period reflects the results of the Fibre operations and the gain on sale recognised upon disposal of the business.
$ 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
2021
2020
-
-
-
-
-
1.5
4.6
6.1
6.1
0.6c
0.6c
1,092.9
(1,035.3)
57.6
(17.0)
40.6
164.0
7.7
212.3
220.0
22.0c
21.9c
(1)
(2)
The net gain on disposal in the comparative period, 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.
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 flows used in operating activities
Net cash flows from investing activities (1)
Net cash flows from financing activities
Net cash inflow for the period
2021
2020
-
20.7
-
20.7
(121.9)
1,589.7
77.5
1,545.3
(1)
During the period net cash flows of $20.7 million were received in relation to the finalisation of the post-close completion process. In the comparative period 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
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 2021
119
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 6: Group structure (continued)
6.3. Orora Employee Share Trust
The Group holds shares in itself as a result of shares purchased by the Orora Employee Share Trust (the Trust). The Trust was established to
manage and administer the Company’s responsibilities under the Group’s Employee Share Plans (refer note 7.1) through the acquiring, holding
and transferring of shares, or rights to shares, in the Company to participating employees. In respect of these transactions, at any point in time
the Trust may hold ‘allocated’ and ‘unallocated’ shares.
As at 30 June 2021, the Trust held 306,567 treasury shares in the Company (2020: 655,046) and 80,000 allocated shares in respect of the CEO
Grant (2020: 168,000). In the comparative period, the Trust also held 180,600 shares held on trust in respect of vested grants that contain a
post-vesting holding lock.
Allocated shares
Allocated shares represent those shares that have been purchased and awarded to employees under the CEO Grant (refer note 7.1). In the
comparative period the allocated shares also included those shares 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.
120
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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 $0.9 million (2020: $4.6 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.
2021
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
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
168,000
-
(88,000)
-
80,000
-
264,040
210,000
(306,040)
-
168,000
-
3.23
-
3.23
-
3.22
-
2.96
3.23
2.99
-
3.23
-
9,438,208
-
(470,061)
(4,332,330)
4,635,817
487,128
14,431,770
-
(3,937,062)
(1,056,500)
9,438,208
696,628
0.54
-
0.44
0.54
0.55
0.43
0.50
-
0.42
0.47
0.54
0.44
4,890,338
2,199,647
(5,000)
(2,291,813)
4,793,172
-
5,773,391
1,839,400
(1,882,916)
(839,537)
4,890,338
-
2.14
1.68
1.69
1.99
2.00
-
2.06
2.06
1.85
2.14
2.14
-
581,689
441,007
(376,970)
(35,019)
610,707
-
1,318,936
293,893
(977,671)
(53,469)
581,689
-
$(2)
2.94
2.14
3.03
2.94
2.31
-
3.05
2.65
2.99
3.06
2.94
-
(1)
(2)
The equity outcomes for the 2021 financial year short-term incentive will be determined and allocated in September 2021 and are therefore not included in the
above table.
The above weighted average fair value is determined in accordance with AASB 2 Share-based Payment in respect of recognising the share-based payment expense
of the award granted.
ORORA LIMITED ANNUAL REPORT 2021
121
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 7: Other notes to the financial statements (continued)
7.1 Share-based compensation (continued)
The exercise price of the CEO Grant, Performance Rights and Performance Shares and Deferred Equity Awards are nil. The exercise price of
Share Options outstanding at the end of the year are set out below:
Grant date
Vesting Date
Expiry date
Exercise price
19 Feb 2014
30 Oct 2015
20 Oct 2016
20 Oct 2017
22 Oct 2018
30 Sept 2016
30 Sept 2019
29 Aug 2020
30 Aug 2021
31 Aug 2022
30 Sept 2021
30 Sept 2024
29 Aug 2025
30 Aug 2026
31 Aug 2027
1.22
2.08
2.69
2.86
3.58
Share options outstanding at end of period
Weighted average contractual life of options oustanding at end of period
Number
2021
-
226,567
-
3,183,125
1,226,125
2020
179,561
307,567
4,024,580
3,509,000
1,417,500
4,635,817
9,438,208
5.3 years
5.8 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 earnings growth targets). Non-market vesting conditions are included in the assumptions about the number of options that
are expected to be exercisable.
The fair value of each option granted is measured on the date of grant using the Black Scholes option pricing model that takes into account the
exercise price, the vesting and performance criteria, and where applicable the market condition criteria, term of the option, impact of dilution,
the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option.
The fair value of rights is measured at grant date using a Monte-Carlo valuation model which simulates the date of vesting, the percentage
vesting, the share price and total shareholder return. Once the simulated date of vesting is determined a Black-Scholes methodology is utilised
to determine the fair value of the rights granted.
The following weighted average assumptions were used in determining the fair value of options and rights granted during the period:
Expected dividend yield (%)
Expected price volatility of the Company's shares (%)
Share price at grant date ($)
Risk-free interest rate - rights (%)
Expected life of rights (years)
No options were granted during the current period (2020: nil).
2021
2020
4.30
29.19
2.56
0.13
3.67
4.10
23.00
2.98
0.62
3.31
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.
122
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
A description of the equity plans in place during the year ended 30 June 2021 is described below:
Retention/Share Payment
plan
CEO Grant
Share Options
Long-term incentives
Short-term incentive
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.
ORORA LIMITED ANNUAL REPORT 2021
123
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 7: Other notes to the financial statements (continued)
7.2. Auditors’ remuneration
$ thousand
Auditors of the Company PwC Australia
Audit and other assurance services
Audit and review of financial reports
Other assurance services
Other services
Taxation services and 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
Other advisory services(2)
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 (refer note 6.2).
2021
2020
848.2
-
1,027.0
30.5
154.8
178.0
232.5
796.8
1,181.0
2,086.8
15.0
5.0
46.3
-
61.3
61.0
25.0
91.0
1,242.3
2,177.8
124
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
7.3. Commitments and contingent liabilities
Capital expenditure commitments
At 30 June 2021, the Group has capital commitments contracted but not provided for in respect of the acquisition of property, plant and
equipment of $20.7 million (2020: $8.5 million).
Other expenditure commitments
At 30 June 2021, the Group had other expenditure commitments of $37.1 million (2020: $38.8 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.
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.
ORORA LIMITED ANNUAL REPORT 2021
125
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 7: Other notes to the financial statements (continued)
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
2021
209.9
(24.9)
185.0
6.1
191.1
190.5
6.1
196.6
474.2
(28.9)
445.3
8.8
454.1
440.6
9.3
449.9
On 30 April 2020, the Group completed the sale of its Australasian Fibre business. On 29 September 2020, the Group finalised the post-close
completion accounts process, refer note 6.2. Accordingly, the financial results of this business are presented separately as a discontinued
operation in both the current and comparative period.
126
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
2021
338.4
1,190.9
1,529.3
524.1
225.2
749.3
237.0
1,245.1
1,482.1
472.7
57.8
530.5
780.0
951.6
80.8
333.6
8.7
1.8
688.7
780.0
11.1
(3.7)
610.6
951.6
(1)
In the comparative period the opening position for retained profits was reduced by $25.5 million as a result impact of the adoption of AASB 16 Leases and a reduction
of $0.8 million in respect of the change in accounting policy in response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision
regarding upfront configuration and customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements. 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
2021 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
Chapview Pty Ltd
Pak Pacific Corporation Pty Ltd
AGAL Holdings Pty Ltd
PP New Pty Ltd(1)
AP Chase Pty Ltd(1)
Fibre Containers (Queensland) Pty Ltd
Rota Die Pty Ltd
Speciality Packaging Group Pty Ltd(1)
Orora Closure Systems Pty Ltd
Envirocrates Pty Ltd
Rota Die International Pty Ltd(1)
ACN 002693843 Box Pty Ltd
ACN 089523919 CCC Pty Ltd
Lynyork Pty Ltd
(1)
These subsidiaries were disposed of on 30 April 2020 as part of the Australasian Fibre business divestment, refer note 6.2. The financial results of these businesses are
included within the comparative period and are presented as a discontinued operation within this note.
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.
ORORA LIMITED ANNUAL REPORT 2021
127
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 7: Other notes to the financial statements (continued)
7.5 Deed of Cross Guarantee (continued)
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
Profit/(loss) 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 gains/(losses) on cash flow hedges, net of tax
Realised losses/(gains) transferred to profit or loss, net of tax
Realised gains transferred to non-financial assets, net of tax
Other comprehensive income/(expense), net of tax
Total comprehensive income for the financial period
Total comprehensive income/(expense) 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 note 7.8)(2)
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
2021
2020
727.2
229.8
(9.8)
220.0
(20.9)
199.1
683.6
337.8
(22.4)
315.4
(35.1)
280.3
6.1
205.2
(8.2)
272.1
2.0
3.7
-
5.7
(3.4)
(0.6)
(0.1)
(4.1)
210.9
268.0
204.8
6.1
210.9
275.6
(7.6)
268.0
679.6
1,042.4
-
(28.3)
679.6
205.2
(113.0)
771.8
1,014.1
272.1
(606.6)
679.6
(1) On 30 April 2020, the Group completed the sale of its Australasian Fibre business. On 29 September 2020, the Group finalised the post-close completion accounts
process, refer note 6.2. Accordingly, the financial results of this business are presented separately as a discontinued operation in both the current and comparative
period.
(2)
In the comparative period the opening position for retained profits was reduced by $27.5 million as a result impact of the adoption of AASB 16 Leases and a reduction
of $0.8 million in respect of the change in accounting policy in response to the International Financial Reporting Interpretation Committee (IFRIC) agenda decision
regarding upfront configuration and customisation costs incurred in implementing Systems-as-a-Service (SaaS) arrangements. Refer note 7.8 for more information.
128
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
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
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
Equity
Contributed equity
Treasury shares
Reserves
Retained earnings
TOTAL EQUITY
2021
2020
0
10.6
139.6
176.6
4.2
12.7
-
343.7
567.7
456.6
13.1
11.6
22.4
0.5
11.1
1,083.0
19.4
45.0
174.3
1.0
11.8
32.4
283.9
567.7
469.9
20.3
13.6
18.6
0.9
46.1
1,137.1
1,426.7
1,421.0
223.8
0.1
4.4
2.3
4.2
61.6
296.4
1.5
180.0
17.3
0.4
28.3
227.5
523.9
212.4
4.2
5.6
7.0
-
71.2
300.4
-
19.0
20.2
1.9
19.4
60.5
360.9
902.8
1,060.1
127.4
(46.6)
50.2
771.8
902.8
335.2
(1.6)
46.9
679.6
1,060.1
ORORA LIMITED ANNUAL REPORT 2021
129
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
Section 7: Other notes to the financial statements (continued)
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;
•
•
• provision of transactional banking facilities on behalf of subsidiaries; and
• provision of payroll, superannuation, share-based remuneration and managerial assistance.
interest expense paid by Orora Limited for money borrowed;
transfer of tax related balances for tax consolidation purposes;
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(1)
2021
2020
4,373
41
141
337
(86)
4,806
4,613
127
170
520
1,340
6,770
(1)
The current period value of share-based payment expense includes negative amounts relating to options and rights that did not vest during the period as non-market
conditions were not met and for rights that were forfeited upon retirement.
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 (2020: nil).
At 30 June 2021, no individual KMP or related party holds a loan with the Group (2020: nil).
130
ORORA LIMITED ANNUAL REPORT 2021
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
7.8. New and amended accounting standards and interpretations
7.8.1. Adopted from 1 July 2020
All new and amended Australian Accounting Standards and Interpretations mandatory as at 1 July 2020 to the Group have been adopted,
including implementation of IFRIC Agenda decisions.
Implementation of IFRIC Agenda Decision – Configuration or Customisation Costs in a Cloud Computing Arrangement
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the
contract period. During the year, the Group revised its accounting in relation to upfront configuration and customisation costs incurred in
implementing Service-as-a Service (SaaS) arrangements in response to the IFRIC agenda decision clarifying its interpretation of how current
accounting standards apply to these types of arrangements. The new accounting policy is presented below and historical financial information
has been restated to account for the impact of the change.
Capitalisation of configuration and customisation costs in SaaS arrangements
Customisation and configuration activities undertaken in implementing a SaaS arrangement may entail the development of software code that
enhances, modifies, or creates additional capability to existing software to enable it to connect with the cloud-based software applications—
referred to as bridging modules or Application Programming Interfaces (API’s). Judgement is required when determining whether the cost
incurred to create the additional code meet the definition and recognition requirements of an intangible asset. Where an intangible asset is
identified the costs are capitalised and amortised over the useful life of the asset on a straight-line basis, otherwise the costs are expensed. The
useful lives of these assets are reviewed at least at the end of each financial year.
Configuration and customisation services distinct from SaaS service
Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider’s application software, are recognised
as operating expenses when the services are received. In a contract where the cloud provider provides both the SaaS configuration and
customisation, and access to the SaaS over the contract term, judgement is applied to determine whether these services are distinct from each
other or not. Where the services are distinct from each other the configuration and customisation costs incurred are expensed as the software
is configured and customised – i.e. recognised as operating expenses when the service is received, where the costs are not distinct they are
recognised over the term of the SaaS contract – i.e. capitalised and amortised over the life of the SaaS contract term.
Financial statement restatement for the impact of the change in accounting policy
The change in accounting policy has been applied retrospectively and comparative information has been restated. This had the following
impact on the amounts recognised in the financial statements.
$ million
Statement of financial position (extract)
Goodwill and intangible assets
Net deferred tax liability
Current tax payable
Retained earnings
Statement of comprehensive income (extract)
General and administrative expenses
Profit after tax
Cash flow statement (extract)
Profit for the financial period from continuing operations
Amortisation of intangible assets
Cash flow from operating activities
Payments for property, plant and equipment and intangible assets
Cash flows from investing activities
30 June 2021
Increase/(decrease)
1 July 2019
30 June 2020
(0.7)
-
-
(0.7)
0.7
(0.7)
(0.7)
-
(0.7)
0.7
0.7
(1.0)
(0.2)
0.2
(1.0)
1.0
(1.0)
(1.0)
(0.2)
(1.2)
1.2
1.2
(0.8)
-
-
(0.8)
0.8
(0.8)
(0.8)
-
(0.8)
0.8
0.8
Basic and diluted earnings per share for the comparative period have also been restated. The amount of the adjustment for both basic and
diluted per share was a decrease of $0.1 cents.
ORORA LIMITED ANNUAL REPORT 2021
131
Notes to the
financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021
7.8 New and amended accounting standards and interpretations (continued)
7.8.2. Adopted from 1 July 2019
AASB 16 Leases
AASB 16 replaced 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 introduced 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 note 3.6 for the Group’s accounting policies on lease accounting.
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.
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.
Impact on the adoption of AASB 16
The Group 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 was no restatement of comparative information.
In applying AASB 16 for the first time, the Group 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 from 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
1 July 2019
Right-of use asset
Property
Plant and Equipment
Deferred tax asset
Total assets
Onerous lease provision
Other payables
Lease liabilities
Total liabilities
Retained earnings
453.4
34.7
29.6
517.7
0.8
7.0
(595.3)
(587.5)
69.8
7.8.3. Issued but not yet effective
There are a number of new and amending accounting standard issued by the AASB that are effective for annual reporting periods beginning
after 1 January 2021, 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 Groups’ consolidated
financial statements:
• AASB 2020-1 and AASB 2020-6 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 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2
• AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Account Estimates
• AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021
• AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
132
ORORA LIMITED ANNUAL REPORT 2021
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.
ii.
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the Orora Group’s financial position as at 30 June 2021 and its performance for the year
ended on that date; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. Within the notes to the financial statements it is confirmed that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
3. At the date of this declaration, there are reasonable grounds to believe that the Company and the consolidated entities identified in note
7.5 will be able to meet any obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross Guarantee
between the Company and those consolidated entities pursuant to ASIC 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 2021.
Signed in accordance with a resolution of the Directors.
A R SINDEL
CHAIR
19 August 2021
ORORA LIMITED ANNUAL REPORT 2021
133
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)
(b)
giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended
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 2021
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 significant accounting policies and other explanatory information
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 & 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.
Pricewaterhouse Coopers
2 Riverside Quay, SOUTHBANK VIC 3006, GOP Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
ABN 52 780 433 757
Liability limited by a scheme approved under Professional Standards Legislation.
134
ORORA LIMITED ANNUAL REPORT 2021
Independent auditor’s report
to the members of Orora Limited
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.
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 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
Audit scope
•
For the purpose of our audit we used overall Group materiality of
$12.4 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 2021
135
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
Impairment of non-current assets including property, plant and
equipment, intangible assets 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 2021, Orora had property, plant and equipment assets of
$627.5 million and goodwill and intangible assets of $411.2 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 or 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 estimated growth rates which are determined
with regard to the long term performance of each CGU in their
respective markets (“long term growth rates”)
• discount rates used to discount the estimated cash flows.
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 FY22 budget and FY23 – FY25 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 CGUs 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 considered the Group’s sensitivity calculations over
a selection of the forecast cash flows.
We also considered the reasonableness of disclosures in light of the
requirements of Australian Accounting Standards.
Decommissioning Costs
(Refer to note 1.2 Significant Items)
Orora recognised a significant item expense of $38.6 million ($27.0
million after tax) during the year for decommissioning costs.
These relate to additional costs associated with the decommissioning
of the former Petrie Mill site in Queensland. Recent significant
developments associated with the unprecedented rainfall levels in
Queensland and unforeseen complexities related to the remediation
of the remaining most technical complex areas of the site, have
resulted in delays and increased estimated costs to complete.
We considered this to be a key audit matter because of the financial
significance of the expense and the judgement and complexity
required by the Group in calculating the costs to complete.
We obtained Orora’s calculation of the estimated costs to complete
the Petrie site decommissioning work and performed the following
audit procedures, amongst others, for the year ended 30 June 2021:
• we tested the mathematical accuracy of the calculations;
• we considered the progression of decommissioning activities
completed, through discussions with senior management and
inspection of land packages agreed between the Group and the
customer, where applicable;
• we made inquiries of the specialist environmental consulting firm
engaged by the Group;
• we compared, on a sample basis, costs incurred during the year
to budgets;
• we compared a selection of cost estimates, where possible, to
third party quotes; and
• we considered the appropriateness of Group’s significant
assumptions and tested, on a sample basis, the data used in the
Group’s calculations by reference to supporting documentation,
including invoices and third party quotes.
We also considered the reasonableness of disclosures in light of the
requirements of Australian Accounting Standards.
136
ORORA LIMITED ANNUAL REPORT 2021
Independent auditor’s report
to the members of Orora Limited
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 2021, 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 2021
137
Independent auditor’s report
to the members of Orora Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Our opinion on the remuneration report
We have audited the remuneration report included in pages 47 to 63 of the directors’ report for the year ended 30 June 2021.
In our opinion, the remuneration report of Orora Limited for the year ended 30 June 2021 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
PricewaterhouseCoopers
Melbourne
19 August 2021
138
ORORA LIMITED ANNUAL REPORT 2021
Statement
of shareholdings
Statement pursuant to Australian Securities Exchange official list requirements.
TOP 20 SHAREHOLDERS AS AT 27 JULY 2021
Rank
Name
Shares held % of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
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
NETWEALTH INVESTMENTS LIMITED
CITICORP NOMINEES PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
NAVIGATOR AUSTRALIA LTD
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
BKI INVESTMENT COMPANY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
INVIA CUSTODIAN PTY LIMITED
BUTTONWOOD NOMINEES PTY LTD
THE MANLY HOTELS PTY LTD
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD BARCLAYS
SUBSTANTIAL SHAREHOLDERS AS AT 27 JULY 2021
Holder
Yarra Management Nominees Pty Ltd
Greencape Capital Pty Ltd
Challenger Limited
The Vanguard Group, Inc.
335,409,387
124,278,517
103,617,231
43,986,259
22,184,054
11,091,025
8,366,612
4,667,336
3,879,287
3,562,454
2,584,706
2,475,323
1,600,000
1,599,326
1,487,964
1,410,176
1,259,940
1,258,507
1,187,076
1,140,633
38.29
14.19
11.83
5.02
2.53
1.27
0.96
0.53
0.44
0.41
0.30
0.28
0.18
0.18
0.17
0.16
0.14
0.14
0.14
0.13
677,045,813
77.29
Last Notice of
Substantial
Shareholding
24 June 2021
2 December 2020
30 November 2020
No. of Shares
49,513,780
67,295,855
66,595,055
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 2021
139
Statement
of shareholdings
DISTRIBUTION OF SHAREHOLDINGS
Fully paid ordinary shares as at 27 July 2021
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
124
3,765
5,452
19,531
15,350
44,222
1,757
703,503,185
78,506,393
38,549,558
47,880,102
7,586,545
876,025,783
86,915
80.31
8.96
4.40
5.47
0.87
100.00
0.01
Votes of shareholders are governed by Rules 17 and 18 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 27 JULY 2021
Unquoted equity securities
No. of employees participating
No. of securities
Options over ordinary shares – exercise price $2.08
Options over ordinary shares – exercise price $2.86
Options over ordinary shares – exercise price $3.58
Rights
1
6
6
44
226,567
3,183,125
1,226,125
5,372,462
140
ORORA LIMITED ANNUAL REPORT 2021
Five year historical
financial information
Results shown for all operations before significant items except where indicated(1)
$ million (except where indicated)
For the years ended 30 June
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 ($)
Net PBITDA interest cover pre significant items (times)
Gearing (net debt/net debt and shareholders’ equity) (%)
Return on average funds employed (%)(7)
Financial Statistics
Income from dividends and interest
Depreciation and amortisation provided during the year
Net finance costs
Cash flow from operations
Capital expenditure and acquisition
Balance Sheet Data as at 30 June
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
Retained profits
Total shareholders’ equity
Other data as at 30 June:
Fully paid shares (000’s)
Orora share price
– year’s high ($)
– year’s low ($)
– close ($)
Market capitalisation
Employee numbers
Number of shareholders
2021
2020
2019
2018
2017
3,538.0
4,659.1
4,761.5
4,248.0
4,039.1
249.1
216.3
156.7
135.8
16.9
14.6
113.0
14.0
288.2
230.4
167.3
238.9
17.4
24.8
606.6(2)
49.3(2)
-
30%/50%(3)
9.7
4.8
0.37(5)
11.2
37%
19.9%
0.2
120.2
32.8
270.6
59.0
980.8
1,343.8
2,324.6
806.3
749.7
1,556.0
768.6
80.8
107.6
580.2
768.6
0.60(6)
7.6
22%
12.0%
0.6
149.2
57.8
17.7
174.3
1,055.4
1,442.8
2,498.2
817.1
650.9
1,468.0
1,030.2
333.6
139.2
557.4
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
1,446.2
2,471.2
3,917.4
1,160.6
1,113.1
2,273.7
1,643.7
484.1
164.7
994.9
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
1,318.1
2,299.0
3,617.1
1,098.7
887.9
1,986.6
1,630.5
479.9
152.1
998.5
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
1,170.1
2,193.1
3,363.2
985.4
831.0
1,816.4
1,546.8
472.3
144.0
930.5
1,030.2
1,643.7
1,630.5
1,546.8
890,240
965,363
1,206,685
1,206,685
1,206,685
3.33
2.23
3.33
2,694.8
3,768
44,653
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
(1) The financial information in the above table is presented on a total operations basis and therefore the period FY17-FY20 includes the financial results of the Australasian
Fibre business that was divested in 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 $0.15 if right-of-use assets were
excluded and right-of-use liabilities were included in the calculation.
(6) 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.
(7) Return on average funds employed is calculated as EBIT divided by average funds employed.
ORORA LIMITED ANNUAL REPORT 2021
141
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 or providing 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 2021.
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.
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.
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.
2. Cheque payable to
international shareholders
(other than New Zealand)
International shareholders (other than
shareholders domiciled in New Zealand)
who do not have an account with an
Australian or United States 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.
142
ORORA LIMITED ANNUAL REPORT 2021
Financial calendar
2021—2022
Financial year 2021 (FY21) ends
Announcement of full-year results for FY21
Ex-dividend date for final dividend FY21
Record date for final dividend FY21
Dividend payment date for FY21 final dividend
Annual General Meeting
Financial half year 2022 ends
Announcement of interim results
for financial year 2022 (FY22)
Ex-dividend date for interim dividend FY22
Record date for interim dividend FY22
Dividend payment date for FY22 interim dividend
Financial year 2022 (FY22) ends
30 June 2021
19 August 2021
6 September 2021
7 September 2021
11 October 2021
21 October 2021
31 December 2021
February 2022
March 2022
March 2022
April 2022
30 June 2022
ORORA LIMITED ANNUAL REPORT 2021
143
Corporate
directory
ORORA LIMITED
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
Chair
Mr A R Sindel
Managing Director and
Chief Executive Officer
Mr B P Lowe
Chief Financial Officer
Mr S C Hughes
Company Secretary
Ms A L Stubbings
AUDITORS
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 1300 554 474
(toll free within Australia)
Facsimile: +61 2 9287 0303
Email: orora@linkmarketservices.com.au
Website:
www.linkmarketservices.com.au
144
ORORA LIMITED ANNUAL REPORT 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 Investor section at
ororagroup.com/investors
ororagroup.com