Orora/ORA

Orora, the glass and can and cardboard packaging company, out with a trading update.

I’d say this confirms what everyone suspected with the Saverglass acquisition; time in the cycle was against them and the update today of “broadly” in-line with pro forma is mgmt for “it is already a disappointment”.

The below additional commentary is essentially throat-clearing for “it’ll come good in time”, even as things get potentially worse in the near term.

The market priced this outcome in pretty much day 1, with the stock trading some 25% lower, relative to the pre-acquisition price more or less immediately. In other words, no-one thought the acquisition was a really great idea, relative to simply buying back shares, or paying down debt. Large, late-cycle acquisitions at a time when cost of debt is high are just not great ideas.

The US business is doing okay, Aussie doing okay, little to get excited about.

ORA is a good quality, reasonably priced company and will be fine over the medium run. The moment the stock went into trading halt, to announce and fund the cap raise, we were pretty much trapped. Since the mark to market was pretty much instantaneous, and thus pricing in a downgrade, we’ve continued to hold the position, and that’s also what we’ll continue to do from here too.

It’s worth much more than $2.50, even as they dented the medium run outlook.

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