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Management Side
Orora CEO calls for energy policy overhaul; announces acquisition

AUSTRALIA (From The Australian) -- Orora Group chief executive Nigel Garrard has called for a new "One Australia" approach to energy policy and for an end to political bickering over the issue as his company looks at spending up to $30 million to secure its energy supply in the troubled South Australian market.

Garrard said three power outages in the space of six months in South Australia had forced the company to look at options to make some of its own baseload electricity, including using heat recovery from furnaces to drive steam generation at its flagship glass plant.

"Whilst there is some capital to be invested and it might be $25-30m, that is a small investment versus the cost of being without power for a sustained period ... We cannot live with uncertainty of supply," he said.

"The technology is there (to generate power). With pricing where it currently is, the returns are better than they would have been three years ago.''

Cost pressures (mainly energy) in Glass and at the Botany Recycled Paper Mill (B9) of approximately $7m were borne by Orora's Australasian group in the first half, as the company reported a strong result with net profit after tax increasing 12.3 percent to $92.1m.

Orora (ORA) declared an interim dividend of 5.0 cents per share, partially franked to 30 percent, which is an increase of 11.1 percent over the prior year.

"We would expect a little more flow through of increased costs in electricity in the second half of the year," Garrard said.

While he said the company's NSW operations were largely covered by fixed-price contracts, he added: "It is concerning when you see the ongoing spike in prices."

''From a broad perspective, I would encourage the federal and state governments to take a one Australia approach and put politics aside and make decisions for the benefits of our country. We are losing our ability to supply energy in an efficient way,'' he said.

Orora also announced agreements to acquire The Garvey Group and Graphic Tech businesses for US$54m as part of growing its North American Point of Purchase (POP) display packaging business.

The company has now established a POP business across 4 geographies in North America, generating $300m in sales which Mr Garrard said would provide a platform for future growth of the business.

Since being spun out of Amcor in December 2013, Orora has made acquisitions in the US and Australia of $380m.

Garrard said that following the election of Donald Trump, Orora remained confident in the US economy saw POP as an attractive segment for investment.

''After the initial uptick following President Trump's election, we are now returning to a more balanced view for the economy,'' Garrard said.

''We remain optimistic about North America.''

He said Trump's proposed tax reforms and infrastructure investment would be good for manufacturing companies and thus good for packaging groups like Orora.

Most of Orora's US clients are domestic companies producing products in North America, so the company is unlikely to be affected by any future tariffs on imports.

Orora said it expected to continue to drive organic growth and to invest in both innovation and growth opportunities during the remainder of 2017, with earnings expected to be higher than 2016, subject to global economic conditions.

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