Orora chief blasts energy policy paralysis, backs NEG
Summary: One of Australia’s large power users has lambasted the nation’s failure to provide cheaper sources of energy and urged politicians to unite and make a deal on the National Energy Guarantee in Sydney today.....
Packaging giant Orora, whose current gas supply contract expires at the end of 2019, said Australia had failed to capitalise on its vast natural resources.
“It’s a sad state of affairs that we’re one of the largest suppliers of energy and liquefied natural gas in the world yet we as a country are not seeing the benefits of that,” Orora chief executive Nigel Garrard said yesterday.
“Isn’t it ironic that we’re the second-largest exporter of LNG in the world and we’re talking about building import terminals.”
He said uncertainty in the supply and pricing of electricity had been difficult to manage.
“Volatility in the electricity market has been quite severe, particularly in the summer months,” Mr Garrard said after announcing Orora’s full-year earnings. “We want availability, but we also need better pricing.”
The Melbourne-based manufacturing company said a decade of energy policy paralysis was to the detriment of the country.
“From a country point of view, there have been multiple years of state and federal governments where decisions have not been made,” Mr Garrard said.
“The NEG is not perfect, but it provides Australia and potentially business with certainty. I sincerely hope that reason prevails on Friday and that we get an agreement on the NEG.”
Energy Minister Josh Frydenberg faces a critical meeting on the NEG today, with the government desperate to win state and territory endorsement of its electricity reform blueprint.
After criticising politicians last year for not doing enough to address the soaring cost of electricity for energy users, Orora signed two power purchase agreements earlier this year with renewable energy operators that provide 80 per cent of its power needs.
Mr Garrard said the move to sign the power deals had lowered the company’s power bill.
Orora yesterday lifted its annual full-year profit by 24 per cent to $212.2 million and expects earnings to rise further in 2019 subject to global economic conditions.
The Melbourne-based company, spun off from Amcor, said the result came despite flat trading conditions in its Australasian and North American markets.
Net profit lifted by 12 per cent to $208.6m, just ahead of analyst consensus estimates, on a 5.2 per cent lift in sales revenue to $4.24 billion.
Despite staid trading conditions, Mr Garrard said the company was unlikely to diversify into new markets in a bid to chase growth options.
Orora’s original parent company, Amcor, copped some criticism earlier this week from analysts over its $US6.8bn ($9.17bn) takeover of US-based rival Bemis, with concern the deal would dilute its investment returns and force it to dump its long-held 20 per cent benchmark hurdle rate.
“You’ve got to look at the allocation of capital and the risk of doing that,” Mr Garrard told The Australian. “In other markets there might potentially be more growth but with that often comes increased risk and for us we’re confident that there are enough opportunities in Australasia and North America for the foreseeable future.”
Macquarie, which described the result as broadly in line, said it expected deals in the North American market would remain a focus for Orora.
Orora declared a final dividend of 6.5 cents, bringing its whole-year payout to 12.5c, up 1.5c on the previous year. Orora shares fell 13c, or 3.6 per cent, to $3.46.