Page 79 - Print21 Nov-Dec 2019

Analysis
What’s in
the box
Nippon is buying Orora’s Australasian Fibre business for $1.7bn in a shake-up of the carton market. Print21 editor Wayne Robinson assesses the implications
of Nippon Paper’s biggest investment yet.
Orora is selling its Australasian Fibre business to a wholly owned subsidiary of Nippon Paper for
A$1.72bn, in a move that will give Nippon an integrated box-making line to compete head on with Visy.
Nippon will be buying a business with 10,000 customers. There are 25 plants and 27 depots across Australia and New Zealand.
Revenues in the last financial year were around $1.4bn, with an EBITDA a smidge under 10 per cent at $137m.
It includes the Orora plant in Oakleigh with the country’s first EFI Nozomi digital high speed, sheetfed, full-colour, carton printing line.
Orora’s share price rocketed skywards by 20 per cent on the news,.
Speaking to Print21 Orora managing director and CEO Brian Lowe said “Orora was not looking to sell, the interest and the bid came from Nippon.” The Orora Board declared it “a compelling offer” to shareholders. The sale is expected to be completed early next year.
Lowe went on to say that Orora felt the Fibre business had “reached maturity” under its tenure, but that Nippon with its ability to source its own paper and board “could take the business forward.”
Nippon Paper is no stranger to Australian shores; a decade ago
it bought Australian Paper, the country’s sole manufacturer of copier and printer paper, and of envelopes, for $700m. Nippon is now investing in Australian Paper with a new $600m energy from waste plant for its Maryvale mill. Nippon has annual sales of around $15bn. Its acquisition of Orora’s Fibre business will be its largest deal outside of Japan.
Above
Vertical integration in a two player market: Nippon buys Orora Fibre
Integration
Nippon’s ownership of the
Orora fibre business will deliver integration, as Nippon already supplies Orora with its Kraftliner with which it makes its corrugated boxes. The new business will be up against market leader Visy, which also has integrated production. According to Tim Woods at IndustryEdge Visy has just over half the market, with Orora a third.
Woods’ figures have the Australian containerboard market at 1.332 million tonnes, with an average growth of 5.6 per cent a year over the past five years. The last financial year actually showed a dip, due entirely to the drought and the subsequent impact on crops. Less than ten per cent is imported, and almost all of that from New Zealand.
Nippon will now own both mills previously owned by Amcor; the one in Botany, and the Australian Paper in LaTrobe valley Amcor released. The Maryvale mill in LaTrobe valley was part of its Paperlinx spin-off almost 20 years ago, with Botany part of the Orora spin-off in 2013.
The Nippon Orora deal came just days after Visy said it would buy
the soon-to-be-closed Norske Skog 265,000 tonnes a year newsprint mill in Albury, with a view to converting it to board manufacturing.
The deal values the business at a multiple of around 11.5 times its EBITDA, and adjusted EBIT multiple of times 18.9. The Orora board says these multiples are above current market valuation.
Once sold it will leave Orora with 80 sites in seven countries, with some 3500 staff, and a business with revenues of $3.4bn.
Orora says the deal “fully values the Australasian Fibre business, with reference to the outlook for the business.” It includes the Botany B9 Paper Mill, fibre converting, specialty packaging, cartons, bags, functional coatings and Orora WRS packaging distribution.
Focus
Once the sale goes through Orora will focus on its Australian beverage business, in which it has the number one market position in cans and glass wine bottles and number two in wine closures and glass beer bottles, and on its North American business, which encompasses both packaging and visual display. It is in the top five in both US sectors, with the fragmented packaging solutions market valued overall at US$50bn, and the visual display market worth around US$10bn, giving Orora plenty of room for growth.
Revenue from North America is now higher than that from Australia. Orora’s last set of full year results saw $2.61bn coming from the US, with $2.15bn from Australasia. At $1.4bn the Australasian Fibre Business had higher earnings than the prior year.
Lowe said: “This announcement represents an exciting new era for both Orora and the Fibre business as it transitions to Nippon Paper.
Almost 90 per cent of the Australian cartonboard industry
is now in the hands of two fully integrated players;Visy and Nippon
– just as the outdoor media industry, the magazine publishing industry, the newspaper publishing industry, the catalogue and magazine printing industries are also in the hands of just two players. 21
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