Thank you for standing by, and welcome to the Orora Limited FY 2024 half year results investor call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you'll need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Brian Lowe, Managing Director, and Chief Executive Officer. Please go ahead.
Good morning, and thank you for joining us today for the Orora Group first half FY 2024 results presentation. I'm joined by Shaun Hughes, our Chief Financial Officer. Today, I am pleased to provide you with an overview of our results for the first half of FY 2024 and an update on our safety performance. In light of the Saverglass acquisition, I'll also revisit Orora's compelling investment proposition as a design-led, leading sustainable packaging solutions provider, and set out how Saverglass is aligned to that investment proposition and the continued progress we've made against our strategic priorities. I'll then hand you over to Shaun, who will take you through the group and business unit financials in more detail before I conclude with an update on sustainability, our second half 2024 perspectives, and the FY 2024 outlook.
At the end of the presentation, Shaun and I, as always, will be happy to take your questions. Before I start, please take note of the important information on Slide 2. I'll now turn to Slide 4. Before I cover the first half 2024 financial highlights, Orora completed the acquisition of Saverglass on the first of December 2023, for a net purchase consideration of EUR 1.3 billion. This was a significant and exciting milestone for Orora, following an extensive due diligence process, and the acquisition of Saverglass will be covered in further detail throughout today's presentation. The first half FY 2024 results include one month of Saverglass earnings, and references to underlying numbers are now inclusive of Saverglass, unless otherwise stated, and exclude transaction costs relating to the acquisition. I'll now turn to the first half FY 2024 highlights.
I'm pleased to report that against the backdrop of ongoing softness in consumer demand, the continued strength of the beverage cans and margin improvement in North America has offset softness in beverage glass in Australasia. The navigation of these ongoing market pressures by our business units, combined with proactive cost control measures and margin improvement management initiatives, delivered an 11% increase in underlying EBIT to AUD 184.1 million. Excluding Saverglass, underlying EBIT was up 3%. Underlying NPAT was up 0.5% to AUD 108.6 million, while underlying EPS was AUD 0.094 per share, reflecting the additional shares post-raising equity for the Saverglass acquisition. Cash generation remains strong, with underlying operating cash flow of AUD 240.5 million. Cash conversion, excluding Saverglass and the G3 rebuild, was 92.7%.
CapEx spend of AUD 76.9 million, largely related to cans CapEx to support future Australasia's earnings growth. The board has declared an interim ordinary dividend of AUD 0.05 per share, unfranked, and 100% sourced from the conduit foreign income account. This represents a gross dividend of AUD 67.9 million and a dividend payout ratio of 62%. Turning now to Slide 5. Our first half FY 2024 result again demonstrates the resilient earnings performance of our North American and Australasian businesses, as the continued execution of our strategy and strategic priorities delivered further earnings growth against a challenging macroeconomic environment that has resulted in decline in revenue. In North America, revenue on a constant currency basis was 15.9% lower than the prior period.
This decline in revenue was driven by 4.9% relating to the continued proactive churn of low-margin customers and products, 2.7% from the flow-through impacts of price inflation, and 8.3% from lower volumes. Against these challenging volume headwinds, our OPS business delivered both EBIT and margin growth, reflecting management's disciplined operating cost alignment and margin improvement initiatives from proactive account management. EBIT was up 0.9% on a constant currency basis, driven by continued focus on embedding pricing disciplines, proactive operational cost management, procurement-driven initiatives, operating site rationalization, and equipment optimization. Pleasingly, our sustained and disciplined approach to operating efficiency, strong cost control measures, and network optimization gains offset softer volumes to deliver 100 basis points increase in North American EBIT, up to 5.9%. Now turning to Australasia.
The resilience of our Orora Beverage business in Australasia was again evident, with earnings growth from record cans production, continued strong consumer demand for cans, and inflation cost recoveries. This offset ongoing soft demand for Australian commercial wine and beer bottle sales, with glass volumes down on the prior period. Revenue declined by 0.9%, driven by inflation cost recovery and product mix improvements of 4.2%, offset by 3.8% lower aluminum cost pass-through, and a 1.3% net volume decline. Australasia's EBIT was up 2.2%, reflecting cans volume growth, active cost management, procurement initiatives, and an improvement in product mix across cans and glass, partially offset by lower glass volumes. Successful commissioning of the new cans line in Dandenong supported 3% volume growth in cans and contributed to further operational efficiencies.
Cans revenue and earnings were higher for the period, underpinned by strong demand in CSD, draft beer, energy drinks, and RTD products. Growth in Slim, Sleek, and multi-size formats reflects continued evolution of consumer preferences. Glass revenue was flat, with the benefit from inflation cost recovery offset by a reduction in glass bottle volumes. Earnings were impacted by high costs of soda ash, partially offset by operational efficiencies and production initiatives. Pleasingly, revenue and earnings from new glass products, including the carbonated water, spirits, and olive oil markets, continued to grow. EBIT margin for Australasia was up 50 basis points to 15.7%, reflecting the modest earnings contribution from the recent cans growth investments, the benefits of lower aluminum costs, and inflation cost recoveries that are passed through to customers.
As I mentioned earlier, Orora completed the acquisition of Saverglass at the start of December, and Saverglass' results during the first month under Orora's ownership were in line with the December 2023 trading update, with revenue at EUR 69.5 million and EBITDA, including the impact of AASB 16 leases, of EUR 15.1 million. Turning now to Slide 6 on safety. I'm pleased to report that the number of recordable case injuries and lost time injuries significantly decreased during the first half, with the number of injuries declining by greater than 50% compared to the prior period. Further, no serious injuries or fatalities were recorded. This reflects the ongoing drive by our leadership teams and team members to improve our safety performance.
Our FY 2023 to FY 2025 global health and safety strategies continues to focus on our 10 high-risk areas, confirming effectiveness of critical controls, incident reporting, and our governance processes. Safety implementation activities are progressing with our Saverglass team members as we align our global health and safety systems. The health, safety, and well-being of our people across the globe is paramount and remains a fundamental and ongoing commitment at Orora. We are confident safety performance will improve further as the focus on continuous improvement activities gain increased traction. Turning now to Slide 7. We first introduced our compelling investment proposition at Orora's Investor Day in April 2022. It sets out eight investment characteristics or attributes that underpin our strategic advantage and core value proposition as a design-led, leading, sustainable packaging solutions provider.
This demonstrates how Orora continues to provide investors with a robust and defensive earnings profile and attractive growth upside. These investment attributes provided Orora with a robust platform to acquire Saverglass. Importantly, Saverglass, Saverglass aligns well to these attributes, as shown on the next slide. Turning now to Slide 8. I don't plan to run through all eight investment characteristics set out in this slide, but I will call out some attributes which support our belief that Saverglass is aligned to Orora's compelling investment proposition and is a logical and compelling extension of our growth strategy.
Saverglass has a leading market position in most specialized bottle categories in higher growth, premium spirits, and wine. These positions are underpinned by long-term customer relationships, where Saverglass' bespoke manufacture and design is critical to the brand positioning and success of global branded beverage players.
The scale, mix, and diversity of Saverglass is enhanced by the integration of our Gawler Glass business. Like Orora, Saverglass has a strong track record of financial performance through the cycle. Sustainability is a key focus for both Orora and Saverglass, and together, we'll continue to drive the strategic direction of our sustainability initiatives. Finally, Orora and Saverglass both have a customer-centric mindset.
This is core to how our experienced management teams enhance our customers' businesses, and very importantly, the customer-centric mindset ensures that we are culturally aligned. Turning now to Slide 9. Our strategic pillars, underpinned by our reliable cash flow-generating assets, remain unchanged. They guide our actions and supported the delivery of our achievements in the first half.... Importantly, they'll continue to guide us over the coming years as we refine our growth strategy, following the acquisition of Saverglass.
In North America, OPS has driven further improvement in financial performance and margin accretion through operating cost alignment, pricing disciplines, and a continued focus on optimizing its business model and operating platform. OPS continued to invest in sales resources to drive long-term volume and earnings growth, with 30 new sales resources recruited, bringing the total to 70 in the last 18 months.
In Beverage Australasia, the cans growth CapEx program is delivering volume growth and additional earnings. The ramp-up of the new can line at Dandenong is progressing well, moving to 24/7 operations in the second quarter and contributing to record production in the first half of 2024. Construction of the second canning line at Revesby is also progressing in line with the project schedule. In glass, capacity continues to be redeployed to new categories with period-on-period growth in these new areas.
Site preparation works are also well underway for the oxygen plant, which will support the rebuild of the G3 furnace with oxy-fuel technology. During the first month under Orora ownership, Saverglass recommissioned its furnace in Feuquières, in France, as a low-carbon hybrid furnace, boosting electricity input up to 30%.
Looking more closely at our FY 2024 priorities. OPS will continue to enhance its business model while expanding its product and service offering and custom packaging capabilities, including sustainability-related offerings. The business will also invest in additional sales capacity, targeting further sales resources in the second half of 2024. For Beverage, the additional capacity from the ramp-up of production at the new cans line at Dandenong enables the business to deploy capacity to optimize efficiency and maximize profitability.
Product mix will continue to be optimized in glass as the business joins the Saverglass network and diversifies its portfolio and regional presence. In the near term, the focus on Saverglass includes creating a global glass manufacturing footprint by integrating Gawler into the Saverglass network, maintaining focus on value capture initiatives, driving incremental volume growth in all markets, and rebuilding the furnace at Ghlin, in Belgium. Across our global business, our attention is firmly focused on sustaining the momentum and continuing the disciplined execution of our strategic priorities. I'll now hand you to Shaun to discuss the group and segment financial results.
Thanks, Brian, and good morning, everyone. I'll start with the group results before I cover the segment's financial performance. I'm at slide 11, and this summarizes the group's underlying and statutory earnings results for the first half of FY 2024. For this slide, I will talk to revenue, EBITDA, and EBIT, excluding Saverglass's earnings. Now, all other measures discussed will be inclusive of Saverglass's earnings. At a group level, revenue of AUD 2 billion was down 10.6% on a reported basis. The decline in reported revenue was driven by a 13.6% decrease in North America, which largely reflects the impact of lower volumes from continued softness in the broader North American manufacturing industry and the flow-through impacts of price deflation.
On a constant currency basis, group revenue was down 12.4%, with North American revenue down 15.9% and Australasia down 0.9%. Depreciation and amortization increased 13.2%, largely reflecting an increase in lease amortization related to leases in North America and depreciation from new capital projects. Group underlying EBIT was up 3% on a reported basis, or up 1.5% on a constant currency basis, attributable to a resilient earnings performance across North America and Australasia. Net financing costs increased AUD 11.4 million from the prior period, driven by the increase in committed debt facilities to acquire Saverglass, the CapEx investment program in Australasia, and higher base interest rates.
Net finance costs also include the one-off benefit of interest income of AUD 11.5 million from the short-term investment of equity proceeds prior to the completion of Saverglass. Underlying NPAT of AUD 108.6 million, up 0.5% on a reported basis, was down 1% on a constant currency basis and reflects the higher EBIT offset by higher net finance costs. EPS was AUD 0.094 per share and reflects the dilutive impact of the equity raise, with only one month of Saverglass earnings. Moving now to the North American business on Slide 12. North America has again delivered a robust earnings result, driven by OPS distribution, which achieved further earnings growth, principally in the Northeast and Southwest regions, offsetting lower volumes from persistent industry headwinds attributable to softness in the broader North American manufacturing industry.
In constant currency terms, revenue was down 15.9% to $975.7 million. In addition to volume softness, reflects the flow-through impact of price deflation and proactive management of low-margin customers and products. Operational alignment initiatives and cost management disciplines offset volume softness, with EBIT up 0.9% to $57.3 million. The proactive management of low-margin business also contributed to a 100 basis point increase in North America's EBIT margin to 5.9%. North American operating cash flow was $61.3 million, broadly in line with the prior period, and cash conversion remained strong at 96%. ROACE of 22.3% was up 190 basis points and is driven by the increase in North American earnings. Turning to Slide 13.
The results for Australasia underscore the resilience of the beverage business and reflect ongoing strong customer demand for cans, and the contribution of earnings from the newly commissioned cans line in Dandenong. The strength of cans, combined with product mix improvements, inflation cost recoveries, and active cost management, delivered a 2.2% increase in EBIT to AUD 82.9 million, despite ongoing softness in domestic glass. The 0.9% decline in revenue to AUD 529 million was driven by 4.2% cost recovery and product mix, offset by 3.8% lower aluminum costs passed through to customers, and a 1.3% net volume decline. Beverage glass volumes continue to be impacted by ongoing soft demand for Australian wine and beer bottle sales, with the lower volumes offset by inflation price recovery.
Excluding the impact of aluminum pass-through, revenue increased 2.9%. Underlying operating cash flow was AUD 99.9 million, with cash conversion, excluding the G3 furnace rebuild, at 89.8%. ROACE of 20.2% reflects the increase in funds employed from our recent capital investments. In the first half of 2024, AUD 58 million of capital expenditure was invested in the beverage business, with growth CapEx of AUD 44.8 million. Turning to Slide 14. Before I cover the first half financial highlights for Saverglass, I would like to touch on the transaction financials following completion of the acquisition on the first of December 2023. Net purchase consideration was EUR 1.3 billion or AUD 2.2 billion, and this is inclusive of the lock box working capital mechanism of EUR 41.8 million, and acquired cash on hand of EUR 71 million.
Acquisition-related transaction costs of AUD 40 million were recognized in the six months to the thirty-first of December, with total transaction costs, including equity and debt-raising costs, of AUD 75 million in the half. As required by the accounting standards, the purchase price accounting review process is underway to finalize the value of goodwill and the fair value of Saverglass' net assets. This process is expected to be completed by the end of 2024. Turning to Slide 15. Saverglass' results for the first month under Orora ownership were in line with the December 2023 trading update, reflecting recent customer de-stocking and softness in consumer demand. Revenue was AUD 69.5 million, with EBITDA of AUD 15.1 million and EBIT of AUD 8.1 million. Both EBITDA and EBIT include the impact of AASB 16 leases.
Positive cash flow in December reflects the benefit associated with the timing of payments and customer receipts. Turning to Slide 16. Underlying operating cash flow was AUD 240.5 million, or AUD 193.8 million, excluding Saverglass. The higher operating cash flow reflects the increase in EBITDA, up 9%, reduced working capital spend in Australasia and North America, and one month of Saverglass' operating cash flow. The group invested AUD 76.9 million in base and growth CapEx. This was primarily driven by additional growth of AUD 60.2 million, relating to the new canning line at Revesby, site preparation works for the oxygen plant as part of the G3 furnace rebuild, and new Helio digital printer. Turning to Slide 17. The group is well progressed with its CapEx program in Australasia.
The recent commissioning of the beverage cans capacity in Ballarat and the new multi-size canning line at Dandenong delivered earnings growth in the first half of 2024. This reflects strong customer lead demand and a positive outlook for canned volume growth. FY 2025 will see the commissioning of a number of key CapEx projects for Orora Beverage and Saverglass, notably the rebuild of the G3 furnace with oxy-fuel technology in Australasia and the Saverglass furnace in Ghlin, in Belgium. The Beverage Cans Group will also deliver the new multi-size canning line at Revesby, which is expected to be completed in the second half of FY 2025. FY 2024 total CapEx spend is expected to be approximately AUD 300 million, including Saverglass. Slide 18 highlights Orora's balance sheet and net debt position, which continues to provide operating and strategic flexibility to support our growth strategy.
As at the thirty-first of December, net debt increased to AUD 884 million to approximately AUD 1.7 billion, with leverage at 2.59x EBITDA. The increase in leverage reflects the impact of the Saverglass acquisition, higher spend for growth CapEx in Australasia before the associated full earnings benefits flow and the G3 furnace rebuild CapEx. Orora maintains a strong liquidity position, with committed undrawn capacity of approximately AUD 690 million, and cash reserves of over AUD 270 million as at the thirty-first of December.
During the first half of 2024, the group upsized debt facilities by approximately AUD 1.4 million, and the refinance of the global syndicated finance facility to support the acquisition of Saverglass, the growth CapEx program in Australasia, and future working capital and CapEx for Saverglass. The average tenor of the group's debt facility is now 4.2 years. Our approach to capital will continue to be balanced and disciplined, as we remain committed to maintaining sensible debt levels and investment-grade credit metrics, with our target leverage range between two and 2.5x net debt to EBITDA. Turning to slide 19. The board has declared an interim, unfranked, ordinary dividend of AUD 0.05 per share.
This represents a gross interim dividend of AUD 67.2 million, with a dividend payout ratio of 62%. The lower interim dividend reflects the higher shares on issue following the equity raise in September 2023. The dividend reinvestment plan will be operative for this dividend, with shares purchased on market to meet our obligations. Given the group's near-term capital investment programs, the tax effects of Australia's instant asset write-off legislation, and other timing differences, the group does not expect to frank future dividends until after FY 2024. I will now hand back to Brian.
Thanks, Shaun. Now turning to sustainability and our promise to the future on Slide 21. Orora continues to make good progress on our sustainability goals under our pillars of circular economy, climate change, and community. Sustainability highlights for the first half include expansion of our cullet sourcing program, with additional cullet sourced from the recently launched Victorian Container Deposit Scheme.
Execution of a new wind farm PPA for 100% electricity consumption for our cans facility in Queensland. The completion of this deal, combined with the existing solar and wind farm PPAs, provides Orora with renewable electricity coverage at all of its Eastern Seaboard sites. And in North America, OPS opened its Sustainability Design Lab to enable our customers to explore innovative materials, light weighting techniques, and the latest market innovations to collaborate with our design experts.
The acquisition of Saverglass further enhances the group's combined sustainability credentials. Saverglass are committed to net zero by 2050, with a 45% reduction in Scope 1 and Scope 2 emissions by 2035, and a 70% target for cullet by 2025. Importantly, Saverglass's sustainability targets are in line with, and in some instances, in advance of Orora's sustainability targets, as reflected by its Science Based Targets initiative certification. During the first half of 2024, Saverglass recommissioned its furnace at Feuquières as a low-carbon hybrid furnace, with up to 30% electricity boost and delivering a 12% reduction in CO2 emissions per ton of glass produced. Saverglass also successfully trialed the use of hydrogen at Feuquières, proving the viability of hydrogen as an alternative future fuel source.
Along with the executive leadership team, I am extremely proud of the great work being done in this very important area. Turning to Slide 23, I'll cover the perspectives for FY 2024. In North America, continued operational cost alignment, procurement-driven initiatives, and optimization of operations will drive further operating leverage. We expect distribution and manufacturing volumes will continue to be impacted by softer economic trading conditions.
However, the OPS business remains well-positioned to drive earnings growth through embedded pricing disciplines and from any improvement in the U.S. economy. Finally, the North American management team will continue to invest in additional sales resources to drive long-term volume growth. In Australasia, the beverage cans business is expected to deliver further growth, driven by continued ramp-up of the new Dandenong multi-size canning line and production mix optimization.
Our cans growth CapEx program is expected to generate earnings of approximately AUD 30 million by FY 2028. In glass, we expect continued softness in consumer demand for Australian commercial wine, and the business remains well positioned to meet any increase in domestic or export demand. At Saverglass, our implementation program is progressing well, with multiple value creation activities underway.
We have commenced integration of our Gawler Glass operations into Saverglass's portfolio to form a global network of high-performance production facilities. The near-term synergies of approximately AUD 15 million are expected to be progressively realized from FY 2025 and comprise network optimization, cost rationalization, and operational efficiencies across the integrated glass business. Global market conditions remain challenging, inflationary pressures are now moderating, and energy costs continue to be well managed across the group.
In respect to cash flow and capital management, we are committed to ongoing investment in our existing businesses. Growth CapEx will continue in our Australasian businesses with the construction of the second canning line at Revesby and site preparation works and the oxygen plant to support the G3 furnace rebuild. We continue to target group cash conversion above 70%, excluding the G3 furnace rebuild.
The dividend target payout ratio remains unchanged at 60%-80% of NPAT, and we will also continue to invest in capacity expansion, asset upgrades, and sustainability initiatives. Turning to our outlook now on Slide 24. While global consumer demand remains uncertain, Orora Group EBIT is expected to be higher in FY 2024, excluding the EBIT contribution from Saverglass. In North America, in line with the first half of 2024, ongoing margin accretion through account profitability programs and a continued focus on cost management is expected to be largely offset by ongoing volume softness.
In Australasia, continued strength in cans in FY 2024 is expected to offset the ongoing softness in glass from lower commercial wine volumes. Saverglass EBITDA in FY 2024 is expected to be broadly in line with the EBITDA run rate from the pro forma last twelve months to June 2023, of approximately EUR 168 million, excluding AASB 16 leases. This could be affected by either a prolonged customer destocking or softness in consumer demand, if these continue beyond the first calendar quarter of FY 2024. As always, this outlook remains subject to global and domestic economic conditions and currency fluctuations.
That concludes our conference call today. Thank you for participating. You may now disconnect your lines.