Good day, and thank you for standing by. Welcome to the Orora Limited Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and one on your telephone. If you require any further assistance, please press star and zero. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Brian Lowe. Thank you. Please go ahead.
Good morning, and thank you all for joining us today for the Orora Group results presentation for the first half of 2022. I'm joined by Shaun Hughes, our Chief Financial Officer. Today, I'm pleased to provide you an overview of the results for the half year ended 31 December 2021, an update on our safety, performance, and sustainability programs, a recap of our strategic pillars and priorities for FY 2022, against which we have continued to make some really good progress. I'll also share with you our beverage cans capacity expansion plans and glass product development progress. The scope, findings, and decision to retain Orora Visual, including an overview and strategic roadmap for OV.
I'll then hand you over to Shaun, who will take you through the group and business unit financial results in some more detail before I conclude with the perspectives and outlook for FY 2022. At the end of the presentation, Shaun and I will be happy to take any of your questions. Before we start, please take note of the important information at two, ensure that you refer to that at some point. Turning to slide four and results. The Orora Group reported a strong improvement in first half 2022 results driven by excellent performance in our North American businesses. Group EBIT increased by 10.4% on a reported basis and 11.1% on a constant currency basis. This outcome was driven by a strong increase in North American earnings, up 32.1% on a local currency basis.
Underlying NPAT was up 12.9% to AUD 102.7 million, while EPS increased 22.9% to AUD 0.118 per share. Operating cash flow and cash conversion was strong for the first half at AUD 145.5 million and 75%, respectively. The board has declared an interim final ordinary dividend of AUD 0.08 per share unfranked and 100% sourced from the conduit foreign income account. This represents a 23.1% increase from the prior period dividend of AUD 0.065 per share. Now turning to slide five. On our first half 2022 result, it demonstrates the continued momentum from the full year of 2021 and reinforces the benefits of an ongoing focus on the execution of our strategy and our strategic priorities.
In Australasia, EBIT was 2.3% lower at AUD 84 million. This reflects the impact of lower wine glass resulting from the Chinese tariffs on wine, which have now been fully cycled. In glass, growth in beer and other non-alcoholic beverages, including a number of new glass products, partially offset the reduced wine bottle volumes resulting from the Chinese tariffs on wine exports. Pleasingly, we have now fully redeployed this capacity, and I will share some further details with you when we get to slide 11. Cans demand remains strong, with solid volumes achieved across all categories and strong customer demand forecasts for the second half. We did experience some modest COVID-related impacts late in the first half due to customer site production issues and supply chain disruptions.
The North American businesses produced an outstanding result in the first half of 2022, continuing the positive momentum that started in late 2020, delivering improvements in both operating and financial performance. With strong earnings growth for both the manufacturing and distribution businesses as we continue to drive improvements in operating efficiency and cost to serve. This has been achieved through a sustained and disciplined approach focused on increased sales force effectiveness, leveraging data insights to improve customer account profitability, ongoing cost control measures, and importantly, tightly managing supply chain inflation and ensuring these costs are in pricing. We have now seen 13 major price increases in the last 18 months. These positive actions delivered by the North American team resulted in an increase in US dollar and AUD dollar earnings for both OPS and OV.
Local currency EBIT was up 32.1% to 51.5 million, and the EBIT margin expanded 70 basis points to 4.6%. Like most companies, COVID-19 continues to challenge how we and our customers operate on a day-to-day basis. In North America, the retail landscape progressively improved during the first five months of the first half. However, the increases in infections did slow activity slightly in December. E-commerce volumes continue to grow, with total manufacturing activity remaining buoyant. Now moving to slide six. As we know, COVID-19 has added complexity and challenge to the operating environment.
We have responded by introducing a number of additional health and safety measures targeted at mitigating the risk of transmission into and at Orora sites and workplaces. This includes where permitted and available to us, wearable devices to improve contact tracing and rapid antigen testing as a condition of entry to sites. Orora has also continued to encourage our team members to be fully vaccinated, including through vaccine incentive programs. In the first half of 2022, the Total Recordable Incident Rate and the Lost Time Injury Frequency Rate have both decreased slightly. There were no serious injuries or fatalities in the first half. The continued improvement in the prevention of incidents has been driven by initiatives such as behavioral-based safety programs, leadership programs, hazard and near-miss reporting, and progressing the initiatives from our global integrated safety improvement program, or as we call it, GSIP. Now moving to slide seven.
I first presented the strategic pillars at our FY 2020 results. These were established to support Orora in executing our objective of becoming a leading sustainable packaging solutions company. Our strategic pillars remain unchanged, and they continue to guide our actions and support the delivery of our achievements in the first half of 2022, and will continue to guide us over the coming years. Now, moving to slide eight. Throughout the first half of 2022, we've made some good progress against our core strategies in each of our businesses, and we'll continue to leverage the positive momentum that we have developed into FY 2022 and beyond. In Australasia, there's been continuous success in extending key customer contracts in both cans and glass, underpinning the investment in our cans capacity expansion and our glass capability.
Our glass business has now successfully replaced all of the Chinese export volumes through a combination of new products focused on import replacement and growth in existing beer, water, and other non-wine categories. In North America, the businesses have continued to execute their strategies and priorities and have delivered strong results in the first half of 2022. In OPS, we have continued to drive improvements in operating discipline and financial performance, meeting the challenge of operating in a higher inflation environment and delivering strong growth in EBIT and margin improvement in both the manufacturing and distribution businesses. Importantly, OPS achieved an EBIT margin of 5.2% this period. OV is also trading profitably and continues to do so, driven by a focused cost reduction program and improved execution. Pleasingly, both revenue and earnings growth have been achieved versus the prior period.
Now, looking more closely at our FY 2022 priorities. In Australasia, reflecting a strong outlook for cans volume and long-term contractual support from our customers, we have commenced our cans and ends capacity expansion plans. We'll also complete the construction of our AUD 25 million cullet beneficiation plant during the second half. For OPS, we'll continue our business enhancement initiatives, including a refreshed e-commerce platform and customer self-help functionality. Our work in exploring inorganic opportunities in North America is progressing as we seek to expand our product and service offerings from 2022. For OV, we're looking to scale our customer value proposition by capitalizing on the solid foundations established in FY 2021, and to further broaden our customer base and reach into the horticulture segment.
Now, moving to slide 10, where I'll cover the beverage can expansion and our glass product development achievements in more detail. At the AGM in 2021, we announced plans for a significant expansion of our cans multi-size capacity at our Dandenong site and our ends capacity at our Ballarat site. Importantly, these exciting investments are backed by new long-term contracts with our major customers. The total investment for the cans and ends capacity is approximately AUD 110 million and will add approximately 10% additional can capacity and 40% additional ends capacity. Both projects are progressing well, and we expect that Dandenong cans line will be commissioned in Q4 of FY 2023, and the Ballarat ends line will be commissioned progressively over late FY 2022 and early FY 2023. Now to exciting developments with our glass business on slide 11.
There's no doubt the introduction of the Chinese tariffs on the Australian wine industry in late 2020 had an adverse impact on Australian wine bottle exports. Our glass team responded quickly to this challenge, and I'm pleased to say that we have now replaced 100% of the lost wine export volume. This includes new products such as spirits bottles and olive oil bottles. These products have been well received by our new customers, both from a quality and service perspective. The full run rate of the new glass volume initiatives are expected progressively in the second half of 2022 and into the first half of 2023. Now, turning to slide 13. At our first half 2021 results, we announced that we would conduct a full strategic review of the Orora Visual business.
Our holistic review considered the market outlook for the U.S. retail displays, the competitive landscape, and OV's relative value proposition and strategic alternatives, including immediate exit considerations. These were compared to the Orora Visual management team's five-year strategic plan. The improvement in the business performance over the last six to 12 months, the stability of the management team, and OV's materially higher full earnings potential compared to the current earnings run rate, has confirmed that the most attractive option to maximize shareholder value is to retain Orora Visual. OV will continue to operate as a standalone business with direct oversight from myself and Shaun. Now moving to slide 14.
This illustrates the types of products and services provided by OV, which include visual and product marketing in-store displays and promotional signage, such as high-end vibrant fabric and counter displays, consumer packaging, including tailored shelf-ready packaging and in-store labels such as price tags, QR codes, and horticultural tags. OV has a full service offering from design through to print production, packaging, and includes fulfillment service options. OV services regional and national retail customers across a diverse range of segments, including telco, beauty, and home and apparel. From its well-positioned national footprint, with four production locations in Orange County, Dallas, Chicago, and New Jersey. Moving now to slide 15, where I'll cover Orora Visual's strategic roadmap. OV has identified various strategic opportunities to pursue capital-light, high-return initiatives that are expected to drive earnings growth over the next one-three years.
The immediate focus is to continue to build a scalable platform for OV. This requires optimization of business processes and improvements in automation. Interim focus for OV is to realize the full entitlements of the business. This includes broadening the customer base and reach into the growing horticulture segment, revitalizing and modernizing critical equipment, and growing the digital client technology platform. In the long term, the focus is on capability expansion in core product areas and expansion into new verticals. Moving now to slide 16, where I'll share an overview of Orora North America's capabilities. OPS and OV both provide value-added packaging products and services to a range of customers in consumer-facing industries. While they operate standalone, OV and OPS are complementary and share a range of commercial capabilities.
Both businesses service national customers, are vertically integrated in manufacturing, and have in-house design teams focused on delivering customized products on a just-in-time basis. I'll now turn to slide 18. Sustainability is part of Orora's DNA and is vital to the way that we operate. In FY 2021, our teams undertook a comprehensive review of our sustainability framework, and at our FY 2021 results, we launched an exciting new chapter in sustainability. This slide sets out the progress we've made in the first half with our sustainability goals and commitments through our three pillars of circular economy, climate change, and community. In relation to circular economy, our use of recycled glass content or cullet, as it's known, is increasing year on year, and we are on track for our 2025 goal of 60% recycled content in our glass packaging that we manufacture.
With respect to climate change, Orora is on track towards our 40% reduction in Scope 1 and Scope 2 greenhouse gas emissions by 2035. Initiatives here include exploring less greenhouse gas-intensive glass furnace technology at our Gawler site, construction of the cullet beneficiation plant, ongoing renewable energy initiatives, and a program of procuring electric warehouse-based vehicles for OPS in North America. The third pillar of our framework is community. This represents our focus on initiatives to benefit our teams and our communities by protecting safety, health, and human rights, and championing Diversity, Equity, and Inclusion. During the period, we launched a number of community-related initiatives, including global Diversity, Equity, Inclusion goals that increase gender, racial, and cultural representation in leadership, operations, and sales roles, and continuing to ensure pay equity across Orora on an ongoing basis.
We also have our sixth year of WILLOW, which is our Women in Leadership program. We're publishing our Modern Slavery Statement and unconscious bias training delivered across Orora. Along with the executive team, I am extremely proud of everyone's dedication in prioritizing actions for our people and our community. I'll now hand you to Shaun, who will discuss in more detail the group and regional financial results. Shaun?
Thanks, Brian, and good morning, everyone. I'll start with the group results before I cover the regional financial performance on that slide 20, and this summarizes the group's underlying and its statutory earnings results for the half. At a group level, revenue was up 9.6% on a reported basis or 10.6% on a constant currency basis. The revenue growth was driven by a strong increase in North American sales, up 13.9% in local currency and reflects the pricing disciplines we've successfully built that ensure we pass through the impact of inflation to customers. Group EBIT was up 10.4% or 11.1% on a constant currency basis, and net finance costs were down AUD 1.3 million on the prior comparative period to AUD 13.1 million.
This reflects the 0.7 million FX benefit on US debt, lower right-of-use lease interest, and is partially offset by an average net debt increase due to the buyback in the second half of 2021 and the first half of 2022. Underlying NPAT and EPS strongly for the half, with NPAT increasing 12.9% and EPS 22.9%. This reflected both higher earnings, lower net finance costs, and the impacts of the share buyback, which I'll discuss further shortly. Turning to slide 21. Australasia delivered sales revenue of AUD 443.2 million, up 0.5%. Excluding the aluminium pass-through impacts from cans, sales were down 2.6%. EBIT of AUD 84 million was down 2.3% on the prior period, but in line with expectations.
This is a solid result and demonstrates the diversified strength and resilience of the Australasian businesses during a period where we cycled the impacts of Chinese tariffs on wine exports and experienced a modest impact to can production, resulting from COVID-related customer site and supply chain disruptions. ROACE remained high at 28% and in line with the prior period. Cash flow was strong at AUD 83.5 million, and cash conversion for the half remained strong and in line with our expectations of 74%. The reduction in operating cash flow largely reflects the lower cash EBITDA. Base CapEx of AUD 8.4 million was approximately AUD 2 million lower than the prior comparative period. Growth CapEx was up AUD 17.7 million versus the prior period to AUD 22.7 million, and this increase largely reflects the AUD 20 million dollar in our beverage businesses during the period.
We expect that the Australasian businesses will deliver cash conversion in excess of 70% in FY 2022. Moving to slide 22, the North American businesses delivered a strong result in the first half, with improvements in both operating efficiency and financial discipline. In local currency terms, revenue was up 13.9%. EBIT increased an impressive 32.1% to 51.5 million, and ROACE increased 650 basis points to 21.9%. The OPS operating and profit improvement program has continued to gain traction throughout the first half. OPS revenue was up low double digits in local currency terms, and this largely reflects the benefit of continued pricing discipline in both the manufacturing and distribution sides of the business. OPS EBIT margins again expanded, increasing by 60 basis points to 5.2%.
OV delivered low double-digit sales growth as well, and this reflects the benefits of both improved volume, customer, and product mix. Pleasingly, OV achieved positive EBIT and growth on the prior comparative period. This reflects the continued focus on cost reduction and a shift to defensive segments, which now comprise approximately 1/3 of the revenue base, delivering revenue and margin growth. North American operating cash flow increased 17% or $9 million to $62 million, reflecting improved cash EBITDA up 18.2 million, partially offset by an increase in working capital, but broadly in line with the increase in earnings. Base CapEx of 9.8 million was broadly in line with the prior period, and cash conversion remained strong at 76%. Slide 23. Operating cash flow remained strong at AUD 145.5 million, just up on the prior period.
The operating cash flow for the half was driven by an improvement in cash EBITDA of 5.9% or AUD 11 million to AUD 194.1 million, offset by an increase in working capital in line with the lift in sales, and a return to more normal levels of inventory in both our Australasian and North American businesses. In the first half, the group invested AUD 41 million in base and growth CapEx. This was up AUD 15 million on the prior period. The increase in CapEx was driven by additional growth of CapEx of AUD 20 million relating to the cans and ends capacity and the cullet beneficiation plant. Tax payments of AUD 45.5 million reflect our normal company tax payments, with the prior period reflecting a tax refund from the fiber sale.
Cash conversion remained strong in the half at 75%, slightly behind the prior period as inventories across the group started to be rebuilt. 24. Slide 24 highlights Orora's strong balance sheet, which continues to provide operating and strategic flexibility as we move forward. At 31 December, net debt increased by AUD 59 million from 30 June to AUD 512 million, with leverage at 1.6 times net debt to EBITDA. This represents a 0.1 times increase from FY 2021 and is driven by the on-market share buyback, total CapEx investments of AUD 41 million, tax payments of AUD 45.5 million as we return to our normal tax payment cycle, and our dollar movements in U.S. debt offset by stronger earnings.
The AUD 150 million on-market share buyback is approximately 20% complete, with 9.3 million shares purchased at an average purchase price of AUD 3.37. The buyback is forecast to be completed during 2022. The company maintains a strong liquidity position, with committed undrawn debt capacity of approximately AUD 400 million, and cash reserves of over AUD 22 million as at December 31. The average tenure of the group's facilities is 2.7 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 2x and 2.5x EBITDA. Onto slide 25. The board has declared an interim unfranked dividend of AUD 0.08 per share.
The interim dividend is up AUD 0.015 per share on the prior period and represents a payout ratio of 68% of underlying NPAT and a 23.1% increase. Our FY 2022 total dividend is expected to be towards the top end of our target 60%-80% payout range. The dividend reinvestment plan will be suspended for this dividend and is expected to be suspended while the on-market buyback is active. 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 2023. I'll now hand back to Brian.
Thanks, Shaun. Now we'll turn to the prospects for FY 2022 on slide number 27. In Australasia, with continued strength in cans and subject to any COVID-related production and supply chain disruptions, cans demand will require 24/7 operations across all sites, and this is expected to drive earnings growth in the second half of 2022. We will continue to identify and implement cost reduction initiatives, reinvest in asset upgrades, and add new capacity as has been demonstrated for cans. The impact of Chinese tariffs on glass has now been fully cycled. Pleasingly, these volumes have been replaced with new products, import replacements, and growth in existing beer and water categories. Volume growth is expected in the second half of 2022.
In North America, the focus for the OPS and OV management teams remains on driving further positive momentum and continuing to build on the demonstrated improvements delivered over the last 18 months, these being productivity, cost efficiency, and margin improvement programs to deliver increased earnings. Despite an increasingly competitive operating environment, successful pass-through of substrate and other cost increases is expected to continue with our disciplined processes having proved effective over the past 18 months. OPS, as has been stated, achieved a 5.2% EBIT margin in the first half of 2022. This is expected to improve over time, noting that seasonality of earnings is weighted to the first half. Improved OV operating and performance momentum provides us with an increased confidence that OV will generate strong earnings growth in the near term.
In respect to cash flow and CapEx, we are committed to ongoing investment in our existing businesses, both for base and growth capital expenditure. For FY 2022 base CapEx, this is expected to be approximately 80% underlying depreciation, excluding depreciation of leases. We continue to target group cash conversion of greater than 70% for FY 2022. Now, in respect to capital, FY 2022 dividends will continue to be towards the top end of our target payout range. The AUD 150 million buyback will continue in 2022, and with the North American business platforms now stabilized and scalable, expansion of our product and service capabilities for OPS, including through M&A, will come into greater focus throughout 2022 and beyond. Now turning to our outlook on slide 28. Positive operating and earnings momentum is expected to continue for the Orora Group throughout FY 2022.
Correspondingly, we are forecasting FY 2022 EBIT to be higher than FY 2021. In Australasia, EBIT growth is expected for the beverage business in the second half of 2022, with the full year of 2022 EBIT expected to be broadly in line with the full year of 2021. In North America, with sustained improvement in performance in both OPS and OV, we expect the second half of 2022 EBIT to be up on the prior period, with continued strong earnings growth for the full year. This outlook remains subject to global and domestic economic conditions, currency fluctuations, and the continuing impacts of the COVID-19 pandemic.
Thank you everyone for listening.