Orora Limited (ORA) AGM 2015 Voting Intentions

Company/ASX Code : Orora Limited (ORA)
Registry : Link Market Services
Poll/Show of Hands : Poll
Webcast : Yes
Venue :
10.30am Hawthorn Arts Centre,
360 Burwood Road
Melbourne, Victoria
Monitor : Mr Gavin Morton
AGM Details / NoM : Thursday 15th October, 2015
ASA Position
Not Applicable
Item 1: Consideration of financial statements and reports

Sales revenue of $3.407 billion was an increase of 7.3% compared with the previous year. Higher sales in North America, increased glass container sales in Australia were the main contributors to the sales increase.

EBIT increased to $225 million. Improved earnings attributable to higher sales and cost reductions. The B9 recycled paper plant met production/cost targets. Cost reductions were achieved in the Fibre Packaging Division. The Glass segment grew its market share in the wine segment. There was also a foreign exchange benefit of $5.7 million from North American earnings on the previous calendar period.

The final dividend of 4 cents per share, partially franked to 30%, brings the annual dividend to 7.5 cents, an increase of 25% over the previous year.

The Orora share price on the demerger date was $1.22. Currently it is around $2.20.

Orora has delivered value to shareholders in the form of increased dividends and an increase in the share price.

Orora expects to continue with organic growth, cost reductions and investments in 2016. Earnings are expected to be higher, subject to global economic conditions.

ASA Position
Items 2(a) and 2(b): Re-election of Mr Chris Roberts as Chairman and John Pizzey as a Director

Both of these directors have adequate experience in regards to being Board members of Orora. Both have less than five directorships in other listed companies.

Mr Roberts owns in excess of 1 million shares. Mr Pizzey purchased 48,160 shares in the 2015 year, and now owns 114,620 shares, the value of which exceeds his annual director fees. Both meet ASA's voting guidelines in regards to owning shares to the value of their annual fees.

ASA Position
Item 3: Grant of options and rights to Managing Director/CEO Nigel Garrard

This resolution relates to the grant of 1,383,500 options and 459,000 performance rights to the Managing Director/CEO Nigel Garrard under the company's LTI plan. Refer to commentary under item 4 for more information relating to the terms of the grants. Mr Garrard has performed well in his position. Shareholder value has increased. It is in the interest of shareholders for Orora to retain his services. The options and rights are designed to reward the achievement of long term outcomes and value creation for shareholders. 

ASA Position
Item 4: Adoption of Remuneration Report

There have been no changes in regards to STI and LTI performance conditions.

The short term incentives are broadly consistent with ASA's voting guidelines. ASA prefers a minimum of 50% of the STIs to be in shares and for some of the award to be deferred for two years. One third of Orora's STI awards are deferred for 2 years into performance rights. The performance measures are based on growth in EBIT, ROFE, and improvement in cash flow and safety.

LTIs are assessed over 4 years which is consistent is ASA's voting guidelines. For the CEO, the split between options and performance rights was 25%/75%. Performance rights are calculated by reference to the market value of Orora shares and the number of options are calculated by reference to the fair value of shares. Two hurdles apply: EPS with a RoAFE gateway, as well as relative TSR. 100% of the options grant is subject to a RoAFE gateway of 11.9% (for the 2015 grant), in addition to minimum compound annual growth of 5% in earnings per share (following which a vesting scale applies). 33% of the performance rights granted are also subject to these hurdles.

The remainder of the performance rights (67%) are subject to the relative TSR hurdle. The comparator group are 100 companies ranked between 50 and 150 on the S&P index. Performance below the 50% percentile results in zero award. Maximum incentive is reached at the 75th percentile. ASA prefers that vesting commences at 30% at the 50.1% percentile, rising with a sliding scale vesting of 2% to 85%, and 100% above the 85% percentile.

Given the report is broadly in line with ASA's voting guidelines, we will vote undirected proxies in favour of this resolution.

ASA Position
Item 5: Increase to aggregate fee pool of non-executive directors

Approval is sought for an increase of $300,000 to the fee pool for non-executive directors, that is, an increase from $1.6 million to $1.9 million. The company is currently using about 80% of the $1.6 million fee pool. It is not intended to utilise the full amount in the near future. It will allow for an increase in director fees during a transition period for the purposes of Board planning, and to allow for adjustments to directors fees in line with market conditions.

This is a reasonable request and we support the resolution.

The individual (or their associates) involved in the preparation of this voting intention does not have a shareholding in this company. 

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