Growth drivers, financial targets and outlook
Orkla's growth drivers, financial targets and outlook.
- Organic growth
- Mergers and acquisitions (add-on acquisitions)
- Margin improvements
- Deliver on initiated and ongoing structural processes
Focus on activities that drive organic growth and improve margins
- Strong innovation programmes
- More cross-market initiatives
- Increase sales force effectiveness
- Strengthen relations with our customers
- Optimising production structure
Updated financial targets 2016-2018 announced at Orkla’s Investor Day 2015
- Deliver organic growth at least in line with market growth
- Target annual adj. EBIT growth of 6-9%1 in BCG
1Including add-ons, excluding currency effects and large acquisitions and divestments
Source: Orkla's 2nd quarter 2017 report
In the markets in which Orkla has a presence, growth is expected to remain moderate in the years ahead, with some variation from market to market.
Orkla continues to face strong competition from imported international brands and retailers’ private labels. To meet this competition, as well as changing trends and consumer needs, Orkla must continue to maintain strong focus on innovation and operational and portfolio optimisation in order to secure its competitiveness and position in the future. Efforts to optimise and rationalise the supply chain so as to exploit economies of scale and reduce costs will continue.
Overall, the global commodity prices to which Orkla is exposed have risen somewhat in the recent past, and are now higher than in the same period of last year. However, prices vary substantially from one commodity group to another, and the uncertainty attached to future commodity price trends is generally high. In the first half of 2017, the euro has strengthened substantially against the Norwegian krone, which will put further pressure on purchasing prices.
The different business areas are exposed to varying degrees to currency risk, primarily related to purchasing in a foreign currency. Orkla also has currency translation exposure in connection with the consolidation of foreign businesses. There will always be uncertainty as to future exchange rate trends. Many of Orkla’s Norwegian companies do a substantial share of their purchasing in Norwegian krone, thereby reducing the overall impact of fluctuations in the exchange rate of the Norwegian krone against other currencies.
The strategy of being a leading branded consumer goods company with the Nordic and Baltic regions as main markets in addition to selected geographies where Orkla already has a presence remains unchanged. Orkla aims to deliver organic2 growth that at least matches market growth and growth in annual adjusted EBIT (adj.)3 of 6–9% in Branded Consumer Goods in the period 2016–2018.
2 Reported growth in operating revenues adjusted for currency translation effects and purchased and sold companies. The figures for purchased/sold companies have been adjusted for a period of 12 months. The main reason for this alternative performance measure (APM) is to show the like-for-like development of turnover in the existing business.
3 Operating profit before other income and expenses.