Continued operational improvement for Orkla
Orkla’s operating profit (EBITA) increased by 9% to NOK 1,124 million in the third quarter of 2011.
Orkla Brands has compensated for the high raw material prices, and delivered satisfactory results for the quarter. Borregaard continues to benefit from good market conditions, and the company delivered its best quarterly result ever. Sapa is experiencing softer markets, especially in Europe, but profit performance for its extrusion operations in North America is satisfactory.
“Due to our focus on operational excellence, Orkla can show improvement in operating profit for the ninth consecutive quarter, despite challenging markets for several of our businesses,” reports Orkla President and CEO Bjørn M. Wiggen.
Results for Orkla Brands are on a par with last year, and margins for the branded consumer goods business have stabilised. In difficult grocery markets, Orkla Brands has implemented price increases to compensate for higher raw material prices. Raw material prices were significantly higher than in the third quarter of 2010, but have recently fallen slightly. Price trends for the different raw materials vary substantially. Orkla Brands’ Russian business has achieved some profit improvement, and the merger of SladCo and Krupskaya is proceeding as planned.
Sapa’s extrusion business is experiencing softer markets. Profit performance for Sapa Profiles North America is satisfactory, while the weak trend in Europe continues. Expectations of underlying market growth in 2011 as a whole were reduced in the course of the quarter. For Sapa, the fourth quarter is expected to be slightly weaker than the third quarter.
“It is positive that Sapa’s North American operations are still showing improvement in more challenging markets. At the same time, the difficult economic situation in Europe underscores the necessity of the additional restructuring measures that are now being implemented in our European organisation,” Bjørn M. Wiggen points out.
Borregaard continues to experience favourable markets and achieve profit growth. The speciality cellulose business reported particularly strong profit improvement.
“The fact that Borregaard has delivered its highest quarterly result ever shows that the organisation is capable of optimising its production and marketing operations in good market conditions. At the same time, good progress is being made on new innovations,” declares President and CEO Bjørn M. Wiggen.
At Orkla Investor Day in London on 14 September, Orkla explained the company’s strategy. Orkla’s growth is to take place in the branded goods business. Furthermore, the Share Portfolio, REC, Borregaard and Sapa will lie outside Orkla’s future area of growth.
“We have clearly defined the direction in which Orkla is to go. Orkla is to be further developed as the leading branded goods company in the Nordic region, based on Orkla Brands’ strong market positions. At the same time, we will give priority to seeking out new companies operating in categories close to our present businesses, while maintaining our centre of gravity in the Nordic region. In our view, the unrest in the financial markets may offer greater opportunities for value-creating acquisitions,” says Wiggen.
“Orkla faces a demanding phase of transformation, in which we have deliberately put ourselves under considerable pressure. We will deal with this process in accordance with our fundamental principles, where the Group’s goal of long-term value creation will be determinant for our decisions,” affirms Bjørn M. Wiggen.