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Improvement for Orkla in the Nordic region

President & CEO Åge Korsvold

President & CEO Åge Korsvold

Orkla’s operating profit (EBITA) totalled NOK 1,103 million in the fourth quarter of 2012, up from NOK 873 million in the corresponding period of 2011. The Nordic branded consumer goods businesses and Sapa Heat Transfer achieved profit improvement.

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For continuing operations, Orkla’s fourth-quarter operating revenues totalled NOK 8,457 million, compared with NOK 8,124 in the corresponding period of 2011.

Full-year operating revenues amounted to NOK 30 billion. Operating profit was NOK 3,295 million in 2012, compared with NOK 2,872 million in 2011.

“Simultaneously with implementing comprehensive structural changes, we achieved profit growth in our core business. I am particularly pleased that many of our large branded consumer goods companies in the Nordic region reported improvement in the latter part of the year. Orkla now has a single strategic agenda: building up our position as the leading Nordic branded consumer goods company,” says President and CEO Åge Korsvold.

The branded consumer goods business

The Nordic food companies achieved sales growth in the grocery channel in the fourth quarter. Operating profit in Orkla Foods Nordic amounted to NOK 392 million, a rise of 11% in relation to comparable operating profit in the fourth quarter of 2011. Stabburet continued to improve its performance in the Norwegian market. Abba Seafood (Sweden), Beauvais foods (Denmark) and the Baltic businesses also delivered profit growth. The Finnish businesses posted operating profit on a par with the fourth quarter of 2011. Abba Seafood and Procordia are to be integrated and will form one of Sweden’s leading food companies. Following completion of the acquisition of Rieber & Søn, Orkla will establish national food companies in Norway and Denmark as well. This is subject to the approval of the competition authorities.

Orkla Brands Nordic also achieved sales growth in the grocery channel. Operating profit in the business area amounted to NOK 408 million, an improvement of 16% in relation to comparable operating profit in the fourth quarter of 2011. Lilleborg and Nidar reported both sales and profit improvement in the Norwegian market. Profit also increased for large Nordic businesses such as the Chips Group and the Axellus Group. Göteborgs/Sætre saw a decline in profit as a result of high factory costs related to ongoing restructuring and demanding conditions in the Norwegian grocery market. Jordan became part of Orkla Brands Nordic on 1 September 2012. The company, which is market leader in the Nordic region for oral hygiene and paintbrushes, is performing in accordance with expectations.

Orkla Brands International posted operating profit of NOK 62 million, compared with NOK 87 million in the corresponding period of 2011. MTR Foods continued to increase its sales in India, even though growth was lower than at the start of 2012. Orkla Brands Russia is undergoing a demanding adjustment process. Changes in the market situation, where nation-wide grocery chains in particular are taking market shares, necessitates significant restructuring of operations.

Orkla Food Ingredients reported operating profit of NOK 74 million, an improvement of 8% in relation to comparable operating profit in the fourth quarter of 2011. Despite weak markets in Southern and Eastern Europe, both operating revenues and operating profit increased.

Other businesses

Sapa Heat Transfer posted fourth-quarter operating profit of NOK 73 million, up from NOK 6 million in the corresponding period of 2011. This improvement is the result of a comprehensive improvement programme implemented in the Swedish production operations. The company had lower deliveries to the European automotive industry, but this was largely offset by increased demand in the USA and China. Orkla’s goal is to divest Sapa Heat Transfer in the first quarter of 2013.

Operating profit for Orkla Eiendom in the fourth quarter was NOK 104 million, compared with NOK 28 million in the corresponding period of 2011. Hydro Power reported fourth-quarter operating profit on a par with the same period of 2011.

Profit from associates amounted to NOK 47 million in the fourth quarter, compared with NOK 59 million in the corresponding period of 2011. Profit was mainly linked to Jotun, which achieved satisfactory sales growth in the quarter.

Sales of shares totalled NOK 436 million in the fourth quarter. As at 31 December 2012, the market value of the share portfolio was NOK 2,630 million. The portfolio is expected to be sold in the first half of 2014.

Discontinued operations

Together with Norsk Hydro, Orkla aims to establish a globally leading provider of aluminium solutions. The establishment of the joint venture is subject to the approval of the competition authorities. The Sapa operations that will be part of the joint venture were highly negatively impacted by weak European markets, while there was improvement in North America.

In the fourth quarter, 81% of the shares in Borregaard Chemicals were sold in connection with the company’s listing on the stock exchange, generating a total accounting gain of NOK 110 million. NOK 412 million related to the adjustment of the value of the investment in REC was expensed in the quarter.

Orkla’s profit before tax amounted to NOK 638 million in the fourth quarter, compared with NOK 1,317 million in the corresponding period of 2011. The Board of Directors of Orkla ASA proposes to pay a dividend of NOK 2.50 per share for the 2012 financial year.