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Orkla Brands' fourth quarter 2011 results

- Weak December sales in the Nordic region

- Profit growth in Russia

- Sale of Bakers

Orkla Brands’ end of the year was affected by weak performance in some companies, in terms of both sales and profit. However, this must be seen in conjunction with a strong year-end performance in 2010. Fourth-quarter operating revenues totalled NOK 6,869 million (NOK 6,980 million)2. Underlying3 sales increased by 1% in the quarter, as price increases offset the decline in volume/mix. The introduction of a tax on fat in Denmark resulted in lower sales. The market trend was particularly demanding in Denmark and Finland. Overall market shares were maintained, but performance varied between companies. 

Fourth-quarter EBITA1 amounted to NOK 876 million (NOK 910 million)2. Profit was negatively affected by currency effects arising from the consolidation of foreign companies. Underlying3 profit declined by 3% in the quarter, and 6% for the full year. Several companies, in particular Lilleborg, Göteborgs/Sætre, Beauvais foods and Panda, reported a weak performance. This was partly due to weaker sales development, but also to challenges in their own supply chain. Global raw material prices were at the same level in the fourth quarter of 2011 as in the corresponding quarter of 2010, and slightly lower than in the third quarter of 2011. The substantial increases in raw material prices in 2011 have posed a challenge, but the companies have dealt with it well throughout the year. 

Large companies like Stabburet and Axellus continued to perform well, reporting growth in both sales and profit. The Russian chocolate and biscuits business also achieved good profit growth in the quarter. In Russia, however, the realisation of synergies and sales growth were counteracted by higher advertising investments and non-recurring costs for the full year. 

Both Pierre Robert’s wool Sport Collection and Abba Seafoods “Middagsklart!” (Ready for Dinner) sauces and stew bases were launched in the quarter, but as usual there were fewer launches in the fourth quarter. 
Sale of Bakers was completed with effect from 1 February 2012. Write-downs and costs of NOK 155 million relating to the sale were expensed. 

In the fourth quarter, Orkla Food Ingredients bought a small distribution company for frozen products in Norway (Iglo). 

Orkla Foods Nordic 
Orkla Foods Nordic posted fourth-quarter operating revenues of NOK 2,650 million (NOK 2,719 million)2. This was an underlying3 decline of 1% that was primarily related to Baker’s negative volume performance. EBITA1 amounted to NOK 357 million (NOK 353 million)2, which was equivalent to an underlying3 decline in profit of 3% that was primarily related to weaker development in Finland and Denmark. 
Stabburet’s good programme of launches in 2011 contributed to continued sales and profit improvement in the fourth quarter. The Baltic businesses strengthened their performance in the quarter, while the Finnish businesses, and Beauvais foods in Denmark, reported weaker results than in 2010. Fourth-quarter results for Procordia and Bakers were on a par with 2010 results. 
Orkla Foods Nordic achieved good growth in market shares in Norway and Sweden, while shares declined slightly in Denmark. 

Orkla Brands Nordic 
Orkla Brands Nordic reported fourth-quarter operating revenues of NOK 2,133 million (NOK 2,176 million)2, an underlying3 decline of 1%. EBITA1 amounted to NOK 361 million (NOK 411 million)2, an underlying3 decline of 11%. The drop in profit in the quarter is primarily due to weak year-end sales with lower volumes for Lilleborg, Göteborgs/Sætre and Nidar, and Lilleborg Profesjonell’s loss of a major export customer. Göteborgs/Sætre incurred high costs in the fourth quarter due to production problems at the factory in Sweden. Steps have been taken to improve the flow of goods and productivity at the factory. 
Axellus, the Pierre Robert Group and OLW (Sweden) showed a solid improvement in sales and profit. Axellus reported progress in all the Nordic countries. The Pierre Robert Group achieved higher sales in Norway as a result of strong focus on several wool collections. 

Market share trends varied for Orkla Brands Nordic, but shares declined slightly in the quarter for Göteborgs/Sætre, Nidar and some of the categories in Lilleborg. 

Orkla Brands International 
Orkla Brands International reported fourth-quarter operating revenues of NOK 722 million (NOK 705 million)2, equivalent to an underlying3 growth of 8%. Fourth-quarter EBITA1 amounted to NOK 87 million (NOK 55 million)2. This was equivalent to an underlying3 profit improvement of NOK 38 million. 

All businesses posted higher operating revenues. Profit growth was driven by the businesses in Russia and India. In Russia, profit was boosted by price increases combined with a favourable category mix and the effects of realised synergies. In India, MTR continued to achieve sales growth driven by good volume performance for its core categories, spices and ready mixes. 

Orkla Food Ingredients 
Orkla Food Ingredients posted fourth-quarter operating revenues of NOK 1,457 million (NOK 1,463 million)2, equivalent to underlying3 growth of 2%. Apart from lower sales of butter and margarine products in Denmark (third-quarter sales were unnaturally high because of hoarding due to the introduction of a tax on fat on 1 October), growth was broad-based. This growth can be ascribed to a combination of increased market shares and increases in selling prices in response to the rising costs of input factors. Fourth-quarter EBITA1 amounted to NOK 71 million (NOK 91 million)2. This was an underlying3 decline in profit of 20%, largely due to lower margins resulting from the above-mentioned increases in raw material prices, and a change in markets from small bakeries to industrial players that are not as willing to pay as much.

1. Operating profit before amortisation and other income and expenses. 

2. Figures in parentheses are for the corresponding period in the previous year.

3. Excluding acquired and sold operations and currency translation effects.