Profit growth and more focused operations
Orkla’s operating profit (EBITA) increased by 19% to NOK 786 million in the first quarter of 2011. Sapa continues to achieve profit growth, and Borregaard can report strong markets and good results. Orkla Brands’ Nordic businesses performed satisfactorily, taking account of negative Easter effects.
The Nordic operations in Orkla Brands delivered profit on a par with the same period of last year, taking account of Easter effects. Orkla Brands is compensating for the continuing rise in global raw material prices into 2011, but there is a natural lag in impact. Further price increases are therefore planned. Due to the late Easter this year, the effect of Easter sales will not be seen until the second quarter.
The restructuring and merger of SladCo and Krupskaya to form Orkla Brands Russia are expected to strengthen the competitiveness of the Russian operations. The first-quarter results reflect one-off costs related to the restructuring process, as well as higher input costs that have not been fully offset by price increases.
Sapa achieved profit growth compared to the same period of last year, as well as to the fourth quarter of 2010. Although the market for aluminium extrusions is still significantly lower than levels in a normalised economic situation, the results reflect an improvement in the US extrusion market, especially within the transport segment. The market for Heat Transfer remains strong.
“Along with growth in Asia, a stronger US market is important for global growth in the aluminium extrusion market. Efforts to reduce costs continue to be intensified pending an improvement in the building and construction segment of the European market,” says Orkla President and CEO Bjørn M. Wiggen.
Borregaard has delivered very good first-quarter results. There is strong demand for speciality cellulose and prices are high, and there is also good demand for other products. The weak results reported by Hydro Power are due to low inflow both in Sauda and to Borregaard’s power plants. The Investment Portfolio achieved a slightly higher return than the Nordic indices with which it is compared.
Orkla took new steps in the first quarter towards focusing its operations. The agreement with the Chinese company Bluestar on the sale of Elkem was completed on 14 April. At the same time, Sapa acquired an extrusion business in India, and entered into an agreement to establish production of aluminium extrusions for rolling stock in a joint venture with China’s largest aluminium company, Chalco. Orkla Brands has signed an agreement to buy Rasoi Magic Foods, an Indian manufacturer of spices and spice mixes.
“The sale of Elkem has laid an important part of the foundation for a stronger focus on further investment in, and development of Orkla Brands and Sapa, both operationally and structurally. The formation of a joint venture with Chalco is a good example of this focus,” points out Orkla President and CEO Bjørn M. Wiggen.