Profit growth for Orkla in fourth quarter
Comprehensive cost reduction measures generate positive effects.
Orkla’s operating profit (EBITA ) amounted to NOK 1,070 million in the fourth quarter of 2009, compared with NOK 998 million in the same period of 2008. Good results for Orkla Brands and reduced costs for Sapa contributed to the profit growth. The Share Portfolio performed well in the fourth quarter; the return for the year was 39 percent, which is 3 percent better than the Nordic benchmark.
Orkla’s full-year operating revenues totalled NOK 56.2 billion (NOK 65.6 billion ). The decline can be ascribed to weak price and volume peformance in Sapa’s and Elkem’s markets. The Group’s operating profit (EBITA) amounted to NOK 2.4 billion (NOK 4.2 billion). Orkla Brands and Jotun (Orkla owns 42.5 percent of the shares) delivered their best full-year results ever, and comprehensive cost reduction programmes lowered break-even levels for Sapa, Elkem and Borregaard.
Orkla’s cash flow from operations increased from NOK 2.5 billion in 2008 to NOK 5.8 billion in 2009. At the same time, the Group’s financial position was strengthened by reducing net interest-bearing liabilities by NOK 7.6 billion.
In line with Orkla’s dividend strategy, the Board of Directors proposes to pay an ordinary dividend of NOK 2.25 per share for 2009, the same amount as in the two preceding years.
“2009 was a challenging year with weak markets for several of Orkla’s businesses. However, comprehensive measures have proved effective, and the Group strengthened its financial position in the course of the year. The Group is well positioned for the future,” affirms President and CEO Dag J. Opedal.
A number of strategic moves were also carried out in 2009. Orkla took over Alcoa’s stake in Sapa Profiles, thus becoming sole owner, while Alcoa took over Orkla’s stake in Elkem Aluminium. Through the acquisition of the aluminium extrusion company Indalex in the USA, Sapa considerably strengthened its position in the North American market. Elkem Solar’s factory in Kristiansand and the expansion of Sapa Heat Transfer’s factory in China were other important expansion projects in 2009. Furthermore, REC (Orkla’s stake: 39.7 percent) is also in a ramping-up stage that will continue into 2011.
Orkla’s investment in REC is reported as an associate. As long as REC’s market price is lower than the carrying value of the associate in Orkla’s financial statements, Orkla will apply the market price at quarter-end as the accounting value. The value will be written up or down according to the future market price until the market price is higher than the carrying value of the associate. In the fourth quarter, this approach entails an accounting charge of NOK 3.1 billion.
The sales value of Elkem’s hydropower plants in Salten and Bremanger was NOK 6 billion, generating an accounting gain of over NOK 4 billion.