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Weaker operating profit for Orkla

From left: CFO Terje Andersen, President & CEO Åge Korsvold and CEO Orkla Foods Atle Vidar Johansen

From left: CFO Terje Andersen, President & CEO Åge Korsvold and CEO Orkla Foods Atle Vidar Johansen

Orkla’s operating profit (EBITA) amounted to NOK 632 million in the second quarter, compared with NOK 698 million in the corresponding period of 2012.

June was a weak sales month for the Nordic branded consumer goods companies. The Russian market still presents major challenges.

“Our operating profit is not satisfactory. We face tough competition from multinational companies and the chains’ private labels. Both the change processes that we are implementing and the integration of Rieber & Søn have required substantial internal resources and attention. We are now ready to reinforce our market plans and initiate assertive marketing activities,” says Orkla President and CEO Åge Korsvold.

Orkla’s operating revenues totalled NOK 7,905 million in the second quarter, compared with NOK 7,213 million in the same period of 2012. The increase is ascribable to the acquired businesses in Rieber & Søn and Jordan. Orkla’s profit before tax was NOK 514 million in the second quarter, compared with NOK 938 million in the same period of 2012.

The Branded Consumer Goods business

Operating profit for Orkla Foods amounted to NOK 263 million, compared with NOK 262 million in the corresponding period of 2012. Profit for Rieber & Søn was substantially lower than in the corresponding period of last year. Stabburet posted lower profit compared with a good second quarter in 2012. Profit improved in Sweden, Denmark, Finland and the Baltics. Since the competition authorities approved the acquisition of Rieber & Søn in April, a comprehensive integration process has been implemented. Rieber & Søn Norge and Stabburet are to become one of Norway’s leading food companies. Frödinge will become part of the leading Swedish food company formed by newly merged Procordia and Abba Seafood. Rieber & Søn Danmark and Beauvais foods will  become a strong Danish branded consumer goods company.

Orkla Confectionery & Snacks reported operating profit of NOK 119 million in the second quarter, compared with NOK 151 million in the same period of 2012. The competitive situation is challenging. Major organisational changes have been carried out. A single company is being established in each country, with a view to strengthening collaboration and integration across the chocolate/confectionery, snacks and biscuits categories.

Orkla Home & Personal had a satisfactory quarter and posted operating profit of NOK 165 million, up from NOK 131 million in the same period of 2012. The profit improvement is ascribable to Lilleborg (Norway) and Axellus, and to contributions from Jordan House Care. The integration of Jordan Personal & Home Care in Lilleborg is proceeding as planned.

Orkla International posted an operating loss of NOK -40 million, compared with NOK -15 million in the second quarter of 2012. Orkla Brands Russia saw a decline in sales in a difficult Russian chocolate market. Further write-downs and provisions totalling NOK 435 million have been made in connection with the Russian operations. The Rieber & Søn companies Vitana (Czech Republic), Rieber Polska and Rieber Russia became part of Orkla International in May 2012.

Orkla Food Ingredients (OFI) reported satisfactory operating profit of NOK 77 million in the second quarter, compared with NOK 68 million in the same quarter of 2012. This improvement is attributable to acquired businesses and increased sales of bakery ingredients in Norway and Denmark. OFI’s ice cream ingredients business delivered a good performance.

Other businesses

Sapa Heat Transfer posted second-quarter operating profit of NOK 84 million, compared with NOK 102 million in the same period of 2012. The factory in Finspång (Sweden) is still not operating at its targeted productivity level, in addition to which profit has been negatively affected by the  strong Swedish krone. The trend on the European automotive market was negative, while the North American market was on a par with last year. Growth in the Chinese automotive market accelerated. Orkla has engaged in exclusive negotiations with a potential buyer for Sapa Heat Transfer, but the parties have now agreed to terminate these negotiations.

Hydro Power posted operating profit of NOK 77 million, compared with NOK 46 million in the second  quarter of 2012. Jotun, in which Orkla holds a 42.5% ownership interest, strengthened its results.

Orkla’s remaining shares in Borregaard and REC have now been sold. Share disposals totalled NOK  2.1 billion. As at 30 June 2013, the market value of Orkla’s shares and financial assets was NOK 1.1 billion.

Discontinued operations

Orkla has concluded an agreement with Norsk Hydro to form a company that will be a globally leading supplier of aluminium solutions. The European and US competition authorities have approved the joint venture, but a reply is still awaited from the Chinese competition authorities. Operating profit from discontinued operations amounted to NOK 163 million in the second quarter and is entirely related to Sapa’s extrusion and building system business, which is to be part of the future joint venture with Norsk Hydro. Sapa’s extrusion and building system business is achieving profit growth in North America, while markets in Europe remain weak. Goodwill was written down by NOK 1,161 million. The write-down does not affect the agreement with Norsk Hydro.

Orkla ASA
Oslo, 18 July 2013

Ref.:
EVP Corporate Communications and Corporate Affairs
Håkon Mageli
Tel: +47 928 45 828

SVP Investor Relations
Rune Helland
Tel: +47 22 54 44 11 / +47 977 13 250