Cash flow (see Note 40)
Group cash flow from operations totaled NOK 2,460 million, compared with NOK 2,469 million in 2010. For the full year, there was an increase in working capital due to increased activity and higher raw material costs.
Expansion investments amounted to NOK 906 million in 2011, and were mainly related to Sapa’s capacity expansion and Axellus’ purchase of Nutrilett trademark rights.
The Group acquired companies and shares of companies in 2011 at a total cost of NOK 1,498 million. These acquisitions consist primarily of Sapa’s purchase of Alufit and Haihong, and Orkla Financial Investments’ increased stake in Finansgruppen Eiendom (FG Eiendom). In 2011, Orkla Brands acquired the companies Henskjold, Dagens AS and Rasoi Magic, as well as two smaller companies.
In the Share Portfolio, net sales of securities totalled NOK 4,494 million (NOK 2,130 million)2 in 2011.
* Figures as reported in 2007-2010. For industrial activities.
An extraordinary dividend of NOK 5.00 per share was paid in November. When this is added to the ordinary dividend of NOK 2.50 per share, Orkla paid dividends and carried out share buybacks for a total amount of NOK 7.5 billion in 2011.
The group has freed up capital totalling NOK 18.0 billion in 2011 through the sale of businesses (Elkem and Utstillingsplassen) and by selling off assets in the Share Portfolio. The freed-up capital has been used to reduce the Group’s net interest-bearing liabilities by NOK 9.0 billion, to NOK 10.6 billion at the end of the year, as well as to pay dividends and buy back Orkla shares.
The Group’s average borrowing rate for the full year was 2.7% on average interest-bearing liabilities of NOK 12,563 million. The interest-bearing liabilities are chiefly distributed among the currencies NOK, EUR, GBP and USD.
1 Operating profit before amortisation and other income and expenses.
Foreign currency
In 2011, approximately 82% of Orkla’s sales revenues were generated outside Norway. Both Orkla Brands and Sapa Profiles are moderately exposed to changes in foreign exchange rates, as both business areas mainly have local production facilities.
However, Borregaard Chemicals and Sapa Heat Transfer in Sweden are exposed to currency fluctuations, with cost bases in NOK and SEK, respectively, and export revenues in EUR and USD. Borregaard has a foreign currency exposure of approximately EUR 100 million and USD 200 million, while Sapa Heat Transfer has a corresponding exposure against SEK of approximately EUR 80 million and USD 40 million.
The Group’s liabilities are spread across currencies in accordance with its net investments in countries other than Norway, and liabilities measured in NOK will therefore fluctuate in step with changes in exchange rates.
Contracts and financial hedge instruments
Orkla Brands generally has few longterm purchasing or selling contracts. In 2011, Borregaard entered into a long-term hydropower agreement with Eidsiva Vannkraft AS. The contract secures power deliveries for Borregaard’s plant until 2025. In the Hydro Power area, AS Saudefaldene has some longterm power contracts. Further details of contracts and financial instruments may be found in Note 23 to the annual financial statements.
Capital structure
During 2011, the consolidated statement of financial position was reduced by NOK 21.1 billion to NOK 66.4 billion at year end. The reduction is largely the result of the freeing up of capital through the sale of Elkem and the net sale of shares in the Share Portfolio. Furthermore, the value of the Group’s investment in REC was reduced by the fall in the REC share price in 2011.
Net interest-bearing liabilities were reduced by NOK 9.0 billion in the course of the year and net gearing4 was reduced to 0.31 (0.42)2.
After paying dividends and share buybacks for a total amount of NOK 7.5 billion in 2011, the Group’s equity was approximately NOK 34 billion at year end. This is equivalent to an equity ratio of 51.8% (53.6%)2. At the start of 2012, the Group has a satisfactory capital structure and substantial financial flexibility.
* Figures as reported in 2007-2010.
Pensions
Orkla’s businesses in Norway have defined contribution pension plans. Most of the pension plans outside Norway are also defined contribution plans. An estimated two thirds of the Group’s pension costs are related to defined contribution plans, which means that the Group’s exposure to future pension liabilities is relatively predictable. Pension costs in 2011 were slightly lower than in 2010.
The Orkla share
At the end of 2011, there were 1,028,930,970 Orkla shares. The number of shareholders fell by 935 to 46,200. The proportion of shares held by foreign investors increased by 2 percentage points to 41%.
*The Orkla share, dividend reinvested.
The price of the Orkla share was NOK 56.70 at the start of the year. At year end, the price was NOK 44.65. Taking into account the ordinary and extraordinary dividends, the return on the Orkla share was -8% in 2011, while the return on the Oslo Stock Exchange Benchmark Index was -12%. The value of Orkla shares traded at the Oslo Stock Exchange in 2011 amounted to NOK 40 billion. This is equivalent to 2.6% of the Exchange’s total trading volume. Further information on shares and shareholders may be found under Share information.
1 Operating profit before amortisation and other income and expenses.
2 Figures in parentheses are for the corresponding period the previous year.
4 Net interest-bearing debt/equity.