Investments in associates accounted for under the equity method are investments in companies in which the Orkla Group has significant influence by virtue of its ownership interest. These are usually companies in which Orkla owns a 20-50% stake. This type of investment is accounted for by the Group presenting its share of the associate’s profit/loss on a separate line in the income statement and accumulating the results reported for the share on a single line in the statement of financial position. Any excess values that are to be amortised are deducted from profit according to the same principles as for consolidated companies. Goodwill is not amortised. Dividends received from associates are reported against the ownership interest in the statement of financial position and regarded as repayment of capital. The statement of financial position value of associates thus represents the original cost price plus profit accumulated up to the present, minus any amortisation of excess values and accumulated dividends received and taking account of the share of any translation differences and the like in the associate. Any write-downs of the value of the ownership interest are presented on the same line. For the time being, the investment in REC is presented at market value (see the explanation below).
Figures for associates that do not report in accordance with IFRS are restated prior to inclusion in the consolidated financial statements. Associates that are part of the Share Portfolio are presented in Note 24.
|Amounts in NOK million||Renewable Energy Corporation (REC)||Jotun||Fornebu Utvikling||Others||Total|
|Cost price 31 December 2011||13,469||175||870||-||-|
|Book value 1 January 2009||14,790||1,552||477||293||17,112|
|Share of profit 2009||(931)||250||(103)||-||(784)|
|Share of profit/loss 2010||393||325||(43)||(30)||645|
|Gains on sale 2010||-||-||-||27||27|
|Share of profit/loss 2011||(3,981)||265||0||20||(3,696)|
|Items charged to equity 2009||(644)||187||-||-||(457)|
|Items charged to equity 2010||114||(169)||-||-||(55)|
|Items charged to equity 2011||30||64||8||2||104|
|Book value 31 December 2009||11,821||1,902||616||337||14,676|
|Book value 31 December 2010||7,049||1,961||573||407||9,990|
|Book value 31 December 2011||1,315||2,182||581||645||4,723|
|Ownership interest 31 December 2011||39.7%||42.5%1||32.4%|
1 The Group has 38.3% of the voting rights in Jotun.
The following table shows 100%-figures for Orkla’s largest associates accounted for under the equity method. Figures for the remaining associates accounted for under the equity method and associates in the Share Portfolio are largely based on estimates, and it is difficult to present reliable figures for these companies. Orkla has no contingent liabilities in associates, either on its own or jointly with other investors.
Key figures (100%):
|Amounts in NOK million||2011||2010||2011||2010|
|Profit/loss after taxes and non-controlling interests||603||808||(10,030)||9891|
1 Includes profit of NOK 101 million from discontinued operations.
Orkla has been an active non-controlling shareholder in Jotun for almost 40 years. The cost price paid for Jotun was NOK 175 million, while the carrying value under the equity method is NOK 2,182 million. Orkla has a 42.5% ownership interest in Jotun, which serves as the basis for recognition in accordance with the equity method, while it has 38.3% of the voting rights. Orkla owns 42,000 A shares and 103,446 B shares in the company. An A share carries 10 times as many votes as a B share.
A total of 23.5% of Orkla’s investment in REC derives from the acquisition of Elkem in 2005, while the remaining investments increasing the ownership interest to 39.7% were made by Orkla during 2006 and in 2007. The investment is of a financial nature and is recognised in principle as an associate under the equity method. Orkla originally had its own valuations of REC, which were compared with the carrying value. In 2009, when the difference between the Group’s valuation and the market’s valuation in the form of the market price became too great, the Group decided to use the market price as a value indicator and thus write the value down to market price on an ongoing basis. Under this principle, moreover, the writedown is reversed when the market price rises, as long as the market price is lower than the carrying value, in accordance with the principles for associates. The REC share was quoted at NOK 3.32 at 31 December 2011, compared with NOK 17.79 on the same date in 2010. In 2011, a further write-down of NOK 5.8 billion was thus taken due to the weak share performance. The value under the equity method is NOK 33.00 per share. Reported profit/loss from REC does not tally exactly with changes in the market price multiplied by the number of shares. The reason for this is that underlying translation effects recognised in REC’s comprehensive income statement will be an income statement element in Orkla’s financial statements under the method now used by the Group. Translation effects are normally reported against the ownership interest, but in a situation where the value of the interest is determined by the market price, items reported directly against the interest will have to be compensated for through recognition in the income statement. The result was impacted by NOK -30 million due to this effect.
Orkla’s shares in Fornebu Utvikling ASA were sold on 30 January 2012 for NOK 2.45 per share, or NOK 658 million for the entire shareholding.