Orkla Brands comprises Orkla’s most advertising and marketing-intensive product categories, and has the Nordic region as its domestic market. Orkla Brands companies produce detergents, personal hygiene/cosmetics products, snacks, confectionery, biscuits, textiles, dietary supplements and health products. Based on solid, long-standing traditions, the companies develop, manufacture and market leading branded consumer goods that have a strong identity and position among consumers and retailers.

MAIN EVENTS IN 2006	FOCUS IN 2007
Acquisition of Dansk Droge. Targets for organic revenue growth achieved and several successful launches carried out. Extensive improvement projects at factories in several segments. Growth in market shares for all segments except for the Biscuits business.	Continue to focus on innovation and sales activities. Improve competitiveness by implementing planned improvement programmes for manufacturing and purchasing. Realise synergy gains from acquired companies in the Dietary Supplements and Health Products business. Focus on efficient structure and organisation.

Orkla Brands’ product portfolio includes strong, well-known brands such as Jif, Omo and Define (Lilleborg), Stratos and Nidar Favoritter (Confectionery), Möllers Tran and Gerimax (Dietary Supplements and Health Products), KiMs, OLW, Taffel and Polly (Snacks), Ballerina and Café Cookies (Biscuits), and LaMote and Pierre Robert (Textiles). These products are primarily sold through grocery outlets.

Orkla Brands’s strategy is to focus and concentrate innovation and market support on strong brands. Orkla Brands’ companies largely hold number one positions on the markets in which they operate. Orkla Brands intends to further develop the Nordic region as its domestic market and expand in selected markets outside the Nordic region. In 2006, 92 % of operating revenues came from the Nordic market. Dansk Droge was incorporated into Orkla Brands in September 2006. As a result of the acquisitions that have been made in the past two years, Orkla Brands’ annual turnover has increased by more than 50 % and it has strengthened its positions both within and outside the Nordic region. At the end of 2006 the total workforce was equivalent to 3,312 man-years.

RESULTS

Orkla Brands’ operating revenues amounted to NOK 7,250 million in 2006, equivalent to an underlying¹ growth of 3 %. All segments except Biscuits achieved sales growth, largely due to successful innovations and a higher level of activity relating to established brands. However, competition from private labels poses a challenge. Systematic, targeted efforts are still being made to increase the rate of innovation, meet tougher competition and generate profit growth. Customer relations have also been strengthened with a view to maximising profit for both customers and Orkla Brands.



Operating profit before amortisation amounted to NOK 1,177 million. The increase of NOK 128 million compared with 2005 is ascribable to both expansion and organic growth. The greatest underlying¹ growth was achieved by Confectionery and Lilleborg. Only the Biscuits business suffered a decline in profit. However maintaining margins has been a challenge, not least due to stronger pressure on prices. Orkla Brands is working on extensive improvement programmes, primarily in the field of manufacturing and purchasing. These efforts are important in order to achieve profit growth. Dansk Droge was consolidated in the financial statements from September 2006 and it will be important to realise synergy gains from the merger with MöllerCollett in the near future.

The continued focus on innovation resulted in several launches of new products in 2006, the largest of which was Pierre Robert underwear (Textiles). Other important launches included the Jif Window System (Lilleborg), the Smash! bar (Confectionery), OLW Cheez Cruncherz (Snacks) and Bixit Sport (Biscuits).

LILLEBORG

Lilleborg is the largest manufacturer and marketer of branded cleaning and personal care products in Norway. Despite pressure on prices from private labels, underlying¹ operating revenues were 2 % higher than in 2005. This achievement was largely due to several successful launches of new products and campaigns, primarily in the area of laundry and cleaning. The Jif Window System was the biggest innovation of the year. As expected, however, the company’s export sales to Unilever declined. Operating profit for 2006 was slightly higher than in 2005. A rise in volume made a positive contribution, but this was somewhat offset by higher purchasing costs. All in all, market shares were slightly stronger.

LILLEBORG PROFESSIONAL

Lilleborg Professional is Norway’s leading total supplier of cleaning and hygiene systems for the professional market. Lilleborg Professional’s operating revenues were 7 % higher than in 2005. Operating profit was slightly stronger, largely due to innovations.

CONFECTIONERY

Underlying¹ operating revenues for Confectionery were 4 % higher than in 2005, largely due to good sales of new products launched during the year. The main launches were Nidar Smågodt Favoritter, Doc Pluss, Smash! bar and Store IFA. Operating profit was better than the previous year, but this must be considered in relation to certain non-recurring factors in 2005. The combination of higher revenues and efficiency improvements in the value chain had a positive impact on profit. Market shares were on a par with 2005.

SNACKS

Underlying¹ operating revenues were up 5 % compared with 2005. All the Nordic snacks businesses increased their sales. The strongest growth was in Norway, primarily due to a good innovation programme. Operating profit was also somewhat higher than in the previous year. Profit growth in the Nordic region was partially offset by higher costs in Russia. Market shares for the Snacks business increased in Norway and Finland but declined slightly in Sweden and Denmark.

BISCUITS

There was a 3 % underlying¹ decline in operating revenues for the Biscuits business compared with 2005, largely related to the Swedish market. In the course of 2006, the Biscuits business intensified its efforts in Finland and Denmark by selling through the sales organisation of the Snacks business. The Kungälv factory had delivery problems, which had a slightly negative effect on both revenues and costs. There is still strong competition from private labels. Operating profit for Biscuits was weaker than in 2005 and market shares declined somewhat in both Sweden and Norway.

TEXTILES

Underlying¹ operating revenues for Textiles were 9 % higher than in 2005. This growth was ascribable to the launch of Pierre Robert underwear and increased distribution in Norway. Sales for the Swedish business were lower due to weaker distribution. Operating profit for Textiles improved as a result of the positive trend in Norway. A decision has been made to close down the Finnish business due to several years of negative profit performance.

DIETARY SUPPLEMENTS AND HEALTH PRODUCTS

This business consists of Dansk Droge and MöllerCollett. Dansk Droge was consolidated in the financial statements from September 2006. As a result of this acquisition, the business has established a position as the leading player in the Nordic region in the Dietary Supplements and Health Products category. The four main brands produced by the new unit are Möllers Tran, Gerimax, Nutrilett and Litozin. Products are primarily sold through grocery stores in the Nordic region and pharmacies and health food stores elsewhere.

Underlying¹ operating revenues for Dietary Supplements and Health Products were 4 % higher than in 2005. Operating profit was higher than the previous year, largely due to acquisitions.

Following the merger with Dansk Droge, work is in progress on organisational changes to realise synergy gains. These changes will primarily be related to sales and production.

RISK FACTORS

Orkla Brands has identified several potential risks. Weak innovations may harm the market positions of strong brands that largely hold number one positions. Higher prices for factor inputs, due to both currency fluctuations and higher raw material prices, may lead to lower margins. In the manufacturing, there are risks of stoppages, production errors, fires/explosions or accidents that affect employees. Orkla Brands’ presence in countries outside the Nordic region, where its knowledge of market mechanisms and external operating parameters is not as good as in the Nordic region, also represents a risk. There is market risk relating to consolidation in the retail trade and the increasing entry of major international players on domestic markets. Stronger focus on health entails a risk for some product categories, but also presents possibilities that are being actively pursued, for example through stronger focus on dietary supplements and health products. Risk relating to the realisation of synergy gains has increased in recent years due to expansion through acquisitions.



¹ Excluding acquisitions, divestments and currency translation effects.