Orkla's operating profit (EBITA*) in the third quarter ended at NOK 811 million, compared with NOK 334 million in the second quarter and NOK 1,026 million in the same quarter of last year. Cash flow from operations for the first nine months amounted to NOK 3.1 billion, compared with NOK 1.5 billion for the same period in 2008. Weak international economic conditions continued to impact demand and sales in several of the Group companies, but the underlying trend has been stable through the second and third quarters. The acquisition and integration of Indalex into Sapa's North American extrusion operations have now been completed.
"In the past year, Orkla companies have implemented comprehensive restructuring and cost-cutting programmes. It is therefore gratifying to see that these measures are helping to improve their cost position and not least, ensure a good cash flow. We see clear signs of stabilisation in important markets, but there are still few strong growth signals," says President and CEO Dag J. Opedal.
Orka's third-quarter operating revenues totalled NOK 14.1 billion, down from NOK 15.9 billion in 2008. This is largely due to weak markets for Elkem and Sapa. Nevertheless, vigorous restructuring and cost-cutting measures contributed to a positive result in the quarter for these companies. Orkla Brands continues to report positive profit performance, and Borregaard posted satisfactory results despite weak markets. The return on the Share Portfolio at the end of the first nine months was 26.2 per cent, compared with 30.7 per cent for the benchmark Morgan Stanley Nordic Index.
The equipment damaged in the fire at Elkem Solar's new plant in Kristiansand has now been repaired and test operations began in October. The ramp-up towards normal production levels will start at the end of November.
Sapa's acquisition of Indalex, its biggest competitor on the US market, has been completed with effect from 1 August. This acquisition will be followed by further restructuring of Sapa Profiles North America, and two or three factories will be closed.
Following the Norwegian parliament's decision in 2008 to change the reversion regime, Elkem sold two of its hydropower assets that operate under licence for NOK 6 billion in the third quarter.
*Operating profit (EBITA): Before amortisation, restructuring and significant impairment charges
Key figures Q3-09 (Q3-08) in NOK million:
Operating revenues: 14 088 (15 904)
EBITA: 811 (1 026)
Profit before taxes: 494 (-939)
Earnings per share diluted: (NOK) 0,5 (-1,2)
Cash flow from operations: 1 663 (365)
As of 30 September 2009 (as of 31 december 2008):
Net interest-bearing debt: 28 226 (27 424)
Equity (%): 50,3 (47,7)
Net gearing: 0,59 (0,55)
The third quarter in brief
- Orkla's operating profit (EBITA) for the third quarter amounted to NOK 811 million, compared with NOK 1,026 million in the same quarter last year and NOK 334 million in the second quarter of 2009.
- Cash flow from operations improved, totalling NOK 3,115 million at the end of the first nine months, compared with NOK 1,473 million at the same time last year.
- Weak international economic conditions continued to affect demand and sales in several of the Group's industrial businesses. Third-quarter operating revenues totalled NOK 14,088 million (NOK 15,904 million)1.
- Orkla Brands reported another good quarter with EBITA of NOK 759 million (NOK 708 million)1. Orkla Brands International and Orkla Food Ingredients posted improved results, while the Nordic units performed on a par with last year.
- Due to comprehensive restructuring and cost-cutting measures, Orkla Aluminium Solutions achieved a positive result of NOK 29 million (NOK 92 million)1 in the third quarter. The acquisition and integration of Indalex in the US have proceeded as planned.
- In Orkla Materials, Borregaard reported satisfactory third-quarter results, while Elkem's results reflected continued weak markets and low capacity utilisation, in addition to the ramp-up plan for Elkem Solar being delayed by the fire in July.
- In Orkla Associates, REC reported EBITDA of NOK 429 million (NOK 711 million)1 in the third quarter. Jotun's EBIT for the first eight months was NOK 858 million (NOK 807 million)1.
- At the end of the first nine months, the return on the Share Portfolio was 26.2%, compared with 30.7% for the Morgan Stanley Nordic Index (43.5% for the Oslo Børs Benchmark Index).
- On 4 October 2009, following the Storting's adoption of a new reversion regime in autumn 2008, Elkem entered into an agreement to sell its hydropower plants in Salten and Bremanger, operating under licence, for NOK 6 billion.
Orkla's third-quarter operating revenues totalled NOK 14,088 million (NOK 15,904 million)*. The decline was largely driven by low demand in Orkla Aluminium Solutions, and slow markets for Elkem's silicon-related businesses.
The Norwegian krone strengthened in the third quarter, against both the USD and euro-related currencies, but was nevertheless weaker than in the corresponding quarter of 2008. Currency translation effects therefore had a positive impact on operating revenues, amounting to around NOK 400 million in the third quarter and around NOK 1.65 billion in the first nine months.
The Group's EBITA for the third quarter was NOK 811 million (NOK 1,026 million)*. Orkla Brands reported a satisfactory third-quarter profit performance with underlying** profit growth of 6%. Markets for Orkla Aluminium Solutions remained very slow in Europe and the US, although the latter saw slight growth compared with the previous quarter. Wide-ranging restructuring and cost-cutting measures contributed to positive EBITA of NOK 29 million in the quarter (NOK 92 million)*. In Orkla Materials, Elkem's results reflect continued weak markets and low capacity utilisation in the silicon-related business. Average capacity utilisation in the third quarter was 57%, excluding Solar. Due to the fire in July, Elkem Solar had no production of any significance in the third quarter and thus made a substantial negative contribution to profit. The damage has been repaired and test run begun mid-October. The ordinary ramp-up of the factory will commence as soon as the repairs have been tested and approved. Borregaard reported satisfactory third-quarter profit, and EBITA ended at NOK 128 million (NOK 110 million)*. For the Group as a whole, EBITA was affected by currency translation effects totalling NOK -18 million in the quarter, and NOK -38 million in the first nine months.
Orkla's equity interests in REC (39.7%) and Jotun (42.5%) are presented according to the equity method on the line for associates. The contribution from associates to Group third-quarter profit totalled NOK -328 million (NOK 573 million)*. Of the total amount, REC's contribution to Orkla's profit for the quarter accounts for NOK -401 million (NOK 496 million)*.
At the end of the first nine months, the return on the Share Portfolio was 26.2%, compared with 30.7% for the Morgan Stanley Nordic Index (43.5% for the Oslo Børs Benchmark Index). Gains, losses and write-downs on the Share Portfolio ended at NOK 334 million in the third quarter, of which realised portfolio gains amounted to NOK 297 million and write-downs of portfolio investments totalled NOK 97 million. Dividends received in the third quarter totalled NOK 14 million, and NOK 238 million for the first nine months.
Group profit before tax for the third quarter was NOK 494 million (NOK -939 million)*, while earnings per share, diluted, were NOK 1.4 (NOK 1.3)* at the end of the first nine months. The tax charge is estimated to be NOK 92 million so far this year.
Strong focus on increasing capital efficiency helped to boost cash flow from operations in the third quarter to NOK 1,663 million (NOK 365 million)*, and cash flow from operations for the first nine months of 2009 totalled NOK 3,115 million, compared with NOK 1,473 million in the same period of last year. After the Group's participation in the REC and SPDE share issues, and the acquisition of Indalex, all in the third quarter, net interest-bearing liabilities amounted to NOK 28.2 billion at quarter-end.
In connection with the acquisition and integration of Indalex in the US, Orkla Aluminium Solutions will carry out further restructuring of its extrusion operations in North America. The factories in Morris and Calgary will be closed in the course of the fourth quarter, and minor changes will also be made at other factories. In this connection, a restructuring provision of NOK 94 million was made in the third quarter. The agreement to divest the business in Catawba in compliance with the requirements of the US Department of Justice has been signed.
* The figures in brackets refer to the corresponding period of the previous year.
** Excluding acquisition, divestments and currency translation effects.
SVP Investor Relations
Tel.: +47-2254 4411
SVP Corporate Communications
Ole Kristian Lunde
Tel.: +47-2254 4431