Continued progress for Industry - weaker for Financial Investments

Orkla's industrial activities were largely unaffected by the general slowdown in the world economy, and Group profit in the third quarter, before other revenues and expenses, increased by 27 per cent. However, Orkla Media felt the impact of the economic climate in the form of lower advertising revenues, and the fall in stock market prices resulted in lower profit for the Financial Investments division.

Total Group revenues for the first nine months increased by 33 per cent compared with the corresponding period last year, to NOK 33.2 billion.
Group operating profit at the end of the third quarter, before goodwill and other revenues and expenses, totalled NOK 2.8 billion, up 23 per cent from the corresponding period last year. This rise in profit was primarily driven by the establishment of Carlsberg Breweries. Orkla Brands and most of Borregaard also reported significant progress.
Substantially lower realised gains for Orkla's Financial Investments division, coupled with write-downs of certain shares in the portfolio, resulted in a marked decline from last year's high profit (which included sales of NetCom and Dyno shares) for this division.
Pre-tax profit for the first nine months amounted to NOK 2.5 billion. Orkla's earnings per share were NOK 7.7 for the first nine months, compared with NOK 16.5 for the corresponding period last year. Before goodwill amortisation and non-recurring items, earnings per share were NOK 9.3 for the first nine months, compared with NOK 18.3 for the corresponding period in 2000.

BRANDED CONSUMER GOODS
- Orkla Foods' operating profit for the first nine months, before other revenues and expenses, totalled NOK 507 million, compared with NOK 503 million for the corresponding period in 2000. With 45% of its sales in Sweden, Orkla Foods is strongly affected by a weaker Swedish krone when profit is translated into Norwegian krone. Adjusted for currency effects, total sales of NOK 8 billion at the end of the third quarter represented close to 2 per cent growth for continuing business.
- Orkla Beverages (40 per cent of Carlsberg Breweries)
For the first nine months of 2001, Orkla's interest in Carlsberg Breweries represented operating profit, before other revenues and expenses, of just above NOK 1 billion, compared with NOK 622 million last year (for former Pripps Ringnes). Sales in the first nine months totalled NOK 11.2 billion, more than double the amount in the corresponding period in 2000. The difference is primarily ascribable to the establishment of Carlsberg Breweries. The business also grew in the course of this year through continued expansion and growth in Central and Eastern Europe, and the consolidation of the Swiss brewery Feldschlösschen, which was acquired last year.
- Orkla Brands' operating profit for the first nine months, before other revenues and expenses, totalled NOK 451 million. This is 15 per cent higher than for the same period last year, but third quarter results were weaker than for the year as a whole. All businesses, except for Household Textiles and Biscuits in Sweden, reported profit growth. Lilleborg Home and Personal Care made the greatest progress, even though the rate of growth, as anticipated, was somewhat lower in the third quarter. Orkla Brands' market positions were largely strengthened or maintained. Operating revenues for the first nine months totalled NOK 3.3 billion.
- Orkla Media reported operating profit, before other revenues and expenses, of NOK 89 million for the first nine months, down from NOK 114 million last year. The third quarter is generally a slow period for the media sector, but the general downturn in the advertising market, particularly in Denmark and Poland, reinforced this trend. Profit for the third quarter alone was a negative NOK -20 million. This fall in profit is primarily attributable to Newspapers Eastern Europe, which posted weak growth in advertising sales in the third quarter, and to Berlingske in Denmark. Significant rationalisation measures were implemented to counter the negative trend, and Orkla Media reduced its total man-years by 440 in the course of the year.

CHEMICALS
Operating profit for Borregaard for the first nine months totalled NOK 426 million, a rise of 37 per cent. However, the growth in profit in most areas of the company, particularly at Borregaard LignoTech, was offset by a substantial decline in profit at Borregaard Synthesis. Denofa's operating revenues fell due to the winding-up of contract production of soya beans in Brazil. For the Chemicals area as a whole, operating revenues for the first nine months amounted to NOK 4.9 billion, an increase of six per cent from last year for continuing business.

FINANCIAL INVESTMENTS
After declining 0.2 per cent in the first six months of the year, the Oslo Stock Exchange Benchmark dropped 23.4 per cent in the third quarter. The index was thus 24.9 per cent lower than at the beginning of the year. During the same period, Orkla's investment portfolio yielded a negative return of -21 per cent. The positive difference in relation to the Oslo Stock Exchange Benchmark is primarily due to the investment in Elkem.
In the third quarter, Orkla's investments in Enitel and AP Holdings were written down to zero by a total of NOK 363 million, which largely explains why pre-tax profit for the Financial Investments division in the third quarter amounted to NOK -279 million.
Pre-tax profit for the Financial Investments division totals NOK 777 million for the year to date, compared with NOK 3,6 billion for the corresponding period last year. Realised gains amounted to NOK 172 million, compared with NOK 3,1 billion last year. Dividends received totalled NOK 539 million. Unrealised capital gains total NOK 1 billion. At the end of the quarter, the market value of the portfolio was NOK 13.5 billion.

FINANCIAL SITUATION
At 30 September 2001, the Orkla Group's net cash flow was NOK -3.6 billion, reflecting a high rate of investment. The expansion that took place in Carlsberg Breweries in the last half of 2000 was not posted as expansion investments in Orkla's consolidated accounts until 2001. This constitutes the bulk of the Group's expansion investments, which totalled NOK 4.7 billion. Nevertheless, net interest-bearing liabilities were somewhat reduced in the quarter, and amounted to NOK 21.4 billion at the end of the first nine months.
As of 30 September 2001, the book equity to total assets ratio was 33.6 per cent. Including unrealised gains on the share portfolio (before tax), the equity ratio was 34.8 per cent.