In total, Orkla's Industry division posted higher profit than in the third quarter of last year. Orkla Brands and Orkla Media achieved profit growth, while the performance of the other business areas was more mixed. The return on Orkla's share portfolio was clearly less negative than the average for the Oslo Stock Exchange.
In comparison with the corresponding period of last year, Group operating revenues for the first nine months dropped NOK 1.2 billion to NOK 32 billion. Group operating profit before goodwill amortisation and other revenues and expenses totalled NOK 2.8 billion at the end of the third quarter, on a par with last year. Adjusted for currency effects, operating revenues for the third quarter alone were much the same as in the corresponding period of last year, while operating profit before goodwill amortisation was up 13 per cent.
"Orkla has a satisfactory development in underlying operations. The demanding situation in some markets however give us some special challenges. That is why we have programmes for improvements in cost control and operations in all our business areas and a number of countries," says Orkla President and CEO Finn Jebsen.
On an extremely weak financial market, Orkla's investment portfolio did considerably less badly than the stock exchange indices with which it is relevant to compare Orkla's performance. The total return on the portfolio at the end of the third quarter was -14.2 per cent, compared with -33.8 per cent for the Oslo Stock Exchange Benchmark Index.
In September, the Chemicals business entered into an agreement to buy the Swiss company Atisholz, which manufactures speciality cellulose and wood-based chemicals. At the same time, several smaller businesses in the Chemicals area are being sold. Also in September, Orkla Foods acquired the Danish company Credin, a leading manufacturer of ingredients for bakeries in Denmark, Poland and Portugal.
Profit before tax for the first nine months totalled NOK 2.3 billion. Earnings per share amounted to NOK 7.2, compared with NOK 7.7 at the end of the third quarter of last year. Before goodwill amortisation and non-recurring items, earnings per share were NOK 9.0, compared with NOK 9.3 for the corresponding period of 2001.
BRANDED CONSUMER GOODS
Orkla Foods' operating profit before goodwill amortisation totalled NOK 591 million for the first nine months of 2002, compared with NOK 628 million for the corresponding period of last year. Adjusted for currency effects, this corresponds to a four per cent decline in profit for continuing business.
Orkla Beverages (40 per cent of Carlsberg Breweries) Orkla's interest in Carlsberg Breweries generated operating profit before goodwill of NOK 1.2 billion for the first nine months of the year, compared with NOK 1.1 billion last year. Adjusted for currency effects, this is equivalent to 19 per cent growth, which is mainly ascribable to profit growth in the Nordic region and for BBH. Operating revenues at the end of the third quarter amounted to NOK 11.0 billion, compared with NOK 11.2 billion in the first nine months of 2001.
Orkla Brands' operating profit before goodwill amortisation amounted to NOK 565 million at the end of the third quarter, up 18 per cent compared with the same time last year. The rise was ascribable to a high level of exports from Lilleborg Home and Personal Care, high sales of this year's new launches and good sales performances by Biscuits and Snacks, while the weaker distribution situation for Household Textiles had a negative effect.
Orkla Media posted operating profit before goodwill of NOK 79 million for the first nine months, down from NOK 192 million last year. Profit for the third quarter alone was NOK 32 million, compared with NOK 15 million in the corresponding period of last year. Magazines and Newspapers Norway achieved profit growth, while Orkla Media's newspaper businesses in Denmark and Poland are expected to continue to suffer from weak advertising markets. Cost reduction programmes and lower paper prices offset much of the decline in advertising revenues.
Borregaard's operating profit for the first nine months totalled NOK 406 million, down from NOK 437 million last year. The stronger Norwegian krone and the weaker US dollar had a negative impact on profit. The acquisition of the Swiss company Atisholz is part of Borregaard's strategy to concentrate activities more strongly in global niche areas for speciality and fine chemicals. At the same time, so far this year Borregaard has entered into agreements to sell nine small power plants and the Swedish company Kemetyl.
After dropping 11.2 per cent in the first six months of this year, the Oslo Stock Exchange Benchmark Index fell a further 25.5 per cent in the third quarter. The Index was therefore 33.8 per cent lower than at the beginning of the year. In the same period, the negative return on Orkla's investment portfolio was 14.2 per cent. The investment in Elkem contributed to the positive difference in comparison with the OSE Benchmark Index. Profit before tax for the Financial Investments division totals NOK 518 million so far this year, compared with NOK 777 million in the corresponding period of 2001. Realised gains amounted to NOK 153 million, compared with NOK 172 million last year. Dividends received totalled NOK 339 million, compared with NOK 539 million last year. Unrealised gains on the share portfolio amounted to approximately NOK 74 million. The market value of the portfolio at the end of the third quarter was approximately NOK 12 billion.
At the end of the first nine months, the Group's free cash flow from the Industry area was NOK 572 million better than at the same time last year. Tax on the gain from the sale of Hartwall shares led to higher paid taxes in 2002. At the end of the third quarter, expansion investments and acquisitions totalled NOK 1.4 billion. The most important were capacity expansions at BBH and acquisitions of new businesses by Beverages and Orkla Foods. Buy-backs of Orkla shares totalled NOK 315 million. Positive currency effects on interest-bearing liabilities amounted to approximately NOK 1 billion.
The Board of Directors has reviewed Orkla's main strategy. This topic has been discussed systematically at a number of board meetings and the Board has thoroughly reviewed and evaluated the Group's individual core business areas as well as the overall strategy.
The Board has concluded unanimously that Orkla's goal is to give shareholders a long-term return that is well above the market average. In order to achieve this, a continued ambitious growth strategy is planned for the Group's industrial operations. This entails focus on efficient operations, organic growth and exploiting structural opportunities by acquiring new businesses.
In the Board's view, Orkla has the necessary financial and management resources to implement an industrial growth strategy of this nature.
At the same time, the Group's dual structure will be maintained by continuing its financial investment activities, but no significant new capital will be allocated to the Financial Investments division.
In the Industry division, the Branded Consumer Goods business will be the main priority and will increase its degree of internationalisation over time. The Chemicals business will be specialised and concentrated on core business areas, while in the longer term Orkla will consider alternative structural solutions for all or parts of this business area.
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