Orkla's operating profit (EBITA)* for the second quarter ended at NOK 334 million, compared with NOK 1,187 million for the same quarter of 2008. Orkla Brands continued its positive profit performance. The development for Jotun (42.5%) and Elkem Energy was also satisfactory, while Sapa and Elkem have been strongly impacted by the weak economic situation. At the end of the first half-year, the return on the Share Portfolio was 13.7 per cent.
"Although market conditions still are challenging for several of Orkla's business areas we are not satisfied with the Group's overall financial results. However, the wide-ranging measures that have been implemented are producing results. We must nevertheless assess the need for further action on an ongoing basis. Orkla's financial position is robust, and the Group is well positioned thanks to its forward-looking portfolio of companies," affirms President and CEO Dag J. Opedal.
Orkla's second-quarter operating revenues totalled NOK 13.7 billion, down from NOK 16.9 billion in 2008. One of the main reasons for the drop is the significant decline in demand experienced by Sapa in several markets, particularly in the automotive and building industries. Volume has fallen around 35 per cent, compared with last year. Nevertheless, Orkla Aluminium Solutions (Sapa) is delivering on its targets in terms of both costs and cash flow.
A fire in Elkem Solar's new plant will delay the ramp-up of production capacity by 2-3 months.
Pre-tax profit for the second quarter amounted to NOK 282 million (NOK 2.5 billion in 2008). Net interest-bearing liabilities are at approximately the same level as at the start of the year, and the equity ratio has increased to 50 per cent. Orkla's Financial Investments division reported a half-year return of 13.7 per cent, compared with 16.7 per cent for the Morgan Stanley Nordic Index and 25.2 per cent for the Oslo Stock Exchange Benchmark Index.
On 31 July it was announced that Sapa has taken over the aluminium extrusion company Indalex, with 1,400 employees and total sales in 2008 of USD 900 million. This acquisition significantly strengthens Sapa's operations in North America, and with a market share of around 30 per cent, Sapa is now clearly the largest aluminium extrusion company in the USA.
Key figures Q2-09 (Q2-08) in NOK million:
Operating revenues: 13 652 (16 851)
EBITA: 334 (1 187)
Profit before taxes: 282 (2 453)
Earnings per share diluted (NOK): 0.3 (1.9)
Cash flow from operations: 1 271 (267)
As of 30 June 2009(as of 31 Dec 2008):
Net interest-bearing debt: 27 903 (27 424)
Equity (%):50.0 (47.7)
Net gearing: 0.59 (0.55)
The first half in brief
- Due in part to the weak global economy, Orkla's operating profit (EBITA) for the first half-year ended at NOK 567 million (NOK 2,216 million)**. EBITA for the second quarter alone was NOK 334 million (NOK 1,187 million)**.
- Profit before tax in the first half-year totalled NOK -33 million (NOK 3,299 million)**, while for the second quarter alone it amounted to NOK 282 million (NOK 2,453 million)**.
- Reductions in working capital helped to improve cash flow in the second quarter. Cash flow from operations at the end of the first half-year was NOK 1,485 million (NOK 1,106 million)**.
- Orkla Brands reported a good first half with continued profit improvement. EBITA for the first half-year was NOK 1,160 million (NOK 1,078 million)**.
- Orkla Aluminium Solutions has been strongly impacted by the weak economic conditions in the USA and Europe, resulting in a 35 % decline in volume compared with the second quarter of 2008. However, volume performance was relatively stable through the first half of 2009 and, partly due to the implementation of cost-cutting measures, the deficit in the second quarter alone was significantly lower than in the first quarter.
- For Orkla Materials, as expected, the market for the silicon-related businesses in Elkem weakened through the second quarter. A negative contribution to profit in the start-up phase of Elkem Solar was a further reason for Elkem's lacklustre first-half results.
- In Orkla Associates, REC reported EBITDA of NOK 745 million (NOK 1,631 million)** for the first half-year. Jotun's results were affected by somewhat slower activity in certain market segments, but profit performance is still satisfactory.
- In Orkla Financial Investments, realised portfolio gains were offset by accounting write-downs, and the net contribution to profit by portfolio investments in the first half-year was NOK -87 million.
- At the end of the first half-year, the return on the Share Portfolio was 13.7 %, compared with 16.7 % for the Morgan Stanley Nordic Index (25.2 % for the Oslo Stock Exchange Benchmark Index).
- Orkla Aluminium Solutions' agreement to purchase the US company Indalex was finally completed on 31 July.
- In July a small fire broke out at one of Elkem Solar's processing plants. It caused no personal injuries or serious damage to critical processing equipment, but repairs will delay Elkem Solar's ramp-up plans by 2-3 months.
Orkla's first-half operating revenues totalled NOK 27,100 million (NOK 33,183 million)**, while operating revenues for the second quarter alone were NOK 13,652 million (NOK 16,851 million)**. The decline was largely driven by low demand in Orkla Aluminium Solutions and slower markets for Orkla Materials.
The Norwegian krone was significantly weaker in the first half of 2009 than in the same period of last year, against both the USD and euro-related currencies. This has resulted in positive currency translation effects on operating revenues, amounting to around NOK 1.2 billion in the first half-year and around NOK 550 million in the second quarter.
The Group's EBITA for the second quarter was NOK 334 million (NOK 1,187 million)**, while first-half EBITA was NOK 567 million (NOK 2,216 million)**. Orkla Brands reported a satisfactory profit performance and underlying*** profit growth in both the second quarter and the first half-year. Orkla Aluminium Solutions saw sales volumes level off at low levels in the first half-year. The implementation of cost-cutting measures had a positive effect, but first-half profit was negative at NOK -490 million (NOK 707 million)**. Orkla Materials posted profit of NOK 132 million (NOK 589 million)** for the first half-year. The decline in profit is primarily ascribable to weak markets for the silicon-related businesses resulting in around 55 % capacity utilisation in the second quarter, and to the start-up of Elkem Solar. For the Group as a whole, EBITA was affected by currency translation effects totalling NOK -20 million in the first half-year, and NOK +18 million in the second quarter alone.
Orkla's share in REC (39.73 %) and Jotun (42.5 %) are presented according to the equity method on the line for associates. The contribution from associates to Group profit in the first half-year totaled NOK -75 million (NOK 1,332 million)**, while the contribution in the second quarter amounted to NOK -210 million (NOK 1,153 million)**. Of the total amount, REC's contribution to Orkla's profit in the first half of 2009 accounted for NOK -115 million (NOK 280 million)** of which NOK -272 million (NOK 196 million)** is the second-quarter contribution. Associates' contribution to profit in 2008 was positively affected by the NOK 830 million gain on the sale of Orkla's interest in Hjemmet Mortensen.
At the end of the first half-year, the return on the Share Portfolio was 13.7 %, compared with 16.7 % for the Morgan Stanley Nordic Index (25.2 % for the Oslo Stock Exchange Benchmark Index). In accordance with IFRS, portfolio investments were written down by NOK 1,070 million in the first half-year, whereof write-downs of NOK 254 million in the second quarter. First-half gains realised on the portfolio total NOK 470 million, whereof NOK 460 million in the second quarter. Gains, losses and write-downs on the Share Portfolio thus ended at NOK -87 million (NOK -183 million) for the first half-year. For the second quarter alone, the contribution to profit was NOK 228 million (NOK 112 million)**. Dividends received in the second quarter totalled NOK 179 million (NOK 310 million)**, and for the first half-year NOK 224 million (NOK 397 million)**.
Orkla's first-half earnings per share, diluted, were NOK 0.9 (NOK 2.5)**. The tax charge for the first half-year is estimated to be NOK 79 million.
Strong focus on increasing capital efficiency helped to improve cash flow from operations through the second quarter, and cash flow from operations for the first half of 2009 totalled NOK 1,485 million, compared with NOK 1,106 million in the same period last year. Net interest-bearing liabilities were at the same level as at the end of 2008.
Orkla Aluminium Solutions' agreement to purchase the US company Indalex was finally completed on 31 July. Under the agreement Sapa will take over Indalex' 11 active production plants in the USA and Canada, with 29 presses and a total capacity of about 315,000 tonnes per year. Indalex' sales in 2008 totalled abouyt 200,000 tonnes, which represents operating revenues of over USD 900 million. Indalex has around 1,400 employees.
*) Excl. amortisation, write-down of inventory in Sapa Profiles in 2008, restructuring, significant impairments and discontinued operations.
**) The figures in brackets refer to the corresponding period of the previous year.
***) Excluding acquisitions, divestments and currency translation effects.
Oslo, 12 August 2009
SVP Investor Relations
Tel.: +47-2254 4411
SVP Corporate Communications
Ole Kristian Lunde
Tel.: +47-2254 4431