Orkla’s operating revenues rose 4% in the second quarter, to NOK 9,771 million.
The Branded Consumer Goods business delivered organic growth for the 13th consecutive quarter. Orkla achieved organic growth of 0.7% this quarter, despite the negative effect of the timing of Easter.
Operating profit (EBIT adj.) increased by 3%, totalling NOK 1,025 million. Orkla Confectionery & Snacks, Orkla Care and Orkla Food Ingredients all reported profit improvement. Orkla Foods posted slightly lower operating profit than in the corresponding period of last year, primarily due to increased raw material prices and higher advertising investments.
“We saw a rise in raw material prices for meat and dairy products in the EU this quarter, in addition to a weaker krone in Norway and Sweden. Our goal is to compensate for this by raising the prices of our finished products, but the price increases will have a gradual effect. We will also continue to improve our own operational efficiency,” says Orkla President and CEO Peter A. Ruzicka.
Profit from associates amounted to NOK 115 million in the second quarter, and can mainly be attributed to Jotun. Weaker shipping and offshore markets impacted negatively on Jotun. Hydro Power achieved operating profit of NOK 79 million in the second quarter, compared with NOK 53 million in the same period of 2016. The improvement is primarily due to higher power prices and increased production volume.
Orkla’s profit before tax increased by 3%, amounting to NOK 967 million in the second quarter. Earnings per share for continuing operations rose 9%, to NOK 0.75.
Acquisitions were made in the quarter for a total of NOK 531 million, of which the Danish company Riemann Holding accounted for the largest share. With this acquisition, Orkla Care has expanded its position in the personal care segment and its presence in the pharmacy channel. Riemann Holding has good positions in the sun protection and antiperspirant markets.
Orkla Food Ingredients strengthened its position in the ice cream and bakery ingredient market by means of several small acquisitions.
In line with its strategy of being a leading branded consumer goods company, Orkla entered into an agreement on 10 July to sell its interest in Sapa to Norsk Hydro. The parties have agreed on a purchase price that values Sapa at a total of NOK 27 billion (on a debt-free basis). The final purchase price will be determined on the basis of the statement of financial position at the date of completion. Orkla’s Board of Directors will propose that an extraordinary dividend of NOK 5 per share be paid out. The agreement is subject to the approval of the relevant competition authorities.
“The sale of Sapa will give Orkla a very solid financial platform that will provide a foundation for both continued growth and good dividend capacity. In line with Orkla’s capital allocation strategy, our first priority is to strengthen the Branded Consumer Goods area by making acquisitions and investing in our present operations,” says Peter A. Ruzicka.