Overall, there was weak growth in the first quarter in the markets in which Orkla Brands operates. First-quarter operating revenues totalled NOK 5,583 million (NOK 5,714 million)2. Underlying3 sales growth in the quarter was around 4%, about one third of which was related to the timing of Easter. Overall volumes were slightly higher than in 2011, since volume growth for products sold through the grocery channel was partially counteracted by weak markets and the loss of contract sales to industrial and export customers. Orkla Brands maintained its overall market shares.
First-quarter EBITA1 amounted to NOK 523 million (NOK 520 million)2. Profit growth was boosted by the sale of Bakers and the timing of Easter. Increased advertising investments in the quarter have reduced profit in the short term. Taking into account the above-mentioned factors, first-quarter profit is considered to be on a par with the same period in 2011.
Profit from Orkla Foods Nordic is somewhat higher than in 2011, while Orkla Brands Nordic experienced a certain decline in profit. Loss of contract production has had a negative impact on profit from the Nordic business units. In Orkla Brands International, Orkla Brands Russia achieved profit growth, even taking into account the one-off expenses related to last year’s merger. In a demanding market, Orkla Food Ingredients posted slightly lower profit than in 2011. Work on implementing cost improvement programmes in Orkla Brands is progressing normally, and savings in the first quarter were on a par with 2011.
The biscuits business has announced workforce cuts of up to 70 man-years, primarily due to reduction of volume in the business’s own factory and the possibilities of rationalisation. Costs related to these cuts will be moderate and will be expensed immediately. The positive financial effects will largely be realised in 2013.
The FAO’s Food Price Index is now slightly lower than in the corresponding quarter of 2011 and at the same level as in the fourth quarter of 2011. However, Orkla Brands continued to see higher raw material costs in the first quarter, primarily due to its raw material mix and a certain contract-related time-lag. These costs have been offset by raising prices.
In the first quarter of 2012, Stabburet expanded its “Kokkeklare” (Ready-to-Cook) concept to include ground beef patties, while Göteborgs/Sætre launched a new Ballerina Cookie in Sweden. Nutrilett was launched in Denmark and Poland.
Axellus acquired Pharma-Vinci A/S, thereby strengthening its focus on the pharmacy sector in Denmark. The company was established in 1941 and develops, manufactures and markets dietary supplements and women’s health products for pharmacies and health food stores. Pharma-Vinci is market leader in its categories and has annual sales of around DKK 50 million.
In mid-2012, Axellus will take over the omega-3 manufacturer Denomega from Borregaard, thereby strengthening its position in marine oils. Denomega is a leading international supplier of odour and taste-free omega-3 oils manufactured from sustainable Norwegian and North Atlantic marine raw materials. The consolidation of omega-3 expertise in Axellus will open up new opportunities for innovation. Sales in Denomega totalled NOK 98 million in 2011.
In Orkla Food Ingredients, agreements were entered into in the last four months to purchase four sales and distribution companies, two in Poland, one in Slovakia and one in Romania. Total annual sales are approximately NOK 270 million.
Orkla Foods NordicOrkla Foods Nordic posted first-quarter operating revenues of NOK 2,026 million (NOK 2,213 million)2. This was an underlying3 improvement of about 5%, about half of which is related to the timing of Easter. Panda and the Baltic businesses showed the highest growth rates in the quarter. First-quarter EBITA1 amounted to NOK 197 million (NOK 186 million)2. Profit growth was positively affected by the sale of Bakers and the timing of Easter. The improved results achieved by Stabburet, Panda and all the Baltic companies were partially offset by slightly weaker growth for Abba Seafood, Procordia and Felix Abba. However, Beauvais foods and Abba Seafood reported sales growth, and Procordia strengthened its market shares in the quarter.
For Stabburet, a good programme of launches, driven by innovations such as Kokkeklare ground beef patties, Grandiosa Nacho and Stabbur-makrell grovhakket (chopped mackerel spread), contributed to improvement in the form of sales growth, strengthened market shares and better results.
Orkla Brands NordicOrkla Brands Nordic reported first-quarter operating revenues of NOK 1,924 million (NOK 1,937 million)2. Underlying3, this was on a par with 2011. First-quarter EBITA1 amounted to NOK 334 million (NOK 363 million)2, an underlying3 year-on-year decline of 7%. The timing of Easter is considered to have had only moderate positive effects.
The first-quarter decline in profit is primarily attributable to the weak start in terms of sales volume in January and part of February, mainly for Nidar, Göteborgs/Sætre and Axellus, and the effect of the loss of contract production.
On the other hand, Lilleborg posted higher sales and profit, particularly in the hair and dishwashing product segments, compared, however, to a weak quarter in 2011. OLW, in the Chips Group, made good progress in Sweden.
Several innovations launched in the quarter have made a promising start. This applies to “Ballerina Fylld Cookie” (Göteborgs Kex), men’s boxer shorts from Pierre Robert and the launch of Nutrilett in Denmark and Poland.
Orkla Brands InternationalOrkla Brands International posted first-quarter operating revenues of NOK 452 million (NOK 445 million)2, equivalent to underlying3 growth of 5%. First-quarter EBITA1 was NOK -37 million (NOK -63 million)2. Underlying3, this was equivalent to a profit improvement of NOK 25 million.
The increase in operating revenues was linked to India and continuing growth for the core categories spices and ready mixes, while operating revenues in Russia and Austria were on a par with the same period in 2011. The profit improvement was primarily related to Russia, generated by the realisation of synergies and the lower prices on inputs (cocoa beans and sugar). At the same time, profit in 2011 was reduced by one-off costs of around NOK 20 million, related to the establishment of Orkla Brands Russia. Advertising expenses in Russia and India were higher than in 2011.
Orkla Food IngredientsOrkla Food Ingredients reported first-quarter operating revenues of NOK 1,232 million (NOK 1,192 million)2, equivalent to underlying3 growth of 6%. This increase was primarily related to Norway and Sweden, and is ascribable to increased market shares and higher prices. First-quarter EBITA1 amounted to NOK 29 million (NOK 34 million)2. Underlying3 profit declined by NOK 3 million. The market is challenging, with increased competition and lower demand from small bakeries. The timing of Easter probably had a certain positive effect, year-on-year, on sales and profit in the first quarter of this year.
1Operating profit before amortisation and other income and expenses.
2 Figures in parentheses are for the corresponding period in the previous year.3 Excluding acquired and sold operations and currency translation effects.