Operating parameters still challenging - compre...
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.
The Group
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.
Orkla ASA
Oslo, 12 August 2009
Ref.:
SVP Investor Relations
Rune Helland
Tel.: +47-2254 4411
SVP Corporate Communications
Ole Kristian Lunde
Tel.: +47-2254 4431
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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