Profit improvement for Orkla Brands - accountin...
Orkla's operating profit (EBITA)1 for the third quarter ended at NOK
1,003 million, compared with NOK 1,232 million in the corresponding
quarter of 2007. The difference is partly ascribable to weak results
from energy trading and one-off costs related to the Kam Kiu
acquisition, which was not completed. Orkla Brands continues its
positive profit performance, while Sapa is feeling the effects of the
decline in both the US and Europe. Weak financial markets are
impacting negatively on Orkla's Financial Investments area.
"Several of the Orkla businesses are experiencing an extraordinary
market situation that will be countered with vigorous measures. These
will include capacity drawdowns, workforce reductions and tight
management of investments and working capital," states President and
CEO Dag J. Opedal.
"The financial markets are challenging, but Orkla has a solid balance
sheet and a comfortable financing structure, where committed credit
facilities more than cover loan instalments through the end of 2010.
We also have a good cash flow from Orkla Brands and the energy
business at Orkla Materials, which are less affected by the market
turbulence. This gives the Group financial flexibility and
manoeuvrability," says Opedal.
Key figures Q3-08 (Q3-07) in NOK million:
Operating revenues: 16 559 (17 795)
EBITA: 1 003 (1 232)
Profit before taxes: -955 (2 234)
Earnings per share diluted (NOK): -1.2 (1.7)
Cash flow from operations: 202 (1 313)
As of Q3-08 (as of Q3-07):
Net interest-bearing debt: 25 244 (16 969)
Equity (%): 51.2 (57.6)
Net gearing: 0.50 (0.32)
1) Operating profit (EBITA): Before amortisation, restructuring and
significant impairments
THE THIRD QUARTER IN BRIEF
* Orkla's operating profit (EBITA) for the third quarter came to NOK
1,003 million (NOK 1,232 million)1, whereas EBITA so far this year
amounted to NOK 3,295 million (NOK 3,893 million)1.
* Orkla Brands had a good quarter and the positive profit trend from
the first and second quarters continued with a growth in EBITA of
19 % in the quarter. Year-to-date EBITA is 17 % better than last
year.
* The profit for Orkla Aluminium Solutions is affected by weak
markets with a decline in volume of extrusions in both the USA and
Europe. Heat Transfer and Building System had a satisfactory profit
and has been less affected by the financial crisis and lower
economic growth.
* Orkla Materials had an EBITA in the third quarter that was NOK 78
million weaker than in the third quarter a year ago. Losses in
energy trading and poor results in primary aluminium were only
partly counteracted by continued high prices and profit growth for
its silicon business.
* Within Orkla Associates, REC had an increase in EBITDA in the
third quarter of 11 % to NOK 711 million, while Jotun had an
increase in EBITA of 15 % to NOK 807 million per the second
four-month period.
* So far in 2008, the Share Portfolio had a return of -27.6 %
compared with -31.7 % for Morgan Stanley Nordic Index (Oslo Børs
Benchmark Index -35.1 %). Orkla Financial Investments had a net
book loss in the Share Portfolio of NOK -2,323 million (NOK 1,398
million)1 in the third quarter, of which accounting writedowns as a
result of impairment losses in portfolio investments amounted to
NOK 2,170 million. This is the main explanation why the Group's
results before tax came to NOK -955 million in the third quarter
(NOK 2,234 million)1.
* The Group has a strong balance sheet with an equity ratio of 51.2
% and net gearing of 0.5. The Group also has a robust financing
structure with long-term committed drawing facilities that more
than adequately cover the refinancing needs for 2009 and 2010.
THE GROUP
Orkla's operating revenues came to NOK 16,559 million (NOK 17,795
million)1 in the third quarter. After correcting for the
consolidation of four months of Alcoa's former extrusion operations
effective in the third quarter of 2007, the operating revenues was at
approximately the same level as last year. So far this year, the
operating revenues has come to NOK 51,072 million (NOK 45,732
million)1. This growth is primarily due to the consolidation of
Alcoa's former extrusion operations in Orkla Aluminium Solutions
effective from 1 June 2007.
Both Orkla Brands and Orkla Materials had an underlying2 growth in
operating revenues during the quarter. Also in the third quarter, the
Norwegian kroner was substantially stronger measured against USD than
last year, whereas it was somewhat weaker measured against the Euro.
Net currency translation effects lifted operating revenues by NOK 19
million during the quarter, whereas the effect at the close of the
third quarter was NOK -1,328 million.
The Group's EBITA for the third quarter came to NOK 1,003 million
(NOK 1,232 million)1, whereas year-to-date EBITA amounted to NOK
3,295 million (NOK 3,893 million)1. Orkla Brands is relatively less
exposed to the international financial crisis and lower economic
growth, and this business also had very good profit growth in the
third quarter. Among the remaining businesses, Sapa Profiles and
Orkla Financial Investments in particular have been negatively
affected by this crisis during the quarter, and these had EBITAs that
were NOK 142 million and NOK 76 million lower respectively than in
the same period last year. EBITA in Sapa Profiles were diminished by
NOK -40 million in non-recurring costs related to the unrealised
acquisition project Kam Kiu in China. Naturally, the profit/loss from
financial power trading may fluctuate considerably, and even be
negative at times. In the third quarter, EBITA from this power
trading in Elkem came to NOK -44 million compared with a profit of
NOK 76 million last year. Elkem Aluminium had a poor result caused by
a weak USD and increased prices on input factors. In addition, a
higher percentage of hedge contracts were realised at lower prices in
the second half of 2008 than in the first half. There is still a good
market for silicon and ferrosilicon metal, and the silicon business
had profit growth of NOK 92 million during the quarter. Borregaard
had a profit at the same level as last year, but also here it was
noted that demand is declining in some market segments. Demanding
markets and reduced activity for Orkla Finans caused that Orkla
Financial Investments had EBITA in the third quarter that was NOK 76
million lower than a good third quarter in 2007. The Group's EBITA
was negatively affected by currency translation effects of NOK -55
million so far this year, whereas the effects in the quarter have
been positive with a gain of NOK 10 million.
Orkla's stakes 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 so far this year
amounted to a total of NOK 1,905 million (NOK 843 million)1, whereas
the contribution in the quarter came to NOK 573 million (NOK 197
million)1. Of this, the year-to-date contribution from REC to Orkla's
profit amounted to NOK 776 million (NOK 610 million)1, of which NOK
496 million (NOK 123 million)1 was the contribution in the third
quarter.
At the close of the third quarter, the Share Portfolio had a return
of -27.6 % compared with -31.7 % for the Morgan Stanley Nordic Index
(-35.1 % for Oslo Børs Benchmark Index). Gross portfolio gains of NOK
38 million were realised in the quarter, but due to impairment
charges of NOK -2,170 million under IFRS, net realised portfolio
gains and changes in the fair value of associates amounted to NOK
-2,323 million (NOK 1,398 million)1. Dividends received in the third
quarter amounted to NOK 58 million (NOK 65 million)1.
So far this year, Orkla's profit per share (diluted) was NOK 1.3. The
key figure has been negatively affected by NOK -3.2 from impairment
charges on portfolio investments. At the same time, there were high
portfolio gains in 2007, which caused that the profit per share
(diluted) in the same period last year amounted to NOK 7.1.
The Group's overall tax charge is considerably affected by the
Financial Investments division's share of the profit/loss before tax.
The most substantial part of the profit/loss from the Financial
Investments division is exempt from taxation. In 2008, the Financial
Investments division had a large accounting loss, which will
therefore not be deductible either. In such a case, the Group's tax
charge will appear to be especially high and based on the situation
after the third quarter a tax charge of about 40 % for the year in
total is estimated.
1) Figures in brackets are for the corresponding period in the
previous year.
2) Excluding acquisitions, divestments and currency translation
effects.
Orkla ASA
Oslo, 31 October 2008
Ref.:
CFO
Terje Andersen
Tlf.: +47 2254 4419
Direktør Investor Relations
Rune Helland
Tlf.: +47 2254 4411
Kommunikasjonsdirektør
Ole Kristian Lunde
Tlf.: +47 2254 4431
Investor Relations
Lars Røsæg
Tlf.: +47 2254 4426
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