Strategic positions strengthened - profit affec...
Orkla's operating revenues totalled NOK 65.6 billion in 2008 (up from
NOK 61.4 billion in 2007). Operating profit (EBITA) ended at NOK 4.2
billion (NOK 4.8 billion ), while pre-tax profit amounted to NOK -2.0
billion (NOK +9.8 billion), mainly due to accounting write-downs on
the Share Portfolio. Fourth-quarter operating revenues amounted to
NOK 16.5 billion (NOK 17.5 billion), and EBITA was NOK 998 million
(NOK 1.2 billion).
In line with Orkla's dividend strategy, the Board of Directors
proposes an ordinary dividend of NOK 2.25 per share for 2008, the
same amount as the year before.
"At the start of 2009 the economic operating parameters are very
weak. The international financial crisis is exacerbating a global
slowdown in the real economy. Orkla companies will be affected by
lower economic growth to varying degrees, and will respond to these
challenges with appropriate countermeasures. Vigorous steps have been
taken in the business areas to adapt cost bases and production
capacity to lower demand and reduced volume growth," says President
and CEO Dag J. Opedal.
Particular attention will be focused on ensuring a satisfactory cash
flow. This will entail strict management of use of capital within the
Group and higher ambitions with regard to cost productivity.
"Orkla is well equipped to meet these challenges. The companies in
the Group have solid market positions, and refinancing needs are
limited in 2009 and 2010," says Mr Opedal.
In 2008 active strategic moves were carried out that are advancing
Orkla's positions or involve restructuring. Orkla is taking over
Alcoa's ownership interest in Sapa Profiles, thereby becoming sole
owner, while Alcoa is taking over Orkla's stake in Elkem Aluminium.
This swap will simplify the structure of the Orkla Group and give it
strategic control of Sapa.
REC continued to upgrade its facilities in terms of both technology
and capacity. Elkem Solar's factory in Kristiansand was mechanically
completed and production will start up in the course of 2009.
Orkla sold its interest in Hjemmet Mortensen, thereby concluding its
involvement in the printed media sector. A decision was made to close
down Borregaard's cellulose business in Switzerland. Orkla Brands'
operations in Eastern Europe were restructured.
Key figures Q4-08 (Q4-07) in NOK million:
Operating revenues: 16 492 (17 514)
EBITA: 998 (1 206)
Profit before taxes: -4 375 (1 249)
Earnings per share diluted (NOK): -4.1 (1.1)
Cash flow from operations: 1 246 (1 243)
As of Q4-08 (as of Q4-07):
Net interest-bearing debt: 27 424 (16 178)
Equity (%): 47.7 (58.3)
Net gearing: 0.55 (0.29)
Fourth Quarter in Brief
- Orkla's adjusted EBITA1 came to NOK 998 million (NOK 1,206
million)2 in the fourth quarter.
- Orkla Brands had another good quarter with a profit growth of about
16 %.
- As expected, weak markets and a rapid decline in demand gave a poor
result for Orkla Aluminium Solutions in the fourth quarter.
- In Orkla Materials, the energy businesses had a high level of
production and profit growth in the fourth quarter. This was offset
by weaker markets near the end of the year for both the chemicals
business in Borregaard and the silicon business in Elkem. Elkem
Solar's factory has been mechanically completed and the start-up
programme has begun.
- Orkla has initiated strong measures to counteract the real effects
of the financial crisis. Borregaard's cellulose plant in Switzerland
has been closed down. In Orkla Aluminium Solutions, the production
capacity has been significantly reduced and the workforce has been
reduced by about 2,000 man-years in 2008, equivalent to a 15 %
reduction. In addition, measures have been introduced to free up
working capital and strict control of investments. As a result of
these measures, write-downs and provisions for restructuring
amounting to NOK 1,620 million were carried out in the fourth
quarter.
- The contribution from Orkla Associates to Group profit amounted to
NOK 284 million in the fourth quarter compared with NOK 5 million
last year. REC had an increase in EBITDA of 10 %, whereas demanding
markets diminished growth for Jotun towards the end of 2008.
- The weak trend in the stock markets continued in the fourth
quarter, and the Share Portfolio had a return of -45.3 % (-46.0 % for
the Morgan Stanley Nordic Index) in 2008. Substantial write-downs
entail a loss on portfolio investments of NOK 3,537 million for the
quarter.
- After accounting write-downs and provisions for restructuring
totalling NOK 4,839 million, the profit/loss before tax in the fourth
quarter came to NOK -4,375 million (NOK 1,249 million)2.
- Initiated measures contributed to reduced working capital in the
fourth quarter and cash flow from operating activities in the
industrial operations amounted to NOK 1,246 million. The equity ratio
at year-end was 47.7 %, while net gearing was 0.55.
- Orkla entered into an agreement in the quarter with Alcoa, where
Orkla acquires Alcoa's shares in Sapa Profiles in exchange for
Orkla's stake in Elkem Aluminium. As a result of this agreement,
Elkem Aluminium is reported as discontinued operations.
The Group
Orkla's operating revenue came to NOK 16,492 million (NOK 17,514
million)2 in the fourth quarter. The decline is explained by a weaker
market trend for Orkla Aluminium Solutions and some of the operations
in Orkla Materials. After having been relatively strong in the first
part of 2008, the Norwegian krone weakened relative to the USD and
EUR in the fourth quarter. Currency translation effects for the Group
in the fourth quarter amounted to NOK 1,367 million, whereas the
translation effects for the whole year came to NOK 39 million.
The Group's EBITA1 in the fourth quarter was NOK 998 million (NOK
1,206 million)2, and for the whole of 2008 EBITA1 was NOK 4,240
million (NOK 4,825 million)2. The financial crisis has varying
effects on Orkla's Business Areas. Orkla Brands had good profit
growth in the fourth quarter as well, despite increased costs for
purchasing in EUR and USD. At the same time, the energy businesses in
both Elkem and Borregaard had a good trend as a result of increased
production and high power prices. High prices at the start of the
fourth quarter enabled Elkem's silicon-related operations to achieve
profit growth corrected for higher recognised costs at Elkem Solar.
Throughout 2008, Orkla Aluminium Solutions worked to adapt its
operations to weaker markets in both the USA and Europe. The trend
was especially weak in December, and in the fourth quarter the
operations had a negative EBITA1 of NOK -102 million (NOK 205
million)2. Weakened market conditions also resulted in a decline for
Borregaard's chemicals business, at the same time as low activity
resulted in poor results for Orkla Finans. Currency translation
effects in the quarter amounted to NOK 81 million, while the
translation effects for the whole year amounted to NOK 26 million.
The income statement in the fourth quarter is charged with provisions
for restructuring and significant impairments, plus write-downs of
metal inventory in Orkla Aluminium Solutions. Altogether, this
amounts to NOK -1,620 million. The biggest items are associated with
the advertised closing of Borregaard's plant in Switzerland, which
amounted to NOK -527 million, write-down of goodwill in SladCo
amounting to NOK -547 million and NOK -188 million in provisions for
restructuring in Orkla Aluminium Solutions. The situation at year-end
2008 has been characterised by uncertainty with regard to the trend
in both demand and prices. The stock of aluminium utilised in end
products not expected to be sold at normal conditions has been
written down to replacement cost. The write-down of NOK -372 million
is classified on a separate line in the financial statement. Of the
total cost associated with restructuring and write-downs in the
fourth quarter, the cash flow effect is about NOK -300 million, of
which about NOK -100 million was paid out in the quarter.
On 22 December 2008, Orkla and Alcoa entered into an agreement to
exchange stakes in jointly owned companies, where Orkla is to acquire
Alcoa's 45.45 % stake in Sapa Profiles, while Alcoa is to acquire
Orkla's 50 % stake in Elkem Aluminium. The accounting figures for
Elkem Aluminium for 2008 and 2007 are presented on separate lines in
the income statement and balance sheet as discontinued operations.
Orkla's stakes in REC (39.73 %) and Jotun (42.5 %) are presented
according to the equity method on the line for associates. Orkla's
contribution to Group profit from REC came to NOK 441 million (NOK -3
million)2 in the fourth quarter and NOK 1,217 million (NOK 607
million)2 for the year in its entirety. In the fourth quarter 2007
the contribution to Group profit from REC was negatively affected by
the full-year effect of changes in accounting principles related to
recognised costs of built-in derivatives in sales contracts in USD.
The contribution to Group profit from Jotun in 2008 came to NOK 253
million (NOK 209 million)2.
Accounting loss for portfolio investments came to NOK -3,537 million
(profit of NOK 337 million)2 in the fourth quarter. Realised loss
amounted to NOK -264 million, whereas the portfolio write-down was
NOK -3,219 million. At year-end, the market value of the Share
Portfolio was NOK 11,426 million, and unrealised gains amounted to
NOK 847 million. In 2008, the Share Portfolio had a return of -45.3 %
compared with the Morgan Stanley Nordic Index (-46.0 %) and the Oslo
Børs Benchmark Index (-54.1 %).
Orkla's profit per share (diluted) was NOK -2.8 in 2008 compared with
NOK 8.1 in 2007. Accounting write-downs and provisions for
restructuring amounted to a total of NOK -8.0 per share in 2008.
Orkla Financial Investments' investment activity in the EEA is
primarily exempt from taxation, whereas industrial operations are
charged ordinary corporation tax in the countries where the
operations are located. Accounting loss for Orkla Financial
Investments in 2008 can therefore not be offset against profit from
industrial operations in the tax calculation. This, together with a
decision received from the Central Office - Taxation of Large-Sized
Companies to change the assessment for 2006 related to the conversion
of two convertible bond issues in REC in May 2006, helps explain the
tax expenses for the year. The authorities above-mentioned tax claim
of NOK 750 million is partly offset by a reversal of previous tax
provisions in the Group. Orkla disagrees with both the indicated
basis for tax liability and the valuation that is derived from the
decision, and the Group will take legal steps to follow up the
decision.
The Board of Directors proposes an ordinary dividend of NOK 2.25 per
share for 2008, the same amount as for the 2007 accounting year.
1) Before amortisation, write-downs on Sapa Profiles' inventories and
restructuring and significant impairment charges
2) Figures in brackets are for the corresponding period of the
previous year
Orkla ASA
Oslo, 19th. february 2009
Ref.:
CFO
Terje Andersen
Tel.: +47-2254 4419
SVP Investor Relations
Rune Helland
Tel.: +47-2254 4411
SVP Corporate Communications
Ole Kristian Lunde
Tel.: +47-2254 4431
Investor Relations
Lars Røsæg
Tel.: +47-2254 4426
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