NORWAY: Nordic foods and ingredients hit Orkla FMCG profits

Orkla, the Norwegian conglomerate, has seen third-quarter profits from its FMCG arm drop after earnings from its Nordic food and food ingredients operations fell.

The company, which is planning to divest assets to focus on consumer goods, reported EBITA from Orkla Brands for the three months to the end of September of NOK762m (US$139.3m), down from NOK776m a year earlier.

Orkla Brands Nordic, the company's non-food consumer goods arm, and Orkla Brands International, which takes in food and non-food outside the Nordic region, achieved "moderate profit growth", the company said.

However, Orkla Foods Nordic and Orkla Food Ingredients reported a "slight decline in profit".

EBITA from Orkla Foods Nordic was NOK262m, which the company said equated to an underlying decline of 5%. Volumes from the division's Bakers unit fell and Orkla also pointed to a "weaker performance" in Finland.

Third-quarter EBITA from Orkla Food Ingredients was NOK62m, an underlying decline of 7%. The company said there had been a "delay" in pushing through price increases to offset raw-material costs.

Underlying revenues from Orkla Brands were up 4% at NOK6.03bn thanks to increasing sales from the ingredients business and from the international division.

Overall, Orkla reported a 4.9% increase in operating revenues to NOK14.9bn. Operating profit was down 7% at NOK937m, although Orkla said its EBITA rose 9% to NOK1.12bn. The company made a net loss in the third quarter of NOK1.3bn thanks to a write-down in its investment in renewable energy firm REC.

President and CEO Bjørn Wiggen focused on the improvement in EBITA, which he said was recorded "despite challenging markets for several of our businesses".

Wiggen also reiterated the company's focus on consumer goods and said it would look to acquire news businesses to strengthen its presence in that sector. "We have clearly defined the direction in which Orkla is to go. Orkla is to be further developed as the leading branded goods company in the Nordic region, based on Orkla Brands' strong market positions," he said today (27 October).

"At the same time, we will give priority to seeking out new companies operating in categories close to our present businesses, while maintaining our centre of gravity in the Nordic region. In our view, the unrest in the financial markets may offer greater opportunities for value-creating acquisitions."

MF Global analyst Andy Smith said Orkla's results were "broadly in line with expectations" although he noted that the performance of its Nordic foods business was "weaker than expected".