Orkla earnings rise, sales under pressure

Orkla earnings rise, sales under pressure

Nordic consumer goods giant Orkla today (17 July) booked a 19% increase in second-quarter operating profit, boosted by savings from the integration of 2012 acquisition Rieber & Søn

EBITA totalled NOK751m (US$212.2m) in the period, the company revealed. Operating profit at its branded consumer goods business totalled NOK704m, up from NOK584m in the year-ago period.

"Orkla Foods realised substantial cost synergies as a result of the integration of Rieber & Søn," the company said. Orkla said its confectionery and snacks unit was "still challenging" but added there were "signs of improvement" toward the end of the quarter.

"All in all, I am satisfied with the group's profit performance. Substantial resources have been invested in change processes and the integration of Rieber & Søn. Our primary challenge ahead is to achieve organic growth in turnover," Orkla president and CEO Peter Ruzicka said.

In the second quarter, sales edged up to NOK8.46bn, compared to NOK7.9bn last year. Orkla's foods and confectionery and snacks units both saw a sales slowdown, which was offset by increased revenues from branded, international, home and personal care and ingredients. 

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BROAD-BASED PROFIT IMPROVEMENT FOR ORKLA

Orkla's operating profit (EBITA) totalled NOK 751 million in the second quarter of 2014, a year-over-year improvement of 19%.

This growth is ascribable to acquired companies and improved branded consumer goods operations.

Operating profit for Orkla's branded consumer goods business amounted to NOK 704 million in the second quarter, up from NOK 584 million in the corresponding period of 2013. Orkla Foods realised substantial cost synergies as a result of the integration of Rieber & Søn. Orkla Home & Personal, Orkla Food Ingredients and Orkla International also showed profit improvement. Although the market situation for Orkla Confectionery & Snacks is still challenging, there were signs of improvement towards the end of the quarter.

Orkla's second-quarter operating revenues totalled NOK 8,459 million, compared with NOK 7,905 million in the corresponding quarter of 2013. The branded consumer goods business had operating revenues of NOK 7,175 million, and achieved organic growth of 0.9% in the quarter. Orkla Home & Personal, Orkla Food Ingredients and Orkla International contributed to a positive sales performance, while Orkla Foods and Orkla Confectionery & Snacks saw a decline in sales.

"All in all, I am satisfied with the Group's profit performance. Substantial resources have been invested in change processes and the integration of Rieber & Søn. Our primary challenge ahead is to achieve organic growth in turnover. We must promote collaboration, exchanges of ideas and transfers of expertise across our companies.

A number of improvement projects have been initiated to improve operations and increase profitability in the time to come," says Orkla President and CEO Peter A. Ruzicka.

The aluminium company Gränges posted second-quarter operating profit of NOK 118 million, up from NOK 84 million in the corresponding period of 2013. The improvement is ascribable to better operations and the effects of improvement programmes.
Hydro Power reported second-quarter operating profit of NOK 39 million, compared with NOK 77 million in the corresponding period of 2013. The negative difference is due to significantly lower energy prices and the sale of a property in the second quarter of 2013.

Contributions to profit from associates (primarily Sapa and Jotun) totalled NOK 192 million in the second quarter of 2014, up from NOK 130 million in the same quarter of 2013. Sapa, which is a joint venture with Norsk Hydro, achieved improved results due to increased volume and the positive effects of restructuring programmes. Market demand for extruded aluminium products in North America rose 5%, supported by growth in the automotive industry and the building and construction sector. In Europe, demand increased by 2%. Jotun, in which Orkla has an ownership interest of 42.5%, achieved growth in both operating revenues and operating profit.
Orkla's profit before tax was NOK 930 million in the second quarter of 2014, compared with NOK 514 million in the same period of 2013.

Original source: Orkla