NORWAY: Orkla Q4 earnings slip despite sales gain
Orkla sales grow, EBITA down
Nordic consumer goods company Orkla has booked a drop in fourth-quarter operating profit, despite an improved top-line performance.
Orka said EBITA fell to NOK1.02m (US$166.2m) in the three months to the end of December, down from NOK1.12m in the comparable period a year ago. During the quarter, the company lapped a one-time gain on the sale of real estate registered in the fourth quarter of 2012.
Operating profit at Orkla Foods' arm rose to NOK422m, compared with NOK368m in the fourth quarter of 2012. The group's businesses in Sweden, Finland and the Baltics achieved both top-line and profit growth, the company said.
The firm's confectionery and snacks unit was hit by "challenging" conditions in Sweden and Finland and total operating profit slid to NOK234m, compared with NOK255m.
Orkla's international arm posted operating profit of NOK4m, compared with NOK62m in the same period of 2012. The company has initiated a strategic review of its operations in the eastern Europe and Russia.
Net profit was boosted as the group lapped charges associated with discontinued operations that totalled NOK310m in 2012. Net profit rose to NOK337m, up from NOK164m the previous year.
Orkla's sales totalled NOK9.45bn, compared with NOK8.42bn in the corresponding period of 2012. Gains were driven by the contribution from Norway-based food group Rieber & Søn, which the group acquired last year.
In a separate announcement, Orkla said chief executive Åge Korsvold will be replaced by industry veteran Peter Ruzicka.
ACQUISITION GENERATED GROWTH FOR ORKLA
Orkla's operating revenues rose 12.5% in the fourth quarter of 2013. Contributions from Rieber & Søn generated growth in turnover for the branded consumer goods business.
Orkla's fourth-quarter operating revenues totalled NOK 9,478 million, compared with NOK 8,421 million in the corresponding period of 2012.
Orkla's operating profit (EBITA) amounted to NOK 1,026 million in the fourth quarter of 2013, compared with NOK 1,117 million in the same period of 2012. The negative difference in operating profit is ascribable to the gain on the sale of a real estate project in 2012. Operating profit for the branded consumer goods business was on a par with the same quarter of 2012.
For the full year, operating revenues totalled NOK 33,045 million, compared with NOK 29,896 million in 2012. Operating profit amounted to NOK 3,163 million in 2013, compared with NOK 3,359 million in 2012.
For Orkla Brands Russia the market situation is challenging, and the results achieved by this business have declined over time. In the light of this performance, a process has been initiated to divest this company.
THE BRANDED CONSUMER GOODS BUSINESS
Fourth-quarter operating profit for Orkla Foods amounted to NOK 422 million, compared with NOK 368 million in the fourth quarter of 2012. The companies in Sweden, Finland and the Baltics achieved both top-line and profit growth. Cost synergies generated by the integration of Rieber & Søn made a positive contribution in the quarter, and this work is proceeding as planned. At year end, cost synergies exceeded NOK 150 million on a run-rate basis. Both Orkla Foods Norge and Orkla Foods Danmark have carried out a demanding integration process, and the companies' sales performance was weaker than in 2012.
Orkla Confectionery & Snacks posted fourth-quarter operating profit of NOK 234 million, compared with NOK 255 million in the same period of 2012. In Denmark and the Baltics, results improved in the fourth quarter. In Sweden, both operating revenues and operating profit were on a par with results in the fourth quarter of 2012. In Finland, the market for biscuits and confectionery was challenging, but the company achieved improvement for snacks. In Norway, there was tough competition in the snacks category and a weaker market for biscuits. A variety of activities have been initiated to create profitable top-line growth and reduce costs. The aim is to cut costs by approximately NOK 300 million over the next three years.
Orkla Home & Personal reported operating profit of NOK 194 million, compared with NOK 186 million in the fourth quarter of 2012. The integration of Jordan was successful and contributed to profit improvement. Lilleborg achieved higher turnover, good profit improvement and stronger market shares. Pierre Robert Group increased its operating revenues, but saw weaker sales of wool products due to a mild winter.
Orkla International posted operating profit of NOK 4 million, compared with NOK 62 million in the same period of 2012. Orkla Brands Russia achieved substantially weaker operating profit in the fourth quarter than in the corresponding period of 2012. MTR Foods increased its operating revenues by 12% in the fourth quarter and achieved volume growth in spice mixes and vermicelli pasta. Felix Austria achieved growth in turnover, while Rieber Polska delivered a stable performance and results for Vitana in the Czech Republic declined.
Orkla Food Ingredients (OFI) reported operating profit of NOK 97 million, compared with NOK 76 million in the corresponding period of 2012. Improvement was broad-based, and was ascribable to both acquired companies and organic growth. OFI achieved improved results in Scandinavia, the Baltics and Central and Eastern Europe.
Gränges, formerly Sapa Heat Transfer, reported fourth-quarter operating profit of NOK 78 million, compared with NOK 74 million in the corresponding period of 2012. This improvement is due to an increase in volumes delivered to the Chinese automotive market and improvement programmes in the Swedish business.
Hydro Power posted fourth-quarter operating profit of NOK 97 million, compared with NOK 85 million in the fourth quarter of 2012.
In the fourth quarter, Orkla Eiendom (real estate) reported a negative operating result of NOK 9 million, compared with a positive operating result of NOK 99 million in the same period of 2012. The completion and sale of apartments were the main reason for the high contribution to profit in the fourth quarter of 2012.
Shares and financial assets totalling NOK 146 million were divested in the fourth quarter. As at 31 December 2013, the market value of shares and financial assets totalled NOK 1,051 million.
On 1 September 2013, Sapa was established as a 50/50 joint venture between Orkla and Norsk Hydro. The fourth quarter is a seasonally weak period for Sapa. Total volume for Sapa was somewhat higher than in the corresponding period of 2012. Sapa's restructuring agenda is progressing as planned, and the results reported were affected by related accounting write-downs. Orkla's share of Sapa's net profit after tax for the fourth quarter of 2013 was NOK -312 million.
Jotun, in which Orkla has an ownership interest of 42.5%, achieved growth in all segments except marine coatings.
Orkla's pre-tax profit totalled NOK 569 million in the fourth quarter, compared with NOK 624 million in the corresponding period of 2012. Orkla proposes to pay a dividend of NOK 2.50 per share for the 2013 financial year.
Original source: Orkla
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