• Consumer branded EBITDA falls 23%
  • Branded sales drop 4%
  • Group returns to profit at NOK2.09bn
Orkla saw sales growth in its branded consumer goods division

Orkla saw sales growth in its branded consumer goods division

Norwegian conglomerate Orkla has booked a decline in first-half profits from its FMCG division.

The loss of contract production in the second half of 2011 had a negative impact on the unit's earnings in the six months to the end of June, as EBITDA slid 23% to NOK1.11bn (US$182.4m). Sales in the period also dropped, by 4% to NOK11.24bn.

However, the firm's branded consumer goods unit recorded underlying sales growth of 1.5% in the first half, with "stable" development in the Nordic markets.

The group, however, returned to profit in the period, with pre-tax profits amounting to NOK2.09bn (US$344.4m) compared to a loss of NOK472m last year.

Group EBITA edged up to NOK1.88bn, a 1.07% increase on the prior-year period.

Sales, however, dropped 3.1% to NOK29.94bn as the company recorded sales declines in its Sapa aluminium division.

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Stable performance for Orkla's branded consumer goods

Orkla's operating profit (EBITA) amounted to NOK 992 million in the second quarter, compared with NOK 1,079 million in the corresponding period of 2011. The timing of Easter sales and weak markets for Sapa Profiles Europe impacted negatively on second-quarter profit. Operating profit totalled NOK 1,880 million in the first half of 2012, which is a slight improvement.

Orkla's operating revenues amounted to NOK 15,145 million in the second quarter, compared with NOK 15,897 million in the corresponding period of 2011.

Taking into account the timing of Easter sales, the Branded Consumer Goods area posted operating profit on a par with last year. Sales volumes improved in the Nordic grocery market, and overall market shares were maintained. The Branded Consumer Goods area accounted for around 60% of Orkla's profit.

"Orkla is in a transitional phase towards becoming a pure branded consumer goods company. The new Group executive management possesses strong branded goods expertise. This will ensure that we maintain focus on operational excellence and organic growth, while we carry out structural changes. The acquisition of Jordan is entirely in line with our strategy of expansion in the branded consumer goods area," says President and CEO Åge Korsvold.

Stabburet in Norway, the Chips Group in the Nordic region and the Baltic businesses reported a positive sales and profit performance in the second quarter. MTR in India achieved 23% growth in sales in the second quarter. Orkla Brands Russia saw moderate sales improvement. To increase the competitiveness of the Russian operations, the number of factories will be reduced from four to three.

Weak markets brought a decline in volumes for Sapa Profiles Europe in the second quarter. Sapa Profiles North America continued to achieve improved volumes and profitability. Sapa Heat Transfer strengthened its performance in the second quarter, following the implementation of improvement measures. Borregaard Chemicals continued to deliver strong results in the second quarter. Lower power prices contributed to weak results for Hydro Power.

In accordance with Orkla's accounting practice, the investment in REC was written down to market value at quarter end. Orkla's profit before tax amounted to NOK 2.1 billion in the first half of 2012. The sell-off of the share portfolio is proceeding as planned. In the first half of 2012, net sales of shares totalled just over NOK 2 billion.

There will be a telephone conference Friday, 20 July 2012 at 3.00 p.m. CET. This conference will be a Q&A session with President & CEO Åge Korsvold. To participate in the telephone conference, dial in: +47 23 18 45 74. To listen to the telephone conference on demand, dial +47 23 18 45 02. Pincode: 1827#. Conference number: 827#.


Original source: Orkla