NORWAY: Rieber acquisition drives Orkla Q3 growth
By Katy Askew | 30 October 2013
Orkla fails to deliver organic growth
The company booked an increase in operating profit for the three-month period, which rose to NOK909m (US$154.7m) compared to NOK686m last year. Gains were driven by the consumer foods business, where operating profit totalled NOK364m in the third quarter, up from NOK312m in the comparable period of last year.
CEO Åge Korsvold attributed the growth in branded food profits to the Rieber acquisition, adding the integration process is "on track". However, he emphasised the group had not delivered organic growth during the period.
"The improvement is primarily ascribable to acquired companies in the branded consumer goods area, and is not the result of organic growth. Seen in isolation, I am therefore not satisfied with the results for the quarter," he said.
Total revenue totalled NOK8.44bn, up from NOK7.19bn in the third quarter of 2012.
Orkla sealed its acquisition of Rieber in April. The deal, which valued Rieber at NOK6.1bn, was announced last August.
Click here to read our analysis of the acquisition, published in August 2012.
ACQUISITIONS GENERATED GROWTH FOR ORKLA
Orkla's operating profit (EBITA) amounted to NOK 909 million in the third quarter, compared with NOK 868 million in the same period of 2012.
Orkla's third-quarter operating revenues totalled NOK 8,443 million, compared with NOK 7,193 million in the same period of 2012.
"The improvement is primarily ascribable to acquired companies in the branded consumer goods area, and is not the result of organic growth. Seen in isolation, I am therefore not satisfied with the results for the quarter, but the internal change processes and the process of integrating with Rieber & Søn are on track," says Orkla President and CEO Åge Korsvold.
THE BRANDED CONSUMER GOODS BUSINESS
Operating profit for Orkla Foods was NOK 364 million in the third quarter, up from NOK 312 million in the same period of 2012. Orkla Foods Norge achieved profit growth in the quarter. However, when the impact on profit of the acquisition of Rieber is taken into account, there was a decline in profit in the quarter. The businesses in Sweden, Finland and the Baltics continued to perform well. Cost synergies from the integration of Rieber & Søn contributed to some extent in the quarter, and further effects are expected in the fourth quarter and into 2014.
Orkla Confectionery & Snacks posted third-quarter operating profit of NOK 185 million, compared with NOK 212 million in the same period of 2012. There is tough competition in the Nordic market from other branded consumer goods companies and retail chains' private labels. A comprehensive programme to create profitable top-line growth and cut costs is currently being developed. The programme aims at reducing total costs by NOK 300 million over the next three years.
Orkla Home & Personal reported operating profit of NOK 250 million, compared with NOK 216 million in the corresponding period of 2012. The acquisition of Jordan contributed to the profit improvement. The process of integrating Jordan into Lilleborg has been successful and is ahead of schedule. Lilleborg (Norway) achieved profit growth and increased its market shares in several key categories. Pierre Robert Group and Orkla House Care also reported improved profit.
Orkla International posted operating profit of NOK-8 million, compared with NOK -15 million in the third quarter of 2012. Orkla Brands Russia continued to deliver a weak sales performance in a Russian chocolate market affected by fierce competition from multinational companies. MTR Foods in India increased its operating revenues by 18% in the third quarter and achieved volume growth in its core categories, spice mixes and powder mixes. The companies in Austria and Poland reported improvement, while the Czech market, impacted by numerous campaigns and squeezed margins, was challenging.
Orkla Food Ingredients (OFI) achieved operating profit of NOK 77 million, up from NOK 59 million in the third quarter of last year. OFI's Scandinavian sales and distribution companies posted broad-based profit improvement. OFI's ice cream ingredients business continued to achieve strong growth in the third quarter. The improved trend in the mixes and bread improvers segment continued in the Netherlands, Norway and Portugal.
Gränges, formerly Sapa Heat Transfer, posted third-quarter operating profit of NOK 90 million, compared with NOK 66 million in the same period of 2012. The Chinese operations in Shanghai continued to make progress, due to improvement programmes and the growing domestic market. The Swedish operations in Finspång also contributed positively as a result of volume growth and the positive effects of improvement programmes.
Hydro Power reported operating profit of NOK 42 million, compared with NOK 45 million in the third quarter of 2012. Jotun, in which Orkla has an ownership interest of 42.5%, continued to strengthen its results.
Shares and financial assets for a total of NOK 168 million were divested in the third quarter. The Group had a net accounting gain of NOK 56 million in the quarter, compared with NOK 390 million in the same period of last year. As at 30 September 2013, the market value of shares and financial assets totalled NOK 982 million.
On 1 September 2013, following the approval of the Chinese competition authorities, Sapa was established as a 50/50 joint venture between Norsk Hydro and Orkla. Orkla's share of Sapa's net loss for September was NOK -35 million. Demand for extruded aluminium profiles in North America rose 2% in the third quarter of 2013 compared with the same quarter of 2012, while there was a 2% decline in demand in Europe.
Orkla's profit before tax amounted to NOK 681 million in the third quarter, compared with NOK 1,191 million in the same period of 2012.
Original source: Orkla
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NORWAY: Rieber acquisition drives Orkla Q3 growth
30 Oct 2013 -