Oslo-based Orkla Group has reported that its Q2 operating profit remained fairly stable, but lower realised gains contributed, as in the Q1, to a lower profit before tax; NOK1.1bn (US$0.14bn) this quarter compared to NOK1.5bn in the same period last year.
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Orkla Brands and Orkla Beverages achieved growth in the Q2, while Orkla Foods posted lower profit than anticipated. The advertising market is still weak and, as expected, this had a negative effect on Orkla Media.
The strong Norwegian krone has a negative impact, and adjusted for currency effects the Orkla Group’s underlying sales and operations were 2% higher than in the corresponding period of last year.
Operating revenues in the H1 amounted to NOK21.5bn, NOK488m lower than in the H1 last year. Group operating profit before goodwill amortisation for the H1 totalled NOK1.7bn, on a par with the same period last year. H1 profit before tax was NOK1.5bn, compared with NOK2.1bn last year.
At the end of the H1, Orkla’s earnings per share (EPS) were NOK4.8, compared with NOK6.8 at the end of June last year. The decline was due to lower realised gains and dividends received for the Financial Investments division, while the negative currency effects contributed to somewhat lower profit for the Industry division than in the corresponding period last year.
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By GlobalData“Orkla is less exposed to economic fluctuations than most industrial companies. However, a strong exchange rate for the krone will have a negative effect on our accounts since we report in Norwegian kroner, while three quarters of our sales take place outside Norway,” said president and CEO Finn Jebsen.
“We are satisfied with the performance of Carlsberg Breweries and Orkla Brands, but overall we must increase the effectiveness of our improvement programmes,” added Jebsen.
“We expect increased uncertainty in the general economy, with considerable risk in the financial markets. As previously stated for Orkla Media we do not expect any improvements in the advertising markets this year, and we anticipate that Orkla Foods will be on a par with or somewhat below last year. We do however expect a year on year progress for Carlsberg Breweries and Orkla Brands.”
Branded consumer goods
Orkla Foods’ operating profit before goodwill amortisation amounted to NOK352m for the H1, down NOK32m from the corresponding period last year. About NOK10m of this is ascribable to currency effects. Abba Seafood had a poor quarter in which the Polish company Superfish in particular experienced a decline in profit. Significant price hikes for raw materials combined with the generally weaker Polish economy had a negative impact on sales volumes. A number of measures have been implemented to counter this, including the closure of two production plants and a loss of 140 jobs. Further costcutting measures will be implemented. A special improvement programme is also being initiated at Procordia Food in the Q3.
In the H1, Orkla Beverages’s 40% interest in Carlsberg Breweries generated operating profit before goodwill amortisation of NOK666m, up from NOK541m in the corresponding period of the last year. Operating revenues in the H1 totalled NOK7.3bn, NOK187m higher than in the H1 2001. Carlsberg Breweries’ sales growth in the H1 was primarily due to continued strong organic growth at BBH, acquisitions in Poland and the consolidation of Turk Tuborg. The Carlsberg brand achieved 7% volume growth during the period.
At the end of the H1, Orkla Brands had increased its operating profit before goodwill amortisation by 12% to NOK367m. In the Q2 alone, profit was 18% higher than in the Q2 of last year. Orkla Brands managed to increase its margins and reduce costs, and launches of new products had a positive impact. The most important launch was Define, a new hair care range from Lilleborg Home and Personal Care. After six months, Define has established a position as market leader in the hair care segment in Norway. With the exception of household textiles, there were minimal changes in market shares for Orkla Brands’ products. The improvement project being carried out in the Biscuits business, which was initiated towards the end of 2001, is proceeding as planned.
