Third quarter results 2014
30 October 2014
Peter A. Ruzicka, President & CEO
Jens Bjørn Staff, CFO
Highlights Q3 2014
Improving operations and delivering on strategy
• Group EBITA improved by 5% to NOK 860 million compared to Q3’13
• Improving operations in Branded Consumer Goods
– Organic growth in BCG of 0.4%
– BCG operating margin improved by 0.3 percentage points
– Strong quarter with both top-line and margin improvements for Orkla Confectionery & Snacks
– Reduction in EBITA for Orkla Foods mainly driven by negative top-line development
• Delivering on strategy
– Successful IPO of Gränges
– Acquisition of NP Foods in Latvia
– Sale of Delecta in Poland completed
• Group EPS of NOK 0.51 (0.43 in Q3 2013)
2
1 Reported growth adjusted for FX, M&A and timing of selling days
Improved EBITA margin driven by Orkla Confectionery & Snacks
EBITA margin BCG
12.2%
12.5%
EBITA margin BCG per business area
14.0%
13.6%
Orkla Foods
Orkla
Confectionery
& Snacks
16.1%
17.9%
Orkla
Home &
Personal
Orkla
International
21.0%
20.5%
-1.1%
-0.8%
5.1%
5.7%
Orkla Food
Ingredients
Q3’13
3
Q3’14
Q3’13
Q3’14
Positive growth in BCG despite challenges in Orkla Foods
Organic growth1 BCG
Organic growth1 BCG per business area in Q3
2.5%
Orkla Foods
1.1%
0.9%
0.4%
-1.2%
-2.8%
-3.9%
4
Orkla
Confectionery
& Snacks
2.6%
Orkla Home
& Personal
-0.5%
2011
-3.4%
-3.6%
Orkla
International
Orkla Food
Ingredients
2012 Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14
1 Reported growth adjusted for FX, Easter, M&A and timing of selling days
3.5%
-3.4%
4.0%
Solid quarter for Orkla Confectionery & Snacks,
challenging in Orkla Foods
Orkla Confectionery & Snacks
• Improved EBITA margin
– Top-line, realization of synergies from
restructuring
Status
• Positive organic growth
– Innovations, improved field sales
execution, increased promotions
• EBITA margin
– Delivering on cost initiatives
Activities
5
• Organic growth
– Continued strong innovation
programme
Orkla Foods
• Reduced EBITA margin
– Top-line, FX, fixed costs
• Negative organic growth
– Fewer innovations / promotions
• EBITA margin
– Delivering on cost initiatives. New
initiatives will be initiated
• Organic growth
– Stronger innovations, more promotions
YTD: Nine plants under closure or planned to be closed
97
-5
Baseline Orkla 2014
6
Plant closed/undergoing
closure
-4
88
Closure considered, prestudy to be finalised in Q4
Other plants
Examples of innovations and relaunches in Q3
PR Sport Young
Soft, seamless base-layer for
active youngsters
7
Examples of innovations and relaunches in Q3
Abba Fisksoppa
A healthy and convenient
meal – easy to prepare and
ready to eat
8
Examples of innovations and relaunches in Q3
Polly bar
Polly bar filled with Polly
peanuts and soft caramel
9
Examples of innovations and relaunches in Q3
Chicken soup
Tasty chicken soup with
noodles
10
Examples of innovations and relaunches in Q3
Idun Mors Hjemmebakte
Ready to use fillings
11
Gränges – A successful IPO despite challenging markets
• Strong operational improvement from Q1 2013 to Q2 2014
– Increase in EBITA margin by 3%-points to 11%
– Strong cash generation ahead of IPO
• Gränges well received by investor community, successfully listed
on NASDAQ 10 October despite challenging markets
– Offering price was set within the initial range at SEK 42.50
per share
– Market capitalisation: approx. SEK 3.2 billion
– Orkla ownership after completion of offering: 31% – 40%1
12 1 Dependent on whether the over-allotment option is exercised
The acquisition of NP Foods will significantly strengthen Orkla’s
positions in the Baltic markets
Amounts in NOK million
• NP Foods is a leading Latvian confectionery &
biscuits player
Revenues by country (2013A)2
– Sales 2013: NOK ~600m1
• NP Foods holds #1 positions within:
Estonia
408 73 481
– Chocolate & sugar confectionery in Latvia
– Biscuits in Latvia and Lithuania
Latvia
220 385
605
• Laima is an iconic confectionery brand
• Other key brands include:
Lithuania 215 299
84
Total
844
Orkla
13 1 Including exports outside Baltic region, 2 Operating revenues Orkla in the Baltic region
542
NP Foods
1.385
Strong revenue and margin growth for Orkla companies located
in the Baltic region
Amounts in NOK million
Operating revenues1
EBITA margin1 (%)
1,022
9.00
898
763
7.70
787
6.40
4.20
2011
2012
2013
RTM
14 1 Operating revenues and EBITA of Orkla companies with operations
in the Baltic region also include revenues outside this region
2011
2012
2013
RTM
Financial Performance
Jens Bjørn Staff, CFO
Group EBITA improved by 5% to NOK 860 million in Q3
Amounts in NOK million
Key figures
Q3-13
Q3-14
YTD-13
YTD-14
Operating revenues
7,508
7,487
20,604
22,095
819
860
1,878
2,112
-193
-47
-780
-7
622
807
1,084
2,090
76
126
299
373
Net financials and other
-67
-62
536
-231
Profit/loss before tax1
631
871
1,919
2,232
Discontinued operations2
-12
-119
-1,092
37
0.43
0.51
0.36
1.69
EBITA
Other income and expenses
EBIT
Profit/loss from associates
and JV
EPS (NOK)
16 1 From continuing operations, 2 Gränges is classified as discontinued operations (adj. made for historical figures)
EBITA improvement driven by Orkla Confectionery & Snacks
and Orkla Food Ingredients
Amounts in NOK million
Branded Consumer Goods: NOK 35 million
NOK 9 million increase in underlying EBITA BCG
860
16
7
819
-21
Group
EBITA
Q3-13
17
Orkla Foods
-2
8
3
30
Orkla
Orkla Food
Orkla
Orkla Home
Orkla
Confectionery & Personal International Ingredients Investments
& Snacks
Orkla HQ
Group
EBITA
Q3-14
1.2% revenue growth, 0.4% organic growth in BCG
Amounts in NOK million
-0.3 %
7,200
M&A
BCG operating
revenues Q3 2014
1.1 %
7,115
0.4 %
BCG operating
revenues Q3 2013
Organic growth1
18 1 Organic growth has been adjusted for timing of selling days
FX
Orkla Foods – Key financials
Amounts in NOK million
2013
Operating revenues
-3.4%
OG1
EBITA margin (%)
-3.6%
OG1
6,903
7,707
853
364
2,597 2,526
Q3
EBITA
2014
YTD
971
11.7 11.6 11.0
12.6
14.0 13.6 14.6
343
Q3
YTD
Q1
Q2
Q3
Q4
• Top-line development still
challenging in Norway and
Denmark
• Q3 EBITA and margin affected by a weaker Swedish Krona and
increased operational costs related to restructuring of both sales force
and production
• Satisfactory growth in Sweden,
Finland and the Baltics
• Cost synergies from the integration of Rieber & Søn and the merger of
Abba and Procordia are being realised according to plan
19 1 Reported growth adjusted for FX, M&A and timing of selling days
Orkla Confectionery & Snacks – Key financials
Amounts in NOK million
2013
Operating revenues
2.6%
OG1
EBITA
EBITA margin (%)
-0.7%
OG1
3,348 3,454
448
185
1,147 1,202
Q3
2014
YTD
• First quarter with organic growth
since Q4 2012 driven by Norway
and the Baltics
440
17.9
16.3
13.1
10.8
10.4
9.6
215
Q3
16.1
YTD
Q1
Q2
Q3
• EBITA improvement in Q3 related to Norway and Denmark
• Reported figures in Q3 and YTD positively affected by timing of
selling days, opposite effect in Q4
• Still challenging in Sweden
20 1 Reported growth adjusted for FX, M&A and timing of selling days
Q4
Orkla Home & Personal – Key financials
Amounts in NOK million
2013
Operating revenues
3.5%
OG1
EBITA
EBITA margin (%)
3.3%
OG1
3,500 3,710
629
250
1,192 1,254
Q3
2014
YTD
• Sales growth for 4 out of 5
business units
663
21.0 20.5
18.0
17.7
15.3
15.0 15.0
257
Q3
YTD
Q1
Q2
Q3
Q4
• Broad-based stable development
• Product profitability in most business units still negatively affected by a
• YTD figures positively affected by
weak NOK
timing of promotions in Q3 and
extra selling days in Q1
21 1 Reported growth adjusted for FX, M&A and timing of selling days
Orkla International – Key financials
Amounts in NOK million
2013
Operating revenues
-3.4%
OG1
2014
EBITA
1.8%
OG1
2,007
1,728
-5
-8
738
-47
661
-90
Q3
Q3
YTD
YTD
• Negative top-line development
driven by Orkla Brands Russia
• Stable EBITA level for Orkla Brands Russia despite negative top-line
development
• 19.0% organic growth in MTR,
investing for further growth
• Improved EBITA in Vitana and Felix Austria
22 1 Reported growth adjusted for FX, M&A and timing of selling days
Orkla Food Ingredients – Key financials
Amounts in NOK million
2013
Operating revenues
4.0%
OG1
EBITA
EBITA margin (%)
4.1%
OG1
4,272
4,713
235
5.4
191
1,524 1,638
Q3
2014
YTD
Q3
5.1
5.7
5.6
2.8 2.9
93
77
6.2
YTD
Q1
Q2
Q3
Q4
• Strong organic growth
• 21% increase in EBITA
• More favourable product mix
• Broad-based contribution margin improvement driven by a sound
mixture of price management effects and volume / mix increase
23 1 Reported growth adjusted for FX, M&A and timing of selling days
Orkla Investments
Jens Bjørn Staff, CFO
Gränges presented as Discontinued Operations
• In Q3, Gränges is presented net on a single line as Discontinued Operations in the P&L
• The result from Gränges in Q3 was NOK -119 million (NOK 37 million for first three quarters)
– The loss in Q3 includes a write-down of net assets
• Orkla sells 60-69% of Gränges
– The remaining 31-40% will be reported as an associate and accounted for according to the
equity method from Q4 2014
– Opening carrying value will be stock market capitalisation as of 10 October 2014
– Cash flow effect in Q4: net proceeds from sale of shares and net interest bearing debt
25 1Assuming that the over-allotment is exercised in full
Sapa (50/50 joint venture)
Amounts in NOK million
Operating
revenues1
10.798
11.603
Underlying
EBIT1
Orkla’s share of net profit
after tax
201
44
54
Q2’14
Q3’14
-51
24
-312
Q3 2013
Q3 2014
• Market growth of 7% and 1% in
North America and Europe,
respectively, compared to Q3
last year
26 1 Pro-forma Q3 2013
Q3 2013
Q3 2014
Q4’13
Q1’14
• Underlying EBIT for SAPA increased compared to Q3 2013 due to
positive contribution from restructuring programmes
• Realisation of synergies and restructuring on track
Jotun (42.5%)
Amounts in NOK million
As of 30 Aug’13
Operating revenues
8,174
•
8,660
Good overall growth in Q3 2014
• All segments growing with improved Decorative
sales in Scandinavia and continued positive
development for the Marine newbuilding market
27
As of 30 Aug’14
EBIT
1.050
978
• Increase in costs primarily tied to market
development activities in growth markets
Hydro Power
2013
Volume produced
Spot prices (NOK/MWh)
2014
EBITA (NOK million)
741
609 583
545 568
650
97
312
294
285 263 296
252
211
77
58
326
Q1
39
Q2
Q3
Q4
Q1
Q2
Q3
Q4
-3
Q1
• Higher volumes compared with
Q3 2013
28
• Lower spot prices compared
with Q3 last year
42 46
Q2
Q3
Q4
• Profit in Q2 2013 partly
ascribable to sale of real estate
(NOK 17 million)
Capital structure
Jens Bjørn Staff, CFO
Change in net debt YTD 2014
Amounts in NOK billion
8.5
0.3
0.4
0.3
8.3
FX effects
Net debt 30
September
2014
-2.3
1.3
0.2
Net debt 31
December
2013
30
Expansion
and sale of
companies
Cash flow
from
operations
Sale of shares Net paid to Tax, dividends
and financial shareholders received, net
assets
financial &
other
Strong balance sheet and financial flexibility
Net interest bearing debt (NOK million)
Net gearing
0.33
19,652
0.31
0.28
0.28
0.24
10,645
8,496
8,329
2013
Q3’14
4,786
2010
2011
2012
• Average maturity 3.6 years
• Average interest cost: 3.0% (3.4% YTD)
31
Q3’13
Q4’13
Q1’14
Q2’14
Q3’14
Outlook
Peter A. Ruzicka, President & CEO
Operational focus going forward
• Future growth and value creation as a focused Nordic based BCG company
• Organic growth as the key long-term value driver
Strategy
• Going from a very decentralised model to a more optimised model
• Leveraging on our substantial local presence, skills and insights
• Deliver on initiated and ongoing structural processes
• Focus on activities that drive organic growth and improve margins
– Strong innovation programmes
Operational
focus
– More cross-market initiatives
– Increase sales force effectiveness
– Strengthen relations with our customers
• Optimising production structure
33
Q&A
Peter A. Ruzicka, President & CEO
Jens Bjørn Staff, CFO
Appendices
Group income statement
Amounts in NOK million
Q3'13
Q3'14
7,508
819
-4
-193
7,487
860
-6
-47
20,604
1,878
-14
-780
22,095
2,112
-15
-7
EBIT
Profit/loss from associates and joint ventures
Dividends received
Gains, losses and write-downs shares and fin. assets
Financial items, net
622
76
2
56
-125
807
126
1
28
-91
1,084
299
242
629
-335
2,090
373
37
40
-308
Profit/loss before taxes
Taxes
631
-168
871
-207
1,919
-417
2,232
-505
Profit/loss for the period continuing operations
Profit/loss from discontinued operations
463
-12
664
-119
1,502
-1,092
1,727
37
Profit/loss for the period
451
545
410
1,764
0.43
0.51
0.36
1.69
Operating revenues
EBITA
Amortisation intangibles
Other income and expenses
Earnings per share diluted (NOK)
36
YTD'13 YTD'14
Net financial items
Amounts in NOK million
FY 2013
37
Q3'13
Q3'14
Net interest expenses
Currency gain / loss
Other financial items, net
-351
-1
-113
-98
0
-27
-73
-5
-13
Net financial items
-465
-125
-91
Statement of financial position
Amounts in NOK million
38
31.12.2013
30.09.2014
Intangible assets
Property, plant and equipment
Investments in associates and joint ventures etc.
Non-current assets
15 402
11 651
11 042
38 095
13 782
9 548
11 333
34 663
0
Operations held for sale
Inventories
Receivables
Shares and financial assets
Cash and cash equivalents
Current assets
Total assets
0
4 836
6 328
1 051
1 805
14,020
52 115
4 337
4 194
5 378
826
1 653
16,388
51 051
Paid-in equity
Earned equity
Non-controlling interests
Equity
1 989
28 490
301
30 780
1 995
27 488
366
29 849
Provisions
Non-current interest-bearing liabilities
Current interest-bearing liabilities
Operations held for sale, liabilities
Other current liabilities
Equity and liabilities
3 369
8 041
2 837
0
7,088
52 115
3 379
9 411
990
1 641
5,781
51 051
Cash flow
Amounts in NOK million
Operating profit
Amortisation, depreciation and write-downs
Change in net working capital
Net replacement expenditures
Cash flow from operations, industrial activities
Cash flow from operations, Orkla Financial Investments
Tax
Dividends received, net financial and other
Cash flow before capital transactions
Paid to shareholders, net purchase/sales own shares
Cash flow before expansion
Expansion investments
Sold and acquired companies
Net purchases/sales portfolio investments
Net cash flow
Currency translations net interest-bearing liabilities
Change in net interest-bearing liabilities
Net interest-bearing liabilities
39
YTD'13
YTD'14
1 292
1 235
- 760
- 566
1 201
64
- 472
- 194
599
-2 488
-1 889
- 115
-5 247
2 944
-4 307
- 809
5 116
9 902
2 138
737
- 922
- 606
1 347
45
- 355
559
1 596
-2 345
- 749
- 68
499
204
- 114
281
- 167
8 329
Sapa (joint venture) – Pro forma information (100%)
Amounts in NOK million
Q4’12
Q1’13
Q2’13
Q3’13
Q4’13
Q1’14
Q2’14
Q3’14
311
346
360
345
314
359
368
350
9,654
10,367
10,974
10,798
10,132
11,346
11,544
11,603
154
304
508
328
-43
440
641
492
Underlying EBIT
-142
16
211
24
-339
155
350
201
Reported EBIT
-618
-148
-1,096
-1,985
-787
-3
168
198
Sales volume (1000 tonnes)
Revenues
Underlying EBITDA1
40 1 Similar to Orkla’s reported EBITDA
Historical dividends
Amounts in NOK
5,00
5,00
2,00
2,50 2,50 2,50 2,50
2,25 2,25 2,25
1,50
1,00
2,50
0,50 0,60 0,65 0,68
0,41
0,39
0,32
0,27
0,19 0,23
0,80 0,90
93
94
95
96
97
98
99
00
01
02
03
Special dividend
41
04
05
06
07
Ordinary dividend
08
09
10
11
12
13
14
Debt maturity profile
Amounts in NOK million
6,537
5,561
1,289
920
978
826
755
378
13
2014
2015
2016
2017
2018
Unutilised credit facilities
42
2019
2020
Drawn amounts
2021
Later
Funding sources
Amounts in NOK billion
2.1
6.9
5.1
5.3
Unutilised credit facilities
Banks
Bonds and CP
Cash, cash equivalents
and interest bearing assets