Third quarter results 2014 30 October 2014
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
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