Sales and profit growth for Orkla

Orkla’s operating revenues increased by 6.1% to NOK 11,772 million in the second quarter of 2021. Operating profit (EBIT adj.) rose 5.0% to NOK 1,265 million.

Orkla’s profit before tax increased by 12% to NOK 1,344 million in the second quarter. Earnings per share rose 9.5% to NOK 1.04 in the quarter. Adjusted earnings per share rose 3.6% to NOK 1.14.Substantially higher power prices contributed to a rise in Hydro Power’s operating profit to NOK 112 million in the second quarter, a year-over-year improvement of NOK 131 million. Jotun, in which Orkla has an ownership interest of 42.6%, contributed to an increase in profit from associates of 2.8% to NOK 255 million in the second quarter.

Branded Consumer Goods had organic growth of 6.9% in the quarter. Easing of coronavirus restrictions and higher demand in the Out of Home sector contributed to 20.5% organic growth for Orkla Food Ingredients, compared with a weak second quarter of 2020. Orkla Consumer Investments had organic growth of 13.2%, driven by increased sales for Orkla House Care and Kotipizza. Orkla Foods had organic growth of 3.0% in the quarter and Orkla Care 2.5%, while Orkla Confectionery & Snacks saw a decline of 1.2%.

Branded Consumer Goods, including Headquarters, saw a 5.4% reduction in operating profit, ascribable to a higher level of activity and increased costs. The decline was partly coronavirus-related, as the cost base was extraordinarily low in the second quarter of 2020. Moreover, there was a slight change in Orkla’s product mix in the quarter.

“The coronavirus pandemic has continued to impact on Orkla in the past quarter. We have seen high infection rates and lockdowns of society, especially in India, but the situation has also been challenging in several other countries. I am pleased that our top-line results were strengthened by volume-based organic growth, and that parts of the Out of Home sector approached a normal situation. However, I am not satisfied with our cost and profit performance, but we are monitoring it closely and will consider taking necessary action,” says Orkla President and CEO Jaan Ivar Semlitsch, who is concerned about rising raw material prices:

“Orkla is exposed to a broad range of raw materials. The coronavirus pandemic has contributed to bottlenecks and disruptions in global value chains. This situation, combined with increased demand, will result in higher raw material prices going forward,” Semlitsch points out.

Orkla has made a number of strategically important acquisitions in the second quarter to strengthen its positions in selected categories and geographies.

In June, Orkla announced its entry into an agreement to purchase 75% of the shares in New York Pizza, one of the Netherlands’ leading pizza chains. The transaction valued New York Pizza at EUR 145 million, equivalent to NOK 1.5 billion, at enterprise value. Together, New York Pizza and Kotipizza own 518 franchisee-operated sales outlets, 286 of which are in Finland, 229 in the Netherlands, two in Germany and one in Belgium.

In the same month, Orkla Health announced that its acquisition of 100% of the shares in NutraQ has been completed and approved by all relevant competition authorities. NutraQ is a leading supplier of subscription-based health and wellness products in the Nordic region. The purchase price valued the company at NOK 3.1 billion at enterprise value.

In June, completion was also announced of the purchase of the Icelandic company Nói Siríus, which is the leading manufacturer of chocolate and confectionery in Iceland. In 2020, the company had a turnover of ISK 3.6 billion (approx. NOK 230 million). With this acquisition, Orkla Confectionery & Snacks is now represented by its own companies in all the Nordic markets and the Baltics.

Furthermore, Orkla Food Ingredients has completed its purchase of the two British companies Cake Décor and For All Baking, which manufacture and sell cake decorations and accessories through online stores, bakeries and grocery chains. Turnover for the two companies in 2020 totalled GBP 14.4 million (approx. NOK 168 million). On 13 July, Orkla Food Ingredients entered into an agreement to purchase the Swiss company Hans Kaspar, a leading specialist in the manufacture of ingredients for chocolate and ice cream producers. In 2020, the latter company had a turnover of CHF 13.3 million (approx. NOK 125 million).