Orkla ASA: announces Q4 and FY-2022 weaker profit

Oslo / NO. (ok) Operating revenues of Norway’s Orkla ASA rose by 15 percent to NOK 16,077 million in the fourth quarter. Operating profit Ebit (adjusted) increased by 2 percent to NOK 1,903 million, due to marked improvement for Hydro Power, but profit was weaker for the Branded Consumer Goods business. The group’s profit before tax amounted to NOK 1,702 million, which was a decline of 8 percent.

Orkla’s Branded Consumer Goods business achieved 13 percent growth in fourth-quarter operating revenues. Organic turnover grew by 10 percent. Growth was driven by price increases to compensate for steep increases in energy, raw material, packaging and freight costs. All business areas had organic growth in the quarter.

Branded Consumer Goods, including Headquarters, saw a 14 percent decline in operating profit Ebit (adjusted). Part of the decline was due to accruals and non-recurring costs. Orkla Food Ingredients and Orkla India achieved improved profit, while the other business areas had a profit decline due to increased costs and lower volumes.

Jotun, in which Orkla owns a 42.6 percent interest, increased operating revenues by 19 percent to NOK 6,916 million. Operating profit Ebita rose by 66 percent to NOK 606 million. The improvement in sales was particularly strong in Marine Coatings, and all Jotun’s segments contributed positively. Orkla’s profit from associates and joint ventures rose by 40 percent to NOK 147 million in the fourth quarter. The increase can be ascribed entirely to Jotun.

Hydro Power increased operating profit Ebit (adjusted) by 52 percent to NOK 631 million in the fourth quarter. The increase is due to higher power prices than in the same quarter of 2021. Power prices varied substantially in the quarter, and declined slightly in relation to the third quarter of 2022.

The group’s other income and expenses totalled minus NOK 201 million in the fourth quarter, compared with minus NOK 88 million, year over year. The majority of the costs can be linked to projects related to the acquisition and disposal of businesses, in addition to structural projects within the group.

For the full year, Orkla’s operating revenues increased by 16 percent to NOK 58,391 million. Operating profit Ebit (adjusted) showed growth of 21 percent, and amounted to NOK 7,411 million. Earnings per share (adjusted) were NOK 5.46, equivalent to an increase of 6 percent. Orkla’s Board of Directors intends to propose a dividend of NOK 3,00 per share for the 2022 financial year.

«In 2022 Orkla faced a challenging market situation characterised by substantial increases in input costs, extensive value chain disruptions and uncertainty regarding the global food situation. In the fourth quarter, we experienced increased costs throughout the value chain. Higher inflation and rising interest rates reduced consumer buying power in most of our markets, which in turn put pressure on our sales volumes.

­Nevertheless, we have largely succeeded in maintaining our market shares and good delivery levels. Going forward, Orkla will increase its investments in brand-building, while also reinforcing our cost improvement initiatives,» says Orkla President and CEO Nils K. Selte, adding:

«As previously announced, Orkla is to become a leading industrial investment company. The scope will be brands and consumer-oriented companies. Our new business model will take formal effect as of 1 March 2023. A comprehensive strategic process has commenced to ensure that the potential inherent in each portfolio company is fully leveraged, with focus on leading brands, greater independence and strong entrepreneurship.»

In 2022, Orkla acquired companies for NOK 3,099 million, while disposals of companies amounted to NOK 132 million. The largest purchases were the US ice cream ingredient company Denali Ingredients (84 percent), the UK dietary supplement company Healthspan Group (100 percent), the Polish pizza chain Da Grasso (74 percent) and the Norwegian raw material supplier Vesterålen Marine Olje (95 percent).

At year-end, the group had 20,471 employees and 119 factories in 22 countries.