Orkla targeting annual Total Shareholder Return of 12–14%

At its Capital Markets Day event today, Orkla will announce the new target for Total Shareholder Return, as well as financial targets for the portfolio companies in the period 2024–2026.

On 1 March 2023 Orkla implemented a new operating model and established 12 autonomous Portfolio Companies.

Orkla is a leading industrial investment company, with focus on strong brands and consumer-oriented companies. The new comprehensive strategy will be presented at the Capital Markets Day later today.

“We are developing a company combining the very best elements from two worlds: building on our DNA of developing brands and combining this with an investment company mindset. It is this combination that will make us truly unique. As an industrial investment company our ultimate goal and KPI is to deliver a minimum annual total shareholder return in the range of 12–14% in the period 2024–2026,” says Nils K. Selte, Orkla’s President and CEO.

Value creation at Orkla consists mainly of four building blocks: the 11 consolidated portfolio companies, Jotun (42.7% ownership), financial assets, and structural opportunities.

Focus for the Portfolio Companies will be their individual financial targets in the period 2024–2026. The value creation potential for Orkla’s consolidated portfolio companies is estimated to be NOK 40–45 bn.

This represents in the period 2023–2026 for the consolidated portfolio companies:

• an underlying EBIT (adj.) CAGR of 8–10%
• a margin expansion in the range of 1.5–2.0 percentage points
• a ROCE improvement from 10% to 13%

Orkla will maintain a financial and business risk profile consistent with an investment grade credit quality, and a net debt to EBITDA ratio of 2.5. Orkla’s first priority is to pay out a stable and increasing dividend over time, and secondly to invest in current business and M&A. Any excess capital will be returned to shareholders either by an extraordinary dividend or large share buy-back programmes.

Orkla has set clear ambitions for its sustainability work, including requirements for its Portfolio Companies. The goal is to enable a responsible transition towards net-zero and sustainable production and consumption. By 2030 greenhouse gas emissions from Orkla’s own operations are to be reduced by 70% (Scope 1 & 2). All food companies are to create positive health impacts towards 2030. Orkla will achieve a balance in gender representation in management teams by 2026.

As part of the process of reducing complexity in the portfolio and a more disciplined capital allocation, Orkla has created a framework to categorise the Portfolio Companies in three groups:

“The “Grow and build” category consists of companies where we aim to grow organically and/or through M&A. The companies in the “Anchor” category are seen as significant cash generators. These companies operate in more stable categories, and are vital to ensure yearly dividend, handling of debt, and fueling Orkla’s “Grow and build” companies. The final category is “Transform or exit”. These are companies where we will work on a plan to either transform or exit within a limited time frame,” says Mr Selte.

The Capital Markets Day presentation and Q&A sessions will be held in English and can be viewed as a live webcast here: https://events.webcast.no/viewer-registration/qU2oj1kk/register

For more information about Orkla Capital Markets Day 2023, please visit this site: https://investors.orkla.com/English/events-and-presentations/capital-market-day/Capital-Markets-Day-2023/default.aspx