Profit growth for the Orkla group

Orkla’s operating revenues increased in the third quarter by 12% to NOK 14.8 billion. Operating profit EBIT (adj.) rose 30% to NOK 2,223 million. Group profit before tax amounted to NOK 2,245 million, an improvement of 29%. Hydro Power and Jotun both had strong top-line and profit growth.

Adjusted earnings per share for the third quarter were NOK 1.58, an increase of 15% from the same period in 2021.

Operating profit EBIT (adj.) for Hydro Power amounted to NOK 773 million in the third quarter of 2022, compared with NOK 89 million year over year. The increase is due to substantially higher power prices than in the same quarter of 2021.

Profit from associates totalled NOK 238 million in the third quarter, compared with NOK 164 million year over year. Jotun had strong top-line growth as a result of higher sales volume and increased prices. All the segments, Decorative Paints, Protective Coatings, Powder Coatings and Marine Coatings, achieved a double-digit sales growth percentage in the quarter. Jotun’s operating profit EBITA increased by 75%.

Orkla’s Branded Consumer Goods business posted an organic increase of 9% in third-quarter operating revenues. There was a certain decline in volume, partly as a result of normalised sales levels in the wake of the pandemic and extraordinary sales volumes in the Norwegian grocery market ahead of the price increases that took place from 1 July.

All the business areas saw sales improvement. Orkla Food Ingredients and Orkla India had organic growth of 21% and 20%, respectively. Orkla Confectionery & Snacks increased had organic growth of 8%. Both Orkla Foods Europe and Orkla Care had organic growth of 4%. Orkla Consumer Investments reported growth of 1%.

The Branded Consumer Goods business including Headquarters saw a decline of 11% in operating profit EBIT (adj.) in the third quarter. The costs of raw materials, packaging, freight and energy were significantly higher, year over year. Moreover, there was high cost inflation in a number of other areas and a certain decline in volume.

“Orkla has implemented necessary price increases to compensate for the higher costs of our input factors. We have a lag effect with respect to our purchasing costs. On the whole, we have entered into long-term contracts and purchase little on the spot market. We now see that inflation is impacting broadly on the entire value chain, and costs will continue to increase in 2023. Unfortunately, we will have to make additional price increases, while also taking further action to reduce our cost base. We will continue to invest in brand-building and innovations, so that we can always offer our customers and consumers a relevant, attractive range of products,” says Orkla President and CEO Nils K. Selte.

Orkla has carried out several important transactions in the third quarter. Orkla Food Ingredients entered into an agreement to purchase 84% of the shares in the US company Denali Ingredients, a leading ice cream ingredients business in the USA. The seller is Denali Companies LLC, owned and operated by the founding family of Wally and June Blume. As part of the transaction, the seller and Denali Ingredients CEO Neal Glaeser will invest in Denali Ingredients and become co-owners in the company with a combined stake of ~16%. Mr Glaeser will continue to head the business. This acquisition strengthens Orkla’s position as a leading supplier of ingredients to the ice cream and chocolate industry, and increases its exposure to higher-growth markets and categories. At the same time, a process has been initiated to seek a long-term partner for Orkla Food Ingredients.

Orkla Consumer & Financial Investments has entered into an agreement to purchase 74% of the shares in Da Grasso, one of Poland’s leading franchise pizza chains with 193 outlets. Da Grasso is owned by Karolina Rozwandowicz (95%) and Magdalena Piróg (5%). Both will remain shareholders in the company in partnership with Orkla. After completion of the transaction, Orkla will have an ownership interest of 74%, while the two minority shareholders will have the remaining shares.

Orkla Latvija has sold its convenience business in Latvia and Lithuania, which mainly consists of the sale of fresh sandwiches through convenience stores and petrol stations.