Orkla’s operating profit (EBIT adj.) increased by 8.7% to NOK 1,205 million in the second quarter of 2020. Operating revenues rose by 5.3% to NOK 11,099 million. Adjusted earnings per share increased in the quarter by 18% to NOK 1.10.
Orkla’s Branded Consumer Goods operations, including Headquarters, had a 16% improvement in operating profit. The improvement is a result of factors including cost-cutting measures related to the coronavirus pandemic, productivity improvements and positive currency translation effects.
Four out of five business areas had a marked improvement in operating profit in the second quarter, compared with the same period of 2019: Orkla Consumer Investments (+46%), Orkla Care (+27%), Orkla Confectionery & Snacks (+26%) and Orkla Foods (+22%). Due to lockdowns in several markets and government-imposed restrictions, Orkla Food Ingredients saw a 48% decline in operating profit.
Orkla’s Branded Consumer Goods operations had turnover growth of 6.2%, primarily due to currency fluctuations and acquisitions of companies. Organic growth was -3.8% in the second quarter. Orkla had good sales growth in the grocery market, but a considerable decline in sales to the out-of-home sector.
“We can look back on a half-year marked by the biggest ever peacetime crisis. In March, there was extensive stockpiling in grocery stores. After a slow start to the second quarter, volumes have picked up again. It looks as though consumers turn to well-known, familiar brands in times of crisis like the one we are currently experiencing. Outside the grocery sector, however, our companies have seen a substantial reduction in demand due to various restrictions imposed by the government. Now that society is gradually opening up again, we have also seen an improvement in out-of-home demand,” says Orkla President and CEO Jaan Ivar Semlitsch.
“As a supplier of food, household cleaning and personal hygiene products, we at Orkla have a responsibility to society to ensure that our products are available. It’s therefore gratifying to see that we have succeeded in maintaining close to normal supply chain operations during the coronavirus pandemic, while also fulfilling our top priority of protecting the health and safety of our employees,” he adds.
Orkla has also taken a number of structural actions:
- Orkla Wound Care has signed and completed an agreement to buy the shares in Norgesplaster. The company holds good positions in the wound care and first aid equjpment markets.
- Orkla Foods Sverige has signed and completed an agreement with PepsiCo, Inc. to purchase the Havrefras brand, including Rug Fras and Mini Fras. The brands hold strong positions in Scandinavia in healthy breakfast cereals.
- Orkla Foods Norge has signed an agreement to sell SaritaS, Vestlandslefsa and Li-Klenning. The purpose of the disposals is to streamline the portfolio and concentrate the business on selected core areas.
- It has been decided to wind up the Swedish business in Pierre Robert Group, and activity has gradually been reduced in the first half-year.
Hydro Power’s operating profit amounted to NOK -19 million, compared with NOK 69 million in the second quarter of 2019. The decline in profit was due to substantially lower power prices.
Profit from associates increased by 37% to NOK 248 million. The improvement is mainly due to good profit growth and margin performance, as well as positive currency translation effects, in Jotun.
Orkla’s profit before tax rose by 2% to NOK 1,200 million in the second quarter.
The results will be presented in a webcast with Presidet & CEO Jaan Ivar Semlitsch and CFO Harald Ullevoldsæter at 8.00 a.m. CET. As a consequence of the Corona situation, there will not be a physical presentation of the results. The presentation and subsequent Q&A session will be held in English and may be viewed live here.