1

First quarter results 2016

3 May 2016

Peter A. Ruzicka, President & CEO

Highlights:

Significant EPS growth in the quarter

Continued growth in Branded Consumer Goods

1.8% organic growth2 despite negative Easter effects

EBIT (adj.) growth of 12% in BCG supported by sales growth and cost improvement programmes

Strong contribution from associates

Sapa delivered solid improvement in both underlying and reported figures

Continued growth in Jotun

Increase in EPS of 74%, from NOK 0.62 to NOK 1.08

Continued high M&A and restructuring activity

Sale of all remaining shares in Grnges

Acquisition of Ham and Kavlis Danish operations completed
Pierre Robert agreement to acquire four textile brands in Finnish grocery trade
Further expansion in ice cream ingredients
Integration of Cederroth and NP Foods ongoing

1EBIT

(adj.) = Operating profit before other income and expenses

growth adjusted for FX and M&A

2Reported

Branded Consumer Goods Q1 2016:

Continued organic growth in BCG

Organic growth performance1
2.8%
2.5%
1.8%
Orkla Foods

3.3%

1.1%
0.7%
Orkla Confectionery
& Snacks

6.2%

Orkla Care -2.2%

Orkla Food Ingredients

-2.8%
2011

2012

1Reported

2013

2014

2015 Q1-16

growth adjusted for FX and M&A

-0.7%

Growth in Orklas biggest category

1.2 million more

pizza Grandiosa
sold in Norway
in Q1

4% volume
and 7% value
growth in Q1
for the frozen
pizza category
Orkla has
strengthened its
market share

Source: Nielsen per March 2016

Launching organic alternatives

Meeting increased demand for vegetarian food

New crisps launch with strong sales and social media exposure

New range from Dr. Greve makes Orkla number one in skin care

Successful cost improvements implemented

Several cost measures
in recent years
-

Increased sales force efficiency

Supply chain restructuring

initiated

Integration programs of acquired

companies initiated
Additional measures in Q1-16

2009

2010

2011

2012

Organic sales growth1

9

1Organic

2013

2014

2015

Q1-2016

Investing in larger, more flexible

production hubs
- Consolidating production of
drinkables
- Consolidating parts of the
Baltic food production

Underlying fixed costs2

sales growth adjusted for Easter effects in the quarterly figures.

fixed costs are growth in SG&A and fixed production / inventory costs, adjusted for M&A and currency translation effects.

2Underlying

Branded Consumer Goods Q1 2016:

EBIT (adj.) growth still impacted by currency

Breakdown of BCG
EBIT (adj.) growth Q1 2016

R12M EBIT (adj.)

NOK million

12%

4 500
4 000

5%

3 500

7%

3 000
2 500
2 000
1 500
Q110

10

Q111

Q112

Q113

Q114

Q115

Q116

Reported
Currency EBIT (adj.)
EBIT (adj.) translation growth in
growth
effects
constant
currency

Strong improvement in Sapa

Significant improvement since
establishment of Sapa JV

R12M Underlying EBIT

NOK million
1,600

R12M underlying EBIT

1,400

NOK 1 billion in synergies realised

Strong North American market
Higher share of value added products

1,200
1,000

Focus on continued operational

improvement going forward

800

600

400
200
0
Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16

11

Leverage on leading market position

Increase share of value added products
Continuous improvement of cost position

Summary

Delivering on our strategy and increasing performance

Keep the strategy on track

Deliver organic growth at least in line

with market growth

Target annual adj. EBIT growth of 6-9%1 in BCG

Maintain a stable dividend of at least NOK 2.50 per share

12

1Including

add-ons, excluding currency effects and large acquisitions and divestments

1
3

Financial performance
Jens Bjrn Staff, CFO

Group EBIT (adj.) improvement of 13% in the quarter

Amounts in NOK million

Key figures

Q1-15

Q1-16

Operating revenues

7 541

8 610

EBIT (adj.)

725

817

Other income and expenses

-117

-30

EBIT

608

787

Profit/loss from associates and JV

238

462

Net financials and other

-51

Profit/loss before tax

795

1 251

Tax

-155

-135

EPS (NOK)

0.62

1.08

14

1
5

Branded Consumer Goods

Sales growth of 16% driven by FX, M&A and organic growth

Amounts in NOK million
8,362

8.6%

5.5%
7,220

1.8%

BCG operating
revenues Q1-15

Organic growth1

16 1Reported growth adjusted for FX and M&A

FX

M&A

BCG operating
revenues Q1-16

Underlying margin improvement offset by dilution effects from M&A

Reported EBIT (adj.) margin in BCG

10.7%

10.3%

Q1
2015

17

2016

Comments

Margin diluted by M&A and

distribution agreements

Increased input costs continue to

impact margins

Underlying positive margin trend

due to several cost improvements
throughout the value chain

Key financials Q1 2016

Solid top and bottom line growth in Orkla Foods

Amounts in NOK million
Operating revenues

2015

EBIT (adj.)

2016

EBIT (adj.) margin (%)

+3.3% OG1
3,045

3,418

Q1
Organic growth related to launches,
campaign activity and the expanded
distribution agreement with PepsiCo
The quarter was negatively
influenced by timing of Easter

18 1Reported growth adjusted for FX and M&A

377
322

Q1

10.6 11.0

Q1

Profit and margin expansion driven by sales growth and cost

savings
Input costs continued to increase, partly due to weaker NOK

Dilutive margin effects from the inclusion of Tropicana and Quaker

(PepsiCo)

Key financials Q1 2016

Strong sales growth in Orkla Confectionery & Snacks

Amounts in NOK million
Operating revenues

2015

EBIT (adj.)

2016

EBIT (adj.) margin (%)

+6.2% OG1
1,457

1,199

Q1
Broad based organic growth

New pick and mix agreement in

Norway and distribution for Lays
contributed positively
The quarter was to some extent
negatively impacted by timing of
Easter
19 1Reported growth adjusted for FX and M&A

159

177

Q1

13.3

12.1

Q1

EBIT (adj.) growth driven by strong sales, but dilutive effects on

margin from pick and mix sweets and Lays products
The acquisition of NP Foods also had a dilutive effect on EBIT (adj.)
margin

Key financials Q1 2016

Orkla Care impacted by acquisitions and FX effects

Amounts in NOK million
Operating revenues

2015

EBIT (adj.)

2016

EBIT (adj.) margin (%)

-2.2% OG1
1,655
1,327

Q1
Weaker sales performance primarily
in Norway for HPC and Health
The quarter was negatively
influenced by timing of Easter

20 1Reported growth adjusted for FX and M&A

247

230

Q1

17.3
14.9

Q1

Profitability in all segments negatively affected by a weak NOK

Margin diluted by Cederroth inclusion and termination of the
distribution of five Unilever brands

Synergy effects from Cederroth integration contributed to EBIT

(adj.) growth

Key financials Q1 2016

Orkla Food Ingredients had slight growth in a seasonally weak quarter

Amounts in NOK million
Operating revenues

2015

EBIT (adj.)

2016

EBIT (adj.) margin (%)

-0.7% OG1
1,680

1,873

Q1

59

58

Q1

3.5

3.2

Q1

The quarter was negatively

influenced by timing of Easter

Continued expansion in ice cream ingredients with peak season

from Q2. A limited positive impact on EBIT (adj.) in Q1

Underlying growth in line with

market

Overall rise in prices of raw materials

21 1Reported growth adjusted for FX and M&A

Profitability from margarine and butter blends fell sharply due to

surplus of milk in the European market

2
2

Orkla Investments

23

Share portfolio

Real estate

Hydro Power

Sapa (50%)

Jotun (42.5%)

Orkla Investments

Financial investments

Sapa (50/50 joint venture)

Solid underlying and reported growth in Sapa

Amounts on 100% basis in NOK million
Operating revenues

2015

Underlying EBIT

Orklas share of
net profit after tax

571

14,051 13,905

2016

209

392

45

Q1

Healthy demand growth in North

America and marginal increase in
European consumption
Falling metal prices and weaker
NOK affected operating revenues
24

Q1

Q1

Significant year on year improvement in operating result and Orklas

share of net profit
Improvement programmes and increased share of higher margin
business contributed positively, as did the weaker Norwegian krone
No restructuring charges in Q1

Jotun (42.5%)

Continued sales and profit growth in Jotun

Amounts on 100% basis in NOK million
Operating revenues

2014

2015

Operating profit

16,282

2,064

13,171
1,314

FY
Continued sales growth in Q1 driven by the Marine
segment and Decorative sales in Middle East and South
East Asia

FY
Profit growth in Q1 positively affected by
improved gross margins and currency
translation effects
Jotun continues its organic growth strategy with
an ongoing new factory investment in Oman

25

Hydro Power

Lower production volumes and power prices

2015

GWh produced

558

Spot prices (NOK/MWh)

246

546

Q1
Slightly lower production
volumes compared with record
high 2015 volumes

228

Q1
Lower power prices
Volume sold on spot market is
exposed to regional prices

26 Source: Nord Pool Spot, Monthly System Price

2016

EBIT (adj.) (NOK million)

56
44

Q1
Lower volumes and price
explain the reduced EBIT
contribution in Q1

2
7

Net debt

Changes in net debt Q1-16

Amounts in NOK billion

0.2

0.9

1.5

0.1

0.1

0.2

8.3

7.8

Net debt 31
December
2015

28

Expansion
and sale of
companies

Cash flow
from
operations

Sale of
Net paid to
Tax,
FX effects
shares and shareholders dividends
financial
received, net
assets
financial &
other items

Net debt 31
March 2016

2
9

Summary
Peter A. Ruzicka, President & CEO

Delivering on strategy

Strong
performance

Allocating
capital to
Branded
Consumer
Goods

Operational
focus going
forward

1EBIT

30

1.8% organic growth2 in BCG

EBIT (adj.)1 growth of 12% in BCG
Strong performance from associates
EPS growth of 74%

Sale of remaining ownership share in Grnges

Acquisition of Ham completed, which will make
Orkla one of the leading suppliers of branded food
products in attractive markets in Central Europe
Several add-on acquisitions in Branded Consumer
Goods

Activities that drive organic growth and improve

margins
Centralise supply chain and reduce factory footprint

(adj.) = Operating profit before other income and expenses

growth adjusted for FX and M&A

2Reported

New salad spreads with fewer calories and more protein

31

Confectionery bites launched in Norway, Sweden and Finland

32

New design for the Nutrilett range

33

3
4

Q&A
Peter A. Ruzicka, President & CEO
Jens Bjrn Staff, CFO

3
5

Appendices

Group income statement

Amounts in NOK million
Q1-15

Q1-16

2015

7 541
725
-117

8 610
817
-30

33 198
3 609
-502

608
238
-63
12

787
462
-50
52

3 107
1 111
-192
64

795
-155

1 251
-135

4 090
-722

Profit/loss for the period continuing operations

Profit/loss from discontinued operations

640
0

1 116
0

3 368
-17

Profit/loss for the period

640

1 116

3 351

Earnings per share diluted (NOK)

0.62

1.08

3.24

Operating revenues
EBIT (adj.)
Other income and expenses
EBIT
Profit/loss from associates and joint ventures
Interests, net
Other financial items, net
Profit/loss before taxes
Taxes

36

Net financial items

Amounts in NOK million

FY 2015

Q1-15

Q1-16

Net interest expenses

Currency gain/loss
Result from Share Portfolio and dividends
Other financial items, net

-192
0
135
-71

-63
1
29
-18

-50
1
78
-27

Net financial items

-128

-51

37

Statement of financial position

Amounts in NOK million
31.12.2015 31.03.2016
Intangible assets
Property, plant and equipment
Investments in associates and joint ventures etc.
Non-current assets

17 676
10 523
13 029
41 228

18 389
10 999
12 871
42 259

Assets held for sale

Inventories
Inventory of development property
Trade receivables
Other receivables
Shares and financial assets
Cash and cash equivalents
Current assets
Total assets

182
4 623
216
5 267
625
1 376
721
13 010
54 238

0
5 173
217
5 556
766
374
1 464
13 550
55 809

Paid-in equity
Earned equity
Non-controlling interests
Equity

1 994
31 335
417
33 746

1 993
31 571
394
33 958

Provisions
Non-current interest-bearing liabilities
Current interest-bearing liabilities
Trade payables
Other current liabilities
Equity and liabilities

4 191
8 722
399
3 869
3 311
54 238

4 328
9 414
903
4 134
3 072
55 809

38

Cash flow
Amounts in NOK million
Q1-15

Q1-16

Operating profit
Amortisation, depreciation and write-downs
Change in net working capital
Net replacement expenditures

605
301
-415
-205

796
253
-445
-390

Cash flow from operations

Cash flow from operations, Financial Investments
Tax
Dividends received, net financial and other

286
40
-224
58

214
-27
-132
22

Cash flow before capital transactions

Paid to shareholders, net purchase/sales own shares

160
-46

77
-122

Cash flow before expansion

Expansion investments
Sold and acquired companies
Net purchases/sales shares and financial assets

114
-46
-723
75

-45
-40
-1 504
925

Net cash flow

Currency translations net interest-bearing liabilities

-580
31

-664
201

549
6 210

463
8 268

Change in net interest-bearing liabilities

Net interest-bearing liabilities

39

Sapa (joint venture) figures on 100% basis

Amounts in NOK million
Q1-15

Q2-15

Q3-15

Q4-15

Q1-16

353

358

341

311

349

14 051

14 484

13 895

12 821

13 905

392

483

404

128

571

-145

-158

-95

209

83

Other excluded items

-46

-260

-135

-250

Sum excluded items

-191

-418

-230

-41

83

201

65

174

88

655

89

14

109

34

418

Sales volume (1,000 tonnes)

Operating revenues (NOK million)1
Underlying EBIT

Excluded items:
Unrealised derivative positions

EBIT
Net income (attributable to majority)

40

Strong balance sheet and financial flexibility

Net interest bearing debt (NOK million)

8,496

7,805

Net gearing
0.28

8,268

0.24

0.23

0.24

Q4-15

Q1-16

0.19

5,661
4,786

2012

41

2013

2014

2015

Q1-16

Q1-15

Q2-15

Q3-15

Debt maturity profile

Amounts in NOK million

5,500

Average maturity 3.1 years

5,000
4,500
4,000

3,500
3,000
2,500

2,000
1,500
1,000
500
0
2016

2017

2018

2019

Unutilised credit facilities

42

2020

2021

Drawn amounts

Later

Funding sources
Amounts in NOK billion

2.0

5.2

8.2

5.1

43

Unutilised credit facilities

Banks
Bonds and CP
Cash, cash equivalents
and interest bearing assets

44