November 28, 2022

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Orkla announces further price increases

Orkla announces further price increases

The matter will be updated with a press conference on the 8th.

The brand giant announced Thursday morning total revenue for the third quarter of NOK 14.75 billion, operating profit of NOK 2.22 billion and profit before tax of NOK 2.25 billion. Business volume increased 12 percent from the third quarter of 2021, and the pre-tax result was a whopping 29 percent. The result before taxes is still about 80 million worse than analysts expected.

Orkla has implemented the necessary price increases to compensate for the increased costs of our input factors. We are behind on our purchasing costs. Basically, we enter into long-term contracts and work to a lesser extent in the so-called spot market. We are now seeing inflation hitting broadly throughout the value chain, and the cost increase will continue into 2023.

Unfortunately, we will have to make further price increases, while at the same time we will implement new measures to reduce our cost base. We will continue to invest in brands and innovations, so that we always have a relevant and attractive proposition for our customers and consumers, says Orkla CEO Nils K. Selte in a stock exchange announcement.

According to Orkla, the costs of raw materials, packaging, freight and energy were much higher than they were in the same period in 2021. In addition, there was high cost inflation in a number of other areas.

greater independence

Now Orkla will be transformed into a leading industrial investment company. The framework will be consumer-oriented brands and companies. Orkla is divided into 12 portfolio companies, according to the exchange’s announcement.

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We want to create a more value-creating structure and culture in the group with greater independence and responsibility for individual businesses. Since Nils K. Celti as CEO on April 11 this year has been systematically creating the new structure and I am pleased that we can now create a new operating and operating model, says Orkla President Stein Erik Hagen in the stock exchange announcement.

Effective March 1, 2023, Jotun (42.6% stake), Orkla Foods Europe, Orkla Food Ingredients, Orkla Confectionery & Snacks, Orkla Health, Orkla Home and Personal Care, Orkla India, Pizza Out of Home, Orkla House Care, Group will be created Healthy and Sports Nutrition, Pierre Robert Wallellburg Group.

Orkla will be transformed into a leading industrial investment company. We will have a long-term, industrial approach to portfolio companies as active owners and work through company boards of directors. The business framework will be consumer brands and companies. Going forward, we’ll have a more dynamic approach to our portfolio, as we’ll look at acquisitions, joint ventures, stock market listings and divestitures, says Nils K. Selte.

low volume

In the previous quarter, Orkla’s critical brands business increased its operating income by 9 percent. However, there was a certain decrease in volume, in part due to normal sales levels after the pandemic. This drop is also explained by the unusual selling in the Norwegian grocery market prior to the price hike that occurred from July 1st.

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All of Orkla’s business areas made sales progress in the third quarter, and the brand’s business, including head office, in the third quarter saw its operating result EBIT (adjusted) decline 11 percent. The costs of raw materials, packaging, shipping and energy were much higher than in the same period in 2021.

Orkla was good in the first half of the year, with sales growth of more than 18 percent. In the second quarter, the group generated operating profit of 1.7 billion.

Index disabled

But the stock market hasn’t appreciated Orkla now that the pandemic is over. Orkla’s share is down 12.9 percent so far this year (see chart below), and that’s nearly three times more than the benchmark.

Stein’s investment firm, Canica, is Orkla’s largest owner with 25 percent of the stock. Folketrygdfondet owns 6.5 per cent. Orkla’s market capitalization at the close of the stock exchange on Wednesday was NOK 77.4 billion.