Orkla Asa · OSL:ORK
Orkla Asa — Q3 2006 Earnings Presentation
44 slides from Orkla Asa's earnings presentation, Oct 31, 2006
Slide 1: Broad-based operational improvement
Broad-based operational improvement Third quarter results 2006 31 October 2006 Roar Engeland Executive Vice President Financial Investment and Corporate Development
Slide 2: Agenda
Agenda • Highlights third quarter • Financial results • Financial Investments • Operational performance • Branded Consumer Goods • Speciality Materials • Special topic: Elkem Solar investment decision 2
Slide 3: Highlights Q3
Highlights Q3 • Improved results for all operations within the Industry division • EBITA +15 % compared with last year • Return on investment portfolio +14 %, outperformed indices per Q3-06 • Commercialisation of Elkem’s solar project with investment of NOK 2.7 billion • The agreement to sell Orkla
Slide 4: Group income statement Q3
Group income statement Q3 Key figures in NOK million 1 Jul - 30 Sep 2006 2005 Change Operating revenues 12 651 11 325 12 % EBITA* 1 220 1 064 15 % Amortisation intangibles -53 -42 Other revenues and expenses 0 0 EBIT 1 167 1 022 Associates 149 78 Portfolio gains 199 672 Dividends and net financial i
Slide 5: Strong industrial growth
Strong industrial growth Change in EBITA -69 41 75 -19 1 220 70 58 1 064 Q3-05 Branded Elkem Sapa Borregaard Financial Other Q3-06 Consumer Investments Goods Figures in NOK million 5
Slide 6: Balance sheet
Balance sheet Key figures in NOK million 30 Sep 2006 2005 Non current assets 39 206 37 762 Portfolio investments etc. 17 621 15 387 Current assets 26 527 19 418 Total assets 83 354 72 567 Equity to total assets ratio 53.6 % 50.2 % Net interest bearing liabilities 19 430 16 388 Net gearing 0.4 0.5 6
Slide 7: Sale of Orkla Media completed at favourable price
Sale of Orkla Media completed at favourable price • Favourable price, 12x EBITDA NOK 7.5 billion • Book value of gain on sale NOK 4 billion • Cash settlement equal to analyst’s valuation NOK 5.6 billion of Orkla Media • Share in Mecom NOK 0.9 billion • Vendor loan NOK 1.1 billion 7
Slide 8: Financial Investments
Financial Investments 8
Slide 9: Stock portfolio outperformed indices
Stock portfolio outperformed indices Portfolio MSCI Nordic OSEBX S&P 500 37,6 % Gains and dividends in NOK million 1 Jan - 1 Jul - 29,7 % 2006 30 Sep 30 Sep 25,4 % Unrealised gains 217 777 Net gains and losses 1507 204 Change in fair value of associates 48 -4 14,0 % Dividend received 711 120 12,3 %
Slide 10: Branded Consumer Goods
Branded Consumer Goods Atle Vidar Johansen Managing Director, Orkla Foods 10
Slide 11: Orkla Foods – Continued strong improvement in Nordic
Orkla Foods – Continued strong improvement in Nordic Orkla Foods in NOK million • Underlying top line growth in Nordic +6 % • Still pressure on prices and margins 1 Jul - 30 Sep 2006 2005 Change Revenues Nordic 2 287 2 170 5% • Weak sales growth at SladCo in Russia Ingredients 692 662 5% • Will not
Slide 12: Continued positive trend
Continued positive trend NOK million EBITA 12 months rolling basis 1 300 1 200 1 100 1 000 900 800 700 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 12 Orkla Foods
Slide 13: Orkla Brands - Strong quarter
Orkla Brands - Strong quarter • Top line growth and strengthened Orkla Brands market shares in NOK million • Still challenging for Biscuits in Sweden 1 Jul - 30 Sep 2006 2005 Change Revenues 1 737 1 558 11 % • Innovation is the key driver to broad EBITA 327 291 12 % based result improvement EBITA-ma
Slide 14: Continued positive trend
Continued positive trend EBITA 12 months rolling basis NOK million 1 200 1 100 1 000 900 800 700 600 500 Q1-02 Q2-02 Q3-02 Q4-02 Q1-03 Q2-03 Q3-03 Q4-03 Q1-04 Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05 Q4-05 Q1-06 Q2-06 Q3-06 14 Orkla Brands
Slide 15: Speciality Materials
Speciality Materials Hilde Myrberg Executive Vice President 15
Slide 16: Elkem – Improved profitability due to restructuring
Elkem – Improved profitability due to restructuring Elkem in NOK million • Commercialisation of Elkem Solar in 2008 • Investments NOK 2.7 billion 1 Jul - 30 Sep 2006 2005 Change Revenues 2 143 2 134 0% • Improved profitability for the silicon EBITA 277 207 34 % businesses due to restructuring EBITA-
Slide 17: Continued strong aluminium markets
Continued strong aluminium markets • High aluminium prices, but lower than Q2-06 EBITA per quarter - Aluminium 140 • Weaker results than last year due to lower gain from USD hedging and production stoppage 120 100 80 • Sales volume +7 % compared with Q3 last year 60 40 • Strong demand in all segment
Slide 18: Hydro power production down from last year
Hydro power production down from last year • Lower hydro power production than last year EBITA per quarter - Energy 250 • High prices and strong trading result 200 • Water reservoir lower than normal 150 100 • Power station in USA sold and transferred 50 • Production per year 525 GWh 0 Q1 Q2 Q3 Q4 Q
Slide 19: Improved results for Silicon-related
Improved results for Silicon-related • Improved profitability for the silicon business due Silicon-related to restructuring in NOK million 1 Jul - 30 Sep 2006 2005 Change • Improved operation and results at Icelandic Alloys Revenues 1 456 1 518 -4 % EBITA 66 - 27 EBITA-margin 4.5 % -1.8 % • Material
Slide 20: Sapa – Strong European markets
Sapa – Strong European markets Sapa in NOK million • Strong volume growth +14 % 1 Jul - 30 Sep 2006 2005 Change • Improved operating margin in Profiles Revenues 3 904 2 887 35 % EBITA 190 115 65 % EBITA-margin 4.9 % 4.0 % • Continued strong performance for Heat Transfer in China • Contribution from
Slide 21: Borregaard – Progress for Chemicals
Borregaard – Progress for Chemicals Borregaard • Significant improved result within Chemicals in NOK million • Price increases and high volumes • Contribution from improvement programmes 1 Jul - 30 Sep Revenues 2006 2005 Change • Production problems in Switzerland still negatively affect results in
Slide 22: Special topic: Elkem Solar investment decision
Special topic: Elkem Solar investment decision 22
Slide 23: Orkla board decision – investment in Elkem Solar and renewable energy
Orkla board decision – investment in Elkem Solar and renewable energy • Orkla’s ambition is to develop a significant position within solar energy • The Orkla Board of Directors has decided to invest NOK 2.7 billion in a plant with capacity to produce 5 000 tonnes of solar grade silicon for the solar
Slide 24: Elkem Solar – historical background
Elkem Solar– historical background • Silicon is the most suitable material for converting solar power directly into electric power • As a global supplier of silicon, Elkem has built strong relations with the electronics industry • Elkem has been working on the development of silicon for solar cells
Slide 25: Orkla's starting point in solar energy - two industrial positions
Orkla’s starting point in solar energy - two industrial positions Si-metal System/ Feedstock Ingot Wafer Cell Module installation Elkem Elkem Solar Building systems ** REC Silicon REC Wafer REC Solar * 27.5 % shareholding 25
Slide 26: The market grew 34% to 1.5 GW in 2005
The market grew 34 % to 1.5 GW in 2005, up to 2.4 GW expected in 2006 Annual module production Germany is currently the most important market GWp 100 % = 1,460 MW installed in 2005 10 9 ROW (235 MW) 8 16 7 USA 6 (100 MW) 7 5 57 4 Japan 20 Germany 3 (290 MW) (830 MW) 2 1 0 2000 2001 2002 2003 2004 20
Slide 27: A falling cost curve will make solar power competitive
A falling cost curve will make solar power competitive Solar power cost compared to electric power prices Cost of electricity production For some customer 1.0 groups in Japan and Cost at 900 sun California, solar hours per year power is already 0.8 economically attractive without Cost at 1 800 sun s
Slide 28: Increase in subsidies expected
Increase in subsidies expected 28 Source: Photon Consulting
Slide 29: Orkla involved in two new technologies
Orkla involved in two new technologies Metallurgical Silicon Traditional Poly silicon Fluidized Bed (F.B.R.) Metallurgical (Siemens) Tri-Chloro-Silane Mono-Silane Slag refining (TCS) (TCS) Leaching Siemens Deposition Fluidized Bed Solidification CVD Deposition (FBR) Semiconductor Solar Grade Silicon
Slide 30: Focus on quality - Product qualified on industrial line
Focus on quality - Product qualified on industrial line Record 18.1 % efficiency achieved in lab Product qualified on industrial line…. …record 18% efficiency achieved in UKON lab % Avg Efficiency 16 15 Efficiency: 18.1% 14 Standard cells from line Cells with ES material 13 12 11 10 0 10 20 30 40 50
Slide 31: Elkem Solar: Metallurgical process
Elkem Solar: Metallurgical process Metallurgical Slag Post Leaching Solidification silicon treatment treatment • Well known processes operated by metallurgical industry today • Avoids transition to silane gas • Low power consumption • Room for process simplification, cost reduction and scale 31
Slide 32: Elkem Solar is prepared to industrialize
Elkem Solar is prepared to industrialize New 5 000 MT Elkem Solar Silicon® plant in Kristiansand • First commercial shipments: Mid 2008 • Jobs: 140 -150 • Investment: 2.7 BNOK • Potential expansion: additional 5 000 MT 32
Slide 33: Next events
Next events 14 Feb 2007 Fourth quarter 2006 results 19 Apr 2007 Annual General Meeting 3 May 2007 First quarter 2007 results 33
Slide 34: Appendix
Appendix 34
Slide 35: Cash flow statement
Cash flow statement Key figures in NOK million 1 Jan - 30 Sep 2006 2005 Industry division: Operating profit 3 175 2 768 Amortisations, depreciations and write-downs 1 491 1 617 Changes in net working capital - 912 -1 004 Net replacement expenditure -1 163 -1 193 Cash flow from operations 2 591 2 188
Slide 36: Largest holdings in the portfolio
Largest holdings in the portfolio Market value in NOK million per 30 Sep 2006 Share of Share of Principal holdings Industry Market value portfolio (%) equity (%) Storebrand Insurance 972 5,5 5,7 Steen & Strøm Real Estate 933 5,3 11,3 Capio Health care 773 4,4 5,1 Fast Search Systems Software 727 4,1
Slide 37: Portfolio key figures
Portfolio key figures Key figures in NOK million 30 Sep 06 31 Dec 05 Change 06 Market value portfolio 17 592 16 149 1 443 Net asset value* 18 780 17 042 1 738 Unrealised gains before tax 5 319 5 102 217 Share of portfolio invested - outside Norway 52 % 53 % -1 % pts - in listed companies 86 % 85 % +
Slide 38: Aluminium hedge in Elkem
Aluminium hedge in Elkem Primary Aluminium - LME 3 month USD/MT Foreign exchange - USD/NOK 3 000 10,00 2 800 9,50 2 600 9,00 2 400 8,50 2 200 8,00 2 000 7,50 1 800 1 600 7,00 1 400 6,50 1 200 6,00 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1996 1997 1998 1999 2000 2001 2002 2003 2004 200
Slide 39: Currency translation effects Q3-06
Currency translation effects Q3-06 in NOK million Revenues Q3-06 Orkla Foods 54 Orkla Brands 18 Elkem 0 Sapa 140 Borregaard -2 Total 210 EBITA Q3-06 Orkla Foods 5 Orkla Brands 2 Elkem 0 Sapa 9 Borregaard 0 Total 16 39
Slide 40: Financial items
Financial items 40
Slide 41: Financial items
Financial items Key figures in NOK million Full year 1 Jan - 30 Sep 2006 2005 2005 Net interest expenses -447 -355 -469 Currency gain/loss 18 33 8 Other financial items, net 273 28 -3 Net financial items -156 -294 -464 41
Slide 42: Equity and liabilities
Equity and liabilities NOK billion Net gearing 48 1.4 44 1.2 40 36 1.0 32 28 0.8 24 0.6 20 16 0.4 12 8 0.2 4 0.0 0 -4 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Q1-06 Q2-06 Q3-06 -0.2 Equity Net interest-bearing debt Net gearing Figures as reported IFRS accounting from 2004 42
Slide 43: Debt maturity profile Sep 2006
Debt maturity profile 30 Sep 2006 Average maturity NOK million 4.9 years 10 000 8 000 6 000 4 000 2 000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 - Drawn amounts Unutilised credit facilities 43
Slide 44: Funding Sources Sep 2006
Funding Sources 30 Sep 2006 Unutilised credit facilities 39 % Bonds and CPs 37 % 13.2 12.4 7.9 Banks 24 % Figures in NOK billion 44