Slide 1: Solid performance - Second Quarter Results 2008
Solid performance Second Quarter Results 2008 13 August 2008
Slide 2: Agenda
Agenda • The Orkla Group Dag J. Opedal – Highlights and financial performance CEO, Orkla • Business Area Review – Orkla Materials – Orkla Associates – Orkla Financial Investments – Orkla Brands Torkild Nordberg EVP, Orkla Brands – Orkla Aluminium Solutions Ole Enger EVP, Orkla Aluminium Solutions •
Slide 3: Q2-08: Solid performance - challenging markets
Q2-08: Solid performance - challenging markets • Positive trend and profit growth for Orkla Brands • Satisfactory results in weakening markets for Orkla Aluminium Solutions • Improved results for Orkla Materials – Negative impact from weak USD, increased P&L charge from Elkem Solar and increasing in
Slide 4: Q2 - Key value drivers on track
Q2 - Key value drivers on track • Orkla Brands profit uplift – Response to challenges generates results • Sapa integration – Restructuring measures implemented – Organisational development as planned • Solar – Elkem Solar on schedule for metal-to-market by end of 2008 – REC: EBITDA at NOK 889 millio
Slide 5: Change in EBITA from Q2-07 to Q2-08
Change in EBITA from Q2-07 to Q2-08 +75 -14 -12 -53 +128 - 82 -6 1230 1194 Q2-07 Orkla Brands Borregaard Orkla Elkem excl. Elkem Solar Orkla Other Q2-08 Aluminium Solar Financial Solutions Investments All figures in NOK million 5 Second quarter 2008 - The Orkla Group
Slide 6: Profit before tax affected by financial items in Q2
Profit before tax affected by financial items in Q2 + 830 - 82 - 899 3053 +118 - 412 - 110 2498 Q2-07 EBITA Sale of EBITA Orkla Realised Net financial Other Q2-08 Industry Area Hjemmet Financial gains/write- items Mortensen Investments downs, Share Portfolio All figures in NOK million 6 Second quart
Slide 7: Cash flow 30 Jun 2008
Cash flow 30 Jun 2008 Key figures in NOK million 1 Jan - 30 Jun 2008 Industry division: Operating profit 2 172 Net depreciation and replacement 220 Changes in net working capital -1 235 Cash flow from industrial operations 1 157 Cash flow from Financial Investments 518 Financial items, net - 636 Tax
Slide 8: Orkla Materials
Orkla Materials
Slide 9: Elkem – Weak result compared to last year, but positive development in main markets
Elkem – Weak result compared to last year, but positive development in main markets Elkem • Primary Aluminium results in NOK million hampered by weakened USD, higher costs and 1 Apr - 30 Jun aluminium hedges Revenues 2008 2007 Change Elkem 2 966 2 351 26 % • Higher energy trading partly Energy 420 3
Slide 10: Borregaard – Improved profitability
Borregaard – Improved profitability Borregaard • Strong market and high prices in NOK million for textile cellulose 1 Apr - 30 Jun – Weaker outlook Revenues 2008 2007 Change • Declining USD and a continuous Borregaard 1 249 1 109 13 % rise in prices of raw materials Energy 43 38 13 % and energy hamp
Slide 11: Orkla Associates
Orkla Associates
Slide 12: Orkla Associates
Orkla Associates in NOK million in NOK million 1 Apr - 30 Jun 2008 2007 Change 1 Jan - 30 Apr 2008 2007 Change Revenues 2 121 1 673 27 % Revenues 3 159 2 872 10 % EBITDA 889 812 10 % EBIT 363 294 23 % EBIT 716 679 6% Profit before tax 335 301 11 % Profit before tax* 708 671 6% • Revenue growth of 27
Slide 13: Orkla Financial Investments
Orkla Financial Investments
Slide 14: Share Portfolio
Share Portfolio Portfolio MSCI Nordic OSEBX S&P 500 Gains and dividends in NOK million 17.8 % 1 Apr - 1 Jan - 16.8 % 2008 30 Jun 30 Jun 9.8 % Unrealised gains - 663 -1 741 Net gains/losses excl. write-downs 663 919 4.4 % Write-downs - 527 -1 056 2008 Change in fair value of associates - 24 - 46 Divi
Slide 15: Orkla Brands
Orkla Brands Torkild Nordberg EVP Orkla Brands
Slide 16: Orkla Brands – profit uplift
Orkla Brands – profit uplift (EBITA 12 month rolling) NOK million 2 600 2 400 2 200 2 000 1 800 1 600 1 400 1 200 Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Q1-08 Q3-08 16 Second quarter 2008 - Orkla Brands
Slide 17: Improvements on track
Improvements on track 1) Price increases compensate for higher input costs – Rise in input factor prices necessitates further increases 2) International operations – Divestments/restructuring of unprofitable companies contributed positively – Further structural measures in Central and Eastern Europe
Slide 18: Orkla Brands in progress
Orkla Brands in progress • Underlying top line growth +8 % Orkla Brands in NOK million – Positive effects from Easter 1 Apr - 30 Jun 2008 2007 Change Revenues • EBITA growth for all business units Orkla Brands 5 650 5 465 3% Orkla Foods Nordic 2 436 2 422 1% • Price increases implemented Orkla Brand
Slide 19: Innovation remains key value driver
Innovation remains key value driver • Big One Hatrick and Nugatti Air largest launches in Q2 • Continued ability to innovate crucial, and main focus for long- term value creation 19 Second quarter 2008 - Orkla Brands
Slide 20: Orkla Aluminium Solutions
Orkla Aluminium Solutions Ole Enger EVP Orkla Aluminium Solutions
Slide 21: The Sapa Group safety trend is positive
The Sapa Group safety trend is positive Sapa Group Safety Rates Sapa Group Safety Rates - Rolling 12 months - - Year to Date June 2008 - 25 YTD YTD Rolling Measure 2008 2007 2008 Accidents Per Million Hours 20 TRR 10.2 18.0 12.1 15 TRR 138 253 326 Accidents 10 LWDR 3.8 6.0 4.0 5 LWDR 52 84 107 Accid
Slide 22: Sapa Profiles on track to reach its financial targets
Sapa Profiles on track to reach its financial targets* • 5-6 % EBIT-margin • 3 times capital turnover • 15-20 % ROCE • Improvement Programmes deliver according to plan… • ...but markets weaker than expected • Strategy remains firm • Orkla ownership share finalised to 54.55 % *In 2-3 years and assumi
Slide 23: The extrusion markets continue to decline both in the US and in Europe
The extrusion markets continue to decline both in the US and in Europe US Extrusion Consumption European Extrusion Consumption 450 850 416 814 403 390 796 400 800 778 764 765 Thousand Tons Thousand Tons 350 341 342 750 742 734 734 326 316 315 318 708 300 700 689 276 250 -7.3% -7.8% 650 -4.0% -6.0% -
Slide 24: The US suffers from low construction activity – now Spain is leading the European market down
The US suffers from low construction activity – now Spain is leading the European market down US Housing Starts Spain Housing Starts 2,5 200 175 177 178 171173 2,0 161 Thousand Housing Starts 2,0 1,9 Million Housing Starts 150 143 1,7 1,6 124 1,5 1,5 119 1,5 1,3 1,2 100 1,1 1,0 1,0 50 0,5 -28% -32%
Slide 25: The volume deterioration for Profiles continues while Sapa HT and BS remain at a good level
The volume deterioration for Profiles continues while Sapa HT and BS remain at a good level Orkla Aluminium Solutions • Weak markets in US and Europe in NOK million – The slow-down in South Europe has accelerated during Q2 1 Apr - 30 Jun Revenues 2008 2007 Change – Building & Construction weak – No
Slide 26: At the establishment of the Joint Venture a set of key strategic themes were identified
At the establishment of the Joint Venture a set of key strategic themes were identified Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety • Organisational Integration • Systems Integration • Restructuring • Redesign • Genesis • Customer Value Management • Organisa
Slide 27: Safety performance has improved over the last year
Safety performance has improved over the last year Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Total Recordable Accident Rate Accidents Per Million Hours 25 23,7 21,1 • Organisational Integration 20 18,5 17,1 • Systems Integration 15 12,7 9,5 9,6 10 8,3 • Re
Slide 28: The creation of a new integrated Sapa organisation has been successful
The creation of a new integrated Sapa organisation has been successful Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Pre Sapa Alcoa • Organisational Integration Joint Venture 6 000 Employees 6 500 Employees • Systems Integration • Restructuring Great respect b
Slide 29: Systems integration and creation of a shared services function are on track
Systems integration and creation of a shared services function are on track Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Initiative Description Migration of IT infrastructure on • Organisational Integration Infrastructure sites to new Sapa IT platform • Syste
Slide 30: Three major restructuring initiatives have been undertaken
Three major restructuring initiatives have been undertaken Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Initiative Description Closure of Noblejas facility • Organisational Integration Noblejas (Spain) Transfer of volumes to other plants Pre-agreement signed
Slide 31: So far 10 different plants have been through a Redesign Programme
So far 10 different plants have been through a Redesign Programme Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Redesign Time Plan 2008 2008 Time 2008 Time Plan Plan Country Country Plant Plant • Organisational Integration Jan Feb Mar Apr May Jun Jul Aug Sep S
Slide 32: Implementation of Genesis is moving forward in all operating companies
Implementation of Genesis is moving forward in all operating companies Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Genesis Status June 2008 Location Genesis Genesis Coach A3 Daily Mgmt Genesis Cases 28 Points 5S TPM 100% Changes • Organisational Integration
Slide 33: Most companies have also started to adopt the Customer Value Management concept
Most companies have also started to adopt the Customer Value Management concept Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety From Strategic Direction …to • Organisational Integration Profiles… Understand customer value chain Solutions • Systems Integration ma
Slide 34: To further support new business Sapa Profiles has recruited 150 new engineers
To further support new business Sapa Profiles has recruited 150 new engineers Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety 200 New Engineers Recruited Number of Engineers • Organisational Integration 150 25 150 40 • Systems Integration 100 41 • Restructuring
Slide 35: The acquisition of Kam Kiu will give Sapa a strong foothold in the Asian market
The acquisition of Kam Kiu will give Sapa a strong foothold in the Asian market Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Kam Kiu Acquisition • Organisational Integration • Systems Integration • Restructuring • Redesign • Genesis • Customer Value Managemen
Slide 36: Profiles North America has reduced benefit costs by 25% compared to pre-JV
Profiles North America has reduced benefit costs by 25% compared to pre-JV Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety 50 Annualised US Benefit Costs • Organisational Integration MUSD 40 41,1 4,9 4,6 0,9 30,7 2,4 • Systems Integration 30 1,2 27,1 20 • Restru
Slide 37: All in all Sapa Profiles has made progress within all prioritised areas
All in all Sapa Profiles has made progress within all prioritised areas Strategic Theme Key Developments Over the Last Year • Environment, Health, and Safety Lost Work Day Rate June YTD from 5.6 to 3.2 No such thing as former Sapa or former Alcoa mentality • Organisational Integration – only Sapa Or
Slide 38: Strategic direction: From profiles to solutions
Strategic direction: From profiles to solutions Sweden: 50/50 Rest of Sapa: 90/10 38 Second quarter 2008 - Orkla Aluminium Solutions
Slide 39: Demand for aluminium solutions is continuing to increase within the Automotive industry
Demand for aluminium solutions is continuing to increase within the Automotive industry • Audi has made a strategic decision to use its light-weight aluminium space frame (ASF) for all new models from 2010 • The second-generation ASF system will be introduced top- down, starting with the next A6 and
Slide 40: Even though the market is weakening Sapa will continue to deploy the strategy laid out
Even though the market is weakening Sapa will continue to deploy the strategy laid out • The negative market trend in Europe and the US is expected to continue in the short to medium term • This, in combination with seasonally lower sales in the 2nd half of the year, leads to considerably weaker res
Slide 41: Coming events
Coming events 31 October 2008 Third quarter 2008 results 41 Second quarter 2008 - The Orkla Group
Slide 42: Second quarter 2008 - The Orkla Group
42 Second quarter 2008 - The Orkla Group
Slide 43: Appendix
Appendix 43 Second quarter 2008 - Appendix
Slide 44: Primary Aluminium – Weak USD, higher costs and hedges temporarily hamper earnings
Primary Aluminium – Weak USD, higher costs and hedges temporarily hamper earnings EBITA per quarter - Primary Aluminium • Favorable long-term power- and alumina contracts provide platform for future profitability 160 140 120 • EBITA in Q2 negatively impacted by: 100 80 – Weak USD 60 – Metal hedges 4
Slide 45: Elkem Energy – Periodic maintenance affects production
Elkem Energy – Periodic maintenance affects production • EBITA at NOK 78 million vs. EBITA per quarter - Energy NOK 66 million last year 350 300 • EBITA from Energy trading at 250 NOK 16 million versus 200 NOK -20 million last year 150 100 • Maintenance at Salten and lower 50 production at Sauda (ex
Slide 46: Silicon-related - Good markets
Silicon-related - Good markets • EBITA (excl. Solar) at NOK 174 Silicon-related in NOK million million, up NOK 38 million on Q2-07 1 Apr - 30 Jun 2008 2007 Change Revenues 2 042 1 542 32 % • Strong, but stabilised, markets EBITA ex Elkem Solar 174 136 28 % in Q2 for silicon metal reflected EBITA Elk
Slide 47: Group income statement Q2-08
Group income statement Q2-08 Key figures in NOK million 1 Apr - 30 Jun 2008 2007 Change Operating revenues 17 569 14 049 25 % EBITA 1 230 1 194 3% Amortisation intangibles -58 -56 Restructuring and significant impairment -34 0 EBIT 1 138 1 138 Associates 1 153 294 Dividends 311 414 Gains and losses/
Slide 48: Group income statement H1-08
Group income statement H1-08 Key figures in NOK million 1 Jan - 30 Jun 2008 2007 Change Operating revenues 34 513 27 937 24 % EBITA 2 292 2 661 -14 % Amortisation intangibles -115 -114 Restructuring and significant impairment -34 0 EBIT 2 143 2 547 Associates 1 332 646 Dividends 399 654 Gains and lo
Slide 49: Balance sheet 30 Jun 2008
Balance sheet 30 Jun 2008 Key figures in NOK million 30.06.2008 31.12.2007 Intangible assets 16 329 16 626 Property, plant and equipment 23 893 21 481 Financial non-current assets 15 864 14 999 Non-Current assets 56 086 53 106 Inventories 9 014 8 533 Receivables 15 473 12 628 Share Portfolio etc. 16
Slide 50: Currency translation effects
Currency translation effects in NOK million Revenues Q2-08 Orkla Brands -106 Orkla Aluminium Solutions -421 Elkem -75 Borregaard -35 Total -637 EBITA Q2-08 Orkla Brands -6 Orkla Aluminium Solutions -14 Elkem -6 Borregaard -6 Total -32 50 Second quarter 2008 - Appendix
Slide 51: Largest holdings in the Share Portfolio
Largest holdings in the Share Portfolio Market value in NOK million per 30 Jun 2008 Principal holdings Industry Market value Share of Share of portfolio (%) equity (%) Tomra Systems Industry 809 5,0 14,6 % Hennes & Mauritz Retailing 628 3,9 0,3 % Vimpelcom-SP ADR Telecommunication 552 3,4 0,3 % Rieb
Slide 52: Share Portfolio key figures
Share Portfolio key figures Key figures in NOK million 30 Jun 08 31 Dec 07 Change 08 Market value portfolio 16 155 17 513 -1 358 Unrealised gains 2 069 3 810 -1 741 Share of portfolio invested - outside Norway 59 % 55 % 4 % pts - in listed companies 85 % 85 % 0 % pts 52 Second quarter 2008 - Appendi
Slide 53: Financial items
Financial items 53 Second quarter 2008 - Appendix
Slide 54: Net financial items
Net financial items Key figures in NOK million Full year 1 Jan - 30 Jun 2008 2007 2007 Net interest expenses -363 -342 -704 Currency gain/loss -19 23 32 Other financial items, net 70 1 138 1 112 Net financial items -312 819 440 54 Second quarter 2008 - Appendix
Slide 55: Net gearing 0.4 as of 30 June 2008
Net gearing 0.4 as of 30 June 2008 NOK billion Net gearing 60 1.4 54 1.2 48 42 1.0 36 0.8 30 0.6 24 18 0.4 12 0.2 6 0.0 0 -6 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1Q 08 2Q 08 -0.2 Equity Net interest-bearing liabilities Net gearing 55 Second quarter 2008 - Appendix
Slide 56: Debt maturity profile 30 June 2008
Debt maturity profile 30 June 2008 Average maturity 4.8 years NOK million 6 000 5 000 4 000 3 000 2 000 1 000 0 2008 2009 2010 2011 2012 2013 2014 2015 2017- Drawn amounts Unutilised credit facilities 56 Second quarter 2008 - Appendix
Slide 57: Funding Sources 30 June 2008
Funding Sources 30 June 2008 Unutilised credit Bonds and CPs 28 % facilities 22 % 7.0 8.7 15.7 Banks 50 % Figures in NOK billion 57 Second quarter 2008 - Appendix