Orkla results first quarter 2008

Key figures Q1-08 (Q1-07) in NOK million

Operating revenues 16 944 (13 888)
EBITA 1 062 (1 467)
Profit before taxes 881 (3 505)
Earnings per share diluted (NOK) 0.6 (2.7)
Cash flow from operations 826 (1 097)

As of Q1-08 (as of Q1-07)
Net interest-bearing debt 18 628 (16 062)
Equity (%) 55.4 (57.7)
Net gearing 0.35 (0.32)

Key figures Q1-08 (Q1-07) in NOK million

Operating revenues 16 944 (13 888)
EBITA 1 062 (1 467)
Profit before taxes 881 (3 505)
Earnings per share diluted (NOK) 0.6 (2.7)
Cash flow from operations 826 (1 097)

As of Q1-08 (as of Q1-07)
Net interest-bearing debt 18 628 (16 062)
Equity (%) 55.4 (57.7)
Net gearing 0.35 (0.32)


The first quarter in brief
*     Orkla's first quarter operating profit (EBITA) totalled NOK
  1,062 million (NOK 1,467 million)1.
*     Orkla Brands achieved profit growth in the first quarter. Most
  of the companies compensated for the rise in raw material prices in
  the quarter by raising prices.
*     Orkla Aluminium Solutions reported a satisfactory quarter
  despite challenging markets, particularly in the US. The
  integration of Alcoa's extrusion business is proceeding as planned,
  while Heat Transfer & Building System continued to perform well.
*     In Orkla Materials, Elkem posted considerably lower profit than
  last year. This is primarily due to financial losses on energy
  trading in the first quarter of 2008, contrary to the high gain
  realised last year, and continued weak results from Elkem
  Aluminium. Elkem Solar is pursuing its project plan and start-up is
  expected towards the end of the year.
*     Orkla Associates' contribution to Group profit was lower than
  last year. REC's profit for the first quarter ended at somewhat
  lower than in 2007, besides which REC's contribution to Orkla's
  profit in the first quarter of 2007 was boosted by gains on sales
  of shares. Jotun continued the positive performance trend it
  achieved in 2007.
*     Partly due to weak stock markets, the return on the Share
  Portfolio in the first quarter was -7.2 %, compared with -13.3 %
  for the Morgan Stanley Nordic Index and -16.1 % for the Oslo Stock
  Exchange Benchmark Index.
*     Pre-tax profit for the first quarter amounted to NOK 881
  million (NOK 3,505 million)1. Realised portfolio gains and the sale
  of other financial assets were particularly high in the first
  quarter of 2007, which explains a difference of around NOK 2
  billion.
 
 
The Group
Orkla's first-quarter operating revenues totalled NOK 16,944 million
(NOK 13,888 million)1. A substantial part of the revenue growth is
ascribable to the consolidation of Alcoa's extrusion operations into
Orkla Aluminium Solutions. However, all the other segments, except
for Elkem Aluminium, reported an underlying2 rise in operating
revenues.
 
The Norwegian krone was significantly stronger in the first quarter
of 2008 than in the same period of last year, particularly measured
against the USD, but also against euro-related currencies. This has
resulted in a negative currency translation effect of NOK -710
million on operating revenues.
 
First-quarter EBITA was NOK 1,062 million (NOK 1,467 million)1. Orkla
Brands, Orkla Aluminium Solutions and Borregaard all reported a
satisfactory performance, and the negative difference in profit is
largely explained by certain special items. Elkem Energy's trading
operations are naturally subject to some volatility and profit may
vary considerably from one quarter to the next. In the first quarter
of 2008 the business realised a loss, while it posted substantial
gains in the first quarter of 2007. In total, this resulted in a drop
in profit of NOK -183 million compared with last year. Costs expensed
for Elkem Solar totalled NOK 77 million in 2008 compared with NOK 27
million last year. Elkem Aluminium's profit will be squeezed for some
time by higher costs and a weak USD against the NOK, while the prices
realised on aluminium sales are lower than current market prices, due
to aluminium hedge contracts previously entered into. As a result of
the turmoil on the financial markets, demand for Orkla Finans's
products was lower at the start of 2008.
 
The Nordic grocery market continues to show good growth. Most of the
Orkla Brands businesses have implemented price hikes that largely
compensate for increases in raw material prices in the quarter.
However, raw material prices continue to rise, and further price
increases will be carried out. The timing of Easter has had slightly
different effects on the various markets, but due to the extra
selling day on account of leap year, the net effect in 2008 is viewed
as virtually neutral compared with last year.
 
The market for Orkla Aluminium Solutions in the US is still slow, but
the trend is relatively stable. The European market weakened
moderately in the first quarter. Stock rundowns and a weak end to
2007 resulted in a positive timing effect on EBITA in the first
quarter, amounting to approximately NOK 30 million. However, the
lower number of selling days due to Easter had a somewhat negative
impact. One-time costs related to the integration of Alcoa's
extrusion business were charged against profit as planned.
 
EBITA for the Group as a whole was negatively affected by currency
translation effects amounting to NOK -33 million in the quarter.
 
Orkla's ownership interests in REC (39.73 %) and Jotun (42.5 %) are
presented according to the equity method on the line for associates.
REC's contribution to Orkla's profit amounted to NOK 84 million in
the first quarter, while its contribution in the first quarter of
2007 totalled NOK 289 million, including a gain of NOK 103 million on
Orkla's sale of REC shares to reduce its stake to 39.73 %. REC
reported first-quarter EBITDA of NOK 742 million, compared with NOK
869 million last year. Jotun's contribution to profit amounted to NOK
78 million (NOK 62 million)1.
 
At quarter-end the return on the Share Portfolio was -7.2 % This
compares with -13.3 % for the Morgan Stanley Nordic Index and -16.1 %
for the Oslo Stock Exchange Benchmark Index. Gross gains of NOK 256
million were realised, but due to impairment charges of over NOK 500
million under IFRS, realised portfolio gains and the change in the
fair value of associates amounted to a total of NOK -295 million (NOK
881 million)1. Dividends received for the Share Portfolio amounted to
NOK 87 million (NOK 240 million)1.
 
In connection with its purchase of additional shares in REC in the
first quarter of 2007, Orkla issued three put options in REC to
Q-Cells AG. Orkla also had certain rights in the event of selling
these shares by Q-Cells. Since the end of the quarter, Orkla has
signed an agreement with Q-Cells to cancel these options in return
for Orkla renouncing its rights attached to the shares. At the start
of the quarter, the net value of the options and rights was assessed
at NOK 67 million. At quarter-end, the net value was assessed at 0,
resulting in an imputed finance income of NOK 67 million in the
quarter.
 
First-quarter finance income in 2007 was boosted by several large
one-time items. The biggest of these were the sale of Mecom shares
(NOK 311 million), the sale of ownership interests in real estate
projects at Fornebu (NOK 261 million) and a share of the sales gain
arising from Q-Cells' reduction of its shareholding in REC (NOK 270
million).
 
Orkla's earnings per share, diluted, were NOK 0.6 in the first
quarter, while first-quarter earnings per share in 2007 were NOK 2.7,
due to high realised portfolio gains and substantial finance income.
After the first quarter, a tax charge of approximately 22 % has been
estimated for 2008.
 
 
 
1 The figures in brackets refer to the corresponding period of the
previous year.
2 Excluding acquisitions, divestments and currency translation
effects.
 
 
 
Orkla ASA,
Oslo 6 May 2008
 
Contacts:
Terje Andersen, CFO, Tel.: [phone]
Rune Helland, SVP Investor Relations, Tel: [phone]
Lars Røsæg, Investor Relations, Tel.: [phone]
 
 
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