Grocery giant Orkla’s revenues in the first quarter increased much more than expected, but the company is also affected by price increases for input goods after the war in Ukraine. – We are in a state of emergency, says the new boss.
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Orkla reports a turnover of 13.27 billion kroner in the fourth quarter of the year, up from 11.50 billion the year before.
Revenues of NOK 12.65 billion were expected in advance in the first quarter, according to Bloomberg.
The branded business, on the other hand, showed a decrease in operating profit (adjusted ebit) of 2.4 per cent. A significant part of the decline is due to increased purchasing costs for raw materials and packaging, as well as rising freight and energy prices.
– We are in a state of emergency, where the situation in Ukraine affects both access to and prices of a number of raw materials and input factors, says the recent CEO Nils K. Selte.
Orkla is known for brands such as Grandiosa, Toro, Stabburet, Kims and Nidar.
– In addition, we see a sharp increase in energy prices from an already high level. A long-term conflict will probably lead to even greater uncertainty and imbalance in the global flow of goods. For Orkla, it is crucial to maintain good delivery capacity and handle cost increases, says Selte.
Further price increases
Orkla implemented significant price increases in all markets during the quarter.
– The accelerating development of increased costs for raw materials and other input factors during the first quarter entails a need for further price increases during the next quarters, the company writes.
Orkla points out that the short- and long-term consequences of the war in Ukraine are unclear, and that a long-term conflict in Europe will affect both the supply and prices of raw materials and other input factors.
In addition, the uncertainty could contribute to a further increase in energy prices from an already high level, as well as increase the imbalance in the global flow of goods.
– The already difficult situation as a result of the pandemic has worsened due to the war in Ukraine and led to further increases in transport prices, as well as increased uncertainty about raw material supply. All of these elements are expected to have a negative impact on Orkla in 2022.
During the quarter, costs related to write – downs and expense recognition of operations in Russia amounted to NOK 116 million, as well as costs incurred in connection with the group’s acquisition activity.
The Orkla CEO emphasizes that the strategy for the company is fixed, but that there will be adjustments in the organizational model.
– In the future, we will evaluate our portfolio of companies and products. To a greater extent than before, we will be open to sales, partnerships or listing of companies if we find it expedient, Selte continues.
Increased electricity prices lift the power result
For Orkla’s affiliated and joint ventures, there was a decline in profit from the same period in 2021.
The decline is due to lower profit contributions from Jotun as a result of significantly higher raw material prices.
For hydropower, Hydro Power, on the other hand, there was an increase in operating profit (adjusted) to NOK 345 million, from NOK 86 million in the same period in 2021. The increase is due to significantly higher power prices than in the first quarter of 2021.
In total, the company’s profit before tax ended at NOK 1.54 billion, up from NOK 1.43 billion at the same time last year.
Orkla is valued at NOK 76 billion on the Oslo Stock Exchange. The largest owner is Stein Erik Hagen’s Canica.
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