Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted earnings per share in Q2 were NOK1.66, up 7% from the same quarter last year.
- EBIT adjusted growth of 13% for the group, driven by underlying EBIT adjusted improvements of 22% in the consolidated portfolio companies.
- Orkla Foods Europe reported 19% underlying EBIT adjusted growth in the quarter.
- Orkla Confectionery & Snacks saw a positive shift in market share for all main categories in the quarter.
- Total cash flow from operations year to date amounted to NOK3.2 billion, compared to NOK2.1 billion in the same quarter last year.
Negative Points
- Orkla Food Ingredients faced challenges in the sweet ingredients cluster.
- Negative currency translation effects led to a slight negative EBITDA development for Jotun in the quarter.
- Orkla Foods Europe experienced negative volume mix development driven by reduced purchasing power and selected customer actions.
- Net interest-bearing debt, including leases, amounted to NOK20 billion at the end of June, up from NOK18.8 billion at the end of last year.
- Higher cocoa prices create uncertainty about volumes going forward for Orkla Confectionery & Snacks.
Q & A Highlights
Q: You mentioned slightly positive effect from raw material cost in Q2. If we assume raw material cost and FX to stay at current levels, do you expect this effect to be larger in the second half of the year?
A: We have said to the market in the last quarters that we expect low mid-single-digit improvements in the input costs this year. And I think that goes for the whole year 2024. And we just want to repeat that message to the market. (Nils Selte, President, Chief Executive Officer)
Q: Solid overall volume development in Q2, but for food, foods are struggling with a 1.6% decline. You mentioned select customer actions and complexity reduction. Can you share some more insight on this?
A: We see some trading-down effects in some of the markets, especially Sweden, Finland, and the Czech. We also see some customer actions due to negotiations with the customers. However, we see better development in the Norwegian and Danish markets. (Nils Selte, President, Chief Executive Officer)
Q: How was your market share development in Q2, and how do you see the competition from private label?
A: We see diminishing private label effects through this year, which is positive. Market development is positive in some portfolio companies, flat in others, and slightly negative in a few. (Nils Selte, President, Chief Executive Officer)
Q: What have you learned from the IPO readiness study in India?
A: We received positive feedback from the study and will now assess if we will proceed to access the capital markets in India. We will provide more information in 2025. (Nils Selte, President, Chief Executive Officer)
Q: Can you update us on the biscuit factory? What do you expect in the coming quarter? Are problems solved?
A: A significant part of the loss from 2023 will be regained during this year. We are on track with what we communicated at the Capital Markets Day. (Nils Selte, President, Chief Executive Officer)
Q: Cocoa prices. Based on your hedging profile and the prices you are hedging at today, how much will cost come up in Confectionery & Snacks and on group level? And when should we start to see effects in the P&L?
A: We are covered for this year in terms of volume and price. If the market stays at this level, we will start to see effects in 2025, with some slight effects at the end of this year. (Nils Selte, President, Chief Executive Officer)
Q: You note market share gains across multiple portfolio companies and multiple geographies. Do you have an idea of who is losing shares? Is it private label or competing branded goods?
A: Mostly private label has taken market share from us over the last few years. We still see some trading-down effects in selected markets like Sweden, Finland, and the Czech. (Nils Selte, President, Chief Executive Officer)
Q: What are you going to do with the money made from selling Lilleborg?
A: That decision is up to the Board. The amount is not significant compared to the whole system of Orkla, and the Board will consider it when we file for the 2024 annual report. (Nils Selte, President, Chief Executive Officer)
Q: Adjusted for Easter effects, what would volume growth have been for Orkla Foods Europe in the quarter?
A: It's better to look at year-to-date numbers to diminish the Easter effects. Year-to-date volume growth is minus 1.9%. (Arve Regland, Chief Financial Officer)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
