Pre-close update for Q1 2025
As a service to the capital markets, the Orkla IR team would like to draw your attention to the following items to remember in advance of Q1 2025 reporting.
Kindly note that based on analyst feedback, we have omitted P&L items for the consolidated portfolio companies that are categorized as “other income and expenses” from the commentary, as these have already been removed from EBIT adjusted. We have instead focused on items that are expected to be of a non-recurring nature, as well as previously communicated outlook statements.
General
- Q1 2025 had one additional sales day in key markets compared to Q1 2024.
- At the Q4 2024 presentation, Orkla stated that input costs, excluding cocoa, are expected to remain stable in 2025, although there is a polarized picture among various raw materials.
STRUCTURAL TRANSACTIONS
Hydro Power
On 24 January, Orkla announced the sale of its hydro power portfolio for a total value of NOK 6.1 billion on a cash and debt-free basis. Please find the full stock exchange release here: https://newsweb.oslobors.no/message/637067
Status of transactions:
The sale is divided into two separate transactions, both of which are subject to approval by the relevant competition authorities and the Norwegian Ministry of Energy.
The sale of Sarpsfoss Limited to Hafslund AS (90%) and Svartisen Holding AS (10%) has now been approved by both the relevant competition authorities and the Norwegian Ministry of Energy.
The sale of Orkla Energi AS and Trælandsfos Holding AS to Å Energi has been approved by the relevant competition authorities, but not yet by the Norwegian Ministry of Energy.
A stock exchange release will be published following the closing of each of the respective transactions.
Impact on the financials:
From Q1-2025, the profit after tax from the hydro power portfolio will be reported under discontinued operations in the financial statements until closing of the transaction.
The buyers bear the economic risk from 1 January 2025, and Orkla will be compensated with a market-based interest rate on the purchase price upon closing of the transactions.
These two effects will be netted out upon calculation of the final gain from the transactions.
Profit from discontinued operations will be included in earnings per share, but not in adjusted earnings per share.
Pierre Robert Group
On 13 February, Orkla announced that it had entered into an agreement to sell 100% of the shares in Pierre Robert Group (PRG) to Jotunfjell Partners for NOK 23 million on a cash and debt-free basis. The transaction has now closed and PRG will from 31.12.2024 no longer be included in the financial statements.
The estimated accounting loss from the sale will be booked as other income and expenses in the Q1 2025 report.
Please find the full stock exchange release, published in conjunction with the reporting of Q4 2024 results, here: https://newsweb.oslobors.no/message/638490
PORTFOLIO COMPANIES
Jotun
- Currency devaluation (Q1 2024): EBITA was negatively impacted by a currency loss of NOK 252 million linked to the devaluation of the Egyptian pound. Profit before tax was also negatively affected by another NOK 189 million on financial items related to US dollar-denominated loans.
- Outlook (Q4 2024): Jotun expects continued sales growth at a higher level than projected market growth. On the other hand, operating margins are expected to decline compared to the historically high levels seen over the last two years. On balance, we expect Jotun to deliver 2025 results on par with 2024.
Orkla Snacks
- Cocoa prices (Q4 2024): The market price of cocoa rose steeply during the fourth quarter in 2024, which is expected to impact the next quarters negatively partly due to limited short-term ability to pass on input cost increases in the markets. We expect cocoa prices to remain higher and be more volatile than in the past but also expect prices to come down to a more sustainable level over time as supply/demand balances out.
- Cocoa volumes (Q4 2024): Cocoa volumes have been secured through Q1 2025. We will provide an update at the Q1 2025 presentation. Mitigating actions have been initiated to dampen the effect of high input prices.
Orkla Food Ingredients
- Cost program in the Sweet cluster (Q4 2024): Cost program initiated in Q3 2024, which is expected to see gradual benefits in 2025 with a high double-digit million cost reduction in total.
Orkla Health
- Non-recurring costs (Q4 2024): Approximately NOK 30 million of non-recurring costs linked to organizational changes and inventory cleanup.
M&A
Please find an overview of acquisitions and disposals here: https://investors.orkla.com/English/why-invest/mergers-and-acquisitions/default.aspx
OTHER