The fourth quarter in brief:

 

- Earnings per share for 2007 were NOK 8.2 compared to NOK 10.9 (NOK 6.9 adjusted for one-time effects related to the sale of Orkla Media) in 2006. The Board of Directors proposes to increase the dividend by 12.5 % to NOK 2.25.

 

- Group pre-tax profit in the fourth quarter ended at NOK 1,267 million (NOK 2,965 million)1. Realised portfolio gains were just under NOK 1.4 billion lower than in the fourth quarter of last year. For the full year, portfolio gains in 2007 were higher than in 2006.

 

- Orkla's fourth-quarter operating profit before amortisation, restructuring and significant impairments (EBITA), amounted to NOK 1,219 million (NOK 1,652 million)1.

 

- Orkla Materials reported a NOK 264 million decline in profit compared with the fourth quarter of 2007. The expiry of power contracts at Borregaard and a significantly lower contribution to profit from power trading at Elkem ­represented a difference in profit totalling around NOK -170 million. A weak USD, the start-up of the anode factory in Mosjøen and higher raw material costs lowered profit for Elkem Aluminium by over NOK 100 million compared with last year.

 

- Orkla Branded Consumer Goods' profit performance was largely as expected and is still being negatively affected by the higher prices of factor inputs and challenging markets for some of the units in Orkla Foods. The improvement programme at Orkla Foods is being implemented on an ongoing basis, and the year-on-year difference in profit was relatively smaller in the fourth quarter than in the two preceding quarters.

 

- In Orkla Aluminium Solutions, the integration of Alcoa's extrusion operations is on track. Start-up and integration costs on the order of NOK 60 million were charged against fourth-quarter EBITA. A provision of NOK 309 million was also made under 'Restructuring and significant impairments' for restructuring production in the new Sapa AB.  Heat Transfer and Building System continued to report profit growth.

 

- The contribution to profit from Orkla Associates was significantly higher in 2007 than in 2006. REC reported ­fourth-­quarter EBITDA of NOK 848 million (NOK 676 million)1 , while Jotun continued to report good sales growth towards the end of the year.

 

- The return on the Share Portfolio in 2007 was 16.2 %, compared with 11.7 % for the Morgan Stanley Nordic Index and 11.5 % for the Oslo Stock Exchange Benchmark Index.

 

 

Orkla's fourth-quarter operating revenues totalled NOK 18,135 million. Of the 24 % rise in sales, equivalent to NOK 3,555 million, NOK 2,969 million is ascribable to the former Alcoa units' contribution to the merger of Sapa's and Alcoa's extrusion businesses. The NOK was signifi­cantly stronger in the fourth quarter than it was last year against both the USD and EUR-related currencies, resulting in a negative currency translation effect of NOK 1,068 million on operating revenues. Full-year operating revenues totalled NOK 63,867 million, up 21 % from 2006. A substantial part of the increase in revenues is attributable to the merged extrusion business, where Alcoa's operations contributed sales of NOK 7,609 million in the last seven months of 2007. The full-year currency translation effect for 2007 amounted to a negative NOK 1,040 million.

 

Fourth-quarter EBITA totalled NOK 1,219 million (NOK 1,652 million)1. Currency translation effects amounted to a negative NOK 36 million for the quarter.

 

Due to the expiry of power contracts and lower gains from power ­trading, Elkem's and Borregaard's energy businesses reported profit that was, in total, over NOK 170 million lower than in the very good fourth quarter of 2006. Elkem Aluminium had a weak quarter, posting profit that was around NOK 100 million lower than last year. Half of this difference is explained by the weaker USD against the NOK, but higher prices of factor inputs and non-recurring expenses related to the start-up of the new anode factory in Mosjøen also had a negative impact. Realised losses on aluminium hedges totalled NOK 75 million in the fourth quarter and NOK 375 million for the full year. Orkla Foods posted lower profit than last year in the fourth quarter as well, but the difference was somewhat smaller, relatively speaking, than in earlier quarters. Non-recurring expenses, totalling approximately NOK 60-80 million, related to the start-up and integration of Aloca's extrusion ­operations were charged against profit from Orkla Aluminium ­Solutions. Sapa Heat Transfer and Building System reported another good quarter and profit growth. Elkem's silicon business and Borregaard's ­chemical business also reported underlying growth driven by good markets. Full-year EBITA amounted to NOK 5,112 million, on a par with 2006. ­Currency translation effects on operating profit were a negative NOK 34 million for the full year 2007.

 

Work on restructuring production in the merged extrusion company, Sapa AB, is proceeding as planned, and a provision of NOK 309 million was made in the quarter under 'Restructuring and significant impairments', primarily relating to restructuring in the UK, Spain and the USA. In 2004, a provision of NOK 765 million was made for losses arising from, and the restructuring of, Borregaard's international fine chemicals business and Denofa's oil and fat business. This work has progressed as planned and the most important measures have been implemented. However, when all the processes, which involve operations in Norway, Italy, China and Brazil, have been concluded, the final costs may be slightly higher than initially estimated. It has therefore been decided to increase these provisions by NOK 75 million, which has been charged against 'Restructuring and significant impairments'.

 

Orkla's shareholding in REC (39.73 %) and Jotun (42.5 %) are ­presented according to the equity method on the line for associates. The ­contribution from REC to Orkla's profit was NOK -3 million in the fourth quarter (NOK 103 million)1 , and NOK 607 million (NOK 128 million)1 for the full year. The contribution from Jotun in 2007 was NOK 209 million (NOK 151 million)1.

 

Realised portfolio gains totalled NOK 337 million in the fourth quarter (NOK 1,716 million)1, while dividends received amounted to NOK 357 million (NOK 52 million)1. At year-end, the market value of the Share Portfolio was NOK 17,513 million, while unrealised gains ­totalled NOK 3,810 million. The return on the Share Portfolio was 16.2 % in 2007, compared with 11.7 % for the Morgan Stanley Nordic Index and 11.5 % for the Oslo Stock Exchange Benchmark Index.

 

In connection with the purchase of additional REC shares in the first quarter of 2007, Orkla issued three put options in REC to Q-Cells AG. Under IFRS, changes in the value of these options must be recognised in profit or loss as they occur, and in the fourth quarter the change in value amounted to an imputed financial cost of NOK -33 million.

 

Group earnings per share (diluted) were NOK 8.1 in 2007, compared with NOK 10.9 in 2006, when earnings per share were boosted by a one-off effect of NOK 4 per share from the sale of Orkla Media. Adjusted for discontinued business and amortisation, and for restructuring and significant impairments, earnings per share were NOK 9.0, up NOK 1.7 from 2006. The improvement on 2006 is primarily due to higher gains on the sale of financial assets and increased contributions to profit from associates. The tax charge for 2007 was 16.0 %. The Board of Directors proposes an ordinary dividend of NOK 2.25 per share for 2007, up from NOK 2.0 per share in 2006.

 

(1 The figures in brackets refer to the corresponding period of the previous year)

 

Orkla ASA,

Oslo 14 February 2008

 

Contacts:

Terje Andersen, CFO, Tel.: +47 2254 4419
Rune Helland, SVP Investor Relations, Tel: +472254 4411

Siv Merethe S. Brekke, VP Investor Relations, Tel.: +472254 4455