Orkla (ORK) Q3 2024 earnings summary

Executive summary

• Adjusted EPS rose 10% to NOK 1.77, with underlying adjusted EBIT up 17% for consolidated portfolio companies, driven by broad-based segment improvements and positive volume/mix, despite higher advertising spend and significant write-downs.

• Organic growth reached 3.9%, with 8 of 10 portfolio companies contributing positively; inflation normalized in many markets, though private label competition and weak consumer sentiment persisted.

• Cash conversion reached 112%, reflecting strong operational cash flow and lower net replacement investments.

• The group is progressing well on its three-year strategy, maintaining value creation targets and implementing a streamlined management structure effective November 2024.

• Jotun, the associated company, continued strong momentum with 8% revenue growth and improved gross margin.

Financial highlights

• Group operating revenues for Q3 2024 were NOK 17,512 million, up 4.3% year-over-year; adjusted EBIT for Q3 2024 was NOK 2,147 million, a 12.6% increase.

• Adjusted EPS (diluted) was NOK 1.77 (+10%); reported EPS (diluted) NOK 1.18; profit before tax declined 18.4% to NOK 1,671 million due to write-downs.

• Cash flow from operations improved to NOK 5.3bn YTD, with cash conversion at 112%.

• Net interest-bearing debt was NOK 18.3 billion, with a net debt/EBITDA ratio of 1.8x (1.4x excluding Orkla Food Ingredients).

• Other income and expenses were NOK -741 million, mainly due to write-downs of NOK 657 million, including ERP platform and goodwill/trademarks.

Outlook and guidance

• Raw material prices are expected to stabilize into 2025, excluding cocoa, which remains volatile.

• The company is on track with strategic targets for 2024–2026: 8–10% underlying EBIT growth, 1.5–2.0 pp EBIT margin improvement, and ROCE increase from 10% to 13%.

• No specific guidance on price increases for 2025; price increases have moderated this year.

• Cocoa volumes for 2024 are secured, with partial coverage into Q1 2025; price increases will be considered if cocoa prices remain high.

• Management expects continued sales growth and solid gross margin for Jotun for the rest of the year.