Orkla in acquisitive mood after solid financial results
its $1.76 billion bid for aluminium packaging manufacturer Elkem
after it reported a stronger than expected 25 per cent rise in
fourth quarter-core earnings.
Operating profit before goodwill amortisation in the fourth quarter of 2004 was NOK 919 million, 25 per cent higher than in the fourth quarter of 2003. In 2004 Orkla's operating profit before goodwill amortisation totalled NOK 2.7 billion, up 13 per cent from 2003.
This solid financial performance has enabled Orkla to consolidate its position in a number of sectors. Furthermore, following the sale of Orkla's interest in Carlsberg Breweries, which generated NOK 17.5 billion, the company believes it now has the liquid assets to move into new strategic positions.
In addition to a number of minor acquisitions in the course of 2004, Orkla acquired the Russian confectionery and biscuit company SladCo towards the end of 2004. Since the beginning of 2005, the group has concentrated on attempting to acquire the remaining shares in Elkem and the åland-based company Chips.
Even if Orkla acquires all remaining shares in these companies (including the minority interest in Sapa), Orkla claims it will still have sufficient capacity to pursue interesting industrial opportunities within its strategic areas of focus.
"Orkla is a dynamic company, and we will actively follow up further business opportunities," said chief executive Dag J. Opedal.
Orkla may well look to build upon its recent acquisitions in the food sector. The company's food division reported operating profit before goodwill amortisation of NOK 1.2 billion in 2004, up 14 per cent from 2003. The company says that improvement programmes are proceeding as planned.
For the moment though, the company is focused on the potential takeover of Elkem. On 10 January 2005, Orkla secured 50.03 per cent control of Elkem, giving it a platform to launch a bid for the entire company, which it values at 11.59 billion crowns (€1.6bn).
A revised shares offer was presented last week in order to make the deal more attractive to shareholders, including US metal packaging giant Alcoa. This would give all shareholders equal rights, Orkla said that the right to extra payments if it bought or sold at a higher price would only apply to 70 per cent of each shareholding.
In compensation, it would pay one crown extra for the other 30 per cent of holdings. The revision could make the offer slightly more attractive for Alcoa, which said on 26 January that it might take six weeks to decide whether to accept or reject the offer.
Elkem is the world's biggest producer of silicon metal and also makes ferrosilicon, aluminium and controls Swedish listed aluminium products firm Sapa. US aluminium giant Alcoa, which owns 46.5 per cent of Norwegian Elkem, has been monitoring the situation closely.
Orkla, whose operating profit of NOK3.8 billion is made up of 40 per cent food, sees Elkem as a perfect fit within its business strategy, and sees the company as an ideal industrial opportunity.
Orkla is one of the largest listed companies in Norway. The core businesses are branded consumer goods, chemicals and financial investments. The group is a leading supplier of branded consumer goods to the Nordic grocery market, holding many number one or two positions in strategically important product areas.
