Orkla ASA — Interim / Quarterly Report 2016

Sep 29, 2016

FINANCIAL REPORT 1 JANUARY – 31 AUGUST 2016

1 JANUARY – 31 AUGUST 2016

JOTUN GROUP – INTERIM FINANCIAL REPORT

• Revenue and volume growth
• Operating profit improved by 5 per cent
• On-going capacity investments in Oman, Philippines and Myanmar

The consolidated financial statement consists of Jotun A/S and its 54 subsidiaries, three joint venture companies in Asia and six associated companies in the Middle-East. Subsidiaries are consolidated with the full amount independent of shareholding, while share of profits from joint ventures and associates are presented on a separate line based on the actual shareholding.

OPERATING REVENUE

Operating revenue increased by two per cent to NOK 10 917 million over first eight months of 2016. The modest growth is attributable to reduced growth rates for Marine newbuilding and continued low activity within the offshore sector. The main drivers of the growth are increased sales volumes in the Decorative Paint segment in the Middle East, South East Asia and Eastern Europe.

OPERATING PROFIT

The operating profit as of 31 August increased from NOK 1 630 million in 2015 to NOK 1 716 million in 2016. The increase in profit is driven by increased sales volume, better results from associates, and positive gross margin development.

INVESTMENTS

Total purchases of property, plant and equipment and intangible assets amounted to NOK 722 million as of 31 August 2016 (31 August 2015: NOK 547 million). This represents 7 per cent of operating revenue, and is in line with strategic ambitions. Construction of new factories and buildings in Oman, Philippines and Myanmar, together with construction of a new office building and R&D centre in Norway, represents the major part of the investments.

NET INTEREST-BEARING DEBT

The net interest-bearing debt for the Group was NOK 1 502 million as of 31 August 2016, compared to NOK 1 591 million as of 31 December 2015. The decrease in net interest-bearing debt is primarily related cash flow from operations. The Group has a solid financial position, and a net interest-bearing debt to EBITDA ratio of only 0.8.

SHAREHOLDERS' EQUITY

Shareholders' equity, including non-controlling interests, has increased during 2016 to NOK 8 315 million as the year-to-date profit of NOK 1 254 million exceeds the effects of dividends for 2015 (declared in 2016) and other equity changes of negative NOK 325 million, mainly relating to unrealised currency translation effects. The equity ratio remains strong at a level of 52 per cent (31 August 2015: 50 per cent).

CASH FLOW

Operating activities generated a positive cash flow of NOK 1 109 million as of 31 August 2016 (31 August 2015: 985). The improved operating cash flow for the period is mainly attributed to increased operating profit and higher dividends received from associates.

SUMMARY OF HISTORICAL DEVELOPMENT

Operating revenue and margin development per tertiary from August 2013 to August 2016 is as follows:

OUTLOOK

Jotun's profitability has continued to improve, but sales growth has eased compared to the strong growth seen in 2015. Sales are expected to continue to develop positively based on our organic growth strategy and presence in growth economies. However, the underlying growth trend is expected to continue at a fairly low level in the forthcoming tertiary primarily due to reduced growth for Marine newbuilding.

Following a longer period with easing raw material prices, the prediction for the coming months is a gradual increase. Jotun will continue to further develop its organic growth strategy and maintain the focus on operational effectiveness by investing in production capacity in both existing and new markets, as well as further developing its systems and personnel.

JOTUN GROUP – FINANCIAL CONSOLIDATED INFORMATION (UNAUDITED)

CONDENSED CONSOLIDATED INCOME STATEMENT

(NOK million)	1/1–31/8 2016	1/1–31/8 2015	31/12 2015
Operating revenue	10 917	10 753	16 282
Share of profit from associated companies and joint ventures	459	383	562
Cost of goods sold	5 535	5 694	8 657
Other operating expenses	3 849	3 562	5 651
Depreciation, amortisation and impairment	277	250	473
Operating profit	1 716	1 630	2 064
Net finance items	–63	–87	–146
Profit before tax	1 652	1 543	1 918
Income tax	398	326	502
Profit for the period	1 254	1 217	1 416

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Equity as at end of period	8 315	7 440
Exchange differences	–285	43
Dividend	–586	–559
Profit for the period	1 254	1 217
Equity as at 1 January	7 932	6 739
(NOK million)	1/1–31/8 2016	1/1–31/8 2015

CONDENSED CONSOLIDATED BALANCE SHEET

(NOK million)	31/8 2016	31/8 2015	31/12 2015
Intangible assets	493	435	476
Property, pant end equipment	4 539	4 047	4 220
Financial fixed Assets	1 681	1 709	2 014
Total non-current assets	6 714	6 191	6 710
Inventories	2 187	2 219	2 198
Trade and other receivables	4 908	4 697	4 757
Cash and cash equivalents	2 180	1 673	1 521
Total current assets	9 275	8 588	8 476
Total assets	15 989	14 779	15 187
Share capital	103	103	103
Other equity	8 017	7 167	7 620
Non-controlling interests	195	170	210
Total equity	8 315	7 440	7 932
Non-current liabilities	2 744	2 791	2 648
Current interest-bearing debt	1 408	911	954
Other current liabilities	3 523	3 637	3 652
Total liabilities	7 674	7 339	7 254
Total equity and liabilities	15 989	14 779	15 187

CONDENSED CASH FLOW STATEMENT

(NOK million)	1/1–31/8 2016	1/1–31/8 2015
Profit before tax	1 652	1 543
Share of profit from associated companies	–459	–383
and joint ventures
Dividend paid from associated companies	718	466
and joint ventures
Tax payments	–185	–159
Depreciation, amortisation and impairment	277	250
Change in operating working capital	–646	–570
Change in accruals, provisions and other	–247	–163
Net cash flow from operating activities	1 109	985
Net cash flow used in investing activities	–722	–547
Dividends paid to Jotun A/S shareholders	–257	–257
Dividends paid to non-controlling interests	–37	–41
Net cash flow from loans	568	111
Net cash flow from financing activities	273	–183
Net increase/decrease in cash	659	252
Cash at beginning of period	1 521	1 421
Cash at end of period	2 180	1 673

Sandefjord, Norway, 29 September 2016 The Board of Directors Jotun A/S

Odd Gleditsch d.y.

Chairman

Nicolai A. Eger

Ingrid Luberth

Birger Amundsen

Terje Andersen

Karl Otto Tveter

Richard Arnesen

Morten Fon President and CEO

Jotun A/S P.O.Box 2021 3202 Sandefjord Norway jotun.com