Orkla ASA — Interim / Quarterly Report 2015

Feb 11, 2016

Fourth quarter results 2015

11 February 2016

Peter A. Ruzicka, President & CEO

Continued growth in the fourth quarter

4.1% organic growth¹

17% EBIT (adj.)² growth in BCG

Full-year EPS doubled to NOK 3.24

Highlights: Strong performance in the quarter

• Group EBIT (adj.)¹ increased by 9% to NOK 1.1 billion
• Increase in EPS from NOK -0.06 to NOK 0.73
• Continued growth in Branded Consumer Goods
• 4.1% organic growth²driven by successful innovations and high campaign activity
• EBIT (adj.) growth of 17% in BCG supported by sales growth and cost improvement programmes

• Increased contribution from associates

• Improved operations in Sapa
• Continued growth in Jotun

• Continued high M&A and restructuring activity

• Foothold in Central Europe significantly strengthened through acquisition of Hamé (pending)
• Further expansion in ice cream ingredients
• Integration of Cederroth ongoing

• The Board of Directors proposes a dividend of NOK 2.50 per share for 2015

¹EBIT (adj.) = Operating profit before other income and expenses

²Reported growth adjusted for FX and M&A ³

Branded Consumer Goods Q4 2015: Sales growth in all business areas

¹Reported growth adjusted for FX and M&A

4 ²For organic growth, data before Q4-14 include Orkla Brands Russia

Top-line growth initiatives:

Several cross-border innovations

Top-line growth initiatives: Increased collaboration with customers

Nutrilett Breakfast Bar for Coop Norge

A range of TORO products launched under Beauvais brand – only in Coop Denmark

Top-line growth initiatives:

Orkla Food Ingredients and Orkla Foods launch TORO-bakeriet

Project team with members from both Orkla Foods and Orkla Food Ingredients

Top-line growth initiatives:

Grandiosa home-made: sales boosted by relaunch

Branded Consumer Goods Q4 2015: EBIT (adj.) growth supported by currency

Continuous improvements for more profitable operations

Significant supply chain improvements Several initiatives to reduce SG&A costs

• 14 factories closed or under closure since 2014
• 15 factory redesign projects initiated

• Continued centralisation of procurement, from 54% to 70%

• Increased sales force efficiency

• Cederroth and NP Foods integration programmes initiated
• Increasing the scope of Orkla Accounting Centre in Tallinn

Significant re-allocation to Branded Consumer Goods

Exits and sales NOK ^~1.5 billion in freed-up capital in 2015

Hamé strengthens Orkla within its key categories

Summary Delivering on our strategy and increasing performance

¹ 13 Including add-ons, excluding currency effects and large acquisitions and divestments

Financial performance

Jens Bjørn Staff, CFO

Group EBIT (adj.) improvement of 9% in the quarter

Amounts in NOK million

Key figures	Q4-14	Q4-15	2014	2015
Operating revenues	8 119	9 571	29 599	33 198
EBIT (adj.)	1 007	1 102	3 214	3 609
Other income and expenses	-102	-234	-100	-502
EBIT	905	868	3 114	3 107
Profit/loss from associates and JV	-252	89	121	1 111
Net financials and other	-148	-11	-363	-128
Profit/loss before tax1	505	946	2 872	4 090
Discontinued operations2	-387	-17	-485	-17
EPS (NOK)	-0.06	0.73	1.63	3.24

¹From continuing operations

15 2Gränges and Orkla Brands Russia are classified as discontinued operations

Branded Consumer Goods

Positive organic growth

Underlying margin improvement

Q4-15 EBIT (adj.) margin bridge

Dilution Q4-15 from M&A Underlying improvement Q4-14

Full year EBIT (adj.) margin bridge

Dilution 2015 from M&A Underlying improvement 2014

Orkla Foods Sales growth and margin expansion in Orkla Foods

Amounts in NOK million

• Continued sales growth across geographies and channels
• Price and volume driven growth through new launches, campaign activity and distribution of Tropicana juice
• Sales growth and continuous improvement programmes drove profit and margin expansion
• Weakening of the NOK and higher raw material prices put pressure on margins

Orkla Confectionery & Snacks Strong organic growth in Orkla Confectionery & Snacks

Amounts in NOK million

• Strong organic growth, primarily in Norway, Sweden, Denmark and Estonia
• Sales growth partly driven by timing and one-off effects, with negative effect in 2016
• EBIT (adj.) growth mainly driven by strong sales
• The acquisition of NP Foods had a dilutive effect on EBIT (adj.) margin from Q2

Orkla Care Orkla Care impacted by FX and acquisitions

Amounts in NOK million

0.6% OG¹ -0.7% OG¹ 17.2 15.3 15.9 12.4 Q4 FY 852 191 881 204 Q4 FY 1,640 1,250 FY 5,534 4,960 Q4 Operating revenues EBIT (adj.) EBIT (adj.) margin (%)

• Organic sales growth driven by 3 of 5 business units
• Campaigns and new launches were the main drivers
• Profitability in all segments negatively affected by a weak NOK
• Margin diluted by the inclusion of Cederroth
• Cederroth performance in line with expectations, however EBIT (adj.) hampered by higher advertising costs than last year

Orkla Food Ingredients Steady growth in Orkla Food Ingredients

Amounts in NOK million

Operating revenues EBIT (adj.) EBIT (adj.) margin (%) 5.3 6.6 5.5 5.4 Q4 FY 345 120 414 116 Q4 Q4 FY 7,598 2,115 FY 1,821 6,534 +3.0% OG¹ +3.4% OG¹

• Continued organic growth

• Increased competition in the margarine segment

• Greater exposure to ice cream ingredients hurt profitability in low season

• Higher investments in sales and marketing

Orkla Investments

Orkla Investments

Financial investments

Sapa (50/50 joint venture) Continued underlying EBIT growth in Sapa

Amounts in NOK million

• 1% market increase in North America

• Stable demand in Europe

• Positive contributions from improvement programmes and restructuring efforts

• Higher share of value added products
• Orkla's share of net profit significantly increased

Sapa (50/50 joint venture)

Sapa restructuring and synergy agenda delivered one year ahead of plan

• Significant improvement since establishment of Sapa JV
• NOK 1 billion in synergies realised
• Exit of unprofitable business
• Higher share of value added products
• Focus on continued operational improvement going forward
• Leverage on leading market position
• Increase share of value added products
• Continuous improvement of cost position

Jotun (42.5%) Growth across all segments and regions in Jotun

• High revenue growth driven by both improved sales volumes and positive currency translation effects

• Growth across all segments and regions

• Better profitability through active cost control and improved gross margin

• Operating profit in Q4 impacted by one-off costs

Lower power prices only partly offset by higher volumes

2014 2015

• Higher water reservoirs than normal in Sauda

Source: Nord Pool Spot, Monthly System Price

• Volume sold on spot market is exposed to regional prices
• low power prices

Net debt and dividend

Changes in net debt 2015

Dividends 1993 – 2015¹

1Proposed dividend

Event	Date
Annual General Meeting	14 April 2016
Q1-2016	3 May 2016
Q2-2016	15 July 2016
Q3-2016	1 November 2016
Q4-2016	9 February 2017

Summary

Peter A. Ruzicka, President & CEO

Delivering on strategy

Strong performance	Group EBIT (adj.)1 • increased by 9% 4.1% organic growth2 • in BCG • EBIT (adj.) growth of 17% in BCG • Strong performance from associates
Value creating M&A and restructuring activity	• Significant strengthening of foothold in Central Europe • Further expansion in ice cream ingredients • Integration of Cederroth ongoing
Operational focus going forward	• Activities that drive organic growth and improve margins • Centralise supply chain and reduce factory footprint

34 ¹EBIT (adj.) = Operating profit before other income and expenses ²Reported growth adjusted for FX and M&A

Launching healthier alternatives

Extended skin care range from Dr. Greve

New chocolate launches in Denmark, Norway and Latvia

Q&A

Peter A. Ruzicka, President & CEO Jens Bjørn Staff, CFO

Appendices

Group income statement

	Q4-14	Q4-15	2014	2015
Operating revenues	8 119	9 571	29 599	33 198
EBIT (adj.)	1 007	1 102	3 214	3 609
Other income and expenses	-102	-234	-100	-502
EBIT	905	868	3 114	3 107
Profit/loss from associates and joint ventures	-252	89	121	1 111
Interests, net	-125	-33	-363	-192
Other financial items, net	-23	22	0	64
Profit/loss before taxes	505	946	2 872	4 090
Taxes	-183	-172	-688	-722
Profit/loss for the period continuing operations	322	774	2 184	3 368
Profit/loss from discontinued operations	-387	-17	-485	-17
Profit/loss for the period	-65	757	1 699	3 351
Earnings per share diluted (NOK)	-0.06	0.73	1.63	3.24

Net financial items

	FY 2015	Q4-14	Q4-15
Net interest expenses	-192	-125	-33
Currency gain/loss	0	0	2
Result from Share Portfolio and dividends	135	16	35
Other financial items, net	-71	-39	-15
Net financial items	-128	-148	-11

Balance sheet

	31.12.2014	31.12.2015
Intangible assets	14 598	17 676
Property, plant and equipment	9 484	10 523
Investments in associates and joint ventures etc.	13 026	13 029
Non-current assets	37 108	41 228
Assets held for sale	22	182
Inventories	3 873	4 623
Inventory of development property	200	216
Trade receivables	4 413	5 267
Other receivables	1 147	625
Shares and financial assets	734	1 376
Cash and cash equivalents	2 615	721
Current assets	13 004	13 010
Total assets	50 112	54 238
Paid-in equity	1 993	1 994
Earned equity	29 066	31 335
Non-controlling interests	245	417
Equity	31 304	33 746
Provisions	3 699	4 191
Non-current interest-bearing liabilities	8 510	8 722
Current interest-bearing liabilities	598	399
Trade payables	3 221	3 869
Other current liabilities	2 780	3 311
Equity and liabilities	50 112	54 238

Cash flow

	2014	2015
Operating profit	3 181	3 058
Amortisation, depreciation and write-downs	930	1 109
Change in net working capital	- 491	404
Net replacement expenditures	- 838	- 930
Cash flow from operations	2 782	3 641
Cash flow from operations, Financial Investments	- 59	94
Tax	- 492	- 727
Dividends received, net financial and other	247	155
Cash flow before capital transactions	2 478	3 163
Paid to shareholders, net purchase/sales own shares	-2 460	-2 594
Cash flow before expansion	18	569
Expansion investments	- 102	- 388
Sold and acquired companies	2 796	-2 040
Net purchases/sales shares and financial assets	350	298
Net cash flow	3 062	-1 561
Currency translations net interest-bearing liabilities	- 227	- 583
Change in net interest-bearing liabilities	-2 835	2 144
Net interest-bearing liabilities	5 661	7 805

Sapa (joint venture) – figures on 100% basis

Amounts in NOK million

	Q4-14	Q1-15	Q2-15	Q3-15	Q4-15
Sales volume (1,000 tonnes)	322	353	358	341	311
revenues (NOK million)1 Operating	11 842	14 051	14 484	13 895	12 821
Underlying EBIT	-55	392	483	404	128
Excluded items:
Unrealised derivative positions	-79	-145	-158	-95	209
Other excluded items1	-545	-46	-260	-135	-250
Sum excluded items	-624	-191	-418	-230	-41
EBIT	-679	201	65	174	88
Net income (attributable to majority)	-719	89	14	109	34

44 1Historical figures are marginally changed for Q4-14, Q1-15 and Q2-15 due to adjusted definitions.

Strong balance sheet and financial flexibility

Debt maturity profile

Funding sources

Amounts in NOK billion

Bonds and CP Cash, cash equivalents and interest bearing assets Unutilised credit facilities Banks