Orkla Q2 EBIT Rises 2.5% on Jotun Strength Despite Volume Drops
Orkla reported a 2.5% EBIT increase and 3% adjusted EPS growth in Q2, driven by Jotun's performance and offsetting volume declines across its food portfolio.
Key points
- Orkla’s underlying adjusted EBIT grew 2.5% in Q2, while organic revenue remained flat due to a 1.3% volume decline.
- Jotun contributed significantly to results with 11% underlying revenue growth and 21% profit growth, offsetting weaker food divisions.
- Orkla completed a NOK 4 billion buyback and acquired European Candy Group to strengthen its confectionery market position.
Orkla ASA posted a 2.5% increase in underlying adjusted EBIT for the second quarter, while organic top-line development remained flat. The Norwegian conglomerate noted that price increases were fully offset by a 1.3% decline in volume mix, resulting in no net organic revenue growth. Adjusted earnings per share rose by 3%, a result driven primarily by strong performance from its coatings division, Jotun.
Reported revenues and EBITDA both fell by 5% due to unfavorable currency effects, according to the earnings call transcript provided by benzinga.com. The EBIT margin held steady at 10.5%. The company stated that the volume decline was caused by weaker demand in several portfolio companies and the reversal of supportive Easter phasing effects from the previous quarter.
Jotun drives adjusted earnings growth
Jotun delivered 11% underlying revenue growth and 21% profit growth during the period. This performance was the primary factor supporting the group's adjusted EPS improvement. In contrast, Orkla Foods and Orkla Snacks experienced organic revenue declines, highlighting a stark divergence in performance between the industrial and consumer-facing segments of the portfolio.
Acquisitions strengthen category positions
Orkla Snacks acquired the European Candy Group, a move intended to consolidate its market position in the confectionery sector. Additionally, Orkla Foods closed a transaction to acquire a 40% stake in Gotan Group, enhancing its presence in the sauces category. These deals are designed to support long-term organic growth by strengthening existing category positions rather than expanding into new markets.
Capital allocation and cost pressures
The company completed a NOK 4 billion share buyback program in July and paid NOK 6 billion in dividends. Management indicated that the ongoing conflict in the Middle East is increasing costs for energy, transportation, and packaging. These inflationary pressures are expected to impact margins in the near term, complicating the cost management strategies outlined in the strategic plan.
