Orkla As A S/Adr

Good morning, and welcome to the presentation of Orkla's second quarter results. My name is Annie Bursagel, and I'm the head of investor relations and communications. So to begin the presentations today, our president and CEO, Neil Selta, will be presenting some highlights from the quarter, as well as from the first half year. After that, EVP and CFO, Arvid Eglant, will be presenting some more detail into the financials. Once he's done, Nils will return for a few concluding remarks. After all the presentations are over, we will be going over to our Q&A. We're going to begin our Q&A as a video Q&A with our analyst community before we go over to taking questions from the web. So if you're interested in sending any questions, you may do so at any time during the presentation. And I will read those up at the end. So with that all out of the way, let me hand it over to you, Nils.

Thank you, Annie. and good morning to everyone. Overall, we continued to progress according to our capital markets day targets. Organic growth was 3.8%, came primarily from price increases in most portfolio companies as well as a return to volume growth on a consolidated basis. End-lying EBIT adjust growth continued but was somewhat slower than previous quarters with mixed developments across the portfolio companies. Earnings per share adjusted was 1.56, up 0.6% from the same period last year. Let's turn into the breakdown of the portfolio companies' performance. There was significant variation in profitability across the portfolio companies in the quarter. Arve will present a more detailed picture of the individual companies, but a few developments deserve mention. Orkla food ingredients deliver a strong quarter driven by both top-line growth and continued successful implementation of the cost program in the sweets cluster. While the headline numbers in Orkla snacks are below our expectations, the company has successfully navigated a challenging input cost environment. Orkly India had an impressive underlying EBIT adjust growth of 20%, excluding government grants. On the other hand, Orkly Health had a weak quarter, and I'm disappointed by the development. I see significant potential in the company, but the result over the last quarters are not good enough. Closing the gap between the company's current performance and full potential is the key focus for a new CEO coming in in August. Then a few highlights from the first half year. In May, the CEOs of Orkla Foods, Orkla Snacks, and Orkla Food Ingredients outlined the operational and commercial steps on the way to secure value creation for the rest of this strategy period and beyond. On the structure side, we continue the disciplined reshaping of our portfolio. We closed the sale of Piero Bag Group in March and Orkla's hydropower assets in April. This has significantly simplified our structure further. In June, Orkla India filed a draft hearing prospectus with the Securities and Exchange Board of India. This marks an important milestone in Orkla India's pursuit of structural options to unlock value. Let's have a look at our CMD targets. Our progress on improving underlying EBIT adjust was within the range, the target range, on a rolling 12-month basis. Unlying EBIT adjust margin remained unchanged since the first quarter and return on capital employed increased to 11.8% since the first quarter. As we said at the capital markets update in May, with a diverse portfolio, we expect some portfolio companies to over deliver on their targets and others to under deliver. In sum, however, we are on track. With that, I will now invite Arvid to provide more detailed overview of the financials.

Thank you, Nils, and good morning, everyone. So let me turn to some more details on the financials for the quarter. The Group's operating revenue rose by 5% year-over-year in the second quarter, following organic sales growth in the consolidated portfolio companies. Ytlas EBIT Adjust grew by 6%, driven by profit growth in most of the portfolio companies. Profit from Jotun and other associated companies were 422 million in the quarter. Jotun's positive underlying operational performance continued in the second quarter, but due to currency translation effects, they reported a slight decline in EBITDA. The decline in net profit versus last year in our P&L is mainly related to timing of the recognition of tax expenses between the first and second quarter. These effects are eliminated in the half-year results. Adjusted earnings per share amounted to NOK 1.56 in the quarter on par with the same period last year. Note that reported earnings per share includes the gain of the investments of the hydropower portfolio reported as discontinued operations. The rolling 12-month EBITDA just margin for the consolidated portfolio companies was 10.3% in the second quarter, an increase of 0.6 percentage points over the last 12 months. In terms of input prices, our guidance remains unchanged. We continue to expect raw material prices in sum to stabilize in 2025, excluding cocoa. Organic growth was 3.8% in the consolidated portfolio companies, with positive volume mixed growth of 1.4%. The greatest positive contributions to volume mix growth was from Orkla food ingredients and Orkla home and personal care, offset by volume mix declines in Orkla snacks and Orkla health. Cash flow from operations in the first half amounted to 2.4 billion, a decline of 0.4 billion year over year. The decline was mainly due to increased net working capital and higher net replacement investments in the consolidated portfolio companies. Turning to capital allocation, as guided, we increased our debt level in the second quarter after distributing dividend of 10 billion. We also closed both hydropower transactions in April. And we ended the quarter with a net interest-bearing debt level of two times EBITDA and 1.6 times if excluding Orkla food ingredients. Now let me move on to some more details on the portfolio companies. Jotun recorded an operating revenue decline of 0.6%, excluding negative currency translation effects from the stronger Norwegian Krone. Sales growth in the quarter was 3.5%. Topline growth was mainly due to higher volumes. In addition, increased premium sales, especially in the decorative segment, contributed positively. Operating profit declined by 2.1% compared to the same period last year. However, excluding negative currency translation effects, underlying operating profit increased by 2.6%. While we see uncertainty related to currency fluctuations, our outlook for Jotunn for 2025 remains unchanged. Organic growth in Orkla Foods was 1%, with a flat volume mix development overall. Volume mix increased in all markets except for Norway. Within prioritized growth categories, we see an improvement in both Sweden and Finland, as well as continued progress in the Czech Republic. Underlying EBIT adjust declined by 1.8% due to lower activity levels in key categories in the Norwegian market, as well as increased advertising spend. Lastly, execution on the revised commercial strategy that workload foods presented at the capital markets update is progressing according to plan. Organic growth in original snacks was 4.3%, and both biscuits and snacks contributed positively to volume mix growth, while lower volumes in the chocolate segment resulted in a volume mix decline of 1.8% overall. Despite continued pressure from high cocoa prices, underlying EBIT adjust was flat. Ökla Snacks has successfully harmonized recipes, reduced the fixed cost base, and implemented continued cost improvements across the value chain. We still expect cocoa prices to come down to a more sustainable level over time. And as we said in Q1, we have returned to a normal cocoa hedging strategy. And during the quarter, Oiklas Next was named to Time Magazine's list of the 100 most influential companies globally, reflecting the strength of the Bubz brand. And the Bubz US launch is now planned for Q3. And this is the first quarter report results for Orkla Home and Personal Care as a part of the anchor category. And the company's positive trajectory continued in the quarter. Organic growth remained high at 8.5%, driven primarily by volume mix growth in Norway, Sweden and contract manufacturing. Underlying EBITDA just growth was 13% with revenue management driving positive mixed effects. Organic growth in Orkla food ingredients was 9.2% in the quarter with positive contributions from all three clusters. Volume growth was primarily driven by sweet ingredients with positive contribution from plant-based and the flatter development for bakery. Underlying EBITDA just growth was 20% and sweet ingredients contributed the majority of the improvement due to both volume growth and the successful implementation of the cost program that began in Q3 2024. That program is now closed following full implementation of all planned initiatives. Orkla Food Ingredients continued to execute on this structural growth strategy in the second quarter as well, with the bolt-on acquisition of the Belgian ice cream ingredients producer Levesuv in April. Organic growth in Ortlieb Health was 2.2%, driven entirely by price. Organic growth from price was offset by volume mix declines in most geographies and categories. In the omega-3 category, headwinds from high cod liver oil prices negatively impacted both margins and volumes. The underlying EBIT decline was 21%. Higher AMP spend has not yielded sufficient results. And in addition, SG&A spending to build the commercial organization continues to outpace sales growth. And as Neil said, adjusting these challenges is the top priority for Orkla Health going forward. Moving on to Oikla India, second quarter revenues included financial incentives provided by the government of India amounting to NOK 6 million compared to NOK 20 million in the same quarter last year. Excluding the government grant, organic revenue growth was 0.6%, driven by volume mixed growth of 3.9%. In the domestic market, organic revenue growth was impacted by price decline on back of input cost reductions, while volume mix growth continued to be positive. Underlying EBITDA just growth was 5.7% in the quarter and 20% if excluding government grants. An EBIT adjust margin increased 2.8 percentage points year-over-year, driven by contribution margin development and continued cost discipline. The European pizza company's organic revenue growth was 1.2%. Consumer sales gained momentum on the back of targeted growth initiatives, although the market situation remains somewhat challenging. Improved results for the New York pizza in the Netherlands were supported by third-party dough sales. Underlying EBITDA just growth was 11%, driven by consumer sales momentum and cost control. Health and Sports Nutrition Group continued to improve profitability, while Ortla House Care had a weaker development over the quarter, driven by volume and seasonal facing. With that, I'd like to give the floor to Nils to present his concluding remarks.