Orkla books write-down on confectionery, snacks

The Nordic group took a further write-down related to consolidation of its ERP system.

Orkla has recorded more than Nrk600m ($54.6m) in third-quarter write-downs partially related to the Nordic group’s confectionery and snacks business.

Two years after president and CEO Nils Selte split the group into individual reporting divisions, or “portfolio companies”, Norway-headquartered Orkla registered write-downs totalling Nkr657m.

Orkla said Nrk350m of the total was due to the reduction of “trademarks and goodwill” mainly due to the company’s Latvia operations within its confectionery and snacks division, one of 11 of the group’s portfolio companies.

The group entered Latvia in 2004 with the acquisition of local food business Spilva.

Orkla explained: The performance in Orkla Confectionery and Snacks Latvija has been weaker than expected since the company was acquired, andgoodwill and trademarks in Orkla Confectionery and Snacks Latvija were written down by Nkr295 million in the third quarter.”

The Nkr350m also included a write-down of “goodwill” for NIC Enterprises in Germany, which sits within Orkla Food and Ingredients, the portfolio business unit predominately focused on ice-cream ingredients and “accessories”.

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Orkla said: “Goodwill was also written down in NIC Germany by Nkr49 million due to weaker-than-anticipated performance.”

A further Nkr299m write-down was registered for the group parent company, Orkla ASA, related to its universal ERP system, which was set in motion from 2018-2021.

“Over the past two years, Orkla has been transformed into an industrial investment company, a process which has entailed major changes to Orkla’s operating model with increased independence and autonomy of the portfolio companies, including with regard to the selection of IT solutions,” the company explained.

“This development has reduced the need for common ERP solutions across the portfolio companies, and thus significantly reduced the value of Orkla’s common ERP template platform.”

Orkla added: “The write-down is not associated with challenges in the operational stability of the ERP solution for the companies using the system.”

In its results statement issued today (29 October), Orkla said third-quarter group revenue to 30 September rose 4.3% to Nkr17.51bn and was up 3.6% year to date at Nkr51.86bn.

Within confectionery and snacks, revenue climbed 7.4% over the three months to Nkr2.33bn and increased almost 11% for the year so far to Nkr6.94bn.

Selte commented: “Orkla’s good performance continued in the third quarter. It is encouraging to observe that most of our companies have increased their operating margins, while making substantial investments behind their brands through higher advertising spend.”

Group adjusted EBIT rose 13% in the quarter to Nkr2.1bn and increased 11% over the nine months to Nkr5.9bn.

Impacted by the write-downs, net profit across the portfolio companies dropped 18.8% in the quarter to Nkr1.3bn but was up 16% year to date at Nkr5bn.