Orkla has reported third-quarter write-downs exceeding NOK 600 million ($54.6 million), primarily associated with the group’s confectionery and snacks segment.
Two years following the restructuring initiated by President and CEO Nils Selte—where Orkla was divided into individual reporting divisions, or “portfolio companies”—the Norway-based conglomerate acknowledged total write-downs amounting to NOK 657 million.
Of this sum, NOK 350 million resulted from a reduction in “trademarks and goodwill,” particularly impacting Orkla’s operations in Latvia within its confectionery and snacks division, which is one of the 11 portfolio companies that constitute the group.
Orkla entered the Latvian market in 2004 through the acquisition of Spilva, a local food business. The company explained that performance at Orkla Confectionery and Snacks Latvia fell short of expectations since the acquisition, leading to a goodwill and trademark write-down of NOK 295 million in the third quarter.
The NOK 350 million also reflects a write-down of “goodwill” for NIC Enterprises in Germany, which belongs to Orkla Food and Ingredients, the unit focused primarily on ice cream ingredients and related products.
Orkla stated: “Goodwill was also written down in NIC Germany by NOK 49 million due to weaker-than-anticipated performance.”
Additionally, a further NOK 299 million write-down was recorded for the parent company, Orkla ASA, linked to its universal ERP system implemented between 2018 and 2021.
The company added: “Over the past two years, Orkla has transformed into an industrial investment company, which involved significant changes to its operating model. This shift has allowed the portfolio companies enhanced independence, particularly concerning IT solution choices, leading to a decreased requirement for unified ERP solutions across the various entities.”
Orkla clarified that the write-down does not indicate challenges in the operational stability of the ERP system for the companies utilizing it.
In its results announcement released on October 29, Orkla reported a 4.3% increase in third-quarter group revenue, reaching NOK 17.51 billion. Year-to-date, revenue grew by 3.6%, totaling NOK 51.86 billion.
Within the confectionery and snacks sector, revenue increased by 7.4% over the past three months to NOK 2.33 billion and rose nearly 11% for the year, amounting to NOK 6.94 billion.
Selte remarked on the company’s progress, stating: “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 in brand promotion through higher advertising expenditures.”
Adjusted EBIT for the group rose by 13% in the quarter to NOK 2.1 billion and saw an increase of 11% year-to-date, totaling NOK 5.9 billion. Despite the impacts of the write-downs, net profit across the portfolio companies decreased by 18.8% in the quarter to NOK 1.3 billion, though it increased by 16% year-to-date to NOK 5 billion.
In the context of food and beverage industry trends, Orkla’s current situation underscores the importance of strategic brand management and the need for companies in the food and drink business to adapt to evolving consumer trends.
