Orkla Puts Acquisitions Ahead of Extra Payouts Amid Growth

  • Says fair value for Sapa more important than fast exit
  • Says hydrower business not a `strategic' problem: CEO

Orkla ASA is putting its expansion over extra payouts to shareholders as it sells off assets to focus on branded consumer goods.

The Norwegian maker of frozen pizza, confectionery and washing detergent is seeking to maintain at least a 2.5 krone-dividend “for the foreseeable future,” and prioritize potential acquisitions, according to Chief Executive Officer Peter Arne Ruzicka.

“The first priority for the proceeds of any sale of Orkla Investments, Sapa, power plants or real estate will be reinvestment in attractive companies that fit into our core business,” he said in an interview on Friday. “If no appealing opportunities present themselves, we will propose an additional dividend or some form of buyback.”

Orkla is completing a transition to focus on growing its consumer brands business started in 2011. It bought Rieber & Soen ASA, which sells ready-made foods, sauces and soups, and toothbrush-maker Jordan AS in 2012, selling specialized biochemical supplier Borregaard ASA the same year. That change is continuing apace.

The company’s shares slid 1 percent to 69.75 kroner as of 1:24 p.m. in Oslo.

Orkla is now consolidating its factories to create larger and more specialized units to speed up cost reductions and adapt better to local consumer demand through investments in new technology and automation, Ruzicka said.

“We will never be able to achieve the same cost level as the largest multinationals,” he said. “We have to balance maintaining a local presence and realizing economies of scale.”

The integration of healthcare producer Cederroth International AB, which Orkla took over in Aug. 31, is going as planned, the executive said. However, it won’t be rushing into a divestment of its 50 percent stake in Sapa AS.

“Fair value is more important than a rapid exit,” Ruzicka said. “While we have no fixed exit deadline, we do expect the European market to improve gradually. We intend to capitalize on our restructuring measures and take a share of the value created.”

The company’s investment in Norwegian hydropower plants “requires little investment and management attention,” but provides potential for further divestment.

“Every time it rains, revenue increases,”  Ruzicka said. “We see no strategic problems with the business -- if the price is right, we may sell.”

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