Orkla (ORKLY, Financial) is a Norwegian foods company. Management is getting out of the conglomerate business and focusing on foods. Third quarter numbers were very strong.
Adjusted EBITÂ was 1.178 billion krone ($1.45 million) versus 993 million in the third quarter of 2015. Revenue was 9.429 billion krone versus 8.38 in 2015. Pretax income was 1.38 billion versus 1.07 billion last year. Earnings per share increased 31% to 1.05 krone.
All numbers beat estimates. Part of the increase in income was due to lower commodity prices, especially dairy and almonds. Management also mentioned a drop in marzipan. That is a first in hearing about the marzipan market for your humble analyst.
During the quarter, two European companies were acquired. The first was Harris, a U.K.-based maker of paint tools. The second was Broer, a Dutch ingredients company. I am surprised about the paint tool company. I thought management was focusing on food.
The extruded aluminum joint venture, SAPA, has also done well. This is a joint venture with Norwegian Hydro. EBITDA has increased from 1.1 billion krone to 3.3 billion krone in three years. My guess is that Orkla eventually sells off SAPA and concentrates on food.
Orkla's hydroelectric power company increased EBIT from 22 million krone to 63 million in the quarter. This is another division that I could see getting sold off.
Another surprise is that Orkla is teaming up with Alibaba to sell products in China. From Scandanavia to the Orient.
The dividend has been 2.5 krone for several years. At a stock price of 79.1 krone, that is a yield of 3.1%. Pretty decent yield. Imagine what the stock price would do if that were bumped up?
Orkla is way underfollowed in the U.S. The stock's American Depository Receipt is ORKLY. At a market cap of almost $10 billion, it should get more coverage. We have owned it for a few years and will continue to hold. It is a great value story.
Disclosure: We own shares of Orkla.
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