Oslo, Oct 31 - Norwegian food-to-metals group Orkla posted a larger-than-expected fall in core earnings for the third quarter on Friday and said it will cut capacity and jobs to cope with exceptional market conditions.
* Orkla Q3 core earnings fall below forecasts
* Orkla says will cut capacity and jobs
* Says well positioned to face weaker market trends
* Writedowns knock group to pretax loss
Though underlying profits were still positive, writedowns of financial investments knocked the group to a pretax loss.
Earnings before interest, tax and amortisation (EBITA) fell to 1.0 billion Norwegian crowns ($151.6 million) in the three months to the end of September from 1.23 billion in the same quarter last year.
The result undershot the range of estimates of 1.05 billion to 1.27 billion crowns in a Reuters poll of 12 analysts whose average expectation had been for a drop to 1.18 billion crowns.
The weaker earnings were partly attributable to weak results from energy trading and one-off costs related to the abandoned acquisition of Chinese Kam Kiu Aluminium, Orkla said.
"Looking forward, we will not have a business-as-usual approach," Chief Executive Dag Opedal told a news conference "Extraordinary market conditions will demand a (corresponding) response from the Orkla units."
"These (measures) will include capacity drawdowns, workforce reductions and tight management of investments and working capital," he said in the statement.
Orkla, which makes products ranging from frozen pizza to aluminium, said its financial investment portfolio and aluminium products unit were hit by market turmoil but its branded goods business saw profit growth.
EBITDA in the aluminium components business Sapa Profiles fell by 142 million crowns and EBITDA in Orkla Financial Investments by 76 million from the same quarter last year.
The share portfolio, which has had a negative return of 27.6 percent in 2008, will be written down by 2.2 billion, said Orkla which has substantial financial holdings in several Norwegian listed companies.
This writedown was the main factor that knocked the group to a pretax loss of 955 million in the third quarter from a year-ago profit of 2.23 billion.
"The financial markets are challenging, but Orkla has a solid balance sheet and a comfortable financing structure, where committed credit facilities more than cover loan instalments through the end of 2010," Opedal said.
"We also have a good cash flow from Orkla Brands and the energy business at Orkla Materials, which are less affected by the market turbulence. This gives the Group financial flexibility and manoeuvrability," the CEO said.
The company, sometimes likened to U.S. billionaire Warren Buffett's Berkshire Hathaway because of its involvement in apparently unrelated businesses, said it saw further signs of a slowdown in its aluminium parts business.
"Planned restructuring projects are carried out on an ongoing basis," it said, referring to that division.
Shares in Orkla closed at 45 crowns on Thursday, valuing the group at about $7.0 billion. Trade on the Oslo Bourse resumes at 0800 GMT.
Orkla's share price has slid 57 percent in 2008 with weak equity markets and a steep fall in the shares of solar industry group Renewable Energy Corp (REC) , in which Orkla holds a nearly 40 percent stake.