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ORKLA ANNUAL REPORT 2003 ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ANNUAL REPORT ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 03 ORKLA’S PRIMARY GOAL IS LONG-TERM VALUE CREATION ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: CONTENTS ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: Our course remains firm . .1 Asset values . .41 Orkla in brief . 2 Branded Consumer Goods . 42 Report of the Board of Directors . .4 Orkla Foods . .46 Income statement . .12 Orkla Beverages . 50 Balance sheet . .13 Orkla Brands . .54 Cash flow statement . .14 Orkla Media . .58 Accounting principles . .15 Chemicals . .62 Notes . .18 Financial Investments . .66 Accounts for Orkla ASA . .31 Orkla’s history . .68 Notes for Orkla ASA . .32 Corporate governance at Orkla . .72 Auditor’s report . .34 Orkla and society . .74 Statement from the Corporate Assembly . .34 Shares and shareholders . .75 Summary accounts for the business areas . .35 The Board of Directors of Orkla ASA . .78 Key figures . .38 Governing bodies and elected representatives . .79 Pro forma 2003 . .39 Group directory . .80 Value creation at Orkla . .40 FINANCIAL CALENDAR 2004 29 April 30 April 6 May 19 May 12 August 4 November Ordinary Shares quoted First quarter Dividend paid out Second quarter Third quarter General Meeting excluding dividend report published report published report published All dates subject to change. THE BEGINNING NORWEGIANISATION END OF AN ERA COPPER PERIOD OVER RAILWAY FROM MINE TO PORT Chalcopyrite mining operations are started Norwegian citizens become main partners. The last royally appointed director of the The last copper ore is smelted, and in 1851 Christian Thams starts planning industrial-scale :::::::::::::::::::::::::::: :::::::::::::::::::::::::::: 1654 at the Løkken Works. 1705 1760 Løkken Works, Hans Rasmussen Müller, dies. 1845 the transition is made to pyrite and new operations. 1898 mining operations. Chr. Salvesen & Chr. Thams’s Communications Aktieselskab is founded to build a railway from the mine to the port. THE ORKLA NAME FIRST USED RAILWAY MAKES INDUSTRIAL HISTORY UNDER SWEDISH MANAGEMENT PROCESSING AND NEW TECHNOLOGY ON THE STOCK EXCHANGE The Orkla Grube-Aktiebolag mining company HRH King Haakon opens the Marcus Wallenberg sr. of the Swedish family The smelting plant in Thamshavn starts up Orkla becomes a listed company. 1904 is founded to continue pyrite mining operations 1908 Thamshavn railway, Norway’s first 1913 of financiers becomes Chairman of the Board 1931 operations, based on the sulphur extraction 1938 at the Løkken Works. Christian Thams becomes electric railway. of Directors. process developed by Orkla. managing director. 1654–2004 MORE STRINGS TO THEIR BOW THE OSLO OFFICE NORWEGIAN OWNERSHIP HEYERDAHL CEO SALE OF HYDRO SHARES GENERATES LARGE GAIN Orkla Industrier begins to build its investment Orkla establishes an office in Oslo with a view Orkla becomes a fully Norwegian-owned company Jens P. Heyerdahl d.y. becomes the Managing The sale of a large shareholding in Norsk Hydro 1941 portfolio. 1975 to expanding the company’s industrial platform. 1977 when Skandinaviska Enskilda Banken sells its 1979 Director of Orkla Industrier. 1980 ensures a substantial injection of capital. shares. Financial Investments become a separate The share price had risen from NOK 150 to business division. NOK 800, largely due to the oil crisis. MODERN MINING OPERATIONS RESTRUCTURING FOR GROWTH IN NEW SECTORS BORREGAARD AND ORKLA JOIN FORCES END OF THE BEGINNING FOCUS ON BRANDED CONSUMER GOODS Orkla and Outokumpu enter into a 50/50 joint Orkla invests heavily in the media sector, Orkla and Borregaard merge and form Orkla Mining operations at the Løkken Works are A merger with Nora Industrier lays the foundation 1981 venture on the mining operations at the Løkken 1984 purchasing the publishing company 1986 Borregaard. The company’s core businesses are 1987 closed down at the end of the afternoon shift 1991 for focus on the Nordic branded consumer Works. Orkla takes over 70 % of the shares in Ernst G. Mortensens Forlag. branded consumer goods, chemicals and on 10 July. goods sector. Høyer Ellefsen, thereby becoming a major financial investments. industrial player, and later makes a substantial gain on the sale of the shares. THE MAGAZINE BUSINESS GROWS VOLVO AGREEMENT CLOSED PRIPPS RINGNES BECOMES WHOLLY-OWNED MAJOR INVESTMENTS IN DENMARK JEBSEN NEW GROUP PRESIDENT AND CEO Orkla Media and Norske Egmont establish Orkla takes over the food manufacturing Orkla Beverages increases its focus on Eastern Orkla enters into a joint venture with Finn Jebsen takes over as Group President and 1992 the magazine company Hjemmet Mortensen. 1995 companies Procordia Food and Abba Seafood 1997 Europe by acquiring an interest in Baltic Beverages 2000 Carlsberg A/S and acquires a 40 % interest in 2001 CEO. in Sweden. The Swedish brewery Pripps and the Holding. Pripps Ringnes is now wholly- Carlsberg Breweries. Orkla Media purchases Norwegian brewery Ringnes merge and are jointly owned by Orkla. the Danish media group Det Berlingske Officin. owned by Orkla and Volvo. Orkla invests heavily The sale of NetCom shares yields a gain of ORKLA’S HISTORY – 350 YEARS HISTORY ORKLA’S in Russia through Baltic Beverages Holding. NOK 2,239 million. ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 1 :. ORKLA ANNUAL REPORT 2003 Message from the CEO OUR COURSE REMAINS FIRM IN 2003 ALL ORKLA’S BRANDED CONSUMER GOODS BUSINESSES ACHIEVED GROWTH, THE RESULTS FOR THE CHEMICALS BUSINESS DECLINED DUE TO WEAK MARKETS, WHILE THE FINANCIAL INVESTMENTS DIVISION RECOUPED MOST OF THE LOSSES IT HAD MADE ON WEAK STOCK MARKETS IN THE PRECEDING YEARS. ALL IN ALL, IT WAS A GOOD YEAR FOR ORKLA. OUR POSITION IS STRONG AND WE ARE WELL PREPARED FOR NEW CHALLENGES. Finn Jebsen Group President and CEO This year, Orkla is celebrating the fact that 350 years have passed since most correct thing for Orkla to do was to sell. Consequently that was the mining began at Løkken in Central Norway and the foundations for the choice we made. Orkla Group we know today were laid. At a milestone such as this, it is natural for us to look back on our own background and experiences. The sale is not a result of any change of strategy or a signal of a short- We have therefore included an account of the Group’s historical devel- term rather than a long-term approach. Our strategic orientation is opment elsewhere in this report. unchanged and our main direction will continue to be profitable indus- trial growth with the main emphasis on branded consumer goods, In the past twenty years, Orkla has achieved particularly strong, prof- preferably at the international level. At the same time, we will continue itable growth. While all three core business areas have grown, our devel- to strengthen Borregaard’s core industrial business, which has now been opment in the branded consumer goods sector has been the most clearly defined as wood chemicals, and our Financial Investments busi- impressive. We have become the leading supplier to the grocery trade in ness will continue to operate with focus on a concentrated, long-term the Nordic region and hold interesting positions in Central and Eastern portfolio. Europe. As a result of this development, Orkla has become a significantly larger, more solid company than before and has created substantial value With our expertise, our solid market positions and our extremely for its shareholders. Our corporate culture is healthy and strong and we strong financial situation, we have a good foundation for further are entitled to be proud of what Orkla has achieved thus far. expansion. We will be patient enough to ensure that our future growth will be profitable and create value. And maybe we will expand our During this period of growth, Orkla has sometimes sold companies in its horizons a little further, perhaps geographically, perhaps in terms of core business areas. In the mid-1990s, for example, we sold all our inter- products, but always on the basis of what we do best. ests in clothing, which was a main area of focus within the branded con- sumer goods business. In the 1980s, Orkla sold its interests in the con- Orkla has achieved underlying profit growth throughout 2003, partic- tracting business, which was one of the Group’s core activities at the ularly in our Branded Consumer Goods business. The value of our time. Nevertheless, the sale of our 40 % interest in Carlsberg Breweries in financial investments also increased significantly, while the Chemicals this anniversary year is different from previous divestments. Beverages business experienced a setback. However, the overall picture is one of were part of a core business that we were strongly motivated to further progress, and we have continued to implement improvement pro- develop and had a central place in our strategic plan. Over a period of