Orkla to shut more aluminium plants in Europe

Norwegian food and industrial conglomerate Orkla plans to close more aluminium plants in Europe after its markets deteriorated more than it expected, particularly in areas worst hit by the debt crisis.

The company, which aims to sell many of its disparate businesses to focus exclusively on its consumer brands such as biscuits and detergents, reported second-quarter core profit below market forecasts on Friday.

Acting Chief Executive Aage Korsvold appointed earlier this year to speed up disposals said most should happen this year, apart from aluminium unit Sapa.

"We will clean up most of it in 2012, but Sapa will take somewhat longer," Korsvold said.

Orkla shares were down 3.5 percent at 0846 GMT and were the worst performer in the Oslo benchmark index, down 0.3 percent.

Revenue at Sapa fell 4 percent from the year-ago period, due to declining demand for aluminium profiles, mainly used in vehicles and construction.

Sapa will shut more of its European production capacity, the unit's head Svein Tore Holsether told Reuters on the sidelines of a news conference, without saying where the closures will come.

"We took action last year based on the market outlook we had then, and now we just have to realise that the market has developed more negatively than we thought then, and that means further (permanent) shutdowns," Holsether said, adding that Sapa's main trouble area was in southern Europe.

Last year Orkla closed three Sapa plants in Portugal, Belgium and Denmark in an effort to come closer to the target of a 6 percent "mid-cycle" operating margin. In the second quarter, Sapa's margin had deteriorated to 3.2 percent from 3.9 percent in the year-ago period.

"Markets for Sapa Profiles Europe are expected to remain soft throughout 2012," Orkla said. "Sapa Profiles North America is expected to continue its positive performance, but with a slightly lower growth rate than in the first half of 2012."

Orkla is likely to have finalised the sale of its biochemical Borregaard unit before the end of the year, and is also considering the option of listing the unit, Korsvold told Reuters.

He also said Orkla's stake in solar-equipment maker Renewable Energy Corp (REC) doesn't belong in the company's portfolio but wouldn't comment on how the firm was planning to exit.

Orkla's earnings before interest, tax and amortisation (EBITA) fell to 992 million Norwegian crowns ($163.3 million) in the second quarter, from 1.08 billion in the year-ago period, and below the average forecast in a Reuters poll of 1.04 billion. Revenue fell 5 percent to 15.15 billion crowns, behind analysts expectations.