Update 3Q12 Share Price: NOK ( ) 1 November 2012 Target: NOK 46 (47) Good Q3, turnaround story continues

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1 Orkla ASA NEUTRAL Update 3Q12 Share Price: NOK ( ) 1 November 2012 Target: NOK 46 (47) Share data Sector: Diversified Ind. Reuters/Bloomberg ORK.OL / ORK Risk Rating Low Outstanding shares Market cap Net interest bearing debt Enterprise value Free float 75 % Average volume High/low 52w 48,8 / 39,1 Weight OSEBX 4,89 % Rel. Perf 3/6/12 4 / 4 / -3 Abs. Perf. 3/6/12 10 / 11 / 15 Price / Book E Good Q3, turnaround story continues Orkla delivered a Q3 result broadly in line with our estimates with an EBITA of NOK 857m (our estimates NOK 834m). We make only modest estimate changes and retain our Neutral rating. Orkla has delivered on its strategy in It has acquired two complementary businesses in its Brand division, has divested Borregaard, and entered into a Joint Venture with Norsk Hydro for most of the downstream aluminium assets. From these transactions a more focused consumer goods business to emerge over the next year. Current valuation as fair, but there are several triggers for a re-pricing of the stock, with the key one being a return to organic growth in its Consumer Goods business. We make only modest changes to our estimates, lowering EBITA by 1% and 2% for 2012 and 2013 respectively. An increase in Foods Nordic estimates is offset by a reduction in other Brands businesses and Sapa Heat Transfer. We see three key share price triggers in the coming year. The first is the success of the Sapa JV with Norsk Hydro. The transaction is likely to go through, but the exit value depends on the speed and impact of the business combination and the market demand for aluminium solutions. The second is the price Orkla will achieve for Heat Transfer, the remaining part of Sapa, which we value at NOK 2.3bn. Orkla intends to divest this business already in Q Third we will be looking for a return to organic revenue growth in the Branded Consumer Goods business, and earnings to justify the recent acquisitions of Rieber & Sønn, and Jordan. Estimate changes ESTIMATE 2012E 2013E Change % CHANGES Current Previous Current Previous Revenues % 0 % EBITDA % -2 % EBITA % -2 % EPS reported 2,28 3,17 3,11 3,22-28 % -3 % EPS adjusted 2,57 2,80 3,27 3,06-8 % 7 % EBITA per area Brands % -1 % Sapa % -19 % Investments % 0 % HQ/Other business % 0 % Prepared by analyst: Per Haagensen Fondsfinans ASA Tel per.haagensen@fondsfinans.no Turnaround story will continue to unfold but unless we see a return to growth in Brands, or divestment at higher than expect prices, valuation is fair. Key figures (NOKm) E 2013E 2014E Q311 Q312 Revenues EBITDA EBITA EPS, rep. -0,90-0,76 2,28 3,11 3,10-1,28-0,17 EPS, adj. 5,55 2,46 2,57 3,27 3,25 0,70 0,44 DPS 2,50 7,50 2,50 2,50 2,50 0,00 0,00 EBITA Margin 6,5 % 6,6 % 8,1 % 10,7 % 10,6 % 7,5 % 11,9 % P/E Industry 11,6 18,6 14,3 14,0 14,1 EV/EBITA 18,1 13,9 15,9 17,3 16,8 P/E, adj. 9,7 18,1 18,0 14,1 14,2 P/B 1,2 1,3 1,5 1,5 1,8 ROE -1,9 % -1,9 % 7,0 % 10,0 % 10,9 % ROCE 6,1 % 7,3 % 8,3 % 7,7 % 8,5 % Source: Orkla, Fondsfinans research FONDSFINANS ASA, HAAKON VII S GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: , FAX: , mail@fondsfinans.no This report was prepared by an analyst employed by Fondsfinans ASA, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research. See page 5 of this report for Important Disclosure Information.

2 Orkla ASA Update 3Q12 Strategy delivered, now time to focus on growth Orkla has done a good job at acting on its strategy and divesting non-core assets. Following these transactions Brands will become the dominant area. We see the key valuation trigger for this business to be organic growth, where Orkla has been lagging its big international peers for some time. Organic growth is a key earnings and valuation driver Organic growth rates, Orkla and selected peers Source: FF Research Estimate changes following the Q3 report We lower our EBITA estimates by 1% and 2% for 2012 and 2013 respectively. An increase in Foods Nordic is offset by lower expected earnings from other Brands areas and lower from Sapa Heat Transfer which company intends to divest in Q Modest downward revision to estimates Estimate changes following the Q3 report ESTIMATE 2012E 2013E Change % CHANGES Current Previous Current Previous Revenues % 0 % EBITA % -2 % Orkla Foods Nordic % 2 % Orkla Brands Nordic % -1 % Orkla Brands International n.m -6 % Orkla Food Ingredients % -2 % SUM BRANDS % -1 % Sapa Profiles % Sapa Heat Transfer % -19 % SUM SAPA % -19 % Borregaard Chemicals % Hydro Pow er % 0 % Orkla Financial Investments % 0 % SUM INVESTMENTS % 0 % EPS 2,57 3,24 3,27 4,10-21 % -20 % Source: FF Research/Orkla Page 2 1 November 2012 Fondsfinans Research

3 Update 3Q12 Orkla ASA Sum of the parts valuation revised in light of restructuring SOTP valuation at NOK 46 (47) per share We apply an EV/EBITA based valuation approach for our SOTP. For Hydropower we use a DCF valuation per asset, while we use listed values for Investments, Borregaard and REC. Sum of the parts valuation at NOK 46 (47) Key Business (EBIT) 2012E 2013E 2014E X 2013 EV Orkla Foods Nordic Orkla Brands Nordic Orkla Brands International Orkla Food Ingredients Rieber og Søn EBIT Other Businesses and Investments 2012E 2013E 2014E X 2013 EV Heat Tranfer (Held for sale) Hydropow er Sapa / Hydro (50% share in Joint Venture) Investment Portfolio, REC, Borregaard, other assets Jotun (42.5%) HQ Costs Value non-core and Investments Net Debt - adjusted for Rieber / Sapa / Borregaard Equity Value Shares Share price target 46,2 Source: FF Research The current valuation is fair, but there exist a number of share price triggers going forward. Sapa speed of integration and aluminum demand Brands growth is key Sapa JV. Orkla and Hydro has combined its assets into a new JV. The transaction will likely be concluded in Q We expect both parties for a rapid integration and a realization of the targeted NOK 1bn in synergies. The parties aim for an IPO within three years. The progress of integration and downstream aluminum demand in Europe and North America will be key Orkla has expanded its Brands business by adding Jordan, a leading company within preventive oral care with sales of some NOK 940m, concluded in Q3. The acquisition of Rieber & Sønn will likely be concluded in Q The rapid integration of these two businesses will be key. In parallel we will be looking at top-line growth to ensure further earnings improvement. Fondsfinans Research 1 November 2012 Page 3

4 Orkla ASA Update 3Q12 Risk Assessment Diversified operations reduce risk Market trends pose threat to growth and margins Sapa sees cyclicality and exposure to raw materials and currency Execution risk in acquisitions and divestments Orkla still operates within several operational areas in addition to its financial investments. As operational and market risks vary across business areas, this will in total reduce Orkla s risk exposure. Within the brands (Foods/Brands) the challenge lay in organic growth and cost inflation. Increasing competition due to market trends like private label could give negative effects for growth and earnings. For increased raw materials costs there will be a time leg of passing on these to end customers. Sapa sees wider market fluctuations than in the consumer goods business. Furthermore, the companies have exposure to foreign exchange and raw materials prices. Orkla has entered into a JV with Hydro for a combination of its aluminum profiles and building systems assets. It has furthermore acquired Jordan, and is in the process of acquiring Rieber & Sønn for its Consumer Goods businesses. All three transaction carry and will continue to carry some execution risk in terms of integration of the new entities. Page 4 1 November 2012 Fondsfinans Research

5 Update 3Q12 Orkla ASA Definitions of ratings Buy Low risk: with a potential of min 5%. Medium risk: with a potential of min 10%. High risk: with a potential of min 15%. Neutral Low risk: -5% to +5%. Medium risk: -10% to +10%. High risk: -15% to +15%. Sell Low risk: min 5%. Medium risk: min 10%. High risk: min 15%. Risk ratings are based on price volatility, fundamental criteria and perceived risk. Ratings are: Low (L), Medium (M) and High (H). Target: Our valuation as of today. Time frame of target: Target is what we value the share as of today. Recommendation distribution as of : Companies in each recommendation category that have been investment banking clients over the past 12 months: Recommendation No Percent Recommendation No Percent Buy % Buy 3 9 % Neutral % Neutral 1 7 % Sell 2 4 % Sell 0 0 % Total % Total 4 Our intention is to issue preview and update research on a quarterly basis. Our investment recommendation is elaborated in accordance with The Norwegian Securities Dealers Associations standards. This report has not been sent to the company for correction of any factual errors. Fondsfinans is organized with Chinese walls between the Corporate Department and the Research/Broking Department. In addition, Fondsfinans has internal instructions and guidelines for handling sensitive information. The analyst receives compensation that is impacted by overall firm profitability, including investment banking activities. The analyst is partner in DIS Fondsfinans. Fondsfinans is under supervision of The Financial Supervisory Authority of Norway. The recommendation has not been changed. 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6 Orkla Sector: Diversified industry Price (NOK): 45,10 Shares outstanding (mill): Date: 01 Nov 2012 Ticker symbol: Market cap (NOKm): Next result: 7 Feb 2103 Book equity per share: 31,2 Net int.-bearing debt (NOKm): Target: 46 Equity ratio: 57,6 % Enterprise value (NOKm): Recommendation: NEUTRAL 12 month high/low : 48,8 / 39,1 Figures in NOKm E 2013E 2014E Q411 Q112 Q212 Q312 Q412E Operating revenue Grow th (%) 12 % -3 % -25 % -31 % 3 % 2 % -3 % 2 % -52 % 17 % Operating expenses EBITDA Ordinary depreciation EBITA Amortisation intangible assets Other income and expenses Operating profit Profit from associates Dividends Gains and losses/w rite-dow ns Share portfolio Financial items, net Pre-tax profit Taxes Minorities Discontinued operations (1 036) Net income EBT (Pre-tax profit) - Industrial Activities EBT (Pre-tax profit) - Orkla Financial Investments Operating Cash-Flow from industry division Segm ent EBITA Orkla Foods Nordic Orkla Brands Nordic Orkla Brands International Orkla Food Ingredients Total Orkla Brands Sapa Profiles (discontinued) Sapa Heat Transfer and Building System Total Sapa Borregaard (discontinued) Hydro Pow er Orkla Financial Investments Total Investments HQ/Other business Discontinued business EBITA Margin 6,5 % 6,6 % 8,1 % 10,7 % 10,6 % 6,9 % 6,0 % 6,6 % 11,9 % 11,1 % EBIT Margin 7,0 % 4,8 % 7,3 % 10,1 % 10,1 % 3,9 % 5,7 % 5,1 % 11,5 % 8,7 % KEY FIGURES AND VALUATION No. of shares, avg m 1 017, , , , , , , , , ,8 Price 54,0 44,7 46,1 46,1 46,1 44,7 45,1 45,1 46,1 46,1 Dividend (Paid year after) 2,50 2,50 2,50 2,50 2,50 EPS reported -0,90-0,76 2,28 3,11 3,10 0,22 1,28 0,28-0,17 0,74 EPS, adj 5,55 2,46 2,57 3,27 3,25 0,43 0,53 0,63 0,44 0,70 CFPS (Non-financial) 1,69 1,93 1,92 1,50 1,62 1,39-0,07 0,51 0,87 0,60 P/E reported ex one-offs 9,7 18,1 18,0 14,1 14,2 Sensitivity EPS 2013E 2013E P/E Industry 11,6 18,6 14,3 14,0 14,1 Price/book 1,2 1,3 1,5 1,5 1,8 BASE ESTIMATE 3,27 3,25 + 1% Revenue grow th 0,02 0,02 ROACE (Industry division) 6,1 % 7,3 % 8,3 % 7,7 % 8,5 % + 1% EBITA margin 0,23 0,23 Balance Sheet Data 10 largest shareholders Current assets Name % Non-current assets Canica As 150,3 14,6% Total assets State Street Bank And Trust Co. 77,8 7,6% Folketrygdfondet 77,3 7,5% Current liabilities Tvist 5 As 77,0 7,5% Non-current liabilities Clearstream Banking S.A. 49,0 4,8% Equity + minorities State Street Bank And Trust Co. 31,6 3,1% Jpmorgan Chase Bank 20,7 2,0% Book equity / share 45,8 33,4 31,3 31,2 25,7 Canica Investor As 16,0 1,6% Equity ratio 53,6 % 51,8 % 57,7 % 57,6 % 52,6 % Bank Of New York Mellon 15,5 1,5% Net interest bearing debt State Street Bank & Trust Co. 13,6 1,3% Net int. bear. debt / equity 0,4 0,3 0,4 0,4 0,5 The Northern Trust Co. 12,5 1,2% Sum 10 largest holdings 541,3 52,6% Cash flow statement Others 488,7 53,8% Cash flow from industry division Total 1 029,9 100,0% Expension investments (Net) Total diluted % Net change in interest bearing debt