Good morning, ladies and gentlemen, welcome to Orkla's third quarter presentation for 2010. My name is Bjørn Wiggen. This is Orkla's new CEO. I'm going to be taking you through the third quarter. First, I'm going to be talking about the strategy, and then we're going to take a look at the figures. For years, Orkla has been a well-diversified portfolio company, and we would like to continue to be that also in the time to come. We have shown for many years, we've demonstrated that we can deliver good dividends, a good yield on this model, and we would like to continue to work in several industrial areas and with investments. We are now actively working to focus the group more sharply.
We have seen that with the model that we have now had for a number of years, we've ended up being very broad-based, and there are many opportunities in all of the areas in which we're engaged. It would be very demanding for Orkla to continue to follow up in all these areas, all the different business areas where we are involved today. We are trying to fine-hone our focus a bit. Very specifically, we've also mentioned previously that we'll be reducing our exposure in the solar energy area. This is something that we are working with, and we will be implementing. This means that we are going to be reallocating some efforts to other areas, mainly to the industrial areas, Sapa and Brands. These are the areas that we will focus on further developing to a significant degree.
We are not forgetting, of course, the operational development, and we will continue to be doing that. We'll work with structural measures and economization, and we will do this in all the companies that we own at any given time. As regards the choice of Orkla Brands and Sapa as our main areas of interest in the industrial part of Orkla, then for Orkla Brands, this is because they have the kind of diversified portfolio model. With the kind of model that we have, it's important to have one large area that generates a stable, good cash flow. This is something that Orkla Brands does, and Orkla Brands has done so over many years.
They have very strong positions, especially in the Nordic countries and the Baltic area, also in selected parts of Russia and India. That gives us room for growth. We have also made acquisitions, maybe not the big, spectacular acquisitions, but we're constantly working with smaller and medium-sized companies when it comes to acquisitions, which we can integrate into our existing activities. We feel that this is a model that works very well. As for Sapa, we feel that Sapa has a very strong global position in aluminum extrusions. Sapa still has a considerable potential for improvement. This means that we can create value by continuing to focus on this area and developing Sapa.
It's rather unique that Sapa is an activity that is really focusing all of its energy on downstream aluminum, while our largest competitors are integrated and have primary aluminum production also in their portfolio. We feel that we are one of the few players that is really focusing on expansion in this segment of the value chain. We also see that today we have very strong positions in North America, as well as in Europe, in Sapa, and we see that there's a considerable potential in Asia that's now sailing up as the absolutely, by far, the largest market area for these products. We have a strong position there with heat transfer, and we're also working to develop our other activities with regard to extrusions in that area.
That brings me then to the highlights for the third quarter, the results. The highlights that we see here are that we have top-line growth. We have good operational progress that's been made for the group during the third quarter. We've had an increase in sales of 15%. If we compare that with the third quarter of last year, where we had progress in all of our business areas. If we look at Orkla Brands, then we saw continued profit growth there. The underlying progress was 5% there, and in particular, the brands' Nordic companies did very well. It was a little bit disappointing to see the trend in Russia, but this was because of very special circumstances that applied this summer. In fact, there was a heat wave, and that reduced the chocolate consumption during the summer.
Selling chocolate wasn't a very easy thing to do at one point. For Sapa, the third quarter is usually a weaker quarter than the second quarter because of the holidays that our customers take, and also at our factories, certainly. We see that after significant growth from low levels in the first and second quarters, we've seen a flattening out of the market now in the third quarter. If we look at the results, there's still, we show good progress from the same quarter of last year, and this is because we're seeing the full effect of the improvement measures, the cost-cutting measures that have been implemented, so that the EBITDA came to NOK 162 million, compared with NOK 29 million a year ago. In Elkem's activities, we see significant price hikes. The demand is strong.
We have a capacity now utilization now, which is almost 100%. That means that Elkem had a good profit and made considerable headway during the quarter. The share portfolio has also had a good year-to-date investment performance, well ahead of the indexes that we compare ourselves with. Our investment performance has been 21%+, and that's some 5 percentage points ahead of the Nordic Benchmark Index. After the end of the quarter, we have sold our forest assets for somewhat more than NOK 1.7 billion, and this sale is expected to give a booked gain of about NOK 1.4 billion. The REC share price has climbed throughout the third quarter.
At the end of the quarter, it was 19.9%. As you know, we use the market price on the stock exchange to make our valuation of our investment in REC. As a result of this, because we have written down the assets previously, now we had to take to income NOK 2 billion in the value of associates for the quarter because of the value of REC shares. Here, a share change for REC of NOK 2.50 has an impact of about NOK 1 billion on Orkla's financial statements, plus, minus. We see here that the improvement in performance for the group was very broad-based. Especially, we saw the progress in Elkem has lifted the result up during this quarter. We also have seen clear progress in Sapa, even though the market development was somewhat weaker.
In that, we got a flattening out, as I mentioned previously. As regards Orkla Materials Energy, we had a good result for Borregaard's power operations, but we still saw weaker results than normal from Saudefaldene. When we compare this quarter with the third quarter from last year, we have to bear in mind that we have sold some power operations, so they're discontinued operations that account for about NOK 80 million. That explains 80 of the 113 in the difference that we see here. Sales, as mentioned, increased by 15%, and this is driven by market growth first and foremost in the different areas, and also the fact that we now have the Indalex companies that have been consolidated into Sapa as from August last year.
The improvement in the EBITDA is 44% than compared with last year. REC, as we mentioned, there was a positive effect for accounting purposes of some NOK 2 billion, and you saw that REC put forward. They presented their results yesterday, and there was an EBITDA of NOK 827 million, and this accounts for an improvement about NOK 370 million compared with the second quarter, and NOK 380 million compared with the same quarter last year. As regards our other associate, Jotun, there's still a good continued profit growth in sales and profits there. For the second four-month interim, the operating profit was NOK 1.04 billion, which is an improvement of 21% from last year.
The share portfolio has sold shares worth a net value of NOK 1.2 billion thus far this year. The sales that were sold during the third quarter contributed to net assets of NOK 318 million, and the average interest rate was 2.3% in the third quarter, and combined with lower average liabilities, this contributed to lower interest expenses during the interim period. All in all, then that gives us earnings before tax of NOK 3.4 billion, and this is compared with just less than a half a billion kroner last year. Let's take a look at the balance sheet then.
At the 3rd quarter, the group had an equity ratio of 49.4%, while the net gearing was at 0.54 at the end of the quarter. Net interest-bearing liabilities at the end of the quarter were just less than NOK 24 billion. This is a decline of NOK 4 billion compared with the same point in time a year ago. We have an increase in our working capital this year as a result of improved markets and rising sales, and this is especially true for Elkem and Sapa. We expect that the working capital will be reduced now later in the year because of normal seasonal fluctuations. Orkla's share portfolio now has a fair value of nearly NOK 12 billion, and this also adds significantly to the group's financial flexibility.
We still see that for Orkla, it's important that we have a strong balance sheet, because that gives us the room to maneuver, as it were, and to implement our strategy. Here we have a running improvement, an ongoing improvement in the EBITDA here. We know the reason for the decline in 2009, where there were very weak markets, especially for Sapa and Elkem, and they are starting to recover here at the end of 2009 and moving into 2010. We expect continued growth there because we have improved our cost positions in all of these areas throughout the crisis, we have cut our costs, and this was done last year. I will move on to talking a little bit about each of the individual areas.
The first area we'll visit is Orkla Brands. This is a market that is relatively stable. We see that the Nordic grocery markets, which is the real focal point for Orkla Brands, are, all in all, relatively stable. That means that the changes that have been very strong in the world economy, the global economy, have not really affected this to any significant extent, and we don't expect that to take place in the future either. No dramatic changes here. Perhaps we see a slightly better market development here than previously, but as you can see, we're talking very, very small numbers. There is competition from international players and from house brands in the grocery industry, and it's very keen, this competition.
It will continue to be keen, and we also see that our records show that the business-to-business area, which Brands also works in, that the market there has slowed this year compared with previous years. Raw materials prices are important elements for Orkla Brands. We see that there is an international trend towards rising commodities prices. For many of the products that we have to buy to use in our products, the international trend is now very clearly rising. Material prices are rising. We see that the increase is not equally strong now as what we saw in 2007. We can also see that this is distributed among many different types of individual commodities, and we have a very broad product portfolio, so we're not very dependent on the trend in one particular raw material.
The largest raw materials for us that we have to follow along with are flour, vegetable oils, and sugar. The natural reaction for us then, when there are market-based raw materials price hikes, then it's natural to compensate for this, for general market-based increases in the price of commodities. This was done in 2007. At this point, we are going to continue working with this, and we feel very well prepared to deal with the more volatile commodities prices in future, as I expect they will come. Orkla Brands has then continued to deliver stable performance growth for quite some time. This is based on the strong brand positions that Orkla Brands has, and its very good capacity to develop and manage these positions in a profitable manner.
As mentioned, we expect that Orkla Brands will continue to play a strategically important role in Orkla in the future as well. The EBIT for Orkla Brands has an underlying growth of 5% during the quarter, and there was a top line that was on a par with last year, so that generally speaking, the market shares have been maintained. This was also a market that was relatively stable. There are several companies that have shown very good improvements in their performance during the quarter. I would mention here Lilleborg Chips Group, Pierre Robert, and Axellus in Norway and Sweden. They've had, as I said, good improved performance. This is partly due to good innovation and also to the consequent sales growth, and it is also a result of the improvements that we've seen from these ongoing improvement programs.
I mentioned that our B2B, the business-to-business market, has had a somewhat slower trend. This is also the case for our export markets, and here we have seen a decline in the third quarter. Our activities have been very demanding at Bakers. Bakers has implemented significant economization measures, and we feel that the company is now in a very good cost position. However, this has not been enough to compensate for lower volumes, lower and declining volumes, so that the result there is weaker than it was last year. Orkla Brands International, I mentioned there that one of the problems was the development in trend in Russia for chocolates, and we've also seen high commodities prices there and mainly of cocoa beans. This has also had an impact on Russia's results.
In India, the MTR brand was relaunched in June. The company saw sales growth of no less than 17% in the third quarter. We feel that this is a very positive trend. The cost improvement programs, they are continuing to run as they should. They're on schedule. That brings me then to Sapa. There we see a flattening out in the market in the U.S. in the third quarter. They are on approximately the level with the third quarter last year. That's when things started to pick up a little bit last year, was in Q3. We also see that the markets in prospects are relatively flat. We see progress in most of the segment. Building and construction is still continuing to be weak. The European market, in the short term, was somewhat better.
There we see we've made headway of 5% in Q3 this year, compared with the same quarter last year. Here, too, we see that a weak building and construction market is pulling the result, the overall result, down somewhat. The third quarter is, seasonally speaking, a weaker quarter than the second quarter. We also see that if we look at the trend through the quarter, we had a slightly slower July than what we expected to have. What we see is that the second quarter, we did very well, so that here it looks like there's been a certain lag in sales between the different months. We've seen a more positive development trend again in August and September. Sapa's sales went better than the rest of the market.
They outpaced the market growth. We see that increased our market shares during this period, along with combinations from the improvement programs for the whole year, we saw an improvement in results from last year. Turning our attention to Sapa Heat Transfer, we see that we had a fire in one of the facilities in February. That meant that it ran with limited capacity for a period of time. We began full production again in August. In this interim period, we've worked very hard to ensure that our customers did not suffer from this situation that arose. We have had significantly additional expenses associated with ensuring deliveries to customers. All of this was insured, of course. Here we have a dialogue with the insurance company to clarify the final compensation.
Although we believe the total adverse effect over time would be limited, we see that there was a somewhat limited impact on the results in the third quarter because of this discussion about some insurance claims. Let's look at Sapa. We see the trends over the most recent years here, you can see that the progress from the third quarter last year was slightly weaker than from the second quarter on the year. This doesn't affect the long-term financial goals for Sapa. They continue to be that we have a turnover rate of 3 and an EBITDA margin of 6, which will give us a return on capital employed of 18%. Those goals stand firm.
The programs that we have is to improve operations, to take advantages of the economies of scale that we have from being big, and to be even better at value-added activities and at creating new products that have greater value with our customers. All of those programs are running right on schedule. That brings us to the Orkla Materials business area. They have had a very strong development trend, strong markets. We see that the markets for silicon metals and ferrosilicon were stable for many, many years, now all of a sudden, we got a tremendous upswing in 2008. That dropped steeply when the global financial crisis began. Now the prices are back up at the high levels that they had in 2008.
This is because exports from China are now being reduced, this is because of China's priority of its own, on its own power resources where they want to use them, they are, have chosen not to use them on the same degree as before on the production of ferrosilicon. This means that there is a larger uplift in this market, this has had an impact on prices, a significant impact on prices in the short term. This has also resulted in a very powerful improvement in the results for this business activity. This is in addition to the prices. This is also because we have here two adapted costs. We went down to the break-even level, we brought it down.
We reduced break-even to a historical low level, so that now when prices are going up, it has a very, very nice effect, I'd have to say, on our profits. For Borregaard, we see some of the same effects here in speciality cellulose. We've seen increased demand there, growing demand and higher prices for Borregaard. We've also seen that the production in the third quarter is more back where it should be after we had some operational problems in the first half. We see an improvement in the results, although there are here, too, higher raw materials costs that have to be taken into account, and we have some negative currency effects here. For Elkem Solar, we see that the market is improving, that means that the interest in Elkem Solar's products are also improving.
The ramp-up of the facility in Kristiansund is continuing. In the third quarter, we produced 598 metric tons, and 270 of those tons were produced in September. We have a gradual increase in our production there month by month. We are continuing to run on the ramp-up schedule that we've had. This will continue in accordance with the ramp-up plan. Elkem Solar is also in the process. It's in a good position. It's in a good position for signing new customer contracts for next year. As regards our energy activities there, it was a good quarter for Borregaard's power operations. For Sirdal, there was, as we also mentioned last quarter, a low filling ratio in the reservoirs and lower than normal precipitation and thereby power production.
If we compare with last year, we have to take into account the NOK 81 million that were contributed by the power plants that have now been sold off. We saw that was in the figures from last year. With a look at, or a view to Orkla financial investments, the share portfolio has reported investment performance thus far this year of 21.3%, and that's 5 percentage points ahead of the Nordic benchmark interest index, as I mentioned. The share of sales netted NOK 1.2 billion in 2010. The portfolio had a market value of NOK 11.7 billion at the end of the quarter. Also, at the end of the quarter, we had an agreement that was signed. Our forestry activities have traditionally been related to Borregaard.
There's very little of that forest lands that is used by Borregaard, so we decided to look at this as an opportunity to see if we could free up some capital since we don't have that particular industrial relationship linger for anymore. We have been working with this for some time, and we sold then our forest lands for NOK 1.7 billion to Statskog, and that will lead to a book gain of about NOK 1.4 billion in Orkla's financial statements. We have also sold Orkla Finans. This is, we are selling this to Pareto AS. Very briefly about the prospects that we see for the future here. For Orkla Brands, we see that the prospects for the Nordic grocery markets remain relatively stable.
Outside of the Nordic countries, in Russia and the Baltic States, however, the situation is more demanding. We see there's a clear trend towards price hikes for several commodities, and in Norway, we expect that there will be continued increases, price increases in agricultural products. We expect that these market-based price hikes will lead to that these price hikes will have to be passed on in terms of increasing prices in the products. Following the flatter trend that we've seen in the third quarter, for Sapa, there's now lower visibility, and this means that there's somewhat more uncertainty with a view to future market trends. In North America, in particular, December is traditionally a slow month, and this is because we close down for the holidays. Many of our customers have their maintenance that is performed during these holiday periods.
For Sapa Building System , we expect weaker markets as a result of slow activity in the building and construction industry. For some of the other markets, we see that there's a better development trend. For example, Sapa Heat Transfer, the demand there, it works with automotive markets, and there we see that demand is remaining buoyant, and there's a strong influx of new orders. This is also because they've, through the financial crisis, a lot of the capacity was closed down in that particular market segment. That now as the markets are starting to bounce back, we don't have enough. There could be a shortage of capacity. For Elkem, the silicon-related activities, there it's expected that the markets will be good in the fourth quarter, and we expect further positive effects of prices, on prices into 2011.
This is because we have contracts that extend for a longer period of time, so we haven't really seen the full impact of the large price increase that we're seeing on the spot market that I referred to a moment ago. Borregaard chemicals also expects to have a good price trends and better prices as they move into the fourth quarter. However, Borregaard is going to see an adverse impact from the weak U.S. dollar exchange rate. That was what I had to present to you today. My colleagues will join me here. This will be Mr. Terje Andersen, Mr. Roar Engeland, and Mr. Torkil Mogstad , who will be joining me in the panel to take questions from the floor. Go ahead, please. Question, Carnegie.
Three questions. I'll start with Elkem Solar. You said how many tons were produced. Can you tell us how many tons were sold? Question two, if we assume that September production will be maintained through all the months of Q4, you should be close to breakeven for that division. Could you just give me confirmation of that? With regard to Bakers, can you give us some more details? Why is it that the volumes are declining? Is there a customer that has disappeared, or are there other structural reasons for that? Mr. Wiggen, answer.
As regards sales, we can say that everything has been sold, but everything is not shippable during that period. As regards the breakeven level, you are correct. We are approaching that, yes. Torkil, would you like to take Bakers? Mr. Mogstad , answer. Bakers, we've had a decline in volumes of some existing customers. We haven't lost any customers.
They're just taking a smaller volume than what they've done before. As Mr. Wiggen mentioned, we have done a lot on the cost side to counter the volume trend, generally with costs, we've worked very hard. Bakers, as I mentioned before, they are improving the quality of their what they offer on the market, I think these two things together will show that Bakers will pick up again, as Mr. Wiggen mentioned. It's a demanding situation. It's challenging, certainly. Question, Nordea. Two questions. First, to follow up a little bit what Preben mentioned, talking about Elkem Solar. Can you say a little bit about the mix there between what has been sold with the poly quality for solar energy and what has been sold as silicon metal, the mix there? Then a question about heat transfer.
How is the ramp-up of the new facilities in China? Are you going to be running full production there in Q4? Answer: As regards Sapa Heat Transfer, we will be running at full capacity in Q4, yes. Full production for Sapa Heat Transfer, both in Shanghai and in Finspång. As regards the breakdown, we are now located where most or now we are having the poly quality. Silicon is just making metal for the little extra overcapacity that we have for making traditional silicon, and this is because we're still not running at full capacity for that, so that in the rest of the chain, we have income revenues that are being generated. After this, most of the quality will be polysilicon, UMG silicon, that we're selling. May I take a follow-up question?
For structure, you're very explicit about the core being brands and Sapa in the future. Can you say something about the processes with Elkem and Borregaard chemicals, Mr. Wiggen? Answer: I don't want to give you any specific information about the processes that we might be running or examining, considering at least. It gives us, naturally, an indication. I'm giving you an indication of the direction that we're thinking. At the same time, this type of processes take time. Once they are put into motion, it's very important that we implement these processes so that we optimize the values of the transactions, so that we're far more focused on having good processes here, and we will therefore take the time that we feel is necessary to do this.
We want to be very clear about this, too, that where we've said that we're working actively, this is then, as I mentioned, to reduce our activities in the solar energy industry. We have one question from the web, from Tommy Jacobson. What is the plan for the future for the share portfolio for Orkla? Would you like to take that, Mr. Mogstad ? Well, the plan is to make good investments, and Sorry, Mr. Terje Andersen . This plan is something that stands firm, and we hope that we'll get a good return. A follow-up question: Is it possible that you go out of the share portfolio and that you spend your money on something else, and in that case, what?
Mr. Andersen answers: Well, in a large company, there will always be different possibilities. Our plans now are to engage in good investments and to do that in the future. Mr. Wiggen adds, Orkla historically has used the share portfolio and its investments also to get industrial options and move into areas, new areas that have started out as financial investments and then have evolved into industrial investments. This is a model that I like, and I hope we can continue to use it. All right. If there are no final questions, we would thank you for being here and for following.