Quarterly market update Q3 2012 OFI presentation

Quarterly market update Q3 2012OFI presentation Orkla Brands PurchasingOctober 16 2012

Agenda – Q3 presentation OFI Speaker Category Time • Kine B. Jakobsen Welcome (incl macro) 09:00-09:05 Flour09:05-09:15 Sugar (world) 09:15-09:25 • BjørnWiman Sugar (EU) 09:25-09:40 • MikaelMcKeownVeg.oils09:40-09:50 Dairy 09:50-10:00 Cocoa 10:00-10:10 • Therese WendelPackaging 10:10-10:25 • Kine B. Jakobsen Wrap-up 10:25-10:30

Executive summary: Q2 commodity price falls were reversed in Q3, expect stable Q4 • Q2 saw crops fundamentals deteriorate sharply after severe draught in the US and other important regions. This lead to sharp price increases for many commodities this summer, but some major commodities have since then eased back again • FAO world food price index was up 6% from June to August 2012 • Many major raw materials saw significant declines in Q2 2012 • Plastics up 10%, Paper packaging -2 to 0%,Aluminium up 5% • Wheat up 10%, Sugar down 10%,Veg.oils +4 to -15%, Cocoa up 5-60% • Nordic economic growth is expected to be modest in Norway. Signs of economy picking up in Sweden and Denmark • Major stock exchanges reversed Q2 losses since beginning of July 2012: • Dow Jones (USA) up 5%, DAX (GER) up 14%, FTSE (UK) up 4% Nikkei (JAP) down 2%, Hang Seng (HK) up 7% in Q3 • OECD leading indicators suggest we are heading for a period of slow global growth • The effects of this summer’s poor weather may continue to pressure prices upwards. However, most crop news should be priced in by now and the macro outlook is still dim. This should keep prices mostly stable in Q4

World food price remain in falling trend and world economy shows few signs of recovery • CAGR 2002-2012: 8,6% • CAGR 2007-2012: 3,9% Note: Major six NME are China, Russia, India, Brazil, South Africa and Indonesia Source: FAO, OECD

Wheat Market prices massively up since mid-June – expected to remain at high level 1 year development Main market events • Prices have stabilised at historically high level as harvesting is approaching completion • Price is ~10% up in since July, ~20% since June • Both fundamental and speculative factors are supporting the high price level (drought and long speculative positions) 5 year development Going forward • The big question remaining is: will the Russian (or other Black sea region) government intervene in the form of export restrictions? • A restriction could lead to a sharp price increase, but the risk should already have been priced into the market and hence prices should drop back soon after • The sowing of winter wheat has started well, and a normal winter may give early predictions of a good 2013 crop, which may put a downward pressure on prices Source: Mintec, Handelsbanken, Kairos, Agronomics

Sugar (world) Prices down 20% since mid-July, expected to remain around or lower than current levels 1 year development Main market events • Prices declined constantly during Q2, but took a sudden upward turn during summer. After a peak of almost 24 c/lbs we are now back at pre-summer price levels • Unfavourable weather in Brazil (too wet) and India (too dry) was the main price driver during summer • Brazil has dried up and the cane harvesting and sugar production is now at full speed – driving prices down again 5 year development Going forward • A supply surplus is expected for the 2012/13 season. This will be the third consecutive season of supply surplus, much needed to rebuild low inventories and keeping price level down • The Indian monsoon season is still delayed, and high domestic sugar prices can reduce the willingsness to export Source: Mintec, Kingsman, Bunge, Kairos

Main factors for the price increase last years • Low Supply and a expected end stock around 1 MMT • Price explosion on the WM for Sugar • Orkla was to enforce price increases throughout the system for + 20 MEUR + wholesaler margin + VAT

Pricing where the last imported Kg set the price for the first produced Kg was used vigorously Price Supply Import Beet Demand Volume

Same factors this year call for a significant price decrease • Increased end stock + 1,5 MMT • WM price for Sugar down +- 30%

Even such a disfunktional market as EU Sugar must react to supply demand factors • EU reported price: • May 2012 711 STD 47 • June 2012 706 STD 43 • July 2012 STD ?? • August 2012 SDT ?? Price Supply Demand Quantity

Sugar (EU) EU Reported Sugar price (EU27) has slowly started to go down Main market events EU Sugar Balance sheet • Main factors used by the sugar industry for last years price increases have turned • Increased end stock + 1,5 MMT • WM price for Sugar down +- 30% • Offered Sugarprices on par with last year • EU reported price: • May 2012 711 € / Mt • June 2012 706 € / Mt Going forward EU Reported Sugar price from 2006 • CAP 2020 road map is uncertain, when will decision be taken and how will the sugar market be deregulated • No worrying signs for the upcoming Campaign part from Finland • Timing of when and what volume to contract is more and more important • Sugar industry fighting to keep prices high Source: EU MAN Com

Vegetable oils Tropical oils fell, other vegoils stable in Q3 – markets expected down or stable in Q4 1 year development, EUR/t Main market events • Positive fundamentals for palm and tropicals oil have driven prices down. Other vegoils have been stable in Q3 • Veg.oil price changes 1 Jul 2012 – 26 Sep 2012: • Rapeseed oil Exw Rotterdam: -3% • Sunflower oil Exw Rotterdam: 4% • Palm oil Cif Rotterdam: -13% • Palm olein FOB Malaysia: -11% • Palm kernel Cif Rotterdam: -14% • Coconut oil Cif Rotterdam: -15% 5 year development, EUR/t Going forward • Palm oil: Strong production, falling demand lead to increasing inventories and downwards price pressure • Soybean oil: Supply deficit, higher than expected yields expected to reduce upside to prices • Rapeseed oil: Disappointing harvest output from Canada and Australia due to draught reduces supply and puts upwards pressure on prices • Sunflower oil: EU production down 15% since last year, combined with shortage of other oils suggest prices will remain high Sunflower oil Rapeseed oil Soybean oilCoconut oil Palm oilil Source: Reuters, Kairos, Walter Rau market report, Oil World monthly

Dairy (EU) Prices have increased substantially in Q3 – expect to see prices levelling out in Q4 Main market events • Q3 has seen severe price increases for most dairy products • German market price changes since 1 Jul 2012: • SMP: +26% • WMP: +21% • Butter: +23% • Cheese: +4% • US drought, wet and cold European summer reduced milk output and availability this summer and caused large price hikes Going forward • Supply is weak with dairies stuggling to meet current commitments for several products • Strong exports this summer suggests demand is solid. Most big buyers have not covered their Q1 2013 needs, so demand can even strengthen • Milk production should start increasing again once farmers receive higher prices for their milk and can afford increased feed prices. This suggests we can expect prices to stabilise during Q4 Source: ZMB, Hoogewegt Horizons, Dairy Trader, Kairos

Cocoa & Chocolate In Q3 prices continued up and the expectation for Q4 is a continuation of this trend 1 year development, EUR/t Main market events Cocoa Butter CocoaPowder Milk Chocolate Index (2/3 butter and 1/3 liquor) Cocoa Beans • Speculative buying driving cocoa beans prices • Weather in West Africa has improved slightly but supply reduced of cocoa beans since Q2 • Capacity reduction of production holds up prices for cocoa butter • Price development in EUR (Q3): • Cocoa Beans: +5% • Cocoa Butter: +60% • Cocoa Powder: +/-0% • Milk Chocolate Base: 45% Going forward • Demand still quite weak for beans • Prices of butter, however, still not attractive for increasing capacity • The main market driver is supply data from the main crop (earliest October) and before that the market is in ”silly season” speculating about weather • Uncertainty about arrivalsof cocoa beans in the start of the main crop due to Ivory Coast’s new regulations • Technical analysis says market is estimated to increase until October/end of Q4 5 year development, EUR/t Source: MintecDatagain, Kairos, Reuters

Plastic based packaging The recent falling trend was broken in August and prices are likely to continue increasing Main market events • Prices turned in August and increased by approx 10% • Price change in Aug compared to July 2012: • PP: +12% • PET: +9% • PE: +12% Going forward • Prices are likely to continue to increase in Q3 • Petrochemical feedstock prices are rising • Resin producers keep control of supply through production cuts • Import from outside Europe is low • However, demand continues to be weak, which is contradictory for further price increases Source: PIE, Plastics Information Europe

Packaging Paper Weak demand and growing inventories weigh on prices in EU Main market events • Demand remained week in pulp and paper market globally • European port inventories up 23% from June • Good feedstock supply continue to weigh on prices for recycled packaging in EU • Testliner / recycled fluting down -2% while kraftliner prices were steady Going forward • Prices are above the moving average but this is considered as a “false signal” • Expect a downward correction from September and this trend is anticipated to last until summer 2013 Source: Euwid, Kairos, Mintec

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Quarterly market update Q3 2012 OFI presentation