Kåkå- Utveckling priser primära råvaror (inkl. indikationer på indirekta och förpackning)

Niklas Myrbäck, Kine B Jakobsen, Mikael B McKeown2012-05-03

Orkla Brands Purchasing

Råvaror

• Socker (KJB)• Mjöl (KJB)• Olja (NM)• Kakao och choklad (NM)• Mejeri (MBM)• Förpackning och indirekta (MBM)

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Orkla Brands Purchasing

Makro indikerar generella råvarupriser nått en sidleds botten...

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Orkla Brands Purchasing

...men än sålänge saknas momentum på kort sikt för att bryta trenden i sidleds

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Orkla Brands Purchasing

Kakao sidleds rörelser, vegoljor och vete har positivt momentum men socker (världsmarknad) negativt

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Coconut OilPalm Oil

Rapeseed OilSoybean Oil

Sunflower Oil

Orkla Brands Purchasing

Market prices down 15% since Q1 peak and are expected to fall somewhat more in Q2

• Ahead of the Brazilian chrushing season the production is expected up 6-8% on last year’s failed crop

• All in all the 2012/13 season is expected to produce a suplus of ~5 mill mt – Brazil, India, Thailanda and Russia are looking good– China’s producion is declining

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Sugar (world):

Main market events

• A price decline is expected due to supply surplus • Price floor realistic in the 20-21 c/lbs range

– low inventories keep market on toes– Brazilian ethanol price creates floor

Going forward

Source: Mintec, Kingsman, Bunge, Kairos

5 year graph

1 year graph

Orkla Brands Purchasing

Sugar (EU):EU commission aims to have a balanced market and less interested in creating price pressure…….

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• European Sugar producers will most certainly try to press prices upwards 10 – 50 € / MT in Germany and France

• Planed meetings with the Sugar producers in April - May

• Orkla will send out RFP I in May • Main focus must be to eliminate

price differences EU mainland Vs. Scandinavia

– Please forward evidence!!!!!!!!

• Price indication Company X Q4 2012

• Current price 770 €/mt DDU• Polski Cukier 827 €• Südzucker 825 €• Suiker Unie 788 €• Nordic Sugar 770 €

2015 2020

Orkla Brands Purchasing

Market prices quite stable during the last month, but are expected to fall back 0-5% in Q2-Q3

• In Europe prices have stabilised in the 200-205 range

• Global inventories are increasing as the growth in supplies outweighs the growth in demand. Balance may however shift during the 2012/13 season

• Uncertainties in Europe relating to damages to the winter wheat and insufficient rain

• Feed prices in Europe keep milling wheat prices up

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Wheat

Main market events

• Logistical problems in Russia due to winter conditions will ease and hence bring more grain to the market before the new European crop season

• European prices are expected to decline due to a supply surplus, but before we know more about the state of the winter wheat and get the spring wheat planted the market remains indecisive

• If no major weather abnormalities occur we should expect a price decline of 0-5% to the 190-200 EUR/mt level

Going forward

Source: Mintec, Demetra, Handelsbanken, Kairos

5 year graph

1 year graph

Orkla Brands Purchasing

From very low levels in December 2011, prices have started to increase again and will likely continue higher

• Supply improved slightly from previous esti-mates but prices have been extremely pressured due to an extraordinary strong crop in 10/11

• Demand seen relatively stable for cocoa beans but stronger on ingredients

• Price development Q1:– Cocoa Beans: +10%– Cocoa Butter: +14%– Cocoa Powder: -2%– Milk Chocolate Base: +11%

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Cocoa and Chocolate:

Main market events

• Surplus of cocoa beans from last crop will diminish if demand continues to stay stable

• Warm weather causing fears of less supply in mid-crop (starts May)

• If not exceptional good weather coming main crop (October), there will be a new deficit and thus prices will soar

• A stronger USD could lift EUR and GBP prices (EUR and GBP unchanged from last quarter)

• Powder expected to continue decrease

Going forward

Source: Mintec Datagain, Kairos, Reuters

1 year development

5 years development

Cocoa BeansCocoa Butter

Cocoa PowderMilk Chocolate Base Index (67%

butter and 33% liquor)

Orkla Brands Purchasing

Weekly Cocoa BeansOutlookShort-term (1 week to 3-5 months)• Kairos expects short-term downtrend to

temporary have stopped and now move sideways trend before a new direction in the medium and long-term can change. Recommendation to stay lean until further notice

Medium/Long-term (6-12 m/12-36 m)• Kairos expects an increase to start

anything from May to after the summer. The increase will be for a couple of months and after that a new downturn before signs of the intact major downturn to change

Kairos

CommentsAfter problems with our software we are now again able to publish weekly newsletters. The graphs (to the left) however are not as before but we are working on solving this asap so that you can view price development on 1 month, 1 year and 5 year horizons. So far, only 1 year.

Summarizing Q1 we have basically seen flat prices. Our recommendation to cover Q1 in January was thus neither wrong nor made you lost an advantage to the market. What has been driving the market to stay sideways is the increased output/arrivals of cocoa beans in Western Africa. The deman of cocoa beans (measured in grindings in North America, Europe and Germany) was published a few weeks ago and was shown relatively strong (after adjusting for the grindings in 2011 that were higher due to Ivory Coast that did not grind anything because of the export ban). All in all is the good supply pressuring prices while demand is quite stable. Therefore, an expected short-term decrease that we warned for has not realized.

Kairos is still expecting we will see a downturn before the end of 2012 but before that a short term increase. As we see prices, we recommend in line with Kairos to await further signs (and also the results of the mid crop that starts now in May) before drawing any conclusions of the price direction until further notice.

However, if you are well profiting in your price in/price out (budget) then we recommend to cover 2012 as price developments are uncertain.

Prices

Other news• Brazil mid crop starts flow early • Ivorian cocoa prices of grinders up on

local demand• Ghana’s Cocobod probes 70 000

tonnes discrepancy of reported purchase vs actual purchase

• Speculators raise net long in cocoa beans

• Attack in western Ivory Coast kills at least five people

• Quality issues reported on Ivorian beans

New fundamentals• Ivorian arrivals reached 1 081

000 tonnes by April 30th (+3,5% from last year), heavily up on weekly basis

• Indonesia cocoa exports soar (output fell by 27% in 2011 but is expected to regain if not equally wet weather)

• Brazilian main crop ended 2% behind last year’s

For full information of how to interpret Kairos’ trend views, visit kairoscommodities.com or contact OBP

Cocoa Beans 1 year (1st futures contract rolling)

Orkla Brands Purchasing

Orkla largest veg.oils up ~5% in Q1, but in general fundamentals support the increase to be short term

• World production of the 17 major oils and fats continued to increased pronouncedly in Q1 2012

• Veg.oil price changes since 1 Jan 2012:– Palm oil Cif Rotterdam: +7%– Coconut oil Cif Rotterdam: -18%– Palm kernel Cif Rotterdam: -13%– Rapeseed oil Exw Rotterdam: +2%– Sunflower oil Exw Rotterdam: +4%– Palm olein FOB Malaysia: +6%

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Vegetable oils

Main market events

• In Q2 it is expected that world production will increase less than the normal demand growth seen in previous seasons, causing pressure on prices

• Palm oil: Fundamentals support price increase, at least short term (3-5 months).

• Rapeseed oil: Continued tight supplies and fundamentals overall support price increase.

• Sunflower oil: Overall fundamentals support downward pressure on price, particularly because of increasing supply surplus

Going forward

Source: Mintec, Kairo

Orkla Brands Purchasing

Dairy prices fell sharply from Feb 2012 and high milk production suggests fall will continue through Q2

• NZ auction prices for SMP and WMP are down 2-5% since Dec 2011

• German market price changes since 1 Jan 2012:– SMP: -16%– WMP: -14%– Butter: -29%– Cheese: -9%

• Milk deliveries in New Zealand, Europe and the USA are on historically high levels

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Dairy (EU)

Main market events

• EU dairy producers face tough competition from US and Oceania dairies on export markets

• Milk deliveries are at high levels historically and we are entering northern hemisphere peak production period

• Prices have fallen far and show signs of stabilising. However, with historically high milk production and modest demand, we expect prices to come down further

Going forward

Source: ZMB, Hoogewegt Horizons, Dairy Trader, Kairos

Orkla Brands Purchasing13

Aluminium, crude and electricity set to move sideways, container freight expected to continue increase

Prices have retreated from Feb-Mar peak Supply is in a downtrend and although demand is

trending up, but we still expect to see a supply surplus in 2012, which weighs on prices

High inventories and low cost drivers suggest prices will continue to fall

Alum

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Oil

Elec

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Supply and demand are both in uptrend, a small supply surplus is forecast until the summer

Inventories on historic average, but declining Weaker Chinese growth and renewed European

debt woes have weighed prices down Expecting to see sideways movement for a while We have a supply surplus in the Nordic region Water levels in dams are high and rising fast as

snow melting gets underway now Coal and CO2 prices are trending down Technical analysis suggests mostly sideways

movement Container freight took off from $1000 to $1700

from early March to late April Both supply and demand is growing, but there is

still a clear supply surplus Technical analysis foresees a medium term

uptrend peaking sometime in Q4, meaning prices will remain at high levels for now

Short term expectation

Kairos summary1 year price development

Graph not up to date

Source: Mintec Datagain, Kairos Commodities, Reuters

Orkla Brands Purchasing14

1 year price development

Plastics nearing short term peak, Kraftliner has started a short term price increase

Source: Mintec Datagain, Kairos Commodities, Reuters

Ethelyne is the main input to PE, and is in a downtrend, exerting upwards price pressure

Demand is still weak due to slow economic growth

Cost of main input Naphta is trending up Currently prices are in a short term uptrend,

expected to peak in Q2 and then fall back

PEPP

Kraf

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Supply and demand are trending down. Demand falls more than supply and yields a supply surplus

Cost drivers are up Expect to see a short term price uptrend

continuing a little further into Q2

Norwegian factory Peterson closed in March removing ~10% of European Kraftliner supply

Main cost drivers are in a down trend Demand is modest with slow economic growth Kraftliner broke into uptrend at the of April,

technical analysis suggest we see at 10% increase peaking in June-July

Short term expectation

Kairos summary