Warmly welcome to Orthex Interim report for quarter 1 2022. With me here I have Saara Mäkelä, our CFO, and Hanna Kukkonen, our CMO. We will be taking you through the events of the first quarter. Here you can see a little bit about the agenda. First a quite quick overall introduction, what the company is doing. Then we'll go into the overall numbers in brief, then we'll touch base on the strategy. We have some interesting things to share with you regarding progress in sustainability and then financials. At the end, there will be a session for questions- and- answers. At this stage already a practical notice. During the presentation, you can post your questions in the meeting chat, and at the end, we will try to facilitate as many as possible.
We might group some questions, and we might have to cut because we have a limited time, but we'll try and answer as many as possible for you. Without further introductions, Orthex is a Nordic leading producer of everyday household goods. We take pride in having our own production in Finland and Sweden. We have three factories. We produce around 90% of our products in our own factories, having tight control over both quality and availability. 90% of the products are produced under our own brands, which are SmartStore, GastroMax, and then Orthex.
We focus on sustainability, and we are actually quite in comparison to how much turnover we have, we are actually quite few people, and that has to do with the high degree of automation in the factories. We are on a technical level, quite advanced. If we look at the sales, which we divide in four different categories. The main categories of the business, and the biggest one is by far Storage. Everything for home storage that you can both have visible in your homes. We have good example of storage in basements and rough storage in your boats, and so on. That's about 65% of sales. Then we have the Kitchen category, which is mostly around preparing food and preserving food.
Freezer boxes, for example, is the most common object in the Finnish home. Then we have the Home & Yard category, which is everything you could think of made of plastic in the home. Traditional Finnish category for us. A lot of products like buckets and bins, mailboxes and so on, and that's about 6% of sales. Plant Care is the last one, and that's our flower pots. Practical, not heavy plastic flower pots made of recycled plastic. All of these categories has one common thing, and that's the mission to make everyday life easier. All the products are practical. All the products are designed to make everyday life a little bit more easy. Is it then good kitchen utensils to help you cook or storage to organize your home?
Functional and award-winning designs. Forerunner in sustainability, I think, there Hanna will talk more about sustainability. One of the cornerstones of sustainability is that we actually design very long-lasting products. They are designed to last for decades, and hopefully the design is such that you don't grow tired of looking at the products. At the end of life, all our products can be recycled. We then also have in our strategy to have about 10% of sales coming from new products, and that's quite key to us because that gives us an opportunity to remain interesting, both to our customers, which are the big retailers in this world, and also the consumers, of course, which are all the households, especially with the focus on Europe at the moment.
Going into the results so far. January to March, sales slowed down. I think the conditions were extraordinary. We had headwind from many directions. We had high raw material prices. We had a lot of consumer uncertainty, and we had to navigate and balance campaign sales and price increases and volume through these very challenging conditions. What for us is important here is that the feedback we get from our customers is that we're not actually not losing market share. On the contrary, at the moment, it's more a question of demand being weaker and sell out in many locations and in many places around Europe has slowed down during the first quarter.
We have also ourselves self-inflicted it a little bit because we have held back on campaign sales to be sure to have profitability in shape. If you remember, at the end of last year, we had very high demand. At that stage, when you have very high demand pushing our campaigns is not the first thing on your mind, it's delivering goods. It's a bit self-inflicted as well. We've been holding back on campaign sales. I cannot ignore the raw material. I think raw material is the biggest factor that actually has influenced the performance of the company and also the operating conditions we are in.
If you look bluntly at the raw material pricing index during a slightly longer period between December 2020 and March 2022, the raw material index has increased as much as 77%. Such an increase during a time which is fairly short, we haven't seen before. Taking one single price increase to fix it all would most likely mean that we would lose distribution. What we have done is that we have taken price increases as the raw material price has increased, but there's quite a long lag before you get it actually accepted and implemented in the shelves in the stores. Basically, if we today would announce a price increase, it would take between four and nine months before it's visible in the stores.
As you can see on the raw material development, that time can include a lot of change. In our case, that time, the waiting time has included increases in raw material cost. A comment on Russia, of course, the unfortunate war in Russia. We are not having direct operations. We don't have suppliers in Russia, and we don't have sales to Russia to mention. But of course, the instability on the market, the carefulness of people when generally cost goes up can have an impact on Orthex's business. Of course, corona. Just when we thought corona was over, the Ukrainian war started.
One comment still on corona, and that's we have one really important Ambiente for us, which is held in Frankfurt each year in February. Unfortunately, this year it was canceled once more. It's the place where we meet most of our customers that we are not seeing regularly. We also meet a lot of new customers in that Ambiente. We're able to show physically our nice products and talk about them. That has probably had a little bit of impact as well on driving the top line. Net sales decreased by 4.9%, and adjusted EBITDA was EUR 1.8 million. We were slightly down from a record first quarter last year.
On the EBITDA level, we were at EUR 1.8, when last year we were at EUR 3.3. The margin in percentage, these are our adjusted EBITDA numbers, was at 8.8%. The net debt was at EUR 1.8, when the last figure was EUR 1.5. Cash flows from operations, EUR 1.9 compared to 3.2. These are the rough numbers for your reference. If we look more into the geographies, and probably this opens up a little bit more of where we are standing.
Because for us, let's say, balancing the sales and the profit and also making sure that our strategy works is quite challenging during market conditions where you don't know for sure in which way cost is going and how consumer confidence and sell-out is going. Compared to that, in the Nordics, we were basically flat in sales, so EUR 17.7 compared to EUR 17.9. Given the fact that the corona was slightly over, not completely over, spending is changing a bit in consumers' minds. I mean, we can now travel, we can go out and eat in restaurants, and we might spend a little bit less locally on your home. That was the Nordic number.
In Europe, we had declining sales of EUR 200,000, and in the rest of the world by EUR 600,000. On this one, I need to comment. This is mostly a phasing of campaigns. We haven't lost any single customer. On the contrary, the distribution has improved in many cases. Also we have some new customers in the pipeline. In that sense, if you ignore the loss of campaigns, the situation is different. Actually, most of the decline that you can see in the rest of the world comes from one big international customer that themselves decided not to run campaign to protect their own margins. On the comparison time for that particular customer, we had normal campaigning that we had been used to.
Given that one brick alone, we would have been flat to positive if that customer had performed as normally. However, keep in mind, no lost listings or customers. Invoiced sales outside the Nordic comp declined, and I think I described the reasons here in more detail already. If you look at the categories, it's quite natural that when we do less campaigns, it's visible in our biggest category and the category which is mostly represented in our export markets, and that category is of course Storage. It's natural that the decline can be seen especially in the Storage category because that's the strong campaigning possibility where we have held back. On Kitchen, we see a slight growth. On Plant Care, we see a slight growth.
Home & Y ard, I would say such a small category, so not much to comment on that one. Moving on to strategy and looking a bit ahead. If you think about what we want to do, it's pretty clear for us. The overall objective is, of course, to make products that makes everyday life easy in a sustainable way. As a goal, we have put to ourselves to be the number one brand in Storage in Europe on midterm. As well, building our position as a leading household company in the Nordics. The building blocks you can see here, still not many big changes in the importance of it.
I think the solid actions to keep winning in the Nordics includes the high focus on new product. It includes the focus on showing the way in sustainability, a clear strategy, and also to look really good in the stores. I mean, so shoppers find the product, so it's easy to shop them, and we can build brands in the stores. There are so many people going in and out of the stores every day that that's, for us, one of the best ways to actually build the interest and the brand, both locally and on the export markets. When we talk about the number two box here, it's actually to grow exports, mostly.
We think it's probably the biggest opportunity we have, and that has to do with accelerating the growth in the customers we already have landed. We have a number of really interesting big retailers around Europe and a few also globally. We are not in all their stores, and we don't have the widest assortment, and we are maybe not even the main supplier in our categories. That's what we are aiming to achieve. The other thing is clearly to find and still continue finding new customers. Now that the big Ambiente fair has been canceled, we have actually put a lot of focus on finding local fairs in the countries where we can be physically present to meet new potential customers.
We're putting a lot of efforts also strengthening the organization with language skills and so on to make sure that we can take good care of all of our resellers and customers. We have the online retail channel still important. I think especially during the corona times, we could see a fast uplift in online retail in general, and we believe that this will continue. Maybe not the biggest building block for us, but we want to look as good online in the big channels and also in the combined brick-and-mortar channels where they have online shops. We want to look as good as in the physical shops. Of course, I've been commenting on market consolidation before.
When there's a good match, a good opportunity and the price is right, we will not be shy to move. However, as we can see now, the conditions in which we operate are quite tight, but we keep looking and when the time is right, we will for sure take action. That were the comments on strategy and now Hanna will take you through a few slides of sustainability.
Thank you, Alexander. Let's have a quick overview on the sustainability actions and happenings during the Q1. In March, we published our sustainability report, and this year it was a part of our annual report, so our first ever annual report, and then we published the sustainability report in the annual report. The key sustainability areas that we define in the report are economic, environmental, and social responsibility. For each of the areas, we have clear KPIs and targets that we define in the report. Some examples of the KPIs are, for example, in the economic area, the customer satisfaction, which we improved from the previous measurement from 3.87 to 3.93 out of 5.
An example in the environmental KPIs is the increase of the sales of the products made of bio-based or recycled materials, and those increased by 30% in 2021. An example in the social area is the work related accidents, which were decreased from 13 to 9, and actually none of them were a severe accident. During the Q1, we started to report our ESG KPIs also to Nasdaq, and we have received the Nasdaq ESG transparency badge during the Q1. What we also have done last year is that we have calculated quite detailed our carbon footprint for years 2020 and 2021. With this information, we can build and define our roadmap to carbon neutrality.
We have the carbon neutrality target in our production for 2030, and with this information, we will now during this year make a detailed map to reach the target. What we can see in the figures of 2021 is that when our sales growth was 16.9%, at the same time, the carbon footprint increased only by 9.5%. If you look at the details in the chart where you can see the Scope 1, Scope 2, and the Scope 3, the majority of the emissions comes from the purchased goods and services, which means the raw material. This is why that is a priority for us to replace the fossil materials to more sustainable materials.
Even though the carbon footprint increased a little bit due to the growing business, the carbon footprint by produced kilo remained the same, which was 2.5 kilos. What happened also during last year is that we changed the electricity in all our three factories to hydropower, so fossil-free electricity. That's why in the Scope 2, the emissions are now zero. Moving on to these raw materials. Our target is when we have the carbon neutrality in 2030, is that the share of the recycled and the bio-based materials will be 80%, and that's the priority where we concentrate in our product development. Today, we use already many different recycled raw materials. We use, for example, post-consumer plastics, which is then the plastic packages that consumers recycle.
We use post-industrial plastic, and we even use other garbage to make new raw materials, such as old fishing nets. A novelty we launched this spring is the SmartStore Ocean range storage boxes made out of old fishing nets. In addition, we use bio-based materials, and currently we use bio-based materials from sugarcane, wood fiber, and castor oil. When we calculate the carbon footprint of these product ranges, we can see that the carbon footprint is actually even more than 80% smaller in the products where we use the bio-based materials. We have also certified all our bio-based products with the TÜV Austria OK biobased certificate to prove that they really are made of bio-based raw materials. Recycling and circular economy is an important factor as well.
All our products are recyclable in the use of their time. Also we want to promote the recycling for the consumers as well, so that they recycle their waste so that it can be used again. An example of this is the sorting solution that we have made, SmartStore Collect, which helps the consumers to sort their waste. That was a short view on the sustainability. We go on to the financials.
Thank you, Hanna. I will walk you through our financials. Alexander was already talking about uncertainty in the market, which is high currently, and it has started to affect the consumer and customer behavior. Due to this very challenging market situation, our net sales declined during the reporting period. It declined by 4.9%, from EUR 21.6 million to EUR 20.6 million. Storage category was affected the most, and we made decisions to limit campaigning due to high cost levels, and we did it mainly in Storage category, where we are often selling three-packs, and it means also shipping some air.
As logistics costs are also on very high level, the campaigning or less campaigning is seen especially in figures outside Europe, where we had almost no campaigns at all. Despite the slight decline in sales during the quarter this year, sales are still on more than 26% higher level compared to quarter one 2022. We are on long-term growth path. Now adjusted EBITDA was EUR 1.8 million. It decreased by EUR 1.5 million from last year's level, which was EUR 3.3 million. Raw material prices were on more normal levels till last year during the first quarter, and they started to peak at the end of quarter one last year.
During quarter one this year, price index was more than 77% higher compared to last year, and high raw material prices were affecting profitability significantly despite the measures we've already taken. We can already see the price increase affecting the figures, but the effect is not high enough to mitigate the exceptional raw material price effect, which is coming through in the profitability. There are also other cost factors which are affecting the profitability. Logistics costs, which I already mentioned, are on high level. I mean, smaller costs like pallet costs and electricity costs are on exceptionally high level. Raw material prices are the single biggest item affecting the figures. Here we have the familiar curve for the ones who've been following Orthex reporting already some time.
Unfortunately, raw material prices are up as mentioned. Currently, there are no availability issues in the market, and supply and demand are in balance. Price pressure is not coming from the availability issues. Due to the war in Ukraine, the European energy market is currently very turbulent and unpredictable. Price increases continued during quarter one. Also, import is still limited. Logistics costs are on high level, so that's not stabilizing the prices in EU. A high unpredictability continues in raw material prices, and it's very difficult to estimate where the prices are going. Next, investments. Investments during quarter one were half a million euros. It's a lot less than last year. Last year, we made a decision to make significant capacity increases.
They were actually taken, brought forward from 2022, and during the first half last year, investments were on exceptionally high level. This year, the phasing is going to be different compared to last year. I mean, specific savings or anything done in investments during quarter one, so that's not the reason for lower level. Most of the investments were related to product novelties and then some smaller capacity increases. We are investing to double molds to some of the high runners, for example. Leverage was at the 1.8 level, so no significant change compared to end-of-year situation, and net debt was EUR 24.7 million . Our long-term financial targets are the same as before.
Even if the latest reported figures are not where we would like them to be, I mean, our view is that the long-term targets are still valid. Total sales were at -4.9% after first quarter, and outside Nordics, sales were -16.5%. We see that in the long term the market will stabilize and targets are still valid. Leverage is below the targeted level as well. Payout ratio regarding the dividends, that's kept on the same level as well. We did make the first dividend payment in April already. Next, Alexander will summarize, and then we will have some time for the questions.
Thanks, Saara. Just to give you the real highlights here as we see them, uncertainty in the market for sure in Q1, both in terms of cost development and consumer spending. Not only maybe holding back on spending, but also spending on different items, especially in the Nordics than those items regarding the Home. Exceptionally high raw material prices, I think that has come through. And still also the volatility in the cost levels that you can see big jumps up, mostly up, unfortunately, not so much down at the moment. But that adds to the uncertainty that we see. I think this concludes this go-through, and we are happy to take any questions you might have.
We'll try to answer as many as possible. Hanna, if you could help to moderate here a little bit.
Yes. I'll start from the beginning. Are your customers, so the retailers, preparing for really weak consumer confidence? What are they saying?
I could answer that one. It's a mixed message, depending on the retailer type and depending on what kind of goods you talk about. In general, I think the tone is much more careful. There's no sort of saying that everything is selling out of the stores and so on. I think maybe the more expensive goods are those that are hurt the first when you think about when consumers hold back on their spending.
What we have concluded internally at Orthex is that especially in the Nordics, where people stayed at home for two years organizing all their garages and all their stuff, they are now getting back to work, or we are getting back to work to the offices, and we are starting to travel and starting to put money as well on eating out and so on. Maybe there's a natural slowdown in spending as well from the corona effect.
Do you see also that the on the customers' inventories, do you think they have been reducing or and if so, when do you expect it to normalize?
Tough question. I mean, of course, every customer should answer that for himself or herself. When we talk about the big warehouses, the information we have heard is that there are quite many full warehouses, and therefore, the retailers are a bit careful in taking in more goods, especially if there's a risk that sell-out will decline, and we're not sure that it will decline a lot. We are not sure about that it will decline in our categories. As there's uncertainty, it usually leads to the fact that you don't want to tie up too much capital, and I think we can see a little bit of that one on the market, as we speak.
Thanks, Alexander. It appears that reducing discount sales to retailers had a negative impact on volumes. Can you say how much the volumes were down in Q2?
Unfortunately, we're not reporting volumes. Of course, I think the statement is correct. If you hold back on campaign sales, it means less volumes. For sure we can see it. It's both self-inflicted, and then I actually talked about the one huge international customer that themselves decided not to run any campaigns to defend their own margins and that can clearly be seen in the reporting rest of the world in our figures.
Next. Selling and marketing expenses were down EUR 0.6 million year-over-year. What were the main components behind lower spend, and what should we expect for the rest of the year? Did this also have a negative impact on sales?
Maybe I can comment on that. Activities have not been cut. I mean, it's not due to that. The cost phasing is quite different this year in actually many cost lines than it was last year. Actually we have more sales employees than we had at the beginning of last year, so that is not taking the sales down. We don't have, I mean, huge saving programs which would be affecting. Of course, spending, spendings are followed carefully as we have challenges with the top line, but nothing significant happening there.
Thanks, Saara Mäkelä. What about the raw material? How has the availability of raw materials developed?
What we hear on the market is that the availability is good at the moment, and we haven't actually during this whole period had any major problems in getting our raw material, thanks to good partners and long relationships. In general, I think the conditions on the market in getting raw material has improved all over.
Thanks. How did sick leaves impact the Q1?
Saara, do you wanna take that one?
Yeah. I mean, sick leaves had some effect. At the factories we had more sick leaves, unfortunately, due to Omicron, and we had to be, I mean, even more careful than before. I mean, people were staying home in case there were any sort of risk of contamination to the virus. It's not that significant compared to last year. corona was there already then.
Thanks. A question about the Nasdaq ESG certificate. What does it actually mean? Maybe I can answer myself that. It means that we are reporting the KPI of sustainability or environmental, social, and governance KPIs to Nasdaq according to their template, and they are gathering the information from different companies, and then they are making summaries and reports, and they are providing then that information to investors. I think these were all the questions this time. Maybe it's time to thank you and see you in August again.
Thank you very much for the questions.
Thank you.
Bye-bye