Warmly welcome to Orthex half-year financial report for the period January to June. My name is Alexander Rosenlew, and with me I have our CFO, Saara Mäkelä, and our CMO, Hanna Kukkonen. We will today take you through the results of the first half and especially the second quarter. Before that, a short introduction to Orthex. We'll look into the strategy a bit, talk about the latest development in our sustainability things, and then financial, and at the end there's time for questions and answers. There's a chat in this broadcast, so you can place your questions there, and we will be happy to answer as many as we can at the end of the presentation. Orthex is a leading Nordic producer of everyday household goods.
We have still seven sales offices around Europe, and our factories are located in Finland and Sweden. I think here quite key is that we do 90% of the products under our own brands and with a strong focus on sustainability. The strategic brands we operate is GastroMax for kitchen products, and then Orthex for basically the rest and the name of the company. Not much new in the setup at this point to communicate. We have customers in about 40 countries around the globe. If you look at what's in it for us, it's actually to make everyday life easier for the consumer.
The consumer who has needs in the home, and the products are designed to solve certain specific needs like organizing your basement or your shelves or being an expert home cook or then sort of being successful in planting your flowers. Storage for us is actually 64% of sales, the majority of the business is there. The kitchen products is about 23% during this period. Home and yard and plant care are about the same size. I think it's good to ooint out that all the products are long-lasting high-quality products.
We don't do any single-use products, and all the products are recyclable at the end of life, and we strongly recommend that everybody recycles their plastics as that's quite an important raw material for us. Another thing to point out is that we have in our strategy to launch new interesting products. We want that about 10% of sales comes from actually from new products to put both in the shelf of our customers, which are the big retailers, and then of course delighting the home consumers. In our strategy, and the key of the strategy is actually to be a forerunner in sustainability.
The focus on design is also somehow linked to sustainability because if the design is good, you will not throw away the product because you get bored of it. We focus quite a lot on the Nordic design of our product. That in very short who we are. Let's go into the first half of the year. One could say that it's been a tough start due to many things mostly impacted by very rapid cost inflation. Especially at the beginning of the quarter, there was high customer uncertainty. Customer here I'm meaning not consumer, but the customers we have, which are the big retailers around Europe. Cost inflation in raw materials is of course very high.
I think almost 78% increase actually between December 2020 and June 2022. That's something that we haven't seen before. Actually, the raw material price peaked in April. Of course, there's also the cost inflation related to the situation in the world today. I mean, it's not only raw material, it's purchased goods, it's transportation. We know about the energy cost and so on. There's a lot of headwind during this time. Based on information and feedback from our customers, we're happy to still say that we haven't lost market share, and that's an important knowledge to us. What have we done to work under these conditions? Of course, price increases is the natural way of doing things.
We have quite a long lag time to get them through. We have done already two price increases during the last 12 months, and actually we have also announced one which is soon also visible. We are working very closely with this one. However, the pace of cost inflation has been, I think, even bigger than we had thought and even faster than I think anyone could have expected at this point. We are working very actively to mitigate as much as possible on that one. When looking at Q2, net sales decreased by EUR 5.3 million.
Of course, we had a very high growth the year before, but the 5.3% decrease was of course not what we wanted. The net sales landing at EUR 21.5 compared to a EUR 22.5 last year. The Adjusted EBITA was negative when we did EUR 2.6 last year. That means that the percentage is at 0.8%. This is clearly driven by the cost factors I mentioned earlier. In addition to that, some currency effects that we'll tackle a bit later in this presentation.
Regarding cash flow, it's clear that if EBITA is not as strong as we wanted, the cash flow is a bit lower or clearly lower. Of course, looking then in more details on the inventory, the higher price of the raw material means that the inventory value goes up as well, and there's more capital tied to the inventory. Commenting on the first half, net sales decreased by 5.1% to EUR 41.6 million, and the invoice sales decreased by 4.4% to EUR 43 million. On EBITA, we did 1.6 compared to 5.9 last year, and then the EBITA margin was at 3.9%.
Of course, this development takes the leverage a bit higher, and we are now at 2.6 EBITDA ratio to net debt. Cash flow during first half of the year was EUR 1.5 million compared to EUR 5.4 million last year. Now I think to what the business looks like in the market for this period. If we start with the geographics and then we go into the product groups, you can see that the Nordics came down in sales by about EUR 1 million. That's our home markets, one could say. Europe is becoming one of our home markets as well, with our local organizations in these places.
During the period, we actually managed to at least in value grow slightly in the rest of Europe, despite the really tough times we had at the beginning of the quarter. Rest of the world in the quarter quite flat, EUR 100,000 difference there. That's the quarter situation. Looking at the first half, I think there the Nordics are again our biggest market, of course, and the decline there is quite visible. Maybe a comment on why. I think there we have done a bit less campaigns, and especially the big volume campaigns, where you need to go deep on prices and give potentially a bit more rebates and ship multipacks and so on.
We haven't done too much of that to try and help the profitability a bit there. On rest of Europe, you remember probably from the last call that the first quarter wasn't that good there, and it was a few customers. Now we are actually less below than in the last quarter. Of course, happy to announce that we have at least stopped the decline in the rest of the European markets. In the rest of the world, there's one customer which is still not performing up to the speed we had hoped for.
Still small numbers, but I would put more of the focus on Europe as a total and maybe not on rest of the world when you think about where we focus our business behavior at the moment and business efforts. I would say the change in customer purchasing behavior in a few major customers explains a big part of the decline. Now the customers for us is not the consumers, it's the big retailers. At some point at the beginning of the quarter when the war had just started, there was a lot of carefulness in how much actually was brought into the inventories and into the stores in terms of product.
When we look at the product categories, the second quarter storage was the one category that was clearly down, and that has to do with the campaign and the purchasing behavior. So clearly we would have liked to see more sales there and clearly the efforts we are looking at going forward is to get back to growth on storage. In the kitchen category, we can see some growth, I think driven by some good products and some good visibility in the stores. Of course, the numbers here are quite small.
Looking at plant care in the quarter, we had a slight decline, but on a total, we are more or less flat if you take the first half year. Home and yard in the quarter, some growth driven by especially buckets made out of recycled fishing nets and some new bin products that we launched are actually driving the growth in the second quarter. Whereas if you take the longer comparison, the development is flat on this one. That's the numbers. Going into the strategy that hasn't changed since last time. We're still looking to become the number one brand in storage in the storage category in Europe.
We're at the same time working hard to strengthen our position as the leading household company in the Nordics. To do this, you need to have a clear strategy. To the right, you can see the two objectives, the number one in storage, the number one brand in storage in Europe, and then the leading household player in the Nordics. You have four big building blocks to achieve this. Of course, the first one is doing well on the Nordic markets, and that we do through clear category strategies. We have sustainability as part of actually everything we do in product development, in choice of materials, in product design, how they fit on a pallet, et cetera, et cetera. The sustainability part is really key for us.
The second box, which is probably the largest opportunity we have because the market outside of the Nordic in Europe is about 10 x as big as the Nordic market, is actually to accelerate the growth we have there. We have landed quite a lot of good key accounts, good retailers that we would like to cooperate with and where we have started, but there's still much room to both get the broader assortment and get penetration into more of the shops of these European retailers. There's a big opportunity for us. The other one is clearly also acquiring new customers, especially on the European markets, is where our focus is at the moment. One should always mention online. For us, it's important. Online is growing.
Not only the, let's say, online trade, which is only online, but many of our partners who has normal stores are also building a very good online presence. Our ambition is to be part of both channels, both the online presence of the customers who have both stores and online, and then those who are doing mostly online. Clearly, that's developing. However, it's quite a small portion of our type of products that are still bought online. That's the strategy. Quite happy to announce that we have a new member in the management team, a Sales Director for Europe and International Markets will join us the first of September. Alex Nielsen is warmly welcome. He's a Danish citizen.
He will be based in Copenhagen in our sales office there together with actually part of the export team and will work closely with the organizations that we have in place over in Europe. That's, in very short, how things are. Now I'll give the word to Hanna Kukkonen, who will take you through the sustainability outlook and performance.
Thank you, Alexander. Next, sustainability. During Q2, we did a materiality assessment to see if our sustainability aspects and if our sustainability efforts are in line with our stakeholders' expectations. We were happy to receive more than 500 replies from customers, employees, investors, suppliers, and consumers. All Orthex sustainability efforts rated very high. The average on a scale of one -five was 4.35. It really seems that Orthex is focusing on the right issues with sustainability. I'll show you a little bit more in the next slide about the results. Regarding the reporting, Orthex disclosed ESG data during Q2 to both the CDP, the Carbon Disclosure Project program, and also to Nasdaq, receiving the Nasdaq ESG Transparency Partner.
This is to meet then the demands of our different stakeholders and to be able to report transparently about the sustainability issues. Then in June, we promoted the recycling of plastic by participating in an awareness-raising campaign called Ämpäristöteko, which was organized by the Finnish Plastics Industries Federation. There we collected old used plastic products from consumers and they went on then to recycling. It was a very successful happening. The materiality analysis, here you can see the different sustainability aspects that we are focusing on. What is really nice to see that all of the aspects were rated between four and five on a scale of one to five.
It really seems that we are focusing on the right issues. The top ones, the most important ones according to the stakeholders were that Orthex products are tested and safe to use, and this is a really important factor for us as well. Then the second most important one is that Orthex is promoting the recycling of plastic and that that's what we did in June as well. Now we are studying the results very carefully and taking into account all the comments, very good comments from our stakeholders and working forward with our sustainability strategy. We'll move next on to financials.
Thank you, Hanna. Net sales declined during the reporting period by 5.3%, from EUR 22.2 million - EUR 21 million. We had a very challenging market situation, and we had lack of campaigns in some bigger customers in Nordics and also outside Europe. Storage category was specifically affected as they will usually have higher campaign levels. Inflation was very high and customers reacted to the uncertain market situation, and this was visible especially in the beginning of the quarter. We had a very slow start for quarter two. Even if based on discussions with our customers, the sell out was performing still, our customers were very cautious and limited their campaign purchases.
It's also worth mentioning that Swedish crown has been weaker, and FX rate effect is explaining 1 percentage point of the decline in net sales. Despite the decline in net sales during quarter two, the sales are still more than 19% higher compared to the level during quarter two, 2020. Extremely high raw material prices and rapid inflation were affecting the profitability during the period, and EBITDA was slightly negative. We had very high inbound and outbound freight costs and an increase in many other cost items such as purchased products or pallet costs or packaging material, and that affected profitability. When we were planning our price increases about a year ago, we didn't have visibility to inflation.
We were concentrating to cover the raw material price increase effect, and the inflation levels surprised us totally. A single biggest item affecting the profitability is still the raw material price, but also Swedish crown, especially at the end of the quarter, was affecting the EBITDA. Familiar course regarding the raw material price indexes. Plastic raw material index prices have stabilized on exceptionally high level. Price index at the end of the reporting period was 78% higher compared to last year. Very high raw material price levels are currently visible also in our inventory levels. In general, energy prices in Europe are at the record high level due to sanctions of Russian oil and reduced gas deliveries. Currently, we don't have any availability issues.
Actually decreased supplier margins give signal that general demand on the market might be actually lower than before. Unpredictability is high and it's very hard to predict how prices continue to develop, even if during the latest months after quarter two, the prices have been slightly low already. Next, our investments. During quarter two, we invested EUR 0.8 million. Our investments were mainly related to product novelties, so new product development and molds for novelties. Last year, we building a capacity, and this year the concentration is more on product novelties. Our net debt was EUR 27.7 million and leverage 2.6, and it's temporarily above the long-term target level.
Our net debt was also affected by the return of the capital we made to shareholders in May. If we take the long-term financials next, currently our latest reported financials are below our long-term targets. We see that this is a temporary and exceptional situation, and we are still committed to deliver the long-term targets, even if current reported are not on the level we expected them to be and expect to be on long term. I'll give a stage to Alexander to summarize the reporting review.
Thank you, Saara Mäkelä. Of course, it's quite easy to summarize the situation. The cost inflation during Q2 was extremely high with exceptionally high raw material prices, and not only the raw material, but also transports and currencies and what not were in strong cost inflation. Then of course the customer purchasing behavior, and here I have to emphasize that I'm talking about the retailers, and especially at the beginning of the period. There was a big carefulness in what to buy and what to have in the warehouse. In that sense, I think that summarizes quite well the situation we are in.
Needless to say, we are working hard to improve the situation and improve the profitability and that's the key goal for us to basically both get in line with the cost levels and adapt to those and continue to build the growth we are focusing according to the strategy. Let's see here if I can move to the next slide. We are approaching the Q&A session, so happy at this stage to take any of your questions.
Okay. There are a few questions already that have come in, so I'll start here. You mentioned that sales picked up toward the end of the quarter and you gained new customers. Was sales growth positive at the end of the quarter? How is the current trading?
Oh, yeah. I can take that one. Of course, we're not giving long-term guidance, but looking at the quarter, how it was, I think especially the start of the quarter was the toughest period for us. So that could explain sort of the sales result there. Then if we look at the volume versus value, I think we have, of course, clearly sort of more sales in value and less in volume, mostly driven actually by limiting the number of mass campaigns where you sell multi-packs and so on. There the volume goes clearly down compared to the value sales.
Thank you. There's a question about electricity. Regarding electricity prices, do you have hedging for 2022? Can you remind us how much you consume electricity on annual level, and how much cost headwinds are you expecting for 2023?
We are hedging the electricity prices. We have hedging for 2022 and also most of 2023 as well. Currently, we're hedging 60%-80% of the consumption, depending on the quarter.
Perhaps worthwhile mentioning as well that electricity is our main source of energy. We don't have gas exposure in our factories.
Moving on to price increases. Regarding new price increases, when these will take place and how much you raised prices now and during the past 12 months?
That's a tricky question to answer because maybe competition is listening as well, and I don't wanna go into all the details on how much price increases we have had in detail. We've done two price increases. We've announced one which we did some half a year ago. Looking at the cost situation, I think we have to be focused in on looking at when the next one after this has to come. We're very actively following the situation of the costs and also how actually our cost increases then flow through into products and not only staying in inventory.
Continuing on the price increases, how have your customers reacted to your price hikes? Have retailers cut your sales shelf space due to it?
Yeah. That's a really good question, and in a way, we are fortunate that we haven't had cuts or any general cuts at all in assortment in any of our customers. In that sense, we are doing well. Clearly, I mean, the retailers are used to the situation. They know that the costs are going up. I think long partnerships and good partnerships means that when there's a need to do moves, you can do it, but you can't take it all at once. Especially with the long lead time, it's very hard to predict. I mean, half a year ago it was very hard to predict the cost level now and then if you go back one year ago, it was even harder.
It's a bit of chasing sort of a moving target, but we are, as I said, actively working to do that.
Thank you. A little bit about the market size. If you have not lost any market share, the market itself must have shrunk quite a bit, especially considering in volumes. How has the market size in storage behaved historically during financial uncertainty, for example, during the financial crisis?
That's an excellent question. I think it's of course impossible to say that something would develop the same way as it did historically, but you can at least have a hypothesis here. The hypothesis is actually that when you have goods which are not extremely expensive for the consumer, like buckets or storage boxes or such, these are usually among the last products that the consumer actually deselects. It's usually the more expensive goods or travel or investment goods that are deselected during tough times. The market per se usually and over the, let's say, long-term period, especially in storage, has grown driven by urbanization and driven by people moving to smaller apartments or houses where you then need storage and you need to organize things.
We have seen 2% growth over time. I would say it's hard to say that the market has actually from a consumer point declined yet. We still see good sell-out in many of our customers. It's more the customer buying behavior, so the retailer buying behavior that has been a bit more careful, especially during the beginning of the second quarter.
Thank you, Alexander. There's a few questions about sustainability which I might be able to answer myself. What are your top sustainability targets and what is your long-term plan in moving from fossil-based raw materials to renewables? We have many different sustainability aspects and targets, but the most important are that we are producing long-lasting and high-quality products that can be used for years and years and then recycled after the use. I would say that maybe the second most important target is that we are moving from fossil-based materials to both recycled materials and bio-based raw materials. We have a target that by 2030 approximately 80% of our raw materials that we use would be out of either recycled or bio-based.
That then leads us to the third most important sustainability target which is that we have an ambitious goal to be carbon neutral in our production by 2030. Working very hard towards these targets. There's a few questions about the rest of the year and the future in the list here. As you know, our board has decided that we're not giving short-term guidance, so unfortunately we're not able to answer for these questions regarding the future. I think that is now all the questions that came in this time.
Okay. Thank you. Thank you very much for listening in. Rest assured we are fully committed to work with the situation we have and push forward. Times are tough and we believe they will at some point normalize, and we'll be working to be as strong as we can both meanwhile and after that.
Thank you.