Good morning and welcome to Orthex Half-Year Financial Report Presentation. With me, I have CFO Saara Mäkelä and CSMO Hanna Kukkonen. We will take you through the results and current happenings in the company. My name is Alexander Rosenlew and I will start the presentation. First of all, a short introduction for those of you who are not that familiar with our company. We are a leading Nordic housewares company with strong brands and sustainable products. Quality is at the heart of what we are doing: durable products, which makes life easier. We have our own production where we produce almost 90% of our products. We have a strong presence throughout Europe with our own sales force and organizations. Three strategic brands: SmartStore for storage products, GastroMax for kitchen, and then Orthex for home and yard, and the name of the company.
We're on a mission to make everyday life easier with practical, durable, functional, award-winning products that are sustainably produced, long-lasting. We do a lot of new products. We enjoy bringing novelties to the market, and our aim is that about 10% of our turnover should come from new products. Storage and organizing our homes and helping to organize our homes is the biggest part of our business today. It's 69% of sales during the period. Kitchen products like food storage, kitchen utensils, and those kinds of products are about 20%. What we call home and garden, flower pots, and all kinds of other usable and good products for the home are about 11% of our sales. That's a short introduction. Going into the first half year and what has been going on. I would say the operating environment is still not that good.
Consumers are careful, and this carefulness is also reflected in how the big retailers and our customers are behaving. There's a lot of cautiousness in the air. Volumes are slightly smaller, commitments are shorter, and so on. This has been the situation for already some time, and hopefully we will gradually see a more, let's say, consumption-friendly environment going forward. During this period in the Nordics, we had some really careful behavior from a few big customers dialing down on campaign volumes, dialing down on buying in products to the warehouses. That made the Nordic performance a bit slower, especially in the second quarter. If we look at the rest of Europe, I think we posted good growth.
There's new distribution, there's deeper cooperation with existing big retailers, and there are some, I would say, quite successful new product launches that now are being rolled out to different customers that we already have. Looking at profitability, I think cost was under good control in the second quarter, and we managed, despite the, let's say, the decline in sales in Nordic, we managed to defend the profit margins and actually improve it compared to the same quarter last year. If we go into the numbers, net sales decreased slightly by 2.3%. What I'm especially happy about is actually the invoice sales growth in the rest of Europe, which was 22.1%. Whereas in the Nordic, as explained, some tough times with a few customers, not lost distribution, but just sort of volumes being very much lower than we had predicted.
Probably some inventory management from our customers as well there, taking down own inventories, being careful. That resulted in a 7.4% decline in the Nordics. The adjusted EBITDA from EUR 1.6 million a year ago to EUR 1.7 million this year, and of course, as a percentage, a bit higher. Cash flow, no drama there, according to plans, just below EUR 0.8 million minus that side. If we look at the full half year, net sales still, I mean, decreased a decrease of 3.5%. If we look at the invoice, its invoice sales is about 3.4%. EBITDA, even though we did better in Q2, the first quarter wasn't that strong, so we're still a bit behind last year. The margin as well, reflecting the same situation here. If we look at sales by geographies, to the left you have the second quarter, and to the right you have the first half.
Here you can see clearly that the tough times were in Q1 in the Nordics, where the sales were just short of EUR 16 million, whereas there was strong growth in the rest of Europe from EUR 4.2 million to EUR 5.1 million. The rest of the world being rather flat with very small numbers. The focus here is clearly on Europe, including the Nordics. That's our home market. If you look at the same thing on a half-year basis, we're still a bit behind in the Nordics. Now we actually managed to catch up what we lost in the first quarter in the rest of Europe. We are almost flat there at EUR 9.5 million in both this year and last year, and a slight growth in the rest of the world.
If we then look at what this means in terms of product category sales, it's quite clear that the biggest category for storage, which is also the product category which is mostly present in Europe, has a, let's say, not easier situation, but a different situation, whereas kitchen and home and garden products traditionally still are mostly sold in the Nordics. Usually when the Nordics are not performing as good as we are not growing, then it's mostly visible in the kitchen, the home and garden categories. You can see that from these slides in both quarters and half year. Having said that, home and garden on a half-year level is up a bit from EUR 6 million to EUR 6.5 million in sales. Storage is slightly up on the quarter, but slightly behind still on full year. This is the situation.
The good sales in Europe, of course mainly storage, brought a growth to the storage category in the second quarter, whereas in the Nordics it was more challenging. If we go to the strategy, which is quite straightforward, at least the ambition, that's to become the number one storage brand in Europe. I think we have identified the ways of doing it in quite a good way, even though we are at the moment gradually refining the strategy and looking at how to accelerate growth further. For now on, and at the moment, I think this is the best way of describing what we are trying to achieve and will achieve. That's the European number one storage brand and then keep growing, keep leading the Nordic houseware market. Three boxes of growth: the Nordics, then the second box of growth is actually to do very well with the European customers.
Do very well means increasing distribution, increasing number of stores, increasing how many meters of shelf space we have in each store, etc., etc. That's probably one of the biggest opportunities we have. We are also quite focused on growing e-comm platforms, e-comm sales, not our own webshop, but the platform of others where consumers are keenly buying all kinds of products. We have the opportunity of consolidation as well. This is very clear for us how to do it and focusing on innovation, sustainability, and a clear category strategy in the three categories where we operate. I'll give over to Hanna at this stage.
Thanks, Alexander. Continuing on sustainability activities during the first half. We conducted a materiality assessment during the spring. The last materiality assessment has been done in 2022. It was time to redo it. We did a really thorough questionnaire and assessment asking our key stakeholders, our customers, consumers, and then our employees and suppliers. The purpose was to make sure that we really concentrate on the right sustainability topics in our sustainability strategy. With the help of these results, we are now refining and looking at our sustainability strategy to make sure that it's aligned with the results of the materiality assessment. In May, Orthex joined the UN Global Compact. It's a United Nations initiative to encourage businesses to adopt a sustainable and socially responsible business practice. What it means to us is that we will, and we have our sustainability strategy aligned according to these principles.
We will report annually on our progress with these matters. Moving on to the innovations and novelties. During the first half, we've launched a lot of new products related to storage and kitchen items. Here are some examples in the pictures. If you look from the left to right, the first one is SmartStore Compact Access, which is a new product that allows to use the storage space vertically. You can stack the products on top of each other. The next one is SmartStore Compact Sort, a range of five different containers that help organizing the drawers. The third one is SmartStore Compact Square, a new design for our square compact range. The last one, we have launched a really nice new color for our bio-based kitchen utensils range. Just to mention a few examples of the novelties from this year. This is very short from me.
I give the word to Saara financials.
Thank you, Hanna. In general, the quarter two was a stable quarter for Orthex. Our net sales decreased by 2.3% to EUR 20.5 million compared to last year's EUR 21 million. The currencies had some positive effect on the net sales. In constant currency, the sales decline was a bit more. It was -4.8%. Despite the very careful consumer behavior, we were able to grow over 20% in the area outside Nordic. It takes us to par with last year on year-to-date level on those markets. Overall, the market conditions have remained mainly unchanged compared to the previous quarter. Consumer confidence has remained very low. Credit insurances still are not available for certain customers. We have made limited sales to some customers outside Nordic. Especially considering this, we can be particularly pleased with the growth in Central Europe.
Despite the decline in sales, we were able to slightly increase profitability compared to last year to EUR 1.8 million. EBITDA margin increased by 1.1% each point. Profitability improvement was driven by efficient cost management. We have been really careful with the costs in operations and with the fixed costs. Also, a slight decrease in raw material prices helped with the profitability. On year-to-date level, we are unfortunately still EUR 700,000 below last year in EBITDA due to a very challenging first quarter of the year. Here, a familiar raw material price index graph. It has been stable lately. During the reporting period, raw material index prices decreased slightly, but fluctuation has been on a very normal level. The market has been stable. Geopolitical uncertainty and balancing of the capacity at our suppliers might be affecting the pricing during the coming quarters.
Our investments during the reporting quarter were mainly related to product novelties. They were actually quite low, only EUR 400,000. This is mainly related to phasing. We are planning to do investments still at the coming quarters. Mainly, investment focus will be in product novelties, but there will be some safety improvements to the factories. We are, for example, updating the sprinkler systems at the biggest factories during the fall. The net debt at the end of the reporting period was EUR 20 million and leverage 1.4. The strong balance sheet and healthy cash flow places us in an excellent position to be ready for potential strategic investments. On the next page, we have our long-term financial targets. They've been unchanged since the listing of the company. Targets will be reviewed during the strategy process at the end of the year.
In sales and profitability, we are currently behind the targets due to challenging market conditions. Leverage and dividend payout targets have been in line with the targets. The second payout of the dividend, EUR 0.11, will be on the 8th of October . As a reminder, our next reporting day is on the 13th of November. Alexander will now summarize the quarter before we go through the questions.
Thanks, Saara. I would say a very short summary. I think the highlight, of course, being the strong growth in Europe, as it's been something we have worked hard to achieve. The other one is a bit counterproductive because the consumers are still careful, which means the customers are still careful. That makes growth a bit tough. That was especially visible in the Nordics during the second quarter. Otherwise, another quarter we'll push forward and hope for consumers being more on our side in the future. I forgot to say that we would be very happy for any questions you have. We'll go through what's already in there, and you can post new questions as well. Hanna will facilitate the questions and we'll try to answer the best we can.
Yes, thank you. Let's move on to the questions. Let's start with the profitability. How does Orthex's profitability differ between the Nordics and the rest of Europe on a gross margin and EBIT margin level? Who wants to take that?
I can at least first comment on that. I mean, we are not sharing openly the customer profitability figures, of course. Transportation costs from our factories to, for example, Southern Europe is higher. Still, we have a lot more smaller customers in Central Europe than in Nordic. It differs. The biggest difference is, I mean, between the campaigns and between certain products. Customer profitability in general is not the big driver for profitability improvement during the quarter.
Yes, thank you, Saara. About the Nordics, have you seen a change in the competitive environment in the Nordics?
I can comment on that one. I think the competitive environment in the Nordics is quite tough. Everyone is speaking about price. In this environment, it's not always that easy to sell a high-quality, durable product. That's why we focus very hard on making it visible to the shopper in the store that they are making a choice of a product, which is a keeper, so to speak, that it doesn't break that easily, and you will be happy with it. For sure, when there's a high price focus, it also means that you will have some, let's say, campaign deals flowing in from fairly low-priced, maybe even very low-quality products that are going on the shop floors. That increases competition. I think it's healthy. It keeps us awake and it makes us work even harder. Having said that, we haven't actually lost distribution in any sense.
It's just, I would say, an environment where the fight is quite tough at the moment.
Thanks, Alexander. About continuing on the environment, the weather, warm summer weather came to the Nordics very late this year in mid-July. Did this have any impact on your sales, thinking on gardening or berry season or so?
Locally in Finland, I would say, and where especially berry picking is a big thing, the berry season has a nice impact on the sales of the freezer boxes. Today, they are quite still a small bit of the overall assortment that we carry. Some 10 or 15 years ago, they were a really big part of the turnover. Today, their effect on the full result is quite small. Clearly, when people are spending more time in the countryside or in their cottages and have the time to do other things than work or study, the likelihood that they do berry picking is bigger, and that we're, of course, happy for. I think the warm weather per se, I mean, it was after a very chilly start of the summer and then it was very warm.
Maybe during the chilly period, people went shopping because it was dull to be outside. Then you had a three-week streak when I think shopping was done a little bit less, especially in the Nordic markets.
Yes, good. Thank you. This was actually all the questions this time. Thank you, and see you next time then in November, 13th of November.
Thank you very much.