Good morning and warmly welcome to Orthex Interim Report for the First Quarter of 2026. My name is Alexander Rosenlew, and I'm the CEO of the company, and together with me, I have Saara Mäkelä, our CFO, and Hanna Kukkonen, our CMSO. We will take you through the Q1 development, and at the end, there will be a Q&A session. Feel free already now to start dropping your questions, and we'll answer as many as there's time for. Without further comments on that, I will jump straight into a short introduction. Orthex is a European houseware company. We have our three own factories where we produce more than 90% of what we sell. We produce products under our own brands.
Strategic brands are SmartStore for storage products, GastroMax for kitchen products, and then Orthex for the rest and the company name, of course. Today we have customers in around 40 countries. However, Europe is our key focus where we have local presence on many markets with our own sales organizations and then a central warehouse in the middle of Europe. This very shortly. If we look at our mission, we create long-lasting solutions for an organized and an enjoyable home. What we do is practical. It's used for a purpose to fill a need with a nice Nordic design to it. The products are, of course, designed and many prices have been won because of those. We also strive to be the benchmark in sustainability in our category.
One of the key things in that is actually to produce products that last long. You don't need to throw them away. There's no single-use product. There are no single-use products and we do a lot of relevant innovation for the market. Storage is by far the biggest product category, and there we are very proud of our SmartStore brand, our presence with the nice products throughout Europe and growing there nicely. The kitchen category is mostly about preparing food and storing food, not so much serving, and that's about 19% of our sales. We have the home and garden category where there's plenty of interesting products for your cottage or your flowers or so on.
This is the setup of where we operate. Jumping into Q1, one could say that the market was really volatile and even more so at the end of the quarter. Of course, everybody knows about what's going on in Iran and things are changing every day, we would comment. During these conditions, we see solid sales. We see strong growth outside of the Nordics, but in Europe, we also see international growth. I'm happy to say that this is built on increased distribution. Our efforts, our local presence with our sales organizations and our good work in the store and with existing customers with increased distribution is giving good results.
Especially worthwhile mentioning good performance in France, Switzerland and Germany. On the Nordic side, I would say that the environment is still a bit tricky. Consumers are careful. We didn't grow in the Nordics in the first quarter. Of course, we would have an ambition to continue to grow in the Nordics. That's one of the key things and we'll comment on that later on. Raw material prices, of course, the very fast rising oil price has resulted in very fast rising raw material prices towards the end of the quarter. However, this is not visible in the Q1 results.
I think we have, we have seen a similar fast rise a few years ago in raw material prices, and we are, of course, prepared, and we have already taken action to try and mitigate what's coming. The situation is very volatile and things are changing extremely fast. We need to stay extremely sharp in our action and in our implementations. Into the numbers, net sales growth of 2.7% overall, and then especially happy about the performance in Europe, a growth of 16.2%. In the Nordics, the sales declined by 1.1%. The EBITDA increased from EUR 1.7 million- EUR 2.1 million, and the margin improved to 9.6%.
Regarding cash flows, we had more investments in the first quarter or more costs from investments coming into the first quarter. A bit of a, let's say, phasing of investments, but nothing out of the ordinary there. Still keeping the investment levels as planned. Looking at the situation per geography, so a bit of the same to the left that I already said, that Nordics declined by EUR 200,000 and then rest of Europe grew by EUR 700,000. Percentage-wise a big increase in the rest of the world, but not major amounts in that sense. Keep in mind that the focus is on Europe and the Nordics, and to become a truly European company.
If we look at categories, usually the storage categories with what we are competitive outside of the Nordic countries and that's the priority for growth. We are happy to post a nice growth in storage because of that the European growth as well is there. When we grow in Europe, it's usually with storage and it's quite visible in this one. As said, coming from better commercial takeoff, better distribution with existing customers and some new distribution as well. The kitchen category a bit tougher for us, and that category is especially present in the Nordics. As I said, the Nordic environment hasn't been.
There seems to be a problem with the net connection. Let's check that. It unfortunately seems that we have some issues with the network, so now you're back, Alexander.
Good. Good to be back. Can you help me a bit where if you were online, where my commenting stopped?
Yeah.
Sorry.
I think maybe one slide back I would say.
One slide back even. Okay. We, I hope you heard about the cash flows and the investments and that was that nothing out of the ordinary. We, we keep the investment levels as planned. We had in the first quarter some phasing with more investments during that time. If we jump into the geographical product category sales, this in pictures more or less what I said earlier. The Nordics down by EUR 200,000 and the rest of Europe up by EUR 700,000 in Q1. The rest of the world a big jump in percentage, but in reality, quite small numbers. Keep in mind that the main focus is on the home markets and growing Europe.
When it comes to the categories, storage is by far the product group that we are expanding the fastest in Europe. Also when Europe goes well, it usually means that storage goes well, and that's clearly visible in the 8.5% growth in the storage category. In terms of the kitchen sales, kitchen category sales, kitchen is quite the Nordic product group for us still. Most of the sales coming from the Nordics and the environment, as said, in the Nordics has been quite tough and very price-driven in the first quarter. In terms of home and garden, the same comment on the Nordic tough environment there.
However, these are quite small numbers, and can turn quite quickly in the opposite direction with good turns in environment or even weather when it comes to flower pots or freezer boxes and so on. Quite stable there. When it comes to strategy, remains clear. We want to be the leader in storage in Europe and the benchmark for quality, practicality, and sustainability in every home. That we do through three major organic growth pillars. That's to be close to the customers, close to our partners in the Nordic, bring relevant innovation, continue to grow with the Nordic retailers, launch new interesting products, et cetera.
The second growth box is to grow with major European retailers, increase our distribution, and also increase the number of shops where we are with the major retailers. I think that one is progressing nicely, especially in Q1. Online growth, being visible on the online platforms is key and it drives growth, it drives brand recognition, and it drives distribution in many markets. An important part of the growth strategy. We have as an option which we keep looking at is also M&A in the market. These are the different ways we believe that will take Orthex towards a leadership in Europe. I now give over to Hanna Kukkonen for going through a little bit what's going on in the stores.
Thank you. I'll show some concrete examples of how we are implementing our strategy. First of all, during Q1 we had the Ambiente fair in Frankfurt, and that's the number one commercial activity or fair for us during the year. This year as well it was a success. We had many old and new buyers and customers visiting us and are working with the leads from the fair. We have continued our strategy to build our brands and work together with our customers in the stores and also online during Q1. Here are some examples of the stores that were built during Q1 and we were especially active in Finland and France during the start of the year.
Here are some examples from both Finland and France. In the next slide, I have some really nice examples just from France. Those were the most active countries in the start of the year. If we jump from that to sustainability. News during Q1, great recognition. Our September last year launch, SmartStore Module, which you can see in the picture, was awarded with the German Design Award with the winner prize at the Ambiente fair in February. In addition, we just got the information last week that the SmartStore Module has also won the Red Dot Design Award, which is a really prestigious design award.
Really happy for these design awards for this product and really looking forward to continue selling it to our customers and consumers. Regarding the reporting, we have published our annual and sustainability report in March. I will show you the main points from that in the next slide. We have also continued our investment to novelties. During the beginning of the year, we have launched one new product made of recycled plastic, and that is SmartStore Essence Stack. I will show a picture later on also of that product. If we start with the annual and sustainability report, we continued our systematical work with sustainability and really are proud that we made progress in so many areas during 2025. Here are some points of the key areas.
For example, the share of the recycled and renewable raw materials increased to 17.9% from 16.6%. We continued improving our energy efficiency. From the base year 2020, we have actually reduced our energy consumption by 12.4%. What we are especially proud of is the sickness absence rate that has decreased for the first time to below our target level, so it was 4.9%, where the target was 5%. At the same time, the LTIF also improved and was on excellent level at 5.6%. Our employee engagement rose to 83% from 81%, and also our customer satisfaction improved. Last but not least, our EcoVadis rating improved from bronze to silver level. Excellent results all in all from 2025.
There's one project I have to mention from Q1 2026, that's a project pilot that is going on in Finland. We are part of the bigger project where there are many stakeholders from industry and from retail, we are piloting a reusable deposit-based takeaway food container and the return system related to it. It is a really great collaboration with many stakeholders, we're waiting to see the results of that. As said, we've continued active investment on novelties. Here the picture, the second one from the left, you can see the newest one from this year, that's SmartStore Essence Stack.
That's a stackable basket where you can use your space vertically and utilize all the unused space that is, for example, in your wardrobe. We have now started to sell that in, and you can already see it in some stores around Europe. Next, let's go move on to the financials.
Thank you, Hanna. As Alexander already mentioned, the net sales increased by 2.7%. Q1 net sales were EUR 21.6 million . The stronger Swedish krona affected the net sales positively. In constant currencies, net sales declined actually by 0.4%. In the Nordics, in the area, Nordic sales declined by 1%. Outside the Nordics, growth was extremely good. It was 19%. We are really proud of the work our international team has accomplished. It's really nice to see that the efforts are paying off. It was visible in all the pictures Hanna was earlier showing. Adjusted EBITA increased by EUR 400,000- EUR 2.1 million. Gross margin improved by 1.1 percentage points up to 28.8%. Raw material prices started to increase rapidly at the end of the quarter. For the whole quarter, the raw material price effect was still positive.
The stronger Swedish krona compared to last year has also put upward pressure to our costs, but we have managed to keep expenses well under control through disciplined cost control in general. Next we have the raw material price indexes. Unfortunately, there's again an exceptional peak visible already in April, and it continued, sorry, in March, and it continued still in April. The war in Iran and crisis at the Strait of Hormuz are tightening the raw material supply and increasing the prices significantly. The price increase started in March, and we have initiated price increases to mitigate the effect. The negative raw material price effect will be visible in our figures during the quarter two, and price increases will be gradually offsetting the impact.
We are not buying our raw materials on the spot market from whoever offers it with the cheapest price. Our purchasing strategy is to build long-term partnerships with trusted suppliers, and we believe that this helps us to secure raw material supply even in the situations when the spot market is not working well and there might not be always even availability. Counting on our long-lasting collaboration and cooperation with the trusted suppliers. Here we have investments. You might remember that during 2025 investments were quite on a low level due to timing. Now investments were more than EUR 1 million over last year's level at EUR 1.6 million.
Most of the investments were related to novelties, but we did some capacity increases as well. We were finalizing the fire safety improvements at the factories. Our net debt continued to decline. It was EUR 14.6 million at the end of the quarter, and leverage was on a very healthy level at 1.0 compared to the adjusted EBITDA. There's well room to work with the M&A targets and projects on the balance sheet. Here we have our long-term targets. They are the same as before, so no changes there. We are currently more or less in line with the growth targets, and outside Nordics, clearly ahead target even.
Profitability, there is room for improvement, and we have to do the work to get to the targeted levels. As raw material pressure eases, we believe that target is achievable through growth. Leverage, I already commented, below the target levels. The dividend payout ratio, annual general meeting decided roughly 60% dividend from the net profit, which is EUR 0.23 per share. Part of it was paid in April, and the second payment will be in October. Something very positive. A quick highlight on our investor relations. We picked up a third place in Best Investor Pages competition among small caps.
It's a nice recognition which we are very proud of, and I hope that you all go and look at the awarded websites. Before I hand over back to Alexander, I want to remind that our next reporting day is in August. It's 18th of August. Alexander, you're muted.
Thank you very much, Saara. Let's go to the next page. There we go. The summary here is quite clear. Full focus on sales growth in 2026, strengthening the European position, and growing in the Nordics as well. Let's say, starting up real growth in the Nordic is absolutely on the target for us. Then, meanwhile, of course, the conditions are quite unpredictable, and it seems to change from day to day. What we hope for is of course that we will get material and to be able to produce and that's the number one thing. Then the other thing is that the cost of material has very rapidly increased.
We are already doing action to mitigate the effects of the rising cost. I think the market and trade understands well where we are. It's an issue that hits the whole industry that is working with these raw materials. In that sense, we hope that good collaboration with our partners, both suppliers and then customers and an understanding there will lead to a good way through the crisis and hopefully we can come out even stronger afterwards. That's the summary. Now I'm happy to open up for any questions.
Yes, let's go into the questions, and let's start with the sales. Sales of the Q1. There's a couple of questions. If we start with the Nordic sales. Nordic invoice sales declined 1.1% in Q1, attributed to smaller early 2026 campaign deliveries and cautious consumer behavior. Is this primarily a timing effect that should normalize, or do you see signs of more structural softness in Nordic demand for remaining 2026? Another question about how do you see the situation in the Nordics going forward? Could you elaborate on that?
Sure. First of all, market conditions in the Nordics are not the best. We know, we know that, especially on our home market, Finland, unemployment is high, inflation is in prices and so on is there. People are careful, retailers are careful. Having said that, I think with the right recipe of new products, close customer collaboration, local presence, and happy also to see the good results from the customer survey that our key account work and help to mutually grow the categories is actually really appreciated by our customers, and that is improving. We still believe, and I still believe that there's room to grow in the Nordics, but it requires good product, it requires good action, and you have to look good in the stores. That's a comment on the Nordic side of it.
Yes. Thank you. If we go to the rest of Europe, which had a nice growth. There's a couple of questions that I tried to group here. One is that, did you win new customer in rest of Europe or was it mostly expanding with existing customers? That's one question. The other one is that how do you view the rest of Europe segments growth trajectory for the remainder of 2026? Which markets do you see as primary contributors?
Really good question. As said before, we have already contracts with many major retailers in Europe. Sometimes these contracts are just for a few products and not for all their stores. Growing distribution can mean growing within an existing customer that we already have collaboration with, and that I'm happy to report that we have done. In that sense, maybe not that many new, completely new customers, but clearly sort of taking the next step in cooperation with major European customers. Many of these customers are, of course, present over a larger geographical area. It's not only in one of the European countries, but quite often in plenty of them. That's also something.
I mean, should you say then when you enter a customer that then takes you into the next country, is that a new customer or is it the same customer? It's at least more distribution and that we are happy to have as well. Having said that, there are still, there are still major customers where we are not present, but happy for quite a good number of really relevant ones now taking us seriously and wanting to grow together.
Thanks. One more question about the Q1 sales. Were sales in Q1 positively supported by retail customers reacting to the Iran situation and the anticipated increase in plastic prices? What do you think?
Well, always hard to talk about or for someone else, but I believe that the retailers are still operating their own networking capital in the most efficient possible way. Usually that doesn't allow for bulking up volumes or t aking action on stocking up.
Exactly. Okay, let's move on to transport costs or continue with the Iran situation. How will you be impacted by increased transport costs?
Maybe I can comment on that. It's part of the pricing structure for us, the transportation cost for incoming goods and outgoing goods. We will be affected, but it has been taken into account in the calculations when we prepare for the price increases.
Yes. Continuing on the material prices. What's your plan regarding upcoming campaigns considering the rapid raw material prices? Are they put on hold?
That's a, that's a good question. I mean, of course, the whole, the whole industry and everything produced out of plastic will have a high pressure to get to a new price level with these raw material prices we see. It's still possible to campaign below that new level of pricing. In that sense, we still believe in campaigning. Campaigning can be so much more than only the price. It can be, it can be sort of really good exposure in the stores. It can be other things that actually trigger the action to buy and to help the consumer to buy. By all means, we are continuing the strong work in the stores.
Yes. Thank you. I think we have answered now all the questions, and some of them were answered already during the presentation. I hope you all got your answers. Yes, we want to thank you for this time and see you again in August.
Have a nice summer.