Good morning, and very welcome to Orthex Half-Year Financial Report. With me, I have Saara Mäkelä, our CFO, and Hanna Kukkonen, our CMO. We will take you through the latest development in the company. Meanwhile, please feel free to put your questions in the chat. We will get back to them at the end of the session in a Q&A opportunity. So don't hold back. We will answer as many as we have time for, and I'm looking forward to that. So first of all, I'm starting with an introduction to Orthex. Not much changes here. Still a local Nordic producer of goods with short transportations to Europe and our main customers throughout Europe.
90% of what we produce and sell is of our own brands, and we have three factories and three strategic brands, so not many changes on this one. If we look at our product portfolio, the main aim with what we're doing is to make everyday life easier for the consumer, at mostly at home, of course, and this is then divided into products for storage and organizing your home. Then it's the kitchen products, home and yard products, and plant care. Out of these, the storage category is by far the biggest one, and it's also the one where we see the most traction when we expand our activities outside the Nordic countries. The aim is to produce long-lasting, high-quality products, and that per se is a sustainability thing.
When you don't produce single- use, and you produce product that lasts tens of years and can all be recycled at the end of life, then we are talking sustainability for real. We also put a lot of effort into design, into Nordic design, and into new innovation. So going into what has happened over the first six months, our sales decreased by 2.3% January to June. However, in constant currencies, the sales grew, and of course, the Nordic weak kronas, both the Norwegian and the Swedish krona are affecting the sales development. They have lost a lot of value.
And one can also say that there's clearly a careful consumer behavior in the Nordics, both how the customers are working with when actually ordering from us and then how the consumers are behaving in the stores. So that's on the sales side. Then, if we look at profitability, there's a significant improvement in profitability, which we are, of course, very happy for. There was a comparison period in Q2 last year, which was really tough. The raw material prices were peaking at that stage. So one could say that the positive development in profitability is clearly driven by a few things. Of course, we'd like to say as well that our doings have affected it.
But at the same time we have had help from the raw material prices, and also we got a compensation from the Swedish state on electricity usage, especially for electricity in the southern part of Sweden, which was abnormally highly priced at the period before. So that helps us as well. And then, on the negative side, the most influence we can see, especially on the top line development, comes from the weak Swedish and Norwegian krona. The raw material prices were fairly stable during the period and back to, let's say, more normal levels.
Then if we did deep dive into the second quarter, it was the same story, I would say, as in the first half of the year, where the net sales decreased, but in constant currency, the net sales were flat, and invoiced sales were totally at EUR 20.6 million. The positive thing here, I would say, is also that we see traction in our strategy to make Europe our home market when it comes to especially storage products, and we can see a good growth on 13.5% outside the Nordic countries in Europe. And then on the profitability side, EUR 2.1 million in EBITA, and that translates into a 10.3% adjusted EBITA margin.
Cash flow is at EUR 2 million and driven by quite many factors, but one thing to mention here is also a decline in inventories. So if we look at net sales for H1, we can see that the decrease. Well, I already commented on this one. It's down from EUR 41.6 million to EUR 40.6 million. And then in EBITDA terms, we have now done EUR 4.5 million in EBITDA, when last year we were at this stage at EUR 1.6 million. And so far, the EBITDA level is around 11%. Leverage, a comment there, we are down on leverage to 2, net debt to EBITDA.
And then cash flows during the first half of the year, clearly a bit more or significantly more than last year. Then a comment on sales and invoice sales by geographies, and there you can see the Nordic consumer behavior, where Nordic sales are down, and then vice versa, the rest of Europe. The remaining Europe without the Nordics are clearly up. So on a first half of the year basis, the sales outside of the Nordics in Europe are up even 20%. So that's a, I would say, result of successful commercial strategy on how we have implemented the strategy throughout Europe.
Going forward in product categories, and I would say the geographical split of sales quite well dictates how the performance in the categories is going, because outside of the Nordics, the storage category is the main part of the business. And when we are growing fast outside of the Nordics, it usually means that the storage category is growing as well. And that we can clearly see in this chart where the growth percentage is 5.2%.
Then if you look at the other categories, especially the kitchen category, is strong in the Nordic countries, and when the demand in the Nordic countries has been challenging, it would, under normal circumstances, and as it is here, it would mean that that kitchen sales are more challenging, and the same goes for plant care and home and yard products that have a bigger role in the Nordic sales than it has in European sales overall. Commenting on strategy a bit, not much more here. So, still, the key objective is to become the number one brand in storage in the category throughout Europe. So we're making Europe actually our home market.
If we before spoke about the Nordics being our home market, now the focus is clearly on, on strengthening our commercial position and, and structure, in Europe. And then, meanwhile, we do that, we shouldn't at all, ignore the Nordic home markets, where we still see growth opportunities and possibilities to strengthen our overall position. So looking at, at the strategy and what we want to do, there are three, clear building blocks. Still, there's, the same building blocks as we, as we believe in, and the same building blocks that we see that, that there's traction in. So it's first of all, strengthening the Nordic position through innovation, through category strategies, through especially also, showing the way in sustainability. The accelerated growth in, in Europe, it's a huge market outside the Nordics.
We believe that there's a lot of growth to do, and we can see both vertical and horizontal possibilities in our key accounts to grow. And then the e-com online business, it's both pure e-com, pure online business, but also the omnichannel, so the big key accounts that might have both physical stores and online stores. So our objective is to be the best partner, both in the stores physically and in the stores online. And that box is actually, at the moment, having quite a lot of traction. So that's the route towards being or becoming number one in storage. Still, one box which we keep on the strategy map is consolidation and looking for suitable ways to accelerate growth. Then I'll give over to Hanna Kukkonen to take us through the sustainability part.
Thank you, Alexander. Regarding the sustainability, we want to be the forerunner in sustainability in our industry. What does it mean in a nutshell? Is that we produce long-lasting products that last for years and years, and that can be recycled after the use. We also produce locally in our factories in Finland and Sweden with safe and tested materials. Our main target is to increase the usage of renewable and recycled raw materials, which then this change has a significant effect on our carbon footprint. We have set ourselves a very ambitious target to be carbon neutral in our production by 2030. What happened during the Q2 within the sustainability area is that we participated in the EcoVadis ESG assessment for the first time.
We were awarded with the Silver medal, and that means that we are among the top 18% of companies globally assessed by EcoVadis. So very proud of this first result from this reporting. We also got the ESG Transparency Partner badge from Nasdaq during the quarter two. And in addition, we audited and were certificated by ISCC PLUS certificate with our Gnosjö factory in Sweden. And this means that we can produce now even more bio-based products in our Gnosjö factory. So great progress during Q2.
It's financials now with Saara Mäkelä?
Yes.
Thank you. Alexander talked a lot about the sales already, so customer and consumer demand in Nordics was weak. In general, especially in Sweden, the consumer goods sector is a bit suffering nowadays, and our net sales decreased by 4.1%. Weak currencies, Swedish krona and Norwegian krone, affecting our figures in Nordics and in constant currencies, year-to-date net sales was growing slightly by 1.2%. During the quarter two, net sales was flat, so on last year's level. Currency rates in general is quite significant, and the negative effect in net sales on year-to-date level was almost EUR 1.5 million.
But as we have organization in Norway and organization in Sweden and two factories also in Sweden, we have a natural hedging from costs in currencies as well, and the full effect does not come through in the PNL. Our EBITA increased from last year's negative figures to EUR 2.1 million, and the positive development of the EBITA was driven mainly by lower raw material prices, and then we received also electricity support from Swedish state. During the quarter, gross margin was 25.6%, and even without the EUR 750,000 electricity support, it would have been 22%. So there is a significant improvement. Historically, the gross margin during the second quarter has been lower as we are preparing our factories to maintenance break.
We are also building inventory, and we are purchasing a lot of pallets and a lot of parts to maintenance. This year, we also paid salary increases retroactively in Sweden, and that affected the fixed costs. Also, we had a lot of commercial activity during the quarter, so fairs and media and a lot of campaign activities. On the next slide, this is a familiar slide regarding the raw material price indices. Index prices have been rather stable during this year, and indexes are down from the peak levels last year. In general, the demand seems to be weak, and availability is on good level currently.
But as always, it's good to mention that price indexes are very hard to predict, so even if it's stable now, it's hard to say anything about the future. Then our investments. Investments were mainly related to product novelties, so we've been doing a lot on that sustainability side and purchasing novelty molds especially, and they were EUR 800 thousand, so on last year's level. Net debt at the end of the reporting period was EUR 24.2 million, and leverage is now back onto 2.0 level. Our long-term financial targets, they are on the same level where they have been since the listing of the company.
In Nordics, we are slightly below due to quite weak consumer demand currently, but in Nordics, we are above the targeted level. Profitability has improved significantly, and we still some improvement opportunities in EBITDA. And also the leverage is within the target range. Dividends, the payout this year will be EUR 0.11 per share, and we paid half of that, EUR 0.06, during quarter two, and the next payment will be during Q4 this year. Then I'll hand over to Alexander to summarize the quarter.
Thanks, Saara, and Hanna as well. So just putting it all in a nutshell, I think on the profit side, to make a comment, clearly a significant uplift from the quite tough period we had during last summer. Especially happy for the continued sales growth in Europe, very much according to strategy. But a reminder that still the market is not as rosy as we would hope for. So there's quite weak consumer demand in especially with the Nordic countries, probably mainly driven by Sweden, which is one of our biggest markets all over. So that's the conclusion for that, and now it's time for questions and answers. Hopefully, we have some in, and Hanna will help us to tackle those.
Yes. There are some questions in, so we'll start with the growth in Europe. What are the factors behind the growth in Europe? Have you been able to win any new customers, or where does it come from?
Good question. Yes, we have been able to win customers, quite significant ones. And always when you get the new customer, first you come in with a few products, and then you get the opportunity, if you do well with those, to expand. So there's actually both sort of completely new customers, but also those big existing ones, where we have managed to actually increase our presence in their stores, either as a part of the shelf or then in a bigger number of stores. And where we have put additional focus and worked really hard, and there are some really nice examples from our key markets like France and Germany, where we have rebuilt shelves to be really interesting and selling for the consumer.
So when the consumer demand is weak, one of our main things to do is to make our products interesting in the store and easy to shop, and there we have been quite successful.
Exactly. Thanks. And then a second question to Alexander about sales and marketing expenses. So your sales and marketing expenses rose quite a bit during Q2. Is this a new run rate for you, or did you have some unusual sales efforts during Q2?
We have stepped up the sales efforts, for sure, and when the demand is weak, we need to help our partners, our customers, to be able to sell out more out of the stores. I think without these efforts, the top line would have been even more challenging. So we've done a lot of efforts in the stores. We have been very active in actually visiting both existing and new customers and attending activities with our sales force. So these are all driving. Let's say, we can look at it as cost, but maybe I see it more as an investment in further growth and in commercial success.
Yes. Thank you. Then a question about the inventory situation with the retail customers. So how has the inventory situation with the retail customers evolved? Does the current invoicing level match the sell-out from the customers? What do you think?
Yeah, tough, tough question, because the situation must vary from retailer to retailer. But what we could see when the war started a while ago already was that many of our retailers started to hold back on their inventory because they were unsure of how the consumers would behave. Then we had the same effect, I think, with the increasing interest rates and the high electricity prices for the consumer, where naturally the retailers thought about, "Okay, how does this affect the shopping behaviors?" And that for sure led to, in many cases, to holding back on how much you buy and how much you want to keep in inventory. We have the feeling that actually we're approaching a situation where the supply chain is more normal, which means less of the up and downs, and hopefully that also means that the inventory levels are getting better in our customers.
Yes. Then there's a question, I think this could be for me. Any news from novelties and related pipelines? So, yes, we have been quite actively working with the new product development, and as we speak now, we are delivering to stores our new, very nice, very high-quality bed roller, and the launch is just going on. And in October, we are launching a new sub-range for our very successful dry food container range, and this will be a range of round food storages. And then, as usual, we're working with the launch window for February, when we launch every year novelties in the Ambiente fair, so very active in the new product pipeline at the moment. Okay, any other questions here? Maybe you already answered a little bit, Alexander, but how do you think the competitive environment has evolved during the H1?
Good, good question. I think, I think it's been perhaps a return to more normal times when it comes to abnormal cost structure. So, a year ago, I think the whole industry suffered from really high costs in raw material. Now, we can see only inflation in wages, electricity, and everything else, but the raw material is not that, let's say, that abnormally high anymore. So that's an interesting situation, and for sure, there are those who were more equipped to survive a tough time and a crisis time than others. I think for us, the positive thing is that we still have kept the focus on the strategy, and we have the means to bring new product to the market, and we are strong going into a period which at least at the moment feels like slightly easier than a year ago.
Yeah. Thank you. And then a very last question also about the sales and the market situation. So have you managed to increase the shelf space in the Nordics? Feels like your sales kept up surprisingly well during Q2, considering the circumstances.
Yeah, that's a good question. I think, yes. The short answer is yes, but where we have put extra focus is to actually make our product attractive in the stores. And that's also, I think, good partnership with our customers, with the big retailers and the small retailers in the Nordics. I think we all understand that when consumer demand is weak, if we can help to actually organize the shelf and do meaningful campaigns and also bring new product to the market, then we can still defend the top line, even though consumers are holding very tight to their money.
Yes. Thanks, Alexander. These were the questions this time.
Thank you very much. I think that then concludes the session for this time, and wishing you all a nice, I would say, end of the summer and perhaps soon start of autumn. Thank you.
Yeah.