Hello and warmly welcome to Ortek's half year report. It's a pleasure to have Sarah Makela, our CFO, with us and Hanna Kukkonen, our CMO, who will help with the questions at the end. Just a small reminder, my name is Alexander Rosenlev, and we will take you through how the first half of the year has gone. There's a chat where you can post your questions, and we are selecting and hopefully, we can answer as many as possible at the end on the presentation. So, I'll kick off here and share with you share with you how things have been progressing.
So we'll do a short introduction of our company, then look at January to June. In brief. We'll touch base on sustainability, which is an important part of what Ortex does. And then a small reminder of the strategy, the interesting parts presented by Sarah, those are the financials. And then we'll leave some room for Q and As.
So, just a brief introduction to those to who haven't followed us that much. Ortex is a leading Nordic producer of everyday household goods with the intention to make everyday life easier for our consumers. We have sales offices in all the Nordic countries and then in the UK, Germany and France. We have 3 factories of our own, and we have a new warehouse on the border between Germany and France to serve Europe. There's about 300 Ortex people in our organization.
We've been growing a little bit now with demand going up and factories needing to produce even more. So it's been positive times in the factories and really good work there. 40 different countries with customers more or less around the world. However, the main markets you can see in the map. And 90% of our products are produced under our own brands.
And 90% of our products are actually produced in our own factories. So we have full control over the quality and the production of those and a big focus on sustainability. Our 3 brands, perhaps in Finland mostly known is Ortex, but then we have in the kitchen segment, We have Gastromats and then we have SmartStore in the storage category. So storage, 64% of sales, clearly the biggest category we have, the fastest growing and also probably the, let's say, the widest assortment of home storage of high quality for the consumer. Kitchen category, 23% of sales and then we have 2 smaller categories.
1 is home and yard, quite traditional products, sauna products, mailboxes and so on. Then we have plant care, which is also 6 percent of sales during H1. And all of those plant care products are made of recycled plastics. So, award winning functional products with a nice Nordic design that doesn't grow old in your eyes. So, the idea is that that you don't want to throw away the products because they are a bit timeless.
Long lasting and then We focus on sustainability in everything we do. Actually, all the decisions we make, we always ask the question, what's the impact on the environment and what's the sustainability of that decision. And then again, about 10% of sales comes from new products. So we are bringing new interesting news to the market and hopefully, will stay relevant. We'll also bring new interesting raw materials to the market with a mission to make everyday life easier for you and me.
So going into what has been going on during the first half and looking at the summary, I think, 1st of all, continued strong growth in all markets and product categories, which means that net sales, invoice sales has gone up. I think what is particularly interesting here is growth both on the home market in the Nordics, but also outside of the Nordics. We'll go in a bit into the details of that. COVID, I think everybody has been affected one way or the other by COVID. There has been both positive and negative.
So I'll spend a bit more time on a later slide on that. And then raw material prices, the development is still tough. Prices are high. However, we have been able to get raw material, which is, of course, the primary thing when you produce things that you have the raw material to use in your production. We'll spend a bit more time on that as well in the financial section.
If you
look at the net sales growing by 28.8 percent and the adjusted EBITA grew to CHF 5,900,000. So total net sales CHF 43.8 during H1 compared to 34 last year. And then when you look at the invoice sales, 27,900,000 and then 45,000,000 respectively. There are some rebates and some outlet sales explains the difference here between invoice and net sales. And looking at EBITA, nice growth to CHF5.9 million from CHF5.1 million.
And the adjusted margin, I think given the higher raw material price is quite naturally a bit down relatively to 13.6. And the net debt to EBITDA ratio was at 1.5. Net cash flow, CHF 5,400,000 from operations when we did 4.5% last year during the same period. Then looking at the Q2, I think here, we can see healthy sales growth at 25.5 percent, taking up sales above CHF20 1,000,000, CHF22.2 1,000,000 and then invoice sales A bit slower here, you can see the effect of actually a few of our own. We have an outlet, Tintin, in conjunction with our Swedish factory in Tingsdrub.
And then we have an outlet in Lohria, and the sales there clearly have gone well, and that explains part of the difference here. Adjusted EBITA, CHF2,600,000 when we did CHF3,200,000,000. The raw material prices in the comparison period are much, much higher this year than what they were last year. And that also gives the percentage 11.9% compared to 17.9%. So I think still with the strong top line growth, we are We're quite pleased with delivering the EBITA at this level and the cash flow from operations at CHF 2,200,000.
Then looking a bit more in detail on what has been going on and where, I think That's probably one of the most interesting things for us because our strategy is to grow double the pace outside of the Nordics. So, looking at the Nordics growing at above 24%, but then looking at rest of Europe growing at 40% and then rest of the world, which includes the U. S. And other markets, almost 100% up, of course, from quite small numbers. So it's according to strategy to grow faster on the bigger European markets.
And then, of course, not forgetting the Nordics, which are core to us to perform well with our partners and customers. So then looking at Q2, I think the same development there in Q2. If we combine rest of Europe and the rest of the world, one could say that the Nordics grew by Outside Nordics grew by 45.8% compared to last year's Q2 at 47%. So the good growth outside of Nordic continues. Then if we look at the categories, storage, as you remember, It's the biggest category for us and also the fastest growing, and it's clearly visible also during this period.
Here, it's, I think quite a good picture of the relative sizes of the categories in the diagram where you can see the impact of the size of storage with a healthy growth up to €28,400,000 But all the categories actually growing nicely, both in the first half of the year and in Q2. So that's according to plan. Then a small note here, we actually sold our snow toys, our sledge is to a Finnish company who continues producing in Finland. And that's a small part of our Home and Yard Product Group. And that was actually to give room for production of products that then serves a wider purpose and also, of course, a way to secure growth capacity for us and focus on the categories where we have decided in the strategy to be strong.
Corona, I couldn't, of course, not speak about corona. It's been, in a way, a quite strange period with, 1st of all, I mean, close downs and some markets with shops where you haven't been allowed into the stores. It's been very hard to meet new customers physically. Fears have been hard to organize and so on. But at the same time, I think people have spent more time at home, especially in the Nordics, which has a positive effect on our product groups where you organize your homes and or you cook at home and so on, that suits our portfolio quite well.
But so there's pluses and minuses on this. I think for us, The first ambition has been to keep our personnel healthy and to ensure that it's safe to work in our factories. And I'm happy we haven't been affected that much by corona. We haven't had any major outbreaks, which is, of course, is positive. So let's see where the world goes.
One effect, of course, of the situation we have today is that the demand for raw material is still high, and that means high prices. So that's one of the corona effects that we also can see at the moment. Sustainability, I couldn't not speak about sustainability. We have decided already to move to renewable energy, and that was done in our Lohia factory in 2020. And I'm happy to say that it has actually reduced the equivalent CO2 footprint from that factory by 600,000 kilos, which is about the same amount as driving 100 times around the globe.
Now, we have made a decision based on this to also include both our Swedish factories in the renewable energy program, and we will report the full effect of that once we have some more time behind us. But all our production is now based on renewable energy. So that's part of our target to become carbon neutral in production by the year 23rd. A few words on strategy and what we are looking to achieve. So our main ambition is to become the number one brand in the storage product category throughout Europe.
And it's also to strengthen our position as the leading household or as a leading household company in the Nordics. So this can be achieved through a few steps we've identified. There are, for sure, many other steps as well, but these are those which we feel are the most important. So keep winning in the Nord. It's bringing new interesting products, serving our customers better, helping to implement the stores so they are appealing for the consumer and they find what they want to buy and want to shop for.
Also, related to the store operations is clearly online. We believe that online is growing and fired by COVID. It's growing faster. And we want to be visible and present there as much as we are visible and present in the physical stores. The box in the middle, branded number 2 here is actually the export markets and with the focus on the big European storage markets.
We have still a very small market share in these markets and we believe that then being so big, there's a good opportunity to grow for us, both through existing key account customers, but also by landing new key accounts and new customers. And this all has to be done with a clear strategy keeping the storage in mind, but also our other categories. We believe that sustainability will not only be a and sort of a good thing to have. I think it will become mandatory. And hopefully, we can be showing the way in sustainability in the industry.
Innovation is key. I mean, high innovation rates, doing well on that has been one of the routes to success so far. So, we'll keep up the focus on innovation and bringing new interesting things to the market. So those are the steps we are aiming for and the box up in the right hand corner. Of course, market consolidation is something we look seriously at.
It's quite a fragmented market out in Europe, and It brings many thoughts and many interesting opportunities that we have to look carefully at and see what it brings. So the long term financial targets, You can see that we've been sales been growing quite fast at the moment, and H1 reported last period is as much as 28.8 percent in total and 47% outside the Nordics. Our targets are more long term. And we believe that over time, we would have as the main goal to grow above 5% as a company and outside the Nordic, double that speed. On the profitability side, the latest period at 13.6 percent on EBITA, pressed by higher raw material prices, We don't change the long term goals here.
We believe this company can do 18% on EBITA long term. On the leverage, 2.5 or below 2.5 could temporarily be above that during M and As or acquisitions. At the moment, we are at 1.5 net debt compared to EBITDA. And then on dividends, the idea is to pay out dividend twice a year and hopefully raising dividend increasing dividend of around 50% or more of the net profits is the goal long term. So that brings me to the financials and Sarah will talk a little bit more in detail about the things I've just said and a bit more.
Thank you, Aleksander. So as Alexander presented already, we had a really strong sales growth also during quarter 2. Net sales growth was 25.5 percent and it takes us cumulatively to 28.8% net sales growth. Storage category was growing the fastest and markets outside Nordics as well. Outside Nordics, we were able to grow Up to 47%.
And we are really proud of our sales guys on the field who've been doing amazing job Despite all lockdowns and challenges we've had due to corona, we have been able to open new customers in Central Europe. We have been able to widen the distribution and In Central New York, we have been able to widen the distribution and assortment of the existing customers and We are winning market shares through those actions. Raw material prices started to peak at the end of the quarter 1 and extremely high prices are affecting our gross margin During reporting period, our gross margin percent decreased from 32.9% to 35.2%. Due to decreased gross margin, our adjusted EBITDA decreased from €3,200,000 to €2,600,000 Driven by strong sales growth, the cumulative adjusted EBITA margin is €800,000 above last year. But the EBITA margin dropped from 15% to 13.6%.
And of course, we have initiated measures to mitigate the effects of extraordinary higher raw material prices, but it will take some time to get the effects It's visible in our figures. Then a couple of slides Regarding raw material prices, which are giving us some headache. You can see that the Raw material prices really peaked up at the end of the quarter 1. And now they are affecting the figures. And they've been already some time on extremely and almost extraordinary high level.
Demand has been globally very high and there are a lot of logistics challenges around the So they are global challenges for all plastic producers. Also very high logistics cost limit imports from, for example, Asia to European Union. So that is also keeping the prices up. And currently, unpredictability is very high in raw material prices and Price changes might affect our profitability as there is a time delay when implementing price increase in sek cost savings. So that means that even if we react to price increases, it takes some time before it can be seen in our figures.
Then the next slide, this presents a spread In C3 and I see, so basically price of the raw material and price of the raw material for raw material. And this presents The margin what raw material suppliers are currently getting and margins has doubled during last months. And it has stayed on very high level already for some months. And it remains to be seen How long they can keep this kind of margin levels. Investments during the first half of the year were €2,100,000 and that's €1,200,000 higher compared to last year.
€200,000 higher compared to last year. Our investments are progressing according to the plan. Due to high demand, the investment phasing will be different compared to last year. So last year, investments were mainly made during Last half of the year and this year, we have been investing to secure the capacity as fast as possible. And our net debt was at the end of the period €27,200,000 And leverage was 1.5, and it stayed on the same level as after quarter 1.
And just to mention that pension liabilities and lease liabilities are included in the net debt calculation. Then a couple of key figures. At the end of the quarter, balance sheet totaled €87,900,000 Net effect of the listing, which was carried out during the quarter 1, was SEK 9,300,000 due to the share issue we had at the St. David's Listing. Our equity ratio increased already During last quarter to 33%, and it was on the same level at the end of reporting period as well.
And total listing costs during this year were €2,300,000 or it's €1,500,000 affected operating profit Negatively. Those were the financials and then Alexander will continue.
And just to give you a small overview of how our board looks like now, we had an extraordinary meeting, general meeting and elected a 5th member to the team. So warmly welcoming Jens Petter Poelsen, who has a broad experience from Lego and now for a long time already heading up the kitchen business as the CEO of Quick. His Danish and has a good experience in International Strategy and Sales. So, that's a nice addition to our strong Board of Directors. So, this is how it looks like today.
And going on to the next slide, which is more or less a summary. Before that, clearly, this is the place to thank the employees of the company as well for a good first half of the year during quite strange conditions with COVID and all of that and also the factories for ramping up and being able to deliver when demand is growing as fast as we have seen in the numbers. So we in summary, we've seen continued strong sales growth both in the Nordic and especially in the outside Nordic markets. Sarah touched based on the exceptionally high raw material prices and how that has affected our relative profitability. And then, of course, what we've been doing is adapting to the higher cost levels.
So, it means that we have taken measures, We will take measures, but it's sometimes a lag in timing between the measures and when they can be implemented on the market, which means that there's fluctuations and there's a risk on short term Profabilities. However, we're not taking down our long term goal of 18% EBITA going forward. That concludes the presentation, and now we're happy to answer any questions you might have.
Yes. There are a few questions in the chat. So thank you for Olof, yes. Okay. Questions.
So I'll start from the beginning here. Could you open up how much of the strong growth In Q2 was due to volume growth and how much due to price increases? How much price increases you have planned for H2?
I can give that a shot. I think most of the growth there is in Q2 is actually due to increase in demand, new customers, better distribution of the products, new products on the market and so on. And then there's a small effect already on price increases. Then our ambition is to be long term also when we look at price increase, we don't like fluctuations. So thinking about how we're doing it is When there's a need for price increases, we take them.
However, there's quite often a lag between the decision and the implementation.
Thank you. Then continuing on plastic prices and prices, so plastic prices Have remained at highly elevated level. What's your expectation for the rest of the year? And then maybe another question linked to this, Are there still production related bottlenecks that affect your raw material prices?
I think, in general, on the market, and this is common knowledge, raw material prices are high. And The main reason is actually the supply of raw materials. So the underlying raw material for raw material producers has not gone up as much as the price of our raw material. And then I think the big question is how long can the very high margin that the producers are now earning, how long can that go on? And that's a $1,000,000 question.
So, I won't speculate too much on that, but it's the situation is extraordinary at the moment.
And then for Sarah or both of you, Sarah mentioned that the measures regarding the high raw material prices, Could you please be a bit more specific on this one? What kind of measures have been done and also will be done?
Yeah. Alexander already mentioned the price increases. So, of course, when the prices increase for us, I mean, if it's a Sourced product or if it's a raw material for our own production, we react by increasing the prices to To customers and to consumers in those cases. And that, of course, has been done. As we both mentioned with Alexander, there is a Time difference when you can see the effect of the increases.
And I mean, we are ready to increase prices again in case the situation continues for a longer time.
Thanks, Sara. Then moving on to customers. So, could you open up your development within European retailers? For example, have you been able to increase the number of retailers in Europe or and SKUs within retailers?
I think a very good question and that's absolutely our ambition to both get new customers. And also, When you enter a really big European customer, you might first get a quite narrow assortment and maybe a little part of the shops they have. And then you have to perform well in this smaller universe. And when that goes according to plan or better than you are and then you're allowed into more stores and with a wider assortment. So that's absolutely the ambition we have.
Many of the European retailers have stores, not only in one market, but in plenty of the markets. So growing with the big European players, is part of the strategy. And then I think the answer is quite clear. If you look at the numbers, Something has been going on, and this is part of it, both new customers and then growing distribution and a wider assortment. Still a lot remains to be done.
Yes. Thank you. And then continuing on the customers. So how has the pandemic Affected your ability to land UK customers, has it caused delays when it comes to negotiations, for example?
Maybe I can comment on that one as well. I think a comparison is always hard to do because we haven't seen a similar time without the pandemic. But looking just at compared to how we used to do things, we used to meet our new customers in fares and we used to meet them physically. And, of course, that's one way of doing things. And I think you have to fight a little bit harder to get the same experience online, and you have to use different methods to be an interesting supplier.
I think given the Conditions we have had, I'm quite impressed by the commercial team and how they have actually live through the situation and been able to also meet new customers.
Thank you. Then going on to sustainability, so what is the share of the renewable raw materials at this moment on H1 and will this increase compared to 2020 when it was around 14%?
Sarah, if you want to chip in, I could say that the strategy is clearly to increase the renewable raw materials and also, of course, the recycled materials. There are a few things which sometimes can make this a bit difficult, and that's food approval. You can't use recycled material today and not especially not post consumer recycled material today for products with food contact. And a lot of our products have the food contact. Then when you look at the amount of both bio and recycled, those have been growing really fast for us.
But since the products with food contacts are also growing and the transparent products are also growing, the relative share of those are not growing as fast as maybe we would hope for, but still happy with the development. Sarah, you might want to end there?
Yeah, I think that was basically all. I mean, with the new customers, we've been selling a lot of clear boxes, which is the core of the race, of course. So I mean, that's affecting that the share is not increasing as fast as we would like to like it decrease. But it is growing and we are working hard on that all the time.
Maybe one comment there, still. I mean, it's Products, durable products designed to last tens of years. So and they can all be recycled at the end of the lifespan. So, actually, part of the sustainability is producing products with such a quality that you don't have to throw them away. You can have them for years years.
Yes. Thank you. Then going to the Gross margin, so would you comment on gross margin seasonality in 2020? And should we expect higher margin pressure from increased plastic Prices for H2 than seen in Q2.
Last year, I mean, we had a Drop in raw material prices. So when corona hit the world, prices went dramatically down and it started to go up after summer. So During the quarter, too, prices were on a low level last year, and that had a positive effect on the margin. And this year, the Case is the opposite. So sort of the spread between last year's figures and this year's raw material prices is exceptionally high.
And that, of course, can be seen in our gross margin, unfortunately. Very hard to say how it's going to continue. I mean, as Alexander also mentioned already, it's only guessing how long suppliers can keep that kind of margin levels for them. But for sure, if the prices stay on this level, they will be Pleasure to continue increasing our prices to fight for the margins.
Thank you. Then how does Ortex see the opportunity in expanding into new growing product categories that uses a lot of plastic? Could, for example, sports like disc golf be interesting for you?
I think a positive question and always nice with new ideas. I think at the moment, the strategy is quite clear for us. We are aiming to be the best in storage and the categories where we are. But, of course, we always look seriously at good opportunities around that and especially if it can include sustainability or something else into it.
Yes. And then I've noticed that Smart Stock Collect is out of stock from some of the shops. Do you have capacity challenges?
Maybe I could comment on this. So in July, we usually have a maintenance break at all our factories. So I mean, we have to close the factory to keep the machine in a top condition. So I mean, that might sometimes affect of course, we are building stocks before the maintenance breaks, but sometimes it might surprise us. And that might affect the availability.
Yes. Thank you. Then moving to the Sales for the rest of the world. So, rest of the world revenue grew 120% in Q2. From which country does this mostly come
from. Well, in the reporting, we tend not to mention single countries, but What I can say is rest of the world, it includes, I think there was a comment on that We have been seen in Argentina, we have been seen in the U. S. And so on. The U.
S. And container store, which is one of the forerunners in selling storage products. He's clearly an important customer for us. So, it's U. S, for example, as well.
Yes. Thank you. Then to investments, Could you give an estimate of your capital expenditure level in 2021? It was €2,800,000 in H1 and you're still planning to do some major investments in H2. Is the year 2021 an exceptionally high CapEx level for you?
I could take this one. I mean, what we communicated after quarter in quarter one reporting is that we decided Bring forward one big machine. The investment was close to SEK1 1,000,000. So that is the exceptional decision what was taken. So that was In our strategy, we originally planned for year 2022, and we decided to take that earlier.
Otherwise, there are No changes to the plans and levers. That's the exceptional case for this year.
And someone is asking about this machine investment that is the new machine investment that has been decided to be done earlier, Now 2021 going to have impacts on early or late Q4. How much does that new machine grow your capacity?
It depends very much on product groups and so on. I'm happy I actually saw some pictures of the machine being moved into the factory here 2 days ago. So it's clearly being started up. And I hope that there will be no complications in the startup, which would mean that within a month, we would have that capacity fully available. And for some certain product groups where the demand is high, it will help a lot.
Thank you. Then there's a question about novelties. What are the most important novelties that you have brought to market after the SmartStore Collect Range, maybe I can answer it myself. So, since we launched the SmartSO Collect range last The spring or a year ago spring, we have actually added new size to that range. So, We've been developing that SmartStore Collect range and also we've been launching new products for the SmartStore Compact range, So, new sizes for those boxes and new, very beautiful and functional, a great taste to the Smart to the Dastromax Kitchen range, so quite a lot of novelty since last spring.
Okay. Then should we move on to employees? Your employee count Has been increasing nicely. Does that count summer employees or are all full time workers?
That's an FTE figure. So basically everybody, if it's a summer worker or full time worker, they are counted in FKS. But Maybe it's good to comment that due to corona, I mean, we have been very careful at the factories. And people only with any small students, they have stayed at home. So I mean, it's been very important for us to secure that Factories are working and we have enough people so that machines are running 20 fourseven.
Good. Then about competitors, have there been any consolidation on the market between competitors.
To our knowledge, no major consolidation at the moment during this period.
Okay. Yes. You have had some very good performing new products lately, for example, Smart Stock Collect. How big percentage of your sales in H1 came from new products?
Hanna, do you want to take that one?
Yes. I think we are at the in H1, We're at the level of around 8% at the moment on new products.
And then you can Sorry. There you can also see that as we have been opening so many new customers, it means that we start with the core range. And that's the reason why like basic smart store products have been increasing quite much. And then you can share it in the share of Novel, please. Yes.
The ambition was 10%. So we are very close to the target. And that's the strategy to be around 10%. So, quite in line.
Yes. Then how much does the new investments bring new capacity to you? There's been Sam talk about the capacity for €110,000,000 will it increase from that?
I can Natalie start. So I mean, we have been investing according to the plan. And the change compared to the plan was that we bought this one machine earlier than planned originally. So that's Basically, the change. So that was included in EUR 110,000,000 Capacity Investment Plan.
Thank you. Have you planned increasing your capacity with M and As in Europe, for example?
We look seriously at all the opportunities out there. And clearly, M and A is one way of increasing the capacity and being perhaps also closer to the growing markets.
There's a lot of questions and I think now I have one final one here, so unless you bring on more, but How much of the sales or revenue is coming from online shopping? Can you give some numbers how has online shopping improved and how is it going with Amazon.
Maybe a general comment on the categories where we operate. The sales online are not clearly as high as in fashion or electronics or travel. But still from a small base, there's a growth. And we have it divided between the pure online and then we have the normal retailers or the traditional retailers that are also work on their own web stores. So it's a bit hard to say exactly how much of, for example, a big retailer like Bauhaus is selling online if they are not disclosing the figures.
So but it's for sure growing and an interesting channel both to be visible and to grow with. Regarding Amazon, I think we have progressed in a way nicely because we have opened our own brand sites in France, UK, and Germany and are looking to expand that. Of course, we're available also in Sweden, which is one of the new Amazon markets. I think there's potential there as well.
Thank you. And maybe one last one and then we finish. So Could you comment on OpEx level and how much temporary cost savings in Q2 due to restrictions on traveling, etcetera?
Compared to last year's Q2, there are no real savings because there was no traveling last year either. I mean, nowadays, our field people are already traveling. All the bigger meetings and fairs are not yet happening. Hard to say it's a couple of €100,000 in a half year. But I mean, It remains to be seen also how much of the meetings and customer meetings will be kept online also in the future.
So Difficult to estimate, but compared to last year, there is no big change.
Thank you, Sara. And now, I think we've hopefully answered all of the questions in the chat.
Okay. Thank you very much from our side, and we'll tune out here and wish you a very nice day.
Thank you.