Hello, warmly welcome to Orthex half-year report. It's a pleasure to have Saara Mäkelä, 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 Rosenlew, 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 of the presentation. I'll kick off here and share with you how things have been progressing. 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 Orthex does. Then a small reminder of the strategy. The interesting parts presented by Saara, those are the financials.
We'll leave some room for Q&As. Just a brief introduction to those who haven't followed us that much. Orthex 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 U.K., Germany and France. We have three factories of our own, and we have a new warehouse on the border between Germany and France to serve Europe. There's about 300 Orthex people in our organization. We've been growing a little bit now with demand going up and factories needing to produce even more. 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.
90% of our products are produced under our own brands. 90% of our products are actually produced in our own factories, so we have full control over the quality and the production of those. A big focus on sustainability. Our three brands, perhaps in Finland, mostly known is Orthex, then we have in the kitchen segment, we have GastroMax, and then we have SmartStore in the storage category. Storage, 64% of sales. Clearly the biggest category we have, the fastest-growing, and also probably let's say the widest assortment of home storage of high quality for the consumer. Kitchen category, 23% of sales. We have two smaller categories. 1 is home and yard, quite traditional products, sauna products, mailboxes and so on. We have plant care, which is also 6% of sales during H1.
All of those plant care products are made of recycled plastics. Award-winning functional products with a nice Nordic design that doesn't grow old in your eyes. The idea is that you don't want to throw away the products because they are a bit timeless. Long-lasting. 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? Again, about 10% of sales comes from new products. We're bringing new interesting news to the market, and hopefully we stay relevant. We also bring new interesting raw materials to the market with a mission to make everyday life easier for you and me.
Going into what has been going on during the first half and looking at the summary, I think, first of all, continued strong growth in all markets and product categories, which means that net sales, invoiced 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 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 negatives. I'll spend a bit more time on a later slide on that. 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%, the adjusted EBITDA grew to EUR 5.9 million. In total net sales EUR 43.8 million during H1 compared to EUR 34 million last year. When you look at the invoiced sales, 27.9% and EUR 45 million respectively. There are some rebates and some outlet sales that explains the difference here between invoiced and net sales. Looking at EBITDA, a nice growth to EUR 5.9 million from EUR 5.1 million. The adjusted margin, I think given the higher raw material prices, quite naturally a bit down relatively to 13.6%. The net debt to EBITDA ratio was at 1.5x. Net cash flow EUR 5.4 million from operations when we did EUR 4.5 million last year during the same period.
Looking at the second quarter, I think here we can see healthy sales growth at 25.5%, taking up sales about EUR 20 million- EUR 22.2 million. Invoice sales, a bit slower here. You can see the effect of actually a few of our own We have an outlet tent in conjunction with our Swedish factory in Tingsryd. We have an outlet in Lohja, and the sales there clearly have gone well, and that explains part of the difference here. Adjusted EBITDA, EUR 2.6 million, when we did EUR 3.2 million. The raw material prices in the comparison period are much higher this year than what they were last year. That also gives the percentage 11.9% compared to 17.9%. I think still with the strong top-line growth, we're quite pleased with delivering the EBITDA at this level. The cash flow from operations at EUR 2.2 million.
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. Looking at the Nordics growing at about 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. It's according to strategy to grow faster on the bigger European markets. Of course, not forgetting the Nordics, which are core to us to perform well with our partners and customers. 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 Outside Nordics grew by 45.8% compared to last year's Q2 at 47%. The good growth outside of Nordics continues. If we look at the categories, storage, as you remember, is the biggest category for us and also the fastest-growing, and it's clearly visible also during this period. Here is, 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 EUR 28.4 million. All the categories actually growing nicely, both in the first half of the year and in Q2. That's according to plan. A small note here.
We actually sold our snow toys, our sledges, to a Finnish company who continues producing in Finland. That's a small part of our home and yard product group. That was actually to give room for production of products that then serves a wider purpose. 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 first of all, closedowns and some markets with shops where you haven't been allowed into the stores. It's been very hard to meet new customers physically. Fairs have been hard to organize, and so on.
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 or you cook at home and so on. That suits our portfolio quite well. 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. I'm happy we haven't been affected that much by corona. We haven't had any major outbreaks, which of course is positive. 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. 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 Lohja factory in 2020. 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. We have made a decision based on this to also include both our Swedish factories in the renewable energy program. We will report the full effect of that once we have some more time behind us. All our production is now based on renewable energy. That's part of our target to become carbon neutral in production by the year 2030. A few words on strategy and what we are looking to achieve.
Our main ambition is to become the number one brand in the storage product category throughout Europe. It's also to strengthen our position as the leading household, or as a leading household company in the Nordics. 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. Keep winning in the Nordics, 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 two 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. We believe that them 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. 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 good thing to have.
I think it will become mandatory. Hopefully we can be showing the way in sustainability in the industry. Innovation is key. High innovation rates, doing well on that has been one of the routes to success so far. We'll keep up the focus on innovation and bringing new, interesting things to the market. 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 the 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. The long-term financial targets, you can see that sales have been growing quite fast at the moment, and H1 reported last period is as much as 28.8% in total and 47% outside the Nordics.
Our targets are more long-term. 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% on EBITA, pressed by high 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, 2.5x or below 2.5x could temporarily be above that during M&As or acquisitions. At the moment, we are at 1.5x net debt compared to EBITDA. 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.
That brings me to the financials, and Saara will talk a little bit more in detail about the things I've just said and a bit more.
Thank you, Alexander. As Alexander presented already, we had a really strong sales growth also during quarter two. Net sales growth was 25.5%, 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%. 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 assortment of the existing customers, we are winning market shares through those actions. Raw material prices started to peak at the end of quarter one, extremely high prices are affecting our gross margin during reporting period. Our gross margin percent decreased from 32.9%- 35.2%.
Due to decreased gross margin, our adjusted EBITDA decreased from EUR 3.2 million- EUR 2.6 million. Driven by strong sales growth, the cumulative adjusted EBITDA margin is EUR 0.8 million above last year. The EBITDA margin dropped from 15%- 13.6%. Of course, we have initiated measures to mitigate the effects of extraordinarily high raw material prices, but it will take some time to get the effects visible in our figures. 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 one, 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 world.
They are global challenges and for all plastic producers. Also, very high logistics cost limit the imports from, for example, Asia to European Union. 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 increases and cost savings. That means that even if we react to price increases, it takes some time before it can be seen in our figures. The next slide, this presents the spread between C3 and IC.
Basically, price of the raw material and price of the raw material for raw material. This presents the margin what raw material suppliers are currently getting. Margins has doubled during last months. It has stayed on very high level already for some months. It remains to be seen how long they can keep this kind of margin levels. Investments during first half of the year were EUR 2 million. That's EUR 1.2 million 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. Last year, investments were mainly made during last half of the year. This year we have been investing to secure the capacity as fast as possible.
Our net debt was, at the end of the period, EUR 27.2 million, and leverage was 1.5x. It stayed on the same level as after quarter one. Just to mention that pension liabilities and lease liabilities are included in the net debt calculation. Couple of our key figures. At the end of the quarter, balance sheet total, EUR 87.9 million. Net effect of the listing, which was carried out during the quarter one, was EUR 9.3 million, due to the share issue we had at the same time with the 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. Total listing costs during this year were EUR 2.3 million, of which EUR 1.5 million affected operating profit negatively. Those were the financials, and then Alexander will continue.
Just to give you a small overview of how our Board looks like now. We had an extraordinary general meeting and elected a fifth member to the team. Warmly welcoming Jens-Peter Poulsen, who has a broad experience from LEGO and now for a long time already, heading up the kitchen business as the CEO of Kvik. He's Danish and has a good experience in international strategy and sales. That's a nice addition to our strong Board of Directors. This is how it looks like today. 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. In summary, we've seen continued strong sales growth, both in the Nordic and especially in the outside Nordic markets. Saara touched base on the exceptionally high raw material prices and how that has affected our relative profitability. Of course, what we've been doing is adapting to the higher cost levels.
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 profitabilities. However, we're not taking down our long-term goal of 18% EBITDA 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. Thank you for all of your questions. 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. There's a small effect already on price increases. Our ambition is to be long-term also when we look at price increase. We don't like fluctuations, 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. Continuing on plastic prices and prices. Plastic prices have remained at highly elevated level. What's your expectation for the rest of the year? 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. The underlying raw material for raw material producers has not gone up as much as the price of our raw material. 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? That's a million-dollar question, so I won't speculate too much on that, but the situation is extraordinary at the moment.
Mm-hmm. For Saara or both of you, Saara 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. Of course, when the prices increase for us, if it's a source product or if it's a raw material for our own products, then we react by increasing the prices to customers and to consumers in those cases. 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. We are ready to increase prices again in case this situation continues for a longer time.
Thanks, Saara. Moving on to customers. Could you open up your development within European retailers? For example, have you been able to increase the number of retailers in Europe 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. You have to perform well in this smaller universe. When that goes according to plan or better, then you are allowed into more stores and with a wider assortment. That's absolutely the ambition we have, and many of the European retailers have stores, not only in one market, but in plenty of the markets. 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. Continuing on the customers. How has the pandemic affected your ability to land new key 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. Looking just at compared to how we used to do things, we used to meet our new customers in fairs, and we used to meet them physically. Of course, that's one way of doing things. 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 lived through the situation and been able to also meet new customers.
Thank you. Going on to sustainability. What is the share of the renewable raw materials at this moment on H1? Will this increase compared to 2020 when it was around 14%?
Saara, 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, that's food approval. You can't use recycled material today, especially not post-consumer recycled material today, for products with food contact. A lot of our products have the food contact. When you look at the amount of both bio and recycled, those have been growing really fast for us. 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. Still happy with the development. Saara, you might want to end there.
Yeah, I think that was basically all. With the new customers, we've been selling a lot clear boxes, which is the core of the range, of course. That's affecting that the share is not increasing as fast as we would like it to increase, but it is growing, and we are working hard on that all the time.
Maybe one comment there still. It's durable products designed to last tens of years, and they can all be recycled at the end of the lifespan. 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 and years.
Yes. Thank you. Going to the gross margin. Could you comment on gross margin seasonality in 2020? Should we expect higher margin pressure from increased plastic prices for H2 than seen in Q2?
Last year, we had a drop in raw material prices. When COVID hit the world, prices went dramatically down, and it started to go up after summer. During the quarter two, prices were on a low level last year, and that had a positive effect on the margin. This year, the case is the opposite. The spread between last year's figures and this year's raw material prices is exceptionally high. That, of course, can be seen in our gross margin, unfortunately. Very hard to say how it's going to continue. As Alexander also mentioned already, it's only guessing how long suppliers can keep that kind of margin levels for them. For sure, if the prices stay on this level, they will be pressured to continue increasing our prices to fight for the margins.
Thank you. How does Orthex 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. Of course, we always look seriously at good opportunities around that, and especially if it can include sustainability or something else into it.
Yes. I've noticed that SmartStore Collect is out of stock from some of the shops. Do you have capacity challenges?
Maybe I could comment on this. In July, we usually have a maintenance break at all our factories. We have to close the factory to keep the machine in a top condition. 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. Moving to the sales for the rest of the world. Rest of the world revenue grew 120% in Q2. From which country does this mostly come from?
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, and we have been seen in the U.S. and so on. The U.S. and The Container Store, which is one of the forerunners in selling storage products, is clearly an important customer for us. It's U.S., for example, as well.
Yes. Thank you. To investments. Could you give an estimate of your capital expenditure level in 2021? It was EUR 2.8 million 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. What we communicated in quarter one reporting is that we decided to bring forward one big machine. The investment was close to EUR 1 million. That is the exceptional decision what was taken. That was in our strategy originally planned for year 2022, and we decided to take that earlier. Otherwise, there are no changes to the plans and levels. That's the exceptional case for this year.
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 impact 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 two days ago. It is 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. For some certain product groups where the demand is high, it will help a lot.
Thank you. 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. Since we launched the SmartStore Collect range a year ago spring, we have actually added new size to that range. We've been developing that SmartStore Collect range, and also we've been launching new products for the SmartStore Compact range, new sizes for those boxes and new very beautiful and functional graters to the GastroMax kitchen range. Quite a lot of novelties since last spring. Okay. 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 the figures. Maybe it's good to comment that due to corona, we have been very careful at the factories, and people with any small symptoms, they have stayed at home. It's been very important for us to secure that factories are working and we have enough people so that machines are running 24/7.
Good. About competitors. Has 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, SmartStore Collect. How big percentage of your sales in H1 came from new products?
Hanna, do you want to take that one?
Yes. I think in H1, we are at the level of around 8% at the moment on new products.
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 basic SmartStore products have been increasing quite much, and then you can see it in the share of novelties.
Yes.
The ambition was 10%, so we are very close to the target. That's the strategy, to be around 10%, so quite in line.
Yes. How much does the new investments bring new capacity to you? There's been some talk about the capacity for EUR 110 million. Will it increase from that?
I can at least start. We have been investing according to the plan. The change compared to the plan was that we bought this one machine earlier than planned originally. That's basically the change. That was included in the EUR 110 million capacity investment plan.
Thank you. Have you planned increasing your capacity with M&As in Europe, for example?
We look seriously at all the opportunities out there, and clearly M&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, unless you bring on more. 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. 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 working on their own web stores. 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. It's for sure growing and an interesting channel both to be visible and to grow in. Regarding Amazon, I think we have progressed in a way nicely because we have opened our own brand sites in France, U.K., 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. Maybe one last one and then we finish. Could you comment on OpEx level and how much temporary cost savings in Q2 due to restrictions on traveling, et cetera?
Compared to last year's Q2, there are no real savings because there was no traveling last year either. 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 hundred thousand euros in a half year. It remains to be seen also how much of the meetings and customer meetings will be kept online also in the future. Difficult to estimate, but compared to last year, there is no big change.
Thank you, Saara. Now I think we've hopefully answered to 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.