Good morning, everyone, to Orkla's Q4 presentation. And for those of you who are present here today, you have had seen the exclusive preview of the new ad of Pizza Grandiosa, which is, of course, a very well known brand in Norway. And actually in 2016, we sold more than 24,000,000 Hitza Grande Ocels in Norway. And for the first time in several years, we managed to increase our market share by as much as 2.5 percentage points. And also for the first time, we sold Pizza Grandiosa for more than NOK 1,000,000,000 in 2016.
And that's why I have this T shirt today. I promised the Grandiose team that if you have 2 consecutive quarters with market share growth or a full year market share growth, I promise to wear Gandhiosa T shirt on the quarterly presentation. So that's why. But then let's go to the financial figures and 2016. I remind you that we had a very, very strong Q4 'fifteen with 4.1% organic growth.
But still looking at Q4 'sixteen, we see solid improvement in both brand consumer goods and in Orkla Investments. The business area care had a quite slow start to the year, but has improved during the year and has 3 consecutive quarters of organic growth. Confectionery and Snacks delivered another very strong quarter. And I'm also happy to see that we have an underlying margin improvement and despite dilution from M and A. The acquisitions we did in 2016 and actually also in 2015 are going according to plan with synergies at or above target level.
In my presentation, I will focus on the full year results, and Jens will come back to the details on the quarter as well as full year. When we are leaving 2016, entering into 2017, we have a brand consumer goods company that are much stronger. Our revenues increased 14% during the year. That's partly due to organic growth and of course also due to M and A activities. Our adjusted EBIT increased 19%, supported, of course, also by M and A but also strong cost development and synergies throughout the value chain.
And our earnings per share increased by 30%, boosted by very good profit from SAPA. And the Board of Directors proposed to increase the dividend from NOK 2.50 to NOK 2.60 per share. In 2016, we ended the year with an organic growth of 1.8%. That is partly healthy volumemix and partly price. Of course, the organic growth is also supported by contribution from distribution agreement and especially from PepsiCo.
We have seen organic growth despite headwind on raw material prices, especially in food ingredients. I will come back to that. In sum, we see that the markets where we are operating are growing. However, the growth is somewhat lower towards the second half of twenty sixteen than the beginning. And we believe the growth is more in line at approximately 2%.
So that means with our 1.8%, we are slightly behind what we believe is the market growth. I'm sorry, I mixed up a little bit here. Okay. If we look at our the strategy that we communicated during Capital Markets Day in September 2015, we promised to continue to reallocate capital from noncore assets into brand consumer goods companies. And I think we have done that quite successfully during the year.
So I think we can tick off that. As mentioned, our organic growth is somewhat below what we estimate as the market grows, so I tick that off as a yellow. We also promised to deliver an EBIT growth of 6% to 9% on the business we had at the time when we announced the targets in September 2015. And we see a growth of 6.8%, so we can also tick that off. And we also promised to keep a stable dividend of at least NOK 2.50.
And the Board is, as I mentioned, proposing an increased dividend of NOK 0.1 to NOK 2.60 for 20 16. So I think we can tick off that as well. These are the growths I talked about. We see Orkla Food has a growth of 2.3%, of course, supported by the distribution agreement with PepsiCo. Confectionery Snacks delivers another very strong year, well above market growth in their categories.
As mentioned, KEA had a somewhat slow start, but had the 3 last quarters with organic growth. So altogether, we are quite satisfied with development in Care and especially the second half of the year. And Orkla Food Ingredients, as mentioned, has seen quite steep decline in some major raw material prices that hits the top line, and that is especially in Marzipan and in Butterblends. So that's about top line. And then I will talk about our cost development.
We have earlier, we have communicated this KPI, black over red, quite simple metrics where the black illustrates the organic growth and the red illustrates development in fixed cost level. And despite pushback from inflation and despite increased volumes, I'm very happy to see that the gap is increasing. And this is thanks to restructuring in supply chain, closing down factories and also through continuous efficiency in our operations. And, of course, also supported by successful integration of acquired companies during the year. We have also talked earlier a lot about utilizing the strength that lies within Orkla.
And we have done quite a lot of things. We have during 2016 announced closure of 8 factories. And actually since we started this restructuring program, we have announced closure of 23 factories altogether in 2.5 years. And less fewer factories, bigger fewer factories means that we can invest more in technology, more in automation, more in innovation and less in maintenance of buildings and old equipment. But there is a lot more to do realizing synergies throughout Orkla.
For instance, we have in Orkla, due to historic reasons, we have 27 different ERP systems. So we have started a project to see if it's feasible to develop and implement one common ERP system for the whole of Orkla. But we also see a lot of very good sales initiatives throughout the company. We have a lot more cross border innovations, taking successes from 1 market, introduce it in other markets, often under local brands, but the same product and based on the same consumer insight. We are sharing innovations, sharing consumer insights across markets, across business areas and business units.
And we are also leveraging on our sales force in the markets where we operate. And I think one very good example is Orkla Foods Norway. They have now taken over the sale and distribution of confectionery and snacks products in the Horeca channel. And that means that we will have a more powerful sales organization for confectionery snacks in this channel as well as we will reduce cost. And during the year, we have also coordinated and set up a central export organization to coordinate all export initiatives we do in the different business units and business areas into each single export market.
And as I think I said when we introduced or presented Q3, we also established online store at Alibaba on the Tmall in China selling Orkla products from several different companies and categories. During the year, we have also reallocated capital from noncore to our investment to brand consumer goods. We have freed up approximately SEK 1,800,000,000 of cash from noncore and invested approximately SEK2.7 billion in M and A in branded consumer goods. We have exited Grange fully. And through the acquisition of Hama in Czech Republic, we have really strengthened our position in Central and Eastern Europe together with our current business there, Vitama.
So now in Czech Republic, Slovakia, we are the largest supplier to the food retail sector. We have also doubled our business in painting tools through the acquisition of Harris in U. K. And we already had a painting tool business in U. K.
And those 2 combined will give us a very, very good position as well as possibility to utilize synergies as we go along. And when it comes to divestment, we will as I said earlier, we will continue to divest assets from Orkla Investments. But for us, it's more important to realize what we believe is fair value than time. We are not in a hurry. And I think Sapa is one such good example that being patient pays off.
Sapa had a very, very strong 2016 with EBIT improvement of 57% from SEK1.4 billion to close to SEK2.2 billion, really impressive performance. And that is thanks to partly the value add strategy that Sapa has taken on. That means that we are going out of commodity products, standardized profiles with low margins into more sophisticated products where we do more machining, more advanced surface treatment and working closer with the customers to make more specialized products where the value add is higher. But Sapa's performance is also improved by reduced cost in Extrusion Europe as well as successful restructuring of building and construction as well as precision tubing. So I think we can say today that the Sapa joint venture has been really successful.
This shows the historical development in EBIT and return on capital employed. And Sapa JV reached the targeted synergies 1 year ahead of plan and 30%, 40% ahead of what we believed was possible. And actually due to a very strong performance and a very strong balance sheet, Sapa is almost debt free by the end of 2016. The Board of Sapa proposed a dividend to the 2 shareholders of NOK 3,000,000,000. I also would like to remind you, and you can see that on the graphs here, that we are, of course, facing more tougher comparables as we go ahead.
But we still see potential improvement by doing more of the value add activities and utilizing the synergies that lies within Sapa. They also have a project called 1 Sapa actually. So we see an improvement potential ahead. So now Jens will take you through the details of Q4 as well as the full year figures.
Thank you, Petri. And as Petri mentioned, we saw progress both from the brand new consumer goods operations as well as Oikla Investments in 2016. Let's start by looking at some of the details and items on the P and L. First, I'm pleased to report that the group EBIT improved by 19% in the 4th quarter due to progress within branded consumer goods and the good contribution from Orkla Investments, mainly related to the sale of real estate assets. Restructuring and M and A activities within branded consumer goods both resulted in continued costs on the line item, other income and expenses.
Strong growth from SAPA lifted profits from JVs and associates to SEK161,000,000. I'll come back to more of the details on these line items later on. Overall, profit before tax increased by 42%, ending at SEK1.3 billion in the quarter. And this equates to an earnings per share of SEK1.09 and that's an increase of 49%. Branded consumer goods revenues also rose 5%, and the next slide shows the drivers behind this growth.
Revenue growth was mainly driven by acquisitions, primarily Hamme and Harris for 2016. Seadroat has now been in the company for a year and is included in the like for like figures in Q4. Organic growth should be seen against a very strong Q4 in 2015 when sales were boosted as Norwegian food retailers competed to offer the cheapest Christmas products. And that, as you know, includes many Orkla products. In the first time for the first time in a while, we have negative currency consolidation effects due to a stronger Norwegian kroner.
And if the exchange rates remain unchanged, we will continue to see negative translation effects going into 2017. Looking more on the details of our aggregated performance in the branded consumer goods area. Higher sales, cost improvements and acquisitions resulted in an EBIT growth of 5%. Our reported EBIT margin was on par with Q4 in 2015 despite, as Peter mentioned, the dilutive effect from acquired companies and distribution agreements. And we see continued improvement on the underlying margin of around 60 basis points for 2016.
That's driven by cost actions and synergies from acquisitions. Looking at each business area, I'll start with Orkla Foods. Compared with a very strong Q4 in 'fifteen, Foods had a moderate organic sales decline this quarter. Cost programs had positive effects on the profits. Higher one off costs in 2015 also explained part of the improvement in 2016.
The acquisition of Hamme contributed to reported growth both on sales and profits, but had a dilutive effect on the margins, as did the PepsiCo distribution agreement. And as you know, we focus a lot on innovations in Orkla. And I'll give you a few examples going through each of the business areas. Several companies within Foods have responded to the organic vegetarian and healthier trend. For example, as you see pictures here, the launch of a frozen vegetarian single serving meal was the strongest launch for Orkla Foods Sweden in 2016.
And then moving on to confectionery and snacks. I'm pleased to report another very strong quarter. The organic growth rate is nearly 5% over the year, and this is due to a broad based sales growth in most of our markets, especially Norway and Sweden. Innovations and new business such as distribution agreement with PepsiCo contributed to the sales growth. The rest of the portfolio also showed growth measured against a very strong quarter in 2015.
This sales growth in combination with lower advertising costs and cost improvements, especially within our Latvian business, resulted in EBIT improvements. And next, I'm really pleased that Orichlac Care delivered another quarter of organic growth. After a challenging start of 2016, Care improved steadily during the year and finished the year with an impressive 2.3% organic growth. For the full year, Orkla Care achieved positive organic growth despite still challenging market conditions. And I'm happy to see signs of improvement in the weight management categories as well in the home care segment in Q4.
The EBIT decline in Q4 was due to the termination of the Unilever distribution agreement and the sale of Seadroat products or brands, Assam and Alevo and higher marketing costs. And this higher marketing cost is ascribable to the Doctor. Greve line extension. In terms of innovation, the most important launch for 16 in Care was the extended Doctor. Greve range in Norway.
This required some additional investments, as I said, but it has already become a great success with number one positions in several categories. M and A had a dilutive effect on care margin. In addition, 2015 figures included, as I said, Unilever distribution with strong high margin sales. Lastly, let's look at Food Ingredients. The organic sales decline in Orkla Food Ingredients was related to price deflation in almonds and butter blends, as also Peter mentioned.
In addition, the loss of a tender contract in Norway in Q3 impacted sales in Q4. We have implemented costs programs and savings, including manning reductions to mitigate this negative effect. Profits were hurt by weak profitability in Butterblends, and this effect will be out of the comparable figures as from Q2 in 'seventeen. Poor performance in 2 local companies also had an impact on profits in the quarter, and the corrective actions have been implemented. Let's not forget that we have increased exposure in ice cream ingredients and are therefore more influenced by seasonal variations.
And as you might guess, these have negative impacts on the results in the winter season. Food Ingredients launched several new products under the Natuli brand, which is 100% organic and plant based brand. And the brand has more than doubled its revenues from approximately SEK 50,000,000 in 2014 to approximately $108,000,000 going out of 2016. So overall, Q4 has been a good quarter with EBIT growth of 5% in the branded consumer goods area. And with that, let's look at Orkla Investments.
Starting with the 2 fully consolidated areas, namely hydropower and In hydropower, higher prices did not fully compensate for a lower production. And this resulted in a drop in EBIT from Q4 2015. For the full year, higher prices resulted in EBIT growth despite lower production levels, so the opposite for the rest of the year. And the end of the year, looking at the reservoir levels, we expect lower productions lower production from hydropower going into the Q1 in 'seventeen. In line with our strategy, we continue to free up capital through sales of shares and real estate assets.
At the end of the year, our remaining portfolio of shares is close to 0, while real estate portfolio had a book value of around SEK 1,300,000,000. The real estate portfolio will increase in value as we start building the new headquarters later this autumn or later. Let's look at the largest assets within investments, and that's Sapa and Joktur. As Peter mentioned, Sapa has improved steadily over many consecutive quarters. And in Q4, underlying EBIT continued to increase.
And this increase was driven by a higher share of value added business as well as internal continuous improvements. The demand for extruded products increased both in Europe and North America. In Europe, the level of growth was has increased, and we expect the moderate growth rate to continue. Also in North America, markets are expected to grow moderately. Then moving on to Jotun.
Jotun continues to deliver volume growth and solid underlying profitability in 2016 measured against a record year of 'fifteen. And in fact, although somewhat lower, 2016 is actually the 2nd best Jotun year ever. Jotun had continued good development in the Decorative Paint segment and then notably the Middle East and Southeast Asia. And sales growth was, however, offset by weaker marine and offshore markets, especially during the second half of twenty sixteen. Higher provisions for claims and currency losses from the devaluation of the Egyptian pound resulted in profit decline for the Q4 and for the full year.
Jotun continues to invest in increased production capacity in line with the company's growth strategy. And the investment activity in 2016 was mainly related to new production facilities in Oman, the Philippines, Myanmar and Malaysia. In addition to the R and D and new headquarter office buildings in Sandvikoyt, Norway. So to recap, a strong progress seen from Orkla Investments, both from the fully consolidated businesses as well as joint ventures and associates. Moving on to net debt.
Operating cash flow was impacted by somewhat higher CapEx and working capital levels. Both relate to the structural changes in the supply chain in the branded consumer goods operations. In 2016, we have closed down 6 factories and started the process of closing down another 8. And we believe that CapEx levels will remain around the current level, as we see now, 4% of sales during the transformation phase. And then we shall revert to closer to historical levels, which is closer to 3% of sales.
The future investments should, however, be more focused on increased efficiency and innovation capabilities instead of maintaining a lot of smaller factories. Regarding working capital, inventory levels will most probably continue to be at a high level during this transformation. In the long run, we should be much more effective with our working capital with a more efficient supply chain structure. At the end of December, net interest bearing debt to EBITDA was 1.5x, and that's well below our targeted range. And the average maturity on net interest bearing debt was 3.3 years with an average interest cost of 1.7% in the quarter.
Now let's look at the dividend. We have paid a stable NOK 2.50, NOK 2.50 over the recent years. The Board proposes to increase the nominal ordinary dividend level to NOK2.60 for the financial year 2016. And finally, let me remind you of our financial planner and I hope to see many of you at our Investor Day in Norway in June. And with that, I'll leave the floor back to Petri for his final remarks.
Okay. Thank you, Jens. Before we open up for Q and A, I will just give some comments about what we're doing going forward and also show you some of our launches. We will continue to deliver on our strategy, and we will continue to have high operational focus. And that means that we will have very high focus on the black over red KPI, which is, as you have seen, have had a very good development the last 2 years.
But prior to that, it had a development where the cost increased too much. So that's important KPI. We will continue to realize synergies throughout the whole organization in supply chain, in the whole value chain, but also in SG and A and in sales and marketing and operating more as one Orkla. There is a lot of synergies from acquisitions, and we will continue to realize those synergies. And that is, of course, an important way for value creation.
But actually, the greatest potential lies in our existing business by improving our existing business on a day to day basis. We believe we are well on track to deliver on the financial targets that we set out in Capital Markets Day September 2015, and we will work hard to achieve the goals and to keep organic growth at a positive level. And just regarding organic growth, we have seen that a lot of our peers in Europe, in the Western markets, experienced a decline in Q4. So compared to that, we are happy with our organic growth, of course, in 2016, but even in Q4, even though it was low and we would like it to be higher. But before I finish, I'd like to show you a selection of our new innovations.
And I think this shows the strength of our innovation culture and how we respond to consumer trends that we see becoming more and more important. We have had a huge success in the health of Finland last year with great success. We are now launching it in Norway, the same products, but under a local Norwegian brand, Bordebra. And these are healthy breakfast products, granola, porridge and muslin and also super rice for dinner will be launched now in February. In Sweden, we are now also launching Palun Soup that you might you saw it on the ad movie.
These are chilled, super healthy and clean vegan soups. And actually, one portion of these soups cover 30% to 40% of your daily need for vegetables. And we see an increased demand for both vegetarian and vegan food. And we are also launching 3 new easy to cook vegan dishes under our Anamma brand in Sweden. And we see especially this trend, this consumer trend is very strong and much stronger in Sweden and partly Denmark than it is in Norway, but Norway is coming.
I mentioned consumer trends. And another important trend is that people want to indulge, but at the same time, they're also looking for healthier way to indulge with healthier snacking. So we are launching a new range of nut bars and snacks, perfect when you are a little hungry and you want a healthier snack. Popcorn, 3 different tastes and popcorn are naturally high on fiber and is probably the most healthy snack you can eat. New nuts produced dry roasted without oil and without added salt.
And also the Konmo brand in Norway, which is well known, I think, for all Norwegians, launched a whole grain they launched a whole grain biscuits in Norwegian markets. And last but not least, Sertra, cookies or snackers, introducing a new biscuit with less salt and fat than competing products and of course completely without palm oil, which is also an important consumer trend we see. When we acquired Sederot in Sweden, we also acquired the brand Grumma, which is a Swedish brand for an environmental friendly detergent. We have now made a complete makeover of the design, but also introduces Grummen with new and improved more efficient formulation. And it's also more environmentally friendly.
And last but not least, as Jens also mentioned, Orkla Food Ingredients have this Natuly brand. And we are now also launching organic smoothies under the Natuly brand. There is no dairy products included. It's just fruits and no added sugar at all. So this is the most healthy smoothie on the market.
So to conclude 2016, we are very pleased to report progress both in brand consumer goods and in Orkla Investments. But we are facing strong comparable quarters as we go ahead, and we have strong focus to continue to deliver organic top line and of course bottom line. We will continue to improve our cost position, and I am very pleased that we achieved underlying margin improvement in this quarter as well as 2016 in total, and we will continue to the hard work to reduce our costs and to improve margins as we go forward. But there is still a great potential. We still have even though we closed down 23 factories, we still have 105 left.
So we still have something to do also in 2017 and maybe even in 2018. And of course, as I've said many times, utilizing the scale, utilizing the synergies that lies within Orkla, working more as 1 Orkla. So we will continue. So with that, I will open up for Q and A.
Praveen
Ascolson, Carnegie. You got to help me out with the Orklaq here result. You seem rather satisfied. I don't quite understand that because it's about a year ago, you sold off the Assam brand and about a year ago, you handed back to Unilever brand. For the past 3 quarters, you've been delivering better results EBIT wise in Oirka Care.
This time you're well below. And you have even had to spend more advertising money on your Doctor. Greve brand, which has been in the stores for more than a year. So I'm just wondering what's really happened in Q4? Why the more advertising spend?
And why suddenly a bit below last year? Thank you.
Well, as mentioned, we had both Allevo, Assam and the Unilever brands in Q4 'fifteen with very good contribution. They are out of the figures for 'sixteen, and that's one part of the explanation. We have also introduced the new brand Doctor. Greve, and we have supported Doctor. Greve with quite substantial marketing efforts as well as increased marketing in total in the Care division.
Yes. I can add adjusted for the items that Peter explained now. We see an underlying growth in EBIT in Care. That is quite close to the underlying growth that we see for the total BCG area.
Looking into 2017, we have seen that Norwegian retail has made some promises to not increase the prices. We have seen this introduction of the best friend strategy by Irma Thusen. And we also see some increasing willingness to increase the share of private label in stores. So can you try to give some comments on how this is going to impact you and your products in 2017? And how you see to deliver organic growth and margins in 2017?
Yes.
Well, first of all, I'll just remind you that only 30% of our revenue is in Norway. 70% is outside Norway. We are best friends or at least we try to be best friend with all our customers. We saw a quite tough price competition by the end of 2015 and also towards Easter 20 16 in Norwegian markets, which, of course, drove volumes but also hampered profitability for the retailers. We don't see this I think the competition between the retailers in Norway is somewhat intensifying, but this is nothing different than what we've seen in other markets where we operate.
I'm not saying that it's going to be easy. It's a tough job and to fight against our competitors and of course fight against private label. But we have done that for many years, and we believe we will be able to do that also in 'seventeen and onwards.
Hello. Sigur Sannes, Stokhaler. A question about factories. How many KETCHIP factories do you have do Orkla have in Norway? And how many overall?
Yes. I think the catch I can talk a lot about catch up. The case is that just to answer your first question, we have one ketchup factory in Norway. Orkla, we are market leader in tomato ketchup in 9 countries in Europe. That's all the 9 countries where we are present.
We are in these 9 countries, we have 7 different brands. We have local strong brands and we have 9 different recipes. And we have too many ketchup factories. And even though we have 9 or 7 brands and 9 recipes, you don't need 7 or 9 factories. So in the future, we will have fewer factories.
I'm not able to tell the exact number, but we will of course have fewer factories also in the future. But in Norway, we have 1.
Martinsen, Saldan Skibank. I've got 2 questions. The first one relates to what we saw that Sapa, the Board of Directors in Sapa is proposing a dividend of SEK3 1,000,000,000, so half of it to Orkla. So could you please comment on your views on capital allocation going forward? You talked a bit about debt maturities.
You also had a comment about Sapa not being in a hurry, but any comments relating to M and As for branded consumer goods, please?
Yes. I can the first priority, as communicated many times, for us when it comes to capital allocation, is to grow the branded consumer goods part of Orkla and grow the earnings capacity and future dividend capacity. So that's the first priority. And having said that, we have a strong balance sheet. So then we are able to take advantage of opportunities that will arise according to our strategy.
To be a bit more specific when it comes to categories, public categories or regions you are looking at right now for Branded Consumer Goods?
The first priority is to grow geographically where we have a presence today. And that is mainly Scandinavia and the Nordics, Central and Eastern Europe. And then looking at the food ingredients and niches, like for instance, ice cream ingredients and wound care, we have a broader European perspective on the growth. So that's the growth, call it, access for Orkla.
And the second question is also regarding Sapa. We understand that there is more focus on value added products and services. So it sounds like there could be upside on the operating margin for Sapa. But could you please comment on what kind of effect that, let's say, change would have on growth opportunities? Thank you.
I'm not sure if I fully understand your question, but I will try. So then you have to Rebecca, repeat. The question is basically that we understand there's a bit of a change in focus in Saba towards more value added products and services. And it sounds like there could be margin upside in delivering more value added products. But what kind of impact would that switch have on growth opportunities?
Well, if you look at the markets where Versapa is in and extruded aluminum, there is the market total market growth is quite limited. We are talking about 1.5%, 2.5% approximately as we believe going forward. But we see that aluminum extrusion is being used in more and more complicated products and especially automotive and transport sector uses more and more aluminum. I think Tesla is a very good example of that, where Sapa is a big supplier to Tesla. Both the first S model, the X model and now also Model 3.
So we don't anticipate a very high growth on volume, but we anticipate a higher margin development as we go into more value add products. That might also mean that we will need to do more investments in more advanced equipment like CNC machines and surface treatment and so on. But the important thing is about not fighting for volumes that will only lead to decreased margins, but working closely with customers and to develop solutions together with customers. And I think we have Sapa has a lot of good examples of that, as mentioned, for instance, with Tesla, but also with a lot of other car manufacturers.
I
have one question from Ole Martin Vazsgaard in DNB regarding Easter effects. How will Easter affect the sales in Q1?
Well, we don't try to predict these effects as you know and don't guide on that. But it's a fact of the matter that in theory there are more selling days in Q1 this year compared to last year. And then you have the Easter last year in or in 2015 in Q1 and then 16 in or I mean in Q1 in 2016 and Q2 in 2017. So that's and then there might be effects of that Easter as well because Easter this year comes rather late. So we have the week before Easter that's included in the Q2.
And traditionally, the week before Easter is strong. So to sum up, more selling days in the Q1. So in theory, 6.5% more selling days. However, Easter placed in Q2 '17 with traditionally some positive Easter effects in the week before Easter. I hope that answered your question.
Okay. No further questions. Okay. Thank you very much for participating. And then I hope you all will try our new Grindelasa that we'll find in the stores in Norway.
Thank you.