Good morning, everyone, and welcome to Orkla's presentation of the first quarter result 2016. Before we dive into the Q1 results, I'm happy to tell you that this morning Orkla announced an agreement to purchase Harris, a leading supplier of do-it-yourself painting tools in the U.K. The acquisition doubles the size of Orkla House Care, and it is a good complementary fit in the U.K. Harris is strong in DIY market. Orkla is strong in the professional market. This is an exciting opportunity for us. Now back to the first quarter results. Overall, I am pleased that we continue to see positive effects from top-line initiatives and cost improvements throughout the value chain. Despite some negative sales effects related to the timing of Easter, we managed to achieve continued organic growth overall in line with the market.
Together with positive effects from internal improvement programs, this resulted in EBIT growth in line with our long-term targets that we communicated last fall in Capital Markets Day. Now let's have a look at some of the details. As mentioned, this quarter had fewer sales days because of the Easter holiday. That is especially visible in Norway and Sweden. This effect is difficult to quantify exactly, but we believe that it amounts to approximately 1.5%, which will have an opposite positive effect in the second quarter. Adjusted EBIT in Branded Consumer Goods increased mainly due to sales growth in Orkla Foods and Orkla Confectionery & Snacks, as well as comprehensive cost reduction programs and positive currency translation effects. Our associated companies continued to report solid progress in the quarter. Sapa continued the positive development and delivered very strong performance. Jotun reported another quarter with all-time high sales and profit.
This resulted in an increase in earnings per share of 75% in the first quarter. We have continued to reallocate capital from non-core into Branded Consumer Goods. In the quarter, we sold the remaining ownership share in Gränges and invested in our Branded Consumer Goods operations. The acquisition of Hamé was completed at the end of the quarter and will make Orkla one of the leading suppliers to the grocery trade in Czech Republic and Slovakia. The integration of Cederroth and NP Foods is moving ahead as planned. These are large and complex processes. It will take time before we see the full positive effect from the integration programs in our figures. As I mentioned, the organic growth trend continued in the first quarter, and I'm pleased to see that we continued to report also positive volume mix growth.
Looking at the sales growth in each of the business areas, Orkla Foods and Orkla Confectionery & Snacks stand out positively. The distribution agreement with PepsiCo had full effects as from January 2016. With the new agreement, Orkla Foods manages the sale of Tropicana and Quaker in the Nordics, while Orkla Confectionery & Snacks covers PepsiCo's snacks brands in Norway, Sweden and Finland. In addition, the new agreement for pick and mix sweets in Coop stores in Norway had a positive effect on volumes in Orkla Confectionery & Snacks in the first quarter. The negative organic growth rate in Orkla Care and Orkla Food Ingredients are caused by timing of sales days due to Easter. The decline in Orkla Care is still somewhat disappointing, but should be seen against very strong comparable figures last year, timing of campaigns, and also challenging markets in some of the categories.
Market growth in Orkla's categories has in some been positive in the quarter. Three out of four business areas had neutral to positive market share development. As communicated at our Capital Markets Day in September, our focus remains on top-line growth and EBIT growth through cost improvement programs. I would like to give you some examples of initiatives to increase top-line growth the last quarter. Frozen pizza is Orkla's largest category. In fact, Norway has the highest per capita consumption of frozen pizza in the world, and the category is still growing. So far this year, the category has grown by 4%, measured in volume. The majority of this growth comes from our products. Actually, the number of Pizza Grandiosa sold in Norway has increased by 1.2 million units in the first quarter.
Pizza Bakeren, which was launched by Orkla last year, generated more than one-third of the category growth year to date. Also the Grandiosa takeaway, launched early 2016, was second best-selling pizza in March. In other words, Orkla is strengthening its market share in its biggest category. In our business, we are influenced by global health and sustainability trends, and we meet increasing demand from our customers and consumers for safe, traceable, and healthy foods. Many consumers want organic options as part of their everyday diet. Today, Orkla has a turnover from organic products of more than NOK 300 million, of which the majority comes from the Swedish and Danish markets. The organic trend is also rising in Norway. This spring, we are therefore launching a new organic ketchup under the well-known Idun brand in Norway, as you can see on the picture.
This is two kilograms of organic tomatoes used to produce one kilogram of ketchup, with the same great taste and texture that Norwegian consumers love. In addition to launching more and more organic alternatives, we have increased presence in the vegetarian food area. Through last year's acquisition of the Swedish company Anamma, we have strengthened our exposure in vegan and vegetarian dishes. Especially Swedes are eating more and more vegetarian food, and in 2015, the Anamma brand had a growth rate of 50%. This investment confirms our strategic focus to offer healthier alternatives in line with growing consumer trends. It is also supplemented by several other vegetarian launches in our existing operations. In addition, our largest vegetarian brand is MTR in India, which is 100% vegetarian. It is not only organic and vegetarian products that are getting more popular among consumers.
Confectionery snacks products actually has some of the strongest growth rates in the markets where we operate. One of our most recent snacks launches is the new hand-cooked Totenflak in Norway. After a six-minute TV ad for Totenflak showing the complete frying process of potato crisps minute by minute, the hashtag Totenflak was the most used Twitter tag in Norway for 24 hours. The TV ad, which was described as Norway's most boring TV ad, received nationwide media attention. From the launch earlier this year until the end of April, 1.3 million units of Totenflak have been sold from our factory. That actually corresponds to more than 50% of the households in Norway, and that is in less than four months. As you all know, Unilever took back the distribution of the skincare brand Vaseline Intensive Care from the beginning of 2016.
However, I am really pleased to see that we have been able to launch a broad assortment of alternative products based on the Dr. Greve range to mitigate the loss. The products have achieved broad distribution so far, and the initial response from consumer is very promising. Through this, Orkla is now again a clear number one in the skincare category in grocery trade in Norway. You have now seen a few examples of top-line growth initiatives, and now I would like to show you some initiatives on the cost side. At our Capital Markets Day in London in September, I talked about our KPI, black over red. This simply means that growth in sales should be higher than growth in costs, obviously. However, that has not been the case for many years, which of course is not sustainable.
We have made several cost actions during the last years, we are able to turn the negative trend in 2015. In order to continue on the right track, we have made several new cost improvement actions in Q1 2016, especially in our supply chain. As an example, we are consolidating our production of drinkables in Norway and Sweden into one factory. In addition, we are restructuring part of our Baltic food production, which means that we are closing two factories in the Baltics. Top-line initiatives and tough cost programs result in adjusted EBIT growth of 12% in the quarter, or 7% adjusted for currency translation effects. The profit growth was achieved despite higher input costs due to increased raw material prices and in several of our categories, such as cocoa, almonds, and fish, also the weakening of the Norwegian currency, which has also been challenging this quarter.
The reported EBIT margin continues to be diluted by M&A activities and new distribution agreements, like the one with PepsiCo. Despite this negative effect, we believe these actions are value-creating underpin our changed focus from margin growth to EBIT growth, which is also visible in the figures. When that is said, we are still focusing on growing underlying margins and adjusted for structural actions we see continued positive margin development in our businesses. I would also like to take the opportunity to mention the continued improvement in Sapa. Also put in a longer perspective than just a quarter. Sapa is now reporting a rolling 12-month underlying EBIT result of almost NOK 1.6 billion, compared with a negative figure when we established the Joint Venture two and a half years ago. I'm also glad to see that the first quarter doesn't carry any restructuring charges.
Although I am pleased with the improvement in Sapa, which is really impressive, I am not satisfied with the absolute profit level still. Fortunately, we still see a lot of improvement potential going forward. To sum up the quarter I'm happy to report continued growth in the first quarter, despite negative effect from the timing of Easter. The sales growth and positive effects from internal improvement programs resulted in EBIT growth in line with our long-term targets, which we announced 69%. As I said at our Capital Markets Day in September, we will continue to focus on improving operations in the Branded Consumer Goods by operating more as one Orkla. Sharing ideas, sharing products between business areas and markets, taking out synergies throughout the value chain. However, we still have a way to go, I see still a large potential going forward.
We will continue to focus on accelerating our performance in the coming period. With that, I would like to hand over the floor to Jens to share with you some more details from the quarter.
Thank you, Peter. I will now take you through more of the details of the financial performance in the first quarter of 2016. Let's start with the group P&L. Despite negative effects related to the timing of Easter, we saw positive development in income this quarter. Organic growth contribution from M&A and positive currency translation effects resulted in an increase in operating revenues of 14% in the quarter. Adjusted EBIT for the group came to NOK 817 million, and that's up 13% from last year. The growth was related to stronger results for the Branded Consumer Goods, both from underlying improvements as well as structural growth and positive currency translation effects. Profits from associates and JVs doubled in the quarter, mainly driven by strong progress in Sapa and continued growth in sales and profit in Jotun.
In the quarter, we also sold an associated company in real estate, resulting in a gain over NOK 57 million in the quarter. The group's net financial costs were reduced in the quarter, mainly due to gains from sale of shares and lower interest rates. This gave a profit before tax of NOK 1.3 billion in the quarter, and that's up from NOK 795 million in the same period last year. Despite increased profit, tax expenses were somewhat lower due to a positive one-off item in this quarter. This resulted in a significant growth of 74% in earnings per share this first quarter. Let's look closer at the Branded Consumer Goods. In Q1 '16, Branded Consumer Goods enjoyed an increase of 16% in revenues year-on-year.
This increase was driven by significant contribution from several acquisitions, positive currency translation effects from a weaker Norwegian krone, as well as organic growth of 1.8% the quarter. Reported EBIT margin was 10.3% in the quarter, and that's down from 10.7% in the same period of 2015. The margin decline is caused by dilution effects from acquisitions and distribution agreements. Adjusted for this, we continue to raise our underlying margin as a result of several cost improvements. The underlying improvement in margin is progressing at about the same level as previous quarters. Let's now review the performance of each business area, starting with Orkla Foods.
The distribution agreement with PepsiCo was expanded to include Tropicana in Norway and Quaker in Scandinavia, which added to the growth in the quarter. On the other hand, sales growth was negatively impacted by the timing of Easter. Orkla Foods have overall stable market shares in the quarter. Sales growth and cost improvements resulted in EBIT growth and margin expansion in the quarter. Although higher input costs have a negative effect on profitability. The agreement with PepsiCo had a dilutive effect on the margin. Let's look at confectionery and snacks. Orkla Confectionery & Snacks had strong sales growth in the quarter, driven by volume growth in Norway and Sweden. The timing of Easter had a somewhat negative effect, especially in Norway. The new agreement for pick and mix sweets in Coop stores gave strong sales growth in the quarter.
In addition, the agreement with PepsiCo to distribute Lay's in Norway, Sweden and Finland had a positive effect since the start of this year. Confectionery and snacks grew their market shares in the quarter, especially driven by Sweden and Estonia. The EBIT increase was a result of strong sales growth. Dilutive effects from the pick and mix agreement, the distribution agreement with PepsiCo, and the acquisition of NP Foods resulted in an EBIT margin decline. Over to Orkla Care. Orkla Care reported an organic sales decrease in the quarter, and as Peter mentioned, this is partly due to the timing of Easter. Lilleborg Profesjonell and Orkla House Care experienced sales growth, but this was more than offset by decline in Orkla Home & Personal Care, Orkla Health, and Pierre Robert Group.
Orkla Home & Personal Care met strong comparable figures from Q1 last year with several launches and campaigns. In addition, the overall market growth was weak and the competitive environment in Norway tough. In Orkla Health, growth was hampered by the loss of a distribution agreement in Denmark and the challenging markets, especially in the weight management category. Pierre Robert was impacted by timing of campaigns this quarter. The market share development in the quarter was weakened because of price pressure in home and personal care, timing of campaigns in Pierre Robert Group, and the challenging markets in weight management category, as I said. Other categories, market share was more stable. A continued weakening of the Norwegian kroner also affected profitability in the quarter. In addition, following a new agreement made in 2014, Unilever took back the distribution of five of their brands from January this year.
These were brands with high margin contribution. Orkla was, however, compensated for this with a payment of roughly NOK 300 million in 2014. The margin was further diluted by the inclusion of Cederroth. The integration of Cederroth is developing according to plan, and as mentioned several times before, it will take some time before we see the full synergy effects of this integration. The sales growth of food ingredients was negatively influenced by the timing of Easter. Adjusted for Easter, the underlying growth was in line with markets in the relevant categories. As expected, increased exposure in the ice cream segment resulted in limited EBIT contribution in the first quarter. In addition, profitability from margarine butter blends fell due to a large surplus of milk in the European market after change of production quotas and the lower export from EU to Russia related to sanctions.
Higher prices of raw materials such as almonds impacted the margins in Orkla Food Ingredients. Let's now look closer at the results from Orkla Investments. I think this is not a good sign. It has nothing to do with the results in investments because they're actually very good. Experts here. Now we are back on track. As stated earlier, during the quarter, the remaining ownership in Gränges was sold at the price of NOK 69 per share, this resulted in a gain of NOK 26 million that is booked in the quarter. I must say that overall, we are very satisfied with this exit of Gränges. After the sale of Gränges, our remaining share portfolio represents a combined market value of roughly NOK 374 million. As you know, Orkla Investments also manages a real estate portfolio with a book value of approximately NOK 1.7 billion.
The main assets are, however, Sapa and Jotun. As Peter mentioned, Sapa has achieved a great improvement. Underlying EBIT for Sapa increased significantly from last year, with improvement in profit in all four business areas. Effects from improvement programs and increased share of value-added products contributed positively to the progress, as well as positive currency translation effects. Demand in North America increased by 3% due to increased activity in building and construction and the strong demand in the automotive industry. Looking at Jotun only reports financial results on a 4-monthly basis, as a result of that, we cannot present official figures for Jotun for the first quarter. This slide illustrates the development in 2015. Jotun had strong performance in 2015, the positive trend has continued into 2016. Jotun delivered all-time high sales and operating profit in the first quarter of 2016.
The strong quarterly result is driven by good performance in all four segments, better gross margins, in addition to positive currency translation effects. Revenue growth is primarily driven by the decorative paints segment in the Middle East and Southeast Asia, marine coating sales in Northeast Asia remains strong. Jotun continues to invest in increased production capacity in line with the company's growth strategy. Investment activity during this period was mainly related to the new factory in Oman. Hydro Power had high production volumes in 2015, compared with last year, production volumes were slightly down Q1 this year. Power prices were also down in the quarter. In sum, this led to a drop in EBIT from NOK 56 million to NOK 44 million. I'll now take you through the changes in net debt. Net debt at the end of 2015 was NOK 7.8 billion.
Net expansion investments in Q1 totaled NOK 1.5 billion, primarily related to the acquisition of Hamé. Cash flow from operations amounted to NOK 0.2 billion. The net sale of shares and other financial items was NOK 0.9 billion. Due to the weakening in Norwegian kroner, debt denominated in other currencies increased by NOK 0.2 billion during Q1, resulting in a total net debt of NOK 8.3 billion at the end of March. This is well under our communicated target of net interest-bearing debt to EBITDA. Orkla's net interest-bearing debt had an average maturity of 3.1 years at the end of March. The average interest cost was 2.1% in the quarter. Now let me hand the floor back to Peter.
Thank you. Well, as you have seen, in the first quarter, we have continued to see positive effects from both top-line initiatives and cost improvements throughout the value chain. Despite negative sales effects related to the timing of Easter, we managed to achieve organic growth roughly in line with the market, and we report the eighth quarter in a row with organic growth. Positive effects from internal improvement programs resulted in EBIT growth. Our associated companies continued to report solid progress in the quarter, and in some, this resulted in an increase in earnings per share of 75%. We have continued to reallocate capital into Branded Consumer Goods in the first quarter. The remaining shares of Gränges were sold, and we have made further investments in our Branded Consumer Goods operations.
As mentioned, the acquisition of Hamé was completed in the end of the quarter, making Orkla one of the leading suppliers of branded food products in the Czech Republic and Slovakia. With Hamé, we get the critical mass to run profitable operations in a region with good growth. We have, over time, gained thorough knowledge about the Czech market through our company, Vitana. I'm also glad to mention that we see now very strong growth in Vitana as a result of company improvements, as well as very good market growth in the Czech Republic. Going forward, we will continue to improve profitability by increasing operational efficiency throughout the value chain. Also by working more closely as one Orkla, the group will exploit synergies more effectively across operations while cultivating Orkla's unique local customer and consumer insights in the markets where we operate.
Before we move on to Q&A, I would like to give you a preview of some of the innovations which are just about to be launched now. Delikat is launching a new range called Our Best Salads. This is a premium range of salads where we have removed two-third of the mayonnaise and replaced it with cottage cheese. This is resulting in a salad low in calories, high in protein, and with a fantastic taste. In addition, the Delikat brand is being relaunched with a new design and a twist lid, which is unique for the category, offering a clear functional benefit to the customer. I urge you to try this product. It's great. Orkla Confectionery & Snacks are about to launch new bites of wafer covered in chocolate with two flavors, crispy chocolate and caramel. In Norway, the launch is building on the strong local confectionery brands, Crispo and Smash.
In Sweden and Finland, they are launched under the well-known biscuits brands, Ballerina. I think this shows a very good example of how we are collaborating, cooperating between geographies and categories within Orkla. In Orkla Health, the complete Nutrilett range is being relaunched across all Nordic markets. The new design highlights naturalness and taste and makes it easier to navigate among the products. I hope you will try and like our new products before, then we move over to the Q&A. Thank you.
Good morning, Kenneth Syversen, SEB. Could you please tell us about the organic growth, excluding the PepsiCo agreement, particularly for Confectionery & Snacks? Secondly, the much-disputed factory structure, and in media in particular, could you let us know a little bit how it was in Q1, if you closed something, and if the plans continue what you have stated previously?
Well, I can answer the first one on this organic growth. Then we don't elaborate specifically on each business area. Adjusted for PepsiCo and Easter, we are very pleased with the organic growth. As Peter mentioned, a healthy growth with a sound mix between volume and price.
I will try to answer the question regarding factory structure footprint. As at least the Norwegians know, there has been a lot of discussion in newspaper about the closing of factories. As I mentioned several times Orkla is a result of a lot of acquisitions over time, over many years. That has led to quite complicated, complex factory structure. We have too many factories producing more or less the same products. We have too many small factories, underutilized, and we have too many factories also with the same technology. This leads to low utilization rates, but it also leads to that too high share of our investments is going into maintenance investments instead of innovations and growth investments.
Our aim is to have fewer factories, and in general, as a general rule, we say that in one certain geographic area, we want to have one factory per category and one factory per technology. We have a long way to go. We have announced closure of 15-16 factories the last 20-24 months. We had been a big discussion in Norway about the ketchup factory at Rygge, which we announced yesterday or we announced a few months ago that we had made an intention decision to move the factory to Sweden. After that intention decision, there is a period where we listen to all stakeholders. We do very detailed investigation. We look at all kind of alternatives and consequences. In this case, we decided yesterday that we will not move the factory to Sweden because of capacity problems among other things.
Long-term, our strategy is very clear. We need to have fewer, bigger factories, more specialized.
Preben A. Skjelsbakk, Carnegie. Could we touch a bit on Orkla Care? I was just wondering when the products from Dr. Greve, the new products, were hitting the shelves, and do you see any changes going into Q2, whether these products can more than neutralize the losses of the Unilever brands? Lastly, you were mentioning that the synergies from Cederroth will take some time. When should we expect to see those synergies in the numbers?
I think, regarding Dr. Greve, I think it's too early to say anything about that. Hopefully, I can tell you some positive news on the 15th of July when we announce second quarter. It's too early. It was launched at the end of February, so it's quite new. Integration processes always are challenging. We also knew that the Cederroth integration would be challenging. We have made very detailed, very good plans of the integration process. The process is going according to or above, actually, our initial plan.
Marius Gaard, Swedbank. I have a question to the acquisition made this morning, announced this morning. When do you think the U.K. authorities will approve the acquisition? Do you see any risk of that you have to divest of any of the brands owned by Harris?
We expect the closing of that transaction during Q3. We don't expect that we need to divest any brands, but that remains to be seen. Anyway, it will only be minor influences to the business.
Martin Stensal, Danske Bank. One question relating to what you stated in the report regarding a continuous stronger competition for Branded Consumer Goods. Could you please talk a bit more about that? Are you seeing a lot more competition, tougher competition? Any specific categories that are affected by this?
We are used to quite tough competition. We have been living with this competition for years, but it's not weakening, the competition. It's tough. In some categories, it's tougher. I think especially some of the Orkla Care categories, we see a very tough competition, both from private label and international competitors. Also with price pressure in certain categories. This is actually nothing new. We see this from time to time happening, but overall, we expect tough competition also going forward. That is also why we are doing this supply chain optimization, and that is also why that is so important for us to increase our competitiveness in the market. Also to be able to, as I mentioned, to invest more in innovations, more in growth, rather than just maintenance of roofs and buildings.
Thanks. A question relating to the acquisition of Harris. Could you explain how this compares to Jordan, how complementary the acquisition is in terms of markets and products?
Yeah, we think this is very complementary. Jordan, Orkla House Care is also present in U.K., but mainly in the professional market, while Harris is mainly in the DIY market. I think they fit very well together in the U.K. No further questions? Okay. Thank you all for coming and listening to us, and please don't forget to try our new great products. Bye-bye.