Good morning, everybody. I hope you noticed this Grandiosa commercial we just played. It has won the silver film prize and is thereby a candidate to win the Gold Film Prize 2015 in Norway. The jury emphasized that the film has a lot of feelings as well as a clear brand strategy. I think commercials like these are great and I am convinced that they promote sales for us.
With this, I would like to welcome you to the presentation of Orkla's 1st Quarter Results 2015. I must admit that I have been anxious to see whether the positive trend from Q4 would continue into 2015. We have initiated several actions to mitigate strong headwind from demanding market conditions and the weakening of Norwegian currency. I'm therefore happy to be able to say that overall I am satisfied with the financial performance in the Q1. Adjusted EBIT for the group improved by 10% to NOK725 1,000,000 compared to Q1 2014.
The improvement was driven by positive development in all business areas. In Branded Consumer Goods, the adjusted EBIT margin improvement was driven by both top line development and cost savings achieved through recently implemented restructuring projects. Furthermore, I am pleased to report organic growth for all business area. The top line development was mainly volume driven, but positive Easter effects accounted for about half of the reported growth. We'll come back to that.
Associated companies also had a very strong start to the year driven both by volume increase in Jotun and synergies from Sapa ahead of plan. Grahengis benefits from strong Asian demand and favorable FX exposure and both analysts following the company as well as the company itself report a positive outlook for Ganges. In addition to improving operations, Orkla continues to deliver on its strategy. The acquisition of Seadroat in Sweden, which was announced in January, is currently being assessed by relevant competition authorities. And we expect the transaction to be completed during Q3 2015.
In the Q1, we completed the sale of Orkla Brands Russia and acquisition of NP Foods in Latvia. Additionally, we made some strategic add on investments in Orkla Food Ingredients during the first quarter and we signed an agreement with PepsiCo to become their primary go to market partner for juice, cereals and snacks in the Nordics. Earnings per share for Q1 increased by 32 percent to NOK 0.62 compared with NOK 0.47 in Q1 2014. This graph illustrates our 12 month rolling adjusted EBIT margin. Compared to Q4 2014, the margin improved by 0.1 percentage points to 11.9 Looking at the short term trend, we have seen improvement in the last quarters.
But in a longer term perspective we see that there is still a way to go and so we will continue our operational focus to improve margins, but we are on the right way. Adjusted EBIT for branded consumer goods in the Q1 was NOK 769,000,000 and this represents an increase of 11% from Q1 last year. All four business areas reported growth in adjusted EBIT. The margin improvement in Orkla Confectionery and Snacks was mainly driven by reduced fixed costs from cost improvement programs initiated last year as well as sales growth in Norway and Denmark. In Orkla Food Ingredients, the adjusted EBIT margin increased by 20 6% to 3.5% in the Q1.
The improvement was broad based. A weaker adjusted EBIT margin in Oklahoma personal was caused by higher input costs due to weakening weakened NUC. Oklahoma Personal have a higher foreign currency exposure due to higher share of traded goods in the portfolio. Furthermore, Oklahoma Personal have made higher investments to support a strong launch program in Lilleberg during Q1. We continue to optimize our factory footprint.
It will take time to realize the full potential in our P and L, but we continue to progress steadily. On this matter, it is important to emphasize that we are not only closing down factories, but rather optimizing our footprint meaning that we also maintain and invest in our remaining production facilities. Additionally, we continuously work with improvement and redesign projects in our factories, which also contribute significantly to our cost base. I have said repeatedly that top line development is a main driver for profit growth. Therefore, I'm pleased to report 4.3 percent organic growth in Q1.
Approximately half of this growth is related to campaign and Easter effects, which will have the same of course, but opposite effects in Q2. On the other hand, the main part of the remaining increase was driven by volume, which is a positive development compared to previous periods. In Orkla Foods and Orkla Foods Ingredients, the improvement in organic growth was broad based. In Orkla Confectionery and Snacks, the growth was mainly driven by Norway and Denmark. In Oklahoma Personal Lilleborg in particular contributed to broad based sales growth, whereas Orkla Health had a weak restart to the year.
Adjusted for Easter effects, all four business areas delivered positive organic growth in the quarter. And now I want to show you some of the new launches in the quarter that have contributed to this improvement. Based on the insight that the average person worries that he, she does not eat enough vegetables, Orkla Foods have entered into a new segment and have launched chilled vegetable pasta in Denmark and Sweden during Q1. So you can only eat this pasta and you get all the vegetables you need. The product will also be launched in Finland during Q2 and it is actually exported to the Netherlands and Iceland.
According to AC Nielsen data, the chilled pasta category has grown by 8% in volume and 11% in value year to date. Pastella has increased its market share by 8 percentage points from December 14. Another innovation is the big cut potato chips. That's a new kind of potato chips with extra deep ridges. The deep ridges capture the spice and give maximum taste.
Bikast was launched in Norway and Sweden during Q1 and contributed positively to the sales growth in the quarter and it has just recently been launched in Finland. A version of the product and concept is to be launched in Denmark later this year. So this is another example of making an innovation bigger by launching the same product in several countries and several markets where we are present. We are doing more of this now and we will continue to urge our business areas to focus on close cooperation going forward. Lilleborg has launched UMO and Blenda detergents in new packaging.
The new series consists of 6 different SKUs and the units are 60% smaller in size, but with a more efficient formula. That means the number of washes is the same. In addition to consumer advantages, this is more environmentally friendly and it is of course also tougher on the stains. Odense has added to its Marzipan product portfolio following the trend of convenient but homemade. A range of marzipan based products for homemade ice cream, cakes and desserts were launched in Q1.
These are products for the consumer markets. In addition to our innovation program in Q1, we have also signed an agreement with PepsiCo to that will contribute organic growth going forward. Orkla has distributed Tropicana juice for PepsiCo in Sweden and Denmark since 1st January and in Finland since 1st April this year. On 27th April, it was agreed to expand the distribution agreement with PepsiCo. The agreement now includes Tropicana in all the Nordic markets.
It includes Quaker in all the Nordic markets and Snacks in Norway, Sweden and Finland. The retail sales value to consumer of the PepsiCo portfolio in scope for this agreement is about NOK 1,000,000,000 according to data from A. C. Nielsen for 2014. All markets are to be implemented 1st January 2016 and Orkla takes over negotiations toward retailers from the fall of 2015.
Orkta will be responsible for sales and distribution, while PepsiCo is responsible for production and marketing. Before handing over to CFO, Jens who will take you through the financials, I would like to confirm that our main operational focus will continue to be on activities that drive organic growth and improve margins. For 2015, we have already implemented several new initiatives in order to reach our targets. I have shown you some of them here today. Furthermore, we want to continue to work with our cost base going forward.
CFO, Jens Bjornstad will now present Orca's financial performance for Q1 2015. Jens, the floor is yours.
Thank you, Petri. I'll continue with the details of Oikla's financial performance. And then starting with the group P and L. Oikla had operating revenues of SEK 7,500,000,000 in the Q1 and that's an increase of 8%. As Peter mentioned, we saw organic growth in the branded consumer goods area this quarter.
In addition, positive currency translation effects and company acquisitions helped the top line growth. As from 2015, Orkla will focus on adjusted EBIT instead of EBITA. Adjusted EBIT is defined as operating profit before other income and expenses. And this change will make it easier to compare Orkla with relevant peers as we are becoming a leading branded consumer goods company. For Orkla, the difference between EBITA and adjusted EBIT amounts to about NOK 20,000,000 for 2014 in total.
Adjusted EBIT ended at NOK 725,000,000 and that's up 10% from last year. The growth was mainly due to a stronger result for the branded consumer goods business. I'll come back with the and revert to the details related to branded consumer goods and Ooyala Investments later. Other income and expenses amounted to a negative $117,000,000 dollars largely as a result of costs from restructuring activities within Orkla Foods. Profit from associates totaled $238,000,000 mostly driven by good performance both from Joktun and Sapa.
The group's net financial costs decreased in the quarter, mainly related to lower debt and lower interest rates. This resulted in a profit before tax of SEK 795,000,000 in the first quarter and that's up from $579,000,000 in the same quarter last year. Earnings per share increased by 32% to NOK 0.62 Let's look at the adjusted EBIT bridge from Q1 2014 to Q1 2015. To keep it simple, I will now from now on use the term EBIT throughout my presentation when referring to adjusted EBIT. As I mentioned, the group's growth in EBIT was 10% or $66,000,000 in the quarter.
Branded soy consumer goods had a growth of 11% or $74,000,000 supported by growth from all segments. Orkla Confectionery and Snacks and Food Ingredients showed especially strong growth rates. Orkla HQ costs have increased for the quarter. This increase is mainly related to a former management option program and other share based incentive programs. These costs are directly linked to Orkla's share performance and fluctuate in line with the company's share price.
This quarter's positive share price development has therefore led to higher costs. And it's important to note that the underlying cost base for HQ costs has in fact reduced. In Q1 2015, branded consumer goods had an increase of 6.7% in revenues year on year. This increase was due to an organic growth of 4.3% and positive currency which will have an opposite negative effect in Q2. Timing effects from campaigns in Oikla Foods had a negative effect on operating revenues in the quarter.
This was expected and was communicated in the 4th quarter. Combined effect from Easter and timing of campaigns accounts for approximately half of the organic growth in the quarter. Despite effects from Easter and timing of campaigns, all business areas in branded Consumer Goods delivered organic growth. The contribution from currency translation effects is a result from a weaker Norwegian kroner. However, with the Norwegian currency slipping back against euro and U.
S. Dollar, we have experienced significant rise in the purchasing costs for Norwegian companies. Overall, strong top line revenues and focused cost reduction measures have mitigated negative currency effects. As Peter mentioned earlier, this is the 4th consecutive quarter with organic growth. I'll now run you through the details for the business areas in Branded Consumer Goods.
In Oikawa Foods, we saw 1st quarter increase in revenues to SEK 3,045,000,000 and that's an organic growth of 4.1 percent and an increase in EBIT of 4% to SEK 322,000,000. Dollars The EBIT margin was on par with last year and ended at 10.6%. The main drivers for development were broad based sales growth and positive effects from cost improvements. The sales increase was affected by early timing of Easter in Scandinavia. In Food Sweden and Foods Denmark, new launches and Tropicana contributed positively.
There was continued growth amongst the Fenobaltic and the international companies. The EBIT margin received an uplift from cost improvements. However, this was partly countered by negative currency effects. As predicted in our communication in the Q4, the timing of campaigns had a negative effect on Foods in Q1. Hoikla Confectionery and Snacks delivered strong organic growth of 4.2% in the quarter.
The quarter was positively affected by the timing of Easter in all Nordic countries. The improvement was primarily driven by Norway and Denmark with continued strong growth from the previous quarter last year. EBIT ended at $159,000,000 and the EBIT growth was broad based. In addition to sales growth in Norway and Denmark, reduced fixed costs from improvement programs that was initiated last year contributed to profit growth and improved EBIT margin. The acquisition of Empe Foods was completed in Q1 and will be included in the figures as from Q2.
Revenues in Ochla Home and Personal in the Q1 ended at 1,300,000,000 dollars and organic growth of 1.4%. The growth was a result of good sales development in 4 out of 5 business units, especially Lilleborg. A strong launch program in Norway and continued growth in the international business drove the increase in Lilleborg. Oikla House Care showed broad based sales growth, while growth in PI Robail Group was due to successful campaigns in Norway. Oikla Health had a weak start to the year and that's partly due to the strategic choice to close down the production site at Denomega, Lechnes.
EBIT in the Q1 ended at 230,000,000 dollars at the same level as 2014. A weaker EBIT margin was caused by significantly higher input costs due to a weakened Norwegian kroner as well as marketing investments to support a strong launch program in Lilleborg. It is expected that the negative currency effects will be partly compensated by price increases during the rest of the year. Orkla Food Ingredients continued the positive development seen over the last quarters with strong top and bottom line growth. The organic sales growth was 7.9% in the quarter.
Easter effects contributed positively and food ingredients had broad based growth both from new and existing customers. The EBIT margin increased by approximately 30% to 3.5% in the quarter and supported by strong top line growth and effects from improvement projects. EBIT ended at $58,000,000 and that's an increase of almost 50% from Q1 2014. Let's look closer at Oikla Investments. I'll concentrate on Sapa, Jotun and our hydropower business.
And in addition, we have 31% shareholding in Genkis and our remaining share portfolio and that represents a combined market value of roughly NOK 2,200,000,000. Oikai Investment also manages a real estate portfolio with a book value of approximately NOK 1,900,000,000. Looking at Sapa. Sapa experienced increased demand for extruded products in North America compared to the same quarter last year, driven by strong automotive demands and increased building and construction activity. In Europe, demand was stable year on year.
Underlying EBIT for Sapa more than doubled from the Q1 last year. The improvement was mainly due to strong North American demand, the synergy program and positive currency effects. Sapa's SEK 1,000,000,000 synergy program continues to be ahead of plan with limited restructuring charges for this quarter. Let me also remind you that Sapa has announced an investor call to be held on the 18th May at 3 Jotun only reports financial results on a 4 monthly basis and the result of that is that we cannot present official figures for Jotun for the Q1. But this slide illustrates the development in 2014.
Jotun had strong performance at the end of 2014 and this positive trend has continued into 2015. Jotun reported all time high sales and operating profit for the Q1 of 2015, with good performance in all four segments in addition to positive currency translation effects. Sail of marine coatings have improved compared to the same period last year, following growth in the newbuilding markets and higher maintenance activity. Decorative sales have increased in Scandinavia, the Middle East and Asia. EBIT in hydropower was slightly lower than last year, mainly explained to lower production volumes and lower power prices.
As of the end of the Q1, estimated snow reservoir levels at Sauda are significantly above normal levels. Now, let's move on to the capital structure of Orkla. Starting with the changes in net debt. Net debt as of the Q4 was SEK 5,700,000,000. Dollars During Q1, Oikla followed through on net expansion investments of CHF 800,000,000 related to several acquisitions in the branded consumer goods area.
Cash flow from operations ended at $300,000,000 at the end of Q1 and net debt for Orkla was 6.2 1,000,000,000. This slide highlights Oikla's strong balance sheet and financial flexibility. Oikla's net interest bearing debt had an average maturity of 3.9 years. As I said earlier, the group's net interest bearing debt was SEK 6,200,000,000 by the end of the quarter with a net gearing of SEK 0.19. Oiklaas Financial position is robust with cash reserves and credit lines that will cover non capital expenditures for 2015.
Finally, I would like to remind you that Orkla will arrange an Investor Day at the London Stock Exchange on Friday, September 11. You're welcome to this event and a formal invitation will be sent out in due time. So let me hand the floor back to Petrik.
Thank you, Jens. I think that the Q1 results show that we continue to deliver on our strategy and on our plans. I see results from an increased focus on operation throughout the organization. The adjusted EBIT for brand consumer goods is improving, but I think more importantly the improvement is due to a healthy development in the underlying operations. Q1 2015 is the 4th consecutive quarter with organic top line growth.
And in Q1, this is broad based and it is volume driven. We have managed to take out synergies from structural changes and hence improved our margin. All four business areas achieved positive growth in demanding markets with strong international competition. I am also very pleased to see that good operations in both Jotun and Sapa have resulted in a solid start to the year. I still see a lot more potential for operational improvement.
And going forward, we will remain focused on activities that drive organic growth and that improve margins. Thank you very much. And then we will open up for Q and A.
Thank you. Can you hear me? Yes. Yes. Thank you.
Martin Stenz, Zaldanske. Great to see such a solid performance this quarter. So congratulations. First question for me is regarding SAPA joint venture. We can see that the underlying EBIT has a strong jump year over year to €392,000,000 but Orkla's share of the net profit is only €45,000,000 Could you please bring us through the bridge where you end that €45,000,000 dollars because it seems like there could be a substantial amounts going from the underlying EBIT to total net share of only 45,000,000
million? Yes. I can briefly explain. And then it was limited restructuring activities in connection to the synergy program this quarter. However, on below this adjusted EBIT, Sapa books market to market changes in commodity and FX derivatives, which is booked that way under IFRS.
So that fluctuates from month to month. And then most of that was unrealized market to market changes. So that's the main explanation. So synergy restructuring charges was very limited this quarter. It was around SEK 44,000,000.
Okay. Thank you. And then back to branded consumer goods. You noted in the report that you have seen a slight pushback on market shares in Q1. Could you please comment on which segments or categories we are talking about here?
I think in general, we see a slight decline. However, we see an improvement compared to the previous quarters. We cannot go reveal any details on the category segments, but I think the most important is actually that we see an improvement from earlier, but we still not happy with the overall performance.
Okay. And then back to the overall question on M and A. There's been a lot of activity over the past 12 months. Cellular Russia and PE Foods you got several and so on. Could you please share a bit more comments on your view forward?
I know it's difficult, but in terms of maybe new segments, consisting segments? And of course, my main question, it relates to India. Are you still focusing on staying in India?
Yes. Well, to the we cannot comment, of course, on any specific M and A plans that we have. But of course, we are looking for healthy well positioned companies that fit well into our current portfolio in the markets where we operate and where we can realize synergies and of course where we can buy or acquire companies at reasonable prices. When it comes to India, the development there is really is very, very strong and it continues. And we have low plans to exit India.
We have plans to continue there and continue the strong development.
Okay. Thanks. And the last question for me regarding PepsiCo. You're extending the deal with PepsiCo and you mentioned a number from AS and E also about the value in the market. But would you be able to comment on the value for you in terms of revenue and EBIT on this total PepsiCo?
I think this deal will be gradually phased into our operations. And parts of the growth in Foods for this quarter was due to this Tropicana sales. And when it comes to specifics on the margins, we don't comment on that. But it's slightly lower than the average of the Foods portfolio.
Peder Hans Goulsen, Carnegie. Two questions and the first one follow-up on the PepsiCo question. A bit curious to understand how you're thinking about bringing Lay's potato chips into Kim's markets, both from your side and also from PepsiCo's side. What is sort of the benefits and why are you doing such a stand?
I think first of all, I think both parties are of course aware that we are in a way competitors, but we also feel different segments in that category. We also have to admit that Lays in especially in Norway is challenging due to high import duty on potatoes. But both parties are aware, and we are competing side by side also today before the agreement. So we don't see any problem with that actually.
And lastly, there has been a lot of changes in the customer structure in Norway especially. Have you had any impact so far? Anything you expect going forward going from 4 to 3 retailers?
Well, we think that the customer on the customer side it will be probably more challenging going forward. On the other hand, I think also as a supplier, I think we like to have of course as many customers as possible, but also strong customers that are profitable. And I think this makes it possible to have 3 strong profitable customers in Norwegian markets and that is probably better than having 2 strong and 2 quite weak.
We have a question from Hakan Asnaju from DNB. You mentioned that Akkadairma drove growth at home and personal. But can you please be a little bit more specific in terms of how this new product range has been received by the market?
Well, the listing for Acoderma has been very good. The sales so far has been very good, but we are hesitant a little bit to reveal any figures because we know that the real proof comes when customers come back to repurchase the products again. So we will reveal more details on Quadarma in Q2 or Q3. But we are very happy with the start. No more questions?
Okay. Thank you all for coming. And I hope that you will find this in the grocery store for the weekend. It's really great. Thank you very much for coming.