Hi, and welcome everyone to Aukla Investor Day. Fantastic to see so many people here today. I know there's a lot of people joining in on the web, so I'd like to take the opportunity to welcome you as well. My name is Matthias Orenius. I'm Head of Investor Relations.
Today, I will also be your moderator. Our main focus today will be on how we deliver on our strategy and increasing performance. Now we have quite an intense agenda for you. First, you'll hear from our CEO presenting the group strategy and targets. Then our Head of Operations will give you some more insight on how we work improving efficiency in the supply chain.
Then we have the CEOs from all our business areas here to present today and they will give you some different examples on how they work creating value and their main focuses going forward. So I really hope that this will be a valuable day for you. And please take the opportunity to ask questions during the Q and A sessions because we will have Q and A sessions after each presentation. And there will also be a final Q and A session at the very end of the day. Management will also be available for you during our break and for about an hour or so after the event.
So please stay for some snacks and drinks. But I think it's time to start today. And I'd like to present our first speaker, our President and our CEO, Peter Russekian.
Thank you, Matthias. Well, it's a great pleasure to welcome you all to Orkla Capital Markets Day. I have now been 1.5 year in the position as President and CEO. So I'm still a freshman in Orkla. We have participants from the management team who have been in Orkla for more than 30 years actually.
But prior to that, I was a Board member for almost 10 years. And in the '90s, I was a large customer of Orkla as I was in the food retail business in Norway. And of course, I am also a heavy user of all the great products that Orkla has. But knowing the company from the Board in consumer is completely different from knowing the company from inside and to really to get to know the people inside the company. And it is a great company with a lot of great people.
During the last years, we have had a lot of internal reorganization. We have had market, on the customers, competitors and on the consumers. That led to not the best performance top line and bottom line. So when I started, I said we have to regain focus on operations. That's the most important thing.
And we have to focus on growth, organic growth and we have to focus on cost initiatives to increase margin. I really look forward today to present together with my management team our plans, our targets going forward. And as you will see during today's presentations, there are several new faces in the management team from the last time we had Capital Markets Day here in London in 2013. My presentation is in 2 parts. I will tell a little bit about what we have done the last 6, 8 quarters and what we will do going forward to reach the targets.
But before I go on to tell you about that, I will visit this quite important slide that I think you are quite interested in looking at. We will still maintain Nordic leading brand and consumer goods company with the Nordics and the Baltics as our main markets, but also in other selected geographies. Growth is important to create shareholder value and we aim to grow at least in line with the markets where we operate. EBIT growth is also important and we aim for high single digit growth in EBIT in NUK going forward. So we do not have a target margin target on each business areas, but we have a target to grow EBIT, because we pay our bills with cash and not with margins.
And regarding dividend, we in the foreseeable future, we see that we will pay out at least €2.50 per share in the period going forward. Then to what we have done the last quarters. Well, we have sold more of non core businesses. We have invested in more brand consumer goods companies. And we have strengthened our position in existing markets, but we have also strengthened our positions in new channels and in new categories.
Seadrott is one such example of acquisitions we have done. With Seadrott, we strengthened our position in Sweden, but we also strengthened or entered into a new category in Sweden, because we are not present in home personal in Sweden. We are in a big position in Norway, but Seadrott gives us a platform for growth in those categories in Sweden. Sverdrup also gives us access to the pharmacy channel, which is very interesting and profitable channel, not only for the Sverdrup products, but also for the rest of Orkla Health products. And Seadrill also gives us access to a new category, the wound care.
During this period, we have also done some exits. We have listed and sold most of our shares in Gringes. We still have 16% left. We sold off our most of our business in Russia and we sold our Polish business, Delekta. As I said, focus on operations is has been main priority.
And we have shown top line growth and bottom line growth and that's the most important way to increase shareholder value of course. We have created top line growth by having fewer but bigger innovations, innovations that really make a matter of the top line. But we have also succeeded in cross border innovations, meaning that we have taken successes from 1 market and introduced it in the other markets. And we have had successful cross category innovations also. We are acting more as one Orkla as you will hear several times today and I will revert to that.
But we have also developed our customer relationships. We sell our products through retailers, so the relationship with the retailers is very important. We focus to spend less time on negotiations on terms and conditions and more time on how to create growth together, because we have a common goal with the customers that's create growth. But we have also initiated several programs to reduce costs. 1 is the optimization of supply chain, but we have also had substantial cost savings through organizational changes.
And Annette will tell you more about this later today on the organizational changes. We have introduced a new KPI. Actually I stole it from our associated company Jotun and we call it black over red, where black represents the organic growth figures and red represents the growth in fixed costs. And as you can see, this is just illustrative, but as you can see, we have had a period where the red have been above black. And of course, you don't have to be Einstein to understand that eventually that will not be the way for salvation.
This is a simple KPI. It's very easy to understand and I tell you it's highly effective. I don't want to see red over black. And during this period margin has improved by 0.5 percentage points. So we have delivered on our strategy on the communicated strategy.
We have reallocated capital from non core to core to brand and consumer goods companies. We have improved our operations visible in both top and bottom line development. And we have realized shareholder value as you can see from the right side of this slide. We have outperformed also stock exchange in the last periods. And actually in this particular graph I'd like to see red above black.
So that's what a little bit about what we have done. So what are we going to do forward? Well, pretty much the same. We will we have no change in our strategy. We will develop and strengthen our position as the leading Nordic brand consumer goods company also with an increased presence in Baltics and some other selected geographies.
We will do more of the same because it obviously works. Our focus on operations has proven that we can deliver line and bottom line growth. But we also have to extract synergies throughout Orkla. We have a lot of powerful brands. We have a lot of skilled people.
We have a lot of fantastic innovations in the different parts of Orkla and we have to utilize the synergies and to really to extract synergies from operating as one Orkla. And we will tell you more about that later. And Orkla is a result of a lot of acquisitions over time, small and big. And we have a lot of local value chains. And I think that was probably right some years ago, 5, 10, 15 years ago to be really local.
But this has led to a complicated supply chain structure. We have 103 factories. We have 30 different ERP systems and it's quite obvious that this is not optimal. We also see that the competitive scene is changing. Our competitors are getting more professional.
They are also seeking for synergies. And our customers have become more demanding. And if you just look at our figures in rough numbers, we have €30,000,000,000 in sales. We have SEK3 1,000,000,000 in profit. We have that means we have SEK27 1,000,000,000 in cost.
Out of those SEK27 1,000,000,000, SEK24 1,000,000,000 is related to supply chain. So it's a huge potential in optimizing that supply chain to reduce the $24,000,000 cost base. And we have started the process. We have already decided to centralize production. We have centralized procurement, logistics and IT.
And Johan will tell you more about this in a few minutes. But one of our competitive advantages is our unique consumer insights and also our flexibility to adjust to tailor made our products to the local needs, local taste, local preferences in the local market. That is really the strength of Orkla. And in addition, we also have a very strong go to market organization in all the countries where we operate. But this as mentioned earlier, this has led to a complex structure.
So going forward, we have to find a balance still being local, but at the same time take out synergies and utilize the size of the power that lies within 1 Orkla. So we need really to have a step change in realizing synergies. And we have for instance several factories producing the same take ketchup, tomato ketchup as an example. We have 4, 5 different factories producing tomato ketchup. It is more or less the same product with some local adjustments under some local brand, but the product and the production technology is more or less the same.
So it's quite obvious that we should have only one factory to produce ketchup in the Nordics. So we have to utilize the strength, realize synergies in supply chain, but at the same time we have to still be able to be flexible and local so we can meet the local consumer and customer demand. Another strength of Orkla is our broad portfolio of number 1 and very, very strong number 2 brands in almost all categories and markets where we operate. And actually we produce, we market and we sell 8,000,000 consumer units every day, 365 days a year. That means that every minute 20 fourseven 6 1,000 decisions are taken in favor of an Orkla product.
Why is that? It is of course because the consumer, they know our brands, they know our products and they trust our products. They trust that products with Orkla coming from Orkla, it is safe and healthy and good for me and I can trust this both product and brand. But we need to further build on these strong positions both cross market and cross categories. And we have to act as one Orkla to utilize the potential that lies within all those strong positions.
On the left side, you see a few examples of our really strong positions in the markets. And we have actually in many cases we have 40%, 60%, 80%, even 100% market shares in our categories. And we compete well with the multinationals. We compete very well with P&G. We compete well with Unilever, with Nestle, with Mondelez and so on.
Have been competing with them for many, many, many years and still we have these market shares. So that shows that our model works, but we need to take out cost. On the right side here, you see an example of what I mean by 1 Orkla. We have responded to the consumer demand of having more healthy snacks. So we have launched developed and launched dry roasted nuts.
This is developed and produced in a factory in Norway. And it is now will be launched in Sweden, Denmark and Finland as well. It is the same product, same production facility, same packaging, but sold under different brands. Any day in Norway in Sweden, Denmark, Finland and Poly in Norway because this is the brand leading this is the leading brand in Norway. And we have several such examples and you will see some later today as well.
We are a big player in a quite small pond. We are the largest supplier to the food retail sector in the Nordic. And obviously, the trade, as I said, we sell our products through food retailers. So the trade retail trade is important to us, but we are also important to them. We have strong brands, strong positions and we have unique consumer insights and we also have good innovations.
But winning with the customer is also important to create growth. And we see a demand from our retail customers that they have a demand to differentiate from the other competitors. And we can help doing that with our model. We can tailor made products. We can offer unique brands, brands that we own for 1 customer.
We can offer an innovation for another customer or we can offer a unique launch for a period for the 3rd customer. And we will do that to a much greater extent. But Apli Wieder will revert to this later today. We also see that new shopping behavior, people or products that people used to buy in traditional food retail stores 10 years ago, they expect to buy somewhere else today. They buy it online of course or they buy it in a specialty store, DIY, tax free, a lot of different occasions.
And we need to be present in all the situations where the consumer expects to find our products. So new channels is important. Approximately 5% of our total turnover comes from export. 5% doesn't sound that much, it's SEK 1,500,000,000 roughly. And we have not done a lot on export on the Orca level.
Some of our companies have done a lot. Some companies have done very little and some companies have only lifted up the phone when the customer has called. We have a big potential in doing much more cooperating together. So we have merged our export sales force into 1 sales force for all Orkla Companies. And we think especially for food products, everything you put in your mouth, it is a big potential in Asia.
Nordic Food is regarded to be healthy, safe and clean. So we have to utilize that. We also see a trend for CSR sustainability. Many companies see this as a hurdle for growth, but we see it as another growth driver. People are more and more concerned what they eat, how much salt, how much sugar, saturated fat and so on.
They are also concerned about is the food safe and how is the impact on the environment from the products I buy. And actually as a player in the Nordics with our local proximity to the local markets, we have an ability to create growth situation out of these trends. Palm oil is one such example. Palm oil is a huge environmental issue in Europe in general and it's the same in Norway. But in Norway, it's also an issue about health because palm oil is separated fat.
So we have replaced palm oil or saturated fat with unsaturated fats in almost all our food products in Norway. And we can do that to meet the local needs in Norway. And I can tell you that our big multinational competitors Unilever, Doctor. Otsuka and so on they will not adjust their recipes to suit 5,000,000 crazy Norwegians, but we can do it. Antti Vida will elaborate on this later on.
We have a very strong position in the Nordics. And of course, with our strong positions as I show you with some of the really, really high market shares we have, there is of course a limit to how much we can grow. Therefore, new geographies is important and especially the Baltics, where we have strengthened our positions by the acquisition of MP Foods. But there are still white spots within some categories. I mentioned Seadroat Home and Personal Care in Sweden.
We are not present at all. It's a huge market. For us, it's a huge market. Seadroat gives us access to fill that white spot. We also see that even though we are mainly in Nordic and the Baltics, we also have Orkla Food Ingredients with a broad presence in Europe.
And Paul will tell you more about this later. We also see growth opportunities from smaller M and A add ons. And when we look at smaller M and A add ons, we look of course at companies that fit with our strategy, fit with our categories, companies that either have a very strong brand market position or they have a position that we can develop. Companies that are attractively priced, I mean with the when multiple at attractive levels at companies where we can realize synergies. And usually the small acquisitions, the small M and As we do, they are highly profitable.
They're easy to integrate. While looking at this map, I would also like to say a few words about India, because I quite often I get questions why are you in India? What are the synergies between India and the Nordic? The taste of food is somewhat different. Well, we acquired MTR in India in 2007.
And since then, the company has grown by close to 20% every year. And of course, there are not that many synergies, but we have a highly professional management team, local management team in India. They're driving the business fantastic. And they claim, they say very openly that without Orkla as an owner, we would never have been in the position we are today. We have helped them in supply chain, innovation processes, marketing tools and of course food safety standards, not at least very important.
So they claim that we are have been a very important owner for the Indian success and MTR is really prospering. I think this slide is familiar to you, at least for those of you who were here 2 years ago. And I have promised I will revert to this the figures and the targets that we communicated. The left column or the figure columns shows the targets that we communicated for each business area in 2013. But since then, quite a lot of things have happened.
We have merged Orkla International into Orkla Foods after we sold the Russian business. We acquired NP Foods in the Baltics and both these two actions have a dilutive effect on the margin of approximately 1 percentage points. We also entered into an agreement distribution agreement with PepsiCo that also had a dilutive effect on the margin. The acquisition of Seadroat will have a dilutive effect on the home and personal margin of 2.5 percentage points. And that's also why we don't want to focus on the margin target for each business level, but rather an EBIT growth target.
That's that the EBIT is what we pay our bills with and that's where how we pay our dividend. And that is also to avoid counterproductive decisions. Because if we only focus on the margin targets, a lot of these actions should not have been done. We should not have bought empty foods. We should not have bought Cedro.
We should not have entered into agreement with Pepsi because they're all dilutive on the margin. But they are value creating on bottom line. So that's the most important thing. Anyway, according to those targets we communicated restated with the dilutive effects and so on, we are approximately 1 year delayed on foods and confectionery and snacks and we are more or less on plan on in home and personal. Well, so that was the status for the previous targets.
So now let's look at the new targets that I briefly commented on already. As I said, we will not have a growth target stated as a percentage. We will have a growth target that should grow at least in line with the markets where we operate, which is of course different from geography to geography. We have grown now we have 5 quarters in a row with organic growth and that is a trend shift. Our growth is roughly 2% on average, but we know that our markets in our main markets in the Nordics are growing 2% to 3% varying by category.
So we are on the right track, but we are still not there, but we are definitely on the right track. And we are mainly in attractive and stable markets in the Nordics, not a very high growth, but it's a growth above EU average. We face strong competition, but we handle that well. And we also have a consolidated market on the customer side. We have 3 main customers in Norway, 3, 4 in Sweden, 4, 5 in Denmark, 3 in Finland and so on.
And that is a challenge, but it is actually also an opportunity, because as I said, winning with the customers, creating growth together with customers, it's more easy when you have 1 or a few big customers than they have for instance in India where they have 170,000 customers. Can you imagine how to make a promotion, really powerful promotion in 170,000 small mom and pop stores? So it's an opportunity. When it comes to EBIT growth, we announced a growth of 6% to 9% every year from now. That includes smaller add ons, but it does not include any strategic bigger acquisitions.
And if we do any bigger strategic acquisitions, we will adjust that EBIT target, upwards of course. And actually this business represent a step change in the EBIT development of Orkla, because if you look back 10 years history, our EBIT has increased by 5%, including acquisitions, big acquisitions. So we are this represents a step change from 5% to 6% to 9%. And again, I said that bottom line and dividend capacity is more important than focusing on the margin target. And that's just to make that clear, that does not mean that we are not focused on margins.
We are focused on margins. We have solid plans to reach the targets. We will continue organic growth at all projects that will support that. We will realize synergies through 1 Orkla. Successful integration of the acquired companies is very important.
That is really an important value driver. And I think our history shows that we usually succeed in that. And we see opportunity to do some smaller strategic add on acquisitions. But before I round off, I would also like to say some words about Orkla Investments, because according to analysts some of the parts, it accounts for approximately 30% of the value of the Orkla share price. So it's a big part of Orkla.
It includes SAPA and JV. It includes 42.5% of Jotun, the paint manufacturer. It includes some hydropower plants. It includes real estate portfolio with a book value of approximately SEK 1,700,000,000 and a shared portfolio with a market value of approximately SEK 1 point €3,000,000 And since we communicated our new strategy some years ago, we have actually done a lot. We have sold Elkam.
We have IPO ed and sold Borigor. We established Sapa JV together with Norwegian Hydro. We sold our shares in REC, unfortunately at the wrong time. We IPO ed and sold most of our shares in Grange. We still hold 16% and we reduced the share portfolio substantially.
And during this time, we also reallocated capital from non core to brand consumer goods businesses by acquisition of Rebrandson, Jordan, NP Foods and Sedrott and a lot of smaller add ons in all business areas. And when it comes to Orkla Investments or non core or whatever you call it, for us it's much more important to realize the real value in those assets or the fair value than speed of execution. And our 2 main assets are Jotun, 42.5 percent of Jotun and actually part of Jotun is branded goods company with a very, very strong brand not only in Nordics, but worldwide. They have had a steady growth over many years and they actually report record high sales and profits so far this year. When we established Sapa JV, we announced a €1,000,000,000 cost saving in synergies in the new JV and we are ahead of plan to realize that €1,000,000,000 And in addition, we see a strong EBIT growth as you can see on the right side.
But we still believe there is a huge value potential in Sapa. We are convinced and 100% sure that the plans and actions that we have going forward will make it possible to pay out at least €250,000,000 in dividends every year. We want to sustain an investment grade company. That means that our debt to EBITDA should be in the area 2.5% to 3% maximum over time. We will continue to have a very high focus on capital efficiency.
And I can assure you that in senior management, the most important bonus target is EVA goal and where of course capital return is an important factor. And we also have to improve our working capital. On the working capital, we are not best in class, but with the complicated supply chain we have and with the changes we do in the supply chain, we see a great potential in improving working capital. And if we have excess capital from operations, which I hope we will have or from the sale of non core, our first priority is of course to find attractive assets to buy in the brand consumer goods businesses. And I mean attractive assets means that that fits into our strategy, fits into our current portfolio at attractive prices, attractive multiples and where we can realize synergies.
And if you don't find that, I can assure you that cash is not burning in our pockets. Then we will suggest to the Board to pay out the cash to back to shareholders either in the form of an extraordinary dividend or with a share buyback program. So I think what you see also from our results the last quarter is we are on the right track. We have quite demanding, but highly realistic goals going forward and we have solid plans and actions. And probably the most important, we have the right team in place to meet those targets and to execute on those plans.
So before I hand the floor to Johan, who will talk about supply chain, I am open for questions.
Yes. But just some quick words before we start the Q and A session. I'd just like to remind everyone on the web that we welcome your questions as well. And since we are broadcasting, please wait until you get the microphone before you state your question and also please state your name and institution. So now if we have any questions?
Chris Carlson at TCG SunTrust. Just how many ERP systems are you going to go down to? You said you had 30. And likewise, how many factories do you think you can chop?
Well, I think Johan will answer the factory question in his presentation. But regarding ERP systems, third systems is obviously not optimal.
A dream would be
to have only 1 and sometime in the future we will probably have. But we have not set a date for having one common system. But we have said that when each business area or local company change their system and is in a need to change, this is the system you're going to have.
No further questions?
Okay then.
Thank you, Peter. Okay.
Thank you.
So now it's time for me to present our next speaker. He started in Orkla quite recently a couple of years ago, but he has extensive experience from operations. It's our new Head of Operations, Johan Karin. Welcome.
Thank you very much, Matthias. Good afternoon. Our supply chain is a great opportunity with a lot of potentials. Why? Well, first of all, we have sufficient enough volumes running through our factories each and every day to make sure that we can secure economies of scale, of course, if we operate it wisely.
Secondly, we have a great team. We have dedicated people, excellent leaders and skilled workers at our factories. And also looking into the potential side around the factory base here, we see when we look into our core performance metrics around utilization and productivity that we are operating, let's say, in our high 50s. We also see that we have over time had a gradual decline on the return on our assets. And when we compare to our peers in terms of how often we turn our inventories, we are turning at a lower pace.
And that was also indicated by the working capital issue that Peter mentioned. And if we look into the revenues per factory and comparing with our peers, we see that we operate maybe down to 1 third of the revenues per factory that some of our peers are doing. And of course, having 103 factories, there is the obvious risk that we are spreading our capital expenditure a bit too wide. Also going back to the NOK 24,000,000,000 in our supply chain cost. So let's decompose that a bit.
SEK 4,000,000,000 plus NOKs goes into conversion cost manufacturing. SEK 1,000,000,000 plus goes into logistics and the rest is basically within procurement. And here, our biggest spend is raw material. And our belief is that we are not leveraging this spend fully and we are going to do that going forward. So what are we then doing?
Well, we have outlined 5 priorities. I promise you there will not be a test in the end, but there will be 5 priorities for us. First of all, we're working with our organizational setup. We are taking all these local value chains and integrating them into one value chain. Secondly, we are rationalizing our footprint both in terms of our manufacturing and distribution setup.
We are also targeting to improve on a continuous basis the cost base we have within manufacturing. That's item 3 on this list. And as I said, we are certain we can leverage our spend better and that goes into the accelerate purchasing savings. And last but not least, we are building and strengthening our capabilities to set a new baseline for our performance. And of course, we do all this to strengthen our competitive position by taking out costs down and operating more efficiently.
So five priorities. So talking a bit about our journey and this corresponds to actually when Peter came on board in 2014. This was our point of departure. So as you can see in 2014, we had limited strategic direction for our supply chain. We were not sourcing across markets well enough and maybe not even collaborating well enough.
And in terms of reporting, it was quite fragmented. So in 2015, this has been the year of gearing up. We have done the organizational changes. We have, for example, moved out the operative responsibility for our factories from the local companies into chain organization per business area. This is quite a big change in Orkla.
And we have also, of course, been keen on not only talking about organizational setup, but also focusing on core improvements in terms of our footprint, but also in terms of our cost out or cost improvement work at their factories. So not only organization, but also delivering here and today. And when we look forward during 20 sixteen-twenty 18, we see that of course we need to step up in our performance throughout our supply chain. We also need to continue building these capabilities and we will accelerate the value creation. And looking at this and looking at our challenges, there will not be one single silver bullet solving all our issues.
There will instead be a lot of different activities that we need to run-in a synchronized manner. And having done this before, most recently at Sony Mobile, I have to say I truly believe that we are in a good spot. We have a good foundation and platform for the continued journey. So Peter showed this picture before. And I realized that the great surprise with animation is gone.
You already know where this circle is moving, right? Thank you very much for destroying that, Peter. But I bring it up here because it's critical for us. We are to a great extent becoming more similar with some of our peers. We are taking out synergies and we're focused on working more as one company.
But the localness, keeping the proximity to our consumers and our customers, it's so critical for us. It's part of our heritage. It's part of our success and it's part of our DNA. And Atlewidda will later on show you some great example of this. So it's important that we will not copy anyone else.
We will make an Orkla journey. So when we're doing this, talking a bit and going more into details around the factory base here, 103 factories. This is including some of the purchases or the acquisitions that Peter mentioned before around MP Foods, Anamma Foods, etcetera and Seelroat. It's not including some of the plants we divested as part of exiting Russia, but it leads up to 103 factories. And this has been, of course, the natural way of adding capacity and complexity through acquisitions.
Also it's fair to say that we have not done any big structural changes for quite some time, which has really grown our footprint. So where are we today? Well, we have many small factories that's for sure. Everything from 4 people up to 400. And as Peter mentioned, we have several factories producing the same products like well several ketchup factories, 5 potato chip factories, 7 ready meal factories.
And we have not managed well enough to source across different geographies and across different markets. And of course, this has led into a situation where we actually have quite significant underutilization of our total base. And then also, as I mentioned earlier, having this wide footprint, also the investments that goes into this footprint has been a bit scattered and maybe not focusing enough on innovation, more focusing in the past of sort of maintaining our footprint. Last but not least, we also see great variation of cost. We, for example, have up to 5 times the difference between for labor costs in factories producing almost the same thing within our footprint.
So there was a question earlier. What are you doing around this? And I'd like to draw your attention to the left hand side. These are sites that we have communicated or already closed. We have closed 5 of these 12 factories and we have communicated that we will close another 7.
If you average this out a bit, we are operating right now at 2 factories per quarter, 8 per year. And to put this into a more historic perspective, from 2,005 to 2013, we actually closed 8 factories. It took us 8 years to close 8 factories. And that's basically what we are running now in 1 year. And we feel very confident with the methodology and the business cases and the way we are are operating this.
And if I should make any prediction going forward, well, my view is that we will continue around this pace 1 to 3 factories throughout 2015, 2016 and well into 2017. And by then we have actually closed down or reduced number of factories with over 20%. So it's really a game changer in terms of how we operate and how we work with our footprint. So what's our basic idea here when we do this? Well, our idea is to go to center of excellences per category or per product line, really focus on building strong, capable and competent factories.
This will of course require a greater internal sourcing being able to share production capacity across geographies. And by doing this, we think and believe that it will allow us to have a better capital allocation in our footprint due to the fact that we have reduced a number of factories. So I'd like to give you some examples here. This talks about herring. We had a factory in Finland and we saw a potential along the lines of creating center of excellences with moving this production into our factory in Kungshan in Sweden, really consolidating the footprint.
So this is one of the 12 cases that were actually one of them that were actually already closed. So by doing this, we managed to take out 80% of the total fixed cost. And we did not only sort of move the jaws from the Finnish markets into the Swedish production facility, we also took the opportunity to streamline and simplify the stock keeping units, the SKUs. And we saw an EBIT effect here of NOK 50,000,000 from one example. So we also have a pretty wide footprint in terms of warehouses.
We have 100 plus warehouses, where of 17 of them 70 of them are in the Nordics or Scandinavia. And by the way, this is today's geography lesson. This is actually Denmark. You have on the far left, you have Jueland and on the right, you have Copenhagen. We had 5 warehouses across Orkla Health, Orkla Foods and Confectioner and Snacks Denmark.
And we reviewed this setup and we found that it's better to consolidate it in 2 logistical points. And also in this process, we evaluated if we should do this ourselves or if we should outsource it. And in the end we outsourced this operation to a service provider and we had 21 people then moving over and getting new employment with this service provider. And we see an effect of this activity up to a saving of up to NOK 70,000,000 from doing this. And now we're continuing into Norway and Sweden.
There's a program and a project ongoing right now. It's not concluded yet, but we hope to have a final decision before Christmas on how we should move forward. So that's what we're doing with our structure. But of course, we have also a lot of improvements to be done with the existing manufacturing base. So we have established a team, a central team of experts that are then working together with factory management along standardized tools and methodologies that we have developed with a clear aim of reducing cost and also setting a foundation for continuous improvements.
And we are running this we have completed 7 projects. These are dedicated factory improvement projects. We have completed 7. We have another 5 ongoing and we are scoping more. And we have then a portfolio of up to 19 projects.
And this is something that we have in focus and that we will continue to have in focus. But remember, it's a bit hard to understand what we're doing, so I will give you another example of that. This is a case from a factory we have in Norway in Bergen. It's producing the Toro brand. These are dry products like dry soups.
And in 2013, they had a really horrifying development of the conversion cost per kilo. As you can see on the graph, it was really going through the roof. So with the central team teaming up with the local factory team, we set a new organizational structure. We also recalibrated the resource demand needed to produce. And we also worked with a more flexible workforce being able to share and utilize the workforce better.
And this team delivered great results. They really did a great job. So not only breaking the curve, they actually are now operating at a lower level than when we started in 2013 in terms of commercial costs per kilo. All in all, we estimate that we will get roughly SEK 60,000,000 out from this activity. And of course, this is tough and somewhat painful processes.
We had 50 of our employees leaving the factory. But we see us being more competitive now than before. So we are also on a journey in terms of our procurement. This is the majority of the NOK 24,000,000,000 Peter and myself have talked about. And we have over some years now moved into a more centralized setup.
And by doing this, we have seen that we could improve our improvement rate or reducing our cost by 2. We are right now having roughly 70% of our spend managed within one team. And we see this continuing going forward. And the role then of Orkla Group Procurement, this is really to stay close to the categories. I mean what we have done is really to put people working with the same categories working together.
So we think that this will strengthen our category dimension. Also, of course, it's much easier to develop and implement and deploy best practices. And maybe number 3 on this graph is the most important. Of course, they continuously need to work with cost out improvements to leverage our spend and also working with price management. And last but not least on this one, I am a strong believer in open innovation and I think there is a lot of activities happening out at our suppliers that we can benefit from by taking in.
And just as an example of this, the work we're doing, this is talking about our spend within one category. This is corrugated packaging, packaging material. Our spend in Orkla is around NOK 300,000,000. We have 30 companies buying this across Orkla. So what we did was that we took sort of a pan European approach, consolidating our business, setting up frame agreements, negotiating terms and conditions, cost improvements and also some bonus schemes.
And we found 1 supplier that could cover 80% of our needs. And this has led into a situation where we can save up to NOK 30,000,000 on EBIT level that will hit us positively, Peter, in 2015 2016. So I mentioned capabilities and this is critical for us in terms of securing that we are building a stronger and better Orkla. One of the activities is around implementing a production system. This have striking similarities to the Toyota production system.
And having worked for a Japanese company for many, many years, I know the great value this provides of setting baseline requirements, standardizing ways of working and also enabling to create and share best practices. We don't have to invent everywhere in the 103 factory landscape. We can do this in a more standardized way. And my aim is also to instill a more proactive management around how we operate this and how we push this through to set clear requirements and clear expectations. Then we're also looking into how we track and follow-up performance.
First of all, we're implementing a shared set of KPIs. That will in turn enable benchmarking. And I've been a factory manager myself. I know there are a few things that drive you as hard as the internal benchmarking. You simply don't want to be on number 3 or 2 place.
You want to be number 1 and this is a great effect. We have also implemented one common tool to report and track improvements. I mentioned there is no silver bullet here. There are tons of activities. We have done in this system up to 1500 different activities targeting improvements across procurement, planning and logistics.
And it's really an excellent tool for us to monitor and follow-up that we are delivering according to our expectations. And then rather unique, we had a question around ERP earlier. And here we're actually moving forward to implement 1 shop floor system to control and monitor our shop floors out in the factory base. So it's also happening on the IT side. So our priorities going forward, well, I guess most of you remember this slide.
It's the same. We will continue to work with our organization and evolve that over time. We will continuously work to rationalize our footprint and warehouse structure. We will work with continuous cost improvements throughout our factory base. We are putting more effort and we are centralizing procurement to leverage our spend better.
And we will strengthen our capabilities as we move forward, really to increase our value realization in terms of taking out cost and operating more efficiently. And I'm very confident that we have all the activities that we need to be able to deliver in the years to come. Thank you very much. Thank you, Johan.
So now Johan will open up for some questions.
Steven Kuzmerzak at Wanger in Chicago. When you look at your the factory consolidation, is this just a question really of moving equipment into existing facilities? Or should we expect much of an increase in CapEx as you have to build larger facilities to handle consolidated production? And the other question is, as you move production into, say, one geography, giving the ketchup example, have you done any research? Does it matter to your customers whether their ketchup is coming from if you're a Finn, do they want Finnish production?
Or are they okay if it comes out of Norway, for example?
Okay. So let me start with the first one. We don't see any significant capital expenditure. Of course, there will be in certain cases a need maybe to set up a new factory. But overall, having fairly low utilization installed in our manufacturing footprint, we believe that we can move a lot before we sort of start spending a lot of money on capital expenditure or building new factories.
Did that answer your question? Then in terms of the localness, yes, this is of course important for us. I've stressed it, Peter stressed it and Atla Vida will stress it further. So we are doing these type of evaluations when we are considering our footprint.
Prenas Wolfson, Carnegie. A short question on your cross country sourcing. I know Norway has a lot of very strict rules on bringing foods back and forth from Norway. Do you think it's easier to do this cross country sourcing outside Norway? Should we expect more impact on your margins in your operations outside Norway than inside Norway?
The simple answer to that question is, yes, it's easier to do this within the EU. But of course, we adopt our footprint towards the game rules for duty regimes or whatever there is. So we are optimizing along where we could optimize. But I wouldn't say that we will have a lower saving rate in Norway. I think there are savings that could be done there.
And some of the recent changes we have done is to actually to consolidate smaller factories in Norway into bigger ones, for example, in Elverum in Norway.
Are there any more questions for you, Jan?
Okay. Thank you, Arnd. Thank you, Matthias.
So now we're moving on to the business areas. And I'm very happy to introduce our next speaker. She's the newest member of the management team, which has almost 20 years of experience from Orkla, various positions within sales and marketing here to tell you about Orkla Confectionery and Snacks on that version.
Thank you, Matthias. At Capital Markets Day in 2013, we were talking about Ochla Confectionery and Snacks being a turnaround with a significant potential. Okla Confectionery and Snacks was up until 2014 underperforming in market shares. And it was urgent to turn around our performance within this business area. And now I can gladly tell you from second half twenty fourteen, the performance is increasingly performing better and this particularly delivered by Norway.
I'm therefore looking very much forward sharing to do with you today the performance in this business area in particular as the turnaround in Norway has been a piece of work I'm really proud of telling you about today. And I'm going to elaborate in the end a bit on the business era going forward for the next years. So what does Ochla Confection and Snacks look like today? Today, we're present in 6 different geographies, 3 different countries. We are still present in the 3 big categories presented here.
And the big change in this map is that we're now present to a much larger extent in the Baltics by our last acquisition in Latvia. We bought Lima, which is the number one iconic chocolate brand in Latvia together with Selga, which is also giving us a strong foothold in the biscuit category in the Baltics here in Estonia and Latvia. Pretty much we're a strong market leader in all the categories and all the countries and having very strong position in several of the areas makes this a very healthy business. And when it comes to turnover, not so much changed since the last 2 years, but now Norway is still our biggest market. And therefore, the turnaround I'm going to tell you a bit about afterwards has been so extremely important to the performance in this area the last year.
We were also telling you a bit about the Baltics becoming a bigger growth driver for us going forward when we met 2 years ago. And now, gladly to tell you that the Baltics is now represented here by 20% of the revenue of the total business area. Also if you look at the revenue split per category, by far still Snacks is our biggest category, but combined with Confectionery, by far the biggest two categories that we are working in. Also glad to tell that those categories at the moment showing the fastest growing rates amongst the categories that we operate in. And then someone asked me out here, what have you been doing for the last 2 years?
We presented and told and shared with you for 2 years in 2013 that we were going to make a turnaround focusing on 3 primary areas. We wanted to get our growth rates going again and increase our market shares. We want to get our cost synergies out and we wanted to make Baltics a bigger driver for the growth in this business area. And what have we been doing? What's the status?
The status I can gladly share with you that the organic growth rate running this year is around just above 2% for the business, the organic growth rate. We've been taking out cost synergies for the last 2 years accounting for about 4% of our total cost base. And we have black over red as Peters were passionately telling you about earlier today in the business area. And we made an acquisition of a number one iconic brand and a very attractive business in the Latvian market. So far, we are on plan with what we were sharing with you 3, 2 years ago.
So 2014 performance was in decline and it was extremely urgent to turn things around. Growth and margins were not in line in what the expectations from Orkla was at that time. And then I'm glad to show the results here from top line growth making a big step change after summer last year and now having growth rates as I told you just above 2% first half this year. The performance has significantly been picked up by the Norwegian turnaround, but I would also say very strong performance in Denmark and in Estonia, the Kalle business that we have there. Still, we have markets having big growth challenges, the one I'm not mentioning when it comes to performance turnaround.
So I would like to elaborate a bit on the Norwegian turnaround as that has been the most important driver for our performance. We had a sharp and I use the word sharp turnaround because if you look at the stables in the graph, not very many businesses, I think, can show growth rates going from minus 4 to plus 6 in only 1 quarter. So only after 1 year of the merger, we were delivering growth in the Norwegian market and that being again, as I told you, the main driver of our performance improvement in the business area of Confection and Snacks. And I'm even more glad to tell you and share with you that the first half sales growth figures is now showing us a growth just below 8% in this company. And all this was delivered whilst we're actually integrating 3 businesses at a very high speed.
And I would like to share with you how we actually have been doing this. So I told you it was urgent. It was very urgent to get the integration going and get the turnaround running at a fast rate. So we had focus on getting the business back on track and we had 3 very important top priorities throughout the whole integration period. We needed to do things rapid at a high speed, not losing time and not losing more margins.
We had to regain our top line growth and we had to turn around our development and market shares. And then we have to get cost synergies. And you can say quite optimistically so, wanting to do all these three things at the same time at a very high speed. I think I'll show you that we have been successful in doing this. So I'll walk you through this 1 by 1.
I'm not going to pronounce the company names. Some of you probably know them. They're like very Norwegian names. But we brought these 3 companies together to one company very different of nature, but at the same time sharing a lot in common. All Winger present in categories categorized by very high impulse and indulgence.
I think we could say making then Ochola Confection and Snacks Norway the natural common home for these three companies. And I was talking about speed and speed was extremely important. I was appointed the CEO in April 2013 for this company. And within 30 days, I had a new management team in place for the new company. And within 3 months, we pretty much more or less had the whole organization in place.
I think very few cases like this can beat us at speed when it comes to organization. We are also very focused on getting common processes aligned to get these 3 companies delivering growth quickly and not delaying us going forward. And as you know, it's probably a soft thing, but moreover, very important, bringing together and building a common culture for these three companies. I was telling you very different of nature. But not the least, we had some very tough priorities and we had to deliver on those immediate priorities at a quick pace.
And at the same time, we're doing all this never ever compromising on the day to day business going forward. I'll tell you the second priority that we set for integration was to actually regain our market shares and get our growth rates up at a higher and positive number. As the integration was moving on, this was our focus. We wanted to regain market shares and that was a tough target as this was a highly competitive category. Increasing competition during the last 5 years in the Norwegian market both by local players and global players.
But with this started then as the growth rates, as you could see in the earlier graph, we would start delivering growth mid year 2014. At the same time, we started then gaining market shares. And the good news was that we were gaining market shares in categories growing at a faster rate than previously. So we're contributing to also category growth. And I would say 3 most important things drive us behind the market share gain.
That would be stronger customer relationships as one true bigger company in Norway increased sales execution and bigger innovations. So on to customers, I think Peter was talking about that also in his presentation. That has been a key to growth for the Norwegian business. In Norway, the retail market is highly concentrated with only 3 big retailers. And obviously, we needed to have strong customer relationships in an integration phase to create the growth.
We had to identify with these 3 Neuwerskopingkorp and Rema neutral growth drivers and we had to create more win win situations that we had been previously as 3 separate companies. And we did this example wise through category management. This is going to be a quite specific one in the checkout zones. We are quite dominant in the checkout zones. By re spacing our checkout zones with our biggest customers increasing sales in a very high margin part of the shop.
We also brought in customers in our strategic innovations at an earlier stage trying to increase and optimize the market fit on the initiatives we're bringing to the market. And for Neugeskruppen which is the largest retailer in Norway, it made Neugeskruppen to increase their market shares in our categories growing faster than the market in all our categories. At the same time, we were gaining market shares in those categories in Neuwerskruppen. And I would say a clear win win situation was created with the biggest customer in Norway. Moreover, a very big driver for growth in impulse categories like these is sales execution.
And this is a very powerful set of numbers, and I will elaborate a bit on those. Very early in the integration phase, we decided to set out to bring together 2 sales forces and creating 1 powerful sales force. And we are combining roughly 300 employees into 1 sales force. And what does that mean? We created a whole new structure in the sales organization.
We changed a lot of our managers replacing them with different and new people. We set some new rules of working, new sets of tools and new ways of measuring performance. At the same time, we're actually creating new routes for everyone working in the sales force. And you can just imagine 300 people going through this change or setting us back a bit. But moreover, we realized ended up realizing cost synergies accounting for 20% in our cost cut.
At the same time, we're actually increasing our number of store visits, as I said, very important to impulse categories by 25%. This particular action being extremely important to the growth on our core portfolio, which I'm going to show you a little bit later. In addition to the customer relationship side and the sales execution, innovation was key to bring growth forward for the company. And you can say having a sales force being going through a restructuring that we were actually going through, you should probably wait a bit bringing bigger innovations to the market. But we decided we needed to bring innovations to the market at the same time.
At the same time,
not to
show this is a very particular one. At the same time, the sales was not being fully operative and that was quite riskful. But anyhow, we did so. I brought you an example from the Chocolate segment. The Chocolate category being the biggest of our categories in Norway in value, we decided to bring in bigger innovations in a high value segment and a highly competitive one as well as Mondelez, our global competitor in confectionery, is very dominant in this area.
In quarter 1 2014, then only half a year after we started integrating the businesses, we actually launched the tablet, several SKUs, a set of new products, I'm just showing you this, into the market by elaborating and taking then brands across categories into the chocolate segment. So, Polly was the biggest not brand in Norway and we also bought some biscuits into the tablet segment. So we leveraged on the strong brands that we had in our other categories in this new company. And it ended up giving them this segment a growth of 7% on average for the last 2 years and last year us growing by 18% then obviously making us gaining market shares in a very important chocolate segment standing for 1 third of the value in chocolate. Secondly, biscuits.
We have been the market leader in biscuits in Norway for ages. And the biscuit category being also an important part of our portfolio has been declining in value for many years in a row. And I think as a market leader, it's your responsibility to actually reignite growth in categories declining. So at the same time integrating these businesses, we set out to make new innovation plans to actually reignite the growth, bringing back that in a category both in declining in value, but also being set out for competition in a much more rapid way. Mondelez, our then global competitor buying biscuit factories across Europe and bringing them innovation into the Norwegian marketplace, but giving category no growth.
So we've recognized this growth in the biscuit category. You can see it's amazing numbers that we're actually seeing at the moment double digits so far this year single digit last year by actually leveraging then chocolate strong chocolate brands, Kispel, which is a big chocolate brand in Norway into the biscuit category, increasing frequency and attracting more younger target groups. And last, I think this has been mentioned several times already today. Our strength lies in our local strong brands and our closeness to our local markets. Saying that, it's also very important that we're actually opening up a bit more and getting launches and innovation to travel faster across markets.
This will drive synergies and we will bring value at a higher speed. This is going to be required by us going forward to a much larger extent as we're meeting competitors like Mondelez and then lastly, Intosnack, who acquired MODES Australia in the Nordics. I'm therefore showing you here a few examples from the Snacks category as we call it the salty part of my business where we brought new launches across Sweden and Norway during quarter 1 this year at a higher speed on the same platform. And I guess Johan that will also help you driving your supply chain structure to a more lean level. So to add up, growth was definitely on our agenda being number 2 priority.
And what happened, this is the strength of the mix of our growth from the last year. In Norway, we actually had a significant growth I showed you almost 8% so far this year. But this mix in our growth is the strength as only 20% of the growth is driven by the innovations I just shown you, so a few examples. But 80% of the growth actually coming from what we're calling core portfolio. Here actually then revitalizing our old and beautiful brands and several of them actually growing by double digit numbers.
And my last focus area, my third and very important priority was to get a reversal of our cost development over the last years. Up until 2013, we were almost close to 26% in fixed cost and percentage points of our turnover. I would say very blunt at very unacceptable level. So we need to reverse the situation and we've been actually realizing then cost synergies accounting for equivalent 4% of our fixed cost base in Norwegian Business, making then fixed cost on a level now at 23.5%, so quite increasingly so improving our margins by doing this. We've been working on fixed cost in several areas, not only supply chain, but also supply chain.
You saw the example from the sales execution what we did for 1 common sales force. But at the same time, we're working actively on FTEs in all areas of the value chain, also headquarters. So to sum up, what are my few reflections on the Norwegian case? I think I have a couple of reflections since I've been running the turnarounds. We definitely have the tools to make our businesses grow and I think also Atle Witte will conclude on that afterwards.
And but we have to apply those more consistently across our markets. We have to learn from what we've been doing in Norway. And it is fully possible to actually reduce your cost base at the same time you're driving your top line. And I think we're going to see more of that also for the years to come in several of my markets. So the future, I see a bright future And I have a few learnings from the turnaround in Norway.
We have the tools and the capabilities to reignite growth in categories we're already present in. And we have to apply those more consistently across all our markets. And then we need to make big innovations travel faster across our markets to some extent done very little of the last couple of years. And then we need to improve sales execution across all markets. These are highly impulse driven and you can see the effect on the core growth on the core portfolio growth I just showed you from the Norwegian case.
We have to work on our cost base. Definitely still in several other markets outside Norway, we have some organizational efficiency to take out. But I have also to then support Johan and say that the real estate change in our cost base is going to come from supply structure going forward. And then lastly, we need to succeed with our last acquisition as Peter was talking about, Elpe Foods in Latvia. We bought a very attractive business and we took it over this spring, so only a few months down the road.
While we have a very new strong management team in place, we're going forward with integration plans as set out a few months ago and there's a big potential there. And I think I'm comparing our acquisition in Latvia very much with the acquisition we did in Estonia 5 years ago, Karlov. You saw the brand in one of the first slides. A business that's been increasingly having a better performance year by year during the 5 last years and I'm expecting the same for MPE Foods going forward. So I said I see a bright future.
Going forward, I'm quite certain that we still are able to increase our performance by mainly focusing on getting our operational plans rolling out across all our markets and get the job done. And then I think ocular confectionery effects will still deliver on our targets set ahead. Thank you.
Thank you, Hammad. Are there any questions for Ahmed? Clear, Pelham?
Thank you. Actually, I have several, but I'll try to be as short as possible. It's hard not to suspect that there's some things going on between you and Nordeus Gillepin prior to 2013 since you mentioned it and since you did so poorly in 2013. I was just wondering what kind of agreements you sort of reached and then started growing again. And also speaking of Nordiskruppen, because you said sales force have been extremely important for your turnaround, but I believe sales force is now kicked out of Mariusgruppen stores.
So will that help you going forward? Or will it make it more difficult?
Okay. So I'll take one question at a time. Being 3 companies like we were previously before 2013 when we started integrating the businesses, We were smaller players and we had a very high competition in several of our categories. Being becoming 1 big company and then getting our competence on a much higher level made our category management for instance or innovation strategies at a much closer level and closer connected to the customers. In this way, we actually had a better dialogue with Neugeskruppen with our category insights and all the insights that we're putting into this natural home of ocular confectioners in Snacksmoghe.
Is that the question answer to your first question? The big player, yes? Secondly, you're asking about merchandisers. I think it's probably known for a lot of the audience is that we actually are not anymore in merchandising our goods in Neueskruppen. We still though have a great part of our sales force visiting Neueskruppen.
And I think the consultancy that each of our sales consultants actually still applies to the shops in Auguste Grupen is very much important. Learning the frequency of being sold the goods sold from the shelves, getting the new products in the right place and getting the right shelving. So we're still visiting Neuweskuppen, still doing a very important job there, but we're not merchandising the goods anymore, no.
Thank you. And just 2 very quick ones. Do you see any changes in consumer behavior in the Nordics? Are people trying to get more healthy? Or are they still buying potato chips?
And the last one is, should we expect your margin to go back up to 16.5% or are you satisfied with where it is right now?
Okay. It's all in the health, your two questions. Healthy, yes, people are increasing being focused on health. At the same time, when you are living a very healthy life, you also want a fully indulgent life during the weekend. So if you can see the numbers in our in how the markets are developing, I see across all our markets in Confectionery and Saks, we're delivering extremely healthy market growth numbers accounting for in between 5% 8% in all our categories in all our markets with one exception which is Finland.
So yes, people are increasingly being aware of their health, but at the same time they really want to indulge with our products. So that was the one question. The margins, we set out a target. I think Peter shared with you 2 years ago on 16.5. We're still working towards that target maybe also diluted a bit by our last acquisition in Latvia, yes.
Petter Nussbaum, ABG. Just a follow-up on the cost savings and how you prioritize those savings. Are you seeing those going through the bottom line? Or are you more in the process of reinvesting in innovation or driving volumes by cutting prices or increasing marketing? Thanks.
You can see that the margin levels have now turned for Ochre, Confectionery and Snacks. So obviously, we're putting some of our cost synergies down to the bottom line. We're also very much focused on reinvesting where we can see growth opportunities. I think there will be a combination of the 2 going forward definitely. So the cost structure yes will give us growth
power. Hi.
Ali Hilali from Ingalls and Snyder. I have a question about commodity prices. We've seen a marked reduction in the last 6 months in most commodities sugar, cocoa, etcetera. How can you quantify the effect that's had on your business?
It's a very mixed picture, the commodity picture for us as we have several big commodities driving our costs. I think it's yes, we've been actually hit by higher commodity prices in several of our segments. And the most important thing that we do is that we're quite close to those numbers and actually work with our price management side to actually yes get our cost side in balance with the prices.
Okay. So I have one question from the web. What is the strategy to grow for confectionery with no presence in Denmark and Sweden and low in Finland and then very high in Estonia, Latvia and Norway? So what is the strategy to grow for confectionery in new markets?
Confectionery is by far one of our largest categories accounting for 34% of our turnover, our 2nd largest category. But if you see at the look at the market numbers, Confectionery as a category as such is by far the biggest market potential in my markets across the board. Therefore, it's extremely important to, of course, develop and making a category of confectionery growing in the existing big markets. But at the same time, obviously, this is a big growth opportunity for us going forward to actually enter the confectionery markets in the other countries where we're not present at the moment.
Are there any more questions? Okay. Then we thank Ambet. And I guess after listening to Ambet, you are very eager to try our confectionery and snacks products. Luckily, there is now a break where we have some product samples outside.
So we are a bit ahead of schedule. We have a 30 minute break. So we'll be back and starting with the presentations at 2 o'clock sharp. So please be back in time. Thank you.
Okay. So welcome back, everyone. I hope you had a chance to try our products during the break. And we will now start again with the presentations. And the next speaker is the CEO of Orkla Home and Personal, Stig Ebert Nielsen.
Thank you. For the next 20 minutes, I will talk about our track record of growing through acquisitions. I will use some examples to give you insights into how we successfully have been integrated company in the past. As you all know, we have recently acquired the Swedish based company, Seadrift, and I would like to share with you the rationale for that acquisition. But let me first give you a short update on the Orkla Home and Personal Business
area.
Okay. This is our portfolio of businesses. We have number 1 position in the main categories that we are operating in. Our markets are in general stable with high margin and we experienced strong brand loyalty. I will come back with examples from both Lilleborg and Orkla Health.
I will come back with example from both Villeborg and Orkla Health later in this presentation and I will also give you the background for the new unit Orkla House Care. As you can see from this figure, we have a heavy exposure in the Nordic countries. Norway in particular with 63% of the revenues. We have looked for a way to balance this exposure. That has been a part of the rationale for the acquisition that you will hear more about soon.
On the right hand side of the slide, you can see the revenue split per category. I think we have some technical problems. Okay. Revenues in Home and Personal have increased from SEK 3,500,000,000 in 2009 to SEK 5,000,000,000 in 2014, representing an average growth of 7%. This has been achieved by combining organic growth with acquisitions and add ons.
Average organic growth in the same period has been approximately 2%. We have achieved this in a highly competitive market with strong competition from global competitors. At the same time, we have been taking care of integration work. We have been focusing on own brands and we have been slimming the portfolio. My main focus in the last strategy period has been to seek additional growth in the Nordic countries with key focus outside Norway.
We have been looking for new categories, new channels and growth opportunities in new markets. As many of you remember, that was one of the key messages in the Capital Market Day in September 2013. With the recent add ons and with the acquisition of Seadrift, we will now deliver on this strategy. We will fill many of the white spots you see on this slide. The Nordics will still be our main markets.
But as Peter also mentioned in his presentation, we will look for growth opportunities internationally with key brands and in selected markets. Many of our businesses consist of major categories in major markets. It is demanding to generate significant growth only with innovation and new product launches. I think it's very important to find the right balance between organic growth and structural growth. We have the necessary critical mass in the Nordics to integrate companies and to realize synergies.
But it's important for you to remember that successful acquisition always start with a strong local market position. You will now see 3 examples which have increased our presence in new categories and in new channels. Our experience shows that smaller add ons are very attractive and often profitable already from day 1. They can be taken in, in existing business almost with no additional fixed costs, which means that the contribution margin after advertising almost goes straight down to the bottom line. Orkla Health has a good track record with such add ons.
The latest 3 add ons, Gevita, Fermavinci and Husk have strengthened our position outside the grocery channel, giving us a stronger foothold in the very interesting pharmacy channel. The aging population causes strong growth in categories like gut health and joint health and these add ons have given us a strong position in these growing categories. In addition, Orkla Health has also bought a stake in Trokdinfabrikken 17%, which is a Norwegian e commerce web based company in the fast growing sports nutrition market. And this would also give us and this is a part of our strategy to give us more insights and expertise in the fast moving digital universe. We have the option to buy more shares in that company and we will evaluate that in the next few months.
Let us now look at a bigger acquisition Jorba. In 2012, we acquired Jolan, adding approximately NOK 1,900,000,000 to home and personal. We decided to split the company, taking the home and personal care part in Jodhan into Lilleborg and then establish a new and dedicated unit only focusing on the painting tools, which is now called Orkla House Care. With Orkla House Care, we have a strong Nordic position in the duty sales channels. In addition, we attained new customer and channel insights, which can be very beneficial also for other Oortla categories like cleaning for home care or confectioner and snacks.
For Home and Personal Care, the integration into Lilleborg was a great success. Let us now look into this case. With the acquisition of Jorudan, Lilleborg attained a new international platform and also a complementary portfolio in Norway, Especially was this important in oral care, combining the toothbrushes in Jodan with the toothpaste in Lilleberg. Jodan has some very interesting position in the international market, especially with the kids concept, which you can see also there on the right hand side of the slide up in the left corner. This was a case with significant synergy potential.
Let us now look at the results. The integration was very successful. The synergies were higher and they were realized faster than expected. I believe also that Lilleborg has gained useful experience from the integration, which will be helpful for us when we are starting the integration with Cedrood. The number of SKUs was reduced, giving us a more focused and effective portfolio.
With this, we managed to take out more than €60,000,000 in total synergies, inclusive €10,000,000 in purchasing savings. The sales in the Nordics are growing, and we see a very strong development internationally with more than 13% in average growth last 2 years. Let us now look at the Seadrott case. I'm really happy that the competition authorities approved the transaction in the end of August. That was under the condition that the 2 brands, Assam and Allevo, are sold.
These two brands represent approximately 8% of the turnover with a slightly higher margin than average. When these two brands are sold, the total purchase price will also be reduced. As Peter mentioned, I think that it's important Sanddek acquisition of Seadrott will really strengthen Oolta's position as one as the leading Nordic player in health and home and personal care products in the Nordics. We will also get access to new category, wound care. And as you can see from this slide, the revenues in Seadrill in Sweden are 43% and it's 8% in Norway.
And that's given very good balance to the strong position we have with Lilleborg and Orkla Health in Norway. So I think it's fair to say that Seadrott is a perfect match for Ochlauer Home and Personal. The integration work has already started. A new CEO and CFO was in place already on closing day, and we have ambitious plans in the months to come. We have put together an experienced integration team also with support from Johan and his central supply chain team.
So what is going to happen? The home and person care part in Seadrift will go into Lilleborg And the health part of Seadrott will go into Orkla Health. Wound Care is today a separate category in FedRoth and we will use the next few months to evaluate how to organize this best in the future. There are 2 things I would like to emphasize on this slide. Firstly, we have achieved the reduced exposure to the Norwegian market that we were looking for, going from 64% to 50%.
Secondly, we have got a much stronger local setup in our other home markets. You can see the development on the left hand side on the slide. For example, in Sweden, we more or less tripled the turnover. We'll be a major player with NOK 1,100,000,000 in turnover and that's a good starting point for further growth. As you have just seen, Seadrift, we will reduce our exposure to the Norwegian market.
We will also reduce our reliance to the grocery channel in Norway. The share is going from 45% to 35%. Down at the right side, you will see how our presence in the pharmacy will be in all the markets. After integrating Seadro, we will have a stronger portfolio and we will be a very interesting partner. We will have a great in our baskets, we will have a great number of brands in wound care, in oral care, skincare, dietary supplements, sports nutrition and so on.
So we will be a very interesting partner for the fast growing pharmacy channel in the Nordic region. In Sweden, Denmark and Finland, we will establish common go to market organizations working close with central marketing in Orkla Health and in Lilleborg. This setup will realize synergies both on the top side top line and also the cost side in common sales force, key account management, category management, but also in systems and support functions. We see a substantial value creation opportunity with scheduled case. On the top line, we will, as mentioned before, attain critical mass on the go to market capability.
Innovation is key driver to accelerate growth. Together, the joint organization will improve. We will have better teams and we will improve their competence. With stronger local consumer insights and trade insights, we want to be an effective partner effective alternative towards the big global players. Sverdrup will give us access to new markets and channels.
For example, we see a lot of cross sales alternatives already from day 1. The cost synergies will come from joining the organization in a more efficient setup and as well as procurement and supply chain improvements. Total synergy potential will be minimum SEK 70,000,000 to SEK 80,000,000 and the main part will come in 2017. To sum up, our track record demonstrate ability to grow through acquisition, while at the same time maintaining a positive development on the existing business. We see many growth opportunities also in the future with new categories, new channels in new markets, both organic and structural.
The acquisition of Seadrott will give us a unique platform for future growth. Sweden will be a key value driver. So I believe that we have a solid base for future growth within a broad range of categories and markets. Thank you.
Thank you, Stiggy. Now we open up for some Q and A.
I would like to know what multiple you paid for the Jordan acquisition and what would that multiple be today after you've had your synergies
on an EBIT basis? Yes.
I don't have that exactly figure today. So we have to come back to that later. Sorry.
Only two questions this time, I promise. Do you see any chance of gaining any market share in home personal outside of Norway in the other Scandinavian markets for the coming years? And also how is Aqua Derma doing right now?
Sorry, but what was the first question?
If you can see any chance of getting higher market shares on home personal outside Norway in the coming years? For you?
Yes, definitely. I mean, with Cedrok, we will increase our market share. So I don't think I understand your question. What?
Personal? With Cedro?
You said Home Care? Just to be clear. Seadoug, they are present in Personal Care, in Home Care and in Wound Care. So with that acquisition, we will have a strong position in these three categories.
In Sweden. In Sweden.
We are also present in Finland and in Denmark.
Okay. So how what will the market shares be in those markets after the acquisition of Sederut?
I don't have the exact figures for each market. Aco Darma, it's to answer that question, I think Aco Darma is moving in the right direction. We are taking step by step and the market share is constantly moving. I think it's fair to say that this is not something you win on the short term. We are up there against playing with big global players, but we are moving in the right direction and we are taking market shares for every month.
Korden Nielskarga, Nordea Markets. Just a question which is more short term related. Can you say anything about the impact of the extraordinary weak Norwegian krona on your purchases and how that influenced your margins presently and going forward?
Yes. It's a good question. It's a challenge. As you know, we have a lot of products that we also buy from outside the Nordic region. So it's a challenge.
We work hard with, as Anne Beata also said, with price management. On short term, it's a challenge to compensate for the currency effect. But on longer term, we will come back and be fine.
Magnus Berg, Arch You described some quite large cost synergies you foresee within due to the Cerro acquisition. So I saw you guiding for the 2017 the old target was 17 0.5% margin. But given that you expect some dilutive effects due to the sales acquisition, do you think that it will be able to or could you see even higher margin when you see these cost synergies? And also, how do you see like how would you prioritize market shares compared to margins going
forward? To
take the first question first, as mentioned also Peter mentioned, we will have a dilution effect the 1st year. But when we have been integrating Cedric, we will be back on track on the same level as we are today. And if we succeed, maybe we will be even higher at the level we are today. So that was the answer on the first question. The second question, I don't think I really understand that.
Yes. It was related to the first one, but also how you view market share compared to margins in general going forward if you're I mean, looking at price income to drive sales, etcetera, compared to
I think that strategy can differ from category to category to market to market. Of course, market shares is very important for us to keep a strong market position. So I think both are important. I think it's difficult to answer clear on that.
It's Peter from ABG. How easy is it to adjust prices versus your customers when you have these FX movements? Thanks.
I think it's fair to say that it's maybe easy to increase prices with the customer. But I think when things happen they are in the same situation. They also buy products from Eastern, from China, from Asia. So I think they understand the position we are in some categories. So some categories it will be easy.
Other it's more a challenge. For example, our textile business where everybody knows that we are buying everything external from Asia, I think it's easier to get understanding for a price increase.
Morten Martin Mezger from DNB Markets. A question on the performance. In the first half, more or less all segments in Orkla was on track on the organic growth targets, while Home and Personal was sort of lagging behind. Can you comment a bit more on what was the specific reasons for this? And what should we expect going forward?
Yes. I think it's the right observation. I think especially Aortla Health has a very tough start on this year. It's many reasons for that. One reason they had a very strong December piping a lot of products into for campaigns in January February.
They also closed one factory, business to business factory at Leknes on low margin products. And also they were facing a challenging market in weight management, traditional weight management products for the Nutrilet business and that was something both in Norway and Sweden. I think that was the main reason. House Care had also some challenges due to a wet spring and the painting equipments and the other company was doing quite good. So two main reasons, 2 companies which was behind on both top and bottom line.
I don't think it's right timing to guiding for the next quarters, but I think both units are doing what they can to be back on track.
Any further questions for Steve? Okay. Thank you, Ernst. Thank you. Now it's time to move on to Orkla Food Ingredients.
Orkla Food Ingredients is presenting for the first time on Investor Day today, but the presenter is no rookie. He has been in Orkla for over 30 years. So please welcome the CEO of Orkla Food Ingredients, Paul Ekkelan.
Thank you, Matthias. Good afternoon, everybody. My responsibility in Orkla is Orkla Food Ingredients, which differs somewhat to the other business areas by the fact that we are primarily a business to business company. 80% of our business is business to business and 20% is business to consumer. I will during my presentation here today give you an overview of our operation, business model, value creation thinking and strategy.
Oikla Food Ingredients as a business area was founded in 1999, although most of our companies have a much longer history. Today, we have 45 companies in 22 countries, consisting of both what we call category companies or production companies and sales and distribution companies. And I will return to that later in my presentation, because this is an important element in our business model and value creation thinking. Within Bakery Ingredients, we are clear market leaders in the Nordic with more than 50% market share. But we also have some very interesting start up positions outside the Nordic, primarily in sales and distribution in Central Eastern Europe within one of our categories, improver and mixes and within ice cream ingredients.
Going back 7 years, we had 75% of turnover in Nordics, 25% outside. Today, we have 55% of our turnover in the Nordics and 45% outside. So although we are still growing in the Nordics, we grow much faster in Rest of Europe. Our main customer segment is the bakeries, where we sell bakery ingredients and solutions to artisan bakeries, to industrial bakeries and to in store bakeries. And this stands for 72% of our total turnover.
Then we sell ice cream ingredients primarily to ice cream shops. That comes for 8% of our total turnover. And within Ice Cream Ingredients, we are growing very fast at the moment. We are clear market leaders in Scandinavia. We are actually also market leader here in U.
K. And we entered the German market earlier this year through the acquisition of Ice Union. Then we have the retail side of our business. In our retail side, we are primarily in Scandinavia, but also for some historical reasons in Romania. Our main brands are in yeast, margarine, butter blends, marzipan and bakery products.
And in this part of our business, we are, of course, cooperating very closely with the 3 other business areas, both when it comes to taking out synergies, but also when it comes to best practice and knowledge. In the rest of my presentation, I will concentrate on the business to business part of Orkla Food Ingredients. Just to give you a short overview of what our offering is from a product perspective. We sell a lot of ingredients, but our goal is to come up with added value solutions for our customers. Our business is not about single ingredients.
It's about expertise in end products, in consumer products. And the same goes for our confectionery products. Again, a lot of ingredients, but the name of the game is to come up with solutions that increase our customers' profit that makes them more competitive. And this is what we sell in ice cream products, a lot of Lalor products here. And here we actually sell everything you need to run an ice cream shop except the ice cream.
It's too much competition on the ice cream side. As previously stated, Orkla Food Ingredients started up in 1999, which means that we are still quite young as a company, still a teenager, still learning, but also with a teenager curiosity for growth and willingness to grow. And over the last 16 years, we have managed an average annual growth rate of 10% over 16 years. The start up position in 1999 that was 3 companies Drakspek in Denmark, Odense in Denmark and Eden in Norway with approximately NOK 1,000,000,000 in turnover. And since then, we have grown both organically and structurally to where we are today, a business unit with NOK6.5 billion in turnover in 2014.
And then the big question is, of course, how much of this growth has been structural and how much has been organic. From this picture, you might get impression that most of the growth has been structural. But in reality, it is fifty-fifty. It's 50% structural growth and 50% organic growth. And one of the main reasons for the rather high organic growth over the years is our business model, which gives us the opportunity to build organic growth platforms through acquisitions.
And I will try to explain that. In Ocular Food Ingredients, we have been consistent to our business model over the last 16 years. On the one side, we have category companies, production companies with deep product novel, deep application novel doing innovations, doing recipe optimization and so on. On the other side, we have sales and distribution companies being very close to the local market to the local customers, really understanding what is happening in the local marketplace, acting swiftly to changes in the market. And we believe that in the interaction between our category companies and sales and distribution companies, there we can create our biggest competitive advantage.
Inputs from our sales and distribution companies to our capital companies can help them making better products. And by making better products, they are strengthening both themselves and our sales and distribution companies. Therefore, we focus a lot on what we call flow of products and flow of knowledge in Neupla Food Ingredients. And at the moment, we have close to NOK1 1,000,000,000 in turnover going from our category companies to our sales and distribution companies. In addition, as previously mentioned, when we are doing acquisitions, when we are buying companies, it's a great opportunity for us to create organic growth platforms.
When we are buying a category company, of course, that's a great opportunity to strengthen the product offering in our sales and distribution companies. And when we are buying a sales and distribution company, of course, that's a great opportunity for our category companies to enter new markets to get new distribution. We are the only one on the European bakery ingredients market and on the European ice cream ingredients market, which operate with this dual model. And we think it gives us a competitive advantage on several dimensions. Our sales and distribution companies are stronger than national wholesalers due to the fact that they have an open access to product expertise, to product development and to application resources in our category companies.
Our category companies are stronger, more profitable than national producers by scale in production in combination with a close cooperation with our sales and distribution companies. And we also differ from the big international product specialists by being closer to the local markets to the local customers and by hopefully being better on cooperating between companies and business units. To make this business model work, to make this synergy thinking work, we have to have leaders that really understand this setting. We are decentralized, organized in a multi local model, and we also build up resources close to where the decisions are taken close to the customer and close to the market. In such a setting, we have to have leaders that can manage and balance 2 hats, both the company hat and the Orkla Orkla Food Ingredients Sets.
Therefore, we focus a lot on what we call people and passion, having the right people, clarifying roles and responsibilities to leaders, so that we together can make it a competitive advantage how we both utilize taking out synergies and local Nenas. To put this into perspective, we have defined 3 very clear value creation arenas in Odfkla Food Ingredients, which we as leaders have to handle. The first one is profitable growth in the companies. That's the most important one and the fundamental for profitable growth in UFI. We have agreed growth plans for all our companies where we focus on 3 elements.
Where are we? Really understanding the basic of the company. Where do we want to go? Profit ambition, growth ambition, growth direction, priorities and how to get there, concrete action plans to be implemented in combination with an active leadership and organizational process focusing on do we have the right people, teams, cultures and knowledge to accomplish the plan. The second value creation arena, we have been talking about that.
That is realizing synergies, our 2 flows, flow of products and flow of knowledge, meaning, sharing best practice and cross selling, cross buying between our category companies and sales and distribution companies to improve our organic growth rate. And the 3rd value creation arena is structural growth, strengthening the total business system by opening up new markets to our category companies when we are doing acquisitions in the sales and distribution area and by strengthening our product portfolio in our sales and distribution companies when we are doing acquisition in the category area. As already mentioned, we have for the last 16 years managed to have a top line growth of 10%. But during the 2, 3 last year, our main focus has been on the contribution margin and profit development, partly by gradually moving our product portfolio towards higher margin product and partly by being better on coming up with added value solutions for our customers. Oikla Field Ingredients has a lower EBIT margin than the 3 other business areas in Orkla, but we are also less capital intensive.
So therefore, an important KPI for Food Ingredients is return of capital employed. And our return on capital employed has increased from 10% in 2012 to 13% in 2015, and we have a clear ambition to increase it further in the coming years. To try to sum up, I would say that Oikla Food Ingredients is a growth machine with a 10% growth every year since 1999, growing both structurally and organically. We think we have a proven business model and value creation thinking, which gives us a lot of opportunities for further growth both in the Nordics, but especially outside the Nordics. We will continue to focus on contribution margin and profit development with return on capital employed as an important KPI for improvement.
Thank you very much.
Thank you, Paul. And now Paul will be happy to answer any questions.
Daniel Johansen with Vonsfeijnsen Oslo. Thanks for a very interesting presentation about this perhaps somewhat overlooked business that you're running. Just wanted to ask one question about impacts of raw materials. Right now, we have a raw material cycle that seems to be slightly more beneficial for you. So I wanted to understand what are the raw materials impact here.
And when you're talking about improving the gross margins or gross contribution, how sort of how do you do that? And what are the critical points there? Thank you.
Of course, raw material going up and down for us is extremely important. And we are following this very closely and also is very occupied with price management. I would say that a lot of our contract with customers is back to back. So there we have most of our customers are very well into what the raw material prices are. So there we have no effect at all.
At the moment, for the 2, 3 last years, we have been running with a positive effect price towards raw material prices between SEK30 1,000,000 SEK40 1,000,000 a year. But our focus is more that we have must have a positive effect from price management and that is what we are focusing on.
So on acquisitions in the bakery business, who are you competing against largely? So CSM and are these run-in auctions or?
No. I would say that our acquisition strategy is totally different from what you see from the 3 other business areas. We are normally doing smaller add ons between NOK 50,000,000 and up to NOK 300,000,000. And we our strategy is more to get in contact with the company, sit down, talk with the management, understand the business, get to know the management and so on. And often it's family businesses.
So we have the opportunity to really get to know the business we are buying before we are doing the acquisition. And that's normally our
acquisition strategy.
Of course, there are sometimes we have to do another way, but that's the way we would like to do it. And we know a lot of businesses around, businesses which we maybe have been a supplier, been a customer and so on over the years and we know them very well. And we have at the moment a list of 5 to 10 companies which we are looking into for the next 2 to 3 years. But that process for us is often 18 to 24 months really getting to know the companies. And we will continue with that kind of add ons.
We don't foresee any big acquisitions. There are some a couple of big companies out there, which maybe can be an opportunity in the future, but they are also at the moment very difficult to obtain.
And can you
talk a bit more about the whole artisanal bakery growth and maybe where you're seeing the fastest growth, which geographies, how much of that has played out already?
This is a rather stable market. The artisan is going somewhat down. The industrial has gone somewhat up. But then we see also a different trend that artisan is coming back in the Nordic companies. And Industrial Bakeries, because we are a supplier and then you have the Industrial Bakeries and then you have the retail side.
And we saw that at the moment the industrial bakeries is in the difficult situation. The retail side is going to the suppliers for solutions and the Industrial Bakeries ends up as a producer. And of course, their margin is squeezed at the moment. Our market share is higher in on the artisan side than on the industrial side, but it's growing on the industrial side at the moment. Don't know if that answered your question, but
Herman?
Yes. One question on the acquisitions again. Is there a rule of thumb how much synergies you're getting out on your acquisitions as a percentage of revenue or as a percentage of cost base?
One more time, please.
The synergy you're getting out on average on your acquisitions, do you have a rule of thumb as a percentage of revenues or a percentage of cost base?
Most of our acquisition, as I said, is between NOK 150,000,000 or NOK 250,000,000 with 2% to 3% margin. And we see several value creation opportunities. Let me take one example. We bought a company in Slovakia, Ekver, a sales and distribution company. The biggest value creation for us was to get SEK 100,000,000 of our products through that system over 2, 3 years.
That was the biggest evaluation. When we are buying sales and distribution in Central and Eastern Europe, we see that they are on a very low level. Typical wholesalers just buying companies and buying products and selling products. In Scandinavia, we have our sales and distribution companies which sell solutions. So we try over time to be more and more professional with these wholesalers in Central Eastern Europe.
And we're moving in the right direction, but that's a longer value creation
history. Any further questions? Okay. Thank you, Paul. So now it's time for me to introduce the last business area presenting here today.
It's also the largest business area in Orkla. And here to give you some more insight in the world of pizzas and pickles and porridge, the CEO of Orkla Foods, Apliride and Agril Johansen.
Thank you for a wonderful introduction, Matias. Good afternoon, everybody. Orkla Foods holds unmatched position in all our core markets. Those markets are what you in general will call mature. This presentation is about how we work to create growth in those mature markets.
So I can promise you great stories on pizza, pickles and porridge and balloons and more smotias. But first, let me give you an update on the current status and performance of Orkla Foods. On your left hand side, you see the composition of our revenues by markets. As you can see still as you can see Norway and Sweden are still our largest markets and 85% of revenues comes from the Nordic area. Outside the Nordics, we have some very interesting positions that we should develop further.
Especially India is a strong contributor to the growth in Okla Foods. On your right hand side, you see the composition of revenues by product categories. We are working in many categories in our core markets. We are market leader and have very strong position in all those categories and we prefer to work in categories with local consumer preferences. Meals and pizza combined is about 1 third of the revenues and combined is the largest category we have.
I was here 2 years back. I presented our business model now. So it's a brief recap for those who are here. Local taste preferences differ between markets, food habits differ between markets and so does values and consideration in various aspects. So our business model build very strongly on developing the local brands with the local heritage in other markets.
We have brands like Abba going back to 1838 and Bouvier going back to 18 50. So our competitive edge is to have the local consumer insight and superior trade and customer insights compared to the multinationals. So you probably heard the word local enough this afternoon, but I will continue. Then we exploit the scale advantages, which we have both nationally and across our markets. The national synergies are often much more significant than most people believe.
We see it in advertising. We see it in steel sales forces and we see it in back office and those kind of functions. Those synergies are mostly national in nature. But with our new and more optimized model that Johan Clari has given a lecture in, we also see that there are much more synergies to be realized across the markets we operate in. We consistently work with creating value from organic growth, but we also consistently work with creating value from structural growth.
Within the framework of the local more optimized model, we always look for acquisitions where we can create excess returns on capital and that can give us a stronger platform for growth in the future and deliver on the key trends. This rather small acquisitions of Anamma and Biokwale gives us positions in vegetarian products and inorganic products in a much better way. Post the acquisition of Reeb and Sun, Orkla Foods has created 1 operating company in each of the markets where we operate resulting in more effective and more cost efficient operations. And after the successful divestments of Orkla Brands Russia and in Poland, we have incorporated the international food companies into Orkla Foods creating a leaner overhead structure and making it easier and frictionless to cooperate and realize synergy across our markets in the food area. I mentioned the Rio Grande Sun acquisition.
The key priorities we did in 2013 2014 was to realize synergies from this acquisition. This was a huge synergy case. This graph shows the rate of the synergies. The run rate of the synergies realized which means the 12 month speed in a way from the actions we have carried through. We have announced a run rate target of NOK 250,000,000 to NOK300,000,000 a year.
And as you can see, we are currently performing at NOK 350,000,000. And maybe also very important to mention is that we still continue to see opportunities to realize synergies from this acquisition that we didn't see before. Like that you may sort of saw on the Johan's Clari slide, we are now closing down 2 factories in Norway and merging them with a rather big Elverum plant, which came in from Eber. We are closing down 1 Finnish plant and relocating production there to Oerbro plant in Sweden and the plant in Sweden and the last one came from Ribebrandsen. This kind of consideration was not there when we acquired Ribebrandsen.
So still we can create value from this. And it was the button. Sorry about that.
So to the current performance.
After the having heavily concentrating on taking out synergies in 2013 2014, I'm now happy to see that we are back on track when it comes to organic growth in 2015. And as you can see also the margins are increasing in 2015 as synergies are realized. And I may remind you that just the consolidation of Rybrenner Sand lowered the operating margin by 1.5 to 2 percentage points. And with the exception of 2013, Orkla Foods has produced underlying growth in profits in all the years on this chart. So I've so far taken you through the current business model and the current status of Orkla Foods and our competitive advantages.
In this section of the presentation, I will talk about how we execute on this business model to successfully create organic growth. As every FMCG company, we need to grow together with both consumers and customers to succeed. We need to deliver on key consumer trends and needs and at the same time deliver on our customer needs. These five words describes the key trends we see in today's market. It's about healthy living, maybe the strongest trend we see around.
It's about convenience, making it simpler for the consumers all the time. It's about indulgence, as Andres talked about, treating yourself. It's about localness, more and more preferring locally produced products and it's about social responsibility, being a conscious and responsible producer and a social and responsible consumer. These trends are something that all players in the market need to address and need to exploit. But these trends also to some extent differ between markets in strength and in consciousness.
And with our business model, we are better positioned to exploit those different from market to market. I will show you a few examples on that. Let's start with the issue of palm oil that also Peter mentioned. In Sweden, this case is not relevant. But in Sweden, we see that consumers are more and more concerned about vegetarian products and more and more concerned about organic products.
In Norway, we see a very strong consciousness on the palm oil issue, both with consumers and with customers. The reason for this is, you know, partly due to health issues with saturated fat and partly due to sustainability issues. And over several years, the Norwegian media has heavily focused on the issues with palm oil in the ingredients of many products. Our brand Nougatte which is a bread topping brand and very tasty so really got the rough treatment in the media from this because it contained palm oil. We were able to quickly respond to this.
In fact, we had already started the work when this exploded in media some years ago. And believe me, it's not a simple product development task to remove palm oil and replace it with something else, because palm oil adds a lot of it adds important attributes to the product. But within just one year, we were able to tell the Norwegian consumers that we have managed to remove all palm oil from our products. And our products today are clearly marked. We do not contain palm oil in Norway.
And the same is of course utilized in our communication with consumers and society and customers. We see that our multinational competitors is not acting like this on this issue. Real men eat salad. Well, that's maybe not me. But I mentioned in Sweden that the vegetarian trend is really strong.
4% in Sweden of the total population say they are vegetarian and in the younger target groups 17% claim they are vegetarian. And there is a new word coming out called the flexitarian. That means that you have a rather normal meal pattern, but you deliberately choose to replace at least 1 meal a week with a vegetarian alternative. In order to meet this trend in Sweden better, Orkla Foods bought Amnama. Anamma is today rather small company producing and marketing soy based dinner solutions.
So with the acquisition of Anamma, Orkla Foods has entered into new segment, gained new competence that will enable Orkla to develop concepts and products to deliver on the vegetarian trend. And in addition, we of course launched in the coming years vegetarian alternatives in our current product ranges. Somebody needs to lubricate this button. Then another trend which is the localness which is very much playing out. You may say ironically the local trend is a global trend.
We see it in all markets. Our consumers feel more confident eating products that are produced locally. And the customers are also focusing quite heavily on local production. And even politicians are more and more encouraging inhabitants to buy the local products. And this illustration shows various signs and symbol used in the different markets to underline that these products are locally produced.
As you may have guessed, we are perfectly positioned to take out this in the marketplace. In the Norwegian market, you see the famous brand Grande OSA there. We put on a stamp saying this is only Norwegian meat and cheese. And by the way, it contains no palm oil as opposed to many competitors. In Sweden, we highlight that the Swedish classical hush that is pitipana for those who understand that word, contains 100 percent Swedish meat and potatoes.
And furthermore in the Finnish market, we highlight that our pickled vegetables are locally sourced and produced. And in Estonia, we see increasing sales when we have chosen to more and more promote the local brand, Pulsama. Good. We have now seen a few example of how Orkla Foods is well positioned to adapt to local trends and to win in competition. Now a few words on cooperation with consumers.
In our highly concentrated markets, Peter mentioned 3 main customers in Norway, 4 main customers in Sweden and so on. We see a demand from retailers of to make unique products for them and the purpose is of course to enable them to differentiate in their competition. On this picture we show, which is from Denmark by the way, how we have executed this. We have a dedicated brand for Coop Denmark called Goralike. Our brand, they have an exclusive right to use it.
In the middle, you see some of the products we have in other markets, dry sauces and soups and things like that, exclusively for 1 year delivered to Coop, Denmark. And on the right hand side for you, we have the Asian brand Mrs. Cheng exclusively delivered in Danske Supermarket, a big Danish customer. This is how we can use our flexibility to deliver better on customer demands. Johan is not always fan of that, that's a different discussion.
So now we have seen some example on how our local approach gives us opportunities to win in competition. In the next section, I will talk about how we need to create growth both within the core portfolio of what we have and launch new products into new categories. And the experience shows us and some of us have some experience That we need to do both those things to be able to create growth. This graph shows in a conceptualized way how we work with this. We develop the existing offers, developing new offers.
We take the existing offers from existing markets into new markets. And I will now show you a few examples of how they do this in practice. That always is better. Pizza is an extremely important category for Orkla Foods. And in Norway we have the biggest per capita consumption of pizzas in the world.
An average Norwegian eat 8 frozen pizzas a year, double the amount of Sweden for instance. However, from 1998 to 2015 we have managed to double the value in this category even though it was the highest per capita consumption in the world. And last year year to date 2015, as you see on your left hand side, the market is still growing, now by 4% and you see also how the new launch in this market comes on top of the existing categories and helps creating growth. So this is a highly innovation intensive and launch intensive category. And if this works now, I will show the catalyst coming up.
The news this year. Orkla Fuse still aims to grow this category a lot by executing our strong innovation programs. On your left hand side you see the products we have launched already this year in the main brands Grandiosa and Big One last with the Californian style pizza under the Big One brand. And these days we are rolling out 3 more variants on our homemade range very successfully so and Pizzabocca aiming to take a share of the growing Italian style market. And the Pizza Baccaria is a new brand to us and is done in cooperation with the biggest Norwegian customer and great tasting products.
Now over to pickles, which I suspect that some of you may think is a boring category and maybe you think it's yesterdays and so on. Well, I can tell you it's not. It's an exciting category. What we did with pickles in Finland as we have done in some other markets is that we put on a lid that makes the jar much, much more easy to open. Many people have trouble with really opening this and you all know that you have your tricks with forks and lights and so on.
This makes it much, much easier to open. And this category has in Finland grown by 6.3% for the last 12 months. And our main product the Felix Mako has grown 20% in a boring category like pickles. And we have never seen a consumer response like this in Finland. Maybe that doesn't tell you much, but we have a very, very many, very, very many consumer crisis coming to us unprompted.
So this show you how pretty clever innovation can make those categories growth even in the categories that we consider dull or whatever you like to call it. So that was about growing the core and how we work with that. Now we go into new categories. In 2010, we launched a new health concept under the Palun brand in Sweden together with the nutritionist, Fredrik Palun. Since this launch, the annual growth in this on this brand has been 50%, five-zero.
Our new target now is to quadruple this brand by 2018. We will of course continue to develop the current categories within breakfast cereals, misfits, juices, smoothies and things like that. But on top of that, we are entering new categories all the time with this brand. We have launched very successfully a range of balloons chilled ready to eat meals. And now we enter the porridge market with this super porridge containing only ingredients that is good for you and 1,500,000 in microwave you have a delicious meal that is really healthy.
So it also delivers on the convenience trend. And now to Denmark, where we have the brand Pastella and that's the market leading brand within fresh pasta in Denmark. And after a period of strong growth up until 2011, we saw a few years of a strong decline taken by the carb focus. And through consumer research, we have seen many times that mothers, especially mothers, but mothers and fathers want their children to eat more vegetables. And then we thought can we embed some vegetables into the pasta and make it a much more healthy meal and deliver on this need.
And in January this year, after 2 year of really challenging product development work, Orta launched what we now call Gjansakbon or a vegetable pasta in Denmark. It's a fresh pasta with 40% vegetables embedded inside. And we have not seen pasta like that in any other market where we operate. This launch has reversed the negative trend in this category. Year to date the category itself, I mean the pasta category itself, fresh pasta has grown by 14% after years of decline.
And our brand Pastella has grown by 36%. And part of the trick is of course that it contains a vegetable without tasting much vegetables, because you know kids don't want things to taste like vegetables, at least not my kids. And I forgot to mention it's only 1 minute of boiling water, so it also delivers on convenience. Well, this insight that parents want their kids to eat more vegetables is of course valid across markets. So what we now do is launching these pasta products in all our core markets.
Sweden, Norway, Finland coming on stream now and we have also experienced strong interest for customers outside the Nordics, Holland, U. K. And other European markets. Another way of creating growth in our so called mature markets is to utilize the professional capabilities in our go to market organization. We have huge sales forces.
We have very professional sales forces in all the core markets. As you know, we entered into this agreement with PepsiCo regarding distribution of Tropicana juices, Quaker Oats and Lays Snacks. The first two are being handled by Okla Foods. And these kind of agreements and these agreements especially will be a source of growth in the coming years when we take over distribution of those products. So to sum up, after a period of strong, strong focus on integration in 2013 2014, we again see stronger performance from Mokka Foods with growth on both EBITDA and on top line.
Our proximity to the market to the customers and consumers gives us a competitive advantage as we can meet the local trends and needs better than most competitors. And our key priorities going forward to great growth are strong programs of the core portfolio as you have seen, strong programs to launch new products and concepts as you have seen and to drive launches cross borders wherever that is relevant as you have seen. So thank you for listening.
Thank you, Arthur. So now Arthur, we'll be happy to answer any questions.
Yes. You for the presentation. Can you say something about the sort of also borderline balancing between innovation and the strong, strong cost focus that you have been highlighting earlier in this session?
It's a very relevant question and a huge question. So it's hard to answer specifically. But we need to sort of eliminate everything that I would call non value creating complexity and keep what we think is value creating complexity. And as we drive out costs or as Johan and his teams are driving out costs, at the same time we need to keep the flexibility because the flexibility and the localness is very much a part of our value creation. But this is sort of an everyday balance that we need to strike right over time.
Yeah, it is hard to answer more precise than that.
Yes. Edna, we heard from Johan about his plans for factory closures and maybe another 20% there. And you and Beth stressed though the localness, local production, local contents. So what do those discussions look like internally when he says you need to rationalize and you say, well, no actually Finnish consumers want to finish pickle. And are his plans realistic?
Yeah. To put that sort of I mean you're striking the sort of the right issues that we need to strike right. I mean basically it's like this. We are more risk willingness if the potential in the cost savings are big. So it's always a trade off with how much cost can we save compared to what risk do we perceive by sort of making a brand or product less local.
If there's a huge potential, we are willing to take the risk. If the potential in the business case is not that huge, we are more conservative. So that's the way we work on it.
And based on your analyses, which categories is localness most important?
I think the closer to the earth that people perceive that product come from, the more important is the localness. But these days lots of economies are in trouble. I know there is a big consumer wish for locally produced products also from a responsibility issue. But I guess that's the general answer to your question. The more close to the people perceive that the products come from that is pickles, jams maybe and those kind of things, the more important is to be local.
You have mentioned palm oil is out of the basket. What are you using instead?
Various vegetable oils. In the Novate case, it's sunflower oil.
Daniel Janssen with Fonsfernans. Just a question perhaps somewhat similar to one of the previous ones here. You do obviously you are one of the market leaders in crisps within the confection and snacks unit. So the PepsiCo deal and I think that somebody has perhaps asked you this question before. But I mean the logic here and sort of how
big is
the Lay's business and what's sort of the rationale behind this?
As I told you, Orkla Foods is handling the juice and the other parts, I don't really have that insight into the Lays business. Anybody else?
I think to be exact we have to come back to that question. But in Norway, the Lay's business is very, very small. That is because of import duty on potatoes. Doritos business, however, is somewhat bigger and Lay's and Doritos is also a bigger part in Sweden and Denmark and Finland. But in general, the main part of the PepsiCo distribution agreement is related to Tropicana and Quaker.
John Innes from Goldman Sachs. I've got a couple of questions actually. The first one is in relation to the capacity utilization rate of the Food division. Can you say how that compares to the wider group? And what you're really aiming to achieve in that ratio going forward given some of the plans from Johan?
And then the second question is in relation to innovation, which appears to be the largest contributor to growth, I would imagine. What sort of focus do you put on return on capital when you think about investing behind these? And can you talk about how that's trended over the last couple of years? Thanks.
Are you ready for the capacity utilization in Fuchs' question Mr. Klarion?
So for the first question around capacity utilization, I wouldn't say that Foods is sticking out negatively in any way. Then we have amongst the different categories where we have different levels of capacity utilization. And this is also, of course, a bit counting on the installed capacity and how much we run the lines. But as I mentioned before, a part of the structural grips we're taking is to sort of reallocate products into available capacities. I think over time we will see overall foods utilization levels increasing to well maybe more healthy levels.
And on the second question regarding return on capital or return on investment on innovation, it's really not for us and you may not like this but it's really not for us a question of return on investment. It's when we see we hit it right, you hit big needs and you find the right needs and you make it big, the return investment is huge. And if you don't do that, it's very small or even negative. I mean that's basically So we need just to concentrate very much on so it's not like we have zillion projects and separate them by return on investments. It is really about do we have a feel that it hits a big need in the marketplace and then we know it's a success.
I hope that answered your question.
Yes. This is Peter from ABG. If you look at your what's your strategy on producing private label? You mentioned that you now gone into a cooperation with Norgeskruppenal on pizzas. Is that something we should expect increase going forward?
And the second question is on the Reebo deal. Obviously, a quite successful story when it comes to cost synergies. Can you say something about how sales has developed versus your expectations? Has it been on par below or above? Thanks.
I will. I forgot your first question. That was about private label. We have a rather opportunistic approach on private label where we see that that can contribute to our profit and to strengthen customer relationship. We are positive on that.
These initiatives was not about private label. That was about developing brands and products in close cooperation with customers. And the last one you definitely will see more of in the coming years. That's a growing demand in our markets that we can deliver into. So that was the answer to that one.
Dereibe, yes, it's a successful case in synergy realization. Sales have developed weaker than we anticipated obviously in 2013 even a lot weaker actually. We now luckily see that it stabilizes and I must see that we have been able to turn around the trend of all what we call dry products which again makes my story that we really focus on something and we can turn it around. So in these days see that the negative development over years in Rebus Dry Products has stabilized and now is even increasing in our core markets. Was there something else that you wanted to have an answer to?
No, that's okay. Thank you. Yes, any more questions?
Doesn't appear that. So thank you, Adler.
Thank you.
Thank you.
And now before Peter sums up and give his final remarks for the day, he and the management team will take some final Q and A. But I'd just like first to thank you all for attending today. It's been great to seeing all of you and I hope to see as many of you as possible staying for some drinks afterwards. So are there any final questions for Peter?
Ola, Martin Haskar from DNB Markets. A question on your EBIT growth targets. Can you sort of quantify or elaborate a bit on where you see the margin improvement potential and what the cost cutting potential is of that organic growth or target. It seems to me at least that you have fairly ambitious program going on with regards to cutting costs and but I can't really find any figures on how much that's going to contribute.
Yes. Well, our EBIT growth target of
6% to 9% includes both organic top line and cost out the in the whole organization, but especially in supply chain. Some of those cost outs, it's very difficult to estimate how much ends up on bottom line and how much do you just have to do how much is cost avoidance, especially in procurement. Included in the business case or in the targets going forward that includes a 6% to 9%, includes cost reductions in supply chain and it includes organic growth on top line. But I cannot give you a figure how much comes from growth, how much comes from cost.
Just a follow-up on organic growth. Can you quantify your sort of view on volume and price?
Yes. We have seen now lately, especially in 2015 that most of the organic growth comes from volume mix and not from price. And that is a big change from what we've seen in the last year, so where most of the growth has come from price. So I think what we see now is a much more healthy growth than we have had previously. But I will also stress that it's combined volume and mix and that also means that we are selling more high value products.
It's also part of the growth.
Yes. We have a question here. Yeah.
Can you just walk me through how you think about acquisitions? So for example, what are you willing to pay? What are the metrics you use? How you decide whether or not you're going to do an acquisition? Is it going to be different?
Now just focusing on bolt ons? So where's your thinking in terms of pricing, returns, how much you're willing to pay as a different
by segment or the business categories?
Yes. There was a lot of questions. Well, if I have to answer and then you have to just tell me if I didn't answer your question. Well, first of all, we see that the most profitable acquisitions we do are the small bolt ons. It's quite easy to integrate and it's easy to take out synergies.
And usually you can reduce fixed cost dramatically in the acquired company because we can just put it in our existing structure. When we look for companies to buy, we want to find companies that fits with our current presence in the market or in the geography. We want as we have mentioned several times today, we want to buy companies that have a strong brand position in the market or that has the potential to build a number 1 position or at least strong number 2. We also look for companies where we can realize synergies fast and easy, of course. And when it comes to what we are willing to pay, that varies, of course, from business area to business area and also from geography to geography.
But in general, we have a weighted average cost of capital after tax of 7.7% and that's absolutely minimum. That's where it starts. And then we add on top of that, we add premiums for geography. We add premiums for inflation and so on. So that's absolutely minimum.
Okay. Did it answer your question? Okay.
Okay. I have some questions on the web. And I think the first one maybe for the CFO. You mentioned the need to improve working capital management. What specific targets do you have for working capital ratios?
Or put in a different way, how much cash do you think your company can extract out of working capital?
Yes. As Peter mentioned, there's a potential here. And looking at 12 month rolling working capital level, we in fact have reduced the level slightly. It's now around 17%. And we have the biggest potential for savings is on the inventory side.
I think that's the biggest one. And then the improvements there will move along together with the progress on the supply chain program that Johan mentioned and looking at the factory footprint of warehousing, etcetera. And then we also see potential especially around the trade payables, the 2nd biggest opportunity and then not that much on the trade receivable side. So we don't have we don't disclose a specific target or ambition here, but the ambition is to it's going to be less than it is today. And today is around 17% improving.
This is also including add on acquisitions that we've done and the headwind on the currency side. So it's moving in the right direction. So I hope that answered the question from the web.
Thank you.
One final question regarding Food Ingredients more from a strategical point of view. I mean the business unit differs quite a lot from the consumer units where it has been a lot of focus over the past few years. So could you just give us an idea here? You back in 20 13, you didn't include that into your guidance, the performance of that segment. So has this become more core for you or sort of the long term strategy?
Would you think that this could potentially be better suited for another kind of business and that you would focus entirely on the consumer segments? And you could could you give us some sort of an idea of the plans for that segment?
Yes, that is right. On our last Capital Markets Day, we didn't include food ingredients. We didn't have any presentation and we didn't have any targets or communicated targets. And the simple reason for that was that the previous CEO believed that that did not fit into the strategy and the structure of the future Orkla. I am of a different opinion.
And as Paul has shown today and also what they have proved is that Foods Ingredients is an attractive business with very good and competitive return on capital employed, even though the margins are lower, but the capital requirements are also much, much lower. So it really competes well with the rest of our business areas. We also see that there are quite a lot of synergies between the other business areas, Specialty Foods and Food Ingredients. And carving out Food Ingredients for sale, for instance, would lead to some negative synergies. And as Paul has shown, we see a great still a great growth potential in Food Ingredients.
The company has grown both organically and through acquisitions by on average of 10% since 1999. And as we also see today that the growth now is even higher than that at I think 14%. And the margins are improving and bottom line is developing very well. So I see that as a part of our core business, partly because of synergies, partly because of the growth potential and partly also because 20% of the business in Food Ingredients is actually business to consumer.
Okay. I have another question from the web. It's quite long, but I have it written down here. I may have missed this in your earlier remarks, but can you briefly review the non food assets of Orkla, the timeline for liquidity in assets you have target to dispose such as financial assets and real estate and the value of real estate asset as they complete development And your thoughts on non food assets like Hydro, Utah and etcetera? Can you comment on your philosophy for returning capital to shareholders with buybacks versus dividends?
And lastly, in your opinion, does it make sense to split off your non food portfolio into a separate investment vehicle?
That's a lot of questions.
That's a
lot of questions. But mainly it's regarding the non branded consumer debt asset and
your view on that? Yes. Well, first of all, we can take the smaller assets first. We have a real estate portfolio with a book value of approximately SEK1.7 billion. That is mainly assets that has come from the operating part of the brand consumer goods companies, where we have closed down a factory or we have closed down a head office from a company and where we have a vacant building that we can develop.
So most of those real estate projects are development projects that will be developed, most of them for real estate, for housing. And then they will be sold and we will get a gain from that development. So we will not actively go out and buy real estate for development, but we will have a portfolio of real estate coming from our core business also going forward. And there will be development gains in that real estate portfolio, but the size of that I cannot comment. When it comes to hydropower, we have 2 main hydropower plants.
We have one set of plants in the Southeast part of Norway called Seiferfossen. Those plants are owned 100% by us and we can own them as long as we want. Then we have some plants on the West Coast of Norway called the Sverdafalden and we rent the what do you call the river fall rights from the state for a 30 year period. We own the infrastructure, the assets, the turbines and so on. But after 30 years, the state owned company Stuttgart they have the right to buy back those assets for book value.
Hydro power assets is not a big problem within Orkla. I mean, it doesn't require any management attention. It's very little maintenance investments. And the great thing is that everything every time it rains, it rains cash and it rains a lot in Norway. So I don't see that as a priority to sell off.
But we are also in a situation now with quite low energy prices in Norway and that is partly due to overproduction in Norway and that's partly due to lack of transfer capacity from Norway to the continent. There are 2 power cables that are under maintenance. That means that we are not able to export as much as we want. And there are a couple of new power cables that will are under construction that will be finished in I think in 2018 2019. So we expect power prices or crystal prices to increase when those transfer cables are up and running again.
So I don't think the time is right now to sell. Then the share portfolio. As I showed, it has a market value of SEK1.3 billion and it has been reduced dramatically over some years. A big part of that is Grenies, our 16% in Grenies. I think that's approximately SEK 600,000,000 is that right?
So approximately 50%. And when the time is right, we will exit most of the share portfolio as well. And then we have the more difficult parts, Jotun JV and no, the Jotun shares and Sapa JV. We have been shareholder in Jotun for many, many years, I think from since the beginning of the 70s. And as I said, as I showed you earlier, Jotun is a great company.
They have developed fantastic actually from a Norwegian base in the very start to a Nordic base and now as a really global player. And they are a market leader and number 1 in the world in marine coatings. And they are also very big in decorative coatings. They deliver high growth, high profitability growth and we don't see an urgency to exit Jotun. It's hard to see any other companies where you can invest your money for a better return than in Jotun.
We're also very concerned that we will develop Jotun and do anything with Jotun, either it's IPO, trade sale or whatever in close cooperation with the other owners. We have a long term or long history of cooperation with the owner family. And then to Sapa JV, the agreement with Norwegian Hydro is that 3 years, that means next fall, both parties can require an IPO if we want. As I said, we still see a huge value potential in Sapa. The American business or North American business is doing very well and it's operating close to 100% capacity utilization.
Europe has been through a very difficult period in general, the European economy, but we now start to see signs of improvement in Europe and demand side is increasing. At the same time, we have been through a very tough period reducing costs, closing down a lot of plants and restructuring the whole business. And I think we should really get our share of that profit going forward. So whether we will require an IPO next year or 3 years down the road, it's still too early to see, but we still see a value creation potential there. Thank you.
So if there's no further questions, I leave over to you Peter for your final remarks. Okay.
Yes, I hope today's presentations have given you a good insight into Orkla into our plans, our actions and our new targets. And I think also we have shown you at least we want you to have the impression that there is a lot of potential going forward, especially in cost and in supply chain. I think also we have seen the last or shown you the last quarters, actually 5 quarters in a row with organic growth, but we have grown both top line and bottom line at the same time and we have reallocated capital from non core to our core businesses. Today, you have seen examples of how we work to improve supply chain and you have seen the great potential. And I mentioned and also Johan mentioned the SEK 24,000,000,000 cost base is tremendous.
We have shown you example how we take out synergies or realize synergies through organizational changes. And there are more such examples to come. We have seen several examples, especially a good example with Seadroort and also the Jurdan case, how we create shareholder value through acquisition with successful integration of the businesses and realizing synergies. Paul has shown you a fantastic story of Food Ingredients, how they have grown from being a small local Nordic player to be actually a European player with a high growth. We have also shown you I think several examples what we mean about 1 Markla acting as 1 Markla utilizing the strengths capabilities that lies within the whole group.
We have seen that with cross border innovations and other initiatives. And we have also how or what we mean by winning with the customers, developing solutions together with the customers, focusing on growth rather than focusing on discussion on terms and conditions. And last but not at least, I think we have mentioned localness and flexibility at least 50 times a day. And that is really one of the core strengths of Orkla. It is our ability to adapt to the local needs, local taste, local preferences and we have to keep that also going forward.
It's been a long day and it's late Friday afternoon. So I guess you're all keen on drinks or at least some refreshments. I'll just show this again, our financial targets. Those targets are much more in line with 1 Orkla. I have already gotten several questions about the margin targets.
Why don't you have a margin targets anymore? Are you not concerned about margins? Of course, we are concerned about margins. But as I have said, it's much more important to grow in an absolute value, EBIT value. We will create shareholder value through long term bottom line growth combined with an attractive dividend.
And focusing only on margin would lead to some not optimal decisions going forward. For instance, acquisition of Severod of MP Foods distribution agreement with PepsiCo would not have been done if we only focused to have a high margin, but still we know it will help us grow bottom line. We have had some quite good achievements the last quarters, 5, 6 quarters. And I must say I'm proud of my team and the achievements we have shown. And I really look forward to work on mostly the opportunities that we have ahead of us and some challenges, but mostly opportunities.
So then I would like to thank you all for coming and joining us here today. And I hope that you have gained some more insight into Orkla. And I also hope that you have will have time to join us for drinks and refreshments in the room next door and for some informal talks and also the possibility to have some additional questions. So thank you very much for coming everyone.