Good morning, everyone, and welcome to Orkla's 4th Quarter Result Presentation. Overall, I am satisfied with the financial performance in Q4. Group EBITDA improved by 6% to over SEK 1,000,000,000 compared to Q4, 2013. The improvement was mainly driven by positive development in the branded consumer goods area. The improvement in branded consumer goods was broad based and I'm pleased to report positive organic growth for all business areas.
The BCG margin improvement was driven by both top line development and cost savings achieved through recently implemented restructuring In addition to improving operation, Orkla continues to deliver on our strategy. We announced the acquisition of Seadrut in Sweden in January. Furthermore, we completed the IPO of Grahengis and the sale of Orkla Brands Russia. We will come back to these issues. Divestment of Orkla Brands Russia including the real estate in Ekaterinburg was completed on January 19.
Proceeds to Orkla totaled NOK 373,000,000 dollars Full year 2014 EBITDA for the Russian business was minus 127,000,000 dollars Ongoing sales process for the retail estate in St. Petersburg has started. So that will be sold short term. We are still awaiting approval from competition authorities for the acquisition of NP Foods in the Baltics and we expect this to come during Q1 2015. Following the sale of Orkla Brands Russia, we have reduced the complexity in the group structure to 4 instead of 5 business units.
The remaining businesses in Orkla International have been consolidated Foods area. Chaka is under Orkla Confectionery and Snacks. The Board has proposed a dividend of NOK 2.50 for the year per share. The EBITDA margin in direct consumer goods improved by 0.7 percentage points. Development was driven by both top line growth and positive effects from several restructuring and integration projects.
Improvement in Orkla Foods was driven both by positive organic growth and cost improvements. The positive margin development at Orkla Food is partly affected by timing effects. We will come back to those effects. Confectionery Snacks continued the positive development from Q3 and hence the second half of the year offsets the poor performance during the 1st 6 months. Orkla Food Ingredients delivered all time high EBITDA in Q4.
For the 3rd consecutive quarter in row, I am pleased to say that organic growth has been positive for brand consumer goods. In Q4, organic growth was 1.8% and all four business areas contributed positively. Still I would like to emphasize that it is somewhat affected by timing effects and some one off effects. We will come back to that. But even adjusted for that there is positive development in all business areas.
In my first quarterly presentation, May last year, which was Q1, organic growth. During 2014, we have initiated several actions which are now starting to see positive results from and we have reported positive organic growth over the last three quarters. The categories where OTA is present in Norwegian and Swedish retail have increased over the last 12 months, whereas we see a slight decrease in Denmark in the categories. Orkla's market shares vary significantly dependent on each on the category, but in total the market shares weakened slightly in Q4. We still have a long way to go and we will continue to focus on activities driving organic growth and improving margins.
On the following pages, I will show you some of the innovations and re launches that have contributed to the positive development this or last year. Frozen pizza is one of Orkla's main categories. Grandiosa Herrmax was launched in Norway in Q1, a pizza with cheese baked into its base. It was the biggest concept launched in Norwegian retail 2014 according to AC Nielsen. Piero Buyer Sports Collection was relaunched in Q1 2014 with improved fit and moisture transport as well as a fresh and new design.
The relaunch was a success and Pietro Bares Sport Bra is today Norway's most sold training top. For the 2nd year in a row, Parluns in Sweden won 1st prize in a poll conducted by the Swedish health magazine, Modra, it's a feel good magazine. The price for the most healthy ready meal was awarded to Per Lund's Super Lunch Soups. Poly chocolate tablet launched in Q1 and the Poly bar launched in Q3 are good examples of how we utilize our brand successfully across strong trends we see within the food categories is focus on health that means reduction of salt, saturated fat and palm oil and also sustainable sourcing. During 2014, Orkla has managed to reduce both salt and content salt content and palm oil from a lot of our products and of course this work will continue going forward.
These were some examples on top line initiatives, but we have also had a strong focus on margin improvements through cost saving programs. The dilution effect of the acquisition of Reber is seen in the EBITDA margin for brand consumer goods in 2013 and rolling 12 months Q1 2014 as you see here on the chart. Compared to 2013, the full year EBITDA margin improved by 0.2 percentage points in 2014. Orkla has a strong track record delivering continuous improvements and cost synergies. Bigger projects such as the restructuring of Orkla Confectionery and Snacks and integration of Reebel contribute considerably, but also the sum of several smaller continuous improvements also make a significant impact.
As mentioned earlier, we are in the process of optimizing our production structure. This work takes time. But as I will show you on the next slide, we are progressing steadily. We work continuously to optimize our footprint as well as redesign projects within the current factories. During 2014, 7 plants were closed or in the process of closure.
Additionally, 2 plants are undergoing a pre study to be finalized during Q1 2015. And I can promise you that more will come. We continue to deliver on strategy to become a focused branded consumer goods company. The acquisition of Seadrott which I will elaborate on shortly is a good example of this. During 2014, we have freed up financial resources through the sale of non core assets as promised earlier.
Also we have invested in brand consumer goods businesses to strengthen our branded consumer goods platform in the Nordics and in the Baltics. On January 15, it was announced that Orkla Home and Personal has entered into an agreement to acquire 100% of the shares in the Swedish branded consumer goods company CD Rot. The acquisition will strengthen Orkla's position as one of the leading Nordic supplier of personal care, health and household cleaning products. In addition, Oklahoma Personal will get access to a new and exciting category, wound care, as well as strengthen the Nordic pharmacy position. Seadroat has a product portfolio of well established brands such as Assane, Bleeve, Selkwik, Longovital, Alevo and Grumma.
Financial statements for Seadrill for 2014 have not yet been published. So I will show here on this slide, I show you 2013 figures. The reported turnover in 2013 was approximately SEK2 1,000,000,000 due to exit from a distribution contract in the beginning of 2014 and some technical accounting effects turnover to be approximately SEK1.7 billion. However, the effect of these adjustments in turnover will have a very limited effect on EBITDA. Significant cost and top line synergies have been identified on Orkla's Investor Day in September.
Synergies related to the acquisition will be described in further detail. The agreement is subject to approval from relevant competition authorities and we expect the transaction to be completed no greater than Q3 2015. These are the financial targets that we communicated during our Investor Day in September 2013. And also we have added the financial targets for Orkla Food Ingredients. We maintain our targets for organic growth from 2016 despite challenging market conditions in Europe.
We are starting to see some improvement in organic growth and this is our most important target and our most important goal to deliver on. The EBITDA margin targets also remain unchanged, but the time frame for achieving the margin targets for Orkla Foods and Orkla Confectionery and Snacks will be slightly adjusted. Also the reorganization of Orkla International into Orkla Foods and into Confectionery Snacks and the acquisitions we have done will have diluting effect on the EBITDA margins. We will provide more details about the financial targets on our Investor Day in September this year. Before handing over to CFO, Jens Bjornstad, who will take you through the financials, I would like to confirm that my main operational focus will be to continue activities that drive organic growth and improve margins.
For 2015, we have already implemented several new initiatives in order to reach our targets. For example, from January this year, Orkla Health will be responsible for Lilibor's product portfolio in the pharmacy channel. We believe this is a win win situation where we coordinate our efforts and expertise and at the same time offer the customer a more specialized and efficient partner for growth. Furthermore, the decision has been made to start a transition process for the procurement function within all of Orkla. The aim is to create a more centralized organization to further leverage on Orkla's size.
A final example is the decision to establish a centralized IT function to ensure more coherent strategic approach to IT investments in the group. So with these examples, I give the floor to CFO, Jens Bjornstad, who will present Orkla's financial performance for Q4 20 14.
Thank you, Petri. I will now guide you through the details of the financial performance for Q4. Let's first have a look at the group P and L. The group had operating revenues of SEK8,100,000,000 in the Q4 of 2014, roughly in line with the same quarter in 2013. First, let me remind you that after the sale of Orkla Brands Russia, this is now stated in the line for discontinued operations both for this year and for 2013.
EBITA ended at $1,015,000,000 and that's up 6% from last year. A stronger result in the branded consumer goods business was the main driver behind this increase. Total EBITDA for branded consumer goods was €1,030,000,000 I'll revert to the details on the branded consumer goods, Oortla Investments and HQ in a moment. Other income and expenses amounted to a negative minus $102,000,000 mainly related to costs from restructuring activities within branded consumer goods. Profit from associates totaled a negative minus $252,000,000 an impairment related to Sapa's Chinese operation is the main reason for the negative results.
The group's net financial costs increased in the quarter compared to the same quarter in 2013. This is mainly related to the recognition in the P and L of negative fair value changes on interest rate swaps. These swaps were previously held as a negative hedging reserve in equity. As I mentioned earlier, the figures from the divested company or Club Brands for Russia is presented on the discontinued operations and totals a negative minus $387,000,000 in the 4th quarter. The 3 main contributing factors to this negative result is a loss on sale, its historical currency translation effects and the negative Q4 2014 results.
So three factors influencing. The full year EBITA for Orkla Brands Russia was negative minus $127,000,000 in 2014. The proceeds from the sale of Brands Russia was positive $373,000,000 and the sales process related to the real estate in St. Petersburg is ongoing. The earnings per share for 2014 more than doubled compared to 2013 from NOK 0.7 to NOK 1.6.
Let's look at the EBITDA bridge from Q4 2013 to Q4 2014. The group's EBITA growth was 6% or 57,000,000 dollars Branded Consumer Goods had an EBITA growth of 7% or $69,000,000 in the 4th quarter, supported by growth for most segments. As commented in earlier quarters, Home and Personal and Confectionery and Snacks was negatively impacted by fewer sales days in the Q4 and adjusted for this all business areas in the Branded Consumer Goods delivered growth. The EBITA for Orkla Investments was negatively impacted by 1 off items, while headquarter costs was below last year and that was largely due to the reduce of external consultants. Down at consumer goods had an increase of 1.5% in operating revenues in Q4 2014 compared to the same quarter in 2013.
This increase was driven by an organic growth of 1.8% and positive currency translation effects of 1.8%. As mentioned timing of sales days had a negative effect in the quarter and there was a negative effect from divestments. The organic growth of 1.8% was as Peter earlier mentioned somewhat boosted by positive one off effects and timing of a larger campaign in Orkla Foods. This campaign effect will have a corresponding negative impact in the Q1 of 20 15 and the top line effect is approximately NOK 30,000,000 to NOK 40,000,000. Despite these adjustments, branded consumer goods showed positive organic growth in the quarter.
So that's growth for the Q3 in a row. The contribution from current Okay now. Thank you. Sorry for that. How's the sound is it?
Okay. Good. Okay. The contribution from currency translation effects is a result of a weaker Norwegian kroner. This will most likely have an even stronger effect going forward.
On the opposite side, the weakened Norwegian and Swedish currency against especially the euro and the U. S. Dollar will result in higher purchase prices for our Norwegian and Swedish companies. This has had effect throughout 2014 and will have an increased effect going into 2015 with the current currency exchange rates. Let me now walk you through different parts of the BCG area.
In Ochila Foods, we saw a 4th quarter increase in revenues to SEK 3,371,000,000. It's an organic growth of 2.2 percent and an increase in EBITA of 7.8 percent to NIS 470,000,000. Dollars The EBITA margin increased by 0.8 percentage points to 13 0.9%. And the main driver for this development were sales improvements in the Nordic companies, continued positive development in the Baltics and international companies and realized cost synergies from the Reber acquisition. And again, And again, what's important to note is that part of the uplift in sales development in the Q4 was a result of sales linked to campaigns in the beginning of 20 15 in Norway.
So this impact in December will have an adverse effect in Q1 2015. The inclusion of the international companies into Ochla Foods, as Peter mentioned, has somewhat diluted the EBITA margin and contributes to a small positive top line effect. Orichla Confectionery and Snacks continued the positive trend seen in Q3 and delivered improved performance in Q4. It's important to note that reported revenue and EBITDA figures in Q4 were negatively affected by the timing of sales days. The underlying development showed organic growth of 0.8%, which was primarily driven by strong growth in Norway and Denmark.
All the Nordic companies showed EBITDA growth in the quarter. In addition to sales growth in Norway and Denmark significant cost improvement programs have contributed. The Russian nut company Chaka was included in this business area from Q4 and have somewhat diluted the margin. Organic revenues in Orkla Home and Personal in the 4th quarter ended slightly above 2013. As earlier communicated, the growth was negatively affected by fewer sales sales for several of the business units and a phasing of campaign pressure between the 3rd and the 4th quarter.
Oikai Health showed good growth in the quarter. This was mainly driven by positive development in Denmark and Sweden and the export business. Reported EBITA in the 4th quarter was $191,000,000 and EBITA margin was on par with last year. The profitability in Home and Personal was negatively affected by a weakened Norwegian kroner against central purchasing currencies and in addition an unfavorable product and market mix. For the last part of the branded consumer goods area, Orkla Food Ingredients posted revenue of $1,800,000,000 in the quarter along with a strong EBITA of $124,000,000 The Q4 was at all time high and this is the 9th consecutive quarter with EBITA improvements year on year from this business area.
The revenue growth was almost 6%, while organic revenue growth was 2.5% and this growth was driven by increased volume and the more favorable product mix. Compared to Q4 last year, EBITA margin improved by 1.2 percentage points to 6.8%. This EBITA improvement was driven by good performance in most of the segments combined with a strong performance from Draugspek and the Ekradine Group. I'll now comment on the results from our businesses outside the branded consumer goods. And I'll concentrate on Sapa, Jotun and the hydropower business.
In addition to these businesses, we have a 31% shareholding in Gregyz and our remaining share portfolio in combination represents a market value of approximately NOK 2,000,000,000. Oiplan Investments also manages a real estate portfolio with a book value of approximately 1,900,000,000 In Q4, Sapa experienced continued strong demand for extruded products with a 9% volume growth in North America. Extrusion demand in Europe was flat, while building systems still suffers from weak markets. Overall volume was up 2% and operating revenues increased by 17% in the quarter. Turnover was positively impacted by Q4
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a seasonally weaker Q4 is a seasonally weaker quarter for Sapa. And underlying EBIT improved by approximately NOK 300,000,000 and this was mainly driven by positive effects from the restructuring program that is ongoing and the strong North American markets. And further a global strong global automotive market supported the Precision Tubing results. As you recall, a key element to the joint venture was to execute on the restructuring program targeting annual synergies of around NOK 1,000,000,000 by the end of 2016. And this program is ahead of our plan and approximately NOK 500,000,000 is reflected in the full year underlying results.
In the quarter, Sapa booked an impairment of fixed assets in China of approximately NOK 500,000,000 slightly below NOK 500,000,000 and the main explanation for the low net profit in the quarter. Jotun has not yet released full year figures, but in general they have a strong finish to the year with revenues with the revenue growth across all four segments. It was improved sales in the Marine coatings and driven by gradual improvement of the newbuilding markets and maintenance sales. It was growth in the decorative and protective, which was supported by higher activity in key markets. After 8 months, EBIT was still somewhat behind last year, but following strong sales development and also improved cost position, Jotun saw a pickup in profitability towards the end of the year.
Jotun continues to invest in new capacity and maintains its organic growth strategy. Now looking at Hydro Power, the profit contribution from Hydro Power was somewhat lower than last year and that's mainly explained by extraordinary income in Q4 last year and due to lower spot prices. For the full year, hydropower is in line with last year somewhat higher than normal volume has been offset by low spot prices. And as we leave 2014, the reservoir levels at Sverdifalme are at 69% which is at normal levels. The last part of my presentation is about the capital structure and starting with net debt for the year.
Net debt as of the Q4 was 5,700,000,000 dollars During 2014, Oikla has received $2,700,000,000 from sale of assets outside the core area where the IPO of Grengis was the largest transaction. Cash flow from operations was $1,300,000,000 in the 4th quarter and $2,800,000,000 for the full year. Working capital in the branded consumer goods area was somewhat higher compared to 2013 and this is largely related to a compensation from the Unilever agreement, which will be paid in 2015. Net sales from shares and financial assets contributed 14 was $2,500,000,000 This slide highlights Oikla's strong balance sheet and financial flexibility. Oikla's net interest bearing debt had an average interest cost of 3% in the Q4 of 2014 with an average maturity of 3.7 years.
And as mentioned, the group's net interest bearing debt was 5 $700,000,000 as of the end of quarter with a net gearing of 0.18. So in summary, Oikla's financial position is robust with cash reserves and committed credit lines that will cover non capital expenditures in 2015. Oikla has paid a steady dividend of NOK 2.5 over the last years. The Board proposes to keep the nominal ordinary dividend level at NOK 2.50 per share for the financial year 2014. This slide shows the financial calendar for 2015.
I would like to remind you that Sapa will be holding a company presentation Ultimo May. Oikla's Investor Day will be held in September. So let me hand the floor back to Peter.
Okay. Thank you, Jens. I would like to confirm that there is no change in our strategy. The future growth and value creation will come from a focused branded consumer goods company in the Nordics and in the Baltics. However, Orkla investment is a large share of our value today and we will focus on getting the fair values which is more important than speed.
We will deliver on started and ongoing structural processes to realize synergies and increase efficiency. This is not finished and it will take time, but we are progressing as I showed you earlier. The 4th quarter results show that we continue to deliver on our strategy and our plans. I see results from an increased focus on operations. Still we have a large operational job ahead of us, but we are progressing and this is developing in the right direction.
Going forward, we will continue to seek opportunities to strengthen our branded consumer goods platform both through organic growth and through acquisition opportunities. And the recently announced acquisition of Seadroat is a good example of this. Although I take great pride in Orkla's broad presence of strong positions in the Nordic markets, I'm also glad to see that we still have some white spots as you can see on the chart. This means that there are several opportunities for growth ahead in our whole markets both organic and through acquisitions. In general, I believe we have a lot of exciting innovations planned for 2015.
We are continuously working to improve our products from a consumer and health and sustainability perspective. We have more cross category and cross market initiatives planned and we will continue to establish good customer relationship. This is hard work, but if we manage this while at the same time focusing on delivering on ongoing structural processes to realize synergies and increase efficiency in our operations, I believe we are well positioned for 2015. In more short term, I look forward to the coming wave of product launches for Q1, which you will find in the stores a week or 2 from now. On the next slide, I will show you one of our biggest launches for 2015.
This is a great example of taking a bold step into a new category. Its success of course remains to be proven, but I am very enthusiastic about it and it has been well received by our customers in the retail trades. Aqua Derma is a new fabric facial skincare series with high quality products that will be launched by mid February. The product series is Liliboy's largest innovation since the Define Hair Care series was launched in 2002 and the products are to be found in grocery stores, in pharmacies as well as selected chains within specialized trade. Supported by local consumer insight, Afradarma will compete against global cosmetic actors in one of the most competitive categories within fast moving consumer goods.
The launch is in line with Orca's strategy of offering local brands, which are easier to choose and which our customers can be proud of displaying in their store shelves. So then we have a Q and A session. Okay. Any questions?
Per van Asghorsen, Carnegie. Two questions, if I may. First, what would be the organic growth in Orkla Foods if you exclude international business that came in this quarter or last quarter? And the other one on the 2016 targets, it seems like you are saying margins will be harder to reach. I'm just wondering what are the reasons?
Are you giving away on the margins to boost the top line growth? Or is it just that things have taken a bit longer?
Will you take the first question? I can take the second. Jens?
Yes, yes, I can. So on Foods, I think what's important is that adjusted for one off items and this call it restatement of the international business, it's positive growth in Foods. So it's a good improvement. I think it was somewhat 40 basis points of impact in the Q4 of this reorganization of the international business into foods. And this is restated both for 2014 and 2013.
Regarding the margin targets, we are not saying that we will not achieve them. We are saying that for the 2 business areas, namely Foods and Confectionery and Snacks, we believe it will take some more time than what we announced on Capital Markets Day in 2013. That means that the structural changes footprint, factory footprint and so on takes more time than anticipated 1.5 year ago. But the targets remain.
Kolbjorn Iskirgo, representing Nordea Markets. Just a question on the growth in the Baltics. It's a very good area for you now. But do you see any impact in this region from the situation in Russia, any slowdown now into Q1 related to very strong ties between Russia and the Baltics in terms of trade and economic growth. Do you see any impact as we go?
So far we don't see any impact even we feared that there would be an impact a couple of months ago. But so far we don't see any impact of that. Rather what we have seen is a flow of cash coming from Russia into the Baltics during this last months, which is probably also helping the Baltic economy. Any other questions?
Just a question about Seadrill. My name is Sigu Sanna, I'm just a stock owner. But this company was not traded on stock market. This was private ownership. Who was the owner of this company?
Can you tell us?
It was a private equity
Maybe it's my direct question on next since it was bought in Q1, 2.15 we can take it on the next session. Okay. Thank you.
Okay. No more questions.
A couple of questions from the net. That's from Malcus Ivar, Goldman Sachs. At your last Investor Day in September 2013, you state that there was some room to improve working capital, but those improvements would come a little later as other changes would take priority. Should we expect working capital efficiency to start to come through in 2015?
I can briefly comment on that. We've now this autumn project looking at what's the improvement possibilities on the working capital area and there is certainly I know there is certain rooms for improvement here. So we will start implementing these actions going into 2015.
One more question from Michael Diva. Will you look at take advantage of the attractively low cost of finance in any way? If so, would you consider buybacks? Or is it more likely that you look for further acquisitions? As
we have stated that as we sell our non core assets and get proceeds from the divestments there. Our main priority is of course to find attractive brand consumer goods company that fits into our current portfolio and where we can realize synergies. In the event that we don't find such opportunities, we will consider an extraordinary dividend or a share buyback, but most likely extraordinary dividend.
One more question from Goldman Sachs. In 2014, it was mentioned that Orkla would look to change its incentive programs to much more focus on growth. Has this change been implemented?
That change has been implemented, valid from 2014. Organic growth has been a bonus parameter for the management team and also levels below. No more questions? I just hope that you will find our new Aqua Derma products nice in the stores in a couple of weeks' time. So I expect to see you all with nice skin next time we meet.
Thank you.