Good morning, everyone, and welcome to Orkla's fourth quarter result presentation. Overall, I am satisfied with the financial performance in Q4. Group EBITDA improved by 6% to over NOK 1 billion 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 am 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 projects. In addition to improving operations, Orkla continues to deliver on our strategy. We announced the acquisition of Cederroth in Sweden in January. Furthermore, we completed the IPO of Gränges and the sale of Orkla Brands Russia. We will come back to these issues. The divestment of Orkla Brands Russia, including the real estate in Yekaterinburg, was completed on January 19th.
Proceeds to Orkla totaled NOK 373 million. Full year 2014 EBITDA for the Russian business was minus NOK 127 million. The ongoing sales process for the real estate in St. Petersburg has started, that will be sold short-term. We are still awaiting approval from competition authorities for the acquisition of NP Foods in the Baltics, 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 into Orkla Foods. That is MTR in India, Felix Austria, and Vitana in Czech Republic. That is now part of the Orkla Foods area. Chaka is under Orkla Confectionery & Snacks. The board has proposed a dividend of NOK 250 per share.
The EBITDA margin in Branded 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 in Orkla Foods is partly affected by timing effects. We will come back to those effects. Orkla Confectionery & Snacks continued the positive development from Q3, hence the second half of the year offsets the poor performance during the first six months. Orkla Food Ingredients delivered all-time high EBITDA in Q4. For the third consecutive quarter in a row, I am pleased to say that organic growth has been positive for Branded Consumer Goods. In Q4, organic growth was 1.8%, all 4 business areas contributed positively.
I would like to emphasize that it is somewhat affected by timing effects and some one-off effects. We will come back to that. Even adjusted for that, there is a positive development in all business areas. In my first quarterly presentation, May last year, which was Q1 2014, I emphasized that there would be no change in the strategy and that my focus would be on activities improving operations and, most importantly, to drive organic growth. During 2014, we have initiated several actions, which are now starting to see positive results from, we have reported positive organic growth over the last 3 quarters. The categories where Orkla 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 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 relaunches that have contributed to the positive development this or last year. Frozen pizza is one of Orkla's main categories. Grandiosa Helmax was launched in Norway in Q1, a pizza with cheese baked into its base. It was the biggest concept launched in Norwegian retail in 2014, according to ACNielsen. Pierre Robert 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 Pierre Robert Sport Bra is today Norway's most sold training top.
For the second year in a row, Paulúns in Sweden won first prize in a poll conducted by the Swedish health magazine, "MåBra." It's a feel-good magazine. The prize for the most healthy ready meal was awarded to Paulúns Superlunch Soups. Polly chocolate tablet, launched in Q1, and the Polly bar, launched in Q3, are good examples of how we utilize our brand successfully across categories by launching chocolate under a traditional strong snack brand in Norway. One of the 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 content and palm oil from a lot of our products. 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 Rieber is seen in the EBITDA margin for Branded 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 & Snacks and integration of Rieber 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, seven plants were closed or in the process of closure. Additionally, two plants are undergoing a pre-study to be finalized during Q1 2015. 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 Cederroth, 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 Branded 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 & Personal has entered into an agreement to acquire 100% of the shares in the Swedish Branded Consumer Goods company, Cederroth.
The acquisition will strengthen Orkla's position as one of the leading Nordic supplier of personal care, health, and household cleaning products. In addition, Orkla Home & Personal Care will get access to a new and exciting category, wound care, as well as strengthen the Nordic pharmacy position. Cederroth has a product portfolio of well-established brands such as Asan, Bliw, Salvequick, Longo Vital, Allevo, and Grumme. I will show here on this slide, I show you the 2013 figures. The reported turnover in 2013 was approximately SEK 2 billion. Due to exit from a distribution contract in the beginning of 2014 and some technical accounting effects, turnover to be consolidated in Orkla's books will be approximately SEK 1.7 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, We expect the transaction to be completed no later than Q3 2015. These are the financial targets that we communicated during our Investor Day in September 2013. 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, This is our most important target and our most important goal to deliver on. The EBITDA margin targets also remain unchanged, but the timeframe for achieving the margin targets for Orkla Foods and Orkla Confectionery & Snacks will be slightly adjusted.
The reorganization of Orkla International into Orkla Foods and Orkla Confectionery & Snacks and the acquisitions we have done will have diluting effect on the EBITA margins. We will provide more details about the financial targets on our Investor Day in September this year. Before handing over to CFO Jens Bjørn Staff, 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 Lilleborg's product portfolio in the pharmacy channel. We believe this is a win-win situation where we coordinate our efforts and expertise, 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. With these examples, I give the floor to CFO Jens Bjørn Staff, who will present Orkla's financial performance for Q4 2014.
Thank you, Peter. I will now guide you through the details of the financial performance for Q4. Let's first have a look at the group P&L. The group had operating revenues of NOK 8.1 billion in the fourth quarter 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 NOK 1.015 billion, that's up 6% from last year. A stronger result in the Branded Consumer Goods business was the main driver behind this increase. Total EBITA for Branded Consumer Goods was NOK 1.030 billion. I'll revert to the details on the Branded Consumer Goods, Orkla Investments, and HQ in a moment.
Other income and expenses amounted to NOK 102 million, mainly related to costs from restructuring activities within Branded Consumer Goods. Profit from associates totaled NOK 252 million. 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&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, Orkla Brands Russia, is presented on the discontinued operations and totals NOK 387 million in the fourth quarter. The three main contributing factors to this negative result is a loss on sale. It's historical currency translation effects and the negative Q4 2014 result.
Three factors influencing. The full year EBITA for Orkla Brands Russia was NOK 127 million in 2014. The proceeds from the sale of Orkla Brands Russia was NOK 373 million, 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 EBITA bridge from Q4 2013 to Q4 2014. The group's EBITA growth was 6% or NOK 57 million. Branded Consumer Goods had an EBITA growth of 7% or NOK 69 million in the fourth 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 fourth quarter, adjusted for this, all business areas in the Branded Consumer Goods delivered growth.
The EBITA for Orkla Investments was negatively impacted by one-off items while Headquarter costs was below last year, that was largely due to the reduce of external consultants. Branded 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, 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 effects will have a corresponding negative impact in the first quarter of 2015, the top-line effect is approximately NOK 30 million-40 million.
Despite these adjustments, Branded Consumer Goods showed positive organic growth in the quarter. That's growth for the third quarter in a row. The contribution from currency. Okay now?
Yes.
Okay. Sorry for that. How's the sound? Okay, good. The contribution from currency translation effects is a result of a weaker Norwegian krone. 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 US 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 the different parts of the BCG area. In Orkla Foods, we saw a fourth quarter increase in revenues to NOK 3.371 billion. It's an organic growth of 2.2% and an increase in EBITA of 7.8% to NOK 470 million.
The EBITA margin increased by 0.8 percentage points to 13.9%. The main driver for this development was sales improvements in the Nordic companies, continued positive development in the Baltics and international companies, and realized cost synergies from the Rieber acquisition. Again, what's important to note is that part of the uplift in sales development in the fourth quarter, was a result of sales linked to campaigns in the beginning of 2015, in Norway. This impact in December will have an adverse effect in Q1 2015. The inclusion of the international companies into Orkla Foods, as Peter mentioned, has somewhat diluted the EBITA margin and contributes to a small positive top-line effect. Orkla Confectionery & Snacks continued the positive trend seen in Q3 and delivered improved performance in Q4.
It's important to note that reported revenue and EBITA 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 EBITA growth in the quarter. In addition to sales growth in Norway and Denmark, significant cost improvement programs have contributed. The Russian nuts company, Chaka, was included in this business area from Q4 and have somewhat diluted the margin. Organic revenues in Orkla Home & Personal Care in the fourth quarter ended slightly above 2013. As earlier communicated, the growth was negatively affected by fewer sales days for several of the business units, and facing campaign pressure between the third and the fourth quarter. Orkla Health showed good growth in the quarter.
This was mainly driven by positive developments in Denmark and Sweden and the export business. Reported EBITA in the fourth quarter was NOK 191 million, and the EBITA margin was on par with last year. The profitability in Orkla Home & Personal Care was negatively affected by a weakened Norwegian krone 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 NOK 1.8 billion in the quarter, along with a strong EBITA of NOK 124 million. The Q4 was at all-time record high, and this is the ninth consecutive quarter with EBITA improvement 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 a 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 Dragsbæk and the Credin 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 Gränges, and our remaining share portfolio in combination represents a market value of approximately NOK 2 billion. Orkla Investments also manages a real estate portfolio with a book value of approximately NOK 1.9 billion. 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%. Operating revenues increased by 17% in the quarter. Turnover was positively impacted by currency translation effects and increased metal costs. In terms of underlying EBIT, Q4 is a seasonally weaker quarter for Sapa, and underlying EBIT improved by approximately NOK 300 million. Further, a strong global automotive market supported the precision tubing results. As you recall, a key element to the joint venture was to execute on a restructuring program targeting annual synergies of around NOK 1 billion by the end of 2016. This program is ahead of plan, and approximately NOK 500 million is reflected in the full-year underlying results.
In the quarter, Sapa booked an impairment of fixed assets in China of approximately slightly below NOK 500 million, and that's the main explanation for the low net profit in the quarter. Jotun has not yet released full-year figures, but in general, they had a strong finish to the year with the revenue growth across all four segments. It was improved sales in the marine coatings and driven by gradual improvement of the new building market and maintenance sales. It was growth in the decorative and protective, which was supported by higher activity in key markets. After eight 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 the hydropower.
The profit contribution from hydropower was somewhat lower than last year. 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. As we leave 2014, the reservoir levels at Saudefjell 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 fourth quarter was NOK 5.7 billion. During 2014, Orkla has received NOK 2.7 billion from sale of assets outside the core area, where the IPO of Gränges was the largest transaction. Cash flow from operations was NOK 1.3 billion in the fourth quarter and NOK 2.8 billion for the full year.
Working capital in the Branded Consumer Goods area was somewhat higher compared to 2013. 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 NOK 0.4 billion, while paid dividend in 2014 was NOK 2.5 billion. This slide highlights Orkla's strong balance sheet and financial flexibility. Orkla's net interest-bearing debt had an average interest cost of 3% in the fourth quarter of 2014, with an average maturity of 3.7 years. As mentioned, the group's net interest-bearing debt was NOK 5.7 billion as of the end of quarter, with a net gearing of 0.18. In summary, Orkla's financial position is robust, with cash reserves and committed credit lines that will cover known capital expenditures in 2015. Orkla 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. Orkla's Investor Day will be held in September. 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 Investments is a large share of our value today. 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. It will take time, but we are progressing, as I showed you earlier. The fourth 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. The recently announced acquisition of Cederroth is a good example of this. Although I take great pride in Orkla's broad presence of strong positions in the Nordic markets, I am 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 home 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 relationships.
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 two 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 trade. Aqua Derma is a new fabric facial skincare series with high-quality products that will be launched by mid-February.
The product series is Lilleborg'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, Aqua Derma will compete against global cosmetic actors in one of the most competitive categories within fast-moving consumer goods. The launch is in line with Orkla's strategy of offering local brands, which are easier to choose and which our customers can be proud of displaying on their store shelves. We have a Q&A session. Any questions?
Preben Aas, 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? The other one, on the 2016 targets, it seems like you are saying margins will be harder to reach. I am 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, and I can take the second, Jens?
Yes, I can. On foods, I think it was 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 fourth quarter of this reorganization of the international business into foods. 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 two 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, factory footprint, and so on, takes more time than anticipated one and a half year ago. The targets remain.
Kolbjørn Giskeødegård 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. 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 these last months, which is probably also helping the Baltic economy. Any other questions? Yeah.
Just a question about Cederroth. My name is Sigurd Sanna. I'm just a stock owner. 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-owned company, and I'm not able to remember the name.
Maybe it's better question on next, since it was bought in Q1.
Yeah.
2:15, We can take it on next session.
Okay. Thank you.
Okay. No more questions? A couple of questions from the net. That's from Markus Ivers], Goldman Sachs. At the last Investor Day in September 2013, you stated 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?
Yeah, I can briefly comment on that. We've now, this autumn, rather project, looking at what's the improvement possibilities on the working capital area, and there is certain rooms for improvement here. We will start implementing these actions going into 2015.
One more question from Markus Ivers. Will you 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, as we sell our non-core assets and get proceeds from the divestments there, our main priority is, of course, to find attractive Branded 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. I expect to see you all with nice skin next time we meet. Thank you.