Okay, ladies and gentlemen, good morning. Please, a few more participation. This is the agenda for this morning. First, we saw some highlights and a few comments on our strategy. Terje Andersen, CEO, will go more in detail in financial performance. Christer Åberg, he will present Branded Consumer Goods. Terje Andersen will present Orkla Investments. We have room for questions. We are favorable of development this quarter, improving EBITDA by 23% to NOK 736 million compared to Q1 last year. Further down, we discuss this organic growth. We are not satisfied with this quarter's top-line development. We are focusing our activities to organic growth and margins, which I will present in great detail shortly. Sales growth in Branded Consumer Goods was 17%, driven by acquisitions and positive currency translations. Adjusted organic growth in the quarter was -1%.
EBITDA in Branded Consumer Goods improved by NOK 76 million to NOK 685 million compared to Q1 2013. The improvement in EBITDA was driven by structural growth and realization of synergies in Orkla Foods, as well as improved performance in Orkla Home & Personal, Orkla Food Ingredients, and Orkla International. EBITDA was negatively affected by weak performance in Orkla Confectionery & Snacks. Christer Åberg, CEO of Orkla Confectionery & Snacks, will come back in more details when he presents the results for Branded Consumer Goods. In terms of Orkla Investments, I want to mention that Gränges experienced continued improvements in both revenue and EBITDA in Q1. EBITDA margin of Gränges increased by 2.3 percentage points compared to Q1 2013. An IPO process of the company has been initiated. We have adapted the organization so that it reflects our strategy on focusing on Branded Consumer Goods in the Nordics.
Orkla Foods, Confectionery & Snacks, Home & Personal are the three business areas that represent Branded Consumer Goods in Nordics and the Baltics. Orkla International had an EBITDA of -NOK 86 million in 2013. We have started the sales process of Orkla Brands Russia and Delecta in Poland. We remain in Felix Austria, Vitana in Czech Republic, and MTR in India. Orkla Food Ingredients is the fifth business area and has an organic growth of 2.1% in 2013 and increasing market shares. There is no change in the strategy for Orkla Investments, which includes Gränges, Hydropower, financial investments, real estate, Sapa JV with Hydro, and the shares in Jotun. Orkla Investments is a large share of our value. We will focus on getting the fair value, that is more important than speed. There is no change in our strategy.
The future growth and value creation will come from a focused Nordic-based Branded Consumer Goods company. The key long-term value driver is organic growth. This is where my focus will be. We have done a lot of structural and organizational changes in the last couple of years, going from a very decentralized business model to a more optimized model. It is important that we utilize our local scale, at the same time utilize Orkla's scale to strengthen competitiveness, leveraging on our substantial local size, our skills, and our insights in the markets. As mentioned, my main operational focus is on activities that drive organic growth and improve margins. I will give you some concrete examples in this presentation, as will Christer Åberg later in his presentation. We will deliver on started and ongoing structural processes to realize synergies and increase efficiencies of our production structure.
I will come back to that also. We have arranged for an optimal structure, and we will realize synergies, both top line and bottom line, of ongoing structural processes. This is not finished, and this will take time. I want to update you on two concrete examples we have communicated earlier. We communicated cost synergies from the Rieber and Stabburet integration of NOK 250 million-NOK 300 million, and the planned run rate effect at the end of 2014 is NOK 275 million. In addition to the cost synergies of NOK 50 million-NOK 70 million from the Orkla Confectionery & Snacks integration, NOK 20 million will come from the cost reduction program at the biscuit factory in Kongsvinger. We combined field sales force in Confectionery & Snacks in Norway, and this has had a negative impact in the short term but will have a positive impact in the longer term.
That was just finished 1st of April this year. Strong innovations from the restructured units will drive growth in the future. We have several great examples of top-line synergies from the restructured units already. To the left, you can see examples of how the new Orkla Confectionery & Snacks company takes brands across the biscuit, chocolate, and snacks categories. The other example is products that are results from combining expertise and technologies from the two companies, Stabburet and Rieber, that is now merged into one company. For example, Toro had a very good expertise in gluten-free products that Stabburet did not have, and Stabburet is now launching a gluten-free pizza based on that technology. We also need to think broader about innovations. Innovation is not just product development. Packaging is also an important area for innovation and an important area or important way to drive growth.
Nora's jam products have more than doubled in 10 years. Growth comes from new packages like the squeezy bottle. The squeezy bottle is here, and the lids that are easier to open, in addition to new technologies like fresh frozen jam. There are also other examples of more functional packaging. This is about new packaging, but also functional packaging with new functions, easier closing mechanism on bags, for example, peanuts from Polly and pastilles from Doc'. Sun dishwasher tablets with soluble plastic. You can put the whole thing into the machine, as an example. Abba Middagsklart is a fantastic fish sauce in five different flavors launched in Sweden in 2011 and has had an annual growth rate of 30% since the launch. The sauce was introduced in Denmark January this year, and after two months it is the second-largest sauce in the market.
It has also become the fifth-largest SKU in Orkla Foods Danmark during a few months. It is also launched in Finland in this quarter. This shows how we can take the same product from one country to another, but maybe under a local brand. We will do more of this, and we will do this faster in the future. We focus on building relations with our customers based on our common interest, and our common interest is to drive growth, drive sales. The battle of the consumer is in the store, and we have to work more with our exposure, more with packaging, and other items in the shop together with the stores. We will ensure that it's easy for the store to expose our products and to make sure that it's natural for the consumer to choose our products when they are shopping.
Our most important customers are the retail chains, and we are focused on them. Still, we need to keep in mind that consumer trends are changing. We want to be where the consumers are, and we will look into other channels as well. It could be in specialist stores, it could be in pharmacies, duty-free shops, or on the web. This shows an overview of the Nordic and Baltic Branded Consumer Goods production structure, and it's quite obvious that this is not the optimal structure. We have 70 factories in the Nordics, and this obviously is not the optimal structure, as I said. There is a potential, but there is also a challenging due to issues around countries inside, outside the EU, short seasons, productions in some areas, vegetables especially, and of course, local adaptations. We have started working on this, and two initiatives are currently being reviewed.
Just to be mentioned, two small examples. Lierne will be decided in the Orkla Foods Norge board meeting on the 22nd of May, and the production from Boyfood in Finland producing herring was moved to Kungshamn in Sweden yesterday. Just two examples, and more examples will come to optimize the production structure in the future. We show in this quarter that we deliver and are on track with our synergies. Organic growth is the challenge, and that will be my main focus going forward. I can promise you, we are all committed to deliver on these targets. Thank you, and let me give the word to the CFO, Terje Andersen, that will give you more information on the financials.
Thank you. I will go through the key financials, starting with the group income statement. Operating revenues increased by 15% in the quarter, mainly ascribable to the acquisition of Rieber.
As you remember, Rieber was consolidated as of May last year. Currency translation effects had a positive impact of NOK 422 million on revenues in the quarter. EBITDA increased by 23% and ended at NOK 763 million, of which approximately 90% came from Branded Consumer Goods. I will refer to the EBITDA bridge on the next page. Other income expenses amounted to a negative NOK 35 million. Almost all of it has cash effect, and the costs were largely related to continued restructuring within Branded Consumer Goods. Profit from associate is mainly related to Jotun and the Sapa joint venture. Net profit from the Sapa joint venture was a negative NOK 51 million in the first quarter. Profit contribution from financial assets was reduced by the disposal of the share portfolio. The market value of financial assets was approximately NOK 1 billion at the end of the quarter.
If you have a look at the EBITDA development, you see that reported EBITDA was NOK 140 million higher than in Q1 last year. Both acquired and organic growth contributed to an increase of NOK 76 million for Branded Consumer Goods. Christer will shortly present the BCG in more detail. Gränges had a satisfactory quarter, driven by both volume growth and cost improvements, while hydropower benefited from high precipitation and significantly higher volume in the first quarter. Restructuring and organizational changes had a negative impact on headquarter cost also in this quarter. However, we expect a more positive trend regarding headquarter cost in the second half of this year. Some comments to cash flow and balance sheet. Working capital increased in Q1 due to normal seasonality. However, the increase was somewhat less than last year.
This was more than offset by profit from operations and cash payment of the Gränges insurance settlement of NOK 300 million. Net interest-paying debt was reduced to NOK 7.6 billion, and Orkla retained a strong balance sheet with an equity ratio of 60% and net gearing at 0.24. I hand it over to Christer to go into BCG in more detail.
Thank you, Terje. If we start with Branded Consumer Goods, we present a rolling 12-month EBITDA trend, which is positive. This is really mainly driven by synergies and improved financial performance as we get a greater scale in consumer goods. In this quarter, it is important to note that we have changed the reporting calendar of a number of companies. This has resulted in a difference in number of invoicing days or selling days in the quarter compared to Q1 last year. This means that we have adjusted our organic growth numbers also including the Easter impact, because we believe that is the best and most transparent way of presenting adjusted organic growth. As we come further into the presentation, you will see the adjusted organic growth numbers with these two things included. Orkla Foods presents a broad-based underlying EBITDA improvement.
This is driven by margins improvements across the board. Q1 for 2014 obviously includes Rieber, but that was not the fact in 2013. If we had a pro forma Q1 including Rieber in Q1 2013, the EBITDA margin would have been two percentage points lower in Q1 last year compared to this year. Two percentage points improvement. Top line is still challenging. Reported growth is 32%, but adjusted organic growth is -2.7%. This is mainly driven by the fact that campaign pressure in Denmark and somewhat in Norway has been a bit lower in Q1 this year. Rieber cost synergies, as Peter said, is clearly on track, and by the end of this year, we will have a run rate of approximately NOK 275 million.
There are still some synergy projects going on, and there are field sales projects in both Norway and Sweden to increase both the efficiency and effectiveness of the field sales operations in these two markets. As Peter mentioned, we have just done a move of the fish factory in Finland to Kungshamn in Sweden. The EBITDA improvement of a bit more than NOK 60 million, as I said, is driven by a larger scale and synergies coming into the business. Overall, we feel that we have an innovation program for consumer goods, which is somewhat stronger in 2014 than in 2013. It is really focused across the board behind our biggest brands and our biggest positions. On top of what Peter mentioned, obviously, the Heia Max launch in Q1 has been a very key priority for the foods business.
Year to date, we have sold about 1 million pieces of Heia Max, and the launch is off to a good start. However, innovations in Norway was somewhat launched later in the quarter than it was last year, and that's also somewhat impacting top line. Orkla Foods Sweden is also launching into chilled ready meals, which is an expanding sector with heat and eat chilled pasta ready meals. There are more examples to come. Orkla Confectionery & Snacks had a weak top line and bottom line quarter. Operating revenues reported improved by 1.4%, and that is helped by not least currency impacts, but the underlying growth is -3.8%, primarily related to a very weak start in Sweden and Norway in the beginning of the quarter. I will come back to the point about the demanding integration process, particularly in the Norwegian market.
This is also impacted by the fact that compared to 2013, in the quarter for the whole market, listing improvements, innovations, and somewhat campaigns were more geared towards the end of the quarter than starting strong in the beginning of the quarter. We were off to weak start in these two markets. Rising raw material prices, both on the raw material side but also impacted by currency, has weakened the margins in the quarter, which we see as a temporary impact in the first half of the year. Overall market shares are somewhat weakened across the board, with exception of Baltics. In Baltics, we can see that we continue to have a very strong development in terms of both top-line growth and the markets as such are developing very well. The quarter EBITA of NOK 116 million is significantly weaker than the same period last year.
Confectionery & Snacks was announced as a new business unit in end of 2012. However, the integration started by the second half of 2013, and this has no doubt been a demanding restructuring process. It has impacted both our top line and bottom line a bit more than we had anticipated. We're still convinced that we will deliver on both the top line and the bottom line synergies as we have communicated. But going from seven businesses to three in our three largest markets has been a demanding process. The single biggest activity in terms of integration was the integration of field sales in Norway, which took place in Q1 2014. This involved more than 200 people in this Norwegian organization across all the geographies of Norway, and that work finished off, and the new structure started working operationally as of 1st of April 2014.
There's no doubt that that has had a negative impact on our top-line performance in the first quarter of the year in Norway, which is our largest market. Synergies will be delivered. We have said NOK 50 million to NOK 70 million, and this will continue to deliver as we go along. On top of that, we will see further supply chain efficiencies, as Peter mentioned also. We see that we can improve both top line and margins. Clearly, this will come into play as of second half of the year. Innovations are more focused behind our biggest positions on our biggest brand. Polly is today launched now also in chocolates, coming from the nut sector, as Peter mentioned, and is one of the best-selling chocolate tablets so far this year in Norway.
The cost initiatives on top of synergies will be mainly centered around the supply chain area, focused on all our categories and throughout the whole value chain. We will also, in this year, do some pricing initiatives, not particularly important in the Norwegian market, linked to raw material cost increases. Also that we will see will impact the second half of the year. Innovations, most of this has been mentioned, but also in Sweden, we are gearing up our innovation portfolio in the snacks category, and several strong concepts are being launched on our biggest brands in the quarter. Overall, we feel that the 2014 innovation program is stronger than the one we had in 2013. Home and Personal Care delivered improvements in revenue and EBITA across all segments compared to Q1 2013. NOK 1.3 billion of revenues is a revenue growth of 5.7% and organic growth of 2%.
This has been caused by broad-based sales growth in most markets, also for Orkla House Care, Pierre Robert Group has been off to a very good start. Lilleborg had a somewhat weaker start in the quarter, but that has been compensated by House Care in international markets. The EBITA of NOK 230 million is a significant improvement versus the NOK 214 million of the same period last year. This has been a stable and solid performance. Couple of examples of a strong innovation portfolio also in Home and Personal Omo. The Omy launch into actives and sports is meeting a need of more and more active consumers facing a need to get odor out of sport clothing in a way that hasn't been really possible before. New technology meeting new consumer needs.
Pierre Robert making exciting launches into stockings and been off to a very good start and having both limited editions and good technical innovations in the stocking category. Strong programs across all the three major consumer units in terms of innovation. Orkla International reports NOK 660 million revenue in the quarter, which is a significant revenue growth of 62%, mainly driven by the fact that we now have a new business in as a consequence of the Rieber acquisition. As Peter mentioned, we have a structural sales process going on for the Russian business. Our EBITA of minus NOK 28 million is less weak than the same period last year. All our strategic units except Russia have improved their performance in the beginning of the year. In particular, India is continued to perform very solidly with an organic growth of 18% in the quarter.
Profit improvements has been stable across the board. As we said, we have challenges in the Russian market. Orkla Food Ingredients, historically, Q1 is always the lower quarter in terms of profitability, but operating revenues of close to NOK 1.5 billion is up close to 9% in the quarter. Organic growth is plus minus zero. EBITDA improved with NOK 5 million. Last year's EBITDA had some one-off positive effects. The underlying EBITDA improvement in ingredients is actually somewhat stronger than what you see on this chart. Across the board, you could see that some of the smaller units in Czech, Slovakia, Poland, et cetera, had strong solids improvements. Ingredients is off to a good start in the year. To Terje.
Thank you. I will give some brief comments to some of the key holdings under Orkla Investments. Starting with the Sapa JV. Sapa experienced improved markets, volume was up both in North America and Europe by 5% and 2% respectively. Most key end markets show a stable to positive trend. Underlying EBIT was NOK 155 million, both volume growth and improvement programs contributed to this increase. The restructuring program is progressing according to plan. An example of this was Sapa's recent announcement of its intention to close a factory in Italy. Restructuring charges will, however, have a negative impact on net profit in 2014, Orkla's share of profit in the first quarter was a negative NOK 51 million. Sapa had a seasonal increase in working capital in the first quarter, net debt increased to NOK 2.3 billion at the end of the quarter.
As you probably remember, Sapa has a credit facility of EUR 700 million. A good quarter for hydropower, where high precipitation contributed to significantly higher production volume than last year. This more than offset the lower prices, EBITDA ended at NOK 58 million. Reservoir levels were somewhat higher than normal at the end of the quarter, this will have only a moderate impact on production volume in the second quarter. On the other hand, expected spot prices for Q2 are 35%-40% lower than last year, estimated profit in Q2 is lower than the NOK 58 million in Q1. Jotun only reports financials on a four-monthly basis, we cannot present official figures for Jotun. However, Jotun has had a satisfactory start in 2014 and can report sales growth in all segments, including marine coatings. Shipbuilding industry continues to recover after a global slowdown.
Due to somewhat higher cost in growth markets, EBIT was more in line with last year. Gränges had a strong quarter with volume growth in both Europe and Asia. Automotive, which accounts for approximately 90% of Gränges end market, continued to show a positive trend, Gränges has a special strong position in the fast-growing Chinese market. In addition, the restructuring process in the Swedish factory made a positive contribution in this quarter. In total, EBITDA increased by NOK 30 million to NOK 117 million, this is an all-time high result for Gränges on a quarterly basis. EBITDA margin increased to 11% in the quarter. As Peter mentioned, Orkla has, in line with the corporate strategy, initiated an IPO process for Gränges, the assumed venue for this is the Stockholm Stock Exchange. We move on to Q&A.
Can you hear me?
We can hear you.
Yes.
Martin Stensland, DNB Markets. First, Peter, congratulations to your first quarter as CEO in Orkla. It is great to see the positive underlying development for Sapa JV and also Gränges. It seems like both volume and prices are up. Could you please give some more color on what you are seeing at the end of Q1, especially in March? Is the positive development continuing for these two assets? Secondly, for you, Christer, regarding Branded Consumer Goods. I can see that you have kept your financial targets for 2015, 2016 unchanged from the capital markets day in last year. You still see the underlying growth is still on the soft side.
I get your point with all of the public relations and the restructurings we are doing, but still on the growth side, could you please put some more comments on how you are getting from a negative organic growth territory up to a positive in 15/16, and maybe some more comments about what you see through 2040? Thanks.
I think Terje Andersen will answer the question regarding Sapa and Gränges first, and then we will come back to your second question. Yes, it is right that there is a positive demand trend for both Sapa and Gränges out of Q1 and into Q2. We see stable to positive trends for most end markets, both in North America and Europe. The automotive market, which is important for both of them, but in especially Gränges is positive into Q2 and especially the Chinese, the Asian market. It is a positive trend into second quarter. Regarding the long-term targets for Branded Consumer Goods, as I said, we are committed to reach those targets. It is obvious, I think, for everyone that it will be challenging. It is not an easy job to reach those targets, but we believe it is possible.
Mainly, it's effects from the restructurings we are in the middle of right now. Fulfill the restructurings, reach the synergies to improve the margins, reduce costs, and improve margins. I think more successful, stronger innovations will help organic growth. Also selling, looking into new channels, as I mentioned, web exports, new retail formats and so on. We believe it's possible. I don't know if you want to add some comments. I think if you look at foods and Confectionery & Snacks in common, there's no doubt that the Rieber integration and the internal integrations in Confectionery & Snacks has meant that we have lost a bit of momentum in our execution performance. There is nothing wrong with our brands. The categories where we operate, we still seek and deliver the type of growth.
If we can come back and strengthen our market shares, which are somewhat weakened, we think that this is no doubt a stretching target, it's absolutely a possible target.
Just to follow up on that, regarding the somewhat weaker market shares, what kind of structural shifts or trends do you see in the market? Are you facing tough competition across the board? Is it private labels that are pretty much taking market shares? Could you please put some comments on that?
Yeah. It differs between markets. I think across the board, we don't see that we're losing market shares based on the fact that there are completely new consumer trends taking consumers off in a completely different direction. That's not the case. It's been tough competition, both from local competitors, international competitors, as well as private labels. In the Swedish markets and Danish markets, private label has clearly made some headway. In the Norwegian market, we can see some other movements. In general terms, the brands that we have are highly relevant, and we haven't lost consumer interest, and therefore, we're also confident that they can bounce back as we get more externally focused as well.
Okay, thanks. A couple of comments on Russia. You're trying to find an exit on the assets in Russia. What is left is then amongst other assets, the Indian operation. What are basically your plans for Orkla International? I would like to see that you stick on with the assets in India to develop that asset. Could we expect that you also try to find an exit of the assets in India?
Well, as communicated, so far regarding Orkla International, we are in the process of selling Russia and Delecta in Poland. For the time being, we will remain in Czech Republic, Vitana Czech Republic, Felix Austria, and MTR in India. All those businesses are developing positively, and especially MTR in India is developing very positively. For the time being, there is no change in that strategy.
Okay. The last question from my side. Peter, you talked about optimizing the production structure. You also mentioned two examples that you're looking into. Any way that you can put some color on the restructurings synergies that you might see out of these two examples you mentioned? Thanks.
I mentioned the fish example that's the most recent and starting off basically in Q2. That should deliver a NOK 15 million-NOK 20 million saving a year once that has been finalized for the foods business.
Preben Rasch-O lsen, Carnegie. A couple of questions. First, could you give an update on the negotiations with Unilever? I believe the agreement is about to end now during spring.
Yes. Basically similar picture as we said in the last report. What we talk about here, I think is important to note, is less than 10% of Lilleborg's turnover, which is really up for discussion. There's good constructive discussions in negotiation. We don't see that this in any way will impact 2014 performance, we haven't finalized the negotiations.
Also on NorgesGruppen. I've been uncertain whether to be concerned or be positive with the announcements from them, that they will do all of the listings and product placements in their stores. You are mentioning that you are doing a lot of restructuring on the field sales force.
It seems like you have to do that again one year down the road. Would that be positive for the margins in Orkla, or would it be negative and NorgesGruppen get price reductions?
I think it was more question than one there. I think in general terms, there's no doubt that we have big field operations, and we're offering services to our stores and our customers, and that's a service they can decide to have or not decide to have, and that's part of our offering. We will continue to visit stores in Norway across the chains with sales reps, whatever the future says, and I think that's clear. We talk about one part of our offering to the stores, which is the merchandising. These are we're in discussion right now with NorgesGruppen, and I will obviously not comment that in detail. We see that this will not weaken our competitive performance. It's something that happens in the market. We have seen it in other markets.
We will obviously make sure that this is done in the best possible way if it's done in our key categories. I don't really want to get into too much detail about our customer negotiations.
Marcus Ivay, Goldman Sachs from Net. In the report you write on the Confectionery & Snacks section that you look to reduce the cost base by NOK 300 million over the next three years. Is this an expansion of the previous guidance in terms of efficiency improvements?
No, this is in line with what we had said previously as well. It's a combination of synergies, plus what we're doing in the value chain improvements. This is fully in line with what we had said earlier.
A cash flow question. Cash flow from operations from Orkla Brands improved much more than the EBITA improvement in Q1 compared to 2013. Is there a real sustainable improvement in cash conversion that we observe, or are there other reasons for this?
No, there are no fundamental changes there. This is more timing effects for Orkla Brands in this quarter.
Yeah, thanks. A couple more questions, please. Can we expect any changes in innovation spending, R&D spending? You talk a lot about product innovations, and I sense that you might be stepping up initiatives.
I don't think we see an increase in overall spending. I think we see a clearer focus on where we invest that money. I think on a general basis, we don't intend to step up the absolute amounts, but I think they will certainly be more focused behind our biggest positions. As we also benefit more, as Peter said, of initiative across markets, that also gives some efficiency, some scope for investing elsewhere without increasing the absolutes in an innovation.
Okay. You also commented on finding an exit for Russian assets and also the one in Poland. On the acquisition side, any changes in how you are looking at bolt-on acquisitions in the BCG division?
I think our main focus now is to realize the synergies of the acquisitions we have done and of the restructuring we are in the middle of doing. Focusing on daily operations and to improve top-line growth. That's our main focus going forward. We don't have any plans for any big acquisitions like Abba, for instance. No.
Does that still mean that we could expect smaller bolt-on towards the end of the year into next year?
That might happen.
Are you still considering bolt-ons with complementary categories or within categories you're still in? Also on the geographical side, is it still the Nordics that would be most realistic to expect any acquisitions?
Well, we have communicated that the Nordics and the Baltics is our main markets, and that's where we will focus going forward. Regarding new categories, we will just have to wait and see.
Thank you.
Okay, seems there are no more questions. Thank you very much for participating.