Good morning, ladies and gentlemen, and welcome to this presentation of the 2nd quarter results from Orkla. We have first, I will give some introductory remarks, then Mr. Thierry Anderson, the CFO, will present the figures to you. And then, Antti Virehansson, the CEO of Orkla Foods, will take you through the consumer goods activities. There are 3 main messages in this quarter.
Firstly, the financial results are satisfactory. We are reporting EBITDA of $632,000,000 versus $698,000,000 last year. Secondly, all the restructuring programs, integration work going on inside our organization are on plan. And thirdly, the divestment of noncore assets continue on plan, with one exception where we are now clearly behind plan. If we then start with the financial performance, there are obviously a multitude of factors explaining this deviation from plan.
1st and foremost, there are some indications that macroeconomic factors may have affected this quarter, but it may be early to say whether this is a change in consumer behavior or it is, in fact, macroeconomic factors. Competition is also still intense. But I think for the most part, we need to look inside Opla to see the explanation for the deteriorated performance in the Q2. There is a weak top line development in June in particular. I would also say that the extended approval process for the Reber acquisition has clearly taken its toll on that organization this year.
And as a consequence, both top line and profit performance for rebur is clearly behind and below expectations. The challenging markets for Snacks and Confectionery, which has been in place for several quarters, continues. And as you know, this is also the reason why we are restructuring those activities, as I will come back to. Finally, we are in the middle of a big turnaround in Russia, and that operation continues to perform below expectations. And we see weak results affecting our results in the Q2 as well.
There are improvements, however, for Home and Personal and Orkla Food Ingredients. The divestment of assets continues with the sale of the REC and Boro Gold Shares. And in general, in this quarter, a lot of activity and a lot of focus on the restructuring activities inside the consumer goods business. The I have commented for the most part on the ongoing transition inside the branded consumer goods. The integration of Reber progresses according to plan.
The new organization is in place. And in general terms, we could say that the very demanding phase of that integration process where we organization is probably focused mostly on themselves, where we set up a new structure, where we appoint new leaders. That activity is behind us. And I think we can now go forward with the new highly motivated management team and organization and effectuate the plans that we have in place for that activity. There are also, as you know, integration processes going on in Denmark.
Where we merged Orkla and Rebor organizations and in Sweden, where we merged further into the Precordia organization. There is a new management team in place in Home and Personal. And there is a and also the new management teams are in place in that organization. With respect to the divestment processes, as you know, in the Q2, we sold the remaining ROC shares and the borrowed shares. The exclusive That does not change Orkla's strategic view on Sapa heat transfer, but we feel confident that in the short term, it is, at this point, more value accretive to Orkla to remain a shareholder of Sapa heat transfer.
As I said, the inside the food organization, we have had several integration processes. Abba and Prokordia have been merged into one organization in Sweden. We feel that processes progressed well. There is also an ongoing integration of Reber. And as I said, that process has now come to the point where new management teams are in place, and we are ready to go with that new organization.
So that new organization will be operational from the Q3. As a consequence of these integrations, the management teams in Norway, Sweden and Denmark have been reduced from 7% to 3%. Similarly, as you know, we have restructured and set up a new management team for Confectionery and Snacks. We've had several quarters with unsatisfactory results with that operation. That development has continued in the Q2.
The new management team is in place. And also there, we have, as a consequence of the restructuring, reduced the number of management teams from 7 to 3. So in general terms, we feel that we have a more streamlined organization, and we expect obviously to see some results of that going forward. The operation in Russia is undergoing a very major restructuring as we have reported in previous quarters, but that activity continues to perform below expectations as we restructure. There is a simplification in terms of reducing the number of plants and in also reducing the product portfolio.
That is having an impact on the top line figures. And as a consequence of the financial performance, we have also decided to write down the intangibles in the balance sheet for that operation. So the remaining book value of the Russian operation is now about kroner 800,000,000. The restructuring process will continue, and we expect the process and the transfer to the new plants outside St Peterborough to be completed by the end of this quarter. With respect to the agreement for a joint venture with hydro for SAPA, we have now received approval from U.
S. And European competition authorities. So the one remaining approval that we that is required is from Chinese competition authorities. I think in general terms, we see that these processes take time. And clearly, the approval from China will take more time than we had hoped for.
However, we feel confident that we will get this in due course. We are in the middle of the so called Phase 2 process. So while it is difficult to say exactly when that approval will come, we feel confident that we will have this approval in due course. But it is taking its toll on the organization. And generally speaking, we see that these approval processes take more time than we had maybe planned for.
We have also in the Q2 established a financing scheme for the new company. So everything is set to go for the joint venture as soon as we get the Chinese approval. Also here, we have reviewed the accounts, and we have decided to write down the remaining goodwill in the accounts, approximately DKK 1,200,000,000. I think in general terms, to sum up, I would say that the second quarter is a disappointment. And however, I think that most of the factors influencing these results lies within our own organization.
We believe that we understand why what we need to do. We have plans and programs in place to rectify the situation. On the other hand, some of these things that some of the challenges that Roark is facing are complex. They will take time to fix. And so for some of these issues, there are no easy answer to the solution, but we do believe that we will be able to rectify the situation as time progresses.
And as I said, we have experienced management teams in place to execute our plans. So in closing, I would also remind you that we have an Investor Day in London on September 26, where we look forward to share with you our thoughts on our plans and strategies going forward as a consumer goods company. Thank you. And with that, I leave it to Thad Janelsen.
Thank you. And I will take you through financial statements and also comment on some of the business areas. Starting with the P and L. Consolidation of Reber as of May and Jordan contributed to an increase in operating revenues by some $700,000,000 in the second quarter. However, the underlying top line development for both Reber and existing business was negative in this quarter.
EBITDA ended at $632,000,000 in the quarter. And if you look at the EBITDA bridge, we see a decline for brand and consumer goods by $13,000,000 Contribution from acquired companies in the quarter was in the area of €40,000,000 to €50,000,000 And Atlividar will cover brand consuming goods in more details later on in the presentation. Sapa Heat Transfer still recognized as a subsidiary. Business reported a profit decline in the quarter, but operating margins were in line with previous quarters. Higher prices and gain from sale of land contributed to an increase for hydropower compared to last year.
For financial investments, last year's EBITDA was impacted by the finalizing and sale of the Eden Real Estate project in Norway and the contribution from this project was $47,000,000 in the 2nd quarter. Headquarter cost was somewhat higher than last year mainly due to provision for long term incentive programs and also increased provisions for employee taxes related to stock options. In addition, there were also some extra project costs related to the corporate center. Back to the P and L. Other income expenses totaled 5 $53,000,000 in the quarter.
As Mr. Koshval mentioned, there was a write down of intangibles in Orkla Brands Russia. And we have also increased previous provisions somewhat in Russia. Immediate recognition of M and A costs and restructuring amounted to about $110,000,000 in the quarter. Profit and loss from sold sales is now mainly related to Jotun.
Jotun continues to perform well and higher margin led to a profit increase compared to last year. Orkla continued to sell shares on financial assets during the quarter, and sales totaled €2,100,000,000 with a net gain of $352,000,000 in the quarter. At the end of second quarter, the market value of the portfolio is about 1,000,000,000 dollars Discontinued operation is related to the part of Sapa in scope for the JV. And as Mr. Koshval was mentioning, remaining intangible assets is written down by $1,200,000,000 in the quarter.
And just to be clear, this write down have caused no consequences for the JV agreement with Hydro. Looking at cash flow and net debt. Net debt at the end of the quarter was €11,800,000,000 dollars Main changes from year end was the acquisition of Reber and the paid dividend in the 2nd quarter. Net sales from shares and financial assets contributed with $2,800,000,000 in the first half. Cash flow from operation was $700,000,000 And as normal, this cash flow was affected by a seasonal buildup of working capital towards the second half.
Cash flow from operation is expected to be higher in the second half of the year. After closing of the JV agreement, we will, as you are aware of, receive a cash contribution of €1,800,000,000 from the JV. The Sapa business in scope for the JV had an EBITDA of $160,000,000 in the quarter. This was on par with last year. Volumes in the European profile markets continued to decline in the quarter and volume was down about 4%.
However, improvement programs and cost reduction compensated for the volume decline and a very weak solar market in Europe. And for your profile Europe, EBITDA was in line with last year. Margin, however, is down compared to last year, but this is fully explained by the significant drop in deliveries to the solar industry. Although the North American market showed signs of softening in the second quarter, staff operation continued to increase profit and EBITDA margin was up 1.1 percentage point to 6.6% in the quarter. Asian business is still in a buildup phase.
EBITDA in the second quarter is still negative, but somewhat improved compared to last year. Reaching EBITDA breakeven levels is expected towards the end of 2014. The slow pace in the European building and construction market continued to affect Sapa building system negatively also in the Q2 and is few signs of significant higher activity in this market during 2013. Some of mixed performance for Heat Transfer in the Q2. EBITDA was lower compared to last year, but margin was maintained and in line with recent quarters.
Swedish operation in Finspong is working hard to improve the productivity in the factory. Plant organization is strengthened and improvement plants are in plan are in place, but performance in Q2 was still behind targets. In addition, increased metal premium and a strong Swedish krone impacted profit negatively for the Swedish operation. Chinese operation in Shanghai performing well and the demand in Asia is still strong. Hydro Power had profit increase in the quarter due to higher prices, but mainly due to a gain from property sale linked to the BoroGuard plant.
Production was 12% lower than the quarter, and reservoirs at the end of the quarter was somewhat lower than normal. So all in all, production for the year will be significantly lower than last year. Then Jotun. As I said, Jotun continued to perform well despite lower demand for the marine segment due to reduction in new shipbuilding in Asia. All other segments, however, shows healthy growth and even though cold weather has a negative impact on the Scandinavian markets.
Gross margins are improved and contribute to a 20% increase in EBIT in the 4th 1st month of the year. The comprehensive investment programs continues in 2013. Largest investments in the quarter was related to construction on new factories in Brazil, U. S. And Russia.
And then I leave it to Ateliveida to go through the Branded and Consumer Goods businesses.
Good morning. This graph shows the long term EBITDA development for Orkla Branded Consumer Goods area since 2,004, 2005. And the EBITDA has grown to about €800,000,000 in that period in a mix of organic and acquired growth. Now with the acquisitions of Ribbonsan and Jordon and the restructuring going on in branded consumer goods area, that gives Orkla an even larger foundation to continue the long term profit growth. Nevertheless, the performance for Q2 was not satisfactory, and I will present some more detail in each business area.
First, some words on the integration of Riber and Son, which had a main focus in the Q2. The transaction was closed on 26th April after more than 8 months since we announced the deal with the Ribeld family. And in quarter 2, the integration of Ribeld and Son into Orklaq will finally commence. In order to realize maximum synergies, we have chosen to integrate the Reber's business units in Norway, Sweden and Denmark into Orkla's existing companies there. And these entities will be part of the Orkla Foods business area.
Since May, the focus has been on shaping the organizations, selecting leaders and reducing the learning in these 2 months. That was executed with huge efforts in May June in order to limit the period of uncertainty on both sides. And as of July, Orkla has already entered agreements and contracts securing about 50 percent of the synergy potential coming from the rebur deal. The P and L effects of that will gradually come through second half of this year and with full effect into 2014. Purchasing synergies takes some longer time to realize, but we will have a full focus on in the second half of this year.
Naturally, the long pre merger period and the strong focus on the organizational shaping in the second quarter has taken its toll on the organizations and led to increased internal focus, which, of course, to some extent, explains the weak sales and profit performance, especially for Norwegian entities. Going forward now, there will be sharp focus on harmonizing business processes and business plans throughout the value chain to improve profit and growth and, of course, continue to realize the cost synergies coming from the Rebuild transaction. Rebuild's corporate headquarter will be integrated into Orkla's headquarter, and the Rebuild companies in Czech, Poland and Russia will continue as stand alone entities within international business area. The rebir accounts for this first half year. Highlights from that is presented here.
Sales declined with 10% in the first half. This downturn relates to most markets in the Ribbon and Sand Group and is broad based across product categories. The pro form a EBITDA is down $8,000,000 to 43,000,000 dollars Lower costs in the headquarter from a lower activity level compensates a weak performance in the Norwegian business entity. In the Orkla accounts, Reebo is consolidated as of May, as you already know. And the profit contribution from Reebo in May June was NOK7 1,000,000.
And as you probably know, there is a seasonally low profit in the second quarter. For Orkla Foods, the quarter must be described as unsatisfactory. Orkla Foods reported an EBITDA of DKK 263 1,000,000, which is in line with the Q2 last year. And for the first half year, the EBITDA is NOK489 1,000,000, up from NOK464 1 last year. The consolidation of the Rebrand Sun units contributes with NOK9 1,000,000 in this second quarter.
Contributes with NOK9 1,000,000 in this second quarter. The sales development in the quarter was not satisfactory. Organic growth, including Rebrand Entities, was 4.2% down. Excluding Rebrand Sun, the growth was close to 2% and down 1% first half year. The main reason behind this is that the product launches conducted, especially in Norway, is less successful this year than it was last year.
In Sweden, the integration of Abba and Prokordia must be described as successful. The manual reduction is fully completed, and the combined company is recording a volume growth in the retail trade of 2% in the first half year. Overall, the market share for Okla Fuchs decreased somewhat in the quarter. The reported EBITA margin was 11.0%, and consolidating rebar dilutes that margin with 1 point 8 percentage points. For Orkla Confectionery and Snacks, there is also a major restructuring going on as the business area establishes now 1 operating company per country.
That means that during the Q2, 7 management teams and organization structures are merged into 3. The total cost synergy effect from this is estimated at NOK 50,000,000 to NOK 70,000,000. Orkla Saxon Confectionery reported an EBITDA in the quarter of NOK119 1,000,000 versus NOK 151 1,000,000 last year. The drop in performance is mainly related to the weaker sales development as the top line was down 4.8% in the quarter. The business area faces tougher competition in snacks, both from other suppliers of brands and from retailers' private labels.
Orkla's own innovations and campaigns has not been strong enough in the quarter to counter that competition. In total, market shares are reduced, and the overall market momentum was weaker in the quarter. For Okla Home and Personal, reported a profit and EBITDA in the quarter of NOK165 1,000,000, which is up NOK34 1,000,000 from the corresponding quarter last year. After 6 months in 2013, the EBITDA is up $77,000,000 from last year. Especially, Lilleborg and Naxelis is driving the EBITDA increase.
Lilleborg partly due to the integration and synergy realization from the Jordan acquisition last year, but also a strong performance on Lilleborg's core portfolio. However, the business area sales was down 4.8% in the quarter, which is partly explained by weak development for Jordan House Care as the cold weather in the important spring and early summer season has led to a softer market development. In addition, Piaro Berg Group had lower sales in the quarter due to somewhat weaker market program. Orkla International is partly covered by AUG. There's continued challenges in the Russian operation despite major restructuring efforts.
Sales are down 18% in the first half of twenty thirteen. The competition is fierce, and Orkla Brands Russia are facing lower sales both in modern trade and in traditional trade. MTR in India, delivery growth of 13% in the 1st 6 months due to launches of successful innovations. The investment in market and organization development continues in the first half year. In Austria, market shares in ketchup and pasta sauces were strengthened, and the company recorded an increase both in retail and in sector.
The rebrand Sun units, the Elekta in Poland, Vitana in the Czech Republic and in Russia are from May consolidated into this business area. These units contributed by with NOK1 1,000,000 EBITDA, and the development for these units in EBITDA was fairly stable compared to last year. For Orkla Food Ingredients, the quarter was satisfactory with a good underlying improvement in the bakery segment in Norway and Denmark, leading to an organic growth of close to 1%. The EBITDA was also up, and that is mainly related to acquired companies. That concludes my presentation.
As you understand, the financial performance in this quarter was not satisfactory with of Home and Personal and Orla Food Ingredients. However, we are very satisfied with the progress made on the restructuring of Orla's branded consumer goods area and the actions taken to realize synergies throughout the business areas. Then I think it's time for questions.
A question regarding the heat transfer process. You've been dealing with that for quite some time. Could you give us some more flavor on the process as such and your thinking going forward with regard to other potential buyers?
I think the only thing we can say is that we did not agree on terms. And as a consequence, as I said, it's more value accretive to keep heat transfer. As you see, the performance is fine. Will, of course, actively manage that asset. There's no change in strategy.
It is a non core asset, but we will keep it for the time being.
Okay. We can have one question from the web, Sandy Mehta. Can you comment on the decrease in cash balance? And 2, what are the prospects for the regular dividend and possible special dividends upon further divestment activities?
I think we went through the cash flow during the Q2. The main changes was related to the acquisition of Reber by close to $6,000,000,000 the acquisition of real estate for the new head office and also payout dividend in the quarter. So I think the slide showing the net debt development explained the cash flow in the quarter.
And maybe I should add that, of course, there is no change to our dividend policy as a consequence of these deviations. So I mean, I might even add, as we said at the outset, we believe that maintaining dividends throughout a transition period where you may have quarters like this is actually part of the rationale why we maintain the dividend the way we do. No more questions? Then thank you.