Good morning, welcome to this fourth quarter report for Orkla. With me today to present the results, I have our CFO, Terje Andersen, and Jan Ove Rivenes, who is the CEO, Orkla Home & Personal. Before we start, we'd like to make a little statement.
What we showed you was the vision of a consumer branded goods company. As you know, 2022 was a year of transition. We made all the required decisions to be able to implement our strategy, which is to be a branded consumer goods company. We reduced our ownership in REC. We listed Borregaard on the Oslo Stock Exchange.
We established or we announced the establishment of the joint venture with the Hydro with respect to Sapa, and we acquired Godan and Rieber & Søn. Going into 2023, the time has come to organize and act as a consumer goods company. Going forward, we will organize and report with five business units: Foods, Confectionery and Snacks, Home and Personal, International, and Food Ingredients, in addition to our ownership stake in Jotun. We, of course, still have non-core assets, but we have a clear plan, which we have already told you about, how we will exit the non-core activities over the months and years to come.
When I say that we need to organize and act as a consumer goods company, first and foremost, the priority is to establish a strategy for growth for Orkla. I believe that we need to create 3%-5% organic growth in the years to come and add acquired growth on top of that. In addition, we need to produce cost improvements of about 4% annually. We will do that partly by extracting synergies across the business units, but also to introduce best practices in all the business areas. We need, and we will continue to produce strong local brands.
We want to be the preferred local supplier, and we need to be the most efficient consumer goods company going forward, and we need to develop our people to achieve that. That is the strategy. In 2013, the priority is to execute on our plans. First and foremost, to start implementing a strategy for growth, and maybe most importantly, then in 2013, to successfully integrate Rieber & Søn, which we still hope to receive clearance for towards the end of the first quarter. In addition to that, we have a process with Hydro, so we expect to close and then start to integrate the JV with Hydro. We still also hope to announce a sale of Sapa Heat Transfer this quarter.
An industrial investment company. It was founded in 1654 and is headquartered in Oslo, Norway. Orkla's main business areas are branded consumer goods, aluminum solutions, and financial investments. Some of Orkla's well-known brands include: * **Orkla Foods:** Stabburet, Nora, Idun, Felix, Abba, K-Salat, Beauvais, Hamé, Vitana, etc. * **Orkla Confectionery & Snacks:** Nidar, Sætre, KiMs, Polly, Göteborgs Kex, etc. * **Orkla Care:** Jordan, Pierre Robert, Define, Sunsilk, Lano, OMO, Jif, etc. * **Orkla Food Ingredients:** Credin, Odense Marcipan, Dragsbæk, etc. Orkla has a strong presence in the Nordic region, the Baltics, Central Europe, and India. The company is listed on the Oslo Stock Exchange
There is, of course, if you look at the current consumer goods business, there's an element of extraordinary dividend in that number, but we have the financial ability to do so. We will try to maintain a stable dividend through the transition period, which will, as you know, take a few years. With respect to the results for the fourth quarter, we achieved EBITDA of NOK 1.1 billion . For the branded consumer goods business, we have an underlying revenue growth of about 1% and profit improvement of about 9%. The Nordic consumer businesses generally show improvements, but the accounts are also impacted by the continuing restructuring of the Russian operations.
that is Sapa is continuing to have a very demanding market in Europe. So they show weak results in the fourth quarter, while Sapa Heat Transfer, on the other side, has shown good improvement and are, I think in a demanding market, producing satisfactory results also for this quarter. In addition to that, the results for fourth quarter are impacted by positive results in a property development project in Oslo. So all in all, I feel that we can say that the fourth quarter is a satisfactory quarter for Orkla. So with that, I leave the floor to Terje Andersen.
Thank you. I will take you through the financial statement and also comment some of the business areas. Before doing that, I'd like to remind you on how the structural changes Åge was commenting have impacted the presentation of the Orkla consolidated statements. Borregaard and the Sapa business that will be part of the future JV with Hydro are no longer consolidated as subsidiaries, but are presented as discontinued operations. After closing of the JV agreement, Orkla's 50% holding will be consolidated according to the equity method and presented as an associated company. Ownership in REC has been reduced to 15.6%, and the stake is now presented as financial holding available for sale.
Jordan consolidated as of September 1st, while there, of course, at present, is no financial consequences from the acquisition of Rieber. You see the significant impact of these changes when you compare the full year reported figures in 2011, here marked by a star, with the restated figures for the same year. Looking at Q4, you see both revenues and EBITA increasing compared to last year. 85% of EBITA is now coming from branded consumer goods. Jan Ove Rivenes will cover this in more details later. On the line for other income and expenses, we have booked NOK 244 million in the quarter. This is related to immediate recognition of M&A costs at group level, further provisions in Russia, and restructuring in Orkla Foods, Sweden. Profit from associates is now mainly related to Jotun.
Q4 is seasonally a weak quarter for Jotun. For the full year, you see that Jotun shows strong profit growth. The process of selling down the share portfolio has worked well. Full return for the share portfolio was 19%, representing a value contribution of NOK 720 million. Market value of the portfolio, including investments in REC and Borregaard, is now NOK 3.6 billion. The remaining 15.6% shareholding in REC has been written down to market value as end of the year, and a total returns of presenting NOK 200,000 REC share is valued mark-to-market. In total, this give a negative impact of NOK 412 million in the quarter on the line for shares and financial assets. Discontinued operation generated a loss in the fourth quarter.
Weak European markets for Sapa and a further provision of NOK 300 million in Sapa explain the most of that. It's a small gain from the Borregaard IPO in the quarter. Looking at cash flow, you see net debt being reduced by NOK 6 billion in 2012, and net debt at the end of the year was approximately NOK 5 billion. Profit growth and reduced working capital contributed to improved cash flow from operation in the fourth quarter, and cash conversion for the year was 102%. Sale of financial asset contributed with NOK 4.5 billion, and sale of companies was mainly related to the IPO of Borregaard. You see that NOK 3.2 billion was allocated back to shareholders through dividend and share buybacks.
You see that net debt has been reduced significantly over the last years, while equity ratio has been relatively stable, somewhat above 50%. Closing of the Rieber & Søn transaction and proposed dividend payment represent capital commitments of approximately NOK 8.6 billion. This will be offset by a NOK 1.8 billion vendor note of the JV agreement with Hydro, further sell down of financial assets and cash flow from operations. Sale of heat transfer will also reduce net debt accordingly. Orkla will therefore retain a strong balance sheet and the financial flexibility to support the strategy going forward. Some comments to some of the business segments. Hydropower, you see EBITA on par with last year. Volume lower, but this was offset by somewhat higher prices. Generally, however, market prices is still at low levels for the energy segment.
There will be a planned maintenance stop in the first quarter of 2013, impacting production volume negatively in this quarter with some 60 gigawatt-hours. Sapa Heat Transfer is consolidated as a subsidiary and is now reported as an independent segment. After a slow second half of 2011, Sapa Heat Transfer is now back on track, delivering satisfactory results. This is coming from comprehensive improvement programs in Sweden that has improved both operation and profit, while the Shanghai business benefits from continuous market growth. The part of Sapa that will go into the joint venture with Norsk Hydro is presented at discontinued operations. Generally, fourth quarter is a seasonally weak quarter for our profile and building system. Profit is negatively impacted by very weak European market in general.
The year-on-year volume in Europe is down 11%, and this market development, I think, underline the importance of the JV agreement with Hydro. North American operation continued to deliver volume and profit growth, and margin for the year, 4.6%. However, this was not enough to offset the weak European performance. Restructuring continues, and a further provision of NOK 300 million have been booked in Q4. At last, Jotun. Jotun has not released figures for their last four months, but that's another good year with double-digit growth in 2012. Organic growth continues in both segments, and revenues for the year will be all-time high. However, towards the end of the year, Jotun experienced reduced demand in the marine segment in Asia, but in all, a good year for Jotun.
I'll leave it to Jan Ove to the next.
My name is Jan Ove Rivenes, and I'm responsible for Orkla Home & Personal. This graph shows the EBITA for brand consumer goods on a rolling 12-month basis. As we'll be seeing, the brand consumer goods area shall shows a positive development in the third and fourth quarter of 2012. The cash flow from operations within the brand consumer goods area had an increase of 30% from 2011 to 2012, giving us a cash conversion ratio of about 100%, which is in line with our long-term targets. Capital efficiency will remain a high priority going forward. Let us have a look at the 4 business area within the brand consumer goods in 2012. First, Orkla Foods Nordic.
They have a substantial part of their revenues from the Nordic region, and they have some of the biggest and strongest brands in the marketplace. Organic sales growth for full year ended at 1%. Adjusting for the loss of one contract correction after fourth quarter in 2011, the sales growth for Orkla Foods Nordic was 3%. In the fourth quarter of 2012, we saw positive sales growth, primarily coming from strong innovation programs in Stabburet and Abba Seafood in Sweden. In total, market share slightly increased. EBITA increased by 10% in the fourth quarter. Profit development was positively impacted by a front-loaded advertising program during the year. The improvement was broad-based, but stable, and Abba Seafood in Sweden had particularly good performance.
In order to strengthen our competitiveness in the Nordics, Orkla Foods Nordic targets to establish one food company in each of the Nordic countries. In Sweden, Abba Seafood and Procordia Food will merge into one company, becoming one of Sweden's largest food company. This merger will be effective from April the first this year. In the fourth quarter of 2012, it was announced that Beauvais Foods in Denmark will move parts of their production to other Orkla factories. The next business area is Orkla Brands Nordic, also having a strong footprint in the Nordics. From January this year, we have split Orkla Brands Nordic in two business area, which are more heterogeneous and more in accordance with the market categories. That is Orkla Snacks and Confectionery, with Nidar, Chips Group, and Göteborgs Kexfabrik.
The other one is Orkla Home & Personal, comprising Lilleborg Professional, Axellus, and Pierre Robert Group. Adjusting for the loss of one contract correction after third quarter 2011, the revenue growth in 2012 was 1%. In fourth quarter 2012, the underlying growth rate was 2%. The improved performance was in large related to broad-based volume increases for Lilleborg and Nidar. Our biscuit area had weak performance. We had a mixed development in market shares. EBITA had an organic increase of 16% compared with the same quarter in 2011. In addition to the already mentioned sales growth in Lilleborg and Nidar, Axellus, Chips Group, and Lilleborg Professional contributed to the EBITA increase in the quarter.
Despite somewhat higher sales, the biscuit operation at Göteborgs Kexfabrik report profit decline in the quarter, much due to extraordinary costs in the factory related to ongoing restructuring. Even for Orkla Brands Nordic, the front-loaded advertising program had a positive impact in the quarter. Jordan became a part of Orkla Brands as from September the first last year. Jordan Personal and Home Care is now organizationally integrated into Lilleborg, while Jordan House Care will operate as an independent company within Orkla Home & Personal. In total, Jordan's performance is in line with expectations. Orkla Brands reported, Orkla Brands Nordic reported a decline in EBITA margin of 1 percentage point. The company is acquired during 2012. Jordan, PharmaVinci, Denomega, and Cevita had lower margin levels than the rest of the portfolio. The underlying margin development was maintained.
The third business area within brand consumer goods is Orkla Brands International. Orkla Brands International reported an EBITA of NOK 62 million in the fourth quarter, compared to NOK 87 million in the same quarter of 2011. In India, a substantial part of the cash flow is reinvested in order to create organic growth through regional expansion. As a result of this, advertising spend increased, and the total result was lower than last year. In Russia, the market is undergoing a substantial change. Customers are shifting from local distributors to more national grocery chains. In order to improve profitability and to adapt to the new market situation, Orkla Brands Russia has reduced the number of product lines compared to 2011. The ongoing structural process of combining production capacity is moving along as planned.
The fourth business area is Orkla Food Ingredients. Orkla Food Ingredients had both sales and profit growth in the fourth quarter, however, measured against the weak fourth quarter of 2011. The introduction of a fat tax in Denmark in 2011 led to low sales in the fourth quarter last year. The fat tax was reversed from January the first this year. Overall, food ingredients maintained market position throughout 2012. One of the most important drivers for growth is innovation. This slide shows some of the biggest innovations on their way out in the market this year. As you will see, our program is broad-based, and it supports our strong brands. I will end this part of the presentation by showing you two commercials, supporting two important and promising launches last year.
Respectively, Abba Middagsklart, finally making it easy for families to enjoy fish dishes with their families here, and Jordan Expert Clean, convincing you to buy a new toothbrush today.
We can start with the questions on the next from Olav H. Jacobsen, asking your view on the ICA wage group in Segwina.
I think, first of all, this is a reflection of the continuing restructuring of the retail trade. In that sense, there's nothing new. I think it is far too early to assess what the eventual effect of this will be. I think, principally, it also means that Orkla needs to continue to improve, to continue to innovate and to improve our competition position.
Preben Rasch-Olsen, Carnegie. Sorry, two questions. First, you gave a target of 3%-5% organic growth for food and brands. Do you have any targets for the margin improvements? What kind of margins should we hope for in food and then also in brands? Then for the Sapa JV, I don't quite get the numbers to add up. There's a loss of NOK 460, almost NOK 70 million in loss on operations, then something on the restructuring, but that only adds up to NOK 350. If you can give some explanation. Also, looking into the first half of 2013, for Sapa, do you see any improvement now in Europe? How is the U.S. going? Should we expect loss also in the first quarter, or is it getting a bit better?
If I take the second one first, when you presented the discontinued, you also had tax and financial costs included in the figure. That, I guess, add up the difference. Maybe you should repeat the first one, because I'm only looking in my book to answer your second one.
Well, for Sapa, I was just wondering how you look to the market now going into the first half of 2013.
Yeah. I think discussed it with the Sapa guys yesterday, and they said that the last part of November and December was particularly weak, also in North America. In North America, they see a slightly better market into 13 than the end of last quarter. Europe is still very weak.
I'll take the opportunity again, since there's not that many only. Firstly, my first question was also on targets for the margins in food and brands. If it's possible to say anything about volumes versus price increases in 2012 for the 1% underlying growth.
On profitability, I think, we will see. I think, we will obviously not achieve, these objectives for this year as we're starting to implement some progress. Longer term, and EBITDA growth for about 7.5% is probably where we need to be.
We could comment upon the volume, the development. In total, when you look at the total portfolio in 2012.