Good morning, welcome to this presentation of Orkla's first quarter results. My name is Kari Lindtvedt. I'm Head of Investor Relations at Orkla. I'm joined today by President and CEO, Jaan Ivar Semlitsch, who will sum up the main points of this quarter. CFO, Harald Ullevoldsæter, will give you the more details on the financials. Before moving on to Q&A, Jaan Ivar will sum up and share some reflections on the outlook. Throughout this presentation today, you're welcome to pose questions on the web, and we will address them at the end of this session. With that, I leave the floor to you, Jaan Ivar.
Thank you, Kari. Good morning, and welcome to this presentation of Orkla's first quarter results on this sunny morning here in Oslo. Overall, I am pleased that we deliver organic growth and margin improvement in Q1 on the back of a strong quarter last year. The coronavirus pandemic still, of course, has significant impact on our operations. Number of infected employees at Orkla since the pandemic broke out is 1,975, but most of our employees are back to work. We have, during the whole pandemic, delivered a service level of 95%, in many ways, best practice as I see it. All our 112 factories have been running during the pandemic with some very short-term exceptions. Right now, the situation in India and Sweden is worrying. These countries have high infection rates. Our operations in these countries are running according to plan. We follow the situation carefully.
It is very special times. I am slightly more optimistic about the future, as several markets are starting to open up more and vaccination programs are progressing. I'm glad to see Orkla Food Ingredients on their way back to recovery following a challenging year. Lockdown and restrictions in our markets have had negative effects on the out-of-home channel, where Orkla Food Ingredients has over 60% of the revenues exposed. It now seems as if the negative effects are much less severe and volumes are coming back, especially for ice cream ingredients. In summing up the first quarter of 2021, I also want to highlight that M&A activity remains high. I will come back with some more details on the transactions we have announced and closed during the quarter in my presentation, and I believe we are delivering on the structural agenda.
First, I would like to sum up the main financials for the quarter. We delivered EBIT for the group of NOK 1.3 billion, an increase of 13%. The improvement was mainly driven by continued market growth for Confectionery & Snacks and House Care, partly offset by lower pace in out-of-home. Revenue management has been a key focus area where we have invested more resources. I'm pleased to see that also this quarter, revenue management is an important contributor to growth and margin expansion, together with cost savings and positive mix for Branded Consumer Goods. Moreover, power prices have increased as a result of higher transfer capacity to mainland Europe and a cold winter with less than normal amounts of snow, driving profit improvement for hydropower.
Jotun also continues to deliver broad-based growth with 42% profit improvement in the quarter, driven by sales growth, margin expansion, and good cost control. Both hydropower and Jotun contributed to EPS of NOK 1.27 in the quarter, an increase of 21%. Since I took office 20 months ago, I've pushed our profitable growth agenda, both organically and through M&A. However, although our organic growth level has increased since 2018, 0.4% in 2018, 1.3% in 2019, and 1.6% in 2020, there is definitely still more to go for. Orkla has several interesting growth opportunities, and we work every day to prioritize and leverage this. For Orkla as a whole, there are three main areas of opportunity that we will exploit to increase profitable growth going forward, in addition, of course, to the current priorities in the various business units. These are plant-based, out-of-home, and health.
We have talked a lot about plant-based. This category shows strong growth rates, which have proven resilient also during the pandemic. Orkla wants to take our fair share of this growth. We believe we have an important role to play in this category. You are probably familiar with our target to grow revenue to NOK 1 billion by the end of 2021. We are well on track to reach this target. Today I'm happy to share with you that our ambition for our plant-based portfolio is to reach NOK 3 billion of revenues by end of 2025 as a minimum goal. This will be achieved both organically and through potential structural moves. We are present in both dairy and meat replacement in categories today in several markets. We believe there is still potential to grow in both of these categories.
Let me just underline, at this stage, this is an ambition, and we'll come back with more details at our Capital Markets Day. Second, Orkla's vision is to be your friend in everyday life. The longer-term trend is that consumption, to a greater extent, happens outside the home, on the go. Although severely hampered during the pandemic, we believe that the out-of-home channel will continue to grow, and we will continue to expand in this channel, both through B2B and B2C. Third, health categories have enjoyed significant market growth during the coronavirus pandemic, and we strongly believe that this development will continue also post-corona. The health trend has been there for several years, and today, people are more concerned with maintaining a strong immune system and a healthy lifestyle.
Orkla has strong positions and competence in the health categories, and we see a potential to build on this platform through existing and new business models. Our recently announced acquisition of NutraQ is an example of this. Another example is the strong growth for our Möller's cod liver oil brand, both in Norway and internationally. On the next slide, I will give you some more details on the M&A activity in the quarter. During the quarter, we have closed transactions with a value of NOK 1.8 billion in total, in addition to announcing NutraQ with an enterprise value of NOK 3.1 billion. I've previously spent some time communicating around the acquisition of 67.8% of the shares in Eastern. With this acquisition, we will strengthen our platform in Southern India, and we're pleased that we closed this transaction in late March.
In addition to this, we have closed three smaller transactions. Proteinfabrikken in Norway, which is a good fit with HSNG in the online channel for sports nutrition. Fort Deli gives us a platform for growth in food service and out-of-home in Finland. Finally, with the acquisition of Ambasador 92, we will strengthen our out-of-home presence in Poland. Also very exciting, as mentioned, we have signed an agreement to acquire NutraQ during Q1. NutraQ is present in all the Nordic markets, offering scalable, subscription-based health and beauty concepts direct to consumer. The transaction is still subject to approval by relevant competition authorities, but I'm happy to say today that we have already received approval in Norway. The transaction is expected to close during Q2, Q3 at the latest. As you can see, these transactions are well in line with our M&A strategy.
Orkla has a clear capital allocation policy with three main priorities: ordinary dividends, invest in current businesses and M&A, and consider payback to our shareholders through extraordinary dividends and share buybacks. M&A is a central building block in our growth strategy. We will maintain our strategy going forward and will focus our M&A activity along three dimensions. First, we aim to expand in categories or niches where we can get critical scale or synergies and on-trend categories, core and adjacent categories. Second, grocery is our biggest channel, 60%, but we are increasingly following consumers to other faster-growing channels like pharmacies, online, and out-of-home eating. Third, we continue to strengthen our footprint outside Norway, focusing on other home markets in the rest of the Nordics, Baltics, Central Europe, and of course, India.
We will also explore adjacent geographies if they are seen to strengthen our core business as a competitive advantage. Orkla Food Ingredients has a slightly different approach and has a more pan-European expansion strategy. Here, in addition to our Nordic markets, we have, for example, strong positions in the U.K., Benelux, Portugal, and Poland. On our Capital Markets Day on the 23rd of November this year, we will elaborate more on both the growth plans for organic and structural growth. I will hand over the floor to our CFO, Harald Ullevoldsæter, who will give you some more details on the financials for the quarter.
Thank you, Jaan Ivar, good morning, everyone. Let's have a look at the financial performance in the quarter one. As you can see, revenues in Branded Consumer Goods were broadly in line with last year. In the same period, earnings for Branded Consumer Goods, including headquarters, improved by 9.5%. Industrial and financial investment had a profit increase of NOK 49 million this year as a result of higher power prices in hydropower. We had non-recurring items totaling NOK -143 million in the quarter, mainly from costs associated with our ongoing ERP project, as we mentioned in quarter four last year. Profit from associated ended at NOK 331 million, an improvement of 55% from last year. This increase was mainly driven by strong profit and margin growth in Jotun. As Jaan Ivar said, adjusted earnings per share grew by 21%. Look at the cash flow.
Cash flow from operation was NOK 447 million in quarter one. Decrease from quarter one last year was primarily driven by negative timing effects on net working capital. Underlying improvement in average net working capital in percent of net sales value is still positive by 20 basis points this quarter, but with a lower rate of improvement compared with the performance over the last two years. Replacement investments were somewhat higher in quarter one compared to corresponding quarter last year, mainly related to the building of the new biscuit factory in Latvia. Net debt, including leasing, increased by NOK 1.5 billion to NOK 7.8 billion at the end of quarter one. The main cash out was related to the acquisition of 67.8% of Eastern, which was closed at the end of March this year.
We also completed a share buyback of 5 million shares in the quarter, summing up to approximately NOK 0.4 billion. Currency translation effect from a stronger NOK reduced the net debt by almost NOK 0.6 billion. Orkla has a strong financial position, and our debt level at the end of quarter one corresponds to approximately one times EBITDA based on the last 12 months, well within our ambition not to exceed 2.5 times EBITDA over time. If we include the acquisition of NutraQ, which is signed but not closed, the ratio increases to approximately 1.4. Let's have a closer look at our Branded Consumer Goods performance. First, I will present the overall picture for Branded Consumer Goods. Then I will take you through the different business areas. As Jaan Ivar alluded to in his introduction, the coronavirus pandemic has had a significant impact on our business.
Before we dive deeper into Branded Consumer Goods figures for quarter one, I want to highlight some of the dynamics we experienced through 2020. As you know, approximately 60% of total sales in Branded Consumer Goods is sales to grocery, while approximately 25% is related to out-of-home. As you can see from the graph, we saw a very volatile sales pattern through 2020, driven by significant variations in sales development between these two channels. Let's start with the grocery sales. In quarter one 2020, we're positively impacted by stockpiling effects in March, especially in foods and Orkla Care, while a moderate reversal in quarter two. Quarter three was positively influenced by domestic vacation and less border trade, especially between Norway and Sweden, and solid market growth was maintained in quarter four.
If we look at out-of-home, we experienced large negative effects at the beginning of quarter two, which was impacted by the shutdowns of various markets and a weakened sales to the ice cream season. We experienced sales indices in the range of 40%-60%. The effect improved, however, through quarter two and further into quarter three and quarter four, with sales indices in the range of 80%-90%. Going into 2021, we are now starting to meet this volatility. Let's start with the top-line performance for Branded Consumer Goods. Overall, revenue from our Branded Consumer Goods business decreased by 0.4% in Q1. Organic growth added 0.5% on top of our strong revenue growth last year. The organic growth was somewhat positively affected by timing of Easter and removal of sugar tax in confectionery snacks in Norway.
Forex translation effects were negative by approximately 1.4%, mainly from a stronger NOK versus euro and SEK, compared to a weak NOK in the first half of 2020. We had a net positive impact of 0.5% from structural changes. Eastern will be consolidated in the P&L from Q2 2021. Moving on to growth per business area. As you can see from the graph to the left, organic revenue growth was 0.5% in this quarter. Q1 was the first quarter we faced the effect of the stockpiling following the coronavirus pandemic last year. This effect was significant, especially in Orkla Foods and Orkla Care. In the grocery channel, we continue to see good market growth. For out-of-home, we are still experiencing a negative effect from lockdown, but we see some improvement, especially for ice cream ingredients in Food Ingredients.
House Care in consumer investments and Confectionery & Snacks Norway are both significantly positively impacted by market-driven demand following the coronavirus pandemic. As illustrated on the right-hand side of this slide, there are big differences in development between our business areas in this quarter. We will take a closer look at this in a couple of slides. First, let's have a look at the profit performance for Branded Consumer Goods. Branded Consumer Goods, including headquarters, grew earnings by 9.5% this quarter, reflecting a 9.7% underlying improvement, while 2.1% M&A addition was offset by 2.4% negative effect from currency. Revenue growth, positive mix, and cost reductions, mainly related to the coronavirus pandemic, were the main drivers of the underlying progress in Q1. As you can see from the graph on the right-hand side, the EBIT margin improved by 0.7% on a rolling 12 months basis, of which 0.6% was underlying.
The progress was mainly driven by good revenue management, product mix, and cost improvements. This was partly offset by higher A&P spend, higher raw material prices, and increased depreciation. In Q1 this year, lower A&P spend has a temporary positive impact on the EBIT margin. Let's have a look at the performance per business area, starting with Orkla Foods. Orkla Foods reported a revenue decrease of 7% in the first quarter, of which 4.7% was negative organic growth. This was driven by sales decline in Central Europe, Sweden, and Denmark, to a large extent driven by stockpiling in March last year. Norway and India, however, experienced increased sales. This was primarily driven by campaigns early in the year in Norway, while India was heavily impacted by shutdowns due to the coronavirus pandemic in the corresponding period last year.
Orkla Foods Sweden has implemented and launched a new ERP system in the quarter. The implementation has been successful, as expected, has led to lower activity in the period, which affected Q1 sales and cost negatively. We still expect some additional cost in a transitional period, while some costs will be of more permanent nature, mainly related to increased depreciations. The sales decline and increased costs related to the ERP implementation affected earnings negatively, while reduced SG&A compensated to some extent. Moving on to Confectionery & Snacks. Revenues from our Confectionery & Snacks business grew by 6%, of which organic growth constitutes for 6.9%. Sales growth was positively affected by Easter and the removal of sugar tax in Norway from 1st January after temporary destocking in Q4 2020. We estimate that approximately 40% of the organic growth was driven by these effects.
Revenue development was also positively affected by regaining listing with a customer in Denmark. The market growth in grocery has been strong, especially in Norway, while the development in the Baltics is still weak, and channels outside of grocery have been exposed to negative growth. Let's have a look at the performance in Orkla Care. Revenues from Orkla Care increased by 7.5% in the quarter, of which organic growth was 4.2%. The organic growth was driven by a solid and broad-based sales increase in Orkla Health, partly driven by consumers' increased focus on own health due to the corona pandemic. Our home and personal care categories saw a small contraction due to lower B2B sales, and the market growth in certain categories flattened out somewhat after strong growth during 2020. Wound care was still negatively affected by coronavirus-related lockdowns in several of its key markets.
Despite sales growth, earnings in the quarter were roughly unchanged from last year, mainly due to higher advertising spend and increased production costs in Orkla Home & Personal Care, and a negative product mix in health portfolio. These effects were the main reason for the 1.3% drop in EBIT margin in the quarter. Let's turn to Orkla Food Ingredients. Revenues in food ingredients declined by 1% in the quarter, while organic growth was negative by 2% due to corona pandemic restriction impacting out-of-home consumption in most of our markets. Sales decline in bakery ingredients was partly offset by higher sales in ice cream ingredients, which were particularly strongly hit by lockdowns in quarter one last year. Earnings improved by 12.7% as a result of structural growth and lower fixed costs. This was partly offset by negative currency effects as a result of a stronger Norwegian krone.
There is still uncertainty going forward. This is closely connected to reopening of markets. Let's have a look at performance in consumer investments. Consumer investments had organic sales growth of 15.4% in the quarter, primarily driven by Orkla House Care, with sales growth in all markets due to high activity within home improvement, including painting tools. Our Kotipizza franchise in Finland continues to see good organic growth as a result of both higher sales, both in the restaurants and Foods tock business. Our professional cleaning business, Lilleborg, had a good quarter. On the other hand, our textile business, Pierre Robert Group, continued to be negatively affected by social restrictions and canceled festivities. This concludes the details for quarter one for our Branded Consumer Goods business areas.
Before I leave the floor to Jaan Ivar again, I will give you a short summary of Jotun's performance in quarter one. Jotun released their sales update this morning. The positive revenue growth continues for Jotun in quarter one. All segments except marine coatings contributed to sales growth. Adjusted for negative currency effects, the sales growth was 17%. The revenue increase is mainly related to decorative paints, particularly in the Middle East, Southeast Asia, and Scandinavia. Uncertainty prevails for second half of the year due to lower activity level in the new build market for marine and oil and gas. As Jaan Ivar said, raw material prices are expected to increase. Furthermore, there are uncertainties as how changes in corona pandemic restrictions will affect Jotun's markets. With this, I leave the floor to Jaan Ivar to sum up the main points of our presentation today. Thank you.
In my opinion, the first quarter of 2021 is positive. We delivered strong results and positive organic growth on tough comparables from the stockpiling effects we saw last year. The ongoing pandemic, of course, still has significant impact on the results. We continue to see good growth in the grocery channel, but still a lower activity level in the out-of-home sector. I'm pleased to see the strong performance of Jotun. We have completed several M&A transactions, this quarter with Eastern and also the announcement of NutraQ. I'm very excited about this transaction, which represents an opportunity for us to strengthen our presence in a new channel. Before moving on to Q&A, I would like to share some reflections on the outlook. There is a lot of uncertainty related to the development in the short term, we see some very positive signs.
Our markets are starting to open up. I'm optimistic and believe that the ongoing vaccination programs will gradually result in further easing of restrictions and enable society to return to a normal life. With this new normal, I see even more opportunities for Orkla to both ensure profitable organic growth and continue our ambitious M&A agenda. This concludes our presentation, and thank you so much for listening, and we'll now open up for Q&A.
Thank you, Jaan Ivar and Harald. We have got some questions on the web. Let me start by one from Bartosz Kowalczyk. Will Orkla grow further in vegan products, and will that be through new product launches or new markets?
Yes. I guess that's the question to plant-based and vegan, and what we also call as alternative proteins, and the answer is yes. We see good growth momentum for plant-based, and we are well on track to reach our goal of NOK 1 billion this year. As I pointed to in my presentation, we have set a goal for 2025. We'll come back on that on the Capital Markets Day. The initial ambition is NOK 3 billion. Yes, we see good growth. To just illustrate that, Anamma in Sweden is our top four brand within all brands in Sweden.
Thank you. We have a question from Ole Martin, DNB, and I think you could answer that together with a question from Markus Heiberg, Kepler Cheuvreux. You make no comments on previous guidance. I suppose you mean the financial targets that we have set. Is this no longer valid? Markus is also asking about if you can elaborate on gross profit and margin development in Q1, assuming a like-for-like product mix. I guess they want a comment on the margin target.
Yes, I guess so. Of course, we are trying every day to reach our targets for the three-year period. Nothing has changed about that. As I said, there are some positive effects affecting our results in the quarter one, that the underlying growth in operating margin in the quarter is not representative for the year as a whole. I think the most important is that we have a phasing of the A&P. We said in quarter four that we will increase our A&P spending during 2021. In quarter one, we have a slight reduction in our A&P spending, and that will not be the case for the total of the year.
Thank you. Markus has a follow-up question. The margin in consumer investments has fluctuated significantly in recent quarters. What do you consider to be a normalized level of profitability in this segment?
I'm not sure if we want to go into those details. It's a very complex question, but of course, this has to do with the extreme demand for our painting tools in our House Care business, which has fluctuated a lot during the last 12 months.
I could probably add that, of course, there are positive HouseCare effects for HouseCare, but they have really delivered on a very good service level during the whole pandemic, and we think that especially Norwegians will continue to refurbish their houses or their gardens during Q2 as well. Of course, there are some positive HouseCare effects here during the staycation and people spending a lot of money in their homes.
Good. Next question from Ole Martin Westgaard, DNB. How should we think about the underlying growth from your India operation following the acquisition of Eastern?
We are, again, as Harald said, we're not giving any guidance. Bear in mind that MTR, we are five times bigger with MTR since 2007. What we also said when we announced Eastern, that the underlying growth within this category is 13% per year in India. We see a growing market in India, both in general, but also taking Eastern in the same journey we've had with MTR. Again, we're not giving any guidance on specific growth numbers for India.
Thank you. Another question from Ole Martin. What was the share of revenue from Anamma and Naturli' in Q1? What is current share of plant-based revenue today, and what is the growth in Q1 this year?
I could start, and Harald can take some of the details as well. First of all, the growth for 2020 was 30% reported, 20% underlying, and Anamma and Naturli accounting for around NOK 870 million last year. We think we are on track, or strongly believe we are on track for the NOK 1 billion goal. That gives a sort of a perspective on the 2021. For Q1 isolated, would you give some input on that, Harald?
I could say that it's more a flat top line development in Q1, which we don't think is representative for the year as a whole. Approximately 50% from Anamma, 50% from Naturli, the split between those two brands.
Thank you. A question from Petter Nystrøm of ABG Sundal Collier. In Brands and the new ERP system, is it possible to give some more detail on the expected short-term higher costs?
Yeah. First of all, I'd like to say that the implementation has been successful. The system is working, and we are producing products every day and selling to our customers. We have, as expected, some one-off costs in this quarter related to the training of our people to have this ramp-up in our production. We are shutting down the production and starting a new system. We have said that it's approximately NOK 50 million in one-off costs in the quarter related to this, and I guess we will have some more one-off costs in quarter two, but a much smaller portion. We will have a more permanent cost increase related to depreciation coming through, approximately NOK 80 million for a year as a whole, 12 months period.
If I could add to the introduction of Harald as well, the service level now in Sweden, Orkla Foods Sweden, is 95%, and the goal is to be at 97%, 98% in June, July. The systems are really working, and this will be a very good system for the future. Of course, there's been implementation challenges, but we see that now as resolved and very good progress on that going forward.
Good. That concludes the questions from the web. Thank you both, Jaan Ivar and Harald. We will be back with second-quarter results on the 15th of July, I would also like to remind you to save the date for our Capital Markets Day on the 23rd of November later this year. That wraps up today's session. Thank you all for joining.