Good morning, and welcome to this presentation of Orkla's First Quarter Results. My name is Karin Lindtvett. I'm Head of Investor Relations at Orkla. I'm joined today by President and CEO, Jani Wang Semlich, who will sum up the main points of this quarter. Then CFO, Haagen Leland Walssertig, will give you more details on the financials.
Before moving on to Q and A, Jan Iveijn will sum up and share some reflections on the outlook. Throughout this presentation today, You're welcome to post questions on the web, and we will address them at the end of this session. With that, I leave the floor to you, Jan Ivoi.
Thank you, Karin, and good morning, and welcome to this presentation of Orkla's Q1 results on this Sunday morning here in Oslo. Overall, I'm pleased that we delivered 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 It's 1975, but most of our employees are back to work. Therefore, 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, but we follow the situation carefully. It is very special times, but I'm 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 Q1 of 2021, I also want to highlight that M and A activity remains Hi. 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 1,300,000,000, an increase of 13%. The improvement was mainly driven by continued market growth for Confectionery and 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 pushed our profitable growth agenda, both organically And through M and 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 3 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. First, 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 SEK 1,000,000,000 by the end of 2021, and we are well on track To reach this target. And today, I'm happy to share with you that our ambition for our plant based portfolio is to reach NOK 3,000,000,000 Our 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, And 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. 2nd, Orkla's vision is to be your friend in everyday life. Our brands must be present Wherever the consumer is. And 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. And 3rd, 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. And 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 NutraKu is an example of this. And another example is the strong growth for our Molersch Cod Liver Oil Brand, both in Norway and internationally. On the next slide, I will give you some more details on the M and A activity in the quarter. During the quarter, we have closed transactions with a value of NOK 1,800,000,000 in total, In addition to announcing NutraQ with an enterprise value of NOK 3,100,000,000. I've previously spent some time communicating around the acquisition of 67.8% of the shares in Eastern.
And with this acquisition, We will strengthen our platform in Southern India, and we're pleased that we closed this transaction in late March. And in addition to this, we have closed 3 smaller transactions, in Norway, which is a good fit with HSNG in the online channel for sports nutrition. And Fort Delhi gives us a platform for growth in food service and out of home in Finland. And finally, with the acquisition of Ambassador 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.
NutraKu 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 and A strategy. Orkla has a clear capital allocation policy with 3 main priorities: Ordinary dividends, invest in current businesses and M and A and consider payback to our shareholders through extraordinary dividends And share buybacks.
M and A is a central building block in our growth strategy. We will maintain our strategy going forward and will focus our M and A activity along 3 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. 2nd, 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. And 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 has 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 November this year, We will elaborate more on both the growth plans for organic and structural growth.
Now I will hand over the floor to our CFO, Harald Ullwasseri, who will give you some more details on the financials
Thank you, Jan Ivar, and good morning, everyone. Let's have a look at the financial performance in the quarter 1. 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, Included headquarter improved by 9.5%. Industrial and Financial Investment had a profit increase of NOK 49,000,000 this year As a result of higher power prices in hydropower, we had non recurring items Totaling minus CHF143,000,000 in the quarter, mainly from costs associated with our ongoing ERP project, as we mentioned in quarter 4 Last year.
Profit from associated ended at NOK 331,000,000, an improvement of 55% from last year. And this increase was mainly driven by strong profit and margin growth in Jotun. And as Jaldinho has said, adjusted earnings per share grew by 21%. Look at the cash flow. Cash flow from our operation was NOK447,000,000 in quarter 1.
And decrease from quarter 1 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 2 years. Replacement investments were Somewhat higher in quarter 1 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 1,500,000,000 to NOK 7,800,000,000 at the end of quarter 1. The main cash out was related to the acquisition of 67.8 percent of Eastern, which was closed at the end of March this year.
We also completed a share buyback of 5,000,000 shares in the quarter, Summing up to approximately NOK 400,000,000. Currency translation effects from a stronger NOK We reduced the net debt by almost NOK600,000,000. Orkla has a strong financial position And our debt level at the end of quarter 1 corresponds to approximately 1x EBITDA based on the last 12 months, Well within our ambition not to exceed 2.5x EBITDA over time. If we include the acquisition of NutraKu, which is signed but not closed, the ratio increases to approximately 1.4. Now let's have a closer look at our branded consumer goods performance.
First, I will present the overall picture for branded Consumer Goods and then I will take you through the different business areas. As Jan Yves alluded to his introduction, the coronavirus pandemic has had a significant impact on our business. Before we dive deeper into Branded Consumer Goods figures for quarter 1, 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. And 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 1 'twenty, we're positively impacted by stockpiling effects in March, Especially in Foods and Orkla Care, while a moderate reversal in quarter 2. Quarter 3 was Positively influenced by domestic vacation and less border trade, especially between Norway and Sweden and solid market growth was maintained in quarter 4. If we then look at out of home, we experienced large negative effects at the beginning of quarter 2, Which was impacted by the shutdowns of various markets and a weakened sales to the ice cream season. We experienced sales indices in a range of 40% to 60%.
The effect improved, however, through Q2 and further into quarter 3 And quarter 4, but with sales indices in the range of 80 to 90. Going into 2021, we are now starting to meet this Volatility. Let's then start with the top line performance for branded consumer goods. Overall, revenue from our branded consumer goods business decreased by 0.4% in quarter 1. 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. In addition, we had a net positive impact of 0.5% from structural changes. Eastern will be consolidated in the P and L from quarter 2, 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. Quarter 1 was the 1st 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 negative effect from lockdown, but we see some improvement, especially for ice cream ingredients in foods 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. But first, let's have a look at the profit performance for Branded Consumer Goods. Branded Consumer Goods included in the headquarter grew earnings by 9.5% this quarter, reflecting a 9.7% underlying improvement, While 2.1% M and 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 quarter 1. And 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. And this was partly offset by higher A and P spend, higher raw material prices and increased depreciation. In quarter 1 this year, lower A and P spend has a temporary positive impact on the EBIT margin.
Now 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 1st 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 Food Sweden has implemented and launched a new ERP system in the quarter. The implementation has been successful, but as expected has led to lower activity in the period, which affected quarter 1 sales and cost Negatively. We still expect some additional costs 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 and A Compensated to some extent. Moving on to Confectionery and Snacks.
Revenues from our Confectionery Snacks business grew by 6%, of which organic growth constitutes for 6.9%. Sales growth were positively affected by Easter and the removal of sugar tax in Norway from the 1st January After temporary destocking in quarter 4 2020, we estimate 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 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 and 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 1 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 kroner.
There is still uncertainty going forward. This is closely connected to reopening of markets. Now 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 Kulte Pizza franchise in Finland continues to see good organic growth as a result of both higher sales, both in the restaurants and food stock business.
Our professional cleaning business, Lilborg, Had a good quarter. On the other hand, our textile business, Pieder Werger Group continued to be negatively affected by Social restrictions and council festivities. This concludes the details for Quarter 1 for our Branded Consumer Goods business areas. And before I leave the floor to Janneva again, I will give you a short summary of Jotun's performance in quarter 1. Jotun released their sales update this morning.
The positive revenue growth continues for Jotun in quarter 1. 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 newbuild markets for marine and oil and gas.
And as Jan Iva 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 Jan Iva to sum up the main Points of our presentation today. Thank you.
In my opinion, the Q1 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 at lower activity level in the out of home sector. Also, I'm pleased to see the strong performance of Jotun. Furthermore, we have completed several M and A transactions.
This quarter with Eastern and also the announcement of NutraKu. 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 and A, I would like to share some reflections on the outlook. Although 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. And with this new normal, I see even more opportunities for Orkla to both ensure profitable organic growth And continue our ambitious M and A agenda. This concludes our presentation, And thank you so much for listening. And we'll now open up for Q and A.
Thank you, Jan Yvesang and Hangout. We have got some questions on the web. Let me start by one from Bartos Kowalczyk. Will Orkla grow further in vegan products? And will that be through new product launches or new markets?
Yes. So 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 1,000,000,000 this year. And 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, but The initial ambition is NOK 3,000,000,000. And yes, we see good growth. And to just illustrate that, Anamma in Sweden is our top 4 brand within all brands in Sweden.
Thank you. And then we have a question from Ole Martin, den Ber. And I think you could answer that together with a question from Markus Heiberg, Kepler Trivinger. You make no comments on previous guidance. I suppose you mean the financial targets that we have set.
Is this no longer valid? And Markus is also asking about if you can elaborate on gross profit and margin development in Q1, assuming a like for like product mix. So I guess they want to comment on the margin target.
Yes, I guess so. Of course, we are trying every day to reach our targets for the 3 year period. So nothing has changed about that. So and as I said, there are some positive effects affecting our Resulted in quarter 1 that the underlying growth in operating margin in the quarter is not representative for the year as So, I think the most important is that we have a phasing of the E and P. We said in quarter 4 that we will increase our E and P spending during 2021.
But in quarter 1, we have a slight reduction in our E and P spending. That will not be the case for the total of the year.
Thank you. And 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.
And I could probably add that, of course, there are positive house care effects for house care, 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 the Gardens during Q2 as well. But of course, there are some positive house care effects here during The staycation and people spending a lot of money in their homes.
Next question from Ole Mafdi in Westcoing, DNB. How should we think about the underlying growth from your India operation following the acquisition of Eastern?
Yes. We are again, as Harald said, we're not giving any guidance. But bear in mind that MTR, We are 5x bigger with MTR since 2007. And what we also said when we announced Eastern that the Underlying growth within this category is 13% per year in India. So We see a growing market in India both in general, but also taking Eastern in the same journey we've had with MTR.
But again, we're not giving any guidance on specific growth numbers for India.
Thank you. And another question from Molle Martin. What was the share of revenue from Anamma and Natuly in Q1? What is current share of plant based revenue today? And what is the growth in Q1 this year?
Yes. So 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 Natuly accounting for around NOK 870,000,000 last year. So we think we are on track or strongly believe we are on track for the SEK1 billion 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. And approximately 50% from alum and 50% from Natul is the split between those two brands.
Thank you. Another a question from Petter Nystrom, Abergge Sundal Collier. In brands and the new ERP system, Is it possible to give some more detail on the expected short term higher costs?
Yes. 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. But 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.
So we have said that it's Approximately NOK50 1,000,000 in one off costs in the quarter related to this. And I guess, Smur had some more One off costs in quarter 2, but a much smaller portion. But we will have a more permanent cost increase Related to depreciation coming through, approximately NOK 80,000,000 for a year as a whole, 12 months period.
And if I could add to the introduction of Harald as well, that the service level now in Sweden, food Sweden 95%, and the goal is to be at 97%, 98% in June, July. So the systems are really working, and this will be a Very good system for the future, but 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 Jan Nivwein and Heine. We will be back with the 2nd quarter results on the 15th July.
And I would also like to remind you to save the date for our Capital Markets Day on the 23rd November later this year. That wraps up today's session. Thank you all for joining.