Hello, welcome to Orkla ASA conference call. My name is Ben, and I will be the coordinator for today's event. Please note this call is being recorded. For the duration of the call, your lines will be on listen only. You will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Kari Lindtvedt, to begin today's conference. Thank you.
Thank you, Ben. Welcome to this Orkla conference call. My name is Kari Lindtvedt. I'm Head of Investor Relations. I am joined by our CFO, Harald Ullevoldsæter, and Investment Executive, Hege Holter Brekke and Atle Vidar Nagel Johansen. The purpose of this call is to answer any questions you might have regarding the financial background information that was published yesterday. The purpose is not to go into detail about performance or development for specific quarters and companies, nor is it to comment on expectations going forward. Our CFO, Harald, will now give you a brief introduction, and then we'll move straight to Q&A.
Thank you, Kari. I will give a short introduction before we open up for Q&A, as Kari said. As you know, Orkla's new organization has been in operation since the 1st of March 2023. We are transforming to be an industrial investment company with a brand and consumer-oriented scope. We currently have 12 companies in our portfolio. An important part of the change is that we want to increase both internal but also external transparency on each portfolio company going forward. We think the financial market will be in a better position to assess the different parts of Orkla. We also think that by opening up, we can increase accountability and focus on portfolio company level. We will be reporting our second quarter results on the 14th of July, and they will be presented on an updated reporting format in line with the new operating model.
The purpose of the information that was released yesterday is to give the market some background in advance of quarter two reporting and a better starting point for understanding our businesses. I want to emphasize that not all of the information we launched this week is representative for quarterly reporting going forward. We will, however, continue to split organic growth into both price and volume mix. We will continue to give you the development in contribution ratio, and we will give you the underlying development in both EBIT adjusted and EBIT adjusted margin, as well as return on capital employed. We have also included some estimates of the cost effects we expect for each portfolio company following the new organization. The role of head office has changed and some functions have been moved to the local companies, and some pricing models have been changed.
The effect for the portfolio company will be modest in 2023, but larger in 2024, when the main changes will take place. EBIT for headquarter ended at NOK -374 million in 2022. If we make this comparable to the new operating model, the figure is NOK -392 million in 2022. The difference is primarily the cease of existence of the business area, Consumer Investments, which moves central businesses area costs to Orkla headquarter, with a net effect of zero for the group. In 2023, we estimate headquarter results to be around NOK -400 million to NOK -420 million. From 2024, we expect improved EBIT level for Orkla ASA headquarter, partly to the change of the inner pricing models and partly due to further cost improvements initiatives.
Before we move on to Q&A, I also want to remind you that the figures have been prepared solely for information purposes. The financial information is derived from the unaudited financial statement of certain Orkla subsidiaries and from unaudited financial information relating to historical business segments in the Orkla group. The information should be treated accordingly. Let me, on this regard, also refer to the disclaimer that is included in the release material. Let's move on to Q&A.
Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question or make a contribution on today's call, please press star one now on your telephone keypad. To withdraw your question, please press star two. Please ensure your lines remains unmuted locally. You will be advised when to ask your question, and please to ask a question at a time in order to allow the opportunity for everyone to ask a question. We currently have no question coming through, so as a reminder, if you'd like to ask a question, please press star one now on your telephone keypad. The first question comes from the line of Eirik Rafdal calling from Carnegie, please go ahead.
Yes. Hi, team, Eirik from Carnegie here. Thank you for taking my questions, also thank you for the background material. I've got a couple, I can take one by one. If we could just start actually with India. It takes a big gross margin dip in 2021 and 2022. Just to understand, does this kind of solely relate to the acquisition of Eastern, how should we kind of think about this going forward?
Yes, the answer is, it's solely related to Eastern coming into the accounts with a lower contribution margin. We're not specifically comment on how you should think about that going forward. Just confirming that it's related to the consolidation of Eastern acquisition. Let me add perhaps that, when we acquired MTR back in 2007, we had a kind of same situation with quite low, low margin, and we have improved over many years. We, of course, are planning for the same patterns for the Eastern company.
That's very clear. Thank you. Would you like me to jump back in the queue with other questions, or can I go ahead with two more?
Please go ahead.
Thank you, Kari. On Pierre Robert, it seems that you've kind of managed to turn it around after a couple of tough years in the late 2010s. Do you kind of view the turnaround as completed after two years with positive volume growth?
No, I don't think we are finished with the Pierre Robert. We're still in a kind of turnaround situation.
Perfect. Thank you. Just one last one on Foods Europe. The -3% negative volume in 2022, do you have any idea of how that kind of compares to the overall market? It's a bit tough with, you know, all the different categories or subcategories and geographies.
I think when you are looking into 2022 volumes, it's really difficult to see the underlying development because of the comparables with COVID effects. I think the first more or less normal quarter is actually the first quarter of this year.
Also looking at how our peers have reported for those quarters, it's more or less in line.
You had big movements both in out of home and in home, in the grocery. It's really difficult to really assess the underlying performance.
Yes, I understand. Thank you so much for taking my questions. Again, thank you for the background material.
We currently have no question coming through. As a final reminder, if you would like to ask a question, please press star one now. There are no further questions. I will hand you back to your host to complete today's conference.
Okay, thank you all for joining today. We are now entering silent period ahead of quarter two. We will be back with our Q2 financial results on the 14th of July. We wish you all a nice day.
Thank you for joining today's call. You may now disconnect.