To the Midsona Q1 2025 report. During the Q&A session, participants are able to ask questions by dialing #5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Peter Åsberg and CFO Max Bokander. Please go ahead.
Dear participants, this is Peter speaking. Thank you all for attending this call. As a top-line summary, I can conclude that we did good progress also in Q1 2025. We are showing organic growth in total, led by our brands and also private label. Cash flow is improving, and EBITDA for one of the items is in line with last year, despite extra costs for both production ramp-up and investment in sales and marketing to support new launches. I would like to make you aware that this presentation can contain certain forward-looking statements, and I would like to refer to the recently published 2024 annual report for a full view on both risks and uncertainties.
In connection with the presentation of the 2024 Q4 report in January, I also presented our key priorities for 2025, and I'm pleased to tell you that we made good progress in this quarter too with those priorities. One key priority was to deliver consistent brand growth. In Q1, we achieved 1.6% versus prior year, and we're reasonably happy with this figure as we at the same time continue to prune the assortment. Also, we could not get out the full sales potential in divisions North and South, as we still suffered from bottlenecks issues in the production at the beginning of the quarter. On the subject of our production, I'm pleased to tell you that we have made major progress in ramping up both in the Ascheberg plant in Germany and also the Castellcir plant in Spain.
These efforts had a short-term negative effect on the EBITDA results, as we had to invest in personnel in advance. This put pressure on the profits at the beginning of the quarter, but it helped us to improve sales and profits towards the end of it. This meant that we had a higher operational efficiency towards the end of the quarter compared to the beginning of the quarter. One key improvement there is also our sourcing, and especially today with more volatile raw material prices and thereby pricing-efficient sourcing, it has increased a lot in importance. We have therefore created a new role, a Group Sourcing Director, to specifically tackle this opportunity, and we're happy to have Josefin Krondahl on board as of mid-March.
Cash will continue to improve as we continue to focus on efficient working capital management, and last but not least, we are proud that we, for the second year in a row, achieved a prestigious CDP A sustainability rating. If we go a little bit more into the figures, and this might be a little bit of repetition, we saw a total net sales growth of 1.4% organic, and it was driven, as discussed earlier, by our brands but also private label. EBITDA for one-off items is pretty much stable. It is down SEK 1 million, and we see a positive contribution from net sales, but then, as discussed earlier, we had extra ramp-up costs and extra investment behind our brands. As I am sure that everyone has noticed, there has been a lot of turmoil in the world lately.
Currently, we see no significant effect from tariffs, but we have been impacted by fluctuating exchange rates. The net effect of this is, however, quite neutral. We're also happy to see that our debt is continuing to go down, and therefore, net debt in relation to adjusted EBITDA ended at 1.5 times, down from 2.5 times in the same period last year. Let's focus on our product categories. We saw solid growth of 5% for the organic category and underlying growth for many of our brands, but also strong growth for private label. This is actually the second quarter in a row that we achieved 5% growth, and this despite the fact that market conditions for organic food are still somewhat challenging, and therefore we're quite satisfied with the growth of 5% for two consecutive quarters.
Our expectation is that the market situation gradually will improve as lower inflation and interest rates gradually will restore consumer confidence and spending, and our market intelligence shows that consumers are willing to spend on healthy and sustainable products. If we look at our conventional health food products, we saw a decline of 4% versus prior year. We have stopped a number of unprofitable private label contracts, and this put pressure on our growth. Still, at the same time, we're happy to say that we have launched Friggs in Denmark, and the first signs that we're seeing are promising. Lastly, we're also backing growth in our sports nutrition segment. The consumer health category delivered slight growth, good growth for our brands, but to some extent balanced by some licensed contracts that we have stopped. The divisions.
If we start with the Nordics, we saw declining sales, and this is due to the fact that we have exited unprofitable private label contracts, and we have also stopped a few licensing agreements. Our brands have improved by 4%, which we see as a positive sign. The reason why EBITDA is down is due to the fact that we have made some major sales and marketing investments to support a couple of big launches: the launch of Friggs in Denmark, but also the launch of a number of new SKUs for Biopharma in Norway. In North, we continue to see good progress. We have improved our offering and have been rewarded by both customers and consumers. We see good demand, but we have, as discussed already earlier, to some extent been held up by our production output.
In Q1, we continued the production ramp-up, which came at a high cost at the beginning of the quarter. However, gradually we have managed to increase output, and we were rewarded by better sales towards the end of the quarter. In the light of the extra ramp-up cost, we are quite satisfied with the improved EBIT results. There should also be more volume coming looking forward. We have achieved new listings for brand Davert, who is our major customer, and also secured a few larger private label contracts, and this will give support to net sales towards the end of Q2. The South Europe division is improving, but from still a low level. It started off quite slowly in the quarter, but gradually improved as production ramped up, especially in Spain. One key achievement in Q1 was a number of listings for brand Happy Bio, our major French retailer.
This listing has also supported sales in Q2. Gross margin was slightly down this quarter, and this is due to the fact that in the Nordics, we sold a less favorable mix, while in North and South, we had extra ramp-up costs, as mentioned earlier. Once the major part of the ramp-up was done in February, we started to see improved margins again in both divisions, North and South. About a year ago, we presented the group's new strategy, and it focused on increasing profitability and strengthening our market position in the future. To achieve this, we are building a stronger organic platform, and we are quite happy to start growing the organic brands again. We also want to continue to develop our strong health food brands. One major achievement in Q1 was the launch of Friggs in Denmark. It is our largest brand in the company.
It's already present before in Sweden, Finland, and Norway, and now also in Denmark. As previously announced, I will leave the company. It has been a long and fantastic journey since I started 17 years ago, and there is no denying that the last years have been quite challenging. I would have said that we are now in a much better platform and better place compared to a couple of years ago, and we have good progress lately. I will remain as CEO until June 23rd, and then I will hand over to my successor, Henrik Hjalmarsson, and I'm convinced that Henrik and the team will do a great job to continue the journey towards our financial goals. With that, over to you, Max.
Thank you, Peter. As a financial summary for the quarter, the net sales grew with 0.9% compared to a decline of 4.6% during the same period last year. The gross margin came in slightly weaker from temporary higher production expenses and an unfavorable mix when sales to private label outperformed sales of our own brands. The EBIT came in SEK 1 million weaker from the slightly weaker gross margin, but also due to the higher investments in the sales activities. Furthermore, the net result was negatively impacted by SEK 30 million related to the announced change of CEO, which was partly offset from a 40% lower financing cost, SEK 4 million. The cash flow from operating activities landed on SEK 35 million, which was SEK 40 million better than last year, and the net debt/EBITDA ratio continued to improve, now at 1.5 times.
Looking more into the net sales development for the quarter, the net sales, as already mentioned, grew with 0.9%. The organic growth was even stronger, landed on 1.4% compared to minus 4.2% during the same period last year. For our own consumer brands, the organic growth was 1.6% with a mixed development for the different brands. For our own business-to-business brand in North Europe, the focus on profit over volume continued, and the sales declined with 6.3%. Our private label business grew strongly with 9.5%. South and North Europe are really delivering strong results here, both in terms of sales growth and also profit contribution, while Nordic still showed negative growth related to the focus on profit over volume. The license business declined with 10.5%, driven by discontinued distribution agreement on the Norwegian market. Now explaining the quarterly EBIT development compared to last year.
The organic sales growth, or in this case labeled as volume, resulted in SEK 4 million higher contribution, but the slightly lower gross margin, however, resulted in SEK 3 million lower contribution. At the same time, the sales expenses increased with SEK 3 million from the significant higher sales and marketing investments in our own consumer brands. The FX translation and revaluation effect had a positive impact of SEK 1 million in the quarter. The transactional effect is included in the gross margin. As a summary, the EBIT landed on SEK 37 million for the quarter. Moving over to the cash flow. As already mentioned, the cash flow from operating activities landed on SEK 35 million, which was SEK 40 million better than last year. The improved cash flow was mainly a result from a better working capital effect.
During Q1, we typically have a seasonal increase of working capital, and this year we increased the working capital with SEK 20 million. Compared to last year, we increased it with SEK 46 million. Finally, our cash and debt situation. We ended the quarter with almost the same level of available cash, despite doing further amortization on our debts, SEK 634 million, representing 17% of the net sales the last 12 months. The net debt in relation to EBITDA continued to improve and landed on 1.5 times, which is 1.0 times better than our financial targets. With this, we would like to hand back to the operator and open up for questions.
If you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. The next question comes from Nikola Kalanoski from ABG Sundal Collier. Please go ahead.
Yeah, hi. Thank you for the presentation, gentlemen. My first question is on Friggs expansion into, I believe it was Denmark. Obviously, Friggs is one of your best brands. Is it unreasonable to imagine a situation in which you expand Friggs into other countries as well, or?
I would say that at the current moment, we will focus on Denmark, but no, it's not unreasonable. It's a potential for sure, yes.
Yeah. Just a follow-up on Friggs. Some food items, they're quite local, and they cater to local palettes and tastes. Would you say that Friggs products have the ability to cater to other nationalities in Europe, if you will, or will they be contained to the Nordics, do you think?
First, I think that there is a further opportunity for the Friggs brand. I think it's a very strong and unique brand. I would say also within the Nordics, taste profiles might vary, but what we have seen is that we have been able to expand the brand from market to market with success. I think that there is potential also in countries outside the Nordics, yes.
Yeah, that's very clear. Just a final one, it's more a matter of clarification. Did I understand it correctly that gross margin was dragged down by ramp-up costs, and if so, we shouldn't expect them to be reoccurring in the future unless, of course, we expect new ramp-ups?
No, I would say what we have done, and this refers to our factories in Germany, most specifically the biggest plant, Achebe plant, but also some examples out of Lauterhofen and Castellcir in Spain. In both those countries, we have had higher demand than our output. We have done ramp-up. We are now at a level where we much better can meet demand. I would say that you would see more of a stabilization of production costs, yes.
Super clear. Yeah. I think in terms of questions, that's all for me. Peter, I assume this is your last conference call as CEO, so I just wanted to take the opportunity again to thank you and wish you all the best after your departure.
Thank you so much.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Peter speaking. This indeed is my last quarterly report and last quarterly call. I made 70 of those, 70 quarterly reports. I would say that it has been a great journey, and I would like to extend the thanks to the team, but also to all the external stakeholders. It has been a privilege to work together with you. The best of luck for the team and Henrik going forward. I'm sure that they will be doing great. Thank you so much.