Welcome to the Midsona conference call. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. I will hand the conference over to the speaker CEO Peter Åsberg, CFO Max Bokander. Please go ahead.
Thank you, welcome to today's call. I, Peter, with together Max, take you through the quarter four results and also paint a picture of the actions we are taking in 2023. Before we go into the main presentation, I just want to make you aware that this presentation may contain forward-looking statements and that such statements are based on current expectations and are subject to risk and uncertainties. The summary of quarter four. The quarter was challenging, and it was characterized by the same trends that we perceived early in the years. That is high inflationary pressures but an underlying interest in healthy and organic food.
We did continue to implement cost-saving measures and prepare price increases with the aim of fully offsetting the cost increases that we have had. I will come back to what we have done and the effect that we see going forward. Sales grew slightly to SEK 1,027 million compared to 2012 last year, with the growth mainly coming from pricing and FX. Adjusted EBITDA decreased to SEK 45 million compared to SEK 61 million last year. This is solely explained by the lower gross margin that we saw in the quarter compared to last year. Needless to say, our main focus is to restore the gross margin. I will present in details what we have done and the positive effects that we will see starting in quarter one 2023 and forward.
We have worked to reduce our cost base but also to strengthen our cash flow. The result of this has been that we have a free cash flow of SEK 120 million compared to minus 25 last year. This was the strongest individual quarter to date, something that we're very proud of, and this is thanks largely to more efficient inventory management. We also did a new rights issue of SEK 600 million. This together with our very much improved cash flow means that we have a much more stable platform going forward. We are and have been taking forceful action to manage the challenges that we have had. The by far most important one is to restore the gross margin via price increases.
As already flagged in the quarter three call, there was limited pricing action in quarter four because there were no customer pricing windows. We are now implementing price increases in quarter one, the effect will come gradually as of Q1. We are in the process of implementing the highest price increases ever across all parts of the business and in all geographies. Those actions will start to have a positive effect in quarter one 2023, the full effect we will see in quarter two. This is because first of all, we expect customers to stock paid in anticipation of the price increases and the bulk of the price increases take effect from mid-February to end March as we also implement a few ones in the month of April. A gradual improvement in quarter one and a full effect in quarter two.
We have launched two cost-saving programs in 2022 totaling SEK 60 million. We are on track to deliver those cost savings during 2023 and also already in 2022, a good effect of the measures taken. We have stabilized the supply chain. With a few exceptions, our delivery precision has been good in quarter four. We also take action to strengthen our balance sheet via new rights issue and extension of our financing agreement by our banks and a strong focus on cash flow, primarily via inventory reduction. I would like to spend some extra time on our price management efforts. As I said earlier, this is by far the most important tasks that we have had and have in front of us.
If you look at the left-hand side, you see that the gap is closing from 4.7 percentage points in Q2 to 3.9 percentage point in Q3. The gross margin gap in Q4 was 1.3 percentage points. In other words, it's getting better, but it's still not good enough. What are the actions that we're taking, and what are the trends that we see in the markets right now? As already mentioned, we are implementing the highest price increases ever in Q1 across all markets and all channels. Negotiations have been challenging, overall, we are coming through. The majority of the price increases are happening from mid-Feb to end March, so we will all else equal, see a gradual improvement in Q1 and a full effect in Q2.
If you look at the development of cost of goods, we do see a stabilization of raw material prices. Some conventional food products have started to trend down. For organic products, the picture is more mixed. Prices do start to stabilize. Exchange rates, we are helped by the strengthened Danish krone and euro against the US dollars, but are negatively affected by the weak Swedish krona. Energy prices are trending down, except in the South Europe, where we had contractual obligations at higher levels. Those are costs that we are pricing for now in quarter one. We have also seen significantly higher cost of water consumption and treatment in Spain due to new regulations from the authorities. These negative effects are, in our mind, unfair, as our increases are driven by the investment that we have made in our plant in Spain.
It's directly creating jobs in the region. We think that we have been, in that sense, unfairly treated. We now have constructive discussions with the authorities. The ambition is to solve the issues during quarter one. A few words on our product portfolio. The market for organic products continue to be challenging. There's a lag in market data. I will conclude that we see market declines in all our core markets. We are holding up quite well. It does not help as long as the markets do decline. Consumers also seem to be choosing product at lower price points. Our private label products have outpaced growth of our branded ones.
To strengthen consumer likability for organic brands, we are now working on a lot of different projects in terms of marketing, campaigning, because there still exists our consumers out there who want and can afford our top-quality branded organic products. Conventional health food is generally performing better. Key brands such as Friggs, Gainomax, and Svebar all grow in the quarter. Friggs, despite the fact that we had some continued supply issues, which resulted in out of stocks. We expect the situation for Friggs in terms of supply to become better. We have seen some improvement already in quarter 1, it should continue to improve as we come into the year. Consumer health saw a slight decline. We grew from our own brands, quite a heavy decline for our high-value licensed brands. A few words on sustainability also.
Midsona has been recognized for its climate change strategy once again, and we did again achieve a A- score from CDP. This is actually a very strong score and places amongst the best-listed companies in the world in this respect. Sustainability will continue to be an important part of our company, and this is something that we will focus on continuously in 2023 and forward. I hand over to CFO Max Bokander.
Thank you, Peter. I will start with a short financial summary. As already mentioned by Peter, the net sales grew with 1.5%, but the gross margin and the EBITDA was weaker than last year. The net result landed on minus SEK 50 million, impacted by higher restructuring costs and financing costs compared to last year. Besides the high interest rates, the financial net also includes an SEK 8 million negative FX effect as a result of our extra amortization of the loans following the rights issue. The net result was, however, positively impacted by a deferred tax income as a result of capitalized losses for entities in mainly North and South Europe. Finally, on this page, as already also mentioned by Peter, we deliver a strong cash flow, actually a record cash flow quarter to date, and I will come back to that more in detail.
The net sales grow with 1.5%, it was fully driven by a positive currency translation effect. The organic growth landed on -3.5%, with private label growing 6.1%, while own brands and licensed brands had a weaker development during the quarter. When our sales to private label increase more than sales of our own brand, this has a negative impact on our margin, gross margin, not necessarily our EBITDA margin. The EBITDA during the quarter landed on SEK 45 million. The negative organic sales growth compared to last year or in this case labeled as volume effect resulted in SEK 9 million lower contribution. The lower gross margin due to mix temporary high production expenses in Spain and continued time lag between cost increases and price increases resulted in an additional -SEK 11 million compared to last year.
I would like to highlight that for Nordic, there was a slight improvement in the margin in the quarter. The savings from the restructuring program and the strict cost control improved sales and admin expenses with a positive net of SEK 9 million. These SEK 9 million, you could say, offset the negative volume effect, but the negative margin effect had full drop through, and that's why we have a negative variance and landed on SEK 45 million for the quarter. We have had high focus and still high focus on executing the restructuring program and also having strict cost control and looking at the sales and admin expenses, the net cost for labor reduced with SEK 9 million compared to last year. This is of course more a reduction if we also consider inflation, salary increases.
Additionally, the strict cost control reduced other costs, which however was offset by higher costs for outbound freight and slightly higher investments in own brands compared to last year. As you can see, the cost in relation to sales improved compared to last year. The free cash flow, as said, was record high in the quarter and was thanks to well-managed working capital and in this case, driven by inventory. We landed the inventory actually SEK 100 million lower than December last year and on the same level as December 2021. Considering that we have had an inflation, we have significantly lower quantities in inventory. We still are in a high or, we are on a level of inventory days where we see we can stabilize this level and maybe could have future improvements as well.
The good cash flow and the rights issue helped us to improve available cash and reduced the net debt with SEK 701 million during the quarter. With that, I hand back to you, Peter.
Thank you, Max. I've got a heads up here during the presentation that the sound did fall out for some time. I don't know exactly when that happened, and I'm sorry about that, but the more important then that I do summarize the key takeouts of this quarter four report. Then more importantly, what we are doing to manage the future in terms of the outlook for 2023. We are clearly reaching higher and there are a number of tasks that we are implementing and measures that we're implementing. The by far most important one.
Call recording is on.
The by far most important one is to manage the price increases, and as stated in the presentation, we are implementing record price increases in quarter one. These with all else equal have a very positive effect on the margins. We are also seeing some signs that raw materials inflations could ease off somewhat. We have, and we continue to implement forceful cost saving measures. We will intensively focus on our brands to be able to give superior customer and consumer value, and we will definitely continue to drive our sustainability agenda. Simply said, we're looking forward to a better 2023. I thank you for the attendance and open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Nikola Kalanoski from ABG Sundal Collier. Please go ahead.
All right. Thank you for the presentation, Peter and Max. I just have a few follow-up questions. The gross margin in Q4 came in around 450 basis points better than the one in Q3. Considering that the next set of price increases, comes in February 2023, as well as the rather significant difference of 450 basis points itself, I'm wondering if you could elaborate on this increase and what the drivers have been.
I'm not sure I understood the question of compared to Q3.
Yeah, precisely. The difference in the gross margin is rather significant, compared to Q3. What were the differences between the two quarters?
I mean, the improvement we see in the quarter four compared to quarter three is solely driven by that we have had better pricing in quarter four. It's still so that quarter four is a very low margin compared to our ambitions and also historic performance over quarter four. Yes, we have seen gradual improvements of the pricing effects we have done. We should see more of that now in quarter one and then fully in quarter two.
All right. Perfect. Thank you. You mentioned some capacity shortages at a major supplier for your own brands in the report. Was this just a one-off relating to a COVID spike or something of that kind, or could we expect this to be a recurring theme going into 2023 as well?
No, it's one of our main suppliers on the Friggs brand that has had capacity issues. But what they are doing right now is that they're in the process of expanding their plant. This has given some positive effect already and should give more positive effect as we confirm bring into 2023. We still have a little bit of an issue on that side. We could have sold more of the Friggs brand, but we do see some improvements already, and we expect the issues to be over in a few months' time.
Just the next thing onto the cash flow. I'm a bit positively surprised here on the operating cash flow for this quarter. More specifically, with respect to the working capital release, you mentioned that less capital was tied up as a consequence of supply chain activities being implemented. My question here is, have you elected to be restrictive on investments in working capital assets, or did you previously operate with some excess working capital, or is there something that I'm missing?
We have been both have had excess inventory. I think when we started the year, we actually communicated at that time that we believed that we had almost SEK 100 million in excess of inventory. This is the level we came down to. We have been restrictive in investing more in inventory. We are now on a level where we see a need of rebalancing the inventory. We believe we have the right level for a moment. We are in certain areas a bit short and still in certain other areas have an excess. There is no risk in our inventory as we normally explain because we have long shelf lives. We still need to continue to work and optimize the inventory.
We do not expect to release further material lift in working capital during the year. We will, throughout the year, have seasonal effects where we now will in quarter one build working capital somewhat. Working capital is the lowest in December it should be for us.
The only thing that I would like to add to that is that the exception of the Friggs situation that we just talked about, the supply chain has normalized. Shipments are coming through as they should. This was an issue at the beginning of the year. We have a much better opportunity to manage this and thereby we have been able to drive down the inventory also.
All right. Thanks a lot. Just finally, a question on the cost savings program. When do you expect to achieve the full effect of the program, and do you still assess that you can achieve the full effect?
We have implemented right now SEK 40 million out of the SEK 60 million. there is an additional SEK 20 million to be implemented. the project have been in different areas and different phases, and most of it is actually completed, but you will have a rollover effect into quarter one and quarter two. I would say we are fully completed in quarter three. In quarter one, I expect to see additional SEK 10 million savings compared to previous year thanks to rollover effect also, but also new initiatives.
Thanks a lot. That's it for me.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
I would again like to thank you for your attendance. We really appreciate it. 2022 was a tough year. We are reaching higher 2023, and we are looking forward to a better 2023. Thank you so much.