Welcome everyone to this announcement of our 2023 Annual Results. Following a record-breaking 2022, the year 2023 confronted us with the most significant demand decline in the European cardboard industry in the last 50 years. This downturn can be attributed to four main factors. Firstly, a prolonged reduction in supply chain inventories after an extreme buildup the year before, driven by supply shortages and the energy crisis. Secondly, high inflation has led to changes in consumer behavior and resulted in a decreased consumption of daily goods packaged in cardboard. Thirdly, Russia has been a vital export market for the European cardboard industry, and this business disappeared factually overnight. This has been less visible in the booming time in 2022 but showed its full impact from autumn 2022 on. Was especially hard-hit given its strong exposure to exports to Russia.
Last but not least, the weak and very competitive overseas export markets contributed to a drastic reduction in capacity utilization across the entire European cardboard industry. Consequentially, markets were down up to 20%, and price pressure for both virgin and recycled cardboard increased significantly throughout 2023. These challenging conditions were particularly reflected in the weak 2023 volume development and financial performance of the Board and Paper Division. In contrast, our Packaging division managed to deliver a strong performance amid an also weak packaging market and despite exiting its highly profitable Russian assets. Here we have shifted our focus towards Western Europe and the U.S. with our recent acquisitions in the resilient pharmaceutical packaging sector, which has been successfully integrated in 2023. We are pleased that they performed well above our high expectations.
Today, approximately a quarter of our packaging sales comes from the resilient pharmaceutical sector, and we see substantial potential for further value enhancement. Despite these overall challenging markets, we've continued our strategic transformation towards enhanced competitiveness and creating a long-term perspective for through more efficiency, sustainability, and innovation. Above all, we've almost finalized our extensive CapEx program of the Group. Having started in 2021, the focus has been on cost and energy efficiency, technological modernization, and enhancing product quality at our most competitive sites across both divisions. The Packaging division has already benefited from these measures in 2023, and that is one reason for the good results. On the contrary, the Board and Paper division had to bear additional standstill costs on top of a weak market in 2023.
But from 2024 on, Board and Paper will benefit from these investments in cutting-edge technology, product quality improvements, and sustainability at our Frohnleiten, Neuss, Količevo, and Kotka mills. Has increased its commitment to sustainability, and we are proud that we are awarded a AAA rating by the global nonprofit environmental organization CDP for our leadership in transparency and performance regarding climate change, forest, and water management. We are the only European paper and packaging company to receive this AAA rating, and this marks a significant progress from our CDP score three years ago. Our strategic sustainability focus aims to capitalize on the growth opportunities presented by packaging from renewable resources with recycling at scale. Recyclability is not enough anymore. We are already in the next stage.
Our customers want a guarantee that almost all of their packaging is indeed recycled, and with a recycling rated Europe of more than 80%, we can give this promise, and we are eager to improve further. This includes, in particular, replacing plastic packaging and thus plastic waste, and the reduction of our carbon footprint through various projects, from photovoltaic installations to adjustments in production processes. Procurement market prices for electricity and gas were significantly lower than in 2022, but still above previous year's levels. Prices for paper for recycling and pulp were declining in the first half of the year but showed an upward trend thereafter, and especially now in the new year. And last but not least, inflation has notably increased personal but also other service costs. So overall, it's a quite mixed picture.
In anticipation of the demand decline, we've reduced our packaging capacity by closing a production site in Germany and our paper capacity by shutting down one paper machine at Kwidzyn. On top, our Profit and Cash Protection Program has included significant cost and working capital reduction, as well as CapEx curtailments. This has already significantly contributed to reducing net debt in 2023, and the cost benefits will mainly become visible with some delay in 2024. At this point, I extend sincere thanks to all our employees for their commitment, their creativity, and their loyalty during these challenging circumstances. And also sincere thanks to our shareholders for their trust in economically windy times. And now I want to hand over to our CFO, Franz Hiesinger. He will present our financial results, and after that, I will return with an outlook for the current year.
Our financial performance throughout 2023 was characterized by different developments across our group. In the Board and Paper division, we faced challenges from unprecedented market-related and investment-related downtime, with underutilization at our plants by over 20%. At the same time, we experienced strong price pressure due to market weakness, which could not be offset by lower raw material and energy costs. As a result, following a relatively strong Q1, Board and Paper faced losses in the subsequent three quarters, resulting in a significant earnings shortfall compared to the record-breaking results in 2022. In contrast, Packaging achieved the best financial results ever, showcasing solid developments throughout the year in a weakening market.
This success was driven by well-balanced core business and the encouraging performance of our pharmaceutical acquisitions in their first full year. However, Packaging results were not sufficient to offset the shortfall in Board and Paper , leading to a significant decline in both our group topline and bottomline performance compared to the previous year's record results. As such, group sales of EUR 4.2 billion were down 11%. With EUR 229 million adjusted operating profit, we achieved an operating margin of 5.5%. The operating margin in Board and Paper was slightly negative, with -1%, whereas in packaging it was 10.2%. Adjusted EBITDA of EUR 450 million represents an EBITDA margin of 10.8%. In light of these circumstances, ensuring a secure and solid financial foundation to navigate effectively through this challenging period became our paramount priority.
This was achieved through the diligent execution of a profit and cash protection plan, which centered around three cash-generating initiatives: cost-saving measures across all areas, a significant reduction in working capital, and reductions in CapEx cash outflows. Through these initiatives, we have achieved an impressive cash flow from operating activities of about EUR 790 million and a free cash flow of about EUR 370 million in 2023. Thanks to this strong cash generation, we managed to reduce our net debt from EUR 1.5 billion to below EUR 1.3 billion. The net debt-to-EBITDA ratio stood at 2.8 times, and the equity ratio was unchanged at 40%. The escalating interest rate environment underscored the advantages of our long-term financing strategy, with more than 60% of our debt bearing favorably fixed interest rates since early 2021.
By the end of the year, our cash position amounted to more than EUR 750 million, despite an intensive investment program with CapEx of above EUR 420 million and after distributing dividends of EUR 84 million to our shareholders, which represented a payout ratio of about 24%. Since the weak market demand might not be over yet, preserving financial stability with a solid balance sheet and sufficient liquidity continues to be our top priority. So we will carry on our profit and cash protection program to secure the long-term development capabilities. This includes maintaining strict control over working capital, minimizing CapEx cash outflows, and adhering to our long-term dividend policy, which entails distributing a third of our earnings. Consequently, we will propose a dividend for 2023 in the amount of EUR 30 million, which is EUR 1.5 per share at the forthcoming annual general meeting.
The times will undoubtedly change to the better, but until then, our focus is on weathering the storm robustly, conserving resources but also taking on opportunities that may arise. From a financial standpoint, we have taken the necessary actions in a timely manner and are well positioned for the future. Thank you. So what is our outlook for 2024? What we have observed, and this is very positive, is a positive volume trend for our Board and Paper division in the first two months. However, margin pressure has continued. Even as the inventory reduction in the supply chain approaches completion, the sluggish economic overall climate in Europe, coupled with restrained consumer spending, suggests only a slow market recovery. Given the challenging conditions in non-European export markets, we anticipate therefore continued oversupply and muted capacity utilization in Europe.
As a consequence, we are intensifying our profit and cash protection program in 2024, supplemented by targeted structural adjustments. Recent cost increases will be offset by corresponding price adjustments. CapEx in 2024 are projected to be around EUR 300 million, including carryovers from the previous year. The focus will be very narrow, and it will be on selective projects to enhance our competitive edge. Despite these short-term challenges, which we see maybe for the whole of 2024, maybe for the first half year, I stay optimistic. It will benefit from its stable, value-adding, and well-diversified packaging business, as well as from its competitive asset base in MM Board & Paper. We are well financed. But most important of all, we have a strong team to successfully navigate the ongoing challenging market with more sustainable and innovative packaging solutions. Thank you.