Good morning, and welcome to the presentation of Orkla's second quarter results. My name is Annie Bersagel, and I'm the head of Investor Relations and Communications. Our president and CEO, Nils Celta, will be unable to join us today due to previously planned travel. So our CFO, Arve Regland, will be holding both the presentation and the Q&A. Now, before I turn it over to Arve, I just want to remind everyone that we're going to begin with the video Q&A with our analysts and after that we will turn over to questions from the web so if you have a question please feel free to submit that at any time and we will take those at the very end so with that out of the way i will hand the floor over to you edve thank you annie and good morning everyone so old class consolidated portfolio companies had a flat organic top line development quarter and a 2.5% EBIT growth.
Overall, we are not satisfied with these results. However, Jotun delivered another strong quarter, contributing to a 3% improvement in adjusted earnings per share. We continued to execute on our capital allocation priorities. And in July, we completed the 4 billion share buyback program that was announced in last November. During and following the quarter, portfolio companies announced several acquisitions in prioritized categories. The largest of these was Oikla Snacks acquisition of the European Candy Group. Oikla Foods also announced the acquisition of a 40% stake in Gotan Group, strengthening its position in sauces. And this transaction was closed Tuesday this week. And both of these transactions strengthen existing category positions and support long-term growth. For the consolidated portfolio, volume mix declined 1.3%. Overall, price increases were offset by lower volumes across several portfolio companies. The reversal of supported easter-facing effects from the first quarter contributed negatively, alongside weaker volume development in parts of the portfolio. Underlying adjusted EBIT grew 2.5% for the consolidated portfolio, inclusive Orglaza. And as shown on this slide, the development varied across the portfolio companies. And I will come back to this in more detail. The EBIT margin was 10.5% with a mixed development across the portfolio companies. Last quarter, we said that we expected increased costs for energy, transportation and packaging due to the conflict in the Middle East. And that remains our expectation. While the risk for more severe near-term disruption appears lower than it did three months ago, uncertainty remains high. The longer-term indirect effects on supply chains and input costs are less clear, and both the timing and the magnitude remain difficult to quantify. Turning to work-class consolidated financial targets, underlying EBIT growth was 2.7% year-to-date, and growth was slower in the first half of this year, but aggregated across the strategy period remains within the target range. The EBIT margin was unchanged from the first quarter, remaining within our target range of 10.5 to 11%, and return on capital employed declined slightly compared to the first quarter reflecting slower EBIT growth and this is the most challenging of the three targets and we still have work to do so I will now provide some more details on the financials reported revenues declined by 5% and adjusted for currency translation effects underlying revenues were flat. Reported EBIT adjusts also declined by 5%, again with the difference compared to underlying numbers, mainly explained by currency consolidation effects. We had the other income of 97 million in the quarter. The largest contributor was the completion of the divestment of Noy Sirius on Iceland during the quarter. Adjusted earnings per share increased with 3% to knock 1.60 and profit increase from Jotun of 17% and lower tax and financing costs more than offset the decline in adjusted EBIT. Cash flow is fairly stable compared to last year with cash flow from operations in first half of the year was $2.1 billion and cash flow before capital allocation was $1.6 billion, a decline of approximately $200 million year over year. Moving on to the capital allocation and leverage bridge. Year to date we have paid $6 billion in dividends and repurchased shares for 2.3 billion expansion investments increased by approximately 300 million during the quarter bringing the year-to-date total up to about 400 million acquisitions of companies consist of three bolt-on acquisitions in oikla food ingredients and the sale of companies relates mainly to oikla snacks divestments of its icelandic business which closed at the end of the second quarter Net interest-bearing debt was 20.7 billion at the end of the quarter, corresponding to a net debt to EBITDA ratio of 2.2 times. So some more details on the portfolio companies, and as mentioned, Jotun had another strong quarter. On an underlying basis, revenue grew by 11%, driven primarily by higher volumes. And all segments and regions contributed positively to sales growth with the strongest performance in protective coatings. Negative currency translation effects continue to weigh on the reported figures. And Jotun has navigated the Middle East conflict well, implementing mitigating actions faster than we expected. Reported operating profit increased by 13%, while underlying profit grew by 21%. And despite challenging conditions, business units within the war-affected markets had a flat underlying sales development and a 2% increase in underlying operating profit. Raw material prices increased significantly during the quarter, although less than anticipated at the time of the first quarter outlook. Gross margins improved as increased premium sales, pricing measures, and continued cost control, more than offset higher raw material costs. It is worth noting that margins do not yet fully reflect the increase in raw material prices. Oil-class share of profit from Jotun increased by 17% to 494 million. And Jotun's outlook remains uncertain due to the conflict in the Middle East. The company expects some margin pressure in the coming quarters, as the impact from higher raw material costs materializes. If the conflict persists, its effect on business conditions, supply chains and raw material markets are likely to extend beyond the region. In Orkla Foods, organic revenues declined by 1.3% in a quarter, with volume mix of minus 2.3%. This partly reflects the reversal of the Easter timing benefits seen in Norway and Sweden in the first quarter. Volume mix growth was 1.4%, in categories classified as growth priorities. Sweden continues to develop well with positive market share trends. The development remains more challenging in Norway and Finland. An underlying EBIT increased by 4%. EBIT growth was supported by improved product and category mix, lower marketing spend and temporary lower fixed costs. Organic revenue declined by 1.1% in Nortla snacks. Volume growth of 0.5% was driven primarily by confectionery. Biscuits also contributed positively, while snacks volumes declined. Volume growth was also dampened by the Easter-facing effects. Lower prices were mainly related to chocolate products. Underlying EBIT increased by 10%. The improvement was primarily driven by the chocolate recovery in july the company announced the acquisition of the european candy group to support further expansion of bubs and oiklasnacks continues to invest in growth capacity the new smudge smash production line at nidar is operational the third bubs line in jönköping is now coming live and through its partnership with mount franklin foods BUBS is now available in approximately 60,000 stores across the United States. In Orkla home and personal care, organic revenues declined by 2.5% on the back of promotional phasing and some negative easter timing effects. Market shares continued to increase in Norway and remained stable in Sweden and Finland. Underlying EBIT growth was 8.2% and was driven by a systematic cost-out initiative across the value chain. In Orkla food ingredients, organic revenue declined by 1.5% with volume mix down 2.1%. Sweet ingredients delivered positive volume mix growth, while plant-based was negatively affected by an unfavorable product mix. In bakery, market demand was weak in Central and Eastern Europe. Easter timing also had a negative impact on volumes in the quarter. The decline in underlying EBIT was broad-based, driven by lower volumes, and a cost base that was too high relative to activity levels. Orkla Food Ingredients has launched mitigating actions aimed at improving efficiency and reducing costs. In Orkla Health, organic growth was 2.7%, driven primarily by pricing. Oral health and wound care delivered positive volume mix growth. And volume and margin pressure from the omega-3 category continued. and the raw material outlook for the category remains challenging. Underlying EBIT declined by 5.8%, higher operational costs, lower profitability in Omega-3, together with increased advertising costs in food supplements, more than offset growth in other parts of the business. The closure of three factories, as communicated last quarter, will continue to weigh on results through the end of 2027. And Orkla India reported its result on the 4th of August. Organic growth was 9.7%, or 11%, when excluding the effect of government grant of 6 million, recognized in the prior year quarter. Growth was driven mainly by pricing, reflecting higher raw material prices, particular for chili and coriander. And volume growth was 1.7%. And both the domestic and international business contributed positively. Underlying EBIT declined by 4.1%. Excluding the prior year grant, underlying EBIT growth was slightly positive. Turning to the European pizza company, consumer sales increased by 8.4%, supported by same-store sales growth. Consumer sales growth was driven by menu innovation and increased distribution. Organic growth was flat, as lower third-party sales in Koti Pizza's wholesale business offset consumer sales growth. Underlying EBIT growth was 4.7%, driven by consumer sales growth and mix effects. And lastly, in Ortla House Care, organic revenues declined by 2.7%, but favorable product and customer mix effects drove a 12% increase in underlying EBIT. The Health and Sports Nutrition Group delivered broad-based organic revenue growth and underlying EBIT growth. To summarize, we continue to execute on our three strategic priorities. We have more work to do on organic growth and volume development. Several portfolio companies continue to make progress on costs, while others have recently launched measures aimed at improving profitability. We have also continued to strengthen the portfolio and deploy capital in line with our priorities. We remain committed to our financial targets and look forward to presenting our long-term ambitions at the Capital Markets Day on the 1st of December. With that, we will open for a Q&A after a short break.
Hello, and good morning. Thank you for taking my questions. Two, if I may. Firstly, obviously, the Easter phasing, Marge, I think you had a benefit in your foods businesses. Obviously, you've had a headwind now. Would it be possible, at least on an aggregate basis, to help us quantify the headwind and get down to what the underlying growth was? for either consolidated portfolio companies or your foods and snacks and OFI. And the second question I had really was on the outlook for 2026. How do you see organic sales growth progressing from here?
