Orkla ASA
OSE:ORK
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Orkla ASA
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Good morning and welcome to Orkla's fourth quarter presentation. My name is Thomas Ljungqvist, and I'm Head of Investor Relations. Our CEO, Jaan Ivar, will start with a brief overview of the full year results and also give a status update on his key priorities. Our CFO, Jens Staff, will then take you through the main points of the fourth quarter results, as announced earlier this morning. And before we open up for Q&A, Jaan Ivar will wrap up with some expectations for 2020. Our prepared remarks will take roughly 30 minutes. So with this, should leave ample time for questions. Now let's get started. Please welcome our CEO, Jaan Ivar Semlitsch.
Thank you, Thomas. Good morning, everyone. I liked the last commercial, by the way. I think it's great. I'm pleased to see us finishing this year with a strong quarter where we report good top and bottom line progress. We saw a continued uptick in organic growth of 2% in the quarter, reaching 1.4% for the full year 2019. It's encouraging that we start to recover from a weak 2018. My ambition is to grow organic growth further in the coming years. Earnings momentum was also good and contributed to improved margins for the full year. Jotun continued its strong performance in 2019. We also made good progress on our capital agenda, reducing working capital to sales by more than 1 percentage points, contributing positively to cash flow for the year. All in all, 2019 has been a satisfactory year, where also our shareholders have received a very good return. I am committed to delivering on our financial targets, and 2019 has been a good start. Before we dive into the quarter, I will give you an update on my priorities highlighted last quarter, starting with our reorganization and supply chain initiatives. The organizational review I initiated in Q3 is progressing as planned. My ambition is to simplify our current structure, have a leaner corporate center with selected centers of excellence and to strengthen commercial units' decision power. Once fully implemented, I expect these changes to result in efficiency gains of NOK 150 million to NOK 200 million on a run rate basis. The majority of this will come from redundancies across our entire corporate center and support functions. I must say I'm impressed by how professionally my colleagues are handling this process. We estimate total restructuring and project-related costs to be in the range of NOK 120 million to NOK 140 million, out of which NOK 50 million were expensed in 2019. Savings will be mainly reinvested for growth and support Orkla's 2021 targets. Moving on to our supply chain agenda. Having visited a wide range of factories, production hubs since I joined in August, it's clear that one of Orkla's strengths is to strike the right balance between, on the one hand, retaining the flexibility required to be more local than our global competitors, but at the same time, having more resource and more talent than our smaller local competitors. This is necessary to support our relatively broad portfolio of strong local brands, 300 local brands in total, with products tailored to their local consumer needs. With this starting point, we are making good progress on both the cost and the capital agenda. We have some large, complex projects ongoing like our new biscuit factory in Riga. But more often, we rationalize production lines within existing network. We will continue to chase efficiencies throughout our supply chain, but we expect the number of factory mergers to be lower than previously indicated. More importantly, this does not change our overall efficiency ambitions, and we are on track to deliver planned savings in line with Orkla's EBIT margin improvement target. Moving then on to an update of our Care business. I'm pleased to see another quarter of positive organic growth in our Care business. At the same time, we need to see this in context with a very weak second half of 2018 as well as the weak start of 2019. The progress in Q4 was driven by sales growth in our largest areas, HPC and Health, partly as a result of sales coming back after the previous destocking in Poland. We still have fundamental changes and challenges in these areas that are being addressed. The markets for HPC in Norway is challenging with volumes moving out of grocery into other channels and also private label taking shares, primarily in the home care category. We continue to see challenges also in several of our health categories, notably weight management and sports nutrition across our markets. As mentioned in Q3, our textile business, Pierre Robert, had a weak quarter, and this continued in Q4. So you may ask, what are we doing about it? And when can we expect performance to improve? Our actions to turn performance in House Care U.K. and Care Poland have been underway for some time with positive effects. Since taking over the leadership for Care last summer, Orkla Care's CEO, Atle Vidar, has initiated a substantial turnaround program to turn performance into the largest HPC and Health areas. The program is targeting substantial cost efficiencies and also a sharper focus on profitably growing the core. It's too early to conclude that the trend turned in Q4, but I'm confident that the turnaround will contribute to improved performance towards the end of the year. Now let's move on to our growth agenda. As I said when we were here 3 months ago, I see potential to speed up organic growth with strong innovations around our core local brands. We have an exciting pipeline ahead of us, and you see some of the products in front of you. I just want to highlight a few examples: Grandiosa, one of our largest brands and most important categories where we have a strong #1 position in Norway, but we can't sit still. This is a dynamic category where innovation is key. We have recently invested more than NOK 0.5 billion in our pizza production hub in Stranda to make sure we can continue developing the best tasting pizza for our consumers. This is an example of a new concept, which you see here in the portion segment with thinner and crispier crust that is being launched in Norway. Jordan, the commercial you also saw, is our largest brand in the Care segment and had good growth in 2019. We are expanding our range of sustainable oral care products across the Nordic markets and internationally. Jordan Green Clean combines functionality and sustainable materials, minimizing use of resources and giving materials a new life. Another important source of growth into new opportunities is our plant-based initiatives. And research indicates that plant-based meat replacement accounts for only 1% of global meat market today. But predictions say that this will change rapidly. What started out as a niche for consumers on a pure vegan diet is now becoming more and more mainstream. A broader group of consumers, including myself, choose to replace meat several times per week. Just would like to add that I still eat meat. Naturli' and Anamma products are spot on this trend, offering great tasting, convenient plant-based food for everyone. These brands have market-leading positions in their respective home markets, and we are rapidly expanding distribution to other markets with a broader launch, including Norway in 2020. And the best thing is that we see limited cannibalization of Orkla's existing products. We see the sustainability and health trends contributing to strong growth also in our vegetarian brands like Felix Veggie. Naturli' and Anamma had a combined turnover just NOK 0.5 billion in 2019, growing 40% from 2018. Our ambition is to exceed NOK 1 billion by end of 2021 and to build market-leading positions in our key categories and markets we entered. Delivering on this ambition will clearly be accretive to our organic growth agenda. Now I'd like to hand over to Jens to take us through the Q4 figures.
Thank you, Jaan Ivar. Let's look at the highlights from Q4. I'm pleased to present a strong finish to 2019 with increased organic growth and improved earnings. All our 4 business areas delivered organic growth in the quarter. Our Foods and Confectionery & Snacks businesses made good progress both on sales and earnings. In Food Ingredients, profit growth was mainly driven by acquisitions. Orkla Care reported growth in both sales and earnings. However, as you remember, this is compared to a very weak Q4 last year. The strong performance in Jotun that we have seen in 2019 continued also in Q4. So in sum, this contributed to an improvement in adjusted earnings per share of 30% in the quarter. The Board intends to propose a dividend of NOK 2.60 per share for 2019. As mentioned, all the business areas delivered organic growth in the quarter, adding up to 2% for the Branded Consumer Goods area. We saw strongest progress in Confectionery & Snacks. This improvement was driven by positive market growth and the changes in the sugar tax in Norway from the 1st of January 2019, as you also may remember, had a very negative impact on sales in Q4 '18. A positive trend in Home & Personal Care and Health contributed to revenue growth in Orkla Care compared to a weak quarter in 2018, as I mentioned. The progress in Foods was driven by good growth in the Swedish markets and for plant-based products. Orkla Food Ingredients continued the trend from previous quarters with moderate sales growth. Overall, revenues from Branded Consumer Goods grew by more than 8% in Q4. On top of the organic growth that I've already described, positive currency translation effects added another 3.1%, mainly from a weaker Norwegian krone versus euro. Structural growth of 3.1% was driven by acquisitions in Foods, Care and Food Ingredients. In addition, Kotipizza was consolidated in our investment area from February, adding another 2% to group revenues. Starting from Q1 in 2020, we will report Kotipizza as part of the Branded Consumer Goods area within the Consumer Investments part. Let's now look at the profit margin and -- profit and margin performance. Branded Consumer Goods, including HQ, grew earnings by over 11% in the quarter, of which 4% -- 4.6% was underlying improvement. This progress was mainly driven by top line growth from improved revenue management and positive mix effects as well as positive effects from cost improvement projects. All business areas contributed positively to the improvements, which was offset by higher HQ costs due to increased pension costs and some timing effects. This progress resulted in an improvement in the underlying EBIT margin of 30 basis points on a rolling 12-month basis, mainly driven by revenue management and positive mix effects. The progress that we saw was partly offset by higher purchasing costs in combination with increased HQ costs, which was then compared to a lower -- lower than a normal level of HQ costs in 2018. When it comes to advertising spend, it's been relatively stable. Let's look at the performance in each business area. And as always, we start with Foods. Top line growth in Foods was mainly driven by currency translation and the structural growth. Organic growth added 1.5%. Growth from plant-based products continued, supported by a strong innovation program. We have good sales progress in several -- in our largest -- of our largest brands and especially strong growth in Sweden. In Denmark, we saw some sales decline due to closed production facilities and lost lower-margin contracts. We saw nice improvements in earnings, mainly from increased revenues but also from cost-reduction programs. The negative impact from weaker Swedish -- Norwegian krone -- and Norwegian krone as well as high raw material prices continued in the quarter. We compensated for these effects through more active revenue and portfolio management. And in sum, we increased or improved profitability by 80 basis points. Let's look at Confectionery & Snacks. Our Confectionery & Snacks business grew organically by 5% in the quarter compared to a very weak quarter last year. In Q4 '18, we experienced a destocking effect in Norway, ahead of the reversal of the sugar tax increase as from the 1st of January in 2019. We continued to see good market growth, especially for the snacks category. Profits continued to grow, mainly driven by organic growth and positive effects from cost-improvement projects. This progress was offset by weaker profits from our Danish business. In addition, higher prices of raw materials such as cocoa and the negative real effects of currency had a negative impact. Let's look at Orkla Care. Orkla Care achieved organic progress of 2.4% primarily driven by growth in Home & Personal Care and in Health. The growth was higher outside Norway, where we, as Jaan Ivar referred to, see a weak trend in the grocery channel. Orkla Health had sales growth in Poland and increased export, but this must be seen to a relatively weak Q4 in '18. Pierre Robert had weak sales in Norway and Sweden in the quarter. Profits grew by 12%. This growth was supported by progress in Health in Poland, profit improvement in Home & Personal Care outside Norway and acquisitions in House Care. The weak performance in Pierre Robert obviously has the opposite effect. Let's look at Food Ingredients. Food Ingredients reported strong revenues and profit growth, mainly driven by M&A. Sales growth was primarily driven by markets outside Scandinavia. Our plant-based brand Naturli' continued to grow strongly, and we also saw growth in frozen cakes from Bæchs. Earnings were up 21% mainly driven by M&A, which also have a positive mix effect on the margins. Let's turn to Kotipizza performance. Overall, Kotipizza had a good performance in 2019. We continue to see a good market momentum with like-for-like chain sales of 6% year-to-date. Sales slowed somewhat in Q4, but we have so far seen an encouraging start to the new year. Kotipizza had satisfactory profit growth for the full year. In Q4, earnings were impacted by higher marketing spend and some one-off nonperiodic effects. The restaurant expansion continues, and we opened up 2 new Kotipizza restaurants in the quarter. Let me sum up our Q4 financials and go into some more detail on our investment division and other material items. Our Branded Consumer Goods area, including HQ, reported strong earnings growth of above 11%. A profit decline of minus 29% from Orkla Investments include Hydro Power and Financial Investments. In Hydro Power, profits were down minus 45% due to lower production volumes and lower power prices. Financial Investments reported an adjusted EBIT of NOK 21 million compared to minus NOK 1 million Q4 last year, and the delta there is related to the inclusion of Kotipizza from February '19. We had nonrecurring items of minus NOK 136 million in the quarter. The largest items were costs and severance paid related to the organizational review at Orkla HQ as well as restructuring projects within Orkla Foods, Care and Confectionery & Snacks. Profits from associates improved by NOK 190 million from last year. This includes the NOK 35 million gain on the sale of Oslo Business Park in the quarter. Jotun had a strong finish to 2019 with solid progress both on the top line and bottom line. Orkla's share of profit after tax was positively affected by nonperiodic items. The effective tax rate this quarter is much lower due to a reversal of a previously deferred tax liability, and this reversal have no cash effect in the quarter. Good progress on our consolidated businesses, and Jotun contributed to an increased earnings per share of 30%. That's adjusted earnings per share. Reported earnings per share in the quarter came in 73% higher than last year. As part of our financial targets, we aim for a reduction in our relative net working capital position by 3 percentage points by the end of 2021. Following an increase of working capital through 2018, we are now pleased to see an improvement of more than 1 percentage points in 2019, freeing up approximately NOK 500 million in cash. And this improvement, of course, contributed to our strong operational cash flow for the year. We invested NOK 2.4 billion in our operations during 2019, and this corresponds to approximately 5.5% of net sales. When it comes to maintenance investments, these are relatively stable at NOK 1.2 billion, and this is in line with our depreciation level of approximately 3% of net sales. As mentioned already last year, we continue to invest more in building our future ERP platform. Our largest expansion investments were related to the upgrade and expansion of the pizza production in Stranda in Norway. And we also have several other expansion projects in Food Ingredients as well as investing in a new chocolate factory in Latvia. We expect CapEx going forward to be in the level of 4% to 6% of net sales over the next 3-year period. However, maintenance is expected to remain below or at the level of depreciation also going forward. I'm pleased we are finishing the year with a strong cash flow from operations, largely driven by the mentioned improvements in working capital. We distributed NOK 2.6 billion to shareholders during the year in the form of ordinary dividends. We invested a net NOK 3.1 billion in acquisitions and organic expansion. We divested assets totaling NOK 600 million, where the largest transactions were related to sale of real estate and the sale of Glyngøre, one of our Danish brands. Net debt, including leasing, was NOK 6.6 billion at year-end, and this corresponds to approximately 1x EBITDA for the full year. So we continue to have a sound balance sheet, and this is well within our ambition not to exceed 2.5x EBITDA over time. When it comes to capital allocation, our #1 priority is to maintain an attractive and predictable dividend in line with the policy announced at our latest Capital Markets Day. The Board intends to propose a dividend of NOK 2.60 per share for 2019, representing a payout ratio based on reported earnings per share of 68%, which is in the upper end of the band 50% to 70% range referred to in our dividend policy. We will continue to invest in our businesses, both organically and through M&A. We have increased average capital employed in our Branded Consumer Goods area by 40% over the last 4 years primarily through acquisitions. Our return on capital employed was 13.3% in 2019, and this has been relatively flat over the last 4 years. So this concludes my review of the quarter. And then I'll leave the floor back to Jaan Ivar for his final remarks.
Thank you so much, Jens. Just to sum up with some few closing remarks. I'm pleased, as you see, just finishing this year with a strong Q4. It's also encouraging to see our working capital levels coming down in 2019, as Jens mentioned, giving a nice boost to cash flow for the year. I remain committed to delivering on our existing financial targets, and 2019 has been a good start. Looking into the coming year, we continue to see moderate growth across Orkla's markets. We estimate our average market growth to be just north of 2% in 2019 and expect no material changes as we look into 2020. There are clearly large variations between categories and markets, and we continue to innovate around the most important trends, where we see higher growth going forward. As mentioned at the beginning of the presentation, we expect markets to remain challenging for our Care segment. Our turnaround initiatives are addressing this issue. Raw material prices picked up during the second half of 2019, and we see this continuing into 2020. Balancing input prices with our customers will be important in an increasingly inflationary environment. We will now open up for Q&A from the audience here in Oslo and from those following us on the webcast.
All right. We can start with a question from the web or from the webcast. And the first question is from Namita Samtani at Bank of America Merrill Lynch, which is actually 2 questions. Given market growth in 2019 was a little bit above 2%, and the Branded Consumer Goods achieved 1.4%, does this not call for additional investments into the business? The second part of her question is, "Could you give us some additional color on the active portfolio management to reduce complexity and also with possible examples?" Thank you.
I think I can start off, and Jens may add if anything is missing. Yes, the market growth is 2%, as we estimate, and we have a growth of 1.4% for the full year. So in some categories, we have lost the market share. Having said that, we have good growth in some of our main core categories where we have put a lot of focus also on the marketing and the advertising spend. I would say that loss of market share is primarily related to the Care segment in some specific categories. Going forward, we -- to the question of investment, we will continue to invest in marketing. We will not cut back on marketing. The plans are of the opposite, and that's also the backdrop to project future that large parts -- large part of the savings will be reinvested into also marketing and innovation to make sure we can deliver on the 2021 targets. We will also work very hard on our innovation pipeline, where we see good progress in all business unit areas. I think that's a bit of the backdrop. We are not happy that in some areas, we lose market share, and we want to take that back. To the question on active portfolio management, I think it's early days to give any specific examples. But as you know, we have established our consumer and financial investment area, also with our new KL member on board from 1st of February, Kenneth Haavet, who will lead that with a small investment team. But if -- to give one specific example, so of course, we are not happy with the Pierre Robert development, although it's only 1% of our total EBIT. We want to have a bigger profit impact from Pierre Robert. And there, we will address all different types of issues. But first of all, the focus is on the profit improvement and the turnaround program that we have initiated. Anything to add, Jens, on that?
I might add that also, one example when it comes to, call it, portfolio management and improved mix effect is exiting out of, call it, lower-margin contracts and production agreements. So I don't want to give a concrete example, but we've seen examples of this both in the Foods area and in the Food Ingredients area. So that's also part of the portfolio management. And also, we have been working systematically in many business units, cutting tail and reducing the numbers of SKUs. So that's also an example.
I have a question. My question is, you used NOK 3 billion on M&A last year. If you were to expand and make similar investment or, let's say, NOK 6 billion for expansion, where -- if you were to just talk around how you think about how you'd spend that money, that would be of interest. And also, what sort of -- I mean, clearly, you'll be looking at -- by certain growth businesses. Is that more of a focus? And then clearly, valuation becomes more tricky. How do you look for -- at valuations when you do acquisitions?
I can paint some picture to that based on also what we referred to in Q3 that our -- first, on our M&A strategy, the focus is really on the core part of the business and adjacent core and primarily in the markets we already operate in, Nordics, Central Europe and the other markets, south of India, et cetera. So it's -- the focus is within our existing setup. Having said that, for Orkla Food Ingredients, we feel we are less limited on the geographical dimension because then it's also food ingredients, ice cream ingredients, plant-based initiatives. So that gives a broader picture of the M&A part. Having said that, we will never go into an M&A case where we don't see a good payback and a good -- very good business case. So we haven't set any targets for the total M&A spend. It has to be on a case-by-case basis. So that gives a bit of a backdrop. I think a positive development we have seen now in 2019 is that our M&A portfolio or the acquisitions are not diluting the margins. So we see positive effects from that perspective compared to our existing portfolio. So I think that's a bit of the backdrop to that. Anything else, Jens, to comment? Or does it answer the question?
To me, it sounds as if you're buying established businesses with margins better than your own, clearly, you'll be paying up for that versus buying a growth business, which has normal -- because it doesn't have -- established itself yet. So some thoughts about how you look at buying higher-margin business than your own and how you value them?
Yes. Well, I think whether it's organically or whether it's M&A, we are clearly looking into growth categories. But at the same time, it -- sometimes it will be a solid position in the existing category on the margin side. So I think it's difficult to point to one specific case or one specific trend. But plant-based is clearly an initiative where we see good growth and good margin development but where we also invest organically.
I'd just add also on acquiring companies that have better margin, but it's also post- and pre-synergies. So we often take out a lot of synergies, especially when we acquire companies where we have a solid foothold. And then the value creation is also much about taking out costs and improving margins in that context. So it must support Orkla value-creation plans. So it's a difference between price and value, of course, as you know.
All right. I'll continue. We have lots of questions coming in from the webcast. We have one question from Eirik Rafdal in Carnegie, which I believe you've already answered. It's about your market share developments. I think we can skip that now. And the next question then is from Markus Heiberg in Kepler Cheuvreux. Your dividend -- dividend is within the 50% to 70% payout range. But what is the Board's rationale behind not growing the dividend from 2018 as targeted?
Well, I -- my view on this is that we have -- and the Board's view is that we have paid out a fairly high dividend when it comes to payout ratio earlier. Last year, it was 80%. This year, it's 68%. So it's within the range, but it's fairly high in the band that we have communicated. So this is -- and Orkla wants to pay out a predictable, steady ordinary dividend. So that's the main rationale. We have paid over time now quite high dividend, and we are still in the upper end of the band. Looking at peers, they pay out around 60% of earnings per share. So also in that context, I believe that Orkla is paying out a fairly good dividend.
Thank you. Any more questions here from the audience or should I continue? Looks like I can continue. Okay. Next question is from Charles Eden at UBS. "Jaan Ivar, you mentioned your intention to drive further organic sales growth improvement in 2020. I just want to understand what's driving your confidence in delivering this? I understand you will see relatively favorable comps in the Orkla Care division. But conversely, you were going to face tougher comps in Confectionery & Snacks." Yes, 2 questions, but let's start with this.
Yes. No, I think, first of all, we have encouraging signs for 2019 and the Q4 2019. We have an exciting innovation pipeline for 2020. We have worked very well on revenue management. We see more opportunities on the volume side. For example, the way we will use our marketing and the spend around that, so that's encouraging. And then we have the turnaround program in Care, which will take some time. When it comes to Confectionery & Snacks, it's important to note that we have some -- we're comparing to a weak quarter of 2018. So that's important to balance. Then I would also say that we -- in our core categories where we put a lot of focus, we've had good growth, and that gives confidence to the whole organization. Now if you take pizza as a specific example, there, we haven't gained share on Grandiosa because a new entrant has come into the market. But we have been able to maintain our value proposition and our revenue base based on that. And we see that competitor also, yes, not having the growth they probably would like to have, without going into more details around that.
All right. Thank you. Moving on to the second question. "You have reiterated the full year '21 underlying EBIT margin target -- expansion target of minimum 150 basis points. Given you delivered just 20 basis points, which I guess in reality is 30 basis points in 2019, and you have highlighted the exception -- the expectation for higher input cost inflation in 2020 as well as the reinvestment of much of the planned restructuring savings, what is going to drive an average of point -- 65 basis points per annum or 0.6%, then underlying margin expansion over the next 2 years?"
Yes. Jens could probably add also to this, but we have underlying very good momentum in Q4. Some of this is also -- the 0.3% figure is also influenced by the HQ part compared to the quarter '18 -- Q4 '18. Then we are also strengthening our revenue management function as part of project future, where we see we have the tools and the methodologies in place to work further on that. So we feel we are on the right trajectory to deliver on the 2021 target in this. Anything else, Jens, to add?
Yes. Historically, so that we are able to increase prices to get compensated for raw material inflation. And we expect the variable margin to contribute also a period going forward. And then as Jaan Ivar said, we had a lower-than-normal level of HQ costs last year, which is approximately accounts for 20 basis points. So when these normalizes and we still have traction on the top line, of course, we expect to have more operating leverage on the margin going into 2020. And then also, as Jaan Ivar said, there's a lot of cost programs ongoing.
I think also in general, we see a trend with raw materials increasing just because of trade barriers, climate change, unpredictability. So we are very conscious to always factor this in when we work ahead in terms of the revenue management piece.
All right. Thank you. Any more questions here from the audience? Otherwise, I can continue from the webcast. Okay. I'll continue. The next question is from Markus Heiberg from Kepler Cheuvreux. "Orkla Foods grew by 1.8% in 2019 and 1.5% in 2018. How do you compare this with your estimated market growth of approximately 2%? As you mentioned, raw material prices were somewhat offset by higher prices to -- booked to customers? Are you growing in volumes?" So basically 2 question, it's a value/volume growth and also how your growth in Foods compared to market.
Yes. I think if we start with the value/volume part, in Q4, where we grow in terms of volume, that's for Confectionery & Snacks and for Care. So that's just important to note from a volume perspective. Having said that, within the foods sector specifically, we grow in some of our main core categories where we see good momentum, and we have also worked on our tail end, where we consciously have spent less on marketing and not prioritized some of those categories. So that -- I think that goes back to my introduction of why I believe in further organic growth because we have done very well on the revenue management piece, but we have further potential on the volume part and the gaining share in some specific categories. And I also mentioned within the food sector, we see potential with good momentum on the plant-based initiatives. I mentioned 40% growth for plant-based in 2019, 50% actually from Anamma and 30% from Naturli', roughly. And we see this trend continue also now when we launch into new markets. So I think that's -- and then there are different elements in this also in the international part of our Foods business, where we see further potential. The second question was around...
Yes, I think you answered it. It was just on value/volume and then your growth versus market.
Okay. I'll just continue, I think. The next question is from Ole Martin Westgaard at DNB. "What was the contribution from the reversal of sugar tax on Orkla Confectionery & Snacks in 2019?"
Yes. I guess it's difficult to estimate this in detail, Jens, but I leave that to you to comment.
Yes. Yes. I estimate the top line effect to be approximately 1.5 percentage points of 1.5%. That's the estimated effect for Q4 '18 and then Q1 in '19.
The second question is, "How has the annual price negotiations with the retailers in Norway been in the aftermath of the Competition Authority's price investigation?"
Love that question. No, I think this whole -- the whole fall and everything around that, I think that has just made us even closer to our customers, even more proactive. It has contributed to our work around innovation. So we would like to have more customers in Norway than just 3 customers, but we want them all well. And we work closely and good with all 3 of them. And we have come to good discussions and meetings with all the Norwegian retail customers. Of course, again, we want more diversity, but we work with those strawberries we have. In India, we have 100,000 customers, which is a bit different than in Norway. But we have had good discussions and they close work together. And I think it has just made us even more proactive in this work.
Thank you. Any questions from audience? Okay. I'll continue. Next question is from Markus Bjerke at SEB. "Could you give us some more color on the organic growth for 2019, please? Given the plant-based business grew 40% to roughly NOK 0.5 billion, how much of the 1.4% organic growth you had came from the plant-based business?"
Yes. We should still bear in mind that the 40% growth is from a rather still small base, NOK 0.5 billion. So in terms of the exact calculation of the total impact, I don't have that figure. But it's still rather limited on the totality. But going forward, of course, with the growth rate we see and also the potential that, that will have a bigger impact going forward with the pipeline we see now. And also with the launch of Naturli' into Norway, we have big hopes and good plans in place to deliver on that.
Thank you. Next question is from Petter Nyström at ABG. It's -- yes, 2 questions. The first one, "Is HQ costs were slightly up from previous quarters. What should we expect on this for 2020?"
Yes. Parts of the HQ cost was related to pensions, to be honest. So you can perhaps comment on Q4 specifically, Jens, and I can give the flavor to 2020.
Yes. Q4, that's -- the effect in that quarter was an increased return on over 12G pensions. So that was one of the explanations. And in addition, there were some nonperiodic items. So that was the effect in Q4 in isolation. And then they returned to a more, I would say, normal level of HQ costs now compared to 2018. And going forward, it should be around -- now we're looking at almost around NOK 90 million per month, approximately. And then, of course, we have the project future, which also will affect going into at least the latter part of 2020.
So we expect the project future impact to come from June, July this year. But as I mentioned in my presentation, we will also reinvest into the business, especially on the marketing and on the innovation side to make sure we can deliver on the 2021 targets and further work on the organic growth agenda.
Perfect. Thank you. And yes, a second question as well. I guess we still have 10 minutes to go. "And you are materially lower. You are materially lower than your leverage target with a net debt-to-EBITDA of 0.1 at the end of the year. Are you giving yourself any time line in regards to M&A before paying out larger dividends?"
I think this is difficult to comment upon and not something we would like to go into details around. But going back to our M&A strategy, we will always look through each case specifically and make sure that if we do any M&A transactions, it has to be with a good return and a good plan ahead.
Thank you. There's also a question -- next question is from Markus Heiberg on margin, how to think about margins into 2020, but I think you answered this previously. So there's another question from Markus Bjerke from SEB. "Could you say something about the margins in your plant-based business, preferably about the level or if not relative to your BCG segments?"
Yes.
No. We don't comment on the details when it comes to the margins. We've given you the top line growth momentum and the basis. But the margins, we never comment on that level.
But I could add that the plant-based business is profitable, of course.
Thank you. I think we've already answered this. I think the last question I have here now is, "How much did MTR in India grow in 2019?" That's from Ole Martin in DNB.
I don't believe that we disclosed the growth there, detailed either. But the growth was fairly in line with the markets. They are taking positions within blended spices that have actually increased their market share. So MTR are performing well. So that's my answer.
If I may add, in addition to the core MTR portfolio, we have also launched Jordan toothbrushes in 4,000 stores in India based on the MTR setup we already have. So some of our strong local brands are being used for exports. And when we have a platform already in India, that's been encouraging on top of the existing spice business, where we -- we see, in general, India is a growing -- not just a growing population but also increased purchasing power. So more and more Indians, they switch from single spices to blended spices. And MTR is extremely well positioned on this trend, as we have a very broad and good portfolio around blended spices. Didn't answer the detailed question but give some flavor to MTR, where we have a very solid position in an area with 60 million people as our customer base.
Thank you. And are there any questions here from the audience? No. That was also the last questions from the web. So with that, thank you, Jaan Ivar, and thank you, Jens. There are just a couple of more points I want to mention before we close. We will be back with the presentation of the first quarter results on the 5th of May. The quarterly financials will then be presented by our new CFO, Harald Ullevoldster, who takes up his position on the 1st of March. Also, don't forget our AGM. That takes place on the 16th of April. This wraps up our session. Thank you all for listening.