Good day, ladies and gentlemen. Welcome to Fiskars Group's call on the second quarter of 2020. My name is Maija Taimi. I'm the Chief Communications Officer at Fiskars Group, and with me is our Interim CEO and CFO, Sari Pohjonen. We will begin with a presentation by Sari and conclude with a Q&A session. You can post your questions in the chat window already during the presentation. We will be referring to the presentation that can be found on our website, and I would like to draw your attention to the disclaimer on slide two, as we will be making forward-looking statements during the call. With that, let's get started, handing over to Sari.
Thank you, Maija. The operating environment in the second quarter can be summarized as being highly volatile, and our performance was strong in these very exceptional circumstances. In the first quarter, we said that the impact from the pandemic was clearly visible in March, and going into the second quarter, April turned out to be even more challenging and was the most difficult month during the first half of 2020. However, the market situation started to improve towards the end of the second quarter, and June ended up being strong in many categories. There were clear differences in our performance by business area. While Terra and Crea were fueled by strong demand, Business Area Vita suffered significantly from the impact of the pandemic. Earlier during the quarter, we took quick action to lessen the negative impacts and secure our liquidity.
The comparable EBITDA for the quarter improved clearly, largely due to our decisive actions to handle the situation. We reduced our spending in many areas and implemented difficult yet necessary temporary cost-saving measures, such as furloughs and reduced working hours. On the other hand, the ongoing programs contributed also to the increase in comparable EBITDA. There continue to be significant uncertainties remaining for the rest of the year. The risk of the pandemic escalating is considerable, as we all can read from the media almost on a daily basis. At the same time, there are very important seasons for our business, such as back to school in Q3 and the holiday season in Q4, the latter being particularly crucial for the Vita Business. We expect to provide a guidance once a more reliable estimate can be made.
Before I go through the quarter in more detail, let me cover the announcement we made after the quarter ended in July, when our board of directors appointed Nathalie Ahlström as our new President and CEO. She will start in her role in January 21 at the latest, and she was chosen to our board of directors in March and will be stepping down from the board once she will be starting in her new position. We welcome Nathalie and look forward to working with her. Then going into the quarter. In Q2, our net sales increased by 5.6%, and the comparable sales change was almost the same, as you can see from the slide. Looking at the first half of 2020, so Q1 and Q2, net sales were at the same level as in 2019, and actually also on the level of 2018.
The sales bridge here is highlighting the very different development of the business areas, especially the impact of the store closures and lockdowns to business area Vita. Our comparable EBITDA increased clearly from the previous year's level, and the margin increased as well. It's good to note that the comparison figures for the second quarter of 2019 were somewhat soft, and in particular, the watering category faced challenges last year, primarily due to the then wet weather in the U.S., whereas contrary to that, this year, the favorable weather in the U.S. contributed to the good performance. As we have said many times earlier, weather conditions do to some extent impact our business. Still, overall, looking at the first half of 2020, the comparable EBITDA was above last year's level and also higher than in the first half of 2018.
Comparable EBITDA increased in both Terra and Crea segments and decreased in Vita. Looking in more detail for the Vita. Vita had a difficult quarter, primarily due to the pandemic. On the other hand, the importance of e-commerce continued to increase as people's movement was restricted. Net sales in our direct e-commerce more than doubled, while the net sales decreased in all other channels. Store closures and lockdowns were hurting sales. However, the situation started to improve towards the end of the quarter, as the restrictions were partly lifted in many of the markets where we operate. Gifting is an important part of the Vita business, which has been hit by social distancing rules and restrictions on holding meetings or any other gatherings, that was also visible for us.
Understandably, the hospitality channel was severely impacted by the pandemic, it remains to be seen when it will fully recover. From a geographical point of view, I'd like to highlight the Asia Pacific region where net sales increased. This happened in spite of the Japan market suffering from closures. Japan is typically an important market for us. Our growth plan in China is proceeding with increasing net sales, I am very pleased with this performance during the quarter. For the Vita segment overall, as already mentioned, the comparable EBITDA decreased mainly as a result of the decreased volumes. The actions to reduce costs helped to mitigate the impact, not fully. For Vita, the second half of the year is extremely important. Currently, the visibility into the, one could say, vital fourth quarter is very low.
As we have stated in the report, we are sharpening our focus on the Vita transformation also the development of digital capabilities. Direct e-commerce channel has been, for quite some time, one of our strategic priorities. It has been growing during the past quarters, there is more to be done in order to improve our digital presence. We have also taken the brand strategy under review, including the allocation of resources between brands. Moving on to the Terra business. The quarter was very strong, driven both by external factors also our own actions. This is seasonally the most important quarter for Terra, weather conditions in the U.S. were, this year, very favorable for both gardening and watering. At the same time, people were more interested in these categories during the pandemic, spending time at home, as we know.
In some markets, store closures did have some impact. However, many markets kept the gardening and DIY stores open during the whole Q2. We've also seen some support from increased distribution, especially in Germany, demonstrating results from the actions we have taken during the past years in that region. Of the categories, we can say that the outdoor category had challenges as government orders decreased. The headwind was, to some extent, eased by the growth in direct sales for the outdoor categories. As a result of the sales development, the comparable EBITDA in the Terra segment increased significantly during the quarter, but also the temporary cost-cutting measures were influencing the situations, not only the sales volumes. For Crea, the Q2 is pretty similar to the one for Terra. Crea did well in the quarter, especially in the Americas.
Demand was generally good for our categories, partly supported by the pandemic. As an example, mask making can be seen in the increased demand for scissors and sewing products. On the other hand, in Europe, store closures were causing some challenges, but the situation did improve towards the end of the quarter. The closure of our own stores reached a high in April, but at the end of the quarter, only a few stores remained closed. Also for Crea, net sales in the direct e-commerce channel increased, but it wasn't enough to offset the impact from store closures for the entire direct our own retail. Comparable EBITDA increased in the quarter, and like Terra, the increase was supported by the net sales development as well as the temporary cost-cutting measures.
Looking at the geographies, our comparable net sales in Europe decreased, and the key reason was the pandemic, which was hitting the Vita segment most due to the lockdowns and store closures, as already mentioned. There were, however, some bright spots. For example, Germany and Norway. As mentioned before, our ambition to grow in Central Europe is showing good results. In the Americas region, comparable net sales increased, driven by Terra and Crea. In the Asia Pacific, net sales were increasing as well as the pandemic was easing in the region. During the quarter, the design team of the Fiskars brand was recognized with a prestigious award. The team was named as the Red Dot: Design Team of the Year for consistently strong achievements. This is a title which is given annually, and the previous winner was Ferrari.
This title is a great honor to the team, and it proves that we are indeed making a positive change in people's daily lives, and I'm really proud of the team and its achievements. Fiskars, like all of our other brands, has a unique identity with a strong focus on detail, design, and high quality. Here you can see some of the marketing highlights for the quarter. In addition to the Design Team of the Year award, Fiskars watering equipment received Red Dot: Best of the Best awards. As already mentioned, our direct e-commerce is a focus area, and during the quarter, we continued the rollout of new e-com sites. The new web stores or revamped web stores for Wedgwood and Royal Doulton were launched, and the introductions of additional sites will follow in the coming quarters.
We have also partnered with the World Wildlife Fund to support biodiversity in Finland. Moving on into the figures for the quarter in more detail. Firstly, looking at the P&L, our gross profit margin decreased during the quarter. The key reasons for this development were the decreased sales volumes in Vita, and also to lesser extent, the product mix in Crea business area. At the same time, we took decisive action to protect our profitability with temporary cost-cutting measures. These are visible, for example, in the sales and marketing expenses, as well as in other expenses for the quarter. Amortization increased from the previous year's level. There are two one-off reasons for this.
We did a EUR 1 million write-down on one of our smaller brands, Gingher, and also it includes a EUR 2.5 million item stemming from customer relationship recognized as intangible assets. The amortization period of these items has been accelerated. Looking at the ongoing major programs, the two programs are both ongoing, and they are proceeding as expected. It's good to note that these programs already contribute to our reported figures. For the restructuring program, a major step was taken at the beginning of the quarter, as our new organizational structure became effective. Here you can see an illustration of the EPS. Earnings per share increased during the quarter, and the increase from the previous year's level was supported by our strong growth in comparable EBITDA.
At the same time, there were some financial items and our tax rate increased, whereby the net income increased more moderately than the EBITDA. Looking at the cash flow for the quarter, also that increased from the previous year's level. You can see that the working capital increased during the quarter. The main reason for that is the high receivables due to the sales volumes. Looking at the balance sheet, June was a strong month for us, and it's also clearly visible here in the balance sheet if you take a look at the trade receivables. Generally, we have more intensely monitored also the credit risk of our receivables, and credit losses have remained at a normal level during the first half of the year. At the same time, our inventories decreased, especially for the Terra categories.
We have generally accommodated the production volumes to the extraordinary situation where some units have increased production while others have been reducing output. Additionally, we raised more loans during the first half of 2020. This has been done to make sure that we have liquidity and can utilize all possibilities that may arise. Looking at the net debt, it increased somewhat from the previous year's level. Good to note that the comparison figures for 2019 already included the change in accounting practices at that time. By this, we refer to the IFRS 16. Looking at the ratios, our equity ratio decreased and the net gearing remained close to the previous year's level. Just as a reminder, our long-term targets have not changed. As said, we have not issued a new financial guidance for 2020.
The situation continues to evolve rapidly, at this time, it's not possible to make reasoned estimates on the potential impact for the full year. We expect to guide the outlook once a more reliable estimate can be made. To conclude, significant risks in our operating environment do prevail, the visibility is weaker than normal. We have the important fourth quarter ahead of us, we'll continue to vigorously manage our spending and also focus our presence on those channels where the consumers are present.
Thank you, Sari. We are now ready for your questions, please type in your questions in the chat window, we will then take them in the order. We have some questions that have already arrived. First from Jutta Rahikainen in SEB. Two questions on Vita. Firstly, could you please quantify roughly how much of the Vita distribution network, i.e. stores, were closed in Q2, how much are still closed going into Q3? Secondly, is the hospitality business significant in size for Vita? Thank you.
The first question regarding the store closures, we haven't disclosed the exact figures, but thinking about how the pandemic situation changed during the quarter, it's good to remember that already towards the end of Q1, we had to close some of our locations in the Asia-Pacific region, that continued to Europe during the Q2. Basically, we have been following the national guidelines in each of the markets where we operate, towards the end of the quarter, one could say a small number of locations remained closed, the situation improved significantly towards the end of the quarter. In terms of hospitality, it is one of our channels. We haven't disclosed the size of the channel either.
Thank you. A question from Petri Kajaani from Inderes. You removed your guidance for 2020 in March and reiterated in the Q2 report in May that the COVID-19 pandemic will have a significant negative impact during the second quarter of the year. The Q2 numbers were excellent, clearly above the comparison period and well beyond market expectations. Why didn't you provide preliminary numbers from Q2 already weeks ago, since your reported Q2 numbers deviated significantly from your earlier message to the markets?
In our view, there were no grounds for doing that. As you said or mentioned in the question, we did withdrew our full-year outlook due to the situation in March and when the visibility weakened significantly. The situation continues to evolve rapidly, and at this time, it's not possible to make reasoned estimates on the potential impact for the full year. Additionally, we do not guide on a quarterly basis.
Another question from Petri. Could you give more detailed information on your temporary cost-cutting measures in Q2, since they were mentioned as a driver for good profitability? What sort of actions did you take, and particularly in which markets and segments?
As we have mentioned earlier, for instance, for all of our office employees, we either implemented furloughs or reduced working hours generally during a part of the quarter. Obviously, since many of the stores were closed, that had an impact as well on the workforce also. As mentioned, we have also taken a look at the production. Some sites have been increasing production, some sites have been reducing the production. On top of that, generally, we have been taking a look at, one could say, all spending during the quarter.
Thank you. Another question from Jutta in SEB. How much of the gardening and watering strength, assuming consumer behavior will not change from Q2, will fall into Q3 too? Please remind us about the seasonality in gardening and watering, typical split in Q2, Q3.
Typically, Q2 is the strongest season for these categories. Obviously, once again, depending on the weather during Q3 as well, and then moving on later towards the autumn, that is the same situation. Generally speaking, Q2 is the highest peak for these categories.
A question from Johan Brown at ABG with a few questions. Can you specify the magnitude of received governmental support during the quarter? Secondly, can you specify the magnitude? Or maybe we take this first question, and then it's more about the short-term cost measures and sales tempo later on.
The magnitude of government support we haven't disclosed, but it is not significant.
The second question. Can you specify the magnitude of other short-term cost measures during Q2 that should not be extrapolated going forward?
That we haven't quantified, but as mentioned, these temporary measures had a significant impact on the result development during the Q2. At the same time, however, as already mentioned, the programs that we have ongoing with the Transformation and Restructuring Program, those are starting to become visible in our numbers as well.
A third question. Is it possible to give some sort of indication of how much of the savings from the Transformation and Restructuring Program is already visible in the numbers?
Both of the programs are ongoing, and they will continue until the end of 2021. What we have said is that they are proceeding as planned, but still emphasizing and reminding that both of them are ongoing. We haven't quantified in more detail the impact so far.
The last question from Johan. Is it possible to say something about the initial sales tempo in July?
We will be commenting the July development once the Q3 results will be disclosed.
A question from Jonas Häyhä in OP Bank regarding demand. Please discuss how does demand currently look for the second half of the year if we assume there is no second wave that could force store closures and so forth. Do you anticipate weaker demand in second half after strong Q2, and if so, why?
Our business is typically very dependent on the seasons ongoing. As already mentioned, the gardening and watering type of categories, they typically are stronger in the first half of the year. The second half of the year, we have, for instance, two very important business seasons for us ahead of us, back to school now during Q3, and the gifting and holiday season during Q4. Generally, as said, due to the overall situation, the visibility is low at this time.
A question still from Jonas regarding savings. What was the level of the temporary savings in euros in Q2? Similarly as before, will some portion of the temporary savings impact second half as well? Please discuss why you are expecting adjusted EBITDA to unlikely reach 2019 levels. Are there any specific items that you know to impact profitability in second half, either positively or negatively?
If I start from the last question, we do not think that at this time it would be possible to make a recent estimate, therefore we have not guided on that one. If the situation is such that we will be able to make a more reliable estimate, then we will get back to that. In terms of the savings, we haven't quantified those in EUR, but we have said that they did have a significant impact on the development during the Q2, as also mentioned in all of the business area materials presented today.
An additional question from Petri Kajaani. You booked only EUR 1.1 million non-recurring costs in Q2. Has COVID-19 affected the schedule of your ongoing restructuring programs?
We have continued with both programs as planned, it's good to remember that in these type of programs, the costs are, one could say, never evenly distributed over time, no conclusions whatsoever should be drawn on those.
That's all for the questions. Thank you for these questions and for your time, if you still have any questions, please do not hesitate to get in touch with us. Thank you, wishing you a great day.