Ladies and gentlemen, welcome to Huhtamäki's Q2 and half-year 2020 results presentation. My name is Calle Loikkanen, and I'm head of investor relations. Huhtamäki's president and CEO, Charles Héaulmé, and CFO, Thomas Geust, will today walk us through the highlights and results of the quarter and the first half of the year. And after the presentation, we will, as always, end with a Q&A session. But without any further introductions, let me hand over to Charles so that we can start. Charles, please go ahead.
Thank you, Calle, and good morning to all of you. Welcome to our meeting, and I'm very happy to report back to you this morning on our second quarter of 2020 and the first half of the year. Without any further, I would like, however, before getting into the financial performance and look at the figures, to give you a bit of a couple of highlights on our operating environment, what has changed during the second quarter, and give you an update about this. And I would like to do this maybe using different time frames. First of all, a very short-term and immediate time perspective about the COVID crisis to explain what we are seeing towards the end of the second quarter, getting into the quarter three.
We are seeing a consistent increase in the order intake since the beginning of April, which represented the lowest part of the business across most geographies, and our food-on-the-go business, which is most impacted by the restrictions during this period of time, is at the end of June still lower than it used to be in 2019, with variations across geographies. However, it is at a significantly better level than it has been at the beginning of April, so that's why our key message is that we see a visible and tangible recovery happening already towards the end of the second quarter. Looking a little bit further in time, beyond quarter two, we are seeing consumption shifts happening, and that are going to drive changes, innovation, as well as probably modifications of the business models overall in the value chain.
A couple of aspects that we would like to highlight is obviously what everybody speaks about, which is the shift from working in the office permanently to home office. The changes that will happen that are not all defined yet, but that will happen in the food service environment and the culture of visiting stores as well as restaurants, what it will imply as well in terms of other channels emerging or eventually growing or accelerating. Another aspect that we see happening is the significant importance and increasing importance of retail, particularly in the food categories, where we see an expansion of the categories at retail, particularly in what we would call the ready-to-eat and the ready-to-cook. That is an expansion, and that will mean as well implications for the packaging industry.
And then there are aspects, requirements, behaviors from consumers that we are seeing happening, which will have an impact as well on packaging. We believe positive in terms of potentially volume of packaging, but as well value of packaging. This has to do with the fact that we see the delivery channel increasing quite steadily. We see requirements for hygiene and safety becoming much higher. We see as well requirements coming up from consumers about traceability of products, what they buy. Consumers want to understand more and more what they buy and what they consume. This will have an impact together with the increase of the e-commerce. All of those aspects will have a pretty significant impact on the need for digital solutions.
So all in all, and I'm moving to slide four of our presentation, our conclusion at this point with the experience of dealing through this crisis for the last month is that basically, if we revert back four months, end of March, when we presented our Strategy 2030 to you, we are saying that the fundamental trends that were underlying the strategy that we decided to renew for Huhtamäki, those fundamental trends are still valid and make our strategy still the right strategy and relevant strategy. Those fundamental trends, without going into further details, as you probably remember, are basically four. One is the next billion consumers, and I'm talking here about trends that we see having a significant impact for the next 10 years.
The first one, so next billion consumers, that means that where we see the growth of a consumer population is basically in emerging markets, in China, in India, and in Southeast Asia particularly. There will be changes in the consumption patterns. I have already alluded to some of the things we are foreseeing, so that is a clear fundamental trend happening. The third one is digitalization. I already commented upon it, and the fourth one, most transformative and very immediate, is sustainability. Most likely, you have as well a remark like all that sustainability has probably been less in the public agenda in the last couple of months during the crisis. However, it is absolutely central going forward, and we believe that it will come back to the center of the game.
Therefore, we are absolutely convinced that this is the right thing we are doing with embedding sustainability in everything we do in our strategy. You probably remember as well that we have renewed our core values on top of our strategy. Our core values, very much linked to the legacy and the history of success of Huhtamäki for 100 years, are renewed and modernized, if I may say, with the three words, Care, Dare, and Deliver, which are much more than words. I would like to illustrate on slide five a little bit about, for instance, the care aspect, but as well the dare aspect of it that we have been emphasizing through a plan that we have put in place in the occasion of our 100-year anniversary in 2020.
So we have built a plan that will be around making a difference where it matters for the world. And where it matters is it has been obviously during this last couple of months because of the pandemic of the COVID-19. So we have made a very conscious decision during the second quarter to make a donation through the International Red Cross for helping countries in real need during this situation, during the crisis. But as well, we have a plan with three other projects which have the intent to make a difference on sustainability for the planet, on the circular economy particularly. And they have basically, without going into too many details, they have basically the ambition to have an impact at different levels.
One is about acting today, and this is through a grant, a donation that goes towards a project of putting in place a cleaning system on a river near Mumbai in India in order to clean the river on a recurrent basis, clean the plastic waste, and get it to a recycling facility. The second one, after acting today, is about educating for tomorrow, and that's through the WasteAid organization, where we are building with them towards countries in three continents: in South Africa, in Vietnam, and in India, building a training and educational system, both virtual as well as physical, in order to enhance sustainability, understanding, and projects in those countries. And then it's about innovating for the future as well, and that will be through Food System 6, which is an organization that helps us dealing with startups.
This will be a process of selecting startups and offering grants to startups who are particularly active in the circular economy of the food systems. These were the couple of highlights I wanted to give you before getting into our business performance for the second quarter and the first half of the year. Without any further going to the slide seven with our second quarter sales, which have been reported with a decline of 8% versus the second quarter of 2019. The comparable net sales growth is actually as well minus 8%. The reason is because there is a bit of a wash between the impact of acquisition and the impact of currency. Acquisition accounts for roughly 2% growth, while we have a negative impact, minus 1% on the currency. This is for the second quarter of 2019.
When you consolidate this for the first semester on page eight, together with the growth of 5% that we reported in the first quarter, then we have a decline of only, if I may say, only between brackets, only because of the context of the crisis of 2% for the first semester. That's a comparable net sales growth or decline of 3%. And we have 2% coming from acquisitions and an insignificant currency impact on this. This is for the first semester. Now, looking at the sales on page nine, the sales broken down in our different business segments. As you remember, as of 1st of June, we have integrated our two segments: food service, Europe, Asia, Oceania, and fiber packaging. And the integration is going very well.
However, we continue during the whole of 2020 to report according to our four business segments in order to offer the right comparability. With no surprise, and this is exactly what we have said consistently already back on the 26th of March when we had our strategy presentation, as well as end of April in the Q1 presentation, our food-on-the-shelf packaging continues to grow through the crisis, while our food-on-the-go packaging is obviously significantly impacted because the crisis has meant lockdowns across all geographies at different periods of times. So the COVID-19 has affected particularly our food service business, and that's globally. So in Europe, Asia, Oceania, as well as North America. And that is visible in our numbers. You see that in Q2, our food service, Europe, Asia, Oceania, is reporting a -28% sales, and that's -17% on the first semester of the year.
As I said, this food service decline affects as well North America. However, less, and we will see a bit further the reason, but as well because we have a strong continued retail tableware growth in North America, which compensates very much for the decline in food service, and that means that for the first semester 2020, we are actually reporting a growth of 1% in North America. Flexible packaging and fiber packaging respond to basically what I was saying, that there has been a strong demand, and there is still a strong demand for the food-on-the-shelf products, and we see that with the growth of flexible packaging of 2% and the fiber packaging of 10%. It's a reasonably high comparable growth in the context. Moving now to the P&L on that consolidated level, and I'm now on slide 10.
We are delivering for the second quarter 2020, as well as for the first semester, what we would call a solid EBIT margin at a level of 8.8%. The earnings in euro are slightly lower than last year, in line with the decrease of the sales. We have positive impacts in 2020 coming, first of all, from the margin management of 2019, particularly through the price management. But as well, we have lower raw material prices overall in the first semester and in the second quarter of 2020. And we have a favorable sales mix impact in North America. All this explains why the margin is certainly a satisfaction at 8.8% adjusted EBIT margin percentage. The EPS is evolving slightly more negatively than the earnings, and that's mainly because the EPS is affected by overall average higher tax rate than last year.
Important to note as well that we have, despite the crisis, continued to invest, and we said it very clearly from the beginning of the crisis, back end of March and end of April. We said we have a healthy financial situation that will enable us to continue investing for the future, particularly for capacity and for the growth trajectory that we see beyond the crisis. Moving on now to our business segments, and I'm on page 12 now, specifically on food service, Europe, Asia, Oceania, where, as I said before, we have a decrease in sales and earnings linked to the crisis. The lockdowns and restrictions that have happened basically everywhere. Primarily in China in February and March, and then in the rest of the geographies more end of March to April and May.
Those lockdowns and restrictions have resulted in a significant negative impact on the demand for obvious reasons. Restaurants were basically closed. So we have had a mitigation effect from the food delivery that is a channel that has increased during the same period, but of course, it's only a mitigation. So overall, a decline in the second quarter of roughly 30%. If you remember, we said back end of March that we were expecting the demand to be roughly 40% down. And so the 30% decline in the second quarter is very much in line because, of course, the second quarter has not been even, and we have seen a recovery of the demand towards the end of the quarter. Important to note that we have, from a profitability point of view, taken measures, obviously, to mitigate the crisis impact.
Some of them have to do with, of course, cost management, prioritization of projects and initiatives, but as well, a very important initiative has been the fact that when we had a capacity made idle by the crisis, for instance, in our factory in Belfast, then we had the idea to try to make use of that capacity to make a difference where it matters to help with the needs of this crisis, and we have allocated this manufacturing capacity to purpose like producing face shields for the healthcare employees, so that is a very important point, and then, as I said before, as well in the food service, like in the other segments, we have continued to invest for future growth and category expansion that we see post-COVID crisis. Moving on to North America, which is certainly one, if not the highlight of the quarter and the first semester.
We see a strong growth in the retail tableware. That was very clearly the case in the first quarter, particularly in March, if you remember, but that has continued in the second quarter, and we have seen as well in the second quarter an increase of the at-home consumption of ice cream, for instance, where we have a large business in the U.S. for the packaging containers. Obviously, the food service business in North America has been impacted, however, less than in Europe, for instance, and there are different reasons to it, mainly two. One is that the lockdowns have been certainly shorter in the U.S. compared to Europe.
Second, there is a mitigation effect linked to the culture of the food service in North America and in the US in particular, where consumers very easily replace consumption in the restaurants to the drive-thru channel, which has been pretty much boosted during this period of time. Important to make a comment on the earnings because the earnings, despite the crisis, have been improving: 17% in Q2, 29% in the first semester. And they are improving as a result of the continuation of the margins' improvement of 2019, as well as this favorable mix between food service and retail tableware, as well as lower input costs. So lower energy, fuel, as well as polymers cost during this period of the year 2020. Moving on to flexible packaging on slide 14. We said back in March and April that the demand was strong for flexible packaging, particularly in Europe.
Then, based on this, you may feel like the comparable growth of 2% is maybe slightly disappointing compared to the demand. However, we need to understand the granularity of what has happened in the world in order to understand. We have had a very solid growth in Europe across or throughout the entire first semester. However, we have had two hiccups, if I may say, linked to the COVID crisis, and that's in India and in the UAE for slightly different reasons. But first of all, India, where back on the 23rd of March, a very strict lockdown was decided by the government for the nation in India, this has created a double crisis in India: a crisis of demand and a crisis of supply. So the supply chain has been completely disrupted.
That meant that not only the demand was lower, but we were not in a position to produce according to the possibilities or to the capacity that we have. That has meant as well additional cost because we had an obligation in India to pay all our employees during the entire crisis at full cost. There were no subsidies for unemployment. And therefore, compared to the volume, this has meant higher costs, as well as higher logistic costs in India, as we wanted to rebound when we had the capacity in place towards the end of the second quarter. In UAE, we have suffered a pretty long factory lockdown, and that was linked to a contamination of more than 100 of our employees in a public dormitory where foreign employees are basically staying during the week. And there has been a contamination.
We had more than 100 employees suffering COVID, and therefore, suddenly, for a couple of weeks, we didn't have the manpower capacity in our factory. That has meant additional cost, logistics, as well as labor in order to compensate and be able to produce. Last point on flexible is to say that the integration of our recent acquisition is continuing as planned and well. Last segment, fiber packaging. We have a significant growth in the second quarter and in the first semester. The comparable growth is 10%. That is linked to the strong demand that we had throughout the crisis across all markets, especially because of the demand or the increased demand of egg packaging, as well as an increase for the cup carriers for food delivery and the continued plastic substitution.
So this has meant that we could, together with lower raw material prices during the first semester, we could improve our EBIT margin as well to a level of 11% for the second quarter and for the full first semester. This is for the quick snapshot by business segment. I will hand over now to Thomas for the financial review. Thank you, Charles, for the comprehensive presentation of the result. And I will therefore focus only on a few additional points around the profit and loss. So first of all, as you saw already from earlier, our positive trend in outperforming EBIT growth above net sales was broken in Q2. And that is evidently coming from the fact that the underabsorption cost in lockdown units and drop in demand caused a significant cost in those units without any top line generated. So that's the main reason for that deviation.
However, then if we go and look on the other items, net financial items, net financial items slightly up compared to previous year, partly caused by some small one-offs as well as internal financial arrangements, change in debt structure, and then to admit that we are also sitting on a higher cash and debt position currently in order to be prepared for the maturities coming up and secure our liquidity during this COVID crisis. The tax rate, as indicated already earlier, is higher compared to previous year, so our current estimate is 23% versus 22% in 2019. The final outcome will obviously be dependent on how the profitability develops in various geographic locations. Moving to slide number 18, there we have the outcome of the currency movements, and as you can see, all currencies are actually trending worse versus full year 2019 rates.
However, if I compare to Q1, we have a further decline also on many of the currencies. However, from a translation point of view, to point out that the USD/EUR, which is one of the biggest currency swingers normally in our results, has been pretty stable. So there we have a slight positive. H1 remains positive, +2% on net sales and +1% on EBIT, while then, due to the reasons explained here earlier, the Q2 currency translation turned negative. Slide number 19, net debt decreased. And partly the decrease is obviously from the fact that we compared to previous year, H1 did not pay a dividend this year. If I would put back the dividend, our net debt would be approximately EUR 1 billion, and that would give a net debt/EBITDA ratio of approximately 2.2.
However, to state from this slide, we are on a very solid base when it comes to our structure, and we have been able to continue the positive cash flow generation, which is then contributing to the net debt situation. The loan maturities in the quarter, the point to point out is a new Schuldschein that we issued. It was issued on June 26th. However, that's not visible yet in our balance sheet as the payment occurred only on July 3rd. But all in all, our maturity is solid. We have a situation now where we have secured financial liquidity that allows us to take care of our payment obligations when it comes to loan maturities, which are pretty significant for both the end of this year as well as next year.
And with also having headroom in the RCF, we make sure that we also have capability to take, for instance, M&A activity actions should they become possible. On the cash flow side, we see that the gain we had from the Laminar acquisition is contributing positively also in the EBITDA. However, that one is then seen as a negative in other activities, so thereby equaling out. So the main development on cash flow improvement comes from working capital, mainly from receivables, also taxes contributing positively. And then, as you can see, the CapEx, as Charles mentioned here earlier, remains on approximately previous year's level. But good cash flow generation given these tough times. On the financial positions, we state that it remains stable, confirming what I said on the previous slides.
If we look at the balance sheet items on the equity side, we have significant currency movements. But beyond those currency movements, basically the biggest movements we have in the balance sheet are normal operations-related movements to operating working capital. Gearing is at 0.62, and that compared to 0.78 previous year. And then North America clearly improving on their return on net assets. And thanks to that, we are then also on return on investments, slightly improving despite the other units suffering from the lower profitability. Progress towards our long-term ambition, clearly for the reasons explained so many times in this call already earlier, the lockdowns and softness in emerging markets are impacting our growth. So our first semester growth is -3%, so clearly below our long-term ambition.
However, I would say a resilient EBIT, adjusted EBIT development in line with previous year, but still, unfortunately, not strengthening towards the long-term ambition, mainly due to the top line reasons. And then we have a net debt/EBITDA level at a solid 2, so in the lower side of the corridor. And as you recall, the board withdrew or did not make a decision on the dividend in relation to the AGM. However, they have the authorization up till June next year to issue the dividend, and that status remains as of today. Looking forward, so on the outlook, we did update the outlook, which we earlier withdrew. And I will, for that reason, even read it out this time. So the outlook for 2020 is disturbance from COVID-19 pandemic on Huhtamäki's operating environment is expected to continue.
The demand, especially for food on the go packaging, may be significantly negatively impacted, while demand for food on the shelf packaging and convenience tableware may be positively impacted. Huhtamäki's diversified product portfolio provides resilience to the effects of the pandemic. Then also for the short term, we have a slight update, which I will not read to you. With that one, I conclude my part. Obviously, the financial calendar can be seen on the slide 27. Calle, anything you want to highlight from that one? Yeah. The Q3 results, obviously, in October, but then in November, on November 10th, we will organize a segment update. You may remember that we were supposed to have a Capital Markets Day March this year, but due to COVID-19, we changed it to a strategy update.
The plan is that on November 10, we continue with the segments and kind of as a continuation to the strategy update. At the same time, we will be organizing a site visit in Hämeenlinna in Finland to offer the opportunity to see the manufacturing facility at the same time. But now, thank you for the presentation, and let's now continue with Q&A. The operator will give more precise instructions on how to ask questions, but please stick to one question at a time with one follow-up question on the same topic if needed. Then if you have more than one question, first start with the first question and then move back to the queue for the second one. This way, everybody gets a chance to ask questions during this session. But let me now hand over to the operator. Operator, please go ahead with the instructions.
Thank you. If you wish to ask a question, please dial 01 on your telephone keypad now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 02 to cancel. So once again, that's 01 to ask a question or 02 if you need to cancel. Our first question comes from the line of Maria Wikström of Danske Bank. Please go ahead. Your line is open. Perfect. Thank you. Can you hear me, gentlemen? Yes. Okay. First of all, the quarter definitely showed the resilience in your business model. And my question is coming from especially in North America, where in the strategy update, you had the margin you guided for the long-term margin profitability in North America in a ballpark of 9%-10%.
Now in the Q2, we had a blowout quarter with a margin of 12.8%. So you don't expect this to be sustainable, or do you think you are more too conservative in the strategy update where the margin was significantly lower? So I mean, if you can a little bit elaborate, how much we should see this as sustainable and how much is just one-off given the current situation as well as the help from the raw material prices. Thank you. Thank you, Maria. Charles. So as you understand, there are different aspects that are explaining the margin in North America in the second quarter. And one that we have not highlighted yet in the conversation or in the presentation is that Q2 tends to be the highest margin quarter of the year in North America. That's a seasonality that may remain as well for 2020.
Second, as we have emphasized, and I think it matters to emphasize it further, we had a very favorable product mix during this quarter, so let's look at the first semester overall because it's a particular semester with this crisis, which is disrupting the product mix, our business mix. The margin for the first semester was 11.7%, so to your longer-term question, we would say that under favorable conditions, which is the favorable conditions we have had in Q2, meaning sales mix very positive or extremely positive, input cost at a fairly lower level than last year. The timing of the investments as well has to be really understood and put in perspective. Remember that we started or we launched a new factory in Goodyear, Arizona at the end of 2018, so 2018 was burdened a lot by this factory. The factory in 2019 was not fully utilized.
Now it is utilized. Going forward, sorry, we will have to increase capacity and potentially in that site or in other sites. So we need to put in perspective as well the timing of the margin of this first semester or of Q2. But overall, to be specific, under those favorable conditions, we believe that North America can continue to deliver above a 10% margin. And by growing the business, we will as well continue to grow our EBIT margin in absolute terms. But as well, we will do everything we can to maintain it as an EBIT margin in percentage. Thank you. I will move back onto the queue. Thank you. Next question comes from the line of Jutta Rahikainen and SEB. Please go ahead. Your line is open. Thank you. And good morning. My first question is then on India.
Could you give us some numbers on the sales development in the quarter, the second quarter? And then also, do you think or sort of what's happening now in July in India? And of course, if you have any good guesses on how the Q2 development from your point of sorry, Q3 development from your point of view in India would be. I think all comments on that topic are of interest. Thanks. Okay. Thank you. Thank you, Jutta. And good morning. So India is a very difficult one to analyze, and that justifies your question. Very difficult to analyze in Q2 because I tried to explain already the huge disruption. And you may have read as well, of course, other multinationals, at least they are reporting Q1, and some of them, our customers, are disrupted. They were in their supply chain as well already in March.
That has continued very much during the month of April and May. There was a very strict lockdown of the country. If you remember what I think we said at the end of Q1, when the lockdown started, all our factories have been shut down by obligation by the government. So not only there was an issue of demand, but there was a huge issue of supply. We have been able, because we are not entirely, but mostly in essential food production. So food is considered as an essential product for the population, as well as we have healthcare products. So we have been able to reopen factories pretty quickly, but that disruption was in Q2. Hopefully, we won't have to suffer it anymore in India.
Now, there were strong disruptions in the supply chain, and that explains both. Your question was specifically on sales, but when you look at the earnings as well are disappointing because we have much higher costs in India during the second quarter. Now, your question, I think, was much more about Q3. So what has happened in India? The situation from a lockdown, from a restriction point of view, has improved in June. Okay? And with this, we see as well our order intake improving, not yet to the level of last year, but improving significantly. Now, it's very difficult to answer your question and very honestly answer it because there is a huge uncertainty on India. If there are two countries in the world right now where the pandemic is increasing, unfortunately, this is USA and India.
And what it's going to give in India is almost not predictable from a business point of view. So at this point in time, we have good hope for a better Q3, definitely, under today's conditions. But what it will be in August and in September, unfortunately, we don't know. So it's difficult to be specific on your question, but the month of July has been better. Okay? Maybe to point out just some of the sensitivities in the Indian market, as it's really, as Charles said here earlier, dependent on the full value chain. So in a case that, for instance, one factory at the end customer goes down, that means that the full supply chain needs to redirect.
So if one significant customer has an impact from the COVID, then the full supply chain needs to adapt, which means that in worst case, you need to reprint things and similar. So that's the situation we have to live with currently in the geography there. But from a demand point of view for essential products, the demand is there. People need food. Okay. All right. And just to follow up on the Q2 organic growth in India, did the or do you want to provide a figure on that one? Q2 was basically flat, slightly up. Your sales in India? Yes. Okay. Thank you. Thank you. And our next question comes from. Okay. If I may further to that one. So as you understand, as we have a significant drop in emerging markets, it's not only coming from India. So it's all over the place.
That's just a clarification to maybe the emerging market. Okay. Next question, please. Next question, please. Yep. That comes from the line of Maria Wikström of Danske Bank. Please go ahead. Your line is open. Yes. Thank you. My next question is on the raw material price development. You saw now the help from lower resin prices in the Q2. Do you expect the same impact to continue in the Q3? And can we also talk about the recycled paper, what you guys are seeing there in terms of prices, and what is the outlook of overall the raw materials for the second half of the year, please? Yeah. I can take that one. So first of all, I would say we have a favorable raw material situation on a generic basis. Of course, as usual, fluctuating market by market.
But as you highlighted, basically on the plastic side, the market has been favorable. How it will go forward, I think, will be pretty much dependent again on how the situation will develop. So we had the situation when, for instance, for the smooth fiber side, where there was a very high demand on tissue. And from a movement point of view, that seemed to be moving it upwards. And I'm not sure what happens if the situation would go into a similar situation as we had as the lowest point. However, my best prediction at this point of time is that we most likely have a pretty stable development from this time forward. Okay. Thank you. And if I may follow up with one more, as there seems to be not that many people queuing up.
Before you conclude on that, and then all in all, I would say, on average, if we compare to previous year, there has been maybe a slight uptick on the fiber side, all in all. So paperboards and similar. Okay? And that is across markets? That's mainly in the basically on a global scale, yes. Thank you. And then my other question was on the update on the current trading conditions in China, where you currently see the demand trading in the Chinese market, to get a little bit of an idea of the food service recovery path. Yeah. That's a good question, Maria, in order to understand. I don't think we can say that China is giving the clear picture of what it's going to be in the rest of the world, but at least it gives an indication.
So on the food service, to be precise, remember that we said at the beginning of this crisis that food service demand was basically impacted roughly 40% negatively. And the crisis in China, I will not say finished, but the lockdown was ending, if I remember well, mid-March. Since then, there has been a consistent recovery of the consumption, reopening restaurants. It has not been overnight. It has been very gradual. And what we are seeing is that our order intake is basically almost back to normal at the end of June. Almost. So it's not yet. Okay? It's slightly down compared to the normal level, but a very small single-digit difference. So that may serve as an indication why we believe that not that we are through the crisis yet, but that the recovery is happening. There will be changes.
There are changes in the business model of the QSRs. We see that. But the demand is recovering. That's the situation in China. However, important to understand that in China I was talking here about mainland demand. Okay? In China, our production now as I was talking about the mainland market, our production in China is as well a lot for a big portion is for export across geographies, particularly in other countries in Asia and Oceania. There, the demand is still very much down, double-digit. So there will be a longer recovery time for those countries because the lockdowns are not completely finished there. And China was clearly, I would not say ahead, but in time, was much earlier in this crisis. And the lockdown was managed very efficiently. So it was actually a short lockdown if we consider it. Yeah. Thank you. Okay.
Our next question comes from as a follow-up of the line of Jutta Rahikainen of SEB. Please go ahead. Your line is open. Excellent. All right. A second question on the CapEx. You stressed now that you will continue to invest. Is it a good assumption that the four-year CapEx will be at around the same level as last year? I believe that's a pretty good assumption with the disclaimer that depending on how we are able to install equipment. So that might take it slightly up or slightly down, in my view. So really, installations and possibility to go on site is one of the question marks there. Okay. And then if I may, a second one on the M&A landscape. How does it look from your point of view? Is this the time to make some deals, or is it not?
If I take that one, so first of all, I think that many of the companies in our space have a balance sheet that takes them through the crisis if it remains short. So from a distressed point of view, I wouldn't say that it's the ideal time for that one. However, when we look on the potential of going for acquisitions, that is really limited by the same things I highlighted with regards to the CapEx. So in order to do M&A, if you haven't started the process prior to the crisis, you really need to have all the site visits, similar stuff. And that is now limited by the virus and lockdowns. But all in all, no reason to change the M&A strategy. I see. Okay. Thanks. Thank you once again. If there are any further questions, please dial 01 on your telephone keypad now.
There seems to be, oh, there is one. Just as I say that, from Carl-Oscar Bredengen of Berenberg. Please go ahead. Your line is open. Hello. Good morning. Thank you for taking my question. Coming out of Q1, we had sort of a guidance saying that you should imply a two-times negative operating leverage on earnings given the price decline in some of your segments. And following this very impressive earnings quarter that we have now, is this still valid going into the later half of the year, or has the sort of negative operating leverage momentum changed as you have been able to flex cost and better adapt to the under absorption in your plants?
So, you are referring, sorry. I didn't get the beginning, but I assume you referred to what we were saying, that if you have a significant drop in net sales, you can have even up to two-times effect on the EBIT. And if I'm looking at the units and, of course, that's a very generic statement. If I look unit by unit, some units have an even bigger drop. Some units are more resilient depending on if they are what kind of local systems are in place. So, do you pay for all the furloughed people, or do you get subsidies and similar? So, there are sensitivities in that statement, but I would still stick to the statement that if you have a significant drop, you can see it from the food service results. You will have a significant impact on the EBIT. Okay. Thank you. Thank you once again.
If there are any further questions, please dial 01 on your telephone keypad now. There seem to be no further questions at this time, so I'll hand back to our speakers for the closing comments. All right. Thank you. Thank you, operator. Thank you very much for the questions and the answers. This then concludes the event for today. I wish you a really good rest of the day, a rest of the summer, and above all, I hope you all stay safe and healthy in this environment where we are. Thank you very much for joining, and until the next time. Thank you. Thank you.