Hello and welcome to the presentation of the Third Quarter Result for BEWI. My name is Christian Bekken, and together with me, as always, our CFO, Marie Danielsson. Today we will touch upon three things. One, the market is recovering. Two, we deliver good results in our downstream, but somewhat weak in our upstream units. And three, what we do to improve and position ourselves for growth. Let's start with a quick market update. Here, there are plenty of signs pointing to the right direction. The inflation is pretty low for the quarter. Profitable growth is a top priority in BEWI. We are constantly working to improve profitability and positioning ourselves for growth, both organic and structural. To be positioned, we are working on operational, structural, and financial initiatives, which we will dive into more today. A few words about our numbers.
Net sales were EUR 252 million for the quarter, down by 5%, which we are relatively pleased with, given the markets. EBITDA was over EUR 23 million, slightly down from last year. However, we deliver an improved EBITDA margin in what has been a very difficult market, up from 9% to 9.2%. In summary, weak results from Raw and Circular, which is why we cut costs, while downstream is solid and has a positive development, both due to the efforts of us and because of the markets' recovery. Let's look at the operational highlights for our segments, starting with the upstream units, Raw and Circular. We are not pleased with the result in Raw. Therefore, we have launched a comprehensive cost-cutting program. Through this, we expect annual savings of EUR 6 million. We see room to increase our efficiency, helping us to become more competitive and to improve profitability at current levels.
I want to underline that we expect demand for EPS as an insulation material to increase significantly when the activity in the construction industry picks up. The EU has a goal for the building sector to be climate neutral by 2050, and to reach this target, both new and old buildings will need to be better insulated. We are well on the way to produce certified material at the new production line in Etten-Leur. Here, we are producing both white and gray EPS, both with recycled content, of course. For Circular, this quarter, we collected around 9,000 tons of material for recycling. This is more than the volumes we produced in fish boxes in the quarter. In the past, we have struggled to use recycled material in our production, but we have now increased our production capacity in Circular to more than 35,000 tons with a new line in Norrköping.
We have downstream units that want to use more material. The biggest challenge today's market is collecting enough material, along with, of course, the margin situation. The third quarter was a good operational quarter for Circular, but difficult financially. This image shows the ICF wall system, which is a popular insulation solution in the Nordics. Sales of wall systems will come after the foundation systems. Most of our key insulation markets are recovering, with the exception of a few countries, like for example, Germany. There is a lot of positive development happening in our company. This summer, we kicked off our new production line for construction boards in Belgium. We have been sold out of this product, so we expect to see increased sales from the capacity increase we have done.
We have also launched a bio-based version of these boards, and there is a lot of talk about using recycled material, but we also believe in increasing the use of bio-based materials. It is environmentally friendly, and it has a favorable cost structure. Finally, let's take a look at our packaging business. Packaging, as you know, has exposure to many different markets, where the seafood industry is the most important one. Slower volumes of salmon have a direct impact on the number of EPS boxes sold, and as mentioned in the first half of this year, we expected stronger volumes and margin in the second half, and we are delivering on that. The HVAC market is still slow, but we believe we have passed the bottom. This is a market we are very optimistic about. New heating and cooling solutions are critical for achieving more energy-efficient buildings.
That's why we also have positioned ourselves for growth here through capacity investments in Sweden and Portugal, and these have been done based on customer contracts. And volumes and results will come in the years ahead here. We also announced a strategic review of our automotive business this summer. We have a good process, and we are on the way here, and we'll share more details on that when we can. Another strategic review has led us to merge part of our packaging business with STOK Emballage. A couple of weeks ago, we announced that we entered into an agreement to merge the trading part of our packaging business with a Danish company, STOK. This includes our wholesale operations of, as they call it in better words, the value-added distribution services. We are doing this because the products of BEWI and STOK are very complementary.
This allows us to offer to our customers a much wider range of products. This is also one of the reasons why we are keeping 15% ownership. The other reason is that we see a great potential for synergies and growth, and therefore also enhanced value. Through this transaction, we also get a chance to focus more on our core business in seafood packaging, which is the fish boxes. This area also has a better margin profile. In addition to the ownership stake, we'll receive EUR 20 million in cash when the transaction is completed. At BEWI, we always want to position ourselves for growth. We have a long track record for doing acquisitions. The past couple of years, it has been less transactions, both due to the market condition and because we have been working on integrating and realizing synergies.
But in parallel, we have been working on positioning ourselves to acquire some of those companies that have not been so successful in adapting to the difficult market as we have. Operationally, we are setting ourselves up by cutting costs. We do this to improve profitability and be more competitive. And we also optimize working capital and limited our CapEx, and that is to increase our cash flow. Strategically, we are reviewing parts of our business to see which areas we can develop better together with partners. And this will allow us to focus on our core business and to allocate time, money, and management focus to the areas where we have the, or we see the highest potential. Financially, we are looking at measures to further strengthen our balance sheet. We now have an agreement in place that gives us more flexible financing for our working capital.
This is an attractive financing for a company like ours. It is also cheaper and something we are considering using more of going forward. We have said that we aim to have EUR 150 million in available liquidity to be in a position to seize the opportunities we believe in, and we are well on our way to achieving that. In summary, we continue to deliver on and work with what we consider to be our key priorities for long-term growth. We will increase collection and use of recycled material. We take responsibility, and at the same time, we have given ourselves a competitive advantage. We are adjusting costs to the markets, demonstrating an ability to strengthen our position. We have started to capitalize on our investments. We don't need further investments when the market activities pick up. We can ramp up the production at short notice.
We have strengthened our financial position, and we will continue to do so. And we are also going to take advantage of that position when the market rebounds. Then we will reduce our exposure in some markets while increasing in insulation, a market we believe very strongly in. And by that, I'll leave the word to you, Marie.
Thank you, Christian. Looking then at the financials. As Christian said, we experienced that the insulation markets in most regions are now recovering. In the third quarter, net sales ended at EUR 252 million, which was 4% lower than last year, with smaller movements than in the respective segments. And as always, this is a mix between volume and price, but where we as a consolidated group still can conclude on slightly increasing sales prices and slightly decreasing volumes.
We recognize different developments in different industries and regions, but in general, we experience a greater seasonal impact from the summer holidays, which we believe then is a consequence of the soft markets. EBITDA decreased EUR 0.9 million compared to last year. This is driven by the upstream segments where the high competition for the volumes put pressures on the margins, and where we now, as Christian mentioned, will take additional measures to reduce costs, to adapt to continuing soft markets. We are though very happy to see that the EBITDA is improving in our downstream segments. Insulation had EUR 0.5 million less in contribution from shares in associates, but underlying EBITDA in the operation increases, and this solid performance in our downstream is the result from actions taken to reduce cost and capacity to adapt to the market in combination with a very strong margin management.
Looking then at segment Raw, volume continued to be on a low level, and that is following the large exposure to the building industry. Volumes are 5% approximately lower than in Q2, and this is a larger impact than we normally have from the seasonality perspective explained by the longer vacations. Sales in September were also impacted by decreasing price expectations into Q4, and that made the customers keep their levels low, inventory levels low. While the market prices for EPS have increased approximately 3% compared to last year, which then impacts net sales positively, the styrene prices have increased approximately 10%, and this impacts, of course, the gross margin negatively. We continue to be very cautious on the cost side, and at all times we try to optimize the efficiency in production.
Of course, we have already done a lot to reduce fixed costs, but as Christian said, we have recently now launched a cost reduction program where we expect to save an additional €6 million per year. This means then that EBITDA ends up at EUR 1.9 million. If we compare to last year, it is the lower volumes and the pressure on the gross margins, but it is positively impacted by that we have monitored the costs very carefully and that we have improved production efficiency. Moving into Circular then. Financially, Circular continues to operate in headwinds, but we must see this as an investment. To be able to close the loop in the industry, we need to increase the usage of recycled material in production, and we are step by step building up the infrastructure to be able to do this.
We are extremely proud of the increasing collection in the quarter, 9,000 tons, and we are also using more and more recycled material internally in our insulation division, which you can see then from the increased portion of the internal sales. Sales decreased 9% compared to last year. This is driven by lower sales prices. This also impacts then EBITDA, and in the current market situation, where there is low availability on waste, there is a low demand in the building construction industry. In combination with relatively low virgin prices, it is extra hard to reach profitability throughout the value chain. If we then move into downstream, starting with insulation. Insulation continues to deliver strong results given the market conditions and continues to improve the underlying performance. Yes, sales are 5% lower than last year. Yes, volumes are net somewhat lower compared to Q3 last year.
However, important now from a market perspective, and I repeat what Christian said, most of our key operating markets are now starting to recover, and it's also important to highlight that the volumes in Benelux are flattening out, and this is an important market to us. I would also like to highlight the focus we have on margin management. In addition to adapting cost and capacity, we actively work on managing our margins. This means that we adjust prices, of course, but it also means that we say no to volumes that are not profitable enough. EBITDA is declining slightly from last year, but this is only due to the lower contributions from the shares in associates that we have in entities in Germany and France, while the full-owned entities we have are performing better compared to last year, even with some lower volumes sold.
It is very positive to note that where we have had the toughest markets, that is the Nordics and in Germany, and where we have made the biggest turnarounds, those are also the entities where that is now contributing the most in relation to last year. Looking into Packaging & Components, the development is stable on an aggregated level, but there is a mixed picture between the different products segments. Sales are in line with last year, but if you look at the EBITDA, it's a fantastic development with an increase of 11% compared to last year. The fish boxes are increasing as expected in the third quarter. This is after a slow start in the beginning of the year, and earnings-wise, we get an extra positive push following the normal price lag that we have from the underlying raw material prices.
Automotive continues to develop well, increasing volume, improving results, and within the industrial segment, we do experience volumes slowly to improve in most regions, but still somewhat lower if we compare to last year since the biggest downturn in the market was first noticed in the third quarter last year then. If we then move on into the consolidated P&L, a few things to highlight here. The cost base is decreasing. Raw materials, including goods for resale, as a percentage of sale is at a stable 50%. Other external costs, including personnel costs, decrease. This is partly explained, of course, by lower volumes, but also a consequence of cost reductions. Operating income has increased compared to Q3 last year, and this is even when we have less contribution from the joint ventures, and our financial net has increased, and this is mainly following increased leasing debts.
Looking at cash flow a little bit closer, operating cash flow in the third quarter amounted to EUR 49 million. I will come back to your balance sheet on the following page, but the operating cash flow is impacted by a cash release of EUR 40 million, and that is following a change in our financing related to a receivable financing scheme. This means, like for like, an operative cash flow of EUR 9 million in the quarter, and that is slightly lower compared to last year, explained by the working capital development and the timing of payments of accounts receivables. We continue to take measures to reduce the inventory further, even if the development in the quarter was rather shy. We continue to reduce our CapEx levels, but we can say or see here that the CapEx year to date has been EUR 23 million.
That is higher than the targeted EUR 20 million, but EUR 6 million of this is explained by strategic important investments related to new customer platforms within automotives, so excluding this CapEx, its CapEx amounts year to date to EUR 17 million, then on the balance sheet and looking then at the capital structure, I believe it's well known that it is a key priority to us to strengthen the balance sheet, but it is also important to decrease the cost for financing and at the same time having a financing that is fit for growth, so besides the operational measures to support above-mentioned targets with the restructuring schemes, with cost consciousness, we reduce the CapEx we have in the quarter, entered into a receivable purchasing scheme.
This should be seen as a starting point for finding a financing structure that is more cost-effective and more flexible in relation to financing a growing working capital. The frame for this receivable purchasing scheme is EUR 75 million, and by the end of September, we had utilized EUR 40 million under this scheme. By these measures, we have been able then to reduce net interest-bearing debt ex IFRS with approximately EUR 35 million, and leverage is reduced from 4.8 to 4.3, while it hasn't impacted return on capital employed, and that is only due to that this KPI we calculate based on a rolling 12 average balance sheet. With that, I leave it back to Christian again.
Thanks, Marie. Now let's move on to our strategy and outlook. Here in the picture, we are at a new Circular facility in Norrköping in Sweden, which we opened this summer.
In the background, you can see compressed EPS. This we are recycling at our facility so that it can be used for new products in BEWI. Today, the facility has a recycling capacity of 10,000 tons, which gives us a 40% increase in our recycling capacity. For those of you following us closely, you've seen this before. We have a strong ambition for growth, and we believe that the biggest growth will come from the need for more energy-efficient buildings. Remember that almost 35% of CO2 emissions in Europe come from the building industry, while only 2%-3% come from the airplanes. If Europe is going to achieve climate neutrality by 2050, both new and existing buildings need to better be insulated, and that is to become more energy efficient. We believe that this will be an exceptionally strong market in the long term.
We are now in a good position for long-term growth. We are continuing to cut costs to be even more competitive. Based on our current structure, we have the capacity for much more volumes across all divisions without needing to invest more. And we have a competitive advantage to Raw and Circular, which gives us access to recycled material. Plus, we have a clear growth strategy and some solid acquisition targets. In summary, the market is still challenging, but there are clear signs of improvements. Downstream is delivering better results, and Upstream, where results are weak, we are implementing strong measures. We are refining our focus on the most profitable part of packaging, and this positions us well for growth. I am pleased with how BEWI has adapted through these difficult years so that we are now in a better position to face the future.
With that, I leave the word to you, Charlotte, for questions.
Thank you, Christian. We have some questions from the webcast, and for those of you listening in, please post your questions through the webcast. The first question is from Nicolas Champvillard in Spread Research. Could you please elaborate on the terms and conditions of the receivables financing agreement? In particular, is it a non-recourse off-balance sheet line? And can you also please remind of the maturity of the RCF? Yeah. So, Marie, I guess.
Yes. This agreement is an uncommitted credit line. It's linked to the RCF that we have. It's a frame of € 75 million. It is a non-recourse. It's off-balance. Those are sold. And the last part, The maturity of the RCF. Maturity, yes. That's about one year over. It's in Q4, Q1, 2025, 2026 is the maturity.
Thank you.
And then we have questions from Susanne Høgen in SpareBank 1 Markets. The first one is related to the cost reduction program in segment Raw. Could you elaborate a bit on what it's about and where will you cut these costs as you have already done quite a lot of cost reductions, Christian?
Yeah, I have to begin with saying that it is always difficult to cut costs. We are also here, of course, cutting in employees, and that would be difficult for those persons that's about. But we have spent a lot of time, effort into developing Raw into becoming a recycling, not recycling plant, but a recycling structure as well.
We are cutting costs to become different in the way that we now want to be the most cost-efficient r aw material producer, not only being a producer producing recycled material, but also a producer producing the most cost-efficient material in Europe. There are many things we are cutting in, administration in personnel, in shifts, and so on, but it is a general plan to become one of the most cost-efficient producers in Europe.
The second question from Susanne is about the cost reductions related to the sales of the traded packaging part. We have sold or will sell, merge the traded packaging business, merge it with STOK Emballage. We have communicated that we will maintain 15% ownership, and her question is related to what will we save in costs related to that divestment, if we can call it.
Yeah, of course, this is two trading companies merging together, and the highest cost for companies like this is sales and costs related to sales. There are two organizations merging together, and of course, we used more costs on having that organization stand alone in our portfolio than it will be together. So the cost cutting here will be related to sales costs.
Okay, thank you, Christian. Then we are, it's a question about the insulation and construction. How much can you increase the production without increasing the fixed cost materially in this segment?
The production capacity is a utilization rate between 60% and 65% now, so we can increase the production costs without having any additional costs on it between 35% and 40%.
Okay, and then it's about the available liquidity.
Susanne Høgen from SpareBank 1 Markets, you have a target or an ambition, excuse me, to have EUR 150 million in available liquidity by the end of 2024? By the end of Q3, you had approximately EUR 95 million. So how will you achieve this target, and will you achieve it in Q4, or is it a more long-term target?
Of course, as I said in the presentation, we see an increase in volumes also, and therefore we will have an operational effect during Q4. We will also have a natural working capital effect like we have every Q4, and we will have the, depending on timing, of course, but the closing of the transaction with STOK. So I'm not saying 100%, but it's a timing issue when we will achieve that goal.
Okay, thank you. And then the last question for now from Susanne. It's about the collection in Circular.
You have collected a total of 20,000 tons of recycled EPS for recycling so far this year. What are your thoughts about the SBT target, which is the target related to the sustainable financing to collect 45,000 tons by the end of 2024? You have communicated earlier this year that you were comfortable to achieve this target, and what are your thoughts today about the market for collection?
First, I have to say, as I said in the presentation, we have succeeded with our goal, so we will reach 45,000 tons. I cannot promise anything in timing, but as we see it now, we are continuing to grow, and we are discussing some strategic opportunities to reach the target as well.
Okay, thank you, Christian. We have no further questions from the webcast now, so then we thank you for listening in, and we'll see you next quarter. Thank you.
Thank you. See you next time.