Ladies and gentlemen, welcome to the Addtech presentation for the Q2 report. For the first part of this call, all participants will be in a listen-only mode, and afterwards there'll be a question- and- answer session. Today, I am pleased to present Niklas Stenberg, CEO, and Malin Enarson, CFO. I will now hand over to Niklas Stenberg. Please go ahead.
Yes, welcome everyone to this presentation of our second quarter. First, some highlights. All in all, a stable report, slightly better than consensus. Good work from our analysts. We ended up with a sales decline with 7% in the quarter, to a large extent relating to COVID-19 and especially the very tough headwinds in scrubber. Varying business climate, but generally we saw a gradual improvement in the end of the quarter. The margin of 11.2% is well approved, in my opinion, and a good proof that our portfolio gives certain hedge in times like this, and also that our focus on cost management has been efficient and balanced. We have also kept a good pace on acquisitions so far, and we see an increased inflow of projects. Looking into sales, we could see organic growth fell with 10%, while we added 6% from acquisitions.
Of the 10% organic sales loss, our estimations show that approximately 8% is related to COVID-19. The majority of the organic drop is relating to scrubber. As I said, we had a very tough headwind from last year. If we take the scrubber effect aside, organic sales dropped with approximately 3%, and the negative effect in Q2 was less than in Q1, which means that the underlying markets have picked up gradually this quarter. Clearly, the scrubber headwinds affect us more than COVID-19. Strong markets for us this quarter, primarily energy sectors, where we have had very good development. Markets for fiber installation and telecom has been good. We had some positive effects on sales in medical and electronics relating to the increased demand in Q1 due to COVID-19. This demand we see have dropped quite significantly this quarter.
OEM sales to mechanical industry and special vehicles was weak, but clearly improved in the end of the quarter. A positive improvement in the cyclical areas. From a geographical point of view, negative scrubber effect relates primarily to Norway and Finland. That's where we have the units working with the scrubbers. Apart from that, we think it's been rather stable in Finland, reluctant in Norway, good improvement in Sweden, and positive in Denmark with the wind power as the main driver. Markets outside of Nordic, tough conditions. DACH, Benelux, U.K., still affected by restrictions, but at least we saw good improvement here as well. Month per month, a slow summer, but a very strong September, where overall demand was in line with last year's September. That trend also continued now the first weeks of this quarter.
The order stock is okay, I would say, entering into the coming six months. It has decreased a little bit, but again, it's been okay. What we can see is that it's a bit shorter visibility in the order stock than we are used to, and it's clear that there is a reluctance if customers that normally can give prognosis and longer orders are now looking it a bit more short term. That's primarily on the OEM side. CapEx related projects is still a bit slow. The large drop in scrubber sales also had a significant impact on the EBITDA and also on the margins, considering the good incremental margins we had Q2 last year.
I will talk more about that under Industrial Process, but the weak scrubber sales amount into a significant part of the negative EBITDA development, which you can also see in the graph on this picture, that Industrial Process has a large part of that. Again, if you take out the scrubber drop that gave us some extra marginal last year, underlying performance is overall quite good, I would say. Again, to keep 11.2% considering the situation is good. Apparently, we've had a strong focus on cost management, significantly less furloughs. We had approximately 800 employees affected by furloughs end of Q1, and now, as you can see, it's 260. We have changed focus, concentrating more on long-term efficiency measures, and we have reduced about 200 employees, most of them this quarter.
The effects of these measures will start to kick in during coming quarters, and especially looking into 2021. Very good work from our teams, and also a general good cost awareness, of course, in the group. It's important to know that our focus is always on long-term profitable growth. We are always considering what measures to take, and we have more actions in pipeline to increase productivity if necessary. Some short words of the different business areas. Automation, stable development, tough comparisons, but good contributions from acquisitions, but also stable organically. It's clear for Automation that it's the companies outside of the Nordics that has the toughest situation. Also, as I indicated before, Automation and also Components are the ones that are affected most by this shorter looking on the order side, and that the CapEx related projects are still on the slow side.
We have good positions in Automation, and it should be room for growth going forward. Improved margins, as you can see here as well. A good product mix and good cost control. Components, a moderate negative effect from COVID-19. Some positive effect from medical, that kept up a little bit the drop in special vehicle and engineering sector, which improved end of the quarter, as I have said. Margins, not so good now this quarter relating to product mix, but also currency effects and also increased transportation costs. Components have had some difficulties to get components home in a normal manner. It's expensive to fly home things nowadays. Energy continue to have a positive market situation, had a good increase this quarter, stable margins, and it's still infrastructure products for the grids that was particularly strong. The underlying potential on that market is still very good.
The speed of installation seemed to slow down a little bit, and that is not due to lack of demand, it's lack of installers to have time to make the installation. That is actually the bottleneck. We saw only marginal negative effects for Energy this quarter, and that's for the OEM customers, like cable installations and stuff like that. It's a positive sentiment in those sectors end of quarter. Industrial Process, you have to focus on scrubber to understand the development in Industrial Process. Last two, approximately one third of the business area sales was scrubber or almost SEK 300 million in sales. Now 75% of that sales is gone, which means that scrubber headwind certainly was very tough for this business area. It will continue to be tough going forward.
Our view at this point is that sale of scrubber will be quite flattish on this level the coming quarters. It will gradually get better in 2021, of course. I mean, from a comparison point of view. On the positive side for Industrial Process, process industry, stable, and especially forest industry doing very good. That market seems to be having a good time. Strong project stock also in 2021 on that side. Actually, if you take scrubber equation out of Industrial Process, demand was in line with last year's quarter for this business area. The loss in margins, as you can see here, is to majority the incremental margins we had last year. I want to point out here that we have deliberately waited to do too much cost cutting in these segments because we wanted to see where the scrubber market would go.
Now with the lower sentiment that we have now, we will make further productivity measures in Industrial Process. Finally, Power Solutions decreased 9%, primarily special vehicles, very important segment for Power Solutions with a heavy sales decrease this quarter. It's primarily the big OEM customers in forest mining and trucks. That has been quite slow, but we have seen a good development the last six, seven weeks. Other segments in Power Solutions are stable, I would say, all in all. Margins a bit weak to be Power Solutions, and that is the strong margins we usually have in Special Vehicle, but it should be room for improvement here since we expect that the vehicle market will pick up. Summarizing the period, sales decreased of 6%, and 7% of the organic drop is COVID-19.
The strong headwinds of scrubber, that's a main reason why it looks like it does. Okay. Looking into acquisitions, we have been quite active, as you have noticed. We completed three in the beginning of this year, we took a little break due to the uncertainties, of course. After summer, we decided to open up the flow again and finalize four in the beginning of September. We are welcoming very nice companies into the group, like Elsystem, interesting automation situation, and Bruusgaard with unique solutions in gas detection, to mention a couple. We have done two more deals now, beginning of October. We keep up activities. I would actually say that the inflow we have at the moment of acquisitions is better than normal.
We have the great position to be able to prioritize among companies that we believe have the best opportunities. Over to you, Malin.
Thank you. Financial position, some highlights from second quarter. Consistently good cost discipline. Cash flow, still stable, and we have comforting headroom in credit facilities. Profitable working capital decreased to 51% due to decrease in profit mainly. Strong acquisition pace, but key financial indicators are still in line with last year. Considering the fact that we are exposed to market segments hit hard by the pandemic and have few exposures to niches being boosted by it, we predicted this quarter to be weak. The summer period in the Nordic mechanical industry and among our OEM customers is usually slow, and this summer was highly likely to be worse than normal. As Niklas said, July and August were slow as expected, then we had a very good month in September. The outcome was overall a proof of the ability to act and adjust.
Our ambition is to adjust our costs to an expected new normal revenue level going forward with a resilient and consistent margin, rather than pumping up margins temporarily. This means that we combine short-term opportunities to save costs with long-term cost reductions, always considering our ability to maintain our competitive capacity. Each company in affected segments has a consistent plan with activities to adjust according to the situation. As a result of the development and according to these plans, we have, during the first six months, already laid off approximately 200 persons or 8% of the workforce. We have had very limited positive effects on our profits from governmental support measures in the second quarter. We believe that given the very tough comparisons regarding the margin from last year's second quarter, our organization has done a very good job in meeting up with a margin of 11.2%.
Going forward, we expect our actions taken to meet the decline in short-term savings, and actions prepared will be adapted according to the development of demand and sales on the market, keeping up a good resilient margin as well as keeping our competitive edge. Cash flow. We have had a stable cash flow so far. A few highlights worthy to address and illustrated in the graph. Our profit has decreased these last months, but the development of our working capital has been positive compared to last year. We have seen a slight increase of inventory during the period due to exchange rates, somewhat expensive transportation costs, and the caution among our companies by bringing home goods to prevent delivery problems and consequent delays to customers. We have to monitor and act on this, obviously, but at this point, we worry neither about this nor any insecurities among customer receivables.
We see here in the graph also that our acquisition pace has been high. Profitable working capital at 51%, mainly negatively affected by the decline in profit, as I said before. We follow our equity ratio, leverage, and gearing closely, and even though we have made several acquisitions, we are still able to remain in line with last year. As we can see here, we are always peaking in the second quarter. Our gearing is stable over time, even though it's not a straight line. It's reasonable level of around one, given the circumstances, we believe. All in all, high readiness for further adaptation to circumstances. Consistent cost discipline with the ambition of resilience and stable margins as well as cash flow going forward.
Network for growth is a way how we talk about how we can power our companies by Addtech. When I took on the role as the CEO, I said that we should focus on getting as much out of the network as possible. We implemented the concept of co-creation, meaning not seeking cost synergies, but to encourage companies to cooperate. The cyber attack last year gave us a push in this direction when companies shared a lot of experience over Teams and other digital channels. Now with the pandemic, this has really helped us in the digital transformation that the pandemic has sped up, obviously. We have increased ambitions here, moved sales courses from Addtech Business School into digital forms, online webinars in different topics.
We have also initiated weekly lunch presentation to share fruitful experience, like digital sales tools, et cetera, between the companies. Of course, we want to come back to meeting our customers. That is very important. Since the environment has changed, we will adapt accordingly. Very good initiatives here. This picture, most of you have seen before, showing our organization structure and how we cluster the companies. Why I want to push this picture now is to just give the feeling of that when having this organization structure really helps us in situations like this to have very good focus and close contact with the companies. We don't have to make general cheese-slicer principle or "osthyvelprincip" in Swedish. Instead, we can focus on cutting costs where necessary, but we can still focus on growth on other areas.
I have very high confidence in our decentralized model and our organization. A summary before going into Q&A. Gradual recovery, long-term cost reductions to replace short-term savings, very good pace on acquisitions and good opportunities ahead, strong balance sheet, and we expect a continued recovery. Of course, there is some uncertainties still out there. scrubber will be, as we predict at the moment, still on a low level. Yes. Let's open up for questions.
Thank you. Ladies and gentlemen if you do wish to ask a question press zero one on your telephone keypad now, if you wish to withdraw that question you may do so by pressing zero two to cancel. There will be brief pause for any questions all being registered . Our first question comes from Marcela Klang from Handelsbanken.
Hi, thank you for taking my question. You mentioned nine acquisitions so far this year. Can you talk about the margins at which these acquisitions come into the group? Are they EPS accretive? Why is the inflow better now than usually?
Okay. Sorry, the first question, was that on the margins in the companies?
Yeah, of the acquired companies.
Okay. We don't go in explaining the margins in any specific company. All in all, I can say that the margins are improving our average margin in Addtech. On the second question, yeah, that's a very good question, actually. I think one reason is that the organization model I showed you before, and with some new people coming into the organization. For example, by splitting up Automation last year, we could lift up some new team members. We have more people being out looking for acquisitions. I think that's my best answer to it. It 's just a very happy situation.
A second question, maybe it's early for you, but you mentioned that you waited with cost cutting in Industrial Process, and you will make further productivity measures now. Can you give us any guidance on the quantity maybe?
No, it's difficult to go into that, I would say. To put it like this, we have had, as you know, very strong growth last year. Part of that growth on top, we could do without increasing too much fixed cost, which means that we got that very good incremental margin. That is not possible to reduce fully. We will see a little bit reduced margin from that perspective. I don't want to go into headcounts and stuff like that. We will make productivity measures.
Thank you. That's all from me for now.
Thank you. As another reminder, if you do wish to ask an audio question, please press zero one on your telephone keypad now. Okay, as there appear to be no further questions, I return the conference to the speakers.
Okay. Not many questions. With that, we say thank you for listening and have a nice weekend.
Thank you.