Good morning, everybody, and welcome to BioGaia featuring Management Statement Q1 2020. I hope all of you are doing fine and keeping safe in these difficult circumstances. So today, I'm going to go through our business executive summary, and then Alexander, our BioGaia CFO, is going to take you through our financials. And as mentioned before, we will take your questions at the end of the presentation. Next page, please. So how did our Q1 look like in a nutshell? So first of all, our sales increased by 7%, which is mainly driven by the sales of our pediatric products, and mainly thanks to our Protectis drop for babies. Regarding the adult segment, we have an increase as well, but in that case, it is mainly driven by Protectis tablets and, to a certain extent, by Gastrus tablets.
Regarding the sales per region, we have a very strong sales growth in EMEA, +14%, a decrease of sales in APAC, -6%, and a slight decrease in Americas with -3% due to periodization of orders and supply issues regarding Japan. And I will come back to that on page six. Next page, please. So as for many other companies, Q1 has been the key event, unfortunately, where I'm invited, and that is with the COVID-19 pandemic. And even if we cannot say that we've been directly impacted by the COVID-19 in our figures or in our production facilities, it has changed our way of working, and that way, we've been impacted, as everybody else, by the COVID-19. We are continuing to build our global coverage. We had one black spot in Latin America, a big one. That was Argentina.
We were looking for a distributor for a long time. I know we finally managed to sign a new agreement with Ethical Nutrition to cover Argentina as from 2020. In terms of research, we are continuing with our research. We have to admit that to run clinical studies these days is not exactly the best period, and we don't want to push our physicians too much. They have really something else to do at the hospital. Anyway, we had a very interesting study published regarding a group of young and healthy sailors working for the German Navy. We did a clinical study with them with Prodentis, and we had very good results showing that when they take Prodentis, they have much better hygiene, oral hygiene, and better gums. We were very happy to have this study published. This study has been done by Professor Schlagenhauf.
After the quarter, we've already published that we are not going to distribute the extra dividend. So we have the General Assembly this afternoon. And depending on the evolution of the situation, we might organize an extra general assembly later on to decide whether or not we're going to distribute the extra dividend. Next page, please. Looking at the sales per segment, as I mentioned in the executive summary, both pediatric and adults are increasing at 7%, but obviously, the pediatrics volume is bigger and therefore more significant in terms of increase. But the pediatrics increase was driven by the sales of our drop, and the sales increase of the adult products was driven by Protectis tablets as for Gastrus.
It is worth mentioning that on the sellout from our partner, that you can't see on that slide, we've had a lot of discussion regarding the increase of the sales of Protectis with vitamin D. This is probably due to the fact that there have been a lot of articles, and the consumers are pretty well aware that probiotics together with vitamin D are very good for your immune system. Next page, please. Nothing really specific regarding gross margin. Very stable for the quarter, and slightly lower 2019 versus 2018 for the pediatrics, which is mainly due to the fact that the loss of the royalties. Next page, please. Now looking at the sales per region.
Here, I really would like to emphasize again the fact that I would like us to look more at the 12-month period rather than only by quarter, because we deliver in 90 days, and sometimes one order might end up in the next quarter where it was planned to be shipped at the end of the quarter. Looking at the Americas figures, we have a minus three for quarter one. That doesn't reflect the reality. We know for sure that the sell-out in the U.S., especially, is extremely strong, especially I mean, March has been our best ever month ever. But it doesn't reflect in the figures because one of the orders that should have been on Q1 will be on Q2. I don't want them to disclose anything about Q2, but you can draw the conclusion.
If we look at the Rolling 12 figures, Americas is a strong +12%, APAC a strong +20%, and EMEA is at -6%, but we know that last year has been impacted by the royalties. Now looking at Q1, so Americas I've already commented. Regarding APAC, I mean, it's a -6%, and it's mainly driven by Japan, not because of COVID-19 that might come, but under Q2, because the lockdown of Tokyo and of the main city was decided really late in the quarter. But it's mainly due to still a small backlog coming from Sanico for our Prodentis lozenges. And anticipating your question regarding Sanico, we said during Q4 that we had a small backlog remaining for Q1, which is the case. It's limited. We were a bit concerned by the fact that Belgium has been affected a lot by the COVID-19.
Hopefully, all our partners are GMP certified and therefore are not following the lockdown rules. So Sanico has been able to produce. Having said that, they have contacted us recently to say that some of their staff have been sick, so they have a big problem of sick leave rather than a problem of serialization. So we might have something like a three-week delay for next quarter. Next page, please, and then I'm going over to Alex. We're going to show us the financials.
Thank you, Isabelle. So then we will move on to slide number nine, the P&L. So if we look at the P&L, we see that, as mentioned previously, we have a gross profit growth of 7%, which is in line with the sales growth. Our operating expenses are -1%. This is mainly if you look, if you break down, you can see it in our report. If you break down the operating expenses, you can see that we have increasing expenses for marketing and sales for R&D, mainly. However, this is compensated by lower other operating expenses, which is mainly due to the fact that we have positive currency effects on our trade receivables that is compensating some of the cost increases.
And the cost increases we have in marketing and sales and R&D are mainly related to staff that we are investing for the future and expanding our sales organization and our R&D. So this leads then to an EBIT of SEK 56 million, which is 20% higher than the same quarter last year. And the margin then is 30% versus 27% one year ago. So let's move on to slide number 10.
Look at the cash flow. We see that we have a healthy cash flow for the period of SEK 67 million versus SEK 29 million in the same quarter last year. If we look at the breakdown of why this is, you can see that we have a positive effect from the cash flow from operating activities compared to one year ago. This is SEK 17.6 million better, and this is mainly it is an effect of the better results then, obviously.
And then we have a positive effect also from changes in working capital of about SEK 20 million. And the main reason for this is that we have collected more of our trade receivables, so we have a positive effect from that. Plus, we have a higher we owe more to our suppliers, so to speak. And yeah. So that is the main reason for this. And this then leads to a cash flow for the period of SEK 67 million and a cash at the end of the period of SEK 284 million. So if we move on to slide number 11, Isabelle will continue.
Okay, so it's a summary of what has been said. We have an increase of the net sales by 7%, a strong EBIT of 56%, which is 20% more than last year, and an EBIT margin of 30% in line with our indication that we had and our target. If we move to the conclusion, I have only two messages. The first one is we have a healthy growth in sales for the Q1 and a very strong increase of the EBIT we are very happy for. We are so far seeing limited impact on COVID-19, and basically, I would say that we have some positive impact in terms of consumer demand. We have had some pressure on costs, mainly logistics and transport, to continue to be able to ship our products, but if you took everything together, the COVID-19 impact is slightly positive for BioGaia.
I just would like to take the opportunity to remind you that we have our General Assembly today at 4:00 P.M. In order to respect the Swedish Health Authority recommendation limiting the number of participants at 50%, I will not attend myself the General Assembly, but I have the pleasure to, I mean, record a film so you could see me. The same film will be available on our website as from 4:00 P.M. this afternoon as well. You will have as well the possibility, of course, to send me questions after the General Assembly. I have created an address, an email address specific for that, which is agm@biogaia.se, which is specified in the website as well. Thank you so much. Alex and myself are waiting, and we'll be delighted to take your questions.
Thank you. Ladies and gentlemen, if you have a question for the speaker, please press zero, one on your telephone keypad. We have a question from the line of Kristofer Liljeberg from Carnegie. Please go ahead.
Good morning. My question relates to the sales growth. Of course, positive to see the improvements versus the last two quarters, but I would have expected maybe to be a bit higher, especially considering your comments of the Q4 where you indicated there could maybe be some stocking effects. And you also say now at the call that there were some positive effects from COVID-19. But on the other hand, there were negative facing effects in the U.S. So is U.S. the only reason why sales is not growing more than 4% organically?
It's a lot of periodization. If you look at France, we had a very big order that was planned for Q1 that was in Q4, the contrary for Brazil. We had one very strong order for Q4 that ended up in Q1. It's really mainly the periodization issue. Sellout is strong, and we don't communicate, and we don't have all the sellout figures. But on our main market, we do have the sellout and our biggest market, like the U.S. When I said that the COVID-19 has a positive impact, it has mainly been in the country where we are very strong online because then consumers didn't need to go to the pharmacy.
So hen I look at all the countries that have performed very well this quarter, so U.S. in terms of sell-out, so U.S., China, Vietnam, they are all in common that they are invested heavily in e-commerce platform. And I had a business call with India last week, and I can tell you India was not really in advance in terms of e-commerce before I was there in February. And suddenly, as agile as Indian could be, now they started to sell online.
So, which might be one of the biggest learnings of this crisis for us is that all our focus that we've had on e-commerce are paying back and that we have to accelerate in other parts of the world that we're a bit more reluctant to sell online, like Europe, to look at the possibility because now consumers have understood that, well, basically, they can order online probiotics. They don't have to go automatically to the pharmacy.
Do you still see your business growing 10% under normal circumstances?
On the rolling 12, absolutely.
Okay. Thank you.
The next question comes from the line of Mattias Wadstein from SEB. Please go ahead.
Yes. Hello. Thank you for taking my question. Just to follow up there, is it possible to quantify the order that will occurring as sales in Q2 instead in the U.S.? Thanks.
I mean, I don't want to disclose the figures. Obviously, we know. And that's why I'm not worried. I don't want to say how much it is in percentage, but I can really see Q4, Q1, and the order books for Q2. I know I'm not worried. And I mean, I had here as well a variety on the phone. And I mean, Americans are being crazy. They've been buying toilet paper and coffee, Coca-Cola, and probiotics. So that's been very strong demand from the consumer.
And I have to mention regarding U.S. as well that the - 3 is as well coming from slight delay for our delivery to Gerber, which has nothing to do with COVID-19 or anything. It's just that we've been obliged to run an extra round of analysis at the lab, and therefore we've been delayed by three weeks. One of the Gerber orders will be delivered in just Q2 as well. It's just timing because of extra analysis that Nestlé asked us to perform.
Okay. Thanks. But so in general, the demand that presumably was strong when we had the call, you are still confident on the demand across all regions, basically, in this extreme business environment?
Yes, I am. I mean, U.S., no doubt. Europe, the question will be. I think there will be a big trend that consumers realize that health is the prior number one. And when they will have a budget of 100, I think they might allocate more percentage of that budget to health and prevention. But at the same time, people are losing jobs, and people will have financial struggle to pay back loans. So they might have difficulty to buy non-reimbursed products. So I don't know which of these trends are going to be in our favor or not, but I can definitively see that consumers are investing more in out-of-pocket products. And you will see in my presentation, General Assembly, I have a slide. It's a very long-term trend that consumers understood that you can't ask to all the time be reimbursed.
Even in countries like France, very strong where normally the government reimbursed your medicine, people understand that it's better that I am healthy not to be sick than wait to be sick to take medicine. It's a very strong trend.
Thank you very much. My last question is regarding some of the studies that are currently being conducted that is being delayed now due to COVID-19. Should we expect somewhat lower R&D spending, not in general, than I'm talking for this year?
No. It's exactly the same number. The problem about the study is that it's difficult to recruit patients. We can't ask doctors to spend time to recruit patients. But the programs are going on, and the only recruitment period is going to be longer. So when we plan to recruit 100 patients in one month, it might take two months instead of three months that we don't know. But the level of spending is going to be the same.
Thank you very much.
The next question comes from the line of Daniel Albin from Danske Bank. Please go ahead.
Yeah. Thank you. I have three questions today. So the first one, if I may, just maybe some clarification regarding the long-term implications of you not being able to participate on international fairs, face-to-face meeting with new distributors. How will that impact you maybe the quarters to come? That's my first question. The second question is regarding the rollout and geographic expansion of BioGaia Osfortis. Would like to know some status there. And thirdly, perhaps if you could give us some level of understanding on the activities in Asia-Pacific here April and beginning of May. Thank you.
Okay. So thank you, Daniel. To answer to your first question regarding congresses, so obviously, we had the biggest worldwide congress on probiotics. We're supposed to be in Copenhagen in June. The webinar has been canceled. So on the positive side, we don't have any spending to attend these congresses. On the negative side, it's true that we like to meet our key opinion leaders, and there are a lot of symposia and so on and so forth. But we've been extremely agile, and I think we are running web seminars, I mean, at least 10 every week with our KOLs answering to physicians via, I mean, our partners are organizing web seminars. And here as well, it's a learning. We don't need to be everywhere all the time and to fly our scientific people around the planet every week. It's not necessary all the time.
And so now we are, I mean, we are registering some web seminars. We have the BioGaia Academy, which is as well a digital platform where we can use the material. So we are developing a lot of material that distributors can use by themselves. So yeah, it's not ideal, but I think we've learned that we might only need to attend two or three instead of 50, and the rest we can do online. And even physicians. I mean, now we had a web seminar in Peru. We had 1,000 physicians online, something in Australia, something in Mexico. So it works. Regarding new distributors, we are already present in 107 countries. So extending our coverage is not exactly the main priority. We had some black spots. We had Argentina that now it's settled. We have Venezuela, but honestly, COVID-19 or not, we don't want to go there.
And we have U.K. and I would say Netherlands. So we are working on it. We have business meetings with different partners, especially in U.K., because that's a market we want to cover. And we have initiated some contacts that we met, and now we continue online. And we hope to be able to sign a deal physically soon. So that's for your first question. The second question regarding L. reuteri. So the good news is that at some stage, our main problem with L. reuteri was to scale up the culture. If you remember, the concentration of the strain L. reuteri is extremely high, and we didn't have enough culture to be able to roll out in more than one market. And now this culture is, I mean, this problem doesn't exist anymore. We have the quantity we want.
So now we are studying the rollout in one or two markets this year, and I hope that we'll be able to give you some more specific news in the coming quarter. And lastly, for APAC, some activities, well, they are very active, but more online. They cannot visit doctors as we speak. But they are here as well building web seminars, and they do as good as they can. So here as well, I'm not specifically worried.
Okay. Thank you. That was all for me.
Thank you, Daniel.
We have a follow-up question from the line of Kristofer Liljeberg from Carnegie. Please go ahead.
Thanks. When it comes to the cost and the COVID-19, the fact that you haven't been able to travel and there's a lot of conferences, etc., that you haven't participated in, is it possible to quantify how much that helps, so to say, the operating costs in the quarter versus a normal year?
I think the most of the saving will be on next quarter because we stopped to travel in March, so it's only one month, whereas we will not be able to travel during all Q2. So I think most of the saving in terms of traveling are going to be on Q2, and same answer for the congresses. We have still some congresses planned for Q3 and Q4 that are still going. I mean, today, we don't know. I mean, it might change, but for the moment, they are still going on, but not under Q2. So then you will have a three-month saving visible, but that you can't see in Q1 because Q1 is only one month.
So if this is the true underlying cost, the operating cost continues to grow in now mid to high-single-digits. For instance, I remember when you started at as CEO, you made some comments that there were a need to invest more in the organization, etc. So is this the new normal to grow maybe cost by high-single-digits instead of mid-teens?
I mean, we have invested a lot in staff, and now it's been, I mean, it's really visible in our figures. So if you look at the personnel, the staff, the payroll, we've been increasing the marketing team with two people, the sales team with three people. So obviously, these costs are going to remain. Having said that, we had a long list of recruitments. We foresaw that we'd see, depending on the situation and our capacity to grow the top line if we want to pursue with that recruitment. So we are cautious. We look at the top line and we try to be online with the sales, something not, I mean, not more than the increase of the sales.
Is it important for you to get back to the 34% EBIT margin in the near term by that holding back a bit on cost expansion?
I think if we maintain a 30% EBIT margin in 2020, I mean, for the year to come, we should be very happy. It's a very high percentage. I don't see any need to increase that percentage more. I would more be, I mean, interesting to look at perhaps M&A to focus on growing the top line by doing clever acquisition. That's more, I mean, BioGaia is here to grow, and that's the objective. So my objective is to grow the sales by being clever and perhaps looking at acquisition and continuing to grow organically. I'm not that much focused on cost, but I want to maintain the cost at the right level.
Okay. That's fine. Thank you very much.
You're welcome.
As there are no further questions, I'll hand it back to you again, Isabelle .
Okay. But I mean, I thank you for all the good questions, and I wish you a nice day and keep safe.