Good morning and good afternoon, everyone, and warm welcome to Bufab's Q1 report. My name is Erik Lundén, and I'm President and CEO of Bufab Group, and together with me here today I have Pär Ihrskog, our CFO. I will start this presentation and give you highlights of the quarter, and then I'll leave over the word to Pär for some financial highlights. At the end I will give you some details about the different regions, and then at the end we'll open up for Q&A. This presentation will be recorded, and by attending to this meeting you agree to the recording. But before we jump into the first quarter I would like to share with you guys that we have a new regional setup effective from 1 January 2024.
As communicated at our Capital Markets Day in December last year, we have decided to go from a segment setup to a regional setup in Bufab in order to in a more efficient way execute our new strategy discovering the next solution. We will, with the new region, have a new setup, have five regions: Region North and East, that will be the biggest, approximately SEK 3.4 billion in turnover. That will be 39% of the total sales in Bufab and consists of 10 countries in Northern Europe and Eastern Europe. The second biggest region will be West Europe, almost SEK 2 billion in turnover, 22% of the group's total turnover, and 8 countries in Western Europe. UK and Ireland, SEK 1.7 billion in turnover, almost 20% of total sales in the group and 2 countries.
SEK 1.2 billion, 14% of total sales and two countries, and then Region Asia-Pacific, SEK 440 million in turnover and 5% of total sales, and consists of seven countries in Asia-Pacific region. The new regional setup are effective from 1 January. Let's continue with some Q1 highlights then. If we sum up the quarter, we think we delivered a solid profitability and stable cash flow in a challenging market. If we start to look at demand in the market, it is tougher now, and we see lower demand year-on-year. Total growth was -9.9%, and our organic growth was -10.6%. And we can see the lower demand across all regions, and we should also have in mind that we are up against very strong comparative numbers. We see a mixed bag when it comes to demand.
We see still very favorable development in energy, oil and gas, and defense, while we see weaker development and lower demand in sectors such as construction, kitchen and bathroom, outdoor, and also general industry. Our order intake in the quarter was in line with net sales. If we look at the margin, I'm very pleased to see that we continue our journey with our gross margin, with a strong improvement to 29.1% versus 28.3% in Q1 last year, and the improvement we've seen in all regions. And the main reason behind this improvement is that we are continuing doing a good job in developing our product and customer mix in the different regions, but also we start to see some sourcing savings coming in as well.
When it comes to our operating expenses, the share of those increased compared to last year, obviously due to the low demand, but also inflation pressure we have seen in the quarter, some restructuring costs, and then also in some companies we see big growth potential in the coming quarter, and we continue to invest for further market share growth. We have also taken some actions in some companies on the cost side to adjust to a lower demand, and also in some cases we will see room for improvement. So some cost adjustments have been made in the quarter, and if you see at the operating margin level adjusted, we ended up on 12.1%, of course impacted then by the lower volumes in the quarter. If you look at the cash flow, we will deliver a strong, solid at least, cash flow in the quarter.
Our operating cash flow amounted to SEK 259 million and corresponded to a cash conversion of 95%. What we have seen now for a few quarters is that we continue to strengthen our financial position and that we have now a balance sheet ready for acquisitions in the coming quarter. I will now leave the word over to Pär for some financial highlights. Please, Pär.
Yes, hello. Good morning, good afternoon. So let's look at some more numbers and graphs. Let's start with the net sales, the graph to the left. Our net sales in the quarter was SEK 2,149 million, which is a reduction of 9.9% compared to Q1 last year, but somewhat better than the last two quarters. If you break down the 9.9%, - 10.6% came from organic growth, and we had a positive currency effect of 0.7% and no effects from acquisitions this quarter. If you look at the gross margin, we ended up on 29.1% in gross margin, an improvement of 0.8% compared to Q1 last year, a stable improvement throughout the last couple of years. If we move over to the EBITDA, we had a SEK 259 million EBITDA profit adjusted in the quarter, a reduction compared to Q1 last year.
The operating margin adjusted was 12.1% compared to 13.6%, but slightly improved from Q4 last year. Then we look at the OPEX, operating expenses. We ended up on an OPEX of SEK 365 million in the quarter, share in percent of sales of 17%. That should be compared to then Q1 last year, an increase of SEK 14 million. The increase is mainly coming from inflation, but also minor restructuring costs in the quarter, but also some additional cost, as Erik mentioned, that we invest in growth. If you compare the OPEX in percent of share, it's a slight improvement from Q4 and Q3. Then we go to cash flow. We believe we had a stable cash flow in the quarter, SEK 259 million. It's SEK 42 million lower than Q1 last year. The main difference is from the underlying earnings.
The cash flow was positively affected by SEK 15 million positive change in net working capital. Then looking at the net debt and the leverage, we continue to reduce our net debt. Compared to Q4 last year, we reduced it by SEK 106 million, and compared to Q1 last year, we reduced the net debt with SEK 242 million. The leverage ends up at 2.7x compared to 2.7x last year, Q1.
Thanks, Pär. We will then go through some highlights from the different regions, and sorry, and we will start with the region Europe Northeast. So the total growth amounted to -10% in the region with organic growth of -11%, with similar performance in both Northern Europe and Eastern Europe. What we see in the region is that we have weak demand in construction, kitchen and bathroom, as well as outdoor, and still very strong demand in defense and oil and gas, mainly in Norway. The gross margin improved slightly to 27.2%, and it's driven by improved customer product mix, but also some sourcing savings coming in in the quarter. We see higher share operating expenses due to lower sales then, higher obsolescence provisions, some restructuring costs, and investments in growth in some of the sister companies. And our operating margin in the region declined to 10.6%.
If we then continue with Region Europe West, total growth -10%, -9% was organic. Demand remained favorable in defense and aerospace, and we start to see some decline in automotive and construction in the region. We continue to have very strong development in France and Czech Republic and Turkey, while Austria and Netherlands, which is flagging and also a continuous soft market development. Increased gross margin also in Europe West, ended up on 25.1%, and also here we see improvement in our product and customer mix in the region. Also a little bit higher share operating expenses due to the lower volumes and end up on an operating margin of 13.1% in the quarter.
Continuing with Region UK Ireland, total growth amounted to -7%, organic growth -11%, and this was mainly driven by the lower demand in the stainless steel business where we have an Apex operation in the UK, but also very strong compared to numbers then. We see a strong improvement in gross margin, ending up on 32.8% versus 29.9% last year. And here once again is the favorable customer mix, but also that we do a good job in working with our customer and the product mix in the different companies, so good improvement on the gross margin. Shared operating expenses increased due to lower volumes, but also some IT investments in the region. Looking at the operating margin, declined and ended up on 12.2%. Then we have Region Americas, total growth of -12%, which all was organic.
Here we see the decline mainly driven by the mobile home industry and a general a bit softer market. Strong improvement also here in the gross margin, ended up on 35.2% compared to 33.9% last year. Once again, we were doing a good job with our customer and product mix, but also then, of course, taking care of the price also on new products and offering. We also see some sourcing savings in the region in the quarter. Higher share operating expenses, if you adjust for remeasurement of some purchase considerations, we ended up on an adjusted operating margin of 12.9% in the quarter. Then finally, we have Asia-Pacific, total growth amounted to -11%, organic growth was -8%, and here we see a general softer market, mainly driven by biomedical, energy, railway, and some general industry.
Slightly higher gross margin also in Asia-Pacific due to customer and product mix, and the share operating expenses increased due to lower volumes and ended up on an operating margin of 16% in the quarter. Also a few words about M&A. As I mentioned initially, we now have a balance sheet ready for acquisitions. So what we have seen in the recent quarter is that we have more activity in the overall market, but also then for us in Bufab. So we are continually looking and have dialogues with potential acquisition targets, and hopefully we can have something to share in the coming quarter as it comes to M&A. Finally then, if we then sum up the quarter, look a little bit ahead and also a few words about our focus areas going forward. So let's start with sum up the quarter.
As I mentioned initially, we think it's a solid profitability in the quarter and a stable cash flow, but in a weaker market. It's a challenging market out there with lower demand year-on-year. I'm very pleased to see that we continue to improve our gross margin, which is, of course, a very important part in the trading business and also for us to, in the long run, reach our EBITDA target. So 29.1% I'm pleased with and how we're working in each of the regions with improving our product and customer mix. The operating margin was solid, considering the lower volumes, ending up on 12.1% and stable cash flow, and we have now, as I said, a strong financial position that we can put us in good position for acquisitions going forward.
Outlook, we would say that the outlook remains uncertain, and if you look at our comparative figures also for next quarter, it will be tough because it's a strong quarter we're up against, and we don't see any change in demand. It is still a mixed bag what we see in the market, with some sectors doing well and others are struggling with lower demand. What we do is that we look at each individual company and have plans in place to either invest if that is needed or adjust our cost base if that is needed. That has worked as ongoing all the time, and we already have taken actions in Q4 and Q1, and we'll continue to do that in Q2 as well to ensure that we're in the right position for the future. All in all, we think that we're in a good position.
We have a large and well-diversified customer article portfolio with good diversification in different industry and markets, and we still have a lot of work we can do to improve how we work with our customer and product mix, so that work will continue also in Q2. If we look at our focus areas going forward, as you all know, we implemented our new strategy last year, discovering the next solution with focus on profitable growth and adding more value to our customers, and that work is ongoing, and I'm pleased with the start. If we look at one of the first priorities that we have now is to ensure that we, in these market conditions, secure new business and take market share. We have a new organization up and running and a partly new way of working, and that is working well.
We also feel that we have good activity in the market. Times like this, when it's cost pressure and lower demands in many sectors, is a good opportunity to take market share. What we see is that our offering gets more and more relevant every day, so we try to capture this potential now and grab market share for the future. We also will continue to invest in selected companies where we see big growth potential, but as I said, also that we are around, obviously, taking actions for companies where we think that is needed to adjust our cost base. Our work also to gradually improve our margins will continue also in Q2, continue working on our customer product mix to continue with the gross margin journey that we think is possible and that we aim to also continue doing in Q2.
We also have a new updated sourcing strategy, and that work is also ongoing according to plan, and we hope to see continued good sourcing savings coming in in the coming quarter. And then also, of course, work with our efficiency overall in the group and make cost reductions where it's needed. And finally, we have also communicated that one big focus area for us is our net working capital, and this work is ongoing. We have improvement plans in place in each Bufab company, and that work is ongoing as we speak. That was the last slide from our end, so now I will leave the floor open for questions, so please.
So welcome to this Q&A session. I would like to ask you to use the function raise your hand if you have a question, and don't forget to unmute when it's your turn. We start with the first question from Johan Skoglund at DNB. Please ask your question.
Good morning, Erik. Good morning, Pär. Johan from DNB here. I have a couple of questions, and then I'll get back in line. So the first one is, if you could comment on the pacing of order intake and sales through the quarter. I mean, did you notice a difference between the beginning and end, like January and March, and could you perhaps comment on how you see customer destocking?
Sure. Hi, Johan. No, we don't see that a big difference in the quarter. It's more driven by different sister companies' position and how the customer base looks like, so not a big difference in the different months in the quarter. Was that the only question you had?
No, on destocking as well.
For destocking, yes. Yeah.
Now, I think I've commented this before. If you look at the destocking, I think that's something that's taking place for different companies throughout quite many quarters, to be honest. So it's very difficult to tell any specific trend or so. So very much depending on which sector we're talking about and, to a certain extent, which regional market. So yeah, not much more to comment on that, actually.
Okay, thank you. And then a question on gross margins. They are strong, and you mentioned better product mix, purchasing savings, some price adjustments as well. Could you perhaps update us on how the price hikes are moving along in the less profitable contracts you talked about before and if the organic decline is mainly volume-driven?
Yeah, I think, as I said, that we do a good job on the gross margin in general, and there are a few aspects of that. First of all, what we try to address in actually all the companies is to ensure that we have, as I say, a solid customer and product mix for the future where we address customers and articles that are not favorable going forward and do that by raising price tag and, in some cases, also changing a little bit the product mix that we have in different companies. So we have plans in the different sister companies, and that work is ongoing. And this, I think, is something that will be ongoing for quite some quarters, to be honest, because this is a long work that we can work with.
But so far, I think that work has paid off well, and we see that both in some of the companies are doing very well now and others that are also struggling. So across the board, we see improvement when it comes to our gross margin. And then what was your second question now? You asked me about, sorry, if you want.
Yes, the organic sales decline. Is that mainly volume-driven then?
Yes, it is. Yes, it is. It's volume.
Good. Okay. And then just a final short question then. And you talked about restructuring costs in the north and east. Could you please elaborate what this consists of? Is it possible to quantify that, and can we expect this to only be in Q1 or for Q2 and Q3 as well?
Yes, we have that mainly in the region northeast, but also some minor also in other regions. So what we do, like always in Bufab, is that we try to address companies where it's needed, and sometimes there is a cost behind that. In this quarter, there were a couple of sister companies in north and east where we took some actions, ended up in some cost. That could also happen in the coming quarters. We're not talking about any major amounts, but yes, it could happen also in the coming quarters, for sure.
Okay, thank you. That was all from me, and good luck with Q2.
Thank you.
So, Karl Norén at SEB, please ask your question.
Yes, good morning. A couple of questions from my side as well. If we start on the operating expenses side, I'm just wondering what you're aiming for here during 2022 or for 2024. It increased around 5%, I think, in Q1 here. Do you think you can keep it flat during full year, or should we expect this 5% up for the full year on OPEX?
Yeah, as Erik explained, we address our cost base where needed, so we will see some further reduction, but we will also invest in the market activities. So all in all, I think we will rather see a flat development, maybe a little bit reduced in absolute terms. And yeah.
Okay, so basically flat operating costs in 2024 versus 2023 is what you're saying?
Yeah, slightly reduced.
Yeah, yeah, that's good. Very clear. And then I have a question on the Easter impacts in Q1 here. I guess you have some less working days year-over-year. So is it possible to say how much that you estimate that the impacted growth in the quarter?
Sorry, can you repeat that question?
The Easter impacts. I guess that the Easter being in Q1 is impacting growth a little bit.
Yeah, it was not that big impact. We had one day less sales in the quarter. So maybe SEK 30 million or so.
Yeah, SEK 30 million. Okay, so not a lot. And just a question also on the—I mean, you said that there were no changes during the quarter, and now we're moving into the second quarter here. I mean, you mentioned that the comparison figures are tough, but I mean, it was still down 5% in Q2 2023. So I mean, the comparables are at least getting easier as I see it. So.
Yeah, correct.
Yeah, so I mean, organic growth should improve sequentially, right?
Yeah, so what you can say is that if you look at the different quarters compared to quarters, we had the toughest in Q1 and then a little bit easier in Q2 and then even further going down in Q3 and Q4. So that is how it looks like. But if you look at all in all and how the market situation looked like in Q2 last year versus how it looks right now, I would say that it is a more softer demand in the market as we speak. Because back then, we had more sectors that still had a quite strong demand in the market versus how it looks like as of today.
Yeah, yeah, that's good. On the acquisition side, you mentioned that we maybe should expect some acquisitions coming up here in the coming quarters. Just a question on the net debt level. You're at 2.7x right now. What would you say is kind of the max range you can go at in a tougher market, so to say?
Yeah, we have our financial targets where we say we should not go above 3.5 on the leverage. So that's the space we play with.
Okay, yeah, that's good. And all from me, I think. Thank you, guys.
Thanks, Pär. Okay, if no further questions, thanks a lot for joining our call and have a good day. Thanks, everyone.