Good morning and good afternoon, everyone, and a warm welcome to Bufab's Q2 report. My name is Erik Lundén, and I am President and CEO of Bufab Group. Together with me here today, I have Pär Ihrskog, our CFO. This presentation will be recorded, and by attending the meeting, you agree to the recording. Before we start, a few words about the new layout that we have. You will see that we have some new layout in the presentation. On the pictures, you will see a few of our 180,000 items that we have in our offering in Bufab. Just that we have that every day adds more and more value to our customers on some pictures as well. I will start to sum up the quarter. After that, I will leave the word over to Pär for some financial highlights.
I will go through the situation in each of our regions, and then at the end, I will sum up before we have time for Q&A. But before we go into the Q2, we have some news to share, and that is that we have decided to divest Bufab Lann and Halborn Metal. This was announced a few weeks back, and the divestment is the result of the strategic review previously communicated and aims to maximize the value for Bufab's shareholders. The conclusion of our strategy was that we see our trading business and complementary niche business as our core business going forward. Lann & Hallborn are two companies that are manufacturing components through turning and milling, and with automotive as the biggest customer segment. The company stands for 5% of the group's total net sales.
Looking back on historical EBITDA, the margin has been in the range between 5%-10%, and also stands for a significant part of the group's CapEx. Now I'm very pleased that we've been able to close this deal and get a new good home for Lann & Hallborn in Arbona . The transaction was closed in the beginning of July, EV of SEK 230 million on cash and debt-free basis, and will be reported in our Q3 numbers. Of course, it also helps our balance sheet. As we previously communicated, we are on our journey to also add more companies into Bufab's portfolio within our trading and niche business. We'll then go to Q2 highlights, and I'd like to start to sum up the quarter. Starting from a growth point of view, we were down 6%, and organic growth was down 6.6%.
It is a right step versus the previous quarter. We should also have in mind that we are up against strong comparative numbers. From a demand point of view, we see a similar trend as in previous quarters: favorable development in energy and defense, while weak in construction, bathroom, kitchen, and outdoor. General industry is still weak, but we see indications that the turnaround is in sight, which of course is positive. I'm very pleased with our gross margin that continues to improve and is now on an all-time high. We actually reached 29.8% in the quarter, and that is up 1.3 points versus last year. This is due to hard work with improving our value creation for our customers, of course, but also working in a structured way with our customer product mix. Also we see some sourcing savings coming in in the quarter.
We have a higher share of OPEX due to the lower volumes that we have right now and also inflationary effects. We also invest in market growth. We are in a situation right now where we both have big reduction programs in many of our sister companies where we reduce cost. At the same time, we want to take the opportunity to actually invest in market share growth. In a market with lower demand and a softer situation in the market, it's a perfect opportunity for us to grab market share when our customers are open for consolidating their C-parts suppliers. So we do both activities for cost savings, but also investments in market share growth. Looking at operating margin, adjusted, we end up on 12.2%, and the cash flow was stable, and we also continue to do a good job with our net working capital.
I will now leave the word over to Pär for some financial highlights. Please, Pär.
Hello, good morning, good afternoon. Some more details on the financials then, starting with sales, net sales. We ended up at SEK 2,142 million in the quarter, which is compared to quarter two last year, -6%, which is a slight improvement when it comes to organic growth. We had -10.6% organic growth last quarter and -9% the quarter before. The split of the 6% then comes from 6.6% organic growth, a positive currency effect of 0.6%, and no acquisitions made. Moving to the next slide. As Erik said, we had very strong operating margin in the quarter, 29.8%, 1.3 points better than Q2 last year, and 0.7 points better than last quarter. The improvement comes from our continuous focus effort to improve our customer and product mix, but also from our sourcing savings.
Our adjusted EBITDA up at SEK 261 million compared to SEK 307 million, which is a reduction of 16%. The lower margin comes from lower market demand, but also higher OPEX, which I will explain on the next slide. Next slide, please. So as you can see, our OPEX in share of OPEX share in percent of net sales ended up at 17.6%, slight increase from previous quarter, and also three points higher than quarter two last year. We see three different things affecting it. First of all, of course, lower sales, which have an impact on this. We have high inflation impact on the numbers. We are working hard to mitigate that by focused cost measures with cost reduction programs in specific companies in our group.
But as a third element, we also invest in our market growth, in our frontline sales force, and also improvement in our warehouse and e-commerce solutions. Next slide, please. Well, looking at the cash flow, solid cash flow in the quarter, SEK 427 million. The main part comes from continuous improvement in our net working capital, SEK 212 million we released in the net working capital in the quarter. And if you look at quarter by quarter, we now show five strong quarters in a row, which is helping us a lot. Next slide, please. Going on to net debt, we have compared to quarter two last year, we have reduced our net debt by SEK 750 million, coming from the strong cash flow the last five quarters. Compared to last quarter, we have not reduced the net debt.
In the quarter, we had a dividend of SEK 189 million and also a payout of an earnout of SEK 145 million. So that's the reason why we have not reduced our net debt further in the quarter. This ends up in a leverage of 2.8, which is an improvement compared to last year of 0.1 point. Thank you.
Thanks a lot, Pär. We will then jump into the different regions and start with Europe, North, and East. The total growth amounted to -3.7% with an organic growth of -4.2%. In the region, we see weak demand in Bufab Poland and Finland, but really strong demand in Tilka, that is big within the defense industry. Strong improvement in the gross margin, 2.0 percentage points up year-on-year, reaching 28.4%. And here's a consequence of good work with adding more value to customers throughout offering and also sourcing savings. We see a higher share of OPEX in the region due to cost for staff, and that is inflation. Provision made for bad debt loss as well happened in the quarter. And then also we continue to invest in sales force in the region.
Adjusted operating margin ended up on 11.7 and would have been on a stable level like previous year if it wouldn't be for those bad debts that we had in the quarter. If we then go to Europe West, total growth amounted to -6.4, organic growth of -5.1. Weak demand in Bufab Germany, Jenny Waltle in Austria, Bufab Flos in Netherlands, while really strong performance continues in Turkey, Czech Republic, and in Bufab France. In the region, we see weak demand in construction and also automotive, while defense, aerospace, and energy develop very strongly. Also improvement in gross margin in Europe West ending up on 25.3, and once again, it's due to working with our value to our customers and our offering and also sourcing savings.
Higher share of OPEX due to high cost, due to inflation, and also we continue to do investments in some of the sister companies in the region where we see big opportunities for market share growth. Also we have some warehouse investments in Czech Republic, and I would like to come back to that. Adjusted operating margin was stable at 12.4%, like previous year. Then we have Region Americas. Total growth amounts to -11.8% with an organic growth of 13.3%. Here we see really weak demand in the mobile home and trailer segment, that is RVs, but also a decline in automotive segment in terms of demand. And here is in our sister company CSG. The gross margin was in line with last year, 36.1%.
Here we see a higher share of OPEX, and this is mainly due to revaluation of additional purchase considerations in a comparative quarter, but also impact of the inflation that we are facing in the Americas. Due to that, the operating margin declined to 11.6%. If we then go to Region UK and Ireland, total growth -6.2%, organic growth of -8.6%. And here we can see a big impact for OPEX with lower market prices on stainless, but was offset by strong development for TIMCO with the market share gains. Improved gross margin of 33.2% versus 31.5% last year. Here we've been working well with our customer product mix and also sourcing savings.
Also for UK and Ireland, we have a higher share of OPEX impacted by realization of additional purchase considerations, inflation impact, and also investments with investments in e-commerce, IT, and also warehouse in the region, building a stronger region for the future. The adjusted operating margin ended up on the same level as previous year, 12.7%. If we then go to Asia Pacific, the last region, total growth amounted to -6.5% with an organic growth of -5.7%. Here we continue to see strong performance for China, but this positive impact has not been offset by the weaker performance in the rest of the region. Gross margin on the same level or more or less the same level as the previous year, 30.2%, and higher share of OPEX also in Asia Pacific, mainly due to inflationary effects and also here investments in customer offering and in sales activities.
Our operating margin declined to 12.6% for Asia Pacific. We will also then share some news in the coming quarters reports, and this time we will start with Bufab Czech. As both me and Pär mentioned now, we are in a situation where we have cost focus very high up on the agenda for Bufab, and that goes across the whole group. But we also want to take the opportunity to invest in a softer market where we see big chance for market share growth. And one example where we have continued to invest is in Bufab Czech, that have shown good progress for many years. Bufab Czech has been part of the group since 2006, and it is a trading company only operating within Czech Republic, and they have a broad offering and services and a very diverse customer base.
Looking back, they have very strong growth in EBITDA, and they are well above our group target of 14% on EBITDA level. Therefore, we have decided to continue to invest in Bufab and have now a new premises that we open up another opening ceremony in the quarter. When I talk about good progress, in this graph, you can see the development since we got listed back in 2014 for Bufab Czech. We have a net sales CAGR of 15% and an EBITDA CAGR of 24%. As we see, this is just the beginning of our growth journey in Bufab Czech, and an example where we have put a good foundation for the future. Now with a new warehouse, we will have capabilities to take on more customers and adding more value to new and old customers in Bufab Czech.
If we then go to sum up the quarter, look ahead on the outlook and also our key priorities going forward. Starting with a short summary then of the quarter. As mentioned, we see continued negative growth, while some improvement versus Q1. Very strong gross margin on all-time high, coupled with stable profitability and the cash flow. The outlook remains challenging. However, we see indications that a turnaround is in sight in the second half of the year. Our priorities remain the same. We have a quite new strategy in place that we will continue to execute on. Here we have three areas that are very important for us now going forward. First of all, continue to secure new business and taking market share.
We have, as I said, a big potential to further increase our position in many of our sister companies, and that opportunity we want to take. A softening market opens up opportunities when our customers have cost pressure and are open for consolidation. So that is what we're doing right now. Of course, also we're working on our margin. We want to continue to strengthen our gross margin. As we see it, this is just a step in the right direction, and we need to continue working on our gross margin and further improve that. And of course, also continuing having full focus on cost savings activities to ensure that we offset the lower demand that we have seen in several sister companies. And we believe if we continue on this journey, we'll put us in a very strong position for the future, especially when the market rebounds.
And thirdly, we have said also that we need to improve our net working capital, and that work, especially on our inventory, will continue and ensure that we secure a strong cash flow. And then, of course, as previously mentioned as well, we will continue also on our M&A agenda, and we are now looking for interesting targets, and hopefully we have something to announce within the coming 2 quarters. That was it for me and Pär today. We will now leave the room open for Q&A.
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 Karl Norén. Welcome to ask your question.
Yes, hello and good morning, guys. Some questions from my side. If we start on the cost side, maybe on the OPEX side, I think, especially the North region and Americas stood out with quite high OPEX here. So if you could elaborate a little bit on the drivers behind that, and you talked about it on the call, but when should we see that OPEX is starting to come down a little bit? Because I think that was what you guided for in conjunction with the Q1 results. Thank you.
Yeah. Hi, Karl. When it comes to the OPEX, as I said, we have since a couple of months now launched cost saving programs, and they are kicking in more and more. At the same time, we have quite high inflation effects in our various regions. We expect our OPEX level in absolute terms to be slightly reduced the next two quarters. When it comes to your specific question about Americas, it looks high compared to quarter two last year, and that is a lot of different reasons. Quarter two last year was rather low. We also had a revaluation of earnout that had a positive effect last quarter two last year. But also quarter two this year, on top of the high inflation we are facing in Americas, we also have some non-recurring costs such as recruitment cost, IT investments, and so on.
Last quarter or last year's quarter was very low, and quarter two this year is a bit higher than normal.
Okay, that's clear. And then just on clarification on the OPEX, when you said it's coming down in the coming quarters, is it from Q2's levels or do you mean on a year-by-year basis?
Oh, from Q2's level.
Okay. That's good. And then I just had a question regarding the provision for the credit loss in the North segment. Is it possible to quantify approximately how big it was?
Yeah, SEK 3.3 million.
Great. Then one question also on the cash flow. I mean, it continues to be very strong, and I think I ask this question almost every quarter, but how much more is there to do on the, let's say, inventory optimization and to continue to have this very strong cash flow?
Yeah, no, I believe we can do more. Of course, the low-hanging fruit is gone, but we have to climb a little bit higher, but there are still things to do there, but at a lower improvement speed, so to say.
I can also add on that, Karl, that as we also communicated before, we think that we have a journey to make to get a new way of working into our DNA when it comes to our net working capital, especially working with inventory. So hopefully, if we do a good job, we can gradually see some improvement coming. But as Pär pointed out, the big impact that you've seen in the numbers, that was due to the extra inventory built up during the pandemic and after. Of course, that was an extreme case, but hopefully we'll be able to see continuous improvement due to the new way of working that we gradually put in place in different sister companies.
Yeah, that's good. And then just to finally one from me on the earnout that you paid during the quarter. Is that related to the TIMCO acquisition?
Yes.
Okay. Good. That's all from me.
Johan Skoglund, welcome to ask your question.
Thank you and good morning. Johan Skoglund from DNB here. The first question is on the improving gross margin. So it's just below 30% on group level, which you had now in Q2. Is this where you're aiming, or do you see more improvements still to come?
We want more improvements to come. I think that the value that we bring to our customer becomes more and more relevant every day. And also looking ahead, I don't see any reason why we should not be able to continue on this gross margin journey. So no more to come. That is the plan.
Very good. Sounds like a confident answer. So the next question relates to the general industry turnaround that you see. Well, you see the beginning of it. Could you please elaborate whether any subsegments are performing better? Are you seeing any end markets well or worse? Or just if you could speak freely about that.
Yeah. First of all, I think that, as I also mentioned here in the presentation, we continue to see the similar trend where we see a few segments doing extremely well, and that is like defense and energy, for example, also oil and gas. And then we have others that are still running at a very low level, outdoor, kitchen, and so on. And then we have a big segment in the middle. We can call it general industry. And here we see indications of improvement. Still uncertainty in the market, obviously, but listening to our sister companies and to the market, we see overall some lights in the tunnel. So that is the situation. And there is no specific industries I can mention, more or less the overall situation in general industry.
Okay, good. And then just a clarifying question on the turnaround. That appears to be showing in all segments now, but Americas. You mentioned automotive, RVs, and trailers, for example. The general turnaround comment on general industry, does that apply to America as well, or do you see any other trends in that region ahead?
In Americas, we have a little bit different exposure. We are more exposed to RV industry and a little bit more than automotive compared to other regions. So from that point of view, it will be a little bit different situation for Americas due to the current exposure that we have in Americas.
Okay, good. Thank you for clear answers to my questions. That was all for now, and good luck with Q3.
Thanks, Johan. Okay, if no more.
Karl, can I have a question again?
Yes, please.
Good. I'm just wondering a little bit on this divestment here of Bufab Lann and Hallborn. You said it's now closed. So I'm just wondering, is all of these businesses, all of them, their reporting is in the segment north, right?
Correct.
Yes. And can you maybe give us some kind of guidance on how we should think on how this will impact the numbers in the coming quarters or so? Because I guess the gross margin in these companies are a bit maybe lower than your other. So if you could go through that a little bit, it would be quite helpful, I think.
Yeah, it's not that much on the gross margin. It's more actually on the EBITDA level where we see the biggest difference, actually. So the gross margin in manufacturing business is not that bad, but on the EBITDA level, it is lower. And as we have communicated before, we have been on a level between 5%-10% EBITDA on the manufacturing business, and it is 5% more or less of our total turnover. So from that point of view, it will give an impact on the profitability level for Region North in the coming quarter.
Yeah. And then with that, as I said, you should see an improving margin there in your larger segments. So I'm just wondering, do you think it's fair, or do you think it's possible to reach, let's say, stable EBITDA margins year-over-year in the second half of the year? Or will that still be tough?
Stable EBITDA margin. Yeah. What we see is that. Was your question specific for the?
I mean, in general for the group, I guess. Because I mean, now you lost, I think, 130 basis points year-over-year. But that's mainly related to Americas, or that's the big delta, so to say. While West is stable, UK, Ireland is quite stable. East is down.
Okay, the question is general on the group?
Yeah.
No, but as we have communicated, we see a chance to continue to gradually improve our gross margin on the OPEX level. We will continue to cut, but at the same time, also continue to invest. And as Pär pointed out, all in all, we see some reduction in the coming two quarters, but it will not be significant. And then, of course, we have the uncertainty that we can't control, and that is how the demand will look like. That will set how it will end up. But we are satisfied with the work that we're doing overall. We need to continue working hard on the cost savings initiatives and manage cost overall, but at the same time, also be clever, invest for the future.
That is what we aim to do now also in the coming two quarters, and hopefully creating a stronger Bufab.
Sounds good. Good luck with that, and have a good summer.
Thanks a lot. If no further questions, then thanks a lot for joining, and wish you all a nice summer. Thanks.