Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's presentation of the Q4 Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star and one on your telephone. I must also advise you that this conference is being recorded today, Friday, the eighth of February, two thousand and nineteen. And I would now like to hand the conference over to your speaker today, Jörgen Rosengren. Please go ahead.
Thank you. So my name is Jörgen Rosengren. I'm the CEO of Bufab. I'd like to welcome everybody to this conference call, where we intend to present our numbers for the fourth quarter of 2018. Thank you for joining. Throughout this call, we'll be referring to our PowerPoint presentation, which is available on our homepage, bufab.com, under the Investors tab, Investor Relations tab. And we'll also be referring to the page numbers of that presentation, and we'll start on page 2. So the fourth quarter in 2018. Oh, yes, and I should say also that I'm here with Bufab's CFO, Marcus Andersson, who will be handling this call together with me. And at the end, as the operator said, there will be room for questions.
Now, on page two, then, the fourth quarter of 2018 was a strong quarter in absolute terms. We enjoyed continued strong sales growth, both from acquired companies, but also continued organic growth, albeit at a slightly lower rate than earlier in the year of 2018. We saw in the market a flat demand relative to the third quarter, but a little lower than the second and first quarter in the year, and also slightly lower, just slightly lower than the fourth quarter of 2018. It says in the presentation, but it should, of course, say than the strong fourth quarter of 2017. And that is, I think, in one way, it's comforting because, of course, there are many external indicators of a weaker demand.
But we have to say that as yet, we have not seen a very strong signal of that anywhere. And also, in the fourth quarter, we continuously enjoyed increased market share. We had good order intake, and if we saw a kind of a flattening out and maybe even drop in the end of the fourth quarter, we attribute that mainly to the uncertainty among the customers and their unwillingness to take on inventory for the year end, because we also saw a very strong start to January in this year, 2019. And we have seen also that our acquisitions continue to contribute well both to sales and results. Our operating profit improved by 14% year-on-year.
We had a low gross margin, which we'll speak a little bit more about in a moment, but we also had a little lower OpEx percentage. And across the segment, it was so that segment International had a very strong profit development. And in Sweden, we had a weak gross margin, which hurt profits there. But in total, we had what we call strong operating profit growth with a slightly lower margin than the last year. We made one more acquisition in the quarter, a company called Rudhäll, which we landed in October. And as a result of an overall strong year, the board is proposing to increase our dividend to, with 25% to, SEK 2.50 a share.
The decision for that, of course, will be taken by the annual general meeting later this year. So that's the quarter in summary, and now we'll hand it over to Marcus Andersson, who will talk a little bit, more about the financials before we go into the outlook. So please, Marcus.
Thank you, Jörgen. If we take a look at page 3 and take a look at the financial highlights for the group, we can see that the order intake increased with 14% compared to the comparable quarter, which was slightly lower than the increase in net sales. Net sales, on the other hand, increased with 17%, where 4% was organic. It should be noted that the comparable quarter, Q4 of 2017, was a really strong quarter when it comes to organic growth. The underlying demand was in line with Q3, but lower than the strong quarter of 2017, as said. The market share considered to be somewhat higher.
If we take a look at the GP, we can see that the decline in the gross profit margins was fully attributable to Segment Sweden, and we will talk more about that in a moment. It is due to the negative effects of rising raw material prices together with the weak Swedish krona, and also due to a lower gross margin in the newly acquired company, Rudhäll Industri. The lower gross margin was more or less offset by our lower OpEx, meaning a better operational leverage for the group as a total. This all resulted in an EBITDA of SEK 82 million, meaning a slightly lower EBITDA margin compared to last year. But EBITDA, however, grew in absolute figures with SEK 10 million or about 14%.
If you take a look at the EBITDA bridge, you can see that currencies contributed with +3 million SEK, volume with +6 million SEK, price cost mix and others, minus 6 million SEK, and acquisitions, and by acquisitions, we mean Kian Soon and Rudhäll, contributed with 6 million SEK. If we just quickly review the full year figures as well, January to December, we can see that all in all, 2018 was a really strong year. Net sales increased 18%, whereof 8% was organic. This, together with an unchanged gross margin, gross profit margin, and an OpEx percentage, resulted in an EBITDA that grew with...
Sorry, with 18% to SEK 367 million, which is another all-time high for the group, and the EBITDA margin, as such, was unchanged compared to last year. If you go to page number four, we can now see that we have seen growth for 22 consecutive quarters for the group. Not only growth, but also organic growth, and really good organic growth during the last four quarters. And the profit development has been keeping more or less the same pace as the increased net sales. So the total development over the last couple of quarters has to be considered to be very good, strong.
If we take a look at the next page, page number 5, and have a look at the Segment International figures, we can see that Segment International's order intake grew by 18%, which is more than net sales, that grew with 15%. Out of those 15%, 5% comes from organic growth, and 5% from the acquisitions. The underlying demand in the segment was somewhat higher, and the market share was higher compared to corresponding period last year. The gross margin rose to a solid, you have to say, 30.6%. And the reason for this, these good figures are a favorable exchange rates in many of the companies in international.
And also that we have been able to compensate for the rising purchase prices by price increases to customers. OpEx was somewhat higher, but all in all, the result for the quarter leaves us with an EBITDA of SEK 68 million, which is 28% up compared to the corresponding period. If you take a look at the EBITDA bridge, currencies contributed with SEK 6 million, volumes with +SEK 4 million, price, cost mix and others -SEK 2 million, and acquisitions by SEK 6 million. If you take a look at the full year figures also for international, we can see that the development in international has been really solid during the full year. Net sales increased with 22%, whereof 9% was organic.
The gross profit has increased with 1 percentage point, which is, of course, very good. And on top of this, we have seen lower OpEx, meaning a good operational leverage. And that is also the reason for us to see a really good development on the EBITDA side, both with a heavily increased EBITDA margin and an EBITDA that grew in absolute figures from SEK 203 million to SEK 290 million, or by 43%. If we take a look at page 6, we can see that segment nternational has now shown growth for 23 consecutive quarters. Also organic growth, and good organic growth during the whole of 2018.
If we take a look at the right graph, we can also see that the EBITDA development for the segment has been really good during the year, driven by a good development in gross profit together with an operational leverage. It's really nice to see. If we turn to page 7 and look at Segment Sweden's figures, we can see that the order intake in Sweden was quite low in the quarter, or at least lower than net sales. Net sales was up with 20%, and about 19% or more or less everything you can say comes from the acquisition of Rudhäll. The gross profit development is, of course, not something that we are happy about.
About half of the decline, compared to the parallel quarter, was attributable to the acquisition of Rudhäll. This is due to that Rudhäll has a lower gross margin, but an operational margin that is comparable with the rest of the segment. Organically, the segment's gross margin was unchanged compared to the third quarter of 2018. The organic decline, compared with the preceding year's quarter, was attributable to rising prices, rising purchasing prices in recent quarters, and the weakened Swedish krona relative to the fourth quarter of 2017. Despite significant price changes to our customers, within the segment, we have not succeeded in sufficiently offsetting the negative trend we have seen the last quarters. OpEx, on the other hand, was in line with prior year.
But all in all, if you take a look at the EBIT figure, as a result of the negative development of the gross margin, EBITDA decreased from SEK 38 million to SEK 28 million, meaning an EBITDA margin of 8.7%. All in all, an unsatisfactory result, of course. If you take a look at the full year, there has been more or less the same trend in Segment Sweden during the last quarters. Net sales, good development, of course, up 11%, 6% organically. But, as already said, we're not happy with the gross profit development and EBITDA margin development. And we-
... needs to, going forward, need to have a strong focus on cost savings and efficiency in order to restore the gross margin over time. If we take a look at page 8, we can see that the segment has shown the growth now for 11 consecutive quarters, also organic growth, which is good. But as said, the last couple of quarters, raw material prices and a weak Swedish krona has pushed down the EBITDA or the EBITDA margin to an unsatisfactory level.
All right. So let me speak then, this is Jörgen Rosengren again. On page 9, a little bit about our acquisitions. We have made in the past years, approximately 2 acquisitions a year.
And we're also very glad that we can say now that many of these acquisitions, in fact, I think all of them, have contributed quite well since we acquired them, which is not always the case with acquisitions, as everybody knows. So, we are quite happy, in fact, about our acquisition strategy, and therefore we continue with it unchanged. And we also acquired then towards the tail end of last year, this company, Rudhäll Group, which contains both trading and manufacturing activities, and has a footprint in Sweden and China, and contributes SEK 200-odd million then to sales, or contributed pro forma last year then, SEK 200-odd million to sales, and had a healthy operating margin.
We think that this is a good addition to Bufab, and we also hope that Bufab is a good match for Rudhäll. Now, we will continue to look for acquisitions. We have what we think is a good pipeline, and are optimistic to be able to continue this acquisition strategy also going forward. To wrap up then on the financials for 2018, we can turn to page 10 and look in total at the EBITDA bridge from 2017 to 2018. Here you can see it both for the quarter, last quarter, and for the full year, and for both our segments and so on. But I will focus now on the full year for the group.
Note then, that the currency and price cost mix other in total had a negative effect on profit. It's +18, +18 with currencies, but unfortunately, -60 price cost mix. Our bottom line on that, I think, is that we have been able to offset for the group the rather hefty raw material price increases we saw towards the tail end of 2017 and during all of 2018 by price increases to customers which have been large. And we have also had a net positive impact of the currency. So in fact, we've held our own, and also as Marcus pointed out before, our gross margin has, in fact, been unchanged in 2018, in rather turbulent circumstances, about which we are, of course, happy.
We have, however, also increased on cost base, and most of that cost increase in the OpEx, as apart from acquisitions and such things, of course, which impacted on a as reported basis. But pro forma, most of the OpEx cost increase has gone into investments in what we call leadership, meaning the initiatives that we undertake to reach our strategic ambition to be the strongest company in our industry during 2020. And acquisitions, as you see, have also contributed well, both in the quarter and in the full year. And in total, we reached a healthy increase of the EBITDA to SEK 367 million, another all-time high.
Looking at the next page, which lacks a page number, but it is page 11. We thought it would be good to look backwards in time now at the end of the year and see how the development has been in the past years. As you can see, then we've had 5 years, 5 full years, in fact, with strong growth and strong organic growth also. Not only that, but all of those years have had 4 quarters in them, which all of them also had good growth. That brings, if you look backwards, the 5-year average then up to 12% or so, which is a healthy number, we think, and also in line with our financial target, which is to grow on average 10%.
It should be noted also that during these years, there have been some good industrial growth years, for instance, 2017, but also some very bad ones. This is a growth that clearly outpaces the industry and our competitors as well. Our margin has been, over these years, relatively stable, we think. We had a dip in 2014, which we're unhappy about, but it's now a long time ago. Since then, we've had stable margins, but it should also be noted, of course, that we have quite a distance yet to go to reach the 12% EBITDA margin target that we have set out to get to. And finally, earnings have developed, as you can see, also quite favorably in absolute terms. Here, we take those earnings per share.
We have also, since we started with our first dividend for the fiscal year of 2014, increased our dividend every year, and the board proposes to increase it further, for the fiscal year 2018. The dividend as a percent of profit is also financial targets, and there, as you can see, we're keeping within the 30%-60% limit that we've set ourselves for the dividend ratio. And then, in summary, I guess, on page 12, we can say that 2018 was a good year. We continued the execution of our strategy, and we made really significant investments in the future in the leadership strategy. We saw, as a result, we feel of earlier investments in our sales organization, primarily, but also in other areas, strong growth...
and the growth was driven by acquisitions, but to a very large extent, also by increased market share across many of our subsidiaries, and across many of our markets, and also good market demand. We had stable margins, so we were able to offset cost increases that we were forced to take by the corresponding price increases to customers, which again, we feel is a sign of strength of our customer relationships. And we have used the organic leverage that we have obtained with the growth for rather significant investment in the leadership strategy. And, as a result, the sales, operating profit, and the net profits all reached an all-time high level by a pretty big margin.
The outlook is, of course, quite uncertain, as everybody knows, but we see no signs as yet of any sharp drop in demand. If anything, we saw a good start to the fourth quarter, which was partly the result, I guess, of the customers being a little bit cautious themselves and, and delaying some orders across the year-end. We had a raw material situation where raw material prices leveled off quite considerably during the end of 2018, and in many cases also started to drop, which we regard as favorable for our possibility to realize savings in the components that we buy during this year, 2019. Our focus in 2019 is a dual one, as always, in fact. We have a short-term focus on realizing purchasing savings and on improving our cash flow.
And we have a long-term focus, which is unchanged and is, we have talked a lot about elsewhere, and, and which is to reach the leadership position in 2020. And of course, as always, we will continue to put a lot of effort into maintaining a good acquisition pipeline and hopefully also landing some acquisitions. And that concludes the presentation, or at least the PowerPoint version of it, and, therefore, operator, if you could now please open up for questions, I would be happy. Thank you. Operator, will you please open up for questions?
Rosengren, thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, you can press the hash key. Once again, star and one to ask a question. We have already one question. Your first question comes from the line of Robert Redin from Carnegie. Please ask your question. Your line is open.
Yeah. Hi, thanks. So, three questions, if I may. So, of course, the result in international was again very, very strong, continues to be the strength. But actually, my focus is on Sweden. So, the Rudhäll acquisition, I guess you can back out what the profitability was in the quarter, and it seems to have been a little bit lower than before. There's some seasonality or something in Rudhäll, or something of extraordinary nature in this quarter? That would be my first question.
Yes, there is sample data on the Rudhäll acquisition in the report. I don't know, Robert, if you've had the time to digest it. But as you note, we say that pro forma, the EBIT margin, the operating margin for it was, I believe we say approximately 9% last year. And in the fourth quarter, it was lower, which is in fact quite normal for that company or any manufacturing company. Basically, we have in those companies lower margin when people are not working, which they are to a lesser degree do in the third and the fourth quarter than the first and the second quarter. So we did not see anything abnormal in Rudhäll in the fourth quarter.
Okay, perfect. You write about price hikes in the Sweden business area. Are they sort of agreed and will come through with the lag in the coming quarters, or was that more sort of an ambition?
Well, I mean, I don't know exactly which part you're referring to now, but we have executed significant price increases in Sweden, also landed those. So we have, although the gross margin is down, it is not down at all as much as it would be if we had not executed the price hikes, because there have been, as you know, rather steep raw material increases during all of, I guess, at least half of 2017 and all of 2018.
Mm.
So we have executed significant price increases, but we also mentioned, I believe, somewhere in the report, that there are some of them that are still intended to come through. But when we say that we have the ambition to improve the margin, the gross margin in Sweden from its current level, that mainly refers, in fact, to purchasing savings, which we hope that we will be able to make plenty ahead.
Okay, right. Yeah, it says some price hikes are yet to be completed during the first part of 2019.
Yeah. So those of course are not in the numbers yet, but they don't constitute the major part of either the price increases that we have made or of the ambition to restore the margin.
Okay, they're a smaller part. But are those sort of agreed upon, or are those some things you hope to achieve?
... Some are, some are not.
Some are, some are not. Okay, perfect. Final question from me on the cash flow. So I guess maybe December sales sort of disappointed. Is that why inventories were high at the end of the year, working capital sales? And what are your sort of working capital sales targets for 2019?
Well, when we look at working capital, we have to say first, I guess, that we're not happy with the working capital development that we've had in 2018. And in particular, inventory, as you note, is not satisfactory. It should, I guess, be placed a little bit in context, that if you look at what happened in the industry in 2017 and 2018, the major concern that all of our customers had, and which was also quite vocal and public, is that it was a concern for being able to get supply, right? So we had a lot of situation where a significant part of our downstream industry had a bottleneck situations occurring. And also in 2019, we ourselves struggled to make sure that our customers were supplied.
And therefore, it's my picture that we have taken on a little bit too much inventory in 2018 in order to ensure good supply. And that's, of course, in itself, not good, but it makes it easier to have a good cash flow in 2019, I guess, if you want to look at it from a positive side. So, we need to improve our working capital ratio in 2019 going forward, especially with regard to inventory.
All right, so it sounds like you expect to have a lower working capital to sales ratio at the end of the year?
We certainly, what we expect, we don't make such expectations or forecasts, as you know, Robert, but we certainly are not happy with the working capital ratio that we have, and we're working to improve it.
Okay, perfect. Yeah. All right, so thanks for a result, which was, you know, good in international. Thanks.
You're most welcome.
Thank you. At this point, there are no further questions, but once again, as a reminder, star and one if you wish to ask a question over the phone. There are no further questions at this point. Please continue.
Okay. In that case, I would like to thank everybody for participating in this conference, and wish you a nice Friday and a good weekend. Thank you. Goodbye.
That does conclude your conference for today. Thank you all for participating again, and you may all disconnect. Speakers, please stand by.