Welcome to CTT Systems Q1 Report 2022. Afterwards, there will be a question and answer session. If you wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Today, I'm pleased to present CEO Henrik Höjer and CFO Markus Berg. Please begin your meeting.
Thank you, and good morning to everyone, and welcome to CTT earnings call Q1 , 2022. Next slide, number two, please. On this picture, you see a new face. I'm Henrik Höjer, and this is my first earnings call as the CEO of CTT. With me today is CTT CFO, Markus Berg, who is already on his fourth earnings call and a great help to me delivering the results of the first quarter. Let's go directly into the report. Slide number three. Highlights of the first quarter. CTT managed to beat their own forecast on net sales, and we closed on SEK 49 million. We also have the highest level on the order backlog since Q2 2020 with SEK 76 million. What's happening around us in the world once again affects also CTT. We have indefinitely paused all shipments to Russia from end of February and onwards.
If not, sales for the first quarter would have been up another 6%. Next slide, number four, please. CTT has two short objectives and obtained the first one in March when Airbus Corporate Jets awarded CTT humidification system development contract for their new business jet, the ACJ TwoTwenty. Next slide, number five, please. Finances in short. In Q1 , we delivered a better EBIT and an improved cash flow. Net sales reached SEK 49 million compared to SEK 31 million last year, an increase with 56%. EBIT was SEK 14 million compared to SEK 1 million, giving an EBIT margin of 29% compared to 2%. Earnings per share was SEK 0.76 compared to -SEK 0.26. We generated an operating cash flow of SEK 9 million compared to -SEK 7 million. Next slide, number six, please.
Looking at the net sales mix and the bridge, the SEK 18 million net sales increase was driven by the aftermarket sales recovery. The aftermarket increased SEK 16 million, growing to 79% compared to last year, and was 75% of our sales volume in Q1. Our other segments stayed on the same level as previous year. I now hand over to Markus, who will continue with some more financial figures. Next slide, number seven.
Thank you, Henrik Höjer, and good morning, everyone. Increased EBIT is driven by the following factors. The main factor for our increased EBIT is business-driven, with SEK 9 million from higher sales volume and SEK 3 million primarily from higher after-market share. We are also profiting from a stronger US dollar compared to SEK with approximately SEK 2 million. Our cost-saving program is now completed and lowering cost by more than SEK 20 million yearly compared to 2019. That is about SEK 5 million per quarter. Let's move on to the next slide, number eight. Cash flow. We have also improved our operating cash flow, mainly driven by improved financial performance, EBITDA, +SEK 9 million this quarter compared to -SEK 7 million Q1 last year. The improvements made it possible for us to amortize on our US dollar loan with SEK 32.5 million.
Working capital increased by SEK 5 million, primarily due to the stopped Russian deliveries, postponed VIP deliveries, stronger US dollar, and some supplier price increases. We closed the quarter with SEK 24 million in cash. Adding SEK 52 million in unused credit facilities gives us a total of SEK 76 million in financing. Net debt amounting to SEK 17 million compared to 29 in Q1 last year. Let's go to the next slide, number nine. Order intake and backlog continues to increase. Order intake was SEK 63 million compared to SEK 38 million the same period last year, mainly driven by the rebounding of the market and stronger US dollar. Order backlog increased by 89% compared with the first quarter last year to SEK 76 million, which is the highest level since the second quarter in 2020.
On the negative side, I would like to point out that SEK 30 million of our order backlog is at risk coming from our Russian Pobeda customer. As Henrik earlier said, CTT has indefinitely paused all our activities in Russia. Next slide, number 10. We now move on to rolling four quarters. Directly into slide number 11. Our OEM sales, as you know, is late in recovery, and CTT is also hit by the production issues that Boeing have on its 787s. Private jet looks promising going forward, but last four quarters was weak. On the other hand, as you have seen before, the after market is strong and early in recovery. In numbers, net sales of SEK 169 million compared to SEK 165 million, up 9%. Operating profit increased more than 200% to SEK 40 million compared to SEK 12 million.
EBIT margin 24%, up from 8%. Earnings per share SEK 2.15 compared to 0.77, an increase of 180%. Finally, operating cash flow of SEK 46 million improved from SEK -22 million. Next slide, number 12. I now hand back to Henrik to give you the outlook. Next slide, number 13.
Thank you, Markus. Let's comment on the effects on CTT from the Russian war to start with. I mentioned a little bit in the beginning, but let's go through it in detail. CTT has paused all activities and all shipments to Russia. Russia was approximately 4% of CTT's total sales in 2021. The aftermarket sales to Russia was less than SEK 1 million. CTT has no employees in Russia or Ukraine, and we have no suppliers in Russia or Ukraine. Some more effects. Comments on the effects. Pobeda has a fleet of 44 aircraft fitted with our systems, and more deliveries were scheduled in 2022, and we had more options on more systems for the near future. The paused deliveries to Pobeda has increased our working capital, but we can use these produced standard systems for new customers.
Aeroflot has humidification in business class in 9 A350s. There is another 12 aircraft not delivered in Airbus production that hopefully will be delivered to a new customer for CTT. The MC21 project was a possibility for CTT in the Russian sphere. The Russian market was a future market for CTT that we now can't access, and we will shift our focus to the European market. Next slide, number 14, please. Looking out on our business landscape, we see that air travel is rebounding and the airlines report that the demand is booming. North America, Europe, and Middle East is leading the recovery, whereas parts of Asia and China is still lagging behind due to the lockdowns. We see a gradual recovery in international passenger traffic and the transatlantic flights are booming.
The U.S. and Middle East airlines are shifting focus to medium and long-term fleet planning to increase their passenger capacity and once again launch their strategic fleet upgrade programs to strengthen their competitiveness. The U.S. airlines just came out last week, and they foresee a very strong second quarter where traffic starts to rebound to pre-pandemic levels with a very strong demand for both business and leisure travel. Airlines also forecast to come back into black numbers in the second quarter, despite record high fuel prices. Since the strong demand makes it possible to put on ticket surcharges to offset the pain. Historically, airlines has been able to make money in periods with high fuel prices. Air travel is cyclic, and we realize that high inflation and interest rates leads to less disposable income for travelers, which can cool off the market.
As every industry, aviation is facing supply chain challenges. Right now, the airlines are bullish in the reporting, and if they are right, leading to a quick recovery of business. Next slide, 15. Forecast for the second quarter 2022. We forecast net sales between SEK 50 million and SEK 55 million compared to SEK 37 million last year. Important factors that differ between Q1 and Q2 affecting our forecast is private jet, significant increase. Aftermarket, we forecast flat or slightly lower in the light of an exceptionally strong Q1 . OEM sales will remain on a low level due to the low 787 production rate with only 1-2 aircraft per month. Next slide, 16, please.
We foresee that the aftermarket sales continue to increase in 2022 and onward, but most likely with a second quarter pause in the upward trend in light of an exceptionally strong first quarter. This increase is based on that we have more products flying today on A350 and Boeing 787 versus pre-pandemic. The delivered Boeing 787 fleet is restored to 99%. Later on, due to the high population growth rate when 787 delivery is resumed, there is 100+ aircraft already built in inventory as of end of 2021 ready to be delivered. The A350 aftermarket was higher in 2021 compared to 2019, and we foresee continuous growth in 2022.
In summary, our aftermarket's growth is driven by more flight hours coming from longer flights and higher utilization per aircraft, and an increasing number of aircraft with CTT Systems. Next slide, number 17. Our OEM market is lagging behind, and OEM will not contribute to growth in 2022. CTT is in a strong position when the recovery starts. On the 787, Boeing has submitted a certification plan to the FAA. Rework has been completed on the initial airplanes, and Boeing continues to work closely with FAA on timing of resuming deliveries. The program is producing at a very low rate and will continue to do so until the deliveries resume, with an accepted gradual return to five aircraft per month over time. Airbus is currently targeting A350 build rate to increase to six aircraft in 2023.
Boeing, in Q1 2022 earnings report, revised delivery of the first 777X airplane and is now expected in 2025, which reflects an updated assessment of the time required to meet certification requirements. To minimize inventory and the number of airplanes requiring changing configurations, the 777X production rate ramp up is being adjusted, including a temporary pause through 2023. We have our system on all these three aircraft. In the background on this picture, you see our latest customer, ITA Airways, and their first out of 8 Airbus A350 fitted with two humidifiers on board. Let's go to next slide, number 18. We are currently on a very low level in our anti-condensation retrofit segment.
The moisture protection market is currently driven by sustainability, topped with an oil price that is on a 13-year all-time high, making the investment pay off time even more favorable for the airlines than in the past. CTT has a great offering for anti-fuselage condensation on A320 and Boeing 737. We are increasing our efforts to obtain a Supplemental Type Certificate for Boeing 737 MAX. We focus on European airlines where sustainability is a key target for all airlines. We have a strong prospect list that we continue to work on. Adding to that, our customer, Jet2, ordered 57 new Airbus A321s scheduled to be delivered in 2023 and onwards, and that's a great sales opportunity for CTT. CTT continuously pursue anti-condensation retrofit opportunities. Next slide, number 19, please. The cabin humidification opportunity.
The pandemic put a spotlight on the importance of air quality and the health effects on dry air. At the same time, pandemic stopped most investment in cabin upgrades. When the demand for travel now is rebounding, we at CTT start to get back to where we were in 2019. The benefit of humidified cabin versus the cost of fitting aircraft with our system is compelling. We notice a growing airline interest in cabin air quality, humidity, and passenger and crew wellness. Short term, there is a limited number of refurbishment programs. Projects will restart when the intercontinental travel comes back to normal levels and the airlines to normal profitability. This is an area which we haven't penetrated, and now, together with our partner, Collins Aerospace, we renew and strengthen our efforts. Next slide, 20, please. The private jet opportunity.
CTT has historically focused on VIP aircraft only, and CTT is dominating the segment. Humidification is de facto standard on wide-body VIP aircraft, but on narrow-body VIP, penetration is lower. Next slide, number 21, please. Our first opportunity is the Airbus ACJ 320 family. Together with Airbus Corporate Jets, we have now a cooperation to offer optimized humidification on the ACJ 320 VIP family. Our humidification system is promoted by Airbus, and we got our first orders in the first fourth quarter 2021. The bolt-on kit deliveries is more scalable compared to VIP projects together with the completion centers. Airbus has sold the first handful of system that we will deliver in 2022. Next slide, number 22, please. Our second opportunity is the large cabin business jet market. Here, the OEM hold the key to the market.
With good references from the VIP market, we have now put ourselves in a position to successfully migrate into large-cabin business jet market. The large-cabin long-range business jet consists of 50-100 new aircraft per year. Long-range +10-hour business jets are equipped for best comfort, and the humidification system is required for matching climate. As already mentioned, CTT reached a milestone when ACJ selected CTT to develop humidification system for the first business jet, the TwoTwenty, that will enter into service next year. The first humidification system fitted to a Bombardier Global 7500 aircraft is delivered to a charter operator and is now in service. CTT now has the needed reference to approach other Global 7500 customers, and even more importantly, Bombardier.
We will in parallel, together with our partners, intense our efforts to reach out to the other OEMs, such as Gulfstream and Dassault and their customers. Next slide, number 23, please. Before I end, I would like to thank Torbjörn Johansson for handing over such a great company to me after many years in the cockpit as the CTT captain. Torbjörn has, together with everyone at CTT, delivered world-class drying and humidification system to the aviation market. On top of that, he has delivered 97 quarterly reports to our owners and the financial market. If I try to beat that, I will be more than 80 years old when I deliver report 98. On the other hand, after almost one month at CTT, I'm very impressed by our products, and I'm even more impressed by all skilled and dedicated CTT employees.
Together with the CTT team, I really look forward to continue our mission to reduce carbon footprint and improve air quality and wellness in civil aviation, and at the same time, continue to deliver shareholder value. Having that said, let's go to last slide and hand it over to you for questions. Thank you.
Thank you, Henrik and Markus. Now it's time for Q&A. If you wish to ask a question, please press zero one on your telephone keypad. Our first question come from Karl Bokvist. Please go ahead. Your line is now open.
Yes. Thank you, and good morning. Hi, Markus, and welcome, Henrik. Looking forward to more quarters hearing from you two. My first question is just on the very strong aftermarket development in Q1. Do you believe that this related to any particular distributor or customer in particular that wanted to, you know, build up inventory or anything like that, or that it related to a particular segment within air travel that really took off faster than expected?
No, we don't have details like that. We think it's connected to air traffic picking up. Maybe as you quickly saw in some of our graphs, it's really going back up to more very close to normal levels. In that, the auto market has to come with it.
All right. You mentioned there that your Dreamliner fleet is more or less back to pre-pandemic levels. My question here is just if you could go a bit more into detail in what you highlighted before with the retrofit potential of humidifiers into the Dreamliner fleet and how that work is progressing.
Now as I said, there is not so many programs right now, but we foresee that this will change now, when the airline starts to fly intercontinental and transatlantic again. In the light of that, there is a need to do upgrades on their fleets. Also then linked to that, they are coming back into black numbers, which more or less all airlines forecasted for the second quarter, that will make them have the possibility to start the retrofits again.
Okay. The guidance there on your private jet deliveries, could you perhaps shed some light on if it will be a kind of. You said significant, but will it be like the, let's say, the majority of expected private jet sales will come in the second quarter, or that it will be more evenly spread out throughout the next three quarters?
This is a long-term journey we're on. We will need to penetrate this market together with our partners. It will take time, and it will be evenly distributed, and it will come aircraft by aircraft. We are now in a very good position together with Airbus on ACJ. As I said, when we look at Bombardier, we have it on one aircraft. We are now in a position to actually start talking with them. This means that this is not coming this quarter, and it will take some time.
Understood. Then just my question there on you. You mentioned the A350 fleet development and build rates improving and so on.
Mm-hmm.
Now forgive me, I haven't looked at the latest comment from Airbus, but when do you think that your deliveries to the 350 would then begin to increase in order to match the higher production rates?
They're currently on five aircraft per month, and they will go to five in early 2023. Late this year, we will ramp up with one more aircraft per month.
All right. That kind of quarterly lead time, do you think that will be similar in the Dreamliner, even given the kind of inventory aspects of that Boeing is currently having?
Dreamliner is harder to comment. I mean, we're constantly talking as every supplier with Boeing and get the latest forecasts. Boeing just came out yesterday with their latest news and we're following that and trying to adopt as good as possible.
Understood. Just thinking a bit more ahead, you did the cost saving program in a time when ahead of the, and during the pandemic, of course. Now things are starting to improve. What do you expect in terms of recruitment pace and, sorry, other kind of cost items returning to pre-pandemic levels?
We have started to recruit a little bit up a few people this year to be in line with the increasing demand. So far we're doing pretty good on that pace. Also of course closely monitoring the market for all our input materials to be able to shift our production as the market returns.
Yeah. Okay. My final one before getting back in the queue is just on the longer term product development. You, for example, there was an announcement a while back regarding a partnership with Camfil and those kinds of new products. How do you foresee those entering the market, so to say, when you can start offering these to customers?
I'm actually gonna pass on that question this time, and then give me some more time, and I will get into both the cooperation with Camfil and the cooperation with Munters that we have to develop new products. It has started, but I'm not really ready to give the exact answers to your questions at this stage. Maybe we can come back to it a little bit later in a month or so.
Understood. Thank you for the answers.
Thanks for the questions.
Thank you. If there are any additional questions, please press zero one on your telephone keypad. There are no further questions at this time. I hand over to the speakers for any closing remarks.
Thank you all for listening, and once again, we're happy to be in this position, really recovering from a couple of tough years, and we look forward to the future. Thank you all.
Thank you.