Yes. Good morning, all of you, and welcome to our earnings call for the first quarter 2021. We take page number two. It's me, Torbjörn Johansson, CEO, that runs the presentation, and with me I have my CFO, Daniel Ekstrand. We take the next picture, page number three, and we go straight into page number four. The highlights of the first quarter was that we met our forecast. We had net sales of SEK 31 million in the lower end of the forecast. The most important thing is that this is the first quarter in the pandemic where the aftermarket sales has been in the correlation with the underlying demand. It means that we are rid of the inventory effects we have had the last two or three quarters. We take the next page number five.
If we compare to the first quarter 2020, which still was a quarter before the pandemic, we have lost more than half of our sales, even though we have managed to have a positive EBIT. That is due to, first of all, a very good mix with a lot of aftermarket sales, but also we have had some headwinds with the currency. Compared to last year anyhow, the headwinds from currency has been less because last year we had a very strong US dollar. I think it was about SEK 9.50. What is a little bit negative is that the cash flow was low, minus SEK 7 million, and that is due to a late payment from a very big VIP customer we have. That was planned for the first quarter, but the payment actually came in in April.
If we would have had that payment as planned, the cash flow would have been around zero. We take the next page number six. If we look at the sales mix, as we said, the aftermarket was very strong this quarter, but it is also an effect that the OEM was very weak. The OEM was at the very low. I think it is many years since we had such low OEM sales. We take the next page number seven. Here we have the net sales bridge. If we compare again to the strong first quarter of 2020, as you can see, we have lost about SEK 30 million on the OEM sales. That is first of all due to the lower aircraft production at both Airbus and Boeing. As you know, Boeing is down to five aircraft a month.
I think a year ago, they built about 13 aircraft a month. We have had an extra effect because Boeing and Airbus have pushed orders from the first quarter into the second and third quarter. By Boeing, it's mainly due to that they have closed the assembly line of 787 in Seattle and concentrate all the assembly of 787 in South Carolina. That has pushed our orders into the second and third quarter instead. The aftermarket have decreased with 30%, and of course, that is driven by a lower usage of the 787 and A350 aircraft. As we said, now the aftermarket is at the same level as it should be based on the flight hours that especially 787, but also A350 flies. Now we have an aftermarket sales that is in line what you should expect. We take the next page, that is page number eight.
If we look at the profit, it has fallen to around zero, mainly it's of course because the lower volume. We have dropped, as we said, more than 50%. We have had some compensation that the mixture has been more off the market than OEMs. As we said, the currency, it was a very good quarter last year for currency. This was also a good quarter for us regarding accounts receivable and accounts payable. The US dollar has been about one Swedish crown lower this quarter compared to last year. This is partly offset by the cost savings we have. We have a cost-saving program, this quarter, compared to last year's quarter, we have saved about SEK 6 million. We came out with a small EBIT profit. We take the next page number nine.
As I said before, the cash flow would have been in balance if this big U.S. VIP customer would have paid as planned. I'm very sorry about that, but I can tell you this payment came in April. Otherwise, the cash flow is relatively balanced. The EBITDA gave us some contribution. We have paid some taxes, and we have made some investments. To strengthen our financial, we have called up SEK 30 million of our loans. We have increased the cash with about SEK 30 million in January this quarter. We take the next page number 10. The order intake has increased now. I think it's the third quarter in a row where we have an increased order intake, and I think this is most related to the aftermarket sale, which is growing from quarter to quarter. This quarter, it has even managed to increase our backlog.
The backlog is higher now than it was in the beginning of the quarter. It will take some time before we come up to higher backlogs totally compared to what we had before, because the backlog we had before that was very high was really dependent on the OEMs, and the OEMs, especially Boeing, ordered for about one year or at least nine months' production. Because they are down to much lower production volumes and they are a little bit more careful by putting purchase orders, we have problem to come up to those big numbers. Now the backlog is more related to aftermarket. We take the next page 11. If we look at the rolling four quarter, it means we take page 12 immediately.
Now we have managed four quarter in the pandemic, and as you can see, we have lost more than half of our sales. We still have a profit of SEK 12 million. It means an EBIT margin of 8%. I'm a little bit proud that we have managed to keep profitable even though we have lost more than half of our sales. This is an indication that we manage the company correct, but it's also an indication of the strength in our business model. We have a very strong aftermarket that give us a lot of income and profit as the aircraft is flying. What is on the downside is, of course, the cash flow. It has been negative, but you can explain that with some precaution of the inventory, but mainly that we have continued to invest in future products.
We have invested a lot in the 777X, but especially also in the private jet area, where we think we have possibilities to grow. We take the next page number 13. If you look at the net sales bridge, as you can see, we have the drop, it's mainly due to the OEM. We have lost about SEK 100 million in OEM sale compared to the four quarters before. VIP and retrofit has been relatively unaffected by the crisis. In the aftermarket, we have also lost about SEK 85 million. If you look a little bit for the future, the aftermarket is something that will recover quickly. I used to say the only thing we need is that our 787 and the A350 start to fly again as they did before the pandemic, the aftermarket sale is back.
Here we really have a potential to relatively quickly, depending on vaccination, depending on the development of the pandemic, to get those almost SEK 100 million in sales back again. That's SEK 100 million that create a lot of profit. It is a longer-term project to bring back OEM to the levels we had before the pandemic because it's more or less dependent on how quickly Airbus and Boeing goes back to production in the line of what they produced during 2019. We have a lot of potential to relatively quickly recover in the aftermarket. We take the next picture, that is picture number 14. We go straight into the outlook and go to 15.
If you look at the second quarter, I expect a sales that will be between SEK 35 and SEK 40. That means that we, after three or four quarter in a row with lower sales, I think now, or I expect now, that we will increase sales again. That is mainly driven by that the OEM, it was a very weak OEM first quarter. The second quarter will be normal again to these low levels that they produce, but we will deliver to the levels that Airbus and Boeing produce. I also expect some increase in the private jet projects. Our expectation for the next quarter is sales between SEK 35 and SEK 40. I'm very glad because I think the worst quarter we have now behind us. We take the next page number 16. I'm a little bit optimistic. The proof is those two graphs.
I used to say in those earnings calls that we have the perspective in Sweden, what we see in Europe. If you see at the left picture, you can see the number of flights that is flown in different part of the world. There you can see that Europe is in the bottom. We really think about aerospace as we see it in Europe. You hardly don't see any aircraft in the sky. This is not the case in the rest of the world. As you can see, in China, the aircraft is flying almost to 85%, 90% of what they did fly before the pandemic. The aircraft is perhaps not fully loaded, but it's a lot of aircraft flying, and that's the same now in North America and so on. For CTT, it is not so important, the load factor.
For the airlines, they always talk about the load factor, but for us, it is flight hours that is important. In the rest of the world, it looks better than it looks in Europe. The right picture, that is a measurement on the amount of passenger that flies in the U.S. every day. You can see they were up before the pandemic to around 2.3 million passenger per day, and they were down in the beginning of the pandemic to about 100,000 passenger a day, a huge drop. As you can see, during the fall and now after New Year, it is increasing. Now they are up to flying about 1.4 million passenger a day in the U.S. If you look at what has happened between January and March, you clearly see the effect of the vaccination in the U.S.
I saw in the news that now about half of the population in U.S. is vaccinated with the first shot. In U.S., the vaccination has already started to drive aircraft traffic back again. We take the next picture, and that is picture number 17. Again, for CTT, it's good that the aircraft traffic come back, and of course, the airlines start to get out of the crisis, if the aircraft is flying and the population is flying. For CTT, of course, the long-distance travel is the important thing, and especially the amount of flight hours that 787 and the A350 are flying. If you look at the graph, you have the total amount of flight hours that the 787 fleet did fly before the pandemic, then we had the drop.
Gradually, with a little bit of a bad situation during New Year with the second wave and so on, the 787 flight hours continued to increase. We are now up to 60%, 70% of the flight hours that the fleet was flying before the pandemic. That reflects relatively good the after-market sales we had now in the first quarter. I expect that the 787 will be up and flying 100% long before the long-distance travel is back in the world to the levels before the pandemic. The 787 is now the most popular long-distance aircraft. It is an aircraft that can fly all the routes, but it don't need so many passenger to be profitable. We are, again, very lucky that our main project is 787. We also have an effect that 787 is small enough to be used also domestically.
There is a lot of 787 that flies domestically in U.S., and in China, and on shorter routes in Asia. We could be lucky to be on the 787. We take the next picture, and that is general, the market drivers. You have seen this before. The pandemic has not only been. Daniel tells me now I should say that you should look into page number 18. I did forget that again. Anyhow, the market drivers that has come out of the COVID-19 is for our humidifier market. It is more and more discussion about the air quality in flight and the confidence to travel, the safety. There have never been more focus on the air quality in aircraft than it is now.
This is, in the long term, of course, a positive thing for CTT with our humidifiers, and we are working also to try to improve also the air quality with ozone and VOCs or what we are working for. On the other side, we have the dehumidifier market. Of course, the big driver for us there is sustainability. The sustainability, we have some extra pressure now due to the pandemic because the government in many countries has bailed out the airlines that otherwise would have gone bankrupt. I think they have a lot of pressure on the airlines now to be more sustainable for the future. We take the next page, and it's page number 19. If we look into our big segment, that is OEM sales, we are dependent for the moment on four big programs.
On the 787, generally, as we said, the first quarter was very weak. We will go back to normal conditions in the second quarter and the second half of this year. We expect that on the OEM side, we will have about the same sales in the second half of 2021 as we had in the second half of 2020. That we are only talking about OEM. How is it looking at 787? The production rate now is down to five aircraft a month. As I said, the first quarter was special because they stopped the production in Seattle. Boeing will not increase production level before 2023. I think in the beginning of 2023, we have a good possibility that they will increase production because of the popularity of the 787.
If you look at 787, we are dependent on the production rate by Boeing because all our penetration on this platform is very good. We cannot have a better penetration. The only possibility for us to increase sales on the 787, except from the higher production volumes, is that we will get more content on the 787. We are working hard on getting cabin humidification into this aircraft. It would be logical because you have cabin humidification on the A350, you have it on the 777X. I think sooner or later, Boeing has to offer cabin humidification also on the 787. If we look at the A350, the problem we had in the first quarter was that Airbus and also Honeywell, which is a first-tier supplier for this system, they were downsizing the inventory. We had hardly no deliveries on the A350 in the first quarter.
The inventory cannot go much lower, so we think we will go back to normal production levels on the 350, which reflect then the selection rate and the production rate that Airbus have. Here is penetration the key. To increase sales on the 350, first of all, if Airbus build more aircraft a month, but if we can get more airlines to select the options. We cannot expect that we will get more content on the 350 because we have already cockpit crew rest and cabin humidification and drying. If we look at 777X, it's negative that the aircraft is pushed into 2023 entry into service. It's logical in this situation. First of all, I think Boeing has a little bit issues with the certification of the aircraft. I think FAA, after the disaster with the MAX aircraft, is looking very carefully before they certify this aircraft.
Also, the 777X is for those condition in the world, perhaps too big. It's better for the airlines to fly the 787 than the 777X. For me, it's logical that Boeing are pushing the 777X a little bit. Boeing will anyhow build the 777X. They are planning to build about two aircraft a month, and we have also orders for two aircraft a month. It's a little bit tricky now because the certification is delayed, so in which condition we will deliver. We have orders on the 777X. For us to increase sales on the 777X, we cannot increase the content. We have cabin humidification, we have cockpit crew rest. What the drivers here will be that we get more penetration, more customers selecting the options, and of course, that Boeing ramp up this aircraft program.
Realistically, some years ahead, perhaps five or six years, I think Boeing will build 777X in the rate of seven or eight or perhaps nine aircraft a month. It's a lot of potential in this program, but it will take some time. MC-21 is the Russian aircraft. It's the same size as the A320 and the 737. Here we have our cockpit humidifier as a basic product. It means that it is installed in every aircraft. We have started with some serial deliveries to a very low level, but I think they will start to bring the volumes or the rate up during end of 2021 and 2022. Of course, here, if we should get growth, it's based on how they ramp this aircraft. I think they will go up to perhaps seven or eight aircraft a month, and then it would be substantial deliveries from CTT.
Here, because it's a Russian aircraft that is mainly sold to the Russian market, at least in the beginning, we absolutely have a potential in the future to get the drying system into this aircraft. S7, for example, which is the big domestic carrier in Russia, is flying our drying system on the 737 fleet. Russia is really a country which would benefit a lot from our drying system. We have not given up. We will try to increase the content on this program. As a summary, even though OEM sales this quarter was very weak, we have a lot of potential in the OEM sales. Of course, it takes some time now before, especially Airbus and Boeing, gear up the production again. We take the next page, and that is page number 20.
If we look at the retrofit business, of course, it's difficult to sell to someone that doesn't have any money. By the airlines, I think we need some more recovery. It's very promising that we have a recovery by the airlines in the U.S. As soon as we are allowed to fly more in Europe, the European airlines that fly, especially domestic or in Europe, will be healthier. We have an interest for cabin humidification by a couple of airlines in the world. Of course, this discussion about air quality, we have discussed the humidity is increasing thanks to the pandemic. We have prospects. We have also a couple of quotations out for the drying system.
We have airlines that have taken drying system to a big part of their fleets already. They are interested to put in the drying system also in new aircraft in their fleet. It's not dead. The Boeing MAX has started to fly again, and we have an agreement with Satair in Turkey to develop the system for the 737 MAX and make an STC for it. We expect that this work can start up in the second half of this year. The 737 MAX is a very interesting aircraft for our drying system. We have a lot of system out on the classic 737, and many airlines that are flying 737 with our drying system will take MAX. There we have opportunities. We take the next picture. That is page number 21. The most promising segment for the moment is really the private jet.
As you know, Airbus is promoting now humidification more than they ever have done. We have on the A320 aircraft, Airbus Corporate Jets. We have a cooperation with Airbus. They have really started to market the system. We have optimized the system for this aircraft type to make the humidification more even compared to the system we have delivered so far. There, I think it's of big importance that Airbus is so pro humidification in corporate jets. The second picture is the Global 7500. You know we have developed the system. It's a big part of our efforts during 2020. The first system is now installed in the aircraft. It has been tested in weeks at the completion center. It's called Flying Colours Corp. It has been in cooperation with the aircraft manufacturer, Bombardier.
They will start to test the system in the aircraft now in May. We expect it to fly during the summer, perhaps in June, perhaps in July, and it will enter into service in the second half of 2021. This is really a milestone for CTT. You know I have been with CTT for many years. I have been on many exhibitions. I have seen those very nice business jets, Gulfstream and Bombardier. We have always discussed, Peter and I, when will we make break into the business jets. We have tried 10 years ago. It did not work. This time we do it. Humidification in this segment gets more and more popular. If we look at the third picture here, that is the Airbus A220. This is the aircraft that Airbus took over from Bombardier.
Bombardier didn't manage to market that aircraft as a passenger aircraft for the world. Airbus went in, and this aircraft is a little bit smaller than the A320, but it's bigger than the business jets from Bombardier or Gulfstream. Airbus has, of course, they sell a lot of these to airlines, but they have also promoted this as a business jet. They call it the ACJ TwoTwenty. Here again, the boss of the Airbus Corporate Jet at Airbus has confirmed that he wants this aircraft to have humidification. They are now specifying a humidification system, and we expect that they will select a vendor now before end of the summer. Of course, we are hoping very much on that program as we are cooperating a lot with Airbus on the A320 for the moment. On the midterm, here we really have growth opportunities.
The VIP aircraft we have delivered before, we would be happy if we deliver seven or eight a year. When or if we get into the business jet, we have the possibility to deliver to perhaps 100 aircraft a year. It's a big difference in the market size of business jets compared to the bigger VIPs. We are very successful on the big VIPs. If we get the same success in business jet, it will be a big thing for CTT. We take the next page, and that is page 22. Here you can see the future project for us, and now you have the chance to ask me questions.
Thank you. We have a question from the line of Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you. Good morning, Torbjörn. Good morning, Daniel. My first question is on the 787 program. I think last quarterly report, you mentioned that there were some, let's call them pent-up deliveries, that could help 787 deliveries during 2021 above the, let's call it, production rates that we are seeing. I was just a bit curious, maybe you mentioned it, but what your thoughts are on the 787 deliveries for the year?
Yeah. In my presentation, I have talked about what we will deliver to the production line of 787. You are right. During a big part of 2020, Boeing did not deliver any 787. They had some production problem and some technical issues, which had to be fixed. They started to deliver 787 in March again. Now they are back to deliver. If we look at our installed base or the actual potential in the aftermarket, we'll grow quicker during 2021 than they are producing aircraft. Boeing will deliver more 787 than they produced during 2021. I think perhaps they will deliver over 100 or even more aircraft 2021 because they did deliver so few 2020. That will, of course, help our growth in the aftermarket from 2022 and onwards.
Understood. Then perhaps if you could just go a bit more into detail into the dynamics in the report where you mention the, let's call it discrepancy between what you're seeing on the aftermarket side for your population of humidifiers compared to your own sales progression. You mentioned earlier there was a discrepancy during the past quarters, now you highlight the kind of SEK 10 million-SEK 15 million in quarterly annual revenue potential if things normalize. Just wanted to touch upon that comment. Is this if the entire population is back to flying on 2019 levels, or is it a revenue potential if you, let's call it, catch up to inventory adjustments and those sorts of things?
I think we said in the last earnings calls that in the aftermarket during the third and fourth quarter of 2020, we did sell less consumables compared to the flight hours that especially 787 were flying. We said the recovery in our aftermarket sale will go in two steps. The first step is that we start to sell to the underlying demand. It means that our partners and the airlines would not reduce their inventory anymore. This has already happened in this first quarter. The first quarter sales is in balance average to the flight hours that the 787 is flying. The potential of SEK 10 million-SEK 15 million more per quarter in aftermarket sales is calculated on the basis that the 787 will fly the same amount of flight hours as they did fly during 2019.
As you know, during 2020, they have not delivered too many 787s out there. If the fleet we have out there start to fly normally, it means more or less 100%, then we have SEK 10 million-SEK 15 million more in aftermarket sales. On top of that, every year that Boeing delivers 787, this aftermarket will increase. So to say, we are back again on the track we had up to the pandemic. Did you understand it?
Yes. Understood. That first component there, when you say that you're selling to the underlying demand.
Yeah
Do you still think that you will have a catch-up effect of the dynamics you saw in Q3 and Q4 that could mean that you deliver sales above the underlying demands for the coming quarters?
Generally, I don't believe that. Of course, we can never control our big partners. It's Boeing on one side and Satair on the other side. We have not 100% control on their inventory. If they have an inventory for the moment that is lower than they want to have at a certain rate, we can have some more sales compared to the underlying demand. Our projection is now following the underlying demand. As you see on the graph of the 787, the flight hours on the 787 is now increasing, especially during March. If this increase continues, our after-market sales will continue to grow. My projection is that we follow now in the after-market sales, the underlying demand, and historically, we have always had a quarter which bump up and the quarter that is a little bit lower.
Principally, now we go after the underlying demand. The big catch-up we had actually in the first quarter.
Understood. I have a few more questions, but I'll get back in line first. Thank you.
I remind you that if you want to ask a question, please press zero one on your telephone keypad now. Our next question is a follow-up question from Karl Bokvist from ABG Sundal Collier. Please go ahead.
All right. Thank you again. On the VIP side then, this is something we've been hearing from you a bit more about lately, and you've touched upon the kind of market size here. Has this changed at all compared to your previous assessment, in terms of number of jets and the split between the likes of Airbus and Bombardier and Gulfstream, for example?
No, I think it has not changed. What has happened in this segment, and it happens every quarter, of course, the project we are working on, the A320, it's one more quarter. We are waiting for the first order for the new system we have developed together with Airbus. On the Global 7500, I'm very happy that we have installed the system in the aircraft. The tricky thing, to go from a little bit bigger aircraft into a smaller aircraft, is the installation. To find the room and space for our equipment. We have done it. The system is in the aircraft, and now I really look forward to the flight of this aircraft. It would be the first time a business jet has a decent humidification system in it.
For us, from a marketing point of view, to sell the first new system to A320 is happening, but it's a very big happening when CTT have a system that is flying on the business jet. Then we have a good chance to get more orders and get more interest from Bombardier and Gulfstream on business jets. On top of that, we have the ACJ TwoTwenty.
I sometimes forget it because we are working so close with Airbus, so that one will come also.
Let's say that the product you are developing on the 320, that actually materializes into commercial deliveries, and now you have deliveries on the Bombardier and the 220 is specified with humidification systems. Just my first question maybe is, has the competitive dynamic changed at all? Are you seeing any other players on the market now? If we assume that, okay, this will be specified, then we have three models that could, with a high likelihood, be CTT Systems. Just for a reminder, out of the kind of 100 annual fleet deliveries, these three models, would they amount to 40 or 60 aircraft? Forgive me if I don't remember.
No. Those 100, we are talking about the Bombardier Global Express, the Gulfstream, and the ACJ TwoTwenty. The A320 is a VIP. There, I think the market in the VIP is the same as we have had the last 10 years, more or less. Big VIPs is generally not growing. The growth we can get there, and we expect, thanks to Airbus, is that Airbus will promote our system much more in the future. We should not forget that the big part of that VIP segment was the Boeing 737 MAX. Of course, Boeing has not sold any MAX for the two years when the aircraft has been grounded. There we have also potential. The big volume is really in the business jet, and that has not changed. I don't know of any competition.
Liebherr did make a humidifier for the old Global Express, and that was not good. Bombardier did not select it. I don't fear any competition from Liebherr in the business jet segment. I don't know of anyone else that makes humidifier. It's hard to compete with CTT. We have both Airbus and Boeing on long-range aircraft. No one else is in there. We have Airbus and Boeing VIP aircraft. We have made a great job. How should you compete with CTT in business jets? The only question mark we had 10 years ago, is it possible to design a system that fit into those smaller aircraft? With the Global 7500, we have proved that the system is in the aircraft. I expect now after the summer that they will say the system performs as specified.
We have showed the world that CTT can make humidification system also for a business jet, and then we open up this market. Here we really have a potential for growth in private jets.
Understood. My final one is just on the sales model, if that has changed at all, and how you divide the work with your main partner, Collins or formerly Rockwell Collins or Collins Aerospace. When it comes to marketing efforts towards the OEMs, but maybe more importantly towards the airliners, how you do that today in a COVID-19 environment and whether or not you've changed the sales model compared to a few years ago, just in order to understand how you aim to potentially increase the penetration on the other aircraft models outside of the 787.
I think if you look at the sales perspective, of course, the pandemic is not good for the sales. I have myself not been traveling since February last year. I have not met Airbus and Boeing personally. Of course, we work with Teams meeting and so on. If you have the contacts before, as we have with Airbus and Boeing, it's okay to work in sales in this situation. Of course, Airbus and Boeing has been defensive now during the pandemic. They have to get everything straightened out themselves. Regarding the airline, of course, it's more difficult to meet with new airlines in this situation, but it has not been that important because the airline this last year have had other problems than to buy new systems.
Where we are very careful is that the airlines that have selected A350 and 777X primarily, that we contact them and promote our options, because that is something they have to do even if it's pandemic. They have to decide how their future 350 and 777X should be configured. There we are working, and we have not changed anything. We have the support of Collins, which also has problem with the pandemic, but we work in the same way as we did before. What is negative for us is, of course, we have had no exhibition in the aerospace. We had before the aircraft interior, where we were displaying our system together with Collins. That was a very big and important opportunity for us to meet with airlines. We did not have it in 2020 in April, and we did not have it 2021 either.
Hopefully, we have that exhibition in the fall or latest in April next year. That is important when we should sell to the airlines. Where we have concentrated is OEM. We manage our OEMs, and we have made a great progress into private jets during this year. On the airline side, of course, we have not been able to promote our systems that good as before the pandemic.
Understood. Thank you for that.
There are no further questions registered, so I hand back to the speakers.
Okay. Thank you very much. We have now managed four quarters in the pandemic. I'm very happy now that it looks like the second quarter will be a start of the turnaround. We will increase sales compared to the first quarter, I hope we will continue with that, the vaccination will continue with the speed we have for the moment that the international travel will come back. With the international traveling coming back and with the 787 as our most important platform, we are in a good position to grow and get back to levels that is not too far away from the 2019 levels. Thank you very much, and talk to you again in three months.