Hello, and welcome to the Elanders AB conference call. My name is George, and I'll be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, your lines will be in the listen-only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star one on your default keypad to register your question. If your request isn't sent at any time, please press star zero, and you will be connected to an operator. I'd like to hand you over to your host today, Mr. Magnus Nilsson, to begin today's conference. Please go ahead, sir.
Thanks, George. Welcome, everyone. Magnus speaking, and together with me is also our CFO, Åsa Vilsson. I will now go directly to slide number five in our presentation and talk about our first quarter. The demand decreased for the majority of our customer segments, which resulted in a negative organic growth of 2%. It was mainly Print & Packaging Solutions that felt the effect of declining volumes, and the Supply Chain Solutions was able to withstand better. In response to the declining demand and the uncertainty in the market, we acted very quickly and implemented structural measures around SEK 87 million. These actions will reduce Elanders' annual cost base with around SEK 145 million, whereof SEK 81 million already in 2025. As a consequence of the declining sales and market turmoil, the adjusted EBIT margin came in at 4.1% compared to 5.5% the year before.
If we then go to slide number six and look at our cash flow and cash conversion development, we can show that we continue to deliver very strong cash conversion, which ended at 138% in the fourth quarter. We also managed to continue to reduce our working capital, which went down with SEK 190 million. The decrease in working capital, combined with the strengthening of the Swedish krona, reduced our net debt, excluding IFRS 16, by SEK 345 million, and including IFRS 16, our net debt was reduced by SEK 862 million. If we then go to slide number seven to look at Supply Chain Solutions, you can see that our organic growth slowed down compared to the fourth quarter and decreased with 1% compared to a growth of 1% in the fourth quarter.
Europe was in line with the previous year, despite low demand from the majority of our customer segments for growth in life cycle management and also in the fashion segment. North America, on the other hand, had a very soft quarter with negative growth, yet the inflow of new customers continued to be positive. We could also see a slowdown in the end of the quarter. Asia, that is very exposed towards electronics, continued its positive trend with organic growth, and our new site in Thailand continues to grow just as planned. Our adjusted EBITDA decreased to 4.8% compared to 5.5% the previous year. The major reason for the low margin is the continued reduction of automotive volumes and the continued soft demand from fashion in North America. We also had an extensive system change at one of our biggest sites in Europe that affected the result negatively.
This is now completed, and we'll not have any negative effect going forward. Structural measures of SEK 31 million were implemented in the quarter with a focus on adjusting our costs related to the automotive customer segment. Cash conversion continues to be very strong and improved compared to last year. If we then go to slide number eight to look at Print & Packaging Solutions, you can see that they had a very challenging quarter with a negative organic growth of 6%, which resulted in an adjusted EBITDA margin of 3% compared to 7.5% last year. Print was clearly more affected by a weaker market, and this combined with a very uncertain market outlook made us act both quickly and substantially on the cost side.
We decided to consolidate two production sites: one in the U.K. and to close down our offset production in Hungary and concentrate these volumes to Poland. These actions impacted our result negatively with SEK 56 million. If we then go to slide number nine to look at the development of our different customer segments in the quarter and start to look at electronics, the picture continues to overall be positive, and we could see an organic growth of around 4% in the quarter because of continued increased demand and also growth in Asia. Improving demand in the life cycle management area in Europe was also supporting the growth. Fashion continued to see recovery in Europe and compensated for lower demand in North America, which resulted in an organic growth in line with the previous year.
The trend we have seen the last month in North America with lots of new requests, new customers, slowed down in the end of the quarter as a consequence of the ongoing trade disputes, especially between the U.S. and China. Despite the turmoil in the market, we continue to see a high volume of new requests, and we have also secured new customers that will be implemented in the second and third quarter. If we look at automotive, we continue the negative trend from the previous year with the negative organic growth of 12%, and for print and packaging, it was even worse with a negative growth of 16%. Supply chain came in slightly better with a negative growth of 11%.
[Outer] was stable in the quarter with an organic growth in line with the previous year, and industrial that showed a stable demand last year turned to negative growth of 3% in the first quarter. When it comes to healthcare, we could see a negative growth of 5%, but the segment continues to look positive going forward with lots of new requests from both existing and new customers. If we then go to slide number 10 and look at how things will be going forward, to meet the uncertainty in the market, we continue to have a high focus on lowering the group's cost base and to consolidate capacity when possible. In parallel with this, we have a very high activity on the sales side to secure new customers.
We think that over time, trade barriers can create new opportunities for global logistics companies such as Elanders by breaking up global logistics chains and replacing them with more regional and local logistics chains, which will increase the need for warehousing. This will also increase the need for smart solutions that make it easier for companies to quickly redirect their inventory volumes between different markets. Here Elanders has an advantage with our own WMS system, CloudX, which with just one integration makes it possible to utilize our global capacity. To support this even further, we will increase the tempo in developing more AI functionality in the system. We also continue to work with reducing our net debt by optimizing our working capital investments and cash flow. As a result, we managed to reduce our working capital by SEK 634 million in the last two years.
That was everything from me, and now I hand over to the operator to handle questions. Please, operator, go on.
Sorry about that. The microphone, ladies and gentlemen, as a quick reminder, if you have any questions, please press star one and just make sure that your line is not muted to allow your signal to reach your equipment. It is star one for questions. Today's first question is coming from Mr. Marcus Almerud of Carnegie. Please go ahead and let his open, sir.
Yeah. Hi, Marcus Almerud here at Carnegie. My first question is on the system change that you have. Was that impact big, and then which end-user segments did that affect?
The system change was affecting us in Europe. One of our absolute biggest warehouses is one of our biggest electronics customers. It meant that during the whole month, the customer lowered the volumes, and we need to have double personnel. I think it's affected our result in Supply Chain Solutions with around EUR 1 million, roughly.
It was rather a bottom-line result effect rather than a top-line effect?
Yeah, it was mainly bottom-line, yeah, on EBIT level.
On fashion in the U.S., did I get you right that you've had a good amount of inquiries for some time, and you saw a slowdown, but there's still a good amount of inquiries? All else equal, if these turn into new orders, should we see new sales coming in approximately when from these inquiries do you expect?
Yeah. The new customers we have gotten there will—some of them will start in Q2 and then in Q3. That trend has continued, and we still have lots of requests. The thing we could see now, especially in the end of the quarter, is that our customers start to get worried how they should handle the high duties between China and the U.S. There is, of course, a risk for us that that will push down the volumes overall for our customers. We are a bit uncertain now when we can see the effect. What we realize is that roughly, of all fashion customers in the U.S., 90% of their volumes are actually coming from China to the U.S. Of course, it's a complicated thing for them, yeah.
I mean, I know you don't give out any forecasts or anything like that, but maybe is it possible to say anything? Things are moving very, very fast. I mean, the bulk of the tariff discussions has been in April. Is it possible to say anything about the mood out there and what are your customers saying? How did April start? Have you seen? Is it too early to say about any impact from this or anything about how the quarter has started?
It's a bit too early to say. I think everyone is very careful for the moment. Even if there are some positive signals, we could see that some of our customers even stopped their export to the U.S. overall. We have to wait and see. It's a bit too early to say. It goes ups and downs from day to day, but I think it's really hard for everyone to navigate. The thing we discuss a lot with our customers in the U.S. is that we can offer them special—we can offer them bundled warehouses. We have the capability to take in their goods without paying any duty, and then you pay duty at delivery for customers. There we see lots of requests. There could be some temporary volume increases, but I must say they have not decided yet.
Everyone is asking for it, but there's lots of boats waiting outside the coast from the U.S. with goods from China. They don't go into harbor, they wait outside. I must say it's really hard to see the effects, but it's still soft, I think, yeah.
Maybe lastly, on the Krona effect on the debt, is that per 31st of March? How does it work when this reevaluation is made? I'll start there.
Yeah. On the debt side, the reevaluation is made every month, end of month. The Swedish krona became stronger compared to the dollar and euro.
Is this effective from 31st of March, you can say? Yeah
Yeah.
Yeah , exactly. Just now, I mean, it's difficult to say what it would have been using the current FX rates, but if it's continued to weaken, then it's per 31st of March. That was based on my questions. Okay. Thank you very much. I'll get back in line. Thanks.
Thanks. Thank you.
Sorry, sir. Thank you for your question, sir. Ladies and gentlemen, once again, if you have any questions, please press star one . Just once again, please make sure that your line is not muted. As a final reminder, please press star one for questions. Hey, Mr. Nilsson, we do not appear to have any further questions. If you would like to turn the call back over to you for any additional—oh, one second, please. We have Marcus coming back from Carnegie with a follow-up question. One moment, please.
Yeah. Hi. I had a couple more, but I'll take the opportunity to ask it. Maybe the demand trend in print, what are you seeing there? Especially throughout the quarter, it seems to be mostly automotive. If you can talk a little bit about online print and what you're seeing there. You talk about the slowdown in growth, but is it negative? What do you think is behind it, etc.? Is it just general economy?
I think in print, we were sort of really bad surprised in Q1. It was absolutely automotive, like you say. They continue to go down. You can see especially cars exported to China start also continue to go down where we do lots of the manuals. Also, industrial clients were softening in Q1. Industrial clients that have been pretty stable during 2024 were also getting softer. Online print, we had growth, but not in the same size like last year. I think overall, lots of our products we are doing in print was slowing down. Even some of the packaging we do for the candy industry and things like that was affected. It was a tough quarter for print. That's why we took two really big actions immediately to be prepared.
Hopefully, it was a bit of a temporary thing because it's very connected to products. I think customers are maybe waiting on what happens with this duty, the trade war, what will happen with their products. It was a big slowdown everywhere.
If you look throughout the quarter, I mean, was this overall the entire quarter, or was it accelerating throughout the quarter, or how does it look?
No, it was pretty bad the whole quarter.
On industrial, is it any regions taking out? Maybe you said during the call, but was it mostly industrial in print, or was it industrial overall where you saw softening?
It was absolutely more in print. There was some in—let's look here. There was some in industrial as well. I think, no, I think it was both, affecting both.
Okay.
Slightly more in the supply chain, actually, when I look here in our numbers. Yeah.
Okay. Finally, maybe you talk about the need for consolidation in print, or that may come in, I mean, happen faster with what's going on in print and seeing the trends. Is this something that you might participate in, or were you just talking about consolidation of the sites?
No. Of course, we consolidate our own capacity, but I think especially in the German market where we are really strong, we are actually looking to do consolidation together with other print suppliers. Yeah, it is something we are investigating. I think there will be opportunities because I think the whole print industry was feeling the lower volumes. For the German market, it could be interesting for us to find partnerships and things to find ways to consolidate capacity.
Okay. Perfect. Thank you very much.
Thank you, Marcus.
Thank you for your questions, sir. Mr. Nilsson, at this point, we have no further questions. I'd like to turn the call back over to you, sir. Thank you.
Okay. Thank you, everyone, for listening to our conference call. Thanks. Bye-bye.
Thank you. Ladies and gentlemen, that will conclude today's conference. Thank you very much for your attendance. You may now disconnect. We wish you a good day and goodbye.