Today and welcome to the Elanders AB quarterly results conference call. At this time, I would like to turn the conference over to Elanders AB CEO, Magnus Nilsson. Please go ahead, sir.
Okay. Welcome, everyone, to Elanders' quarterly report. It's Magnus Nilsson, CEO, speaking, and together with me here is Andréas Wikner, the CFO of Elanders. I will go through the presentation here, and for people who have downloaded the presentation, I will start now on page number 2. I will talk about the highlights for the second quarter, April to June 2018. During the last 12 months, we have had three big customer projects within Supply Chain Solutions that have been more complex than we expected. One of these has now been closed down, and the other two, we have managed to make lots of improvements, and we also have managed to negotiate price adjustments with the customers. As a consequence, we expect a considerable better result from these projects in Q3 and Q4 this year in comparison to last year.
And as you could see in Q2 results, the effect was also much less than in Q1, and that's why we achieved even a slightly better result than the year before. The strong organic growth is continuing and was 10% in the second quarter, and it's mainly driven by the business area Supply Chain Solutions and also the subscription box business within Print & Packaging Solutions. As announced before in April 2018, 70 employees in the business area Print & Packaging Solutions were given notice of redundancy in connection with the decision to close down the last of offset printing operations in Sweden. And these redundancies are not expected to generate any significant additional cost. But then we move to page number three and look at the numbers for Q2. Net sales increased by 15% to SEK 2.6 billion compared to SEK 2.26 a year before.
Of this, 10% units was organic growth. EBITDA increased by 7% to SEK 116 million compared to SEK 108 million the year before, and result before tax increased to SEK 74 million compared to SEK 73 million the year before. Net result was SEK 42 million compared to SEK 54 million the year before. The reason that this was lower was because it was affected negatively by one-off deferred tax cost of SEK 11 million when the deferred tax assets were revalued using the new corporate tax rate in Sweden. We also managed to improve our cash flow in Q2, and operating cash flow went up to SEK 127 million compared to SEK 47 million the year before.
So then if we move to page four, so then if we look at the accumulated results for the first six months, then net sales increased by 14% to SEK 5 billion compared to SEK 4.4 billion the year before, and of this was 11% organic growth. EBITDA is still a bit behind, because of the weak Q1, and was SEK 199 million compared to SEK 214 million the year before. Result before tax was SEK 120 million compared to SEK 143 million. Net result amounted to SEK 76 million compared to SEK 107 million, and that was, as I mentioned before, that was a negative effect of SEK 11 million because of the one-off deferred tax costs in Sweden. Operating cash flow increased to SEK 92 million compared to SEK -113 million the year before.
Then if we move to page number 5 and if we look at Supply Chain Solutions, this is absolutely Elanders' biggest area, and it's, it's now 74% of our, our turnover compared to 73% last year. And if we look at the net sales for Q2, it was SEK 1.96 billion compared to SEK 1.71 billion. EBITDA result was exactly the same this year as last year. It was SEK 96 million compared to SEK 96 million the year before. And if we look at accumulated, we are at the sales of SEK 7.47 billion compared to SEK 7 billion, and result is SEK 276 million compared to SEK 302 million.
So it's still behind, and as maybe as you remember, the Q1 was really weak for Supply Chain Solutions because of the projects, and we can now see that we're recovering and we made the same result as the year before, even if we still have some effects of this new project. But we see the improvements, and we can also see that the results from this project will be much better the coming two quarters in comparison to the same quarter last year. So we don't expect so much negative effect going forward like the first six months. A couple of new customer agreements have been secured the last 12 months, which will have a positive effect on the sales the coming years.
One example is we secured a new client where we will provide a complete e-commerce solution including everything from the front end, warehousing, back end, payments, and transportation, and this is in the area of fashion and lifestyle. So we continue to have a really strong growth in the Supply Chain Solutions area, and now when we start to get the big projects under balance, we expect good development going forward. If we then go to slide number six and look at Print & Packaging Solutions, that is now 24% of Elanders' sales. We have managed a pretty good start on the year even if it's a very challenging area, and in Q2, the sales were SEK 643 million compared to SEK 533 million. We also had a small increase in EBITDA where we made SEK 29 million compared to SEK 25 million the year before.
And if we look at accumulated numbers for the first six, or the 12 months, we are at SEK 2.386 million compared to SEK 2.2 million the year before, and EBITDA is in line with last year's 104 compared to SEK 103 million. So even if the price pressure continues and there's still a high overcapacity, we managed to keep our position and even made some small improvements in the result. It's mainly our operations in the U.S. that continues to show great improvement both in sales and profitability, and that is both in our traditional business area Print & Packaging and then also, of course, the subscription box business. Elanders has gone from almost zero in sales 2016 to $18 million in 2017, and in the first six months of 2018, we have already reached the sales of $21 million.
As we also earlier announced, the consolidation of our production units continues, and, as I mentioned before, we had 70 employees that was given notice of redundancy in Sweden. With that, we will close the last offset operation in Sweden. This is in our strategy to try to consolidate as many of our print facility as possible to control and optimize investments and also to have a less exposure to the future negative growth in this area. If I go to slide number 7, if we look at the e-commerce area, we can see now for some years of declining sales. We have managed to balance the sales, and if we look at Q2, the sales was in line with the year before. It was SEK 44 million compared to SEK 43 million, and EBITDA result has improved.
It was SEK -2 million in Q2 compared to SEK -5 million the year before. If we look at the rolling 12 months, we have net sales of SEK 209 million compared to SEK 208 million, and EBITDA is SEK +4 million combined compared to SEK -1 million in 2017. The results have improved, partly due to cost-cutting measures, and we also have managed to improve our way of doing marketing. As you know, all the profit is mainly coming in fourth quarter, so the other quarters are small to control costs and to prepare. We also continue our strategic overview of e-commerce solutions future within Elanders Group. That's continuous.
Then if we go to slide number 8, so the focus area as far as it's going forward, we continue to focus on the new customer projects that we now can see that we have started to get a good balance in, and with the price increases, we've also done some product improvements. But we still keep a close eye on that, because that will, of course, when we get them balanced, that will strengthen our margins and profitability, and it will, of course, also improve our cash flow. We continue to aim for business with more high added value, like more sophisticated contract logistics omnichannel solutions and value recovery and also after-sales service. Of course, we think over time this will help to improve margins and to increase our return on capital employed.
With our high organic growth, it makes it possible for us to be more selective in acquiring new business and higher cost margins instead. So we have a clear message there to our companies that margin is, is the first focus for us. The growth is, of course, needed and important, but we need to have a higher margin margin focus. And we have today to say no to low margin business with low return on, on capital employed. That can be sometimes especially important for us in the Print & Packaging area with a high price pressure. So that was the summary going forward, and that was our presentation. So now we open up for, for questions.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key followed by the digit one on your telephone. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We'll go to our first question now from Emmy Östlund from ABG. Please go ahead.
Hi there. So, I was wondering regarding the customer contract that you resolved. So I assume there was still sort of a nominal negative effect in Q2. Could you talk a little bit more about sort of when you were able to renegotiate the contract and sort of so we can sort of have an understanding of what kind of margin picked up and recovery we can see for the coming, for the rest of the year? Thank you.
Yes. I think, you know, the negotiations have been going on in Q2, so it means actually that the price increases will start in first of July, so it's going forward. And then, of course, there's also some extra project money we will get to do some improvements. So if we see on Q1 and Q2, I think the effect was already around half in Q2 compared to Q1, and so step by step in Q3 and Q4, it will improve. So it's, we cannot say any exact numbers because that it's like a forecast, but if you look at Q1 and then Q2, there was already there an improvement, at least, maybe half the cost in Q2, and I think the trend will be the same in Q3, Q4, and then in Q1, all of it will be balanced.
The effect will be less and less every month going forward, actually.
Okay. And then all, all of the sort of the negative effect will be gone by Q1 next year?
Yeah.
Yep.
This week we have talked about.
Okay. Yep. Gotcha. And, in terms of, the subscription box business, so that's gonna be sort of a larger and larger share of your, Print & Packaging Solutions. I was just wondering, is there any difference there? I mean, I, I would assume that the seasonality is different, and also there might be sort of a difference in margins. Could you talk a little bit more about that?
Yeah. There is some seasonality in the subscription boxes, of course. There's normally an increase in Q4, but it's still rather stable during the year because it's actually a business where you get a monthly box as a member, and so it's pretty stable. But there is an increase because you can also order extra during Q4, like Christmas gifts and things like that. So the thing that's happening is this is in our site in Atlanta. That was originally a Print & Packaging Solutions site, and the Print & Packaging Solutions's still doing well there as well, but the subscription box is, of course, growing and growing. So, I think in the long run, we it actually belongs more to Supply Chain Solutions, but it's, it is the way we have done before in Brazil.
We changed the print site to be both print and supply chain, and later on, we moved it into supply chain. So I think that will be the same in the long run. Somehow, we need to show itself.
But it's actually consisting of two parts, you could say, because it's Andréas talking here now. Because the subscription box business is both, some part of it at least is freight charges that you do sort of invoice on your customer's behalf, and then you have the contract logistics part as well. And so the margin on the freight charges is pretty low because it's just trading volume, and then you have better margin on the contract logistics services that you do together when you're picking, packing the products into the box for the customer.
Okay. Gotcha. If I could ask a final question as well. You.
Yeah.
I don't, I'm not sure if you mentioned sort of the total effect in the quarter. Could you talk a little bit more about that as well?
You mean the negative effect in the second quarter, I mean, from the projects?
No, no. I mean just the currency effect if you had any significant.
I think that, of course, we have some positive effect on the result, but in the same time, we have the negative effect on the financial cost. So, I think Andréas is checking here. I think we don't have. So it's more an effect on turnover, I think. In result, it's more balanced.
Yeah. Because we have a we have a.
Yeah.
Because we have lots of weakening dollar in comparison to last year. And a weaker dollar if you look at accumulating number, but you have a stronger euro. So there are sort of, I will check here if you know, you have to have another question meanwhile. We can come back to it.
Okay.
A little bit later.
Thank you. Thank you. I will get back in line then.
Yeah. Thank you.
Thank you.
Thank you. Again, ladies and gentlemen, if you would like to ask a question at this time, please press star one on your telephone keypad. We move on now to our next question from Tobias Westerdahl, who is a private investor. Thank you.
Hi. Thank you for taking my question. I would like to hear your thoughts about the debt and your plans and expectations for the coming years.
Talk about the debt? Yes. I think we have, the debt is rather high for the moment, but, of course, there we also have a very negative effect of the currency. I think more than Andréas, you know, the.
I think we're SEK 140 million.
I think we have a negative effect of SEK 140 million on the net debt, because of the currency. So that we cannot do so much about. But we can see now that we think we have reached a peak in net debt, and we are now seeing that we are strengthening our cash flow and our results. So we expect that the net debt will start to decline step by step. And our target is always in long term to be under net debt/EBITDA on 3. So that is, of course we are a bit far away for the moment, but we will reach that in we think in around two years something, depending. We also control investments pretty hard this year as well, so we expect that there will be a positive trend.
All right. Great. Thank you.
Thank you. At this time, we have no further questions in the question and answer queue.
Coming back to the question, I don't know if Emmy is still in the line. I know there have been some problems before with the technical things, but coming back to the currency effect or the effects on the results, so it's more or less zero on an accumulated basis because we have SEK +5 million from euro on the result, but at the same time, we also have SEK 5 million or roughly SEK -5 million on the U.S. dollars. So it's about zero.
Okay. So if there's not more questions, we thank everyone for calling in, and wish you a nice summer as well. Thank you, everyone.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.