Good day, and welcome to the quarterly results conference call. At this time, I'd like to turn the conference over to Magnus Nilsson. Please go ahead, sir.
Thank you. Welcome, everyone, to the Elanders phone conference. This is Magnus Nilsson, CEO, speaking, and together with me here is also Andreas Wikner , the CFO of Elanders. I will start by going through the presentation that is also downloadable on our webpage, and then after that, we will open up for questions. I start on page number two. So if you start with some highlights for the first quarter of 2018, we could see that the strong organic growth continued in the Q1, and it was 20% organic growth, and it was mainly driven by the business area Supply Chain Solutions.
We could also see growth in the Print & Packaging Solutions, but the main driver for the growth there was actually the subscription box business that we have started in the U.S., so that's actually also a supply chain business. So the strong growth from the fourth quarter continued in Q1. Unfortunately, we continued to be affected by some implementation costs for some of our new major big customer projects, and that generated a higher cost than expected. We also, during the first quarter of 2018, decided to close the last offset printing facility in Sweden. And, so we gave notice to around 70 people, and this is because of the downtrend, of course, in Print & Packaging.
So instead of investing more in print operations, in heavy machinery, we decided to close it down. Instead, in Sweden, we will focus on the digital print we have in Stockholm, that is developing very positively. And we will also establish a supply chain site in Borås, outside Gothenburg, where we will start to develop other type of services, and we will then source the production volumes in other group companies. If we then go to picture number three, and we look at the result, so it means that net sales increased by 13% to SEK 2.4 billion, compared to SEK 2.139 billion the year before, of which I mentioned before, 12% was organic.
EBITDA amounted to SEK 83 million compared to SEK 105 million the year before, and net result was 33-34 compared to 53. Operating cash flow was SEK -44 million compared to minus SEK 161 million the year before. If I then go to picture number four, and we look at our biggest area, Supply Chain Solutions, if we then look at running twelve, now, Supply Chain Solutions is now 74% of Elanders AB's turnover, and is by far the biggest business area we have. And the organic growth in this area was actually 13% in Q1. And as I mentioned before, the startup cost for some of our new major customer products was affecting their result negatively because of extra resources and so on.
On the positive side, we have secured some new, very interesting customers for this year that we will start delivering to in the second half of this year. One of them is, I can just mention, one of them is Panasonic. We have communicated that before. It's a big consumer electronic contract for us, where we would take over existing facility with personnel and everything in place. We expect that should go very smoothly. And we also, we have some days ago, signed an agreement with the big international football club, where we will do omni-channel for them, where we take care, we will take care of both their, all their e-commerce orders to consumers, the supporter shops, and also take care of their retail business. That was on a very positive note.
So if you look at the numbers then for Q1, net sales for Supply Chain Solutions ended up at almost SEK 1.8 billion compared to roughly SEK 1.6 billion the year before. EBITDA was SEK 54 compared to SEK 80, and that is mainly because of this extra cost, and that also affected the EBITDA margins. It went down to 3% compared to 5.1% the year before. If I then go to Print & Packaging Solutions, I must say we are rather pleased with the start of the year there. We could see an organic growth there as well. But this is mainly coming from the subscription boxes that we started in the USA.
I think I've talked about that before, but that is this new kind of business we start up in the end of 2015, where we handle different kind of memberships, where we can, for example, for cosmetics, get a monthly box with different samples. This is a business that is growing very strongly for us, and last year, we achieved roughly $80 million in sales. And in the first quarter 2018, we reached $10 million. So we expect almost to double this business this year.
So this is the driver for the organic growth. And as I mentioned before, we have given 70 people notice in Sweden, and in the long run, that could be beneficial for us also because the offset volumes produced in Sweden will now be moved to other facilities in Europe for us, and mainly then Hungary and Poland. We think it will give us better margin in the long run and also fewer sites where we need to make investments in hardware. So this means that net sales ended up at SEK 605 million compared to SEK 539 million the year before. EBITDA was slightly lower, SEK 35 million compared to SEK 38 million, and EBITDA margin was 5.8% compared to 7.1%.
And that means now that in the running twelve months, the print and packaging part is now 24% of our sales. If I then go to slide number six, and we have talk about E-Commerce Solutions . We made lots of changes there last year. We did changes in management, we did some cost-cutting programs. We also changed to more efficient marketing, and we could see that already in Q4, that we could make some improvements. And this continued now in Q1, so we have sales was in line with the year before, and EBITDA was -3% compared to -5% the year before. And, we need to have in mind there that e-commerce had all earnings in November and December, so normally you make minus the first three quarters, and then you earn money in the fourth.
So we could see that the things we have done gives better numbers, and we also stopped the downtrend in sales. And we are continuously overviewing how we should handle this part in the future, because it's a very small part of our business today, and on running 12 months, it's only 2% of our total sales. Okay, and here are some points about focus areas going forward. Of course, we have extremely high priority to get all the new customers' products up and running as they should, because that will, of course, affect immediately our margins, to improve the margins and profitability, and it will also improve our cash flow.
And we also see an opportunity with the growth we have now, the strong organic growth, that we should focus more on business that is with a higher added value, like sophisticated contract logistics and omni-channel solutions. We are working more with value recovery, after-sales service, and so we want to be more focused to choose the right kind of business to grow our margins step by step for the future. So that is the focus here now: get the projects under control, to be more selective when we choose business going forward, and work how to improve margins and cash flow. Okay, that was everything from me, and now we open up for questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll take our first question from Carl Ragnerstam with Remium Nordic.
Good afternoon, it's Carl Ragnerstam from Remium.
Hi, Carl.
Can you, can you comment on the size of the football club deal, and how this will affect full year CapEx? And also, when do you expect to recognize revenue from it? Thanks.
Yeah. The football club deal is a six-year agreement, and the yearly sales will be around EUR 6 million-EUR 7 million. The CapEx is pretty high, it's around EUR 4.5 million-EUR 5 million. The reason is it will be highly automated, and so that will give us lower personnel costs, and because of the long time agreement, we can make the depreciation of the investment during that period. I think, regarding the revenue, as it's said now, is that the revenue should start coming in in the second half of the year. It's a bit hard to predict how quick they can ramp up, but what we understand is we will ramp it up pretty quick.
There will, of course, be some startup costs in IT system and things like that, but I think the main part will be the investment, so it should not be so much affecting the results, and it should give an effect on revenue, at least in Q4.
Yeah, full effect, full effect in Q4, yeah.
We don't expect too much cost out of it, and we think that revenue should be up and running pretty well in Q4.
And CapEx mainly in the second quarter and perhaps in the start of the third quarter. And so the majority in the second.
Okay, great. I have a couple of more, if I may. Could you further elaborate on the problems you face within supply chain solution and the deals there? How much.
Yeah
Did the extra cost impact earnings within Supply Chain Solutions this quarter? And also, what measures are you planning to take to solve this?
Yeah. I think, as we don't take it as one-off cost, but I think if you look at. If I say like that, if you look at our Supply Chain Solutions area, and if you look at the year before in margins and things like that, without these problems, we should be at least in line with last year's margin. And if you look at them, we have, it's actually about three big projects, and we can see now that two of them will be solved during Q2. They will have less effect in Q2. And in the third one, we are actually having some discussions with the client because it's more complex than we thought, and that is from both sides.
You know, both, you know, can be misunderstanding and complexity. So we are actually having a negotiation with them, how to increase some prices, to do some adjustments. So out of three projects, two is we know we have solved main, the main problems there, and they will be, should be up and running pretty well here in Q2, and that leave us to one project. And then we are still in a pretty tough negotiation phase with the client. So but we hope that we will know more about it in Q2. So it's
Okay.
So out of three problem areas, two should be solved, and then we have one left. So we-
It takes less
Yeah, yeah, so the effect will be less.
In Q2 than Q1?
Yeah.
Okay. Great. Thank you.
Then it's star one to ask a question. There are no further questions at this time.
Okay. So thank you everyone for calling in, and, then we are closing the conference call. Thank you very much.
Thank you.
Bye-bye.
That concludes today's presentation. Thank you for your participation.