Hello, everyone. Welcome to this podcast. My name is Casimir Lindholm. I am the President and CEO of Eltel. With me, I have our CFO, Saila Miettinen-Lähde. We will now present Eltel's Q3 report. I will start with going through the highlights of the third quarter on page three. We saw gradual improvements in our operational performance, despite that our net sales is coming down. The main reason for the net sales drop is the divestments that we have made in order to strengthen our financial position and of course, deliver on the Nordic strategy. We also saw some currency effects, mainly coming from Norway, that had a strong impact on the net sales drop as well.
Due to the cash releases that we have made and due to the divestments that were made, we have been able to improve the balance sheet, and now we have a stable balance sheet situation, reduced net working capital, and reduced net debt. During the quarter, we saw some impact of COVID-19 in our operations, and I will come back to that shortly in more detail. Also, as you might have noticed this morning, we released the fact that we'll launch a new segment structure in the financial report starting with the January-March 2021 interim report. Without getting into all the details at this stage, I can say that the current power and communication segments will be replaced by four country segments. That is Finland, Sweden, Norway, and Denmark.
The change has the intention to reduce the complexity and in a more balanced and transparent way, reflect the group's performance and organizational setup. We will come back to this topic as part of the full-year report in February and explain the details then. We now turn to page four and look how COVID-19 impacted Eltel during Q3. We have seen some project postponements and delays, mainly in our high-voltage business in Poland and in Germany. We have also seen some local effects. If, for example, we have a technician that has tested positive for COVID-19, of course, we end up in a quarantine situation for that whole team. All in all, still moderate impact. It's here and there some postponements and here and there some quarantine situations. Overall, I think Q3 moderate impact regarding COVID-19 for our business.
On top of this, we have seen some reduced and delayed investments, mainly from one of our largest customers within communication in Norway, and that started in Q3. Maybe not on us such a high level as we anticipated despite it, but still clear impact on the net sales. During Q3, we also saw an increase in short-term sick leaves. That has to do with quarantine situation I was referring to earlier. Of course, we have had some personnel that tested positive to COVID-19 as well. Still, all in all, a good and stable situation despite the second wave of COVID-19. We now turn to page five, and look at our large high voltage and power transmission projects. The strategy around the Nordics was defined and communicated early 2019.
As you can now see from the picture with the bubbles, we are coming closer and closer to delivering on that strategy. Most of these big projects, roughly 10 of them, will be finished during this year or early 2021. This means that we will have only four projects, and they are all in Poland, then from the third quarter 2021 and onwards. Everything else is done and finished by then. This means that in two years, we have gone from a mix of being a service company and a project company to more and more look like a service company with roughly 90% of the volume in the Nordics starting January 2021. This has, of course, reduced the risk of the company and the need for cash as such. The last four projects that we have then in Poland are mid-size projects.
They are not the big ones that we have seen before. We will not enter to similar projects going forward. Basically, the 120 projects that we had in the portfolio two years ago will be in nine months, it will be only four left. With that, I now hand over to Saila. We turn to page six to look at the group's overall numbers.
Thank you, Casimir. As Casimir already mentioned, we did continue to show improving profitability in the past quarter, and this is despite the decline that we saw in our net sales. Our net sales figure came to EUR 226.7 million, which is down by 19.6% from EUR 281.8 million last year. As was also mentioned, the divestment of German communication and the Swedish business area, Aviation & Security, was clearly the biggest contributor to this decline, and the rest was largely then attributed to COVID-19 related performance, particularly in high voltage Poland and the mentioned investment cuts in Norway. Our operating EBITA for the quarter improved to EUR 6.7 million from EUR 4.1 million in 2019, and with this, we achieved an operating EBITA margin of 2.9%.
Our operating results, i.e., EBIT, amounted to EUR 5.8 million, which shows an improvement of almost EUR 2 million from EUR 3.9 million a year before.
Cash flow from operating activities amounted to -EUR 16.2 million, which reflects the seasonal working capital buildup during the busiest months of construction work in the summer and the early fall. You may notice that the comparative figure from the previous year is a positive EUR 6.7 million. That reflects a somewhat atypical release of working capital from certain high voltage projects that were completed during that period. With that, I now move on to slide seven, and we will look at the figures for the first nine months of the year. In January-September, our top line amounted to EUR 708.8 million, which showed a decline of 12.4% from EUR 809 million last year. As Casimir mentioned, some 40% of the decline was due to the said divestment. Accordingly then, organic net sales in power and communication declined less, which is by 6.2%.
This development stems largely from COVID-19 related impact since the springtime, especially in high voltage and lately also in Norway. In Sweden, the investment cuts that we've seen already previously by key customers did continue, but then on the other hand, we have actually seen net sales growth both in Finland and Denmark. Our operating EBITA continues on a clearly positive track, demonstrating the progress that we're making in our transition. The operating EBITA amounted to EUR 7.5 million, which more than doubles the figures from last year, which was EUR 3.6 million at the time. The operating EBITA margin for the first nine months was 1.1%. Our operating profits, i.e., EBIT, for January-September was EUR 26.7 million, and that, of course, then included the EUR 20.4 million gain that we got from the divestment.
Cash flow from operating activities improved from -EUR 13.6 million to -EUR 1.7 million, but still remained negative, which largely reflects the seasonal pattern of our operations. As Casimir mentioned, one of the key achievements that we have made in recent times is the reduction in our net debt. In September 2019, that figure still amounted to EUR 191 million, where at the end of Q3 this year, the figure was EUR 109 million. That shows then a clear decrease of EUR 82.5 million. I will now move to slide eight to look at the net sales by segment. In segment power, our net sales for the third quarter were EUR 84.9 million, which is 17.6% less than last year. The decrease is primarily due to our strategy whereby we reduce the exposure to big capital-intensive projects.
As you already saw in the bubble charts shown by Casimir, our portfolio of large projects is being ramped down, and we only have a handful of projects left extending to 2021 or beyond. One example of this ramping down or taking down of big projects is our large high voltage project, Reisadalen, which is right now nearing its completion in Northern Norway. To an extent, the decline also reflects low activity and delays caused by COVID-19, and this particularly is prevalent in high voltage Poland. It's good to mention that against the challenges mentioned before, we also have good news in that in Finland, we continue to be the market leader in power, and we are actually seeing increasing net sales in Finland. In segment communication, net sales amounted to EUR 138.5 million, which shows a decrease of EUR 21.4 million.
Again, the decline was largely due to the divestment of the coalition German communication business, as well as in the Aviation & Security in Sweden. Organic net sales came down also, but by less, 8.9%, and that relates primarily through reduced customer investments in Sweden, and lately also during Q3 in Norway, where the earlier indicated COVID-19-related cuts were, to an extent, realized. Again, on a more positive note, we can state that the decrease was partly offset by contract extensions in Finland, and then we also saw increased volumes in Denmark. In other, our net sales amounted to EUR 3.3 million and related to the remaining projects that we have in the Power Transmission International. The PTI portfolio is being ramped down, and the remaining projects are estimated to close in 2021 after some delays that we have over the recent months been due to COVID-19.
Let's now move to page nine and look at our EBITA development by segment. In the third quarter, our operative EBITA in segment Power was EUR 0.9 million, which is a full EUR 4.5 million better than last year. With this, the operative EBITA margin was 1.0%. The improved results primarily gained from the gradual recovery of Sweden High Voltage, which we have been very hard working on, and clearly also the reducing risk level in the big Power projects is reflected here. Finland, as a country unit, improved its performance despite the negative effects that we have seen from the build projects in Finland. With that, it is good to note that two of the projects where we have seen challenges relating to subcontractor management were operationally closed now in September.
In segment Communication, the third quarter operative EBITA amounted to EUR 6.4 million, which is down from EUR 9.4 million in 2019. The operative EBITA margin was 4.6%. EUR 2 million, i.e., two-thirds of the decline in EBITA came as a result of the divestment, a remaining big factor was a one-off, a write-down in one Danish project. Again, on the positive side, Finland and Sweden both improved their performance, Norway did continue to produce healthy margins despite the decline on the top line, which resulted in the actual EBITA figures coming slightly down. In Other, the operative EBITA was EUR 0.5 million with an operative EBITA margin of 14%. This overall, of course, results or reflects the ongoing ramp down of the PTI project portfolio, primarily in Africa. With this, I conclude the summary of the financial performance for the third quarter.
With this, we also move to page 10, and I turn it back to Casimir Lindholm.
Thank you, Saila. We can move directly to page 11 and have a look at what Eltel will focus on going forward. There are no major changes here. We have worked a lot with the tendering process. We have made the major changes regarding the organization in respective countries, and we are focused on implementation and execution regarding our frame agreements and projects. We can see clear improvements in the Nordic countries regarding this work done in operational excellence. We have then in, as part of COVID-19 times, now started to focus even more on upselling to our existing customer base, because entering the new customers is maybe a bit more tricky in these days compared to pre-COVID-19. A lot of focus now on selling more to the existing customer base.
Regarding the strategy, of course, we are strengthening day by day our position as the number one player in the Nordics, both regarding our position in the market. We have increased our market share towards our biggest customers, and we are the quality player in the Nordics, and we are strengthening our financial position as well step by step here. Now we can see also gradual improvement of our operational performance. We are strengthening our market-leading position. We will focus also on Poland and Germany to turn those businesses around, and that might include divestment as well. All in all, according to the plan and gradually improving both the profitability, the quality, and the customer satisfaction. Also, we received the employee engagement survey results, and we see positive development on that side almost in all countries.
All in all, according to the plan, step by step. We move to page 12. We are in the middle of our long-term plan. No main major changes here either, except for, again, focus on upselling to existing customer base is important in these COVID-19 times. Going forward, we start to prepare ourselves for possible M&A activities, but that is not due until early 2022. Of course, any process like that needs preparation, and that kind of preparation we are doing. The main focus is on the operations in the Nordics and turn things around in Poland and Germany and continue with possible divestments. That concludes the presentation, and now we open up for any questions that you might have.
If you do wish to ask a question, please press zero and then one on your telephone keypad now. Just as a reminder, that was zero one if you wish to ask a question. We have a question from the line of Stefan Lundborg from ABG Sundal Collier. Please go ahead. Your line is open.
Good morning, Casimir. It would be interesting to get your sense on what you see the potential is with 5G in Sweden. The licenses will be sort of allocated here pretty soon. What kind of market potential do you see for you in that business?
Thank you, Stefan. This is relevant for all Nordic countries for the next three to four years. 5G will be a major thing in the market. It has, as mentioned before, been postponed due to various reasons, and now things start to move in all countries. We are doing pilots in Finland and Norway, and as you said, things are starting to move in Sweden as well. Of course, this is a growth opportunity for us going forward, no doubt. At the same time, we need to be professional and a bit cautious regarding terms and conditions in this business to make sure that we also get up to the markets that we are aiming for.
My personal view on this is that there will be lack of resources in the Nordics regarding 5G rollouts. We need to, of course, handle that situation in a good way, and hopefully take advantage of that regarding the profitability. Yes, it is on the agenda for sure both in a sales perspective and a net sales growth perspective and operationally to make sure that we do the rollouts in a very good manner so that we get the margins that we are aiming for. It will come in different waves, and it will come with different vendors, and it will have different setups in all four countries, dependent on is it a turnkey project from the vendors, or are the telcos running the projects and implementations themselves with us and the vendors side by side?
Yeah. I guess your visibility must be quite high, even though I know you can't tell us what it is, you must plan for it, as you say, because their lack of resources, all the telecoms must be keen to sort of sign up partners to sort of roll this out, because from society, there's a huge pressure to do this as quickly as possible.
Yes. Absolutely. We just need to play the game the right way.
Yeah. Okay. Do you have a sense for, without sort of saying anything about your share, et cetera, how big do you think this is in the Nordics, in the segments that you do for the whole market? What is sort of the size of the pie for you to sort of, you think, for the whole market in the Nordics, the 5G?
Let's say that it's thousands of sites per country without going into any details, because as you say here, we, of course, have information. Well, it's part of information that the telcos provide to the market, so we can't reveal.
Okay
those plans. All in all, it's thousands of sites in all Nordic countries during next three to four years, so it's a substantial amount.
Yeah.
Yes, then the rollout speed will differ from country to country and operator to operator. In that, it is not clear yet the speed.
No. Does the issue with Huawei and that they're not allowed to use that equipment, is that an additional potential for you or to change that equipment, or is that sort of not really anything for you to be involved in?
I think regarding Huawei, that also differs from country to country. Huawei, for example, in Finland, will be part of 5G. It's that differs country to country. Again, for us, it's more important to make sure that we work with the right partners and in the right setups and with the right contracts. That is the most important thing for us.
Okay. All right.
To my knowledge, yes, there will be swaps, but in the early stages, it will be on existing towers and masts, and then later on to the totally new sites then.
Yeah. Just last question. You have had, historically, a benefit by, you had sort of access to resources from outside the Nordics because of your geographic scope historically. Is that something you can use when it comes to 5G, you think? As you say, that there are lack of resources?
Yes. 5G is not doable with only local resources in the Nordics for the next years, for sure. We will use our resource base outside the Nordics, yes.
Okay. Excellent. Okay. Thank you very much.
Thank you.
Just as a reminder, if there are any further questions, please press zero and then one on your telephone keypad now. There are currently no further questions registered, so I'll hand the call back to the speakers. Please go ahead.
Okay. Thank you all for listening to our Q3 report, thank you for the questions. As always, we are available if you have any questions further on during the day or during the week. Thank you all for calling in.