Hello, and welcome to the presentation for Beijer Electronics Group AB's fourth quarter 2019 report. Today, I am pleased to present Per Samuelsson, President and CEO, and Joakim Laurén, Executive Vice President and CFO. For the first part of this, all participants will be in listen-only mode, and after, there will be a question and answer session. Per, please begin.
Thank you very much. First of all, welcome to all of you. Me and Joakim will present Beijer Group's last report for 2019 and coming into the new decade. We will go through it as we normally do. I will start up, Joakim will come in and talk about the group and the different entities, I will come back at the end of the presentation for some final comments and a little bit outlook on coming into 2020.
First of all, before we come into the quarter, what I think is good when you're looking into the total 2019 is that when you compare 2019 with 2018, with 2017, and with 2016, we can see that the strategy we were laying out during end of 2016, it's working to begin with, which also means that we have every year since then, we have been improving both sales and the results. That is also important is that we are now coming into a situation where we have been taking a lot of cost during this year, especially in the development side, but also on the sales marketing side, which means that when we now go into this new decade, we have a product portfolio that we think is quite good.
We have a customer pipeline and also existing and new potentials that I, as a CEO, are quite happy with, and we also have an organization that works. Totally, if we take a little bit longer perspective and look at the last couple of years, coming into this new decade, we have a good possibility to continue a good growth and profit improvement for the next three, four years. Having said that, then of course, I mean that big business economic downturns, of course, that could affect us. With the present situation, we are going into the new year with a lot of opportunities. Coming into the quarter and the last quarter, we have here, if I pass down the slide here, we see a Westermo, and this quarter, Westermo is, of course, that's the best unit at the moment.
They are proving that both with growth and they have good profitability improvements. We can see that the inroad to the new segments that we call power distribution as well as rail trackside looks quite promising. Together with that, we then during 2019 have done two acquisition to complement the product portfolio on the wireless side. One Irish company called Virtual Access, as well as the Swiss company called Neratec. They have a good based in the results also going into 2020 with a good situation. We also see that with those two units, after the acquisitions, we can see that from 2020 onwards, we expect them to definitely add also to the profit. We haven't had them for so many months last year, but from 2020 and onwards, they should and they will contribute also on the profit side.
It's also nice to see that Beijer Electronics landed a five-year contract agreement with a value over SEK 150 million. That is, of course, an estimated value, but that's what we believe coming into this. Also, we have had some weak points in the history when it comes to the cash flow, but we're also happy to see that now, you saw a little bit quarter three, but also quarter four, we can see that we start to have a cash flow that starts to be okay. That is also good to see. We can see on the order side, and I will comment that a little bit later, a little bit more, but you can see that the order levels, if I look at the group level, you can see that they are all more or less on the same level during 2019.
We can see that if you compare with 2018 and also a little bit 2017, there we had some single big order intakes from especially on the train side that we haven't had in the same way during 2019. Still, we are in a decent level when it comes to order intake, and that also means that we are going into 2020 with a backlog at least on the same level as we came into 2019. We haven't been eating on the backlog during 2019. On top of that, of course, the acquired companies will contribute on that side as well. Therefore, there is an increase total.
When we're coming into Beijer Electronics and their result and their development, we have a couple of quarters been focusing, and we're telling you about the situation where we had four different product groups in the history that we call old product group that we needed to transfer. Those of you that have been following us the last couple of years knows that we call the new product group X2 Series. What happens in this industry is that then you go out to customers, as we did end of 2018, beginning of 2019, and tell them that that product will now go end-of-life. If you want to do some last-time buy, you have to do it now. What happened end of 2018, beginning of 2019, several of our big customers bought a lot. You saw that in the development in Beijer here as well.
That was, of course, good. The downside is a little bit that some of these big customers still have old products in their inventory, which in turn means that then they haven't really started to put orders on the new X2 series. The good thing is that we have a good feeling, and we also know that we haven't found major customers that have left us. What we now are waiting for is their inventories of our old product to go down, so for them to start to order more on the X2 series. When we do the internal analysis on this side, we believe that during Q1 and especially Q2, we will see changes when it comes to the order intake on X2 products.
Coming into the second half of 2020, we believe that Beijer Electronics should be a bit normalized, and then we have done this transition, and then hopefully we have three, four years going forward with a more normal growing situation. That, of course, affects Beijer's situation quarterly. If I look at year-for-year, I still quote, I'm not worried on this. They're doing the right things, and I believe this will be okay. Korenix, a little bit on that, the smallest unit, they had a situation where they had several of their big orders that actually were in our books, that they were sending them out of 2019, and they pulled them to, I would say, first half of 2020.
One other thing that is important here is that we have also seen that the Korenix product mix together with Beijer's mix, when it goes to the IIoT market, we can see more and more that Beijer Electronics' existing customers want to buy also some of the products coming from Korenix. That means that in combination with that, we need to expand Korenix sales channels. This is a good fit. Beginning now this year, Korenix is then partnering up with Beijer Electronics' sales organization. That means that Beijer Electronics' sales organization in Europe will then sell also Korenix products. We can also see some other possibilities to save some costs by working a little bit more together, especially on the supply chain.
When we're coming into a little bit outlooks on the business environment, we have all these old things with Brexit and trade war, China, U.S., and so on. We have no change in our view compared to three months ago, which means that there is still uncertain, but we still have good activity from the customer levels. There are some customers that, as I said, in example, Korenix are postponing a little bit their orders, but they're not canceling. Then we have other customers saying that, "Okay, we don't give you the big orders in one step. We give you orders every month." The uncertainty is still there, but we don't see a big downturn as such. We have the same thing with all of you that read newspapers and so on. You have heard about the coronavirus in China.
Of course, that we also are following carefully. We have a Chinese organization, and at the moment, they are forbidden to go to work. There are a lot of restrictions on traveling and things like that. Now, this is in the middle of the Chinese New Year, so it was expected for them to be off anyway. Of course, if this continues, and if we don't see an improvement, it could affect the Chinese sales. Luckily, in this case, it's not a major part of our business, but I just want to mention it. Of course, there could be some areas on the supply chain that we are now looking into if we will be affected on our supply chain, I think. As we can see today, we see minor problems here.
Of course, if this continues, and if it expands, we need to come back on that issue and see what happens. Before coming into next slide, I again want to mention that if you look at the group strategy that we laid out end of 2016, we can see that it has proven to be quite successful. For me, being the CEO, we can see that now we are not discussing at all what to do. Now we do the different things, and now we are really trying to, how do you say it, make the strategy happen, if I put it that way. I think from that perspective, it's quite good.
If you go into the orders and the sales side, you see here very clearly that if you look at the order intake on the left side, you saw that Q4 2018, we had a very high order intake, and you can see it was SEK 450 million. There we had some projects, big projects on Westermo and train side. We also had a lot of last-time buy, as I have already mentioned, from Beijer Electronics. If you look at otherwise the order intake, you can say the last two years, 2018 and 2019, they are on a rather okay level. Also, I want to be clear, we expect to see step-by-step increases in order intake compared to the sales level during first half of 2020, in order to continue growth path.
On the sales, we steadily have an organic growth on the sales, also now added on the last quarter especially, we have acquisitions that came in for a couple of months. As also already mentioned, we have a good backlog the way we see it. We have over SEK half a billion, The 10% increase compared to last year, that is actually the acquired entities that adds for them, Basically, we have a good level coming into 2020. By that, Joakim will comment on the each unit and also the group.
Hello, everyone. This is Joakim here. This slide shows the overall group, and the heading says, as Per have laid out, it's a mixed picture in the quarter. If we look at the full year, we have a good improvement. Looking at the order intake, it was SEK 407 million. We had a sales of SEK 415 and an EBIT of SEK 22 million. You see in the graph below that we have somewhat bumpy on the EBIT side, but the longer trend, clearly, there's a good development pointing in the right direction. Some comments then. IFRS 16, that I think most of you know about. We have a limited impact on EBIT, so it's less than SEK 1 million that is affecting the quarter positively for these rules implementation.
EBIT, I just mentioned, SEK 22 million in the quarter. We end up the year well above SEK 100 million, which is, of course, a step forward compared to last year. Westermo, good progress. Beijer Electronics, as Per laid out, irregularities continue. Korenix did not really achieve, and I will touch base on all these three going forward in the coming slides. As Per said earlier, we are happy to see that the organization is able to create a positive cash flow. We had SEK 70 million in the quarter, ending up with SEK 56 million actually for the full year. We are getting there, and that's a strong thing to note. The EPS ended at SEK 0.44. In that, we should be clear that we have an impact on the tax line.
We had a stamp duty related to the acquisition of Virtual Access in the quarter of SEK 2.9 million impacting the EPS. Okay, let's move on to business entity Beijer Electronics. As the heading says, it is bumpy. We have talked about these end-of-life processes that create the irregularities between the quarters, it continues also in this quarter. We also highlight that we have signed an agreement with Otis. In the quarter, we had SEK 198 million in overall intake. We had a sales of SEK 194 million and a profit of almost SEK 11 million in the quarter. As I said, as Per laid out before, it is these irregularities caused by the phasing out of the four older generation that is continue to impact also this quarter.
Once we are through with this process, we expect stabilization, and that we will see starting up in Q2, but then more thoroughly in the second half of this year. We want to highlight that despite this bumpy development during the year, we do see a profit improvement if we look year-over-year. That's of course good to see. Finally, we did in the quarter sign a supply agreement with Otis Elevator Company, and that is then for display solution products to their Compass product line that we are very happy to note. That concludes Beijer. Let's move on to Westermo. Westermo heading, solid development. In the solid development delivering these numbers, we do a lot of activities and initiatives that is forward-looking as well.
Looking at the orders, SEK 184 million, sales of SEK 199 million, and an EBIT of SEK 22 million for Westermo in the quarter. It is a good development. There is organic growth and a profit improvement. If we conclude the Full Year 2019, it is a record year for Westermo, both on orders, on sales, and on profit. Of course, during the quarter, it was end of October, we acquired Virtual Access, with the addition of also Neratec that was done in the summer. We do have a good portfolio, and that is, of course, something that we will expecting to see generating also profit in the year. This quarter, the profit contribution of the acquired entities is marginal. We only have some costs related to the acquisition as such in the quarter.
We continue with the activities that we talked about before, where we are investing in products and organization for the new segments, power distribution and rail trackside. That is, of course, then included in these numbers. Last but not least, we have, during some other quarters earlier, talked about our challenges in the supply chain of Westermo. Now we can say that it works well. It is much more stable. They are performing in a good way. Also, we see a positive cash usage in the organization contributing to the total of the group, of course, and that is also something that is very nice to see. Let's move to Korenix, our small entity. Here we have talked about that the target was to come to break even. We had a sales shortage, and it created a loss, and as Per pointed out, the reason for it.
The orders as such, SEK 30 million in the quarter. The sales was SEK 26 million. Unfortunately, a loss of SEK 2.8 million in the quarter. It was a handful of projects, as we write here, that was moving to 2020. We are somewhat too depending on some larger projects for Korenix's sake. It is not in the perspective of the group, but for their side and their size, they are somewhat too dependent on projects. If we have movements on those, you will have hits like this happening, and that is, of course, not ideal. As Per said, we do partner up with Beijer Electronics in Europe for adding on another sales channel to add on to the existing network that we have there. We do some coordination activities where we look at supply chain, as mentioned here, with ambition to benefit the cost base for us.
We should note that we have been, and we have continued to have a high activity in the Korenix side, where we have now a new model design or a platform for both hardware and software implemented that will be implemented for basically the whole product range going forward the coming year. That kind of concludes the go-through of the business entities, and Per, take it further.
Okay, thank you very much. I will combine the targets as well as the outlook here on this slide. You can see now, and we have gone through the different units, and we can see that Westermo now is contributing on 11%, 12% EBIT level, and Beijer is around 5%, and there is a small loss in Korenix. We have a target so far to go to an EBIT level for the group of up to 10%, and we have said that, and I still will state that during next year, there will possibilities to reach that at least for quarters.
We could see now going into the year that the product portfolio, I would say, in all three units. We will also start with Westermo to come out with new products on the power for the power distribution segment, and we still have a very good portfolio for train, but also traditional networks core product is also now starting to be quite good. Beijer Electronics, their main task for 2020 is to make sure that we get good order intake on now the product series X2, as well as the newly introduced caller Zero Plus. That is for cloud solutions, et cetera. Also another product we call BoX2 in relation to that. There it is, if you understand what I'm saying, it's only now to sell. It's not to do more development on this side. We see good signs on that side.
Another comment is that the acquired companies, it's always everybody knows that it's not that easy all the time to acquire companies, but the small Neratec acquisition, that it looks quite good. They start to get into the culture Westermo Beijer Group very well. They will also during next year, during 2020, change naming to this. There it's a very smooth transition. Secondly, Virtual Access that we only have had for a couple of months. We can also see here, when we look at the backlog and also comments from customers in both these cases, the customers of Virtual Access and Neratec, they are quite happy that they now belong to the Beijer Group. You can always be uncertain of those things. That also looks quite okay. We have the backlog, as I mentioned.
Coming into 2020, we see, and that's why we say that we will continue the way we see it today to increase sales and earnings for the Full Year 2020 compared to 2019. Of course, to continue this growth, we could also see that during the first half of 2020, we need to step up one level on order intake compared to coming out of 2019, and you can be sure that everybody's aware of that here and everywhere in the organization. Once again, if you have been around for a long time, it starts with a very good pipeline, and it starts with good communication with customers and that product that the customers really want to buy. We will do what we can to do that change.
I can just end up with, for the next coming years, 2020, 2021, and 2022, that's, in my view, the foreseeable future. We are going into the new decade with good hopes. With that, I want to thank everybody and open up for questions.
Thank you. Ladies and gentlemen, if you have a question, can you please press zero and then one on your phone keypad now in order to enter the queue. After I announce you, just ask that question. If you find that question has been answered before it's your turn to speak, just press zero and then two to cancel. Any questions, please press zero and then one on your phone keypad now. There will be a brief pause while any questions are being registered. We now go to the line of Havan Hanna at Redeye. Please go ahead. Your line is open.
Hi, guys. Thank you for the presentation. Happy to participate in my first call with you. If we start with the order intake, I know that it can vary between quarters and Q4 2019 was very strong. Given that, was this quarter's numbers in line with the expectations, or would you say that you had higher targets internally?
That's a difficult question to answer directly, but I put it this way, this is in line with expectation totally. Being a CEO, you always want it to be higher, if I put it that way. Of course, if you have pipelines and things like that, you always want some of them to come earlier. The base order intake, I would say it's okay. We knew already coming into the quarter that quarter four, as you said, last year, was extremely high.
There is not. My quick answer is no. It's close to expectations, I would argue and say on the order intake.
Okay. Thank you.
Sorry. Please carry on. Sorry.
Okay. When you look at the pipeline, is it the same as it has been the last quarter, or do you see any bigger differences in terms of size or type of customers, geographies? Would you describe it as a healthy one, in lack of better words?
Yeah. That's a good question. When we define pipeline, I have been in business to business since, what is it, 1985, I think I've been working with this. You need to be very clear how you define the pipeline, and you need to be clear that what is a potential customer. We have, I would say, quite a good process on that side where we evaluate pipeline, because it starts with pipeline, and it goes into orders and so on. I would say that pipeline is strong, and both in Westermo and Beijer, and it starts to improve also in Korenix. What you can see then also is that, somewhat more interesting customer has come in during quarter four.
Having said that, you can also see that the business climate as such, if this would have been two years ago, I would say that we probably would have landed a couple of more bigger projects quicker, because now there are some hesitations, meaning that you can see from the customer side, they don't really get the orders as quick as they did before. Since most of the customers are specified, so if they get an order, we get an order. That's one thing. I would say that yes, the pipeline is good, and I think it's fresh, that you can probably find a singular market where we can do better and so on.
Now it's up to get it signed, because what happens here is that we know that we will get it sooner or later, but we haven't been signed, and then you can't get it in. That is, of course, a sign from the market that there are some uncertainties. They don't really dare to push the bottom here in some cases. If you look at overall, this could be valid for 5% or 10% of the cases, but that's the 5%, 10%, 15% that we want to have on top of the normal order intake, if I put it that way. I don't know if you got wiser after that, I think you know how we talk about pipeline and we think it's healthy, there is a process behind that, if I put it that way.
Okay. Thank you, Per. It clarifies it. Just the last question, then I get back with you. I'm curious about the agreement with Otis, and just on a high level, what would you say were the main contributing factors in winning this order over competitors?
A couple of ones. Here it's a combination of the organization, I would say, in Taiwan to begin with. When Otis evaluated us, they were also to the Taiwan organization, the factory as well as the people on the technology side. They found out that they were quite impressed with what was going on over there. Secondly, there were some good ideas on the product side. Also here it's relations. We have a couple of persons in the U.S. organization that have old relations with Otis going back 10, 15 years, and where they trust each other that if there is anything happen, we will sort it out. We have during the year, step by step, been building up relations on several levels.
It's a combination of, I would say, strong organization supply chain in Taiwan, relations from the U.S. organization to start it up, and then especially in the Beijer organization, they have step by step been meeting more and more people. Because this is a long-term agreement, so it means that they need to rely on each other a lot. That's a combination of those things. That agreement now, it means that, I would say April, May time, it will start to be more and more regular deliveries from this agreement. Second half, we will be full up to speed and then going into 2021. That's the way it look like.
Okay.
Just to raise now on clarity, you don't sign deals like that with volume guarantees and things like that. What you do is that we know that every time they sell this product around the world, we will do it, so to say. It of course based on, you can call it forecasts, careful forecasts on what's going on in the future.
Okay. Thank you, Per. That was the last question. Thank you for the presentation and your time for answering the questions.
Okay. Thank you.
Okay. If anyone else has any further questions at this stage, please do use this opportunity to press zero and then a one on your phone keypad now. There'll be a further pause while any final questions are being registered. I just see we've no further questions at this stage. May I please pass it back to you for any closing comments and to close the call?
Yeah. I just want to thank everybody for listening in. I appreciate that. Now we will go back in to do whatever we can to make 2020 a success. Thank you very much.
Thank you very much.
This now concludes today's call. Thank you all very much for attending, and you can now disconnect.