Ladies and gentlemen, welcome to the presentation of Beijer Electronics Group AB Q3 2020 report. Today, I'm pleased to present Per Samuelsson, President and CEO. For the first part of this call, all participants will be in a listen-only mode. Afterwards, there will be a question -and-answer session. Per, please begin your meeting.
Thank you very much. First of all, welcome to all of you listening to this presentation of Beijer Group's quarter three report 2020. This is Per Samuelsson talking. We have the normal agenda as we normally have, a business update, and a very short summary on the statements on the report. Joakim will come into the financial performance, and we will come to a concluding note at the end of it. After that, we will have, if you want, a Q&A like that. If we start with a summary of the report. I think everybody realizes it, and that's the same, I guess, for all companies presenting in reports Q2 and Q3; we have an impact that comes from the COVID-19 like that.
Of course, for us, it has been that we have a drop in volumes during mainly Q2 and also now Q3. We indicated in the last quarter; we saw then that Q3 probably will be in line with Q2; that's more or less what happened. Very important statement for us in this is, of course, that we haven't seen any loss of the customers. We can see that the volumes decrease that we have had are more or less related to the fact that customers that we have had have not ordered as they normally do, if without the pandemic. We think that some of the customers have a little bit lower capacity because they can't really run the factories at 100%. They perhaps run them with 90%. We also saw that we know that some of the customers have been taking down inventories and things like that.
The important thing for us going forward is that we know that if we go around the world and also in the different entities, we haven't seen any loss of customers. Which also means that when the customers start to order a little bit more and also increase their volumes, we will get the orders again, if I put it that way. We took very early on in March a cost reduction program, and that has definitely had the effect that we wanted to have. We have also seen that we have the stronger Swedish krona, mainly in Q2 but now also Q3, has affected the result with roughly minus SEK 8 million. Nevertheless, we have going out to the quarter still; even if it's low figures, we have a profit going out of the quarter.
When this COVID-19 situation started in March, if I put it that way, February, March, we directly decided that, first of all, of course, the cost thing, but then also we decided to make sure that we, of course, have as good a cash flow as possible and also have a good financial position so we can really handle the company during this period. We also realized, I would say , in March or April, that product development and also doing everything we could to get out of this situation in a good way was important. That's also what we have done. We have, after now, the first three quarters; we can see that we had a small positive free cash flow during the quarter as well, but also accumulated for the nine months.
As I said before, we have come down on the cost side, but we have done it the way we see it in a smart way, meaning that we still have an organization in place that is good and motivated. We have products that are, I would say, better than ever, and we also are organized and prepared to take care of volumes going up, hopefully the next half year. If I go into the next slide, we can see that all three entities, Westermo, Beijer Electronics, and Korenix, have had an impact from COVID-19, but Westermo came in a little bit later. Now we start to see in Beijer Electronics and Korenix mainly that we have seen during the end of the quarter three small but significant increases in the order intake.
We also are saying that we can see the signs that the bottom has passed. We believe now, when we have gone out of Q2 and Q3, that as we say it now, we see clear signs that the bottom has passed. We can see that already in Q3 when it comes to Beijer Electronics and Korenix, and we can also see some signs, but also the beginning of Q4 when it comes to Westermo. We have all the time been saying that the whole strategy is to make sure that when we are coming out of this crisis, when it starts to fade off, we will be in even better shape and ready for growth. With the aim as quickly as possible to come back to the financial targets that we have, meaning the 7% organic growth, but also the EBIT level of 10%.
When it comes to the COVID-19 measures, I will not go through this slide in detail; we were actually sitting here an hour ago discussing this thing. I think we have found out that we have one person in the whole organization that has gotten COVID-19, which is, of course, very positive that it's only one; it was not a serious one. Of course, we continue with the different things where people work from home, we also now are back into where more or less in the all offices around the world, definitely in Sweden, that people are now all in the office. I would say 50% or 60% working from home and the rest in the office.
Otherwise, in Q3, we don't have major effects on results or the financial positions that have to do with things we have got from governments and things like that. I would say that it's a sort of clean result. It's clean from COVID-19 supports. We got an agreement for an additional credit facility, if we would need that, but as we see it today, we are far from taking that facility in place. With that, I go into order intake, and of course, you can see in the volumes from the last couple of quarters that the volumes have gone down, both when it comes to sales and the order intake.
The way I see it is that this is very much, as I said in the beginning here, related to the fact that the customers that we have have, of course, then ordered lower volumes, but we haven't lost any customers. When we now talk and listen to what customers are saying, They have inventory at the right levels. I would say in a majority of the customers that we have, with a few exceptions in the U.S., by the way; otherwise, I would say that most of those customers are now starting to go back into order, actually to put normal volumes into our order books. That's once again why we state that we have passed the bottom. With that, I'm passing on to Joakim, and we're coming into the financial performance.
Hello, everyone. This is Joakim. I will now, on a couple of slides forward, give you the financials, and comment somewhat on those. I will start with the group perspective. In the heading, we state that, as Per said, COVID-19 has for sure impacted our earnings, and so have the currency effects. If we look at the numbers, the order intake was SEK 310 million, the sales were SEK 335 million, and the EBIT was SEK 5 million. Clearly, as stated before, the currency impact that we have on the EBIT of a bit above eight million is mainly transactional variances, and the major part of that has actually hit Beijer Electronics, even though it has impacted Westermo and Korenix as well, but the major part is actually hitting Beijer Electronics. As Per said, we have launched the restructuring program in the early part of the year.
We see clearly that the effects of that have paid off, you could say. We see reductions. If we look on a sequential basis at the overhead cost, we reduce the overhead cost further by 7% from Q2. Yes, we lose on the top line. We also handle our cost positions all across our organizations in a good way. Bottom line, net income is also positive, or an EPS of five öre per share. Of course, low levels. This is how it looks. Per said also that we have had a positive cash flow. It's actually the third quarter of this year. Every quarter up to now, we have had positive cash flow, even though it's small numbers. Still on the right side. That concludes the group. Now we talk Westermo.
In Westermo, we have for sure also here seen impacts of COVID-19, but we want to state that the strategic focus that we have had in Westermo is still there, and it's still the main target that we have for the organization. The orders, they were hit for sure. We had an order intake of SEK 164 million in the quarter. The sales were SEK 182 million, and the EBIT was SEK 15.6 million. When it comes to the order situation, as Per said earlier, we have had a negative impact in the quarter, as our customers are deferring the investments and reducing stocks, et cetera.
However, what we see in the pipeline and going forward, we do see good potential, and this then is also part of the qualification of our statement that we believe, what we see today, is that the bottom has passed. The EBIT was then SEK 15.6 million in the quarter.
Of course, a relatively low level compared to where we come from. Again, it is an impact of the lower volumes of COVID-19, of course. We want to highlight for you who are following us that the two acquisitions that we did last year were Neratec and Virtual Access. When it comes to Neratec, we are basically done. It's fully integrated. We have changed the name of the entity, et cetera, and that is something that we put behind us and look forward. That's all done in a good way. Virtual Access is ongoing, basically on plan. We want to state that both these entities contribute well in the quarter. You who follow us, you know that we have lower activity levels in general. We have maintained the focus on these segments because we believe in these.
There will be good growth there; this is, of course, something that we have continued to do in this quarter as well. Another point that we want to also emphasize is that we continue to invest in the longer future. We did inaugurate an extension of the production facility that we have in Stora Sundby, Sweden, the production plant, and the supply chain set up going forward. That was Westermo. Beijer Electronics. Here we see that we see a further impact of the COVID-19, but also we want to state that there are clearly signs of bottoming out.
Order intake was SEK 128 million, sales were SEK 136 million, and unfortunately, there was a loss of SEK 4.5 million for the quarter as such. The drop of the sales is an effect of the pandemic. If we look on the regional side, it is mainly in the U.S. that we see the high impact.
I think we all know, and we all follow the uncertainties that we have in that part of the world. obviously, it has impacted us in Beijer Electronics in the third quarter. When it comes to orders, if we look at them on a sequential basis, we do see an increase in Q3 compared to Q2, driven very much by a good development in Asia, where we see good traction in many markets, and that is, of course, comforting. The restructuring program that was put in place is also, of course, impacting or helping to mitigate the loss of volume in Beijer Electronics. if you look on a sequential basis here as well, we lower the overhead cost in Beijer Electronics in Q3 compared to Q2 with another 10%. we try to mitigate as much as we can to lower the impact on the result line.
We have had some kind of redistribution of the restructuring cost for you who read the report here clearly. You can see that the excluding restructuring is lower than the EBIT on the bottom line. That's a redistribution within the group. We want to highlight that the agreement that we did with Otis by the end of last year—we are into regular shipments now as planned. In this quarter, that is expected then to gradually increase going forward. That cooperation works well. There we have seen less impact of the pandemic, actually. Finally, the cooperation with Korenix that we have talked about earlier in reports and presentations, that one continues. We believe that there will be good effects out of this kind of cooperation between Beijer Electronics and Korenix. Korenix, they were hit hard in Q1 already. Q2 wasn't too good.
Q3 is actually somewhat better. We state continued impacts. Also here, we want to state that we see signs of bottoming out. Order intake was SEK 22 million, sales was SEK 20 million, and the loss was just above SEK 1 million on the EBIT line. As stated, the Q3 orders were actually better than Q2, so the signs of bottoming out are actually qualified by that. Still, of course, on very low levels. We are not sinking. We are heading upwards when it comes to the order side. If we look regionally for Korenix, it is Asia where we see the positive development. While in the U.S. and in Europe, we still see relatively low traction for Korenix. That's how it looks in the third quarter. As we stated on Beijer Electronics, the restructuring programs have given the intended effect.
We continuously also, in Korenix, lower the overhead cost, trying to mitigate the loss of sales; the EBIT was around SEK 1.4 million for the quarter. We have talked before about that despite the tough situation, we have maintained the longer perspective in Korenix. We have invested, you could say, in rearranging the product offering, both the hardware side and the software side with a modular approach. That is continuing. Now as we come to the end of the year and going forward, we will see gradual launches of new products in the market based on the new design. Of course, this will help us going forward, and it will help us also when it comes to the cost side on the products. The cooperation here between Beijer and Korenix is continuing, as I said before.
The focus is the sales channels, mainly in Europe and the U.S., and then also coordinating supply chains, making use of each other so that we can increase efficiency and also maintain or even create a better customer experience in the way we supply our goods. This basically concludes the financial part. Per, I'll hand it over to you now.
Thank you very much, Joakim. Couple of words. Before I come into the points that I have on the slide here, a couple of words on the COVID-19 situation. As everybody understands, I'm far from an expert on what will happen and what's going on and things like that. One thing we can see now is that perhaps in March, I believe that this will be the start of a pandemic, and then it will be an ending. Perhaps I was too naive; I thought it would end, let's say, around September, October, or November . We now know that will not happen, and it goes in several areas the wrong direction. What we are saying now is that the organization in Beijer Group, we need now to learn how to live with this situation.
Coming into 2021, we can't, as we do now, refer too much to COVID-19. We need to make sure that going forward we will have an increase in sales, that we will reach the targets of the 10% EBIT, and also that we will still have some sort of pandemic going on. Because we know now that travel will not be back to normal during next year, and so on. Once again, what we are now doing is preparing our organization for a sort of new normal. If this then ends quicker than we now believe, then that should be a sort of a bonus, if you understand what I'm saying. What we now have said and what we have said all the time the last six-eight months is that we should go out of this with a stable financial position.
That we definitely have. We have more or less the same financial position now as we had when we started this year. Some of you that have listened to me before know that three or four years ago, we had a sort of product situation where we had a lot of products that were close to an end-of-life situation in more or less all entities. Beijer Electronics is now definitely ready with the X2 transition, and we now have product lines in Beijer Electronics that are working in a good situation, and it's one system, if I put it that way.
Westermo has a strong offering in trains, as you know, but also now on the track side, and we are very close to also finalizing very good product development into the energy sector, which means that we have an alternative traditional networks product that is quite in a good situation. As Joakim referred to before, Korenix has also now done their job, which means that all three entities will have a very good product portfolio going into 2021, which is very good. We said before that we haven't lost any customers, and for me in my position, that's extremely important because when the customer started to go up again, and we see now signs that that is happening, then we know that we will get the orders, and that is, of course, extremely important.
On top of that, we can see in our pipeline that there are also good possibilities to actually catch some new customers. Which means that with a lowered cost base, it will be a little bit, if you understand my point, easier to get up to the 10% EBIT target because we have lowered the cost base. Now coming into 2021, as we said, financial targets are in focus. It means that if I come back to what I started this with, the whole organization should now realize that even if we still have pandemic situations going on next year, we should still be able to reach our financial targets. That will be the most important thing for us going forward. Of course, it starts with getting the volumes up.
As we said, we have seen that we have reached the bottom. Now we hopefully will see better orders, and after orders normally come sales; then we will have an easier time reaching the financial targets. That a little bit concludes our presentation. You can see that the uncertainty, of course, continues. As I've said, we don't dare to have too precise a forecast on the near future. Once again, we think that we have reached the bottom. Thank you very much. We're handing over to questions.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero and one on your telephone keypad. The first question comes from the line of Mark Siöstedt from Redeye. Please go ahead.
Hello, and thank you for taking my questions. I have a few questions about the product portfolio going forward. You said that the one -box solution was very important in order to secure the North American train customer. How much are your bolt-on acquisitions like Neratec and Virtual Access adding to these one-box solutions? If you could brief a bit about it.
I understand the question. When it comes to one system or whatever, that's referred to as Beijer Electronics when we have the X2 series. When it comes to the acquisitions, Neratec and Virtual Access, that is related to Westermo's offering. They are complementing both the train segment as well as, especially, Virtual Access, into the energy segment. A little bit different, the two different entities. Perhaps I was a little bit unclear when I talked about that.
Okay. If I may ask a few more questions.
Yes.
Do you see a ray of light with the Korenix new products, the modular approach, and the combined cooperation with Beijer Electronics? Do you think this will help the company to break even?
Yeah, definitely. I tried to indicate there, so that's a good question, is that we have lowered the cost base a lot, both in Korenix and Beijer. What we can see is that both Beijer and Korenix are now targeting the same customer segments.
Yep. Last question.
Mark, just one more comment on Korenix. We have lowered the cost base with the cooperation between Korenix and Beijer Electronics. We have higher ambitions than break -even. Absolutely so.
Yeah. I understand.
They should be on at least the level of the financial targets in the near future. Not meaning a quarter, but within the foreseeable future, you could put it like that.
Yeah. Okay. Yeah, I understand. Last question. With the new extension at the Stora Sundby production plant, have you seen traction in the energy segment and the trackside? Could you brief us a bit about the possible future here?
The extension gives us opportunities to, of course, increase volumes going forward. When you look at, first of all, the track, we can see increases in orders going forward when it comes to the track side, that they are closer to the train, and it was a little bit, understand me right, easier to get orders into the track sides because it was a little bit similar type of selling as it was on the train side. The energy side, as we have said, takes a little bit longer time because of two reasons. One reason was that we needed to upgrade and do development on products and also get certifications that we now start to get. The product starts to be ready. Secondly, it's a little bit different ways of selling.
It has been a high effort the last year to educate the sales teams in different parts of the world on how to sell when it comes to the energy segments. That's why I mean that we will see even more traction when it comes to the trackside during 2021. We can see that already at the end of 2020, by the way. I think we will see some improvement when it comes to the energy segment in 2022 and 2023. Probably with some orders during the next year, but we will see some more significant increases 2022 and 2023 when it comes to the energy segment. That is what we have said more or less all the time here.
All right. Yeah. Thank you.
Thank you.
Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. As there are no further questions, I'll hand it back to the speakers.
Okay, thank you very much, all of you, for listening, and I wish you a nice day. Thank you very much.
Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.