Ladies and gentlemen, welcome to the presentation of Beijer Electronics Group AB Q1 2020 report. Today, I'm pleased to present Per Samuelsson, the President and CEO, and Joakim Laurén, the Executive Vice President and CFO. For the first part of this call, all participants will be in listen-only mode. Afterwards, there will be a question and answer session. Per and Joakim, please begin.
Okay. Thank you very much. First of all, hello, everybody. I guess that now everybody's used to sitting in digital meetings like this. Welcome to the presentation of the Q1 report 2020. As normal, we will go through this. I will take the first section, Joakim the second one. I will have some concluding notes. We have the Q&A session after that. If you have had the time to just quickly go through the report, you can see that what we do there is that we are focusing, of course, and start up to discuss the COVID-19 situation. We're saying that it's, of course, overshadowing most of things. All of you listening to this know stuff. We don't have to dig into that in detail, what happens around the world.
Of course, for us as an organization, it affects us, and I will come back to a specific slide on that theme. I already now want to tell you that the employees and the people we have in the organization has really been very professional, and they are really doing a good job in these difficult situations, which means that in this first quarter, even though we have had some hiccups because of the COVID-19 situation, I must say that there has been a high activity level, also the operations, supply chain and so on, have been able to work in a good way. We are stating that we have overall not seen significant downturns because of this situation, but we're stating that if we try to do an estimation, we can see that between 7%-9% downturn because of the COVID-19 situation.
That is mainly in Korenix and in the Beijer Electronics entities. It's of course always difficult to do those estimations, but we try to be as, how should I put it, straightforward on that as possible, so we don't overestimate that factor. The big shining star to this quarter is, of course, Westermo. If you have been, and as you will listen to Joakim later on, they have done a very strong quarter, and they have maintained a good growth. They have a good profitability. Also nice to see that the two acquisitions we made last year, Virtual Access as well as Neratec, both have contributed in a good way during the quarter.
Also on top of that, in these difficult times, Westermo closed a deal with a train manufacturer, train company in Northern America, and we estimate the value of that contract to be around SEK 80 million. That is, of course, also well done in these times. Beijer Electronics, they are one of the two entities that has been affected by this coronavirus situation. I could talk about it in the following way. We that are doing business in the Asia-Pacific regions, normally, there is what we call a Chinese New Year coming up. This year it came up between January and February. Normally, you have one to two weeks around those celebrations they have over in that region where it slows down or even closing down. This year, because of this situation, the coronavirus situation, it was longer.
Also we had, especially I would say in February, end of January, but especially February, there were some issues on the supply chain, meaning that some difficulties to get some of the components into it. It never ended up in a situation where we need to close down any line and things like that. That's a little bit what has happened, and then, of course, on the customer side, especially in the Asia-Pacific side, but also when you have projects that you want to close, if I put it that way, or start up, then there are some hesitations. It's a combination of supply chain and a little bit that some project slows down. That's why there is a little bit lower sales in the quarter in both Beijer Electronics as well as the Korenix side.
Coming back to Beijer Electronics, and I know Joakim will comment on that, the good thing in the quarter one is actually that the order intake was in a good situation, and increased up to SEK 187 million-SEK 189 million, I think it was. That is a good sign for the new product X2 series that we are coming into now. Korenix is the unit that had the toughest quarter in relation to the size and everything, and they lost, I would say, 20%-25% of the business or something like that. We took a decision very early to take a cost program, and we prepared for that more or less directly. Both Beijer Electronics and Korenix have done that quickly and efficient. We took the cost now in quarter one, and we will see cost effects from April and going forward.
We say that the cost we have taken is SEK 15 million, and the estimated yearly savings will be SEK 40 million-SEK 45 million starting up now in April and going forward. Our comment is that the overall underlying performance of the group, we will say is decent level driven by Westermo. Also we want to state and take up that the cash flow we had, those of you that are following us knows that during 2017- 2018, we had beginning of 2019 as well, we had some sort of issues on the cash flow side, but Q4 last year and Q1 this year, the cash flow is okay. We ending up this section by saying that we are preparing ourselves for tougher times ahead. All of you listening to this are probably, in some cases, better than me to predict what will happen going forward.
How should I put it? This statement, plan for the worst and hope for the best. That I think goes for us. We have a lot of plans and scenarios going forward for what we should do if things goes worse. We could really push the bottom if we want to do things here. I will comment a little bit more how we look at the future in 15 minutes time here. If we go into, specifically a little bit, this COVID-19 situation. I don't need to state, but of course, people's health and safety first. We really have done all the things we can in order to avoid, how should I put it? Physical contacts and physical meetings and things like that, but also separate workplaces and all these things.
Of course, as a lot of other companies, wherever possible, we work remotely from home. I could say that we, as all other companies, are getting quite good in digital meetings, even myself, if I put it that way, and I'm not the youngest one in these cases. We can also see that it's important that we also meet at the offices. We are not completely shutting down the major offices. We try to have it sort of where people are in 30%-50% of the people are in the offices, and then we roll it around. As my own situation, I'm in the office two to three days a week, and then I'm working from home the other days, and most of the people are doing the same.
Of course, we have a special group headed by Joakim, where we are looking and exploring all the different, we say country specific support packages. There are some packages in Norway, some other things in U.K., heard one in U.S., and so on. Of course, here in Sweden, we have our packages. We are monitoring all these packages so we know what we can do and we can't do. Once we get to prepare ourselves for if it gets worse. We have done some things in the different countries, but we haven't been taking the final measurement or final thing, taking down, and I'm trying to say the English words for Swedish terminology, but we haven't done that yet. We have prepared ourselves for it.
In difficult times, it's always important to protect the cash and also to make sure that we have a good situation on that side. The board, they will suggest on the annual meeting to take away the dividend in order to save that money in the company. We can also say that we have a transparent and extremely good dialogue with our major bank. I know that if we need, we will be able to extend credit lines and things like that. That's not the situation today because as you can see in our report, we are coming out of the quarter in a good situation here. We are saying also that we will as a Beijer Group adapt its cost level.
What we mean here is that when market condition changes, and I'm saying when, because I think there will be some changes going forward. When things are happening, we will be very quick adjust further on if we need to. All of us of course hope that that's not happening, that we don't need to do that, but we prepare ourselves very carefully on this situation. Some of you know also that we have in the management team here, several of the people that have been around in other crises. You can be sure that we will do the actions we need to do when we need to do it, and if we need to do it.
Last point there, once the crisis is over, because it's not if the crisis will be with, once the crisis is over, then we are really doing everything we can to make sure that the organization, workforce, employees, that this will be intact. That we will remain attractive to both the customers and employees. Also if you have been around before, you know that when it goes the other way, we need to be prepared there as well. By that, I also have a couple of comments on the orders. You can see here on this slide that, I know that Joakim will comment a little bit more onto it, you can see that there are no dramatic changes in the order intake or in the sales, if you see in the quarter one, both from the order intake as well on the sales side.
A little bit is with the organic growth that was more or less not there if you look at the group, and that the growth on the sales side is mainly, and a little bit the order take, is mainly driven by the acquisitions. I wanted to note that also Westermo is growing, also excluding the new entities by a good healthy 8%, and that I think is very well done. By that, I hand over to Joakim.
All right. Hello, everyone. I will take us through more of the financial aspects of the report or the first quarter. We start with the group, and as Per has described, we stayed a stable underlying process, but COVID-19 having an impact in the quarter. Order intake SEK 406 million, sales SEK 395 million. We have an EBIT excluding the restructuring program at SEK 23 million or 6%. After the restructuring program, SEK 8 million or 2.1%. You can see in the graph below the P&L, the EBIT development, and here we show in Q1 excluding the restructuring cost because that is the underlying business generation of the quarter as such. It is not in line with Q1 2019, but actually somewhat higher than we had if we take a sequential look compared to Q4 2019. When it comes to currency, we have a positive impact.
The fact that we have a weak Swedish krona and do a lot of business in euros and in dollars. We have a positive effect of about SEK 2 million in the quarter, transactional variances mainly. Looking at the bottom line, the net income, of course, impacted by the SEK 15 million in restructuring costs. We end up at SEK +5 million compared to the SEK 20 last year, or an EPS of SEK 0.19. As Per pointed out before, we want to state that we have a positive cash flow, not huge numbers, but still positive, SEK 3.5 million, mainly driven by good progress in Beijer Electronics, which we are happy to note. Now we take us through the three different entities, and we start with Westermo. The heading here, good performance with record profitability.
It's really good to see that Westermo is doing really good in this first quarter of 2020. We have an order intake of SEK 202 million, sales of SEK 214 million, and an EBIT of SEK 33. Looking at the graph of the sales, it's pointing upwards, of course, including the acquired entities. With those, we have a 25% growth. Sorry, that was orders. In terms of sales, there is a 35% growth, but organically, as Per pointed out before, it is 8% growth, which is strong to see in a quarter like this. Per has already mentioned the agreement signed with the North American train operator. That is a good one to note. When it comes to Neratec and Virtual Access, the two companies that we acquired last year, they are contributing.
They are adding basically in line with the rest of Westermo, which is in line what we stated before. The last point, we have been talking about the new segments, power distribution and rail trackside. That's ongoing right now, and there will be new products coming up in the coming quarters. Let's move to Beijer Electronics. Here we state a mixed picture. Let's look at the numbers. Order intake, SEK 188 million. Sales, SEK 164 million, and an EBIT excluding the restructuring of SEK 4.8, but including the restructuring cost, we come to a loss in Beijer Electronics. Clearly so, you see in the graph that we have a drop of the sales in the quarter.
We have an impact of the COVID-19 situation, but also what we have been seeing during 2019 with the phasing out of the four product families and those challenges that we saw during 2019, that has been somewhat overall also in the first quarter. The good thing is that the orders increased, and we see a good growth in the X2 series, and that's basically what we planned for, and that's also what we can note in the first quarter, which is something to make a note of, I think. The restructuring is impacting Beijer Electronics, as stated before.
A good thing that we want to note also is that I think most of you remember that we took, or we signed an agreement with the company Otis in the U.S., and we have started to do deliveries, pilot deliveries in the quarter, where the regular shipments are scheduled then by the end of Q2. Then we go to Korenix. Yeah, it was a tough quarter for Korenix. Being placed in Taiwan with quite a big extensive part of the business in China, of course, they had a tough quarter, no doubt about that. Orders at SEK 20 million, sales at SEK 21 million, with quite an extensive loss, where the restructuring program also made it even worse. Looking at the sales graph below, you see that this is a hard one for the entity Korenix.
The restructuring program meant that we had to make adjustments in the organization here in Korenix. That we coordinate some activities with Beijer Electronics, mainly on the supply chain side. That's also part of this restructuring program. The low sales is basically the reason why we have the loss in the quarter. The last point here, though, we want to raise that I think many of us have seen in the news that things are coming back in China, and that is something that we see also. There's quite a lot of customer activity, both in China and Taiwan and the region, and we saw that in the Korenix organization at the end of the quarter. This concludes the financial side, back to you, Per. Thank you very much.
First of all, I just want to restate that this quarter, when we come to the performance, we are very, very happy with Westermo and all the people in Westermo should be proud of what they have done during this quarter. I also want to, of course, that the other units people should be proud, but they have a little bit of challenge before they could prove and show these type of figures. We also have a situation in Westermo where I think that the segments that we are supplying to are not directly affected in a situation where we have this coronavirus situation. We'll see, but of course, if this environment will continue, then of course, Westermo will be affected as well, but at the moment, they are doing well.
The good thing in Beijer Electronics is, as we have stated now a couple of times, is the order intake. For us, the proof for the X2 series has been to see now that during first half of 2020, that we can see orders coming in on the X2, and we see that that is coming. Korenix, we have said as well, but I must say that they are a smaller entity, but believe us when we say they're doing a good job, and step by step, they will come up from this situation. We can see now that there are more and more activity in Asia-Pacific side, and I'm also sure that the cooperation between Beijer Electronics and Korenix sales side in Europe will have a positive effect, especially the second half of 2020. We have already discussed the cash flow.
It's important for us to follow, and we will continue to follow that every week, every month, because in a crisis situation, that's the most important thing in the end. We will still have a huge uncertainty going forward, and as we have also stated in the outcome for 2020 that we have to change the last couple of months is, of course, we don't really know what will happen going forward with economies in the world. Once again, we prepare for a tough situation, but we hope for that it will be better. Once again, at the moment, we are getting orders, we are selling, we are supplying, and the customers are paying.
We haven't seen dramatic downturns yet, but of course, it's a little bit slower, and you can see in Beijer and Korenix that, as we said, 7%-9% downturn in the quarter, and that's really what we see at the moment. For us, we can say that for the next couple of months, I would say that what happens in Europe is the most important thing for us. We have close to 70%- 75% of our sales in Europe in the group, and we'll see now if the big countries like Germany, U.K., Spain, Italy, and these ones, France, by the way, if they're starting to open up, and if there are some positive trends going forward, then perhaps we can come out of this in not very bad situation.
Not open up, and if they have a rebound going down again, then we will have problems going forward. At the moment, I'm a little bit optimistic because we can see that most of our customers and the segments we are supplying that have not been closing down, more or less, with a couple of exceptions, they are still running, and we can see that they will continue to run. I'm a little bit optimistic at the moment for that. As I've said before, we do everything we can to make sure that when we come out of this, we will be in a good shape. That means that we should have supply chains in order, we should have the right people in place, and so we really could be there when the market is starting to go up again.
By that, I think we end the presentation. As I've already said, this is the outlook, and yeah, doesn't say that much. It's just that we don't really know what will happen because of the coronavirus situation. You can see in quarter one that so far it has not been that bad. We are still working every day, and as I said, we haven't seen a quite big downturn yet. By that, I open up for questions.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad and you will enter a queue. After you are announced, please ask your question. Please hold until we have the first question. Our first question comes from the line of Havan Hanna of Redeye. Please go ahead. Your line is open.
Hi, guys. Thank you for the presentation, and hope you are all doing well during these times. Just quickly around the pandemic and if you could say anything about the activity level during April compared to the first quarter and maybe first and foremost, compared to the end of March?
Hi, Havan. Thank you for listening. I'm sorry to say I can't comment. I don't want to comment anything more than I have already done. That is, I had said that we are still getting orders, we are still selling, we are still supplying, and so on. More than that, I can't comment on that point.
Okay, got it. Have you noticed any customers placing larger orders than usual, maybe to secure products if the situation should worsen even more in the coming months?
That's a good question as well, of course. We haven't seen that much. There were some tendencies in February that there were some that wanted to safeguard a little bit, but not in a big extent. On the other way around, we haven't seen, you can call it the bigger contracts that we normally get, for instance, investment. It evens out a little bit. I would say that overall a quite a normal situation when it comes to that side. I just want to state, Havan, that we have also written in the report. We have not seen any cancellations of existing orders.
Yes. Thank you. Maybe a question around R&D and your view and strategy around that. Are you making any changes there, or do you continue as planned before this whole situation appeared, so to speak?
First of all, no, we haven't done any big changes on the R&D, but when we have the different plans, if we need to cut down anything going forward, then of course, that will be one of the area we will perhaps delay some of the projects a quarter or two. We have prepared to do that. So far we haven't been taking down those activities a lot. There is, of course, one thing we could mention is that one thing you do in these situations is you cut down on consultants, for instance. On the development side, we have some consultants that have been canceled during the because of to prepare ourselves for tougher times. I would say generally speaking, we haven't taken down the R&D more or less at all, if I put it that way.
There are also some changes where you try to focus on the short-term customer-oriented things, but I would not say, generally speaking, no big changes. Once again, if there will be a downturn on the order intake and so on, we have prepared ourselves to work two days and be home for three days, then, of course, that will affect how much we can do if that will happen. We are not there yet, if I put it that way.
Okay. Thank you. Just a quick update on acirro+ , how is that performing and
We said in an internal sort of podcast where, now when we had these times when nobody could travel and the digitalization, how should I put it, increases in a lot of ways. We are all selling acirro+ through different digital ways. There are no significant in the figures in Q1. My personal view on that one, I will try to really go through that second half of 2020. That's when I start to evaluate if that is a good product or not.
Okay. Maybe a last one, just around the Westermo order with the North American rail company. Can you talk a little bit more about the order? Is it a new customer? What potential are you seeing going forward? Just overall, your view of the North American rail market as a growth driver and your plans and ambitions there.
Short version there is that, first of all, there is no misunderstanding. It's not an order, it's a contract.
Okay.
We have supplied to this customer before. The good thing with this contract is that they are employed at us for the next couple of years. That will start up end of this year, going forward for a couple of years. That is, of course, very good. We see that there are happening things in the North Americas, that there are also other customers up there. We see more in the pipeline, more opportunities, going forward. For us, of course, those of you that have been following us a lot of years, note that we had earlier a Toshiba order for the Washington side that kept the American organization going. Now we have got another big one, and that's good also to get other orders in the U.S. That, I guess, is as much as I can say.
I'm really looking forward to see Westermo's development in the U.S. in the next couple of years, because they have a good organization over there.
Okay. Thank you very much, guys, and stay safe and take care.
The same to you.
You too, Havan.
Thank you. May I remind everyone that if you wish to ask a question, please press zero one on your telephone keypads. There are no further questions at this time. Please go ahead, speakers.
Okay. Thank you very much. I just want to thank all of you for listening. As Havan said, I also take care in this time, and we will continue and take care, but also do our best to come out with a good result also going forward. Thank you very much.
Thank you very much.
This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.