Ladies and gentlemen, welcome to the GARO Q1 Results 2019 conference call. My name is Jordan, and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. I will now hand over to your host, President and CEO, Patrik Andersson. Patrik, please go ahead.
Thank you. Hi, everyone, and welcome to Garo's presentation of the first quarter, 2019. My name is Patrik Andersson, and I have today been appointed new President and CEO for Garo. I have been acting CEO of the group since middle of February this year. I joined the company in 2007, and since 2015, I have been a sales and marketing director for the group, and also a member in the management team in Sweden.
I have also been a member of group management team since 2016. With me today, I have Garo's CFO, Helena Claesson. Next slide, please. I will start with a short introduction of the company. Garo develops and manufactures innovative products and turnkey solutions for the electrical installation markets.
We have two business area, it's Sweden and other markets, and we have operations in the Nordic countries and also in Ireland and Poland. We have production sites in Gnosjö and Värnamo in Sweden, and also in Szczecin, in Poland. We have invested a lot of capacity in last years. Our headquarter is based in Gnosjö, Sweden, and we are approximately 400 people total in the group. Next slide. Some operational highlights. GARO's products area, E-mobility, continues to have a strong growth in the markets in the quarter.
We can see an increase in demand in all countries and of all charging products. During the quarter, several of our major projects was finalized, and we also got follow-up orders from multiple customers. We could also see that our delivery capacity reached stable levels.
Our business area are the markets, had a strong development in the quarter, especially as a result of good development in eMobility and also in electrical distribution. We also have invested in higher market presence. We have strengthened our sales organization with several recruitment in the quarter, and we have participated in several industrial fairs. The fairs was placed in the Nordic countries and also in Northern Europe, which is in line with our strategy to grow in these regions. Next slide, please.
Then we come to our product areas. This slide shows our product areas, shares of the total sales in the quarter. As you can see, the largest product area is electrical distribution products, which contributes to almost half of our revenues. A s from quarter...
Looking at the numbers of comparing with 2018, it could seem as project business is losing market share. This is not the case. We are on the same level as quarter one last year, and the same goes also for Temporary Power. Now over to Helena for some comments about the financial performance. Next slide, please.
Thank you, Patrik. Then some financial highlights. Net sales in the quarter amounted to approximately SEK 248 million, which is 20% up compared with the same period of 2018. It should be noted that the first quarter last year was weak in electrical distribution products, very much because of the harsh winter, which came in late in the season.
The growth in sales all came from organic growth and to a large extent, driven by eMobility. EBIT amounted to approximately SEK 29 million, giving us a margin of 11.7%, to be compared with 12.1% in 2018. However, during this quarter, SEK 4 million has been taken as a provision for severance payments to the former CEO. EBIT margin, excluding this provision, was 13.5%.
The strong results is an effect of scale benefits from high volume and efficient cost control. Next slide, please. Looking at net sales and EBIT developments over time, you can see that, from Q2 2017 and going forward, we can see some volatility in between the quarters, but the rolling twelve months shows a good trend of growth over time in both sales and operating profits.
The volatility in between the quarters reflects and gives the feeling of the seasonal changes in the business of Garo, where we normally have a strong Q4 and a weaker Q3, and sometimes also Q2, due to summer and less working days in those periods. Next slide, please. As Patrik mentioned earlier, the business of Garo is divided into two segments: segment Sweden and segment other markets.
Here you can see the split of sales, both between product area and segments. In electrical distribution products, we had a growth of 12% in Sweden and 19% in other markets. Again, for the Swedish part, same period last year, Q1, were a bit weaker due to the cold winter.
Temporary power and project business has been stable when comparing with the same period last year. And EBIT and E-mobility growth with 109% in the segment Sweden, and 61% in other markets, giving a total growth in Q1 of 89% compared to the same quarter last year. Next, please. Now, looking at GARO Sweden, the underlying markets in which GARO operates, grew with approximately 5% during the first quarter of 2019.
For GARO, the net sales of segment Sweden amounted to SEK 163 million, which is a growth of 18% compared to the same quarter, 2018. Please note that the comparable figures, again, last year, was a little bit weaker due to, within electrical distribution products, again, due to the late and cold winter.
The highest growth is to be seen in e-mobility, now being our second largest product area within the group. EBIT amounted to SEK 16.3 million and gave us a margin of 10%, which is a decrease with 5% compared to Q1 in 2018. However, the provision for the former CEO of SEK 4 million was all taken in this segment, Sweden. E xcluding this provision, the margin for the quarter was 12.5%. Next slide, please.
In our segment, other markets, net sales amounted to SEK 85 million, which compared to approximately SEK 68 million in Q1 last year, is an increase of 24%. I n this segment, growth was to a large extent driven by e-mobility, although from lower volumes compared to segment Sweden. Operating profits increased by 70% to SEK 12.9 million, which gave us a margin of 50.1% for the quarter.
The improved operating margin follows the strong growth in sales volumes in the quarter. Next slide, please. Looking at cash and balance numbers. Cash flow from the operating activity came out a bit lower than the same quarter, 2018, and amounted to SEK 9.2 million, to be compared with SEK 10.7 million in 2018.
Cash flow from investing activities was SEK 6.6 million, of which approximately SEK 2.5 million was related to product development. Net working capital has increased over the last quarters and amounted to almost SEK 205 million, to be compared with SEK 170 million in Q1 of two thousand-
Thank you, Helena. Strong growth and development opportunities, our strategy here remains the same. The main driver of the growth will be organic growth. A successful product development has been, and will be, the key to this growth. On top of this, we're always looking for potential acquisitions, where we can add or even new additional products and product areas, or companies with some special edges, as our acquisitions of Web- EI in 2017.
It can also be acquisitions of Nordic electrical companies, in order to strengthen our market positions, such as acquisition of Eurel in 2017. We are also looking at new geographic markets, which are focused mainly on the north part of Europe. Next slide, please. The last slide for outlook.
Demand construction related products in Sweden is still good, but a slowdown is expected in 2019. However, the renovation sector has been deemed stable. The trend in other markets served by GARO is expected to remain favorable. We see a strong trend for the e-mobility product area, with continued expansion of charging infrastructure in all markets. All in all, GARO has a positive view of the market condition, mainly driven by the continued expansion of charging infrastructure. Thank you, everyone, for listening, and we are ready for questions.
Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We now have a question from Oscar Wikström, from ABG. Oscar, please go ahead.
Very much. F irst, let me congratulate you on a nice quarter. I just have a couple of questions. Firstly, just one thing on growth. You mentioned here that the electrical distribution comparables were quite easy, but has there also been any sort of Easter effect that you have seen in the market?
Easter effect?
Yeah, so the Easter falling into Q2, as opposed to in Q1 last year, so less working days.
No, we can't see that.
Oh, okay. All right, so following up on that, so if you look at the EBIT margin, it was really strong, and you mentioned here that it's both, the high volume growth as well as, efficient cost control. Would it be possible to get an understanding of, how much of each here? Is it mainly, volumes? T o what degree has the cost control, paid benefit to the margin?
I would say that the majority of it is volume, and that GARO now is in a, so to say, a organizational structure, where we have the staff needed to expand further with existing setup, so to say.
Understood. All right. A nother thing that I was thinking a bit about is just in eMobility, I mean, it was very strong growth. Is it possible to get an understanding of sort of what products there I mean, was it fast chargers or more slow chargers? Or could you give us a flavor on just the sort of products that have been selling the best in this quarter?
We can say it was the whole range from the Wallbox, the public charger, and the fast charger. I f we could mention one segment, I think we grew a bit more in the Wallbox. We grew in the whole portfolio, but a bit more in the Wallbox segment.
Understood.
Home charger. Yeah.
Yeah. And just one other thing there. This slowdown in the project business and temporary electric installation, when you say slowdown, do you mean a decline or just sort of a flattening out scenario?
I would more say a flattening out scenario, as you, as you said, a flattening out.
Okay. All right. I mean, that was pretty much what I had to ask, so thank you very much.
Thank you.
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