Thank you. I'm Erik Stenfors, the CEO of HANZA, I wish you all a warm welcome to this presentation of the first quarter 2021. I will run this together with my colleague and our CFO, Lars Åkerblom. During Q1, we made an acquisition in Finland, it was actually not just an acquisition, but also an important delivery on our strategy, therefore, I'd like to just give a few words about our business model. If we turn to page two, please. A product-only company that has outsourced its production is normally using contract manufacturers, that's companies producing one part each for this product. You may end up with a quite global and complex supply chain, as you see illustrated to the left. That's why we have created HANZA.
We have gathered different kind of manufacturing technologies in certain geographic areas, which we call manufacturing clusters. What's interesting about this is that we can then lower the manufacturing costs for our customers substantially, and at the same time, keep a decent margin to HANZA, normally a couple of percent higher than the single technology manufacturers. Furthermore, the customers will have an increased flexibility, only have one party to talk to, and it will reduce the number of shipments, which is quite important. It will be less impact on the environment, and you will have a more green supply chain. If we move then to page three. So far, we have established six manufacturing clusters, as you can see on this map, and we are really pleased that we have been able to attract industry leaders to choose HANZA as the manufacturing partner.
We see some examples at the bottom. This is also a different way where we both produce in our clusters and sometimes we also streamline the supply chain for our customers. That's a service we offer. With this short introduction, I will now move on to quarter one and to page number four. The market in the beginning of this year, it's clearly gaining momentum. We saw that it was increasing actually month by month. We still have some customers area which are slow, customers selling equipment and machinery to textile industry, to breweries, to shop fittings. And we also see a clear difference in geography, where the Nordic countries has been doing quite well in the beginning this year. The lockdown in Germany that started before Christmas has more or less put a lid on the economy in that country.
But we've been active with new sales, and we see also new opportunities comes as a consequence of the pandemic. A number of product owner would like to rethink their supply chain, and that's something we're working quite actively with right now. If we move to operations, we had some outbreaks of the virus that affected us negatively in some factories, especially in Czech Republic and in Poland, so that is our Central Europe cluster . Despite that, we've been able to work with the roadmap 2021. This is a plan for this year that we have presented in earlier reports. It's all about to strengthen the cluster in order to handle increasing volumes and also to grow the margin on a group level. We do this in two ways. We are investing in our clusters.
We have invested about EUR 3 million the first quarter, and we're also building a brand new factory in Estonia. The second way to strengthen the cluster is that we look at strategic acquisitions. That brings us to page number five. The acquisition of Suomen Levyprofiili, which we did in March 19 this year, so a little more than a month ago. This is a manufacturer of high-quality sheet metal structures. They're good in welding. We have articles, the tanks for water and fuel, and there can be no leakage, so you have to be really good in welding. Also high quality when it comes to painting. We see an example, a green hood on this picture. They are operating in a factory built 2014, quite new, and we have the honor to welcome 100 more colleagues to HANZA. Good customer base. They have customers in machinery.
They also have customers in mining industry and in forestry. That's an area we like to grow in HANZA. We see that this acquisition meets our demands on technology, geography, and customer base, and also financials. That's why this acquisition is then a delivery on our strategy, that we have been able to, by an acquisition, strengthen our cluster in a almost perfect way. You might also notice that we have upgraded our graphic identity from this report. If you look at the picture, HANZA Joensuu was the first factory who could have the new logotype. You see it on the wall in the office of HANZA Joensuu. By that, I leave the floor to Lars Åkerblom on page number six.
Thank you, Erik. Now we'll go through the figures on the balance sheet. As Erik said, we did an acquisition in the end of March. Which means that SLP is consolidated from late March. Just a small part in the P&L, but the full balance sheet. I will come back to that. Starting with the sales, we see that we reached SEK 567 million compared to SEK 599 a year ago. We are still hurt by the COVID-19 effect, and we also see a negative effect on the currency of approximately SEK 25 million. We have identified and said that mainly one customer that are affected by the pandemic, only that one is SEK 40 million.
A year ago, we took a decision on an action program in connection with the pandemic, and that when we concentrated the production in two sites in Cluster Sweden and Cluster Baltics, and that has a negative impact of approximately SEK 10 million. SLP contribute the time that they were part of the HANZA Group with SEK 5 million. If you add those together, that leads to SEK 70 million that affect comparability between the two quarters this year and last year. If we exclude them, we actually see a growth of 7%. We also see an increased earning. We have an EBITDA of SEK 22.5 million, 4%. In those SEK 22, we have one-time cost connected with the acquisition of SLP, transaction cost, and integration cost.
If you adjust for those, we have a margin of 5% compared to 3.4% last year, since we didn't have any one-time cost in Q1 2020. We move to slide seven. Here we see the two operational markets, the segments. We have Main markets and Other markets. We see that the Main markets is having a sales of SEK 300 million compared to SEK 338 million a year ago. In the Main markets, we have the same type of one-time effects of SEK 56 million. If you adjust for that, we actually see a growth of 6% in the net sales. We have continuously strong profitability. We have an EBITDA of 5.1%, and here we have part of the one-time cost connected with the acquisition. If we adjust for those, we actually see a margin of 6.3%. Other markets is continuously improving.
We see net sales, which is actually higher than last year, even though we have a negative effect of the currency. If we adjust for that, we actually see a organic growth of 7%. And we are continuously increasing the EBITDA. In Q1, we show a margin of 3.9% compared to almost 1% last quarter, the quarter in 2020. In both markets, we are still affected by the COVID. We also have effects on COVID in some of the factories due to people being sick in COVID. We are still have a negative effect on Narva, but they are improving and developing according to plan, but still affecting the margins in the group. Moving into slide eight, some other financial figures. We see the Equity to Asset Ratio is still above our financial target of 30%.
It has decreased since last year due to the currency effect and has increased with the SEK 1.8 million shares that we issued in connection with the acquisition of SLP. We can show in Q1 a continuously strong cash flow from operations, that is mainly due to reduction of working capital. We have, as Erik said, invested approximately EUR 3 million, and that is excluding the acquisition in SLP. The operating net debt is as a result of the positive cash flow decreasing, if you exclude the fact that we added on operational net debt connected with SLP. The operational net debt is actually decreasing if you exclude the effect of the SLP acquisition with SEK 36 million in quarter one. In total, we show improved profitability and a continuously strong cash flow and a solid balance sheet in quarter one. Over to you, Erik.
Thank you, Lars. We turn to page number nine, and a look at the future. We have actually a quite positive view on the future. As I described earlier, we see that the market is picking up, and we expect it to be even stronger in the future. In addition to this, we have good sales activity. And this is both selling our clusters, but also the activities we have when we are streamlining our customer supply chain, which is quite exciting. If you look at operation, I think that the limiting factor for HANZA and for the manufacturing industry, maybe for the global economy as a whole, will be the access to material and components. So far, we've been able to navigate quite well in HANZA, but that's something that we keep an eye on.
Other than that, we will continue to work according to our roadmap 2021. It means that we will continue to invest in order to be able to produce the increase in volumes, but also we will look at more strategic acquisitions. If, but only if, it fits, we are ready to buy additional companies. That completes our presentation, and we can then move on to page number 10, then our Q&A session.
Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question comes from the line of Erik Cassel from ABG. Please go ahead.
Hello, everyone. First off, could you perhaps go into some more detail regarding the raw material and component problems with, for example, raw material prices increasing quite substantially? Could you go into some more detail how this may affect you over the coming months in terms of sales and margins?
Okay. We are not sitting on the same place now, Lars and I, so we will have to cooperate. I will start with a few lines, and then I hand over to you, Lars. What we see is the increase of price, as you point out, with the raw material prices. That's something that is transparent for us. In our contract, that's something that we forward to our customers. The price issue is not as important, or it's important of course, because the customers might have a problem to sell more units. What is really a problem is the shortage, and then you also the situation for semiconductors and everyone's talking about Volvo. That's something, if you're lacking components, you cannot really produce, can you?
We are so far been able to navigate, but prices we can handle through our customer agreements. Now, over to you, Lars.
Yes. You're asking about the effect on the financials, and of course, with higher prices on the raw material, we are increasing the sales by that fact. I don't expect it to have a major impact, but some increase of the sales it will have. It will not substantially have any impact on the profitability in margin also. What we also see is that we can see some increase of the stock. We need to buy some safety stock for some parts and some components. I think that's the main areas where it affects the financials.
Very good answer. Thank you. And then you said in the report that you expect Germany to recover in the end of 2021. Just for clarity, so I can understand this, and perhaps also in regards to wording, do you have indications from your customers to start ramping production at the end of the year? Should we see a gradual increase with sales back to normal levels at that point?
I can again start to answer in general, and if Lars might add some comments. We are in close contact with our customers, and especially when it comes to quick ramp-ups. We are receiving constantly work costs, and they are increasing. The demand has been a bit quicker than we expected, like you said. We thought that the upturn will come at the end of this year. It might come a bit earlier. We have been working closely with our customers in order to have capacity. Also we have seen last year that it's actually a feature of the manufacturing clusters that we can respond quickly to an upturn in sales due to the fact that we can share resources in a cluster. I expect us to be quite able to handle upturn.
There is a tricky situation in Germany because of the lockdown, and it has hurt the economy. Nobody can actually tell how quick it will go back. They say the latest forecast is it will go slower than the bounce back from the financial crisis, which was quite quick.
Lars, would you like to add something?
No, I'm fine. No comment.
Perfect. Thank you. In the Nordics, which segments are you seeing increased demand from primarily?
We're not presenting segments per say, but I think it's obvious that the mining industry has had an upturn. We have seen Sandvik's report, that's a big customer of ours. As I said before, we have indicated, I think, the segments where it's not been growing. Other than that, it's been quite over the line, quite good.
Okay. Yeah, perfect. I guess we could see some change in sales mix in the coming quarters. Do you think this would be accretive for margins or should they continue their positive trend upwards, so to speak?
Would you answer that, Lars?
Yeah. We don't give any forecast in that sense. What we say is that we expect to continue to grow and look positive on the market segment, and we know that in Other markets, we are developing according to plan, and that will help us to increase the margins.
Okay. Thank you, guys. All from me.
Thank you.
Just as a final reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. We have another question from the line of Fredrik Nilsson from Redeye. Please go ahead.
Hello, everyone. Fredrik Nilsson from Redeye here. One question about the improvement in margins in Main markets. It was quite an impressive increase also relative to last quarter, where you said that Sweden was strong, if I'm right? If Germany still is weak, if it's Finland that's driving the improvement quarter-to-quarter?
I'm glad that you brought that up. Erik speaking. I will again say a few words in general, leave over to Lars . What we stated before was that Sweden had a really good margin, and now we stated in this report, in my comment that actually a much larger part of HANZA now has a really strong margin. We have not ended up with specific countries, but we are saying that more and more of HANZA is getting a very strong margin. I leave over to you, Lars to elaborate on that.
We don't disclose the different segments in profitability. What we say is that what we see is that a main part now of HANZA segments are operating on the financial target, about 6%. We also see that the cost reductions in different segments are helping us to improve the margins. I think that's more or less all I can say about it.
Okay, thank you. One more question from me. You mentioned that you get the forecast from your customers in Germany, for example, that's looking really promising. I mean, is the levels in those forecasts enough to take Germany into margin levels in line with your target as well? Do we need to see an even further improvement until we get to that point?
Okay. As you see, we have a margin around 9% on several parts of HANZA. The whole idea is that we will continuously develop HANZA. We will be a company under development, meaning that we will take some extra costs, and we said that even though including these costs, we should be able to end up in a 6% EBITDA. That's the end goal, and it means that all clusters must come to the point when they have a margin well above 6%. If specifically Germany, how much that would impact, I dare not to answer that. Let's see if Lars can say more on that.
I think you can say it like this, that having one customer that in quarter one is having SEK 40 million lower sales compared to last year, and we will see an increase in the market coming back in the end of the year. I think that you can easily understand that reaching our financial target of 6% when you have such a big drop in volumes is not possible. We need to see the market coming back in order to reach a reasonable profitability in Germany.
I also like to add that this loss in volume is unfortunate, and it's a challenge for the group margin here now, but it's not a long-term challenge, and it's not a challenge for the business concept. What we wanted to do when we entered Germany was to have a platform for further growth, and that has been accomplished. It's sad that this unit in Germany, with high dependence on this customer, needs new orders and/or return of the main customer. It's not a problem which is at all affecting our strategy or long-term goals. They are still solid.
Okay. That's all for me. Thanks.
Thank you.
As there are no further questions, I'll hand it back to the speakers for closing remarks.
Okay. Thank you. I'd like to thank everyone for your attention. We are developing rapidly, and we are sure that the best is yet to come. I hope that you will keep your interest in HANZA. Thank you very much, and goodbye.