Good morning, ladies and gentlemen. Thank you for standing by and welcome to Inwido Q3 report conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star and one on your telephone. I must advise you that this conference is being recorded today, Monday, 23rd of the-
We'll give you the figures later on. We will take, as stated, questions after the presentation. Let's go to slide two. I start with the summary of the development during summer and Q3, where I think we can say that we follow our strategic plan. We continue to grow by 8% in the third quarter, 4% organic. The top line is there. We have made two acquisitions during spring and summer, Bøjsø and Bedst & Billigst, the e-commerce company based in Denmark. We have added another around SEK 200 million of turnover. Supply chain disturbances, especially in the Swedish supply chain, from our component factories all the way through to the window factories. They are much less now, but they have still impacted the quarter roughly by, say, SEK 25 million in the quarter.
We have the usual uncertainties, political and financial risks, of course, but that is something that we see in basically all industries. In fact, it's jumping a little bit up and down. We get various signals, but at least the inflation is not falling anymore. We are also seeing and expecting some raw material prices going forward for aluminum, for glass, for wood, for transportation. That will also lead in a good manner. Consumers seem to be in a positive mood trend. As a matter of fact, the Finnish consumers, they are on an all-time high level when it comes to consumer confidence. I think the only question mark we have right now is the U.K. market, where there is a slight trend downwards for consumers, and that is, of course, connected to the Brexit discussions.
The markets in general, as before the summer, are driven generally by new build. There are lack of dwellings. The new build has continued to invest, but still in a good mood. We also continue to see a shortage of competence. It's difficult to recruit on all levels in the Nordic markets, especially, I would say, the countryside. It's also hard to find all the resources we need in our factories with the urbanization going on. The good demand creates longer lead times. This goes for, I would say, all producers in our industry, but also outside our industry and also for the raw material, because the markets are still, I would say, very volume and production driven and go for some kind of cost plus price. About the Inwido performance, again, good growth, profitability hit by short-term operational disturbances.
In general, you can say that nothing has changed in our business model. We still see it as the right model and a successful one, but the operational disturbance Organic growth 4%, you can say that all segments are growing, even Sweden-Norway, with a slight growth. Organic +1% in the quarter, it is positive more or less everywhere except Sweden, that is very much connected on the sales engine and also the capacity there. The order stock towards the end of the quarter is +7%. That is the highest EBITDA margin after good growth and good control of the business. A very good performance in Denmark.
e-commerce is now 6% of total group sales, e-commerce is developing according to plan, even though that we can see some sharper competition and the development jumping a little bit up and down from week to week and month to month. Overall, good development for e-commerce. Further for us, BnB adds some SEK 125 million of turnover with a Nordic platform for that business. We will add another major production unit in a low-cost country as well. Again, the short-term disturbances in the Swedish supply chain continue and will be back in Q4 as I see it. Turning to slide five to go through a little bit why is this happening. First of all, I would like to say that we all have to remember that we are made to order. We don't have any article number production.
We don't have any windows and doors on the shelves that we can deliver. We have to. It's been, of course, from the start of the year with no winter and a very high volume growth, both at our suppliers and in our own factories, made us for many of our suppliers in the beginning of the year. Then trying to ramp up, we got some shortage of people and competence, it was very difficult, and it is still difficult to recruit the right level of resources in some of the areas. We added to that some new product launches and some changes in our product platform that created some technical challenges during spring and summer on top of all the challenges that we had.
Then, of course, as you always have, with all the other problems or challenges that we have had, some machinery breakdown and some new investments not running exactly according to expected from the beginning at production. Very costly, of course. I have to thank all our good people out there in the factories for working so hard to make other processes. I would say all processes have been revised, especially the material planning and the coordination with our main suppliers. We have taken down deliberately capacity in some of the Swedish units to not overbook and to get some headroom going in several plants. In some factories, we have also added new leadership and exchanged the leadership to get a better short term and strong, completely coming back on track with our supply chain. Turning to slide six.
If we take a look at the first nine months, again, good sales growth and profit, obviously below our expectations, but in line with 2016 can grow, and we are strengthening our market position. As I said before, backlog of orders, +7%, is high and the highest ever. The Operating EBITDA in line with last year, first nine months. Obviously the operating companies this year, and the latest one was Bedst og Billigst, the Danish, but with a Nordic platform in e-commerce. That's our latest Inwido member, and we will continue this path, of course, going forward. Going to slide seven and then going through all the business slightly with 1% in the quarter, despite the challenges we've had in the production. This is a new segment as of July 1. Henrik Hjalmarsson is the new head of the business area, started in August.
We see in the Swedish market that the consumer confidence is on a healthy level, we also see slight signals that consumers continue to be slightly more hesitant summertime in 2016, when there was a lot of debate also about amortizations and lending in the Swedish market. There is not a big change, in comparison to the industrial markets, the new build markets, consumers are more hesitant, I would say. Further disturbances in the supply chain, I'm not going to say so much more about that, substantial extra cost in the quarter is basically the reason for dragging the Operating EBITDA. There has dropped a bit in Sweden from around 60% down to around 55% because of the strong growth in the new build sector. Total sales still in Sweden-Norway, +1%, and total order backlog per annum quarter, +15%.
Part of that order backlog is, of course, also a dealer more negative than they might be if we cannot deliver according to expectations. Turning to slide eight. Just a reminder of the reasons why we created Sweden-Norway as a new business area. There are several reasons, of course, we want to get a bigger business area where we can utilize the resources better because they are utilizing the same factories, it's more or less the same products. With the consolidation of two areas, it's very much in line with how Inwido normally operates, where we produce and much lower profitability and consolidation is needed, and synergies are needed to get Norway completely back on track. This plan, very strong order book and segment mix still slightly unfavorable.
We see that Finland is really coming back now as a market with good GDP development and a very high consumer confidence, actually higher than before the financial crisis. We so far also see continued very good growth within the new build sector. Both construction companies and house factories are very active and showing good demand there. We had problems operationally also in Finland of a completely different kind. It was more seen in the beginning of 2017. I would say that we are now back on track within the consumer business, and we will be fully recovered in Q4. The organic ordering take already in Q3 was actually more than 14% in Finland during the quarter. The situation with lack of sales people in some of the consumer-driven segments, and that created indirectly a negative mix.
I think we will recover that in the coming about the Finnish development in the coming quarters. Denmark Q3, I already stated that it's a very strong development in both sales and product confidence and still in a positive trend. We have good growth in all our channels, especially the sales to the carpenters and installers human-driven. Here we don't engage very much in the new build market at all. Total sales +18%, total order backlog -3%. That is nothing to be worried about. We have shorter lead time, we have improved capacity, and we are dealing with the orders very, very fast in the Danish business. It's nothing to be especially concerned about for Denmark as I see it right now. Turning to slide 11, Emerging Business Europe, where we have, as always, a mixed development.
However, the overall business area is developing more or less according to plan, with growth and with improved profitability, where Ireland, Poland, and the latest acquisition within uPVC windows in U.K. developed well. The e-commerce is still growing and according to plan, even though the growth in the quarter was slightly lower than earlier. Growth pace will vary going forward. Growth pace to be more up and down going forward also. The acquisition, as I said before, Bedst & Billigst strengths rounds of sales in the next coming period. It's really taking up a big share of the restructuring. Then we are improving our competitiveness, especially in the direct sales model that we have around the London area. Up 22%. Total order backlog lower -13%. That is very much related to direct sales in U.K. and to some extent in Austria for the business units.
Turning to slide 12. The outlook. It continues to be good as we see it. The markets are in general positive. The Inwido long-term performance should be promising, where the underlying profit is still good. To repeat the challenges, of course, we have to come back on track with the supply chain disturbances, and they should meet the right and enough competence to also ramp up production when needed. Of course, the political and financial uncertainties as for all could be worthwhile mentioning, even though we have not seen a big change in the sentiment over the last couple of years, despite all the things happening around us.
Operations will be in better shape in Q4. As I said, we still expect some extra cost around SEK 10 million, I would say, if everything goes according to the plan we have now. Then, of course, in coming back into 2018, we should be fully recovered. Strategic pillar in our plan that we should always try to make efficiency improvements and structural changes to improve to take out at least SEK 100 million of cost. Thereby also improving the competitiveness with full effect in 2019, already into some details later on in this presentation. Our management ambition is still there. We tend to think that we are with most of them on track. We are acquiring companies. We are launching now connected products in most markets.
We are taking efficiency and cost efficiency measures to be as flexible. Short-term challenge we have is to capitalize on the strong Nordic position by now getting the value chain back on track. To come back to normal production as soon as possible, but also to continue to ramp up sales in Finland in a, as we see, favorable market where we have a couple of competitors with some challenges. The number two in Finland is now in some kind of administration phase, and not really operating as the company should. We will continue to evaluate further acquisitions. That's a continuous process, and acquisition-based growth in Europe will still be a focused area for us.
Obviously, with SEK 100 million program running, the efficiency and cost improvement program must be in focus, that we secure, that we also create and get these SEK 100 million out of the system. We will continue to launch connected and other new products to improve life at home for our consumers. That is, of course, the foundation for the whole company.
Thank you very much, Håkan. We turn page to page number 16. On this page, you can see the income statement for the third quarter, as well as year to date revised. EBITDA decreased in a quarter and reached SEK 172 million compared to SEK 202 million last year. I will later in the presentation come back with some reasons behind the lower results. Last year, the Q3 had a positive one-time effect of SEK 10 million from resolution of an earn-out, and thereby, as you can see, the EBITDA is SEK 40 million less this year compared to last year due to the fact that this SEK 10 million resolution of the earn-out. Profit after tax reached SEK 160 million compared to SEK 152 million last year. On year to date, sales has been improved by 16%, were up 5% in organic growth. Page number 17.
In the Q2 report in July, we stated extra costs and loss of income of about SEK 45 million is going to be solved in the beginning of Q3. However, as Håkan previously stated, the production disturbances continued after summer vacation and has affected the results after summer vacation. The units have been forced to run on extra shifts and on overtime to handle the delivery time to our customers. This has been costly, and at the same time, new people have been recruited to handle situations with lower efficiency as a consequence. We are in a high season right now, and the production units estimated today that the situation will be solved during the fourth quarter, when we are entering the low season, and the extra cost in a Q4 of entry sales compared to last year, and at the same time, lower sales efficiency in Finland and U.K.
The negative sales mix. The sales department in Finland, as we described in the Q2 report, is today up on speed, and the order take is ahead of last year in the third quarter. Page number 18. This page is showing to the left, sales in the third quarter for 2016, 2017, and 2015. To the right, you can see the order take for 2015, 2016, and 2017. As I stated before, the sales increased by 8% in total, whereas organic growth was 4%. Inwido is not facing a top-line issue. It's more a short-term cost issue with too low efficiency in the coming quarter. However, the negative sales mix is more driven by the market. The order take was on par with last year and adjusted for acquisitions, the order take was plus 1% compared to last year.
The order take has been impacted by the production disturbances in Sweden, delivery times, and thereby short-term reduction in capacity for new orders with short delivery times. Turn page to page number 19. On this page, you can see the order backlog in SEK from Q1 2012 until Q3 2017. As you can see, the order backlog is plus 7% compared to Q3 last year, and this is the highest order backlog we ever had. The order backlog is always at peak in Q3, and it will be reduced in the fourth quarter when we are entering the low season. We are plus 7% compared to last year, which is positive. Turn page to page number 20. On this page, you can see Operating EBITDA in SEK for the third quarter as well as year to date.
You can also see the margin, Operating EBITDA margin for the third quarter as well as year to date for the year 2015 until 2017. The margin was reduced in the quarter as a consequence of the lower efficiency and a negative sales mix effect, and the margin reached 11% compared to 14% last year and 14.7% the year before. Operating EBITDA on year to date is on par with last year, but the margin has decreased from 11.3% to 9.7%. Turn page to page number 21, and this the cost efficiency and cost improvement program, as Håkan mentioned, Inwido during the first half of 2018 and will reach full effect from 1st of January 2019. The savings are within all business areas and will demand a one-time restructuring cost of about SEK 80 million to be taken in Q4 and Q1.
Most of the restructuring costs are write-down of assets and will not generate any cash payments. We will come back with more detailed information about this program in the Q4 report. This program is, of course, one of the actions for Inwido to reach our targets. Turn then page to page number 22, the last slide before we open up for questions. On this page, you can see the net debt in SEK million EBITDA has been somewhat improved despite the lower result in the quarter. The net debt was at EBITDA, was end of September 2.2 compared to 2.6 last year. Inwido has, as most of you know, a very high seasonality, and this seasonality will previous years. We open up now for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Again, as a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your
I'm here. A couple of questions. Firstly, if you look on the Sweden-Norway operations, I think, Håkan, you sounded fairly confident on orders. Clearly, the production disturbances, it sounded that the sources of these problems come from a very wide variety of areas. I just wanted to hear from you, Carin, obviously, prices are pressured in that channel. Were you too optimistic in trying to achieve those orders? Something here to strengthen the confidence in you actually achieving those savings.
Okay. A lot of questions there. If we take the Sweden-Norway case, I think the situation is more or less unchanged from before. Actually, what is very positive for us in the Swedish market is that we, in Q2, also gained market share again in Sweden, despite all the challenges. We have had a lower, if we cannot deliver. I think the situation is very much unchanged.
We hear a lot about the Norwegian market and the challenges in the real estate market there. We cannot really see it. We come from a small position in Norway, we are still growing substantially in Norway, actually. We have 27, soon with the Danish acquisition, we will have 29 factories. Of course, they are not running smoothly 100% all of them all the time. This happens. The problem for us now is that a couple of our bigger factories came behind because it started with the material shortage. Efficiency further by launching some new technical platforms. We did some mistakes there or ran into some problems with those projects. Where you lag too much behind, it takes normally a longer time to come back on track because you try to pressure the system.
Slumps. That is basically what happened to some extent after the summer where we pressured the system very hard. I would say these are problems or challenges or things that happen from time to time in a system to make our production process even more detailed and efficient. Also when you get some disturbances, the risks, that these are larger than before when you had a lot of extra resources, extra material stock, et cetera. The risks now are, of course, with 10%-11% working capital to sales, the risks are higher, and that is what we see right now.
Yeah. The final one. Could you give us something to strengthen the confidence in you being able to achieve the SEK 100 million in savings?
Well, I think the only confidence I can give you is that you look back at history. You take a look at Inwido, and you compare to all other window and door makers that you can find, how they perform. You can see all the 20 factories we closed down. You can see the margin improvement that we have done back to 2010, 2011, and all the other KPIs that we have improved over the years. I think that is the only confidence I can give you. Obviously, as I normally say, to drive business is not science, you can always end up with new problems and challenges that you haven't foreseen. I'm pretty secure that we have defined they are strong and good.
Okay, thanks.
Thank you. Your next question comes from the line of Kenneth Patey of Carnegie. Thank you. Please ask your question.
First I'd like to hear some comments about pricing in Finland sales force around London there. What is happening there? As I remember, you should start to introduce your own supplier, own windows to that sales force around now. An update there also. Thank you.
Finland, I think there are several reasons for price increases to some extent, that will generate price increases to our customers, but also, of course, that we are one of the-- To some extent utilize that. I think at the last time when another big competitor ran into problems some three, four years ago, I think you should also be careful that next coming quarters. When it comes to U.K., I think it's more of a, the challenge we have there is that we have had, because of the capacity of all the supply into our own factories. That has also created some downturn in sales, and therefore, we have to now to look into this business model and also restructure what we can and what we have to do to come back on track with full competitiveness.
The plan I see now for U.K. looks very promising, and I hope for good development in 2018 with the U.K. sales.
Okay. Is it still a capacity problem in factories supplying the U.K. or?
Yeah, you can say that. Not only because of the supply chain issues we're talking about in Sweden, it's also about the huge growth of the e-commerce business unit. e-commerce to a great extent and part of our U.K. business is utilizing the same factory, a big factory we have in Poland, and we are investing, but with the growth we have seen in both actually in U.K., but especially in e-commerce, we haven't had the right capacity to take on more production in our own regime. That is part of the problem for U.K. We are investing heavily in our Polish factory to ramp up sales, sorry, ramp up production and to be able to ramp up sales in U.K. We expect that to happen in the first half of 2018.
Okay. Thank you.
Thank you. Your next question comes from the line of Bregt De Smet of Nordea. Thank you. Please ask your question.
Thank you very much. Could you tell us about the organic growth in Sweden and Norway, respectively for Q3? The Sweden was, I think, around SEK 478 million for the respective.
Yeah. Obviously, the Sweden-Norway margin is dragged down a bit. That Norway is not the most profitable, as I said, by almost 18% in the quarter. The Swedish growth, maybe it's not the best quarter to calculate growth rates because we have consciously limited some of the sales to be able to deliver as much as we can to the most important customers in Sweden. We will have to come back, I think, in Q4 and Q1 and Q2 next year to really see the potential of the Swedish market. That's how we see it right now.
All right. Do you see any changes in the consumer behavior in Sweden since the housing market has been a bit uneasy and unstable?
Not really. The changes we have seen and are seeing in Sweden, they occurred, as I said, from around 15, 16 months ago. The market tends to be stable in that direction, it continues the same way. You can read, I don't know how many articles about all the risks and problems, of course, that might impact consumers going forward. We currently see it being worse right now. I think we have a nice and decent development, even though new build is growing much faster still.
All right. Long reason or risk that you might lose any clients now because of disturbance?
Yeah. As I said, I'm quite sure that we have made a couple of customers very disappointed during this time, but we try to stay very close to them and communicate as much as we can about the challenges. Basically, we have taken all the cost to make sure that they are not hurt too much. There might be some damages in some relationships, as always, when you are delayed. On the other hand, I think it's also very known in the market that we are not the only one. We will have some tough discussions with a couple of customers also going forward.
All right. Given your leverage level along with these disturbances, again, how confident are you on carrying out new M&A at this point?
I must say, I don't see any big problems there. I think we will continue to take down net debt during Q4, and I think there is plenty of headroom to make further acquisitions in 2018. I'm really looking forward to come back with positive news on that side later on.
Okay. One final one for me. It's somewhat of a slower development, and also the Q3 figure of minus 3%, does that include the latest acquisition of Bedst & Billigst?
No. Okay, we're going back to the two questions. Normally, it depends from quarter to quarter. You can take in roughly, you can calculate that sales in one quarter, 50% of the sales in a quarter is in the backlog when a quarter starts, and 50% of the sales is generated by new orders in the quarter to be delivered in a quarter. When it comes to Bedst & Billigst, that deal is signed, but we have not closed the deal and they are not within our books as of today. However, we have Bøjsø in our books, but that order backlog.
All right. Thank you very much. That's all from me.
Thank you. We don't have any further questions at this time. Please continue.
Okay. Thank you all for listening in, that ends the presentation of Inwido Q3. Have a nice working week. Thank you very much.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.