Good morning, welcome to this presentation of Nederman Group Q1 2020. It's interesting times we are living in. Some of the bullets, of course, for the first quarter, we have had a negative impact from the COVID pandemic, or more correctly, of the political decisions emanating from the COVID pandemic. That has had a negative impact on the result and also on the orders received, especially the early close down in China. Basically, the country's been closed down for 2 months. Our 3 factories is being closed or running in slow speed for roughly 2 months. That has obviously had a negative impact both on order intake and sales. We have had some delivery problems, but it's been primarily in China and into China. We have had delays in project execution, that has been in EMEA and Americas.
Large projects where we not got access to the site to finalize the installations. We have taken certain methods, that's temporary layoffs, it's shortened working hours, and we have been following the different laws, legislations, and recommendations in each and every jurisdiction, because it's different in U.S., it's different in Holland, Sweden, Denmark, et cetera. We are following the local regulations, and we are using the shortened working hours as it's presented where appropriate. As communicated, the dividend proposal has been reversed by the board. We have also a high level of readiness for future challenges. More far-reaching contingency plans has been prepared for implementation if and when necessary.
I move on to the next slide and summarize the financials for quarter one 2020. Incoming orders SEK 995 million versus SEK 1.019 billion in Q1 last year. That's a currency neutral decrease of 3.6%. Net sales SEK 981 million for the quarter versus SEK 1.036 billion, which is a decrease of 6.6% versus Q1 last year. Our operating profit SEK 64.2 million versus SEK 72.1 million in Q1 last year. That gave us an operating margin of 6.5%, including that was some relatively small posting of final acquisition costs from the Gasmet acquisition. Our adjusted operating profit was actually SEK 65.1 million versus SEK 73.1 million last year, an operating margin of 6.6% versus 7.1% last year. Bottom line net profit for Q1 was SEK 34.2 million versus SEK 46.2 million last year, and that gave us an earnings per share of SEK 0.98 versus SEK 1.32 in Q1 last year.
As Sven previously mentioned, the dividend proposal has been withdrawn. We now move on to the Nederman Extraction and Filtration Technology slides, Sven will tell us a little bit more about what's happened there.
As we said, there has been quite a mixed development, in some countries where close down or complete lockdown has been performed early on. We have seen a significant decline. Late in the quarter, we saw Germany, where we landed behind a very strong Q1 last year. Nordic, especially Denmark, stands out with a very strong lockdown very early on, reducing our capabilities of working there. U.K. orders received and sales grew after a positive trend in a number of system sales and reseller sales as well. Later in the quarter, there were restrictions that has made it slightly more difficult. Poland, healthy. North America, orders received declined a little bit in later part of Q1, but our sales were well in excess of last year. A positive development. Brazil has had a favorable trend for orders and sales, and we've had significant orders also to the automotive industry.
APAC actually had orders received higher than Q1, with a good development in Thailand and Indonesia and Malaysia. However, China was down, but there was a recovery last two weeks in the quarter. If you look at it, we had good profitability. There was some slowdown in orders, China and Asia especially. We had a very solid performance in the division despite the tricky situation there. What we have seen also is a growing activity in the partner webshop, a webshop that we have developed over a few years, working towards our retailers and partners, and we've seen a significant pickup here. Some effect is that we'll have to postpone a launch of a new filter and control system because we feel it will not have the attraction, and we will not be able to get through the corona noise. We will take that later in the year.
That's some of the effects we've seen.
If I go through the numbers for Extraction and Filtration Technology, orders received for the quarter were SEK 425.9 million. That's an organic decrease of 9.3%. Sales, however, were up 1.2% in the quarter to SEK 462 million, and profitability increased as well, with adjusted EBITDA at SEK 64.8 million versus SEK 62.6 million last year. That's an EBITDA margin of 14% for the division for Q1. If we then move on to Process Technology, I'll hand back over to Sven.
Yeah. The development in the quarter, there has been a decrease in orders received. That has mainly, or I would say, it comes from the textile industry close down in important markets like China, India, Bangladesh, where there has been literally no activity in that region for some period. However, we now see that China gradually is coming back. We have partly offset that by doing well in the Americas. We have also in EMEA, in foundry smelters, mainly in aluminum and asphalt segments, where we have had some positive development in the quarter. Problem when it comes to sales is the execution of the project has been delayed. We have had difficulties to get access to sites.
We have large installations in a, not mention the name, a large truck manufacturing in Södertälje, which closed down a few weeks, where we were denied access to install a brand-new large filter system. What is interesting is that the service and digitization strategy continues to generate result. We have got service contract with the remote control, with the Insight MikroPul system, a special one for SEK 30 million, which is a breakthrough in that area. We can also see that the merits of remote monitoring and remote service has now been sort of introduced. People start to understand that there are merits in it. We see a growing interest for the products and systems we have developed.
What we see in the future is, of course, that the chemical industries and the textile industries, some of them are coming back now. They are also evaluating their coming investments. We will have to evaluate what will happen going forward. It's big uncertainties.
If I talk about the numbers for Process Technology for the quarter, incoming orders, they were SEK 335 million, which is a drop of 10.3% or currency neutral versus Q1 last year. Sales were SEK 299.7 million, which is a bigger drop. It's 30% drop in sales versus the same period last year, currency neutral. We see that we have built a little bit of backlog in the division, although the drop in the textile market has made a significant impact on overall sales. That falls down to profitability as well, where you see adjusted EBITDA has come down to SEK 9.3 million from SEK 21.7 million in the same period last year. We have an EBITDA margin of 3.1% for quarter one. If I move on to Duct & Filter Technology.
The Ducts and Filters, we have the Nordfab, where we had 17% growth compared to last quarter, although slightly lower than Q1 last year. The problems we had earlier in the new ERP system implementation has been resolved, we are back on track there. Order sales and profitability improved in Asia, that is a clear result of the changes that were completed Q3 last year. We now see the positive result, better sales, better profitability, and a more structured organization. We introduced a new pipe system during the quarter, the first large installation has been very successful, they are completed. What we see is that there is a difference also in demand.
Wood business, construction business, still operating in the U.S., we can see now that there will be some difficulties because there are restriction on visiting sites, that means that our installers are postponing their orders because they cannot do the installation. Minol secured a strategic order and grew versus Q1 in Europe, although that the large business end users has been declining. What we see is that this will have an impact next or this quarter, that depending on if the installers can go to site, they will start ordering again. If they cannot go to site, it will be delays.
The financials for the Duct & Filter Technology division. External order intake was SEK 117 million for the quarter, which is a 10% currency neutral decrease versus Q1 last year. Sales were almost in line with Q1 last year at SEK 132.1 million, adjusted EBITA is SEK 15.7 million versus SEK 16.8 in Q1 last year. The EBIT, the margin for the division in quarter one was 11.9%. Move on to Monitoring and Control Technology.
Monitoring Control had a development in the quarter. We start with Asia, where the demand grew for emission monitoring solutions. That is when you monitor emissions of gases and particles in the environment, stack emission, et cetera. We have a particularly strong sentiment in China. The demand for the process control, that is management control, manufacturing process, was slightly weak. That is our Boston-based business, it's related to that there were less new installations made in the quarter due to the lockdown. We could see that some recovery at the end of the quarter in especially China, where there is a growing interest. We have NEO Monitors, Gasmet, AFS, where we are technology leaders in gas and particle monitoring.
We are using that in order to build a stronghold in Asia, especially in China, and we are using our Gasmet office in Hong Kong to build a complete MCT stronghold in China and Asia. In Europe, the demand for process control solutions was relatively weak. Again, the same few new installations, but the emission monitoring improved compared to last year. Overall, solid performance. North America, process control solutions continued to dominate the operations. Orders received actually rose, and the sales were in line with last year. Going forward, we are focusing on introducing the NEO Monitors and Gasmet product in a much broader context in that region, and we see that as a positive development when the market opens here. We have also launched the new monitoring product, CMM AutoCal, says everything, as I am sure that you understand that I will not develop it further.
It has new technology that reduce the need for costly manual validation, and again, we have taken a, not a giant leap, but another leap to continue to be the technology leader in this area. Some of the effect has been that, as you've seen here, we have had a good demand in China, but there has been some difficulties getting shipments into China. That is opening at the moment.
The financials for the division. Incoming orders for the quarter, SEK 116.6 million. That's currency neutral growth of 93.9%, obviously coming from Gasmet. We're not part of the Nederman Group in Q1 last year. Organic growth actually 11.8% down in Q1. Sales, SEK 108.4 million versus SEK 53.5 million in Q1 last year. That's currency neutral growth of 105.8%, and organic growth in sales of 7.7% as well, which gave us a greatly improved EBITDA at +SEK 10.6 million. We were more or less breakeven at quarter one last year. The EBITDA margin for the division in quarter one was 9.8%. I'll move then on to the region slide and just talk you through some of the numbers. Those that have looked at this will have noticed that there's a very apparent picture that APAC has been the biggest challenge in quarter one.
There's a significant drop in both order intake and sales in the region. I'm sure that most people are not surprised to see this. There's some backlog being built in Americas, that comes largely from the Process Technology division, where we had a couple of larger orders as mentioned, EMEA was relatively, I say, flat for quarter one versus quarter one last year. Cash flow for operations. We had a positive cash flow in quarter one, which is actually relatively unusual for Nederman. We usually start the year with negative cash impact from the large projects that we tend to receive down payments on in Q4 and then start working on in Q1. All in all, SEK 13 million positive operating cash flow in quarter one this year versus SEK 45 million negative in Q1 last.
There was overall a slight increase in net debt, as there usually is in our first quarter, as I mentioned. We have a relatively small cash flow from operations, and then we have had some fixed asset investments and also made the final payment in relation to the acquisition of Auburn FilterSense that was from two years ago.
If we summarize the first quarter in the four divisions, we have Extraction and Filtration Technology. As mentioned, it's been a mixed quarter for order intake, but overall a solid performance with strong sales and good improved profitability. Process Technology has been suffering from the complete shutdown in China, India and some other important, for them, important areas that has meant that the textile market has had a downturn. There has been reduced sales, and as we mentioned before, a lot emanating from problems accessing the sites, et cetera. That has, of course, negatively impacted the result. Duct & Filter Technology has had a small order decline, especially at the end of the quarter when more countries were closing down. There has been still a strong but slightly reduced profitability. There has been extra cost to keep the operations going due to the restrictions we have around the globe.
Monitoring & Control Technology order intake varied by region, but a very strong China, reasonably strong rest of Asia. We have seen a significant improving profitability. Overall, we have had a quarter that has been very much impacted by restrictions, imposed restrictions due to the COVID pandemic, and that has had an impact, and it also has had an impact on increased costs. For instance, if you are allowed to do an emergency service, for just examples, in U.K., you can't send two service technicians that you normally do in one car, you have to send them in two cars. There has been a lot of practicalities, a lot of focus around the different rules that has been set up. Despite that, I think we have come decently well out of this quarter, and we'll see what happens later on.
If we go to outlook, as you understand, there is currently an extreme uncertainty regarding the development of the global economy. It's very dependent on political decision. For the Q2 of 2020, Nederman expects a negative effect of the COVID pandemic to be considerable in most of the group markets, not least in Europe and North America, where a large number of countries have closed down all non-essential operations. The Chinese market is expected to continue displaying signs of recovery during Q2, provided that the COVID epidemic in the country continues to be kept under control, while the situation in several APAC countries remains more troubling. It's currently extremely difficult to estimate exactly how extensive the effects of the COVID pandemic will be or how protracted in terms of time.
Nederman has introduced several measures to prepare the group for a prolonged difficult situation, and will, in the second quarter, implement further measures as and when the continued development necessitate it.
I move on to the final slide, the financial calendar for 2020. Our annual general meeting's next Monday on April the 27th. It will be a much briefer affair than is ordinarily the case. Today is actually the last day for registration for attendance and also for postal voting for any shareholders who wish to vote via post and will not be attending in person. We also have a new date for the interim report for January to June 2020, which was previously the 14th of July. We will release on the 17th of July instead. 14th of July is actually a very tight deadline, and given the Q2 that we see ahead of us, we think in order to be able to provide more information and better information around the second quarter, we need a couple more days there. Note that July the 17th.
The Q3 report will be released on the 23rd of October. That is all from Sven and I. Now we are happy to open for any questions that people listening may have.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Daniel Lindkvist of Handelsbanken. Please go ahead. Your line is open.
Thank you. Just a few short questions. You had quite strong order intake in Process Technology in Q4, but low conversion on it in Q1. Could you just elaborate on the degree of delays and the degree of order intake just simply being with a longer timeframe?
There have been some delays. Like you say, Daniel, you are right, we had a good quarter four in terms of order intake in that division. The fact that we built backlog was more down to the delays in execution on certain projects. What it does mean is assuming that we are able to get onto sites and continue to work on these projects, which it seems that countries are starting to open up as well now, Q2 for that division may not be quite as severely impacted in terms of sales as for perhaps Extraction and Filtration Technology, but there has definitely been some delays in the quarter due to the pandemic. We also do have a backlog that is spread. Those orders that were taken in Q4 last year were spread out over more than Q1 for this year.
Even when they were placed, some were as late as the very end of 2020, and there might be some questions on whether those will even be fully delivered by the end of the year. We applied percentage of completion accounting, if the work is done on the projects, the revenue is also recognized. That impact may not be quite so severe.
Okay, great. Just further on Process Technology, the textile business, under normal circumstances, how big part of that operation would you say textile is?
35.
35 something.
35%.
It fluctuates due to order size. The orders are so huge in that division, it really can be several percentage. Ordinarily, what is normal or what is ordinary, but somewhere around 30%-35% is perhaps where they are textile-wise.
What we're seeing is that about 80% of that is in countries where you have the large. The things are India, which is now completely shut down. China, that is reopening. It is also then the rest of it, the Singapore, where they handle sales in the region of Bangladesh, Pakistan and so on, where you have a tricky position at the moment when it comes to both getting access to and discuss new sales projects as well as supplying at the moment.
Just moving on to the Duct & Filter Technology, you have the very high order conversion from Q4 in this quarter. Should we now see that the Nordfab problems in the wake of ERP systems is compensated fully from Q4 to Q1?
Yes.
Yeah. They are running as normal. Of course, now they have a different.
Now they have a different situation, that is, again, the question of will our installers, which is our base customers, will they get access to sites and thereby order equipment? That is. You can see a big difference here. It seems like still the wood industry is doing all right and they are in operation, whereas the large industries related to automotive and more engineering sectors has been more hit and been closed down. Probably it's my speculation, probably because they have had more problems in their supply chain, whereas the wood industry has been more domestic and therefore been able to continue their business with less interruptions.
Yeah, okay. Just on the monitoring and control systems, this was the first Q1 with experience for the Gasmet. Could you just elaborate shortly on the seasonality in the Gasmet business and why it is, and just try to give that in regard, in view to the delivery problems?
Normally, Gasmet is highly seasonal for some reason, probably because they have a lot of public tenders and public customers like defense rescues, meaning fire brigade, all of that with the portable unit. Their strong quarter is normally Q4. Q1 is normally their weakest quarter during a year, and historically, they have not been generating profit in Q1.
Okay. Of course, the rest of the business was rather good then in Q1 in Monitoring and Control Systems.
Yeah, also Gasmet, I said this was historic. Gasmet made a very good result compared to historic figures this year. They are positive, and we see that they are now doing inroads and growing in Asia, in China, and we will use their office in Hong Kong to further consolidate our position because NEO has one in Beijing and we will further do. There's a growing interest for this high-tech measurement in China at the moment. Our second activity will be, when time allows us to do that, we will also consolidate and grow our business where we have a significantly weaker attendance, both for NEO as well as for Gasmet. The products are well suited also for the American market.
We will be delayed in these measures due to, I don't have to say, but we can't travel, we can't sign, we can't employ people at the moment. We can't even do an interview.
No.
We are very positive to the development for the division.
Yeah, good. Just.
Also, in fact, just also with this, we have, over the last two years now, been introducing and advocating that remote control of your system will be very beneficial for the factory owners and also give them possibility of adjusting and do remote analytics on that. We see a significant growth in the interest of that type of systems. Try to understand that if you can't get the service technician there because you're not allowed to fly from Oslo to Houston, there is a benefit in doing that. We hope that later in the year, and especially next year, we will have more breakthroughs with these new systems.
Yeah. Something good might come out of this then, in the end.
Yes. We hope for that.
Yeah. Just my final question. The order intake, I think it was surprisingly strong at only down 10% organically. How should we view it? Is the likelihood of the orders received now converting into sales rather good, or how should the order intake be viewed under these circumstances?
It's very different between the divisions is what I would say. In Process Technology, they will hopefully, as long as they have access, like I mentioned before, to sites, they will continue to be able to deliver on the backlog they have. What they will see is that it will probably be a late. The later question will be, will companies continue to make large investments? That will be later in the year. The orders that they have now will be delivered. They will unlikely to be canceled. If you take the other divisions, particularly Ducts and Filter Technology and Extraction and Filtration Technology, they will dip in terms of order intake and sales faster. They're smaller solutions and product sales, so they will dip faster. The recovery will be quicker as well, we expect.
The Monitoring and Control Technology is somewhere between the two of those two extremes. Do you want to add anything to that?
The large systems will of course, probably be so, but there is definitely now with the clear evidence that we have now, you can read it in The Guardian today or yesterday or something, that they now really try to see and understand that bad air quality has an impact also if you get corona or whatever. If you are a smoker or if you're living in areas with bad air quality, you have much more severe effects of getting the virus. It's also so, we need to also keep in mind that more than 8 million people, which is significantly more than the COVID death toll so far has been, 8 million people every year die because of bad air quality in their work environment or in their living environment.
I think and hope that we will be able to forward this message, that there are possibilities, You've also seen the different articles in different areas where you can see how Northern Italy also getting blue skies. China and Japan is getting blue skies. As we advocate, you can have blue skies if you invest in filtration equipment and take care of your pollutions instead. Hopefully, there will be some good knowledge spread around about this topic as well.
Yeah. We should really hope so. Thank you, guys. Sorry for taking up so much of your time.
Thank you.
Just to remind everyone, if you would like to ask a question, please press zero one on your telephone keypads. You can press zero two at any time to withdraw your question. There'll now be a further pause while any questions are being registered. There are no further questions at this time. Please go ahead, speakers.
Okay. We thank you for taking time listening to us, and wish you all a continued good day. Thank you very much.