Hello, welcome to the Nolato AB Q1 Report 2020. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question- and- answer session. Today, I'm pleased to present Christer Wahlquist, CEO. Please go ahead with your meeting.
Hello, and welcome everybody to the presentation of Nolato's first quarter 2020. I would like to start. This is Christer Wahlquist. Here I have Per-Ola Holmström beside me. I would like to start on page two in the presentation material, summarizing up the group Q1 figures. During the first quarter, we have seen good growth overall during the quarter with a 17% increase compared to last year, and it is built up by growth in all business area, and the sales ended up at SEK 2,065 million. The profit, the operating profit, the EBITDA, rose to SEK 241 million, excluding the non-recurring items. We have seen an increase across all three business areas, and we're pleased of the overall good performance. The EBITDA margin ended up at 11.7%, excluding the non-recurring items.
We feel that in the special times we are with the COVID-19 situation, we feel secure with our financial positions and in a good position to execute our long-term strategies, which of course then also includes acquisitions. Turning to page three, summarizing up the three different business areas we have. Of course, they are different in the market segments they operate in, but a lot of similarities behind the scenes. We use the same materials, the same sort of solution-oriented development partner, same sort of production technology. In the sense of business, they are a little bit different. The medical is, of course, a long-term, very stable business with a step-by-step build-up, a lot of focus on quality assurance, and quality control. We have the Integrated Solutions area, which is more a fast-moving business, a lot of focus on flexibility, and those kinds of items.
We now have the Industrial Solutions part of the business, which is, of course, more following the business cycle and those kinds of things, a lot of focus on efficient lean manufacturing. Turning to page four, starting with the medical business area. Here we see a stable, growing business, very long-term, conservative, consecutive growth in this business area. The latest quarter ended up at SEK 642 million in sales. Good situation in the medical. Turning to page five, we have two different business segments in this business area. Medical devices, being the largest portion of the business, consists of customer-specific development and production for all kinds of different areas of the medical community. We have the pharma packaging, which is dry containers for liquid and solid drugs. Part of that business is our own designs that it’s then adopted to different drugs, different consumers.
Part of the pharma business is also unique developments for individual customers and the specific drugs. Turning to page six, going into the medical first quarter. We saw an increase in sales 5% in total; if we adjust that for currency, it ended up at 2% increase. We saw during the quarter very good growth in the production volumes, a little bit slower sales on the project side. Long-term, we see a very good growth on the product and as a total. The corona COVID-19 situation, we have seen some effects of that in the medical. We have seen some delays in projects, depending on the situation, where we can travel, and the customer cannot travel to us as much . We saw a positive impact on some segments of the production side, mostly related to the diagnostic and those kinds of products.
During the quarter, we saw good EBITA margins of 13.6%. Of course, we saw a positive sales mix, but also if we look into the difference between the project and the production, we see a little bit higher margins on the production side than on the project side, especially when we sell equipment to the customers. Jumping into Integrated Solutions on page seven. On the graph there, you see 20 years of different sales, and our ambition over the last period of few years has been to expand into new market segments, and we have been successful in that integration, and we see a little bit higher sales numbers during the last years here. Turning to page eight, even in the Integrated Solutions business area, we have two different market segments. We have the consumer electronics, which is the largest portion of the total business area.
That consists of what we call Vaporizer Heating Products, different connected devices, and, of course, the mobile phone and the wearables. The smaller portion of this business area is the EMC thermal, which, of course, is shielding solutions for electromagnetic influences and heat distribution from electronic devices. In this portion of this business area, the EMC thermal, we have, of course, our latest acquisition, Ja-Bar, which fits into the EMC thermal. If we turn to page nine, we jump into the Q1 of Integrated Solutions. We saw a sharp increase in sales during the quarter, a 50% growth if we adjust for currency and the Ja-Bar situation when we acquired in late 2019. During the quarter, we saw an inventory buildup by customers.
Of course, it's a result of the continuity of the corona situation, but also a buildup for the rollout of new product variants in the VHP sector. During the quarter, we saw EMC affected by the coronavirus, but during the later part of the quarter, we saw a strong situation. We also had low volume on the mobile phone segments. The margin ended up at 13%, a strong margin in Q1, and of course, this is the first quarter with Ja-Bar, and it contributed by SEK 43 million in sales, and that is well according to our plan of the acquisition. If we then turn to page 10 and look into the Industrial Solutions business area. Here, with Industrial Solutions, we are on a technology and graphical expansion. It's a journey of expanding geographically and in technology.
We established a U.S. footprint during last year, and it's performing well according to our plans. If we then turn to pages 10 and 11, we'll see the two different market segments of our Industrial Solutions. We have the General Industry, which is approximately 60% of the total, and we have our Automotive part of Industrial Solutions, which is approximately 40% of the Industrial Solutions business area. If we turn to page 12, we will jump into the Q1 of Industrial Solutions. During the quarter, we saw an increase of sales. If we adjust that for currency, it's a 4% increase. We saw new customer projects within the General Industry continue to make a positive contribution. We saw a normalization in the hygiene area. During the later part of the quarter, we saw a production suspension within the automotive industry.
We saw that in late of March, and we see it in most parts of April. After that, we also felt a sort of volatile start- up of part of the automotive industry. We feel that the automotive industry production will impact the second quarter of this year. The margin, EBITDA margin, ended up at 8.2% in comparison to the 8.3% last year. We saw a negative impact, approximately one percentage point, due to the automotive industrial production suspensions during the quarter.
Good afternoon. Per-Ola Holmström presenting group financial highlights on page 13. We did see growth of 17%, and in combination with increasing the margins. It resulted in an EBITDA result of SEK 241 million. We did have a non-recurring item of SEK 14 million, and those were connected to the close down of one of the operations we have in the UK within the pharma packaging business within medical. We have taken SEK 22 million in costs in Q4 last year, and the remaining part, according to accounting principles, was taken in this quarter, SEK 14 million. Totally SEK 36 million.
We have estimated the cash flow effect of those of about SEK 30 million. The EBITDA margin was 11.7%, excluding the non-recurring items. Tax rate this quarter, about 20%. That is also in line with what we estimate for the full year 2020. We did have a negative cash flow after investments. It was SEK -73 million compared to SEK +25 million last Q1 last year. We did see a working capital need during the quarter from the increased sales numbers and also an increase in inventories because of the sales increase, but also because of the COVID-19 situation; we did have higher inventory numbers in this quarter.
The rolling 12-month number for earnings per share was SEK 28 and EUR 29. The equity assets ratio ended at 49%. We have a financial net asset of SEK 601 million. We have a strong financial situation because of this.
We expect the full- year investment number to be about SEK 400 million during 2020. It was only SEK 70 million during Q1, hence the pace of the investments will increase during the second half of this year.
Turning to page 14, looking at the current situation per business area. On the Medical side, of course, maintain a growth strategy, a lot of focus on innovation, we feel that we have strong customer relationships. On the Integrated Solution side, we have established our position in the new product areas. We see a continued strong position within the EMC business. Of course, as we're building up this, we have our really strong production structure, flexible. On the Industrial Solutions business area, we have advanced our market positions. We see the efficiency measures that have been taken, and we see an effect of those.
Of course, we see the disruptions as a result of the coronavirus situation, the COVID-19. We would like to open up for questions.
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 Carl Ragnerstam from Nordea. Please go ahead.
Hi, it's Carl here from Nordea. Thank you for taking my questions. First of all, on the medical solutions business area, you said that some projects are postponed due to the COVID-19 situation. Could you perhaps quantify that during the quarter? Could you also give any indication of the growth pace during the end of the quarter? Was it just damped organic growth, or was it even negative organic growth in the end of the quarter?
First, the comment on the project situation. I would not say it's postponed, but it's taking a little bit more time when it's hard for our engineers to have meetings with our customer engineers, either at our places or at their places. It's not postponed, it's just that some things take a little bit more time when it's difficult to have physical meetings. Of course, we are working with video solutions and so on, but it's not really the same thing. I hope I answered your first question there. The second was the growth rate during the quarter. I would say it's been stable over the quarter. We have not seen any decline as a total in the later part of the quarter.
Okay, is it possible to quantify the impact of the slightly slower project development?
No, it takes some more time, but nothing that we see will impact the big picture.
Okay. I guess we should expect, as you said, that project business could have lower margins. We should probably expect a slightly or a similar margin mix going into Q2. Is that correct?
It depends on the product mix, I would say. I think our long-term guidance is the right way to look at it. Of course, we have quarters with a little bit
Higher or lower margin, but it's variating ± 0.5% points, and that's what we should expect going forward as well.
Okay, perfect. On Integrated Solutions, you said that you expect the inventory build-up to stay in Q2 and then decrease. Could you perhaps clarify that? Do you expect a decrease in the inventory build-up pace or a year-on-year volume decrease, or how should we look at that?
That is a comment concerning the inventory build-up situation. We expect that to continue during Q2 and then drop off as an effect in Q3.
Okay. You don't mean year-on-year decrease, you mean adjust? Yeah.
The inventory effect. Yes.
Okay, perfect. Is it possible to quantify or give an indication on the underlying volume development if you exclude the inventory build-up?
No, we don't have the exact numbers for that. It's an assessment we do that we have these effects, and we cannot explain the effects in more detail behind those numbers. We are certain that there has been such an effect during this quarter.
Okay, perfect. The final one from me. Could you give an update on whether you have any production units closed globally currently, and if you see any supply chain disruptions right now?
Currently, we don't have any production units closed due to the COVID-19 situation. Of course, we have the ones related to the automotive industry not going full speed due to some constraints in the total supply chain, but Nolato is not causing any disruptions, and all our units are producing.
Okay. Thank you.
Thank you.
The next question comes from the line of Mikael Laséen from Carnegie. Please go ahead.
Okay. Hi. A couple of questions. If you could just take a look at the Integrated again here, the development in the quarter, and the inventory build-up. Because I think that you started 2020 with relatively stable revenues compared with the second half, and then you had a disruption in the middle of the quarter. That means that March must have been really good. Is the March level what you're also expecting in Q2?
We agree fully what you said. We had the disruption, and we ended the quarter quite strongly. That is correct. Understood. We said earlier that we have a good order situation, but we had the disruption of not being able to produce those orders. We ended up the quarter being able to ship out a lot of those, and of course, ended up with the strong end of the Q1. That is correct, yeah.
Okay. Will the March level, the very high level that you had in March, continue in Q2? Is it that level we should expect here in the near term, or is it more the average that we saw in Q1 in total for the integrated side?
I think two comments to that. The Q1 was a bit up and down, as we commented. On an overall basis, we see a similar situation during the second quarter. Of course, we had about a bit more than one week where we stood still in production in Q1, which we then don't expect to do during Q2 if the stable situation continues in China.
Okay. Got it. In general, what's your view on tobacco heating or VHP in this market climate, where we have a lot of lockdowns and difficulties, maybe with the retail channel? What's your view on the situation right now? Could it impact your volumes in Q2 and Q3 more than expected, maybe? Maybe you can say something about it.
If we comment there on a more general way of doing it, without going into which customer and so on, but that type of business and that type of product, what we generally understand is that if you want those products, you will get them. It could be maybe affected on converting users of other types of those kinds of products to a new version. That could be affected by having retail stores closed. If you are using it, you will most likely get it.
Okay. Innovative customers there. Just the final one, can you talk about the climate for the industrial segment right now? What is the sentiment, or what is in terms of general demand? We see that the indicators are falling massively, and just curious to know and get more input from you.
As we are in many different market segments in the industrial sector, we have some segments that we see maybe an increased need during this situation, and we have other parts of the business seeing less volume. As a total, we expect Q2 to be impacted by the corona situation.
Okay, thanks.
The next question comes from the line of Oskar Vikström from ABG. Please go ahead.
Thank you. I just have one more question to follow up on this discussion. Could you just repeat what you said about the automotive exposure and sort of how it has affected Q2 thus far, as customers are maybe starting production again? Where are you in your production? Just give more details on that, please.
To summarize, we have about 40% of our industrial business area towards the Automotive Industry. We have communicated earlier that this segment is mainly the one that we have seen problems within, and the reason for that has mainly been our main customers closing down their operations. Of course, we had to do the same. During some weeks, we did that, and of course, affecting our sales numbers and results because of that. We did stop for about one week in the end of Q1, and we have been standing still for some weeks until last week within April. Production has started in a slow pace and, of course, not the ideal production setup . It's going up and down, and we are producing at a low level, of course. That is the situation right now. That is the short-term situation right now.
All right. Thank you very much. That's all from me. Thanks.
Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. As there are no further questions, I will hand it back to the speakers.
Thank you for listening to our presentation of the first quarter, and I wish you all a very good day. Thank you again.
This now concludes our conference call. Thank you all for attending. You may now disconnect your line.