Ladies and gentlemen, thank you for standing by. Welcome to the Studsvik Q3 2020 conference call. As is done, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. I must advise you this conference is being recorded today, Friday, 23rd of October, 2020. I would now like to hand the conference over to your first speaker today, Camilla Hoflund. Thank you. Please go ahead.
Thank you. Ladies and gentlemen, welcome to Studsvik interim report for the third quarter 2020. Let me introduce myself, Camilla Hoflund, and I'm the CEO of Studsvik, and with me I have Claes Engvall, the CFO of the company. We will walk you through the Studsvik report for the third quarter 2020 that shows the results overall expectations. Next page, please. Studsvik is a company with a strong characteristic, mainly in the nuclear industry, providing services to customers represented by utilities, fuel vendors, international research organizations, and regulators. We are independent organization that operates on a global market with a very strong international footprint. Our offerings cover several areas of the fuel and reactor life cycle for new builds, reactors in operation, decommissioning, including radioactive waste technologies to final disposal research. One of our key initiatives has been to expand beyond nuclear into a new segment, medical isotope production.
We have one of a kind automated robotic installation in our hot cell in Sweden for production of isotopes. The company, Studsvik, started life at Studsvik site, 100 km south of Stockholm on the Baltic Coast in Sweden. Studsvik has continued to evolve and grow over the 70 years into a truly global company and now has bases in Sweden, Germany, U.K., U.S., Japan, and China. We are a global organization. Our employees support customers worldwide across the whole nuclear fuel and reactor cycle. Next page, please. Studsvik offers services in the global nuclear industry to support safety and efficiency. Adapting to our mission statement, we create customer solutions to complex problems using our proven ability to innovate.
When working with our customers, we challenge them too to think differently and support them towards long-term goals of delivering reliable and more sustainable energy to the growing population of the world. With our vision statement, Studsvik can make a difference, making it easy to benefit from clean nuclear energy. This quarter, we have showed strong progress in our international business development within the fuel qualification with orders on new markets like China and South Korea. This breakthrough, in combination with our already very strong market position in Europe, U.S., and Russia, puts us in a world-leading position when it comes to fuel testing and analysis. During today's report, I will walk you through the group summary following with more specific updates of each business area.
I will hand it over to Claes Engvall that will walk you through the financial highlights and outlook as well as risks moving forward. Next page, please. It is a great pleasure to present the quarter three results for you today. The turnaround program within Waste Management Technology and the German operation have been performed, and the outcome has exceeded all expectations. We also have good news to share from the other business areas. Scandpower have managed to sign license deals that has a significant impact on the results within the period. Fuel and Materials Technology has received significant orders from China and Korea within fuel testing in our hot cell facility in Sweden. Note that we still have the Norwegian order to come in the future.
Studsvik as a group has a very limited impact of the COVID-19 pandemic, and in quarter three, there is no impact at all. The German operation is showing increased sales and an outcome of well-performed revision. In summary, in quarter three, Studsvik Group managed to deliver well above the external communicated group targets of growth 10% and operating margin 8%. We are definitely moving in the right direction. Next page, please. Fuel and Materials Technology. This is a stable quarter with planned summer vacations for the operations, although there have been a lot of activities within the market and sales. After several years of persistent business development work, we have made a breakthrough in both China and South Korea at the same time. Both markets are important, and we expect this business to grow over time.
As reported earlier, the medical isotope production is delayed as we are waiting for deliveries of the irradiated sources for the production. Last call, we mentioned that we expected to sign the contract with the Norwegian government, NND, Norsk nukleær dekommisjonering, for transport and treatment of fuel in our facilities within the quarter three. The status is that we have agreed on the contract terms for a project scope above NOK 130 million, although the signing is postponed pending clarification of responsibilities between the Norwegian parties. Next page, please. Waste Management Technology. The financial effect from the turnaround is well above expectations. In general, the sales activities for new technology license sales have slowed down due to the COVID-19 and travel restrictions. Therefore, we have no major license sales in the period. However, we have received small orders for pre-studies for different waste technology.
These pre-studies, the orders are from customers in the U.S., Europe and Asia, they have the potential, of course, to be the beginning of a larger license sale for the future. We foresee a ramp up of the business beyond COVID-19. Next page, please. Scandpower. This quarter, we have signed major license sales for software on the home market in the U.S. for about SEK 20 million. Usually, we receive larger sales at the end of the year. The market and sales team have increased their digital activities to promote our world-class software and applications. The response is very positive from our customers in the U.S., Europe and Asia. There is a temporary slowdown of the business in China, pending on the U.S. election. Next page, please. The German operation. The turnaround of the German operation has been a success.
The performance has improved and we see the impact on the financial numbers. This quarter shows increased sales due to high customer demand during the revision. To manage our obligations for our customers, we had a temporary engagement with subcontractors for the peak period that impacts the margin. The order books 2020 are full, and we continue to build up the organization, including new management in the areas of decommissioning and engineering. No negative impact of COVID-19. However, local COVID-19 outbreak remains a risk. Now I hand it over to Claes Engvall for the financial status.
Thank you, Camilla. I will spend some time taking you through the financial highlights. The next page, please. As you have seen from Camilla's presentation, we had a quarterly EBIT of SEK 23.1 million, which we are very happy about. In this quarter, we have no items affecting comparability. Also, as Camilla stated, there has been no COVID-19 impact on our performance this quarter as opposed to previous performance this year, but no COVID-19 impact this quarter. Looking at the EBIT, we are happy to say that compared to last quarter and previous year, we made an improvement of SEK 19 million after IACs. If you compare the complete period Q1 to Q3, we made an improvement of SEK 60 million on EBIT level. The group's available cash are at quarterly closing at SEK 86 million.
One of the reasons why it's not higher is that we saw some good sales towards the end of the quarter and also an increase in accounts receivable. Next page, please. Some of the highlights for this quarterly closing includes the operating profit, of course, SEK 23.1 million, which takes us to a cumulative profit this year of SEK 36 million. Just like Camilla said, we have seen an operating margin in the quarter, which is above our target of 8%, and we came in at 12.3% for the quarter. Accumulated this year, we have a profit margin of 7.1%. The free cash flow this year has been very positive. Just like I've said previously, we saw some good sales towards the end of the quarter, affecting then the working capital through increased accounts receivable.
Also, we have seen a strengthening of our financial situation on a increase or an improvement in the net debt to equity ratio. Next page, please. Looking at the performance this quarter as opposed to previous quarter last year, we made a improvement of SEK 27 million. The previous amount I was referring to was after IACs. This is including IACs, therefore the difference. In Waste Management Technology, we saw an increase of SEK 15.4 million, of which IACs account for SEK 8.5 million. Just like Camilla said, this is related and of course, the turnaround we made last year and the effect we now start to see. Scandpower, we made some good sales in Q3 that we were more expecting to come in in Q4, but we saw them already in Q3. We improved the profits by SEK 12.8 million.
For Germany and Fuel and Materials Technology, we saw a stable development as compared to the previous corresponding quarter last year. All in all, an improvement of SEK 27.2 million. Looking at the cash flow, just like I said, we have had a good development of the free cash flow. Very much related down, of course, to the strong EBITDA. We had some, just like I commented before, some impact on working capital due to increased accounts receivables. We have an investment level so far this year of roughly SEK 50 million, which is then also related to the adverse effect from and counteracted by the dividends we have received from associated companies, which accounts for the cash flow from investments. The other, of course, is mainly related to the putting back of the depreciation, since it doesn't have any cash effect.
Altogether, SEK 25.2 million in positive development on the free cash flow. Our financial situation as compared to one year ago is much more stable and has been more stable for quite some time now. Next page, please. Financial outlook. Starting with Fuel and Materials Technology, we are expecting a stable operation in 2020. Also we would like already now to highlight that in Q1 2021, we will make a maintenance as part of the hot cell at the Studsvik site, with some impact, though a minor impact. The Scandpower, we also expect a stable business for 2020. However, just like Camilla commented, there is a risk of loss of momentum in the Chinese business now pending the U.S. elections.
We're not very sensitive profit-wise to the Chinese business this year, but it might have some smaller impact in case the tension is further strengthened between the U.S. and China, and therefore impairing our ability to do business in China. Waste Management Technology. Here we are very happy to state that we now believe in a break even or above in 2020. As you will remember, last year, 2019, we made a big loss in this area, part of which was explained by IACs. Excluding the IACs, we made a loss of almost SEK 20 million. We had a target of a profit improvement of SEK 10 million, and now we are happy to state that we foresee a development which is even more positive than we previously said.
In Germany, we made a loss of SEK 1 million last year. Now we are expecting to exceed somewhat the SEK 10 million target we set out. Please bear in mind also that this target is including the negative effect we'll have during Q1 or Q2 mainly for COVID-19 in Germany, which accounts for SEK 8 million. Germany, the underlying, has also been a very successful journey for us. Next page, please. The financial outlook is very much, of course, related to COVID-19. In our operation today, like we said, we don't see any negative impact right now. However, we are very cautious because we get mixed signals from what's happening. We get a lot of signals what's happening in Germany. We are paying a lot of attention monitoring the COVID-19 situation. That still remains a risk for us.
The same thing goes for political tension, trade conflicts that might impair our ability to do business in certain areas. Looking towards the end of 2020, we don't foresee any major restructuring items affecting comparability, just like we stated before. The cash level we are expecting to improve towards the end of 2020 as compared to the level we had end of Q3. Also, I would like to inform you that we have still not received any ruling from the Land and Environmental Court concerning the bank guarantee for the guarantee for future waste management costs. That concludes my presentation and Camilla's presentation, and before we hand over to the Q&A session, we would like to thank you all for joining and listening in on our conference call. Please back to Bella then, and see if you have any questions.
Thank you, ladies and gentlemen. We will now open up for questions. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press hash one. Once again, please press star one if you wish to ask a question. Your first question comes from the line of Stefan Knutsson from ABG. Your line is open.
Hi. Thank you for the presentation. Regarding the accounts receivables that were increasing, is that connected to the orders in China and South Korea?
No, it's connected to the Scandpower order.
Okay. Perfect. Also on the Waste Management, it was a very strong improvement in the EBIT margin. Was that expected on this level? Is it sustainable or was it some temporary drivers here?
I know that, Stefan, you listened in on the Q2 telephone conference, and I would say that the turnaround has gone faster than we expected for the business area. Also, of course, just like we stated previously, we will not accept any business making a loss. Actually, the turnaround went faster than expected.
Perfect. Also on the Scandpower, on the license deals, I saw that you made a year-over-year improvement of around SEK 30 million on EBIT. Is that comparable to what we should expect from a license deal? I mean, around 65%-70% incremental EBIT margin on a license deal for Scandpower.
No, just like we wrote in the quarterly report, is that Scandpower is very difficult to predict when we will get these license sales. Sometimes we get them in Q4, which is kind of a typical year. This year we got them in Q3 instead.
I mean, year-over-year, you improved the absolute EBIT by SEK 30 million in Scandpower. Is that a good estimation on how much license sales will contribute to EBIT?
Stefan, hi. It's Camilla here. I can try to answer your question. I think you need to see that there is a big range when it comes to license sales. There are a lot of smaller license sales that we are doing on a regular basis, but then they are not that big or having the big impact and of course, lower in the sales level. It's a big range. When we get a bigger license sale, like this one, then it has a huge impact.
Okay, perfect. I got you there. My last question is regarding U.S. election. Do you think it will be a higher risk for any business impact if Biden wins the election because he's more pro to green energy?
I think there are two answers to the question, and this is also our interpretation of the situation, is that maybe it's not such a big difference in the long run between Trump's approach to China and Biden's approach to China. We're not expecting if Biden wins, that things will change dramatically. However, I think there are some question marks concerning Trump's actions within the next couple of weeks, and then depending on the development. It's more related to what's happening actually the next couple of weeks, but not in the long run, because in the long run, we don't really see any change and the difference between the two candidates for China. I think we think they will have basically the same approach.
Okay, perfect. That was all for me. Thank you for the answers.
Thank you.
Thank you.
Your next question comes from the line of Paul Harness a Private Investor. The line is open.
Thank you. Hi, Claes and Camilla. Paul Harness here. Thank you for a good quarter. Good to see that Studsvik is moving forward. I have a question on the dividend from associated companies where the year-to-date difference down September 2020 versus last year is quite big. Actually, I see it came in Q2, that difference. I mean, historically, it's been quite a, let's say, even dividend from mainly the U.K. business flowing through on this line. Now we see a big, let's say, jumping in Q2, then back to flat in Q3. Is this a change in that business? I can't remember what was driving the higher dividend in Q2. Can you remind me of that?
Yeah, of course. Thank you for asking the question. Of course, in the underlying, we have the LLWR in the U.K. This time, we're in Q2, we had one-off effect from a associated company or a joint venture in Germany. It's only one-off effect. We will not repeat and we can't expect anything like that in the future. It's one-off effect.
Okay. Yeah. Thank you.
Thank you.
That was all from me.
Thank you.
There are no further questions at this time. Please continue.
We say thank you very much for listening in today, and have a nice weekend. Bye.
Thank you. Bye-bye.
That does conclude our conference today. Thank you all for participating. You may all disconnect. Be careful. You stand by.