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Good morning, and good afternoon, everyone, and warm welcome to Bufab's Q1 report. My name is Erik Lunden, and I am President and CEO of the Bufab Group. And together with me here today, I have Par Ihrskog, our CFO. I will start this presentation and give you a highlight of the quarter, and then I will give over the word to Par for some financial highlights. At the end, I will give you some details about different regions. And then at the end, we'll open up for Q&A. This presentation will be recorded and by attending this meeting, you agree to the recording. But before we jump into the first quarter, I would like to share with you guys that we have a new regional setup effective from 1st of January 2024. As communicated, our Capital Markets Day in December last year, we have decided to go from a segment setup to a regional setup in Bufab in order to be more efficient way to execute our new strategy, discovering the next solution.
We will, with the new region have -- new set up have 5 regions. Region, North and East that will be the biggest, approximately SEK 3.4 billion in turnover. That will be 39% of the total sales in Bufab and consists of 10 countries in Northern Europe and Eastern Europe. The second biggest region will be West Europe, almost SEK 2 billion turnover, 22% of the group's total turnover in 8 countries in Western Europe; U.K. and Ireland, SEK 1.7 billion in turnover, almost 20% of total sales in the group and 2 countries. Americas SEK 1.2 billion, 14% of total sales in 2 countries, and then region of Asia Pacific, SEK 440 million in turnover and 5% of total sales and consists of 7 countries in Asia Pacific region. And the new regional setup are effective from 1st of January.
So let's continue with some Q1 highlights then. If we sum up the quarter, we think we delivered a solid profitability and stable cash flow in a challenging market. If we start to look at the demand in the market, it is tougher now, and we see lower demand year-on-year. Total growth was minus 9.9%, and our organic growth was minus 10.6%. And we can see the lower demand across all regions. We should also have in mind that we are up against a very strong comparative numbers. We see a mixed bag when it comes to demand. We see still very favorable development in energy, oil and gas and defense. While we see weaker development and lower demand in sectors such as construction, kitchen and bathroom, outdoor and also general industry. Our order intake in the quarter was in line with net sales. If we look at the margin, I'm very pleased to see that we continue our journey with our gross margin with a strong improvement to 29.1% versus 28.3% in Q1 last year and improvements in all regions.
And the main reason behind this improvement is that we are continuing to doing a good job in developing our product and customer mix in the different regions. But also, we start to see some sourcing savings coming in as well. When it comes to our operating expenses. The share of those increased compared to last year, obviously, due to the lower demand, but also inflation pressure we have seen in the quarter, some restructuring costs. And then also in some companies, we see big growth potential in the coming quarter, and we continue to invest for further market share growth. We have also taken some actions in some companies on the cost side to adjust to a lower demand and also in some cases where we see room for improvement. So some cost adjustments we made in the quarter. And you see at the operating margin level adjusted went up on 12.1%, of course, impacted by the lower volumes in the quarter.
If you look at the cash flow, we will deliver a strong -- or solid cash flow in the quarter. Our operating cash flow amounted to SEK 259 million and corresponding to a cash conversion of 95%. What we've seen now for a few quarters is that we continue to strengthen our financial position and that we have in our balance sheet ready for acquisitions in the coming quarter. I will now leave the word over to Par for some financial highlights.
Good morning, good afternoon. So let's look at some more numbers and graphs. Let's start with the net sales, the graph to the left. Our net sales in the quarter was SEK 2.149 billion, which is a reduction of 9.9% compared to Q1 last year, but somewhat better than the last 2 quarters. If you break down the 9.9%, 10 -- minus 10.6% came from organic growth, and we had a positive currency effect of 0.7% and no effects from acquisitions this quarter. If you look at the gross margin, we ended up on 29.1% in gross margin, an improvement of 0.8 compared to last -- Q1 last year, a stable improvement throughout the last couple of years. If we move over to the EBITDA, we had SEK 259 million EBITDA profit adjusted in the quarter, reduction compared to Q1 last year. The operating margin adjusted was 12.1% compared to 13.6%, but slightly improved from Q4 last year. And then we look at the OpEx, operating expenses. We ended up on an OpEx of SEK 365 million in the quarter, share in percent of sales of 17%. That should be compared to the Q1 last year, an increase of SEK 14 million.
The increase is mainly coming from inflation, but also minor restructuring costs in the quarter, but also some additional costs, as Erik mentioned, that we invest in growth. If you compare the OpEx in percent of share, we -- it's a slight improvement from Q4 and Q3, and then cash flow, we believe we had a stable cash flow in the quarter, SEK 259 million. It's SEK 42 million lower than Q1 last year. The main difference is from the underlying earnings. The cash flow was positively affected by SEK 50 million positive change in net working capital. And then looking at the net debt and the leverage, we continue to reduce our net debt compared to Q4 last year, we reduced it by SEK 106 million. And compared to Q1 last year, we reduced the net debt with SEK 242 million. The leverage ends up at 2.7%, compared to 2.7% last year Q1.
Thanks, Par. We will then go through some highlights from the different regions and we will start with the region Europe, Northeast. So the total growth amounted to minus 10% in the region with organic growth of minus 11%, with similar performance in both Northern Europe and Eastern Europe. What we see in the region is that we have weak demand in construction, kitchen and bathroom, as well as outdoor and still very strong demand in defense and oil and gas, mainly in Norway. The gross margin improved slightly to 27.2% and is driven by improved customer product mix, but also some sourcing savings coming in, in the quarter. We see a higher share of operating expenses due to lower sales then, higher obsolescence provisions, some restructuring costs and investments in growth in some other sister companies. And our operating margin in the region declined to 10.6%.
We then continue with Region Europe West, total growth, minus 10%, 9% was organic. Demand remained favorable in defense and aerospace, and we start to see some decline in automotive and construction in the region. We continue to have a very strong development in France and Czech Republic and Turkey, while Austria and Netherlands, which is soft and continues soft market development. Increased gross margin also in Europe West and up on 25.1%. And also here we see improvement in our product and customer mix in the region. Also a little bit higher share of operating expenses due to the lower volumes and up on our operating margin of 13.1% in the quarter. Continuing with region, U.K., Ireland, total growth amounted to minus 7%. Organic growth, minus 11%, and this was mainly driven by the lower demand in the stainless steel business, where we have an Apex operation in U.K., but also very strong comparative numbers then.
We see a strong improvement in gross margin, ending up on 32.8% versus 29.9% last year. And here, once again, is the favorable customer mix, but also that we do a good job in working with our customer and the product mix in the different companies. So good improvement on gross margin. Share operating expenses increased due to lower volumes, but also in IT investments in the region. Looking at the operating margin, declined and end up on 12.2%. Then we have Region Americas, total growth of minus 12%, which all was organic. Here, we see the decline mainly driven by the mobile home industry and generally a bit softer market. Strong improvement also here in the gross margin and up on 35.2% compared to 33.9% last year. And once again, we're doing a good job with our customer and price mix, but also then, of course, in care of the price also on new products and offering.
We also see some sourcing savings in the region in the quarter. Higher share of operating expenses. If you adjust for remeasurement of some purchase considerations end up on adjusted operating margin of 12.9% in the quarter. And then finally, we have Asia Pacific. Total growth amounted to minus 11%. Organic growth was minus 8%. And here we see a general softer market, mainly driven by medical, energy, railway and some general industry, slightly higher gross margin also in Asia Pacific due to cost and product mix. And the share operating expense increased due to lower volumes and ended up on an operating margin of 16% in the quarter. Also a few words about M&A. As I mentioned initially, we now have a balance sheet ready for acquisitions. So what you've seen in the recent quarter is that we have more activity in the overall market, but also then for us in Bufab. So we are continually looking and have dialogues with potential acquisition targets. And hopefully, we can have something to share in the coming quarters when it comes to M&A.
Finally then, if we can sum up the quarter, look a little bit ahead then also a few words about our focus areas going forward. So let's start with sum up the quarter. As I mentioned initially, we think it's a solid profitability in the quarter and stable cash flow, but in a weaker market. It's a changing market out there with lower demand year-on-year. I'm very pleased to see that we continue to improve our gross margin, which is, of course, a very important part in the trading business and also for us to, in the long run, reach our EBITDA target. So 29.1% I'm pleased with, and how we're working in each of the regions with improving our product and customer mix. The operating margin was solid, considering the lower volumes ending up on 12.1% and stable cash flow.
And we have now, as I said, a strong financial position that we can put us in a good position for acquisitions going forward. Outlook, we will say that the outlook remains uncertain. And if you look at our comparative figures also for next quarter, it will be tough, which is a strong quarter, we're up against. And we don't see any change in demand. It is still a mixed bag what we see in the market with some sectors doing well and others are struggling with lower demand.
What we do is that we look at each individual company and have plans in place to either invest if that is needed or adjust our cost base, if that is needed. And that is work that's ongoing all the time, and we already have taken actions in Q4 and Q1, and we'll continue to do that in Q2 as well to ensure that we're in the right position for the future. All in all, we think that we're in a good position. We have a large and well-diversified customer- and article portfolio with good diversification in different industry markets. And we still have a lot of work we can do to improve how we work with our customer and product mix. So that work will continue also in Q2.
If we look at our focus areas going forward, as you all know, we implemented our new strategy last year, discovering the next solution, will focus on profitable growth and adding more value to our customers. And that work is ongoing, and I'm pleased with the start. If you look at one of the first priorities that we have now is to ensure that we, in these market conditions, secure the business and taking market share. We have a new organization up and running, and importantly, new way of working, and that is working well. We also feel that we have good activity in the market, times like this when it's cost pressure and lower demands in many sectors, it's a good opportunity to take market share. And what we see is that our offering gets more and more relevant every day.
So we try to capture this potential now and grabbing market share for the future. We also will continue to invest in selected companies where we see bigger growth potential, but as I said also earlier, obviously taking actions in -- for companies where we think that is needed to adjust our cost base. Our work also -- gradually improve our margins, will continue also in Q2, continue working on our customer product mix to continue with the gross margin journey that we think is possible and that we aim to also continue doing in Q2. We also have a new updated sourcing strategy. And that work is also ongoing according to plan, and we hope to see continued good sourcing savings coming in, in the coming quarter. And then also, of course, work with our efficiency overall in the group and to make cost reductions where it's needed.
And finally, we have also communicated that one big focus area for us is our net working capital. And this work is ongoing. We have the improvement plans in place in each Bufab company, and that work is ongoing as we speak. That was the last slide from our end. So now I will leave the floor open for questions. So please.
So welcome to this Q&A session. [Operator Instructions] We start with the first question from Johan Skoglund at DNB.
Johan from DNB here. I have a couple of questions, and then I get back in line. So the first one is if you could comment on the pacing of order intake and sales through the quarter. I mean, did you notice a difference between the beginning and end of January and March? And could you perhaps comment on how you see customer destocking.
Sure. Johan, no, we don't see that a big difference in the quarter is more driven by different sister companies position and how the customer base look like. So not a big difference in the different months in the quarter. Was that the only question you had?
No, destocking as well.
Now I think I commented this before. If you look at the destocking, I think that's something that's taking place for different companies throughout quite many quarters, to be honest. So it's very difficult to tell any specific trend or so. So very much depending on which tech we are talking about and to a certain extent, which regional market. So yes, not more -- much more to comment on that actually.
Okay. And then a question on gross margins. They are strong, and you mentioned better product mix, purchasing savings, some price adjustments as well. Could you perhaps update us on how the price hikes are moving along in the less profitable contracts you talked about before? And if the organic decline is mainly volume driven?
Yes. I think, as I said, that we do a good job on the gross margin in general, and there are a few aspects of that. First of all, what we try to address in actually all the companies is to ensure that we have a solid customer and product mix for the future, where we address customers and articles that is not favorable going forward and do that by raising price tag and in some cases, also changing a bit the product mix of different companies. So that we have plans in the different sister companies and that work is ongoing. And this, I think, is something that will be ongoing for quite some quarters to honest because this is a long work that we can work with. But so far, I think that work has paid off well. And we see that both in the -- in some of the companies are doing very well now and others that are also struggling. So across the board we see improvement when it comes to our gross margin. And then what was your second question now? You asked me about...
The organic sales decline. Is that mainly volume driven then?
Yes, it is. It's volume.
Okay. And then just a final short question then. And you talked about restructuring costs in the North and East. Could you please elaborate what this consists of? Is it possible to quantify that? And can we expect this to only be in Q1 or for Q2 and Q3 as well?
Yes. We have that in -- mainly in region Northeast, but also some minor, also in other regions. So what we do, like always in Bufab we try to address companies where it's needed and sometimes there is a cost behind that. And in this quarter, there were a couple of sister companies in Northern East and where we took some actions and up some cost. That could also happen in the coming quarters. And we're not talking about any major amounts, but yes, it could happen also in the coming quarters, for sure.
Okay. That was all from me, and good luck with Q2.
Karl Noren at SEB.
A couple of questions from my side as well. If we start on the operating expenses side, I'm just wondering what you're aiming for here for 2024, it increased around 5%, I think, in Q1 here. Do you think you can keep it flat during full year? Or should we expect this like 5% up for the full year on OpEx?
Yes. We, as Erik explained, we address our cost base where needed. So we will see some further reduction, but we will also invest in the market activities. So all in all, I think we will rather see a flat development, maybe a little bit reduced in absolute terms and...
Okay, so we're basically flat operating costs in 2024 versus 2023 is what you're saying?
Yes, slightly reduced.
Yes. Yes. That's good. Very clear. And then I have a question on the Easter impact in Q1 here. I guess you have some less working days year-over-year. So is it possible to say how much that you estimate that impacted the growth in the quarter?
Can you repeat the question?
The Easter impact, I guess that the Easter being in Q1, it seems like it can go for little bit...
Yes, it was not that big impact. We had 1 day less sales in the quarter.
So maybe SEK 30 million.
Yes, SEK 30 million.
Okay, so not a lot. And just a question also on the -- I mean, you said that there was no changes during the quarter. And now we're moving into the -- in sales. And now we're moving into the second quarter here. I mean, you mentioned that the comparison figures are tough, but I mean, it was still down 5% in Q2 2023. So I mean, the comparable are at least getting easier as I see it...
Yes, correct.
Yes. So I mean organic growth should improve sequentially, right?
Yes. So all you can say is that if you look at the different quarters, compared to quarters, we had the toughest in Q1 and then a little bit easier in Q2 and then even further going down in Q3 and Q4. So that is how it looks like. But if you look at all in all and how the market condition look like in Q2 last year versus how it looks right now, I would say that it is a more softer demand in the market as we speak. Because back then, we had more sectors that still had a quite strong demand in the market versus how it looks like as of today.
Yes, that's good. And on the acquisition side, you mentioned that we should expect some acquisitions coming up here in the coming quarters. Just a question on the net debt level, you're at 2.7x right now. What would you say is kind of the max range you can go at in a tougher market, so to say?
Yes. We have our financial targets where we say we should not go above 3.5% on the leverage. So that's the space we play with.
Okay, yes that's good.
Okay. If no further questions, thanks a lot for joining our call, and have a good day. Thanks, everyone.