Inwido AB (publ)

STO:INWI

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Welcome to the Inwido Q2 2024 Report Presentation. [Operator Instructions]

Now, I will hand the conference over to CEO, Fredrik Meuller; and CFO, Peter Welin. Please go ahead.

[Fredrik Meuller, executive]

Good morning, and welcome to this webcast and telephone conference covering Inwido's Second Quarter and Half Year Performance in 2024.

My name is Fredrik Meuller. And since the 10th of April this year, I'm the President and CEO of Inwido. And joining me today here in our Malmo head office is also Peter Welin, our Group CFO.

Over the past 3 months I've had an intense but fun and promising onboarding to our group, including visits to many of our sites in Sweden, Norway, Finland, Denmark, Poland, England and Scotland. I met with a lot of our co-workers, and I certainly know more about the window and door business now than I did before. Above all, I can conclude that Inwido is in a good place. It is well functioning, professional in all aspects. Our current activity level is high, and I notice a lot of smiles on people's faces, which bodes well for what's to come.

While many of you are, of course, familiar with Inwido, it may be worth reiterating that our 34 business units comprise what is de facto Europe's leading window group. The strongholds are in the Nordic region, plus the U.K. and Ireland, but we actually cover 12 European countries in total. Our rolling 12-month turnover equals SEK 8.8 billion, with a return on operating capital of 13.1%. Furthermore, we're not just producing high-quality windows and doors, we also improve people's indoor life through our energy efficient and aesthetically appealing solutions.

We are on an exciting journey towards doubling the size of the company by year 2030. I find it achievable as there are still many profitable growth opportunities for us to pursue. And based on my impressions from these first 3 months, I dare to say that we have only scratched the surface yet. We enjoy a strong value proposition for the years to come, and our proven performance track record gives us comfort and credibility. Me and my management team are in the process of clarifying our vital few strategic priorities, as well as determining how we can speed up their execution a bit. In short, it's about realizing organic and acquisitive growth options, while getting that volume flowing through a more efficient setup, harvesting on recent investments made in our people and in our operations.

Let me now turn your attention to the quarter that just passed. I'm proud to report that we as a group are back on a positive growth trajectory, with order intake increasing across all of our 4 business areas. Our order backlog went up by an impressive 68%, largely driven by our Sidey acquisition and an uptick in consumer sentiment, in turn boosted by lower inflation and interest rates.

It was particularly pleasing to note our performance leap within e-Commerce, more than doubling its profitability and within Western Europe, where our Irish entity, Carlson, booked Inwido's largest order to date. All of this gives us cautious optimism for the second half of the year. Still, I, of course, remain humble over the fact that uncertainty still prevails in the marketplace, particularly given the continued low new build activity hampering industry and project-related demand overall, particularly in Sweden and in Finland. With regards to acquisitions, which form an important growth driver for us, we have noted a higher activity level in Q2 and can conclude that our target funnel is healthy. Last but not least, the green transition is definitely gaining momentum and here, Inwido is getting quite a lot of positive recognition for both our positioning and our efforts.

If we then look at the quarterly figures, order intake grew by 22% and by 10% organically relative last year's Q1. Our order backlogs increase of an impressive 68%, of course, includes last year's acquisition of Sidey Group. But even if adjusted for this, it grew by 10%. Net sales were up 3% quarter-on-quarter, but declined organically by 5%. I can conclude that several entities have gained market share during spring, in most cases with maintained margins. Our operating EBITA reached to SEK 263 million, equaling a margin of 11.4%, up from SEK 261 million but down from 11.6%, respectively. Net debt in relation to operating EBITDA went up from 0.7x last year to 1.4x now, or 1.1x, if not applying IFRS 16 accounting, still safely within our set target though.

As usual, certain achievements are worth celebrating a bit extra, and this quarter is no exception. First, I'm very pleased about our healthy progress within e-Commerce, displaying strong growth in top line and translating that to a profit more than twice the size of where it was 1 year ago. So well done, Bo and team. Secondly, our longstanding efforts and our favorable position within sustainability are getting more external recognition, here exemplified by Financial Times listing of Inwido as one of Europe's Top 500 Climate Leaders, and by TMF, the Swedish Wood and Furniture Manufacturers Association, handing its Nova Award to our Elitfonster entity for their innovative work on total window recycling. And this is also worth highlighting, of course, our Ireland-based entity, Carlson, which joined Inwido already in 2006, booked a record-high order in the quarter, worth around EUR 9 million and spanning over a timeline of almost 2 years from now. This is a sign of trust from our customers and of Carlson being perceived as the clear leader in his field. Congratulations are definitely in order for Michael and his team.

As you know, sustainability is high on both our management and Board agendas, and it is gradually becoming a part of our company DNA. Visiting our sites recently, I noted with satisfaction, our particular efforts within work safety. While our vision for lost-time accidents is 0, our trend line continues to slope downward, which is very, very positive. Some of the patterns seen and communicated already in the first quarter have also been present in Q2. In terms of challenges, I'm again thinking primarily of the soft market for new build, what we typically refer to as industry or projects.

In the case of Sweden and Finland, activity is still at historically low levels here. Accordingly, this has hampered our performance for the full 6-month period, causing net sales to decline by 13% organically relative to the same period last year, and our operating EBITA margin to decline from 9.9% to 8.5%. The negative delta in earnings per share from SEK 5.26 last year to SEK 2.89 in the first half of 2024 is largely related to items affecting comparability and to positive currency effects in last year's financial net.

Now it's time to dig deeper into our consolidated Q2 numbers, as well as our business areas performance. And I therefore hand over to you, Peter. Please go ahead.

[Peter Welin, executive]

Thank you so much, Fredrik.

And we start with this page. This page is then showing the income statement. To the left, you can see the Q2. In the middle, you can see the year-to-date and to the right, you can see the rolling 12 months as well as last year.

Starting with the Q2, net sales is up by 3% compared to last year. Organically, it's down by 5%. Gross profit is slightly down, minus 1%. And the gross margin went from 26.7% in the quarter to 25.6% this year. However, Inwido has taken some restructuring costs in the quarter of about SEK 23 million related to the one factory project in Vetlanda and also due to write-downs of inventories. Thereby, the gross profit has been impacted negatively by these 2 restructuring costs. Excluding these restructuring costs, the gross margin was more or less the same as last year.

Operating EBITDA was up 3%, and the margin was the same as last year, 14.8%. Operating EBITA is up by 1% compared to last year, meaning the margin went from 11.6% to 11.3%. I will come back more to when it comes to operating EBITA margin. The EBITA was down from SEK 262 million last year to SEK 240 million. The restructuring costs then impacted this SEK 23 million. That's a difference between operating EBITA and EBITDA. Further down the income statement, we can see that profit after tax is down by 22%. Inwido had also last year -- in Q2 last year a positive currency impact in the financial net.

So when comparing the financial net compared to last year, we had a positive impact last year and that thereby lower result this year. So, profit after tax as well as earnings per share was then negatively impacted by the restructuring costs of this year and when compared to last year, we had a positive currency impact. Thereby, low earnings per share, even though operating EBITA was more or less in the same levels last year.

Looking at year-to-date Q1 plus Q2, sales is down by 5%, and operating EBITA is down by 18% from SEK 430 million to SEK 354 million due to the performance in Q1. The more normal Q1, I would like to say, compared to previous years where we had a positive COVID impact in Q1, and the margin has declined from 9.9% to 8.5%. Earnings per share is down from SEK 5.27 to SEK 2.89. Rolling 12 months or later 12 months, sales is about SEK 8.8 billion. Operating EBITA is 10.9%, and the earnings per share is SEK 9.35.

This page is showing the development and the calculation of organic growth. We do it a little bit differently compared to other companies because we changed the history. In that sense, we make a pro forma. So starting to the left, sales last year was SEK 2,263 million. Then we add on the acquisitions. Their sales that what they had in Q2 last year, meaning Sidey had a sales in Q2 last year of SEK 196 million, meaning we went on a pro forma from SEK 2,263 million to SEK 2,459 million. The acquisition gave us 9%.

Then we recalculate the pro forma with the currency of this year. Now this year, it's a quite small impact, only plus SEK 1 million and the percentage is more or less the same. And then we then compare the pro forma last year with the FX of this year compared to the sales in this year and then we have a decline of 5% organically. Then minus 5%, meaning minus SEK 128 million. The total sales is plus 3%. Organically, it's minus 5% when comparing to a pro forma last year adjusted with the currency of this year.

Let's start with the business areas. We go -- starting with Scandinavia, Scandinavia continues to be impacted by low volumes in the new build market, especially in Sweden, whereas the Danish business unit benefits from increased activities in the consumer market. Sales is down by 7% to SEK 1,117 million. Operating EBITA margin was more or less the same as last year, 14.2% this year compared to 14.3% last year. The order intake was improved by 4%, and the order backlog end of the quarter is plus 6%. To the left -- to the right, you can see -- in the graph, you can see the development, the rolling 12-month sales as well as the rolling 12-month operating EBITA margins. As you can see, the peak was in Q4 2022. And the sales is now rolling 12-months, 21% behind the sales in Q4 2022. And the margin has -- even though -- despite the sales decline, be quite stable.

If we then go over to Eastern Europe, Eastern Europe has continued to be a challenging market, especially the Finnish market. And Finland is hampered by the strong volume decline in the new build segment, and we have taken actions. However, we've not been able to keep the operating EBITA margin because decline in Q2 this year was minus 22% in sales, went from SEK 569 million to SEK 441 million. The operating EBITA margin went from 13% to 5.5%. The order intake in the quarter was, however, positive, plus 2% compared to last year, and the backlog is more or less the same as last year, minus 4%. You can see the same graph to the right, showing the development from Q2 2022, the sales latest 12 months as well as operating EBITA margin latest 12 months. And as you can see, compared to the peak in Q1 2023, sales is now 29% lower compared to Q1 2023 and the margin has declined latest 2 quarters.

Next one is e-Commerce. e-Commerce had a positive development. We have increased the market share, and we have a substantial profit growth. So, we continue to have a positive development in all markets when it comes to e-Commerce sales. And April was actually at an all-time high monthly order intake for e-Commerce. In the quarter, sales is plus 50% from SEK 271 million to SEK 311 million. The operating EBITA margin has been improved from 3.9% to 10.8%, meaning the operating EBITA in the quarter was plus 220%. The order intake is plus 16% in the quarter, and the backlog end of the quarter is minus 6%. And here, you can see that to the right, same development, same graph showing development from Q2 2022. Sales have started to increase and the margin has started to increase as well. And we have a positive development in latest 2 quarters when it comes to the operating EBITA margin.

Going over to Western Europe. In Western Europe, we have a positive order intake and we have improved profitability. We have continued profit growth in the second quarter, both organically as well as an acquirer. In England, we have gained new customers since some of our competitors have gone bankruptcy. And in Scotland, Sidey, we continue to have a good development and we have also a good development in Ireland in our business unit, Carlson. In the quarter, sales is plus 108% from SEK 227 million to SEK 471 million.

The operating EBITA margin has been improved from 6.8% to 11.4%, and the order intake is plus SEK 169 million (sic) [ 169% ]. Of course, positively impacted by Sidey acquisition, as well as the largest order ever for Inwido taken by Carlson in Ireland as Fredrik mentioned. And the order backlog is plus 480%. And here Sidey has a different business model, with large order backlog compared to the rest of the group and thereby, we have a high growth when it comes to order backlog.

This page is showing the sales development, as well as operating EBITA development from Q2 2022 -- sorry, 2023 to Q2 2024. Starting with sales, we can see we have lower sales declines in Scandinavia, Eastern Europe, whereas we have growth in e-Commerce and in Western Europe. And looking at EBITA, we can say that we have declined in Scandinavia by SEK 12 million. Eastern Europe was down by SEK 49 million. However, e-Commerce has improved the result by SEK 23 million and Western Europe has improved the result by SEK 38 million. The reason why we are lower operating EBITA margin this quarter, went from 11.6% to 11.3% is due to development of Eastern Europe where sales declined by 22%.

Scandinavia, their margin was more or less the same as last year and we have higher margin or improved margin in e-Commerce as well as Western Europe. And when comparing the margin compared to previous year, Q2 previous year, we can see the margin this year is more or less the same as it was pre-pandemic or even higher than the pre-pandemic. Indeed, we had a really high margin in Q2 2021 due to the pandemic, especially due to the performance of e-Commerce. So the margin this year is slightly down compared to last year from 11.6% to 11.3%, once again due to Eastern Europe, meaning due to Finland. And the margin for total group is more or less what it was pre-pandemic.

Looking at the cash flows. The cash flow, excluding acquisitions of subsidiaries, is more or less the same as last year minus 2%. Cash flow from operating activities is minus 2%. Then we have a positive deviation when it comes to changes in working capital. Minor adjustments when it comes to inventory. We have a positive cash flow from operating liabilities and negative from operating receivables, and a total impact of plus 8% compared to last year. And this changes in working capital has then compensated a higher CapEx in the quarter. CapEx in the quarter is plus 22% compared to last year.

To the graph -- to the right, you can see -- to the graph to the right, you can see the development when it comes to CapEx since 2019. Before 2019, the normal CapEx level of Inwido was 3% to 3.5%. Then during COVID time, the CapEx was reduced due to different circumstances. And now in 2023 as well as the beginning of this year, the CapEx level has increased and we are today on a rolling 12-months level on 4.1%. We must compensate the lower CapEx that we did during COVID. So instead of being on 3% to 3.5%, we should be 3% and 3.5% and 4% the coming years.

So with a strong cash flow in the quarter, more or less same as last year, the net debt is more or less same in Q2 as it was in Q1, meaning the cash flows generated in Q2 has compensated the dividend payment that we did in May Q2 this year. So, net debt is more or less same as in Q2 and net debt in relation to EBITA is today 1.4x, same as in Q1 -- sorry, for Q1. And it was 0.7x last year when we include IFRS 16. Excluding IFRS 16, net debt versus EBITDA is 1.1x compared to 0.4x Q2 last year.

This page is showing the return on operating capital. Return on operating capital has declined and is now on 13.1% compared to the target of 15%, still above the pre-pandemic level. The main reason why we have lower return on operating capital is the lower EBIT in SEK compared to 1 and 1.5 years ago. And this page is then showing the order intake and the order backlog. To the left, you can see the order intake development in Q2 2019 to 2024.

And to the right, we can see the order backlog from 2019 until 2024 end of Q2. The total order intake was 22%, excluding acquisitions, meaning excluding Sidey is plus 10%. And all business areas have higher order intake compared to last year.

Scandinavia plus 4%, Eastern Europe plus 2%, e-Commerce plus 16% and Western Europe plus 169%. Excluding Sidey and excluding a large order in Carlson, Western Europe has still a positive order intake. And then the order backlog is plus 68% compared to last year. Excluding acquisitions, it's also here plus 10%, where we have a higher backlog in Scandinavia as well as in Western Europe.

I now hand over back to Fredrik. He will make a summary and outlook.

[Fredrik Meuller, executive]

Thank you very much, Peter. Excellent run through as always.

To sum up, we can conclude that Inwido AB is back on a growth track. While markets remain uncertain, particularly in the new build segment, we have grown our order intake across all 4 business areas. We've raised sales and we've raised profits too. And we do see macroeconomic signs of consumer sentiment moving in the right direction. This morning's inflation figure in Sweden is one good example of that. The M&A climate is also improving, meaning that altogether we are cautiously optimistic about what the second half of the year has in store for us. The green transition is gaining momentum across Europe, which is also exciting for the medium to long term.

And before we open up for Q&A, we would like to make some noise about our upcoming events. So, please make a note of these in your calendars already now, particularly our Capital Markets Day that will take place in Stockholm. As always, you can also find a lot of useful information on our web page and via our frequent posts on LinkedIn.

And now, Peter and I would be delighted to answer any of the questions that you may have.

[Operator]

[Operator Instructions] The next question comes from Albin Nordmark from Nordea.

[Albin Nordmark, analyst]

So, a couple of questions. Firstly, regarding the gross margin, which seems to be increasing across 3 of the 4 business areas, how should we think about the gross margin looking ahead?

[Peter Welin, executive]

It's a very valid question. Looking ahead, we can see that we have been able to keep our sales prices on a good level, and we've also been able to reduce the costs in connection to the lower volume that we had in this year Q1, as well as in Q2 because we have a volume decline compared to last year looking at the productions. Then the order intake is positive. So, we have been able to keep the sales. We have a positive material impact in Q2 compared to previous years and also compared to Q1. However, we see that the material price is going to be more stabilized and perhaps some materials are going to be slightly up. So in our expectations, we see a quite flat development in the next coming period.

[Albin Nordmark, analyst]

Okay. And within e-Commerce, can you comment on the margin there. We had -- I think you had some 17% margin before the pandemic and then you were down really low and now you're getting up again. So, what's the normal margin there? And also if you can comment on is it just Denmark that's going well there? Or is any other country picking up? Yes.

[Peter Welin, executive]

If you go back to pre-pandemic, the margin of the e-Commerce business was 10 around -- between 10% and 12%. That was quite a normal business. Then during the pandemic, the margin increased quite rapidly because the market increased very quickly and we had limitations on how quick we can increase the capacity. So the way for us to reduce the order intake was actually to increase sales prices, and that had a positive impact on the margin. And then we went up to 15%, 16, 17% during the pandemic.

Then we have seen higher competition in the e-Commerce business. We have seen last year some new has entered the market. And when the market has declined, the price competition has been much tougher compared to the level of pre-pandemic. So, we foresee that it will take some years until we can come back to the level that we had pre-pandemic, this 10%. It will not be done during this year. We'll take some years. But we are on the right path towards the target of 10-plus percent in EBIT margin. And the other question you had was which markets? We have a positive growth, more or less in all markets. So it's not only Denmark. Denmark is the biggest market for e-Commerce, but we also have positive growth in the other markets. And we also entered some new markets during this year.

[Albin Nordmark, analyst]

Can I ask you what markets you entered this year?

[Fredrik Meuller, executive]

We entered The Netherlands. That was mentioned in Q1. And of course, we have other markets to penetrate as well on our action list. At the same time, we have quite a lot more to do on a positive note, already in the existing markets that we're in. Denmark is, of course -- we're more heavily tilted towards Denmark, which is great, but we also want to grow the other jurisdictions as well beyond Denmark. So, that's also proceeding very nicely.

[Albin Nordmark, analyst]

Great. And my last question. Can you comment some -- overall comments on the M&A market? And also specifically, is it likely to close any acquisitions during '24?

[Fredrik Meuller, executive]

Yes. As mentioned, first of all, M&A is important for us, as you know, if we count backwards from the 2030 ambition of being twice the size of where we are today. We, of course, need to grow the whole group by a CAGR of 10% to 15% per annum. And let's say, roughly half of that could and should come from acquisitions, where we also have a very positive track record. Just looking at Sidey's one excellent example of that. We have noted definitely an uptick in M&A activity as such, which I think is a good sign for the outlook of the market and the industry also as such. I think also -- I think what we and I reflected on already in the Q1 report, Inwido is quite an attractive buyer. I don't feel that we have really missed out on any major or more attractive opportunities. Rather, there are quite a few coming knocking on our door wanting to be part of the Inwido group going forward, which is great news, of course.

So, while we had an attractive funnel and an excellent process already in place before Q2, that has been even further solidified. And for us, it's -- we're not stressed up about it. We want to continue to do the right deals. And yes, everyone involved in M&A knows that it sometimes has to take time before we get to the finish line. And I'm not in a position to say that we will close the deal within the next 6 months. We're moving forward on a couple of discussions. It's, of course, also a matter for me to build those important, really crucial relationships with senior management and owners of these businesses that we are talking to. So, yes, I can just conclude and note with pleasure that we are -- there's a high activity level here, both in the market and within Inwido. So that's very promising.

[Operator]

The next question comes from Sofia Sorling from Carnegie.

[Sofia Sörling, analyst]

Congratulations to a great report, Q2. And I have a couple of questions. So, let me first start with the non-recurring items that you recognized during the quarter. Could you give the split between what is related to the restructuring related part and the inventory losses? And then also this type of inventory losses, what type of product is it? And the reason for this non-recurring item?

[Peter Welin, executive]

Okay. The main part is the inventory. And the reason for that is that we have some old inventories in the books and we also made some platform changes and thereby, we had them all in store [ where we took ]. And then the rest of the part is the restructuring connected to Vetlanda, but the main part is the inventory.

[Sofia Sörling, analyst]

All right. And should we expect any similar cost recognitions ahead or is this all?

[Peter Welin, executive]

No. Not when it comes to the inventory. It's not -- when it comes to Vetlanda, it might be some small as well in Q3 because we cannot take everything once. We have to take it when it comes. And that is the cost connected to moving the machine. But most of the cost is now taken. But [ online ] there can be also in Q3.

[Sofia Sörling, analyst]

Okay. And you mentioned that the consumer behavior was strong in Denmark. Could you say anything about the consumer behavior in the other regions that you operate in?

[Fredrik Meuller, executive]

Yes. It's, I think, related to what we actually communicated in the Q1 report. Denmark as a country, as a market has, from a macroeconomic perspective, been a little bit ahead of the other Nordic countries. And with lower inflation and lower interest rates, we're beginning to see some of that trickle through to Sweden, first of all, and then Finland and to some extent, Norway, are still lagging as mentioned.

So in Sweden, it's -- I think weather has also been a positive factor. I think I speak for all of us that the winter was just miserable, and that is that. Now the spring and early summer has added to people, consumers being a bit more buoyant and then inflation being low as witnessed again this morning in Sweden. That's indicating most likely that interest rates will continue to go down a bit already this year, which is typically a positive signal for our market. England is still a bit slow. A bit -- yeah, a bit on the softer side.

[Sofia Sörling, analyst]

All right. But you mentioned also that there is very strong momentum now in Ireland, for example. What is the main reason for that, would you say? And would you say that it's currently at very high-level momentum and you should not expect that to continue? Or is this something that you expect will continue?

[Peter Welin, executive]

The total market in Ireland has been positive. And then we have been able to gain some quite large orders and we have also gained some market shares in Ireland. How the market will develop next in the future? We still are positive on Irish markets. We don't expect high growth, but we still expect that to continue for the next coming periods that the market will be stable.

[Fredrik Meuller, executive]

I think we're -- if I may add to that and more of a personal reflection, having visited Scotland and England, not Ireland, but Scotland and England recently, it is, of course, a lot happening in the -- around the green transition. The full evidence, I guess, and the full action plans have yet to be seen in all jurisdictions. But, for example, in England, there is talk about, of course, the whole market and the standards going from single glazing to triple glazing windows more or less overnight. And that could happen already next summer, so in 1 year's time. It's just a sign of the momentum now picking up speed, the whole transition picking up momentum, which is rather exciting, of course, and where Inwido should be at least in a rather favorable position.

[Sofia Sörling, analyst]

Okay. Interesting.

[Fredrik Meuller, executive]

That would relate to the Irish market as well, medium to long term.

[Sofia Sörling, analyst]

Okay. And you mentioned quite a lot that the order intake was positive. But actually, if we look at the order backlog year-over-year, it was down in several of the business areas. How would you interpret that? Is that like more of a negative order intake trend than in the later part of the quarter? Or how should we view that?

[Peter Welin, executive]

Where we have a negative is the e-Commerce business and that order intake is -- order backlog is quite small in that sense because we only work in the consumer sales with a short order backlog. Looking at Finland, because we also have a -- we have a positive in Scandinavia. We have a positive in Western Europe, even though we take away the Sidey and then we have a negative also then in Eastern Europe. But Eastern Europe was little bit differently compared to that last year backlog of Eastern Europe was quite big. We ended 2023 with a big backlog, large backlog in Eastern Europe in Finland, and then we work from that backlog during the first 3 quarters for more or less a whole year. So when looking at Eastern Europe, we are comparing to quite high backlog.

[Sofia Sörling, analyst]

Okay. Great. And when we talk about Eastern Europe, let's see -- do you have any specific action plan for Eastern Europe to improve the margin within this business area? Or how do you view to -- yes, what is your action plan within Eastern Europe, would you say?

[Fredrik Meuller, executive]

I think, first of all, one needs to acknowledge the fact that top line is down by, what is it, 22%. That's not something you can compensate for just overnight. We've done a great job, as always, within Inwido in trying to align the cost base as much as we can, but without hampering the future, the near to medium term, because we do need both blue-collar and white-collar employees for when the market comes back, both from a competence and from a capacity point of view.

So, we have taken measures. I'm rather impressed by that. We have not destroyed the business because we're in it for the long run. Yes, we continue to have our ears close to the ground. And if we need to adjust more, we will do that, certainly. But we're in a good spot. I think we have fared better than many of our peers, to be very honest. We have a good mix. We have the right team in place. And I'm absolutely certain we will bounce back not only in Finland, but in Eastern Europe as a whole.

[Sofia Sörling, analyst]

All right. Yes? Sorry.

[Peter Welin, executive]

No, just adding one thing. Yes, it's down to the 2% in Q2, but year-to-date, we are down 33% this year. So it's quite a massive drop for Eastern Europe and then especially Finland.

[Fredrik Meuller, executive]

And again, if you look at new build in Finland, you have to go back to the 1940s to find the same low levels in terms of new builds. We're at extraordinary low levels. I think that's worth noting.

[Sofia Sörling, analyst]

Yes. Okay. Actually, I have 2 more questions, if you don't mind. One is about the competitive landscape. If you can give us how you view the competitive landscape at the moment and perhaps in the different geographical regions that you operate in? Do you see more now price pressure, more fierce competition? Or is it maybe the opposite, lower pressure due to bankruptcies among smaller players? What do you see?

[Peter Welin, executive]

Then we have to take a little bit region by region. So if you start with Scandinavia, nothing has happened when it comes to -- there's no -- some companies have financial problems, but there are no companies that are really financial stressed. The material price has gone down during the last quarters. And that also means that the prices have little bit gone down in that sense. So, we see a little bit -- also some companies are trying to buy volumes at the moment. So, we see in some markets, some -- we see a tendency to lower prices to buy volumes, especially when coming into the project market. When we go over to look at U.K., there is a different situation because in U.K., 3 of the largest competitors has gone into bankruptcy during the latest 8 months, 9 months. And we have gained new customers due to that. We have taken some new customers. Even though the market is still declining in U.K. in Q2 this year, we have increased our sales because we have gained market shares, taking over some new customers.

[Sofia Sörling, analyst]

All right. And let's see, that was U.K. And Eastern Europe, did you have any specifics there or did I miss?

[Peter Welin, executive]

Sorry. Eastern Europe, Finland, also here we can see a quite tough. In some segments there, we also see a price pressure. The price has gone down, and we have also been a little bit forced in that sense to also reduce the prices somewhat.

[Sofia Sörling, analyst]

Okay. All right. That was actually all my questions.

[Operator]

There are no more phone questions at this time. So, I hand the conference back to the speakers for written questions and any closing comments.

[Peter Welin, executive]

Okay. We have received one question. It's from [ Helga Maas ]. We have already talked about this, but still read it because a little bit more sense to hear. The question is, would you mind talking about situation in Finland? Do you witness some positive signs in a new build activity, given order intake is increasing in Q2? Should we expect better situations in second half of this year? Or do you take actions to reduce cost base there? If yes, should we see already better EBITA margin in second half of this year?

We talked about Finland. The Finland is still a tough market. The new build market is still very tough and in some way, the consumers. Also the consumers are hesitating. Yes, we have taken a higher order take in Q2 this year compared to last year in Finland. However, it doesn't mean that the market has been increased. It's more that we have gained market shares during this period. We should not expect a better EBITA margin for the next coming quarter because we are now still comparing to really good profitability during last year. So, we still see positive development in Finland and we see a positive signs on our -- especially on our activity, not so much on the market, but our performance. We see a positive sign, but we are still comparing to very strong margins last year in Q3 as well as in Q4.

When it comes to cost reductions, yes, we have taken down the cost once again. The sales is down by 33% in Eastern Europe and we are still making profits, smaller profit. We are still making profits in Eastern Europe, and we have reduced the cost. And for us, it's a little bit of balance right now because if you take too much cost, then we will not be able to fulfill the high order intake that we have. So it's a little bit of balance right now, how much cost reduction we can have compared to the market situations and our order intake.

See here. Then we have some other questions, but they have already been answered. So, no new questions.

[Fredrik Meuller, executive]

Then we say, we conclude there. Thank you, everyone. What remains is for Peter and me is to wish you all a very nice summer. So, thank you and take care.