Please go ahead.
Good morning, everyone. As usual, I'm here with Hans Kooijmans, and we're happy to take your questions in a moment. My name is Piet van der Slikke. We started 2023 with a strong first quarter, with an EBITDA growth of 6% and even adjusted for forex, 8%. Certainly, when you realize that we grew Q1, 2022 with 59%. We were able to hold revenue more or less at the same level as quarter one, 2023, and we're able to increase our margin. The business segments in Life Science performed quite well. In the industrial segments, we saw effects of destocking and slowing down of demand. We completed two acquisitions in Q1, one in the U.K. and one in China.
Sunrise in China will give us a strong position in the Beauty & Personal Care market in that country. We closed the small bolt-on acquisition in Sweden last week, signed two deals in South Africa and India, and we expect to do more acquisitions in the course of this year. We have proven resilience throughout our history. We remain very positive about our ability to grow organically and by adding businesses. I will take your questions later, and Hans will now give you a short update on the numbers.
Thank you, Piet. Good morning, ladies and gentlemen, and as usual, a short summary of the first quarter 2023 results from where I will start on page nine of the presentation. We are happy to report a solid start of the year. forex adjusted revenue increased 5%, and gross profit increased 9% in the first quarter of this year. The gross profit increase was a combination of 5% organic growth and 4% as a result of the first time inclusion of companies that we acquired in 2022 and the start of this year. Gross profit in percentage of revenue improved by 0.8%, point to 25.9%. This increase in percentage was amongst others, a combination of product mix effects, changes in local market circumstances and successful internal gross margin improvement initiatives.
FOREX adjusted operating EBITDA increased 8% to EUR 149 million. The operating EBITDA margin increased by 0.2% to 12.8%. The conversion margin calculated as operating EBITDA in percentage of gross profit was 49.5%, which is slightly below the same period of last year. forex adjusted net result increased 6% to EUR 83 million. Compared to Q1 last year, both free cash flow and cash conversion margin more than double to respectively EUR 147 million and 97%. This increase was a combination of increased operating EBITDA and a relatively low investment in working capital as a result of more modest top line development. Net working capital translated in days of revenue was 60 days, close to the 59 days reported end of December.
Year to date, cash earnings per share were EUR 1.74, an increase of 6% compared to the same period of last year. On the last line of this page, you could see a 14% increase in our number of employees. This increase is a combination of organic growth and the first time inclusion of acquisitions. On the next page, slide 10, a lot of numbers, you will find gross profit, EBITDA conversion margin per operating segment. As you can see, EMEA reported 9% FOREX adjusted gross profit growth and 7% operating EBITDA growth. Operating EBITDA in percentage of revenue in EMEA improved 0.3% to 13.6%.
As most of the acquisitions in this region were relatively small, it's fair to assume that the impact of acquisitions was limited and most of the growth in EMEA was organic. Americas, the next column reports a forex adjusted gross profit increase of 6% and operating EBITDA increase of 8%. A part of this EBITDA growth is acquisition related and is a result of the impact of M&A done in 2022. Asia Pacific, in the third column, reported 14% growth, profit growth and 8% operating EBITDA growth on a constant currency basis. The decrease in conversion margin is the result of higher growth profits being more than before, offset by relatively higher own cost growth in this region.
In the last column, the cost of holding companies, and as you know, this includes all normal operating companies, including costs related to the head office in Rotterdam and the regional support offices in Singapore and the US. On page 11, the summary of the free cash flow. Adjusted operating EBITDA increased EUR 8 million, which is in line with the reported operating EBITDA growth. Two million of CapEx, followed by a relatively low EUR 2 million working capital investment. As mentioned before, last year's substantial EUR 75 million working capital investment was mainly the result of an all-time high 25% organic revenue growth in Q1 last year. A short update on net debt and leverage. Reported leverage ratios and leverage based on the definition used in the definitions in the new loan documentation were more or less similar
Compared to 2022 year end numbers at 1.8 and 1.3 x LTM EBITDA. The 1.3 x leverage ratio is well below the lowest 3.5 x leverage threshold in the IMCD loan documentation. You might have seen that in February, we completed the refinancing of IMCD's multicurrency revolving credit facility. The new facility amounts to EUR 600 million as interest margins based on external credit ratings and a five-year term. The first maturity date of this new facility is March 2028. Last but not least, our outlook for 2023 on this page that you might have seen. So far, the short summary of our year to date financials. Piet and myself are happy to answer your questions. I would like to give back Sharon, the operator.
Thank you.
Sharon.
Yeah. If you would like Go ahead ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. We'll pause for just a moment to allow everyone an opportunity to signal for a question. We'll now take our first question from Matthew Yates from Bank of America. Your line is open. Please go ahead.
Hey, good morning, everyone. A couple questions. The first one, just on the outlook. There's a line in the press release about it being prudent not to give an outlook because of the uncertainties. Please correct me if I'm wrong, and I know you've always stressed on calls that the order book of the business is inherently pretty short term, but I can't recall you ever including that explicit comment in writing before. Are you trying to convey something there? The second question, we've seen that in the course of the last couple of months, the company's announced that Valerie will take over as CEO next year. I was wondering if you can talk a little bit about the background here, why you've gone external rather than internal.
I guess you must know Valerie pretty well from her time on the IMCD board over the last 18 months. What especially impressed you, about her in trusting her to take over the business, going forward? Thank you.
Thank you, Matthew. Thank you for your questions. First question on the outlook. We have always in our history been very prudent and cautious, hoping to under promise and over deliver. We feel that economic uncertainties now are, let's say, more so than usual, and therefore we felt it's prudent to postpone an outlook to later. I think, I don't, we don't want to convey a message other than the message that we conveyed, namely that there are uncertainties. We also say, and I said it also in my opening remarks, that we're positive about the resilience of our business.
On Valerie, yes, we know Valerie, of course, as you, as you pointed out, as a supervising director, and she has been an excellent non-executive board member. She also has a long experience in the chemical industry as her CV shows. She knows our business. Yeah, after carefully weighing possibilities by the supervisory board, the choice was on her, and we are very confident that she will do an excellent job as my successor.
Okay. Thank you, guys.
We'll take our next question from Matthias Maenhaut from Kepler Cheuvreux. Your line is open. Please go ahead.
Hello and good morning. Thank you for taking my question. One question actually. If you look at working capital, and the fact that you do not provide a guidance statement for the next quarter, could that probably relate to some recent weakness in the order book, or is that not necessarily the case? Could you maybe also elaborate a little bit on the trends you're seeing in the different end markets you have and then over the different geographies into Q2, please? Thank you.
On the working capital question, I think you answered it already, Hans, to a certain extent. We have invested less in net working capital, so we see, of course, a bit of flattening of our revenue line. That also frees up cash. On the different business segments, I already indicated that the industrial segments show some slowdown. Industrial segments in our case are the Coatings & Construction and mainly in Advanced Materials segments. Whereas the Life Science segments do very well. Coatings, Pharmaceuticals, Beauty & Personal Care and Food.
Food ingredients have performed excellently. As always in our type of business, if the economy's softening somewhat, we see also softening in the more industrial segments. We have to see if that is the main effect of destocking or also a slowing of demand. It's difficult to see that for every single product. I guess that is a summary. A bit of a softening in the industrial segments and a very strong performance in the Life Science segments.
Thank you.
Once again, ladies and gentlemen, please press star one to ask a question. We'll now take our next question from Suhasini Varanasi from GS. Your line is open. Please go ahead.
Hi. Good morning. Thank you for taking my question. Just had a follow-up on the outlook, please, or the lack of one. Just wanted to understand if you had seen any incremental or worsening of trends towards the end of the quarter, March or in early April, that makes you cautious on the outlook or, you know, on your inability to give the outlook at this point. Just wanted to understand if things have worsened through the quarter because it felt like a pretty decent start to the year. Thank you.
Yeah. As somebody also pointed out already, our visibility is pretty, let's say, limited, because of our, let's say, the order book is pretty short-term. What we see is volatility almost per month. I don't want to speculate about the second quarter yet, because again, the volatility is high. That's why we also felt it's better to be cautious than taking the usual outlook. Basically, I would say the volatility is a bit larger than we used to.
Understand. That's very clear. Thank you. Just one question on the APAC region, please. Can you maybe comment on what you're seeing in that end market because of the way the margins have evolved in the first quarter on a year-over-year basis? Where do you see normalized margins trending, and what are you seeing in terms of the country trends over there? Is what are the weakness, areas of weakness that you're seeing in Asia? Thank you.
Yeah. Perhaps, Peter, I should take this one. Feel free to add, of course. If I look at gross margin development, we reported a softening in Q4 last year of the margins in that region, as a result of some specific items. I refer to the discussion that we had about stock provisions that we took mainly in that region in Q4. What you see in Q1 this year is that gross margins came back to a similar level as last year. That is a bit of that. If I look at different trends in different markets, I think we all have seen what happened in China, coming back after the lockdown, but taking quite some time to get back to more normal.
The question is, what is the more normal in China going forward? There we see also different trends in different parts of the markets.
Yeah. Maybe I add to what Hans is saying. China is coming back, I think, but slowly. We see other markets performing relatively okay. Strong India. It's a different picture all over, but pretty okay, I would say.
Thank you.
Next up we have Annelies Vermeulen from Morgan Stanley. Your line is open. Please go ahead.
Oh, hi there. Good morning. I just have one question left, please. I wanted to ask about food. You flagged that food has remained relatively resilient within the Life Sciences division. Some of the commentary we're hearing from some of the food producers has been quite mixed in terms of still relatively strong pricing, but a potentially slower volume outlook, you know, as consumer demand wanes through the year. I realize your, you know, your visibility is limited given the short terms of the order book, but I'm just wondering if you're seeing any of that going into the second quarter based on your conversations with customers in your food segment. Thank you.
Well, we see still, we still see growth in the first quarter, good growth. Maybe a little bit less than we had hoped, but still very good growth and very resilient margins. I have no inclination to expect that that will change in the coming period. I think we have a very strong food business, very much focused on specialties, but also very much focused on the trends in the market. Let's see how the volumes develop. So far we're pretty happy with what we have seen at this moment.
Okay, good. Thank you.
Next up, we have Jayan Chellapali from JP Morgan. Your line is open. Please go ahead.
Hi, thanks for taking my question. In the last earnings call, you had mentioned expectations for healthy profit growth for the first quarter. Would you say the same now about the second quarter? If not, what has changed?
I think I should stick to the outlook that we gave. As I said before in a previous question, visibility is quite short-term. I wouldn't want to speculate now on what will happen in the next couple of months. I mean, you don't see big swings in our business. We just want to be prudent, so we don't want to speculate now about a second quarter.
Understood. Thank you.
Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We will take our next question from Kieran Moto from ING. Your line is open. Please go ahead.
Yes. Hi, good morning, everyone. The market is still quite volatile. Is anything you can think about the destocking is coming to an end somewhere in 2023. Is there any idea you have on that subject? That is my first question. Second question is, with the changing markets, what do you think about the M&A possibilities in this market? It looks to me that the opportunities could increase. I'm not speaking about pricing, eh. That it could increase in terms of, yeah, the peoples reconsidering their position with regard to their ownership of companies.
Yeah.
That was my question.
Thank you for your Yeah, thank you very much. On destocking, it's a good question when it ends. I think one has to assume that it ends rather sooner than later because at a certain stage, of course, stocks are depleted and need to be refilled. Very difficult to say. Also difficult to say because of the large range of products that we carry in our business. I would say that we are at a point that it's more makes more sense to if going forward that destocking has finished than assuming that this will go on forever and particularly in the industrial markets. I think, I mean, I think it's...
The reason also that we are cautious is that if you look at the outlooks of macroeconomists also in markets like the United States, that there's a large uncertainty there about how far the economies will slow down. That also triggered our caution. On your M&A question, listen, We always feel that in a market that is resilient and strong, that M&A opportunities are better than in a market that goes down. As a general remark, because people in our business feel that they cannot extract maximum value if the market goes down. Not many companies in our sector will suffer really difficulties, economic difficulties in the sense that they have to sell.
Notwithstanding that, we still feel that there are a lot of opportunities in M&A. We have a healthy pipeline. As I said also in my opening remarks, we expect that we will close more deals in the course of this year. Don't let's say expect that there will be more opportunities because the market goes down versus a resilient market. I don't think that that in, as a general, view is the case.
Okay. Thank you.
Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Ladies and gentlemen, please press star one to ask a question. It appears that there are no further question at this time. I would like to turn the conference back to our speakers for any additional or closing remarks.
Well, I thank you very much and in particular, the people that are in London and had to wake up early. I wish you all a good day and see you next time.
Goodbye.
That concludes today's conference. Thank you, everyone, for your participation. You may now disconnect.