Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Interpump first quarter 2023 financial results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star zero on their telephone. At this time, I would like to turn the conference over to Ms. Elisabetta Cugnasca, Group Head of Investor Relations of Interpump. Please go ahead, madam.
Thank you. I am Elisabetta Cugnasca, Head of Investor Relations of Interpump Group. Good afternoon or good morning according to your time zone, and welcome to Interpump first quarter 2022 financial results conference call. As usual, I have to bring your attention to the disclaimers slide insert in the annex part of the presentation, I hope you were able to download from our website. Afterwards, it's my pleasure to give the stage to Mr. Marasi, who today I am introducing you as new group Chief Executive Officer. As a matter of fact, last 28th of April, the newly nominated board split Chairman and CEO role, and Mr. Marasi was appointed as Group CEO.
Thanks, Ms. Cugnasca, thanks to all of you for the attendance. Due to the circumstances, please allow me to take two minutes for some personal remarks. As some of you probably remember, I joined Interpump in 2016 with the double hat of M&A responsible and head of Hose and Fittings division. During these years, following the growth of the group and the expansion of these businesses, I had the opportunity to add different businesses role and hat too. Among them, of course, the one that I appreciated the most has been the leadership of Walvoil Group in the last two years. Since last 28th of April, I'm wearing an additional hat, the one of Interpump Group Chief Executive Officer. For sure, the most important and demanding of my entire professional life. I feel mandatory to express now my deep gratitude to many people.
I would like to thank Mr. Montipò first for his trust and mentorship, my colleagues who help me and support me in this time, and the financial market, too, because discussing with analysts and investors has been an important step in my growth path that allow me to understand topics which have to be clear in mind of someone who has the responsibility to lead a listed company. Having said that, let's have an overview on the first quarter 23 and consequently on the entire 2023. The results of the first quarter 2023 were significantly better than our rosiest expectations. Speaking about top line, despite an unprecedented growth achieved in 2021 and in 2022 and some fear of a softening market demand, we enjoyed a further acceleration from the fourth quarter 22, this resulted in an organic growth higher than 18%.
Moving to profitability and margins, the very strong organic growth and the full deployment of the countermeasures adopted in 2022 to face the recessionary trend resulted in an EBITDA margin of 25.3%, a number that is unprecedented in Interpump Group history. In addition to this, and despite the impressive organic growth, the cyclicality that characterized the first part of the year and the peaking CapEx, we have been able to improve the cash flow generation from EUR 6 million to EUR 14 million in the quarter, stabilizing the inventories level, thanks to a less critical situation regarding supply chain and logistics in comparison to the situation of the last two years. We expect to improve significantly the cash flow generation in the following quarters, in line with our promises of last summer that we already did the first steps.
Furthermore, we maintained our focus on M&A growth path, going on with the implementation of our risk management approach through diversification, this resulted in the Shell Mold and I.Mec acquisitions. Finally, we started to implement the first actions of our 2023, 2024, 2025 ESG journey, this resulted in the approval of the new code of ethics and the creation of the sustainability committee. Moreover, with the concrete and practical approach that you know distinguishes the group, we took the opportunity given by the appointment of the new board to anticipate the most important step related to the formalization of succession plan action. That is the separation between the chairman and CEO roles. These results, what does it mean for the remaining part of the year? It means that we are expecting for the full 2023 a higher than expected organic growth rate.
In particular, we believe that our mid-single digit organic growth rate anticipated last February of 2023 will become a high single digit organic growth rate. On top of this, we expect to consolidate further the record high profitability results achieved in the last two years to improve the cash flow generation and to continue with our external growth strategy. As always keeping an eye open on what is going on around us. The milestone of our medium long-term growing strategy is profitability excellence, and we are ready to promptly adapt ourselves and our industrial footprint and structure in case of market change. After this first snapshot, let's deep dive on the first quarter 2023 figures.
Regarding sales, with an organic growth of 18.7%. I said before, 18.7% is the best result of the last three years, excluding COVID rebound of Q2 2021. Considering performance drivers, we mentioned a 14% volume growth and 4% price growth. Both division performed very well with a well-balanced growth rate. In particular, Water-J etting performance was supported by complete solution products. Some colors on sales evolution by geography. USA were up by close to 19%, Italy by around 20%, Germany by close to 30%, France by more than 20%, and Canada by close to 25%. For updating purposes, among the second countries, China, which last year was Group Cinderella, in this quarter grew double digit by more than 11%. Sector application.
Industrial vehicles adapter up by almost 14%, agriculture and forestry up by 20%, earth moving machines up by more than 30%, lift by 25%, construction by more than 30%, food and beverage up more than 20%, and so on. Another important point is White Drive. The investment done to increase manufacturing capacity and to reduce bottlenecks are bearing fruit, and in the quarter, sales were up by almost 28%. Moving to profitability, the EBITDA margin of 25.3% is a record not only for the first quarter, but this is also an historical record for a general point of view for Interpump Group. Across the group, we are fully benefiting of the very strong and balanced organic growth and the full deployment of the counter measures adopted in 2022 to face inflationary trends.
Regarding White Drive, for the second quarter in a row, EBITDA margin stood at 21%, driven by improvement on both sides of the world, the ocean. In Europe, the rationalization between Poland and Germany is going on, and finally, efforts done last year in U.S. are bearing fruit. Last week, I spent 3 days in the bottom line of White Drive, and I'm very proud to say that our colleagues fully embraced Interpump managerial approach. On a final remark, please do not let you misled by the last part of the insurance reimbursement regarding Romanian fire that accounted EUR 3.6 million that we are receiving in the quarter. With our usual transparency, we underline it to you, please keep in mind that this is not a gift.
This is the compensation of all the activities and losses and expenses we are doing to make the factory working again. Hopefully next summer, the production in our Romanian plant will be back again. Moving to CapEx. As you know, we are going on with the post-COVID production expansion plan, and gradually, we are rolling out the equipment phase after the land and building one. I would like to remind you annual figures because of, on CapEx, we have a medium to long-term strategy which could not be properly judged by quarterly numbers. In 2021, almost 50% of our CapEx were dedicated to buy land and build factories. In 2022, this per-percentage went below 40% and today is below 30%. To give you some color, please allow me to switch to Walvoil CEO hat.
We are completing, as you know, the enlargement of our plant in Reggio Emilia, a state-of-the-art building that was honored by the visit of the Italian President of the Republic on last 29th of April. As a matter of fact, Mr. Mattarella, for Labor Day, visited the Reggio Emilia two companies, one of which was Walvoil. It was, of course, a great honor to be chosen as one of the best example of the so-called Mechatronics Valley, absolutely the best gift for Walvoil's 50th birthday that we will celebrate in few weeks. Moving to cash flow generation, it's important to underline that the CapEx plan is ongoing, but at the same time, we are delivering the commitment we took last summer to significantly improve cash generation. We saw first result in the fourth quarter, 2022.
We are going on this path despite the negative effect of the exceptional sales growth, which is driving up receivable. In terms of inventories, I would like to assure you that we slow down our purchases after the hectic phase of exactly one year ago, and we are now stabilizing our inventories levels, thanks to a less critical situation regarding supply chain and logistics in comparison to the situation of the last two years. The limited increase in value is explained by the inventory accounting methodology based on the average cost and therefore inflationary trend are kicking in the evaluation of the inventory. We expect anyway to significantly improve the cash flow generation in the following quarters, in line with our promises of last summer. We already did the first steps.
Concluding with acquisition, I would like to dedicate a few words to the two most recent acquisition, because from a different point of view, they are very, very important. Indoshell, the foundry, this is a completely different acquisition compared to all the others done by the group in its history, a unique one. We bought many times companies which represented an upstream integration process. Eurofluid in October 2022 was last example, but we never got to the raw material level. With the pandemic years, 2020, 2022, what the pandemic years showed us and our constant focus on risk management pushed us to take the opportunity to buy an Indian cast iron foundry. Walvoil India has been working with this foundry since many years and therefore this was not a leap in the dark.
We already invested in these few months to improve the factory and the working conditions to align with the group state-of-the-art standard. We will concentrate and invest in order to increase the production capacity. We estimate that at the end of the year, Indoshell will be able to deliver 8,000 tons of cast iron per year. Our plan is to secure a very significant part of Walvoil Group needs of cast iron, that I remember you, is the most important raw material used in the group, start to gradually support the group outside of the country through contracts and needs. I.Mec, as many of you underline us several times, in most recent years, our acquisitions were more focused in the hydraulic sector in comparison with Water-Jetting and flow handling.
It was not our choice, it was the result of how complicated, competitive and long an acquisition process could be. I.Mec, we are finally reinforcing again our flow handling activities and commitment. The company today has as a most important reference market, the tile and ceramic one, but this technology is consistent with the one used in food and beverage, pharmaceutical and cosmetic sector. We started a path with Bertoli, we progressed with Inoxpa Mariotti & Pecini, and I.Mec. i believe that I gave you all the important details on the first quarter results, but summarizing all of them, the first quarter 2023 is the best quarter in group history, in both terms of sales and profitability. Now I will leave the floor to Ms. Cugnasca for the ESG updating.
Thanks, Mr. Marasi. I will be quite fast since we have already update you in the past months step by step. We implemented two action of our 2023/2024 period plan, which aims the building of group ESG foundation. The governance two, we approved the new code of ethics, which now incorporate group ESG commitment. Governance one, we create inside the new board the sustainability committee and the executive director inside it's the new CEO. I believe that is the best evidence of how group is taking seriously the topics. This last mention allow me to underline you the concrete step related to governance two, the formalization of group succession plan. This would be prepared in the next few months by our board, but we anticipate the most important step, the separation of chairman and CEO role with the appointment of Mr. Marasi as Group CEO.
You are aware of the fact that concreteness is our mantra. We had the chance of the annual shareholder meeting and new board appointment. We executed. Always from a governance point of view, even if from a different standpoint, last April, the new remuneration policy was approved. We know that there is still room for improvement. We introduce important novelties. From then, we introduced ESG targets. We gave more visibility on financial targets. We inserted the clawback clauses. For the long term incentive plan approved last year, as promised, we aligned the holding period to the best practices. For discretionary bonus and indemnities on termination, we introduced threshold. We fine-tune calculation methodology. Summarizing, we are working hard to improve.
Thanks, Ms. Cugnasca. Some final snapshot. The first quarter 2023 has been the best quarter ever. We upgrade our 2023 organic sales guidance from mid-single-digit to high-single-digit. We will never give up working to consolidate and protect profitability. We are actively and successfully pursuing our M&A strategy. We have separated the chairman and CEO role.
Thank you. We are ready to take all your questions. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. To remove yourself from the question queue, please press Star and Two. Please pick up the receiver when asking questions. Anyone who has a question may press Star and One at this time. The first question is from Matteo Bonizzoni of Kepler. Please go ahead.
Thank you. Good afternoon. I have two questions. The first one relates the evolution of the order intake and backlog. I remember when there was last call in February for the full year release, you said that, if I am correct, at the end of January, the backlog was up around 20% year-on-year. I just want to check what has been the evolution after January. In terms of book-to-bill, as regard to intake in the last few months, if you can also comment separately for the division and also in terms of backlog growth, I know at the end of April or what is your last check? This is the first question. The second question relates CapEx.
Free cash flow in Q1 was still, I mean, impacted by working capital, but also CapEx was relatively high, it was around EUR 40 million, if I am correct. Can you provide a broad indication for CapEx for the full year? Thanks.
Thank you, Matteo. Regarding order intake and backlog, I can confirm that the backlog remains above, well above EUR 1 billion in total. I say that it is stable month after month, this would mean that the order intake to bill ratio is around one. It is clear that this number is different from the crazy numbers that we were seeing one year ago, we are really comforted that the demand from the market remain strong and the backlog remain so high, because in this sense we have a full visibility and we can operate with the proper time horizon our factories. Regarding cash flow, it is clear that in the first quarter was penalized by two factors. The first one, the very strong organic growth that led to a significant increase in receivable.
Second, the concentration of some real estate related CapEx in the first quarter. My invitation is not to consider that CapEx will be for the full year 2023, four times the CapEx that you are seeing in the first quarter. I confirm once again that we will be around 5% of our sales.
Thank you.
The next question is from Domenico Ghilotti of Equita. Please go ahead.
Good afternoon. My first question is related to the operating leverage in the Water-J etting. Can you elaborate on why, despite the strong improvement in sales, the margin was pretty stable? If you can, you were very clear on the guidance for the top line. Can you elaborate on the expectation that we should have on the margin side? I didn't catch the point, actually.
Okay. Regarding operating leverage on Water-Jetting, I believe that what we have seen, I mean, 27.8% against 28% in the quarter, is absolutely not meaningful in the quarter. We maintain our excellent performance in Water-Jetting and profitability. As we have commented many times, our operating leverage is limited by the recourse to outsourcing, at least in the short term. Then we are absolutely happy of the results in terms of profitabilities and profitability that we have achieved in the two divisions in the first quarter. Regarding margin expectation, you didn't catch because, it is because we didn't mention. As always, our aim and our full commitment is to protect and to maintain our excellent results.
Maybe I rephrase the question. What are you seeing in terms of price contribution going forward? If I'm not wrong, it was just 4%, so it was not a big driver of the first quarter, but should we expect at some point a reversal of the price impact?
No. Also in February, when we commented the guidance and expectation for the year, I was commenting that our expectation for further price increase or price contribution for the year should have been very limited. The results of the first quarter are a demonstration of this. Considering the evolution of raw materials price that are pretty stable, some reduction in energy cost and some increase in labor cost. I would expect no significant variation from this level of price going forward in the following three quarters. I would not invite you to consider any further price increase in the remaining part of the year. I will consider that this number will remain stable.
I'm more concerned about potential possible price cut.
We have already give back something in terms of removal of energy cost related surcharges, considering that the peak in energy cost, in particular in Europe, has been experienced in the third quarter 2022. We have applied in the fourth quarter 2022 here and there some energy cost related price surcharge. Considering the strong reduction of the stock energy cost in the final part of last year, we have already reduced and removed the energy surcharge in the first quarter 2023. Overall, if you consider the group on a consolidated basis, I believe that the counterbalanced effect between some price increase, some catch up of the price increases applied during 2022 and some removal of surcharges will end up in the full year with a limited price effect.
We saw 4% in the first quarter, and I believe that we will stay around this number.
Okay. That is clear. Thank you.
As a reminder, if you wish to register for a question, please press star one on your telephone. The next question is from Bruno Permutti of Intesa Sanpaolo. Please go ahead.
Good afternoon, everyone. I have one question related to the reimbursement. I'd like to understand if during the year you expect to have extra costs related to the reopening of the Romanian facility, more or less in line with the reimbursement you expect to have, or just can clarify what is exactly the impact there and the adjustment we should consider on the EBITDA. A second question relates to the receivables. You mentioned that you had an increase in the receivable in the first quarter. I'd like to understand what is the time framing which you expect to have a normalization or a cash in of them.
If on the supply side, on the other side, you weren't able to increase the payables and, I mean, are there still tensions on the supply side, or now the situation can be considered normalized as to what you are seeing?
Sorry to bother you. We will answer you immediately to the first question. Afterwards, can you please repeat the second one? We had a gap in your voice.
Yeah, sorry.
No problem. It's probably our fault. After the first answer, will you, please you repeat the second one, please?
Yes. What's related to the receivables and to understand better what could be the time horizon in which you expect to have a normalization of receivables. Part of the question is why you couldn't increase payables and how is the situation on the supply side. If there are still some tensions or if the situation is completely normalized, probably you can also manage your net working capital a little bit better.
Okay. In regarding your first question regarding the insurance reimbursement for the Romanian plant fire, it's important to underline that we have booked in the first quarter EUR 3.6 million, and we will have as a positive effect in the second quarter, other EUR 5 point something million. That will be more than enough to cover the completion of the restructuring and the restartup of the Romanian plant. It is clear that we are still facing operating losses and operating costs for managing this situation and for restarting as soon as possible the full production capacity in this manufacturing plant. The insurance reimbursement is not a one-off. It's not an adjustment.
It is a coverage of these costs and operating losses will be enough to cover the costs that we will have to face. We have budget until we will be ready again to operate this plant in full. Regarding working capital, receivable and payable, it is true that we have increased receivable and we have increased payable. Of course, receivable are on turnover and payable are on purchases. The effect is significantly different. Just for your record, receivable increased in the quarter by EUR 57 million, a significant jump that is the consequence of 18.7% increase in sales. Regarding the supply chain status, I confirm that the situation is now much better than the one that we have lived in 2021 and in 2022. It is not completely efficient.
It is not completely back to normal, but it has improved a lot in terms of availability and in terms of logistic time and cost.
Okay, thank you. Look to me, a follow-up on the first question, related to it. You had more or less a quite high operating profitability in the hydraulic sector. If we assume that you had more or less a compensation between the additional cost and the insurance reimbursement. Can we assume that for the remaining part of the year, I do not say I understand that probably the first quarter was very strong in term of organic growth, and we probably will have a slowdown in the second half of the year?
Nobody knows, this is probably the at this moment, a reasonable assumption. The point is, we were used to operating profitability around 22%. Now you have 25.3%. Probably the truth could be in the middle for the remaining part of the year for the hydraulic segment.
I'm not commenting on precise results or expected results by quarter or by division. What is absolutely clear is that the margin in hydraulics in the first quarter were not, as you said, quite high. They were spectacularly high because 24.3% to 160 basis points more than the corresponding quarter of last year is really a spectacular performance. What we have already commented in February regarding the expected profitability or EBITDA margin for the year is to protect and wherever possible to increase the profitability. Of course, the results of the first quarter were driven by the impressive organic growth. In the second part of the year, we do not expect a significant slowdown. On the contrary, we are increasing today our guidance and our output for the year.
We are pretty confident that we will be able to maintain our excellent level of profitability.
Thank you.
Once again, if you wish to ask a question, please press star and one on your telephone. The next question is a follow-up from Domenico Ghilotti of Equita. Please go ahead.
Can you hear me?
Yes.
Yeah. My question so is usual. If you want update on what is the current pipeline of potential opportunities, if you have seen something more, say, closer to potential acquisition or if it is the same, can you just give us an update on that?
Yeah. It's very good. Also the evolution of our M&A opportunities and situation. We have closed two important acquisition in the first part of the year. Not really important in terms of sales, but important for the reasons that we have commented before, for different reasons. Both of them are absolutely traditional. We are very confident that, based on the current environment or the number and the quality of the seed that we have on the table, that we will do something else in the remaining part of the year. We see even more important that, over a mid to long-term time horizon, our strategy and our opportunities to consolidate further several of the markets in which we are already present will absolutely remain in place and will be larger and larger.
We are absolutely optimistic and looking forward.
Okay, thank you.
The next question is from Alessandro Tortora of Mediobanca. Please go ahead.
Yes. I, with the best to everybody, I will take some follow-up on what I heard before. The first one is, Fabio, if you can comment a little bit on, let's say, the weather performance in the first quarter, considering the strong growth achieved in the, in the first, let's say the first quarter. If you can help us to understand, let's say, a sustainable pace of growth for the driver this year. That's the first question. I don't know if you want to go one by one or I can.
No, go ahead. Complete.
Okay, then the, the second question is on the inaudible or back of level that you mentioned before. Uh, like, can you help me to understand how these, uh, let's say compares versus, uh, I don't know, the beginning of the year, just understand the, the trend and also, uh, do you see significant differences in terms of trend, let's say, between the two division if I read correctly the presentation, uh, that Water-Jetting is, uh, still on the way up in terms of, let's say, of the acquisition. Um, then, uh, if, if you can comment a little bit also the performance of North America, above all the performance in the Water-Jetting, the division where I, where, uh, let's say, I saw a limited growth in the quarter. And last, it's just, let's say, uh, if you can help, uh, us to...
Let's say if you can give us a guidance also on the financial charges. I see a certain increase in this quarter, in this first quarter. If you, let's say, can help us to have a maybe on this item for the feedback. Thanks.
Sorry, Mr. Tortora, 1 point. The fourth question on Water-Jetting, you were referring to sales revolution or to something else? Sales were up organically in 16%, probably you are referring to something else.
I'm referring to sales. I'm referring to sales, and I'm referring to North America, Water-Jetting sales growth.
Okay, thank you.
Okay. Regarding the first question about White Drive performance, I'm very happy and comforted to see that finally all the investment that we have immediately decided, or that we have decided immediately after acquisition are finally entering in full production and are giving us a better and more important manufacturing capacity. This is absolutely fundamental and absolutely important on a financial point of view because as you have noticed, we have achieved a 28% growth in the quarter for White Drive. Even more important, this increased manufacturing capacity is absolutely comforting for me and for the group because we are now able to serve better our customer base. We have removed many bottleneck and many capacity constraint that we have found in the company when we acquired it.
With all these investment and some outsourcing, some optimization, we have been able to significantly increase our manufacturing capacity to support better the market, to protect and expand our market share, and to give the customer a better service and a better customer experience. The second question regarding Water-Jetting order acquisition, I confirm you that, like seen in the last couple of quarters, the acquisition of orders and the momentum for Water-Jetting is even stronger than the very good one of the overall division. This is particularly important because the order backlog in Water-Jetting is also made by systems or equipment with a longer lead time for the definition of the technical specs with the customer and a longer lead time for the execution.
This is very comforting because of the visibility that this stronger backlog give us. Regarding the North American performance, without entering in too many details, what is important to underline is also the exchange rate effect. The exchange rate effect that this year is sort of a headwind. We had some contribution, some comfort last year. The exchange rate evolution this year is moving on the opposite direction. We don't care too much considering how diversified we are and how balanced we are in terms of manufacturing capacity and sales background. There is nothing that is important to mention at this time, in particular on a quarterly result. The last question was regarding...
Was related to the financial charges. It is clear that since the significant depreciation of the dollar against the euro is bringing higher exchange losses, the jump in net financial charges is explained by the currency exchange evolution.
Okay. Fabio, sorry, just to understand, the amount, the million was made up of, because, I don't see the detail. Basically, it's made up of, mainly, FX losses, as you said?
Yeah, we are approximately EUR 3 million in the quarter in exchange losses. You will see the details in the quarterly report.
Okay. thanks, Fabio. Yes.
Thank you. Thank you, Alessandro.
Once again, if you wish to ask a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Marasi, there are no more questions registered at this time.
Okay. Thank you very much for everybody of you to listening to us. Let's speak in at the beginning of August. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone. Thank you.