Afternoon, everyone. This is Benedetta Mastrolia, the Investor Relator of Newlat Food, and thank you for joining today's call on the Newlat Food's first quarter 2023 results. Joining me today to discuss our results are Angelo Mastrolia, our Chairman, Giuseppe Mastrolia, CEO and Chief Commercial Officer, and Fabio Fazzari, Group Financial Director. Before starting, I would like to remind you that this presentation may contain certain forward-looking statements that reflect the company's management's current views with respect to future events and financial and operational performance of the company and its subsidiaries. These forward-looking statements are based on Newlat Food S.p.A.'s current expectations and projections about future events, and any reference to past performance of Newlat Food should not be taken as a representation or an indication that such performance will continue in the future.
This is not an offer to sell or a solicitation of an offer to buy Newlat securities. We move directly to slide seven, where we have our financial highlights for the year, for the period. Before commenting and going over our results, I would like to please note that the results are presented on a consolidated basis, which means that they include EM Foods starting from the 1st of January 2023, and they do not include EM Foods in the comparative figures of 2022. We can move over to the results. Revenues.
Consolidated revenues were EUR 207.3 million, which is an increase of 25.3% versus EUR 165.2 million in the first quarter of 2022. If we exclude EM Foods, we had an organic growth of 19.3% year-on-year, and we had the highest increase in bakery, which had an increase of 46.3%, and in dairy of 42.3%. If we go over to EBITDA, we can see that the adjusted EBITDA was EUR 18.2 million, which is an increase of 39.3% versus last year's results of EUR 13.1 million.
In terms of adjusted EBITDA margin, we actually had an improvement both from last year and also from the end of year results of 2022. We had an EBITDA margin of 8.8%, which is to show that there was instead a steady improvement of margins, thanks to the completion of the latest round of price increases that were passed on to customers, as well as a stabilization of production costs. EBIT was EUR 9.8 million, which is an increase of 97% versus last year, where we had EUR 5 million in EBIT in the first quarter.
If we look at net income, we had net income of EUR 6.4 million, which is a outstanding result, as it increased 166% versus last year, where we had EUR 2.4 million in net income. If we move over to free cash flow, we had an adjusted free cash flow of EUR 7.2 million and a cash conversion of 79%. Net debt, if we look at net debt, excluding IFRS 16 lease liabilities, we had a net debt of EUR 26.1 million versus EUR 34.6 million at the end of 2022. If we include IFRS 16, we had a net debt of EUR 73 million versus EUR 81.4 million at the end of 2022.
Moving over to the next slide, we have sort of gathered some of the results of other big and diversified food companies in Europe and also worldwide. In terms of growth, Newlat together with Mondelēz had the best result in the first quarter of 2023. Therefore, we had an amazing result if we compare the sales to some of the most important and best performing companies in the sector. This is thanks to a contribution of both growth of volumes and also a positive mix and price contribution. If we move over to the next slide, we have sort of an update on the EM Food integration.
As we said in the last call, we have been working on the launch of the Minuto range, which will be launched in Europe soon. Here you can see some of the work that we've been doing the last few months in terms of packaging and product development. As you can see, we've developed all the packagings with a very modern design using vibrant and distinctive colors, as well as a very appetizing photography to draw customers' attention. We were also able to show the first mock-ups of the product and to show the products to our consumers and make them try to our consumers and customers at the TUTTOFOOD trade show this week in Milan.
It's, it was the biggest food show, trade show in Italy this year. The reception's been amazing. We've had a lot of interest from both consumers and clients who are really interested in the product. Just a little bit more on Minuto. We've actually ran a consumer survey in Germany last month, where we had, we asked two questions. The first one was, "Did you know the brand Minuto before this survey?" The second question was, "How likely would you be to purchase this product if it was priced at a reasonable price point?" The results were pretty outstanding. We already have an 86% knowledge brand awareness in the market in Germany. 86% of consumers said that they know the brand Minuto already.
78% of consumers said that they would purchase the product if it was available at a good price, at a reasonable price. That is actually even more interesting if we look at the brand and the category leader in the market, which had these 71% purchase intention versus our 78% purchase intention. Even if the product hasn't been launched in the market yet, we see that the consumers are really interested in the product and would be more likely to purchase our product compared to the long-standing market leader. Now we move on to some more news from Semper Mentis. Last year, about this time last year, we launched Naked Ultimate, which is a more premium range that we presented earlier in earlier presentations.
In the last year, we've been able to sort of see that this is a huge success. Has been a huge success in the U.K. with a retail sale, sales value of GBP 2.2 million. 80% of consumers will recommend the product, which is a quite high score in this instance type of survey. This type of product, this new range has been able to increment the Naked sales as we've attracted new and different customers from the original range customers.
We've been able to attract also younger consumers who are more likely to buy this product than the original range because of its more pungent flavor and its really new and sort of fresh design, as well as the packaging being more sustainable than the original than the original range. We're really happy with these results. Now we move on to the revenue highlights for the year. As mentioned, sales were up 25.3% on a consolidated basis. Organic sales growth was 19.3%. In terms of just volume, organic volume growth, we had 6% of organic volume growth, which is an outstanding result considering the industry average and our also historical average as well.
In this period, we saw an acceleration of sales, both in terms of just sales value but also in terms of volumes, as I said, and an improvement on margins overall. We had an increasing underlying demand, which is shown in the great results of volume growth. This period was also characterized by new launches and new listings and very, I would say, committed work from our commercial team and team in order to finally close up the final round of price increases, which were applied at the beginning of the year. This year we.
This in this period, we also had an excellent bottom line performance, which can be seen in EBIT and net income results, which were basically doubled and more than doubled in the case of net income as a result of course, an increase in sale, but also an improvement on the supply chain and sort of a decrease in the average purchase price. If we move on to the revenue breakdown by business unit, we can see that all the segments were positively impacted by in this period, so we had an increase in all of them. In general, roughly all of them were sort of influenced by one-third which one-third of volume increase and two-thirds of price increase.
In particular, if we look at the different business units, we had pasta with an increase of 18% sales. This was both an increase in sales in general, but also thanks to the entry of new customers. The largest increase was recorded in the large retailers and B2B channels, especially in Italy and in Germany. We also had an increase in the private label exposure of pasta in other countries. As regards milk, we had an increase of 13.4%, which was mainly attributable to an increase in B2B in the B2B channel. In terms of instead instant noodles, we also included in this presentation bakery mixes to the segment.
In this case, we're presenting instant noodles and bakery mixes as a whole segment, as one segment. Of course, we can see here that the increase was 50.2% if we include bakery products. Bakery mixes, sorry. If we remove those, we can see that there was an actual very good increase of 19% of just instant noodles. This was mainly thanks to an increase in all the different geographies, all the different reference markets, but also an increase in the U.K. thanks to the launch of the ultimate product and also an increase in the average selling price, mainly in the U.K. As regards bakery products, these grew, these grew of 46.3%, and the Cristina sales were the ones that drove the increase.
Dairy products also increased quite well. We had an increase, especially in mascarpone. Special products segment also increased 42% with the development of baby food and special products and B2B concepts. In terms of distribution channel, we had an increase in the large scale retail channel of 19.2%. We had an increase of all the business units in this category. B2B sales were increased by 82%. In this case, there was a contribution of EM Foods. The overall development of this channel was pretty good as well without EM Foods.
In terms of normal trade sales, we had an increase of 31.8%, as a result of a higher average selling price and also an increase in demand and in new clients. In terms of private label, we had an increase of 16.6%, especially in the dairy and pasta business. Food service remained pretty stable in this period. If we look at the geographies, we had an increase in all the geographies, with a, I would say average increase of 19% in all the geographies, especially in Italy, Germany and the U.K. We had an increase thanks to higher sales volumes in pasta, instant noodle and bakery in Italy.
In Germany, we had an increase, which was mainly thanks to an increase in sales volumes of pasta and also good contribution from instant noodles. The United Kingdom sales grew thanks to our sales volumes again in pasta and instant noodles. As said earlier, the instant noodle segment was particularly incremented by the Naked Ultimate launch. The pasta sales were sort of driven by the launch of Ragu, which was launched last year. The other countries, sales increased by 76.2%, which of course includes EM Foods in this case. If we do remove EM Foods from the results, we had an overall growth of 20%. Now we move over to the EBITDA breakdown by business unit.
As can be seen, EBITDA, adjusted EBITDA was EUR 18.2 million in Q1 2023, compared to EUR 13.1 million in 2022. If we look at adjusted EBITDA, this was 8.8% versus 7.9% in the first quarter of 2022. And in general, there was a clear improvement in most of the EBITDA margins in both in Q1 this year compared to Q1 last year and the end of the year 2022. We're sort of comparing both the Q1 2022 and the last and the full year 2022 results. If we look at pasta, we see there was a steady increase from last year's results.
If we look at Q1 2022, we had just 4.1% of EBITDA margin. By the end of the year, we were able through mainly price increases to reach 6%, and now we're back to 8.1%, which is a very good increase considering all that's been going on in the last year. The milk market, in particular, was one of the markets that suffered the most, the highest increases in raw materials, especially in Q2. In this case, we can see that in Q1 2022, we had a good margin of 8.2%, which was brought down to 6.8% by the end of the year of 2022.
In this last quarter, we were able to bring it back up to 7.8%. It was almost a full recovery of margins in this period for the milk segment. Next we have some more insights on the bakery and dairy products. Here we can see that bakery had a clear improvement, 310 basis points in going from Q1 2022 to Q1 2023. It's quite remarkable to see the increase in the dairy segment as EBITDA margin had suffered pretty badly from the raw material price increases in 2022, especially in the second quarter of 2022. This year, the last three months, we've been able to increase margins, EBITDA margins to 15.2%.
If we compare it to last year's results, so the full year results of 2022, we can see that it more than doubled, because it was 7.2%. Now we move on to the next slide, where we have more on free cash flow and also sort of, an overview of the EBITDA margin, which improved quarter by quarter, going from second quarter of 2022 to the first quarter of 2023. As can be seen under table on the left-hand side, we can see that there's been a recovery of the net working capital, which is in the change of net working capital, which was just minus EUR 0.5 million.
This is shown in a great generation of free cash flow, which was EUR 7.2 million in the first quarter of 2023. On the bottom side of the page, we can see sort of the progression of EBITDA margin. As mentioned earlier, the sort of worst price and cost increase was suffered in the second quarter of the year last year. As we can see, the margins were lower, and they sort of hit a low all-time low for the year in the second quarter of 2022, with 7.13% of margin.
We were able to steadily increase quarter by quarter the EBITDA margin to finally reach 8.8% EBITDA margin in the first quarter of 2023. There's been sort of a clear display of how the commercial actions put in place have been successful and have been useful in order to increase our margins overall. Moving on to the next slide, we have more on M&A. This is sort of what we said last time. The market right now is pretty interesting for Newlat Food as the interest rate increase leaves less room for private equity. Also the current credit market environment is very favorable for us.
We are looking more, there's more sort of an increase of industrial players being involved in this in M&A in general. In terms of possible targets, we're still working on targets that we said that we mentioned last time. We're working on one transformational target in the U.K. with over EUR 1 billion turnover. We're also working with a special product company in Italy that we're trying to acquire. Just recently we've been able to find a new target in the bakery sector in Germany. As regards the deals we've been talking about for over a year now, we're still in talks in that particular case. There's a few things open right now.
We hope that we can close at least one deal by end of the year. onto the last slide, where we have sort of an outlook for the year 2023. The management of Newlat Food is very committed to achieving consolidated revenues with a double-digit growth, adjusted EBITDA margin of around 9%, a free cash flow which is expected to surpass EUR 30 million by the end of the year, and a free cash flow yield of 14%. As I just said, we are very focused on M&A, and we really hope to and we do expect to close another acquisition by the end of the year. That's it for the presentation. We can open a call for questions.
Usually you can either unmute yourself and ask the questions, you can raise your hand and we can let you talk, or you can write your questions in the chat, where we can read it out for you and answer your questions. Thank you so much.
Yeah. Good afternoon, everyone. Arianna Terazzi from Intesa Sanpaolo. Can you hear me?
Yes.
Okay. Thank you for the presentation. I would ask you an update on current trading. Namely, if you could elaborate on the kind of volumes growth are you seeing in the current months across the various categories. Also if you are seeing pressure in terms of possible downward revision of your prices. Thank you.
Thank you, Arianna. Generally speaking, the current trading reflects substantially what we experienced in Q1. This is the reason why, with the visibility we have today, we update you about the guidance for the full year in terms of growth and in terms of profitability and cash generation. At the moment, in Q1, we complete our latest plan in terms of price increase. We have no particular pressure at this moment, in terms of cutting price.
I have to say that, and to highlight once again that, the growth that we achieved in Q1 and the growth that we are experiencing today, and considering the order book that we have also in the coming two months, we have a substantially, still volume growth. It's not just a matter of pricing. No pressure in terms of cutting price. This is the reason why we expect the margin improvement that we achieved in Q1 to be improved in the next quarter and to be around 9%, as we said in our guidance statement for the end of the year.
Thank you.
Mm-hmm.
Paola, you can go ahead.
Thank you. Hi. Good afternoon, everybody. I have a still a question on profitability. Okay, good to know that you are not experiencing any pressure on downward pressure on prices for the time being. Let's see. I would like to understand to what extent have you already benefited from the downward trend in input costs in basically wheat and milk, or to what extent are this going to be a further help for the next few quarters? Another question, if I may, is on the contribution of EM Foods, which we can expect for the next few quarters, and the ramp-up you are imagining in terms of your initiatives going forward. Thank you.
Thank you, Paola. In terms of profitability, we it was not driven by benefit from a particular slowdown in raw material or packaging or transportation price. The situation, generally speaking, is still a situation that need the price increase that we made because we need to think about not only particular singular, single raw material, but there is there were and there is pressure in several areas starting from the raw materials. Milk, for example, it was a bit down since the beginning of the year, but still materially high versus the average level, for example, of 21. We experienced pressure on transportations, logistic, energy.
There are several areas that all together create a picture in which, yes, it's true that, some ways, we experience some stabilization or a bit of slowdown, but, the situation remain, still, I would say, tough at the basis, and, it is justifying the, price increase that we made. For this reason, we highlight in our press release that we are, really happy about the job that, we achieved in the, in the past months, because with the situation still tough, we have been able to pass through substantially, a percentage very close to 100% of the price increase that we experienced.
For this reason, the improvement of the profitability, I can say that it is sustainable because if we are going to experience a scenario in which most of the raw material really will drop down, we can we have no problem to cut price again. What we look at is the profitability. We are absolutely sure that this level of profitability could still be improved, but it's something that as a base on which we can move forward, it is absolutely sustainable. In terms of EM Foods, it's clear that the contribution of EM Foods was not positive in the quarter, but because EM Foods is a sort of a startup, we are developing a lot of projects. We invested in the integration, in renewing, some areas.
We have a lot of projects that are going to start in the coming months, also on the commercial side. We believe that very soon, the contribution of EM Foods could be positive and supportive for all the group. I'm afraid, but considering the number of project and the different timing, et cetera, we would like not to share a more precise detail in terms of EM Foods, but I think that my description could get the general situation of this particular division. I have a question in the chat asking about the cash conversion cycle from Joris. Thank you, Joris for your question.
What I can tell you is that first quarter is just the first step of the improvement that we planned for the full year. As you saw, the contribution in terms of change net working capital was still a bit negative in the quarter, but materially improved versus at the end of the year. Our plan, our expectation is to have for the full year still, again, a positive contribution in terms of net working capital. This, obviously, this improvement is coming for an improvement of the cash conversion cycle. There is a question from Akash. Please,
Hello. Good afternoon, everybody. I would like to ask, how the M&A impacts the margins of the company?
The M&A, you mean, the latest acquisition?
Yes, exactly.
Yes. As I said before, it was a bit dilutive at this stage because it is in a developing phase. It's just the first quarter we are managing this company and we are in the pipeline several project starting for the second half. In a normalized situations, the M&A obviously is something that should improve the profitability of the group and not to be diluted. Even if our rule on M&A is to take into consideration the return on capital employed. Which is the real, I would say evidence of the value creation, because profitability could be very high, but if you pay a lot, this acquisition, you have a substantially a dilution in terms of return on capital employed.
Two things. The target in terms of M&A for the value creation is based on return on capital employed. In terms of the current situation, the recent acquisition will improve in the coming months and in a normalized situation will be absolutely in line with the profitability of the group.
Okay, thank you so much.
You're welcome. There is another question from Mario Bello. Please go ahead.
Yes, can you hear me?
Yes.
I would like you to add on a little bit of information regarding the return on capital employed, if you may, to let us understand what are your general framework to evaluate the M&A. We know that on the table you are negotiating a few deals, can you add a little bit of color? What are the things you are willing to consider? What are the criteria, if they mainly are synergies or potential new markets or consolidate positions? I don't know. What are generally the things that you look in the M&A?
Yes. First of all, it's important to highlight that we have general rules, but each single potential deal is obviously different than the other because there are a lot of company-specific aspect that we have to take into account. Generally speaking, I have to say that we have a very disciplined policies in terms of the multiples on which we can acquire a company, which are absolutely, I would say in a range, that could be between, depends obviously the specific situation of a company, but could be no higher than the seven times at the moment. We consider a lot the potential synergies that we can achieve.
You know that we are a company with spare capacity in several areas. It is important for us, for example, as it is for the deal we are negotiating in U.K., maybe to get the opportunity to internalize some productions and to cover the spare capacity we have. In this way obviously, we have an improvement in terms of profitability and return on capital also for the group standalone, because we are going to reduce substantially capacity and to dilute the fixed cost. It is important to consider the assets. If a company includes also real estate assets, it's something that we value also as a positive thing that could maybe in some case we could apply a premium.
This because it's something that could reduce the volatility in negotiating rent, and you have obviously something to add in your balance sheet. Profitability is important, but it's important for us to balance the equation between how we are going to spend for a company and how much is the EBIT that we can realize from this company. This is more important than the single profitability of the company, because in terms of profitability, usually, we would like to drive this target in terms of synergies, new commercial opportunities or the integration in a big group who generate natural synergies, for example, in procurement, etc. These are, I would say, the general rule we have. As I said at the beginning, each case is different than another.
We have to value obviously, case by case. This just to give you a general information about, our approach.
Thank you.
A question from BSF. It's about the possibility that we announced in terms of the acquisition of the Sansepolcro plan. This is a project that we announced to the market. It's a project that remain on the table. As soon as we will have additional news on that, obviously we will communicate this to the market. It's one of the project that we have on the table today, including several potential deals in M&A. No other question?
Okay. I guess if there are no more questions, we can end the call. If you have any questions, going forward, we're always available to answer all your questions by email or if you need anything else, we're always available. Thank you so much.
Thank you, everybody.
Thank you. Bye. Thank you. Bye.