Thank you very much, Operator. A warm welcome from my side to you all. Before we start, some housekeeping items. Please note that this call is being recorded, and a replay will be available on our website at deutz.com later today. Your participation in the call implies your consent with this. Also, please note that management comments during this call will include forward-looking statements which involve risks and uncertainties. For the discussion of risk factors, I encourage you to review the disclaimer contained in our annual report and this presentation. All documents related to our full year 2021 reporting are available on our website. Joining me today is our new CEO, Sebastian Schulte, who is also our interim CFO, and Mr. Oliver Neu, our Head of Finance.
As usual, Sebastian Schulte will walk you through the highlights of the performance of the group, and then hand over to me, as I will provide some more details of our financial performance. Sebastian will close the presentation with our current market outlook and our guidance. After that, we will be happy to answer your questions. Now, without much further ado, I will hand over to Sebastian.
Thank you very much, Christian, and good morning. Very warm welcome to our DEUTZ annual results call for 2021. As stated by Christian, I'd like to start to give you an overview about some key operational and strategic developments that were achieved during 2021. Let me first start with order intake, which raised significantly by a bit over 50% to EUR 2 billion. Unit sales, when we talk about our DEUTZ engine, so that excludes the Torqeedo, the smaller Torqeedo units, unit sales rose up by 33% to a bit over 160,000 units. That brought us revenue up by 25% to EUR 1,617 million. If we combine that with the order intake, we recorded a book-to-bill ratio in 2021 of 1.24, so quite a significant growth still at the end of the year. On the bottom line, we achieved EBIT for exceptional items. We didn't have many exceptional items.
We see that later, of EUR 37.2 million. That brought us a margin of 2.3%, and that meant we walked up 8.1 percentage points or EUR 112 million if we compare with the prior year. Having said that, prior year 2020 obviously was heavily affected by the COVID implications, and that was a year of a lot of uncertainty. We do not like to compare that much more with that prior year because that is not really a fair comparison. On the free cash flow side, we closed the year with positive EUR 21.6 million, and we are quite proud of that because we have the operational impact, obviously, from the EBITDA, but also we increased business significantly, as we showed earlier, but we still managed to keep working capital on a reasonable level.
In that sense, we were able to record that EUR 21.6 million cash flow, which brought us then also to the decision to propose a dividend of EUR 1.5 per share, which is quite a high ratio for the time being, 47%, but we believe that's also exceeding our expectations from the market quite significantly. We show that as a starting point for solid dividend policy going forward. Also, on the innovation side, product innovation side, we presented, we developed, and presented, unreal, our hydrogen engine. We'll come to that in a minute. Very important nowadays, ESG. We increased our sustainability exposure. We joined the UN Global Compact, and with having joined the UN Global Compact, we are committing ourselves also officially to their core values or principles when it comes to human rights, OSH, corruption prevention, and obviously environment.
This is only one example of our ESG and sustainability achievements. We'll come to more in a bit. Last but not least, we had, in mid-February, quite a significant change in leadership. I assumed the role of CEO following Dr. Hiller, and we also had, on the head of the supervisory board, a change, Dietmar Vogelreiter, who has been with us on the supervisory board as an ordinary member before, since 2019. He assumed the role of the chairman from Bernboa, who will remain at the supervisory board. If we look back on the past year, we do see quite a few positives, but also quite some negative input factors which kept us busy in those 12 months. First of all, we had a broad economic recovery really across all relevant end markets, which all grew pretty much with double-digit sales growth.
We had further effects, positive effects from our cost measures. We managed to lower our break-even volume point to 130,000 units as promised. We achieved our service target. Sales and service went up 16%, and we went through the previous wall of EUR 400 million. We will come to a bit more detail during the course of the presentation. Also, particularly when it comes to our classic segment, we broadened our customer basis. We signed new long-term contracts with Samuel, with SPHA, with ECCO, and with ASCO, just to name a few. On the flip side, the year was challenging, as said. We call it here, we will name here the semiconductor shortage, is one example. We had significant issues with the electronic control units, particularly on the smaller engines. They led to, we call it, sales loss.
In other words, without that shortages, we would have produced and sold significantly higher volume, but that's how it is. Semiconductors is just one example. We had other issues, just to name a few, polymers, plastics, pretty much across the supply chain. That was not easy. That is still challenging right now, but as a company, we have learned and we are learning to deal with that situation in sort of a new normal, better day- by- day. COVID-19, there were waves, and really that depends a little bit on which manufacturing side, which operational side on our side, on our end, but also on our key suppliers. There were days and weeks where we were not able to run our operations as efficiently as possible. That is also something which we have to face now. It should not be an excuse. It just should be an explanation.
On the price side, raw material prices are hiked, and a lot of our suppliers requested additional premiums to be paid, particularly in Q4. That number went higher and higher. We recorded here demands of EUR 25 million. We are not accepting all those demands, to be very clear. In fact, we're fighting against it. In some aspects, it's a bit of a give and take together with the suppliers. That will also, Christian will tell about that later, be one of the impacts we saw, particularly in Q4. We had catastrophic events. You all know them. On the global scale, the blockage of the Suez Canal, and on a German scale, the flooding in the Ahr Valley.
The blockage of the Suez Canal, as a response to that, we moved quite a lot of our freight operations from sea freight on the train line, particularly between Europe and Asia. We will come to that later. That obviously, due to the recent events in Russia and in Ukraine, we have reverted that, but that was something which kept us busy quite a lot during that period of time. In the flooding, we had a few suppliers who were affected during that course, apart from obviously all the terrible issues with the people, and some of our employees were also negatively affected by that. Talking on our hydrogen strategy, we would like to name a couple of points. First of all, our pilot project, we are very proud of that, the TCG 7.8 hydrogen. We piloted that project with a regional utility company, RheinEnergie in Cologne.
We have here developed stationary equipment for power generation together with those guys. That is going to be the first, or that is the first pilot application for that engine. We have, and you see here on the right side of that chart, you see the picture that is still on the DEUTZ facility in Köln-Porz. We have that demonstration model in operation since the end of December. We opened that as a board at the end of December, and we are going to deliver that to RheinEnergie in the course of this spring as a demonstrator. Full production of that engine we expect to happen from 2024 onwards. Another project we are quite proud of is our cooperation agreement with the DLR, the German Aerospace Center. That is a joint project where we are focusing really on making construction sites more environmentally friendly.
That is something which has been developed jointly by the DLR Innovation Hub with the DEUTZ Innovation Center. Two really sort of innovation-key groups working here together. The idea is pretty much, when you look at a construction site today, particularly the heavy equipment is almost 100% fueled by or driven by diesel engines. We want to create solutions, develop solutions, ideas how to enable on these construction sites the use of hydrogen-powered vehicles. A lot of this is to do with the issue of fueling because obviously the diesel has a much higher energy density than hydrogen, and we need to develop here clever fueling and logistics solutions in order to make best use of the new hydrogen technology. Moving on to service, we have mentioned earlier already our service target, a 400 million be achieved. We see that here on the charts.
We came up from 348%- 403. 60% may sound a little low compared to the overall revenue increase. However, we need to keep in mind that in 2020, service revenue was not down very much. If we compare it with 2019, it was more or less stable. That was pretty good how we kept our highly profitable business growing here. Although in tech and all, the backlog is not that relevant in the service business because obviously the business is turning much, much quicker than our new engines. If we look back to five years, we have a positive track record of a CAGR of 7%, and we intend to grow that business further of more than 5% per year. Just a few examples how we grew, because we grow on the one end organically, on the other hand, also smaller acquisitions.
For example, what we did in the last year, we opened two new so-called DEUTZ Power Centers in the States. One is called the DPC Mid-Americas in Dallas that opened in May 2021. Another one, the DPC West, opened in the Las Vegas region on November 1st. That is something which brings us really profitable growth, profitable business, but also expands our footprint also beyond using only DEUTZ parts and servicing only DEUTZ engines. We are getting broader here as planned. Talking of our road towards more green business, the first step we did is we increased transparency at the beginning of fiscal year 2022. We have included or we have incorporated a new segment structure as of January 2022. We are now reporting our two segments. The one is green.
In the green segment, we are summarizing everything related to electric drives, everything related to hydrogen engine and business, and our green businesses, Torqueedo, Future Fit cost program, and also the small investment in Blue World Technologies and obviously the related service businesses as well. On the classic side, we keep what we are good at and what we are strong with and what we still believe will be important for the next decade or more to come. That's the diesel engines, gas engines, biofuel engines, and the earlier mentioned related service business. As you remember, in late 2021, we went on a capital markets day where most of you were also present, where we shared a vision that by 2031, we will believe that roughly 50% or more than 50% of our revenue shall be green.
That's something we'll want to measure ourselves internally against, and we want also to give you the opportunity to measure us against that. That's the vision, and we need to, first thing is giving the transparency. That's what we've done with the new segment structure. As said, we start formally with that new segment structure now in 2022. Going back in 2021, we just want to give you a bit of a pro forma view where we would have stood had we already reported in that structure earlier. You see the green bars are relatively small still, smaller intake, EUR 65 million versus almost EUR 2 billion on the classic side. Unit sales a little more advanced.
That's due to the relatively high number of Torqueedo units, small value units on the maritime sector, and revenue, obviously, as said, because the relatively smaller value of Torqueedo business, we had EUR 54 million. You see on the EBIT side, you see that we first said a very clear thing. On the classic business, we achieved 4% margin already. That's another step up towards where we've come from and where we want to go to. On the green side, highly negative at the moment, driven by this considerable startup investment, particularly in research and development. Everything, all the activities relating to our hydrogen engines and our electric portfolio is shown here. That's a little bit of an upfront investment, but we're convinced during the course of the decade that will grow.
Moving on on the topic of sustainability, I want to give you a few highlights of 2021. We significantly reduced CO2 emissions by 55%. We reduced significantly waste for disposal, and we're down to 5,000 tons now on waste for disposal, meaning that more than 17,000 tons we can reuse. All of our sites, we use 100% green electricity. We showed earlier already 3.3% that the share of our green business. Also on the G part of the ESG, 99% of our workforce have now completed our compliance training. That's very, very important. 75% of our production site is now in line with the ISO 45001 certification. That is our two sites in Cologne, our site in Ulm, Hersbach, all the German sites essentially, as well as our component factory in Spain.
Last but not least, 55% of our top 150 suppliers are now ESG rated by Ecovadis. That means in our sort of fields of action for ESG, environmental, social, and corporate responsibility, we are working hard, but also successful to make progress here. That is visible and clearly reflected in an improvement in the ESG ratings. We are utilizing quite a few here. I am not going to go through it in all the details, but to pick out a few, in the MSCI, we went up from BBB to A. We are top 50% in our peer group on the Sustainalytics. We are top 30% of the peer group. In the corporate ESG performance rating, the prime one rated by ISS ESG, we are in the top 20% of our peer group. That means our sustainability efforts, they are paying off.
I also would like to give you a bit of an outlook on our strategic roadmap because as we heard earlier, our results conference 2021, obviously the focus is on the completed year 2021, and we come to that later, the outlook on the next, on the current year and the next quarters. In my position as new CEO, I'm now in that office for four weeks, and I would also like to use the opportunity to provide you a little bit of an outlook on how we are sharpening our corporate strategy in the months to come. Let me first look back and reflect a few points already mentioned. We are in the middle of a big transformation.
When it comes to the technological transformation of DEUTZ, we have defined and agreed internally with our 10-year outlook division, a clear vision of that of being able and needing to bring our business share in the green technologies of more than 50% in the next 10 years. Also, when it comes to our path of improving profitability, we have clearly defined that we see DEUTZ with an EBIT potential of up to 8%. That is very, very clear. Both of these objectives are correct and important and will work on achieving them. We want that our shareholders remain or gain confidence in the long-year development of our company. When we look back now in the last years, DEUTZ has addressed quite a few, let's say, building blocks for this path.
My impression is some of them are correct, but more than some of them are correct, but not everything was, let's say, consequently and with a necessary stringency implemented. A few things might also still miss it. We do not want to make a fast, snap decision here. We want to move on systematically. What we want to do now is we want to evaluate all those sort of building blocks and activities to really see whether all these activities contribute as we hope for and as it is necessary to achieving our goals. This is in terms of impact, but also timing and stringency. That might mean that we also come to new conclusions and new considerations. We will, as a management team, work on that very, very structured and consequent in the coming months.
It is very clear our objective that first we define the specific activities for, we call it, we call it the first horizon, 2022-2025, and also make it operational. We also think further ahead and already look firmly at the next horizon, 2026- 2029. It is also very important to come to Russia and Ukraine later that we need to see are there any geopolitical sort of changes which we have to carefully analyze, and we might have to include some activities in our strategy. That is just a teaser. We will give you in every three to six months, we will give you an update on where we stand here. The next sort of point where we will inform on that will be after the semi-annual figures.
That everything against the background of transforming DEUTZ more towards green and bringing and defining the way and achieving the way to the profitability of 8%, etc. Having said that, I would like to hand over to Christian Ludwig, who will provide more detail on the annual numbers 2021. I will, at the end of the presentation, take over again to give an outlook on the current fiscal year. Thank you for now.
Yes, thank you very much, Sebastian. I will continue and share a little bit more color on our financial results. Starting it off with the order intake, it was already mentioned, we surpassed the EUR 2 billion mark for the first time, I believe, in the past 20 years. Growth of 52%.
This was driven by all our major application segments, but clearly the highlight here was material handling with a growth of 118%, the genset business with a growth of 83%, and construction machinery with a growth of 68%. If we look then onto the unit sales, here you can see that we are also a solid growth of 33%. This was more or less evenly distributed between the DEUTZ engines and the Torqueedo engines. Torqueedo was up 35%, DEUTZ 33%, but basically barely a difference here. The share was very stable. If you look on the revenue side of things, you can see that actually we have a little mismatch here. Unit sales up 33%, revenue only up 25%. There are two reasons for that. First of all, in the revenue column, there is also the service bucket.
Service obviously did not grow as strong as the engine business. Secondly, we also had a mixed effect. We sold a lot more of smaller four-liter engines than we did in the previous year. That led to a decline in our average sales price per engine. It was actually down roughly 20% year- over- year. Please keep in mind, last year, 2020, was not a usual year. Also, if you look at 2019, we saw roughly a 5% decline in our average sales price per engine. Nevertheless, we had a very strong year overall. The order intake to revenue figure gives us a book-to-bill of 1.24 times. That led to the fact that at the end of the year, our order backlog more than doubled to almost EUR 680 million. This roughly implies 90,000 engines in the order backlog.
If we have a look at the revenue breakdown per region, you can see that especially Germany, as well as the Americas, were the top regions with more than 30% growth. You also can see that in the Asia-Pacific region, growth was a little bit subdued. There you can, I guess, already see that China was not as strong as some expected last year. Please keep in mind, this does not include the joint venture revenues, as these are only consolidated at equity. The weakness, if you want to say, in Africa and Middle East with only 4% is due to the fact that this region is mainly a genset region, which was our weakest application last year.
Looking on the revenue breakdown by application, you can see, as stated before, material handling with +65%, and the construction equipment with +30% were our two strongest application segments. We are very happy that already our number three position at the service business with almost +16%, service is now 25% of our revenue share, which of course is important for us as it has a higher profitability than the new engine business. Coming to the profitability, you can see that we were able to improve our operating profit significantly by more than EUR 100 million year- over- year to EUR 37.2 million in 2021. Actually, we were able to increase our profitability in every single quarter of the year versus the previous year's quarters.
The main drivers here were, as we already said, the increased volume of business with better economies of scale and also the result of the cost savings we'd implemented. We do also have to say that the absolute payments to a supplier are going to instantly play a small role here. Our EBIT margin at 2.3% is only in the lower half of the upgraded guidance of 2%-3%. Please keep in mind, we started the year guiding 0% EBIT margin. We were able to increase it to 1%-2%, and only in September increased again to 2%-3%. We had a very solid positive development through the course of the year. One more addition here. If you look at the Q4 result, you can see that our EBIT margin declined versus Q2 and Q3. There are two reasons for this.
First of all, we had a rising material cost effect that really hit our bottom line stronger than the other quarters because we could not pass on these cost increases as quickly as possible to our customers. Secondly, we also had a negative effect from our joint venture in China. As stated earlier, we saw a significant decline in the second half of the year, and in Q4, we actually had to book a loss. Still, overall, our net income amounted to EUR 41.3 million, which means that we were able to report an EPS, earnings per share, of EUR 0.34. Now, a quick glance at some of our balance sheet figures. First of all, starting with our R&D spending. As you can see, absolute R&D spending was more or less stable year- over- ear.
The reason for that is that we did not cut any R&D spending in the crisis year of 2020. I expect that this figure will be going forward in the similar range. Of course, what happened due to the strong rise in sales is that our R&D ratio came down significantly to 5.1%. Just as a sidebar, our capitalization ratio was well below 10% in 2021. On the investment side, you can see that we actually were able to decrease our capital expenditure significantly by almost 30%. The main reason here is that our leasing expenditure was almost halved. The PP&E were only down 20%. The main driver here was the fact that in 2020, we built the new line five in Cologne for the smaller four-liter engines, and we did not have a similar investment last year.
Finally, a quick glance at working capital. We're very proud that we're able actually to keep the working capital growth at only 7.7% despite a sales increase of 25%. That meant that our working capital ratio actually declined by two and a half percentage points to 15.7%, a very strong figure and a result of the rigorous working capital management across the group. All these effects now accumulate basically in a very strong cash flow. First of all, if you look at the cash flow from operating activities, you can see that we're able to increase this by almost EUR 50 million. Drivers here clearly, of course, the much better operating performance and also the very efficient working capital management. The free cash flow result was even a tad better, the result here clearly being that we had lower investments, as mentioned before.
Finally, if you look at net debt, also here, a very solid situation. The deviation between free cash flow and the net debt is that we paid back a significant amount of leasing liabilities. Therefore, not everything that we were able to generate on free cash flow is also visible in net debt. Overall, we're very satisfied with the result. Finally, a quick glance at our balance sheet overall. We were able to increase the total assets by roughly 10%, and our equity ratio was stable at 45.6%. You can also see that our leverage is back to pre-crisis levels. After the crisis year 2020, we're now at a net debt EBITDA level of 0.6 times. In a very healthy situation. This allows us basically to finance our organic growth.
It also has allowed us to turn to a dividend proposal of now EUR 0.15, which equals a 47% payout ratio. At least the last time I checked, roughly a 3% dividend yield. Of course, also, we have sufficient financial headroom for potential future energetic growth, although there is no immediate target which we can talk to you about at the moment. If you look at our financial positions, we have basically unused credit lines of more than EUR 200 million available for us. Only EUR 35 million of those have been utilized so far. That ends my presentation on the numbers. I now hand back to Sebastian.
Thank you, Christian. Looking ahead in the guidance, we brought here one overview on, let's say, the global market developments for the current year from the perspective of our end customer or main end customer sectors. You see here in brackets, that's the view as of February 2022. Because we believe that was the last time when we really got, let's say, reliable information. Obviously, we'll come to that later. The impacts or potential impacts of the war and the crisis in Ukraine and Russia, that will certainly be reflected going forward also in these sort of studies. If we look at that picture, we see almost across the board here, quite an optimistic outlook all across our relevant markets, both in terms of sector as well as region. We see particular agriculture, green arrows in Europe, Americas, and APAC.
We have been talking recently to our key customers, and they do see obviously a bit of an impact on Ukraine and Russia. They, on the other hand, see quite strong order backlog in their portfolio. Their statements have been, well, it's quite stable, but we need to watch it carefully. Also in terms of construction equipment, the studies show, and that's what we've been confirmed from our customers, an outlook of 2%-3% growth, 2022 versus 2021. We certainly see that in our order book. When we talk about material handling here, it's always very interesting to see what the rental companies believe and how they act. We carefully observe their statements with conversations, also looking at what they say on their websites.
When you, for example, look at United Rentals or HRC, these sort of companies, they still believe 2022 versus 2021, partially an increase in CapEx spending, 50% or more compared with 2021. That is something we need to, which means we still can support here the positive outlook. China or APAC with the truck business, that is still the red arrow. We already informed last year on this development. We see a slight improvement when we talk to our partner, but we have to keep in mind also the recent information. When it comes to what happens now in terms of COVID in China, there have been quite interesting news this morning, as you all will have seen in the media. Topic already addressed Russia and Ukraine.
Obviously, one of the most important aspects we're analyzing right now is what is really the impact of that war towards DEUTZ. I mean, we are all looking terrified to the overall geopolitical developments. I think there's no doubt on that. Today, we'd like to focus on really the potential business impact. When looking at that, we'd like to structure it into three buckets pretty much. The one is the direct top-line impact. That's not that much for us. We had before the crisis in revenue in the region. I talk about Russia, Ukraine, and Belarus. The majority of the numbers I'm mentioning is Russia, didn't have very much direct business to Ukraine and Belarus. We had a pre-crisis revenue of some EUR 20 million there. We don't even have an own footprint in Ukraine or Belarus.
We have our subsidiary DEUTZ Postock based in Moscow. Also, none of our, so that is certainly something, okay, maybe the direct impact on the revenue side is not that high. What we did immediately when the war started, we stopped the major business with that. When I say major, it's that we said, okay, the local service business will continue for the time being, but also we reduced that to the minimum now. What we also did as an immediate risk mitigation action, we transferred all the majority of money which was on the bank account of our DEUTZ subsidiary in Moscow. We transferred that to Germany. Yeah, we incurred some translation losses, but that's in the region of EUR 1 million. That is nothing which will have a major impact on our profitability. We keep that operation now on a very, very low profile.
Pretty much keep it able to pay their rent and the basics of their salaries. We have 19 employees in that region. That already sort of puts it a little bit in perspective. The second big block is logistics. I said earlier that as an immediate response to the Suez Canal crisis, we moved a lot of our shipping to the railway, to the railroads on the one end. You see that on that slide, the two lines, the transit as well as the Silk Road. We use this for pretty much three reasons. First of all, we produce high-quality engines in Germany, which we sell in China. This is one of the freight reasons, of the reasons why we have logistics here.
The second one is certain parts which we send out of Germany to our Tianjin operations in China for local production of engines there. The third is then bringing certain parts of China into Europe. All of these three routes are relevant for us. When the crisis started, we had 20 containers en route. We stopped immediately. We moved it all going forward, all back on sea freight. Right now, as of Friday, that's the last information we have. There were 12 containers still on the railroads, five towards China with engines, six also parts towards China, and one container from China towards Germany also with parts. Overall, rather limited exposure. That is something which we have reacted immediately, and we can work with that. Obviously, we are affected, as everyone in that situation, by increased transit times and potential higher cost.
The third bucket is the supply chain, the overall supply chain. When it comes to our suppliers in there, we have started, we have increased, we have implemented a task force which on a pretty much daily basis observes the situations and acts accordingly. One example, we have now secured our annual requirement for palladium. We need that on the level of a tier two supplier. You see how much in detail we go into that subject in order to secure our supply chain. We have other issues, for example, like the truck drivers. A lot of truck drivers come from Ukraine, Belarus, and Russia. As you know, the majority of them are not available anymore. We changed the order to other providers. We are not heavily affected by the issue of wiring harnesses. We know that Leoni has a major plant in the Ukraine.
We're not directly affected. We do know that one of our suppliers uses some components from Leoni from that region. Here, we are working together with that supplier to find suitable alternatives. After all, direct consequences for us are for the time being manageable. The indirect consequences are difficult to predict. We will monitor that very, very carefully and act accordingly. Moving on. That brings me to the last point of the presentation, the guidance, the 2022 guidance. We put together our guidance in February, as with the regular schedule. When we put together the guidance, we saw unit sales in the region between 165,000 and 180,000 engines. Another step up from the completed figures for 2021. That translates into sales volume or sales revenue between EUR 1.7 billion and EUR 1.85 billion.
We see here on the one end, the classic number of 16-175, and the green between EUR 75 million and EUR 100 million . With the implementation of the new segment reporting, we are also now in providing principal guidance on this level of the segments. When we look at the EBIT margin for the group, we see a range between 3.5%-5.5%. Here we see increasing profitability of classic 4.5%-6.5%. And green for the same reason stated earlier, high upfront investments when it comes to R&D in particular of minus 30% to - 20%. And free cash flow, we see another step up in the low to mid double digit millions of EUR. Having said that, that was the state of February. That's the best available information we have. We are cautious on that subject because of the war in the Ukraine.
We know that particularly when it comes to the supply chain, we already had in Q4 2021 quite a challenging environment. Now with that issue pretty close to us here, the environment has become even more difficult. The visibility is low, as mentioned earlier, particularly when it comes to the supply chain. There will be, or we expect there will be, price increases for freight, raw material, and energy. Very clear is we're working very structured on passing it on to our customers. There is a time delay in achieving that because of the still high order backlog we have in our books. We have almost EUR 700 million order backlog in the books. That needs to eat itself through the P&L. We need to observe how our end customers and their end customers change or keep their investment decisions in our core markets.
In that sense, we put the guidance under review because these numbers do not yet include potential effects related to the current geopolitical crisis. Having said that, I would like to thank you very much for your attention. Yeah, we are here to answer your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is in line of Charles Friedrich from Berenberg. Please go ahead. Good morning.
Thank you for taking my questions, three or four if I may, and I'll do them all in the beginning. The first one would be with regards to your guidance. Based on what you've seen so far in the first, yeah, couple of months now of the year, are you so far on track to achieve the guidance? It's more about how we move on from here. Connected to that, in terms of the indirect impact, where do you see the biggest challenge? Is there one particular item, or is it rather a whole range of different issues that could become problematic? Also, in the beginning, in your prepared remarks, you mentioned roughly EUR 25 million in additional demands from your suppliers in last year. What exactly was that referring to?
Finally, the outlook for your Chinese JV in 2022, do you reckon it's still going to be loss-making? Thank you.
Thanks, Charlotte. Let me start, yeah, with your first question in terms of outlook or what we see January, February. I can, obviously, as you know very well, we cannot give detailed information yet. That's only sort of an indication. January and February was in line with our planning. That we can clearly say. January was seasonally typical for the season, a bit of a slow start. February, we went actually quite well in terms of production and also margin quality. So far, those two months have been as planned. Looking back at January and February, that's not the reason why we put the guidance on the revenue.
Had we just had the crisis in the Ukraine not started, we wouldn't have put the guidance on the revenue because of January and February numbers, to make it very clear. Now, what is the major issue? At the moment, again, that is really the situation as of now. At the moment, I do not see the major issue from the top line at the moment because we have a high order backlog. We have a lot to do, and we still could sell more if there were no restrictions on the supply chain. That we need to observe. What I see at the moment, and that relates to your third question already, is really the shortages on the supply chain, both on freight, but also on freight costs, but also on certain important components. When I mentioned the EUR 25 million, these were demands from our suppliers.
I think I mentioned clearly that these were demands which we obviously did not accept. We have here also a task force in place carefully evaluating what kind of demands we must consider because we also do not want to endanger our supply chain. The major issues are pretty much from those suppliers who have a high load of energy costs in our forgeries, for example. That is certainly the biggest issue related to the EUR 25 million. Now, when we come to the uncertainties going forward, it is really, are there any sort of surprises for us on tier two or even tier three with components which are beyond our control? That is something, yeah, that is mainly supply chain, to cut a long story short, is the major concern which we see at the moment.
Again, we will evaluate the situation very carefully over the next four to six weeks. Last question related to China. At the moment, we expect our joint venture to be slightly positive, only slightly positive. As I said, we saw first lights on the horizon when it comes on volumes. Again, with the current COVID developments in that country, we also need to see. I hope this answers your question, Charlotte.
Thank you. One follow-up, if I may. The 25 million, would that be the cost increase on an annual basis, or over what period of time would that have been?
This was not a clear cost increase. These were demands which the supplier stated towards us. By the end of the year or the beginning of January, the sum of that was 25.
I think we can fairly state that it's roughly equivalent to an annual demand from those suppliers. Again, we didn't give them all of that. Also, this number is increasing, and we expect this to increase.
Understood. Thank you very much.
The next question is from a line of Dr. Jorge González Sadornil from Hauck Aufhäuser Investment Banking. Please go ahead.
Hello. Good morning. Thank you for taking my questions. My first question will be around the cost savings that you were expecting last year for 2022. If I remember well, they were around EUR 40 million-EUR 50 million. I know one third of them were related to cost savings in raw materials. How do you see these cost savings being achieved during the year? Are they going to be completely compensated by the negative impacts, or what are you expecting regarding this?
Although you have already commented on China, I don't know if you can give us a range of the production that you expect for the joint venture and then a little bit more color on that. Maybe regarding the backlog, the 90,000 engines that you commented, can you confirm how many months of your sales are already in this backlog included? I imagine that not all the aftermarket sales that you expect for the first part of the year are going to be included in the backlog. How much of the year is already included in this backlog, please?
Okay, Yoga. This is Christian. I'll start with the cost savings. We had accumulated cost savings of roughly EUR 40 million after 2021. That includes also the savings we had in 2020. That was roughly EUR 12 million at the time.
Another close to EUR 30 million came on top of that last year. Of course, we expect further cost savings this year. As you can also see in our, let's say, initial margin target guidance, we expect the margin to expand significantly over last year. As we have to, yeah, put our guidance under review, of course, we cannot say today what exactly the effect is going to be. Clearly, without the Ukraine, the expectation would, of course, have been that we would see additional positive results for the margin from the cost of activity this year as well.
Let me just add one topic also. Yes, that is the plan. In the light of this whole inflationary environment, obviously, we're working again to pass on cost increases to the customers.
On a net basis, this will be at the end of the year when we look back at cost increases as well as price increases. We will come more towards a grossing situation because when the targets for the cost savings programs were defined, that was in a year or in a time where there was hardly any sort of general price increases considered. That is something which I believe all the industrials have now to reassess. That is not by no means saying we're not going to be successful in concluding the cost savings. I'm just saying the whole effect of what is net, what is gross, we have to reassess because we see a shift upwards on both cost and revenue side. Regarding China, what we currently see is production volume between 20,000 and 30,000 units in the joint venture. That is the current plan.
Yeah, we'll follow up on that as soon as we have first quarter numbers here completed. Your third question related to the order backlog, it's roughly, on average, roughly seven months of order backlog. There are some KLUs, that's what we call our sort of lowest defining unit of an engine, which have an order backlog of a year. Others are much shorter. On average, it's seven months. On the service side, we're not that high. It's usually a bit more than a month because the business turns much, much more quickly.
Okay. Thank you, Sebastian. Two quick follow-ups.
Regarding the negative margin that you expect for green, is it related to Torqueedo, negative profitability, or is it because you are ramping up some new projects for the green division, like the product that you saw us in the capital market day? Finally, regarding the dividend, this number that you have proposed, it looks like a message to the market now because it was the previous dividend in the past. What about 2023? Is it going to be more important, the 30% payout, or this reference of dividend?
Yeah, Yoga. First of all, coming to your question on green, it's right that the majority of the expenses which bring the margin of green so significantly below zero, that's related to R&D for our new project. Relating both the hydrogen engines as well as the electrification projects we have here.
To give you a rough number, we currently foresee a number of R&D expenses of between EUR 8 million and EUR 10 million on the hydrogen system as well as EUR 10 million on the electric system. That is quite a lot of that. Torqeedo is around break even. That does not really have a major impact here on the negative profitability of green. Your second question regarding dividend, yes, on the first glance, the payout ratio, 47%, sounds quite high. We intentionally did that because in 2020, we did not provide, we did not pay a dividend for 2019, although 2019 results were very much favorable of doing so. Back in that year of 2020, the COVID crisis just took off.
It was from the management in charge at that time, the right decision, I would also say, from today's perspective to suspend the dividend in order to first evaluate what is really the full impact of COVID on DEUTZ. We are trying to sort of do that now and to pay something to the shareholders, which we believe was due already a couple of years ago. In the future, as you said, or as your question implied, we want to grow the dividend. We want to grow the dividend not by keeping that high payout ratio, but by going to the 30% payout ratio, but with the underlying of a stronger operational performance. Very clearly, that should be the return of DEUTZ to be a strong dividend payer as well.
Thank you very much.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one on your telephone. The next question is from a line of Richard Schramm from HSBC. Please go ahead.
Yes. Good morning, gentlemen. First question would be on China and not on the joint venture with SANY. You elaborated already on this, but your own activities and the activities with your other partners, can you shed a bit light on how these are developing in the current environment? Do you have also here a delay in business performance and what results you have achieved in these cooperation agreements and your own activities there? Thank you. That would be my first question.
Thanks, Richard.
In our, let's say, beyond the joint venture, in our operations in Changjing, we are for this year foreseeing to produce between 8,000 and 10,000 engines, particularly smaller for little. This is running according to plan right now. What I really believe now is that with the geopolitical changes, we see that it's going to be very much China for China and Europe for Europe and Europe for America. I do not expect, let's put it in that words, that from what we produce in China in terms of engines, there won't be a lot of engines being sent to Europe at the time being. It will mostly remain in China. There is sufficient demand. When I say 8,000 units-1 0,000 units, you see that is already not a very high number there. We don't have a high dependency there.
What we do see still is certain key customers, particularly Terex and JLG. These are customers which we globally serve from our key accounts from our U.S. operations. They do also have Chinese operations and Chinese demand. We do send some of the, particularly the 2.9 and the 2.2-liter engines from Cologne to China. There we see pretty much no shortage of demand at all at the moment. It is more the opposite. You catch me here in a cautious way. As said throughout the presentation, we need to really keep a close eye on what is the development over there. One thing is also very clear. China remains an important market for DEUTZ, but it is not the only market for the future. We are standing here on several pillars. Our standpoint in Europe and the U.S. is very, very strong.
We want to keep, we want to be in China because it's an attractive market, but we do not say that we depend on China.
Okay. Thank you. My second question is on the ability to increase your own selling prices. In your press release, you state that, yeah, in fact, you are always a bit, let's say, running behind the actual development and that your backlog at the moment, obviously, has not a satisfying margin level, which would compensate the higher prices you are paying on the material side and logistics side, etc.
What prevents you from catching up with the current development and not staying behind the curve, but maybe being a bit proactive and, yeah, being at the end of the day a bit more aggressive in your pricing with your customers so that you do not run the risk of being squeezed here on the margin side?
Oh, it's a very good question. The answer is very clear. First, let me start with the facts. We did run a couple of price increases, one as of July 1st last year, another one as of January 1st this year. To be very honest with you, I believe it took us too long. We needed a change of mindset to be more aggressive. That's exactly what we're implementing right now.
We are in a situation—we need to be very clear on that—where it's not the question about how is the justification for a price increase. The question is more, what is the number, the percentage, and so on. That is something which I can tell you very frankly, DEUTZ hasn't been very strong in the past, sometimes being a bit over-aggressive. I think so that hasn't happened. Often, in our environment, we as a company, we're used to being very concerned about losing customer, losing volume. I'm not saying it's wrong. It's always been important. It's always important to be cautious on your base. On the other hand, it's very important to react immediately when you see there's an opportunity out there. There is an opportunity out there. There were already opportunities last year. We were a little slow.
We're catching up on that right now. To be very specific, what we're doing right now is to address systematically our key customers and confronting them very clearly with the impacts we see on our cost base, particularly from energy prices. That is something you can explain very easily, and people will understand. I'm not saying it's easy to incorporate this, but that is one of the focus points we are already putting much more pressure on since the last four weeks.
Okay. Good luck with that. Final small question concerning this effect on the deferred taxes last year, this EUR 22 million-EUR 23 million, where you obviously capitalized on losses carried forward. What is precisely behind this step that you made this decision and which pushed up your tax position here?
Oh, yeah.
I would call it more like a technical point because when you describe or when you define the value of the Latente Steuern, of the deferred taxes, you look at the next five years of your business planning. In the last year, when the accounts of 2020 were closed, the five years of the business plan were 2021, 2022, 2023, 2024, 2025, with at that point a fairly weak outlook in 2021, which was pretty much break-even. Now, this weak year has been taken out of the planning. As we explained today, it is replaced by a middle strong year. Now we are planning 2022, 2023, 2024, 2025, 2026. The weak year has been taken out, and the stronger year 2026 has been taken in. That has an impact on the book value of the deferred taxes.
That is exactly the reason why we have that impact here on the accounts. We went in with fairly conservative assumptions, to be clear on that. It is not a—we do not use that as an instrument to boost balance sheet value. We do not need that. We have a high—we have a high equity ratio, so fairly stable. That is the explanation for this mere technicality.
Okay. Thank you.
There are no further questions at this time, and I would like to hand back to Christian Ludwig for closing comments.
Thank you very much for listening to our presentation and for asking questions. If you have any additional questions, please feel free to call the investor relations department. We will be at your service. We will be back in the first week of May with our Q1 results and hope to talk to you by then again. Goodbye.