Good afternoon, ladies and gentlemen. This is Christopher Helmreich, speaking of Wacker Neuson Investor Relations. Thank you very much that you've dialed in, and welcome to our Q1 earnings call. Today with me in Munich are Kurt Helletzgruber, CEO and CFO, and Alexander Greschner, CSO of Wacker Neuson. Over the next 10 to 15 minutes, we will present the results and highlights of Q1 2021 and provide an outlook for the remainder of the year. You will have the opportunity to ask questions right after the presentation. Please note, the entire call will be recorded. You can find the slides for the call at wackerneusongroup.com/investorrelations or in the webcast. I would like to hand over now to Mr. Helletzgruber.
Good afternoon, ladies and gentlemen. This is Kurt Helletzgruber. I would also like to welcome you to our Q1 '21 conference call. I would like to start with our Executive Board update. In our last call, I already informed you that we believe in Mr. Tragl, we have found the ideal person for the position of CEO and Chairman of the Executive Board. I'm happy to inform you today that Christoph Burkhard will be assuming his new role as CFO alongside with Mr. Tragl as CEO on June 1st. I'm absolutely convinced that they will, together with the entire executive team, bring our group forward in many respects. Mr. Burkhard has a lot of international experience with outstanding expertise in financing and execution of global transformation processes, and he has already proven his ability to successfully manage working capital in a rapidly expanding global engineering company.
It's also a very important area for our group. Most recently, Christoph Burkhard served as CFO of the Nordex Group, a listed company with around 9,000 employees and one of the world's largest manufacturers of wind turbine systems. Prior to this, he spent 18 years at Siemens AG working in various positions, including CFO for the company's global offshore wind business. With the arrival of the two gentlemen, the Executive Board team at Wacker Neuson is complete, and I will return to the supervisory board as planned already last year. I've enjoyed my time on the Executive Board very much, and I've had the chance to work with many of our company's great employees. Together, we have driven forward a lot of changes, and I would like to thank everybody very much for the fantastic cooperation. To get further to our Q1 figures.
We are very pleased with our first quarter results and the strong start of this year. Sentiment among our customers continues to be on a very high level. Given the positive development in our target markets, our revenues increased by 5.6%. We are particularly proud of the rise in profitability that we saw in the first quarter. Gross profit increased, thanks to a good product mix with a strong service segment and improved productivity at our production plants. Secondly, our operating costs were well below the previous year, and also our fixed costs are on a much lower level today. Consequently, EBIT rose by 50%, the EBIT margin reached 10%, which is, for a first quarter, a quite remarkable figure. Our net working capital is still well under control. We are close to our strategic target of 30% or lower.
Free cash flow came in at positive EUR 10 million in the first quarter. Supply chains at the moment, the only negative point, are currently the largest area of concern for us. Demand from the market is high, and topic issues such as pandemic-related restrictions and the blockage of the Suez Canal are resulting in recurring bottlenecks. We have to be extremely flexible with production to ensure we don't miss out any manufacturing slot. The situation is further compounded by price increases for raw materials. You have heard all this from my colleagues in the car industry and so on. What we at the moment try, we don't want to close down one of our factories like some of the car manufacturers do it for one, two, or three weeks due to shortage of material. The next slide, I would like to hand over to my colleague, Mr. Greschner.
Good afternoon from my side. This is Alex Greschner. I take you quickly around the globe here with this slide. Overall, we look back into first quarter with positive results in all regions. Starting in Europe, we reported a strong growth, specifically based on a very dynamic development in the DACH, as in Germany, Austria, and Switzerland, but also Netherlands and Belgium region, Eastern Europe, and in the U.K. In particular, we did well on excavators, dumpers, but also in the light equipment field of compaction equipment. I would say specifically regarding the service businesses, which play a major role in our direct markets in this Western European region, we could continue our trend from last year in the rental and rental sales operations and also the aftermarket business, including spare parts. We had sales recorded above average gains.
Our strategic approach there is, I think, bearing fruit, because there we look into a real sustainably strengthening of these services. Also to mention in our agriculture world, where you may still remember last year, first quarter, we had an extraordinary strong development with more than 20% growth compared to 2019. Still based on this strong quarter, we could again increase sales by 9% in 2021. The Americas, you look here on the slide on an 11% nominal decrease in revenue. If we correct the FX situation, this represents minus 4%. If you would have seen January, we would have been a little bit more pessimistic, but February, March was already a catch up and the order intake and backlog is promising that there is the trend into the right direction, and not only in revenues, but also in profitability.
We had three months in a row with a positive result in the first quarter, which is, I would say, with our history, well, not new, but it was not the situation in the last couple of years. This profitability, we consider it really sustainable as it's basically most on a much lower cost base as we started into this year. I would say on a small base, but with a big jump, was Asia-Pacific. Last year, Asia-Pacific represented 2% of our group revenues. Now it's 4%. It's still, as I mentioned, a low base, a small base, but this goes back to an increase as well in China and in Australia, New Zealand of more than 100% compared to last year. China has to be seen a little bit relative, as we all know that March 2020 was already a COVID month in China. We did increase.
The market inside China is as challenging as it was. It's extremely competitive, but we also started a very good approach, I would call it, into the export business out of our Chinese factory, which is a good, and I would call it, again, sustainable growth. In Australia and New Zealand, we could win a number of new dealers. This is the base for our compact equipment business, and we also entered Australia on the agricultural business in our partnership between Kramer and John Deere. All this contributed to a, well, plus/minus doubling of the revenue figures. This I would hand back to Kurt Helletzgruber.
On the next slide, we can see, as already mentioned, our net working capital is well under control. The net working capital ratio is significantly lower than the prior year, level at around 31%, which is almost our strategic target of 30%. Our investments in Q1 are still below the planned target. However, this is mainly due to delays regarding the investments in our plants, and we still plan CapEx of the year in the range of EUR 100 million-EUR 110 million. You have certainly noted that our cash flow from investment activity is impacted by a fixed-term financial investment of EUR 100 million. It is a fixed-term deposit which we had to negotiate with the bank. The reason for it is there we don't pay negative interest rates, which is already, in our days, quite a success.
The net financial debt to EBITDA is 0.5. Here we feel that we are in a very solid and comfortable position. The next slide we will show you about our share program and about our dividend. We are proposing a dividend of EUR 0.60 per share to our shareholders for the past year. The reason we have suspended the dividend last year against the backdrop of the coronavirus pandemic, this year's payout ratio is well above our longstanding dividend policy of 30%-50% of net income. If you combine 2019 to 2020, we arrive at a payout ratio of 41% with the proposal we have made. I think that in the range with our dividends policy. As you know, we also have launched a share buyback program, which started in April.
We intend to buy back our own shares up to a volume of EUR 53 million. No more than 3.5% of the share capital. These shares are to be used primarily as a possible acquisition currency or to service any participation programs for employees and/or members of the executive board of the group. The next slide, we will show you some of our corporations, and I will give back to Mr. Greschner.
Yep. This is zero emission. Zero emission is something you know from the previous calls. As we announced already in our March communication, we try to really develop zero emission now much faster, much further than we did in the last years. That means, based on a five- and 10-year scenario planning, we have set up now teams and technology groups to really be able to install and push the product development. But not only this, but also all the governing and supporting services that we need to really, let's say, push up the zero-emission sales and profitability in our markets. A very important step that is written in the center of this slide is a cooperation with Bomag. You may know from our industry that this is one of our major competitors in the light compaction equipment, specifically in Europe and Americas.
We decided to open our battery platform to this competitor or to this manufacturer, as we also will do to others. The background is clear. You all know, I'm sure, from the gardening tools and other tools you buy in Hornbach or Bauhaus, that there is a big battle between all electric tool manufacturers, and we try to stay, let's say, in the lead here, being the first one that brought up this product on real job sites three, four years ago. By including our competition on the same standard, we are convinced that this will create really, on one side, a very big customer value that will accelerate also the increase of battery-powered products.
On the other side, obviously, we also want to make sure that we are sustainably implemented with our technology, that we are not exposed to other, let's say, battery-focused manufacturers that enter our business based on their battery experience. We are still and will be the leader here in soil compaction and concrete compaction products. I would go into the benchmark, I think. That's it?
That's it.
That's it.
That's it. Let's come to our outlook for the year 2021. As you can see here, we have almost in every field for the outlook, a fantastic basis. Our first quarter has been exceptionally successful. We are back on our growth path, and we are seeing a sharp rise in profitability, too, which is sometimes more important than turnover. This has given us an excellent foundation for achieving our goals for the year. You can see here our order backlog significantly above prior year's level as the business climate in construction is a record high value ever since in 2009. Sentiment in agriculture sector in Europe has risen to its highest level since 2011. I have to come back to our uncertainties. I already mentioned that our main concern at the moment is the state of the global supply chain.
In addition to the general increase in demand, we are seeing significant price increases for raw materials that are important for us, such as steel. If you look at the commodity index, it went up by 52% in the last year. If you look at all the commodities, it's a dramatic figure. If you look at steel, for example, the price doubled in the last few months. Considering all these points, we have decided to leave our guidance for fiscal 2021 unchanged. Ladies and gentlemen, the first quarter has shown that our working on internal issues has been successful. I am firmly convinced that we will continue on this path and achieve the goals set out in our strategy. Thank you very much for your attention. We are now open for your questions.
Thank you, Mr. Helletzgruber. Thank you, Mr. Greschner. We're now going into the Q&A session. I would like to ask the operator to give you a short introduction. Thank you.
Thank you for heading back. We will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. We have a first question. It's from Jonas Blum, Warburg Research. The line is now open for you.
Good afternoon, and thank you for taking the questions. I got three, please. Firstly, around the strong momentum in your services and aftermarket business. I was just wondering if you could elaborate a bit. Do you see this as a sustainable trend, or is it also perhaps driven by some catch-up effects following the latest recession in 2020? Because you also mentioned the sell-off some of your rental equipment. That's basically the first. The second, around your Americas market. Just very nice to see momentum picking up here again. Just wondering around your working capital protection here. Do you see a chance to increase the existing financing facility? Could you also just remember or to remind us to what extent you have currently used the existing facilities in place?
Just finally, given your strong EPS momentum in Q1, could you also help us with regards to the moving parts in your financial results, given that it was quite balanced in Q1, especially given the positive foreign exchange effect? Thanks a lot.
Okay. This is Alex Greschner. I would take on the first question regarding services. Two pillars of the service development. The first one is based on our rental fleet. As you mentioned correctly, we have had tremendous use of our rental fleet last year where, let's say the risk appetite of investments was postponed into the second half of 2020. During this first period, we were able to, let's say, feed our customers with rental products, but also with rental purchase opportunities, so people could buy out machines from our rental fleet, which was extremely attractive. Let's say this is something we keep on doing. It means we are turning our rental fleet as well this year. That doesn't mean we are shrinking it.
We do not want to reduce our rental business in general, so we are feeding into the rental fleet permanently, by also selling off machines on a very nice, profitable level. The second pillar is the parts business. I think there it is a natural growth, based on the improving setup we have since two years now. You remember, maybe from before, that we had difficulties in providing the right service level. All the logistics and stuff is done. That is a good base. We have moved a lot of our customers, especially key accounts, international large companies, on our online parts platform. Which gives a lot of convenience to these customers to buy parts directly through us and our channels, and this again, is a high bond of these customers and is, again, I would call it a sustainable impact that will stay on.
Yeah. Second question is Americas. For last year, we had a horrible year in the U.S. This year, we really picked up quite well in the first quarter, and we see a very positive trend for the rest of the year. As far as our financing line is concerned, you notice that we have this ABS finance program, which we use at the moment. It helps us a lot. It boosts our sales. It is a necessity for the U.S. market. At the moment, we have EUR 150 million line. We, at the moment, negotiate to increase this line for 2022 and further on. Up to now, we used almost around EUR 90 million out of this program for our financing. The financial result was your question in the Q1. I mean, the positive effect in Q1 resulted almost 100% from a stronger U.S. dollar.
Very helpful. Thanks a lot.
Our next question is by Stephan Bauer, Metzler. The line is now open for you.
Hello, everyone, and thank you for taking my questions. I have several. Firstly, to what extent can you actually pass on higher raw material and transportation costs to your customers? Secondly, would you have to pay some sorts of penalties in the event that you're unable to meet delivery dates, given the strained situation and global supply chains? Last part would be on electrification/emission free products. Could you comment on the expected revenue share of electrified products over the next three to five years, especially given the ambitious goals set out in the EU's Green Deal? How would a higher revenue share of emission free products actually affect your margins? Thank you.
On the first question regarding, I would call it pricing. I'm Alex Greschner, sales. I'm responsible, yes, to forward as much as possible of the incoming cost and, as it is, let's say, a global situation that we are facing here, it is possible to pass on. It is, how to say, in some areas, delayed as we have an order backlog, but even there, customers are willing to accept the increases because it's, as we said, an official global situation where also our competitors are in the same position and try to push prices. Regarding penalties, so far we didn't face this. There are obviously certain contracts where we could, but it's a very minor level. Again, we don't think that in Q2 or 3 we will get into a situation where we face such a problem, due to deliveries or delays.
The last question on electrification. We have set up two scenarios. We have set up a conservative scenario and an aggressive scenario for a five- and 10-year term. Again, it's a difficult question to answer because, again, if you speak about tools and small light equipment, we see shares that get rather fast into two-digit number of revenues. In 2030, that area, we think about parts that are close to half of our revenue on light equipment. On compact equipment, the development isn't as fast because still the price difference or cost difference compared to conventional machines is quite high. If you're a customer of ours, you have always different options, let's say, to get your CO2 balance under control. You can buy certificates, or you can buy machines, or you can buy CO2 neutral fuel.
It's pure calculation right now, but I can tell you that the machine prices are getting close to the other alternatives. We also expect there an improvement. We are not planning to do this by sacrificing any margins compared to the regular business.
Let me add a few words to electrification. It's a new field for all of us, and the main point is it doesn't only depend on us. It will depend on the different regulations we will see in the different countries. Of course, there will be a big difference between China and Europe. Even in the European countries, you will find different regulations, and the U.S. is again different. It's very difficult at the moment to predict the figures for the next three to five years.
Okay. That was very helpful. Thank you.
Our next contribution is from Charlotte Friedrichs Berenberg. The line is now open for you.
Hello. Thank you very much for taking my questions. The first one would be around the sort of monthly phasing that you had in the first quarter, and apologies if I missed this during your prepared speech, but can you give us an idea of a month-by-month basis how the order intake and revenues developed in the first quarter? Secondly, how you see this already progressing in the second quarter now. The second, sort of, third question, sorry, would be around raw material prices and to what extent you have already increased prices so far. If you can share with us the magnitude, please.
Okay. Your first question on order intake and order backlog. We can say both is at the highest level that we have ever seen in the company. The order intake, if we take Europe, it's in the high 2 digits. If we take the Americas, it's in the high 2 digits. If you take Asia Pacific, it's in the 3 digit increase compared to prior year. This is also, and as far as we know, continuing. That brings me to your second question. After a first increase in prices with effective January, we have done a second step in March. Even we have done now two times, between 2% and 3%, we didn't see a break or stop or impact on the order intake so far. This is what we did on pricing and how the order intake reflects at this point.
I think we missed out one question. Charlotte, could you please repeat that one?
The raw material price? We didn't get the question.
Sorry. The question would be, I think you half answered it already with the price increases, maybe as a follow-on.
Yeah.
Are you seeing raw material price pressure becoming even worse now in the second quarter? What's your expectation going into Q2 and Q3?
Our expectation is it's a very difficult question, but at the moment, we still see an increase. We would say in the third and fourth quarter, we will find the drop again. That's our expectation for this year.
Okay. Thank you very much.
Thank you.
As a reminder, if you want to ask a question, please press zero and one on your telephone now to enter the queue. There are no further questions right now, so I hand back to the moderator. Thank you very much. Yeah. I'd like to conclude the call. Thank you very much for dialing in. Have a good rest of the day.