Good ladies and gentlemen. Welcome to the Conference Call of WashTec AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Dr. Ralf Koeppe, who will lead you through the conference. Please go ahead.
Thank you very much. Ladies and gentlemen, on behalf of the WashTec board, with my colleague, CFO, Dr. Kerstin Reden, and CSO, Stephan Weber, who are attending with me the call, I would like to welcome you to the Q1 Presentation 2022. Next slide, please. Before my colleague, Kerstin Reden, will present our Q1 figures, I will give you a short news update on WashTec. Finally, we will have the Q&A session with the WashTec board. Next slide, please. Let me summarize our business model to take everybody on board. WashTec is the leading provider of innovative solutions for car wash worldwide. Our product range comprises all type of vehicle wash equipment, as well as the associated peripheral devices, wash chemicals and water reclaim systems. As specialists in environmentally friendly vehicle wash system, we work continuously on innovations that contribute to sustainability and mobility for today and tomorrow.
WashTec also offers comprehensive servicing packages and digital smart service solutions spanning the entire product life cycle, including equipment maintenance, chemicals, equipment take back, financing arrangements, and operator management. Furthermore, let me provide you with an update on impacts of the war and the COVID lockdowns in China on our company. The supply chain situation remains tense, as already indicated at our last earnings call on March 31st. Things are unchanged, and for this reason, we have not prepared a slide. The situation requires constant efforts to secure the supply chain with highest priority. We currently observe a reduced efficiency in our plants because of this issue. Slide four, please. Some update on our CO2 footprint, including reduction goals. Our carbon footprint represents the countries Germany, Czech Republic, the U.S. and China, and totals 7.2 tons CO2 emissions per year.
These are the countries where we operate plants. The consumption covers all operations, including service. Our goal is a 30% reduction in CO2 emissions per EUR 1 million turnover in our business activities by 2025 on the basis of the year 2019. In other words, 13.1, 3.7 tons per EUR 1 million in CO2 in the year 2025. In total, we have already achieved a 14.9 reduction in our total CO2 emissions since 2019 per year. Further steps within the next years comprises systematic data collection, including our national subsidiaries in countries without production footprint and the inclusion of step three emissions. Slide five, please. Of course, this and other topics concerning economic, environmental and social sustainability will be discussed in detail in our first standalone sustainability report to be published in Q2 this year.
Next slide, please. After two years of lockdown, the UNITI expo, the leading European trade fair for the retail, petroleum and car wash industry, is opening its gates on May 17th in Stuttgart, Germany. Under the motto, mywashtec, Green Car Care, Digital, Sustainable, Successful, we are going to present our innovation and product program, including wash equipment, chemicals and digital services. In case you are nearby, don't miss a visit. I now hand over to Dr. Kerstin Reden, CFO of WashTec, to present the Q1 results. Thank you. Next slide, please.
Thanks, Ralf. Hello, everyone. We made a very good start into the year. Group revenue was up 19% to a revenue level of EUR 101 million. This is one of the highest revenue figures for a first quarter in the company's history. We have a very good business momentum across all segments. All segments grew double digits. A very strong performance came from ClearCount business in the U.S. Compared to prior year, machine revenue from ClearCount more than doubled. However, please note that the prior year quarter still showed a significant reluctance to invest as a result of the pandemic. From an EBIT perspective, we saw a step up of 31% up to an EBIT level of EUR 4.6 million. This improvement is the result of the strong revenue performance, which was mainly volume-driven. Cash flow was lower than last year.
Mainly, main reasons were increase in inventory, higher tax payable, and also higher capital expenditure. Moving on to the next slide. Here you see the Q1 development of revenue, GP and EBIT over the last three quarters. As mentioned, we had very strong revenue performance. GP was impacted by higher costs and also inefficiency in production. Due to shortage of materials, operations had to interrupt the production flow to wait for supply. This explains also the higher inventory level. In addition, more workers were needed to assemble and manage the parts. As already mentioned, EBIT increased 31% to EUR 4.6 million, driven by the higher top line, higher GP. You might have the remarks that you would expect EBIT to be higher at such a high revenue level.
However, apart from supply chain related issues, we also faced higher OpEx, in particular higher travel costs, higher energy and vehicle costs. In addition, we spent more on R&D to drive innovation and also to support operations in securing supply to the customer. From a product performance perspective, next slide. Revenue from machines and service increased 90% or EUR 30 million. Chemical was up 23% or EUR 3 million. The Sahara dust helped here quite a lot to generate this exceptional good result in chemicals. We already highlighted we had a very strong growth in key account business, in particular in the US. Nevertheless, also direct business and service grew double digits. Direct business here from a higher base. Despite the difficult geopolitical and economic environment, orders received remained stable in the first three months of the year.
The figure through to the end of March was at the same solid level as the prior year. The order backlog was significantly higher at the end of the first quarter compared to prior year. Continuing with the regions. All regions contributed to the revenue growth. Europe showed a step-up, a revenue step-up of 12%, the US of 58%, and Asia Pacific of 30%. Europe delivered an EBIT of EUR 4.4 million, up 16% year-on-year. The growth in the US relates in a significant part to key account business from the order backlog, that is from orders placed before we raised our own pricing. At the same time, we had to take on more people to assemble and install the higher amount of machines.
In addition, OpEx was impacted substantially due to higher travel and higher energy and higher vehicle costs in particular, and also some extra costs. In the US, the result was in line with our expectations. We have increased our own pricing, but due to the fractional approach and, due to the backlog, we will only see the effect step by step over the next quarter. Asia Pacific delivered good results. Revenue and EBIT were both up compared to prior year. As a summary on the next page, the EBIT bridge. The improvement in EBIT can be referred to the volume driven increase in revenue. We saw a negative impact from material price increases on GP of approximately EUR 2 million or 3% of cost of goods sold. Selling expenses increased as well, mostly due to higher outgoing freight and higher travel.
In addition, as already mentioned, we spent more on R&D. Regarding cash flow, please go one slide down. We delivered a cash flow of minus EUR 5.8 million. Main reasons were the increase in inventory, higher tax payables and higher capital expenditure. The significant increase in inventory relate to raw materials and work in progress, both caused by the supply chain disruptions. Net operating working capital increased relative to December last year and relative to March 2021. This increase was driven again by supply chain issues. However, KPIs such as DSO and DRO improved relatively to the prior year quarter. Equity increased to EUR 101.4 million at the end of March 2022. The equity ratio was at 36%. This is slightly lower as the ratio at the end of the last year due to higher total assets.
Coming to the last page, our guidance. Our guidance remains unchanged. Revenue is expected to increase up to 9%, and EBIT is projected to be between EUR 45 million and EUR 48 million. This guidance assumes that we do not face significant interruptions in the supply chain and other major ramifications from the war in the Ukraine. As a summary, Q1 was a very good start into the year. In particular, the strong revenue performance confirms that we are on the right track to reach the EUR 800 million revenue mark in 2030 by continuing to execute our strategy. With that, I would like to thank you for listening and hand over back to the operator to open the Q&A session.
Thank you very much. Ladies and gentlemen, 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 is your turn to speak, you can dial zero and two to come to your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Alexander Galitsa, H&A. Your line is now open.
Yes, thank you very much for taking the question. Firstly, maybe on the pricing, higher prices for your products. It's definitely good to see the top line being so strong despite the fact that you mentioned that hardly any price effects have been in Q1 realized. The question is that at least my understanding was that at least for the direct sales related revenue, that you will be able to see already prices having an impact in Q1. I was just wondering why that wasn't the case yet.
We do have positive price impact. However, the effect is immaterial and offset by some negative mix effects. That's why I didn't particularly mention it. You are right, we have some small numbers from the price increases in direct business, chemicals and services one.
Okay, understood. On the gross margin, now from today's perspective, looking into the remainder of the year, I think it would be helpful to understand kind of the expected dynamic that you foresee in terms of higher selling prices on the one hand, and then input costs on the other hand, and how that should impact profitability as we go into the next nine months of the year. Maybe the question I have is, based on the kind of price increases that you have implemented, while also taking into account sort of the part of the backlog that is still with fixed pricing, how much higher average sort of realization price would you expect in the remainder of the year relative to what you have seen last year?
All together, at the end of the year, we expect to see a price increase of 2%-3%, same as I said last time. However, we expect in the end that we can offset the material cost increases. However, given the latest round of increases, it might be 2023 until we have the full offsetting of both price increases and cost increases. We are working on that. We just reviewed our pricing again and decided on actions to be taken so that in the end, that we can offset the increases by our own higher pricing. 2022 might be, or probably is, impacted a bit.
Okay. Sort of on the net basis, I mean, you mentioned in Q1 you had 3% increase in cost of goods sold through higher prices, which wasn't offset by your higher prices. For the next three quarters, basically, you could also foresee sort of some no negative effect or slightly negative, or do you still have even room to, yeah, to see sort of a leveling off, but not entirely, that you kind of come out as net zero?
Our hope is to come out to net zero at the end of the year. However, next quarter will still be probably impacted. As you rightly mentioned, we have a strong backlog and also the gradual approach. Next quarter will still be impacted.
Okay. Understood. Maybe just building up on that, could you explain why Q2 2021 gross margin was that high. I mean, you mentioned in the report that it is due to higher revenues and structural improvements, but it almost looks like there's an outlier with 33%.
Yeah. Q2 2021. You're talking about Q2 2021, right?
Yes, yes.
Yeah. Here we had the effect from all of the restructuring taken. You are right. We had a lower level of people as we have now. At the moment, we also have more people, for example, in production because of supporting with the supply chain disruptions. All those issues we didn't have at that time. We also have kind of a normalization in OpEx at the moment, so travel costs normalized and cost increase. We also have inflation in other areas. In Q2, you couldn't really see an impact from the price increases. There were already price increases in chemicals, as far as I remember. At that time, we also had a lot of efficiencies that we could realize and where we could offset the price increases.
Now chemicals further increase in prices and so then you have an impact.
Okay. Maybe lastly on order intake backlog dynamic, you mentioned that the order backlog was higher, significantly higher year-over-year. At the same time, orders received remained stable on the sales level of last year. Can you put this stable orders received in Q1 into perspective for us? Does this indicate to you some demand softening, or is it rather due to the high comparable base? I'm just wondering whether you're happy with the orders in Q1 you received, or were you really hoping for a better performance there?
Yeah. Hi, this is, Stephan Weber speaking. I mean, it has to do with the high level that we had in Q1, 2021. Overall, the order intake that we see, I mean, we always have a mix of, key account and direct business, and the order intake that we see this Q1 is very high as it was last year, also very high. Last year we had a catch-up effect, we had, you know, due to the corona in 2020. We are very pleased with what we are seeing now.
The fact that we have still a super high order backlog has to do with the fact that we already reported by end of the year that we have already carried forward such a very high order backlog with significantly higher to whatever growth we have ever seen in this company. We are just maintaining that level, which is very pleasing at this level. We are not diluting anything of that high level. We are still able, despite having a significantly higher revenue for the first quarter, we are still maintaining a very high order backlog.
Okay. Would you be able to confirm that, in last weeks of Q1, you haven't seen any change in demand dynamics from customers?
Yeah. I can absolutely confirm that because it's actually a very fair question from your side, because we also had, as I described during the investor conference, we are working very much alongside our funnel analysis, you know, where we in CRM look at the funnels, and we had a prediction for Q1, and we actually nailed it, I have to say. I mean, what we saw is what we got, which was very pleasing with all the disturbances that we saw in due to the Ukraine situation and Russian war. We were slightly concerned, let's put it this way, that this has maybe also an effect on the investments taken by in other countries.
What we saw by end of Q4, in other words, our forecast for Q1, was spot on, I would say. I mean, we didn't see, of course, the order intake that we expected in Russia and Ukraine because there is simply no order intake. However, that was also overcompensated in other regions. We came out even slightly better than what we forecasted, which was very pleasing to see. To answer maybe also the next question, we also with the same method and with the same funnel analysis, we also see a good Q2 from numbers, inquiries and the quotations that we have out. We are also positive that we can continue that way.
I might want to add that especially the key accounts that are in the upstream business are having excellent cash flows generated by the higher oil price. That impact we discussed the other way around two years ago or one and a half years ago. Now also is present.
Okay, thank you. Last question I forgot. You mentioned the interruptions and lower productivity in plants. I think last time we spoke, this was hardly an issue back then. From today's standpoint, is it something that you expect to linger with you, or is it something that you kinda have found a solution in the meantime?
Well, let's say the thing is, what do you see at the end of the year in the final end-year figures? Now we are in the year process. You know that there are lockdowns, you know the ships waiting for unloading and loading in Shanghai. We're working hard that we can maintain our capability to deliver to the customer.
Certainly at the moment, when I look how many machines are still to be completed, even it's like one or two weeks that they are waiting for some parts. We have a certain impact that we see in the figures. As I said, the situation is difficult, and we acted last year quite fast. The effect is there, yeah. I don't expect that these effects or the work will be easier during 2022. That's already what we mentioned in the investor call or last earnings calls as well.
Okay, thank you very much.
The next question is from Eckhard Cord, Baader Bank. Your line is now open.
Yes, hello. Most of my questions have already been answered. There are still some questions left. Maybe with regard to the order intake and the order backlog. You never give precise figures on that. What I would be interested in is the order backlog at the end of Q1 even higher than at the end of 2021?
No, on a similar level.
Similar level, okay.
Slightly higher, but not significantly higher. Let's call it a similar level.
Okay. Overall, nevertheless, a level which is, I think, promising, at least for the top line for the remainder of the year.
Yeah, yeah. As I indicated also during the investor conference, the challenge is, I mean, the way we look at it is more fighting the margins, getting the price increases through and whatever else the top line. The way, if it continues the way it is, we are pretty certain that we will meet our forecast. You know, that we will be.
With regard to China, we have this lockdown in Shanghai you already mentioned. There are rumors that also in Beijing could be a lockdown. The situation could tighten even further in this region. What do you think about that?
I mean, a clear opinion on that. I mean, that's a very, I mean, as I said, sorry, I have to say that doesn't help. Overall, as you know, the business that we are doing in China as of now is not super significant to the group, so the impact luckily is also not super significant. However, and plus we have in the flexibility and the time also ways to catch up, you know. In other words, if this comes back, it's early in the year, we can catch up in order to come up at final figures. At the same time, we are reporting APAC together, and we are seeing a super positive development in Australia as it stands now.
For the region, I'm pretty confident that we can at least land where we wanted to be. However, we were actually hoping to come out better. Now with this situation in Shanghai, where even our factory has been closed now for three weeks, this is becoming a challenge. Like I said, it is also not much we can do about it, in other words. Luckily, although this is not our future perspective, at this stage now, it's not so significant for the group performance. As I believe.
Yeah.
It makes sense. Only luckily.
Yeah, of course, a lot of external factors you cannot change, of course, yeah. One question to the P&L. As often in the past, you had a rather high tax rate in Q1 of 48%. Last year in Q1, it was around 40%. Does that mean that we should expect for the full year a higher tax rate than last year, was it close to 31%?
Well observed. Yes, we have to pay capital gain tax. Those relate to internal distributions to be able to make the external distribution quite complicated stuff. This month or this quarter was particularly burdened by this, but we should, you should expect a normal tax rate at the end of the year.
Okay, good to hear. Thank you very much. That's for the time being.
We have a follow-up question, and it's from Alexander. Your line is now open again.
Yes, thank you. Also a question on the digital offering. Could you provide an update on the number of machines that have been connected so far? I believe last number you gave out was 6,000. Is that how much has that been in the meantime?
I think we gave the numbers at the investor day, so around 6,000. I think this is a one-time disclosure. We don't plan on giving you update quarterly on that. You can do the calculation.
Yes.
Average price and so on. This is more or less continuously growing because, as we explained, every machine leaving the plant is connected. Yeah.
Yeah. Makes sense. I should have asked, phrased it differently. That makes perfect sense. Maybe also on Sahara impact, would you be able to somehow quantify how much was the kind of extra in terms of chemical sales?
There was a high peak in the week, you know, it was an all-time high in one or two weeks. Yeah, yeah. We had the highest March ever. That's been this way. That's why what we also disclosed is that the Q1 showed significant growth in chemical sales all over the world. I mean, mainly in Europe, due to the Sahara situation, and Sahara was a strong contributor also to the growth in the top line. I mean, so far so good. This has been the best quarter in chemical sales ever, you can say.
Yeah, usually our growth rate is at 7%, and up 23% is particularly high.
In 2023, the weather was bad, and then there came the Sahara sand. Some of the orders had to be made necessary because of the Sahara sand washes, but also because the good weather kicked in. We observed this effect, and it was overlaid by the Sahara dust. That's why we have these high rates.
Okay, thank you.
At the moment, there are no further questions. As a short reminder, if you would like to ask a question, please press zero and one on your telephone keypad. We have no further questions. I would like to hand back to you for some closing remarks.
Yeah. Thank you very much for attending the Q1 call. As a reminder, on May 16th, we have the annual general meeting 2022 as a virtual meeting, and the Q2 call and figures are due on July 28. Thank you very much for attending, and hope to see you soon. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.