Good morning, ladies and gentlemen, and welcome to the presentation of Huhtamäki's first quarter 2022 results. My name is Kristian Tammela. I'm the VP of Investor Relations. Today, we will have presentations by our President and CEO, Charles Héaulmé, as well as CFO, Thomas Geust. After the presentations, in normal manner, we will have time for a Q&A session. Without further ado, I'll hand over to Charles.
Thank you, Kristian. Good morning to all of you, and thank you for joining us this morning for the presentation of our results for the first quarter of 2022. As usual, I will start giving you a little bit of a flavor for the business context in which we have been evolving during the first quarter of this year, and explain how we've been supporting the results of the company, which as you have probably seen, as we released them this morning, are pretty strong.
This being said, obviously we need to start by reminding that we are operating in a very challenging environment, reminding all of us that it's now the third year starting that we are in what I would call an external context of high crisis, which started of course with the COVID pandemic in 2020. For probably bad reasons, the COVID-19 pandemic sounds like a little bit like life as usual today. It's not because as we are seeing for instance in Asia and particularly in China, it's very present and justifies a broad-based lockdown in the country of China.
At the same time, in 2021 started this, as a result of the pandemic and disruption to the global economy, what we would call a high-end broad-based inflation, including disruption to the overall value chain and raw material availability. This disruption in the supply chain is only amplifying in 2022 as we see it. Then there is the dramatic event that started more than two months ago now, on the 24th of February, with the war in Ukraine. That has been basically the operating environment in which we have been evolving.
This being said, and major credit to the entire team of Huhtamäki showing resilience as usual, but as well agility in managing the business, we have been in this context able to deliver a strong performance in the start of the year, through strong net sales and as well through strong adjusted EBIT growth. This is driven by, of course, a positive impact from our 2021 acquisitions, one in China, and one larger in Turkey and Egypt. We have seen as well volume growth, as well as increased operational efficiencies. In the context of the high inflation, we have been able to show pricing power and mitigate the impact of this inflation. That's for the short term in the context of the first quarter.
Now, our strategy that, as you remember, our 2030 strategy we presented 2 years ago, our strategy is obviously evolving according to the context and priorities of the company. The most important change that we need to mention, which was announced a couple of days ago, is our decision to initiate the process of divesting our operations in Russia as a consequence of the Russian conflict in Ukraine, and as a consequence of the poor outlook that we see from an economic point of view in the country in Russia, as well as from a relationship to what I would call the Western world.
This being said, this means that we will be reprioritizing our investments, but always according to our 2030 growth ambition and strategy, in order to capture all the significant growth opportunities that we see in the rest of the world, and there are many. It's very much about reprioritizing where the markets and the growth opportunities are fitting our strategy and our values. In this context, I would like to say that we continue investing in our fiber capacity and in our sustainability program, particularly in sustainable product innovation, and that is an extremely positive sign in our evolution. We are increasing our capacity in smooth molded fiber packaging, particularly in Europe, in Germany specifically.
We have as well a signed VPPA agreement in the U.S. after signing one in Europe late last year. We are installing solar panels in different factories, and during the first quarter it was in our factories in China. About sustainability, and I'm moving here to the slide 3, we would like to highlight the acceleration of our innovation for sustainable products.
Rather than giving you a catalog of all the different launches, and there are quite a few launches that we have made of new sustainable products, we would like to, with a little bit of pride, but keeping humility of course, we would like to present three awarded products that are completely new from the company, and they have been awarded in the very demanding Dow Packaging Innovation Awards 2021. We have in particular this very new fiber sundae cup and lid made of fiber. It's obviously 100% renewable material. It is recyclable, it is compostable, and that's with all the insulation specification for ice cream packaging. This product has been awarded into the top 10 Diamond Finalist of this innovation award.
A very important achievement for a fantastic product, very innovative, all made of fiber. In our Flexible Packaging technology, we have two awarded products as well. One is dedicated to instant coffee, and that's the main characteristic of this product is, apart from being fully recyclable, which is number one objective for us, it's alu foil free. That's for the brand Nescafé. We have dedicated to a product that is very important in volume in the market of India. It's a coloring shampoo for men, and for which we have developed as wel l, a fully recyclable two-sided flexible membrane packaging for this product. It has been awarded as well in the first quarter in this award.
Very nice achievements, which are just a reflection of the acceleration of our sustainability investments and innovations. Moving on to our business performance, and I'm now, for the ones following offline with the presentation offline, on slide 5 showing the sales growth of the first quarter. The sales growth has been 31% in the first quarter, 2022. In this 31% breaks down into a comparable net sales growth of 19%. And that's when we are excluding 8% impact, positive impact from our acquisition, mainly Elif, accounting for EUR 63 million. Then a 4% positive currency impact during the first quarter. This positive currency impact, we'll come back to it later on in our financials with the positive trend particularly of USD.
That's for our sales, which are above EUR 1 billion in the first quarter 2022, which is a never achieved level in the company. When we break down this growth and this sales on slide 6 by a business segment, then we see that all business segments are growing very nicely. Very nicely compared to the previous quarters, but as well very nicely compared to our long-term ambitions. This is particularly supported by the continued recovery in the Food service demand, as well as a continued good demand for the food on the shelf product. Of course, the pricing impact that was mitigating the impact of the inflation in our input cost.
As you see, Foodservice Packaging growing 18%, and North America growing 24% during the quarter. Flexible Packaging growing 18%. All of the three segments, of course, we need to recognize on the comparison of a Q1 2021, which was fairly soft from a growth point of view. And Fiber Packaging growing 8% compared to the same quarter a year ago, 4% growth. A very good performance, and those numbers are comparable growth resulting in a 19% comparable growth. This translate as well very nicely into the profit and loss in terms of profitability, where we see our adjusted EBIT, I'm on slide 7, adjusted EBIT in euro terms growing 27% and our adjusted EPS growing 29%.
Important to say, and we will see more details on the cash flow, that we are optimistic about the future. We see a lot of growth opportunities, particularly in strategic areas that we have mentioned before, and that justifies significant investments that we continue to make in order to enable our business expansion and our portfolio transformation in the context of the plastic substitution particularly. That is driving the increase of our CapEx during the first quarter of the year. Let's look now in slide 9 at and the following slides into some further details per segment, starting with the Foodservice segment, where we see, as I said before, a continued recovery in the demand. The net sales growth are increasing 23%.
That's a comparable growth of 18%. As mentioned, the demand for Foodservice Packaging is continuing to improve. I would say it's globally overall at the level of pre-pandemic now. You know, it has taken two years to get back in terms of demand to that level. However, there are some regional differences. The net sales have increased in most markets around the world, however, with the exception of China, for the reasons mentioned before, due to the continued COVID-19 lockdowns. When we are thinking about now the profitability compared to Q1 2021, we see that the adjusted EBIT is increasing 45%. The margin percentage is increasing from 8.5% to 10%.
That's despite the fact that in this quarter, our input costs have been increasing a lot. Paperboard and polymer prices have increased significantly, and the supply chain continues to be disrupted, including some concerns in terms of availability. In a way, growth is there, growth of demand is there, and the availability may challenge actually further growth. The adjusted EBIT is improved mainly by this growth in sales volume, but as well by the mix of products as well from a sustainable products point of view. It is of course improved by the pricing actions which offset the significant cost inflation.
I want in order to give back the full credit to the segment Foodservice, to mention that this improvement of the adjusted EBIT margin is very much linked as well to the continued positive impact that we see from all the productivity actions that we have engaged into in 2021. If you remember, we mentioned this program, I believe in each quarter last year, and this is really showing now a full effect as we had promised about a year ago. That's for Foodservice for the first quarter. North America is basically in the same range of numbers with a growth of 32%, comparable growth 24%.
That's very much driven by pricing of course, but as well by the demand, the recovery of the demand in Foodservice Packaging and the continued strong demand in Retail Tableware. As I said before, for Food service, broad-based cost inflation affecting all the input costs, raw material, labor, distribution, energy, everything is involved. The team in North America is as well doing a very good job in anticipating the impact into our P&L and into managing the pricing in the right way, as well as continuing to maintain our efforts in operational efficiency. That enables a pretty strong growth of the adjusted EBIT in euro terms.
I want to make one comment that when you see the margin, the EBIT margin in percentage, it looks like a decline versus Q1 2021, but we need to be very clear. In Q1 2021, the inflation linked to the disruption of the market had not impacted our P&L in North America yet in the first quarter. It started really as of Q2, and therefore it's not a fair comparison and our margin of 11.5% here is a strong margin in the context. Moving on to the slide 11 for Flexible Packaging, we see a strong growth, of course, supported by our Elif acquisition. That was where we started the integration on the 23rd of September last year.
As well, what I would call a turnaround in the Flexible segment in terms of how to manage the cost inflation and its related mitigation. That results into a sales increase of 41%, a comparable net sales growth of 18%. Obviously, when we discount for the Elif acquisition, that is playing a full role here. As I said, the margin increase or the adjusted EBIT margin increase is linked in euro terms to a lot to the pricing actions that we have taken in the first quarter. I think we are very proud about the way the team has been handling both the magnitude of the inflation, but as well the timing of the actions and required pass-through.
That's for Flexible with a very promising improvement of our P&L overall in that segment. Then finally, page 12 is the Fiber Packaging, where we see a reported growth of 16%, comparable growth 8%, and that's after deducting particularly the currency impact. The 8% is pricing related, but as well volume related, even though in that segment, or in that market, I would say, we see a relatively soft continued growth in the market. Let's remember that we're coming from an incredibly high growth of that market in 2020 and, therefore, a relatively lower growth level in 2021 and 2022 as a consequence of the very high level 2020.
The adjusted EBIT margin of 8.2% may call the attention versus Q1 2021, but here we need to give a little bit of granularity on the numbers so that it's comparable. Actually, our margin in the conversion business, so the fiber products, the rough molded fiber product is still above a double-digit percentage very much in line with last year. Why is the EBIT margin of the segment only 8%? It's not concerning at all. It's only for actually a good reason, which is a mixed impact from our growing machine business. You probably know that we are developing and producing manufacturing machines for the molded fiber industry, and particularly for our needs in rough molded fiber like smooth molded fiber.
The increase of the investments, the increase of the production of these machines, has a negative effect or a dilution effect on our percentage of margin. That's misleading because the business is still profitable as it used to be. We should not be at all concerned about this 8% margin. With this, I will hand over to Thomas for further details on the financials.
Thank you, Charles. Nice to have you back presenting the results. From my point of view, first of all, highlighting the very strong growth and the strong EBIT growth as well. I would say it from the perspective that, normally, I have always said that, I would love to see EBIT outgrow net sales. This is however, the mechanism that we have been communicating ever since Q4 throughout the first quarter. The fact that, increasing commodity costs will have, and actually slightly also has had an effect already, in first quarter on the margin development. You could see it in North America and you could see it in the Flexibles numbers, that there's actually a drag on the margins exactly as we have been communicating.
However, considering a good volume growth in line actually with our ambition roughly, we have a really strong absolute EBIT development for the quarter. That's something we are of course very satisfied to see coming through. Other items to highlight on this one is the net financial items slightly below previous year, I would say mainly related to our structure of what kind of financing instruments we have been using in the quarter itself. We have a higher number of short-term debt which actually is still quite efficient in the market, so commercial paper and similar. Also highlighting here the adjusted tax rate.
It's at 24% roughly this year versus 23% previous year, partly driven by the country mix coming through where you know we are operating in quite high tax jurisdictions. I would also like to highlight the good growth on EPS, the 29%, and actually the EPS itself or EUR 0.63. That's actually completely in line with the reported EPS as well. Our adjusted EPS is, for this quarter, one-to-one with the reported EPS and that in my view is also indicating some stability in our business coming through. Further, maybe to highlight that the minority interest is increasing, which is indicating that the India business is also finally improving.
On the currency, the EUR 35 million positive with a 4% contribution to net sales growth, coming from many currencies. As usual, the big mover for our numbers is the USD which is trending quite favorably compared both to average rates previous years as well as closing rates. You will also see the currency translations in the balance sheet when looking at, for instance, equity. The net debt/EBITDA at 3.0. A slight drop versus end of the year, no real deleveraging from absolute terms. It's really the EBITDA which is driving the slightly lower number.
Obviously, as I will be highlighting on the next slide, we have a cash flow which is still negative. That's of course explaining the continued increase in absolute net debt. Gearing is at 92% and also then slightly down towards the end of the year. Just as a reminder, the key reason for the increase in net debt, the jump from Q2 to Q3 previous year is obviously the acquisition of Elif. Looking at loan maturities, we issued a term loan facility of EUR 250 million in the quarter. That's for, of course, financing short-term financing. We haven't gone out on the long market at least yet, so we are obviously evaluating how the market is developing currently.
For that reason then the average maturity is also dropping to 2.6 versus 3.4 previous year. As said, short-term financing is still quite efficient and we are utilizing it to the extent possible. Going to the free cash flow. On the free cash flow, clearly of course the increased profits are contributing positively. Capital expenditure as indicated already by Charles and always the timing effect as well is a drag for our cash flow generation. On a positive note, it's investments into growth and investments into the new capabilities that we have been communicating about.
If you look on the change in working capital, there we have the main driver still exactly as in the previous quarter being the impact of the cost inflation, which is driving up especially the inventory, and the majority of the increase actually is price-driven on the working capital side. Although there are, for instance, in Foodservice also a build-up of stock within these numbers. Turning to the next slide, which is a bit of a highlight of our balance sheets and key KPIs. Not a major change except for the Elif acquisition contributed items. Operating working capital for the reasons I explained and for the addition of the acquired units is clearly up.
Net debt, as said, clearly up also versus previous year, but then you see the equity also increasing strongly versus previous year. The return on investments and return on equities are slightly lagging indicators. However, they are for the return on equity developing also favorably now in the quarter. As a...in next slide, we will take the progress towards long-term financial ambitions. We are, of course, clearly outperforming the long-term ambition in the quarter. As said, from a volume point of view, we are more or less in line with the ambition, so that's the most important part for us to look at currently.
Of course, the other part is just to make sure we are trailing well also on how we are getting our acquired units contributing, and then of course the pricing elements. Profitability-wise, on a margin level for the reasons explained earlier, we are trailing behind the long-term ambition. Also here, you can see that we are on a higher level than where we have been in the history, at least on annual level. Then, the net debt is on the high end of the corridor as expressed earlier, and this one is dependent also on positive cashflow development going forward, in order to get the de-leveraging going.
The dividend payout is proposed to be 45% for the year and the decision will take place today, I assume, in the EGM. For the short-term outlook and short-term risks, outlook is unchanged. However, the short-term risks that we have done some changes to the previous statement, bringing forward really the geopolitical situation as well as the inflation. Of course, COVID is still remaining as a factor to account with, especially, for instance, in China at the moment. With this one, I would open up for Q&A.
Thank you.
Thank you. Thank you both, Charles and Thomas. Before we go to the Q&A, I'll still hand over to Charles for a few words.
Thank you, Kristian, and thank you, Thomas, for the presentation. I just wanted to make a small note that, as you know, I have been away for the first quarter for unfortunate reasons of health issue. I'm fully back into and in full swing and very good motivation back in duty. This is not what I want to highlight now. What I want to highlight is that this first quarter has been a part of the external context.
My absence was adding an additional pressure to the team, and I wanted to make this comment after you have seen our results, you know, in the granularity and with all the explanations to show that, I think, you know, beyond the results, it's extremely important for me, particularly as the leader of the company, to know by the proof of this absence and of the results, driven by the team that we have a very mature organization, very resilient, agile as well, and which has been-
... You know, it's the best sign for a leader if you can be, if you have to be absent, and unfortunately for not so nice reasons, that nothing is going to change or on the contrary, actually, you know, things are going to go well, and actually even better than potentially expected by some of you. The credit goes back to the team for the resilience, for the agility, and particularly I want to recognize Thomas, who... Thomas was taking on top of his CFO job, as you know, he was the interim CEO during that period of three months in a very complex external context, which has been very difficult to handle, of course.
I think it says a lot about the maturity of the team, and the leadership of Thomas, and of the entire executive team. I wanted to make that mention because I think it's as well important to know this context in order to gauge and evaluate the preparedness of the company to face difficult times as we are going through. Thanks for making the space for this comment. Thank you.
All right. We are ready for some questions. Operator, if you could please.
One moment while we get everything working.
Apologies for the delay. Thank you. If you do wish to ask a question, then please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two. There will be a brief pause while questions are being registered. Our first question is from Justin Jordan. Justin, please go ahead.
Thank you. Good morning, everyone. Firstly, Charles , I just want to say welcome back. Well done on your speedy recovery . Great to have you back. Just two quick questions, if I may. Firstly, just on the obvious, cost inflation. You called out clearly raw materials, freight, energy and labor. Can you give us some sense as best you can, are we at the sort of peak of cost inflation, or should we expect further cost inflation in Q2, Q3, and therefore further pricing actions to offset that? Clearly, I have to say extremely well done on the pricing action you've done in Q1. Just given the exceptional cost inflation that we're seeing, can you give us some split of the 19% comparable revenue growth?
Just how much of that is price increases versus volume growth? I appreciate you don't normally do that, but we're not in normal times. Secondly, just on working capital. I appreciate the working capital outflow in Q1. Can you just give us some sense of it? You've pulled out some supply chain issues. Should we think about working capital sales being structurally higher in 2022 than a normal year because of those issues? Just, Thomas, can you just remind us your thinking on guidance on CapEx for 2022? Thank you very much.
Maybe Charles, you comment on the cost inflation to begin with or do you want me to take that one, then I can take the two other ones?
The cost inflation, Justin, to your question, and thank you for welcoming me back. The cost inflation is, you know, very difficult to predict. The world is in a huge turmoil situation. There is one thing that is... There are several, let's say, factors creating this, the broad-based and high cost inflation. This has been first the disruption from the COVID pandemic that has created different types of demands across the world. That's the first disruption. This has created... The second, the COVID pandemic at a certain time as in 2020 made many companies make alterations in terms of capacity reduction at the time.
Those capacity reduction take time to rebuild as the demand is increasing a lot now. There is the huge disruption linked to the war in Ukraine. When you take all these factors, it's very difficult to predict what's going to happen. To us, it's pretty clear that when you take the P&L of 2022, it's going to be impacted during the entire year because there is a time lag as well into the way it impacts the P&L, of course, through the value chain stocks, and so forth. We anticipate a relatively, let's say, stable impact or continued impact quarter after quarter in our P&L.
Therefore, the importance of the process we have in place in order to mitigate this cost inflation, we believe we are very well prepared. The Q1 is there to demonstrate that we have the processes in place and the organization is ready to face those issues. Thomas.
Yeah. I think that's my key points also around the inflation, that the most important thing is that we still believe that there will be a challenging environment which needs to be monitored, and therefore we need to take actions accordingly. On the comparable growth, as we have been saying, we will be giving more insight to the volumes this year than we would do under normal circumstances. I mentioned it already during my presentation, but I can say it more clearly here now is that our volume growth was roughly in line with our long-term ambition on net sales. That as a soft guidance on where we are with regards to the volume and the other elements you have available in the presentation.
On the working capital side, so structurally higher, I wouldn't say that there's a reason. Actually, in many cases, we are still almost hunting for raw materials and are ,from volume point of view, in some categories actually on low level when it comes to inventory levels in our stock. For that reason, we have then in other areas where we have had the opportunity to get access of material, taken some forward-looking stance and taking in material. As said earlier, it's not really the volume which is the key driver for the inventory increase of our numbers. It's really the prices that come through. Then you had a question I think on guidance on CapEx as well. We don't...
It's actually quite difficult to forecast the absolute landing point of CapExes this year because what we have seen is that there is delay in the supply chain of CapExes. It's also a delay in getting people available for installations, and so on. I think what we are seeing is the overall catch-up of the supply chain still from the COVID side on CapExes. What we have been saying is that we see that we have a continued increase in CapEx also this year.
First quarter obviously a timing thing as well, but I think that's also indicative for the fact that we are running a higher CapEx program, especially related to fiber, but also in the other businesses when it comes to some, let's say more innovative new type of products, new technical solutions.
Great. Thank you, guys
Our next question is from Robin Santavirta. Robin, your line is open.
Thank you very much. Now, trying a bit, sort of, the same question related to input costs as Josh, Justin, but the point I would like to hear your view on is, I mean, if we look at the margin now in Q1, it's actually to me surprisingly strong in the current environment with quite significant input cost inflation. Is there something sort of extraordinary, sort of good in Q1 that we should be aware of when it comes to the margin and Q2 and Q3 development? Or is this roughly an indication of what the next quarters will bring if we would see input costs remain roughly at this level? Just trying to understand, sort of, the outlook for the sales margin ahead.
I appreciate it's very difficult, but you see it better than we do. Any color on that would be appreciated.
Yeah, Robin. As I have been communicating from my point of view, the mechanism of price increases and the margin drag is there and it's evident. I think what we have in the first quarter, first of all, no, we did not have any one-timers that would have boosted the results. It's really an operational result that you are seeing. From that perspective, looking at the EBIT and EBITDA development from absolute point of view is what you see from the company. That's the really positive news out of it. How we look at the operating environment currently, we see that the operating environment is currently pretty much the same.
It has the same disruptive elements that we unfortunately have had to live with since 2020. I have said earlier that we came out pretty good out of the 2020, which was a drop in demand. We managed quite well the fluctuating recovery of 2021 with a good result. We also were able to start to mitigate the costs in a more active way than what we have had in history. I would say the first quarter is now reflective of our reactiveness and awakeness on what's happening in the market. The real challenge in my view will be the supply chain.
What will happen to the supply chain, going forward, but as said, currently the environment looks quite the same as what we have seen in Q1. With continued price increases, however, as anticipated.
Thank you. Can I just ask on Asia and related to India? I know you have had some struggles in the past two years there. It's a big market for you in India. How is that developing now in terms of volumes, margins and operationally what is the outlook? Also related to Asia, what is going on in other parts now with the COVID and what do you see?
I can take on first of all on India. India, which is as you know has been the monitoring part and I gave us a bit of a hint that the minority impact on our EPS is slightly coming through. We have performance improvement in India. India, we have been focusing really on the profitability in India and mainly maybe then with a bit of volume softness. However good growth in India in any case. Clear double-digit growth also in India and then a profit improvement clearly up from previous year. Remembering that actually Q1 last year was not a complete disaster when it comes to the India performance.
It was more towards the end of the year when we started to see the performance going down. India clearly improved versus Q1, and they, I would say, even more clearly improved versus the full year performance 2021. Talking about relative performance. Otherwise, Asia is of course still a bit of a disrupted market. Here I would especially highlight China, which has been a country of lockdown. We have all read the news on Shanghai's complete lockdown. If you think about a 25-28 million-person city, which you completely close down. Of course it has an impact on our customers and through that one indirectly also on us.
We have negative organic growth in China for the first quarter.
Yeah. Maybe to summarize the outlook in three words is India, we are positive about turning around profitable growth. Southeast Asia as well. I mean, there it's not a turnaround we need because we've been developing and growing profitably in the recent past. That will continue. The main risk in the whole area you were questioning, Robin, is very clearly China for the reasons explained. There we don't have answers on a short-term perspective.
I understand. Thank you very much and well done in Q1, and welcome back, Charles.
The next question is from Jutta Rahikainen. Jutta, your line is open.
Great. Thank you. I echo Robin on that. Welcome back, Charles. A lot of my questions were covered already, but I'll give one or third try on the gross margin topic here, framing it slightly differently. Now, you said that the impact from input costs will probably remain the same as in Q1 or currently it's trending at that magnitude. At some point, you did speak about the sort of net impact of input costs and price increases. Is it fair to say that also that net impact is pretty much stable for this quarter and maybe for Q2 and the quarters to come? Again, I'm just looking for if there is a rhythm mismatch somehow in the price increases you've made and the cost inflation you've seen. It's a really.
The other way, the easier way to ask is maybe the Q1 gross margin somehow exceptionally good, or is it sort of a semi-good proxy of coming quarters? Thanks.
The gross margin in relative terms is quite similar to previous years. From that perspective, or actually down in my view with regards to roughly the pricing impact that I have been talking about earlier. We have a actual dilution on margin on gross margin level if you take a clean gross margin. Similar things are likely to happen going forward. The difference is that we have most of the businesses having full demand coming through, and operating results is therefore also benefiting from the operational performance to a greater extent than what we saw last year.
Okay.
Maybe one point. Sorry, Jutta, to complement this. Last year was, of course, impacted by the timing of some of our sales and contract with customers have a timing embedded into the pass through. That was one of the, let's say, two drawbacks for us into 2021. The second one was, you know, the preparedness of the organization in face of a brutal and so significant inflation. The thing is we have the organization and the processes in place now reacting extremely well, and we don't have, of course, the timing effect anymore or the timing negative impact because it's an ongoing, over two years, it's an ongoing process.
Therefore, that's where you find the positive impact, which should remain for the rest of the year. From that point of view, it's not exceptional in Q1, but it's better than last year for those reasons.
Okay. Thank you. A similar question relating to EBIT margin for North America. It did come down a bit, but it was still at very good levels, I would say. You had the COVID effects on the mix in the past few years. Is this now sort of, how should I put it, normal non-COVID quarter in North America? Should we think that assuming COVID doesn't strike back in the U.S., this is kind of a proxy of the profitability in the quarters to come?
If I may, to complement Thomas on North America. First of all, on the lower margin, I think, as I mentioned it very quickly when presenting, last year we didn't have the inflation negative impact into the P&L in Q1 2021. It was already in the value chain, but it was hitting our P&L in the second quarter. At the same time, we had very well anticipated, if you remember the comments a year ago, we had very well anticipated the pricing actions in North America in the first quarter last year.
That explains that Q1 last year was relatively high as a comparison base versus this year, where the margin is a more, let's say, ongoing level that you may consider as a good reference for that segment. From a COVID point of view, what we see is so certain positive effects of the COVID, if I may say, like the Retail Tableware business that has been growing a lot, thanks to, if I may say, the pandemic at the time, that market remains high. It remained high in 2021 and continues to remain high.
There is something structural that we had predicted, and we had said last year we believe it will remain like this, in changing therefore or amplifying the culture of convenience of home consumption in the U.S. On what was negatively affected, the Food service, to your question, yes, we believe we are back into relatively normal pre-pandemic conditions, particularly so in the QSR segment, in the food delivery, as well as all the consumption that goes into schools with the food trays, into stadiums as well with cup carriers and food trays. All of this is back to basically what we would call normal. That's a positive aspect of the Q1 and then the outlook we see in North America.
Okay. That is very clear. One more. This is a more general question on demand. Now, I know you've stated many times already that Q1 was really strong for you and also on the volume side, good. Did you see any changes in the consumer customer behavior during the quarter after the war? And also if you want to or can, any comments on sort of April also would be of interest. I'm just thinking about the sort of cyclicality, or the consumer getting spooked, and obviously not maybe having as much money to spend as they used to. Have you seen any, I would assume, negative impacts for your business from the war on the demand side?
No, we haven't seen any negative impact specifically from the war. Let's be clear, affects only, if I may say, a small part in the world. We don't see any, you know, impact of significance. Yes, the demand is strong, but we don't believe that the demand is exceptionally strong. We believe that this is the new normal. Probably it looks very strong because we're coming from two years, 2020 and 2021, which were heavily disrupted. The demand now is back to, you know, what I would call the new normal. There we are optimistic that it will remain like this.
Where our big question is, and I think Thomas underlined it earlier, is on availability of basically raw materials. Some of the raw materials for different reasons, but particularly this high demand, but as well the allocation on capacities that were made by some suppliers in the world, for instance, in paper production in 2020, the availability of raw material is the biggest question mark at this point. Not that it would drive to a decline, not at all, but that unfortunately, it may drive to a more limited growth versus what we could be delivering if there was no limitation in raw material availability.
Okay, good. Thank you. That's all for me. Many thanks.
Thank you. Our next question is from Cole Hathorn. Your line is now open.
Morning. Thanks for taking my question. Two from my side. I'll start with one by one. Just on North America, we've heard about availability of packaging being quite tight, and I'd just like to hear a bit more color around your discussions with customers, and how that availability or limited availability of packaging is driving through the price increases. You know, what are some of your competitors doing? Is it the whole market's tight and it's all focused on availability more than pricing? That's the first question. Just a little bit more color on how that FX might impact or support the business through the year. Thank you.
I'll take maybe the first one, and Thomas, you take the second one. Availability, I think you made the question and the answer. You're completely right in your analysis. Availability is indeed the main concern of the value chain versus pricing. In a way, back to what Jutta and Robin and as well Justin were asking before, yes, the pricing or the pass-through, how was it possible. Well, part of it was clearly possible because there is high demand, and at the same time availability constraints. Therefore, it's a context where passing through becomes slightly not easy, but slightly easier to manage. This availability is, as I said befor,e remaining a high concern.
It's particularly the case in North America, for instance, on paper. Paper is probably where we see the main constraints. Why? Because it takes a lot of time to build capacity. It takes about two to three years to build a new capacity in paper production. So, that's where we see the main constraints.
For the second part, I didn't quite get the difference between the first and second part, but I would maybe continue on the availability and quality and so on. I think this is the time when the customer goes back to the fundamentals of what is most important to them for getting their revenue stream done. That is to have suppliers who have enough scale and enough global presence in order to be able to, as well as possible, manage the full supply chain in a disrupted market. That in my view, the global players or the multinationals like us have a preferred situation currently versus some of the local players for the reason of availability.
I might have missed the other part of the question.
It was about FX.
Thomas, just on FX. I mean, at the beginning of the year, you mentioned that, you know, on an absolute EBIT basis, you're looking at North America growing year-on-year. I was just wondering, should we think about it as North America growing year-on-year in absolute EBIT, but then with obviously the benefit on top of that of positive FX translation?
Yeah. Okay. First of all, basically the numbers you have been seeing is impacted, as you say by... The statutory numbers are impacted by the FX. However, that's the translational part that we have always been talking about. I think the highlight to look is at the organic growth or comparable growth of the segment. As you can see from that one, that's quite buoyant.
You called out operational efficiencies in your release, and I know you've been doing work on this since the start of the pandemic, to kind of rightsize your footprint and align where you think there's better growth. Can you talk about how that operational efficiency is now leading to, you know, higher profitability? Kind of you're reaping some of the rewards from that work. Thank you.
Sorry. You mean in North America or in the group? I don't know for some reason the line.
In the group for-
Yeah.
Sorry, in the group for the Food service business. You did a number of actions to improve your operational footprint and go into the right segments that you're looking to focus on in growth. I'm just wondering how that's delivering kind of incremental EBIT now that you are kind of a year down the line with that program.
Well, first of all, I think one of the things is that we optimized our resourcing back in 2020 during the COVID situation. We had then continued high investments in the segment throughout 2021, which to some extent, offset the benefits of the profitability already then coming through of the segment. The real key driver here is that we have been able to keep the cost levels and thereby getting better productivity now when the top line is starting to grow in Foodservice.
The optimization of the production was done in order to deal with a normal situation in a very efficient way, and that one is now bearing fruit.
Thank you.
Top line is also there.
This is all the time that we have for today. If you still have questions, you can reach out to me directly. With that, I'd like to thank both Thomas and Charles and wish you a great day. Thank you.
Thank you all.
This now concludes our.