Welcome to this presentation of BEWI's result for the first quarter 2022. My name is Christian Bekken, and I am the CEO of BEWI. With me today, as always, I have our CFO, Marie Danielsson, who will take you through the financials. Our presentation includes some forward-looking statements, so I would like to point your attention to our disclaimer. We will start with some highlights for the quarter before Marie will go into more detail into the numbers. A very strong first quarter result following strong demand in most of our segments. Both our integrated business model and our experienced organization continues to perform robust quarterly results for the group. The high raw material price, combined with solid demand for EPS beads, maintains a strong margin and a good result for segment Raw.
Our integrated business model and procurement strategy, and also organization, allows us to outperform the market as we did in Q1. Downstream segments continues to manage adjusting prices to compensate for high cost level, driven mostly by high raw material prices, and we see positive development in volumes of insulation, especially in Benelux. On the other side, we had lower slaughter volumes in Norway, which impacted packaging components for the quarter. A shortage of electrical components is still challenging for the automotive industry and our exposure there. We see positive development and result for Circular. The process to complete the Jackon transaction is progressing as earlier communicated, and we have announced three new acquisitions in line with our strategy, which will strengthen BEWI's position in the future. Summing up, we are very pleased with the first quarter.
Still as always, we are more focused on the opportunities and challenges ahead of us. Now I will briefly take you through some numbers and highlights for the quarter. For the first quarter, net sales are up by 55% compared to last first quarter. BEWI RAW saw increased styrene prices and following EPS prices due to high demand combined with limited market supply in the quarter. 37% organic growth coming from increased prices in all segments, improved volumes, as I said, especially in Benelux, but we also had lower volumes of fish impacted volumes of fish boxes sold. 18% comes from acquired companies, and we continue to deliver solid results. Adjusted EBITDA of NOK 34.4 million, 106% improvement. If we include Jackon, NOK 44.2 million for the quarter, 101% of the improvement was organic. Continued strong RAW...
No gap in RAW. Downstream segment managed to adjust prices to compensate for higher cost. A 5% improvement following acquisitions. An increased EBITDA for Insulation and Circular, but IZOBLOK still struggling due to a shortage of electrical components. All in all, a good operational performance. A new company has joined BEWI, Trondhjems Eskefabrikk, a Norwegian paper packaging company, a manufacturer of fiber-based packaging products, mainly for the food and beverage industry. A significant share of raw material used is recycled, as we are very eager to understand and to develop in that segment, recycling. The revenues of EUR 13.5 million in 2021 was up 15% compared to 2020. The consideration was made in line with historical M&A EV/EBITDA of five to seven, and as communicated, BEWI.
We have also done an important step in U.K., taking over 100% shares in Jablite, preparing the company to join forces with Jackon in U.K. and a well-structured platform to take a good position in the U.K. We entered into this company together with the management, who has completed a comprehensive restructuring program since 2020, including closure of two facilities and other cost initiatives, resulting in significant profitability improvement. This company has an annual turnover of GBP 40 million and EBITDA between 5%-10%. They have 50 years experience from developing EPS solution for both insulation and packaging. They are operating three facilities in the U.K., and the experienced management team will continue in their roles. A total consideration for the 51% share, GBP 10 million settled in cash.
We managed to enter into this company relatively smart, so an overall entrance into U.K. has been very successful so far. We continue to develop our company also by doing M&A, and once again, pointing your attention to what we are doing, creating a circular industry company within insulation, packaging, and components, a multi-product and sustainable products for its markets. Year-to-date acquisitions of NOK 61 million in turnover, but more importantly, well-managed and profitable companies with a strong history. With that, I leave the word over to you, Marie.
We look more into the details on the financials. I think we were quite proud in Q2 last year when we were able to say that we had the best result ever. Then in Q3 last year, we managed to do that again. Q1, where we are right now, we are very proud to say that once again, we do our best quarter ever. Remind now that we do this in a market where raw materials continue to go up, energy prices goes up, general cost inflation is a fact. We do that in a market where we struggle in the automotive industry, and also we do have a product mix which is not favorable since we have low volumes of fish boxes sold in this quarter.
EBIT, net sales are increasing from EUR 149 million approximately up to EUR 230 million. 2/3 of that is coming from organic growth, and 1/3 is coming from the acquisitions that we have done recently. Looking at the EBITDA though, it's more than twice as high as last quarter or in Q1 last year. That is increases basically, as Christian said, only coming from organic growth. Even with challenges in the individual segments, the robust business model that we do have that is integrated, where we have a very diversified market and geographical spread, we can perform extremely well also when we have challenges.
As you see, we do increase the EBITDA in each and every segments besides packaging, and that is, as Christian mentioned, that it is the automotive that we consolidate into packaging and component segment, and we do have lower fish box volumes this quarter. RAW is performing very well. They benefit from the upcoming raw material trend, but it's not just that, it is also that we do a fantastic job on the purchasing strategy. We do a fantastic job on price management, and we have an extremely well-running production. Volumes though are pretty much in line with last year. Packaging and component is also growing. They are growing approximately 50%, also a mix of acquisition and organic growth. Organic growth is a mix from price. We are increasing prices that is related to indexations in our customer contracts.
We are increasing prices due to increasing cost structures. We have very good development in our food trading operation. On the negative end, again then, we have sold less fish boxes in this quarter. That also explains a little bit if you look at the EBITDA, and you most likely can notice that we have a margin dilution. That is explained by the same things. We are growing on food trading, in general, lower margin compared to our production operation. We have lower fish boxes sold this quarter, generally in the higher end on the margin. We have automotive, where we still struggle, and that do not contribute to our earnings at this time. Insulation, as well, approximately 50% growth.
It's a mix between organic growth coming basically from Benelux, which is extremely important to us because that is the more advanced product, more high-end market. We also have got good contribution from acquisitions that is mainly Kemisol is performing very well as well. Last but not least, our circular segment that is extremely important to us. This is the segment that is responsible to collect used EPS for further conversion so that we can use it as raw material again. We, as you know, have grown this segment through acquisitions, through greenfield, other initiatives, and last year, we managed to turn the red numbers into black, and that continues now. We actually have a margin that is close to 10%, and this journey will continue.
It is an extremely good growth from approximately EUR 3 million only in revenue up to about EUR 10 million. A few things on the consolidated full P&L that I would like to bring attention to. You can see on goods for resale that that is more or close to double as high as last year. That is again the increasing operation we'd had with food trading. Otherwise, the costs are increasing. That is in line with acquisitions that we do.
Associated companies that we just take into our P&L on one line, they contribute also twice as much as last year, which means that Germany, France, and U.K. that we just recently then acquired a 100% share in is performing also extremely well. If you look at the income tax expense, that can look high, but that is due to that we have quite a lot of costs that we cannot deduct in our tax calculation, so the effective tax is below 25%. Financial structure, the numbers are moving in the right direction. Leverage is going down, return on capital employed is going up. We still have an unused credit facility that is EUR 80 million.
Also worth mentioning is our cash flow. It's not the first time, but for a long time we do have a negative operational cash flow, even though we have a fantastic result, and that is due to working capital. With the increasing raw material prices, and also with the cost structure in general increasing, there is a heavy working capital that impacts our cash flow at this time, but will of course come back later on. CapEx-wise, we have spent NOK 5.2. Approximately half of that is related to the normal maintenance and is in line with our target to be 2.5% of sales. Residual is related to our investment programs. With that.
Thank you, Marie. Now to summary and outlook. The world is changing, and we need to change with it. We will continue on our journey to become a fully circular company, and with the platform we now have created and the experience we have gained, we will continue to lead the change. Challenging existing business models will be key words going forward, especially in Circular. Business to business in recycled plastic materials is fragmented, then there is a lot of market opportunities going forward here. We are looking forward to continue to challenge status quo, technologies, and doing transformative acquisitions. As we have said earlier, we will also continue broadening our product portfolio. To the outlook, we are experiencing solid or strong demand in our key markets. We are well-equipped to meet industry-wide challenges in all our value chain.
We already today see shortage of electronic components, delay in logistics and transport, general cost inflation. Russia's invasion of Ukraine has increased uncertainty for all. We see EPS prices is on a historical high level. Although raw material prices are expected to stabilize or slightly decrease, we are expecting going forward to see improved profitability from our downstream at the expense of our upstream unit. The completion of Jackon transaction is expected to happen the first half year, second quarter, pending regulatory approvals. We have a continuous strong pipeline of M&A opportunities, and obviously, we have a strong focus on meeting the new challenges the markets will bring. Summing up, we are well-positioned for further growth. We have a solid operational performance providing a positive cash flow. We have a proven business model and a proven delivery capacity in challenging times.
We are experiencing still a strong underlying demand. We have a robust financial position, and we will continue to pursue growth opportunities in line with our strategic priorities. By that, I leave the room for questions.
Okay. Joachim.
Thank you. Congratulations on a very strong quarter once more. In general, it seems like price sensitivity among customers is fairly low, given the ability to push high raw material prices over to the customers. Can you elaborate a bit on the price sensitivity in the different segments and yeah, how is that?
Price sensitivity or a product which is needed, I like to say that our product is needed in the society, therefore, it is not that price sensitive. You can take examples as medical packaging. We obviously, as you can see on the results, push the prices on the customers, but we are also pushing realistic prices to the customers, and we are having stable, robust results, not over the top either. If you look at automotive industry or food and beverage packaging, it is product which is needed in the society. Therefore, if you use the word price sensitivity is not that high, due to the necessity of those products, and that is what I have said all along. Our product strategy in our company remains. We will always search for producing the products which is needed in the society.
Just a follow-up question. Regarding the margins in segment RAW, you briefly touched upon it, but do you expect to be able to sustain some of the higher margins going forward despite the margins improving in the downstream segments?
It's an impossible question to ask. You will see different structure on the long gaining margins in our own downstream. In the group level, we expect to maintain those margins you see here for the company, as we have said all along, around 15% EBITDA as a target over time.
Thank you.
Okay, we have some questions from the webcast. The first one is from Glenn Ringheim in ABG. It's referring to Jablite. Can you give a sales split on packaging versus insulation? When do you expect the transaction to close?
The transaction is closed already. The sales split is approximately 2/3 insulation, 1/3 is packaging.
Then there's another question from Glenn as well. I think that's the same as Joachim just asked. It's about the EBITDA margin for RAW. It's extremely strong at close to 20% and have been for several quarters, while the historical average until early last year was around 5%. What do you say is a normal margin for RAW longer term? I think you probably already.
I will again repeat myself in saying that the normal margin for the overall group is 15%, and as we have shown in the presentation and stated all along, it is so that we will see movement from the margin picture from raw to downstream sometimes and opposite. Overall, we are expecting to see and perform around 15% EBITDA on the company group level.
We have one question from Eva Larsson. Assuming the Jackon transaction or acquisition is approved in the second quarter, when will they be consolidated into your numbers?
Starting from the day we then are approved and finalize the transaction. Within two weeks, we have communicated after the approvals from the competition authorities or.
Well, in practice, it mean that if we close it very soon, it will be consolidated as from June. If we close it by the end of June, then it means that we consolidate it from July.
Okay. We have questions from Herman Dahl, Nordea. Have you seen any weaknesses in the demand for insulation products in 2022? If not, do you expect it going forward due to lower building and construction activity?
Said all along that speculation I leave to the journalists, but in the order book, we see a stable order going forward. Obviously we are prepared as everyone should be in these times to see lower volumes going forward, but we don't see it today.
This is a follow-up question from Herman Dahl. Can the relatively high margins downstream mainly be explained by increased volumes and higher dilution of fixed costs or by price increases?
Once again, repeat.
Can the relatively high margins downstream mainly be explained by increased volumes and higher dilution of fixed costs or by high price increase?
It's a mix.
Yeah
Of course.
I would also like to point out to the question you had before as well. You have to remember that when you're talking about the construction market and the insulation player, the construction market as such consists of new build and also of renovations, and we are exposed both to renovations and new build. For BEWI, it's not only the new builds and construction that is a part of the volumes and order intake.
We have two questions from Anders Brundtland in Carnegie. In your outlook, you write that you expect continued high EPS prices, but raw material prices to stabilize and slightly decrease. This does imply you believe even higher CapEx levels for 2022. How does this fit into your view of your slightly lower margins in RAW?
Oh, I don't think we mean that. We have been very clear on pointing out that we expect margin movement from raw to downstream. It needs to be a misunderstanding. We do expect margins to move a little bit from raw to downstream.
There's another question from Anders Brundtland. Your guidance for improved margins in the downstream segments during 2022. Can we expect this from the second quarter, given the general one quarter lag between higher costs being moved to customers?
Given what we always say, we do not speculate on the market situation in long term. We do say this because we expect this to happen in Q2, yeah.
Okay. I don't know if we have more questions. No, it seems to be that. Any more questions from the room? No?
No. I have to say thank you for your time, and we see you next time.