It's a pleasure welcoming you to Elkem's First Quarter 2022 Results presentation. My name is Odd-Geir Lyngstad, and I'm responsible for investor relations. With me today, I have CEO Helge Aasen and CFO Morten Viga. CEO Helge Aasen will take us through the business update and the outlook for the second quarter. CFO Morten Viga will present the financials for the first quarter. We will take questions after Helge and Morten's presentations. With that, I give the word to CEO Helge Aasen.
Thank you very much, Odd-Geir. Good morning, everyone. It's a pleasure to be here and present another strong quarter for Elkem. The result for the first quarter was another all-time high, and actually for the third quarter in a row. The EBITDA more than tripled compared to the first quarter last year, and the EBITDA margin reached 33%. The strong result is explained by high sales prices combined with very good operational performance. Conditions in general have been challenging for many industries with high energy prices, lack of raw materials, and transportation problems. Elkem's position is strong, and we have been able to manage these challenges well. This is based on our integrated value chain, long-term relationships, and robust supply chains. A very important move is the new partnership with Hydro and Altor for our battery materials project.
We think this will accelerate the development and the growth of Vianode. Vianode is a strategic project, very well positioned in the green transition, and we really look forward to the cooperation with these excellent partners. Downstream specialization remains a key part of Elkem's strategy. We have now also made a decision to build a new flagship research and innovation center in Shanghai. Let's move to ESG. This is a key priority for Elkem, and also here we are making good progress. We launched a climate strategy last year with reduction targets in line with the Paris Agreement. We are responding to CDP's initiatives on climate and water, and was rated A- and B- respectively.
The CDP reporting is a very comprehensive reporting and has developed as a key driver for us to raise awareness and to improve the work on sustainability. In 2022, we also plan to respond on the CDP Forests. In the first quarter, Elkem obtained platinum rating from EcoVadis, which is one of the most respected ESG rating agencies. Platinum is awarded to only 1% of the companies rated, and we are very proud of this achievement. The safety performance, on the other hand, has been weaker in 2021 and in the first quarter this year than previously. We think this is partly a consequence of COVID, which unfortunately has resulted in less inspections and less interaction, and thereby also harmed our safety work.
We are working hard to improve that now that COVID restrictions are removed in most locations. Fortunately, almost all reported incidents have low severity. Elkem is also working consistently to improve processes across the ESG spectrum. On environment, we have increased the biocarbon share in 2021, and we have now more than 80% of our electricity consumption from renewable sources. 70% of our waste has been either recycled or reused. Coming back to Vianode, we were very happy to announce the partnership with Hydro and Altor on April 6. This is a very important project for Elkem and a significant opportunity in connection with the green transition. Vianode will enable production of anode battery materials with more than 90% reduction in emissions.
This is possible due to use of clean, renewable energy and also a new and closed production process. The project will be strategically important to develop a European-based value chain for the electric vehicle, the manufacturing, and the market for battery, as we know, is growing at an exponential rate. An electric vehicle consumes between 40kg-70 kg of anode graphite or synthetic graphite. It's quite evident that the volumes are going to be very large and representing a very attractive business opportunity. At this stage, Vianode is still a technology development project, and Vianode will develop anode materials with unique characteristics tailor-made to customer processes. Key parameters that we're focusing on are increased range, faster charging, longer service life, and increased safety.
All of these characteristics must be met in large scale industrial processes with low cost and consistent quality. We have already come a long way. This was started in 2016, and we believe that the partnership with Hydro and Altor will be key to accelerate and successfully realize this project. With these partners, we are adding both industrial and financial expertise and experience. The impact from the Russian invasion of Ukraine, I would like to say, first of all, this is a terrible tragedy, obviously, for all the people affected. Our first priority is to ensure the health and safety of our people and the business partners. In addition to that, we have significant focus to make sure we comply with international sanctions. Elkem does not have manufacturing or our own employees in Ukraine and Russia.
These countries also constituted a very limited part of Elkem's sales revenue, last year. However, Russia's invasion have created further disruptions to raw material supply and transportation. In Carbon Solutions, we have partly sourced anthracite coal from Russia, and this is a critical raw material for the production of electrodes. Silicon Products have also sourced some material for certain ferrosilicon grades. Now we are working on alternative sourcing possibilities, and we are optimistic that satisfactory solutions will be found. Let me talk a little about our integrated value chain. The past two years have been characterized by several incidents causing disruptions to the industry and international supply chains. COVID, energy crisis, and now, recently, the Russian invasion of Ukraine.
I think we have proven that Elkem's business model is robust and resilient, and it has enabled us to manage through these challenges in a very successful and good way. We have captive access to high-quality quartz, our own production of electrode materials. We have internal supply of silicon to our Silicones business, which secures stable conditions also here. All of this has been instrumental in order to secure full production and improve Elkem's competitive position. In addition, we have secure access to electrical power based on a defined long-term hedging strategy with contracts and production in locations with access to stable, renewable energy. All of this has secured and relatively speaking, improved Elkem's cost competitiveness. Specialization strategy in Silicones is a strategic priority for us.
The expansion of the Xinghuo plant in China is an important part of this strategy as the project secures access to high quality, competitive feedstock for further specialization and improved environmental performance downstream. Research and innovation capabilities are essential in order to develop tailor-made products for highly specialized applications. To support this strategy, we have decided to build a new flagship research and innovation center in Shanghai. The new center will house several application labs addressing opportunities in key industries. To mention some of them, high-performance silicone products for the electric vehicle sector, products for medical devices and cosmetics, and paper and textile coating materials, and also products for 3D printing. In 2021, actually 26% of our revenues in the Silicones division was generated by products launched within the last five years.
We think this demonstrates that Elkem is delivering on innovation and product development. To put this into a longer-term perspective, the Silicones expansion program now going on in China is expected to generate an additional NOK 5 billion of sales from downstream specialization by 2030. The automotive market is still quite weak. Global sales of light vehicles were around NOK 80 million in 2021, actually 13% below pre-COVID levels. The recovery in 2021 was hampered by problems with semiconductors and logistics and COVID restrictions in Asia. This has continued into the first quarter of this year. As we know, the situation in Ukraine has also added to the problems. However, EVs are growing faster than expected and nearly doubled compared to first quarter last year.
In China, the sales of electric vehicles was up 176%, compared to a year ago. Europe was up 38% in the same period. In both these markets, electric vehicles and hybrids reached a combined market share of 20%. This development is good for Elkem and compensates for the reduction in total car production because an electric vehicle contains approximately 4x more Silicones than a conventional car. We come to the market update. Starting with Silicones. The Silicones prices in China were up after Chinese New Year. Although demand in China was stable, demand from export markets increased both in Asia and to the U.S. In March, Silicones prices came down again due to the negative impact from the new COVID restrictions and lockdowns in China.
The restrictions have forced the downstream Chinese plants to suspend production in some areas. This resulted in lower demand for upstream products such as DMC, but the production so far has been less impacted by those restrictions. Late March and early April, the DMC prices, which many of you follow, seem to have stabilized around RMB 28,000 per ton, and smaller price increases have been observed in the past few weeks. We continue to see strong demand for specialty products, particularly to the electric vehicle segment and to life science. Price increases were implemented worldwide in Silicones, specialties, from first quarter this year, and in the second quarter, we will see further price increases, which will be gradually implemented due to continued cost pressure.
In silicon and ferrosilicon, the market prices have remained at the high level in the first quarter. The energy crisis in Europe has resulted in high production costs and also capacity closures in silicon and ferrosilicon. Combined with logistics problems, this continues to make it challenging to restart idle capacity. As a result, we expect to see tight market conditions and high prices still for some time to come. High energy costs in Europe and other regions have strengthened Elkem's competitive advantage due to our long-term hedging strategy on electrical power. Limited access to raw materials, such as alloy materials, for instance, have caused supply constraints for several competitors, which is contributing to the tight market conditions for various ferrosilicon grades. On top of that, the invasion of Ukraine has caused further supply disruptions and increased prices for ferrosilicon.
Going into the second quarter, we continue to see strong demand across all product lines and are basically sold out. Turning to carbon, the steel markets are important for Carbon Solutions, both directly and indirectly. Due to the location of Elkem's plants, the steel production outside of China is of key importance. In the first quarter, 2022, the steel production outside China was quite stable compared with a year ago. This in contrast to China, where the steel production has been restricted due to the energy situation, and also as a measure to reduce CO2 emissions. Estimated production in China was down 8% in the first quarter this year, compared to a year ago. In addition, the sanctions against Russia is impacting the market supply.
Russia normally accounts for about 4% of global steel production, and of that, approximately 40% is normally exported. Lower demand for Russian steel is supporting the production in the EU and the U.S.. Due to these tight market conditions, higher raw material costs are passed on to increased sales prices for carbon materials. With this, I'll give the word to our CFO, Morten Viga, to take us through the financials.
Thank you very much, Helge, and good morning to all of you. It certainly is a great pleasure to once again stand in front of you and present record results. Elkem is delivering new all-time high revenue and EBITDA numbers for the third consecutive quarter. Our operating revenues for the quarter amounted to almost NOK 12 billion, and the EBITDA amounted to NOK 3.9 billion. The increase in revenue is largely driven by higher sales prices, particularly for Silicon Products and Carbon Solutions, which both reached all-time high levels. As mentioned, the EBITDA was all-time high also with NOK 3.9 billion, which represents an EBITDA margin of 33%. This is also driven by high sales prices.
I would also like to say that the industry conditions have been very challenging, and these results would not have all been possible without Elkem's strong integrated value chain and leading cost position. For us, this is really a proof that we have very robust business models. As you also can see, the profitability improvement in Q1 was particularly driven by Silicon Products, which increased the EBITDA by more than NOK 2.7 billion. As always, we have included a page with the main financial numbers for your benefit. I will not at all go through all of this, but I would like to point at the EBITDA of almost NOK 3.9 billion, representing a margin of 33%, and this is a clean number. There are no particular one-offs or currency impacts into the quarter.
I should, however, mention that the eliminations of intercompany profit are higher than normal because we have higher prices, and then we also have higher margins and higher eliminations, particularly for Silicones sold from Silicon Products in Norway to Silicones in France. Of course, this will be realized at a later stage. Other items amounted to -NOK 23 million, mainly related to a loss of NOK 17 million from a hedging program in the [Salten Energigjenvinning] system, where, as you may remember, we acquired 100% of that asset a while ago. Following that acquisition, this hedging program has been terminated. The net finance income amounted to NOK 32 million+ . The net interest expenses were -NOK 41 million.
That's a bit lower than in previous quarters, following a further improvement in cash and a lower net interest-bearing debt. On top of that, we had positive currency gains of NOK 78 million, mainly related to translation effects on internal loans in euro as the NOK closed stronger end of Q1 compared to end of Q4. The tax cost for the quarter were NOK 732 million, resulting in an effective tax rate of 22% for the quarter, and this is also a good proxy for the estimate for the rest of the year. Let's have a look at the divisional results and start with Silicones, which delivered a good quarter. Although profitability was hampered by higher raw material costs.
The sales prices in China specialties, where we launched new prices effective from January. As I said, we have seen higher raw material costs that have offset these positive effects. This particularly applied to silicon, which is the main raw material. Here we have seen that silicon prices have come down during the quarter, particularly in China, and that is the region where we are short on silicon. As you may remember, in Europe, we are fully backward integrated with silicon metal production in Norway. Finished goods prices have been at very good levels for specialties. We did launch price increases at the beginning of the quarter. In China, where we are exposed to commodity prices for a portion of our sales portfolio, we have seen prices coming down, but now have stabilized at attractive levels.
The total operating income for the quarter amounted to NOK 5.2 billion, which was 41% higher than the first quarter of last year, and the EBITDA amounted to NOK 820 million, representing an EBITDA margin of 16%. We have seen strong demand in all regions and once again, particularly for specialty products to EVs in automotive industry and also for more advanced, or even more advanced products to life science segments. The sales volumes for the quarter were slightly down versus Q1 last year, and a reason for this is the logistics bottlenecks that we have seen during the quarter. Let's move to Silicon Products, which have had a real record quarter in terms of profitability.
This is very much in line with our guidance from the Q4 results, because as we said, there is a very good time lag of approximately three months from changes in market prices to our books and one to two months for ferrosilicon. In Q1, we benefited from the extremely high prices that the market observed in Q4 last year. Maybe even more importantly, we have been able to raise prices, increase prices for specialized products in foundry alloys effective from January 2022, and this will clearly have an even more permanent impact on average sales prices and also on margins going forward. The total operating income amounts to NOK 6.4 billion, which was more than a doubling compared to first quarter 2021.
The EBITDA of almost NOK 3.3 billion equals a margin of more than 50%. The extraordinarily strong result is, of course, explained by high sales prices, very good sales volumes, stable and good operational excellence, and above all, Elkem's leading cost position. We continue to see strong demand in general, despite the weakness that we have observed in the automotive segments. As Helge said, we are sold out for the second quarter. Let's look at Carbon Solutions, which is the smallest, but in general, the most stable business in terms of financial performance. Here we have also seen excellent result in the first quarter. Total operating income was NOK 727 million, which was up 50% from the same quarter last year.
This was all-time high and explained by very good sales volumes and further improvement in sales prices. The EBITDA amounted to NOK 194 million, representing a margin of 27%, and the EBITDA was up 60% from the first quarter last year. There is, in general, a cost pressure with higher raw material, higher logistics costs. With our very strong market position, we have been able to to compensate this by higher sales prices. In addition, we have also seen increasing sales volumes. We see, even in today's turbulent world, we see good steel markets outside China, which are our main markets. We believe that this will also support a very good demand for Elkem's Carbon Solutions products going forward. The strong results for the first quarter is also driving improvements in other key financial ratios.
The earnings per share amounted to NOK 4.20 for the quarter, which also by far is a new record. Total equity amounted to NOK 22.9 billion end of March, and that gives an equity ratio of 51%. If we adjust for the dividend payment to be decided upon by the annual general meeting later today, the pro forma equity would be NOK 21 billion, which gives a pro forma equity ratio of 49%. Our financial position balance sheet is rock solid and has been further improved during the quarter. Our net interest-bearing debt has now been reduced to NOK 3.8 billion due to very good cash flow generation in the quarter.
Combined with strong EBITDA during the last 12 months, we now see a leverage ratio of 0.4, which of course gives us an extremely solid financial position. If we adjust for the dividend payment to be approved later today, the pro forma net interest bearing debt would be NOK 5.7 billion and then give a pro forma leverage ratio of 0.5, which is still extremely strong. Also, on the debt financing side, we have a clear ambition to have a solid position with a well-distributed maturity profile. We have raised new bond loans at attractive terms in 2021. We do have major term loans from Elkem's relationship banks maturing early next year, 2023.
We have already started a process to refinance these loans, and we will get back with more information when this process has been completed. We do believe that the timing now and Elkem's credibility is very good, and we expect this to happen at very good terms and conditions. The debt maturities that you see in 2022 largely consists of Chinese working capital financing, which by its nature is regularly rolled over and we don't see any renewal risks. As I said, we have had an extremely strong cash flow generation in Q1, with cash flow from operations amounting to almost NOK 2.8 billion. That's by far a new all-time high record. Of course, this is driven by very strong underlying EBITDA. But also very efficient and strong capital efficiency management.
We have been able to keep working capital at a very low level, below 14% of operating revenue. Because of inflationary effects, we have seen an increase in the nominal value of the working capital. In relation to operating revenue, we have improved the situation. The investments for the quarter amounted to almost NOK 600 million, which was up from NOK 443 million in the same quarter in 2021. Reinvestments were quite low, NOK 256 million, representing 54% of depreciation. You should expect a higher number going forward because our target is to be between 80% and 90% of depreciation.
Our strategic investments were also quite low, NOK 340 million for the quarter, and these are predominantly related to our two main Silicones expansion projects in China and France. Also, the strategic investments will be higher in the coming quarters. We do now have a fantastic financial flexibility and capacity, and we are of course looking at attractive business opportunities, both organic projects and potential M&As. As these projects are often binary, it's difficult to provide an exact guidance for strategic investments for 2022. I can promise you that, we will carefully scrutinize such opportunities, but we will not at all let the strong results compromise our very strict criteria for investment decisions. With that, I would like you, Helge, to take us through the outlook for Q2.
Yeah. Thank you, Morten. Elkem continues to see strong demand going into the second quarter, explained by strong market positions and robust and integrated value chains. In Silicones, our operations in EMEA and in the U.S. will gradually benefit from somewhat lower silicon prices. In Asia Pacific, COVID restrictions in China could have an impact on demand. Silicon products will continue to benefit from good demand and high prices. Contract prices for silicon will be down compared to the first quarter 2022, as explained by Morten, but remaining at the highly attractive levels. Carbon solutions continue to benefit from strong steel and ferroalloy markets outside China, but could be exposed to raw material and transportation constraints. To sum up, the second quarter looks good for Elkem. With that, I give the word back to Odd-Geir.
Thank you for that, Helge and Morten. We will now open for questions. If there are someone here present at Felix, please give a signal and if you want to ask any questions. If not, we start with questions that we have received on the web. There are two very similar questions from Mubasher in Citi, and Charlie Webb in Morgan Stanley. They ask if we can provide some color on the scale of the potential demand slowdown in China due to the lockdowns. As a continuation of that, if there has been any impact on demand from our customers.
Yeah. I think it's difficult to predict. As we all know, China is taking strong measures to contain spreading of COVID. It has mainly been limited to the Shanghai region, and we have been somewhat impacted by reduced production at our Shanghai operations. How this is going to develop further is difficult to say, but obviously it is a risk.
I would like to say that we have seen in Shanghai now, and also other regions, it really started in Shenzhen, a lockdown now for more than a month. So far prices have held up and also demand in general have held up very nicely. We have seen the latest DMC statistics showing us stable and even a marginally improving trend. Of course, uncertainty going forward.
Mm-hmm.
As an integrated or included in that question, and you alluded to it, Helge, if our production could be disrupted.
So far, very limited impact for us. As mentioned, reduced production in our Shanghai operation for some time. Yeah, I don't think I'll speculate more on what may happen.
There are two questions, also quite similar, from Mubasher in Citi and Truls Egner from SEB related to silicon metal prices. Mubasher is asking, what do you see as the drivers for lower silicon metal prices in the second quarter? Truls is asking, how much do you expect the realized silicon metal price to be down quarter on quarter?
I think drivers, what we have seen, and it's actually started second half last year with the escalating energy prices following a shortage in China and then a similar situation now continuing in Europe. I think as long as energy prices are high, silicon prices will remain on a high level.
I think it's quite easy to understand Elkem's realized prices in Q1. The market prices in Q4 is really a good proxy. To understand the Q2 prices, look at the market prices in Q1, which have been lower than Q4 last year, but still at a very attractive level. I would also like to point out the fact that we have a very solid cost position inherently, and the major part of our costs in silicon metal are pretty much unaffected by the high inflation that we are seeing in the market currently because we have long-term contracts on power, we have captive quartz production, we have captive electrodes, and we have very good sourcing contracts on reduction agents.
We are in a very good position.
We have also received a question from Martin Melbye in ABG, which I guess will be difficult for you to answer, but still I'll try. Please elaborate on the Vianode economics. What was the price paid by Hydro, Altor, and how does the full scale EBITDA look like?
I think we have to take into account that this is still a development or technology development project, and the next phase now will be investing or taking a decision to invest in a industrial scale test production line at Herøya. We have decided or agreed with the partners not to disclose numbers related to the transaction, and it's far too early to start talking about margin levels on longer term industrial production, in my opinion. I think the underlying dynamics and drivers for this initiative are extremely attractive.
We have a question from Charlie Webb. How much order book visibility do you have? Has this got worse, better, or no change compared to first quarter, or not only first quarter, but compared to 2021?
I think we have very good visibility now moving into the second quarter, and as we both have indicated, we are basically sold out.
Again. We get more into kind of outlook. Can you provide us with a gauge of where you expect second quarter EBITDA to land, and how much of a sequential moderation should be anticipated?
Good question for the financial director.
I think we have given a good, let's say, description on how we see the market in Q2. Generally, strong. As I said, prices on silicon metal, which is an important part of Silicon Products, will probably be lower in Q2 compared to Q1, but still at a very attractive level.
I would like again to see if there are any questions from the audience. Doesn't seem to be that. That concludes the Q&A. Thank you very much, Helge and Morten, and thank you for all following Elkem's first quarter presentation. Thank you.
Thank you.
Thank you.