Good morning, everyone. Welcome to Kitron's first quarter report 2023. I'm Peter Nilsson, CEO of Kitron, as usual, with me today is CFO, Ms. Cathrin Nylander. Following today's brief presentation, we will have a Q&A, please post any questions you may have to the Q&A section of the webcast. Thank you. In our previous quarterly presentation, I was asked whether Q1 would be as strong as Q4. My answer then was Q1 will be strong or stronger, I'm happy to report that the revenues in Q1 exceeded the previous quarter by close to 10%. Let's kick off the review. Next slide, please. Slide 2. I'm delighted to present our achievements for the first quarter of 2023. We had an excellent quarter with significant growth in many areas of the business.
Our revenue for the quarter was close to EUR 191 million, an increase of 32.3% compared to the same period last year when it was EUR 144 million. Our EBIT was EUR 17.3 million, which represents an impressive increase of 119% from the EUR 7.9 million of last year. We've also seen an increase in our net margin, which has grown to 7% from 3.1% last year. Our cash flow has been strong this quarter with a cash flow of EUR 10.4 million, a significant improvement compared to the negative cash flow of EUR 10.9 million last year. Our return on operating capital has also increased to 26%, up from 11.5% last year.
Our cash cycle conversion has also improved, reduced from 108 days to 90 days. Our net interest-bearing debt to EBITDA ratio has been reduced from 3.6 to 2.0, another strong improvement. Our order backlog increased to EUR 586 million, representing a growth of close to 35% compared to last year when it was EUR 435 million. Our earnings per share for the quarter more than tripled to NOK 0.74 compared to NOK 0.22 in the first quarter last year. We've had an exceptional first quarter, and I'm proud of the hard work and the dedication our team has shown.
We're committed to delivering value to our customers, and we'll continue to work hard to maintain our growth trajectory. Speaking of growth, let's take a look at some trends. Slide 3, please. Demand has been particularly strong in the Defense and Aerospace and Electrification sectors. It continues to remain robust in industrials. Supply chain constraints are improving but not yet back to normal, with primarily large node semiconductors and custom parts continuing to be challenging. Even though revenue has been all-time high in the quarter, undelivered backlog remains at approximately EUR 50 million, improving some 16% the previous quarter. This equates to about 3 to 4 weeks of full production. Broadly looking at the sector trends, product that supports energy efficiency, energy grids, EV charging will continue to grow over the next several quarters.
Driven by global security trends and concerns, the Defense sector is continuing to strengthen. We see that products that incorporate automation, mobility, Connectivity, and some levels of automation are also positioned for further demand increases. On a regional level, the Central European sites lead the way with a growth of over 60%. The Polish facility alone has delivered more than 160 of sales compared to last year and the same quarter last year. The Nordic sites follow with a growth of 30%. Comparatively modest growth, just under 10% in others as regionalization drives business back to Europe from China, and local business has yet to recover fully. Next slide, please. It's the order backlog.
The order backlog for our company has increased significantly compared to last year, rising from EUR 435 million to EUR 586 million this quarter. This is a positive development and a testament to the strength of our customers and our business. The growth in our order backlog has also been driven by our performance across different market sectors. Connectivity grew from EUR 75 million to EUR 81 million, while Electrification grew from EUR 135 million to EUR 210 million. The Industry sector also grew, rising from EUR 115 million to EUR 135 million. Medical Devices sector remains flat, with orders remaining around EUR 31 million. On the other hand, D efense and Aerospace grew from EUR 78 million to EUR 130 million, representing an impressive 66% increase.
We've observed that component lead times are decreasing, particularly on Connectivity products or product components where they're in the Connectivity products. This is resulting in shorter order horizon from our customers. In contrast, Electrification orders have continued to increase, driven by products and technologies that target energy savings, such as heat pumps, electrification of gas-powered tools and equipment in EV charging, load balancing for local or long-haul grids. These products tend to have a higher degree of higher-level assembly with many custom parts. Additionally, the Industry sector continues to thrive on automation-related products and advanced tools for silicon chip design, verification, and application testing. While the Medical sector has remained flat, we'll continue to monitor this sector for any growth opportunities. Finally, we see strong defense in Defense and Aerospace, driven by increased security concerns in Europe and the U.S.
Overall, we're encouraged by the growth in our order backlog, and we're committed to maintaining our positive momentum in all market sectors. Next slide, please. As a supplement to order backlog, we also consider the R12 demand, which is a twelve-month forward-looking demand based on customer forecasts. I'm pleased to report that the R12 demand has risen from eight to EUR 837 million from the EUR 647 million last year and EUR 802 million last quarter, reflecting a strong trend of growth for our business. The R12 demand affirms the trends we're seeing in the order backlog, with strong growth in market sectors such as Electrification, Defense, and Industry. Market sectors like Connectivity and Medical Devices are somewhat softer as lead times and stock levels are adjusted.
While the order backlog has a modest growth quarter on quarter of 1.03, book-to-bill ratio, the R12 demand shows a book-to-bill ratio of 1.2. In summary, we're confident that our strong progress and growth will continue into 2023 and beyond. We'll continue to focus on securing capacity and materials to meet our customers' demands and grow our position in the industry. I'll be back to discuss the outlook and key takeaways in a little bit. For now, Cathrin will review some hardcore details behind the numbers. Next slide 6, please.
Thank you, Peter. Euro as a presentation currency. The idea to change presentation currency to euro is not a new one. It has come up as a topic with investors over the years but also in our own discussions, especially after the acquisition we made last year, even further driving down the NOK part of the revenue and transactions. It is to eliminate the variations in the NOK specifically and to give greater transparency on the underlying growth. A few data, it's treated as a change in accounting policy according to the IAS 8. The indirect method, shortly explained, is that the sites still report in the local currencies. Numbers are first consolidated into NOK and then changed into euro. With the direct method, we would have skipped the stop with the NOK.
The resulting consolidation would have been the same, but there are some valuations aspects on the assets that are different. The presentation currency change will take out variations in translation differences in consolidation, but not underlying currency risk as such, which is important to have in mind. Since this is an accounting change, numbers, comparative numbers for the opening balance in 2022 and onwards are audited and currencies used in the table are shown below. The methods are for your information here so that you can look into it. If you want to look at the restated numbers, you will find them by quarter on kitron.com. For your information is that we have recalculated them month by month. To get the correct numbers that we get, you have to do the consolidation on the month-by-month basis. Next slide, please.
Slide 7. On this slide, we're just briefly showing the comparative development between NOK and EUR as presentation currencies over time. The top left table shows revenue per year in NOK and in EUR and the % growth for the same period. First, CAGR is slightly higher in NOK than in EUR, reflecting the NOK development over the time we've had in this period or over time. Looking at the growth in EUR and NOK, it is evident that the NOK numbers are varying much more and that the variation is of course linked to the NOK development. The difference in growth is up to 10%, but it's also, you know, a possible difference in decline of 10%. Also exemplified to the right is a table showing translation differences, the consolidation for the 1st quarter. It's very clear.
You can see that the underlying growth is 36%, but presented in NOK, it's 47%, and in EUR, it's 32%, and the 32% is much closer to our underlying of 36%. We are taking out some noise and making the numbers more transparent for us and for all the other users of the accounts, the main reason for the change. Next slide 8, please. Revenues. Now on the revenues in the quarter, Peter made some comments on it. Overall growth in the sectors compared to last quarter is 32.9% and 32% compared to the same quarter last year. We have a sector growth compared to last year varying between 8%-63%, which is quite high.
I choose to comment on the developments compared to last quarter for this time. In general, component availability is continuing to ease and the demand is strong. Connectivity continuing with the growth, it's between 5%-10%. It now the third-largest sector. Electrification, industry, now the two distinctly largest sectors and continue to grow with 13% and 10% respectively from last quarter. Medical device is up 11% from last quarter, and defense aerospace grew 5% in this quarter. We will continue to see sector deviations between the quarters as component supply is still a bit uneven, but there is a clear growth compared to last year. Again, in summary, total growth of 32%. Next slide, please. Slide 9. Business sectors. The revenues are discussed by Peter in depth. I'll just follow shortly with some of the numbers.
The large growth in volumes creates large economy of scale in general and more efficient utilization of resources. It shows us how efficient we can be on higher utilization. All the sites are profitable and at good margins, but I think there is still some room for improvement. The Nordics, Norway, Sweden, and Denmark, revenue grew 30% and the profit grew 92%. EBIT margin is over 9.8%. CEE, Lithuania, Czech, and Poland grew 60% and profit grew 157%. EBIT margin is over 10% in this area. The rest of the world, mainly our two facilities in China and the one in U.S., revenue grew slightly lower on 7.4% and profit improved up 84%.
U.S. no longer loss-making and has shown improved stable results for all three months in the first quarter. EBIT margin at 9.1% and the same as last quarter, and a strong improvement from last year at 5.5% when material allocation was still holding us back. Profit at EUR 17.4 million compared to last quarter's EUR 15.9 million, followed by the revenue increase of 9%. As for the employees, now approximately 3,200. Strong growth on direct workers in CEE due to the volume ramp-up and up from the 2,800 last quarter. Next slide, please. Slide 10. Cash flow and working capital. The cash flow ended at a positive EUR 10.4 million compared to a negative EUR 10.9 million in the same period last year.
The net working capital is stable or exactly the same, basically, from Q4, in spite of the continued growth of 9%. I'm very happy that we can stop the movement on that one. But other items brings the cash flow down a bit, but still positive due to the profits in the quarter. A positive EUR 10 million in cash flow. Cash flow on net interest-bearing debt continue to be our attention to guard our interest expenses and hence net income and earnings per share. Next slide, please. Slide 11. The positive trend in the key ratios continue. Net working capital is 23.7%, trending downwards. As we previously said, our target is to be below 20%, and now we finally made a, sort of a big, step down towards that.
ROC at 26% is above the strategic levels of 20%-25%, where we wanna be or higher. The strong ROC is of course driven by the profitability in the quarter since operating capital is stabilized. CCC at 90, down from 100 last quarter and 108 same quarter last year, we're finally seeing some traction here too. Consistently higher output are improving the ratios, but we are still some distance away from our targets, I have to say. net interest-bearing debt or EBITDA decreased from 2.5 last quarter to 2 this quarter, and net debt ended at EUR 140.7 million, down from EUR 154.8 million last quarter. It's a result of both improved profitability and reduced debt.
Excluding IFRS, we're at 1.9 and, which is good. Equity as a percentage, 25.6%, same level as last quarter, and earnings per share in EUR is 0.07 compared to EUR 0.02 last quarter. We will present the earnings per share in EUR and in NOK going forward to make sure that we have a direct connection between the share price and our earnings. Finally, proposed dividend of EUR 50 per share. Today is the AGM, and we've decided it will be paid out in or about May 18th. That was all I had to say. Next slide, and over to you, Peter.
Thank you, Cathrin. Thank you. Overall, we're very happy and challenged by the strong customer demand. We do expect further improvements in EBIT and capital efficiency. As a result of this, we update our outlook for 2023, further reflecting the strengthening of the underlying business as well as the change of presentation currency from NOK to EUR. For 2023, Kitron now expects revenues between EUR 700 million-EUR 800 million and an operating profit or EBIT between EUR 60 million-EUR 75 million. Let's move on to the key takeaways. Next slide, please. Slide 13. As the CEO of Kitron, I'm thrilled to see the growth in the last quarter. We've worked hard to improve our supply chain, and we're seeing the results of our efforts.
Our strong margins in Q1 were the result of growing demand from our customers in sectors such as Electrification, industry, and defense. The positive trend is expected to continue from the first quarter into the second quarter. We're committed to delivering value to our customers and excited about this year and the future of Kitron. Finally, we're pleased to propose a dividend of NOK 0.50 to our shareholders. With those words, next slide, please. I'll remind you that the Q&A will start shortly, so please post any questions you may have in the Q&A section of the webcast. Thanks. Cathrin, back on.
Right? While we wait for the questions to come in, let's discuss this, switch in presentation currency. Why now, and what's driving this? You're on mute.
Thank you.
There you go.
It's been clear now the last year. We started to internally just switch to EUR to get a better idea on capacity increases needed, especially when we are talking about the growth for the group as such, not for a site specifically, but when we say that we have customers growing and that they will be growing, you know, out of the capacity of a certain site over time. It was always a discussion, is it NOK driven, or is it actually the underlying growth? For us, it makes a lot of sense to do this internally. I think it's the same externally. It will give us a greater transparency.
In some ways, you know, it's a little bit of less up and down, I would say, on the growth back and forth over the years. We have received some questions, Peter, already.
Yeah. We can move on and start to take them on. First question is from, Christopher Haugland. Did you onboard any new customers of significance in the first quarter, or did the growth primarily come from existing customers? Well, first of all, I think the top 20 customers in Kitron, they represent about 90%, or not 90, I'm sorry, about 60% of our sales. Am I correct, Cathrin?
Yeah.
Yeah. Of those top 20 customers, 19 showed growth or strong growth, so a lot of the business is driven by existing customers. The remaining customer who didn't show strong growth was basically flat.
Mm-hmm.
On top of that, actually, in the first quarter, we are ramping in Poland significant new business with, within Electrification.
Mm-hmm.
There's been a big, t hat's why we grow, Poland grows, you know, 160% year-over-year.
Mm-hmm.
I don't wanna comment exactly on who those are, but they are within Electrification, you know, either grid solutions or EV charging and others also. That, I think that's, you know, the significant thing. Of significance, it's within Electrification. Also from Christopher then, how much of our upgraded guidance can be explained by expanding gross margins following improved supply chains? Why don't I hand that over to you, Cathrin?
This is a difficult question to answer in one. You know, it's several questions actually in one, I would say. The profitability increase is a lot about economies of scale and taking out the inefficiencies we have had and stops, et c., and waitings. I would say it's split when it comes to those two, whatever is, you know, basically improved efficiency and what is large economies of scale. The top line is, that's probably asking, it's only the margins, right? Yeah, I would say that. It's half and half, I guess.
Hey, you wanna move on?
Yeah.
Benjamin Billiard.
Mm.
Can you please comment on the M&A pipeline, please, now that you've deleveraged and on, and are on the front foot operationally? We are looking. I think every week we have a couple of prospects we review. Some are more interesting than others. Nothing that's, you know, coming in firm yet. We are looking. We're doing calculations. We're seeing how it affects... We wanna find business, of course, that's creative to Kitron and to the bottom line. Actively searching and, if we're looking at pure capacity expansions, we're also looking at expanding those internally, so. Let's see. Outlook and visibility for revenues, EBIT, and margins for 2024.
Well, I guess.
Well, the rolling 12, you know, that includes the first quarter of next year. That's in there, and we show for most of the different business units, we show growth in Q1 next year versus this year. The full 2024 is not, you know, we don't have numbers probably for the fourth quarter yet, except for some sites. If we look at the order backlog and the full year next year, for example, for Norway, looks very strong because of defense and aerospace orders.
Yeah. It is a bit early to comment on the 2024, I'd say.
Yeah. I mean, we don't have full numbers.
No
There's only partials for certain market sectors.
We're only in the first quarter, huh? Q2 of this year?
Yeah. Trygve Bruland, "Are you seeing any signs of destocking of inventory amongst your customers? If so, which segments, why, and how does this influence you, if at all?" We've seen, I don't know, maybe, we have about 200 customers. The top 50 are, you know, account for somewhat above 90% of our sales. Within them, probably two, three, I think three customers that I know of that are not increasing, right? Not growing the way they projected they were going to grow, but stable in demand. There's nobody that's really pulling back beyond the levels of 2022.
Yeah.
So far, you know, we're positive and upbeat, and we're struggling with capacity everywhere.
We did see some adjustment, but that was last year, basically, so.
Yeah, it started, I mean, it started early, say, let's say in the third, fourth quarter last year on some of the customers pulling back.
Some other customers grew more than they pulled back.
I'm having no customers call me and saying, "I want to pull back." I'm having customers call me and saying, "I want more. Why aren't you delivering more?" That's the main focus.
Mm.
Okay, we'll give it another few seconds here and see. I think, maybe people were a little bit overwhelmed.
Mm-hmm.
Okay. We are in a little bit of a delay here, 30 seconds or so.
It's 40, I think so.
I don't see anything more coming in. You know, we'll be holding meetings the rest of the day, and hopefully I'll meet you in person, some of our investment community. Okay, guys. Thanks for this quarter. We'll see you next quarter, and hopefully we'll have even better results then. Have a good weekend. Thanks.
Thank you.