Ladies and gentlemen, welcome to the Medmix half year results 2022 conference call and live webcast. I'm Iruna, the Chorus Call operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christoph Lautner, Head of Investor Relations. Please go ahead, sir.
Thank you, and good morning, and welcome to Medmix H1 2022 results conference call. Today with me is our CEO, Girts Cimermans, and our CFO, Jennifer Dean, and as well, Sheel Gill, our Head of Strategy, M&A, and IR, and my successor here at Medmix. For this call, we have prepared a presentation which you can find on our homepage. Please note that if you want to ask a question during Q&A after the presentation, you have to dial in via the phone number that was sent to you when you registered. As always, I want to draw your attention on slide number three. The call may contain forward-looking statements containing risks and uncertainties. These statements are subject to change based on known or unknown risks and various other factors, which could cause the actual results or performance to differ materially from the statements made in the call.
Having said that, it's now my pleasure to hand over to Girts Cimermans for the presentation.
Thank you, Christoph, and good morning, everybody. Let me talk about the highlights of the first six months of this year. The first half of 2022 was in many aspects yet again very far from business as usual. The momentum that Medmix had throughout last year continued into early 2022. The world was enjoying a recovery from a pandemic when the Russian invasion of Ukraine brought with it unforeseen geopolitical and economic effects. Supply chain constraints, rising freight, commodity and energy prices and their impact, followed by COVID lockdown in Shanghai that limited our output and sanctions in Poland late April that led to suspension of manufacturing in our plant in Wrocław. These events yet again put our business model to test. A test which we passed with flying colors.
In the first six months, we achieved record revenue of CHF 250.6 million, growing organically over 10% from the same period last year. Our exposure across diverse markets helped us compensate for temporary headwinds in industry. Our common operations function rallied quickly on ramp-up plans for alternate manufacturing sites as Poland was suspended. We delivered 24% adjusted EBITDA margin. Thanks to our strong customer relationships, we were able to agree on price increases to compensate for the inflationary pressures. The reason for the 140 basis points variance from last year was primarily the time lag between cost increases and the agreed price increases, and also higher costs being a standalone business. Our cash flow amounted to CHF 14.3 million after Polish sanctions and the necessity for higher working capital to fund growth and secure customer deliveries.
Not only did we succeed to deliver over 10% growth the first six months, we also gained traction on our strategic initiatives, sustainability, geographic expansion, and launching new products. The Pharmapack trade show in May saw the launch of PiccoJect, our brand new auto-injector for Drug Delivery segment. More on that on slide six. This brand new auto-injector is targeting the fast-growing biologics and biosimilars markets for prefilled syringes. Due to its innovative design, it is smaller than most competitors' devices, and that makes it easy to use for patients. This has been proved by human factors study. PiccoJect has an extremely low part count, only eight. Most auto-injectors in the market today have more than 15 parts. This low part count significantly reduces manufacturing and scale-up challenges that will benefit our customers. The low part count also improves the reliability of the device.
The launch at Pharmapack was a success. There and in subsequent events where we showcased PiccoJect, we received great interest from our customers and even some respectful nods from peers. We have already received a solid amount of leads from pharma customers around the world, helping us grow the pipeline for the CHF 100 million midterm target for Drug Delivery revenue. Moving to page seven, let me talk about the revenue performance of our segments. Dental segment continued growing strongly as the dental practice occupancy continued its recovery. The revenue in Dental segment grew 15.7% to CHF 71.3 million. All geographies showed strong growth, especially the U.S. We were able to negotiate price increases with our customers to account for the cost inflation, and these increases gradually started to come into effect in the second part of Q2.
We continued to improve our market coverage with the Dental trade, one of our strategic initiatives for Dental. We entered Japan and deployed more resources to the U.S. and China to work with local trade. Drug Delivery segment grew 16.8% to CHF 23.8 million. On the back of higher demand from customers and recovery of elective treatments in post-pandemic environment. Similarly, as the elective surgeries rate recovers, and thanks to continued growth from a tissue bank market in the U.S., Surgery segment grew 16.2% to CHF 6.7 million. We also signed a co-development agreement with a major medical device player, where we expect to see first device revenue contribution already next year. Industry segment revenue remained essentially flat versus same time last year.
Once the Polish sanctions were imposed, we experienced strong support from our customers and trade organizations around the world. Customer loss has been negligible, and we continue to see strong order intake as our customers put trust in our ability to mitigate the impact of suspended manufacturing in Poland. Industry revenue for the first half was CHF 79.2 million. Beauty segment revenue grew 15.8% to CHF 69.5 million as the pandemic restrictions were gradually lifted and our customers prepared new product launches. The output for Beauty segment reached pre-pandemic levels. The Beyond Mascara strategic initiative gained solid traction as the team has started to work on 16 new customer projects involving the new Micro Bristle Applicator.
Overall, the teams across Medmix have done outstanding job in the first half, demonstrating focus, relentless execution, and agility to master the volatile environment around us. In the next slide, let me talk more about the Healthcare business area. Healthcare business area now represents 41% of Medmix revenue, up from 37% in 2021 as the underlying markets performed well and we performed stronger than the markets. The revenue was up 16% organically, and all segments grew double digits. Business area gross profit margin was 0.6 percentage points up, reflecting the positive impact of volume and mix, and margin upsides on closed out of customer projects. A few words about consumer and industrial business area on slide nine. The revenue for the area was up 6.7% despite the impact of Polish sanctions and COVID lockdown in China.
Within days after lockdown in Shanghai was eased, our plant commenced deliveries and was back to near 100% capacity utilization. Beauty segment saw strong volumes across all sectors. We saw continued interest from indie customers, securing more projects from existing indies and also winning projects with new accounts. We also saw nice volumes from the high number of new product launches as the beauty industry took advantage of the relaxation of COVID restrictions. Although we were successful in agreeing on price increases, also with our Beauty and Industry customers, business area gross profit margin was down 3.1 percentage points as the price increase effect lags behind the cost increases and also mix. Now, let me talk about the impact of Polish sanctions on Medmix on slide 10. As you might know, Medmix Poland was put on the sanctions list of the Polish government on April 27th.
While Medmix firmly believes the decision is erroneous and continues to appeal for the removal from the sanctions list, with the strong support of Swiss and United States governments, as well as customers and end users around the world, the plant operations remain suspended. Important to highlight is that no other Medmix company worldwide is under sanctions. As we continue to work for the removal of the sanctions, we also early on initiated mitigation actions to ramp up capacity and production across our other manufacturing sites in Haag, Switzerland, Elgin, U.S.A., and Shanghai, China. The production assets have been ordered and capacity outside Poland increases as we speak. We have also accelerated the assessment of inorganic options for additional sites in Europe. If the Polish plant is not reopened, we see a one-off impact on the 2022 revenue of around CHF 30 million-CHF 40 million.
In the event we decide to exit Poland, either due to sanctions remaining in place or because of this drawn-out stalemate, the attrition is so high that the plant no longer remains feasible. The maximum negative one-time impact on net income is expected to be in the region of CHF 25 million. A few words on our milestones and sustainability on page 12. On group level, we obtained two carbon verification certificates. Haag site saw upgraded EcoVadis rating to gold and 10 out of 13 sites are now supplied by low carbon electricity. Industry segment launched the new MIXPAC greenLine cartridge that helps reduce the carbon footprint by 36% compared to a similar cartridge made of virgin plastic. The product has been met with high level of interest from our industry customers. Beauty segment published its very first sustainability report that can be found on GEKA website, geka-world.com.
With this, over to Jennifer for the financial section.
Thanks, Girts. On slide 14, we see the overview of our H1 2022 results. As Girts explained in the highlights of this first half year, Medmix successfully delivered revenue growth that was at the top end of our full-year guidance for 2022. 10.2% growth, FX-adjusted, is the result of a strong performance in all our market segments, with each achieving between 15% and 17% growth year-on-year, except for Industry, which was impacted by the sanctions imposed by the Polish government. Our gross profit margin percentage decreased by 110 basis points versus the same period last year. This was primarily as a result of the time lag to pass on the unprecedented cost increases we've experienced for raw materials, energy and transport to our customers.
In addition, we experienced additional costs related to the Polish sanctions and COVID lockdown in China. These impacts were partly compensated by a favorable change in product and customer mix as we grew our share of Healthcare revenue in the portfolio in line with our strategy, and we saw some positive closeout project results in our Healthcare segments. Adjusted EBITDA margin percentage decreased 140 basis points, driven primarily by the time lag to realize price increases, as well as headcount to support our strategic initiatives and costs we now incur as a standalone company. Our net income grew by 4.8%, reflecting our strong volume growth to CHF 23.8 million. Net debt increased by CHF 24.8 million to CHF 135.7 million, reflecting higher working capital needs.
Net debt to adjusted EBITDA ratio remained relatively stable compared to December 2021 at 1.1 x. Turning to page 15 and our walk for year-on-year adjusted EBITDA. Firstly, our adjusted EBITDA margin increased by CHF 2.2 million or 3.8% compared to the same period last year, though decreased 140 basis points as a percentage of revenue. Most of the uplift, CHF 9.5 million, came from higher volumes as we grew revenue by 10.2% or CHF 23.5 million. Mix was positive, contributing CHF 1.3 million as healthcare grew faster than consumer and industrial. Margin impact was negative CHF 4.5 million, being the net result of cost inflation and price increases passed to our customers with some time lag.
OpEx is growing in line with our plan with an impact of CHF 4.3 million as we hire critical roles, mainly in sales and R&D, to drive our strategic initiatives and incur new costs to operate Medmix as a standalone company. Foreign exchange has a minor impact in Medmix due to our geographical mix. On slide 16, we move to the bridge from H1 2022 adjusted EBITDA to net income. Depreciation and amortization are stable year-on-year. Nothing to highlight here. Our non-operating expenses are CHF 3.6 million. They are mostly related to the impact of sanctions on our Polish factory, COVID lockdown in China, and spin-off related expenses such as legal costs, signage, and IT.
Financial expenses at CHF 3.2 million are CHF 800,000 lower than the first half of the year, reflecting more favorable financing conditions. Income tax was also at a relatively normal level, with an effective tax rate of 15.1%. Moving on to slide 17 and our walk from net income to free cash flow. Our net working capital increase in the first half of 2022 was driven by three elements. Firstly, sequential revenue growth, that is compared to the second half of 2021 of +10%. Yes, coincidentally, the same as year-on-year growth. Secondly, as demand normalizes, we are transitioning back to our make to stock model of the past to secure lead times, improve agility, and ensure excellent customer service levels. This required an increase in our inventory levels.
Finally, at June 30, we had CHF 7 million of inventory trapped in Poland as a result of the sanctions. Capital expenditure is relatively low at 5% of revenue versus our full guidance, full year guidance of 9%. This was mostly anticipated as our main expansion projects were planned for the second half of the year. Firstly, based on strong continuing demand in our Industry segment markets, we had already planned to ramp up capacity in Poland. This now has and will be partly accelerated and deployed in alternate sites to ramp up capacity fast. Depending on the outcome of developments in Poland, the remainder will be deployed in Poland or elsewhere later in the year.
Second, we continue to pursue our healthcare investment strategy by preparing our new site in Atlanta, U.S., ready for production for U.S. customers in 2023 and with progressing on key R&D projects in all our Healthcare segments. With free cash flow at CHF 14 million, we converted 60% of our net income to free cash flow. This is slightly lower than the prior years due to the increase in working capital, as just discussed. Back to you, Girts.
Thank you, Jenny. This brings us to the financial outlook on slide 19. Revenue in the range of CHF 460 million-CHF 470 million is our expectation for this fiscal year. Early in the year, we guided for 8%-10% growth in revenue for total year. In effect, we confirm that guidance, albeit adjusted for the CHF 30 million-CHF 40 million negative impact due to Polish sanctions. With respect to the adjusted EBITDA margin, we expect to deliver 24%, which is 200 basis points below our guidance earlier this year. Half from a time lag of price increases versus the underlying inflation, and half from the adverse impact of Polish sanctions as we ramp up manufacturing elsewhere. Our midterm aspiration of 8% revenue CAGR and 30% adjusted EBITDA margin remains unchanged.
Finally, to my takeaways for the first half of the year on slide 20. Despite the geopolitical headwinds, we achieved a record revenue in the first half of 2022. Teams around the world did an amazing job, and I am proud of their achievement. These six months also proved the resilience of our business model, exposure to diverse end markets with common backbone. We continue our pivot towards healthcare with higher-than-market growth rates, new product launches, and new customers. We demonstrated strong resilience in consumer and industrial business area, where we start to see returns from the expanded manufacturing site in Bechhofen and amazing customer stickiness in industry. Overall, I'm very pleased with the first half year results of Medmix. With this, I'd like to thank you and open the floor for questions.