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Good day, and welcome to Suominen's Q1 results publication. Today, our President and CEO, Petri Helsky; and CFO, Toni Tamminen, will present the results. And after the presentation, there is time for questions. Petri, please.
Thanks, Emilia. Yes, welcome also on my behalf. The first quarter of this year was difficult for some as we had expected. Our net sales were EUR 110 million and the comparable EBITDA was EUR 3.3 million, so significantly lower than in the comparison period. Cash flow from operations was minus 2.7. And due to the business environment, which has further, let's say, become more challenging after the Russian innovation in Ukraine resulted in us updating our outlook for the year. We then have a closer look at the financials. Toni, please.
Good morning also on my behalf. So as Petri said, sales were EUR 110 million and -- compared to the previous Q1 sales volumes decreased while sales prices increased following the higher raw material prices. And of course, Q1 last year, we were still living from Suominen's point of view in this COVID-induced demand boom, so the comparison numbers were pretty high. And now as we have communicated previously, the sales were negatively still impacted by this high inventory situation, especially in the U.S. at certain key customers.
Currencies had a positive impact of 4.6 million compared to the Q1 '21. Positive -- one positive thing in the sales is that our -- we have pretty consistently been about 25% in the sales of our new products as a proportion of the whole. And now for Q1, we actually reached 30%. So this is, of course, very encouraging.
Then if we move to that result, EBITDA. So EUR 3.3 million, huge decrease from Q1 last year. Currencies had a positive impact of EUR 0.6 million. And the driver was really both lower sales volumes and then this continued to significant inflation in raw material, energy and freight costs. We started experiencing this in the first half of last year and now it has not gotten any better. If anything, the war in Ukraine has made things worse. So inflation in all these areas continued on a high level. Our sales prices increased, but due to the lag, which we have been discussing numerous times, we could not fully compensate negative impact from this increase in input costs.
Then looking at the consolidated statement of profit and loss. So of course, the decrease is mainly in the top rows of the P&L statement. Costs were slightly higher as present in the SG&A. There is really nothing worrying there. The main driver for that is exchange rate. So we had a positive impact in sales, but obviously, also costs are higher when translated into euros. Then of course, some normal fluctuation, minor inflation that happened during last year.
So overall, I would say that costs very well under control and driven by the low EBITDA, also the net profit fell negative in the first quarter. Cash flow, also, as Petri commented, negative main driver being the lower result, lower EBITDA, net working capital increased somewhat from the year-end figures. And their inventories improved but receivables increased, and payables decreased to some extent.
And more for information, we have made a change to our full turning performance measures, which we report as part of our financial reporting. So this is our invested capital and return on investment -- invested capital metrics. We have decided to change them to better reflect the performance of our core business, so really our -- pacing them more on the operative profit and eliminating the impact of cash at hand. So you can see the new formulas and all formulas there. So in this report, these figures have been restated for the previous year. I think that is the numbers very briefly.
Okay. thanks, Toni. So this is the one summary slide concerning Suominen strategy, which was launched in early 2020. And there's just one -- a small update on the headline, if we're in the middle of the page strategy, the growth and profitability improvement really comes through sustainability, customer focus and efficiency. Otherwise, the contents of the slide has remained unchanged.
Some examples of continued strategy implementation, we have been investing in capabilities as we've been also stating in this kind of events. One example here is the investment project in Italy in our Cresta plant, which was completed in the second half of last year. There, with the investment, we increased and improved the capabilities of that production line. And really within investment, we enabled the production of next-generation sustainable nonwovens. And the interest from our customers and the market for these products has been very high and the timing proved out to be very good because before this investment with this production line in question, we were able to produce only one type of product, which was not sustainable to its nature and the demand for which has now fallen. And in fact, with the new capability, we are able now to run after this ramp-up curve, which has taken the last several months.
We are now in a situation where we can run that line flat out and with this new sustainable product. So overall, very successful case and really then underlining also our capability to innovate and then commercialize new sustainable products. And as a sign of also then the market and the players in this field recognizing our achievements, Suominen was granted an achievement award in the very recent idea conference for our sustainable, flushable innovations, the trade name being then HYDRASPUN Aquaflo. As a further example of then the strategy implementation and what comes to the theme area of low-impact manufacturing, we installed solar panels at our Alicante plant which, of course, then improved further the carbon footprint of our operations. If we then have a look at the updated outlook. So we expect that our comparable EBITDA will decrease clearly from 2021.
And as was already mentioned in the presentation, the war in Ukraine further accelerated this cost inflation, which we have seen already since more than a year, when it comes to raw materials. But this, of course, more also then further deteriorated the situation when it comes to energy costs and transportation costs. The inventory situation that we have been mentioning and which Toni also spoke about in his presentation, when it comes to high inventories at certain key customers of ours in the U.S. that has been progressing the normalization has been going forward. But it has taken somewhat longer than we expected. And these factors combined, then will impact our results negatively during this year. Of course, we are taking all measures and actions to mitigate these factors. And of course, try to maximize the results for Suominen.
Thank you, Petri and Toni. And now it's time for questions. If we start with the questions from the lines. So operator, please, do we have any questions?
[Operator Instructions] The first question comes from the line of Harri Taittonen from Nordea.
Yes, the outlook, obviously, means that the second quarter is still affected as we imply with the wording there. But I mean, could you give color on that on the sort of U.S. inventory situation? I suppose like earlier, you thought that most of the issue would be solved during Q1, but now it extends to Q2. But is it -- I mean, what's your feel? Is it going to be kind of equal impact in Q2 versus Q1? Or is it something that could be resolved during the quarter so that this would be marginally sort of easier quarter, second quarter compared to Q1? I just give a bit of feeling how long and how sort of -- how gradually this inventory issue is sort of solved in your view?
Yes. Thank you for the question. I think that there's a couple of things impacting that. First of all, we are seeing signs of the inventories having progressed and to the better seen from our side. And we are then starting to see orders for the -- especially for this household disinfectant products that have been the ones where we've seen this high inventory levels. The other thing that we have been doing is that we have what could be called a swing line, which can produce either such HSD products for then a completely different product family being moist toilet tissue. And we have been actively now during the last several months been running trials and qualification runs in order to then transfer the production of that swing line partly from HSD to the [indiscernible] TT products. And those trials have been proceeding well, and our customers who are then converting the fabric to the end products. They have gained, they have one new business for themselves. So there is a market demand for this product of ours. Once we get this, of course, multistep qualification processes finalized. But we are on a good track and not only with 1 or 2 customers, but a number of customers.
So we are changing the product portfolio for that capacity partly then to another product family, which also then helps in achieving that. Of course, we have been then hunting for other volumes and other customers also for these HSD products than what we have more traditionally been serving, which have been now, say, suffering from this inventory level.
So there are number of steps that we've taken to improve the situation. But with the very high inventory levels that our customers have been having, of course, it was somewhat of a shock for them as well when they, let's say, realize that in the middle of last year or in the early part of Q3. And they are very cautious now when it comes to then offering or ordering product from us and they play very carefully.
Yes. Yes. No, that's yes, that's helpful -- these colors. Well, the second question is really, as Toni was saying that you have talked about this again and again and again with this the lag prices and costs. But now my impression is that you have increased the share of kind of formula-based pricing. I was wondering sort of how this situation looks currently that -- I don't know how much you want to give the information on that, but how big a proportion is related to formula sales and how long the lag is now when the costs have increased.
Yes. Traditionally, already since years, our North American business was to a very high degree, mechanism price-based and still is. And more recently, that the South American business also is now much more mechanism price-driven, which the downside in this mechanism is the lag but the upside is really that we are able to then push through the cost increases, which would be difficult in certain market conditions, of course, especially when the entire supply chain, of course, is squeezed. It's not only us here in our part of the chain but it's also, of course, the converters who are then having the retailers as a next step. They, of course, want to resist the, let's say, the price increases.
And it's finally, of course, the consumers who then are facing the inflation of different goods, including our types of materials. Then in Europe, again, going back a couple of years, there were very few mechanism-based customers. Now there are more in for -- let's say, for year '21, the proportion of European mechanism business rose sharply this year, it's somewhat lower than what it used to be a year ago. Not much. Not much. Yes, but it's still -- the majority of European business also is in mechanisms.
Yes. And a comment there that we always comment on this. And you can easily get the impression that this is some kind of a problem, this mechanism pricing. And it absolutely is not in this kind of an inflationary environment. So really it is benefiting as the lag is just a fact of life that we need to deal with, but we would be much worse of if we did not have such a high proportion of this mechanism sales. And coming back to your final question about how long the lag is. So it is on average -- it depends, but one quarter is a good approximation of the lag. And premium payment...
Yes. And as mentioned, it's -- it has been very quick and steep, the increase because in late 2020, many of the raw materials were at historically low levels. In late '21, they were only a year later, they were at record high levels, and they have kept on -- not all the raw materials, but many of our main raw materials have kept on increasing, of course, deeply still during this year.
Yes, we are talking about double -- low double-digit further increase, further increases quarter-on-quarter. So from Q1 to Q4 and in Q2 to Q1.
Yes, that was actually something I was thinking about asking as well that if one -- [ realize ] from the kind of the lowest point to the highest point, it's been a long way, of course, but then thinking on this Q1 versus Q4 and then Q2 versus Q1, I mean that -- is that sort of more or less same kind of increase still or sort of -- is the rate changing in any way if one thinks of sequential price increase, but you said that it's pretty...
Yes. In the big picture, it is more or less the same. Of course, there is variation between the categories. So unfortunately for us, it's our big most important raw materials, viscose and polyester who are posed to these bigger increases. Then some of the -- some other raw materials are showing even minor decreases. But as we commented -- so Q2, these increases in this major category seems to be around the same level as Q1 versus Q4. But we are now seeing signs that the second half, it would ease up. Probably it will not turn to decrease, but the pace should slow down in the second half, which, of course, then gives us an opportunity to catch up on our margins.
Yes. And the impact of -- let's say, of the Ukraine war was that some of the signs that we had seen earlier on this raw material stabilization was, in fact, pushed a bit forward. And we've got further increases than what we had expected because of the impact the war had on, of course, many factors in supply chains.
[Operator Instructions] The next question comes from the line of Antti Viljakainen from Inderes.
Back to this U.S. volume issue. Could you please discuss a bit how did your volumes develop in U.S. if you exclude these struggling big customers out of the comparison? I mean has there been a fair amount of growing or at least flat customers in the portfolio where the volumes down in the - most of the accounts?
Yes. Outside the HSD, there -- one could say that there's always somewhat normal fluctuation in, let's say, the products, the MTT that was mentioned, the moist toilet tissue, there, the demand has been very high and the production line that is really specialized on that has been running flat out. And then let's say, the spunlace normal -- I think, has been leaving a relatively normal lab. There's some customer fluctuations always, but it's really -- it's the HSD that has been the headache.
And the second, energy-related question. Do you see any risk of production disturbances in your plants in Spain and Italy if Russia doesn't deliver gas to European Union?
I think that -- for -- from electricity point of view, let -- of course, Italy and electricity market is dependent on gas, but I think they, as a nation has to solve it somehow. I think that Suominen has only a very small total issue in that. Then what comes to the actual gas usage which we use for, let's say, drying the fabric in production. I think there the gas is needed. But of course, there are other gas then, which, again, the entire EU that already currently are some smaller, of course, gas connections to both Italy and Spain. But I think that it's something for EU to figure out. We have then also some alternatives for the natural gas, but they are relatively costly.
So certainly, it would cause probably for all actors present in those countries. Some things to be looked at and sold and not to -- not to necessarily to the same cost as with the natural gas. But this is much bigger an issue than Suominen said. It's the EU and the countries, we'll have to figure out ways to how to deal with it.
But to give some flavor on our energy consumption in these countries. So really, the inflation, the energy inflation, we are seeing it's really through electricity. So the increase in gas prices, the direct impact from that to Suominen is pretty minor. So our gas consumption is not huge. It's really the vast majority of our electricity cost is -- sorry, energy cost is electricity.
[Operator Instructions] We have a follow-up question from the line of Harri Taittonen from Nordea.
Yes. Just a follow-up on the capital expenditure, obviously, very low CapEx rate for this quarter, reflecting maintenance, I guess, is there -- I mean, if one thinks now whether revision sort of looking at new initiatives possibly. But do you think -- or what is the kind of the feel for the CapEx and the project pipeline now that you completed the earlier investments last year? Should we -- what should we look at for this year?
I think that when the time comes, we will then tell if there is something that we will start implementing. But of course, I think, we will be relatively cautious not to spend huge amounts of CapEx in this kind of situation. But again, on the other hand, I think that if we have good projects which are reasonable in cost and attractive in taking us further in our strategy implementation and improving our profitability, I think that it's possible that we might be going ahead with something.
There are currently no further questions at this time. I hand the conference back to you, speakers.
Thank you. And thank you for all your questions. And before we end this event, I want to advertise that the Q2 result will be published then on August 9. And I think this was all. So everyone, have a good day. Bye.
Thank you. Bye.
Thanks. Bye.