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I think we should start.
Yes, Christoph. And no, that's -- ladies and gentlemen, welcome to the conference call of Krones. After a good start to the financial year 2022, we want to present you today the figures for the first quarter. At first, some technical information. For all who participate via video, if you do not see fully both presenter, then you have to change system settings in Teams. It's very easy. Please make a right-click with your mouse key at the picture and select, fit to frame. Then you see the entire picture with both presenters. So once again, please make a right-click and select, fit to frame. Well, additionally, after the presentation held by Christoph Klenk and Norbert Broger, you have the possibility to ask questions. [Operator Instructions] If you have not -- if you do not have the possibility to send us a short information mail, we will ask at the end, all of you, for further questions. So I think let's start with the presentation. I think we are all interested in the details for the first quarter. So I will hand over to Mr. Klenk. Christoph, the floor is yours.
Yes. Olaf, thanks so much. Yes. Good afternoon, and a warm welcome from our side as well to today's conference call, and I can make it very simple today. We have very good news. The numbers are very pleasant, and we are running you through that. The numbers are even emphasizing, let me say, that we are moving towards our midterm targets. They are supporting that strongly, and we will give you the content and background, why is that and why we believe it's sustainable, what we are going to do. When I jump to the first page, you see here a summary, but I don't want to go deeper into that. We actually intend to be quite quick through our presentation that there is enough room for questions and answers. Why is that? We believe that you have a 2:00 -- some further obligations, and we try please to get some speed into the presentation. Overall, you see here the key figures, 45% plus in order intake, we come to that, revenue plus 13% roughly, EBITDA margin at 8.8% and the free cash flow after the first quarter very good from our point of view, EUR 77 million. For all of that, we will go deeper into the subjects. First, to the order intake, and we are very pleased what we see here. That certainly was EUR 1.5 billion, roughly the highest order intake we had ever in the first quarter. And you might now ask, why is that? And how is that supported? And let me put it this way. Number one is that we have a good technology, that's basis for it. But I would say the biggest emphasis comes from we have been going stable through the crisis and have supported our customers quite well. I would say some feedback we get like that and say, okay, since Krones has been extremely supportive in those critical times, there's a huge trust into our organization. That is true for technology, but even more for our service team around the world. So it's some kind of security, what we are selling and giving to our customers, and that is certainly something which we get that from the market. Nevertheless, of course, we have a great investment climate in our industry. There is some recovery in it. And of course, there are longer delivery times in it. We will talk about that later on. But all in all, I think the markets have worked quite well. The pipeline even looks good. So even Q2 might have good results and order intake. Even it's [ represented ] that all our products have been doing extremely well when we look to that 45%. That says a lot as well about processing and into logistics. So that's on the same magnitude as of the core business. So that's for the beginning from the order intake, and I hand over to Norbert.
Thank you, Christoph, and a warm welcome from my side. The revenue development, the next slide. You can see in the first quarter almost 13% increase compared to last year, as Christoph mentioned already, which also means that we are on level or slightly above before COVID-19 crisis, 2020. We have a significant increase in all areas, but the new machine business, of course, has a stronger increase than the service business. As you know from the past, although in the crisis, the new machine business has the biggest downturns and reductions. Now with more confidence in the market and with high order volumes that started last year already, the new machine business is growing overproportionately strong. Nevertheless, we have also, on the after-sales business, good growth in all areas. And when we look at the different areas in the world, our worldwide map, we have strong quarters in North and Central America, almost 21% of our total sales. Similar as last year, which was also a very strong quarter for North and South -- North America and Central America, and also China had strong revenues in the first quarter. Of course, shutdowns, COVID-19 related, which we'll certainly discuss later on, had so far no impact for us in China. On the other hand, you see Eastern Europe, Russia with decrease in relative sales to 6.3% coming from 7% last year and almost 10% the year before and also South America, still on the weak side, only 7% of the total sales represented by South America versus normally around 10% in the past. And Europe, Middle East, Asia Pacific on a normal level. EBITDA development, EUR 87 million in the first quarter compared to EUR 77 million last year, increase of 13.7%, despite the fact that the new machine business was overproportionately growing, which, in general, has a lower margin as service business, despite the fact that we had additional costs, let's say, to manage the supply chain issues and get parts wherever in the world, sometimes at ridiculous prices in, let's say, not from normal sources but on auctions in the Internet and so on. This is all factored in. It's also factored in that we spend about EUR 1 million in the first quarter for the Ukraine crisis, half of it as a donation and the other half internally to rescue our people to -- and their families and give them support and jobs in other Krones companies, mostly in Germany. EBITDA margin, 8.8%. So we are, let's say, constantly moving forward to achieve our goals. I'll come to that later on what we are doing and why the margin is improving. And similar on bottom line, EBT margin, 5.5% versus 5.1% in the prior year and increase of 22% to EUR 55 million versus EUR 45 million the year before. We are more or less on the level before corona crisis. Q1 2020 was not yet or very, very little affected, but on sales and profitability very little. So we are on that level despite the challenges we still have. COVID-19, for example, we had a very high sickness rate in the first quarter in the German plants, but also in other locations, unusually high compared to normal times. And considering those facts, we think this is a very good result and showing what -- that what we are doing since 2 years constantly is working. And we told you in the Capital Markets Day last year and the year before that we have, let's say, a program that we consequently and consistently follow through to improve our results. Of course, volume helps better capacity utilization. That's no doubt. But the points that we presented you 2 years ago are still valid, which means -- we adjusted our capacity. So this part is a check mark on, it's completed. Product cost reduction. We are continuously working on that. We think we made significant progress in some areas, for example, can lines, where we improved our competitiveness. We are still continuing to reduce our own added value in manufacturing. We are working on our global footprint. Hungary plant is improving. Of course, they are fighting with the same supply chain issues as almost every other plant. We are making development progress in China. The localization of supply chains is continuing, same with strengthening our local service worldwide, which was a huge asset during the pandemic times. We are reshaping our product portfolio. We have addressed the brewery, process technology and specialty brewery business, which shows a clear improvement and positive results. Also, the Intralogistics business is improving, growing but also profitability. And pricing, of course, has been a big issue in the last 18 months with 2 price increases we announced for the new machine business, several price increases we had for services, spare parts in order to compensate the dynamic price increases on the material side that we see nowadays, monthly, weekly, sometimes daily but also to help to improve our profitability. So as a result, you can see that our personnel expenses in relation to our sales dropped. So in 2022, we have the full impact of the capacity adjustments showing here in the P&L. On the other hand, the material growth compared to last year is constant despite the fact that material prices increased tremendously and despite the fact that the mix has changed, significantly more new machine business, ratio versus service business compared to last year, and the new machine business has, by its nature, higher material growth than service business. Personnel development, stable compared to year-end last year. So overall, very little changes in Germany, stable. However, we are in the process to recruit people, especially in the digital area and in some technical areas for our, let's say, R&D and innovation. And outside Germany, we have a growth of about 1%, primarily technicians. In the last 2 years, we had some fluctuation, which we did not completely replace because of the low business. Now we are making this up again, filling up service capacity worldwide. Also in order to prepare to, let's say, work on the higher order backlog in the future and master that. Working capital, significant improvement, 23% in relation to our sales compared to 28% last year or 27% the year before. So also here, the measures and the steady follow-up on those measures shows impact. Our supplier financing program that we started 2 years ago shows impact. So the payables days increased. Receivables improved a little bit. And of course, we had a benefit of the prepayments due to the good order situation. The only negative part, if you want so, regarding working capital is inventory. Here, we try to, let's say, increase inventory, safety inventory wherever we can at this point of time to save the supply chain, at least internally as good as we can without the challenges we have from the market here. And ROCE slowly, but surely, of course, also is improving and is also in line with our guidance for this year. When we look at the different segments, filling and packaging technology, and maybe I have to -- I want to say in advance, in the past, including the Annual Report 2021, Krones showed 2 segments: one is filling and packaging or it used to be called filling and decoration; and the other one, the old one was called process technology. You remember, we started already last year, June, to split up this other segment, process technology, to show more transparency because that included the classical process technology with [indiscernible] and other processing technology topics and the intralogistics. And from now on, we always show the 3 segments, so one, filling and packaging technology. It's the same one as what you have in your old documents as filling and decoration. And the other one is pure process technology, and the third one is pure intralogistics. So having said that, filling and packaging technology, revenue increased similar like the total group, 13%. EBITDA level, 9.7%. Here, we have not completely achieved the margin of last year, which is a result of, let's say, significant increase of new machine business, much stronger increase than the service business compared to last year. On the other hand, the price increases that we started last year in August, and we added more this year, has only a limited impact so far in the first quarter because we're still working on order backlog also from last year in our [ POC ] IFRS revenue recognition. Process technology, increase of 16% in sales. EBITDA level, 3.5% versus minus 0.5% in the 2 quarters, 2021 and 2020. We are not fully in our guidance yet for this year, which is 5% to 7%, but we are positive that we will achieve it. You probably remember that last year, in the last quarter, we had a significant increase in profitability in process technology. And this is -- the reason is that we are rather careful during the year with the evaluation of projects. And only when projects are finished, then if there is some security included in there, we release it. So with increasing business here and with, let's say, our conservative approach at the beginning of the year, we are confident that we will achieve here also our guideline. Intralogistic growth of 7% in revenues -- sorry, 5.5% EBITDA level versus 3.2% last year. Of course, 2020 first quarter is not representative. You might remember the first COVID-19 wave in 2020, northern part of Italy was complete shutdown, which also meant for our intralogistic shutdown and therefore, low revenue, unabsorbed fixed costs and low results. So coming to the, let's say, financial topics, cash, cash flow. We are still very strong. We have cash of EUR 453 million. Our net cash, almost same amount EUR 447 million because only EUR 5 million used credit lines. We have around EUR 960 million free credit lines. So total liquidity, about EUR 1.4 billion. Our equity ratio, 39%, EUR 1.4 billion also equity. So very solid as you are used to it from Krones. Free cash flow 2022, EUR 77 million after EUR 30 million last year. Of course, we have a better result of around EUR 10 million. We have less noncash changes. Here, noncash change is primarily depreciation, but also provisions. Last year, we had an impact, 2021, with provisions for restructuring, which we don't have in 2022. Working capital, an improvement, and that leads to cash flow from operating activities of EUR 108 million. CapEx, a little bit higher than last year, EUR 26 million and some minor other activities. So total free cash flow is EUR 77 million. And financing activities, EUR 8 million negative. So net change in cash, EUR 69 million. The financing activities, the ones that you see are leasing payments. And here, you see the development, graphically, free cash flow development Q1 2020, Q1 2021 and Q1 2022. And you also see the cash conversion rate defined as free cash flow in relation to net income, meaning this quarter, 193%, very good and very high. Our target corridor long term is between 80% and 100%. Okay. Having said this, and I think we covered the major financial topics, Christoph will take over.
Yes. Norbert, thanks a lot. Just give you some reflection on Ukraine-Russia conflict and how we are affected by this. And on the next page, you see what we, let me say, estimate on the current COVID-19 development in China. Firstly, Ukraine and Russian conflict. The revenue we have in that area, and we account for that Ukraine, Belarus and Russia, is 1% to 1.5% of the total order and revenue intake of Krones Group. So it's roughly EUR 70 million, which -- we have no production there. We had just services there. And the direct impact is -- and we emphasize direct, what we buy direct from the Ukraine or Russia is very limited because no materials or product obtained from there. However, we all know, for example, nickel is an issue in case you work with stainless steel. Russian -- running projects in Ukraine and Russia will be finished. That's due to our contractual obligations, which we have. On the other side, we have decided taking no further new businesses on both, and therefore, we have no further contracts from those countries. And let me say the risk we're carrying at the moment is quite limited. You see there a few single-digit million euro amount because those projects we had on board, they have been in a very final stage and the payments have been done. So there's, let me say, a remaining risk, but this is relatively small, and we even believe that those risks, we can handle. Then on the next page, you see the impact we see from COVID-19 and the shutdown we see in the Shanghai, China area. I mean the main area for us is Shanghai since our production plant in China is located there, and most of the sourcing we do there is shipped from the Shanghai port. Now we split that in 2 sections because the direct impact, we can more estimate, the indirect impact that comes to that is more difficult for us. So we had a partial lockdown of our Taicang plant. At the moment, it's running around 80%, 85% of the capacity we have there. So it's up and running. And of course, deliveries out of that plant, because of the shipments, are delayed, and we ship in 2 directions, either to China -- China to our customers from that plant or we ship from China to Asia some products. We have no critical suppliers. We buy direct from China. And there is no single source for it. So after a detailed evaluation, we can source all what we get from China directly even from other suppliers. And of course, we have activated those where we had other suppliers here in Europe. So I would say the direct impact is quite limited. And I should say here, even, let me say, shipping from Germany to China is another issue that we go into the harbors, but there are alternatives. So this seems to be handled. Now the indirect impact we have is that our suppliers, and let me put it this way, electrical components. We all know that a lot of those things they buy, sometimes even semiconductors, it's coming from China, and we can't estimate what this really means. Some of our suppliers have already done some warning letters in an early stage, but this has been, let me say, a warning because they have been even uncertain what is going to happen and how is the whole thing with the sea freight capacities and so on developing.
So -- and you see that later from us, we say the impact of this is, at the moment, quite reasonable for us but it's definitely depending how things are continuing. The last news yesterday morning from our team was well, it seems even Shanghai harbor is recovering, which was a good news, and even that we ramp up our plant in Taicang further, again, a good news, but we all don't know how this will continue. So that's to the COVID-19 situation shutdowns in China to the latest material short supplies probably. And then finally, our outlook for 2022. We deal every day with being optimistic on one side, but then being brought back to, let me say, the hard-core things happening around us. But if we look to, let me say, to the whole thing in a nutshell. The -- first, material supply shortage, we have already calculated in the revenue growth, you see with the 5% to 8%. So this is something we believe in case things, in terms of supply chain, do not further escalate. That seems to be the realistic scenario. And even Norbert said that earlier, the EBITDA margin we are emphasizing for this year is between 8% and 9%. And I would say tailwind is that we have managed on one side, material cost/pricing reasonably. And I would say this is giving us a good fundament in case you see and look to that, that the EBITDA margin is going in that direction. ROCE, 10% to 12%, which is a consequence out of that. And of course, we have a disclaimer on it, saying no further escalation of the Russian-Ukraine conflict, of course. We can't estimate what that would mean at the end of the day, including in case we would have further energy supply issues in between. So this is not something we can evaluate. And second, of course, that the COVID-19 shutdown situation in China is taking place a couple of weeks, but not months, that we can recover from that and the impact will be not so strong. So that's, let me say, in a nutshell, how we see things for the outlook 2022. And we have here at the end, we have a summary. However, I mean, all is said from our side to say, okay, we have a very good order intake, good order backlog. It's the order backlog even going into 2023, which is great. The revenue recovery and capacity utilization is improving, still not fully utilized because of material shortage, but anyway, close to. Improvement of profitability is going in the right direction. The strong service business is supporting. We had a very good free cash flow, which is we are really happy about it. And of course, the global supply chain problems, and I have really to emphasize, our team is great with creativity, what they have done and what they are doing every day is outstanding. It's going in the right direction. We can handle it up to now. And this is for us then the consequence that we confirm our guidance for 2022. So that's hopefully short and condense from our side. Thanks. And now we are moving on to the Q&A. Thank you.
Yes. Thanks to Christoph, and thanks to Norbert about the detailed figures and also the additional information about Ukraine-Russia crisis as well as Chinese situation. [Operator Instructions] And once again, if you could not see both presenter full in one picture, just press the right click of your mouse key and take, fit to frame. But I already have a first question or somebody who wants to a ask question. It's Mr. Weier from UBS.
The first one is on the order intake side, and the first part being the EUR 400 million sequential increase that you saw over Q4. Was that driven largely by large tickets? Or any change in the structure you had? I think last year, it was very much dominated by your small and midsized accounts. That's the first part. And the second part is you mentioned this was another prebuy ahead of your price increase. But I was just wondering, to what extent is it at the expense of order intake you would have normally seen maybe at the end of the year or maybe even next year? I mean what's your visibility on those activities? That's the first.
Yes. We had only one large order into the whole order intake. So all the rest was, let me say, on a standard magnitude. What we call a standard magnitude that there are orders including up to 3 -- EUR 30 million. The biggest one we had on board is -- we have on board is a brewery. Let me say, turnkey. It's a EUR 90 million order. And this is the split, of course, between processing and bottling and packaging. But all the rest are standard orders in the size of normal magnitude. That's what I wanted to say. And to the second question, has the price increase already, let me say, pushed forward the order intake? I wouldn't say so because none of the motivation we have seen from, let me say, let us do it in a hurry because of pricing. It's more about that we see a lot of demand because of certain reasons. I mean there is, of course, the recovery, but there is old equipment. There are new products. So it's a mixture. Some markets are coming back stronger than others because they have been falling back, let me say, like Asia and even Africa. We had, let me say, some lower order intake and in particular, South America, which was doing well recently. So it has a bit to do with the market, yes. And of course, customers are thinking different. We are at the moment at 12 to 13 months delivery time, and they're rethinking what do they need for their, let me say, 2023 period and maybe even beyond that, what they are going to do. So that's driving a bit of order intake. And in regard of the pipeline, the pipeline for Q2 looks very good. I mean we are already through April and have a warehouse. So that was, again, very good. What we see for May and June coming should confirm that because we are closed for the final negotiations and doing those deals. And even in what we can see in Q3, if, let me say, world economy changes not dramatically, looks good. So that's 2 of your questions. I hope that answers it.
Maybe the structure, customers last year, this year.
Yes. Good. This is an important thing somehow because we said last year that our, let me say, midsized customers and private-owned customers have been a bit more encouraged about investments and the key accounts stepped a bit back. This year, the key accounts picking up and have significant investments, which we definitely feel in the order intake.
And what you just said, I mean, does it make it a bit more tougher for you on the pricing side? Was it easier to pass it on for the small and midsized one? Or doesn't [indiscernible] make a difference?
When you -- no, I mean, hard to say. Yes, we got things along in pricing as we were looking for. But was that easy? No, it was not easy at all. Sometimes it was a kind of unbelief in the face of our customers that we are really serious about that pricing. But nevertheless, even with -- let me say, giving them a lot of insight how the material cost increases, we could really convince them that we are still tough where we are with that pricing and that we need that money, otherwise, there would be no business for us. Because we have been crystal clear, we do not walk beyond a certain price point. Maybe because of that, it was a bit easier, but the discussions don't feel easy.
And the other question I have was just on the supplier side. I mean we now have incidences from other companies where supply agreements are in place, but they are no longer really reliable. Suppliers can't stick to it because otherwise, they would go out of business if they deliver on these terms. I know that you don't buy that much direct raw material so it's probably less of an issue for you, but just general, maybe some feedback on the financial health of some of your suppliers maybe.
Yes. I mean first point is, before we come to financial and pricing, I think the fact that Krones was, in the past, criticized quite a bit because we have a lot of, let's say, local sourcing and not running after the cheapest part somewhere in Middle Asia to ship it to Europe, which was criticized in the past, now became an advantage for us. So most suppliers we have for the, let's say, the German European plants are European suppliers. In China, we also need European suppliers. But of course, we are also using Chinese suppliers there. But this structure helped us quite a bit to, let's say -- I mean, it's -- don't get it wrong, it's still a huge challenge with the supply chain. And we have a situation that none of us have seen in the last 30 years before. But with all the creativity of our people and the flexibility in the process, so far, we were able to manage it. Now pricing. Here, we have -- or we are seeing also things that, let's say, our purchasing department is not used to -- starting last year, okay, the smaller suppliers came and said, "Well, I don't care what contract. Either you pay me x percent more or you don't get anything" or "I'm running out of business." Whereas, let's say, the big suppliers, the well-known big names in Germany, they stick to their contracts, but that is also changing this year or has changed. Even big suppliers, I have a handful of examples, of course, I cannot tell names, where we made new contracts in February for 12 months and 4, 6 months later, they told us already, "Sorry, we cannot stick to the contract. We have to increase the prices." So that is the situation. On the other hand, we are acting similar on our side with pricing in all areas. But it's extremely dynamic, and I can just confirm what you mentioned. Vendors and suppliers, who in the past, stick to the, let's say, the price agreements they had with us, whether it was 6 months, 12 months, 18 months, 24 months. They come, after renegotiating a new contract, 4 weeks, 6 weeks, 8 weeks later, especially when this Ukraine-Russia thing happened and said, cannot do it. And you have seen the same graphs, the 2 weeks after the invasion in Ukraine, how nickel and other prices went up.
So thanks, Sven, for your questions. I also have -- another person wants to ask question, Mr. Daniel Gleim from Stifel. I'm not sure. I think we have also, last call, some technical problems with Mr. Gleim. So no problem for you. Perhaps the next one then -- and you will get later a chance definitely, Mr. Gleim, to ask question. But the next one then will...
Do you hear me now?
Yes, perfectly.
Apologies. I would like to ask 2 questions, if I may. The first one is on the order momentum. You mentioned the pipeline is very good. May I ask, could we scale this a little bit how good it really is? Do you think more about the first quarter order intake territory or more about the fourth quarter? So we get a little bit of understanding which direction we are heading.
Yes. I would say to say something about the fourth quarter, really difficult. But I would say, I mean, we have anticipated a significant growth in order intake. I mean now you can't, let me say, multiply the order intake of the first 3 months by 4, that you come to the right number. That would be certainly not the wrong conclusion because we believe that the first half year might be significantly stronger than the second one. But what I can say is that we believe that over the year, we will have a significant growth in order intake, and last year have been already really good. So that's the assumption for the time being. And let me say, for those projects who run longer into Q4 and most probably will be decided there, we see projects until, let me say, Q1, Q2 next year with the big ones. Why is that? Because we see since the long, bigger orders coming up or, let me say, complete replacement of some of the factories our customers have. But to really make a mathematics out of that for the whole year will be, at the moment, with all the circumstances, difficult. But again, at the moment, we believe that we are above the order intake of last year. And this was EUR 4.3 billion just to remind you, and this would be really great in case we would achieve that.
Very clear. May I follow up? You mentioned on the key accounts that they are now picking up. Do we already see them in full swing in the first quarter? Or is this something that you expect is building up as we speak?
It's building up. We saw that already in the first quarter. We saw some of the bigger ones, good and reasonable orders. There are some more orders in the pipeline from the big ones. So I would say full momentum will be given later. But I would say in the magnitude, I have just described it. So this will be not in addition to, let me say, anything on top. So that's in our evaluation.
And has there been any delays in your industry from the current geopolitical risk? Is this something that you observed? Or was there nothing along those lines at all?
No. I would say we see now the first projects mainly in Europe, where there is a, let me say, a question mark in terms of timing and placing those orders. So we see a bit of a delay as bigger the order are, but this is mainly related to Europe. We haven't seen that in all the other areas around the world.
Perfectly clear. Maybe one last one. If you think about the profitability headwind that you are witnessing at the moment -- have we seen the full impact in the first quarter already? Or do you expect a sequential deterioration in terms of higher costs for the second quarter compared to the first one?
We think it would be about the same impact. There might be some additional challenges, headwind costs on the supply chain side. On the other hand, I mentioned we had an extremely high sickness rate in our plants, February, March. So this is certainly going down. That will help. So overall, I would say no improvement, but also no deterioration regarding headwinds on efficiency, profitability.
Thanks to Daniel Gleim from Stifel. And the next one will be Mr. Richard Schramm from HSBC. I have no further at the moment in the line.
Can I ask a follow-up, Olaf?
Yes, Sven. Great. Thank you.
I had one follow-up question just on the divisional performance where -- outside the core segments, which was showing quite an improvement in Q1, and it's -- you reconfirming the guidance sounds like this was not a one-off development, but we will also see a steady improvement in the coming quarters. Is that the right perception?
Yes, that's the right perception definitely. So we are -- how to say -- I mean, things are developing good. We have changed much more than we could describe. And in particular, we have, in those segments, very good managers and teams in -- which are, let me say, emphasizing the development we have at the moment. And still, I would say, for processing, we have still our critical view on the brewing business, which is a proportion of it. Once this develops in the right direction or not, and we still say with what we have said earlier that in case we are not pleased with that, we are still looking [ critique ] to that with a probably decision later on if it's not going in the right direction. And everybody's aware of it.
Thanks, Sven. And let's try again to get Mr. Schramm, your questions, from HSBC. He has written me just in a headline, he has a question to the material quotation, which is more or less stable to the prior year's one in the first quarter. And it looks not so good as 1 -- as 2 years before. But I think we already have a lot of information given about the material quotation. Perhaps the question will be, are there any changes planned in this quotation for the next quarters? Do you see a more positive or negative development?
I mean the mix will -- between new machine and service business will not change like compared to last year or the COVID-19 situation where the new machine business suffered and went down more significantly so that we expect to be stable now. Of course, we have the seasonal changes that we always have in our business: Q1 and Q4, a little higher service business; whereas Q2 and Q3 is a stronger new machine business proportionally. That will not change for the time we can oversee, but not like what we have seen in the crisis that we have a significant mix change. So that's stable. And on the pricing side, it's -- I mean, it has become, as crazy as it sounds, normal business since middle of last year that we have extremely dynamic development in material prices, monthly, weekly changes in pricing. On the other hand, I think we have proven that we are able and also flexible enough to play it in a smart way also on our, let's say, selling side so that we have no negative impact bottom line.
Thanks a lot, Norbert. I've received his question more or less, and it was in the direction about the mix effect. So I think the question is answered from Mr. Schramm. The next one will be from [indiscernible] from [indiscernible] Capital.
Congratulations on a fantastic first quarter. I was interested to learn a little bit about the strategic options that you are about to execute on the noncore segments. It is, of course, very good that results are improving. But the course that you gave us on the Capital Markets Day of executing on that divestment there, I guess, that's still on track. Is that something you can confirm?
Well, I wouldn't say it's on track because we have not moved yet. But again, what we did is we said the investment will take place in case the profitability is not taking place. At the moment, we are going in the right direction. And the debate is not given yet because we said we will look at it in the second half of 2022 and make a decision how things would continue. So we have not reached that point. But I said it earlier, we are still sticking with that few of the whole thing, and the most important thing for us in terms of the processing equipment is that we get the profitability not only for this year, right, or for last year. It must be sustainable. That's the important point. And it's a part of the processing business. So that's the statement to that. But nevertheless, we have not given up on that view.
Yes. I think that's also good to hear because, I guess, it's -- for you, like in all successful corporation, management time is really constrained. And I suppose you want to really focus some time on the successful core business to gain more market share and be even more successful there.
Let me put it this way. Processing, and we said that already many times before, different from brewing business. So let me say what is soft drink and fruit juice related is important in coordination and in combination with our core, the filling and packaging. This is important. Brewery became not that important anymore. But let me say, the processing as such is for the long term. And in particular, when you look to water scarcity we have around the world, very important factor for sustainability for us. That's the reason why this will definitely stay with us, and that's the reason why we say it needs to be on a profitable level, that it has really, let me say, earned to stay with us not just for the purpose of technology, but even for the purpose of making money out of it.
So Chris, as you mentioned profitability repeatedly, is profitability the only thing? Or are you looking at other things as well? Is it just enough that it makes a euro profit? Or how should we understand that then?
Yes, you are correct. No, it's not only euro profit. It has to do a couple of things. Number one, it has to support our core. That's the most important one. Second, it has to deliver the customer technology, helping him out on sustainability issues like water scarcity or CO2 reduction. So that's the second target we have with that. It needs to support the growth of the organization. And number 4, and you can pull it even in front, it has to be at, let me say, 6% to 7% EBT margin level that we are satisfied with it. That is playing on the same league and the same level as the core is doing.
Thanks to [indiscernible] about his question. Perhaps I ask directly the participants who have just logged in via a mobile phone and have not the possibility to raise your hands in the Team chat or something like that. [Operator Instructions] No, I don't think so. So we are coming also more and more to the 2:00. Yes. I think no further questions at the moment, Christoph and Norbert. I think all the figures were clear, quite good.
Yes. Thanks a lot for having us today and listening to us. You see the 2 of us, including, of course, Olaf, about being optimistic for 2022 as long as somebody can say he can be optimistic about 2022 given all the circumstances around the world, we are absolutely aware of that. And of course, there is still some uncertainty in which we can't justify. But the fundaments we have with, let me say, the Q1 results, with the order intake, we know exactly what margin is into that, I would say, should give us a fundamental -- manage 2022 like we just said it. So thanks a lot for listening. A pleasure to have you here, and all the best for you and that really things goes in the right direction around the world, that will be really good. Thank you.
Thank you. Bye-bye. Have a good weekend.