Frank Dellaquila
Senior Executive Vice President and Chief Financial Officer at Emerson Electric
Thank you, Lal, and good morning, everyone. Please turn to Slide 5. As Lal mentioned, we had a very strong operational start to 2023. Underlying sales were within our expectations for the quarter at 6%, driven by 10% growth in software and control and 5% in Intelligent Devices.
Net sales were up 7% with a four-point drag from currency and a five-point contribution from AspenTech. World area growth was led by the Americas, which was up 13%, driven by strong process sales, particularly in energy and chemical. The continued energy crisis in Europe, affected demand as underlying sales were below prior year by 2%. However, sales were up 7% after adjusting for the impact of Russia.
Sales in Asia, Middle East and Africa were flat versus prior year, as strength in the Middle East, driven by chemical and energy investments was offset by dam sales in China, mainly due to challenging year-on-year comparisons and sporadic code-related shutdowns. By industry, we continue to see strength in later cycle markets like energy and chemical. Chemical investments and plant modernization and sustainability remains steady in North America and Asia, but we are keeping a close eye on this market as we assess our outlook for the balance of 2023.
Overall, first quarter process industry sales were up high single-digits. Similarly, hybrid sales were up high single-digits, led by continued investments in life sciences reshoring and metals and mining. Discrete sales were up mid single-digits as this earlier cycle business starts to lap more difficult comps. The growth in discrete was offset by weakness in our commercial business in safety and productivity, which was down 10% for the quarter, but with early signs that we are bottoming out.
Overall, we feel confident about the health of our end markets and our conversations with customers indicate continued growth in investments during 2023. Price during the quarter contributed four points as our pricing actions from 2022 and additional actions taken at the beginning of 2023, are driving strong price realization. Backlog grew approximately $700 million during the quarter to $6.6 billion, giving us ample opportunity to execute on the rest of the fiscal year plan.
Adjusted segment EBITDA margin improved by 130 basis points and leverage was 40%, excluding AspenTech. North America mix contributed to the margin expansion and price was accretive to margin in the quarter. Software and control margins were up 200 basis points, led by AspenTech. Intelligent Devices performance was strong with 110 basis points of adjusted EBITDA expansion.
Adjusted EPS was $0.78, and I'll discuss the details when we move to the next chart. Lastly, on this chart, free cash flow of $243 million was down 20% year-over-year, mainly due to trade working capital, including the impact of supply chain performance, which is improving, but is still challenged. We are focused on improving trade working capital as we progress through the year, and we reiterate our expectation of 100% free cash flow conversion for the full year.
Turning to Slide 6. This is our adjusted EPS bridge versus the prior year. First, I wanted to say that we had very strong operational results, again, reflecting low-40s leverage on incremental sales, which delivered $0.15 to adjusted EPS in the quarter. There was an unfavorable impact due to stock compensation as Lal said of $0.09 and an additional $0.09 due to currency. The stock comp impact was primarily due to our legacy long-term incentive plans, which required mark-to-market treatment on recorded expense of the 31% increase in our stock price during the quarter. The last of these plans will run off in 2023 and the new plans do not require mark-to-market accounting. So going forward, the variability from stock comp will be dramatically reduced in 2024 and beyond from what it has been historically. Currency in the quarter was primarily driven by the accounting treatment of our long-term contracts in addition to customary translation and transaction impacts. Other non-operating items and share repurchase contributed $0.02 through the quarter.
Please turn to Slide 7. Turning to our 2023 outlook. We continue to see strength across our end markets. As we communicated in October, process, hybrid and discrete markets are all expected to grow mid to high-single digits in 2023. The long-term secular trends we discussed in November continue to be relevant for our business and are driving growth and successes in 2023. Energy transition spend continues to be strong as evidenced by the successes Lal highlighted a few minutes ago. Energy security investments, including LNG continue to accelerate especially in North America and the Middle East. In hybrid, life sciences investments due to reshoring continue to move forward and metals and mining spend is centered around electric vehicles and electrification value chains. Those value chains are also benefiting discrete markets, especially in the US. The one weakness we see in the business today is our commercial exposure within the Safety and Productivity segment, which was down 10% in the first quarter. We expect these sales to improve as we move throughout the year as we face easier comparisons and we see early signs of a turn in demand.
Please turn to Slide 8. We're maintaining our full year guidance based on the underlying strength in our end markets and robust backlog. The guide for underlying sales growth remains at 6.5% to 8.5%. We now expect currency to be less of a headwind at 2 points, and AspenTech is expected to contribute 3.5 points. Therefore, we are increasing our net sales expectations to 8% to 10% of a point from the previous guide. We are holding operating leverage, adjusted EPS and free cash flow conversion for the year at the previous guide. Within that guide, we intend to cover the unexpected stock comp headwind that we had in the first quarter with excellent operational performance. For the second quarter, we expect underlying sales growth of 8% to 10%. Currency continues to be a headwind, reducing sales growth by approximately 3 points. AspenTech will contribute approximately 5.5 points and net sales are expected to be 10.5% to 12.5% up. Leverage expectations again are in the mid to high-30s. Adjusted earnings per share is expected to be between $0.95 and $1, which is a 13% increase at the mid-point of the guide. We've included quarterly data for 2022 on a continuing ops basis in our press release and in the 8-K that was filed this morning.
Thank you for your attention, and we'll now turn it over to the operator for Q&A.
