Good morning and welcome to the Cabka Full Year 2023 Result Investor Presentation. My name is David Brilleslijper, and I'm your moderator today. I'm here today with Frank Roerink, the CFO of Cabka, and Tim Litjens, the CEO of Cabka. We'll start the presentation in a moment, but before that I would like you to share questions with us, and you can do that to push the "Ask a Question" button on the lower right-hand side of your screen. To start the presentation, Tim, please.
Thank you, David. First of all, warm welcome to everybody during this webcast in which we will elaborate on the 2023 full year results, as well as give you an update on our progress regarding the execution of our strategy. After that, Frank will take you through some of the detailed financials, and of course there's always room for Q&A at the end. Let me start off with some first highlights on 2023 underpinning the successful steps in the further execution of our strategy, translating to an improved profitability. We've posted sales of EUR 179 million, that is 6% below the record year of 2022. We've seen a decline, especially in what we refer to as our non-strategic sales segments.
We've taken a deliberate choice to divest the PVC business in the course of 2023, accounting for a decline in sales, as well as have seen a decline in what we refer to as our non-strategic contract manufacturing sales. So, to be clear, that is everything in our contract manufacturing activities that we do outside of the space of reusable transport packaging, so essentially using some of the idle capacity to fulfill demand by customers outside of our strategic focus. When we move to the recycled content, we see that we've progressed there further.
We've recycled a total of 157,000 tons of plastic waste. That's 89% of recycled content in all of the products that we've brought to market, an absolute leading number within the industry, so we're quite proud of that. We posted an operational EBITDA of EUR 24.2 million, that's 12.3% of sales, 1.5 percentage points above the prior year.
Net working capital came in at 13.7% of sales, or EUR 27.1 million, so a good reduction there, helping us to free up some cash flow, and we've seen a total operational net income of EUR 2.5 million. Before going a little further into some of the details of 2023, allow me to take this opportunity to once more walk you through our mission and our strategy and the business model. Cabka's mission is, through innovation, as you will also see later in our presentation, which is essential within the execution of our strategy, through innovation really drive a transformation to sustainable reusable transport packaging within the world of logistics. We do that on the basis of three strategic pillars, the first being customer intimacy.
Especially over the last couple of years, we've really integrated deeply into the supply chains of our customers and, through close collaboration together with the customers, started to design products within our innovation center in Valencia. Through those highly tailored and customized products, we've been able to give customers significant benefits when it comes to what we call TCO, total cost of ownership, but also from a sustainability perspective, the LCA analysis. I will elaborate a little bit more on that later. We do that essentially leaning on, on the one hand, benchmark products that we bring to market, as well as leveraging all the material expertise that we have. We have our design engineers within our innovation center in Spain designing these products together with the customer, helping them to optimize their efficiencies within their supply chain, but obviously also helping them to reduce their CO2 footprint.
We do that by bringing plastic waste from waste, transferring that, or converting that to a new raw material, and working that into our new products. These three strategic pillars: customers, products, and materials, translate essentially to a unique integrated value chain that we apply as Cabka. We really go from the raw plastic waste all the way to the product, and that's essentially what you see on this picture. As feedstock, we take both post-industrial as well as post-consumer hard-to-recycle plastic waste, and meanwhile also take back quite a significant amount of product that we've supplied to customers that has come to end of life. We buy this back in order to provide a full circular service.
All that waste is being recycled in-house, and through our innovations on processing technology as well as materials and product design, we bring then new reusable transport packaging to market. By applying that business model or that value chain, we've meanwhile built a quite impressive presence across many industries. As you see here, we serve reputable blue chip customers across industries of food and beverage, retail, chemical, pharma, automotive, and pooling. And actually, quite a few of the companies that are listed here are on what we call our Customized Solutions. So, they are running with products that we've co-developed with our customer, that we've tailored to the challenges that they have in their particular supply chains.
If we then go and zoom in a little bit more on 2023 itself, I'd like to give you an update on where we stand with regards to the execution of our strategy. Let's start off with sales. As mentioned already before, we've operated in 2023 in a market that, from a general perspective, has been somewhat challenging. Higher interest rates have led to many customers in the supply chain lowering their stock levels, as well as putting a brake on CapEx spend overall, and that has had an impact on the general demand that we've seen. Nevertheless, the innovations that we've put forward over the last couple of years have helped us to really steer against that market headwind and still deliver a stable level of sales in our strategic segments.
I'll elaborate a little bit later on some of the new customer contracts that we've signed and some of the new products that, in relation to those contracts, we've launched. When we look at operations, also there are good progress. As mentioned in prior webcasts, we've taken the initiative to consolidate but also expand our Eco-business in Germany, and that exercise was finalized in the first quarter of 2023 with success, immediately also leading to some higher sales. We've reopened and also expanded the facilities in the U.S., as you may recall, after we had to recover from the flooding in 2022, but we're happy to see that we're in full operations and actually have been able to turn the factory into a better state than it was ever before.
Simultaneously, we've also launched a new recycling technology, both in the U.S. as well as in Europe, a technology that helps us, on the one hand, to significantly improve our operational efficiencies and, on the other hand, also improve the mechanical properties of the materials that we put forward and use in our products. So, in that sense, really a knife that cuts on two sides. Last but not least, as mentioned, a good part of the decline in sales compared to 2022 comes from the divestment of our PVC business, which was concluded last year, as well as the divestiture of our Genthin site in Germany following the decision to consolidate the Eco-business. From an ESG perspective, also there good progress.
As mentioned, the recycled content has further increased from 86%-89%, so we're doing a good job in convincing customers to move toward higher content of recycled plastic waste. But of course, ESG is more than just the materials that we use, and all of our efforts, and I'll elaborate a little bit more on the objectives that we've set for ourselves with regard to ESG, but all of those efforts have meanwhile also been awarded by reputable sustainability ratings like EcoVadis, as well as the Climate Disclosure Project, resulting for us to really operate in the top tier when it comes to the plastics industry. Last but not least, with regard to ESG, good progress on the execution of our roadmap of moving towards 100% of green energy.
We've implemented the solar farm in Belgium, but also are well underway with achieving the targets for the years to come and reaching that 100%. With regards to finance, cash from operations increased significantly. Frank will elaborate on that in a little bit, but that amounted to EUR 27 million in 2023, especially related to improved operational results as well as lowering our working capital. As announced also at the end of last year, we successfully secured our debt refinancing at EUR 80 million. Also on that, more details later. For 2023, we propose a cash dividend of EUR 0.15 . I will now take the opportunity to elaborate a little bit more on the commercial side, as Frank later on will deep dive somewhat more into the financials.
I spoke of some of the new contracts, customer contracts that we've closed, contracts that really lean on, let's say, a close cooperation with the customer to develop new products, and that's what you see here. We've launched two large foldable new containers, one with BMW, the other one with CHEP. Large foldable containers being a strategic growth segment for us, so bringing products as these to market with two reputable companies as these certainly is a big move. Also bringing four new pallets to the market with Continental, Red Bull, IFCO, and Xella. I think this slide already shows, again, also how we are spread amongst the different industries within the economy.
We range from automotive to pooling to food and beverage, as well as now also the building and construction sector, with Xella and some other developments within, especially the Dutch market, proving that our solutions are helping our customers to especially deliver better results when it comes to carbon footprint. In relation to that latter, you have probably heard of the two concepts of total cost of ownership and lifecycle analysis, and these are two concepts that play an essential role in how we bring our products to market and how we actually interact with our customers.
We try always, by an intimate understanding of the supply chain of our customer, we try to quantify what the true benefits to these customers will be, both from an economical perspective, so the TCO, as well as from a sustainability perspective, so the lifecycle analysis, which enables us really to act as an expert consultant and therefore also propose the products that we bring to market rather as an asset than an expense. We're seeing that that proposition is really quite getting a lot of traction, is quite appreciated by our customers. I also promised you to give you some further update on our ESG roadmap. As you may recall, we've set seven different objectives for ESG, ranging from circular economy to climate change and energy, innovation, health and safety, business ethics, diversity and inclusion, and sustainable procurement.
We started with this roadmap as of the date that we basically were listed, so we're some two years underway now. The roadmap has been clearly defined, the objectives have been set, and we've already started to deliver against those objectives. All of this, obviously, will then come together and will be consolidated in the CSRD reporting, which we're well on track to deliver those results at the end of 2024 when CSRD becomes a mandatory reporting requirement. But happy to see that we understand what the requirements are and we're executing against that plan and obviously making good progress on these objectives. That brings me to hand it over to you, Frank, to walk the audience through the detailed financial results.
Thank you, Tim. So, let me first kick off with some key financials that we use to measure our improved operational profitability.
As Tim alluded to, the revenue growth has been declining this year versus last year. However, if we look at the period when we first gave the guidance, we've been able to achieve a 7.6% year-on-year growth since 2021. And with that, an operational EBITDA where 2021 was quite steep with 17.1%, we had a tough year in 2022 where our margin declined to 10.8%, which was suffering quite substantially from higher energy prices and raw material prices. This year, we've been able to restore that quite substantially back to 12.3%. This has been through quite severe cost management and making sure that we could deliver again on much better prices for ourselves and for our customers. And that, of course, generated a very healthy cash, moving it from EUR 5.3 million last year now back to EUR 27.1 million cash generation from operations.
So all in all, I think we've made a really good turn in 2023 to improve that profitability of the company. Let me zoom in on the results and all the elements of the P&L. The decline has been alluded to by Tim, that 6% predominantly from our divestiture in the PVC business and the decrease in the non-managed strategic contract manufacturing part. And if you take that away, then you see still a stable sales in our strategic segments, which is pretty good considering the tough climate that we're operating in. Really important to stress here is the gross profit improvements. We've been able to improve that with EUR 7 million despite the decline in sales, and you see that we've been able to push the margin back up to 51% from 44% last year.
So there is a really good recovery of the business that we're able to deliver again above the 50% mark. We do see that operational expenses have increased 8%, which is not something we're too happy about, but this is something which has been predominantly driven by inflation, where we saw both our salaries of our teams going up, so our people in our factories and the people in the offices, we were faced with inflationary adjustments there. We also took the liberty to also improve the quality of our staff and by filling it with a lot of new people, especially in sales and especially in the U.S., where we see our major growth opportunity. So there we also boosted the sales operation. Overall, a very healthy operational EBITDA of EUR 24.2 million, which is at 1.5 percentage points improvement versus last year.
Let me make sure that we also share with you the impact of the innovations that Tim shared with you, what it means in number terms. When we started the innovation center in Valencia in 2021, we had the first results already that year of 4% of our sales came from new products. That percentage has now increased to 19%, so 19% of our sales comes from products that we've innovated in the last two, three years. So you see the importance of these new products that they bring to our top line. Also, the importance of the underlying business, if you see on the right graph, is that a deliberate choice of stepping out of the PVC business. Yes, it hurts the top line, but it's a very deliberate choice because PVC doesn't fit with our RTP strategy.
Also making sure that we free up capacity for making our own products rather than making products for some of the contract manufacturers, that has been a very deliberate choice. If you strip that out, we will be able to have a stable and steady growth and making us ready for future growth. Zooming into the categories of sales, so let me first address the Customized Solutions. Had the examples that we were shared with you, that has been giving us a 37% year-on-year growth from EUR 28 million in 2021 now to EUR 53 million of sales in Customized Solutions. In our portfolio sales in Europe, we've had also year-on-year growth of 9.1%. So again, there the heart of our strategy, still solid growth showing that we are able to grow our business where needed.
We do that through new products, but also basically through new customer acquisition, especially in southern Europe, we were able to successfully recoup quite a lot of market share. To the earlier comment on the Eco sales, the consolidation has delivered a flat growth in 2022, but now this year a 7.6% growth in the Eco-business, so towards a EUR 24.5 million turnover there. All in all, these segments do show that we are able to grow our business substantially. Of course, 2023 was also a year of still significant investments. We invested EUR 30 million. A significant part was related to the flooding, the unfortunate flooding that we had in the U.S., where we had to spend a lot of CapEx in order to restore the asset base.
Now, the downside of such a catastrophic event is that it also allows you the opportunity to redesign these setups. So we also took the liberty to invest a little bit more in order to expand the capacity base so that we're ready for future growth. So all in all, a significant EUR 12 million went into the U.S., delivering a total CapEx program of EUR 30 million that we spent in 2023. To the guidance that we've given to the market on replacement and maintenance CapEx, we still stuck with below 4%. We are at 3.8% of CapEx that we spend there in maintaining the current asset base. So all in all, all the investments that we make have been towards the U.S. restoration and towards growth.
If I then zoom into the largest contributor of cash generation last year, as inflation hit our customers where they started to destock, we also took a very deliberate choice in making sure that our stock levels were right in line with what we wanted it to be. So we took a major decline in our working capital, especially in inventories, and we took working capital down from EUR 38 million now to EUR 27 million. A very healthy reduction there, predominantly, as I said, in inventories that helped us to deliver this. If I then translate that into a total cash generation, a truly remarkable turnaround for EUR 22 million better than last year, so giving us EUR 27 million of cash generation from operations, partly driven by the operation itself, a healthy EUR 5 million improvement, but predominantly a very significant part in the working capital improvement area.
We did invest EUR 30 million back into the business, as I said, a significant chunk in the U.S. Of course, the refinancing of the current debt structure that we had in place into the new facility. We repaid some of the old facilities in order to go into the new territory. That, I think, is a good segue to give you a little bit more detail on the debt structure that we currently have in place. I think that the strength of the balance sheet after the IPO has helped us to secure a new consortium of banking partners, Commerzbank, ING, KBC, and Rabobank, together have put a facility in place of EUR 80 million, which is a substantial improvement from the previous facility that we had of EUR 60 million.
So I think it's a good test and proof that we are as a business have growth potential in a sustainable industry with good solid margins and enhanced profitability. All in all, I think it's a very good facility to have as a company, especially when it still provides us an additional increase option of an additional EUR 20 million in case we all wanted to increase. The element that I want to touch on now is the guidance that we've provided. There's two things that we have done. We have tried to frame the guidance more in a time period of 2021 to 2026. Previously, it was more a longer-term guidance, and now we've set a very deliberate deadline for 2026 to deliver on these targets.
We have reiterated and changed five of the forward indicators, and one of the indicators being the operational EBITDA, that we've made an adjustment to bring it to 17% by 2026. The sole reason for this is the impact that inflation had on our cost structure, whereby we feel that making the move from the 12.3%-20% is not realistic at this point in time. We still keep on moving towards that 20%, but for 2026, we believe we can achieve 17% operational EBITDA. All the other guidance that we've provided in terms of medium-term guidance will stay as is. Summarizing on the performance of 2023, a decline of 6% versus 2022, yet a 7.6% increase year-on-year versus the strategy. We're at 12.3% operational EBITDA margin.
We're well below the guidance in terms of CapEx and net working capital, respectively 3.8% and 13.7%, and we propose a cash dividend of EUR 0.15 at the upcoming AGM. Then the last slide on the guidance for 2024. We do see that the year starts off slow. However, we feel confident that we can deliver mid-single digit sales growth for 2024, and we feel comfortable that we can deliver a margin of operational EBITDA within the brackets of 13%-15% range. That is all about the guidance and the financials that I'd like to share. I will show you again the calendar of dates, which has not changed since the previous announcement. We will publish our annual report on the 18th of April, and we will also publish then the agenda for the AGM, which is planned for the 30th of May.
Of course, we're looking forward to seeing you at that AGM. With that, I'd like to hand it back to you, David, for the Q&A.
Thank you, Frank. We see the first questions coming in, but I kindly invite you to ask more questions by using the Ask a Question button in the lower right-hand side of the screen. To start off, maybe on a more personal note, Tim, you announced yesterday that after eight years as CEO, you will leave by the end of September. Why did you take this decision, and what does it imply for the company?
Yeah, thank you. Well, it goes without saying that it's been a decision that I've taken only after very, very careful consideration. But as you already said, David, I took that decision after being at the helm of this company for the last eight years. So I think after eight years, there's typically a very natural moment for me personally, as well as for the company, to seek for a change. We've also made efforts, me personally, but also together with Frank, over the last two years to significantly upgrade the team around us. There's been some new appointments within the executive team, but also lower in the organizations we've made, and those changes that really provide a much stronger base for executing the growth that is to come.
So I feel that this is also a moment after leaving behind some of the challenges that we've seen, and especially 2022, that this is a good moment to hand over my responsibilities. And I will do that, obviously, in very close cooperation with the team. With Frank, speaks for itself, as well as the supervisory board. So I deem that task of finding a good successor for me in good hands. And I'm actually excited also to see what's to come in the next couple of months and working on this seamless transition.
Thank you, Tim, and we'll be seeing you still for the coming months. So not goodbye yet, but thank you for at least for the past eight years. One additional question maybe on this. The press release of the results was published yesterday after market, not this morning before market. What was the reason for that, or is that connected to your leaving?
Yeah. Well, it's actually very, very simple. We wanted to take the opportunity to properly also announce this change internally. So this gave us, from a timing perspective, a better opportunity to do so. So yesterday, immediately after the press release, there's been various calls within the company to inform them, and not just about my departure, but obviously also about the steps that we are to take right after that. And so that's really what there's to it.
Okay, thank you. Maybe switch to some financial questions. Frank, a question here to comment on CapEx for full year 2024. Would it be, in absolute terms, higher than full year 2023, considering U.S. startup costs won't be there in full year 2024 or lower? How do you see it?
Yeah, thank you, David. Clearly, the years 2021, 2022, and 2023 have been investment years for the company. We made a very deliberate plan to grow and to invest in growth, to expand our capacity. And if you bring on top of the unfortunate catastrophe that happened in the U.S., the flooding, then you see why the CapEx was substantially higher than originally anticipated. That having said, means that these years were the money that we've used was money well spent in terms of establishing a really good asset base in the U.S. So we've brought down the average life of the asset base down from 13 years now to 3 years. We've expanded the capacity, and we've been able now to launch new products in the market that we'll see come to fruition in 2024.
That said, the level of investments will be brought now back in line with the cash generation of the company. We do want to balance out debt what comes in that we use that carefully to also deliver on the promise that we've made to our shareholders and that we've made to the marketplace, which is all about dividend payment, which is all about a healthy debt structure, and making sure that we balance income and outflow.
So that implies less CapEx for this year?
Well, it indeed implies a much more balanced approach towards cash income and cash outflow. So that is indeed the guidance.
Okay. A bit deeper on the U.S. investments, could you give a bit of color of expansion CapEx in the U.S. facility as to if it's enough for the foreseeable future, or would you need more facilities in the future, and also how are the operations currently going? Maybe the second one is for Tim, I don't know, but the first one is certainly for you.
Yeah, the asset base in the U.S., the unfortunate part or fortunate part, I don't know. I didn't see the operation before I joined because that was a totally different operation than how it is today. Many people don't appreciate what happened in the U.S. Basically, the factory was flooded with more than 1.5 m of water everywhere in the factory, which basically destroyed a lot of machinery and a lot of electricity and a lot of infrastructure that we had. The asset base that we've now been able to restore and build on has basically two things. One, it is much more tailored towards market demands. What do I mean with market demand? It is much more tailored to what we see happening in the U.S., where customers are looking for.
It has quite a significant capacity whereby for the next years, we don't see any need to further expand that capacity. That said, we, of course, don't have a crystal ball, so we'd never know what exactly will happen in the U.S. marketplace. If we would come to a capacity constraint, which I hope we do because that means that we're doing really well, then, of course, we have a fantastic network of toll operators that we've been using during the flooding that have shown to be able to produce and help us with production of our products. As you may recall, during the period of the flooding, all our customers were still supplied with products, and we believe we can continue to do so.
So we can always make the trade-off to build our own capacity or use external facilities to produce products for our customers. So it gives us quite a flexibility in the U.S., and we believe the U.S. is one of the biggest markets that we can break through, and we're putting a lot of effort in that marketplace.
Okay, maybe pass it on to Tim and maybe expand a bit on the question. The operations currently in the U.S., but also what is your market position and development both in the U.S. and Europe at the moment?
Yeah, I think Frank already said it. We were confronted, let me say, with the opportunity to really envision what a new plant would look like. So we took that opportunity, and we built it back bigger and better. That's as simple as it is. I alluded shortly about this new recycling technology that we're implementing, and that actually comes from some of these efforts that we've made in the U.S. So what we see is when you ask the question, David, about how are our operations running, we see an excellent performance, really, in operations, which is a dramatic change compared to how the factory was prior to the flood. So in that sense, yeah, we've really been able to turn this into a good thing. That, of course, then also gives us the base for growing in the U.S. The U.S. is a very significant growth market.
We see many opportunities, especially opportunities for our propositions in Customized Solutions and high-value products. One of the testimonies to that is, of course, the contract that we signed with Target, meanwhile, already quite some time ago. But we see that we're gaining a lot of traction. So having the production facility as well as the tolling network that Frank just referred to is absolutely essential for us to successfully execute on that commercial strategy.
Okay, that's the U.S., Europe? Your market developments?
Well, within Europe, I think you've seen it in those charts that were presented by Frank. A lot of the growth is driven by innovation, and yeah, you see that our proposition and our capabilities there really help us to differentiate. And that, of course, the traction that we have with many of these blue-chip companies, of course, also rubs off within the bigger market.
Okay. Maybe that's a nice bridge to recycled materials because we have two questions on the use of that. I'll give them both to you so you can maybe combine your answer. The first one is, what is the actual price advantage of recycled products versus virgin material, seeing the low actual price for PP and PE? And the second one related to that is, we see a lot of inflow of very cheap virgin plastic, making the use of recycled materials relatively expensive. How does this impact your business model and your margins? So the price advantage of recycled versus virgin in the current market.
Yeah, so let me start off by explaining a little bit to the audience what's going on in the market for plastics, meaning both virgin plastics as well as recycled plastics. Indeed, contrary to what we've seen in the course of 2021 and 2022, where there was a true melt-up, let's say, of many supply markets, as well as the material markets, we see now that lower demand across the entire plastics industry, combined actually also with an increase in supply, has led to significant downward pressure on virgin prices. And typically, then what you see is that recycled prices will follow in the slipstream of that. Obviously, to an extent, that helps us somewhat with our margins.
At the same time, as we were able to push prices up when the market was moving higher, we're obviously also passing these advantages back to the customer on the back of the contracts that we have. I think, David, that proves the importance of the integrated business model that we run. I think, especially here in the Netherlands, there's a lot of debate these days about some of the recycling companies that are struggling, which is truly unfortunate because I think we have an industry within the Netherlands that is really a frontrunner, not just within Europe, but also within the world. But it proves it's a very hard business if you're just acting in a small part of that value chain.
By us operating in a much broader part of the value chain, really bringing products with significant added value to the market that allows us not only to have a certain pricing power if the market moves up, but that also helps us to provide more stability when we see these waves in the prices of the materials themselves.
Talking about waves, maybe to Frank, there's a question. Can you provide some quantification to a slow start of the year? Is that flat or negative sales growth, and what is the U.S. negative in Q1? Or was the U.S. negative in Q1 and Europe positive? You get it?
Sure.
Yeah?
Well, we will do a Q1 trading update on the 18th of April, so then I'll be able to provide you much more insight into what happens in Q1. What we do see, in general terms, is that both the U.S. and Europe are not as strong as they were last year. Keep in mind, by the way, for instance, last year we had just launched the product with Target, which boosted our sales. We had a lot of capacity, idle capacity, for our non-strategic contract manufacturers that we used in a very opportunistic way to make sure that we would use the capacity. That sector has suffered quite substantially from interest rates that's predominantly in construction and in public works. That has been in a decline since then. So those are weak markets that we see.
Unfortunately, that doesn't hurt us so much, but we do see that the full-year guidance of mid-single-digit growth is still, we feel, very comfortable delivering that number. The key reason being that we have pivoted towards much more Customized Solutions, which help us in terms of margin delivery, which help us in terms of customer connection. We believe that that is the solid foundation of the company to bring us to the mid-single-digit growth for 2024.
Thank you. For people who are watching the webcast, you're still able to ask questions via the Ask a Question button in the lower right-hand side of your screen. Next question we received, that is, do you expect I think for Frank as well, do you expect the inflationary pressure that you see will also have a positive effect on your nominal sales growth?
It's a fair question. It's a question which relates to the earlier comments that what we did in 2022. In 2022, we were faced with increased energy prices and raw material prices. The far majority we were able to pass on, in good discussion with our customers, into higher prices for our customers. But as Tim said a minute before, when prices go down, we, of course, have the obligation to the reverse. Yes, there's always an impact between the movement of our raw materials in terms of material prices and energy prices that translates to impact in prices. Now, the second element to add to it is that we are trying well, we're not trying. We're actually delivering a much more balanced sales portfolio in terms of portfolio sales and Customized Solutions.
When we talk about Customized Solutions, it's not only a pricing play that we have. It is value. It's about what do we deliver to the customer that helps them to deliver their value to the end market. And as a good example, I think the pallet that you saw from Red Bull is a good example where it's not about the cost of the pallet. The product that's on top of the pallet is much, much, much more valuable than the pallet itself. And Red Bull, why did they engage with us? They wanted to protect the material, the ingredient of Red Bull, which is on top of the pallet. And then it's about delivering a pallet that can actually withstand the transportation requirements, that can withstand pressure in terms of weight or in terms of temperature.
And that's much more important than just delivering a pallet at the cheapest price. So yes, price is important to our customers, let there be no mistake. But it's also about that we deliver a product that protects what they are shipping. And that's what the real heart of Tim's comments earlier on was about, changing the RTP market. We are not only about simply delivering a pallet. We understand what the consumer is looking, what the customer is looking for. And by understanding, it means that we address their problems, whether it's breakage, whether it's strength of the pallets, whether it's protecting the product inside the box, or whether it's about dealing with temperature changes that they have to do while transporting the product. And that is the understanding that we bring to the marketplace. And we bring that through innovative products that are made out of recycled material.
And that recycled material, I think that that is good for people to understand. The change in legislation in Europe and in the U.S. about the content of the amount of raw material that needs to be from recycled resources is going to go up. And the company like Cabka is uniquely positioned to actually benefit from that change in market and into legislation. It is very hard to process, hard to recycle plastics. The name says it. It's hard to recycle material, and not everybody can do that. And we are uniquely positioned to do that better than many of our competitors out there.
So product characteristics are more important than inflationary pressure?
It is. We will carefully balance the two. But I would like to stress the importance of product. It is just not simply a pallet. It's not simply a box. It is there to do a certain function.
Maybe if you'll allow me to build on that, I think.
Of course.
If we look at what's coming at us through the legislation within Europe, the so-called PPWR, this is not just about an obligatory recycled content. This is very much also about replacing one-way packaging by reusable packaging. So the unique combination of using a high amount of recycled content or exclusively recycled content with a product that has been designed fully for reusability, where we try to maximize the life of that product, which then linking it back to the slide I presented on total cost of ownership as well as on the LCA, every time that you are able to use that product once more helps you to further dilute that total cost of ownership and your carbon footprint. And that's something that we've been working and building on over these past couple of years already. That's what all of our innovations are targeted towards.
I think, in that sense, the PPWR will only give us more tailwind in the years to come.
Okay. Thank you. That's about strategic segments for the company. Now we're going to non-strategic segments. Question here, I think, for Tim as well. Regarding these non-strategic segments, what are your plans for that part of the company or division? Is it not possible to sell those activities, or is a sale challenging where the operations are reliant upon third-party manufacturing? Do you intend to run down further your non-strategic segment?
Well, is it possible to sell it? I think, as we've proven with the PVC business, we've decided to actually sell that business in the course of 2023, with the PVC business clearly being a business that is not part of our strategic focus, but also factoring in the material PVC itself that we would rather not continue with going forward. Then, of course, there is the contract manufacturing. And to be clear, there's two types of contract manufacturing that we do. There is contract manufacturing related to reusable transport packaging. So that is still very much within our strategic scope, to be clear about that. And then there is the contract manufacturing that we do in other markets. Frank alluded on that shortly. The majority of that goes into building and construction.
To be fair, that's a business that, yeah, as long as it brings good margins and we have some idle capacity left that we opportunistically may continue to feed a little bit, but we're not actively seeking acquisition of new projects there. That's capacity that we very much also would like to redirect to our strategic segments, allowing us to further enhance our margins across the portfolio.
Yeah. Okay. Going back to Frank, how does the inflationary pressure for your input costs compare to those for competing products? Can you shed a bit light on that, or is it more a Tim question?
No, it's something we can address jointly. Let me first talk about the raw materials. Clearly, inflationary pressure is an element. However, supply and demand, when we talk about our raw materials, is much more important than anything else. Tim already explained that when there is an oversupply of plastics, that will not help prices to move up and reversely down. In energy, you may recall that we've implemented a whole new hedging strategy in the beginning of this year in order to ensure that we're not subject to heavy volatility in energy prices. So that is working quite well. So we are much better covered in terms of pricing. And that means the volatility is out of the energy prices. Then when we talk about inflationary impact on salaries and on the services that we source in, unfortunately, that will remain an issue we have to deal with.
The good thing is that we see in 2024 a significant lower pressure due to inflation on, for instance, wages than what we saw in 2022 and 2023. It is, of course, something that we carefully monitor. It is relevant for us. We want to be a proper employer and therefore pay proper wages. We compete with other employers. In that sense, if there's an inflationary pressure, we have to deal with that. It is something that we carefully monitor and make sure that we are not too vulnerable to those pressures in the market, which is not easy. You've seen 2023 that we've been able to address this properly.
Okay. Thank you. I think we're going to medium-term guidance. Also, one of the hot issues, I think, in the questions, you moved it from at least 20% to towards 17%. That's quite a difference. Does that mean that you see no more upside above the 17% level?
Thank you for that. If I didn't clarify that before, thank you for offering me the opportunity to do it now.
It's one of the people asking the question.
So the previous guidance, the 20% is something what we'll continue to aim for. But it's a longer term. We've always said it's a mid-term guidance. So for a longer period of time, what we've done right now is to limit the period so that we've been very clear by when we want to achieve that 17%. It's by 2026. And that doesn't remove any of our ambitions that we want to continue beyond 17% towards the 20%. However, we have to be realistic. In the current climate, we are at 12.3%. And making that change, it requires us to grow. It requires much more capacity utilization. It requires some changes in our overhead structure, which we can't execute from today to tomorrow. It will take time to get that implemented. But our ambition will remain to be that we move towards the 20%.
I think it's fair to point out one thing, David, is that when the prospectus was written and the 2021 results were delivered, it was a different time than where we are currently at. It was a pre-Ukraine war. It was pre-the energy crisis, the energy prices, and pre-inflation. We didn't see inflationary pressure that we saw in the last two years. And whether we like it or not, that's a reality we, as a business, have to deal with. And I think what we try to do is bring reality to the targets. It doesn't change our ambition longer term that we want to move beyond the 17%. But I believe that we, as a company, have a responsibility to provide realistic guidance to the market where we think we can be by 2026.
Okay. To add up, maybe there's another question to add, maybe a bit more of that realism in there. Also, on the EBITDA medium-term guidance, could you provide, if possible, a build-up, for example, segment-based, of how you expect to achieve the guidance? Is that possible? Can you do that? That's kindly asked.
Yes. The guidance that we've provided has always been about growth. And a company like ours, Tim and I, we've been in the chemical industry for quite some time. And there is no magic in the chemical industry. The real reason how you deliver good margins is by getting to full capacity utilization. That's the best way to improve your margins. We now still have some spare capacity left in operations, both in Europe and in the U.S. And it's up to us to grow our business so that we can start using the capacity. And if you deliver the capacity, you sure will deliver a better margin. And that will be sufficient.
If it comes to which segments, it's almost, I wouldn't say not relevant, but it is a total company effort whereby sometimes you make more margin in one product because you have a very good price and value proposition, and where in other products you make more volume, and there you can allow yourself a lower margin, but you make more volume, hence you make more cash. That balance needs to be struck right every single time. The aim of the company right now, it's all about growth.
Now, that's a nice bridge to another question, maybe for Tim. You gave a single-digit growth forecast for 2024, for full year 2024. That doesn't sound very ambitious to someone in the audience, especially when you take into account the inflation of some 3%-4%. So the forecast minus inflation will result in approximately 5% growth. Is that not a bit on the safe side? Shouldn't you be a bit more ambitious for this year?
Well, I think there should be a differentiation between which are our ambitions and what we like to put forward as realistic targets.
You overdeliver.
In that sense, we would like to overdeliver against that target. I think you've seen that on the base of the actual products that have come to market, the contracts that we've signed, that we have a good base, a good jumping platform to say, to push for further growth. But we need to be realistic. These challenging general market circumstances are not yet behind us. I think we see across Europe and maybe to a lesser extent in the U.S., we still see that many manufacturing industries are struggling, which then also builds up further price pressure within the market. So especially those players that cannot lean on innovation like we do, typically then resort to lowering their prices to fill their capacities, etc. So I think what we do is we factor all of this in and translate that to a really realistic target.
Yet at the same time, of course, all focus is on continuing this innovation push and continuing signing these new contracts with customers.
Okay. Good. We have some more questions on customers' pipeline, etc. The first one is, do you expect a further impact of destocking in 2024? Is that one of the reasons maybe behind this bit low estimate? And how much spare capacity do you have in your main business line? So first, impact of destocking, is that also in the sales forecast?
No. The destocking effects we saw mainly in the course of 2023 and already towards the end of the year. We've also seen that in the recovery of the fourth quarter sales. That destocking is no longer a major theme. It may, of course, happen left or right occasionally. But in that sense, no, I don't expect for that to continue to bother us in 2024. If we jump to your question around capacity, as Frank alluded to, we've expanded our Eco-business. We've expanded also our reusable transport packaging capacities within both Europe as well as in the U.S. If we look at that from a macro perspective, I would say that we have about 20% of headroom, partially also to come from quite a few initiatives that we're currently taking within operations to drive up the efficiency.
There is a full automation investment program on the table to help us with that. But we've, for example, also rolled out a so-called MES system, which allows us to, on a daily basis, actually on a real-time basis, look at the performance of all of our injection molding machines across the globe, identifying bottlenecks, etc. So if you look at how we're pushing to actually expand within the existing capacity, if I could say that, that is coming from those initiatives as well.
Okay. Let's go to the pipeline. Actually, we have two questions on that. It's maybe a nice one to round up with. The pipeline for customized products, how does it look at the moment? Do you see it slowing, or do you see a slowing conversion into firm contracts due to the more challenging environment, or are you on track? What is the pipeline, especially for Customized Solutions?
Yeah. No, we actually don't see a slowdown in that regard. I mean, meanwhile, we have over 40 colleagues in the innovation center working on these projects. And in that sense, these projects are also not just built on a certain momentum. We engage with customers because they really have a problem to be solved. It typically also takes us, depending on the complexity of the solution, anywhere between nine and up to sometimes 18 months to really bring a solution to market. So these are longer-term trajectories that are not shut down simply because the macroeconomic tide is giving us a little bit of headwind. So in that sense, the pipeline that we built is truly a guidance also for us for the future.
Yeah. And just maybe digging a bit deeper, do you see new potential tailwinds? And also, would that be automobile or food sector, which has been very successful in the past, or any other sectors, any other leads?
Well, actually, the good thing, again, is that you see in the pipeline the same spread across the different industries, as I've shown on this slide, elaborating a little bit on our blue-chip customer base. You see, actually, that across all industries, there are these logistical challenges. On the one hand, to drive for better economics. On the other hand, to reduce carbon footprint. A good example of an industry that we actually were never active in but now really comes up is building and construction because they have these CO2 issues that they need to overcome. In that sense, it's a well-spread pipeline. We don't have, let's say, a concentration risk in one or the other industry, if you like.
Okay. Thank you, Tim. Ending with the pipeline of new products is maybe a good end also to this Q&A. Thank you all for dialing into the webcast. I just want to end with one remark that this webcast has been recorded and will be placed on the investor website, investors.cabka.com, by tomorrow. So if you want to look at it again and see us in action again, please do so after tomorrow. For now, thank you for dialing in, listening in, and hope to see you at a recent event or a quick event coming up. Thank you.