Good afternoon. This is the quarterly conference call operator. Welcome, and thank you for joining the Carel full year 2021 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star then zero on their telephone. At this time, I would like to turn the conference over to Mr. Francesco Nalini, CEO of Carel. Please go ahead, sir.
Thank you. Good afternoon. Thanks for joining our call for the presentation of the full year 2021 results. I'm going immediately to page 2, with a recap of the main corporate events of this last year. At the beginning of 2021, we started the construction of the new plant in Croatia, effectively doubling our capacity in the country and intended to support our growth in Europe, but also increasing the resiliency of our supply chain footprint. The construction has been going as expected, and the start of production will be in April, so next month. In 2021, we completed 2 acquisitions, 51% of the share capital of CFM, a system integrator based in Turkey, and 100% of the share capital of Enginia in Italy, making dampers for air handling units. Both acquisitions fully in line with our strategic guidelines.
We appointed a new board of directors and a new board of auditors. Executive tasks and powers on ESG were assigned to a specific director, Carlotta Rossi Luciani. We entered into our first sustainability link loan for EUR 20 million related to gender equality targets. We also approved and disclosed our first multi-year sustainability plan, Driven by the Future, fully integrated with our industrial plan, involving 7 SDGs, 55 goals, and 68 specific targets on a 3-year time horizon. Today, we're also disclosing the first calculation of our standing in terms of alignment with the EU Taxonomy on sustainable investments for revenues, OpEx, and CapEx. We're very happy with the results because, for example, approximately 60% of analyzed revenues are not only eligible, but aligned with the taxonomy.
Likewise, 50% of the total investments of the group are aligned with the taxonomy. I'm now moving to page 3 with the main financial highlights. Basically, in Q4, we observed the very same trends that we had in the previous quarters, leading to a record in terms of revenues growth rate and profitability for the full year, in spite of global tensions in the electronic material supply chain and higher inflation. Revenues grew by 26.8% in 2021. If we exclude the adverse impact of the exchange rate, as well as the positive contribution coming from approximately half year of consolidation of CFM and Enginia, then the organic growth rate was, in any case, well above 20% at 21.9%.
In 2021, we seized many opportunities related to the acceleration of the secular growth trends in many key applications of ours. At the same time, we managed, thanks to our actions to improve resiliency, to mitigate the impact of the supply chain shortages, which unfortunately is still here with us and affecting a number of product families. Adjusted EBITDA margin in 2021 was 21%, up 130 basis points over the full year 2020. This excellent record performance was driven mainly by operating leverage, offsetting higher raw material costs, as well as a slightly different product mix due to the shortage slightly affecting the gross profit.
Fortunately, the increase and disruptions in energy costs do not have a very strong impact on the group, since in 2021, the entire energy cost for the group was less than EUR 1.8 million. The possible cost increase of energy is not expected to be too material for us. The EBITDA margin was slightly lower compared to the nine months, but that was entirely expected and anticipated and fully in line with what happens every fourth quarter of every year due to slightly softer sales, due to the accrual of some costs and expenses, and also some small writedowns. Organic net financial position, so net of M&A was down by 50%, compared to the previous year, thanks to a high conversion rate, around 60%.
Approximately EUR 70 million of free cash flow from operations easily covered EUR 15 million increase in net working capital, driven by an expected increase in inventory, and most of all, driven by higher revenues, easily covered EUR 18 million of CapEx and EUR 12 million of dividends. On page four, we can see some more figures. Revenues, we can see on the chart in the top left, revenues were up 26.8% to EUR 420.4 million from the EUR 332 million of 2020. If we adjust for the foreign exchange, the growth was 27.1%. If we take out the acquisitions, then the organic growth was 21.9%.
If you look at the chart on the top right, we can see that the growth was even stronger compared to 2019 before the pandemic, at 23.5% organic. EBITDA at EUR 85.3 million was up almost 31% compared to the EUR 65 million of 2020. If we adjust for some non-recurring items, mainly related to our M&A activity, EBITDA adjusted was EUR 88.2 million, up 35% from the EUR 65 million of 2020, or 21% of sales up from the 19.7% at the end of 2020.
Net profit was EUR 49.1 million, up almost 40% over the 35 million of 2020, thanks to an excellent operating performance, but also thanks to a reduction in the tax rate that was 19.6% vis-à-vis the 21.1% of 2020, as we will see in a few minutes. CapEx were EUR 18.7 million, up 41% from the EUR 13.3 million of 2020, and including the construction of the new building in Croatia. Finally, we propose a dividend distribution of EUR 0.15 per share, up 25% from the distribution of 2020, and corresponding approximately to 30% payout ratio. I'm moving now to page 5 with the revenue breakdowns. To the left we see the breakdown by region. All geographies grew very well in 2021.
EMEA grew by 28.1%, net of the foreign exchange or 22%, without the acquisitions, and that's in spite of the electronic component shortage. All applications performed very well in EMEA, so the good performance was across the board. In Asia Pacific, sales grew by 24%, net of the foreign exchange. Here we continue to have a very good result in China, while some other parts of the region had some issues towards the end of the year, related to the shortage and the supply chain. The growth rate in China is beginning to normalize after an exceptional growth, but in any case, at the very good level and with very good growth prospects. In China, we're having very good results in data center, in indoor air quality, in food service that fully recovered in 2021.
Food retail slowed down a little bit in 2021 after an exceptional 2020, but it's already improving again. In North America, sales were up by 23.2%, net of foreign exchange. Again, with good results in data centers, indoor air quality, and food service. Food retail was somewhat slower in terms of growth, and that's because of a slowdown in investment on the end market in North America due to the supply chain issues. Not our issues, but general issues that slowed down the investment on the end market. In North America, I would like to mention that we are starting to see a very interesting growth in heat pumps. You know, it's an application very new in that region, but we are starting to see very good prospects for this application for the future.
In Latin America, sales are up 38.8%, net of the foreign exchange, with a good performance across the region. To the right, we see the breakdown by sector. HVAC grew by 24.5%, net of foreign exchange, with very good results in all applications. Again, we see an acceleration in the secular growth trends of many end markets like data centers, heat pumps, indoor air quality. I remind you that in indoor air quality, we are having more and more a unique proposition with controllers, humidifiers, heat recovery systems, and now the components made by Enginia for air handling units.
In refrigeration, sales are up 32.5%, net of foreign exchange, with a very good recovery in food service all over the world, but also very good result in food retail, apart from a slight slowdown in the growth rate in China and North America as mentioned. I'm now moving to page six, and I leave it to Nicola to comment the items below the EBITDA.
Thank you, Francesco. The slide number 6 details the group result from the EBITDA to the net profit. The 2021 result was impacted by higher D&A costs, mainly related to M&A activities. These figures include EUR 4.1 million related to PPAs increase with an increase of EUR 1.2 million compared to last year. In the period under review, the financial charges were higher compared to last year due to an increased IFRS 16 effect for EUR 250 thousand, and the accounting impact from the put and call option for the CFM acquisition for EUR 400 thousand. Such growth was in part compensated by a better result of the company's consolidated with the equity method. The tax rate of the period was equal to 19.6%, below 2020 level.
Such a decrease is mainly related to a different country mix. The group net profit as at December 2021 was equal to EUR 49.1 million, compared to EUR 35.1 million of the fiscal year 2020. Slide 7 shows the net financial position evolution of the fiscal year 2021. At the end of 2021, the net financial position was equal to EUR 57.8 million, compared to EUR 49.6 million at the end of December 2020. Excluding IFRS 16 liabilities, the net financial position at the end of December amounted to EUR 30.2 million. It was equal to EUR 21.4 million at the end of last year. The free cash flow from operations of the period was strong and equal to EUR 70 million.
The increase in net working capital was mainly driven by the business growth. It should be noted that the DSO at the end of this year, it improved compared to last year level. In June, the group paid dividend of around EUR 12 million. In 2021, M&A activities impacted the net financial position for EUR 35 million. The slide number 9 summarizes the sustainability plan approved by the board of directors of the company in the second half of 2021. The plan is developed for a period from 2022 to 2024, and is fully integrated with the financial plan of the group. The plan defines six areas of commitment and includes 55 sustainability objectives.
The group has a multilevel governance structure comprising a member of the board of directors with specific powers, the risk and control committee, and the operational multifunctional ESG team. I leave the floor to Francesco to go on with the presentation.
Thanks, Nicola. I'm on page 10. After the focus on the sustainability plan, another focus we would like to have now is on the digitalization roadmap that the company has been following for a few years now. We started in 2017, actually. This digitalization roadmap is aimed at transforming the company and is aimed at improving the efficiency and effectiveness of internal processes, but also at increasing the resiliency of our activities. In light of this, I would like now to present briefly just a few examples out of 14 project streams that are underway in this digitalization roadmap. The first example is the sales and operation planning system. Using technologies like machine vision, machine integration and deep learning, this system is basically aimed at a much better planning for our supply chain.
It was fundamental during the disruptions we've been having in the last few years, and is also very much improving our resiliency because it integrates the management of the different plans, and so allows us to adjust the supply chain footprint much faster and reacting to events. We are doing a very extensive implementation of a product lifecycle management system aimed at significantly decreasing lead times and, in general, the time to market of new products and ideas. It also allows to have a much faster and much safer deployment of new products into different assembly lines around the world, so again, improving our resiliency and capacity to adjust the footprint. The final example is related to services.
You know, we are developing also organically our service business, and we are adopting a number of technologies to support business opportunities in the on-field services segment. This is, of course, on top of the investment that we have been making in digital services. In 2022, the financial resources required by this digitalization roadmap will be approximately EUR 5 million, of course, between CapEx and OpEx, a significant part will be CapEx. I'm now moving to page 11 for the closing remarks. To summarize, in 2021, we had a record in terms of revenues growth and profitability, while at the same time implementing actions to mitigate the impact of the shortage and the supply chain disruptions.
We completed two M&A transactions for a cash out of approximately EUR 35 million, fully in line with our strategic guidelines. In terms of ESG, we accelerated our efforts. We implemented a three-fold governance with an executive director having executive powers on ESG at the board level, with a risk control and sustainability committee at the advisory level, and an operative multifunctional ESG team to implement the activities. We approved and disclosed our first multi-year sustainability plan, Driven by the Future, fully integrated with our industrial plan. We also completed our first taxonomy analysis, and approximately 60% of the analyzed revenues and 50% of total CapEx are aligned with the taxonomy. We disclose these figures one year ahead of the legal requirement. 2022 presents a number of big opportunities, but also big challenges.
In terms of opportunities, as already mentioned, we are seeing an acceleration of the already strong underlying trends in many of our end markets. These are accelerated by regulation like F-gas, Kigali, Green Deal, and also by the scenario. Of course, the higher energy cost and the energy disruptions are going to accelerate the demand for energy efficiency. We're also seeing a very strong growing demand all over the world for indoor air quality, where we are building more and more a unique value proposition. In terms of challenges, we still unfortunately have with us the electronic material shortage that we hope we have passed the peak, but the shortage is still here. We have the COVID-19 pandemic, and we also have the recent geopolitical tensions. Now, we are looking with very deep concern at the developments of the conflict.
On the business standpoint, let's say that in 2021, sales to Ukraine and Russia were in the range of the low single-digit% for the group. Should we have significant disruptions in our business with these two countries, considering the big backlog we have in this moment due to the shortage, we would use the materials and the capacity for covering the backlog we have elsewhere. To conclude, significant elements of uncertainty related to COVID-19, the electronic material shortage, and the recent geopolitical tensions persist. Therefore, we believe it's too early to give a precise guidance for year-end. In any case, taking into account the positive trends in demand that we saw at the beginning of 2022, we expect at least for Q1 to report an organic double-digit% growth rate in revenues. Thank you very much for your attention.
We are now more than happy to answer to all of your questions.
The first question is from Alessandro Tortora of Mediobanca. Please go ahead.
Yes. Hi, good afternoon to everybody. I have, let's say, four questions. The first question is on, let's say. You mentioned before an acceleration on, let's say, all or almost all of your applications. Can you give us an idea, also considering this first part of the year, the trend between HVAC and refrigeration? Because in the past, we observed the, let's say, outperformance of the refrigeration business. Now, if I understood well, also HVAC is in a certain way matching this superior growth. Just to have an idea of what's your view, what's your feeling on the performance by segment, considering the growth profile you mentioned before. This is my first question, Francesco.
I don't know if you want to answer it, or maybe I go with the second one.
Okay, thanks. Thanks, Alessandro. Yes, actually, we are seeing an acceleration especially in HVAC applications, structurally, I mean. Because short term, we have a very strong growth also in food service, for example. We definitely see a structural acceleration in these applications that could lead, even if it's too early to say, to a revision of our mid-cycle expectations. Let's say that for the time being, in any case, we maintain an expectation of a higher growth rate in refrigeration. It could be that, I mean, we see what is going to happen because, you know, the situation is very volatile in this moment, but it could lead to a revision of our expectations in the future. You're right.
The second question is on refrigeration. You mentioned before, for instance, that the U.S. is currently, let's say, appreciating some high efficiency product like heat pumps on the residential side. What's your view on, let's say, the food retail, also considering that even in the U.S. now we have a regulation, let's say, much more stringent on synthetic refrigerants. Just to give me also on the refrigeration side in the U.S., if you see some changes.
Yes, we definitely expect an acceleration of natural refrigerants in the United States. It's starting to happen and it's going to happen. We will see a huge growth also on that standpoint. Let's say in general, low global warming potential refrigerants, and among them, CO2 definitely will be important. Of course, we start from a very low share of the market, like in heat pumps, where we are starting to see a very good growth, but the expectations are definitely very positive.
Okay, okay. The last question are all related, let's say, to the cash flow side. If you can give us an idea of CapEx, considering, let's say, the growth or the potential growth you are mentioning, so the CapEx for this year. Secondly, on the working capital side, if we need to assume any built-up or further built-up of inventories considering the supply chain volatility. Last, sorry, I forgot, also the tax rate side, 30% this year, let's say, any indication of a sustainable level for the tax rate. Thanks.
Thank you, Alessandro. This is Nicola. With reference to the first point, the CapEx, we are seeing 2022 being around something more than EUR 20 million in terms in total value. With reference to the tax rate, we believe that the structural level could be in the next few years around 21%-22%. The last point, you know that we have already communicated in the past that it is our intention to increase slightly the level of working capital compared to the actual level. It is our goal to have some more inventory in order to be sure to have a better service to our customers.
Okay, thanks.
The next question is from William Turner of Goldman Sachs. Please go ahead.
Hi, everyone. I have a couple of questions. The first one is on profitability and your kind of expectations going forward. I guess, like, looking at the fourth quarter, you had obviously very strong sales, and sales growth accelerated in the third quarter. It was probably your best quarter ever. Yet the profitability came down sequentially. Like, just given, obviously, like, you had a lot of growth, so I can imagine there was a lot of volume leverage. If the growth wasn't as strong, like, where would margins go? And I know you don't wanna commit to too much guidance, but what are your kind of, like, rough expectations for 2022?
Would it be reasonable for us to assume that just given how strong the growth has been for the last couple of years, that there could be some slowdowns throughout the year?
Okay. Thanks, William. In terms of profitability, yeah, in the fourth quarter, as mentioned, we expected, like every year, a slight decrease in profitability. The decrease in Q4 of 2021 was in line with the previous years. Going forward, let's say that for the time being, we maintain our mid-cycle targets of high single-digit organic growth rate and a profitability between 19%-20%. As we grow, let's say that we intend to use the additional resources we get from the growth for investments. Investments like, for example, the digitalization that we saw in R&D and the production capacity and so on. Of course, we are going to, if needed, adjust our level of investment in growth to whatever is necessary to maintain this target.
Should the growth continue to be as strong as it is today, we will afford to be able to invest more. Of course, considering the current conditions of cost inflation. Should it go down a little bit, we would adjust investments and OpEx accordingly. We are able to modulate that. Of course, we are now operating in a context of cost inflation, which is not helping. In 2021, we saw very little price effect, because we increased the prices twice. Considering the very high order portfolio we have, it takes time to see the effect deployed. In 2022, we already did an even bigger price increase.
We could see some more price effect in 2022, but not enough to cover all the cost inflation. Should the situation revert in the future to a usual scenario of deflating raw materials, of course, the scenario would improve a lot also in terms of profitability. Let's say in the current conditions, our target is again mid-cycle, high single-digit organic growth and 19%-20% profitability. We can adjust the investments and the OpEx according to the real operating leverage we get.
Okay. Yeah, that's very clear. So you've got levers if there was a slowdown in demand, and you are using pricing more aggressively than you have historically. I guess another thing that we're quite interested to hear your thoughts on, obviously you play in quite a few end markets. How do you see the outlook for each end market, and which is the ones where you see the most you have the most optimism for? Are there any end markets you're expecting to see a deterioration in next year, this year?
Okay. We are seeing, and we expect to continue seeing, in the near future, a very good growth in, of course, barring any deterioration in the macro scenario, of course. We continue to expect a very good growth in heat pumps, in data centers, in indoor quality, but also in refrigeration. Basically across the board. We see really very positive demand. Each application has maybe slightly different drivers, but each is growing very well, and each driver is structural to a good extent. In the near future, we don't see any signs of slowing down from any of these applications. We can see some local slowdowns in some countries, like I mentioned, food retail in China, in the U.S. in 2021, but those are local and temporary trends.
Overall, we don't see any application which is going to significantly slow down in 2022. Again, this is, of course, barring any deterioration of the macro situation.
Great. Thanks. A kind of final question. I mean, you did briefly touch it. In terms of your investments, is there any particular region or product vertical where you're investing disproportionately now and you've got particular optimism on that you'd flag?
Yeah. We are investing significantly in indoor quality. By the way, also, for example, the acquisition of Enginia was referring to indoor quality. So we're investing there in terms of product development and also in terms of channel development. So we are looking at that application with great interest. We are continuing to invest in analytics and digital services, and also in the transition to new refrigerants. So we have strong investments across the board to adapt all our product range to the new refrigerants. In terms of geographic areas, we are basically still investing significantly in EMEA also because the growth is very good, but we are also intended to ramp up our investment in North America and Asia.
Okay, great. Thank you.
The next question is a follow-up from Alessandro Tortora of Mediobanca. Please go ahead.
Yes, thanks. Thanks, Francesco. Three follow-up. Very brief follow-up, I promise. The first one is on, let's say to follow up on the previous question on profitability. Considering also the quarter by quarter trend observed last year with a very strong start and then, let's say some sequential slowdown. Can you help us to understand, for instance, if also for Carel, the narrative this year is a false start, probably with some lower margin, and then considering the timing of the price increases, better second half? This is the first question.
No, Alessandro, no. We don't have evidence of any fluctuations of this kind, let's say. We don't have any particular expectations in this regard, apart from the usual fourth quarter decline that again happens every year. Apart from that, we don't expect any particular seasonality.
Okay. No seasonality on this side. Then when you mentioned before the price increase already made, which is model-based, can you give us an idea, clearly these are exceptional times, but can you give us an idea of the price component, let's say, inside your organic growth this year? Could be like, I don't know, a mid-single digit price increase that we should have this year considering this hyperinflation scenario.
Okay. In 2021, it was almost negligible. In 2022, we expect also considering the, as you said, the, let's say, the deployment of all the actions on prices, we expect a low- to mid-single-digit price effect.
Okay. The last is on indoor air quality. You mentioned several times that this is, let's say, a segment of an application where the company is gaining traction and exposure. Is it possible today already to quantify a certain weight on your total sales? I know Enginia is inside, like, I don't know, 4-5% of your total sales coming from indoor air quality application.
Okay, Alessandro. Very roughly, it could be something around 25% of the total turnover in this moment because it's humidification and, let's say a good part of the commercial application. Approximately 25%.
Okay. Thanks.
Gentlemen, there are no more questions registered at this time.
Okay. Thank you for listening. Thank you for your questions, and looking forward to speaking with you for the presentation of the first quarter 2022 results.