Good morning. Thank you very much. Good morning, everybody, and thanks for joining this presentation of the 2019 results. I'm starting from page two with a recap of some key milestones related to the execution of our strategy during the year. We followed mainly three strategic directions in 2019: the sales footprint expansion, the manufacturing footprint expansion, as well as the development of services. In January, we set up Carel Ukraine as a direct sales branch of Carel Poland to better control the Eastern European market, which is, by the way, providing very good growth results. In July, we did the inauguration of the new facility in China, three times as large as the previous one, and we deployed our first line of inverters in the country for high efficiency solutions.
In September, we inaugurated the enlarged facility in the U.S., twice as big as the previous one, and we also acquired Enersol, a distributor in Canada specialized in humidification and humidification-related services, so establishing our first direct presence in the country. At the end of the year, we entered into our first multi-year recurring contracts for the provision of digital services to a big food retail chains in Europe, according to our digital services strategy. At the very beginning of 2020, we received the official confirmation from the Chinese authorities of the renewal of the high-tech enterprise status, also for the 2019-2021 period. It's retroactive for 2019.
This means we have a tax rate of 15% instead of 25% for the period. It's also a very important recognition by the Chinese authorities of our efforts in the country in terms of innovation, R&D, and intellectual property development, thanks to the efforts of our 50-strong R&D base. I'm now moving to page three with some highlights. We are very happy to report a solid top-line growth for 2019, as well as a 19.5% profitability, despite challenging macroeconomic conditions, especially in Europe and China. This is completely in line with the guidance that we provided for the third quarter results. Overall revenues grew by 16.8% with a positive contribution net of foreign exchange from all geographic areas.
We have a contribution of EUR 32.7 million from the consolidation of HygroMatik and Recuperator that in 2018 were present for just one month. They grew basically by 10% as a combined entity, which is completely in line with the business plans. It represents a strong acceleration compared to their previous performance as standalone entities. Organic growth was 5.1%, or 5.9% if we just consider the core business, which is by far the more strategic. EBITDA adjusted was 19.5% during 2019. As expected, we had a slight reduction compared to the third quarter by 80 basis points, due to a seasonal cost trend that happens every year. If we exclude the IFRS contribution by EUR 4 million, the EBITDA adjusted margin would have been 18.3%, again, 80 basis points below the third quarter, again, for an expected seasonal phenomenon that we also anticipated in the guidance.
The cash conversion was very good. We had a very good cash generation in 2019. We had a cash conversion of 74%, despite the higher CapEx for the footprint expansion, up from 54% in 2018. That's thanks to positive operating results as well as from a significant positive contribution from the net working capital reduction, as we will see in a few minutes. Moving to page four, with some more economic and financial details. Looking at the revenue bridge on the top right, we start from EUR 280 million at the end of 2018. We had EUR 13.7 million of organic growth contribution, EUR 2.5 million of positive contribution from the foreign exchange, and then we lose EUR 1.8 million due to the non-core.
Organic sales were EUR 294.6 million, to which we can add EUR 32.7 million from the M&A, and we land at EUR 327.4 million of total revenues for the period. EBITDA adjusted grew by 15.8% in the period, including EUR 7.2 million from the consolidation of the two entities, as well as EUR 4 million from the IFRS 16 adoption, but discounting higher costs like EUR 800,000 of recurring IPO costs not present in 2018, and EUR 800,000 approximately of additional costs related to the U.S. China duties, as well as some additional indirect manufacturing costs related to the manufacturing footprint expansion.
Net profit grew by 14.2%. Again, we had the contribution of the two acquired entities that is offset by higher interest charges for the loans for the M&A transactions, as well as a higher tax rate, since in 2018 we had the one-off contribution of EUR 2.1 million from the patent box.
CapEx were EUR 23.6 million, completely in line with the expectation. We propose a dividend distribution of EUR 0.12 per share, which is a 20% increase over 2018, with a payout ratio of approximately 34%. Moving to page five, with the revenue breakdowns. To the left, we have the breakdown by region. We can see that all regions grew net of foreign exchange and provided a positive contribution to the top line growth. EMEA grew by 18.9%. There's also, of course, the contribution from the two acquired entities. EMEA had a slight deceleration in the fourth quarter, due especially to the applications exposed to automotive, whereas we had a restart of the acceleration in refrigeration in Western Europe as we will comment in a minute. Asia-Pacific had a solid 6.2% net of foreign exchange, despite the difficult economic situation in China.
North America had a very good 13.6% growth net of foreign exchange, and South America had a very strong acceleration at 11.1% net of foreign exchange, thanks to the very good performance of the Brazilian market, despite market conditions in the rest of the region that remain challenging. To the right, we can see the breakdown by sector. HVAC grew net of foreign exchange by 24.4%. Again, here we had a slight deceleration for the applications exposed to automotive. Refrigeration grew by 4.5% net of foreign exchange. We saw in Q4 the reversal of the negative trend for refrigeration in Western Europe that we reported in Q2 and Q3. I can say that this positive accelerating trend of refrigeration in Western Europe is confirmed also in these first weeks of 2020, confirming our expectation that the deceleration was a pretty short term phenomenon.
We have a 29.4% net of foreign exchange decline in the non-core, and if we just consider the core business, the growth would have been approximately one percentage point higher. I'm going to page six for the items below the EBITDA. D&A are EUR 16.8 million, up from EUR 9.1 million in 2018, and that's mainly due to the change in perimeter for EUR 3.4 million to the higher CapEx, as well as the adoption of the IFRS 16 for EUR 3.8 million. Financial charges amount to EUR 1.4 million, up from EUR 0.1 million in 2018 due to the loans for the M&A transactions, the absence of the positive contribution from the life insurance policies that we had in 2018, and the interests coming from the IFRS 16 adoption. The tax rate was 22%, in line with the nine month and in line with the guidance.
We had the positive retroactive effect of the high-tech enterprise status in China, that is offset by higher IRAP taxes in Italy and some other minor elements. In any case, we expect this 22%-23% to be the range of our tax rate also for the future. Page seven, looking at the net financial position bridge. We start at the end of 2018 with a net financial position of EUR 59.1 million. We have EUR 51.7 million of free flow from operations, very strong and more than enough to cover the higher CapEx as well as the dividends. We have EUR 8 million of positive reduction of the net working capital due to the stock reduction normalizing after the increase of 2018 due to the shortages of raw materials, as well as a reduction in credits and in tax receivables.
We have EUR 23.6 million of CapEx as we have seen, we arrive at the free cash flow of EUR 32 million. If we consider the EUR 10 million dividends and some other minor elements, we arrive at an organic net financial position of EUR 34.6 million, which is EUR 25 million better than the net financial position we had in 2018. If we don't consider the IFRS 16 and we don't consider the tax step-up investment that we made in the third quarter, basically, our net financial position would have improved by EUR 25 million. If we then consider these final elements, we land at the net financial position of EUR 62.1 million, with a 74% conversion rate. Moving to page eight, with a focus on the COVID-19 situation.
We are very pleased to say that this situation is confirming the validity of our key strategy of a duplication of manufacturing in several different plants in different regions of the world, because this is helping us very much to mitigate strongly the effects of this situation on the supply chain. We have one plant in China, in Suzhou, out from the Hubei province. The plant normally represents 30% of the production of the group, and we have 120 blue collars there. The plant was closed for one week from the 3rd of February to the 10th of February, after the New Year vacation. It reopened on the 10th of February, gradually, and as of now, we have more than half the employees fully working. We have more or less 60% of the capacity operating in that plant in this very moment.
We expect to have 80% of the capacity by mid-March. The plant is operating at a very good level, also considering that, of course, the Chinese market has been slowing down. Since the end of January, we started moving manufacturing out of that plant into other plants. For example, we moved the manufacturing of the low-end refrigeration controllers into our Brazilian factories that had spare capacity, and that was done very quickly. We moved the manufacturing of a very important line of programmable controllers manufactured in China into our Croatian plant, and then the Chinese plant focused on the remaining intercompany business, as well as on the Chinese local market, which of course, had been slowing down. As of now, we didn't have any disruption in the plant. All the Tier 1 suppliers have reopened, and on average, they are working at slightly more than 50% capacity.
We don't have any issues in terms of logistics. Our warehouse in China has been working at full capacity almost since the reopening. We don't have any problems with custom duties. We don't have problems with air freight, neither with sea freight. On the other hand, the prices for especially sea freight are pretty cheap in this moment. We don't have any disruption. Italian plants are all operating 100%, we don't have any problems, any disruption in our Italian plants. All our Italian Tier 1 suppliers are operating without any disruption. We can estimate, of course, there is an impact, especially on the Asian market, about the virus. We can estimate the impact, especially on the Asian market for the virus in Q1, to be in the range of EUR 3 million-EUR 4 million approximately.
We expect to recover part of that in the following quarters as the situation hopefully improves. Of course, if the situation worsens, it will be a different story, but we cannot foresee that. Moving to page nine, with some conclusions. Talking about 2019, we continued to deploy effectively our strategic guidelines and execute effectively our strategy. Even in presence of a difficult macroeconomic scenario, we managed to reach an organic mid-single-digit growth in the top line with a positive contribution from all geographic areas. We completed our production footprint expansion plan in line with the roadmap that will support our organic growth for the next three to five years. We continued the integration process of the two entities, HygroMatik and Recuperator, which is going on smoothly. The results are in line with the business plans and are accelerating compared to their previous performance as standalone entities.
We acquired Enersol, the Canadian distributor active mainly in the humidification and humidification-related services. As far as the services are concerned, we entered into the first multi-year recurring contracts with big food retail chains in Europe for the provision of digital services, and we created a new profit center after-sales and service to develop more and more the service business for the group. To conclude, our medium-term expectation remains the same. There is high single-digit organic growth rate and a profitability in the range of 19%-20%. Of course, in 2020, the visibility in this very moment is limited by the COVID-19 situation. It's difficult to foresee what the organic growth rate will be for 2020. The visibility will improve in the coming quarters. We expect, in any case, the growth rate to accelerate during the year.
In this very moment, what we see in our order portfolio is a positive growth. We are growing despite the COVID-19. In particular, we are seeing a positive growth result in Europe. We are seeing a rebound, especially in refrigeration in Western Europe, as we expected, that already started in Q4, but is strengthening in this Q1. We are seeing some positive input from the heat pumps application, especially related to natural refrigerant in Europe. On the other hand, the applications related to automotive are still suffering. In North America, we will probably have, the first month of the year, some consolidation after a very strong 2019, which is somewhat to be expected as physiological. In any case, we expect a growth for the full year. In Latin America, we continue to see positive results, thanks to the excellent performance of the Brazilian market.
Thank you very much for your attention. We are now more than happy to answer to all of your questions.
Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. We will pause for a moment as callers join the queue. The first question is from Alessandro Tortora of Mediobanca. Please go ahead.
Yes. Good morning to everybody. I have, let's say, four questions, if I may. The first one is related to, let's say, the last comment you made on the outlook, but also the expectation by region. Can, let's say, you tell us, sorry, probably on the APAC side, the order intake, short-term order intake trend, considering that you mentioned before North America, basically stable and let's say some positive trend in Europe, because I missed the indication on APAC? The second question was on the, let's say, cash generation. If you can give us an idea of, for sure, the CapEx level for 2020, if you can, let's say, defer some investment or, let's say, you keep going with the planned investments.
Then on the cash generation side, if at least we can assume a similar level of cash generation, free cash generation, also EUR 25 million on the one you got this year also for 2020. The third question was on the refrigeration. As you mentioned before, refrigeration is improving in, let's say, last quarter, also in the first part of the year. Can you give us an idea? We remember that in the past, this was a strong boost for, let's say, the group top line organic growth. Do you have any idea, any feeling of, let's say, the normal growth that we may achieve this year on the refrigeration side? Thanks.
Okay. Thanks for the questions, Alessandro. Yes, you're right. I forgot to mention some indications on the Asia Pacific market as we see it in these first weeks of 2020. Let's say that we are seeing orders coming from China and from the region, so our Chinese customers have restarted. We are seeing orders coming, so we are pretty confident that this loss we're having in the first quarter, that I estimated in total region between EUR 3 million and EUR 4 million, can be recovered in the following quarters. In any case, we are already seeing orders coming from our customers. The situation, especially in China, is, as of now, improving significantly. Of course, if the virus situation continues to improve there. Talking about the cash generation, so the CapEx level that we expect for 2020 is something in the range between EUR 15 million and EUR 18 million.
In this moment, we don't foresee to slow CapEx down because we don't see the reason to do that. Of course, should there be any problems, we can easily postpone CapEx, but it's not something that we foresee to do now, because we don't see reason to delay investments now.
These investments are mainly related to R&D and, let's say, our maintenance CapEx level for R&D, for the digitization of our manufacturing process, as well as the continuous deployment of individual assembly lines. Concerning the cash generation for 2020, let's say, of course, all the uncertainty on the visibility for the growth rate that I just mentioned, it applies also to the cash generation. Let's say that in general, if the situation of the virus does not worsen, we could expect, in principle, a cash conversion in the range of 60%-70%, more or less. We have to consider also that probably, we have a very good net working capital level in this moment, below 14%, so it's very low. Due to the virus situation, to better cope with the supply chain issues, we could increase the stock levels this year, somewhat.
Probably, the net working capital could increase a little bit, not much. Let's say that we expect to stay at a very good level of no more than 18%, in any case, of net working capital. Considering the refrigeration market, yes, last year we had a slowdown in Western Europe because the other regions were still performing very well in refrigeration. We had a slowdown in Western Europe due to a de-stocking effect, as well as some economic uncertainty that basically led to a postponement of some investments, but also partly physiological after an excellent 2018, where refrigeration in Western Europe grew by 24%. We expected that to be short-term, and actually in Q4, we already started seeing a reversal of the trend, and this is confirmed also in these first weeks of 2020.
We expect refrigeration to continue being an engine of growth for us.
Of course, again, the visibility difficulties we have for the top line apply also to refrigeration. Refrigeration last year was growing in an excellent way in North America and also in China. Of course, now the visibility in China is somewhat limited, now it's a little bit too early to provide an indication for refrigeration. We hope to have more visibility in the near future.
Okay. Understood. Just if I may follow up on, let's say, your point on the COVID-19. I understood that clearly focusing on China, you have already an idea of, let's say, initial impact. In Europe, you mentioned that on the supply side, everything is fine and is going, let's say, on a normal production rate. On the demand side, clearly now focusing, for instance, on HVAC, what is your feeling on the behavior of your clients' demand in this context? Clearly if we are talking about, let's say, some normalization in, let's say, Europe for the refrigeration. On the HVAC side, considering the different client base, what's your view on this segment?
Okay. With the exception of the automotive sector and the applications that for us are related to automotive, that as I mentioned, are still suffering, in general, so far, we didn't see any demand reduction in Europe due to the virus. Our customers are.
As we see them, they are going on as usual. Just the applications related to automotive are struggling. The rest, as I mentioned, refrigeration is improving. We're seeing some good interest for the solution of heat pumps with natural refrigerants. In general, in Europe on the demand side, so far apart from automotive, we're not seeing any problems.
Okay, thanks.
The next question is from William Turner of Goldman Sachs. Please go ahead.
Morning, everyone. You touched on some of the questions that I was going to ask just then. A couple that I have is, do you foresee, like in 2018 when you had an electronic supplier shortage coming from China, do you foresee that becoming an issue going forward again? How do you expect to cope with that? My next question is sort of related to COVID-19, is that, how do you feel prepared if your plants in Italy got disrupted and you had to move production, say, to Croatia or another region? Do you think you have sufficient flexibility to manage that?
Okay. Thanks, William, for the questions. In terms of the supply chain situation, so we didn't face any disruption as of now, not on the supplier side, neither on our manufacturing capacity, and not on the transportation or custom duty side. Of course, there could be some delays in the coming weeks, because we can see in the coming weeks some effect of the supply chain disruption that happened in China at the beginning of February. It can be probably more visible in a few weeks. We don't expect that to be a major disruption. What we are seeing is probably there could be some tensions on the prices of some raw materials because some wholesalers and distributors could be increasing prices. We are now coping with both situations.
The possible, let's say delays in supply that, again, we don't expect to be major, but there could be. We're trying to cope with the possible delays in supply as well as the price increases by increasing a little bit our stock level. Now it's very low. We managed to have a very good reduction in 2019. Now we have plenty of room to increase a little bit the warehouse, if needed, to cope with this new supply chain challenge. There could be some tensions on the cost of raw material, some delays, but nothing major from what we can expect in this moment. Concerning our Italian plant, should it be forced to reduce its capacity, then we can say, in Croatia, we're able to manufacture more or less two-thirds of what we can manufacture in Italy.
Brazil has still some capacity left after the production we moved from China. Of course, we have the Chinese plant that, in the meanwhile, will have probably restarted 100%, so we can utilize what is now available on the Chinese plant that has been just increased and enlarged, so there is plenty of capacity to continue working. Should the Italian plant be forced to reduce its capacity, there would be some disruption, but we would be able to cope thanks to the additional capacity that we have and the resiliency of the manufacturing footprint.
Great. Thank you. Just two other follow-up questions. Firstly, regarding Recuperator and HygroMatik, the 10% growth that you had organically in those businesses is quite strong and impressive given their history. Can you just discuss a bit more about how you generated that and what you expect going into 2020 and 2021 for those businesses? My last question for now, obviously your lower tax rate in China, that's a benefit. What do you expect with tax into 2020?
Talking about HygroMatik and Recuperator, basically the strategy we have to start for Recuperator is mainly based on cross-selling and commercial synergies. We are using the Carel sales network to cross-sell the Recuperator high-efficiency solution to our customers for increasing their efficiency. That is providing the result. Recuperator was underdeveloped before in terms of sales network because they didn't have a sales network, even if they had an excellent product. We're now using our sales force starting from Europe, in the future, we will expand also to other regions to promote the product to our customers, especially in the air handling unit sector. On the other hand, the Recuperator also on the cost side, we achieved some, already in 2019, some significant synergies in terms of manufacturing efficiency and SG&A.
For HygroMatik, the strategy is basically to add a humidification brand to our portfolio, the premium brand, HygroMatik. What we did in 2019, starting from the German-speaking countries, Germany, Austria, and Switzerland, we started cross-selling the Carel humidification product using the HygroMatik sales force, which is very strong there. They started cross-selling the Carel brand with a different positioning to customers. That has been already providing very interesting results. As time goes by, we will extend this cross-selling strategy also to other parts of the world. The expectation for the two companies for 2020 is not very different from what we achieved in 2019, of course, taking into account the uncertainty coming from the COVID situation, of course. All the issue of visibility we have for the COVID, of course, applies also to HygroMatik and Recuperator.
Having said that, in general, the expectation is more or less to maintain the performance we had in 2019. Concerning the tax rate, yes, we had a reduction in China. The tax rate that we expect looking forward is more or less in line with the one we have now. Between 22%-23%. That's our expectation for the medium term for the tax rate, including 2020.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Nalini, there's a follow-up question from Alessandro Tortora of Mediobanca. Please go ahead.
Yes, thanks. A very, let's say, qualitative follow-up, Francesco, on what you mentioned before, looking at, let's say, the whole year. Considering, let's say, the comparison base and also now the trend in order backlog you mentioned, do you expect for sure, assuming that COVID-19 situation will, let's say, stabilize at a certain point, you are assuming, let's say, a better second part of the year? Just to have an idea, do you believe that according to all, let's say, the assumption you mentioned, let's say the first part will be a sort of stable growth environment and then adding some growth in the remaining part of the year? Is it a reasonable assumption?
Okay, Alessandro. Yes. What I can tell you is that in this very moment, our order portfolio, despite the COVID-19 situation, is positive already. Of course, we will have an effect in Q1, the EUR 3 million-EUR 4 million I mentioned, but regardless, we have a positive order portfolio in this moment. There could be already a growth, in the first part of the year, in the first half of the year, there could already be a growth that we expect, in any case, to improve as the year goes by because the COVID-19 situation resolves. We recover part of the sales we lost in Asia due to the COVID-19, also because hopefully, the general industrial economy also in Europe improves. Yes, we expect an improving during the year. As of now, we see a positive order portfolio, even as of now, let's say, despite the COVID-19 situation.
Of course, everything is very uncertain at this moment.
Okay. Thanks, Francesco.
For any further questions, please press star and one on your telephone. Mr. Nalini, there are no more questions registered at this time.
Okay. Thank you very much, everybody, for your attendance. Looking forward to speaking with you for the Q1 2020 results. Have a good day.