Good afternoon, this is the Chorus Call conference operator. Welcome, thank you for joining the De'Longhi full- year 2022 consolidated results. 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 press signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabio de' Longhi, CEO. Please go ahead, sir.
Good afternoon, ladies and gentlemen, welcome to the De'Longhi Group full- year 2022 results conference call. Today, together with me are Nicola Serafin, Group General Manager, Marco Cenci, Chief Strategy and Control Officer, Stefano Biella, CFO, Fabrizio Micheli, Director of M&A and IR, and Samuele Chiodetto, Investor Relations. Let me start with a warm welcome to Nicola. Nicola at the end of last year was appointed by the board of directors general manager. Nicola and I will closely work in cooperation with aim to pursue the long-term objectives of growth and profitability for the group. Now, back to the full year results. The group ended the 2022 with revenues slightly lower than the record levels reached in the previous year. Thanks to the continuation of the upward trend in the coffee maker business and a positive contribution of the currency.
The exogenous events of the last 12 months have partially deteriorated the consumer spending power and increased the main input costs across the entire sector. Specifically, in the last quarters, we have highlighted three main headwinds affecting the group's performance. Cost inflation, extra costs related to the excess stock, and softening demand. As a straight response to this, we have implemented a set of selective measures in order to lower the impact of these factors on our business. First of all, last year, we were able to implement another selective price increase, contributing around EUR 87 million in 2023 in order to offset, in part, the impact coming from the upward trend of many production costs. Secondly, the group has significantly reduced the level of inventory from a peak of around EUR 1 billion, reached in June, till EUR 551 million at the end of 2022.
This massive reduction had an immediate positive effect on the net financial position, supporting a strong cash generation in quarter four. With regard to profitability, a lower impact of the logistic and warehousing extra cost was partially already seen in the fourth quarter, while the production inefficiencies should be recovered in the end, in the future, along with a normalized capacity utilization. Finally, despite the challenging microeconomic backdrop, the group continued its investments in advertising and promotion with the aim of strengthening the brands, in particular by carrying on the global coffee campaign starring Brad Pitt as an ambassador. Now, allow me to highlight the slides from six to eight, where you can see the main products launched in 2022 for each category. That are the results of the investment in R&D and innovation with the continued improvement of quality, design, and usability.
Among the others, let me just mention La Specialista Maestro with the Cold Extraction Technology and the Eletta Explore, including the LatteCrema cold feature, which will help us to enlarge our target audience addressing the cold brew drinkers. Let me focus on the results. Consolidated revenues for 2022 were slightly down by 2%, with a positive contribution of +3.9% from the currency component. In the fourth quarter, revenues fell 3.9%, with a positive support foreign currency equal to 3.1%. As already mentioned, in the last months during 2022, the inflationary backdrop and the geopolitical tensions weakened the consumers purchasing power and confidence in Europe. In the other non-European geographical areas, the general market climate was more favorable. Some more color on the geographies.
Southwest Europe showed a generalized drop in consumption in the last couple of quarters, specifically in quarter four. The area had similar adverse dynamics to the previous months, with the exception of Germany, with turnover in line with 2021. Northeast Europe were down in both periods analyzed, mainly due to the direct impact of the Russian-Ukrainian conflict. In quarter four, most of the countries suffered the complex situation, with exception of few markets such as Poland. The MEIA region experienced a positive quarter four. Driven above all by a positive currency contribution, net of which, however, growth was still positively slightly positive. The American area achieved a double-digit growth in the last quarter, thanks to a significant currency effect and a positive development of the coffee business.
The Asia Pacific region performed quite well during the year, with a quarter four still in positive territory, thanks to the significant expansion of Greater China. As to the evolution of product categories, the segment of coffee machines for households showed a positive trend, both in the 12 months and in the fourth quarter, thanks to the expansion of the core categories, fully automatic and manual machines. The food preparation segment closed the year and the quarter with a marked decline due to an overall weakness in consumption in our categories and a tough comparison with the results obtained by the group in 2021.
As regard to the remaining segment, we point out the growth achieved in the year and confirmed in the fourth quarter by the comfort segment, portable, conditioning and heating, which was offset by the partial weakness of the home category, floor care and ironing, still negative in the last quarter of the year. Finally, the contribution of the professional coffee machines represented by the new acquired Eversys was largely positive, showing a very strong growth trend in the, in all quarters of the year, with a total turnover significantly up in the 12 months.
Looking now at the evolution of operating margins, the net industrial margins stood at 47.3% of revenues compared to 49.7% last year, as an effect of the inflationary pressures and some cost component, raw materials, transport, transformation costs and production inefficiencies due to temporary reduction in the utilization of production capacity, not fully offset, but the price increase implemented during the year, contributing for around EUR 87 million in the 12 months. Adjusted EBITDA amounted to EUR 362 million, equal to 11.5% of revenues, compared to 16% in 2021, witnessing a margin erosion due to the aforementioned cost inflation, lower volumes and extraordinary warehousing costs.
On the contrary, in the fourth quarter, the margins were in line compared to last year, thanks to positive price contribution, EUR 39 million in quarter four, slightly lower expenses for advertising and zero incremental extra costs related to logistics, thanks to a lower level of inventory. As to the balance sheet, net financial position as 31st December 2022 stood at EUR 299 million, decreasing from 2021 year-end. In particular, the free cash flow before dividend and acquisition was almost flat in 2022 due to higher level of investment. CapEx was EUR 156 million and negative working capital dynamics minus EUR 188 million, determined by a negative balance of the trade receivables payables aggregate, which was not entirely offset by the aforementioned sharp reduction of the warehouse.
In quarter four, the group generated a positive free cash flow of EUR 270 million, thanks to a positive operating cash flow and above all, to the substantial reduction of the inventories at EUR 551 million. As a conclusion of my results overview, let me say that 2023 begins in a complex scenario marked by a difficult start to the year, to the signs of a further destocking of retailers, which add to the effects of our strategic choice to exit the mobile air conditioning market in the United States and to the challenging comparison with an extraordinary growth of the first months of the previous two years. We're confident that the gradual fading of the aforementioned headwinds will allow catching a progressive improvement in the economic climate and consumption trend in the second half.
As to this 2023, we are forecasting full- year revenues slightly down and an adjusted EBITDA in the range of EUR 370 million-EUR 390 million. We can open the floor to Q&A. Thanks.
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 touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has question may press star and one at this time. The first question is from Niccol`o Storer from Kepler. Please go ahead.
Good afternoon, gents. Thanks for taking my questions. The first one is on EBITDA evolution and probably is many questions in one. What should we expect as main building blocks for EBITDA evolution from one year to another? The additional EBITDA you plan for 2023 seems a little bit low because in 2023 you will have a carryover of price increases, you will have lower transportation costs, maybe other lower input costs, maybe savings from extraordinary costs from 2022 extra warehousing and stopping production. If you can help us a little bit on how to manage this bridge from one year to the other. Second question is on working capital.
We have seen that you've managed to limit the growth in working capital, which is a level you are targeting for 2023 in relation to revenues. The last question is on CapEx. We have had another year of strong CapEx, well above EUR 100 million. What should we expect for 2023? Thank you.
Hi. Hi to everybody. Nicola Serafin speaking. It's a pleasure to contribute, to answer the question. Let me go on the EBITDA evolution building blocks. Definitely looking to the EBITDA for this year, we have a bit of price increase carryover from last year. We do not plan further price increase for the time being, but we are looking forward to keep the for the time being, the current price level. This is definitely a positive effect. We have, we are targeting also to have a bit of a positive mix effect in 2023.
Nevertheless, we still see in line with the guidance on a volume, negative volume effect that is driving down the potential EBITDA. Still, we are looking forward in terms of operational costs carry over on material costs from 2022. Still, we are under pressure of labor cost and energy cost compared with 2022. Say that, I would like to confirm that most of the so-called inefficiencies cost that we have suffered by 2022 upon the either the warehousing and logistic cost due to the overstock and the manufacturing and efficiencies that we got to in slowing down the production are planned to be recovered.
Nevertheless, we are not looking forward to a full recover of this inefficiency amount because the raising costs that we see in this inflection trend, it's something that still we see that can keep a full recover of that extraordinary cost. Hi, let's restart from where we stopped. I was mentioning that for from a cost point of view, we had definitely a higher cost on energy and labor cost, while we see benefit in materials. We have a carryover still of material cost from 2022. While we see a benefit from the sea freight.
In terms of the recovery of the inefficiency, we are confident to recover all the warehousing and logistic inefficiency due to the overstock now that we have normalized the stock, and also to be back regular in with the manufacturing cost in terms of operating cost. We have also, let's say we had in 2022 also benefit from the exchange rate, that this is something that is not fully, let's say, predictable and incorporated this year. Out of the total inefficiencies cost that it was shaped, we think that we can recover something that is in the range of EUR 20 million- EUR 30 million. More or less 50%-60% of that amount.
Okay. Thank you, Nicola.
Now we can go to the second question from Niccol`o Storer. The second question is about the working capital. We announced in the past that our long-term target in working capital is below 10% on sales. We think that now, thanks to the inventory reduction that we achieved in 2022, we are well positioned
Will continue to be at this level at or below 10% on sales. With regard to CapEx, we expect in the mid-term to see a reduction of our investments. Very likely 2023, we will have still high level of investment for the group. It could be below, slightly below the levels reached last year. However, not far from what happened in 2022. I highlighted that, in particular, we have the, you know, completion of the headquarter in Treviso, and a new plant to support the growth of Eversys. Which the new plant will be built in 2023. If there are no more questions, I hand over the word to you again for...
Thank you. Thank you.
The next question is from Luca Bacoccoli from Intesa Sanpaolo. Please go ahead.
Hello. Good afternoon, everyone. Can you hear me?
Yes.
Okay, good. A few questions from my side. The first one is on 2022 results, and related to the receivables, which went down significantly and disproportionately vis-a-vis the top line drop. I was wondering what is the explanation behind that trend. I don't know, such as a change in use of the factoring or there are other explanation. The second question regard the net financial charges. They were EUR 25 million. If you can please provide a split between the pure net financial charges and the eventual effects component. Regarding the guidance, the top line guidance, I was wondering if you can give us a bit more color on the mix between volume trend and pricing.
You partially already mentioned that you're expecting a positive impact from the carryover effect of the pricing. I was wondering if you are seeing any, let's say, claim from retailers asking for lower pricing returning the stronger price increase that you deployed last year, given the, let's say, more benign environment on the cost base for you and for all the sector players. My final question is on the M&A. Risks of a recession just in Europe basically have decreased significantly. Do you see the environment, let's say, more positive and clearer for M&A, notably on the professional segment? Thank you.
Okay. Thank you, Luca, for the questions. Yeah . Let me start for your first question, which is on our receivables. No, no, the factoring securitization program is in line with the last year. The benefits are coming from an improvement in our DSO, limited. The fact that we have short shipped Russia, where I remind you that we use the on consignment stock at trade level. The reduction of the shipment significantly reduce our exposure to Russia.
With regard to the financial charges, more in detail, for the 12 months, we had some negative impact on our charges due to the purchasing of some minorities in Eversys UK. Also, a small loss related to the sale of a stake in NPE, an electronic component supplier, part of which was part of the group and was sold years ago to a Chinese supplier. All this representing approximately EUR 4 million. We had about EUR 1.5 million coming from negative interest. We have some amortized costs for approximately EUR 8 million, which are non-cash one-off.
The financial charges for the year represented, a negative for EUR 25 million.
Okay. If I can go on the answer of the price policy and the price environment. For the time being, we are planning to keep the carryover of the pricing and the current price level. On one side it's correct that the freights are benefiting the cost of goods and the overall costs. On the other side, we also to have to recognize that there are still inflation and pressure costs on materials, energy and labor that in somehow are offsetting. Indeed the price of goods are not lowering for the time being, and this is in somehow recognized at retail level. Obviously, this is part of negotiation.
We are not planning in this moment to take all promotional activities and invest on this, but obviously we are ready to consider this along the year, depending on how the market and the scenario will happen.
The fourth the last question about M&A. I think that some positive news are coming from our balance sheet. We have strongly recovered from a hard year with a strong cash generation, and we start 2023 with about EUR 300 million net financial position positive. Obviously it seems important. We think that M&A has always been an important element in our strategy. We have performed two years ago Capital Brands, and also we have completed the acquisition of Eversys.
I think that, yeah, there are opportunities, we're working on, and, I think, we want to continue to invest, in, unique products and strong brands, allowing us eventually either to grow in strategic geographies or in complementary adjacent categories. I think that, yeah, it's a priority we are working on.
Okay, thank you. I missed a question regarding the advertising and promotion on 2023. I'll take the opportunity to ask right now. What is your assumption embedded in the 2023 guidance? Are you expecting to keep the absolute level unchanged, or are you somehow tuning the expenditure based on the environment, more uncertain environment, I would say? Thank you.
I think that maybe Nicola can give you a, can answer your question. However, I want to remind that our ambassador campaign and, you know, signing Brad Pitt as a global ambassador and being able to have a global campaign around our Bean to Cup systems has been a phenomenal enabler to capture growth, enter our brand, open new markets. This is certainly a lever that we want to use even more in the future. With regard to the short term, of course, we need to adapt a little bit.
I hand over to Nicola, the answer, and maybe Nicola can anticipate what we're gonna do in the United States, what we are doing now as we speak, but as well as on what is the strategy we want to adopt in advertising for the year.
Yes. Well, thank you, Fabio. Obviously, this is our strategy is consistent with what Fabio has announced. The fact that continuing investing on a global campaign with a relevant ambassador is part of our building strategy. This means that we are keeping and we are planning to keep a significant level of investment on this. Nevertheless, considering the view that we have on volumes on this year that are not growing, slightly declining, we are planning to modulate the A&P level according to this level, keeping, let's say, an incidence that can be on the similar level or slightly below the incidence level that we got this year.
Okay. Great. Fantastic. Thank you.
The next question is from Andrea Bonfà from Banca Akros. Please go ahead.
Hello. Good afternoon to everybody, thank you for taking my question. Fabio, if I may, my question is actually on the EBITDA bridge, and I want to, let's say verify some number with you. I mean, in the past, you guided us for EUR 60 million extra cost related to the excess available stocks. In the past, you guided us that the inflation shipping represented a bargain of EUR 90 million across. On top of that, we need to have the carryover of price hike, which is looking at what you share with us, we can quantify it in EUR 20 million-EUR 30 million. We are talking of something potential benefit of EUR 180 million on your cost base.
If I look at your EBITDA guidance, it seems that you got a big chunk amount of inflation assumption below, and or let's say, you don't have to. I just want to at least share with you, and maybe you can confirm after the at least the positive on your side. I mean, the shipping cost, the extra cost related to the e-excess level of cost and the price hike saving. The second question is regarding the new machine that you launched again with George Clooney ambassador for the filter coffee in US. If you can share with us, if for you, was it already a relevant category, or is it a new category? If you have any comment on that. What is the potential for that segmental product? Thank you.
Yeah, okay. Just a clarification about, well, I think that the 2022 results have been, EBITDA has been heavily impacted by many elements of different, let's say, sign, positive or negative, and all of great magnitude, for sure. For sure, we suffered from super high logistic costs, freight, for instance. At the same time, we had a massive also cost increase in term of materials, and we also suffered from efficiencies that in a call last year, I have highlighted around EUR 50 million-EUR 60 million. Also we have put in action actions in price increases. We have also worked improving our mix.
We have also more lately in the second half, in particular in the fourth quarter, started program to control better the cost. All together, this has resulted in the EUR 360 million EBITDA that we have announced today, slightly higher than our forecasted EUR 340, which was in the top end of our guidance. It means that some of the recovery has already matured in the fourth quarter. I think that ideally, we should have probably around EUR 40 million-EUR 50 million that we can potentially recover between efficiencies in costs related to logistic and related to say, the return to normal of our factories.
In the end, also in the meanwhile, we saw some other elements coming in that we can't, let's say, not take in consideration. We have all including this, including also an expected soft start to the year. We expect the first quarter to be soft on the back of the tough comparison with last year. I recall that not just last year, but also two years ago, that in the past two years, just the first quarter, we had a growth approach 70% in two years.
I think that because also this weak start to the year, it makes sense to have realign our ambition around the new guidance that we have announced between EUR 370 million and EUR 390 million in EBITDA for the full- year. I would just say that indeed what you said is exactly in line with what we said. We are in a very, let's say, still a market with lack of visibility and complexity and some material changes kind of sudden.
I think that we are confident that thanks to the brands, the products, also now a sound financial position, we're well-positioned to achieve the new targets. TrueBrew. Second question. Yeah, is very early to really comment on the launch. What I can say is that, we're very pleased for the launch. I think our team has done a phenomenal job in term of preparation to the launch. I think with a massive campaign is visible in the key metropolitan cities, is online. We have activated all the key customers, and we got a tremendous support from trade with regard to the product.
Because it is the very first time for De'Longhi that we enter massively in, say, the more traditional American coffee market. This machine is basically a machine that is brewing coffee to the higher standards according to the Specialty Coffee Association and World Coffee Associations. It can do, it can brew coffee in six different sizes exactly in line with the, say, the most popular American coffee chains. It's addressing potentially every single American household in term of the fact that this is the most common drink coffee drink in every house. Of course, it's positioned itself because of the technology and innovation.
This is, it's the first time there's a fully automatic American coffee maker. It's in the top end of the market. Again, given the strong trend with specialty coffee and the great passion that Americans have around coffee, we are confident that this innovation can have a positive traction and is also potentially a strengthening element in our coffee, let's say, full-fledged coffee strategy. We are now a player that can offer all type of coffees for American with innovation from Nespresso and with Vertuo, say addressing the capsule market as well as the cappuccino maker with a traditional Italian technology pump grinder or automatic now.
We enter also the American coffee market for the very first time.
Thank you very much. No, it's fine. Thank you very much indeed.
Ambassador, Brad Pitt is the ambassador again in a new movie. We're all excited and looking forward to also sharing with you some results, probably, in the say when we will be able to comment, the first half of the year.
Thanks again.
The next question is from Alessandro Cecchini from EQUITA. Please go ahead.
Hello, everybody, thank you for taking my questions. The first one is, if you could quantify your shipping costs for 2022 versus 2021. Just to have the bridge of the increase. My second question is, beyond, I mean, the guidance for this year. Last year, 2022, the management team was strongly, I mean, involved in inventories reduction, a lot of activities, and so on. I would like to wonder how much is the management team focused on improving margins. Actually at the end, your profitability in 2022 is, of course, not satisfactory because 11.5% is something that I think that you are not satisfied by these margins.
I would like to give more flavor on this. How much the management team is incentivized, is pushing on improving margins. Also because I believe that your structure, your operating cost structure was set up last year for growing sales and not for - 7% of top line. My last question is that is still about M&A. In your view, is more important at this stage to conquer new geographies or increase market share in new, underpenetrated geography or to, I will say, enlarge the product range and so on. Just to have your best priority if you can. Thank you.
First question about shipping costs.
I think, yeah, the, I.
All I can take.
The difference in shipping costs that we got year-on-year, it is something like EUR 15 million. The difference, obviously, this is what we see from the P&L. There is definitely also the effect of the stock that we had built and reduced over the year. We have also EUR 220 million in stock reduction that was transported the, let's say, the year before. This is the year-on-year difference that we can have.
Okay. Thank you. Yeah, on the focus of management, I have to say that, obviously, the management was very involved with the, let's say, reducing the stock. You know, there are different marketing, or let's say, team of management, addressing different issues and tackling different problems. Therefore, for sure, the sales teams and the marketing teams have been very focused in improving the margins. I have to say that, notably, we have increased the prices a couple of times in two years. We, just last year, I said we have improved our pricing by about EUR 87 million, which is not a minor price increase.
Obviously, the circumstances were such that nevertheless, we could not fully offset the higher costs. If we, for a moment, we look at say the results of the last quarter, I have to say that you can start seeing the potential profitability of the group. Of course, we're gonna have probably in 2023, say, better quarters and probably more difficult quarters. I cannot promise that all the quarters will go in the same direction as it happened in 2021, and also in the second part of 2022. If you look at our performance in quarter four, I think that despite a sales decline, we have delivered a quite strong profitability.
I don't disagree with you, but also not fully agree with you because, I mean, the group has already proven that in quarter four, we can still even in declining markets, provide a quite strong profitability. Obviously, our long-term ambition is to go back on a more stable base to the profitability levels of the group that we have, you know, delivered in the previous years.
Thank you.
With regard to, also cash generation, I think that we've proven that once that the inventory levels are under control, we have a solid cash generation that will be also with, let's say, the profitability improvements will be, cash generation will be another priority for our management team for 2023. With regards to your last question, which is about M&A, I already commented. I don't like to be more specific. I think that, for sure, we are always looked into new brands, new products, as well as on, you know, geographic addition.
I believe that, for sure our focus will continue to be in both directions and, yeah, either one or the other.
Okay, thank you. Just a point on the previous question about the new machine in the U.S. If you could elaborate a little bit more your expected positioning. If you see other players having the similar machine, or you at this stage consider yourself a sort of, I mean, a first mover with this kind of machine. Just to elaborate a little bit more on this point. Thank you.
Well, it's an innovation. It's for sure an innovation. We are the first mover. To give you an idea, fully automats usually brew coffee between 7 g-15 g per cup, which doesn't allow the consumer to brew longer cups, like 6 oz or 8 oz or eventually even more. From our research, most Americans, although they really love cappuccino, and cappuccino and espresso is a super growing category, and we are experiencing that in our numbers. You know, we do with our growth in North America. We are not yet addressing the majority of consumers who still like traditional American coffee. We believe that at the same time, there is a strong premiumization trend.
People are spending more for better coffee. In the end, coffee, even if you invest in equipment, let's say $500 as the commanding price for TrueBrew, is still a relatively cheap treat for a family, provided that they use on a regular basis and also compared to what they spend when they go out in a coffee bar or elsewhere to have a cup. In this perspective, we can address every household, provided that they are coffee lovers and they have the pockets for EUR 500, $500 coffee maker. We are confident because there are some expensive American coffee machines that are not automatic, and they are, you know, selling very successfully in the high end.
Therefore, we want it, as a, you know, global coffee leader, we wanted to explore this opportunity. We got, in the meanwhile, incredible support from our trade partners. All the, you know, the key retailers are super supportive, have listed the product, and we can really start our advertising campaign, you know, with the support of about 1,500 doors, 1,500 stores in the United States and with the Brad Pitt advertising campaign.
Thanks a lot. Last point, Longhi. Do you expect to launch this in China as well, or just not in China?
Well, no, it is a good question. I think this product potentially has more, let's say, opportunities also in other geographies. For the moment, the focus would be more specific in just the United States. We want to exploit the potential in North America and then decide what are the other opportunities along the year, as soon also we'll be able to read the results of our campaign and our launch.
Okay. Thank you.
The next question is from Isacco Brambilla from Mediobanca. Please go ahead.
Hi, good afternoon, everybody. Three questions from my side. The first one, is on the, revenue mix in the, pie chart, on revenues by product line. I guess, the first time you are displaying your B2B coffee makers sales. Can you clarify if that, 3% is all related to, Eversys? Second question, which is quite, similar, is on, NutriBullet. Could you share with us the amount of revenues generated by, NutriBullet in, 2022 and how, it is comparing with, pre-COVID, revenues when you acquired, the asset? The last question is on 2023, guidance on the top line.
Could you elaborate a bit more on the underlying assumption on the performance of food preparation, which is supporting your guidance of slightly decreasing sales this year? Thanks.
Yeah, good question. About, yeah, professional coffee machine are now approximately EUR 100 million in sales and are just Eversys. With regard to NutriBullet, Yeah. Okay. Let me grab the 2020 number.
Yeah.
In dollar. Okay. This is euro.
In dollar.
In dollar. Okay. Approximately we are, let's say about 20% down versus 2020, which was a record year for NutriBullet. The third question is about the development in food preparation.
Guidance.
The guidance. We believe that we started experiences a slowdown in the food preparation market already in quarter two 2022. We expect to continue with negative sales throughout quarter one 2023 and to see improving results progressively during the year. We're confident that we're gonna see stabilization in food preparation decline in the second half of the year and the full stabilization for the future years.
Okay. Very clear. Many thanks.
The next question is from Francesco Brilli from Intermonte. Please go ahead.
Good evening. Thanks for taking my question. Can you hear me?
Yes, we can hear you.
Okay. Yes. Few questions on my side. The first one is a clarification on advertising and promotion. If you can share with us the final percentage on sales of AMP for fiscal year 2022. Then a follow-up on M&A. Actually a couple on this. You mentioned that you will build a new factory for Eversys this year. Should we assume that you are going more for an organic development of this segment rather than looking for potential addition externally? On Eversys, just a clarification if you can. I assume that the increased minorities are related to the good performance of Eversys this year. Just check on this.
My final question is on the discontinuation of mobile air conditioning in the U.S., if you are looking for further actions of this kind, for specific subsegments and in specific markets in the future. Thank you.
I can hand over the first question to Nicola.
About the AMP on 2022, it's 13.5% of sales. You have also a detail in the presentation by quarter. It was fluctuating between 12% and 14.5%, depending on the quarter for more than EUR 400 million of total amount.
Yeah. With regards to M&A, well, I can just repeat what I, you know, previously said. I mean, M&A is a priority, has been always a key element in our growth story. We've always been very disciplined. We believe that either coffee or eventually food preparation are certainly our priorities. When it goes to coffee, I mean, certainly there is a high growth segment for the group. In food preparation, probably we should eventually be more selective, adding products that have more potential for acceleration, complementary, as in the case of NutriBullet.
I think that great news is coming from our cash generation and being again cash rich, cash positive, which will put us in the condition to be well-positioned to capture, you know, opportunities around the market. With regard to the discontinuation of portable air conditioner, we said it's a strategic decision. It's a strategic decision as we have decided to walk away from a very specific channel of distribution, which was becoming too expensive and with margins below far below our group average. This lower profitability in portable applies only to that channel of distribution and that specific market, the United States. While on the contrary, continues to be a profitable segment for Europe, for instance.
Therefore, the decision has been in a way strategic, but also very, very pragmatic, very practical. This does not undermine the potential, the profitability potential of portable air conditioning in the other geographies.
Okay. Just on minorities, if you can share?
Yes. On the minority. No, it has not to do with Eversys itself. Eversys has a branch, a local branch in the UK, where local management had a minority stake, a large minority stake. We are now buying out the remainder, and next year will be fully consolidated into our accounts.
Okay. Thank you very much.
The next question is a follow-up from Niccol`o Storer from Kepler. Please go ahead.
How are you saying?
Thank you. Thank you for taking my questions, additional questions. The first one is on AMP, if you can detail how much was A and how much was B in 2022. The second one, again, on EBITDA bridge. I saw that you've had EUR 15 million boost from Forex in Q4. What should we expect going forward? Should we exclude this EUR 15 million from the bridge, or should we expect a negative contribution in 2022? How should we think about Forex in 2023? Thank you.
About advertising. In 2022, approximately EUR 150 million-EUR 160 million has been pure advertising. Has been, well, there's a record year in term of advertising investment for the group. The reminder has been all on the promotional or operational initiatives. With regards to the second question, is about FX. We had a positive support from FX in 2022, while we expect slightly negative in 2023.
Thank you.
The next question is a follow-up from Andrea Bonfà from Banca Akros. Please go ahead.
Hello, good evening. I would like to know if it's possible to have your transportation cost for 2022, the equivalent of the EUR 214.5 of 2021, the one for you, including your cost of service, if possible?
Okay. Pure transportation costs from 2021- 2022 went down from EUR 214 million- EUR 190 million.
Volume effect.
I think that you have a volume effect, which is also current effect. I think it's not very easy to read this number on a stand-alone. Of course, in 2022, we had a peak fare and peak rates per container. In the end, we purchased less products, therefore, we had some negative, let's say, positive effect, which generates the reduction from EUR 214 million- EUR 191 million in 2022.
The EUR 91 million are the equivalent of the EUR 110 of the first semester, which were up of 30%. It means that your transportation costs were down 40% on the second half. Is that sound kind of correct?
Excuse me. The line is very disturbed. We can't hear you very well.
If I take your EUR 191 million of transportation costs, it means your transportation costs went down almost 40% in the second half. Is that something looks correct from your standpoint?
Yeah, but it's on, including volumes.
Yeah, yeah. Okay.
What I'm giving you is the total figures in transportation for 2022 versus 2021.
Okay. Thank you.
Unfortunately, in 2022, although we have a higher, let's say, per product transportation costs, the sharp reduction in the shipments has helped us to have a lower total transportation cost.
Okay, thank you very much.
The next question is from Fraser Donlon from Berenberg. Please go ahead.
Hi there, Fabio and Nicola. Thank you for the presentation. There are four questions on my side. The first one is kind of conceptual, I guess we've spent the last couple of years quite obsessed, almost by coffee and then by inventory stocking. If we travel back to the positioning of like Kenwood and Braun, you know, how satisfied are you with the level of investment in those businesses and the overall positioning of them? The second question would be on margins midterm. Obviously, the mix of the business has shifted more towards coffee. Eversys will step up in the equation as well. You know, should we not consider that the margin potential should actually be higher modestly than in the past, given that change?
The third question would be on the capacity expansion plan for Eversys. I've obviously read that that's backed by some tangible contract wins, but could you maybe qualify how much of the capacity expansion you're planning for that business? The final question is on labor cost inflation. Could you maybe give some color on what level of inflation you see among your staff? Thank you very much.
With regards to Kenwood and Braun, no, we're very happy as we are also NutriBullet. Kenwood is still the market leader in stand mixers in, let's say, outside the United States, which is our core, let's say markets for food preparation. Braun is the market leader in the stand mixers. Now are we getting some good traction with Braun in some new categories which are, for instance, ironing and ironing system more, let's say, low growth traditional categories. We think that the fundamentals around Kenwood are Braun are still intact. Good brands positioned in the mid-high end of the market, they're, you know, helping us also in term of profitability.
I would like to highlight that both Kenwood and Braun provide us with great profitability in the core categories. Unfortunately, we are comparing now Braun and Kenwood with a super record here. Now we have just to, you know, manage, let's say, to, let's say, go back to normal and hopefully with the normalization of the stock levels at trade and also hopefully with improvement of the consumer confidence and also the improvement in some geographic areas.
I don't want to say that, you know, the end of the conflict in Ukraine and Russia is far beyond our control, but at least the normalization of the consumer behavior in Eastern Europe, in those geographies, that for sure will allow these brands to go back to their, I don't want to say the record year, which probably the record year won't be achieved in the short term, but to go back to a more normal year. I can. Yeah, Nicola, do you want to add on something with regard to our action on the margin?
Yes. If you want to add something on the margin, you mentioned that we are going towards coffee, let's say, favorable margin with coffee. As Fabio has mentioned, we have to consider that Kenwood and Kitchen Machine particular and Braun are definitely higher contributor to the margin. They are suffering the volumes in this moment, but as core category and core products, they are definitely not second best compared with coffee. Now it's time to gain back stabilize the market level that they deserve, and obviously to go for some volume efficiency. I do not see margin issues with these two brands.
Well, on Eversys has performed at the top of our expectations. We're very pleased that this, although is a major investment for Eversys, you know, the, you know, Eversys requires a new, more space. We have now started, we are in the process of doubling the manufacturing space. We expect this investment to be around EUR 20 million. We expect the new plant to be ready by year-end. This will allow Eversys to continue its growth path and also potentially, yes, satisfy increased orders from key coffee roasters and key coffee chains in United States and in Asia.
Yes. About going about cost inflation, indeed, aside of the transportation cost, we still see cost pressure because of energy, because of materials and because of labor in particular. Along all the value chain, this pressure is definitely higher in Europe than it is from the sourcing from China. Nevertheless, we see still a carryover, an unfavorable carryover of cost from 2022 to entering 2023. In particular, cost inflation is significant for blue collar in particular, but still also white collar and along all the value chain of the suppliers. This is definitely the highest pressure that there is there.
Okay. Thank you for your answers.
Once again, if you wish to ask a question, please press star and one on your telephone. The next question is a follow-up from Alessandro Cecchini from Equita. Please go ahead.
Hello. Thank you. Only a quick follow-up on Eversys, because reading newspapers and so on, it's the partnership with Starbucks. Could you, of course, elaborate a little bit more on this? Do you consider this kind of new partnership with them something very transformational for the company, or is a nice-to-have add-on for the company? Just to elaborate a little bit more on this. Thank you.
Well, I have to say that for Eversys to have the... To become a supplier of records of Starbucks is a dream. Is a dream, is something that was unforeseeable, probably even two years ago. I think this is showing the... You know, the potential of Eversys, is showing what Eversys is bringing to the market. I think it's an incredible success for a startup like Eversys. But it's because of the innovative technology, the quality of its products, the focus in the brewing quality. I think that also is the proof that we can count on a very strong management team, because to really be selected by Starbucks is a lot of work.
I think that yes, it can be transformational indeed, as well as we can get more. I mean, I think it's the visibility that we have now with Eversys in the marketplace is very strong, and we see that Eversys, which now is probably number four in the ranking of the fully automats in the world. This offers certainly the opportunity for, to Eversys to climb in the ranking and become a even more meaningful player in, in this marketplace.
Okay. Thank you.
Mr. de' Longhi, there are no more questions registered at this time.
Good. Thank you all for attending the De'Longhi full- year 2022 conference call. Bye-bye.