Hi, this is Benedetta Mastrolia. I'm the Investor Relations at Newlat Food, and thank you for joining Newlat Food's Nine Months 2023 Earnings Call. Joining me today to discuss our results are Angelo Mastrolia, our Chairman, Giuseppe Mastrolia, CEO and Chief Commercial Officer, Rocco Sergi, CFO, and Fabio Fazzari, Group Financial Director. Before commenting on our results, I would like to remind you that this presentation may contain specific statements that are neither reported financial results nor historical information. Any forward-looking statements are based on Newlat's current expectations and assumptions of future events, and are subject to various risks and uncertainties that could cause these results to differ materially from those projected or implied by these statements. Now we move directly to page 7 of the presentation, where we have our financial highlights for the period.
So as for the last presentations, we're presenting our results on a consolidated basis, which means that the EM Foods revenues were included into the consolidation scope only from the first of January 2023, and the 2022 numbers do not reflect the EM Foods acquisition. As regards to revenues, we had a revenue of EUR 600.7 million, which is an increase of 15.2% versus last year's results. We had an overall organic revenue growth of 11.2%, and we had the highest increase in instant food by 30.9%, which is of course boosted by the EM Foods acquisition. In dairy by 24.7% and in bakery by 14.5%.
As regards to our main markets, we had the highest increase in Germany once again by 20%, with by 20% in the first nine months. In Italy, we had an increase of 9.8%, and in the UK, we also had a good increase of 11.7%. Moving on to EBITDA, we're looking again at the adjusted EBITDA as usual. We had an increase of 36.6%, which means that we had an EBITDA of EUR 58.3 million, as opposed to EUR 42.7 million in the first nine months of 2022. If we look at the adjusted EBITDA margin, we had a very good improvement, and we went from 8.2% to 9.7% in the first nine months.
If we just look at the Q3, we actually had a very good result, and we had a very good recovery margin as opposed to last year. We actually went double digits in the last quarter. We had an EBITDA margin of 10.6%. Moving down to EBIT, we had an EBIT of EUR 31.8 million, as opposed to EUR 11.7 million last year, which marks an increase of 171%. So we had a steady improvement of all the income statement figures, which kind of outpaced the increase in revenues. And we had... We have achieved this thanks to, of course, the, I would say, a very important attention to costs, and especially we had basically no increase in admin and sales costs.
We had just a slight increase in those, so very good management of these, of these lines as well. Moving down to net income, which is the one actually performed the best in the period. We had an increase of 414% versus last year, which means that we went from EUR 3.5 million at the end of the first nine months of 2022 to EUR 18.2 million at the end of September 2023. We had a very strong operating leverage, which helped us overcome the higher in the net financial costs that we incurred in this period, and we were able to basically have a very, very good result, even as. Even looking at the other features in the income statement. Moving on to free cash flow.
We had a free cash flow of EUR 29.2 million, which is an increase of 166% versus last year. We had a very good performance free cash flow, especially if we compare it to last year's results. Thanks to this, free cash flow generation, we were also able to further improve our net financial position. If we're looking at debt, indeed, we had an improvement of the net debt, excluding IFRS 16 liabilities, which went from EUR 63.1 million at the end of 2022 to EUR 14.8 million at the end of September 2023.
So we had a huge improvement, and even if we look at the figure with the IFRS 16 liabilities included, we had a very good performance, and we had a net debt of EUR 60.5 million, as opposed to EUR 109.8 million at the end of 2022. Moving on to the next slide, we've wrapped up some of the nine months results of some of the best and well-known food companies in the world and in Europe. And we were able, even in this context, to be up there with the market leaders and to be, in this case, we were the second best performing company among the sample of companies we've picked.
This shows that even if we're a smaller company compared to these huge companies, we actually have a very good operating leverage. We have a very good strategic positioning as well of both our brands and our position in the market as an operator in general. And as can be seen here, we've outperformed some big companies such as Nestlé, Unilever, Kraft Heinz or Ebro. So we're really, really proud of the results. And you can see a little bit more of the results here. Onto the next slide, we have just this little sneak peek of what we've done in Germany in terms of the Minuto range.
Well, so we've just launched in the beginning of October, end of September, the Minuto Bakery range in Germany, in some of the most famous retailers in Germany, such as EDEKA. This is just a very quick photo of what we've just launched. We will be launching more products in the near future. And Minuto stands out as one of the most youthful and most modern proposals on the market compared to the existing players in this industry. And we're really hopeful that this product will keep growing in the future.
We've had a really good reception, both from consumers and customers so far, and they're really happy with the product, and we cannot wait to actually expand their range, which is already ready to launch in the next few months into the German markets, in the German retailers. And we will be selling these even in our other reference markets. Moving on to our breakdown and analysis of the sales. We move on to our revenue highlights again, where we have some of the highlights of our income statement. So as just mentioned earlier, we had an improvement of revenues of 15.25%, which means that we had EUR 600.7 million in revenues.
We had an overall expansion of our market presence as well as our client base. If we look at the other figures of the income statement, we had an increase in gross margin, for example, 23.70%. So the more we go down during the income statement, the more we can see that we've outpaced the revenue increase. So we were able to have sort of an enhanced operational efficiency. If we look at cost of goods sold, for example, we can see that cost of goods sold accounted for 81.9% of sales, as opposed to 83.2% last year. So we had an improvement in the purchasing conditions as well, which reflected into these numbers.
EBIT also shows an impressive increase of 170%. And this again really is proof our operational performance and profitability. And as just mentioned earlier, we had virtually no increase in sales and distribution and admin expenses, which only increased by 2.91% and 1.20%, respectively. And this really shows our meticulous control of all the costs that go into the company. Then just to mention again, the net profit surged by 414%. So we had EUR 18.2 million in net income. And again, this is really thanks to the really good leveraging of our inputs and output costs. Now we move on to the breakdown by business unit.
As can be seen by the bar chart, we actually had an improvement in all our business channels, business units. The one that stands out the most, as the organic growth is dairy products, which increased by 24.7%. We had a really good growth in this particular segment. We actually just worked to increase our client base, as well as relaunching our product. We actually just relaunched our main brand, which is Optimus, in Italy, with a new packaging. So we're really eager to see what this is gonna be like in the near future. But we actually seen really good reception as well so far.
In terms of pasta, milk, and bakery, we also had a very healthy growth in all these segments, which, you know, increased by 11.4%, 10.4%, and 14.5% respectively. In terms of pasta and bakery, the most of the growth was attributed to different channels. So one of them being large retailers, especially in Germany for pasta and in B2B contracts as well, in Italy and in other countries. We actually signed a few B2B contracts at the beginning of the year, which helped us improve our pasta and bakery sales.
As regards milk, since it's a more local type of product, we actually seen an increase in milk, mainly in Italy, of course, and in the sort of traditional channels such as large retailers, as well as normal trade and food service, in particular. As regards instant noodles and bakery, as mentioned earlier, the data is influenced by EM Foods. However, we also had an increase in the instant noodles segment, in particular, thanks to the addition of new products into both the Italian and the German market, as well as in the U.K. market. So recently, we just launched a new packaging and new recipes for Naked in the United Kingdom, which was very well received by customers and clients alike.
We've seen a very good reception as well of the other products that we already mentioned in previous conversations. So, Naked Ultimate in Italy and in Germany. And we keep seeing really good feedback from clients in Italy and Germany as well. And we hopefully will see more contribution as well, organic contribution coming from the bakery mixes since the launch of Minuto into the German market, as well as the launch that will be in the near future in other countries as well. Dairy products I just mentioned, and special products had a growth of 4.7%, which is mainly coming from B2B contracts that we have in this segment. Moving on to distribution channel.
So they all grew quite well. In particular, if we look at large retailers and food service, these are the ones that grew the most by 21% and 18.9%, respectively. We had an overall growth of all, mostly all of our business units in the large retailers. So we had a number of higher demand in pasta, instant noodles, milk and dairy segments as well. And we had, as mentioned earlier, an increase in food service related mostly to milk, as it's a very specific channel for milk and dairy products.
As regards to B2B, B2B sales, as mentioned, earlier, we had an improvement of 11.6%, which is actually, coming from the contracts I mentioned earlier about pasta and bakery in particular, as well as other countries, such as, special products as well. As regards to milk and dairy, we had the most growth in the normal trade channel, so the growth that can be seen can, that is in there is mostly related to milk and dairy. Moving on to geographies. Again, Germany grew the most by 20% in this period, so it keeps proving itself as our best, reference market at the moment.
In terms of sales, we've seen an increase in both pasta and instant noodles, as well as the contribution maker, bakery mixes a little bit, but we will see more of it in the last quarter with the momentum that will take the Minuto to the third line into EDEKA and other retailers in Germany. As regards to U.K., we had an increase of 11.7%, which is boosted by an overall increase in demand and also in prices, but also by the new launches of the Naked Best Ever range, and as well as other recipes that were put out into the market, as well as other initiatives regarding, for example, Mug Shot, which has been relaunched and revamped as well recently.
So, we've seen a really good performance in the U.K. as well. Italy also went pretty well. We had an increase in mostly with pasta and bakery in B2B, but also, noodles and instant products in Italy, as well as milk, of course, which actually mostly are related to the Italian sales. So of course, we had an increase in there as well. As regards to other countries, of course, we had an increase, mostly due to the acquisition of EM Foods in France. However, we saw an increase in most other countries as well, in the countries we export to.
We've seen an increase in different export products such as dairy products, as well as pasta, as well as bakery, where we've seen an increase in all of these, you know, of these products. Moving on to the next slide, we have an EBITDA breakdown by business unit. So as can be seen from the right-hand side, we have had actually an improvement in basically almost all the EBITDA and EBITDA margin figures. As regards EBITDA margin in pasta, is actually the one that improved the most. We went from just 4.6% EBITDA margin to 10.9%, at the end of September 2023.
So we actually had a more than double increase in EBITDA margin, which is boosted by better conditions of purchasing, as well as a better positioning of our products into the market and some very advantageous contracts that we signed. As regards to bakery products, we also saw a really significant increase in EBITDA by 15.3%. And we also had, once again, bakery being our best performing segment in terms of EBITDA margin, where we had almost 14% of EBITDA margin as opposed to 10% last year. So this is again, thanks to better purchasing conditions, better pricing points into our clients, and just an overall improvement in all the different things that together EBITDA.
Overall, we had an increase, basically in all the business units, EBITDA margins, but not in the instant noodles and bakery segment. This is because of the EM Foods acquisition, which has an overall lower EBITDA margin as opposed to the pre-existing instant noodles and sort of cinnamon buns segments. So we had to go from 11.6% to 7.2%. However, we expect that this will pick up as we keep putting out new products and actually work on efficiency with EM Foods as well. In general, as I already mentioned earlier, we had an overall improvement of margins in the last quarter, and we had an overall EBITDA margin, an average of EBITDA margin in Q3 of 10.6%.
Here it can be seen a little bit more into details. So we can see the cash flow statement first, which, as mentioned, the free cash flow generated for the first nine months of 2023 was EUR 29.32 million. In both the bar chart and line chart, as well as the table below, you can see a bit of the evolution of both EBITDA, EBITDA margin and then free cash flow, as well as the revenue growth throughout the last quarters. As can be seen from the line charts, we actually see a very steep line going upwards. So we've gone from just 7.13% in EBITDA margin to 10.57% EBITDA margin from Q2 2022 to Q3 2023.
So we've actually seen a steady improvement in these numbers. We've seen an improvement in the EBITDA as well. If we look at last year's EBITDA, for example, for Q3, we see EUR 14.2 million as opposed to EUR 19.8 million in Q3 2023. If we look at revenues as well, we had a steady improvement. Q3 is usually a weaker quarter as opposed to for example Q3 or Q4, where we expect this year to be in line with last year, but you know, above, following sort of the same growth rate we've seen in this quarter. So we expect to see an improvement in Q4 as opposed to Q3, as well as Q4 last year.
So, we're really hopeful that we will close the year with really good numbers. Underlying free cash flow, as some of you may remember, last year, we had to sacrifice some free cash flow because of the extraordinary inflationary events we had to incur. But however, as can be seen in the very bottom line of the bar chart, of the table, we can see that we had an improvement going from -EUR 3 million in Q2 to EUR 11.8 million in Q3, 2023. We had a steady improvement, kind of stabilization of free cash flow in the last few quarters. Moving on to our next page, which is M&A opportunities.
We're sort of reiterating what we already said in the previous presentations. So we are still in a very favorable environment, which is thanks to different factors. One of them being interest rates being really favorable and the current credit market also being favorable for our type of structures and leverages. And as well as the fact that food companies are not as appealing at the moment for financial investors. So we have more space to work with food companies to acquire some really interesting targets. We are still into the process we announced earlier this year about a potential acquisition in the U.K., which is well over EUR 1 billion in revenues.
We're still talking with the company, and hopefully we can give some news in 2024. We, however, are still keeping an eye out for other acquisitions. So we actually have conversations going on with different counterparts, and we are looking at different food targets within revenues being within EUR 50 million-EUR 200 million in revenues. As regards the target we announced last year coming from a multinational corporation with operations in Europe, we're still waiting for the internal reorganization process to move and to give us a green light to go on with the process.
So we're still on hold on this one, but we're still working on many different opportunities that we hopefully can share with the market soon. Moving on to the very last slide, where we have an outlook on 2023 results. We, as a management, expect to have results that are in line with the ones presented today. We expect to have a consolidated revenues growth with a double-digit growth. We expect EBITDA margin to be above 9%, and we also expect having free cash flow to surpass EUR 35 million, and with a free cash flow yield of over 13%. And as just said, we are really, really committed to our strategic focus on M&A.
We're really committed to closing at least an acquisition and at least one of the ones we've just mentioned. Of course, we are still open to see other targets in case they come forward. So we're really working on that, and we really hope that we can share some really good news soon. Now we can move on to the Q&A. So we can open the call for questions. As usual, you can either unmute yourself and ask the question directly here, or you can send the questions via the chat, and we will read them out for you and answer your questions. Thank you.
Yes, if I may, Arianna Terazzi from Intesa Sanpaolo.
Yes, go on.
Good morning, everyone. Okay, I have two questions for now. So, just to better understand, which is the updated CapEx level for 2023, 2025, basically for 2023, which kind of level is embedded into your cash flow projections? And then second, if you could remind us, which is your target in terms of instant noodles and bakery mixes, in terms of profitability and when it could be reached? Thank you.
Arianna, good morning. So about the first question, the level of CapEx, we believe that for 2023, we may have a CapEx spending around 2% of revenues. And we expect this to be a bit below 2%, coming from, well, so for 2024, sorry, and a bit below coming from 2025. As you saw, it's not linear during the year. This depend, obviously, about the timing of the different project. We don't have a proportional spending quarter by quarter. And about the instant noodle profitability, we have several project ongoing. For sure, our target is to reach around 10% of profitability for this division. We have several project ongoing.
Part of the project are related to automation and efficiency, in the plant in Symington's. Other project are related to on the commercial side, are related to the development, of new, innovations, new products. The production of, the European part of the business in France, in EM Foods, where we already transfer a line, and we will start, very soon. So there are, a lot of, project ongoing. After the acquisition, we announced, relevant, amount of synergies.
It's clear that what we face after the acquisition with this material increase of the inflation, the cost of single project, also in terms of raw material, because if you had to introduce automation in a plant, you may understand that maybe so we need also to wait for the right time to buy a new machinery, a robot, or something that was materially impacted by the inflation wave. And for this reason, we are a bit in delay versus the original plan, but the target remain in place, and we are confident that in a couple of year, we can complete the full achievement of the synergies from the U.K. acquisition.
Thank you, Fabio.
Welcome. Maybe, Paola? We don't hear you. Now you are in mute, or there is something that is not working. Okay, we try again, later.
We have a question coming from Evan Pallets in the chat, so I can read it out for everyone. So one question from my side is, growth rate is getting reduced a little after Paola is-
Can you hear me now? Okay. Yeah. Yes.
Yes. Maybe just one second, Paola. We complete to answer to the question that we received in the chat, and then we come back to you.
Okay. So, it seems the growth rate is getting reduced a little bit in comparison with the previous quarters. How do you see the market stages for keeping with the organic growth? And could it impact the EBITDA margins in the future, due to potential price reductions in case there is a price reduction request from the market?
Yes, on this point, we can answer that. First of all, at the moment, into the market, we don't see any sign of weakness. Everything is going on very well. The demand remain robust, so the market is answering very well to all the initiatives that we have in place. The fact that you are seeing a reduction of growth is mainly related to a mathematical effect. The point is that most of the price increase have been made in the second half of last year. This means that we benefit from comparison base, positive comparison base, in the first half of the year. In the second half of the year, we have a more challenging comparison base.
This means that the growth is naturally reducing, but this is not driven by reduction of price or other initiative. It's just simply a comparison mechanism effect. And in terms of volume and price, I can tell you that the split remain substantially the same that we experienced in the past quarters. In particular, in the third quarter, volumes accounted by 35% of the reported growth, and 65% was still related by prices. You're welcome. Please, Paola, go on with your question. But now we don't hear you again.
Can you hear me now?
Yes, now it's okay.
Okay. I hope it will last for a while. Okay, so, my first question was on the several many opportunities you are considering. I was wondering whether there is a ranking from your side on what can be more likely, and also what is more desirable to you. Also, providing that, in case more of them come to a point where they can be finalized, or at once, would you select which one would you select? Second question is about the trend in special products. If you can elaborate a little bit on the underlying dynamics here, especially with regards to the contract that you signed now a couple of years ago.
In particular, because in Q3, I think we had a negative top line trend, and also in terms of profitability. So I was wondering whether there is anything temporary here, which we should be aware of. Also, in terms of B2B, my understanding is that the toughest comparison, and therefore now also the most evident slow down in volume is in the B2B segment. So if you can elaborate here as well, what kind of relationships drove growth in the last few quarters, and to what extent are these commercial relationships being confirmed going forward?
The very last question, you mentioned that your expectation for Q4, if I got it right, you said you are expected to improve profitability compared to Q3 and also to Q4 2022. I was wondering if you can elaborate on that, whether you are expressing that this, you know, condition in absolute terms, in percentage terms, and what are the underlying drivers in terms of input costs. You seem to be benefiting from best purchase conditions. What extent is this going to be maybe even more evident in Q4? And on the other side, what we should expect in terms of normalization of prices, which is a follow-up from the previous question. Thank you very much.
Thank you, Paula. So starting for the first one related to special products. So special product is substantially delivering normal level of growth. We have not a linear performance quarter by quarter because we have the implementation of new products and new lines, especially new oven, and also new lines for the main business. This obviously could create maybe a different performance month by month and quarter by quarter, but it's just a sort of organizational, technical not recurring situation. We believe that in 2024 the reported growth could accelerate versus what we are going to report in 2023.
In any case, apart from this, I would say, the organizational impact, we continue to have what we can consider a normalized level of growth for a food category. Nothing particular, I would say negative even if as I said, there is a different performance quarter by quarter but it's just, as I said a technical issue. In terms of B2B, we continue to deliver and to increase and to strengthen our relationship with different player in the discount segment, in the retail segment. And this continued to be for us an area of strategic focus.
Also considering that, as you know, we continue to have spare capacity in some categories, and for us it's important to try to reach new volumes and to strengthen our relationship with players that are, I would say, the growing one today in the food industry. Because especially thinking about the discount segment, the trend for this player continued to be very, very strong. As a general comment, for the profitability, I can tell you that, as we said, the drag in profitability that we experienced starting from the second quarter of last year was something temporary and driven by the fact that we experienced a mismatching between the increase of input costs and the possibility to complete the pass-through. Now the pass-through is substantially complete.
I think that this quarter reflected what is our say underlying level of profitability, and this must be the target for the future. It's clear that if additional maybe acquisitions or maybe additional investments in new project in new countries, this could maybe have an impact on the profitability. But if we imagine the company to continue to grow in the coming quarter with the current structure of the business, I think that the third quarter reflected what is the actual underlying level of profitability. That is about the level that we experienced before the inflation wave as you remember.
This means that, apart from the effect of leading to the price increase, we also got important results in terms of efficiency and margin improvement, underlying margin improvement. About the M&A, that was the last point you asked about. We are involved in several potential deal in Italy and outside Italy. It's clear that we continue to follow with a lot of attention and a lot of interest a very big deal that we highlight in our presentations before. It's clear that this is a very interesting opportunity for the group. It's a transformational deal, and we are negotiating and working hard to try to be able to communicate as soon as possible to the market, a positive evolution for this deal.
But this is not the only one. There are also other deals, maybe, and obviously, smaller than this one, but in any case, at the same time, important because all the business, all the deal that we are follow could allow the company to enter a new business and to continue the diversification of the offer versus our customers. So I cannot tell you now more, but I hope that we will be able to share with the market positive news very soon.
Much appreciate.
Thank you. Just to answer to another question that came into the chat asking about the guidance 2024. I think that is too early and there are a lot of things on the table today to speak about the guidance for 2024. For sure, as we I would say demonstrated in this year and also in the past, we continue to be very focused on growth, business development, margin, underlying margin improvement, and also M&A that remain one of the core business of the company. One is food, and the other one is M&A.
We have another question actually coming from Stefan P., who is asking: For the next few months, do you expect to trade working capital in line with the last three quarters with similar collection of payment terms? Or do you anticipate returning to the trade working capital levels of 2021, 2022, with long terms compared to those of the recent period?
Our target is to come back to a very efficient level of Net Working Capital. Last year, we have been impacted by the inflation wave and the very tricky situations that everyone faced into the market. Now we are step by step, trying to get the very strong position and situation that we experienced in 2020 and 2021. For this reason, I think that in Q4, also because it's an historical situation, because always happen, we may be in the positions to improve further the contributions from the Net Working Capital in terms of cash flow generation. Are there other questions?
Seems there are no more questions, so in case you do have them, please, feel free to send us an email and we'll reply with our answers. Otherwise, thank you so much for joining the call, and we will see you very soon. Thank you.
Thank you. Bye bye. Thank you.
Thank you. Bye.