Hello, and welcome to the Rémy Cointreau full year results 2021- 2022. My name is Josh, and I will be your coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Marie-Héléne Dubreuil, Chairman, to begin. Thank you.
Good morning, everyone, and thank you for being with us this morning for Rémy Cointreau's full year results. I'm here with Eric Vallat, CEO, and Luca Marotta, CFO. 2021 was an historic year for Rémy Cointreau, and I would like to thank and congratulate our 2,000 people around the world. Once again, they have demonstrated their expertise, passion, and strong commitment. The group achieved record financial KPIs, including sales growth, gross margin, current operating profit margin, and earnings per share. In 2021, all stars have shined for this historic performance, and we strongly outperformed the worldwide wine and spirits market. Rémy Cointreau gained market share in all regions and on most of our brands. Beyond these spectacular figures, we have continued to prepare the future, sticking to our long-term vision by investing in our strategic inventories, capital expenditures, and more importantly, behind our brands.
As you know, this represents an important step up compared to the past, including now all our global brands. We are also proud of our CSR performance, which reflects our ambition to grow responsibly and share value with all our stakeholders. This includes our employees, of course, as Eric will explain, but also all our equity shareholders through a dynamic shareholders return policy this year, including the 1 million shares buyback program launched in June 2021, and EUR 2.85 dividend per share that will be proposed by the board of director at the next shareholder meeting on July 21 this year, up by more than 50% compared to last year. This would represent the highest dividend ever paid. Now I will turn it over to Eric, who will take you through the fiscal year business review.
Thank you, Marc, and good morning, everyone. Thank you for joining us today, and a special thanks to our English participants, as I know today is a bank holiday with the Queen's Jubilee. I am happy to take the mic now to share with you our solid progress on our strategic journey and our overall results. Luca will then obviously, as usual, go further into detail. I am now moving to slide five. As Marc explained, we hit new records this year. Beyond the absolute value, I would like to stress that they have been achieved thanks to an outstanding and record growth of our sales compared to last year, but also to 2019, as you've seen from the press release this morning. Back in April, you saw our sales numbers.
We talked about a 27% organic sales growth. Thanks to the very strong contribution of all regions with a +29% organic growth versus 2019, our sales ended the year well above the pre-pandemic level. In terms of profitability, the COP, current operating profit, stood at EUR 334 million, up almost 40% on an organic basis, representing 25.5% margin. As mentioned by Marc, this is the highest level ever. COP grew by 57% compared to 2019. This performance has been driven by a strong increase of the gross margin, 1.5% more organically to 68.6%, and a good control of our overhead costs while investing massively, and I'll get back to it, behind our brands to prepare tomorrow.
Finally, net debt stood at EUR 353 million, leading to a very healthy a ratio of 0.79, down 0.54 versus last year. We rely on a very sound basis, which gives us a strong flexibility to further expand in the midterm. Our record results have been achieved thanks to a record growth. More importantly, in this challenging environment, our growth is probably healthier than it has ever been, as shown in slide six. First, it is driven by favorable consumer trends, which are going to last. To quote only one of them, the up-trading trend, the trend of drinking less but better, pre-existed COVID and has accelerated sharply. We have gained years. It is no secret that with our portfolio of brands, we are well-positioned to take advantage of it.
Second, the key to success, whether you speak volumes or value, is the desirability of our brands. The motivation of our clients is both rational with the quality of the product and emotional with the storytelling and the values of our brands. We've always paid great attention to our products, and we keep doing so. There is not much you can do if your product is not great. We are now boosting the desirability of our brands by scaling up the activations, building on their strong stories and values with good results overall. I will share some examples in the next slide. As a consequence of these favorable trends, combined with leveled-up investments, our growth is driven by end demand. This is why also we call it healthy.
We are in a real pull mode, which is much healthier and fits better our D2C approach to the business. Allow me to also say a word about pricing, which has sharply improved in the past two years. We took advantage of the tailwind, and strong demand, not only to invest more behind our brands. We also took some strong decisions to reinforce the consistency of our pricing worldwide beyond price increases themselves, improving gross margin, of course, and controlling, our route to markets better overall. This puts us also in a very healthy situation. Lastly, as part of our portfolio management, priority, we have improved commercial efficiency and strengthened partnerships with key distributors, allowing for better visibility and piloting of our business overall. We still have work to do, of course, a lot, but we are clearly less blind than we were.
As I said, moving on to slide seven, these remarkable results have been led by a strong step-up in our A&P investments. We are proud to have launched several powerful campaigns that will help and are helping already to unleash the potential of our global priority brands. At Rémy Martin, to start with our king, we have launched the Believe in Time campaign, which is highlighting the unique relationship to time of Rémy Martin. It will be relayed by more D2C investments in the future as our goal is to turn around the business model in the next 10 years, making it a pioneer of D2C in the industry. The aim at Rémy Martin has always been and remains to create value by improving the mix and leveraging our pricing power.
The Team Up for Excellence campaign with Usher featuring 1738 has proven great success and contributed to our fast growth in the U.S., where we continue to gain market shares. We also launched a new campaign to relaunch XO in China in January. With the lockdown, it's too early to assess the results, but we are confident in our ability to regain our fair market share on XO with the 360 activations that have been designed. Third, Cointreau. Cointreau refocused on cocktails in 2017, leveraging a trend that is only gaining momentum. Its communication has been smart and consistent since then, with the Margarita as a clear drink hero. Consistent and crowned by great results, not only in the U.S., but also in the U.K. or in Australia, to name a few countries.
We partnered with Jessica Alba, as shown on the slide, but more to come soon. On The Botanist, we know we have a hidden jewel, and it's not anymore such a hidden jewel. The liquid is truly fantastic. If you try it, you buy it. Hence, the challenge on awareness and desirability of the brand. Being part of our global priority brands, The Botanist will benefit from accelerated investments as shown already with the ad for the Super Bowl. More to come soon as well. Last but not least, we are very proud of our latest We Also Make Whisky campaign for Bruichladdich, which is very thoughtful, like the brand is. It has been launched only a few weeks ago, but the first results are extremely promising.
Just for those who haven't seen it says a number of things about Bruichladdich, like, we like starting small but being big, thinking big. We also make whisky. This is basically the approach, telling a lot about the brand, and of course, highlighting the fact that we do an exceptional whisky, and if we do it's because of the way we do it, our values and our relationship to terroir. This should also help us accelerate and leverage even more a key category, which is now also booming in China. This stellar year is also the result of the strong progress on our four strategic priorities, which I guess you all know by heart now. I am on page eight here.
As you may recall, the first priority is to increase value per case. Throughout the year, we have continued to leverage up trading consumer trends, being fully focused on retail price through price increases and product mix. The results are tangible and very promising. We recorded a positive mixed price sales effect of 9.2 points at group level, driven by an increase of 13.8 points in cognac and 7.1 in liquors and spirits. Even in liquors and spirits, the price mix has played a big role. These great results for Rémy Martin are mostly driven by the success of our intermediate quality products in cognac, such as 1738 Accord Royal in the US and Rémy Martin Club in China.
1738 grew at more than 60% in 2021, 2022, and its contribution to VSOP sales rose by 12 points versus 2018, 2019, which is massive. Meanwhile, Club grew at more than 30% this year, and its contribution to total sales grew by 13 points versus 2018, 2019 in China. We know who our champions are. If you look beyond retail price, the gross margin increased by a 1.5 point organically, as I said, versus last year at group level. This has been achieved thanks to the investment behind our creative and strategic brands, growth in cognac and liqueurs and spirits, and the improvement of our gross to net management. Priority number two, enhance portfolio management.
As you know, we have assigned clear roles to each brand, and we have split them in three groups with a clear set of priorities for each, global priority brands, regional power brands, and incubator brands. The ultimate objective is, of course, to maximize our gross margin by growing our most accretive brands while improving the metrics of our regional power brands. After two years, we can say that we have unlocked the growth potential of our global priority brands beyond cognac. Cointreau sales were up at more than 35% versus last year worldwide, and at more than 40% versus two years ago. The Botanist grew at around 50% versus last year.
Finally, our single malt whiskies increased by more than 30% versus last year and by more than 45% versus two years ago, which explains why, for the first time in a long time, our liquors and spirits division grew faster than our cognac division. In parallel, transformation is also on its way for our regional power brands. Among our regional power brands, Telmont is the one we have taken the farthest. In a little over a year, we have totally rethought its positioning and are already starting to reap the benefits. The third priority is to implement client-centric model, as you may remember. We have accelerated sharply on e-commerce with the opening of more than 10 e-boutiques this year, leveraging a new common platform. I will come back to that later.
In the meantime, we also now rely on eight boutiques, including the last one in Hainan for Rémy Martin, and alongside a solid opening roadmap for the coming years. The results are particularly visible in China, where our direct sales grew way faster than the non-direct sales at 40%. Finally, our fourth priority, which is achieving responsible growth around three pillars, preserving our terroir, acting for our people, and committing through time. I'll get back to it in the following slides. We are today allocating an important level of investments, EUR 80 million over the next 10 years, that will be invested in terms of CapEx, but also OpEx. Beyond sales, the slide nine precisely allows me to stress that we are even more proud of the progress we made on CSR-related matters.
What makes me proud, actually, is the commitment of everyone in the team now on a daily basis and whatever the position in the organization. I believe this has been achieved thanks to a new and much more granular organization with the nomination of around 100 sustainability champions throughout the organization. This is how we will make it. On terroir, as you can see on the slide, 78% of our agricultural land is now engaged in responsible and sustainable certification, which confirms the steady increase observed over the past five years from 36% in 2017, 2018. Sharp acceleration. Certifications are an important first step towards responsible and sustainable agriculture, but we also want to accelerate further on the protection of our terroir by 2030. For that, we will deploy the project New Generation Terroir, which is twofold.
First, we need to make sure our soils are ready to face more heat waves and less water. The answer to that is agroecology. That puts soil health at the core of its farming methods. It is proven regenerated and healthy soils are more resilient to face climate change in the years to come. They are also fantastic carbon sinks, so we are part of the solution in a way that can capture more CO2 from the atmosphere. The goal is to gradually install more transversal and scientific indicators that will measure the actual soil health of our terroirs. You progress only on what you measure properly.
Second, we will continue to invest in our R&D so that by 2030 we have identified 100% of climate resilient varieties, not sure of my English accent here, ready to be planted. On people, we welcome 3 more women in our Comex this year, so now the proportion is 30% women at Comex, coming from 10%. Also among the top managers, their position within the group, regional and worldwide, women also account for 35% of the key positions versus 30% last year. Work in progress, but good progress.
To drive engagement among our employees, as Marc said, we also launched an employee shareholder plan in France last June 2021 that was subscribed by as much as 77% of our employees versus an average of 52% in France. We will now be launching it in our international markets. We have also decided to accelerate on responsible consumption, of course, by launching our internal responsible drinking ritual, which is being spread worldwide. Last but not least, on time, we are on track when it comes to the reduction of our carbon footprint. Our CO2 footprint per bottle is down 9% in 2021-22 versus last year. We are well on track to achieve our -50% reduction target by bottle by 2030.
As an example, 44% also of the energy in our distilleries, our own distilleries and production sites, is now renewable versus 26% last year. This sizable increase was largely driven by the switch to biogas, particularly in Cognac and Angers, and the goal is to reach 100% by 2030. The other and last example I would like to share is the removal of secondary packaging gift boxes. 76% of the Group's bottles are now naked, compared to only 21% in nineteen-twenty, which gives you an idea of the magnitude of the progress which was achieved there. Our goal is to have 85% naked bottles by 2025, so we keep moving forward.
Beyond the organization, which I briefly referred to, I believe the great progress was also achieved because we now have turned our vision into tangible and more granular objectives, which are measurable and which are tangible for all our teams. There are nine of them, as shown in this slide 10, split evenly between terroir, people, and time. These nine objectives, which I am not going to read, as I'm otherwise I'd be way too long, but will define our roadmap for the coming years. To conclude on this ESG chapter with the slide 11 now, you have certainly noticed that we are the first spirits group to be carbon neutral. We're very proud of it.
We achieved it thanks to six projects in China and in the US, which are truly relevant and in line with our values. These projects will secure carbon neutrality for the next four years. This is only the beginning, as the real challenge for us is to reduce our own emissions, which we much prefer to compensation, of course, and which, as you've seen, we are working hard on. We are making good progress, as I said, but I would also like to say that it's still a long way to go. We have to acknowledge it, and that beyond CO2, we are now also tackling some critical topics like water usage, and diversity when it comes to people. More to come and to share next year on this ESG topic.
Let me now take you through a quick business review before giving the mic to Luca. I'm moving to slide 13, which gives me the opportunity to remind you of our full year sales number by division. I will be quick as they were already detailed by Luca in April. Cognac, which represented 72% of our sales, grew 26% organically and 31% versus 2019, 2020. Liqueurs and Spirits, which contributed to 25% of our sales, recorded a 32% increase and a 27% increase on a two-year basis. Lastly, our partner brands, 3% of the group sales were up 15% this year. On slide 14, now just a word on the regions.
The slide shows that total growth is well balanced across regions with all of them contributing to the overall performance. Americas generated an excellent growth of 30%, up 52% compared to 2019-20, confirming a new paradigm that is being installed. In APAC, the solid growth was of 26%, representing a 20% increase in sales compared to 2019-20, despite a collapse of the travel retail activity. Finally, EMEA benefited from the economic recovery and the strong momentum of the on-trade channel. Being up 22% this year, the region is now on track to quickly return to its 2019-20 activity levels. Let's now focus on the Cognac division profitability, whose great key figures are summarized here on slide 15.
COP grew by 44% on an organic basis, so 59% versus two years ago, representing an increase of the margin of four points to 34% over the year. This is a record. This breaks down into an organic increase of 4.2 points, a slight negative currency effect of 0.2 points, and a neutral scope effect. The organic improvement reflects a strong gross margin improvement of 1.4 points, resulting from a well-balanced contribution in volume, mix, and price. On top of the price increases, we benefited from the strong performance of our top-end portfolio, including intermediate quality products such as 1738 and Club. These gross margin gains have been reinvested behind our brands in A&P, which were up circa 25%, particularly in the U.S. and in China.
The stable ratio reflects the fact that we continued to invest to grow the awareness of our brands and fuel their future growth. The strong operating leverage of the division has thus largely absorbed the significant increase in investments in marketing and communication. The ratio contribution is up 2.6 points. Let's now have a look at the Liqueurs and Spirits profitability division, whose key figures are encapsulated on slide 16. COP grew by 10.6% on an organic basis, 16.5% versus two years, representing a margin of 10.6%, down 2.7 points.
This performance reflects a decline of two points in organic terms alongside a negative scope effect of 0.8, linked to the consolidation of Belle de Brillet in May 2020 and Telmont in October 2020, and a favorable currency effect of 0.3 points. Being ahead of its strategic roadmap, the group has decided to reinvest a large part of its gross margin gains, 1.5% versus 2021 and 3.5% versus 2019-20, in marketing and communication to increase the awareness and the desirability of our brands, particularly Cointreau, The Botanist, and Vauquelin, and to prepare tomorrow. The Botanist campaign in the U.S. is probably the best example to illustrate. The Botanist is one of our priority brands, and we invested far more than its current U.S. market share would typically warrant.
It was commensurate to our hopes for this unique gin, and we will continue to mobilize all necessary resources to achieve our goal to become the undisputed leader in high-end gin, with obviously a short-term impact on profitability. Again, the investments of today are the sales of tomorrow. At the same time, the group maintained a strict control of its structural costs, so the ratio contribution was up 1.7 points overall. Let me now give the mic to Luca, who will take you more into details.
Thank you, Eric. Now let's move on to the detailed analysis of the financial statement and begin with the full-year income statement. As already mentioned, organic sales were up 27.3%. On that basis, gross profits increased by 30.2% in organic terms, implying a +1.5 organic improvement in gross margin, i.e., 2.1 points on a two-year basis, reaching an all-time high. This good performance was driven by a well-balanced combination of, first of all, a strong volume effect of EUR 92.1 million, led by cognac division in our key markets, U.S. and China.
As well, even stronger mixed price effect of more than EUR 100 million, EUR 113 million, including splitting between a pure mix effect, EUR 60.1 million, resulting from our value strategy, as well as a pure pricing effect, EUR 52.9 million, following price increases in all regions. Sales and marketing expenses were up 24% in organic terms overall, reflecting our decision to reinforce our investment behind our brands. Within this total, we have to split between, first of all, the A&P expenses that grew 37.4% organically, i.e., an organic increase of around 50% plus 45.8% on a two-year basis, so much more than our organic sales growth.
Being ahead of our long-term plan, we have decided to reinvest most of our gross margin gains in A&P to unlock on a long-term basis our brand's midterm growth potential and by developing their awareness and desirability. Most of the increase comes from the, technically speaking, above the line part, i.e., classic media, digital, and PR, around 70% of the total. Besides that, around 40% of our total, all natures considered, A&P spending was digital. In parallel, second element, distribution costs increased by only 7% organically.
Even more important, that means an organic reduction, organic decrease of around 4% on a two-year basis, reflecting an increase this last year in terms of key accounts in our international subsidiary, as well as some strategic OpEx to accelerate on retail, direct to client, commercial excellence, and optimization of the gross to net revenue management. This was partially offset by some efficient savings initiated during the pandemic. Administrative expenses increased by 28.2% on organic basis, meaning +24% on a two-year basis, in line with our sales growth. This evolution, however, includes some specific costs. First of all, this year, EUR 2 million of donation to the Rémy Cointreau Foundation. Second, around EUR 5.49 million of charges related to mid- and long-term retention measure, profit sharing programs, and the employee stock ownership plan.
The remaining part was mainly composed by brands OpEx that reflects some additional accounts and some key investment in e-commerce, CRM, and brands development and protection. All in all, current operating profit reached an all-time high at EUR 334.4 million, up 39.9% on an organic basis, and even more on a reported basis, plus 41.6%, after taking into account a favorable currency impact of EUR 6.4 million on the bottom line and a negative impact of EUR 2.4 million linked to the scope effects. More important, on a two-year basis, this represents, on organic basis, an increase of 56.9%.
Operating profit margin stood at 25.5%, up 2.3 points on organic basis versus last year and up 4.6 points versus two years ago. Now, let's move to the analysis of the group current operating margin, which is an important and synthetic slide. It was up 2.1 points to reach 25.5% over the full year. Again, this is an all-time high, an all-time record. This breaks down into an organic increase of 2.3 points, a neutral currency effect, a slight negative scope effect of -0.2 points linked to the consolidation of Brillet in May and Telmont in October of 2020.
The organic improvement of the current operating margin basically reflects a strong increase of the gross margin, first driver now and for the future year, fully reinvested into A&P and an excellent control of our global distribution and structural cost ratios. In more details, first of all, gross margin was up 1.5 points as a result of a well-balanced strong volume and price mix contribution. Second point, as said, A&P ratio increase in the same proportion at -1.5 as an impact on the bottom line. The acceleration A&P was particularly focused in our key markets, U.S. and China, and largely dedicated to our global priority brands.
At the end, as a last element, the ratio of distribution structural cost decreased by 2,030 basis points, reflecting an excellent control over cost despite a strong recovery of the business and despite some strategic investment on that line as well. Now, let's take a look at the rest, the remaining part of the income statement. What's happening between operating profit and net result. Other non-recurring operating expenses stood at EUR 14.1 million, representing essentially provision for international customs risk related to prior periods and booked already in H1 2021-2022. Second important element, the reported tax rate decreased from 35.1% last year to 31.1% in 2021-2022, benefiting from the drop in tax rate in France as well as a positive geographical mix.
Excluding non-recurring elements and items, the effective tax rate was 29.3% for the year to be compared to the 33.5% clean tax rates of last year. At this stage, we expect tax rate to be around 30% in 2022, 2023, alongside the gradual decrease of the tax rate in France. As a result, net profit share came in at EUR 212.5 million, up +47% on a reported basis. Excluding non-recurring items, net profit came in at EUR 228.1 million, up more than 50%, 52.6% organically, i.e., almost doubling, +82.4% on a two-year basis.
Net margin excluding non-recurring items to the very strong level too, an all-time high of 17.4% at +2.9 points versus last year and +5.2 points versus two years ago. Last but not least, a very important financial element, excluding non-recurring items, clean EPS came out at 4.52 EUR, up +52.8% on a reported basis and 81.5% versus two years ago. Now, slide 21, let's move to the analysis of the non-recurring items, i.e., the reconciliation table spreadsheet between net profit and net profit excluding non-recurring items. Non-recurring items in 2021, 2022 mainly integrated three components.
First of all, as said, EUR 14.1 million provision, which mostly essentially reflect the provision for international customer risk relating to the prior periods and a minor goodwill impairment on DHG for EUR 0.5 million. Second element, EUR 3.4 million of positive non-recurring tax items linked to this provision. Third, a net EUR 4.9 million charges on deferred taxes related to the impact of three sub-elements. First of all, the decrease of the legal tax rate in France on a deferred tax asset. The switch from 28.4 this year to 25.8 has some negative non-recurring implication in terms of revalorization of the deferred tax asset.
On the opposite, the increase of the legal tax rate in the U.K. on deferred tax liabilities from 19 to 25%. Third element, the decrease of the legal tax rate increase on deferred tax liabilities on trademark from 24 to 22. All in all, these elements have been neutralized for the non-recurring and clean profit. Now, one of the most important slide in 2022, the analysis of the cash flow generation and net debt. Free cash flow generation stood at EUR 90.4 million in 2021-2022, compared to EUR 123 million last year.
This evolution reflects, first of all, a huge spectacular increase of the EBITDA, plus EUR 110.9 million on the back, as you have seen, of a significant operating profit growth, but more than offset by a strong increase of the total working capital outflows. This increase of these outflows needs to be split between, first of all, another strong increase of the working capital outflow related to eau de vie and spirits in aging process. This is the consequence, said many times, of a higher level of purchases in cognac, eau de vie, and other aging liquids to prepare and to secure and to feed the future, compensated by huge level of demand, especially in the US. Second element, important, other working capital items, outflows that were up more than EUR 100 million, EUR 118.4 million.
We have three elements that need to be detailed to explain this evolution. First of all, the base of comp. 2021 was not a normative year, but as this is demonstrated by its positive variation last year of EUR 35.8 million. Second, a meaningful increase of accounts receivable of EUR 43.3 million linked to a lower level of factoring. This year, end of this year, only around EUR 50 million, EUR 14.7 million receivable were subject to early collection via factoring programs as of 31 March 2022, to be compared to EUR 55 million end of March one year ago. Third element, an increase of EUR 30.2 million in other stock, excluding eau de vie and other strategic aging liquids for the remaining part to avoid any product disruption in a context marked by continued logistics and supply tensions.
Second element to explain the free cash flow generation is clearly the increase of EUR 17.1 million of the tax outflow, reflecting the higher level of profits. This is a mathematical consequence. In the meantime, capital expenditure investment outflow were stable, more or less -EUR 0.4 million, and below our initial expectation due to the pandemic that limited the physical execution of some CapEx programs. In parallel, other non-operating cash flow decreased versus last year. Once again, we need to explain a bit because we recorded an outflow of EUR 129.3 million in 2021-2022 versus an inflow of EUR 13.6 million a year last year, so a swing. This was largely driven by the payment in cash of the dividend, EUR 94 million, more or less.
Share buyback, EUR 170 million, partially offset on a positive side by the early redemption of 58% of the OCEANE for EUR 155 million, more or less. As a result, at the end of March, our net financial debt stood at EUR 353.3 million, up from EUR 314.3 million in March 2021, leading to a decrease of the gearing ratio from 1.33 to 0.79. Slide number 23, few comments on net financial expenses, which were a charge of EUR 13.2 million this year, slightly down from EUR 14.6 million the year before. First of all, net debt servicing cost slid down in absolute value, reflecting a decrease of the ongoing monthly average debt.
However, our cost of debt was slightly up from 1.01 to 1.15, reflecting a lower use of the lines of which part of them have non-usage fees. Net currency increased slightly to EUR 0.7 million loss this year versus almost comparable loss of 0.4 the previous year. As you know, this is a volatile non-cash item related to the hedging of group's non-euro debts and future flows. Finally, other financial expenses, which amounted to EUR 2.1 million this year, were almost stable compared to the previous one. Now slide 24, move to the impact of currency hedges. The group reported a positive translation impact.
EUR 24.6 million positive impact on sales, and contribution of EUR 6.4 million operating profit in 2021-22, better than our expectation. This mainly reflects, in terms of currency mix, the favorable evolution of the Euro-CNY. In addition, we enjoyed an improvement of the average Euro-dollar translation rate of the period, which came out at $1.16 per euro this year compared to $1.17 last year. At the same time, our average hedge rate was stable at around $1.17 per euro in 2021-22 versus last year. This is the past. I said this is very important to talk to each other every quarter and now looking at our focus for the future.
For 2022, 2023, assuming as is written, highlighted, an average Euro-dollar conversion rate of 1.08 and a hedged rate of 1.13, we anticipate an impact between EUR 70 and EUR 80 million positive on sales, with most of the effect recorded in H1, about two-thirds of that. Between EUR 30 and EUR 40 million positive impact on published COP, with also the same most of the positive recorded in H1, two-thirds. A huge contribution expected in terms of published evolution for the two 2022, 2023. As the evolution of the Euro, US dollar exchange rate remains very volatile, we will share with you an update every quarter. It's very important. Additionally, as a reminder, the sensitivity of the group versus our expectation is the following.
One cent increase in the US dollar versus the euro, simulation, including additional impact of other currency pegged to US dollar, is around EUR 11-12 million gain or loss, depending on the variation on sales, and EUR 7-8 million gain on operating profit, all things equal. Bearing in mind that hedging in advance, like we do, we are a very cautious company, implies cost of four-five cents on the hedged theoretical rates. At this stage, for 2022, 2023, we already cover 80% of our net US and pegged currency exposure, US dollar exposure, of which around 40% are options. Now, slide 25, move on the overview of the balance sheet with total asset liabilities of around EUR 3 billion, 2.98, slightly up compared to last year.
On the asset side, global inventory increased by EUR 122 million to EUR 162 million due to purchases of young ODV, and that's the reason why inventories account for 54% of total assets, stable versus last year. In absolute value, this is a very important all-time high. At the same time, on the liability side, the shareholder equity is up by EUR 113 million, reaching another historical level, mainly driven by the strong progression on net income and the early redemption of the OCEANE. This has been partially offset by the share buyback program and the dividend recognition. Net gearing indicator, so the group's net to debt equity ratio, was almost stable over the period from 20%- 21%. Now, slide number 26, moving to the ROCE, return on capital employed.
Our ratio came in strongly at 22.2% in 2021, 2022, up 5.1 points on a reported basis and 4.9 points in organic terms. This was driven by 5.4 points increase in the ROCE of the group brands and a positive swing in the partner's brands ROCE from -50 to -1. It's a minor indicator, but mathematically has a slight impact. The organic improvement was clearly driven by the strong performance of our numerator, our operating profit, up 39.9, while employed capital also grew by the much slower pace, 9%.
Looking at the performance by division, it is the cognac ROCE rose by 7 points to reach 26.7% on a reported basis, and that was up also 6.5 points on that as it drives this journey. Clearly, the outstanding organic COP growth of the division, +43.8%, more than offset the +8.1% organic increase in the employed capital. On the opposite, Liquors and Spirits division at the ROCE is slightly decreased, declined by 0.9 points to reach 12.1%, and was broadly flat in organic terms. This evolution reflects our decision to intensify, increase our investment beyond our brands. Eric Vallat mentioned just some minutes ago, the example of the booth investment during the Super Bowl, which is a good illustration.
Beyond profit and loss effects, we also reinforce, we'll continue to reinforce our medium to long term investment on CapEx and inventories. Now, slide 27, looking at the denominator, the capital employed more closely, the overall amount increased by around EUR 128 million, mainly split in between an organic increase of EUR 123.9 million and a positive currency impact of EUR 3.8 million. On the organic side, the employed capital had an increase of 9%, reflecting a very strong increase in aging inventories, around 60% of the total increase, and to a lower extent in manufacturing storage capacity and other inventories. Basically, most of the increase is linked to strategic long-term investment. Finally, let's move to slide 28 and move it to the yearly dividend.
Given our strong annual result and our confidence and serenity for the coming years, an ordinary dividend of EUR 1.85 per share in cash will be put to a shareholders vote at the AGM on 21st of July, 2022. In addition, an exceptional dividend of EUR 1 per share will be proposed with the option to be paid in cash or share. Overall, it will represent an increase of 54.1% versus last year, and it is an all-time high. For your information, shares will be traded ex-dividend on July 27, and the dividend will be made payable starting from October 3, 2022.
Overall, total dividend equates to a payout ratio of 63% of the recurring EPS and a yield of 1.6 on the average share price over the financial year that was EUR 178.59. Now, let's go back to Eric. Slide number 30.
Thank you, Luca. It's quite a challenge to speak of the outlook in the context, which is clearly hardly predictable and not necessarily made of only good news, with the Q1 marked by the war in Ukraine, the lockdowns in China, inflation and the supply chain tensions. You know what? Provided we are agile and reactive, we are confident and positive for the year to come. There are reasons to that. Reason number one on slide 31 is related to the fact that we have a roadmap which is now clear and well understood and which has been validated by the consumer trends emerging from the past two years, as I said. As a result, we are ahead of our 10-year plan, which is certainly not common.
This gives us means to invest more than we would have expected in the future of our brands. Sorry for hammering this again, but the investments of today are the sales of tomorrow. We are also confident because in the past two years we have strengthened our organization and business model as written on slide 32. I said two years ago that the focus for the first two years would be on our transformation. I must admit that in a world which is changing ever faster, transformation will never end, and we will always need to be agile and to adapt, which is why we have appointed a chief transformation officer. But we made good progress, more particularly on two fronts, commercial excellence and D2C activities. I am now moving to slide 33.
You know, the only thing we know about the short-term future is that we do not know what it's gonna be made of. This reminds me of my experience in Japan after three years. You know, the one thing that I had learned is that the Japanese culture, which I loved, would always be a mystery to me. Same here. I will not pretend I know what our future will be made of. It's unpredictable, whether it comes to macroeconomics with inflation and stagnation, health with the pandemic or geopolitics with what is happening in Ukraine. There's something positive about it. First, it forces us to evolve our business model even more quickly, which is a focus of a group of our size for the better.
This inflationary context being high-end is definitely potentially a competitive edge for us. Also, we shall not underestimate the fact that travel retail is meant to recover in the coming years and accounted for 11% of our sales in the past. This year, we'll also benefit from positive exchange rates. But more importantly, again, the trends emerging from COVID are favorable to us. The off-trade obviously, but also the rise of cocktails, of interest, and of consumption at home, which are driving D2C. I would like to conclude by the rise of environmental consciousness, which echoes our strong focus on terroirs. Hence, our confidence in our potential, while not obviously ignoring the challenging environment. Which drives me to the conclusion before we take your questions on slide 34.
I am fully confident that we will continue to outperform the exceptional spirits market in 2022-2023, while ensuring the best execution possible of our strategic roadmap. We expect 2022-2023 to be another year of strong sales growth, but also of strong investments, particularly in A&P again. We are in the favorable position of being ahead of our long-term targets. This has freed up resources for further investments. Despite the current environment that I have just described, we expect to pursue our profitable growth trajectory led by first, a solid resilience of our growth margin, which will notably benefit from the price increases that we have realized last April, this April, across the board. Also thanks to a continued good control of our OpEx.
Again, on the growth margin, I would like to stress that our positioning is quite unique and helps us afford this. We will also benefit obviously from the exchange rate positive impact, which could be up to EUR 30 million or EUR 40 million on the COP. Of course, this remains particularly volatile, and Luca will keep you updated every quarter. I would like to thank you for your attention, and we are now happy to answer your questions. Thank you very much.
Question or make a contribution on the call today, please press star one on your telephone keypad now, please. Please ensure your line is unmuted locally, and then you'll be introduced into the call. That is star one on your telephone keypad now, please. We do have some questions in the queue already. Our first question comes from the line of Laurence Whyatt from Barclays. Please go ahead.
Morning, Marc, Luca, Eric. Thanks very much for the questions and the call. Three from me, if that's okay. On the. You mentioned a few things around inflation and the current situation that consumers are facing. Do you have any insight in terms of the current trading and any recent impact that you've seen from consumers across your different brand portfolios? You imply that there's much less impact on the high-end products and maybe perhaps slightly more on the lower-end products. I wonder if you can break that out by if there's any sort of comments you can make by brand or by price point, that'd be very helpful.
Secondly, between your two divisions, or two main divisions, your liquors and spirits margins are still well below historic levels, and of course, you've increased A&P significantly, in liquors and spirits. As we look forward to the 2030 targets, should we expect more of the margin to come from the liquors and spirits division and with the cognac division to remain at similar levels, or do you expect cognac to also contribute meaningfully to those 2030 targets? Then finally, when we look at consensus, for FY 2023, it's looking for around just over 10% organic sales growth for the year. You've made a comment of strong growth into 2023. Historically, I think that's meant well into double digits. Are you...
Could you make any comments on consensus with that sort of 10% being forecast at the moment? Thank you very much.
Okay. I'll answer part of the second question as well, but I'll let you rebound, okay, Luca. On inflation and current trading, first, you know, not to be misunderstood, but what I said is that, clearly being on the high end is being in a favorable situation when it comes to inflation. You hinted that potentially the lower entry price points brands could be more affected. I would say that for me high end applies to every single category. Being the exception in every single category is being high end, even in a category which is more entry price points. When you are high end, you are less affected than when you are entry price point. We are high end on every single category.
I would say that whatever the category, we are probably more resilient than one could imagine, at least at this stage. We do not witness at this stage a slowdown. We expect a double-digit growth in the Q1 , despite very high comps. I remind you that last year we were growing 105% on the Q1 . Also, despite the total closure of Shanghai and a number of cities in China, and this is not only and solely driven by our cognacs. It's driven by a number of brands, and it's across the board when it comes to markets, except obviously Russia and China. It doesn't mean there will be no impact.
Of course, I cannot predict the future, but at this stage, if we look at the current trading, we see a strong resilience of our brands. As to the second question, but Luca, feel free to complete about the margin. Of course, indeed, it's been lower this year. Again, don't forget and don't underestimate the exceptional investments we've done behind our brands. If we hadn't done the Super Bowl, the picture would have looked very different. Super Bowl is not meant to deliver on last year. It's meant to feed the growth for this year and the coming years, as well as all the actions we take.
We take the hit last year, but we take the benefits in the following years. Of course, I would just like on my side, and I would let Luca complete more, but to say that definitely the reason why we over-invest today is because we believe in the strong operating leverage in the longer term for sure on these brands, which are accretive from a gross margin standpoint. It's all about volumes, and that's what we are aiming at. As of today, this is what we witness. You can't749109
I don't think that I have much to add because it was very clear. In terms of contribution to the long-term journey, in terms of expansion of the bottom line, like with spirits, will be clearly more important than Cognac. The absolute value that are related to the divisions are clearly different. Cognac will still be the needle mover of the group's performance. The expansion is meant to increase in the 5-10 year plan more than the Cognac. We'll be less reliant on top and bottom line to Cognac than today. To be able to do that with some brands that are already a very high gross margin, we need to have more size. To have more size, we need to invest.
Chicken and eggs, but at this—I don't know what is the chicken with the eggs, but we need to spend and bet on the fact that the spend are well done and lasting for the future. Then we have bear fruits on top line and increase the absolute value of the profit of the division.
Spend in proportion of sales will decrease over time?
Yes.
Definitely.
Yes. Consensus will be a year of strong growth, beating the market in gaining value market share. As you know, we do not guide precisely. At this stage, the consensus organically is +10.2%. We are comfortable with that. We are comfortable with this kind of consensus in terms of top line. In terms of balancing of semester, we will start strongly the Q1 with a double-digit growth.
That's all really clear. Thank you very much.
Thank you very much. Our next question comes from the line of Olivier Nicolai from Goldman Sachs. Please go ahead.
Hi, good morning, Marc, Eric, and Luca. First of all, just perhaps on the long-term guidance that you gave, not a lot of companies are giving guidance to 2030, which actually I've noticed it's now 2029. That's the first question. Just a second question, going back on the U.S., could you perhaps give us a bit of an update on the supply chain issues that the Cognac manufacturers have been facing, including you?
The level of inventories in the trade today, and if you are concerned at all about any, you know, pricing elasticity on the VSOP or 1738. Then lastly, on the FX guidance, I was just wondering if you could give us a rough split of the guidance of EUR 30 million-EUR 40 million impact on EBIT between what's coming from the transactional effects compared to translational. Thank you very much.
You take questions one and three, Luca, okay?
Yep.
Yes.
Long-term guidance. Maybe I was not clear. It is still the same. 2030 for us was meant to be March 2030. It's the year 2029, 2030. We just ended year two. The year five will be 2024, 2025, and then 2029, 2030 will be the year 10. The FX always on this question doesn't play a role because we recalculate every year the performance, the same scope, and same exchange rate as 1920.
Everything is comparable because when we build the roadmap at 72% and 33% in terms of gross margin bottom line, this has been done without Brillet and Telmont and has been done with the exchange rate of more or less 1.14, being an average between conversion and translation of 2019-2020. The split between 30% and 30%, I have it, but clearly I don't disclose because that's the reason why I keep a fork of this estimation. Because the more the dollar will beat the 1.08, in terms of spot rate through the unhedged part, which is at this stage around the 20% considering the volumes of the budget, the more it's accretive or the opposite.
Is being not covered is automatically positive, negative for the global profile of the P&L in the end. At this stage, the 30-40 is linked to the cautious or less cautious position of the conversion component, which is the by far the most complicated part to predict because it's linked to the changes, the volatility of the dollar, but also to the net exposure, because we have a global amount. Just imagine that we are maybe performing better or less or worse than budget, the absolute value which are uncovered change. The global impact will be different. But the only thing that I can grant you, in total transparency, I think we are one of the most transparent company on that to share our hypothesis with the markets.
Every quarter, even if it's not a result-oriented conference call, even if it's sales, I will provide our state-of-the-art estimation in terms of how much we cover, how much is the impact on top line, so pure conversion, and bottom line, so mix. Every quarter we will discuss that, so you can adjust the hypotheses and the published reported basis consensus on every other three months.
Thank you, Luca. As to your second question, with the focus on the US. First, you refer to potential supply chain issues. Yes, there are supply chain issues, if you take one issue we have, for instance, is the difficulty to get drivers for the trucks in the US, which is delaying some of the shipments, knowing that at least the merchandise is in the US. Definitely we do struggle with that, I'm not speaking here of huge delays, I'm speaking of some delays. We also see the Port of New York, New York being more and more busy. We are better prepared than we were two years ago, of course, the impact shouldn't be as dramatic as it was two years ago.
Yes, there are some logistic tensions. You also asked about the level of inventories. So our stocks were quite low at the end of the fiscal year by end March. Maybe two weeks on VSOP and a month on 1738, so very healthy stocks. We are currently restocking but not in big quantities, marginally, maybe two weeks, because demand remains strong because of some logistic issues, and also because we will manage our stocks throughout the year. We are in the process of restocking and the issues we are currently facing are not that severe. As to price elasticity, particularly on VSOP, we don't witness it today, but it could be.
It could be, but I wouldn't take it as bad news, in fact, because first, you know, we have increased our prices on VSOP, and we haven't witnessed any negative impact, so it's pure conjecture at this stage. There's nothing certain about it for sure. But if this is to happen, it will be on formats, for instance, that are not necessarily strategic for us, and it would give us an opportunity to accelerate the optimization of our mix. Our price sensitivity is certainly much, much less on 1738 Accord Royal, a product behind which we invest a lot, whose demand is very strong.
Here we are quite comfortable, and this would also give us potentially the opportunity to arbitrate more in favor of 1738, which would not be solely a bad news, obviously, and even a good news. It would help us accelerate the improvement of the mix. As of today, we do not witness yet, at least, any impact on VSOP. Don't forget, VSOP is very strong for Rémy Martin. It's, we are the absolute leader on VSOP, and we clearly benefit also from the huge investments we've done behind our brands, which has increased their level of desirability.
One additional point which is not linked to your question, which is overall, it's a complicated year. We have some inflation all over the world, macro political. All that considered, combining strengths and threats of the market, also of our company, 2022, 2023 will be another year in which the gross margin will improve, will be higher than 2021, 2022. Gross margin remains the first driver of the journey, even considering the context. I don't know how many companies are saying that today. We are saying that.
Thank you very much, and congrats on the results.
Thank you very much. The next question comes from the line of Edward Mundy from Jefferies. Please go ahead.
Morning, everyone. Three questions from me, please. First, Eric, you know, just on China, we're hearing conflicting reports on the level of reopening. Appreciate you don't have a crystal ball, but could you share perhaps some perspectives on your key regions and what you're seeing on the ground, and what you're hearing from key customers about the roadmap from here? The second question, again for Eric. You've appointed a chief transformation officer. You mentioned that there's, you know, the business is much stronger relative to history, but could you provide a bit more color on what the brief is for the chief transformation officer? And then the third question, perhaps for Luca, you know, coming back to slide 25, and the currency piece.
You know, clearly, where you're hedged at the moment is much higher than where spot prices are. Are you able to talk about fiscal 2023 and 2024, to what extent you're locking in at current levels? Should we assume a similar impact for fiscal 2023, 2024, as we're seeing for 2022, 2023?
I'm sorry, can you just repeat your question one? Sorry about that.
First question is, on China. You know, what are you seeing on the ground, and what are you hearing from key customers on the roadmap from here?
On China to start with, obviously these past 54 days or so of confinement have been very tough for the teams. Obviously, it's been a very strict confinement with a very severe impact on our business for Q1 for sure. Now, what we see, what we hear is two things, one, a smaller survey that was made, not so small actually, on a number of confined people in China showed that there was an appetite for revenge, not only spending, but revenge living in a way, and that we could expect people go back to restaurants, clubs, and so on. Some kind of revenge attitude.
We already witness it in retail, so we see not in our stores, but in the fashion stores and so on. You see people queuing already, like after a number of days of frustration. It would take a bit more time for us, but we are quite confident that we will see consumption bouncing back. In the short term, we are quite confident in our ability to recover in China, and I would say recover even more quickly as our stocks are very healthy. This is, it's not only a sellout, it's a sell-in and sellout topic, but on both sides, we're quite confident there.
If you look at it more medium term or long term, obviously, I cannot, as you said, I have no crystal ball on the political front, but what I can say is demographics are very positive for our business. Definitely, the middle class growing fast is not a bad news for us, considering the fact that we are accessible and affordable luxury in a way. We have a very strong level of awareness in China. Second, the wealth equalization matter, which is something that is not totally clear, but is not bad for us either, as clearly it will increase the overall wealth of the middle class, which is again, something which is positive for us.
China, apart from the political, unpredictable, happenings, which we don't see coming now for sure, but we are quite confident in the short term, and in the medium term for the reasons I evoked. Also, we have a great team. I would like to say that one difficult thing also in China is to secure a good level of trust and great teams, that you know, and great consistency between the brand strategy and the market implementation. This is what impressed me the most when I came back to Rémy Cointreau, is the level of our teams in China and how good they work with our brands. Again, we cannot go to China, so it's very important, this level of trust.
Now, moving to your second question and the CTO appointment. It is first an acknowledgment of the fact that the world is changing fast. We need to adapt ever faster. The idea is not to create a kind of a, you know, big business unit with number of people. This is not the way we work. The idea is to have someone very senior with a very short, small team that will help us address a number of topics that we consider strategic and where we know, we need to evolve, not only our organization, but also our processes. To make it clear, this year, the focus will be on two main topics. One is commercial excellence, which is still ongoing.
It's a change of culture, and it's been kicked off in the US, it's been rolled out in some European countries, but it's still something that needs to scale up, and that will be her number one mission. The number two mission is on D2C, and more particularly on the digital transformation. Here, I'm not speaking necessarily of communication, which is handled by the brand, but I'm speaking more of every sales-related activities on e-commerce. E-commerce is not only about opening our own e-boutiques, it's about addressing the whole ecosystem. This is where there's a level of complexity and a level of adaptation required. It's already in progress, but we will accelerate with her, as she's a lady and she's a woman.
Obviously, we do have some other topics that she will take over later. Her mission number one for the six months to come is this one, these two topics.
2023-2024 Forex for US dollar, considering same amount on net exposure of 2022-2023. The expansion is not taken into account because we need to reevaluate that more complete way all around the year, the budget process. At this stage, we cover between 30%-35% over the estimated needs. We have locked in a rate of 1.12.
The option part is lower than the habits because, considering the volatility of the dollar on the positive side at this stage, we have to combine a very cautious hedging policy of the group with the fact that covering too soon could crystallize some position too soon as well. I repeat, around 30%-35% of 2020-2024 needs, considering the same amount of this year, will be lower because we'll continue to improve, hopefully, in the U.S. dollar next year, 1.12, and of which only one-third of options.
Thank you.
Thank you very much. Our next question comes from the line of Richard Withagen from Kepler. Please go ahead.
Yes, good morning, all. Thanks for the question. Yeah, Eric, I actually had a question on that consumer excellence that you just mentioned as the key focus point for the current fiscal year. What are you doing? What are the changes? What are you implementing in 2023, more specifically? You mentioned you already implemented it, for example, in the U.S. What kind of results do you see after the implementation? That's the first question. The second question I have is on ready-to-drink products. I mean, certainly in the U.S., we see a lot of propositions coming to the markets, a lot of margaritas, especially as well.
What are your thoughts on how that could impact the demand for Cointreau? As far as I know, you're not playing in that category specifically. Maybe your thoughts around that. Thank you.
Okay, question one first. I'm not sure. I think you said consumer excellence, but maybe I understood wrong. It's commercial excellence, which is obviously related to the consumer and the client, but it's really about our commercial internal matters. I would say we are working on four layers. The number one is clearly distribution distributors management. I'm not going to go into detail here.
Clearly, with all the possibilities now you have to manage data differently, there's much more we can work on together with our distributors for a better understanding of the market, of the consumer behaviors, of everything that could help us drive more our commercial teams. The second one, which is related to that, is commercial planning. Commercial planning is really key. It's driven by a good collaboration between the distributor, our commercial teams, and our marketing teams, marketing in the field. Here also, we are working on anticipating more, planning more, so as to secure more impact for everything we do. The third driver is the gross to net.
Clearly, there's a lot of room for improvement of the gross to net at Rémy Cointreau, and this is typically something we're working on, implementing tools that will be used also by our commercial teams, training our commercial teams on this gross to net topic, which is not necessarily something obvious, and which is key when you move from being very cognac-driven to managing a real portfolio. The last one is the consequence of all this, the organization of our teams. Obviously, we've gone through a reorganization in the U.S. to adapt to this new environment made of more e-commerce, made of more direct-to-client activities and so on.
This has been keeping us busy in the past six months, notably in the U.S., as I just said. These are the four main, let's say, areas. There are, of course, others we're working on. We have streams. They are rolled out. For every single stream, we have a region taking the leadership, and then we scale up. Is it proving to deliver? It's obviously early to say, but when you look at our gross margin, the way we have improved the portfolio management, I see a lot of results. I am truly convinced, even though I cannot quantify precisely, that a lot is coming from it. You know, myself, I worked in a store for three years.
I was a store manager and even an assistant manager at Louis Vuitton. I can tell you that, when your teams are briefed properly, when they have a good understanding of the drivers of the business, of how the gross to net is built and so on, if they are properly briefed, they deliver way more. I'm sure that this is going to contribute sharply in the coming years as much as it contributed last year. As to the question on ready-to-drink. Ready-to-drink were very fashionable twenty years ago, are fashionable again. It might be more long-lasting. I'm not denying it. I think it's more competing with beer and some other potentially alcohols than ours, but it's still a reality for us.
You know, our value strategy is made of drinking less but better, and it's certainly not of, let's say, selling more non-alcohol. We are focusing on our liquid. It does not mean it is today not necessarily generating value and not necessarily a very, let's say, magnifying the liquid, you know? I'm not denying that, for some of our brands like Cointreau, which you referred to, it could be of interest to do it the Cointreau way, certainly not the way it's done today, to kind of reinvent this ready-to-drink topic. It's something that I am not denying as a potential topic of interest that we might test in the near future. Again, it is not strategic.
There is so much we can do, with our liquids as they are, with the growing cocktail culture, and this is our main focus, and this is where the gross margin will come from, much more than from ready-to-drinks.
Thanks, Eric.
Very much. The next question comes from the line of Fintan Ryan from JPMorgan. Please go ahead.
Good morning, Marc, Eric, Luca. Thank you for the opportunity. Three questions from me, please. Firstly, during the presentation, you mentioned the increasing weight of the intermediate products, 1738 in U.S. and Club in China, and how that's improved over the last two-three years. Can you give us a sense of what the current state is now in both of those key markets in terms of VSOP, intermediates, and XO in the bulk within your cognac portfolio? What does the optimal portfolio look like if you sort of go out to your FY 2030 margin targets? Secondly, just more on the sort of short-term gross margin drivers. Clearly, gross margin has been a key driver of expansion in FY 2022.
As you think into FY 2023, what should we be thinking about in terms of the levers of mix, absolute and product mix, absolute pricing and the, maybe offsetting factors of incremental COGS or input cost inflation? Thirdly, just maybe, back on the free cash piece for next year. You mentioned that the CapEx, your CapEx plans have been a bit slower than you had anticipated. Could you just give a sense of what the CapEx you're looking at for FY 2023 and also the other working capital items? Would you anticipate them being a big delta in overall free cash delivery for FY 2023? Thank you.
Luca, you take question two and three, okay? I'll take the one, number one. On the intermediates and actually the whole cognac portfolio and in the various regions, the situation is obviously very different from one region to another. I would say that if you take the US, the whole portfolio is very healthy. I mean, we see healthy growth on the whole portfolio. VSOP, obviously, but more importantly, seventeen thirty-eight growing way faster. As we said, it's gaining share against VSOP. It's also partly our decision of improving our mix. Clearly we see very strong traction on the seventeen thirty-eight, which is clearly driven also by the strong investments behind. Also, not to be underestimated, we enjoy a strong growth on XO.
You know, I like to say that I remember six years ago on XO, our XO was $110 and, our lovely competitor, our main competitor in the US on XO was at $190. We have repositioned XO. We are now on par with our competitors. We lost 50% of our volume overnight, and we've regained the volume, and we are enjoying a steady growth in the US. I would also like to quote Louis XIII, which is enjoying a very interesting momentum in the US. As we said also, our Louis XIII was the probably the number one brand to suffer from the pandemic and the closing of the on-trade, but it's also the number one brand that recovered from the reopening of the on-trade.
We also see the benefits of the up trading with Louis XIII. Clearly, we do have a momentum. I would say that Rémy Martin brand in the U.S. is very healthy. That's probably why it's gaining a market share as we can witness. Europe is very different. Obviously, Europe is a myriad of countries. The brand is very healthy there as well. It depends on the regions. Overall, I am currently the interim CEO of EMEA, and I can tell you as a CEO of EMEA that I have to manage countries which every day are crying for more cognacs. I'm discovering part of the job of my successor soon, which will not be easy, which is to manage this. As to China, we spoke a bit of China.
I would like first to start with Louis XIII because I said during the presentation that we are going through a reengineering of the business model. I would like to insist that if we achieve our plan, and I believe we will, Louis XIII might be the only luxury brand, even more than the brands I've been working for in the past in fashion or whatever, that will be fully integrated because we are in the process of integrating downstream. Upstream, we are very integrated. If we manage this with Louis XIII, we will definitely create a lot of value. This is in progress. We are making good progress. Just so you know, we have divided by two the number of wholesalers we are working with this year.
It's a great step forward, working in a very different way with them. Actually, despite this division by two, we are going probably and certainly to achieve more sales with Louis XIII than last year, and we do enjoy an interesting momentum. Let's see with the reopening now, but we are quite confident. For the rest of the portfolio, Club is very healthy, gaining market share. This is not new. We launched a three sixty plan on XO years ago, and it's really proving very efficient. We are increasing prices and increasing volumes. So all good here. Then XO. XO is our game changer in the future. I'm not saying it's a make it or break it, but it's a fantastic opportunity.
We do not have our fair market share today. We probably have 8% market share, while our market share is between 14%-16%. There's a lot to regain there, which is why we are proactively working on this 360 plan I referred to. Telling you that it's delivering. It's too early, of course. We saw before COVID some interesting growth. We believe in the opportunity of e-commerce for XO as well as a good driver. Let's see how it pays off once it reopens, which is the case since the day before yesterday.
Margin in 2022, 2023. As said, we elaborate a little bit more to the question, are we expecting like many other companies in our sector to see stability or deterioration gross margin due to the global environment? No, we don't. We think that the gross margin, global at group level, will be higher in terms of ratio to the turnover compared to 2021, 2022. Even if we are not denying there are some headwinds, macro political or specific, liquor cost. We highlighted that also 12 months ago that the cost of goods, even before the rise of the inflation, before the political situation, the world confusion at this stage, was 2022, 2023 was meant to be a more costly year in terms of costs. Packaging costs, components, logistics costs with the.
On top, e-com and digital journey increasing means additional pressure on logistics, on gross margin. CSR is very positive as a global value, but sometimes could be specifically on a short-term negative impact on gross margin. We are not denying all that, but we have much more. In terms of dimension, think of the absolute value of the COGS and logistics, the absolute value of the gross. When Eric talks about gross to net, what is gross? It is the theoretical top line we are delivering before counting the discount to the trade with the final client. If you are able to improve that in qualitative but also quantitative day-to-day basis, one point is four-one compared to the COGS. We have a lot to deliver.
We have a lot of elements to mitigate this and even beat these inflation issues. Price increases, mix improvement, mixes format, ranges, states, brands, geographical, channels. We are really on this moment, on a positive momentum. Very important price increase has been done in April. We have still a stronger pricing power. Even if difficulties are there more than ever, even for us, IRES, we think that we will increase the gross margin group ratio compared to the turnover overall at group level. I'm not saying that will be the same thing brand by brand, but at group level in 2022, 2023 compared to the previous year. We are very proud of that. Free cash flow. Free cash flow before non-operational element like dividend and so on, share buyback, this year, it will be higher than this year.
Okay, capital expenditure, your question, will be higher than what we experienced this year, will be between EUR 70 million and EUR 80 million, which is our normative guidance for a normal year. If you are not able to reach it's not because we don't have plans, because the pandemic sometimes makes things go slower than we want. That is 70- 80. Strategic working capital outflow will be higher than this year. Will be between EUR 70 million and EUR 80 million. Technically speaking, we have, you know, EUR 40 million-EUR 50 million more in terms of headwinds in cash flow. But even if I will say that, we'll be beating that. Why? By EBITDA, first of all, because cash is cash. In cash, you can't publish result, it's not organic. In this moment, you have the conversion, the dollar that play a role.
On top, we cannot consider the other working capital item of this year as EUR 118.4 million as an exit, as a normative one. Clearly some technical elements of this year will reverse. Also the amount of trade accounts receivable is linked to the way we are doing business. This year was a low point in terms of factoring. Historically, we have more than EUR 100 million in factoring. The free cash flow, even if we are increasing strategic working cap in capital expenditure, will be higher than this year.
Great. Thank you, Luca. Very clear.
Thank you very much. The next question comes from the line of Jeremy Fialko from HSBC. Please go ahead.
Hi. Good morning. A couple of questions from my side, kind of clarifying elements of your guidance for 2022, 2023. So the first one is on the top line and the circa double-digit consensus organic growth, which you said you're happy with. Is there any expectation that there will be a degree of, like, restocking, included within that? Or would you anticipate ending sort of 2022, 2023 with a similarly low level of inventories that you ended 2021, 2022? And then if you were to decide that you wanted slightly more inventory in the system, would that constitute some upside to that current consensus where it is? And then secondly, on the operating profit side, obviously you've signaled that your gross margins will be up.
In 2022, 2023, the comments you make on control of OpEx implies you'd expect some sort of leverage through the sales line there. Can you just confirm whether that's the case or whether you think the sort of A&P and OpEx will grow roughly in line with sales in the coming fiscal year? Thanks.
Feel free to 'cause maybe I will be too dry on the answers so feel free to include some comment. We are not happy. We are comfortable. We are okay with the guidance. Year of strong growth, starting with a strong H1 because we are not. This is slightly different. Technically, we simplify that, and Eric simplified that, saying we are restocking. We are realigning. It is more correct. We ended the year with overall less stock than we wanted to, not only in terms of sell-in, because the sellout, the final retail was not able to grab the product, to drink the product they wanted. There is no restocking in a negative way that to be considered. It is a realignment.
At this stage, the year is designed to be more balanced compared to the 2021, 2022. We are starting strong, but even if on the heels of very, very huge comps, we'll be more balanced between H1, H2, and also between quarters. At the end of the year, if the world was the same paradigm of 2021, we will end with a bit more coverage. Now let's talk about chicken. In 2021, we invited 10 people to a dinner, and everybody was meant to have a chicken because they like chicken. We ended with three chicken, four. Now we are inviting them again, and we are restocking, but actually we are not. We are partially realigning, switching from three-six chicken.
They wanted 10, so we are still missing some part. The good news is that they like very much our cognac. They wanted not 1.2. We need 12 cognac. Even if the year is more balanced mathematically, I'm not excluding that in terms of mathematical coverage or the new paradigm, we'll be ending at a lower pace, even more in volume than in value, because the gain between formats and ranges will amplify the VSOP to 1738 in China, the VSOP to the club, this kind of cognac, red label, blue label. It was a little bit a metaphor, but to try to explain that there's more balance, but even having said that, we might end with a low level.
That means that probably if the final consumption is still there, like we think is still developing, we will have a strong Q1 in 2023, 2024 as well. You're perfectly right on the second assumption. Gross margin increasing next year, A&P increasing as well, but OpEx overall, even if we are not giving up on strategic investment in OpEx as well, will be growing less than the top line. If your global collective guidance is a double-digit +10.2% in top line, operating expenses at group level without stopping any important program will be growing by the lower pace compared to the top line. On that point is a great achievement because. Oh, we had another technical problem.
Happening in the studio.
Even that is a great achievement because there is inflation also on salaries. Salaries are very important for our people, and we treat well our people as well. Growing in OpEx less than top line because of the environment is at least a huge achievement as increasing gross margin. You are right, but I wanted to highlight some additional color on that.
I don't think you were dry, and I will not elaborate. I will stay on your chicken story, and even the furniture was moved by the story. We will stick to this.
Thank you very much.
Thank you. We'll be taking our last question. It comes from the line of Trevor Stirling from Bernstein. Please go ahead.
Morning, Eric, Luca, and Marc. three questions. Sorry to have three at the end of the day. First one, Luca, just going back to your waterfall chart on cognac margins, was struck by that 2.6% margin expansion coming from distribution and others. I wonder if you could just give us a little bit more color on, is that mainly operating leverage? What's going on behind that? Second one, perhaps bigger picture stuff, liquid availability. I think through the year you've been a bit short of liquid. You haven't as much aged liquid as you would have liked. I think you've been prioritizing 1738 over VSOP. As you move into FY 2023, do you think your liquid supply or availability is more in line with your expected demand?
Third thing, Eric, coming back to your point on ESG and 78% of acres is under sustainable cultivation, is that your own acres? What are you tracking, you know, the acres that are under the cultivation of the growers and the Bureau National Interprofessionnel du Cognac?
Can you repeat the last question? Sorry.
Lent.
Yes. On your ESG section, you talked about 78% of acres being sustainably cultivated. I just wondered if that was the company-owned acres, and are you also tracking the acres that are under the control of the wine growers and the prix d'achat?
Okay. You want to answer question one?
Yes.
This is the impact of the leverage of distribution of global cost structure for the cognac was spectacular also because it's linked to the increase of the size. The cognac margins are already there even to support an even stronger top line. At the same stage, the Liqueurs and Spirits division, which is more composed by different brands, have at this stage some more costs, some more investments if you compare that to the structure of the top line. As we said before for the A&P, for the spirits, also for the OpEx, this is the first part of the journey. Increasing the size, we will see declining also the ratio of OpEx, not only of A&P compared to top line.
At this stage, this important cognac leverage ratio, profit to the global profit, is linked to the fact that the global means are already there and adapted to top line, which is totally accretive. The additional dollar, the additional euro made with the cognac has a much more accretive impact on the global profit bottom line than liquors so far. It won't be the same case in some years.
As to your question on liquid availability, supply, and the 2030 plan, the first thing I'd like to stress is that we have the liquid to achieve our 2030 vision. Obviously, it's a vision that was also drawn taking into account our sourcing capacity. I would even say that we can achieve more on the upper grades, particularly on XO. As you have understood, we have an ambitious plan, and we do have the liquid to achieve more on XO. There is a way to do more on the upper grades. The thing is, indeed, we are growing way faster than we had originally planned. I think it's good news in a way because it will help us achieve.
It is going to drive value even more than we had planned, should demand remain that much stronger than the offer. It can have a positive impact on value. Of course, it is creating tension on the liquid, which is not something new, which is something that we've been facing over the past few years. We've been working on our side on how to optimize our sourcing, how to gain sourcing. I will not tell you it's easy. I will tell you it's a focus, of course, and we are working on securing liquid to achieve even more than the vision, but it is work in progress. We do have some interesting assets to achieve such.
Starting with the fact that we have this unique relationship with the wine growers driven by our business being probably more family driven. Obviously it's not only and solely about this. Even though it matters, don't underestimate that the wine growers they are family owners and managing their patrimony like we are, and it's very important for us as an asset. Obviously we are working on new tools to secure additional sourcing. The only fact of sharing our ambition with the wine growers, I think has been a very interesting step forward in the past few months. Whether we indeed the 100% target, of course it is direct and indirect. It's not only our terroir, not only our acres.
If you take cognac, we are already certified 100%, and we've been pioneering in the region. It's clearly the 15,000 acres that directly or indirectly contribute to our products that are at stake. We are working with our orange suppliers. We are working with our cereal suppliers and so on. We've been doing it for long. We are just accelerating on a topic that has always been the focus for us, anyway, being very terroir-driven.
That was very helpful, indeed. Thank you, Eric and Luca.
Okay, we'll hand you back over to the speakers.
Sorry. Thank you very much, everyone. I hope that you got it, obviously. It's been a record year for us. It's pride for our teams. I would like also to congratulate them worldwide. Records when it comes to sales, when it comes to gross margin, when it comes to COP. I would like to insist that this has been achieved thanks to the heritage of sometimes up to 300 years of craft. It starts with a great product, and this is our heritage. This is what we need to transmit to the next generation. It's not solely this, of course. It's also driven by our solid investments and by trends that we believe are long lasting, hence our confidence while not denying, of course, the global environment.
Thank you very much for your attention and looking forward to speaking with you soon. Bye-bye.