Good day and thank you for standing by. Welcome to the Rexel full year 2021 results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero, and I would now like to hand the conference over to your speaker today, Guillaume Texier, Rexel CEO. Please go ahead.
Good morning, ladies and gentlemen, and, thank you for joining us, online or by phone. I am Guillaume Texier, the CEO of Rexel, and I'm here today with, Laurent Delabarre, our Group CFO. Last time I had the opportunity to speak to you, it was our Q3 sales call. I told you how Rexel had posted at the time a robust performance and was supported by positive and solid underlying trends. I'm very pleased that our Q4 results fully confirm this, making 2021 a historic year for the company. What's also interesting, beyond the figures, beyond the record results alone, is to comment on the way that they were achieved as this provides indications, optimistic indications about what the future may look like.
Moving to slide three and starting with the key highlights. 2021, as I said, was a record year for Rexel by almost all metrics. Starting with the middle graph, we posted our highest growth rate by far with 15.6%. This is helped obviously by the fact that 2021 was a rebound year after COVID. Even over two years, our average growth rate is at 3.7%, which is still the highest figure in 10 years. As a result, our turnover, which had navigated between EUR 13 billion and EUR 14 billion historically, rebounded sharply to reach EUR 14.7 billion, even before the full effect of the Mayer acquisition, which is going to easily carry us above the EUR 15 billion mark.
On the right part of the graph, our EBITDA margin reached 6.2%, its strongest performance since our 2007 IPO. What's interesting to underline is that the fact that this performance has to do with two sets of factors, which really go hand in hand and cannot be separated, and you see that on the bottom of the graph. On one hand, you have the external factors, and on the other hand, you have the self-help. On the external factor side, we benefited, first of all, from a sharp post-COVID rebound, which went way beyond the simple execution of the 2020 postponed projects.
We see now that the boost for our sector will span longer and higher than just a one for one compensation of the dip, because of savings redirected to renovation because of stimulus plans. Second external factor and quite important, a general trend towards electrification, and I'll come back to that later. Everybody talks about it, but we believe that we are really starting to see the effects on ourselves, especially linked to growing sustainability awareness and regulations. Last important external factor, the return of inflation after a decade for us of relatively low inflation or even deflation in some categories. Here again, I'll come back to that. Those are all positive factors and factors which we think, by the way, will last.
The record results we are posting for 2021 wouldn't have happened without also a great dose of self-help through all the improvements that the team has made to the business over the last few years, which drove commercial success and margin enhancement, especially thanks to the help of digital tools. On slide four, we take a closer look at the highlights of the year. What I would like to underline is the fact that our performance was delivered in a year which was far from smooth. Yes, there were volume gains, but our challenge was to serve them without adding too many costs to generate leverage, and you will see that we delivered on that.
Yes, there was inflation, which is in general a positive for distributors, but we had to demonstrate and to work to demonstrate discipline to pass through to prices, which we did successfully, helped by our pricing processes and by our digital tools. Finally, a key word for us this year was agility, as we had to navigate COVID constraints, especially towards the second part of the year, increasing supply chain issues linked to availability of products from our suppliers. In this tricky environment, we were able to demonstrate our added value to our customers by holding the right inventory, leveraging our relationships with suppliers, and using our expertise to propose alternatives. If I go to the following slide, we look at another key highlight, our strengthened financial structure.
This year, we demonstrated again that the Rexel model generates strong and recurring free cash flow, reaching a record EUR 681 million in 2021, which is EUR 68 million more than in 2020, which had been boosted by an exceptional working capital inflow linked to the pandemic. Compared to a more normative level in 2019, free cash flow is up almost 50%. Our net debt at the end of 2021 stood at EUR 1.55 billion, down almost EUR 400 million compared to 2019.
Compared to 2020, it's slightly up, as a result of our resumption of an active M&A strategy with five acquisitions completed in the year, representing an investment of EUR 439 million. Despite this outlay, our indebtedness ratio fell to a record low 1.37, compared to 2.14 in 2020 and 2.47 in 2019. Which means that we have now a sound financial structure which allows us headroom to continue our growth strategy and increase shareholder returns in 2022 and beyond. In the next few slides, I'd like to focus on what makes Rexel's business model so robust because this is what allowed us to deliver this year.
First of all, if I switch to the next slide, to slide seven, we are positioned on a booming market. The two graphs on this slide are a way of showing that. At last year's Capital Markets Day, my predecessor, Patrick Berard, presented how Rexel stands to benefit from the structural trends in electrification, increased electricity usage, and increasing demand for energy efficiency amid a global acceleration in the energy transition. What I like, I mean, you will find many graphs explaining that, everywhere. What I like about those two ones, which come from IEA, is the fact that they don't focus only on buildings, but also on industry, which is another important market for Rexel.
What it says is that if actors are serious about a net zero trajectory or even just about their own pledges, they will have to electrify massively. There is no way around that. What is interesting is that this electrification will also be more complex and more technical, raising topics such as balance of the electrical network, microgrid, EV charging capacity, automation, innovation, connectivity, which are as many opportunities for us to add value because complexity is always, for us, an opening to upsell and to sell services. If I go to the next slide, to slide eight, here we show that this electrification trend translates into growth trends in almost all of our products categories, which is quite interesting.
The top left part of the pie includes all those exciting categories where sustainable innovation is happening right now, and we all know the names, EV charging stations, renewable energies, heat pumps, for example. Here we are talking fast growth sustained by, very often by governmental stimulus plans. The second segment below gathers a product categories that are maybe a little bit less directly impacted by these sustainable technologies, but are nevertheless vital to make those technologies work together and will very likely need to be replaced as we transition to a new electrical world. We are talking, for example, the big category for us of electrical distribution.
The third category on the right includes products which are sometimes considered as commodities like, for example, cables and conduits, but will also benefit from the volume growth, and more importantly, are likely to experience an inflationary environment in the future, as they are very dependent on raw materials which may become increasingly scarce. I'm talking copper, aluminum or steel, and the news is full these days of reports explaining how the availability of such materials is going to become difficult in the next few years. Really, it's not limited to the top category and top very visible categories of those categories which are buoyed by stimulus plans, but all the electrification system is going to benefit from growth trends and from inflation.
Slide nine talks about our model, which is fundamentally omni-channel. Rexel focuses, you know that very much on digital, as you will also see in the next few slides. But we also believe that for our customers to be served efficiently, we need more than that. Let me start maybe with the bottom line, which is very important. What we do is everything to let our customers focus on their business. Their business is not to pass orders, is not to drive around to find products. Their business is to electrify, basically. This is increasingly crucial as skilled labor shortage becomes an electrical issue in our trade everywhere in the world.
What we do is we provide extremely tailor-made logistics and services, including to the last mile, and sometimes in less than two hours, thanks to our identified network. We provide expertise and training to our customer, either remotely or on the point of sales. We have a range of digital tools to increase productivity on those sites. All of those building blocks are important one way or another to our two main categories of customers that you see here on the two lines, proximity customers and project customers. There are nuances by country and by customer, but the strength of this model, and what makes it relevant to our customers, is the ability to offer not only one, but all of those features which are necessary to the productivity of our customers.
Slide 10 focuses specifically on one of the key elements of our unique value proposition, digital, which has been a key area of focus for Rexel for several years and an area on which I believe that we are differentiated. This is an investment which really bears fruits at several levels, as it provides additional growth, additional service, and additional efficiency. I will not go into the details of this slide, which is pretty much self-explanatory, but suffice it to say that this is a true differentiating factor which is only available to those players who have the right scale to do it efficiently, Rexel being one of them. For example, it's one of the reasons why Mayer decided to join forces with Rexel last year, the strong belief that digital was the future and that Mayer was not big enough for digital.
Last but not least, on slide 11, ESG and more specifically sustainability. I am personally a big believer in sustainability through my personal background. I was pleased to see that Rexel is already doing a lot on this topic, being, for example, the only distributor with SBTi targets and also 100% finance through sustainability-linked bonds this year. This is good, but we can and we must do more in terms of orienting our customers towards the most sustainable solutions and also in our own operations. The example on the right shows well what we are doing, for example, around Paris.
Through our investment in another store very close to Paris, we are both able to propose a matched value proposition, which is delivery on the job site in two hours, knowing how difficult it is for our customers to park in Paris, like in many big cities. Equally importantly, a totally clean delivery system, including electric vehicles and bikes, saving more than 30% CO2 on our deliveries. This is clearly the future, and we are strongly motivated to accelerate on those topics. Moving to the next part, not only do we have a solid company, but we also have momentum. I have to give credit to Patrick Berard, my predecessor, and all the Rexel teams for having really changed the game over the last few years. Truly, we are delivering above expectations in our transformation process.
First of all, on slide 13, we are ahead of our Capital Markets Day objective that we announced just last February. In profitability, we are at 6.2%. If we restate for the one-offs, that would put us at 5.8%, but with the guidance to be above 6% as early as 2022, one year ahead of schedule. We said in the Capital Markets Day that we would grow faster than our comparables, and this is clearly the case. Our digital sales this year are up 27% in 2021 after a COVID year, which saw by nature a big jump in digital. This is a great result. We are well underway to reach one-third of our sales in digital. Cash conversion was above our target in 2021.
As far as acquisitions are concerned, we had a busy year, and I would add that we are extremely happy with the acquisition we have made, and I will come back to that. On slide fourteen, we detail our performance versus market in the various geographies. This data is based on our internal assessments, often backed by public data provided by industry associations. In North America, we believe that we were more or less in line with the market, despite us having willingly lost positions in some less profitable segments or regions. In Europe, we have gained market share, in particular in France and Germany, and showed selectivity to boost our margin in the U.K. In Asia Pacific, we believe we were globally in line with the market.
On the following slide, you see the progress we made in bringing all our countries to our target profitability level. This is an update of a slide which was shown at the Capital Markets Day. This slide clearly shows that more than two-thirds of our sales now come with an adjusted EBITDA margin above 6% compared to 38% in 2020. You see the speed, the momentum, of the transformation within Rexel. If we move on to the next slide, we focus on the progress that we have made on digital. I was telling you that it's important for us, and you can see here the actions that we have taken in 2021.
In 2021, digital represented almost EUR 3.5 billion of sales or nearly one quarter of our sales. In Europe, we are significantly above that level, with 35% of our sales coming from digital, and we are above 30% in eight countries overall. In the U.S., we are also making headway, and even including Mayer, which lags somewhat in digitalization, as I was saying, we are at 12% in North America, where we see substantial upside. It's also worth noting that in North America, the lower rate of digitalization is also related to the fact that we have a far higher share of project activity in that market, representing more than one-third of our sales. If we look only at warehouse-driven sales to be comparable to our other markets, we would be closer in terms of digitalization to 18%.
Digital transformation means much more than simply switching sales to the digital channel. It also means a complete revamp of our organization to make it data-driven. The slide shows you several examples of this. Digital transformation starts with a thorough analysis of our customer and product segmentations. This allows us to deploy our tools gradually across the group and to implement our key digital initiatives, such as customer churn, branch assortment, next best offer, track and trace, or email to EDI. 2021 also saw the go live of our supplier portal that reinforces our partnership with our key suppliers and strengthens our role in the value chain. On the next slide, our 2021 performance demonstrates once again that the Rexel model is cash generating and resilient. I was talking about that.
Free cash flow of EUR 681 million in 2021 was a record, exceeding even 2020, which benefited from the working capital inflow post-pandemic. Our model shows a cash conversion rate of between 60% and 70% on a normalized basis, with the exception of 2017 and 2018, when Rexel focused on investment in inventories to improve product availability, notably in the U.S. On slide 18, an update on M&A, and you see that Rexel resumed its M&A strategy in 2021 in a selective and disciplined manner, but still ambitious, with five acquisitions aimed at boosting our growth. Since the last time we spoke, we bought an industrial automation distributor business in the Midwest region of the U.S., Winkle, with annualized sales of close to $30 million.
Those five acquisitions together of the year added EUR 1.2 billion in sales. One thing which is striking is that they are, they all are ahead of plan in terms of integration and synergies, which says something about the quality of the diligence. We are really very pleased with our recent track record here. We will continue to look at opportunities that match our three criteria for acquisitions, reinforce core electrical distribution positions, expand to adjacent specialists, and develop value-added models. On slide 19, sorry. Let me focus a little bit more on Mayer, our biggest acquisition in a decade. The integration process is proceeding very smoothly, very rapidly, and both teams are finding many opportunities. With Mayer, we clearly have the opportunity to integrate first-rate teams and benefit from a very strong brand recognition.
There will be strong business complementarities on transportation, logistics, or complementary approaches to some customers. We'll be able to take the best of both companies in terms of pricing processes, digital, or supplier relationships. Overall, I think after just a few months together, we are very confident that this will be a great success story for both companies. The better-than-expected integration process allows us right away, only three months after the acquisition, to upgrade our synergies targets from 1.5% of sales to 2.5% of sales, and to accelerate implementation with already 1.5% expected to be delivered in 2022. With that, let me hand over to Laurent to go through the figures.
Thank you very much, Guillaume, and good morning to everybody. Let me go now more in detail into our strong financial performance. Starting on slide 21, you see our Q4 group sales and the geographical breakdown compared to both 2019, before the pandemic, reference and guidelines, and 2020. At group level, when comparing with the pre-crisis level, same-day sales growth is up +11.1% versus Q4 2019, accelerating compared to the +6.7% posted in Q3. This acceleration at the end of the year is a positive entering into 2022. Looking at the various geographies and comparing with the pre-crisis situation, all geographies accelerated versus the Q3, and notably North America, with 9.7% growth in Q4 2021 versus Q4 2019, an acceleration compared to the +2.5% in Q3.
We'll have a look at each geography in greater detail shortly. On slide 22, we take a look at our overall Q4 2021 sales performance. Our Q4 sales of EUR 4.1 billion were up 12.2% on the same day basis and up 20.3% on a reported basis. These reported sales were impacted by a favorable scope effect as the acquisition of Mayer in the U.S. and the utility business in Canada brought 4.9% of sales in the quarter, and also by a positive impact from foreign exchange. We now anticipate for full year 2022 scope impact with the acquisition of Mayer to be close to 6.5%, and the full year currency impact to be slightly above 1%, assuming spot rates remain unchanged.
Moving to slide 23, let's have a look at the volume and price contribution in the quarter. The 12.2% organic same-day sales growth in Q4 2021 benefited from a favorable pricing contribution similar to Q3, but with different dynamics between cable and non-cable products. Indeed, the positive copper cable price contribution was +5.1% in Q4, slightly lower than in Q3, as the copper price has risen in H2 2020. At the same time, the contribution of non-cable price further accelerated at +6.6% in Q4 2021, notably thanks to Europe, while North America maintained its high contribution. Q4 2021 was also marked by a better volume contribution than in Q3, despite a more difficult base effect.
Indeed, volume contribution stood at +0.5, but +1.2 when we restate a large aerospace contract in China that benefited 2020 and is completely gone in 2021. If we only focus on our two main geographies, volume was up +1.3% in Europe on a challenging base effect, and in North America, it improved significantly, up +3.1%. If you look on a full year basis, our volume are up +5.9% in 2021, including Europe at +9.6% and North America at +1.2%. While we expect cable price contribution to be lower in 2022, as copper price were high all along 2021, creating a more difficult base effect, 2022 will benefit from the two positive contributions from non-cable price.
First, the carryover effect of price increases passed all along 2021, and notably in Europe, where price increase accelerate in H2 2021 and will benefit H1 2022. Second, the additional price increase that supplier will pass to offset the raw material effect and higher OpEx inflation. On slide 24, let's look at the contribution of three geographies to the 12.2% same-store sales growth achieved at group level in Q4 2021. You have all the details in the press release on a country-by-country basis. We'll just highlight the key evolutions of the quarter.
In Europe, our Q4 2021 is up 12.4% versus Q4 2019, accelerating versus the 10.4% posted in Q3 2021 on a two-year stack, as a result of the combination of further price increases on non-cable products and positive volume momentum, mainly in U.K., Benelux, Sweden and Austria. In North America, we benefited from a significant sequential improvement in the U.S. Indeed, Q4 2021 in the U.S. was up 11.4% versus Q4 2019, compared with 2.8% in Q3 2021 versus the same period two years ago. This was notably driven by a significant volume recovery compared to the pre-crisis level, from -20% in Q3 2021 versus Q3 2019, to -10% in Q4 2021 versus the same period in 2019.
This results from an acceleration of our proximity business, which was already very robust in previous quarter, combined with better activity in project and specialties. Lastly, by end market, our three end markets are above their 2019 level for the first time in Q4, and the commercial segment significantly improved in Q4 2021. Lastly, in Asia- Pac, we saw sequential improvement compared to pre-crisis level, with 10% growth in Q4 2021 versus Q4 2019 compared to +1.8% growth in Q3 2021 versus Q3 2019. This is largely explained by the positive trend in Pacific with the end of the lockdown in major city in Q4. On slide 25, we show you the building blocks that led to a record adjusted EBITDA margin of 6.2%, up 196 basis points.
In fact, the progression was even stronger as we did not benefit in 2021 from the 15 basis points of COVID-related effects that we disclosed last year, and include 60 basis points of governmental subsidies, net of -45 basis points lower volume rebates, which supported our adjusted EBITDA margin in 2020. The progression from 2020 to 2021 can be explained by a very positive operating leverage with an impact of 170 basis points from strong volume growth and price increase. A net positive non-recurring of 40 basis points.
As a result, on one hand, a positive one-off gross margin gain on non-cable inventory price inflation for 80 basis points, and on the other hand, a - 40 basis point one-off effect from higher performance-linked bonuses, notably for our sales force, in a context of better than anticipated activity versus our initial budget. This effect had a significantly stronger impact in H2, as the period continued to benefit from non-cable inventory price inflation, while performance-linked bonuses had already reached their maximum in H1. Lastly, we also had a productivity impact of + 36 basis points that offset inflation of - 34 basis points. Moving to slide 26, you see how each geography contributed to our record profitability.
On gross margin first, excluding the positive one-off effect from the gain on non-cable inventory price inflation, our underlying gross margin benefited from pricing initiatives across geographies and also strong business selectivity in our project activity in North America. Moving to the adjusted EBITDA margin, profitability improved in all geographies, even restated from the positive one-off effects. Europe's adjusted EBITDA margins to that 7.1%, up 174 basis points, including circa 20 basis points of non-recurring items. This strong performance largely is made largely thanks to the combination of the positive gross margin impact, the robust sales growth, and the implementation of our structural measures. We posted strong productivity gains as we achieved a strong growth with 300 people less than before the pandemic.
North America's adjusted EBITDA margins to that 6.5%, up 278 basis points, including circa 100 basis points of non-recurring items. This good performance is largely thanks to the same factor as in Europe. Similarly, we delivered this performance with 620 fewer people than before the crisis. Asia Pacific's adjusted EBITDA margins to that 2.4%, up 52 basis point, largely thanks to the progression in Pacific. On slide 27, we look at the bottom line part of our P&L. Let's start with our adjusted EBITDA of EUR 906 million, up 69%.
Reported EBITDA was significantly higher at EUR 964 million, reflecting the positive non-recurring impact of EUR 58 million from copper price. Other income and expense amount to EUR 45 million, largely explained by an impairment on trade receivable in connection with the legal proceeding in China for EUR 23.4 million euros. In addition, we also had circa EUR 10 million of acquisition-related expense for the five deals completed in 2021 and EUR 7 million of write-down on right-of-use and other fixed assets, and a limited EUR 6 million of restructuring in a recovery environment well below our normative level, which is between EUR 30 million and EUR 35 million.
Restating for one-off cost largely related to the EUR 23 million charge for the early redemption of the two bonds that we have refinanced with two sustainability-linked bonds, our financial cost of net debt decreased by circa EUR 12 million to EUR 67.6 million euros, reflecting the good work done on the balance sheet over the last years. In addition, we have the interest on lease liability for EUR 40.4 million in full year 2021, versus EUR 42.7 million last year. For 2022, we anticipate interest on lease liability at close to EUR 42 million and financial cost of net debt at circa EUR 75 million as cash out from Mayer acquisition came late in 2021 and also in the context of rising interest. In total, net financial expense for 2022 should stand at circa EUR 120 million, excluding one-off cost.
Our income tax stood at EUR 23.2 million, 23.2% due to the recognition of one-off deferred tax of EUR 32.2 million as a result of better than expected future taxable income in countries carrying losses, tax loss carry-forward. Restated for non-recurring impact, the effective tax rate stood at 27.3% versus 30.7% in full year 2020, down 340 basis points, notably thanks to lower tax rate in France. For 2022 onwards, we confirm our indication of a tax rate below 30%.
As a result, net income was EUR 598 million versus -EUR 261 million, and our recurring net income stood at EUR 575 million, up 107%, reaching all-time high level for a year. On the next slide, we generated record cash flow before interest and tax, reaching EUR 681 million, reflecting the robust operational results. If you exclude the atypical year of 2020, the level of free cash flow conversion is higher than in the previous years at 65.7%. Free cash flow after interest and tax reached EUR 426 million after paying EUR 56 million in interest and EUR 199 million in income tax.
The strong free cash flow generation was generated in the context of a significant outflow from trade working capital of close to EUR 324 million in order to finance the strong rebound in sales well above the 2019 level. At the same time, the change in non-trade working capital provided an inflow of EUR 116 million, largely from the provisioning of variable pay to be cashed out in H1 2022. Let me share a few details on the evolution of our CapEx. Gross CapEx stood at EUR 103 million, representing 0.7% of sales. Of course, on a higher than expected sales level, and this includes 50% of IT and digital CapEx.
The EUR 439 million financial investment was related to the five acquisitions completed in 2021, including the biggest, Mayer in the US and also the utility distribution business in Canada. This leads to a slightly higher than last year net debt level of at EUR 1.55 billion, while at the same time, our indebtedness ratio at 1.37x reached an all-time low. Let me turn on slide 29 to our balance sheet and liquidity picture, which show that we have no significant short-term repayment schedule. As of December 31st, we have EUR 1.27 billion of liquidity, including the EUR 850 million in undrawn facilities on our Senior Credit Agreement.
In 2021, as you know, we successfully issued two sustainability-linked bonds for EUR 1 billion due in 2028 with a 2.18% coupon. This rate will increase by 25 basis points if Rexel is not able to reach its Scope 1 and 2 on one side and Scope 3 targets by 2023. With those operations, we have extended our maturities and reduced our financing. Indeed, we have reimbursed a EUR 500 million bond maturing in 2025, which carried the same coupon, and a EUR 600 million bond maturing in 2026, which carried a 2.75% coupon.
Overall, our active financial management over the recent years is reflected in the low average effective interest rate on gross debt, down 3 basis points year-on-year to 2.42%. Reflecting Rexel's improved earnings, strong free cash flow generation, and lower indebtedness ratio, the rating agency Standard & Poor's upgraded in September our BB rating with a positive outlook. On slide 13, we present our proposed dividend for 2021 financial year to be paid in 2022. Rexel will propose to shareholders to increase the dividend by 63% to EUR 0.75 per share, EUR 0.29 higher than last year, fully payable in cash early June. This remains subject, by definition, to approval at the Annual Shareholder Meeting to be held in Paris on April 21st. This represents a payout ratio of 40% in line with our dividend policy.
It offers a 3.6% yield based on yesterday's share price. With this, let me now hand back to Guillaume to discuss our 2022 outlook and priorities.
Thank you. Thank you, Laurent. Let's now look at how we see 2022 shaping up. I'll start with slide 32, which shows that we are entering 2022 with a record level of backlog. You know, we are traditionally not a backlog type of business. But that being said, what we are seeing is a strong increase in the U.S., in Canada, in France, for example, and you see that plotted on three years with a base of 100. This is due to two factors, basically. Strong underlying demand, really, and delays in projects because of labor or product scarcity that disrupted activities.
To give you an order of magnitude, backlog represents a material part of the North American business, but they are much smaller in France, let's say around 5% of the business. This illustrates both the reality and the positive trend of the underlying demand and also the tension in the supply chain. If I look to the next slide, if I go to the next slide to our 2022 outlook, I would summarize that by saying that first of all, 2022 presents great opportunities. We will be supported by favorable elements in an uncertain environment as labor and product availability will remain a factor. We expect that non-cable inflation will continue and add to carry over pricing impact.
We also expect a robust volume environment with room for additional growth in the U.S., supported by the high level of backlogs and continued high demand in Europe. In this context, leveraging our transformation and enhanced efficiency, we target for 2022 at a comparable scope of consolidation and exchange rates, a same-day sales growth of between 4% and 6%, an adjusted EBITDA margin above 6%, and a free cash flow conversion above 60%. In terms of our transformation and growth driver, I would like to finish by saying that we have already made significant progress, but that there is also more to come. Slide 34 shows you what we have achieved and where we think the way is still upside.
We consider that deleveraging is largely completed, allowing us to allocate more to acquisitions or return to shareholders. We are also well advanced in excellence in operations and digitalization, but we will continue on those two fronts, our steady progress. Similarly, we will also accelerate growth through continued efforts to outperform the market while benefiting from such structural trends as electrification and energy transition. The areas that offer even more upside are M&A. You've seen that 2021 was a more active year. We intend to continue to do that. Further acceleration on the ESG side, as I was talking about in my introduction, where we see significant opportunities to leverage our existing strengths.
On all of those topics, all of those strategic topics, and on all the ones, I will have the opportunity to detail if we switch to the next slide, our strategic roadmap at the Capital Markets Day that we will hold on June 16th in Zurich at our Swiss headquarters and largest branch. During that event, we will be pleased to take you on a visit of the biggest branch in our network overall, with sales of close to EUR 100 million. It features state-of-the-art technology with a new automated storage solution. You will be able to see firsthand how our activity has evolved in one of our most advanced country. Obviously, we will update you on our strategic roadmap.
We very much look forward to seeing you there. Now Laurent and I are happy to take your questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your questions, please press the pound or hash key. Please stand by while we compile a Q&A queue. Your first question comes from the line of Andreas Willi from JP Morgan. Please go ahead.
Good morning, Guillaume. Good morning, Laurent. Thanks for the time. My first question is on investment and priorities if you look to 2022. Obviously you have in the past invested in your urban strategy, automated warehouses, new delivery models. Should we expect a further increase in investments there? And how aggressively do you want to push this in terms of also where CapEx is going? And then the second question on your benefit you had from the non-cable pricing, the net 40 basis points. Maybe you can just explain how you exactly calculate that, what you call exceptional, basically. And looking at 2022, obviously, we still have good price increases coming through.
Would you then call that just as a, basically, as a normal effect and not an exceptional effect that you embed in your guidance?
Okay, thank you, Andreas. I will take the first question, and I will let Laurent answer to the second question. Investment priorities for 2022. Clearly, I mean, you are right when you mention logistics, and I was giving the example of what we did around Paris. So you've seen also pictures of the Zurich store. You are right that advanced logistics and customer promise in terms of service is increasingly important in our world. Clearly, as I was mentioning, our customers. I mean, one trend that we see increasing is labor scarcity in all countries, which means that our customers are looking for productivity, and productivity is provided by excellent service level, which comes with automation and with investment in logistics.
That being said, a big part of that has already been done. You've seen pictures of what we have done in Paris, in Zurich, in other branches, in Switzerland, for example. We have a steady investment program there, to make sure that we are differentiated on this front. I would say that in terms of global investment level, including that and including also digitization on which we are going to continue, even though at a probably lower level than in the past, you know, I would hold to what we said at the Capital Markets Day, which was a 0.9% guidance on CapEx. I see no reason to change that. This was already included, I believe, in the plan that the team had presented in February.
We continue with this plan, which is guaranteeing that on digital and logistics, we continue to maintain and increase our differentiation level with other distributors. Laurent, for the question about one-offs.
Yeah, on the one-off, you know that it's an inventory impact. You know that on the cable one-off inventory impact has been restated four years from our communication. On the non-cable one, it is impacting our performance. What we have looked on a country-by-country basis is what are, I would say, the exceptional inflation we have faced this year. Usually by country, we say that around 1%-2% is a kind of normal range of inflation we have. This one has not been restated. It has been done granularly, country-by-country basis, and the rest has been restated.
On the other side, we have taken the one-off cost impact of higher commission for our sales guy and bonuses for our people, leading to a booking of 80 basis points on the gross margin and a negative of 40 basis points on the bonus and commission leading to this 40 basis points. To go one step further, yes, we anticipate next year, so in 2022, to have additional inflation. The global inflation should be we have on one side the carryover from 2021, and on the other side, additional inflation coming from our supplier. Today we anticipate to be around 3% plus, depending of course, on a country-by-country basis.
Thank you very much.
Thank you. Your next question comes from Lucie Carrier from Morgan Stanley. Please go ahead.
Good morning, gentlemen, and thanks for taking my question. Actually, the first question is a little bit of a follow-up on what Laurent was discussing and is a question I've received a lot this morning from investors. I was hoping you could help us understand a little bit more the top-line guidance in terms of the underlying assumption, i.e., what did you assume in terms of a copper impact in 2022? How much do you assume in terms of carryover pricing from 2021 into 2022? 'Cause I think there's maybe some uncertainty around the overall volume effect that you expected in 2022. Some color on the building blocks would be helpful, please.
Okay, I can take it. On the copper impact, I mean, you know, first of all, as Laurent mentioned, we will continue to see some inflation very clearly. The environment is inflationary on the non-cable part of the business. We have some carryover inflation, as Laurent was mentioning, and we will see some additional sequential inflation during the year. The early indications of all of our suppliers and the price increases are going in that direction. In terms of copper, we have an assumption in copper, which is basically stability and zero effect on our P&L of copper.
Because I mean, in a way, in the long run, I read all the analysis about scarcity of copper, and I believe that indeed, we are going to see an increased difficulty in procuring copper. That's an inflationary trend in the midterm. In the short term, it's not our practice to bet on copper prices because it's a spot market. There is uncertainty here on which we took a middle assumption. In terms of volume, what I would say is that overall, first of all, I would emphasize on the fact that we see a very strong underlying demand.
When we talk to our customers, when we look at their backlogs, when we look at our backlog, it's very clear in almost all countries in Rexel that the underlying demand is very high, that the order books of our customers are full for the year and even beyond that, which means that there is no problem about demand. Now, what is more of an uncertainty is two things. First of all, labor availability. We are talking about that when I was talking about logistics. Clearly this is something that we hear more and more from our customers. It doesn't affect our operations at this stage, but it really affects the capacity of our customers to deliver at the speed which would be required to serve the high demand.
The second thing is materials availability, and we mentioned that during Q3 and Q4, we saw an increasing tension in the supply chain. We are able to juggle with that. We are able to provide and to ensure that our service level remains high with our customers. Clearly this is creating a limitation to the ability of job to be executed. Those are two uncertainties which goes on the other side of the high demand that we are seeing. I would say that those two limitations, labor availability and materials availability, in the long run, there are opportunities for distributors because as I was mentioning, labor availability at our customers, we can help solve that, either through logistics, I was mentioning that, but also through advanced services.
We can help our customers focus on what their core business is in the long run. In the same way, scarcity of materials, we can also, it's an opportunity for us to add value by proposing alternatives, by also holding the right inventory thanks to our relationship with our suppliers. But in the short term, those are uncertainties. I hope I'm giving a little bit more color on the building blocks. There is inflation. There is volume, clearly volume potential in the U.S. where we see a good momentum, especially in the commercial and in the industrial businesses which were still at volumes lower than 2019. We see good momentum, and we think this momentum is going to continue.
The uncertainty in Europe, we will continue to see robust demand. The uncertainty on the volume part is around supply chain, basically. I hope I answered your question, Lucie.
Yes, that's very, very helpful. Just to make sure I understood well the comment from Laurent, the 3% inflation on non-cable is that, you know, the combination of what you expect from carryover and additional prices? Is that correct?
Yes, it is.
Okay.
It is carryover plus a sequential inflation, and then there is an uncertainty around copper inflation, and then there is volume.
Okay. Understood. Very clear. My second question is maybe to elaborate a little bit more on volume. Thank you for providing that slide, I think, where you are showing the volume effect in 2021 versus 2020. I was just wondering if you could give us this information versus 2019 for Europe and North America, and whether you are now seeing, I would say, proper evidence of a better growth recovery in terms of volume in North America particularly, because it seems that it has been lagging.
Yeah, absolutely. We can give you the volumes versus 2019. Laurent, I will let you give that, and I will make the comments on North America. Absolutely.
Yeah. The volume versus 2019, we were 0.8% in Q3, and we grew to 1.4% in Q4 in Europe versus 2019. Over the year, we are up 4% in Europe. In North America, we were close to -20% in Q3, knowing that we are above 2019 in the proximity business, but we are behind on large project and industry. We had a sharp recovery in Q4. The -20% in Q3 became -9% in Q4. On a full year basis, of course, we are still negative. We see clearly a good momentum, recovery on large project and recovery on industry.
Let me make a few additional comments on this -9%. I mean, clearly, the momentum is there. When we look at the detailed analysis on the industrial and commercial projects, we see good volume momentum in the U.S. We are very confident in the recovery and in the demand. Maybe one comment about the -9% in volume in Q4. First of all, you have to remember that between 2019 and today, we also selected a little bit the segment, the geographies and the customers which we focus on. That was part of our transformation, focusing on the most profitable segment, geographies and customers.
It led us to cancel our participation to some unprofitable businesses. I think when you look at those 9% compared to 2019, you should also look on the other side to the very impressive margin appreciation that we have seen in the U.S., because one is a little bit the consequence of the other.
The second thing is, I don't want to take that as a pure calculation because it doesn't make a lot of sense, but when I look at the backlog increase in the U.S., in Q4, the backlog increase almost completely offsets this - 9%, in fact. The reason why I don't look at this as a pure math is that, you know, we are always concerned about the quality of our backlog. Because obviously there is a little bit of advanced ordering which doesn't really belong to Q4. But nevertheless, it's an indication of the tension that we are seeing on the supply chain.
I think that, you know, if I remove selectivity and, on top of that, if I remove the limitations which are due to the supply chain, very clearly we are back at 2019 underlying level in terms of volume. I hope it gives more clarity. In terms of momentum, clearly, we are seeing a positive momentum.
Thank you very much. If I can just ask one last question around the dividend now. I mean, this is stepping up meaningfully, you know, in line with your guidance. Can we consider the EUR 0.75 that you're now paying a bit of a new floor, provided a normal operating year from here?
I think we have given guidance in terms of distribution percentage at the Capital Market Day. We had a dividend policy to distribute at least 40% of the recurring net income. This is just the pure calculation on that with a very impressive recurring net income this year. So far. Let me put it this way, Lucy. I'm very confident in the economy. I'm very confident in our business, but I think it makes more sense from a financial balance of the company to have a guidance in terms of a percentage of recurring net income. I'm quite confident that the recurring net income is going to be good, but I wouldn't transform that.
I wouldn't take the bet of transforming that into a floor, an absolute floor in terms of dividend.
Okay, fair enough. Thank you.
Thank you.
Thank you. Next question comes from the line of Martin Wilkie from Citi. Please go ahead.
Yeah, thank you. Good morning. It's Martin Wilkie from Citi. Just a question on the Mayer transaction. You've brought forward the synergies by a year or so. I want you to talk a little bit about the underlying profitability of Mayer before you acquired it. I'm assuming that it's been lower than Rexel, but just to think about how we should think about the opportunity once the synergies both this year and next have been achieved, just to understand how Mayer compares to the existing North American business. Thank you.
You know, I think, Mayer, first of all, provides a leadership position in a good part of the U.S., which is quite dynamic in terms of momentum, because what we can disclose is that the underlying growth of Mayer in 2021 was slightly higher than the average of U.S. It's a good and very active part of the U.S. Mayer is providing us with a leadership position. In terms of synergies, we talked about it. I think, we have and we will continue to go through the quick wins. Now before that, there is going to be opportunities in terms of also further digitization, et cetera.
Beyond that, what does it bring us in terms of overall in North America? I think it brings a scale also. Scale and relevance to suppliers, which is quite important, to customers, which is also quite important. Like any acquisition would give that. I think Mayer gives a scale like any acquisition of this type would give. It gives us also a very great leadership position and a great name in the Southeast of the U.S. I think those are the two things which they are providing.
I hope also, in terms of what I was saying about our M&A policy, I hope also that it gives assurance to the company that we could acquire that, in terms of integration, there is a positive to be gained for both the acquired company and for Rexel, which is a good story for the future.
Thank you. For 2022, obviously you've got the higher synergies, but would the transaction be meaningfully either dilutive or accretive to the North America margin, or is it broadly in line with the synergies? How do you think about-
With the synergies, we will be very close now to the North American average.
Great. That's helpful. Thank you very much.
Slightly lower, but very close.
Thank you. Next question comes from the line of Daniela Costa from Goldman Sachs. Please go ahead.
Hi, good morning. Thank you. I'll ask two. The first one is kind of a follow-up on margins. I guess sort of you brought forward the 2023 target. Obviously, we still have high pricing carryover into next year. I was just wondering if you still expect pricing, let's say if prices reverse, do you think the 6%+ margins are still sustainable medium term? Or maybe put it another way, how much of the margin increase that you've had versus 2019 do you think is structural versus this exceptional situation that we are seeing on pricing? That would be the first one.
The second one, kind of also on regarding medium-term views and your observations from having a look at the business now for a few months in terms of the cash conversion over 60%. I understand this year you probably have to reinvest a little bit into working capital. As you look longer term with the digitization and all the automation initiatives and things that Rexel has been doing, what is this all around 60% the right level to think about, or are there opportunities to improve that cash conversion? Thank you.
On the margin part, I think, to answer your question, which I will summarize that what is the part of inflation and what is the part of underlying improvement of the business. I mean, first of all, you know, we delivered a 6.2% margin overall. We restated the one-offs due to inflation as Laurent mentioned, to 5.8%. There is also, you know, there is also a mechanical effect, which is due to the fact that there is inflation and there is a recurring effect of inflation.
There is still, if you compare to the margin that we had in 2019, which is 5%, I believe, a substantial appreciation which is linked to operational excellence, to productivity, and to improvement of our processes, especially in the least profitable countries, but in fact in all the countries. Now, in the future, I mean, you were mentioning what happens if the price reverse. I think, you know, copper is one thing, but for the rest, I mean, even for copper in the mid-term, I see clearly price appreciation, overall in copper. Short-term, I wouldn't bet on that, the mid-term very clearly.
On electrical, on the rest, on non-cable materials, I truly think that the trend and for the years to come, I mean, we don't. I don't give a guidance for several years. But that being said, the inflation environment is probably here to stay. I'm really not betting on a price reversal in terms of non-cable products. I guess the answer to your question is that there was indeed a substantial appreciation of the underlying performance of the business due to all the efforts that we were talking about, digitization, productivity, margin gains, pricing processes, et cetera.
For the future, I mean, what we clearly see for 2022 and probably beyond is a globally inflationary environment. Now, in terms of the cash conversion level, what I would say is, we had a CMD in February where we gave overall guidance on cash conversion. We're going to have another one in June, where we're going to update you on the strategic plans and on the overall target. I wouldn't answer to your question in between. I think at this stage, we are very comfortable with what we have said at the CMD, and we'll stick to that.
We'll see in June if we have reasons to change that.
Sounds good. Thank you.
Thank you.
Thank you. Next question comes from the line of Phil Buller from Berenberg. Please go ahead.
Hello, good morning. Thanks for taking my question. I have one on Mayer, which seems to be going very well and very quickly. What are your plans for more deals from here? Given what you just said on Mayer, would you expect bigger deals or smaller bolt-ons? What should we expect in terms of the normal leverage going forward? Are you happy at these lower leverage levels, or should we expect leverage to head back up again? Thanks.
Thank you. You know, M&A, it also depends on the availability of targets. It's not something that can be easily programmed on a one-year basis. That being said, I can give you some indications on the kind of target that we are looking for. We really have two categories. There is consolidation in electrical distribution, and really our sweet spot is what we have done this year. I mean, Mayer is probably on the higher end in terms of size of what we do. You know, we really like a small and midsize acquisition, and I would qualify Mayer as a midsize acquisition. There is another segment which is quite of interest to us.
I mean, there are many new opportunities, and we talked about some of them, you know, for example, EV charging stations, services, additional services. On those new activities, it may from time to time make sense to acquire a smaller company. Those are going to be smaller size acquisitions in adjacent categories to accelerate our development there, to acquire talents, competence, and to make sure that we gain a few years in terms of building our business in new attractive growth prospects. Those are the two kind of acquisitions that we are looking for. As I mentioned, in the future, we intend to be a little bit more active than in the past.
Really, in terms of the leverage that we plan, we had said at the CMD that we intended to be around two, and that is still our midterm sweet spot in terms of leverage. As I said, clearly it depends also on the opportunities and on the availability of targets in acquisitions.
The last thing I would mention is that clearly the U.S. is one country where we see great opportunities, you know, both because the market is good, but also because we feel that over the last few years, we have clearly turned around our business and built a strong platform, be it in terms of talents, in terms of processes, and in terms of digital. So having built this platform, we think we can now leverage it to get bigger.
Got it. Thank you. If I may just follow up on Daniela's question. I'm looking at your slide 34 in the presentation and the digital and the excellence in operation pie charts, which are only around one-third colored in. I'm just trying to understand if there's anything we should infer from those, i.e., are these areas that might require some higher investment that could see margins trend back below the 6% level at some point beyond 2022 that we could hear about at the Capital Markets Day, or is this
6% margin level, a normalized floor. Thanks.
I won't get into long-term guidance at this stage. This is more the topic of Capital Markets Day. With that being said, as I answered at the beginning of the call, I'm very comfortable with the level of investment that we have right now and with what we gave as a guidance at the CMD, which is 0.9% of sales. We'll see what we guide for in the midterm, but at this stage, I'm very comfortable that this level allows us to continue to invest in a healthy manner in the business, in the modernization of the business.
Okay, thanks.
Thank you. Next question comes from the line of Alexander Virgo from Bank of America. Please go ahead.
Thanks very much. Good morning to both of you. Appreciate you taking the call. I wondered if you could just do a couple of things in terms of go into some granularity for us. I'm trying to reconcile in one sense the comments on slide 24 about end markets being above 2019 and volumes being below. Just if you could clarify that for me. Second, I wondered if you could talk a little bit about the end market dynamics you're seeing in terms of industrial versus construction in both North America and Asia, and particularly in the latter sense in terms of China construction. I guess we've seen an awful lot of headlines around China construction in particular.
What I'd be appreciative of your views on, of what's going on on the ground. In North America, I'm just thinking about the strength of organic growth guidance from some of your suppliers, for the next 12 months, and thinking about how that volume plays into your own guidance. Thank you.
Maybe I will start to remain on slide 24. So we have two different situations. Europe with already some good momentum in volume versus 2019. It is mostly the segment of small and mid-sized customers who have proximity to a very efficient workshop plus branches. On that, if we compare versus 2019, Europe was in terms of volume. I'm talking volume. Was up 0.8% in Q3 versus 2019. 1.4% in Q4, and on a full year basis 4%, Q1 and Q2 were yes higher also compared to 2019. In North America, you know, the mix of our business is different.
We are more in large project and industry, what we call our proximity business, which is made of residential commercial and small commercial is around 30% of the mix. Where we are in those proximity business, such as in the northwest of the U.S. or in Florida, we have above 2019 level. Because of first the recovery of the market, plus what Guillaume explained on the selectivity we made, explaining also the strong rise of our EBITDA margin, volumes are still behind. Q3 was around - 20%, and Q4 was around - 10%. You will see a gradual improvement.
You see clearly a gradual improvement in some segments in the industry, such as low oil and gas recovering sharply from a very low point in 2020.
I think, I mean, to comment on industry in the U.S. as it was the core of your question, I believe this is a potential upside for us. As I said, I think the demand is high and particularly in industry in the U.S. There is a potential to have a high demand. The question is going to be the ability, once again, the availability of raw materials and the ability of labor to execute the project. I think what's interesting is that the demand is high in industry in the U.S. for two reasons.
First of all, because there is a recovery movement in many sectors in the U.S., and Laurent was talking about oil and gas, chemicals also, with the activity there. The second part is that clearly what I was mentioning, labor availability, becomes a very big topic for many of our industrial customers. What it leads us to do is meet them to consider automation projects. As you know, in the U.S., in many parts of the U.S., we are quite strong in industrial automation, and that will be opportunities in the medium term. Now, in the short term, are we going to be able to execute? Are our suppliers going to be able to provide the materials to serve this demand?
That's to me, the main uncertainty, and that's the reason why, we could be considered as being a little bit cautious, on this part of the guidance. I think you had a question on construction in China, but unfortunately in China, we are mostly industry.
Yeah, yeah.
I'm not sure we are extremely knowledgeable about construction in China.
No, we are in China only serving the industrial markets, and we are distributing international brand. Almost half of our business is distributing Siemens product. We are distributing also Schneider, Rockwell and ABB.
Again, only with industry, so we have no real exposure to the real estate market. Okay?
Okay, great. Thanks very much.
Thank you. Next question comes from the line of Alistair Leslie from Société Générale. Please go ahead.
Oh, yeah. Hi. Thank you. Good morning. Couple of questions, first on digital. I think you say you're now connected with all your strategic suppliers on the supplier portal. But how many are you now actively or, I suppose, contractually kind of exchanging data with? And what's the scope to kind of monetize this going forward? I was wondering how much sustainability can be a driver here, given obviously suppliers' needs for more data, customer insight. You flagged there you're working on sustainability charters as well on slide 11. Do you see that as a big opportunity? The second question was just quickly, you gave the portion of sales above 6% margins. I think that's now 67% versus 38% a year ago.
Could you say how much is above 7%? I think you gave that a year ago when it was around 33%. Thank you.
I will let Laurent decide whether he wants to give the above 7% proportion. It's a little bit detailed. On the relationship with supplier, you're right, that we are in the middle of rolling out the supplier portal, which is quite interesting, especially in terms of scarcity, in terms of data exchanges in both sides. I mean, it allows the supplier to have a better visibility on what the demand is precisely. It allows the distributor to have more visibility and more precise data exchanges with the supplier on availability of materials. It goes in the direction. I think this is the main goal of the supplier portal.
It goes in the direction of more intimacy and better service to ultimately our end customers. Yes, there is a monetization part of it. I wouldn't qualify it as extremely meaningful at the scale of the group. Really the main goal is to improve the service level and improve the intimacy with supplier in a world where collaboration with suppliers is going to be increasingly important, both because of innovation and because of availability of products. I think in terms of this useful collaboration with supplier, yes, the next frontier is probably going to be about ESG, both in terms of data exchanges about the ESG qualification of the products and the solutions.
In terms of us also being able to push specifically the portions of the offers of our suppliers, which are green and proven to be green. I personally believe, as I said, very much in the role of distributors in this sustainability transformation of the industry overall. That includes a higher level of collaboration with our suppliers, many of them being quite committed also to sustainability. I think we can create an ecosystem which has the ability to push the right solutions to both our end markets, be them construction or industry. I think really sustainability in terms of collaboration with our suppliers is the next frontier.
As you were mentioning, we have started to sign supplier charters with on sustainability with our suppliers, but this is only the first step, I believe. Laurent?
On the breakdown, I will not give you the precise percentage, but we have five key country that are north of 7%, even if you restate the one-off. There are this level of EBITDA that are reachable for more and more countries. That was what was designed in this slide. The game changer in between 2020 and 2021 is really the evolution of the U.S., which moving to the bucket above 6% this year.
Okay. Thank you.
Sorry not to give the precise figure, but at least directionally, I think, 7% is not unreachable for many countries.
Great. Thank you.
Thank you. Next question comes from the line of William Mackie from Kepler Cheuvreux. Please go ahead.
Thank you very much. Good morning to everybody. Thanks for the time. A follow-up actually on the same question about the chart of overall margins by country. Just looking at the lower end of it, you've said 30% or so is below the 6%. Can you describe what needs to happen to lift that final one-third up above the midterm margin target of 6%, and how achievable that is? The second is more a question around your working capital and supply chains. You've highlighted the constraints to service levels due to availability of product. Could you provide perhaps a little color by region or by, you know, major product groupings where you're seeing the lead times on deliveries becoming overextended on the inbound of inventories?
Perhaps on the other side of that, what is the policy with regard to working capital and stock levels going into 2022? Are you sending a signal to build the inventories into the first half of this year? Thank you.
Okay. I'll take the questions. You know, yes, there are a few countries which are below the threshold of 6%. We believe that we have strong and sound plans to bring them back to this level. I mean, two of them are well known. Those would be the U.K. and Germany, which are big countries. I think we have very structured plans, and we are seeing good progress there in Germany.
As I was mentioning during the presentation, we have clearly gained market share, and we have very strong momentum with our customers, gaining new customers every month. Progressing on all fronts in terms of profitability, be it in terms of productivity or in terms also of margin. The action plans are very much about the basics here. I mean, providing the right service level to then gain customers and then go to digitization to improve productivity. That's really what we are doing, and we're seeing a very good progress there. U.K. is a little bit the same story, but with variations.
Because, you know, in those countries, we don't start always with the same basis in terms of customer mix, in terms of segment mix, in terms of network, in terms of people. In the U.K. also we focus on the basics of service, on the basics of digital, on the basics of logistics also, to make sure a little bit the same story that we ensure maximum level of service. We regain customers. Sometimes, you know, we focus specifically on some segments, and I'm not going to enter too much into the details because that's competitive information. We focus on some segments on which we see greater opportunities in terms of both margin and penetration, and that's the way we progress.
I can clearly answer that, yes, we have plans for those countries to come back to the normative profitability level, or else we would have done like we have done in the past, the perimeter changes, to take the consequences of the fact that we didn't have serious and credible plans of getting there. I'm quite confident on those countries. In terms of our inventory and working capital policy and shortages. First of all, shortages, we are starting to see difficulties in supply chain a little bit everywhere because they are due to several factors. I mean, there is the very well-known electronics factor. You know that many of our products and more of our products are connected now, so they include electronic chips.
The availability of electronic chips is extremely difficult. It has been extremely difficult in 2021. We think it's going to continue to be difficult in 2022, at least in the first half, maybe a little bit less in the second half when I listen to our suppliers. We will need to live with scarcity in this category. We have learned how to juggle with that and proposing alternatives to our customers, managing inventory to make sure that we are able to continue to service our customers. Chips is one factor. Last year, what we have seen also is, you know, supply chain difficulties due to transportation.
We know very much about the issues about container ships, you know, in various parts of the world. This is also creating availability issues on other categories which do not necessarily include electronic components. We have seen also on some other materials like plastic resins or like steel, for example, in some cases, spot availability issues. I think those ones are probably going to improve gradually in terms of other raw materials and in terms of transportation. What is going to remain is chips availability, which will take time and investment, as you probably know better than I, to completely fix. This is our new world.
We are learning how to live with that and how to be differentiated in this environment. It's not going to be very different from what we have experienced in the second part of last year. In terms of our inventory policy, you know, we have automatic algorithm which lead us to increase the safety stock when we see an increase of the variability in the lead times. Not an increase in the lead time by itself, but an increase in the variability in the lead time. This had led us to increase a little bit the level of inventory overall by two days overall compared to 2019.
I mean, I'm not taking 2020, which was a little bit exceptional in terms of inventory. If I compare to 2019, we are 2 days above. I think this is due to this through those algorithms, which are leading us to increase a little bit our safety stocks. What I should say also is that our policy is not to build a pile of stock. I mean, we are not speculating on further price increases. We are not speculating on availability of materials based on rumors. We are just having a rational policy in terms of inventory management. For now, it has been quite successful ensuring a high level of service to our customers while keeping our inventory under control.
Yeah, we anticipate 2022 to be stable to where we are today. Depending also on, as pointed out by Guillaume, the level of availability, we will be able to reduce our inventory.
That's very helpful.
I'll take that into account. Yeah.
That's very helpful. Thank you, Guillaume, Laurent. One final follow-up. Sorry, it wasn't clear to me. On the 4%-6% revenue growth guide, what are your core assumptions about the contribution from copper?
We said that copper is at zero. We assume that
Yeah.
Current copper price. Yeah. In fact, it will be a small help in the first part and a smaller headwind afterwards. Overall, it's zero and zero overall.
Thank you very much.
Thank you. Next question comes from the line of Andre Kukhnin from Credit Suisse. Please go ahead.
Oh, hi, good morning. Thank you for taking my questions. Just a quick couple of follow-ups first. On your margin guidance for 2022, when you pre-announced in January, you already talked about over 6% for 2022, and since then, you've pulled the Mayer synergies forward. I wanted to check, should we think about Mayer synergies message today as incremental, or was that already kind of taken into account when you pre-announced it in January? Just given the open-ended nature of your margin guidance, I wanted to double check that.
Okay. No, I mean, the answer is that it was already included in the guidance in January, so you shouldn't add the synergies, the additional synergies to the guidance. You know, the announcement in January was a very short one.
Mm-hmm.
It was mostly a results update, so we kept it not too detailed, but we already had that in mind, the fact that the synergies on Mayer would be there. But I have to add probably that the guidance is not 6%, it's more than 6%. The 6% would be a floor.
Yes. Yes. Thank you. Okay. That's very clear. Just on the price carryover effect, you talked about over 3%, including further price increases by suppliers. Can you quantify just pure carryover effect? I have it down at kind of over 2.5%, but I want to double check with you, please.
The carryover will be around 2%.
Pure carryover is 2%. Okay, perfect. Thank you. Final question is broader one. Someone touching what you talked about before just now with the kind of high adoption of electronics. With this industrial IoT proliferation and rising demand for things like connected sensors and gateways and other edge devices, could you talk about how you're positioned in those product categories versus more traditional automation and building controls and whether they carry any kind of different margin profile for you than others?
You know, that's a good question. I think we are well positioned in those categories, especially due to the fact that we often offer additional services linked to that. I wouldn't say that the margin profile is so different, maybe a little bit higher. What would you say, Laurent?
Well, I would say that, of course, we are seeing solutions to a combination of products, so it help us to sell more. Then those products are more expensive and the margin is globally in line with the previous generation.
Mm-hmm.
They are.
I hope you
Yeah.
It's more a gross play-
Yeah.
than a pure margin play.
Yeah.
Well, it's clear. Thank you very much for your time.
Thank you. Next question comes from the line of Christian Devismes from CIC. Please go ahead.
Yes, good morning, everybody. One question for me. It is on the effective tax rate. It's true that 27.3% in 2021, down 340 basis points. Should we consider that level is, let's say, a new normative tax rate for the coming years? Could you make perhaps some comment about the fact that, tax rate decline in France and perhaps the share of your profit in the U.S. is, increasing a lot. Could you make some comment about your effective tax rate for the years to come? Thank you.
Yeah, thank you, Christian. I commented that 23% is very low because, well, last year we have written down some deferred tax asset. This year we are recognizing again with the one-off impact. The normative tax rate is more around 27%. It's kind of new guidelines to be below 30%, first because of the taxable rate in France going down, and also because we have permanent differences that are quite stable in amount and that are better absorbed by your higher profit before tax. We have the kind of dilution of this permanent differences that is also helping us a lot.
Thank you.
Thank you. Next question comes from the line of Miguel Borrega from BNP Paribas Exane. Please go ahead.
Hi, good morning, everyone. Just a few questions on your guidance again for organic growth of 46%. Just stepping back, with all the non-resi momentum in the U.S., the residential market in Europe and the energy transition, you say the market is good, but according to what you're saying, basically implies volumes of around 2% in 2022. How does that compare to market growth to which you benchmark? When would you expect volumes to pick up more meaningfully to mid-single digits, perhaps? Lastly, do you think at some point, your non-cable prices need to come down as economies reopen to allow volumes to start coming through? Thank you.
I mean, first of all, I think I would come back to my initial comments about the volume guidance. The volume guidance is, I mean, there is no specific volume guidance by the way, but our volume expectations are determined more by the ability to service than by demand. I think it is very clear that the demand level is high. There is no issue with that. Clearly, the year is going to be determined by two things, labor availability at our customers to execute and the ability of our suppliers to provide the materials. That's basically what it is.
I think making comparisons to the end markets, for example, from this point of view wouldn't make a lot of sense because it's really today supply constraint rather than demand constraint. That's clearly the story, and there is uncertainty around that. It can be better than what we have said. Maybe it's a little bit conservative, and in this case, we will come back to you at the CMD to update if things go better. That's clearly the logic behind our guidance. On the second part, which is, will the non-cable pricing go down at some point when economies reopen? You know, I think everywhere I look. I mean, let me take a step back.
First of all, I'm not going to predict too much about the future years. That's probably going to be more questions for the CMD. That being said, when I look at our environment, it is very clear that we are seeing an acceleration of electrification. I had a slide showing that, but in more and more categories, we are seeing really a change of slope of the demand. The change of slope of the demand will require investment in terms of manufacturing production, investment in terms of raw materials. I'm not absolutely sure that the industry is going to be able to go as quick as the demand acceleration.
In general, I think we are in an environment where scarcity is going to become more important, and therefore, it's going to provide a support on pricing. On a short-term basis, I don't know what it's going to be. I can only say that apart from lighting, where there was specific reasons, on non-electrical categories, we have never seen deflation in the past. I mean, the past is never an explanation for the future, but that gives you a few elements to answer the question.
Great. Thank you. Just very quickly on margins and the 40 basis points of net positive effect in 2021, was that all of it in the second part of the year? Is there anything lapsing into the first half of 2022? Thank you.
Yeah. At group level, we said in our H1 communication that it was offsetting each other. It materializes a lot in H2. In fact, in detail, it started in second half in North America. In North America, we had already additional volumes, plus we started to have also volumes in Europe. We'll have a soft impact in H1 in North America, and the biggest part will be in H2 in both Europe and North America.
Thank you.
Thank you. The last question comes from the line of Supriya Subramanian from UBS. Please go ahead.
Yes. Hi. Good morning. Thank you for taking my question. Just, most of the questions have been answered. Just one question around, you know, the long-term trends that you're seeing in terms of increased electrification and increased demand for energy efficiency products. Could you share some details around which are the regions which you think are moving faster than others, in this space? And also, any indication of what proportion of your product sales, sort of fall under the energy efficiency category versus the traditional electrical goods product? Thank you.
You know, that's interesting. That's an interesting question. I mean, in terms of electrification growth trends, I mean, first of all, it's clearly, in many cases it's linked to sustainability concerns. Traditionally, Europe is a little bit more advanced than some parts of the U.S., but we are seeing, from this point of view in terms of regulations, in terms of, in terms also of push towards that. We see the U.S. coming up quite quickly, under the pressure by the way of financial markets which are quite international also. Sustainability drives demand for reduction in CO2 content. Reduction of CO2 content requires two things, basically, electrification and renewable source of electricity.
We are starting to see that in every part of the world, driven by a universal trend towards basically sustainability and ESG, with more advanced markets in Europe, for example. You know, our biggest market for some categories like heat pump charging stations would be more in Europe or in France, for example. We have more active categories there. In terms of what categories are impacted, I would come back to the slide which I had in the presentation, which is, I don't remember what the number of the slide is, but there was a symbolic pie in three parts, one-third, one-third, one-third. I think it's important to re-emphasize on that.
One-third, the first one-third was the typical category that everybody thinks about, charging stations, photovoltaics, heat pumps, for example. All those categories which are growing extremely fast because, you know, in many cases, they are subsidized by the countries just to push the sustainability agenda. This is one part, and it represents roughly, I mean, I could give you more details, and I will probably do that at the CMD, but it's roughly something like one-third of the business. It's not the only part of the business, and I think this is the important point which is impacted by electrification.
You know, when you start to have, for example, in a house, when you start to have PV panels, when you start to have EV chargers in the house, then you need to start to have smart electrical load management in the house.
Mm-hmm.
You know, you will need to manage an important load charging several vehicles, and especially when you go to fast charging, it's going to have a heavy impact on the grid, on the system. The same way photovoltaic, if it becomes widespread, is going to create issues in terms of too much power generation in some cases, which is going to require batteries and smart management of the electricity at the local level, at the building level. All of that creates a need for renovation of the electrical system as a whole. You see that those categories, you know, breakers, electrical distribution in general, cable management, are things which you don't think about when you think about electrification, but in reality, they are going to be-
Mm-hmm.
Heavily impacted because those two are going to have to modernize. Because of that, I think that a bigger part of this one-third that everybody thinks about is in general impacted by the growth trend of electrification. Not to mention the fact that this acceleration, as I was mentioning, in response to several questions, is also going to have an impact in terms of availability of material, in terms of scarcity, and in terms of inflation. Which means that I hope that we are going to see also a strong support for pricing in the next few years because of that. I hope it answers your question, but basically, growth and electrification is everywhere, if I summarize my answer to your question.
Very, very helpful. Thank you so much. Thank you.
Thank you. I would now like to hand back over to the speakers for final remarks.
I mean, thank you for participating in this results call. I mean, I said what I had to say. Basically, if I summarize my main messages, first one is that those were historic results for Rexel. We owe that both to a good market, and I think I shared my confidence in the fundamentals of the market for the future. It also has to do with the strong transformation that the company has been leading under the leadership of my predecessor, Patrick Berard, and that we will continue to push on. We see opportunities for the future very clearly.
You know, we are going to operate in 2022 in an environment which is going to be both characterized by high demand, but also the need to continue to navigate in supply chain tensions. I think I look forward to meeting you in Zurich for the maximum of you physically, if the COVID constraint allows us to do that in Zurich, because you know, I don't want to make too much of an advertisement for that, but it's clearly an impressive branch. I think you can watch us on the internet very clearly.
I mean, if you can make sure that in your agenda you have some room to go there, I think you will learn more about Rexel, about the fundamentals of the business, and I hope that it will help you share even more our confidence in the future of the company. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may all disconnect.