Please note that this call 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 later on in the call. I would now like to hand you over to the Chairman and CEO, Michel Giannuzzi and Natalia del Bruffes, CFO to begin today's conference. Thank you.
Thank you very much, and good morning, everyone, and thank you very much for attending this call. I hope you and your relatives In good health and not suffering too much from the COVID. We will go together with Nathalie through the H1 results. And we'll start first of all by reminding everyone about the company profile. As you know, Veraya is the Leader in Europe in glass packaging industry and Europe, which is for us the great Europe encompassing EU plus Ukraine and Russia represented last year 90% of Beraya sales.
We are number 2 in Latin America where we are present in 3 countries, Brazil, Chile and Argentina. And in last year, Latin America represented 10% of our sales and we are the 3rd largest company in the glass packaging industry. As you can see on the left hand side, we have a very diversified end market reach where we can address all the segments of the market With a strong presence in the wine segment based on our historical presence in the 3 largest wine producing countries in the world, Namely Italy, France and Spain. And we address it more or less in a balanced way all the other segments of the market. Now Verania is made of 32 glass producing plants with in total 58 furnaces to produce glass packaging.
We also have 3 decoration plants that provide additional services to our customers. We are also treating about half of the Calette. Calette is the name of the used glass that we use internally and therefore we have 9 Factories that are working exclusively for us in order to treat the collect that we reintroduced in our furnaces to make glass again. And in total, we employ around 10,000 employees in 11 different countries and we make every year about 16,000,000,000 bottles and jars. So moving to the financial highlights of the semester.
First of all, I think it's interesting to note The capital structure has evolved quite a lot since December. As you have noticed, there has been 2 blocks of shares traded On the market based on the sell down of Apollo, which today It means that Apollo owns 16.3 percent of the capital of the company. At the same time, we've seen Our Brazilian investor BWSA increasing their share progressively and slightly up to 26.6% at the end of the semester. And the most important, I think, highlight of the semester was the fact that as we mentioned before, We have bought back some shares at 2 times during the semester. In total, we bought back from €109,000,000 worth of shares.
Some of these shares, 1,600,000 of the shares that we bought back had been canceled in order to avoid any dilutive In fact, due to the employee ownership program that we've implemented last year and this year. And we have kept 1.7% of the treasury shares in the balance So today the Veraya share capital is divided into 122,289,183 The other important financial event of the semester was the launch of an inaugural Fence. This was the first issuance of a bond by Veraya as Since we are listed as a listed company, it was clearly oversubscribed. We had 4 times more request event. The €500,000,000 that we finally committed to issue.
We were the 1st issuer of a Fence. Sustainability Leak Bump in Europe in the glass packaging industry. And we benefited from very attractive financing conditions With a coupon of 1.625 percent per annum. And this has provided us not only a diversification of our funds financing, but also it has provided us a greater and extended maturity because it's a 7 year bond that we've raised in May. So I think we have been very much Supported and we received a lot of interest from the bond investors on the 2 KPIs That are ESG related that we have taken to measure the sustainability approach of Veraya.
One of them is the reduction of the CO2 emissions, which is in line with the presentation we made in January regarding our Long term commitment to reach 27.5 percent CO2 emissions reduction By 2,030 in line with the COP21 agreement. And therefore for this specific bond, The objective is to reduce by 15% against 2019 our steel emissions by 2025. The second KPI that we took Was to increase the collect usage rate, external collect usage rate and to increase it by 10 points versus 2019, again reaching 59% by 2025. Now this has been considered by Vigio Aeris, Which is the independent or second party opinion that looked at this bond as very relevant And of a higher ambition, which allowed Veraglia to reach the highest rating provided by Vigio So we are the team here is very proud about what has been achieved. And it's again a strong commitment Not only on the financial benefits of Isbon, but also of the commitment of the company in its move and ambition to reduce CO2 emissions.
Moving to another completely different topic. One of the very strong capabilities of Beraria is design. And just as for information, since 2009, sorry, We are organizing in the main various countries some design contests with students. This year we had more than 500 students in France, Italy, Spain and Ukraine. And we provided a theme of the year.
This year the theme was glass in solo format. And based on this theme, we receive a lot of interesting design ideas and design kept Design the products that sometimes end up in a commercialization Because they are very much liked by some of our customers and we've had very interesting successes in the past with this contest The most interesting products have been selected by our customers to be commercialized. Every year, we also have on the design side what we call a style book, which is trying to anticipate the trends For the following year, this is our premium product line, which we call selective line that is benefiting of this trend book. And this again has been updated and put online on our website very recently. And you can see all the beautiful products that we can provide to the customers as well as the new trends for the next year.
So this is all for the design. Let's move again to environment where Virella has joined the emission for climate initiative Launched by AFFE, AFFE is the French Association of Private Enterprises. The idea is to Really put together all the good examples of what companies in France are doing to reduce the Global warming at the global level. And we've submitted 3 low carbon projects On the platform, the emission for climate platform, one of them is about the improvement on non melting energy. The other one the second one is about the ability to demix white color in order to improve The share of white color in the flint glass production.
And the 3rd project is about the project that is ongoing with the installation So these were again some good examples of What Gaia is doing to reduce its CO2 emissions. And last but not least, on the social and community side, We have, as we speak, partnered with BPI France on their big tour. This is the 2nd year in a row that we event. The purpose of this is really to get consumers, citizens Know more about the glass industry, about Veralia and also promote, of course, the recycling habits At a very large scale. So this big tour is organized in 24 different cities From July 16 to August 20 by BPI France, we also promote during this tour the know how and the innovation And the French Industry and Technology, and we have a stand there where we meet event.
100 or 1,000 even of the, I would say, visitors, where we educate them about the quality of glass and the importance of recycling. So the goal is really to raise the awareness and to involve local communities in the challenges of the circular economy. And last but not least, we have a few jobs event. To propose to those people that would be interesting to join us in our industry. Now these are the most interesting, I think, highlights of the semester.
Now let's move to the financial results. As you've seen from the numbers, this is a very robust performance in the 1st semester With a very, very strong Q2, where you can see that the revenues We're up 4.2% for the semester and it was even a 7.7% organic growth for the semester. But Q2 shows a very strong after Q1, as you remember, that was a bit soft. We mentioned a soft start for the year. Q2 was extremely strong With 14.8% growth in Q2 and a 17.6% organic growth in Q2.
So this is, as we said before, the results of the progressive reopening of hotels, coffee and restaurant mainly. And by the way, we are clearly sold out and our factories are producing as much as they can. Everything they can produce is today being sold given the strong demand that we have on the market. Now on the profitability side, our EBITDA increased also very significantly, 15.4% compared to H1 last year and 20.8% organically to reach €345,000,000 Which means an EBITDA margin of 26% compared to 23.4% last year. Again, very, very nice results that we are very proud event.
As a consequence, indeed, the net income jumped significantly from €79,000,000 Last year to €133,000,000 and it's even €155,000,000 if we exclude the PPA impact due to the Acquisitions of the company by from Saint Gobain, which is the amortization basically of the customer relationships That was, I would say, booked at the time of the acquisition. And despite the strong Share buybacks that we made during the semester. The very strong cash flow allowed us to keep reducing the leverage of the company and we ended up the semester With the leverage of 1.9 times adjusted EBITDA for the last 12 months against 2.1 times at the end of March this year. So altogether, these very strong results give us the confidence that we can improve our guidance for the year And we are going to revise, if you want, upward the 2021 adjusted EBITDA guidance, and I will comment it event. Before we move to the guidance upgrade, which I'm sure you look for hearing from us, I will hand over to Nathalie, who is going to explain to you the strong results of the semester.
Thank you very much, Michel, and good morning to all of you. So indeed, let's go and look at the sales at the top line where you can see that we enjoy a strong organic growth in the first half with plus 7.7%. Now as Michel commented, you know that we had a slow start In Q1, in the year in terms of volumes, we had a negative organic growth in the Q1, but the Q2 is showing plus So the sales have been strong on all product categories, exception for food joys. That is a category that benefited last year from the 1st lockdowns in the Q2. So FUJAR's volumes And thanks to exports to Asia and U.
S. Pickup in the second quarter. The sales price increases, as already commented, are pretty moderate, and this is exactly as planned. And one important point in the first half and even stronger in the second quarter is that we enjoyed an excellent product mix at group level. And now the last pillar is impact on exchange rates that is negative for us, mainly from Latin America.
If we look now upper regions and move to South and West Europe, You can see that the sales recovered well and organic growth is positive at plus 5.5%. So the growth It's in all the countries and all the product categories with the comment already made on food choice. In South and West Europe, we can really see the spirits Back and strong recruiting is quite strong in the 1st semester. The growth is also there in wine and beer and sparkling wines benefited from Italy increase and especially on Prosecco. And in South and West Europe, price contribution is pretty neutral.
Moving to North and Eastern Europe. Here, you can see negative organic growth. So some comment here. It's we mainly had A fall in volume in Q1, so the impact is mainly in the Q1. And we've seen an improvement in the Q2 with volume improving across all product categories.
And to recall that 1 year ago, North and Eastern Europe had been I see this very differently from the COVID and was the region, the only region in our group with The sales prices are overall stable and the foreign exchange impact is negative due to Ukraine and Russia. If we move to Latin America, you can see very strong organic growth. We had some additional capacities, as you know, in 2020 that we fully benefit from in 2021. But the market is really strong in all the countries And in all the categories with again the same comment on food choice. So as Michel And especially in this country, we are fully sold out and the market is pulling really hard.
Now increased in selling prices are still there. We compensate Inflation and hyperinflation in Argentina. So we have this effect always in Latin America And the impact on ForEx is negative, but despite this impact, I mean, even with the impact, the increase in sales is there. So how does this translate into EBITDA, adjusted EBITDA and in margin? You can see that we moved from €299,000,000 up to €345,000,000 And More than that, we improved significantly the adjusted EBITDA margin percentage moving up from 23.4% 2 26%.
So the activity pillar is slightly negative. It was, if you remember, Pretty negative in the Q1. So here we benefit from the positive volume growth I just commented in the second quarter. But we have also still destocking effect in our EBITDA as we had 5 furnace repairs in the first Half of this year compared to much less in last year. And we have the strong sales.
So again, we are sold out and We sell everything we produce in the Q2. The spread contribution is especially strong. Here, we benefit from €45,400,000 in our EBITDA, and the mix The PAP is contributing significantly to the good performance of this first half year With a net productivity of €21,300,000 and that is 2.7 percent of production cash cost, You know that this pillar is especially important as it is purely our internal work contributing to improving our EBITDA. Event. Exchange rates impact continues to be negative with a minus €16,000,000 And the other Pillar is almost I mean, it's very low with plus and minus.
So if we look at the regions now, South and West Europe, we've seen an improvement in the EBITDA margin, moving up So North and Eastern Europe, we saw that we are penalized by volumes and We also have in this region adverse exchange rates that are also impacted the EBITDA. Still the spread is positive. It does not unfortunately compensate fully for the negative impact of the volume drop. And in this region, maintenance costs are pretty high in this first half and that's Latin America is posting an outstanding performance as you can see with adjusted EBITDA margin moving From already a nice level of 30.6 percent up to 38.5%. So the growth In sales volumes and the dynamic of the market, we already commented.
The spread is positive, which is a very good achievement in this region where Inflation in cost is continues and the mix was also strong in the region. The industrial performance is also delivering in the region. And one point to comment on this first half Is that Brazil benefited from an impact positive impact tax credit on the ICMS Following a Supreme Court decision to give brands this credit. But despite this one off, I mean, Adjusted EBITDA margin is really strong and improving versus last year. If we move to cash and balance sheet, let's look at investments fully in line with Our plans, our strategy, you can see that total booked CapEx reached 100 €9,000,000 in the first half.
And this semester, we've seen more recurring CapEx. This is directly linked To the maintenance in the furnaces, which we comment to you and which were less last year, 1 year ago, And the strategic CapEx, we will see the Jacutinga to CapEx in the second half of the year. So For the first half, it's pretty limited to €11,000,000 And 1 year ago, we had the The cash flow generation is very strong in this first half. It starts, of course, with the Adjusted EBITDA, so the strong growth in adjusted EBITDA, so €45,000,000 more. And the cash conversion is still very strong with 68.3%.
And the change in operating working capital Inventories are still extremely low as we are addressing the market, plus we have these furnace repairs. And one important point on the overviews, absolutely very well managed, stable, and we've been facing no customer issue So the operating cash flow ends up at €211,600,000 to be compared So our net debt at €1,000,000,000 sorry, €256,200,000 And leads to a ratio, a net debt ratio at 1.9 times that is decreasing event. This is end of March, but also as you can see, this is end of the year. And 1 year ago, we were at 2.5 So we continue to deleverage the company even after the share buyback of €109,000,000 which Michel commented to you. The good thing is that by decreasing our net debt leverage Below 2, we allow Veralia to lower our CLA and RCF margins by 25 bps, So we lower our financial interest.
Net debt and liquidity profile. Sorry. Our net debt profile has changed since last time I presented to you. I'm very pleased to present One new line with the sustainability linked bond we issued in May for €500,000,000 And as you can see on the right of the table in the final maturity column, it allows us to push €500,000,000 of our debt to 2028 when the rest of the maturities are for 2024. And as you can see and commented already, the nominal rate is at a very interesting nice level.
So in this operation, we managed to diversify our funding financing sourcing And to diversify also maturity. Now available liquidity is reaching 800 €47,900,000 so still at a very nice and comfortable level.
Thank you, Nathalie. So moving to the conclusion, I mean, as you can understand, we are very proud and very Happy with the strong performance of the 1st semester. After a soft start as we commented in Q1, Q2 has been accelerating quite significantly And we end up the semester with a high organic growth of 7.7%, which It's clearly a bit better than expected. We have also improved significantly our EBITDA and EBITDA margin, Reaching 26%. So as you understand, this is above our target of 25%, and we are again The PAP has played an important role for that.
Consequently, the net income, of course, has jumped significantly. And on the financial side, the issuance of the new Goro System Living Bond And the share buybacks have been also 2 major events using the strong cash flow of the company In a very, I would say, efficient way in the case of the share buyback that we mentioned. Now based on the stronger performance, We are revising our 2021 outlook assuming that there is no New widespread COVID lockdown and we are of course always careful about the uncertainty we have in front of us. We are still And there are some partial lockdowns or partial restrictions. But assuming that there is no Widespread or massive lockdown like what we had last year in the fall, we believe our sales will reach around €2,600,000,000 With the volume that will be back to 2019 level, we are upgrading Our adjusted EBITDA target for the year, which now should be €675,000,000 versus the €650,000,000 That we commented before.
And interestingly, since we are we have achieved almost all the objectives Of the midterm objectives that we set at the IPO time 2 years ago, we will organize the Capital Market Day on October 7 In order to provide you with new midterm objectives and an update on our strategy and results. So this being said, now I think we can move to the Q and A session and we'll take the few questions.
Event.
The first question is coming from the line of Matthijs Pifenberg from Deutsche Bank. Matthijs, you're unmuted. I may now go ahead.
Yes, good morning. Thanks for taking my questions. I've got 2 at this stage. Firstly, on pricing. You mentioned moderately positive pricing.
We've talked about flat pricing before. When I listened to the Vitraula earnings call, they're talking Ferlette versus minus 0.5 to minus 1 before. So what's the situation? Are you pricing a bit Better on the spirits and champagne side. And then also for next year, remind us, I think The majority of your energy costs are hedged as well for next year.
When we listen to withdrawal, I mean, I'm not sure if this number is correct, but they are talking 10% price increases that they want to go for next. So if that's true, isn't your margin expanding significantly if your Energy costs continue to be hedged to a very large degree.
Okay. Thank you, Matthias, for your questions. First of all, regarding pricing, we confirm when we say moderate price increase, it's at the group level. But you know, we have 2 very different geographies, Europe and Latin America. And on the one hand in Europe, We are in line with what we said before.
Europe prices are flat basically. It can vary a little bit by country, Slightly below 0, I would say, in Iberia and Southwest Europe and slightly positive in Northeast Europe. But altogether, in Europe, it's about flat. As we mentioned before, so there's no change compared to the previous comments. So the moderate price increase comes actually from Latin America, where Here in this region, we are facing more inflation.
And also the commercial relationship with our customers Allows us to go back to the customers during the year to revisit the prices, which is not the common practice in Europe. Usually in Europe, Fence. Prices are fixed once a year and we wait for the next round of negotiations usually at the end of the year or beginning of the year, the following year to renegotiate prices. So yes, this is exactly what we commented before. There's no change on our side.
We are exactly in line with what we commented on the price side. Event. The surprise to some extent, which I would like to highlight again is on the mix side, which you don't have a split year, but it is very strong. And part of it is because as you mentioned premium segments like champagne or especially spirits like the cognac So part of it is unfortunately due to the fact that we are sold out. And of course, if we are sold out, we favor the most Most profitable segments of the market and try to, of course, provide our customers with more added value products rather than commodity products.
So part of it also is due to the fact that we are sold out. But this is an important thing on the mix side. Now regarding the hedging policy, clearly, every company As it's on policy regarding aging, our policy is very clearly described. I remind everyone what it is. We want to cover 100 percent of the energy cost of the following year sorry, 85% of the energy cost in the following year by October, So that we can really have a good control and a good visibility on the cost structure of the following year.
And this is what we are doing every year, which means that as you can understand, the energy prices of this year, We are locked for most of it, for more than 85% of them, they were locked back last year. Now Unfortunately, the energy cost increase that we see today will have an impact next year. And of course, next year, even if we are hedging on a rolling basis And progressively into the following years, next year we'll have to go for significant price increases In order to reflect the inflation that we have and when I say significant, it's probably mid single digit.
Okay. The second one would be on the PAP savings. I guess you prepared for this question event. EUR 21,000,000, 2.7 percent. Are you not raising the PAP savings guidance at this stage?
And then also coming back to the guidance, maybe we can touch upon the individual components. So it's the PAP savings, there will be operating leverage, there is mix. But you also talked about restocking being possible in the second half, which is implying better fixed cost absorption. So I guess the EUR 675,000,000 is still remains as conservative as the EUR 650,000,000 before with the new dynamics in place.
Okay. Let me try to answer, Matthias. So on the PAP, yes, we are very pleased to see The strong delivery in this semester was 2.7%. Now, yes, our guidance is 2%. We are It's above 2%, remember.
So we're always pleased to see much higher numbers. Now In this year, we and this is really good, we benefit from the effect of the FEN. Transformation plan in France that is and that was planned that is contributing to the PAP numbers. And this one will not have that every year. So to answer to you on the guidance, event.
And you're right, we've been delivering 2.2% and here 2.7%, so which is good. But again, the transformation plan in France and the France effect will be for this year.
And the rest of okay, sorry.
On your second point, yes, I was coming to that. So in the guidance, you're right, we integrate Positive impact of not having to destock and hopefully to restock in the second half of the year. Now on the adverse side, we have 2 important points, which we mentioned already. The first one is the inflation. I think we are all we would all agree that inflation is coming.
And yes, we are hedged on Most of our energy now we have 15% that is not hedged. So this one is even this year having inflation. And one important point where we see inflation coming strong and that was quite limited in the first half is packaging Fence. And to a lesser extent, on freight and transportation. So these 2, we don't have hedging policies, And we have we see a really it's very strong on packaging.
So let's see how this goes. But we did integrate a negative effect on inflation costs in the second half. And then another point is the mix. We have quite a specific mix situation that is not usual When we manage and serve all the markets. So here we also integrate a less positive or even a negative impact on the mix So that's why the plus and the minus would balance, I would say.
Okay. Thanks a lot. Fair enough.
Thank you, Majes.
Thank you for your question, Matthias. And the next question is coming from the line of Francisco Go Ruiz from Exane. Francisco, you're unmuted. I may now go ahead.
Thank you very much and good morning to all of you. I have two questions. The first one is, I mean, a follow-up on Matthias, which is on operator leverage because We have seen a very positive turnaround in Q2 despite that the inventories are still declining. So could you see an acceleration of the drop through in the second half of the year, if you are able to start increasing the stock or given the strong demand, you think that you won't be able to The second question is on the margin in Latin America. If you could give us the impact of the one off in Brazil And your view on how sustainable these margins are?
And last but not least is on the latest 5 to 50 FEN. On the European Union, if you could give us an idea if there is any change in your event.
Hello, Francisco. So for your first point on the operating leverage And the inventory level, we would like indeed To rebuild stock in the second half, again as per today, we are sold out. So we anticipate That we won't be able to rebuild inventory as strong as we would like. So the effect there would be more limited event. Then we would have told you at the end of March.
Now in the margin in Latin America, So the impact of the ICMS one off is €7,000,000 to be really clear. So it means that the margin of Latin America even the adjusted EBITDA margin of Latin America even if you deduct this one off We don't see many clouds in the sky. I would say the market is strong. The ability of our team To maintain a positive spread has been more than demonstrated over the years and is still there, and we can see that every month. And again, the industrial performance and the PAP is delivering very steadily and strongly in this region.
So the quality
Regarding your first question, Francisco, good morning. The fit to 255 plan decided by you event. It's yet to be better understood at our level. Clearly, as you know, we are still expecting to receive the final CO2 quota allocations, which are due normally this month, we don't expect any major Difference versus our assumption. So we know that this there will be a reduction of CO2 quota compared to Phase 3 In Phase 4, but this is already anticipated.
We believe it's going to be around 7% less quota And the Phase 3 quota we used to receive. I remind you by the way that we also hedged on our CO2 quota. The shortfall of quota is being hedged. We are fully hedged for next year. We are hedged 75 To cover this year to quota cost.
So of course, we know That this fit for 55 will put additional pressure on the companies event. To accelerate the Acute emissions reductions plan and we are extremely pleased that we didn't wait and we actually anticipated back in January if you want This topic by providing and by working on our road map to reduce our CO2 emissions And not just the road map and the target, but also concrete action plan. So we believe we are very well positioned compared Based on the by the way, VISIO ARIST work that has been done when we issued this SLB, In order for them to provide an opinion on the, I would say, ambition of our targets, they benchmark, Of course, our competitors and the rest of the industry and the results of our benchmark was that our results and our mission are really very advanced, And we are comfortable with all action plans that we've launched that we'll be able to follow these additional targets That will be set.
Thank you very much.
Thank you so much. Okay. There are no further questions sorry. We do have another question coming through from Fraser Donlon from Berenberg. Fraser, you're unmuted.
I may now go ahead.
Yes. Good morning, Michelle and Natalie. Thanks for the presentation. Just a question on pricing for next event. Like when you look at what's going on in French wine, obviously, there's this kind of weak harvest and maybe this impact will be shared across a couple of years rather than what based on the kind of aging Life cycle of wines.
But do you think that, that disrupts somehow the balance of the market in places like France and that could play through to the ability to increase prices in that particular market? And then the second question would be, could you maybe just color a little bit the kind of specific volume trends you saw in Q2 in the different regions and or countries. Thank you.
Good morning, Fraser. So I will take the first question and Nathalie will comment the second one. Regarding the harvest, as we mentioned, this frost event that took place in the Q1 Was, of course, impacting the French wine producers or will impact the French wine producers during this year's harvest. The real impact is yet to be seen because as usual they always claim big numbers in order to get The attention of the government, but the real impact are still to be measured when harvest comes in the fall. We believe that for Veralia, this could have some impact in France, but Yes, I repeat to be defined and we'll know probably better and we'll comment it probably better in October during the Capital Market Day.
But certainly not this year because this will be next year. And to some extent limited by the fact that Last year was a good year. The harvest was very good. And if you look back in the past, You have from good years to bad years, it's not unusual to have the variations of 20% or 25% in the harvest. And this is why the winemakers are using some inventories, some bulk wine That is put aside during the good years to provide for the bad harvest the following years.
So what would be Difficult if we have 2 bad years in a row because then you have emptied your reserve The 1st year and the 2nd year, you are short of wine, which is not the case. So cross fingers, unless 2022 It's about a year from the harvest point of view. So far, we trust that there will be enough reserves to compensate for The lower harvest this year than last year. Now regarding the balance and the consequences in the French market in Due to this low harvest, if you want, in France. So knowing that, by the way, The harvest in the other countries like Spain and Italy should be very good this year.
So again, as you know, there are quite a lot of exports
Fence. Now your second question on the sales and volume in the second quarter And to give more color for region, so first, in just one step behind on the Q1 In the regions, Latin America was already strong and it was mainly Europe really strongly hit versus last year. In the Q2, we've seen very strong rebound in volumes In South and West Europe and in all the countries, in Latin America continued to be really strong. And in North America, it was more Flattish compared to previous year as we commented. But again, North and Eastern Europe Last year, 1 year ago, the effect of the pandemic was a bit later.
And So the comparison is not exactly the same. But as a conclusion, on the second quarter, Really strong, especially strong in South and West Europe, in Latin America still and a bit more flattish in North and Eastern Europe.
Very clear. Thanks both for the answers. Just one final question, If I may, from my side, I'd just be kind of returning to the point on carbon. Obviously, you have the hedge in place, but do you have now more color on like how the number of Kind of free permits and allowances might evolve in this year and in later years.
Well, that's what I was mentioning, Fraser. I think we still wait for the final allocations for this year, Which are due normally in July. But as mentioned before, I mean, we believe it will be in line with our forecast, which Basically a reduction of 7% quota compared to Phase 3, but we don't have yet the numbers.
Okay, perfect. That's event. Thank you very much. I'll leave it there. Thank you.
Thank you. Thank you, Fraser for your question. And the next question is coming from the line Lars Kjellberg from Credit Suisse. Lars, you're unmuted. I may now go ahead.
Thank you. Just had a couple of questions left. Can you remind us about the packaging element as a percent of your cost structure considering the significant cost inflation you have there? And also if you can call out the financial impact of your heightened furnace activity in H1 And how we should think about that in H2, considering last year you had literally everything happening in H2? And also if you can call out the what you expect for the full year in terms of CapEx you highlighted, of course, Yakatinga will come into the equation Strategic CapEx in the H2, but what can we look for the full year for total CapEx, please?
Thank you.
Okay. So for your first question, so freight and packaging represents about 10% of our Total cost structure. But again, the increase in the packaging line is really strong, Which is leading to some impacts and strong impacts in expected, sorry, in the second half. But all in all, freight and packaging is 10%.
Now regarding the furnace repairs, I mean, roughly speaking, you can count around probably a bit less than €1,000,000 of Additional maintenance cost and startup cost when you shut down the furnace for reconstruction. So that's more Less than €1,000,000 is the right number for the cost of such a furnace. So around €807,000,000 or €800,000 is probably event. Closer to the number. And regarding the full year CapEx will be exactly in line With our guidance, if you want, of 8% for the recurring CapEx, so it will be exactly 8% for the recurring CapEx.
And if we add the strategic CapEx, which in this case will be mostly due mostly linked, sorry, To Jacotica II New Furnace, we should be slightly below €250,000,000 for the full year. So I would guess EUR 200 between EUR 240,000,000 to EUR 250,000,000 of CapEx for the year.
Thank you. And just to clarify on the furnace comment that you made, I guess that excludes lost production, etcetera, and then potentially lost revenues then Because that number seems You're
right. No, no. Only the start up cost, the fact that you have to heat The furnace to bring it to 1500 degrees C temperature and during that heating period, for example, you use gas and energy, which He's not used to be producing any bottles. So these kind of things, but it's not including the loss of revenue, Which normally should not happen if we have stock, because normally what we do is we build stock ahead of the Fence stoppage in order to Keep selling during the reconstruction. The fact is this year because we ended up last year with very low stock, We have not enough stock to deliver everything we should have done.
So Taking that into account, how would you make us think about the total impact from this activity in H1 But you didn't have the stocks to sell?
Well, this is the most difficult question because we It's very hard to know exactly how many sales opportunity we missed, if you want, because your question is about this. We've sold everything we could, And everything we have produced has been solved. Hence, the destocking that still occurred in H1, Despite, I repeat, the starting year the start of the year, which was already starting from the very low end on the inventory side. But it's very hard to quantify how many sales we lost because of lack of capacity.
Got it. Final question for me. You obviously called out a very favorable product mix as spirits recovered, kind of high premium products recovered, etcetera. How should we think about the mix going forward as we continue to reopen, assuming that, that is indeed what's going to happen? Should we have a favorable mix?
And how abnormal is the current mix versus what you would see in a normal year?
Okay. I think it's very important and very interesting question you're asking, Lars, because when we comment the mix, we always comment the mix versus the prior year. And you remember last year was exactly the opposite. The 1st semester, we had an unfavorable mix because spirits the most, I would say, Premium products like spirits, champagne suffered from the lockdowns, and therefore, our mix was quite negative this year. You've seen the rebound and the very strong sales of our customers in spirits, especially in cognac area, but not just cognac.
And of course, year on year, the mix is extremely positive. But I would say, It's not either I would say, If we had to compare with a normal year, you wouldn't say it's so positive, I would say. It's positive, but not with the same amount. So what I'm going to say is that it's one thing to compare year on year mix impact, which is what we do when we comment on the financial results. It's another thing to look at what could be the, I would say, normal run rate of the product mix we have.
And here we are back to what we Said during the IPO is there is a long term megatrend about premiumization that we see in spirits, but not just in spirits, we see it In wine also, you look at the Rose wine, it's very obvious that it's going premium. And this The megatrend that you have we are observing on many years, if you want, Has been somehow disturbed by last year's pandemic, but it's still there. And what we see is a catch up, a recovery Compared to last year, but the trend is still the same.
Very clear. Thank you.
Thank you, Lars, for your question. And there are no further questions in the queue. So I'll hand it back over to your host to conclude today's conference.
Okay. Well, thank you very much, everyone, for attending this call. And I know that you have a few busy hours and days in front of you with all the I feel the results of all the companies, but I wish you after this intense working period A good summer break and stay in a good health. And I look forward to talking to you again after the summer break. Have a good day.
Have a good day. Bye bye. Bye bye.
Thank you everyone for joining us on today's call. You may now disconnect your handset's host. Please disconnect it.