Okay, I think we are ready to start. Good afternoon, ladies and gentlemen. Welcome to our full year results conference 2018. We welcome our guests here in the Steigenberger Frankfurter Hof in Frankfurt, and we also welcome our guests on the phone. With me today are three of our five board members, our CEO, Dr. Heinz-Jürgen Bertram, our CFO, Olaf Klinger, and our President for Nutrition, Dr. Jean-Yves Parisot. All documents have been published this morning on our page in the section financial results. In the same area, you will find the playback of this conference call in the course of the day. After the presentation, we are open for your questions. I will now hand over to our CEO, Dr. Heinz-Jürgen Bertram. You may begin.
Thank you, Tobias. Good morning, ladies and gentlemen, welcome to the Symrise Investor and Analyst Conference on the occasion of our 2018 results. We are glad you have joined us here in Frankfurt. Of course, we would also like to welcome everyone who has dialed in today. This year, Olaf and I are joined by another member of our board. Some of you have already met Jean-Yves Parisot, our President of the Nutrition segment. Today, we will guide you through our today's results presentation. I would like to kick off with a brief overview of this year's highlights, actually better, last year's highlights, and key developments. Olaf will then take you through the financials in full detail. Jean-Yves is afterwards going to shed more light on our most recent acquisition of the U.S.-based ADF/IDF. Specialized producer of meat and egg-based nutrition ingredients, particular of pet food.
I will continue with an update on our strategic initiatives and the outlook for the current year. As usual, we are then opening the floor for your questions. Having said all that, let us now start with an overview of our full year performance. Chart four for our financial highlights. Ladies and gentlemen, the fiscal year 2018 adds into our tradition of profitable growth. It has been another year of capitalizing on our resources and taking advantage of new opportunities. We've done both very successfully. Symrise has delivered on its full-year targets in spite of various strategic investments and pressure from raw material prices and unfavorable FX effects. We managed to grow our top line for the 13th year in a row and kept profitability at a healthy level.
In 2018, we further expanded on our market share and grew sales by more than 5% to almost EUR 3.2 billion. We saw particularly strong organic growth of 8.8%. As we are long-term oriented, we have prepared for tomorrow and beyond by making strategic investments into growth initiatives. They pave the way forward and allow us to grasp the opportunities we see for our business. We maintained our solid earnings power despite investments and cost pressure. EBITDA came in at EUR 631 million, while our EBITDA margin was with 20% at a very healthy level. Net income for the period grew to more than EUR 275 million, which corresponds to EUR 2.12 per share. We would like to have the shareholders participate in our success. The management and supervisory board therefore propose a dividend increase to EUR 0.90 per share for the fiscal year 2018.
Chart five for the sales development on group level. We have seen good demand across all regions and segments for 2018. Our group sales for the full year, adjusted for portfolio and FX effects, increased by 5.3% to almost EUR 3.2 billion. On an organic basis, we grew sales by almost 9%. Therefore, we not only outperformed the market growth, but also exceeded our targets, which we raised during the fall. Let us now move on to our segments on Chart six. Scent & Care delivered strong organic growth of 8.9%. The segment recorded sales of EUR 1.3 billion. Adjusted for FX effect and the Citratus acquisition, growth came in at 4.8%. There was particular strong demand in cosmetic ingredients, aroma molecules, and fine fragrances, which grew in the double-digit percentage range. Our Flavor segment grew sales by over 8% to around EUR 1.2 billion.
On an organic basis, without acquisitions and FX effects, sales increased by a very good 9.5%. Growth was driven by all regions and all application areas. We recorded particular strong demand in sweet, savory, and beverages. The Nutrition segment increased sales by an organic basis of 7.4% to almost EUR 640 million. Adjusted for unfavorable FX effects, growth amounted to 1.2%. Pet Food was again the strongest growth driver with double-digit percentage growth in certain regions. The application area Food also developed very favorably and recorded strong demand. Chart seven illustrates our regional performance. As you can see, we saw a particular dynamic good development in Latin America and Asia Pacific with a growth in the double-digit percentage. EAME and North America recorded good demand. We grew sales in these regions by more than 6% each. Overall, we achieved around 13% sales growth in emerging markets.
Ladies and gentlemen, Chart eight underlines our track record of reliable delivering sales and earnings growth, and it demonstrates quite impressively, we are creating value every single year. Since our IPO in 2006, we delivered a compound annual sales growth of more than 8% and equally strong earnings. We remain one of the most profitable companies in our industry. Our EBITDA margin of 20% is yet another indicator for our successful strategy and resilient business model. That makes us very proud. In this context, I want to mention all our employees and thank them for their commitment. They have a significant role in the success of Symrise. Rest assured, we will continue on our path and remain committed to delivering profitable growth going forward. Let us now turn to share price development as Chart nine illustrates. The Symrise share yet again outperformed the DAX and MDAX.
Our share price gained approximately 20% in the last 12 months. We want our investors to participate in our financial success. For the fiscal year 2018, management and supervisory board will therefore propose a dividend increase to EUR 0.90 per share to the AGM, which will take place on May 15th. I would now like to hand over to Olaf for a deep dive into the financials. Olaf, over to you.
Thank you very much, Heinz-Jürgen, and also good afternoon from my side here to all of you in the room, but also on the phone. Following Heinz-Jürgen's initial remarks, I would like to give you a few more details on our 2018 financial performance. Let's start with group sales development on page 11. Bearing in mind that the industry is already nicely growing at around 4% a year, that we grew already organically 6.3% in 2017, we are proud to present an organic growth of 8.8% for 2018. With this, we are the number one growth player in our industry. Two-third of our growth came from new volumes and about one-third from price increases. In Q4, raw material cost-related price increases changed the ratio to almost half and half, which shows that first price increases have been successfully implemented.
The portfolio effect of 1.3% comprises the acquisition of Cobell and Citratus. Cobell is consolidated since July 2017 and accounted for EUR 53 million sales in 2018. Citratus is consolidated since December 2017 and accounted for EUR 10 million sales. These portfolio effects will vanish now in 2019, but before you delete this column in your models, ADF/IDF, re-fill this column in the course of this year. The negative foreign exchange effect of -4.8% for the full year was mainly driven by the Argentinian peso, the US dollar, and the Brazilian real, but the headwind was 1.7% already weaker in Q4, leading to a higher reported growth of 7.5% in Q4. Please turn to slide 12 to take a closer look at our bottom line. 2018 sales rose stronger than gross profit, resulting in a margin dilution of 150 basis points from 40.9% in 2017 to 39.4% in 2018.
This development was mainly related to the very strong increase in raw material cost. You are all familiar with the shutdowns of some Chinese chemicals factories due to environmental issues, the citral shortage due to fires in plants in Germany as well as in India, followed by hurricanes and other climate-related impacts like the hot summer in parts of Europe, with the corresponding effects like bad harvesting or low water levels, especially on the Rhine. In other words, we mastered the perfect storm in 2018. The cost of goods sold includes material costs without FX effects amounting to EUR 1.4 billion. In 2017, it was EUR 1.26 billion. This represents a material cost quota of 44.4%, significantly up from 42.2% the year before.
Positively, the margin went not down by 220 basis points, which is due to a high level of discipline in operating costs and to some significant price increases for selected categories. Overall, raw material prices were up at around 5% in 2018 after 4% in 2017. Clearly at the upper end of our expectation and guidance. For 2019, we remain cautious. We're still increasing raw material prices, especially in Scent & Care, but clearly below the 5% level of 2018 expected. Moving to earnings, group EBITDA amounted to EUR 631 million and thus was stable compared to last year. The margin of 20% meets precisely our margin target for 2018. As already explained, the earnings performance must be seen in the context of higher raw material expenses, increased CapEx, high and good R&D spending, as well as ramp-up costs and strong headwinds from foreign exchange.
To give you an idea, the FX translation effect on an EBITDA level amounted to EUR 35 million on a full year basis, so quite severe. Group EBIT rose 0.6% to EUR 434 million, resulting in an EBIT margin of 13.8% comparing to 14.4% in 2017. The slight compensation against the EBITDA margin comes from a lower amortization and a positive impact from a VAT tax credit in Brazil, which fell into other operating income, which amounted to EUR 10 million. Please turn to the next slide 13, for the segment reporting. In Scent & Care, we saw strong organic sales growth of 8.9%, adding 0.8% from Citratus acquisition and an FX headwind of 4.9%, leading to a reported growth of 4.8% for the full year. Reported sales were EUR 1.324 billion for 2018. Looking at earnings, Scent & Care EBITDA amounted to EUR 254 million.
The margin at 19.2% was slightly below the 19.6% level of the previous year. While Scent & Care was strongly hit by the raw material crisis, we see this clearly as a good result. On slide 14, we are coming to Flavor, the fastest-growing segment in 2018, with an organic growth of 9.5%, an additional 2.5% from the Cobell acquisition, whereas unfavorable -3.9% from foreign exchange. We increased Flavor sales by 8.1% to EUR 1.19 billion. As expected, the price component, which was 50% in 2017, came down slightly. In total, we saw one quarter of the growth related to price impact in 2018. Coming to the segment's earnings, Flavor EBITDA amounted to EUR 244 million after EUR 243 million in 2017. The margin at 20.5% was below prior year's margin of 22%, but still at a healthy level.
This despite the Cobell acquisition, which is, as explained before, still below the overall Flavor margin and the high raw material prices. Q4 margin has to be seen against a very strong prior year quarter. Let's move to slide 15 for Nutrition. Nutrition reported sales of EUR 639 million. Organic growth came in at 7.4%, with about 50% price and 50% volume, mostly eaten up by a negative FX impact of -6.2%. As you know, Probi has been experiencing temporary de-stocking problem at one of its major clients for a while, but this ended last year in summer, and we saw a strong turnaround in the second half last year. EBITDA for Nutrition achieved EUR 132 million or a margin of 20.7%. The decrease against 2017 because of the upfront cost for the new U.S. facility.
Ramp-up costs here were at EUR 5 million. Please let us continue with the P&L elements below EBIT on slide 16. The financial result improved by 20% to EUR 45 million, mainly due to the lower interest payments that came in with the convertible bond and a lower negative FX impact. Income tax in 2018 increased by 9.6% to EUR 109 million, mainly due to nondeductible interest payment following the U.S. tax reform. The tax rate was 28.1% after 26.6% the year before. In line with our expectations overall. Please remember that we gave a new midterm guidance for the tax rate at the Capital Markets Day of 26%-28% for 2020 and beyond. The net income of EUR 275 million, we achieved an undiluted EPS of EUR 2.12 attributable to Symrise shareholders after EUR 2.08 in 2017.
We will propose a dividend of EUR 0.90, which is EUR 0.02 more than last year at the annual general meeting in May. Please turn to slide 17 for the review of our balance sheet. Total assets increased by EUR 246 million or 5.6% to now EUR 4.9 billion over the previous year. On the asset side, this was mainly due to an investment-related increase in property, plant, and equipment, and because of the significant increase in sales of trade receivables and in inventories. The increase on the equity and liability side resulted in addition to EUR 175 million increase in equity from slightly higher trade payables and financial liabilities. The shift of EUR 500 million between current liabilities and non-current borrowings is due to the maturity of the Eurobond in July 2019.
Provisions for pensions and similar obligations decreased by EUR 10 million due to the increase in the discount rate for pension commitments granted primarily in Germany. That was from 1.7%-2%. With an equity ratio, including the non-controlling interest of now 39.5% at the end of 2018, Symrise has a very solid foundation for driving future business development forward in a sustained manner. Let's turn to slide 18. In 2018, we implemented business free cash flow as the new KPI, first internally, to focus stronger on working capital management. Despite inventory challenges and the acceleration of growth investment, which led to our highest-ever CapEx of EUR 226 million, the business free cash flow as a percentage of sales remained at prior year level of almost 10%.
After this new KPI is now established within our organization, we are confident to steadily improve the business free cash flow as a percentage of sales over the next years. Let's turn to page 19 to our solid financing structure. Our net debt, including pensions, amounted to 3 times EBITDA or 2.2 times excluding pensions. This is slightly above what we expected for 2018, but our ambitions are unchanged. We target net debt including pensions to EBITDA level of 2 to 2.5 times. Our top priority remains to run Symrise with a clear investment-grade profile. While slide 19 was about the status quo from December 31st, 2018, we were already very active in the first few months of 2019 since we announced the acquisition of ADF/IDF.
On slide 20, you can see that the EUR 800 million purchase price is already partly financed by a very successful capital increase of EUR 400 million, beginning of February, and a term loan of EUR 200 million which we closed a couple of weeks ago with our bank consortium. The remaining EUR 200 million, we financed this piece by a German Schuldschein which is currently marketed and which should be closed in the course of March, which then concludes basically all the refinancing activities for our recent acquisition. From my perspective, you can see that also everything is on track when it comes to financials and therefore I hand back to Heinz-Jürgen.
Thanks for handing it back to me, but I voluntarily hand it over to my friend, Jean-Yves.
Okay.
Yeah.
Thanks a lot, Olaf, and thanks a lot to Heinz-Jürgen.
No problem.
Okay. Good afternoon, everybody. I'm very pleased to have the opportunity to present you the acquisition, ADF/IDF, and I will take the opportunity also to explain to you what Symrise Nutrition is. Before starting, I just would like to remind all of you that we are between signing and closing. It means that we are under antitrust rules applied also for communication event like today, and you all will understand that. Just as I told you, I thought it was very interesting to remind all of you what Symrise Nutrition is about. Symrise Nutrition is about three main ideas. Symrise Nutrition delivers natural ingredient-based solutions. Symrise Nutrition is focusing on taste and health through nutrition, and Symrise Nutrition is delivering to customers clean label solutions that can really satisfy the end users by having clean label, very natural products at the end to consume.
This is what it is about. The way we are organized is a customer-centric way. We are organized through three business units, Diana Food, Diana Pet Food, and Diana Aqua, addressing the three markets, aquaculture for the last one, which is the last market we are addressing. On top of these activities, driven through the Diana organization, we have a subsidiary called Probi, Swedish subsidiary, and who is 100% focusing on probiotic. To make it simple, Symrise Nutrition is a combination of Diana with what I explained to you, organized by business unit, and Probi. We are addressing taste and health and nutrition, we are also addressing two other functionalities, cover and color, and food protection.
As was mentioned before, the segment is reaching EUR 639 million sales last year with a very good 20.7% EBITDA margin on sales. On top of that, it is important also to understand that Diana, within Symrise group, is providing some synergies. For example, we provide some raw material for making some flavor action in the flavor division for building some new taste on the market. Another example, we provide some probiotics to cosmetic ingredients for putting on the market also some products for skin based on probiotics. In a nutshell, that is what I think you have to understand and to remember about the Symrise Nutrition segment. Now, what is Diana about? I think by explaining you the business model, you will be very well understanding why we are focusing on ADF/IDF acquisition. The business model of Diana is very simple. It is built on three main competencies.
The first one is the raw material mastering. We are really mastering key strategic streams in meat. For example, the chicken stream, in vegetal for some vegetables like onion, red beet, fruits like acerola or strawberry, and last but not least, some marine raw materials. This is what we guarantee to our customers, that we are really guaranteeing food safety, traceability of this raw material. The second competency is a technological competence. We are applying on this raw material a set of technologies, and the value of Diana, which is a process-based entity, is really to put together different technologies to create functionalities. These technologies can be from cooking, concentration, drying, fermenting, hydrolyzing. We have a set of technologies. We are the know-how for applying on this raw material. The third pillar is really to provide to the customer this final functionality he is asking for.
Taste, health or nutrition, color or food protection. We are addressing these functionalities to three target markets, pet food, and aqua. For addressing this market, we are also investing a lot in this in-application labs, whether for human beings, but also for dogs and cats. That is what is Diana about. We just put science and nature, and we convert this raw material through the process to unique solutions for the customers. Now, that being said, what is ADF about? Identity card of ADF/IDF, which has already been presented the 31st of January, is quite simple to read. ADF/IDF is focusing on two main streams, the chicken stream, and when we say chicken, I should say the chicken carcass stream, and the egg by-product stream. This entity is focusing on two target markets.
The first one is pet food, the second one is food, focusing on two key functionalities, taste and nutrition, health and nutrition. There are 13 sites in U.S., 11 for production, two for chicken, and nine for egg. There are also two R&D centers, one for chicken and one for egg. This company was created by Reimer 40 years ago, and it is a real success story that has been built by being based in Springfield, Missouri. What does it mean after 40 years of business development? The company will reach $220 million sales, consolidated sales in 2018, with a good profitability of 23% EBITDA ratio on sales. You have been presented the business model of Diana, you will be much more familiar what's ADF/IDF about. ADF/IDF share the same DNA.
They are sharing the same way of building the business, of building solutions for the customers. It is where the complementarity of both business is. The raw material, they are focusing on chicken and egg. On the processing, they are focusing on cooking, concentrating, extracting, and drying. Functionality, they are focusing on taste and nutrition. It is a perfect fit with the way Diana is providing solution on the market. The two end markets ADF/IDF is addressing is primarily pet food, and the main strategic driver for making this acquisition is definitely to reinforce the presence Diana Symrise has in the pet food market, and the second market addressed by ADF/IDF is food market. That being said, you understood the route, you understood the why, the real strategic rationale.
If we give you the five main points of the strategic rationale, I should make it very simple. First, to reinforce the positioning in these full natural products on these two streams, which are eggs and chicken. Eggs is totally new for Diana. Chicken, we were already there with a plant in France. The second point, which is the main one, is to leverage our current pet food activity by extending our palatability offer to the premium nutrition segment. Definitely, we will be a key player proposing to the pet food manufacturer a holistic approach for the solution for the pet food. The third strategic rationale is also to better serve our customers. By having a better, wider footprint, we can definitely improve the quality of the service. The fourth is the partnership with the key customers.
By crossing the expertise of the two companies, we can definitely propose to the key customers, key global customer or the fast-growing regional one, strong partnership for innovating together based on our new capabilities. Last but not least, key strategic point is also to put together two very knowledgeable teams, the Diana teams and the ADF/IDF team, for developing the future profitability of the nutrition segment. If we come back to the basics, customers and products. Today, ADF/IDF is focusing on U.S. It's a U.S.-based company and selling mainly in U.S. It is a company selling to pet food industry and food industry, as I told you. Concerning the pet food, the chicken-based products are proteins, growth, and fat. These are high-quality protein that ADF is proposing to the pet food industry. The second stream is egg.
The egg proteins are very rich protein in amino acids, very high digestible protein. These are very good protein for pet food industry. By combining these two streams, definitely Diana is entering a new dimension for proposing new offers to the pet food industry. Concerning the food industry, we are only speaking about chicken. Why? Because the eggs are coming from grader eggs or breaking operations or unhatched eggs from broilers, which are considered in U.S. as inedible. They are not used for the human beings business. It means that the company is focusing on chicken, also selling protein, growth, fat, but also some bone growth for health benefits. It is what it is, what the company is about. What are the next steps? Again, everything is subject to the closing, to antitrust.
The idea is to make a very smooth integration respecting people, culture, competencies. The idea is to make an eye-to-eye integration. The idea is also to deliver synergies, the main synergies are top-line synergies. Definitely, there is a very good geographical fit. ADF/IDF is very strong in U.S. Symrise is very well-organized worldwide. This is the first lever we can really play. The second one is also some cross-selling, mainly in pet food, where definitely we can propose jointly palatability enhancer and some very good new source of high value proteins and creating an extended value proposition. These are very soft top-line synergy we can deliver. On top of that, there are some cost synergy through raw material substitutions or also basically take the best of all the organization in terms of competencies and mutualizing some of them.
All in all, I feel myself very confident to have some cost synergies at horizon 2020 of about EUR 7 million, and top-line synergy horizon 2021 of EUR 15 million. I really think that this is a very strategic deal for Symrise, making us enter much stronger into the pet food industry. You see, it's a very complementary model in terms of stream, but also in geographical presence in U.S. I think that now you have better understood the strategic rationale, and I'm hoping that you are sharing my big enthusiasm to start the integration as soon as we can of this new entity. Thank you, I hand over to Heinz-Jürgen Bertram.
[Non-English content]. Ladies and gentlemen, with these insights into our most recent acquisition, let us move on to the outlook for 2019 and our goals and objectives. Chart 29 shows the core of our business, our proven strategy. More than a decade of sustainable and profitable growth is evidence that we not only have a very effective setup, but also that our strategy is spot on. The results underline the consequent execution of our strategic priorities in terms of growth, efficiency, and portfolio. All three are well-proven levers and have contributed to our highly reliable performance over the years. Going forward, our focus will be to continue investing in our own resources and incremental growth projects, by expanding our capacities or adding strategically to them. Counterbalancing pressure on our margins by improving efficiency.
A prime example is our backward integration and our investments in new tools such as artificial intelligence. Continue expanding our business into adjacent high-margin growth areas that capitalize on mega trends. Move on to Chart 30 for an overview of some projects along our strategic priorities and investments. In 2018, we kicked off a number of growth initiatives. The most important ones are shown on Chart 30. We expanded our pet food facilities in France and Spain, as well as our R&D facilities for perfumery in China. We furthermore invested in the new technology at our Branchburg flavors site in the U.S. and opened a new production facility for Diana in Banks County. We significantly expanded our capacities for cosmetic ingredients and aroma molecules.
Some of you know exactly what I am talking about because you had a chance to visit a few of our American facilities during our Capital Markets Day just a few weeks ago in January. Our overall CapEx spending amounted to EUR 226 million, which equals 7.2% of our sales. For the current year, we have planned additional investments in organic growth and will spend in the volume of about EUR 200 million. In the future, we target a CapEx range of 5%-6% of sales. The first projects are lined up already. Amongst others, a new encapsulation plant for fragrances in Holzminden and the opening of the new site in Nantong in China. We also plan to double our menthol capacities and already scheduled the second phase of the cosmetic ingredient expansion, both projects in Charleston.
Before we move on to our recently announced updated midterm guidance, summarize what we expect for the current fiscal year on Chart 31. We had a good start into 2019, and we are confident to again outperform the growth of the relevant markets. According to estimates, annual global market growth will be around 3%-4%. As usual, at this point of the year, we target an EBITDA margin of about 20%. I think that was clear enough now. Our confidence is supported by a promising start of the year and with the strong demand across all businesses. Ladies and gentlemen, turn to Chart 32 for an overview of our ambitious financial and sustainability targets for 2025. At our Capital Markets Day in January, we have presented our updated long-term financial goals.
Until the end of 2025, we aim to almost double our sales to around EUR 5.5 billion-EUR 6 billion. We want to achieve this increase by annual organic growth rate of 5%-7% and complementary targeted acquisitions. We furthermore raised our ambitions in terms of profitability. Long-term Symrise aims to achieve an EBITDA margin within the target corridor of 20%-23%. To our environmental goals. Sustainability is an integral part of our strategy. In everything we do, we try to consistently improve our impact on the environment. May it be by the way we source raw materials or the manner we reduce our ecological footprint, for which we have been recognized several times in the past. In December, we were named Germany's most sustainable company, and we are proud to say that we are the only company awarded twice now. That clearly shows our commitment.
I want to conclude today's presentation with the illustration on chart 33. It outlines our growth journey to individual stages. We will continue to drive organic growth by leveraging megatrends in a growing population, urbanization, and the increasing demand in nutrition and care. Through integral incremental growth projects, we plan to expand our portfolio towards adjacent, fast-growing and high-margin applications. For instance, in the areas of naturalness and health. Digital business processes, such artificial intelligence, will also contribute to growth and profitability. All these levers will allow us to further drive our top-line growth and even more so, further expand profitability. As we did with ADF/IDF, where it makes strategic sense, we will add competencies through bolt-on M&A. With this positive outlook, we see ourselves well-positioned to achieve our goals.
We would now like to hand over for you for questions, if there are some, and I'm sure there are some.
First from my side, thank you very much, gentlemen. We will start here in the room with the Q&A session you're all waiting for, and we will turn to the telephones afterwards. Due to time constraints, like always, we have fascinating stories to tell. I kindly ask you to put only one question. Another thing I have to ask for, please give your name and your company so that everybody on the phone knows who you are, and please try to speak precisely and clearly that everyone on the phone calls understands that. Thank you very much. First question from Thomas Swoboda.
Yes, thank you. Thomas Swoboda from Société Générale. A question on your margin development in Q4. Q4 is seasonally a weak quarter. You have turned around your margin performance some 200, maybe even 300 basis points against this negative seasonality. The question on that is, could you just give us an idea what happened there? Are you passing through your increased input costs to your clients? Is there anything else we should be aware of that has driven this strong performance in Q4? Thank you.
The main driver is really that price increases are coming through. As I indicated in the price volume picture, we see clearly that this is helping now. It's not over yet, but we have worked a lot on this in the course of the year. When we started the year, you might remember that we almost had no price element in our health and care environment, and now it's moving towards 50% and even more. That is helping a lot. You have seen that there is a one-time element, which reflects a VAT credit of EUR 8 million in the fourth quarter, which is related to a reimbursement in Brazil. I think some of you might know that Brazilian companies have started law cases because there was a double taxation, and this was ruled in our favor.
We released EUR 8 million in the first quarter on this topic. Overall, I think the climate has improved, and I'll let Jean-Yves comment on Diana for the fourth quarter. I think the improvement is a good sign that we have worked a lot in 2018 in a very tough environment. Hopefully, we can carry this now forward.
I would say now to everyone, it's clear why we have backward integration. I think everyone in the room saw now that we obviously suffered a bit less from the raw material crisis. What we have been telling you constantly, it's not a snapshot. Overall, in these critical times, this will pay off, and I think this is clear evidence. The numbers speak a clear language. We had some extra effect, but overall, let's put it this way, the bottom line was slightly better than you had expected. The backward integration clearly pays off, and Jean-Yves is, with the Nutrition division, a clear supporter and lever for the backward integration. As Diana, that's natural ingredients being used in other application areas. You want to comment a bit on it?
Just I should add also that a very important point for raw material management in terms of price or cost is we are securitizing a lot our raw materials in terms of quantity and price. But we are also buying a flexibility, meaning that we are also working on some kind of substitutions. We are discussing with our customers, which are making also the business of our customers very sustainable. We are a lot of actions also to really go through this raw material increase or cost. As I said, during the business model presentation, the raw material mastering is also going in this direction to be capable to replace by really working hand in hand with the customer.
I think your question answered. Okay. Tobias.
Sure, sure.
You will I'm going to pick all the questions.
Next question from Knud, please.
Yeah. Knud Hinkel from Pareto Securities. Thank you for taking my question. Mr. Klinger, you touched upon your new KPI cash flow. You also stated a very clear target for CapEx to sales. Do you have also a guidance for us when it comes to net working capital intensity? It's roughly about 35% right now, and it has been in the past below 30% even. What's your expectation going forward? Thank you.
Yeah. First of all, we have put the business free cash flow in place exactly for this reason. Working capital is our topic in Symrise. We have put respective KPIs also for management in place for 2019 to work on this, I'm sure that we have a lot of mindset change in Symrise in the meantime, that working capital matters. The business free cash flow is hopefully improving through this attention which it gets now. Having said that, keep in mind, first of all, our business model is demanding when it comes to working capital. We have, in general, long supply chains with the backward integration. That is an explanation. The second explanation is we are growing very fast, and through that, also the working capital is growing along with that.
I hope the ambition is clearly that we can improve the working capital, with the ambition that it should not grow faster than top line. Next question.
Thanks for this. Michael Schaefer, Commerzbank. Since we have Jean-Yves with us, a question. I recall 2015 at the CMD in France. We talked about the very early stages of the aqua business unit. I wonder whether you can provide us a bit of an update on the journey since then maybe also kind of quantifications of how does the business developed since then, where are we now, what are the targets in terms of growth going forward?
Thanks for the question. I like very much this aqua business because it's a new business unit. It's the smallest among the three business units. From the time of 2015, we did a lot for fixing the operation. We have three plants today delivering the aqua products, one in Thailand, one in Costa Rica, and one in Ecuador. Each plant is specialized on some type of raw material coming from shrimp or tuna or tilapia, and we are selling that as a growth promoter or palatant to the aquaculture. One thing I will tell you from 2015 to now, we gained the trust of key players. We gained the trust of key players in salmon industry and shrimp industry. Now we are working with a yearly contract with some very sustainable delivery plan.
Also we are starting to really enter some R&D, GDA, where we are also investigating a lot in health nutrition through hydrolyzation of the proteins we are delivering. We make very nice business now. It's still small compared to the others, and profitable. Also we are also starting to make innovation. Definitely, it is a business unit. I love your question and I should be very happy to actualize you and along the road because I'm very confident with the customer feedback on the future of this business.
Let's reemphasize, it's still very small. We're still in the learning curve. We're still in there, and as soon as we are out of the learning curve, we'll let you know. It's a promise. Over there was a question.
Thank you. Liv Cohn from Davy. Just if we go back to the pricing realization in H2 and maybe looking into then 2019. The pricing achieved, does that cover the inflation expected in 2019? Then secondly, just on the flavored margins, Cobell in particular. We all know that that's been a little bit of a drag on flavored margin in 2018. If you could just please provide an update on that for 2019. Just one more question, sorry. The acquisition, does that require a level of investment in terms of CapEx or R&D? I know you mentioned cost synergies, is there an investment required in CapEx? Thank you.
Okay. You had to wait the longest, you were allowed to ask more than one question. Okay. Pricing.
In some areas, we got hefty price increase, overall, I would not say it covered the whole inflation. The deal is like the years before. We get price increase, we can push price increases for raw materials typically on with a delay, which we see now. We also have to gain some efficiency in our processes, which means we are obliged to gain 1%, 2% efficiency in our processes per year. The good news is so far, we always achieved it, and I do not see a reason why we shouldn't achieve it for this year. Bear in mind, in our strategy, the second pillar is efficiency because of that reason. If we were not to always improve our processes, we would not have a sustainable and long-term stable business.
Coming back to your first question, if we see raw material price increases in a transparent world, us and our customers know what raw material price increases we face, with a delay, it's possible to shift this on. Increases in energy, salary or whatever, that goes pretty much as a rule of thumb on us, that has to be covered by efficiency increases, which we're pretty good at and typically we achieve. That is the first question. Cobell. Cobell was, as you mapped it out right away, it was not a brilliant strategic farsighted move. It was just a good occasion, which we pragmatically grabbed. The margin was very low, the price was very attractive, we know this business from something we do in a location here in north of Germany, in Brunswick, to be precise.
We know that, we knew it would cause a margin dilution. The margin was below 10% when we bought it is now 10% plus. In the sense of being honest, will it ever be at 20-plus percent like some other pockets of our business? I doubt it because the German part we are doing it is not there either. However, if you do the total cost, Cobell is juice-based beverages, it extends our supply chain along the value chain. Indirectly, we have a lot of benefits in our flavor business. If we add that, coming as a consequence of our capabilities in Cobell, it very well adds to a nice bucket. Coming there to your question, I think this dent in the profitability of the flavor business, which we saw last year, should be over pretty soon.
Going forward from now on, I would say Cobell is not a reason for any excuses. I think that was as clear as it can be. The last one, it's a bit of a tricky one. Do investments come with the planned acquisition of ADF/IDF? I would like to reiterate what Jean-Yves already said. We have to be a bit careful here. We're still in the due diligence, antitrust clearance process, which puts us under some legal requirements. We have not been allowed to look into this case. Let's put it this way. From everything we know and we can say, it's very well manageable. Let me put it this way. Okay, next question. Tobias, do your job, pick someone.
Before everybody starts a second question here, okay, one more from Thomas, and then I would like to switch over to the phone.
Thomas has only asked one question-
Yeah.
-he followed the rules, so he can ask a second time-
I have to do two more, right?
A second single question.
Thomas from Société Générale again. If I may again to the CFO. On the Capital Markets Day, you said that whatever happens in terms of acquisitions, you would like to have comfortably met the investment-grade rating. After acquiring Diana a couple of years ago, you ended the year with 2.7 times EV/EBITDA. If my model is correct, you will end this year with 3.1 times EV/EBITDA. Is this according to your expectation and to what you framed at the Capital Markets Day, or will you be a little bit above it?
That's a little bit difficult to answer because I don't know the contribution on the EBITDA side, which we will get from ADF/IDF. The reason is I don't know when the closing will be. I'm missing a piece to give you a clear expectation on the leverage ratio. The environment stays. We have done the capital increase in a very conservative way, let's say it this way. We just asked for what we needed. It was 50% of the purchase price, we will add another EUR 400 million on the debt side to the picture. Now it really comes down to the EBITDA contribution from our new baby.
Right. If I may.
The range I see from my perspective, and I mentioned it this morning to the press, is somewhere 2.8 to 3 at the end of March.
If I might sneak in a follow-up. In terms of the closing, you don't know the date, that's completely clear. What should we have on our agenda? Sometimes around mid-year, or would it be too early?
I would give this to Jean-Yves because he's closest.
Okay. I had the question during just before the meeting. Difficult to answer. We are in front of the Department of Justice who are making their job the right way. We are answering the questions and, like every kind of antitrust exercise, it's difficult to get you any date. I should say we are optimistic, but we are not in a rush. Sorry not to give you a better answer, but that's where we are. Let's put it this way. First, we're by far not in the position pushing or telling the American authorities what to do or what not. If you were to assume mid of the year closing, the moderation you did was not too far off. I think that says it as much as I can put. All righty? Okay.
Any more questions in the room?
One more.
One more from Knud.
With regard to currency, your strong organic growth has partly been eaten up by currencies, especially in nutrition. I guess you have a lot of business in Latin America. Is there something you can potentially do about it in the future, or do you just accept these movements there?
Pretty much as I mentioned, the number is very high, was EUR 35 million last year. Quite an impact, but you can't do anything against it at the end. It's the conversion of the currency. The good news is that it seems now that we will not see any major currency headwinds in the first quarter of 2019. I mentioned Q4 was -1.7%. At the moment, we are pretty much neutral when it comes to the currency environment. Should be a good driver of the reported gross number. I think that's from the room at the moment. We have some opportunity after that at the coffee. I would be happy to switch over to the people on the phone. There are some waiting in queue. I give over to the operator, Leanne, please continue.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll take our first phone question from Gunther Zechmann with Bernstein.
Hi, good afternoon. Can I just ask on the 20% margin target, what your assumptions are within that? Specifically, what do you assume for price versus raw material cost for 2019 to include any synergies? You mentioned EUR 7 million cost synergies, clearly not fully this year yet. Do you adjust for any costs to realize those synergies? If you could just clarify if that includes or excludes IFRS 16. Thank you.
Before we answer anything, who is on the phone? Please be so kind, who is there?
Of course. I thought the operator had mentioned it. It's Gunther Zechmann from Bernstein here.
Perfect. Now you get an answer, no problem. Basically, our CFO will hop in as well. We talked about this IFRS effect is in. All synergies and everything we can see at the moment is in. On the other side, this 20% at this early point in the year, we always will put it out. Last year you were reading it as the profit warning. It is a number because we're supposed to give you a guidance. If you read how we communicated the business, the year has started pretty well, pretty okay. Giving you a detailed guidance on the margin at this point in time would just be misleading you. The message, it has started healthy. Our business is healthy, and if you look back on how 2018 was closing and how we delivered, actually it's better than you expected.
With that, I would say I gave you all the necessary information to make your calculation. IFRS is in. Olaf wants to add something.
Let me add to that point on the IFRS 16 impact. The EBITDA will see a positive impact of EUR 15 million estimated at this point in time. The EBIT will see a positive impact of just EUR 2 million just by moving the DNA part. The financial result, given the interest component which plays a role, will be probably a negative impact of close to EUR 3 million. Bottom line, it will almost be neutral. The balance sheet will be extended by around EUR 100 million out of this IFRS 16 environment. Just to avoid any confusion, our guidance does not include the IFRS 16 impact.
The EUR 15 million, which you have just heard, comes on top of our guide, just to be clear.
That's great. If I can just follow up on the first point of my question on price versus raw materials. You said you haven't quite compensated due to the time lag for the inflation of the last year or years. Do you expect to do that within 2019?
Yeah. We saw the 5% last year as the headwind. As you have heard, we are working heavily on price increases. We are working heavily with customers to secure supply. As Hans-Jürgen indicated, over time, we will make sure that we can get the price element also to compensate on the raw material side. As I also said that 2019 should see less raw material headwind than 2018.
Okay, thank you both.
You're welcome.
We'll take our next question from Alexandra Thrum with Morgan Stanley.
Good afternoon, it's Alexandra Thrum from Morgan Stanley. Thanks for the presentation and for taking my question. You've answered most of the details around the guidance for 2019. Just one further point of clarification. You incurred some ramp-up costs in 2018. Can you just give some more detail around what your expectations are for ramp-up costs year on year, 2018 versus 2019?
Yes. The 5 million we saw last year, we would expect a similar amount this year. Not because of the Diana facility, but more related to China. We are making good progress with our new facility, and by the end of the year, this should be ready to get to product out. This first turnover then in 2020, and in 2019 for the ramp-up, we expect around 4 million to 5 million additional cost.
Thanks very much. Then just on the organic growth number. For the full year in 2018, there was a small benefit from US dollar pricing in Latin America. Should we expect that to reverse in 2019? Could you clarify what the impact was in 2018 as well?
Yes. Like with other companies, given the currency developments in Brazil and especially in Argentina, we have seen some impact on the organic growth. More importantly for us was that there was extremely good volume growth also in Latin America. The business itself is running very well and is supporting this very high growth number extremely well. The hyperinflation in Argentina is having a positive impact on the organic growth. That's correct. It also has a negative impact on the bottom line, just by the mechanism. If we would take the hyperinflation impact in Argentina to EPS, it would basically add EUR 0.02 to the EPS number, just to give you an idea. Most of the impact, the negative impact from the hyperinflation Argentina is ending up in the financial result. That help?
Thanks very much.
Welcome.
We'll take our next question from Heidi Vesterinen with BNP Paribas.
Hi, it's Heidi from Exane. You were talking about increasing your presence in premium pet food. Could you talk about what your current exposure is? When we think about premium, super premium, and I guess other non-premium pet food, are there big differences in terms of growth rate of the market or profitability from your perspective? Thank you.
Jean-Yves, I would say that's for you. Heidi, you had in preparation of our Capital Markets Day, asked the question, does management care about cash? At least I would like to notify Olaf has included that in our target. I hope you are happy about that. We do care about cash.
Thank you for clarifying. Yes, we have seen that today. Thank you very much.
We try to listen to the opinion of the analyst, as you can see. Jean-Yves will shed some light on premium, super premium, and hyper premium pet food. Jean-Yves, the stage is yours.
Thanks for the question. First of all, answering the first question. Today, we are not exposed very much to the nutrition part in pet food. We are selling some peptides, we are selling some fibers, but still a very small business in the pet food business unit. By doing this acquisition, we should definitely enter a very sustainable way and a strong way in this nutrition side. Why premium or super premium? There are a lot of supplier of protein in pet food. You can supply different type of protein, meat-based or vegetable-based. The one we are speaking about are meat-based. Among the meat-based, the chicken one are very high grade of protein, and the egg one are even higher grade of protein, with very high-value amino acid constitutions and with a very high digestibility.
You know that in the pet food manufacturer world. There are some pet fooders who are selling more low-end products and some manufacturers who are selling more high-end products, which are corresponding to the breed or some pathologies or some age of the animals. The market we want to address are the second, the high-end market, where the dog or the cat are really needing some specific type of nutrition model. We are already in very good contact with the key players in this high-end, so-called premium products through our palatability enhancer. By keeping the very good contacts we have established and by providing now a more holistic approach through palatability enhancer and high-value protein, we can definitely address this, what we call premium or super premium market. We are speaking here about really usage value.
It is value the end consumer will be ready to pay for the health of his dog or his cat. It's more than nutrition, it is health through nutrition. Okay, Heidi?
Thank you.
You're welcome. Best regards. Are you in London?
Yes, I am sorry I couldn't make it over, but thank you for the presentation.
No problem.
We'll take our next question from Patrick Roquas with Kepler.
Yes. Good afternoon, everybody. My name is Patrick Roquas from Kepler Cheuvreux. I have two questions for Jean-Yves on ADF/IDF. Firstly, could you clarify the historic sales level of the company? Because in an article in the local press, it was indicated that the company had sales of around EUR 250 million, and you recently indicated that the company grew sales by 4%-5%. That's the first question. Secondly, could you provide some more information on the IsoNova JV with Rembrandt? How big is it, how profitable, and also, will you continue with it? Thank you.
Okay. I should say that's three questions in one. The first one is the turnover, the revenue. We are speaking about a consolidated revenue of $220 million. Okay? You have to know that ADF/IDF has also a joint venture, for which turnover is not consolidated. That's the difference between the 220 and the 250 or 260 you could have seen somewhere else. That's the first question answered. The second question is concerning the rate, the growth rate. The current growth rate until now is 4%-5%, it is, I think, a very nice growth rate in U.S. market. The pet food industry and the food industry are growing, pet food is much more growing in APAC or Latin America than in U.S. market.
What we think is that by joining the competencies of the both companies, we can increase this CAGR from 4%-5% to 6%-7%, just by taking advantage of the Symrise network and taking advantage of the cross-fertilization of the people knowledge for providing new value proposition to the customer. That is for the second question. Concerning IsoNova, until now, is a joint venture with Rembrandt with an egg manufacturer in U.S., the idea is to have the full IsoNova activity in the new entity. The idea is to continue to buy from Rembrandt, some byproducts, some egg, coming from breaking eggs or other kind of eggs that they don't utilize for human field. The idea is to keep the relationship with Rembrandt as a key supplier, to take over all the business.
That's clear. Thank you very much.
Welcome.
We'll take our next question from Patrick Schmidt with Warburg Research.
Yes, hi. It's Patrick Schmidt from Warburg Research. Thanks for taking my question. Already, lots of questions have been answered, I might take the topic of D&A. What can we expect in terms of your amortization in 2019, especially because you've invested slightly more than in recent years? Is there potential indication of the ADF/IDF acquisition in terms of PPAs? It's probably too early, I know, but maybe an indication. Thank you.
Yes. Thank you, Patrick. I take the question. Unfortunately, I can't give you any idea at the moment on the PPA impact. That is definitely way too early. Hopefully, we have a base at the end of June, but no indication there at the moment. Given our higher investment spend at the moment, you should assume that the D will go up slightly, not dramatically, but a little bit. The amortization in 2019 should be pretty much stable.
All right. Thank you very much.
Welcome.
We will take our final question from Isha Sharma with MainFirst.
Hi, this is Isha Sharma from MainFirst. Just one question from me, please. Could you please throw us some light on the positive margin development, especially in Scent & Care that we have seen in Q4? You indicated at the CMD that you aim for 20% margin at Pinova. Where are we there at the moment? Thank you.
Olaf said it. Okay, I'm going to take it. Scent & Care, the margin is different by segment, as you rightfully said. Scent & Care is a compilation of fragrance, aroma molecules, and cosmetic ingredients. It's fair to assume and to say the margins in the different segments, first, are different and have a different seasonality, to put it this way. Cosmetic ingredients tends to be above the Scent & Care average margin. Fragrance, depending by the business units you talk about, can have a lower or a higher margin. Aroma molecules with the acquisition of Pinova has a margin increasing. Having said that, let's look in the detailed picture you asked for on aroma molecules, in particular, Pinova. We started with the acquisition of Pinova, and it was around 10% EBITDA.
That's what we communicated, and we said always at the point of time of acquisition, it will take us three years to get it to the rest. We're happy to say by this year, Pinova is contributing. It is pretty much there where it should be at this point in time, and it will definitely be at the end of this year, which we always said. We're happy to say we're a bit ahead of the integration schedule and what Pinova contributes. You can also assess if you look at the final numbers, which we published for last year, and Scent & Care and this relatively good stability of the EBITDA margin has contributed big deal to our backward integration, where Pinova was the big element for, which helped us to get around the citral crisis. At least we had material.
It is difficult always to separate where is the contribution to the bottom line and where is the contribution to the top line. The contribution is there. The good news is that the fact we always had the material when others did not have it, and you see it in the accelerated top line growth. Not always on the bottom line, because in Pinova, like in aroma molecules, we have long-term contracts, and it doesn't help us that the material is short and we're the only supplier, we're bound to some long-term contracts. We can leverage to, in such a time, to a limited extent on price peak. The good news is at least we're able to pass on when the time is there, price increases definitely. Overall, to sum it up and answer your question on Pinova.
Pinova was the right decision at the right time, we would always do it again. The good news also is we delivered on our integration plan. That's why we had the investors stay in Charleston, because we said, "Seeing is believing." Everyone can look, I think everyone who was there saw nothing to be concerned of, and it seems to be very well on track. I hope that answers your question.
Thank you very much.
You're welcome. That was the final question. As we said, we would like to thank everyone for being either on the phone in this call or, of course, everyone here in this room. You folks here in the room will have the privilege to ask a few more questions when I have my coffee. Having said this, Tobias.
Difficult to have the last word after the CEO, but I have to. This brings us to the end of the conference. Before we all leave the room and the phone, I need to repeat a comment on our financial reporting, which we are doing now for more than a year. Q1 and Q3 will be reduced to sales statements in line with competitors, in line with clients. Just to repeat this here on this occasion that you're not surprised at the 30th of April that there's something missing and you have so much free time. That's for my side. Many thanks for your participation. We are looking to forward having a coffee with you here in the room. Many thanks to all of you on the phone. Maybe we see each other in the next weeks in terms of road shows, conferences, et cetera.
Thank you very much. Have a good day and goodbye.