Good morning, everyone, and welcome to Huhta Mackie's Q3 2021 Results Presentation. My name is Karl Loydkanen, and I'm Head of Investor Relations. Automaki's President and CEO, Charles Olmer, together with CFO, Thomas Gerst, will today walk us through the results of the quarter and the year to date development. And after the presentation, we will, as always, end with a Q and A session. But without any further ado, let's begin with the presentation.
So let me hand over to Charles.
Thank you, Kelly. Good morning to all of you, and welcome to our presentation of our Q3 2021 results, And thank you for joining the session. I will start with a couple of words summarizing before going into More details about our performance, summarizing the business context of our quarter 3, as well as a little bit of some highlights of Performance. First of all, we are delivering a solid growth in the Q3 2021 And particularly in the emerging markets. And that is on the back of a continued recovery of The on the go consumption that we see in most markets.
We'll come back to a bit more details, of course. 2nd point That all of you are, of course, aware of, there is an environment of a significant, if not extraordinary inflation, Particularly on the raw materials and freight as well as energy. And overall, we've been pretty successful in passing through This exceptional inflation, however, this has been slightly more challenging in the emerging markets. We'll come back to that as well. 3rd point of importance is that we continue to focus on our sustainability priorities.
As a matter of examples, we have seen our science based targets being approved during the course of The quarter, we have been applying for the signed base targets during 2020. And second point, our global sustainability index that we Introduced at the end of last year, 2020, it continues to improve. And something that is not written as well on the slide that you have is One of our new sustainable products, the Fiber Leads and Sunday Fiber Cup, have been awarded as the Sustainability Europe winner when it comes to bio based products. So this is Another highlight. And then another highlight of the quarter is that we have completed the acquisition of the company, Elif.
I'll come back to that after presenting the Q3 results. Let's start on Page 4 with the sales of the quarter, With a total of close to €900,000,000 €896,000,000 this represents an increase of 6% versus the same period of last year. In terms of comparability, the comparable net sales growth is 4%, and that's The same comparable net sales growth is 5% when it comes to emerging markets. We have seen, of course, a small impact from our acquisition That is coming from our acquisition in China completed at the beginning of June 2021. And then very little impact this quarter from the currencies.
So that's for Q3. When this is considered with the 1st semester than year to date, from January to end of September, We are reporting sales in increased mode of 3%, but it's a comparable net sales growth of 6% year to date. They're off 11% in the emerging markets. Of course, that compares to a year 2020, which was highly disrupted By the pandemic that's really started to hit the economies more in the Q2 of 2020. Positive impact from the acquisition, that's as well what I mentioned already.
It doesn't, However, include any impact from the Elif acquisition, which has been completed in the last days of September. And therefore, any impact will be visible only as of Q4 2021. And unlike Q3, which was much more stable on the currency front, the year to date impact, so coming entirely from the 1st semester, It's a negative 3% on our growth, minus €78,000,000 Breaking down the growth, the comparable growth of 4% in Q3 and 6% year to date by business segment. I would say, 1st of all, Foodservice with a comparable growth of 2% year to sorry, in Q3 And 11% year to date is confirming the gradual recovery that we were announcing in Q1, Confirming in Q2 and reconfirming in Q3, we are not yet year to date at pre pandemic level. But in Q3, we clearly see a bump positive surge in the demand of our food service in continuation of Q2.
North America continues to deliver solid comparable growth of 5% in Q3, 4% year to date. That's on the back of 2 things: the continued strong growth that we have seen in 2020 and in the course of 2021 for retail tableware, But as well, in Q3, a recovery of the Foodservice segment or category and particularly because The schools and stadiums have been reopening and that has boosted, of course, or restarted, I should say, in 2021 Our sales of lunch trays as well as catering products for the stadiums, cup carriers, as an example. Flexible Packaging growing relatively well in the context of the continued pandemic in some Regions of the world with a 7% comparable growth in Q3 and a 4% in the year to date. We will see with differences depending on the different regions. And fiber is where, if you remember, 2020, where We had a very strong growth in 2020.
We ended the full year 2020 with a close to 10% comparable growth in fiber. This year in relative terms is slightly more modest. So we are recording a 2% comparable growth And that's obviously on the back of that very strong year 2020. The demand is still there, but of course, The evolution of the consumption or the recovery of the normal consumption, if I may say, less Home consumption and more on the go consumption, of course, plays relatively against the growth that we had in 2020. That's for the growth by segment.
Going now to the consolidated P and L. The as I said, solid comparable Growth as well as reported growth. The adjusted EBIT and EPS have decreased due to the input cost headwind, And this input cost is linked to raw material, freight, energy. Everything has been really Emphasized strongly during the quarter 3, it started, of course, in the 1st semester, But it was hitting the P and L much more into Q3, whilst our mitigation actions as well already in the 1st semester. And then we are seeing as well, which is a positive sign Of confidence and as well reflecting the market demand, we are increasing our investments, our organic investments In 2021, very confident about the demand going forward.
So we are Implementing organic projects in the different packaging categories where we are playing. We'll look now and I'm turning to Page 9 for the ones following the presentation offline. So Page 9, now going into Some more business details by business segment. First of all, with the Foodservice Europe, Asia, Oceania, where I said we continue to see a recovery in the demand. However, there are some variations depending on the markets and product categories.
For the categories because there is, of course, the push of the plastic substitution and variations between markets because we still see markets It's in the world like Southeast Asia, for instance, where we continue to have very strong restrictions And eventually, lockdowns in some markets in Southeast Asia linked to the COVID pandemic. The net sales have increased, particularly thanks to products related to food delivery that continues to be And that's an area where we believe we should be very confident going forward. All the takeaway, food on the go, food delivery That has become a part of our daily life, including in the developed markets, is there to stay. It's The convenience way of life is there to stay. Year to date adjusted EBIT is well above the previous year.
At the same time, in Q3, it is decreased compared to last year. And that's very much on the back of a mix The sales mix that has been very different versus last year, last year was more disrupted. And then we have, of course, in Q3, the impact of polymer and distribution cost that has a negative impact on our EBIT margin. North America, the demand, as I mentioned before, continues to be strong, particularly in retail tableware and Food on the Go Products. The raw material and freight availability is a real challenge in North America, Particularly paperboard.
And the price challenges have accelerated at least have accelerated in terms of Hitting our P and L in if the spot prices were already known in Q2, it's visible in our cost of goods sold Mostly in Q3, which explains why there is a slight reduction of our EBIT margin. At the same time, year to date EBIT margin is continuing to be strong with a 12.4%, a little bit ahead of last year. Flexible Packaging. Overall, we are seeing and I'm on Page 11. We are seeing overall a good demand despite some significant variations between product categories and markets.
It's, for instance, what I mentioned as well for Foodservice, very visible in Southeast Asia Well, for instance, countries like Thailand or Vietnam have been suffering strict lockdowns still in Q3. That has hampered not only the consumption, but as well in some cases and for quite a few weeks, some restrictions for us in terms of the possibility to produce at capacity. The net sales increased in most markets, particularly in Middle East, Africa and in Europe. The earnings, however, are impacted And negatively by the pass through, which the raw material inflation pass through that has been Very successful, but much more challenging, we have to say, in emerging markets, and that explains why The margin of Q3 is lower. I'd like to mention here that it may look Very low to lose 2.5 points in a quarter, but actually when we look at the operational performance of Flexible, we are actually gaining One point of margin.
So it's really the temporary raw material impact, raw material energy and freight impact that is there Impacting our margin, therefore, we are, from a structural perspective, not concerned. On the contrary, A lot of very positive things are happening in the segment with a positive impact on the margin. And then as I said before, we have announced the acquisition of Airlift, but as mentioned, it doesn't impact the Q3 numbers. And finally, fiber, where we see the demand for fiber based packaging normalizing. Now we need to mention that in our fiber production, we have sales, of course, in the fiber division itself, But we have lots of sales for cup carriers that are going to the Foodservice segment in terms of customer channels.
So it may be a little bit A modest growth of 2% linked to, for instance, the eggs consumption that has normalized, but there is a growth Still strong growth happening for fiber products for Foodservice that are not visible into the fiber Segment itself, but in the Foodservice. The earnings are maintained over 10% On a year to date basis, however, suffering slightly from the raw material prices and when I'm saying raw material prices, [SPEAKER CARLOS GOMES DA SILVA:] It's actually all input costs, particularly the recycled fiber, but as well the energy costs that are impacting our margin in Q3. With this, I'd like to give you a couple of words before handing over to Thomas for the financials about Elif, our acquisition in Turkey and Egypt. Elif and for some of you, We have seen the presentation we gave earlier, I think at the end of August, when we Signed the project of acquisition, it may be a repetition, but probably still good to have a few words on Elif. Edith is a major supplier of flexible packaging, particularly in Europe, Middle East and Africa.
It's completely based in Turkey and Egypt, 2 big factories. In Turkey, it's a factory of 1,000 employees In the surrounding of Istanbul and in Cairo, it's a factory of about 500 employees. I'll come back to the categories where Elif is particularly present. What is Key for us is that it's bringing to Huttemaki a state of the art flexographic printing technology, which is a complement to our portfolio. And a second very strong aspect is the fact that Alif E has a very strong, like Outemaki, sustainability ambition, And they have actually a very strong performance where the share of their recyclable products, so Products which are technically recyclable of more than 90% precisely year to date 91%.
So looking on Page 15 at the products categories, you see that it's a very diverse A portfolio that Elif is bringing to us and very complementary. The Elif is present in Food and Beverage and in Pet Care, Like Huetemaki, which is our core business for the Flexsteel Packaging, but Elif is very strong in Personal Care Home Care products, which is an excellent complement to our portfolio in terms of not only products, but as well customers And therefore, bringing an opportunity to not only have a synergies from a cost point of view, but as well from a top line point of view. So a couple of words, Page 16, without maybe trying to repeat myself or give you too many details. But A couple of words to explain the rationale for us to engage with Elif and now integrate Elif. First of all, it's about strengthening our existing footprint.
We are already present in Egypt, but now we are very Relevant in the market with these 2 factories, very complementary portfolio. And second and very important, We were not present in our flexible packaging in Turkey, which in itself is a very important market, big market, very large market, but as well Growing market. This company is making, which maybe is not mentioned in the slide, but I would emphasize from a risk perspective is invoicing 100% of its sales in hard currency, Mostly in USD and in Europe, but as well in British Pounds, which makes it vulnerable To the risk of currency from a top line point of view. So it's adding scale for us Where we are present and adding geographies into our emerging markets leadership. 2nd, as I mentioned before, Complementary Technologies.
We are particularly strong in Roto Gravior Flexible Packaging. Elif is bringing us The flexographic technology, so very complementary, extremely competitive from a production platform being based in Turkey And in Egypt, 2 countries, 2 markets which are in free trade agreements with the EU. So this is as well very important for us. And thirdly, it's a company that is accretive for us in terms of our sustainability Strategy. So it really makes sense for us to have Acquired Elif, there will be, as I said, some synergies, of course, from a cost perspective, both in terms of organization, but as well, obviously, in In terms of procurement, there are synergies in the technology side, but we expect synergies from a top line perspective And expanding our customer base from both sides, expanding the possibility of Elite Products and Technology for Food categories as well as And this is an opportunity for me to remind all of us that for us, flexible packaging is Absolutely key in the center of our core business and of our portfolio towards our 2,030 ambition and for our growth.
Just one or 2 important aspects. One is the fact that the market for flexible packaging is expected to grow Significantly over the next years or decade. And second, that flexible packaging I have a great value from a sustainability perspective. This is something we have repeated over the time. But as we are investing in such a big player, I think it's worth mentioning why, because it makes food and products available everywhere.
It brings or It secures food safety as well as hygiene. It's very light, so very competitive from a freight point of view. And it's reducing the waste of food, which is, as you remember, the number one issue of the Food Systems impact on the environment. So now handing over to Thomas for the financials.
Thank you, Charles. Jumping into the detailed profit and loss immediately, highlighting a few things that Charles maybe didn't cover completely. So first of all, I would highlight that the year to date numbers are reflective of the performance we have seen This year with the in some segments, early activities around the pricing and then in some segments Now slowly starting to see some recovery on the raw material side. So the year to date numbers, Quite descriptive. The quarterly numbers showing an accelerated impact of the Raw material hit, so our value add decrease is higher in the quarter compared to year to date.
I would also highlight that our recovery in direct costs and production overhead is actually Quite favorable from the point of view that we have, of course, a different situation in 20 'twenty one versus 2020 when we had many factories down for with under absorption. Then another item I want to highlight, which is not visible on this one, is that we do have higher R and D costs as well. We are roughly SEK 4,500,000 higher year to date, and this is obviously The part of our investments into new product categories. So these are additional information with regards to the sort of operational result that was already highlighted by Charles. The outcome is obviously that we have a development of A favorable development year to date with a slight drop or a drop in margin in the quarter From SEK 10,100,000,000 to SEK 8,500,000,000 in adjusted numbers.
Other things to highlight is That we do have IACs both year to date and in the quarter. In the quarter, the main items are related to the acquisition costs of Elif. While then year to date, we do have restructuring activities both in Foodservice and in Flexibles. So related to the announcements and activities we did already at the back of last year. Finance costs related to the acquisition.
So operationally, our finance cost is still trending favorably with, of course, now a higher net debt our debt level going forward. Our tax rate remains unchanged, and the adjusted EPS year to date is Up 4% while in the quarter, down. On the currency exposure side, I'm happy to tell that to see that all our key Currencies, except for the Thai, but have been developing now favorably In the quarter, so only the tieback having a negative impact here. And that, of Of course, he's explaining that despite having average rates still trending unfavorably, we are finally seeing a positive currency Translation on the net sales row while the EBIT row is flat. So 3, maybe I'm positive into the quarterly results on from currency translation.
Then maybe one of the more interesting slides as we have some real movements here. You can see that we are now on A net debt EBITDA level of SEK 3.0 billion and the net debt has gone up to SEK 1,400,000,000. If we would take the net debt EBITDA level pro form a, so with Elif numbers in, Then we could take out a few tens of points out of the Other things to highlight is that the gearing obviously also goes up to 0.96 And we do remain below the Clearly below the covenant level. And as said, with the pro form a, we are well within still within the ambition level. Here is the structure on our financing.
The big move here is the bridge finance, which Can be seen in the 2023 numbers. So we have drawn the bridge. We took it in order to finance the acquisition. A big part of the overall bridge has been drawn, and we still have some facilities available. Also on that one, looking at the average maturity, it's now 2.6 years coming down mainly due to the length of the bridge, which is 2 years.
But all in all, still a quite Good spread of maturity in our Financing Structure. Cash flow is developing unfavorably, To a large extent, driven by working capital in the quarter. Working capital, of course, has Also beyond real growth, the element of the price increases in there. So that's, To one large extent, driving the negative development in working capital. Otherwise, it's Mainly the normal things of capital expenditure where we are on a higher level and then the profit side.
But so the cash flow development, we are, of course, not as such satisfied with it, but of course, it's also coming on the back of a very On the balance sheet then, The main items we have in here on the balance sheet movements comes again from Elif. So Elif is Fully in the balance sheet, no impact in the profit and loss so far, so the profit and loss impact coming in Q4. So that's changing both the absolute balance sheet rose as well as the Ratios in the number seen on the page. So higher total assets, higher increased net debt and higher Equity to be highlighted. Where are we then trending on our Long term ambition.
On our long term ambition, we are now seeing in the year to date numbers a growth of 6%, so slightly above the ambition level. The adjusted EBIT margin on a healthy level, but Below ambition at €9,100,000,000 And then the net debt to EBITDA without pro form a On the upper end of the corridor. And then we did pay the pay out the Dividend second part of the dividend now in October. So that's not yet reflected in the balance sheet numbers. Looking forward in the outlook, No changes in the short term risks.
We have a slight modification To the wording, however, nothing material. With that, we conclude our presentation And open up for questions.
Yes, that's right. Thank you, Thomas, and thank you, Charles. And now let's continue with Q and A. So let me hand over to the operator for instructions.
Thank
And we have Few questions coming through. The first is from Robin Santavirta of Carnegie. Please go ahead. Your line is open.
Thank you very much, and good morning to everybody. I would have a question about the Input cost inflation you're seeing at the moment. Could you help us to understand now The Q on Q or the sequential of the development of, in a sense, the value add Well, margin going into Q4, just sort of we understand is Q4 sort of Where you will see more heard from what we have seen recently related to logistics, energy And raw materials or was Q3 now sort of the most challenging quarter Based on the information we have today, could you also highlight how much of your cost is energy? And is that hedged in some way? Thanks.
So Good morning, Robin. Thank you for the question. And Thomas, you'll complement after me, of course, if relevant. So to your question, Robin, the I think it's important to look at the net, but of course, I'll try to give Some elements about, of course, the input costs themselves, the growth increase. What we're seeing is and the reason I want To speak about the net is that in the diversity of our portfolio and geographies, we don't have A consistent timing in terms of when the input cost increase is hitting the P and L and the mitigation pricing is happening.
So when we're looking at Q4, basically to answer in a very simple term to your question, we are seeing Q4 At about the same net impact as Q3, that's what to answer in a very simple way. Now why is that and what has happened in Q3 and what is happening in Q4? In Q3, we have seen an increased Impact from the raw material extraordinary inflation, particularly in developed markets, in the U. S. Particularly, but as well in Europe for Packaging, for instance.
While the impact of this raw material inflation was much more in the 1st semester In the emerging markets, and that's because we have more spot purchases in emerging markets. We are not covered In the emerging markets with contracts at certain terms. Then the mitigation itself, The mitigation with our pass through on pricing is increasing gradually through the year. It was fairly strong already or very early in the U. S, which has, of course, Supported our margins in the 1st semester and makes the situation where net net, the 2nd semester North America It's slightly lower than the 1st semester.
But all in all, what we're seeing is that when you take the inflation On Energy, Freight and Raw Materials, netted from the mitigation, We see that Q4 will be net net about the same as Q3. Yes. The second part of your question specifically related to energy. Energy depends it depends very much on our different, how should I say, Portfolio Businesses or Product Categories and Technologies, but overall in the group, we have In about 3% to 3.5% cost of our sales being energy, The energy costs have been increasing a lot in Q3. What we're seeing on overall all the input costs in that Q4 We'll remain at a very high level, but this is a level that is not increasing really anymore.
It's the same level as we had in Q3. Anything you would like to add?
Yes. Maybe the addition, we do not hedge energy prices. So and we don't hedge
Okay. Good, good. That is clear. Then sort of 2 other Questions. First, related to Alif.
I understand you will now consolidate that company into your P and L In fully in Q4, could you comment is that something that supports your margin in the Flexible Packaging The division or is there any sort of cost that is related now To this company, sort of being part of your P and L in Q4. And then related to the Foodservice business or the On the Go business overall, how would you describe sort of the current situation compared The pre pandemic or the normal level, how far are we below still at this stage? So those 2. Thanks.
Okay. So I'll answer again and then Thomas you complement. So if I take Elif quickly first. So with Elif, we are seeing Elif as accretive to our situation and Specifically, of course, in Flexibles business where it's going to be consolidated because Higher profitability than our profitability at Flexible Ute Mackey, not just because of our performance 2021, but structurally More profitable. So that we will on this, we will see a clear impact in Q4 and in 2022.
The question on Foodservice, so versus pre pandemic, If I'm being more precise, so what I said is that we have seen the Recovery of the demand starting in Q4 last year. We have said it Again, in Q1, that it was very clearly coming. It was confirmed in Q2, so and in Q3, same. So it's gradually increasing And that's obviously linked to the easing of all restrictions around the world, even though some geographies remain, Let's say restricted. At the same time, when you look at our performance year to date, Of course, in the growth that we see in fiber foodservice, a good part of it is linked to a pricing increase.
So all in all, year to date, we are seeing that the volume is still A small single digit below pre pandemic year to date. That's what we're seeing. The volume is clearly still below, but year to date because Q1 was below, Q2 was below and then we are recovering gradually. So very soon, and I would say 2022, we should be very clearly at pre pandemic, if not above. Yes.
I would add To the last comment here that the difference is that on overall level, it's exactly as Charles is saying. However, there are markets which Are clearly performing better, whereas other markets are still distressed. So that element, we still do have in the foodservice numbers as well.
Good. Thank you very much, Charles and Thomas. Thanks.
Thank you. Our next question comes from the line of Peter Schadeau of NTE Asset Management. Please go ahead. Your line is open.
Yes. Hi. Thanks for the opportunity. So we are an institutional investor in Uttamati, India, and I had a couple of questions related to that. One impact, recently the CFO and the management directors have both resigned, and that has also been the phase when the financial performance of the company has been weak.
So how should one look at the management churn of the at the company and the financial performance? Any comments would be helpful.
So I would say that there isn't a direct correlation at all between those events. First of all, the CFO is retiring rather than resigning. So We could have eventually thought about a later retirement, but that's the situation Under the wish of the CFO, so that was not something completely unplanned. The Managing Director has resigned from his duty indeed At the end of September, so it's still in duty until end of November. We are This is not linked to the weak performance.
Let's remember that the weak performance is In the Flexible segment overall, I would like to say, I underlined it into my presentation, but I want to make that very Clearly understood. The numbers, the top level numbers do not reflect that Overall, we have actually a solid performance in Flexibles, and we have an improvement of our operations. So I'm not speaking here Specifically about India. In India, we have a specific transformation plan ongoing in order to make ourselves more competitive From a manufacturing perspective, from structure perspective, but overall in the segment, we are improving In terms of our overall operations, and that's a value of roughly 1 point of EBIT margin, So it's not insignificant. The entire situation is linked to the inflationary situation across the world, but particularly In India, obviously, we have to acknowledge that the situation in a country like India, where You get into a job about a year ago or decide 1.5 years ago to get into a job and you discover a situation where The country is very disrupted, much more than what we know in Europe, by the COVID pandemic.
Yes, we have A transformation that is due in our operations in the country and then you end up into A situation of extraordinary inflation situation that is extremely complex to manage, extremely complex to manage And even more in emerging markets than in developed markets, it can drain on the health of people. And that's part of The situation which has happened with Sudip Molla, our Managing Director, who wanted to preserve himself from the very high pressure, We have put in place an interim solution where the group itself is supporting strongly. We have sent on the ground immediately a team with 2 group members, both on a financial leader As well as a sales leader of the group into India in order to manage the interim period. First of all, with Ranjeev and Sudip, our current CFO of India and Managing Director, and then to take over for until we are in a position to have the right management in place.
Thank you very much. And just to follow-up on that, I mean, we have been addressing the issues on the investor interaction by the management. And over the last couple of years, they have gone completely quiet. So how do you look at that part of the activity or the responsibility of the management From corporate governance point of view, and would you like to make any changes over there?
Currently, we are Looking into the overall situation in India, and let's get back to that one when we have more clarity on it.
Perfect. We'll wait for any positive development on that side. Thank you.
Thank you. Our next question comes from the line of Karl Hathorn at Jefferies. Please go ahead. Your line is open.
Morning. Thanks for taking the question. Just like a little bit of a reminder on how the contracts work in the flexible packaging Business to pass through the cost inflation. I mean, you've talked about some challenges passing through that cost inflation in the emerging market side And versus finding it a little bit easier on the developed side. Is there a difference in how the contracts work in the polymer pass through is the first point?
And then the second one is on the Elif acquisition. Is there any EBIT or EBITDA amount that you're guiding to on that Acquisition? And then finally, on your North America business, we've seen the paperboard prices continue to go up. But we're also hearing that given the wider cost inflation environment, people have been able to pass through pricing a little bit easier. All those negotiations I'll frame with everyone knowing that prices are rising.
How are you finding those negotiations in North America? Thank you.
So let me see if I captured all of them, but I will start and then Charles will complement. So first of all, from contract Point of view, there's not really any difference in the cases where we have contracts between the different markets. So it's very much the same mechanism as So we have a raw material and especially in on the polymer side, it's quite easy to follow Specific indexes, we are negotiating the prices with our suppliers, and the indexes are basically moving them Then accordingly. Then it's more on the customer contract side where we will have the deviations, and that comes From the length of the contract, so how long it takes for us to pass on the movements, That has not really been an issue, the timing as such when the movements are not as hefty as they are this year. But I would say the pass through contracts, in some cases, in emerging markets are on a longer trajectory than in some of the mature markets.
And then the other element is that, for instance, India is more on a Spot based level when it comes to customer contracts. However, also the raw material movements are clearly moving Quicker and in a more volatile way than in some of the other markets, especially now currently. So I would say the main difference is the volatility of the market, not the structure of the contracts as such, to summarize on that one. Was the second question a guidance on Eelift?
Yes, that's right.
Yes. So from that point of view, You have roughly, I believe, an understanding of the annual net sales levels, which are roughly SEK 200,000,000 On Elif. The other guidance we have been giving on that one is that the acquisition was more on the top of our traditional 8 to 10x multiple. So if you take those two parameters into account, then I believe you will be able to Come to a relatively good assumption on the impact of the business. Hope that helps.
And then on the North America side and the commodity prices there, That is a highly inflationary market. And I would maybe highlight another part also of the raw material things. One of the key reasons for actually the inflation is the availability of material. So I would highlight that part of it. And I think it is well Understood throughout the value chain that there is a issue of availability in many of the commodities, not only in our industry.
And I would say the success of getting prices Through is then more related to whether the end customer perceives the product to be critical. With this said, I would conclude that the situation in North America, we were early movers in pricing, as Charles For saying, we will continue to do the work and communicate to our customers what the situation on the raw material side is. Anything you want to complement to any of the questions?
You're well. Very complete. The only thing to say is because I believe that the Slight reduction of our margin in the U. S. In plus the comments I made on Q4 may make you think that we are not As capable as passing through as some other players that you suggest, it's not the case.
The case the problem we have is timing because as Thomas was saying, we have been early movers in the passing through. Our price increases were already impacting positively in Q1 than in Q2. Therefore, with the Timing of the impact of the input cost into our cost of goods sold, we are seeing a lower net net In Q3 and in Q4 than we have seen in the 1st semester. That's the situation in the U. S.
But we don't have any issue in the U. S. On the pass through, the only issue we have or challenge we have in passing through is in emerging markets where it's been much more complex, Linked as well to the structure of customers, much more smaller customers, for instance.
Thank you. That was helpful. Thank you.
And our next question comes from the line of Jutar Araghenkanen of SEB. Please go ahead. Your line is open.
Good. Thank you, and good morning. Some of my questions were already exhausted, but a Few more. Getting back to the question Robin had at the beginning on this net impact of raw materials or input costs, broadly speaking, and pricing. So So double checking here.
You are saying that input cost inflation will accelerate towards Q4, But so will your pricing actions, is that the outcome? Or is there a way to read it?
It's a very good summary, in other words, of my answer to Robin Jutta. So the I mean, our pass through is It has been more than 95%. So we are on a high scale, but the input cost increase is Very, very significant. And the net net of higher input cost, because now it's going to be in Q4 in all P and Ls, All geographies and all commodities which are increasing, so it's everywhere. But as well, our pass through is Has gained effect fully in Q4.
So net net, it will be more or less the same as in Q3 in euro terms.
Okay. Good. Just double checking that. And then another one on North America. We covered a lot of it already.
But regarding the product Nick, earlier you said that the sort of COVID times, meaning less food service and more of the other sales, Has been good for profitability. And now you referred that Food Services is kind of rebounding, which makes a lot of sense. But still, your profitability was Was really good, I have to say, in the quarter, at least better than I expected. So would you say that the sales mix now in this quarter was, so to say, normal? Or do you still have a COVID mix gain, so to say, in the profitability.
If you just describe that a bit. Thanks.
So Jut, I would say it this way that the foodservice hasn't fully recovered yet. So if you look at the top line development, As I have been saying so many times earlier, when the top line comes through even higher, then you will see the mix We had a very favorable fiber mix in the quarter still here. So Fiber consumption and the branded plates are continuing on a Very high level through the quarter. And then if you think about the return of school Consumption and similar, that's coming in now than later in the year.
Yes. In other words, we were Certainly, a little bit concerned that 2021, the product mix would be, of course, back to pre pandemic. And it's not the case so far because the retail table where is double digit growth versus 2020 when it was already very strong Quarter after quarter. So that's that is supporting our margins. But we are monitoring this very closely.
So consumption with disposables seems to be something which people got used to.
Yes. The convenience way of life is there That's our understanding, not only for the U. S, but across the world.
Okay. That's clear. And then the last one for India. What was the local currency growth for Q3 quarter on quarter sorry, year on year?
Let me come back to that one. Let me see. So India, you said year to date growth?
Well, actually, both are good to hear. But I was asking about the quarter. But if
you have a year to date, I'm happy
to hear that as well.
It's very low single digit Growth in India.
And that's for Q3
and Q3? For the year to date, and negative slightly negative in the quarter.
Good. That's clear. Thank you. No other questions for me.
Thank you. And we have one other person in the queue so far. That's Henry Papanen From OP Finance, Incorrect. Please go ahead. Your line is open.
Yes. Good day for everyone. I have two questions. My first question is related to freight availability. I wonder if you had some, let's say, sales delays From for example, from Q3 to Q4 because of low freight availability.
And then second one is related to competition Status, how is competition developing at the moment? Because some of your Competitors, they have stronger, let's say, financial capability. And then in some cases, they may have faced quite Several issues regarding this recent cost inflation. Thank you.
Thank you. So The freight availability is very clearly a prime, but I would say it's not just the freight. It's as well some commodities, particularly paperboard
In
especially in geographies like U. S. And Europe, So does it have an impact on sales delay? I mean, when you consider some commodities, the increase The very strong increase of the lead time, Tech Aluminum has tripled the lead time In this period of time, paper bond availability is an issue. I would say, yes, we have a slight Lost opportunity of further growth during this period, whether it's going to compensate in Q4, Well, Q4 continues to be disrupted as we see it.
So maybe it's more Q1 next year, let's say, when things probably Hopefully, normalized, but there is a slight delay. Is it significant in terms of percentage? No, but there is an impact. And then the competition status. So to your point about whether our competition would be stronger, I don't think so.
So it's a very diverse situation. Yes, there are some bigger competitors in Certain markets like in North America or if you think of flexible packaging, but we are remember that we have A large part of our business, which is in emerging markets, where we are a very big competitor compared to our local competition, And there, our Mescal is actually stronger. So it's a balanced picture, let's say. At this point in time, Everyone is on the same situation with the availability challenges as well as the extraordinary inflation.
Okay. Many thanks.
Thank you. And we have a further question. This comes from the line of Justin Jordan of Sam, please go ahead. Your line is open.
Thank you. Good morning, everyone. I've just got two quick questions. Firstly, for Thomas on ALLEAF. Thank you for the guidance you've given.
I I just wanted to understand, I suppose, 2 specific impacts from ALLEAF. When you talk about its revenues being in hard currencies, I'm just aware that the Turkish lira has Appreciate it significantly gets many currencies in 2021 year to date. Has that been beneficial for the operating margins of the business? And secondly, with regard to Elite, is there any particular seasonality quarter to quarter within the business within the year? Just Regarding the €200,000,000 revenue you've guided to, is that something we should just think about being uniform through the quarters?
And then just completely differently, I guess, also from you, Thomas, clearly CapEx in the 1st 9 months is some €27,000,000 higher in The 1st 9 months of 2021 versus 2020, can you help us understand what guidance you might be thinking about for CapEx for 2021 overall as a calendar year? And clearly, when you think about the growth opportunities and the inclusion of ALLEAF, should we be thinking about 2022 CapEx being higher than 2021 and going forward like that? Thank you.
So if I start, it was a bit difficult actually to hear over the line, unfortunately, but You just ask again if we missed something. On the CapEx side, CapEx is, we believe, will be on a higher level than previous year. So the trend which we have year to date is expected to continue. We will stay below EUR 300,000,000, That's for sure. Then CapEx is going into 2022.
There, We are in the middle of the budgeting process. So obviously, from that point of view, we have we do not have a final conclusion on what Kind of levels we would be landing at. However, as we have been indicating, we are a company now going on a Mixed growth execution, which is CapEx based for the categories where we believe We have a strong internal capability of doing something better than through acquisitions, And then we have the acquisition part. So I would expect the CapEx is to remain on high levels also in 2022. So minimum, the level we will be coming in, in 2021 and likely above.
Then on ELIF seasonality, my Understanding is that there is no significant variation between the quarters in Elif. They are on quite standardized products, Which is supporting that one. So it's not like ice cream coming in, in the summer or similar. So they are mass producers To multinational brands in continuous consumption categories, if we say it that way. Then I think you had a question around the currency related things to Elif.
So yes, they are working in both purchases as well as sales in hard currency. So from that point of view, we don't see any significant upside of currency fluctuations as such.
And we have one further person in the queue. That's Anders Knutsen of SEB. Please go ahead. Your line is open.
Thank you very much, and thank you for the update, guys. I was interested in the R and D comment that you had, Thomas, In terms of that you spent €4,500,000 more in Q3. So point 1, how much money have you actually spent In absolute level, in terms of R and D. And then obviously, we are seeing, as you also highlighted, Charles, more product coming out from you. This higher R and D intensity, does that give you an opportunity to increase your margins on your products?
If you can elaborate a bit further on this R and D spend, please. Yes.
First, a small correction. The SEK 4,500,000 higher than previous year It's year to date, not quarterly. So that just if there was a misunderstanding from how I presented it in the earlier one. Our R and D is currently on €19,500,000 versus €15,000,000 previous year. So that gives a ratio, I believe, 75% while it was 0.6% previous year.
So that's the kind of levels we are talking about still with regards to R and D. Our R and D has traditionally and is still Very much related to the parts similar to my comment on CapEx, where we believe we have strong in house capabilities. So we are talking a lot on about the Fiber Technology Development. So that's where a big part of our spend is going.
Okay. Okay.
So I don't understand the numbers.
Yes. And of course, we are talking then new product categories and, as in many cases, new product categories, at least at the initial Part has a margin profile, which is favorable.
Okay. Perfect. Thank you very much.
Thank you.
As there are no further questions at this time, I'll hand it to our speakers for the closing comments.
All right. Thank you, operator. Thank you very much for the questions and the active participation. On behalf of the Husainacker team, we thank you for participating and wish you a really good rest of the day. Thank you.
Thank you.
Thank you from my side,