Good morning, ladies and gentlemen. Welcome to the 2022 annual results presentation for Health and Happiness International Holdings Limited. Before we start, let me introduce the management representatives who are with us today. With us today is Mr. Luo Fei, Chairman. Mr. Akash Bedi, Interim CEO and Chief Strategy and Operations Officer. Mr. Yidong Wang, Chief Financial Officer. Ms. Joy Tsai, Investor Relations Director. During today's presentation, Mr. Luo will first give some opening remarks, after which Mr. Bedi will present the group's business review and outlook. Following this, Mr. Wang will present the group's financial review for the 2022 full year. Following this, we will open the floor to questions. I will now pass it over to Mr. Luo Fei for his opening remarks. Mr. Luo, please.
Ladies and gentlemen, Ladies and gentlemen, good morning. See how. I'm delighted to be seeing the faces of all of you again in the first time in 3 years. Indeed, there have been too many black swan events during this time, which have caused tremendous changes in parts of the business environment. During the 2021 pandemic, while it was raging, we resolved to formulate a 3-year growth plan because some things always remain the same and you must have faith in growth. For example, that pandemics always fade away and growth will be always a company's bottom line. 2022 was the plan's first year, and we achieved our growth goals in principle, whether on a reported base or like for like. We saw an increase in revenue alongside improved efficiency and a higher EBITDA.
Looking at each of our three pillars within our biggest, which is the BNC business. Of the BNC business, the major segment is our infant milk formula business. You can see how much it is of our total business. It is some 60%, 50%, 40 something %, the three pillars. You know that in the past three years of the pandemic, because of various challenges, including the low birth rate for infant milk formula, there had been a lot of competition. We are pleased to say that we have been able to stabilize our infant milk formula business, and we had a 0.7% increase. We have been focusing on high-end products. From category point of view, we have continued to make development. Also, we have been consumer centric.
For our Biostime brand, we basically focused the brand on protection and care. In the past 3 years, we have been focused on that. At the same time, we have grown and developed our channels. We have continued to develop in the lower tier cities. Having done these tasks for the super high-end, we have 12% market share. Last year in super high-end, we have gained market share, in fact. In the infant milk formula, which you are most concerned about, I know, in this area, we have been able to stabilize our business. At the same time, this kind of growth did not sacrifice our EBITDA. In fact, we still have very good EBITDA in the infant milk formula business. Another very important business of ours in probiotics, and it has been on the growth trend as well.
This is simple in a sense, how do we educate the consumers in probiotics and how do we increase the penetration, therefore fueling growth? Other sector is ANC, Adult Nutrition and Care. I've been talking to my colleagues for Swisse acquisition, it had been some years, seven and a half years. In 2022, our ANC business had experienced double-digit growth, which means a few years ago in going into the racetrack or sector of ANC was a correct one. In China, we do see that in cross-sector and e-commerce, we have been doing well. Also in the China market, we have also been growing. This has already been contributing 20% of our revenue. In normal trade e-commerce, we are number four. We're very happy to see that.
In the Australian and New Zealand market, a few years ago, we have been focusing on this market as well. In 2022, we had very good growth, and this is in ANC business. Also, for ANC, I'm very happy about what my team had done, and that is we have a new slogan, and that is Health is the New Fashion. This is a new positioning of ours, so that for Swisse, this brand of ours, how do we integrate it into everyday life and into a trendy life? This is helpful in our growing our market share. In 2020 and 2021, in North America, we had 2 acquisitions as well. For baby business, even though in 2022, because.
For the pet business, because of major jitters in the supply chain in 2021 and 2022, but at the same time, we're very happy to see that in 2022, for example, for Zesty Paws, Q2 in Walmart, we have been able to come online for Zesty Paws. I'm very happy to note together with the team to say that they have been doing very well. In the 3 quarters, we are already number 2 in the Walmart sales for Zesty Paws. Helping Walmart in its 8% market share to increase that to 12.4% for Walmart. Walmart is very happy as well. For Zesty Paws, we are very trusting of this brand that it will continue with this trend and will bring on continuous growth.
For Solid Gold, we have been doing well in the China market after the acquisition in 2020 in the China pet market. In particular for e-commerce, we are number two in cat food, especially cat food for the premium sector. With our know-how in this area, we will be integrating that into our Solid Gold cat food business. In North America, Solid Gold, we have made some adjustments. We have focused on e-commerce and Amazon, the model of 1P had been transformed to 3P. We have also been able to better manage our investment in the market, and we have been able to reach our goals. The past three years with the pandemic, I had always been thinking that the pandemic would pass because in the history of humankind, pandemics usually pass in three years.
Through this kind of integration of our business, through weathering the storms in the past three years, we have more than survived. Actually, in the past three years, our debt ratio is returning to reasonable level. Our pet business and our other strategies is based on our strategy. As we continue to invest in our continued growth, our debt ratio and our return to shareholders would also grow. June of last year, we are very thankful to our long-term banking partners for their support, we have completed a $1.2 billion, which is sustainability-linked. It's a syndicated loan refinancing for three years. As we integrate ESG into our business, we have a new model, and we call it COSI or Cost Out Sustainability In model.
I believe that business success is one of the greatest public good. Our promotion of nutrition, movement, and mind is helping people to live healthier and happier lives. This is our belief, and we are advocates of that. I thank my colleagues and our partners for their support. Together, we will provide for the world over a high-quality family health nutrition solution and also create value for the world over. This is my opening speech. Next, I would like to have our CEO and CSO and our interim CEO, Akash, to speak. He joined us in 2018, and in September of last year, it's been 6 months he's been acting CEO. I've been working so well with him. We have been working day and night, I can tell you. I would like to have Mr.
Akash Bedi to talk about our 2022 business review. Thank you.
Thank you, Ms. Tsai. We are now looking for Mr. Akash to present the business review.
Good morning, everyone. Whoever doesn't know me, I think Faye introduced me. I'm Akash Bedi. I have multiple titles here, interim CEO, CSO or CO. One thing there is, I've been with this company for 5 years. Let's take that one. Long time associate. In fact, many of you will probably not know, I know the company since 2013. The first ever convertible bond done by H&H, I was with HSBC and helped them raise $300 million. Second association through Swisse. One of the key things is I know the business. I've been here for a long time. Thanks to the trust from the board and Faye, you know, to help me present the results here. In fact, not only the board, Jason has been a very good team player and a friend with me to help and guide me here.
It's the first time, okay? First time we go ahead. Welcome. After three years, we are here face-to-face. I believe many of you know our mission and vision. It's very simple. Our mission is to make people healthier and happier. That doesn't change and will not probably change because we want to retain this. We are probably one of the unique companies who wants to make difference to the people, how they live, not only the people, even the pets, through our Now acquisition. Our vision is very simple: to be a global leader, being a premium family nutrition. The reason we say family, because today family not only includes babies, but also the pets. We want to be a purpose-led company. We want to make sure it doesn't only benefit the business, but also the society.
Through our three key pillars, B&C, A&C, and P&C, we believe we can deliver profitable growth, and it will create the pathway to achieve our vision and mission. I'm sure all these brands look very familiar to all of you. Four of our key strategic brands, Beiersdorf, Swisse, Zesty Paws, and Solid Gold. We have a very simple strategy: to win in our existing markets and drive growth internationally. We'll speak in later pages, where are we on this progress. Our focus remains to grow our share, our market share, gain scale, and be relevant in every market that we present across history. We also have strategic brands, including Aurelia, Good Goût, and Dodie, that we are using to build local scale in the markets like including France and U.K.
Our growth framework will probably look very familiar to you, but this is the message we want to pass to you. It is remain well consistent despite all the macro challenges. We didn't have macro challenges. We've had several volatilities, supply, political, and even our own management changes. But strategy is for long-term. It's for here to win. It's for here to gain scale. It's for here for us to be relevant, not only to our consumers, but to our stakeholders, to our investors, to our supply partners. It's based on three-prong strategy. One, winning in core. Like I said, we want to be not only the relevant, we want to be the leader in the markets where we are, including Mainland China, Australia, and North America, through our strategic brands of Beiersdorf, Swisse, Solid Gold, and Zesty Paws. Globalization remains a central theme for H&H.
Thanks, post our acquisition of Swisse, we have been able to deliver good results of that. As we'll see in the coming pages, this is becoming one of our fastest growth pillar and also now started to contributing to our profitability. We will continue to remain this one. However, more than ever, we'll remain choiceful. We'll be strategic as to where we need to be. I do believe we are in the right markets. We don't need more markets, but we need to grow within our markets through our strategic brands. We will continue to invest for the future. We are a product-led company, and a product needs both innovation and the channel. We're gonna be investing for the next few years through disruptive innovation by not working internally, but also with our partners. This is our key success and will remain for the period.
With this framework, I do believe that we can deliver not only profitable growth rate, but we'll remain consumer-centric and be able to achieve our sustainable key targets that we have defined and committed to everybody. In the meanwhile, we will implement all these measures through effective capital management, which will deliver best-in-class shareholder returns and position us from a good to a great company. In terms of our 2022 performance, I'm very happy to say the guidance that we've given in 2022, we are able to deliver. One of the key objectives that we want to do is whatever we promise, we need to deliver that, and that reflects in our numbers. We were able to deliver double-digit revenue top line growth rate, 10.6%, and on like-to-like basis, excluding any impact of acquisition, +6.4%.
Despite all the volatilities, cost pressures and uncertainties, we were able to grow our EBITDA by 6.5%, in line with the guidance that we have given back in 2022. Our strength of our business remains is being asset light, and that is reflected in our operating cash flow percentage, through which we have been able to deleverage our net debt to EBITDA. Very happy to report our leverage, which was 3.87 at the end of June, is now 3.58. A trend that we want to continue, and we will remain consistent in our approach to go back to a long-term leverage of 2x in the next 24 months. We want to make sure while we are growing, we also reward our shareholders. That's why happy to report 50% dividend payout ratio in line with our historical average.
It's not a change; it's going back to where we were. This shows the confidence that we have in our business coming back to growth and driving profitability. In terms of specific going into our views, first and foremost, China remains our largest market. It represents close to 75% of our NSR contribution. Very happy to report all our business segments, BNC, ANC, and PNC, reported positive like-to-like growth. The most standout being positive growth rate in our infant milk formula business of 0.8 percentage point, despite all the market headwinds of declining birth rate. Our two key pillars delivered double-digit revenue growth rate of 12.5% and 20% for the period ending 2022. What drove this performance? IMF business coming back to the growth.
We increased our share in the super premium category, which remains our key focus, and we will continue to invest our time and resources on that category. For the period 2022, we were able to increase our market share by 40 basis point, and today remain number one, number four player in that segment. In terms of our ANC business, we are now getting the benefits of the post-COVID health awareness. For both our core markets, ANZ and China, we reported double-digit NSR growth rate. When we go more deeper into our guidance, we'll talk you where do we expect this business. Something we remain confident that we can drive market share growth and grow at a healthy rate going forward.
PNC, our newly created vertical, very pleasing to see that we have been leader in the North America, and we have been able to grow our market share in the key channels of e-commerce and now diversifying our presence into retail through Zesty Paws. Solid Gold is leading the front into the China market by becoming now a number two premium cat brand in that market, delivering 26.7% NSR growth rate despite all the macro uncertainties that we faced it. We are a product-led company. Innovation remains central to our expansion, and we will continue to be there. We want to be the forefront. We want to be the leader. We want to make sure any product that we launch follows our consistent model of bringing benefit to the consumers.
Within 2022, for our BNC business, the two key highlights that I want to highlight is the launch of our Biostime Probiotics with lactoferrin. It goes back to our proposition of building protection, building immunity theme. We have seen the success of those reflecting into our numbers in 2022. We will continue to innovate across the same theme of inner protection, building on theme not only in China, but in other markets as well. Not only we want to innovate in products, we also want to innovate in terms of formats. We launched our Biostime Gummies both in the China and the Italian market. This is something we want to extend into other markets. ANC, we want to premiumize our portfolio. Premiumization doesn't mean price. Premiumization means bringing better products to that.
We want to extend the success of Swisse Plus, which we did in 2021 through Liver Cleanse. We are seeing that through our healthy aging product, NAD+. Very soon, when we finish presentation, we will walk you through as to what does it mean to the consumers, why we are differentiated, and what does it bring to that. We will continue to be growing our share of Swisse Plus into that. In terms of PNC, Zesty Paws being the number 1 also has a responsibility not only to grow, but to also drive the category share. We are now extending the territories of supplements into other categories. One of the key biggest launch I want to talk about is the launch of our Dental Bones, which is one of the virgin category, if you will look at for Zesty not being there.
We want to own this category by driving share not only in North America, but use this as an opportunity to extend and enter into Asia, China, and other markets as well. Solid Gold, we want to increase the size positioning by leveraging on the nutrient boost proposition. Being a size-led, we do believe we can premiumize the range and being able to gain share into the high-end North American market. In terms of our revenue mix, this has been our strategic framework that we want to globalize, we want to diversify, but we don't want to be in the markets where we can't gain scale. Having said that, we are pleasing to say that we have been able to grow in the key markets like North America, doubling our revenue share from 4.9 to 9.6% for the period 2022.
We do expect China will remain our largest market for the next foreseeable future, but we will see increased revenue contribution coming from North America and Asian markets as these markets gain scale and we are able to launch other brands into this. With an exception of Europe, all our three markets have reported positive like-for-like growth, and Jason will walk in the financial section what does it mean in numbers. In terms of our category performance, BNC business remains our largest segment, representing close to 52% of NSR contribution, with ANC representing 35%. The most important thing that we can see is the increasing contribution from our PNC. This is our key growth driver, delivering close to 20.9% LFL growth rate, which increase our revenue contribution from 6 to 12%.
In terms of the growth by markets, with an exception of EU, all markets deliver positive growth rate. There was a strategic choice that we have as we guided in 2022. We'll be very choiceful. We want to focus on channels which only drive not only the growth, but also profitability. This we started implementing in China through Dodie, now we are extending that, the review process into other markets, UK, Italy, and North America. This is a result of that we have a slight decline in EU, we do expect in 2022 all the business to contribute positively to our NSR performance. Overall, despite China being 75% of our business from a group perspective, outside of BNC, we have a very diversified revenue mix. For ANC, 65% of it comes from China, remaining 35% comes from ANZ and Asian markets.
We do expect in the next 12 to 18 months Asia business to increase, have a higher share of pie to our revenue. In terms of PNC, North America today is our largest market. We do expect Mainland China and Asia to have a higher contribution in the next 12 to 18 months as we try to leverage H&H scale and existing markets to grow the revenue. Talking specifically about our biggest revenue contributor, BNC segment, as you can see, very pleasing to see IMF delivering positive revenue growth rate and the biggest turnaround of our Probiotics business of delivering 12.8% growth rate. As we I think Faye mentioned at the start of the presentation, 2022 was a very unusual year.
We were hit with a lot of supply chain COVID issues, but despite that, we are happy to say that we have met our EBITDA margin target of mid-teens level. Despite all those pressures across all our business, we have been able to maintain our profitability. With the exception of BNC, we are able to drive a higher EBITDA thanks to the higher increasing product contribution from probiotics. Moving to our deeper business review on the BNC segment. One of the key focus strategy we developed two years ago is not to chase the market share growth rate, but to have a healthy, profitable growth rate, and that's what we are able to deliver. Contrary to the market which declined by -6% for 2022, we were able to deliver +0.8% growth rate for China market.
We do believe that this trend in 2022 3 should continue as we expect to increase our share from the super premium category, where currently we are number four brand and grew ahead of the market, which declined by -2.1%, and we had a growth rate of +1.3 percentage point. probiotics will remain in our growth trajectory and will not only contribute to the growth, but will also contribute to the profitability for the BNC business in 2023. In terms of the market share, our overall market share from an IMF perspective was flat, but the key color, the categories that we are focusing is a super premium category. We were able to increase our market share by 40 basis point and had a marginal increase in our good IMF market as well by +0.1 basis point.
In terms of the channel performance, our overall market share saw a marginal decline. This was a strategic choice that we are now trying to increase our share of throughput, our productivity, being more focused how we can drive higher volume growth by just not investing into the price and promotions. Moving to our ANC business, a clear growth driver, delivering 14.1% like-for-like growth rate. With CBEC business, which represents today 80% delivered plus 7% top-line growth rate. The biggest highlight is our normal trade business delivering 49% NSR growth rate and delivering 20% revenue contribution, which is almost double to what it was in 2018 of 9.1%. This is thanks to all the efforts that the team has put together in building a very robust port-product portfolio. Today, we have 17 Blue Hat.
We do believe now we have the full range of products to drive the growth journey for the normal trade segment and be among the top five brands by the end of 2023. Moving on to our third newly created business vertical, PNC, a clear standard performance, delivering 26.7% NSR growth rate and able to hit number 2 premium cat brand in China. This was delivered thanks to all the effort put by the team in getting MOA registration. We have today now close to 30 registered SKUs, which is almost double to when we acquired the business in 2021. We are increasing our distribution. Today, we are in present close to 7,600.
We have a clear target that we want to accelerate our penetration into the normal trade category in the next few years and increase our share of registered SKU by adding at least 10 new products by the end of this year or early 2024. Outside of China, ANZ delivered +10.1% LFL growth rate. This was delivered through both our ANZ and domestic business and our corporate daigou business. Very good to report that we had seen significant increase in our sell-through performance for ANZ, where we grew significantly ahead of the industry, delivering 12% retail growth rate compared to 7% for the overall market. We are today getting number one position across a number of growth categories that are relevant and prevalent to the Swisse, like multivitamins, like liver health, joints, and et cetera.
One of the key focus will remain is to become an undisputed number one domestic player in the next 12 to 18 months. North America is today our third largest market, but it's a significant contributor to our group's growth. I'm very happy to say that both our brands, Solid Gold and Zesty, remains in very good health. They are delivering positive growth rates, Zesty being the standard performer. It has retained its number one position in the e-commerce. While it has been an e-commerce brand, we are now seeing a very good success rate of it entering into the retail channel. As Faye mentioned, within a period of less than one year, we have been able to hit number two market position for Zesty into the Walmart channel with a coverage of approximately 3,900 doors.
This happened during the period of all the macro and COVID uncertainties in the last year. That shows the strength of the brand that it has been there. Solid Gold had a muted growth rate, but this was all a strategic choice that we wanted to lead to the transformation of Amazon business model to move away from a wholesale business to a marketplace business. We want to be a premium-led brand, and we want to control and define the destiny of the brands that we operate, and this is the reason we made the strategic choice. We have completed this restructuring as of end of December 2022, and the business is back to our growth expectations. A quick highlight on our integration update, because in December we completed first year of our Zesty Paws acquisition.
Very happy to report that now we have created one unified management who is responsible in running all our three business units in the North American market. Thanks to that effort, we are seeing the success of that now coming and reflecting into our business. Because of the deep understanding of the Zesty Paws management into the pet segment, we have been successfully able to place Solid Gold into the Walmart channel. This is a great achievement that we have done. We do believe this is gonna create significant upside and growth opportunity for Solid Gold in the next 12 to 18 months.
Leveraging on the success of the Zesty Paws in the e-commerce, we have been able to transform its position on Amazon, and we are now gonna make sure we achieve the number one position or among the leading brands on Amazon for selected categories on Amazon. We're not yet at the end of our integration. We still have some bit of work, but we are happy to say that the front end from a management perspective work has been done. We are now looking at the last phase of the systems integration, which is related to finance, supply chain, and IT. We expect this transition to be completed no later by end of 2023. In terms of our expansion markets, we did witness a decline of negative growth rate of 6.9%.
As I explained, this was primarily led to the restructuring of channels in our selected markets like Italy and U.K. The most pleasing performance that we have to see is the Beiersdorf France performance. We delivered double-digit growth rate. We increased our market share. We continue to retain our number one position in organic OMF and our recent innovation of code, hitting a number one market position. Very happy to report that while we deliver double-digit growth, Beiersdorf business in France have now started contributing positively to our P&C profitability. A trend that we expect to increase in the coming years as we gain more scale for that. Asia remains our key highlight, delivering 39% NSR growth rate for the period ending 2022. This has been delivered by the strong efforts that we have done over the last 5 years.
These markets we see not only to contribute the growth but also contribute profitability. Hong Kong and Singapore today stand out. After 4 years of continuous investment, we have been able to deliver growth, and they have now achieved EBITDA margin targets in line with our ANC average of close to 20%. We do expect our other markets will reach this level of growth and profitability as they gain more scale in the coming years. As I said, we want to be a purpose-led company. We have created shared value ecosystem. We have created 4 enablers of our sustainability. These are defined as per the UN Global Compact and also the Sustainable Development Goals.
Governance remains one of the key principles for our sustainability, which means we have now included for all our senior managers sustainability KPIs. We not only want to embrace and talk about it, we want to bring this into our actions and our businesses as well. As we mentioned, COSI. Sustainability is not about just cost. Sustainability is also bringing value to the business. We were able to refinance our debt of $1.2 billion through sustainability-linked initiatives that only not bring capital to us, but also bring financial benefit to our organization. In terms of specifics for our four key pillars, advancing story of good health. Why did we pick this? We are a health and nutrition company. We want to bring the best products to the market. We launched over 250 new products.
Don't be scared, this is across three portfolios, so it's not a lot, but we need to innovate. We need to be there and drive the right products for that. We have been very much appreciated by various agencies across the globe for bringing those two products. In 2023, we have a commitment to develop clean label policies and bring those products to the life as well. We want to reduce our footprint. Today, in every newspaper, we see our climate change is happening. We want to make sure that we are making an effort, a conscious effort in positively contributing to that, right? We have now, in 2023, gonna submit our SBT targets to reduce carbon emission by 1.5 degrees over the next 10 years. This is a big commitment.
Being a health and nutrition company, we believe this is an obligation on us to make sure we're delivering not only value to our business, to our consumers, but also to the environment and the planet that we live in. Honoring human rights. People and product are our two key propositions. We want to make sure that we operate fairly, not within the company, but externally. We have been able to work with all of our suppliers who have signed as of today, 99% of the suppliers have signed Supplier Code of Conduct, which is a great achievement. That means they align with our objectives of treating their people fairly and honoring them. We want to make sure that we carry on this trend going forward. Last, we can't have any policy without a good governance.
2022, we created an ESG committee which is led by Laetitia Albertini, our previous CEO. She's leading this front along with Faye and Pascal, not only to monitor our performance, but also to give guidance where we need to be. We do believe this is a strategic thing for business to get outside in view while we try to grow our business. 2023 outlook. We want to be a growth-oriented company. We want to be profitable. In terms of top line, we want to make sure that whatever growth we have delivered in 2022 remains consistent for 2023. Overall, we expect for 2023 to deliver high single-digit revenue growth rate with EBITDA margins in mid-teens. We want to make sure not while we are driving growth and profitability, we're able to drive our shareholder returns while deleveraging our balance sheet.
We do believe with the strength of our businesses and the growth that we're seeing, we can go back to our long-term target of closer to 2 times net debt to EBITDA by end of 2024. In terms of our specific business units, PNC, we expect overall this business unit to deliver positive growth rate in line with 2022. This will be underpinned by our growth in the Mainland China business, where we expect the super premium category to positively contribute and grow ahead of the category. We do expect the probiotics growth rate will continue to retain its growth that it started in 2022. Specifically for ANC, we expect high single-digit growth rate, a trend which is similar to what we have observed in 2022.
We expect China market to grow close to high single digits, supported by growth in the normal trade, which will grow at double digits growth rate in 2023. In terms of ANZ, we want to go back to our number one position. We remain confident based on the success we had in 2022, we can achieve that one by the end of this year. That will help us to drive a high single-digit growth rate collectively for that region in 2023. In terms of PNC, this year is more about bringing back the growth into our businesses, despite we should not have any challenges in supply chain. We expect North America overall PNC business to grow at close to 20% with EBITDA margins in line with 2022 to mid-single digits.
With that's a wrap on my side from the business and the outlook. I leave to Jason to talk about financial performance.
Thanks, Akash. Good morning, everyone. Based on the business and the financial performance as just as summarized by Akash, then I would like to through with you some P&L balance sheet and cash flow items, which can be more useful for you to understand our overall financial results for 22. Just to reiterate, right? For the 22, based on this double-digit growth of the revenue as well as the healthy profitability level with mid-teen level EBITDA margin, this is well in line with our plan already set for 2022. As Chairman just mentioned, this is the first year of our new 3-year plan, we are quite happy. This well in line with the plan, and everything is on right track.
For the colleagues who have been following us for years, probably you're quite familiar with the adjustment principles we have been taken over the year very consistently, i.e., we adjust out the non-cash and non-recurring items which are not directly linked to our underlying business and operation performance. Again, this time, we also did the same to ensure the full transparency and consistency. With these adjustments, also it makes it easier for you to understand the actual underlying performance of the overall operation. Regarding the growth margin in our P&L. As you may recall, we mentioned before that growth margin is a very important item in our P&L. It's because the growth margin can ensure the sufficient financial resource to invest in our brand building, the channel penetration, as well as the new product development.
We are quite happy for 2022. We have achieved our growth margin above 60%. Even though, if you do the year-over-year comparison, you may notice there is a 2.5 percentage point decline. I would like to give you the reasons why there is a kind of decline in order for you to understand better our overall margin profile. For this 2.5% impact, within that about 1 percentage point is due to the product mix change with the higher contribution from our PNC business. Second, another 1 percentage point is due to the reclassification of certain free gift costs for BNC business in China from S&D into the COGS, following a more precise way of reclassification. Based on the respective purposes of usage. This is a pure just accounting treatment change.
The another remaining half percentage point is due to the higher sourcing costs we faced in 3 segments. You may recall exactly 1 year ago, when we met you for the annual result discussion, we indicated that at that time, based on the overall inflationary environment we foresee for 2022, we expected the impact on our gross margin due to inflation is to be 1-2 percentage points. This is the outlook we indicated at that time. Thanks to the great efforts made by Akash, by our overall operation supply chain, even our sales teams together, we managed to reduce that impact down to only half percentage point. With all these efforts made, we can still finish the year of 2022 with the gross margin above 60%.
In terms of the Selling and Distribution expenses, we have taken the same consistent approach to drive our spending efficiency improvement. As you can see from this final result, we have achieved the spending efficiency improvement for all our three business segments. At the same time, of course, we also would like to invest our resources to drive the growth of our new business, right? Especially in the PNC area. You may recall in the past years, we have indicated a financial discipline the company has been following, is that we cap the investment into new business, new markets at 10% of the total Selling Distribution expenses.
For 2022, under this strict discipline implementation, we finished with only 4 percentage points invested into the new markets, especially related to the PNC growth, to drive for brand building and also the new market and channel expansion in the core markets of the U.S. as well as the China. We see it's a quite good balance for us to allocate the resource to support the growth. At the same time, still to maintain our consistent track record to continuously drive up the efficiency improvement for overall S&D. The same consistent approach as taken for our admin expense management, as you can see from this slide. There's a continued improvement of our admin expense ratio. Let's move to the balance sheet items. For working capital is an important item for us to also to manage in terms of overall operation efficiency improvement.
Just now, Akash mentioned, for our EBITDA in 2022, 985% of the EBITDA was converted to the pre-tax operating cash flow. This also really thanks to partially the improvement of working capital days by around 10 days. Within these three items, you may notice that for inventory days, even though we achieved the slight improvement from last year, but still at a relatively high level. This also due to the good reasons behind. Basically, first is the safety stock we build up ahead of the new GB implementation for IMF in China. Secondly, also due to the higher sourcing cost, especially for PNC business in the U.S., especially related to the Solid Gold business. Which means that the ending balance value of the inventory will also be higher, associated with this higher sourcing cost.
Plus, also the safety stock build-up for the Solid Gold supply to China. Based on these 2 reasons, we see it is quite necessary still at this moment for us to keep this a high level in order to ensure the business continuity. Overall, the working capital is well managed with this slight improvement of the overall turnover days. Last, this is a quite important slide for us to show you our liquidity position, as well as the overall capital structure. As we know during this vocal time, the healthy liquidity position and healthy cash flow generation are very key to the company. We are very happy that we finished the 2022 with the strong cash balance of over RMB 2.3 billion.
This is after we successfully bought back $30 million US dollar senior notes in the late part of last year. If without that impact, our ending cash balance could have been even higher. With this sufficient cash resources, then we can use that for the three purposes as we indicated before. To support the company's growth needs, to ensure the continued gradual deleveraging of the overall balance sheet, to also to sustain the continuous dividend payout as a return to our shareholders. We will continue to run in the same way going forward. In terms of our capital structure, as we can see for 2022, thanks to the support of all our banking partners as well as the capital market partners. Now we have a stable, long-term focused, and a clean-cut capital structure with only two outstanding financial instruments.
One is the 5-year $270 million senior notes, which will mature in October 2024. The other is the $1.125 billion term loan, which will mature in June 2025. This is a very solid capital structure for us to carry out going forward. You may notice that for our finance cost, for 2022 increased by over RMB 240 million. This is just to reflect two factors, right? One is about the incremental $550 million US dollar debt we incurred in October 2021 for Zesty acquisition. Basically, for year of 2022, we took this full year annualization of the interest cost for that incremental debt.
Secondly, also, due to the fact that in the H2 of last year, the market benchmark rate also increased quite rapidly in association with the Fed rate hike. Despite this higher finance cost, you can see on the right-hand side of this table, which is a very important kind of curve right for us to show to you, is that based on this continued healthy generation of the cash flow and EBITDA, we managed to achieve our gradual deleveraging already in 2022. We indicated to a capital market before that our target is to use this three-year period to bring down our net leverage ratio from the peak time shortly after the Zesty acquisition, down to the level of around two times by end of 2024.
We are very happy for 2022, which is the first year of this three-year period, we managed to achieve that. Based on this very solid base we have laid out, we feel quite confident that for this year and next year, we will continue this positive trend to gradually deleverage our balance sheet.
Jason, can we also talk about hedging policy on the loan hedging policy?
Oh, yeah. Some colleagues may also be keen to know, right? Because now in these days, we have seen the US dollar, the currency exchange rate appreciation and also the rate hike. Also to reiterate, actually, the company has been following a very consistent risk management policy. For our term loan and also the senior notes, the currency exposure-wise has already been predominantly hedged through either the hedge instruments or through our natural hedge to match with our revenue source of income. Interest rate-wise, our $270 million senior notes, basically the coupon rate is fixed for the entire five-year period.
For our term loan portion, close to 40% of the term loan has also been hedged through the interest rate swap. For the remaining 60% of the term loan, it's more related to the currency rate of Aussie dollars and Hong Kong dollars, which also we will look into the proper market window to hedge or to fix if the hedge rate becomes favorable at a relatively low cost to us. That's kind of overall the practice we have been taken, even from the very beginning when we arranged our term loan and senior notes for the first time in 2016, and we have been consistently following that since then.
Now, our Chairman, Akash, Joy, and I will be happy to answer any questions you may have. Thank you.
Thank you, Jason. Thank you, management. We are now ready to take some questions from the audience. If you have any question, please raise your hand, and we will pass the microphone to you. Please also introduce yourself and your company. Charlie Chan.
Okay, thanks. This is Charlie Chan from China Renaissance Securities. Very happy to see Mr. Luo and all the management after three years in person, so that's a great opportunity. I have two questions. One is for the BNC and one is for ANC. For the BNC, I can see H&H has achieved impressive results last year by focusing on the super premium segment. I would like to ask, our observation shows some of the industry players actually choose to participate in the competition in the mainstream or even economic segment. What signals or factors you have identified to decide that you want to participate in the super premium segment going forward while the whole market is actually shrinking?
Also, what is the competitive advantage you have, so that you are so confident that you will continue to gain market share and do well in this segment? That's first question. My second question is regarding the ANC business. This year, what we can see in China is the overall consumer demand actually still remain relatively weak, although there is sort of a recovery after COVID. Also, the CPI in February actually is pretty low, it's at 1%. Our understanding is ANC products are more of a discretionary, and there may be some pricing pressure or competition pressure. How do you see the pricing trend and marketing investments in this year in China's market? Thank you.
Thank you. Thank you for your question. I think it's a good. They took the mic away from me. Can you hear me? Thank you for this question. I think if you go back to our company marketing strategy, which is PPA, Premium Proven Aspiration and Engagement, right? Since our company inception, we have always focused on the premium end of the market. Why we have chosen is because we want to bring the best efficacious pro-product, which is backed by science and bring benefits to the consumer. We have chosen to stay away from basically what we call mass to the commodity, because how do we differentiate? We want to be differentiated. Differentiated in today market is not sufficient. We want to be distinctive as well. Distinctiveness come when you bring the new innovation to the market, right?
All our products, as you know, for China, are coming imported. We were one of the first few players to bring LPN, OPN into the market as well because that brings immunity and protection team for that. Talking in terms of specific market data, as you mentioned, right? If you look at from a super premium category, plus category, that increased by 10 percentage point in 2022 on an MAT basis. Whereas the mass market, which we call a mid-tier, declined by -21 percentage point. If you look at from overall, yes, mid-tier or mass is bigger in size, but the shape of contraction of those segments is pretty sharp compared to the super premium. Our products, which are there, just brings benefit, and we do believe we have that advantage to gain share into that. How are we gonna win through that?
Like I mentioned, we have a two-prong strategy. One is distribution penetration. As of December 2022, our overall weighted distribution in the market was close to 67%, which increased by 3 percentage point, not basis point. We are still under-indexed compared to the competition when it is close to 90% for the top players that we look at. We have a significant room for distribution expansion across MBS supermarkets and the pharmacy to be there. That's a constant effort that we're trying to do and grow with that. How are we gonna share? Is through increased consumer education. We want to be driving our share of growth through education, why our product is better. One of the initiatives that we started, among others, is to have baby advisors.
Today, we have close to 600 baby advisors in China, covering across approximately 1,200 hospitals. Who's the PNC consumer? It's a pregnant mother or anticipating to be a mother, right? We want to talk to them right at the point where they're coming to, right? We are engaging with them through various education session, through various classes. We want to be there, right? We are now displaying our products through gift packages, right? We don't want to limit to just Biostime. We want to show the full depth of Swisse and to Dodie as well, so they can see H&H is a family nutrition provider. As of the first two months of 2023, we had given almost 30,000 gift packages.
Based on that, we have seen 10% repeat purchase rate, which is quite a high factor that we see because this category has a lot of stickiness and a repeat purchase coming to this. From a overall category to perspective and our activation focuses on very much building on that 2 levels.
any other
Sorry. Swisse. Sorry, I forgot about the Swisse.
Yeah.
My apologies. I think for overall ANC business, we do believe Swisse is in a very unique position. I think you asked a question of the market fundamentals. For the first time in 2022, the overall market increased by 7 percentage point. This was driven by both the volume. Pricing is still on a bit of a challenge, but the volume growth was 15 percentage point. Again, when you segment the market across the various price tiers of it, the premium end is still growing. How are we trying to grow? We want to make sure that any price that is there is given by the product that we give. Our Swisse Plus range, which we have taken to the mature elite people, like elderly, we want to focus on that because we want to make sure we give the right product.
Products like our NAD+ Healthy Aging, that we will talk about it, and our cholesterol are leading the front on that by educating to them why this product is relevant to that. Market has come back to growth rate. Our overall market industry growth was 7%. Swisse can sales was +30%. That's why we were able to increase our market share from 6.6 percentage point to 7.5 percentage point on the cross-border channel. Within the normal trade, today we are among the top 10 brands. In fact, we're number 4 brand with close to 2% market share. It's a very fragmented market. In terms of the relative growth of the market, as you were asking, we increased our share by 45%, whereas the industry grew only by 15 percentage point.
Both in the normal trade and the cross-border business, we are growing through volume and value. Specifically into the normal trade, which is our growth driver, we do believe 2023 will be the perfect platform. We have our entire range of products built through Blue Hat and the domestically manufactured SKU like whey protein powder, vitamin C effervescent, et cetera, that will help us to get more closer to the consumer. We want to be a product-led and a brand-driven company, not a channel-driven company. That's our key area of focus in 2023.
One point I need to add about Swisse business. We see the growth more like driven by the increased penetration. As you know, like multivitamin is quite mature category. Since like 2 or 3 years ago, now we see the very fast-growing the multivitamin category because we see that many young generation, they join this category because they want to maintain their health instead like they just buy the supplement for release pain of the joint. They are take multivitamin just for the keep the healthy. That's a change. Increase the penetration. I think the driver more come from the increase of penetration is that price. Yeah.
Thank you. Carol.
Thanks, management, for taking my question. This is Carol Xia from Morgan Stanley. Firstly, glad to see that you delivered everything you promised for 2022 and achieving the growth target in the first year of your new three-year plan. My first question is regarding your priority for 2023. I understand that financially you're targeting to bring down your net leverage ratio, but what about business and operational-wise, what is the top 1 priority for the new year? I remember Lu Zong was talking about supply chain back in 2022. What's on your mind for this year in 2023? My second question is on the IMF.
You outperformed peers in industry in 2022, and if you're targeting a stable IMF growth for the new year, what is the underlying assumption that you are seeing for the new birth, for the industry value and volume growth, as well as your market share? My third question is on your PNC. Can I get a detailed breakdown regarding the Solid Gold as well as your Zesty Paws brands? Whether the strategic adjustment for Solid Gold has been completed, and if you're targeting the in-line growth in the new year for the PNC, what is the growth respectively for Solid Gold and Zesty Paws? Thank you so much.
Thank you. I think our priority, like I mentioned very clearly, deleveraging will be an outcome of the business strategy that we place. It's not just the one initiative. It will be an outcome of the initiatives that we're placing. For us, the key focus remains is consistent profitable revenue growth for all our business units. We will be very laser eye-focused on delivering that initiative across all our markets. Carol, as we mentioned in the call as well last night, right? We will not be scared away in making some tough choices, even if it comes at the expense of some market share loss, because we want to make sure that our products are reaching to the consumers where are there.
We want to make sure any investment that we're doing is not a price lag, it's actually a consumer building or a category build-up growth rate for us. That's why you can see we have been very disciplined in maintaining our S&P ratio. Jason explained how it has been there, and that has been a constant effort that we want to make sure we are investing those money in growing our category share, in increasing our penetration. As Pei mentioned, for Swisse, the biggest growth rate is driving penetration. Penetration comes through consumer education, through all the efforts that we have to do. If you were to ask us the key focus for us, we want to retain our growth journey that we have outlined during the 3-year plan that we do.
We want to make sure the KPIs that we have given to you for ANC, BNC, and PNC, that we not only meet it, we try to over-exceed that. In terms of the challenges, I will say that still inflationary challenges still persist for some of the food business. We are not yet out of the woods on that. Having said that, we do expect these trends to normalize at the end of Q3, early Q4. Thanks to the effort that we have been trying to do in taking control of our procurement and the scale that we have, we should be either able to negate through increased economies of scale or through product mix, like we have successfully delivered for our BNC business through increasing contribution from probiotics as well. That.
The last, which we will be very careful and choiceful, is to take selective price increase, assuming the market warrants that and the market expectation and the product delivers that. In terms of the priority, I would say that's our key focus. In terms of the IMF growth rate, as I explained, we do expect the overall market again to contract in 2023. Having said that, our expectation for the super premium category is that it will still show a positive growth rate. This has been driven by the increasing demand of quality products into the market. Outside of that, from a category perspective, we as a business, as I explained, have significant white space opportunity or headroom to increase our distribution. Just to give you some statistics, we have been
able to increase our contribution from lower tier cities, which was 50% a few years ago, to now 70%. This is where we are trying to bring much more benefit to our business because not only it drives growth, because these are the regions where still the birth rate is positive, but will also drive the profitability for the business as well. In terms of PNC, I'll defer to Jason to give you specific guidance, but as I mentioned, for us, Solid Gold restructuring is behind us. We have completed the transformation of that. This year is about execution, which means premiumization of our portfolio, making sure the strategic channels that we are taking care of, like E-com in Amazon and Walmart, we are able to deliver the outlined performance for that one. Jason, you can use it now. Okay.
For our PNC business, actually, in our financial results, we have reported as a 1 piece because we do see, right, for Solid Gold and Zesty, they are operating in the same market. We share a lot of channels, there are a lot of kind of synergies for us to drive together. This is why we do not, like I say, report separately for these 2 brands, because we see as a 1 piece of the business to manage together. What we can assure you is in terms of the growth performance for last year and also going forward, we will ensure the strong double-digit growth for each of these 2 brands. Adding together show also continued strong double-digit growth. In terms of the margin profile, you already seen from our acquisition announcements before, right? For Solid Gold and Zesty.
For sure, in terms of gross margin for these two brands, they can be different. It's because they are two different natures of the business. For Zesty is a supplement business. For that one, as you may recall from our acquisition announcement, the gross margin is around 60%. For the year after the acquisition, we can see this more or less the margin profile maintains. Even though, yes, in order to expand into the new channels for the Zesty business, especially offline, we may need to reduce a bit in order to gain the scale, right, during the beginning stage. Overall, the margin profile for Zesty does not change.
Going forward, we believe for Zesty as a supplement business, the margin profile should come closer or mirror the existing supplement business of the company. In terms of the Solid Gold, you know it's a food business. You have seen from our acquisition announcement, the overall gross margin is lower. When you look at our total PNC gross margin last year, 46%, then for sure, the Solid Gold gross margin is below that. Plus, last year, as we have mentioned, we do face the inflationary pressure.
This is why for Akash and also our whole operations supply chain teams have worked very hard last year to optimize in the U.S. market, also in the China market, to still support a healthy growth margin for the Solid Gold business and going forward, right? As indicated, we expect towards end of this year or early next year, the margin for Solid Gold business will also gets normalized. Overall, we see, right, there's a same consistent trend for us to aim for this profitable growth. In terms of the guidance for next year or for this year for PNC business, in addition to the strong double-digit growth, we will target a stable EBITDA margin profile for the entire PNC business from 2022 to 2023.
Just 1 point to add, Carol, right? Just to echo what Jason said there, right? We do expect normalization to happen. In terms of longer term, we do expect PNC business to have a higher profitability to what we have. Today, we're trying to find a very good balance between growth and profitability. We do expect Zesty Paws will remain a very profitable growth. For Solid Gold, we need to invest behind the premiumization. Longer term, we do expect by in next two or three years, PNC business to hit low double-digit EBITDA margins in line with our average that we have said.
for the business plan. We remain focused on delivering that % to that. Just to add, in terms of we understand, right. We do expect with an exclusion of any one of the events like we faced last year in Russia and Ukraine, overall, we have seen the peak of the inflation, and we see some of those getting subsided in the next quarters.
Thank you. One last question. Over there.
Hi, this is June from Haitong. Thank you so much for the presentation. I have three questions. First, firstly, what is the plan regarding the repayment of your 2024-dollar bond, which is happening in one and a half year, right? I would like to know if H&M, H&H still has some like M&A plan. Lastly, what is, do you have any, like, cash flow guidance for this year? Thank you.
I'll take the second one, June.
Okay.
Thank you for your question. I think as we explained, we don't do M&A for the purpose of scale. Our M&A plan is very well-defined to make sure any acquisition that we do contributes strategically to us in terms of either portfolio expansion, product expansion or geography expansion. These are the criterias that we look at it. In addition to that, we have financial KPIs that it needs to contribute positively to our growth and profitability targets that we as a business operate in. Post our acquisition of Swisse, we had completed a family nutrition from both babies to the adults. Through pet, now we have become an integrated premium family nutrition. We do believe that now we have a full set of portfolio that we can capitalize to drive superior growth rate for the next few years.
As you can understand, Zesty Paws is a number one pet supplements. It's a category that has started just in North America. We want to capture this trend, not only there in the domestic market, but take this into Europe and Asia. Pet food globally is a growing category. As we can see, North America today represents 45% of the market, and China is only 4.5%. We see significant upside for both our Solid Gold and Zesty Paws. Our efforts from a growth perspective will remain driving internal growth, driving making sure that we can drive higher synergies like we've been doing. As you can see from our track record of Swisse, when we acquired the business, majority of the sales from Australia was through exports. It was having 0 direct sales into the China market.
Today, we get close to 65% sales for Swisse from Mainland China. Not giving as a percentage target, this is the same leg of success that we want to demonstrate for Solid Gold and Zesty and Solid Gold in the coming years.
Regarding your question about the plan for the bond refinancing and also cash flow guidance. For the refinancing side, as you may recall, the company has been taking a quite prudent approach to refinance offer debt instruments, say, usually 1 year ahead of maturity, so as to maintain a long-term focus capital structure. To us, definitely we will not wait till close to the maturity for the refinancing. Right? We will do it quite earlier than that in order to have sufficient time buffer to explore the various cost-effective financing alternatives. Meanwhile, you may notice that we already successfully brought back $30 million senior notes late part of last year.
Now the outstanding amount is only $270 million, which means that, say, the overall refinancing pressure, right, cash flow wise, is becoming lower than one year ago. Definitely, this is one of our key focuses, financial measure wise, to ensure this proper refinancing with objectives to, again, keep a long-term focus capital structure and also to try to optimize our finance cost as much as possible. Regarding the cash flow guidance for this year, it is also very consistent with the principle Akash also mentioned earlier, is that we target to maintain, to keep at least 90% of the EBITDA to be converted to the pre-tax operating cash flow. Meanwhile, also to maintain a moderate CapEx payment. As we indicated last year, right?
Our CapEx payment last year was, we indicated to have $130 million, and if you look at our final result is $125 million. We intend to keep at the similar level going forward, which means that it will not put incremental or additional cash burden on our overall liquidity position. Overall, we are quite confident, yeah, we can maintain this healthy cash flow so as to support company's growth needs. Also to achieve the continued deleveraging and the continuous dividend payout.
Okay. One more thing I want to add about the strategy. M&A strategy. We are I don't know why, it's the image for H&H is diversified strategy. No. We are more focused strategy, like BNC, ANC, and PNC. We're all for the family nutrition, right? Like at BNC, we have infant formula, but also with supplement. We're the number 1 brand for kids supplement in China. We can see a lot of know-how can share, like, R&D and also the ingredient. Pet, you know, as Zesty Paws have a big SKU for fish oil. You know, Swisse have a big volume for fish oils. That we can share, we can synergy, right? Can reduce cost. We are more focused on strategy, not the diversified strategy. Now we are quite happy.
We have three pillars and then now for coming years, we are more focused on how to deliver the result, how the development bring the great brand to other market, like Zesty Paws from U.S. to China and to Australia to Asia, and Swisse from Australia, China, and other market. Yeah.
Thank you. Thank you, management. Thank you everyone for joining us today and the great question. This brings today presentation to an end. Thank you.
Thank you.