Good morning, everybody. It's a pleasure to see so many of you here in person again in Zurich, and I also would like to greet all of the participants which have joined via the live webcast. It's a pleasure to welcome all of you on behalf of DKSH. As Andre said, I'm Terry Seremetis, the head of Investor Media Relations at DKSH, and with me today is Ido Wallach, our CFO, and Stefan Butz, our CEO. Before we start, it's my duty to remind you to look at the disclaimer of the presentation regarding forward-looking statements. For those who do not have the presentation in front of you, please go to our website, www.dksh.com, look at the Investor Relations section. With that short introduction, I'm looking very much forward to the call, and I hand over to Stefan. Thank you very much.
Yeah, good morning, everyone here in Zurich and in the call. It's a pleasure. Thanks for joining, and a very warm welcome here for our 2023 full-year results presentation. Yeah, joining here is Ido Wallach with me and the whole Investor Relations team, so also thanks to all of you. So today's agenda foresees a short recap of our highlights of the past year. I will then continue with a review of the business units in 2023, and then after that, Ido is going to follow up with a more detailed financial update. To conclude, I will provide an outlook before we then open the Q&A session. We are very pleased to report that our results are again marked by growth, further market margin expansion, and effective cash management despite the macro environment we faced in 2023.
This shows that our value creation model works very well. DKSH net sales increased by 5.3% to CHF 11.1 billion at constant exchange rates. Our core EBIT grew 12.6% to CHF 329.9 million. The strong cash flow of CHF 282.3 million allows us to further pursue our M&A strategy and to propose a higher ordinary dividend of CHF 2.25 per year, an increase of 4.7% compared to last year. These results go hand in hand with our consistent track record of achieving 10.1% core EBIT growth at constant exchange rates and 60 basis points core EBIT margin expansion since 2019. At the same time, we generated more than CHF 1.1 billion of free cash flow, returned approximately CHF 640 million via dividends to our shareholders, and made 25 acquisitions. Our balance sheet remains very strong, and we are net cash positive.
Our 2023 results confirm our value creation by capitalizing on our diligent strategy execution and our resilient and scalable business model. As you have seen with the other Swiss companies, the Swiss franc has considerably strengthened last year, and on top, we faced some very weak Asian currencies. I will primarily be commenting on our results using constant exchange rates, as this better portrays the actual underlying operational performance in our local markets as well as our competitive strengths. The exceptionally strong appreciation of the Swiss franc resulted in a negative currency effect of 9.2% on core EBIT. The focus on constant exchange rates also ensures better comparability of the results between 2023 and 2022. Let's now focus on the highlights of 2023, which underlined DKSH's purpose of helping business to deliver growth in Asia and beyond. Our clearly defined growth strategy is firmly established.
In all of our five focus areas, we demonstrated strong performance and achieved noteworthy successes. Throughout 2023, we consistently advanced and developed our business. In line with the business unit strategies, we entered new strategic partnerships with clients like Beiersdorf, Lipton, Novartis in different markets, and acquired three companies and one early in 2024. Our efforts to evolve our corporate culture have also been proven successful, as we strengthened our leadership team, been awarded with the Great Place to Work certification in nine markets, increased the share of women in senior leadership positions to 35 34%, sorry, and streamlined our headcount. We also grew our digital business. We implemented SAP S/4HANA and achieved double-digit growth in our digital platform, DKSH Connect.
We made progress in the digitization of our supply chain network, such as the automation of our distribution centers, and are engaged in various AI pilot projects, for example, in the area of data utilization and optimization. This is a confirmation of DKSH's consistent commitment to its digital strategy, the development of its performance, marketing, and e-commerce capabilities. To further develop our operational excellence, we invested in our labs and distribution centers. In addition, we expanded the Global Shared Service Center in Malaysia, where, by the way, we celebrated 100 years of market presence in 2023. The proof of concept of our focus on operational excellence was in the business unit Performance Materials, where, in a very challenging market environment, we increased the core EBIT margin by 80 basis points. More to that later. We also remained firmly committed to sustainability.
We closed 2 sustainability-linked credit facilities and achieved more than 50% reduction of our CO2 emissions. For all our sustainability achievements, we have been recognized by EcoVadis with the renowned gold rating for the second year in a row. With these achievements, we fulfilled our purpose of enriching people's life in Asia and beyond. In 2023, DKSH continued to focus on higher profitable business. Due to the economic situation in the M&A environment, the first half of the year was rather quiet, after which the pace of acquisitions picked up again. We successfully completed three acquisitions in 2023 and signed another one early 2024, which led value to our portfolio and enhanced our growth. Since 2019, we have acquired 25 companies. More than 80% of these M&A transactions were spent on higher profitable business.
Through these transactions, we extended our presence across regions, broadened our supplier as well as customer base, and enhanced our value-added services. We will further pursue our M&A strategy in 2024 on the back of a solid pipeline to accelerate our growth. DKSH has consistently dedicated itself to achieving sustainable and profitable growth for the benefit of its shareholders. This commitment is underlined by the fact that we have increased our dividend for the past 11 years. For 2023, our board of directors proposed an ordinary dividend of CHF 2.25 per share, which was equivalent to a growth of 4.7%. If you are a euro or U.S. dollar-denominated investor, the dividend growth in your local currency would be approximately 10%-15% due to the appreciation of the Swiss franc. We will continue to pursue this progressive dividend policy in the future.
Let me now provide you an update on the progress in our business units, starting with healthcare. In our business unit, healthcare, we delivered accelerated net sales growth of 6.5%, which was driven by a strong underlying market and solid business development as we expanded with existing and new clients, especially in Thailand, Vietnam, Malaysia. The Core EBIT grew by an impressive 14.5% to CHF 155.9 million. The EBIT margin increased from 2.6%-2.8%. This strong year is also due to the continued focus on higher added value segments and services, such as the own brands and medical device business, as well as our full agency services. The acquisition of [Patterson] in Australia, as well as Medipharm in Brunei early 2024, will further strengthen the business unit's market position. This year, we will continue to expand our market position and drive into higher value segments and services.
Moving to the business unit, consumer goods, where we have successfully capitalized on our market position in Asia Pacific. The focus on our core activities resulted in net sales growth of 2.2% to CHF 3.5 billion. The core EBIT grew, and the core EBIT margin was 2.3% despite the lower consumer sentiment and subdued market volumes. As we progressed through the year and following a detailed analysis of our portfolio, we decided to focus even more on our core FMCG business, which nowadays already accounts for around 95% of the business unit, with a slightly higher margin and which is growing. So we decided to fully exit our non-profitable, non-core fashion retail business, which is already fully reflected in the 2023 results. With the acquisition of CS&Co., we strengthened our capabilities in the growing beauty sector in New Zealand.
With these steps, we will continue focusing on our position in Asia Pacific by driving growth and profitability in our core business under the leadership of our new business unit head, Chris Ritchie, who had an impressive start at DKSH and showed already his very strong growth mindset. Let us now focus on the Business Unit Performance Materials, where we report net sales growth of 6.0%, 6.1% despite the challenging market environment. Driven by gross margin expansion, Core EBIT in 2023 grew double-digit with a strong Core EBIT margin increase of 40 basis points to 8.1%. This was driven by disciplined pricing management as well as strong cost control, including right-sizing. To improve comparability to the standard reporting in the specialty chemical sector, we decided to expand our disclosure for Core EBITA. The Core EBITA also lies above previous year with a strong increase of 17.4%.
The EBITA margin increased even 80 basis points compared to 2022 based on positive contributions by all regions: Asia Pacific, Europe, and North America. We experienced increasing demand in the life science sector, which comprises food and beverage, pharma, as well as personal care in Asia Pacific and Europe, and we expanded our market region North America. The business unit also reduced inventory levels and improved working capital days. Our scalable and global business model, alongside our business development and the potential for additional industry consolidation, lays the foundation for future growth opportunities. Last but not least, let us focus now on our business unit technology. I'm really pleased to say that the whole team achieved once more remarkably strong results in 2023. Net sales and core EBIT increased double-digit, resulting in an increased core EBIT margin of 6.8%.
The business unit consistently implemented their growth strategy and sustained growth in key areas such as scientific instrumentation, precision machinery, and the equipment for the semiconductor industry. We also benefited from our consumables and service business, which remained to be a significant catalyst for growth. The scientific instrumentation area was further strengthened by the acquisition of Bio-Strategy in Australia and New Zealand, underlying DKSH's leading position in this industry in Asia Pacific. Overall, the business unit is on track with its focus of fostering its position in key industries and higher margin segments and services, which goes along with further market consolidation potential. To sum up, all four business units increased their Core EBIT at constant exchange rates compared to 2022 and will keep focusing on their growth strategies to strengthen their market positioning further.
Now, I hand over to our CFO, Ido Wallach, who will guide you through the financial results in more detail. Thank you very much.
Thank you, Stefan. Good morning, everyone. Welcome also from my side. It's a pleasure to have you here. Pleasure to see in person those of you who are in Zurich. And pleasure to provide you with further details of our 2023 results. As always, to ensure best possible comparability of our underlying operating performance, I will also focus on our results at constant exchange rates. We are very pleased with the achievements made in 2023, as they are reflected in our key financial metrics. Net sales grew 5.3% at constant exchange rates. Core EBIT increased by more than double the rate of net sales at 12.6%, again at constant exchange rates. Core EBIT margin increased by more than 15 basis points.
This marks the fourth consecutive year in which we increased our core EBIT margin. Core profit after tax stood 5.8% higher than in 2022, again in constant exchange rates. We generated, as you heard, CHF 282.3 million in free cash flow, representing a cash conversion rate of 137%. This is the fourth year in a row in which we surpassed 100% cash conversion and our long-term target of 90% conversion. These results affirm, once again, our solid track record of top and bottom-line growth, together with margin expansion and alongside strong cash generation. Let me now cover our net sales and core EBIT development in more detail. We grew our net sales organically by 3.2%, slightly ahead of 2022 when we reported 3.0% growth. M&A was once again an important component of our growth with a contribution of 2.1%, again an acceleration versus last year.
Combining organic and M&A, our net sales growth at constant exchange rate was 5.3%. Our net sales, similar to many other Swiss companies with significant international business, have been strongly affected by 7.5% FX impact following the strengthening of the Swiss franc. This is mainly a transactional impact when converting our results from local market currencies into Swiss francs for reporting and consolidation purposes. From a transactional perspective, our sales and cost structures are primarily executed in the same currency. When they are not, the exposure is hedged. Moving now to the development of our core EBIT. We are very pleased with our continued core EBIT growth. Our core EBIT grew organically by 5.1% ahead of our organic, ahead of our organic net sales growth. M&A added 7.5% to core EBIT growth, also ahead of its contribution to top-line growth.
Net sales growth, combined with continued strong focus on operational excellence and resource optimization, deliver an overall core EBIT margin improvement of more than 15 basis points. Similar to net sales, the transactional FX effect had a strong negative impact on our EBIT, measuring -9.2%. The investor materials that we publish today on our website include details on the items that we consider non-operational, of a one-off nature, or in short, non-core. There are several items that fall into this category in 2023. The largest, which accounts for about 50% of the total, relates to the complete discontinuation of our unprofitable fashion retail business. The remainder primarily includes fair value adjustments and share-off results in associates in which we do not own majority share or control. They are therefore non-core to our operations. To note, of the total CHF 24 million non-core items, more than 70% are non-cash.
All in all, Core EBIT reached CHF 329.9 million. Core EBIT margin increased by more than 15 basis points and reached the threshold of 3.0% of net sales. Taking a moment to reflect, we also review our full-year results in the longer-term context to ensure that our strategy execution measures up consistently in strong term, long-term performance. Over the past five years, we have achieved continuous growth in all three key financial metrics. Since 2019, the year before COVID, at constant exchange rates, our net sales grew at a compound annual growth rate of 3.3% and our core EBIT margin sorry, core EBIT at 10.1%. Our core EBIT margin has increased 60 basis points to 3.0%. At the same time, we deliver increasingly solid free cash flow generation, exceeding 100% conversion in each one of the past four years.
As you are all aware, a key component of our agility and success is our low-risk asset-light business model. We typically lease our offices, lease our distribution centers, and lease our transportation and fleets. As a result, capital expenditure in 2023 remained at a low level of 0.3% of net sales. Let us now move on to our balance sheet. It remains very solid and in many respects even stronger at the end of this year with strong liquidity position and no net debt at the end of 2023. I would also like to emphasize three things. We continue to have strong focus on timely collection, which drives our lean working capital balance. Our trade receivables and trade payables, as a percent of net sales, are all at five-year low in 2023 following continued sequential year-on-year improvement in each of the past four years.
This is a result of relentless collaborative efforts of all our business teams who understand the pivotal role of lean balance sheets to our business and of whom we are very proud. The same teams work similarly relentlessly on pursuing our just-in-time inventory strategy. Inventory level in 2023 at 10.3% of net sales is also at five-year low with improvements across all business units but most notably in Performance Materials. We operate a low-risk asset-light business model that enables a high and consistent free cash flow generation. In 2023, we use our cash flow primarily to fund acquisitions and to distribute an increased ordinary dividend. Accordingly, our net cash position by the end of 2023 stood at CHF 6.5 million compared to a slight net debt position of CHF 42.3 million at the end of 2022. Core return on equity increased 20 basis points to 11.7%.
Core return on capital employed increased 140 basis points to 12.9%. With a strong equity ratio of 31.8%, again above last year, we have significant leverage headroom to further grow our platform through industry consolidation. We continue to carefully assess deals, and only acquire if we find them value-creative, scalable, and available for a reasonable price. Let me also provide you with some additional financial indications before we return to Stefan to elaborate on our future prospects. In terms of M&A, we estimate that our recent acquisitions will contribute around 0.5%-1.5% to net sales in 2024. On the FX side, we again expect some headwinds. Assuming that current rates prevail for the remainder of the year, we expect a full-year FX impact of -3% to -5%. Tax rate, we estimate it will remain within the mid-term range of 27%-29%. Capital expenditures is expected to remain within 0.5% of net sales for the full year. With that, I would like to thank you again for your attention and hand back over to Stefan.
To conclude, let us move to the outlook now. With respect to the current macroeconomic landscape, we see that Asia Pacific continues to be a key region of global growth. Investments and a growing population further support the economic development. We also state a relief from rising consumer price as inflation has returned to pre-pandemic levels due to fewer challenges in the supply chains and the effect of monetary tightening. Looking ahead, we remain very optimistic about the prospects for Asia Pacific. We are confident about Asia's long-term potential, which allows us to benefit from favorable market industry and M&A consolidation trends.
We remain committed to deliver GDP-plus sales growth at constant exchange rates and expect core EBIT in 2024 at constant exchange rates to be higher than in 2023 by holding on to our asset-light strategy and our resilient business model. As always, our outlook assumes economic growth in Asia Pacific as well as exchange rates to prevail at current levels and exclude any unforeseen events. We intend to advance our business by consistently implementing our growth strategy, embracing digitization, enhancing our corporate culture, prioritizing sustainability, engaging in M&As, and maintaining a focus on operational excellence. At this point, I'm also very happy to announce that DKSH will organize a Capital Markets Day in London in the second half of this year.
We are convinced that this is a good touchpoint outside of the usual reporting calendar to deepen understanding of DKSH and showcase our expertise and growth strategy across all business units as well as to update you on our path forward. We will provide further information about location, date, and the agenda over the course of the year. With that, I thank you all for your attention and invite you now to address your questions in our Q&A session. Thank you very much.
Do we start first with questions here in Zurich from the room? We have a microphone, so I kindly would ask you quickly to tell us your name and the company you're working for. So let's start with Pascal, please. Go ahead with your questions.
Yes. Hello, everyone. Pascal Boll from Stifel. Two questions. The first one on FTEs. I was quite surprised this morning when I saw the decline in FTEs by around 10%, especially in consumer goods, but it doesn't really seem that this feeds through to the results, especially on the margin side of consumer goods. So what's behind that dynamic? And then secondly, maybe just staying with consumer goods, we have seen of some FMCG goods companies that in Asia we saw some deflationary dynamics. Do you think that or what do you think will be the impact going forward on your business? Do you see volumes increasing from here? What do you think? Thank you.
Yeah. Thank you very much, Pascal. So, the first question I would take on the FTEs and the second one then hand over to Ido. You might recall that in the second half of the year we announced that we dissolve our joint venture with Smollan, the DSFM Field Marketing, business. So they took the majority of the people, with them in our non-core markets, whereas we kept some in in the core markets where we will continue to run field marketing in an integrated way. Please don't forget, this is a significant amount of headcount but primarily in countries like Myanmar, Cambodia. So we talk about people who are not even making, you know, $3,000, $3,000 or CHF 3,000 per day. And in the continue part and in since the dissolvement, partially we need to hire some freelancers. So those costs will be then included in the in the P&L, but you don't see in the FTE headcount.
Thank you. With, thank you, Pascal. With regard to FMCG overall, I think we're more optimistic going forward on the level of demand. There have been some ups and downs with the inflation over the past few years. In our disclosure in the annual report, you can see that organic growth has turned positive for us in FMCG this year, versus a decline. So +2% versus about -1% last year. So overall, I think we are more optimistic going forward. We have seen a valuation impact of 2% and a volume impact of -1%. Then, additionally, we had some business development effect. So overall, I think we are more optimistic than before and not concerned too much about the deflationary pressure.
Thank you very much. Maybe ladies first. Second question from Stefanie, please.
Thank you. This is Stefanie Scholtysik from Mirabaud. I have a question on your guidance. So you guide GDP-plus on CER. First, on the GDP on a weighted average. So what's your expectations in terms of GDP on that weighted average? And would this include also inflation or not? Maybe if you could break that down. So how much is real GDP? How much would be inflation? And would this also include bolt-on acquisitions or is it purely organic-driven? That's the first one.
Okay. So let me take it. Go. Thank you, Stefanie. Yeah. The expectation for the main region we're in, which is Asia Pacific and Southeast Asia, is always ahead of the rest of the world. So we're already starting with, I think, a good head start there. We're talking about the estimates between 3%-3.5%. They will obviously change throughout the year, versus what you see in Europe and North America of about 2%. It's our objective and our commitment to grow ahead of it. That's including inflation.
Would it also include bolt-on acquisitions or is this purely organic?
Bolt-on acquisitions are included. Yes.
So in the GDP-plus, it's included bolt-on.
Yeah.
Okay.
Like last year, the GDP-plus, you know, weighted on our, you know, footprint was low 3%. And as you can see here, we delivered 5.3%.
Okay. Thank you. And then, a second one, if I may, on Performance Materials. I mean, we saw quite the decline in organic growth in the second half. And did these destocking still continue in the second half or, and what do you expect in the first half for next year? Do you think there will be an improvement of the situation?
Mm-hmm. Yeah. Thank you very much. So yes, you are right. Comparing H1 versus H2, there was still some destocking, especially in Q3. If you compare Q3 with Q4, we have seen that Q4 was better than Q3. So looking at the market overall, we feel that probably Q3 was the bottom of the market from what we have seen. We also have seen a very good January. In terms of the outlook for 2024, we are in alignment, you know, with many others who are forecasting that H2, you know, we should see a much better environment than what we have seen last year. I think H1 will remain to be a little bit challenging. But again, I think the bottom was in Q3. So we are optimistically going into 2024.
And yeah, if I can add to that, where you surely have seen destocking is in our inventory. As I mentioned before in my speech, a big proportion, about two-thirds of the inventory decrease that we have seen is in our own PM inventory. So we're going into 2024 with a healthy, very healthy inventory level, which we can price well.
Okay. And maybe a last one from my side and then I pass it on. Do you have any view on Thailand?
Yes.
What do you expect?
Yes. A positive view. Very good. I think what we have seen in, you know, 2023, was a nice growth over 2022 in Thailand. You might have seen that the GDP forecast by the Asian Development Bank for 2024 for Thailand was higher or is higher than in 2023. So that's optimistic.
I also had the opportunity to meet the Prime Minister most recently when he was on his way to Davos. So it's quite optimistic, you know, what he is sharing about his plans for Thailand for the years to come. And there's also the incentive scheme he's trying to establish now over the next couple of months. So on the back of a good growth we have seen already in 2023, yes, we look very optimistic in Thailand for 2024 across all four business units.
Thank you very much, Stefanie. Next question. Gianmarco, please.
Good morning, everyone. Gian Marco at ZKB. Three questions from my side, please. The first one is on Terra Firma. Can you please give us a bit of better understanding about the development of the business there? How is the integration going on and also the search for bolt-on acquisitions there?
Is the profitability still significantly above the 8% on API level that we see for your segment? Second question is regarding the fashion business that you discontinue. Can you give us a bit of sense about the size that that's still made within your portfolio and also how big the loss was that you had to face there just to better understand now the profitability improvement that comes out of this disconsolidation? And then the third question is regarding your own healthcare brands. I was astonished when I saw on slide number 6 the over 20% API margin that you have for some of the acquired companies there. That's definitely above my expectations. Can you tell us how this is developing and also how big the share of your revenues within the healthcare segment the own brands today account for? Thank you.
Okay. Yes. With pleasure. Thank you very much, Gianmarco. Maybe I take the first two questions and leave one for, for you, Ido. So, in terms of, you know, Terra Firma in the US, the integration is going very well. Canada is already completely on our SAP platform. The US business is being migrated as we sit here and speak. So there's a very good integration process going on. We have the first synergies, you know, coming into the business and going out of the business into our core PM business. So we are highly, you know, we are highly encouraged by that. In terms of the margin, yes, the margin is slightly higher than in our core business and the margin also include increased in 2023 over 2020, too. But the volume or the underlying market conditions are, you know, still very challenging.
I think that covered all of Terra Firma, right? Thank you. Second question was regarding our, you know, fashion business. You might recall that, you know, we are running a retail fashion business including the fabrication of the fashion materials historically since over 60 years in Thailand. Most recently, we switched, we switched our partner there and was trying to build a new brand, you know, during and coming out of COVID. And that was a little bit more challenging than we, you know, than we thought considering the fact that this is not the, you know, core business for us, point number one, that the overall, especially the jeans market, you know, is changing significantly. You know, we decided to stop this loss-making business.
As you can see in the number, you know, the closing costs of, you know, CHF 11 million we separated, you know, out of the core. The year-to-date losses, you know, during the year till end of Q3 are still included. They obviously are going to give us some tailwind for next year. And they were, you know, good mid-single digit. But all the closing costs are accounted for in 2023. So in 2024, you have slight tailwinds overall.
On own-brands, yeah, it's, we've said in the past that, we're going to drive these local jewels that we have in our portfolio. They tend to be a lot more profitable than the distribution business, because that's where we take the entrepreneurial risk.
The acquisition that we made from Eisai last year has significantly improved the overall numbers of our own-brands in healthcare, which were already very strong before. We've, I think for Swiss investors, you may be familiar with the Medinova brands that set of brands that we have. Overall, it is not yet 3% of our sales, but it's going to be there one day. And we're around 2%-2.5%. Yeah. Yes.
Of course.
Yes. Yeah. Yeah.
Thank you very much. Is there any more question or are there more questions in the room here in Zurich, please?
Thank you very much. Rico Kutscher from the Swiss Business News portal, muula.ch. And I have three questions as well. Can you explain a little bit the hedging? So you depend very much on currency fluctuations. And one-third of your business is in Thailand. So, it's very on weak currencies, you said. And if I remember well, you explained last year that it's shown in the financial result, and the financial result of the hedging is highly negative in 2023. So that was my first question. The second question I have: can you give an update on the watches, Maurice Lacroix? I think it's almost one decade for sale, maybe if I'm wrong. And the third question is the outlook on Asia. You were very optimistic. Can you emphasize this a little bit more why you're so optimistic on Asia? Thank you.
Okay. Thank you for the question. Maybe I'll start with the hedging. By the way, as a side comment, I think versus the Swiss franc, every currency was weak this year, not just the Thai baht. Look, the healthcare and consumer goods business, we buy from the supplier at local currency. Okay. So we have no transactional exposure. Whichever country we sell, our COGS are denominated in the local currency. So it's, as I said in my speech, a complete transactional FX exposure, not transactional. It's a supplier that bears the FX risk. In the technology and PM business, we buy in the producer's currency or it tends to be in generally in the industry denominated in U.S. dollars, in euros, sometimes in yen. And those transactions we hedge as soon as we place an order.
And therefore, we are protected on each transaction from the price that we bought and the price that we plan to sell. This is the PM and technology business. The finance result this year is overall negative as it was last year. I think it's about CHF 8 million larger in negativity versus last year. It is not only hedging. There is interest expenses inside. There are valuations of assets on the balance sheet. So it's not only just the hedging results, but in fact the increase this year versus last year is more related to interest costs and not to the hedging effect. Okay.
Okay. Regarding Maurice Lacroix, I mean, first of all, ML you know generates a positive EBIT, positive cash flow for us. They're gaining you know market share in a few, especially Asian countries. Last year, unfortunately, the German market, which is the most important market, was slightly depressed. So the results in 2023 are slightly below 2022, but still are overall a positive contribution to the group, especially also in terms of margin. And, yes, the business is for sale. We can have a, you know, discussion after the meeting here if you are interested. But right now, it's not very easy, you know, to sell a brand like this, you know, in this market environment. For us, it's a, you know, valuable part of our portfolio. So we don't see any reason, right, to donate it off, so to say, or sell it, you know, under the value we see with this, you know, with this brand and the outlook behind it.
In terms of Asia, yes, I think, you know, if the US and Europe together, the GDP forecast for 2024 is, you know, 2.5%. You know, the forecast for Asia weighted according to our footprint is, you know, 3.4%. So that's why we are optimistic. So overall, this is significantly ahead of the other two major business regions, you know, in the world. I think if you look into the, you know, population is increasing in Asia, it's a very young dynamic, you know, population you have there. The intra- Asian trade is growing. As you might know, Southeast Asia for us is the most important region.
We currently also see even a shift in terms of economic growth, you know, where China is a little bit more challenging and a lot of, you know, investments are actually moving to Southeast Asia, which is going to give us additional tailwind. And then, I mean, just please, you know, take a look at our healthcare results. I think you see that healthcare spending in Asia is growing continuously, and we can capitalize on that. And the other, especially in our technology business unit, you see that a lot of investments in R&D and in academia is happening in Asia, which is driving especially, you know, our scientific instrumentation business in technology. And putting this all together, yes, we are quite optimistic. I forgot for Performance Materials.
I think also if you follow the chemical market a little bit, you will read that, you know, many chemical companies, you know, are investing, you know, rather west or east of Europe because of the lower, you know, energy prices and the great workforce you can hire there. So putting this all together makes us very optimistic.
Thank you very much. Is there any more question in the room, Pascal, in the front?
Two follow-up questions, if I may. So first, maybe digging a little bit deeper into Performance Materials, and the market trends you see there. You already touched a little bit on it. You said that in life science and Asia, it's you're doing a little bit better. But maybe you can share some more thoughts on what you see market dynamics-wise, life science versus industrials business, North America versus Europe and Asia. And then, on the margin side, I mean, you increased the margin quite significantly in 2023. I think when we talked last time, you also put a target of 9% sometime, maybe in a year's time.
Where do we stand now in terms of this trajectory? Maybe you can give us here some color. And then one question to you, Ido, on the result of associates, which is negative minus CHF 5.7 million this year. I tried to kind of find or see the bridge, how this result is produced. And, in note 1920 of the financial report, it only shows that the e-commerce value dropped significantly by around one-fourth. What is the rest that drives this, yeah, this result? Thank you.
Yeah. Thank you, Pascal. And maybe I start with, you know, with Performance Materials. So overall, if you look into our portfolio, two-thirds of the business, a little bit less than two-thirds of the business is life science, and the rest is, you know, industrial. Life science was also during the, you know, the crisis over the last 24 months hit slightly less than the industrial, than the industrial part. We see now, after all, the destocking and, you know, this unusual price peaks we have seen during COVID and coming down again, you know, especially in 2023. You know, we see that, you know, especially in life science, you know, pricing is very, very stable, and the demand is, is picking up nicely.
We have a very few, you know, good examples, you know, coming out of Japan and some other Asian countries there. Industrial is still a little bit more challenging. We believe that the destocking, or at least in our portfolio, the destocking, is completely executed. Prices are stable, but on a lower level than what we have seen in the past. Now it's really time that the investments are taking place by the companies, and, you know, our customers are ordering more. It's slightly happening on a lower price level. So that will take a little bit of, you know, time.
In terms of, you know, which region is hit most, I think the largest decline in industrial we have seen in Europe, which is not a, you know, surprise if you look at the energy crisis and industrial crisis overall. Next is then the U.S. Please consider that, you know, for us, the most important market is Asia. That's probably also the reason why we came out reasonably well, you know, out of 2023. And we're able that even across both regions and the full portfolio, including industrial, we were not only able to increase the margin, but also the gross margin, which is a, you know, strong sign of our competitive positioning. In terms of the margin target, I think we advanced significantly in 2023 despite the headwinds. You also know that in this business, we have economies of scale.
So we are quite optimistic that we can also hit the 9% margin soon. But as mentioned before, I think H1 is still, you know, a little bit more challenging in 2024. But now you had one? Did that cover all the questions on PM? Yeah. I think so. Yeah. Okay. Okay.
On the share of associates, I think there are two other associates where we had impact this year. I mean, you're right to point out that it's mainly coming from e-commerce. We also had elements from Crossmark that we reported in H1. That's our joint venture, an associate that we have in Australia for field marketing. And also, we had to realize some loss when we separated the business with Smollan in Vietnam. It was accumulated losses on FX losses over the years. That's CHF 2 million.
Okay. So you would reconsider that as kind of one-offs now?
Yeah. They are definitely not repeated.
Thank you.
Definitely.
Thank you. Any more follow-up questions in the room before we move to the participants in the call? It's not the case. Operator, can we take, please, the questions from the call?
Yes. As a reminder, if you wish to register for a question, please press star followed by one. The first question from the phone comes from the line of Andy Grobler with BNP Paribas. Please go ahead.
Hi. Good morning. Two questions, if I may. The first one on free cash flow, another very strong year of free cash conversion. How much more is left to go from that perspective, or do you feel you've kind of got to a good place, and it should normalize from here? And then secondly, and slightly more broadly, you talked earlier about intra-Asian trade and the opportunities there. As I understand it, that's grown as a proportion of your business over the years. Now, how big is it now, and what are your expectations for the coming years in terms of that as a supporter of organic growth for the business? Thank you very much.
Thank you, Andy. This is Ido here. Let me start with the cash flow. Yeah, indeed, another very strong year. And we will continue to shoot high in the future. We'll remain with our general guidance of 90% of PAT, going forward. but we're working hard to do even better than that in another year.
Yeah. I would take the second question, Andy. You know, thank you very much. Yes, as I was indicating before, I think we will see that, you know, there are more trade is happening, especially also with Southeast Asia, which is growing nicely. Today, around 25% of our business is dependent on, you know, intra- Asian trade. And we expect that that is growing slightly faster than the rest.
I'm thank you for that. And, Ido, just going back to the cash conversion, I know that's the kind of the long-term expectation. But as you look at 2024, do you feel it's going to be a fairly quick move down to 90% conversion, or is there another year of, you know, kind of well above trend before we get to that point?
I think we're quite confident with the 90% guidance, and we'll stick to that.
Okay. Fair enough. Thank you very much.
Yeah. It's still very strong, 90%, no?
Yeah. Yeah. No, I know.
And no promise overdeliver.
Thank you, Andy. Can we take the next question, please?
The next question comes from the line of Jon Cox with Kepler Cheuvreux . Please go ahead.
Yeah. Thanks. Thanks very much. I wanted to just come back to Performance Materials. I know, you've had a lot of questions about it. It looks like it seems to remember Q1 was down, probably about 5% or so. I'm talking about organic. And then Q2 was probably down 3%. And then we were down probably around 12%, I guess, Q3. That's the worst quarter. And then Q4 maybe down at 8%. And then January, you said, you know, much better coming into the year. Just trying to get a feel for where you are in January. Are you sort of down five, four, or five, something like that? That's the sort of first question.
And as an add-on to that, you mentioned this 9%. You said, "Look, it's H1 still challenging, to get there." Are you saying that potentially in H2, you can get to that 9% margin, or is that still a little bit too soon? So that's the questions on Performance Materials. The second question, just on consumer, it still doesn't look like it's growing as much as you would expect. If you look at the GDP metrics, as you mentioned of yours, you know, last year, over 3%, it's only around 2%. Do you think we'll be closer to that GDP this year? And then also, you used to have this target of getting to a 2.5% margin in consumer. Not, again, much progress there. Do you think you can get there, this year? Thank you.
Yeah. Thank you very much, John, for your question. And the 9% question, I actually expected, by reflecting how I did choose my words and answering the question be, you know, before. But what I would like to say is, like, look, I mean, in, you know, in H1 this year, it will be definitely tough, you know, to make progress in reaching the 9%. The second half of the year, we should make progress. You know, overall, we want to achieve, you know, the 9% margin as soon as possible. But we can't forecast that we are going to hit it in, you know, 2024 or in H2 of 2024, which you might understand because there's still a lot of uncertainty out there, you know, in the market. And maybe we pick up on that question when we, you know, when we show H1 results.
In terms of the comparison of the different, you know, quarters, you know, one correction, and that is, you know, Q4 was over Q3. So, there was definitely, you know, an improvement. And that's the reason why I said that Q3 most likely, you know, was the bottom of what we have seen. Regarding January, yes, January was actually a good start in the year. But there's one caveat here. You know, last year, in January, there was Chinese New Year. This year, it's in February. So what we always say is, only at the end, right, of February, you really know how the first two months were, you know, playing out. So, we have to be a little bit cautious. But definitely, it was, you know, better; the start was better than Q3, but also better than, you know, Q4, which gives us the optimism.
But. John, maybe I can. Yeah. But not yeah. No, go ahead. Go on.
I was just going to say you're not, but you're nowhere near close to flat in January, even with the potential benefit of the Chinese New Year move.
Very close.
For January. Okay. So down a couple of points there.
You're asking for January only and the Chinese New Year effect, okay? So just that we are on the same page.
Yeah. So is there a chance you could actually go flat for H1? That's what I'm trying to get to, or close to flat.
Well, I mean, we're not in July.
Okay. Thanks, Stefan. And then the consumer, yeah.
Let me take a shot at the consumer. We've said a year and a half ago, we're going to transition gradually from a better-before-bigger to a bigger and better strategy. There's a glass half. We're not happy ourselves.
We're not yet at GDP-plus growth in CG, and that's where we're targeting. But there's glass half full in the story as well, as I mentioned before here to Pascal. This year, we have turned into organic growth. Okay. It's 2%. It's not yet at GDP, but it's better than -1% of last year. We're also very pleased with the CS&Co. acquisition we made in New Zealand. It had a very strong Q4. It's a beauty business, which is sustainably and consistently a growth category. So going forward, we expect to accelerate the growth. This was also a sideways year on the margin. It remains at 2.3% versus last year. Let's recall that in 2019, it was a 1.7% margin. So I'm not happy that we didn't grow margin this year, but we have come some way.
I think what was mentioned here on the effect of the fashion business, which is not going to be in our books in 2024, we have some tailwind to take us to the 2.5, which remains our objective. In the Capital Markets Day that we will have in the second half of the year, we will talk more about our growth strategy in CG going forward. Maybe just as a an add-on then, it's just trying to, you know, line up all these different parts of the pie, isn't it?
You know, could you do, you know, another year of 15-20 basis points group margin improvement this year, even maybe ex currencies, and then with the currencies, maybe more like 10-15 basis points?
Well, we'll let the currencies do their work, because that's not in our control. But as we said before, internally, we target every year to grow our margin by 10 basis points. It's sometimes there's occasion in which we prefer a big contract, which may be lower in margin but better in overall strategic direction to slow that down. But internally, we try 10 basis points. The last few years, it was 20 basis points, so we overdelivered our internal targets. We're also budgeting 2024 for 10 basis points. Where it will be 15, it's, we're not going to stop at 10 if we can do more. But I don't want to commit to you more than what we internally target.
And then if you look at your consensus at the moment, it's around 343. Obviously, this is for the Core EBIT, and obviously, you did a bit better than consensus for 2023. Are you relatively comfortable with that, even with the currency at the moment?
We would have told you if we were not.
Okay. Thanks, guys. And congratulations.
Thank you.
Thank you, John.
Thanks, John. Next question from the call, please.
The next question comes from the line of Nicole Manion with UBS. Please go ahead.
Hi. Thank you for taking my questions. Two questions from me, please. Sorry to come back on this point straight away, but I do have another follow-up on the consumer margin outlook, if that's okay. So just to get it sort of right, you've exited a loss-making business. The watch business is at least a known quantity. And you did buy some food service businesses, you know, in the relatively recent past, which had highly accretive margins to the division.
So maybe just to get a sense of well, maybe one way of asking it is, are those food service margins still highly accretive? And what does that tell us about where the margins are tracking in that core FMCG business, if you can perhaps give an update there? And then secondly, just on the M&A pipeline, with the balance sheet obviously being back to net cash, could you maybe give us a sense of what you're seeing, particularly in PM, perhaps, in terms of what your priorities are, but also, where you think multiples are, settling, if they are indeed settling? Thank you.
Okay. Thank you, Nicole. Yeah. The food service is accretive. The acquisition that we made in New Zealand of beauty business is accretive. In general, we're going to go more premiumization of our in the categories that we play.
And as I mentioned, there's tailwinds that are going to help us to bring us to 2.5 very soon. The food service is accretive, but it's relatively small in size, so there's so much it can impact the mix short term. As we mentioned time and again, we're shooting for the 2.5. Once we get there, we will shoot higher. And this remains our guidance, may not be necessarily for this year, but very shortly after, if not this year.
So on your second question, Nicole, yes, we have a strong balance sheet. We are net cash positive. And we always said, like, "Look, we are feeling comfortable to go up to 2x, you know, leverage if required." Overall, the pipeline is getting healthier again.
Last year was a little bit challenging because also many people, you know, they didn't want to sell during a period where you saw, especially in the chemical markets, you know, declining revenues and declining raw margins, you know, for many of the local players. And price expectations were, you know, still too high. So what we have seen especially in the, you know, last quarter of the year, that price expectations are coming, you know, further down, which opens the opportunity to accelerate again the acquisitions. And yes, the pipeline is looking good. And, as we sit here and speak, we are involved in, you know, more than just one or two projects. So the outlook is, you know, 2024 should deliver more M&A contribution than 2023.
Great. Thank you.
Thanks.
Thanks, Nicole. Operator, do we have any more questions in the call?
There was the last question.
Thank you very much. Any more questions here in Zurich in the room? Does not seem to be the case. Then we would like to thank everybody for their attendance today. And, for the participants here in Zurich, there will be some flying lunch also served. So I hope you stay with us a little bit. Thank you very much for your time, and looking forward to seeing you all again soon. Thank you very much.
Thank you.
Thank you very much also from our side. Thank you.