Ladies and gentlemen, welcome to the half- year results 2021 conference call and live webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Urs Riedener, CEO. Please go ahead, sir.
Good morning, everybody, welcome to this half- year 2021 call. It is a pleasure, at least later on, to hear you all. We are sorry for the delay, we had some technical issues on our side, we hope they're resolved and you hear us. First of all, we are very pleased with the results we were posting this morning. We have seen a organic growth rate of 3.7%, after the 2% we already have been posting last year. Of course, our strategy is bearing fruits, even and despite of all challenges we see in the environment and the still ongoing pandemic in different parts of the world. We profited a lot from a consistent development of the company and portfolio we're having. Also, we were profiting from the strong branding concepts we are having across the world.
If you look into the figures, you see we are especially pleased with the international business, a bit less so with Switzerland. That's what we have been seeing already before, that Switzerland will settle very soon at the pre-level crisis. That's what we are observing in our half-year results. We are also happy that at the right time, we were pushing our initiatives towards more sustainability, and there we're making progress, and I will come back later to this. We think this topic is gaining further importance, and we are on top of it. For the full- year, we think that we are on a good way to achieving our annual target. With those remarks, we go into the details, and the speakers of today will be myself and then, of course, Ricarda.
She will go a bit deeper into the financials of the half- year, also she will be answering your questions then in the Q&A session later on. If we are now on Page five, for those who have the presentation in front of them, what we see is a good growth-driven performance. The growth was very crucial to achieve this good performance. Of course, overall, we have a reliable Emmi business and we were also profiting from our decentralized approach with decentralized organizations. We invested a lot in empowering those teams locally in the past, and we are happy that this was paying out during the pandemic. Then, of course, the diversified country portfolio and category portfolio, but we were also able to open up new channels during the pandemic.
Some of those channels did stick now even a bit after or partly after the pandemic. Of course, we also have a good setup with the supply chain, because we have normally regional supply chains. We have seen maybe less disruptions than other industries. The growth trajectory, you have already seen, 3.7%. EBIT margin increased, and the mix above all did also improve, and this mainly due to branded concepts, some nice growth in some niches. Also, the good development in all emerging markets we are in helped a lot. As I said earlier, we have expected a setback in Switzerland after the record first half- year in 2020, and we are somehow back to reality, in different dimensions, and I will come back to that.
Overall, we are sticking to the strategic growth path. Despite some challenges in the environment, we are happy that we are able to keep our long-term trajectory. Of course, as I said, we are also strengthening our efforts in sustainability, which gives us a confident outlook. Now to the figures. I will go fast because you have seen them probably with the media release we have been sending out this morning. The net sales increased quite a lot, 6.2% overall, organic growth 3.7%. I think it's noteworthy here that already last year in the half- year, we had a growth of 2.0%. We see a lot of companies that have seen a decline last year. Not us, therefore it's good to even grow more this half- year. The EBIT is good.
Increased quite nicely, because the sales mix mainly shifted back. We are strong at a bit more convenience, a bit more branded, a bit more fresh. Financial strength is still a given, which gives us also room for future investments. We also can observe here that we were able to bring down the EBIT to the net profit line, so really to the bottom line. There, where we also see a nice increase in the net profit margin. Looking at the short-term results is nice, but that's not our style. We want to develop the company long-term. You see that we were able to come back to an organic growth rate between 1.6% and now 3.7% since 2018, which is good and on target. EBITA is improving.
Was a bit under pressure last year because we have always been saying that the pandemic was more hurting us than helping us, and this is the proof now that we can do better. The EBIT also is at the record high for half year. We never had this high EBIT. The net profit is also developing nicely. There we have to mention that, mainly in emerging markets, we have more minorities, and so we have to pay out dividends and also to the minorities, mainly, as I said, in the emerging markets. The growth path then looks quite different from region to region. The group is balanced, but under the surface, we see quite some ups and downs. Normally, we believe that we can a bit grow in Switzerland. Organic growth should be made every year at a low level.
We have seen acceleration of business during the half year 2020, and now we have seen the setback come to that. America's dependence on food service, so there is a lot of food service business in there, which hindered better figures in last year, and food service is partly recovering, not yet full recovering, but there are some other impacts we are seeing counter those two, that give us quite a nice growth rate of almost at 12% organically. In Europe, we see a constant acceleration. This on the surface, this looks good, but we see here that we have different parts of our that is growing in different directions. Past year, we have seen overall, for example, good growth in organic products, also in goat products. This year, we have seen a great push in Italian desserts. Going on, so now I'm on Page nine.
If we look at Switzerland, we see that we still have an increased pressure from dairy imports. This, on one hand, of course, in relation to the pandemic. Of course, you see, for example, a lot of fresh cheese coming in, or we have seen that last year. Pizza consumption was on a high, and what do you find on pizzas? Imported cheese. This goes on. We see a good export on cheeses from Switzerland, but we also see still increasing imports, which means in figures, now I'm talking about the first half- year of 2021, cheese imports grow by 7.7% still, and the exports are increasing by 8.1%, which, of course, then is something that lacks in Switzerland. We are happy to sell abroad if the prices are correct. You don't see those sales in Switzerland, for example. A few highlights.
Great growth rate in Brazil. There we have been investing into a new milk powder factory, and this is now up and running. Probably you ask yourself, Why milk powder? This is a generic product. Right you are. It helps us to balance the milk intake and also to balance sales. For example, if the milk price for UH milk is too low and the milk is still coming in, we produce powder, and once the price is correct again for UHT, we produce against UHT, and hopefully sell then the powder at the right time. Because this is quite a fluctuating market, we have to do some hedging in there. Sustainability model we implemented and communicated in February. I will come back to this.
We had the beleaf, almost launched, but relaunched because we went into Swiss oats, Swiss ingredients, and also we're doing a step up in communication and this helps a lot, because we believe that at least the big part of the vegan market is also becoming local in the future. Of course, there is space for global brands, but we think it's even more space for some localized products. We were merging the two companies, Quillayes Surlat, doing great progress there also during the pandemic, also looking for synergies. This was working well, and we are establishing ourselves as number four in the Chilean market. Pasticceria Quadrifoglio. This is a company we acquired in October 2019, and we acquired it to strengthen our food service arm. That's exactly what we are doing.
We were shifting over the retail business into Emmi Dessert Italia, into the organization, which is concentrating on sales to retail, and we are building up now, even building a new factory to be sure that we can deliver on the demand in the food service in the future with Pasticceria Quadrifoglio . We were also starting the construction of a new plant, producing mainly Luzerner cream cheese. We think we have to be really at the edge of new technology there and also be ready to innovate for those kinds of products. This, some highlights. I do not need to mention the strategy because this is unchanged. Strong domestic market, international growth, that's mainly what we achieved in the first half year and also some progress on the cost management. Also there, we have seen progress. Great to see how the desserts are progressing.
We learned through last year how good the figures are. We were still in the positive with desserts, but we thought there should be more potential out there. Now we see it. We see in all markets double-digit growth, which is great. Goat milk products came down a bit, because we have seen mainly in the U.S., in powder and in the milk business, a huge demand last year. This corrected itself, and we still have some issues with the availability of containers to ship some goat milk powder to China. On the other hand, we see the fresh cheese going into food strongly coming back. Organic was also more or less stable. We have seen a huge upswing a year ago, and now we are stable. The success story here is really desserts. That's where we are growing very, very fast.
The others, they were a bit more impacted of the swing back to normal in this whatever second phase, third phase , fourth phase of the pandemic. Strategically, of course, we still are working on differentiation, and we are always bringing out new products. We just launched, for example, in the past week, the Super Kefir and the new functional in the U.K. Casual food is coming back. Of course, this was under pressure a year ago because people were not out in the streets, not commuting that much. Now there is more use of such kind of products again. By the way, we also see this with CAFFÈ LATTE. Plant-based, we gave a push in different areas. Here you see the beleaf brand, but even bigger success story is laid in Austria, and also Spain is doing well here.
Coffee picking up again, double-digit growth with CAFFÈ LATTE in all markets or almost all markets. Food as it should be, a clean ingredient sheet, so doing very well, also growing double-digit this year. We were a bit in trouble a year ago, did a relaunch, pushed also innovations there, and now we are seeing a great trajectory again. Dessert, I was mentioning. Digitalization, we are sometimes using our online shops and also doing email campaigns, gaining expertise in that field. Of course, green power mainly has to do with milk being sourced in the region. Here we have a Spanish example. Eight hours after the milk is coming out of the cow, it's here in the bottle, which is great, and also experiment a bit with a more sustainable packaging here.
That's our fields where we want to grow, where we want to deliver innovation, and that's what we have been doing also in the first half- year of 2021. The net sales by division, I go fast here. You see, of course, quite a shift towards our international businesses. Switzerland being at now 42.5%, and Americas growing, of course, quite fast from 33.8%- 37.7%, also due to acquisitions, global trade being stable and Europe also increasing in importance, but not that much as we do not have acquisitional effects and also organic growth rate was a bit lower. I think what is important for you to understand is what is the recovery path of food service, and that's where I would love to spend a minute or so. What you see here is Switzerland organic growth. We have been mentioning it before.
You see that the food service share is at 8%, organically - 9% versus previous year, coming down from 9%- 8%. For me, more important is the figure in 2019. 2019 we had a 14% food service share in Switzerland, which means from 2019- 2021, we went down by 6%, and that's one of the issues we are having. We are not recovering those 6% percentage points of sales elsewhere, and this explains a bit the low organic growth we are seeing in Switzerland. Food service in Americas, telling the same story. Yes, recovering, coming back. We had - 37%, + 36%. Here it's not the food service as a whole that is recovering at this pace. We have been opening up new channels during the pandemic, and now we see the old channels coming back.
The old channels are not yet back at 100%. Also here, we are coming down in a two years comparison from 22% to 19%. Europe, we are not that strong in food service. Yes, it comes down 1% over two years, but we do that much. This is mainly due to Pasticceria Quadrifoglio here. Global trade, plus, minus, stable. Of course, in global trade, we sell quite some yogurts, for example, to Singapore, or also to Hong Kong, and they're mainly into airlines and hotels, and of course, this was down too. On the group, we still see a bit of a negative effect of the food service business, which means that we hope there is still room to recover, but it's not so easy to tell when this is going to happen.
If you look at the retail, at the tourism figures and their outlooks, some of them are saying maybe in five years we are at the same level again. A big question mark is how long does it take? Net sales by product group, I will go quick here. Basically, what you see is from dairy products to fresh products. This is exactly what has been happening. Last year, we have seen a shift into dairy products because people were stockpiling some of those products at home. Now those stocks are depleted and we haven't seen an upswing of that importance last year with the fresh products. We see a constant demand there, and that's what you're seeing then in the figures. Just to explain a bit how the whole picture is presenting itself.
As I mentioned before, we see a total growth rate of 6.2%. Acquisition effect is 3.2%. Currency effect, that probably helped us because historically we have always seen higher currency effects. This is a very stable situation for once at least, and then the organic growth. Just referring to the currency effect, yes, we see that stable, but we are not sure whether this is remaining this stable because with the inflation starting everywhere, of course, you are paying the inflation then also with some differences in the strength of local currencies. The highlights I mentioned, I think I don't need to go into details. I think the branded business I didn't mention that much so far. We see a nice growth with Emmi CAFFÈ LATTE, really great, double-digit, as I said, in almost all markets.
Kaltbach growing double-digit, which is a bit more of a surprise because already last year, cheese was very much asked for. What really helped us, and regardless, coming back to this, is Emmi Dessert USA. We were buying this more food service-oriented company last year because we have seen that it was holding up quite well, even during the pandemic. It was a slightly negative trajectory, but never as negative as the whole food service market. Because they were able to open up new channels, and now they have those channels and food service is coming back, so we see very nice growth rates there. We see our emerging markets growing very nicely, all between 10%-20%.
Some of them are a comeback like Mexico, there we need to come back, we are food service-oriented, the others already have been growing a year ago. Europe, really pushed by desserts, by CAFFÈ LATTE and Kaltbach. As I said, Switzerland, I will come to that a bit more in trouble. We see Switzerland here on the next chart, now on 17. I think here it's important to note that we also had a positive effect of a milk price increase for the producers of around 1%. Volume-wise, we are even a bit weaker. What we have seen is a strong comeback of cross-border shopping.
Some of the trade channels I'm talking to, they're saying it's back at the same level, and some of them are still saying, Hmm, there might be even some room for acceleration in the second half of the year. What we see in Switzerland especially is more production capacity coming online. We have smaller dairies coming online, being quite aggressive on prices, and we decided to let go a bit of sales in the generic segments because they can produce negative EBITs, and they will learn it over time, that there is no future for them. We do not need to follow everybody with the low prices. This will have an impact in the second half- year and even an impact into 2022. I will come back to this. Dairy products, I already mentioned.
There is also an impact in dairy products with butter. You know that Switzerland needed to import butter during the last year. Some of the industrial clients, and now it's getting complicated, are doing a system that is called which means that they take imported butter, they produce whatever they produce, bakery products, and they export it again. In the past, they have been using Swiss butter, and we were able to sell them our butter. It was going up, now it's going down, but the mix is okay. Fresh products, we love the development here with Emmi CAFFÈ LATTE, also with Jogurtp ur. With the added value products here, private label business is a bit suffering due to the overall trend of this retail. I go a bit faster in North America because there is less to explain.
Great organic growth rate in cheese, dairy product, and fresh products. Of course, also, the exports out of Switzerland are doing well into this region. We are really happy. What we are seeing more for the second half of the year is, of course, that the prices for different input materials are going up, logistics costs are going up, also salaries are going up. We also might have some heatwave effect in our goat business in the San Francisco areas. There are quite some things going on. We believe we can manage them quite well, but we also believe that we are not going to see this progress anymore for the second half. We can come back to that a bit later. Here you see the fresh products doing well overall and pushing the division Europe. You can read the organic sales rate.
I was also already referring to desserts and CAFFÈ LATTE and the big products I mentioned, Gläserne, with a slight setback. A great growth rate last year, we weren't able to keep that momentum. The market was not able to keep that momentum, and we have a bit more pressure again on the business model of Gläserne. We are also observing a very nice progress with the branded products. I'm coming to a few strategic topics. We are still working on the portfolio transformation and now on Page 21. Here you see how we develop our portfolio over time, being regional in Switzerland, becoming national in Switzerland. With the export, entering the new markets, mainly in the surroundings of Switzerland. Going more into niches and also going more into emerging markets. Meanwhile, always developing our mix and our portfolio.
How we do it, you might be familiar with this, is here you see example of Italy. Before I joined the company, Emmi did an acquisition with Trentinalatte yogurt in Italy, which was a bad move, but it's always easy to say afterwards. We had that business mainly consisting of yogurts and exports out of Switzerland, being, of course, far not profitable. We said we need to totally shift it bent into desserts and made the acquisition of the leading dessert player in Italy with A-27. We wanted to diversify the portfolio, already at that time, going more into vegan, going more into different formats, also going into organic there with Rachelli. We had to build a new plant because we inherited an old site for A-27.
We sold Trentinalatte, sold Venchiaredo, where we had a minority stake in a fresh cheese producer. We have seen we even need to further expand the portfolio with desserts, more small portions, and also products in glasses, really premium offerings. Closed then Rancho site, integrated it into Gattico, then acquired a food service branch with Pasticceria Quadrifoglio, and then, of course, out of that formed Emmi Dessert Italia. Now, we were complementing last year, this Italian branch with the Emmi Dessert USA branch. You see this then here that, of course, on the next page, we were able to work very much on the portfolio. We have different offerings, can go from small monoportions to big packs, glasses, for example, organic, vegan. We can offer a lot. We have some very nice brands like the Sorbissimo, where we are by far market leader in this specialty in Italy.
We still are building up a premium brand with Rachelli, which we want to push a bit more next year. Like this, we're establishing more or less a global presence with Italian desserts. Emmi Desserts USA still being focused a bit more on food service, and Emmi Dessert Italia still being focused more into retail. We have quite some synergies as, for example, Emmi Dessert USA was always using fresh mascarpone from Italy. Of course, we can buy better in Italy, mascarpone that they could, for example, from the U.S. We can now play a game and can become stronger and can also streamline ourselves a bit more in this area. Another strategic point is sustainability.
As I've mentioned before, I think, it was the right timing we had and we were communicating earlier this year that we want to concentrate on employees, communities, and the planet, which means on our stakeholders. We also went into the direction of science-based targets. We have to make sure that we not only talk about it, but we also have some quite measurable objectives we want to achieve. We also want to go into direction of net zero by 2050. On the next page you see how this all comes together. I'm now on Page 27. You see the stakeholders we are having here, and then we have, of course, 2027 targets with developing employees, pushing sustainable dairy, what means that we want to have an above average standard of 100% of our Emmi global milk supply.
We want to continue working on reducing emissions. We already achieved in the past years -24% in our own control. We want to go up to 60%. We also are working on Scope 3, which means mainly with our milk producers. Reducing waste, of course, is an issue. We want to have recyclable packaging, this at 100%, and want to further reduce rubbish and food waste. We already have quite a good track record, but we still can improve there. We see, also during the heatwaves and droughts, of course, that we have to work on water. Therefore we say in most areas, we only reduce by 15%, but in risk areas like Tunisia, for example, like California, we want to reduce this by 50%.
You also see the sustainable development goals of the UN, where this plays into, and then, of course, this should be to the benefit of our shareholders, but also the stakeholders. Here on the next page, we have just not only talk, we have also a few examples, how we work with people. We already have since years a trainee program in Switzerland where we're taking in young talents, and now we have that in Italy as well. Very good people we hired there, so we love them. Also it's good to develop the company culture with those young people. We have the Vitalait Fondation in Tunisia, where we are investing money to promote regional milk production. In the past, we've already had a bit not enough milk, and so that was a struggle. Last year was a bit better. In the second half it was better.
This year, first half it was a bit better. Learning them how to do better farming and more sustainable practices, we can only profit also on our side. We are strengthening also the women because, normally the women are having the cows in Tunisia. We are also experimenting and going towards a circular economy here with CAFFÈ LATTE. These are a few strategic things and highlights we're working on. I'm handing over to Ricarda. Ricarda, please?
Thank you, Urs. Women not only have cows, they also have the finances under control. Good morning also from my side. You heard the reported sales were up 6.2%, driven by a strong organic growth of 3.7%, and therewith proving once again Emmi's quality backed by a very disciplined strategy, consistently transforming the portfolio and an agile organization willing to learn and adapt continuously, backed by a very strong company culture. What we like about the 3.7% is it's broad-based and it's of good quality. Growth came from where we want growth to come from. You heard it from Urs, the geographical growth pockets, the emerging markets accounting for a good 15% of sales. Our strategic niches, mainly the dessert, our brands with a double-digit performance from both CAFFÈ LATTE and Kaltbach.
The solid acquisitory growth of 3.2% was mainly driven by Emmi Dessert USA, who is performing above expectations. For the full year, we expect to come in around the guided 1%-1.5%. I remind you, closing of the transaction was early October last year. Foreign exchange reduced sales by -0.7%, negative developments mainly of the U.S. dollar and the Brazilian reais, and have been partly compensated for by positive developments of the euro, the Chilean pesos and the British pound. The gross margin stood at a high 37.2%, representing a very strong increase of 107 basis points. This is again an exceptional result and it's a testament to our continuous and consistent portfolio transformation. The majority of the increase is driven by the acquisition of Emmi Dessert USA. We have seen gross margin increase across all divisions, driven by the good quality of the growth.
The operating expenses came in at 27.4% of sales or + 64 basis points, driven again, acquisition effects. Emmi Dessert USA has a significantly higher personal expense ratio, a return to a more normalized spending level of marketing and sales. Also, and this is our watch-out as we go into the second half and 2022, increasing pressure on input costs, namely logistics and freight, packaging, and with the labor market upside down in the U.S., wage increases, and of course, also inflationary trends. EBITDA rose by a strong 10.9%. The margin came in at 9.9% or + 42 basis points. Finally, EBIT came in at CHF 129.4 million, a very strong 15.5% above prior year at an improved margin of 6.9% or + 55 basis points. Lower temporary, namely SAP due to end of economic life, gave us some tailwind. This is quite an exceptional result.
Strong growth driven by the recovery of the out-of-home market and very strict cost management coming out of a difficult 2020 help us. H2 will be softer as we will start to lap two very strong 2020 quarters. Marketing and sales spend will return to a more normalized level. We will further increase marketing on Emmi CAFFÈ LATTE to further drive the very good momentum. Input costs will continue to increase, not only driven by the global supply chain challenges, but an increasingly inflationary environment. As you know, it will take a few months for pricing to catch up with input cost increases. As Urs said earlier, last but not least, we expect FX headwinds which pressure not only Swiss import but also our P&Ls for translation effects.
Page 31 gives you a deep dive into our cost positions, and I think I've made my comments on why some of those ratios went up and what to expect going forward. Page 32 summarizes the EBIT to net profit, which net profit after minorities was up 21.4% or 65 basis points. It's important to note that we have some extraordinary effects that drove this substantial margin improvement between EBIT and net profit, and that we expect to normalize in H2 in 2022. One of them is income from associates and JVs. This position was up CHF 3.5 million year-over-year, mainly driven by a stellar 2020 performance of some of those associates. I would expect this number to normalize next year trending around zero, in line or hopefully slightly better than the historic trend. The other one is financing costs.
Financing costs were down CHF 3.5 million year-over-year, mainly driven by better FX results. Something again I expect to normalize in H2. For the full- year, I would expect this number to come in around or somewhat better than last year's figure. Tax rate came in at the guided 16.5%. We confirm 16.5% for 2020 full- year and accept an increase towards 17% next year as we continue to grow internationally and see higher tax rates there. Finally, minorities were up CHF 3 million. Drivers are additional minority interests following our acquisition in Emmi Dessert USA and a strong performance mainly in Chile and Tunisia. As you know, strong local partners are part of our M&A fee. Page 33 summarizes our cash flow profile. As you know, Emmi has a strong and stable operating cash conversion of roughly 80% of EBITDA.
H1 is always a bit weaker, and H1 has been particularly weak as last year we had extraordinarily low stock in Switzerland given the strong COVID related top-line development. Year-over-year, the cash flow is driven by substantial stock build-up to a more normalized historic level. What is important for the full- year, we expect operating cash conversion around 70%, therewith compensating the extraordinarily high 90% last year and bringing those numbers over two years down to and in line with our historic average of 80%. Moving to Page 34, CapEx was up CHF 3 million year-over-year and mainly driven by strategic investments, building out our strategic niches, growth markets and differentiation. We retain a high capital discipline, the result of which is also visible in our continuous ROIC progress.
H1 came in at 8.5% or a good 100 basis points higher than last year, driven by an improved operating margin. For the full- year, we expect CapEx to come in as guided earlier this year around CHF 170 million or CHF 180 million. With this, I move on to our strong balance sheet on Page 35. End of June, net debt stood at CHF 196.7 million or at 0.5x EBITDA, or in other words, we continue to have room to support our growth. With this, I hand over to you, Urs, again. Thank you.
Thank you very much, Ricarda, for this very rich presentation. Now we come already to the outlook, and, of course, we give you some hints where we see second half of 2021 and also try to look a bit already ahead into 2022. The outlook, of course, we continue our strategy, which means promoting branding concepts and innovations in Switzerland. We still want to further optimize the product range and channel mix because also in Switzerland, we have new emerging channels we have better to collaborate with in the future. Then we need, given the pressure we are seeing, to maintain the high cost discipline and also we need to invest in differentiation because in the end, if you have a differentiated product and only a brand, it can also be packaging, then we are able to hold up the price pressure we are seeing.
The challenges, of course, are the fragile recovery of the food service business, but also the industrial customer sector. Of course, one year ago it was about the product availability, and there we were very good. Prices are coming back and price pressure are coming back. This has to do with aggressive discounts in Switzerland, but also with cross-border shopping tourism and, obviously, also rising input costs. Which means on the client side, we are going to see that, and we're going to see that on our side. This will be a very nice challenge for the remainder of the year. Internationally, go ahead with strengthening our network and the branding concept. We want to drive organic growth and still see this development and transformation of our portfolio in all subsidiaries, but above also in emerging markets.
We just need to maintain the teaching momentum we're seeing in niche business, and in some we have to regain it, like in goat and also a bit in organic. Yes, we still need to compensate because we think the food service is not coming back at the same level as 2019 within the next 12 months. We need to also find new channels and new opportunities, how to reach the consumers that might be still a bit more at home also in the future. We see quite some uncertainties in the business. Just looking back a bit out of memory and with the experience I have, I see more than usual and even much more than usual, because we see the pandemic still going on. We see the inflationary pressure, rising input costs, macroeconomic development that is not clear.
The U.S. economy overheating, how long is it lasting? For example, labor market, we are having lost sales already now in the U.S. because we don't find the people to produce during all the shifts we would need to produce some cheeses there. There are quite some challenges and uncertainties, and not to mention FX, because we believe with the inflation, FX is coming back on the agenda, and we have been profiting in the first half that this was not the case. You know what we are doing, so I think we just have to continuously work on the culture, on the costs, on the portfolio, on the innovation, and if there are opportunities, let's jump into those opportunities.
Of course, we also have to make sure that we are progressing with the Emmi sustainability model, because we see it that this is a real part of what the consumers and stakeholders are asking for, and it can even be, for some business models, also something we can differentiate with. Of course, you see the assumptions. We do not assume that, for example, the pandemic is coming back with full force, for example. We still believe that at least the economic performance is going to be more or less stable. As you have probably seen, we are increasing a bit our outlook for 2021. The group sales, we believe they are revised, and we believe that they are between 2% and 3% by the end of the year. Old estimation has been 1%-2%.
Sales in Switzerland, we took down. We even also see in July, we believe it's more towards the 3.5% than the 2.5%, because we still also talking to retail in Switzerland, they believe that the second half year is going to be significantly below the second half of 2020. Of course, this will also hurt us a bit. We were able to increase Americas. Initially, we said 4%-6%, now we are at 7%-9%. We were able to increase Europe along to 3%, we said, with the figures we are seeing, we see it more at 3%-5%. EBIT, we think we are well-positioned to reach the midpoint of our guidance, as well as with the net profit. I think, just to give a glimpse into 2022, we do not change the medium-term forecasts.
All I know and looking at the sales development in Switzerland and also the discussion we are having here, I see Switzerland for the next year more at -2% than at this regular 0%-1%+ . Important to note, we still see a big hit for next year, and then we believe that we can recover later on and come back to these growth rates. Nothing changed for the rest of the regions. Thank you very much so far. Now we would open up for your questions.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star one on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star two. Questioners on the phone are requested to use only handsets and eventually turn off the volume of the webcast. Anyone with a question may press star one at this time. The first question comes from Patrik Schwendimann from ZKB. Please go ahead, sir.
Thank you. Good morning, Riedener and Ricarda. My compliments for these strong results despite the high prior year basis. My first question, after the strong H1 result, your unchanged EBIT guidance seems to be conservative. You gave some reasons for it. One reason is higher input costs for H2. In percentage, what increase do you expect overall as a rough estimate for the input cost in H2? When do you think can you absorb these higher input costs, this higher price and lower costs? You were mentioning a few months, what do you expect here also for next year then? What was your organic sales development in July? Was it similar to H1? Can you give us here some hints? The contribution from M&A was higher than expected. I guess it was thanks to the strong performance by Emmi Dessert USA.
Where is Emmi Desserts in the U.S. currently in terms of the EBIT margin, and do you expect here some margin pressure in H2? Last question, the contribution from associates was much higher than expected. You were mentioning that this will fall back to around zero. Can you explain what is really behind these volatile numbers? Thank you.
Thank you. Patrik, I will start with the EBIT guidance. Then Ricarda will complement mainly on M&A and the last question. The EBIT guidance, we believe that we can achieve, as we said, the midpoint of our guidance by the full year, because I think we are in an extraordinary environment, mainly input costs-wise. As we say internally, a lot of the younger generation is not used to an inflationary environment. This is something we also have to discuss with our trade partners, because their expectation in their mind is that prices are going down, and this is not going to be the case anymore. Prices need to go up, and we know that normally it takes us more or less, depends a bit on the market.
I do not want to say it officially because otherwise everybody's postponing the price increase that we are asking for. Honestly, there are some months, I would say, of a delay in there. Sorry for not being clear there. What we are seeing is actually that, and this is a very rough estimation, but just taking some figures I know, is that the input costs effect might be a figure like CHF 10 million+ this year, and probably at least. That's what we are seeing, at least. Therefore, that's something we have then to somehow compensate for, and there is going to be a delay, given all the other things, FX, for example, translation effects, not being able to deliver.
We have an estimation that we are losing quite some sales already in the U.S. because we do not have the staff to produce the products. Things like that make us a bit cautious, but also realistic. I wouldn't see us on the very cautious side. I think we are on the realistic side. As I always say, you can always be more optimistic, but don't blame us afterwards. Organic July is coming down in Switzerland. We had a weak month in Switzerland in July, but I have to explain that we have one day less in July. One billing day less, which means, of course, already minus. I was also able to talk to a few clients last week, and they all have seen a very low July.
This had to do, of course, with Swiss people going abroad, traveling, weather input, whatever. July was not good. We are still on the trajectory to what we are saying. We have even seen positive growth in Europe and also in the U.S., sorry, in Americas, in line what our objectives are. There was a bit of a hit in Switzerland, and honestly, a bit more than we expected. We have to catch up, and this makes also the outlook a bit more prudent on our side. This was the reason why I said I see it more at -3.5% than at -2.5%.
Good morning, Patrik.
Very clear. Thank you.
Good morning, Patrik. Thank you for your question. With regards to the acquisition effect, the positive acquisition effect is coming from Emmi Dessert USA, and we have no longer a negative dilution from Lácteos Caprinos, who we have divested end of last year. These are the two primary effects of the M&A effect. With regards to the Emmi Dessert, yes, we are better than our internal business plan. That's good, that's something we will continue to drive going forward. When it comes to margin, I would expect also those margins to come slightly under pressure going forward. It's a fairly labor-intensive business. The labor market in the U.S. is upside down, as we said earlier. Wages are going up, therefore, also together with input cost increases, those margins will face quite some pressure going forward.
Of course, we have our tools and our mindset to work against it, but certainly, some headwinds to come there. With regards to your fourth question, I am sorry, but you have to repeat it, please.
The contribution from associates was much higher, and it was +CHF 3.1 million. You were mentioning that this will come back to around CHF 0 for next year.
Yeah.
Can you explain, what was really behind this very volatile number?
Yeah. This is a bunch of participations we hold. It's about 15 entities, and they're more active in, I would say, the more daily-focused environment. Some of them have had a really good year last year, and therefore, we have a positive contribution year-over-year. As we see the environment normalize, we see also those results normalize and trend back to a historic level. Historically, this number has been slightly negative. We're also working that number to turn it positive for next year. I would, as I said, expect hopefully a positive zero.
Okay, perfect. Regarding the Emmi Desserts in the U.S. the current EBIT margin was around what level?
It was nice. She said. She didn't want to tell you more.
Higher than the 6.9% of the group?
That's what we expect from a niche.
Okay. Thanks a lot.
You're welcome.
The next question comes from Joern Iffert from UBS. Please go ahead, sir.
Good morning. Many thanks for taking my questions. The first I would be, please, on the Italian desserts. Can you share with us what were the growth rates in the first half 2021? Also looking over the last couple of years where the organic growth tracker clearly improved. To some extent, it was goat cheese being a booster, then it was slowing down. It was organic a booster, slowing down a bit now with Italian dessert. What's in the pipeline for the next 2- 3 years? The second question would be, please, Switzerland is likely your key profit tool, as we also can derive from your tax rate. Let's assume it's 70%-80% of your profits, if I may say. Shall we think about the medium term that Switzerland is coming a bit under pressure, and you can overcompensate this by international markets?
The third question, please. The EBIT margin track record between 2015 and 2019 was more muted, and it has increased significantly recently. Is this more muted time period on EBIT margin development now over, and shall we expect continued improvement in 2022, 2023? Many thanks.
Yeah. If you talk about the niches like the Italian dessert market, we have always been growing in the past, but normally we have been somewhere in the mid-single- digits. Even during the pandemic, honestly, I was positive surprised that we were able to post a positive organic growth also. I think it was around 3% or so in the past year, which was good. I was surprised because I thought that could be also the contrary. What we have seen now is mainly through putting all the resources together and establishing a more professional team, having more a kind of a category and portfolio approach, we really can outpace our competitors because the competitors are still selling single products, and we are selling more and more concepts and are a well-trusted advisor of our retail clients. This affects with opening up new channels.
Here we are talking about a lot of different markets, even going into Southeast Asia, working very well with global retail chain, for example. This brought us up to double-digit for these Italian desserts. We believe that we can uphold the momentum. Whether it's always going to be double-digit, honestly, I don't know. That's the idea. We have a stronger team, we have a better portfolio, and we are well set up there, and we also improved our production footprint and are becoming more diversified as I explained earlier. You then were a bit referring goat cheese. Yes, sorry, there was a pandemic. If you forgot about it I'll have to remind you because we have seen some ups and downs there.
For example, fresh cheese, the big logs go mainly into the restaurants because you find them on salads, for example, there were no sales. What we have seen on the other hand side is, of course, the milk powder and the milk, and this is not going to remain. We see the goat recovering, and we see it coming back to mid to high single-digit growth as it was in the past. I have no worries there. It's just a bit of an up and down, and we have to live with it. Because we know where it's coming from. Referring, yes, of course, we are constantly working on the pipeline, also trying to innovate in all those niches, and we have a very strong focus on that. I have no worries overall with the niches.
I have a bit of a worry with the organic at the moment, but we also believe that this is due to the pandemic, and then we also have to admit that we still have to do some homework with that price on it. The Swiss business, we know that it has always been a bit under pressure, EBIT-wise, but we also see ourselves in a good position to defend ourselves, because we are the most important player in Switzerland, and this has a strategic value, and this strategic value can also be translated into pricing power. We are constantly working less only on sales, but on the mix. If we grow double-digit with CAFFÈ LATTE, that's a good thing, and Pur, so we have really to work on the branded portfolio. We do not look at the total sales.
Of course, it's nice to uphold them and have a slightly organic growth rate there. We look more at the quality, because the future is the quality of the sales and not the quantity of the sales in Switzerland. You're a bit in the past with your estimation of the Swiss EBIT. That was once the case, but that's what we are constantly working on, and we always say the progress is coming from outside of Switzerland, and that's what we have been seeing in the past. We do not need to hide ourselves regarding the EBIT coming from some foreign companies. EBIT 2022, maybe Ricarda saying a word on how we see a bit the future.
Well, with regards to the future, if I look at how you guys project the future in your consensus numbers, I think you're not so far off. They look quite reasonable to us.
Yeah. Important to note, yes, it was extraordinary. Yes, it was also a step-up we needed to do because we were not showing the step-up a year ago. We expected, without the pandemic, a step-up already last year. I know that you love those drawings where you just can draw a line. It's not going to be a line. There are going to be ups and downs, and we have some reasons to believe that there are also some things out there we will see an impact in our P&L in the future. Of course, we want to improve, but don't nail us down when we improve, at what rate we improve next year, the year later. We want to continue the story we have been showing in the past. That's clear.
Many thanks for this. Just to follow- up on the margins, because the EBIT margins between 2015 and 2019 were more or less flattish, this improved quite a lot in the last two years. I just wanted to double-check, and this is my assumption, that this period where we have flattish margins over 3- 4 years is likely over. Would this be a fair conclusion?
What I would expect is that, yes, this higher level we should be able to keep, and we want to further progress. There were always good reasons why we didn't do this progress in the past, and we have no idea what good reasons there are in the future why we are not progressing. If you take translation risks, for example, if we would see the Swiss franc strengthening again by 5%, this has quite an EBIT impact in the end, because we are translating those figures from outside Switzerland into Swiss francs. There are some things we cannot influence, but basically, the quality of the business has improved and we are very happy with it, and we thought this should have been earlier the case a bit. Now we showed it, which is good.
I would more flatten the past than draw it into the future.
Very good. Very helpful. Many thanks to both of you.
The next question comes from Jon Cox from Kepler. Please go ahead, sir.
Yes. Good morning Ricarda. Thanks-
Jon, we don't hear you. Sorry.
Can you hear me now? Sorry.
Now it's good. Yeah, now it's good.
Apologies. Good morning, guys. Well done on the results, I don't want to accuse you of sort of grabbing defeat from the jaws of victory, you tend to be quite cautious on a lot of lines you're mentioning, being relatively cautious when I thought the idea would be looking at what's happening is really Switzerland now is about 40% of your business. Your margin's actually gone up. That should reassure people that Switzerland is just uber profitable and the rest of the business is not so. Looking at your midterm targets, 2% to 3%, obviously as Switzerland gets smaller, maybe that target should be 2%- 4%. That's a bit of a preamble before I get into the questions. Just on the food service slowdown, which seems to be quite a big contributor to what's happening in Switzerland at least.
Talking to other companies with food service exposure, they are making adjustments on that, assuming it won't come back for a long time. Wondering what your plans are. Is it really about trying to find new parts of food service to expand into to make up for that shortfall you've seen, or do you think there will be adjustments? To come back to what my colleague was saying on the profitability generally, are we right in saying now that the profitability of international is now much closer to Switzerland than it was, or is there still a fair way to go? That would give us comfort in terms of the good growth dynamics we see. A question on the desserts. You mentioned this is quite an interesting business for you in the U.S. and in Italy.
Can you give us a rough idea how much your dessert business is now as a proportion of group? Just the last question, I'm sort of echoing Patrik when he was talking about the associates. Mine's on the minorities. The minorities looks higher. Obviously, that means that weighs a little bit on the net profit and EPS. Do you assume that we can just double that for the year and assume that sort of more 2016, 2017 annual minorities outflow, going forward? Would you say it's really a bit of a one-off because of what's happening with the COVID unwind? Thank you very much.
Thank you. I will at least try to answer some of the questions. I think you're correct when it comes to the growth rate, if you're saying probably we are going to see a bit more volatility. The more we are in emerging countries, the more we are going to see a bit of volatility. This is one of the challenges we are seeing going forward, not only when it comes to the top line, but also when it comes to the results. Of course, we try to balance that out with being active in different countries. As a group, normally, we are not used to see that kind of volatile environment, mainly when it comes to input costs, prices, retailers, buying power, political issues out there. This is not so easy then for us to predict what kind of growth levels we are seeing.
Coming to the food service question. Of course, food service is important to us, but it's not that big. I think the best move we made was setting up of our own food service delivery organization. Now it's around 3 years ago. That was the smartest move we did, because you wouldn't want to look into our figures, we still owning our own fleet of trucks delivering to food service clients. We have already seen that in a maturing market, this is probably not our thing to do it. There are more specialized, mainly clients from ours, and so we handed over the business to one of them, and now they have the impact. We still have it, of course, a bit on the sales, which means turnover side. I think our challenge is then, of course, to open up also new segments.
We have, for example, launched also a vegan range into food service. We are also collaborating very intensely and launched new products with some of those very famous worldwide chains in food service, which means in fast food restaurants, for example. That's ways how we want to promote it. We are not so unhappy if we sell less of generic milk in our P&L, I can tell you, because if differentiation and EBIT is okay, we love to do the business, otherwise, we don't want to do it. Profitability, I wouldn't bother that much because we have seen, of course, that we are able to uphold Switzerland and to improve outside of Switzerland, and there is no reason we believe why this is not going on. Having said that, with a bit more fluctuation, maybe in the future because of some emerging markets.
The dessert market is a bit over CHF 300 million already, including the U.S. business. This is nice and it is growing. Of course, we have a very good setup and we still believe there is potential because the U.S., for example, is the biggest dessert market in the world. We have carved out our niche, but we are not in a position where we have very competitive fight, so we still can find our way to invent new niches or also bring to market innovations and being more in a blue ocean there than in a red ocean, if you know what I mean. Associates, once again, Ricarda?
I think, Jon, your question was on the minorities then, no?
Yeah, exactly.
That's all I can say. As for the minorities, well, I hope this is at least going to double for the second half and it's going to continue to grow because it means that we're making very good progress, in some of those very strategic and recent acquisitions.
Okay. I want to just follow- up just on the medium-term guidance, just given the mix and what's happening with your business and expansion internationally. That I'm not talking about next year, but potentially that midterm guidance could actually be raised from 2%-3% for the group to maybe 2%-4%.
We will talk about it once we are there and we see it.
Okay. Thanks very much.
At the moment, this is our guidance.
The next question comes from Pascal Boll from Stifel. Please go ahead.
Yes. Good morning, all. I've a couple of questions. First, regarding food service, can you give us some details on how much of this food service recovery was driven by new channels? How much was old business? Is there potential that old business recovers, that we're going to see their disproportionate growth then? Secondly, on the guidance, you keep the absolute EBIT numbers stable while you keep your guidance in margin terms for the net profit line. How does that work? What's the explanation there? Thirdly, regarding the Swiss business, I think at the beginning of the year, you were more cautious for H1, more towards the decline of around 4%. Now you came in at 3.3%, you are more cautiously on H2. What's the potential? Is this more conservatism or do you see really red flags here?
Finally on M&A, we haven't seen something announced in H1. Is there something closer in H2? Thank you.
The M&A question, we're never answering. We are constantly monitoring the market and also, as always, looking at targets. Whether we bring them in or not, we do not want to explain in public. The new channels question on the food service. What we have seen is, it's difficult to open up new channels if you have a very specific business model. Which means, like any dessert in Italy, we were, for example, serving the restaurants directly. It's not easy to find new restaurants if all of them are closed. We can try to collaborate with some industrial partners, and that's what we are doing. In Switzerland, it's very difficult to find new channels at all because we have so huge channels, mainly Migros and Coop, who are also active in food service.
You find here and there a few hundreds thousands, it's not so easy to compensate. If you take the U.S., totally different story. We had a kind of a customer we were working with, of course that customer thought it would be great to have a kind of a pizza. As we were already collaborating with the customer, this is probably around, I don't know, on an annual basis, close to CHF 10 million business we were bringing in. We're expecting the other channels to come back, they're going to be additional. Emmi Dessert USA, as I said during the acquisition, as we have seen the restaurants shutting down. Before the acquisition, we thought we have to monitor closely what they're doing. They only lost about 5%-10% of sales.
They had about 70% of sales in food service. It's a totally different picture. Overall, and it's very difficult to say it overall, probably from our food service part, we are seeing 80% overall, and there is still another 20% to go, and then we hope that some of the new channels will stick. The question is over what kind of time this is going to be. Swiss, the red flags, yes, you're correct. I was a bit more positive on the second half, as I mentioned, seeing new competitors or new capacity coming into the Swiss market mainly for fluid milk, and they're already active. We lost some packages at bigger clients, and this will have a negative effect into also going into 2022. Why did we lose them? Answer is very easy, because of pricing.
We do not want to bring down the whole market under pressure. We have one customer doing some insourcing also. A strategic decision on their side. On the other hand side, we can also, as you might have seen with that customer, if you know what I mean, you also see as a compensation that we have launched beleaf in the biggest retail channel in Switzerland just a few weeks ago. We have a push with Aktifit. We more work than with our strong products, and you see it sales wise, but it doesn't mean that you see it then profit wise. Your EBIT questions, again, I hand over to Ricarda.
Thank you, Pascal, for your questions. As for the guidance, this is our most realistic assessment of both the bottom line as well as how this translates into the margin picture. I would just like to add again, because I've now heard it so many times, this guidance was not conservative at the beginning of the year, and it's not conservative as we see things now. As I said earlier, we have two very strong quarters ahead of us, and we have a retail momentum that's coming back, and we have rising input costs, plus on top an inflationary environment and a difficult labor market situation in the U.S. Just to give you an example, the dessert business is seeing 10% of the EBITDA melting away for higher logistic costs year- to- date July.
Just to give you an idea for the impact of those higher input cost prices.
Okay, thank you.
Thank you. I think we have time for one last question, and then we have to stop it.
The l ast question for today's call is from Andreas von Arx from Baader. Please go ahead, sir.
Yeah, good morning. Just also four quick questions from my side. First one is on the cash flow statement. I didn't get that change or the reasoning on that significant inventory impact on the cash flow statement and to what extent that is seasonal or structural, if you could repeat that one. I have two questions on Latin America. I haven't heard a lot about Brazil. If you could provide here an update, big level, what's going on, maybe also big CapEx project. On Chile, are you really happy with a number four position in the market? Is this just a number four general position and you have more like a leadership position in niches? As I know you, Mr. Riedener, I'm not sure a number four position is what you really would like to have long- term.
Then lastly, coming back on that Switzerland topic. If we go a bit high level, you a couple of years back promised an acceleration in organic growth in Switzerland, and now we are experiencing a declining phase in Switzerland that will last at least for two years. Could you give some high level indication on what the profitability is doing in Switzerland? Is that rather stable absolute or the margin? Not specific year, but just general over time. Because the question here is that pressure that you're seeing really impacting profitability or not? If it is impacting profitability, what are you then doing? Is there a cost-saving program, and is that impacting your mid-term margin outlook? Is that something that is not really having that much an effect? Here, your insights will be very helpful. Thank you.
Thank you. Ricarda will start with the cash flow statement.
Yeah. As for the cash flow statement, that, Andreas, is a seasonal effect, and it's very much driven by a very, very low inventory last year. If we look at H1 net working capital percentage of sales came in at 15.5%, that compares to H1 2019 of 15.2%. Yes, we're slightly on the higher side, but we are on a more normal level. Last year, we were at a very low 14.7%.
Latin America. We are overall very happy with our Brazil operations, of course, and that's something we still have to learn, but we knew it before. We have ups and downs, quite the fluctuating market, mainly when it comes to pricing, profitability, and also sales. We see wonderful month, and we see what's happening again, we see wonderful month again. That's a bit of a challenge. That's also the reason why we invested into this milk powder tower, to better somehow have a more stable result there. That's an investment we did. We are just ramping up in Espírito Santo, a new UHT plant. We have been active selling into Espírito Santo before out of Minas Gerais. As you know, duties between the states, we decided to go into that state and becoming the leader in that state.
It is a small state, of course, compared to Minas Gerais. Also, we believe that there is quite a nice profit potential there. Then we are still working on the portfolio, pushing the yogurts. They are developing well. It still needs time to further improve that. Overall happy. Chile, you are absolutely right. Of course, we are stating this also in the presentation, you are correct, number four overall. We are more looking at the segments in the end. As you know, in the past, we have not been that happy that we are leader in the UHT milk. We are still leader in the UHT milk, but that is not the part of the business we are most happy with because we see also some fluctuations there. With the acquisition or collaboration joint venture with Quillayes, we are also market leader, for example, in the fresh cheese.
We are also market leader, even if it's very small niche, in some of the functional products. In vegan, we are progressing. We have a bit of goat, so we're even building up those niches. They're very small, at least we are leader in those. I would say the most prominent and the most important position is the fresh cheese position, because there we have a wide array of products and also with Quillayes, we have a more premium brand. This was also always a bit an issue because Surlat means milk from the south, so it doesn't position it very well. There are other milks from the south, obviously. Switzerland profitability, if you look at our internal figures, we see it stable. Till a few years ago, we have been improving it further. Now we see it stable and the game is very easy.
We have pressure from the sales. It's not like other companies, big consumer goods companies who think now we have to do a big restructuring. We are always doing our homework, not only for new CEO chance. Therefore, we are also working on a lot of EOE projects. Of course, we have to keep up the profitability, and we care a bit less about the sales because the sales we can do better and cheaper with better profitability elsewhere, the additional sales.
Thank you very much.
Good. Thank you. Last slide from my side is just to remind you that we will have an investor update on sustainability. We'll have a webcast where we can go a bit more in-depth in what we already have been doing, what we want to achieve till 2027, and what does it mean to have that net zero 2050 vision. Thank you very much. I thank you for your interest in Emmi. Thank you also for the compliments we got on the half-year result. I think it's always good if we have good results also to walk through the world with open eyes. That's what we are doing, seeing a lot of opportunities but also seeing quite some challenges out there, and we will do our best to balance both to be able to have a great 2021 results.
Thank you very much, and have a nice day.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.