Ladies and gentlemen, welcome to the Givaudan 2020 Half Year Results Conference Call and Live Webcast. I am Alessandro, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Gilles Andriy, Chief Executive Officer, accompanied by Mr. Tom Hallam, Chief Financial Officer of Giro D'On. Please go ahead, gentlemen.
Thank you. Ladies and gentlemen, good afternoon as well as good evening to Asia and good morning to the Americas. Welcome to this conference call on our 2020 half year results. I'll make this call together with Tom Hallam, our CFO, who will take you through the presentation before answering your questions at the end. The investor news on our half year results 2020 was published on our Giraudin website at 7 o'clock Swiss time this morning.
This is where you will also find the slides for today's presentation. Along with the investor news on our website, you will find our 2020 half year report as well. I'd like now to start going through the presentation, and I invite you to turn to Slide number 3 to go through our performance highlights. So in the midst of this unprecedented global pandemic we are all going through, I am happy to announce both an excellent sales growth and a strong financial performance for the first half of twenty twenty. With these strong results, I'm confident we will achieve by the end of this year our ambitious 2020 goals set 5 years ago.
Furthermore, we made good progress with the integration of our recent acquisitions over the last month. In such a difficult environment, these strong results demonstrate our market leadership and the important role we play in sustaining the global supply chain in food and beverage as well as in household, health and personal care products. I'm very proud of the entire Givaudan organization for their dedication and their agility during this challenging period and for enabling us to continue to support our customers to keep those essential products available to billions of consumers throughout the COVID-nineteen crisis. In the first half of twenty twenty, we reached sales of CHF 3,200,000,000, a growth of 4% on a like for like basis and 4.1% in CHF 3. This was achieved thanks to the excellent performance of those parts of the portfolio, which were not impacted by the COVID-nineteen pandemic, namely our consumer product fragrances and the vast majority of our Flavors business, representing over 83% of group sales combined.
The strong demand of these products more than compensated the less resilient part of Givaudan, namely Fine Fragrances and Food Services, 17% of our group sales, which experienced a very strong decline from March to June. We achieved an EBITDA of CHF 734,000,000 up 11.3% compared to 2019, representing an underlying EBITDA margin of 23.7% compared to 22.3% in 2019. Free cash flow reached CHF 178,000,000, up 20%, representing 5.5% of our sales compared to 4.8% in 2019. So we are very happy with the overall performance in the first half year of twenty twenty, making us confident to deliver on our 2020 target. Let's turn now to Slide number 4.
On a like for like basis, our Fragrance division grew 4.5% and our Flavors division grew 3.6%. In the context of the COVID-nineteen pandemic, we managed to deliver this good growth by maintaining our operations and global supply chain with minimal disruptions. The good growth was achieved across most product segments and geographies with particularly strong performance in Household, Health and Personal Care segments within the Fragrance division as well as in Packaged Foods, Savory, Snacks and Nutraceuticals for the Flavor division. Once again, all our strategic focus areas complemented by acquisitions have contributed to our growth, namely high growth markets, health and wellness, naturals, local and regional customers, whilst sales with our multinational customers showed a good momentum. Let's turn to Slide 5.
In the first half of twenty twenty, high growth markets delivered a 9% growth continuing to show a regain momentum as we already saw it happening in 2019 and despite the current pandemic situation. Latin America performed strongly, led by Brazil, Argentina and Chile. Africa, Middle East and Russia contributed with strong growth levels as well as did most parts of Asia Pacific, including China, which recovered in the Q2 from a COVID-nineteen affected Q1. The only market which was almost flat was India, given that the country has been heavily affected by the COVID-nineteen crisis. In the mature markets, we grew 0.5%, led by a strong development in Central Europe, Korea and a single digit growth in North America.
This was offset by single digit decline in Western Europe as the result of travel bans and severe lockdown measures. High growth markets make up 42% of our overall sales, still below past levels. This is the consequence of the acquisitions we made in mature markets combined with the currency situation in the high growth markets. Our presence in high growth markets has always been a key driver of our growth and continues to be one of our key strategies for 2020 and beyond. Midterm, the demographics, the ever growing middle class and the strong urbanization trends will continue to support the growth of these markets, especially in Asia, where urbanization and the middle class are still below average.
Our size and our operations footprint give us a unique exposure to the diversity of these high growth markets in which we continue investing both with additional talent and new facilities to service the wide diversity of our clients. We have seen in the first half of twenty twenty how critical our geographical balance is creating natural hedges against a crisis like the COVID-nineteen where the timing of the pandemic has been quite progressive and with a different intensity depending on the geographies. Please now turn to Slide 6. Now I'd like to highlight the sales development by region for the group. As you can see, all 4 geographies have contributed to our overall growth, albeit at different rates.
Sales in Latin America and Asia Pacific continued to perform well and remained ahead of the other regions. Latin America recorded another outstanding growth with 15.5%, driven mainly by Argentina, Brazil and Chile, volume growth contributing to half of this growth. The growth in Asia Pacific was 3.9 percent with double digit growth in China and high single digit growth in Southeast Asia. North America grew 2.7%, a good result considering last year's higher comparable and the consumer effect of the pandemic situation. EAME grew 1.7% with higher growth in Central and Northern Europe than in the southern and western part of Europe due to the weight of Fine Fragrance.
Let's turn now to Slide 7. In this challenging COVID-nineteen environment and in line with the company's purpose published end of last year, Givaudan has been and will continue to be strongly focused on first protecting and supporting our employees, be those on-site or those who are still working from home. I'm very proud of how the entire Giraudin organization responded with agility and dedication during this challenging period by enabling us to continue to supply our customers to keep essential products available on the shelves to consumers throughout the COVID-nineteen crisis. The majority of our manufacturing sites have been kept almost at full capacity, and our teams did a fantastic job as well as managing the whole supply chain from sourcing raw materials to responding to delivery challenges in order to meet our customers' needs. Finally, taking care of the communities in which it operates.
In the very early stages of the COVID-nineteen pandemic, the company established a Communities Fund to enable our sites to support local communities that are being affected around the world. Givaudor committed to donate at least CHF 1,000,000 to this fund and to date the fund was benefited has benefited over 120 initiatives across 40 countries. Let's turn now to slide 8. The Fragrance division grew 4.5% on a like for like basis and 7% in Swiss francs. Fine finances decreased 16.4 percent like for like.
This part of the business has clearly been the most affected by the COVID-nineteen crisis due to the almost global lockdown and sharp reduction in all retail activities in many countries around the world, and this was combined with an almost complete standstill in air travel, closing most of the business down through travel retail channels. Only marginal e commerce activity has been able to continue. On the other hand, Consumer Products grew an impressive 11.8% like for like. We delivered this strong growth in both high growth and mature markets. Growth stemmed from all regions and customer groups with a remarkable momentum of local and regional customers.
Consumption led demand for hygiene and pandemic related products like household, health and personal care was the most significant. Lastly, Fragrance Ingredients and Active Beauty was broadly flat on a like for like basis. Active Beauty performed relatively well in such difficult market conditions, thanks to a well balanced portfolio of customers and products. In the meantime, sales of Fragrance Ingredients grew low single digits. Now let's turn to the next slide, number 9, on Flavors.
Sales of the Flavor division grew 3.6% on a like for like basis and 1.9% in Swiss francs. The division has proven to be very resilient despite the impact on the sales to food service and the reduction in out of home dining. It is worth highlighting that all of our strategic focus areas, namely natural, health and well-being, integrated solutions as well as local and regional customers contributed strongly to the overall performance of the division. Sales in Asia Pacific increased by 2.4% on a like for like basis. China and Thailand recorded double digit growth, whilst India and Indonesia have seen decline in sales.
In the mature markets, Japan, Korea and Singapore were leading growth. Savory snacks and sweet products were the leading segments overall in Asia Pacific. EME increased 3.4 percent like for like, led by double digit growth in North Africa and the Levant and a good single digit growth in the Middle East. France, the Benelux and Northern Europe have seen also a good momentum. North America increased 2.8% on a like for like basis with a good performance from both global and local and regional customers in the Beverages, Snacks and Sweet Goods segments.
Finally, Latin America increased 10.6% on a like for like basis, driven by a very strong growth in all markets and segments, notably Brazil, Argentina and Colombia, and segment wise, in dairy, beverages, savory and sweet goods. Let's turn now to Slide 10. When we presented our 2020 strategy in August of 2015, we clearly stated that acquisitions would be an important part of our 5 years growth path. Since 2014, we have acquired 16 businesses for a total of over CHF 3,600,000,000 including most recently Angoure, Indina Cosmetics and Alderes, each one with a very strong and natural strategic rationale as well as a perfect cultural fit to Givaudan. These businesses have a combined annual real contribution of more than CHF 1,500,000,000 to our total group sales.
Across all activities, our success in providing winning solutions to our customers and creating value is also a demonstration of our efficient acquisition strategy. We aim at further value creative acquisitions to complement our core capabilities and increase the portfolio of Naturals, Health and Well-being, Active Beauty, Integrated Solutions and Local and Regional Customers as well as new adjacent business areas or technologies like Biotechnologies with which we believe we can further provide value to our customers and shareholders. Let's turn to the next Slide number 11. What you can see on this slide is a recap of those 16 acquisitions mapped against our strategic priorities, namely naturals, activity, local and regional customers, Integrated Solutions and Ingredients to support our Fragrance and Flavors combined business. You can see that each of those acquired companies contribute and for some of them, such as Naturix and Angoure, contribute in multiple parts.
Let's turn to Slide 12 with a focus on Angoura. As we explained at the time of the acquisition in November, Angura is a leading independent company in the F and L Specialty Ingredients business headquartered in New Jersey in the U. S, offering a rich palate of natural ingredients and a strong position with L and R customers, especially in the U. S. Sales in 2019 were more than $250,000,000 This acquisition perfectly fits our strategic priorities such as Specialty Ingredients, Local and Rizzo customers, and we've enjoyed from day 1 an excellent cultural fit.
I'm happy to report that the acquisition is now completed, integration streams are fully engaged in all functions and regions, and quite importantly, growth and synergy targets have been established and are in progress to be delivered. Finally, we have had extremely positive feedback from customers. With this, I'd like to hand over now to Tom, who will give you more granularity on our financial results. Tom, your turn.
Thank you, Gilles. I would also like to welcome all of you to our conference call. Gilles is taking you through the main aspects of the market development, the business performance of the Group as well as the recent acquisitions. On the following slides, I would like to focus on the operating performance of the Group and the 2 divisions. Let me start with the performance highlights on Slide 14.
Group sales increased by 4% on a like for like basis, which excludes the impact of acquisitions as well as any currency impact. In Swiss francs, sales increased by 4.1%. The absolute EBITDA increased to CHF 734,000,000 compared to CHF 660,000,000 in 2019. And the underlying EBITDA margin remains strong at 23.7%. The free cash flow as a percentage of sales was 5.5% compared to 4.8% in 2019.
In the following slides, we will cover the group's performance in more details. Please turn to Slide 15, which shows the exchange rate development. Once again, in moments of crisis, the Swiss franc has again strengthened against all major currencies in which the group operates. The impact is less pronounced in major market major mature market currencies and more pronounced in some emerging market currencies. However, once again, our operational and geographical spread continues to provide good natural hedges and our EBITDA margin remains well protected against these currency fluctuations.
Please turn to Slide 16, which shows the group performance. In 2020, the group continued to achieve productivity gains and demonstrate a strong cost discipline. We also delivered on the final CHF15 1,000,000 of GBS savings, all cumulating in a gross margin, which improved to 42.2% in 2020, compared to 41.2 percent in 2019. The EBITDA group incurred costs of CHF 24,000,000 related to acquisition and restructuring costs compared to CHF 11,000,000 in the previous period. We also incurred CHF 4,000,000 related to our GBS project compared to CHF 19,000,000 in the same period in 2019.
As you see on the bottom right of the chart, our underlying EBITDA margin was 23.7% in 2019. The increase is driven by the productivity gains and the cost discipline as explained before. On the next two slides, I would like to spend a moment on the operating performance of the Fragrance and Flavor divisions. Please turn to Slide 17. We will start with the Fragrance division.
The Fragrance division recorded a sales increase of 7% in Swiss francs and 4.5% on a like for like basis. The division recorded CHF 333,000,000 of EBITDA compared to CHF 270,000,000 in 2019. The margin showed a good increase compared to last year, driven by higher sales as a result of the recent acquisitions in the division and our actions taken to contain expenses as mentioned before. The EBITDA margin was 22.9% on a reported basis and 23.4% on an underlying basis, bringing us back to historical levels and a reflection of the high levels of innovation on consumer insights that we bring to our clients. If you now turn to Page 18, I will comment on the Flavors performance.
The flavor division recorded a sales increase of 1.9% in Swiss francs and 3.6% on a like for like basis. The reported EBITDA increased to CHF401 1,000,000 from CHF390 1,000,000 in 2019. Again, as a result of continued productivity gains and cost discipline. The reported EBITDA margin in 2020 was 22.7% and on an underlying basis, the EBITDA margin was 23.8%. Please turn to Slide 19, which shows the net income of the group.
The income before tax increased to CHF 480,000,000 from CHF437 1,000,000 in 2019. The non operating expenses were flat compared to the prior year, CHF52 1,000,000 in 2020 compared to CHF54 1,000,000 in 2019. The net income was CHF 413 1,000,000 or 12.8 percent of sales. The group's effective tax rate increased to 14% in 2020 compared to 13% in June 2019. Basic EPS increased to CHF 44.81 compared to CHF41.24 in the 1st semester of 2019.
Please turn to Slide 20 for the cash flow performance of the Group. During the first half of twenty twenty, Givaudan generated a free cash flow of CHF 178,000,000 or 5.5 percent of sales compared to CHF148 1,000,000 or 4.8 percent of sales in 20 The operating cash flow for the 1st 6 months of the year was CHF359 1,000,000, an increase of 33%. The group continued its investments to support the growth in high growth markets, most notably in China. As such, total net investments were CHF139 1,000,000 and as a percentage of sales, net investments were 4.3% in 2020. Compared to 4.6% in 2019, if we exclude the impact of the sale of the Zurich Innovation Center.
Working capital increased to 27.9% compared to 27.3% in 2019, due to slightly higher temporary inventory increases and accounts receivable levels related to the COVID-nineteen pandemic. Despite the ongoing crisis, I'm very happy with the overall financial performance of the group and the free cash delivery in the 1st 6 months of the year. Please turn to Slide 21 to look at the debt profile of the group. During the 1st semester of 2020, the group issued 2 new bonds for a total of €1,000,000,000 increasing the net debt position of the group as well as its leverage ratio. However, the group continues to have a well balanced debt portfolio with a weighted average effective interest rate of 1.43%.
Furthermore, on this side, you will be able to find the maturities of our debt profile, as well as the respective average interest rates for each debt maturity. With this, I would like to conclude my part of the presentation for the 1st 6 months of 2020 and hand back to Gilles.
Thank you, Tom. So our growth outlook, we have delivered a strong first half in 2020, and we are proud of our achievements in this period all the more given this unprecedented context that we are all going through. Once again, the resilience of our business and the consistency of our results have been demonstrated. All our strategic areas are growing to our expectations: high growth markets, LNR customers, health and well-being, naturals, integrated solutions and recent acquisitions add to the breadth and the resilience of Giraudon. Visibility is limited for the remainder of the year, both on the ongoing pandemic, still very active in many parts of the globe, and its potential economic consequences.
Nevertheless, our half year results put us in a good place to confirm our 20 20 guidance on which the entire organization is focused on delivering. Short term, our focus remains on keeping our operations, supply our customers, leverage our business continuity action plans as required, whilst our first priority is to protect and support our employees and of course, keeping our current discipline on costs throughout the business. Our focus is also to continue integrating the recently acquired businesses in our Giraudin operating platform. Integration costs of CHF 50,000,000 are confirmed in 2020, half of which have already been spent in the 1st 6 months of 2020. And finally, we are finalizing our new strategic road map for 2021 to 2025, in line with Givaudan's purpose, which we confirm unveiling on August 27, both live in Zurich for those of you who will be able to travel and via a live webcast for the others.
Let's now turn to Slide 24. Our 2020 road map is centered on responsible growth, shared success. Our ambitions and the road map have sought to ensure responsible growth and shared success for shareholders, customers and all key stakeholders. Building on the success of 2011 to 2015 strategy, we wanted to create further shareholder value through profitable, responsible growth with the additional contribution of acquisitions. To create long term value, we will capitalize on our market leadership and most importantly, continue to build close partnerships.
Givaudan's 2020 strategy is built on the pillars of growing with our customers, delivering with excellence and partnering for shared success. After 9 semesters and still one to go, we are fully on track with our ambitious financial targets, thanks to an average of 5.1% like for like growth and an average free cash flow of 12.5% at the end of 2019 and the strong results we announced today for the first half of twenty twenty, that gives us confidence that we will deliver on all aspects of our 2020 strategy. Flavors and fragrances are consumed every day around the world they are an essential part of successful consumer products for our clients. I'm confident about Girodins' strength and our DNA built over the last 2 50 years to continue to create value for our customers, our shareholders and all our stakeholders. With the significant contribution Giordano's employees around the world make every day, I'm convinced that we have the right people, the right strategies and plans in place to continue on our successful path.
Ladies and gentlemen, many thanks for your attention. Thomas and I are looking now forward for your questions.
We will now begin the question and answer The first question comes from Celine Panuti from JPM. Please go ahead.
Yes, good afternoon. My first question is on the trend throughout the quarter. So you delivered a balanced quarter, but with 85% with good growth, but then you had a 15% of fine fragrance of foodservice or 17% that was down sharply. Could you give us a bit of a feel of how these have progressed throughout month by month? And how we should look at the balancing of those 2 extreme, if I may say, in the 3rd or in the second half of the year?
My second question is on the EBIT performance, which was quite strong. So you mentioned productivity gain a few times, but and as well as the €15,000,000 savings from JBS. Could you give us a bit more granularity on the different building blocks that have delivered that performance? And finally, the FX has been quite negative in the first half of the year. I was wondering whether we should expect pricing or if you have already seen a pricing implementation in especially in Latin America.
Thank you.
Okay. Thank you, Celine. Good afternoon. So I guess that you're referring to the trend in the second quarter because essentially the first effects of the lockdown we observed in the second half of March that was clear when we announced our Q1 results and we saw that hitting basically the Fine Fragrance business. That was the second half of March.
But then essentially April, May June, we've seen a very, let's say, consistent decline, I would say, across the 3 months for fine and foodservice. The only thing is we've seen in the month of June a recovery of fine in the U. S. Simply because retail stores, especially on the specialty retail business, have reopened quite aggressively and we saw the immediate positive effect on our Fine Fragrance business in the U. S.
But essentially, this is, I would say, a direct consequence of the stores which were closed during those 3 months in many countries around the world. And Foodservice, essentially, has followed the same trend. So a very consistent balance across the 3 months, except for the month of June where we saw an improvement in the U. S. And then on the 85%, the one which is growing nicely, Consumer Products and the rest, It's also been very consistent on flavors.
There is no peak and valleys for flavors and in the same way for Consumer Products across the second quarter. Tom will add to it, but on the improvement of the EBITDA, yes, productivity gains, but you have also obviously the synergies which are carved out from the acquired companies. We have always very clearly stated that we would bring step by step the acquired companies to the levels of Givaudan. The third element obviously is I don't consider the level of EBITDA of the Fragrance division in 2019 being the norm. So that's basically being improved, thanks to price increase and the number of measures.
And finally, people have not been traveling at all. So that also helps around the world. So that basically explains the 1.5% improvement. You also obviously have an operational leverage. The growth of 4% is all volume, so that also helps on improving the EBITDA.
I'm not so sure about the pricing. What do you mean the pricing implementation? So the pricing, as we said, there was a leg of pricing for fragrances in the Q1 that was clearly communicated at the time of full year results. And then we have a pricing effect in Latin America. We said that the growth in LatAm is roughly half of the growth in LatAm is volume.
So that's basically the other half is pricing. Yes.
On the last question, I was referring to the weakness in FX in Latin American currency, whether we should expect further pricing benefit in the second half of the year?
Well, in the end, Celine, it depends very much on the currencies. I mean, we have pricing mechanisms in these countries, particularly in Argentina and in Brazil. And as the currencies fluctuate, we have agreements with our customers to pass price, which we're doing on a constant basis. And just to come back a couple of incremental items on the EBITDA, as Gilles mentioned, I mean, I think as he said, our facilities are operating, most of our facilities were operating at 100%. So we're getting very, very good capacity utilization.
As Gil also mentioned, we have less travel, less discretionary expense. On the other hand, I mean, clearly, our freight costs are up. I mean, as you know, in general, the tariffs for freight are higher in the 1st 6 months of the year. But very happy with what we've done in the 1st 6 months. Some of it is really, let's say, short term and some of it is as a result of, as Jules says, of the acquisitions and the investments we've made on things like GPS.
The next question comes from Heidi Vesterinen from Exane BNP Paribas. Please go ahead.
Thank you. I first wanted to ask about fine fragrance, please. If travel retail, which is a big channel, remains depressed for quite a long period of time, do you think it will take longer for this business to recover to pre pandemic levels? Or do you think consumers will just shift to other channels? What is your view on the future of fine fragrance?
So Heidi, thank you for the question. Well, that's a $1,000,000 question. Basically, yes, for sure, the travel bans, travel traffic is having a big impact. Depending on the source of what you hear, it's estimated that 20% to 30% of fine fragrances are being sold through a duty freeze. So that obviously has an impact if it's not if consumers don't go elsewhere.
So the elsewhere can be obviously stores. Let's see how consumers behave. But I would say the online and sales on the Internet is something that has clearly been growing quite strongly even if it represents to be a small amount. But that could certainly be the alternative, which not only replaces the duty free, but also prevents I mean, allows consumers not having to go to stores when you have all those measures which are there to protect consumers in the stores and so forth, which is not made easy, especially to smell fine fragrances. So let's see how things go.
To go back to the pre COVID-nineteen levels in terms of 2019 is certainly going to take a little time.
Thank you. And then I have another $1,000,000 question then next on Foodservice. Just based on what you know now and the conversations you have with customers, do you expect this to bounce back? Or do you think that it could be worth deemphasizing this perhaps as you think about your new strategy? I just wondered about your current thoughts.
Thank you.
Well, I would say that foodservice is less in a way less by nature, less volatile than fine trackers because it's less discretionary. And in a way, where foodservice is different than fine fragrances is that you could argue that people not going to food service points of sales replace that by eating at home and maybe buying packaged foods and so forth. There's been a shift from one side to the other where I can't say the same for fine fragrances. If you miss a sale of a perfume bottle, you won't compensate by by something else, maybe a deal. So I'm quite confident that the foodservice will come back.
At what speed, I don't know, but certainly will come back strongly as stores and shops and restaurants open.
Thank you.
The next question comes from Patrick Rafaisz from UBS. Please go ahead.
Thank you and good afternoon everyone. I have three questions, please. The first would be around working capital. Tom, you talked about the impact of COVID-nineteen on inventories and receivables. How much of that would you expect to unwind in the second half of this year?
And then the second question would be on synergy potential. You talked about the integration charges for this year. You talked about the revenues of acquired businesses. But if you think about cost synergies over the next 2 to 3 years, how much do you think these acquired businesses could add just from integrating the assets? And then the last question on M and A strategy.
I'm sure this will again feature prominently in the next strategy cycle, where we'll hear more about end of August. You also talked about adjacencies. What do you think about natural colors here? Is that maybe a business that could feature more prominently in your portfolio at one point? Thank you.
So maybe I can start, Patrick, on the working capital, and I'll hand over to Gilles. So on typically, our working capital is higher anyway at the midpoint of the year, just because of the availability of materials, crops and so on. And then traditionally what we do is we decline in the second half. And as I mentioned in my notes earlier on, we certainly have seen that we are being very, very conservative with our inventory levels. The situation continues to be tense from a supply chain perspective, as Gil mentioned.
Just as a couple of examples, India continues to be a big supplier on the fragrance ingredients side. And of course, the situation is difficult. And of course, none of our customers want to miss on this would we expect to be is, probably Where would we expect to be is probably around 25% of sales by the end of the year, which is where we've been traditionally. So clearly, we would expect to come down over the next few months. Then on the cost synergies, I mean, typically the way that we think about the businesses and you remember what we said we would do with Naturix is we would bring the whole Flavors division back to pre acquisitions levels by 2021.
I think our half year results are clearly a good demonstration of that. And that's typically what we would expect with any of the acquisitions. We some of the companies that we've acquired have margin levels that we would expect to increase to chippered on levels. Others have very, very strong margin levels and we would actually expect to continue to get synergies anyway. So we have targets for each of those companies.
And then maybe just on the M and A point, I hand it back to Gilles.
Yes. So certainly in terms of M and A, we will continue to be what we have been over the last few years, which means being opportunistic, disciplined and diligent and making sure that every acquired company fits both the basically the strategy of Giraudan but also the cultural fit. We are not going for size at all costs. So certainly, whether it's the COVID-nineteen or post COVID-nineteen or beyond will create opportunities. I don't know if it's going to be more or less, but we'll still be opportunistic.
So as it relates to Natural Colors, there is no mystery that Naturix actually provided roughly a €50,000,000 business of natural colors, which is doing well. And that could be obviously a space in which we could be interested to expand to be the leader, for example. But that would be obviously for what it is, meaning that integrated solutions is not necessarily always the primary reason to buy an adjacent business. The adjacent business needs to be meeting our requirements in terms of growth, profitability, meeting also our purpose, I would say, in terms of clean label also on the label. So and Integration Solutions is basically an additional benefit.
So yes, Natural Colors could be a way to expand to basically be in the leading position around this space. Thank you very much.
The next question comes from Tom Biegelsworth from Citi. Please go ahead.
Thanks very much. A couple of questions, if I may, just kind of points of clarification largely. Firstly, on the Unger deal, can you I don't think I fully understood what's kind of unique about that. And if you could help understand that, what that's going to do for your business that you weren't able to do yourselves would be super helpful as a first question.
Do you want to take it?
Yes. So Ango is a very interesting asset because it's multifaceted. I mentioned $250,000,000 About 40% of that is really what we call essential oils in the space of lime, as an example, which are truly a complement to what Givaudan has as a portfolio. So there are really things that we did not necessarily have. We have a small business in Florida around lime and citrus, but this is really complementing that with unique essential oil products, which had been developed over time by Angora.
And then you have a very interesting business as well around chemical ingredients to serve our Fragrance business being manufactured in the U. S. Or Mexico. So this is also complementing our ingredients that we are making in house. And finally, the other 40% is really about what we call compounds, compounds for fragrance and flavors with local and regional clients, especially in the U.
S. But also in the U. K, which again complements our portfolio of LNR clients, given the fact that this is a promising set of clients. So ingredients, natural essential oils and LNR clients for both F and
Thank you. And the second question is, you've helped you've given us a number of kind of the building blocks of the EBITDA margin. But if I'm trying to understand the implications of that. If things normalize, do we expect growth to maintain at these kind of levels and margins to kind of maybe come off a little bit because some of those other costs will come back and utilization rates might drop? Or is it that or is there another sequence out there where actually growth accelerates and you can maintain and grow this margin from here?
So I mean, I think if you look in the 1st 6 months of the year, I mean, it was very British term. I would call it swings and roundabouts in terms of cost and cost avoidance. I mean, clearly, as Gilles said, we were not traveling as much as we would normally be traveling. On the other hand, we had higher distribution costs. I think the only if you as you said, if we go back to a more normal world, maybe the only guidance that I can give you is that typically between the half year and the full year, our EBITDA margin is 100 bps lower.
And one of the main reasons is that in December, we typically have a shorter shipping month. So we miss probably a week of sales. But that's probably the only guidance that I can give you based on, let's say, 10 years of history in a normal world.
Very helpful. Thank you both.
The next question comes from Matthew Yates from Bank of America. Please go ahead.
Hey, good afternoon, everyone. Thank you for taking the questions. I've got a couple. The first one is around foreign exchange, which we can see the big negative impact on the top line, but has seemingly been mitigated on the bottom line. I think in the introductory remarks, you talked about the natural hedges in the portfolio.
I guess just given all the changes you've had around acquisitions, around the GBS, if you wouldn't mind just giving me a bit of a refresher there as to your transaction exposure on the group? And then the second question is around your active beauty business where I think you said it was flattish in the first half. I'm guessing the overall category was probably down much more substantially than that. And you talked about having a diverse portfolio and customers. Could you just elaborate a little bit as to how you're able to do so much better than the end market in beauty?
Yes. So I'll start with the active beauty and maybe Tom will take over the thing on the natural hedges. So yes, I mean, I would say the beauty of this Active Beauty business, if I may say so, is that it's the way we've built it. It's highly specialized. We are really specialized in the high value added ingredients of the skincare ingredients business and not in the commodities or in the less value added ingredients.
And in a way, that's the first reason that this portfolio portfolio is doing well because it's really driven by technology. It's driven by it's also a portfolio which is very much, I would say, in fashion because it's biotechnology driven. It's essentially renewable resources. It's the latest acquisition we are making. Alteryx is also going to contribute for that.
So it they are really products which are very successful. We've been winning the Gold Award on active beauty ingredients every year in terms of innovation for the last 4 or 5 years. And obviously, yes, it's also the diversity of clients. But I would say it's a bit the unique position we are taking with our portfolio, which is differentiating. That explains the, as you said, the relative performance to the market because if we look at the way the category has been performing, it's not fine fragrances, but it's not been great.
And then Tom, maybe on the Yes.
Absolutely. Thanks, Gill. So thanks for the question on the FX. Maybe what I'll do is I'll split it into 2 parts. So firstly, on the transaction part.
So we invested significantly in our IT platforms over the last, well, probably 10 years now. And if you look actually, we have a very, very good visibility on our exposure at a group level to all of the currencies around the world, which allows us to hedge our transaction exposure on a daily basis. And you see actually in the non operating expenses in the 1st 6 months that we have very little FX exposure that is not hedged. Of course, that depends afterwards on some of the currencies. I mean, particularly places like Argentina, where we find it very difficult to hedge.
But so that's really on the first part, which is transactions, where we're hedging our exposure from the moment that we have exposure on the balance sheet. Then on the translation, so as you mentioned, you see the impact on the top line of the strengthening Swiss francs. Maybe a couple of points. The first is that if you look at our exposure, of course, our biggest exposure is on raw materials around 37% to 40% of our sales is raw materials, which is very closely matched to the currencies in which we sell. And then our manufacturing footprint is a global footprint, because we want to be close to our customers and close to consumers, which means that we're also producing in the markets in which we sell, which provides that natural hedge.
What I've done in the past is I've given a sort of rule of thumb mainly on the dollar, which is the most important currency. And typically what we would say is that a $0.10 movement in the dollar Swiss francs is somewhere between €50,000,000 60,000,000 of absolute EBITDA on an annual basis. But as you mentioned, and as I mentioned in my speech earlier on, we are naturally hedged at the margin level, but there is an impact on the absolute EBITDA.
That's very helpful. Thank you. If I can just squeeze in a follow-up, I think it was on Thomas' question about the margin and your comment that usually it would be down about 100 basis points in the second half. Given some of the cost saving effects you did in the first half seemingly look temporary, would you expect the second half this year to be down more than 100 basis points?
No, I don't think so. No, I think, I mean, if you look at where we are today, we continue to have the savings. And so I would expect it's going to be pretty much a normal year in terms of the EBITDA margin.
Very good. Thank you all.
Next question comes from Gunther Zechmann from Bernstein. Please go ahead. Hi, good afternoon gentlemen. On the margin point, just to continue on that, you mentioned productivity gains, cost discipline and the more temporary effects that helped the margin. I was more wondering the 100 basis point on the gross margin improvement, How much of that was from raw material costs, if any?
And then following up from that, what is your expectation for raw materials for the rest of the year? Thank you.
So we've been very consistent and we'll continue to be consistent on raw mats. It's essentially we are
forecasting them to be
flat against last year. Improvement has a lot margin to explain the 1% improvement. The improvement has a lot to do with, obviously, the price increase that we have made. As mentioned to the again, the improvement that we have done on the acquired companies because some of those synergies, if I take well, for example, the synergies on purchasing that we are having with the acquired companies, that has an effect on the gross profit margin. And the efficiency gains that we talked about where we had a very good volume being produced with all sites being at 100% capacity, as Tom mentioned.
So that explains basically the improvement of the gross profit margin.
The next question comes from Jean Philippe Bertschy from Vontobel. Please go ahead.
Good afternoon, gentlemen. I would have a question on the market share gains. From your numbers, it looks like you are clearly gaining market share. And I would like to know where or in what which segments are you gaining market shares and why in your view? And the second one would be on the flavors in North America.
It seems that you had an acceleration in the Q2 and I would love to know what is it coming from this acceleration in Q2 as we had the tendency to see a slowdown in Q2 for the food players. Thanks. Okay. Thank you, Jean Philippe. So basically, I'll start with your last question.
In North America, I believe that has a lot to do with almost those categories which have been helped in a way by the confinement, by having consumers actually go back to traditional categories such as savory, canned soups and so forth. Some of those categories actually which had been suffering for the last, whatever, 3 to 4 years, came back almost thanks to the situation in the U. S. But in other parts of the world. So that explains, I would say, the improvement of our flavors business in the U.
S. For the most part. Then your question on market share, well, it's a bit early to say. Let's wait for our competitors to report their numbers. It depends who you're talking about.
And I guess IFF and CMY are the 2 ones 4 years, so maybe that continues in the first half, let's see. 4 years, so maybe that continues in the first half. Let's see. And same wise, let's wait for their results. I would say that overall, if I refer to market share gains done in the past, clearly, a market share gain in Fine Fragrances, that was clearly the case, and in fragrances overall.
But also, the Flavors division started to really pick up an incremental better growth than IFF and even CMYs end of last year on the Flavors division. So I can't tell you exactly where because I don't manage any of those companies, but we have basically I believe that overall, this has a lot to do again with what we call our natural hedges, where we really have the widest spread in terms of portfolio of products, thanks to the acquisitions portfolio of clients, thanks also to the acquisitions and the way we have always developed and made choices in terms of growth strategies at Givaudor. And then it's a matter of execution. We are integrating those companies without any disruption on our core business. We have made 16 acquisitions, but none of them have interrupted or made or distracted any of our operations.
So that I believe that is also quite helpful. On the contrary, it helps accelerate obviously, the on the sales and the commercial synergies. So all in all, I think we are happy with the development. Thanks, Sal, for the innovation. Operator, we'll take the last question.
The last question comes from Katy Hutchinson from Davy. Please go ahead.
Hi, good afternoon and congratulations on a good set of numbers today. And my first question is on Latin America. And so it seems that the Q2 flavor to Q2? And how has the region performed since the end of June? And then my second question is on the flavors business in China.
So could you help us to understand the categories that you think will likely be strong in the second half? And if you think that the growth trend towards multinationals in the region is sustainable over the coming few quarters? Thank you.
So in Latin America, I mean, this is all relative to the slowdown in Q2 for Flavors because, yes, we were tracking, I think, at 18%, and that means the second quarter has more in the range of plus 3% or 4%. So this is a relative slowdown from a double digit growth that maybe we have been too used to. But I would say the essential reason is Mexico and I would because on the other markets of Latin America Pro Flavors, they did well. So it's Mexico, and I believe this has a lot to do with the whole COVID situation. And then for China, well, it's a bit difficult to predict what's going to happen in the second half.
We have and I've been personally very well, let's say, surprised by how fast China rebounded and picked up again with our business in both Fragrances and Flavors. And we have no reason to believe that will not continue to be the case in the coming months. So China has been again strong in both divisions and across different clients. Your comment about is the, let's say, the accelerated growth of global and international companies sustainable, I would say that I hope so and I wish for all our global clients. I would say that some of the part of the explanation, especially on the flavor side, has a lot to do with those categories which have been supported in a way by the COVID-nineteen, the confinement, traditional food categories, which have seen a strong growth, and I was mentioning in the U.
S, but in other parts of the world, and that was very much so with the global international clients. So let's see how this is going to be sustained in the next months to come. Thank you. So that was the last question. I thank you and thank you everyone for your attention and your questions.
I'd like to welcome you obviously at our next, let's say, next milestone which is end of August on 27th August which will be the disclosure and the publication of our 2020 5 strategy that we will have some sort of hybrid events, both virtual and physical in Zurich. So one way or the other, we look forward to seeing you on the 27th August. Thank you again for your attention.
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