Ladies and gentlemen, welcome to the Givaudan 2019 Full Year Results Conference Call and Live Webcast. I am Alice, 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 The conference must now be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr.
Gilles Henri, Chief Executive Officer, accompanied by Mr. Tom Hallam, Chief Financial Officer of Givaudan. Please go ahead, gentlemen.
Thank you. Dear 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 2019 full year end results. I'll make this call together with Tom Hallam, our CFO, who'll take you through the presentation before answering your questions at the end. The investor news on our full year results 2019 was published on our Gevaudor website at 7 o'clock Swiss Time this morning, 24th January 2020.
This is where you will also find the slides for today's presentation. Along with the Investor News on our website, you will find also our 2019 annual report. I'd like now to start going through the presentation and invite you to turn Slide number 3 to go through our performance highlights. As we enter into a new decade and into the last year of our 2020 strategy period, I am happy to report an excellent sales growth for the full year 2019, substantially above market. We are fully on track to achieve our ambitious 2020 goals, and the integration of Naturix as well as all the other acquired companies is making excellent progress.
We continue to invest throughout the year in different parts of the world. As a landmark event on the 14th June 2019, we inaugurated our new state of the art innovation center in Zurich, so called the ZIK, housing research activities for both divisions. This center is certainly second to none in our industry. On the 15th 16th October 2019, during our Investors Day, we presented it to the financial community. We are very proud of this cornerstone facility for our future success to come.
In 2019, we added close to CHF 680,000,000 of sales and reached more than CHF 6.2 1,000,000,000 of sales. This represents a growth of 12.2% in CHF 6, thanks to an excellent like for like growth of 5.8% and to the contribution of the acquired companies. Both divisions contributed to this robust growth, which was supported by a further encouraging recovery of the high growth markets. Our project pipeline and win rates improved strongly, testifying for the strong relationships and the good innovation momentum we have with our clients. We achieved an EBITDA of CHF 1.275.
This represents an increase of 11.4%. The comparable EBITDA margin is 21.5%. We delivered a very good free cash flow of CHF 787,000,000, which is up 11.9% compared to 2018. It represents 12.7% of our sales and is fully in line with our 5 year guidance. At the AGM on March 25, the Board of Directors will propose a dividend of CHF 62 per share, which represents an increase of 3.3 percent year on year.
Thanks to the powerful combination of continuous innovation and all the acquisitions we made over the last 4 years, we have a strong and broad portfolio fully aligned with consumer and societal trends. On the back of this set of our 2019 strong financials, we are fully on track to deliver on our 2020 guidance. Let's turn now to Slide 4. On a like for like basis, our Fragrance division grew 7.3% and our Flavors division 4.5%. We again saw an excellent growth with local and regional customers, while sales with our multinational customers continued to regain a good momentum.
The excellent growth was achieved across all product segments and all geographies. Alongside high growth markets, all of our other strategic focus areas, namely Naturals, Health and Wellness, Active Beauty and Integrated Solutions, strongly contributed to our growth. Our recent acquisitions contributed to the growth of both the Fragrance division and the Flavor division. Let's turn now to Slide 5. In 2019, high growth markets lived up to our expectation by further improving to double digit growth, 4 times the growth rate of mature markets.
This is a clear improvement over the recent years. The emerging markets of Asia Pacific grew very strongly, led by Indonesia, the Philippines, Thailand and Vietnam. Eastern Europe, Africa and the Middle East also contributed with double digit growth as well as Latin America. In the mature markets, we grew with a solid 2.4% led by Southern Europe and Korea. High growth markets make up 43% of our overall group sales, still below past levels.
This is the consequence of the acquisitions we made in mature markets combined with the currency development in the high growth markets. Our presence in high growth markets has always been a key driver for 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 globalization 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. Let's turn now to Slide 6.
I'd like now to highlight the sales development by region for the group. Sales in Latin America and Asia Pacific continue to perform very well. Latin America recorded another outstanding growth with 15%, driven by all the main markets of the region, be it Argentina, Brazil, Mexico and Colombia. Volume growth contributed to 2 thirds of the total 15% growth. The growth in Asia Pacific was 5.6% with high single digit growth in the high growth markets.
North America grew 2%. EME grew 5.7 percent with double digit growth in Iberia as well as in the high growth markets of Eastern Europe, Africa and the Middle East. Let's turn now to Slide 7. The Fragrance division grew 7.3% on a like for like basis and 10.9% in Swiss francs. This excellent growth was driven by the strong performance of new wins as well as the price increases to compensate for higher input costs.
Fine Fragrances increased 5% like for like. We continue to sustain our clear market leadership in Fine Fragrances in both mature markets and high growth markets. A high level of new business wins across all customer groups, combined with an excellent market performance of recent launches, were the main contributors to these further outstanding results. Consumer Products grew 7.8 percent like for like. We delivered good growth in both high growth and mature markets.
Growth stemmed from all regions and customer groups with a remarkable renewed momentum of multinational customers. Fragrance Ingredients and Active Beauty grew 8.1 percent like for like. Active Beauty, we achieved an encouraging double digit sales growth, driven by all customer types and active ingredients. Specialties in Fragrance Ingredients recorded a strong double digit growth. Now let's turn to the next slide, number 8.
Sales of the Flavor division grew 4.5% on a like for like basis and 13.4% in Swiss francs. All of our strategic focus areas, naturals, health and well-being, integrated solutions as well as local and regional customers contributed strongly to the overall performance. Sales in Asia Pacific increased 6.4% on a like for like basis. The division recorded double digit growth in Indonesia, the Philippines, Thailand and Vietnam. China and India achieved a strong single digit growth.
EAME increased 4.4 percent like for like with double digit growth in Africa and the Middle East, driven by Egypt, South Africa, Nigeria and Morocco. In the mature markets of Benelux, Italy and Spain, a high single digit growth was achieved. North America decreased 1.6% on a like to like basis despite the good performance from local and regional customers. New wins and growth from the existing business in Savory, Snacks and Beverages were offset by the weaker performance of the Dairy segment. Latin America increased 19.2% on a like for like basis with 2 thirds volume growth driven by very strong growth in Mexico, Brazil, Argentina and Colombia.
Let's turn now to Slide 9. A couple of slides on the acquisitions. The first one, when we presented our 2020 strategy in August 2015, we clearly stated that acquisitions would be an important part of our 5 years growth path. Since 2014, we have acquired 15 businesses for a total of over CHF 3,600,000,000, each one with a very strong and natural strategic rationale as well as a perfect cultural fit. These businesses, once fully integrated, will have a yearly contribution of more than CHF 1,500,000,000 to our total group sales.
Across all activities, Fragrances, Active Beauty and Flavors, 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, integrated solutions, local and real customers as well as new adjacent business areas such as the ones we brought by Naturix and Active Beauty and with which we believe that we can further provide value to our customers and to our shareholders. Let's turn now to Slide 10. When evaluating potential acquisition opportunities, we respect 2 hard criteria. First question, can we create value for our customers?
2nd question, can we create value for our shareholders? Very simple. You can see on this slide our last 15 acquisitions were strictly aligned with our 20 sixteen-twenty 20 strategy to increase our stake along 5 strategic themes: Naturals, Active Beauty, Specialty Ingredients, integrated solutions, local and regional customers. And you can see from this slide that some of the acquired companies actually ticked many of those themes. Let's turn now to Slide 11.
This slide gives a short follow-up on Ann Tayac's GBS update. As you know Ann Tayac is the Head of GBS and IM and T, sitting on our Executive Committee that she gave on our Annual Investor Conference on April 9, 2019, in Vernier. The transitions in EME, North America and LATAM are now fully complete, and the two teams in Buenos Aires and Budapest are fully operational for these three regions. In Asia Pacific, the most complex region in terms of cultures, languages and businesses, We have completed the Phase 1, and the implementation of Phase 2 is ongoing and will be finished by the end of this year. All our 3 delivery centers, the CBS delivery centers, Budapest, Buenos Aires and Kuala Lumpur work in an efficient way within the broader Givaudan organization and the projected financial benefits are fully being delivered according to plan.
With this, I'd like to hand over to Tom, who will give you more granularity on our financial results. Tom, please go ahead.
Thank you, Gilles. I would also like to welcome you all to the call. As Gilles has taken you through the main aspects of the market and sales performance, on the following slides, I will focus on the operating performance, the cash flow and the balance sheet of Givaudan. Let me start with the financial highlights on Page 13. As Gil mentioned, Group sales increased by 5.8% on a like for like basis and by 12.2% in Swiss francs, which includes the full year impact of Centraflora, Expression Parfumet and Naturix, as well as the partial impact of the acquisitions we completed in 2019, most notably Drome and Fragrance Oils.
The underlying EBITDA margin was 21.5% in 20 19 compared to 21% in 2018. We increased our free cash flow by 11.9%, resulting in a free cash flow as a percentage of sales of 12.7% or CHF 787,000,000. Please turn to Slide 14, which shows the exchange rate development. This slide shows the comparison of the average exchange rates of 2019 versus the average of 2018. Overall, major market currencies were relatively stable.
We faced volatility in some emerging market currencies. However, our operational and geographical spread continued to provide good natural hedges and our EBITDA margin remains well protected against these currency fluctuations. We continue to maintain a good cost discipline throughout the organization, as well as continuing to benefit from the savings from our GBS initiative and other productivity gains. You see that our gross margin declined from 42% to 41%, driven by the full year impact of Naturix, as well as the mechanical dilution as a result of the pricing actions to compensate for higher input costs. The EBITDA was CHF 1,275,000,000 in 2019 compared to CHF1.145 billion in 2018.
We had a number of 1 off items in both years, mostly costs related to the implementation of GBS of CHF 31,000,000 and acquisition and restructuring expenses of CHF 25,000,000. In the media release, you will find the table with more details of the adjusting items. The operating income increased to CHF 920,000,000 in 20 19 compared to CHF883,000,000 in 20 18. On the next two slides, I would like to spend a few minutes on the operating performance of the 2 divisions. If you turn to Slide 16, we can start with the Fragrance division.
As Gilles has mentioned, the Fragrance division recorded a sales increase of 10.9% in Swiss francs. Acquisitions contributed CHF127 1,000,000. The EBITDA for the division in 2019 was CHF555 1,000,000 compared to CHF508 1,000,000 in 2018, driven by a strong sales growth and the contribution from the acquired companies, Jerome and Fragrance Oils. The underlying margin was 21.3% in 2019 compared to an EBITDA margin of 20.7% in 2018. If you now turn to Page 17, we will cover the Flavors performance.
The flavors division recorded a sales increase of 13.4 percent in Swiss francs. Acquisitions contributed over CHF 300,000,000. A continued strong focus on internal costs and continued productivity gains increased the EBITDA from CHF 637,000,000 in 20 18 to CHF720 1,000,000 in 2019 and compensated for the fact that the division was impacted by the lower margin of the Naturix business for the full year. On a comparable basis, the underlying EBITDA margin was 21.6 percent compared to 21.2 percent in the prior year. Please turn to Slide 18, which shows the amortization amortization of intangible assets.
I've included this slide, which has been updated to give you a perspective of the future amortization. This has now been updated to include all acquisitions included in 2019. Please turn to Slide 19, which shows the net income. The net income before tax was increased in 2019 to CHF808 1,000,000 as a result of the strong business performance and a stable non operating level of expenses. Despite higher interest costs related to the recent acquisitions, the group incurred lower foreign exchange losses.
As a reminder, in 2018, the Group incurred increased foreign exchange losses, most notably as a result of higher foreign currency losses in Argentina. The effective tax rate in 2019 was 13% compared to 14% in 2018. The net income was CHF 702,000,000 in 20 19, a solid increase of 6%. Basic earnings per share was CHF 76.17 compared to CHF 71.92 in 2018. Please turn to Slide 20, which shows the free cash flow.
In 2019, we had again a strong free cash flow of 12.7 percent, exactly as we had in 2018, despite continued significant investments we made throughout the year. During 2019, Givaudan generated an absolute free cash flow of CHF 787,000,000, an increase of 11.9% compared to 2018. We had an extremely strong increase in operating cash flow, up by 24% versus 2018 to CHF 1,100,000,000. Total net investments were CHF 246,000,000 and as a percentage of sales, net investments were 4%. As a reminder, in 2018, total net investments were 3.3%.
Excluding the proceeds of the ZIG transaction, net investments were 5.1 percent of sales. In 2019, we continued our investments to support the growth in high growth markets, most notably the construction of an additional fragrance facility in China and the completion of the flavors facility in India. Working capital was well managed coming in at 24% of sales in 2019 compared to 26% in 2018. Please turn to Slide 21. Over the last 20 years, the company has generated a cumulative CHF 8,600,000,000 of free cash flow, including the proposed dividend for 2019, Givaudan has returned over CHF5 1,000,000,000 to shareholders in the form of either dividends or share buybacks since its spin off in 2000.
This clearly underlines the strong commitment of the company to return surplus cash to its shareholders. Based on the continued strong cash generation, the Board of Directors will propose an increase of the dividend to CHF62 in 2019, an increase of 3.3% in the year. Please turn to Slide 22. Our debt shows a long duration maturity. The weighted average interest rate of our debt portfolio at the end of 2019 was 1.3% compared to 1.4% in 2018.
At the end of the year, our net debt was CHF3.7 billion. We have a well balanced debt profile, which with interest rates, which we have locked in at attractive rates. Finally, please turn to Slide 23, which shows the leverage ratio. At the end of the year, the leverage ratio was at 47% compared to 41% at the end of 2018. The increase in the leverage ratio was due to the impact of the new acquisitions we completed during the year and also due to the increase in lease liabilities, an impact of CHF440,000,000 due to the adoption of IFRS 16, the accounting standard on leases.
Excluding the impact of IFRS 16, the leverage ratio would have been 44%. With this, I would like to conclude my section of the presentation and hand it back to Gilles.
Thank you, Tom. Let me come back and talk about the outlook for this year. First with that, an excellent 2019, and we are proud of our achievements. We saw an encouraging pickup in high growth markets with double digit growth, and all our strategic areas are growing to our expectations. Fine Fragrances to our great pleasure continues to strongly outperform the market and competition, and we finished the 4th consecutive year with outstanding growth, making us the clear number 1 in Fine Fragrances globally.
Local and regional customers continue to be a strong growth driver across both divisions, and we have seen a substantial pickup from multinationals, mainly in Household and Personal Care. Recent acquisitions and areas of strategic focus, namely Health and Well-being, Naturals, Integrated Solutions, all contributed positively to those good results. In 2020, we expect raw material prices to remain stable at the current levels. Through the Angura acquisition, we enjoy an enhanced in citrus and lime, and through Aldervier, we will be able to leverage natural fragrances ingredients for fine fragrances. Our focus in 2020 will be to deliver on our 5 year guidance 2016 to 2020 and the integration of all recent acquisitions will be a further area of occupation in 2020.
Therefore, we expect CHF 50,000,000 of restructuring costs in 2020. End of August 2020, we will present our strategic road map for 2021 to 2025 in line with our purpose, which we have communicated in November of last year. Let's turn now to Slide 27. Our 2020 road map is centered on responsible growth with shared success. Our ambitions and the road map for this year and beyond seek to ensure responsible growth and shared success for shareholders, customers and all key stakeholders.
We want 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 4 years, we are fully on track with our ambitious financial targets, achieving an average 5.1 percent like for like growth and an average free cash flow as a percent of sales of 12.5%. I'm very confident to achieve a successful 2020, the last year of our strategic period, and to fulfill our ambitious guidance.
Flavors and fragrances are consumed every day around the world, and they are an essential part of successful consumer products for all our clients. I'm confident about Givaudan's strength and our DNA built over the last 250 years to continue to create value to our customers, our shareholders and all our stakeholders. With the significant contribution Givaudan's employees around the world make every day, I'm convinced that we have the right people, the right strategy and the right plan in place to continue on our successful path. Ladies and gentlemen, many thanks to your for your attention. Tom and I are looking forward to your questions.
The first question comes from the line of Celine Panuti, JPMorgan. Please go ahead.
Yes. Good afternoon, everyone. A few questions. So first of all, if I go back on the growth for the market in which you are exposed, you mentioned how well the emerging markets have done. Yet I think China and India, you mentioned were mid single digits.
And a lot of your customers have been a bit more cautious since the end of last year about global demand. So what do you see in terms of market demand as you look into 2020, specifically when we look at Asia Pac and e and Latin America? My second question is about pricing. Is it possible to have an idea of how much pricing contributed to 2019? And would it be fair to think that there would be not much pricing in 2020 given your raw material outlook of almost flat flat, in fact?
And lastly, I think a question for Tom. Tom, I saw that the depreciation to sales ratio has increased a lot in 2019. Is there any reason behind that? And is around 3% the new level we should be looking at? Thank you.
Good afternoon, Celine. So on the China and India, so more or less China represents 6% of our group sales and India a little shy of 5%. So actually, India continued to grow very well and actually against a very high double digit comparable that was in 2018. And going forward, we have absolutely no indication that there's any slowdown. Actually, India has been 1, if not the most consistent high double digit growth market for us for the last 10 years.
So I'm always very impressed by the stability and the strong performance of India, which reflects the position that we have in this country actually for both Flavors and Fragrances. And this is also why we invested largely in a new Flavors plant, as you know, in Pune last year. As it relates to China, we have seen, again, as compared to 2018, high mid single digit growth in China for both with some good performance for both divisions, maybe higher on the flavor side. Certainly better than 20, I would say, 2017. We've seen an improved momentum.
Again, no signal of any slowdown. And actually on the fragrance side, with the contribution DROM, DROM, which actually, funny enough, despite the relatively small size vis a vis Givaudan, has a very large contribution with our Chinese business to Givaudan and which will diversify further our clients and local clients portfolio that we have in China and which will give you give us a very good position going forward. So still quite confident on both markets. And as you know, again, we have the signal that you hear maybe from multinationals on those two countries sometimes obviously differ from our position because we have half of ourselves in those two markets, which are with local and regionals. As it relates to pricing, this is also a very good achievement.
Again, we have fully compensated the accumulated raw mats increase that we have seen in 2018 2019 and which have strongly impacted the Fragrance division. So in absolute value, happy to report that we have fully compensated, again, in collaboration with all our clients, the increase of raw materials in absolute value. So that means obviously that you have some dilution that we have to compensate for. Going forward, as I said, there is no basically, the raw mats are at a stable level now, and we don't foresee any price increase, any significant price increase going forward other than the ones we had which already had been negotiated in 2019 and which have just because of timing a spillover effect on 2020, but which is minimal. And now maybe Tom?
Yes. Thank you, Celine. So on the depreciation, it's a good question. Actually, the devil is in the detail on these things. In 2018, we had EUR127,000,000 of depreciation.
Then 2019 is impacted by the change in lease accounting. So if you look at the depreciation, let's say, on a comparable basis to 2018, it's €147,000,000 And then you need to add the impact of IFRS 16. And if you look in when you have a second page 77 of the annual report, you have the table which splits out the depreciation between the various asset classes.
Okay. So that will continue to be the new base for 2020?
That's the new base for 2020, but it's simply a change in accounting, Celine. It's not a pickup in terms of expenses.
And maybe just could go back to my earlier question on market demand. So between Q3 and Q4, we've seen a slowdown in total group growth. What do you attribute this to?
Well, that's a good question and a very easy answer, Celine. Actually, we can attribute almost 80% to 90% to one single reason, which is fine fragrance U. S. With one single customer where we had basically what I would call a delay in orders from December to January. So the reason I'm saying that is that we obviously have a view on January sales.
So we can see that it's really a shift of sales from December to January in food and that's so and that basically the Q4's relative slowdown basically to the other 3 first quarters that you can all see is almost entirely attributed to this single reason.
All right. Thank you.
The next question comes from the line of Isha Sharma from MainFirst. Please go ahead.
Hi, gentlemen. Thank you for taking my questions. Tom, this one's for you. Could you please give us the full year EBITDA bridge, first of all? Secondly, again, going back to Fine Fragrances, it saw an organic decline of minus 4% in the 4th quarter.
So I'm assuming that you've already answered that question. Just trying to understand within fragrances, the price effect and volume, if you could please split that for us. Lastly, if you could please talk about what you see in North America in the flavors market? As you mentioned, that there's good momentum at local and regional regional customers, but the organic decline of around 2% in Q4 then, does it come mainly from MNCs? Thank you.
That will be my 3 questions please.
So maybe I take the financial one first. Probably the simplest thing is I give you the split as I did at the half year. So starting, 1st of all, with the gross margin, and then we'll go to the EBITDA margin. So starting with gross margin and just as a reminder, you know that in 2018, we had this one off cost of what we called a citral that cost us €50,000,000 in 2018. So we that was not repeated in 2019.
So that has 90 bps positive for the gross margin in 2019. The dilution impact that both Jun and I referred to is negative 150 bps in 2019. And then the acquisitions was negative 90 bps. So that's really the bridge on the gross margin. On the EBITDA margin, if I give you the same split.
So again, the citral issue was positive 90 bps. The dilution impact from the net price raw mats was negative 120 bps. The savings from GBS and the impact of IFRS 16 is 100 bps, so split fifty-fifty. And then acquisitions was negative 60 bps. So that really gives you, I think, all of the elements, both for margins gross margins and EBITDA.
And I think also the question that you have really on prices is covered on that. And then maybe on the North America performance between local and regional multinationals, I hand it back to Gilles.
Yes. So again, on North America, we actually did well on the fragrance side. You've seen a decline of 1.6% like for like, which have dealt more with the multinationals and also dairy and whereas Local end results actually performed well. So we are basically confident that we will see an improvement of our Flavors business in North America in the coming months. And I think on Fine Fragrances, I think we answered the question.
Again, it comes back to this single situation in North America, fine fragrances, which given the materiality has a significant translated into significant slowdown of fine in Q4, but also on the group. So but again, very confident on fine given the amount of new wins that we have won in 2019, which will have an effect on 2020.
Thank you very much.
Your next question comes from the line of Jean Philippe Bertier from Frontholder. Please go ahead.
Good afternoon, gentlemen. The first one would be on full year 2020 After 2 years of really a nightmare with regards to the raw materials and the supply chain disruption of citral, it as well of numerous acquisitions and GBS. So it looks like you have like not an easy year, but it looks quite promising. My question is like with the savings, how much you want to invest into growth R and D capacity expansion, if you can maybe share some words on this one? The second one would be on M and A.
I think it was as well several acquisitions. Leverage ratio is actually hitting almost 50% net debt to EBITDA of 3x. Do you have some targets of some goals to reduce that? And what would be this ratio? And last but not least, just in terms of guidance for the tax rate, I think, Tom, you were guiding for 16% to 18%.
Now we're again 100 bps lower than last year. If you can share as well some some insights in this topic. Thanks.
Jean Philippe, yes, on your first question, basically, I gave a bit of insights about, let's say, our agenda for 2020 20 and the coming years, it's going to be 1, to finish GBS, but also and we've seen actually, as you've seen, the inventory is going down, for example, end of last year. This was really thanks to GBS. When you have 3 GBS centers, it's actually very helpful to drive in a very efficient way without any impact on the service of our clients, the inventory is down. So that's one example of the benefits that we see with GBS in addition to the savings that Tom referred to. Going forward on GBS, it's going to be very much about continuing to use and to implement new digital tools, new type of AI type of tools, which will help those 3 platforms improve continuously our efficiency and agility to our clients.
The second topic will be very much, as we mentioned, to start integrating some of the acquired companies into SAP and into GBS, but also to drive, let's say, savings, which again will help us lift some of these acquired companies to the level of the EBITDA of Girodon. And that's obviously our commitment for Naturix, but also for such acquisitions as Droma. So that's why the work is going to start is starting as I speak now and will translate obviously into some costs, so €50,000,000 going forward. As it relates, I'm not so sure I understand your question about reinvesting into the business, but essentially, we are not we have no plans to actually use some of those savings to reinvest into the business. I think the size at which we are at Giro D'An allows us to have enough operational expenses to drive growth in the different strategic areas that we have going forward.
And so just on the 2 financial questions, Jean Philippe. So if you look at the balance sheet, I mean, we continue to have a strong balance sheet. If you look at, let's say, net debt to EBITDA, we have headroom. We have strong cash flow generation as well in 2019. And if you look really at the pipeline from a portfolio perspective, and as Gilles mentioned at the beginning, we have a very strong portfolio.
Of course, we're always looking for some opportunities to add on. And in 2020, we will already close on Indena and Angara in the first quarter. So we have flexibility and ultimately our objective is to maintain our investment grade rating. On tax, it's a very pertinent question. If you look actually in the 2 countries where we have our biggest operations, the U.
S. And Switzerland, both countries have tax reform over the last 2 years, which clearly has a benefit and an impact on givaudan. And if you look now at, let's say, the guidance for 2020 onwards, we would guide to an effective tax rate between 12% 14%, so for 2020 going forward.
Very helpful. Thanks.
The next question comes from the line of Gunther Dachmann from Bernstein. Please go ahead.
Hi, good afternoon. Just from my side, on Naturix, we haven't spoken too much about. Can you just disclose what the growth in the Naturix business is and what margins you've seen there and what you expect for 2020? And the second question is on free cash flow. For 2020, do you expect any one offs?
So maybe I can take both questions, Gunther. So on the sales, we had low single digit, which is really, if you look at what we forecast for 2021, we expect to get to 10% growth for Naturix, very much in line with the growth of our naturals portfolio. On the dilution, given you really the dilution impact on the acquisitions, it becomes more and more difficult to split out Naturix as we continue to integrate it into our business. But I think, as I say, 0.6 percent negative on the EBITDA. And clearly, we would expect over the next couple of years as well, the working capital within Natrex to come down.
So that's really the on the let's say, on the P and L side of things. On free cash flow, nothing exceptional for 2020. As both Gilles and I said, we feel very confident in our long term guidance and in hitting what we set out in 2015. Thank you.
The next question comes from the line of Patrick Rafaisz, UBS. Please go ahead.
Yeah. Thanks for taking my questions. The first would be on integration and GBS charges. You've guided for €50,000,000 integration charges. According to plan, you still have a bit left for GBS as well.
But then again, 2019 was a bit higher. How should we think about the charges from GBS in 2020? And with the current portfolio, where would you see the integration charges evolving to in 2021 after the €50,000,000? That's the first question. The second one would be just a follow-up on fine fragrances in Q4 and your comments that this was a timing issue with a large list customer.
Would you say that you will have a full reversal of that in the Q1, so we're looking at a very strong quarter for Fine Fragrances than in Q1. Would you confirm that? And the last question is on dollarized pricing. Obviously, still a theme in LatAm in 2019. And I know you cannot do any currency forecast, but from where we are today, what are your views on dollarized pricing benefits in 2020?
Thanks.
On your first question, in fine track answers, the reason that I could say that it was a timing effect on 1 single client in the U. S. Is exactly that, that we see a full reversal in January. Now don't ask me to commit on what's going to happen for the Q1. But as it relates to your question, yes, there's a full reversal in January and yet we are confident for the full year.
But don't ask me to commit on any growth for the Q1 yet. I don't have this visibility. Tom, you
want to? Yes, absolutely. So Patrick, on the integration costs and GBS costs, so yes, you're right, we have a little bit higher than what we'd forecast at the beginning simply because of the speed of the project. I mean, as you saw from the slide that Gilles presented, we are accelerating or we're doing very well in terms of the implementation of the project. For next year, we'll probably have costs of less than CHF 10,000,000 I would say at this point for GBS.
And then for the integration costs, I'd say €50,000,000 for next year. It's probably going to be half cash, half non cash, because it really depends on the speed at which we can go. And probably you can take the same number for 2021 as well. So about the same amount, but again, half cash, half non cash. On Argentina, or let's say, dollar pricing in Latin America, as you say, in the end, your guess is as good as mine.
I mean, the markets continue to be very volatile. We saw a lot of volatility in the market, I would say, in the second half of the year. I think what is comforting from the results and you see it actually in the 2019, actions with customers and suppliers. So we have a very good monitoring in place and we're really making sure that despite the volatility, there is very little impact on the group.
Okay, thanks. Very useful. Thank you both.
The next question comes from the line of Andreas von Axt from Baader. Please go ahead.
Yes. Thank you very much for taking my questions. I'll start with organic growth, 5.8%. Could you give an indication how much of that growth comes from
acquisitions being done
in the last alternatively, could you provide a number how much acquisitions have been growing in 2019? Then the second question would be to continue on the integration costs. If I look at the last 3 years, I think integration costs amount to around 10% of the acquired sales. Is that kind of the figure we should expect going forward? And this 10% restructuring cost also the figure that we should take into account when we look at return on invested capital of the acquired companies?
I mean, does that also mean that with these significant restructuring costs that you have with your acquisitions, I mean, should the benefit from that then lead to margins, which are clearly above group? Or is that 10% cost what you need to just reach the group average in terms of profitability? And then just lastly on GBS, you now indicated for higher costs. Does that also mean that you have higher benefits from GBS given now higher costs? Thank you.
Okay. So maybe I start with the acquisitions. Obviously, we did 15 acquisitions, and that started 4 years ago. So for some of those, it's actually easy to answer your question because we track them almost independently. And some for others, when I say track them because they are managed independently and for the others, they already are fully integrated into Givaudan.
But I can give you some specifics. Active Beauty, which is almost a combination of 2 acquired companies, has been growing double digits now for the last 3 years. Express en Parfumme which is kept independently is growing double strong double digit in 2019 and that's really for local regions in Fragrances. And I can even give you the example of Drome even though it was acquired only towards the end of last year has been delivering a double digit growth in 2019. And then you have, let's say, an indirect indications when we talk, for example, naturals.
So naturals is growing double digits for Givaudan and that obviously includes a lot of acquired companies. Again, the Vika, the SpiceTech, the Naturix to a certain extent. So all of those contribute to double digit growth in natural. So I'm very confident to say that almost all our acquired companies are actually driving very good and very strong growth for Givaudan.
And Andreas, on the integration costs on GBS, So I mean, if you look at the original scope of GBS and the original cost, we are on track. Where the additional cost has come from is simply now as we start to integrate some of the acquired companies and put them onto our platforms. And conversely, if you look at some of the, let's say, the integration costs that we have, these may not necessarily in the market where we want to be present with our customers and with our clients. And it becomes very difficult to start to split out on a single project by project basis. So I think we've been very clear and I think Gilles has also been clear earlier on in the call.
We expect that the acquired companies come back to givaudan margins within 3 years and very much in line with our long term guidance.
But do I get any additional benefits from the €50,000,000 integration costs to be booked in 2021 like the benefits that you show with GBS? Or is this just costs necessary to for the normal business?
So this is a mixture, I'd say, for normal business plus the acquisitions that we have made. We have a commitment to bring the acquired businesses up to the jouvertons levels and that's the cost that is related to that. Thank you.
The next question comes from the line of Matthew Yates from Bank of America. Please go ahead.
Hey, good afternoon. Just a couple maybe that haven't been touched on already. Are you able to be any more explicit on the margin trajectory in 2020? As you suggest, this incremental benefits from GBS to come through, your 60 basis points of acquisition dilution is slowly getting less dilutive, I guess. Are there any sort of headwinds you're facing that would maybe offset some of that?
And then the second question is maybe just to get an update on your position in plant based foods. That was something I know you showcased quite a bit of at the event in October. And I'm sure you saw IFF use that as part of their rationale around the DuPont acquisition. So can you just talk a bit more about how material it is to the group and what your outlook for that segment is going forward?
Okay. I can take both questions. So the answer to your first question, we asked for now, we don't see any headwinds going against basically the list of positives on our margin that you just listed, so no headwinds as for now. And then the second question on plant based protein. This is for sure an exciting segment, But we started really working on this segment 4 years ago, essentially with, let's say, homegrown organic innovation because this territory at its place to plant based proteins is actually quite virgin.
There's no there was no at the time existing ingredient slate in plant based proteins. And so what we have done is developing a whole set of natural solutions which help those plant based alternatives actually taste good. Again, this is very similar to what we did on Health and Wellness where when you remove salt, sugar, fat, essentially it is not as good when you remove all those baddies. So the whole Health and Wellness segment that we have developed in 10 years, which is reaching now CHF700 1,000,000 has been started from basic resource with what we call taste modulators and flavor solutions. So at minimum, what we can anticipate on plant based protein is to follow the same logic to make those solutions taste good.
But what we have in addition, different different ingredients that we acquired through those companies, which will help even going beyond just simple flavors and taste modulators. So very, let's say, very positive and very well positioned going forward. And we didn't need to do a very large acquisition to be dealing with this exciting segment.
Great stuff. Thanks very much.
So I think we have the last question.
Last question for today comes from the line of Charles Bentley with Credit Suisse. Please go ahead.
Hi, Joe. Hi, Tom. I just had a couple. You add back that delayed customer in Fine Fragrances, can you give an indication of what organic growth would have been? And then other than that in Fragrances, it appears like a sequential slowing across the other subdivisions.
Is that exit rate something that we should be looking at for 2020? And then just thinking about leverage, I mean, post Unger and Indena, we're looking at kind of greater than 3 times net debt to EBITDA. Is this would you say what would you say is kind of the upper end of the comfortable range for this metric? Thanks. Yes.
So,
question on the slowdown of what would have been the growth if I guess I answered your question by saying 80% to 90% of the difference vis a vis the normal growth rate that we have up to now in fine finances was due to this single client. I think you can do the math and get a picture of the magnitude and the maturity of this of the impact in Swiss franc sales because I don't have the figure off my head. So basically, we are growing roughly at 7% to 8% in fine finances. We slowed down in finances, we slowed down at 4% in the 4th quarter, so you can make up the difference. And then I'm not so sure I understood the sequential slowdown.
What was your question?
So if I look at Consumer and Fragrance Ingredients and Active Beauty, it feels like the kind of the Q4 run rate was below the kind of 9 months. So I guess is that the rate that we should be thinking about for 2020? Or was there kind of anything that we should consider as kind of a one off?
No, there is no is nothing to say about Fragrancing Goods and Active Beauty. I mean, it's been running quite strongly throughout the year, and there is nothing sequential going down about it. I mean, I can't so Tom, do you
want to? Just on the leverage, I mean, if you look at the company over the last 10 years, we've clearly had higher net debt to EBTDA levels. We've felt comfortable going to those levels where we have attractive acquisition targets. But we've also been able to very clearly demonstrate that we would deleverage the balance sheet over time. And if I look today at what's in the pipeline, I think we have a very strong balance sheet.
We have the capability to execute on any potential deals that come through. And the strong balance strong cash flow generation to deleverage over time.
Okay. So thank you everyone for your questions and your attention. Just a message essentially on April 8, April 8, we will have our Investor Conference, which this year will take place in Kemtal, close to Zurich in our new ZIK, the Zurich Innovation Center. And it's going to be an exciting day because this is going to be very much about showcasing all the product portfolio, the solutions that we, let's say, got through the acquisitions and the new ventures that we have. So I think you will have a wonderful day to really understand essentially what are in terms of products contained in those 15 acquisitions we made.
Thank you again.
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