Ladies and gentlemen, welcome to the Givaudan 2018 full-year results conference call and live webcast. I'm Irina, the Chorus Call operator. I would like to remind you that all participants will be listening remote, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Gilles Andrier, 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 2018 full-year results. I will make this call together with Tom Hallam, our CFO. We will take you through the presentation before answering your questions at the end. The investor news on our full-year results 2018 was published on our Givaudan website at 7:00 A.M. Swiss time this morning, 25th of January 2019. This is where you will also find the slides for today's presentation. Along with the investor news on our website, you will also find our 2018 annual report. I would now like to start going through the presentation and invite you to turn to slide number three to go through our performance highlights.
The beginning of 2018 was marked by our game-changing acquisition of Naturex, which makes us now the very clear leader in naturals, the largest trend in the food and beverage landscape. 2018 was also a year of strong business momentum, fully on track with our 2020 objectives, and a year where we strongly invested for the long-term future. In 2017, we had passed the 5 billion sales mark. In 2018, we have grown by another half a billion of sales to reach more than CHF 5.5 billion, representing a growth of 9.4%. This strong result is the combination of the acquisitions and the solid like-for-like sales growth of 5.6% achieved in a challenging and ever-changing environment. Both divisions contributed to this robust growth, which was supported by an encouraging recovery of the high-growth markets. Our EBITDA increased to CHF 1,145 million, representing a margin of 21%.
Our free cash flow amounted to CHF 703 million, 12.7% of our sales, increasing by more than CHF 100 million compared to 2017. This improvement was achieved despite the adverse raw materials environment and substantial investments for our future, namely in our Givaudan Business Solutions, the GBS program. Second, the integration of the new acquired companies. And last, the investment for new production sites in India and in China. Both the integration of Naturex and the Givaudan Business Solutions implementation are making good progress as planned. These results, along with the full project pipeline and high win rates, are again a convincing demonstration of the continued value we bring to our customers across all regions and all segments, demonstrating our ability to deliver high levels of performance in the short term whilst making substantial investments for the long term.
We are satisfied with the overall performance in 2018 and are confident to deliver on our 2020 midterm targets. Let's turn now to slide four. In 2018, we achieved sales of CHF 5.5 billion, a growth of 5.6% on a like-for-like basis and 9.4% in Swiss frans. On a like-for-like basis, our Fragrance Division grew 6.6%, and our Flavors Division grew 4.6%. I would like to highlight some of the key growth drivers. We again saw an excellent growth with local and regional customers, while sales with our multinational customers regain a good momentum. Global demand for natural flavors and ingredients continue to remain strong. One of the reasons that after the acquisitions of Spicetec, Activ, and Vika, we further complemented our rich palette of flavors and natural ingredients with the acquisitions of Naturex and Centroflora last year.
Today, natural flavors and ingredients combined with health and wellness flavors, namely our taste solutions, which are all naturals, represent 70% of our Flavor sales, growing at a high single-digit rate. Our high-tech encapsulated fragrances combined contributed again strongly to the good results of our Fragrance Division, especially in the household and personal care sectors. After 2016 and 2017 strong results, our Fine Fragrances achieved another outstanding performance with 10.7% in 2018, with a balanced contribution of the broad range we have across geographies and customers. Let's turn now to slide five. In 2018, high growth markets lived up to our expectation and grew 8.2%, twice as much as in mature markets, improving over 2017. India, Indonesia, China, and Vietnam, as well as Eastern Europe, the Middle East, Argentina, and Brazil, were at the forefront of this strong development. The whole of Latin America is back to a double-digit growth.
In the mature markets, we grew with a solid 3.6%, led by Japan, Italy, Spain, and Central Europe, but also a strong contribution came from Northern Europe and Germany. 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 continued weakening currency situation 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 growth strategies for 2020. 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 the 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 locally. Please now turn to slide six. I'd like now to highlight the sales development by region for the group. Sales in Latin America and Asia Pacific picked up strongly in 2018. Latin America recorded a double-digit growth with 10.6%, driven mainly by Argentina and Brazil. The growth in Asia Pacific was 7.8%, with double-digit growth in India and a strong growth in China, Indonesia, and Vietnam. North America grew 2.1% on the back of last year's strong comparables. In Europe, Africa, Middle East, both the mature and the high-growth markets delivered the good result of 4.7% for the region. Let's turn now to slide seven.
The Fragrance Division grew 6.6% on a like-for-like basis and 7.8% in Swiss francs. Fine Fragrances sales increased 10.7%, the third consecutive year of outstanding growth, which along with the acquisition of Expressions Parfumées, makes us now the clear number one in Fine Fragrances. This year's performance was driven by strong growth in all regions with sustained high levels of new perfumes, won across all customer groups, combined with volume growth for the established business at key accounts. Sales of the Consumer Products grew 6.1%, triple the market growth. The results show a balanced development in mature and high-growth markets, as well as across all customer and product segments. Fragrance Ingredients and Active Beauty increased by 4%. Active Beauty sales recorded a high single-digit growth, mainly driven by a strong performance with local and regional customers, where Fragrance Ingredients showed satisfactory growth, supported mainly by price increases.
Let's turn to the next slide, number eight. Sales of the Flavor Division grew 4.6% on a like-for-like basis and 10.8% in Swiss francs. Naturals, health and wellbeing, integrated solutions, as well as local and regional customers, contributed strongly to the overall performance. Asia Pacific grew 6.2% on a like-for-like basis. This growth was fueled by double-digit growth in India and Singapore, as well as a strong single-digit growth in China, in Indonesia, and in Thailand. Local and regional customers continued to grow strongly and all segments contributed positively to this encouraging development in Asia. Europe, Africa, and Middle East grew 3% with double-digit growth in Sweden, Egypt, South Africa, and Ukraine. The U.K., Spain, Turkey, and Russia achieved high single-digit growth. On a like-for-like basis, sales in North America grew by 1.8% against the very strong comparables of last year.
The performance was a result of new wins and the growth of existing business in the segments of beverages and confectionery. Sales in Latin America increased by 14.7%. Strong growth in Brazil and Colombia, as well as in Argentina, contributed to this excellent result. Let's turn now to slide nine. When we presented our 2020 strategy in August 2015, we clearly stated that acquisitions would be an important part of our five-year growth path. Since 2014, we have, including Naturex and Albert Vieille, acquired nine businesses for a total of over CHF 2.5 billion. These nine businesses, once fully integrated, have a yearly contribution of more than CHF 1 billion to our total group sales. The integration of Soliance, Induchem, Spicetec, and Activ are fully completed. The integration of Vika, Centroflora, Expressions Parfumées, and Naturex are well on track.
Across all activities, Fragrances, Active Beauty, and Flavors, our success in providing winning solutions to our customers and creating value is 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, but local and regional customers as well, and as new business areas, which we believe can further provide value to our customers and shareholders. The acquisition of Naturex fits fully with our 2020 strategy to expand our offering to our customers with natural products, with integrated solutions and Active Beauty, as well as to further complement our customer base. Givaudan is the global leader in the space of natural flavors, and Naturex complements perfectly our capabilities with its strong portfolio of plant extracts and natural ingredients across the food and beverage, nutrition, health, and personal care sectors.
In 2018, we completed the acquisition and refinancing of the related debt. We started the integration last September. We are fully on track. The new organization is in place as of January 1st, 2019, and we have identified both the synergy sources and developed a sustainable growth strategy. In the coming years, we aim at executing this growth plan and reach, for Naturex, an annual growth rate of 10% in three years. Our objective is also to improve the Naturex financial performance to the Flavors Division level by end of 2021. Let's turn now to slide 11. On this slide, you can see the four different spaces in which Naturex is active, offering a wide range of natural ingredients. All four spaces are adjacent to the flavors we sell, offering many opportunities to sell across both Givaudan and Naturex customers, as also to commercialize unique value-added integrated solutions.
What are those four spaces? The first one, natural preservatives. They are there to replace the synthetic one. Rosemary extract is a very good example, not only acting as a preservative, but also providing natural taste and natural antioxidants. The second space is natural extracts, which provide taste, and in combination with flavors, will provide enhanced natural taste solutions. The third one, natural colors, which like for natural preservatives, will help our clients remove synthetic ingredients, switching to naturals. Finally, natural phytoactives, which provide unique health and wellness benefits, which customers can claim. Let's turn now to slide 12. While we grow, we are determined to maintain our agility and excellence in execution in order to offer a superior customer experience. This is the rationale for Givaudan Business Solutions, GBS, the formation of which was announced in 2017.
GBS is a global organization unit providing best-in-class internal processes and services. It is designed to increase internal efficiencies and leverage best practices from across the organization, enabling the company to deliver with excellence. GBS is fully on track with the plan and is delivering tangible benefits in line with our stated objectives. The transition within our European sites has been fully and successfully completed in 2018. The U.S. is planned to be completed by the end of Q1 2019.
The GBS centers in Budapest, Buenos Aires, and Kuala Lumpur are fully operational. Finally, the LatAm and Asia Pacific transitions are well on the way, and the whole GBS project will be completed by 2020, resulting in a highly improved service and differentiated level to our customers, in addition to CHF 60 million of annualized savings. With this, I'd like to hand over to Tom, who will give you more granularity on our financial results.
Thank you, Gilles. I would also like to welcome you all to the call. On the following slides, I will focus on the operating performance, cash flow, and balance sheet of the group. Let me start with the financial highlights on slide 15. Group sales increased by 9.4% in Swiss francs, which includes the full year impact of Activ and Vika, as well as the partial impact of the acquisitions we completed in 2018, most notably Naturex. The underlying EBITDA was 21% in 2018 compared to 23.3% in 2017. We had a number of one-off items in both years, which I will come back to later. Our net income was CHF 663 million or 12% of sales. As Gilles mentioned, we increased our free cash flow by over CHF 100 million, resulting in a free cash flow of CHF 703 million, or 12.7% of sales.
Please turn to slide 16, which shows the exchange rate development. This slide shows the comparison of the average exchange rates of 2018 versus the average of 2017. Overall, the major mature market currencies in which the group operates were relatively stable against the Swiss franc in 2018. Nevertheless, we faced volatility in some high-growth market currencies, which impacted our results in the year. However, overall, our operational and geographical spread continued to provide good natural hedges, and our EBITDA margin remains well protected against these currency fluctuations. Material costs, which were partially mitigated by price increases in the year. The EBITDA was CHF 1.145 billion in the year, compared to CHF 1.089 billion in 2017.
We had a number of one-off items in the year, including CHF 20 million of insurance proceeds, and a gain of CHF 25 million from the sale of the Zurich Innovation Centre, as well as a reduction in the cost related to the implementation of GBS. In the media release, you will find a table with more details on the adjusting items. The underlying EBITDA margin was 21%, compared to 23.3% in 2017, down mainly as a result of the net increase in input costs. The operating income increased to CHF 883 million in 2018, compared to CHF 869 million in 2017. On the next two slides, I would like to spend a few minutes on the operating performance of the two divisions. If you turn to slide 18, we can start with the Fragrance Division.
As Gilles has mentioned, the Fragrance Division recorded a sales increase of 7.8% in Swiss francs. The EBITDA for the division was CHF 508 million in the year, compared to CHF 486 million in 2017, driven by a reduction of the costs of the GBS project as well as CHF 20 million of insurance proceeds. These positive impacts more than compensated for the impact of a single significant supplier disruption during the year, as well as the net increase in raw materials. The underlying EBITDA margin was 20.7% in 2018 compared to 24.5% in 2017. If you now turn to page 19, we can cover the Flavors performance. The Flavors Division recorded a sales increase of 10.8% in CHF. Acquisitions contributed almost CHF 200 million to this growth.
A strong focus on internal costs and continued productivity gains meant that any mechanical dilution from the increase in raw material costs offset by price increases, as well as the smaller impact of acquisitions, were fully compensated. During the year, the division was impacted by the Naturex acquisition, which was the main reason for the drop of the underlying EBITDA margin. As such, the underlying EBITDA margin was 21.2% in the year. Please turn to slide 20, which shows the amortization of intangible assets. I've included this slide to give you a perspective of the future amortization, which has been updated to include the acquisitions that we completed in 2018. Please turn to the next slide, which shows the net income. The net income before tax was down slightly in 2018 to CHF 772 million, mainly as a result of the increase in non-operating expenses, particularly in Argentina.
The effective tax rate was 14% in the year compared to 9% in 2017. As a reminder, the lower tax rate in 2017 was mainly driven by lower tax expenses in the United States. The net income was down to CHF 663 million in 2018, mainly as a result of these two items. Basic earnings per share was CHF 71.92 compared to CHF 78.18 in 2017. Please turn to the next slide. I'm particularly happy with the free cash flow as a percentage of sales, which was 12.7% in 2018, despite the significant investments we made during the year. During 2018, Givaudan generated an absolute free cash flow of CHF 703 million, over CHF 100 million higher than in 2017. Our operating cash flow increased by 6.4% in the year to CHF 916 million.
Total net investments were CHF 184 million, and as a percentage of sales, net investments were 3.3% of sales. As a reminder, in 2017, total investments were 4.8% of sales. Excluding the sale, the ZIC net investments were 4.2% of sales. As such, the net impact of the sale of the ZIC on the free cash flow was CHF 50 million or 0.9%. In 2018, we continued our investment to support the growth in high growth markets, most notably the construction of an additional Flavors facility in India and the start of an additional Fragrance facility in China. Working capital at the end of the year was 26.3% of sales, compared to 24.5% in 2017, mainly as a result of the higher inventory levels in Naturex. Over the last 19 years, the company has generated a cumulative CHF 7.8 billion of free cash flow.
Including the proposed dividend for 2018, Givaudan has returned over CHF 4.7 billion to shareholders in the form of either dividends or share buybacks since its spin-off in 2000. This clearly underlines the strong commitment of Givaudan to return surplus cash to the shareholders. Based on the continued strong cash generation, the Board of Directors will propose a further increase of the dividend to CHF 60 / share from CHF 58 / share in 2017, an increase of 3.4%. Givaudan continues to have a conservative debt profile. As a result of the refinancing activities completed during the last couple of years, we have significantly extended the duration of our debt profile. The weighted average interest cost of our debt portfolio at the end of 2018 was 1.4%. During the year, we issued dual tranche euro bonds to finance the acquisition of Naturex.
At the end of the year, the net debt was CHF 2.8 billion. We have a well-balanced debt profile with interest rates, which we have locked in at attractive rates. This is reflected in the two investment grade ratings that we received during the year, with S&P A- and Moody's Baa1. Finally, please turn to slide 25, which shows the leverage ratio. As you know, it is our objective to keep the leverage ratio below 25% in the medium term. At the end of the year, this ratio was at 41% compared to 21% in 2017. The main increase in the leverage ratio was the impact of the Naturex acquisition we completed during the year. With this, I would like to conclude my section of the presentation and hand back to Gilles.
Thank you, Tom. We had a good 2018 with an encouraging pickup in high growth markets and all our strategic areas growing to our expectations. North America has returned to its usual growth pattern, whereas Fine Fragrances, to our great pleasure, continues to strongly outperform the market and competition, the third consecutive year of outstanding growth, making us the clear number one in Fine Fragrances. Local and regional customers continue to be a strong growth driver across both divisions. The recent acquisitions and the areas of strategic focus, namely health and wellbeing, naturals, integrated solutions, all contributed positively to those good results. Raw materials, like in 2018, will increase also by another 5%-6% in 2019. And we are very confident to fully compensate these cumulative increases by further implementing price increases in collaboration with our customers.
The implementation of GBS and the integration of Naturex are fully on track as previously communicated, and we are very confident to deliver the respective benefits. Let's turn now to slide 28. Our 2020 roadmap is centered around responsible growth with shared success. Our ambitions and the roadmap for the next two years seek to ensure responsible growth and shared success for shareholders, customers, and all key stakeholders. Building on the success of the 2011-2015 strategy, 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 three years in this plan, we are fully on track with our ambitious financial targets.
Achieving an average 4.9% like-for-like growth, and an average free cash flow of 12.4%. It is Givaudan's intention to maintain its current dividend practice as part of this ambition, and we will propose to the general assembly on 28th of March 2019 a dividend of CHF 60. Flavors and fragrances are consumed every day around the world, and they are an essential part of successful consumer products for our clients. I'm confident about Givaudan's strength and our strong DNA built over the last 250 years to continue create value for 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 strategies, and plans in place to continue on our successful path. Ladies and gentlemen, many thanks to your attention. Tom and I, we look now forward to your questions.
Ladies and gentlemen, we'll now begin the question-and-answer session. The first question from the phone comes from Celine Pannuti with JP Morgan. Please go ahead.
Yes. Good afternoon, Gilles, and good afternoon, Tom. I have a few questions related to top line. The first one, if you could give us granularity in terms of growth. If you could give us the growth of local and regionals versus MNCs. You said MNCs were getting momentum, so if you could share that. As well, on top line, if you could give us the breakdown between volume and pricing. My second question is on the underlying growth in the market. You mentioned that some of the emerging markets had accelerated in 2018. Many of your customers, some of them are already reporting, are showing accelerating pricing, too.
I was wondering what you think the outlook in terms of volume demand, especially in some emerging markets where if the brand start to price up there is some volume elasticity, whether you think that could have an impact of weakening volume into 2019. Finally, you reiterated your raw material guidance for 5%-6% for this year, which was the same as 2018. I presume they will be pricing this year. Does it mean as well that they will be pricing into 2020? What is the momentum right now in terms of negotiating pricing with your customers? Thank you.
Okay. Three questions, Celine. Thank you. To your first one on growth. Roughly today, we have 50% of our sales are with local and regionals, and the other 50%, the remaining 50% with more global and international clients. The growth with local and regionals in 2018 was around 6.5%, and the growth with globals was 5%, which again showed a significant improvement over last year. Remember, the whole of Givaudan sales grew 5.6%, which is an accelerated growth versus 2017. That really came, I would say, from the globals. The split between volume and pricing. As stated, yes, we have raw materials increase for both divisions, but for the lion's share in Fragrances. We have passed some price increases in the second half of last year, especially on the Fragrance side.
Essentially you can take in the 5.6% as a ballpark, 4% of volume and 1.6% on price. In price, you obviously have a bit of currency pricing linked to LatAm especially, as you know. The lion's share of the 1.6% of price are true price increase. That's the split between volume and pricing. Then I'll come back on your second question, but to continue on raw mats. Yes, we have, let's say 5%-6% raw mats increase in 2018, the same amount in 2019. Essentially we are both very committed and very confident to compensate the total raw mat increase in absolute value through price increase. We have already achieved part of it in 2018. We are obviously working on price increases on both divisions. You know that means sitting with clients and collaborating and implementing those price increase.
As of now we are very confident to pass on, let's say, the lion's share of the price increase for the combined 5%-6% for both divisions in 2019. There will be, let's say, a relatively small tail end in 2020. That's because of the phasing of the price increase, depending on the clients and so on. Then your third question on the underlying growth 2018. You're referring to the price increase of our clients especially in Asia Pacific. Does it have an impact on volumes? Well, it's always very difficult to correlate the growth we have, especially in Asia Pacific, with the ones of our clients, simply because a lot of our sales for Asia Pacific, for our clients, are actually manufactured in mature markets. That's one element of distortion between the two.
Second, again, as you know, our sales is a combination of global clients but also local and regional clients. Looking at just the growth of our global clients, the ones who actually publish their sales in Asia Pacific, is not giving a full picture of the Asia Pacific momentum because we have another set of local clients which are growing strongly also in Asia Pacific. To answer your question, we have not seen yet an impact of the pricing policy or the price increase of our global clients on volumes for Givaudan. Okay, Celine, that I think takes care of the three questions.
Thank you very much.
The next question from the phone comes from the line of Jean-Philippe Bertschy from Vontobel. Please go ahead.
Good afternoon, gentlemen. I have a question on the Flavor margin in H2. I think it was up 30 basis points in H1. What was really the real impact of Naturex in the second part of the year? Did you have as well some impact from raw material price increase? This is the first one. The second one may be for Tom. You are alluding to the free cash flow and the impact of CHF 50 million for the Zurich Innovation Centre, CHF 50 million. I guess you had as well some one-offs from GBS cash cost of CHF 64 million.
Overall, should we see a free cash flow percentage of sales at 13% in a comparable base? A small add-on on the comparable EBITDA you gave in a press release, why are you not excluding the cost savings of GBS and adding the GBS impact in full year 2018? Thank you.
Okay. Thanks very much. If you look firstly on the Zurich Innovation Centre, as you say, we received CHF 100 million in the year, we actually had cash out during the year for the project. The net impact was CHF 50 million. On the Naturex, the impact of the margin in Flavors in the year, this was absolutely, as you said, driven by Naturex. There was no impact of raw materials apart from what we call the mechanical dilution. As you know, as we increase prices in the year, we are offsetting the absolute impact of the increase in raw materials. We're protecting the absolute EBITDA, not the margin. There is a dilution of the margin. There's no increase or no impact aside from Naturex in the second half in Flavors.
Thanks.
The next question from the phone comes from the line of Patrick Rafaisz from UBS. Please go ahead, sir.
Thank you, and good afternoon, everyone. I have three questions as well, please. Two on the margins in Fragrances and on the group level. First, can you talk a bit about the mix impact in Fragrances? Looking at the performance of the segments, I would have had the impression that the mix should have improved. Was the raw materials impact maybe even bigger than what we see on the gross margin?
The second question, can you talk about Q3 versus Q4 and how that's developed? Where was the squeeze from raw materials bigger? I would have expected at least to Q4 to see some relief given that base chemical prices started to come back quite significantly after Q3. The third question, a follow-up on the volume price mix. You started to implement some price increases, would you dispute if I assumed that you chose also to forgo some price increases to gain market share? Is that a fair assumption, or is that totally wrong? Thank you.
Okay. Patrick, I'll take care of the three questions. It would be a fair assumption to say Fine Fragrances is growing so much, basically it has a mixed improvement effect on the margin. Fine Fragrances, even though it's a great growth, it only accounts for 10% of the whole group sales. To actually move the needle, even for Fragrances, you really have to grow 3x this rate. I would say the full impact on the EBITDA of Fragrances has really to do with raw materials increase, which obviously have impacted much more the Fragrance Division. Your second question about, okay, we hate to dissect quarter by quarter. Clearly, we had signaled when we reported the half year results, also the three months, the nine months, that we would have a huge comparable for Fragrances.
In fact, we were happy to see that, I would say, again, despite against those very high comparables, we managed to actually grow very significantly, even in the fourth quarter. Again, that was driven by still a good momentum in Fine Fragrances, good momentum in Consumer Products, and yes, some price increases which started to kick in, especially in the fourth quarter for Fragrances.
Your question about, okay, I would say that in terms of timing, there is always, raw mat, they don't increase just on a single day. It's spreading over time. In the same way, price increases spread over time. To always correlate raw mat increase to price increase on a quarterly basis is a science. It's much better and safer to look at it on a two-year period like we are doing, which is, again, we will fully compensate the cumulative increase of raw mats with price increases. To your last question about are we gaining volumes because we forgo on price increase? Absolutely not.
Okay. Very clear. Thank you.
The next question comes from Alexandra Straton, Morgan Stanley. Please go ahead.
Good afternoon. Thanks for taking. I have two questions this afternoon. The first question is just on Naturex. You mentioned the main impact on margin in the Flavors was the Naturex lower margins. I just wanted to know if you imagine or if you see it staying around this level, or if you think you can achieve some synergies or some cost out from here. The second question was just on GBS cost. I noticed that the GBS cost in the second half was less than expected, it's just been pushed out a little bit further. Could you just let us know what actually happened here?
Okay, Alex, thanks very much. On Naturex, I think we've been fairly clear in the press release what we expect in terms of the financial performance of Naturex within the division by 2021. As we say, we expect that the sales of Naturex will be at around 10% growth by 2021, which is very consistent with our growth in naturals today. The second is that we expect the Naturex business to be back to what we'll call pre-acquisitions for the Flavors Division by 2021. In addition to that, we would also expect the Naturex business to be in line with our other financial matrices or metrics. That includes working capital as a percentage of sales, the impact on the tax rate, et cetera. That's really on Naturex.
Thank you.
Sorry, the second question on GBS. Sorry. Just on the timing. Just a bit of timing on the costs. We have less expenses in 2018. We have a little bit of more in 2019 and 2020. As Gilles said, we're fully on track in terms of the business benefits and fully on track in terms of the progress of the project.
Okay. It's just a timing difference?
Yes.
Thanks very much.
The last question from today comes from the line from Patrick Lambert with MainFirst. Please go ahead.
Hi, can you hear me?
Yes.
Yes. Just making sure. A few questions. Sorry. First, could you help us on Naturex exit rates of 2018 in terms of margins, in terms of growth, and is there any seasonality that you can think of in terms of Naturex, maybe on working capital or maybe on top line, too? I'm asking that because in the text, you're basically saying that every basis point of margin dilution for the full year. If I do that, the margin of the acquisition was very low. So if I try to extract the margin there. That's the first question around Naturex.
The second question, again, I think on margins, Fragrances, if I do adjust for citral impact, and I guess you continue to think that 2018 was about CHF 50 million impact, that's about 200 basis points dilution. There's still year-on-year 180 basis points dilution. Is that just raw material that you need to work on, and that's ongoing, basically? That's the second set of questions. For Tom, quickly, the cash tax rate always amazes me, and I'm always getting involved. Could you guide us on the cash tax rate for 2019 and also on financial expenses? Thank you.
Patrick, I'll take most of those, I think. Firstly, on Naturex, I think we acquired and completed the acquisition in September. I don't think that the performance in the last four months is really equivalent to a full year performance. What we've done is that we've stripped out the main integration costs that we have, but of course, we'll have some other minor costs in there. The timing, as you mentioned, is also important. Typically in the second half of the year, there tend to be more things like congresses and so on going on in the company. I think what's more important going forward is the projections that we've given and the commitment that we have for 2021. On Fragrances, as you mentioned, we are very clear in terms of the communication. The total citral impact was CHF 50 million in the year in the Fragrance Division.
There's nothing else in the underlying apart from the net raw materials impact. Raw materials offset by pricing with, of course, the comment on the dilution. On the cash tax impact, if you look at our guidance, generally we've been somewhere between 16%-18% for guidance from a P&L perspective, which is very consistent over the last few years. As I said, in the past, we expect to be towards the bottom end of that if you look going forward. I think you can take that as a good proxy for the cash tax impact. Finally, just on the financial, on the non-ops, maybe I can give you the guidance for 2019. As I mentioned, financing costs are fixed or fairly fixed, around CHF 60 million of interest cost. The pension interest cost of around CHF 12 million.
What we call the FX hedging costs are somewhere between CHF 10 million and CHF 15 million a year. CHF 15 million -CHF 20 million for others, which is mainly the capital taxes. That gives you a fairly good idea of what to expect for 2019. Of course, the only thing that's not included in that is any significant movement in currencies where we are not able to hedge. That gives you, let's say, the main elements that go into that.
Thank you.
Thank you.
This was the last question. I would like to thank everyone for your attention and your questions. Look forward to meeting you and seeing you on the 9th of April for our annual conference in Geneva and the 29th of August in Zurich for the half year conference. Thank you, everyone.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.