Ladies and gentlemen, good morning or good afternoon. Welcome to the Givaudan 2018 Half 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.
After the presentation, there will be a Q and A session. 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 Gileadot.
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 Healthier results. I will make this call together with our CFO, Tom Hallam, who will take you through the presentation before answering your questions at the end. Investor news on our Hartier results 2018 was published on our Gibraltar website at 7 o'clock this morning Swiss Time, 19th July 2018.
This is where you will also find the slides for today's presentation. Along with the Investor News, you will find also our 2018 half year report on our website. I would now like to start going through the presentation and invite you to turn to Slide number 3 to go through our performance highlights. The first half of twenty eighteen was marked by our game changing acquisition of Naturix, which makes us now the clear leader in naturals, the world's megatrend in food and beverage. We delivered a solid like for like sales growth of 5.6 percent and including the contribution of our latest acquisitions, a growth of 7.7 percent in Swiss francs, all this in an ongoing challenging environment.
Both divisions contributed to the solid business momentum, which was supported by an encouraging recovery of the high growth markets, honoring their name. We achieved an EBITDA of CHF 601,000,000, representing a margin of 22.5 percent. The net income amounted to CHF371,000,000. The free cash flow represented 4.2% of our sales, impacted by substantial investments in our future, namely in our Gbaudin Business Solutions, GBS program and in our new state of the art research center in Zurich to be opened next year in 2019. Both the ongoing Naturix public tender 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, delivering high levels of performance while making substantial investments in our future success. We are satisfied with the overall performance in the first half year 2018 and are confident to deliver on our 2020 midterm target. Let's turn now to slide 4. In the first half of twenty eighteen, we achieved sales of CHF 2 point 7,000,000,000, a growth of 5.6 percent on a like for like basis and 7.7% in Swiss francs. On a like for like basis, our Fragrance division grew 6.5% and our Flavors division grew 4.9%.
I'd like now to highlight some of the key growth drivers. We saw again an excellent growth with local and regional customers, while sales with our multinational customers picked further up. Global demand for natural flavors and natural ingredients continued to remain strong, one of the reasons we continue adding to our rich palette of flavors and natural ingredients with acquisitions like NaturX and Centroflora. Today, natural flavors and ingredients combined with health and wellness flavors, namely our taste solutions, which are also all naturals, represent 70% of our flavor sales, growing at a high single digit rate. Our high-tech encapsulated fragrances again contributed strongly to the good result of our Fragrance division.
After 2016 2017 strong results, our Fine Fragrances continues with an outstanding performance, growing 15.6% with many perfumes recognized at the major award ceremonies in Europe and North America this year. Let's turn now to Slide 5. In the first half year of twenty eighteen, high growth markets lived up to the expectation and grew 7.8%, nearly twice as much as mature markets. China, India, Argentina, Brazil, Mexico and Russia were at the forefront of this development with double digit growth rates. The whole of Latin America again grew double digit.
In the mature markets, we grew with a solid 4% led by Japan, Spain and Italy. A strong contribution came also from Northern Europe and Germany. High growth markets make up 43% of our overall sales, still below past levels. This is the result 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 strategies for 2020 despite a few remaining weaknesses at present.
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 gives us a unique exposure to the diversity of these high growth markets in which we continue investing both with additional talent, new facilities to service the wide diversity of our clients. Please now to turn to Slide 6. 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 the first half of twenty eighteen.
Latin America is back on a double digit growth with 10.8 percent, driven by Argentina, Brazil and Mexico. The growth in Asia Pacific was 7.1 percent with double digit growth in the largest markets of India and China. North America grew 1.9% on the back of last year's very strong comparables. Italy, Iberia, Northern Europe, Russia and Germany contributed strongly to the good results of 5.6% for the EME region. Let's turn now to Slide 7.
The Fragrance division grew 6.5% on a like for like basis and 7.5% in Swiss francs. Fine Fragrances increased by 15.6%. This performance was driven by double digit growth in all regions and by sustained high level of new perfumes won across all customer groups combined with volume growth on established business of key accounts. Sales of the consumer products grew 3.9%, showing a balanced development in both mature and high growth markets as well as across all customer segments. Fragrance Ingredients and Active Beauty increased by 8.2%.
Active Beauty sales were mainly driven by a strong performance with local and regional customers. Fragrance Ingredients showed a strongly improved growth compared to 2017. Now let's turn to the next slide, number 0.9% on a like for like basis and 7.8% in Swiss francs. Naturals, Health and Well-being, Integrated Solutions and local and regional customers all contributed strongly to this overall performance. Asia Pacific grew 7% on a like for like basis.
This growth was fueled by double digit growth in India, China, Singapore. Local and retail customers continued to grow strongly, and all segments contributed positively to this encouraging development in Asia Pacific. Europe, Africa and Middle East grew 5% with good growth in Central and Eastern Europe, led by Russia. In Africa and the Middle East, Egypt and South Africa made a good contribution to the regional performance, which was partially offset by challenging market conditions across the Middle East. The mature markets of Western Europe delivered good results with double digit growth in UK, Ireland, Belgium, Switzerland and Sweden.
On a like for like basis, sales in North America grew by 1.3% in 2018 against the strong comparable of 8.9% in 2017. The performance was a result of new wins and the growth of existing business in the segments of beverages and dairy. Finally, sales in Latin America increased by 11.7% with double digit sales growth in Argentina, Mexico, Colombia and Brazil, where the economic situation is recovering. The strong growth came from all segments, led by beverages, dairy, savory and snacks. Let's turn now to Slide 9.
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, including Naturix, acquired 8 businesses for a total of CHF 2,500,000,000. These businesses, once fully integrated into Givaudan, will have a yearly contribution of CHF 1,000,000,000 to our total group sales. The integration of Soliance, InduChem, SpiceTech and Active are to a large extent completed and the integration of Vika and Centroflora is well on track. In all activities, Fragrances, Active Beauty and Flavors, our success in providing winning solutions to our customers is a demonstration of our value creation and efficient acquisition strategy.
We aim at further value creative acquisition to complement our core capabilities and increase the portfolio of natural, integrated solutions, local and regional customers as well as new business areas where we believe we can further provide value to our customers. Let's turn now to Slide 10. The acquisition of Naturix fits fully our 2020 strategy to expand our offering of natural products to our customers, to expand our portfolio of integrated solutions and Axi Beauty Natural Ingredients as well as to further complement our customer base. Givaudan is the global leader in the space of natural flavors, and Naturix 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. The final steps of the acquisition of Naturix are progressing well.
All regulatory approvals have been secured and financing for the transaction is completed. The purchase of 40.5% of the shares of Naturix was completed on 4th June 2018. The mandatory cash tender offer was launched on 28th of June and will continue until early September. We expect the closing of the transaction in September 2018. Let's turn now to Slide 11.
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 of Givaudan Business Solutions, GBS, the formation of which was announced last year. 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 well on track.
We are fully on track with our cost and benefits plan, which was initially communicated. The GBS centers in Budapest, Buenos Aires and Kuala Lumpur are fully operational. Many countries have already migrated to GBS with transitions successfully completed. The implementation efforts are now active in all regions with Europe scheduled to be fully transitioned by the end of 2018, followed by North America, Latin America and Asia Pacific. 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 to this conference call. Gilles has taken you through the main aspects of the market development and the business performance. On the following slides, I would like focus on the financial performance of the 2 divisions and the group. Let me start with the financial highlights on Page 13.
Group sales increased by 5.6% on a like for like basis, which excludes any currency impact as well as the recent acquisitions. The absolute EBITDA was flat at CHF 601 1,000,000 whilst the underlying EBITDA margin remained strong at 23.4%. Net income was CHF371 1,000,000 or 13.9 percent of sales. The free cash flow as a percentage of sales was 4.2% compared to 5.3% in 2017. Please turn to the next slide, which shows the exchange rate development.
Once again, despite some significant currency and our EBITDA margin remains well protected against these currency fluctuations. However, we incurred some FX losses in certain markets, which I will come back to later. On the next slide, the continued productivity gains and cost discipline were offset by a lower gross margin of 44.2% in 2018 compared to 45.6% in 2017, mainly as a result of the lower gross margin in the fragrance division. We continue to increase prices in collaboration with our customers. As a reminder, this has a dilutive impact on the gross margin.
The EBITDA was CHF601 1,000,000. In the 1st 6 months of 2018, we incurred costs related to the preparation of our GBS project of CHF 25,000,000. As you can see on the right of the chart, our underlying EBITDA margin was 23 point 4% in 2018 compared to 25% in 2017, driven exclusively by a lower gross margin. 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 the next slide, we can start with the Fragrance division.
As Gilles has mentioned, the Fragrance division recorded a sales increase of 7.5% in Swiss francs and 6.5% on a like for like basis. The division recorded $250,000,000 of EBITDA, a decline from 2017 largely due to the impact of a supply disruption of a major supplier of the fragrance ingredients industry, which impacted the whole industry. Including this, as well as the $25,000,000 of GBS costs, the EBITDA margin was 20.4% on a reported basis and 22.4% on an underlying basis. If you now turn to the next slide, we can cover the Flavors performance. The Flavors division recorded a sales increase of 7.8% in Swiss francs and 4.9% on a like for like basis.
A strong focus on internal costs and continued productivity gains meant that the reported EBITDA increased to CHF351 1,000,000, an increase of 9.3%. As such, the EBITDA margin in 2018 was 24.2%, an increase versus 2017. We have updated the projected amortization of intangibles to reflect the latest acquisitions of Centra Flora and Expression Parfume. Of course, this chart will change again once we have completed the acquisition of Maturex foreseen for September 2018. The net income before tax decreased to CHF431 1,000,000 from CHF451 1,000,000 in 20 17.
Overall, a flat operating income was impacted by higher non operating costs, most notably as a result of the high foreign currency losses in Argentina. The net income was CHF 371,000,000 or 13.9 percent of sales, down slightly when compared to 2017. The group's effective tax rate decreased to 14% in 2018 compared to 15% in June 2017. Finally, I'm particularly happy with the free cash flow that we generated in the first half of twenty eighteen despite a number of headwinds. During the 1st 6 months of 2018, Givaudan generated a free cash flow of CHF113 1,000,000 or 4.2 percent of sales.
The operating cash flow for the 1st 6 months of the year was CHF269 1,000,000, flat when compared to 2017. Of course, this includes the cost that we incurred with the implementation of GBS as well as the impact of the lower gross margin in the Fragrance division. As both Shiel and I have previously commented, we continue to invest in our future with significant CapEx projects driven by the new flavors facility in India and the innovation center in Zurich. As such, total net investments in property, plant and equipment and intangible assets was CHF 143 1,000,000 or 5.3 percent of sales. Working capital increased slightly in the half year, mainly as a result of higher inventories driven by crop cycles and increases in raw material prices.
With this, I would like to conclude my part of the presentation and hand back to Gilles.
Thank you, Tom. We had a good start in 2018 with a good pickup in high growth markets. North America has returned to its usual growth, whereas Fine Fragrances, to our great pleasure, continues to strongly outperform outperform the market and competition culminating in a growth of 15.6%. Local and regional customers continued to deliver strong growth in both divisions. Recent acquisitions and areas of strategic focus, health and well-being, naturals, integrated solutions, all contributed positively to the good first half year results.
Raw materials, as forecasted early this year, will increase by 5% to 6% for 2018, and we see so far no relief with a similar development in 2019. We faced a short term one off impact due to a key supplier disruption, mainly affecting the first half twenty eighteen profitability of the Fragrance division. We continue to implement price increase in collaboration with our customers to reflect the raw materials increase. The implementation of GBS is well underway with the previously communicated outlook of costs and benefits, which is fully confirmed. It will this year deliver the 1st financial benefit of CHF 20,000,000 for 2018.
Let's turn now to Slide 23. Our 2020's road map is centered on responsible growth, shared success. Our ambitions and the road map for the next 3 years seek to ensure responsible growth and shared success for shareholders, customers and all key stakeholders. Building on the success of the 20 eleven-twenty fifteen strategy, we want to create further shareholder value through profitable, responsible growth with the additional contribution of acquisition. 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 its customers, delivering with excellence and partnering for shared success. Ambitious financial targets are part of the road map to 2020, and we aim at outperform the market by growing ourselves on a like for like basis of 4 16 to 2020. In this period, we aim at delivering an average free cash flow as a percentage of sales ranging from 12% to 17 percent. As part of the company's 2020 strategy, Givaudan also seeks to create value through targeted acquisitions, which complement existing capabilities in providing winning solutions for its customers. Since 2014, Givaudan has announced 8 acquisitions, which are fully in line with the growth pillars within the company's 2020 strategy.
It is Givaudan's intention to maintain its current dividend practice as part of this ambition. 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 DNA built over the last 250 years, actually 250 years this year to continue to create value for our customers, our shareholders and all our stakeholders. With the significant contribution Giro D'On's employees around the world make every day, I'm convinced that we have the right people, the right strategy and plans in place to continue on our successful path. Ladies and gentlemen, many thanks for your attention.
Tom and I, we look now forward to your questions.
We will now begin the question and answer session. 1st question comes from Heidi Basterinen from Exane. Please go ahead, Madeline.
Hi, good afternoon. So a few please. First of all, on growth, do you expect growth like for like growth to decelerate in H2 given comps are tough especially in fragrances? I actually wondered if you might feel more optimistic second half. And then secondly, could you comment on North America, please?
You talk about tough comps, which is true, but we're hearing a lot of bad news on North America. You would have seen Unilever report today. So what are you seeing? And is it is the sluggishness in any sort of specific category or customer type? And then last question on the fragrance margin.
So we think about the phasing of GBS and the citral issues fading, you said most of the impact was in H1, if I heard correctly. It would make sense to assume a strong margin in H2, because we have less negative impacts. But then are there other factors that I should be thinking about? I wondered about operating leverage, if your growth slows linking to question 1. Fine, we have tough comps in fine fragrances.
Does that have an impact on mix? What should I be thinking about? Can we have a comment on H2, please? Thank you.
Okay, Heidi. So I'll start by covering your first two questions On the like for like growth, so obviously, maybe I'll start maybe on the Flavors one. Unlike Fragrances, Flavors last year had a sort of pretty equal pattern of growth between H1 and H2. So there is no sort of difference in terms of comparables and flavors. And so as you've seen, we have seen a good pattern of growth for Flavors in H1 and we don't see anything different going forward.
On the fragrance side, there is a significant difference in terms of growth between H1 and H2-seventeen, so creating a difference in comparables. So that's why we remain cautious for H2 in fragrances. Even if you are right, we will see some pricing coming through in H2. But so we sort of difficult to have a good sort of line of sight for H2. But again, on the positive, we have some price increase, but the comparable is very high, especially in the Q4.
On North America, well, North America, yes, there is a high comparable. But as we see today, we are growing for the group 1.9% for North America. There is no, let's say, as we sit in the different parts of the business, whether if we look at Flavors, if I look at Flavors, we have a very high comparable last year. That was very much driven both by volumes growth, which were coming from many wins in North America, but also by price increase, which had to do with vanilla, where North America is a big market. So that's for Flavors and we have a good momentum still in 2019.
So there is nothing to report which would be alarming on the Flavors side. And on the Fragrance side, I would say that it's a bit the same, high comparables. If I look at fine fragrances, the 15.6% for the world, well, they have a big part also in the U. S. Where we are making good progress.
So in Consumer Products, there is nothing to report which would be of any issue in North America. So it's really a question of comparables and I can't think of any sort of concern also. Unilever is obviously a large client for Giraudin, but we have many other clients in North America. So maybe I pass on now to Tom on the Fragrance margin.
Yes. Thank you, Gilles. Heidi, just on the Fragrance gross margin on the Fragrance EBITDA margin for the second half of the year. So firstly, maybe on the citral, we have we estimated the full year impact for citral will be around 50,000,000 of which twothree impacted in H1 and onethree will impact in H2. Then as you rightly comment, GBS will actually be less of a cost in the second half of the year.
As Gilles mentioned, we're fully on track. We announced that we would have €40,000,000 of cost for the full year, €25,000,000 booked in the first half. So therefore, €15,000,000 in the second half. But of course, we have more of the savings coming in the second half of the year split equally between Fragrances and Flavors.
Thank you. Next question comes from Patrick Rafaisz from UBS. Please go ahead.
Thank you. Three questions from me as well, please. The first is a follow-up on the last question about the GBS in H2. So I'm clear on the cost type, but what about the benefits? Was there already anything booked in H1, maybe a few million helping the Flavors margin, which was up 30 bps?
And then the second question around raw materials. You're already guiding now for a 5% to 6% increase in 2019 as well. It's pretty early. And I was just wondering if you can add a bit of color in which areas you see that inflation happening already with the crystal ball into 2019? Last question, free cash flow as a percentage of sales lower, again, that's in 2017.
I understand that we are looking here at a 5 year average framework, right, not a year on year target. But last year, you did make some reassuring comments indicating that you were still confident that you could reach that range with the full year as the bulk of the cash flow is generated in H2. Would you be comfortable to repeat that for 2018 as well? Do you think you can catch up in H2 with the cash flow generation? Thank you.
Okay. So I'll start maybe with the raw materials question, and then Tom will take care of the GBS and free cash flow. So on raw materials and just to be very clear again, I mean the raw materials increase, if you look at H1 and actually the full year, there are really 2 parts. There is this, let's say, let's call it the BASF impact, which is for the full year, which impacts entirely Fragrances, which amounts to €50,000,000 for the full year and it is 2 thirds in H1, 1 third in H2. But then there's the other part, which is the general raw materials increase of 5% to 6% in 2018, the large amount of which is really impacting on the Fragrances in other families than the citral families.
This has a lot to do with, let's say, the fact that volumes are growing for Givaudan, but also for many companies. So that puts a strain on the demand. And when we look at the office side, you have actually a lot of capacity which has been diminished. So when I'm thinking they are China, for example, on the synthetic ingredients, which puts pressure now on the office side. So really, I see the effect between the two concerning very much the Synthetic Ingredients.
So 5% to 6% for 2018. And the reason we say that there is no sign of relief for at least 2019, at least the first part of 2019 is that we have cycles of negotiations and we which gives us a bit of an outlook of 6 to 12 months. And in any case, let's not forget that raw materials are being purchased at one point. So that gives us clarity on where we stand on the pricing. But we hold 2, 3 months of inventory.
So that means until it goes into P and L, there's always a time lag on the P and L impact. So that's why we see also sort of a trailing effect on 2019, which we will have to compensate with price increase on the client side. So maybe now, Tom, you can clarify on GBS and free cash flow. Yes.
Thank you. So on the first point on GBS, as we've said, we expect to deliver €20,000,000 of savings in 2018. You've seen the program actually and how it's phased. So if you look at the split, we would expect probably that $20,000,000 about 3 quarters of the savings to come in the second half. We had savings, small savings in the first half of twenty eighteen.
It's actually in both divisions. It's equally split and it will be equally split for the full year. It's just clearly more transparent in flavors. And I think if you look at many of the programs that we have adapted or adopted in GBS when we talk about productivity and lean manufacturing and lean programs, you really see the benefit of that in flavors and it's very transparent. On the free cash flow, so you're right that our guidance is 12% to 17% on average over the next 3 years.
We have achieved that in the 1st couple of years. Of course, we with 3 years to go, we need to have a good next couple of years in order to make the average. We think that we feel very confident in hitting the 12% to 17% for the 5 year period. And as such, I'm confident that we will have a stronger free cash flow in the second half of 2018.
Okay. But with lower confidence that you would meet that range this year, right? I mean last year we're a little bit below, this year maybe a bit more below, right, given where we stand at H1?
But I think it depends very much on things like inventories. I mean if you look in the 1st 6 months of the year, we have the GBS impact, we have the impact of inventories, We're investing 5.3% of our sales in CapEx. And despite that actually and a lower EBITDA margin. And despite that, the drop in the free cash flow is only 1% versus last year. So it's very difficult over the phone to show my confidence, but I'm confident in the next 3 years.
Okay, thanks. That's very clear. Thank you.
The next question comes from Annabel Haslett from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question. I was wondering how you see demand in the second half with particular reference to fragrances. And related to that, are you able to comment at this stage on the fragrance pipeline for Christmas? Thank you.
So I think I answered partially on the Fragrance side. Again, we have a very high comparable for the second half, especially the 4th quarter for Fragrances. But on the other hand, we have, let's say, a strong pipeline of projects, a very good pipeline of new wins, which is always an indication at least on how we can generate new businesses overcoming erosion. So net net net will have a good development of fragrances in the second half aside this strong comparable. You're referring to Christmas.
Christmas, that's very much fine fragrances. Fine fragrances is 10% of the whole group, 20% of fragrance sales. So wherever it goes, it has a minimal impact on Givaudan. Next question?
The next question comes from Jean Philippe Bercher from Fondobel. Please go ahead.
Hi, gentlemen. I would have like 2 questions. The first one on pricing. If you can share with us the pricing in H1 and what do you expect in H2? And maybe if you can split between what you are pricing in terms of raw mats and as well the FX or the currency related pricing?
And the second one is on Active Cosmetic Ingredients, another double digit growth in H1. Can you put a little bit of color 2 or 3 years after having entered the markets where you stand? And as well maybe in terms of profitability, whether this is accretive to the Fragrances margin?
Thanks. So on the Active Cosmetics that we call Active Beauty, you know that we when we decided to actually enter this space, which we thought would fit very well to Givaudan, especially leveraging the clients the common clients that we have between Fragrances and Skin Care Active Cosmetics. We actually had €5,000,000 but we really clearly sort of set an ambition to say if we wanted to be a very strong leader in this space, which is which we estimate at roughly EUR 1,000,000,000. The market of active cosmetics is EUR 1,000,000,000. So we set as a target, we said we need to reach EUR 100,000,000,000.
So we went after acquiring Soliance, as you know, and then InduChem. And over the last, I would say, 3 to 4 years, we have had a strong development. So I can report now that we are at the level of EUR 70,000,000. Now with the Naturix, we'll bring EUR 10,000,000 of active cosmetics entirely naturals, which will take us to close to €80,000,000 between €80,000,000 €90,000,000 And the rest next 2 years with double digit growth will do the job. So I think that we are quite happy with the development, hitting this target and really creating out of Givaudan a strong player in this space.
As it relates to pricing, I would say that on the flavor side, because the flavor side we have we are incurring obviously raw materials increase not to the same amount as fragrances, not to the level of 5% to 6%. But we clearly, over the last in the first half and in 2017, we managed to recover the raw materials increase by price increase. So there, we are we basically have managed to work with our clients and passing pricing through. Actually, I'm and maybe it didn't come so clearly in the whole, let's say, presentation, but the results of the Flavors division is very good. Let's not forget this point.
We as you see, the EBITDA of flavor is actually increasing, which means that we both managed to, let's say, overcome the sort of slight dilution that you get when increasing prices to reflect raw mass increase. And in addition, we are overcoming or compensating or bringing at least the assets that we acquired to the same level of EBITDA already today, so which is why we are actually improving the EBITDA margin of Flavors. So let's not sort of pass this strong result.
So if I may, I think the improvement definitely came from the operating leverage of the existing business. That was a very strong volume operating leverage, plus then, as you said, kind of the improvement you made to get commissions?
Yes. It's only 4.9%. The operating leverage plays a bit. I would say that don't forget that the acquisitions, they are quite material. We are talking Active plus Vika plus SpiceTech, which is not at 24% EBITDA levels.
So that's on one side. Then on pricing for the fragrance side, the increase of raw materials aside the BASF impact obviously has been very sharp and it usually is. And that's why we have taken time to really work with our clients to reflect that in price increases. And so that's why the price increase have been quite minimal in the first half of H1, but will come through fully in H2. So what I'm referring to, in fact, is that there's obviously a time lag of 3 to 6 plants between incurring raw mats increase and price increase, and which explains a bit the rest of the difference when you look at the EBITDA of fragrances.
You put the BASF impact aside and that the rest is explained by the time lag. So going forward, we are very confident to basically compensate fully for the raw mats increase on the fragrance side and to continue working with our clients to reflect that.
Thank you. And maybe another one. You said, I think, Julien, if I'm not mistaken, that you have the financing for Naturox in place. Can you give some details on that please?
Yes, I can. So I mean if you actually we have the financing in place, as Shiel mentioned, it's a full financing package. We have a bridge facility already agreed with a group of core banks. And we also have a takeout plan already set for the refinancing. So we're very well prepared for the financing as it arises over the next quarter.
So the more than €1,000,000,000 that we see in the short term movement in the cash flow, This is it?
Yes. So we will actually this is part of the 40%, which we will refinance with the refinancing package during the second half of the year. Thanks.
The next question comes from Ranulf Orr from Redburn. Please go ahead, sir.
Hi. Thanks for taking the question. Just on the €20,000,000 benefit from GBS you expect this year, can you sort of clarify what the benefit is? Is that savings that will drop straight through to EBITDA? Or is that in sales?
What that is? Thank you. And secondly, the Expressions Parfume acquisition, can you remind us what sort of margin that business had, please?
Okay. So yes, I mean on GBS, essentially, this is true and straight savings, which come to the EBITDA, 5 of which were in the first half, 15 will be in H2. So that's and the EUR 60,000,000 of savings of GBS, which should come at the end of the program in 2020. This is also, let's say, yes, a mix of labor savings, of outside costs of but those are tangible and material savings outside any other savings, which would be like, for example, saving on inventories or improving the working capital. So that's GBS.
On Express on Parfumet, just as a reminder, Express Sans Parfumet is a significant but small sort of fragrance compound company, which was settled in Grasse many years ago, 30 years ago, very much specialized in locals and regional clients, but also leveraging the image of Made in Grass. So it's not just for Europe. It's actually going also in Asia and other parts of the world. Many of their clients we don't have. The overlap on clients is extremely small.
And so obviously, the EBITDA level of Express en Parfumil is much lower than Givaudan, but we aim at increasing it to above the 20%.
Thank you very much.
The next question comes from Thomas Wrigglesworth from Citi. Please go ahead.
Good afternoon, gentlemen. Two questions, if I may. The first is a point of clarification. Did you say that 70% of flavors is now based in naturals? Does that incorporate the Naturix effect?
And where are you heading on naturals given that you've clearly made a strategic ambition over the last now 3 years to move significantly the portfolio towards Naturals? And my second question, which is if the Naturals is now complete, what next? I mean, obviously, you made your move into Active Beauty, as you've spoken about. But are there other areas or other dynamics that we should be thinking about just from an industry perspective in terms of where that M and A strategy will now fall? Thank
you. Yes. Thank you. That's a good question. I mean so to clarify, when we say when I say 70% of what we sell in flavor in the flavor division is all naturals.
So to be very clear, that includes flavor compounds as we know them, flavor ingredients. The already acquired, let's say, assets such as Active International, SpiceTech, Vika and now Centroflora, but that does not include Naturix yet. And so it's a whole combination of, as I said, compound but also ingredients, which are all naturals. I mean clearly, because as I said, this is where customers is going. This is fueled by, obviously, also the whole trend around clean labels, around and not only for flavors, but also moving from, for example, synthetic naturals to natural sorry, synthetic yes, synthetic colors, sorry, to natural colors or synthetic preservatives to natural preservatives.
So this is really where we are and what's the strategy. So if you combine everything around naturals, we Natural Extracts, the acquisition, we are talking EUR 800,000,000 which have been added to Givaudan portfolio, which gives us a very clear leadership. But to be also specific on naturals, naturals are there, and that's true for especially Naturax. Those companies, what they are extremely good at is to master and to be the expert of the sourcing side. So once you have when you master a source of whatever the natural extract, this is not just meant to service a taste function.
This is also can be servicing other functions such as preservation, colors and so forth. This is why, for example, Naturix, part of the natural extracts are there to add taste, but other parts are there to do other things like I said, colors, preservatives, the phytoactives. And this is a very interesting space because that gives Givaudan another set of ingredients which are doing other things than taste and which can complement taste, especially when you think integrated solutions. So going forward, what's next for Givaudan? Well, let's first let us digest 8 acquisitions, make the best out of it in the 1st place.
Now with Naturix, it's a significant large company. We are talking 1400 employees actually 1700 employees, sorry. So the once we complete the acquisition, we'll kick start the integration, trying to make the best out of Naturix but also with other acquisitions. On the more long term perspective, obviously, Givaudan has, let's say, the means and the firepower to make other acquisitions. But we will always, let's say, have a ring phase how far we go by making sure that we whether we are talking ingredients, whether we are talking solutions that we always create value for our clients, meaning that we will never, for example, go into any commoditized business.
I think this is where we are coming from, and this is will be always the ring fencing how far we go in terms of acquisitions, whether adding solutions or compounding capabilities, whether adding ingredient capabilities. So I cannot be more specific than this, but this is where we are today. So maybe now we take the last question, one more question.
The last question for today comes from Vincent Ryan from Berenberg. Please go ahead.
Good afternoon, Gilles. Good afternoon, Tom. Just two questions for me, please. Firstly, I'm wondering, could you give us a sense in terms of the differing growth rates between the global customers you saw in the first half and with the local and regionals? And if there's any sort of difference in the outlook going forward between those two different sets of customer groups?
Then secondly, just following on from what you just said around the Naturix deal and integration process. Wondering, could you give a sense in terms of what you think initially the costs of integration or one off costs associated with that will be in the second half of this year and potentially into 2019 as well as the step up in amortization that you would expect to see once it is fully acquired? And then finally, related to that, would you given the acquisition of Naturix and on a standalone basis, they were targeting organic sales growth double that of Givaudan, ultimately, obviously, at a slightly lower margin. But given the sort of potential of that portfolio as well as on a standalone basis as well as the ability to cross sell between your existing customers and business, Do you see scope for potentially in time increasing the midterm growth guidance from the current 4% to 5% growth range? Thank you.
Okay. So on the first question, I would say in the first half, we are still in the same sort of pattern. LNR clients, local and regional clients are growing 6% and the multinationals are growing 3%. As a reminder, it's a fifty-fifty split if we look at the total sales of Givaudan between multinationals and LNR. But one set is going twice as fast as the multinationals.
Now multinationals are improving over last year, as a note. Now on Natura, I mean, it's really early to give any sort of guidance on what the integration is going to cost or produce. We are going to engage into doing that in September. But as a word of caution, NatuX and you referred to it, is really with Givaudan a question of accelerating the growth of NatuX. Certainly, the ambition they had as a stand alone company was maybe a bit too optimistic or too ambitious, however you look at it.
But at the same time, the way they've been growing, I'm sure we can do better in the frame of Givaudan. I'm very, let's say, positive and optimistic of the combination. Just without revealing any secret, the share of of multinational clients that NaturaX handles is 15% when it's 35% for Givaudan. So and the number of clients that we have in Caron is actually quite minimal. So really cross leveraging Naturix with the portfolio of clients of Givaudan.
Already, we can hope to really accelerate the sales of Naturax. Geographic expansion is another way of doing it. Accessing all those markets which are also very much going around naturals is also one way to do it. The integration will help us to really have the best sort of commercial setup to leverage Naturix with Givaudan and really offer that to our clients around the world. So we'll come with more precise figures, expectations and so forth once we started the integration.
Great.
Thank you very much.
Thank you. So thank you for your questions, for your attention. And I look forward to seeing you again on the 30th August for Half Year Conference in Zurich. Thank you.
Ladies and gentlemen, the conference is now over.