Ladies and gentlemen, welcome to the Givaudan 2023 full year results conference call and live webcast. I am Sandra, the conference call operator. I would like to remind you that all participants have been placed in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Gilles Andrier, CEO. Please go ahead, sir.
Thank you. Ladies and gentlemen, good afternoon, good evening to Asia, and good morning to the Americas. Welcome to our 2023 full year results conference call. Tom Hallam, our CFO, will also be on this call. We will take you through the presentation before answering your questions at the end. All relevant documents related to the full year-end results, including the slides, which will be presented now, have been published this morning and are available in the results center on our website. So I'm very pleased to present to you a strong set of figures with a sustained growth and a record high free cash flow for 2023. This has been achieved despite the challenging environment that we have faced throughout the year with destocking in end markets, the impact of shrinkflation, and the sustained high raw material costs.
Those results have been achieved thanks to the strategic choices which have consistently guided us for the long and the short term. To name three of them, our focus on high value-added consumer differentiating, supported by continuous innovation, ingredients and solutions, our natural hedges across customers, geographies and product segments, which help deliver consistent results in the turbulent market, and finally, the proactive steps that we have taken to adapt to the broader environment and deliver a strong financial performance. Let's slide-- Let's start on slide three to comment on our performance highlights. We have delivered total sales of CHF 6.9 billion, a solid like-for-like growth of 4.1%, supported by the strong contribution of high growth markets, growing at +10%, and the implementation of price increases to fully compensate for the increases in input costs in 2023.
With the strengthening of the Swiss francs against all currencies, sales declined 2.8% in Swiss francs. The reported EBITDA in Swiss francs remains stable at CHF 147.3 million compared to 2022, despite the strong currency headwind. Measured in local currencies, the EBITDA increased by 8.8%. This means the comparable EBITDA margin increased by 150 basis points to 22.4% on the back of the positive contribution from the price increases across all businesses, the Performance Improvement Program , which we implemented early in 2023, and the continued effective cost management across the business.
Last but not least, we have reached a record high free cash flow of CHF 920 million, corresponding to 13.3% of our sales, and with that delivering on our target range of above 12%. Tom will elaborate in more details on the financial results shortly. Finally, the board of directors will propose a dividend of CHF 68 at the AGM of 21st of March 2024, which marks the 23rd consecutive dividend increase for our shareholders. Let's have a more detailed look on the top line performance on slide four. In an operating environment which continued to be challenging in some key markets and segments, we sustained good business momentum in both divisions.
We are very happy we are able to deliver on the things we can control, our pricing actions, our focus on Performance Improvement, and our project pipelines, as well as our win rates. The like-for-like sales growth for the group of 4.1% consists of a strong pricing element of 6.3% and the balance of 2.2% in volume decline. The reasons for the volume decline are well known: destocking, shrinkflation, lower consumption, elements reflected in the numbers published by our own clients. The positive news is that volume development in both divisions has sequentially improved in the second half. The group sales increased by 7.9% on a like-for-like basis in the fourth quarter.
The strengthening of the Swiss franc continued to have a substantial negative translation effect of over CHF 500 million or 7.3% on our sales. On the like-for-like basis, our Fragrance & Beauty division grew strongly at +7.6%, and our Taste & Wellbeing division was slightly up at 1.1% for the full year 2023, with similar pricing contributions across the two divisions. The divergence between the two divisions' volume growth can partially be explained by the fact that inflation in food and beverage prices has been particularly strong, and in fact, there are easier alternatives in the home kitchen than for Fragrance & Beauty products, such as laundry, household, or personal care. We'll get to more details by division shortly. But first, let's have a look at the performance from a geographic standpoint, starting on Slide five.
One of the differentiating traits of Givaudan that we have already mentioned is really our natural hedges, which come across the portfolio of product segments, regions, and markets. They allow to provide balance and protection in a difficult environment. Our strong global presence allows us to cope with singular market issues, which may occur from time to time, while at the same time benefiting from the sustained excellent growth that we have seen in certain high-growth markets. So the continued strong like-for-like growth at +10% in high-growth markets was driven by Latin America and the Middle East, leading to an overall sales share of 46% of group sales. Our presence in high-growth markets has always been a key driver for our growth and continues to be one of our key strategic pillars for 2025.
Mature markets, like-for-like sales, were slightly down by -0.6%, almost entirely driven by North America. On a positive note, we have seen continued solid growth in Europe, in particular, driven by strong demand for Fine Fragrances in France, Iberia, and Italy. Slide six shows the geographic sales development on a more granular basis by region for the group. As mentioned before, Latin America continued its strong growth trajectory at +15.1%, supported by key markets like Brazil and Argentina in both divisions. Like-for-like sales growth in Asia Pacific remained modest at +3.9%. The double-digit growth in India and the mid-single digit growth in China was combined with a soft growth in Southeast Asia, mainly driven by the weakness in Taste & Wellbeing.
The like-for-like performance in North America was -6.8% for the full year, with similar declines in all business segments. We have, however, seen a stabilization in the second half on the back of easy comparables. Sales were slightly up for both divisions for the fourth quarter over a weak comparable. Overall, our positioning in the U.S. remains strong, and whilst it is too early to say when the turnaround will gain traction, we are very well placed to respond when market conditions improve. Finally, we have seen continued good momentum in the EMEA region, growing like-for-like at +8.4%, even amidst record growth at the previous year of over +11% in 2022. As mentioned before, the strong performance was broad-based in mature markets such as France, Spain, Italy, as well as in high-growth markets such as the Middle East.
Turning to a divisional view on Slide seven, starting with Fragrance & Beauty. Sales amounted to CHF 3,312 ,000,000, up 7.6% on a like-for-like basis, and +1.7% in CHF. The strong like-for-like growth was driven by the impressive progression in Fine Fragrances and an acceleration of volume growth in the Consumer Products business in the second half of the year, as well as the positive impact of price increases across all segments. Fine Fragrances showed a continued excellent like-for-like growth of +14%, a double-digit increase for the third year in a row. We are well-positioned across prestige Fine Fragrances , specialty retail, and we have seen a pickup in travel retail in 2023.
Volume growth accelerated in Consumer Products in the second half, together with the already implemented price increases, leading to a sound like-for-like growth of +7.1% for the full year. Fragrance Ingredients & Active Beauty increased by +1% like-for-like on the back of a strong prior year. The Active Beauty part continued to show positive growth in the mid-single-digit range, particularly given the high comparables of the recent years. Let's have a closer look at the performance of the Taste & Wellbeing division on Slide eight. Sales in this division amounted for CHF 3,603 million, growing 1.1% on the like-for-like basis, and a decline of 6.7% in CHF.
The positive pricing impact to compensate for higher raw materials was partially offset by the weaker demand in North America and some markets in Asia Pacific. Overall, the strategic focus areas with high-growth markets and local and regional customers continued to contribute positively to the division's performance. Looking at the regional performance, the way the division is managed, like-for-like sales remain solid for Europe with +3%... and continue to be very strong in SAMEA, which includes India, with +13.2%. Latin America increased by 16.8%, and as mentioned before, North America, like-for-like sales declined by 7.5% due to destocking and shrinkflation. While Asia Pacific declined by 2.6% on the back of consumers opting for solutions from their own kitchen, as opposed to packaged foods.
From a segment perspective, double-digit growth was achieved in Snacks, and growth momentum in Sweet Goods further improved. This was offset by weaker volumes in the other segments. Let me now move from the financial facts to other highlights around innovation and other purpose-led targets, starting with slide nine. Innovation is our lifeblood from creating differentiating solutions that address our customers' challenges, to leading the way in areas such as biotechnology, sustainability, and digitalization. Responding to more than 300,000 individual customer briefs annually, and winning more than our fair share, lie at its core, our ability to deliver unique innovations. Imperative, not only to offset the industry's average 10% erosion, but also to meet our long-term sales growth targets of 4%-5% annually.
Our R&D activities allow us to provide our creation and development teams working on those briefs with novel technologies, differentiating ingredients, which will make those bespoke solutions we develop with our customers, win the briefs and win the consumer. In 2023, we have increased our R&D spend in local currencies by +6%, corresponding to an absolute amount of CHF 519 million. So let me share with you some examples of the outcome. In Taste & Wellbeing, we have introduced OatWell, a unique prebiotic fiber ingredient, harnessing the natural goodness of oats to support gut health. With consumers actively seeking ways of optimizing wellbeing and increasingly aware of the crucial role of gut health, OatWell delivers nutritious and delightful food experiences with scientifically proven benefits in every bite. In Fragrance & Beauty, we expanded the boundaries of skin hydration.
PrimalHyal, our new cationic hyaluronic acid, crafted by white biotechnology, is a unique cosmetic active, outperforming standard HA hydration benefits by at least a factor of two. And finally, we stimulate both divisions with the use of digitalization and generative AI. For example, with e-commerce solutions for local customers, which are being piloted in Indonesia and China, for the use of proprietary AI model, supporting the creativity of our perfumers and flavorists. Let me share now some highlights on our ESG achievements on Slide 10. In addition to the financial targets, we also aim to deliver on key non-financial targets around sustainability, diversity, safety, linked to Givaudan's purpose. Let me highlight today our progress against our nature ambitions targets. At Givaudan, we are committed to being the change that we want to see in the world and showing our love for nature in everything we do.
Our decarbonization roadmap has been in place since 2010. It's an integral part of our purpose commitments to become climate positive before 2050, with clear set interim milestones. Our ambitions are closely aligned with stakeholders, customers, and shareholders through the long-term incentive plan. Our climate journey is already well underway, and in 2023, we have made further progress towards those ambitions. Our Scope 1 and 2 emissions have been reduced by 43% compared to the 2015 baseline. Converting to renewable energy sources is also a part of our emissions reduction strategy, and by the end of 2023, we reached a level of 94% renewable electricity being used across all our sites.
We are proud to have achieved and received the prestigious Enterprising Leader Award at the RE100 Awards in New York in 2023, recognizing our leadership in the industry by embarking on the renewable electricity journey. With that, I now hand over to Tom for more details on the financial results.
Thank you, Gilles. I would also like to welcome you all to the call. On the following slides, I would like to focus on the group's financial performance and those of the two divisions. Let me start with the financial highlights on slide 12. Group sales increased this year to CHF 6.915 million, an increase of 4.1% on a like-for-like basis, and a decrease of 2.8% in Swiss francs. The decrease in Swiss francs is solely due to the currency impact of the strong Swiss franc in comparison with the other major currencies the group operates in... as we will see on the following slide in the presentation. If we exclude the effect of currencies, sales growth in local currency would have been 5%, including acquisitions.
The net income increased to CHF 893 million, an increase of 4.3% compared to 2022, and an increase of 14.3% when measured in local currency. The net income margin was 12.9% of sales. As Gilles has mentioned, the group achieved a record free cash flow of CHF 920 million, or 13.3% of sales. Our net debt to EBITDA was 2.9 times at the end of the year, compared to 3.7 times at June 2023, and 3.1 times at December 2022. Please turn to slide 13, which shows the exchange rate development. This slide shows the comparison of the exchange rates in 2023 versus 2022.
In the current year, mainly due to the ongoing geopolitical instability and the economic uncertainty, the Swiss franc has continued to strengthen against most of the major currencies in which the group operates, with an impact on the sales in Swiss francs, as previously mentioned. Overall, the impact has been limited because of our operational and geographical spread, which continues to provide good natural hedges, and our EBITDA margin remains well protected against currency fluctuations. For instance, EBITDA increased by 9% on a currency neutral basis, but was flat on a reported currency basis. Please turn to slide 14 for an overview of the operating performance of the group. The gross margin increased from 38.8% in 2022 to 41.2% this year.
The growth margin dilution effect of the pricing actions to compensate for higher input costs, as well as the lower cost absorption to, due to lower volumes, were more than offset by the price increase and by the margin improvement measures taken by the group's performance and program, improvement program, launched at the beginning of the year. On an EBITDA level, the margin improvement measures taken also resulted in an EBITDA margin increase from 20.7% in 2022 to 21.3% in 2023. In absolute numbers, EBITDA was CHF 1,473 million in 2023, compared to CHF 1.476 million in the prior year.
We had a number of one-off items in the year, amounting to CHF 74 million, all related to restructuring and project-related expenses, and mainly related to the group's Performance Improvement Program and footprint optimization. The underlying EBITDA margin was 22.4% this year, compared to 20.9% in 2022. Operating income increased to CHF 1.116 million in 2023, compared to CHF 1.112 million in 2022, an increase of 0.3%, which represents an excellent increase of 11% when measured in local currency terms. On the next two slides, I will spend a few minutes on the operating performance of the two divisions. If you turn to slide 15, we will start with Fragrance & Beauty.
So Fragrance & Beauty recorded a sales increase of 7.6% on a like-for-like basis, 1.7% in Swiss francs, mainly driven by the continued excellent growth of Fine Fragrances and an acceleration in volume growth in the Consumer Products business and price increases in all units. EBITDA for the division in 2023 was CHF 769 million, compared to CHF 698 million in 2022. The underlying EBITDA margin was 24.7% in 2023, compared to 21.6% in 2022. If you now turn to page 16, we will cover the performance of Taste & Wellbeing. Taste & Wellbeing recorded a sales increase of 1.1% on a like-for-like basis, and a decrease of 6.7% in Swiss francs.
Sales continued to be good in Europe, South Asia, Middle East, and SAMEA, as well as Latin America, but are challenging in North America and Asia Pacific. The division faced lower cost absorption due to lower volumes and recorded an EBITDA of CHF 704 million in 2023, compared to CHF 778 million in the prior year. On a comparable basis, the underlying EBITDA margin was 20.3%, flat when compared to 2022. Please turn to slide 17 for the net income. Net income before tax was CHF 989 million in 2023, compared to CHF 928 million in 2022, with the increase due to lower non-operating expenses compared to the prior year.
Although interest expenses increased, the group incurred significantly lower realized and unrealized losses on FX derivatives. The effective tax rate increased to 10% in 2023, compared to 8% in 2022. Net income was up to CHF 893 million in 2023, which is a solid increase of 4.3%. Measured in local currency, net income increased by 14.3%. Net income margin was 12.9% in the year, and basic earnings per share was CHF 96.81, compared to CHF 92.83 in 2022. Please turn to Slide 18, which shows the free cash flow. I'm particularly happy with the strong improvement in our free cash flow, driven by the various actions that we have taken in the year.
This resulted in a free cash flow conversion of 13.3% in 2023, compared to 6.7% in 2022. The increase is mostly explained by the lower cash investment in working capital, especially the positive impact of inventory management in as part of the group's Performance Improvement Program . During 2023, the group generated a record CHF 920 million of free cash flow, compared to CHF 479 million in 2022. Total net investments were CHF 270 million, and as a percentage of sales, net investments was 3.9%, compared to 4.1% in the prior year, as the group continues to invest in growth opportunities. Working capital was 24.1% of sales, compared to 26.8% in 2022.
Slide 19 has been updated to include the final acquisition values of Amyris, acquired in 2023, and it gives you a perspective of the future expected or amortization for 2024 and 2025. Please turn to Slide 20. Since the year 2000, the company has generated a cumulative CHF 11.7 billion of free cash flow, including the proposed dividend for 2023. Givaudan has returned CHF 7.6 billion to shareholders in the form of either dividends or share buybacks since its spin-off in 2000. As mentioned in previous years, this clearly underlines the strong commitment of Givaudan to return surplus cash to shareholders. The board of directors will propose a further increase of the dividend to 68 CHF per share from 67 CHF in 2022, an increase of 1.5%.
Please turn to Slide 21 to look at the debt profile of the group. This slide shows a well-balanced and stable debt profile, as in the prior year, with interest rates which have been locked in at attractive rates. At the end of the year, net debt was CHF 4.3 billion, with a weighted average interest rate of 1.7% at the end of the year, compared to 1.7% in 2022. Finally, please turn to Slide 22, which shows the net debt to EBITDA ratio. At the end of the year, net debt to EBITDA was 2.9 times, a significant improvement compared to 3.7 times in June 2023, and 3.1 times in December of 2022.
We continue to focus on deleveraging the balance sheet, using our stronger profitability and lower working capital to reduce our net debt. With this, I would like to conclude my section of the presentation and hand it back to Gilles.
Thank you, Tom. So let me now come back to our 2025 strategy and the outlook for 2024 on the next coming slides. As a reminder, allow me to highlight the key features of our 2025 ambitions. We are committed to growth with purpose, creating for happier, healthier lives with love for nature. We are placing customers at the heart of our business, supporting them to grow and create products that are loved by consumers. The 2025 strategy is focused around three growth drivers: expand the portfolio, extend the customer reach, and focus market strategies. In accordance with the company's purpose, four growth enablers are defined, namely creations, nature, people, and communities. These three growth drivers and four enablers are all underpinned by a commitment to excellence, innovation, and simplicity in everything we do.
Let's look now at the performance commitments of the 2025 strategy on slide 25.... We have now completed three years of our five-year strategic cycle, and our performance thus far reconfirms our strategic choices. Givaudan's 2025 strategy consists of ambitious targets, aiming to achieve like-for-like average sales growth of 4%-5%, and free cash flow above 12% of sales on an average basis. They are both measured over the five-year period in averages. In addition, the company aims to deliver on key non-financial targets around sustainability, diversity, and safety linked to Givaudan's purpose. Our focus remains on implementing our 2025 strategic focus areas, guided by our purpose. We remain confident in our plan and have the right foundations in place to continue growing with our customers. Let me finish now with the 2024 outlook on slide 26.
We are very well positioned with our capabilities, the quality of our portfolio, and our creative strengths to deliver on our 2025 strategy. Our natural hedges across the portfolio, segments, regions, clients, and markets provide balance. For 2024, the increase in input costs for the group is expected to be minor, however, with continued pressure in some key naturals. Our proactive approach with the Performance Improvement Program delivered first results in 2023. We'll maintain a strong focus on operational excellence, reviewing the manufacturing footprint, supply chains, particularly in Taste & Wellbeing, in the next two years of the strategic cycle, while emphasizing business continuity to navigate in a volatile geopolitical environment. We expect for this, an associated cost of around CHF 50 million in 2024.
With that, we arrive now at the end of our 2023 full year results presentation, and let me hand back to the operator for the instructions to open the Q&A. Tom and I look forward to taking your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Anyone with a question may press star and one at this time. Our first question comes from Celine Pannuti from J.P. Morgan. Please go ahead.
Thank you, and good afternoon, Gilles and Tom. My first question is on the volume outlook as I think about 2024. Gilles, you mentioned that there were three issues that you faced, destocking, shrinkflation, and lower consumption, as far as volume is concerned. Can you talk about those three pillars as I look into 2024? Do you expect some form of restocking? What could be the benefit from the reverse on shrinkflation? And then overall, how should we think about consumption, when some of your customers seem to still be facing weaker demand? My second question is on the margin improvement that has been quite impressive, especially on the fragrance side, but Taste & Wellbeing has been flat.
You mentioned that you are focusing on manufacturing footprint in that division, but at the same time, I see that there will be some cost pressure on the natural side. So can you talk about how we should think about the margin progression across the two divisions as we look into the next few years? Thank you.
Thank you, Celine. I see that you're already in 2024, commenting on 2023. So, the outlook, well, as you know, we don't give a given outlook, but, responding to your questions on the three things which we have seen, explaining the volume decline in 2023, I would say that we can expect that, destocking and, shrinkflation are things which are one-time things in a way, because at some point you cannot decrease inventories to... our clients cannot decrease inventories to a certain point. And shrinkflation, it's a bit, it's a bit the same.
So yes, in Q3, we saw a bit, the end of the sort of or the stabilization of the destocking, but also the shrinkflation, and then confirm in Q4 by seeing an improvement in the volume growth. So, you know, we could say that obviously those two things are over. But one thing to mention, which I think is important, and especially, well, essentially for the destocking, there is an interesting analysis, if one does it, is that if we look actually at our sales in 2021 for actually both businesses, Taste & Wellbeing and Consumer Products, our growth was actually very strong. And actually, it's much stronger than our own clients, when you compare the two volume development.
In a way, we can only know that now, is that somehow there was a substantial upstocking in 2021, which was essentially consequent to issues around, if you remember, the supply chain and our freights and all of that, which essentially turned out to be a destocking in 2023. So let's not consider destocking of 2023, followed by an upstocking in 2024. You know, basically, we, we have a plus in 2021 and a minus in 2023, and then from now on, at least, you know, from what we can, we can expect, is coming back to a sort of a more normalized growth, but with no element of going back to higher inventory levels.
You know, shrinkflation, let's see how that develops, because obviously this, the shrinkflation is consequent to prices that have been increased by our clients in the first place. So let's see how that develops. You know, do we come back to normal sizes and so on? Yet to be seen, that would be, I would say, more the cherry on the cake than anything else. So going forward, you know, the volumes, you know, we should see and hope, you know, for normal sort of volumes development. One indication, as you know, we don't have a portfolio of orders that take us beyond four-five weeks.
So the true one indication that we always is a good proxy is the amount of briefs that we work on, which testifies and supports the obviously the innovation, the appetite for our clients to innovate, to launch new products, and also, I would say, at testifying, basically, how they see the future in terms of volume development. And so for us, really, the brief pipeline is very good. We have also our win rates, which are also very good, you know, showing the the clear competitive, let's say, differentiations that Givaudan brings in this competitive world. So this is also a positive indication going forward.
The lower consumption that we mentioned, obviously, that's more the uncertain part, because that can continue going on. But we remain optimistic. Looking also at 20 years of volume growth for Givaudan, again, in the natural hedges, we have always managed to deliver consistent results. As it relates to the margin development, so we are happy with the sort of stepped improvement that we have seen for the group EBITDA.
Yes, with a differentiated margin, EBITDA margin between the two divisions, but that means the way we look at EBITDA, and we have said that a few times now, as well on multiple roadshows, is that we are aiming at coming back to sort of an entitled EBITDA of 24% EBITDA margin through the improvement of the gross profit margin. So we have made a step change there, and we have yet to further improve our gross profit margin, and that especially on the Taste & Wellbeing division. And that by working, as I said, on the manufacturing footprint, you know, cost on the supply chain, we have some opportunities to be better there.
But let's not forget something, the fact that even on the Taste & Wellbeing division, which is actually delivering an EBITDA margin, very, very, you know, reflecting the highly specialized business we are in, you know, if I look at it from a competitive standpoint, holding a 20.3% EBITDA margin when you have such a decline in volume, has been quite an achievement that I feel very proud that the team has achieved. Because as you see, as you know, the operational leverage to improve EBITDA margin on the back of growth, is always a reality for us, but it can also work the other way. And despite that, we have managed to hold on the comparable EBITDA margin.
So we are very much committed and focused on improving that furthermore, and there are works to be done on the footprint, on the supply chain going forward, and I'm confident we'll get there. The input cost, yes, you know, it's really sort of a stable, mild increase with pluses in some naturals, you know, slight minuses on, on, on other parts, but it would not have—it will not create a material headwind for the EBITDA of the Taste & Wellbeing division. As it relates to naturals. So next question?
The next question comes from Nicola Tang, from BNP Paribas. Please go ahead.
Hi, everyone. Thanks for taking the questions. First, I was intrigued, Gilles, by your comments on in Asia Pacific, consumers switching to kitchen solutions versus packaged foods. Do you see any risk that this trend could emerge in other markets outside of Asia, either because of, from a cost perspective, or perhaps because of consumer awareness around health and wellness and, and processed foods? And, what do you think needs to happen to get the consumers in APAC to switch back? And then the second question, on Consumer Products , you know, you noted, you know, you noted the volume acceleration, sequentially in H2 last year. Do you see this as a restocking trend, or is it more reflective of underlying demand? And, you know, should we expect continued acceleration into H1 as well? Thanks.
Thank you, Nicola. So, on Asia Pacific, you know, obviously we have, you know, this idea of competing, as we say, with the kitchen, yes, it's an explanation to explain, you know, sort of the lower consumption on packaged foods. We don't think it's a long-term trend. It's really a sort of a singular response when you have inflation, I mean, sharp inflation on food and food and beverage. Because at the end of the day, there is still a fundamental thing where convenience for consumers is very important. And especially when you have the urbanization, people, you know, working, I mean, more people working in cities and so on, convenience is important.
So, we see it as maybe a sort of, obviously, a temporary trend in Asia Pacific, and especially in countries where income are very low. So that's one thing. And the health and wellness products, so the switch is not due to health and wellness. Actually, health and wellness is a very good trend for us when consumers switch to health, diet, and so forth, we are also there with, as we call them, taste modulators, to help those products taste good. But also all the phyto actives, health, natural products, you know, which is a very nice portfolio that we have from Naturex, are also helping getting there.
So health and wellness is not competing or explaining some of those trends when you go back to the kitchen, and it's yet very specific to some countries in Asia Pacific. On the Consumer Products side, the acceleration that we have seen is, I would say, more the stop of the destocking coming back to actually normal volume growth. And from what we see, this has nothing to do with the idea of restocking. Again, take into consideration that the stocking up or the restocking, or whatever we call it, happened in 2021, and somehow the destocking is basically which happened in 2023 for both Taste and Consumer Products. We see it as coming back to sort of the more normal inventory levels that were prior 2021.
So again, the idea of restocking going forward is not the assumption. This is more about coming back to a normal sort of consumption pace for both Consumer Products and taste.
The next question comes from Arben Hasanaj from Vontobel. Please go ahead.
Good afternoon, gentlemen. I would have three shorter questions. First of all, on free cash flow. So there, I was wondering, kind of, what kind of levers can you still pull there? Because it seems like in terms of net working capital, you've already come a long way. So apart from general increase in profitability, where do you see still potential there? Then the second question will be around M&A. I mean, can we assume that M&A is now again higher on the agenda, given that free cash flow has bounced back, and also net debt, yeah, has gone or has decreased a little? Or can we assume that 2024 will be really focused on footprint optimization before you consider any additions there? And then a final short question on Fine Fragrances.
I mean, given the growth that you've seen there, are you planning specific capacity expansions for Fine Fragrances, or can you accommodate that growth kind of given the footprint that you have now? Thanks.
So thanks, Arvin, for the questions. Maybe I'll take the free cash flow part of the M&A, and I'll hand it to Gilles for the complementary part of M&A and then Fine Fragrance. So, you know, free cash flow, you know, 13.3% in the year. You know, what were the two biggest drivers as you've seen is really an improving EBITDA margin and a reduction in the working capital as a percentage of sales. And, you know, Gilles already referred to the EBITDA going forward over the next couple of years. We believe that we have opportunity to increase the margin. And on working capital, we also believe we have margin. We finished the year at 24.1% of sales.
If you look at where we've been historically, we've been somewhere between 22%-23%. So really those are the two levers, is, increasing the EBITDA margin and, reducing the working capital. On, on M&A, look, I mean, we've never seen our, debt, and our net debt, EBITDA, as, as a ceiling, or something that's blocking us. The M&A pipeline has been, has been quiet. You know, Gilles, I think, will refer to the areas we're interested in, but, you know, we've always been active. We were active in 2023. You remember we did the, the deal with Amyris at the beginning of the year. And we continue to, to look for opportunities.
You know, it's more that there's not so many sellers in the market, but I'll pass it to Gilles to complement on M&A and then on the Fine Fragrance.
Yeah, as Tom stated, so obviously we are more in an increasingly more comfortable position to do M&A, but even though it's not a hurdle for us and never been, it's really a question of assets, available assets. You know, let me remind some of the themes under which we screen potential opportunities. One is obviously still around our core business. You still have assets around, I would say, pure players around fragrance makers as well as flavors makers around local and regional clients. So opportunities there to increase again our footprint in certain countries which actually allow us to, you know, to go and engage with new sets of local clients.
Actually, I'm very happy with the track record we have had in terms of creation, value creation with all those, I would say, small mid-sized players. Fragrance Oils, Expression Parfumée, Drom, Custom Essence in the U.S. as examples. So we'll continue in this direction. The second direction has to do with expanding in the field of those, again, high value added ingredients, which go beyond flavors, around, remember that we expanded on, on colors. We, it can be on naturals, it can be on things around health and wellness. So those themes are still quite valid. And then the third direction can be in terms of further a bit integrating on the, on some ingredients that we buy, that we would make rather than buy.
So those are examples of the things we look at. I forgot, you know, Active Beauty, which is also a fantastic success stories over the last few years. But yes, you know, we have to find sellers, you know, so basically it takes two to dance. And when-
Mm-hmm.
Multiples are slightly depressed, you know, maybe you have less sellers and transactions. And then I'll finish with your question on Fine Fragrances. Yes, I must say we are very happy and very proud of this growth. Yes, it's a question of the market. You know, the market has been growing. When you look at some of our clients growing strongly in Fine Fragrances. But it has also to do with, I would say, the market share gain that we have done in Fine Fragrances. And I would say the third reason is also, which something which makes a bit again, Givaudan special, is that we are in every part of Fine Fragrances.
Meaning that, yes, it's about prestige Fine Fragrances , and we've seen tremendous successes with some of the new launches. But it's also Fine Fragrance clients in SAMEA, which has been a spectacular growth over the last few years. Actually, SAMEA, for us, is as big as LATAM now in Fine Fragrances . We started from zero 15 years ago. And then the end market, or rather two end markets, on one side, the sort of more specialty retail, mass Fine Fragrances , as well as the prestige, I mean, niche, what we call the niche, high-end fragrances. So we are really in all different markets, and many of them are growing strongly. So in terms of production capacity, obviously, Fine Fragrances doesn't take as much volumes as what you see on Consumer Products.
And so we are well equipped to continue growing in line with the production capacity that we have had at hand.
All right. Thank you very much.
The next question comes from Gunther Zechmann from AllianceBernstein. Please go ahead.
Hi, good afternoon, gentlemen. A couple of questions from my side, please. Hope you can hear me all right. Firstly, Gilles, would you mind talking us through the stabilization you've seen in Taste & Wellbeing in North America, especially in Q4, incrementally? That would be really helpful in terms of the categories and, and the customers where you've seen that uptake. That's the first one. Secondly, any comment on supply chain disruptions? I know it's early days, but are you looking into implementing any surcharges because of Red Sea disruptions, similar to what we've seen with Suez Canal ships getting stuck in the past, for example? Then if I can sneak one more in, could you please provide us with an update on the investigation of anti-competitive behavior by the CMA and other authorities, which was recently extended to personal care?
Okay. So that was very patchy, so I got some help to understand your questions. So yeah, the first one around the, I would say, the stabilization on of Taste & Wellbeing in Q4. You know, actually, and you could argue the stabilization as well on Consumer Products. Actually, we have seen, you know, mild growth in Q4, finally. Obviously, in all honesty, we have a lower comparable in Q4 2022, but at the same time, it's a good signal that maybe we come back to normal times.
We have seen on the positive side, you know, in terms of the pipeline, the briefs, the win rates, we have a very encouraging position in North America, in both Taste & Wellbeing and Consumer Products. So that's really the part, as you know, that we can always control, or at least where by focusing on win rates, that can help compensating for higher levels of erosion. So there, you know, that gives us confidence. Then on the supply chain disruption, I think you refer maybe to the Red Sea. Obviously, what we see is that delays have increased, you know, to actually get... We have quite substantial flows, material flow going through this route. So lead times have increased....
with some additional charges, but yet, which are, let's say, controllable and minimized. And then your final question on this investigation, well, essentially, I don't have much news other than repeating what we have already said. It's a worldwide investigation, with all, U.S., European Commission, Switzerland and the U.K. And it involves all the key players, but we are fully collaborating with all of them, with no idea about the outcome yet. But it will take time.
The next question comes from Daniel Bürki, from Zürcher Kantonalbank. Please go ahead.
Yeah. Good afternoon, everyone. I would have a question on this factory optimization program. Could you give us more details? You mentioned it will take two years, CHF 50 million on cost. Will we also see some costs in 25? And, what could be possible benefit savings out of this program? Thank you.
Yeah. So thank you, Daniel, for the question. So you know, the cost that we outlined in the CHF 50 million is for 2024. You know, I expect that we will also have costs in 2025 as well. In terms of the benefits, I mean, I think Gilles already elaborated on what you should expect to see on the Taste side, because most of the optimization is expected on the Taste division. You know, we expect in the long term to have very, very consistent margins. And historically, the two divisions have had very, very similar EBITDA margins. So you know, there, you know, you can already factor in or calculate the benefits that we would expect to see from those two programs.
You know, that's very similar to what we've done in the past. You know, if you look back, and I'm sure you remember the period, 2012 to 2015, we had similar programs. Over those three or four years, we were able to increase the margins back to the levels that Gilles was talking about before.
Thank you.
Ladies and gentlemen, this concludes the question and answer session. I hand back over to the management for any closing comments.
Thank you. So dear ladies and gentlemen, thank you for your interest and your questions. I'd like to remind you, we will publish our Q1 2024 sales results on April eleventh of this year, and welcome you to register to our investor event on the same day. This year, we'll break with tradition, and we will hold the event in Kemptthal, close to Zurich. With that, I thank you very much.
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