Good morning, and thank you for joining us. Today's call is hosted by Samuel Sigrist, CEO, and Frank Herzog, CFO. The slides for the call are available for download on our investor website. The presentation may contain forward-looking statements involving risks and uncertainties that may cause results to differ materially from those statements. A full cautionary statement and disclaimer can be found on slide two of the presentation, which participants are encouraged to read carefully. With that, let me now hand you over to Samuel to begin the presentation.
Good morning. I hope everyone is safe and healthy at this time. I would like to start with the key points on 2020, a year which SIG proved its business resilience. We did grow the top line, increased profitability, and generated strong free cash flow. Crucial in this respect is our role in supplying food and beverages, for which demand remained robust. To be clear, overall, COVID-19 was a headwind for us due to lower-than-expected growth in Asia Pacific and a negative earnings impact caused by currency volatility, particularly in the early months of the year. However, we continued to benefit from the geographic diversification, which has been a pillar of our strategy over the last decade and more. Generally, in recent years, growth has been driven by markets outside Europe, but in 2020, very strong performances in Europe as well as the Americas offset.
I continue in our overview. Generally, in recent years, growth has been driven by markets outside Europe, but in 2020, very strong performances also in Europe as well as the Americas offset the temporary weakness in Asia Pacific. This was a year of strong cash generation, enabling us to achieve a slight reduction in leverage while continuing to invest, notably in the new plant in China for the Asia Pacific region. As a further illustration of the ongoing expansion of our footprint, we announced in November the planned acquisition of the remaining 50% of our Middle East and Africa joint venture. I'm happy to say that the COVID-19 crisis has not led to any interruption of the focus on sustainability generally, and at SIG in particular.
We continue to blaze a trail in this respect, it's playing an increasingly important role in our relationships with customers and all our other stakeholders. Today, it is my pleasure to speak to you for the first time as the CEO of SIG. There have been two other changes within the group executive board in 2021. José Matthijsse has joined us as President and General Manager, Europe, taking over from Martin Herrenbrück. José brings to the role valuable experience with food and beverage companies, including a major customer. With me today is Frank Herzog, who took over as Chief Financial Officer from the beginning of the year. Frank has extensive finance and management experience at major international corporates and in investment banking.
You will be hearing from him in a few moments, and I hope it will not be too long before he can introduce himself to you in person. Turning now to the financial highlights of 2020. Core revenue rose by 5.5% at constant currency to EUR 1.8 billion. There was a significant headwind from the depreciation of major currencies against the euro, which reduced the reported growth to 1.7%. Despite the currency headwind, adjusted EBITDA reached a record level, and the adjusted EBITDA margin increased compared with 2019. Free cash flow of EUR 233 million, while somewhat below the exceptional level of 2019, was robust and indeed ahead of our expectations. Adjusted net income increased by 7% to EUR 232 million, and we are proposing an increase in the dividend of more than 10% to CHF 0.42 a share.
The number of shares for which this dividend will be paid will increase by just over 5% following the completion of the Middle East joint venture transaction. The payout ratio at end 2020 exchange rates will be around the midpoint of our targeted range of the 50%-60% of adjusted net income. Return on capital employed showed a substantial increase to 29.5%. As an evidence of our ongoing focus on sustainability, we can point to a number of milestones reached in 2020. Aluminium Stewardship Initiative certified aluminum is now available to customers in all regions. In Europe, it has become the standard. More customers adopted our recyclable paper straws, including, for example, Nestlé in Brazil. We are already proud of the environmental profile of our cartons, but we always strive for more.
Together with Nestlé and other industry partners, we are funding a chair at the EPFL in Lausanne to support breakthrough research on sustainable materials. External validation of our achievements is important to us. With EcoVadis, we have currently ranked in the top 1% of companies. I'm pleased to report that we have just been recognized by the Carbon Disclosure Project for our work in engaging with our suppliers to tackle climate change. In 2020, we made strong progress towards our Science Based Targets initiative approved 1.5°C climate targets, which include a 60% reduction in Scope 1 and 2 emissions by 2030. Both our carbon emission targets and our EcoVadis score are included as performance metrics for the coupon on the term loan, which form part of our debt financing in June.
Key to our ability to keep operating during the COVID-19 crisis was the early implementation of a pandemic preparedness plan, starting in China. We learned from the experiences of our Chinese team and then implemented rigorous precautionary measures at all our plants globally, with the result that they were able to continue operating throughout the year. The crisis highlighted the resilience of our localized supply chains in each region, and we were able to maintain a high level of customer service. We received many letters of appreciation from our customers, and I would say that if anything, this crisis has further strengthened our customer relationships as we worked in partnerships to deliver essential nutrition to consumers across the globe.
This was a great effort by all our teams worldwide, and I'm truly grateful to all our employees in our factories and elsewhere who met the challenges head-on and with such success. During the year, we have seen the importance of category diversification as well as of geographic diversification. By this, I mean our ability to offer packs that cater to different consumption occasions. In Europe and America, for example, we could step up production of liter packs for liquid dairy and of cartons to food, both of which were in high demand during the pandemic. Looking to the future, it's encouraging to see that in 2020, we continued to win new customers and to increase share of wallet with existing customers.
We also found our customers to be ready and willing to invest in new fillers, which, of course, is a positive sign for growth in the years ahead. I'd now like to go through the main top-line drivers in each of our regions. In Europe, a large part of our business is in liter packs suited for at-home consumption. As a result, we saw a significant step-up in demand, notably in the second quarter, as customers and retailers restocked following the hoarding by consumers at the onset of the COVID-19 crisis. Consumption of liquid dairy remained at a relatively high level, reflecting the change in consumption habits. With the second wave of lockdowns starting towards the end of the year, we saw strong fourth quarter growth against the tough base of comparison.
To be clear, our business in Europe would have grown last year even without COVID-19, continuing the track record of market outperformance since 2018. This reflects our ability to keep winning new filler contracts. In 2020, new contract wins included a mega deal with Hochwald in Germany for 15 fillers, which are scheduled to come on stream in 2022. We also continued our expansion into new categories such as, for example, plant-based milks. Asia Pacific was a rather different story, with a clear headwind arising from the impact of lockdowns on the on-the-go consumption. For the full year, the region did show modest growth at constant exchange rates. This was thanks to the full year consolidation of Visy Cartons, which contributed EUR 44 million.
Even in China, where the pandemic came under control quite early on, it was September before consumption patterns began to return to more normal levels, and the recovery has been gradual. In Southeast Asia, where lockdowns started later and lasted longer, the effects continued throughout the year. With consumption remaining depressed, customers de-stocked in the third quarter, and as we had anticipated, they were not ready to undertake the usual year-end rally in the fourth quarter. However, as in Europe, our teams continued to drive the business forward, winning new business with a key customer in Thailand and further expanding our dairy footprint in India. The Americas was an extraordinary success story in 2020. The first quarter, admittedly, is measured against a low base of comparison in Q1 2019, when sales were constrained by late deliveries from our plant in Germany.
Subsequent quarters, however, clearly benefited from positive COVID-19 effects in Brazil and Mexico. Lockdowns favored higher at-home consumption of milk and food, and in Brazil, there was a further benefit from increased welfare payments to low-income households. In this context, basic products saw strong demand, but we were also able to serve a flourishing premium market, providing a variety of sizes for indulgence purchases. However, our growth was not only driven by the market. The accelerated placement of fillers with Shefa and Líder Alimentos, two new customers in Brazil, and the successful ramping up of these fillers made a big contribution, particularly in the third quarter. This great performance in Brazil and Mexico easily offset a relatively subdued U.S. market.
Although here, too, at-home consumption of food was strong, compensating for a decline in food service sales. Now let me hand you over to Frank for a review of the financials. Frank?
Well, thank you, Samuel, and also warm welcome from my side. I'm excited to have joined SIG, and I'm delighted to share these solid results with you today, less than two months into my tenure. These results are strong evidence of the attractive business model and financial profile that convinced me to join SIG. Now let's look at the numbers in more detail. If we look at the sales evolution, there isn't that much to add to the full year numbers based on what Samuel already said. What stands out on this chart is the significant impact from currency already mentioned before. This is apparent in the difference between the constant currency growth rate and the growth rate of reported revenues. The Brazilian Real is the most important effect here, and the impact on reported revenue is therefore greatest for the Americas.
On a constant currency basis, it is impressive to see the size of the Americas contribution given that it is our smallest region. As Samuel mentioned, the APAC region benefited from the full-year consolidation of Visy Cartons. At group level, Visy added 260 basis points at constant currency growth. Let me have a quick look at the Q4 financials. As anticipated, the fourth quarter was relatively weak in growth at constant currency of 1.4%. Let me recap the reasons for this. EMEA growth continued to be robust. APAC declined due to a significant reduction in the year-end rally compared to prior years. Customers in this region had little appetite to rebuild stocks after a period of significant destocking, and they preferred to conserve cash rather than chase volume rebates. In the Americas, growth continued in the fourth quarter, but at a lower rate.
After a very strong first nine months, many customers had already reached volume levels that qualified them for rebates, so they too had little incentive to build up stocks. Reported revenue in Q4 was also negatively impacted by significant FX effects compared to 2019, as key currencies remained weak against the euro. Looking at the Q4 adjusted EBITDA bridge, this negative impact from currencies was a major headwind that was only partially compensated by the operating performance. Lower raw material and SG&A costs and a higher JV dividend more than offset small negative impacts from top line and from production efficiencies. The latter is due to the fixed costs relating to the new APAC plant as it reached completions. Let's come back to the full year and the EBITDA bridge.
In 2020, we were able to achieve a record level of adjusted EBITDA despite the large and exceptional currency headwinds, which I'll come back to in a moment. At constant currency, the adjusted EBITDA margin reached 28.7%, was essentially in line with our medium-term guidance. We saw a substantial top-line contribution and a strong benefit from lower raw material costs, which exceeded our initial expectations due to the impact of the COVID-19 crisis on spot prices. Prices did pick up towards the end of the year, the benefit of lower hedge cost and our ability to negotiate prices with selected suppliers more than offset this. The continued implementation of operational excellence programs and the high levels of capacity utilization at our European plants resulted in production efficiencies of EUR 5 million. The negative contribution of SG&A costs reflect growth projects realized in the first half of the year.
The timing of such project tends to be lumpy, and in addition, the second half benefited from some of the savings measures we put in place in response to the crisis. Let's take a closer look at the currency impact. I said the currency impact in 2020 was exceptional. In the pie chart on the left of the slide, you can see that the large part of the impact was due to the Brazilian real and the Thai baht. The impact included realized revaluation effects incurred in the first half of the year as a result of the sharp depreciation of these currencies in the last two weeks of March. Transaction impacts were partially offset by our hedging program, which hedges currency risk on a 12-month rolling basis using a layered approach. The hedging program complements our strategy of natural hedging through the localization of production.
There was some improvement in exchange rates in the fourth quarter. The average exchange rate for the year was more favorable, however, than the levels that we're currently seeing in 2021. Looking at the adjusted EBITDA margin by region, Europe increased its margin by 2 percentage points to 34% as the strong top-line growth also fed through into production efficiencies. In addition, sourcing costs declined and the dividend from the Middle East joint venture, which until we consolidate this business, is recognized in the EMEA segment, was EUR 2 million higher than in the previous year.
The margin in APAC at 32% held up well, down just one percentage point in the face of difficult operating environment and negative impact from currency. In the Americas, the depreciation of the Brazilian real was a significant impact, as it has done in previous years, driving down the margin by three percentage points to 23%. This masks the underlying attractive profitability of this region and the excellent growth achieved in 2020. On this occasion, it is worth looking at the differences between reported and adjusted EBITDA. The main difference between these two metrics in 2020 is the add back of impairment losses, mainly relating to the production assets of our Whakatāne paper mill in New Zealand. We'll be coming back for the reasons for this. The unrealized gain in derivatives, which in 2020 is a deduction in respect to adjusted EBITDA, relates to our commodity hedging contracts.
Moving on to adjusted net income. The increase in adjusted EBITDA was the primary driver of the 7% increase in adjusted net income. The significant FX movements on intercompany loans had a non-cash impact on this that is adjusted. The same applies to the FX effects associated with our refinancing and the costs relating to the early repayment of our debt financing. Let's now take a look at our strong cash flows. Strong free cash flow generation in 2020 was a key indicator for the resilience of our business. Net cash from operating activities was positively impacted by the adjusted EBITDA growth and lower net working capital. These positive inflows were offset by debt refinancing costs and additional tax payments, primarily driven by payments of 2019 liabilities in 2020.
Total CapEx was slightly higher in 2020, and also lease liabilities with their related payments increased as our plant in China came on stream. Looking at more closely at cash from operating activities, working capital was well controlled in a challenging environment. While we did build up safety stocks at our factories during the year, by year-end, the level of inventory in Euro terms was virtually unchanged compared to 2019. Trade receivables declined sharply, partially due to FX changes and the lower year-end rallies in the Americas. As a result, the ratio of net working capital to revenue fell sharply to 6%, within our medium-term target range of 5%-7%. Total operating working capital is negative as it includes accruals for volume bonuses to customers. As a final part of our cash flow, let's have a closer look at our capital expenditures.
As already mentioned, the increase in PPE spending related to production equipment at our new plant in China. The land and buildings for this plant were being financed through leases. Gross filler CapEx was basically unchanged compared to 2019. At the beginning of the COVID crisis, we were expecting customers to rein back or postpone investments given the uncertain environment. This proved not to be the case, as food and beverage demand remained to be robust. We placed 59 fillers in the field in 2020. This is a very strong performance in such a challenging year and a strong sign of the resilience of our business. Total CapEx of 8% of revenues was right at the low end of our target range of 8%-10%. This in a year when we financed a major expansion project and saw a lower level of upfront cash.
Finally, a quick look at our leverage and financing. In 2020, we saw a slight reduction in net leverage to 2.7x , despite an increase in lease liabilities relating to the new APAC plant. Our strong cash flow generation is reflected in the cash balance of over EUR 350 million. The debt refinancing, which we carried out in June, enabled us to move to an unsecured structure on typical investment-grade terms and extended the overall maturity profile. Our cost of debt at year-end was 1.6%. To sum it up, these solid results are testimony to SIG's attractive business model and financial profile that combines growth and resilience with strong margins and cash flows. As I said at the beginning, in light of these results, I'm excited to be part of the SIG team and to contribute to this business and its future growth.
I look forward to meeting you in person and to fruitful discussions, just as soon as we are able to do so. With that, let me hand back to Samuel.
Thank you very much, Frank. As you have heard, the construction of our new Asia Pacific plant proceeded as planned in 2020, and the plant is now in operation. Production will be ramping up in the course of this year. The plant is situated in Suzhou, China, and will benefit from operational and overhead synergies with our existing factory and from its proximity to our regional tech center. It will serve the entire Asia Pacific region, as well as supplying combismile packs globally. It represents an increase of approximately 70% in our China capacity and 35% in Asia Pacific capacity, enabling us to meet the needs of a region with strong, medium, and longer term growth prospects. Let me now give you the background on our decision to close our Whakatāne paper mill in New Zealand after due assessment of the strategic alternatives and the required consultation with employees.
The mill was acquired in 2010 from the New Zealand-based Rank Group, which was also the owner of SIG at that time. Since then, it has been gradually converted from producing folding boxboard to producing liquid paperboard for our plants in Asia Pacific and the Middle East. While ownership of the mill has given us valuable insights into the LPB market, we have never regarded it as core to our business. The mill is now more than 40 years old and would require significant investment to keep it viable. Given that we now have expanded sourcing opportunities with our external suppliers, we intend to stop production at the mill in the second quarter of this year. The final closure of the site is expected to take place in 2022. A pre-tax impairment charge of EUR 38 million has been recognized in the 2020 financial statements.
Decommissioning and redundancy costs of around EUR 30 million are expected in the first half of 2021. These will be part of the adjustments to EBITDA. Approximately half of the cash flow impact is expected to be offset through the sale of equipment and net working capital assets. In 2021, the cash flow impact should be around EUR 10 million. The acquisition of the remaining 50% of our Middle East and Africa joint venture is on track, and is expected to close in the coming days. We are excited at the prospect of fully integrating this business. It gives us direct access to high-growth region with a well-invested footprint in terms of both sleeves production and fillers at our customers. Looking at the JV's operating performance in 2020, sales to third parties were EUR 266 million, 3% below the previous year's level at constant currency.
This reflected the impact of lockdowns on consumption of non-carbonated soft drinks and a weaker fourth quarter as customers were cautious and did not pursue the normal year-end rally. In addition, some central banks in key markets imposed capital controls in the fourth quarter. More broadly, though, sales of liquid dairy, which has been the focus of our recent expansion initiatives, performed well during the year. Let me remind you of the reporting impact once the transaction is completed. We will consolidate the third-party sales in the region, net of what used to be sales by SIG to the JV. These sales will become intercompany and will be eliminated. For the period March to December 2020, which will form the base of comparison, net third-party sales were around EUR 150 million. Dividend income will be replaced by the consolidation of EBITDA from the business.
The acquisition is expected to be accretive to both earnings and cash flow per share. Return on capital employed is a key metric for us and is underpinned by our filler placement model, where we have strict return criteria for each machine that we place. In the interest of comparability, we use a 30% tax rate for the calculation, but using the actual tax rate in 2020, we had a ROCE of over 30%. The increase in adjusted EBITDA and the reduction in operating net working capital were the main drivers of the improvement, supplemented by a reduction in the asset base due to the impairments. Overall, this is a very positive development. Let me turn now to our guidance for the full year.
As I mentioned just now, we expect to consolidate revenues in the Middle East and Africa from the beginning of March, subject to final completion of the transaction. The combined business is expected to achieve core revenue growth at constant currency in the 4%-6% range on a like-for-like basis. In other words, compared with a 2020 baseline adjusted for 10 months sales to third parties in the Middle East and Africa. Taking account of the ongoing restrictions in Southeast Asia affecting on-the-go consumption, we would rather expect growth to be in the lower half of the range. This, however, still represents a significant acceleration in growth compared with the 2020 growth rate, excluding the Visy impact. Assuming no major deterioration in exchange rates, the adjusted EBITDA margin is expected to be in the 27%-28% range, including the consolidation of the Middle East business.
Given the recent spike in commodity prices, we now expect raw material costs to be broadly neutral, with higher spot prices offsetting lower hedged costs. SG&A spend is expected to increase as we continue to drive growth investments. Net capital expenditure is expected to be around the midpoint of the targeted 8%-10% of revenue range in 2021. Given the good outcome in both 2019 and 2020, we have slightly lowered our tax rate guidance for 2021 and for the medium term. Otherwise, our guidance for the medium term is unchanged. This includes an adjusted EBITDA margin of around 29%, which we are maintaining despite the major currency headwind experienced since the target was set, and despite no longer having the benefit of rising dividend income from the Middle East joint venture. To conclude our call today, our top-line performance in 2020 demonstrates the resilience of our business.
We continued to achieve best-in-class profitability and strong return on capital employed. Our installed base of over 1,260 fillers in field is a strong platform for future growth, augmented by our investments in new fillers and in production assets, as well as by the expansion of our geographic footprint. Our business fundamentals remain strong and are underpinned by the attractive environmental profile of our packs and by our company's broad focus on responsibility. That concludes our presentation for today. I should now like to open up the call for questions. Operator?
The first question comes from Alexander Berglund from Bank of America. Please go ahead.
Thank you very much, and good morning, everyone. I have a bit of follow-up questions on your comments on raw material and the raw material inflation. If I got it correctly, given the hedging that you have been doing, you don't see any kind of major change on your raw material bill into 2021. If we now indeed are in a more of a kind of inflationary raw material environment, I just wonder if you could talk a little bit about the SIG process of recovering the potentially higher raw material costs going forward. How do you do that through your contracts, et cetera? Because if I remember correctly, you don't have any real kind of pass-through mechanisms in place. Just if you can give a bit of color on that. Then I have a follow-up question on Whakatāne, if that's okay.
Sure. Absolutely. Thanks for your questions, Alexander. I mean, to start with your raw material questions, if you look at our COGS, 50% of that approximately is related to our A materials, which is the paperboard, the polymers, and aluminum. About 50% of the total raw material spend is related to paperboard. We discussed that in earlier calls, but we look at the paperboard as a rather stable input cost. If you look back, many years, I mean, we have also seen that if there are price adjustments, it tracks maximum European inflation. As we secure our supply of paperboard through multi-year arrangements with our suppliers, that statement remains also true. If you then move on to the polymers and aluminum, there obviously are commodities that track global commodity prices.
We counter that with our hedging strategy, where on a 12-month rolling basis, we hedge 80% of our purchases, which leaves, give or take, 20% exposed to the spot price movements. If you look at the spot prices for aluminium as well as polymers of the recent weeks, that really has spiked. Given that situation, now all the hedging benefits that we had and have are offset by these increased price levels. I think it's important to understand that if you take, for example, aluminium, the metal part is about half of the total aluminium spend. Obviously, that depends on where the raw material price sits. The other half are conversion costs, where normal supply-demand mechanisms play in, where our procurement teams can also create alternatives.
The way how we look at these changes in input costs and how we tackle them in our pricing, I mean, pricing, we discussed that earlier. You're absolutely right. We don't have automatic pass-through mechanisms. We never wanted them because that always requires also, at least to some degree, to disclose the cost structure. We discuss pricing for our packaging material with our customers on an annual basis, we factor into those price discussions different aspects. We factor into those discussions the value that we create. What are the filling capabilities the customers make use of? Also, we factor into those discussions the changes in the input costs, which include those changes on the commodities. That's how we handled that in the past, also intend to handle that going forward.
I hope that answers your first question, but I think you have another one on Whakatāne.
Yeah. Thanks for that. Also on Whakatāne, can you just remind us how much of your current liquid packaging board needs that you source or have been sourcing now internally from Whakatāne? Now if you increase your third-party purchases, will this trigger any new pricing negotiations for those additional tons that you will require? Are those kind of linked to contracts that you already have negotiated with your suppliers? Also, does this mean that you need to source your LPB from further distance? Does that have any impact on your financials?
Yep, I understand. Whakatāne had a capacity to supply up to 20%-25% of our demand, and obviously it was always a choice between the mix, between internal and external and obviously the price levels to what degree we tapped into this potential. I don't comment on individual specific arrangements with our suppliers, but we look at Whakatāne and the closure-related cost as a case that delivers a payback, and that obviously also includes our arrangements for the continued supply now exclusively through third parties of LPB. If you look at the past couple of years, there has been consistently more capacity in the market. I think, again, that backdrop and the backdrop, obviously, that we are able to deliver a positive return on this closing cost, we felt it is the right point in time to close the operations in Whakatāne.
From a supply cost perspective, that will not have an impact, really. Whakatāne is also not just around the corner, and from that perspective, we consider that rather to be neutral.
Okay. Thank you very much. That's very clear.
Thanks, Alexander.
The next question comes from Sandeep Peety from Morgan Stanley. Please go ahead.
Good morning. Thank you for taking my question. Just the first one is on carton recycling rate. I appreciate you don't provide any targets there. If you can give us a roadmap and the thinking behind how you intend to increase that rate. Your competitor reported at 26%, that's the global rate. Some sense there will be helpful.
The question was on, forgive me for that, Sandeep, on recycling rates. Can you please remind me what KPI you were referring to?
I'm referring to the carton recycling rate.
The carton recycling rate. Obviously, it depends ultimately on the infrastructure in the given jurisdictions, what the collection rates are, and collection rates obviously determine the potential of what is ultimately recycled. When you call it the carton recycling rate, I presume you mean the recycling rate for the entire beverage carton, which is a compound structure consisting of the cardboard, of the polymer, and the aluminum layer. If you look into Europe, the broader category of the beverage carton, so that's not related to SIG, that's just across all players, the recycling rate is close to 50%. That varies again, really, from jurisdiction to jurisdiction as a function of how collection systems are in place, which is often a governmentally organized infrastructure question. We engaged in projects beyond Europe also in order to drive recycling together with customers, together with NGOs.
We have a number of projects in Brazil, but also on the way to establish one in Thailand, where we also made other progress. Obviously, naturally, collection rates are much lower there. There's limited reliable data on that, but we're definitely determined to keep driving this collection and ultimately recycling rate up.
Okay. That's very clear. Second question is on the EBITDA margin. You have mentioned that excluding the currency impact, you achieved 28.7% in 2020. What is resulting in expectation of margin to be lower in 2021?
Yeah. Thank you, Sandeep. It's Frank here. Let me take that question on margin. I think with regards to FX, we have to realize that the average rate for 2020 is obviously lower than the year-end rate and also the exchange rates we currently see. That is what is the basis for the headwind that can be anticipated in 2021 if current exchange rates persist. Obviously, I don't want to venture any guess on how exchange rates are moving, but at least from the current point in time, this is just how the numbers add up. Yeah.
Sandeep, you referred to a lower margin. We didn't cite that. I think we expect to be well in the range of 27%-28%. Frank just elaborated on the expected slight currency headwind, but I think we also expect clearly a positive contribution from the consolidation of the business in the Middle East with give or take 50 basis points. We also have to continue to invest into SG&A because that is how we drive innovation and geographic expansion. You probably remember that we did put some austerity measures in place last year, which to some degree, we have to swing back. That's what we're going to expect to happen with SG&A. Overall, that's how we look at it. 50% should be positive contribution from the business in the Middle East.
Raw materials, given what we just discussed earlier, based on Alexander's question, rather probably neutral. SG&A, again, a bit of more of an investment and maybe a slight currency headwind as currency stand now, but we expect again to be well in the range of the 27%-28%.
Yes, understood. Thank you very much.
Thank you, Sandeep.
The next question comes from Lars Kjellberg from Credit Suisse. Please go ahead. Mr. Kjellberg, your line is open. Maybe you are on mute, sir. Let's take the next question from Joern Iffert from UBS. Please go ahead.
Good morning. Thanks for taking my questions. The first one would be please on APAC. Can you give us a rough idea what was roughly the difference in terms of growth rates of China versus Southeast Asia? Was China growing positively in Q4? Second question would be, please, we saw a couple of announcements in the last couple of months from companies like Coca-Cola. They are evaluating paper-based bottles. Is this something where you can support them, where you can have a program with them? The last question would be, please, momentum looking into 2021. Comms are not easy in the first half. Would you say that the risk you have negative organic sales growth in Q1, Q2? Many thanks.
Thanks for your question, Joern. If you look into Q4 in Asia Pacific, your question is specifically on China. I think we discussed also on the Q3 call that we did see the business in China coming back in September after a rather subdued July and August. We kind of thought that it took more than six to nine months for China to get through this COVID crisis. What we have seen also in the fourth quarter, China was, I should say, broadly flat. The reason for that is that we did see healthy growth rates in the plain white milk segment. It's a segment where we are less present, as we offer with our solutions with for ambient yogurt drinks, with the particulates in products that others consumed on the go.
We did see that also in the fourth quarter, while, and you have seen that, I guess, the economy reported good growth, that the category of these on-the-go products still was broadly flat. I think it's also related to the fact while probably there are less lockdowns, and we see that with our teams. For example, students remain studying from home and that there were just less people on the go. That with regard to China in the fourth quarter. Your point on the paper-based bottles. Yes, we saw these press releases, but we also see them as part of a series of releases that happened to come out since years by now. There was a big beer producer who announced that a couple of years back that they're going to go into paper-based bottles.
From our perspective, the products that our customers pack in our containers, these are products that require barrier to protect their product. These are barriers like light barriers, like oxygen barriers, all these paper-based bottles, that's an appealing concept because obviously the shape freedom that comes with it. From our perspective, there is no viable solution out there in order to provide also those barriers. The other point is, there is no solution out there really at scale. That's how I would put it on the paper-based bottles. The momentum on Q1, I would refer to the pattern that we saw evolving as a function of COVID-19, what it meant to our business, which means that lockdowns kind of are decisive for our sales and growth rates.
Lockdowns in Europe mean a tailwind, and the same is true for the Americas, if I'm more precise, for Latin America, as we have, especially in the U.S., a sizable food service business. On the other hand, for the APAC region, it is a headwind as we are exposed to much more on-the-go consumption since more than 90% of what we sell is single-serve and estimate 60%+ is really consumed on the go. While China, if you look at these numbers also of the incident numbers, case numbers, looks very solid. Southeast Asia and many countries there remained until the end of the year and still today, at least in partial lockdowns, which also includes schools and related to that, all the school milk programs. I think that's a bit the pattern that we see across the globe.
The next question comes from Alessandro Foletti from Octavian. Please go ahead.
Yes, good morning. Thank you for taking my questions. I have a couple. One on the EBITDA margin in Americas. It has been suffering a little bit over the last couple of years, and I believe main driver of that is really foreign exchange transactions. What can you do to turn that around? My first question. I have a couple of others.
Yeah, Alessandro, thank you for that question. Clearly, EBITDA margin is important for us to drive in all our regions. As you pointed out, Brazil has a big burden in terms of the devaluation of the Real, which has been going on for years, but last year was particularly pronounced. We're obviously trying to protect ourselves as much as we can through localizing production, particularly sourcing the liquid packaging board locally, but this is a very specific resource as I also have learned even in my less than two months here, that is not so fungible as aluminum. That is a major part that we're doing. Obviously, we're hedging and having a rolling 12 months forward hedging program so that we can defer the impacts of FX movements.
Ultimately, you can't hedge forever. You can smooth it out. That is what we're doing. We obviously also got hit particularly hard in this very short, very sharp change of exchange rates at the end of March last year, which led to the revaluations. That steepness in the change in the curve, hopefully, is exceptional. I think those are the things that we're doing as much as we can to protect ourselves. Yet translational risk is always there. That's something where we're trying to work to improve our position there in that region. Did you have a second question?
Yes. Maybe first a follow-up on this one. I don't hear you speaking about prices.
Alessandro, you are familiar with the way how we think about prices and how we handle prices and pricing with our customers. I think ultimately, a devaluation of a currency as we see it also happening with the real, which also is, at least when we look two, three years back, also a lasting one. Two, three years back, the real was at BRL 4.50 per euro, now it is above BRL 6 per euro. I think we also consider that a change in input cost and equally to changes in commodity pricing, factor that into our price discussions with our customers. We are not going to disclose really on a top line, as you know, what is the price impact, mix impact, volume impact, as fundamentally what drives our top line, globally speaking, is the volume growth.
Fine. Thank you. Maybe as a second follow-up. The price discussions that you have, are they sort of spread out across the whole year or more concentrated in Q1, et cetera? Can you remind me that?
No, that is normally in the first half of the year. Most of them in Q1, but normally in the first half.
This across the world?
Yes.
One question on the net filler installation. You have a net filler installation of 33 fillers this year. On the 1,200 fillers that you have, it's about 3%, 2.5% growth. Can you translate that in terms of cargo volumes, the capacity that you're adding? Am I correct assuming that maybe it's much more than this 2.5%?
I think that is the right conclusion. What we retire are fillers that are of lower speed, and what we place are fillers of higher speed. That is why we internally also look much more to the number of fillers placed to the additions, because that is, for us, the leading indicator that we keep growing our installed base, that we keep winning share of wallet with existing customers, respectively, make our ways into new accounts. Just to picture it a bit, if you retire a liter machine, that can be a liter machine with the speed of 6,000 packs per hour. The single serve, which is the other extreme, that we place, is a machine that has 24,000 packs per hour, just to put that in perspective.
In addition, you can also imagine that a filler that replaced a new one, in order for us and for the customer, for the investment case to work, that needs to be a filler that is fully spread, fully loaded, so that it has a high utilization rate. Whereas the ones that we retire are often the fillers that were providing spare capacity and had much lower utilization. That's why, on one hand, what we place is more capacity than what we retire, and this is amplified by the utilization of those respective lines.
Okay. Thank you.
Thank you, Alessandro.
The next question comes from Alexandra Christian from Stifel. Please go ahead.
Yes. Good morning to everybody. It's actually Christian Arnold. Follow-up on the fillers question. Very impressive, this 33 net fillers placed here. Could you give us a little bit information about where do you have these fillers placed? In the last one, two years, I think we had a very positive impact in the Americas from the new fillers. Where have these fillers now been placed?
Sure. Thanks for your question, Christian. Obviously, we are pleased with the number of fillers that we placed last year. You might remember that early in the year, we said, if we look back to other moments of uncertainty, and definitely the great financial crisis was one of those. We did see that our customers did trim their capital budgets, and hence projects, co-investment opportunities became fewer or got postponed. Now what we do see is that looking back on 2020, that hasn't really happened. If you look our gross filler CapEx, and even the number of fillers placed, is a very decent number, and we're very happy about that. We continue to win fillers across the board, and we continue to place fillers in the Americas.
You remember in the third quarter call, we talked about the accelerated ramp-up that we had the pleasure to see there, and the filler wins that we had in Latin America, and that continues to be a very attractive market for us. Also Europe. We talked about, although that's not yet in the numbers of fillers placed, but it was an important win. We did 15 fillers at Hochwald, but also in Europe. You might remember earlier calls, we said, we have a pipeline of fillers that will come on stream, that we did win in earlier periods, and that were now placed and were deployed and started commercial production. The same, obviously, is very encouraging, also continued in Southeast Asia.
While sleeve sales, for the reasons discussed, slowed down, we kept our discussions for projects ongoing with our customers, not only in the new geographies like India, where we were able to conclude deals with the largest dairy, Amul, but also smaller players. Also across Southeast Asia into more established markets like Thailand, where we did win in a period where the teams couldn't meet the customer, just met them virtually. We did win an expansion, a share of wallet gain in one of the leading Thai dairies, which was obviously very positive. I would say it's across the board, but it's predominant in the sector of what we define liquid dairy. Remember, that also includes all the cow milk alternatives, so these plant-based milks, which becomes obviously a more and more important relevant category for us.
Okay, thank you. In the light of the joint venture in the MEA and maybe some catch-up demand, would you expect that this net filler figure would even increase in 2021?
Given that we looked at now at the filler placements, excluding the JV, obviously the absolute number of fillers will, going forward, increase as a function of us adding another segment to the business. The filler footprint in Middle East is well invested, and we kept placing fillers over the past couple of years in line also with the other regions. The numbers that we referred to, which is 1,260 by now, includes the installed base in the Middle East. We always looked at that as SIG fillers globally, as they are the cash generating units that we have out there in the field.
Thank you.
Thank you, Christian.
The next question comes from James Rhodes from Barclays. Please go ahead.
Hi there. Good morning. I've got three, please. The first is on R&D spend. Could you talk more about what specifically you're working on in your R&D programs? What do you think a carton could look like by 2030? Second is on extended producer responsibilities. Do you think that over time you'll have to participate in providing collection and recycling capacity more in your end market? Third, financial based, the upfront cash for fillers as a percentage of gross filler CapEx. Could you remind us of the long-term guidance there, what that ratio should be and how it relates to the different contract structures you have with customers? Thank you.
Sure. Thanks a lot, James. On R&D, you're familiar with the fact that we spend about 3% of our top line on R&D. I think we can categorize our R&D projects broadly into three categories. There is, number one, the entire topic of sustainability, which is predominantly a topic of the sandwich structure, optimizations in the sandwich structure of our packaging material. You're familiar with our flagship products like Signature Pack, where we stripped out the aluminum and replaced the polymers from finite sources with polymers from renewable sources, and have by that a pack which is 100% from renewable sources. There are many subcategories of that by now, product family of the Signature Pack, and that's where we continue to drive innovation. That also includes, by the way, the closure. For example, we have recycled plastic in the closure and so on and so forth.
The second category is everything related to consumer convenience and maybe differentiation on shelf. That means new shapes. You remember combiSmile, was a differentiated premium shape for the single-serve market. Obviously, over time, we will continue to add new packaging formats, not only in the single serve but also in the liter space for our offering. We have features in there, and I think we discussed it earlier with the Heat&Go, with this microwavable pack. There are also other features, opening devices that provide more convenience, complete perforation, for example, so that you have a food product where maybe your tomato passata, where you can open the entire top of a pack, because it's completely perforated and others. That means there are step-change innovation, but also smaller incremental ones to provide consumer benefit.
Last is everything related to what I would label improved TCOs and filling capabilities for our customers. That is more around the engineering piece of our offering, the filler machines, but also the downstream, because part of the downstream, we do design and manufacture in-house. That includes a straw applicator, that includes especially our cap applicators for the closures. There we provide innovation that help customers to bring their conversion cost down, their total cost of ownership, but also it helps them to fill products that you can't fill a lot of technology into, and you're familiar with that, includes drinksplus, which we bring to more packaging formats at SIG. drinksplus is our capability to fill chunky products. I think these are the three main areas where we spend on R&D.
Your question on the Extended Producer Responsibility, that is one where final answer is out saying, obviously, we monitor legislation change, but at this point, it is difficult to say who is going to be affected by such legislation, to what degree, because there are some discussions ongoing that obviously environmentally advantages packaging substrates are excluded from that. But, again, I think it is too early to say. In terms of upfront cash, although we went now through periods of elevated upfront cash with over 50%, I think our midterm, our reference point remains at approximately one-third of the total gross CapEx to be upfront cash. This is largely a function of the mix in terms of how much does the customer pay upfront. Respectively also the mix of what are the S&L Sale and Lease to third-party deals that are part of the deployments.
Great. Thanks very much.
Thanks, James.
Yeah. Thank you.
The next question comes from Lars Kjellberg from Credit Suisse. Please go ahead.
Yeah. Thank you. I had some technical difficulties myself, so apologies if some of my questions have already been answered. Sam, I was just thinking about your comments on EMEA. You talked about growth excluding COVID-19. How should we think about that and how should we think about the EMEA considering the significant tailwind you had at home consumption in the base for 2020, i.e., when looking at into 2021? Also curious on the China plant investment. What sort of benefits do you expect from that in 2021 and when fully ramped, 2022, 2023, I guess that is. Middle East Africa, can you give us a sense of how the currency portfolio will change if it's material, that exposure that has been somewhat volatile, and if you have Obviously, there's no liquid packaging board in the region there, right?
How do you hedge for that potential volatility? The final one from me, is your margin guidance 27%-28%. You were at 27.4% last year with a pretty significant negative from FX. If I'm looking into the current year, you have, of course, mentioned neutral and raw materials. Growth should accelerate. Whakatāne, I guess, would be a small net positive to margins and Obeikan clearly a positive. Why should we not be exceeding 28% this year? The final point then, how do we get to 29%? Just want to hear you talk about that again. Sorry for all those questions.
Sure. Thank you very much, Lars. On your first one, EMEA, and I think, specifically, your point is on Europe, where we said before that in Europe, we would have seen growth also without the tailwind of COVID. I think that really goes back to what we discussed, very early on, at the point of time of the IPO and through all these updates that we provided along the way, that statement that we made at the IPO, that we believe while we guide for the group, only we said we believe that all our segments are going to positively contribute to this growth. Now looking back, we have also seen that Europe indeed did deliver growth and this was a function of the visibility we had on filling machine projects that came on stream.
In Europe, often if you think through the brownfield and more rarely greenfield projects, those lead times until a filler is really put into the factory because customers have to do some reshuffling in the factories, some civil engineering work. The lead time in Europe might be a little bit longer, but obviously on the bright side, that gives us the good visibility into longer term visibility. That's why we were comfortable to make this statement. Along these years, we kept winning deals and we kept growing our share in markets where we had a lower share compared to the European average, which stands at about 25%. With obviously the Hochwald deal, which allows us to double our share of wallet with that customer. We continue to make good progress there and we remain positive also on the European segment.
Going forward, obviously we'll report on a standalone European segment. Now, your second question was on the China plant and what benefits we expect from the China plant. The Chinese plant is a growth investment. It is providing the required capacity for both what we call finishing, which you remember includes printing and the actual finishing where we manufacture the sleeve. It also, in this case, includes an extruder, which is a bit of a step function because that's the biggest equipment in our operations and provides a step up in capacity. It also is the equipment that produces semi-finished material that travels well across the globe. Hence we manage this capacity globally. With the Chinese plant now we're going to get additional capacity.
The benefit is that we can harbor the growth in Asia-Pacific and beyond. You remember last year, or the year before last year, end of 2019, when we said we start to get closer to the capacity limits in the second half of the year. We had also to prepone certain orders into the third quarter in order to ultimately accommodate the year-end rally. The benefit is really to continue growth, and on the other side, the ramp-up cost that we quantified in the low single-digit million euro amount last year, and already said last year will be an even smaller amount this year. That still holds true. Obviously, we're very happy that the Chinese team was able to commission the equipment and get the plant now up and running, and it will ramp up over weeks and months to come.
With regards to Middle East and Africa, the currency mix, I think you referred to. One of the good things that the partner and we have done, which was our predecessor here, not the current management team, but it was established back in 2001. They had one simple principle that they only sold in euro and US dollar. We kept that for all these years, and that obviously gets us into the situations where central banks sometimes make it harder for our customers to place hard currency denominated LCs, but it comes with the benefit of lower volatility. Paperboard supply is going to be obviously done through our global network of suppliers and what the commodities are concerned. We will put also the Middle East under the similar hedge policy as we have it in the rest of the world.
No, thank you. I think, lastly, your question about the EBITDA margin. As we said previously, there's going to be clearly a tailwind, a pickup of about 50 basis points from the CBOB transaction with the Middle East joint venture. Bearing in mind, there are two offsetting effects. There's the benefit from the consolidation, we're also losing the JV dividend, which came in with no cost, so with 100% margin. The net benefit is the 50 basis points that we talked about. You need to look at the points on the FX side, where you can see where currencies currently are compared to the comparators last year. We're always looking at it on a year-on-year comparison. That clearly is a headwind. There's some benefit and some average drop-through that we see from growth.
As Samuel said, last year, we started certain growth projects in the first half of the year also to pursue our R&D agenda, which is important to continue to drive the growth. We halted those in the second half and there are obviously now certain projects and work that we want to do and that we also believe are important to drive the business. Once you put all of this in the mix, and again, currency is an uncertainty, except we can see where the rates are right now, then you come to that range of 27%-28%, and we'll be well within that range.
Maybe you'll ask for it last on the midterm guidance to 29%. We continue to work on the levers that helped us to get to today's level, which is investing into the better return projects and driving the margin improvement through mix. It's also along the lines of operating leverage that we continue to expect as a function of the growth. Last but not least, the work that we continue to do within our plants to drive operational efficiency. Does that answer your question, Lars?
It did. Thank you.
Thank you, Lars.
The last question for today's call comes from Alessandro Foletti from Octavian. Please go ahead.
Yeah. Thank you, gentlemen, for taking my follow-up. Just one quick one on the Middle East. I was not aware that you have also the same type of rally, year-end rally there as you have it in China, for example. I was surprised to see the declining growth rate, particularly in fourth quarter. What can you say for 2021 for that region?
Our seasonality, if you so want, is a function to a large degree of how we structure the commercial arrangements, like with these year-end rebates. The same structure of commercial arrangements we also have in the Middle East. With regards to 2021, you're familiar with the fact that we will not provide guidance on the level of segments, and Middle East/Africa will become a standalone segment. Obviously, we are intrigued by the fundamental growth drivers that we see in this region, whether it's population growth, disposable income growth, and hence we believe that the Middle East and Africa region is a great addition to our consolidated business. If you look to the growth rates according to the study that we made public at the point of time of the IPO, the five-year CAGR there is expected to be in the range of 5.5%-6%.
Our aspiration is clearly also to continue to gain market share in the Middle East and Africa market, a market where we already today own close to 25% of the market.
Okay. Did I hear correct? Was it a mistake of my eardrums that you had, again, sort of problems with the national banks, some national banks in that region?
Yeah, that's right. We said that with the fourth quarter was a bit of a decline, and we saw the key markets in the region. I think from my discussions with the team, I saw that at least in three different jurisdictions, central banks made it much tougher for our customers, not to say impossible, to place LCs at this either US dollar or euro. Hence, obviously, even if customer intend to buy, that just forbids to trade. I think that's what we saw. It was not the only reason. We also did see that especially the category of non-carbonated soft drink was soft in the fourth quarter. That is a function of lockdowns, but not only lockdowns, because there were not everywhere severe lockdowns in the Middle East.
What we sell in non-carbonated soft drink, the majority of that is single serve, hence consumed on the go. That's definitely where formal lockdowns or even just reduced traffic had a negative impact. Also schools remained closed in the region. All these juice boxes that the kids take to school, they were not sold in this instance. On the positive note, we kept growing in the dairy business also in the fourth quarter, which was obviously very encouraging to see, and it's clearly also a function of the strategy we pursue in that region.
Okay, thank you very much.
Thank you, Alessandro.
You're welcome.
Okay, I think that all-
This was the last question.
Excellent. Thank you so much. I hope in today's call, we have been able to show that 2020 was not simply a year in which our business demonstrated resilience under exceptional circumstances. It was also a year in which we continued to pave the way for future growth with new filler placements, the expansion of our production footprint, continued investment in new categories and markets, and of course, the Middle East joint venture acquisition as just discussed. These moves all underpin our objectives to sustained growth with an acceleration in the rate of core revenue growth in 2021 and of further increases in profitability over the time as discussed. I look forward to reporting on our progress in the months ahead, and I thank you very much for joining the call today. Please stay safe and have a very good day. Thank you very much.