Good morning, everyone. We'd like to begin our program today. I see some familiar faces and some new ones. For those of you who don't know me, I'm Matt Delmaria. I'm responsible for Investor Relations and Communications at Avtar.
A very warm welcome to all of you joining us here in New York and a warm welcome to those of you joining on the webcast. We're very excited today to talk to you about our continuing global growth story. But a few housekeeping items before we start. For those of you here with me in New York, the exits are clearly marked here on your left hand side. We're on the Eighth Floor of the Marriott Marquis.
And just outside in the atrium, there are staircases and elevators and escalators should we need to exit. So just a little bit of a safety mention there. If you haven't had a chance to see some of the products we have displayed in the encourage you to do that maybe after the event. We have some sustainable solutions back there also. And you'll see in our presentation today, sustainability is very, very important to us.
And so we have some sustainable solutions in the back. Then And we're very fortunate to have our global leader of our environmental health, safety and sustainability, Beth Holland, joining us today. Beth, would you want to stand up? And so if you have an interest in that topic and would like to speak further about it after the event, please see Beth afterwards. We're very happy she could join us today.
On the tables in front of you, you see a few other solutions. We have the popular Fiji water with our beverage closure solution. And then maybe equally or more important, you have the M and
M
Minis with a CSP solution. So feel free to open those, share those and take those with you when you leave. For those of you joining me after our event here today, we're going to meet on the First Floor near the Starbucks. So that I think you have instructions on that, but see me afterwards if you have any questions. With that, our agenda, you're going to hear from our senior leadership team today.
And then after our remarks, we'll have our standard Q and A. This is our obligatory safe harbor language. Please see our SEC filings for risks and uncertainties about our financial results. So the senior leadership team today, we're very happy to have everyone with us. So this is our senior executive committee, the top leaders in the company.
You know many of them or maybe all of them, but some of you, a few faces will be new. Really presenting at this type of event for the first time, we have Mark Preur, who's President of our Food and Beverage segment Xiangwei Gong, who's President of Aptar Asia and Sheila Vincellar, who's our Chief Human Resources Officer. So we're very excited to have the full breadth of the leadership team here with us today. And for those of you on the webcast, there is an ability for you to answer questions when we answer the Q and A session, and we'll do our best to get to those later today. And with that, I'll turn it over to Stephane.
Thank you, Matt. Good morning, everybody, in the room and on the webcast. I'm really delighted to spend this morning with our owners, with our shareholders of the debate that shareholders will only yes, in our case, there's no doubt many of you have been with us for a decade or more and some even decades. So we really appreciate that opportunity to update you on the business, on the company, and on the growth story. Because that's really the key point that I want to make today.
We are a growth story. We have been a growth story, and we
are positioning ourselves to continue to
be a growth story for decades to come. We are blessed that we are operating in attractive markets, markets that are from a macro trend point of view, from a demographics point of view. Those trends don't change from one day to the next. And we win in those markets with solutions that make a difference in consumers' lives and in patients' lives and save lives at times. So if you take nothing away, nothing else away from today, it's really these three points.
In addition to updating you on the what, and we'll talk a lot about the what we do, Today will be a little bit different from prior events because we will also discuss with you how we do it, kind of give you a feel for the some
people
call the smell of the place, the feel of the place that you get a sense of what is the culture of the company. And that's why I thought it would be good to start actually what is our purpose. We discussed this a lot with employees, and it is pretty ambitious. It's really improving everyday life for people everywhere with innovative, reimagined packaging solutions. And we do that really by partnering with customers to help them win in their respective marketplace.
Of course, we are a B2B company, but often what we do has a significant impact on the consumer experience, how the consumer experiences the product, the drug delivery and the efficacy of the product. We are not a not invented here company. A lot of the innovations that we source from the outside, course, we're very proud of the inventions we make on the inside. We do that sometimes with acquisitions, sometimes with venturing investments. You just saw one a couple of days ago with Pure Cycle, we'll come back to that.
Wherever the best ideas are, we grab them and we convert them into solutions that make a difference for our customers' brands. We do it in a sustainable way. We didn't invent sustainability the last eighteen months. We have been in this for a long time. If you track back our history, if you talk to Beth, we feel very prepared to take advantage of the current wave of sustainability interest from consumers and customers.
And we're a global company. Please remember, 75% of our people are outside of The U. S. And everyone up here on this stage has lived in a different continent, maybe more than one, and brings that global experience to bear to drive the growth of the business. And last but not least, we stayed true to our core values, and I will not go through them.
The first one, maybe we respect and trust people. We don't we didn't invent those core values yesterday. They've been with us for the last twenty years. Unchanged, you will, those of us who visit some of our older plants, you will find those core values a little faded, they're still on the plant wall, and we stay true to them and they are as relevant today as they were twenty years ago. So what are our strategic priorities?
If you want, this is our strategy on one page, very simple. And we show you the same strategy that we show to our people, that we show to our customer. It's everywhere the same. It's very simple. Where are we coming from?
What are the macro trends that are relevant to us? Where are we going? And how do we get there? Where are we going? It's very clear.
You know our published targets. We are strongly affirming those, being maybe a bit more acquisitive, amping up the talent pool and the development of talent, and adding high growth economies to our mix. But let's talk a little bit more specific. The company is very much focused on growth. We're not only talking about it here, people are incented on it.
The annual incentive is based 35% on a core growth. There's a focus on growth on new product development, a new customer acquisition. And we have added the high growth economies to that. Organizationally, mindset wise, we're by far not done, but clearly tilting the company that we go where the growth is and not where the growth was. We're not cutting any ties with any places where we're adding.
It's a big world up there. Secondly, I already talked about talent and leadership, very important to raise the bar. I'll talk about some examples in a minute. We're a manufacturing business. The three areas, three functions we put particular emphasis on: How will you come up with new products?
Do we make them efficiently? And do we get the right price for it? So when we talk about core functions of functional excellence, we talk about those three things: Innovation, Operations and Commercial. You all know and will have a discussion around where we are in the transformation of our Beauty plus Home business and of our corporate support functions. Very important that we implement this project well.
And last but not least, acquisition and partnerships. So a few updates. Organic growth, you know last year we had 8% organic growth. This year, today it's 5%. On the talented leadership, let's start at the Board.
Over the last two years, we've added three new Board members, or refreshed the Board with three Board members. Isabelle Marie Stamper, great addition, former executive committee member from L'Oreal, CFO of Peugeot Citroen, intimately familiar with industry before Pedro, she's been in this space. Great addition to the Board, Chetty Wu, former chair of Johnson and Johnson's Consumer Healthcare business and currently with Carlisle and Craig Owens, formerly with Campbell Soup, and before that, operating executive with Coca Cola. Great additions to the Board, all of them significant international experience. Of course, our Board is also a global Board, and half of our Board meetings are outside of The United States.
Then in the senior team, Matt already mentioned, added Sheila Winslow, our first class CHRO. Shangwei Gong, our President of Asia, deep experience. You will hear from both of them. We've strengthened the M and A group. Thierry is somewhere in the room, back there.
So a lot of the activity that you've seen, he's been involved with. We strengthened innovation, sales, operations, and so on. Coming back to functional excellence, one important aspect is always to know what good looks like. So what we brought in is really a benchmarking, how are our plans, how is our sales process, how are our innovations practices compare to world class, not only in our industry, but on an absolute level. And our, operational excellence leaders have done a good job kind of developing the roadmaps in upping the game, particularly in those areas where we are not as strong.
Transformation, quite simply designed to bring Beauty plus Home back to its top line target and its EBITDA profitability, and with that, not only expands the margin of Beauty plus Home, but also of Aptar. Last but least, a brief update on the acquisition agenda. Of course, CSP Technology is a very large acquisition for us. Last year, Bob will update you on that. It's going very well.
Reboul, on the other hand, very small, but our first step into color cosmetics, a significant growth area. Nanopharm and Gateway designed to build the Pharma Services business or build out the Pharma Services business. Gael will talk about that. A couple of days ago, we took a venturing stake in Pure Cycle. Pure Cycle is, as far as we know, the only source of ultra pure recycled polypropylene that can come in contact with food.
So, it's very important, 90% of the plastics we buy are polypropylene. So we need an ultra pure source. And early tests look very good. So we're very excited about that, have a front row seat that that venture develops. Another venture that we took a stake in is LOOP.
You see the tote there in the very back is one of the many pilots on how to get closer to a circular economy, get products back from consumers, get them refilled. And we are part of that, yes? So if you think, well, if it's reusable, that's not your shtick, it's not true. We can make products reusable. We can make them 100% recyclable.
In the case of lube, the aluminum can comes back, they put the new dispenser on it, the dispenser is recyclable. And last but not least, a partnership with Nippon Closure. So it's just a brief update on kind of the areas of progress on our strategy on the page. Of course, our investors are recognizing the growth story. The vast majority of our shareholders are growth or GARP shareholders, and of course you have the index investors and the few value.
It is a long term compounding growth story. You see here 4% sales growth over a ten year period, 6% adjusted EPS, nine plus percent dividend growth. If you did an adjusted free cash flow, that would also be around 9% to 10% over the ten year period. You know this better than we do. Of course, the ten year look on TSR.
Okay, we did ten point five years, which cheated a little bit. But the message is that we're performing better than our peers and the S and P. So why is that? Coming back, powerful macro trends that are driving or enabling the growth in our markets. Sustainability, we got a lot of questions, and I'm sure we will have the questions here today.
Isn't that a killer of your business? And the reality is it's actually helping us to come up with new innovative solutions, help customers address the sustainability issue. We are agnostic whether our product is on top of a glass bottle, aluminum container, a reusable plastic container or a recycled plastic container. We are mostly engaged with the consumer experience of experiencing the product, getting it out of the container in a way that is convenient, in a way that allows the consumer to experience the product in the best possible way, or, deliver the drug. And we can make those dispensing devices from recycled material.
We can make them in a durable way, so they can be cleaned and returned. And that's what our customers and what the consumers are looking for. Of course, health and wellness, big driver, not only in Pharma, but also in the nutritional area of the business. Connectivity, where Pharma really does lead the way with connected devices, having everything on your app, tracking. We're not quite sure yet how this will work in different countries, but we are at the forefront on that.
Urbanization, a huge driver of growth in Asia, because hundreds of millions of people coming not only to the cities, but into the middle class and becoming consumers of our products. Changing demographics, in addition to the Asia equation, of course, you have a huge young population in some parts of Asia and a significant aging population, even more rapidly aging in Asia than you have in this part of the world. E commerce, I don't need to get into, but clearly also driver of innovation for us. That all ends up with our markets growing nicely GDP plus. And then we put a couple percentage points on top of that with our innovation and with the conversion from non dispensing to dispensing or from non active to active packaging, resulting in the top line growth targets that we've published and that we stand by.
We serve many different customers. As little customer concentration as business, an increasingly global and diversified set of customers. And we do that with a diverse business model, both in terms of end markets and in geography. The big share of Europe here is a little bit misleading. We don't have better numbers for you, but please keep in mind that most of the high end luxury beauty, skincare products are today filled in Europe, so we sell in Europe, but the end product ends up in the mall in China or in travel retail.
And we see a trend where this supply chain is reorganizing itself, where it will increasingly be made in Asia for Asia. And Shangwei will talk more about that later on, and it's important that we get organized against that shift and catch it on the other end. A broad set of technologies. While they have all different colors, there's a lot of commonality, whether it's pumps, valves, they go across all three of our segments, whether it's active packaging technology, Bob will talk about that. And when you look at the unit operations, they're very similar, that we can leverage a lot of technology operating practices across all three segments.
And in the end, it all results in consumers having a better experience in consuming products, in getting drugs into their system that are beneficial. Let me give you two examples. One, saw the commercial before. What seems very mundane, the top of sour cream. Very simple, be simple, put it in a pouch, put it upside down, and the brand gets a 70% revenue boost, including a nice margin expansion.
That's a good example of a conversion from one delivery mechanism to another. Another one may be more sober, more sobering. Of course, Narcan, a solution that reverses opioid overdose. The molecule naloxone has been around for a long time. But in our Unidose system, can be administered by any one of us.
You don't have to be trained. And it has saved many, many lives. Of course, creates a significant business opportunity. Here an example of sustainability, I already talked about being agnostic about the container, but this is an example where we have post consumer recycled content of 50% in a solution that is refillable washing up liquid. On sustainability, as I mentioned, we've been engaged in this for a very long time.
We are part of world leading institutions like the World Business Council for Sustainable Development. We've made public commitments like the the Ellen MacArthur Foundation's New Plastic Economy. And we are actually putting our money in solutions that are critical for us, like Pure Cycle and Loop. Also, see a number of examples here on a regional basis. This is very important for us to be able to steer the conversation, but it's also very important for our customers, because they take us really seriously, hey, you guys know what you're talking about.
It's not just lip service. When you talk about food crates, food contact polypropylene, you know what the tests are, you know what is required to make it happen. So let me sum up. It is a growth story. It has been a growth story.
It will continue to be a growth story because we are operating in attractive markets, and we are executing innovative solutions that help our customers improve and save lives. Before I hand it over to Sheila, I just wanted also to say a few words around innovation. Jean Marc Pardons, who's here, he's been instrumental in amping up our innovation culture, the way we track pipelines, advance our science agenda. Just recently, it took the leadership team and about 100 of us to Silicon Valley to really be immersed in that innovation infrastructure and visit many innovators out there. And they are not just software companies, three d printing companies, companies that do a lot of material innovation, sustainable polymers.
So it was really good to get our innovation teams around the world connected to that. And we're part of a number of these innovating companies where we can get better deal flow that result in things like the pure cycle investment. So one of the things that also came out of that is that we're going to put in customer co creation experience centers in major regions. We're going to start next year, with one in Paris. And I'll just show you a little mood video.
And after that, Sheila will come up. Thank you.
Good morning, everyone. It's great to be here. I joined Aptar ten months ago, and, I'm really pleased to be part of this fantastic team. And even more, I'm very excited to cover with you, all that we are doing in the important strategic priority of investing in our people. First of all, as Stephane already referenced, this is our universe.
We have 14,000 employees in 18 countries. Our center of gravity is mainly outside The U. S. We've got huge employee population in EMEA, a growing group in Asia and South America. And of course, we have our teams in North America with our global headquarters being in Crystal Electric outside Chicago.
Having such a global footprint, of course, is important in many ways. One of them being having global assignments, international job opportunities for our employees is critical. People grow tremendously through crucible assignments and global mobility having experience working and living outside your home country is a critical expectation if someone wants to aspire for the top positions at Acthar. Stephane already showed you a picture of our ExCom, so now I'm showing you a picture of our Board of Directors. Just a few things to mention.
Diversity, global diversity, cultural diversity is very, very important for us. Our Board of Directors come from six different countries, six different nationalities, talked about the diversity of women, 40% women on the Board. And all of our committees are chaired by women. This is important again in a whole bunch of different ways, one of them being, the support for diversity and inclusion. The tone at the top for any such initiative is absolutely paramount.
And so we're very fortunate that both our Board of Directors and all of us in the ExCom are deeply committed to forwarding a culture of diversity and inclusion. Why is that so important? You would say it's common sense. It's the right thing to do. But also research experience shows that diverse and inclusive companies perform better, they're more innovative and produce better financial results.
Here are a couple of things that we have accomplished. Just recently we've been included in the SPIDER Gender Diversity Index. We're pretty excited about that. We have partnered with the Catalyst organization to build out our roadmap for the next coming years. We are going through a survey internally to learn more about some of the challenges and some of the opportunities.
Everything that we do at Acthar is guided by our core values of respect and believing in the self worth of every individual regardless of where they come from or regardless of the many different ways that we are unique. So this space is extremely active. Of course, this is a couple of examples on gender diversity work, but we are approaching DNI as a broad topic. And of course, we will be focusing and working on all the other various aspects of the way we can be diverse and inclusive. So right after we talk about diversity and inclusion, having an inclusive workplace, increases employee engagement a thousand fold.
Employee engagement is that magic that happens at the intersection of great leadership, good performance, and having a great company identity, meaning caring about the organization, caring about its purpose, caring about its performance. And we do that through a lot of high touch, people to people kind of interaction. You see a couple of pictures here, town halls, site visits, quarterly reviews, roundtables a whole host of other things through which leadership engages in dialogue with our colleagues around the world. And this dialogue often involves talking about our strategy, talking about our priorities, roles, what our role is, so everybody knows how they contribute to the overall Acthar results. We also have a recurring employee survey.
Now we're entering into the third cycle, which is also very important because through this we keep our finger on the bus of the organization. And employees have taken it very seriously. We consistently get over 78% participation and over 20,000 unique comments, which of course is great feedback for us and provides us the opportunity to put together actions and continue to build out our environment and make Aptar a great place to work. When we talk about engagement, of course, number one focus is safety. Safety is not a priority for us.
It is a core value. And it's built on the mindset and philosophy that that everybody should go home from work the same way they came to work. Being safe provides an opportunity to engage further, feel good about the environment that you work in. We also adopted and introduced a globally relevant standard, the EHS system, which means that everyone has the exact same level of expectations towards working in a safe environment. That really yielded a lot of great results.
More sites are being ISO certified and our safety results have improved as well. Of course, we take time to celebrate some of the safety milestones. And you'll see a few of these pictures. For example, in Abta Chiete in Italy, we celebrated three years without incidents. And you see a couple of other examples there.
And then on the right hand side, the eight critical EHS rules which are valid, relevant across the universe of Acthar no matter which geography people work in. And again, these are posted all over when you walk around in Acthar. So safety first mindset. So I talked about D and I, talked about engagement and creating a culture of inclusion, diversity and engagement. The important component of that is how we think about development.
We take the long view on talent and development skills, leadership is of course a big part of that. We're building on the mentality of the founders of Aptar, again going back decades, on a very distinctive style of leadership, which is entrepreneurship, risk taking and agility. Our corporate university delivers training on a whole portfolio of topics, skill development, change management, project management and many others. The items I wanted to highlight today was our flagship leadership development program. CASA is a global program.
Tatita and Greenhouse are regional and La Fabrica is a local program. I might mention we're very proud. They are award winning programs with very unique inspirational content. For example, in CASA, we take our leadership team, a 3x1 week program to the vast slums of Mumbai to the fast paced entrepreneurial minded big metropolis of Shanghai. And in two weeks' time, the last component we are taking our team to the Navajo community in Arizona.
These programs are meant to instill and develop compassion, agility, risk taking, self reflection, and in an ever changing environment how we continuously adapt. So we talked about leadership at a higher level in the organization. Another very important component is development as it relates to our technical skills. This is an area which is a talent group that is very hard to recruit, very hard to retain. So what we do is growing our own, building on the great examples of proven successful German apprenticeship programs.
We have now opened the doors to our First North America Technical Excellence Center, where the idea is that we are developing our own technical skilled operators through six to twelve month programs in eight modules of six weeks. It's a combination of classroom and workshop training and we just started last week with the first 19 participants. We're very, very excited about this and of course have very grandiose plans to continue to roll this out across The U. S. And other locations in Acthar.
This is quite frankly, I believe it's part of our sustainability, how we continue to retain the skills we need and make Acthar successful. And as I wrap up, our key takeaways, and I wanted to use this picture because it somehow gives us a glimpse into the future. This is a group of our trainees in one of our facilities this summer. They had a great time and we had a really great group of students. But as a couple of takeaways, number one, focused on safety at the top of the house.
It's one standard for all. Through diversity and inclusion, we continue to engage and inspire our colleagues for continued success. And again, taking the long view on talent development, continuing to make sure that we develop careers, we retain talent and grow leadership for the future success of Acthar. That's my story, and I'm sticking to it. And I'm going to hand over to Shangri.
Good morning. I'm very happy to be here. And I'm very happy that you're here. And I'm very happy that have the privilege to take you on our Apartheid Asia journey. It's the right place at the right time.
We are in Asia. We have a very meaningful presence. We are in Indonesia. We are in Thailand. And actually, our most important assets are in India and in China.
In India, we are our pharma facility is in Mumbai and our B and H and food and beverage facility is in Hyderabad. We are expanding in Hyderabad. As you see here, this was the beginning of the year when our CEO, Stefan, laid the foundation for a new facility. We are growing double digits there and we are excited to be able to move into the new facility end of the year. In China, we have the biggest asset Suzhou.
Suzhou in relation to Shanghai is a little bit like Philadelphia to New York, very close, one hour by train, only 10,000,000 people. It has it's supposed to be the fourth most important city for trade. And it has the most important national level industrial park in collaboration with the Singapore government. We have had our Uptar presence in Suzhou in the past twenty four years. And we also have a very important facility here in the South Of China in Guangzhou.
And this is in close proximity to Hong Kong. As you see here, this is the new facility that we are open to operate at the end of the year as well. We will produce for B and H as well as food and beverage and also our CSP is going to invest the new line. You see here a sample of our customers that cover both global customers that are very big in Asia as well as local champions in all three segments. We are committed to growth to long term growth in Asia.
As a very important gesture, we have had our first ever Board meeting in Asia in April, and that was in Guangzhou sorry, in Suzhou. And you see our Chairman having a very important meeting with the Mayor of Suzhou that I just talked about. And our ex com and Board members have unveiled our new Aptar China investment company. And also visiting our globally most important customer, L'Oreal, it's a facility in Suzhou. And it's a really, really impressive facility as L'Oreal continues to grow the business in China.
And this is a Chinese company called Zala, whose products I'm going to talk a little bit later. And this is our own facility and our own employees. Now, why we want to be in Asia and what are the major drivers? As we know, we all want to be beautiful. And we want to be beautiful every day, every moment.
We take pictures anytime. And this is a very, very significant driver. Skin care gives us intrinsic beauty. Color cosmetics is like right now, makeup. And Asia has it's just a huge population, huge young population, huge older population, but don't want to look out.
I'll talk about that later. And really, really big opportunities there. And that's why if you read the reports of our customers, they're all there. Their exciting points right now are Asia. And while we have a lot of young population, but the rapidly aging population is a real significant phenomenon in Asia.
We know that Japan has been leading to enter the aged society and China is actually following the footsteps, which gives us huge opportunity. In my generation, we were born in my family, we were three kids. My generation, we have one kid in the family. So it actually gives enormous social challenges, but also enormous opportunities for us from food, from health care, from the way we want to look, we want to live, we want to feel. These are all opportunities for us.
And then why made in Asia for Asia is important and important now. Forty, thirty years ago, you probably would not be able to imagine that GM would build the biggest facility in Shanghai, biggest what's the brand? It skips my mind. No, anyway, the most impressive facilities and the biggest sale in China. In the beginning, people import and then there is import tariffs.
Does this sound familiar? And what happens to build the biggest plant in China? And why is Tesla building the biggest facility in Shanghai? And think about what our customers are going to do. So as the consumers want to have these products and they want it fast, they wanted to have fast change of style and color and the feel.
And all this really gives you something, some opportunity to act. As our customers are acting, we have to act as well. And then the most important trend, or it's not a trend, it's really just the sheer fact that it's the size, it's the scale. When they talk about Asia, you talk about the population, and this is just the most fundamental fact that we have to see. And China and India will be the biggest rising economies as well as ASEAN actually, many countries in ASEAN entering the most stable period and really sheer size that is just a breathtaking.
So now you see this picture. It's maybe a little unsettling. All of a sudden in 02/1930, like China will be the largest economy by total size, not per capita, per capita, it takes still a long way and this is why actually we are so excited because it still gives us opportunity and India as well. And U. S.
Is here. And then I just you will read it faster and why this gives us all these opportunities with rising age of rising population and the largest aggregate growth in the income driving premiumization, middle class people have more money, they need to spend. And even if you talk about a little bit of recession, maybe people buy don't buy car, another house tomorrow, but they can buy something that make them feel good, which will be skin care, color cosmetic, better foods, better health care. And then the need for convenience and to be quick and to be easy and to have the nutrition, the right nutrition, the right delivery format and it's really fueled by the urbanization. And another point that I want to mention that I didn't say earlier is about now the really the really relative geographic stability in the region.
China and Japan have entered into the best relationship since I remember. And that is actually very, very meaningful. Most Asians look to Japan, to South Korea as more the leading countries with better quality of life and better quality standards of everything, whether it's car, whether it's beauty products, whether it's food. So this gives us a real, real good opportunity to leverage. And then this is one picture to highlight the Asian population and why it is very significant for us.
And as we know, our pharma business continues to grow. And this is actually something if we do it right to shape the infrastructure, shape the way people age and it's quite empowering. Relatively speaking, the spend per family on healthcare is still very, very small comparing to some of the developed countries like Western Europe or like America. So in the old days, our parents' generation, they stay at home. They have a lot of children to take care of them.
But imagine now when our generation, we have a lot of us, but we have only one child in the family. So you need to really have institutionalized facility and you need to have professional service, you need to have much, much better social infrastructure to take care of this aging population and therefore really huge opportunity for us. Our customers, they are growing by leaps and bumps. And then this is only a beginning. And then this is one product that I want to highlight, this Jala that I mentioned earlier.
Actually, I got the email today, we are shipping the first orders for them. When you want to have functional ingredients, very often strong antioxidants or anti aging ingredients, very often you have challenges with formulation. You put them in the product, anything that contains water may have shelf life problem. So we have this really patented technology to put the booster, the functional ingredients, whether it's serum, it's vitamin C, whether it's something you want. And they actually put the formula here and to highlight to the consumers what's in it.
It's a very high percentage ingredient that really functions. And normally, you cannot put in the formula. But by putting in a separate chamber so these are two chambers. This is the base and this is the booster. So two separate chambers, then you can you mix actually in your hand.
It comes from two different channels, comes to your hand and you will see two streams of products and you mix it. So it's fun and it gives you really something to play with, but also real, real good high power in powering function. And in the future, you can actually change the booster as well. So we are very excited. We launched with one Chinese national brand, and we are excited that this will become a major product for us in China.
And then we have a lot to talk about in Asia, but I just want to give you now this few takeaways. And just remember, Asia is big, and Asia is only at the beginning. And we have a lot to do there. And to start, we want to have local capabilities. We want to have strong local teams and local innovation for our local consumers.
And then it requires us to act now to be agile and to really capture the momentum. We need to have efficient operational model and to be in Asia for Asia, whether it's in color cosmetics, for healthcare, skincare, for also our beverage and food markets. And then we will grow our business organically as well as inorganically. We are going to look really ambitiously and with real strong focus to grow in Asia also through strategic partnerships as well as acquisitions. And the last but not least, our strategy is really aligned with the strategy of our customers as well as consumers, but especially our customers also aligned with the initiatives of the government policymakers and regulatory bodies.
And this is a very, very important message as well. So with that, I think it's time for us to maybe take a little break. We can fill our coffee, bathroom, or dance, but three minutes. And after that, our President of Pharma, Gail, he will come on stage. Thank you.
I'm just calling people to come back.
So we're going to be starting, gentlemen.
Yes. Good luck to attract people.
So good morning, everyone. I'm trying to tease people to come. You want me to go ahead? Okay. So good morning, everyone, and welcome back from the three minute break.
With this slide, you will have a snapshot of our Aptar Pharma business as of today. I will be starting with the upper left corner and I will go clockwise. From a business sales by region, I mean 67% of our business today is coming from Europe, followed by The U. S, 27%. And whenever you combine LatAm and Asia, we reach 6%.
It's important to notice that some of our customers, depending on markets, are filling in Europe and delivering product to The U. S. Or the other regions. From a customer's perspective, I mean, are dealing and partnering with all the big names, I mean Sanofi, AstraZeneca, the Merck and GSK of the world, big generic companies as well and more and more with biotech and startups. Aparpharma has been always heavily IP focused and we are leveraging over 700 different patent families in order to provide the right dispensing solutions to our customers.
We never manufacture other products. We always manufacture our own product. And this gives to our customers an additional layer of IP protection. Aptar is the engine of innovation dispensing solution in the pharma space. We have been partnering and supporting more than 150 prescribed medicine on the market, 30 plus NDA new drug application, 65 plus ANDA generic products.
We manufacture per year over 8,000,000,000 solutions between components and drug delivery devices products. And our sales by market, prescription is the largest market for us, 51% followed by CHC, Consumer Healthcare, 23% injectables, 16% and ABTA CSP in the active packaging is bringing 10% of our overall revenue. From a financial performance, I mean, the segment is doing pretty well, 18 top line growth comparison first half twenty eighteen to reach over USD $550,000,000 Core wise, we are at plus 12% and our profitability EBITDA margin is moving up from 35% to 36%. Our long term target will remain 6% to 10% top line wise and between 3236% from a profitability perspective. Looking at the Aparthe Pharma growth driver, I will start with the first one, conversion and life cycle management.
The overall story of Aptar Pharma is to convert from non dispensing to dispensing solutions. I'll put it another way, from non so convenient drug delivery devices to patient friendly delivery devices. From tube to LF product or drug dermal products, from, let's say, Blofumin Seal ophthalmic product to nonpreserved multidose eye care delivery system with our OSD product, from solid oral form to intranatal drug delivery solutions. Two, we are looking at entering and strengthening our presence in what we call new application field for us. So CNS standing for central nervous system, the Penn market, but also biologics.
We are strengthening our service capabilities in order to partner with our different customers from formulation to post market launch. And last but not least, our ex our legacy application field, allergy rhinitis, asthma COPD, nasal saline or nasal decongestants are key for us, and we will continue to strengthen and grow our presence in those markets. The first deep dive I'd like to make this morning is around the Penn and the CNS market, the central nervous market. If you step back and you look at the overall market, the value of those markets are relatively flattish. Unit wise, we are at plus 2%.
But the overall story for ATA is to focus and look at niche product conversion from traditional delivery format to Intranasal drug delivery. As we speak, in the first eight months of 2019, the FDA approved five submissions using our Intranasal drug delivery solutions. Months of March, Johnson and Johnson came to market with the FDA approval for Spravato for severe depression treatment. Teva for Naloxone generic. Doctor.
Redis for sumatriptan using our Unidose. More recently, Eli Lilly with Glucagon for hyperglycemia treatment. The interest for those players, big pharma co biotech startup, to repurpose drug is to look at the intranasal delivery from helping them to have a faster onset of action. You've got a close connection, those two brain. You've got a fast intake in the bloodstream.
But also to lower the development costs, you repurpose a molecule already approved and proven efficiency by the different regulatory bodies. You lower also your development costs. And more importantly, you allow those players and we allow our customers to reclaim patent protection with combination products. So the formulation with the complex drug delivery device. And whenever you discuss with the marketing people of Johnson and Johnson France, Pravato, the name of Pravato has been done because you hear the word spray, Pravato spray formulation combined with an efficient drug delivery devices make the success of the product.
Pharma service expansion. In the month of May, we announced two acquisitions, Nanopharm in UK, Gateway Analyticals in The U. S. The overall objective for us is to strengthen our value added differentiated offer to the different players. In other words, to help them from formulation through analytical support, regulatory support to fast track their submission.
Combined with the Next Breast, Next Breast is part of the Aptar family for a long time, plus our legacy Aptar Pharma services capabilities around extractables, releachables, regulatory support basically. We are offering our customers a way to derisk and accelerate their programs. And there's a huge value beyond that one. For ABTA, it allows us to strengthen our pipeline of projects. I was discussing with one of you this morning around our pharma pipeline.
That's a way for us to strengthen our pipeline to derisk and accelerate this pipeline, but also to be early on for any new project. Last, this is a way for us to extract additional value. You know that we are in a business cycle where it could take time. Pravato to be on the market, we've been working with Johnson and Johnson for the last twelve years. So being able to supply and provide service capabilities early on from a formulation perspective to analytical support, it's a way also for us to extract value on top of our device and tooling sales.
Asmaz COPD, legacy market for Aptar Pharma, the numbers you've got are for all drug formats. But the important message, this is a market which is growing volume and value wise. Within this overall market, Aptar is having a leading position in a sub segment for portable inhaler. So we will continue to grow with the market and we will strengthen our investment to improve the reliability of our product and the regulatory bodies every day are raising the bar, coming for innovation solutions, coming from service support, from formulation to fast tracking their submission and also to look at sustainability as we are committed to reduce the carbon footprint of our drug delivery devices in the asthma space. Last but not least, I mean, Aptar Pharma is heavily invested in the connected devices space.
And as we speak, we've got a fully dedicated team doing nothing else but looking at developing our product portfolio, add on devices or integrated devices, not only for the asthma COPD market, but also whenever the therapeutic area does bring value for the overall system. Two, to work on manufacturing and scalability capability in order to ramp up. And there, we are leveraging our core capabilities around supply chain, quality, project management and manufacturing operational expertise. And three, to partner with the right data and digital platform in order to connect the overall ecosystem between the patient and the definition, but also with the pharmacos and also with the payers and the PBM. The non adherence
cost
for the industry is huge. Pharmacos are losing in the range of $188,000,000,000 due to no low adherence. Sixty percent of the patients do not respect fully the prescription given by their physicians. So the overall ecosystem and the key stakeholders have interest to push the digitalization of medicines and treatments. Stephane presented that our innovations are there to improve lives, but also to save lives.
Month of July, the FDA approved Baqsimi from Eli Lilly. Baqsimi is the first needle free rescue treatment for severe hypoglycemia for adult and children of the age of four and plus. They are leveraging and they are using our BiDose technology for powder treatments. And because it's a powder, it's important to notice that we are combining this technical platform, BiDose powder, with the Aptar CSP technology container that will allow to protect moisture ingress. Three takeaways I'd like you to remember.
The first one, from a solid right to play market, allergy rhinitis, nasal decon, asthma COPD, Aptar is gaining flexibility in the value chain in order to offer our customers additional service capabilities to fast track and derisk their product submission. Two, we are heavily invested whatever application field, legacy or new one, to continue to invest in our products, innovation, product reliability, product capacity expansion. As we speak before the end of the year, we're going to be fully localized in Russia. We are localizing more and more production in Asia, in The U. S.
For the one going to Congress this afternoon. You're going to see this is a different Congress with different SKUs locally produced. And digital transformation for us. Last, the Aptar Pharma enjoy having a very highly experienced leadership team, global leadership team, and the one going to Congress will have the opportunity to interact with them. Thank you very much.
With this, I hand over to Elton.
Great. Thank you, Gail, and good morning, everybody. I'm excited to talk to you today and share some insights into our Beauty plus Home business. So let's get started. So if you look at the chart here on the left hand side, you can see in the upper left hand corner that we are well represented around the world in all the different regions.
Europe is our largest region, followed by North America, while China and Latin America represent about 18% of our sales. And Stefan highlighted before as well as being a leading supplier in Europe in the beauty business, that several of those products, whether they're fragrances or facial skincare products, are shipped outside of the region and go into the likes of China as well as into travel retail, which are two fast growing areas for our customers. From a market perspective, about 90% of our sales are between beauty and as well as personal care. And today, we have over 6,000 customers, with a significant portion of our customers being large global players like P and G, L'Oreal and Unilever. And we also have good representation with large local regional players like L Brands here in The U.
S, Peshawan in China, as well as Botticario in Brazil. While Aptar Beauty plus Home may not be a household name, we are literally in millions and millions of households around the world as we supply over 16,000,000,000 solutions on an annual basis. From an innovation perspective, we focus on helping our customers differentiate in the marketplace. We also deliver convenience to the end consumer. And with this, we leverage IP and patents.
And we have over 400 patent families that encompass all of our products. Now not all of our products have IP or patents, but you can see some of our innovations down here below. One of them is a twist to open actuator on an aerosol valve that allows the consumer to select between two different doses. We also helped Avon launch one of their new perfumes. And we collaborated with L'Oreal on a shampoo that is utilizing a paper based bottle.
From a result standpoint, year to date, on a core sales basis, our sales are even with prior year. Our Beauty business is continuing to grow. Our Home Care business is continuing to grow. And as we mentioned in our recent analyst call, we are seeing some headwinds, some market headwinds in personal care, specifically in North America. We also, from an adjusted EBITDA standpoint, despite the fact that our sales are even with prior year, are demonstrating improvements in EBITDA from 13% to 14%.
Within Beauty plus Home, we have several growth drivers. Today, we're going to focus on four and share those with you. First of all, from a sustainability standpoint, our customers and consumers are looking for more sustainable solutions. E commerce, e commerce is a fast growing channel, and our customers are looking for solutions in supplying that e commerce channel. Color cosmetics is a newer application field for us and presents some opportunities for further growth.
And as Shang Wei had highlighted, we see opportunities to grow geographically in Asia, specifically in China. Starting first with sustainability. We work with the entire ecosystem to come up with a variety of solutions. We're looking at leveraging post consumer recycled materials, developing reusable solutions, as well as designing, developing and engineering new monomaterial solutions that are easily recycled. Some examples that you can see up there on the bottom of the chart.
First of all, it's our partnership with Loop. Stefan highlighted that a little bit earlier. And some of the samples are in the back of the products that we supply. We also have launched a 100% post consumer recycled material product line enclosures. And lastly is a picture of our lotion pump, which is a monomaterial pump that is highly easily recycled.
From an e commerce perspective, e commerce today represents about 14 of the retail channel and it's projected to grow to exceed 20%. This is a very important retail channel for our customers. Today, in a recent earnings release at L'Oreal, they talked about half, half of their global growth is going through e commerce. They also identified that 50% of their sales in China's mass market are being distributed through e commerce today. So you can see the importance of the e commerce channel.
What are customers looking for? They're actually looking for an omnichannel solution because they're not sure where these products are going to be shipped. They may ship it to Walmart. And Walmart may decide whether it's going through an e commerce channel or it may go directly to the retail stores. So they're looking for an omnichannel solution that can withstand the rigors of a very challenging distribution channel through e commerce.
Also, we are working with the various e tailers out there, like Amazon and others, to make sure that we can meet their requirements. Examples of different products that we have launched include eLatch for a tube top, Desktop Go, and also a new lotion design we came up with to be e commerce friendly. Moving on to color cosmetics. This is a newer application field You can see that in this chart that historically it has grown very fast and it's projected to continue that fast growth.
And we plan on continuing to leverage some of the products, ideas, technologies, customer relationships coming out of skincare to help us penetrate this market. Examples include our pumps and tube closures to be sold into liquid foundation and also targeting premium lipstick, leveraging our technology from Reboul, one of our recent acquisitions that Stefan highlighted earlier. The skincare market is extremely important for Aptar. And this is an example where we developed an innovation and partnered with Clarins to bring it to market. Clarins came to us with a unique challenge and said, hey, we are looking for a unique, attractive, airless system, which allows us to dispense two different serums, keep them separate until it reaches the consumer's hand, while also allowing the consumer the option of two different doses, depending on their specific needs.
And by the way, one other thing, we'd like you to incorporate some post consumer recycled material in that as well. So certainly a tall challenge, but nevertheless, we were able to collaborate with them and jointly partner and bring this to market. And today, Clarins has been extremely successful with this product. We supply two different sizes of packages for them, and across a number of different serums. So a very successful innovation indeed for not only ourselves, but for our clients, which really demonstrates that if we help our customers win, we will also win.
Moving on to our business transformation. We've spoken several times with you the importance of business transformation for our Beauty plus Home segment. And we literally have hundreds of initiatives that are being executed by thousands of employees around the world. Now we're about the midpoint as we're working through our business transformation, and we certainly still have more work to do. But I can say that we are in a much better place to deliver on our long term growth goals than we were when we initiated this program at the 2017.
Now our business transformation is delivering. And we do have some headwinds. Our business transformation, as we calculate, has delivered in the first eighteen months between 25,000,000 and $30,000,000 of incremental EBITDA. Now you may look and say, Hey, Eldon, we looked, you're only about $16,000,000 reported. How does that work?
Well, I did mention that we have a few headwinds. Some of them include the losses that we've attained in the start up of Rabaul. This wasn't part of our original business transformation plan, but we still never, nevertheless, see that very important acquisition. Secondly, currency headwinds that we have and third, some increases in SG and A, including some severance costs that are not part of restructuring. All
three
of those totaled somewhere between 12,000,000 and $15,000,000 So if there's one message that I'd like you to take away from this slide on business transformation, is that we expect business transformation to help us deliver on our continued sales growth goals and our EBITDA goals. So in conclusion, Beauty plus Home is a growth story. It is absolutely a growth story. The more that we help our customers grow, the more that we are going to grow. The Clarins example is a great example.
We see opportunities for growth in skincare, in color cosmetics. We see opportunities as we help our customers in sustainability, as we help our customers with e commerce. We see opportunities for growth in Asia, specifically in China. And finally, from a business transformation perspective, we expect that by executing our business transformation, we will be able to deliver the ongoing sales growth as well as our EBITDA margins. With that, I'd like to hand it over to Marc Prieux, our President of Food and Beverage.
Marc?
Thank you. Good job. Good morning, everyone.
Are you ready for our food and beverage update? Still awake? Okay, good. Over the past few years, ATA established itself as one of the key players in the food and beverage packaging market. And we play in that market by delivering product conversion to dispensing systems, leveraging innovation and our global presence.
And this brings us to a business of around $400,000,000 half of it is in North America followed by Europe, then Asia and LatAm that are the growing places. It's well balanced between food and beverage, two third, one third. And in that market, we deliver, of course, the big international companies that you know very well, the Kraft Heinz, Nestle, Danone, Coca Cola, Pepsi or that world. But we are also very successful with the local regional champions like Conagra in North America, Masspex in Europe and Yili in China. And what we deliver to those customers is a wide range of well targeted solutions, starting with our flip top closure and you can experience one of the samples of them with the Fiji water you have in front of you, Hopefully, you like it.
To the Tintop closure for the infant formula and not to forget the iconic inverted closure with the dosing valve that we deliver to the source and condiments application field. The main and the most important example being the Kraft Heinz ketchup inverted bottle. And of course, all these solutions are supported with a very strong IP. We have 150 patent families and we are very well targeted. Looking at the first half of the year, we were able to grow the sales by 14%.
If you exclude the CSP acquisition, it was a core sales growth of 7%. Coming from all the regions with the exception of Europe, where the very long winter until the May almost has been reducing a bit the beverage season. And therefore, the growth was coming mostly from the food side of the business. We were able to grow the bottom line by 1% to 17% EBITDA. And if you look at the bottom of the slide, we have the long term market guidance, six percent to 10% core sales growth, 18% to 21% for the EBITDA, and we are confident that we can deliver and achieve those targets.
And why are we confident that we can achieve those targets? Because we have several key growth drivers and I will introduce four of them today. One is conversion, second is innovation, third is sustainability and last is geographical expansion. On the conversion, this is the story line of the segment. This is our DNA.
This is what we do every day and we have been doing for several years, delivering innovative solution to our customers, helping them to grow their sales faster than the average of the marketplace. On the innovation, of course, we continue to innovate and to introduce innovations to our existing and strong application fields like the Sauce and Condiments, but we are also innovating and leveraging our technologies like CSP or BAP to enter new application fields like the dairy or the infant formula or the instant coffee. Sustainability, as you heard this morning, is a big topic. Of course, it's obvious that it could be disruptive for our business. This has the potential to be disruptive, but we decided to turn it into a competitive advantage.
And building on what Stephane was presenting to you at the very beginning, I can add that we have, thankfully, a network of material scientists, people capable of designing our products for recyclability, capable of validating new resins, and we are leveraging all these four Cs that we have internally now to deliver to our customers really tailor made solutions and to customers that have today made commitments to public commitments to increase their proportion of recycled materials and they are running short of solutions actually. Geographies, we had conversion success stories in Europe, in North America. And actually, we see a level of maturity in some markets like in Asia or to a lesser extent in LatAm, calling for that to a replication of that story of conversion. And this is exactly what we intend to do is to go to those markets, leveraging our technology, our innovation, tweaking a bit our products for sure to be adapted to the local markets and replicating that conversion success story. And I will give you three examples on how we do it.
The first one is the infant formula, baby milk, powder milk. We started entering that field several years ago in Europe and very quickly moved to China and became today the market leader in China. What we are delivering to the consumer, not to our customers, but to the consumer is safety, which is the most important thing in infant formula to convenience and third, an experience in the premium brand because we stay on the high end of the market. And as that market is growing, what we foresee for the midterm, long term is very interesting development with connected devices, leveraging some of the technologies Gail was mentioning to you and data generation and selling those data back to the parents, for instance. The second example is how we can combine innovation and sustainability.
Fifteen years ago, we started on the market to promote the flip top closures that were not existing at that time. Today, we are the market leader worldwide in a very niche segment, a portion of the market that is growing at least twice the speed of the average of the market. So we converted the market and we created the portion of the market that is growing faster. When we look at the big, big $500,000,000,000 in retail sales of these soft drinks and we look at the trends that you know for sure, the carbonated drinks going a little bit down, the bottled water going up big time, the growth double digit, very strong double digit growth in Asia or in Middle East and Africa. And adding to this, the new directives in Europe, the sustainability concerns in Europe with the single use plastic directives, all the plastic caps must be staying attached to the container for any container below three liters.
We see a potential for us leveraging our innovative solutions like Flipplease, and you have an example of Flipplease at the back of the room or the recent partnership we signed with NCC in Japan with a very specific technology. We believe we can again bring value to that market, convert a portion of that market, of course, not the entire market, but a small portion of that market the same way we did it fifteen years ago with the flip top. One last example, which is maybe the best example where you combine innovation, sustainability, market conversion and customer sales growth. So echoing what Stephane was presenting on Daisy, this is another example of our StenCap and flexible solution moving from a glass bottle this time to our flexible solution, of course, a lot on the carbon footprint. And what is interesting with that one is it was launched in July.
And we got an article in the Washington Post that triggered a tsunami of request to us and to our partners. And we see now a real trend on the market. And we got small and very big customers that we are not so much interested before in this coming to us, saying this is a very interesting solution. We see a real trend, mostly in North America, but also in Latin America. Actually, we are very proud of that solution and we believe it's going to be a significant business over the coming years.
Again, on sustainability, we play and we use different components to deliver our sustainable solutions. Of course, we try to reduce the weight of our products. We work on the materials. We design solutions that are compliant with the new regulations. And if you look at the flip flit solution, which is the green picture, if you bring that solution to an existing bottle, you have to reduce the bottleneck.
And this is equivalent to 1,000 tonnes of resin saving every 500,000,000 units, which is a direct saving for our customers. So we can bring a conversion of the market, an innovative solution, compliance with the regulation and bringing savings to customers. Of course, as mentioned before, we have LOOP and we have also Pure Cycle. There is no polypropylene food wet contact, permanent contact on the market today. Pure Cycle is one of the promising solution.
This is reshaping the market and it's our duty to make sure that we secure partnerships with these innovative companies that will be delivering the reasons we need for the future in our business. In conclusion, what we do best to grow our business and we will continue to do is conversion. We convert markets. But we do it with innovative solutions that are bringing safety and convenience to the consumers. We do it in different geographies, and we want to enter and convert new geographies, namely Asia for sure.
And last but not least, leveraging all our knowledge and sustainable solutions, we want to club all that together and win more profitable business. Thank you very much. And with this, I pass it to Mr. Bob Kuhn.
Thank you, Mark, and good morning, everyone. Before I touch on some of our recent financial performance, I'd like to give all of you an update on Aptar's largest acquisition to date, which we've rebranded as Aptar CSP Technologies. And hopefully, at the end of this, you'll have a better appreciation for some of the synergies and some of the things we saw when acquiring this unique technology. Now some of you may have been familiar with CSP Technologies prior to Aptar's acquisition, and you may have associated it to just a desiccant or a moisture absorption company. While that is true for a significant portion of the current business today, hopefully you'll see in the following slides that there's much more to offer than just moisture absorption technologies.
Even though they are noted for moisture absorption or desiccant, their solution truly is a differentiated solution from what is on the market today. Now, most of us are familiar with the standard bottle on the left. Think of, in The U. S. Market, a bottle of aspirin.
Typically in a bottle of aspirin, you have that annoying little canister or sachet, which takes away the moisture. But in a standard bottle application, the moisture passes through the tablets or whatever's in the package itself before being trapped by the canister. The Avtar CSP solution truly is an integrative active polymer approach, where the desiccant material is molded directly inside the lining wall of either the vial or the bottle. And in that way, moisture cannot penetrate through the product and thus impacts the integrity of the or improves the integrity of the package contents. And all the moisture is absorbed in the lining of the vial prior to the moisture entering the headspace.
Now, you're going to hear me refer to the technology as a three phase technology. So why do we call it a three phase technology? They start with the base polymer, to which they then add a channeling agent, and the third phase then is the active ingredient. Now, in this example, that would be moisture absorption. But it can do a lot more than that, and I think the takeaway from this slide here is that, and I'll show you some examples in the coming slides, is that it can also, in addition to moisture and oxygen absorption, it can remove gases, it can remove odors, and as you'll see on one of the slides, it actually can act as a release agent.
Aptar So CSP today has three factories, two of which are in The United States and which will account for about 75% of today's turnover. The third factory is located in France, representing the remainder. Now Zhang Wei already mentioned to you one of the synergies is that post closing last year, we're working on setting up an Aptar CSP line in our new facility in Guangzhou, China. The split roughly year to date has been about sixty-forty pharma, food and beverage. Traditionally, it's been more seventy-thirty.
And you'll see, based on some of the project pipeline, we expect the final numbers to be closer to that seventy-thirty. I'm not going to touch on each one of these innovative solutions, because we'll talk about that later on as we go through the presentation. So what are some of the key growth drivers that we see for CSP? One is in the transdermal area. I'm going talk to a little bit about microneedle patches.
Okay? This is an area that today Aptar, previous to the acquisition, did not have any presence in. Second one, and a very important one, is in the food safety business. So Mark talked about our food and our beverage application. Food safety typically is dealing with food service companies, and a very different large part of the overall food and beverage market.
What CSP is today noted for, really, is the diabetes vials to protect glucose monitoring test strips. So if you're familiar with the glucose test strips, this is giving the diabetic a glucose reading of the sugar level at any one point in time. Any moisture into that test strip can significantly impact the reading of that. And for a diabetic, it's very important, because it's the indicator as to how much insulin to take or how much sugar that they need to intake. So there's a lot of movement today.
See in the market a lot of improvements around the management of diabetes, particularly around continuous glucose monitoring. Even with continuous glucose monitoring, the patient still needs to use glucose test strips on a daily basis to continue to calibrate the monitoring system. But what we're excited about is one of those products on the market today is a product by Abbott called Abbott Libre. And it's been a huge success in the market. And why are we excited about it?
It's because those continuous glucose monitoring systems also are very concerned about moisture. And so Aptar CSP provides an element to the complete solution that is critical for that monitoring system to work. Last is the active blister market. When we talk about active blister, think of oral solid dose, so the pill market. You've not heard Aptar talk about pills in the past.
That's partially because we didn't have any solutions that were value added in this space. I'll share with you one that we currently have a project active project on. And even beyond that, those four areas, what we're most excited about is some of the synergies that this technology can bring to Aptar's legacy products. Gael shared one of those with you as we move more into our Aptopharma space into powder device systems. It's a natural add on of secondary packaging to be able to protect the device before it's used.
But I'll share with you later on another example when we talk about food safety that we think has applicability even in the beauty and home market. So oral solid dose. Think of tablets and capsules. Huge market. Huge, huge market, right?
We're focusing on some of the higher value, very expensive applications in this market. Think HIV and oncology. We estimate that this addressable market today is nearly $12,000,000,000 Okay? These products are very sensitive to moisture and to oxygen. And these are very expensive products to the patients.
One pill can range anywhere between $500 to $3,000 per pill, which is why they have converted from being offered in a standard prescription package into a blister application for ease of use and for compliance. But even a blister application does not necessarily protect the product or the tablet from moisture and oxygen. So through Aptar CSP's proprietary heat staking technology, we're able to put a layer on that blister package, which once the tablet or the capsule is filled and inserted, you get a complete moisture protection and oxygen protection system. So very, very important. Now, this is not a dream or an idea, right?
This is an actual project that with one of our customers, they've actually received first FDA approval last month. And they anticipate to be on the market in the 2020. Transdermal microneedle dissolving patches. So patch deliveries have been around for a long time. And in fact, again, this is a good example, it's an existing market.
It's $5,700,000,000 as of last year. This market is growing at about a 4.5% rate and is expected to exceed $7,000,000,000 by the year 2023. So what makes this market unique and interesting to AptarGroup? One, we don't participate in it today. Two, it is also sensitive inherently sensitive to moisture and oxygen.
It's high value products, typically dealing with large soluble molecules, particularly biotech. And the current configuration today, while it's I'm sorry, while the current solution today is adequate, the configuration itself is really not. So you heard all the other segments talk about conversion. Think of this as a conversion opportunity. The current solutions really have a separation between the patch and the delivery mechanism.
With the CFTex CSP technology, you can see in the picture in the corner, it is a complete molded solution incorporating the desiccant technology, which again, using typical Aptar words, ease of use, convenience. And we're seeing a lot of activity from the major players in this market seeking information on this technology. The last example I'm going to go through, and again, I ask you to remember releasing as opposed to absorbing, right? One application that we see a huge potential for, and one that we think improves lives, is around antimicrobial technology. So in The U.
S, there isn't a month that goes by that we don't hear about some form of product recall, whether that's in the retail space or in the restaurant chain. Typically, hear of E. Coli or salmonella contamination or listeria. These are big issues when they come on the market, and they cause significant loss of value for restaurant chains and retail stores. And every time you see an article on that, pay attention, because what they talk about is what is the origin of the outbreak?
Where did that pathogen begin? We're coming at it from a completely different angle. We're saying you will never be completely free of pathogens, no matter how good your food processing plant is. We see those examples pop up every day. But what we can do is, with the three phase technology, we can add a layer that releases antimicrobial gases into the product, which are not harmful to the product, right?
So once the product leaves the processing plant, in this case it's a sliced tomato example destined for a restaurant, It has been proven to knock down the pathogens 99.9%. So think of it as an insurance policy, not only for the food processing plants, but also for the restaurant change, and potentially eventually for the retail market. Now, antimicrobial is not just for the food market. One of the interesting inquiries we're getting from the Beauty plus Home segment is, hey, I have cosmetic customers that are dealing with very sensitive cosmetic bulk products. And one of my concerns is once the package is open, think of a jar with a cream, I get microorganisms into the package.
Can Aptar CSPs antimicrobial help in this matter? So those are one of the active projects that we see in leveraging that three phase technology across beyond just the pharma and the food and beverage segment. So what are the key takeaways? The integration has gone extremely well, and they're delivering on the business case plans that we had forecasted. We do have a strong pipeline of Aptar synergistic products.
Talked a little bit about the secondary packaging devices with pharma, the expansion in Guangzhou, and the antimicrobial technology potential applications in Beauty plus Home. There's many more than that. But I think the important takeaway from this is this technology acquisition has enabled us to enter into currently existing high value added spaces, like transdermal, like oral solid dose, and food safety. So again, very, very nice pathway to some new markets that we didn't participate in before. Moving on now to the after financials.
Six months to date, our core and our reported sales were 5%. That's because acquisitions added 6% and completely offset the headwinds that we saw in currencies. Our adjusted EPS is up 13% through the first six months, and that's with a higher tax rate of 29% versus 26% last year. Had we neutralized prior year numbers for a similar tax rate, last year's EPS would have been about $06 less than what's shown here on the screen. Touch on our consolidated financial targets.
So our core sales growth on a consolidated basis remains the same at 4% to 7%. You can see here the three columns that give you the three year average last year and where we are year to date, we're solidly in the middle of the range for our core sales target. Adjusted EBITDA as a percentage of sales is still 20% to 22%, again, inside the range in those three categories. The one target that we did revise is a return on invested capital. Previously, we were at 14% to 16%.
We did reduce it by 1% to 13%, 15% as we become more acquisitive with acquisitions like CSP, Nanopharm and Gateway, right? So we've reduced that 1% down to 13% to 15%. Our dividend payout ratio has remained the same. I'd like to mention that this is our twenty sixth year consecutively of paying an increased dividend. And our leverage ratio is one:three, and that hasn't changed.
And as of the June, we're slightly above 1.5 actually 1.7 from a leverage perspective. We hear a lot of discussion in the market today about a recession and if and when we're going to enter in one. So we felt it was important to demonstrate how Aptar performs typically through a recessionary cycle. And the best example of that that we have is the last recessionary cycle, 02/2009. So the bars here represent the EBITDA margin during that period.
While we saw a slight decline, 02/2008, 02/2009, which was the most impacted, we saw an increase. Okay? The lines you see is the share price performance. The light blue line at the top is Aptar's share performance, and the other two are the S and P five hundred and our peer group. Now, of all the markets that we serve, one can deduce that the most economically sensitive is the fragrance market or the beauty market.
And we certainly did see that happen in the 2009. Our least economically sensitive is our pharma market, which performed well during that period. People still needed to take their life saving medication. And what helped us through that last crisis was a strong balance sheet. So fast forward to today, where are we?
We still have a very strong balance sheet. And the pharma business is a larger portion of our overall business than it was back in 2008 and 02/2009. We often talk about our balanced capital allocation approach, investing in ourselves, whether it's capital expenditures or acquisitions, share buybacks, and the last leg is dividends. So we took a five year look back and looked at how much
have we spent on those activities.
And we spent nearly $2,600,000,000 over the last five years. And it actually is very well evenly spread, with acquisitions, CapEx and repurchases all between 700,000,000 and $800,000,000 and the fourth leg of dividends being 400,000,000 So very balanced capital approach. And with that, I would like to turn the presentation over to Stephane for some concluding remarks.
Thank you, Bob. So just a few points to wrap up. I'm incredibly proud of this team. You met them all. You will get to grill them here in a minute with your questions.
But I think you get not only what we're doing, but how we're doing and how we're doing it together. We are growth business. We're taking advantage of growing markets with our innovative solutions. There's a lot of synergies across the portfolio technology platform operations, whether it's active packaging, whether it's the pumps, the valves. Age are both represents a tremendous opportunity, but frankly also an imperative.
You gotta go where the growth is, and that's where the growth is. An engaged workforce, whether we're talking about the top leaders, whether we're talking about the maintenance technicians, is key. We're doing everything we can to make sure we have an engaged and well skilled workforce. Our balance sheet, we take not for granted. We are good stewards of your capital.
Bob just went through that. Yes, we have a more proactive acquisition agenda, but we're a disciplined acquirer. There are many, many more deals that we say no to or in the end, don't go to the final stretch in the auction than you actually see announced. And we are confirming our long term growth and margins targets. And with that, I would ask my colleagues to come up here and show you a little video of how we get organized.
Yes. This is Paul Eckley from State Farm Insurance. Stephane, obviously, you've been at the company two point five years. But could you give us your perspective on the Asia opportunity, particularly China and the color cosmetics? Why was that slow to develop?
And what are we going to do about it now?
Let's first talk about what we're doing about it now. It is getting after it in a hurry, developing solutions and amping up the organization. You heard from Shangwei. In consumer facing businesses and also in the B2B to B2C business, so when you supply consumer facing businesses, it's very important that you live and work and breathe in the market that you serve to really understand what's going on, what are the trends. And maybe in hindsight, we didn't ramp up early enough the leadership talent in the region to kind of ring the bell in the company and come across with the passion that you witnessed with Shangwei, why we need to get organized around that faster.
Now the good news is it's not too late. A combination of inorganic and organic steps, we think we can participate in that. I think if you take Latin America, there we were early in. We are a part of the fabric of the industry. We take good advantage.
But in Asia, maybe because the school is culturally a little bit further away, we have to catch up. Mimic, do you want to add anything, Paul? I
mean, the one thing I could add is, Paul,
we had
obviously, way back when, a much stricter product scope around dispensing solutions. And there was a lot of debates over the years at the boardroom level, is mascara, is lipstick, is that a dispensing device, right? And particularly in the lipstick market, the mechanism is very critical to be able to gain from the business. So I think what you've seen over the years is we've loosened a little bit that product scope after CSP is one example of that, and it's around technologies. And I think Stephane highlighted maybe some of our talent in the region wasn't quite ready for that.
So I think it's a combination of maybe a more narrow product scope and a slight opening of that product scope to get into some of the more faster growing markets.
Edlain Rodriguez, UBS. This is for either Stefan or Gael. You've made a couple of acquisitions, bolt on acquisitions in pharma over the past couple of years. Are there still holes in the portfolio you still need to fill? Or are you good where you are right now?
And what does the pipeline look like?
Yes. Let me take the general and then Gal, please add. I mean we have an active pipeline for each of the segments and cross spanning technologies. And we're not done in pharma by any stretch. There's a good pipeline.
Now in pharma, just in others, valuation is always a big topic. And not
all
of those that we follow, you're going to get. But maybe you want to add to Yes.
What I wanted to tell you to answer your questions, we're actively looking at the best way to strengthen our service and offering capabilities. But anytime we're going to be looking at acquisitions or partnerships or licensing, that's going to be around our right to play strength, where we are really strong and where we're going to be really bringing value through the overall value chain. So we won't be looking at acquisitions being the one feet all type market approach. So we're going to be looking where it's going to strengthen our pipeline of projects. And you know that in the pharma industry, everything needs a long pipeline of projects on how to make the pipeline being more robust and to derisk and accelerate your pipeline through the finish line.
George Sapos, Bank of America Merrill Lynch. First of all, thank you for the presentation. As always, great forum, and congratulations on the performance over the last number of years. My two questions are going to be initially on sustainability. And I think, Stephane, you had mentioned that you're agnostic as to whether your customers' package will be metal, plastic, paper, glass relative to your dispensing device.
Those other materials other than plastic tend not to lend themselves to dispensing, right? Because they're not flexible, it's hard to actuate. So in those applications where it would move to something other than plastic, Are the devices that you'd be selling more complex, less complex, higher margin, lower margin? And are you, in fact, seeing moves by your customers away from plastic to those other materials? Question number one.
Relatedly, again, the tethered cap is a great device. There's been a lot, though, talked about in the media the last couple of months about water and what material it's going to be in over the next number of years from some of the larger beverage companies. How do you see that shaking out? And what does it mean for your closures business? Thank you.
Let me take a stab at both Mark and Alden should add. Have we seen a switch today to different containers? The basic answer is no. Now we see pilots, and we just showed you the video. Look, by the way, the Pantenechon pool that you see there in the back is in a beautiful aluminum container as well.
It's got the pump on it. Now, the preference is for that pump to either be reusable so that it can be washed many times. Different polymer choices can be done. No problem. Up to a different price point.
Or for that pump to be mono material and to be fully recyclable. So again, the container can change, but you still got to get the product out in a way that enhances the consumer experience. Don't want your tissue pour out the dish soap like that. That's one. Two, on bottled water, of course, we've seen the various we are not in bottled water today, let me be very clear.
What we do see is the sustainability angle gives us an opportunity to capture some space, whether it's the tethered cap, whether it's the flip flick, taking advantage of that. But it is really early days to see which portfolio of solutions the consumer will adapt, whether it will be all through aluminum containers, which, by the way, for the world would be terrible, but consumer is the consumer. And over there, it will be a mixture of different solutions. Our pipeline of volume in terms of having new development projects with customers that we didn't have before has certainly gone up the net net for sustainability.
And maybe just from a Beauty plus Home standpoint, and then we'll hand it back over to Mark. We're looking at trying to come up with a variety of solutions. We don't know which direction it's going to go. I mean our customers are already out there making commitments by 2025 and some even earlier, where they are going to have all their materials either be recyclable, made of recycled plastics or be reusable. And so we're going down all of those paths simultaneously.
We're staying close with the entire ecosystem, as we talked earlier. The customer, the end consumer, the recyclers, the people like Loop that are reusing the packages and washing and coming up with unique designs around all three of them.
But to be clear, do you see this as neutral or positive for Mint?
Absolutely. We see it as and Mark mentioned it as well. I mean it is an opportunity or it's a threat. But for us and in fact, we've sat across the table from our customers, and they're not sure how they're going to get there with the commitments they've made. And they're saying, help, what can you do?
How we work together to come up with unique solutions?
Yes. And your question was targeting the bottled water. So as Stephane said, we are not in yet, but we want to be in. Now on the real trends of the market, you saw the Disney announcement a few weeks ago. You will see these back and forth, but what we get from our customers and what we understand from the market is going to stay mostly with PET bottles.
You will not see a big shift back to metal or glass for many reasons. And we have insight for sure, we believe with our customers like Coca Cola, they will stay with the PET bottle for the majority of their volumes. And this is where we want to play. And to add to this, so to extend beyond just bottled water, for sure, it's important for the food and beverage to be ready with the new materials. But before we get PCR resins on the bottle of water, it will take some time because you have the compliance, the organoleptic issues and so on.
So it's first going for the tetra red caps and then certainly moving into recycled resins later on. So you will see different steps. And this is why we stay very open in our solutions because today, it's very difficult to say which solution will take the lead or not, same
for your business, I guess or not.
To be very specific, your question, net, net, net positive to the top line, much more project volume the positive to the bottom line.
Matt Krueger here with Baird. Thanks a lot for taking our questions. Just wanted to dig a little deeper into the Beauty plus Home and overall transformation initiatives. I think you mentioned that you're about halfway done from the Beauty plus Home perspective. First of all, does that apply for the corporate side of the efforts as well?
And then I was hoping that you could talk a little bit about what some of the differences are from kind of the first half of the execution phase on the transformation initiatives versus this upcoming second half of the phase and any difficulties associated with kind of progressing along that time line.
Okay. I'll take the overall picture, then maybe Bob, you can talk about corporate and Alvin about the business. So the big three pieces, if you like, first was to get the whole commercial excellence and front end of the business tuned to be much more in a rapid cadence, project conversion and tracking zone, so address the top line. I mean we are performing at a much better current market situation notwithstanding, but good cadence and good follow-up on project customer customer project conversion. The second one is deal with operational issues, underperforming sites.
We've been transparent about a number of sites, our MC site start up, our executive site is France, the RIBO acquisition and the couple sites in North America. We are waiting through those. Some of them have come out on sea. That could be and the Asian side is doing well now. The other ones are starting to improve.
We're in the middle of that. That proves harder than we thought or it's not harder, but it takes longer. But no insurmountable obstacles. And then the third phase is about headcount, fixed costs. Those things are in the pipeline.
But given that we have a large European base with all that means around work count, approval and all that, it should work its way through the system. So with that kind of overall setup, maybe you talk about the corporate things.
Sure. So when we're talking about the corporate services, we're primarily talking about information systems, finance and HR. On the information system front, we're more or less complete with the initiatives that we targeted and set out to do. On the finance side, there was a fair amount of work that had to be done moving us into an in source global business service center. We have now created that global business service center for our European operations, and we're in the process right now of migrating the transactional accounting aspects into that business service center.
We expect to be complete middle of next year with our European operations. And on the HR side, we've had some very good initiatives. But with Sheila being new to the organization, we didn't launch more transactional shared service approach to HR. So we'll take a look at that as we head into 2020 and see what other things we can accomplish. So overall, we set out a target for the three year of our cost saving initiatives.
We're tracking or exceeding in all cases, and we're on time with the majority of the corporate services.
And moving back to Beauty plus Home. As Stefan mentioned and I mentioned in the presentation, certainly from a commercial standpoint, we do have momentum going again. Our beauty business is continuing to grow. Our home care business is growing. We have a little bit of lumpiness, I would say, in our personal care business today.
I've talked with a few of you prior to this. We don't see this as this is a market issue. As an example, in North America, our the sun care market was very slow in start because we had a long, cold, wet spring that certainly diminished the sales. We're not going to make those up. In terms of the hair care business, it's a little bit softer, but you can hear that and our customers say the same thing.
And going back to Stefan's comment earlier, we do have a great cadence. We have a great project pipeline, and we're continuing to follow those. We're continuing to launch new products. We talked about those related to sustainability, e commerce, where we're getting some traction in that area as well. Operationally, as Stefan highlighted, we do have a couple that are behind us with Anassee, with our Decorative French facility also showing levels of improvement.
We're also seeing improvement in our other sites a little bit slower. We're continuing to invest in taking out non value added costs, improving automation, improving throughput in our facilities. So those projects are also continuing. And then lastly, in terms of our overall overhead, we do have programs in place to take out costs as well. And we are working through the works councils in Europe.
One other thing that we did recently, we sold one of our injection molding sites here in North America to a company by the name of Flex. We're still going to leverage that facility as injection molding site for us, but we've moved a fixed cost now to a variable cost, so providing an opportunity for us to continue to flex up and down as our volume changes. So historically, we've done that, and this is another opportunity for us to continue to leverage that capability.
Neil Kumar from Morgan Stanley. So you mentioned that Beauty plus Home, particularly Fragrance, is the most economically sensitive of the three businesses. I was just curious as to how the business and the Beauty Home portfolio has evolved to better withstand a downturn since the last recession?
I would say, certainly, the Asian consumer, whether it's China, whether it's travel retail, plays a much larger role. And if you want the one unknown versus the prior recession is, is it going to be a synchronized recession? Are we going to see that? And how is the Asian consumer going to react to that maybe different than the European luxury consumer? I think that's the biggest change.
We have not started to develop a position in color cosmetics, but it's still very small. So fragrances are still going to
be the big. Yes. No, I fully agree with Stephane's comments. If we look back at 2009 from a geographic perspective, both Asia and Latin America grew during that recessionary time. And now that Beauty plus Home has a larger presence in Asia for that, I would expect that to also be a mitigating factor.
And maybe one other comment. In our European factories also, we have gone to a system manufacturing process that allows us to manufacture shorter runs, faster changeovers. So that certainly is going to help us be a much more flexible and adaptable in a tougher economic environment.
Gabe Haiti, Wells Fargo. Stefan and team, thank you for all the detail. Another sustainability question, it's obviously thematic at this point. Is there anything unique or presumably there is proprietary with the I know it's early days, the pure cycle investment? And then from a strategic perspective, how are you thinking about that in terms of just being able to in source your own post consumer resin or what have you?
And or is there any IP that protects the process? And then I guess, from my understanding, scalability is something that's kind of limited this technology up to now. Is there an investment required? And would that be borne by yourself or co investment or what have you? Okay.
Maybe bigger picture, the way we think about venturing investment is, okay, there's an entrepreneur out there who is coming up with a great idea and they're running 100 miles an hour, but it's kind of really interesting and relevant for us. How do we get a front row seat to that? And then you take 5%, 10% stake, maybe you get a Board seat, you get some preferential rights and you follow that. But that's what it is. It's not the intention to buy the company.
Maybe you want to license the technology, maybe you want to execute the preferential rights. We think about that in the venturing investment the same way we make a venturing investment in connected devices as what we do with Pure Cycle. So the reason for Pure Cycle is get a front row seat, get secured access. If these guys are successful with the food grade polypropylene, that we have access to it from day one, maybe get some good pricing with that and be the first one to test it out. We're not going to build polypropylene plants.
No intention of doing that. But we have some good company. Procter and Gamble is there. Some other large companies are there. And now we have a front row seat.
Whether you want to build or That's how we think about it. So if they want to build a big plant, we're not going to invest in that.
Okay. And perhaps one quick one, again, on sustainability. Curiosity, are you getting any or having more dialogue with some of your pharma customers versus some of the food and beverage applications that seemingly is more in the kind of light right now as opposed to pharma?
Okay. I would say from a pharma perspective, I mean, we are starting to have discussions, but it's no comparison with the different channel and beauty channel customers. I mean, the CHC, the consumer health care, yes, customers are talking about sustainability, but step by step and still at a very long distance. The one active subject we've got in is in the Asthma COPD, we are heavily working with our customers and different partners to reduce the carbon footprint of our agro salt division. Apart from that one and being very active on this one, I mean that's not the huge pressure from the market.
It will come. We are short from that one, and we will leverage obviously the overall work done by the other segments and the sustainability and the innovation group.
Maybe a good example, Bob, help me with the history here. Last time, there was this switch in aerosol in the pharma market from everyone that it was very ozone depleting to one that's a little or much less ozone depleting after actually managing a significant part of the market in that shift. So these discontinuities, if you play them right, also are a big opportunity. And that's how we look at the whole sustainability field. So it's just a reminder.
Yes, that's perfect.
Nothing else there. Paul?
Yes. Paul Leckley from State Farm Insurance again. Sheila, it's rare when we have the HR person in the company give us a presentation, and thank you for that. But if I could just ask what when you came to Avtar, what was it that you saw that needed to be fixed?
Well, thank you very much for
You can say where do
I start.
Stefan said, she'll add it to your long list. And we've got plenty of opportunities.
It really is
our preparation for sort of this next level of evolution of Acthar. You know, with all my ten months' experience and knowledge, in the organization, I really see us truly evolving from a combination of extremely well run organizations with very, very matching and fitting cultural philosophies, how we now really truly organize and become a truly global player. And in order for us to do that, we really have to truly roll out an integrated talent management strategy, where really we look at talent development, acquisition, retention and development across horizontally and vertically. So digging deep in the organization to make sure we know who our talent is that will be in our position ten, fifteen, twenty years down the road. And that is to me the biggest opportunity.
We have very many pockets of excellence, but this all needs to connect, come together and be very, very intentional in working through that. So to me that and in a way, it's a sustainability strategy and how we make sure we are ready with our leadership of tomorrow starting today.
Eva, I mean, part of it is also just making it scalable. I mean my predecessor, they did a great job. I mean look at the guys up here. Their career has been developed over the years, Boston, France, Berlin, China, Market China. So but as you grow, as you become more compliant, you need to make sure that you keep developing these leaders for the future to be replicable and sustainable on a larger scale and become more inclusive also of Asia in our whole talent approach.
Because everybody needs to feel this is a meritocracy, I can make it in this company no matter where I come from and do that at scale. And for that, you need to start to professionalize the systems that, when we were a smaller company, could just be done by a few people.
I want to piggyback off of Paul's question to a bit. From the internal survey work that you've done so far, Sheila and Stephane, what have you found in terms of the single biggest positive that most of your employees have about Aptar? And what are you finding is the most repeated comment that you need to work on the biggest challenge for Aptar internally as an organization away from developing the management and the talent to grow? That's question number one. Question number two, you mentioned that you're doing, if I heard you correctly, more in the way of benchmarking across your facilities, which is fantastic.
And the nature of Aptar as such where you wouldn't think naturally of benchmarking from one facility to the other, given the disparity and the uniqueness of each of the products. What are you finding from your benchmarking in terms of, again, the single biggest opportunity for Apgar across myriad manufacturing processes and facilities? Maybe you can take
this first one Sheila and then Mark talk about particularly operational excellence benchmarking.
Yes. And in the spirit of transparency, our biggest sort of positive or the biggest improvement that comes through really across all parts of the organization through the survey is the clarity around strategy, around vision mission. And that's really due to a lot of good work that has been put in place with communication, key messaging, engaging directly with everyone. So I really find that there is a very strong company identity. It's also built on our great legacy throughout the founders work and with the current leadership.
So lots of positive aspects there. Also very positive on our philosophy and our drive for innovation and continuing to build a culture of innovation. Lots of good initiatives there and good feedback. Now in terms of the challenges, and I don't know whether it's surprising or not, it's one of these things that we know it's sort of easy to do, but we still sometimes miss it, is this opportunity for reward and recognition. And again, the true spirit of transparency is something that is always very startling when you look at it.
And because it's many times it's not the monetary recognition, it's really that one to one engagement, thank yous and just real time recognition. And so that was one thing that is in a way easy to fix. It takes intent. It takes that thoughtfulness, but we've got a number of things, activities that we've started engaging in. And already we see the feedback coming back on that.
So and then the other one is very universal in today's connected world and kind of high flex work environment. It's how we manage the work life balance aspect. And so one of the things we have one of my work streams we're looking at is really how we continue to develop more workplace flexibility and other ways of connecting and engaging with where appropriate engaging with the task at hand. So this is all very, very helpful and good feedback and really feeds our action plans and our action items. And we look forward to our next round, which is coming up in a few months and see what we learn next.
Okay. Operations. So your question was about the benchmark for our factories and how we manage efficiency. So we have across the three segments plus Aptar CSP more than 50 factories in the world with different level of maturity and systems. And what we did first is to implement one system, one internal benchmark with the usual KPIs you can have and rolling this out to bring all the factories at the same minimum level.
And now what we do is we go to the next steps. We are implementing the Six Sigma activities to reduce our viability, to improve the performance. And we are also in some cases like safety, benchmarking ourselves with the outside world because you have norms and references. I'm telling you today, for instance, on safety, which is a long journey. We were able to bring ABTA to the average of the industry, and we are now looking at going to best in class.
So we have a set of the KPIs and systems that are reporting these KPIs, and the aim is to bring all these factories to the highest level of efficiency, especially for well done.
Right. And one thing I would like to highlight, though, too, is that transparency because there wasn't as much transparency across the different sites and that linkage and that openness so that people can learn from one another. And Marc and the operational excellence team have really done a great job in that area.
And if I can build on this. So we want to create one floor minimum level and improving from this. And the next steps are, for instance, the industry for the zero, where we are going to bring more innovative solutions, more data collection, data driven processes. So this is what we are currently doing to go to the next steps and for sure not seeing where we are.
Yes. Sorry, just wanted to build on one comment you made that, hey, these are different operations. How can I imagine? Actually, the unit operations are very similar and manufacturing KPIs, uptime throughput, change over time, yield, safety, those are universal definitions. And you can actually, once you have the system put in place, very easily benchmark and track improvements and then do project by project improvement.
And some sites take the lead, like in Industry four point zero, using artificial intelligence, maybe you can say a few words about that, Gael. Pharma side takes the lead. And once we got it to a certain maturity, we leverage over to other
And that's what I wanted to bring to you. So we've got a pilot program in some of our pharmaceutical facility and basically where we digitalized the overall process. So having the ability to get a complete electronic batch release instead of getting piles of documents, how to track and follow our performance digitally speaking, I mean moving screens, getting the overall team, having real data reality. Around artificial intelligence or machine learning, I mean, right now in our laboratory facility in France, we've got machine learning and artificial intelligence around visual inspection because zero defect is a requirement in pharma. So piloting an Industry four point zero project in pharma and obviously leveraging the organization in order to make sure that we're going to replicate and share best practices around the organization.
Anojja Shah, Bank of Montreal. I have two questions. One is just a follow-up on the recession question that we asked before. I know in your 2Q earnings call, you said you weren't actually seeing any slowing yet in fragrance and the more economically sensitive. Has that changed since then?
Or is that still the case? That's number one. And number two, in this digital health care focus that you have, how receptive is the health care provider community? And do you even need them to be involved?
On the first one, we haven't seen it in fragrance, but we were very clear we have seen a slowdown in the personal care market, particularly in The U. S, a little bit also in Europe.
But would you say that's recession based?
There is a lot of humming and hawing around this, whether that's being prudent around working capital, supply chain tightening. Some of it is related to one of major product launch last year, not repeating and not actually going as well as one of our customers. So I wouldn't rule it out, at least that the trade is getting ready, but it's not related to the luxury fragrance that we called out
in 2019. So to answer your questions around the digital health space, all the key stakeholders will have to get a part in order to be in the digitalized So the care provider will have to be part of that one, like the pharmaco, like the physician, like the patient, like the payers. So the only way for us as an industry to be successful to make sure that we are all connected for digital medicine providing support. So the answer is yes. At June, different business model, our opinion and so on.
That's why we've got in pharma a fully dedicated organization looking at digital health care, how to come with solutions because one solution in one country for a certain therapeutic area will be different for another region or another therapeutic area. So we need that flexibility, that agility, that ability also in that space to learn, to very fast, to learn from and to adjust our business model. So but yes, all the key stakeholders will have to be part of this transformation, this digital transformation.
Let me also be very clear. The revenue from digital in our P and L today is zero. But this is obviously a very important segment for us, and everybody is trying to figure it out, and we want to be sure that we're part of figuring it out and picking the solution. None of us know how the patient health care provider insurance, data privacy equation is going to work. And it's for sure is going to be different by country because health care systems are completely different by country.
George?
George Staphos, Peevee. Last two, I promise. First question for Shanggui and Stephane. So we've heard a lot about the risks, the issues in producing in China and Asia more broadly and the puts and takes on protecting intellectual property. Can you tell us from your vantage point what the urban legend is relative to the reality and how you manage, obviously, a great suite of technologies for growth in a market that might be a little bit more challenging from a protection standpoint?
That's question number one. Question number two, and Stephane, you had mentioned it in your discussion. One, you lowered your return on capital hurdle in your long term target. We understand why. We noticed that within the segments, you're no longer providing that segment EBIT to invested capital goal.
We assume that's probably the same reason you're going be a little
bit more
acquisitive. One, can you comment on that? And two, how do we expect how do you continue to expect to manage the return on capital as well as it has been when you're growing more acquisitively? How do you prevent the horses from leaving the stable, so to speak? Thank you very much and good luck in
the quarter. Maybe let me start with the second one first, Bob, you chime in and then go back to the China topic. So as you know, we changed the whole incentive comp structure, both for short term incentive and long term incentives. So short term incentive, we had kind of a three year moving average of a number of metrics, and we replaced it with very simple metrics, revenue growth, 35% EBITDA growth, 65%. Recognizing that we need to bring the return on capital equation in differently, and so we put that into the long term incentive.
So in our long term incentive, that's now driven the variable portion by total shareholder return and return on invested capital over a three year period. Since we shifted the short term incentive from EBIT to EBITDA and for the reasons you already mentioned, acquisition and that we do a lot of divvying up of capital at shared sites, we said, okay, let's not have another metric in the short term incentive around EBIT to segment capital, but we are tracking, of course, the return by segment internally. And Owen, do you want to add anything? No, you always say exactly what I was going to say.
So we talked a lot about the synergies, right, in the shared facilities, and we want to encourage that. And inherently, doing a return on invested capital by segment has a fair amount of assumptions involved in that, right? So by focusing at the top level internally and all by one metric, we're actually encouraging the segment to leverage those assets and those sites. We didn't want to get into intercompany bickering overall, well, now you put more in my production facility, I'm going to shift part of my balance sheet to you now because you're using my assets. We want to focus more on the value added in the bigger picture and get everybody focused on increasing the overall consolidated return.
On IP, the urban legend is, of course, we bring our great technology to steal it and we go home with no money. The reality is the last two parties I sued for intellectual property infringements were in this country, and won. It is, of course, you have to be judicious, but China is then no different than other countries. You have to protect your information, compartmentalize where necessary. The reality is our Achilles heel
Everything in China moves at three to four times the speed here. We call it China speed. It's real. We don't make it up. It's even in our own company.
Things that we can do in three months or six months in China will take us eighteen months, two years in France. It's just a reality. It's not a value judgment. It's a reality. And that's our Achilles.
If we're not fast enough in China, we lose the game. Intellectual property, don't lose a lot of sleep over. Of course, we we gotta practice the same best practices that we do everywhere else. The bigger picture is, of course, what you read is now that more and more China has become an innovation hub. They have enormous interest to protect intellectual property and the systems become much, much more robust and akin to what we have around passenger rights and portability and so on.
And you can see Shangwei, you can jump in just one second.
You can also see that
in China that commitment our customers, you can go read the last earnings release of L'Oreal or the last earnings release of Estee Lauder and they have a very firm commitment to not just the selling of the product there, but also to be there.
Thank you. I feel really protective in the new period of the market. Wonderful. So you hear a lot of sound, fists, and we are now in that most exciting space of real technology that a lot of people are concerned about. So what we do really and how we innovate, a lot has to do with the way we work together, the way we bring the product actually to the market, the way we execute.
So this is not something that you can easily replicate. And that's one. And number two, if you look at our customers, they are really putting their largest innovation centers in China, whether it is P
and G, whether it's Unilever, whether
it's Estee Lauria. Even if Estee Lauder doesn't make anything in China, they have 100 people in R and D to collect customer consumer insights to try to create products that bring to New York that will be maybe made in New York but bring back to China. So this is what is actually driving behind all the growth of our customers. And it's very important, and we cannot forget that. So I really echo what Stefan said, is we're not concerned about that.
It's really about how we innovate and how we bring the product to market in the most agile way.
Yes. The other thing, of course, I don't want to invalidate because many of those experiences are true. If you're Siemens, you use so high speed trains and now you see your technology driving around made in China. That's a real experience. But we're not making high speed trains, as Sheng Wu said.
The government does not put their thumb on the scales on who makes the lipstick or who makes the makeup. It's our ability to execute.
Gavin Hoyn from Palpate Capital. First, I wanted to make sure I'm, I guess, hearing things or interpreting what I'm hearing correctly. It seems like broadly speaking, the company as an organization is trying to move from what may have been a little bit more, and I'm sure this is a term you don't want to hear, but like silos into more of an overall integrated whole. And I just wanted to confirm if that's accurate from what I'm hearing. And maybe related to that, Asia seems to have its own leadership.
How does that interact with the three segment leaders? It doesn't sound like there are independent leaders, at least for the other regions. So trying to understand kind of that part of how the organization is structured.
Thank you. Wonderful question. Actually, I'm a big, big believer in small entrepreneurial units. So it is not one whole in fact, we're going back to earlier days, we celebrate our founders' generation and our founders' mentality that was consisting of small entrepreneurial units. The way we scope these small entrepreneurial units is on the regional product market combination, whether the logical grouping of assets, products, markets.
And so for example, our $800,000,000 Beauty plus Home business in Europe is today four P and L units, the fragrance units, the skin care and color cosmetics units, the personal care and the home care unit. With their own P and L leaders who have their bottom line, who are single accountable for that, who have their sales force. And we share things that they shouldn't do themselves, like invent new accounting practices or new people practices, they should use the corporate system. So leverage across the world, what we should do together across the world, but actually reinforce the entrepreneurial drive and focus. Shangwei just went through a model where in China, we also have three P and L units that drive the business and are incented to that.
So I'm not a big corporate guy. I love our small office in Crystal Lake. It will not grow in a big corporate machine.
And I'd just like to add, I mean, we have been a few of us living long term in China. Spent nearly seven years in China, but kids born and raised in China and so on. So having discussion with Shopware about the market, the dynamic, the agility, the different mindset and so on, that's natural because that's been through that one.
That's a good point. You can have a lot of, sorry, charts and Gracie and who's on first and who's on second, or you can just have a team that works together to grow the business. So I have not a lot of patience when they start bickering about who's now accountable, is it me first or she first or me second. The P and L leader in China for the sixth, that's the person who's on first.
Yes. That's right. Sorry,
I just want to add. It's a great question, actually. We I think we benefit from this great optical culture that we are used to working together. I joined this company as a new kid, but already immediately integrated into the company, into the company culture and from day one. And then secondly, we actually have this very strong motto, act local, think region, leverage global.
So we have a lot of global technology and assets in our technology, our capabilities, in our people. And so that is really, really valuable. We would be foolish in the region to start everything from scratch. But how we execute and how we take the accountability of delivering those targets is very crucial. And now having me there, of course, it raised a little bit of the profile of Asia.
And actually, not a little bit, a lot, let me say, because if you look at our charts, our biggest businesses are in Europe and in The U. S, and this is how it has been. And when you think about how important this one customer, let's say, customer, let's say, GSK or L'Oreal, could be bigger than the whole country. And what do they worry about? They spend 95% of the time, of course, on this biggest account.
And maybe Friday evening, say, oh, Asia. Even if they no bad intention, they all want to be Asia to be successful, but you only have twenty four hours a day. It's not a priority. So having me there, of course, I'm going to be the guardian of Asia and make sure that the Asian topic comes to stage, comes to ex com agenda, whether it's talent the profile of our talent, it has to do with the talent, really very, very crucial, priorities, resources allocation, how we innovate. And so this is actually a beautiful challenge so far.
And I really love also how it's working out with our segment leaders to take Asia to the next step.
And maybe just to add one last thing. Seems like you've opened a big that we're passionate about. And in terms of the comment Stefan made earlier, we're not sitting here trying to go, okay, what's the order chart look like? How are we dividing this up? We focus on the business.
And then how are we going to grow the business? And we focus on the customer and what are the what's the customer needs and how do we solve that? That's the priority. Everything else we will figure out.
Okay. So I cannot not say. I
was going to say that,
but I'll let you go ahead.
Okay. And it's and it's two things. One is it's absolutely true. It's that, you know, the org chart cannot drive how you work, basically. So I really see the value that I've mentioned in my presentation as well that everybody here has lived and worked in another country, many times in each other's countries.
And that really I really see the value coming through that in terms of how this team cooperates. That's one. The other important thing is really the at local, leverage global, that's very, very important from a people perspective because that's a huge value proposition for our team members. You join Acthar in one part of the organization and you don't just hire people for a job, we hire them for a career. And you think about the plethora of opportunities there are as you look across the segments and the regions.
So the global aspect comes into play in a big way like that.
I was just going to say you can see
the passion that she brings for the region. And having her on the executive committee, I can confirm there has been a certain amount of passion as we're discussing resources and capital allocation. And she's definitely the one voicing and leveraging the resources and making sure we stay true to what our targets are and what our strategy is. If we want to get bigger in Asia, we
need this. We have to
have that. And I think that's really important for the organization.
Great question.
Paul Eckley at State Farm. Stephane, could you give us some idea quantitatively or qualitatively of how much business you guys do in Japan and Korea?
Yes. That's hard. Directly, we do nothing in Japan, nothing ish. We import something via China where we have a joint venture. But be very much, this is the first global biz my first global business is first time I don't have anything
in Japan.
It needs to be addressed. We are looking at ways of addressing that. And if for no other reason than this Asia for Asia trend will make that an imperative because certain countries have a certain luxury connotation. Right now, Made in France is a luxury connotation. Made in Japan is right behind that.
And the luxury producers were the Delodo versus L'Oreal or the LVMH as well. I cannot react fast enough from New York or from Paris with my supply chain. I need to be in region, but I still want this luxury cachet. So the next best thing, I make it in Japan, made in Japan and sell it into China. So that's for no other reason, for that reason, we need to be in Japan.
But of course, Japan is fourth or fifth largest economy in the world. It's not something huge. And by the way, a very rich one, with a lot of, role model for Asia in terms of products for the elderly. Yes, it's hard to get into. But once you're in, you make good money.
In that sense, very similar to pharma. Korea is a different story, but very important for the beauty business, again, as a role model, particularly in skincare. So we have some homework to do in Asia.
We are doing that, actually. We are doing that. It's a great question. It's a great question. We do sell to Japan and Korea via China mostly but also some from Europe.
For example, P and G's SK II is made in Japan, and we do sell to SK II. And we see actually increasing needs of our global customers shifting their manufacturing to Japan and also innovation center in Japan and Korea, we definitely want to leverage that. But also even for pharma, we see a lot of interest in technology that we could try to build on to we have interest in technology for them and therefore we just have to figure out the way to pass that business model. The example Mark talked about the licensing, cross licensing with NCC is a very significant step for us. And it's something we definitely want to also build on for pharma, for example.
And for pharma in certain application field, we are market leader in Japan because products are filled outside Japan. Energy run IT, no Japanese players is filling in Japan. Products are coming from the outside. As Matthew PD said, now there are many applications where we've got strong interest, where we will have to develop partnership licensing, and we're looking at the best way to sell this market.
We definitely want you to ask this question again next time. That's what I would like to say.
All right. It looks like we are going once, going twice. I'll hand it back to Matt. Thank you very much.
Thank you.
Great. Really like to thank everyone, especially those of you who traveled to join us today. And thanks to everyone joining on the webcast. That concludes our event. If you have any questions, we'll be available shortly here for a little bit for coffee afterwards.
And then those of you meeting with me, we're going to meet on the First Floor near Starbucks, and I would encourage everyone to make our way down there.
So thank you
again. Appreciate it, and have a great day.