Emmi AG (EMMN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the annual report 2020 analyst conference call and live webcast. I am Moira, the chorus call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Konrad Graber, Chairman of the Board. You will now be joined into the conference room.

Good afternoon, ladies and gentlemen. I'd like to welcome you to the conference of the results of Emmi Annual Results 2020. Thank you for your interest. And I'd like to start with 3 main points. I think all over, we can say that our strategy is on track. That's a very good news, I think, also from analyst point of view. We have, first of all, a strong corporate culture, outstanding commitment and agility of our employees so that we were all the time ready to deliver whatever was ordered. I think in the COVID-19 time that's not so obvious, but we achieved this goal, which is very important for us and also to public, I think. Secondly, we have a proven strategy. We could say today, it's also COVID-19 proven. We could -- we were able to turn this strategy in good results. We'll come back on this issue. And furthermore, it was possible during this period also to fulfill long-term succession solutions which we have planned long before on Board level and also on group management level. And third, we present nice results, good results. The group sales have increased to CHF 3.7 billion. This is a record in the history of Emmi. We are very proud that this was also possible due to our employees which have done -- who have done an excellent job. And according to our dividend strategy, we have increased or we intend to increase the dividend from CHF 12 to CHF 13, at least that's the proposition to the general meeting which will take place in the mid of April. I hand over now to Urs Riedener. And before I hand over, I just would like to show you these faces. We have Thomas Gruter and Dominik Burgy who will join the Board of Directors after the general meeting. Christian Arnold and Niklaus Meier will leave. And on group management level, we have Matthias Kunz, who hand over his duties to Jonas Leu with beginning of 2022. In the meanwhile, Jonas Leu is Deputy Executive Vice President of Americas this year for the next 10 months. And with 20 -- beginning of '22, he will take over the full duty of Matthias Kunz. That's all from my side. I hand over now to Urs Riedener.

I would love to start with presentation, just giving an overview of what you can expect from us during this afternoon. First of all, I would love to talk a bit about strategy implementation and what we have done during the year 2020. Then Ricarda goes a bit more into details when it comes to the financial results. I will try to do an outlook in a very difficult environment. And then we are open for Q&A. First of all, as Konrad just mentioned before, we are quite proud how we navigated through this challenging year 2020 because you all know what happened and we had a huge volatility in the business. Nevertheless, our setup was very successful. And in the end, we are on expectation and on a very good level when it comes to the final results. We believe that overall, the coronavirus had a slightly negative impact on the overall performance. So yes, there might be some positives, but there are also some negatives. In the sum, we believe that we are slightly negatively affected from this pandemic. So I continue maybe with a summary of the year. So what you see is that the diversified business model we are having really stands the test, which means that we are in the branded business, we're in the private label business, we are in the premium business, we are a bit more in the base business, we are in more mature markets, we are more in emerging markets and we are also in some niches. So this whole mix we are having, had a lot to stabilize the whole company and also to accelerate some parts of the businesses while others were standing back a bit. So this then leads to a strong overall performance of a sales growth of 6.1% and 1.9% in organic terms. The EBIT is comparable to last year. The adjusted, of course, then increases from 0 -- 7.0% to 7.3% compared to prior year. And as you will see later on, key brands and niches and emerging markets, we're doing especially well. So we believe the strategy is on track. And it's always great if you have incidents like this COVID-19 pandemic that you can really focus on the strategy, and that's what we have done when it comes, for example, to investment, when it also comes to acquisitions. So we have even done acquisitions during this crisis. And we have also worked on a net zero 2050 ambition when it comes to greenhouse gases. So also on the sustainability front, we have been working a lot and we have set ourselves ambitious targets, which means that overall, we think we are cautious for '21 because we don't know what really expects us out there in this environment. But we also are positive because we know we can do it, and we have a very good balanced mix, and we just have to somehow push the right levers and then success will continue. So here you see the figures. I'm sure you've already read them. Sales growth of 6.1%. I mentioned organic growth. I mentioned, yes, we have done some acquisitions. I will come back to that a bit later. And of course, we still have the currency effect, and this is something we are having all the years. And last year, the amount was more than CHF 160 million, we just lost by translating local currency into Swiss francs. The EBIT, I mentioned, this adjusted 7.3%, unadjusted 6.9%, and of course, it's a new record. And we kept our financial strength during this year. Ricarda will come to that. And the dividend was already mentioned here. Just to mention, in the year 2010, the dividend was at CHF 3.40. Now it's CHF 13, so -- which is also a proof of the success of the past years. Net profit tick lower, mainly due to minorities. Also financing costs, you guys -- you are asking us for negative interest rates. So that's where you see them. And of course, also the tax rate was a bit higher. When it comes to the volatility of the year, as we already stated during the half year presentation, we started quite well into the year with 2 months being more or less on target also on a kind of strategic growth we want to achieve. Then, of course, a very strong March with a growth of 10%, then really the slowdown of mainly the food service businesses in Americas, also within Europe, but also in Switzerland. So the stockpiling effect, negative effect in food service and negative effect because of the stockpiling effect in March. And then astonishingly good June, and then you see the gap narrowing a bit, but still, the volatility is going on. And we believe that this volatility is also going into 2021, at least into the first half year, and then let's see how we can handle the second half. If we go a bit more into details, you see here the numbers for -- exact same numbers for Switzerland, Americas and Europe. And you can see here that Switzerland had quite a positive effect in the first half year, which led then to growth of 3.8%. And then in the second half, there was quite an up and down, and mainly down in November. And what we can observe here is, yes, of course, we have a positive effect in the retail sector, but we have a more negative effect now over time in the food service and in the industry sector, which brought that figure down in the second half year, and we expect that to continue until we see a total opening and people coming in again into Switzerland. I'm talking about tourists, and hopefully not too many going out to buy abroad, again, their daily goods. Then Americas started well. The pandemic hit a bit later. You see that also. Also not that stockpiling effect. And then ups and downs, but clear recovery in the past months, mainly September, October, November, December all positive. And Europe, even a bit more so, also slightly lower figures in April and May, and from then on quite a good and stable business. So we are quite happy with that. Of course, the red figures always indicate here what the exposure is to food service. I'm referring to food service because sometimes people ask me what does it mean. So it means restaurants and they were from 0 to 100. So in between that, depending on the region. But you also have schools, nursing homes, whatever. So whatever is consumed outside of home is included in there. Then here what we have also seen in Switzerland is mainly that the imports have risen. So we had quite some imports during the past year. Only the cheese imports were up by 10%. And of course, this has to do with the availability of milk. If we export more, there is no more milk to sell in Switzerland, but I think it has also to do, of course, that things like frozen pizzas were imported. Then grated cheese did extremely well. And also fresh cheese like mozzarella was imported quite a lot. And then the third factor probably you see in there is discount. So the people that are used to buy abroad, so the tourists who go over, for example, to Germany to buy the daily goods, they buy cheap stuff normally and they were looking for cheap stuff mainly at discounters also during the year 2020. If I go on, I think what we really did well, and we were already elaborating on this during the half year presentation is, so we handled the COVID-19 crisis quite well. So the advantage, if there is an advantage was, of course, that we have seen it coming in Italy mainly because Italy was hit hard initially. We could learn a lot, and then have invested a lot to protect the health of the employees because we always had in mind it's very important that people feel safe to come to work. Because if they don't feel safe at work, they're not coming anymore because they might be afraid. And the proof of the pudding in the end is the absenteeism in Switzerland. So the overall absenteeism in Switzerland in 2020 was lower than in 2019, which is great because we are also first to send people into quarantine. So we had to send them home. But overall, it worked quite well. Of course, then we were also working on business continuity plans and also contingency plans. So we developed kind of more than 20 different plans. For example, what are we doing if the milk supply's collapsing, if we have a problem with packaging, if we don't have enough people on site, et cetera, et cetera. And we prepared quite well, and we let this out of the group. Then we had some divisional teams and then we had some local teams. And then of course, what also helped is the strong collaboration with suppliers, mainly packaging material, which means that, for example, for Switzerland, we had to buy packaging material in Brazil just to make sure that we are able to supply with those huge demand stacks we have seen. And then very -- we were also working not that much on liquidity because that was never an issue, and not that much on the balance sheet because this was not an issue, but more also on synergies. So we were tapping more into synergies, how can we leverage the strength of our group when it comes to joint buying, et cetera, so we made there some efforts. And then happy enough, we were also able to tap into opportunities very early on. So once we have done the crisis, 2 or 3 weeks after we said, so we have to set up, and by mid of March, we said now we need just calls with the local entities to look after what are the opportunities in the business and how can we share know-how, what works when it comes to online, what doesn't work, what kind of channel shifts do we see, what -- how are you handling overstocks, for example, how do you handle short supply. So we really worked in a very good way and the teams have done a great job there. So some highlights out of the year, just January to December. In January, it was important that we were recognized as an inclusive employer here in the canton of Lucerne. So everybody is talking about it. We are doing it since years and collaborating with those people there. Then marketing side, expansion of the Kaltbach range with the brand AOP Emmentaler. So that worked very well, and we could increase sales. I will come back to that later. Tap into the vegan trends with our own brand. We are doing vegan since 20 years. So we know what we're talking about when it comes to recipe development, packaging, et cetera. But we launched a new brand, Beleaf, mainly in Switzerland, but also in U.K. and also in Germany. Then the third launch. So we are putting this class there because this was a launch out of Italy in April into the U.S. market when everybody else was talking about COVID-19 and we were able to list that at several retailers in several countries with a great success. Then, of course, protein is still on trend. Sustainability, it's important that we also talk about it internally. That's what we do. That we raised the awareness of our employees regarding this topic. I will come back to this later. Then we were also a bit lucky, like for -- with the goat milk powder at Meyenberg in California because we invested into new packaging, so in this bag, before we have been in tins. And we could exactly launch that when the demand was high and we had a great response from the market. Then we changed a bit the recipe, went to all natural with Caffe¨ Latte, which was very well received by consumers. That's something we want to patent in the future, that we also have a competitive advantage towards our private label friends here. Then we just went live with the Kaltbach online boutique, not a big business. We believe that e-commerce is better done within partnerships with our retailers. But left and right, we try out what we can do there and whether we can build out or build up a business here. Then the acquisition of Emmi Dessert in October. I will come back to that later. We continued investing with this investment into the cheese factory, new cheese factory in Emmen, CHF 50 million investments, which also goes behind then Lucerne Cream Cheese because this cream cheese is growing every year, mid-single digits, sometimes a bit more. And we have a capacity constraint, and therefore we invested also in new technology. Then nitrogen lorry, the first one worldwide -- among the first ones worldwide. We also invested in that because we think we have to prove that new technology is working in the daily routine of logistics. You know our strategy. I'm not going here into detail, but strategic pillars are strong domestic markets, international growth and cost management. And then, of course, we are pushing still all the niches we are in. Also the branded products, of course, but also these niches. If I go a bit more into detail with the strategic pillars, we have seen good growth of Caffe Latte in Switzerland. In mainly March, April, we thought, boom, maybe it's the first time we're going to see a sales decrease because we all know that the traffic somehow changed. People are staying at home. They're not going, for example, to taking the train, visiting the kiosk every day. So the daily routine changed quite a lot. And the question is, can you still hold the consumers when the daily routine changes. And what we have seen there is, yes, we can. We have a strong brand. People want to have this product, which means they go into retail, they buy multipacks and they consume it at home. On the other side, also, Kaltbach was great. In Switzerland, we had a growth of almost 14%. So this premium cheeses are working well. Overall, we were also growing almost 10%. So this positioning really works well. And then we also went into all natural. The growth abroad is concentrated on many entities. Of course, here we have the ones we acquired with Emmi Dessert, but also Brazil was growing quite well. Quillayes Surlat, where we made the merger. You have to imagine, we do a merger, bring 2 organizations together during a crisis, people are not allowed to meet physically, but we have done it. We are on track. Also the savings are on track. So we are very happy how this was managed. And then, of course, we also profited from Onken and some other brands here, where we have seen strong growth. Cost management was very important because we have faced, as you know -- we're supposing that the year is becoming very difficult after mainly March and April, so we went into costs and we worked very well with this ProcureNet initiative, which means that we are looking for synergies when it comes to buying within the group. Emmi operational excellence, that's something we're doing since years. Still making progress there, still cutting out and taking away some money there. Investing into an ERP system for the smaller companies internationally, that's something you don't see in the P&L, but it's an effort we are doing there. And then also of course, training our marketing people because the marketing landscape is changing a lot. So we have to educate them on a common marketing, Emmi marketing model and also, of course, teach them do digital marketing on their own and not only giving the task to outside agencies. And then, of course, some other things we have done. We have been putting together 2 Canada entities, for example, to look for synergies. When it comes to niches, here you see the desserts. So the desserts, we're doing very, very well because we never had to close one of the production sites. And of course, we had sometimes a bit of supply issues, but really minor ones, which means that in the end, we were able to grow mid-single-digit in this area, which is just great. The milk is -- goat milk is a very differentiating case. So in the goat milk's product, we have on one hand side, the fluid milk doing very well, the powder doing very well, also the yogurt maintaining. And we have seen some issues mainly in the premium cheese and the cheese logs because they go into food service or high-end gastronomy, so high-end restaurants. And if [Technical Difficulty] cheese platter in the restaurants, you're not going to sell. So there we have seen some issues. But overall, we could maintain more or less [Technical Difficulty] having in there. Organic products, we're growing nicely. Of course, on one hand side with Glaserne Molkerei in Germany but also [Technical Difficulty] Green Valley Organics in the U.S. and then we have in almost every company we have an organic range. And what I really love to see is the dairy alternative you see here, MyLife-MyLove (sic) [ MyLove-MyLife ]. So from Leeb Hale, that was growing tremendously. So this was a great support to the whole division, a very successful company and concept. Just a quick overview on the figures. So Konrad said it, first time more than CHF 2 billion sales abroad, outside of Switzerland. And if you look at the top countries, not so much change, still U.S. below CHF 500 million. And of course, being a bit under pressure overall, but mainly due to the currency. So it was the translation then from dollars into Switzerland where we suffered a bit, not that much in sales. Germany doing very, very well. Spain, [Technical Difficulty] because we have there food service exposure and tourism exposure, and Chile really doing well, which means U.S. almost CHF 500 million and the other ones are around CHF 200 million, so quite a balanced portfolio. If I go a bit into the divisions here, you have seen the figures. I think the most important message here is the bigger the food service percentage, the lower the organic growth rate, of course. And this is something you see, for example, in the Americas. In the Americas, food service came down from 28 -- 26% to 19%, which means minus 7% of the total sales we are having in the U.S. and plus 1.6% means that we were able to grow in all other channels almost by 9%. So that's our other channels performance. And that's what you have to compare, if there is a company without food service sales. And also in Switzerland, of course, we had a share of 16%, Switzerland being affected the most. Also when it comes to the decline of food service from 16% to around 10%, which means here, you had an organic growth rate in other channels more than 7%. And you have to be aware that there in Switzerland, we also have business-to-business, which means that we are also supplying, for example, the chocolate industry, and you know that they were also having some troubles in this environment. Europe, lowest food service sales, and that leads then also to the highest organic growth rate because the food service share went from 6% to 8%, so 2% and then you're at 6-point something, almost 7% organic growth for the rest of the channels. That's important for you, I think, to understand that you really can discern the different businesses we are having. So sales by product group, it was interesting to see that we have seen a comeback of cheese compared to the half year. In the half year, we had 29% of cheese, now we have 30.8%. So cheese was doing better in the second half. Also dairy products overall, we were doing a bit better. So there, we profited and the others were at the same level or a bit weaker in the second half year. If it comes then to the growth, the growth was very broad-based. Here you see how we went from almost CHF 3.5 billion to CHF 3.7 billion, with a total change of 6.1%. Acquisition effect was, of course, good or even as we expected. Then of course, the negative currency effect did cost us more than CHF 160 million. And then you see the organic growth rate. To the markets, what really helped us is the growth markets like Chile, Brazil, Tunisia. They were all around more or less double digit. And we have seen that we were doing a great job there with basic products. Of course, we have also seen in Tunisia, for example, that schools were closed, which meant lower sales on yogurt, but we could compensate there in the milk area. Then you see the North American business, overall, more or less flat. I think what was extremely positive was the Emmi Roth sales in the U.S. because Emmi Roth has more than 30% of its sales in food service, but it was able to maintain the previous year's sales, which means more or less stable, even a slight growth, which means that, of course, they were able to grow within already existing channel. But for at least 20% of their sales, they had to look for new channels and selling opportunities and that's what they found. So they were very agile to look after new business during this year. The European market were all quite well, mainly to branded concept, also mainly -- also due to cheese exports and also for higher -- because of high demand for organic products like out of Glaserne Molkerei. Caffe Latte was also growing similar number as in Switzerland and this, of course, in U.K., Austria, Germany and Spain. And of course, we have seen ups and downs. And of course, we have also seen quite some additional costs of this COVID effect, but we were able to do cost cutting in some other areas. I'm now going quite quick through the divisions because I already explained a lot. What you see is, as I said, Switzerland coming back in the second half of 2020, and here you see mainly an effect in dairy products. We were growing by half year at the rate of 3.1%. Now, we are more or less flat or slightly negative, which means that we're no longer able to compensate the losses we have in food service. Cheese still doing well, also coming down a bit. Fresh products, still doing well, also coming down a bit. Then in the division, Americas, we see the cheese sales being flat. This is mainly due to these high premium offerings that suffered the most, but recovering in the second half of the year. Dairy products doing tremendously well, mainly in Tunisia, also a bit in Brazil and Chile here as main drivers. And then the fresh products also still a bit negative in organic sales, but recovering over time. And we were also very happy with Caffe Latte in Spain because we are selling a lot through kiosk and small outlets. And we have seen a growth rate also there of around 3.5%. So this was really great. And then, of course, we also had some positive effect here in the fresh product with our market entrance we did with yogurt in Brazil. As I said, on the negative side, you have seen Tunisia with school programs the same in Chile. The children not going to school, which meant that they didn't take with them some yogurt for the break. So of course, there were some negative effects also in there. But overall, we managed to balance them quite well. And in Europe, a lot of good things, mainly recovering in the fresh product with Caffe Latte, but also Onken yogurt doing well. And as I mentioned before, the Italian specialty is doing well. Cheese sales, great. So we have seen a great acceleration during the second half, mainly with Kaltbach, fondue and Swiss cheese this -- in the Netherlands. So we had an enormous amount of sales of fondue in the Netherlands during the whole crisis and also some premium cheese in Germany and U.K. Dairy also good, of course, organic products as Glaserne Molkerei helped there. So now just taking a bit of a distance here, is -- so where are we coming from and where are we heading to. Is -- you know that Emmi was founded as a separate entity in 1993. It was regional for quite some time, #4 in Switzerland, was then able to acquire parts of Swiss Dairy Foods beginning 2000. With that, became national leader. Then we were able, on the export, to build up some international business. And then we have seen that we have really to implement local businesses and fixing all those local entities and make them profitable. That's what we have done in Phase 1. Then we went into more niches, more specialties. That's how we went into Cypress Grove specialty cheeses, desserts, for example, also goat in there. And then we said, okay, that's great because we need the more differentiated product portfolio but we also need some growing countries. And then we went more into countries like Tunisia, like a bit stronger in Chile. So we expanded our presence in Chile, into Brazil we went and into Mexico to make sure that we can profit also from these growing countries. And we are still working on differentiation, which means we are still expanding in niches, as, for example, with the dessert business or also with the Leeb that has the goat and sheep part, but also nondairy -- a very important nondairy part we are working with and opening up that segment. So that's the story and that's the direction we want to continue. Here, you know all the M&As we have done in the past. Still happy with all of them. Of course, Seymour was a bit under pressure because the crumbles, the blue cheese, they go very much into food service because, for example, they go in salads. They're served with salad. So that's a factory, yet sometimes just to close down for 2 weeks and then to open it up. And Leeb Hale, very good, excellent, one of the fastest-growing nondairy brands in Europe. Then Laticinios Porto Alegre, doing very well. And then, of course, Pasticceria Quadrifoglio. We profited a lot from that in 2019. They go mainly into food service. And of course, the food service business was sometimes 0, and then it recovered and then it was 0 again. But the good thing is we had then some capacity there to produce for our desserts in Italy because we have seen some capacity constraints elsewhere, so we could make use of the people and also of the plant. And the Quillayes Surlat, I already mentioned, great success on plan, delivering also on synergies. And Indulge Desserts is the latest baby we are having in the dessert family. So we have been building up this Italian business mainly with 4 acquisitions. The first 3 in retail, always differentiating our offerings a bit more and then with the fourth one with Pasticceria Quadrifoglio we went into food service because we believe it's a huge market and we have proof of that. And now with Emmi Desserts U.S., we go into also retail also with food service here and have a strong presence in the New York area. And of course, we're looking for know-how exchange, synergies and distribution, recipe development, et cetera. So we make really this segment to a segment of a size of already almost CHF 300 million, and we continue to expand that. So we have not only been working on the portfolio and the companies and doing M&As, we have also been working on the sustainability strategy. And of course, a lot of companies are talking about it nowadays, but we already started years ago, and we reached some, not all of the targets we set ourselves for 2020. When it comes to reducing greenhouse gases, so we cut our emissions by 24% versus 2014, and we have some very good examples of how we managed it. Then we established a standard for sustainable milk in Switzerland. Initially, it was quite a discussion. Now it's a standard and we want to involve that standard even further. And we are collaborating with 6,000 dairy farmers in Switzerland. And in Tunisia, for example, last year, we were educating 1,800 farmers on how to do better cattle herding and how to improve yield when it comes to dairy. Then waste reduction, not yet on target. This has also to do with Tunisia, where we still have some landfill, and we're looking for solutions and we are quite optimistic that we can reduce that further, but we are always also working on packaging, reducing use of plastics, for example, elimination of some parts or at least using the same type of plastics. You see a very small example, just the sleeve of Caffè Latte, we make sure it's also PET, which means then if the whole thing is PET, it's recyclable. If you have a foreign body on it with a sleeve, then, of course, you cannot recycle it. And then employee development is also important to us. So as you know, 2020 has gone. So we were setting ourselves new ambitious goals for 2027. And this, in the area of sustainable milk, of course, still working and evolving the standard in Switzerland. We want to achieve 100%. But also expanding the reach of this program to our international subsidiaries and to have a standard -- Emmi standard above the local standards. Then developing employees will remain important. And then I think a big focus on reducing emissions because we go from the 24%, we go now into direction of 60% and 60% is quite a lot. And this is scope 1 and 2, and 1 means that's the production side and 2 means the energy we are using. But additionally -- and that's what not many companies are doing in our segment. We're also going to scope 3 that -- which means that we also start working with our suppliers and want to reduce also the greenhouse gases in that area. And of course, it's mainly milk because of the greenhouse gases in scope 1, 2 and 3, 90% is in scope 3 and only 10% is in 1 and 2, and there we're making great progress. Then we are going to reduce waste further. We want to go to recyclable packaging as we try to do here, but we also need to close loops that we really make sure that you can give it back the used packaging. And then a new topic for us is reduction of water because maybe in Switzerland, water is not a huge topic. But if you are, for example, working in California or in Tunisia, it's a huge topic there, and we want to contribute from in our value chain. That's what you see here. So we go from farm to fork. So we expand and include scope 3 and go into new areas and also expand the program a bit worldwide and also go into vision net zero and we also -- that's easy or not so easy to claim on one hand side. On the other hand side, we also want to measure ourselves with the science-based targets initiative so that we really can report on progress and this in a scientific way. And then, of course, this means also to reduce our power consumption and increase the share of renewable electricity to 100%. So that's what we already communicated last week, and we are happy to answer some questions afterwards. So now I'm going fast because this is the marketing stuff and -- about the marketing stuff. Here, you have innovations like dairy alternatives. We do it under established brands like Caffe Latte, Beleaf, we go into whey, we go into premiumizing Kaltbach and we feel a global innovation pipeline. Then we're looking very much after trends, which means that we identify relevant trends on the group level and then we implement concepts, but also do this not only on a group level but also locally. So we're looking for concepts paying into those global trends. Yes, Caffe Latte is going on. So we work a lot on the marketing mix, also have been working on the recipe. But also work on the portfolio with new extensions. And we make use of this zero sugar boost we are seeing now in the marketplace, which means that we bring another best seller with Caffe Latte Macchiato without added sugar and also without added sweeteners and lactose free. And we go here also, of course, more into expand our reach into an nondairy product under this brand here. Then we expand the portfolio of plant-based and -- by using oats sourced from Switzerland. So Swiss oats [indiscernible] to make sure that we have a clear differentiation with all those imports coming into Switzerland. Then the yogurts, we also relaunched a whole marketing mix, so mainly to design onto the communication, but also we're adding new varieties with dates, only sweetened with fruits and dates. So no sugar here. Promising start, just a few weeks out there. We go into 100% natural. We have done that for the whole fondue range and continue to do so for some other topics. Organic. So we had here a growth rate of more than 20% for our Pure yogurt. So here, you also see how we multiply concepts. We have seen before the Pure idea in Switzerland. This is the Pure idea when it comes to Glaserne Molkerei, great success, fast-growing brands there to make sure that we differentiate ourselves. And last but not least, we also tried to push category growth, which means that we are working with a lot of customers on the category development because we are an important supplier when it comes to premium desserts. And if we can grow with a certain customer just by bringing in innovation and structuring the category in a better way by 10%, it's a great success for both partners here. And here, we have some very good examples how we manage this. With this, I hand over to Ricarda. She will go a bit more into the details of the figures. Thank you.

So good afternoon also from my side. I would like to start on Page 46. And before diving into the numbers, let's get the basics right first. In December 2020, we sold Lacteos Caprinos as part of our ambition to continuously improve the quality of our portfolio and improve the underlying growth and margin profile. The sale came at a loss of CHF 14.6 million. If we want to understand our progress and performance, I think it's important to adjust numbers. We usually don't adjust numbers, but I believe this year, it's important to adjust numbers for the aforementioned CHF 14.6 million. They were booked under other operating expense and therefore, impact both EBITDA and EBIT. The impact net profit with CHF 14.2 million and impact on cash was really neglectable. So looking at the P&L, you saw and you heard we had sales up 6.1%, driven by very good organic growth of 1.9% there with -- proving once again Emmi's reliability in a very difficult trading environment. As you heard from Urs, backed by a very solid strategy, backed by a well-diversified portfolio, geographies, categories or channels in an agile and resilient organization and the example of Emmi Roth is just one of many examples we have seen this year. With the 1.9%, we came in slightly above expectations and our guidance of 0.5% to 1.5%, driven mainly by better-than-expected momentum in the international business. And what we do like about the 1.9% is growth really came from where we want growth to come from. Growth came from our strategic niches. It came from our brands. It came from our geographical growth markets. And it was not least very broad-based, as you heard before. We also had very strong acquisitory growth at 8.7%, again, coming in above our expectations and guidance of 6% to 7%, and this was mainly driven by very good progress and momentum in Brazil and Chile. Following our acquisitions in 2019 along these geographical growth pockets, as we call them, our emerging market share is now 15% of sales. We had negative FX of minus 4.5%, driven by the appreciation of the Swiss franc and coming mainly from the emerging market currencies of Brazil, Chile, a bit from the euro and also the dollar. I think one of the highlights really is the gross margin. It came in at 36.4% or plus 17 basis points. It was driven by an improved profitability of the international business. And the 17 basis points, they were achieved despite massive pressure from the portfolio shift towards more generic products, that's more basic products, that's less convenience, that's less premiums. It was achieved despite massive headwinds from FX and also continued price pressure from our retail partners. So I think it's a very notable result, and it shows and demonstrate that we continue to work on our portfolio and to move into more value-adding products and that we have our operations well under control. If we look at the expense ratio, you see costs came in at 26% of sales, a very good improvement, backed by rigorous cost management but also very careful savings. And we'll come -- we'll go into more detail on the next slide. As a result, EBITDA -- adjusted EBITDA rose by 10.8%, came in at 2-point -- 10.5% or plus 45 basis points. And the adjusted EBIT came in at CHF 271.2 million. That's a plus of 11.5% at a margin of 7.3% at a strong increase of 36 basis points. And again, I think this very good margin progression reflects our strategic progress. It overall is driven by a more profitable international business along the very focused niches and goals we set ourselves. If we move on to Page 47, you see our cost positions. You see rigorous cost management, Urs alluded on the pillars on Page 18, you're very familiar with them. And I think it's important to make a comment about marketing and sale expenses. They came in at a considerably lower level and were driven, one, by a shift in the marketing mix towards more digital, towards more in-store. Also, of course, more focused, given all the uncertainties. And then as you can imagine, it's also been quite a difficult environment to introduce new products into. And therefore, we expect a slight shift also now into this year. And if you were to ask me, so what's a sustainable margin improvement then adjusted for acceleration of cost management or reduced spending, I would say, of the 36 basis points you saw our EBIT margin improve, 15% are sustainable. Moving on to the next slide, 48, you see the EBIT to net profit bridge. Net profit before minorities came in at CHF 215.8 million, plus 11.8%, a stable margin of 5.8%. And net profit after minorities, they came in at CHF 202.6 million, 7.6% increase, a slightly lower margin. We've guided early last year for structurally higher financing costs, higher taxes as well as higher minorities. We try to be helpful on the slide with the comments so you understand the increase in the position. And if I can make 2 comments, they'd be on the tax rate. The tax came in at 16%. For 2021, we expect tax rate to be around 16.5%. And we see ourselves moving up in the medium-term towards 18% or 19% as we grow more strongly internationally where we face higher taxes. But as you are well aware, there's a lot up in the air when it comes to corporate tax rates. And I would just say, we take it year by year. And my second comment is around minorities. I think for me, seeing the plus CHF 4.2 million, that's very good news. I like that dilution. Emmi has a very strong philosophy and focus of building out its portfolio with strong local partners. And I think the proof lies in the pudding and the CHF 4.2 million demonstrate it works out really well. The result is very much driven by Brazil, by Chile as well as the Austrian plant-based business. And we're very happy how these businesses are evolving. This is one of my favorite slides. The Emmi business model exhibits a very high and also what I like is a very stable cash conversion. Over the last 5 years, cash conversion was around 80%. 2020 cash conversion came in at a very high 91%. And I think it shows, again, our very focused performance but also our robust business model. Thanks to a strong balance sheet and thanks to a high cash conversion, we continued to invest throughout the crisis, be it M&A with the addition of Emmi Dessert U.S.A. or be it into our operations. CapEx came in at CHF 101.4 million and was very much driven by strategic CapEx. Just to mention some of them, one of them is the new cheese plant here in Switzerland. It provides room to produce cheese in a more resourceful way or without much waste. And also, we've seen good growth along specialty cheese last year, and it will provide us additional capacity for that future growth. Second important CapEx was in Brazil, one of our growth markets, where we have now 2 more powder plants, giving us the critical ability to steer the milk flow across a more diversified portfolio. We invested in Italy into our dessert business. We invested in Holland into our goat business. And what I really want to say is, if you think we're getting too excited with CapEx now, don't worry so much, we focus very much on growth pockets. We focus very much on strategic niches. And in fact, our ROIC increased from 8.3% to 8.9% this year. And I want to assure you that we continue to deploy CapEx in a very disciplined manner. Last year, we guided for increased CapEx of CHF 300 million for 2020/'21. 2020 came in at CHF 130 million, so expect around CHF 170 million to CHF 180 million for 2021. This is really the result of all. We have continued to have a very strong balance sheet. We have a net debt ratio of 0.43 and net debt at 163.1. And with a maximum leverage of around 3x EBITDA, we also continue to have room for future growth. I would like to conclude with this slide. Emmi has a very reliable and a very sustainable dividend policy. Emmi increased the dividend per share every year now for the last couple of years, and the Board of Directors increased the payout ratio last year from 25% to 30% to 35% to 45%. This year, the Board of Director proposes CHF 13, which represents a very good increase of 8%. And with this, I would like to hand over to you, Urs, again. Thank you.

Thank you very much, Ricarda. Now we come to the outlook 2021. And as always, I would love to give you some perspective of -- on how we see the year. And of course, we see that in Switzerland, we have a very good channel mix to offset the volatility. We are also going from private label to brand, from basic to premium. And innovation, of course, will help us to steer our overall portfolio into the direction of being more differentiated. We work with Emmi operational excellence in Switzerland and abroad also to somehow compensate for the pressure we are getting on the prices from our dear clients. And the biggest risk of what we see out there might be that we see a bit of a delay of the food service business in the course of the year, which means that if once borders are open, the Swiss are going out as tourists to buy daily goods or if they go out on holiday, then, of course, we might see the food service not being able to cover this gap that might then exist in the retail. And of course, what we also are going to see is probably declining retail sales in the course of the year, which means that the retailers will continue and increasingly even fight on prices because in the past year it was about quality, it was about logistics who is able to deliver. And now they see maybe that some of the businesses are losing market share. So they will a bit fight more on prices. And then, of course, we still see a quite high Swiss milk price compared to the countries surrounding us, mainly compared to Germany. And of course, this favors imports and also makes it a bit more difficult to export. But that's -- the whole picture is something we are used to. We know the game we are in, and we know how to fight those trends. Main watch out this delayed recovery in food service here. Internationally, we are a bit more optimistic, as you will see then also in the figures. We believe it just can continue to grow in the segments where we are very strong in desserts, Emmi Caffe Latte or also with Emmi Roth. Of course, the strong presence in emerging markets is going to help us and also the desserts or goat milk and organic products. So we have still quite -- some potential in those niches because we are, meanwhile, a sizable player there, and we can leverage this. Yes, food service should also recover and help us. And then, of course, we never know what kind of economic conditions we are going to see out there. And of course, also given the strong Swiss franc and the price increases mainly we had to do because of the high Swiss milk prices, we see that we might not be able to have that huge increase again in '21, as we have seen that for cheeses from Switzerland in the year 2020. So the focus areas for us is protect employees and the business. So we continue what we have done successfully in 2020. And we don't know when it's exactly over and what does it mean when it's over. So we just are staying focused on this. Differentiation through innovation is important, then expand the Emmi network and also use synergies wisely. And of course, if we see something out there, we have to put in place some countermeasures on the cost side. And there we have a proven agility with our decentralized organizations where really people take pride and take responsibility in steering the business towards success. And of course, very important to us because we are talking also about how viable is our business model for the future. It's very important for us to make a step up in sustainability ambitions, not only Switzerland but everywhere where we are active. Then this leads to the following figures. For the coming year, we see the sales of the group between 1% and 2%. Mainly, Switzerland might suffer a bit and, as I said, mainly from food service not recovering that quickly and maybe retail coming down mainly in the first half of '21. So we even believe that we could have or see numbers in Switzerland by midyear compared to prior year as low as minus 3% to minus 4% because there is no way we're going to recover or somehow balance out that stockpiling that took place. But then in the second half, we should be stronger once food service is back on track. In Americas, we believe 4% to 6% is possible, and we are quite optimistic. Also Europe, maybe the momentum is coming back a bit there because the retail momentum also there might be a bit overstretched at the moment. But we believe with all the concepts, innovations we are having, 1% to 3% is achievable. And we also want to grow the EBIT line from CHF 275 million to CHF 290 million. So we see it in this bracket. And also the net profit margin we see coming for the next year. So yes, there are some things we don't know. And if you know them, we are happy if you tell us what's going to happen during the year, but that's the guess and the estimate we are having. And mid- to long-term, we keep our forecasts unchanged, which means sales of the group should then once Switzerland is back on track again, increase 2% to 3%. And then, of course, the same sales as we are going to see already this year, hopefully, in Americas and Europe. And in the net profit margin, we try to be a bit higher in the future, but this gap is already within reach. So thank you very much. Which means that we are coming now to the Q&A part. And so my colleagues will join me here, and we will try to answer your questions. Thank you.

[Operator Instructions] The first question is from Jorn Iffert from UBS.

The first one would be, please, on Switzerland. Can you give us a little more clarity on what is roughly the pricing pressure you're expecting on average for '21? And also, when you said there are rising imports from outside Switzerland, is this impacting your key retail partners and the [ Korb ] for example? Or is it more that consumers go to discounters like Aldi and Lidl. And the second question would be, please, on your EBIT guidance. Can you give us a little bit more color, what is the contribution from cost efficiency? Is this the usual CHF 5 million which is a great effort every year and also from M&A. So if you can split a little better what is coming organically from cost efficiencies and from M&A?

So maybe I start with the question on pricing pressure. So what we see and what we mean there is that the game we have seen in the past, which means which was the game in '19, '18, '17 is going to continue. And of course, we haven't seen a lot of price pressure now in '20 because the question was more about logistics, standards and measures there. And we believe, as always, in Switzerland, we have a price pressure ranging from CHF 5 million to CHF 10 million and we'll need to make up with our cost measures with that. So in the end, we hopefully have a balanced portfolio or a balanced outcome on this, but this is how the game usually works. What we see is that some of our competitors, mainly in the basic assortments, they are having some financial troubles, which means they have to do everything retail is telling them and this is increasing a bit the price pressure there. But don't worry, we can handle that. But it's just getting back to the usual, and the market share game is becoming more important because mainly the discounters, they have increased their market share during the crisis. But because everybody grew, it was not such a problem. As soon as everybody is going to see indexes below 100, they are fighting again for market shares. That's what you can already see. Just looking a bit at the retail landscape in Switzerland, they start to communicate on who is lowering prices at what kind of speed. Retail, yes, it's very much, of course, discounter related, but not only -- but of course, the discounters are price-wise the most aggressive ones. But you also have to keep in mind that, for example, our key partner [ Korb ] is expanding the pre-guarantee range because that's their strategic answer towards the discounters. Just expanding that range means that also average prices are coming down. And obviously, also, margin is a bit under pressure. But for every business that is out there, we decide whether we want to do it, yes or no. But that's the usual game. But you're correct, it's more -- the more price-sensitive channels and we are not having that huge market share in this more price-sensitive channels. EBIT, Ricarda?

So thank you, Jorn, for your question. As for the EBIT, that's an organic EBIT range guidance, and the step-up in EBIT is very much driven by the international business. Of course, cost is always on our mind, but it's very much driven by growth and mix progression.

So does this mean, Ricarda, that the acquisition from October 2020, the part of this falling into '21 that this EBIT is coming on top to your guidance?

No, no, no. I meant organic in the sense of our existing portfolio, including Emmi Dessert U.S.A. But any potential future M&A is not included into that range.

The next question is from Patrik Schwendimann from ZKB.

[Foreign Language] Congrats for the whole crew for this impressive results in this tough environment. Very impressive. First question, net debt is still very low despite the acquisition of Indulge. Do you see a chance for more acquisitions in the current year? And if not, what would be the alternative? That's my first. Second question, in which area would be your priority for acquisitions? And what about buying out minorities? And thirdly, regarding plant-based products, what is the current percentage of sales for plant-based products? And what do you expect here in 5 years? And last question regarding Caffe Latte. What growth potential do you see for Caffe Latte for the next 5 years? And in which markets do you still see the highest growth potential for Caffe Latte?

I will quickly start and then Ricarda will complement me on the net debt. And then we're talking about the acquisition. What we see is when it comes to acquisitions, of course, we're always looking at the list and the potential targets. And we don't know whether we're going to do an acquisition in '21, yes or no. It's just open, and we don't feel under pressure. What I can say here is that we were building up very strong strategic positions in the past, and we feel very comfortable also growing organically. In the past, we didn't have those positions, so we needed to buy them. And this pressure kind of eased because we converted those acquisitions into a good current business. And coming to the minorities, we love minorities depending on the country. Of course, if we can, we try to increase the stake. But in many countries and in many businesses, we love to have this local entrepreneurship within the company. So buying out sounds great. But if you have good people being engaged with skin in the game, I'm happy with that model too. So financially, it might be interesting, but strategically that sometimes different from financially might be not such a good idea. Ricarda?

I think Urs said it all, Patrik, unless you have another question. We're not steering our activities, but you know that, and I know you support that from our balance sheet.

Just -- if you wouldn't do any acquisitions, then what would you do with the money?

We would inform you in 5 years.

Next dividend payment is next year.

You know the guidance about dividends, this is not going to change for next year.