Givaudan SA (GIVN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Givaudan 2019 Full Year Results Conference Call and Live Webcast. I am Alice, the Chorus Call operator. [Operator Instructions] And 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 Mr. Gilles Andrier, Chief Executive Officer; accompanied by Mr. Tom Hallam, Chief Financial Officer of Givaudan. Please go ahead, gentlemen.

Thank you. Dear ladies and gentlemen, good afternoon as well as good evening to Asia, and good morning to the Americas. Welcome to this conference call on our 2019 full year-end results. I'll make this call together with Tom Hallam, our CFO. We'll take you through the presentation before answering your questions at the end. The investor news on our full year results. 2019 was published on our Givaudan website at 7:00 Swiss time this morning, 24th of January, 2020. This is where you will also find the slides for today's presentation. Along with the investor news on our website, you will find also our 2019 annual report. I'd like now to start going through the presentation and invite you to turn to Slide #3 to go through our performance highlights. As we enter into a new decade and into the last year of our 2020 strategic period, I am happy to report an excellent sales growth for the full year 2019 substantially above market. We are fully on track to achieve our ambitious 2020 goals and the integration of Naturex, as well as all the other acquired companies is making excellent progress. We continue to invest throughout the year in different parts of the world. As a landmark event on the 14th of June 2019, we inaugurated our new state-of-the-art innovation center in Zurich, so-called the ZIC, housing research activities for both divisions. This center is certainly second to none in our industry. On the 15th and 16th of October 2019, during our Investors Days, we presented it to the financial community. We are very proud of this cornerstone facility for our future success to come. In 2019, we added close to CHF 680 million of sales and reached more than CHF 6.2 billion of sales. This represents a growth of 12.2% in Swiss francs, thanks to an excellent like-for-like growth of 5.8% and to the contribution of the acquired companies. Both divisions contributed to this robust growth, which was supported by a further encouraging recovery of the high-growth markets. Our project pipeline and win rates improved strongly, testifying for the strong relationships and the good innovation momentum we have with our clients. We achieved an EBITDA of CHF 1.275 billion. This represents an increase of 11.4%. The comparable EBITDA margin is 21.5%. We delivered a very good free cash flow of CHF 787 million, which is up 11.9% compared to 2018. It represents 12.7% of our sales and is fully in line with our 5-year guidance. At the AGM on March 25, the Board of Directors will propose a dividend of CHF 62 per share, which represents an increase of 3.3% year-on-year. Thanks to the powerful combination of continuous innovation and all the acquisitions we made over the last 4 years, we have a strong and broad portfolio fully aligned with consumer and societal trends. On the back of this set of our 2019 strong financials, we are fully on track to deliver on our 2020 guidance. Let's turn now to Slide 4. On a like-for-like basis, our Fragrance division grew 7.3% and our Flavours division, 4.5%. We again saw an excellent growth with local and regional customers, while sales with our multinational customers continued to regain a good momentum. The excellent growth was achieved across all product segments and all geographies. Alongside high-growth markets, all of our other strategic focus areas, namely: Naturals, Health and Wellness, Active Beauty and Integrated Solutions strongly contributed to our growth. Our recent acquisitions contributed to the growth of both the Fragrance division and the Flavour division. Let's turn now to Slide 5. In 2019, high-growth markets lived up to our expectation by further improving to double-digit growth, 4x the growth rate of mature markets. This is a clear improvement over the recent years. The emerging markets of Asia Pacific grew very strongly, led by Indonesia, the Philippines, Thailand and Vietnam. Eastern Europe, Africa and the Middle East also contributed with double-digit growth as well as Latin America. In the mature markets, we grew with a solid 2.4%, led by Southern Europe and Korea. High-growth markets make up 43% of our overall group sales, still below past levels. This is the consequence of the acquisitions we made in mature markets combined with the currency development in the high-growth markets. Our presence in high-growth markets has always been a key driver for our growth and continues to be one of our key strategies for 2020 and beyond. Midterm. The demographics, the ever-growing middle class and the strong urbanization trends will continue to support the growth of these markets, especially in Asia, where urbanization and the middle class are still below average. Our size and our operations footprint give us a unique exposure to the diversities of these high-growth markets in which we continue investing both with additional talent and new facilities to service the wide diversity of our clients. Let's turn now to Slide 6. I'd like now to highlight the sales development by region for the group. Sales in Latin America and Asia Pacific continued to perform very well. Latin America recorded another outstanding growth with 15%, driven all -- driven by all the main markets of the region, be it Argentina, Brazil, Mexico and Colombia. Volume growth contributed to 2/3 of the total 15% growth. The growth in Asia Pacific was 5.6%, with high single-digit growth in the high-growth markets. North America grew 2%. EAME grew 5.7%, with double-digit growth in Iberia as well as in the high-growth markets of Eastern Europe, Africa and the Middle East. Let's turn now to Slide 7. The Fragrance division grew 7.3% on a like-for-like basis and 10.9% in Swiss francs. This excellent growth was driven by the strong performance of new wins as well as the price increases to compensate for higher input costs. Fine Fragrances increased 5% like-for-like. We continue to sustain our clear market leadership in Fine Fragrances in both mature markets and high-growth markets. A high level of new business wins across all customer groups, combined with an excellent market performance of recent launches, were the main contributors to these further outstanding results. Consumer Products grew 7.8% like-for-like. We delivered good growth in both high growth and mature markets. Growth stemmed from all regions and customer groups with a remarkable renewed momentum of multinational customers. Fragrance Ingredients and Active Beauty grew 8.1% like-for-like. In Active Beauty, we achieved an encouraging double-digit sales growth driven by all customer types and active ingredients. Specialties in fragrancing regions recorded a strong double-digit growth. Now let's turn to the next slide, #8. Sales of the Flavour division grew 4.5% on a like-for-like basis and 13.4% in Swiss francs. All of our strategic focus areas, Naturals, Health and well-being, Integrated Solutions as well as local and regional customers, contributed strongly to the overall performance. Sales in Asia Pacific increased 6.4% on a like-for-like basis. The division recorded double-digit growth in Indonesia, the Philippines, Thailand and Vietnam. China and India achieved a strong single-digit growth. EAME increased 4.4% like-for-like, with double-digit growth in Africa and the Middle East driven by Egypt, South Africa, Nigeria and Morocco. In the mature markets of Benelux, Italy and Spain, a high single-digit growth was achieved. North America decreased 1.6% on a like-for-like basis despite the good performance from local and regional customers. New wins and growth from the existing business in Savoury, Snacks and Beverages were offset by the weaker performance of the Dairy segment. Latin America increased 19.2% on a like-for-like basis, with 2/3 volume growth driven by very strong growth in Mexico, Brazil, Argentina and Colombia. Let's turn now to Slide 9. A couple of slides on the acquisitions. The first one, where we presented our 2020 strategy in August 2015, we clearly stated that acquisitions would be an important part of our 5 years growth path. Since 2014, we have acquired 15 businesses for a total of over CHF 3.6 billion, each one with a very strong and natural strategic rationale as well as a perfect cultural fit. These businesses, once fully integrated, will have a yearly contribution of more than CHF 1.5 billion to our total group sales. Across all activities, Fragrances, Active Beauty and Flavours, our success in providing winning solutions to our customers and creating value is also a demonstration of our efficient acquisition strategy. We aim at further value-accretive acquisitions to complement our core abilities and increase the portfolio of Naturals, Integrated Solutions, local and regional customers as well as new adjacent business areas such as the ones we brought by Naturex and Active Beauty, and with which we believe that we can further provide value to our customers and to our shareholders. Let's turn now to Slide 10. When evaluating potential acquisition opportunities, we respect 2 hard criteria: First question, can we create value for our customers; second question, can we create value for our shareholders? Very simple. You can see on this slide, our last 15 acquisitions were strictly aligned with our 2016-2020 strategy to increase our stake along 5 strategic themes: Naturals, Active Beauty, Specialty Ingredients, Integrated Solutions, local and regional customers. And you can see from this slide that some of the acquired companies actually ticked many of those themes. Let's turn now to Slide 11. This slide gives a short follow-up on Anne Tayac's GBS update. As you know, Anne Tayac is the Head of GBS and IMNT, sitting on our executive committee, that she gave on our Annual Investor Conference on April 9, 2019, in Vernier. The transitions in EAME, North America and LatAm are now fully complete, and the 2 teams in Buenos Aires and Budapest are fully operational for these 3 regions. In Asia Pacific, the most complex region in terms of cultures, languages and businesses, we have completed the phase 1, and the implementation of phase 2 is ongoing and will be finished by the end of this year. All our 3 delivery centers, the GBS delivery centers, Budapest, Buenos Aires and Kuala Lumpur work in an efficient way within the broader Givaudan organization, and the projected financial benefits are fully being delivered according to plan. With this, I'd like to hand over to Tom, who will give you more granularity on our financial results. Tom, please go ahead.

Thank you, Gilles. I would also like to welcome you all to the call. As Gilles has taken you through the main aspects of the market and sales performance, on the following slides, I will focus on the operating performance, the cash flow and the balance sheet of Givaudan. Let me start with the financial highlights on Page 13. As Gilles mentioned, group sales increased by 5.8% on a like-for-like basis and by 12.2% in Swiss francs, which includes the full year impact of Centroflora, Expressions Parfum?es and Naturex; as well as the partial impact of the acquisitions we completed in 2019, most notably Drom and Fragrance Oils. The underlying EBITDA margin was 21.5% in 2019 compared to 21% in 2018. We increased our free cash flow by 11.9%, resulting in a free cash flow as a percentage of sales of 12.7% or CHF 787 million. Please turn to Slide 14, which shows the exchange rate development. This slide shows the comparison of the average exchange rates of 2019 versus the average of 2018. Overall, major market currencies were relatively stable. We face volatility in some emerging market currencies. However, our operational and geographical spread continued to provide good natural hedges, and our EBITDA margin remains well protected against these currency fluctuations. We continue to maintain a good cost discipline throughout the organization as well as continuing to benefit from the savings from our GBS initiative and other productivity gains. You see that our gross margin declined from 42% to 41% driven by the full year impact of Naturex as well as the mechanical dilution as a result of the pricing actions to compensate for higher input costs. The EBITDA was CHF 1.275 billion in 2019 compared to $1.145 billion in 2018. We had a number of one-off items in both years, mostly costs related to the implementation of GBS of CHF 31 million and acquisition and restructuring expenses of CHF 25 million. In the media release, you will find the table with more details of the adjusting items. The operating income increased to CHF 920 million in 2019 compared to CHF 883 million in 2018. On the next 2 slides, I would like to spend a few minutes on the operating performance of the 2 divisions. If you turn to Slide 16, we can start with the Fragrance division. As Gilles has mentioned, the Fragrance division recorded a sales increase of 10.9% in Swiss francs. Acquisitions contributed CHF 127 million. The EBITDA for the division in 2019 was CHF 555 million compared to $508 million in 2018, driven by a strong sales growth and the contribution from the acquired companies, Drom and Fragrance Oils. The underlying margin was 21.3% in 2019 compared to an EBITDA margin of 20.7% in 2018. If you now turn to Page 17, we will cover the Flavours performance. The Flavours division recorded a sales increase of 13.4% in Swiss francs. Acquisitions contributed over CHF 300 million. A continued strong focus on internal costs and continued productivity gains increased the EBITDA from CHF 637 million in 2018 to CHF 720 million in 2019 and compensated for the fact that the division was impacted by the lower margin of the Naturex business for the full year. On a comparable basis, the underlying EBITDA margin was 21.6% compared to 21.2% in the prior year. Please turn to Slide 18, which shows the amortization of intangible assets. I've included this slide, which has been updated to give you a perspective of the future amortization. This has now been updated to include all acquisitions included in 2019. Please turn to Slide 19, which shows the net income. The net income before tax was increased in 2019 to CHF 808 million as a result of the strong business performance and a stable nonoperating level of expenses. Despite higher interest costs related to the recent acquisitions, the group incurred lower foreign exchange losses. As a reminder, in 2018, the group incurred increased foreign exchange losses, most notably as a result of higher foreign currency losses in Argentina. The effective tax rate in 2019 was 13% compared to 14% in 2018. The net income was CHF 702 million in 2019, a solid increase of 6%. Basic earnings per share was CHF 76.17 compared to CHF 71.92 in 2018. Please turn to Slide 20, which shows the free cash flow. In 2019, we had again a strong free cash flow of 12.7%, exactly as we had in 2018, despite continued significant investments we made throughout the year. During 2019, Givaudan generated an absolute free cash flow of CHF 787 million, an increase of 11.9% compared to 2018. We had an extremely strong increase in operating cash flow, up by 24% versus 2018 to CHF 1.1 billion. Total net investments were CHF 246 million, and as a percentage of sales, net investments were 4%. As a reminder, in 2018, total net investments were 3.3%. Excluding the proceeds of the ZIC transaction, net investments were 5.1% of sales. In 2019, we continued our investments to support the growth in high-growth markets. Most notably, the construction of an additional Fragrance facility in China and the completion of the Flavours facility in India. Working capital was well managed, coming in at 24% of sales in 2019 compared to 26% in 2018. Please turn to Slide 21. Over the last 20 years, the company has generated a cumulative CHF 8.6 billion of free cash flow. Including the proposed dividend for 2019, Givaudan has returned over CHF 5 billion to shareholders in the form of either dividends or share buybacks since its spin-off in 2000. This clearly underlines the strong commitment of the company to return surplus cash to its shareholders. Based on the continued strong cash generation, the Board of Directors will propose an increase of the dividend to CHF 62 in 2019, an increase of 3.3% in the year. Please turn to Slide 22. Our debt shows a long-duration maturity. The weighted average interest rate of our debt portfolio at the end of 2019 was 1.3% compared to 1.4% in 2018. At the end of the year, our net debt was CHF 3.7 billion. We have a well-balanced debt profile, which -- with interest rates, which we have locked in at attractive rates. Finally, please turn to Slide 23, which shows the leverage ratio. At the end of the year, the leverage ratio was at 47% compared to 41% at the end of 2018. The increase in the leverage ratio was due to the impact of the new acquisitions we completed during the year and also due to the increase in lease liabilities, an impact of CHF 440 million due to the adoption of IFRS 16, the accounting standard on leases. Excluding the impact of IFRS 16, the leverage ratio would have been 44%. With this, I would like to conclude my section of the presentation and hand it back to Gilles.

Thank you, Tom. Let me come back and talk about the outlook for this year. Thought we had an excellent 2019, and we are proud of our achievement. We saw an encouraging pickup in high-growth markets with double-digit growth, and all our strategic areas are growing to expectations. Fine Fragrances, to our great pleasure, continues to strongly outperform the market and competition. And we finished the fourth consecutive year with outstanding growth, making us the clear #1 in fine fragrances globally. Local and regional customers continued to be a strong growth driver across both divisions, and we have seen a substantial pickup from multinationals, mainly in household and personal care. Recent acquisitions and areas of strategic focus, namely Health and well-being, Naturals, Integrated Solutions, all contributed positively to those good results. In 2020, we expect raw material prices to remain stable at the current levels. Through the Ungerer acquisition, we enjoy an enhanced position in citrus and lime. Through Albert Vieille, we will be able to leverage natural fragrances ingredients for Fine Fragrances. Our focus in 2020 will be to deliver on our 5-year guidance, 2016 to 2020, and the integration of all recent acquisitions will be a further area of occupation in 2020. Therefore, we expect CHF 50 million of restructuring costs in 2020. End of August 2020, we will present our strategic road map for '21 to '25, in line with our purpose, which we have communicated in November of last year. Let's turn now to Slide 27. Our 2020 road map is centered on responsible growth with shared success. Our ambitions and the road map for this year and beyond seek to ensure responsible growth and shared success for shareholders, customers and all key stakeholders. We want to create further shareholder value through profitable, responsible growth with the additional contribution of acquisitions. To create long-term value, we will capitalize on our market leadership, and most importantly, continue to build close partnerships. Givaudan's 2020 strategy is built on the pillars of growing with our customers, delivering with excellence and partnering for shared success. After 4 years, we are fully on track with our ambitious financial targets, achieving an average 5.1% like-for-like growth and an average free cash flow as a percent of sales of 12.5%. I'm very confident to achieve a successful 2020, the last year of our strategic period and to fulfill our ambitious guidance. Flavors and fragrances are consumed every day around the world, and they are an essential part of successful consumer products for all our clients. I'm confident about Givaudan's strengths and our G&A built over the last 250 years to continue to create value to our customers, our shareholders and all our stakeholders. With the significant contribution Givaudan's employees around the world make every day, I'm convinced that we have the right people, the right strategy and the right plans in place to continue on our successful path. Ladies and gentlemen, many thanks to you for your attention. Tom and I are looking forward to your questions.

[Operator Instructions] Your first question comes from the line of Celine Pannuti, JPMorgan.

Yes. A few questions. So first of all, if I go back on the growth for the markets in which you had, before you mentioned how well the emerging markets have done. Yet I think China and India, you mentioned around mid-single digits. And a lot of your customers have been a bit more cautious since the end of last year about global demand. So what do you see in terms of market demand as you look into 2020, specifically when we look at Asia PAC and Latin America? My second question is about pricing. Is it possible to have an idea of how much pricing contributed to 2019? And would it be fair to think that there would be not much pricing in 2020 given your raw material outlook of almost flat -- flat, in fact? And lastly, I think a question for Tom. Tom, I saw that the depreciation-to-sales ratio has increased a lot in 2019. Is there any reason behind that? And is around 3% the new level we should be looking at?

Celine, on the China and India, so more or less China represents 6% of our group sales; and India, a little shy of 5%. So actually, India continued to grow very well. And actually against a very high double-digit comparable that we had in 2018. And going forward, we have absolutely no indication that there is any slowdown. Actually, India has been one, if not the most consistent high double-digit growth market for us for the last 10 years. So I'm always very impressed by the stability and the strong performance of India, which reflects the position that we have in this country, actually for both Flavours and Fragrances. And this is also what we invested largely in new Flavours plant, as you know, in Pune last year. As it relates to China, we have seen, again as compared to 2018, a high mid-single-digit growth in China for both -- with some good performance for both divisions, maybe higher on the Flavour side. Certainly, better than 20 -- I would say, '17. So we've seen an improved momentum. Again, no signal of only slowdown. And actually, on the Fragrance side, with the contribution of Drom. Drom, which actually -- funny enough, despite the relatively small size vis-?-vis Givaudan, has a very large contribution with their Chinese business to Givaudan, which will diversify further our clients and local clients' portfolio that we have in China and which will give us a very good position going forward. So still quite confident on both markets. And as you know, again, we have the signal that you hear maybe from multinationals on those 2 countries, sometimes, obviously differ from our position because we have half of our sales in those 2 markets, which are -- with local and regionals. As it relates to pricing, this is also a very good achievement. Again, we have fully compensated the accumulated raw mats increase that we have seen in '18 and '19, and which have strongly impacted the Fragrance division. So in absolute value, happy to report that we have fully compensated again in collaboration with all our clients, the increase of raw materials in full -- in absolute value. So that means obviously that you have some dilution that we have to compensate for. Going forward, as I said, there is no -- basically, the raw mats are at a stable level now. And we don't foresee any price increase -- any significant price increase going forward other than the ones we -- which are already had been negotiated in '19 and which have just because of timing, a spilling -- spillover effect on 2020, but which is minimal. And now maybe, Tom?

Yes. Thank you, Celine. So on the depreciation, it's a good question. Actually, the devil is on -- is in the detail on these things. In 2018, we had CHF 127 million of depreciation. Then 2019 is impacted by the change in lease accounting. So if you look at the depreciation, let's say, on a comparable basis to 2018, it's CHF 147 million. And then you need to add the impact of IFRS 16. And if you look in -- when you have a second, Page 77 of the annual report, you have the table, which splits out the depreciation between the various asset classes.

Okay. So that will continue to be the new base for 2020?

That's the new base for 2020. But it's simply a change in accounting, Celine. It's not a pickup in terms of expenses.

And maybe if I just could go back to my earlier question on market demand. So between Q3 and Q4, we've seen a slowdown in total group growth. What do you attribute this to?

Well, that's a good question and a very easy answer, Celine. Actually, we can attribute almost 80% to 90% to one single reason, which is Fine Fragrance U.S. with one single customer, where we had basically what I would call a delay in orders from December to January. So the reason I'm saying that is that we obviously have a view on January sales. So we can see that it's really a shift of sales from December to January in food. And that's -- so -- and that -- basically, the Q4's relative slowdown basically to the other 3 first quarters that you can all see, is almost entirely attributed to this single reason.

The next question comes from the line of Isha Sharma from MainFirst.

Tom, this one's for you. Could you please give us the full year EBITDA bridge, first of all? Secondly again, going back to Fine Fragrances, it saw an organic decline of minus 4% in the fourth quarter. So I'm assuming that you already answered that question. Just trying to understand within Fragrances the price effect and the volume, if you could please split that for us. Lastly, if you could please talk about what you see in North America in the flavors market. As you mentioned that there's good momentum at local and regional customers, but the organic decline of around 2% in Q4 then, does it come mainly from MNCs.

So maybe I'll take the financial one first. Probably the simplest thing is I give you the split, as I did at the half year. So starting, first of all, with the gross margin and then we'll go to the EBITDA margin. So starting with gross margin, and just as a reminder, you know that in 2018, we had this one-off cost of what we called citral. That cost us CHF 50 million in '18. So we -- that was not repeated in '19. So that has a 90 bps positive for the gross margin in 2019. The dilution impact that both Gilles and I referred to is negative 150 bps in 2019. And then the acquisitions was negative 90 bps. So that's really the bridge on the gross margin. On the EBITDA margin, if I give you the same split, so again, the citral issue was positive 90 bps. The dilution impact from the net price raw mat was negative 120 bps. The savings from GBS and the impact of IFRS 16 is 100 bps, so split 50-50. And then acquisitions was negative 60 bps. So that really gives you, I think, all of the elements, both for margins, gross margins and EBITDA. And I think also the question that you have really on price is covered on that. And then maybe on the North America performance between local and regional and multinationals, I hand it back to Gilles.

Yes. So again, on North America, we actually did well on the Fragrance side. You've seen a decline of 1.6% like-for-like, which have dealt more with the multinationals and also dairy, and whereas local and regionals actually have performed well. So we are basically confident that we will see an improvement of our Flavours business in North America in the coming months. And I think on Fine Fragrances, I think we answered the question. Again, it comes back to this single situation in North America Fine Fragrances, which given the materiality, has a significant -- translated into a significant slowdown of Fine in Q4 but also on the group. So -- but again, very confident on Fine given the amount of new wins that we have won in 2019, which will have an effect on 2020.

Next question comes from the line of Jean-Philippe Bertschy from Vontobel.

The first one would be on the full year '20. After 2 years of really a nightmare with regards to the raw materials and the supply chain disruption of citral, and as well of numerous acquisitions and GBS. So it looks like you have like not an easy year, but it looks quite promising. My question is like, with the savings, how much you want to invest into growth, R&D capacity expansion, if you can maybe share some words on this one? The second one would be on M&A. I think it was as well as several acquisitions. Leverage ratio is exiting only -- almost 50%, net debt activity of 3x. Do you have some targets or some goals to reduce that? And what would be this ratio? And last but not least, just in terms of guidance for the tax rate. I think, Tom, you were guiding for 16% to 18%. Now we're again 100 bps lower than last year. If you can share as well some insights in this topic.

So Jean-Philippe, yes, on your first question, basically, I gave a bit of insights about, let's say, our agenda for the -- for 2020 and the coming years. It's going to be one, to finish GBS, but also -- and we have seen, actually -- as you've seen, the inventory is going down, for example, end of last year. This was really thanks to GBS. When you have 3 GBS centers, it's actually very helpful to drive in a very efficient way without any impact on the service of our clients. The inventory is down. So that's one example of the benefits that we see with GBS in addition to the savings that Tom referred to. Going forward, on GBS, it's going to be very much about continuing to use and to implement new digital tools, new type of AI-type of tools, which will help those 3 platforms improve continuously our efficiency and agility to our clients. The second topic will be very much, as we mentioned, to start integrating some of the acquired companies into SAP and into GBS, but also to drive, let's say, savings, which again will help us lift some of these acquired companies to the level of the EBITDA of Givaudan. And that's obviously our commitment for Naturex, but also for such acquisitions as Drom. So that's why the work is going to start, is starting as I speak now and will translate, obviously into some costs, so CHF 50 million going forward. As it relates, I'm not so sure I understand your question about reinvesting into the business. But essentially, we are not -- we have no plans to actually use some of those savings to reinvest into the business. I think the size at which we are at Givaudan allows us to have enough operational expenses to drive growth in the different strategic areas that we have going forward.

And so just on the 2 financial questions, Jean-Philippe. So if you look the balance sheet, I mean, we continue to have a strong balance sheet. If you look at, let's say, net debt to EBITDA, we have headroom. We have strong cash flow generation as well in 2019. And if you look really at the pipeline from a portfolio perspective, and as Gilles mentioned at the beginning, we have a very strong portfolio. Of course, we're always looking for some opportunities to add on. And in 2020, we will already close on Indena and Ungerer in the first quarter. So we have flexibility. And ultimately, our objective is to maintain our investment-grade rating. On tax, it's a very pertinent question. If you look actually in -- the 2 countries where we have our biggest operations, the U.S. and Switzerland, both countries have gone through significant tax reform over the last 2 years, which clearly has a benefit and an impact on Givaudan. And if you look now at, let's say, the guidance for 2020 and onwards, we would guide to an effective tax rate between 12% and 14%, so for 2020 going forward.

Next question comes from the line of Gunther Zechmann from Bernstein.

Just from my side, on Naturex, we haven't spoken too much about. Can you just disclose what the growth in the Naturex business is and what margins you've seen there? And what do you expect for 2020? And the second question on free cash flow. For 2020, do you expect any one-offs?