Huhtamäki Oyj (HUH1V) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to Huhtamäki's Q4 and Full Year 2020 Results Presentation. My name is Calle Loikkanen, and I'm Head of Investor Relations. Huhtamäki's President and CEO, Charles Héaulmé; and CFO, Thomas Geust, will today walk us through the highlights and results of the quarter and the full year. And after the presentation, we will, as always, end with a Q&A session. But without any further introductions, let's begin the presentation. So let me hand over to Charles.

Thank you, Calle. Good morning to all of you, and welcome to our 2020 results presentation that I will take together with Thomas. We will start with an executive summary of the basically key messages we want to leave with you regarding our performance in the fourth quarter of 2020 and most likely on the entire year 2020. First of all, retailing is something that has come through pretty clearly through the different quarters of 2020 is that we are continuing to deliver a solid performance despite the COVID-19 pandemic and the resulting economic crisis. What do we mean with this is that we are delivering a solid full year sales performance. We are continuing to improve our profit, and we are delivering a strong cash flow, which enables us to continue investing, particularly for growth. Regarding the consumption and the market evolution, we would like to convey the message that we are seeing a gradual recovery on the short-term demand. This has continued during the fourth quarter. However, there is still a pretty important volatility in the market and particularly on the food service market channel. We see as well in the market, a continued strong demand for fiber packaging as well as retail tableware, which have to do with the increased home consumption. This has been the case throughout the entire year of 2020. And then last message is that we have linked to this situation of 2020 as well as the more structural changes of the consumption, we have embarked in on the transformation journey, which is very much in line with our long-term growth ambition, but certainly accelerated by the year 2020, focusing on improving our competitiveness, innovation and sustainability in order to deliver growth for the future. So let's look first now at our operating environment, a few reflections on the year 2020, I'm trying to take a holistic view of our performance in the context. Summarizing that the year 2020 has been basically a year of external disruption and internal transformation for us. With external disruption, without going into too much granularity, it's obvious, we can't avoid saying that there has been a strong disruption of the macroeconomy linked to the COVID-19 crisis, at the same time as there has been continued geopolitical tensions creating disruptions for the business in 2020. Second is the sustainability legislative agenda that is gaining momentum across the world, but particularly in the EU. And that creates from one side, some uncertainty. And at the same time, it creates as well lots of opportunities, which, of course, is very important for us to consider trying to anticipate and preempt. Thirdly, the consumption is shifting. And if I would retain very much only one aspect, which is about 2020, the evolution of the consumption at home that is very clearly driven by the crisis itself. With some underlying structural shifts going forward, which have to do with convenience, but as well, the innovation, at least the requirement for more innovation in secular products. Now in this context, what have we done, and that's what we call the internal transformation. First of all, we have renewed our long-term growth strategy. We have established our 2030 strategy. We have presented it to the community early in the year and rolled out this strategy internally. And this strategy is focused on 4 pillars: sustainability, digitalization, innovation and high-performance for growth. This being said and according to the consumption shift that we are seeing, there is an adaptation necessary on our product portfolio due to these consumption changes and the increased focus on sustainability. And at the same time, we are towards the -- we have been towards the end of 2020, preparing for what we would call the post COVID, the new normal. That -- and that drives to actions to improve competitiveness as well as investments for expansion and automation. Important to say that in all this context, together with our renewed long-term strategy, we have renewed our purpose that is inspiring our day-to-day business, which is protecting food, people and the planet. So a very inspiring long-term perspective on the role and responsibility that we see as a packaging leader in the world. The context of 2020, obviously, with the pandemic has been a very strong pressure test for our company for the resilience of our business and our portfolio, but for the resilience as well of our organization and management. And we're happy to say that during the year 2020, our industry and particularly, the fact that we are in food packaging, has been recognized across the entire world as what is called an essential industry. And therefore, this has allowed that, together with the commitment of our organization, this has allowed to maintain our operations open for most of the year. And when we retroactively think and calculate what does that mean, that means that our factories have been actually open and running 99% of the time. It doesn't mean that we've been able to run at 99% of the capacity all the time because, of course, there has been some manning challenges in different parts of the world, but at least the factories were open most of the time to some specific exceptions. And we have constantly worked on protecting the health and safety of our employees. This drives me to speak about now the business performance in 2020 and starting, obviously, with the sales of the quarter 4, where our net sales and reported sales have been declining by 7% in Q4 2020 versus Q4 2019. It's important to understand that the main part of this decline is actually the currency fluctuations, which have been very negative, you probably remember in Q3, but even more negative in Q4 with an impact of minus 6%. The rest being an upside of 1% on the acquisitions that we concluded at the end of 2019 and beginning of 2020, meaning that the comparable net sales growth for Q4 were minus 2%. All this put in perspective of the full year means net sales reported of minus 3% versus 2019 at EUR 3.3 billion versus EUR 3.4 billion last year with, again, this a pretty substantial negative impact from the currency with a minus 3%. When we break down by businesses, by reported business segments, you can see that for the Foodservice Europe-Asia-Oceania, we are reporting a minus 7% in Q4 and minus 10% overall in 2020. That's comparable growth. In North America, we are reporting what had been pretty much anticipated, a slight decline in the fourth quarter of minus 2%. We'll come back to the reasons for this decline, which is not in line with the very strong performance of Q3. And all-in-all, in the year 2020, full year, it's a growth -- comparable growth of 1%, which is a very good result in the context. Flexible packaging overall, a 1% plus growth -- comparable growth for the full year. And then fiber packaging with a strong 9% comparable growth for the full year. We will comment now into further detail on each of the business segments for us to explain you the granularity of the performance of each of our businesses. Before that, looking at the P&L at global level, then it's fair to say that we are continuing to improve our margins at adjusted EBIT level. Where in Q4, we are at a 9% -- 9.0% EBIT margin level, adjusted -- sorry, EBIT margin level, and on a full year basis, 9.1%. So all in all, with a minus 3% net sales reported decline, we are increasing actually our adjusted EBIT in euro terms by plus 3%. The adjusted EPS is very much in line with the EBIT growing by 4% from EUR 1.88 last year to EUR 1.95, and that despite the currency headwinds. And as you see on the bottom line of the capital expenditures. So investments have been up to EUR 223 million, which is an extremely good level, showing that we are confident with our future, and we have lots of business expansion as well as automation investments going on for the benefit of the next periods. Looking now into steel at global level, what we committed to last quarter to inform you on a regular basis amount, which is our sustainability performance. We started in Q3 to report on sustainability performance, and we believe it is extremely important as we have put sustainability at the center of our long-term strategy. We believe it's important to maintain a strong transparency as well as monitoring the progress of our performance. I may not go through all the different indicators, but maybe give a little bit of explanation around some important evolutions, positive or less positive. So if we start with the renewable or recycled material, which is slightly declining from last year's level of 67.6% to 67.3%. I mean, it's basically flat. However, when we have an ambition to go to 80% in 2030, obviously, this is not taking off. And the main reason is basically a temporary reason linked to the particular mix of the year 2020, where the foodservice business has been strongly affected. And as you clearly understand, foodservice business is mainly paperboard based, which is renewable material, and therefore, that impacts that level. We are -- even though it's a very small number with 3.8% of renewable electricity, we're very pleased with it. Why? Because we started from 0. And taking off is the most difficult part. It's about understanding what to do about it, how to move the needle and put the first actions in place. First actions being linked to power purchase agreements on a long-term basis, but as well local activities like generating electricity from solar panels on the roof of some of our factories, and we will go on deploying such activities. We have then the nonhazardous waste recycling, which as well is going down, and that result is very much a temporary effect from the ban from -- or the rejection from China back at the beginning of 2020 not accepting anymore the import of waste from the rest of the world. And that is, of course, affecting our capability to recycle. But it's only, let's say, a hurdle on our way towards 90% in 2030. And maybe good to mention last point because I mentioned before that health and safety of our employees is absolutely our top priority and has remained so in the year 2020, in particular. We have been improving a lot on safety recourse with a strong reduction of our accidents, and that is visible in the LTI ratio that we are reporting. Going now into -- on the business side into the granularity by business segment before we look into the financials at group level. So starting with foodservice, I would say that, and I mentioned already, that the COVID-19 crisis has continued to have a significant negative impact on the demand during the fourth quarter of 2020 across basically all markets in a pretty consistent manner. Accordingly, the segment's adjusted EBIT has decreased due to lower volume, lower asset utilization linked to this lower demand. And you understand, I started in the introduction mentioning that we are actually engaging in a transformation project, which is very much about foodservice, which resulted in the quarter 4 to record an IAC of EUR 10 million linked to the adaptation of our capacity to what we are projecting will be the future market demand at the same time as we are investing in new products and industrialization and investment for growth in different markets in the world, in Asia and in Europe, for instance. Moving on to North America, where we have had a strong performance throughout the year. And this has been a combined picture. So first of all, it's a negative picture like in the rest of the world on foodservice, where our foodservice business has been impacted by the COVID-19, maybe to a lesser extent than in the rest of the world because of the very strong convenience culture in the U.S. with very strong food delivery demand as well as a drive-through channel that is slightly compensating the food delivery -- the foodservice, sorry, direct impact. The good news are coming as during the rest of the year from the retail tableware as well as the consumer goods products. But retail tableware is really boosted. We were coming into the '19, if you remember, from a strong growth already. So the market is growing. We are growing with the market. But in addition -- and we are growing very nicely with our top brand Chinet. But at the same time, the home consumption, which has been increased by the crisis in 2020, is of course, boosting the demand. And the earnings were supported by these additional volumes as well as -- the favorable mix that it represents as well as the continuation of a good market conditions on commodity and distribution costs during the year 2020. Flexible packaging has seen an, let's say, 2 different perspectives. So from one side, we have seen a pretty strong, pretty good demand in Europe, linked to the increased home consumption. Therefore, more demand for food on the shelf and prepacked products. At the same time, we have seen an increased volatility, particularly in Q4, actually, a strong volatility of the demand in India and in Middle East. So in Q4, like in the rest of the world -- of the year, sorry, the growth has been strongest in Europe, and we have seen a decrease of the demand in India to basically some shifts in the consumption behavior in India, linking this to an unfavorable product mix for Huhtamäki in India. And that leads to an EBIT margin in -- overall in the full year, which is at 7.7%. So a slight reduction versus last year, very much linked to all the cost that has been into our structure and into even our labor cost, particularly in India during the crisis, where we could not have any furlough due to local legislation. So it temporarily, let's say, hurdle in our profitability here in flexible packaging. Finishing up with fiber packaging, where we have had a strong performance throughout the year. We are coming with an underlying market growth, which has been boosted by the home consumption during the year 2020. There has been a strong demand for eggs. And therefore, for eggs packaging, particularly in Europe, but as well across most geographies. So here, the name of the game is capacity. We have been growing very nicely at 9% for the full year, and the earnings have been as well on the high side with reaching full year a good 12%. So as I said, name of the game now is capacity and capacity utilization. So we are investing further in this fiber business that is very promising. With this, I will hand over now to Thomas, our CFO, who will take you through more details on the financials.

Thank you, Charles. So going into the first slide here, the detailed profit and loss. We can see that what Charles already highlighted, a drop in sales development. Looking at it, though, from an overall perspective, we can conclude that it's, to a large extent, caused by the accelerating currency impact, so the strengthening euro versus other currencies. The -- for the full year, the organic comparable growth and acquisitions are leveling out. Looking at the profit development, the favorable trend of accelerating EBIT above the net sales growth. Here, we can see that it slowed down in the quarter. Here again, we also have a currency impact coming from the fact that some of the good, better margin units have a bigger currency impact. And then we also need to remember the fact that North America's contribution in Q4 was not as buoyant as we saw in 2019. I would also like to highlight that the tax rate remains on the same level as previous year, so on 23%. And net financial items through the year on same competitive level as previous year. That ending up in an adjusted EPS of EUR 1.95 versus EUR 1.88 million in previous year. From the reported numbers, you will see that the reported EPS is EUR 1.69, including then IAC items. The IAC items for guidance impact approximately 1% on gross margin level negative. More details around the currencies. In the currencies, you can see the accelerating trend towards the end of the year if we compare the closing rates of the year, big important currencies like USD, Indian rupee and the Russian ruble have clearly dropped towards -- against the euro. And you can see there that the impact on our profit and loss on the left side is not as significant. So taking USD as an example, average rates down approximately 2% versus average rate in 2019. However, if you look on closing rates, it's down 10%. This then obviously indicating that if continued, our profit and loss will see continued negative translation in the profit and loss. Net debt-to-EBITDA continued to improve. We are on 1.8 net debt-to-EBITDA in the fourth quarter versus 2 in 2019, so an improvement in our solidity. The covenant level, 3.5 on frozen GAAP. However, with the new RCF, we are at 3.75. Highlighting also the net debt as such, EUR 867 million versus EUR 904 million in previous year and a gearing of 0.64 versus 0.63. Lease liabilities are at EUR 154 million out of the EUR 867 million. Moving to loan maturities. The average loan maturity is 2.7 years versus 3.4 years at the end of 2019. And we have unused credit facilities of EUR 310 million maturing in 2022. And as you might have picked up, we did the renewal of the RCF, so syndicated revolving credit facility in January, and we are happy to inform that it also includes an ESG element in it, the first issued by Huhtamäki. To the cash flow from an operating cash flow point of view, so cash flow generated by operations, we are roughly on previous year's level. So the drop in cash flow, the slight drop of EUR 21 million, is caused by the CapEx. And therefore, we had, thanks to the strong operating cash flow, the ability to continue to invest, and the investments have been -- the most significant investments have been in the fiber category as well as then from a country point of view, it is U.S., U.K. and Germany. Turning to the balance sheet. The balance sheet is showing a decline actually in equity and noncontrolling interest that is caused by currency translation. So here, we can see how significant the currency movements have been. Looking then at the return on investment and return on equity here, I would actually highlight the fact that we are in our tables, calculating it on a 5-quarter average, and therefore, the equity part is lagging behind. So we have a higher level of equity versus what you see here as a spot rate in our calculations. The Board of Directors is proposing a dividend of EUR 0.92 for 2020. That will -- is a payout ratio of 47%. So within the 47% on adjusted EPS, so well in the range of our dividend policy. And it would generate a yield of 2.2 versus year-end share price. This is the 12th consecutive year of growing dividends for Huhtamäki, if the payment is carried out -- is decided in the AGM. Looking at the progress towards long-term financial ambitions. Here, we can really see the most negative part, which is the organic growth, where clearly, the COVID has being the main reason for it. For the other ones, we are progressing and improving. So adjusted EBIT is slightly up or actually nicely up versus previous year and moving slowly towards the long-term ambition. Looking forward the outlook. The outlook has been updated and states now "The group's trading conditions are expected to improve compared to 2020. However, with continued volatility in the operating environment, Huhtamäki's diversified product portfolio provides resilience and the group's good financial position enables addressing profitable growth opportunities." So that's the updated outlook. When it comes to the short-term risks and uncertainties, that remains unchanged compared to our previous statement. So to conclude, the year has been very much colored by the COVID pandemic. However, the performance has continued solid. It has improved on profit, been basically solid on sales, and we have been able to generate strong cash flow, as said here earlier, enabling then investments. We have seen also a gradual recovery in the year. However, volatility, especially in selected markets, has definitely continued as well as for foodservice. We see a strong continued demand for fiber packaging and retail fiber, retail tableware. And as you have seen, we have embarked through our strategic ambitions on a long-term growth journey. We will continue to focus on improving competitiveness, innovation and sustainability for growth as main headings. With this, I hand over to Calle.

Thank you. Thank you, Thomas, and thank you also, Charles, for the presentation. Here on the Slide #30, you can see that the upcoming events, and maybe as a highlight, that the annual accounts are coming out in the first week of March, and then we obviously had the Q1 results on the 22nd of April. But now let's continue with Q&A. The operator will give more detailed instructions on how to ask the questions, but please limit yourself to one question each. If you then have a follow-up question on the same topic, then that's fine. But if you have more questions, then please drop back into the queue after your question. But now, let's hand over to the operator for more instructions. So operator, please go ahead.

[Operator Instructions] Our first question comes from the line of Carl-Oscar Bredengen from Berenberg.

I just wanted to touch back up on the CapEx and M&A going forward, Charles. You stated previously that, obviously, we see that the balance sheet is quite healthy. And then you're targeting more strategic ambitions that, that has been with limited opportunity during 2020. Can you talk a little bit about the -- how would you think about the targeted CapEx and M&A going forward, either you or Thomas?

Okay. Maybe I can start. Thanks for the question, and Thomas, you chip in and complement my answer. I mean, we are -- as you said and repeat what I said before, very clearly, we have a balance sheet, as presented by Thomas, that allows us to invest organically and inorganically. So absolutely no change to our strategy in terms of growth. And despite the setback of 2020, we are confident about the opportunities in our core, but as well in additional portfolios that derived directly from our core linked to the consumption evolution. Our target for CapEx is basically always in the range of what we have always said in the past. So we are planning in the same range for 2021. And in terms of -- towards which type of portfolio, you understand probably from our results and explanation, and the bit of granularity we're giving is that there is a strong growth and strong demand on some categories like fiber. We see with the plastic substitution, particularly the demand in Europe and need for further investing in new innovative products, and I'll take you very much know about our previous investments, for instance, in paper stores, where we have become the market leader in terms of quality, with our fresh ready meal trays that were launched in the U.K., but more products came in and very successful like the fiber, for instance, that we have launched in France during 2020. And we have -- we can say like for the paper stores now leading the market in terms of quality. So that's for the CapEx will very much go towards fiber, but not only fiber in all our different businesses. M&A, we remain extremely focused on M&A. We have a pipeline of potential targets. The year 2020, as you very well understand, has been a difficult year in terms of driving due diligences, making the right analysis and the right alliances. But we are confident that 2021 and going forward will be much more dynamic, let's say, and very much linked to our core business. Thomas, do you want to add?

Yes, I could maybe add or complement to that one. So first of all, I think both with regards to M&A and CapEx, the main thing is to do profitable growth. So that's what we are aiming for. And you might recall that we actually, in our previous ambition, had CapEx as a separate topic. We removed that one and rather talked about the net debt-to-EBITDA of 2 to 3. So that is really the guidance or instruction against how we are looking towards growth. There are categories where we see that we are better equipped ourselves to develop, and then we will put CapEx in. And then there are categories where there are avenues or opportunities to do M&A. So I wouldn't stare blindly on which we are and how we are developing. There will be years where the CapEx is slightly higher and there will be, yes, where the CapEx is slightly lower than what we see in this year's development.

And the next question comes from the line of Maria Wikstrom from Danske Bank.

My question is linked to the raw material and the expectation of the raw material price inflation. So now you said in the report that in North America, you said rather stable, but going up towards the end of the year. We already have seen, I mean, some of the plastic packaging peers announcing for price increases. So how you would see the raw material pressure in -- going into Q1? And I guess, I mean, we need to talk about the different segments, as North America, the prices have been skyrocketing. It has been going up, but more -- not as quickly in Europe. And then in flexible segment. I mean, you said it was stable in Q4, but then some of your peers, like Amcor, said that a further headwind in the Q1. So could you just walk us through about how should we think about the raw materials going into 2021, please?

Thank you, Maria. I will take the question, at least to begin with and in this case, Charles, will then complement. So I think you hit the nail in the sense that we consider 2020 to have been more on the favorable side. So actually, with an overall commodity level on a pretty low level. And that goes especially for what you are saying around the polymers. I would say, currently, to some extent, I could sign off on what's being said about, what the peers have also identified. I would highlight, though, that it's a bit different depending on markets. But with the low commodities, I guess, it's more likely that you will see them go up than down as such. I would remind you, though, that the first quarter is typically the quarter when you see a lot of attempts to get the commodities up. Everyone is looking for whether there is demand or not. And therefore, my claim would be that demand will at the end be the decisive factor for whether we see an uptick in the commodities or not. So far, the movements have not been dramatic, and they are varying a bit depending on geographies as well.

Yes. Maybe it's good to complement that our portfolio is diversified in terms of products, but as well in terms of materials. And that potentially gives us more resilience in front of the increase in one commodity or the other, and at least more than in companies that potentially would be more exposed to that commodity like polymers. So that's the balanced maybe a view that we need to take.

Sorry, Maria, before you go. And then one thing that also partly, to some extent, will have an impact is the currency, continued currency development. Obviously, to some countries, import will be more difficult if the currency is weak. Sorry, please go ahead, Maria.

Yes. Just -- I mean, to get my math right that, at least, I mean, the North America, the screen prices of the polymers have been going up quite a bit. But how much is plastic out of your sales in North America?

We haven't disclosed the plastic level. But as you know, we have been mainly growing in the fiber categories over the last years, but we are talking still a double-digit of the portfolio, lower double digit.

And the next question comes from the line of Jutta Rahikainen from SEB.

So let's continue with the topic of North America. Now we had a full year 2020, and you made a great EBIT margin there. I think that's fair to state. Can you help us to look into 2021? A lot of stuff happened in 2020, of course, product mix, COVID-19 and all that. So is it -- as my question, if I phrase it like this, is it evident that the EBIT margin will be down in North America in 2021? And if so, do you think that will be a significant drop or just a drop?

Jutta, we are usually not guiding. However, we will not avoid answering your question. The thing to consider, of course, with the very high level of the margin improvement in North America, your question is pretty natural. This being said, the year 2020 has not been an easy year at all. There has been lots of favorable conditions, like we said, commodity distribution costs that were low in Q2, then rebounding a bit in Q3 and in Q4, that is expected to be slightly higher in 2021, certainly. At the same time, and then the mix has been favorable, as we have said quarter after quarter during the entire year 2020. At the same time, there are aspects which have been detrimental to 2020, which should revert back positive for us in North America. A couple of examples. It's been a very disruptive manufacturing footprint in 2020 linked to the COVID issues that has been rising, particularly in the second half of the year in the U.S. That doesn't mean that we've not been able to grow as much as we could have grown because of the mining challenges in the market. And that means that next year, we can -- next year, sorry, 2021, we can expect a higher utilization of our assets, and that will drive a certain compensation of the challenges that you and we highlighted. The second point is, as we have said, as a reason for a little bit of an expected, but disappointing Q4 in North America from a size model. This has been linked to the fact that we didn't have any more finished goods inventories as we entered in Q4. And that's usually what, from a seasonality point of view, this inventory is what helps us growing even more in Q4. That was not the case this year. And rebuilding those stocks will increase as well with the utilization. So all in all, to say that we see challenges. But we would not speak at this point of a substantial drop of our margin in 2021.

And the next question comes from the line of Cole Hathorn from Jefferies.

Good morning. Could you mind giving a little bit of color of how you're looking at your foodservice network globally? And what decisions and how you're basically making the decision to rationalize some of that capacity to make sure that you're not closing lines or products that you could be using in the future when growth recovers? And how are you thinking about that rationalization?

Yes, that's a very good question. Not an easy one, but that's what we are doing on a permanent basis and analyzing based on our core business, our long-term strategy, but as well adapting to what's happening in the market. And what we project to be eventually not just short-term or temporary changes, which, of course, should not be driving big decisions because as you are clearly saying, we need to be able to produce what will be needed in the near future. And that's why during 2020, we've not taken some drastic decisions, for instance, on our footprint early on during the crisis because we wanted to be clear on the projection and how structural are the changes happening in the market. This being said, we need always to be improving our competitiveness. Second, we need to adapt our portfolio to what's happening in the market. One big driving force is sustainability. A second one is -- that is new, is the acceleration of the shift in the consumption and particularly because of the home consumption, the convenience, the need of convenience. So in your question, you're asking about throughout the globe, and that's an additional complexity because things are not evolving in the same way from a sustainability perspective as well as from a consumption shift perspective in all regions at the same speed or in the same manner, whether you're in Asia, in Europe or in the U.S. Fourthly, because of sustainability, there is a drive towards plastic substitution in the FMCG channel, which is a new opportunity for us, and that is driving some of the investment decisions that we are taking. Very clearly, and that's linked to the IAC that we were mentioning during the presentation, we are taking decisions to adapt our footprint according to what we see are structural changes or structural competitiveness challenges that we must analyze. One was in Q3 with the New Zealand restructuring, what has been decided in Q4 is around -- more around Europe with the need to restructure and adapt, for instance, in the U.K. in order to become more competitive. Some more positive are investments that we are taking for opportunities that are arising from these portfolio changes.

And the next question comes from the line of Maria Wikstrom again from Danske Bank.

My second question is on the flexible profitability, which continuously have been lagging the targeted range of 9% to 11% EBIT margin. So what are currently the actions you are doing in the flexible segment to basically to get the business closer to the targeted profitability level?

Thank you, Maria. So on the flexible business, the first disclaimer that I think is extremely important to remember is 2020 is a huge disruption, much more than we may have thought at the beginning of the crisis. The reason is very much linked to emerging markets. The COVID crisis has impacted the demand in emerging markets and particularly in India, where we are, of course, very exposed. So very exposed to growth, when things are usually going on the positive side, but as well during 2020, it went really downside in India. So this is the temporary impact. And why I'm saying it's been disruptive in the P&L, so in the profitability because, particularly, for instance, in India, there was not what you would get in Europe, for instance, with the furlough and all the cost -- the possibility to address your cost during this period with much more flexibility in India. There wasn't this -- from a legal perspective, there wasn't this possibility. So we have been hanging up with our structural cost as well as all the labor cost during the entire year 2020. At the same time, so you're asking what are the actions, and that's a natural question. So we are taking actions on managing our portfolio. This is something that started in 2019 that resulted at the time in a pretty interesting improvement of the margin. We are continuing this. And second, we are working on productivity actions in our manufacturing footprint and efficiency. And I would like to mention that when we look at our flexible headcount, for instance, we have been -- as a matter of an example, because India has been very much in the spotlight of driving the margins down in 2020, for the reasons explained, we have been reducing our resources and adapting our capacity from a mining point of view. This shall result into improvement in 2021. So obviously, a lot is going on. And the margin ambition of 9% to 11% on the midterm remain absolutely true and the commitment that we have taken remains.

And the next question comes from the line of Robin Santavirta from Carnegie.

Now I have a question related to the outlook statement you provide, basically stating that you look for a bit of a better trading environment this year. Now if you look at 2020, you had really strong demand for the on-the-shelf business and then obviously, weak demand in the on-the-go segment. What are you seeing now for the winter and the spring? Do you expect more of the similars of the development that you had in H2 last year? Or do you already now see a bit of improvement in the on-the-go business?

So Robin, I would say the current status is for the on-the-go business quite similar still at this point of time. I think what we saw in the summer, we saw a -- as it seems, temporary uptick as markets were opening up and people were able to move around. So I would say that one can expect a similar outlook for the Foodservice segment as long as we still have limitations of movement in the market. And again, to Charles' point here earlier. Some markets will open up earlier, some markets will be locked down for longer periods. And from our point of view, then the progress, if looking at foodservice as a segment, will be dependent on whether it's a smaller or a larger or a bigger market that opens up. So North America, as an example, has been quite stable now in foodservice -- in the foodservice since summer, but still on a fairly lower level.

All right. And then just sort of a continuation of some of the questions earlier on input costs. I would ask in North America, what is the average price or time span for the price agreement you have? And do you have a lot of those sort of expiring at the end of December? Or is it sort of ongoing agreements throughout the year?