The long-term goal of an adjusted EBIT margin of at least 14 per cent will be achieved by recovering the impacts from Covid-19, including volumes and value within Pick & mix as well as profitable growth and product mix within Branded packaged products. In addition, we will continue to drive cost-savings and efficiency activities throughout the entire value chain.
We aim to pursue selective acquisitions that are consistent with our current product portfolio. This means that we acquire brand-driven companies within the same categories, preferably in countries where we are already active. We may also acquire brands within our categories but in countries that are close to our main markets.
In 2021, we once again delivered very strong cash flow, resulting in a net debt/EBITDA of 2.0x as we closed the year, well below our long-term target of 2.5x. We therefore deem that we have the capacity for both acquisitions and share dividends. The dividend pay-out ratio should be 40 to 60 per cent of net profit.
We adjust our prices based mainly on fluctuations in raw material costs and exchange rates. Historically, we have managed to offset headwinds from raw material and currency through pricing. Sometimes we also adjust prices in conjunction with initiatives such as new product launches or changes in packages.
Input costs, including for raw materials, packaging, freight, and energy, are increasing. We have announced and initiated negotiations concerning price increases in response to the significantly higher cost inflation. These are expected to take gradual effect as of the beginning of 2022. Historically, we have managed to offset headwinds from raw material and currency through pricing.
For those seeking an alternative to products with sugar, Cloetta offers options such as nuts, chewing gum with xylitol and pastilles. Additionally, we are offering candy with lower sugar and no sugar. We also believe that the major challenge in this context is hidden sugar that is found in various food and beverages. Cloetta’s products are among the most honest, since all consumers are aware that they contain sugar.
In general, we must count on the possibility that different countries will both introduce and abolish sugar and confectionery taxes from time to time. When different taxes are introduced, it naturally affects our sales, but only initially and to a minor extent since our products are of a type that consumers want, and can afford to treat themselves to, despite price increases.
Palm oil in and of itself is a very good oil. It is very effective for surfaces and has excellent properties for food production. To prevent negative environmental consequences, Cloetta only uses RSPO-segregated palm oil, which means that the oil is produced sustainably and does not contribute to destruction of rainforests. However, the small amount of palm oil that was previously used in the glazing of a number of candy products, to give them a protective surface and prevent them becoming sticky, has been exchanged for alternative oils.
If we no longer sell a product, this is unfortunately often due to insufficient demand for the product in question. In certain cases, it could also be because the product’s profitability has been too low or even negative. The launch of new product types can sometimes be difficult if we lack a brand that can carry them, and at the same time the necessary marketing investments can be so high that the products would not be profitable.