Letter from the Chairman and the Chief Executive Officer
We look back over a year in which SIG’s business has again proved its resilience and continued to grow in a volatile and uncertain environment. The COVID‑19 crisis continued to affect many of our markets but globally demand was underpinned by our role as an essential industry supplying food and beverage producers. Our teams were able to cope with additional supply chain challenges thanks to our well diversified and localised supplier base and effective logistics management. Deliveries to customers were made on time and our service engineers in the field continued to overcome mobility restrictions in order to ensure flawless operations in our customers’ factories.
Robust revenue growth and higher profitability
Core revenue growth of 6.6%1 in 2021 was above the guided range of 4–6%. The highest growth rate came from the Americas, where performance exemplified our strategy of combining new customer wins with an increasing share of wallet at existing customers. The strong top-line growth was accompanied by an increase in the adjusted EBITDA margin which was achieved despite higher raw material costs in the second half of the year. In recent years we have demonstrated our ability to maintain best-in-class profitability in the face of foreign exchange as well as raw material headwinds. Adjusted net income in 2021 increased to €252 million and, in line with our dividend payout guidance of 50–60% of adjusted net income, we are proposing a 7% increase in the dividend to CHF 0.45 per share, compared with CHF 0.42 per share for 2020. Free cash flow generation remained strong with net capital expenditure slightly below the target range of 8–10% of revenue, thanks to relatively high upfront cash payments received upon placement of new filling machines.
Investing in future growth
In 2021 we continued to place a significant number of filling machines with new and existing customers across all regions. We also continued to invest in our manufacturing base. Our new Asia Pacific plant in Suzhou, China opened at the end of 2020 and is progressively ramping up its capacity. In April we announced the construction of another new plant – this time in Queretaro, Mexico – which will enable us to serve our North American customers faster and more efficiently. The plant is expected to open in the first quarter of 2023 (see story Expanding our global presence).
Innovation milestones in the Middle East and Africa
We are pleased to report that the integration of our Middle East and Africa business, of which we took full control at the end of February, has proceeded very smoothly. In November, we were privileged to attend Gulfood Manufacturing at the Dubai World Trade Centre, which is a landmark event for food and beverage processing technology. We were able to experience first-hand the immense energy and drive for innovation which is characteristic of the Middle East and Africa region. The high point was receiving the award for “Top Futuristic Technology” for our next generation filling machine SIG NEO (see story Investing in innovation). The opening of our new Tech Centre in Dubai, which took place on the eve of Gulfood Manufacturing, clearly signals that we are committed to delivering a continuous stream of innovation designed to meet the needs of customers in this region.
Sustainability at the heart of our business
The launch of SIG NEO highlights the focus on sustainability which permeates our investment in R&D. It is not only our carton packs which can help customers to achieve their environmental objectives. SIG NEO has a 25% lower carbon footprint per filled pack compared with SIG’s current generation filling machines for family-size packs, due to low waste rates and reduced consumption of water and other utilities. And we continue to broaden the appeal of our most sustainable packs with the launch of SIGNATURE EVO, which extends lower carbon aluminium-free packaging materials – already available for plain white milk – to oxygen-sensitive products such as fruit juices or plant-based beverages.
Our longstanding and in-depth focus on environmental, social and governance issues is illustrated by the range of metrics reported in this, our first combined annual and corporate responsibility report. We are committed to the United Nations Global Compact and our business contributes to several of the United Nations Sustainable Development Goals. In this report you can read about our ambitious strategic priorities targeting Forest+, Climate+, Resource+ and Food+.
In 2021 we introduced a sustainability metric into our short-term incentive programme and in 2022 its weighting will increase. We have set the benchmark high with the choice of our EcoVadis score as the metric. We already have a Platinum ranking with EcoVadis, putting us in the top 1% of companies covered, and we need to continuously improve in order to maintain our position. The score covers a broad range of criteria in the areas of environment, labour and human rights, ethics and sustainable procurement. These criteria have a bearing on many facets of our business and touch on the work of many of our employees. Our experience has shown that our people are not only aligned with our ESG objectives in the workplace – they are ready to go the extra mile by implementing external sustainability projects and community engagement programmes. In Brazil, for example, more than 100 employees completed a series of climate-related challenges to earn points that were then converted into food for donation to homeless people and to families affected by COVID‑19.
Diversity, culture and leadership
Over the years SIG has steadily expanded its global presence and we have more than 80 nationalities represented among our employees. Our progress on gender diversity has until recently been slower and we are determined to remedy this, with the ambitious target of 30% of leadership positions occupied by women in 2025. Our commitment to an inclusive culture, to fair and equal opportunities for everyone and to enabling our employees to develop their full potential is reflected in a new appointment to the Group Executive Board. With effect from 1 January 2022, Suzanne Verzijden has joined as Chief People and Culture Officer, bringing 16 years’ international human resources experience in a major multinational company with a focus on people development, culture and talent topics.
In view of the growing importance of the Asia Pacific region in SIG’s business, we have decided to move to a dual leadership structure for the region. Fan Lidong, who became President and General Manager Asia Pacific North with effect from 1 January 2022, has 30 years’ experience in the packaging industry and has been instrumental in driving SIG’s rapid growth in China. Angela Lu, who joined the company as President and General Manager Asia Pacific South, brings considerable experience in the food and beverage industry, including more than 10 years with a key customer in Europe and Asia Pacific. Lidong and Angela take over from Lawrence Fok, who was President and General Manager Asia Pacific until the end of 2021. We would like to thank Lawrence for his many years’ service and for his many valuable contributions to SIG’s development in the Asia Pacific region.
With these additions to the Group Executive Board, we have an experienced and diverse leadership team possessing a broad range of skills which are perfectly aligned with our strategic priorities.
In early 2022 we announced plans to acquire two businesses which will expand both our range of solutions and our presence in key geographies. The acquisition of Evergreen Asia’s fresh milk carton business gives us access to new customers in China as well as allowing us to help existing customers expand in the fresh segment. Milk is recognised in China as an important source of protein and as good for health – all the more so since the pandemic – and demand is growing strongly.
The acquisition of the Scholle IPN business broadens our leadership in sustainable packaging systems and solutions. The business comprises bag-in-box and spouted pouches, which have many similarities to our cartons in terms of end-markets and industry structure. Scholle IPN has for many years deployed aseptic technology which we will further develop by leveraging our core competence in this area. We will also be able to maximise the growth potential of the acquired business through expansion in Asia Pacific, Latin America and the Middle East and Africa, building on our existing long-established presence in these regions.
Aseptic cartons remain a large part of our business, with robust growth prospects and a high level of profitability. They also represent an outstanding platform which will allow us to create significant value from these two exceptional external growth opportunities. We would like to thank all our employees for their energy, skill and dedication in building SIG into the strong company it is today and we look forward to working together on the exciting journey ahead.
Chief Executive Officer
1 Like-for-like at constant currency.