This call is being recorded. If you have any objections, you may disconnect at this point. Now, I will turn the call over to your host, Mr. Lloyd Midwinter. Sir, you may begin.
Good morning, and welcome to the Exnovel Q3 Q3 2016 Investor Update Conference Call. I'm Lloyd Midwinter, Director, Investor Relations. Today, our CFO, Mehul Josella, will guide you through our results for the quarter. We will refer to our results presentation, which you can follow on screen and download from our website, axonobel.com. A replay of the call will also be made available.
There will be an opportunity to ask questions after the presentation. For additional information, please contact Investor Relations. Before we start, I would like to remind you about the Safe Harbor statement at the back of the presentation. Please note this statement is also applicable to the conference call and the answers to your questions. I'll hand over to Melies, who will start on Slide 4 of the presentation.
Thank you, Lloyd, and good morning, everyone. In the Q3 of 2016, we achieved volume growth in decorative paints and specialty chemicals and further growth in profitability over and for all business area. Revenue was down 4% due to adverse currency and price mix effects. EBIT was up 1% at $442,000,000 and operating income 4% higher at $454,000,000 positively impacted by incidental items. Our return on sale and return of investment improved.
Net income attributable to shareholders was $285,000,000 The cash generation continued to improve with net cash inflow from operating activity up 3% at $600,000,000 And we increased the interim dividend by 6% to €0.37 per share. Turning now to Slide 5. Our Q3 2016 represents another quarter of improved financial performance. Profitability improved further despite adverse currency and price mix effects and challenging condition in several countries and segments. Volume growth in Decorative Paints and Specialty Chemicals was offset by lower volume in Performance Coatings and revenue was down 4% due to adverse currency effect and price mix.
EBIT increased to $442,000,000 versus $432,000,000 last year, reflecting continuous improvement initiative and lower cost, partly offset by adverse currency effects. Profitability improved further. We returned on sale up 70 basis points at 12.3% versus 11.6% in 2015 and return on investment improved 220 basis points higher at 15.2% compared to 13% last year. Overall financial results are shown now on Slide 7. During Q3 2016, we delivered higher profit driven by continuous improvement initiative and lower costs.
Revenue was down 4% due to adverse currency and price mix effect. Volumes grew in decorative paints and specialty chemicals, while volumes were flat overall. EBIT was up 1% at €442,000,000 with continuous improvement initiatives and lower cost, partly offset by adverse currency effects. Restructuring cost during the quarter was much lower than the same period in 2015, although our guidance remained 0.5% to 1% of revenue over the medium term. We expect restructuring costs for the full year to be around the same level as 2015 with around half of this expect to take place in Q4.
Operating income was up 4% at €454,000,000 Operating income was positively impacted by primarily non cash incidental items with a net effect of €12,000,000 including adjustments to provision amongst other post retirement benefits and asset impairments. The incident items impacted operating income of decorative paint performance and the operating income in other activities. Return on sale improved to 12.3% for 11.6% last year and ROI increased to 15.2% versus 13% in 2015. Slide 8 shows the quarterly trend for volume and price mix for ExxonMobil and each of the business areas. During Q3 2016, volumes were flat overall, while volume growth in decorative paint and specialty chemicals.
Volumes were up 3% for decorative paints and 1% for specialty chemicals, while volume were down 2% for Performance Coatings affected by adverse conditions in the marine and oil and gas industries. Demand differed per region. However, deflationary pressures continue in line with the previous quarter. This is particularly the case for specialty chemicals where price mix was negative 3% due price deflation in several markets. Deflationary pressures are expected to continue in Q4.
Price mix also adversely impact performance coating by 2% and was 1% lower for decorative paint, although this was mostly mix effect. I will now run through some highlights and growth initiative for each of the business areas. Let me start with Decorative Paints on Slide 9. Volumes increased 3%, mainly due to positive development in Asia and the Europe, Middle East and Africa region, while volumes continue to be down in Latin America. Demand trends differ per country in EMEA and uncertainty continue in some markets.
Currency volatility remained, including for the pound sterling. In Latin America, market conditions remain challenging due to the economic instability and currency devaluation. Positive demand trends in many Asian markets continue and in China volumes were positive despite continued challenging condition in the construction market. Revenue was down 3% mainly due to unfavorable currency effect including the pound sterling. EBIT was up 2% mainly due to higher volumes and lower cost, partly offset by unfavorable currency.
Operating income was also positively impacted by incidental of €9,000,000 Return on sale increased to 12% from 11.5% and volume improved to 12.5 percent versus 10.6% last year. We recently launched our 2017 color of the year, which is a denim drift this year to help inspire customer to make confident color choices and drive growth for our businesses. Highlights for Performance Coatings are shown now on Slide 10. Revenue was down 6 percent due to unfavorable currencies, lower volumes and adverse price mix effects. Volume percent lower affected by adverse condition in the marine and oil and gas industries.
Demand trends differ per segment and region. Volumes in Marine Coating were impacted by the slowdown of the new build activity in Asia as well as maintenance and drydocking. The outlook for the marine industry remains challenging. Protective coating volume remained robust related to a strong project backlog despite some headwind in the oil and gas industry. Volumes were up for positive automotive and specialty coating as well as for powder coating, while volume development were mixed per region for wood and metal coatings.
Profitability continued to improve despite lower volume. Gross was up at 14.2% versus 14.1% in 2015, and return on investment was 13.9% compared to 26.5% last year. EBIT was down with continuous improvement initiatives and lower costs more than offset by adverse currencies and lower volumes. Operating income was negatively impacted by incidental items of $7,000,000 The intended acquisition of BASF Industrial Coating Business is expected to be completed towards the end of 2016. We recently broke the ground on a powder coating plant in Mumbai that will bring us closer to our customers and provide several innovative lines including products for pipes.
Moving now to Specialty Chemicals on Slide 11. Volumes were 1% higher with positive developments, especially in Industrial Chemicals, partly offset by lower demand in the oil related segments. Volume for Industrial Chemicals were up due to increased demand and higher supply chain availability in Frankfurt and Rotterdam. Revenue was down 3%, mainly to price deflation in several markets. EBIT and operating income were up 3%, mostly due to improved volume and operational efficiency.
Return on sale increased to 14% compared to 13.2% in 2015 and oil improved to 17.2% versus 16.4% last year. Our Specialty Chemical business recently launched an essential ingredient for outdoor cleaning products that successfully meet stringent U. S. EPA environmental standards. I will now move to the financial review on Slide 13.
In Q3 2016, we improved financial performance for another consecutive quarter. Profits and margin increased with EBIT, operating income, return on sale, return on investment all higher than last year. In terms of shareholder returns, net income attributable to shareholder was flat at at €285,000,000 and adjusted EPS was €1.20 per share. Net cash from operating activity was up 3% at €600,000,000 Cash discipline continues with CapEx around 4% of revenue and lower than last year at €1,800,000,000 although slightly higher as a percentage of revenue. We are delivering on our improved programs and are maintaining the strong cash discipline.
And we decided to increase the interim dividend by 6% to $0.37 per share. Moving now to Slide 14. Free cash flow generation improved 11% versus Q3 last year, demonstrating the positive impact of higher operating results with EBITDA margin of 16.5% versus 15.7% last year, combined with continued discipline on CapEx, working capital and interest paid. Interest continued to reduce, thanks to the redemption of IQTOM debt and the refinancing at 1.125 percent low coupon. The year to date effective tax rate was 28%.
Free cash flow from operation after CapEx and pension top up payment improved 11% to $469,000,000 versus $422,000,000 in Q3, 2015. On September 30, 2016, the net debt was €1,100,000,000 down 35% on the same period last year. Turning now to Slide 15. During Q3, further derisking of pension liabilities, including an additional non cash buying transaction for GBP 1,700,000,000 related to the ICI Pension Fund, means a total of GBP 2,600,000,000 of pension liability have been covered by non cash borrowing during 2016. The recent buying do not impact the agreed top up schedule we communicated earlier this year.
Since 2014, a total of GBP 8,200,000,000 pension liability has been covered by non cash buy in. The cumulative effect of derisking activities mean around 80% of interest rates and inflation risk and almost 60% of longevity risk is now covered by insurance contracts and hedging. Most of the buy in has been related to the ICI pension fund, so the percentage will be higher for this scheme. This activity will further reduce volatility and uncertainty related to the defined benefit obligation and associated top up schedule. We'll continue to manage actively our pension liability.
Now if we look at the impact according to EAS 19, you have it shown on Slide 16. An increase in EAS 19 deficit was mostly the result of the derisking of pension liability through the non cash buying transaction I mentioned to you related to the ICI pension fund with a total net impact of minus EUR 391,000,000 combined with lower discount rates in key country and higher inflation, partly offset by higher asset returns. Moving now to Slide 17, about our dividend policy, which we mean to pay a stable to rising dividend. And in this quarter, as I mentioned, we decided to increase the interim dividend by 6% to €0.37 per share compared to €0.35 last year. Slide 19 includes some recent highlights in number of areas.
Building on the work we are doing through our human initiative human city initiative, we work with several partners to help improve the lives of residents in Quito, Ecuador. The launch of AquaSox, an innovation native waterborne anti scalp coating with superior hardness and excellent clarity is designed to make it easier for Chinese furniture industry to transition to more sustainable waterborne coatings. And at Cinnober, DSM, Google and Feelings joined force in a long term agreement to source power from renewable energy project for part of their operation in the Netherlands. Now turning to Slide 20 for some concluding remarks. So during Q3 2016, we achieved further growth in profitability with returns up in Aubinet area and positive volume development in the Accorative Paints and Specialty Chemical.
EBIT and operating income were higher. The net income to shareholder was $285,000,000 and the net cash inflow for operating activity increased 3%. We increased our interim dividend by 6% and our outlook isn't changed. The market environment remains uncertain with challenging condition in several country and segments. Deflationary pressure and currency headwinds are expected to continue.
We maintain our financial guidance and focus remain on driving continuous improvement and organic growth. This concludes our formal presentation, and we will now be happy to take your questions. Please limit your number of questions to maximum 2 so other can participate. Thank you.
Our first question comes from Mr. Paul Waugh. Sir, you may begin.
Yes, thanks. Good morning, guys. It's Paul Walsh from Morgan Stanley. I had obviously two questions to fit with what you've just asked, Miley. First on cash flow.
What are you going to do with the cash flow? I mean, I guess you could grow the dividend more aggressively than you have, but are you keeping capital aside for M and A? And how should we think about that moving forwards from here? The second question I had was just around the rates of profit growth and how you keep that momentum going. I think you mentioned PIP costs are going to be 50% fall in the Q4.
Do you think you can still grow underlying earnings in the Q4? Or is it getting tougher, I. E, what additionally is being done at the group level to continue to combat what are relatively lackluster markets? Thank you.
Thank you, Paul, for your questions. So first on the cash flow, as you've seen during this quarter, we continue to improve. So I think this is a strong reflection of our strategy to both drive the continuous improvement, the growth and also strong discipline maintained on our working capital and also our capital expenditure. So this cash flow has enabled us to reduce our debt further. If you've seen our debt at the end of the quarter was €1,100,000,000 And as we said before, we are focusing to use our strong balance sheet, 1st to grow the business organically, but also to consider bolt on acquisition.
We have announced at the beginning of the year the acquisition of the BASF cold coating business. And as we mentioned, we will be closing it by the end of the quarter. And we are, again, considering other bolt on to use this cash flow. The dividend is also an important part of the way we return cash to shareholder and that's why you have seen further increase of our interim dividend at 6%. Now on your second question about the performance and the growth, you have seen in this quarter further growth, in particular, in decorative paints in the Q4 of growth in a row.
Chemical also has posted growth and lower growth in Performance Coatings mainly due to challenging condition. As you know for Q4, Q4 is traditionally a small quarter for AkzoNobel due to the seasonality effect. And I also mentioned to you that we will probably see higher restructuring cost in this last quarter, even though overall we mentioned now that restructuring cost stay at the level between 0.5% to 1% And we are those restructuring costs are mostly targeted in area where we see challenging condition, in particular in the marine business this year or in also to support the continuous transformation we are doing in our global business services or functional transformation efforts.
But just coming back to that last one, is there any reason to believe why the underlying progress can't continue? Or I mean, forgetting about the cost of restructuring, on an underlying basis, are you still expecting to make progress?
As we see, we continue to drive our continuous improvement. So the progress are we continue to focus on that, and this will remain the focus for the next year also.
Okay. Thank you very much.
Thank you, Mr. Walsh. Your next question comes from James Knight. Sir, your line is now open.
Morning. Actually picking up a couple of points from Paul's questions. Firstly, can you quantify or give some dimension to the degree of cost cutting charges you expect in the Q4 and how that compares with the Q4 last year, just so we can get an idea of the dynamic? And secondly, we see a lot of bolt on activity in coatings and paints year to date, which AXA hasn't played in. It's made sense a bigger deal.
But what's stopping the activity there? Do you think the multiples being offered there are still too high? Thank you.
Well, so on the cost cutting, as I mentioned, we are really now on the phase of continuous improvement basis. So all the efforts we are doing right now rolling our message in our supply chain or in driving the function is regular. So the pace of the improvement is going to be on a regular basis. So we don't expect major change on the pace. As I just mentioned, in terms of restructuring charges, we will probably see higher charges in this in the last quarter than what we have seen.
So this is more the cost of benefit are expected to remain on the same pace. On your second question about bolt on acquisition, yes, you've seen a lot of activity in the M and A area in the different business on the coating side, but also very active on chemical. Multipo, I clearly I, we are determined to stay and focused on the bolt on we think can bring value to the business. I think we've been very disciplined. You've seen the acquisition.
We have realized at the beginning of the year, this is typically the acquisition we want to do in one of our core business, bringing us an increased position in a market where we're already a strong leader and also bringing some new technology. So that's what we will focus when we look at potential new acquisition and that is definitely part of a strategy to this bolt on on top of our organic growth.
Thank you very much.
Thank you, sir. Next question comes from Mr. Martin Evans. Sir, your line is open.
Yes. Just picking up again this M and A theme. You're on the wires, news wires, Eileen saying that you're prepared to undertake multiple bolt on purchases. And as you say, acquisition prices are high. I mean, is this almost now an admission of defeat in as much as the growth within your restructured business is clearly very poor, volume growth of 0% for the group, price is down another 2%.
Is it an admission that you need to change the structure of the group materially? And the other thing is you say you've earned the right to M and L. I'm not entirely sure what you mean by that. Surely, what you're saying is that you need to make acquisitions. I think earning the right following restructuring may not necessarily be logical.
So to be very clear, this is absolutely in line with the strategy we have announced 1 year ago in our Capital Market Day. So nothing has changed. It is absolutely not something new. We have at that point clearly highlighted that we have been in the past year concentrating in restoring the profitability in the business, building the foundation And we are now in the 2nd leg of our strategy, which was to focus both on profitability and also on growth. And these growth will be on organic growth, primarily focused, but also on pursuing with bolt on acquisition.
So it is absolutely in line, nothing new. The concept of earning the right is to say that we have built the foundation before you can acquire a company, you need to be able to achieve internally restore the capacity within the company. And therefore, we have done that. And now we think that we've reached a level with the way we run the business and the profitability and the value generation, in particular, in term of cash generation is restored. Look at our balance sheet.
We have now a stronger balance sheet and this is coming from this. So just to be clear, no change. It's exactly the strategy we have announced and it's in line with the step we have taken this year with this first acquisition. But as I mentioned, we will remain disciplined as cash is cash generation is a key focus for us.
Thanks very much.
Thank you, Mr. Evans. The next question comes from Mr. Peter Clark. Sir, your line is
Yes, good morning. I just want to clarify one thing and to the two questions. Just clarify on the restructuring charges. You indicated that Q3 was similar year on year, which is certainly what you get by what you're suggesting on Q4. And then the two questions.
On the UK, obviously, you said it was down ahead of the vote and it remained down. And I'm just wondering if it was down for the whole of the third quarter. And the reason I asked that, of course, your competitor suggested that July actually was a bit better for it will happen in August September, of course, subsequently. But effectively, they said that. Obviously, the big paint season is over in the U.
K. It's very important for you. And then the second question is related to the Marine. Obviously, judging by the numbers you've given, you could probably gauge that the business is probably down 10% or so. Obviously, you maintain this challenging, going to remain challenging.
Is that a sort of trend line you see continuing? Or are we going to be lapping something soon? Or is it was it below trend, that sort of volume and price hit we saw in the Q3? Thank you.
Yes. So first question on the restructuring. As I mentioned, we expect the restructuring cost for the full year to be about the same level as last year, but around half of it to take place in Q4. So clearly, we will see more in Q4 on comparison compared to Q4 last year, but overall for the full year would be about the same level, which were around €74,000,000 for the full year last year. On the UK, I have not mentioned anything.
I have not mentioned that we are down in the UK. Overall, as we mentioned, Europe, Middle East, Africa was up. In UK, what I have indicated is that we do not see any clear trend on the market today. It is really to determine what is going to be the trend. We have seen a very various trend in the quarter.
If you look at statistic out also, they are all over the place. PMI dropped sharply in the 2 1st month then improve and bounce back in September. You see some figure that say that GDP will be lower, but we also have index that show a steady and stability, for example, in IHS index for construction growth. So no clear trend. And therefore, I have given no indication on the downturn in the UK.
Overall, as I say, Europe, Middle East, Africa remained during the quarter positive. And your last question was about the Marine. Indeed, Marine is not a surprise. We had already flagged that to you in since the beginning of the year that we were expecting downturn because that's where we've seen that the backlog was clearly down. And yes, we do see that this negative cycle will remain in the future.
So this is part of the challenging condition, which are part of our outlook.
Thank you.
Thank you. Next question comes from Alex Stewart. Sir, you may proceed.
Hi, Maris. My question has been answered. Sorry about that.
Thank you.
Thank you, sir. Your next question comes from Woodley Dondogan. Sir, your line now is open.
Yes, thank you. It's Woodley Gaut again at ABN MRO. Two questions. The first question is on the accident at BASF. I was wondering, have you seen or do you expect an impact of the accident at Ludwigshafen on your businesses, be it positive or negative?
And then secondly, and sorry about this because a couple of questions have already been asked on M and A, but also I want to ask something about it. Your large coating peers are doing major acquisitions. Don't you fear that your market positions will weaken as your competitors become bigger and stronger by doing these larger acquisitions while you're keeping with bolt on acquisitions? Thanks.
Okay. So on the GEA stuff, as I mentioned, the acquisition will close at the end of the year. So we'll contribute in 2017 to the growth. Related to the incident, and no, the incident does not affect any of the operation we are planning to acquire from BASF. On the
My apologies. I meant BASF as a competitor or as a supplier, not so much the transaction of the coating gases.
Well, at the I'm sorry, so can you repeat your question exactly because I thought you were meaningful acquisition. What is your question?
No, no, it's 2 different questions. So the first question is on BASF as a potential supplier or as a competitor to AkzoNobel. Just wondering whether that will have an impact on your business, the fire at Lutuxhaven. And
then secondly Okay. So on this, the detail are still emerging. So you can understand that it's really too early to say what will be the impact of this incident. So I cannot comment at that stage. On the other question, which was related to the M and A that's going on in the industry, As I mentioned, we are part of it with the bolt on acquisition.
The landscape is changing. We are, of course, a strong player in this market and we expect to remain so through our continuous focus on innovation and technology. We have shown you several example that we've launched this quarter of products in particular for the Chinese market with clear sustainable advantage. We'll continue to grow in India with this new factory. We have just opened for powder business.
We are developing further products in chemical for cleaning and surfactants. There are many example all across our business where we launch new products, and that's clearly a strength that will help us in this industry to continue to grow.
Okay. Thank you. Thank you. Next question comes from Patrick Lambert. Sir, your line is now open.
Hi, Melissa. Hi, Lloyd. Hope you're doing well. A few questions for me, 2 I think or 3 maybe. Again on Marine and Protective, would it be possible to get a split between maintenance and OEM in both Marine and this a rough estimate would be fine just to see how sustainable the maintenance business because you mentioned also maintenance being a bit weak on marine.
And if you can comment that also maintenance on protective will be interesting to know, first question. 2nd question again on Deco UK. Could you comment a bit more on the parts of Europe, Sweden, UK? I know you too I think Peter tried, but in terms of volume growth versus the 3% average of the region? And the third one, raw materials.
We're starting to see raw materials going up on the back of your price, but also on supply tightness, I guess, in TiO2 and restructuring of some plants there. What's your outlook for the remainder of the year and maybe early 2017? Thanks.
Okay. So on your first question about the marine business and Protective, As we mentioned, the slow what we've seen the pressure on the volume in Marine Coating are impacted both by new builds and also by maintenance and dry docking. You've probably seen the news all in all Asia, a lot of distressed company in the shipyard industry. So these industries really facing a significant downturn and that affect both of the activity of maintenance and also on newbuild. On the protective side, as we mentioned, on this quarter, we remain robust because of our backlog of project, but we clearly see the headwind continuing in the oil and gas industry.
Though for the moment, the outlook remain negative for this sector. On the other end, as we mentioned, we have in Performance Coatings other markets that are growing, in particular, the automotive and the consumer electronics in specialty coatings. We also see good trends in powder and overall Asia has really shown a good progress. Now if we look at Europe, as I mentioned, for decorative paint, we see a strong growth of the paint of 3%. The growth is Asia.
So we continue to see a very good demand over Asia and also including in China, Middle East Africa is also positive, but I would say it's really Asia, which is the largest contributor. And Latin America is really negative. We have flagged that. It continued to be a challenging market even though the currency now is getting better, but that's really the main driver. On the raw material side, in this quarter, we continue to see raw material prices lower.
Although as we mentioned before in some of the region, the currency adverse impact on raw material has hampered this reduction. If we look forward, when you look at the curve, and I recall, you know that perfectly, we do not buy oil. We buy the receivable, so there is also a lag effect. But when you look at the curve of oil price, we are now back to about the same level of last year. Therefore, we do expect the year on year benefit on wood material to dissipate over the end of the year.
And in TiO2, we, for the moment, expect benign effect on the short term.
Thanks, Menis.
Thank you. Next question comes from Christian Faitz. Sir, you may proceed.
Yes, good morning. Thanks for taking my two questions. First of all, Deco, in Europe, can you please talk about underlying volume trends in the various countries? I know you talked about the U. K, but how about France, Benelux and the Nordics, for example?
Then second of all, in your specialty chemical activities, can you please talk about demand trends in China during Q3, maybe sequentially how demand developed? And in that context, other companies are talking about easing supply pressures in China, I. E, quite a few local competitors are leaving the market. Can you confirm that in your specialty chemical activities as well? Thank you.
Yes. So for Europe, although as we say, it's still a very different sneak back of country. We are in more than 30 countries. But on the major country, as I mentioned to you, UK still a very nuclear trend on this market. In France, the market remain challenging.
I think that's the important part. But overall, we are slightly up in this in the region. Going to China, as I mentioned, we have seen a good progression during the quarter. And I must say, this is a quarter board in all the businesses. You have seen some figures this morning about GDP in line with expectation, about 6.7%.
So, so far, we continue to see a good trend in China and also in overall Asia region, which represent a significant part of our growth for all our businesses, including for Chemical. As you've seen this quarter, volume growth in chemical are 1%.
Thank you.
Thank you. Next question comes from Jean Francois Lemonti. Sir, you may proceed. Hello.
Jean Francois Lemonti from Morgan Stanley. I have a quick one I want to further elaborate on the dividend. Let's say, after years of leaving dividends unchanged, you opted last year, but you're still not at industry standard, which would be a 3% yield on your competition. If I take a 3% yield on your current share price that would point out to €1.80 dividend, which would be 15% to 16% increase year on year. And the same way you say you've earned the right to do M and A after years of net generating cash, you've turned the corner and generated significantly more cash.
So it's 6 times more year on year in Q3. And I would have thought that your investors also have earned the right to earn a market rate dividend yield. So can you a bit elaborate why you're not adjusting your dividend to competition? That's the first one. And on the second one, is there any reason to think that your cash generation in Q4 would be materially below last year?
Thank you very much.
So on the dividend, as you pointed out, we had several years of stable dividend in a time where we had cash negative. So it was also to show the confidence we had in the future. I think since last year, we are in clearly a different trend. We have increased our dividend last year 7%, and now we continue to increase the dividend. Our policy is really stable to rising, though dividend are very important and we do indeed focus on the cash generation and also returning the cash to the shareholders.
So I think these 2 years increase of the dividend is a sign of the fact we want to clearly give the benefit to our shareholder. In term of how we confer with other, as I said, we have to have a policy which is sustainable in the long run. Going back to your
Is there a simple reason why not to go to industry standards because that would cost you EUR40 million, which additional, which is nothing compared to your cash generation. So is there any reason behind?
If you as you think, there is no pricing, there is not industry standard. We're looking at our own if you see last year, we had already a payout ratio, which was quite significant above 40%. We have our policy to struggle to rising dividend. So it's long term trend, which is important. We want to reward regularly our shareholder.
And I think 2 years and I think this one, the interim dividend continuing to show progress on the dividend is a very good sign. So about the cash generation, as I mentioned, we continue to be focused on the cash generation. You've seen good progress on this quarter and yet we do expect to continue to show progress. I recall that in the Q4, we expect to close the acquisition of BASF. But excluding the acquisition, we continue to aim at being cash positive for the year.
Okay. Thank you.
Thank you. Our last question comes from Mr. Paul Walsh. Your line now is open.
Yes. Thanks, Manish. Just one follow-up question please on the pension top ups. I think they're denominated in sterling. The next one is due in the Q1.
Are you doing anything to take advantage of current sterling weakness to reduce the net present value of those top up payments? Is there anything you can do to lock in the current favorable rates to reduce the euro burden?
Yes. For the moment, as we have indicated on our cash top up, first important to notice that the recent buy in that I mentioned have no impact on those top up. The only positive impact is that, as we mentioned before, it reduced the potential volatility of the stop up, so increase the visibility. In terms of the stop ups, we are giving them to you an indication in euro. At that time, it was €0.71 versus pound exchange rate.
With the lower pound, you can expect to see a lower effect. We do sometimes edge a part of it, but not all. And therefore, we expect to benefit for some of the lower currency when we'd be on top of next year.
And just one final one for me, sorry. Pricing power. If we do move into an inflationary environment year, how confident is the group that they can manage that with pricing initiatives across the 3 divisions, please?
Well, as you know, we are constantly reviewing and adapting to a situation on the pricing. We have flagged nevertheless that for the past two quarters, we have seen a deflationary environment with deflationary pressure, in particular in chemical. If environment change, of course, our policy is always to see how we can reverse this trend. And we will adapt as we've done in some markets that have seen this pressure. You've seen what we've done in Latin America, in Russia, in Brazil was good example of what we were able to achieve.
But on the short term, we see that the deflationary pressure will probably remain.
So remain for how long? And just to be clear, you think you can get price up if you need to?
Well, that's always been our policy and will remain our focus. As we say in our outlook for the short term, we continue to see deflationary pressure and we see challenging condition, but our policy is always the same to look at how to improve our margin and pricing is one of the aspects when we see environmental change condition.
Understood. Thank you very much.
Thank you. Next question comes from Martin Dunwoody. Sir, your line is now open.
Great. Thank you very much. I've got two questions. Firstly, just coming back to the pricing again, not really relating to raw materials. I know you say it's a deflationary environment, but more in the case of Sterling in the UK, whether you're doing anything on pricing there to offset the weakness you're seeing in currency?
And then secondly, on Marine, you alluded to restructuring coming through there. Have you already been restructuring in Marine? Or is there an awful lot more to come that you're doing within that? And what kind of actions are you taking to cut costs within that area? Thanks.
So on the currency, as you've seen in this quarter, overall, the impact on the revenue was around 2%. And as we have put in our outlook, we expect currency headwind to remain. And if we look at the current currency at the stage where we are might be even a little bit higher in the last quarter, mainly because of the pound. This is mostly translation effect. As you know, we are producing and locally in the UK.
So we are fairly natural edge except for some of the raw material that we import, but we'll continue to adapt as we mentioned before. Your other question was on the marine and restructuring. As we mentioned before, we are now we have done very large restructuring in the past and in particular in Performance Coatings. We did close many sites and Marine was, of course, part of the overall change we've done in our Performance Coating business where we delivered a lot of management where we also closed factories. So Marine was already part of that.
Of course, as we mentioned, when we see further downturn on the sector, we could take additional measure. That's what we did in Brazil last year when condition were not favorable. And we'll continue to adapt going further in the specific market where we see weakening trend happening.
Okay. Thank you very much.
Your next question comes from Markus Mayer. Sir, your line is open.
Good morning, Markus Mayer, Barahel here. Only one question remaining. As you are now in the times of merger mania, For you, does the merger among coating companies make sense? And would you also be willing to do such as that if there would be a logic behind that?
I didn't get I'm sorry, your I'm sorry, I couldn't hear. So on merger, as we mentioned, our strategy is really to drive growth to organic growth, volume development and also bolt on acquisition. So this is part of our strategy that we are pursuing for more than a year now. And the acquisition we've done from the BASF Industrial Coating are part of this strategy. We, of course, continue, as I mentioned before, to be very disciplined in the way we acquire and make sure the target or the company we want to acquire or merge are really fitting with our strategy of growth and profitability.
No, the question was if there as a merger among 2 large coating companies would make sense and from the business you'll augment logic and how you, the management of Aktundra will see such a merger if someone would approach you?
Well, I do not make any comment on, again, speculation. Our strategy is clear. We want to pursue bolt on acquisition, and that's what we are focusing on.
Okay, perfect. Thanks.
Thank you, sir. We have no questions at this time.
Okay. Thank you very much to everyone for the call and your questions. We'll end the call now.
Thank you, sir. That concludes today's conference. Thank you all for joining. You may now disconnect.