Good morning, ladies and gentlemen. Thank you for holding, and welcome to the ENDLESS Call Full Year 2018 Results. At this moment, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions. I would like to hand over the conference to Mr.
Piet Von der Schlicke. Please go ahead, sir.
Yes. Good morning, everyone. I'm here with Hans Kormans, CFO of RMCB. And he and I will be happy to answer your questions regarding our press release containing full year 2018 results. In this year, 2018, we achieved record growth.
Revenue grew with 29% and EBITDA with 25 percent. Cash earnings per share increased with 23%. All regions contributed to this fantastic result. In 2018, we made 3 important acquisitions, IT Horn in the United States on the West Coast, enabling us to form a national organization in the U. S.
With our other activities there VELUX in Europe, which will strengthen our Advanced Materials business and Aroma in India, which offers us complementary market segments and is a big step forward to become a pan Indian distributor. So to summarize, 2018 was an exceptional year. We further invested in our business model by strengthening our IT backbone and by investing in digital capabilities. We are optimistic about delivering good results in 2019. And maybe it's now good to give over to Hans for additional remarks on the numbers.
Thank you, Pete. Good morning, ladies and gentlemen, and I would like to give you a summary of the 2018 full year financial results of IMCD that we published earlier today. As Pete said, in summary, consider 2018 as an outstanding year with all regions contributing to the growth of our results. As you can see on Page 10 of the presentation, revenue increased 25% compared to 2017. And this increase was a combination of 10% organic growth, 18% acquisition related growth and a negative ForEx impact of minus 3%.
The acquisition growth is the full year impact of 3 acquisitions made in 2017, Novemdus in Italy, Bosco and Lomas in North America. And further acquisition growth includes the impact of acquisitions in 2018, the 3 Pete just mentioned, so ETR in the U. S, Felix in EMEA and at all mine in India. ForEx adjusted gross profit increased 29%, thereby organic gross profit growth was 13% and the remainder the result of acquisitions. Gross profit as a percentage of revenue remained stable at 22.5%.
And during the year, we experienced the usual fluctuations and differences in margin percentage between the regions and between the quarters. And this was caused by local market circumstances, product mix differences, product availability, currency fluctuations and the impact of the newly acquired businesses. For your convenience, we included a line with EBITDA comparison. However, for IMCD's Asset Light Business Model, the EBITDA development shown in the next line is more relevant. Operating EBITDA increased on a constant currency basis with 30% to €202,000,000 The operating EBITDA as a percentage of revenue remained stable at 8.5%.
The same applies for the conversion ratio of 37.7%. This means that the expected negative impact on margin percentages of the acquisition of LV Lomas, E. T. Roan and VLOGS, acquisitions with on average much lower EBITDA margins than group average, has been compensated by a combination of improved performance in acquired businesses and EBITA margin improvement in the rest of the group. On the next slide, Page 11, you will find a summary of the financial details for our operating segment.
The activities in EMEA continued its trend over the last years to deliver strong growth. On a constant currency basis, EMEA realized 14% gross profit growth, whereby gross profit as a percentage of revenue further improved. Organic gross profit growth was 10% and the remainder the impact of acquisitions. Operating EBITDA in EMEA increased 16%, whereby the EBITDA margin further improved from 9.9% in 2017 to 10.3% in 2018. Most of this reported growth is organic.
The figures of Americas in the second column show a combination of the impact of substantial acquisitions combined with strong performance and double digit organic growth. The acquisition impact is the full year impact of the acquisition of Bosco and LVLomas completed in 2017 and the acquisition of Horn completed end of July 2018. Both Lomos and E. P. Horn had an EBITA margin that was much lower than group average, resulting in a negative impact on EBITDA and conversion margin percentages in this region.
Organic gross profit growth in 2018 in the Americas was 22%. Operating EBITDA increased to €60,000,000 an increase of 79% on constant currency basis. It's fair to assume that this growth could be split about fifty-fifty between organic and acquisition growth. Asia Pacific had another good year and realized 13% organic growth profit growth and a further improvement of the gross margin percentage from 20.7% to 20.9%. Operating EBITDA increased 19% on a constant currency basis, and most of this growth was organic growth.
EBITA margin and conversion margin both further improved. And in the last column, you will find in the holding companies all non operating companies, including the head office in Rotterdam and regional support offices in Singapore and New Jersey in the U. S. The absolute amount of holding costs increased from €15,000,000 to €17,000,000 And this increase reflects the growth of IMCB and the need to strengthen support functions in both Rotterdam and the regional head offices. Holding cost as a percentage of revenue decreased by 0.1% from 0.8% in 2017 to 0.7% in 2018.
On the next page, you will find a summary of the P and L lines from EBITDA to result for the period and a few general remarks. Amortizations of intangible assets are noncash costs related to the amortization of supplier relations, distribution rights and other intangibles. Most of these intangible assets relate to the acquisitions made in our history with private equity owners before the IPO in 2014. The nonrecurring income and expenses are cost related to M and A activities and some costs related to one off adjustments of the organization. The nonrecurring net finance costs have to do with IMCD's refinancing in Q1 of last year.
Repayment of the old term loans and revolving credit facilities resulted in a €4,600,000 accelerated noncash amortization of transaction costs related to these loans. The development of the finance cost and income tax expenses are summarized in the next two slides. First, a breakdown of the net finance cost on Page 13. And in 2018, finance costs were about €4,000,000 higher than previous year. It's obvious that on average higher net debt positions in 2018 as a result of acquisitions made through the main driver of these higher interest costs.
On Page 14, a summary of our income tax expenses. And I encourage you to remember, as a guidance for our tax cost, we indicated to expect a blended tax rate in the range of 24% to 28% of result before tax, calculated as EBITA minus finance and nonrecurring cost. As you will notice, the summary on the bottom of this page indicates that IMCD's blended regular tax rate was about 25.5% in both 2018 2017, both at the low half of the guidance given. Tax cash out in 2018 was €43,000,000 compared to €35,000,000 in 2017. I hope this helps, and I would like to refer to the annual report for further details on the tax calculation.
On the next page, the calculation of cash earnings per share. As you can see, the calculation method is consistent with previous years. And this means that we decided not to adjust for the noncash nonrecurring €5,000,000 accelerated amortization of net finance cost. An adjustment that would have been absolutely defendable and would have added an additional €0.09 to the reported cash EPS. However, we decided to keep the calculation method simple and consistent and avoid confusion about definitions used.
At the AGM, we will propose a dividend of €0.80 in cash per share, which means an increase of 29% compared to last year. This dividend proposal leads to a payout ratio of 32% compared to 30% last year. Then on the next page, a summary of IMCEE's balance sheet. Property, plant and equipment slightly increased but still relatively low as a result of the Asset Light business model. Intangible assets and the related deferred tax liabilities are a result of acquisitions made in our private equity history.
You can see a growing equity position of €786,000,000 covering about 56% of capital employed. And this increase in equity is mainly the balance of a net result of €100,000,000 and a dividend payout in May last year of €33,000,000 The two other lines, working capital and net debt, are summarized on the next pages. Page 17, you will find a summary of the absolute amounts of the various working capital components, and these absolute amounts translated in days of revenue. As you can see, the absolute amount increased with €85,000,000 which includes €57,000,000 related to acquisitions done in 2018. The €28,000,000 remainder is a combination of increased business activities adding €33,000,000 and a positive impact of exchange rate differences of €5,000,000 On Page 18, a summary of our net debt provision.
In the first half of twenty eighteen, EIMSADIG successfully issued a 7 year unsecured unrated €300,000,000 corporate bond with a fixed coupon of 2.5%. Further, we entered in a new 5 year syndicated €400,000,000 euros multicurrency revolving facility. And this refinancing has improved terms and conditions, extended our maturity profile and provides further flexibility and appropriate levels leverage levels to support future business developments. On this page, an overview of the maturity profile of our debt structure as per the end of December 2018. In the course of this week, we agreed with our banking syndicate, so called amend and extend, and by the maturity date of our revolver facility, so the green bar in the summary, will move from April 23 to April 24.
So it will move 1 year to the right. Reported leverage at the end of 2018 was 2.8x EBITDA, which was well below the required maximum as said in the loan documentation. And I would like to finish the financial summary with the cash flow overview on Page 19. And as you can see, the absolute amount of free cash flow improved to €5,000,000 to €166,000,000, whereby the cash conversion ratio decreased to 80%. This decrease in conversion margin is the result of higher operating EBITDA, partly offset by increased working capital investments, mainly driven by substantial organic growth of the business.
And then last but not least, on the last slide of the presentation, you will find the outlook in which we, amongst others, indicate that IHCD sees interesting opportunity to increase its global footprint and expand the product portfolio organically by acquisitions. I think Peter and myself are happy now to answer your questions and would like to give back to the moderators.
Ladies and gentlemen, we will start the question and answer session now. The first question is from Mr. Gando Gon, ABN
AMRO.
Let me start with 3 questions. The first is on the Americas. Organic gross profit growth, still very high, but it did slow down from Q3 to Q4. Can you talk a little bit about why that was? The second question or questions is on working capital.
So when I read that part in the press release, you indicated you had higher inventory at year end due to temporary safety stock in U. S. And also, you had lowered than planned customer deliveries in the last weeks of December. So my first question is the final remark about lower than planned customer deliveries. Is that solely referring to the U.
S. Or to other regions as well? So that's the first part of that question. And then secondly, could you quantify the impact of both elements? And then thirdly, on this, has that normalized?
So the lower deliveries in the last week of December, has that normalized in January, February? So apologies, that was question 2. And then finally, question 3 is on organic growth again. So this is very high in 2018, very stellar performance, I must say, although it did slow down towards the end of the year, but still above historical average. Should we expect that this higher than historical average organic growth will continue in
the short term, I.
E, in the next few quarters?
Okay. Thank you, Mutlu. Let me try to answer your questions. First question was about organic growth slowdown in the Q4 in the Americas, you say, you asked and why that was. I don't think that you have to read anything specific in that.
I think still on a very good growth pace also in that quarter. So there's no specific explanation for that. Working capital, 4th quarter, is that the increase only you asked, I think, only in the Americas or totally for the group? And the answer is that is for the group applies for the group. Then lower deliveries in Q4?
And does that also do we see that also now in Q1? We will see at the end of Q1, of course. But I think that we are, as we said, positive about also 2019. And the last question was what was the organic growth? The organic growth, the first 13% is the new norm.
Listen, probably not a note low. I think 13% is, of course, extremely high. As we also indicated, this is a stellar year, 2018. And we will do our best, but it's a very, very high bar. And we have seen in the past also that we have slower years.
So I would certainly not qualify that now as a new norm.
Okay. Thank you very much. I have a few questions, but I'll join the queue again.
The next question is from Mr. Olofsson Kepler. Your line is open. Please go ahead, sir.
Yes. Good morning, gentlemen. My first question is basically a follow-up on Mahmudu's question on the organic growth prospects. You don't break down the various drivers, but can you confirm that new distribution rights and new supplier relationships had a meaningful contribution to the 13% organic growth in 2018? And then looking at 2019, do you think that new supplier relationships can have at least a similar impact as in 2018?
And which regions will see the biggest tailwinds from new relationships? Is that mainly North America and some of the Asian markets? And then I have some follow-up, please.
Yes. I think part of our business model is, of course, that we constantly try to expand existing relations with our principal suppliers and that we also try to find complementary product ranges and suppliers to the business that we have. That is a constant process that is partly, of course, not totally determined by ourselves because it's also something that is, to a large extent, determined by suppliers. But we are, in our model, very positive that suppliers will see the let's say, our sales channel as a sales channel that adds value to their business. So we certainly expect in all regions the addition with new product lines and new suppliers.
So a big it's a big part of our organic growth is, of course, on the one hand, to find new customers for existing products and on the other hand, to add, as I say, new supplies and new product lines. And that's a continuous, let's say, emphasis and pressure on our organization to deliver that. And so far, we have been successful in that, and we don't see any reason why that should not be the case also in 2019.
Okay. But coming back on your earlier remark that 2018 was a stellar year, was then the impact from new relationship? Was that exceptionally high? Or
No, I think it's a combination. It's a combination of very good economic circumstances everywhere, plus this effect. And we will have to see in 2019 how the economies will develop in the various regions. And as you can read every day in the paper that it is yes, it's, let's say, mixed in the sense that some dark clouds are there and some positive views. But let's see what happens.
So it's a combination of the both.
Okay. Then another question on the conversion margin, which was stable in 2018, although it improved in the existing operations. As you continue to grow your gross profit organically, do you think the conversion margin in the existing operations can improve further, I. E, will there be operating leverage? Or will further improvement to the conversion margin fully depend on improvements at the acquired businesses?
I think it could be a combination of the 2. And again, here, it depends on what we add. So if you can add a new supplier relation or a new product line whereby you don't need to invest in additional labs of people, then it helps to improve the conversion margin. But it could also just go over the trigger point that you need to add people and capacity, and then the conversion margin will remain stable and you only grow the actual demand? Listen, we said in the past, of course, that we have been extremely efficient our conversion margins.
Historically, the added businesses that have here and there are lower corporation margins, so we do our best to bring it up to speed. And also, when conditions are favorable, expand the margin, let's say, organically. But it's hard work, and it's as you are at this quite high level already. It will be difficult to further expand. This is, by the way, something I said also at the IPO in 20 14.
So I'm not sure if we have reached the end. But we stay on it. But it is, of course, something I mean, you have many forces. You have customers, of course, that want a better price. You have suppliers that have also better prices than we are in between.
So it's not something that we can easily do.
Okay. And then my final question. Following the most recent acquisitions, can you update us where you stand in terms of revenue or gross profit breakdown between Life Sciences and Industrial end markets? Is that still something like 40, 60?
Yes. I think a low 40 and a high 50. And then a low 40 for the large Low, yes.
And is there a big difference between regions?
I think that we are, let's say, more even in Europe and that we are more skewed still in the United States and Canada in the industrial sector.
Okay. Thank you.
The next question is from Mr. Kumar, HSBC. Your line is open. Please go ahead.
Good morning, gents. Just trying to understand how the cost pressures are looking ahead in 2019. Remember, we had a discussion about freight charges going up in Q3 with some of your competitors. I know you outsource a lot of it, but have you seen that filter through in the cost price of inventory or in the selling prices or in your SG and A in some shape or form? That is question number 1.
Question number 2 on the supplier synergies with all the acquisitions you've done. Appreciate you've given a lot of color so far in terms of growth. Can you illustrate some examples how actually that works when you're selling the same supplier over a bigger geographic footprint or network in terms of what sort of cost synergies you might be able to get?
Okay. First question on freight costs. I think this is, of course, a relatively, let's say, modest part of our total cost structure. We see, in particular, I think that's well known in the United States, a shortage in trade capacities. Of course, have gone up a bit.
But it really does not material affect our margins and our cost structure. So I wouldn't attach too much importance to that. On the supplier synergy, I think what is important to realize is that we always try to expand the relationships that we have. So for example, if we work in a certain region in the U. S.
Or in Europe, we very often are capable at a certain stage, depending also on the needs of the supplier to expand that relationship elsewhere. And for example, in the United States, we are very busy doing that and trying to convince all of our suppliers to do that. For that reason, we are building that Ityhorn was a piece of the puzzle in that story. We are building a national organization whereby we can cover in the different market segments all regions and then also, of course, enable us to offer a service to our suppliers and customers that is more efficient than they had before. The cost synergies is very not the first thing we look at.
We look at top line synergy, ability to grow pieces of suppliers in bigger regions. Very important for us is also to align with the, let's say, the winners in different market segments, so those who have the best products. So it's a palette. It's a whole combination of factors that make, let's say, that make our model work. And basically, what we try to do is to optimize our sales channels for our suppliers.
And as a lot of factors in geographic presence, our IT capability, our ability to formulate the products of our suppliers. And if we have that all right, then of course, we are attractive to work with. And yes, that, in effect, results in more business.
Thank you very much.
The next question is from Mr. Gugel, Deutsche Bank. Your line is open.
Thanks for taking my question.
I just wanted to go back to what you said around the December. Well, the fact that inventories were a little bit higher in December as orders weren't coming through.
Could you just give us
a little bit more color on that? Was that very much on the industrial side? Did it continue into January? What do you think was driving that? And then on the outlook, I mean, obviously, you haven't put any numbers toward that.
But given that you said sort of medium term 6% to 7% organic, would you say that building everything in and obviously the fact that comps get a bit tougher this year, 6% to 7% organic GP growth is a realistic assumption for 2019? And then last question was, I missed what you said earlier about the cost of debt. I know you said that you'd raised some financing this year. I think you said 2.5%. But the debt number the interest costs were a little bit higher than I was thinking.
Could you give us your cost of debt now versus what it was a year ago? That would be very helpful.
Okay. First question on December. I think in the 25 years that I'm in this business, I've never been able to guess what December does. And I'm not going to tire you with days or working days or what the Christmas period is, but it's difficult it's very difficult to predict what a month of December does and what exactly is in the mind of customers. I think in 2017, we had a very strong December.
This December was a little bit weaker. We don't see that going over into January. And it is, in principle, in all market segments. So it's not specifically in only in Industrial. The 6% organic growth that we gave as a guideline is something that we still stick to.
And as a general guideline for over the years as a percentage of organic growth. And Hans, do you have to follow-up? Yes. Stephen, if you look at interest cost, about half of our net debt is the $300,000,000 2.5 percent bond. So I think that's an easy number.
The other half is all based on Virebor, LIBOR, PULSEN margin, and the margin is around about 1 point, I think 1.5%, 1.35%. So I think the blended interest costs are slightly below 2.5 percent on the net debt position.
Okay. Great. And is that similar to what it was in 2017?
Yes.
Thanks a lot.
The next question is from Mr. Brainer, Degroof Petercam. Your line is open. Please go ahead.
Hi, good morning. Thank you for taking my questions. Actually, I would like to come back to the Americas. That would be my first question, then I will have a second one. First of all, the Americas, I would like to talk about a bit about the footprint because you mentioned that with the acquisition of Ichijor, you're basically building a national organization, which from what you said in the past is really key to attracting new suppliers and the new contracts and attract, obviously, new customers afterwards.
So I was wondering, are you today happy with your footprint? Or do you still see some kind of gaps that need to be filled in with further acquisitions or potentially with organic development? So that's the first question. And then secondly, it's actually the first time that I see that you put quite a lot of emphasis on digitalization, ERP systems, etcetera. So I was wondering where are you in this journey?
Is that like completely done? Or are there still investments that are needed in the coming years to actually move fully digital? And in what way does that enable you to, I would say, facilitate organic growth and attract new suppliers?
Okay. Thank you very much, Nathalie. On the U. S, it's, of course, still a work in progress. We are integrating the business that we acquired, and it's quite an effort to build national teams in the different market segments and very a lot of practical issues that we have to solve there.
But we have made great progress on that. We still have, of course, gaps in certain market segments that we further want to improve. There's always things to improve. But we are pretty happy now with, let's say, the progress that we have made, and we are pretty also excited about the opportunities that we have. And so I would say still work to do, but a lot of, let's say, a lot of work has been done.
And I expect a lot from our organization there. On the digital side, yes, this is, of course, always a big question. I mean, in 2018, we have worked a lot to strengthen our IT backbone, our ERP system, and that will continue in 2019. We also introduced globally sales force as a sophisticated CRM tool, but also as a platform that we could use to see how we can improve and let's say, the our let's say, the customer experience, so to say, in modern language. This is something that we will develop further.
We are really not finished with that. And it is also something that we will test, and we also have to see how we can improve customer experience and customer approach. This is something we work hard on, and we will see what happens. I mean, in the end, we want, of course, in the most efficient way, be able to reach out to as many customers as possible and also help them, maybe also digital with their issues or formulation questions or technical questions. So we're working on that.
And 2019, we certainly need to further improve and make it more sophisticated. So I hope it gives you a little bit of flavor about this subject.
Yes, yes, yes, certainly. But I was also wondering because you talk a lot about the customer side of the equation and the necessity to actually move more and more digital. That's what the trend that we currently see. But I was wondering, is that also helpful on the supplier side?
Yes. But with many suppliers, we already have a quite sophisticated, let's say, interconnection. So I so we and that will improve further. I think for our suppliers, of course, it's essential that we also connect in the most easy way with their customers in the end, our customers, but also their customers. Because if we can grow their product line product range and push their brands and promote their brands, they will be happy.
So yes, it will also further simplify the relationship suppliers, but we already done a lot in that field.
All right. That's very clear. Maybe if I can add just one question, because this is something that I believe we see in downturns, I would say, like on slowing economic circumstances, that actually most of the chemical suppliers have a tendency to focus internally because they have all the cost issues, etcetera, and that the trend towards outsourcing and, I would say, slower economic environment has tended to increase. Could you confirm that? Is that something that you are seeing?
And would that be one of the reasons why you mentioned that you gained new supplier relations and as part of the reason why your inventories were higher in December?
No. I think that I mean, I can't confirm as a general trend, in my experience, that when, let's say, for chemical companies, the situation become a little bit more difficult and tight, There's a need that, let's say, there's a tendency to trends to make costs that are fixed maybe more variable and use companies like ours. But that is a general remark, and that is not applicable to, I would say, to 2018 because we had a very good economic environment. So generally, it's true, but I think that's not a reason for or an explanation for what happens at this moment.
I was more referring to 2019 actually, like,
well, down the road. So
Yes. Yes. Okay. Well, let's see. I mean, I don't know how the economies will develop.
I mean, so far, it's still relatively okay, although there are some signals that are a little bit less positive. I think manufacturer index in Germany was a bit not so good. So let's see how that develops. But that's more macroeconomic discussion that you that we all can have, and it's not so much directly related to us.
Okay. All right. Thank you very much.
The next question is from Mr. Beekara Berenberg. Your line is open. Please go ahead, sir.
Just two questions from me. Would you be able to confirm what the organic conversion margin was in Q4 and half by region as well as the organic growth per region as well in Q4? Thank you.
We are both looking confused at the organic conversion margin growth in Q4.
Sorry, I
did not make I think what we show in the press release is the organic growth figures on an annual basis. And there we split it, let's call it, between the regions. That is basically what we normally present. And what people do themselves is just do this quarter, or just the full year from the 9 months and then try to calculate something out of there.
Okay. And then the organic growth, sort of maybe commentary on there. You mentioned that there was no specific reason for the slowdown in Americas. And how does that relate to some of the other regions that you see?
No. It's just what Pete said before. It is December is always difficult to predict. We don't want to talk about number of working days or when the Christmas period starts or whatever have you there. It's just always a month difficult to predict, also difficult to plan how much stock you really need to fulfill all the orders that you have in your books because customers easily move their orders into the next year.
And that resulted this year, and we saw a slowdown in December, orders moving into the next year and slightly higher stock and lower debt positions. But nothing strange or special compared to other years. It's just the usual uncertainties in the December month.
Okay. That makes sense. Thank you.
The next question, Mr. Kando Van, ABN AMRO. Your line is open.
Yes, thanks. A few more questions. So Alst, you mentioned a net debt EBITDA ratio of 2.8 at the end of the year. Should that when I do all the math, I get to EUR 280,000,000 of EBITDA and that includes full year impact of acquisitions. Can you just explain to me how you get to that EBITDA?
Is that a pro form a number, I. E, as if you had owned the business for the last 12 months? Maybe just get that one underway.
Yes. Basically, what we do is we look at what was the last 12 months before the acquisition. That is what we use as the full year M and A number, and then deduct what we realized ourselves. So we don't include normalizations or growth or whatever you would add.
Yes, yes. That is what I'll do. Okay. Second question, just getting back to the outlook. A lot of chemical producers, and especially the cyclical ones, are rather cautious in 2019.
And then when I read your press release, you sound rather optimistic. Now I know that your organic growth is built up of, on the one hand, economy and on the other hand, what you do on top of that. So is it maybe fair to assume that although the economy might be so so, the belief in your own growth on top of that is maybe for 2019 higher than historical averages?
I don't think we give an outlook. Other than that, we are always sunny fellows here. But no, I can't add to what we said that we are positive that we are not going to qualify further, Mudro.
All right. All right. And then finally on M and A, let me see if you could answer that one as well. So I mean the larger acquisitions that you did in the last few years are performing very well. And you always have this line in your press release that you see interesting opportunities.
What I would like to know is, to what extent do you believe that you can execute on larger targets this year as well?
Also there, I can't and you'd expect that probably from me, I can't give any comments because it's any acquisition happens only if there are 2 tango, so to say. And so can't make any predictions on that.
All right. All right. Thanks anyway.
The next question, Mr. Mulder Your line is open. Please go ahead, sir.
Yes. Good morning, guys. Kiara Mulder from ING in Amsterdam. I have two questions. One is about the development at VLOCs in Germany, given the, let me say, the interest in the automotive industry.
So maybe you can give some indication about the development there. And the second question about the Schuldschein to stay in Germany. The Schuldschein is 3.5x, so it's not 3.75x. What about the peak multiple you can reach? Is that also the case for the Schulstein or not?
Can I answer the last one first, Peter? Yes. Yes. That's the case, Kiran. So we have the same acquisitions right.
Yes. On Velox, I think it's good to maybe explain to you that the integration of this business and, let's say, in the full synergy effect, will be felt later in 2019. HELOC is a company that is centrally organized from Germany with subsidiaries in the different countries. And we're going to integrate the German company, but also the local subsidiaries. And we will do that in the course of this year depending on local labor laws, tax laws, legal rules as to mergers.
So that full effect and synergies will come in the second half, maybe the Q4 of this year. The business is performing in accordance to expectations. The question about the automotive industry is a valid one, and that is, of course, an important one for many business segments, in particular, of course, the Coatings and the Advanced Materials sectors. It's too early to tell for me if how that will develop. I think we're all curious to see how the car industry in Germany will perform.
Let's hope that it will perform in accordance to expectations. But if that's not the case, yes, then it certainly will have an effect also on customers of air loss and of customers of our coating business.
So let's see
how that goes. And if you speak about dark clouds, do you have a specific country, region or project line in mind? No. I think we all know the dark clouds. We have caused the Brexit.
We have a bit of a slowing down of growth in certain areas. You just mentioned Germany, the car industry. So I'm speaking, let's say, as a solid reader of the news, and I don't have bigger insights than I think all of us have. So but if the general economy slows down, that will have a certain effect on anybody.
Mr. Von Schlicop, there are no further questions.
Okay. Then I thank everybody for your interest and for your questions, and I wish you a fantastic week in Varunie.
Ladies and gentlemen, this concludes the conference call. You may now disconnect your lines. Thank you for your participation. Have a very nice day.