Good morning, ladies and gentlemen. Thank you for holding, and welcome to the IMCD Analyst Call Full Year Results 2016. At this moment, all participants are in a listen only mode. And after the presentation, there will be an opportunity to ask questions. I would like to hand over the conference to Mr.
Peter van der Slicker. Go ahead, please, sir.
Yes. Thank you very much. Welcome to everyone. Hans Cormans and I will be happy to answer your questions regarding our press release of this morning containing the 2016 results. I start with a few preliminary remarks.
The year 2016 was again characterized by the challenges of uncertain geopolitical and macroeconomic circumstances. We saw generally modest growth in European Economies, more or less flat demand for chemicals in the U. S, continuing difficulties in Brazil and a stable environment in Asia Pacific. Under these circumstances, we are satisfied that IMCD's business operations in 2016 resulted in significant growth of gross profit, EBITDA and cash flow. Our European business showed good organic growth.
Our activities in Asia Pacific showed satisfactory growth, and we steadily continue to strengthen our positions in Asia by investing in local countries. We have worked hard to integrate MF Cache, now renamed IMCD U. S, and we have made the first steps into the U. S. Personal Care market with which we are very, very happy.
In order to manage our activities in the Americas and exploit synergies, we have opened a regional office in Jersey City. In 2016, we continued our selective acquisition strategy. We do not commit to an annual spend of investments, but remain prudently and patiently looking to invest in quality businesses that will fit into our strategy. The businesses we acquired during 2016 in Kenya, the U. S.
And Puerto Rico and Turkey all contribute to the expansion of our strategic geographical and market coverage. Ladies and gentlemen, as I said in the press release, we have a strong business model, which is well positioned to benefit from megatrends, which favor the use of specialty chemicals and food ingredients. Our cash flow remains strong, and we remain focused on growth of gross profit and EBITDA. As you know, we refrain from giving a quantitative outlook, but we are optimistic for 2017 to further increase value for our business partners and shareholders. And with this, I would like to ask my colleague, Harls, to lead you through the numbers, and after which we will invite you to ask questions.
Hans? Good morning, ladies and gentlemen. Would like to, as indicated by Pete, give you a short summary of the 2016 financials of IMCD. And of course, for further details, I would like to refer to our annual report and press release that are both available on the company website. In summary, we consider 2016 as another good year despite, as Peter indicated, challenging market conditions.
I would like to start on Page 9 of the presentation where you can see that revenue increased with 12% compared to 2015. This increase was a combination of 3% organic growth, 11% acquisition related growth and a negative ForEx impact of 2%. The acquisition growth is on the one hand the full year impact of acquisitions made in 2015 and the result of 2 acquisitions in 2016, Moetzler in the U. S. And Puerto Rico and CNS in Kenya.
FEEDSA acquired in the second half of December twenty sixteen and due to the timing of this bolt on acquisition, no impact on 2016 revenue and EBITDA. ForEx adjusted gross profit on the next line increased 18%, whereby organic gross profit growth was 6% and the remainder the result of M and A. Gross profit in percentage of revenue improved 0.5% from 21.8% in 2015 to 22.3% in 2016. In all regions, we saw an improvement of the gross profit percentage. Further, we experienced the usual fluctuations and differences in margin percentage between the quarters and between the regions.
This was caused by local market circumstances, product mix differences, product availability and the impact of newly acquired businesses. For your reference, we included a line with EBITDA comparison, but more important for an asset light business model is the EBITDA development in the next line. Operating EBITA increased on a constant currency basis with 18% to €147,800,000 The operating EBITDA in percentage of revenue further improved from 8.4% in 2015 to 8.6% in 2016. Also, the conversion ratio further improved by 0.2% to 38.7% in 2016. On the next slide, Page 10, you will find financial details per operating segment.
Activities in EMEA in the first column include IMCD's operating companies in Europe, Turkey and Africa. The operations in the region showed a pretty strong performance in 2016 despite uncertainties as a result of the upcoming Brexit and industry specific challenges. On a constant currency basis, EMEA realized 4% revenue and 7% gross profit growth, whereby gross profit in percentage of revenue further improved. Operating EBITDA in EMEA increased 10%, but by the EBITDA margin further improved from 9.1% in 2015 to 9.6% in 2016. As the only acquisition in this segment was CNS in Kenya in September, with full year revenue of about €5,000,000 it's fair to say that all reported growth was organic growth.
In the next column, the second column, you will find Asia Pacific. For IMCD, more than half of our business in this region is in Australia and New Zealand. The remainder is a combination of businesses in India, Malaysia, Philippines, Indonesia, China and Singapore. Compared to the size of the market, our Chinese activities are, as you know, relatively small. Further in this segment, we have start up activities in Thailand, Vietnam and Japan.
In Asia Pac, we realized 10% organic gross margin growth and a further improvement of the margin percentage from 18.7% to 20.1%. The margin percentage improvement was due to a further rationalization of the product portfolio and adding new suppliers. As a consequence of adding additional cost own cost to further strengthen the organization and start up related cost, operating EBITDA only increased 3%. EBITA margin percentage was flattish compared to 2015. Americas in the next column is the combination of IMCD's operations in U.
S. And Brazil. 3 recent acquisitions in this region have a substantial impact on the 2015, 2016 comparison. In general, IMCD U. S, the former MF Cashet, had a reasonable year, taking into account difficult market circumstances.
Gross margin and operating EBITDA of IMCD U. S. Was slightly higher in 2016 than 2015. IMCD's industrial activities in Brazil, the former Marchendi business, had a difficult year. As a consequence of the economic slowdown, IMCD Brazil had to adapt its organization to this new situation.
Further, a reassessment of expected future cash flow of these industrial activities resulted in a non cash impairment loss of €5,700,000 Muzsler in the U. S. And Select Chemie in Brazil, 2 recently acquired pharma businesses in this region, performed in line with expectations. All in all, operating EBITDA in this region increased to €31,600,000 euros And in the last column of this sheet, you will find in the holding companies all non operating companies, including head office in Rotterdam and the regional support offices in Singapore and New Jersey in the U. S.
On the next page, you will find a summary of the P and L lines from EBITA to result for the period. Some general remarks about the numbers on the sheet. As you can see, net finance costs are slightly lower compared to 2015. However, this is a bit of a mixed bag and therefore specified on the next page. In this breakdown on Page 12, you will notice that real interest cost related to the loan structure was slightly higher in 2016 compared to 2015.
Further in the net finance cost, you will find compared to 2015, a negative change related to movements in deferred considerations and a positive change related to interest hedge contracts and currency exchange results. If I go back to Page 12 to the line income tax expenses. In the consolidated P and L in our statutory accounts, you will find tax cost of about €22,000,000 In the hope that it will give you a bit of a better understanding of this tax line, I broke this €22,000,000 into 3 pieces on the sheet. About €32,000,000 income tax expenses, this is an amount which is close to the cash tax paid, the cash tax that you will find in the cash flow statement. About €6,000,000 is a tax credit, a non cash release of deferred tax liabilities related to the amortization of the intangibles.
And there is an amount of about €5,000,000 which is the first time recognition of deferred tax assets mainly in the Netherlands. Further on the sheet, you see the impairment loss, which was explained before and some nonrecurring items, which are costs related to M and A activities and one off adjustments of the organization. For the cash earnings per share, I would like to take you to Page 13, where you will find a summary calculation of the cash EPS and the proposed dividend. In 2016, IMCD realized a cash earnings per share of €2.01 which means an increase of 12% compared to last year. Further, at the AGM, we will propose a dividend of €0.55 per share, which means a payout ratio of 28%.
This proposed dividend means an increase of 25% compared to 2015. On the next page, a summary of IMCD's balance sheet. Property, plant and equipment slightly increased, but still relatively low as a result of the asset light business model. Then intangible assets and related deferred tax liabilities relatively high as a result of the M and A activities and our history as a private equity owned company. And you see a growing equity position of €722,000,000 covering about 64% of capital employed.
And the increase in equity is mainly the balance of net result of €73,000,000 positive currency result on foreign operations of about €21,000,000 and as a negative, a dividend payout in May of €23,000,000 The two other lines, working capital and net debt, are summarized on the next pages. Page 15, you will find a summary of the absolute amount of the various working capital components, and these amounts translated into days of revenue. As you can see, the absolute amount of working capital increased with €21,000,000 which includes €10,000,000 related to M and A in 2016. The remainder, €11,000,000 is a combination of increased business activities adding CHF 5,000,000 and the impact of exchange differences adding another CHF 6,000,000. On Page 16, a summary of our net debt position.
Highlight in 2016 on Amstrad's debt side was a successful amend and extend of the existing facilities and the subsequent debt capital market issuance of Schulzheim. For further details, I would like to refer to the information in earlier press releases about this subject and the statutory accounts. Short term borrowings of €71,000,000 include an amount of €58,000,000 related to deferred considerations. The majority of this amount relates to the acquisition of the remaining 20% of MF Cache. The completion of the acquisition of this remaining 20% was executed and paid on the 1st March of 2017.
The reported leverage at the end of 2016 was 2.6x EBITDA. The leverage ratio calculated on the basis of definitions used in the IMCD loan documentation was 2.3x EBITDA, which was well below the required maximum of 3.5 times as set out in the loan documentation. I would like to finish the financial summary with the cash flow overview on page 17. As you can see, the cash conversion ratio further improved from 19.5% in 2015 to 92.3% in 2016. Main driver of this increase was the higher operating EBITDA in 2016.
And then the next slide is the outlook, and I think Peter already mentioned something about it. So we are happy to invite Q and A. Or Piet, do you want to add something to that? Thank you very much, Hans. No, I would like to invite you to ask us questions.
So we will take the first question.
Ladies and gentlemen, we will start the question and answer session now. The first question is coming up from Josh Padel, Berenberg. Go ahead please.
Yes. Hi, good morning. Few questions please. The first one on the Americas conversion margin. So it's obviously was down quite significantly in Q4.
And I just wondered if you could help us sort of split that or just talk more generally about how that is between Brazil and the U. S, Specifically, what's happening with conversion margins at MF Cachay? And then also perhaps talk about the outlook there for 2017? And then my second question is on the EMEA top line. It looks like your organic gross profit growth accelerated quite sharply towards the end of the year.
I wonder if you could talk about what's driving that. And then my final question for now is on the U. S. I just wondered what sense you're getting from the team on the ground regarding the outlook in general in 2017 for the U. S.
There seems to be a lot of investor optimism for the region, but I wondered how that compares to what you're seeing on the ground. Thank you.
Jos, thanks for the question, Krebs. I will take the first one on the conversion margin in the Americas. The main driver of the change that you see there is the result of what we saw in our industrial activities in Brazil, whereby in the last quarter of 2015, we had a relatively strong quarter. And this year, it was really difficult in that market. And that combination, so an absolute worsening of the situation in Brazil, was the main driver of the drop in conversion margin that you saw.
And would you be able to
comment specifically on conversion margins in the U. S?
In a way that you see them as
Sorry. And as in terms of are they growing? Are they holding stable? Or are they in decline?
Basically, they are stable. They are on average on a higher level than the group average. And what I said before, in the last quarter, we had a serious impact of the activities the industrial activities in Brazil, leading to a slightly lower conversion margin than the year before. Okay. On your second question, EMEA growth in the 4th quarter has been very satisfactory.
Combination of new product lines and favorable market circumstances. We are quite positive about our business opportunities in EMEA. So it's a combination of new business and good demand from the market and further optimization of pricing, etcetera. So it's always a mix in our business. Then with respect to outlook U.
S, yes, well, I mean, I think we have to be careful to give outlooks for different regions. I think we all read papers now more than ever about the U. S. How that exactly will translate in chemical demand is very difficult to say. So let's it's early days, so I don't want to preclude on that right now.
I think generally, as we have also said in our press release, we are positive about our opportunities to further grow.
Okay, great. Thanks very much. I'll leave it there
now. The next question is coming from Mudlu Gundogan, ABN AMRO. Go ahead please sir.
Yes. Good morning, Pete. Good morning, Hans. Four questions from me. First on EMEA, a bit of similar question.
Obviously, EMEA did very well in terms of gross profits growth in Q4. How you talk about a combination of new product lines and favorable market circumstances. So that seems structural. So my question is, did that continue into Q1? The second question is also on EMEA.
The good performance was also that you kept your operational expenses rather flat year on year. Can you tell us how sustainable that is or whether you are contemplating to invest in that business to further fuel growth? The third question is on Asia Pacific. A clear acceleration also in growth profit here, up 28% if I'm not mistaken. Can you tell us what changed compared to Q3?
Because that was still up 8%, so a significant acceleration. And then finally, on Asia Pac as well. Here a very high increase in your operational expenses, I mean, almost up 50% or more than 50%. Was this all related to growth investments into the business? And if so, how quickly do you expect them to be absorbed by additional gross profit?
Thank you.
Okay. First question is about EMEA. How does that do we see, let's say, positive signs for Q1? The answer is yes. But we have not absorbed the whole Q1.
So but the positive start. Flat own costs, always, of course, an important part of our attention, how do we keep our costs under control. As you know, most of our own costs are related to people. And it is there is a relation, of course, in growth and adding product lines and increase of own costs. What we also see is in specialties that we have to attract talents that have a very technical ability and also commercial ability And competing for that talent in different markets is difficult.
And that means pressure upward pressure also on salaries and compensation packages. People are extremely important. Everybody always says that. Sometimes it's true. In our case, it's very much true.
We depend on about 1800 persons with all their talents and knowledge to advance our business. And so that has our attention. So it's a to a certain extent, it's a mixed answer. On the one hand, if we grow our business, we will have to add costs. But of course, we also want to increase our productivity, so we need to find the right mix there.
On Asia Pacific, in general, I would like to say that we, of course, have the established business, in particularly in Australia, that is growing, modestly growing. And we have a mixed situation in Asia, where we have also established businesses and businesses we invest in. And investment in our parlay means that we will invest in people and do not sometimes immediately see then also top line growth related to that. We will continue to do that. We are very positive about steadily adding suppliers and product lines in certain countries.
But we're also not so big there that we not see sometimes quickly changes in top line and changes in results. So I'm always a little bit cautious about giving too much meaning about a quarter here quarter there. I think generally, we steadily grow our business in Asia Pac and I hope to see that also for the next year, the current year.
Can I just ask, Pete, the your own cost level in Q4, should we take that as a run rate going into 2017, to be a bit more specific?
For Asia Pacific or for the group?
Yes. For Asia Pacific.
What we said is that we are investing there also in setting up new ventures in countries like Japan and Vietnam. And basically, we are building up capacity there. And what Peter indicated, if you first need to bring the people there and it's not immediately that you have the related revenue, It's always a bit of a chicken and an egg discussion with suppliers about having the structure first and then getting the business or the other way around. So I think as to add to what Harald is saying, I think we have to be cautious to take that as a run rate. We will invest significantly in manpower in Japan also to take on new product lines.
And there will always be a little bit of lag time between that. So I don't think that you can say that that's the run rate for next year
for the current year. Thank Okay. Thank you.
Your next question is coming from Andy Chu, DB Coats.
Sir. Yes, good morning. A few questions for me, please. First one is just over your supply base and whether with the same supply consolidation, there might be any sort of potential impact that you see in 2017 for deals that have been executed in 2016? Secondly, just in terms of the gross profit growth rates organically for Q4, not sure if I've missed this, but maybe if you could just give the Q4 growth rates at the group level and by geography.
Obviously, there's a lot of rounding when we try and back out Q4. And then just in terms of in the U. S, obviously, a large supply win with BASF, which I think has come in from the start of November. What is the impact please of that rather large supplier on the U. S.
North American business?
Okay. Andy, the first question, supply consolidation. As you know, of course, a lot happens in the markets. You have the DowDuPont merger that still needs to be approved. We don't see any specific reasons of concern there.
There are also others. We constantly anticipate and discuss these developments. I don't see real negative consequences. You never know. It's a moving field.
But I don't think that, that has let's say, it's changed as to what we have seen in previous years. But for 2017, I don't see negative consequences. Haralds, then the second question. And then some more technical one. Gross profit growth in Q4, I think your question was if I look at the presentation, ForEx adjusted Q4 consolidated plus 14% EMEA plus 12% Americas, plus 13% and Asia Pac, plus 25%.
And then your next question was the Personal Care BASF. Yes. I think on the U. S. In general, I think that we are very much focusing on developing and executing our strategy.
That, of course, means with our existing business, but also with potential new businesses, either by adding market segments or as we did with Muetzler in pharma, where we are expanding that as much as possible nationwide. We also have brought one of our main suppliers in the pharma business, and we convinced them to work with us in the U. S. As well. We added, as we said, also Personal Care in a certain region of the U.
S, the Southeast. I don't want to speak about impact of individual additions to the business, but that we find it strategically important also to inform you that on top of the business that we acquired also expand into other markets, that's obvious. And we will continue to try to expand our footprint in the U. S. Also regionally.
And I'm very optimistic that our model and our relationships will bear fruit. I think if you look at our company and look back but also look forward is that we are not there for the next quarter. We consistently work to execute and implement our strategy. I think what also is very important for our business is that we and for the quality of our business is that we align with top players in the world in specialty chemicals, in food ingredients and pharma ingredients, that we invest in quality of our people and also in, yes, let's say, the sustainability of our relationships. So I think you have to see it in that way.
And the but we don't want to comment on each supplier or what the effect on reserves will be.
You very much.
And maybe just one last one is just in terms of M and A and the landscape. Obviously, you've had a very strong sort of 20 year track record on M and A, but the balance sheet is obviously rebuilding post the MS Cache. Are you looking to do anything large again? Is it fair to say that the sort of use of paper was probably pretty much a sort of a more of a sort of one off and sort of you'll just carry on more on the bolt on track and in terms of execution? Thank you.
Yes. No, thank you. I think we are open for bolt. We absolutely do not limit ourselves to only bolt ons. We are also looking at wherever benefiting our business also to larger acquisitions, But we will not we will be patient.
But in each region, we continue to look for those acquisitions that make our business stronger, and that can be big ones and smaller ones.
All right. Thanks, Pete. Thanks, Hans.
The next question is coming from Bart Koster, ABN Financial News. Now Jones, go ahead please.
No, all my questions have been answered. Thank you.
The next question is from Quirijn Mulder, ING. Go ahead please.
Yeah, good morning everyone. A couple of questions. First of all, can you maybe elaborate on your your first step in the Japanese market with an office as I understand? So what's the reason to step into this mature market? And do you see opportunities there?
And should we look in an M and A sphere? Or should we look in some supplier relationships there? The second question about the outlook. If I look at the outlook, it's an exact copy of last year. But the comment of Pete is different in the first page.
Last year, you spoke about growth, opportunities for growth and now you speak about opportunities for creating value. Is there a shift in, let me say, from growth to value for shareholders? Or is that exactly the same what you were always saying?
Yes. About the last question, I mean, I'm trying to be creative. But consistent and creative, I mean, the outlook on the last page of the press release is exactly the same as last year. We don't give a specific outlook, and we won't do that. I want to express, though, that we are, like we did last year, optimistic about our business and about the opportunities that we have.
So I think in that sense, you have to read these statements. But let's not make it an exercise to interpret each word. Somebody is blowing in the microphone. And then about Japan, we will gradually build up worst mature markets, I would say about that, that you can say, of course, of all developed markets, also in Western Europe or Europe and U. S, I'm not so impressed by that in let's say, in terms of that, that is negative.
We're talking we're speaking about huge markets. And these huge markets, of course, have bear a lot of opportunities. And we see opportunities in Japan with our model as well. We certainly expect to add suppliers in Japan as well, and we are preparing for that. And furthermore, we're also looking for acquisitions.
So I hope that answers your question.
Yes. My last question is about your organic growth is in the industry is 5% to 6% annually. We have seen for a couple of years lower organic growth. Is that something you expect to return soon, the 5% to 6%? I'm sorry, the average growth of this industry.
This industry average?
Yes, the industry, specialty chemicals, distribution, etcetera.
I'm not sure if there's a yardstick exactly there. I don't know it. I saw that some of our competitors are far below that. Our organic growth now holds 6% organic gross margin growth, basically in line with the long term guide we gave. And if I remember well, last year, it was, I think, 5.5%, so in the range of 5% to 6%.
Okay. That's great.
Okay.
The next question is coming from Milu Buenk, Goldman Sachs. Go ahead, ma'am.
Hi, good morning. Two questions from my side. One is on chemical price inflation. I think it's a big topic amongst the competitors and the suppliers as well. Just wanted to see what you've seen so far?
What do you think it will contribute into its gross profit growth in 2017? And then the second one is just a follow-up from Andy to ask earlier on the Q4 group gross profit growth organically because it seems to have accelerated and just wanted to make sure that we've got the right number there?
Okay. The first question, chemical price inflation. As you know, we have and I've said that before, we have many, many, many products. And it's difficult to speak in general. Nevertheless, I would say that if you look at the total environment, let's say, the possibility to increase prices has improved.
And you know, of course, we have the petrochemicals that have for us a further away link with oil price. It has been a bit more favorable. Demand has increased, so the environment is better to increase prices. Then on the 4th quarter Yes. Milo, the growth percentages that I mentioned on the question of Endy were multiplied between organic and M and A growth.
Percentage were ForEx adjusted Q4 growth figures. You look at the segments, EMEA, the 12% was more or less organic growth. Asia Pacific was organic growth. And in the U. S, I don't have a number in mind there.
Of course, there is some M and A in there, but I don't know how much exactly that was in Q4. If you look for the whole year, then what I said the question of Clear at moment is that organic growth for the year on the GM line was 6 percent.
Okay, got it. Thank you very much.
There is an additional question coming up from Mr. Mudlu Gundogan, ABN AMRO. Go ahead please, sir.
Yes. Thank you. A couple of smaller questions. First on Americas. Would it be possible to give us the organic growth in operating EBITA for only the U.
S. In Q4? The second question is on the net finance costs. Hans, you already showed it on the full year numbers, at these amounts CHF 3,400,000 in the second half, which is significantly below the first half. Can you tell us what the reason was for this variance?
I see the full year numbers, but I don't see the half year numbers. And then on the tax rate, that was rather low in the second half. What was the reason for that? Was that the deferred tax asset that you showed on the slide? And is that something that will be reoccurring in 2017?
And then finally, it's not a question, it's more of a comment. Would it be possible to get quarterly numbers in the future instead of the full full year numbers? Thank you.
Perhaps to start with the last one, Mutlu. But basically what we always say is that if you look at our business, we will always have differences between the quarters. And therefore, it's better to look at, let's say, year to date compared to last year. So that's the reason that we try to stick to half year figures, 9 month figures and the full year figure. And we don't want to end up in a debate about small changes in the quarter because there is always some volatility there.
And that's the reason that on purpose, we only show cumulative figures there. Your question on the low tax burden in the second half of the year and more special the DTA that we have there in the last quarter. Yes, that is a one off. And what you can find in the back of the back of the statutory account is an exact calculation on the basis of this first time recognition. And basically, what I can say is that most of these unrecognized tax losses have been valued in the meantime.
Then you had to be honest, I did not take note of your first two questions. Organic growth U. S? Yes. And then you asked for specific EBITA growth.
That is something that we don't disclose. And in the steps, we explain why. And basically, when we acquire businesses, we can we try to follow exactly margins of the business that we bought, but it's more complicated on the cost side because quite often, we start changing the organization, changing the cost structure and so on and so forth. And therefore, we never report operating EBITA growth split into organic and nonorganic growth there.
Okay. But would it be possible then to give the number for Q4 for hemp so we can split Brazil from the U. S? That's actually my question.
No, that's something we don't disclose. Right. Because then the next question is, can you split Brazil into pharma and industrial activities? And before you know, we get a discussion about individual companies, and that's what we try to avoid.
Okay. Understood.
The next question is from Mr. Andy Chu, DB. Go ahead, sir.
Thank you. Hans, just a quick one on the organic growth rates. Obviously, appreciate you're running this business for several quarters and it's not just one quarter. But can you just help us a little bit with the group organic growth rate for Q4? Because I guess if we mathematically back out Q4, I think one comes to a number of 9% organic GP growth for Q4, which clearly is we know there's an acceleration from Q3 at I think around about 3%.
But could you just help us with that 9% actually sounds sensible or whether actually with rounding you're kind of closer to sort of 6% to 8% range something like that. I appreciate I don't want to give the number, but just in terms of magnitude of how fast acceleration has been or just anything sort of that you might be able to help us with in terms of understanding the Q4 rate?
Think your number, Andy, is pretty right. I think it's somewhere between 9% 10%. And basically, when we look back on the year, it was we had a strong start of 2016 and a relatively weak Q3 and then a stronger Q4 again. And that is what we because the question that we got after Q3 is this the new run rate for the rest of the year. And I'm a bit afraid that we now get the same question after a strong Q4.
Please look at the more general trend whereby organic growth during the year was on average 6%.
Okay. Perfect. So just to clarify, so the Q4 organic was 9% to 10% organic GP at the group level?
Yes.
Perfect. Okay. Thanks very much.
There's an additional question coming up from Mr. Klerijnberger, ING. Go ahead please sir.
Maybe not on individual companies, but maybe on individual countries. Have you any idea about the impact of the Brexit on your business full year 2016? And when do we expect any recovery in Brazil? Is there any outlook on that you see there? Anything happening there in your industrials business or overall in Brazil?
Okay. On Brexit and the impacts in 2016, I think that for this moment, the biggest impact has been the currency drop, the pounds decrease in value. And that, of course, has put our organization into high gear to maintain percentage margin levels. And we have been very successful in doing that in the U. K.
Markets. So yes, an impact, but we have been able to deal effectively with that in 2016. Then Brazil. Generally, I am and remain positive about our opportunities in Brazil. We have to go through this deep economic crisis there, which affects prices of chemicals.
We built our organization from a formerly family owned business to a professional IMCD company. We have changed top management last year in September, which will be very positive for the coming period. So I think I see positive signs. I see also positive signs to add significant business to our existing portfolio. So overall, I'm optimistic for our Brazilian operation.
Whether that will have immediately effect in the 1st months of 2016, we will see. But let's say, for the near future, I'm positive about our also our industrial business in Brazil.
Thank you.
Sure. There are no additional questions at this moment. Please continue.
Nobody anymore?
I'm sorry to interrupt you, sir. But there is one question coming up again.
Okay.
Yes. Mr. Bart Koster, ABM Financial News. Dow Jones, go ahead.
Yes. Good morning, gentlemen. Sorry to interrupt. To make it clear to you, I'm not an analyst, but a journalist. But I wanted to try to make to take this opportunity to ask for you.
You elaborated a bit on the availability for acquisitions in all regions bolt on or bigger ones. I was just wondering what's your financial arm length in 2017 for acquisitions in general, if I may? Yes.
I don't think that we will put a number on that, but we have significant cash flows and credit lines. And there's always for good acquisitions, there's always finance available. I think more importantly for us is to do not more than we can chew off in terms of our management capacity, our ability to integrate businesses in our structure. I think that's more important than the financial possibilities because I think that for our strategy, they are sufficiently available.
Okay. And would you take the opportunity to make a more balanced spreading of the sales and earnings spread worldwide, so looking more having more focus for acquisitions in Asia and the Americas than in Europe?
Well, obviously, our history is in Europe. That's why we also still have, let's say, are the largest contributions coming from this continent. But I think that also in the past, we have expressed our wish and strategy to, let's say, to increase the contribution of other regions across the world. So yes, we will try to focus to increase our exposure in other regions.
Okay. Thank you very much.
There are no further questions, sir.
No further questions. Well, then I thank everybody and have a great day.
This concludes the IMCD analyst call. Thank you for attending and you may disconnect your line now.