Morning. Thank you for standing by, and welcome to the Rexel second quarter and a half year 2015 results webcast. At this time, all audio participants are in a listen-only mode. I must advise you that this webcast is being recorded today on Wednesday the 29th of July 2015. I would now like to hand the webcast over to your presenter today, Rudy Provoost, Chairman and CEO of Rexel. Please go ahead, sir.
Thank you very much. A very good morning, ladies and gentlemen, and a warm welcome to our second quarter and first half 2015 results presentation. I am joined today by Catherine Guillouard, our Deputy CEO, and I will start the presentation with the highlights of our performance in the past three and six months. Catherine will give you the details from a financial perspective, and I will come back at the end to give you a few concluding remarks and confirm our full year targets before opening the floor for questions. Let me begin on slide three with the highlights of the quarter. In the past quarter, we posted sales of over EUR 3.4 billion, up 8.4% on a reported basis. This increase was boosted by a strong 9.6% currency effect, mainly attributable to the appreciation of the US dollar versus the euro.
On a constant same-day basis, sales were down 1.6%, including the copper effect. Excluding this impact, sales were down 1.8% on a constant same-day basis. This drop mainly reflected a sequential slowdown in North America, which is largely attributable to a 32% decline in sales in the oil and gas segment. Our sales in Europe were up 1.5%, which represents a good sequential improvement over the 0.1% decline recorded in the first quarter. Despite the slowdown in organic sales in North America and the impact of cable on our gross margin in Europe, we posted a sequential improvement in adjusted EBITDA margin, which stood at 4.4% in the second quarter compared to 4.1% in the first quarter.
To protect our profitability going forward and further improve our adjusted EBITDA margin in the second half, we've implemented a series of measures, more particularly, a cost efficiency program in North America, which I will detail a bit later in this presentation. We posted solid free cash flow in the second quarter. We actually generated EUR 104 million before interest and tax, which is the equivalent of EUR 66 million after interest and tax. Finally, we continued our efforts to optimize our financial structure with the successful placement of EUR 500 million in notes due in 2022, which allowed us to refinance US dollar notes due in 2019 at a significantly lower coupon. On slide four, you have the highlights of the performance in the first half. First-half sales reached more than EUR 6.6 billion, which represents a 7.8% increase on a reported basis.
Again, there was a strong positive 8.9% currency effect, which means that on a constant same-day basis, sales were down 1%, including a negative copper effect of 0.1%. Excluding this impact, sales were down 0.9% on a constant and same-day basis in the first half. Our adjusted EBITDA margins stood at 4.2% in the first half, which is lower than last year, where we had the 70 basis points higher EBITDA margin. Net debt at June 30 stood at EUR 2.6 billion. Important to realize is that that debt in the half was impacted by a strong negative currency effect of EUR 134 million. Consequently, the net debt EBITDA ratio stood at 3.2 times at the end of June versus three times at the end of December. Lastly, we confirm the financial targets we announced in February. We expect actually to be at the low end of the range.
I will give you a bit more insight in what's behind that outlook in my concluding remarks. That brings me then to a geographic perspective on the results. Starting with Europe on slide six, which represents 54% of our total sales. In Europe, sales were up 4% in Q2 on a reported basis and 1.5% on a constant and same-day basis. In France, representing one-third of Europe, our sales improved sequentially as they were broadly stable in Q2 after a 3.6% drop in Q1. This sequential improvement reflected higher cable sales. There is also the benefit from an easier comparable base last year. As a matter of fact, in general, construction levels in France remain quite low. In the U.K., sales were down 2.3% on a constant and same-day basis. If you exclude impact of branch rationalization, then that is 1.8%.
This drop is actually mostly attributable to a lower impact of project business in our mix in the quarter. Sales in Germany confirmed their return to growth, rising by 1.7%, in particular reflecting a solid industrial end market and higher cable sales. In Scandinavia, sales continued to post solid growth of almost 8%, with Sweden up 8.3%, Norway up 10.2%, and Finland up 3.3%. In other European countries, performance was mixed. We have some strongholds like Belgium and Austria, where sales was up respectively 6% and 2.1%. In Southern Europe, Spain posted double-digit growth thanks to both a strong domestic and export activity. Italy posted 2% growth, but Switzerland was down 2.8%, impacted by lower pricing, which is entirely related to the evolution of the Swiss franc, while volumes were actually stable.
In the Netherlands, conditions remain difficult, with sales down 3.1%, which marks a significant sequential improvement over the 13.2% drop posted in the previous quarter. Slide seven summarizes our performance in Europe from a half-year perspective. First half organic sales were up 0.7%, and adjusted EBITDA was down 6.5% in EUR terms. Gross margin was impacted in the second quarter by cable for two reasons. First, cable sales were up in volume, and as cable sales carry a lower margin, there was a dilutive mix impact. Second, cable prices faced heightened competitive pressure during most of the quarter with a negative impact on the gross margin. OpEx were under tight control and actually partly offset the negative impact on gross margin. As a result, adjusted EBITDA margin as a percentage of sales stood at 5.6% in the first half, down 45 basis points year-over-year.
Let me quickly comment on an acquisition we made in Belgium. Slide eight actually gives you the details. We recently acquired Electro-Industrie en Acoustiek, which allows us to strengthen our market share in Belgium. This company is an electrical distributor based in the Antwerp port, and in a way, it's a beachhead into the port's industrial zone. It benefits from strong industrial end market exposure. With around 30 employees and three branches, Electro-Industrie en Acoustiek posted sales of EUR 15 million last year with a profitability above group average. This summarizes the European story, let's move now to the other side of the ocean, North America. On slide nine, you have the details for the second quarter.
Sales in the region were up 12.8% on a reported basis, which of course reflects a strong positive currency effect of EUR 223.6 million, mainly due to the appreciation of the US dollar against the euro. On a constant and same-day basis, sales in the zone in the second quarter were down 5.9%, which mainly reflects the strong deterioration of demand in the oil and gas segment, with 32% lower sales as well as lower copper sales. In the U.S., sales were down 4.6% on a constant and same-day basis. Let me give you the main components of this drop. Oil and gas represented around 3.4 percentage points, as sales to the oil and gas segment fell 33% in the quarter in the U.S. Lower cable sales represented 1.4 percentage points.
There's also the impact of the branch network optimization, which I will explain a bit later in detail, which accounted for another 1.2 percentage points. In Canada, sales were down 10.3% on a constant and same-day basis. Also here, I would like to share with you the main components. Oil and gas represented around 2.9 percentage points as sales to the oil and gas segment fell by 29% in the quarter. Lower cable sales represented 2.4 percentage points, and there was actually also an impact of lower photovoltaic sales, which represented another 3.4 percentage points. That gives you the perspective on the second quarter. On slide 10, you find the details for the first half. Organic sales in North America were down 3.3% on a constant and same-day basis and 3.9% on a constant and actual day basis.
Gross margin improved by 20 basis points in the first half to 22.2% of sales, which is an improvement driven by pricing efficiency initiatives, generating higher commercial margins that were implemented in Canada at the end of last year, and optimization across the board on back margin. The bad news came from OpEx, which actually grew by 1.8% in the first half, while sales decreased by 3.9%. As a result, OpEx as a percentage of sales grew by 105 basis points in the first half to 18.6% of sales. This increase mainly reflected the lag between the slowdown in sales faced in Q2 and the adjustment measures to be taken in such an environment. Remember, there is also still the impact, as we flagged last time, of higher logistics costs related to the transformation program, which has been underway and ongoing.
I will detail in the next slides the cost efficiency measures we have implemented. That will produce actually positive effects in the second half to deal with that reality. Adjusted EBITDA margin, the first half dropped by 90 basis points to 3.6% of sales, obviously as a consequence of that OpEx situation. Slide 11 details the cost efficiency measures I have just mentioned. In the U.S., we have taken some drastic actions and decisions. First, in the second quarter, to deal with the OpEx challenge, we decided to optimize our branch network. By merging 23 branches with other existing branches in the same commercial regions, we also closed another nine branches in Q2 for profitability reasons. Second, we reduced the full-time effective base by 237 people in Q2. Third, we decided to streamline even further our initial plan to create and reconfigure regional distribution centers.
We now plan to have 13 at the end of the year, two fewer than initially planned. The combined effect impact of these measures and actions give us a total estimated OpEx saving on an annualized basis amount of around EUR 20 million. Of course, in the second half, we'll start benefiting from that. In Canada, on top of the implementation of our pricing initiatives to improve gross margin, we've also taken additional cost measures, such as implementation of an absence no pay program in Western Canada and Quebec, and further adjustment of health insurance cost. I think we covered here the North America business quite extensively. Let's move now to Slide 12 with an overview of Asia Pacific, which represented 10% of our sales, starting with a view on the second quarter.
Sales in Asia Pacific were up 18% on a reported basis, reflecting a positive currency effect of EUR 37.6 million on the one hand, and a positive scope effect of EUR 18.2 million on the other hand, as a consequence of the impact of the acquisitions we made in the past. On a constant same day basis, sales were down 1.1%, a slight improvement over the -2.5% we recorded in the first quarter. Performance in the region was mixed, with sales in Asia up 1.6% and sales in the Pacific region down 3.8%. In China, sales were up 4.4%. You have to take into account a significant drop in wind sales. As a matter of fact, if you exclude the wind, sales were up 4.2% in the quarter.
In Southeast Asia, sales were up 5.7%, driven by high-end non-resi business and lighting projects, which more than offset the lower sales in the oil and gas industry. In Australia, sales were down 3.8%, a sequential improvement over the 7.5% drop recorded in Q1, and reflecting continued low project activity, as well as the impact of the branch rationalization program we implemented in Australia. If you actually exclude the impact of branch closures, sales were only down 4.5%. In New Zealand, sales were down 4%, again, a slight improvement over the trend we've seen in the first quarter. On Slide 13, you'll find a summary of our performance for the first half. Organic sales were down 1.7% in the half. Gross margin stood at 18.4%, which is lower than last year due to the impact of low activity in Australia.
OpEx rose slightly by 0.4%, represents 16.4% of sales in the first half, which is a slight increase over last year. Adjusted EBITDA margin dropped by 110 basis points to 1.9% of sales. Again, the main reason for that is the impact of a weaker performance in the Pacific region. We've done the tour du monde, time to then get into the financial details, and nobody is better placed than Catherine to do that. Catherine.
Thank you, Rudy, good morning to all of you. The table on the left-hand side, I am on slide 15, details the evolution of our sales year-on-year in the quarter and in the half. Our reported sales were boosted by a strong positive currency effect of 9.6% in Q2 and 8.9% in H1, mainly related to the appreciation of the U.S. dollar against the euro. Our sales also included a slight net positive scope effect of 0.4% in Q2 and 0.3% in H1. Organic sales were down 1.4% in Q2 and 1.2% in H1. You can see the breakdown of both figures on the right-hand side of the slide. In Q2, copper represented a positive effect of 0.2% versus a negative effect of 0.4% in Q1. Overall, in H1, copper had a negative effect of 0.1%.
As previously commented by Rudy, organic same day sales, including the copper effect, slowed down in Q2 at -1.6% year-on-year versus -0.4% in Q1, leading to an H1 drop of 1%. The calendar effect in Q2 was a positive 0.2% versus a negative 0.6% in Q1. Overall, in H1, calendar had a negative effect of 0.2%. Slide 16 details the evolution of our profitability since the beginning of the year. Our adjusted EBITDA margin in H1 stood at 4.2% of sales. Q2 showed a sequential improvement at 4.4% of sales versus the 4.1% recorded in Q1. Nevertheless, the 4.2% margin in H1 represents a year-on-year drop of 70 basis points, which is detailed in the table. Gross margin in the first column dropped 30 basis points in the half to 24.3%.
This mainly reflected a drop in European growth margin in Q2, largely due to lower growth margin on cable sales and, to a lesser extent, lower growth margin in Asia Pacific. Both impacts were partly offset by improved growth margin in North America, notably in Canada. The second column shows that our OpEx increased by 40 basis points to 20.1% of sales. This mainly reflected a strong increase in North America, mostly attributable to higher logistic costs in the U.S. and significantly lower activity in Q2 due to the oil and gas segment. In addition, our OpEx in the U.S. in Q2 was also impacted by a bad debt charge of EUR 2.9 million. As already mentioned by Rudy, we have taken necessary measures to reduce our cost base both in the U.S. and Canada.
In Europe, we continue to exercise strict cost control. OpEx as a percentage of sales dropped by 20 basis points in H1. The combination of the 30 basis point drop in gross margin and the 40 basis point increase in OpEx resulted in the 70 basis point drop in adjusted EBITDA margin that was previously mentioned. We target a year-on-year improvement in adjusted EBITDA margin in H2, in line with our full year 2015 guidance. Let's move now to slide 17 with our P&L statement for the half year. Let's start from our reported EBITDA of EUR 275.4 million, down 7.3% year-on-year. Our PPA amortizations stood at EUR 8.6 million versus EUR 7.6 million last year. Other income and expenses amounted to a net expense of EUR 59.2 million versus EUR 33.7 million last year.
They include EUR 36.8 million of restructuring costs versus EUR 22.6 million last year. EUR 19.1 million of goodwill impairment versus EUR 6.3 million last year. The year-on-year increase in restructuring expenses is mainly related to our North American operations. The goodwill impairment charge is mainly related to our operations in Australia for EUR 10.3 million and to our operations in the Netherlands for EUR 8.5 million. Operating income stood at EUR 207.6 million versus EUR 256 million last year. Net financial expenses amount to EUR 139.4 million versus EUR 91.7 million last year. This included EUR 52.5 million of one-off costs related to our financing optimization operation that took place in Q1 and Q2. I will expand on that shortly. Excluding these EUR 52.5 million, net financial expenses were down 5.2% year-on-year. Income tax amount to EUR 25 million, versus EUR 52.4 million last year.
The rise in tax rate from 31.9% last year to 36.7% this year is mainly due to non-deductible goodwill impairment losses recognized in 2015 as compared to 2014. As a result, net income from continuing operations stood at EUR 43.2 million versus EUR 111.9 million last year. Net income from Latin America discontinued operation represented a loss of EUR 41.7 million and is detailed in the appendix five. Recurring net income stood at EUR 133.4 million, down 8% year-on-year. Slide 18 details our free cash flow before interest and tax in the quarter and in the half. In Q2, we generated solid free cash flow of EUR 144.2 million before interest and tax, a significant improvement over the EUR 94.5 million of Q2 2014. This was mainly achieved through tight control of working capital.
Solid cash flow generation in Q2 allows us to post positive free cash flow before interest and tax in the half year of EUR 2.4 million. In the first half, the working cap improved by 70 basis points year-on-year from 12% of sales in H1 2014 to 11.3% of sales in H1 2015. Improvements in payables and receivables more than offset slight deterioration in inventories. Our gross CapEx amounted to EUR 51.2 million, versus EUR 41.5 million last year. Slide 19 presents the usual bridge of our net debt over the quarter and over the last six months. During the quarter, we paid an interest charge of EUR 36.5 million and an income tax charge of EUR 41.8 million. Our net financial investment was a limited outflow of EUR 9.8 million.
During the half, we paid an interest charge of EUR 76.6 million and an income tax charge of EUR 75.6 million, our net financial investment was a limited outflow of EUR 20 million. Our net debt at the end of June stood at a little over EUR 2,550 million, up EUR 343.4 million year-on-year. Almost EUR 134 million is due to negative currency effects, and EUR 51 million came from the financing optimization one-off already mentioned. Let me inform you about the outcome of the choice in dividend payment that we proposed to our shareholders. 59% of them opted to receive their dividend in Rexel shares. As a result, dividend pay in cash on July 1st amounted to EUR 91.2 million. Slide 20 details our net debt at the end of June. We have three bonds, which represent over 50% of our gross debt, and our securitization lines represented more than one-third.
Our senior credit facility is undrawn and constitutes a reserve of EUR 1 billion, which we can tap if necessary. Our financial structure is sound, with strong financial flexibility. We have an average maturity of four years and no significant debt repayment before June 2020. We also continue to reduce the average cost of our financing on gross debt by 85 basis points from 5% in H1 last year to 4.15% in H1 this year. I will detail on the next slide the successful placement of EUR 500 million of these euro senior notes that was completed in May and allows us to refinance at a lower cost, an existing bond. Lastly, our net debt to EBITDA ratio stood at 3.2 times at the end of June. The ratio at the end of June is traditionally higher than the one at year-end because of the seasonality of our business.
We confirm that we intend to be at three times or less at the end of the year. Last May, as indicated on slide 21, we issue a new bond of EUR 500 million with a seven-year maturity and a coupon at 3.25%. This was used to redeem our 6.125 USD senior note due December 2019. The nominal redeem at redemption was EUR 442.5 million. As indicated earlier, the one-off charge recognized in our Q2 net financial expenses stood at EUR 33 million, and the refinancing generated a net present value of EUR 14.4 million. This successful placement and the refinancing came on top of the straight repayment in Q1 of our 7% euro senior notes due December 2018. These two operations combined will generate significant savings in interest charge totaling EUR 41 million on an annual basis.
The average effective interest rate on our gross debt should stand at around 4% in 2016, based on the prevailing interest rate at end June 2015. This compares to an average effective interest rate of 6.7% in 2012, as you can see on the chart. These operations demonstrate our continuous efforts to improve our financing structure and reduce our financial expenses. Let me now hand over to Rudy for his concluding remarks.
Thank you, Catherine. We go straight to slide 23 in order to give you an update and a bit more color on how we view the two key factors that impact our sales and profitability. On the one hand, sales to the oil and gas segment and on the other hand, copper prices. Concerning oil and gas, we mentioned in this presentation that our sales to that segment declined strongly in Q2 as a result of the suspension or downsizing of several projects in the wake of falling oil prices. As mentioned, the impact was particularly strong in our North American business. Given this performance, we now estimate that sales to the oil and gas segment in the full year could fall by between 25%-30%, which is actually equivalent between 1%-2% of our group sales.
With respect to the copper prices, the evolution has been below our expectations. As you see on the right-hand side of the slide, prices in dollar terms were down by 17% in Q1 and over 10% in Q2. Copper prices are currently at around $5,500 per ton, and assuming that this price remains constant in the second half, we estimate the following impacts. At $1.12 per EUR, because there is currency, of course, you have to take into account. At $1.12 per EUR, circa 0.5% on sales, a drop of circa EUR 13 million in gross margin, and a decrease of circa six basis points in adjusted EBITDA margin. At $1.07 per EUR, circa 0.3% on sales, a drop of around EUR 8 million in gross margin and a decrease of around four basis points in adjusted EBITDA margin.
That's the sensitivity analysis we've made and factored in in our working hypothesis for the remainder of the year. Having said that, let me conclude on slide 24 with an update and remarks and comments related to the targets for the full year. To get straight to the point, we confirm the financial targets we announced in February and are in a position to be more specific right now. We confirm these targets, but we're at the low end. Actually, in view of the first half performance we detailed today on the one hand, and the lower-than-expected copper prices and performance over the oil and gas sector on the other hand, we expect to be at the low end of the range we presented in February.
The way we express this is that we expect an organic sales decline of maximum -2% for the year, and an adjusted EBITDA margin of at least 4.8%. Regarding cash flow, we stick with our at least 75% of EBITDA conversion rate before interest and tax, which corresponds to around 40% of EBITDA conversion rate after interest and tax. The adjusted EBITDA margin target for the full year 2015 obviously represents a year-on-year improvement in adjusted EBITDA margin in the second half, building on the sequential improvement we recorded in Q2. I think we've been very clear today about the cost efficiency measures we're implementing, which should contribute to us achieving that target. On the gross margin side, we have very specific action plans in place to maintain the momentum we've seen increasing in the first half.
Our teams are mobilized and incentivized to that end. Lastly, we did not reiterate our dividend policy in today's press release, as we do not repeat it every quarter. As there was a question or a comment of an analyst this morning, I just want to make sure there is no misunderstanding, and for the record, reaffirm here that our dividend policy is unchanged. We stick with the policy, as you very well know, of distributing at least 40% of recurring net income, and you are very well aware of our track record in the past couple of years in that sense. Thank you very much for your attention. We are looking forward to your questions. Go ahead.
As a reminder, that's star one if you wish to ask a question, your first question comes from the line of Lucie Carrier. Please ask the question.
Hi. Good morning, Rudy. Good morning, Catherine. Thanks for taking my question. I have a couple. The first one is actually on the European margin, you've explained, obviously, that you've seen an impact on gross margin from the cables or higher cable sales. I have to say, compared to history, the variation seems very pronounced. Considering that European margin normally is kind of a rock for you in terms of profitability, how should we think about the evolution of this margin for the rest of the year, especially if we continue to see strong copper sales? Second question I had, maybe you're targeting a higher second half margin on improvement year-on-year on the second half margin. If I follow you correctly, you're expecting to achieve about close to 5.4% margin in the second half.
Can you detail what you see as drivers of this margin improvement in the second half and as an improvement year-on-year? Just finally, I wanted to come back to your initiatives in North America. You spoke about initiatives put together in the second quarter, I had the feeling that some of the branch optimization was already kind of part of the broader investment program that you've been carrying since the end of 2013. What is new in the initiatives in North America? When you talk about the EUR 20 million savings, annualized savings you expected to reach, is that just from the new initiative or is that for the entire transformation program that you've been carrying in North America for the past two years?
Okay. Thank you, Lucie, for those questions. I will let Catherine answer the European question about cable and all the elements in that equation. Let me get into your second and third question first. On your second question about the drivers of the profitability improvement in the second half, there is a number of considerations. One, on gross margin. We simply assume that we will continue the momentum we have in gross margin across the board. In that sense, we consider the negative impact of cable in the second quarter not as a trend, but as an event, which has led us to very specific rules of the game in terms of driving that business and dealing with that business in the second half. On the OpEx front, clearly, there is two sides. One is in Europe. It is about OpEx discipline and continue to fine tune and streamline.
The biggest part is what we are doing in the U.S. In that sense, your third question is related to it. What I talked about earlier is actually somewhat new because Brian McNally and the team went through a very in-depth assessment of the productivity of their branch network. We came to the conclusion that during that exercise, we actually could merge 23 branches with existing branches in a number of commercial areas. We took out headcount. We took out a few management layers. We simplified the go-to-market model. As a consequence, we could reduce headcount with 273 full-time equivalents.
Having realigned the branch network, we tested all the hypothesis on the logistics network, eventually ended up with a decision not to invest in a DC in Texas, which is also related to the oil and gas situation, and not to invest in a DC in Northeast Ohio, because that is mostly an industrial logistics platform we need to support our Rockwell business, and we actually can also manage that through a network of super branches with the right inventory to serve large customers with a distinct profile. This has been, in the second quarter, a very significant effort. To align the logistics and the branch network optimize wherever we could. The total impact of that is indeed a EUR 20 million better OpEx picture on an annualized basis. Simple answer is that, you could take half of that EUR 20 million, and that is coming into the second half.
The other thing to mention is the evolution of the transport cost. Actually, we see a positive evolution there. In Q1, we still had EUR 3.2 million extra costs that became in Q2 EUR 1.4 million. We expect that will disappear in the second half, and therefore will help us definitely in the comps. Also important to mention is that we will also expand. This is also about resource reallocation. We are adding a DC in California. We are going to add 3 to 5 branches in the first phase. Platt branches, we use our Platt franchise there, and Platt has shown close to double-digit growth in the first half, and we think they will continue to drive that. There is also return on investment there, on the OpEx side that we factored in.
All that together gives us indeed, the confidence that, even with assuming that sales in North America and U.S. in particular will be down in the second half, we think somewhere mid even high single-digit decline due to that severe impact of oil and gas. That even with that profile, we can drive the EBITDA improvements. I didn't talk too much about Asia Pacific. Also there's a set of measures to make sure that we end up where we need to end up. That's actually the working hypothesis. I think I answered through this answer also your third question. I would hand over to Catherine here to give you a bit more insight in the European gross margin profile and the relationship with cable or other elements.
Yeah. The cable market was very competitive in Europe. We had strong cable sales in H1, notably in France, Germany, Sweden, but also Spain, Netherlands and Italy. Cables represented in Q2 and H1 around half of the GM drop. The pressure in Europe on cable gross margin start to ease in June. Obviously, it is too early to comment on July. We have, in our perspective, to a more resilient H2 in term of GM in the second half.
Thank you. Sorry, could I just have one follow-up, please? Actually two small one. First on the EUR 20 million savings that you've spoken about. If I understand well, the EUR 20 million savings, are they net savings versus the expense you have for this transformation, and they are coming on top of your previous investments program. Is that correct?
Yes, it is correct.
Okay. Thank you.
There is a restructuring associated with that, because obviously if you go that far to take out the headcount I mentioned, and streamlining the operations, there's an element in there which actually was not there three months ago when we discussed. Maybe Catherine, you can-
No. Just to repeat, it's annualized basis. We started at the end of Q2, it's annualized. It is not all in 2015.
No.
There will be a part also, you see, in H1 2016.
Yeah. Exactly. The other thing is how much restructuring exactly do we have associated with this?
Restructuring in North America in H1 was EUR 10.8 million, which explain more or less bulk of the part, the increase in H1 in restructuring. You have seen that we have invest EUR 36.8 million, which is an increase of EUR 14 million versus last year. We are planning now to have a restructuring cost for the year of EUR 60 million, more or less in line with 2014 level.
Thank you. Just, sorry, the last follow-up is on the recovery of the margin in the second half. Is there obviously also an element of that coming from Europe, I mean, not only from cables but potentially from better mix, notably France, maybe at the end of the year?
Yes.
Yes. You hear both of us saying yes.
Yes.
Indeed we assume that this cable situation we faced in Q2 will not repeat itself in the same way and in that magnitude in the rest of the year. Yes, depending on which country grows faster or behaves better, there's some mix effect, yeah. The weighted average of all that, again, for Europe, is reflected in the working hypothesis that we will see slight growth, with gross margins holding up. Strict OpEx control and management and therefore Europe remaining the rock you were talking about before. I think the European rock is very solid. There's no reason to believe that that would not be the case in the second half of this year.
Thank you very much, guys.
All right.
Thank you. Your next question comes from the line of Denis Moreau. Please ask your question.
Hello.
Hello, Denis.
Hello, everybody. It's Denis Moreau, UBS. Three questions, please. The first one relates to actually the number of branches in the U.S. that came down by 6%. Which is quite intense. Can you detail the main locations and end markets, which have been affected by this cut? Secondly, could you detail the price effect, excluding the copper price effect during the first half or second quarter? Lastly, could you update us on how your market share has developed in Europe, given all the efforts that you make on your cost base? Do we see some gains or losses in some countries?
Okay. I'll let Catherine deal with your price question in a minute. With respect to your question about U.S. branch network, I really don't have a map of the U.S. right here with all the cities and the states, so I cannot answer that question right now. To make a long story short, the logic is very simple. If we have too much brick and mortar and too many branches in the same place, by regrouping and reconfiguring, we think we can do the job in a more cost-effective way. That also includes examples where before there was a Gexpro branch and a Rexel branch that we would use the same branch, the same building, and give a place to both teams and banners in the same location, which we didn't consider in the past, but which is part of this consideration.
With respect to your question about market share in Europe, let's just quickly go through the countries. We know for a fact that in France, we slightly increased our market share in the first half. If I take this by end markets, we probably were stable in industry. We slightly gained in the non-resi area on the back of our medium-size and larger project business. I would say in line with market in the resi environment. In Germany, where the industry represents one-third of our sales, we know for a fact that we did better than the market. The market was up about 4%-ish. In the first half, we were up about 5%-6% in industry. In the C&I space, stable. On a total country basis, maybe slightly lower, but you need to realize that we are mostly active in Southern Germany.
In Southern Germany, we actually increased our number of active customers, gained share on the back of the improvement of the service levels of our Maisach warehouse. Overall, after four or five consecutive months of sales growth in Germany, we think we're in a pretty good place from a market position standpoint. In the U.K., I would call it broadly stable. We've made some inroads on the industry side. At the same time, in some metropolitan areas like London, where we are not as big as our average market share in the U.K., we mathematically could have a negative impact due to the fact that the non-resi market in London has been more buoyant than in other places. At the same time, you take the weighted average of all that, we see good growth for 10 months in the resi market.
Again, I think a weighted average, broadly stable. We know in Scandinavia that we're gaining share. We've seen there now a continued high single-digit, even double-digit growth. We are growing in Austria faster than the market. I think in Switzerland, we've done a nice job in dealing with the collateral effects of the Swiss franc, because volume wise, we're doing well. I think in Spain, we fully benefit from the recovery in some places. We had some growth in Italy, although in Italy, we're only present in a few provinces. I would say in Belgium, we're beating the market. In the Netherlands, I think right now we stopped losing relative to the market. I think in Europe, weighted average, but again, we do not have all the data yet. A lot of those data come with three months delay or sometimes even six months delay.
Having cross-referenced this, cross-checked this with suppliers, which we do on a quarterly basis, I think we're in a pretty good place in Europe overall.
Okay. That's quite good.
Before the follow-up, still the pricing question and the copper versus non-copper effect. Catherine?
Copper was negative, same day sales -0.4% in Q1, positive 0.2% in Q2, giving an H1 at -0.1% in same day sales. Q2, obviously, we have a mixed effect because the copper price was -10% in USD and +11% in EUR.
Okay. For the price effect on the other goods, excluding copper, is that something?
Slightly positive.
Okay.
Excluding cable sales, it's 0.2%.
0.2, yeah.
Okay. Just one follow-up question on the reorganization in the U.S. If you were to quantify the progress and the completion, what would you say? Are we at 60%, 80%?
No. We're doing very well. On the Eclipse IT side, we're pretty close to finalizing wave four. There is a wave five. Wave four will be completed in Q3, wave five will be completed in Q4. By the end of the year, we can call the Eclipse conversion done. Actually, we're accelerating the development of a digital platform, an e-commerce, e-business platform, as we are a bit ahead of schedule on the ERP side. We think that we actually can even be in a better position from a commercial perspective and an operational perspective at the end of the year, in terms of the platform we need for future growth. On the logistics side, well, you've heard me talking about the fact that we're now focusing on implementing 13 DCs rather than 15. There's no purpose in itself in building warehouses and adding brick and mortar.
We've been continuously looking for optimizing, aligning the branch network with the logistics network. For example, I'll give you an example. The Rexel C&I business is now organized as a dedicated business unit. We have eight districts there. Each district has what I would call almost a dedicated hub, a dedicated DC. In the alignment, the better alignment between the commercial and the operational management structure, we have made more progress. Having said all that, by the end of the year, we can also consider this logistics program, this network optimization program, as done. I can say we will move on with life, so to speak. The third element in all that is because this transition process triggered some extra costs, as I explained. On the transport cost side, in Q1, we were still EUR 3.2 million higher, Q2 EUR 1.4 million.
That will also disappear in the second half, as we promised in previous calls. I think we will be able to start 2016 with a clean sheet of paper in that sense.
Thank you very much.
Thank you. Your next question comes from the line of Margaret Paxton. Please ask your question.
Good morning, everyone. Thanks for taking the question. Can I just ask quickly on North American oil and gas? I think some of your peers are talking about the decline flattening out. I just wanted to ask what you're seeing there in terms of trend. Just to clarify your comment to Lucie earlier on about the cable sales in Europe being an event, not a trend. Just to clarify, do you mean that you don't expect such a high dilutive effect from the cable sales, or do you mean you don't think it will be such a high portion of sales?
Well-
Finally on North America being a clean sheet next year. I think you've been asked this lots of times before, but in 2016, what kind of margin range are you thinking about when you say a clean sheet?
Okay. Well, let me start with the North America oil and gas question. There's different schools of thought out there. I spent the whole week, last week in the U.S. I talked with a lot of suppliers and customers, and we looked to this oil and gas business in and out. Look, we are careful, and that's why our working hypothesis for the second half is that we will be still down somewhere between 20%-30%. Of course, we're in two sides of the oil and gas business. With the Rexel Inc. banner, we're more upstream. We've seen in the first half a drop in rig counts with more than 50%. Indeed, some people will say that this drop will not be as severe or will not continue in the second half, and there's maybe something to say for that.
As a matter of fact, 80% of our business upstream is project business, not MRO business. If you're more on the MRO side as a supplier or a player, then you could have slightly different assumptions. As we are more on the project, the CapEx side of all that, we prefer to be careful, and we extrapolated the second quarter trends and actually the exit run rates we've seen in June, to be more specific. Our Rexel banner is more active downstream. Also there, we have avoided to dream ourselves to a miracle. We stick with quite conservative assumptions there. By the way, downstream, given the profile of the business, there's also some negative impact on adjacent businesses, industrial business like OEM and the metals business, which are affected by that oil and gas situation.
Our assumptions are what they are on the basis of what I explained. The same is true in Canada. The only thing in Canada is that we see some recovery of mining. Mining was a big drag on our performance last year. We see the potash mining business going the right direction, and it looks like our assumption is that we will gradually be able to offset partially, I guess, the negative oil and gas impact in Canada by an improvement in mining in the second half. Cable Europe, again, let's call a spade a spade. We saw increase in cable sales. In some cases, we didn't like the gross margin that went with it. The instructions to the teams in charge are to take smarter decisions in making trade-offs.
The working hypothesis is that they will take smarter decisions in the second half. That's more a trade-off issue. I'm confident that we will be able to do so. Which brings me then to your last point about the U.S. We're not going to talk about 2016 at this point. It's too early. We have an investor day at the end of February, at that time, we'll answer your question.
Okay. Thank you very much.
Thank you. Your next question comes from the line of Andreas Bali. Please ask your question.
Yeah, good morning. I had a follow-up question on the cable issue, again. As I understand it, you discount cables to get electricians through the store as a teaser, and obviously then you get more volume elsewhere and that's kind of a trade-off you have to take. Was that really the issue in Q2? If we then have less discounting in cables in Q3, will that have a negative impact on market share, or has the whole industry gone into a bit of a price war in Q2 on cables and everybody will stop doing it in Q3? If you could just-
Sure
Could you elaborate on the difference between the two things? What is Rexel's specific push for market share relative to industry price competition?
Okay. Thanks, Andreas. It's definitely not a teaser for the electrician story. It's very simple. We were able to conquer a few big projects in which the cable component was significant. Some of these projects were quite low in, I would say, initial profitability, because some of these projects over the lifetime then improve in terms of profitability, but through other product categories. Let's not go there. It's not a teaser for electricians case. It's a specific set of projects that we took in the second quarter, which didn't have the right profile, and we learned from that. There's no reason to extrapolate anything. I insist on that. It's true in general that the cable business and the project-based construction cable business is a very competitive place, and that it indeed takes very tight rules in the way we do the arbitrage.
We make the trade-offs in terms of investment, in terms of gross margin versus volume. Again, I insist there is nothing structural here that you should extrapolate for the sector or the cable industry.
Thank you very much.
All right.
Thank you. Your next question comes from the line of Ronald Selord. Please ask your question.
Yes, good morning. I would like to know, please, the evolution of the discounts that electricians are getting from you. If your listed price was 100 two years ago, and they get X% of discount, how is this evolving?
I'm not sure that I understand fully your question. Our business is not a discount business. Our business is a value added.
I know it's not a discount business
a value added service business. The way we manage pricing, because at the end of the day, that's what this question is about, is a very structured process where we segment the market, on the basis of the different dimensions of that segmentation, velocity of products, and appetite or acceptance of price sensitivity of customers or types of customers. We actually have a differentiated pricing policy. One of the reasons why actually, we are confident that in the second half, our gross margins will remain intact in comparison with the first half is that, we think that our pricing metrics and pricing methods are sufficiently sophisticated to deal with the market demand and the market reality.
To put it another way, are your customers having more, let's say, bargaining power over you than before or less?
No. This is not about bargaining power. It all depends on the end market. When we are in the non-resi space, we have 2 types of business. There is the business of the contractors and installers, the small and medium contractors and installers, and that's, call it regular business, with the normal pricing models and mechanisms. Then there is the big project and large contract business, which indeed could require us teaming up with a specific manufacturer to make sure that the offer is competitive but still profitable. Yes, that's a different type of business where, in this case, project pricing, which is in itself a science, has a very different profile than the over-the-counter sales to, for example, small electricians. Smaller electricians in branches. That's non-resi. In the resi space, you actually have even more counter sales, over-the-counter sales, and smaller contractors and electricians.
In the industrial space, this is very much a direct customer business. We do direct business with the Alcoas of this world and the Alstoms of this world. There you very often have contracts which are based on a TCO model, a total cost of ownership, a productivity improvement model over time. Their price is only an element in a productivity equation. We cover, of course, the whole spectrum. If your question is, has something fundamentally changed? No, nothing has fundamentally changed.
Okay. Thank you.
Thank you. Your next question comes from the line of William Mackie. Please ask your question.
Yes. Good morning. Thank you for taking the question. I wanted to come back to North America, please. You've disclosed that oil and gas relates to 10% of your revenues in the region, also that the decline is in the order of 20% to 30% or 25%. That would account for around two and a half percentage points of the decline. Yet you're reporting an organic decline much larger than that against the backdrop where many of the construction markets are recovering. You've highlighted that you've gone through a branch consolidation, and a significant branch consolidation in your restructuring program.
I wonder, can you specify what the impact on your growth was from the consolidation of branches on top of the consolidation of oil or the reduction in oil and gas demand, therefore giving an indication of what the underlying growth you're seeing relating to the construction market is? It's very hard for me to equate the declines you're seeing against some of the positive moves that we're seeing in some of the construction end markets.
I think the detailed answer on your question is on page nine. I'm not going to repeat that, but you find all the details here that we can share. It shows you what's coming from oil and gas, what's coming from lower cable sales, what's coming from branch network optimization. In U.S. and in Canada, what's coming from oil and gas, cable, and PV. That is the answer. With respect to the different end markets, look, clearly oil and gas is a big part of our industrial activity. As I was mentioning before, on the sector side of our business, we have some collateral effect for oil and gas in our OEM and business and with some of our larger metals customers, which has some extra negative effects, which is not in that direct oil and gas number, so that's more indirect impact.
On the resi side, you're right, resi is up in North America. I need to remind you of the fact that resi, in our balance of sale, is only 5% of our sales. I could imagine that there are other distributors out there or companies out there who are more upbeat or have better numbers, but that's just because their profile is different in that sense. On the non-resi side, it's a mix. Again, not every state in the United States behaves in the same way. We know for a fact that West Coast and Northeast are up in non-resi, and we are benefiting from that. There's other places where that is not the case. We also are not in every state in the United States, so it could be that in some places where there is growth, we are actually not present.
It's hard to draw a line, but if you compare our numbers with the usual suspects and some of them already published their numbers. Take WESCO, for example, and I could give other examples, but take WESCO, for example. What's happening in their industrial business and in their non-resi business is definitely not very different from what's happening in our case. Of course, they have a utility business we don't have, and their utility business is up. They have a big government business we don't have, and they have, and that business is for them also up. If you kind of start peeling back the onion, so to speak, and you look to the underlying trends, I think we can explain why we are where we are. I think you have the answer on your question.
Thank you for the detail on page nine. It's very clear, and thank you for the answer. If I can sort of similarly come to the question around the U.K. and France, where you've highlighted the cable sales growth factor, how would you characterize the trend in the market within the French market? There's been some optimism around certain subsegments or verticals in construction in France, but it may be too early for you to see it. Do you get any sense of any shift there in a trend? Again, with regard to the U.K. down 2.3%, I think you highlighted and we know the regional difference between London versus the rest of the country, do you think you're losing share anywhere there? Or is there anything specific that would suggest you were lower than the overall market trend?
Let me start with France. On France, there's some very early indicators that would point towards a gradual improvement, although we have not seen that because we're late cycle, and those indicators are pretty much driven by early cycle businesses. The working hypothesis is that if those early indicators would continue to behave consistently in the next months, that 2016 should be a better year than 2015. I'm not going to quantify that, but I'm qualifying it. Let me put it that way. You need to take it by end market. On the industrial side, as I said, we pretty much behave in line with the market. In non-resi, we're in the larger project business. Being in the larger project business has triggered some of that cable business, and we talked about it.
That's where we gain share, but with a gross margin impact that we discussed. On resi, it's pretty much a renovation play. It's not a new construction play. In France, we know we're gaining market share, slightly. We continue to reinforce our position. We think we're in the right place, in the right categories, in the right end markets. The jury is out. The French market has been quite erratic over the past 12 months. We sometimes had a month where we started to believe that it was getting better, and then the month after, it didn't continue. Also the summer period is a difficult period to use as a proxy for improvement. I'm not going to make statements about it. In the U.K., well, I think I explained where I think we are. We're making inroads on industry.
We have reinforced our MRO portfolio. In non-resi, I think as we are underrepresented in the larger London area, mathematically, there is a negative impact effect on market share calculation. On resi, we see this with Denmans, and that is actually going the right direction. I mentioned that also before. There is still an effect of comparison with last year because in the U.K., we actually closed branches. We actually did not necessarily merge them. We closed some of them, which now has an impact. Yeah.
That's a good point.
Voilà. There is some impact there, and that will be still there this year. Next year, of course, the baseline will be more equal. I don't think I can give you more detail at this point. This is as much as we know. Yeah.
Thank you very much for the comprehensive answer. Cheers.
Thank you. Cheers. Thanks.
Thank you. Your next question comes from the line of Pierre Bousteix. Please ask your question.
Yes. Good morning to both of you. I have two questions, if I may. The first question, I would like just to come back on your initial comment on your dividend policy, which has not changed. I understand that, but could you consider a cut in the dividend, or will you maintain it as a EUR 0.75 per share like you did last year? That's the first question. The second question is regarding the M&A pipeline with only one acquisition this year. When you look at your competitor, Sonepar, they made a number of acquisitions, including in the U.S. If you can have more clarity on the acquisition pipeline and in particular, in the U.S. for Rexel.
Okay. On dividends, I cannot give you more details. Obviously, every year at the end of the year, when we come together with the board, we decide on cash allocation. Our policy is, we call it our golden triangle. Yeah. There is, on one hand, our commitment to shareholders to pay an attractive dividend, which we've been doing consistently. There is the notion of having an envelope for M&A up to EUR 500 million a year.
On average.
On average. You need to see this over a longer period. There is the third corner of the triangle, which is staying below the 3 net debt-to-EBITDA ratio. We are in that triangle. Not every corner is the same every year, but that's a decision and a discussion for February. At that time, we give you an update. As I said earlier, explicitly, the dividend policy is the same policy at this point as we had. There's no need to question that in any way. On M&A, we have a number of cases in the pipeline, not only in the U.S., also in other places, even Europe. We'll keep you up to date every quarter. We have a pipeline.
I must admit in the U.S. that given the kind of a challenging market, that this year we give full priority to finalizing all the transformation program, and optimize the go-to-market model, that, as I said earlier, we have a clean sheet of paper next year. I can tell you that in that context, M&A is a key priority. No more comments at this point. Of course, it takes two to tango when you're trying to conquer an M&A target. If you make comparisons with other companies out there, they do not necessarily have the same strict investment criteria as we have. They also strategically do not necessarily use the same parameters as we do. I would not draw conclusions about our M&A portfolio or pipeline or external growth strategy on the basis of those comparisons.
Actually, for a fact, I'm not going to give names, there's some targets out there where we actually were involved, we said, "No," because we thought that the price was too high and/or the quality of the company not good enough to sustain an investment case.
Okay. Thank you.
Thank you. Your next question comes from the line of Christophe Quatron. Please ask your question.
Yes. Good morning, everybody. Just two question, if I may ask. First one is about Europe. Could you come back a little bit more on gross margin evolution per country? Even you don't give any details, but give us the flavor of what's going on in dedicated local markets, please. Going back to also Europe, could you give us what's going on with Germany, where you have done a lot of reorganization in terms of supply chain? Just could you give us where you are in terms of evolutions vis-à-vis the logistics, more particularly on the impact on the profitability? Second question is around Asia Pac.
Could you give us more granularity on what's going on per country, on what is more particularly the trend, as it seems that China is in a more difficult environment, notably regarding pricing, and what are the main focus of you, Rexel, as going forward into this region of the world?
With respect to Europe gross margin, I cannot and will not give you details by country. There is this very simple rule that there is a correlation between the level of concentration of a market and our market share position on one hand, and gross margin entitlements or EBITDA entitlements, I have to say, on the other hand. In Europe, clearly, we're in a strong position because there's many countries where we are number one or number two, in relatively highly concentrated markets, which of course give us EBITDA levels which are quite significant. If you're in a country and you have 30%+ market share, the EBITDA levels can easily be high single digits. If you're a 20% market share player, you're still a number one or a number two. You get into nice mid-single-digit EBITDA levels.
That logic, that rationale, and we expressed that to you at roadshows and at these kind of calls, is still valid. I think you will have to do it with that rule of thumb to judge the quality of the detailed execution in the countries. A reason why we are confident for the second half is that we believe that we're in a good place there. With regards to Germany, yes. In Germany, the Maisach DC is up and running at very good service levels. We have fill rates of above 90%. We have increasingly more satisfied and convinced customers. Actually, our new customer count is exceeding our previous track record in the past six months. We see productivity improving. We see better quality of inventory. We're actually extending, expanding the SKU range. Actually, we're adding 50% more SKUs to offer a better value proposition to our customers.
In general, I think we do well. The transport cost also there is going down. Warehouse cost goes down obviously as productivity improves. One of the reasons why we've seen us consolidating and even reinforcing our market position in the south of Germany, which is our stronghold, is related to that. I'm very pleased. We also have a management team that is up and running. We have a new leader. We have a new lady who joined us running the logistics. We'll have a new sales director beginning of September. Patrick Berard and the team there have done a nice job in solidifying the German management structure, too. On Asia Pacific, let me start with China. We are an 80%-85% industrial automation/system integration player. So far, we have not been too much affected by the negative trends in resi or non-resi, or in general.
I'm going to be honest, we expect some pressure in the second half on sales, even in our industrial automation arena. That's also cross-validated with some large suppliers. That also has to do with the fact that we don't want to take too much risk on working capital. We could grow much faster if we would give in on receivables, which we don't want to. There's a trade-off there. Moreover, there's this whole wind business that was huge last year, and in comms terms, is a bit distorting the picture. Without going into the details, we're going to talk every quarter about what the China business is with and without wind. Otherwise, we're not going to give you a good perspective on our core business there.
Southeast Asia is an interesting case where despite the fact that half of our Southeast Asia business, oil and gas, with the same pressure, I mean, 20% decrease, we're able to compensate 20% decrease on 50% of our business, which is oil and gas, with a similar increase in the non-oil-and-gas part. Our lighting projects do well. The acquired companies perform better than the business case. The high-end, non-resi, larger project business in the hospitality area is doing well. That's a balancing act which works for us. You know the situation in Australia. I think we extensively talked about this. Australia is not anymore the country where we saw double-digit drops and complete decline of sales because of the mining situation.
I think step by step with the new team there, because also there we have a new leader, and also there we upgraded the management team. I think we're increasingly more seeing momentum building of improvement. New Zealand is, I guess, too small to talk about. It's not changing anything in the total scheme of things. That's a quick update on Asia Pacific.
Okay. May I ask two other questions really quick, if I may?
Sure. Go ahead.
Yes. First one is related with the hiring of someone at the strategy role. Could you elaborate a bit more of what is your view about this hiring of such people in terms of repositioning Rexel and what is the rationale behind this hiring? That's my first question. Second question, sorry to come back on Europe, but it appears to me that despite the organic growth coming back, there are not such an impact at the margin. You explained a lot what's going on there, but if I remember well what you have said into the past, you always mention that you need to have a good allocation or a good direction coming from Germany, France, and U.K. in order to come back with a certain level of leverage on the profitability.
Is it still the case, or do you plan to come back on such a level at the operating leverage in 2016 more than in 2015, putting your guidance at the bottom of the ones you mentioned at the beginning of the year?
Let me start there in Europe. Again, if you take Europe, you need to understand what's happening in each country. You mentioned U.K. and Germany as a decisive factor. The more decisive factor is actually France. Relatively spoken, France is still underperforming kind of the overall European performance. That is, of course, thinking about next year and the evolution of our European business, a key factor. If we get France back on run rates that are at least at European level and even hopefully better, and we'll talk about the hypothesis in February, there's no reason to doubt that we would not be able to get to the operating leverage you're talking about.
By the way, if you factor out this cable impact on gross margin and you look to the business on not just taking the view of a quarter, but taking the view of the last 18 months, so to speak, and you do a sensitivity analysis, again, there's no reason to believe that we would not be able to continue with a strong Europe generating the profitability that you expect from it and we expect from it. On the hiring, well, you need to see this in a broader context. We just finished with the board of directors, an exercise called Rexel 2020, which is a comprehensive strategic plan which we discussed with the board. We will actually, when we have the investor day in February next year, give you an update, because that will be the frame of reference for our discussion at that time.
In that context, we decided to actually reinforce the Executive Committee with a dedicated leader for everything that will be related to the execution of that Rexel 2020 strategy, which covers obviously strategic initiatives. It covers M&A, it covers new business development, it covers an expansion program. We thought that we would benefit from having a dedicated leader with a dedicated team going forward to drive that effort, and that's why we've recruited Thierry Delarue, who is actually not coming from the sector, but he's a real international cosmopolitan leader, worked for many different companies in different industries, also has a consulting background earlier in his life.
I think this is part of creating a team that is the right blend, the right mix of expertise and experience, people like Patrick Berard , and at the same time, new people coming in, giving a new perspective, a new impetus, and enriching the Rexel HR value proposition, so to speak.
Okay, thanks a lot for all your answers.
Thank you. Thank you for the questions.
Thank you. There are no further questions at this time. Please continue, sir.
Okay. Well, I'm really pleased with the interest. A lot of questions, and I would call them all very good questions, and I hope on your side, you will call our answers very good answers. With that, I would like to thank you for joining the call. Wish you a great day and a good summer. For those who take holidays, wonderful holidays. Thank you.
Thank you. That does conclude the webcast for today. Thank you for participating. You may all now disconnect.