Thank you. Good evening, everybody. I hope that you have received our press release and that you have been able to go through the highlights. Let me sum up our 9 months sales performance. The consolidated sales for the 1st 9 months were 27,891,000,000, including a negative group structure impact and currency impact.
In fact, when we look at the like for like, we saw a significant improvement in Q3 with like for like sales up 3.2% after the minus percent like for like. Both volume and prices improved in Q3, with volumes up 2.3, and prices up 0.9%, which is a significant improvement over the first half. Especially in a continued deflationary cost environment. I know hand over to Sreedhar, who will give you additional information about our 9 month sales, including by segment.
Thank you, Pierre and good evening to everyone. Let me give you more details about our sales for 3.2% like for like, returning to normal levels in most countries in the quarter. The currency impact was negative 3.7 percent for the quarter, mainly driven by the weaknesses of the Brazilian real U. S. Dollar, Norwegian Crone and other emerging market currencies.
The structure impact was negative 5.7% for the quarter. As a result of the divestments linked to Transform and Grow Initiative, and also includes the integration of acquisitions in particular continental building products for from February 2020. Now coming back to the like for like growth, pricing trended to 0.9%. In Q3, thanks to the recent price increases, despite the continued deflationary environment for industrial businesses. We expect an ongoing positive 2.3% in Q3 as we recovered from the impacts of pandemic.
I will now give you some more details by segment. High Performance Solutions like for like sales recovered well in the third quarter from Q2 while still remaining negative at 4.6%. Mobility saw an moderate decline in Q3, rebounding sharply on Q2. Europe remains significantly down, but sales to China and North America rose sharply. We continue to outperform the market in mobility in Q3 with sales down 3.3% like for like.
This is once again driven by our increasing exposure to high value added products and especially electric vehicles gaining share. Industry saw a marked fall in sales in Q3 but nevertheless, a clear improvement from Q2. In the context of the coronavirus crisis, The slowdown in our customers investment cycle is particularly impacting related activities with a negative mix impacts for the High Performance Solutions segment. Construction Industry held up well in life sciences continue to enjoy good growth. Turning now to the Northern Europe.
Like for like sales were essentially flat over the quarter and virtually back to the normal for the region as a whole. Nordic countries were up slightly in Q3, as they were already at the end of June, driven by distribution which continued to increase its market share and was supported by a strong exposure to the renovation market, whereas the new construction was less dynamic. The UK improved with sales almost flat in Q3 after a very difficult Q2 We saw some catch up effect with a good month of September, but also a good performance from distribution, which is up in Q3. Where our adaptation measures are already bearing fruit. However, the situation remains fragile ahead of Brexit.
Germany decreased slightly in Q3, still impacted by the spillover impact of the automotive market but with the construction market back to 2019 levels. Now coming to the Southern Europe like for like sales showed a clear upturn in Q3. France drove this positive momentum. Thanks to the energy efficient solutions and our strong position in distribution, benefiting from a supportive renovation market on small and mid sized jobs on top of a catch up effect. Regarding the Americas, sales grew double digit in Q3, up 11.4% like for like.
North America saw strong growth with like for like sales up 5.3% in Q3, driven by volumes in exterior solutions and gypsum. The pricing environment was better and overall prices were slightly up. The integration of Continental continues to go very well. And we are on track to reach over $15,000,000 strongly over Q3, up 25% driven by both volumes and prices, a strong rebound from Q2 and also catch up effect. Brazil continued to benefit from sales synergies as part of our Transform and Grow reorganization.
Which enabled it to once again grow faster than the underlying market. We see that across our construction solutions, whether it is on facades, combining gypsum and glass, on interior solutions with ceilings and insulation, or on other construction chemical applications, etcetera. Lastly, our Asia Pacific region saw like for like sales down 3.6% in Q3, but is seeing improvement month after month. And return to growth in September. China continued to show growth up double digit in Q3, driven by gypsum which continue to but the situation is improving progressively month by month.
In Southeast Asia, China continues to be different from country to country. To sum up, Q3 has seen a strong recovery compared to We continue to gain market So overall, an excellent quarter. I will now hand over to Pierre Andre for concluding remarks.
Thank you, Sreedhar. Though I'd like to make a few comments about the priorities for the rest of the year and the outlook. So the priorities are very clear. Number 1, firstly and foremost, clearly health and safety. Is our top priority in this very challenging health environment.
2nd, we are announcing the and sustainable growth profile, driven by the continuation of portfolio optimization as part of Transform and Grow according to market condition, I mean divestments our digital and customer productivity as well as new services to adapt our solutions to the needs of the post coronavirus world. And by comprehensive portfolio, our green solution produced or distributed by Saint Gobain. 3rd priority, we continue to implement operational measures to optimize earnings and the operating margin. We unlock sales synergies make possible under the new Transform And Grow Organization. We continue to optimize the price cost spread with very good results at the moment.
We reduced our costs, thanks to additional post COVID measures, which would generate 200,000,000 in full year savings by 2021, including EUR 50,000,000 in the second half twenty twenty. This program was announced in July and progressing well. The cost savings program as part of Transform And Grow generating 130,000,000 additional cost saving in 2020. Including EUR 50,000,000 in the second half, which will enable us to meet our EUR 250,000,000 target 1 year earlier than planned. And we continue our operational excellence program aimed at offsetting wage inflation and other fixed costs.
4th priority, increasing free cash flow generation by reducing CapEx by more than $500,000,000 in 2020 versus 2019 and continuing to optimize the working capital requirement. And we have a good we have good results in terms of cash flow generation. Last three, we will maintain a strong balance sheet Thanks to the portfolio rotation and the cost savings program as part of Transform And Grow, the structural improvement of more than 100 basis points in the group's operating margin compared to 2018 should materialize in 2021, assuming, of course, volumes similar to the 1 of 2018. In terms of shareholder returns, you will remember that in July we brought forward our target of a reduction in the number of shares outstanding to 530,000,000 to the end of the year. This means a reduction of 12,000,000 shares in the second half of the year, of which we have already completed 9,000,000 shares.
In the fourth quarter of 2020, amid the lack of visibility as to impact to the impact of the COVID pandemic, Saint Gobain should benefit from ongoing favorable trends on most of its markets. Particular renovation, which accounts for around half of the group sales and is a market on which the group is strategically very well positioned. The catch up effect reported in certain countries in Q3 should diminish, and we remain cautious at the outlook for the UK ahead of Brexit and for industrial markets, which are expected to remain down on 2019. In terms of profitability, the price increases implemented in the summer should result in an ongoing positive price cost spread, and the adaptation measures taking in the automotive segment in Europe and in the UK are progressing well. To conclude, as you will have seen in the press release, based on our results and sales growth in the third quarter, We now expect a like for like increase in operating income for the second half of twenty twenty compared to the second half of twenty twenty 19, excluding, of course, a major new impact from the recent deterioration in the health situation.
The group's extensive exposure to renovation market means we are ideally placed to benefit from stimulus at the European or national level, which are focused on the energy transition and which are going to support Saint Gobain structural Growth. Saint Gobain's medium and out and long term outlook are robust thanks to our successful strategic and organizational choices, sustainability, thanks to our solution to protect our planet, while offering comfort and well-being and enhanced customer performance. I repeat what I said in July, as the gross profit of Saint Gobain post COVID will be higher than the gross profit of Saint Gobain pre COVID. And our strategy is perfectly in tune with the group, new purpose that we have just revealed, making the world a better home. Sreedhar and I are now happy to answer any questions you may have.
Thank you. The first question comes from Eve Bromed from Exane BNP Paribas. Sir, please go ahead.
Good evening, gentlemen. Thank you for taking my questions. I'll have 3. My first one is on your comment related to Q4. First of all, should we assume that you are implying further like for like growth on a year on year perspective?
And just as a follow-up to that, how should we assess the impact of lockdown measures announced in Germany in France yesterday? My second question is on 2021 margins. It might be a bit too early, but I think you alluded to it in the press release and you suggested that you would be able to reach 2018 levels plus 100 bps But assuming you don't get back to the 2018 volume levels, given the cost savings related to COVID-nineteen and the Transform and Grow program, And the positive price cut spread, would you feel comfortable that you could actually still achieve this level of margin even in volume stable 2018? And last but not least, on the U. S, leading indicators for new housing markets and price increase announcements are exceptionally strong Can you comment on your inventory and supply conditions and if we should really believe that the price that have been announced will stick in the market?
So I take the first question first two questions and Sreedhar will take the third one. On Q4, no, we are not the visibility is still low today. So we have a good trend, and I can tell you that the trends in October are good. They are similar, I would say to the trends we have seen in September. But the visibility is low.
Are. And, there are, there is some element of catch up that we have seen that is fading progressively. And we are returning to normal, but you have seen, for example, that in France for the 3rd quarter, we were at 9%, 8.7% growth, I don't assume that this is going to continue. So we will have, we will have some, of these effects which are fading So I cannot, at this stage, give you a guidance on the volumes on Q4. It's, it's still too early.
Now, the effect of the lockdown, which has been announced in France and Germany it's a little bit early to assess what it is going to be. But, from our understanding, in both countries, construction related activities and industrial related industrial activities are not concerned by the lockdown, in France, the French president yesterday said clearly that construction activity should continue, which means that the bulk of Saint Gobain activities are open and are going to stay open and we so it is very different from what we had at the beginning of the lockdown in France in April. In Germany, there is no also measures, which are hampering our activities, both industrial and in construction. That being said, there may be, you know, from the macroeconomic impact, there may be an impact of this lockdown, even though I, as we have seen also in the third quarter, I believe that consignment as a and lockdown have resulted in allocation of spending by the household which have been generally beneficial to renovation. So I, and I think this is a, this is a trend that we have started to see and it and I think it may continue and they emphasize.
So no major impact So I'm very in a different situation from the one we had at the beginning of the lockdown in France, where if you remember, there was a lot of confusion and So we went down to a level of 50 percent of sales. I don't expect anything like that at the moment. We may have some impact. It's too early to quantify, but it's not going to be a major. So when I say in the guidance that you know, the we there was a sentence where we say that it's yeah, excluding a major new impact from the recent deterioration in the health situation, what has been announced in France and in Germany yesterday is not part of that.
But, you know, situation is changing. There may be, anywhere in the planet, there may be very significant decision happening, which we have no idea today, And that's why I think it's important to stay cautious. 2nd question, on the 2021 margins, There are some costs, that actions that we have taken, which are not going to increase the margins significantly. When you say that the cost savings linked with COVID are going to reverse. I don't think we will travel as much as we were traveling before, but we will travel more than what we have been traveling, in the last 6 months for sure.
I have not taken a plan, planes since March. So this is going to change. So there are some costs that are going to come back The 2nd category of costs, which are not going to increase the margin are the costs, which are linked to activities, which are going to stay difficult for some period. The goal with this cost action is to mitigate the impact of a difficult situation. That being said, I think that the 100 basis points, that clearly, if you look at the situation in the in the first half of twenty twenty, when we have a volume drop, our margin is dropping.
Saint Gobaini is not immune. So assuming we are out of this situation for the full year of 2021, I think it is very realistic to expect This increase in the margin, that's what we are re iterating, today. 3rd question, Sreedhar?
Yes. So, yes, the indicators are quite positive. When you look at the residential market in the U. S, is quite very well oriented. The permits are up by 8%.
The housing starts are up by 11%. And it is the market situation is very good and we see that in our numbers, our volumes And that's why we have been able to also push the price. I think the team has done an excellent job of remaining focused on price. You see that the gypsum prices has stabilized in Q3. The exterior products prices have gone up.
So, we have
very deflationary
in a very deflationary environment. And we are, we continue to remain confident the pricing dynamics in the U. S. And at this point of time, I think the team is very, very focused on price and it's a very good news for us and it helps us to improve the complete the spread, the price cost spread is an extremely important impact we see in our numbers.
The next question comes from Jean Christophe Lafaire, Romoulain. Sir, please go ahead.
Francois, good evening, everybody. I have two questions. First, follow-up question in America. We had, we have the best price hike in Sagovin Portfolio is that early due to exterior solutions, or do we have a catch up effect in installation? First question, Secondly, you are showing optimism after this good 3 quarter pro form a, is that due to an exception, let's say, surprising good results in September?
Think that June July were very good in term of result at Saint Gobain level. Did we have also is good surprise in terms of results for Saint Gobain. And last question regarding the distribution sector in France, we could have some asset for sales, as we have, for example, for Larivier, as SIG is in difficult situation, could you consider a sub acquisition in the French distribution? Many thanks.
So Shreedan answered the first question and I think the second one is America.
It is 2 Americas is exceptionally good and it is both in North America and Latin America. Latin America, you also know that there is a change impact. So, there is also some amount of justification to push the price. I think team has done an excellent job of pushing the price, notably in the glass business in Latin America and also in the construction construction products. So, it's a combination of both the regions which has helped us to deliver a very good price.
And again, one again, I say this has also helped us to improve the spread between the price and cost in the region.
So the second question, you sound me optimistic. I would say I'm cautiously optimistic. I am a realistic it's a realistic optimism given what I see in the business at the moment. So we have seen a continuation as I said, positive news during the quarter, with, some element catch up and in France, it is clear that, we are we were up 9%. Distribution during the third quarter is up 10%.
One of the reason, and I think I said that in July, I said we will have a very good summer because we were told at the end of July that a number of our cost numbers, we take 1 week or less to catch up from the lock down. And that's what they did. So we had an exceptional August from that standpoint. But the trend in September is, is good. And as I said, the trend in October stays good.
That being said, the situation may evolve at any time. So that's why I am based on where we have been so far, I am optimistic, but I remain cautious. Now in terms of the acquisitions, yeah, we are looking at all opportunities and we have looked at a number of situations in France. That's, that being said, we are extremely cautious, and so far, we have not fined situation, which were appealing to us. And I must say so that the one you mentioned is not an option for antitrust reasons.
That being said, when I talk about acquisitions, our our priority is on small acquisition at the moment, our number one priority for this year, has been and is to continue to strengthen our balance sheet.
Okay. Pierre Andre, for the question, Ravony is apparently for sales.
Thank you for the information.
So you are not considering this acquisition, apparently?
I cannot answer because I have, but I will investigate. I was aware of the other other situation you mentioned, but not this one.
The next question comes from Ben Edelfest from BHS. Sir, please go ahead.
Yes. Hello, good evening, gentlemen. First question is on the dividend we have an update on the dividend or maybe on the payout ratio? I thought this matter were to be, reviewed by year end. That's the first question.
On the second one, when I'm looking at your distribution business, what percentage of revenue is linked to B2C on the on the which one is linked to B2B, to maybe a better assess what the lockdown impact, especially in France would be?
In, well, on the first question about the division, I said in July by the end of the year, and I think I see if I remember correctly, I talked about November on that page. So We will update you by the end of the year, and our thinking for the 2020 dividend policy, which will be distributed in June 21, once this has been reviewed by the board. So you will still hear from us by the end of the year. On distribution, sales, I would say, it's probably around 20% of our sales, which are, where we have independent or customers which are not, you know, sometimes they are between professionals and private. I am so that's that's I think it's around 20%.
It depends a lot by region, but I think that's around what it is.
I think we will continue.
But we will continue
to keep your distribution. Yes.
Yes. But we will keep those customers, I think. To a large extent.
The
next comes from Elodial from JPMorgan.
So I have three questions, if I may. The first one on the on your guidance for H2 operating profit. So obviously you lifted that up you found a lot more optimistic looking for an increase in like for like operating profit in H2. Can you give us a little bit of granularity on what you expect in terms of development per division? And second, if you could also give us a little bit of idea of the potential of the magnitude that you expect?
Is it low single digit, mid single digit providing that the conditions do not deteriorate in November December. So that's my first question. Actually my second question, I'll group the 2 that I had in just one question. Can you update us on your views on the different renovation community. So we have the French one that has already started.
Are you seeing an impact there? And can you give us a bit of an idea of what you expect for Q4 in 2021 from that specific plan and going a little bit more back end loaded, what do you expect from the green deal and the EC has released a paper 2 weeks ago with some amounts there, what you view on that? Thanks very much.
So the first question, Sreedhar will give you some, some ideas ongoing, but I want to stress that we are, I'm not going to qualify this increase at this stage.
Yes. So that you just have to I don't think anybody can qualify in a given circumstances. The uncertainty still remains. I think all our confidence comes from the fact that we see the spread between the price and the cost is it's in good shape. The measures on cost we have taken is moving in the right direction, whatever we said in end of July.
And Q3 results have been sales and results are good. I mean, very good. And also the October the trend is good. So, I think all this helps us to remain confident with the caveat of this uncertainty in the next 2 months, we'll have to see how things evolve. Now coming to the granularity, I mean, I'm not going to get into too many details, but just I can say if the sanitary issues does not have a negative impact on our business, we should see in all the segments and margin improvements as compared to the last year's second half, the high performance solutions, you know, the high performance solutions, if you remember, the first half was 7.2% and second half of last year, it was 12.5%.
Certainly, it will be significantly better than first half margin. This was 7.4%. But, but it will be below the last year's second half margin, so somewhere in the middle. So that's what I would say.
Concerning your second question on renovation, the first thing I would say about France is that at the moment, Our customers have a very significant backlog. So that's a and I am not yet able to say whether the backlog includes a significant part of my premium lineup, which is the new, I think it's too early to say whether it is linked with that, but the backlog is high. And I think it's going to progressively come into play, and it will mitigate the activity in new construction residential, which could be more difficult next year. So I think we are going to see this balance as we have already seen when new is, which has not really started to come down, we come down, there will be more activity on renovation. And I think this energy innovation will clearly grow progressively when our customers have a ability to, when they are, they have the the yes, they are available.
At the moment, they are quite busy and the activity is strong. So but it's it may have started, as you know, this new, especially for the global renovation. The new scheme is available. You can, you can quote on it starting 1st October. So we are really, at the beginning, I cannot give you a clear idea whether it will be a significant impact in Q4.
But clearly, it will be a significant impact in 2021. Concerning the green deal, I think the impact will be a bit later But you need to have in mind that a significant part of the Greenhill is in fact the funding of the national schemes So the national scheme, if I take the example of France is starting, and it's just that France will be reimbursed, in other words, by the EU, from what it has already started to, if the plan is approved and the review, which I think will not be a problem, So I think that these, these plans are linked, but clearly the effect of the Green Deal plan will, will be a bit later than some countries which have started, a bit earlier. And I think it will, it will, but it will last also for a few years. So I think it's going to be very significant, but we are just at the start up. Last point, as I forget to mention, which is, as you have seen in France, a very significant part of the new money is going to be 2 public buildings And that's schools and hospitals.
And we are, as far as Saint Gobain is concerned, we are extremely well positioned and we have created teams to address this situation with universities, with hospitals, and analyzing this program, is starting. The one hospitals, I have not seen yet a lot of starts, but in universities, it's going to start. It will be, there will be projects, launched in, very quickly. So the work will start will be done in 2021. And this, this also could be significant And it allows me to be relatively optimistic for what is called nonresidential because for office building, we are clearly going to have a drop, but I think that the public buildings could mitigate the impact far as the non residential, which is not a huge segment for the government, which is still a significant one, could be impacted.
That's what I would say, and this is going to kicking mostly next year.
Great. Thanks very much.
The next question comes from Arnold Lemann from Bank of America. Sir, please go ahead.
Thank you very much. I have three questions, if I may. Firstly, I'd like to come back on your, the comment around your 2021 margin improvement target. Firstly, why do you refer to 2018 volumes and not 2019, considering that I think last year volumes were maybe slightly up, but not very different from 2018. And just to confirm, in terms of the M and A activity, including in this guidance, I assume it's excluding German distribution, including Continental, but you're not assuming any more disposals, maybe we know some assets in distribution of potentially for sale.
How would that, are you including any incremental disposals in this guidance? And also what would be your kind of price cost dynamic scenario beyond the volume That's my first question. Secondly, on the UK, quite a lot of macro headwinds at the moment and also Brexit around the corner. On Brexit, do you expect any disruption in your distribution business? Are you sourcing a lot of products from the EU?
Is there a risk that beyond the local macro there's some logistic outsourcing disruption next year. And lastly, on the share buybacks, on your calculation of 12,000,000 shares, I mean, I guess that, that's accurate compared 5.40 to 5.30, but typically every year, you also issue shares for stock options or employees? How do you account for that in your calculation on share buybacks? Thank you very much.
I'll start with the third one, which is very easy. We also purchased 6,000,000 outside of this 12,000,000. We purchased 6,000,000 shares in the first half, which were, canceled and compensated employees, share plan, like every year. We have always compensated that for the last, I don't know, 6 or 7 years. And so the $12,000,000 is in addition to that.
On UK, 1st of all, we have had time to prepare, So, I think that for us, I don't expect significant issues for our businesses. The impact is clearly more on the macro situation, in the UK. And I think we should not estimate, especially if there is no deal. I think it's going to have a significant impact on the macro economy in the UK. That's why we are very cautious at the moment.
We have had, I would say, a good surprise on the Q3, which bounced back more than what we anticipated, but I think the situation in the UK, as Sreedhar said, is still fragile. On 2021, why did we say 2018? Because that was the basis when we announced the planned Transform and Grow? So I refer I just I'm just repeating what we said at that time. So there is nothing new, at that time.
And concerning the divestitures. I think we have done already what was schedule, and if they are, if they are more acquisition or divestitures, that could, that could help. I am, I think at this stage, I would not say whether it's in addition included, we will see. No, I
mean, it all depends on volume and it also depends on the mix of the volume because we keep in mind that high performance solution is one of the most profitable segment, which is suffering. And we are not sure that it's going to come back to the same profitability level in 2021. So So there are, at this point of time, what is important is, if we get back to the volume of 2018, the minimum we have committed is 100 basis points. That's something we need to deliver, which may be more. It can I mean, we need to do maybe we have to do more divestment?
We'll have to do to get this objective met.
The next question comes from Gregor Kuglitsch from UBS.
Hi, thank you. Can you hear me well?
Yes.
Excellent. Thank you. I've got
a few questions. So, one is bit technical. So if you could just help us out for the second half, the anticipated foreign change in acquisition or disposal impact on operating income? Obviously, you're guiding for organic, so I'm trying to figure out the the technical elements, if you want, for the second half, if that's possible at all. The second question is, are you able to quantify a little bit the run rate that you saw in September in October versus that quarterly run rate of 3.2%, because obviously there was some special effect in August with the canceled holiday in France.
So if you could just give us a directional fear, whether that's maybe to the 2% level or whatever you can share, that would be helpful so we can get the underlying
growth. And then coming back to the
guidance sort of target for next year? I understand what you'd say, if you want an old, an old, it's old news in a way, but obviously, I think it's nevertheless significant that you're reiterating it today. So the question is a little bit going back the point you just made, I mean, it looks like HPS, but it could be worse and perhaps the other segments compensate So are you basically saying you should meet that if every segment is kind of the same or do you think you're comfortable enough that you can kind of adjust for the mix, basically, if it's perhaps all in distribution, that's a lot higher and APS is down a lot. Or I just want to understand I understand that it's basically the same as you said before, but obviously, you will know that currently the consensus figures are quite a bit lower than that 8.7% and perhaps there's a good reason for it. So I want to understand kind of I suppose to what extent you would want to qualify it, if at all?
So on the second, maybe you want to please on the first question. Yes.
So on the ForEx, Q4 ForEx on sales could be more negative than Q3. If I take the current spot rate, it still remains volatile. Some of the currencies are moving. There are swings. So, and the H2 ForEx on OP could be more negative than the on sales given the recent trends of depreciating currencies in the regions where the margins that above the group average, particularly the U.
S. Dollar which is in the last quarter, it depreciated. And then you have the emerging countries. Many of the currencies are depreciating. So, I think there would be some amount of mix element in this.
Now concerning the run rate, you know, there are different numbers of days each, compared to last year in each month. But I would say basically the month of September was more or less the same at the same level than the quarter. In terms of a like for like growth. So there are some countries we had a catch up in July August and some countries which are better in September. So, for instance, I would say that India, for instance, is going, is still negative for the quarter, but it's It's improving the most after months and continuing to improve.
So the same for Latin America. On the other hand, the special effect of France was in August and we are more to normalize the good growth in September. What October, you know, the months, they are still 2 days to go, but I would say the trend so far is not very different from September, in October. Now concerning margin, you would allow me not to be more precise at this stage. I think there may be a melting pot and a cooking to get there.
And we reserve the ability to use some ingredients. There have been so much volatility in the last 2 years So I think that we don't want to be too more precise.
We just have to keep the big picture. The big picture is we committed 100 basis points certain base. The fact that we have made very good progress on Transform and Grow related objectives, whatever we set for ourselves If we get back to the sales volume, that's something we need to deliver. So I think we just have to keep this big picture and think that will be important.
Okay. Alright. Thanks a lot.
The next question comes from Nabil Ahmed from Barclays.
Yes, good evening. Thanks for taking my questions. I had 3 actually, Just one about the pricing improvements in the quarter and what you seem to suggest in Q4. I think you mentioned U. S.
Roofing and gypsum, you mentioned LatAm also driven by the ForEx as well. I was wondering if you could comment about the pricing environment you're seeing in Europe, across your major businesses, so flat glass insulation, etcetera. My second question, was, on what you mentioned in the press release, which I think is very in the file that you reduced the delegated credit facility, meaning that you seem more confident about cash flows and liquidity. Should we assume Saint Gobain will also perhaps be progressively returning to a more aggressive acquisition strategy, I mean, beyond the few bolt on deals that have been announced lately. And maybe as well, considering share buyback beyond the 530,000,000 share target?
And lastly, there's been two comments in the press they see in France about one of your distribution brand that is for sale and Torres from various party. I'm not expecting you to comment on specific deals. But could you comment more broadly on the disposal pipeline? I mean, I understand it is probably a more environment to achieve disposals, even it's probably more difficult to agree on the business plans. How would you describe your postal pipeline?
And should we expect potential deals to materialize over the coming months? Or is that completely unrealistic given the satisfactory situation?
Shreedhar, you take the first question?
Yes, sure. So price, Neville, is the focus everywhere, just it's not just in a Ricas, the price focuses also in Europe. The one of the businesses where there is a lot of push on prices, the glass because glass had to drop and that's how the business works. When the energy prices come down, there is a pressure to bring down the price. So now that there is some stabilization on the price on energy price in the after the summer.
So we started pushing the prices up. So If you take Q3 versus Q2 sequentially, we have improved 4% price in glass. So that's something which we will remain focused. And opportunistically, we look at other businesses too. Again, it has to be driven by country because the competitive situation is quite different in each country and we have to our objective is to also make sure that we don't miss out on the market position and the share which we have in a given country.
On, on the, the second question, I, you know, the general idea is that we want to keep a strong balance sheet. That's a priority for the timing. So the level of buybacks and the small acquisition is more driven to small one for the moment. We want to keep a strong we were able to, this credit line at the cost after September. And after we have made this big cash again with the CCaa stake.
That's why when we took that credit line, we didn't have that. So that's probably the Ashreedhar, the reason why we're comfortable to
We are comfortable because of that, for sure.
On, generally, on disposals, you want to
Yeah, I mean, the strategy on disposal has not changed. We will continue to focus on are looking for opportunities to divest. It's certainly the COVID has slowed down the whole process just for the practical reasons. So, we will, as we said, we have opportunities. We have done this exercise by country looking at the portfolio by country on the profitability of each of the small businesses within the country.
So, we believe we have opportunity to do and we will continue to explore that. Now, there are some few big ticket things. So, you know, that I mean, you alluded to that, one of the B2C business in France and that's something which again, we are making progress. Again, it is, it's a difficult business And while we have done a lot of work, good work in terms of strengthening the business situation in terms of logistics, IT and rationalization of costs and all that. So, at this point of time, the project the idea is to constantly look for a credible solution partner, which remains a top priority for us because we're working on it.
But in terms of the pipeline, I would say in the last year, given what Sreedhar said, we have identified a number of opportunities. So the plan of ideas is strong. We have more as you already too. The feasibility is not there always. And during the last 6 months, we have made some, we have put some projects on hold, some we are restarting but the timing, we cannot be very precise at this time, but there is a good pipeline.
The COVID has not helped us in that.
Would you say interest as maybe picks up compared 3 months ago? I mean, did you see more effects by, I don't know, private equity or industrial players now compared to, I don't know, early in the summer?
I don't know whether what is happening in the last few days. It's going to change it again. I think each situation is different. So we are looking at case by case.
Okay. Thank you.
The next question comes from Tobias Verne from MainFirst. Sir, please go ahead.
Number 1, you mentioned HPS earlier in terms of margins. I just like to get a little bit more sense of which part of HBS is pulling the margins down as we speak. And then in terms of the recovery recovery potential, Number 2,
can you give us an indication
where the profitability of Lapeyre is at this point in time? If only to say it's negative, neutral or positive or maybe very negative or neutral or very to get a sense there. And then just lastly, your volume assumption to get back to 2018, when you do the math very quickly, and I might have done it wrong, it seems to indicate that you need to rebound at least 5.5 or plus percent volume percentage points on a like for like basis in 2021. Is that not quite a challenging number unless I got it wrong?
So on the third one, you know, you can do the math. I'll let you do your math, I think we are in a very volatile world. We grew 2% compared to last year in the quarter and the first half was very negative. So I think we are in a volatile environment and that's also why we are putting this wording that it's linked with the volume of 2018. Sreedhar, you answered 2 other questions?
Yes. So on your question specific to high performance solutions, you know that the mobility is one of the business, which is very much impacted because of primarily of automotive sector. Europe remains difficult, whereas the China and the North America is growing for us and we are also growing our share because of the critical car. But otherwise, Europe still remains a challenge for us. So, that's one area, which is bringing down the profitability of the high performance solution.
The second one is, we have certain industrial businesses, which basically linked to the investment cycles of our customers, which has hit their investments for example, the ceramic products, typically if the furnace is built, you need to our customers ask for the ceramic ceramic products. And when they postpone their CapEx projects, there is an impact with the time lag. And then you see that happening in in this business in the second half, which is a profitable business. And so it will also have a mix impact within high performance solutions. Otherwise, the other construction industry is resisting very well.
It's a business where we are continuing to gain market share particularly in an external thermal insulation, which is a market which we are very strong and we are growing. And the life sciences is growing. It's again, a profitable business, which is continuously growing and that's a way that's where we have invested in the last few years. And all this investment is helping us to strengthen our position in that particular segment. So, this is mainly because of mobility and industry?
So,
it is negative. I mean, that's what I would say. I won't qualify beyond that.
But it's improving this year?
Yes. So but it still remains negative.
Okay. Thank you, gentlemen.
The next question comes from Yassine Touahri from our midstream investment for Research. Please go ahead.
Yes, good evening, gentlemen. So I've got a couple of questions. The European Union issued, last month, this renovation wave program where they want to double the energy revolution rate by 2020 2019 with a monetary minimum energy performance standard for existing buildings. Have you tried to assess what does it mean for the growth and the structural growth of your business in terms of volumes? And if really this materialize, how can you capture this growth?
Do you want to capture it through CapEx, through merger and acquisition? And the last question, which is related to that is that if you go for CapEx or for acquisition, do you have specific criteria in terms of a return on investment?
Okay. So the, EU renovation wave is, in my view, extremely powerful in the future. In addition to the fan, and because there is a money, it has a part of significant part of the Greenville, which is going to go on this renovation wave. You rightly pointed out a very important point, and I am fully very aware. We have worked a lot in the last years with the with the various governments and with the Brussels technically to help them or give us our opinion on how to devise such scheme.
I would, address, take an analogy, which was, which what has happened for new buildings, the there has been strong growth, especially in our insulation business, in the last 7 or 8 years based on regulation. And the one I expect in mind is in France. Called what's called Aarte Domino's 2012, which was an application of EU directive. On the minimum performance for new building. So the fact that now the EU is addressing the renovation market and to progressively because it's much more difficult.
Progressively have a minimum performance requirement is, in my view, it's really powerful, it's going to take time. You may, you may be aware that, if insurance There is a similar ideas. I don't know whether they are going to be implemented soon. By the cover, the cover source situation, product team, was, try with pushing forward this, minimum obligation, which is already in the French show by, in 2028, and they are trying to get that to 2024. All that goes in the same direction.
I think it's too early to assess exactly what's going to happen, but it's very positive and structurally. It can be very very significant, but it will extend over a number of years. So I, I cannot give you a precise timing But I, for me, it's a major move. This is the directive, which the EU the commission said they want to, to approve in 2021. It's not yet approved.
It's a project, but I think it's going to be a significant milestone it will take it will take years, but I think for the next 10 years, this is a source of growth, for Saint Gobain. How we are going to address that mostly with our existing business. We have made significant, for instance, CapEx in the last 10 years in France, in insulation, based on this regulation for new buildings and also the new incentives for, which have been put in place also for renovation. So we will address that mostly through CapEx in our various businesses because when you are, using situations most of the time, you have plasterboard with it. So and more and more, we are providing solutions and systems.
And we may complement that by other niche products, which go with it, our other materials. For instance, we have made also an acquisition 3, 4 years ago in France with wood fiber, which is growing and we just announced that we are going to double the line. Now I'll critique our criteria for CapEx or acquisitions are very strict, and we want to really create value very quickly. So we have a very strong metrics, on that, maybe Shreedhar, you want to comment on the metrics?
Yes. So on CapEx, generally, it is, IRR of 20 is something which we strictly apply. And again, we look at more and more the businesses where the growing businesses, which has got a historical tax record of generating cash. It's also one of the criteria to allocate cash. And in terms of acquisition, anyway, we have talked pass, it's more creating the value within 3 years, within 3 years of time.
I will stress that in the last few years, In Europe, we have made, I am talking about insulation in France, Glass wool and wood fire. We have not made huge acquisition, a huge CapEx growth CapEx in Europe, because a number of countries have had a big drop after the 2 2008, 2009, and we didn't need capacity until recently. So there may be more if there is growth in the next few years, but it's more, it's more for the future than it has been.
And maybe a follow-up question just on the IRR of 20%. Is it after tax? How do you calculate that? And the second one is, if you look at your Saint Gobain as a group, how much of your business is directly exposed to Energy Innovation?
Before tax Wait. Wait. Wait. Wait. Wait.
Wait. Wait. Wait. Wait. Wait.
Wait. Yes. Sorry. It's not 20% is before tax.
20% before tax? Okay. Thank you.
I
would say that directly or indirectly around 60% of what we do is, is having an impact is driven by that energy efficiency. Renovation.
And have you tried to separate what is direct and indirect or is it too complicated and too nuanced?
We are still working on that and we, we will on some of precisely on this question in the next few months.
Thank you very much.
The next question comes from Mike Betts from Databaz, Ana Luis. Sir, please go ahead.
Thank you very much. I had two questions, if I could, please. The first one was on the volume growth in Americas, the plus 8.3% in Q3. And the question is, how dependent or how much of that was roofing? Because, Owen's calling yesterday said they thought the market was up 25%.
In Q3. And the second part of that question is the sustainability of growth in that business in Q4 And then finally, I know it's a sales call, but you've talked about them. So hopefully you'll permit me this question. Normally, you give us an estimate for raw material costs and energy. For the year.
And I'm just wondering what your latest estimate is for 2020. Thank you.
So all these questions are for Sreedhar, Mike.
Yes. So, Mike, we have in terms of the roofing business, I won't be very precise, but I think we have done well. We have done very well as compared to the other competitors in the market and roofing has certainly has been a biggest contributor in the in the big contributor in the 3rd quarter numbers. And the gypsum volume was also very good. For us.
And then the second question was, what is the total billing of energy. The energy billing was 1, we expect it to be around 1,100,000,000 for the year. And within that, you have close to 50% is electricity, which remains almost stable. And then 45% is gas. And the 5% is fuel.
And how did that compare, Shrida, with last year? What was the 1.1 compared with?
I didn't understand his question. It does come up.
It declined on the energy bill. In 2019 on 2019?
Yes. So it was something like 1,200,000,000 So it has an impact of your deflation plus the volume reduction.
And just coming back to roofing, Shreedhar, outlook for Q4, do you expect a slowdown in roofing in the U. S?
At this point of time, the if there is no again, the caveat is if there is no impact of Corona virus, the confinement related restrictions, I think we still we are very confident of continuing the trend, what we have seen in Q3. So, at this point of time, the team is quite optimistic. It depends on how how the sanitary situation will be in the country.
That's great. Thank you very much.
Micah, I'm not sure you when you talked about the sales of Americas in the third quarter, you don't want to, you may want to make the distinction between Latin America as Latin America, North America.
He was more focused on roofing. So I Yes, but I think the Latin America.
No, but the number he gave was not for the 8% Was it
not for
the North America? It was for a total.
It's a total Americas for sure. I mean Latin America was also very
because the sales growth in Latin America was 25% for the quarter.
Strong in Latin America.
Yeah, Brazil, but a little bit everywhere, but really, very good. And Brazil was is our biggest concern.
We have
Sorry.
We have a new question from Tobias Vernais. Sir, please go ahead.
Sorry. Just one more follow-up question. Natural gas prices, when I look at energy costs across the piece at the moment, It seems that natural gas price, it seems to be picking up in the U. S. Over and above what the case was last year.
Just should just remind me, did you say 45 percent of your energy bill is is gas? Is that right?
Yes.
Yes. And how much, are you seeing a similar price development in the rest of your markets in natural gas?
At this point of time, I expect it to continue to remain low. Again, have to see how things evolve. I mean, the first half, we talked about something like $50,000,000 savings the deflation impact, and it should be certainly more for the whole year.
Okay. And you said that the 2019 1,000,000,000 was
1,500,000,000, sorry?
1,250,000,000. 25.
Okay. Thank you very much. Have a good evening.
We have a new question from Eric Lemarie from Bryan Garnier. Sir, please go ahead.
Yes, thank you. Just one think of questions from my side. You mentioned in your, action priority of action in number 2, growth, I mean, particular, on the back of innovation, and you mentioned digital, My question is a solid one. Would you be interested to, to make the acquisition of a software company, especially in the beam field.
We have done some small acquisitions of start ups in that area for our distribution business, but I don't know whether you that's what you have in mind, but we have done very small acquisitions. I would, no, I would not contemplate something really big. You know, I would not do the moves that Schneider Electric has done, for instance. I think it's a bit too far from our DNA.
We have no more questions.
Well, thank you then. If they, I thank you for participating in this conference call, and I I wish you a good evening. I remind you that we, our 2020 results will be published on the 25th February next year. Good evening to everybody.