Good morning, everybody, welcome to this presentation on our 2019 results. I will go quickly through the highlights, Sreedhar will go into more detail in our results. Benoit and I will update you on the strategy, I'll finish up with the outlook for 2020. 2019 has been a very good year for Saint-Gobain. You see the main figures, sales up 1.9% to EUR 42.6 billion, up like-for-like 2.4%. Our operating income is up 5.7% on actual terms 4.7% on like-for-like basis, with an increase of the operating margin of 30 basis points to 8%. Our recurring net income is up 10% at EUR 1.915 billion, the EPS is up a little more because we have reduced the number of shares outstanding.
The EBITDA with the new definition that Sreedhar explained to you in July is up 4.8% at EUR 4.870 billion, and the debt is down. This is a debt post-IFRS, which is down EUR 700 million to EUR 10.5 billion, which gives a good ratio. If we put these numbers into perspective, we have had a regular growth in the last few years. You see that in the last five years, our margin has significantly increased, and it will continue with our Transform & Grow program , where we have had a first good step this year. On average, the operating income has grown 6.5%, and the recurring net income has grown 13.2%. The level achieved in 2019 is, in fact, if I exclude the peak of 2007, is the second then with 2007, second highest in our history. The recurring EPS has grown 14% on average in the last five years.
A good year of progress. The main highlight in terms of the organic growth, this has been achieved through, I would say, in a market which was a bit more difficult than the one of the last two years with, I would say, especially a difficult market in our industrial activities and the performance in that framework of our High-Performance Solutions division is really very good, very strong resilience and much better results than what I have seen around us. Prices up 1.8% and volumes 0.6%. Sreedhar will come back into that. As I said, a good increase in the operating margin, which is in line with our Transform & Grow initiatives. Where I would say we are in these initiatives, we are globally ahead of target. We are very happy with the way the new organization has functioned. Benoit will give you more details.
Our cost savings plan was EUR 250 million until 2021. We have revised the objective for the first year for EUR 50 million initially to EUR 80 million in the summer. We landed EUR 120 million in cost savings in this program, which will allow us to focus now more on growth. The second part of the Transform & Grow initiative was linked with acceleration of the portfolio rotation. We have divested EUR 3.3 billion of sales, more than the objective I had set, which was EUR 3 billion, on good conditions. We have made 18 small acquisitions for EUR 260 million. I'm very happy that the Continental Building Products acquisition in the U.S. we have been able to close much earlier than what we anticipated. In February 2020, which will be a good addition in 2020.
A very strong point of 2019, the free cash flow is up 50% with a very strong cash flow conversion up sharply at 44% versus 31% in 2018. I would say we have acted on all elements to increase this free cash flow, which we are going to continue to work on. As I said, a good increase in the recurring net income, 10% up versus 2018. A good year, and Sreedhar will take you more into details.
Thank you, Pierre-André. Good morning, everyone. Let me give you some more details on the results with the sales bridge. The sales has increased by 1.9%, as reported, and by 2.4% like-for-like. The like-for-like growth was driven by pricing in overall less supportive market environment. We saw a positive exchange rate impact, mainly coming from the appreciations of U.S. dollar against euro. The structural impact was negative due to the divestments we have made as a part of the Transform & Grow, with a bigger negative impact in the fourth quarter as we deconsolidated a number of businesses during this period. Here we can see the quarterly trend of our organic growth split between the volume and price. The pricing effect has moderated in the recent quarters, for instance, in glass with automotive demand going down, and more importantly, in the context of a lower inflation environment.
Quarterly volumes were volatile due to the working days impact. If we look at fourth quarter compared to the third quarter, the drop is largely due to the negative working days swing in Europe. If you look at the operating profit, always compared with organic sales, our organic sales growth was 2.4%, which is translating into the increase in operating income of 4.7%. We are able to achieve 30 basis point improvement in our operating margin at 8% for the year. The growth in operating profit was driven by our volume growth, a slight positive cost spread, and more importantly, the acceleration and cost saving through this Transform & Grow initiative. We have achieved strong results from this initiative, with EUR 120 million positive impact on operating profit in 2019 from the cost savings driven by new organization, which is well ahead of our plans.
The inflation of input cost was slightly less than EUR 450 million. In 2020, we expect it to be less than 2019. In addition, our divestment results in a positive impact in the operating margin of 15 basis points for 2019. With the full year impact for these divestments, which we did till now, we will have completed the 40 basis point target which we set for all the divestments which we were supposed to do under this Transform & Grow initiative. If you look at the business income, clearly increased and helped by non-operating cost despite the EUR 130 million cost related to Transform & Grow. Asset write-downs are largely linked to divestments that we did during the year.
In addition, we have depreciated assets of Proppants to adjust the book value at the end of the year, as we are well engaged in a process to exit the Proppants business in North America. EBITDA progressed 4.8%. I recall that this is as per the new definition introduced in the first half, wherein we take into account the non-operating costs so that EBITDA equates more closely to cash. If you look at the net recurring income, you have the net financial expenses, which is excluding Sika , was stable compared to last year, and the average cost of borrowing comes down from 2.3% to 1.8%. Regarding income tax, the tax rate on recurring net income rose slightly to 25%. The recurring net income rose 10% and earning per share has gone up by 11% in this year as we continue to do our share buyback program.
This is the cash flow, as Pierre-André said, this is an important part of our results. You see that there is a sharp increase of 50% in the cash flow. This bridge is what I presented to you all last year in July after the first half results. This again, this definition is based on the feedback I received from most of you. During the year, we created a lot of focus on cash with a lot of communication within the organization to sensitize ever further the importance of cash. I'm pleased to report this increase of 50% in our free cash flow, and we also saw an improved cash conversion rate at 44% as against 31% in 2018. This is driven by various improvements, notably the reduction in non-operating costs and working capital.
We saw an improvement of two days of sales in operating working capital. In terms of CapEx, I said last time that we would not increase further the CapEx. Overall, in fact, in 2019, the CapEx, we are 2% below than 2018 level. Within this, we spent EUR 536 million on growth CapEx, which is discretionary and including especially like the investments we did in life science, construction industries, energy efficiency solutions in like insulation in France, facade solutions in glass in Mexico and India. We will continue to focus on this important metric even in 2020. We said in our priorities that we will further increase the free cash flow in 2020.
We target to reduce at least by EUR 200 million the CapEx by optimizing further the maintenance CapEx and allocating CapEx with more strict criterias in growing and profitable businesses now that we have passed our recent peak. Here we are showing the ROCE and ROI, both before IFRS and after IFRS 16, as this is an area where this accounting treatment changes the number quite a bit and makes the comparison much more difficult. If you look at the numbers, both definitions, clearly it shows a good improvement in 2019. In fact, in the last five years, we have made consistent progress in these indicators. Finally, turning to the net debt and the shareholders' equity, where again, we are showing both before and after IFRS 16 for a better comparison. Net debt increased EUR 700 million.
Sorry. I mean, the increasing mode of cash flow. The net debt decreased by EUR 700 million and even more before IFRS 16 at EUR 840 million. During the year, we generated free cash flow of EUR 1.9 billion and received just over EUR 1 billion in divestment proceeds. We invested around EUR 300 million on acquisitions, just over a half a billion on growth CapEx, paid just over EUR 800 million in dividends and share buyback. Overall, our balance sheet and the ratings remain very strong. This is our new organization. I'm going to give you more details based on the new reporting segment, which is quite aligned to our new organizati on, which is by c ountry and market. We'll start with High-Performance Solutions. You see here the like-for-like sales in High-Performance Solutions grew by 0.4%, driven by pricing, with volume slightly down, impacted by slowdown in industrial markets.
Mobility business significantly outperformed the market, with the sales up slightly compared to an automotive market where the global sales were decreased by 6% over the year. Our outperformance was driven by the differentiation strategy, focusing on higher added value products, which continued to pay off, particularly in electrical cars. Our businesses serving industrial markets were also down, impacted by a slowdown in industrial markets in the second half. Our businesses serving the construction markets continued to grow, driven by gains in market share, good trends in external thermal insulation systems, and the recent acquisitions which we made are performing very well. Our life sciences business continued to enjoy good growth in pharmaceutical and medical sector. The operating margin was 12.7% compared to 13.4% in 2018.
Impacted by a slower industrial market for the second half, we are pleased to have been able to achieve an operating margin at 12.5% against 12.4% achieved in H2 2018, despite the tougher industrial market situation. This is particularly a strong performance in a very difficult market context, wherein we have been able to outperform many of our peers. Northern Europe, you see here like for like, growth of 1.7% over the year and was stable in the second half with a particularly negative calendar impact in the fourth quarter. The Nordic countries saw like-for-like growth led by distribution. The renovation market remained solid, but the new construction was softer. The U.K. was down, particularly in the distribution in the second half, driven by a continued difficult market situation. Germany progressed despite lower volumes in the second half with a less favorable situation in non-residential, for example. Glass.
Eastern Europe saw organic growth. The operating margin for the region showed a sharp rise of 70 basis points to 6.3%, driven by the positive spread between the price and the cost, the impact of acceleration of Transform & Grow related cost savings, and the divestments of low-performing businesses. Southern Europe, Middle East, and Africa saw a 3.3% like-for-like growth for the year and 2.3% in the second half, despite a particularly negative calendar effect in the fourth quarter. France had a great year, supported by renovation, despite a slowdown in new construction in the second half. Distribution continued to grow, and insulation saw double-digit growth driven by the strong demand in energy efficiency-linked renovation. Amongst other European countries, Spain showed particularly a very good growth. The Middle East and Africa were down, especially Turkey was quite tough.
Overall, pipe business is now profitable, continued its successful efforts to improve the competitiveness in a difficult export market. As in Northern Europe, the operating margin for this segment increased significantly by 80 basis points to 5.4% operating margin. This is clearly thanks to the improvements in France and also the acceleration of cost savings from our Transform & Grow program in particular. Overall, we had a good performance, progression in sales, strong margin in this region. The Americas region grew 2.9% like-for-like over the year. North America grew 2.1% over the year, and clear acceleration at 4.7% in the second half, with a better volume in exterior solutions in gypsum, specialty ceilings, while insulation performed well. Overall, in terms of pricing, after a good start of the year, prices were slightly down in the second half due to tougher comparison basis.
Canada was down for the year, hit by a decline in the construction market. In Latin America, it was much a year of two halves, with a 4.6% like-for-like growth for the year, but a slowdown to 0.5% in the second half, especially in building glass in Brazil in a more uncertain macro environment. The operating margin for the region was 10.1% compared to 11.2% in 2018, with a more difficult environment, as I said, in Latin America, and clearly 2018 had been aided by a very high second half. Asia-Pacific region grew 4.1% on a like-for-like basis, driven mainly by volume. This is clearly led by our solutions to improve the productivity, for example, plasters business and the mortars business. Building glass declined in the second half due to the lower utilization rates as a slowdown in the automotive industry put pressure on prices.
India showed strong growth with double-digit growth, particularly in gypsum. Saint-Gobain in India, developing an integrated solutions for home and hospitality market as we look to target new growth niche markets. China had a good year and benefited from a start-up of new plaster plant in the first half, as well as a good growth in mortars business. Southeast Asia saw a good growth by volume, but continued to have a very competitive pricing environment, which impacted the overall price realization in this region. The operating margin for the region progressed from 10.4% to 10.6%, driven mainly by the volume growth and little bit of Transform & Grow savings. In a nutshell, very good results with a strong focus on cash generation and an improvement in operating margin in a more difficult external market environment.
Execution of our transformation program to create more value for our investors in a medium and the long term is on course. Now I hand over the floor to Benoit, who will give you an update on our strategy and transformation.
Thank you, Sreedhar, and good morning, everyone. I will now turn to our strategy, and I will cover the first part to tell you where we are on our progress with Transform & Grow one year after the launch. Transform & Grow is a true radical transformation of Saint-Gobain in terms of organization, for sure, in terms of mindset also, and in terms of portfolio evolution of our businesses. It's going very well, and I would say our teams have embraced it and have been able to execute it extremely well and fast. Faster, I would say, than anticipated. We are well ahead in our plan, and I'm very confident that it will continue to bring strong benefits for Saint-Gobain going forward. Why did we embark our teams so deeply and so well on Transform & Grow? To some extent, it's because the goal is simple.
It's to make Saint-Goba in much stronger to deliver strong, profitable growth to our shareholders based on two pillars, a new organization and a stronger portfolio of businesses with higher growth and profit. I will come in a minute to the changes of the organization. Beside the changes of reporting lines of perimeters, we have been working a lot on our culture to focus it more and more on accountability and ownership. This is at the center of our transformation. How do we do that? First, with one single line of command, one topic, one owner. Second, with new incentives for all our CEOs by market, by countries, 100% aligned to the perimeter that they manage, which is a change versus the past.
It's roughly twice more versus what we had in the past, where they had a kind of solidarity bonus on a larger perimeter where they had little influence. They are now 100% on the perimeter and P&L that they manage. Also, fast decisions, thanks to a lot of simplified processes that we have re-engineered over the last 12 months, and our teams have the authority to allocate their resources exactly which are under their management on the perimeter that they manage with one goal, optimize their P&L. Also, it is important that we have increased the ownership of our teams. I give the example here of a worldwide survey that we did last fall. Remember that we had a small one in March, early on in the project. We did a worldwide survey last fall with all our people. 74% of our teams participated in it.
It's an external survey made by Ipsos. They showed close to 80% engagement towards our goals and towards Saint-Gobain, which is four points above the external benchmark that was delivered by Ipsos. A lot of accountability and a lot of ownership from all our teams on Transform & Grow. Our new organization brings together in one team the businesses that serve the same customers. For local construction markets, we leverage by country comprehensive solutions across all our assets, product lines and systems, sales expertise, brands, logistics, et cetera. We have given you numerous examples over the last 12 months. I give a few there that brought growth above the market in 2019, solutions for offsite manufacturing in the U.K., in Benelux, in Nordics, which are growing fast. The dedicated facade offer across several product lines in Brazil.
Overall in Brazil, our gypsum grew double-digit in a tough market last year. Home and hospitality sales organization in India, combining our number one position in glass and our number one position in gypsum to target new growth markets. In all countries, these reorganizations, which took place in early 2019 with a design adapted to each country and market specificities, have brought significant productivity gains as well. We see clearly these gains reflected in our 2019 performance that Sreedhar just presented. For our global businesses, our organization by market brings an enhanced focus on our customers, on innovation also, and boost our ability to leverage global scale. For instance, in mobility, with a global customer approach around the world, our footprint, worldwide footprint, has allowed us to capture quickly a double-digit growth in electrical vehicles and also to leverage our global customer relationship to extend our product range.
If I take life science, we followed very fast our U.S. customers in their development, whether it's in Europe, in India, in Korea or in China. For construction industry, we are leveraging transversal R&D across all the group. For instance, our textile solutions business has developed new glass mat products for new applications of glass wool for external insulation in Switzerland, replacing other materials. Under more challenging market conditions in 2019, we have clearly outperformed our peers in most of our global market segments with a strong ownership and accountability of our market CEOs. Now on the hard savings. We have delivered faster on our savings, EUR 120 million for the full year of 2019 versus EUR 80 million expected when we last met in July.
All actions identified by the teams at the beginning of the year, 1,000 action plans, are being executed with rigor step by step and cascaded down. Let me take, for instance, Germany as one example. We acted fast early in the year to cut ex-delegation cost and redundancies in the first half. Second step, we started to optimize back office to lower cost in HR, finance, purchasing. Third step, we decided to merge completely the management of Isover and Rigips. By operating them together, we have another round of synergies in marketing, sales, customer service or supply chain. We trigger also growth synergies to push joint prescription, key-account management or new offer. With no surprise, a bit more than 60% of our savings have been delivered in Europe with a significant gain in margin that you can see already in 2019.
Overall, we have around one year payback on all these actions. We'll deliver another EUR 80 million in 2020, and we are well on track for the full EUR 250 million by 2021. Second pillar of our Transform & Grow program, our active and value-creating portfolio management, making here also Saint-Gobain much stronger. On divestment, we have acted fast and decisively. We divested businesses representing EUR 3.3 billion of sales ahead of our target of EUR 3 billion. We have done this at quite attractive multiples, around 10x EBITDA for a total amount from divestments, a bit more than EUR 1 billion, and all that will add more than 40 basis points to our operating margin. We'll continue this optimization to make Saint-Gobain stronger using the same clear criteria of decision. One, the financial performance in terms of cash returns of profitability.
Second, the contribution of those businesses to Saint-Gobain in terms of value creation and synergies. Third, of course, make sure that we find the right timing and the right market conditions. There are several ongoing dedicated reviews and actions on other projects, and we are acting decisively on all these with no taboo, and we have further opportunities for divestments that are currently at various stages of progress. Switching on acquisition, we have done 18 selective acquisitions last year within a clear and disciplined capital allocation along three criteria. First, new geographies with four acquisitions, mostly in Latin America, adding plasterboard, ceilings businesses, buying also the leader in tile fixing in Peru. Second, technological niches to extend our product range, for instance, for acoustic solutions in mobility Also for high-end technical seats in aerospace.
Third, 10 small operations to reinforce local leadership, whether it's in our Nordic distribution network or specialty ceilings in the U.S. All these small mid-size moves build up progressively a strong Saint-Gobain set of businesses, and they are well within our strict criteria of value creation in year three. Of course, a significant one is Continental Building Products with a strong strategic rationale to strengthen our leadership position in the U.S. construction market. The closing went well and fast on February 3rd, roughly two and a half months after the announcement, which is very good for our teams and also for our customers. The timing is good also, as you have seen in terms of using U.S. housing starts, which have been moving up month after month over the last four to five months.
The full leadership team is already in place and has been in place since day one with a good combination of the best talents coming from Saint-Gobain and coming from Continental Building Products. I were there again two weeks ago, and I can tell you that all action plans are already in place and being executed. One example, for instance, already as of end of last week, all the sales territories had been reassigned for either a former Saint-Gobain salesperson or a former Continental Building Products salesperson. We have taken the best of the two teams, and we are well ahead in our integration plan that will deliver more than EUR 10 million of cost synergies in 2020 and more than EUR 50 million in 2022. I'm very confident that this move will create value.
Here we can summarize high level the benefits of our active portfolio management as a result of the moves that we have executed in 2019. You can see that we have been selling at 10 x multiple, EUR 3.3 billion of sales of difficult businesses operating at 3% EBITDA margin. We have been buying at eight times multiple after synergies, roughly EUR 700 million of sales in very good businesses making above 20% EBITDA margin. We'll continue to create value thanks to our active portfolio management with ongoing selective acquisitions and targeted divestitures. Overall, a busy year of transformation, well executed in terms of culture, in terms of organization, in terms of portfolio, with a lot of achievements. I'm very confident that we are on the right track, moving ahead with a strong positive dynamic. I now turn to Pierre-André.
Thank you, Benoit. You see our initiatives on Transform & Grow are bearing fruit, and I think it reinforces the unique positioning of Saint-Gobain and that will allow it to capture profitable growth. When I look at what's going on in the world, there are a number of mega trends, and I think there are three which are particularly important for Saint-Gobain. First, urbanization that we see all over the world. Second, climate change, which for many is a big challenge. For Saint-Gobain, it's a huge opportunity, and we are seizing it. Third, digital, which allows us to really bring more value to our customers. In this framework, we are focusing on three drivers in terms of growth. One, which is sustainability, as I just said, where Saint-Gobain has a lot to offer.
The second, which is adding, and we have done that for a number of years, but there are still plenty of opportunities increased by digital to help our customers with their productivity. Third, wellbeing, which very often goes together with sustainability. Let me start with sustainability. As I said, it's a huge opportunity for Saint-Gobain. We estimate that around 60% of our portfolio contributes directly or indirectly to reduction of CO2 emission, with around 40% of our manufactured sales and around 80% of our distribution business, which is more and more focused on energy renovation. In this slide, you see a few examples of the leading sustainable solutions that we provide in our different markets, and which are helping to deliver CO2 reduction to our customers. We are increasing, of course, our positioning on these markets.
Sreedhar mentioned the very strong increase in insulation in France, which is driven by the energy renovation, which led us to invest significantly. You see a few other example in buildings and also in mobility, where we have a growing part of our offer, which is linked also to the need to improve this in cars. The importance of this subject can be summarized in one figure, which is the fact that around 35% of the CO2 emission in the world are related to building. About 75% of that is linked with the way building operates, so the heating, the cooling of the buildings. That's where we provide solution. 25% is linked with the way the building are made, the carbon footprint of the building. From that standpoint, Saint-Gobain has two role.
The first one is that more we are using our solution versus traditional solution, which emit much more CO2, is good. More Saint-Gobain solution in the buildings, better it is. Second, we can also, and that's what we are doing, improve our own CO2 footprint. As you know, I've made, for Saint-Gobain, a commitment in 2015 during COP21 to decrease our own CO2 emission by 20% by 2025. We are well on track, and in fact, we are accelerating our results in that framework. We are at 14.5% in 2019, with a 2.8% reduction only last year. We are well on track. As you know, I have made a bolder, I would say, commitment for Saint-Gobain at the UN last year on 2050. This year, we are going to work on a precise roadmap to get there.
2050 is not that far when you are in industrial activities, and we are working hard in that direction. I think that we are going to find solution. We will not do that alone. We'll need a change in the energy mix from government, but in that framework, which is the European framework, I think we can deliver that roadmap. Second area, which is, as I said, productivity and innovation. This is really changed significantly with digitalization. Whether it is on personalized production, whether it is on usage of data, whether it is on new business models, all that is providing additional growth. You see here a few example with a very significant, also internal change within Saint-Gobain. I think in those areas also, globally, we outperform our markets. To finish up, I will show you in these areas, a number of innovation.
As you know, I am particularly proud of the fact that Saint-Gobain, in the last nine years, has been ranked as one of the 100 most innovative companies in the world. It's across sectors ranking. Here, I'm sorry not to be able to welcome you today in our new tower. We are just a few days short, next time it will be there, and you will be able to see that there are 82 solutions from Saint-Gobain which are at work in this new tower, which is, I would say, a large showroom of our knowhow. You see on the right, a few example of solutions that we have launched, innovation we have launched in 2019 on these three areas, sustainability, productivity, and wellbeing. As I said, sustainability and wellbeing goes very often together.
If you look at the new generation of our electrochromic glass, Harmony, it is both bringing energy efficiency and much more comfort in building. You see a few other examples in this chart, again, in mobility and in facades, whether it is with our new gypsum activity, with the productivity on our new partitioning system that we launched recently, and some others. A very strong flow of innovation linked with these three growth drivers. I come to the outlook, and first on our shareholder return policy. The board, yesterday, has recommended to the shareholder, which will meet on June 4, 2020, an increase of the dividend to EUR 1.38 per share, which is in line with our policy. We are, I would say, this year back in our targeted range between 35% and 40% of the recurring net income at 39%.
This dividend will be paid in cash. In terms of number of shares, we have reduced the number of share last year, and it's down to 542 million, and we will continue to act in that direction in 2020. Now, in terms of the outlook, the outlook for 2020 is marked by a number of macroeconomic uncertainties. We will continue to benefit from this attractive positioning that I mentioned and good trends, especially in renovation and in a number of our high-value solution markets within the industrial market. Now, a few words about the coronavirus, which is an important impact. I must stress that for Saint-Gobain, China. Sometimes I've been criticized for not being enough in China, and you know why. In some of our basic business, we consider that China is not, for us, an attractive market.
The fact is that Saint-Gobain sales in China is only around 2% of Saint-Gobain. From that standpoint, we have had in the last weeks, and it is recovering fast at the moment, but we have had an impact, and there will be an impact in Saint-Gobain in China. The impact on overall Saint-Gobain of what we have seen so far is not material. On the other hand, the spread, if it is really confirmed of this virus, makes the situation more globally, more difficult to evaluate. If I take that out, I would say that we expect for our various markets a continued slowdown in some of our industrial markets with, on the other hand, easier comparison, I would say, in the automotive sector.
Northern Europe, the trends are mixed with a slight growth expected in the Nordic, but a more uncertain situation in the U.K., which when I say uncertain, it could be better, but the Brexit situation is making, at the moment, a bit more uncertain. Southern Europe, we expect good overall growth driven by renovation, especially in France, while the new construction should see a moderate slowdown. Probably more moderate than what was anticipated one or two years ago. In the Americas, we should have good market growth. Benoit mentioned what's going on in the U.S., I think this is going to bear fruit, and we expect a better situation also in Latin America. Asia-Pacific, I would say, outside of the issue of the coronavirus impact, we should have had growth. There will be an impact from the coronavirus, especially in the first quarter.
Our priorities, I would say two sets of priorities for us this year. One, around the evolution of our strategy, second, in terms of cash flow and margins. In terms of strategy, we will continue our portfolio optimization, the integration of Continental and further divestment acquisition, as Benoit has expressed. We will continue our strategy of differentiation and innovation to improve customers' productivity, to develop sustainable solution, and contribute to the wellbeing of all. I think there are three very strong drivers for Saint-Gobain for the years ahead. Second set of priority, which will allow us, as Sreedhar already said, to increase, again, after a very good year, to increase our free cash flow for 2020.
We will increase also, in line with our Transform & Grow program, the operating margin through a constant focus on price-cost spread, thanks to, and that's a constant of Saint-Gobain, a strong pricing discipline. The continuation of our cost savings program in the context of Transform & Grow, which will, as Benoit said, bring EUR 80 million more in 2020, which means overall, EUR 200 million between 2019 and 2020. We will reduce our CapEx this year by around EUR 200 million after a peak of two, three years in CapEx, as I have said. We are going to be very strict on maintenance CapEx, like Sreedhar said, and we'll continue to have good growth CapEx.
We have had, I would say, a few years where because of distribution modernization in IT and logistics and some needs in our fast-growing areas in HPS, we have had an investment peak in the last two, three years, so we'll have a decrease. We are going to be very strict on maintenance CapEx. We will continue our operational excellence, which should, we anticipate, bring another EUR 300 million of additional cost saving, which is very well needed because of inflation, which is still there, even though in terms of raw material and energy cost, which is covered by price, we should expect less inflation than last year. In terms of operating profit, we expect, in this context, a further increase in our operating profit, like-for-like.
There is an impact of divestment, and there is acquisition, but our guidance is on a like-for-like increase, like the last few years. We expect an increase in operating income. I have added an uncertainty about the impact of coronavirus. As I told you, as of today, what's going on in China, there is no material impact, but I cannot exclude that there is a much wider impact. We don't know yet. That's what I have added, this uncertainty. Again, Saint-Gobain is globally, little affected by this situation as of today. That's the outlook for Saint-Gobain. Now I am with Benoit and Sreedhar at your disposal for any questions you may have. Yeah, we'll start with the room, and then we go to the internet and the phone. In the room, yes, please.
Yes, I have two questions. One diffi cult and the best for the end. Difficult question, if we look at China, it's not only a question of sales, it is maybe also a question of supply chain.
No.
Could we have some flavor on the supply chain and mainly in the high-performance materials? It is relevant. Secondly, looking at the slides 20 and 17, in terms of pricing, we have a good price increase over the year in America and higher than the other divisions. Where comes this difference?
Yeah.
Many thanks.
On the values, I can describe the situation with, I would say, three circles. First circle is what's going on in China. As I said, it's a significant drop in the first quarter in sales in China. Our plants have restarted. We have 41 plants in China. There are 38 which are operating. They are not all operating at 100%, because for instance, the construction sites have not started again, the demand is low. We have that sometimes when there is a very tough winter, I would say. I think the situation is improving at the moment in China. This first part is not, I would say, the one I described, the impact is not material for Saint-Gobain. It's going to be material when we report the Asia Pacific part, it will not be material for Saint-Gobain.
The second circle, I would say, is the one related to your question, which is on the supply chain. I remind you that 90% of the products that Saint-Gobain manufacture are sold where they are manufactured. We are very little involved in those large supply chains. In our industrial markets, our customers are sometimes involved in a worldwide supply chain. I must say that at this point, we have not seen any impact. There may be some, but frankly, I am not extremely concerned about that. I must add that for our local businesses, which are in Europe, we rely very little on goods coming from China. I would say that the logistics and the supply chain issue for Saint-Gobain, there are some uncertainties, but I don't see that as a big issue.
There is a third circle, I would say, is if there is a spread, which we are starting to see, but I cannot quantify that, of the, I would say, the epidemic outside of China. Today, there is things going on in Korea. We have reduced significantly our presence in Korea, so I don't think it's going to be important. If it becomes something very global, then I cannot quantify, and I cannot answer on that question. I think those are the three ways. Yeah, Benoit, do you want to add something?
Just to give some numbers of that. If I take all the raw materials that we buy around the world, we have around 1% of raw materials coming from China, and they are not sole source. That gives you the impact on the fact that our local manufacturing around the world is not going to be impacted if there is a shipment blocked in a port in China. That's to put some figures on what Pierre-André just said.
On pricing, Benoit.
I can also-
Yeah
Within Americas, you have also Latin America, where there is always higher inflation. It's true that in North America, we know that prices move up usually in a wider spectrum than in Europe, and on top of that, you have Latin America, where, because of infla tion, we have to push prices much higher than in Europe.
Yeah, next question.
Yes. Good morning. Arnaud Pinatel from On Field Investment Research. Just to understand a little bit better your guidance for 2020. In H1 2019, if I'm right, your operating profit like-for-like was up 8.3%. For the full year, it's up 4.7%, so it looks like H2, like-for-like operating profit was probably just slightly positive. We have seen an erosion in pricing at the end of the year, as you mentioned. We see your guidance or your outlook for the top line being less supportive in 2020. You are confident to, if I put the coronavirus on the side, you are confident that you can improve on a like-for-like basis your operating profit for 2020? Could you explain to us what is, if I can say, the one, two, three key drivers behind this confidence for 2020?
Well, first of all, on the second half of 2019, we have had operating profit like-for-like growth. It's slightly less than 2%. We have had a 30 basis point of increase in margin. I think the first element of our confidence for 2020 is the fact that our Transform & Grow initiatives, as Benoit explained, are bearing fruit and are going to continue to bear fruits. That's the first point. The cost element is quite important. The second element is that, you mentioned a decrease in the pricing in the second half versus the first half.
We also have decrease inflation of raw material and energy. From that standpoint, Sreedhar told you that the 2020, we have relatively good news. The last point, if you focus on the fourth quarter where we had the slowdown in sales, it was very driven by a number of days. The math are not completely simple on that. We had an extra day in November. Sorry, less days in November. We had a better December, but in fact it didn't bring in December, the number of days doesn't count the same way. I can tell you that the trends in our construction markets in the beginning of the year are good. It's still difficult market in industrial activities, but it's good. I don't see, in terms of sales, the trends that you have from Q3 to Q4 being representative of what's going on. That's the second element of your question.
Yeah, Benoit, you want to?
Some markets like France, like the U.S., which are doing well.
Yeah.
Thank you. It's very clear. Just on the energy, could you help us to quantify it for 2020?
Yeah. 2020, we expect the gas cost to be lower than 2019. You just have to keep in mind that electricity is close to 50% of our energy bill, which still we have inflation. Net, you would still have some inflation, but certainly lower than what we had in 2019.
Can you put the figure on an absolute term on that?
The overall, the energy bills we have is close to around EUR 1.5 billion.
What do you expect as a decline for 2020 on this EUR 1.5 billion ?
That's what I said.
Yeah, I'm sorry.
Okay, I will.
I just need a figure. That's all.
We are not going to give you a precise figure at this stage.
I wish.
It will be lower.
I wish.
Can you tell me what is the price of the barrel in six months?
Based on the spot price at this time.
Based on simulation. I can only tell you, there's no point in speculating based on spot price, because spot price has no meaning. You know that it's so volatile.
Okay.
I can only tell you that.
You have the tracks, so you know the visibility.
Sure. That's why I'm saying, based on what I see the trend, I'm telling you that the gas price should be lower, based on what I see the trend now. Okay? Don't forget that the electricity is going to go up. Electricity is going up, and for me, the energy bill is 50% of that is electricity.
It will be lower than last year, significantly. We're not going to give you a figure at this stage.
No, but. Next question.
Yeah.
Good morning. Sven Edelfelt, Oddo BHF. Two question from me. You mentioned last year some positive effect from Transform & Grow on revenue. I'm talking about probably market share gain here. You were not able to quantify. Are you today able to put a figure on that? That's the first question. The second one is one of my favorite, Pont-à-Mousson. Can we have an update on that, please? Thank you.
On the revenues, we don't give target because it's difficult to say what is the comparison, what is the basis? Is it the competitors? Is it the market? I gave some examples and we can go into numerous examples where we have high single digit growth above the market. If I take from Brazil, overall, we have calculated quite precisely, it's 1.5% above the market. It's progressively accelerating in many countries. The more synergies beside cost on revenues that we have, putting our businesses together. It's roughly that kind of range, 1%-1.5%, when we have all the organization in place and working together. On pipe, as Sreedhar mentioned, we have made good progress in our profitability improvement last year. We are well on track with the plans that we have outlined and executed over the last two and a half, three years.
We continue to have discussions on partnership. At this stage, it's too early to tell you exactly where we stand, but we continue to have those discussions. We should have a better year again in 2020 versus 2019. We are executing on that, and we continue our discussions on potential partnerships.
Next question. If there are no qu estion in the room, we go to the telephone now first. We go on the phone.
We have by phone a question from Yves Bromehead from Exane BNP Paribas. Please go ahead.
Good morning, gentlemen. Thank you for taking my questions. Just a few on my side. My first question is on your comments, Benoit, regarding the merger inside of your firm between Isover and another subsidiary, I didn't catch the name, but in terms of marketing and management team. I presume there's still a lot of silos in your product portfolio, which could benefit from merging with larger subsidiaries. I guess my question is, given how fast you realized your savings in 2019, why haven't you increased your 2021 targets as well?
Sorry, because I gave the brand name in Germany, which is Rigips. This is the brand name of our gypsum business. I should have said it. Basically putting together insulation and gypsum, which we have done in many countries. Yes, now what we have done last year is to break those silos when it makes sense, because it doesn't mean that we should have the same salesperson on the ground selling all kinds of products of Saint-Gobain. It would be a mistake. We do that on a very careful way, more for technical prescription than the day-to-day life on the ground. Clearly we are developing and pushing also joint offer in terms of marketing. It could be for wood construction, it could be for off-site manufacturing. It could be also covering the DIY or the key-account management with the key-account management.
All those initiatives are indeed breaking silos on the back office when we have joint customer service or joint logistic to make our business easier for our customers and also on the offer side on the growth. We think what we have identified early on in the program with 1,000 actions is what we can and we will deliver on the cost side. Again, beside the cost, the main benefit is to accelerate on growth. Clearly, when we are able on facades to put the offer of Saint-Gobain between glass, between gypsum, between insulation, it's a big benefit when you talk to architects and you can land a big facade offer on a complete integrated system. On the cost side, we don't want, and we will not do more than that because we think that's the right achievement we can deliver on the back-office synergies.
After that, the main benefits of Transform & Grow, and it's accelerating in 2020, will be on growth, developing, cross-selling, upselling of products and joint systems.
Thank you. I guess a second question, if I may. On the deal with Sika that didn't go through up to the end, where do you stand in terms of your strategy with regards to mortars? Do you still want to become bigger? I guess that's a big kind of beneficiary for facade systems and for insulation to reach the Green Deal targets by 2050, for example. Where do you stand on the strategy with mortars, please?
We have made a numb er of acquisition and a number of sm aller greenfields in a number of new countries in 2019, and we'll continue to grow this business, which is growing very nicely.
But just we have-. You won't do large M&A in the space?
We have done some M&A over the years, small to mid-size. We have done, for instance, in Southeast Asia, several of them. We bought the leader in Peru end of last year. We are looking at other projects. We have now 13 plants in Africa, if I'm correct. We continue to develop the business on construction chemicals and mortars around the world. As you rightly said, it goes very well with the other businesses of Saint-Gobain when you talk about external insulation and other good applications for CO2 reduction.
Okay. Thank you very much.
Next question.
We have another question by phone by Nabil Ahmed from Barclays. Please go ahead.
Yeah, good morning. Thanks for taking my questions. I have three, actually. The first one on U.S. roofing. Is it fair to assume that you didn't see that much yet into Q4 2019, the deflation in asphalt costs, and therefore price cost was probably less positive than it was same time last year, and that's potentially something that could improve into the first part of 2020. The second question was on U.S. gypsum. In the context of improving housing trends in the U.S., are you starting to see an upturn in pricing in that market? I would be interested if you could comment on that. Finally, I had a last question on asbestos. I was wondering if you could put a bit of context behind the actions you have taken and the settlement you have reached. Why now? What are the next steps?
When do you expect that Chapter 11 voluntary petition to be final? Thank you.
Thank you. I start with U.S. roofing. Yes, we have seen a better cost position in t he second half of last year and accelerating a bit in Q4. We started to see that, and we don't anticipate anything negative in 2020. The price-cost spread on roofing should continue to be good and to further improve. We have some ongoing discussions to raise prices also in the U.S. Overall, the dynamic on roofing on this price cost spread is positive. We assume a reasonable storm year in terms of volumes, but overall, the picture for roofing looks good. On gypsum, the volumes are very strong now, clearly we have seen from September, October, et cetera, on housing starts. We see that in our volumes both for Saint-Gobain CertainTeed and Continental right now. This is a good dynamic in terms of volumes. Indeed, we are pushing prices to the market, and I'm confident that those prices would stick.
Coming to asbestos, the context is this is something which is there in Saint-Gobain for the last more than 15 years that we have been dealing with this issue. In the recent past, you would have seen on an average, we have an impact in our P&L, which is close to EUR 90 million. This is a cash which is going, this is something which is in U.S., many companies are suffering. We had this route of Chapter 11, this is something which we have seen many corporates taking steps in this direction. This is something which is a long drawn process. The whole idea is to be fair and deal with this issue in a fair manner to the people who are genuinely impacted in a more efficient way. That's the objective of taking this route of Chapter 11.
We'll have to go through this process of negotiating with the concerned agencies. As and when we arrive at the conclusion, we'll have to create the trust. Now, the good news in all this is that one is clearly that from 2020 onwards, we are not going to have any impact of asbestos in our P&L specifically for North America. That's the background to this whole thing.
And what's the timeline behind-
It's going to take, well, if you look at what's going on generally in the U.S., I would say between three and eight years.
Yeah. Okay. Thanks a lot. That's useful.
I don't see any more question on the phone. I go back to the floor. Yes. Then we have the internet.
Monsieur, traditional question regarding the glas s. Could we have the order of magnitude of the absolute price of 4 mm ? Regarding the slide 17, we had plus 1.9% in 2020 or 2019 for High-Performance Solutions. What was the situation in the glass? Thank you.
Yeah.
Start, Sreedhar.
I believe you were looking for 4 mm glass in Europe. The 4 mm glass Europe for the first half was 3.4, second half was 3.3, and fourth quarter was 3.2. Okay? It is decreasing, but you just have to keep in mind that Saint-Gobain, because we have this value-added products, high value-added products, the impact, overall impact is still lower in Saint-Gobain P&L.
What was the second one?
The price variation apart from glass in the 1.9%. I think 1.9% on the slide 17 includes the glass. If we deduct the glass.
No. It's not because it's-
No, it's only the au tomotive glass.
Automotive glass.
Yeah.
Automotive glass is quite difficult. It's always going a bit down. We try to prevent that with new models with a better mix. I don't think it's very significant.
Okay. Thanks.
If I may, another question.
Yes.
Regarding your disposals, you said you can see further opportunity to divest. In the past, you gave us roughly an idea of the envelope p roceed you could target, or the amount of sales you will sell.
Yeah
Could we have also a figure on that?
No, I-
I'm sorry to ask again.
No
Question on figures.
No, I'm sorry because I will not answer like I will answer the question, but saying that I don't want to give any more figure, and I will announce disposal when they are done one by one.
Okay. Very clear. Thank you.
Now we go to the internet. We have a first question.
Yeah
From Elodie Rall.
Yes.
I read the question, and then you answer, Sreedhar.
Okay.
Could you please help us reconcile net debt variation, which is down EUR 700 million, while free cash flow was up EUR 600 million year-on-year.
Yeah.
Divestment amounted EUR 1 billion, while CapEx and dividends were flat year on year. Why isn't net debt down more than the EUR 700 million reported?
If you just recall what I said, the debt reduction before IFRS is more than what you have here. It's EUR 700 you said, it's EUR 840 million. This difference is primarily coming because of, again, an accounting treatment in IFRS 16. When you have any construction you do, you have to account the whole leasing obligation as your CapEx. Your new tower of Saint-Gobain has been accounted in the 31st of December. That's the main reason why there is a difference.
It's a one-off that the-
One-off, for sure.
In terms of the lease, the amortization and the lease.
Yeah
Spend on the lease, which is by the way, both of them are non-cash. When we talk about cash in IFRS, this is non-cash.
Yeah
It is treated in the debt.
And-
There is a one-off there.
Yeah. That is why I don't include in my cash flow comparison, because it's not cash, and it's quite consistent with the spirit of looking at the cash in day-to-day business.
Second question. You mentioned in your presentation that you viewed 2019 as a peak year from an investment perspective. What makes you more cautious? Do you expect lower growth going forward? Can you elaborate on what you mean by peak? It's not that we are more cautious, it's that we have a cautious decision to have less CapEx in 2020, and I think Sreedhar already answered, and I also talked about it. I think, in distribution, we have had, and I mentioned that in the last three, four years, we have had significant investment in logistics and IT systems to facilitate the digital evolution of part of our distribution. This is going down. There were some specific programs on life science and on Sekurit, where our growth with, for instance, with the electric vehicle, has meant a significant investment program.
We have much less CapEx in 2020, clearly in automotive glass. We have had also links with digital in our plants, a lot of productivity investment. Then, there is a clear action to be, in the framework of the new organization, to be very strict on maintenance CapEx. Do you want to add something, Benoit?
Yes. Clear allocation on the capital and CapEx for maintenance. We have not cut any growth projects in emerging markets.
Yeah.
We are ongoing with new development in Mexico, in India.
Yeah.
All that is going well, and we have not reduced any of those.
There is a question from Josep Pujal from Kepler. Can you continue optimizing maintenance CapEx beyond 2020? That's a follow-up question. Maybe, Benoit, you want to?
Because we have defined strict criteria for the maintenance CapEx. We think on that we can continue, for sure. Depending on the cycle of some investment in life science, as I said, we followed our U.S. customers to Europe, to India, to Korea. If it comes back with further additional growth, we are going double-digit in some of those businesses. We'll restart some growth CapEx. On maintenance CapEx, yes, we are confident we can maintain a good level, close to what we have done and planned for 2020.
There is a second question from Josep Pujal. Do you think that you can bring the working capital requirement below 27 days of sale, which is a record low? Sreedhar?
As a CFO, I'm not going to be complacent. I'm going to continue to look at all the possible things where we can optimize, but at the same time, you just have to also be pragmatic, because we have to run the business. We have to make sure that the customers are served properly. We have to find the right balance. We will continue to maintain the discipline, and you have seen in the past, we used to show the trend of 15 years. I think we have made a significant progress in the last five years. We have actually kept it below 30 days, and that's something which we will remain disciplined.
I think there was a year we were at 26, if I am correct.
Beside the financial discipline, we have also ongoing projects on the overall supply chain to optimize the overall supply chain, from sales forecast to production planning and, of course, inventory and deliveries and logistics. There are also operational world-class supply chain projects within the group.
I would say that 2018 was a bit high compared to the trend that we have had. 2020, we are at a good level, I would say.
Yeah.
Sreedhar is very active on that. Next question. What you want? Sorry. Yeah. Eric Lemarié from Bryan, Garnier. What would be a reasonable estimate of the working capital variation in 2020 after this very good performance in 2019?
I-
Well, the question in days, now you have the question in euros, but I think it's going to be a similar one.
Yeah, I just said, we will remain disciplined, this is something which is an important topic for all the management team. I can tell you that in Saint-Gobain, working ca pital is something which is an important metric reviewed in every single business review.
As there is a new question on the telephone, because I think I have finished.
Yes, we have another question by phone from Manish Beria from Societe Generale. Please go ahead, sir.
Yes, I have three. The first one is on your operating margin improvement. In 2019, you improved your margin by 30 basis points. If you look at the split, 30 basis points is coming from the cost-saving plan that is exacerbated one . 15 basis points is coming from the divestment because you're selling low margin business. You are getting a price cost gap that is positive. Out of 30 basis points, 45 basis points is coming from self help . Despite price cost positive, why it is not showing more margin improvement? That means, the operating leverage is somewhat negative. This is the first question, why is that? Maybe there is more cost inflation in your fixed cost, so you can explain that. The second one is, when can you be allowed to sell the Sika stake, and what are your plans?
What are you going to do with these investments? The third one is, in terms of disposal, have you received all the money in 2019 or we are left something to be received in 2020?
Okay. Yeah. Manish, I'm surprised you're not asking question on debt, but I'm happy that you're asking question on the margin. See, we just have to keep in mind, what I said is that we compensated the inflation. That's a point you need to keep in mind. The second point you need to keep in mind is that, the volume growth is just 0.7%. Don't forget the mix in the businesses. We have seen that High-Performance Solutions, even though they have outperformed vis-à-vis all the peers, an excellent performance in the current context, but the reality is that the margin has certainly dropped. It's a business mix, and we have to see that an apple to apple. Clearly, there is the impact of savings and the T&G savings, and the leverage of whatever limited volume growth we had is there in the P&L.
It is just that the business mix is not favorable for us.
Okay.
On the cash proceeds, yes, we received everything.
Yes, largely we have received almost everything. We have received this year. Unlike last year, we had to receive something from China divestment, but this year we have received.
Including last nine to last adjustment from Korea.
Correct. Large part of the money came in the second, the last quarter of the year.
So o n the Sika?
Yeah. On Sika, I have said that already several times. As part of the a greement, that complex agreement that we have made two years ago, we have said that we will not talk about that for two years. I will update you on this topic, and I am not going to say one thing or another. I will just update you on our thinking when we publish our results of the first half in July.
Okay. Yeah. Thanks.
There is no more question? Is that all the questions in the room or Okay? Well, thank you very much.