Good morning, everybody, and welcome to this presentation on our 2019 results. So we'll, I will go quickly through the highlights, then Shreedhar will go into more detail in our results. Benoit, and I will update you on the strategy and I'll finish up with the outlook for 2020. So 2019 has been a very good year for Saint Gobain with, you see, the main figures. Sales up 1.9% to 1,000,000,000 euro, up like for like 2.4%.
Our operating income is up 5.7% on actual terms and 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 1.9 1,000,000,000. And the EPS is up a little more because we have reduced the, to 11%, we have reduced the number of share outstanding. The EBITDA with the new definition that should I explain to you in, in, in July is up 4.8percent@4.870000000000 and the debt is down. This is a debt post IFRS, which is down 1,000,000 to 10.5.
Which gives a good ratio. So if we put these numbers into perspective, we have had a regular growth in the last few years. You see that in the last 5 years, our margin has significantly increased and it will continue with our Transform and 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 20 is the highest, the 2nd then, with 2007, 2nd highest in our history. Recurring EPS has grown 14% in on average in the last 5 years.
So a good year of progress. So 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 2 years, with, I would say, especially a difficult market in our industrial activities and the performance in that framework of our high performance solution 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% Cheddar will come back into that. As I said, a good increase in the operating margin, which is in line with our Transform And Grow Initiatives, where I would say we are, in these initiatives, we are globally ahead of target We are very happy with where the new organization has functioned. And Benoit will give you more details.
Our cost savings plan was 1,000,000 for until 2021. We We have revised the objective for the 1st year for 50,000,000 initially to 80,000,000 in the summer. In fact, we landed 120,000,000 in cost savings in this program, which will allow us to focus now more on growth. In the second part of the Transform and Grow initiative was linked with with acceleration of the portfolio rotation. And we have divested 1,000,000,000 of sales, more than the objective I had set in which was 1,000,000,000 on good conditions.
And we have made 18 small acquisitions for 1,000,000 And I'm very happy that the continental product, 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. And I would say, we have acted on all elements to increase this free cash flow, which we are going to continue to work on.
And as I said, a good increase in the recurring net income 10% up versus 2018. So a good year and, and Sreedhar will take you more into details.
Thank you, Pierre Andre, and good morning, everyone. So 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 and Grow with a bigger negative impact in the fourth quarter as we deconsolidated a number of businesses during this period. So 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 impacts. And 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 our organic sales. Our organic sales growth was 2.4%, which is translating into the increase in operating income of 4.7%.
And we are able to achieve 30 basis point improvement in our operating margin our volume growth, a slight positive cost spread, and more importantly, the acceleration and cost saving through this transformer growth initiative. We have achieved strong results from this initiative with a 1,000,000 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 1000000. And in 2020, we expect it to be less in 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 and growth initiative. So if you look at the business income, clearly increased and helped by nonoperating cost despite the million costs related to Transform and Grow. Asset write downs are largely linked to divestments that we did during the year. And in addition, we have depreciated assets of Poppants to address the book value at the end of the year as we are well engaged in a process 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. So if you look at the net recurring income, you have the net financial expenses, which is excluding Cica, 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.
So this is the cash flow. And as Pierre and I said, this is a it's an important part of our results. And you see that there is a sharp increase of 50% in the cash flow. And this bridge is what I presented to you all in last year, in July after the first half results. And this, again, this definition is based on the feedback I received from most of you.
So during the year, we created 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 improved conversion cash conversion rate at 44% as against 31% in 2018. And this is driven by various improvements, notably a reduction in non operating costs and working capital. We saw an improvement of 2 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 536 1,000,000 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. And we will continue to focus on this important metric even in 2020. And we said in our priorities that we will further increase the free cash flow in 2020. And we target to reduce at least by 1,000,000 the CapEx by optimizing further the maintenance CapEx and allocating CapEx with more strict criteria in growing and profitable businesses now that we have passed our recent peak. So here, we are showing the ROCE and ROI, both before and I have 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. So if you look at the numbers, both definitions, clearly, it shows a good improvement in 2019. In fact in the last 5 years, we have made consistent progress in these indicators. Finally, turning to the net debt to end the shareholders' equity, where again, we are showing both before and after IFRS 16 for a better comparison. Net debt increased 1,000,000 and evermore sorry, sorry.
I mean, the increasing mode of cash flow. So the net debt decreased by 1,000,000 and even more before IFRS 16 at 1000000. During the year, we generated and received just over billion in divestment proceeds. We invested around 1,000,000 on acquisitions just over 500,000,000 on growth CapEx, paid just over 800,000,000 in dividends and share buyback. Overall, Our balance sheet and the ratings remain very strong.
So 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 organization, which is by country and market. So we'll start with high performance solutions. You see here the like for like sales in high performance solution grew by 0.4%, driven by pricing with volumes 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. The environment remained difficult in Europe and China, and our outperformance was driven by the differentiation strategy focusing on higher added value products, which continue to pay off particularly in electrical cars. Our businesses serving industrial markets were also down impacted by slowdown in industrial markets in the second half. However, Our businesses serving the construction market 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 a 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 Not that, Rob, you see here like for like, growth of 1.7% over the year and were stable in the second half with a particularly negative calendar impact in the 4th quarter. The Nordic Countries saw like for like growth led by distribution.
The renovation market remains solid but the new construction was softer. The UK West 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 nonresidential, for example. Class. Eastern Europe saw organic growth.
The operating margin for the region showed a sharp raise of 70 basis points to 6.3 percent, driven by the positive spread between the price and the cost. The impact of acceleration of Transform and Grow related cost savings and the divestments of low performing businesses. Southern Europe Middle East And Africa saw a region of 3.3 percent like for like growth for the year and 2.3% in the second half despite a particularly negative calendar effect in the 4th 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 crop. However, 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 percent operating margin. This is clearly, thanks to the improvements in France and also the acceleration of cost savings from our Transform and Growth program in particular.
So 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 installation 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 the 4.6 like for like growth for the year, but a slowdown to 0.5% in the second half, especially in building glass in bezel in a more uncertain macro environment. The operating margin for the region with a more difficult environment, as I said, in Latin America. And clearly, 2018 have been aided by a very second very high second half. Asia specific 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, Plastics business and the Motal business, Building glass declined in the second half due to the lower utilization rates as the 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 startup of Nubes Plaster plant in the first half as well as a good growth in Motaz business. Southeast Asia saw a good growth by volume, but continue 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 percent to 10.6 percent, driven mainly by the volume growth and a little bit of transform and growth 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 Now I hand over the floor to Benoit who will give you an update on our strategy and transformation.
Thank you, Shreedhar, and good morning, everyone. So 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 and Grow 1 year after the launch. Transform and 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 I've been able to execute it extremely well and fast.
And faster, I would say that anticipated. So 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 and Grow. To some extent, it's because the goal is simple. It's to make Saint Gobain much stronger to deliver strong profitable growth to our shareholders.
Based on 2 pillars, the new organization and a stronger portfolio of Benses with higher growth and profit. Will come in a minute to the changes of the organization, but beside the changes of reporting lines of parameters, we have been working a lot on our culture to focus it more and more on accountability and ownership. And this is at the center of our transformation. How do we do that? 1st, with one single line of command, one topic, one owner, 2nd, 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 to kind of solidarity bonus on the larger perimeter where they had little influence, they are now 100% on the perimeter and P and L that they manage. Well, for past decisions, thanks to a lot of simplify the processes that we have reengineered over the last 12 months, 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 and L. Also, it is important that we have increased the ownership of our teams, I give the example here of 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. And this showed it's an external survey made by Epsos, They should cost 80% engagement towards our goals and towards Saint Gobain, which is four points above the external benchmark that was delivered by Ittose. So a lot of accountability and a lot of ownership from all our teams on Transform and Grow. Our new organization brings together in one team, the businesses that share the same customers. So for local construction markets, we leverage by country, comprehensive solutions across all our assets, product lines and systems, sales expertise, brands, logistics, etcetera, 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 off-site manufacturing in the UK, in Benelux, in Nordics, which are growing fast. A dedicated fasad offer across several product lines in Brazil, overall in Brazil, our Deepgram group double digit in a tough market last year, home and hospitality sales organization in India, combining our number 1 position in glass and our number 1 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. And 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 Transvessel R&D across all the group, for instance, our Textile Solutions business has developed new Glassmat products for new applications of Glass wool, for external insulation in Switzerland, replacing other materials.
So 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 markets used. Now on the ARDS Savings. We have delivered faster on our savings, 1,000,000 for the full year of 2019 versus 1,000,000 expected when we last met in July. All actions identified by the teams for the beginning of the year, 1000 action plans are being executed with a rigorous step by step and cascade it down. Let me take, for instance, Germany, as one example, reacted fast early in the year to cut ex delegation costs and redundancies in the first half.
Then second step, we started to optimize back office to lower cost in HR, finance, purchasing. And the 3rd step, we decided to merge completed the management of Isover and regips. By operating them together, we have another round of synergies in marketing, sales, customer service or supply chain. And we trigger also growth synergies to push joint prescription, key account management or new share. 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.
And overall, we have a 1 year, around 1 year payback on all these actions. So we'll deliver another 1,000,000 in 2020, and we are well on track for the full 1,000,000 by 2021. 2nd pillar of our Transform And Grow Program, our active and value creating portfolio management, making it here also Saint Gobain much stronger. On divestment, we have acted fast And decisively, with divested businesses representing 1,000,000,000 of sales ahead of our target of 1,000,000,000. We have done this at quite attractive multiples around 10 times EBITDA for a total amount from divestments, a bit more than 1,000,000,000 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 cut area of decision 1, the financial performance in terms of cash returns of profitability. 2nd, the contribution of those businesses to Saint Gobain in terms of value creation and synergy. And third, of course, make sure that we find the right timing and the right market conditions. So there are several ongoing dedicated reviews and actions on other projects, and we are acting decisively on all these with Notable, 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 fixed criteria, first new geographies with 4 acquisitions, mostly in Latin America, adding plasterboard, selling businesses, buying also the leader in tile fixing in Peru, 2nd, technological niches to extend our product trend, for instance, for acoustic solutions in mobility and also for high end technical sales in aerospace. And third, 10 small operations to reinforce local leadership, whether it's in our Nordic distribution network on specialty ceilings in the U. S. All these small mid sized moves, built up progressively, a strong Saint Gobain set of businesses, and they are well within our strict criteria value creation in year 3. Of course, a significant one is continental building products with a strong strategy trational, strengthen our leadership position in the U.
S. Contraction 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 housing, U.
S. Housing starts, which have been moving up month after month of the last 4 to 5 months. The full leadership team is already in place and has been in place since day 1, with a good combination of the best talents coming from Saint Gobain and coming from Continental Building Products. I went there again 2 weeks ago, and I can tell you that all action plots all action plans are already in place and being executed. One example, for instance, already as of and of last week, all the sales territories had been reassigned for either a former Saint Gobain, salesperson or a former continental being product, salesperson.
So we have taken the best of the 2 teams, and we are well ahead in our integration plan that will deliver more than 1,000,000 of cost synergies in 2020 and more than 1,000,000 in 2022. So 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
a
10 times multiple, 1,000,000,000 of sales, up difficult businesses, operating at 3% EBITDA margin. We have been buying at 8x, multiple after synergies, roughly 1,000,000 of sales in very good businesses making above 20 percent EBITDA margin. And we'll continue to create value, thanks to our active portfolio management with ongoing selective acquisitions and targeted divestitures. So 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, and I now turn to Pierre Andre.
Thank you, Benoit. So you see our initiatives and on pro form a and grow our 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 megatrends and I think that there are 3, which are particularly important for Saint Gobain. 1st, the organization that we see all over the world.
2nd, climate change, which for many is a big challenge for cyberBA, it's a huge opportunity. And we are seizing it. And third, digital, which allows us to really bring more value to our customers. In this framework, we are focusing on 3 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, that there still plenty of opportunities increased by digital to help our customers with their productivity.
And third, well-being, which very often goes together with sustainability. So let me start with sustainability. As I said, it's it's a huge opportunity for Saint Gobain. We have, we estimate that around 60% of 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 renovation energy renovation. In this slide, you see a few examples which are, of the leading sustainable solutions that we provide in our different markets and which are helping to deliver CO2 reduction to our customers.
This is, and we are increasing, of course, our positioning on these markets. Shreedhar 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 examples in buildings and also in mobility or the 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 is, I can be summarized in one figure, which is the fact that around such 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.
So that's where we provide solution. 25% is linked with the way the building are made, the carbon footprint of the building. And from that standpoint, Saint Gobain as 2 roles. The first one is that more we are using our solution versus traditional solution, which, emit much more CO2 is good. So more Saint Gobain solution in the building's better it is.
And second, we can also, and that's what we are doing, improve our CO2 footprint, our own CO2 footprint. As you know, I've made for Saint Gobain, a commitment in 2015 during COP 21 to decrease our CO2M own CO2 emission by 20% in, by 2025, we are well on track and in fact, we are accelerating our our results in that framework. We are at 14.5 in, in 2019 with a 2 point 8% reduction only last year. So we are well on track and, as you know, I have made a bolder, I would say, commitment for Saint Gobain at the UN last year on 2050. And this year, we are going to to work on a precise road map to get there.
A 2050 is not that far when you are in industrial activities. And we are working hard in that direction. And I think that, we are, we, we are going to find solutions. We will not do that alone. That we can do, 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. 2nd area, which is, as I said, productivity and innovation. And this is really changed significantly with digitalization, whether it is on a personalized production, whether it is on usage of data, whether it is on new business models, all that is providing additional growth. As you see here, a few example, with very significant, also internal change within Saint Gobain. I think in those areas also globally, we outperformed 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 9 years has been ranked as one of the 100 most innovative companies in the world. It's a across sectors ranking, and here we'll, we'll, I'm sorry not to be able to welcome you today in our new tower. We are just a few days short, but next time, it will be there and you will be able to see that there are 82 solution from Saint Gobain, which are at work in this in a new tower, which is, I would say, a large showroom of our of our know how. You see on the right, a few example of solutions that we have launched, innovation we have launched in 2019, on these 3 areas, sustainability, productivity and well-being.
And as I said, sustainability and well-being goes very often together. So if you look at the new generation of our electronic glass harmony, it is both sustain bringing energy efficiency and much more comfort in building. And you see that you see a few other examples in this in this chart, in, again, in mobility and in facades, whether it is with our new gypsum activity with the productivity and our new partitioning system that we launched recently and some of this. So a very strong flow of innovation linked with these 3 growth drivers. Now I come to, the outlook.
And first on our shareholder return policy, the board yesterday, as recommended to the shareholder, which will meet on June 4, in, on June 4, 2020. An increase of the dividend to per share, which is in line with our policy and we are, I would say this year back in our targeted range between 35% 40% of the recurring net income at 39%. This dividend will be paid in cash. In terms of a number of shares, we have reduced the number of share last year and it's down to 1,000,000 and we will continue to act in that direction in 2020. Now in terms of the outlook, The outlook for 2020 will is marked by a number of macroeconomic uncertainties, but 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 valid solution markets, within the industrial market.
Now a few words about the coronavirus, which is, everybody, which is an important impact, I must stress that for Saint Gobain, China is sometimes have 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 2% around 2% of Saint Gobain. So from that standpoint, we have had 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, but seeing impact on overall Saint Gobain of what we have seen so far is not material. On the other hand, the spread, if it's really confirmed or this, of this virus makes the situation more globally, more difficult to evaluate.
Our, if I take that out, I would say that our 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. And Northern Europe will, will the trends are mixed with a slight growth expected in the Nordic but a more uncertain situation in the UK, which, well, I say certain, it could be better, but it's not the Brexit situation is making at the moment a bit more uncertain. Southern Europe, we expect good 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 1 or 2 years ago. In the Americas, we should have a 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. Now our priorities, I would say, 2 sets of priorities for us this year, one around the evolution of our strategy and second, in terms of cash flow and margins.
In terms of a strategy, we will continue our portfolio optimization, I, the integration of Continental and further the divestment acquisition as Benoit has expressed and we will continue our strategy of differentiation and innovation to improve customer's productivity to develop sustainable solution and contribute well-being of all. I think there are 3 very strong drivers for Saint Gobain for the years ahead. 2nd set of priority which will allow us, as Sreedhar already said to increase, again, after a very good year to increase our cash flow free cash flow for 2020 and we will increase also, align with our Transform and Grow program, the operating margin, through a constant focus on price cost spread, thanks to, and that's a constant Sangouba, a strong pricing discipline. The continuation of our cost savings program in the context of France and Landro which will, as Benoit said, bring 80,000,000 more in 2020 with the, which means overall 1,000,000 from between 20192020. We will reduce our CapEx this year after by around 1,000,000 after a peak of 2 or 3 years in CapEx, as I have said, we are going to be very strict on maintenance CapEx.
Like Sreedhar said, and we will have, we'll continue to have a good growth CapEx but we have had, I would say, a few years where because of distribution modernization in IT And Logistics and some needs in, in our fast growing areas in HBS we have had an investment peak in the last 2, 3 years, so we'll have a decrease. And we are going to be very strict on maintenance CapEx. We will continue our operational excellence, which should we anticipate bring another 1,000,000 of additional cost telling, which is very well needed because of inflation, which is still there. Even though, even though in terms of raw material and energy cost, we, which is covered by price, we should expect less inflation than last year. So in terms of operating profit, we expect in this context a further increase in our protein profit like for like, because there is an impact of that month 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. But again, Saint Gobain is is globally, a little affected by this situation as of today. That's, that's the outlook for Saint Gobain.
And now I am with Benoit Antrida at your disposal for any questions you may have. Yeah, we'll start with We start with the room and then we go through the, to the Internet and the phone. So in the room,
yes, Yes. I have 2 questions. 1, difficult and the best for the end. So, difficult question if we look at China. It's not only a question of sales.
It is maybe also question of supply chain. Could we have, some flavor on supply chain and mainly in the high performance materials. It is relevant. And secondly, looking at the slides 20 and 17 in term of pricing. We have a good price increase over the year.
In, in America and higher than the other divisions. Where comes this difference many things.
On the values, I see I can describe the situation with, I would say, 3 circles. So first circle is what's going on in China. And 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.
They are 38 which are operating they are not all operating at 100% because in the for instance, the construction sites have not started again. So the demand is low, but we have that sometimes when there is a very tough winter, I would say. And I think the situation is improving at the moment in China. So this first part is not, I would say, the one I described is not the impact is not material for Saint Gobain. It's going to be material when we report the Asia Pacific Park, but it will not be material for Saint Gobain.
The second circle, I would say is the one related to your question. And on which is on the supply chain. I remind you that 90% of the products that Saint Gobain manufacturer are sold where they are manufactured. So 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. And I must add that for our local businesses which are in Europe, we rely very little on goods coming from China. So I would say that the logistic and the supply chain issue for Saint Gobain, I don't see that as a there are some uncertainties, but I don't see that as a big issue. And then 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 epidemi outside of China. Today, there is some things going on in Korea.
We have reduced significantly our presence in Korea, so I don't think it's going to be important. But if it becomes something very global, then I cannot quantify, and I cannot answer on that question. I think those are the three ways. Yes, but do you want to add something?
Give some, just to give some numbers of that. If I take all the raw materials that we buy around the world, we have around 1% from materials coming from China and they are not sole source. So 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. So that's, to put some figures on what Pierre Andre just said. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I can also within Americas, you so Latin America where there is always higher inflation.
So, but 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 inflation, we have to push prices much higher than in Europe.
Yeah. Next question.
Yes. Good morning, Arnaud Pinnettau from Enfield Investments 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 point 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 over your outlook for the top line being less supportive in 2020. So you are confident to if I put the coronavirus on the side, you're 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 1, 2, 3 key drivers behind this confidence for 2020?
First of all, on the second half of twenty nineteen, we have had operating profit. Like for like growth, it's slightly less than 2%. And we have had a 30 basis point of increase in margin. So I think we are, the first element of our confidence for 2020 is the fact that our Transform and Grow initiatives, as Benoit explained, are bearing fruit and are going to continue to bear fruits. That's the first point.
The second so it's cost the cost element is quite important. The second element is that the you mentioned a decrease in the pricing in the second half versus the first half, but we have also a decrease in the inflation of raw material and energy. And from that standpoint, Sreedhar told you that the 2020, we have relatively good news. So last point, if you focus on the fourth quarter where we had a slowdown in sales, it was very driven by a number of days And the maths are not the maths are not completely simple on that. We had the next Friday in November sorry, less days in November.
We had the next we had the better of 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 the in our construction markets in the beginning of the year are good. It's still difficult market in industrial activities, but it's good And I don't see, I don't see, in terms of sales, the trend that you could have from Q3 to Q4 being representative of what's going on. So that's the second element of your question.
Yeah, Benoit, you want
to And some markets like France, like the U. S, which are doing well. So we Thank you.
It's very clear. Just on the energy, could you help us to quantify
it for 2020? Yes. So, 2020, we expect the gas costs to be lower than 2019. But you just have to keep in mind that electricity is close to 50% of our energy bill, which still we have inflation. So net net, you would still have some inflation, but certainly lower than what we had in 20 19.
The overall, the energy build we have is close to 1,000,000,000
So what do you expect as a decline for 2020?
So that's what I said. So I sorry. We are not
going to be too precise to go at this stage.
I wish. I wish.
Can you tell me what is the price of the barrel in 6 months?
Based on the spoke price?
I can only tell you. There's no point in speculating based on spot price because spot price has no meaning. You know that so volatile. I can only tell you that. 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? But don't forget, that the electricity is going to go up. Electricity is going across. And for me, the energy bill is 50% of that is electricity.
It will
be lower than last year, absolutely. I will not going to give you a figure at this stage.
Next question.
Two questions for me. You mentioned last year some positive effect from Transform and Grow on revenue. I'm talking about probably market share gain here. You are 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 points on which one can we have an update on that please? Thank you.
No, on the revenues, we don't give target because it's difficult to say what is the than what's in the business? Is it the competitors? Is it the market? We I give some examples and we can go into numerous examples where we have high single digit growth above the market. So if I take, France and Brazil, overall, we have calculated quite it's 1.5% above the market.
So it's progressively accelerating in many countries. The more synergies beside cost on revenues that we have, putting our businesses together, but it's roughly to do that kind of range 1% to 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. So we are well on track with the plans that we have outlined and executed over the last 2 and a half, 3 years.
We continue to have discussions on partnership and 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. So we are executing on that and we continue our discussions on potential partnerships.
Next question. So if there is no question in the room, we go to the to the, the telephone, no first. So we got the phone.
Okay. So we have, by phone, a question from Eve Broomhead from Exane, David 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. So I presume there's still a lot of silos in your product portfolio, which could benefit from merging with larger subsidiaries. So I guess my question is, given how fast you realize your savings in 2019, why haven't you increased your 2021 targets as well?
So the sorry, because I gave the brand name in Germany, which is regips. This is the brand name of our gypsum business. I should have said it's basically putting together insulation and gypsum, which we have done in many countries. So yes, no, 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 person, salesperson in the ground, selling all kinds of products at Saint Gobain. It would be a mistake.
So We do that on a very careful wave, more for technical prescription than the day to day life on the ground. But 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. All kinds of it could be also covering the DIY or the billiard mentions with the key account management.
So 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 OSHA side, on the growth. We think what we have identified earlier on in the program with 1000 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 And clearly, when we are able on facade to put the offer of Saint Gobain between glass, between gypsum, between insulation, a big benefit when you talk to architects and you can land a big FASTAT OSHA on a complete integrated system. So, 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 Transformango and it's accelerating in 2020 will be on growth developing cross selling, upselling of products and joint systems.
And I guess the second question, if I may, I mean, on the deal with Cica that didn't go through up to the end, where do you stand in of your strategy with regards to more TARs, do you still want to become bigger? Because I guess that's a big kind of beneficiary for fat type systems and for insulation to reach the green deal targets by 2050, for example. So where do you stand on the strategy with more charges
we have made a number of acquisition and a number of small greenfields in a number of new countries in 2019, and we'll continue to grow this business, which is growing very nicely.
You won't do large M and A
in the space? We have done some M and A over the years, small to mid size. We have done Eastasia 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. So we continue to develop the business on construction chemicals and mortar from the world. And 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?
So we have another question by phone by Nadil Ahmed from Barclays. Please go ahead. Yes, good morning. Thanks for taking my questions. I have 3 actually.
The first one on the U. S. Roofing, Is it fair to assume that you didn't see that much yet into Q4 2019, the deflation in actual 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 into the first part of 2020.
The second question was on U. S. Gypsum, in the context of of improving housing trends in the U. S, are you starting to see an upturn in pricing in that market? So I would be interested if you could comment on that.
And 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? And what are the next steps? When do you expect that chapter 11 for the tariff addition to be final. Thank you.
Thank you. So I'll start with the U. S. Fulfing. Yes, we have seen a better cost position in the second half of last year and accelerating a bit in Q4.
So we started to see that. And we don't anticipate anything negative in 2020. So 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 US. And, overall, the dynamic on roofing on this price cost spread is positive.
We assume reasonable storm year in terms of volumes, but overall, the picture for roofing looks good. On gypsum, the volumes are very strong now. And clearly, what we have seen from September, October, etcetera, on housing starts, we see that in our volumes both for Saint Gobain Certainly And Continental right now. So this is a good dynamic in terms of volumes. And 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 last more than 15 years that we have been dealing with this issue. And in the recent past, you would have seen on an average, we have an impact in our P and L, which is close to 90,000,000. And this is a cash which is going and this is something which is in U. S. Many companies are suffering.
And so we had this root of chapter 11 and this is something which is We have seen many corporates taking steps in this direction. And 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. So that's the objective of using taking this root of chapter 11. And we'll have to go through this process of negotiating with the concerned agencies. And as and when we arrive, what 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, you are not going to have any impact of asbestos in our P and L. For specifically for North America. So that's the background to this whole thing.
And what's the timeline behind
It's going to take a well, if you look at what's going on generally in the U. S, I would say between 3 8 years.
Thanks a lot. That's useful.
I don't see any more questions on the phone. I mean, I go back to the floor. Yes. And then we have
Mr. It's a traditional question regarding the glass. Could we have the other magnitude of absolute price of 4 millimeter. And regarding the Slide 17, we had plus 1.9% in 2019 for high performance solutions, what was the situation in the glass? Thank you.
So, for, I believe you were looking for 4 glass in Europe. So, the 4 glass Europe for the first half was 3.4. 2nd half was 3.3 and 4th quarter was 3.2. Okay. So it is decreasing, but you just have to keep in mind that SangerBAM because we have this value added products, high value added products, the impact, the overall impact is still lower in Saint Gobain Puyendal.
The
price valuation is a price variation in, apart from glass the 1.9% I think 1.9% on the Slide 17, includes the glass if we deduct the glass.
Automotive Glass Automotive Glass.
Automotive Glass is a is quite difficult. It's always going a bit down, and then we try to compensate that with new models with a better mix. So I don't think it's very significant.
If I may, another question? Yes. Regarding your disposal, you said you can see further opportunity to divest. In the past, you gave us a roughly an idea of the envelope of proceed you could, target or amount of sales you will sell. Could we have also a figure on that?
I'm sorry to ask, again, question on figures, but
No, but no, but I'm sorry. I will not answer like, oh, wait, 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 1 by 1. Now we go to the aftermath. We have a first question from Elod D'Aral, you I read the question and then you answer Could you please help us reconcile net debt variation, which is down EUR 700,000,000, while free cash flows was up EUR 600,000,000 year on year? And divestment amounted EUR 1,000,000,000, while CapEx and dividends were flat year on year.
Why is the net debt down more than the 1,000,000 reported? Yes.
So if you just recall what I said, the debt reduction before IFRS is more than what you have here. It's $700,000,000. And this difference is primarily coming because of, again, an accounting treatment in IFRS seen when you have any construction you do, you have to account the whole leasing obligation as your CapEx. So your new tower Singapore has been factored. I mean, I've been accounted in the 31st December.
And that's the main reason why there's a difference
So it's a one off that the
1 off
for sure. The amortization and the lease and the span on the lease, which is, by the way, Both of them are non cash. And when we talk about cash in IFRS, this is non cash, but it is treated in the debt. Is there is a one off there.
Yes. And that is why 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's making 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 that we have a conscious decision to have less CapEx in 2020.
And I think Sreedhar already answered and I also talked about it. I think we have, we have had in distribution, we have had, and I mentioned that the last 3, 4 years. We have had a significant investment in logistics and, and IT systems to facilitate the digital evolution of part of our distribution. We this is going down. And then there were some specific programs on, on, that, on life science and on, on security, where we are, the our growth, which, for instance, with 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. And then, there is a clear action to, to be in the new, in the framework of the new organization to be very strict on maintenance CapEx. You want to add something? It's a
clear allocation on the capital and CapEx for maintenance and we have not cut any growth projects in emerging markets. We are ongoing with new developments in Mexico, in India. So all that is going well, and we have not reduced any of those.
Then there is a question, from, Joseph Pujal from Kepler. Can you continue optimizing maintenance CapEx beyond 20 20. That's a follow-up question. Maybe Benoit, you want to
Yes, because we have defined a strict criteria for the maintenance CapEx. So we think on that, we can continue for sure. And then, depending on the cycle of some investment, like science. As I said, we followed our U. S.
Customers to Europe, to India, to Korea, if it comes back with, 1st additional growth. We are growing double digit in some of those businesses. We'll restart some growth CapEx. But on maintenance CapEx, yes, we are confident we can maintain a good level, close to what we have done and plan for 2020. Yes.
It's 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 Shreedhar?
Yes. So, 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. So we have to find the right balance.
We will, 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 5 years. We have actually kept it below 30 days and that's something which you will remain disciplined.
I think there was a year we were at 26, if I am correct.
Discipline, we have also ongoing projects on the overall supply chain to optimize the overall supply chain from a sales forecast to production planning and, of course, inventory and deliveries and logistics. So there are also operational world class supply chain project within the group.
But I
would say that 2018 was a bit high compared to the trend that we have had. So 20s, 20s, we are at a good level, I would say. And Shreedhar is very active on that. Next question, Yes. Eric Lamargier from Bryan Garnier.
What would be a reasonable estimate of the working capital variation in 2020 after this very good performance in 2019? I That's a question in this. Now you have the question in euros, but I think it's going to be a similar answer.
Yes. So I just said, we will remain disciplined and something which is an important topic for all the management team. And I can tell you that in Singapore, working capital is something which is an important metrics reviewed in every single business review?
As I read the new question on the telephone because I don't have I think I finished
Yes, we have another question by phone from Managed Belong from Societe Generale. Please go ahead, sir.
Yes. So I have 3. The first one is on your operating margin improvement. So in 2019, you improved your margin by 30 basis point. So if you look at, I mean, the split 30 basis point is coming from the cost saving plan that is exacerbated 1, a 15 basis point is coming from the divestment because you're setting low margin business.
And you are getting a price cost gap that is positive. So I mean, out of 30 basis points, 45 basis is coming from self help. So despite a price cost positive, why it is not swing more margin improvement. That means, I mean, the operating leverage is somewhat negative, I mean. So 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 sell I allowed to sell the CCAR stake and what are your plans? I mean, what are you going to do with these investments?
And, the 3rd, third one is like in terms of disposals. So have you received all the money in 2019, or we are left something to be received in 2020?
Okay. So Manish here, I'm surprised you're not asking question on debt, but I'm happy you're asking a question on the margin. See, it's like, we just have to keep in mind I said is that the spread is we compensated the inflation. So that's a point you need to keep in mind. So, the second point you need to keep in mind is that, the, the volume growth is just 0.7%.
Don't forget the mix in the businesses. We have seen that high performance solution, even though they have outperformed visa with all the peers, an excellent performance in the current context, but the reality is that the margin has certainly dropped. So, it's a business mix and we have to see that in apple to apple. Clearly, there is, the impact of savings and and the T and G savings and the leverage of whatever limited volume growth we had is there in the P and L. It is just that the business mix is not favorable for us.
Okay.
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 you received
last 9 to last adjustment from Korea? Correct.
And last part of the money came in the 2nd, the last quarter of the year.
So on the Zika?
Yes. On circa, I have said that already several times as part of the of the agreement, the complex agreement that we have made 2 years ago, we have we have said that we will not talk about that for the for 2 years. So 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 at our when we publish our results in the, in, of the first half in July. There is no more questions.
Is there other questions in the room? Okay. Well, thank you very much.