Good evening, everybody. I hope that you have received our press release and that you have been able to go through the highlights of our 3rd quarter sales. Let me first sum up in a few words our performance. The consolidated sales for the 1st 9 months were 1,000,471,000,000, up 4.3% including a positive group structure impact of plus0.2 percent and a positive currency impact of plus 0.7 percent. Organic growth for the 1st 9 months was plus 3.4% with volumes up 1.4% and pricing up plus 2% in a less inflationary environment for raw material and energy costs.
As we said at the end of July, The macroeconomic backdrop is becoming less supportive overall. However, given our market and the benefits coming from our transformation program from what I see today and confident we will deliver on our targets. And I now hand over to Sreedhar will give you additional information including by segments.
Thank you, Pirandre, and good evening to everyone. Let me give you more details about our sales for the 1st 9 months. As Pierre said, sales rose 3.4 percent on a like for like basis. Over the 1st 9 months and were up 3.1% in the third quarter. The reported figures included positive exchange rates and structure effects.
The currency impact was plus 0.0 0.7% for the 1st 9 months and plus 1% in the third quarter, mainly driven by a positive effect of the U. S. Dollar despite weakness in Nordic currencies. The structure impact added 0.2% to overall growth for the 1st 9 months. Please remember in the fourth quarter, we will be deconsolidating distribution in Germany, Optumara in Denmark and Capa car in France.
In terms of working days, we saw a positive impact of around 1.5% in Q3 In Q4, the working day impact will be slightly negative at the group level, but the significant differences between the segments including a more negative effect for Now coming back to the most important part, the like for like growth. Sales were up 3.4% over the 1st 9 months and up 3.1% over the third quarter. We achieved a price effect of +2 percent over the 9 months and +1.4 percent in Q3. Against a higher comparison basis last year and in a less inflationary environment for raw materials and energy cost. Remember, we reduced our forecast for the full year of the inflation from less than 600000000 to $450,000,000 between $450,000,000 $550,000,000 $550,000,000 sorry, between $450,000,000 and find a meal at the end of July with the expectation that H2 will see less inflation.
Q3 is confirming this trend and it might even be slightly below this range. The most important thing is to watch the spread and to at least compensate the increasing input cost with pricing, which was the case Despite the context of less supportive markets overall, volumes were up 1.4% over the 9 months and up 1.7% for the third quarter. With the positive working day impact of around 1.5%. I will now comment on each segment, starting with high performance solutions, which showed organic growth of 0.9 For the 1st 9 months, volumes decreased 1% in hesitant industrial markets and we saw a positive price effect of 1.9%. Mobility sales showed slight growth helped by an easier comparison basis in Q3 last year, but its automotive markets remains difficult.
As you know, our differentiation strategy towards high value added products and solutions continues to bear food particularly in electric cars. Activity in serving industry saw sales decrease slightly for Q3 in a more uncertain environment in most regions. Activity is serving the construction industry, continued their growth in both American and European markets benefiting from market share gains, good trends in external thermal insulation systems and recent acquisitions. Lastly, life sciences continued their strong growth dynamic. Turning now to Northern Europe, which posted like for like growth of 3% over the 9 months and 1.9% in Q3.
For the 9 months pricing was up by 1.8% and volume was up by 1.2%. Despite the downward trend in the UK, distribution showed positive sales growth overall for the region. The Northern European Industrial Businesses also published with good trends in plasterboard in particular, while construction glass stabilized. Sales strength in the Nordic countries continued their growth, benefiting from their exposure to the renovation market in particular in distribution. Albeit at a lower rate than in the first half.
Sales decreased in the UK in a difficult economic environment especially in the distribution in Q3. Germany saw some growth despite a slowdown in volumes in the third quarter. Eastern Europe continued to progress. Southern Europe, Middle East and Africa, saw a like for like sales growth 4.2% over the 9 months and 3.7% in Q3. Pricing was up by with a supportive working day effect.
Distribution continue to drive this growth while the industrial business also progressed in particular in plasterboard insulation and motors as well as the construction glass, but in a more measured way. Pipe continued its successful efforts to improve competitive duty, but with softness in export markets. France had a good quarter, driven by a supportive renovation market where distribution continued its growth. As a deep installation, which once again showed double digit growth, driven by strong demand in energy efficient renovation. The other Southern European countries continued to grow, particularly in Spain.
However, sales in Middle East and Africa once again decline, especially in Turkey. Distribution across both European regions progressed 4.0 percent like for like, including a price impact of +1.5 percent. Americas covers 3.8% on a like for like basis over the 9 months 6.1% in the third quarter. For the 9 month period, we saw a price effect of +3.5 percent with volumes up by 0.03%. North America picked up in Q3 on an easier comparison basis for volumes, but much more difficult in price.
Exterior products showed strong growth driven by volumes with pricing coming off slightly on a higher comparison basis. Installation achieved good pricing while gypsum pricing remained under pressure, but with slightly better volumes. Latin America after a good first half flows significantly in Q3 with a weak growth and the macroeconomic environment is becoming more uncertain. Asia specific delivered 5.8% growth over the over the 9 months volume progressed 6% while pricing was down by 0.02%. Growth was driven by plasterboard and motors while glass fell back in Q3 due to lower factory utilization with the decrease in automotive market.
India showed good growth trends in particular in plasterboard, which continued to show double digit growth and also in glass to a lesser extent. China benefited from the startup of the new plaster factory during the first half and strong growth in motors. Southeast Asia continued to face a very competitive environment in terms of sales price, but volumes picked up and showed a good dynamic in Q3. Now to conclude, overall the macroeconomic drop is becoming less supportive However, we remain focused on our operational priorities in terms of cash allocation, pricing versus inflation, and transformation and the Transform and growth related execution. I will now hand over to Kieran Ray for concluding remarks.
I'd like to make a few comments about our strategy priorities and the outlook for the rest of the year. We have continued our confirmation of the group within our new organization with divestment sign or close, now representing over 1,000,000,000 of our 1,000,000,000 in sales. We achieved our target of divestment, representing more than supervision of sales ahead of schedule. But as we said before, this is not the end of our divestment program. For the divestments announced so far, the full year impact on margin is over 40 basis points.
And as announced in July, we now expect to achieve the additional cost savings as a result of our program Transform and Grow more quickly than initially expected with more than million expected for 2019. We confirm our action priorities for the year as a whole in terms of our focus on high levels of free cash flow generation pricing, our CapEx program, our commitment to R&D Investment and our cost savings program or 1,000,000 per year, which is in addition to the structural cost savings coming from Transform and Grow. The group has takes the following trends for the 4th quarter. For high performance solutions in hesitant industrial markets, The automotive sector is expected to remain difficult in Europe and China, but against an easier comparison basis. Northern Europe, we should see less favorable trends overall with a particular difficult environment in the UK And remember, we will have the deconsolidation of the distribution business in Germany in Q4.
For Southern Europe, Middle East and Africa, We expect overall growth for the region with a lower contribution from new construction in France that a solid renovation market, especially in France. For the Americas, we expect stabilization in North America and a more uncertain environment in Latin America and Asia Pacific further growth. To conclude, as you will have seen in the press release, we are confirming our objectives for the full year 2019 and we expect for the second half of 2019, a like for like increase in our operating income compared to the second half of twenty eighteen. Sreedhar and I are now happy to answer any questions you may have.
We have the first question comes from Elodial from JPMorgan.
Hi, good evening. Thanks for taking my question. So I have 3 if I may. First of all, on price cost, so pricing is going I mean, it's less strong than in H1 as anticipated given cost inadequate concentration is also lower. But can you give us an idea of your expectation for the spread between price and cost in H2 versus what you have delivered in H1?
You're going to be higher or lower? And second question on HPS margin. You had guided at H1 that margin for the year should be for H2 should be similar to H1 level. And is that still the case given that you have coded a more difficult, automatic market and more hesitant industrial markets? Lastly, could we have an idea of what you think you're going to end up in net debt at the end of the year, guidance on CapEx 17, but you've bought back some shared, I think, around 300,000,000 in Q3.
So, given the divestments, do you have an idea where you end up in net debt? So much.
Okay. So, I take all the three questions. So, it's true that the price overall for the 9 months is 2% and in the Q3 it was 1.4%. But this is something, if you clearly remember that we revised the guidance in the first half, which we had said initially that it would be less than 1,000,000 was brought down to between 1000000 to 1000000. This was with the expectation that the inflation will be lower in the second half.
And this assumption is clearly confirmed in the Q3. And I think the most important thing, what I said is that we continue to focus on the spread between the price and the inflation and this is something we did managed to pass on the inflation in the 1st 9 months and we would remain focused on ensuring that the inflation is passed on even in the Q4. The second question is on HPS margin. You're right. The HPS PS high performance solution is the automotive market remains difficult even though we have a lower comparison basis, and industrial markets specifically which are linked to the automotive market are also having a negative impact However, high performance solution continues to remain focused on value added value added products and specifically on automotive market segments, you see that we continue to outperform the market if you look at the Q3, the market was down by minus 3.5% and we had positive 2% and the life sciences and construction industry continues to do well.
So, in this given situation, we are confident to at this point of time that we should be able to do better than what we did in second half of 2018 margin. First question, you know, debt is something which we don't give the guidance. True that you are right. When you said that we have said that the CapEx will remain at similar level of similar level of what we had in 2018. However, there is a lot of focus on cash, we are working on it.
Again, the debt level will depend on what we do on acquisitions and divestments and diverse certainly we have made a good progress. You have seen that we should get the money for German distribution divestments. We should, if everything goes well in terms of the calendar we have defined. At the end of the year, we should also probably be receiving the money from Korea. This should help us.
And so, I won't say beyond this, as the debt is concerned.
Thank you. Just to come back on the HPS margin comment, So, I had understood that H1 we're guiding for H2 to be in line with H1 margin at 13%. And I think now you just said you want to be above 12.4% from H2 last year. Is that correct?
So, yeah, around that level in between the two, I would say.
Okay. All right. Thanks very much.
So, not far from 13.
Thank you.
The next question comes from Jean Christophe Florent from Credit Sir, please go ahead.
Yes, Francois. Good evening. Actually, I have two questions. If you don't mind. First one is my traditional question.
Could we have the order of magnitude of the 4 millimeter price flood glass. I saw in the German diaries that it was a slight eroding and we have also a slight a very slight increase for the processed glass. So can you elaborate on that? And secondly, could we have the split for the 3rd quarter, our 3rd quarter between volume and price in Asia and in the Americas many tanks
of Cipla. Okay. So, I think, I know John Krasov, you will ask this question. Honestly, I get on I keep telling you, we don't look at these numbers on a day to day basis, but I still make sure that I have this number answered for your question only for you. So, so, the 4 prices at this point of time are three point 3, you are right that the basic class prices are under pressure.
But at the same time, you know, for us, Sangaba since we are into high value added products, we are holding the prices, holding well the prices as of now. For Q3 for us in Europe, the pricing was 0 plus, slightly positive. And worldwide, it was slightly negative. So, that's on glass pricing and on Asia? On Asia, the Q3 volume and price is, volume was 6.4% and price was minus 1.7%.
And in America, yes. Yes, in America, the volume was plus 6.2% and the price was minus 0.1%.
Okay. Just just to follow-up does the processed glass industry, which is very independent. AccET continue to accept the price hikes initiated by the Flat Glass Industry.
At the
moment, there is not a lot of price hikes, price as Shreedhar said are more stabilized.
You just have to keep in mind that the glass industry, the pressure, if at all, it's coming from the glass industry, which is especially in the automotive demand which is flowing down and you know that the automotive market is going through difficult time for last few quarters. So, that impact is there. Otherwise, you know, we are managed as of now, we managed to hold the price. Excellent. Many, many things for just a clear answer.
Next question comes from Arnaud Lehmann from Bank of America. Sir, please go ahead.
Thank you. Good evening, gentlemen. I have three questions, if I may. Firstly, coming back on your share buybacks. Actually, I think you've slowed down the pace of share buybacks in the third quarter.
I think you've done about 2,000,000 share buybacks in Q3 compared to 6.5 in H1, if I'm not wrong. Was there any reason for a slowdown? I was just being opportunistic And do you have a share count target for the year end? That's my first question. My second question is on your CapEx.
I understand you confirmed the CapEx guidance for 2019, but we know it included some extra CapEx for the digitalization of the distribution business, does that imply that we can hope for some decline in CapEx spending into 2020. That's my second question. And lastly, We've seen quite a few chemical companies getting involved in this PFO liabilities in the U. S. I believe you booked something like 25 or 30,000,000 provisions at the end of 2018, for that, you have to have to three sites that have been mentioned regularly in the press as well.
Would you expect more provisions for 2019? Is it a issue that is getting worse for you or so far it's under control? Thank you very much.
Okay. So, I think all these questions for me coming to share buyback, I know you're right, we have always been opportunistic taking steps on opportunistically and that's what we'll continue to do. We have bought, we have done the buyback of 8,500,000 shares till now. You just have keep in mind last year was exceptionally high of close to 13,000,000 shares. So, we will remain opportunistically.
We will take stat that's one. 2nd is on CapEx. It's true that digital investments should slowly should come down a little step by step. So, in 2020, you should see that impact is slightly lower than what we saw in what we saw in 2019. So that's the 3rd question.
The 3rd question on PFOA, You're right. We had made the provision of PFOA in 2018 or 1,000,000. In S1, we made a provision of 1,000,000. For us, there is nothing which is a new alert. Things are going the way it is.
We are cooperating with the with all the agencies. We are, we have been and we'll continue to operate in compliance to make sure that we to all the regulations. And we are cooperating with all the stakeholders to make sure that all the necessary actions are taken. So, there is no there is no red flag at this point of time.
The next question comes from Reni Defend from ODDO BBS. Sir, please go ahead.
Two questions for me. Can we have an update on the Ponte Amucson on Lapeyre, if any? And the second one is maybe a bit more tricky. I would like to come back on Zika. Since the lockup period ends next year and since you are cleaning your portfolio, can we imagine Saint Gobain distributing the free cash share to each shareholder as a special dividend?
I know it's a bit early but is it out of question or you have no taboo? Is it something that you might consider?
I will start with the second question. On Zika, as I have already said, I am not going to say anything on for the now it's 6 more months. So for the 1st 2 years, I said I would not say anything or what it would do after this lockup period and I stick to that.
Concerning
the pie business, as you are aware, first of all, this business is recovering and that's the good news. The plan that we have launched 2 years ago is progressing well. And so the situation is improving. And second, we are looking for various options and partnership and this process is ongoing and compared to what I said in July, I have nothing more to report. Concerning Lapeyre where we have also a difficult situation where our priority is also to improve the situation.
We are also in the process of exploring various options concerning this business and but I have nothing more to say at this time.
The next question comes from Yves Ramed from Exane BNP Paribas.
Good evening, Doctor. Manache, it's Ebrahim Head from Exane BNP Paribas. I'll have three questions, if I may. The first one, I wanted to know if we could come back the to the comment you made on the EHP margin. Could you maybe give us some more color on what is driving a more positive view on margin given your total underlying trends is more cautious for Q4.
Is there any mix effects that we should be aware of? Secondly, some of your peers have been highlighting in softer trends in overall in European insulation markets. Is that something that you are seeing? And then as a follow-up to that, we are also aware of some material stone wall capacity addition is in the process end next year? And do you expect prices of insulation to start declining in Europe?
So, Eve, on high performance solution, the situation today is you're seeing that in the last few quarters, the automotive market remains it's down and it remains down and we have no clear visibility of how things are evolving. So, when you have the specifically in Europe and China, the capacity is clearly underutilized. So, it has an impact on profitability. Even though from a market share point of view, we are doing a very good job of outperforming the market by gaining our market share in electrical car segment, but this electrical car segment, it's a future for us and we are continuing to invest on this market. And this is something which is, we are dealing with some of the demanding customers and they are, they are clearly, we are we have a leading position in this market and that is something which is quite progressing in a good direction.
The other thing is the activities which are serving the industrial markets are certainly linked to the Automotive segment in many places. So, also some of the general industries have the indirect links So, all this have an impact with a certain lag impact and you see that pressure coming on that's what you see when we look at our competition. We believe that we are still doing a better job than the competition even in a given difficult situation. And the other two segments are doing very well. Life Sciences, it's actually going very well.
I would say that double digit growth. And we have a construction industry, which is also going very well. So, so, it's a mix, a mix situation. But again, what's important is the team is taking necessary steps. They are continually focused on gaining share value added products.
I think the business model, we are investing on the right things. So, I remain confident on high performance solutions.
Well, when I look at the recent the publication of people working in the same environment. I am pretty happy about the performance of the team in terms of our sales performance at this stage. Concerning insulation in Europe, I think it's very important to have in mind that installation is a very local business and so situation vary country by country and also that within insulation, you have different types of materials. And when you look at different players, they have a very different mix of materials. So, as you know, Saint Gobain is a very mostly involved with blast wool.
And the glass wool market, which is linked more with residential market and new and renovation doesn't have necessarily the same dynamics than what you can see with other markets, which are more linked with non residential. If you take some different products. So, I think that the situation that the different players are experiencing in insulation vary from that and also vary depending on the strength they have in the different countries. As you know, Saint Gobain is quite important in France, which has a very strong dynamics linked with the incentives provided by the government. So, I would say that view.
The way I see at the moment the trend in insulation for Saint Gobain is quite supportive of the role in Europe.
Thank you. If I can add just one more question. We've heard quite a lot of discussions on IMO 2020. And its potential positive impact on the U. S.
Asphalt roofing industry. Do you have a view already
on this impact or not?
Thank you.
Theoretically, IMO should have a positive impact in terms of, you know, it should have a downward pressure on the price we just have to keep in mind that, U. S. Is not the biggest, biggest contributor. So, it could have a lesser impact in the U. S.
Market. Otherwise, you know, it's always difficult to foresee what is going to happen. We did see, the price of us fault at the end of the third quarter dropping. So, we just have to keep, we have to watch watch very closely and, you know.
And we would focus on the, on the, on our spread, as always.
Thank you so much.
The next question comes from Joseph Pigeon from Sugar. Please go ahead.
Two questions for me. The first one is on the disposals. You've done the target the or even a little bit better, 1,000,000,000 of sales. Is it over or is is there more to come? And if yes, what would be the, I would say philosophy the same kind of, I would say business and the performing business or something else?
My second question is on glass Europe. Are you planning for 2020, more maintenance closures, compared to, this year? Or should it be similar? How do you see this issue? Thank you.
Okay. So, on disposal, Josep, I always said that the It's an ongoing issue. The problem is not over. On the other hand, I also said that I'm not going to give quantify objective anymore. The most important thing is that we are analyzing now and I see that giving a different look at our businesses.
We are analyzing our portfolio in the framework of the new organization. So, by country for the regional businesses and by market for our global businesses. And this is giving us a very new perspective And as you know, a number of managers have been a change and are in place in their new perimeter as of now 1st 8 months, we start to see a number of additional ideas on divestitures and also on acquisitions with a philosophy which could be a bit different from the one we have had. So, we have a number of topics identified. And there is there are a few on the pipeline and we may have more even during this year.
But it's going to be an ongoing process. And as I said, we have no no taboo. We are trying, as I said, to form a question and so to find the best solution going forward for our pipe business. Concerning class, if I am, what I have in mind is that this year, we have had most of our plants have been working most of the year And next year, I think we have one plant which is due to, which is due for repair in Europe. That could be adjusted, but that given the the length that we forecast, that's for the timing that's the plan to stop one line for repair during next year.
Okay. Thank you. And if you allow me a follow-up on the spread between price increases and cost increases, Could you specifically for Q3, tell us if the spread was also positive? We you said that it was the case for the 9 months and that the goal for the H2 is, yes, to be positive, but for the Q3, did you observe a positive spread?
Yes. So, Q3, we had a positive spread, you know, the inflation, as I said, the second
half, we have
been able to compensate.
We have been able to compensate. That's something which we are focused on.
The next question comes from Robert Garner from
And just two for me, please. One of you, if you wouldn't mind us giving us the remainder of the divisions in third quarter by price and volume. You gave us Asia and the Americas. Just the split price volume there, please. And I'd also just about the pace of growth that you're seeing in the third quarter.
Obviously, the working days helping in terms of volume there. How should we think about how growth has trended through the quarter? Is it safe to assume that with the markets more challenging, thus it's that pace of volume activity is weaker at the end of the quarter than the first or I'm just wondering if you can give us any sense of how the business has traded late in the quarter? Thank you.
Okay. Let me just answer the first question, the price and volume break up, so for high performance solution, the price was 2.1% and the volume was minus 1.3%. Northern Europe, it was price was 1.8%. The volume was plus 0.1%. Suddenly, Europe, the price was 1.5%.
Volume was plus 2.2%. Americas, we had a price which is minus 0 point 1 percent volume was plus 6.2%. Asia Pacific, we had price of minus 1.7 percent volume plus 6.4 percent.
Okay. On the second question, you know, it's always a higher journey it's difficult to comment on a month and especially during the summer because you have a different trend in the summer, with vacations, which are with exactly at the same. They are not in the same countries at the same time. And then you have one thing is that we had an additional day in September And as you know, one day is generally rather mathematical when we talk about distribution It's not the case when we talk about our industrial businesses. So, it's completely easy to read, but I would say globally, I would say I have not seen a significant change in the trend from July to September.
We are seeing a softening in some market, but on the other hand, you have seen that the U. S. Was quite a strong in, in, so I would say that there is no significant change in the trend, but there is a general softening, which are of the industrial markets that we have seen, I would say, in HPS already in the first half. So, it's I would say that If I have to give some color on 2 countries, I would say that France is doing quite well. You remember that I was probably earlier in the year, more optimistic than many and 4th.
I've just saw this afternoon some statistics from the industry association, which are revising up their forecast for France. They are more aligned now with my due than they were before. So, I think I was right. And France is holding pretty well at the moment. The UK has been a little more difficult in the last 2, 3 months.
And I would say the trend in September was not good in the UK. If I have to add a little another thing on other regions. I would say Asia is holding well and Southeast Asia is a little bit stronger at the moment. I have the feeling Latin America has been soft lately. So, you know, it varies by geography.
I would say that no real change in trend in the
The next question comes from Navin Ahmed from Barclays.
Actually had 2. The first one on the divestment, the 3,100,000,000 of sales that have been disposed. Could you confirm whether these businesses were free cash flow negative? And if you could help us to understand by roughly how much that would be fantastic? And the second question, I'd like to come back on the French performance in the quarter.
So, I was wondering if you could quantify how much how France has performed on the like for like in the third quarter and how does it compare with H1? We also saw a very strong residential transaction market. We saw a significant spike in mortgage application in France. Are you seeing an acceleration in the renovation market in parallel or do you think that's something that is more likely to happen next year? Thank you.
Okay. On the second question on the French market, there are clearly some downward plans that should have happened or to happen when you look at the statistics of the new construction market. We are seeing that more slowly than what was expected and I am not sure we are going to see a full impact of that. The second point is that at the moment, I still see the French market, driven by the ability of our customers, the small craftman, to provide liver. So, I would say that so that's why I would say the trend is pretty stable.
And when there is a little less new, there is a little more innovation. You if you have looked at the in detail in the statistics, you would have seen that the order book is growing at the moment, which is which is also a good sign. So, I would say that there is no I don't expect the trend to go up but I don't see I am not as worried as many people were at the beginning of the year. For the divestment, we have never given I don't think they are not a free cash flow negative. I mean,
in the biggest, the German distribution business, we have low margin, low margin, but still a profitable business.
Yes. But I mean, for CapEx, if you look at free cash flow, it was presumably not generating any free cash flow or even slightly negative, is it fair to assume that?
The oil CapEx were generally in line with depreciation, which are, so I this
German business.
Yeah. So, there is no, no, what you see on the low margin is also it was not cash consuming cash.
Okay. And then maybe you just let me rephrase my first question. I mean, what I was referring to was not new housing starts and permits. I was referring to the residential transaction. Secondary transaction which have accelerated during the summer.
This is positive for innovation normally.
And I guess my question was
have you seen an acceleration in the renovation market in parallel already in Q3 or that's a backlog that's created for next year?
No, we have not seen it. I would say that we have not seen it. As I said, you have seen that the order backlog is growing and I said that as a new construction is still, is still a slightly positive at the moment. I would say on those activity, I think that the craftments are delaying the work and renovation. That's my assumption, that's what I hear on the ground.
Now, but on the other hand, the fact that there are more transactions generally is a positive for innovation. I that everywhere.
Can I ask just a quick follow-up on France in the Watsonals? Are you seeing anything any measures that could potentially impacts of it will
be on negative fee or businesses in France?
I am not very happy about what has been decided on the credit report. Transitional energetic city. I think it's good that it's moved to it has been moved to subsidy instead of being a tax credit that's positive because people will get the money for, but the total amount which is going to be available has been reduced. So, I think it's not positive. I am not I don't know whether it's a big negative no, it's it was not very positive, that element.
On the other hand, you have another or other things which can turn positive especially. And for us, it's more important. The energy certificate are the main driver of our growth in situations for instance. And I think that is continued. And I think that the net the next, the government is extending, is extending progressively, but this is not in the finance law, and that is is extending the perimeter of this energy certificates, which are not subsidies from the government I think they prefer to act this way.
So all in all, I don't see a big change from what's going on.
Okay. That's very helpful. Thank you.
The next question comes from Tobias Wehmann from Morgan Hey, sir. Please go ahead.
The first one should be a very quick one. I'm just trying to understand your new guidance in HBS. Clearly, you talked about satisfactory markets and now you're saying on one hand, less favorable, but again, you highlight the easier comparison base. So, can you read this as a downgrade as markets become worse than what you were expecting or how can we understand the new balance?
Honestly, there is not a big change. I said we should be in the run. We have had big swings last year. So, this is not we were at much higher level. We have gone down in the second half of last year.
We've bumped up a little bit in the first half of this a year. And what I'm saying now is that I thought we should be in the range. We should be a bit above above what we were last year. So, it's not a very significant change.
Okay. Fair enough. And then, another follow-up on the organic growth for H2. I know that was came up before, but, Katie, you have to cross selling target more than 45,000,000 with where you could see about 3% organic EBIT growth, that you talked about the margin improvement and then you're also talking about higher volume and pricing. It's still positive even though maybe a little bit lower than in the first half of the year.
So putting all this together, it seems to me we should it should not be unlikely. And then we obviously have positive working as well. Putting all this together, we could have more than 5% organic growth consensus seems to be somewhere around 1%. I wonder if I missed something here or is there anything that could deteriorate significantly from here?
I, I, my guidance is to be above the first, the to have a like for like growth in operating income in H2 versus H2, I am not commenting beyond that. Okay, okay. Because the other one, it's clear that the comparison basis of H1 20 18 and the comparison basis of H2 2018 is quite different.
Yes, correct. But I mean, you'll still guide it for a year on year increase in margins next year. And you also guide for positive volumes and positive pricing and positive working day effect and 45,000,000 cost savings?
I have not given any guidance on the price and you. I don't want to comment. I don't want to comment. You make your own assumptions on that. I don't say it's going to be positive or negative, but I have not given any guidance on that.
Okay. And just confirming what I said in July is that within the framework, of the overall guidance for the year, which is an increase in operating profit like for like for 2019, Okay. I also added something because given the performance of the first half of twenty nineteen, you could have derived if I have just kept the same guidance that I to reach our guidance that could have been significantly negative in the second half. So, I believe that we will have also an increase in the 2nd half, but I didn't quantify that.
Okay, okay. Just fair enough. And then just final one on cash conversion. Clearly, we had seen quite a strong uplift in the first half of the year. But I was hoping maybe you could give us a little bit more insight what to expect next to, but also beyond 2019 because I know you have a very high internal focus on improving the cash conversion now So, I wonder you could give us a little bit insight on the specific things you're working on and we are planning to increase the cash conversion maybe going into 2020 and beyond.
Yes. So, when we met last time, I said that, you know, we are focused on cash, really, we recognized that last year that was not a good situation. So, there is a lot of focus on it. I mean, the one of the simplest change which we have brought in is in all the business reviews, the business, the management team meeting, the first thing we discuss is now to just look at the cash situation. So, there is a focus.
We are working on it.
There
is a lot of debate on the CapEx, the growth CapEx. So, I think there's a lot of interaction happening in all the business reviews and I'm I'm confident that we should make progress in this area.
Next question comes from Yassine Tuohri from On Field Investment Research.
Yes. Good evening, gentlemen. A couple of questions. First, a question on your capital allocation strategy. Over the past 12 months, we've seen that most of the assessments or lots of the assessments that you've done were in distribution and a lot of the acquisitions and CapEx where in innovative products and solution, is it something, is it a trend that we could see continuing in the next, in the next few years?
Where you could see more divestments in distribution and more investments in our invested products. And then a second question on your transformation program. It's been an early 1 year now. Could you give us a bit of an update what have been the key challenges and what are the key successes where it's been better than expected and where it's been more?
So on the first question, if you take out building distribution in Germany, which is a big part of our divestment. For the rest, no, the answer is no, I mean, the 2 other, the next biggest one is in Flat Glass in Korea. And then we have had the number of small divestitures in distribution in APS in silicon carbide and in that solution. So, no, this is not the, this is not what I say once again, which I said during the when we announced the strategy and this organization that we are analyzing our portfolio in the framework of the new organization. And that means that you can have for a different business worldwide, a different recommendation concerning different countries.
And that's and if I refer more to distribution more specifically, distribution. It is more and more clear for us that we have to be very strong locally when we are strong locally, we will get even stronger. So, you may see acquisitions also in distribution in the countries where we think we can really have a very powerful position, depending also on the mix of business we have in that country. Now concerning Transformango, I think that we are progressing quite well. We give you detailed update in July.
And I think we'll give you another update in February. But, compared to what we said in July, we are completely on track the organization is well settled. We have identified a huge number of action plans and we are We are, I would say, seeing more early than what we thought some growth opportunities materializing. I think that in Brazil it has been clearly the case and we are seeing more countries where we do than that. In terms of the cost savings, we provided you with an update in July.
And I think we are clearly on track to deliver our objective for 2021, but we are delivering them more quickly. We will give you an additional update when we publish our full year results.
The next question comes from Divay Zwena from MainFirst. Please go ahead.
Yes. Hello. It's Sebastian here from MainFirst.
Can you hear me? Yes.
Three questions, if I may. Number 1, just, for the spreadsheets, building distribution in Germany, you're going to deconsolidate in the fourth quarter. Obviously seasonal business has had a very small contribution in terms of operating income. Should we assume that the operating income in the fourth quarter, would be possibly even negative, which we take out? That's the first question.
The second question, just remind us very quickly in terms of the Q4 comparison trends and working day, impacts, the key features if possible for us to think about And then, just lastly, the energy costs coming, down possibly below the 450 to 500,000,000. Shreedhar mentioned,
is that a
trend you're seeing continuing into next year?
I think the first one what we said about distribution in Germany is that the sales in 2019 was 1,000,000,000 and the operating profit for the year is 21. So, yes, the first quarter and the second and the last quarter are generally not the biggest one. So the impact is
Okay.
Thank you.
The other question stood up. All right.
The second question was on a working day.
Well, I mean, just in terms of the comparison effects we have to take into account or remember from last year in Q4 and the working days. Obviously, I don't want you to run through all of them, but the main ones, which we should have in the back of our minds.
So, the working days, I'll talk about the first quarter. In this year, we had minus 0.05 percent impact overall. The 2nd quarter, it was minus 1%. And the 3rd quarter, we had a positive impact of 1.5%. And the last quarter will be slightly negative, but within the region, segment, you will see an impact, for example, in Europe, it could be minus 1%.
I would have to caveat to what Sreedhar just said, this is a mathematical impact. It is a mathematical impact in distribution generally, but it's not necessarily a material impact our industrial businesses. So, but, you know, the concept of daily sales, which is widely used in distribution is not applicable to our manufacturing businesses.
And the third question was on inflation, inflation as a topic. So volatile, I won't like to start guessing what's going to be the inflation in the next year. I will certainly comment on this when we publish the final results in the end of February.
Okay.
As I'm on the phone, I want to ask question if I may. So the consensus was mentioned earlier, and I've double checked on BOB just now and also have another number in the back of my mind. Can you clarify what it is actually at the moment, both absolute and in like for like terms?
Absolute value is 1,000,000,000 So that's the figure I remember.
Next question comes from Eric Lomari from Bryan Garnier. Please go ahead.
Hi. Hello. Good evening. Just one question from Assai. Regarding the UK, have you taken any specific measures prepass Saint Gobain in case of a Brexit or do you consider yourselves Brexit ready?
First one time.
Well, we have a lot of time to prepare. We are ready at the end of March. And as you remember, we have seen some, because of that, the higher level of sales in the UK in the first quarter and a destocking impact to some extent in the second quarter in our customers. I would say that so we have we are already as you know, the business of Saint Gobain are the businesses of Saint Gobain are extremely local So, the vast majority of what we manufacture in the UK is sold in the UK. So, it's not we are the value chain is not a major it's not a major impact.
So, yes, we are ready. I think that at the day, the R brexit on the 1st October is not very likely, even though this is changing day by day, but as far as I am able I'm able to follow what's going on in Westminster. I think that it is not very likely. So, we are going to have most likely a more smooth transition.
We don't have any further questions at the moment, ladies and gentlemen. Okay.
Okay. So if there is no more further questions, I remind you that our full year of 2018 results will be published on the 27th February. I thank you for participating in this conference call