Good morning, everybody, and welcome to our 2018 results presentation. I'm going to do that with the announcement we made in November about our organization with Banwabaza, most under Shreedhar. Most of you know Benoit, who was our CFO in 2005, 2009,
and then
he was head of distribution and then in construction products. Many of you don't know Sreedhar. Sreedhar has been, in the group for, also around 20 years with a carrier both in finance and in general management. In India and in France. He has been recently was in he was CFO for the HPM division.
So I'm very happy to present the results and the strategy together with Benoit who has been, as a Chief Operating Officer, is particularly in charge of the implementation of our Transform and Grow program. So we'll talk about this later. So I will, present very quickly the highlights. Shreedhar will go into more detail in the results and then together with Benoit will present some elements on strategy, and I will finish with the outlook. So You have seen the main figures of 2018.
Sales are up, 2.4% at 41 800,000,000, on a like for like basis, they are up 4.4%. The operating income at a 1,122,000,000, is up 3.1% on an actual basis. And 4.5% on a like for like basis with an increase, a small increase in our operating margin, from, to 7.5%. The recurring net income is up 6% and the recurring EPS is up 7.4% given the reduction of the number of shares. At, the cash flow from operation is up 1.6percent@2.9000000000, and our net debt is at 1,000,000,000 The main highlights of this year, I think we posted a very solid organic growth at 4.4%.
With the 4th quarter, which trended very well at 4.8%. So above the average, and a very good contribution of prices. We'll come back to that, but that's also bothering well for the beginning of 2019. The operating income increase in the second half, 7.2. So, in line with what I told you in July, clearly above the level achieved in H1.
And I think that's, was very important and is very important. We have been able to achieve that, which means an increase of 4.5% over the full year results. Basically, it means that a number of issues which were affected first half are behind us. 27 acquisition of around a little less than 1,000,000. And as, I as our objective as a beginning year.
We have increased our CapEx, mostly with additional growth projects in emerging countries. CapEx are up 8.3%. In November, and that was an important milestone. We have launched this a Transform and Grow program with 2 components, and we'll come back to that on asset rotation and on a very significant change in the organization. So in terms of our divestment program, where we we are, we said we would divest 1,000,000,000 by the end of 2019.
We are well underway. Were above 1,000,000,000 of sales already announced or completed. The new, organizational structure will generate 250,000,000 cost savings, and it's Benoit will explain that it's well in line. So we are we'll, we'll deliver more than 1,000,000 already in 2019. Our net income is increasing at 6 point for 6% as I said.
The net income is down at 4,220,000,000 after number of asset impairment for 1,000,000,000 linked with our transformation program. And that the net income, recurring net income is clearly, the results of our operating performance and the board is proposing to the shareholders to increase the dividend to per share. To be paid entirely in cash. So now, Shreedhar will go into more detail about our results.
So thank you Pierre Andre for your kind introduction. Good morning to all of you. It's indeed a privilege for me to be the 1st non French CFO of this incredible group with the history of 350 years. And I'm really committed to contribute my best to the success of this group. And I'm equally looking forward to interact with all of you.
So let me get into the details of results So I'll start by explaining the sales analysis. Like for like growth for the year is 4.4% whereas the actual evolution is at 2.4%. The main difference is coming from the exchange rate. However, this trend is improving as the impact of currency in the last quarter is less than minus 1% as compared to minus 2.9% for the year. With especially with the dollar appreciating in particular.
Coming to the structure effect, we have the positive impact of 0.9% on account of our small and mid sized successful acquisitions. It also includes certain divestments made during the year as part from the like for like comparisons for the second half due to the hyper inflationary situation. And if we look at the details of like for like growth, we have 3% on account of price and 1.4% on account of volume. And then we we we we have also a very good price increase in most of our businesses and regions demonstrating our ability to pass on the inflation that we saw during the year. The volume increase of 1.4% for the year is driven by all regions.
If you look at quarterly trend of organic growth, we see an acceleration in pricing over the course of the year. With an overall increase of 3.5% in the second half and 2.5% which was a comparison for the first half. This strong pricing in H2 means we are better placed to start the year 2019. The strong focus on price helped us to achieve a positive spread for the year, even though we made some short term trade offs in volumes. Volumes were also volatile quarter to quarter.
During the year due to the number of working days and comparison basis impacts. However, the overall volumes for the year were positive. Looking to 2019, we expect a we expect to see a negative impact from working days in the 1st 2 quarters, around minus 0.5 percent in Q1, around minus 1% in Q2. Q3 should be positive with around 1.5% and Q4 slightly negative. Coming to operating income, you see it increase.
It increases by 4.4.5% on a like for like basis. And the actual increase is 3.1%. The overall margin is at 7.5%, a 10 basis point improvement compared to last year. As expected, the operating income has significantly improved in second half. On a like for like basis, sales went up by 4% and the operating income went up by 7.2% with a good margin improvement.
The cost inflation for the year from the raw materials and energy was around 1,000,000. With most of the inflation seen in construction products, but also in HPM and glass. The inflation in energy and transportation was quite significant. Looking forward to 2019, we still not have the full visibility at the beginning of the year on raw materials and energy inflation but it is likely to stay at a high level even though probably a bit lower than 2018. Business income, you see here the non operating costs decreases from 1000000 to 1000000, mainly due to the positive impact of CCAR transaction.
As we reported in the first half results, this includes 180,000,000 gain resulting from the controlled premium paid by Sika. In addition, we have accounted of around €60,000,000 restructuring costs related to our Transform and Grow program And we also have costs related to accelerated restructuring of our pie business in Europe and in China. The gains on disposal includes the positive impact from the sale of five sites in China, but also the negative impact on accounting, of reconsolidation of Venezuela due to the deterioration of the economic and political situation. Let me take a moment to explain in detail the non cash exceptional impairment of this year. So following the creation of the new organization in the context of the transformation program, the strategic review of our portfolio is underway by country and market.
As a result of this, we have reviewed the situation, the business plan of certain businesses for for the annual impairment test. Taking into account the current situation and the outlook resulting in the impairment of certain assets. The major ones are 750,000,000 in distribution UK in view of the uncertain situation due to the Brexit and increased tough competitive landscape in the UK distribution market. The probability of many players is under pressure. The profitability of many players is under pressure.
And our distribution results in UK are also impacted. Given this situation, we had to review the assumptions for the impairment test of our book value leading to the depreciation of a large part of the goodwill. In addition to this, we are in the process of reviewing the strategic positions of our channels, brands, in UK distribution business. We are also analyzing the strengths and the weaknesses of each distribution channel and the synergies with other businesses within UK and the European businesses, distribution business. The second impairment was done in 5 business for 1,000,000.
As you are aware, this business is in difficulty for quite some time. Due to the very low volumes as compared to past cycles, Since 2017, we have accelerated the restructuring of the pipe business in Europe and we are also in the process of reducing the footprint. For example, we have announced the closure of German plant, and this is in addition to the closure of 1 out of the 2 plants in China. We have also taken some more major steps to reduce cost in France and we continue to look for further best options and evolutions for this business. Here, I would also like to mention that we have successfully sold the land and building of this closed plant in China.
And this this operation was pretty complex, and I would say it was very well executed. The 3rd impairment was done in Lapeyre of for 1,000,000 And sales are improving for the 2nd consecutive year, but in terms of profitability, we still have a long way to go. Here, Also we are looking for best options and evolutions for this business. And then finally, we are have adjusted the book value of our German distribution business by 1000000 in the context of our announcement to sell this business. Regarding asbestos, related litigation in the U S.
For the 2nd consecutive year, we have a reduction in the new claims and the overall outstanding claims have also come down. We have accrued 1,000,000 during the year to cover the litigation against this topic. Once again, as explained in the first half, €601,000,000 out of the total €781,000,000 gain for Sika transaction is treated as pure financial gains. The rest of the financial costs are down by 8% and the average cost of borrowing comes down materially from 2.8% to 3 2.3% compared to last year as we continue to optimize our borrowing costs. Regarding income tax, the rate of income tax has come down from 25% in 2017 to 24% in 2018.
Mainly due to the decrease in the US tax rate. Recurring net income, which is also the real operational performance of the group has increased by 6% in 2018 and earning per share goes up more by due to the accelerated shared buyback program. The non cash impact on account of the exceptional impairment is reflected in the net results which is at 1000000 for the year. This graph shows that the level of cash flow generation from operations remain robust. While free cash flow is slightly lower than last year due to increased CapEx investment for the future growth focused on growing markets Example, in emerging countries and in promising niche markets, you see there is a small reduction in the free cash flow.
The overall operating working capital remains at a good level. That is below 30 days the chart target. This is the slight increase this year and partly due to this is partly due to the exchange rate and higher inflation impact in our stocks. However, we'll continue to have strong focus and remain disciplined in this topic like we have demonstrated in the last 10 years. The ROI and ROCE remains virtually stable at the robust levels.
The impact of the improvement in the operating income is not reflected in ROI due to our decision Finally, let's look at the debt and the equity evolutions. The debt is higher by 1,000,000,000 as compared to the last year. It's mainly due to 1,000,000,000 investment in acquisitions, which include circa close to 1000000000 and the acceleration of the share buyback program with an investment of close to around 1000000. And our balance sheet remains very strong and the leverage is at a reasonable level. And our re re rating also remains solid.
Now let's get into some details by business. For Innovative Materials, it was an overall a good year with a solid organic growth and particularly a good price realization While all regions have contributed to the organic growth, the growth was led by Asia, emerging Countries, and North America. As you know, this sector's presence in this region is quite significant. The margin level remains at a very good level for the 2nd consecutive year and it is in line with the target that we set in 2017 Investors Day. In line with our strategy, there is an increase in CapEx by 1,000,000 as we continue to invest in growing markets in particular in emerging countries.
Flat glass. You see Flat Glass organic growth are up by 2.8% and the price increase is 3.7% for the year. While the volume was lower The H2 price increase was 5.2% as compared to 2.2% in H1. Automotive glass grew in line with the overall glass business for the full year in 2018. However, as already explained at the end of October, we saw a weakening of business environment in the second half with a sharp volume decrease in Europe and China.
The other emerging countries like Latin America maintained a strong level of growth. Industrial And Innovation related investments continue to contribute to grow our share of high value added solutions. Construction market sales in Europe, Asia, and emerging countries are progressing and are driven by good pricing. After resuming the production in 3 float plants that were repaired during 2018, we started successfully the new 5th, 5th float line in India. We also started an Automotive glass plant in Mexico.
The operating margin bounced back in the second half to close to 10% driven by improved industrial performance and higher prices in So high performance materials had an excellent year, driven by all the businesses and regions, with a strong growth particularly in Asia and emerging markets. Overall, organic growth is at 7.2% with a strong volume growth of 5.2 percent for the year. While there was exceptionally strong contribution from ceramics in H1, we are also reaping benefits from the strategy of allocating more and more resources to growing niche markets. The operating margin further progressed to 16.3 percent during this year. We continue to invest in growing businesses like life sciences in the US, China, and India, as well as textile solutions in Czech Republic.
Construction Products. If you see you have clearly an organic growth at 5.6 percent of which 4.2% is price. And the operating margin is also up to 9.3%. We invested in CapEx of 1,000,000 during the year and the large part of the growth investment was focused in Emerging Countries. Interior solutions achieved an organic growth of 5.5 percent of which 4.7% is in price.
In line with our priority, this was driven by all regions with a clear acceleration of sales price in second half, particularly in North America. The operating margin increased to 10.5 percent with a positive spread between price and inflation benefiting from accelerating of price increase in the second half. We invested in our gypsum business in Vietnam and Egypt. And also we invested in promising markets like blowing wool manufacturing capacities in Europe. Exterior Solutions achieved an organic growth of 5.7 percent of which 3.6% is in price.
Our exterior products business in the U. S. Against a backdrop of high inflation in its raw materials and transport costs, pricing lagged inflation in the first half, but we were able to achieve significant price increase in the second half. Unlike last year, the roofing business also did not benefit much this year from the strong related sales upside. Pipe continues to restructure to reduce the overall cost and the Motaz business progressed particularly in Asia and in emerging countries with a recovery in Brazil.
Due to the lag between price and inflation in the first half, the exterior solutions overall margin is only at 7.5%. The situation improved in the second half enabling us to achieve significant Moving to Building Distribution. The organic growth of the Building Building distribution division is 3.6% with the 2nd semester at 4 point at 4%. France had a good year despite some disturbances due to LOS that weighed slightly on the lapeyre business at the end of the year. The Nordic Countries show a sustained growth throughout the year, while Germany progressed slightly.
However, The UK distribution business experienced a decline in volumes and the competitive pressure on margins increased. Brazil remains hesitant over the year, but stabilized in the second half. Despite an increase in operating margin in France, and the Nordic countries, the distribution sector margin is at 3.3% as compared to 3.4% in 2017. And mainly due to this UK situation I explained. We continue to invest in IT, digital tools, and logistics weighing the margin weighing on the margin by 20 basis points between 20182017.
Let's look at the sales trend by region. France continued to show positive growth dynamics with 3% increase in like for like sales for the year. And 2.5% in the second half, benefiting from a solid construction market but it remains constrained by a shortage of skilled laborers. The other countries in Western Europe grew by 3.5% on a like for like basis with the second half at 3.3%. The Nordic countries continue to show good momentum.
Germany grew except the car market which fell sharply in the second half of the year. The UK continued to show organic growth but driven only by pricing. The environment remains uncertain with a declining volume trend. However, Southern Europe, once again, in this year, delivered a very good growth of 7.2%. North America progressed by 6.2 percent organic growth with the 2nd semester at 2.6 percent due to the high comparison basis in exterior solutions and in HPM especially in ceramics.
Otherwise, the market remains very well oriented both in construction and in industry. Asia And Emerging Countries continue to develop with sustained organic growth of 7.4% and 6.7% in the second half. Driven by all geographical areas and benefiting from an improvement in Brazil. Now let us look at the operating income by region. The operating margin of France increases from 1% in 2017 to 3.6% in 2018, driven by continued organic growth in all businesses.
Whereas the other Western European Europe margin contracted from 5.9% in 2017 to 5.5% in 2018 and mainly due to the decrease in volumes in UK and the German auto market. The North America margin continues to improve from 11.3% in 2017 to 11.9% in 2018. Mainly on account of pricing and positive mix in HPM. The Asia and emerging countries operating margin is up from 11.5 percent in 2017 to 11.7 percent in 2018, driven by good organic growth. However, yeah.
So I'll I'll end that. So now I hand over Otherwise, I'll keep continuing. I hand over the floor to Pierre Andre to share with you the strategy and the outlook of the growth. Thank you.
Thank you very much, Sreedhar. So now we would like to update you on our Transform and Grow program. Announced in November. Last year, and as you remember, there are 2 pillars, which should, give us 100 basis points increase operating profit by the end of 2020. Benoit is going to update you on the augmentation organizational component, and I will update you on our portfolio management.
So Benoit,
Thank you, Pierre Andre. Good morning, everyone. So let's go together through our new organization. And what are our Transform and Grow operational priorities. What it means in terms of growth and competitiveness benefits And second, where do we stand in terms of good execution?
There are 2 main benefits in our transformation. First, we gained a lot of agility by having 1 single line of management and one simple decision making process for our country COs, for the local businesses and second, in the regions, and second, for our market CEOs within High Performance Solutions. That's the first benefit. 2nd, we gain proximity to our customers. Our local CEOs have full authority across all the product lines, and they're able to anticipate on the market trends they're able to take 5 decisions on customers, whether it's pricing, logistics, and they're also able to allocate the resources on the growing segments and market in their countries.
In addition, our new organization leverages the group scale in 4 domains which are Innovation And R&D, marketing, industry performance and also distribution performance. This is where we have grouped together some central experts in order on those 4 domains to support the success of our businesses on the ground. Now timing of execution. We are on track and we are moving fast. So all the teams and all the appointments have been made.
All the teams are operational on the ground everywhere since January 1 2019. I can tell you that our teams are very enthusiastic. They have embraced the dynamic and the new mindset of the Transform and Go program very positively with a lot of speed and energy. So we are all fully on board on that since January 1st. Why the teams are so positive, you would say?
And what does it mean for them? When first, the new organization give them a clear empowerment and clear ownership on the perimeter that they manage. Their incentives are fully aligned also to their results and the perimeter that they manage. 2nd, local means local. So we have more than 80% of our country COs within the different regions and countries who are natives from those countries.
And if I take high performance solutions, we have more than 60% of our top managers who are non French. We have also promoted the best talents, and we have a very good mix of San Gobain experience, long time managers within Saint Gobain and some newer managers that either we have recently integrated from well integrated acquisitions or manager that we have hired from outside, and they bring a lot of their expense also from outside. So we have a good mix of experience from within Saint Gobain and also diversity and new ideas. Now let's turn to both, and I would like to give you a few examples so that you have a good feel of what's going on in the ground in our Transform and Grow program. I start with commercial efficiency.
In the U. S, for instance, we have grouped together our roofing and siding sales organization to increase our territory coverage for our customers. In Brazil, we are currently reorganizing 300 salespeople across channels, and we organize them by channel, either direct project with our technical experts or retail channel. In France, we take benefits of our very dense distribution network to train thousands of small customers every year, tightening the relationship between our distribution and our manufacturing brands will help them gain a better penetration on small customers for the renovation market. If I take Italy as another example, we make ourselves easier to do business with for our customers.
So one single point of contact for our customers across the different product lines. By country also, in our local businesses, we will accelerate our growth by leveraging a strong leadership position in the product line. That could be Flat Glass, for instance, in Romania, and accelerate using the strong base, accelerate the development of all their product lines. So now one single country CEO drives the offer of a complete solutions and the development of the different public lines to the best local opportunities. Within High Performance Solutions, we have organized our teams by market.
By doing so, for instance, on aerospace, grouping our glass and composites offer on aerospace, we built more customer intimacy. We share technical expertise, and with better co develop solutions as it is the same customers buying the various products we produce for the aerospace industry. We'll continue, of course, to concentrate our CapEx for growth in 2 promising technologies and also into fast growing markets. We allocate our resources where we have strong competitive positions, robust synergies, and also, of course, solid growth potential. We have been very active in 2018 with more than 17 new plans whether it's in Mexico, in India, like Sreedhar mentioned, Vietnam, Indonesia, China, Romania, Poland, or Czech Republic.
For our Manufacturing businesses, we dedicated last year, 65% of our CapEx outside of Western Europe. Now the world of construction is changing and becoming more and more data driven. If I take France, our businesses, embrace a very large part of the value chain from upstream beam objects that we deliver to the architects to downstream with websites, talking to the end users. And we are well placed in all those digital touch points along the value chain. As you know, we have invested a lot in our IT and digital capabilities for in distribution in France, in the Nordics.
And that's why we gained market share, and we continue to improve our margins and businesses in those 2 very strong countries. And our omnichannel presence is growing accordingly in France and in the Nordic Frances. It gives us synergies between our manufacturing brands, our distribution businesses and attractive opportunities to push more of our solutions, to do more cross selling, to increase the added value product that we sell and capture more of this changing value chain, thanks to the digital environment. Innovation is also a strong pillar for growth. We are pleased to be for the 8 consecutive year within the top standard, most innovative companies globally.
We keep pushing our group synergies on trans vessel R And D with our 8 cross businesses R And D Centers. We leverage the critical mass of our spent, 1,000,000 last year, and we'll continue to do that in 2019, We share joint labs, could be on Thermal or acoustic labs that are spread in our major regions. We leverage also common technologies, take putting or polymer extrusion, for instance, across all kinds of product lines, and markets. We leverage material platforms such as ceramic, plaster, plastic or glass, whether it's glass for glass insulation or automotive or building glass. And we'll continue to invest on innovation.
We'll also extend our multi solutions offer. We have grouped together our central marketing experts into one team. Will develop more of the Saint Gobain solutions. They will work our marketing experts with R&D to target system applications such as facade. If I take facade, for instance, we have 4 or 5 product lines of Saint Gobain, targeting this application.
So we can work with R&D, marketing to develop more of a Saint Gobain System, Saint Gobain solution and facade. And also country by country, it will allow us to focus more easily on growing segments, such as off-site manufacturing in the UK, We have just reorganized into one business unit now that we have 1 country CEO for the UK. We used to have some benefits and some initiatives in distribution, in manufacturing, we have grouped all of them into one off-site manufacturing business unit, so that we group our strengths across design fabrication and, of course, logistics. We continue to roll out our industrial excellence programs that have delivered another 1,000,000 savings last year. See, also, we brought together under 1 Sanford team, our technology and insured experts by product line.
They provide the best industrial standard equipment to the country's benchmarks and also support to help our plants improve further. This gives confidence that we'll continue to deliver roughly 1,000,000 of savings per year in 2019 2020. Now on our additional, on top of that, 1,000,000 savings coming specifically from Transform and Grow. I told you that teams acted fast. We have identified very quickly more than 700 bottom up action plans, and it works.
In recent past, we have the proof, thanks to some pilots, done in some countries. I've highlighted just a few examples there that we can both reduce SG and A and grow the top line. There are 3 main categories of savings, 50 percent of organization streamlining, whether it's SG And A or back office reduction, less management layers, simplification and focus on core functions, 35 percent of pure structural changes, no more sectors, no more activities, no more delegations, and downsizing a bit of shared service centers and 15% of deeper reorganization, it could be merging some commercial sales force. I illustrated a few examples are logistic. It could be also combining management positions.
Since we acted very fast over the last 2 months, we are confident that we'll deliver more than 1,000,000 into 2019 P and L, more than 1,000,000 by 2020 and the full 1,000,000 savings by 2021. So I'm very confident by the depth, the depth of our transformation program, our Transform and Grow, both what it will bring in terms of step change in our growth profile and competitiveness. We have the right teams to succeed and execute well on our plan. I now hand over to Pierre Andre for the portfolio pillar of our plan.
Thank you, Benoit. So I will now talk about the second part of this plan, which is active and value creating portfolio management. And one thing which is, Benoit, as I alluded to that, on some example, which he gave on our local businesses, This new organization will entail a very different way we are going to look at our businesses from a strategic endpoint, I mean, the local businesses is less changed from our high performance solution, although this market reorganization will also trigger a change in the way we look at our businesses. What I mean by that is that our the strengths, the weaknesses and then also the need for acquisition and divestments in a given country will be looked at given the strengths and the weaknesses of our portfolio in that country. And the links between our businesses that a moment can create.
And this will be a very important component and it will be less. That means what does that mean? It means that for instance, we may very well Mammock acquisition in a given country of businesses where we are not necessarily present in other because it adds us in this particular market, something which can create additional strengths for us. It means on the other way is that for our businesses where we are generally in a very strong leadership position worldwide, There may be some countries where we have difficult situation and where the link or what it can add to the portfolio is less relevant. So instead of having a worldwide view of this business and to say we have to be and we want to be everywhere, we will look at it a different way.
So it's a very, new way to look at our portfolio that we are starting in Saint Gobain. We have launched a review of the all our countries since this announcement, and this will going to be very important going forward. Now if I take up the acquisition side, we have been quite active this year with 27 acquisition. A little less than 1000000, very good small acquisitions, which are contributing already this year to a P and L, and they will contribute more next year. We are very strict in our financial criteria.
We create value very, very quickly. And I would say that the acquisition we have done in the last three years are really very good from that standpoint. As you see on this slide, we have been this year above the the goal was to be above 500,000,000 on average. We have been clearly above for 2019. We will see depending on the opportunity, but we are going to be very trick because in some areas, prices are high at the moment.
And I would say in the last few months, we are We have had plenty of opportunities, but we have said no more often than, yes. Now examples of what we have done this year and how it's going to evolve in the next few years. So there are 3 categories. Technologies, and that there is going to be no change on that. We have had some very nice additional technologies, which are fueling our overall portfolio of technologies and then fundings innovation to come back on what Benoit said on innovation.
2nd, we want to enter new countries and that we can do it either with Greenfield or through acquisition and third about the local leadership. And that's where we, we will have, what I said in terms of, country analysis we will take more of that into account. So that means that in some countries, we will, we will grow certain businesses which are linked with the portfolio. For instance, one of our most important acquisition in 20 team was in distribution in Norway. We are building a very strong position with very good synergies.
Second part, which is the divestment program, you, we, I announced in July, and we we confirmed that in November that we are accelerating our divestment program, and the goal is to by the end of 2019 to have divested more than EUR 3,000,000,000 of businesses in terms of sales for $100,000,000,000. And this will have an impact on our operating margin between 2018 2020 of 40 basis points on our impact. So on this program, we are well underway. We have a completed around or signed around more than 500,000,000 in sales. We have You see the list on this slide, and we are well underway on the, this, a significant divestiture of our building this in Germany, which is coming from this new approach in terms of looking at a country.
As I said, we have allowed this strategic review of our portfolio country by country in the context of the new organization. And this will lead as I said for the acquisition, it will lead to additional divestments. So to summarize, this Transform and Grow program, which is well underway, will lead to an increase in operating margin by 100 basis points by at the end of 2020. So on a full year basis in 20212021. So this is for the strategy I concentrated as a strategy on this Transform and Grow, which is a framework on which we are going, to to move Saint Gobain forward, and this is a main task of Benoit in the years to come.
Now a few words about the outlook. So first about the dividend, we already, Sreedhar mentioned already the share buybacks, which where we have been quite active in 2018. In line with our group objectives. So we have about 12,800,000 of shares, some significantly more than in 20 17, which is leading to a reduction in the number of share outstanding. In terms of the dividends, so the board as recommended in its meeting yesterday to the General Shareholders Meeting in June to increase the dividend to 1 1.33 per share, which, and this is a payout ratio of 42%.
We're in line with our strategy. Our strategy is to be, in the range between 35% 40%. And we are gradually going into that range, reducing a little bit of payout. We are still above the payout, but on the other end, given the increase in the recurring net income, we are increasing also the dividend. So it's consistent with also what we did last year, and it's a sign of confidence in our future.
So payment will be in cash, and you have the details on how it will be, the timing on the slide. Now on the outlook, First of all, and it's no surprise to me given the good exit rate. We are starting the year is starting well, although we are not very advanced in the year, but it's already a good to take. And I would say that we we continue to see globally good trends for Saint Gobain in 2019. If I take And you will see now that I am using our new reporting segmentation that we will use going forward.
In terms of high performance solutions, we should have a solid industrial market, which will remain supportive, particularly in the U. S. On the other end. As you will know, there are some uncertainties on the automotive market in Europe and in China, but our exposure to automotive is also very strong in other parts of the world, where it's going well, like South And Central America. In terms of the Northern Europe, region, we should see progress.
Of course, there are uncertainties in the UK with increased risk of a no deal Brexit but Nordics should continue to enjoy good growth in 2019. Southern Europe, Middle East and Africa, which encompasses France, we should have a growth in the region. With unless I zoom in France, which is the biggest country in that new region. In France, the construction market should be supported by renovation, which is steadily improving, while the new construction market could be down in the second half, following what has the decline in permits and housing starts of last year. America as we should have a good growth, both in North America and in Latin America and further growth in Asia.
So in terms of our action plans for 2019, in addition to the a Transform and Grow program, which Benoit said, will deliver more than 1,000,000 in 2009. We are going to continue our cost program and to deliver also 1,000,000 that the objective for 2019 on the 2019 cost base And we are going to continue to focus on price, which has delivered very good results in 2018. And from that standpoint, also, the year is starting pretty well. Our CapEx program after the increase of 2018 will stay close what we have done in 2018, with, again, a focus on growth CapEx outside of Western Europe, and also on specific emphasis on our distribution businesses, where it is having an impact, a short term impact of the margin, which will continue to have to a lesser extent in 2019. And with that's where we will reach a peak and then it will progressively decrease.
However, we will continue to invest in R&D. This is a strong to support our differentiated high value added solution and we will focus on free to get a high free cash flow generation. In terms of a profitability, even this market outlook specifically for Saint Gobain, we are targeting a further like for like increase in our operating income in 2019. So this is the end of this presentation. And now with Benoit and Sreedhar, I am at your disposal for your questions.
So we will start by question from the room, and then we will take the Internet no, the call question and serve the internet. So first, in the room, Yes.
I have two questions. First, a simple question in traditional regarding the order of magnitude. Of the price of 4 millimeter in Flat glass. And secondly, a strategic one, you implemented more than 1,000,000,000 impairments, value correction, of which targeting 1st Lapeyre secondly, so building distribution in UK and also the pipes. Does it mean that you could consider a disposal, or is it too early to raise this subject?
Many thanks.
Let me take the first question on price of 4,000,000 meter. It has gone up by around 2% and it is 1,000,000. But again, I want to tell you that this is more and more irrelevant because you know, our strategy is to work more on a high value added products. So, but this is something we you just have to keep in mind?
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] No. That's it.
We're always that question. Well, it gives you an answer. And when you look at the price evolution, you will see less and less correlation with the 4 millimeter price in Germany, which is your reference, but No, we see good, at the moment, in the last 2, 3 months, generally in the winter. There is a tendency to see a drop in pricing, and we are stable at the moment, which is, I would say, in Europe, a good sign. Now in terms of your question on the strategy, and the impairments we have done, I think that FEDAR has already given you the answer, but I will confirm, as you understand, there are 4 different situations.
So the situation in, Germany where clearly the adjustment of the value is in line with our, as linked with our the process that we have launched to divest this business concerning Lapeyre and a pipe we, we, these businesses have been in a difficult situation, even though Lapeyre had a good in the last two years had a good growth in terms of sales, but the profitability is still not there, and it's a business, which is difficult. A pipe business, we are also under a significant restructuring program, which is progressing well. We have revised our perspective for this business given the current situation, and We are focused on these two businesses. We are focused on the improvement and our restructuring programs. And we are, of course, studying all the options for these businesses, but the main focus is to improve the situation for these businesses.
In terms of the UK, the UK, we are not in the same situation. We have a much more positive situation in terms of profitability, but we have had, as Sreedhar said, we have had a decline in profitability in 20 18, which is the reason for the small drop in profitability overall of our distribution business despite an improvement in France and in the Nordics. And despite also, as I said, of this significant additional cost on the acceleration of our digitalization. So in the UK, given the uncertainties, and I would say, the when I say uncertainties, they are heavy uncertainties about what's going to happen with black seats. And the competitive situation in the UK, which and the profitability in the industry, we have also revised our perspective.
And at
the same time, as I alluded in terms of the country analysis and repeating what Skoda said, we are analyzing the strengths of our various businesses, like we do in the other countries, within distribution, the channels and brands to see how they fit having a medium term perspective within each other, with the rest of our businesses, and in the UK and within our European setup. So those are the 3 those are the 3 different situations, but Germany is for sale. The 3 other businesses are not for sale if I summarize what I said. Next question. Yes.
So one was a mic. Everybody will be able to ask his question.
A couple of questions. First, maybe one on your reorganization. How do you reconcile 2 very different approach within the group activities? Where you could have conflict of interest between your manufacturing divisions. When we look at your manufacturing division, there probably is an incentive to, in a new digital world, to create new routes to market and to potentially bypass distribution.
And in your distribution division, you could have to reinvent your business model to avoid being bypassed by manufacturers So how do you, how do you motivate managers in both categories? How do you avoid conflict of interest? And what is the risk of internal cannibalization of businesses? And then the second question, which is a bit more on accounting, when we look at your results, you're mentioning in your financial report that there is the settlement of one off disputes in favor of the group for around 1,000,000 in 2018 in your operating income. Is it, is there a 1,000,000 1 off?
So before the first one, let me
take the first question. The easy answer, which is the right one, is that they talk to each other. Manufacturing and the distribution businesses, they used to be in a different sector, so a bit in silo outputs. Now we look at that country by country. Give you a few examples.
For instance, I think we are in France well advanced in terms of what we call the PIM product information management. It started with distribution because that's the way you describe your products on the web, and we have more than 80% of our total turnover within distribution in France covered by the PIN, so good digital information. And then it did accelerate, thanks to this internal discussion. And yes, you need product information on digital, our manufacturing brands to digitalize their information. So the fact that we have this digital touch points help us to accelerate our digital presence and omni channel approach.
So I don't see a risk of cannibalization because actually they work together to improve the overall Saint Gobain for when you look at, some configurators of products, for instance, manufacturing can help our distribution arm to settle the exact same product definition for renovations, customers, distribution can, on the reverse, give some market data and big data analysis to our manufacturing brands on how to get the better perception on the web. So the best solution in that case is to clearly tackle all the value chain start very upstream with beam objects and downstream with end users, websites within distribution, and then talk to each other so that we promote our solutions, we promote our products. So there is no conflict in that regard. And we have invested a lot on digital. If I take just a platform, our brand in France, we have more than 1 third of our craftsmen, which are using an omni channel approach some click and collect into store, some web applications, some app type of usage.
So they are very much advanced in terms of digitalization, which also is a good learning process for our manufacturing brands. If you look at some brands in France, whether it's Placo, whether it's Esover, we are very well advanced with beam objects, with interaction, with distribution.
If I may add one thing, this one, digital was one of the 3 reasons why we made the change in the organization. And it's just the opposite. It's because I think we see more opportunities than we have changed the organization so we can work better and more and take advantage of our global food film country by country.
And of course, we, as we said in, end of November, in terms of commercial relations on the ground. We keep a good dependence in terms of what are the different channels we sell to, what are the different brands and suppliers we buy from in distribution. So we have, on one side, this commercially independent, which is for the success of both businesses, but on digital, since it's a bit blurred along the value chain, we change a lot of data and information.
The second coming to the 70,000,000 exceptions, you know, a group like us, a large group, we do have such one offs. It could be positive sometimes. It could be negative sometimes. And we had a number of settlements of such litigations during the year in different businesses. And let me also tell you that we also had the operational costs linked to some of these litigations, which impacted us, the the p and l in a negative way.
You know, the examples you can take, IP disputes. You can have, issues with suppliers, customer issues, And this is something which, which is, which is an ongoing, ongoing issues we have, we face in the in the business. Sometimes we win, sometimes we don't win. And another example I would quote is take the second half. We had this it's a pure accounting impact.
We decided or we had 2 identify Argentina as a hyperinflation country and impacted our results negatively. So all in all, these positives are to compensate all the negatives we get into the we have it in our business.
Okay. Next question, yes.
Good morning, David Ahmed from Barclays. I've got three questions actually. One on the reorganization, one on your cost inflation guidance, and one on the guidance generally. So on the organization, are you able quantify what could be the costs, the restructuring costs or the costs that is attached to the reorganization. And more broadly, given the ongoing restructuring you're doing at La Pera Pipe and so all businesses, what would be the restructuring costs we should expect for to 2019.
The second question is on the cost inflation. I mean, you seem to be guiding on similar energy and raw materials cost inflation in 2019 than in 2018. I mean, we saw some deflation in energy prices here and there. So I was wondering why, you're seeing that? Is that related to the comparison base of H1 'eighteen while you're seeing a lot of inflation.
Is that related to your hedging strategy? Is that related to raw materials inventories, which means that we're not going to see a lot of deflation into your numbers in 2019. And finally, on your outlook, you seem pretty confident One of your competitor in the U. S. So when scoring is looking at declines in similar businesses than what you are in 2019 and I don't see a lot of mention.
You seem to be very confident in the U. S. And in Europe, as well, apart from uncertainties you're mentioning about the UK and the French housing market, What about the Nordics in Germany, some of the construction companies have cut guidance there as well? So I was wondering if you can update on that as well. Thank you.
Okay. So Benoit, you want to start with, can you confirm and go and then maybe
Yes, on Transform and Grow. So we had 1,000,000 exceptional restructuring cost in 2018, we should have a bit less than or around 100 by 2019. In terms of additional restructuring costs to deliver on our savings. And maybe Shreedhar, you want to add on the overall restructuring costs for 2019?
The overall, you just have to keep in mind that in 2018, we have a positive impact of C car, which is EUR 180,000,000. So just a EUR 180,000,000, just have to keep that in mind. So we expect that in taking into account that we have this Transform and Grow program going on, which will be which will have a cost in 2019, around 100+1000000. So you should you should expect maybe slightly lower than what we had in 2018 after taking into account the positive of circa.
On the raw materials, raw materials and energy, yes, we could have a bit of positive surprise in 2019 versus what we had in terms of inflation in 2018. We still have a big inflation in 2019, but it might be slightly better than 80. It's a bit too early to say because you have seen the volatility of some of the oil price. And second, bear in mind also that we have a lot of electricity and natural gas in our energy bill. So it's not only oil or totally directly oil related.
So Yes, we could have a bit better or a bit less inflation, but still a significant inflation in 2019. So far, we start the year with a good price momentum and a good price cost spread. Let's see how the year develops, but yes, it might be slightly easier than what we faced in 2018. Yes.
You know, I'll just add, if you look at and you all, you all keep track of the trend of price, the oil price, 2017, the average was $52 and it went up to $72. And then in October, it went up to $86. And then it came back $50 in December. It's really, really volatile. And now it's hovering around 65 $65 per barrel.
And to your 3rd question, Nordea, will
you comment on the, on the U. S? We had a very strong second half in our interior finishing business, partly in the U. S. Just to give you the order of magnitude, we were in the 10% type of price increase in Q4 versus Q4 of last year.
So we are also with pretty good volumes. So, after that, when you look at some peer, there are always some either geographic or customer mix which could impact, so we are confident about the start of the year in terms of pricing and volume dynamic for our interior finishing business, a bit more insulation than in gypsum on the volume side, but we finished the year very strongly both from an operational standpoint in our plans compared to the second half of twenty seventeen, which was more difficult. And also in terms of pricing dynamics. So, we are fine there.
That's why we see a good in the U. S. In construction. In Europe, I start with the Nordics where I had exactly the same question last year and many people were negative on the Nordics in 2018, where we have had a very strong growth. And I think we will continue to enjoy good growth in 2019.
There are a number of reasons for that. There are some new construction markets, especially in Sweden, which are fragile and are at a very high level. But on the other hand, renovation has been low and given the lack of labor and the demand in the renovation, we we, renovation will grow in 2019. So we expect overall good growth from the 2 Norway is also going well. So we have some infrastructure markets and urbanization, which is continuing.
So we are positive for 2019 in the Nordics. And that, I would say, our competitors are also quite optimistic, contrary to what some other people or maybe from a macro standpoint, you can hear. In Germany, in construction, we had a pickup in the second half of twenty nineteen, which blocking when we look at Germany, you didn't see because we had also a drop in our automotive glass market linked with the situation of the auto and some of our HPM business, given the situation well known in the automotive industry, in Germany in the second half. But construction has been, has been better, and the trend for 2019 are positive, I would say both from a price standpoint and a volume standpoint. So I think on Europe, you know, overall, I can repeat what I said on front, but I give my view on France already during my presentation.
We are, we are reasonably positive on the construction markets in 2019, given our specific markets. And given overall, as the fact that the new construction in Saint Gobain, which is always with ups and downs is much less important than the renovation market, where we see reasonable run and growing trends in most of our countries. And you
give Svenny Delfeld ODDO. Two questions for me. Can we have an idea of the typology of a 250 1,000,000 savings as well as split per division would be useful. And after the write off, the 1,000,000,000 write off, what is the value left in the balance sheet for the different businesses that has been mentioned, if not, a 0?
Benoit, on the first quick question.
To show you that we have truly transformed the group. I don't know the answer by division, but I know it by region. So we should get roughly 60% to 65% of the savings in both Europe. And I would say maybe a bit more in Northern Europe, but also a good portion in South Europe. We should get roughly 20% in the Americas.
And a bit more in North America than south, roughly 5% in Asia, because again, in Asia, our main priority is clearly for continued growth and 10% in the High Performance Solutions business. So that's the speed by region that that we track and follow. All the targets have been given to the different managers by country mid December, so we are well on track with what has been identified.
And we don't communicate on the second question. Josep
Pujal from Kepler Cheuvreux. I have two questions, please. The first one is to double check the price cost gap in 20 18, when I do a rough calculation, it's slightly positive gap, 30,000,000. Do you confirm that figure what is your figure, please? And also to look at that dynamically, you started last year being rather cautious about that.
And would you say that, your view about this gap has been improving over time and what is your view today? And my second point is on My second question is on guidance. You are guiding more or less the same way than last year. So growth in the like for like EBIT, but what is different for you compared to last year? What are the plasses and the minuses, is there a sort of comfort given by the base effect, the problems, the technical problems that you had had last year?
Is there some things that worry you more in terms of, the outlook for volumes or the growth in your end markets. Could you elaborate a little bit on that, please?
Okay. So on, on the price inflation spread, as I said in my presentation, we have the close to 1,000,000 inflation in this year. If you take the price increase the inflation, it's mainly in large part of the inflation is in the construction sector. And then we also have it in glass and HPM, So, if you take first half or I mean, take the industrial price increase, it's close to 3.5% So I would say that in the first half, we did have, we did compensate the inflation. So it was more or less neutral, whereas second half, clearly, we have a positive spread, because you as I said, we accelerated our price increase and you see that impact in most of our businesses second half is quite the impact of this is reflected in the profitability of the many of our businesses.
So so so price has been our, priority for the year. And again, you know, as I said, we are going to be in terms of inflation. As I said, we will be again closer to what we had this year or maybe slightly lower because it's pretty volatile and it will be very difficult to put a precise number. We don't it's still premature. And I would just say that price increase would remain top priority for us.
On the guidance the try, I will not give you more precise guidance, but I can give you some compared to last year, some positives and negatives, and you mentioned some of them. So clearly, if you look at the global macroeconomic indicator for growth in 2019, there are a little bit less favorable that's outside of Saint Gobain. They are a little less favorable than they were last year. If we look more at Saint Gobain, I would say that there are some, the pricing situation starts and the price versus cost starts significantly better than where we were last year. You mentioned some difficulties in Sargobinds operational issues, especially in Flat Glass in the first half, I don't forecast them, but some of these events on the other hand, we have outside of our control in, in, if I take, for instance, what happened in Egypt or in Brazil.
But I would say that, and there are some businesses where you have easier comparison basis, and there are some businesses where we have a more difficult comparison basis. So but I would say that on price. We are quite confident, and you have to be careful on the macroeconomic indicator. As I said, not to overemphasize the new construction element in some countries. So I, that's why I am, I'm confident to have an increase in our operating profit like for like.
And then we should have, in addition to that, a contribution from the acquisitions. And as far as today, but that I remain very cautious, but the exchange rate impact, which is not the guidance, but if you take the total operating profit, it sounds also in better shape than last year. And what I say about guidance is our, you know, we have been used to give our guidance, on the like for like, but This is a discounting, is a good impact that I think we are going to have going forward from the acquisitions. Next question. So if there is no more question in the room, then we go to, the telephone So the question on the phone?
Yes, we have some questions. First question is from Elodiraal from JPMorgan.
I have 2, if I may. So the first one would be a general question on net debt and your preliminary view this year. So where would you like ideally net debt to end up at the end of 2019 given your guidance for flat CapEx and your acquisition and divestment strategy? And then the second question is just technique technical again to come back, on the 1,000,000 accounting impact that was raised earlier in the discussion. And just to understand, in 2019, what would be the comparison base that you will use to calculate the like for like growth would you use the 3122 reported operating profit, or will you exclude the 1,000,000 impact?
You want to answer, straight
down the debt? Yes. So on the debt, as you saw that we had, increase of debt of, 1,200,000,000 in this year and it's primarily on account of the investment we did on acquisitions, 1,700,000,000 which includes Sika acquisition, which is close to 1,000,000,000. And if you see the normal small and midsize acquisitions, what we did, it's 20% more than what we did last year. And also this year, we increased our share buyback.
We bought close to 13,000,000 shares in the year as against the 8,000,000 shares last year. So it's another investment we did of So this is, this is why these are the main reasons for increasing the debt. Now coming to your, you know, the guidance, normally, we don't give guidance because there are so many factors involved in this, because the CapEx another thing which we did. Again, it was a conscious decision we took this year that we invested more CapEx. So it was 8% CapEx increase again, on a growing markets.
And I must tell you also that there are many interesting projects, for the future, profitable growth. So So we will continue to invest wherever it makes sense. And, you know, coming to the rating, it's still a very solid, and there is no, I would say that the leverage is at a reasonable level. And, coming to your other second question, maybe Pedro will add. I'll I will only say that, you know, as I said, that you have this one off benefit, but I also said there are costs.
So so this is something which is, you know, overall, positives have compensated the additional operating costs we had during the year. So I don't know how we will have it.
No, but it's not for me, it's not It's not a topic. And of course, the basis comparison for 2019 is the operating profit that we reported 1,000,000,000 or 1,000,000 Next question.
Question comes from Arnaud Lehman from Bank of America.
Thank you. Good morning. I have 3, hopefully, brief questions, if I may. Firstly, just could you remind us your overall exposure to the automotive sector in total in terms of sales? And if you could give a little bit, of the exposure to Europe, I guess, Asia and Latin America.
Secondly, the dividend, I think the board decided to increase the dividend by 2%. Your recurring net income is increasing by 6%. So I'm just trying to understand why there is between the two why you didn't increase the dividend by, let's say, 5% or 6% in line with the recurring net income. Is there any message behind this decision? And lastly, could you be interested in the acquisition of BASF Construction Chemicals?
Our auto exposure. So I will take the first 2 and maybe, Bernard, So on the automotive, automotive is around 8% of our sales. With, and now it's under a new segment of high performance solutions where we have put together a security, the automatic glass business and the various components that we had in high performance materials. So around 8%. I would say that with an exposure, which is around 3rd, I would say in Europe, a little more than a third because HPM is significantly less than Faglass.
Faglass, it was it is less than 50% and HPM is clearly less than that. I would say a third in Europe, a third probably or 20% in the U. S. And the rest is in between Asia and Latin America across the board. So I would say a broad exposure.
This means that given the trends in operating market, we are a globally better place than what we see. That's why our, especially from what's going on in in Mexico and it's in India where we have opened a new plant. So we are, we have been suffering in the fourth quarter. There are uncertainties. The beginning of the year is not very easy, but the automotive market is globally predicted, I would say, as flat for for the year at the moment.
And when I look at our geographic exposure, we are a bit better than that. So that's for, automotive. For, the dividend, yes, I don't think I think I answered the question already. Our policy is to have a dividend payout, and we stated that regularly between 35% 40% of the recurring net income. We are, we have been, but our policy has been also for the last 8 years, not to decrease the dividend and to increase the dividend in line with the increase of the recurring net income when we are in this range.
That's the policies that we have stated. In the last two years, we had increased the dividend. Why we were still not in that trend, but we are going down because we a much higher level. We were going down, reducing the payout still around 40%. I think last year, the recurring net income, if I correct, increased by 17% and we increased the dividend by 3%.
So we had exactly the same issue, but we were at 43%. We continue in that direction. So in fact, if we applied our policy, which did not increase the dividend, and as we did the last two years, we are increasing the dividend to progressively go back to our range of 35 to 40. We are at 42 with a proposal of the board of yesterday. So this is a very clear policy.
When we are in the range 35 to 40s, then our policy would be to align the growth with the recurring net income. And then you want to answer, we will have yes.
Yes. On BASF, well, first, we don't comment, obviously, on some specific situation. Now that being said, we have seen that over the years, we have grown very nicely our Mortars business in several areas, whether it's tie fixing or some construction chemicals. In 2017, we bought a nice company, Maris, exporting around the world and some good construction chemical niches. So we'll continue to do in principle those kind of mid sized acquisitions.
We are more in this mode than a digger topics, so more midsize acquisitions, a lot in emerging markets, which is our area of focus. We did some also with MegaFlex in 2017. And clearly, we are more in terms of big size on the divestiture side than the big acquisitions. And maybe to complement the answer on the to the value, we don't publish the book value first because it's discussed with auditor second that if I take distribution Germany, we will sell. So we don't want to say what is the book value and we approve, we'll sell it to the higher price than the book value.
Like we did for instance, for our pipe business in China, with a nice capital gain. So you will have the that picture later on.
Thank you. Next question?
Next question comes from Gwen Jantal from Jefferies.
Good morning. It's Glynis Johnson from Jefferies here. Just one if I may. It's just in terms of cost inflation. I appreciate you don't want to necessarily pin down raw material cost inflation, but can I just check that your general guidance for its length on?
Does that include your energy cost as well? Also can you give us a little bit in terms of wage inflation?
Yes. So, yes, when I say 1,000,000 for 2018. It does include the inflation of energy cost. And so coming to wage inflation, we had wage inflation in the range of 3% to 3.5% for the whole group. Again, it varies from region to region.
So, well, that's my on the wage inflation. And the 'nineteen wage inflation,
it varies country by country, but there is no seeing specific for 2019. We have Brazil accelerating again, so a bit more inflation in Brazil than some years ago, but overall, it's country specific, but we are in line with the market. And
So globally, I would say the trend in the last 2 years has been given the labor markets in many countries, a little more inflation than what we had 2, 3 years ago.
Thank you. No.
Next one.
Comes from Manish Baliya from Printers.
So I wanted to ask you one question like So if you look, the free cash flow generation that Fangoban is doing, in terms of free cash flow to equity, it's something like less than 1,000,000,000 and you're already spending $700,000,000 in dividends. So how are you going to finance your acquisition and buyback. It seems to me like all this has to be financed with additional debt that you have done in 2018. So just if you can explain what's the policy there, do you want to take more debt, or do you want to have an improvement? You see improvement in free cash flow generation in 20 team because of EBIT improving or CapEx coming down.
So what is the strategy there? How do you finance your acquisition and buyback?
Yeah. So, let me take this question. So, coming to you know, the the debt increase, as I explained, it's mainly on the account of acquisition. So you just have to keep in mind that from year to year, it varies because, this year, consciously, we invested a lot. We invested in CapEx more than 8% of last year and the investment in acquisitions, which is more than 20 and other than CCAR, which is close to 1,000,000,000.
So, we have you just have to keep in mind that we are generating, in the first place, the 3 close to 3,000,000,000, cash flow. And, this is something which we believe will continue and you'll always have some impact or positive impact of the improvement in the results on this cash flow.
Okay. Thank you.
Next question
comes from Will Jones from Redburn.
Thank you. I've got 3, if I could, please. First, just really reflecting on 2018 when you look at all your various businesses in the different countries. Are there any that you would highlight to us as having outperformed or even underperformed the underlying kind of mark picture. I can see the positive or negative.
The second is around just picking up on building distribution margin, I think down about 20 basis points in second half on second half. Do you have any target in mind for that that business. I know it's new reporting lines, but we will still be able to see its profitability. Do you have in mind a number for 2019 in terms of whether maybe you can hold the margin there or is it realistically likely to slip a little bit further? And then the last one was just when you think about your ongoing strategic review.
And when we think about the net of future acquisitions and future disposals above and beyond the disposals you've already talked about, how do you think do you think that net number will be pretty neutral or could disposals be bigger than acquisitions? Just wondering if you'd be willing to maybe quantify how those 2 might into play against each other?
Okay. So on the various countries. I would say that in 2019, they are I think we have done better than the market in a number of countries. I think it is the case in France. I think it is also the case in the Nordics.
And in the U. S, we had a very good run, especially in the second half, in the U. S. For Brazil, Brazil and India, I would say we always, overperform. So that's probably the countries where we have We have done none, but why you want to add something?
No, that's fine. And maybe Germany was a bit under pressure in some business lines. And And maybe UK distribution is a bit lower. Below some of our peers.
Yes. Second question was on the distribution margin. We gave some targets at the Investor Day in 2017. And those targets, in my view, are not changed. And so that's still what we have in mind.
In 2019, I expect a slight increase overall in the margin in distribution.
And we have gained quite nicely in France and in the Nordics and distribution, and we continue to improve and 'nineteen will be even better.
But it's clear that when I give this range in 2017, I probably underestimated the impact on OpEx of the investments we are doing in digital And IT. And as I said a bit earlier, these ones are going to peak probably in 2019. They will start to decelerate probably, not before 2020 21, as I would say. So I think we have had in the last 2 years a significant increase in our OpEx this year is plus 20 basis points. It was already an increase last year.
So this has a this is probably, but I think it's important that we do that. This is these investments will, will, will pay off. But one, at the time we do these these investments, the productivity, which is going to be the result of the assessment, is done a bit later than the increase. So at the moment, we have, I would say both the cost of the old and the cost of the new. So that's weighing on our margins, and that's why I'm pretty pleased that we have despite that increased the margin in France and in the Nordics this year.
That I, you know, I don't, I don't have a number in mind, but I think that the disposals are going to be more significant. And acquisitions, as I said, this year, depends on the opportunities, but, at the moment, we may, you know, the when I look at what we have in the pipeline and the prices, we may be lower than when we were in 2018. Early in the year, and I don't want to miss some small, very good opportunities. But at the moment, I would say that the equilibrium between the 2 for 20 and 'nineteen, maybe more balanced.
Thank you.
So there is no more question on the phone. So then we have question on the Internet. Okay. So questions from Paul Roger from Exane BNP Paribas. What impact could phase 4 of the carbon emission trading scheme have on your manufacturing footprint in Europe.
Well, this is a very technical question, but as you know, I am quite, interested in and committed in this question of climate change and Sagava has taken some very strong commitment to reduce in the environmental footprint. We are in line to do that in terms of CO2. So we have targets which are going to some extent to reduce the importance of this topic. And this is, this is the goal. I would say that the the new phase of the European carbon emission, which means an update of the allocate allocation rule will progressively link to a reduction of the allocations, but concerning a cost for Saint Gobain for the next few years, we don't see an impact.
This could bite in, not before 5, 6 years. And then we should have had a reduction of our CO2 emission. 2nd question, our management incentives being aligned with the transfer grow initiatives, maybe for Benoit?
Yes. I think I already mentioned in the presentation that, again, all either the market CEOs of High Performance Solutions or the country CEOs within the regions are totally aligned with the paymeter that they manage. 70% on financial targets and 30% on qualitative target. Within that, a good portion is on Transform and Grow to deliver the additional savings and for some of them also to work on the divestitures in terms of portfolio management within their country. So yes, it's fully aligned and
it has been already been designed. Then we have questions from, again, it's Johnson from Jefferies. Can you tell us what raw material costs are actually increased by, in full year 18 and guidance for full year 2019, what should be we anticipate from other cost items such as wage inflation and energy cost inflation I think that Shaddar has already answered this question in 2019 to a 1,000,000. Largest inflation PPC, no, sorry. No, next question.
What is the current asset base of UK distribution so we can work out how much was written down as a percentage and what was the reasoning for the write down, where there was specific I will see approximately that we used to evaluate this case of a write down. Well, as a, our, are done, with our auditors comparing the future as the IFRS rules and comparing a flow of future cash flow with the present value. That's what we use. So it's not and then we compare the 2. And to do that, we use, of course, the wax.
So that's the way, it was done as, Seder mentioned, it's, what we have written down in the UK is a big part of the goodwill, which was mostly the goodwill of a very old goodwill from the acquisition of that business, so 18, 20 years ago. On the next question is
I have 6 question 12, but
I moved from 4 to 12, but I know that's here. Okay. Question 5, HPM had a great 2018 with the benefit of Ceramic, obviously, in the margin. It's a lumpy business, no, So what can you tell us about ceramics for 2019? Ceramics is a great business.
It's not a lumpy business. And that it's a business which has 2 components. There are some components which are linked in terms of markets with CapEx. And some components which are linked with, I would say more OpEx of our customers, consumables of our customers. What I would say and Laurent, you may add this column, but I would say that the order book on the CapEx, which is the only indication, which is very strong, and that's a business where some visibility.
The order book for ceramics at the moment is quite solid. So on the, on the, more the consumable part. It's linked with industrial activity. And I would say at the moment, we are seeing as some, a good, good trends in the U. S.
Laurent, do you want to add something? Or
Just one word. The order book today is quite good indeed, as you said, Pierre Andre is in line with the second half, not as strong as the first half last year. It's in line with the second half. So we are on for a good another good year in Ceramic in 2019.
Next question from Philip Croussard Richelufinos. It is in French, but I will translate in English. Could you explain the consistency on an increase of 1,000,000 of EBITDA with gains of 1,000,000 in terms of cost reduction, price of 3% and volume of 1%. I think that's a bridge you already talked about it, but you can
Yes. So I think won't repeat what I said. Just the point we need to keep in mind that the 300 saving is the saving coming from the operational excellence program. We call world class manufacturing. And also there is a purchasing excellence program and this is something which we you have to keep in mind that this helps us to compensate all the inflation we have in manpower costs and other operating fixed costs.
Next questions. Could you explain the movement in accruals from 20172019, which means that the net self financing is is down, which is not true, then as you find this is slightly up, when the results improving? And can you give us a bridge on the net debt? The bridge you gave it already on the net debt. You gave the reasons.
And I would say that there were a few more. Restructuring costs outside of Cica than the year before, which is the reason. That's a net self financing is increasing a little less than the operating margin? Yes. The operating profit.
8. 1 off gains. In 2018, you had 1,000,000 of settlement settlement gain. Now it's a number of things. In which division was this gain?
And as your 2019 guidance assumes similar one offs are repeated. I think that there has been a misunderstanding on that. And I think that Sreedhar answered that question already. How much cash is to be received into 2019 from the disposal sign agreed so far that I don't know. So the 1, so 500,000,000 sold?
Yes. So you know that? No, so I can just give you I thought it
was a total problem.
If you just take the overall target we have given in 2017 Investors Day, of 1,000,000,000 out of that till now, if you take into account the silicon carbide which we have signed and yet to close and also the money part of the money we need to receive from the China, China transaction, which should happen very soon. So if you take all this into account, we have close to 5 50% of our target is already, done.
10, free cash flow reported and after CapEx was low at 0.6 not the number, Irene. Do you expect an improvement in 2019? And you saw why? So the free cash flow as reported is 1,000,000,000. And as Sreedhar said, there was an increase in CapEx, which is the main reason.
And we don't give guidance on the free cash flow, but it's clearly the like for like improvement in operating profit plus the, probably the exchange rate stay where it is additional improvement on operating profit because of acquisitions, more than compensating in my disposal. We should have a good free cash flow in 2019. 11, can you please guide on 2019 with the restructuring costs and the 2019 tax rate on the restructuring costs you have answered on the tax rate? Yes. We have already answered also.
Twelve E Business, which is mostly in distribution, Is it, I don't understand the question from Stephan Repo? The business, which concern mostly distribution, Is it in a plan, which take into account the composing? Maybe Benoit, you want, if you understand the question, I'm not sure I understand.
Is business staff of plan, including logistics and digital marketing, I would say, yes, of course, we have a digital strategy all our businesses and particularly for distribution, which is more omni channel than pure ecommerce. And maybe I complement the answer that I made earlier on, we don't see in our universe of construction pure players sailing from the plant, roles of glass wool insulation to the end user. So that's not happening. So there is no big description of the traditional channels. What is important for us, both in manufacturing and in distribution, it's to digitalize what we have so that our customers have all kinds of touch points.
If they are on the job site, they can order with the app, they can click and collect in the morning, like 97% of our customers in platforms. So it's not the E business per se as a pure player. It's digitalizing all the value chain. Whether you are on the web, on the store, visiting on the job site or with your app. So yes, E business is part of that.
We have, for instance, in the Nordics, roughly 20% to 25% of E orders from our customers. Sometimes it's delivered on the job site with our good logistics. So logistics is fully part of the plan, and we have invested a lot in logistics in France and in the Nordics. And sometimes, the customers pick up in the store. So it's, it's fully part of our digital strategy, which has been very successful in, partly in France and in the Nordics.
But we don't see a big cannibalization of that you may have in some other categories of manufacturers, selling directly to the end user or pure player of distribution jumping over the biggest merchants. So far, the physical assets that we have for the heavy building materials, so all those products still exist and are very powerful.
Now question. Last question is from the Tobias Vergara from MainFirst. Flat Glass prices have deflated by some 40%, 50% in real terms since the '80s. While value added products don't necessarily show better trends when you look at official statistics. I know that Glass is a historical founding member of the group, but reality is that pricing power is one of the worst in your portfolio and in building materials generally.
Given this dampening impact on your pricing and hence return for the group, would you consider applying the same value creating shareholder threshold to this business over time? I start by the end of the question. Of course, yes, and the return on capital employed of Flat Glass is significantly above the average of the group. And maybe this question is triggered by the, also, the fact that the margin was down in the first half. I told you in July that we'll get back to the close to 10%.
We are up 9.8% in the second half. So we are also back on track in Flat Glass. I would say, to some extent, this is a nature of industry to our productivity and that part of this productivity is going back to customers over time, one point. 2nd point, I disagree on the value added products and industry. We are so constantly add value to our products.
And I would say that the value of our added glass has not followed at all the same pattern than commodity glasses. So I would say that we are happy with our Flat Glass business. We have had both in Automotive And Building overall, a good return. There are some years where it has been extremely good. There are some years where it is a bit lower, but I would say it is above the average of the group and we, of course, apply the same criteria.
There is no taboo. I said in November, I used that sentence when we look at the portfolio of business, but I think Flat Glass is for Saint Gobain, a good business. So we maybe one point to
one because We invest a lot on the food lines in emerging markets, with big success in Mexico, in India and the rest of the world. When we look at what we call glass solutions, which is more the local businesses, there, again, with the Transform and Co program, we look at our positions and our strengths country by country, and that's why we divested part of our UK glass solution business and the Nordic glass solution business. So we are pragmatic also.
And we are reviewing the various countries to, in the same, in the same view. I think we are finished with the questions, maybe to summarize the main messages following the the good operational performance of 2018. We are confident about the outlook in 2019, and the group is clearly accelerating accelerating its transformation as to this Transform and Grow program, which is well underway and that Benoit and I, we are very confident we'll deliver the benefits that we have put in place.