Good morning, everybody. I hope that you have received our press release and that you have been able to go through the highlights of our third quarter sales. Let me first sum up in a few words this release. Our consolidated sales for the first nine months were EUR 31 billion, 130 million, including a positive group structure impact of +1.1% and a negative currency impact of -3.6%. Organic growth for the first nine months was +4.3%, confirming our growth trends despite the high comparison basis in Q3 2017. We succeeded in accelerating pricing strongly, something that is clearly essential in an inflationary environment with an acceleration in pricing to 2.9% for the nine months after +2.5% in H1, while volumes rose +1.4%. I'm pleased to say that the industrial issues that weighed on our profitability in the first half are now largely behind us.
I will hand over to Guillaume, who will give you additional information, including by business sector and geographic area.
Thank you, Pierre-André, and good evening to everyone. Let me give you more details about our sales for the first nine months. As Pierre-André said, sales rose +4.3% on a like-for-like basis over the first nine months and were up 3.1% in the third quarter. The reported figures were once again impacted by negative exchange rate impacts, partly offset by positive structure effects. I'll take a moment to give you a few details on those two effects. The structure impact added +1.1% to overall growth for the nine months, reflecting the consolidation of acquisitions in Asia and emerging countries like Timco, Megaflex, and Isoroc Poland. In new niche technologies and services such as TekBond, Scotframe, Maris, and Logilimacimo. To consolidate our strong position such as Glava, Kirson, and Bolton acquisitions in Building Distribution, including Per Strand. By activity, the impact was strongest in Interior Solutions.
The structure impact was smaller in the third quarter at +0.6%, reflecting also the acceleration in our portfolio optimization program. On top of the disposal of the insulating EPS foam business in Germany, you have the glazing installation operations in the U.K. and our Chinese pipe business of Suzhou, where we have launched the process to divest and which contributes to the lowest structure impact in Q3. Elsewhere, Argentina has moved into hyperinflation. As a result, we have excluded the country from our like-for-like sales numbers from the first quarter. The currency impact was -3.6% for the first nine months, but with a smaller -1.9% negative impact in the third quarter, with the reduction mainly driven by U.S. dollar turning slightly positive against the euro.
The impact remains negative, however, driven by the continuation of negative effects from the Brazilian real, the Nordic krona, and other Asian emerging country currencies. For the first nine months as well as the third quarter, the currency impact was negative in all sectors, but the decrease in impact resulting from the dollar turning positive could be most clearly seen in HPM and in Construction Products. It's like always hard to say what the impact might be for the rest of the year, but at today's rates, looks like the impact on sales for the second half could be much less negative than for the first half. To finish on the technical effects, working days were stable overall for the third quarter, and for the fourth quarter, we should see a positive impact of working days of around +1%.
Coming back to the most important part, the like-for-like growth. On a like-for-like basis, sales were up, as I said, +4.3% over the first nine months and +3.1% over the third quarter. We succeeded in passing further price increases, resulting in an acceleration of the price effect to +3.5% in the third quarter from +2.5% in the first half, resulting in pricing of +2.9% over the nine months period at the group level and +3.4% for our industrial businesses. This focus on pricing was essential given the continued inflationary backdrop. We now expect raw materials and energy inflation of around EUR 600 million for the year, with increase driven mainly by the recent increases in energy price and oil-related materials, as well as transport.
Volumes were up +1.4% over the nine months and down -0.4% for the third quarter, impacted by the high comparison basis in HPM and Exterior Products in the U.S. in 2017. I will now comment on each sector, starting with Innovative Materials, which was up +5.2% over the nine months and up +3.5% organically in Q3. Flat Glass continued to post growth in line with the trends we saw in the first half, with organic growth up +3.2% in Q3 and +3.4% for the nine months. Pricing accelerated sharply at +5.1% in Q3 and +3.1% for the nine months. In automotive, we continue to enjoy good growth momentum despite the market disruptions linked to the introduction of the new emission regulation in Europe, helped by our positioning on high-end solutions. Our recent CapEx and innovation investments continue to gather pace.
In construction markets, sales continued the growth that we saw in the first half in our main regions, driven in particular by better mix and an acceleration in pricing for transformed glass in Europe. In terms of our float repairs, Poland and Egypt restarted in September as expected, following Romania, which restarted in Q2. In addition, we have started our fifth float line in India. High Performance Materials posted organic sales of +7.3% for the nine months and +3.5% for Q3, with the slowdown reflecting the tough comparison basis, particularly in ceramics. All divisions and regions progressed over the nine months, and the price impact increased to +2.4% in Q3, with +1.7% for the nine months. Turning to Construction Products, which saw organic sales up +5.6% over the nine months, including an increase of +3% in Q3.
Pricing accelerated to +5.6% for Q3, with +4.2% for the nine months. In Interior Solutions, we saw organic growth of 5.9% for the nine months and 3.5% for Q3, driven by pricing, which accelerated to +5.6% for Q3 and +4.6% for the nine months. Western Europe saw sales increase slightly despite lower volumes in the U.K., while in North America, the acceleration in price increases weighed on volumes. We saw good growth in Asia and emerging countries once again. Exterior Products saw organic sales growth of 5.3% over the nine months and +2.7% over Q3. This slowdown was due to a much tougher comparison basis for Exterior Products in Q3, which had been boosted, as you remember, by additional demand linked to Hurricane Irma and Harvey in Q3 last year.
The negative swing from this at the group level was around 1.5% on volumes between Q2 and Q3. However, we were successful in achieving a significant price increase in August, which, as you will remember from our comments in July, was a key focus for us. Excluding the structural impacts relating to pipe in China, sales trends improved in pipe, where we are nevertheless continuing our restructuring program. Mortars progressed, especially in Asia and emerging countries, despite the uncertainties in Brazil. Overall, Exterior Solutions saw pricing accelerate to 5.5% in Q3 and 3.7% for the nine months. Lastly, Building Distribution saw organic growth continue the same rhythm as in the first half at +3% for Q3 and +3.1% for the nine months. France had a good quarter with supportive trends overall, and the Nordics continued their good trends from the first half.
The U.K. maintained positive growth, but once again driven by pricing with volumes negative. Germany and Brazil saw sales decrease slightly in Q3, and overall, Building Distribution saw a price effect of +1.9% in Q3 and +2.2% for the nine months. Finally, let me give you some comments on the growth by geographic area. France maintained momentum in Q3 with organic sales up +3.1%, both for the quarter and for the nine months, benefiting from robust new construction and growing renovation, even if growth remains constrained by the lack of available skilled workforce. Although Western Europe grew +3% like-for-like over the nine months and +1.7% over the quarter, the Nordics continued to report a good pace of growth. The U.K. showed a slight growth driven by pricing, but with volumes declining in what is clearly an uncertain environment, and Germany remained hesitant.
North America posted like-for-like growth of 6.8% for the nine months and +1.3% for Q3, where the comparison basis was very tough in Exterior Products and HPM, as I mentioned. Both the construction and initial markets in the U.S. remain robust. Lastly, Asia and emerging countries continued to show good organic growth with sales up +7.1% in Q3 and up +7.9% over the nine months, driven by growth in all regions. I will now hand over to Pierre-André for concluding remarks.
Thank you, Guillaume. I'd like to make a few comments about our strategic priorities and the outlook for the rest of the year. We continued to carry out a good number of small and mid-size acquisitions with 17 companies acquired year to date for a total of EUR 560 million over the first nine months, focused on our three pillars to enable us, first, to consolidate our leadership position and unlock synergies like Per Strand in Norway. Second, to accelerate our growth in emerging countries like Kimmco in Kuwait. Third, acquire additional technological bricks to be combined with our portfolio of innovative solutions like HKO in Germany. In addition, we are moving forward with our strategic initiatives to accelerate the group's transformation.
These focus on accelerate the renewal of the group portfolio with divestments representing sales of at least EUR 3 billion by the end of 2019, resulting in margin accretion of around 40 basis points. In addition, we are defining a new organizational structure to get closer to the market, offering greater agility and more synergies. We will make a specific announcement of this new organizational structure on the 26th of November. We confirm our action priorities for the year as a whole in terms of our cost-saving programs, our CapEx programs, our commitment to R&D investment, and our focus on high level of free cash flow generation, as well as our focus on pricing, as Guillaume discussed. The group expects the following trends for the fourth quarter. A robust construction market in France, albeit constrained by the availability of skilled labor.
Progression in other Western European countries, despite continued uncertainty in the U.K. and temporary disruption from the automotive market. Growth in North America in both construction market and industry, good momentum in Asia and emerging countries. To conclude, as you will have seen in the press release, we are confirming our objectives for the full year 2018. For the second half, we expect the like-for-like increase in operating income to be clearly above the level achieved in the first half. Guillaume and I are now happy to answer any questions you may have.
Ladies and gentlemen, if you wish to ask a question by phone, please press zero and one on your telephone keypad. We have a first question from Elodie Rall from JPMorgan. Please go ahead.
Hi. Hello. Good evening. I have two questions, if I may. The first one on guidance. I'm wondering if you feel more or less confident, post Q3 on your guidance than you were after the H1 results. You are expecting higher cost inflation, now looking at EUR 600 million for the year. I think versus EUR 500 million previously. You have reiterated your guidance, so does it mean that you expect to fully offset cost inflation this year through price increases? Can we have a little bit of color, maybe of what clearly above H1 operating income means? What clearly means? Does it mean mid, high, or double-digit growth? That's my first question. The second question on roofing. We saw Owens Corning having a lower view on the industry post their results. They're looking for a 10% decline now for industry volumes versus 5% decline previously.
Is that also your view for Saint-Gobain's exposure? Thank you.
Elodie, I will take the first question, and Guillaume will take the one on roofing. On guidance, I have a similar mood, I would say, in terms of our confidence in the guidance than I was at the end of July. Maybe as we have delivered the quarter, I would say I should feel a bit more confident. I think we are in line. If I take your point, I think that we are seeing a bit more inflation. On the other hand, we are pretty happy with the price increase that we have been able to deliver in Q3. We have had a very good delivery in price increase, which is needed because we have had also cost inflation. I think I would say we are clearly on track.
We should expect in the fourth quarter, maybe a little less price, because if you remember, we were a bit short in pricing in the third quarter last year. We should expect, on the other hand, a bit more volume in the fourth quarter than what we have had in the third quarter. All in all, I think we confirm our guidance, and I am not going, as I said in July, to be more precise than what I said in terms of being clearly above the level achieved in the first half. Guillaume?
Yes. You had a question on roofing and on the guidance given by Owens Corning. By experience, the fourth quarter and in general, the winter months in building materials and especially in roofing in the U.S. are difficult to predict. The only thing I could say is to remind you that last year, the fourth quarter volumes were driven strongly by the effects of the hurricanes that we experienced in the U.S.
Third.
And-
Third and fourth.
Yes, third and fourth quarter, but the fourth quarter also. What I mean is that traditionally we are a little bit less exposed than other players to those regions, which would tend to say that we probably benefited a little bit less than them last year from this. Beyond that, I won't comment the outlook-
Also what we have seen in the third quarter.
Yeah, absolutely.
Right. Thanks very much.
We have another question from Yves Bromaide from Exane BNP Paribas. Please go ahead, sir.
Good evening, gentlemen. Just a few questions on my side. The first one is on the Interior Solutions business, where pricing was strong, but it seems like volumes were probably a touch light, and you gave some example, including the U.K. and North America. Could you maybe give us more color on what exactly is driving the volume decline in the U.K.? Is it based on regulatory changes? On the U.S., are you seeing weaker housing markets? My second question is on your margins in the HPM division. If I remember correctly, the ceramic business was the key driver of margin accretion in recent quarters. You mentioned that you had a lower growth in this segment in Q3. How should we think about margins in HPM in H2 2018 versus last year? My last question is on Germany.
You mentioned that Germany is quite hesitant and slow in the renovation markets. We have seen some news of a push towards fiscal reforms for the new residential markets. Are you seeing anything new on that? Are you confident in terms of the measures that can be taken in Germany? Thank you very much.
I'll start with the last question. The political situation in Germany is everything but clear at the moment. If there are some good fiscal measure, that will be positive. We have not seen that yet. It will be clearly welcome. Concerning the margin in HPM, I think we have seen good margin and good improvement in all our businesses. On the other hand, we said that the margin level of the first half was clearly very satisfactory. It's a bit early to say, but we expect good margin in the second half in HPM. I'm not sure exactly whether we will be at the level we had in the first half, but we'll get very good margin. On the Interior Solutions?
Guillaume, you know I can comment on Interior Solutions in the U.S. and in the U.K. In the U.S., as you saw in general, we pushed price very strongly in all of our businesses. In the U.S., I think what you're seeing also is a balance between price and volume. We made a conscious choice since the beginning of the year, to push price. That's one thing. On the U.S. market overall, in new construction and in renovation, we remained very confident in the U.S. market. There is no issue about that. In the U.K., the market is much more hesitant in all of our businesses and including in Interior Solutions. It's a slightly different story, and there is no specific change in trend compared to the beginning of the year. We have said from the beginning that the U.K. was a market which was hesitant.
It continues to be hesitant very clearly.
I would say in the U.K., we are doing slightly better in our Building Distribution business than in our Interior Solutions business because Building Distribution is mostly renovation, which is less, I would say, affected than the non-residential market, which plays a more important role in our Interior Solutions business. We see volumes which are difficult. In the U.K., we have also, like Guillaume said, put a lot of priority on pricing.
If I can just add just a quick follow-up to that. I think Owens Corning yesterday also mentioned the fact that in Europe, they're seeing a slow start to commercial buildings in their insulation division in Europe. Are you seeing something similar across Europe, or are you happy with the trends that you're seeing there?
I think my comment was more specifically related to the evolution of the political situation in the U.K.
Thank you very much.
We have another question from Nabil Ahmed from Barclays. Please go ahead, sir.
Yeah, good evening. Thanks a lot. I actually got three questions. First one, sorry to add that, I missed some of the pricing impact in Q3, if you could give back the price.
Absolutely, Nabil, I will do that.
Second question, I guess, is more a follow-up on an earlier one on the Interior Solutions and the comments you made about the choice to push up pricing in the U.S. It seems to the expense of volume, which might imply that you've lost market share. Could you give it a bit more color in what business exactly this is happening? Is it in all Interior Solutions business in the U.S. or specifically in insulation? Lastly, on Flat Glass, the Poland and Egyptian floats are back online in September. Does it mean that we should expect still a remaining margin squeeze in the second half because they've not been up and running in the third quarter? Also a follow-up on the European auto market. You seem to be considering that a temporary disruption there.
Didn't seem to have a lot of impact on the reported growth for glass. Where is your confidence coming from? We saw a number of profit warning in the sector.
On pricing for Q3. In Flat Glass, we had an internal growth overall of 3.2%. Pricing was 5.1% and volume -1.9%. HPM price was 2.4%. Construction Products overall price was 5.6%. In Interior Solutions, it was 5.6% also. Exterior Solutions, it was 5.5%. Distribution price contribution to growth was 1.9%. That's for the overall pricing figures. I don't think there is much more granularity to be given in terms of Interior Solutions in the U.S. Clearly, we made a choice to push price, it was true both in gypsum and in insulation, with very good success, as you could see in the figures I was just mentioning in Interior Solutions. There is no one specific business. It is true in Interior Solutions. It is true also in Exterior Solutions, where we had a very good pricing effect in Exterior Products, and in particular in roofing.
That would be the general comment. Your last question was on glass.
On automotive glass, yes.
There was one on startups, which was did the one-offs and especially the restarts of Poland and of Egypt have an impact in Q3? As we said, they have restarted in September, so they had an impact in Q3, they will not have an impact in Q4. In terms of overall margin guidance in glass, I think we made comments in July on that, there is nothing to change specifically about that. We are on track.
On the automotive market, as you have seen, we have trends in glass which are very similar in Q3 to the one we have had in the first half. That doesn't mean that we have been completely exempt from some trends happening on new emission norms. In fact, these trends have had, for us, an impact in Germany, a significant impact in Germany. Globally, in the other countries we have had in Europe, it has not had an impact. We have good growth in many other regions, especially in the NAFTA markets and in parts of Asia. I think that the main reason for our performance in automotive glass is that we are mostly on the high-end cars, so we have a good mix impact. The growth, for instance, of electrical vehicles will be very positive for Saint-Gobain. The trends are good for us.
The same thing you would have seen that the market for cars, the luxury cars, especially in North America, have a much better behavior. It's also the case in many countries in Europe. Saint-Gobain is very present on this segment where we have all our new innovations in terms of laminated sidelights, windscreens, head-up displays, lighter glass, thermal insulating glass. I think all in all, we have a very good mix effect in our Sekurit Automotive sales. Which explains the fact that overall, we don't see an impact of what some auto manufacturers have seen recently.
If I can just add a follow-up on Interior Solution. I guess my question was, have you seen either in gypsum or insulation competitors reluctant or more reluctant to push prices as much as you did? Do you think it's a temporary factor and you're going to win back market share progressively? Or is there any of those two markets where you see possibly less discipline in terms of pushing up pricing in the industry?
I think overall, as we commented on, we are quite satisfied with the way we have pushed price increases, which doesn't mean that all markets were exactly the same. It's really a micro situation. Remember, in H1, one of the markets on which we had specific concerns was roofing in the U.S., on which we were quite successful to push price increases in Q3. It's a complex game where you push price and then there is a reaction, et cetera. It's difficult to give you one specific example which would stand out of a market where the situation would be more difficult than elsewhere. I think overall, we are in a market which overall understands the necessity of pushing price increases.
Okay. Thank you.
We have another question from Mr. Jean-Christophe Lefèvre-Moulenq from Crédit Mutuel CIC. Please go ahead, sir.
[Foreign language] Do you hear me?
Yes, absolutely.
Hello. Good evening, everyone. I have two questions. First, could we have flavor in Flat Glass prices today, the order of magnitude of the price in EUR? Secondly, coming back to the Building Distribution, the magnitude of price hike is far below the price hikes implemented in the industrial businesses of Saint-Gobain. What does it mean? Is that a matter of strategy, or is that because the market has dramatically changed? Many thanks.
On the second question, I would say that the difference in pricing between distribution and our manufacturing business, if you look at the fact that distribution is only relevant in Europe, the difference is much less important than globally. That's one answer. The second is that, as Guillaume just explained, I think that in our
manufacturing activities, we have clearly pushed a privileged price versus volumes and not in all categories. Maybe in some categories, the inflation has not been as strong, or our other suppliers in other type of categories have not had the same strategy. I would say that's probably the two reasons. On Flat Glass prices, I have to check because, I don't look at it, I told you many times.
The price of 4 millimeter, if it's what you're asking for, Jean-André.
Yeah.
It's a little bit above EUR 3.4 per square meter. It increased a little bit, it's less and less relevant to our business because the mix is much more important. You see that as a price effect in Q3 in glass, which includes also the mix effect, improved by a little bit more than 5%.
Let me ask a follow-up question. In the Building Distribution, does it mean that you have a market share policy, notably in France and in Germany?
In Distribution?
Yes.
No, that is not what I am saying. What I am saying, in distribution, generally, we try to pass the price increase that we receive from the suppliers.
It means that the negotiation with your suppliers are well-oriented.
We try to get good pricing, yes, from our suppliers. Yes.
I can assume that you will keep intact your level of end of year rebates.
That's the goal, yes.
That's the goal, okay. Okay, Pierre-André, many thanks.
We have another question from Josep Pujals from Kepler Cheuvreux. Please go ahead, sir.
Yes, hello, gentlemen. I have two questions, in fact. The first one is on cost inflation, which does not relate to raw materials and energy. Is there any negative surprises on that area, or things are going as expected? My second question is on the gap between price increases and the raw materials and energy cost inflation. Would you agree that the gap is improving on your favor? Because if I calculate well, you move from EUR 500 million-EUR 600 million, I would say, the costs. The prices have accelerated much more. The selling prices go from 2.5%-3.3%, this is for industrial, but as a group, from 2.5%-3.5% in Q3. Would you make that reading?
Josep, I will take those questions. On the first one, I would say that there is clearly inflation in raw materials and especially in the oil-related raw materials. There is clearly acceleration of inflation in energy and especially in natural gas and fuel. Transportation is one you didn't mention, which is also anchoring inflation, especially in the U.S., but a little bit elsewhere in the world, but especially in the U.S. Beyond that, if you refer to the inflation of fixed costs and especially the inflation of salaries, we have seen, obviously, inflation slightly higher than last year, but nothing which would lead to surprises. It's been relatively moderate compared to what we have seen on the raw materials and energy side. The same holds true also for leases and rents, which is another large component.
As far as your comment on the spread, that's an interesting calculation, yes, I would agree that the situation has probably slightly improved compared to when we talked to you at the end of July. That being said, keep in mind one thing that Jean-André mentioned at the beginning of the call, which is the fact that last year we had a specific pricing pattern where we were going out of the cyberattack. You remember that we had a Q3, which was quite difficult in terms of spread, and that we pushed extremely hard to catch up in Q4. Which means that in terms of price increases, we have a high comparison basis in Q4 of last year. Because of that, I would still remain cautious in concluding anything for the full year.
It continues to be a battle to continue to increase price on the back of acceleration of inflation.
Thank you.
We have another question from Mr. Robert Gartner from Davies. Go ahead, sir.
Good evening, gentlemen. Thanks for taking my call. Two from me. 1, I wonder if you wouldn't mind just talking about some of the disposals you've mentioned in the release. I've seen the U.K. one, and maybe I'd missed the one in Germany, the EPS insulation, and maybe the rationale for closing in China. 2, if you could, I'm just wondering, had you guys thought about, I know you're buying back shares and extending that program beyond the cancellation of the shares that you talked about previously. Finally, I might have to wait till November 26, but you talk about unlocking more synergies in the organizational changes. I'm just wondering, is that additional savings, fixed cost overhead, these kind of things that maybe you've identified? Thanks.
On your 1st point, I will be more specific in November. You have to wait 1 more month.
The 2nd question was the buyback program. As you've seen, we have taken advantage of the share price to continue and to accelerate our buyback program with 11.8 million shares bought back at the end of September. I think we continue actively to go in this direction. We are not yet at the target that we had of going back to 530 million shares. I think for the moment, we continue actively to push this program. Your 1st question, Robert, was about?
Just on the total.
About the total, yeah.
Germany and China.
Yeah. Pierre, do you want to comment or?
EPS?
Yeah, EPS and the installation in the U.K., you wanted to get more?
As we said in July, we are accelerating. Well, we have always had disposal, but we are trying to accelerate disposal, especially on some, I would say, less performing businesses. That has been the spirit in which we have done the first two you mentioned, the one which was EPS, which is a foam business in Germany, which was disposed in the first half of this year. The U.K. was done in July, and the pipe in China is in the process. It's not finalized yet.
Maybe one comment. First of all, those are relatively.
Yeah
Modest in size business, at least for the first ones. The third one you were asking for questions about why do we do that? I think we already mentioned the fact that we are stopping production in these plants in the H1 call. We mentioned the fact that it was part of our action plan to restructure our capacity worldwide on the pipes business, which is facing difficult market conditions. We have started to do that in China, part of the program is also to sell the plant, which we have entered into the process of doing. It's not closed yet, but we have clearly signed an agreement.
We'll communicate more when we are closing, yeah.
Thank you.
We have another question from Mr. Arnaud Lehmann from Bank of America. Please go ahead, sir.
Thank you very much. Good evening, gentlemen. Just maybe two or three for me, please. Firstly, I guess coming back on automotive, I think it would be useful for you to remind us the overall exposure of Flat Glass and I guess maybe HPM to the automotive sector in percentage of these divisions, and also more specifically, your overall automotive exposure to China, please. Secondly, I noticed a small negative scope effect in Exterior Solutions in Q3, so I guess you've sold something or deconsolidated something. Could you please explain this? Thirdly, I guess, when you look at cost inflation, you've been relatively clear about it already, but when you see recent trends in steel, oil-related products, and wages, what sort of scenario do you start to build for cost inflation in 2019? Thank you.
I'll take the first one. On automotive, as we have said, the automotive exposure overall of the group is around 9%. If I take Flat Glass, it's around 40% of Flat Glass, with about half of that in Europe and half of that in emerging countries.
Since Arnaud's question was specifically about China, when you say emerging countries.
Emerging countries, it's significant, but I would say Latin America is probably bigger than China. I include there Poland, Czech Republic, which are two significant countries. Latin America, India, China, Japan. China, we are seeing some slowdown in China. Once again, our mix in China is pretty on the high end, which for the time being, we still have positive growth during the Q3 in China.
The perimeter impact in Exterior Solutions, that's the pipes business we are talking about just the question before in China.
All right.
In terms of cost inflation for 2019, I have to say, usually we give guidance on 2019 in February. Specifically for this question, given that it is influenced by the price of oil, by geopolitical situation in the Middle East, and by possibly also commercial tensions, I would prefer to wait a few more months to give you guidance. It's going to be more precise and more useful for you.
We're rising up our guidance on raw materials and energy this year in March, in July, and again this year in September.
Yeah. I will try to wait a little bit more before giving you something.
Okay. Maybe a last one on your buyback, the 11.8 that you mentioned, is it incremental or is it what you've done year to date? Where would you expect your share count to land at the end of the year, please?
Incremental, I don't know.
At the moment, I think we are at 500 million and 44 at the moment, huh?
Yeah. What we are going to do between now and the end of the year, let us decide and not give a specific market information during this call. 11.8 is what we have done since the beginning of the year.
Okay. Thank you very much.
Thank you.
We have another question from Mr. Gregor Kuglitsch from UBS. Go ahead, sir.
Hi. I wanted to maybe ask you on the technical effects, particularly now that you're, I think, obviously putting China, for instance, into discontinued operations. I guess that's how the accounting works and if you could perhaps help us, what you think all in the M&A effect is today as we stand, because I'm guessing that, for instance, China was loss-making, and then obviously you've done a few extra bolt-ons in the third quarter. Any kind of help on the full year 2018 operating profit contribution from acquisitions, please. On the kind of profit growth side of things, so the way we I guess from where we're sitting, you've obviously had a volume decline in the second, sorry, in the third quarter. I understand obviously the first half you had some operational issues, but those seem to have lasted in Q3 or the majority of Q3.
I guess I want to understand a little bit more why you're so optimistic on accelerated profit growth for the second half. Obviously with the numbers that we've seen today and what you've reported in H1, everything considered, it doesn't seem obvious. If you could perhaps give us a little bit more color, what gives you that confidence that you're going to see that pickup in profit growth, please?
On the second question, on the other hand, the first question was whether we would be double digits, and I didn't answer to specify where we'd be, but I stick to what I said. As I mentioned in July, we had a number of one-offs, which impacted significantly the first half. The number of them were not present in the third quarter. There were still 2 Float Glass, but one was forecasted that impacted the third quarter. I would say that the ramp-up of some our automotive plant has been progressing pretty well.
I would say that the reason why I see a better profit growth in the second half than in the first half is first, I was disappointed by the profit growth on the first half, and I think we have, as I said, a number of issues which are largely behind us.
On the perimeter, I'm not completely sure I understand your question. There is no accounting magic here. As long as the business is not sold, it's part of the consolidation and when it's sold, it gets out of consolidation. Here in Pipes China, we took it out and we put it in perimeter, as far as the like-for-like sales evolution is concerned. In the P&L, until the closing, it's going to be there. A general comment on that is that when we announced the disposal program and when we gave a little bit more color on the disposal program in July, we said that our goal was to improve the overall margin of the group by around 40 basis points. We are still in this line, which is that we want to be relative to the group operating margin.
As we commented, those businesses for the moment are relatively small. This is the beginning of the process.
Okay. Including all the acquisitions, how much profit contribution do we expect for M&A, for perimeter effect?
No, we didn't give anything on that. The 40 basis points was the impact of the disposal program.
All right. Thank you.
Thank you.
We have another question from Mike Betts from Data Based Analysis. Please go ahead, sir.
Thank you. I've got two remaining questions please, both of which relate to the U.S. On Construction Products, I think you attributed some maybe slowdown in volume growth there to higher prices. My question is, lead indicators are suggesting the housing market there is slowing in the U.S. How long, typically is the lag between those lead indicators and what you would see in insulation and drywall, for example? Because I kind of know your construction terms, it's three to six months, but how quickly do the distributors in the middle there tend to react? And then secondly, and this is probably a very short question or very short answer.
High Performance Materials, lots of different products. Are they impacted at all by the tariffs in terms of maybe less competition coming from China or elsewhere because of the tariffs that have been imposed in the U.S. in any of those significant product areas? Thank you.
Maybe on the U.S., as I mentioned, we are positive on the construction market overall in the U.S. Remember that also exposed largely to renovation, also, in the U.S. We are seeing a quite active market. If you refer to articles saying that the housing starts are slowing down, et cetera, I wouldn't take a temporary slowdown as a signal that this is the end of the cycle. That's clearly not what we have in mind. Yeah, overall, a good momentum here. In terms of HPM and the impact on tariffs-
Yeah.
I mean, Pierre-André, maybe you want to comment.
No, I can give you two numbers. First of all, if you look at the percentage of the Saint-Gobain sales which are moving from one continent to another one, it's around 2% of our sales. When I look at the HPM products, which have been impacted so far by what's going on between the U.S. and China, it's around EUR 40 million. In fact, already a part of those EUR 40 million, we have increased prices without significant impact. Clearly, the direct impact of what's going on the trade war for Saint-Gobain is marginal. That doesn't mean that we will be immune if there is a slowdown in the global economic growth. So far, in our various market, we see still good trends shorter.
I think one of the remarks that Mike was making, I believe, is that it should favor also the U.S.-based producers. It's true that, on the other hand, we also have a strong presence in the U.S. in terms of production in HPM.
That's what I want to say. Even if HPM, the products are in travel, in practice, we are manufacturing on both sides of the Pacific Ocean, and in practice, they don't travel. That means that's why we are not really affected.
Are there any significant competitors who produce in China and export to the U.S. who are going to be negatively impacted by the tariffs? I mean, the EUR 40 million, I think, is the production that you do elsewhere and bring into the U.S.
In China. Yes, that was specifically in China.
Are there significant Chinese competitors for any of your major products that will be badly impacted? Is it possible to give a figure?
I am not able to answer this question, Mike. I have just seen in the last release of 3M that they said that for some categories, they seem to have a bigger impact.
Remember, Mike, maybe that the HPM business is a co-development business where we are extremely close to the customer in terms of development, in terms of service, et cetera. Which means that, yes, it's a worldwide business, but the exports are not so important because of that, because of this necessity of being very close to the customer.
Understood. Thank you both.
We have another question from Eric Lemarié from Bryan Garnier. Go ahead.
Yes. Good evening. Thanks for taking my question. I've got two questions actually, both regarding France. Regarding France, I know this is not a core market for you in France.
What?
Not France, but we can see a slowdown of the new residential market in France.
I mean, France is our first country by far, so I don't know what you call a core market.
Yes, I know, but I was referring to the slowdown of the new residential market in France.
Okay. Yeah.
I know you're more renovation-oriented-
Yes
Don't you start to feel the slowdown of this new residential market? It was my first question. The second question on France again, what does it take, in your view, to change the situation of this labor shortage in France? You mentioned this lack of-
Yeah
skilled labor.
On France, we are seeing indication which are negative on new build in terms of housing permits and housing starts. If I come back to the question asked by Mike Betts, the lag is much longer in France than in the U.S. This will have an impact progressively in 2019, the new build activity. As you said, rightly, and I am sorry I misunderstood your introduction. New is much less important than renovation. What we are seeing in the renovation is, in fact, the third quarter was slightly above the level that we had in the first and the second quarter. I expect that this lack of labor generally means that when there is a trade-off to be made between new and renovation, our customers are apt to privilege new.
I expect that there is a pent-up demand in renovation, which will, at least as that we are seeing in Q3, and we will see that again in Q4, will take the work from a slightly less booming sales in new. In new, at the moment it's not negative, but it will progressively in the new residential turn negative next year. I must say also that in terms of new, the statistics have been historically quite volatile. I think the level we have in France at the moment is not that high. I am not sure you can say that what's going on in new builds in the last six months is clearly the end of a cycle.
Okay. Thank you. We have no further question for the moment. Ladies and gentlemen, I would like to remind you that if you wish to ask a question, please dial zero and one on your telephone keypad. We have another question from Manish Beria from Société Générale. Please go ahead.
I just have only one question, maybe just on your net debt. I remember well, maybe in the first half you said something about net debt of greater than EUR 8 billion. Can you just please confirm that? Because I see the consensus number for the net debt is still at something like EUR 7 billion. Am I missing something? You already told about EUR 8 billion, but people are building EUR 7 billion. Can you just throw some light on that?
I think we will comment on net debt at the end of the year. There is no specific additional comment to be made compared to what we said in H1 at this stage.
Okay, thank you.
We have another question, gentlemen.