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. So our consolidated sales for the 1st 9 months were EUR 31,000,000,000 including a positive group structure impact of +1.1 percent and a negative currency impact of minus 3.6 percent. Organic growth for the 1st 9 months was plus 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 9 months after plus 2.5% in H1. While volumes rose +1.4 percent. And I'm pleased to say that the industrial issues that weighted 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 Andre, and good evening to everyone. Let me give you more details about our sales for the 1st 9 months. As Pierre Andre said, sales rose plus 4.3% on a like for like basis the 1st 9 months and were up 3.1% in the third quarter. The reported figures were once again impacted by negative wage impacts, partly offset by positive structure effects. And I'll take a moment to give you a few details on those two effects.
So the structure impact did plus 1.1 percent to overall growth for the 9 months, reflecting the consolidation of acquisitions in Asia and emerging countries like Kimco, MegaFlex, and Israel Poland, in new niche technologies and services, such as Tech Bonds, Scott frame, Paris, and lovely Massimo. And to considerate our strong positions such as Glava, Kierisson, bolt on acquisitions and building distribution, including pest fund. By activities, the impact was strongest in interior solution. The structure impact was smaller in the 3rd quarter at plus0.6%, reflecting also the acceleration in our portfolio optimization program. On top of the disposal of the insulating EPS form business in Germany, you have the glazing installation operations in the UK and our Chinese pipe business of Suzhou where we have launched the process to divest and which contributes to the lowest to Train Pike in Q3.
As well, Argentina has moved into hyperinflation. And as a result, we have excluded the country from our like for like sales numbers from the first quarter. The currency impact was minus negative impact in the third quarter, with the reduction mainly driven by dollar turning slightly positive against the euro. The impact remains a negative, however, driven by the continuation of negative effects from the Brazilian real the Nordic Krona and other Asian emerging country currencies. For the 1st 9 months as well as the 3rd quarters.
The currency impact was negative in all sectors, but the decrease in impacts 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 1st for the third quarter. And for the 4th quarter, we should see a positive impact of working days of around +1 percent. Now coming back to the most important part, the like for like growth.
On a like for like basis, sales were up, as I said, plus 4.3% over the 1st 9 months and plus 3.1% over the 3rd quarter. We succeeded in passing further price increases resulting in an acceleration of the price effect to plus 3.5% in the 3rd quarter from plus 2.5% in the first half resulting in pricing of +2.9 percent over the 9 months period at the group level and plus 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 600,000,000 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 plus 1.4% over the 9 months, and down minus 0.4% for the 3rd 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 9 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 plus 3.2% in Q3 and plus 3.4% for the 9 months. Pricing accelerated sharply at +5.1percentinq3and+3.1percent for the 9 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 and high end solutions. Our recent CapEx And Innovation investments continue to get a pace. In construction markets, sales continued the growth that we saw 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 was started in Q2. In addition, we have started our 5th float line in India.
High Performance Materials posted organic sales of plus 7.3% for the 9 months and plus 3.5% for Q3 with the slowdown reflecting the tough comparison basis, particularly in ceramics. All divisions and regions progressed over the 9 months and the slight impact increase to plus 2.4% in Q3 with plus 1.7% for the 9 months. Turning now to construction products, which saw organic sales up plus 5.6% over the 9 months, including an increase of 3% in Q3. Pricing accelerated to plus 5.6% for Q3, with plus 4.2% for the 9 months. In interior solutions, we saw organic growth of 5.9% for the 9 months and 3.5% for Q3, driven by pricing, which accelerated to plus 5.6% for Q3 and plus 4.6% for the 9 months.
Western Europe saw sales increase slightly despite lower volumes in the UK. While in North America, the deceleration 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 percent over the 9 months and plus 2.7 percent 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 demands linked to hurricanes Yema and Harvey in Q3 last year.
The negative swing from this at the group level was around 1.5 percent 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 9 months.
Lastly, building distributions, so organic growth continue the same rhythm as in the first half at +3 percent for Q3 and +3.1 percent for the 9 months. France had a good quarter with supportive trends overall and the Nordics continued their good trends from the first half. The UK 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 plus 1.9% in Q3 and plus 2.2% for the 9 months. Finally, let me give you some comments on the growth by geographic area.
France maintained momentum in Q3 with organic sales up plus 3.1% both for the quarter and for the 9 months, benefiting from robust new construction and growing renovation, even if growth remains constrained by the lack of available skilled workforce. Also Western Europe grew 3% like for like over the 9 months and plus 1.7% over the quarter. The Nordics continued to report a good pace of growth the UK 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 9 months, and plus 1.3% for Q3, whereas 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 plus 7.1% in Q3 and up plus 7.9% over the 9 months, driven by growth in all regions. I will now hand over to Pierre Andre for concluding remarks
Thank you, Guillaume. Now 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 sized acquisitions with 17 companies acquired year to date for a total of 1,000,000 over the 1st 9 months focused on our 3 pillars to enable us First, to consolidate our leadership position and unlock synergies like Carstrand in Norway second, to accelerate our growth in emerging countries like CIMCO in Kuwait and 3rd, acquire additional technologies, technological bricks to be combined with our portfolio of innovative solution like HKO in Germany. In addition, we are moving forward with our strategy initiatives to accelerate the group's transformation. This focus on accelerating the renewal of the group portfolio with divestments representing sales of at least 1,000,000,000 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 26th 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 our NDA investment and our focus on high level of free cash flow generation as well as our focus on pricing as Guillaume discussed. So the group expects the following trend for the fourth quarter. A robust construction market in France by constrained by the availability of skilled labor. Progression in other Western European countries, despite continued uncertainty in the UK, and temporary disruption from the automotive market.
Growth in North America in both construction market and industry and good momentum in Asia And Emerging Countries. To conclude, as you will have seen in the press release, We are 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.
And we have a first question from Elodie Rawl 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 see a more or less confident post Q3 on your guidance anywhere after the H1 results. You are expecting higher cost inflation now looking at 1,000,000 for the year.
I think versus 500,000,000 previously, but you have reiterated your guidance. So does it mean that you expect to fully offset cost inflation this year through price increases? And can we have a little bit of a color maybe of what clearly above H1 operating income means what clearly means? Does it meet high or double digit growth? So that's my question.
And 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.
Hi, Lodi. I will take the first question and Guillaume will take the 1 on roofing. So on guidance, I feel about I have a similar mood I would say in terms of the our confidence in the guidance and I was at the end of July, maybe as we have delivered a quarter, I would say I should feel a bit more confident. I think we are in line. What has 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, which so we have had a very good delivery and price increase, which is needed because we have had a So 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 are we were a bit short in pricing in the third quarter last year, and we should expect on the other hand a bit more volume in the fourth quarter than what we have had in the third quarter. But all in all, all in all, I think we confirm our guidance. And I am not going, as I said in July, to be more precise at what I said in terms of being clearly above the level achieved in the first half.
Giyo? Yes, a question you had a question on roofing and on the guidance given by Owens Corning. You know, by experience, as a 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 4th quarter volumes were driven only by the effects of the hurricanes that we experienced in the U. S. Sure. And yes, Southern 4th quarter, but the 4th quarter also And what I mean is that traditionally, we are a little bit less exposed than other players to those regions. So which would tend to say that we probably benefited a little bit less than them last year from this.
So, but beyond that, I won't comment, I won't comment the answer. And so
what we have seen in the
third quarter? Yes, absolutely.
All right. Thanks very much.
We have another question from Yvonne 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 solution business, where pricing was strong, but it seems like volumes were probably a touch light and you gave some example, including the UK and North America. Could you maybe give us more color on what exactly is driving the volume decline in the UK? Is it based on regulatory changes?
And 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 for the key driver of margin accretion in recent quarters. And you mentioned that you had a lower growth in this segment in So how should we think about margins in HPM in H2 'eighteen versus last year?
And 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 reference for the new residential markets Are you seeing anything new on that? And are you confident in the term of the measures that can be taken in Georgia? Thank you very much.
I think the I'll start with the last question. The political situation in Germany is everything but clear at the moment. So if there are some good physical measure that will be positive, I have not seen we have not seen that yet. So but it will be it will be clearly a welcome concerning the margin in HPM. I think we have in good margin and good improvement in all our businesses.
So on the other hand, we said that the the margin level of the first half was clearly a very satisfactory. So it It's a bit early to say, but we expect good margin in the second half in HPM. I will I'm not sure exactly whether we will be at the level we had in the first half or but we'll, we'll, we'll get very good margin on the interior solution.
You know, I can comment on interior solutions in the U. S. And in the UK. In the U. S, as you saw in general, we pushed price very, very strongly in all of our business is, and in the U.
S, I think what you're seeing also is a balance between price and volume. And 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 accident in the U. S. Market. So there is no issue about that. In the UK, the market is much more hesitant in all of our businesses and including in interior solutions.
So 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 UK was a market which was hesitant. It continues to be hesitant very clearly.
And I would say in the UK, we are doing slightly better in our distribution business than in our more our interior solution business because distribution is mostly renovation, which is less, I would say, affected than the nonresidential market, which plays a more important role in our entire solution business. So then we see volumes which are good. And in the UK, we have also like be offset, put a lot of priority on pricing.
If I can just add just a quick follow-up to that. I think Owen's calling yesterday mentioned the fact that in Europe, they're seeing a slow start to commercial buildings, in their installation division in Europe. Are you seeing something similar in across Europe? Or are you happy with the trends that you're seeing there?
No, I think my comment was more specifically related to the evolution of the political situation in the
So we have another question from Nabil Ahmed from Barclays. Please go ahead, sir.
Yes, good evening. Thanks a lot. I actually got three questions. First one, and sorry to add that, but I missed some of the pricing impact in Q3. So, if you could give back the, the surprises.
Absolutely.
I will do that.
So one question,
I guess, is more follow-up on an earlier one on the entire position and the comments you made about the choice to push up pricing in the U. S, it seems to the extent of volumes, so which might imply that you've lost market share. Could you give us a bit more color in what business exactly this is happening? I mean, is it in all entire solutions business in the U. S?
Or specifically in the solution. And 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. And also a follow-up on the European auto market, mean, you seems to be considering that's a temporary disruption there. It didn't seem to have a lot of impact on the reported gross for glass, but where is your confidence coming from?
I mean, we saw a number of profit warning in the sector.
So, on pricing, on pricing for Q3 in Flat Glass We had an internal growth overall of 3.2 percent. Pricing was 5.1% and volume minus 1.9 HPM price was 2.4%. Construction Products overall price was 5.6%. In interior solution, it was 5.6 also and exterior solutions, it was 5.5 and distribution price contribution to growth was 1.9%. So that's for the overall pricing figures.
I don't think there is much more granular to be given in terms of interior solutions in the U. S. Clearly, we made the choice to prove price. It was, and it was true both in gypsum and in insulation with a very good success. As you could see in figures that was just mentioning in interior solutions, but 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 its area of products and in particular in roofing. So, that would be the general, the general comment. Your last question was on glass, do you On automotive glass, yes, I will there was one on startups, which was, do we need to did see one offs and especially the restarts of Poland and of Egypt that has an impact in Q3. As we said, that restarted in September.
So they had an impact in Q3 and 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 and there is nothing to change specifically. About that. And you are
on track. And 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 Q in the first half. And that doesn't mean that we have been completely exempt from some trends happening on a new emission norms. In fact, these trends have had for us an impact in Germany, a significant impact in Germany, But globally, our in the other countries, we have had in Europe, it has has not been had an impact. And we have good growth in many other regions, especially in the NAFTA markets and in the parts of Asia.
And I think that the main reason for our performance in Automotive Glass is that we are mostly on the high end car. So we have a good mix impact and the dry, the growth, for instance, of electrical vehicles will be a very positive for Saint Gobain, we have the trends are good for us. So, and the same thing, you would have seen that the market for cars, the luxury cars have especially in North America have a much better behavior. He's also the case in many countries in Europe. And Saint Gobain is very present on this segment where we have all our new innovations in terms of laminated side lights, wind screens, head up displays, lighter a lighter glass, a thermal insulating glass.
So I think we have all in all, we have a very good mix effect in our security 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 Jeep or more in solution 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 2 markets where you see possibly less discipline in terms of pushing up pricing in the industry?
No, I think, overall, as we commented on, we are quite, satisfied with the way we have post price increases, which doesn't mean that all markets were exactly the same. It's really a micro situation. And you 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 game where you push price and then there is a reaction, etcetera.
So 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 the market. Which overall understands the necessity of pushing price increases.
So we have another question from Mr. Jean Christophe Flassevel Moulin from Credit CAC. Please go ahead, sir.
Francois, do you hear me?
Yes, absolutely.
I have two questions. First, could we have, flat glass prices today, the order of magnitude of the price in euro. And secondly, to coming back to the billing and distribution, the magnitude of price hike, if are 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, as the market has dramatically changed many tanks?
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 is only in Europe, the difference is much less important than what it's done globally. So that's one. And so the second is that as GEO just a 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 we our other suppliers in other type of categories have not had the same strategy.
That's I would say that's probably the 2 reasons On flat glass prices, I have to check because, you know, I don't look at it. I told you many times.
It's a price of 4 millimeters. What you're asking for? Yes, it's a little bit above 1,000,000. And it increased a little bit, but you know, it's less and less relevant for our business because the mix is much more important. And 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. Does it in the Building Distribution does it means that you have a market share policy? I mean, notably in France and in Germany?
In distribution?
Yes.
No, it's not that's not what I'm saying. What I'm saying in distribution generally, we tried to pass the price increase that we received from the suppliers
So it means that the negotiation with your suppliers are well oriented.
We try to get good pricing, yes, from our suppliers. Yes?
So I can assume that you will keep intact your level of end of year rebates measure year?
That's the goal, yes.
Okay. Okay, Pierre Andre. Many thanks.
So we have another question from Juzep Pujal from Kepler actually. 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? And 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 500 to 600 1,000,000, the, I would say that the costs, but the pricing have accelerated much more the selling prices go from 2.5percentto3.3percent in the if I or sorry, this is for industrial, but as a group from 2.5to3.5.
In Q3, would you make that reading?
So, Rudep, 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 ready 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 as well 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 will lead to surprises. It's been relatively moderate compared to what we have seen on the raw materials and energy side. And so in 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.
And yes, I would agree that the situation has probably slightly improved compared to when we talk to you at the end of at the end of July. That being said, keep in mind one thing that Pierre Andre 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 cyber attack. You remember that we had a Q3, which was quite difficult in terms of spreads 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. So 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.
So we have another question from Mr. Robert Gautner from Davys. Go ahead, sir.
Good evening, gentlemen. Thanks for taking my call. 2 for me. So one, I wonder if you wouldn't mind just talking about some of the disposals you've mentioned in the release, I'd seen the UK 1 and maybe I'd missed the one in Germany, the EBS installation and maybe the rationale for closing in China. Second, if you could, I'm just wondering how 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. And finally, I might have to wait till November 26, you talk about unlocking more synergies in the organizational changes. I'm just wondering, is that additional savings, fixed costs, overhead, these kind of things that maybe you've identified?
On the on your short point, I will be more specific in November. So you have to wait to wait 1 more month.
Our second 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 11,800,000 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 offering back 530,000,000 shares. I think, for the moment, we continue actively to push to push this this program.
And your first question, Roberto, what's about? So
Just on the total, Germany and China.
Yes, Pierre, do you want to comment or those are yes, yes, yes, and installation in the UK wanted to
get more as I we said in July, we are accelerating what we have always at disposal, but I will We are trying to accelerate disposal, especially on some, I would say less performing of businesses and that has been the spirit in which we have done the first two you mentioned one which was the EPS, which is a core 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. I mean, first of all, those are relatively modest sized businesses 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 this plant, in the H1 call And 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 have another question from Mr. Arnold Lemann from Bank of America. Please go ahead, sir.
Thank you very much. Good evening, gentlemen. Just maybe 2 or 3 for me, please. Firstly, I guess coming back on automotive, I think it would be useful for you to remind us your overall exposure 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, on I noticed a small negative scope effect in exterior solutions in Q3. So I guess you've sold something or they consolidated something. So could you please explain this? And thirdly, I guess, when you look at cost inflation, I mean, you've been relatively clear about it already. But when you see risk on trends in steel oil related products and wages, what sort of scenario do you start to build for inflation in 2019?
Thank you.
So I'll take the first one. And on the automotive, as we we have said we are the automotive exposure overall of the group is around 9%. And 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. And the rest Since Arnaud's question was specifically about China, when you say emerging countries?
Oh, emerging countries, China is only a relatively noisy. Significant, but I would say Latin America is probably bigger than China. So it's I include there Poland, Czech Republic, which are 2 significant countries, Latin America, India, China, Japan. So that's, so China, we are seeing some slowdown in China. But once again, our mix in China is pretty on the high hand, which for the time being is we are we are we still have positive growth
during the in China. The perimeter impact in exterior solutions, that's the pipes business we're talking about, just question before in that.
All right.
All right.
And in terms of cost inflation for 2019, I have to say, I mean, usually we give guidance on 20 19 in February. And specifically for this question, given, I mean, given that it is influenced by the price of oil, by geopolitical situation in the Middle East and by possibly also commercial, commercial tensions. I would prefer to wait more months to give you guidance. It's going to be more precise and more useful for you.
We are rising up our guidance on the raw material and energy this year in March in July. And again, this year Yes. So I will try
to wait a little bit more before giving you something.
Okay. Maybe your last one on your buyback, the 11.8 that you mentioned, is it incremental or is it what you've done year to date? And where would you expect your share count to land at the end of the year, please?
It incremental. I don't know.
At the moment, I think we are at $500,000,000 $444,000,000 at the moment,
Yes. And what we are going to do between now and the end of the year, I mean, let us decide and not give a specific market in mentioned during this call. So, but 11.8 is what we have done since the beginning of the year.
Okay. Thank you very much.
You.
We have another question from Mr. Gregor Kuglitsch from UBS. Please go ahead, sir.
Hi. I wanted to maybe ask you on the technical effect particularly now that you're I think obviously putting China, for instance, into discontinued operations, I guess, that's how you works. And if you could perhaps help us, what do you think all in the M and A effect is today as we stand? Because I'm guessing that, for instance, China was loss making and then if you've done a few extra bolt ons in the third quarter. So if any kind of help the full year 2018 operating profit contribution from acquisitions, please?
And then on the on the kind of profit growth side of things. So the way we I guess from where we're sitting, 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. So I guess I want to understand a more why you're so optimistic on accelerated profit growth for the second half, because obviously with the numbers that we've seen today and what you 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 you're going to see that pickup in profit growth, please.
On the second question, I think at the other end, the first question was whether we would be double digit and I didn't answer to specify where we would be, but I stick to what I said. I think that as I mentioned in July, we had a number of one offs which impacted significantly the first half. And the number of them were not a present in the 3rd quarter. There were still 2, 2, floor glass, but one was forecasted that impacted the third quarter. But I would say that the ramp up of some of our automotive plant has has been progressing pretty well.
So I would say that the reason why I see a better profit growth in the second half than in the first half.
I was disappointed by the profit growth on the 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.
It you know, as long as the business is not solved, it's part of the consolidation and when it's 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, but in the P and 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 basis points, we are still in this line, which is that we want to be relative to the group operating margin But as we commented, those businesses for the moment are relatively small. This is the beginning of the process.
Okay. But including the acquisitions, how much profit contribution do we expect for M And A for perimeter effect?
No, we didn't give anything on that. I mean, the 40 basis points the impact of what the impact of the disposal program.
We have another question
Thank you. I've got 2 remaining questions, please, both of which relate to the U. S. On construction products, I think you attribute 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 at Wallburn, for example, because I'm, I kind of know in construction terms, it's 3 to 6 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 market overall in the U. S. And remember that also exposed largely to renovation also saw in the US and we are seeing a quite active market. In terms of, I mean, if you mentioned you refer to articles saying that as the housing starts are slowing down, etcetera, I wouldn't take a temporary slowdown as a know that this is the end of the cycle.
That's clearly not what we have in mind. So, so, yeah, overall, a good, a good momentum here In terms of HPM and the impact on tariffs, I mean, Pierre Andre, maybe you want to comment?
No, I can give you 2 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. And when I looked at the HPM, products which have been impacted so far by the what's going on between the U. S. And China it's around 1,000,000.
And in fact, for already a part of those million, we have increased prices without a significant impact. So clearly, it's a direct impact of what's going on on the trade war is for Saint Gobain is marginal. Then that doesn't mean that we will be immune is there is a slowdown in the global economic growth. But so far, we see in our various market, we see still good trends
But I think one of the remarks that Mike was making, I believe, is that it should favor also the US based producers and it's true that, on the other hand, we also have a strong presence in the US in
terms of
production in HPM.
No, even if HPM that's what I want to say. Even if HPM is the products are in travel, In practice, we are manufacturing on both sides of the Pacific Ocean. And in practice, they don't travel So that means that's why we are not really affected.
Are there any significant competitors who produce in China and bought to the U. S. Who are going to be negatively impacted by the tariffs. I mean, the CHF 40,000,000, I think it's the production that you do elsewhere and bring the U.
S. In China, yes, that's what specifically in China, yes.
Are the significant Chinese competitors for any of your major products that will be badly impact I mean, is it possible to give a figure of
I don't I am not able to answer this question, Mike. I have just seen the last release of 3M that they said that there is there for some categories that 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, etcetera, which means that, yes, it's a worldwide business, but the export are not so important because of that because of this necessity of being very close to the customer.
So we have another question from Eric Lemargier from Bryan Garnier. Please go ahead.
Two questions actually, both written in France. Regarding France, I know this is not a core market for you in France. Not in France, but we can see a slowdown of the new residential market in France?
I mean, France is our 1st country by far, so I don't
know what's going on. Yes. Yes, I know, but I was referring to the slowdown of the new residential market in France. I know you're more renovation oriented, but don't you start to feel the slowdown of this new residential market? It was my first question.
And 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
skilled labor.
So 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 my best the lag is much longer in the U. S. And in France and in the U.
S. So this may have this will have an impact progressively in 2019, the new build activity. As you said rightly, and I'm sorry, I misunderstood your introduction. I am new is, is much less important than renovation. And what we are seeing in the renovation is, in fact, the 3rd quarter was slightly above the level that we had in the 1st and the second quarter.
And 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 obtained to privilege new. So I expect that there is a pent up demand in renovation, which will, at least, that's what we are seeing in Q3 and we will see that again in Q4 will take the work from a slightly less bullying sales in new, even though in new, it's still it's still at the moment, it's not negative, but it will progressively in the new residential term negative next year. I must say so that in terms of new, the statistics have been historically quite volatile. So I think the level we have in France at the moment is not that high. So I am not sure you can say that the what's going on in the new build in the last 6 months is clearly the end of the cycle.
Okay.
So we have no further questions for the moment, ladies and gentlemen. I would like to remind you that if you wish to ask a question, please dial 0 and 1 So we have a another question from Manish Beria from Societe Generale. Please go ahead.
So I just have only one question. Maybe just on your net debt, So I remember well, maybe in the first half, you said something about net debt of greater than 8,000,000,000 So can you just please confirm that? Because I see the consensus number for the net debt is still at something like SEK 7,000,000,000. So Am I missing something? I mean, you already told about 1,000,000,000, but people are building 1,000,000,000.
So can you just show 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 this stage.
So we have a question, gentlemen.
Okay. So thank you for your participation in this conference call and good evening to everybody.
And we'll we will talk to you on the 26th for the organization conference call. In the morning for those who are interested.