Earnings Call: Q4 2017

Feb 23, 2018

Good morning, everybody. Guillaume and I are going to present to you our 2017 results and the outlook for 2018. First, I will take the highlights of 2017. Guillaume will go a little more in detail into results, and I will come back on strategy and outlook. The key figures for 2017, which has been a very good year for Saint-Gobain. Sales up 4.4% at EUR 40.8 billion, which means a like-for-like growth of 4.7%. If I exclude the impact of the cyber attack, it would have been a bit more than 5%, which is the best like-for-like growth of the last 10 years. Operating income plus 7.5% and plus 9.6 like for like, with a 20 basis point improvement of our margin and an acceleration in the second half. The recurring net income was up 16.7% at EUR 1,631 million. Our free cash flow is up 7.6%, despite a good growth in our CapEx. We will come back on that. The net debt is at a little bit less than EUR 6 billion, so a very solid situation with 1.4 times EBITDA. These figures would have been better if we did not have, in June, a very strong attack. We commented in July about that. I have nothing new, in fact, to say. We were able to close that by the beginning of July. What I told you in July, the results were very much in line. There was an impact of around EUR 65 million in the first half and another 15 mostly in the summers. What is important to notice, because it has an impact on our overall results, is that the impact was not the same everywhere. It was mostly in terms of geography, Western Europe and Nordic countries, Germany and France mostly. In terms of activities, around half of that impact was in Building Distribution, and Construction Products were also significantly affected. What is important also is that we have been able to rebuild our architecture in a much more solid way, but cybersecurity is not an item which is behind, and it is still a threat, I guess, for all companies at the moment. I think we are in a strong situation, but we are, like everybody else, not completely immune. These good results have been helped by supportive markets overall, even though we have also some important initiatives which help us. I think we had a good recovery, especially in France. It is probably the most important difference between 2016 and 2017, and a very solid growth in France in the second half with the good news, which is that renovation in the second half has started to make progress, and so the growth is not only coming from new build. We had globally good growth overall in the other countries in Europe, even though there is a lack of visibility in the U.K., but 2017 was okay. Germany has been a bit hesitant in 2017 for some of our markets. North America, good. An improvement in the second half, both on construction and what is more new, a very strong increase in industrial activities in the second half in the U.S., which is going to continue this year. Very solid growth in all emerging countries, including, what is also good news, a start of a recovery in the end of 2017 in Brazil. All our emerging countries are growing significantly. When you compare Saint-Gobain to what we were a few years ago, this picture has changed significantly the profile of the group. In this framework, our main highlights, organic growth accelerating at 6% on the second half and 6.5% in the fourth quarter. Good, and that was a challenge. Good increase on price, up 2% year-on-year with 2.3% in the second half and 2.7% in the fourth quarter. Guillaume will come back on that. Increase in operating income of 9.6% like for like. Double digit in the second half, 12.4%. Compared to what I told you in July, we were significantly in line. I would say better than what I said. We said we would be better than the first half in the second half. It was significantly better. We were helped also on that by cost savings, which are a little more than what we had in mind at the beginning of the year, EUR 290 million. Recurring net income up 16.7%. As I said, a good increase in free cash flow, 7.6, despite a rise in CapEx. Acceleration of our policy of small and mid-size acquisition. We completed 28 acquisitions in 2017, a little bit above our average range for the next few years of EUR 500 million, EUR 640 million. A good improvement in the main metric that I follow, which is our return on capital, with the two ratios, ROI up to 20.8%, passing the bar at 20%, and the return on capital employed to 11.2%. In terms of shareholder return, we bought back 8.3 million of shares. We have canceled 7 million, and I'll come back to that. The dividend, the board has recommended to the shareholders for the general shareholders' meeting, is an increase to EUR 1.30 per share. These are the highlights, and now Guillaume will go a little more into detail. As already mentioned, we delivered a very solid internal growth over the year, despite the impact of cyber attack, with 4.7% internal growth. On total growth, you can see on this graph that there is an exchange rate effect, which was clearly negative, with devaluation of the British pound, of the US dollar, and also of several Asian and emerging country currencies against the euro. It's worth mentioning at this stage that the impact of exchange rate on profit was even more significant given the geographic mix, because the U.S. and emerging countries account for a larger proportion of our profits and our sales, with some emerging countries small in sales but bigger in profit. Looking to 2018, if we were to remain at current spot exchange rates for the full year, which is always a very theoretical exercise, the FX impact on sales would be more negative than the -2.6% that we saw in H2 2017. Regarding the structural impact, we saw nearly 1 percentage point of growth, reflecting our step-up in acquisitions made in our three strategic priorities. That is Asia and emerging countries, new niche technologies and businesses, and consolidation of our strong positions. Stripping out exchange rate and structural effects, we arrive at our organic growth of 4.7% for the year, with an acceleration in the second half, and particularly in Q4 with an increase of 6.5%, which I'll discuss a little bit more in detail by business and by region. First of all, taking a look at the quarterly breakdown of internal growth, I will first comment on the volumes, which is the orange bar. My first remark will be to point out the large swings between the two orange bars between Q1 and Q2 of this year, which is largely explained by working days, and also the cyber attack in Q2. In fact, if you restate from those effects, the volume trend over the year was similar over the first two quarters and accelerated in the last two, which is an interesting momentum as we enter the year 2018. For 2018, we don't expect working days overall to have a significant impact for the year. It's worth noting, however, that at the start of the year, we should see a negative impact of around -2% for Q1. Moving on to the pricing part of the internal growth, which is the blue bars. You remember that we said several times that pricing was key for us this year, and we are pleased with the achievements of our teams on this topic. What we have here is a clear acceleration in pricing in the second half, up 2.3%, and in Q4, up 2.7%. You can see from the chart that this was achieved, firstly, against a more difficult comparison basis as the year progressed. Secondly, and we said that already in previous calls, at a more difficult time of the year to push for price increases, because traditionally in our industry, as you know, we are a little bit more used to spring price increases. A good performance, but this performance was absolutely necessary because of the context of increasing costs in raw materials and energy that we face with inflation of those costs ending up amounting to over EUR 500 million for the year. Remember that this amount of more than EUR 500 million is relevant to our industrial businesses, Innovative Materials, and Construction Products, the latter being where we saw most of the cost inflation this year. For these industrial businesses, pricing was up around 2.3% for the full year, which means that we had a slightly negative spread overall. Looking forward to 2018, our clear focus remains on pricing against the continued inflationary backdrop, an important subject across the industry if I listen to the calls of other players in the sectors. Because this topic of pricing is an important one, we added one graph to the presentation focusing on the quarterly pricing evolution in each one of the sectors. You can see, first of all, the quick switch from a deflationary environment to an inflationary environment at the group level at the end of 2016. What I would also highlight is the recent momentum in Building Distribution, but even more importantly in Construction Products. I would mention finally, the consistent ability to pass prices that Innovative Materials have demonstrated over the last two years, illustrating the high level of differentiation and value added in this business. Moving to operating income. Operating income, Pierre-André mentioned that grew 12.4% in the second half on a like-for-like basis, bringing the full year increase on a like-for-like basis to 9.6%. A good result given that this includes, once again, the impact of the cyber attack. On a reported basis, the 9.6% like-for-like figure translates into 7.5% given the negative exchange rate impact, which was more significant on a profit basis and for sales for the reasons I was mentioning at the beginning of the presentation. Remember, for example, that most of the negative FX impact came from the U.S. and certain Asian emerging countries, regions which, for us, represent one third of the group, but 55% of our profit. This 7.5% increase in operating income translates into an increase of 9% in business income and, as we will discuss later, a 16.7% increase in recurring net income, illustrating our focus on the lines below operating income that we have been speaking about in the past. You will see on this slide that non-operating costs did increase a bit, as on the one hand, we saw a decrease in restructuring costs, which are naturally less necessary in a better volume environment. On the other hand, we saw a rise in litigation expenses. On asbestos, as you saw on the previous slide, the accrual to the provision remains at EUR 90 million. New claims are stable to slightly down versus last year, and we settled just under 4,000 claims during the year. Following on from the 9% increase in business income we saw earlier, we achieved a 19.5% increase in net attributable income and a 16.7% increase in recurring net income. Our net financial expense decreased once again by over EUR 90 million with the average cost of our gross debt down to 2.8% compared to 3.5% last year. The tax rate on recurring net income decreased to 25%, mainly due to items such as the reimbursement of the 3% tax on dividends in France. Income tax expense was EUR 438 million with the U.S. tax reform resulting in a non-recurring gain of EUR 91 million. Moving on to recurring net income and net income. You see on this graph that the increases in net attributable income and recurring net income look even a little bit better on a per share basis. I remind you, and Pierre-André already said that we canceled 7 million shares during the year. So in the end, we have a recurring net income of EUR 1,631 million and a net income, and Pierre-André mentioned it was a record, of EUR 1,566 million. Cash flow from operations climbed 10%. CapEx rose 12.3% at EUR 1,538 million, equivalent to 3.8% of sales within the range that we have indicated, if you remember well at our investor day last May. In terms of operating working capital requirement, this remains stable at a good level of 28 days of sales, illustrating our continued focus on keeping this under control. When it comes to ROI, return on investment, and return on capital employed, I am pleased to present a further increase in both figures with the ROI increasing to 20.8% and the return on capital employed to 11.2%, both of them being the highest figures since 2008 when restated from the cyberattack. We clearly continue along the path to steadily improve our value creation ratios. To finish with the general figures, moving to net debt. The net debt has slightly increased since last year, mainly due to our acceleration in acquisitions and our share buybacks of just over EUR 400 million. Our balance sheet remains strong with our net debt to EBITDA ratio stable at 1.4. I will give a little bit more details by business and by geography. Innovative Materials had a very good year, delivering organic growth of 5.3% with an acceleration in H2 up 6.5%. We posted a very nice improvement in profitability up over 100 basis points compared to last year to 12.4%, driven by both the Flat Glass and the High Performance Materials businesses. Profitability is now back to levels which had not been seen since 2008 and within the normalized range that we gave at our investor day meeting. In terms of CapEx, we spent EUR 660 million this year in Innovative Materials with our main projects being, for example, a new float plant in India and growth investments in Mexico in coated glass and textile solutions. I will now turn to each one of those businesses, High Performance Materials and Flat Glass, to give you a little bit more details. In Flat Glass, Flat Glass delivered good results with organic growth of 5.2%, driven both by 2.5% of volume and a price effect of 2.7%. The good pricing over the year allowed us to achieve a positive spread versus raw materials and energy costs. In automotive glass, we benefited from good trends in all regions, both in terms of sales and in terms of orders, and with strong momentum in Asia and emerging markets in particular. In the construction markets, sales in Western Europe improved with float glass prices trend stabilizing, but higher prices for transformed glass in the second half. Asia and emerging countries continued to grow. Our operating margin crossed through the 10% level to 10.1% from 9.1% last year, driven by the growth I have just described and the positive spread for pricing versus raw materials and energy costs. High Performance Materials had a very good year, with sales up 5.8% and even an impressive 9.2% in the second half, driven by all regions, but in particular Asia and emerging countries. North America saw good momentum in the second half, driven by a strong growth in industrial markets in the U.S. after a more hesitant start to the year. All of our HPM businesses grew over the year, particularly ceramics, which benefited in the second half again from the very good industrial recovery in the U.S. The operating margin grew significantly by 140 basis points to 15.1% compared to 13.7% last year, driven by the good growth as well as limited increases in raw materials and energy costs. Turning now to Construction Products, where we saw 6.2% organic growth with an acceleration in the second half for this sector, also up 8.8% for the second half. Operating income increased to EUR 1,143 million, the highest level in 10 years. The operating margin tightened to 9.1%, mainly due to the time lag between pricing and raw materials and energy cost increase. However, as we saw on the previous graph, we were able to accelerate pricing in Q4 to 3.6%, something of an achievement given the tougher comparison basis, if you look at the fact that we had already started to increase pricing last year with Construction Products having only moved into positive pricing in Q4 of the previous year. This brought the full year price effect to +2.8%, with volumes up 3.4%. We spent EUR 582 million in CapEx over the year, including on plasterboard plants in India and Vietnam, for example. Interior Solutions grew 5.9% over the year and 7.6% in the second half, led by growth in Asia and emerging countries, and with volumes continuing to pick up in Western Europe, especially in France. North America progressed also. The operating margin went down to 9.5% compared to 10.3% last year, hit mainly by the inflation in raw materials and energy costs over the course of the year. A number of the materials that we have seen the most inflation on in 2017 are used in the Interior Solutions sector. For example, steel profiles, paper, and gypsum, with a move towards natural gypsum and away from synthetic gypsum, resulting in some additional cost across the industry, as I explained in the first half results. Interior Solutions is also the area where our teams pushed price the hardest, with good success, with prices up 3.1% for the year, 3.5% in the second half, and even 4.1% in the last quarter. We are seeing momentum here, even though we experienced a time lag at the start compared to the raw materials and energy inflation. Exterior Solutions delivered organic growth of 6.7% over the year, with an acceleration to 10.1% in the second half. This acceleration was driven by an improvement in all three businesses, but in particular, Exterior Products in the U.S. This business benefited from additional weather-related demand resulting from repairs after the hurricane in the U.S., and also of the very good construction and renovation activity in the U.S. overall. The pricing environment of Exterior Products remained a little bit tougher in the U.S. Pipe began to recover, led by pricing in the context of strong inflation in raw material and energy costs. Volumes were lower year on year, remaining hit by the lack of significant export contracts, but stabilized in the second half with an upturn in Brazil and an improvement in China. Mortars had a great year, with growth accelerating in the second half thanks to Asia and emerging countries, with a better performance in Brazil. Despite the raw material and energy cost inflation, we managed to achieve a wider margin of 8.4% for the year, up from 7.9% in 2016. Lastly, Building Distribution saw organic growth of 3.6%, despite the impact of the cyberattack, which was most pronounced on this sector. France continued to recover, led by good momentum in new construction, but also by the progress in renovation in the latter part of the year. The Nordics continued to deliver solid growth, whilst the U.K. grew at the same rate in the second half as the first half, but with the pricing contribution increasing and the volumes down. Germany was down slightly and the environment remains difficult in Brazil. We are focusing our Building Distribution investments in digital and logistics, a cost in the short term, but from which we should see progressive benefits in the years to come. Now, sales trends by regions. Let's now look at those trends where we saw organic growth in all four regions this year. France grew 3.5% like-for-like over the year, and 4.8% in the second half, with both price and volume positive. This growth was driven both by dynamic new build activity and also progress in renovation. We saw an acceleration in Q4 with sales up 6% like-for-like, thanks to the progress in renovation and a less negative impact from Pipe at the end of the year. It's worth noting that if we exclude the negative impacts of the cyberattack and Pipe, France growth would have been around 5% for the full year. We saw further growth in the rest of Western Europe, up 3.1% over the year, with progression in all countries aside from Germany, which remains hesitant and which was affected by production transfers. The U.K. continued to grow, driven by pricing, despite volume settling and the lack of visibility. The Nordics once again showed good growth in our main markets, Norway and Sweden. Regarding Southern Europe, we had a good year led by Spain. North America, we mentioned that already when we talk about High Performance Materials and when we talked about Construction Products. North America grew by 6% like-for-like over the year, with 9.8% growth in the second half. In construction, volume continued to trend well and was boosted by additional weather-related demand in the second half. I mentioned earlier that in the industry, we saw a good volume improvement overall, and particularly in ceramics. Finally, Asia and emerging countries had another excellent year with sales up 9.2%, driven by all four regions as detailed on the slide. The second half was even more impressive, with an acceleration to 11.4% organic growth, thanks in particular, and Pierre-André mentioned that, to a better performance in Brazil. When you look at operating income by region, the operating margin widened in France to 3.1% for the year from 2.9% in 2016, driven by the recovery in like-for-like growth there, affected by the cyberattack on the other hand. In the rest of Western Europe, we saw the margins tighten to 5.9% from 6.2% the year before, hit by the cyberattack, which was most strongly felt in this region, and also by the time lag between pricing and the rise in raw material and energy costs, particularly in the second half, which particularly impacted this region. As a result, operating income decreased slightly for this region this year. North America, to the opposite, saw margins widen by 80 basis points to 11.3%, and operating profit in this region rise by 12.3%. Asia and emerging countries not only is our fastest growing area, but it is also our most profitable one, with very good improvement, with margins up to 11.5% from 10.9% last year, and an impressive 16.8% increase in operating income. Lastly, looking at the EBITDA generation and the CapEx by region, I think the main remark I will make is that we are clearly focusing CapEx investments in the most attractive markets and regions, and you saw that on the previous slides, both in terms of growth and in terms of profitability, with a clear emphasis of our CapEx on Asia and emerging markets. Now I leave it to Pierre-André to give you more details on this as he gives you an update on the strategy. First, a few points about strategy, where we basically implemented the roadmap that we explained to you at our Investor Day last May. I will just cover briefly four points. First, growth with an acceleration of growth in 2017, which is going to continue. Three engines, mostly. First, a recovery of our markets, which have been going less positive than the overall economy for a number of years, have started to shift, and this should continue. Two examples, which are also our two biggest countries, France and the U.S., where we clearly see our markets being better than the overall economy, and this will continue. Overall, I think there are good engines a little bit everywhere in the world. Second factor of our growth is our longtime focus on innovation. Two examples of products we have launched recently, which are not still yet a very big part of our sales, but which are growing very fast. You remember we launched this new plasterboard last year, Habito, where sales are growing up very fast, and our electrochromic glass is now in a more commercial phase. Sales are accelerating. Third engine is clearly a change in Saint-Gobain profile compared to a few years ago, driven by the acceleration from a low base of the type of solution we provide into emerging markets. This is based on the growth of the middle classes in these countries. That is why the organic growth in those regions is growing very fast with now a very good coverage. It is representing 35% of our profit in 2017, despite still a low level in Brazil compared to what it has been historically, and Brazil is starting to come back. This is a significant part of our growth, and which will continue in 2018. It is a structural growth, and that's where we concentrate a very significant part of our growth CapEx. As you have seen, and this is fueling our growth, we are increasing our CapEx with three main area priorities. First, new geographies where there is growth. Guillaume mentioned a few examples. That's clearly where we are putting our growth CapEx. Secondly, a speed up in the digital transformation of our distribution activities, with significant investments in IT and in logistics. Third, and I explained to you this program in May last year, we are speeding up our investments in modernizing our plants, using all the new technologies that are called Industry 4.0 in Germany, with a new wave of productivities. We forecast, again, an increase of our CapEx in 2018. But we are very tight on the other CapEx, with all our maintenance CapEx. We stay in the range that we have announced in May. Second point, which is linked with this new wave of investment in productivity, cost savings. We are stepping up, in line with our program, to generate over the next three years around 300 million. In fact, in 2017, we generated 290 million. I give you here a few example of what we are doing. I think in most of our activities now, we have started with some pilot sites, and we are going to expand. I follow some metrics in terms of our robots, in terms of the number of projects where we are using data analysis, which requires also some investments in IT. But there is a new wave of productivity in all our industrial businesses, which is coming and which is fueling these cost reduction results. Third point, digital is not only in our plans. Our digital transformation is quite fast at the moment in all aspects, and mostly, I would say, in the relationship with our customers. We have launched a number of new initiatives, acquiring a few small startup, being very reasonable in terms of prices, and launching some internal startups like Homly, we talked about a number of times. I would say that a big part of our efforts to digitalize what we do is first, which is probably less known, is digitalizing all our customer offering with what we call a PIM, product information management. We have covered now a big part of our range, both in our industrial businesses, in construction, and in distribution. We are also rolling out the new, what is called BIM, building information modeling, which is going to change, progressively, the productivity of our customers with a number of projects. We are growing our new business model like Homly, but there is not only Homly in France, so into intermediation to get closer also to the end user, which is gaining a more significant role in the value chain. This requires, clearly, a step up in our IT expenditures, especially in distribution, which is having also an impact on our cost in distribution. There is a significant increase in the IT cost, and this will be there for two, three years, which is explaining that the recovery, to some extent, in terms of the profit, is taking a bit longer that we could have expected. But I think it's a very important investment for the future. And of course, we have increased also our IT expenses related to cybersecurity, as I mentioned. I would like to give you, with a short video, a small example of the kind of things we do in logistic and IT with this new automated warehouse that we have installed for Dahl in Norway. If you can have the video. This is just an example, but you see that in distribution, we have very automated logistic. It requires significant investment, but this position us very well for the future. The last point on strategy is an acceleration in terms of small and mid-sized companies, where we explained to you in May that we were planning around EUR 500 million of acquisitions on average in the next three years. We have done a little more than that, EUR 640 million in 2017 with 28 small acquisitions, which should generate significant value. We are very strict with our criteria to create value in year two or year three, which mean that if I take the one we have done last year, if I include the synergies that we generate in this year two and three, we have multiples which are on average below seven times EBITDA. We have a very good pipeline at the moment, and we have already signed deals for more than EUR 200 million at the beginning of this year. But we are quite selective, and in fact, there are a lot of small opportunities, but I say no more often than yes at the moment because we want to stay very disciplined in terms of prices. There are some countries where prices are becoming too expensive for us. The focus has not changed. Three priorities, bolt-on acquisition, where then the idea is to deliver very quickly cost synergies and increase our local footprint. We have also acquisition in new geographies and where it's really then to help the group to bring the other businesses in the geography. You remember that the first step in a country is generally culturally the most difficult one, but then we can accelerate. Technological niches, where the idea is to buy a technology which is very close to what we do in the other, and then to roll out using the same channels around the world. We have had some very good, nice examples in HPM but also in other activities. You see a few examples of what we've done. Sometimes I have classified this acquisition into three categories, but sometimes there are some which I would say tick two boxes of these priorities, which is even better. Now in terms of outlook, first, to express this confidence in our outlook, the board yesterday decided to increase the dividend to EUR 1.3 per share, which represent 44% of the recurring net income. You know that our policy is to be between 35% and 40% of the net income. We have decided to propose to the shareholders to increase the dividend as we are getting back to that range. This dividend will be paid in cash. During the same time in 2017, we have bought, as Guillaume said, 8.3 million of share and canceled 7 million of them as of now. Now in the outlook, as you understood, I am quite optimistic about 2018, and the trend of the fourth quarter is quite encouraging from that standpoint. I think we are going to have a further good growth in France, led by the newbuild and which is now the big engine, which is a bigger one for us of renovation has started, and I am confident about 2018 in France. We should have a good progression of other Western European countries, whether it is in the South, whether it is in the North and in Germany. There is one country where there are some uncertainties, which is clearly the U.K., given the very uncertain process of the Brexit, which is more creating uncertainties on the market than having a direct impact because Saint-Gobain, we buy and what we produce in the U.K. is sold in the U.K. So we are not going to be affected strongly by what's going on between Europe and the U.K., but the general climate in the U.K. is uncertain at the moment. Very strong growth in North America, and I would say there I am much more optimistic after the US tax reform, which is going to have a significant impact for 2019, '18 on the industrial businesses and construction is going to stay good. So I think the U.S. will deliver us good growth in 2018, and we should have a good momentum in Asia and emerging countries. At the moment, most countries are going well, including, which is new from the fourth quarter, Brazil. So I think we should have a good growth there. What does that mean for our businesses? I think that for Innovative Materials, we should have good continued growth, and we should also have good margin levels. In Construction Products, clearly, we'll have better volumes, better prices, but clearly, the focus is to have a better cost price spread than in 2017. The end of the year bodes well, and what we have announced at the beginning of this year in a number of countries is also positive. We have still a significant inflation in this business. And Building Distribution should benefit from volume growth in Western Europe. So in this overall framework, what are our priorities? No surprise, the first priority is price, but you see that the trend has been good. I'm pleased with the fourth quarter, but it is absolutely necessary that we do that. The environment is getting a bit more supportive, but in some cases, we are clearly to take some risk in terms of short-term, in terms of our market share. We are ready to do that. In some cases, the industry is having the same pressure on cost and also is acting. It is a clear focus for Saint-Gobain. We will continue to deliver our cost-cutting program. And this year, I expect EUR 300 million in line with what I told you. The CapEx program will increase in line with that I told you from a strategic standpoint. We will be around 4% of sales in 2018, with a focus on a growth of CapEx, mostly in emerging countries, and also in the U.S. in some cases. Productivity, with all the Industry 4.0 program and the digital transformation, particularly in Building Distribution. We will continue to have a strong commitment on R&D, which is growing regularly in line with our revenues to support our differentiated high-value-added strategy and a good focus, again, on high free cash flow generation. You have seen that we have increased the net sell— the free cash flow in 2017 despite the increase in CapEx. Overall, I am targeting for 2018 a further like-for-like increase in operating income for 2018 with good confidence in the economy and the ability of Saint-Gobain to deliver further growth. That's what we have to tell you. Now, Guillaume and I, we are ready for your questions. Hello. Yes, good morning. Josep Pujal from Kepler Cheuvreux. I have two questions, both on pricing, please. The first one, would you say as a CEO of one of your peers, who consider that passing prices in an inflection point where we have had two years of deflation and suddenly cost inflation comes back, this inflection period is a little bit more tricky because clients are not used, et cetera. Do you think that there is a sort of burden or negatives that has been impacting you in H2 2017, but that increasing prices will be easier going forward? My second question is, if you could be more precise in those areas, where it's for competitive reasons, more difficult to push price increases. I understand that not all the businesses. In some businesses, it's relatively easy to, let's say, grow prices according to cost increases, but there are a few ones where it's tougher because the competition is tougher. Could you share with us this situation? Thank you. I will start because you asked the question to me, so I will start, and Guillaume will expand. Yes, I think that it is clear from the trend you have seen quarter after quarter that we are getting out of this situation you described. Which mean that our environment is now realizing that we are back to not a huge inflationary mode, but we are out of the recession. The first one are the raw materials, and it's coming through the chain. The reaction that I hear at the moment from even from the customers of distribution, so for the craftsmen, the contractors, is more positive in most countries than it was one year ago. With especially all these categories of customers, the issue is that when they are contractors of projects, they don't want to change their pricing during the project. That was one of the issue we had, let's say, in Q3. You have seen that Q4 is getting better, so I am becoming more optimistic about that. That being said, then you have the competitive situation in each business. I have seen that many times in the past. The competitive situation is not necessarily according to what you can study in business schools. It is not when the capacities are full that necessarily the pricing is good, and it is not when the capacities are limited, there are plenty of capacity available, then the pricing is necessarily good. It depends by industry, by the behavior of the various actors, and that can have different consequences. There is not one specific situation. As in most cases, the leader in our market, Saint-Gobain, has a very strong stance in that. That is what I explained in my presentation. Maybe Guillaume, you want to add something? No, because I would repeat what you said. It is a question of several parameters, pricing. It is a question, obviously, of capacity utilization, but also of competitive structure of the market. Lastly, about behaviors. It is something which is not really predictable. When capacity utilization is extremely high, then we usually have a very good pricing power. This was the example, for example, in the last few years in Flat Glass in Europe, we had good pricing power on the back of good capacity utilization. But when there is low capacity utilization, it does not mean that the opposite is true. The truth is changing from year to year. A place where we have usually low market share is the U.S., but it does not mean that in the U.S. we always have difficulties to increase price. It depends really on the moment, on the behaviors. There is no real clear answer to be given on that. It depends on the countries and even sometimes on the regions inside the country. Yeah. Xavier Delfel, Natixis. Yeah. Three for me, if I may. Firstly, on the Building Distribution, looking at the full year, it seems to me that the operating leverage is a bit weak, or at least a bit below the guidance you gave a couple of years ago, which was between 20%-30%. I would just like to understand the reason behind it. Is it digital? Is it FX? Second question is on Sika. Looking at the share price, it stands above your acquisition price, or at least the option you have on Sika. Why wouldn't you simply exercise your option and wait for the laws and court to rule? Is it something you think of? The last question is on the elimination between the operating profit. It seems that the figure is three times higher than last year. Can you elaborate on that, please? I will answer the first two, and Guillaume will answer the third one. On the operating leverage in distribution, I think that you mentioned the two main reasons. First, there is clearly an exchange rate issue concerning the U.K., which is having an impact. I would say that we have more cost linked to IT and digital transformation, especially in France and the U.K. I would say Nordics, we have made those investments already. We have some big programs going on in France in terms of IT, which is having not only a CapEx impact, but also a cost impact. So that is also lowering the leverage. But I would say that country by country, there are some countries where we have a good leverage. It is a little bit lower this year than what we have in mind and that we flagged. Mostly for these two reasons. The third point on distribution, which this one is behind but has had a clear impact, is that it is a business where the cyberattack was the most important. The cost impact of the cyberattack versus the sales drop is clearly higher than the leverage. So it has a negative impact on the leverage, which was very clear in distribution in 2017. A big part in the first half, but also some in the third quarter. That was, I would say, more unfortunately for the future one-off. On Sika, as you know, we have a contract with the Burkard family, and our goal is, and we are confident, we wait that the Burkard family comes back, gets back their property rights. Our main scenario is that this will happen before the end of the year. On the eliminations, in fact, what you are talking about is what we call the holdings, which is what is centrally accounted for in operating profit. It is true that it is higher this year. There are several reasons, one of them being insurances, because you know that we are self-insured. We had, for example, an earthquake in Mexico, where we suffered damages in our Flat Glass installations. All of that is accounted for in holdings. Another factor I would mention, but there are several of them, another factor I would mention is the valuation of free shares as the performance of the group is increasing. Hi. Yeah. Nabil Ahmed at Barclays. Thanks for taking my questions. Three, if I may. First one, could you come back on the operating income bridge in the second half of the year, 12.4% like-for-like, obviously a very good number versus 7.4 printed. I think in your presentation, you mentioned that the contribution of the acquisitions were much higher than the group on average for geo-mix reasons and business-mix reasons. I was wondering if you could clarify what is the bridge in terms of contribution of acquisition in H2 versus FX, as well give a guide, in 2018, again, given the amount you have spent so far, how much should we expect as an operating profit impact for 2018 and also on Forex? Second question, I think you mentioned an increase in litigation costs beyond asbestos. Could you please clarify, and come back on that? Finally, last question is on Innovative Materials. Margin is already very high from an historical standpoint. You seem to be pretty relaxed and pretty bullish on growth. Do you see potential for further margin increase in Flat Glass and at HPM? Thank you. I will take the third question and Guillaume will take the first two. In terms of margins for Innovative Materials, you remember that I was asked many times whether we will get back to 10% in Flat Glass. We are there, and I am pretty happy we have delivered that, especially when I look at the results our main competitors, I think that the gap has in fact increased. I think the goal for me in Flat Glass is to stay double digit, and on the back of good growth in volume driven by our investment, both in Sekurit, where we are gaining share a little bit everywhere and in Flat Glass in emerging countries. Those are the main driver of the growth, and I think the goal is to stay at double digit. Concerning HPM, we had, I think one year better margin than the one we have had in 2017. I think also this level we are at, in 2018, I feel quite confident we will stay at that level and that we will generate also in HPM good growth. As I told you, I repeat myself, but I am quite bullish at the moment on what's going on in the U.S. industrial activities. We have very strong order books, and I think we should have a good year in HPM. On litigation costs, we have this year, as you saw, EUR 337 million in non-operating costs overall, which is EUR 25 million higher than last year and slightly lower to give you a perspective compared to what we have in 2015. There are three components, as I mentioned. Here, there is the asbestos cost, which are relatively stable. In fact, very stable. Then there is the restructuring costs, and as I mentioned, we are trending down in terms of restructuring costs. We continue to have restructuring costs as it's part of our optimization programs, but as our activity is getting better, we are doing a little bit less of large restructuring. Then there is the litigation and environmental costs, which are quite variable year on year. We have many prevention policies on this one to try to reduce the number of occurrences of those events, and I think we are very successful in doing that. As I mentioned during the investor day, the other side of the situation is that every event is costing more in a world where litigation costs are higher. This year, we are in a relatively high year with, for example, legal fees, linked to the fact that we are one of dozens of parties involved in the Grenfell Tower inquiry in the U.K., or in the U.S., our voluntary efforts to remediate water pollution around three of our former existing sites in High Performance Materials. Those are two examples of what happened this year. It's very lumpy year over year, and this year is a relatively high year, but remaining below what we had in 2015. Sorry. There's no specific events that was mentioned that you can The two I was mentioning, for example, are the largest, which are exceptional. You had a question about contribution of FX and perimeter to operating profit. Usually, we do not get into such details, but I think I mentioned during my presentation that the exchange rate effect this year on operating profit was disproportionately higher, negatively higher compared to the exchange rate on the sales because of our specific geographical mix and because of what I mentioned, for example, on the U.S., where we have a good level of profit and in some Asian and emerging countries where there was a lot of currency variation, in countries where we were generating profits. When it comes to perimeter, I think the guidance we have given is that the acquisitions that we have done this year will generate on a full year basis approximately EUR 500 million, and I would say that the profitability of those acquisitions is more or less in line with the rest of the group. Sorry. How much of the EUR 500 million is already in the '17 numbers? In the '17 numbers, I do not have the figure in mind, but what I would say also is that there are going to be acquisitions next year. So all in all, it compensates. I gave the answer on sales, but really I wouldn't get into such details on operating profit, because here it depends so much on the situation country by country and on the specific profitability that we have in each country. For example, one big element is the evolution of the USD in a country which is representing a substantial part of our profits. So it's very difficult to predict. Give us the rate of the USD for 2018, and we will answer your question. Given the present, one is going to be more than what we had in the second half. That was the answer from Guillaume during his presentation. If we take the spot one. Bonjour. Two questions for you. The first one is, coming back to France. You are confident in France. We have today more or less 330 million EUR EBIT standpoint, but use to hit 600 million EUR ex Verallia. Could we, in the reasonable future, hit back this 600 million EUR contribution number, first? Secondly, to get back to the two difficult activities, Pont-à-Mousson and Lapeyre. Where do we stand to these two businesses? Are they today hitting positive numbers or not? Many thanks. I think you answered in your questions. The profitability France is hit by the fact that these two businesses have clearly not good performance, even though Lapeyre is improving. Our Pipe business is starting to improve at the end of the year. The fourth quarter was better. We have launched significant actions to reduce our cost base in France. The French business of Pipe has been affected by clearly a very significant drop of our exports for both reasons, which are the fact that the oil countries which have been historically buying a lot of pipes don't have, given the price of oil over the last two, three years, have had a drop in their orders. This is starting slowly better, but in fact, the recovery has been behind what I was expecting. The second reason is also, and that's why also we reduce our cost base in France, is that there is new competition for this export business. We are lacking competitiveness in France to compete in some of these export markets. In terms of the domestic markets in Europe for Pipe, France, in fact, is a market which is better. I think the outlook for the French market in pipes is getting better. All the works which are, for instance, going on around Paris for the next few years are positive. Other countries are still weak. Spain, which is a country where we have a significant potential, has been below what we expected, mostly because of the political situation. I'm not talking about Catalonia, I'm talking about the fact that we didn't have a government for quite some time, and this is taking time to come back. I think that the activity from a Pipe standpoint is we have touched low points. The fourth quarter, the comparison with this was better. Those two activities are having an impact on the profitability in France. The other impact is what I told you, we are under a big investment program at the moment in our distribution business. I am confident that with the volume, progressively, we are going to significantly improve the profitability of France. To come back to Pont-à-Mousson and Lapeyre, are you now still in losses for the year or slightly positive? If I combine the two, we are still making losses in 2017, yes. Okay. Yes, hello. Eric Lemarié, Bryan Garnier. I got three questions, if I may, please. The first one on raw materials and energy. You probably mentioned it, but I missed that. Could you remind us what was the impact of raw materials and energy last year, and what could be your guidance for 2018? A second question on Sika. I can see you are very confident to finalize the deal in 2018. But I was wondering if you are not a bit worried by the fact that we are still waiting for the Court of Appeal decision on the voting right of SWH, and that another appeal after that is likely. Do you think you will have the time to close the deal this year because of these legal issues time lag? A third question regarding Europe. Could you remind us why Germany was so soft last year, and why you believe it will be better next year? I mean, in 2018. On Nordics, we can hear sometimes some negative comments regarding construction in the Nordics. You are doing very well in this part of the world. Are you by any concern about the construction markets in the Nordics today? Thank you. I will take the first one. On raw materials and energy, what I said during my presentation is that, the cost impact for last year was over EUR 500 million. For this year, we continue to see an inflationary environment, but we are cautious about giving guidance, but we think that, the cost inflation is going to be there. It's going to be less than last year, but probably more than EUR 300 million from what we can see at this stage with continued inflation in some raw materials, with some others plateauing. But overall, we think between EUR 300 million and what we had last year. Concerning Sika, I am not an expert on the legal timing of the tribunals in Switzerland, but what I understand is that the procedures at the federal court in Lausanne is a relatively short one. As I told already, our main scenario is that we will have an outcome before the end of the year. If by accident, we don't have an outcome by the end of the year, I can assure you, together with the Burkard family, we'll find the appropriate course of action in due time. Concerning Germany, as I think I said already, we had some closures of businesses in Germany that were transferred to Eastern Europe, which has had an impact in our activity, in Germany. This was mostly in our Flat Glass business. Concerning our construction businesses, whether it is Construction Products or where it is distribution businesses. First, Germany was more difficult last year than other countries in terms of pricing. That's one country where the difference in terms of cost and price was not very easy. Germany was quite hit by the cyberattack, given our systems we had last year. Also I would say that the construction market has been, in 2017, from our standpoint, a bit disappointing. I think the main reason is that our customers are finding hard to find labor. There are labor shortages in the construction market, which means that the activity is slowed down by this factor. I think that some of these factors will not play in 2018. Concerning what's going on in the labor market, I feel a bit more optimistic also about that because as there was a clear shortage, as always, there have been gaps being filled through different ways by the German economy. Concerning Nordics, I am positive about the Nordics. Sometimes I hear some negative comments about the Nordics. We have had a fantastic year in Sweden. I think Sweden will stay good. Norway was not that high in terms of the economy, and we performed well, and we have a very good recovery at the moment in Finland, which will continue. All in all, I am not pessimistic. Maybe Kåre Malo, who is heading our distribution business and he's from Norway, can give you more color of what's going on in the Nordics. I share very much what Pierre-André said because it is always a discussion when we have such a good market and also high price increases in housing. We see for 2018, a good market. Also, a report given by the Norwegian bank was very positive. Unemployment is going down, so the economy stays stable. We also have to remember that we are not only in new building, we are in renovation and all kind of different sectors. We can leverage from that, because infrastructure is increasing, especially in Norway. In Sweden, price increases in housing has been significant. We see a little bit flattening of that for 2018, but the market stays strong. We expect from those two markets, which has a huge impact on our result and our turnover, a good market for 2018. Thank you. Now we go to the question on the phone, and then we will go to the internet. First call, the phone. Ladies and gentlemen, if you wish to ask a question by phone, please press 01 on your telephone keypad. We have a question from Arnaud Lehmann from Bank of America. Sir, please go ahead. Thank you very much. Good morning, gentlemen. Two questions from me. Firstly, on CapEx, you give guidance EUR 1.7 billion for 2018, 4% of sales. Do you believe that 4% of sales is like a new normative level for Saint-Gobain, or is 2018 slightly higher than average because of digitalization and other Industry 4.0 CapEx spendings? That is my first question. My second question is, regarding the M&A outlook or your acquisition outlook. You have indeed been relatively active in the last months. What is the state of your M&A pipeline? Do you believe you will be able to continue the pace of acquisition in the coming months? Thank you. Okay. I will answer the two question. On CapEx, what we guided for is 3.5%-4.5% of sales. We have been at the low end, we will be in the bracket. I am not going to give you an exact percentage of sales for the next three years. I think that there are some CapEx which are going to be higher in 2018 in terms of IT than it will be on the long run. We maybe still have, in Building Distribution, high CapEx in 2019. But I think that it is probably significantly higher than the long run average. In terms of the growth CapEx, it depends also on the growth that we see in those countries where we follow the growth of our markets. As you have seen, we have a very good growth in these emerging markets, and we will follow. I do not know exactly. We adjust all the time the pace of our CapEx in those countries depending on the trends that we see. That is where we spend the bulk of our CapEx. Concerning Industry 4.0, I think that we are going to have more CapEx like in 2018 than in the years we have had. In other words, I think that I would say in between what we have had at the low point and what we have in 2018 is probably where we are heading. But we could have a bit higher ratio also. We are going to stay in our range, 3.5%-4.5%. In term of acquisition, I think I already explained that in my presentation. We have a good pipeline. The year we have started with already a few deals signed, around EUR 200 million already in the first quarter. For the rest, I cannot give you a number. I am very careful on pricing at the moment. We do not want to overpay. It is very difficult to know in advance. As I said, I have asked my colleagues to provide me with many ideas, and we say no more often than yes, but we have a good pipeline. I cannot tell you what is the number. I guided on the range on average, which is around EUR 500 million. It may be a bit more or maybe a bit less. I cannot give you. I do not want to have a number in mind for the year. I think that I have always been saying that in the past, and I am sticking with that policy. Thank you very much. We have another question from Elodie Rall, from J.P. Morgan. Madam, please go ahead. Yes. Thank you. Good morning, everyone. Can I just come back on pricing to start with? You expect cost inflation to be more than EUR 300 million for this year, but less than EUR 500 million. Can I ask what would be the annual impact of the price hikes that you've already announced in Q4? And how much more would be needed to offset the cost inflation that you forecast for the year? That's my first question, please. Second, on roofing, you said volumes were supported by strong storm activity in 2017. What is your expectation for 2018? I think Owens Corning has guided for a mid-single digit decline for 2018. Is that what you expect as well? And third, please, do you expect wage inflation to be higher in 2018 than last year? And is the higher cost savings target aimed at offsetting that? Thank you. Yes. On the price cost inflation, I think, your question is about how much is already in the price increases that we have and how much is in the future. In fact, it's a tricky question and there is a little bit which is already a little bit of a price increase, which is already in because of the price increases that we have announced. But on the other side, if you look at the cost spread equation, there is also a little bit of cost inflation, which is already in the contract that we have. All in all, one is offsetting the other, and it's a wash. I think a very simple way of calculating what we need to do is to take the 300 and do the division, because approximately, both effects linked to 2017 actions are equivalent on the cost and on the price side. On roofing, yes, we saw what Owens Corning said about the outlook for next year. First of all, as they mentioned rightly, it depends very much, like always, on the weather situation, which I'm even less able to predict than the exchange rate. But I would say that overall, because of our geographical footprint, we are a little bit less exposed to storms. It doesn't mean that we are not exposed to storms, but we are a little bit less exposed to storms than Owens Corning. Because of that, I think we will have a slightly more optimistic vision of 2018. And we expect at this stage to see a flattish market in 2018, given the fact that in 2017, we benefited indeed from some storms. And I think your last question was about wage inflations. Yes, there are some countries, especially, for example, in Eastern Europe, where we are starting to see increased inflation, because simply, the activity is getting more busy. It is also the flip side of the good activity that we are benefiting from. And yes, part of our cost-saving efforts, and in particular automation and Industry 4.0, are aiming at compensating that and at making us a little bit less sensitive to those inflations. So I do not know if it is a complete answer, but we are pushing as hard as possible on the cost-saving side to offset the overall cost increase that we see every year. Okay, great. Thank you. We have another question from Manish Beria from Societe Generale. Sir, please go ahead. Yeah, good morning. So I have two questions. First is on the operating leverage. So for 2017, I see it something like 12%. Even if I remove the cyber impact, it is something like 15%-16% for the group. So do you see this operating leverage number improving in 2018? And also I wanted to ask, so I thought that maybe the fixed cost will come later, so the operating leverage at the initial years will be much higher. So when do you think with the improvement in volumes, the fixed cost coming back into the business? My second question is, I wanted to ask, can you finance your acquisition, buyback, and dividend with internal cash flow generation? So in other words, do you see your net debt falling over time? Thank you. Okay. On the first question on operating leverage, I think we have not changed our vision compared to what we said at the Investor Day. This year was, as you said, a little bit disappointing in terms of leverage, and it is mostly because of two effects, the cyber attack and the cost-to-price spread. As we explained, we increased price quite substantially, and we are happy with what we have done. But on the other hand, we saw an acceleration of inflation during the year. As Pierre-André mentioned, I think it is true that it is an inflection point also, where this lag costed us a little bit of operating profit. If you remember well, what we had explained at the time of the Investor Day is that we were clearly anticipating leverage in the future years, but that it would depend also on what we were able to do on the cost-to-price spread. It was assuming a constant cost-to-price spread. So the answer to your question on 2018 will depend very much on what we do on this side, and I think this question has been addressed very much by Pierre-André. In terms of where and how long can we last without adding fixed costs, I would say that it depends very much on the situations and on the businesses. It depends, for example, on capacity utilization. If you remember well, what we are traditionally saying is that in Europe, in Construction Products, in construction-related activity, there are many businesses where we still have room for additional volumes in our existing capacity, which does not mean that at some point you do not have to add shifts or things like that. So the leverage and the capacity to increase volumes with limited fixed cost may be higher than in other countries. For example, emerging countries, where clearly we are building capacity to follow the very impressive growth of the markets. Now, your second question was on debt, if I remember well, and our capacity to self-finance. You saw the net debt evolution last year. It increased by approximately EUR 400 million, which is exactly the amount of share buybacks. On the other hand, there was one exceptional item last year, which is that we contributed once again to the pension fund for approximately half of that. So I would say overall, we are balanced. If I look at that, in a year like last year, with EUR 641 million of acquisitions and EUR 400 million of share buybacks, we probably kept debt stable plus. So I think it will depend in the future on what we do in terms of share buybacks and in terms of acquisitions. As Pierre-André mentioned, we have a general guidance on acquisitions, but it is not precise year after year. Okay. Maybe if I can add one more. On Sika, the price that has been negotiated is much lesser than the current share price. Do you think a situation when you have to pay more, maybe the family wants more for the stake. Do you see a scenario when you have to pay more for the Sika? Thank you. No, I think there was some speculation last week in Switzerland in some newspaper, which is wrong, and I have nothing to add to what I said more on Sika. I think that our alignment with the Burkard family is total. I want to add something on the debt, is that the way we manage is more to keep our rating at a level where it is. From that standpoint, we are in a very comfortable situation at the moment. We have some room. The question on the acquisition is to stay disciplined, which is a strong commitment I can give you from my side. If there is no more question on the phone, I will move to the internet. We have a question first from Paul Roger from Exane. "Are new price increases planned in U.S. wallboard, insulation, and roofing? Will the price-cost spread be stable for the Interior Solutions division overall this year?" I can give you the announcement we have done in the U.S. in terms of pricing, which doesn't mean that we have this price realization. But we have announced significant price increase in insulation between 12% and 15% in February. In gypsum in January, also 15%, and in roofing, around 3%. The timing of those is at beginning of the year, which is usual in the U.S. I cannot tell you at this point, but we are really pushing hard on this price increase. In terms of will price-cost spread be stable for Interior Solutions division overall this year, you can derive from what I said. The goal is to do that and maybe to do even a little bit better. All our efforts are in this direction. I will give you the result when we know it. I refer you to various comments made at the beginning of this morning on the pricing, depending on the situation. Do you expect the recent trend of insulation companies expanding in stone wool to continue? How could the penetration of different type of insulation change post the Grenfell strategy? Maybe Benoît, you want to answer that question? Benoît Bazin heading our Construction Products sector. Well, clearly there is a strong insulation market overall on many applications. Stone wool is, of course, one of the materials. We have also our stone wool offer, and we see also glass wool coming back on some new applications like facade, like external insulation on facade and also flat roof. So, for each application, there are several solutions, stone wool being part of the offer, glass wool as well, and other materials. So it varies according to the regulations, according to the countries, according to marketing that all the insulation players have done. So yes, stone wool is growing. We are investing in stone wool, and the overall insulation market is quite strong right now. The third question from Paul Roger is, are you more confident on the year ahead than you were at this stage 12 months ago? Yes, I would say yes. I would say yes for under two main First, I think that we are getting out of this deflationary environment, which was a drag, and I refer to the first question of Josep Pujal on that. So I'm more confident from that standpoint. On the overall economy, I think it's better. With two countries which are our two biggest countries, where I'm clearly more confident than I was. France, clearly, and the U.S. I would say, and the U.S., where really the last part of the year was very good, and the US tax reform is going to have, for 2018, a very positive impact. Question from Félix Brunotte from AlphaValue. Could we have more granularity on the discrepancy between the 7 million share cancel and the reduction of outstanding shares by only 2.6? Well, the difference come mostly from the employee savings plan issuance, which was 4.5 million shares this year. So this is very arithmetic. Deutsche Bank. Given the strong price increase in H2, will this impact the potential for further price increase, in H1 2018? Well, I've given you the example of what we are doing in Construction Products in the U.S., and the answer there is clearly no. I think that the situation would have to be analyzed business by business, depending on what we are doing. But, the answer is clearly no. There may be one country or one business in one country where the answer would be different. Please, can you remind us guidance for group tax rate on an ongoing basis after taking into account the changes in U.S., France, Belgium, et cetera? Guillaume? Yes, I can do that. It's always difficult to predict the tax rate. There are many evolutions during the year. That being said, you saw that the tax rate went down from 27% to 25% on recurring net income this year. A part of that was exceptional, linked to the reimbursement of the 3% tax on dividends in France, but not everything, because it's true that we have reduction in tax rates, for example, in the U.S. on an ongoing basis and in other countries. So in the end, at this stage, our expectations are to be around in between, which means 26% between last year and this year. Question, you guide to strong growth in North American Industrial in 2018. What gives this confidence, and should we expect this to be most evident in HPM and therefore helpful to margin? The first part of the question I already answered many times. I think that the US tax reform and the good momentum we have seen in the first quarter, and the good order book we have at the moment. Yes, this will benefit Industrial. It's mostly our HPM business, where 40% of our sales are in the U.S. And clearly, as HPM has higher margin than the average for the overall margin of Saint-Gobain, it is positive. What was French like for like growth in H2, excluding cyber attack and Pipe? I would say it's closer to 6% than to 5%, since the average is 5%, Guillaume. Uh- No, but you don't have that number. No, I don't have to do the retreatment, but I think it will be closer to six than to five in the second half. Building Distribution investment in digital and logistic. Is this reflecting a step up in online competition in this business? If so, in what regions? We are investing in digital in all our countries in distribution. But clearly, in terms of the CapEx, the two big ones at the moment are France and U.K. In Nordics, we have done changes in our IT already some time ago, and the logistics is now already, I would say, nearly done, even though it's continually refining. We are looking at an expansion in Sweden of our logistic warehouse, similar to what I have shown you in the video. But basically, it's mostly France and the U.K. The question is, how we Well, it's clearly, I would say, to be in a position to be ahead, in terms of distribution. There are challenges in all type of distribution. We consider that our type of distribution, because of the specificity of our products, is less challenged by new entrants than in other type of distribution. But clearly, we want to be ready for changes if they happen. For us, the answer is IT and logistics. From that standpoint, I would say that we are investing heavily in France, but I think we are probably ahead. In the U.K., we are probably a little bit behind some others. So it's a different situation in those two countries. Please, can you confirm if you do or don't have the power to extend the offer for the Sika share at the current bid price without agreement of all the Burkard family? The legal verdict is not achieved by end of December. I think I've already answered two or three times this question. That's all what I have. Yes. I think that No, Dutch. You just answered this. There is another question on the phone, I understand. We could go back to the phone. Yes. We have another question by phone from Will Jones from Redburn. Sir, please go ahead. Just a couple from me, please. The first, when we are looking at the notes to the accounts with regards to the pension charge that went against EBIT. It looks like it dropped quite a lot last year, EUR 125 million charge, and it was about EUR 200 million in the previous year. I think most of the change was in the second half. Is that correct? I guess, why did it happen, and does that benefit kind of hold through 2018? The second one is just a two-part question around distribution. Firstly, just coming back to the extra investments in digital. Is there any way to quantify the OpEx effect last year of that? If not, can you just help us, will this step up in OpEx on that issue, if it is growing, will it be kind of easing year on year from here forward? Is it a similar effect in 2018? I guess, staying in that division, just maybe a quick run-through of the kind of competitive backdrop from your traditional peers in distribution by key country would be helpful. Thank you. Okay, I will take the first one. Overall, we pay year after year approximately EUR 8 billion in salary, wages, and pensions to our employees. This is a very important cost that we are watching closely and are pushing to optimize every year. Pensions is one of the components of those EUR 8 billion that we are working on. You remember that last year, for example, we did a special contribution to the pension fund in the U.S. to optimize the tax component of the pensions. We do other things on an ongoing basis, like, for example, buying back pensions in some countries. We did that in Europe and the U.S. Like changing the plans in some countries also, we did that in the U.S. Overall, this explains the fact that we were able to reduce the pension cost. It shows one thing, which is that those EUR 8 billion are not outside the scope of what we are working on in terms of the cost base. It is not part of the cost savings, but it is something also that we are working on. Is it going to have an impact on next year? First of all, we will continue to optimize next year. Secondly, what we have done this year is going to have an impact on the service cost for next year, yes. On the question on the distribution cost, I would say that overall, compared to two, three years ago, in 2017, it was probably 0.2, 0.3 or more in term of cost. I do not expect a significant increase of that, but on the other hand, we are going to have additional costs compared to where we were a few years ago for another two to three years, I would say. But I do not expect that to grow from where it was in 2017. I forgot that there was another question. I did not get the last question. If you can repeat, Will. No, he is gone. Sorry. Oh, hello. Sorry, the other question was just around kind of just general kind of competitive levels. Oh. From your traditional. In Building Distribution? Yes. Yeah, in Building Distribution. Yeah. And in key countries. Well, I would say that in the Nordics, we have a relatively good competitive situation with a strong competitor in our plumbing and heating business. Overall, I think we are doing more or less as where they are. We are doing better than competition in the building material side in Nordics, clearly. In France, I would say that we are doing a bit better than competition, both in terms of growth and in terms of margins. In the U.K., as you know, Travis Perkins has better results than Saint-Gobain. It is too soon that this has been the case for a number of years. I would say the gap last year in terms of sales growth has been reduced. That is what I would say globally about our main situation versus main competitors. Thank you. Okay. Well, if there are no questions, thank you very much. Thank you.