Earnings Call: Q4 2013

Feb 20, 2014

Good morning, everybody. Together with Laurent Guillot, our CFO, I will present the results for 2013 and the outlook. As usual, I start with the main highlights of the year. Laurent will go into more detail on the results, and I will come back on strategy and the outlook. Key figures for 2013. Sales at EUR 42 billion, down 2.7%, and flat at constant exchange rate. Operating income down 3.5% at EUR 2.764 billion, but up slightly at constant exchange rate, +0.4%. Recurring net income, EUR 1.027 billion, down again 2.5%, but positive, +2.4% at constant exchange rate. Net income, EUR 595 million. Free cash flow, EUR 1.1 billion, so very strong increase, 41%. Net debt down around EUR 1 billion at EUR 7.5 billion, -11.4%. These set of figures have been registered in a context which has seen, as we thought at the beginning of last year, with a turn during the year. Overall, not a great macroeconomic scenario, with a very difficult first half in Europe, not helped at all by the weather conditions, which were especially difficult in the first months. Overall, I would say a sluggish economic environment in Europe, better in the second half, led mostly by the U.K. and to some extent by Germany and some countries in Northern Europe. North America, we had a very strong upturn as expected in residential construction and solid industrial markets. Asia and emerging countries in our markets have been quite good in 2013, with especially the construction sector in our activities very solid and improving during the year. On the other end, and especially in those emerging countries, but also in the U.S., we had significant, as mentioned in my first slide, depreciation of all currencies against the euro, with a growing impact. The impact of the exchange rate was around 2.7% for the full year, but 4.1% on H2. In 2013, we implemented our priorities, which were quite clear. Focus on price. We have achieved a 1% price increase in a context which was slightly better in terms of cost, especially of the raw material and energy input cost. We have delivered significant savings as planned, around EUR 600 million in 2013, with specific emphasis on some sectors which were struggling, and especially we are seeing in the second half the first results of our actions in terms of adjustments in the Flat Glass business. We have managed, I think, quite well our cash with a very strict approach to CapEx, down more than what I said at the beginning of the year. We expected EUR 200 million down. In fact, it has been EUR 400 million down versus 2012. Acquisitions were very moderate last year, EUR 100 million. On the other end, we had three more times this effect on divestitures. We had a very strong performance again, like last year, in terms of operating working capital, because we have maintained the level of 29 days, which is below our medium-term objective, and we already reached last year. In terms of our results, I think we have delivered on our objectives. I talked about, during the year, the fact that the first half would be the low point of our results. Clearly, we have done slightly better, in fact, than what I intended in July, especially with the adverse impact of exchange rates. Compared to the second half of 2012, our results in the second half of 2013 at constant exchange rates were 16% up. Thanks to our management of CapEx, we had a very good level of free cash flow, up 41% on 2012, and our balance sheet is robust with a net debt down to EUR 7.5 billion. Laurent will go into more detail in our different results. Thank you, Pierre-André. Good morning, everybody. A little bit more details on group numbers first. Turnover, -2.7%. The -2.7% is coming mainly from exchange rate, as you can see. We had a -1.3% exchange rate impact in the first half, -4.3% in the second half, so very significant, coming mainly from a depreciation of almost all currencies against EUR, but for us, more specifically, coming from Latin America, from depreciation of dollar and pound against the EUR. Perimeter, a very small, moderate impact. We have in the first half, the impact of the acquisition of Brossette in 2013. In the significant part of the year, the acquisition of Celotex. On the opposite, we made some divestiture. As you know, we sold a business in Pipe and Foundations in Construction Products in the U.S. in the first half of this year, and we made some disposals on non-core periphery asset in the Building Distribution. So +0.3% impact of the perimeter. On a like-for-like basis, the evolution of the turnover is thus -0.3%, +1% in price. So continue to be a good performance in price in an environment where raw material and energy costs are stabilizing through 2013. Volumes are down -1.3%, mainly impacted by the evolution of the volumes in the first half of the year. If you look at the quarterly organic growth, you can see two things. First, very good performance across the last three, four years on prices, with always good price realization. Clearly more important when inflation is highest. It had the highest point in 2011, still at a good level in 2012, 2013. +1%, with a +1.2% in Q4 this year, on the back of improvement in Flat Glass in emerging countries and a little bit in Building Distribution. Concerning the volumes, you see the very significant U shape of the volume evolution with a significant drop of the volumes in 2012, beginning of 2013. Clearly, the comparison basis for the beginning of 2014 will be relatively easy due to the bad weather conditions last year. You see the strong improvement through the year with positive numbers in Q3 and Q4. Q3, you remember that we had a positive impact of number of days, +1 day, which means approximately 1.5% of our sales. If you compare Q3 and Q4 at same number of days, we have a stable situation in term of growth of volumes or a slight improvement in Q4 compared to Q3. Improvement in volume in H2, improvement in prices. Overall, this has had a very significant impact on the operating income through our significant operating leverage. An operating income in H2 at a little bit above EUR 1.5 billion. Clearly, in line with the guidance that we have given at the beginning of the year of H2 above H1 2013, clearly above, and H2 significantly above last year in H2. 9.9% as Pierre-André said, and 9.9% above last year. 16% above last year at constant exchange rate and perimeter, with an improvement in turnover of 2.6% on a like for like. A very significant operating leverage that comes from, clearly, slight volume improvement. A small spread between price and cost. We passed the cost to the customer in price increases, but also due to the significant cost reductions we have made through the year. I remember you that we have an impact in 2012, 2013 of the change in accounting for employee benefits. You have all the details both in the presentation and also in the annex. I don't come back on that subject, but it has an impact on the numbers of 2012 of EUR 18 million on operating income and EUR 73 million on net income. If I come back to non-operating item now, the non-operating costs, including restructuring costs, are still at a relatively high level, EUR 492 million, with EUR 90 million for the provision for asbestos-related litigation. As always, I will come back on this subject. Around EUR 400 million in other expenses, mainly restructuring charges, with a significant part, almost half of it being for Flat Glass, with a significant restructuring program that we have in Flat Glass. The remaining restructuring actions are almost all in Europe, and especially, we continue to have significant restructuring plans in the southern part of Europe. Other operating expenses, EUR 381 million, with a capital gain on asset disposal of EUR 99 million. The consequence of mainly the disposal of Pipe and Foundations activity in the U.S. Also, the capital gain on the disposal of the building of the headquarter here that was matched by capital losses on small disposals that we've made in Building Distribution in non-core assets. Asset write-downs EUR 476 million. Three big items in this number. First, the consequence in asset write-downs of the restructuring actions in Flat Glass, EUR 143 million. The consequence of the decision to dispose some of our assets, for example, Fiber Cement that we have signed at the beginning of this year, and we had to write down some tangible assets in this division. The last point is intangible write-downs, so goodwill write-downs in one of our business in Lapeyre or B2C specialist in France, due to the significant drop of sales we had after the market turned down in the window market in France. Significant drop in the market in the last 2, 3 years, and we had to revise the value of the goodwill of this business. Taking all that into account, a business income that is going down by 3.8%, more or less in line with the evolution of the operating income. The outstanding claims concerning the asbestos-related claims in the U.S., as always, very stable situation. New claims, 4,500 new claims in 2013, in line with the last two years. Settle claim at the same number so that the outstanding number of claim is stable. The payments is a little bit higher than last year, but you remember that last year we had some delay in payments, so that if you look at the medium term, it is clearly a relatively stable number and the provision remains stable at EUR 90 million in 2013. Net financial cost is slightly going down with an average cost of growth debt at the end of the year, which is significantly going down, so that we can expect a further decrease of the net financial expenses, especially in cash next year. The income tax, although the tax rate on recurring net income is going down due to the fact that we have asset goodwill write-downs that are not deductible, whereas last year we had more tangible asset write-downs that are deductible. The total expenses in income tax is increasing in 2013 compared to 2012. The consequence of the slight decrease in operating profit and the evolution of the exceptional items is a decrease in recurring net income, EUR 1,027 million. At constant exchange rate, you see that we have improved our recurring net income compared to last year, despite the tough situation of the first half 2013. A strong improvement through the year. 2.4% at constant exchange rate. The recurring EPS is at EUR 1.86, and the net income is going down to reach EUR 595 million, and the EPS is at EUR 1.08. Next slide, please. Capital expenditures, as Pierre-André explained, our CapEx level has been significantly reduced compared to last year, more than EUR 400 million reduction compared to last year at 3.2% of the sales, the lowest level in last year, 2009, we were at 3.3%, so a low level. That was achieved through a unique cost saving reduction like the one we explained to you at the Investor Day. That was also achieved through optimization of CapEx timing. Due to the slowdown of some economies, we have postponed some CapEx. It is not cancellation, it is more postponement of some project that will be done in the coming years. And clearly, the focus in 2013 continued to be on growth CapEx outside Western Europe. Due to this reduction of CapEx and due to the good level of cash flow from operation, we were able to achieve a strong increase of the free cash flow, +41% above EUR 1.1 billion, EUR 1.157 billion in 2013. And on the cash control, we continue to have a tight rein on operating working capital requirements. You remember that last year I told you that the 29 days was a record year in term of working capital requirements, and that we will have difficulties to continue to reach the same level. In fact, from an operating point of view, we were quite tight on the working capital requirement, and we were able to stabilize the working capital requirement at this same number of days, so great performance. Leading due to the fact that our turnover has been slightly down due to the exchange rate. This is leading to a cash inflow in term of financing of EUR 97 million. Some acquisitions and divestments, EUR 100 million of acquisition, mainly in HPM between Brazil, Germany, and the U.S., in line with the strategy we announced and we confirmed in November. Also an acquisition in Morocco in the Gypsum. Some disposals, Pipe and Foundations. In Building Distribution, some disposals of non-core assets in Argentina, Eastern Europe, and Benelux, and also France and the U.K. after the acquisition of Build Center and Brossette. Also, disposal of the head office building here in La Défense. Not included in this EUR 357 million, we had some agreement at the beginning of the year to make a disposal of additional businesses in M-Tec, in Fiber Cement, in Construction Products, and in MPRO in Belgium in Building Distribution. Return on capital employed and return on investments have slightly improved despite the reduction of the turnover. The turnover is down at 2.7%. ROI is slightly moving up, stable, I would say, slightly up to 16.9%, and the return on capital employed 9.4%. Net debt and shareholders' equity. Shareholders' equity is stable at EUR 17.9 billion. This is mainly due to the fact that we had a very significant almost EUR 1 billion impact of exchange rate on the shareholders' equity. Otherwise, you have EUR 0.6 billion due to the net results and EUR 0.4 billion positive due to the pension actualization. On the debt, clearly the strong cash flow we had, the strong management of working capital requirement lead to a reduction of the debt of EUR 1 billion, so that all the indicators, net debt on shareholders' equity and net debt on EBITDA are improving. 42% for net debt on shareholders' equity and 1.8 on net debt on EBITDA. We continue to have a very strong balance sheet. The details a little bit by business sector with minus 0.3% at the group level. Clearly, between H1 and H2, we had a strong improvement in all our divisions. Construction Products at plus 1.9% in 2013, plus 5.6% in the second half, so a strong increase of the performance, driven by Interior Solutions in the U.S., emerging countries, and driven also by the stabilization of our activities in Europe. A more moderate growth in Building Distribution and in Innovative Materials in H2, plus 1.7% in Building Distribution, plus 1.5% in Innovative Materials. Packaging remains slightly behind. We had a minus 0.6% in the second half. I will come back with more details on these numbers. Always to remind you that the split or the breakdown between the business sectors is quite different if we look from a sales point of view, from an industrial asset point of view, and we have approximately three divisions with approximately the same weight with Building Distribution, Innovative Materials, and Construction Products. Come back on Innovative Materials. First, concerning the turnover. Organic growth, as you can see, minus 0.7% for the full year 2013, minus 2.9% in H1, and plus 1.5% in H2. With Flat Glass, plus 2.8% in H2, 2% in prices, and 0.8% in volume. In prices, we have clearly an acceleration of price increases in H2, coming mainly from emerging countries and from Sekurit. Leading finally to a positive spread in the second half, whereas we had a negative spread in Flat Glass in the first half. In volume, 0.8%, so still a small contribution coming from the volumes. With the stabilization of our activities in Western Europe, still negative in downstream activities, but more positive on automotive and especially of our automotive activities in Germany. Also, strong contribution from emerging countries, especially coming from our automotive activities in Latin America, in Eastern Europe, in China. HPM, flat compared to last year, which is a much better performance if we compare to the first half. We have zero price in an environment where the cost in 2013 were slightly negative in term of raw material and energy. So a positive spread, but nevertheless zero prices. Also zero volume. We had a strongly negative contribution coming from ceramic, as I told you, for several quarters already. Minus 12% still in the second half in ceramic. That was fully compensated by our other activities, abrasive, plastic, and with strong performance of Adfors, driven by emerging countries. Europe and the U.S. had a small contribution this second half. The consequence in term of operating profit, an improvement of 0.9 points in the margin between H2 last year and H2 this year, mainly driven by the improvement of the margin in Flat Glass. The margin in Flat Glass as stated before, is not so much coming from price, a little bit from the spread between price and cost, but marginally. A little bit coming from the volume, but, slowly, and mainly coming from the cost reduction and significant restructuring plans we have implemented. This lead to the fact that we've doubled the profit in absolute terms between H2 last year and H2 this year, or we almost triple the profitability at constant exchange rate between H1 and H2. HPM continued to post a quite strong performance, 12.5% in a difficult environment for HPM, where we continue to have our strong contributing ceramic business with low sales. On the opposite, we have improvement of profitability of the other businesses and a significant cost reduction. We continue to have a strong contribution of these businesses in term of EBITDA, over EUR 1.1 billion approximately at the same level, slightly above last year, so an improvement at a constant exchange rate. Capital expenditures of 412, we had strong developments of our activities in emerging countries with the end of the float lines in Colombia and India, a quarter in Brazil. The development of different units of Sekurit in China and Mexico, for example. So EBITDA minus CapEx, 717 plus 35% compared to last year. Construction Products. A strong performance in H2, a minus 1.7% in H1, plus 5.6% in H2, both in Interior Solutions and in Exterior Solutions. With a strong contribution of prices in Interior Solutions coming from the price improvement we had, especially in the U.S. and emerging countries, both in insulation but strong in plasterboard. We had a strong volume increase in this high value-added solutions, Interior Solutions, plus 3.7%, clearly coming from emerging countries, coming from the U.S., to a lesser extent, coming from some countries in Europe, like the U.K. We continue to have a more struggling situation in the southern part of Europe and a slight reduction in France. Exterior Solutions. Some price stabilization in the second half of this year, -0.4%, mainly due to the price evolution of roofing and pipe business. At the same time, we had a reduction of our cost of raw material and energy, so the spread in these businesses were positive. In term of volumes, a strong volume improvement in Exterior Solutions, mainly coming once again from emerging countries, but also coming from the pipe business with the export contracts. On operating profit, another improvement of the profitability of Construction Products, 8.9% in H2 compared to 7.8% in H2 last year. An increase at constant exchange rate of 22%, knowing that we have an improvement of the like-for-like business of turnover of 5.6. A strong operating leverage coming in both division, Interior Solutions and Exterior Solutions, coming from a positive spread between price and cost, coming from a significant volume improvement in Interior Solutions, and coming also, to a lesser extent from cost reduction, more in focused areas like the southern part of Europe. EUR 433 million in CapEx, with a significant project in gypsum in emerging countries, in Brazil, in Russia, in Indonesia, but also coming from some projects in the U.S. with one greenfield plant in roofing. From a series of small capital expenditures in mortars. EBITDA is stable, slightly up at constant exchange rate, compared to last year, so that the EBITDA minus CapEx is at above EUR 1,054,000,000, an increase of 11% compared to last year. Building Distribution, 1.4% negative in 2013, clearly driven by the impact of the weather in the first half. The second half was positive at 1.7%, driven by a strong improvement of our businesses in the U.K., +8%, in Germany, +5%. A continuous good situation in the Nordics with 2.4% improvement compared to last year. On the opposite, we posted, I'm talking about H2 numbers, we continue to have a slight reduction of our turnover with a -1% in France, but improving through the year, clearly with a trend to stabilization of the situation in both France and in the southern part of Europe, where we are almost on par in the second half compared to the second half last year. Concerning the profitability, you remember that we said at the end of the first half that we would be around and above the number of last year. We are clearly significantly above the number of last year with, at constant exchange rate and perimeter, 11% improvement between H2 last year and H2 this year. 11% in profit compared to 1.7% in internal growth. This is a very good operating leverage. Not coming from the commercial margin, where we continue to face some pressure, but clearly coming from a significant cost reduction in Building Distribution. 4.4% margin in distribution in H2. Clearly, you can see that on this graph that H1 was clearly strongly affected by the weather conditions. EBITDA minus CapEx at a very good level of around EUR 700 million. The packaging business, Verallia. A turnover that is down for the full year, -1.8%, -0.6% in the second half. We continue to enjoy good growth in Latin America, +8%, but we face difficulties both in the U.S. in volumes, both in the U.S. and in Europe. In Europe, it is clearly mainly the southern part of Europe, between Italy, Spain, and France. The impact on the opposite, on prices, we continue to enjoy a strong price increase, +1.6% in the second half. In terms of operating profit, clearly despite the fact that we have a positive spread between price increase of 1.6% and the cost, we suffered a little bit from the volume decrease, both in the southern part of Europe and in the U.S., with a profit level overall at 12.1%, including the discontinuing depreciation of VNA fixed asset after the announcement of the disposal of this activity. In a slight reduction compared to last year, if we do not book this EUR 29 million impact. If you look at the profitability level across the last period of the last full period of six months, you can see a quite strong stability of the profitability of this business. Talking about EBITDA minus CapEx, a slight reduction of the CapEx compared to last year, so that the EBITDA minus CapEx is almost stable compared to 2013. EUR 355 million last year, EUR 367 million, a slight improvement, so a good cash generation of this business. Briefly by geographic area. As you can see, we continue to post a negative number in France. If you look at the second half, only -1.5%, and if we take the fourth quarter, we are more between -0.5 at constant number of days, -0.5 and 1% in France. So progressive stabilization of our activities in France or continues to be slightly negative. In other Western Europe, on the opposite, +2.3% in the second half compared to -1.2% for the full year. A strong improvement in the U.K., 7.5% in H2 compared to 3.6% for the full year, 3.9, so almost 4% in Germany. In the Nordics, 2% in H2. Only Spain and the southern part of Europe continue to post negative numbers. Even in the fourth quarter, we are stabilizing in Spain. So a positive trend and a net improvement of our activities in other Western Europe. North America, -0.3%, +1.4% in the second half. Clearly, this comes from a very strong positive on the construction markets on Interior Solutions. Above 20% growth in Interior Solutions in the U.S. on a like-for-like basis. On the opposite, we are clearly a poor year in the ceramic business and in volumes in roofing, depending on the weather conditions, the activity was not as strong as last year. Asia and emerging countries continue to be quite strong for Saint-Gobain and improving in the second half compared to the first half, with a growth rate in the second half of 10.4% overall. Continue to be driven by Latin America, +almost 15% growth in the second half. Asia and the Middle East, +13%. Both Asia and Eastern Europe came back with high single-digit growth, around 8%. In the case of Eastern Europe, it is driven by the rebound of the Eastern European economies, but also driven by the fact that we relocate some production in these countries, strongly contributing to their improvement and the improvement of their profitability. Once again, the breakdown of the activities by geographic areas, by industrial asset, I think it is important to continue to focus on industrial asset split when we look at Saint-Gobain. You can see that we continue to have a well-balanced portfolio with two strong geographic areas, Asia and emerging countries, approximately one third. Other Western Europe, mainly in the northern part of Europe, one third also, and two other smaller parts, France 23% and North America 14%. So a very balanced portfolio of geographic exposure. Operating income by geographic area. Despite the fact that we have some volume decrease and turnover decrease in France, quite a good performance in profitability with a stable profitability, 5.1% last year, 5% this year. Let's say almost stable in absolute terms, EUR 290 million. On the opposite, in the other regions, a strong improvement in other Western Europe due to some additional volumes, but also additional cost cutting. North America, slight improvement despite the decrease of the turnover of the high contributing businesses like ceramic and roofing. The improvement of our profitability in Interior Solutions leads to an improvement of the profitability of the U.S. business from 10.5% to 12.2%, if we restate from Verallia North America, from 11.2%, so 70 basis points improvement in North America. You remember that we were not last year totally satisfied with the profitability of our businesses in Asia and emerging countries, and we announced an improvement of the profitability of this business, and this has been achieved significantly in 2013 with a 1.2 points of profit improvement in H2 compared to H2 last year due to volumes improvement, but also restructuring and improvement of our businesses in Asia and in Eastern Europe. CapEx by geographic area. As you can see, we continue to focus on Asia and emerging countries and on North America. Europe continue to be quite at a low level with 2.1% of the turnover in capital expenditures. We don't need so much CapEx, as we have capacity installed in Europe, and we continue to focus our growth CapEx in Asia and emerging countries and in the U.S. In the U.S., I talked about the roofing plan that we've started this year, but we've finished a plant in proppants in HPM in Little Rock, and we've developed several projects in emerging countries in Flat Glass, in Gypsum, in mortars. Two points to conclude concerning 2014 and the impact of changing accounting rules. First, very minor, small impact of the change concerning the elimination of proportionate consolidation with IFRS 10, with an impact of approximately EUR 10 million in 2013, that will reduce the operating income. A more significant impact concerning IFRIC 21, concerning the change of recognition of date for certain taxes. This has a natural impact over the full year, but this will have a strong impact in term of H2 versus H1 numbers. We will have a negative impact on H1 of EUR 60 million and a positive impact in H2 of EUR 60 million because we have to book these taxes the 1st of January and not by 12 parts across the year. EUR 60 million reduction of H1 compared to last year in term of impact of taxes, that will be compensated by a EUR 60 million improvement in H2. Now I give the floor to Pierre-André for the strategy. Okay, on the strategy, it's more a quick reminder of what we explained to you at the end of November during our Investor Day. We are going to focus on three main priorities: to strengthen the group profile and to raise the potential for organic growth, to increase the group's focus on differentiation, and to continue to manage the group in terms of management with four key priorities. Strategically, we want to raise the potential for organic growth. We will focus most of our investments outside Western Europe in the next few years with EUR 3 billion CapEx growth between 2013 and 2018. And to increase also the part of the industrial assets outside of Western Europe, where, as Laurent said, we have already plenty of assets. We will also reduce the group's capital intensity in developed countries, progressively realigning our mix of business. Our industrial activities will focus more on downstream activities, which are less capital-intensive, with value-added solution, asset-light solutions, with the development of Building Distribution and a specific action to reduce the capital intensity of Flat Glass by 15 points by 2018. Second point on this strengthening of the group profile, we will accelerate acquisitions and disposal to support the strategic objectives. So after the disposal of Verallia North America, Verallia will also exit the group when market condition permit, and we have initial divestment program of non-core assets, which are small assets in various divisions like what we have done in 2013, and you have seen that some are in process at the moment. We, on the other hand, will increase our acquisition flow with the three main targets, accelerate the group expansion in North America and emerging countries. Accelerate the development of niche industrial activities, which enlarge technological portfolio of the group, and strengthening our core countries in Building Distribution. You see on these slides the numbers which are into brackets, what we intend to invest in those three priorities. Second strategic priority to increase the group focus on differentiation. Through R&D, we are going to maintain our R&D effort, which has been increased over the last five years, focusing more and more on local and co-develop innovation. Co-develop, that means with our customers or with industrial partners, and we have launched last year, and we will launch more and more new solutions based on these co-developments and more local. To that extent, we have increased the activities of our R&D center in Shanghai, and we have opened last year in Chennai, in India, a new R&D center, which is going to focus on local applications for markets which are different from our main markets in Europe. To give an example, a construction solution in hot and humid countries. That is one of the focus of this new center. Second point, we will accelerate the development of our highly innovative industrial niche, and we strengthen the leadership of the group on our sustainable habitat solutions, based on additional comfort, what we call the multi-comfort program for habitat. We will adapt our marketing efforts with increased role of a division strategy. We have just launched in France a new platform of growth in this area, with a new brand, Outiz, focusing on items which are light, and with a multi-channel approach and very quick deliveries, with a very strong emphasis on logistics, and we will increase brand visibility. The four priorities in terms of management, always continue to operation excellence program. From that extent, we have launched a new plan for 2014 and 2015 of around EUR 800 million. I confirm that for 2014, we aim to reduce our cost base by EUR 450 million. New steps in terms of corporate social responsibilities, which are, by essence, in the heart of our business model in terms of sustainability. That is what we provide to our customers, and that is also the way we want to look at our involvement in our environment and target attractive returns for the shareholders with the aim of maintaining the dividend, paying in cash and trying to balance three objectives in the medium term to grow the dividend when the results grow, with a normalized payout of 35%-40%, and to contain the dilution, reducing progressive the number of shares. These objectives are not easy to balance all at the same time, and I will tell you just later what the board has decided for 2014. Second point, maintain a solid financial structure. We will continue to look for a high level of free cash flow on average over the next five years, EUR 1.5 billion per year. We are increasing progressively, and we will be higher than that at the end of the period. An operating working capital of around 30 days at year-end. You have seen that the last two years we have been already below that objective, and I think we need to maintain more or less where we are. CapEx are going to increase, but will stay below 5% of sale with also a level which will be lower in Western Europe. We maintain our same criteria in terms of value creation and rate of return. Same thing for acquisition with the priorities I have mentioned. Now I would like to give you a few hints about the way we see 2014, what is our outlook and the perspective and our action plan. In terms of outlook, the economic climate is progressively improving. Although in Europe, I would say that the industrial markets are still sluggish. Construction markets are slowly improving. You have seen that since the last two quarters, and this upward trend is led by the U.K. and Germany, and still some sharp contrast from one country to the next, but overall, it is progressively improving. North America, we are going to continue to have a good momentum in residential construction, both in the new and I think this year, improving also in renovation, and industrial output will remain robust. In terms of emerging countries, I think we are going to have a good growth rate in those countries. Of course, there are some macro trends that may be different from one country to the next, but I think it will not have a big impact on our activities. Household consumption will remain firm. So overall, a macroeconomic environment, which is still uncertain, but which is gradually improving. What does that mean for our businesses? I think we are going to register further progress in the profitability of the Flat Glass business, mainly thanks to our cost reduction program, which is going to be again significant in terms of its impact in 2014. Operating margin in HPM will remain at a good level. Construction Products, we will have the impact of this good momentum in the U.S., which is going to continue, and also in South America. As I said, timid upturn in Europe, led clearly by U.K., which is very solid at the moment, and Germany, which is gathering momentum. Satisfactory, and that is led by the progress and our investments pace of growth in Asia and emerging countries. Clearly Pipe has started to benefit in the second half, and this is going to gather speed this year progressively of some large export contracts, mostly in the Middle East and Africa regions. In terms of Building Distribution, trading will improve. Although it is still contrasted from one country to the next. We will have also, thanks to our progress in terms of cost, we will have an improvement of our margin in 2014. Packaging, which should continue to have a solid profitability. So five priorities for Saint-Gobain in 2014. The first one was already there last year and has been there for the last few years. It has been one of my strong focus, is to push for a price increase to exercise our pricing power and leadership in a context of reduced inflation and raw material and energy cost. But overall, I think our costs are increasing, and we need to continue to increase price. This cost reduction plan that I mentioned, implementing and delivering on this cost reduction plan is clearly a very strong emphasis also for this year. We will increase our CapEx. I think that the level we had in 2013 is a low level. In fact, in percentage has been the lowest we have had. We have more projects on emerging countries and in the U.S., as Laurent mentioned, and we are targeting around EUR 1.5 billion of CapEx in 2014. We will continue to have sustained R&D efforts focused at this strategy goal to differentiate and bring higher value-added solutions. With the two ratios which we are focusing on new product sales and this differentiation ratio that I commented at our Investor Day. I expect improvement on these two ratios, which is the way to measure the results of our R&D activities. We will finalize very soon the divestment of Verallia North America. In terms of the outlook, as I said, our different markets should improve. Even though the macroeconomic environment remain overall unsettled, I think in terms of Saint-Gobain, our market, our sales will improve. I expect in 2014 a clear improvement in our operating income on a comparable structure and currency basis. We will target a continuing high level of free cash flow. In terms of the dividend, the board decided yesterday to propose to the shareholders meeting in June to maintain the dividend, which despite the fact that the recurring EPS payout rate is significant at 67%. The yield will be around 3.1%, and we are moving towards payment in cash. This year, we will propose 50% in cash and 50% at the choice of the shareholders, cash or in shares. The goal of this progressive reduction is clearly to strengthen our credit metrics and our ratings. You have here also the timetable. In a nutshell, I think 2013 has shown that Saint-Gobain is very solid. We have passed the worst, I would say, and the upturn has materialized, as I said last year, and we are going to continue to improve. I think, as I explained in November, our strategic positioning with our three main pillar of growth focused mostly on habitat, but with some industrial activities complementing this vision is very powerful for the long range. We have very strong assets, which we are going to benefit from the housing upturn in the U.S. and progressively from the improved economic environment in Europe. We are focusing strategically on innovation, as for strong efforts on R&D, additional technologies, and emerging countries while we maintain, and that has been the case in the last few years, a very strict financial discipline. I am confident that we will deliver, like in 2013, our objectives this year in 2014. I thank you for attention, and now Laurent and myself, we are at your disposal for your questions. May we have microphones, please? Ah, they are coming. Huh? No, it's coming. Voila. No, it's coming. Voila. Monsieur, I have a question regarding the two underperforming business lines today in term of current situation and maybe also the improvement potential. First, could we have more flavor on the Pipe and Foundations divisions in term of EBIT improvement in 2013? Maybe could we have the contribution? Secondly, regarding the Flat Glass division, could we have more flavor on the upstream and downstream situation, the price situation, and maybe the ability of the Flat Glass division to pass the price hikes to the distributors and processors? Thank you. On Flat Glass, our goal, as you know, in Europe and also in emerging countries, has been to pass price increases. We have had a better resistance and success in the second half of 2013 than in 2012, and to pass that progressively also to our own network. Clearly, the improvements of our results in the second half are linked to that and are also linked to a very significant improvement in our cost position with very significant restructuring. The profitability of the downstream and the upstream is not really relevant from that in the Saint-Gobain view. But I tell you it is improving. 4%, we are already back to above the level of the first half of 2012, and this is going to continue progressively. Laurent, pipes. Yeah, concerning the Pipe business, compared to last year and due mainly to two factors, which is improvement in emerging countries and mostly coming from the contract we have in the exports to the Middle East. We have improved the profitability from a very low situation. We have improved the profitability of this business for approximately 250 basis points compared to last year. Can we assume that we will come back to EUR 200 million EBIT in the coming years as it was the case before the crisis for the pipes? I think that medium term, I have no problem. It will not be the case this year. It is going to improve gradually. Yeah. Josep Pujal from Kepler Cheuvreux. I have two questions, please. The first one is on working capital change for 2014. I assume that volumes will be up next year. You have also said that it would be very challenging to do better than the 29 days of sales. Should we assume that the working capital change should be negative this time for 2014? My second question is a general question on, I would say, the dividend policy, which I find quite unusual. You are paying EUR 1.24 per share, which represents 70% of payout compared to the net current result, 110% of the net published result. This is quite important. I would like to understand what is the logic behind that. Is it a sort of engagement vis-a-vis shareholder? Is it that you do not find a better choice to deploy capital? You struggle to find CapEx or acquisitions targets? Is there another explanation? Can you share the logic with me? Thank you. Concerning the working capital requirement, we hope it will be negative next year, as you said, because the more growth in term of turnover we have, the most negative is the working capital impact on the cash flow. This is a good news. Clearly, we've achieved, and I remember the discussion we had last year, I was saying that the 29 was a record, very strong target. Probably we'll struggle to achieve the same number. We were able to achieve it this year. So, we've made a huge effort, and we continue to focus on working capital requirement management year after year. Mathematically, you're right. If the turnover increased significantly, then the working capital is a drain on the cash flow generation, but that's very positive. On the dividend, I think it's a part of the DNA of Saint-Gobain to maintain the dividend, and it has been the case for 30 years with one exception, which was a very specific situation in 2009 because of the major crisis where we cut the dividend. We have always given priority to that over the other objectives. You can see that as a confidence that we are going to increase our results, and this is part of the reason. But I think it has also been, I would say, a kind of very strong statement of Saint-Gobain towards its shareholders over the last 30 years. That's why we have privileged this solution. At least what the board is recommending, sorry, to the shareholders meeting. Yes. Arnaud Palliez, Raymond James. I have three questions, if I may. The first one is, what is your expectations for the cost inflation in 2014, both on fixed and variable costs? The second question, can you please break down the 1% price increase you had last year, between the different regions and tell us what were the area, the businesses where you still have some price deflation last year? The last question is regarding Lapeyre. You've made an impairment. It's more or less the only B2C business in your portfolio. Do you consider that it's a non-core asset and could it be disposed? Thank you. I'll take the first two questions. Concerning cost inflation, you have mainly two parts in your question. One part is raw material and energy, and this year we incurred approximately a little bit more than EUR 100 million cost increase, which is representing a very small amount in term of percentage because it's EUR 100 million on EUR 8 billion costs. So very small cost increase, a little bit north from EUR 100 million in 2013. We will probably have the same kind of order magnitude of cost increase for next year, not very different. This can fluctuate through the year. So I give you an idea today in taking into account the prices of raw material and energy as of today. Concerning the other inflation, you have obviously inflation of all the costs, but mainly of salaries. We have EUR 8 billion of spendings in term of salaries. You have a little bit of inflation in all the regions. It's somewhere between 2% and 2.5% overall for the group, knowing that you have obviously much more higher inflation in emerging countries and very moderate in Europe. The second point, 1% price increase. Overall, we have a positive price increase across all the businesses and across all the regions. Clearly much more significant in the U.S. and in emerging countries, and a little bit less in Europe. Concerning Lapeyre suffered in the last two years very significantly from the collapse of the window market in France. As you may know, two significant competitors of Lapeyre in the window market have been either under liquidation or administration. So Lapeyre has suffered, but we are investing in Lapeyre. Lapeyre is serving both consumer market and professional market, with projects which are very much in line with our strategy. We are investing in Lapeyre. We are launching at the moment a new kitchen program, which is going, I expect, successful, and I think we'll also benefit from what's happening to our competitors. So Lapeyre is an asset which we intend to grow. Yes. Good morning. Yassin Froehli from Exane BNP Paribas. I would have two questions. First, your volume increased by a bit more than 1% in the second part of 2013, and operational margin at the group level improved to a level which is slightly higher than 7%. When you are looking at 2014, would you hope or expect volume growths that are higher than what you have achieved in H2, which was approximately 1.5%, I think? Could you expect margin that are higher in 2014 than what you have achieved in H2? My second question would be about your strategy in emerging market. We have seen currency depreciating in many emerging markets, and we have also seen that the value of some asset has reduced. Are you seeing that in your market, and do you think that 2014 could be an opportunity to do more acquisition in emerging market? Concerning your first question, we see a little bit. Yes, we see some clear improvement in the volume trend, especially because the comparison basis of the first half will be relatively easy compared to last year. When we publish, and I want to just pre-warn you, when we publish the numbers of Q1, don't take the number of Q1 as a trend for the full year, please, because this will probably not be the case, is that we will have very strong numbers at the end of Q1. But, see, in term of internal growth compared to the bad weather conditions we have had- If we have a very bad weather in March, Laurent, be careful. I mean, the comparison base is easy. So far, so good. That's what Laurent Guillot means. But this will not be the trend for the full year. Clearly, we have different evolution depending on the different regions. We continue to be quite strong in emerging countries and in the U.S. But in the U.S., you have seen this year the impact of the weather on the roofing business. Clearly, in the first part of the year, in the beginning in January, the numbers are not great in the U.S. due to the weather conditions and the tough weather conditions we have there. So we are always a little bit linked to the weather concerning the full year. But we should see an improvement progressively in Europe as we have seen in the second part of the year. Concerning the margins, you always have to remember that there is a seasonality in Saint-Gobain between H1 and H2. H1 is always a little bit lower than H2. If you take the last 10 years. For sure, if you take one single year, like last year, you may have a deceleration. But if you look on a very long term, you have a seasonality between H1 and H2, especially because in Building Distribution, we have more working days in H2 with a stronger activity, especially in Germany. There is a slight seasonality. On top of that, you should add the impact of IFRIC 21 on H1. So you know the EUR 60 million difference between H1 that you have to take into account. Concerning your second question, yes, the answer is obviously yes. The question is more the availability of targets. As you know, our growth model in emerging countries is based on a combination of industrial CapEx and acquisitions, and it depends on the availability of CapEx. When the markets are growing, often it is easier and less expensive to put capacity than to buy companies. So if we find good targets, the answer is clearly yes. Whether we will be able to do that or whether we will grow more through CapEx is a case-by-case subject, and I don't know exactly the result. But yes, it's an opportunity. We are looking at it. Thank you very much. It's Christian Koch from MainFirst. I just have one question on the Building Distribution business, please. In your outlook for the division, you said that you expect a further increase in the margin going forward. Looking at the numbers of last year, obviously the only increase happened in the second half of the year where you achieved 4.4%. My question is, should we take into account that 4.4% is something that we should also take into account going forward for 2014 as it's- As Laurent said, it's particularly true in Building Distribution. You have a difference between the margin in the first half on a long-term basis and the second half basis. On the other hand, I said also that the margin of the 2014 will increase compared to the overall of 2013. Okay, thanks. I think I was very clear. Almost as clear as my answer to. Pardon. Yes. Good morning. Maria Furus from Société Générale. I had two questions. My first question will be on distribution. I wanted to know if the improvement in margin in H2 was coming, if you could just precise maybe from which region. Also, in particular for the U.K., I wanted to know if you were gaining back, actually, the margin you have lost during the crisis. Second question is on Flat Glass. Could we have a bit of an overview on the prices situation? Is there a price increase scheduled for 2014? What is the level of the float at the end of 2013? Many thanks. On Building Distribution, yes, clearly, there has been an improvement in the U.K. in the second half. But no, we are not back at all to the level we were before the crisis. The significant increase in volumes in the U.K. of the second half doesn't compensate at all. We are still very far. The U.K. was one of the countries which went down the most during the crisis. So there is still a long way to go in terms of volume. But yes, it has helped a lot. We are also benefiting from the end of the integration of Build Center, which had a way on the margin during 2012 and still in the first half of 2013. So progressively, the margins are improving in the U.K., and that's a significant contribution. In terms of Flat Glass, prices are expected to increase progressively in 2014. As you know, there is a seasonality, but I would say the exit rate of 2013 is slightly better than the exit rate of 2012. The first quarter, I didn't see the drop that we had in 2012. I think this is linked to the capacity reduction that we have done and also the one that some of our competitors have done. We expect then from where we are, after a stabilization during the winter, we expect a progressive bounce back of prices starting probably in the spring. I have a question related to the fine from the EU on Flat Glass, please. Is there any update that you could share with us, in particular as regards the timing where you would expect a decision potentially this year? Thank you. No. We have no idea. We have no idea. The courts are taking their time, and they don't give us any indication. Thank you. No more questions? There are questions from the internet. Yes, I have. So question from Mike Betts. Could you remind me of the normal seasonality in operating profit between H1 and H2 in Building Distribution? Is H2 margin a good base for the full year in 2014? Weather impact and IFRIC 21 impact. Yes, IFRIC 21, I think I already answered that question. But IFRIC 21 impact will be even, in fact, more significant in distribution than in the other businesses because of the weight of our Building Distribution activities in France. So it will be very significant in Building Distribution. The weather impact, as Laurent Guillot mentioned, that we expect to have a very good first quarter. I would say that we have had a very good first half of the first quarter. So until yesterday, clearly, the weather has been much better in Europe than last year. We had a good January, and Benoit promised me a good February. In terms of March, I do not know. But it is clear that last year we had a very bad weather during the first quarter and especially in March. That is what I was saying, March, we are not yet in March. On the other hand, we have a very bad weather in the U.S. in the first two months, which has had an impact on our activities and not only on our activities in construction because there has been a lot of disruption in the U.S. because of electricity stoppage. So even some of our industrial activities have been hit in the first two months in the U.S. But as you know, because of the weight of Europe versus U.S. in Saint-Gobain, the positive from the weather impact so far is much stronger than the negative for the bad weather in the U.S. So that having in mind, the full year profit level of distribution will be above the one of 2013. But I expect the first half to be below in terms of rate of margin, the second half of 2013. Second question, again from Mike Betts. Is Boral joint venture with USG a competitive threat to your Gypsum business in Asia? Are they transferring their ultralight product to the region? No, USG is a very solid and good competitor in the U.S. But Boral has been a solid competitor in Asia. They were associated with Lafarge. They were alone for a while, now they are back with USG. I think compared to the past situation with Lafarge, I do not expect very significant changes. But yes, they are trying to compete with their strengths, and we have also our weapons. So I think competition is healthy. Question from Maria Perez. Regarding the disposal of Verallia, could you offer more visibility of the timing? I do not know whether the question is on Verallia North America. I answered that question. And concerning the rest, no, I have nothing more to say today. Now we have questions on the phone from Manu Ringbra from Deutsche Bank. Good morning, gentlemen. Can you hear me? Yes. Yes. It is Manu Ringbra from Deutsche Bank. Three questions from me. The first one on the guidance you provided for 2014. Can you just help me understand how are you splitting that between volume growth and operational leverage in EBIT? And then cost savings, the EUR 450 million you achieved or are targeting to achieve. Just to give me a bit of an understanding how it is split there. Secondly, are you expecting more restructuring costs from the ongoing measures in 2014? And then finally, if you can help us to get some more clarity on the cost savings program for this year. I know it is still early, but how is it proceeding? And also, if you can give us a bit more tangible examples of what you are actually doing in 2014 and 2015 compared to what you have done so far. Thank you. In terms of the guidance, all the components that you mentioned, we expect them to have an impact. To be frank, I do not even know myself at this stage, so I am not going to answer on the various impacts. The only thing which I can say is that we will have a very strong impact from the cost savings, because that is material and that is completely under our control. In terms of the volume growth, for a significant part, it is linked to the condition of the market, and that is more difficult to assess at this stage. I tried to give you some indication, but we are still in an uncertain environment. In terms of restructuring costs, yes, there will be additional restructuring costs this year. We can say, Laurent, that they will be lower in 2014 than what we had in 2013. Yeah, but it will continue to be material. It will continue to be material. Well, we have some action plans at the moment in various countries, whether it is in Pipe, whether it is in Flat Glass, where we are continuing to adjust our capacity. We have, in Europe at the moment, some restructuring actions in place. We continue to develop our program concerning World Class Manufacturing and concerning reduction of purchasing costs that we launched several years ago and that continue to give fruits years after years. Can I just follow up on the guidance question? Assuming volumes are flat in 2014, should we see the EUR 450 million of cost savings flowing through to the EBIT line all, or do you see some factors that will offset those? Because historically, I think you have been able to offset cost inflation with price increases pretty much for the last 10 years. I confirm that we have been able to offset cost of raw material and energy in the last years through price increases. But as you know, and as I commented beforehand, we have also increase of salaries and other costs. A part of this is always compensated by productivity gains that are included in our savings. This is also an impact that you should take into account in your bridge, if what I understand is you are trying to bridge 2013 and 2014. Okay. Thank you. Mr. Jones. Hi. Good morning. Three questions, please, if I could. The first was just on Verallia North America. It seems that you are confident of that being disposed before May. Can I just double-check in terms of the terms of that deal, in terms of the price, nothing changes given FX movements, delays, profitability of the underlying business? Is that as you talked about last January? Secondly, just within the EV of the deal, can you remind us of the cash versus pension liability transfer split, one versus the other? Thanks. The second was on cost savings. In terms of the divisional split, there isn't a huge amount of detail at the moment. Can you give us an idea of how that EUR 450 million is falling? It does not seem like you are emphasizing the cost savings as much today as you have on previous programs. Can you just confirm you are as confident in terms of their ability to impact the P&L as previous schemes? Presumably, it does get a bit tougher the further you run through. Program. The last was around pricing. Clearly, a pickup in Q4 to 1.2%. Can you just talk through what lifted that versus where we were in Q3? Generally, do you think on the industrial divisions that if the cost inflation picture is similar, which is what you're implying, do you think that the industrial pricing can be maybe slightly better in 2014 than 2013 if the volume backdrop is a little bit more favorable? Thanks. Laurent? Okay. Concerning the first question, Verallia, the price has been fixed at the beginning of 2013, and there is no adjustment except for the disposal that will be made, but this will have a minor impact, limited in term of amount. The total cash that we will receive is around EUR 1 billion, in line with what we communicated one year ago. Clearly, the price is fixed independent from the evolution of the performance of the activity. Concerning the evolution of the exchange rates, this is totally hedged since the beginning, so there will be no impact on what we receive of the evolution of the exchange rate. Concerning your second question concerning the cost program, no, there is no less emphasis on the cost reduction program than in the previous periods. The cost reduction will be less important because the evolution of the volume is different and the evolution of the activities and the macroeconomic environment is less severe in Europe than what it was a year ago. So we make a cost reduction of EUR 450 million, and we are confident that we will be able to achieve this cost saving in 2014. As I explained at the Investor Day, we are targeting new areas also in addition in terms of cost saving. For instance, what we have done with our WCM programs in manufacturing, we are going to expand that into other areas like logistics and the performance of our sales organizations. Concerning, finally, the price improvement we had in Q4 in term of evolution compared to Q3 or compared to the beginning of the year, clearly we have, as I stated in my introduction, we have an improvement of prices in Flat Glass, especially in emerging countries and in Sekurit in Q4 compared to the previous period, but also we have an improvement in prices in Building Distribution. Okay, thanks. Sorry, just a couple of follow-ups. I guess on the pricing side, it is probably too early for you to give guidance, but do you think the industrial businesses can do better in 2014 than 2013? I just assume the base of Flat Glass should help you deliver that all else equal, but would you comment on that? It is a little bit early to say that. As you know, we are passing the price increases now, and it is a little bit early to comment on the price evolution, knowing that clearly the environment in term of inflation, of cost on raw material and energy, is not as difficult as the beginning of last year. Last year, at the beginning of the year, we had some increase of cost of raw material and energy, and at the end of 2013, beginning of 2014, it is a little bit less the case. Okay, thanks. Sorry, one follow-up on the cost savings. Are you willing to give any kind of further help on the split of their impact out by division, please? The split by division of the cost savings. I think it is in the presentation on internet, but For the two years. For the two years. Yep. Got it. Sorry, and it's not very different, materially different from one year to another. Thank you. Clearly, it's more important in Flat Glass than in the other divisions, but you have the split in the presentation. Thanks. Next, I have Mr. Lehmann. Good morning. Thank you very much. I would have three questions, if I may. The first one is regarding U.K. Building Distribution. Obviously, the volume outlook is positive in the U.K., but on the other hand, there was last year some issues with the competitive environment and a little bit of pricing erosion. What would be your outlook for U.K. pricing, especially for distribution, please? Do you think the improving volumes will support a better pricing environment? My second question is coming back to High-Performance Materials. Some erosion of the margins in 2013. I understand lower volumes from high margin ceramics business. What would be your outlook for 2014? You seem to guide for some sort of stabilization of the margin for HPM. Is that accurate? Lastly, could you give us a view on the tax rate for 2014, please? I take the first one. On Building Distribution, as we said, we had some margin erosion mostly in the first half of 2013. Since then, it is improving, and we expect a good pricing environment in 2014 at this stage of the year. We are positive on the U.K. in distribution. Concerning HPM, clearly, the order book for the ceramic business in the first part of the year is relatively weak, more or less in line with the second half of 2013. We will see. We expect some improvement in the second part of the year, but it is a little bit early for the time being to comment. On the opposite, we have, and we will continue to have improvement of the other businesses, plastic and abrasives and Adfors in 2014. Concerning the tax rate, clearly in 2013, we had a relatively high profit in high-tax countries. I think not about France, but I think about the U.S., where the tax rate, as you remember, is 39%. I think also about emerging countries like Brazil. As long as there is an improvement overall across Europe and across other emerging countries, we should see progressively the tax rate going back to what we said several times, being the long-term tax rate for the group when the profitability is approximately the long-term profitability everywhere, which is 29%. I expect an evolution, progressive evolution through the years back to this level. Great. Thank you very much. Okay. We have Mr. Kuglitsch. Hi. I've got a couple of questions. Can you maybe just help us, I think you obviously alluded to the bridge. Can you just maybe give us a bridge for what you think the profit bridge was in 2013, thinking about cost price on the raw material side, cost savings, volume impact, FX, and whatever else you deem important. The second question is on foreign exchange. Can you just give us your best guess at this point, given spot rates, what you think the impact is on sales and EBIT for the coming year, for this year, for 2014? Then just a clarification question on Flat Glass. When you say progressive improvement, you've done 1.5, now you're at 4. Are you essentially saying sequentially you will progressively improve? In other words, go, for example, from 4 to 5 to 6. Is that what you're talking about? Or you're more thinking about the annual averages? Thank you. Okay. Concerning the two, I take the two first question, you take the last one. Yeah. Laurent Guillot is very happy to answer about Forex, so I leave him. I will not answer about Forex, about what I expect to be the exchange rate in 2014, that I let you to your economists that are more talented than I am. If I take the Forex exchange level of today, in term of currency, and I try to figure out what will be the impact on the operating profits, it's an impact of EUR 100 million at the level of today compared to 2013. Knowing that in 2013, we had already an impact of EUR 100 million compared to 2012 due to the evolution of the exchange rate. This EUR 100 million was mainly in the second half, and the impact in the first half was quite small. I try to answer to your first question, which is a bridge between 2012 and 2013. Clearly, what we had, we had a small positive impact on the profitability coming from the difference between price and cost of raw material. We had a strong impact, around EUR 200 million, coming from the volume effect, which is linked to the fact that even if the volume is slightly negative, in fact, what went down is the most contributive businesses like ceramic. The contribution of the volume decrease was higher than the average contribution of the group due to the fact that the volume decrease was in businesses that are relatively capital intensive and with relatively high margin. We had a cost saving of EUR 600 million. On the opposite, we had some inflation of salaries and other costs that offset part of these savings. Finally, we had EUR 100 impact on exchange rate. Concerning Flat Glass, at this stage, our goal is to be, for 2014, above the level in terms of margin of the second half, but I'm not able to quantify how much. You know in Flat Glass, pricing has a very significant impact, and we are doing whatever we can to improve pricing, but there is always an element of uncertainty. At this stage, I just tell you it's a goal to be above the second half, but we'll see how it progresses. Fair enough. Thank you very much. Then I have questions from Mr. Michael Watts from Berenberg. What investments, acquisitions are you targeting in Europe? Well, in terms of acquisitions for this year, the focus will be mostly outside of Europe. Medium-term, we said that we also have in mind to strengthen our presence in distribution. So there may be some small ones this year, but distribution has been integrating very well Build Center and in process of has finalized the integration of Brossette, but Brossette is still taking a lot of time in the management. So I think that the priority is to deliver fully what we planned. Progressively, we will have mostly some small acquisition in our major countries in Europe. There is another question from Mr. Watts, "What level of restructuring charges do you anticipate in 2014?" I think we said less than this year, but significant. That's what you said, Laurent. Yes, significant reduction. Nevertheless, it's a significant reduction, but we continue to have a significant level of restructuring costs. I mean, the EUR 450 million, you don't do it only just by doing normal actions. You have also to make a restructuring and to take charges. So it's a reduction but a significant level. We have two question of Paul Roger from Exane. "Do you expect positive volume this year and a favorable price cost spread?" I think we answered to that question. If the weather conditions are good in March, we expect a positive evolution of volumes in the first part of the year. Clearly, we have a trend for the time being concerning emerging countries in the U.S. that are positive and a stabilization in Europe. The cost spread, as always, is a significant strategy. As someone remind us before, we have 10 years of track record in term of passing the cost increase to our customer in Saint-Gobain. "What proportion of the EUR 450 million cost cutting would you expect to flow to the bottom line in 2014?" I think I answered also to that question previously, explaining a little bit what are the plus and minuses, including the cost increase we will have in raw material and in salaries. Obviously, all the EUR 450 million will flow down to the bottom line. There will be some other movements coming from other evolutions. A question from Sven Edelfelt. "Could you explain the decline like for in the packaging business in Q4 at -3% after +1.6% in Q3? Is it relating to price increase anticipation from customers or something else? No, I think there is a part of evolution which is linked to the macroeconomic environment in the southern countries. I think we should look at the H2 as a total and not Q3 and Q4 separately. Q3 after the summer was quite good. Q4 clearly showed some decline with especially a decline in the southern part of Europe, but also in the U.S. I have three questions from Aynsley Lammin, Citi. First, what is your expectation from volume growth and price inflation for Building Distribution in U.K. and Germany in 2014? I think I already answered in terms of the U.K., where we are positive, and we are also positive on terms of volume and pricing in Germany, but to a lesser extent than to the U.K. By the way, Germany is truly benefiting more than other countries by the better weather in the first two months of 2014. Second question, please, can you comment a bit more on the recent trading trends and outlook in Sweden for 2014? Yes, we didn't comment on that. I think that Sweden is also, after a difficult first half in 2013, has moved up very significantly in the last months of 2013. And we are quite positive in terms of the improvement in Sweden, which are balancing the fact that Norway is slowing down a little bit, and Norway was stronger at the beginning of 2013. So there is a balance between Norway and Sweden, but Sweden at the moment is quite upbeat. Third question, please, can you provide a bit more color on the outlook for volumes in France in 2014? Well, when you look at France, you see some macroeconomic data, especially in construction, which are quite depressing. And when you look at Saint-Gobain sales, you don't seem to see the impact of those. Because I think this is going to continue to be the case in 2014. I think the market in France for us, the macroeconomic environment is not very positive, but I think it's not at all as bad as you could think. And so we are not expecting necessarily an improvement in France. There will be an impact of the weather positive at the beginning of the year, but we are not, on the other hand, very negative on France as far as we are concerned for 2014. There is one question from Paul Roger. As a follow-up on the bridge, what was the magnitude of general cost inflation that offset the EUR 600 million savings in 2013? And clearly, and I gave some indication on that beforehand. We have an EUR 8 billion charge in salaries in Saint-Gobain, and you have a general inflation of salaries between 2.5% and 3%. So it's a big EUR 200 million impact of cost increase that we have every year just due to the general inflation, knowing that this is very much more significant in emerging countries, and this is clearly much less than that in Europe and especially in continental Europe. And we have a very small amount of other general cost increase. I have a question from Liang Wong Koi from Clear Recall. More information on your roofing activity performance in 2013 and outlook for 2014. Well, roofing activity during 2013 has seen very strong upswings from one quarter to the next. We had a very strong first quarter. We had a very bad second quarter because of destocking. We had a very good third quarter, and we had a more disappointing fourth quarter. Overall, it has not been a great year at all, as Laurent Guillot explained earlier, mostly because of the impact of storms and weather, which there were very few storms in 2013 compared to the average and especially compared to the year before, which had an impact. Our volumes were overall for the year, not positive in roofing in 2013. For 2014, if we can expect a more normalized weather, but that is very difficult to assess. We should see some growth, which is not very easy to quantify. To remind you, the roofing market is mostly renovation, so the impact of what is going on in new construction is limited compared to our Interior Solutions business, gypsum and insulation, which are strongly benefiting from the upswing in new construction in the U.S. So probably more positive in 2014 on roofing, but magnitude is not clear. I think we have no more questions. I thank you for your presence. We will have the first-quarter sales at the end of April. To conclude, I would like to say again our confidence about delivering a clear improvement in our profitability in 2014. Thank you.