Ladies and gentlemen, welcome to the Cyber Bank Conference Call. I now hand over to Pierre Andre de Chardin, Chairman and CEO Bernard Bassin, COO and Mr. Sellev, CFO. Gentlemen, please go ahead.
Good evening, everybody. I'm very pleased to announce the strategic acquisition of Crezo. This is perfectly in line with Saint Gobain's Strategy to strengthen our position in providing sustainable solution in the construction market. It comes at a time where decarbonation of construction is accelerating. As you know, Saint Gobain has been looking for opportunities to strengthen our position in construction chemicals to enlarge our offer and reinforce our existing position.
This acquisition comes 18 months after our very successful Continental Building product acquisition, which has been, as you know, timely done and very well integrated. I'm going to let Benoit Bazin, who has been leading this acquisition very effectively, explain to you the details of the transaction. Benoit will be, of course, in charge of the integration going forward.
Thank you, Pierre Andre. Good evening, everyone. As Pierre Andre said, it's a major opportunity for Saint Gobain to reinforce our leadership in construction TV growth and create The growth platform of more than €3,000,000,000 in sales. It's fine on the Slide 2 that you have, I think, in front of you. So create a growth platform of more than €3,000,000,000 in sales in Construction Chemicals.
As you know, Construction Chemicals is a market on which we are already a leader with strong positions in 66 countries and brands such as Weber, Maris Polymers or Techbon. We provide solutions that are fully aligned with our 2 growth drivers, sustainability and performance. TRISO is positioned on an innovation driven growth platform in construction chemicals where we already have the presence in Middle East and Brazil. Friesau provides comprehensive additive solutions for sustainable construction, thanks to its vertical integration of polymer know how and customer intimacy with high value added services. It is an outstanding company, which has demonstrated its ability to grow profitably under the leadership of Thierry Bernard, the CEO of Chryso, someone I know personally and will join Saint Gobain along with his team.
It is a great pleasure to welcome Chryizo's experienced and highly competent team to Saint Gobain. The acquisition process has confirmed that the combination of Chryizo with Saint Gobain will boost our leadership not only in the Additives segment, but in Construction Chemicals overall. This is also the right timing at the beginning of a strong construction cycle, while we are seeing an acceleration of both decarbonization and also the penetration of ready mix in emerging markets. So I'm highly confident about the strategic value for CRISIL, for Saint Gobain and for our shareholders. I'm in now to Slide Number 3, Construction Chemicals market is a €60,000,000,000 market.
In this market, the combination of Twizzo and Saint Gobain existing business leads to a more than €3,000,000,000 unique growth platform in all segments of the market with leading brands and positions and a worldwide footprint of more than 200 plants in 66 countries. While Saint Gobain brings its geographical footprint, its existing customer base, its innovation capabilities and its ability to scale up. Creto provides advanced chemistry expertise, vertical inspiration of polymer know how, customer intimacy and market access that can be leveraged beyond additives. On Slide number 4, You can see that Trizzle is a growth machine. Additives deliver sustainability and performance to the products to which they are added.
The idea to a range of formulations, concrete, cement, gypsum, mortars, while Overall representing less than 3% of the end product, Additives make all the difference because they bring a large range of critical characteristics, Workability, Durability, Sustainability, Early and Final Strength, Etcetera, etcetera. If I look at the mature markets, the decarbonization trajectories imply that low carbon concrete will grow and represent up to 90%, nine-zero, of the volumes by 2,030. Adidas will be the key ingredient for adoption and implementation of those low carbon products. They enable the development of formulations that reduce the quantity of cement and water consumption or that enables solutions to deal with versatility of raw materials such as demolition waste and recycled aggregates. For instance, some major cofactors have pledged to move to 90% low carbon by 2,030.
This does require up to 3 to 5 times more additives than today. On the other hand, in emerging markets, ready mix penetration will also strongly drive demand for additives. Ready mixed concrete requires additives so that concrete can be delivered directly to job sites for productivity and performance. Emerging countries are on the curve of transitioning from more than 80% of cement sold in bulk to more than 70% ready mixed concrete in mature countries. This shift creates significant market growth for the additives, both in terms of penetration and product sophistication.
All in all, those solid trends will drive the adidas market, which is expected to grow by 6% to 7% on a compounded annual basis over the 2021 to 2025 period. I move on Slide number 5. Of this very attractive market. Crezo is a well recognized leader with sales around €400,000,000 in the last 12 months of 2021. And last 12 months, EBITDA of €85,000,000 Creuzot has demonstrated outstanding and consistent profitable growth over the last 20 years with 7.8% compounded annual growth rate, of which 5% to 6% organic.
It is present in 20 countries with a balanced footprint of 55% in mature markets and 45% in emerging economies. The ADU market is essentially the market where local leadership positions combined with world class innovation and supply chain make the difference. CRISO model is therefore extremely powerful. The company's strategy over the past years has been to develop worldwide competitive advantage, while growing and entertaining leadership positions in key geographies, number 1 in France, number 1 in South Africa, number 1 in Turkey with 2 scale effect advantages number 4 in the U. S.
With a very targeted regional growth strategy that has proven extremely efficient in terms of both market penetration and profitability. I move now to Slide number 6. What makes Crizo special and what are the competitive advantages of Crizo? There are 4. 1st, Triso secures cost innovation and technological advantage, thanks to its unique of Rotary Internal Polymerization Capability with 4 centers: France, India, Turkey and South Africa.
That being combined with a network of 31 local mixing plants. So this strong initial infrastructure is low capital intensive and the polymerization centers of Chryso are located at regional level associated with a strong focus on quality and logistics, which enabled the company to benefit from an optimized sourcing strategy and customer service. 2nd, Chryso has also a very strong differentiation on customer centricity and service offering and the ability to build long term partnership with our customers and to co develop a lot of products with them, dance and expert local relays in an empowered organization enabled to push efforts and tailor products to local needs. 31 local formulary centers create the perfect dosage based on local input materials, weather conditions, technical specifications for each particular application, dosing equipment located in customer premises, optimize and digitalize supply chain and show best service to the end customers with impressive customer appraisals. 3rd, Relying on those unique assets, Chryizo achieved dynamic organic growth by targeting selected channels and client types in key geographies such as USA, India, Italy.
As a result, for instance, in the U. S, Chryso has expanded organically with a 17% annual growth rate between 2017 2020. The focus is based on margin accretive growth through a very structured process. And finally, Chryso has also created a value through strategic profitable bolt on acquisitions well performed over the last 20 years, overall 20 over the last 20 years. So once within Saint Gobain, the leadership of Chryso management team who has been responsible for the Success of CRISPR will pursue and accelerate on those levels.
They are fully aligned with Saint Gobain DNA and the deep foundations led by our transformation plan Transform and Grow, local empowerment, customer proximity, ownership and accountability, alignment of teams and business objectives, while leveraging worldwide scale and expertise. I move now to Slide number Kevin. CRISO value proposition is also fully aligned with our 2 growth drivers, Sustainability on one side and performance. If you take sustainability, the major move towards low carbon concrete in the next decade, Trizo is best positioned. It is an innovation leader with 35% of new products to sales, recognized R and D teams, 3% annual R and D spend.
Complemented with Saint Gobain Innovation Capabilities will support the acceleration path towards ultra low carbon concrete, where the stake is to decarbonize what represents 4% of the total world CO2 emissions. Creuzo has a strong portfolio of sustainable additive solutions that will key to reduction of concrete CO2 footprint and also address the aggregate shortage when you need aggregates for concrete as well as enable the development of the circular economy where you can deal with demolition waste and versatility of materials. As a very recent example, CRISO has launched Enviromix, a range of products fully dedicated to enable substitution of Clean Care in low carbon concrete. On the performance side, Additives provide cost effectiveness, speed and productivity gains to the products they are added to. They deliver the performance that is needed to follow the pace of utilization and infrastructure needs.
Krizio's same floor products perfectly complements Weber's Flooring Solutions, enabling savings on cost per square meter, while providing ease and speed of deployment for Residential and Commercial Products. So a lot of productivity gains, a lot of examples that can be very material for the customers. I now let Gerard give you details on the synergies and also details on the transaction.
Thank you, Benoit. And let's Look at now Slide number 8, which gives a lot of details on synergies. In total, you notice here that we have identified and built in the business plan EUR 50 €1,000,000 of synergies by year 5. Out of that €15,000,000 synergies are related to the cost And €35,000,000 synergies are linked to growth. When you look at the cost synergies of €15,000,000 Which will be delivered within 3 years' time.
They consist of savings on joint raw material purchases, Vertical integration of Creso products in Cengeban and administrative cost savings. And the growth synergy of €35,000,000 based on a focused expansion plan in identified key geographies, A detail of which I'll give in the next slide. So all these synergies have been identified in consultation with the Chryso management to ensure that the execution is completely flawless. Let's go to Slide number 9. Here are the details of the growth synergies.
They are focused on 3 areas, each representing roughly 1 third of the total EUR 35,000,000 Savings. Acceleration of Crizo in its priority countries like U. S, India, South Africa and Middle East, where Saint Gobain's strong presence in terms of brand image, local capabilities, Talent Pool and Industrial Footprint can support Creso to grow faster. The second category is Development of Crezo solutions in some selected geographies like LatAm and Southeast Asia, where The additive market is growing faster and it's quite sizable, where Saint Gobain's construction chemicals business is also very strong With the local industrial and market presence can help Creso to grow. Lastly, Acceleration of Sangamo and Crizo combined growth in construction chemicals to cross selling and co development of construction system solutions In high value added markets within Europe, where our current Construction Chemical business is very strong, Be it in waterproofing or concrete repairs.
Having exchanged in detail with the Chryso team, We are confident that we will deliver additional growth synergies with further geographical market expansions or bolt on acquisitions, Which will be boosted by the combination of Stengerbans and Creso's respective pipelines. We are therefore Very enthusiastic on the growth prospects that this acquisition provides to Saint Gobain in the field of construction chemicals. With all the details work done with the management, we are confident of delivering a minimum of EUR 50,000,000 synergies in the next 5 years With the clear potential to deliver much more. Let's look at Slide number 10. Here are the overviews of the transaction details.
We have entered into an agreement with Synven, the international private equity firm to acquire Crizo based on an enterprise value of EUR 10.20 million. This enterprise value represents a multiple of 12 times Khrysos' last 12 months EBITDA of €85,000,000 And a multiple of 7.6 times post run rate synergies of EUR 50,000,000 in year 5. Senga Barm will fully finance this acquisition using the proceeds from divestments made by the group in the last 2.5 years. We are confident that we will create value in the year 3 even if we take only cost synergies of $15,000,000 into account. So earnings per share will be accretive for year 1.
Post acquisitions, Saint Gobain pro form a net debt to EBITDA will be around 1.3 times before IFRS impacted. In comparison to the end of 2020, which was 1.1. We expect to close this transaction during the second half and Krizo will be integrated within Saint Gobain's High Performance Solutions segment. We are impressed with Quizot's profitable growth track record over the past years and we are eagerly looking would like to welcoming Thierry Barnard and his team. We are confident that together we will build a new chapter Sir, of Khrysos profitable growth story and create value for our shareholders.
Now I pass on to Pierre Andre to conclude.
Thank you, Sreedhar. So to sum up, this acquisition of a great company is very much aligned with our vision to be the leader in sustainable construction. The addition of Crizo will further strengthen Saint Gobain's growth platform in construction chemical as Clizo is a leading player with a strong track record of profitable innovative growth. So we are very confident that this acquisition will create value for our shareholders. And now we are at your disposal for any question you may have.
Ladies and gentlemen, if you wish
to ask a question, you have to press 1
We have the first question from Sven Henetfeld from BHF. Please go ahead.
Yes. Good evening and thank you for taking my question. Two questions for me. First one, can you comment on the polymer patent? Is it synthetic or natural polymer?
How does this compare to slag of Casinated Clay. And to what extent the polymer can replace the clinker content in cement? Is it 5% or 50% of your role replacement? That's the first question. On the second one, looking at the revenue per plant, it seems a plant generated about €12,000,000 of revenues.
On looking at your synergies, it's €35,000,000 of synergies. So do you need to add some CapEx to get there? And can you maybe comment as well if the plant are limited in terms of capacity utilization? Is it the metric to look at?
Thank you.
Yes. So I take the first question. Today, it's mostly synthetic polymer, but they have their own technology and patent. They have more than 300 patents on the chemistry. So it's a very well defined innovation process.
2nd, the Adhesive, they don't replace slag or Kink Air. They are used to reduce the ratio of Kink Air in the overall concrete. And by doing that, and you can, as you know, replace totally Kink Air with SLAG, when you do that, when you either lower the clinker content or you substitute with other materials, whether it's SLAG or something else, Then you increase a lot the volume of additives by 3 to 5 times. So this is not a replacement of clean care per se, but it allows to decarbonate the concrete by lowering what is the CO2 content of the concrete. And by doing so, you have to put much more additives.
And this is the growth of CRISIL. The second question is, yes, the mix in plants are very small units of a few 100 square meters. And the reason why we are very confident about the growth plan is that if I take just Southeast Asia and Latin America, we have 50 plants. We are going to free up some space within those plants and the CapEx for mixing is a few €100,000? Yes, it's
€1,000,000 maximum. And if you really want to do polymerization, we are €500,000 to €5,000,000 So it's low CapEx. Very low capital capital intensive, yes.
And we'll open up the local infrastructure of our concentrated chemical plant around the world to accelerate the growth of CRISPRISO.
Next question.
Thank you. Next question from Jean Christophe Laffert Romulan from Centimeters C. Please go ahead.
Can you hear me?
Yes. Hello.
Yes, good evening, Francois. I have two questions. First, to continue with the question of Sven. The formulation of cryzo chemistry Is directly mixed to ready mixed concrete, not to cement. Is that clear?
You have the 2 applications, Franchette, if you have both within cement, but the bulk of the market is directly with concretes. So it's 80% concrete, 10% to 15% cement. And interestingly enough, we have a 5% to 6% in gypsum. So that's also interesting because we put Adeze in gypsum on the Surrey for gypsum platform.
Okay. It's very clear, very clear. 2nd issue, Could we have more flavor on the market channels, what is the share of Distribution and which is the share of direct sales to Worx.
Yes, good question, I'm sure.
Well, 95% direct. So it's a B2B business, 95% direct with the large contractors or large ready mix players. And this is why We put it in the high performance solutions with global innovation, global scale, global customers and 95% direct sales based on co development Innovation. Very similar to what we have. You know the business of ADFORC within construction industry.
It's a vertical of high performance solutions. So this is exactly the same characteristic for Priso.
Okay. And a follow-up question also. The existing business of Saint Gobain, so Weber Reboot, could we have some metrics in terms of Sales and EBITDA margin. If we look at the CRISIL EBITDA margin, it's close to 21%, very high. Is that the same metric for Weber Reboot?
Many thanks.
As Benoit already said, we have we are talking of a presence of more than €3,000,000,000 if you take
your CZR out, we are talking
of DKK2.6 billion, DKK2.7 billion and we are talking of a profitability of if you just take what we saw in the last 12 months, we are talking about something like 16% EBITDA.
How much you
said? 16%.
16% for existing business of Saint Gobain.
Yes.
Okay. Sorry, Pierre. Many thanks.
Thank you. Next question from Elodie Rall from JPMorgan. Please go ahead.
Hi, good evening and congrats for congratulations for this announcement. A great acquisition, it looks. A couple of questions. First of all, could you give us a little bit of color about the competitive landscape in the bidding process To this acquisition, when did you start looking at it? How competitive was it?
So that would be helpful. That's my first question. 2nd, could you give us a bit of history in terms of the EBITDA margin profile of this The acquisition, I think you gave us the history on sales. And lastly, just I need to ask that one, but No, not sure how much your answer, but did you consider buying your own shares at 7 times rather than doing the acquisition at 12 times? Thank you.
Well, on the first question, it's a very good question. We had the one to one discussion with Sylvain, on this asset, so there was no competition option. Maybe Sylvain had in mind to launch such a bidding process in the coming weeks. And we have been fast and we agreed both with the management was extremely eager to join Saint Gobain and to accelerate the growth strategy of CRISIL within San Juan, which is a key element for CRISIL and SYNVEN in the decision making process, of course, a key element for us. And of course, the price was a good price for both, both Saint Gobain to create value and both since then.
So we have been alone in this transaction. In terms of EBITDA,
we said it is around 20% and that's what we are looking at in the business plan. What we have put is in the range of 20% to just to be prudent at this point of time. But I think it has You have seen that this is a growing business. I mean, if you take the last 20 years, it has grown close to 8%, which is substantial growth. And so we believe that it always has some upside in this.
Right now, we have taken us around 20%.
And on the last question, we consider that in order to create value for our shareholders, buying such a growth platform with a fantastic track record at 7.5 times per synergies will create more value than the straight share buyback as we speak.
Great. Thanks very much. Very clear.
Thank you. Next question from Arnaud Demands from Bank of America. Please go ahead.
Thank you very much. Good evening. The first question is trying to understand this acquisition in the context of your strategy. We knew you were interested in the space when you were trying to acquire So I guess it's a logical move. But do you see this acquisition as the beginning of a New platform for your future development in construction chemicals.
So should we expect more acquisition in this space in the future? That's My first question. And secondly, on the synergies, the €50,000,000 but I guess more on 15 on the cost side, I mean, Triggo has been through ownership from Sinven and I believe before that LBO France, so private equity, which typically are quite active with cost cutting. So what makes you confident that there is more cost synergies to extract? And lastly, if you could just give us an indication of the yearly CapEx spending and the operating margin
of the business. Thank you.
Yes. I'll take the first question and Benoit will follow on the rest. As you know, we I have been for Quite some time interested in Construction Chemicals. We have a very sizable business with Weber and we have been growing in the last year by small adjacencies and complements. Crezo has 2 characteristics.
It's also an adjustment in that space. It's a leading player in some countries. So it's from that standpoint, it's bigger. But I would say it's the other characteristic of Credot, it's a little bit of jewel in that industry. It's the highest profitable of the company I know in this sector with very, very solid growth and probably the most innovative.
So I think We'll integrate and that will be the job for the next 1 year to integrate that company. And then we will see from there, We'll evaluate whether we need to but I think it's already there is going to be a lot of growth from this acquisition. So one thing at a time.
And you have on Slide 3, the different areas where we are active on Construction Chemicals. So It's a wide space. What is interesting is that on all the small bolt on acquisition, sometimes they were half Additives have other construction chemicals. Trisot didn't want to buy them. Within Sandbar, of course, they will buy them.
And sometimes we didn't want to buy something which was half additives and the other half closer to our existing construction chemicals. So the mix for those bolt on acquisitions going forward will be perfect to have both Khryso and Weber together. On the synergies, Arnaud, we don't expect any Cost savings on SG and A, because as you said, this company is extremely well managed. And no, When we mean cost synergies on the raw materials, we have €2,700,000,000 of construction chemicals plus the 400 of Priso, there are a number of formats that we buy, which are the same. So we expect some purchasing gains.
There are some very slight Savings on cost like IT licenses, the size of Saint Gobain will provide some savings on that, but the bulk is some raw materials purchases. And second, we have, as you know, some concrete ready mix products within France in our business Merchant Business, close to €350,000,000 of business. Within that, we buy some additives and we make sure that we have the integration, the vertical integration of Chryso Products into those activities that we have in house. So that will be raw materials and kind of vertical integration rather than Cocely because Crezo is already extremely streamlined and well managed, as you said. Chardin?
Yes. So regarding your question on CapEx, it's been the range of $15,000,000 to $16,000,000 CapEx. And yes, so that's I think that was the question, right? So there's the CapEx.
Yes, just on the operating margin.
Operating margin is shocking around 16%. 16%. Yes, more than 16%, actually it's between 16% 16.5%.
Thank you so much.
Thank you. Next question from Cedars Ekboom from Morgan Stanley. Please go ahead.
Thanks very much. Hi, gentlemen. I've got a couple of questions. The first one, just back to your margin comments. I know that you're not giving much detail on the margins pre the last 12 months.
But if we benchmark Chrysler, again, some of the listed Construction Chemical peers out there. Its margin is significantly higher than all the listed companies that we cover. So I'm just wondering if you can give us a little bit more detail on trying to understand where that margin gap comes from. Is that a regional thing? Is that down to sales channels?
That would be really helpful. And maybe put that 20% in the context of the average of the last 5 years, If you could. And then the second question is on return accretion. So we've discussed the earnings accretion, But I wonder if you could talk about when you think this business will be neutral from a returns basis. Is that when all the synergies have been fully realized?
And then the last question is just on that revenue synergy number. Can you talk to us a little bit about how you see bolting how you expect to bolt this business into your group? My understanding is that you don't have that much of a presence in concrete admixtures at the moment. You obviously do have interest in mortars. So I'd just like to understand where you see the opportunity and also maybe the challenges as it relates to realizing that revenue synergy.
Thank you.
So, yes, if you have to why I think the first place is they are extremely efficient. They are successful. They That's why they are their margins are better than the others. And this is coming mainly because I think that the business model, the way they have developed, I think they are focused on the local leadership. They are not trying to spread their wings everywhere in the world.
I think they have been extremely focused on this Please, but they believe that they could get the returns. And the other thing is the way they have the supply chain, the way they have Nice including the polymerization is one of the important aspect and the attraction in this target was It's done in only 4 plants globally. So this also brings more efficiency. I think they have really managed very well in the last few years and that's why this margin is Clearly, best in class.
And very steady.
Very steady.
There was a question. The second question was on the return of capital employed in year 3.
Yes. So I said that we will create the value in the year 3 And that's something which we are very confident and we said that it will be coming with only cost synergy of €15,000,000 We are not even factoring the revenue synergies. Revenue synergy will be an upside, which we have factored of €35,000,000 in
the year by year 5. And to your question on the growth synergies, well, first, we are already in 2 ambit years. We have a bit more than EUR50 €1,000,000, 5,000,000, both in the Middle East and Brazil. So this is a segment that we know well, plus we use additives, as I said, in our own Concrete Ready Mix Business in France and in Adhesive or Gypsum. So we know this segment.
Now going forward on the Growth CNG. How we are going to do that? As Sreedhar mentioned, first, it's acceleration on the countries of priority for KRYZO, namely USA, where they have tripled their sales in the last 10 years. In the USA, KRYZO alone is in itself quite small actor. We have more than $5,000,000,000 of building materials.
So the name, The presence of Sangamo, the network, the sales people that we can divert and to put into and meet your sales and cover the geography will be extremely useful. 2nd, in India, just staying on the priority countries for KRYZO. Trisot is a BPO of €30,000,000 €3,000,000 in India. You know that we have a €1,000,000,000 business, highly successful In India, growing almost 20% over the last 20 years. So clearly connecting Krizio with the brand of Saint Gobain India with the talent that we have with all the usual set up with the R and D that we have in India will be one way.
2nd Pocket of growth is open to CRISIL, big markets, namely Latin America and Southeast Asia, where they are not present and they are not present because they were too small to have the reins and the strength to launch strategy on those markets. If you take just Latin America and Southeast Asia, we have close to €600,000,000 of Construction Clinical. What are we going to do there? I said we have 50 plants in those countries. We have 20 plants in Brazil alone.
We'll select The right logistic place for Crezo to install in a few 100 square meters their local mixing plants and units, Take some of the salespeople and we have many talents ready to go and launch their strategy on those new geographies. And 3rd, cross selling in mature countries where we have a very, very large presence. It's CEO. Close to the €2,000,000,000 of sales that we have, namely in Europe. And here, we have several applications on flooring.
For instance, Crezo has recently launched something which is over the last 3 years growing double digit for floor for self leveling floor and we'll use those technologies, our network within Weber to accelerate their growth in the Nordic countries, in Germany, in Czech Republic in Switzerland, where they are very small today because they don't have the size and order. So the opportunities are big. If you ask about the challenges, for me, the only one is make sure we have the talents and the teams ready to tackle all those challenges And all those opportunities are both. So it's not the lack of ID, not the lack of existing business country by country, not the lack of R and D And Innovation efforts when we connect the team together, it's having the right people in place. And what is very nice about that is we feel very comfortable about the culture, about the teams within Crezo and Saint Laurent.
Yes. So I just said, again, I want to insist on this that these all these ideas has been built With the management team of Creso. I think that is most important point because there is a buy in. They believe in this and that's what is making us Really feeling that this we are going to be very fast in getting it done.
We have spent the last few weeks talking a lot in-depth on R and D and Geographic Development with Thierry Bernard and his team, and we share the same business plan going forward. That has been discussed in-depth.
Great. Thank you.
Thank you. Next question from Gregor Pugliesch from UBS. Please go ahead.
Hi, good evening. Thanks for taking my few questions. So the first one is just maybe on that point on how it's managed. I see on your final slide, it's going to be part of the HPS High Performance segment. And I believe Weber is kind of split around the different regionals segment.
So I guess the question is from a practical perspective, who's kind of in charge? Are you going to kind of run them separately and they Let's get some space, you indicated in the individual plans to sort of allow them to expand? Or I guess, How will you sort of do the organizational setup? Maybe it changes over time. So that's the first question.
The second question is going back to Slide 3. Can you give us an idea? I appreciate where Crizo sits, but your business In those sort of 6 buckets that you've outlined, how you define the where how does it split up? So where is Pangoban kind of the strongest in that in those 6 categories? And to what extent is there an overlap With Credo or is it fully complementary?
And then my final third question, just maybe just technically, if you just give us Your WACC threshold that you use for the value creation comment by year 3, please. Thank you.
So to your first question, as I said, the characteristic in terms of global innovation, Global customers, 95 percent direct sales is very similar to what we have within High Performance Solutions and our construction industry vertical segment. Now so the CEO of Crezo will report to the CEO of High Performance Solutions On day 1, at the time of the integration, we'll keep the full autonomy of Khryso as a vertical market, as a business unit within division, within high performance solutions. How it's going to work? On the cost synergies, of course, will exchange on raw materials purchase because we have central purchasing with Weber. Same on the CEO, purchasing of additives within our business for the ready mix business, which will be very easy and done very quickly.
The growth side will open up the infrastructure of Weber, which is indeed in the different countries, will open up this infrastructure to free up some space in order to put dedicated mixing units of Khryso country by country in the right order of priority for Criseo. So that's the support of the Saint Gobain infrastructure, Whether it's in the U. S, in India, whether it's in Latin America and in Southeast Asia, that will provide the growth of CRISPR in those countries going forward. On the 3rd bucket of gross synergies that I mentioned, the technology for instance for self leveling floor that Chryso is rolling out In France today with the CEMEXA, this is the brand name that they use. We have a lot of flooring applications ourselves.
So we'll use the 2 channels, continue with the CRISODE channel under CEMEXR and put this technology under Weber for their flooring applications, whether it's in Germany, whether it's in the Nordic countries to accelerate the rollout of this technology within of flooring applications of Weber. But again, RIZO will be managed as a division of high performance solutions with the full autonomy to continue the innovation going forward and the growth.
The other question you had is WACC, it's 6.85% is for the Average, on an average. So that's what we are looking at.
Okay. Sorry, on the second question. There was a question on the 6 segments, sorry. So we are very strong on building finishing, on resins and coatings, on waterproofing And we are present on the 3 other segments, Concrete Specialties, Additives, Analytics, but to a much lower extent, Marla.
Okay. So you will not transfer anything of
the existing business into Creso. There's no reason to do that.
I mean, I appreciate Weber is a bit different, but Some of the other bits which may be small, maybe a little bit better over there. Are you still the
small new
product line?
Yes. The question, Benoit, is whether there are some small parts that we have already there that will be transferred to KRYSTAL. Yes, we are studying that, but it will be maybe some small Specialist Companies, but this is not going to be a significant material.
Yes, we have a small and midyear business already in Brazil. Of course, On day 1, it will be put under the management of Criseo, and it will be used as a bridge ahead to expand in Brazil. So there will be some thank you.
Thank you. Appreciate it. Thank you.
Thank you. Thank you. Next question from Tobias Warner from Stelure. Please go ahead.
Yes, good afternoon. Congratulations to this acquisition. A number of questions from my side, if I may. First one quick to answer. Crizo is out of the old materials, is that right?
Yes. Yes. Okay, great. Thanks. Secondly, the tax rate within Crizo, where does that stand?
Yes. The CRISPR's average tax rate is around 22%.
22%. And It's cost of debt. Does it have any debt or?
They have debt, but it is not relevant for us because we will be reimbursing everything and we have a lot of cash And we will invest
for debt at the moment, if I may.
For Sengel, I will just No, I mean, if you just take that, What is an average cost of our debt what we have is around 2%.
That's fine, Deutsche.
So
just please have in mind that we have $8,400,000,000 cash end of last year.
Okay. And then thirdly, If you could, could you decompose the historical growth, the 7.8%, how that's put together other than the 6% to 7% coming from the mix just organic growth.
It was between 5% 6% organic growth and 2% of bolt on M and A acquisitions.
And go on, sorry.
Yes. If your question is why you're talking of 5% to 6% to 7% what you have taken for the future?
Yes.
Yes. So we expect this market to grow at that rate. The one point which Benoit said quite often during this call is The whole decarbonization is something which is going to accelerate and this is going
to be a big upside for the Chryso business model. Yes. I add that we have not built in our business plan any bolt on. And as Benoit said previously, they could be because there are a number of very small companies that are the different of these construction chemical businesses, as Benoit mentioned. So we there will be an opportunity for a lot of small bolt ons, but we have not factored that in the business, not at this stage.
Yes, it is standalone at this point of time.
Okay. Two more questions, if I may. Such an interesting acquisition. So out of the 5% to 6% Organic growth, what's sort of the pricing we should assume there historically?
Historically, it has been something like around 2% on an average. It depends on year to year. And I think they have been quite successful. We have been quite successful in passing on The inflation is also through adding lot of new products. I mean, because you see you would have seen in the presentation, we talked about 35% of the sales comes So from the products which didn't exist 5 years back.
So that's also another way they keep introducing the positive mix effect. Otherwise pure price, I would say between 1% to 2%.
Okay, great. And the last question is more general one. You talk about the theme of de carbonization. Are you inclined to also enter into other products which would take away market share from the existing Yes. It's clinker driven cement world.
No, I was going to say we have made acquisition in wood, Whether it is fiber wood as a few years ago in France and we are expanding the capacity of the acquisition we just announced to increase our merchanting of wood activities in France, where we see A strong growth. So that's also a way to increase our exposure to a very sustainable and growing businesses, which are part of the decarbonation answer to the construction industry.
And you know what is interesting, it's not only the Lower CO2 of concrete or cement. It's also the fact that you can use if you use more additives, you can use different kinds of sand and Aggregates. And we know that going forward, there is scarcity of those 4 modules. There is more and more pressure on where you can have a query, etcetera. And the fact that with commodities, you open up the versatility of the aggregates, the sand that you can use for concrete, the demolition waste.
It does open up a wide spectrum of chemistry, innovative chemistry for In construction, and it's way beyond pure cement.
Okay. My very last question, apologies for so many questions, but Gregor made a great point in terms of how this business is going to be managed. I mean you're going to have a great business, €3,000,000,000 of turnover and more growing going forward. He'll be sitting within several different divisions. It'd be great for us to actually be able to track it as a unit and see how you manage this going forward.
Any thoughts on that?
We don't intend to change the structure and the reporting of the financial communication that Pierre Andre and Schreuder have been put in place for the last Cheers. But we will report to you the progress and the value creation, of course, on this acquisition like we have done on Continental over the last years like we have done all the time within Saint Gobain.
And like we will do in Continental in at the end of the first half.
And I will come back to you at the Capital Market Day also on what we have done with Continental over the last 18 months.
I just think Santas and Weibo and Crezona, but it's also the Gypsum division and business, which have a real nice fit with one another, and it'd be great to see that.
What is important at the end of the day is to continue to improve strongly the margin of the group. So you should see that going forward.
Thank you very much. Well done. Thank you.
But when you talk about So it's a raw material for Gibson to some extent, which is a very for platform board, which is a very good one. And so as Benoit said, it is the same philosophy that the one we have for what we call construction industry today, which is mostly products made out of fiberglass and which are ingredients of a lot of solution that are in our regional markets. That they are sold to large customer. That's the specificity of CRISPR.
No, I see. I mean, there's
a lot of things coming together there now. Exactly.
Exactly. You got it.
Thank you.
Thank you. Next question from Yassine Touarey from On Field Investment Research. Please go ahead.
Yes, good evening. So I would have two questions. So first, how will Khrysos management interact With Saint Gobain GX 670, the different head of countries and Weber's manager to allocate capital, Whether on the CapEx on bolt on acquisition, what the decision is going to be made? And my second question is what is The outlook for the 2021 sales and margin for KRYZO is an environment where demand is quite good, But where chemical cost inflation has never been so high, do you see some potential margin pressure? What have been the latest trends?
That would be very useful if you can give us a bit of color on that.
Well, I take the first question. We will, as I said, place Creso as an autonomous division of High Performance Solutions. We have discussed and agreed on all that with the CEO of Crizo in order to continue to nurture and grow The autonomy and the growth and the success of KRYZO. So in terms of decision, whether it's on CapEx, whether it's on the small bolt ons, be the CEO of KRYZO We'll interact with the Head of High Performance Solutions and myself to make quick relevant decisions on The growth and whether it's CapEx, whether it's external growth for Priso going forward. So there is no In connection with Weber, which is done by country, it will be again a direct line between the Khryso CEO, Hi, Catherine Solutions' CEO and myself.
So quick and we have agreed on all that, on term sheet and everything, so it's all clear and ready to go.
Yes. So your question on Yes. So our outlook for 2021, we have indicated to you the last 12 months figure. It's in the same line. I think The management is very confident to deliver what we have said last 12 months figures.
And on the cost inflation, on the price price increase versus cost inflation. Can you give us a bit of color?
Yes. As of now, they are doing well in the Q1 as they have managed well. So I think you have They have been able to manage that. And this is something which we have been Doing it consistently in the last few years. And again, I said, I think they are very, very focused on local markets and trying to see that The margin is also improved to the mix, which they introduced to
the new products. And coming back to this question on The margin or the integration of Criseo, we share exactly the same culture and the Same empowerment of local teams. We have discussed that at length. So all the transformation of the group with Transform and Go, I think is fully aligned with the model of local empowerment, decentralization of Cridl. So we feel very confident that the integration will go very well.
And maybe last question. In terms of R and D, I understand that Credo has a definitely an edge yes, other player in the same industry. How can this edge be transferred to there.
We again, we are not talking about the same application. So we are not going to of course, When we have some knowledge to be transferred in terms of chemicals, in terms of compositions, in terms of we will share, but We'll keep the central R and D of Creso, which is in the south of Paris. We'll open to Creso all the platforms, all the capabilities of the R and D centers of Saint Gobain. When they go for instance, I give a good example. Brazil, we are small in amateurs.
They are not in Brazil. We have an R and D center in Brazil. It makes full sense to add some admixtures capabilities in our R and D center in Brazil to support technically The growth of CRYSTAL in Brazil. We have an R and D center in India. It makes full sense.
They have a local R and D technical center in Mumbai. Our center is in Chennai. It makes sense to connect them. So we'll keep the dedicated R and D, which has been extremely successful, and then open up the platform of Saint Gobain. And I'm sure we started to have those discussions.
There will be a lot of ideas generated by just the exchange of between our different researchers.
And Benoit, you told me the R and D teams of and the Head of He's always extremely excited by these prospects that bodes well.
Thank you very much.
Thank you. Next question from Heath Boumanhead from Exane BNP Paribas. Please go ahead.
Good evening. Thank you for taking my questions. I was trying to understand the cost synergies. You mentioned €15,000,000 as a sort of a run rate. But if we look at the cost of additives, I think this is about 5% of the white content of North Dales, but it's much higher in terms of the actual amounts in value.
So I was trying to understand what are really the cost synergies here as you backward integrate into the additive manufacturing and whether there are significant opportunities for that to be increased by a multiplier effect. My second question is Whether you are now fully focusing on becoming a construction chemical company and potentially looking at either Further consolidating your new position in the additive admixture, for example, in the U. S, But also in other chemical products like adhesives, resins, waterproofing and even mortars sorry, membranes. And lastly, on the sales synergies, could you maybe have us understand how much of that is just cross selling versus New market opportunity. And if you have already done your due diligence, what would be the size of the revenue potential if you had a strong position in Brazil and Southeast Asia, for example, for Crevo?
You take the cost synergies.
Okay. I'll take the cost synergies. I mean, if we're talking of the €15,000,000 Eve, out of that €15,000,000 we are saying largely it is coming from the raw material which we buy for within the Construction Chemicals and Additives business which have Saint Saint Germain, we're talking of again SEK 2,700,000,000 plus. So we have taken half of the large part of that, half of that is coming from there and the other part is coming from The distribution business which buys the additives from outside, we are just talking of integrating that with Quizot, that's one. The second thing is Some business also buys additives from outside.
We are talking of integrating them with Krizo. So this is to me, this is a low hanging fruit And they should be able we should be able to achieve very quickly.
And on the second question, yes, we are Happy and we continue to grow our Construction Chemical business, but there are many other opportunities within Saint Martin. You see what we have done in Gypsum. Yes. At the beginning of this week, we announced a small acquisition in Additives in Russia, Construction Chemical in Romania. So There are some opportunities, but it's not the only growth driver of Saint Gobain.
On the growth synergies, CEO. The plan is, for instance, to take in Brazil over the next 5 years 10% of market share in the additives market. You could say it's not extremely ambitious, maybe we'll do better. That will be very nice. And in terms of total revenue, it's a bit north of €100,000,000 with a nice contribution margin, so between €100,000,000 and €120,000,000 additional sales over the next 5 years to get To this margin impact coming from gross synergies and reasonable market share gain, whether it's in Southeast Asia, whether it's in Brazil, in the single digit type of market share and could be even more.
Thank you. If I could just come back
on the Additive, I mean, If I do a simple math, I think you're probably buying around €150,000,000 to €300,000,000 of additives in your business
just on
the north half. So €15,000,000 I know you said no heavy fruits but
No, because we buy some raw materials together, but the additives that are used in concrete are different. The additives that are used in In concrete, we buy them because we have a concrete business in France, which is in the €350,000,000 range. So there is Quite a few additives in terms of million of euros that Frederic mentioned that we are going to switch to Credo. In terms of raw materials, there are some, I don't know the English word, polycarbon dioxide and things like that, that we buy together between Crezo and Weber. So there will be a bit of a material gain.
Maybe there will be more, but so far this is what we have figured in our business plan on the purchasing gain.
Well, thank you very much for taking my questions and have a good evening.
Thank you very much. Next Question from Eric LeMari from Bryan Garnier. Please go ahead.
Yes. Thank you. I've got 2 actually. First one is, Is there any specific risk that the deal will not be completed by H2 this year? And do you have any break of fees there?
And the second question, I was wondering you already answered partly the question, but I was wondering what type of raw materials are purchased exactly by Crizo? I suspect it is chemical, but which one exactly, apart
the one you just mentioned?
There are many, many, Robazio. So we are not going To enter into those details and I think none of us are expecting chemistry. So there are many raw materials. The beauty about Crezo, The difference of many others is that, as we said, they have a vertical integration and they go very upstream. They buy monomers And they have polymerization unit to make polymer.
And it does provide 2 advantages. 1st on the cost side because monomer You can buy on the commodity market. For example, we have a plant in Turkey where they buy monomer from Asia and they sell those polymers When they have polymerized the models in Europe, so they buy the last for coming from Asia and they sell in Europe. But again, After that, there are some secret that I don't want to put on the market. So they buy monomer, which are commodity driven and they make their own polymer with all their patents.
So And second, on your first question, no, there is no risk and we expect there is no difficulties on the antitrust side. We need to have a bit of finding, We are confident it will flow nicely on Phase 1 in the different countries where we have to do it. And so closing will be in the second half of this year. Thank you. Thank you.
Thank you. Before going to the next question, CEO. We have one more question from Michael Betts from Database Analysis. Please go ahead.
Thank you very much. My question is a big picture one. I mean, as far as I'm aware, amongst the global cement It's only CEMEX has its own construction chemicals company, but all of those companies are spending a fortune on R and D In additives and trying to lower due to carbonization or self leveling concrete, etcetera, etcetera. So my question is, Does Equisor work with those big global cement companies? Or does it concentrate on working with the smaller Independent ready mix companies and contractors.
And what risk is there given the amount of spending that these big cement companies in conjunction with their partners are spending Some of the technology gets overtaken by new products. I mean, how defendable is some of the Crusoe thing, the Crusoe technology, I guess, is my 2nd part. Thank you.
Well, thank you, Mike. No, you are right. Cenex is only one with some additives Business and know how. Creveu works with all the top players in the cement industry, all the top players in the concrete as concrete customers and also the top contractors. They sell directly to the VINCI of the world and those large Contractor.
So it's a true B2B at a very high level with all the big players. The beauty about the CRISPR model is that CEO. Some of those businesses 20, 30 years ago used to be like within that far integrated within 7 company. But you share when you are an additive supplier, you share so much knowledge with the cement or the concrete player that when you are concrete customer of additives, when you are cement customer of additives, you don't want your supplier of additives to be integrated in Cement and to share your know how all your co development with other Cement competitors. So this is the reason why over the last decades, most of the LEDs went out of the big segment players.
And this is going to stay the same going forward. On the second question, no, we don't foresee and discussing Clients with the management of Creo, they have been always at the forefront of new materials, of new patents, of new products. CEO. The product I mentioned, they just launched, I think it's last week for how To lower a big weather, the clinker content of concrete. So they have been truly not only the most profitable company, but also the most innovative company of their sector and we'll continue to provide the financial resources, R and D resources that they continue on this success we pass going forward.
So just as a follow-up Benoit, and apologies if it's in the slides or on the press release. How much is Freso spending on R and D a year?
So 3% on sales. 3% on sales And they have a central R and D south of Paris and they have 26 or 29, I forgot, look 20 centers, so 20 centers, look, I think it's more than that. 24. 25, sorry. 26.
26, sorry. 26 local development centers within their different geographies. So that's the combination of central innovation and local Development Centers.
Understood. That's great. Thank you very much.
Thank you, ladies and gentlemen. We don't have any more questions for the moment. And CEO. On your telephone keypad, we have one new question once again from Jean Christophe Ferre Romulan from CMC. Please go ahead.
Thank you, Stuart. An additional question regarding the channel mix And the client mix of Weber, is that the same or?
No, it's very different. Weber is mostly a big part of Weber is for distribution. That's a big difference. That's why we have it in our regional local organization by country.
Okay, okay. It's very clear.
But there are some there are also some direct customers in the Netherlands, it's a much less much smaller.
One thing which we have not talked about that one for instance In some countries with the same extra self leveling flooring application you start the foundation of the building. Of course, you start very early in the building. And later on, we can leverage our local businesses, whether it's Weber, Gypsum, Insulation for distribution to pick up additional business, but it's through different customer channels.
Okay.
And that's the reason for putting it in HPS, Jean Christophe.
Okay. Okay. Now we will We
sell directly to large customer with a very co development model.
Okay. Many thanks.
Thank you. Looks like we have no more questions. Back to you for the conclusion.
Well, I think once again, I think it's a Very good acquisition. We are quite excited as you understood and well prepared. And I think that The team of Creso is fully on board, but I think that's something which is going to be very helpful and which will help Benoit to make it to have a very quick integration of that company in Saint Gobain. So they are very exciting prospects and we are quite excited.
Thank you. And I hope to have hopefully then during the Capital Market Day on the 6th October. So we We'll make sure we work diligently to have closing, and we are eager to welcome them within Saint Gobain and continue on this very fantastic growth platform. Thank you. Thank you.
Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.