Earnings Call: Q4 2018

Mar 6, 2019

Dear ladies and gentlemen, welcome to the Full Year 2018 Results Small Offering Track AD. For our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. If any participants has difficulties hearing the conference, please press star key followed by 0 on your telephone for operator assistance. May I now hand you over to Steven Holland who will be used as a conference. Please go ahead, sir. Thank you very much, and welcome to everybody for the rest of the call for full year 2018. I'm just trying to share with my presentation. I'm not ready to answer your questions. Yeah, thank you for the successful year of our company. I'm operating gross profit from operating EBITDA. Gross profit amounted to 2,660,000,000 EBITDA growth was even stronger with a 4% up in the EBITDA margin of 876,000,000 in 2018. I'd like to request many colleagues from our organic business development. You'll see the world. How does it make sense of people around the world in the various different situations interconnected? To share the emergency damage in all circumstances contributed to give it away. As with my last injection, I see a free result in buying the airlines which is more challenging, This is picking up from Naomi Energy. I think it's I've got a benefit from the big sister's department in the market of €25,000,000. In 2018, we began getting for that and the manufacturing executed number of very promising acquisitions around the globe. It's a fully closed fixed transaction. It's been combined and defined by you. €265,000,000. The earnings per share, the group increased by 27% which you have made there. Message is 0.98 and I found you registered the company by car. Just the GX payment in June. Okay. I'll give you another €1.2 per share. It was a reduction of increase of 9.1% compared to last year's dividends. There's an IPO that's returned with the 8th executive increase. Obviously, then, I mean, on the line that you mentioned last year. I'm trying to get you a couple of initiatives which pick up, please. Currently, you're progressing. I wish she'll be interested in a a lot. If you're looking at, we should be looking at the, the local back of this mobile and the future. There's a couple of strategic programs in flight to the global market. But it's not that there's a repositioning about food and nutrition. I'll talk about it in a few moments. And digitization digitization, which we call GGB, in in Grand Prairie called Connect Healthcare. She got something about 2 years ago, we're making very good progress as you keep it up, but I personally know that this is a brand pack called brand pack connect, but also we and we've been doing things that are taking a lot now. Is we also provide a transaction to internal cost of this where we can see a payment plan for the mobile devices from our supplier It's a very important initiative with our company, and we see, yeah, the case of traveling around digital, program manager's locked. Right? For the nutrition. You may remember, I have a market today, and we actually, especially launched out across the food and nutrition. But this market is very, social. You can take some social plans, which, which is growing like expectancy and it runs through world population. So that I've, I think it's improving the equipment industry and how it's tested for us, and they could see much of a new boost now for, like, at reduction and low sugar, etcetera, etcetera. Our customers and the food and beverage producers are looking for support from domestic requirements, and don't take it as an IT position to support them. Would you change that approaching the general validation and now for the nutrition business. We now call them on Global Growth. We start to start to see marketing procurement and technology. And sales tech support people now a 100% dedicated to improving the industry. The new for the new organization, we use the more agile and custom that you should make in process. To considering, growth and investment in in the food industry. Because the nutrition team has the own, but as its own branding in order to to budget to make sure I'm not used in buying a customer. I'm struggling to go through this business, and we'll go through all the progress on the acquisition and getting through with any questions. To the next slide, of the president of the Brazilian com company. I hope you just go work and, go through a specific number of investors investors for bank accounts. That's just the math that we should have decided a bit more and listed a particular concern about the ability of the chemical effect in general, and so I can't be able to find that when I go to the chemical not personal experts in the chemical industry, but that's nice to nice to grow, and we like to reiterate that we're living in nature really in nature of our company. I just I've got a notification from the most important part of the image is back. We're actually actively over 70 people around the world. I mean, to give you a call, I would need a disclosure for a single trip today. I think the industry put a accounts for 10% of our customer business. Regarding customers and products, you will not be fined any company more than that that goes by than our style. Our business is basically more than 5, and therefore, we do not depend on the single live delivery. We are planning to go through chemical prices so that our profitability is actually not impacting price cost price volatility you can see any kind of industry. In addition, in addition to this, our M and A approach is going to be an international branch. We're focusing small and mid sized acquisitions, which are value preaches from a very good day. If you look at the last 14 years, you're gonna be fine 1 year, where we had the margin decline in our operating EBITDA, that was in 2009. And that could be down declined by less than 1%. That's the law. But not me, I have my, you know, the terms of tickets for cash flow characters, character speaks of our business. Invoying the call, due to recession environment environment and crisis. You think that it also comes down, and therefore, we released working capital at Brent cash inflow. In 2009, for example, we have a new formula of 240,000,000 in cash during that period, and that was in the business of the significantly smaller than we are today. I'm looking for the next slide into the operating EBITDA bridge. 2017, we reported an operating income of 836,000,000. We managed to go down to 876,000,000 in 2018. So this we've gotten down to the phone confirm, which is shown on the bridge of this line. We've got an opportunity to get a strong headwind from foreign exchange translation. There's no 28,000,000 for the full year. They closed the number of value of free cash flow issued in 20172018. They still believe contributed an incrementally and €4,000,000 in the year 2018. It's an organic, business development on the air region of a good start from the year to share organic growth we're going to be able to explain the stuff to that more challenging environment, but we end the EBS as an organic growth of 3%. I'm also have a year in terms of receiving non credit growth, but let me understand, which is a significant increase. Right. Basically, for this, and obviously, the management team not made it a great job. For the course of 2018. And last night, I reached you on a very close of around 2%. This is this kind of volatile and challenging environment and and and, again, take the resilience of our business model in Asia, we've we've put you on a flattish organic development, for the year. You have a proposal group that can offer you an EBITDA of 80 to 1,000,000 euro. It's processing the organic growth of about 10% of the group as a whole. We believe this is a strong growth meeting in Lambda, become more challenging at the end of the course of the year. On the next slide, we'll extend the development regions in more detail. In in the year, we've reported a strong amount of growth for the first half of the year. It's just our initiative, something that has continued to pay off. In addition to nearly close admissions, we'll take loads of program and then an MEI deficient improvement program. Last year, we saw a number of companies reporting which we've got from associated individuals in district in Q3 and Q4. Technicals in the automotive. In automatic, in 2018, I'm not making which you must be very strong results. Yeah. So for the gross profit grew by 8.9 percent, maybe down by by email 11.2% based on all organic. Growth was both based on major bridging benefits in the industry. On the top of that, we saw our increasing budget pressure. This is mostly now in transport costs. But we managed to mitigate some of those costs by applying surcharges. Thank you for Latin America. I'm with American Machine Network in organic growth in both public and EBITDA. Are facing an environment that's currently challenging and in effect, including declining additional production and across the collection landscape that can be capitalized as some more difficult from time to time. However, I'm happy with where we managed this result and the line that was reinstated, and I'm going to be operating with more difficult like to know the book, Brazil, it's Columbia with 2 professors, which showed an average contribution. I'm taking the market leader in the region, and I've just ideally positioned maybe it's a huge opportunity, and we'll be producing a strong start to the current year. In Asia Pacific, we reported good growth, at gross profit and in regard I'm happy to not begin to take this issue of weekends during the course of the year. Overall, the organic EBITDA was processed in 2008, which can be attributed to the margins in the cockpit. For example, in China, we are currently taking private business costs as we move now warehouses and our operations. However, this will be only temporary. I'm a demand for the degree of immigration of the region. Oh, China's social health departments all the way at the lower right So possibly contributions came from our acquisition, not necessarily from Raj, India. It's not a specific, it's a strongly of the year from Connecticut and the acquisition. Ecosystemic origin to the highest long term work potential, but we will be actually further investments in the region of recognized into the world's largest market. Greeting up today. We're the only double distributor of administrative innovation, and we advise further growth through an increased market share and acquisition. Turning to you now to you 4. Next slide is provided first in EBITDA ratio in the 4th quarter. We'll request a no effect compliance change in the session in the quarter. Conditions contributed to €8,000,000 EBITDA. In any of your benefits, it was slight negative in the 4th quarter, which in accordance to attributable to the coordination challenges that it takes there. Not the matter we do this year, it has been a very good quarter, and organic growth is around 14% what you did, optimize for the last year's level. You know, it's just a different okay. It's something that maybe dot com slash here in the group that is shown here as you rather store it. Didn't that affect the time we gave the performance measures to be good. So again, it's not working. She's also good work. Acquisition. Also, we've done 18 weeks using the extra M and A strategy for the number of interesting acquisitions. And in there, we can see that position in 2014 and I'm on indulgent. You also agree a timely agreement to acquire the Metro group in, East Africa. This deal will close during the course of 2019. Additionally, that the area is sold out by our Texas business in Denmark. This is just a noncore business for us, and we initiated those first in 2017. We've finally called the business to Kroger Group, an estimated value of €10,000,000. In North America, we were acting Canada, and quite a few business days, Canada, the colors, which is a large one, and it was set up by just looking at the market significantly. In addition to the selection of the suppliers, This was an interactive warehouse and logistics infrastructure. So we're keeping that in night it's a nice quote on the acquisition in our business for London. I think we're delighted as to, sort of, the Raj transaction where we, find, supervisor in the process in India. It's a very small section of the program and how you're tracking within the market. And this acquisition, we have significantly committed our market access and expertise with Thank you, Steve. Good afternoon. I would just like to walk you through the details of our financials to pull out to help you at transparency and to provide a platform for your questions, later in this call starting on page 15, our sales amounted to a trust point €6,000,000,000,000 of, I think, was profit or was more important, but That's a disputed page figure. We're told, 2,560,000,000. Life sales and life operating was also the operating EBITDA reached you all time highs for our group, and this amount is to 875,500,000 For all of our KPIs, we report a significant growth, a future relief on an ethics adjusted basis. I would like to emphasize that most of the growth is at suitable to our organic business. A lot of money. Colette EWA actually grew by about, 5% organic conversion ratio for the group at the year for the full year was 32.9% slightly above half year plus. The next slide, the screen shows the product income statement below operation EBITDA, to be transferred from special items in 2018. We recorded special items in the policy of positive amount of €17,000,000 This may be related to the successful sale of the borrower's extra business that we generated an income of 28,000,000 The line also includes cost items in relation to our efficiency improvement, outbound in EMEA, in the fourth quarter, we decided to extend the program in order to address the software results in our EMEA segment in the second half of the year. If you use the stage for the workforce, apologies, the workforce a little stronger than initially expected and we've also made selective changes to the management. When it comes to the further lines of the TSL, there are no major changes for depreciation, for amortization compared to previous year. Depreciation for 2018 amounted to €122,000,000 and amortization amounted to 15,000,000. It's close to 98,000,000 expense. The financial result is on last year's level in the interest line about the benefit from the repayment of our bonds of our formerly expected bonds in July On the other hand, we we earn, some higher input charges from borrowings in countries with relatively high interest rates like India, like 30 like Argentina. Earnings before tax amounted to €624,000,000, 19% about the figure reported a year earlier. The profit after tax will be given by 28% and the amount is to 462,000,000 In 2018, we recorded tax rate of only 26%. This is around 5 percentage points lower than in 2017. And it is mainly attributable to the changes in the extension. But the cashier is put at €3.98. Cow increase of 27% compared to a year earlier. I'll check the 17 and move direct see into 'eighteen, a few couple of remarks on our on the investment and financing cash flow. CapEx amount is €178,000,000. In line with the guidance we provided. In 2018, the cash out for purchase prices by physicians was €199,000,000 main acquisitions that we paid for were Canada Colors and Watch in India. Investment cash flow also contains the proceeds from the private sector sales in an amount of €68,000,000. The main item in the finance in cash flow is a dividend of €170,000,000 to be paid out to our shareholders in June. Page 19 gives you an overview of our balance sheet. The total asset group amounted to €7,700,000,000 up by about €400,000,000 from a year ago. No structural changes to the balance sheet, the increase of the right position balance sheet results from acquisition and from organic business development. Looking into indebtedness on page 20. At the end of the year, net debt amounted to a €1760,000,000, level of cashier good at two times. Last time, this previous year, despite a quite strong acquisition It should be off the group now amount to receive 1,000,000,000. I'll take the details on the maturities scheduled and, let's take a look into working capital on page 22. Page working capital amounted to a 1,000,000,000 €800,000,000 at the end of 2018 compared to the end of 2017. It is an increase, which is to appear to be written by higher prices or chemicals. It'd be typical turnover still. It could be under pressure and then placed at 7.3x. Free cash flow amounts up to $525,000,000 in cash flow, obviously, benefits from the growth in operation EBITDA. Also working capital helps the improvement of the cash flow in the sense that payout covered in capital was lower in 2018 than the year ago, lower than 2000. Slightly higher, but in line with our expectation. We will propose to the general shareholder meeting our annual dividend on page 24 with due to details based on a profit after tax of €461,000,000 and returning to the share of €2.98. So this proposal to the shareholder meeting in June, the dividend of 1 year old 20¢ per share. This results in a 180,000,000. We will pay out that it implies payout ratio, slightly ahead of 40%. Okay. So last year's dividend of 1.10 the proposed dividend represents an increase of 9.1 percent. So since approval, we continue our strategy of annual dividend increases It will be the a consecutive dividend increase with the IPO in 2000 rand. Page 25 is busy charge. It's from IFRS 16 on the changes to the, lead accounting, and it's need to, give you information and guidance on the future treatment of our lease. In 2019, so in the problem is in the just started financial year. We will adopt the new lease in standard, IFRS 16. She has provided special dividend agreement in in our international group in total. We actually reviewed a significant number of 6500 using contracts. In 2018, the total rental and lease expenses and the outstanding to a 124,000,000 euro. This amount in 2018 was included in our operating EDP today as an expense item. So if you had option of 5 in most of these contracts that have to be reclassified and presented as if we would have thought of effective assets and finance that. Based on the 2018 data, we currently expect certain amount of about a €100,000,000 to go out of the operating That's fine. Operating behavior is increased by a corresponding amount. So please, as you said, of the reclassified contact contracts for the future we show in depreciation and in interest expense. Earnings per share should only be impacted to a very minor extent following the research. Due to the capitalization of this contract, balance sheet will reflect the liability and will reflect the access to initial impact which we already did close. In our annual report that we released today will be around €350,000,000 on the balance. Please please be a bear. This is meant that first guidance, we will provide further information and more details in the course of 2019, our 2019 quarterly and annual financial statements will include reconciliation information which should allow you to better understand and track this at our main SEI operation EBITDA from first quarter 2019 onwards will include the effects of your discount we would suggest that the market, that the sales type start saving their expectations on an EBITDA number that include the reclassification, please. Is that a relatively complicated explanation on leases? I'll hand it back to Steve for our outlook statement. I think we are. That's about starting the current trading and then adjust the balance of the year. And I'll take you through the gross profit for working day. On a monthly basis. So I'm just slowly releasing that when we write it down. And October's rate was 4.90%. 1% of organic. And November was 7.3% of organic. December was 7.3% 3.2% of organic sales. In January, we're up to 3.9% of organic sales. In February, growth was 10%. It was 2.5% organic sales. As you will know from my Q3 reporting last year, the general market in in there with respect to the weekend, and this is really okay. At the beginning of last year, and we continue to enter the new year. We are about to commit, so we can go after this in 2019. Hopefully, it's more difficult environment It's an assessment we actually need a more cautious approach for close to year 2019, and we expect those 2 will pronounce in Q3 and Q4. EBITDA with a professional credit range between 3% 7% in 2019. Isn't supposed to be on a constant currency basis with green acquisition. But the more, if it is based from a permanent account representative, it's not taken to account the impact of the first time adoption. The lease leasing center. I have reached the team that called the frozen gas. This is not America and Latin America, but I've had a good start. We maintain our positive usage. With regards to end of this visit, we expect that they will make a a good contribution to the protocol group. Okay? Office in Topton, China are in the Bradford phase. I believe that's my line over the next 12 months. The pacing of the death of the group, the pacing of the growth of the group is to be more back in the back end loaded as well. The more more difficult parts you get high comps in 2018. Around about a 195,000,000 Euro CapEx in our in our existing business. The electricity report number proven 20 that we've set compensation from the Chinese authorities. Of around €25,000,000 for the existing sites in China that we are moving. I'm going to be able to be aware that the North American market for transportation is currently undergoing to make changes to the next level of consolidation and to get more position as market, and we've already seen some decisions by particular the 5 to do our research in that current arrangement. I'm gonna go for potential changes to local supply chain. We can ask a question. We can answer any of your questions. Ladies and gentlemen, we will now begin our question and answer session. If you have a If you find your question has answered before just your attempt to speak, you can dial 0 2 to cancel your question. If you are using speaker equipment today, please list the handset before making your selection. One moment, please, for the first question. The first question is from mister Gunwar of ABN AMLO. Your line is now open. Please go ahead. Yes. This afternoon is 1. I have a a few questions. Just based on the guidance, can you tell us what would make you either hit the low end or the high end of that range? Is that only macro or other other factors as well that we should take into account? Secondly, quite immediately, and I think Steve just said something about it, but I missed it. But it appears that organic growth profit growth slowed down to a flat growth year on year fourth quarter. Can you tell us what drove that slowdown? And then 2 questions on North America if I may. So first of all, it seems that organic growth Growth profit growth accelerated somewhat in the 4th quarter. Can you tell us what the reason was behind that? It's actually considering that, we heard a lot of weekend mark because it should be typical week end mark. It's in the fourth quarter. So possibly surprised for that performance. And then also on North America, very good cost control, how your commercial margin was up, a 146 year on year. Can you tell us why that was and how sustainable it is? Thanks. Okay. I've been given to the European message just for the, you've been I think I've graduated quite a few markets in London. I think So any anybody's looking at, across the road industry because we're gonna we're gonna slow down in the in the region. I just I just I just had a couple of weeks of first quarter. If you if you look at the past and, confident, a pretty but the main reason is that she went through to that case and be very strong. I think it will be an advantage afterwards for European business in terms of growing much strongly in the second half. I've been answering your question in what rates did between 3 7%. It's a it's a range there for a reason. And, honestly, really, while we're looking, if you look around the the world, I think we can see, you're still a positive experience within North America, possibly in Latin America. Again, Asia Pacific, New York checking organic revenue just so they can be inspired from the cost of risk if we have that. So the the the the question is it's how the opinion market as well in the course of 2019, and certainly they're working very hard to, to increase our, our market share where where appropriate and I'm looking at how we might increase the contribution of the fraud and with the new PIN, and at least I could get this. So, okay, it really depends on how well your account but nevertheless there's 3 regions in the end of that resilience in the sense of those 3 regions that are a big positive for the group. And so that's why we're looking to get started. To 7%. I prefer North America because of the trading out of North America, we we had a a good 4th quarter and let me when we look into certainly the illustrating numbers that we paid for, for the for the year on, sending up to your server yet, but, certainly, it doesn't seem to be any slow down in this slowdown, and I'm not I'm not American business. And we had a very much broad based approach. So, at at this stage, I I can't give an answer as to why other people maybe not being as as we are, but that's the other place that the students have been performing well. And it says in the congratulations. I'm on the wait for business administration here. Ma'am, we do. I'm not sure. Did you answer your questions or anything else? No. So so, indeed, you you got the last question in North America. So the very good cost control. Have you conversion margin was up a 140 basis points year on year. Just wondering how sustainable that is. That's what it is. You you certainly have through our organization, including the North American business, a good cost control, and we would expect controversial improvement also in North America going forward. The high improvement you've seen in Q4 It's a little bit due to the year end volatility due to the Q4 volatility. You might remember that they always happen to be 1 or the other 6 months each and every year. So it's a positive number. So don't take the letters from printout of that now. Okay. That's very helpful. Thank you very much, and I think the North American, this is an extremely well in terms of recovery transport costs. It's more difficult for me to be able to put me as an increased process. It's more of a challenge, but in order to make sure that we do that. Yeah. Thank you very much. The next question is from Steven Golden, Deutsche Bank. Your line is now open. Please go ahead. Thanks a lot. Should I just just dig into the, the North American number because I I think you've grew organically in since you called about that 14th. If you just give me a bit of a feel for for what the underlying drivers were there? Was it was it volumes or a bit of price? It's just just general macro health, some specialty, or did you did you maybe win some some new contracts within that? Secondly, can you give us a bit of a bit more color on how the specialty the business has been going recently. And within your guidance, how much of that is being driven by trying to mix improving its specialty First question would just be, could you you've touched before on some points on EMEA restructuring. I was struggling to hear that slightly if you could if you could give a bit more color there. And sorry, last last one, just wanted to ask you on the tax. The tax rate was lowered. I think due to, your past reform is is the current rate sustainable going forward? It may be, you know, you know, 1st of all, they're welcome to be good to of over coverages, adultery, if I if I remember correctly. Maybe I don't get your customers in the supplies or a treatment. So I'll I'll add up and then you just jump in with whatever he didn't answer. How is the India restructuring? We brought it up, in explaining the special items below operating EBITDA and the special items in below operating EBITDA in Q4 Included the expense of 10,000,000,000 dollars, $11,000,000 expense in Q4. For your key efficiency measures, which is basically personal change and personal reduction measure. Text message, 26% for the full year. This on page 1% is unsustainable phone call. So no reason from today's perspective to expect to make the change, optical group tax rate in 2019, or beyond. Book development in the business in North America, in Q4. From our perspective, the continuation of the positive trends that we have seen throughout the North American business for a while now in, in in variety, customer industry, there's not an an outstanding funeral textbook, which is a trouble treatment by the team, and, it's happening in the it and why I'm renting North America. So I think we've got a number of your questions, but maybe not all of them. Uh-uh. Yeah. Sorry. The only other thing I wanted to ask was back talk to you, how that's going and, just with with with regards to your guidance, how much of that is being driven by threats and maybe mix improvement in perspective. I'll I'll take this one. In in terms of the, obviously, I'll take some of the, yeah, for the nutrition department, and that is really targeting a growing special element of after nutrition, offering. I would say that the, overall, especially because it's going by 2 to 3% more than the initial benefits because of cost of cash. How much more of that can be brought in, again, affiliated 15. But certainly, the reason we reorganized ourselves is to actually be more attracted to the chemical consumers and and such as chemical manufacturer, which we, which we continue to target, as you might imagine. So it's it's a project of industrial chemical. And we would continue to appreciate on that. But at this stage, it's probably 2 to 3%. But if not, there's there's a driver of the is more fundamental because it's a broad broad approach for the exact line of demand. I guess the control industry. Great. Thank you very much. The next question is from Chase Energy with JP Morgan. Your line is now open. Please go ahead. Yeah. Hi. I was just wondering if you can give us some color around your comments on and it should be affecting your character to to, you know, your participate or, you know, benefit from the on waste, moderation in the market soil, like, what sort of benefits, you know, are you trying to gain share possibly from the disruption, from 2 of your users compared to merging there. 2nd question was, you know, what are the trends you see in the oil and gas business in in the US of your maybe, you know, some of the chemical companies are starting or have started to see a slowdown from oil and gas business in q 40. So I would be doing a helpful if you can give some comment there. And the last question is on M and A activity. Firstly, can you give us some color of how much of M and A contribution? Have you included in your, EBITDA, constant currency growth guidance? And secondly, given profitor deals have been sort of announced in the last 6 months. Have you seen some more private distributors wanting to talk, at least more approachable in terms of, discussing a potential transaction. Thank you. The, the terrorism consolidation going in North America. And within our North American visitors, they are white spots which would be a normal thought in by a combination of a capital, a capital expenditure, and or acquisition. And that will and will extend we are we are we're reminded to do either or in terms of actual capturing opportunities that that that result So it it is, we're slightly under additional investment where where we feel there's opportunity to, take an an increase market change. And geographical areas where we've not been. But equally, we're still focused on on M And A as well. So I wouldn't say that, it's either or a combination of the both of both. It's sort of, I mean, it generally I think, yeah, M and A in the current market is, it's it's it's quite interesting to find obviously, there's some market that's slowing down, and we're definitely using marketing example. And and I don't believe that some of the valuations in the private sector. I've probably caught up with the the public sector as of yet. So I think we we don't see at this stage a economy of people coming to the market. I believe that it's it's a relatively easy to know from that respect. You do have a very strong pipeline, on on M And A, as you know, just take some benefits from the landlords to to choose the commercial target. And, we're certainly, we feel confident that we'll be able to meet our M and A target for the course of this year. Yeah. You also had the question. You, you actually pointed out that the 3 to 7% currency at the start at the end guidance we are giving includes, M and A. Is it considered the the M and A that we already have undertaken, but we also have to consider the disposal of the biotech for business where we use, a little bit of EBITDA And the next of these effects or the next of M and A and disposal of sales sector, it's 1 a half 2, maybe 2 percentage points. Again, trends, I'm sure you will remember that, about 10% of our business in North America. So it's part of North American business with your customers in the oil and gas industry. We measure the contribution of this business as you would expect in our level, in our business on a cost profit level. We still see growth in that business. Still see double digit growth in that business, but there's no denying that the growth was stronger at the beginning of the year than towards the end of the year. Thanks. The next question is from Rory Mackenzie of UBS. Your line is now open. Please go ahead. Firstly, I wanted to ask about the lower gross profit growth you've seen in Europe. Has that been, just as soon as delaying orders or was there any price pressure? And leaving that organic decline will carry over in the 51 2019. And then secondly, I wanted to ask about, you know, you reminded us how your resilience as distribution. So, of course, when area came with the prices do have an impact on your working capital, so given the kind of stop there. You know, should we expect to lose the free cash flow in the year ahead. Thank you. If I was gonna do it on the pricing, to be fair, and I think we've looked at the the the general activity of the market. We we wondered whether whether it's a general, a general payment of parts that have come down, but, some are doing some sort of bank on the amount of people checking in. It's like a destocking approach now, and we've been able to talk about it a few times. I just couldn't really be affected by destocking because we're locally small. That we supply, but, we're particularly maybe in the area of specialty. That might be that might have been a consideration. Well, I think, the the reality is that there was just a broad, more of a broader base slowdown in the in the European region. Because I don't think it was, detoxing up for hours of working with Brian to come down, probably this location demand was a good moment. You're right, sir, while we, obviously, can you subscribe to take some interest on our working capital and then therefore, on our cash flow. And in that sense, we do see, I'm using also reference sensitive pressure already, However, we do see selected and when the shipping model price decreases so far is and when we see hover price decreases, we will have, a boost in desktop from working capital reduction. Okay. Thank you. And then if if I may, I wanted to ask about your other announcing today. And see that that he decided to step down as Printech CEO of this financial year. You know, that he is stating that a big change to the company. So is there any more you can tell us about either the the decision or maybe the process to the board will will take over the next year as they look through options. Thank you, Warner. So it's for bringing it up. It's a very sensitive issue. I'm having a good day. I hate say, but I'm I'm nearly sixty two years old. So what I might look to feel like I am with a number at the end of the day, we have seen a time with no man. And so I've I've been the reason that I I was that's what we're considering was the center that we have, such a lot going on in the company, sort of digitization, shabby chemical, that's the way you operate companies with more than Europe, a whole host of things which we need to be delivered. And, I think that is from the the the CEO needs to be here for the is a long term for the execution of the project, which is from the master plan business success. But I thought you were probably right in the last time being, to to actually announce that. So together, it's a healthy time to get to touch it right for the good team of transition. Okay. Thank you. You don't wanna call it the other one in the room, but I just want to bring it up. The next question is from Lawrence Alexander of Jefferies. Your line is now open. Please go ahead. Yes. Hi. This is Nick Sarah on for Lawrence. Few questions, if I may. In regards to working capital, how much are you aiming to improve working capital turns over the next 2 or 3 years? And, what are some of the levers you can pull in order to do so? Yep. You know, we are looking at each other, who's that to to to to to answer the section. Let let me go ahead and add. I'm sure he can can assure you about the inside. Obviously, working capital is a fair share of the capital. We've tied into the company, and we have to increase working capital over the years significantly, partly through acquisitions, partly through a strong increase in chemical prices, and these 2 elements are kind of natural in our business, which we have to and do expect. But to be clear, we also have seen an increase in working to a degree through deterioration of working capital crime. And it it has is it the the length of the time it took and the degree of deterioration in working capital assurance we are seeing, he just initiated a significant worldwide project, also for the energy to provide them to review the funds. So would you work in capital governance, to review working capital decision structure, also to review working capital tools. I can give you an exact hearing today about the levers we will use It's obvious that the that we look at inventory terms, a teacher may be at inventory terms because they are directly under our control. We also look into the sales outstanding and days payable outstanding. So it's it's a full fledged video and seen course of the year. We give a be able to get you better insight with which we were specifically planning for. And I I might answer that. I don't think we're not too much on the amount of time, but of the amount of working capital is, in our business. We, possibly crafted an issue, and and and and and this, employment department quite significantly. I would say that, in general terms, but, payment terms for customers, and both our payments have been the final payment terms for customers, Probably, I don't need to need to review this for next time. I mean, we've seen a trend by a manufacturer asking for him, even type of payment terms at the same time. The reverse happening, and that's when we just talked to you, and I think that we we just certainly manufacture recognized So there's there's some work required to make sure that there's that gap doesn't, develop. So we are looking at what's going on with my partners. That's what we might address issue. Perfect. And then just one more. How should we think about the tailwind in 2019, for shared gains in the US to the industry realign? So we can cover it with you, though. Yeah, I'm just waiting on the outside for Josh. Do we make out how should we think about it? How should we think about it? There is sanctioning the market. And we are super concentrated, super focused on dealing with customers and suppliers. And we have I believe it is if no internal dispatch. Thank you very much. The next question is from Chris Demko of Warbucks Research. Your line is now open. Please Yes. Good afternoon. Thanks for taking my questions. First, maybe, with regards to your Internet efficiency programs, So first, you booked 11,000,000 special item in the fourth quarter for the EMEA region. Can you maybe elaborate what is the, the itchy corresponding positive benefit or impact, from the future here now from that efficiency measures. And secondly, You have something here restructuring in the years before you have, initiated to explore the consulting initiatives for which you are thinking that this extension may again the EMEA restructuring fee median benefit for a total of 28,000,000. How much does this impact have materialized already in the 2018 P and L and other any spillover effects in 2019 and put your quantified Secondly, with regarding your regarding your interest expenses, you repaid a high coupon in the mid of 2019. And if I remember correctly, at the Capital Markets Day, You were such as paying interest expense roughly at 70 coming down to roughly 75,000,000 on a per earning basis. Looking on, looking at your interest to financial expense, I think there's more in the in the region of of of 80,000,000. So this is 75,000,000 and the relief on the interest side, still valid, or is this simply a talked by your by by by M and A and by the before mentioned loans you have taken in high interest, high interest. And lastly, we currently face, volatility on the FX side again. Could you remind us a rule of thumb the household changes from the US dollar euro exchange rate translate into into EBITDA, assuming the program gap review. Let me go ahead and and see what your tender is. The attention of European efficiency program, which I mentioned that we expensed in the fourth quarter, 11,000,000. It should deliver 2000 nineteen and going forward and and a savings of mid single digit. So mid single digit, your positive impact on on EBITDA. We were asking for the status of the prior efficiency improvement program in Europe that we indicated actually savings. These these savings are there, and you can actually track the the headphone changes into the right process. So they are part of our European with us in 2018. To be a good booking initiative that we indicated 2,000,000 Euro benefits on a run rate basis. It's a little bit more difficult to isolate for our financial because is it obviously ultimately shows in in our profit platform. The amount is there, maybe not to the fullest, we give them the market circumstances particularly in India, but, the the high majority of this target is to your tree. As I put points to the text that he has grown, the EBITDA in 2018 is more than 8%. Including acquisitions on an organic basis, like, a half percentage of group. So we can see that the organic EBITDA increases, and if we it gives you a degree of comfort as a measure which will contribute this to our service development. The cost you asked about interest expenses. If if I may say the difference between 75.80 is where the city is small and keeping that part of the depth is is is is floating ways and it is and it should be between counties and counties It's not for me to proceed interest expense down to a activity of 5,000,000. You will stay here. After this perspective, given that I see a little bit higher interest expenses in in in the US dollar, but particularly financing is in in the relatively expensive emerging market. So the country is probably a bit more 80,000,000 at the guidance and then the 75,000,000 I I used before. Translational ethics volatility was the a photocopically waived, the reminder is it's dollar euro moved by 10. So dollar euro by 10. In Texas. I will be, yeah, about 20,000,000 boxes. Okay. That's helpful. Thank you very much. Sure. The next question is from Isashana of MainFirst Bank. Your line is now open. Please go ahead. Hi, gentlemen. Good question from me, please. Number 1, could you just give us some guidance, for free cash flow in 2019? Because of the moving parts like networking, better, but at the same time, a little bit of higher traffic. Just maybe a little bit ideal on the range would be good. The second question is around acquisitions. Recently, you have announced the acquisition of New England, Pigments And Raisins Company also in the US could you give us more could you give us more details on that one and how should we look at the strategy in 2019? Would would it be around more around strategic ingredients and would stay in the US or do you also get other job of this? Thanks a lot. Oh, I try away from the free cash flow guide. We'll have a positive impact of ERC from the expected improvement in GBVA, partly offset by the CapEx, which we, which we made out. Why am I shy away from the guidance? This volatility in cash flow comes to chemical prices I got Lancy. It's probably not that equipped for the tentative status for the first for the course of the year. For sure these purposes, but there is an overall negative benefit by volatility, which is very difficult for us to to That's just the recent acquisition that you mentioned, US based, acquisition. It's a relatively small acquisition of, however, exactly which we expect to learn more and include the food ingredient professionals there. And so you would expect the, acquisitions on a global basis, which was before. Growth of that. So that's just the area of the other group. Thank you. The next question is from David Keith of Goldman Sachs. Your line is now open. Please go ahead. Yes. Hello. Good afternoon. Actually, Matija calling from 2012 massage. My first two questions are on the Convergent margins on the Latin America on Asia Pacific. We talked a lot about EMEA on North America. But first of all, telephone area small division, it's your lower conversion margin. What what do you think it would take to have that margin going upfront of the mid twenties to the, say, 30 or low 30. Is it already just macro? Is there is there anything specific that's now you could do to have the margin to a structurally higher level. 2nd question is on Asia Pacific. Just to just to decide, is it a little bit better what you are shifting for next year? So, computer margins target on 35%. But you would be expecting some further, say, one of costs in China is is of my understanding. So we should expect a bit of a margin pressure as we go into into 2019 and then graduate from 2020 onwards. If you can just elaborate a bit on that, please. And then the the third question, we just, double checking something which you said. I think you mentioned that in North America, one course of the business is linked to the industry. Is is that right? Is it is the number that's high? And I was on the impression that it was a smaller number. So if you could just confirm, please. Thank you. The very broad church in terms of, the upstream, the downstream. So it's diversified within the area. And, it was more than gig about 30%. You know, I think in years, combined, and I think it's reduced as a as a proportion of business in from here. In terms of the last American commercialization, I mean, it's so okay if you look for commercialization from Latin America. They work. They work. They work. They work. They have no service, but I think that's when we had, but I think it's because it's in Venezuela, which probably is coming back. Yes. So we can there's a huge amount you can give into the virtual address for our shift in Latin America. Other than the the critical mass within each individual country, and it's such a large area. This is a roundabout, business concentration in terms of improving the commercial ratio. And that, so it can be done by. So I'm going locally. Fine. I would tell you that, the way we are viewing paper at the moment, you know, up to 20 low searches is not inconceivable. But it is actually on a low, but it's more business region. So it doesn't move the needle back in a long way. I've never seen the target for a shark, which are are not the too too far out. When we came to, April 15th, again, we have, as a just a portion of the fact here in terms of where the issue is rather it leaves small and covers the top of the group. And, and therefore, we do have a major, cost increase and things like that. From in China, it's kind of a negative negative ground on the commercial ratio. But we we do expect to be a transform logistics problems to be solved at the course of 2019, 2021. It has taken a extra charge to take a little longer and we would have expected, and this is all all down to the licensing of the new site in China. It's on 15 the package. So you could give a price as if, in maybe, you know, frustrating on your side of social and and amazing differentiator when you are. We like this in China, and we are. And so when we use that for one time, that will that will clearly affect the efficiency and, improve commercial ratio serving that part of the region. Okay. Very, very clear. Thank you very much. And we have a follow-up question from Mister Guendran of ABN AML. Your line is now open. Please go ahead. Yes. Thank you. Just a just a few follow ups. So, Also, on LatAm, you can't go profit growth. That that refers from, from a positive 4% in q 3 to a negative 4% to 4. Can you tell us what it was? Is that is that just the macro, or is there anything else going on? So that's the first question. The second question is, is on Asia Pacific, yeah, only on the decline in the in commercial margins that you mentioned to China? Can you just disclose what what the more or less what course is that you had in Q3 and now in Q4 and what we should expect through a quarter going forward because the, 2012 2000 sorry, 2020, 2021 team quite a long, long period, for these calls. And then finally, it's it's it's it's not a question but more request. I I know you've been doing this for a very long time, but would it be possible when you publish Q4 results to get a Q4 report as well? Because that way, we can direct see what it has to the quarter instead of having it to devices from the end result. You think it is in the annual report, at least in the annual report, there is a great page on segment reporting for the 4 key numbers. If if if that is what you mean. We we we don't issue a refund usually if you a common carrier on Q4, but the numbers are there in the annual report. Yes. Okay. Ratio and I'm pressing that to my head here. So I think one of the things which, you have to bear in mind is that Asia Pacific is is an area in which we are investing in best digging in, as a company and it has been for quite some years. And I think this is the one that we're seeing, but perhaps, maybe not necessarily appreciated, because of the, you know, pressure on on short term results. We are actually looking, quite significantly into the infrastructure, people management, training and what have you. So this region tends to have a a a cost issue, if you like. I'm not very embarrassed because we build a of the critical mass in the Asia Pacific region and and make the business, put the business business in a position where it can make more acquisitions it's a bit of a chicken and egg scenario where we do actually improve that in the region. It is also, a quite a difficult region relative to cough. On the average, we look at the accelerating and what have you moving anywhere between 10% 15% depending on which region you might have in the end in terms of the region. So So there's a that's a quite a challenging amount in terms of cost. But I it's conversion ratio decisions around Asia Pacific is is a is a topic which to lead you in a positive direction. What would be the question? We we would, I think, the last customer, trajectory left in America, and I'm not sure if of the details of the question. We we do have, if I if I go through the quarters in Latin America on on the gross profit, level. Then these are slightly better than flattish in Q1, 2% growth in Q2, up to 4% in Q3, and 1% in Q4. I I would more deem that volatility of a small and a little bit more difficult region, but I wouldn't deem that financial institutions to follow-up with you. Okay. That's very helpful. Thank you. And we have another follow-up question from Cleveland University of JP Morgan. Your line is now open. Please go ahead. Yeah. Hi. Can can you remind me that there was any material impact you saw in your numbers in Q4 or Q3 from the lower Rhine water level? That's number 1. Number 2 is just checking because if I look at your Q4 gross margins, it's just the gross profit, sales. I would have thought that the chemical price is sort of coming down, or it's flattening out. That number should have been flat to up, but but it's going to accept for for US. It's account and all the other reasons in Q4, vacation was due for 2017. So can you help us understand the dynamics on on drop profit, or gross margin rather, given the stimulus price we are now starting to throw back his edge down from the high. Thank you. If you write it first, you have to write it to the app while we're done. Cleaning, close it now. We're closed a day, but the water wasn't running. Well, no, it's not operating. We we we certainly have some impact, in Q3, from, a increased, operator to transport, and a little bit of decisive and what happened. Now that that that has a ease, but it's like requesting action. This is what this is a challenge for the European Veterans. It's a it's a transologist. It's costing you from not come down. And we're actually going to see it in making up in North America, but it's available to transport drivers. Private for 60 ADR is is still an issue. And, and then, and it's a costing version of interest for it is quite high. And, well, I probably would expect you to see some of the same way, refinance is a relief from, transportation costs in New York region, particularly Germany, with the Rhine, having a question normally. I don't think we've seen that much of a change. So it's not not really being presented at one way traffic because of up and not really on on your question for, cost of percentage of sales. I I get your problem. It's it's it's not a KPI that we track. It's not a KPI that we managed to do. Right? But we would I I would discuss, so I have your point that it's not the management tool in this business. And we can certainly have a conversation probably set an offline conversation why that is and what our thought process is behind it. That's the I I can't come and present it, got pocketed percentage of care. Thank you. Sure. The next question is from Rajesh Kumar. Agent team. Your line is now open. Please hold. Hi. Good afternoon. Thanks for checking on the freight crossing firmly earlier. Can you give us some color on how the freight cost inflation is, shaping on it up in the geography and how the pass through of that is, working where can we pass it on to the customer invoicing and they're not second question would be, you've done quite a few acquisitions in the last 3 or 4 years. What sort of supplier synergies do you expect due to all the new acquisitions we've done, in the coming year margins? And finally, a very simple one, when you invoice your customers, you invoice them for the value of the products that is sales. It includes your markup or you invoice them for cost of product plus a separate mark for your services? Well, after the last one, firstly, we we we have a I look at we can do cost for the market and just individual service charge. Pricing is is market pricing. And so that we have, we we understand the market for the very products that we sell, and we add our margin to the the base price that we that we have charged by the supplier, and that margin will vary depending on how much work we put into the product If, for example, if you're buying products, then having mixing blending or repositioning all the organizational work, So it's gonna be act plus plus plus plus. So I'm very interested. So, frankly, we've got a a not too easy and, an example to give you it's not just cost, but it's not it for sure. In terms of the transport, of all time costs, we're gonna get those number in terms of the, total cost. It is, well, well over 10,000,000, in the North American and Europe. I think it would be fair to say that the North American market is more receptive to the charges and and and and they are more effective than they've been able to resolve. It's more quite the same in in Europe and therefore. I think I mentioned a bit earlier on since the in relation to the ride. We we didn't see the risk of the cost. We didn't really get a third time in the marketplace for that that difficulty. And and that's the case. They will be in the future not changing, but at this stage, we're we're covering up ahead of council costs in in Europe. More difficult in North America. Thank you. Again, so did I understand your answer correctly that when you go to the customers, will the customers only see the sales number? You don't see your sales profit number. Can we charge you a day, sir? Absolutely. So they're they're generally doing one price, sir. If you're buying something by carbonate, if you apply for something by carbonate, you don't hear breakdown is a component part of the pricing. So gross margin is a tool you use internally never reveal to the customer? No. We don't. I mean, I you know, we don't we we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don't we don the customer there we go. Thank you. Ahead now. We haven't received any further questions. I'll hand back to the speaker. Okay. Well, thank you so much for joining us I'll, we're gonna take a hold of your results, and I'll take a good time to speak with her. Thank you. Bye bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.