Earnings Call: Q4 2015

Mar 16, 2016

Yes. Thank you. Hello, ladies and gentlemen, and welcome to today's Brenntag AG Full Year 2015 Results Call. Throughout this, all participants will be in listen only mode, but after this, there will be a question and answer session. And just to remind you, this call is being recorded. Today, I'm pleased to present Stephen Holland, CEO. Please begin. Thank you, and welcome, everybody, to our 2015 results call. I'm on the side together again with Gerard Miller, our CFO. So I've been struck for numbers. 2015 Brent Ag's good performance in Europe, Latin America and Asia Pacific. It was clearly more challenging around North America, particularly in the oil and gas sector. For the group, Brenthag is above well in 2015 with respect to earnings and particularly when it comes to cash flow. You mentioned 2018 prior year's gross profit as well with operating and operating EBITDA in 2015. Call. Gross profit increased by 11.8 percent to almost €2,300,000 and operating EBITDA increased by 11.1% to a percentage of €7,000,000 This was supported by a strong tailwind from the U. S. Dollar. On a constant FX basis, gross profit increased by 2.4%. For the full year 2015, we faced great weak demand from customers in the oil and gas industry. We just had pricing impacts on the group. Before we exclude oil and gas, the group's gross profit grew by 4%. The operating EBITDA of €87,000,000 is at the Our brand of accounts range of €790,000,000 to €800,000,000 which we published in November. On a constant currency basis, the operating EBITDA increased by 0.7 tonnes. Our free cash flow was particularly strong in 2015. We generated free cash flow of €764,000,000 which is almost fifty percent on last year's number. Earnings per share were €2.26 and interest earnings per share were €2.68 which is about 15.5 percent increase compared to last year. If you're pleased to see the proposal of Equinor shares meeting to approve a 1,000,000,000 of €1,000,000 per share. Call. Call. We signed a number of value accretive deals in 2015. A total enterprise value of these acquisitions might be more than €550,000,000 call. I'll just go straight on to the acquisition slide. All in all, we completed 10 acquisitions globally. Call. Two large acquisitions were executed in United States, which were JAN and Berlin Windward, where we acquired 2 specialty lubricants distributors, call. The first one is ranked among the top 5 players in the market. These two acquisitions, we have significantly expanded our existing lubricants distribution business. Which is the largest highly attractive and subject to ongoing consolidation. A very important acquisition for us was the TAT Group in Asia Pacific, strategic moves for Brempag in the Asia Pacific region. BAP is a leading distributor of industrial chemicals and pharmaceutical products and services. KPI has a warehouse and logistics infrastructure in the region, which we expect to grow Celsius during the course of 2016. Call. In Europe, we executed a number of calls and acquisitions, which will strengthen that position in Digital Focus, and we've had Holmberg in Sweden, Comikus Maronia in Spain and Pacitects in Turkey. In South Africa, we acquired Lionheart, a the state sector. In 2015, we also entered the Middle East distribution market, establishing majority stake in the chemical distributor, Trican. Call. Can we just look at the NII and its active distribution performance around the region? All these acquisitions are already accretive and how is it going up for our portfolio and geographic coverage. Thank you, Steve. I hope you've excluded the interest of the group in some details, And we will start on Page 6. On the slide, you will see the first part of our income statement. In an economic environment, I showed the lowest growth rates for years. We were able to grow gross profit as well as EBITDA double digit. Reported growth was strongly supported by currency fairwind and, equally, by depreciation of the U. S. Dollar. However, gross profit and EBITDA also grew on an FX adjusted basis. In 20 'fifteen, we mainly operated in an environment of foreign chemical crisis. This year, we had an impact on our sales, We've got down on an FX adjusted basis by 4.6%. Due to the price part 2 of our business model, we did not see A negative price effect on our gross profit. Our pricing is based on the absolute cost topping contribution, And it is not a single percentage of sales. Cost management is a key area for us. And also in 2015, we managed to keep cost increases well under control. Our revenue ratio in 2015 is about flat, 35.6 percent up to 35.8 percent 1 year ago. When we move on to the P and L lines below EBITDA, Depreciation for the year amounted to €108,000,000 and amortization to €36,900,000 Keep in mind, amortization mainly represents customer based amortization from acquired companies. The financial result amounted to a net expense of €112,000,000 and this compares to an expense of €83,000,000 his prior year. The difference is driven by the purchase price obligation for the remaining 49% of our Chinese companies from June. The balance sheet reflects our obligation to project outstanding 49% in Sonjol in 2017. So it continues to be highly successful despite the slowdown in the Chinese economy. As a consequence, we have committed to purchase price obligation at Overall, earnings per share excess totaled €549,000,000 which is 8.2% ahead of last year. For the full year, we recorded tax rate of 36%, close to the range of 34% to 35% as we typically indicated. Earnings per share is €2.36 and that is 7.3% above the year this year. If you exclude customer price amortization and if you exclude the change in the Sungjunk purchase price obligation, This comes to an adjusted earnings cash share of €2.68 and that's 15.5% above previous year. I'd like to provide a brief update on a specific topic. This is about Venezuela. And actually, it's more 2016 relevant than 20 15. So far, we translated our balance sheet and our earnings in Venezuela from local currency to U. S. Dollar at an exchange rate of about 30.5 percent bolivar to U. S. Dollar. And for that, we used call. So called CCAT rate, which was 1 or 2 different rates available under state controlled conversion schemes. In February, this year, so recently, the state of inventory has changed its complete exchange rate regime. And since then, the conversion ratio of 13.5% for the CCAT system is not any longer available. No certainty at all about 50 sets of new VICI at this stage, but we are pretty conservative and pretty prudent in the accounting of our Venezuela operation. And we expect that The devaluation of course in Venezuela could result into an asset write off smooth financial expenses of about €25,000,000 And that would be a worse case and that's a 2016 event, and it does not impact the 2015 accounts. You can go back to 'fifteen. In 'fifteen, they generated an EBITA in Venezuela of about €12,000,000 And as a precautionary measure, we currently assume that we will not generate any meaningful EBITDA in Venezuela going forward. I'm moving on to the cash flow statement on Page 8. In 2015, we achieved a very strong operating cash flow for €593,000,000 after €369,000,000 in 2014. This is partly driven by higher earnings. And in addition, we achieved the cash inflow from working capital. Let's quickly talk about Investment and financing cash flow. CapEx amounts to €100,000,000,000 and that's in line with our guidance. Cash outflow for acquisitions in 2015 amounts to €500,000,000 If we have taken over some debt For some of the acquisitions, the actual cash spend is a little bit below €415,000,000,000 of enterprise values, which we have mentioned in the context of our acquisition activity for 2015. You would also note in the cash flow statement a capital increase of 35 for sorry, for €34,000,000 This is an inflow from the warrants that we issued as part of our convertible in November. The line of repayment and proceeds from Boeing is mostly a net effect from the issuance of the convertible as well as the repayment of the accounts receivable modification program earlier in the year. I'll skip the page and move on to financial debt leverage on Page 11. On Page 11, you would see We did leverage most of the acquisition spending of more than €550,000,000 was actually done from cash flow. Net debt increased only €256,000,000 during the year and would leverage then at an optimal level of 2.1x at the the end of the year. On the subsequent page, you can see our strong financial profile that The provides pretty good profitability in execution of our strategy. At the right hand side, you can see the maturity profile of our India business. After the repayment of the securitization program in June and the placement of the convertible in November, the maturity profile is even more long term. Our main highlights in the performance are the 1 piece of equipment in 2018, syndicated loan in 'nineteen and convertible in 2022. Trade working capital amounts to €1,268,000,000 at the end of the year. A year ago. We did deliver in 2015 a very strong free cash flow of €764,000,000 And that's significantly up against previous year. The increase was driven by a reduction in working capital as well as an increase EBITDA. I'll close the right part of the presentation with a discussion of dividend on Page 15. This is an 11% increase over previous year and the dividend reflects a payout ratio of 42%. This confirms our commitment to provide not only earnings growth but also cash return for shareholders. I hand the presentation back to Steve for segment discussion. Thank you, Georg. I will take you through the comments for segments for the full year On this page, the Q4 view on the following page. For the Americas first, in Colombia, we grew our operating gross profit by 3.6% call. And operating EBITDA by 3.2%, both FX adjusted. Aeroband business continues to build strongly in Specialty Chemicals and Valuamated Services an increasingly 10 regional success rates. North America business, we saw a reduction in demand from oil and gas customers, call. Additionally, momentum for the rest of the economy slowed down during the course of the year. This environment operating operating gross profit decreased slightly by 0.5% If we take gross profit growth by customer interest, we can clearly see the weakness in oil and gas. We expect to have a gross profit reduction of US39 $1,000,000 which equates approximately 13% of the gross profit generated in our Oil and Gas business. The strong bridge was almost completely compensated by the growth in other customer groups. We see all the details on one of the following pages. Call. Operating EBITDA decreased by 4.6 percent, FX adjusted, a strong translation tailwind leads to a strong growth of 13% on a high reported basis. The North American business has started to reduce the overall capacity in oil and gas business to reflect the low level demand And as a result, we saw our account reduction of more than 100 people in the course of the year. In Latin America, we showed a strong increasing earnings in 2015. Operating gross profit grew by 9.8 percent as adjusted for more than reaching balance from efficiency enhancements implemented in the past. This resulted in a strong growth in operating EBITDA, currently 9.1 percent as I suggested. 20 15 was a strong year for Latin America. Compared to Asia Pacific, operating gross profit grew by 2.3% as expected, which is slightly benefited from increased operating efficiency, Welcome to the outlook. Let's go to the graph of the segments in Q4. As As far as Europe is concerned, in Q4, operating gross profit increased by 3.4% in the 4th quarter. The likely overall weak environment is a good result for our European business. Gross conversion ratio in Q4 twenty fourteen was comparably high. EBITDA in Q4 20 40 ended slightly below the level of last year Thanks, Justin. In North America, in Q4, Undertronomakh continues to be clear, backing up a combination of wins in oil and gas and a loss of compelling momentum. In total, operating gross profit decreased by 5%, FX adjusted. So the full year, let me give a breakdown on gross profit for customers in oil and gas. Customers in oil and gas declined by about 33%. Gross profit from all the customer industries increased by 3% The true market is acquisitions closed during the course of December. We did not have much of an impact on the quarter. Lattanmacher. Lattanmacher reported an increased earnings in Q4 with gross profit going by 3.2 percent as I suggested. Call. This results in a strong growth in operating EBITDA of 15.7%, again FX adjusted. As you can see, we grew the operating gross profit by 2%. Operating EBITDA did not fully reach the high levels of Q4 2014 on an FX adjusted basis. Q1 on Page 18, which you'll see the graphs that we've shown in previous presentations. And I'll leave them there for information purposes. And I'll move on to the outlook. So when we come to the outlook, the world has already become an easier place in 2016. The low price of KNG has caused a weak demand for testing in the oil and gas industry. However, we have the worst behind us. I can probably remember this for Q1 and we expect more normalized position for Q2 twenty sixteen onwards. On today's perspective, our major currency translation effects was posted in 2016 and the U. S. Dollar euro is currently trading 1st on the last year's level. Significant acquisitions in 2015 and the acquired businesses will contribute to the 2016 earnings. Call. Distribution continues to be resilient, the cash remitted business, we have plenty of growth opportunities, and we have developed a market leader, are extremely well positioned within this industry. Combined all these factors, we expect to go beyond all the relevant funding promises in 2016. Call. Europe and Asia Pacific countries for growth, so will North America dispel the challenges from the weakening from oil and gas. Keep in mind that a good part of our Chikka Sajikka acquisition program was North America. Following on the Can I expect to allow LTS to run about €150,000,000 in 20 16? The M and A pipeline remains full and active and we will guide you in the usual spend of between 200,000,000 to 250,000,000 for 2016, but also we're guiding from strong free cash flow. On broad, that's a lot of the chances from the macroeconomic ramp call. We are confident that Brenntag is well positioned for further growth in 2016. We expect the current trading to our Q1 expectations. Let me walk you through gross profit per working day on a monthly basis. In respect to this, please keep the reminder of our rigmas oil and gas industry On Q1, the Neste came back to run up 3% from what the gross profit generated by the group. So let's go through this. So we're looking at 3% from oil and gas. Form. And these are all Exhibits numbers. So our total profit for gross profit for working day declined by 0.6% as reported. And Germany grew by 0.6% as reported and was negative 2.2 percent. In November, the decline amounted to 2.7% as reported, between 0.9 percent organic pay. In December, gross profit and working debt grew by 4.2% and was about flat organically. In January, gross profit per day increased by 8.6% and plus 3.5 percent organically. In February, the growth was 5.2% and replenishment organically. In 2016, we expect to keep guidance after Q2 and as it has been in the past years. However, a lack of effects highlights the effects of the effect of Q1 now. The 2015 has comparables which are quite high in Q1, keeping the area of oil and gas. In addition, it was the movement on Easter into a Q1 event Fund as it was in Q2 last year. All these challenges are unlikely to continue to perform strongly call. Call. Olin 1. I'll now turn the call back to you. Call. 0 and then 2 to cancel. And there'll be a brief pause while all the questions are being registered. First question is from the line of Rob Plant, JPMorgan. Two questions, please, on North American oil and gas. I think you mentioned a 23% decline in Q4. Do you still expect oil and gas in North America to decline across the quarters of 2016. And you mentioned, Steve, that you've taken out 100 people. Clearly, oil and gas was a drag on the margin in North America in Q4. Do you think the cost base is properly in line now? Thank you. Thanks for that. As far as the sequential movement of GP generational, If you go back in 2015, you can see we had 3 relatively stable quarters, which around about 65, 64,000,000,000,000 for the last quarter, we had 61,000,000 including, of course, the December and the Christmas holidays. So we seem to have a trend of relative stability in the oil and gas gross profit generation. And at this stage, we've not been Talas, which suggests that there's going to be a further deterioration of oil and gas, gas production generation. So I think we're looking at as much as opposed to a continued decline as we saw in Q1 2015. As far as costs are concerned and people are concerned, yes, we have taken over 100 people out of the organization To right side the organization, we are there or thereabouts in terms of the required people to operate this business. And therefore, we don't see any change beyond the 100 or so people that don't fill that just through the course of 2015. All right. Thanks, Steve. We're now over to the line of Nomura and Andy Chu. Please go ahead, Andy. Your line is open. Thanks very much. Good afternoon. A few questions from me, please. Just starting with the Venezuela. It's clearly been an issue and sort of perennial issue in terms of Venezuela. So can you just sort of clarify exactly why you're expecting virtually no EBITDA is actually a prudent year? And I think you sort of indicating that the market should take €12,000,000 of EBITDA far out of 2016 numbers. And is this a business that you would like to keep sort of longer term given that all the issues historically? Secondly, on Oil and Gas, I guess, we're sort of most of the way through Q1 now. So in terms of what you've seen in terms of the run rate, like you give me confidence to make your statement that we should see some sequential stability in gross profit in North American Oil and Gas. And just to be clear, in terms of January February organic working day FX adjusted GP trends. You would be running at 5.5% for January and 3% or excluding the MS1 gas. Is that correct? And if so, where are you seeing the sort of for the growth coming from by region or by country. Thank you. Hi. Your sentiment here, Please restore on any reasonable exchange rate mechanism in February this year. We would assume That we will not that we do not want to bring any more product into Venezuela from outside to sell it locally. It just doesn't make sense anymore. It basically means the only activity which will remain in Venezuela for the time being is a little bit of local activity local sourcing and local selling. We've now tightened the operation significantly over the last couple of years. We just have about 30 people in Venezuela today, and there just won't be any meaningful EBITDA generation from today's perspective. With respect to 'sixteen numbers, yes, 2015 was still reasonable in the fiscal year in Venezuela, Generating €12,000,000 of EBITDA, and it won't reoccur this year. So the Venezuela effect will be a negative effect of €12,000,000 EBITDA of Sigvegine over €15,000,000 I think the second point you had was I'm not Sure. Exactly. That's the point. But all I guess about sequential stability. So we would assume for this And this is basically based on the trends we have seen in the last couple of quarters. We would assume across the quarterly gross Profit run rate, quarterly gross profit run rate in all, I guess, in North America up $60,000,000 or maybe a bit lower. Because profit per working day trends, which we quoted, includes the oil and gas unit effect. So if you want to exclude oil and gas, The numbers were about 3% higher. Okay. And then maybe one last one just in terms of JA and then when would you just can you give us some just flavor of how those businesses, those large businesses are performing And since you've taken them on board, I mean, clearly, the in the U. S. Isn't particularly Premier at the moment. So can you give us an idea of how they are performing first? Yes. So, yes, Burling Windwood So pretty much in line with our expectations. JAM is more difficult because they do have a marine element to their business, but And we are there's more synergy this year at the very start of the integration for GIM. But overall, Q1 will be a slightly down quarter So for both of those, I think probably best comment on those news release in Q2. Next question is Silvia Fedova at Deutsche Bank. Please go ahead. Silvia, your line is open. Yes. Hi. Good afternoon, everyone. I have 2 things. On lockdown, could you clarify if you continue to have any kind of Congrats on asset benefits in Q4 and what we should expect for that going forward. And then going back To your January and February run rate, could you just talk a little bit about what that looks like by region, please? Well, represented by region, in terms of the January February, obviously, it's not by region. But To give you a flavor for the geographically, we still see positive numbers in Europe, Asia Pacific and Latin America. And actually positive in the most America despite Venezuela. So this is So there's a reasonably good environment for us that North America has its higher comp back to the prior year on oil and gas. But some industries are our expectations. Call. What was the revenue in Q4 organically, if you can just give us that? It's about 0 point 0 $0.06 I would say is in the U. S, ex acquisitions and ex oil and gas, we see small positive gross rates in gross profit. Okay. That's basically an issue every month. In Latin America, So in the Americas, all the type context environment, I have a very hard time to single out what some people call transaction analytics effects. We're now over to Gerhard Oganas of Exane BNP Company. Please go ahead. Your line is open. Just one question, please. Please tell us what you expect for PPAM amortization following the recent acquisitions going forward? So you mean for customer based amortization? That's right, yes. We'll have to come back with an exact number. You think it's 50? Yes. She had 36 last the year, and we would expect this to go up there to €55,000,000 Okay. We're now over to Mihir Banc of Goldman Sachs. Please go ahead. Your line is open. Hello. Good afternoon, gentlemen. Thank you for taking the question. A couple from my side. First of all, in the Q4, you've seen a little bit of a pickup in North America outside of oil and gas. Can you just say if that's Broad based or if there's anything specific to me? And then also on the Q4, the conversion margins in Latin America and Asia Pacific That part of it, could you explain what the reasons are for that? And then lastly, on the oil and gas. So You've given us a spirit in the past about upstream, mix stream and downstream. Can you give us a little bit more color on how these segments are performing? And if this mix has changed as You want to see even more negative than the rest. Yes. In terms of the Northern Ireland performance, it is Pretty much across the board. You said one set best segment for the other on Excluding the oil and gas element, I think maybe perhaps you could highlight the food ingredients and Life science has been particularly positive, but not outstanding beyond any other particular industry. As far as the oil and gas Midstream, Midstream Downstream. We thought we'd really see any sort of significant change throughout our model in 20 2018. Although to be fair, mixed drinks will have taken a little bit more pressure as the price of oil That's not super significant on that. So there's a difference in the run rate. What I said, I think, Neil, we had some question on sequential improvement on conversion ratios in Latin America and Asia Pacific in Q4. I would generally cite that it is a good economic environment. It has good gross profit growth, tight cost control. So it's a case of positive Okay. Understood. And maybe one additional one. It's under Amazon John. You've said in China that That performed really well. At the end of the year, are the defensive revaluation in the Q4 has been slightly higher than for the other quarters? Initially highlights on the performance there. I think the assumption is actually a case of continuous improvement really. The business has been developing very nicely in value added services. We're taking more and more customers, international customers that want to use our services in China. It's increasing all the time. So it is actually a very positive story for the business. Okay. Understood. Thank you so much. We're now over to Simon Mazzamutti, Bank of America. Please go ahead. Your line is open. Call. A couple of questions on conversion margin maybe. If we talk about North America, I think in Q4, you reached a level of 36%. I guess normally Q4 is the strongest month from a conversion margin perspective. So I was wondering if that 6% is the new normal for this division and what do you think in 2016 Exactly. I'll turn to. And then similarly in Europe, I think over the year, if I'm not wrong, you've seen 1.5% organic growth at gross profit level and understandably not much margin improvement. My feeling is that Europe is improving slightly above the 1%, 1.5% organic growth level recently. I was wondering if that continues to be the case. Should we expect some margin improvement in Europe in 2016? Hello, it's from North America. I wouldn't regard 36% in the normal the conversion ratio in North America. I think Q4 is quite a tidy quarter in many respects and a bit all sorts of things there like annual rebates and this and the other and maybe due to low activity in oil and gas, and that's going to be effective towards year end. So I would expect to see the conversion ratio back up to some not just similar levels. Yes, we really normally, I would expect us between in the 40s, so maybe 39 to 40 That's plus 46%, 45%, but certainly not 46% as you've seen in the Q4. As far as Europe is concerned, Europe is in a really good position in terms of the expansion of growth in GP And we'll have a very positive effect on the conversion ratio, and that's really where we are to some extent that because it's now, I would say, at a tipping point, but Unfortunately, the economic environment is not so fabulous out there. But nevertheless, the efficiency gains that we've been looking for are being delivered. And therefore, I would hope that the multiple growth in G and B is going to really start showing that conversion ratio. If I can follow-up on North Is it realistic then to expect maybe next 1 of this year with oil and gas still being a problem? Is it realistic to expect Margin, a year on year margin similar to last year in the first half of this year or should we expect further deterioration Paul? I always have a little bit of a challenge of commenting on and forecasting conversion ratios on a quarterly It was a quarter just 12%. You can always have volatility. Maybe directionally, I I hope and say, on a full year basis, in North America, full year basis, we had 38.8% in 2015, And we would expect a rate on a similar level, maybe a slight improvement this year. In Q1, I would not be too surprised if Q1 still comes in a little bit below last year's level because Q1 will still have an oil and gas hit, which the other quarters shouldn't necessarily have anymore. Thank you very much. Maybe just the last one on Venezuela. If you could quantify the gross profit contribution as well. That would be helpful. I can I just need to to for the number? The cost profit contribution in EBITA last year was around €19,000,000, €19,000,000 I know it's a very high conversion. 'nineteen was not it, 'thirteen, 'twelve EBITDA, but that was the mechanics of the business so far. Thank you very much. We're now over to Rory McKenzie at UBS. Please go ahead. Your line is open. Thanks. Yes. 3 for me, please. Firstly, again, on North America. General Industrial production have been weaker and there's a tough comp for both UNEX Oil and Gas NH1. So can you give a good view there for the rest of the market? And do you expect any positive growth in EBITDA complementing M and A in North American Marketing and Human Outlook. And then 2 more, but maybe just that one first, please. Yes, well, I think most people would agree that the North American macroeconomic situation is somewhat more challenging And you will say at the beginning of 2015, but we do believe that we've got some we're pleased about that business in terms of what kind of growth and what avenues It's actually solid outside of oil and gas. So we are expecting GP growth in North America this year. And Okay, great. And then I just want to ask, in Europe, where you've seen those trends, can you talk about that Buy by Country or Region. Anything you've done? I mean how is Germany doing basically, given some of the introduction there? Yes. As far as your concern, I guess what we would do, I hesitate to do this far, Will, but it's a very Similar story in terms of UK, Nordic, positive, very much positive. Germany positive, Eastern European positive, Italy positive, Spain is a challenge, France a challenge. Okay. Germany has grown in EBITDA last year around 5%. Okay. That's helpful. And then just last on the working capital. Obviously, that's why the intro is the turnover falling pretty steadily. Can you explain how much that is due to the mix changes over time? And also this year, I think Q4 being the weakest quarter for growth, there must have been a benefit on working capital. So What would you expect there for PEXI? I know it will rise differently, but any more detail there would be would be helpful. I think just working capital term, clearly, we're looking at working capital term very intensely. And I think we've shown around about That's been the number we're interested in today. We would be disappointed to see that number go any lower and any meaningful We're now over to Christian Hubs at Interbank. I have a question for some Equinoxetech. You have acquired DAT Group in Singapore, very satisfied. This is very important for the growth call. Ideas in that region, and you will take over the 100% of Shenzhen in China. Can you elaborate a little bit on your growth expectations when these two companies together with your increased network where you have invested heavily over the last years. What do you expect to grow during the next 3 years in Asia Pacific, including these two items. Well, obviously, we've been fully consolidating already, so that's already in our numbers and Excellent. That's all already in the numbers. Asia Pacific generally has been More challenging macroeconomic effects more recently. We are we would expect to be high single digits And do you have to invest also further above February in that region into that business? It's a good question actually. It really just depends on how we structure our product portfolio in the region. We are being encouraged very strongly by our suppliers and our customers to invest in more in the region in terms of physical assets. But we are a rather cautious organization, and we do have some good assets on the ground now with TAT. And therefore, I would prefer probably to probably hold that question a little bit longer while we can get ourselves up again. Okay. And are things more stabilized in Australia and Poland, honestly? I would say Australia and, yes, Australia and indeed New Zealand, We are really pleased with Australia and New Zealand. The ones that we have put on the way up. Thailand, I'm afraid I can't say the same to Thailand. Well, it's clearly not a disaster, but unfortunately, the time business, which is just about large business in the case of the region, is Velocity Week. Okay. And last question, if I sum it up on the acquisition you have done in consolidating 15. When I include an EBITDA of approximately EUR 16,000,000,000 in total on a year on year basis 2016 against the EUR 15,000,000 coming from the year. Is that roughly a right number? What's the number, Christian? 60.60. Thank you very much. Now it's back to Andy Tew at Nomura. Please go ahead. Your line is open. I do apologize, actually Rajesh Kumar, HSBC. Please go ahead. Hi, good afternoon, gents. Just trying to understand call. Just trying to understand how your discussion with suppliers are going through in the New Year In terms of pricing and volume factors, clearly, volume, Brent Smart from last year would be lower. So are they agreeing on slightly better for Pirate Bay this year than last? What sort of pricing benchmark are you going to go through? Martin, Mark, are you going to go through? Well, in general, as you know, we have put a price pressure model in our business. So pricing is So whilst net leverage is going to be up or down, we're concerned about the gross profit contribution that we're concerned about, If you're looking for a sort of general market feel for pricing in general, I would say that we saw Obviously, we saw some unwinding working capital during the course of 2015 as prices tended to fall during the course of the year. Oil based prices are probably now where they're going to be in terms of the settlement to the sort of new levels. I really can't see any major price erosion out there in the marketplace, nor do I see any major significant increases in prices because The demand is relatively subdued in the Norwegian markets. So I would think it's more a case of pretty much status quo, certainly for the 1st and second quarter. That's largely in U. S. Dollar or is it basically currency? But in Europe, a lot of stuff would be Europe, but And also, Peter, is the U. S. Dollar? Well, I'm not quite sure. All our business in Europe is obviously in the euro, and There's very little business, which I would say is broader than our business than perhaps in, say, Latin America and certain countries that have that issue. And are you buying large consignments of broad based products? We're not in that position. Okay. And If you look at the inventory term, I'm following on from earlier question that How much is it due to a bit more mix through Specialty Chemicals? How much of that is more due to slow down in volumes and due to the risk growth inventory write down in the coming quarters. I think there is a general drift In terms of we are increasing our share of the Specialty Chemicals margin, no doubt. And in certain number of our acquisitions that we have for Specialty Chemicals And if you like, change the mix somewhat, but I wouldn't say that The result of the number is just hardly changed from the previous year, and Okay. Now we go to Peter Holofsen of Kepler Cheuvreux. Please go ahead. Your line is open. I have one question left on the volume trends that you saw in 2015. Did you see a meaningful difference between specialty and industrial perm comps? Or was it a more of a similar trend that you saw there? Yes. It's really difficult. We don't really volumes are not the metric which drives our business. You'd be pretty aware that Gross profit contribution is the primary driver for us. And talking about volumes in specialties, you're really on a road to confusion Because clearly, it is it's a GP discussion as opposed to a physical movement of products. In general, call. Yes. Volumes were obviously low due to oil and gas, but across the rest of the range, I guess, is an expansion of nothing dramatic in either direction. Okay. Thank you. We're now over to the line of Ani Hsu at Nomura. Please go ahead. Your line is open. Thank you. I have one more please. Just in terms of the strong cash flow performance and looking at the working capital inflow in Q4, Is there anything other than pricing and sort of what volume weakness, are there any sort of one off timing effects in that sort of boosted the cash flow for Q4 and the year. And then in terms of oil and gas, could you give us a sense as to how much oil and gas contributed to Q4 group EBITDA, please. On the cash flow and working capital, there's no one off effect in working capital in Q4. There's no significant volume effect. There is pricing effect in there, and there's user seasonality in there. We typically have The lowest working capital year and the highest middle of the year. So in that sense, you would expect some ramp up of working capital in Q1, Sorry, what was the second question? Yes, Mr. Klein, we downloaded the strategic plan, oil and gas. I derived it, but I'm sorry, Greg. What you would say, we had in North America And oil and gas PP in Q4 of $61,000,000 and that comes at a conversion of about 40%, a little bit below. 40%. Okay. Okay. Which means that you've probably got 12% and you might have 3,8, EBITDA from Morning Gas. Sorry, I have to ask if you remember too what the 12% refers to. I was just trying to get the number in terms of the percentage of oil and gas in Q4. For Yes. Good afternoon, everybody. I wondered if you could just clarify the movement in the year on year of the EMEA FX adjusted EBITDA, please. So in Q2, that was Plus 4.8%, income plus 2.1% and now you're minus 0.6%. Now could you remind us to say something In Q4 2014, there was a one off benefit of that, but I noticed Your EBITDA has now sequentially declined for 2 quarters on a reported basis in Europe. Is there also any FX in that? And then also just on the in North America. Have you already Taken out a reasonable amount of cost in the U. S. I just wondered whether you're taking any headcount out at all ex the oil and gas businesses. Have you taken the chance to try and optimize the North American business and I hope we've already seen some of that cost benefit in Q4, please. I'll take the North American one. Yes, We have reduced headcounts in other parts of North American business, but not substantially. And reduction did actually occur during the quarter of 2015. So you'll see some of that, some of the positive effects of that, especially in Q4, but also So the costs associated with that in Q4, I think we'll probably be roughly awash, so no discernible within plus or minus As far as the cost of that, I'm clear that that would be that this cost savings associated with that will roll into 20,000 Europe had, I would say, Tom, Europe had a strong first half of the year in 'fifteen, A little bit weaker second half in 'fifteen, and you see that in the weaker growth rates. Europe started well into 2016. There was no particular one off in the Q4 2014. It was a good quarter, and it seems a high comparable. Okay. Thank you. And are you able to venture at all what the ballpark level of cost savings you may have made in North American business. Yes. You should probably go for run rate between $7,000,000 $8,000,000 call. Great. Well, just to remind all participants that if you wish Call. And there'll be a further pause while any further questions We have a final question, and that's from the line of Christian Kauffman of Mindfast. Please go ahead, Christian. Your line is open. It's just a follow-up clarification a little bit on the guidance you mentioned. I mean, first of all, it was really clear that on an absolute basis, we have had to increase in 2016. I guess the question is more on the magnitude. I mean, I understand from the comments you made and the sustainability presentation with efficiency enhancements and volume growth That you expect an increase in the underlying earnings organically. Is that correct? That is correct. And when we take into account the fair value issue, let's just assume that this worst case Happy NIM, that the €12,000,000 will be raised on the EBITDA levels. Do you fully expect, let's say, growth underlying Okay. At this stage, Stephen, I see there are further questions in the queue. So I might just pass the call back to you for any closing comments. Okay. Well, thank you very much, everybody, for your questions. I think we covered just about everything we've covered. So again, thanks very much for joining us. And I will call the end of the call back. Thank you very much. This now concludes the call. Thank you all very much for attending. Please now disconnect your lines.