Dear ladies and gentlemen, welcome to the Brenntag AG results call Q1 2012. This call is being recorded. As a reminder, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press * key followed by zero on your telephone for operator assistance. I now hand over to Mr. Holland. Please go ahead, sir.
Right. Hello, everybody. Thank you very much for dialing in for our review of the Q1 2012 earnings. I am on the phone together with Jürgen Buchsteiner and Georg Müller, we will be happy to take your questions after the presentation. For the first quarter, our group delivered continued growth in earnings in a less volatile but slower-growing economic environment, as measured by industrial output. Gross profit growth of 7.4% resulted in operating EBITDAR growth of 6.3% on a constant FX basis. We were able to continue to deliver organic growth as well as a positive earnings contribution from our acquisitions, especially Zhong Yung in China and Multisol in Europe. Based on the average conversion rate of Q1 2012, the US dollar is stronger than Q1 2011. Consequently, the as-reported growth rates are higher than the FX-adjusted growth rates.
Considering this positive translation effect from the stronger US dollar, we show an 8.5% as-reported growth of EBITDAR operating. Operating expenses include a EUR 10 million non-recurrent expense for implementation of an efficiency-enhancing measure program in Europe, partly compensated by the release of a provision of EUR 7 million after the final settlement of a third-party claim in Europe. Disregarding these non-recurrent expenses, operating EBITDAR amounted to EUR 174.5 million. Asia Pacific segment is still impacted by the flood effects in Thailand, but we clearly see improvements month-over-month. I just came to the operating highlights. How does this translate into your full set of numbers? Gross profit, a total of EUR 475 million, 7.4% above previous year on an FX-adjusted basis. Operating EBITDAR, a total of EUR 171.5 million, 6.3% above previous year on an FX-adjusted basis.
Adjusted for the EUR three million negative one-off effects, the Q1 2012 EBITDAR operating amounts to EUR 174.5 million. Free cash flow generation was strong in Q1 2012, an increasing of working capital due to the usual seasonality, but also influenced by higher average prices. Still, free cash flow totaled EUR 37.9 million compared to EUR 47.9 million in Q1 2011. I just came to the late start with the changes to the management board. As you can see on the slide, Jürgen Buchsteiner, our current CFO of Brenntag Group, will move to a new responsibility for Asia Pacific and mergers and acquisitions worldwide. This underlines the strategic importance that we apply to both Asia Pacific and mergers and acquisitions in the group. We are delighted to welcome Georg Müller, who will replace Jürgen, the CFO, when Jürgen makes his move to his new role in Asia Pacific and M&A. Okay. Moving on.
In terms of our free float, Brachem Acquisitions SCA placed a total of 11.5 million shares in two tranches, and our free float has therefore increased from 64% to 86.3%. The transaction was led by Goldman Sachs. At this point, I'd like to hand over to Jürgen.
Thank you, Steve. Let's have a look at page nine. We see the detailed financials for Q1 reflecting the continued positive development for our business. I want to talk too much about the numbers. Just briefly mention gross profit totaled EUR 475 million, representing a 7.4% FX-adjusted increase. Important here, we'll talk about this later in more detail. All regions contributed to the growth of gross profit. A few words as to the expenses. Expenses grew at a higher rate than gross profit as a result of one-time cost for the acceleration of our efficiency improvement measures in Europe. These costs were partly offset by a release of a specific provision after the final settlement of a third-party claim in Europe. As mentioned, adjusted for these 3 million net one-time effects, the conversion ratio continued to improve compared to Q1 2011 for Europe as well as for the group.
The related savings in Europe that will kick in in Q2 and continue to grow over the remainder of the year should improve the conversion ratio further. In summary, the operating EBITDA totaled EUR 171.5 million and represents an FX-adjusted increase of EUR 6.3 million. Adjusted for the just mentioned one-time effects in Europe of a net expense of EUR 3 million, the adjusted EBITDA is at EUR 174.5 million for Q1 2012. Let's turn to page 10. Depreciation for the quarter was EUR 22.8 million, in line with the historic levels. Amortization amounted to EUR 8.6 million in Q1 2012 and includes amortization of the customer base for our acquisition with EUR 6.7 million. Amortization on software was EUR 1.1 million and other amortization elements with a total of EUR 0.8 million. The financial result totaled EUR 22.6 million.
As mentioned in our last performance call, our financial result in the past were partly impacted by a technical effect related to the outstanding payment obligation for the remaining 49% of Sanyong. In this quarter, this effect has been negligible. The strong reduction of our financial result in comparison to Q1 2011 is mainly attributable to our successful refinancing in mid-2011. Overall, earnings before taxes amounted to EUR 117.6 million, 15.2% over previous year. For the quarter, we record a tax rate of 32.5%, which is below the level of the expected tax rate of 34%-35%, which we generally indicate. Consequently, profit after tax amounted to EUR 79.4 million, 18.7% above previous year. Now, some new information which we added here as to the EPS, which we show at the lower part of the slide.
Earnings per share for the quarter totaled EUR 1.54, an 18.5% increase over the previous year's quarter EPS. As you know, our earnings per share are impacted by amortization expense and effects from the revaluation of the Sanyong liability. Together with a wide range of analysts, we think these effects are not really relevant for valuation purposes. Therefore, many analysts adjust the EPS calculation for these effects. In order to support this analysis, we also state the earnings per share, excluding amortization and the Sanyong liability effect. For Q1 2012, the adjusted EPS amounted to EUR 1.66 and was EUR 0.12 higher than the as-reported figure. To the next page, some cash flow information. We show the details for the operating cash flow and overall the cash flow from operating activities amounted to EUR 26.2 million.
If you review the cash flow statement line by line, you know that the income tax payments remained on the level of Q1 2011. We talked about the lower quarter tax rate here. In addition, positive benefits from our interest payments, which decreased following the refinancing mid-2011. On the other hand, we had a higher outflow for current asset and liabilities in Q1 2012 compared to 2011. Important to know, this is mainly driven by the increase of non-trade asset and liabilities. The outflow for trade working capital in Q1 2012 was at EUR 80.7 million and therefore significantly lower than the Q1 2011 cash out for working capital, which was at EUR 97.4 million. On the next page, some information to the investment cash flow. Spending for CapEx in Q1 2012 was at EUR 16.5 million.
Here just to note that in the cash flow statement, we show a spend for purchases of consolidated subsidiaries and other business units of EUR 0.7 million, which are related to the final determination of the purchase price for Multisol. You also see the debt repayment of EUR 103.1 million, which relates to the repayment of the drawn part of our revolver credit facility, and we funded this out of liquid funds at the end of January. This leaves us now with almost a full EUR 500 million revolver for general corporate purposes. Page 13, briefly, you see the information on our balance sheet. Please refer to the footnote. There you see that out of the EUR 2 billion in tangibles, an amount of EUR 1.2 billion is related to the BC Partners acquisition of Brenntag and not to acquisition performed by Brenntag.
As to the balance sheet and leverage on page 14, net debt decreased during Q1 by EUR 39 million to EUR 1.45 billion compared to the end of 2011. The group's leverage for the quarter is at 2.2 times, which is slightly below the leverage end of 2011, which was at 2.3 times. Page 15, for your information, you can see the development of our leverage since 2007. Page 16, you get the information on our maturity profile, which we believe is patient enough to leave us sufficient time and flexibility and gives us no pressure to refinance on a short-term basis. Page 17 includes working capital information. Trade working capital amounted to roughly EUR 1 billion at the end of the quarter. We turned the working capital 9.2 times on an LTM basis in Q1 2012. This turn is at this level since summer of 2011.
Briefly, on my last page 18. The free cash flow Q1 2012 delivered a free cash flow of EUR 77.9 million after EUR 47.9 million in Q1 2011. The increase by EUR 30 million, so 63%, is driven by the EBITDA increase and as I mentioned earlier, the lower spending for working capital compared to last year's first quarter. With this, I would like to turn over to Steve to give us some information on the performance of our regional segments.
Thank you, Jürgen. Okay. As we turn to page 19. All the regional segments contributed to our growth in Q1 2012, as they had in 2011 over 2010. In Europe, we grew our gross profit by 4.8% on an FX adjusted basis, and the operating EBITDA by 1.5%. I've already mentioned that we incurred a net one-off cost of EUR 3 million. If I adjust, the operating EBITDA growth was about 5.4%. We are in the process of reducing European headcount by around about 4%. Agreements have been reached with more than half the affected individuals, and we expect to conclude the outstanding agreements shortly. Where EUR 10 million of expenses have already been booked, we currently expect approximately EUR 2 million more to come in Q2.
Starting Q2, the quarter personal expenses savings before restructuring costs will amount to roughly EUR 2 million or a little higher and then increase quarter by quarter to reach approximately EUR 3 million in Q4. Europe has a relatively slow start in 2012. The business is growing and obviously it benefits from the acquisition of Multisol. While growth, especially March, was better than earlier in the year, we will continue to monitor the situation in Europe closely, and take further action if it should prove necessary. In terms of North America, North America continues to be a strong performer in the quarter with an FX adjusted gross profit growth of 10.1% and operating EBITDA growth of 12.3%. The business continues to develop well across the continent. Also in Latin America, we saw Latin American business perform very positively. The segment delivered a 9.4% FX adjusted gross profit growth and 11.6% EBITDA growth.
Just coming to Asia-Pacific. Asia-Pacific shows a 16% gross profit growth and only a 5% operating EBITDA growth. The difference in growth rates between GP and operating EBITDA growth is due to the flood impact in Thailand, where we did not adjust our structure as we deem the situation to be temporary. In addition, we continue to upgrade our Asia-Pacific's headquarters in order to be able to cope with expected future growth of this very important region. The Asian situation is still somewhat mixed. After a relatively slow start in the year, our Chinese acquisition, Zhong Yung, showed a very positive dynamic within the quarter. On the other hand, our business in Thailand still suffers from the fact that industrial production in the country has not returned to pre-flood levels. Macroeconomic research indicates that the industrial production is still approximately 9% down in a year-over-year comparison.
In Thailand, we had a reduction of EUR 1.6 million gross profit in Q1 over 2012 of previous year. This picture is slowly improving. March had the highest gross profit since September of the previous year, almost 50% higher than the flood month of November. Mainly due to the Thailand impact, the Asia-Pacific was somewhat soft organically Q1 versus the very strong Q1 of 2011. Let me reiterate our group's operating gross profit growth for Q1 2012 amounted to +7.6% and operating EBITDA up 6.3%. If I come to pages 21, 22 and look at the outlook. We continue to have a very positive outlook in 2012. We expect macroeconomic growth, but at a slower pace, and certainly with differentiation around the globe.
We expect the outsourcing trends to distribution, the preferential role of scale distributors, and Brenntag's strong competitive position to provide further long-term and sustainable growth potential. We expect the group to grow sales and gross profits. The gross profit development will be driven by volumes and gross profit per unit, while chemical prices are less relevant in the context. We've also to continue to work on the efficiency of our group. EBITDA should grow stronger than gross profit. In addition to the organic growth, the acquisitions undertaken in the course of 2011 will have a full-year impact in 2012. We expect to give quantitative guidance later in the year as we've done in 2010 and 2011. Let me address the current trading environment. We are continuing our growth path also in April 2012.
Gross profit and the EBITDA are ahead of the same period in 2011. The acquisitions undertaken in the course of 2011 helped generate gross profit growth. To some extent, the currently stronger US dollar also supports earnings developments. Gross profit per working day grew by 5.5% year-over-year in January, 4.3% in February, 9.4% in March, and 5.7% in April. North and Latin American markets continue to show stronger growth. The European gross profit is still suffering from a relatively weak market environment. Southern Europe is clearly weak. Other parts of Europe are developing more positively.
In Asia, Thailand does show a slowly improving trend after a temporary weakness during the flood of last year. We continue to reduce our costs in Europe. We initiated a program to reduce the European workforce by 4%. Most of the action's been taken in the first quarter, but part is still to be carried over into Q2. We currently expect one-off costs in the range of one full year of savings. We have gone to very detailed manner throughout each and every function to determine the optimization potential available to us. We will update you again after Q2. Closing on the outlook for the full year 2012, we are confident that we can grow all the relevant earning parameters also in 2012, organically and supported by the acquisitions that we've undertaken in 2011. The macroeconomic environment remains challenging, particularly in Europe, more than in any other region.
Our high level of diversification in markets, regions, and industries underpin the growth and resilient characteristics of our business. Thank you very much. Are we able to take questions?
Yeah. Maybe the operator can help us and provide the participants with instructions how to pose questions.
Dear ladies and gentlemen, we are now starting the question and answer session. If you'd like to ask a question, please press 01 on your telephone keypad. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. Our first question comes from Mr. Rob Pontin from JPMorgan. Please go ahead, sir.
Thank you. First of all, congratulations to Jürgen and Georg Müller on your new jobs. Relating to that, Jürgen, you've now taken over as head of Asia as well as head of M&A. The one thing I've been slightly puzzled at this year for Brenntag has been the lack of acquisitions. I remember last year you saying that perhaps 40% of acquisitions could come from Asia-Pacific. Therefore I'm linking your two jobs and wondering if we're going to get some news on acquisitions, particularly in terms of Asia-Pacific. Thank you.
Rob, it's Jürgen here. Thanks for all the good wishes here, also challenging question. Just as a reminder, last year's acquisition came in end of Q2 and in Q3 and in Q4, the Chinese acquisition September and the Multisol acquisition in end of November. We're still work digesting these. On the other hand, I think it's fair to assume that you will see some acquisition in Asia this year pretty soon.
Would you still think that you could use perhaps 40% of your acquisition firepower in Asia-Pacific? Is your confidence on Asian acquisitions increasing?
I would say yes, I would not measure it on a quarter by quarter or year by year basis. It's an average over several years, we still stick to our statement that we would see roughly 40% of the available acquisition funding generated out of operating cash flow dedicated to Asia with the other regions, Latin America and Eastern Europe, getting to 10% each, the remaining 40% allocated to the more mature infrastructures in Western Europe and Northern America.
Thanks, Jürgen.
Our next question comes from Andy Chu from Deutsche Bank.
Good afternoon or good morning. Just a few questions, maybe some numbers ones. Just to clear up, for March and April, could you give us the organic gross profit per working day, please? Are they hovering around 1%, 1.5%?
Georg, for you?
Yeah, just to take Andy. Just messed up with my papers here.
Oh, just relax.
Sorry.
Shall I move on maybe to another question?
I have it here. I think March would be roughly 5%-6% organic growth of GP per working day. April, you're right, it's hovering around 1%-2%.
Okay. Perfect. Just finish off on numbers. In terms of volume and price, I guess your 10% roughly FX-adjusted top line, what was the breakdown, please, between volume and price? Maybe you could give us indication of what volume and price is doing in Europe as well. Thank you.
If I take that one. Volumes on the group quarter over previous year's quarter are up by a percentage point, but organically down about three, and prices are up about 8%. The organic volume development in Europe is a little bit weaker than that of the group, but not materially so.
Yeah. Andy, it's Steve here. One of the things that we do, I've done in Europe is we looked at low margin business, and that tends to be the higher volume business. Therefore, if we're not happy with the levels of return we're getting, that's what we would sacrifice. We're not so much driven by the higher volume business. I wouldn't read too much into the volume development at this stage. Okay, fine. That makes sense. My final question is just sort of wrapping up sort of acquisitions in Asia. I guess if I've made the calculation correctly using Q1 2010 pro forma numbers for EAC. The business over the last two years from Q1 2012 has basically shown no growth on an organic basis. In Asia. I just wondered your thoughts in terms of the spend going into Asia.
Is it going more into Southeast Asia or are the acquisitions going to be focused more on China? Just a quick question on headcount. Steve, you mentioned growth in Asia, but your headcount since the end of the year in Asia Pacific has actually fallen by just less than 2%. Just wondered what's going on in headcount terms, please. Thank you.
Yeah. That's, as to the performance, I think you referred to EAC. I didn't get all the information, but I guess the question was, have we seen there significant organic growth of the business outside China, so the former EAC and Rhodia business? I think over the last quarters, we haven't seen this. We reported on this major issue here is the relatively slow business in Thailand, starting with the flood in Q4 last year. We have seen significant recovery. The GP per working day in Thailand in March was significantly higher than compared to the lowest levels immediately after the flood. We see some improvement, but it's fair to say that the current performance level are still significantly below the top levels which we have seen in the past.
We also have to understand that Thailand represents roughly 25%-30% of our EBITDA generation in Asia, including China. As to acquisition targets, you probably would expect more bolt-on acquisitions in Southeast Asia, exactly for the reasons I mentioned. We have already relatively strong positions in Thailand, in Indonesia, and even Vietnam. Smaller bolt-on acquisitions probably would help us to broaden our base there and become more robust and independent from economic development. The focus of acquisitions could be on China, but again, we define also Asia Pacific, including Australia and New Zealand. These are still very interesting areas where we have some position, but where we believe that with the right acquisition, we could improve the overall performance in Asia Pacific and also stabilize the performance more.
Just in terms of the headcount movement in Asia Pacific, is there anything to point out on that front?
No, not really. It's general because we have seen some weaker performance in Thailand and some of the economies affected by this would look into Indonesia, et cetera. We did not go through any deliberate headcount reduction. We just didn't replace people leaving the company.
Just coming back to Asia Pacific, and maybe I was a bit long-winded, but I guess you say on an organic basis, that Asia Pacific has not grown for the last two years. I guess you're making relatively expensive acquisitions, 10x EBITDA-type multiples being paid to secure infrastructure and growth opportunities in Asia. That hasn't been the case, I guess, over the last couple of years. Should we be concerned in terms of the future acquisitions going to Asia and your confidence of the ability to deliver growth in the region? Thank you.
I don't really share your view that we haven't grown there organically over the last two years. We have seen some weakness beginning maybe with last year, Q3, Q4, with the flood. Outside Thailand, we see some growth, but I had to explain the importance of Thailand. I don't really see this and share your view. In addition to this, just to clarify, we didn't pay 10 times multiple for acquisitions. We paid just recently 7.5 times for our 51% stake in the Chinese joint venture. Yes, we paid 9.6 times estimated 2000, I think it was 2010 results for EAC. On the actual results achieved for 2010, the multiple is significantly lower at roughly 7.5 times. We pay higher multiples because we expect higher growth.
Coming back to your point, we of course expect significant above group average for Asia Pacific and see right now some headwind around Thailand.
Great. Thank you very much.
Our next question comes from Mr. Chang Liu from UBS. Please go ahead, sir.
Hi there. Just a couple of questions from me, if I may. I was just wondering if you could help us with the Asia Pac organic GP growth rate for the quarter, excluding Thailand, if that's possible. Secondly, just very quickly on LatAm. Gross profit growth, including acquisitions, was 9.4% in Q1 as versus 16.1% in Q4. Could you just quickly remind us when the Amco Internacional acquisition was consolidated and what Amco's gross profit contribution within the quarter was?
Gerd, do you have the details? I don't have them handy here.
Yeah. Chang, the gross profit growth in Asia, Q1 over Q1, if I exclude Zhong Yung and if I exclude Thailand, is marginally negative, so in the range of -3% to -4%.
Right. I suppose, excluding the Thai floods impacting Thailand, are there any other issues in other regions in Asia Pac that we need to be concerned about, or that we should be monitoring?
No, I would say no. We see that the number of surrounding countries like Malaysia, Indonesia, are not doing that great currently, but we basically see this as indirect flood effects from Thailand due to the economic interaction between all these countries.
Right.
Yeah. Steve here. Can I just add a little bit, something to this as well? We've got to be a little bit careful here as far as Asia Pacific is concerned. Asia Pac is actually still a relatively new region for us. We really started making some significant progress in 2008, 2009, and we are actually establishing essentially a bridgehead here to develop what is a very significant market opportunity for Brenntag going forward. You've seen obviously the changes in the management board to reflect our view about the long-term strategic opportunity that's in Asia Pacific. Whilst, clearly on a day-by-day and quarter-by-quarter basis, the numbers move around somewhat. Longer term, we see this as very much a very strong, organic growth opportunity for Brenntag. It's a very large market, and we expect to participate fully.
During this, even now, we're still investing quite heavily into management in the region to ensure that we're well-positioned for growth. I don't want people to take a negative outlook on Asia Pacific, because we're certainly not taking that view.
The Amco acquisition, Chang, came on stream only January this year, and it's a relatively small acquisition also in the context of Latin America.
Okay. Did you have the absolute figures for Amco's gross profit contribution within the quarter?
No, I'm sorry. I wouldn't have that at hand.
No worries, I suppose if it came into effect in Q1 without impacting Q4, I suppose on an organic basis, would it be fair to say that you saw some deceleration in LATAM? If you could give any clarity on the main driver of that would be quite helpful.
I think we would say that a very high single-digit growth rate in LATAM is a strong growth rate, a comparison to a little bit higher growth previous year might shed a little bit of wrong light on the situation in LATAM.
Sure. Thank you.
Cheers, guys.
Our next question comes from Georg Ramschagen from Commerzbank.
Yeah. Hi, all. Thanks for taking my questions. Just to follow up on the EUR 7 million provision release, could you just add a bit more detail on this? I just realized in the quarterly report that the environmental provisions actually decreased by a comparable amount. Is this related, and if you could give some information on this? Thank you.
Georg, do you want or shall I go? I'm happy to go. The provision release, which we are mentioning, which is stated in the quarterly report as due to the settlement of a third-party claim, is basically related to an older fire that we had. You might remember from the IPO prospectus that we had the fire in one of our Spanish facilities late 2005.
We provisioned for environmental and other damages. Because with the authorities and with the insurers, the case was ultimately settled now, we released the excess provisions.
The provision decrease in environmental provisions are actually related to this.
Yeah.
Cool. Thank you very much.
Our next question comes from Mr. Gerhard Orgonas from BNP Paribas.
Good afternoon. I've got a question for you. Give us also the organic operating gross profit development in Europe, excluding Multisol and in North America. If I look at organic operating EBITDA in Europe and adding back the EUR 3 million net expense from restructuring, but reducing maybe EUR 4 million-EUR 5 million from Multisol, is it fair to say that operating EBITDA was flat to slightly down in Europe?
Georg, do you want to go or? Yeah. We are hesitating to talk in too much detail about organic growth rates. Basically, once we start integrating businesses, it becomes a little bit an artificial exercise. The difference between as reported and organic, sorry, between as reported and organic in North America is very negligible because we had in the, relative to the size of the region, only a smaller acquisition last year, G.S. Robins. Europe, yes, Multisol has an effect. On an EBITDA level and adjusted for the restructuring, Europe was still with a relatively small percentage up organically Q1 over Q1.
Okay. Thank you.
Our next question comes from Mr. Simon Telson from Credit Suisse.
Yeah. Good afternoon, Steve, Jürgen, and Georg. Most of the questions have been answered, but just one last one. I would be interested, particularly in Europe and North America, whether you've seen any trends within your verticals in the different sectors your customers are operating in. Has there been any changes over the last quarters in terms of that? Thank you.
Sorry, did I understand, so the changes in customer industry profiles, is that what you're saying, or?
Yes, exactly.
Right. Well, we do actually focus ourselves on particular industry segments such as water treatment, pharmaceuticals, personal care and the food sector, in addition to areas like adhesives and coatings. For us, in terms of any changes we would see, we would say, for example, the adhesives and coatings market, which is around decorative products and construction has probably been an area which has been more negative outlook as opposed to positive. We see pretty large degree of stability in quite a lot of the other segments which we focus on. In fact, this is really one of our strategies, is try to support such industry groups which do give us long-term stability, such as water treatment and food and personal care. I say, I think probably the most marked effect would be in construction, for pretty much obvious reasons, I think.
Okay, thanks.
As a reminder, if you would like to ask a question, please press zero one on your telephone keypad. Our next question comes from Mr. Barricks from Merrill Lynch. Please go ahead, sir.
Hi, guys. It's Toby Reeks from Merrill Lynch. I guess a similar sort of question to the last one. Just within Europe, could you talk about the sort of different regions and how those are performing?
I think as we said in our briefing, it's clear Southern Europe is weaker than the rest of Europe in totality. This has really been pretty much the picture now for quite some time, really. I would say sort of over the second half of last year, we saw certainly Spain and Italy as being weaker markets. We weren't actually involved in Greece at all, but probably most people will be pleased to hear. We do see some good performances in Europe as well. We don't want to paint a completely bleak picture here. We find some surprisingly good performances in Northern Europe. We are actually perhaps a little bit more optimistic than maybe we sound, because we do see some real upside potential for us in Europe.
I think what's really interesting at the moment for us is that clearly, suppliers and customers are certainly adopting a more conservative view in terms of the way they source their products and what have you. We see the typical behavior which you would see in a recession coming through now, where people are buying more often, smaller quantities and what have you. Nevertheless, the underlying demand is still pretty strong in many industrial countries in northern parts of Europe. It's a bit of a region two halves to some extent.
Would that be sort of France, I guess France, Germany, those are the sort of the key strengths. There's not been any change over the past quarter in any of those markets there?
I wouldn't say France is particularly a buoyant economy, to be fair. I would say that surprisingly, like the U.K., Benelux, Nordic regions, Germany, parts of Eastern Europe, really are very resilient.
I'm assuming from what you said, that's sort of more of a share gain than anything else. Is that right?
It's a good question.
Hard to say.
I'm not quite sure how much my competitors are losing market share. It's a good question. Well, we don't feel that we're moving backwards, so I guess that may well be a market share increase. I guess the fact it probably is, but we're not seeking to rush out there and grab market share. We're seeking to make sure what we do is profitable, and hence the measures that we're taking in Europe.
Okay, thanks very much, guys.
As a final reminder, if you'd like to ask a question, please press 01 on your telephone keypad. Our next question comes from Geoffroy d'Alançon from BNP Paribas.
Yeah, maybe just one more question on your cost efficiency program. In addition to letting go your 200-250 employees, what are the other areas where you find that you can cut costs? Have you identified any other major topics, as in warehousing, for example?
Yeah, certainly we have a very extensive review of all the European physical assets done and complete. To be frankly, this is not work that's been done in the last five minutes. We are a planning organization, and we've been looking at this for quite some time. We're taking action currently to significantly improve the effectiveness of our transport fleet in terms of load utilization, operational efficiency, and certainly where it makes sense, we will consolidate warehouses and offices, again, where it makes sense. I think the important thing is that we don't see this as any sort of retreat at all. We're still very much configured for growth, we will take the steps that are necessary to improve efficiency, as is absolutely obviously to do in the current market environment.
I would say transport is probably a key focus for us, and warehouses where it makes sense. Bear in mind that our business is very much a local business, and our customers appreciate a local source.
Thanks.
There are no further questions. I now hand over again to Mr. Holland.
Okay. Well, ladies and gentlemen, thank you very much indeed for your time today. Thank you for all your questions, and I think that's probably the end of the call. Thank you very much.
Ladies and gentlemen, thank you for your attendance. This call is being concluded.