Earnings Call: H2 2019

Feb 21, 2020

Ladies and gentlemen, welcome to the KingSpan 2019 Full Year Results Conference Call. My name is Felicia, and I'll be coordinating your call today. Are followed by one on your telephone keypad. I will now hand you over to your host, to your host, Dean Murta, Chief Executive Officer, to begin. Gene, please go ahead. Okay. Thank you very much and good morning, everybody. Welcome to our 2019 results call. And there is a good bit of detail in advance of the results self in the presentation, that's we'll either come back to in Q And A or, or it's worth actually exploring yourselves in any event rather than taking up the call with it right now. So if we could move directly into the results, that's on Slide number 14. Which is tied to 2019 in summary. So in essence, we had a we had a very good year actually. Revenue was up 7% to 4,700,000,000 profit of trading profits just short of $500,000,000 and basic EPS up 11% to almost $2.05. All of the business has actually performed quite well in the year, both at an organic level. And from an acquisition perspective, it was actually very little activity, apart from the Baccassia acquisition close to year end in France. So just by business unit, the insulated panels business grew at 7% worldwide, particularly strong in the Americas and most of mainland Europe, and understandably weak in the UK, in particular in the last quarter. In fact, the early part of the year in the UK as we'd have reported before was quite strong, but that's that faltered significantly towards year end. And that's affecting us obviously at the beginning of this year as well. Quadcorp, which is a a, key part of our strategy in the insulated panels business now represents 9% of global sales And in absolute terms, it grew 36% year over year, which is very encouraging. And we see that pattern of growth continuing and potentially even accelerating into this year. At a volume level incident, at an underlying volume level, insulated panels grew 4%. Year on year, like like flight. The insulation board business revenue was up 2%. And this business in particular, would have seen significant deflationary pressure. You recall a couple of years ago where MDI was extraordinarily high Well, as that came off, so too, did the pricing in particular of our PIR board business, which, if you like, curtail the sales growth, at a like for like volume level. Once again, that business in fact was up 8% year on year, which is very encouraging at an organic level. The Life And Air business, really had a great year with revenue up 12%. And that was, that was all like for like organic growth, particularly strong in North America and well improved in Western Europe and in particular, in France. And again, you'd say that trend has continued into this year where where the Ben looks in Southern Europe is strong and North America again has started the year in good shape. Margins are improving their gradually and our medium term target is still to get to a 10% return on sales and we're on track, I would say, to achieve that. The Water And Energy business revenue grew 3%. So relatively steady in our data and flooring business, driven particularly by the former, which is the data site, actually the strong year with 13% revenue growth. We'll say a lot of that activity now focused in large scale data centers. Which, which is also incidentally a significant driver of growth in the panels business and indeed the board business from a flat roofing insulation perspective. So that in essence captures the summary of the results. And I'll now hand you over to Jeff on page 15. Thanks, Jean. And just to go through some of the financial highlights on page 15, group revenues $4,660,000,000, up 7% year on year. And I'll come to the components of that growth shortly. Group trading profit 12% ahead at 497 point 1. Group earnings per share grew by 11 percent to $204.6. Our final dividend of $33..5 brings or brought the total dividend for the year to 46.5 center, up 11% on the previous year. Strong free cash flow performance. And again, we go through the details of that in a second. Free cash flow up 9% to $337,000,000. Net debt and net debt, just to be clear about it, is calculated on a pre IFRS 16 basis, which is pre the leasing standard. So our net debt was 633,000,000 down $95,000,000 on the previous year. Trading margin was up 50 basis points to 10.7%. Our net debt to EBITDA, again, calculated pre IFRS 16, which is consistent with our banking agreements. 1.1x compared to 1.4x the previous year. Our effective tax rate down modestly to 16.9% and that really just reflects the relative waiting of earnings year on year from a geography perspective. And we continue to progress our return on capital employed, up 50 basis points to 17.3% And just to deal with the with IFRS 16, which I have referenced there a couple of times, there's a $122,000,000 of capitalized leases, including in, included in payables on our balance sheet. So not classified as debt, and that's consistent with our banking definitions. Moving then to page 16, which just shows the progression in trading profit over the last 5 years. So you'll see from 2015 through to 2019, compounded profit growth of a little over 18%. From a margin perspective, the profile of our margins by division is set out on the right hand side of the chart. So insulated panels, up 40 basis points in the year. Much of that was to do with both sales mix, but also an element of operating leverage on foot of the 4% volume growth that we saw across the group. Installation board, an exceptionally strong margin, 13.4% well up on the previous year. And that, that would reflect a positive cool term mix, but also a element of lag as well associated with the raw material deflation that we saw during the year. Lisenair, continues to progress its margin 7.7 percent in the year. And that will continue to to build over the coming years as activity levels grow. At Warvern Energy at 6.8% broadly in line with the previous year, data and flooring at 11.4% with a strong margin in absolute terms down marginally on the previous year. Again, that really reflects the relative geographic mix of the business, but strong nonetheless. So all of that combined give a group margin up 50 basis points to 10.7 percent. Page 17, it just bridges the sales and profit year on year. So firstly, to deal with the revenue bridge. So in overall terms, our revenues grew by 7 percent, from in terms of what the movements were, currency added at $40,000,000 to revenue, which is 1% acquisitions contributed $199,000,000 or 5 percent out of the 7. And underlying revenues grew by, by 1% or 47,000,000. From a profit perspective, grew profit, group trading profit grew by 12% and the components of that were currency, was 6000000 positive or 2%. Acquisitions contributed 18000000 or 4% and underlying profits grew by $27,800,000 or 6 percent across the year. Our free cash flow performance is set out on page 18. Strong free cash flow performance in the year delivering $337,000,000, up 9%. Naturally, the strongest driver of that was our EBITDA $580,000,000 of EBITDA. We had a decent working capital performance in the year as well, 11.9% of sales was our average investment in working capital. The other key constituents of the free cash flow performance Our cash interest expense was $16,700,000. And our cash tax was a little over $87,000,000 and our net capital expenditure across the business was $154,300,000. And reconciling net debt which is on page 19. We ended the year 633,200,000. The key movements through the year were free cash flow reduced debt by $337,000,000. Acquisitions or acquisition spend was $142,000,000, of which Bacasier was the significant element of that, and that was incurred late in the year. Our dividend was $78,000,000. We paid a deferred consideration on previous acquisitions of 29,700,000 So a lot of that combined to land us at $633,000,000 as at year end. And return on capital employed is a key metric in the business. In absolute terms, our return on capital employed was 17.3% in 2019. If you annualize the impact of acquisitions, given that they were very much back end back end loaders, the annualized return is approximately 17.7%. So we continue to to build on our returns profile. From a geography perspective, the profile is set out on page 21. So our biggest geography is, is Europe, 53% of global revenues in 2019, up from 52% in 2018, and absolute terms grew by 10%. The Americas, a little under $1,000,000,000 now $991,000,000, up 8%. The Americas, comprises 21% of our, of our global revenues. The UK, revenues were down 6% in the year to 892,000,000 with the UK now comprising 19% of our group revenues. And rest of world, our revenues grew by 4% to $313,700,000 and Rest of World comprises 7% of our global revenues. So with that, actually the strength of our balance sheet, before I hand back to Jean, the strength of our balance sheet is highlighted on page 22, The, we have a, in terms of our principal funding basis, we have a 300,000,000 revolving credit facility, which was undrawn atyearend, which was that was arranged during the 2019 financial year. We have a pre existing revolving credit facility of a little over $450,000,000, which again was undrawn at year end. And post year end, we've we've agreed a green loan of 1,000,000, and that's to fund the group's planet passion initiatives, the internal initiatives that we have within the group. So we've, we've a ring fenced green loan to help with that. So the combination of our available cash balances on hand and committed undrawn facilities is little under 1,000,000,000 to be specific. And the weighted average maturity of our debt is for four and a half years. So with that, I will come back to you. Great. Thank you, Jeff. We'll take you now to slide number 29, which is titled the outlook. So in essence, the start of 2020 has actually been reasonably difficult in January. We would have pointed towards this in our November IMS, which largely was a result of weakening intake at the time, in the UK. So that's translated into proven off dispatches in particular in the UK, in January. But overall, in fact, oddly enough was a short month. For us, which meant we had less trading days year over year, which left us slightly behind prior year. And that said, for the last 3 or 4 weeks order intake, which is the key, forward looking indicator for us has improved both in the panels and the board businesses. There's been a decent uptake and intake across most of our geographies. Which should bode well for the 2nd quarter, dispatches. And our acquisition pipeline is healthy. I'd have to say that it's always pretty healthy, but you'll have noted last year, not much happened, and Jeff spoke about that. And, but yeah, once again, healthy, we have a number of active projects presently and comfortably around 750,000,000 of headroom without breaching our own fairly conservative limits of 2 times debt to EBITDA. So that area of the business is in good shape, but it's the most unpredictable part of our business, of course, and there's no guarantees we will ever actually transact. From the from the climate agenda piece, that debate obviously is, that's flared up worldwide. Our business is naturally squarely positioned in that area. Our whole business really is about energy conservation. In terms of what we do. But, as well as that, how we do it is becoming increasingly important. And we're 10 years into our net 0 energy program. So it's this isn't kind of new material for KingSpan. We set a target in 2011 of getting to net 0 by 2020, which we we're just about to. But going forward, we've set a set the bar much higher right across the business and what we call our planet passionate program, which covers energy, carbon, circularity and water harvesting right throughout the group. So this is an initiative with 12 very specific and demanding commitments that we've made, and the whole business is aligned on this, literally every single facility. Is aligned. And that, that agenda is a core part of what we want to achieve over the next decade. Our global footprint has been expanding dramatically over the 4 or 5 years. And I think it's back on slide 10. You can see, what we're looking at presently in terms of the next 2 to 3 years of global expansion, which, which is very significant as well. So in essence, In essence, I think that takes us out of the presentation and we're happy to throw it open to, to you all for questions. The first question we have is from David O'Brien from Goodbody. Great. Thanks guys for taking the questions. Firstly, if I could bring you back to Slide 7, Could you just walk us through some of the detail in terms of the competitive advantage of quad core as you've laid out there? And in addition to that, the prospects for for the quad core product in terms of what size it could become within the KingSpan portfolio over the next, you know, 5 to 10 years. And secondly, just touching on Planet Passion as well on Slide 9, you see, you outlined more detail. If you could maybe just bring us through a bit of that color, And what does it mean for the internal workings at KingSpan? Should we be thinking about this as a purely as cost or will there be some sort of return on it? And what is the reaction of suppliers and customers being to the initiative, please? Okay, David. Thank you. So Slide 7, as you asked for first. Yeah, we we this comes up from time to time. What's quad core and how does it differ from traditional materials, etcetera? So, we felt the best way to articulate that was actually pick, pick a sample project, rather than talking about the theory of it. So for a building with a 100,000 square meter, wall requirement, which is not untypical, these is, we're seeing massive data, facilities. Obviously, the whole online trading piece, and general retail is seeing facilities in this kind of 100,000 square meter category. So just to pick one of those, if you were to go part core over Mineral Fiber. And this is to achieve a fairly demanding new value of about 0.12. It would require 300 millimeters of the Mineral Fiber product, which the quad core would be a maximum 150 millimeters by comparison. So the implications of that, even if you talk about the plan at least, it's almost 340 foot trucks less on the road and obviously less on a site in terms of congestion, etcetera. The actual like for like panel cost, would be around 25% lower, and that's just at a pure panel level. And that gives a significant installation cost savings and also excess recall savings related to a ticker product, which are extremely material. And then over on the right hand side of that, you can see it's about 1300 tons lighter structure required because the product is so much, so much thinner and easier to handle. From a fire perspective, we have a 60 minute, what's known as an AI 60 standard. Which is very demanding frame material. CODCO has achieved that. And in fact, we'd be confident that in certain configurations in EI90, will be achievable very shortly. And then most crucially of all, we provide a 40 year term and guarantee I. E. Where there's no energy performance degradation in a product, which we were not in a position to do over mineral fiber. So they're the key practical differentiators between quad core and older material. What it means for us in terms of, where it can go in the business. As I mentioned on the call, it's 9% of our global sales presently and we have a medium term target of that achieving 50%. And I'd be I agree the whole team will be confident of achieving that probably over about a 5 year period. The second point here was on Planet Fashion is on Slide 9. And well, it's kind of self explanatory there. We have 12 specific demanding initiatives across those 4 headings of energy, carbon, circularity and water. And this is real. It's a very embedded initiative throughout Kingspan and it's common hot on the heels of our net 0 energy agenda. So this isn't new material for us. As some examples, we want all of our sites to have a solar power generation. We're committed to 0 emission cars. Worldwide by 2025. The second arity piece in terms of using PET bottles, so plastic bottles in our process is already well underway. We'll use about 300,000,000 bottles this year, a lot of which is going into quad core. And we have an intention, a 5 year intention of that being 100% of all quad core will be fueled by PET. 0 waste to landfill and then our ocean and water projects are well underway as well. We obviously have a rainwater harvesting business in a water and energy piece. And will we expect for the group at its present size to harvest and reuse about 100,000,000 liters of water over that period? Sorry, by the end of that period annually. The probably the most demanding part of this is from a supplier perspective. We want to get buyer alignment to make this even deeper and meaningful, more meaningful. And that's obviously a challenge, but something that we we've engaged already with the primary supply chain and actually it's been received quite well. But from a returns perspective, each of these projects have to stand on their own. So we're not just, blindly investing in all of these areas just for pure goodness sake. We are a business. We're a business that's focused on returns. And each of these projects have to stand up 1 by 1, and a fair bit of it would be funded by the green bond that Jeff alluded earlier on. Great. Thanks for the detail. Our next question comes from Tobias Weiman from Morgan Stanley. Tobias your line is now open. Hi, thank you for taking my question. The first one is on the board margins. You talked earlier on the call about the positive impact from the bottom mix, but also from from the lag effect from the price raw material effects. Is there any reason why we should expect this trend to reverse in 2020? Because I guess the cool term effect will continue to be positive. In fact, you just said you want to go from 9% to 50% of sales over the next 5 years. If I look at the raw materials, they also seem to be still favorable. So how should we think about spot margins in 2020? Well, just on borrower margin, and we've been saying for some time that the margin that we've, that we've experienced through 2019 at 13.4%. That is exceptionally strong and I would underscore the word exceptionally. We, we, we, a team, a key team during 2019 was deflation. And I think we held on to that deflation for a little bit longer than we would have anticipated. And that will naturally unwind through 2020. So Our best sense at this point is that margins in insulation through 2020 will be mid-twelve as opposed to the 13.4% that we saw in 2019. And that's really just the extended lag around that deflation. Probably just a note of caution there as well. Like we've, as we noted earlier, we, you know, the MDI market has been fluctuating fairly extensively over the last couple of years. So it peaked about 18 months ago. It's troughed probably just about now. And just depending how things go in China with regard to the virus, it's a significant source of MDI material worldwide, which has the potential to get disrupted. And if it does, to be honest, we'd be nervous about PMGI inflating once again. So that's something we keep a very close eye on over the next weeks. In fact, it's not even months. So if you're saying mid twelves, are you assuming that MDI prices are going up throughout the year or is this based on the assumption of sort of spot prices? That assumes flat. That assumes where we are now. Okay. That makes sense. And then just following up on the pricing side as well. I think if you disclosed your volumes earlier, so you can sort of back out the pricing. And it seems the year on year pricing in boards was sort of down 8% to 9% in the second half in panel. So I think it was down around 3%, which I think is similar to what you have talked about in the first half of the year, but I think the comparison base was a bit lower in H2. So that's a supply that prices sequentially have gone down. From H1 to H2? Yes. That's correct. And as a follow-up, how should we think about pricing for 2020? Because obviously, raw materials are still down. If I look at MDI, it's currently, I think the spot price down 10% year on year. Should we expect pricing to still be weak in 2020? Or what's your guidance for negative organic growth in Q1, mainly based on lower volumes? The volume in January for sure was under pressure. We'd expect less so in February March. But from a pricing perspective, we're still seeing downward pressure in our selling prices. Particularly on board and as you rightly point out, it's largely MDI related. This is a moving piece and, I wouldn't, I wouldn't, we can't really understand the potential impact of the China piece. In terms of inflation. Okay, that makes sense. And just a final follow-up on the UK, obviously, Q1, you said it's still weak But maybe can you talk a little bit? If you look at your order book, do you expect an improvement in maybe in Q2 or at least in the second half of the year, I guess the comparison base will get easier as well? Or do you think the UK will remain weak throughout the year? Okay. So it has started week, which is a result of the week intake in Q4. And so that's, that's, if you like to die as cash for Q1, we carry an order book generally of about 3 months on average units later panels. So we've got that kind of hard visibility. The intake has improved, encouraging that in February, not good in January, improved well in February, So we ought to see, we ought to see year on year at least steady business from Q2 on. Okay, that's very clear. Thank you very much. Our next question is from Flore O'Donnell from Davy. Flor, your line is now open. Thank you. Good morning, everyone. Just a couple from me. One is just on what you're seeing in, in Europe at the moment, I guess, with particular reference to, Germany, France and maybe Netherlands as well. The second one, if I may just refer to the slide deck as well. Slide 10, ever a very interesting slide on your, your, global organic expansion. Just be interesting to hear a bit more on the agenda there. It looks, relative to the last time you had the slide up, there's a few new projects going in there. So your thoughts around that would be, very appreciated. Thanks very much. Okay, Forrest. So just in terms of the end markets, we've, I think we've talked an offer at the UK and that's clear. Germany, is continued to be reasonably weak actually. You know, there's a lot of lot of news out there in terms of industries, you know, far beyond us. Auto, other industrial industries, etcetera, that are particularly weak. And that, that is having an knock on effect on the ground, and we're seeing that in demand. So so far in the year we're actually behind in Germany and we have no reason from where we're standing now to think that that's going to change any. The Netherlands actually has been weak enough as well, and that's all into a couple of environmental measures that maybe are a little over the top in the Netherlands, which has caught back on activity on building side. So we'd be reasonably, optimistic about those measures being, adjusted, let's say, to allow activity resume in a number of sites that have been held back. So the Netherlands slow for now, but that, that should change. And then France, you asked about as well, encouraging, I'd say, in a work. We had a good year there last year, and we've had a, we've had a very decent start in France. So we'd be optimistic about that. On the Slide 10, which you referred to. Yes, there are a number of new projects there. So this is our next 2 to 3 year pipeline of organic developments. New to this would be the couple of lines in Brazil. We just completed 1 last year. We're building a new facility right now in the very southern part And then mid to north of the country, we expect to build a, where what would be a 6 facility, in the portfolio next year. So that's encouraging. And then we're in fact looking at some other regions in Latin America as well concurrently. We're building an insulated panel line in the Northeast and actually under the same roof that's in the U. S. Rather than under the same roof, we intend to build a PIR board line, which will be our first our presence in insulation there so far is really limited to XBS in our Winchester business, the PIR market and flat roofing in particular, is very large in North America. So this will be our 1st series attempt at that. And then just started right across the world. There's a number of other initiatives from the Kayrock plant in our Sydney facility, for panels. And new tools will be Southeast Asia where we're actively looking at a startup in Vietnam, which would hopefully kick off on later this year for for commissioning next year. So, yes, very, very healthy portfolio of new projects there. Great. Thank you. And just a quick follow-up for Jeff. Jeff, have you guidance on CapEx for this year? Approximately 1000000. 160. Great. Thanks very much. Thank you. Thanks, Barb. Our next question comes from Gregor Kuglitsch from UBS. Gregor, your line is now open. Hi, good morning. I beg your questions. I'm just coming back to the I think this has mentioned in the text. I don't know if you've mentioned in the presentation on the sort of you call it alpha core, which is the sort of fiber free, if I'm not mistaken, buyer safety kind of product because obviously that's an issue in the UK. So wanted to get an update there and how you see that perhaps kind of panning out and perhaps you could therefore increase your share a little bit in the high rise. Then just coming back to quarter. So I appreciate the slight of interesting, but how does it compare to your existing panels? I just wonder, obviously, there's probably an element of CODCORE replacing some of your legacy panels if I'm not mistaken. So what's the improvement kind of compared to that? And then in that context, you commented it costs could be 50% or that's the sort of midterm aim. Is there an element of, I think we've seen the same in CoolStern that kind of get rid of some of the older technology and this is kind of partly a substitute and keeps you ahead of the game in terms of keeping your premium margin. And then if you could just, sorry, those are kind of the sort of long term piece questions. In terms of numbers, could you just remind us where we are now in sort of separately the chemical and the steel bills so we can get a bit of a sense where things ended up, that would be helpful. Okay. Okay. Thanks for that. Yes, the Alpha Core project is traveling a lot broadly to plan. This, as you point out, will be a non fiber alternative to the so called non combustible category. And we, we, the development, should, should see us at least soft launch of product towards the latter half of this year and then in earnest next year. As we've pointed out before, this is a this is pure This is pure R and D and it'll be a first iteration, of our, of our, development into into this non fiber ACAS category. So we'd expect that to lead to, I would say, other iterations down the track I think we'd expect it to be a low volume production item and a relatively high cost production item, for the near term. Its key advantage over Mineral Fiber, of course, will be its thickness. So we expect the terminal properties of this to be broadly in line with PIR So something close to half the thickness of fiber. And, but at the get go, had a significant premium, just by its very nature because it's a, it's very new material. The quad core that you asked about is versus our existing material, it's about 15% better on thermal. And although our existing PIR in insulated pounds, in particular, we have exceptionally high fire performance. The quad core brings that up to a different level once again, which we talked about while we were on the slide. There is, of course, some internal substitutions. There's no doubt about that, but that's at a premium margin, of course. So we We'll encourage that all to be long. We'd expect about 50% as I said, of the total panel business to be quad core, and by 2025. So just on raw materials, Gregor, I mean, for us, as we said before, in very broad terms, raw material moves are a pass through for us with the lag in both directions. And very directionally, Our steel bill is a little over 1,000,000,000 and our chemicals in one shape or form are approximately 1,000,000. But they're very directional numbers. Next question comes from Arnaud Lehman from Bank of America. Thank you very much and good morning gentlemen. My first question, I guess, a follow-up from Greg Gordon, cool term and Quetcore. It sounds like you want this product be a very large part of your business in the medium term. Could we have a feel for the margin gap with your existing business? I appreciate you don't want to be too specific. But as you increase the penetration of these products and you replace some of your traditional PIR volumes, what is the margin potential driven by this penetration. And my second question is, if you could give us a little bit more granularity on your acquisition pipelines. Should we expect bolt on a acquisitions in your board and panels businesses in Europe? Or are you looking at potentially slightly bigger deals in your, let's say, new products around industrial installations or waterproofing? Okay, Arnaud, thanks for that. I think you'll appreciate it. It'd be a little bit sensitive to get too much into pricing or margin premium. The shift to quad core and tool term. But our our our I suppose our primary and first of all is to protect what we have. We already have healthy margins in our board and panel businesses. So that's our primary ambition is to make sure that we're the step or 2 ahead of the market at all times to, to, to, protect that, which you'd have seen the pattern over the last 2 to 3 years of margin expansion in those businesses. And that's largely as a result of the transition to those materials. I hope that answers that. From an acquisition perspective, I'd say, I'd say bolt on and medium size is what our focus is. Of course, every now and then we come across a gargantuan prospect. But so far, we haven't been tempted into into that zone. So everything we're looking at is bolt on to medium size and very absorbable. You mentioned panels and boards of course, that's key to us and further consolidation of those markets, will be a primary focus of our M and A agenda. But also our life and air business, is focusing on a number of opportunities that we'd hope to land this year as well. And we set a short term target of getting that to around $500,000,000 revenue. And what we're looking at right now would at least take us to that in the near term. So They are the three business areas that are going to be getting the primary M and A folks. Thank you very much. Next question is from yassin Tuohri from On Field Investment Research. Yassin, your line is now open. Yes, good morning gentlemen. A couple of questions. First, on your inflation, you kindly commented on the inflation for chemical. Could you give us a bit of color on what you've seen in 2019 for still? And what would you expect for 2020 in terms of still deflation or inflation? And then I think you get you were very helpful in commencing a little bit about the margin prospects for your board business. Could you give us a little bit of color on what do you see for your panel business? And my last question would be on regulation. So the European Commission has announced a green deal in December of last year. How do you think this could impact King's Pan business? And I think in this green deal, there is a substantial focus on improving the existing buildings. What kind of offering do you have and what kind of marketing offering could you develop address the renovation of building in Europe. Okay. Thank you very much for those questions. And I'll just deal with a couple of them first anyway. From a From a steel perspective, we saw steel deflates somewhat last year. And that continued actually into the 4th quarter. The steel industry is, I suppose, attempting to harden their price and potentially get it up in Q2. And we're obviously very mindful of that. But at the same time, with one eye on demand, I think it's it's feasible that steel doesn't actually succeed in inflating in the second quarter because general industrial demand as we talked about earlier is under some pressure. From a regulatory environment perspective, it's improving, but it's not anywhere like you'd expect out of the global climate talks that have happened successively. So it's moving the right direction, but there's nothing we could point towards that's very solid. That's going to significantly, move the dive for Kingstown in the short term. But obviously the general direction of travel is good. From a renovation perspective, we, we, the business is very focused on that. It's really only about a quarter or less of our activity. But our products are totally suited towards that. And if the codes do change, we'd expect them to change most significantly in terms of upping helping the renovation for, opportunities. As we keep saying, if emissions are to be reduced from buildings, have to be reduced from ones that exist, not ones that don't exist yet. So if governments are serious about this, then the renovation agenda will come much more before. And last one was on the margin on the margin for the insulation panel and maybe do you have a view of where you would like to be, medium term as well? Well, just on the panel margin itself, it's We added 40 basis points to it in 2019 to 10.4%. The driver of panel margin will be a function of many things, including geographic mix, product mix, the impact of acquisitions which were made in 2019 and so forth. So it's very difficult to be specific to within ten basis points. I think given the mix of activity that we have, it will be somewhere between 10% 10.5% depending on all of those factors. And more medium term, our medium term is, is high teens returning capital employed. Our pricing will reflect that. But I think our margin profile in panels over the medium term will be will be similar to to current levels, which is in that kind of early, early tens type area. I mean, for us, It's all about achieving 2 things. We do value returns and growth and we're trying to convert, elements of the market away from traditional materials. So that's, you know, volume piece over time is every bit as important as pricing. So from a modeling perspective, you can model similar margins impaused as currently. We have another question from Robert with work from Exane BNP Paribas. Robert, your line is now open. Thank you. I just wanted to start with a follow-up on the M and A theme. So where do you stand on recticell given where the share price is currently, would would you consider this acquisition in the future? And I guess also just as a follow-up, are you prepared to pay above your historical deal multiples to penetrate new verticals as well? Thank you. And just on the recto cell, we haven't revisited that at all. We'd always remain open to it. It's a very fine business, but it's not currently on our agenda at all. And I can answer your second part. We, we're not changing our returns, aspirations up or down. We've a fairly fixed view on that which has served us well in the past and we're going to stick to that. The next question is from Rajesh Sia from HSBC. Rajesh, your line is now open. Thank you. Good morning, guys. I have three questions, if I may. First one is, if I can go back to your order book outlook. We talked about January was physically weak and that improved in the 4 weeks to February. Can you just give us on broad sense of globally how the panel order book look like in January and how it is looking locked now? That one is first. And the second one is, coming to the quarter, there's an improvement, strong volume growth happened 36% for the full year. If I look at first off where they get around 42% and so that implies second half is slightly slow down. So am I reading little bit too much into it? Or is there any specific, like the UK decline had a largest impact? That's why the, growth was kind of slowed down to 30% in the second half. And the third one is on your carbon reduction targets, which you talk about 50% reduction in the supply chain. Does that include somewhere, how the MDI, emits carbon or steel limits carbon or it's just on the other part? A little bit more clarity on that would be helpful. Thank you. Okay. Just to deal with the question around the order book, without wanting to go into many specifics on individual regions. We flagged in our November trading statement that the area that we were seeing pretty acute weakness terms of order book and intake was the UK where we were down mid to high teens in the latter end of last year. And naturally, we're harvesting the far side of that now in terms of sales out the door in the early part of this year. As Jean mentioned earlier, we have seen order intake in the UK improve in recent weeks. And so what all that will mean, we would feel by Q2 is from a volume perspective, our global panels order book will be low single digit volume growth when you take the mix of geographies that we have running at different speeds around the world. And as regards our growth levels in both, in both cool term and quad core, they're very much intact and on track cooled current volumes actually grew by 15% during, during 2019. Quad core, as we've mentioned earlier, the medium term plan is that it'll, it'll comprise 50% of our global installation, insulated panel sales, and grew by 36% in absolute terms in 2019. So And that, that, that agenda is very much on track. And then you asked about the Carbon reduction targets from our suppliers. Yeah, as I pointed out, that's probably the most demanding of our targets because it's not directly in our control. And yes, absolutely, it's our MDI and steel suppliers primarily are the ones that are going to be focused on. Both of those are reasonably consultative. And on the MDI side, it's obviously Petrochem based in the first place. And so, so yes, but they are they are long term projects. But I would just say that those industries realize the requirements, and are are receiving that kind of demand quite positively. But we ought to just be cautious in terms of time scales here. Nothing can change overnight, but there's the industries are receptive, and we'll be putting face initiatives to address their own capital. Thank you. Yes. We have another one from Rajesh Patki from JP Morgan. Rajesh, your line is now open. Yes, good morning, all. You've commented a fair bit on your European operations. If you can provide us some more color on trading in the Americas. So in the U. S, but also in the LatAm markets, how are the acquired businesses performing there? Okay, Rajesh. Thank you for that question. The North American markets for us last year was at an excellent downturn actually. Like everywhere, it was a little bit slow in January, but order intake has notably improved actually in the last couple of weeks. So we'd be, we'd be positive in North America for at least the first half as always towards as far as we can see. In Latin America, we've been growing organically at quite a pace over the last 2 years. In our, in our Kings Money Suez joint venture, particularly in Brazil. We're present, as you know, in Colombia and Mexico as well. Those businesses are somewhat smaller, but the Brazil side of the side of the coin is where most of our focus is going to be in the near term. And as I said, between last year and next year, we'll have built 3 new facilities, toting new facilities. So that gives you some indication of the demand we expect from that. Great. Thank you. Okay. You're all very welcome. And thank you for joining the call and no doubt we'll be speaking to each other over the next few days. Thank you