Are we starting? Okay. Yes. Good morning, everyone, and a very warm welcome to our analyst conference regarding results 2018 and also the outlook 2019. Very happy you could make it today. I think we're going to spend the next maybe 30 minutes to present you the results and the outlook, and then we have plenty of time for your questions and comments. I will start with some highlights and overview, and then Géraldine will take over with some more details on the performance 2019. I think to start with, we had a very good 2018, especially the accelerating of our performance in the second half of the year is where we want to be. We had a challenging first half, as you know. At the same time, we were kicking off our new strategy in end of the Q1 quarter.
I'm very happy to see now the results we had in the second half, where we are growing more than 5% and the EBITDA is growing more than 6%. We get in the right corridor where we want to be with our company, with our strategy. When you look further, I'm very happy that in 2018, we could also transfer that success into the bottom line. We are double digit on net profit and also double digit on earnings per share. Also one of the key aspects we want to realize in the company, the deleveraging. We made quite a step with bringing the net debt to EBITDA ratio down from 2.4 to 2.2 times. With all this, we are very confident going into 2019. I think we have the company well-positioned.
We have the organization is all implemented, all these changes to the new operating model. Closing of corporate offices has all been done, and we are now in a very good position to benefit from into 2019. I want to share a few slides with you here. Like always, we like to update you on the strategy execution. Most important element of our Strategy 2022 is to shift the gears to growth. This company will be about growth and all four business segments have been growing in 2018, and you will see much more to come in the next years. We have started the bolt-on acquisitions. As you know, we haven't done that in recent years. Now we started with four deals closed in 2018, and already in the past three months only, we closed another four deals. We have also here quite gained some momentum, and you can expect that we will close a few more deals in 2019, maybe bringing the number to a 5 to 10 bolt-on acquisitions for 2019. Also here accelerating.
On a simplification, we have established a new organization. Was not an easy exercise, especially at the corporate centers. We closed four of six corporate sites. From Singapore, Miami, Zurich, also to Paris, the former Lafarge headquarter, was a significant exercise. We reduced the headcount significantly. However, I'm very happy that we could do this in a very timely manner. We have started to do that in the first half of 2018, and we are done with everything.
The teams are in place now, and we can focus on the future and have no more restructuring exercise at the headquarter, which is a very good thing. Related to that, we have the CHF 400 million cost saving program ahead of plan. If you study our profit and loss statement, you'll find already quite a significant contribution in the 2018 results. I think Géraldine will talk about this in more detail later. Good. We have talked about the other things already. I want to share a few more slides with you. This is the overview of the eight bolt-on acquisitions here, all in Europe and the U.S. Very focused about most attractive mature markets here. Very happy to see that we could start this, and we have quite a pipeline of deals to come.
We promise to close the gap to best-in-class performance, both for aggregates and for ready-mix concrete. You see we have been working on this already in 2018. We ensured here a dedicated leadership, including performance management, incentive systems, and also asking our managers to grow the business again. You see the results. We have a very significant increase in margins already in 2018 achieved. You see excellent pricing, more than 3% in aggregates. This compared in cement, we were a bit over 1% price increase. In aggregates here, we were much stronger. This will be one of our most attractive business segments in the future, and you can expect that this is only the first step in catching up to best-in-class performance here in aggregates. You see a similar picture in ready-mix concrete. Also here you see we have even improved the EBITDA more than 50% in 2018.
We are coming now slowly to much better performance levels. Also here, this has been the start of our initiatives to close the gap to best-in-class performance. You will also see the next two to three years here that we will significantly improve the business. On health and safety, very important for a strong company to be best in class in health and safety. We have a very strong program. You see the lost time injury rate here, where we improved in 2018. We even had the biggest improvements. We made a couple changes in the organization to be more effective and very happy to report also that we are here on the right track to make our business safer for all people, our employees, our contractors, and our suppliers and customers. On the performance highlights, you see these are the five targets.
What we promised in Strategy 2022, from sales growth to margins, cash conversion, and return on invested capital. We are moving in the right direction. From the growth, I'm happy we are even slightly above the corridor target here. We have a bit over 5% growth in 2018. I'm happy that we could shift the gears to growth here. On the EBITDA, we had a tough first half of the year. We couldn't fully achieve our strategy target of at least 5% EBITDA growth. As you know, in the second half, we were more than 6%, and we're very confident that you will see here strong results going forward. Cash conversion was a bit held back this past year. We had some restructuring. We had a few one-off costs, which we shouldn't see in the coming years.
Also we had quite some raw material stocking, which was favorable for us to do. We weren't improving as much as we wanted to, but also here we go in the right direction, and you will see that we're going to move to the 40% cash conversion in the years to come. Return on invested capital, also here, a significant improvement from 5.8%-6.5%. You will see that we also step up here towards our target above 8% return on invested capital. With this overview, I think I hand over to Géraldine, who gives us more details, and then I come back and talk about 2019.
Thank you, Jan. Good morning, everyone. I'd like to take you through our earnings presentation for the quarter and the full year. In 2018, the group has recorded a solid operating performance, which translates into the strong metrics that are presented here. On net sales, we're up 5.1% on a like-for-like basis, driven by both volumes and prices. It really reflects the ability of the group to capture the natural growth potential of all the markets on which we operate. Our recurring EBITDA was up 3.6% on a like-for-like basis, and this has been achieved thanks to an excellent Q4 and an excellent H2, where we have reached two of our objectives. First, to get a recurring EBITDA growth above 5%, which is the case with a Q4 at 6.5% growth on a like-for-like basis, and an H2 at 7.3% on a like-for-like basis.
Second objective was to get an overproportionate growth of our recurring EBITDA over sales, which is also the case. For sake of comparability and simplicity, we are presenting our earnings per share before impairment and divestment. It amounted to CHF 2.63 per share for 2018, up 11.9% compared to 2017. A double-digit growth, also overproportionate to our recurring EBITDA growth and our net sales growth. The free cash flow amounted to CHF 1,703 million, slightly up 1% compared to 2017, which translates into a cash conversion defined as our free cash flow out of our recurring EBITDA at 28%, stable compared to last year. This slide shows the progression of our quarterly performance, and you can see here the benefits of the new Strategy 2022, quarter after quarter.
Q1, the trend was fairly positive with net sales growth, but you remember that we suffered from headwinds, notably the bad weather in the U.S. and in Europe. In Q2, the recurring EBITDA growth was back to growth. In Q3, we were reaching overproportionate growth. In Q4, we confirmed the trend. This improvement has been achieved thanks to the ability of all teams to capture the market growth while improving the margins. Yes, the organization, the simplification of the organization has helped. Also, the cost-saving program. All this has helped to support operational efficiency. New dynamics have been implemented in ready-mix and in aggregates, as Jan explained. All of this contributed to improve our profitability. If we look at the global footprint of the group, this slide shows you the volumes growth by business segment and by region.
In cement, you can see that all the regions contributed actually to the growth. In cement, our average growth is 4.4% on a like-for-like basis. This has been driven by the very strong performance of Europe at 5.2% like-for-like growth in terms of volumes, that was supported by the good performance of Eastern Europe countries. Also our top Western markets, Germany, Spain, France, did very well in Q4 in terms of volumes. Middle East, Africa was more challenging, and we know the difficulties in some countries like Iraq and like Algeria, and we commented that already during 2018. Good news is the trend of H2 and Q4 is above the average of the year, and that we are seeing very good trends from Nigeria. As a result, the volumes were stable in Middle East, Africa.
In Asia, PAC, we recorded a strong volume growth at 5% that was supported by the demand in India and the recovery of Southeast Asia, notably the Philippines. Latin America had a more contrasted performance with a slowdown in Mexico the second half of the year, but a very good volume trend coming from Brazil, leading to 3.5% like-for-like growth in all cement volumes in LATAM. North America was up 3%. As far as our aggregates business segment is concerned, we grew 1.2% like-for-like in volumes. I remind you that 84% of the aggregates volumes are coming from North America and Europe, where the growth was up 2%. Our ready-mix concrete business segment grew 0.6% on a like-for-like basis, driven by a strong growth in Europe, above five. Let's now go to our net sales bridge. The total sales amounted to CHF 27.5 billion for 2018, up 1.6%.
This results from a like-for-like growth of 5.1% that has been slightly offset by a negative scope effect of -1% and a larger conversion effect of -2.4%. This is mainly coming from the Argentinian peso, the Indian rupee, and the Nigerian naira, which have all three depreciated against the CHF in 2018. This 5.1% like-for-like growth is coming from, again, volumes and prices. All the business segments have contributed to this growth, and almost all the regions, apart from Middle East, Africa, we're going to comment in a few minutes. Our recurring EBITDA amounted to CHF 6,016 million, up 0.4%, and it results from a like-for-like growth at 3.6% that was offset by a negative FX impact that we just already saw on sales. Yes, the major contribution to our EBITDA growth is stemming from volumes.
You all know that in 2018 we faced a huge inflation. H2, we have reached an over proportionate growth. We had a Q3 at 8.1% and a Q4 at 6.5% recurring EBITDA growth, which translates the good market trends as well as our efforts in terms of cost savings. This is the results by segment. Our net sales in the business segment cement were up 6% on a like-for-like basis with volumes up 4.4%. The EBITDA of the cement grew a bit slower than the sales due to the price over cost effect we just mentioned. The aggregates net sales were up 4.5% with volumes up 1.2%, while our ready-mix concrete business segment was up 3.8% in net sales with volumes up 0.6%. These two business segments improved greatly their profitability, as Jan commented earlier.
Solutions and products had a like-for-like sales growth of 2.7%. The recurring EBITDA of this business segment was affected by the business segment in the U.K., the asphalt, that was hit by high bitumen prices. Now I turn on to the performance by region. It's a fairly contrasted performance, where you have North America and Europe that are very good solid performers. Latin America, that in some countries have suffered from the economical and political environment. Middle East, Africa, fairly challenging. Asia, PAC, an excellent performance. Let me now go into the detail of each region.
In North America region, we capitalized on strong market fundamentals. We were, as I said, negatively impacted by harsh weather in Q1 and an early winter in Q4. Our growth strategy, coupled with strong price management and rigorous cost control, laid the basis for these good 2018 results compared to prior year, this despite the challenging weather. The growth strategy was further supported by two bolt-ons acquisition, Tarrant Concrete in Texas and Metro Mix in Colorado. Overall, recurring EBITDA is up 2.7% on a like-for-like basis for North America. Let me now turn to Latin America. We had a strong H1 in 2018, where cement and ready-mix concrete segments delivered a double-digit growth in terms of net sales and volumes. The strong performance was boosted by large infrastructure projects in Mexico, a solid demand in Argentina, and economic acceleration in Brazil.
In the second half of the year, we incurred a decline in volumes due to the past elections in Mexico. Argentina's economy deteriorated further. We saw a slowdown in Ecuador and Central America. The trend in Brazil was continuing to be positive. Net sales for the region grew by 9.4% on a like-for-like basis, reflecting the price increases to compensate for high cost inflation. The recurring EBITDA in 2018 is slightly below prior year. Let's move on to Europe. Europe in 2018 was a strong year for the region, which benefited from solid market trends. Increased public infrastructure spending in Eastern and Central Europe, the big projects in the U.K. with High Speed 2, in France with Grand Paris, in Russia with Great Moscow.
All that together with a rebound of the construction and the residential business, paved the way for this solid revenue growth in most countries. The net sales were up 5% like-for-like, with volumes improvement in all segments: cement, ready-mix, aggregates. The region experienced a good traction from prices, notably in key markets such as Germany, Spain, Poland, and Russia. Recurring EBITDA is up like-for-like 5%, a remarkable progression in this cost inflationary environment. Let's turn to Middle East, Africa. 2018 was a difficult year for Middle East, Africa. Market conditions remain challenging, driven by a competitive profile, shift in supply and demand, sluggish economies in the region, and the rise in energy and distribution cost. Our net sales were down by 4.3% like-for-like in 2018. Recurring EBITDA declined by 28.2% like-for-like as compared to 2017. In Algeria, the market conditions remained challenging in the year.
The cement demand showed signs of stabilization toward the end of the year. Also in anticipation of the presidential elections in 2019. Over the year, the competitive pressure coming from a weaker demand impacted the prices. We started an active turnaround, and we are full speed on developing all our export strategies out of Algeria. Egypt was a country where we had a very good H1 and a slowdown in H2 due to the new capacity coming in. In Nigeria, as I said, we saw positive cement demand evolution overall. Better performance also to be noted in South Africa and some East Africa countries. If I move on to Asia Pac, Asia Pac delivered a strong set of results for 2018. Net sales were up 8.3% like-for-like, and our recurring EBITDA recorded a significant growth at 22.5% like-for-like.
China was a key driver of this higher profitability, supported by the price momentum backed by the supply side reforms decided by the Chinese government. India recorded a significant sales growth, and that's compared to last year that was driven by increased volume and very high demand. The demand, notably in affordable and rural housing, as well as infrastructure projects, supported our volume growth for both companies, ACC and Ambuja. Cement prices were above previous year. Effectively yet not sufficient enough to offset the cost inflation in India. Australia benefited from dynamic market conditions, high infrastructure spending, and from a participation to all the major infrastructure projects. Situation in Malaysia remains challenging, while Philippines are improving. Let's now turn on to SG&A cost saving program. One year ago, we announced a cost saving program of CHF 400 million.
The first objective was to get a simplified and country-focused organization. Therefore, most of the savings that you see here are coming from our corporate structures. Effective 2018, we have delivered close to CHF 200 million of savings net of inflation. The plans have been going all year long. We have downsized and restructured the headquarters. We have looked at all the countries and their local structures with a view to get the organizations locally flatter and leaner, eliminating the redundant positions. This will lead to deliver the CHF 400 million at a constant 2017 exchange rate on a recurring basis. All the actions will have been implemented by the end of Q1 2019, delivering the CHF 400 million savings. Our cost base will move from CHF 2.7 billion to CHF 2.3 billion on a recurring basis.
CHF 300 million will be visible in 2019, while the full effect will be visible in 2020. If we now turn onto our P&L under IFRS principle, the P&Ls are not necessarily comparable from one year to another due to the impairments or divestment that sometimes can be significant. This is why we chose to present to you the P&L before impairment and divestment. We've already commented the EBITDA increase of 0.4%, severely impacted by the conversion effect. I'm going to go to the lines below. You see here a decrease of our depreciation and amortization by CHF 65 million. This is coming from a lower fixed assets base and strongly monitored CapEx. You can see that we have increased the restructuring, litigation and other non-recurring costs.
I would remind you that in 2017, there were large reversals in the number. In 2018, actually, most of the amount is the restructuring cost linked to the cost-saving program that we contained to CHF 300 million. Our net financial expenses reduced by CHF 103 million, lower cost of the debt by 0.3%, and also thanks to all the refinancing operation that we have done in 2018. Last but not least, our effective tax rate. The effective tax rate amount to 27.7%. That is down by three points compared to last year, mainly coming from the reduced corporate tax rate of the U.S. All in all, the net income group share, we generated CHF 152 million, up 10.8%, a double-digit growth over proportional to our sales and EBITDA growth. If I now move on to the free cash flow.
Our free cash flow amounts to CHF 1,703 million. It is slightly up compared to last year, and it translates into a cash conversion of 28.3%. It represent 28.3% of our recurring EBITDA. I think it's self-explanatory, but I would insist on the income tax rate, which is a cash tax savings consistently with the ETR decrease I just commented in the P&L. This is our net financial debt. The net financial debt has decreased from CHF 14.3 billion to CHF 13.5 billion. Our leverage as well has reduced by 0.2 times. Basically, you have the cash flow from operation which generated CHF 3 billion, less the CapEx that we contained net at CHF 1.3 billion, gives you the free cash flow of CHF 1.7 billion. We have allocated close to CHF 200 million to our bolt-on acquisitions in order to fuel future growth.
We have paid CHF 1.2 billion of dividends to our shareholders. We have paid also CHF 156 million to the shareholders of our subsidiaries. You can see that we've saved CHF 300 million, which comes mainly from the translation effect on our debt held by foreign currencies, and also by the hybrid bond that we have done in Q4 last year, which under IFRS accounting principle is treated as equity. Our Holcim Indonesia transaction has been reclassified as held for sale. You can see the impact here. It relates to the local debt of Holcim Indonesia, and this had to be done according to IFRS principle. We are happy to report a deleverage of 0.2 times. We will also gain another 0.1 time in 2019 following the closing of the transactions of Holcim Indonesia.
Of course, we will continue to have a strict discipline on our portfolio and our investments in order to reach our target as announced of two times or lower by the end of 2019. We use the ROIC or the return on invested capital to measure our capital efficiency. We believe that the long-term value creation depends on our ability to get strong returns with limited invested capital. We are happy to present this progression since 2016. We think that our disciplines put us well on track to reach the 8% for 2022. We propose a dividend of CHF 2 per share. For the first time, we also propose a scrip dividend, meaning that all shareholders will have the opportunity to elect either for cash or for shares issued at a discount.
We think this is a great opportunity for our shareholders to choose to accompany us and to benefit from the results of our Strategy 2022.
Thank you, Géraldine. We come to the outlook 2019. We are looking with quite some confidence into this year. We expect solid markets on the one hand, on the other hand, our strategy, we are in full execution speed, and our organization is fully implemented. We expect a very positive environment for us in 2019. When we look at the markets, we listed here the five trends in the regions. We believe North America, what we see at the moment, we have good order books, good project pipeline. We expect this to be a good market for us in 2019. Latin America has softened throughout 2018. However, we see now stabilizing volumes in Latin America.
For Europe, we had good volumes in 2018. We see also here a further very good market in Europe, with the only exception being England, where we might have a slightly softer demand. Also here, we have quite good order books for England. The Middle East, Africa, that was our big challenge in 2018, where we took a big hit on the profitability. We think we have bottomed out here in this region. We will see here stabilizing market conditions and not another downturn in our results. Asia Pacific, we see a continuation of the growth trend from India to Southeast Asia, good market conditions in China and also in the Pacific. For ourselves, we feel very good about the strategy. It has started to work from the growth initiatives to the cost initiatives. Organization is fully in place.
We have completed the restructuring. We think we are in a very good position this year to deliver our promises here, 3%-5% growth and EBITDA growth of at least 5%. Very important, we will continue with the deleveraging. We want to be at two times or below by the end of this year. We have a big improvement program for the cash conversion here in 2019. Maybe as a stopper here for potential cash out, we believe our CapEx investments, plus our bolt-on acquisitions, will stay on a moderate magnitude of below CHF 2 billion. I think with this, we gave a good overview on the performance, especially on the accelerating trends and performance, how organization strategy is fully established and our confidence for 2019. I think I'm very happy to start the Q&A now.
Yes. Good morning. I have one question regarding the cement division in the past and in the outlook. Let's have a look on slide 17 and also on the media release on page four. If we compare the cement sales +6% in the cement volume 4.4, the price hike seems to be lower than for aggregates and ready-mix. What does it mean? Did we have some difficult countries in 2018? What is the outlook in 2019 given the big announcement made by the main producer in Europe? I think to Germany, to France, to Benelux and to Spain. In Germany, you announced almost +€10 per metric ton. Will this price announcement stick or not? Many thanks.
Oh, no, I appreciate your question. This is, I think, one of the key topics which keeps us busy, I think, every week of the year. I think you observed that well. We had a price increase in cement, which was above 1% for 2018. If you look at the margins, it was not enough to counterbalance the steep cost inflation, which we had of over CHF 300 million coming from energy alone. Here we had some time delay in recovering. The good news is, we were able to do that towards the end of the year. When I look at the Q4 results, we were able to mitigate the cost inflation also in cement.
For 2019, I think we are rather optimistic with the current lower energy price level and our activities, that we will have a good 2019 for the margins also in cement. Thank you for paying so much attention to our price increases. I'm happy to hear that we are quite active and, this is key in our industry to be a bit aggressive sometimes on the pricing.
Also in the U.S., price rise?
The prices will increase in the U.S. this year.
Could we have the order of magnitude or is that too difficult?
Sorry.
Could we have the order of magnitude of the price hike in U.S. or is that too difficult?
Let's say we're going to have a positive margin situation in the U.S. this year. We were not fully happy last year. We had quite some cost inflation in the U.S., not only energy, also logistic was quite high. I'm sure you followed that, our price increases were not as effective as we wanted them to be. Now we have also made quite some significant announcements, we are very confident that we're going to have a good 2019 in the U.S. You made an interesting observation with aggregates and ready-mix. I would turn this a bit more positive. With our new strategy to have these segments run by separate leaders with full profit and loss accountability, we made much bigger sales price increases in aggregates and in ready-mix concrete.
If you look on our charts, in aggregates alone, we have over 3% in pricing, that pricing is dominantly mature markets with strong currencies. A very good situation, I am very happy to see that.
Good morning. {inaudible} Just a few questions on my end. The first one in Middle East Africa. Could you maybe comment on what you expect in 2019, if you think this is kind of the bottoming out or if it could get worse considering what is happening currently in Algeria, for example? As a follow-up to that, are there any reasons why the issue that you are facing in the region, which seem to be more structural, would not also be repeating itself in Latin America or Asia? Lastly, maybe on India, where we have seen big reports of price increases, cement price increases sequentially. What is your view in terms of the margin expectation for 2019 in the country? Thank you very much.
Okay. Thank you. Let me start with India. I think India, we had a situation where we had also very big cost inflation in the last two years, actually, the sales pricing did not fully satisfy us. I think you will see a different situation in 2019. I think we will have a good pricing in cement and a catch-up of the margin there. Middle East Africa, I think we have a bottom out already. We took an EBITDA dip of 28% in 2018, that was really, I would say one of the worst trends I think we had to face in many years. However, I think we took the right measures.
It is partly in some markets, it might be structural, in other markets it is also we changed the focus of the management and also we changed a few people in the team to address the problems. I think when you look at Latin America, it is a different markets. They are much more mature compared to Africa or Middle East markets, where you have quite a well-protected market positions and factory positions. I am not so worried about Latin America. You can just go ahead and provide the microphone wherever whoever looks sympathetic and charming.
Well, I'm glad that fell on me. Phil Roseberg from Bernstein. Just a couple of questions, please. One for Géraldine. The cash conversion progression was a little bit slow compared to the overall target. I guess what I would like to understand is, will that speed up and do you have a sort of an objective for 2019 where that could end up? I've got, of course, a question for Jan, please. On the divestment program, just would like to know, there's an awful lot of sort of gossip out there about selling off the Middle East complete. Few words.
Shall I take that question? I'm older than Géraldine. I have a more hard time to memorize. On the divestment program, I think what you have seen from us in 2018, we divested only one country. I think what is key, and I explained that to you before, we have 54 countries with cement assets and we made, of course, a full analysis, but not only what country we believe in or what is maybe less attractive, it's also about the valuation. We always said we're going to be very value-disciplined, whatever we do with investments, with divestments, and I think that's a promise we will keep. We selected one asset last year, that was Indonesia, and I think we sold for about double the valuation of our own group, right? That's the only way how we can significantly de-leverage the group.
I think that was quite well done, and we just about closed this transaction a month ago. The next steps will not be, we're not going to put 10 other markets for sale. We will, again, make a very value-disciplined approach. We're going to select one, two, maybe three markets, and only if we achieve the same momentum as what Indonesia gave us, we will proceed. Most likely you will see the next few months already, maybe one more action, but it's not going to be like a yacht sale or something. It will be very disciplined and selected.
Okay.
On cash conversion in 2022, I do not wish to guide for any cash conversion for 2019. However, be assured that we're working full speed and continuing to reduce all financing expenses. We're working full speed in improving our working capital and so on. That's a constant focus of the teams.
Just a quick follow-up. Is the scrip dividend option anything to do with that?
No
pace of cash conversion?
No. The scrip dividend is just adding flexibility and giving an opportunity for our shareholders to choose. Yes, it might give some financial flexibility so that we can accelerate and shift gears to growth even quicker.
Thank you.
Lars Kjellberg, Credit Suisse. On the concrete actions you've taken to improve the margins in aggregates and ready-mix, you mentioned pricing being a component. That's one thing, but it's not structurally changing the business. What concrete actions are you taking going forward to really close the gap to your competitors? If you can outline a plan, if you like, how to do that.
Yeah.
One question, really, on disposals. You had a CHF 2 billion target, which you're almost at. You just alluded to, you may do something more in the near term. You put a floor or ceiling, I should say, on the CapEx plus bolt-ons at CHF 2 billion. You potentially would release a lot more capital. How should we think about the use of proceeds if you release more?
I mean, think the proceeds is simple. We want to de-leverage, so we are now at 2.2 times net debt to EBITDA, and we want to be at 2 times or below. We want to strengthen the balance sheet to be a strong, stable company. On the aggregate business, I think we have probably the best or one of the best aggregate business globally. There is no structural reason for us to have such low margins. 2017 EBITDA margin was, I think, around 19% for aggregates. If I look at some of the competitors, the margin is, I don't know, 25% or 30%. I see no reason why our margin should be 19%. We took now the first step. We went already to 21% in one shot, and you will see similar steps. It's a bit a change in focus. We empower the people.
In the past, these people have to be a bit sidelined. The cement was the main topic in the company, and the aggregate people were a supportive actor or actress or something. We changed that totally, and we said these people are separate, and they don't report into cement. They report into country management. They report to group management. They are separate. We have huge gaps to close in commercial, which pricing being one of the biggest KPIs. Very confident. I visited many of our aggregate sites. We have amazing assets, amazing reserves. There's no reason why we shouldn't further catch up with this performance gap.
If I may just may. Clearly, it's still a competitive market, pricing cannot be the ultimate tool to shift. Is that a misperception on my side?
Depends always on the local market, the commercial skill, if you have an aggregate quarry operation, you have to be a very commercially focused person with customers, with pricing, also with product range. You'll get different products out of the quarry and all of this. It's really much a commercial role to have this, and we saw that we have a big gap to close, and I'm happy to see that already in the first year of the Program, we see such a positive trend. You will see that for the years to come.
Okay. Thank you.
Bernd Pomrehn from Vontobel. One question for Jan, two for Géraldine, please. You achieve a great improvement in aggregates and ready-mix, mainly driven by price increases and efficiency gains. What are you doing to accelerate the volume growth? What are you doing to gain market share in aggregates and ready-mix? Are you shifting some CapEx also into ready-mix and aggregates? Then for Géraldine, what are your ambitions to bring down the average cost of debt this year and also the tax rate? Obviously, these are also drivers for improving the cash conversion rate. Thank you.
Yeah. Thank you for the questions. I think we have in aggregates and ready-mix, we have quite a nice list of fast payback investments, which we are now just starting to do. Both businesses, once you have the quarry, the other one by itself is not very capital intense. We have some very nice opportunities to grow the business also with some organic investments.
On the financing expenses, we are going to reduce the financing expenses. That's right. I am expecting to have, in value, some reduction, close to CHF 100, I would say. In tax, it's a fantastic job to go from 30.5% ETR to 27.7% on a sustainable basis. This is the answer.
Okay. Thank you, Géraldine.
Thank you.
Hello?
Yes. Thank you. Remo Rosenau, Helvetische Bank. On the EBITDA bridge, you showed this CHF 59 million negative impact from the price cost ratio. Looking at the timing of your price increases and the fact that you were able to mitigate these cost increases in Q4 or even overcompensate, thinking forward one year, if we are here in a year and see the same bridge, we should see a very positive number there, right?
I'm ready for it.
Yeah.
As I said before, we're quite confident for 2019. I think we did a lot of the right initiatives, and one of them is the pricing and making sure the right people are responsible for the business. At the moment, I think we have pressed or pushed the right buttons. However, you depend, of course, what are the energy costs doing and so on. At the moment, we believe we are on a very good path.
Okay. Looking forward to that then. On the solutions and products, which was the most disappointing division, you blamed it to the U.K. bitumen, U.K., asphalt, I think.
Asphalt.
Bitumen prices, right? Is that the only reason? What would the division have done taking out that effect?
Remo, when you look a bit, this division at the moment is pretty much based on four countries, Australia, Canada, U.S., and the U.K. I said before, this is actually a very good situation because you can see it's a significant part. It can play a significant part in a country. However, it's not a global business unit yet. It's basically 95% is focused on these four countries. The explanation was very simply right. We had some SFL. We had about three issues in these four markets, and they just add up to a bad momentum, and it doesn't look good. You will see this is only a temporary thing. Once we make the right moves with an M&A or something in that segment, we will get into a much more stable and stronger trend.
Okay. The plan is to base it on more than four countries in future.
I hope so, yes.
Okay, great. Thank you.
Thank you. Martin Hüsler, Zürcher Kantonalbank. I also have two questions. First of all, I think after the Q3 results, you were a bit more positive for your EBITDA guidance of 3%-5%. Now you are a bit below the average of those, of this range. What was the biggest surprise for you in the fourth quarter that you couldn't see in advance?
Okay. Okay, I think we were a bit disappointed by Middle East Africa, right, in Q4. Maybe.
Well, first of all, the quarter four was a good quarter. We had 5% growth and more than 6% EBITDA growth.
Yeah.
We were missing, what you're saying, we end up at 3.7 instead of 4.0. That's what you mean. It's a marginal call. We have a few, we thought that in Middle East Africa, maybe we had reached the bottom already in Q3. That was a bit maybe our forecast at that time. That was really the one trigger why it wasn't four, it was 3.7 plus in EBITDA. That was not a fundamental thing.
No.
You see from our presentation, we are happy with the pricing. We are happy with the markets. It was, I think, Middle East Africa, we thought Q3 has seen the worst, and then Q4 was also quite bad.
Of course, my question is just about to see or to get a feeling for the visibility that you have. If I remember correctly, you were quite optimistic then, also on the capital market day, that the Africa, Middle East will have to turn around now because the base is pretty low, and it looks like first it gets hard before it gets better.
We had two months. It's like a two-month time difference. Yeah. My conclusion is still the same, but just we had two months extra going down and bottom is reached now.
Thank you. The other question, can you remind me of your expectations for one-offs and restructuring costs for 2019? Maybe looking forward, what's a good run rate of those kind of costs?
You know these costs are composed of the restructuring cost. This you will see a sharp decrease for 2019. The litigation portion, I don't guide on that portion, naturally. I cannot. Yeah.
Good. Thank you.
Lars Credit Suisse. I just want to come back on Middle East and Africa again. Why is it again stabilizing now? There seems to be still some structural issues in the region. If you'd just shed any color on that'd be really helpful.
Okay. Middle East, Africa was not just one country. We had Algeria, many people talked about Algeria, but also we had in other countries and areas, we had difficulties. Some structural, maybe a shift in demand supply ratios. A lot of it also was a bit man-made. We were not as efficient in the operations we should be. We changed the team responsible for Middle East, Africa last year. That's why we are confident that we have seen the bottom, and now for 2019, we are positive.
It's less market and more you, is that what you're saying?
I think it's a mix. I think we're going to have stable markets from the demand side on average, we have quite some performance issues which we have to solve on our side. Yes. Two more.
Thanks. On the holding costs in Q4, they were substantially down to CHF 10 million, versus CHF 90 to CHF 100 in Q1 to Q3. A substantial decrease. Now is this a sustainable basis? The -CHF 10, I can't believe it's so low. Still, as an indication for 2019, what would you guide for? On the volume trend of aggregates and ready-mix, while the EBIT margins developed nicely towards the end of the year, the volumes were getting a bit weaker in Q4. Any explanation there? Perhaps if you have some thoughts on the changes of the airport building in Mexico and the changes of the president. How much did that impact your business, and how do you expect that to go forward? Thanks.
Okay. I start with Mexico. We had a change in Mexico. We were also supplying the airport. I visited last year. It's an impressive project. We don't know what's going to happen. New president is installed now for eight, nine months. Usually maybe in the summer, we can already expect some positive momentum in Mexico. We had some demand decline in Mexico, but not that crucial. We expect that the market will pick up later this year. On the aggregates and ready-mix side, if you remember or recall the last few years, we had declining volumes. Our challenges or our target is, of course, to improve the margins on one hand, which we already made a good step, and then also to go into volume growth. There was a question before that we're going to see some investments.
We do the bolt-on acquisitions now to really make sure we also grow the top line in these two segments. Q4 was nothing special. It's a country mix. It's a weather mix. It's nothing to worry. We had good returns in Q4 in these segments. We go to the holding cost?
Yeah, sure. I've guided already during the presentation that you will see CHF 300 million in 2019 and the full effect in 2020. It's normal that you see this progression of savings in Q4. It's quite reassuring, actually. It's the effect of the closing of the sites in Zurich and Paris. People are leaving, and you have that effect at full speed, effectively in Q4. It's normal you see this progression.
On aggregates and ready-mix, you say volumes follow margins, obviously.
Volumes follow. No, have to follow. Yeah, we're very excited. These two segments are a big part of our future, and we will take more focus on them.
Thanks.
There was one more question here, I think.
Thank you. Octavian. Apologies if this question is already known by everyone, do you have any effect from IFRS 16?
Yes, it is indicated in the annual report, and I would refer to that. You have an impact on our net debt that is expected between CHF 1.4 billion and CHF 1.5 billion, and an impact on our recurring EBITDA between CHF 400 million and CHF 500 million.
On EBIT nothing, basically. Is that correct?
Excuse me?
On the EBIT operating profit.
No.
it-
Less
it becomes.
Yeah.
Good. If we have no more questions, I think we can. One more?
Excuse me, it just popped up now. Your two times leverage then, does it include this-?
No
increase of 1.5?
It's before IFRS 16. It's mentioned.
All right.
each time we mention the leverage. You have a footnote before IFRS 16.
All right, thanks.
It should not impact materially. Maybe 0.1 times or it's Yeah.
One more there.
Just, how was the start to the year? The weather was fine in Europe, but it was pretty cold in the U.S. If you compare it to last year, this time around.
I think I don't want to comment. I think the Q1 result is due for beginning of May or something. As you see, we have an optimistic and confident guidance for 2019. As of today, I have no reason to change our guidance. Good. If there's no more question, I invite you, we can have a bit of talk one-to-one or in groups. I also have my colleagues from the executive management with me, the regional managers of the five regions. Please feel free also to ask questions if you have on certain regions, areas or countries. Thank you very much for joining and wish you a good day.
Thank you.