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Edited Transcript of AALB.AS earnings conference call or presentation 26-Feb-19 1:00pm GMT

Full Year 2018 Aalberts Industries NV Earnings Presentation

Langbroek Apr 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Aalberts NV earnings conference call or presentation Tuesday, February 26, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Arno R. Monincx

Aalberts Industries N.V. - CFO & Member of Management Board

* John Eijgendaal

Aalberts Industries N.V. - Former CFO & Member of Management Board

* Oliver N. Jäger

Aalberts Industries N.V. - Executive Director & Member of Management Board

* Wim A. Pelsma

Aalberts Industries N.V. - CEO & Member of the Management Board

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Conference Call Participants

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* Henk Veerman

Kempen & Co. N.V., Research Division - Research Analyst

* Luuk Van Beek

Banque Degroof Petercam S.A., Research Division - Analyst

* Martijn P. den Drijver

NIBC Bank N.V. (ESN), Research Division - Head of Research

* Peter Olofsen

Kepler Cheuvreux, Research Division - Analyst

* Philip Ngotho

ABN AMRO Bank N.V., Research Division - Analyst

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Presentation

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [1]

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Welcome, people in the room, welcome, people joining our webcast. Our agenda for this afternoon is that we'll go through quickly through our Aalberts company passport strategy and objectives, we will review the business with our colleagues, we talk a little about the business development and also the acquisitions and divestments and the optimizations we made in the business, financial review, outlook and hopefully a lot of questions and answers from our side.

Aalberts. The essential thing of Aalberts is that we focus on niche technologies where our culture is very important. Good is never good enough, that is an essential thing of our company. Greatness is made of shared knowledge. I cannot stress how important this topic is because our brilliant people talk everyday with each other, get ideas and therefore also new innovations. These new innovations are very important for our future business. This is the real strength we have. So essentially these are the 3 things where we create value with.

How do we create shareholder value? Our way of creation: mission-critical technologies. There we always say: where there's less traffic of competitors. That's a continuous search for niches, for uniqueness, where we try to get a leading niche position. And I can't tell you enough how important this search is every day.

The reason why we did a very good year also in automotive in '18 is because we are in niches, in businesses where we have less traffic, where we are unique, where we have high entry barriers, therefore, high pricing power, higher added-value margins and sustainable profitable growth.

Our mentality: good is never good enough. It stops not by doing your regular work; it goes beyond the line of duty, as we say. So we take the extra step in operational excellence, in improving your EBITA margins, in cash conversion. Very important isn't -- a very important topic within Aalberts. And then the cash you generate, you allocate on the disciplined way in your strategic business. What is not strategic, we optimize or we divest, and we keep on doing that because we want to allocate the capital to the highest margin business. Also, in '18, we did a lot of work on that.

Greatness is made of shared knowledge, technology exchange, innovation speed, fast learning of colleagues, open culture, adaption to market development continuously. I can't tell how important it is and how quick we accelerate there as a total group. The name Aalberts is really helping in creating fast learning and fast adaption and new innovations.

What is the effect of creating shareholder value? Our track record: over 40 years of sustainable profitable growth. Who can say that? So why would it not happen the coming years? Even when the world is really uncertain, we believe that the strength we have in our business, in our niche technologies will also help us in coming years to drive further shareholder value.

On the next slide, you see our average development in share price, earnings per share, dividend per share. Dividend, EUR 0.75 per share, an increase of 15% in 2018. We call it a relentless pursuit of excellence continuously, that will never stop. What is the key? The key strength is our people, also that the people and the culture, the Aalberts way: winning with people. We introduced that 3 to 4 years ago and the people feel more and more safe in our total group. That means, the moment you feel safe, you exchange your knowledge. The moment you exchange your knowledge, you learn. And when you learn, you adapt and you innovate.

Greatness is made of shared knowledge. It's unique advantage because we are very lean structured: head of 25 people, 16,500 people everywhere in the world learning fast with innovations. Our innovation road map, which we started 3, 4 years ago, are accelerating and becoming bigger and bigger. So we will introduce more products, more technologies the coming years than we ever did based on this.

Global leading niche technology positions in Installation Technology, Material Technology, Climate Technology, Industrial Technology. Very important this, as we are there where we really can make the difference. So when you say, yes, you are an automotive or in semicon, yes, that's a big thing, "I'm in semicon." But where are you in semicon? Yes, we are in the frontend. We are in the highest technologies, we develop with big OEMs, and there we are special. We make the frames of certain (inaudible) machinery where there are only 1 or 2 players in the world. So that is the difference. That is uniqueness, what we call where technology matters. Because everywhere where you are unique, you can ask the high margins. And we do that in every niche technology position.

Our way of sustainable entrepreneurship, we do that already since our inception in 1975. Always we've been where technology matters, but also we embrace these sustainable development goals, as you see here. We really take our responsibility, but we also have an impact. Especially, we are impacting eco-friendly buildings, sustainable transportation, lifetime extension of materials, clean water and sanitation, and producing and consuming responsibly.

For example, we make almost -- or sell almost more than 300 million meters of pipe. You can imagine, when you transport water or heating through our pipes that we have a big impact also for the environment, that we should talk more about it because Aalberts does a lot. So that's why this topic for us is very important and it's also our way of sustainable entrepreneurship.

Our strategy and objectives they are not new. We presented them in December 2017 on our Capital Markets Day. So it's now roughly 15 months later, 15 months. We announced the strategy for 5 years. So 15 months later. Don't forget that when you look to the numbers later on.

Non-financial objectives. There it all starts with. Worldwide leading niche technology positions. Continuously improving your portfolio. When it's not the right position try to improve with an acquisition, with a divestment, with new products, innovation road map, organic growth, continuously improving. It is a never-ending story in the things we do. So we have an endless potential from that point of view to grow.

Creating sustainable profitable growth, sustainable profitable growth. That means long term, not short term, long term profitable. It's about profits, not about growth, it's about profits. What we always say: we need revenue to make profits. But it's about making profits because profits generate cash and cash we can invest with.

High added-value margins says something about your position, about what you add to the -- for the customer, your customer added-value.

Converting strong operational execution into free cash flow. Continuously we are driving that. We are not there where we want to be. And we made some good steps I think in '18, especially on the debtor side, but especially on inventory side we will make bigger progress the coming year. Because you see, more and more our structure is coming together. And first, you need to have your structures well and then you can improve your operational execution even future and generating more cash.

Financially, this means an average organic growth for the coming years more than 3%, EBITA margin more than 14%, return on capital employed more than 18%, free cash flow ratio conversion more than 70%, driven by entrepreneurship. And that is also I think very important how we create value. It's driven also by our structure.

So when you look to the next slide: how are we organized? This is how we are organized, a lean and effective structure. Aalberts' leaderships team of 7 people in the executive team and we have business teams around it. These business teams are developing their strategic business plan for the long term, including innovation road maps long term, long term. Started already years ago, but we accelerated that 3 years ago with very dedicated plans.

So when you know how our business works, then you know that innovations needs time. So when you start with innovations 2, 3 years ago, you also know that in year 3, 4 and 5 it will come to the market, that will be in '19, '20, '21. For example, hydronic flow control, at the moment we have 15 new products and systems coming in the markets the coming 6 months. We developed them from '15 to 2018. I was with the team 3 weeks ago. It's amazing. Especially, also in the field of sustainability, energy efficiency. A tremendous new flow of innovation, as they call it. But that's only one team.

The uniqueness is the Aalberts networks. The Aalberts networks, that is the dotted line you see in the picture, is where we drive Aalberts (inaudible) sustainability, operational excellence, HR development, governance, digital, pricing excellence, key account management. That means several people of the different business team comes together under the leadership of one executive team member and they drive best practices and fast learning. We're do that now for 3 years. It's really working. Myself, I do operational excellence.

We have now -- for the first time in Aalberts, we have roughly now 8 COOs in all these business team, which we see every 3 to 4 months and we Skype with them every 2 months to drive the projects. That is why our margin goes up, for example, and it will keep on going up because we are not finished. We told you all and also the outside world that in December we were only 50% done with our operational excellence. That's only 15 months ago. So maybe we are now at 55%. So still a lot to gain, even where we make 13.3% EBITA margin.

It stimulates business focus, entrepreneurship -- very important -- fast learning and fast decision making. The entrepreneurs within Aalberts are very important and we should never, never lose that. Innovation is driving the profitable growth. As I said, innovation road maps more than EUR 100 million per year we spend now. It doubled the last 5 to 6 years. More than 400 people. We counted them last year in March; it was roughly 419, roughly 419, exactly 419. But it will now be more. 4% of our total revenue. We had always 3% percent of our total revenue. A pragmatic culture, lean structure keeps us ahead of the game.

Things like manufacturing 2.0, what does it mean? It means that you lay out the factory from 0. So we say to the plant manager, "Make a drawing of your plants when you start from 0 again." Then he says, "Then I will change everything." Then we say, "Why don't you do it now then?" So that drives change and improvements. Master data and leveraging, of course the mega trends.

Do we have to say something about this sheet? Converting strong operational execution into free cash flow, a very important topic in our management, in our teams, generating high added-value margins to invest in innovations and market opportunities. So high margins -- good position, high margins, pricing excellence and then the cash we generate, innovate and allocate to the right businesses, the right acquisitions in the right innovation road maps, in the right sales structures. That is a snowball which will continue. This is our 10-year history within Aalberts.

The next is: what do we do with the cash? This slide we already presented many times. First of all, 30% of our net profit before amortization is our dividend. In 2018, 15% up. Organic growth, between EUR 130 million, EUR 170 million. We will give later some guidance about 2019. Many, many projects we have in our business team. Many things we can drive forward. That also you will see in our guided number for '19.

Acquisitions: bolt-on, sweet spot. When you can do an acquisition and you can strengthen your business team by doing that and also generate new organic growth for the future, that are the nicest acquisitions. Our deployment, our goal is EUR 100 million to EUR 200 million per annum, which we also reached in 2018.

Bigger acquisition, strategic footprint, you have to wait. Till now prices were too high. You never know. But we are ready. We have a strong balance sheet. So when the opportunity is there, we will not wait, we will attack. But we have to get our money back, so we calculate before we do these things. Because a bigger acquisition you can use for a strategic footprint can sometimes also ruin your -- let's say, your efficiency because a bigger acquisition is mostly an island you acquire, is difficult to integrate. The smaller ones you can go faster. So we are careful. Acquiring is easy, but getting the returns that's the most important. By this, we strengthen our worldwide leading niche positions.

Return on incremental capital employed of the last 10 years. 2008-2018, 10 years, 20.2% return on incremental capital employed. And you know that our goal for return on capital employed of the year is even higher than we reached in 2018. It demonstrates the sustainability of our long-term business model which we have.

2018, the highlights. Revenue up 2%, organically 5%. We had an operating profit plus 9% -- I think very well -- EUR 366 million, improved to a margin of 13.3%. Our free cash flow amounted to EUR 312 million despite a much higher CapEx of EUR 134 million, which we spent, and the year before was EUR 119 million. So we spent much more CapEx and we're able to even generate this free cash flow. Our return on capital improved to 16.6%. And we continued -- and I can't stress how important that is -- to invest continuously in organic growth and innovation initiatives. We do that already for years.

Also, in '18, we put a lot of money in additional people and road maps to generate the growth for the future organically. Otherwise, you don't grow 5% in '18 when we would not have done any investment in 2015 or '16. Bolt-on acquisitions we did 4, very nice companies, very nice bolt-ons, EUR 82 million annual revenue. And we optimized our portfolio through divestments and optimization of EUR 97 million. The total sum is: plus 5% organic; earnings per share, plus 16%; continued investments in growth and innovation also in '18, but also in '19.

My colleague, Mr. Jäger, will explain you more about the different business segments.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [2]

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Okay. Wim, thank you very much for taking that over. Also, I would like to welcome you present in the auditorium as well as the ladies and gentlemen joining us on the webcast. After having seen that the overall picture is very positive, I would like to give you some background on our business in specific. So I would like to start with Insulation Technology and our whole products for fluid majors.

So within EUR 1.1 billion turnover, we have achieved EBITA margin of some 12% in 2018. So we are convinced that we have realized a good organic growth even if you see that the minus 1 may give a different impression. But currency effect, strengthening of our portfolio via divestments led to a correction which give us a picture of above.

An EBITA margin of 12%, which is a bit softer compared to the half year numbers. So the main background of that is that we have invested in the strength of our organization. We have increased production for groove and new products, mainly Push-Fit, because we had a high expectation for Q4. So we generated some stock. So we produced more. But principally the market were a bit lower in Q4, mainly due to personnel and material constraints that lead to a reduced demand on the market. And further investments into innovations and some digital engineering activities in around in that picture of the margin you see here on that sheet.

So right now Installation Technology is a fully integrated worldwide organization. And this becomes visible by the rollout of the recently presented company passport, which we did in the beginning of last year. The acceleration of the rollout of worldwide plans for technology, that's technology-wise as well as commercial-wise. And the management and organization for America, APAC and Europe is now fully implemented and functional. Would like to underline that with an example. The presence -- the erection of the distribution centers in North America, that is finished, as well we did some distribution commercial centers in Canada. And this is ongoing also for something comparable into Europe.

Giving a quick view on the multilayer system. Also, they had an excellent year in Europe as well as in North America sales and result-wise. So we are constantly in process to optimize our portfolio and focus our teams on further growth.

So the key takeaway for Installation Technology: it's many investments in the line of a global organization, optimization and efficiency investments. So the focus worked out very well in 2018 and we do have positive expectation for 2019 with all the investments we did in the year of 2018. So one could -- we have a positive impression also of the development of numbers in 2019.

Coming right now to the next technology, Material Technology. So we generated roughly EUR 750 million turnover, with an EBITA margin of 13.3%. One could take 4 headlines to describe the year 2018. We had good organic growth throughout the year. We had good project development for future business. We did an alignment of the surface treatment organization into one organization. And we strengthened our portfolio with bolt-on -- with 3 bolt-on acquisitions in 2018.

So our Aalberts' worldwide presence demonstrated power in the increased investment in our heat treatment business in Europe, especially in the eastern part of Europe. We did an acquisition in specialized manufacturing to achieve a footprint in North America as well as in Mexico. We're widening our surface treatment portfolio via the acquisition of reel-to-reel capabilities, which is a real niche technology, which find its end application, for example, in more electrification of cars, autonomous driving. Also, you have a higher demand on electrical end applications and you need reel-to-reel plating to deliver the products we are producing, for example, in metallist in that market. And we did an acquisition of Roy Metal Finishing and that creates an excellent competent center for corrosion protection systems in the United States.

Investment and development of new projects in the automotive business for the electrification of cars as well as autonomous driving. So we see a lot of project there. We see a very high demand on development capabilities. So we are quite positive in that development for the upcoming year. We do see that in Europe. We see that in Asia. And also with the footprint we have created in North America, also there that is visible.

The energy business, the IGT business, that led to higher value add. So we did investments in that. From an organizational point of view, more engineering. So the aim is that we produce partly completed parts even if the IGT market is pretty low at the moment, so we gain market share and we're robust in our position in that market.

In the aerospace business, where we in process to change technical processes and we are in process to establish robust partnerships with the tier 1 supplier as well as with the OEMs in aerospace.

And last but not least, we invested also a lot of operational excellence projects. You know that that part of the division have quite a lot of sites. And operational excellence is always a key topic to improve the efficiency of the operations. The key takeaway for Material Technology is good performance and many opportunities via our strengthened portfolio.

Everybody talks about automotive industry, which is an important part here. Everybody is a bit hesitating, everybody is a bit negative if you read the press. I could not say that for us in 2018. Sure we had some lower markets because of the testing procedures, but this is a temporary effect. And also if you look at China, where we had a very strong development in that business in new products, electrical vehicles, and if you look at the German OEMs, they made quite a good year in 2018, despite the fact that the Chinese principal market appears a bit lower. But that applies not for the markets we are in.

Coming right now to Climate Technology. With around EUR 550 million turnover, we achieved an EBITA margin of 12%. That is a good organic growth because of new and upgraded product ranges. We invented also digital functions of our products and services. We had challenging markets post summer due to material and manpower scarcities. I would then make a reference to what I said in Installation Technology: we had very good order intake in Q4, which offers good development opportunities for the year 2019.

Also here, innovation is a key topic for the upcoming years and that refers to upgraded product lines, new product lines with new functions, digital business models. First results already achieved in projects in France and the Netherlands. We invest in energy efficiency improvement within buildings via big data analyzes. We said that the sustainability is a topic in what we're doing, and by analyzing that, we could achieve buildings with lower consumption. And also we invested in prefabricated modular build systems, which led at the far end to speed, efficiency and reduced failure rates in the construction of buildings. So if you would like to give that development a headline, we could say quality and time is what matters here.

Also, in a lot of places here operational excellence plays a key role for further success. We integrated 3 locations in Spain, France and the U.K. in 2018. And decisions were taken to invest in a new fabrication and distribution center in the Netherlands. So key takeaway for Climate Technology is new products, it's digital business models, speeding up our innovation as well as engineering.

Coming to Industrial Technology. Good EUR 400 million revenue led to an EBITA margin of 15.7%. And it's well known here in the auditorium that we have in this respect made a wide range of niche technologies, working B2B on high performance level. So this was a more distinguished view.

Starting with fluid control. That was quite challenging in the year 2018 mainly due to lower governmental projects in Eastern Europe and China. So there was a market a bit lower than what we have expected. The acquisition of VAF, the leading sensor and measurement specialist for strengthening the portfolio in ships for lower fuel consumption and to extract steering of the uses of fuel via transportation. And very good product development and tailor-made solutions for regulating fluid in cars such as CNG valve and air-conditioned valves, which is a reference made to our company, VENTREX, in Austria.

Dispense technologies. This was overall a very good year. We consolidated in 2018 the U.S. operations so that we have more focus. And we further aligned the diverse operations to be able for a global offering of our major key accounts, to give you an example, such as Coca-Cola and Heineken, so that we have a global way to deliver that into that market.

Advanced mechatronics. We have invested around 180 engineers to cope with the development speed of our key accounts and to enlarge the value add of our products. We have good growth prospects in the frontend, means the machine built of the semiconductor market. Also here everybody said, "Well, semiconductor is very difficult," in the end of 2018 and the beginning of 2019. But underlying that we are in the frontend and we have a positive view. If you look at the ASML forecast, so they're aiming for around 30 EUV machines in 2019, but having made 18 in the last year. So they are quite bullish regarding their forecast. And we co-engineered and manufactured pre-products, for example, for machine builders for the chip making industry.

Key takeaway. That's a good performance, good order intake and additional investments will facilitate the further growth in that business development.

So I would like now hand over to my colleague Arno Monincx.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [3]

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Thank you, Oliver. And also from my side welcome to everybody here and in the webcast. Business development. Already mentioned several times, acquisitions, divestments optimizations a very important part of our strategy.

Also, this year we strengthened our portfolio with 4 nice acquisitions, all players with a very strong market position in their niche market segments. That means that these companies, all 4, are creating high added-value margins. We remain, as we said, very critical with acquisitions, very disciplined. It should really contribute to our group, to our platform, to our technology, and we should also be able to leverage the Aalberts power financially, but also with key account managements and the footprint, as said.

We continued to strengthen this portfolio. We will remain to do that also this year. But as said, 4 nice acquisitions. PEM, France, reel-to-reel surface treatment technology. Oliver already explained a little bit about that how important it is with electrification of cars. VAF Instruments, a very nice company in the Netherlands, also very niche. They make sensor measurement systems and performance management software engineering. Actually, they -- with their technology, you improve the efficiency of a big container ship.

And just to give you an example how special this technology is, a big container ship normally consumes about $15 million of LNG or petrol per year. Now with this technology, you improve the performance of the ship. So that means you need -- you know exactly when you need the maintenance to clean the bottom of the ship, et cetera, which gives a saving of the performance of 20%. So you can imagine that if you install these tools, which is of course an investment for an owner, that the return of these tools are very, very high.

And the good thing of this company is that we believe and we know already because we brought these business teams together, for instance, with hydraulic flow control, that you can add this technology in other business segments -- because at the end in the performance of a heating system in a building you have exactly the same, you put in energy and you want to have the highest outcome of efficiency, of performance. So let's say with this technology, we can exchange between the business teams to get a higher return of that. That's a good example of how these teams work together.

Now Roy Metal finishing in the U.S., material technology company, corrosion protection. And then the fourth one, Co-Planar in USA and Mexico. All 4 very strong niche companies, really strengthening our technology positions in these areas. And an annual revenue of EUR 82 million.

Second part of these improvements of these positions is of course our divestments and optimizations. We constantly have on our agenda to improve our portfolio. That means that noncore business or low margin business we constantly review that and see if we can stop this or divest it or optimize it, which we did in 2 areas again, Insulation Technology and Material Technology, where we just stopped with these businesses. And at the end, that resulted in a divestment of an annual revenue of EUR 97 million. So that total impact of acquisitions and divestments and optimizations is negative of EUR 15 million full year. John will tell you later about how that impacted 2018.

But the most important in strengthening our technology positions going forward is of course the organic growth. We have a big attention for our organic growth and we do that by, like Wim already explained, these innovation road maps. All our business teams do have these innovation road maps for the long term and we are really now in the phase that we accelerate that.

We will introduce a lot of new products not only this year, but also in the coming years. We even set targets for our teams of innovation rates, so everybody knows really where to go. And what you can also see is that we will even increase again also in 2019 our CapEx budget. We spent about EUR 134 million last year and we will do in '19 between EUR 140 million and EUR 160 million. Because we really believe that this is where the growth -- this will be the best possible growth if we really introduce new products and of course keep on investing in not only new products, but also in efficiency and capacity of our production locations.

Of course acquisitions remain an important topic of our business development, but only when it makes sense. We will be very critical, as always. It should be 100% strategic, but also a 100% cultural fit even if we want to continue with that. That's for us always the crucial fact. Besides that, it should be a very strong market position in their specific niche and it should also be a business and technology which we can really optimize further by leverage our group strength with our global platform, with our financial power, with our key account approach, where we can combine the power in these businesses and really grow the company. Then that acquisition -- and of course last but not least, the price should be right because we also want to make money and to want -- and we want to create a good return on capital employed.

Final part, last part, optimizations. It will be a continuous process that we revalue -- let's say, evaluate our low margin businesses and noncores. So we will continue also there to optimize further.

And I think that brings us to the financial review of John.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [4]

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Okay. Thank you, Arno. I think there are some highlights to present. I saw some of you analyzing our numbers of course this morning, which always has to be done in a very short period of time. So I got some similar questions and maybe also some notes later on which were sent out maybe with some assumptions as well also for '19. So hopefully we can elaborate on those items and make sure you're all fully aligned with the numbers and what's behind the story.

So maybe starting with the revenue bridge. I think very important to understand how we came from the reported 2017 revenue of EUR 2.694 billion. We had acquisitions. In the press release you can see, as Arno already explained, on full year basis EUR 82 million additional revenue, of which we consolidated EUR 37 million in the year, so that was 2018. So that means there's another EUR 45 million additional revenue for 2019 for the full year inclusion of those acquisitions we did in 2018.

You see a number of EUR 44 million because you may remember in 2017 we did the Pneutec acquisition, which was only consolidated for 6 months. So there's an additional EUR 7 million to be added to that. So that explains the EUR 44 million.

If we then go to divestments. Press release you can read the EUR 97 million. Arno mentioned EUR 55 million was included in 2018. And EUR 5 million was, you could say, shift over from 2017, which makes the EUR 60 million.

Currency. Also, that was disclosed in our press release. EUR 39 million on revenue, negative impact, mainly U.S. dollar and Russian ruble. If you remember the half year results, we were even at EUR 46 million negative impact year-on-year. So the dollar strengthen, as you know, in the second half. So that more or less compensated some of that and we ended up with the EUR 39 million. Mainly dollar-related.

So organically, we are left behind with EUR 120 million, which is close to 5% organic growth, which brings us to the reported EUR 2.759 billion. So hopefully that gives you the total picture. That also means that -- so additionally we have EUR 45 million impact in '19 out of the acquisitions, but there's an additional, you could say, EUR 42 million. So the EUR 97 million we explained on the divestment full year and the EUR 55 million in the press release. Another EUR 42 million of divestments and optimizations, which has a negative impact in '19.

So more or less these 2 compensate each other. So there's no additional benefit in '19, just to take it apples and apples in the comparatives. So hopefully that helps you as well in your own expectations for '19. Of course you can pencil in some organic growth if you like. Well, that's of course up to yourself. But at least the starting point should be the full year reported number, as you can see it on this slide.

The next slide is on the income statement. Well, starting with the revenue -- just explained the bridge. Our EBITDA more or less improved by EUR 40 million. So that's a strong performance. But you may also remember -- if you look at the line depreciation, there's a big jump from 2017 to '18. But in 2017 we had a benefit of EUR 7 million, EUR 8 million -- we explained a year ago on the same place here -- which was a benefit on depreciation and therefore the EUR 87 million depreciation in '17 was rather low.

And we also guided that the full year '18 number would be between EUR 95 million and EUR 100 million, but we came out with EUR 96 million. So that's not a bad estimate we made about a year ago. That also means that benefit was totally included in the numbers of Installation Technology, if you may remember, which may also explain some of the segment reporting. We'll go into more detail later on.

While EBITA we already saw EUR 30 million improvement to EUR 366 million. Net interest expense, well, more or less remained, although we had more or less the same net debt year-end '17 at year-end '18. But as you know, during the year -- we're using a lot of working capital during the year, which we reduced at year-end, as we will see later on. Other net finance costs were EUR 3 million lower than in '17. Well, of course that's a more volatile number due to currency impact, which was a bit less in '18 compared to '17.

Income tax, I think another element which was picked up by most of you. Our effective tax rate was only 21.4% compared to the 24.6% a year ago. Main explanation, you may see that in the Netherlands at the end of 2018 there was an announcement by the government that they will reduce the corporate income tax rate in the next 2 years from 25% to 20.5% in 2 steps. That means that all your deferred tax liabilities which are valued at 25% have to be recalculated and taking this new percentages into account. It's just how IFRS wants you to do that. It's not a choice. It's just how you have to do it. And that helped us in this stage to reduce our income tax expense in that sense. And it also avoids of course the cash-out of a similar amount in the next years to come.

You may also remember in 2017 we had the same situation in the U.S., where Mr. Trump signed the new tax law just before Christmas end of '17, where we were also forced to take that impact into account, which helped us also in 2017 to a lower tax rate. But as you can see from the effective tax rate, maybe to a lesser extent there's some other benefits also helping the tax rate.

Guidance for also 2019, I'll also come back to what I said a year ago, 24%, 25% effective tax rate we would see as a normal tax rate, especially now that we see that, well, the Netherlands, U.S., France and U.K. they have also more or less now stabilized on what they plan to do. Hopefully, Germany will follow to reduce from 30% to 25% at some point in time. That would also help our group additionally. But that's not planned yet. So that may come in the future. But that leads us to the total EUR 275 million net profit, an increase of 15%, and EUR 2.49, an increase of 16% on earnings per share.

I think the revenue growth -- now also with decimals. As you know, as financial we also like to take decimals into account, round them up where needed. But in this case, the 4.6% to be explained. 2.4% was really the reported increase if you take the euro-euro comparison to '17. FX impact and the currencies minus 1.4%, still a big impact. And the total of acquisitions and divestments percent though as already shown, minus 0.8%. So that brings the total of the 4.6%, is 2.4%, 1.4%, 0.8%.

I think I remember mentioning already the FX impact on revenue. I think also here to realize, there was a EUR 4.3 million negative impact on EBITA like-for-like. That's just translation of U.S. dollars into euros on the full year 2018 result. That number was more or less reached already at half year and more or less stabilized in the second half, more or less the same as we explained for the revenue. And about 70%, 80% of that difference is to be allocated to Installation Technology. I think also Oliver mentioned the FX impact is mainly in Installation Technology and that also partly explains the minus 1% from the segment reporting.

So conclusion here: EBITA up 9%, net profit 15%, earnings per share up 16%, with the various comments I made also on depreciation compared to '17 and what happened with the taxes in the year under review, 2018.

If we go to the balance sheet. Of course there are some impact of acquisitions which we did, which, yes, normally increases your goodwill and intangibles. But that's normal. We I think further improved and increased our equity. As you can see, net debt mentioned before more or less stabilized, but we took new debt onboard, as we will see in the cash flow statement. We spent money on acquisitions, received some money from divestments. And I think we also worked hard to get our leverage ratio at 1.3, so that's the same level as the end of 2017.

I think working capital was a big topic when we were here at the half year results. So what happened with working capital? A very big increase of around EUR 175 million in the first half. We also predicted at that point in time that we would still be left behind at the end of '18 with a slight increase in working capital, that we would not reverse the full amount in the second half year. So we reversed about EUR 160 million out of that EUR 175 million and we have a minus of EUR 14 million we'll see in the cash flow statement.

So the working capital as a percentage of revenue, 16.8%. So the same level as 2017. And you may remember '17 was a very strong year on working capital performance. So I think we were happy that starting the year with around EUR [30] million negative compared to [17] on working capital, we at least manage that into the direction where we are. But more to say about working capital later on. Equity, 53%, still a very solid equity ratio and solvability. And return on capital further improved to 16.6%.

Cash flow statement, we had some question about this as well this morning. So I'll try to explain you a few of the headlines there. Well, I think on EBITDA we already explained, around EUR 40 million increase. And in this line, result on sale of equipment, change in provisions, partly in that line are some noncash releases of earn-out provisions. That will be disclosed in the segment reporting. So you normally include that in the acquisition cash flow. So it's not a real cash flow because you have not paid it. So you have to reverse that out of your EBITDA back to your operational cash flow.

We had some fire incidents, so insurance money which we received, which is partly linked to the proceeds on the capital expenditure. And you won't see that in the operational cash flow. So this is the real way of presenting this on the operational cash flow of EUR 427 million, which was exactly the same amount as in 2017. Well, working capital, I'll touch on that a little bit later. Net CapEx more or less on the same level as 2017.

We explained before. So what we capitalized is EUR 134 million, so that's what we put on the balance sheet. But the cash-out was only EUR 115 million. There was a gap of about EUR 20 million, which we already received from the insurance company for the assets which we had to write-off because they were damaged by the fire and we will reinvest that amount in 2019, maybe even partly '20. I think important to note is that because that will come back in the numbers of 2019.

Well, I think finance cost, nothing to mention about that. Income taxes, also that was noted by some of you. We have a lower tax rate, but the cash-out is higher. Well, we made also more profit, so we get a higher tax. And of course that's also more or less a timing and that we still have to pay taxes also from prior years where we normally don't get all the filings -- well, we do file on time, but you may not get the payment schedule for that. So that is also something which will shift over in the next few years to come.

I think on acquisitions, we had some comments this morning that the cash-out for acquisitions -- first half year we had PEM and we had some earn-outs which we paid in the first half. So that was included in the -- close to EUR 25 million in the first half of cash-out. And there's another EUR 140 million cash-out in the second half year, which was consisting of the 3 acquisitions, VAF, RMF and to a lesser extent Co-Planar.

So those 3 together was that amount. And I think some of you had predicted that that was maybe a much lower amount. Because if you look at the revenue contribution of those acquisitions, that may look as small or midsized acquisitions, but let's say that the margins are at least a little bit above our average. And therefore, if you look at the normal healthy multiple I think we paid for those acquisitions, the cash-out maybe more explainable than was taken into account. But that explains the number you see here, although the EUR 131 million on this slide is netted of the EUR 34 million which we received from divestments. And as you know, all those divestments were done in the second half of 2018.

We took some new financing onboard, EUR 170 million, to finance those acquisitions. So new term loans. In our normal structure, the 7-year structure, you know from our side the first 2 years we don't repay and in the remaining 5 years we pay in quarterly or semiannual installments to our banks, and that fits very nicely in the repayment schedule we have for the next years to come.

We obviously repaid EUR 140 million again in 2018 after EUR 130 million in '17. So we -- next few years you will also see a similar amount going through our cash flow from the term loans which we took on board, especially in 2014 you remember for the Impreglon and Flamco acquisition.

Dividends paid, EUR 72 million. That was also discussed already in the half year results. We paid that in May to our shareholders. There's EUR 7 million, yes, to noncontrolling interest, but that mainly includes our share-based payment program where we bought shares for those eligible employees and pay that out. So that's the EUR 7 million you will see here, which leads us to a EUR 27 million positive net cash flow compared to EUR 129 million in '17. So that's EUR 100 million difference.

In '17, you may remember we only had EUR 41 million cash-out in acquisitions, but we took onboard EUR 145 million in financing to finance the acquisitions we did in 2016, which were dollar-denominated and we refinanced those in '17. So that gives you maybe a shift over in those 2 years. But that explains the difference, which some of you noticed, in the numbers this morning.

So conclusion on working capital, although the delta of minus EUR 14 million is more or less in line with what we already guided. But especially I think the inventories, which increased by EUR 67 million in the first -- let's say, in 2018, the full year. But also the first half year, we had already a very big increase. Although it's partly, as you know, related to higher raw material prices. On the other hand, we have higher inventories in some of our businesses. We have a plan in place to further reduce.

I think there were good reasons why the levels were a bit higher at year-end. I think also Oliver touched on the fourth quarter, which was maybe here and there a bit weaker in revenue, but we still produced in that respect. But it doesn't helps us to improve our surplus levels going forward. But on the other hand, we also have a plan to further reduce our inventories in absolute terms, but especially in percentage of our revenue. And especially the quality of our inventories, we will further work on. Because I think on the receivables and payables -- yes, another strong year on receivables. And the payables at least we had to stretch a bit less than we did in '17 and we want to get rid of that funny year-end moment, as we all know, which always takes place, as I say, on the 33rd of December. So we're trying to get rid of that impact.

Here we have the segment reporting. I think revenue already mentioned in the various slides Oliver showed us. I think Insulation Technology the minus 1% explainable by currency. Don't forget that part of the divestments we did in the second half year were related to Insulation Technology. And we also did some cleanup in the product portfolio included in that number. So that is all impacting of course at least in the like-for-like top line euros.

Looking at the CapEx. I think also these numbers were disclosed in earlier slides and so, yes, nothing to mention. More important I think what's on the bottom of the slide, our CapEx guidance for 2019, that we expect our CapEx to be in the range of EUR 140 million to EUR 160 million for 2019, somewhere in that range. And of course we will update you further at half year again, but this is what we have in mind, I think which also confirms our confidence going forward investing in our businesses for further growth.

Looking at our operating results also per segment. Well, Installation Technology, look at 2017, very strong also, 12.2%. That number included -- EUR 39 million -- EUR 7 million, EUR 8 million of depreciation benefit, which was totally linked to Installation Technology. Of course we had some one-offs again in 2018. And Installation Technology took some additional costs, but I think in the like-for-like around that 12% margin I think is a fair comparison between the 2 years.

I think the margins in the other 3 segments further improved. And I think we got a lot of questions on this nice holding/elimination line, where we normally allocate all nonrecurring impacts just to make sure that the segments are clean and that you really look at the correct margin improvement or at least development per segment.

Really got one comment, that we have been very efficient in the holding to have 0 expenses. I can tell you that we tried hard to win, but we were not very close to that number. No -- so at the half year, we had minus EUR 6 million in that line and I guided at that point in time without of course knowing divestments or the fires, et cetera, that we had some impact in the second half that would normally expect you to be around maybe minus EUR 12 million just on a like-for-like basis. We came out with 0.

So it was about EUR 10 million to EUR 12 million benefit in the second half year, which came partly from the insurance income to, say, compensate for the damaged assets, partly the release of the earn-out provisions, but also the income we got from the divestments. And of course if we further divest activities or cleanup, we may get of course further proceeds from that. We asked Oliver at least to stop to get income from other sources, meaning insurance. And of course also the earn-out, yes, that also may differ year-on-year, how that works out from the acquisitions we have done in the past.

I think it's good to see that our EBITA margin improved from 12.5% to 13.3%. And at least you see here -- at least in the like-for-like per segment, the development was a slight minus for Installation Technology, as explained before. The others further improved, one better than others. But yes, more room for improvement we would say. But hopefully, that explains you the total picture on segment reporting and of course any further questions on that specific topic we may touch on later on.

Dividend proposal, I think already mentioned. The cash dividend for 2018, we will propose to the General Meeting in April EUR 0.75 per share. That's an increase of 15% compared to EUR 0.65 which we paid out in 2018 for the year '17.

Well, the last slide. So I think also Wim started to touch on the financial objectives in our strategy. This is only the first year, 2018, of that 2018-2022 strategy. So where are we and are we on track? Well, looking at the left side, the 5-year average organic revenue growth, you may see a nice number starting in 2008. So that's the 5 years, 2008 and the 4 preceding years, with a record year 2006. For the ones who were there already at that point in time, that was a record of 14% organic growth. If you average that over the 5 years, that helps you to get to 6.5%.

2013 unfortunately has a very negative year in it, as you can imagine, which was 2009. So that more equalized out the total organic to 0%. If you take 2018 and the 4 years before, we are at 3.5% average organic revenue growth. As you know, our objective for that period is above 3%. And we will update you every year on where we are on that. That is the picture on the average organic revenue growth.

EBITA margin, 13.3%. We mentioned the objective is to be above 14%. Return on capital, 16.6%. The target is to be above 18%. Free cash flow conversion, we were close to 68%. Above 70% is our objective there. Leverage ratio, below 2.5, while we are at 1.3. That's a very low leverage I would say. Solvability, well, above 40%. We were at 53%. But I think also that number, except for 2008, has always been on a high side.

And we have not said that we have to reach each of these objectives every year. Some may be reached in 1 year, others may be reached in other years. But the objective is to get to those targets in the 5-year strategic period we are overlooking. So you can see we are on track to reach those objectives, but we're just 1 year of the 5 underway.

I give the word back to Wim regarding the outlook for '19.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [5]

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2019 outlook. As it stands here on the sheet here, we remain confident in the execution of the many growth and innovation initiatives and investment plans. I can't tell you how important these plans are and plans are made already years ago. And when business teams come together and they have a plan, then step by step they are improving. And what you see now after the transformation of Aalberts in the last 5 years where we put the business teams together, you see more and more traction in the business teams. You see also that we clean up the portfolio more and more. So this is also motivating all these business teams to drive forward all these growth and innovation initiatives.

Most of the innovation road maps started 3 years ago, as I said. So a lot of innovations come to the market in '19, '20, '21. So that it will drive our growth. Innovation is driving our growth. So we are very confident of our teams and our plans.

We pursue our focused acceleration and objectives. As John Eijgendaal said, we are on track with these targets and we will pursue that further also in 2019. That means that we'll drive our profitability further. So some say to us, "Aalberts, you don't give any guidance." What we say in '19 that we will generate sustainable profitable growth and we will increase our profitability further. That is the guidance towards our objectives.

The comments I have especially to Bullet 1 and Bullet 3 is the following. What you see here on the sheet is that we remain confident. But I'm pretty positive about the further development. What I see on the plans we have and the innovations and the teams and the energy we have in the teams that despite maybe here and there are some headwinds, but I think in certain markets we are on the right side because we are where technology matters. So it's very important in semicon where you are in semicon. It's very important in automotive where you are in automotive. And the fast learning and the decentralized organization we have with the high level of entrepreneurship, with very good plans will also help us in '19 to generate further profitable growth.

On top of that, we have a very nice pipeline of acquisitions. We're working on that very intensively at the moment also. We have again a few topics which we would love to divest to improve our portfolio further. But as we said, we never know when we do it because we want to have the right price at the right timing.

So we are very good positioned for further growth and we are positive about our further development in 2019, further sustainable profitable growth also in '19. So that is the guidance and the outlook we give with our team.

Thank you very much. And I hope you have a lot of questions which we can answer.

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Questions and Answers

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [1]

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Can we start?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [2]

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Of course.

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [3]

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I don't know whether this works, but I'll give it a try anyway. Martijn den Drijver, NIBC. With regards to Installation technology, would it make sense to ask you how much the OpEx investments have been with regards to operational efficiency and all the innovation road maps and also relative to 2017, so we have a bit of more granularity of how much you actually spent? And possibly if you could also give some guidance for 2019. I know it's asking a lot, but I want to try it anyway. You want to deal with them one by one?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [4]

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No, no. No, I think it's maybe difficult to give exactly the number of guidance, but maybe let me give you a few examples which we did. We bought Shurjoint in 2016 in the last quarter. Shurjoint has a foundry in Taiwan and China, but the most interesting part of the sales is in North America. We had an agent in Canada, which agent also took some margin. Now we decided, for example, to change that situation. So that means you change your sales channel, then you have to pay your agent and you have to sell out the inventory he has. That means 2 things. You have to make a deal with the agent. It means that you have to build up your own salesforce, which is roughly 20, 30 people in Canada. We had to install 2 distribution centers in Vancouver and Toronto. And we had to sell out roughly 5 to 10 million of groove fittings, roughly, which we can't produce in our own factory, which means under absorption in your factory. I can't tell you a number what exactly, but you can even I think imagine. This is only one topic where you -- yes, it will mean millions of EBITA because it's also a nice margin product. It's only one example. The second example is, is that we changed also the salesforce. So we again strengthen the salesforce in certain areas in North America. We added people for groove because we bought this company in '16. So we added people in '17, we added people in '18. On the other hand, we also changed the management in America because we thought we should improve there further. And no, that also is all -- I call it friction cost to improve it further towards '19. So when you would ask me: do you think that all these measures we took in '18, would that have an effect -- could that have a positive effect on your margin in '19? That question you would ask me, then I would say yes. Because it's all investment and we made additional cost. How much is this, it will be difficult to calculate in detail because -- but that has to do what I -- what we say also in our headline of our press release, continued investments in growth and innovation.

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [5]

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And just with regards to markets, what can you say about how much are developing Installation Technology? Specifically, what are you seeing...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [6]

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Industrial Technology or Installation?

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [7]

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Excuse me, Installation Technology, what are you seeing in North America and Europe?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [8]

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Yes. Maybe one thing to add, that is without what John explained about the depreciation which took place in Installation Technology. So about the costs in that segment.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [9]

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Yes, compare the EBITA...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [10]

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Exactly.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [11]

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On the segment report.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [12]

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So I only talked about the additional efficiency measures. The markets. Yes, the markets in Europe in building installation, let's say, the residential buildings, commercial buildings where we are active, in industrial installations, which is mainly North America are good. We had a good year in '18. I see also in '19 there will be a very good project base. So when you look in Climate Technology, for example, where we're also active in residential/commercial buildings, that we have a very good pipeline. The order book is much higher than last year, also driven because we had a slow quarter 3. And order intake increased in quarter 4, which we couldn't ship out. So that was -- that's the reason why Climate Technology was a little bit lower. But we took already the cost in so that you can -- let's say, the margin is not increasing so much. But we are positive about the residential/commercial market. The second thing is, innovations are coming. So especially in Climate Technology, I mentioned we have now 15 very nice product lines and systems, also with a sustainable approach, energy efficiency driven, business models with digital services, which really looks very promising. So I'm very excited about that. I must honestly say, I was with the team 3, 4 weeks ago -- and that said something about Aalberts -- is that I saw products which I never saw in the past at all. I thought they have 3 or 4 product lines and they had 15 or 20. So it goes so rapidly at the moment. It's accelerating everywhere. That -- and that is the strength of this lean and effective structure. So that is -- so America. America, our management is positive about the first half. I must say they have of course also some doubts and that I also have. I don't know how the second half will be, I don't know. I don't say it will be bad. Actually, I don't know. Because, yes, it could be that the amount of liquidity which is put in the market in America due to the tax changes that you get lesser investments. And we have also a lot of industrial insulation business there. That means when you have lesser investments in manufacturing, shops or equipment, that you also have lesser valves. I must say our orders were also in quarter 4 pretty good. So let's see. So first half, I'm not so worried. The second half, I don't know, but it could also be good. On the other hand, we're also here introducing what Oliver said is a very nice new product, which we showed you in '17, is the power press. And Oliver said push, but he meant the power press fitting and valves, where we also add additionally roughly $5 million to $10 million of stock made last year to sell out mainly in America because it's running very fast. So that could help us really. So also there we are not negative, especially not about the first half. Let's see how the second half is.

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [13]

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All right. Two more. On Material Technology 2% growth. If we exclude M&A, that's slightly negative 1.5%. So it's thereabout. Is that solely power generation, and if so, what are you going to do? You mentioned plans, but can you a little bit more [clear]? And if you look at margins, 40 basis points improvement at the EBITA level. Is that -- how much of that is coming from acquisitions? If you could give a bit more clearance on that?

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [14]

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The principal is the margin improvement that comes from the business which is currently running. There's just improvement in existing business. And if you look at the power gen market, where you had a question too of how that has developed. That is recognized that if you look at GE and Siemens' numbers, which are the main drivers of that, they are pretty low and far behind numbers of 2014 and '15 when that market was pretty okay. What we have done, that we changed a bit the way how we do things. So that we mainly work on the combustion chamber in North America. And we had a lot of brazing and heat treatment activities in that field. So what we changed is that we added more value to the products we are doing, mainly in the combustion chamber side. That we will be continuously doing so that we get more market share of all of that. A lot of competitors are not really interested in pursuing that and we are in process to establishing a different way of how we add those products to the market. So we do not see that in 2019 as a threat of what may be a bit a complicated thing in the change of 2017 to 2018.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [15]

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But we restructured the business in '18. So we reduced the capacity heavily, which is done. So in '19, we will take advantage also of the low cost base, mainly in Greenville. But there's a nice opportunity I think. Also, what Oliver said is that certain competitors are much weaker than we are, so we can also take share. So that's actually what we're trying to do in power generation. Aerospace is going very well, aerospace.

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Martijn P. den Drijver, NIBC Bank N.V. (ESN), Research Division - Head of Research [16]

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And then the final one from my side. You previously had some sort of guidance or number that you had in mind for divestments, EUR 150 million to EUR 250 million. If you add 2017 and '18, you've really basically completed that program. There's obviously other activities that you may want to divest and maybe you can update us on that target for the next couple of...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [17]

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The target we gave that time that was also before we did this, correct, we gave the target of roughly EUR 200 million, EUR 250 million and then we changed it a little bit higher because we want to sell something else, which we didn't do in the end. But 2014, we bought 2 very big companies that time. We bought Flamco and Impreglon. And that can happen again. Because the moment you buy some bigger entities, there's sometimes always something which is, "hey, that's something" -- "the 10% or 20% of that I don't like." Then you optimize. And especially in Impreglon last year we did a few things. You don't like that, so you optimize it and over the years you sell it, especially (inaudible). You sell it at the right moment at the right price. But this is not the right moment. You don't do it when you know the right price. You also wait. And you improve it till you do. Now we still have some left. For example, in Flamco, yes, I think it's completely not ready because we should earn a little bit more money and then probably bring to the market at the right time. But yes, we have still some left what we see now. But again, it could also that when you do an addition acquisition comes something to it. And the other thing is optimization of your product lines. Also, there we have not done yet. So what is left -- yes. I think what we see now, it could be that we still have left, John, maybe EUR 40 million, EUR 50 million, what we see now on the radar. I don't know if we do it this year. That depends again on the timing and the price. But in the end, you must know that we only do it where we get a good price. And we will improve our portfolio towards the years front of us. Otherwise, we would not do it. And I think the picture, especially also what Arno and John showed, that shows that we continuously are improving the business and you get better positions every year and you get also more pricing power. And that's actually what we want. But that's roughly the -- in the guidance, EUR 50 million what we see now.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [18]

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Henk Veerman, Kempen & Co. I also have a couple of questions. I will tackle them one by one, starting with the top line or added value I should say. In the second half, the added value margin was a bit lower I think versus the run rate of the previous half year's. And actually, we -- what we did discuss is the material -- the commodity price impacts I think the last couple of semiannuals. And now I haven't heard any comments related to that, if I'm correct. But I think with the -- let's say, on average the commodity price is going down, I would have expected a slightly higher gross profit margin in the second half of 2018?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [19]

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Yes. I think there's hardly any impact in the second half. What we explained at the first half year that we would expect a full year impact on the revenue side maybe between 1% and 2% on the full year because our coverage system which Arno runs from our side, prices have been pretty stable from that side. Also, our sales prices have been, yes, based on that and of course further improved where possible. So normally it runs more or less in parallel. And what we normally see from the seasonality that our added-value margin is lower in the second half year than in the first half year. So in the first half year, we were building up normally also part of our inventory set to overcome summer period and the trends for quarter 3 and quarter 4. So it has always some impact on the added-value margin. Some mix effects of course are there as well. But I think the raw material content had -- if you look at the current raw material prices -- again, I think Arno -- yes, that's another topic for 2019, yes, to be on top of that, keep our prices where needed and cover ourselves also throughout the year '19, yes, where we can to keep our added-value margin. Although you saw a further improvement from our numbers, another 30 basis points in margin. So yes, normally you would expect margins to decrease percentage-wise mathematically if you just add on the raw material price on top. So there's more what we do there also on pricing excellence to improve the mix of our products, do the divestments, as Wim explained, to clean up the portfolio and get to higher margins. I think the raw material impact is not -- it is of course a topic, but not a very big impact in the second half year because we normally predict sales and purchase more or less on that level.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [20]

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Okay, it's clear. Secondly, on organic EBITA growth, I think in 2018 and also in 2017, there have been a couple of one-off effects. So I think in 2018 there was a provision release in the second half of 2018 and 2017 there was a depreciation positive one-off?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [21]

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Also in the second half, right?

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [22]

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Yes.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [23]

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Also in the second half? Yes, correct.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [24]

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But if you look year-on-year, my estimate of organic EBITA growth -- I think maybe you've done the calculation yourselves -- was about 7%. Is that how we should think of 2018 organic EBITA growth on an underlying basis of about 7%?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [25]

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Yes, I think 7%, 7.5% is what we also calculated on that. And stripping out all these one-offs, which are pluses and minuses, we'll just have to forget. Therefore, I think also the presentation on our second reporting is cleaned per segment and that I think gives you the right picture on the underlying revenue and the EBITA development organically. Also, the impact of acquisitions of course was pretty limited in many of the -- a little bit in Oliver's Material Technology, but not so much contribution from acquisitions. They're rather small, as we said. Not in cash-out maybe compared to what we discussed before, but definitely in contribution to revenue and EBITA last year.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [26]

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And on the second question basically on the margins, I think 13.3% is quite a high margin, but also because I think there are some positive one-offs in there as well like -- would you agree that the organic margin step up, EBITA margin step up in 2018 year-on-year is about 30, 35 bps?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [27]

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I think if you strip out the same one-offs in '17, I think the step up is not that far away from the 80 basis points which we show. It may be [6] or 70 basis points, but not as low as you indicated.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [28]

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We could have improved even more where we would -- in America, we did a lot of things to further improve the efficiency. So that's -- yes. Therefore, it's also very difficult to calculate everything in detail because you drive also the management every time to improve their business. But the integration of Shurjoint costs you money, but in the end you do that to come out better. We also on purpose let a few -- 2 customers go. They were private label. We thought it was too low margin. Of course it's one-off negative for us. We didn't mention it, but now you have it. So you continuously try to improve that. So I fully agree with John. I think it's pretty like-for-like. But the 0.8% is the improvement.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [29]

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Okay, that sounds quite nice.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [30]

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It is nice. It doesn't sound only like that.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [31]

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Two questions on the end markets. I think firstly, a large building installations competitor recently in its call warned for the increasing competition of private label in building installations. Maybe you could talk a bit on that.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [32]

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Yes, that's why we got rid of 2 customers. No, no, that's maybe a joke. But of course you have -- every time you have private label or other threats with customers. And therefore, this innovation driving growth is so important. At the moment in Installation Technology, you are -- you have a new product, you go to your customer, the end user, not only the distributor of your product, that's the wholesaler -- but you go to the end user and you say I have something new. And when he wants to have that and you worked on it for 5 years to get it all done, then you can't only give that to him, but he also sells maybe other products. So innovation is driving your complete sell-through of the other products. And so that's -- but when you have no innovations and you have only the products left in your portfolio for years and years and years, yes, you get competition not only from private labeling, but also from other things. And private labeling you get when you don't innovate. So we always say private label -- yes, of course we don't like that, but in the end sometimes we do it when it's only -- when it's part of a total package, including our own branded or innovative products. But yes, the competition which you mentioned has always been there. What you'll see in that businesses are the distribution channels. And also there again innovation is very important. So that's why we changed the whole structure in the last 5 years to -- with this case, integrated piping systems and Installation Technology, we have a very condensed package of fittings, connections, pipes and valves and hangers, fixing for the pipes. And that's our pitch. The rest we don't do anymore. And we divest or we optimize. That's our business. And then you want to be the best in that and you allocate all your energy and money to innovate in that particular area, including design services, including digital, including plug and play, digital modules in the BIM software. We are all busy with that. But you can't do everything. So that's why the focus is so important. But yes -- so this is not new actually. It's a fact of life. So when you don't innovate, you come in these kind of discussions.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [33]

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Especially, in the commodities.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [34]

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In the end in that business, everything will become a commodity when you don't innovated and when you don't have the package and the brand.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [35]

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Okay, one follow up on that. I know that -- I think many investors have had some questions related to your CapEx step up, so the new guidance, which is sort of...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [36]

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We always said. We said that already for 3, 4 years.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [37]

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But what you didn't say like giving your answers on private label maybe like being -- is fierce competition as you need to spend this CapEx in order to maintain the same growth in upcoming years.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [38]

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The CapEx is 40%, as Arno Monincx has explained. 40% innovation, 30% efficiency, 30% capacity. The capacity is mainly in heat treatment, for example, Eastern Europe, heat treatment North America, a big potential for us. Also advanced mechatronics, we have a lot of capacity we need to grow. And so we have more areas. Innovation is 40%. So yes, we spend a lot on innovation. But 30% is efficiency. That means automating of lines. It means that you're manufacturing 2.0. You come with a new layout of your factory. You outsource what you did before yourself. Or you in-source sometimes; you need new equipment. So that's why CapEx is so important because it improves not only your product lines, innovation, but also improves your processes, including IT. We also will invest tremendously in IT the coming years. The last years we did already. But I think 4, 5 years ago we invested EUR 2 million or EUR 3 million. Coming year it will be EUR $50 million. So we align all kind of processes. So there's a lot of investments going on to be ahead of the game. Because you have to be ahead of the game and then you can ask a high price. So when you don't do that, you come in trouble. But it's I think, yes -- and it's only accelerating. So you have to accelerate continuously faster. Therefore, we need every brain in Aalberts Industries. That's why I always say, "I need every idea in Aalberts Industries to connect and to innovate again, so we should not lose time due to big structures." Look to our lean and effective structure we have; it's so lean. We immediately decide and we go. That's a huge strength. I can't tell you how big a strength it is. Tell me a company who has that like that? And that's quick decision making. That's thinking a little bit behind the numbers. But that's innovation.

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Unidentified Analyst, [39]

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It's [Ya Palos] from [Dissern] Capital. A few questions. First, on innovation because you talked a lot about the road map which started 2 to 3 years ago. Just from a top line perspective, should we think that sort of the contribution from new products and innovation should be bigger in '19 than it was in '18?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [40]

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Could be, should be.

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Unidentified Analyst, [41]

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Okay, we'll take it as a yes.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [42]

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That's a short answer.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [43]

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And you know why I say could be, should be? Because it always takes longer. When you work with technical people, they say -- and therefore, you need also a business guide to decide in the end to bring it on the market because a technical person in the end is never ready. So it takes always longer. So that's why I'm hesitating a little bit. But for the coming years, '19, '20, '21, we will see a flow of innovation in many areas. And for example, in the business of Oliver Jäger, he's, for example, developing Eastern Europe, developing North America, developing Mexico, developing China, also to other areas. I call it also innovation.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [44]

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And maybe to add to that, we also started to measure the innovation rate, where we can really see older products introduced to the market in the last 4 years what that contributes to the top line. So how much percentage of your top line gets into new products, let's say, implemented in the market in the last 4 years. And also that percentage, which may differ from business to business of course, is something we are measuring now and also that should improve and increase. And yes, we are on top of that, to spend our money of course on the right innovation projects. So I think that's also something which shows that.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [45]

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You always have to analyze the health of your turnover. If you're in automotive, you have to look whether your turnover is not 8 or 9 years old. Then you can say -- well, yes, that's phasing out cars and products, that you have to have maybe 3, 4 years old to be always on the right run rate. And then you have to measure that. It's always -- if you look at precision machining, that you have always a development stream of new products you're doing together with the OEMs. And what Wim said on the Installation Technology, where you're more to the construction, you have to have constantly new products to bring on the market that you can say and you have a certain rate that you have a healthy turnover, which gives the prospects for the future. But to give you one answer for all, let's say, the different niche technologies we are doing, that is a bit -- that will be a bit complex to do.

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Unidentified Analyst, [46]

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Okay, that's very clear. And then what about the sort of investments associated with that? Because you showed that the R&D is stepping up indeed, which perhaps short term is impacting the operating leverage a little bit. But how should we think about it going forward this -- have most of the investments been made now or should we continue to expect more step ups?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [47]

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This is a very good question because the R&D additional people -- most of the investments have already been done in the last year. So when you -- that's always why I explain, because the question: "How can it be your added-value is going up from 58% to 63%?" And of course -- and Mr. Veerman, "Why it is not going to 65%?" But we came from 58%, yes? And then the EBITA margin didn't go up so quick. That was the question a few years ago. One of the reasons was we invested a lot in R&D, additional management, but also strengthening our structure, COOs and these kinds of things.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [48]

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Indirect cost.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [49]

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Indirect cost. But that is done the last year. So what you get now, when innovation road maps gets traction with the people -- because first you will need the people and then you go work on the innovation road maps. Then it takes 3, 4 years before it really comes in the market. When we invest in equipment in Material Technology, it takes you 2 years sometimes before you really get the revenue inside the investments you do. That's our business. That takes time. So most of the cost has been taken. Of course we will add through, but I think the jump to do these programs have mostly been taken. What we do now a lot is we invest in digital services. We have now a digital hub in France, where we have software engineers, more than 10. We have a digital hub in Holland. We have a digital hub in Poland; we never had that. So we get all kind of digital business models where we combine products with services. That's very exciting for the future.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [50]

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So all this depends on your assumption of organic growth. But all else being equal, the incremental margin in '19 should be better than '18 at a similar organic growth rate level.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [51]

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That's our aim. Because our goals for -- our strategy focused acceleration between 2018-2020, our goal is to have a higher margin at 40%. And we said in December 2017, we want to reach it as soon as possible. We don't know when, but as soon as possible.

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Unidentified Analyst, [52]

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All right. And then a last question on your M&A because it seems like you've been doing a lot of nice M&A. Could you perhaps share a little bit more about these companies, what their organic growth profile is and what kind of margins do they make?

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [53]

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You mean the companies that we bought?

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Unidentified Analyst, [54]

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Yes, exactly. Like a positive organic growth of -- the 100 million [Versils] that you bought.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [55]

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Let's say, we -- regarding margins, I can say that they will all contribute to our margin performance. So they are all above our average. And we believe -- let's say, these are 4 smaller sized companies of course with a very strong position in their niche. But because of our -- let's say, the possibilities and opportunities that we see in the leverage of our Aalberts power, yes, we see an above average organic growth potential.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [56]

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Now for example, Co-Planar was a small acquisition, but the footprint we got, we looked for many years already. In North America and Mexico leverage a lot of technologies off precision stamping.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [57]

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But the answer, as I said before, it doesn't -- one answer doesn't fits all and every acquisition has a different background. What Arno mentioned in VAF, it's good for exchanging that technology within the group to accelerate the growth in principle. If you look at what Wim said, the Co-Planar activity, that is we are creating a footprint of metallist technology in North America. Nobody would do an acquisition of that size in that business, but it has the same technology and it offers us a hub in North America and Mexico to grow with the key account we're having within the metallist group. So if you talk about organic growth -- and we said why we are super happy if it's 4% or 5%. Yes, if we do therefore 5%, I would not be so happy, personally spoken. That should be different. If you take a 3-year period of time and when we develop the right customers and the right projects, which we are already doing -- we have already 10 projects we are going to develop and hope that come in the years '19, '20 and '21. That business where Wim said it takes its time to develop. But if you take the old years -- 5%, 6% organic growth is not the target we're aiming for. This is not why we did that even if the company could do that by itself. The same applies for Roy Metal Finishing. That's about corrosion protection systems. A significant portion goes into the automotive industry. We do not have any business of that specific technology in North America and we are quite convinced to accelerate growth while having a combination with customers we do have in Europe. But that is really a strategic investment. That's why we said we are focused not on acquiring turnover and having EUR 30 million, EUR 40 million, 50 million more turnover in the portfolio. It's about executing what we think we should do in the different technologies. So if you just say, "Well, it's all 5% growth," yes, that's nice, but this is not what it's about.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [58]

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Experience is -- on paper -- we have a much higher growth than average on paper because we made all the plans. So the potential is there. Practice is it will always take longer. And so -- but we should get the many things we acquire. And that's also why you have to acquire always 2, 3, 4 things and then again implement because it always needs time to get the traction going on. And then you go again. So let's say in theory we should grow much faster with these plans, but sometimes when you are experienced you know it's sometimes tough. But on the long end, it is, yes.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [59]

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Luuk van Beek, Petercam. First, a question about visibility, because in the past you always said, well, we have basically 0 visibility up to a couple of weeks, but in the meantime a lot has changed with all the investments in key account management and the programs you have become part of. Can you describe how much visibility now you have in your various segments and how far you can look ahead?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [60]

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We start by Material Technology then.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [61]

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Okay, let me start. If you look at the business we are doing in automotive and machine build and aerospace, it's mainly a service business. So the visibility, that's a couple of weeks you could go at. And when you have your relationship with customers and you know what you're going to expect. But if you look at order intake, that's a much shorter view you have. In other segments, it's a bit longer because you have different trends and products taking more time to develop. But if you look in automotive, then you know what people are buying and that's your visibility.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [62]

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But when you know that your customer has a lot of work, you will also have the work. And that is heat and service. But I think in Industrial Technology, we have a much longer -- you can see a pipeline. When we look to the fluid control, there are very nice pipeline where we can see much further. It can be 6 months sometimes. And that's also the forecast, for example, we have in advanced mechatronics or in specialized manufacturing. Forecast is not really an order, but you know you are in the program so that they need you. So based on what your customer says to you. Especially, in the Industrial Technology area, we see much longer -- we can see a longer forecast or order book.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [63]

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And then on the integration of your distribution in the U.S and Europe. Obviously, the positives led to higher inventory. That's still the case in some areas. Can you discuss how far you're in the process and at what time you expect to release for those inventories?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [64]

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I think the inventory -- and you could see that also in the numbers John explained -- that's mainly related to North America and something in Europe, so North America and Europe, mainly certain product lines. Now one explanation is the power press fitting and valve, where we really produced stock in 2018 because we saw a big traction going on and we launched that in North America. So we have roughly now -- we created $5 million to $10 million additional stock to really be very service -- have our service level on a very high level, which we also do now. So that is more or less done, but that impacted especially the second half of '18. The second thing is, we had expected in North America a little bit more sales in the quarter 4, which didn't come. We had the orders, but we could not ship it all and it was mainly in December. That also has to do with the holidays in that period. And so you expect a little bit more sales, mainly also in the groove, in the Shurjoint business. So the projects were there, but we didn't have the possibility to ship, so we ended up actually by not having the sales -- having the orders, but not having the sales and not able to reduce the inventory. But we know exactly where it is, what to do, so we will address that. We already addressed that for '19 to really, yes, sell out.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [65]

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Yes. And then finally on Brexit. You have a small business in the U.K., which I think maybe produces for the local market. To what extent do you think you are vulnerable to Brexit and also could it affect your continental European businesses and are you preparing in any way for it?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [66]

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That's very hard to predict. I think everybody is looking what's going to happen. But of course what we also learned from our, I'll say, U.K. management -- of course the markets may not be as good as you always hope, but that may be a temporary impact. Of course we are exporting a lot from our U.K. business or produced in the UK, exporting. So they are benefiting already for a number of years now from the -- I'd say the lower currency of the pound. A bit more expensive for importing from Europe, which is partly within the group, and partly from external parties. And there may be some duties coming on compared to what we now see between U.S. and China. That may be something which may occur. Yes, you have to defend your position of course and take that into account when you go into the market, pricing, et cetera. But everybody in that market will have that same issue in that respect. So yes, a concrete number or a concrete impact, yes, it's very hard to predict. I think we are managing the business, try to be cost efficient, lowering our breakeven where we can. And on the other hand, also do the innovations and make sure that we have a solid position in the U.K. itself. I think also Oliver has a nice heat treatment business in the U.K., several locations, yes, which is more or less 100% U.K. oriented.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [67]

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Local for local, no?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [68]

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Yes.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [69]

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Yes. And going back to...

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [70]

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So it remains...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [71]

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Going back to the U.K. maybe to add. You maybe remember also that the pound became much cheaper, so the imports we had in U.K. business also we had to increase our price that time. That was maybe 2, 3 years ago. We did that. But you see now also with the rates in the U.S. what happens, everybody increases price. So yes, in the end it's about your market position, if you succeed in increasing your price. So we did that also 2,3 years ago in the U.K. So when this would happen, we will do the same. On the meantime, what we also did, we produced what is sold in the U.K. and we also tried to produce more in the U.K. And we still have a big -- pretty big manufacturing footprint in the U.K., which can help us even to have a positive effect. But yes, as John says, let's first see what's going to happen. It changes every day. But the preparation for us is, at the moment you get tariffs, yes, we will adapt our price and of course look to the competition and adapt immediately, what we also did in U.S. because we increased our price.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [72]

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Maybe the size -- Luuk, the size of the business is less than EUR 200 million what we do in the U.K. So if you look at our geographical split in the press release, it's already included in the first line, Benelux, U.K., Nordic, EUR 700 million. I'd say EUR 180 million to EUR 200 million is U.K. So that's partly what we sell into the U.K. from other territories and what we produce and sell in the U.K. So it's really the sales-out in that region. So that's between 5% and 8% of group revenue. So in that respect, you have to take into the relative numbers I would say. Of course we will look for any impact it may have and take corrective actions of course.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [73]

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But also here -- in my opinion in the U.K. also the real answer is innovation. What we do with our Installation Technology business is now bringing innovations, which we also assemble or produce locally. And there you can also gain market share and that is actually also how you can win.

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Luuk Van Beek, Banque Degroof Petercam S.A., Research Division - Analyst [74]

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So position, yes.

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Peter Olofsen, Kepler Cheuvreux, Research Division - Analyst [75]

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Peter Olofsen of Kepler Cheuvreux. Maybe as a follow up on this question. What exactly was the contribution from pricing to the organic growth in '18 and what do you expect for 2019? Of course some things you can't predict, but I assume there is some spillover from last year, but we've also seen some raw material prices coming up. So some color there.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [76]

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Yes, what we said already in the first year that we were around 1% year-on-year in the first half and that we would expect to slightly increase that in the second half year between 1.5% and 2% to take the full year impact of '18 into account compared to '17. And if you now look at our close to 5% or 4.6% to take the precise organic growth, yes, I think that is still a valid number. Let's say maybe 1.5%, max 2% is price related and the rest is volume. And we think there is a lesser impact in '19 because we already implemented the full impact of the pricing. And looking at current raw material prices, I think Arno -- I think that's where we are, let's say, heading towards in '19 as well. There is a limited impact on the pricing other than of course pricing excellence, which of course is a different topic. So we may still increase prices, but maybe not necessarily just related to raw material.

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Peter Olofsen, Kepler Cheuvreux, Research Division - Analyst [77]

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And then on some of the digital business models that you referred to in the earlier questions and also in the press release. I assume today this is still very, very small, but maybe in 3, 5 years how sizable can it be?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [78]

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Yes, it's a good question. Yes, how sizable it gets. It is -- I think what we see now, but it's -- it is a trend which you see in more places that you often combine it with the products you sell, that you offer a digital service in combination. Now for example, when we talk about expansion vessels, you have now the opportunity to also storage energy in a vessel where you can also adapt -- or you can connect certain electricity out of it. So yes, you never know how quickly these products gain momentum. My experience is that it will take time. And so -- but also here when you have the possibility to offer it, it can trigger customers to take that product but in combination with other products. So it will accelerate also the sales of your other product lines. So that's also a positive effect. I think the total number is difficult to predict, I don't know. But it's small, you're right. But it will grow.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [79]

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It is everywhere in almost every business. It's a topic. So products should communicate with each other and so there's a lot of digital, yes, content thinking going on.

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Oliver N. Jäger, Aalberts Industries N.V. - Executive Director & Member of Management Board [80]

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Yes, it's a bit designed -- when you say, well, it's a digital product, it's not the product per se is digital itself. It's a combination of digitalizing what you're selling. So that means if you talk about innovation and if you have valve fitting or you have in the climate control business applications you're offering, so the principal installation you're offering that remains technically the same. But the way how you steer it and how you manage it, that becomes digital, that's an add-on. So the entire package is viewed as digital, but the product per se is still the product it was before, so to say. So if you say, well, what's the digital [composition], give a number, that will be a bit hard to say because the entire way how you manage installations is different.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [81]

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But it can be both. For example, we have developed now -- together with a small, a very small acquisition we did in France we developed now thermostatic head, where all the algorithms are in. So even, for example, that you know exactly how late somebody goes to sleep in holidays, you know the holidays, everything is in.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [82]

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Weather forecast.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [83]

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Weather forecast, everything. It's in such a product. So that's -- there you put actually software, digital content in the product. And we launched it now at the moment. Then we have now a very nice product, it's like this. It's from a company, Comap. You can put in every room. You click on it and you say the temp is too high. You click here and it goes down. You can take it with you and everywhere you can put that, yes, sort of round -- yes, handling unit you could say. It's a complete new innovation. So what we do, an existing product, but we digitalized it with digital additional features. Another example is, for example, we say, "You have a nice commercial building. You have a boiler room. And what we can do, we can install all your equipment between source and emitter." And we -- every 2 months we look to the system performance and we measure that. So we have all content. We gather the data for you every week, every month, and we see that the system performance is very bad or is good. So I would do this and this and that, then you have less energy. And they give you a contract to monitor that every months and you get an agreement -- I don't know the -- you get the sort of service for that. And that's additional payment. So we do that now. But it's in trial and error and learning phase. And other request we got, "In such kind of building we want to outsource the whole boiler room, could you maybe do that for us? So can you take it off? So we give you a lease tariff for the whole boiler room." "Okay." We have now one pilot running somewhere to see if we can earn money with that, how it works with the pilot. We are active in a very nice project in The Hague. It's called the Green Village, where there's a row of houses, where we try -- and we are part of that as Aalberts. We try to bring hydrogen through the network of copper to heat the houses. That is the trial. And we are one of the bigger sponsors with the Technical University of Delft. Now these kind of business models we are busy with and all kind of ideas, innovations. So that means you use hydrogen in your homes as a test. So that could of course be fantastic. So these kind of things and how that will in the end become a business model, yes, we will see. But it goes very fast. What do we do then? We bring the people together from fluid control, thermal & sanitary efficiency, hydronic flow control. We say, "Here we have some ideas. Why don't you do this? Why don't you do this?" Greatness is shared with all the knowledge we have in the group. That's Aalberts. But yes, that's important to understand.

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Peter Olofsen, Kepler Cheuvreux, Research Division - Analyst [84]

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Thanks for that. Then my final question is on cost inflation and then especially wages. As we've heard mainly from Eastern Europe in the automotive industry of some sizable wage increases. So what do you expect in general for Aalberts for '19?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [85]

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Difference per region, as you already said. But yes, we already see -- well, take even Netherlands as an example, what happened there already. There's a huge increase, up to 8%, if you look at the collective labor agreement which was just finished a few weeks ago. Although it's in steps, but it will increase total cost by 8% over a 2, 3 year period, just the Netherlands. But I think also -- in the U.S. we already have seen some increases in inflation on the cost side. Eastern Europe -- I think, Oliver, China already has been on that line for many years now. So yes, I think on average -- I think the impact towards '19, I think we all anticipate for us to further increase prices as well. But yes, you may see maybe even 2%, 3% on average cost inflation on labor and indirect cost of your people.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [86]

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And then you have to incorporate that in your business I mean that increase.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [87]

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Plus price, yes.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [88]

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That could be another driver for price increase besides -- raw material is pretty flat till now, but inflation of wages could be another driver for price increase. We discussed it in our management. I think the main effects you will see maybe a little bit '19, but it could be '20. But it's a good point. We have to be on top of that.

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Unidentified Analyst, [89]

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(inaudible). One or two questions on your portfolio changes; firstly, the divestment. You received proceeds of some EUR 35 million selling 100 million of [Versils]. Just roughly if you would sell it at 8x, would that mean that you have sold businesses with a margin of about 4%?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [90]

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At least below 10%. There are maybe a few which are a bit higher than the 4%. But it was partly also -- and (inaudible) is not always, let's say, totally a company with the full margin. But they are lower margin businesses, yes, that's correct. So you get a lower multiple and lower margins.

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Unidentified Analyst, [91]

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And then, on the other hand, making acquisitions, we have seen that you...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [92]

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It was also noncore.

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Unidentified Analyst, [93]

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Yes, yes, yes.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [94]

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We don't sell the (inaudible) of our company. So the multiple is normally a little bit lower.

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Unidentified Analyst, [95]

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Okay. Then on the other hand, you've made acquisitions. And if you look at the past, you have made, yes, let me say different kind of acquisitions, companies with very high profitability, which result in very high cash-outs. And otherwise companies you buy -- you had much more upside for improving margins. If you look at these 2 kinds of acquisitions, when will you realize first your ROCE margin of 18% and in how many years?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [96]

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No, I think the -- of course about the ROCE margins, we have a strategy of focused acceleration. Our aim is to achieve more than 18%. We are now at 16.6%. So we are on track there. So we will improve that. But it's a combination. When you look, for example, to 2014, we had the opportunity that time to acquire Flamco and Impreglon, which had lower margins, both at around 7% EBITA. So we saw the opportunity because we knew the business to improve it. Now both -- I can tell you after now 4 years, 4.5 years, are doing much better than they were then and they are above our own goals which we set that time because we knew the business. And the other type is that you add technologies or you add the footprint like Co-Planar or you add technology like PEM or you add a technology like corrosion protection in the America and a footprint. So it's often a combination; it is both. But I think the moment you acquire something which is low EBITA margin and mostly more revenue, then you have to be very sure with your knowledge that you are able to increase it to our average EBITA margin, pretty sure, because otherwise it will really ruin your returns. But it can generate a lot of value when you do it. And we did both. So I think we can do both also in the future.

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Unidentified Analyst, [97]

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I agree. But also on the other hand, if you acquire a company with a very high profitability, you also have to make sure...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [98]

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That you don't pay the highest multiple. Yes, you're fully right.

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Unidentified Analyst, [99]

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Maintain or at least improve -- or at least maintain that margin.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [100]

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Yes. Or you don't pay the highest multiple. Or you're able to increase the revenue fast with your other business. That's of course...

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [101]

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And we improved that ROCE of the last year, so...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [102]

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But we always made -- we always make plans. We make plans in detail with the existing management or with the management who becomes responsible for, let's say, the add-on or the bolt-on or the acquisition we do. And then we drive also the performance of that plan in detail. The moment we have not a return which we agreed upon upfront, yes, we say, "Let's wait a little bit." We should first get the return on the previous acquisition. Otherwise, it doesn't make sense. Otherwise, you're right, you don't get the returns. But this is a combination I think -- a combination -- organic growth. Then on top of that, you do acquisitions, where organic growth by far is the preference. And these acquisition should generate additional organic growth again by the combination. But that is hard work. So you have to drive the improvement plans very thoroughly. So it's both.

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Unidentified Analyst, [103]

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Thank you. When you look globally, where do you see for your markets the best economic environment and where do you think the challenges are greatest?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [104]

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The last, the...

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Unidentified Analyst, [105]

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The challenges are the greatest.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [106]

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I think we have -- yes, we have many end markets where we have potential. But because -- the point is you should not look only to the end markets or what is in the papers about an end market. The point is you should know the combination of our pitch, our technology which we sell to the market in combination with the end market. So when you look to semicon, for example, yes, semicon you have the frontend, you have the backend. For example, you have investments on the frontend, which improve the efficiency of the chip making where we are, but we are not at the backend, but others are. Now we are in the efficiency improvement of making chips to make them smaller or quicker or whatever. So there we are. So there is still a lot of possibility even when maybe you have a small dip, but that will continue, that will continue in coming years. Another thing is automotive. When you are in automotive -- when you are not in the electrification of vehicles because that is the trend and you only are in diesel engines, for example, yeah, which is going down, then you will a problem. So you must also look what is your product or your technology in combination with the end market, and that's where we look every day to optimize that. So from that perspective, we've selected all the businesses the last year to have a positive leverage of the trends. So energy efficiency of buildings, we are in the boiler room, we are in the piping system, we are in flow heating, but we are not in other things where we don't think there is growth. Otherwise, we stop it. And so we select it all. Aerospace we're also positive, but we are in the area where there's weight reduction of the materials with aluminum technologies for extrusion, machining, coating. But we are not in steel or we are not in plastics. We are in aluminum because we believe in the weight reduction of the planes, which is also the fact because it's growing. And that's -- so in many, many combinations we see growth. Of course when there's headwind -- yes, you can sometimes also feel the headwind, but with your positioning and your innovation drive you can counter attack the possible headwind in the future.

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Unidentified Analyst, [107]

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Maybe a follow up on one of the earlier comments John made. So there was this release of an earn-out provision and I'm not sure how sizeable it was. But what's the reason then that one of the acquired businesses has not performed to plan or what's the reason for this release then?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [108]

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Yes, it's twofold. That was only a few million, so it's not a huge number. The few million impact, 2 reasons. For one acquisition we agreed with the sellers that we would by them out for the earn-out 2 years earlier than we agreed because we were going to integrate the business and then it's very hard to still have focus on the real profitability and then you always get arguments with the sellers, which we didn't want because they are still in the business running the management. So we paid them off. So in that respect, we paid a lower amount because we paid earlier than the agreed timing. And a small amount which was released, yes, we -- or, let's say, the sellers did not reach the agreed performance for that period. That was a small amount and therefore it was released from the liability. And it's clean now for those acquisitions. And whatever is remaining, I discussed with a few of you this morning. Yes, that's still on the balance sheet for acquisitions, which we are going to pay out partly this year and partly next year. So we normally have an earn-out. And we have also sometimes what we call a deferred payment so that we pay a part of the already agreed fixed price on a later date with no interest by the way. But that's the deferred payment. This was really related to the earn-out which was released earlier than the originally agreed date, which I think both parties were very happy with. And on the IFRS, as you know, then the difference goes into your income statement.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [109]

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Philip Ngotho, ABN AMRO. I have just a few questions left, mainly on financials. So the first part is on working capital. John, you mentioned before that there are always funny movements towards the year-end.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [110]

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Did I say funny?

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [111]

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You said funny. You said funny movements.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [112]

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They are funny.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [113]

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So indeed.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [114]

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You are right.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [115]

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And I think it was mainly related to the payables, I believe what you said. Also, if I look at -- according to my definition -- and everybody uses a different definition -- but the days payable outstanding at year-end was around 147 days if you compare to the raw materials. Historically, it's been an average of 100 days. What is in your view for Aalberts the normal level that the payables should be at if you don't have these funny movements?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [116]

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Yes, I find it's always difficult to take from the balance sheet if you take just the payables and try to get that linked to raw materials, which is only a part of that. So what we normally do -- and if you do that consistently, it also is a same KPI -- to take it on revenue as we do also with receivables on day sales outstanding. We also take the days payable outstanding, so the DPO, based on the same level. And then normally we would go for 60 to 70 days on DPO. And on receivables we are, if you look at our average historical number, between 50 and 60 days. That's on average. And of course at year-end, you may see a higher number of days DPO on the payables and a lower on DSO because we try to get in as much as we can in cash at year-end and we may pay on the 2nd of January, maybe the 3rd. And so that is of course the game. As I mentioned before, we don't like it that much, but everybody is playing the same game and therefore you get some funny movements. And yes, we try to get rid of those extremes going forward by managing better especially inventories and of course remain a solid position towards your customers and your suppliers.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [117]

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But if I would change the definition, then I would still see a significant increase over the years...

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [118]

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If you relate that to full year revenue, it's not that significant. It's not that we were at 20 days before, now we are at 60. No, we may be -- we may have been at around 50 and now we are between 60 and 65. I think that's a more solid way. Because also during the year we have renegotiated with suppliers, extend -- let's say, extended payment terms, which we already started a few years ago. So that also kicks in more and more. So leave out maybe this funny year-end situation, we are trying to get -- yes, you may also get some letters from our customers, who just say, "180 days, otherwise we don't do any business with you." Well, we are not that aggressive that we do that. But yes, we may have extended to 60 or 90 days with some of our major suppliers or even get consignment stock from those suppliers. And so we have taken a lot of measures already and I think still some to do to further optimize also on the payable side without, let's say, ruin your relationship with your suppliers because that's not the goal of paying them late.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [119]

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Yes. Okay, clear. Then maybe indeed on the inventories. I appreciate the comments that you made and also earlier about the fact that product innovations have also led to higher inventories and that will probably phase out or you will get rid of that once you sell it.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [120]

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It was mainly one new product line.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [121]

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One new product indeed. But again if I benchmark you guys towards peers and not always perfect peers, but it seems that inventory levels are extremely high. I would say if you go towards industry average -- and you can have discussions of that what is a fair number for Aalberts, but you can nearly half that number. And you've already said that you want to improve your inventory levels. But do you have a certain amount in mind where you think that that's what the level that we should be targeting going forward?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [122]

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Of course we have our own targets, but I think maybe that's too much detail for now. I think much more important is that the quality of our inventories is going to improve. Because of this huge portfolio we have, because all companies have their own products, they have older products, they have new products, also all the innovation which we have done over the past few years are just adding in many cases products to the portfolio, new developments, acquisitions, et cetera. So I think it's more the quality of the inventories. Although we agree that it is too high. But I think we commented that already. The last 2 years we increased a lot on inventories partly due to raw material prices, partly due to some other effects, which we explained. So yes, we have a goal in mind to work on. But let's take that first and show that we are going to improve. But it will be nice if we could squeeze out 1/2 of those inventories. If you have a buyer, then I'm there tomorrow to get the cash.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [123]

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But you have to be -- because this question we got also years ago -- you have to be very careful what you compare with what you compare. Our strength is -- it is mainly Installation Technology. Our strength is that we are very close to the customer and we have a total package in this case in mainly piping systems. So where we come from is a much broader portfolio. So we reduce that to piping systems. But to optimize that, you need to change your structure, your distribution structure, which we did now in the U.S. So now we're going to make it more efficient. And we're going to do it in Europe. In Zeewolde there's now a new assembly and distribution center that's now built. It should be ready in summer. And then we will of course optimize in 2019 and mainly '20 we'll optimize also the distribution footprint in Europe. But I think also our business, which is package of products, connections, pipes and valves, needs already a much wider portfolio. But that's also the reason why we are able to keep our margins high. And so it's a combination. And we have a brand in each country and we grow organically. So of course for us it's also simple. There is only sell connections and we put them in one place and we put them in Poland and we sell them to the whole world. I will be sure that you lose your position, you will become a commodity, you will private label -- you will be private labelized very quickly. So it's a combination of things. So apples and apples, you have to be very careful here. What is without doubt that we can improve it and we have a target. We already mentioned it here in a few times. But you will see that the coming years on inventory, mainly Installation Technology. But when you look to the inventory in fluid control, that are very nice ratios, but it's completely other business. Maybe you have 6% working capital there, but it's not a business...

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [124]

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In Oliver's business.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [125]

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Because you have such a product line, such a product portfolio. And his business is even -- it's below the (inaudible).

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [126]

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Then maybe still a question on the release of provisions because you just mentioned that it's just a few millions for the earn-out provision. But if I look at the cash flow statement, also in the balance sheets, there is a provision release of total of nearly EUR 22 million. So where is the other part coming from?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [127]

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Yes, in this line change in provision, the EUR 22 million, a part is linked to the earn-out provision which have been released, which we discussed before. Another element is because of the insurance proceeds which we received, which are part of our EBITDA or EBITA, that's reclassified in the -- I'd say the proceeds from sale of equipment. If you look in the cash flow statement on the investing activities, you see a plus of EUR 21.6 million. That's coincidently the same number, but it has partly to do with each other. So it's more a reclassification in the cash flow statement because those proceeds from the insurance company are not part of your operational cash flow. So you're more or less reclassifying them from your investing to operational to neutralize that impact. And that's not around EUR 10 million impact based on that. Plus the earn-outs and some other, let's say, normal share-based payment, that's also an element of a few million which is included in there.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [128]

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Okay. But then just to get the picture completely clear, if I look at the balance sheet, there I see a -- was it -- a EUR 17 million or EUR 16 million delta year-on-year. And I assume that the claim for the insurance wasn't there yet, right?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [129]

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You mean between the CapEx number...

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [130]

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Between year-end 2017, so the provisions -- other provisions and noncurrent liabilities that there is a decrease of around EUR 17 million.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [131]

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Yes, that's partly linked to that and partly of course we are shifting from the earn-out provisions to the short-term earn-out provisions, which are included in the current liabilities. And so every year when we -- because we explained before we released a provision or paid out a provision for earn-out earlier in '18, which was supposed to be paid in '20. So it was under the long-term provisions, reclassified to short term because was paid in '18. And that's also being done at the end of '18. You look what's going to be paid in '19, reclassified from provisions to current liabilities with no impacts on cash flow of course.

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Philip Ngotho, ABN AMRO Bank N.V., Research Division - Analyst [132]

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Okay, clear. Then my last question is just on the higher CapEx guidance that you gave. Can you indicate which segments will see the largest -- or where the increase, the delta increase is mainly going to go to? And maybe is -- am I then also correct to assume that nearly EUR 20 million of that is actually related to just the fires? So that's -- underlying the increase is not even that high?

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [133]

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Well, if you EUR 140 million to EUR 160 million and take around EUR 20 million, I think you're pretty close to that number. We still are between EUR 120 million and EUR 140 million, just stripping out that. And we had guidance EUR 130 million to EUR 170 million going forward. So I think that's within that ballpark number. And it's a range.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [134]

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But I think the fires will be lower.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [135]

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It will not all be spent in '19, as I said. Maybe partly it will even be in '20 because there is a delivery time of many of the equipments of at least 12 to 18 months.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [136]

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No, I think it will be between -- I think because you have to talk to your customer. They have to order the line. So there will be maybe an impact of EUR 10 million, EUR 15 million -- EUR 10 million, EUR 12 million I think in '19. So yes, when we give guidance, EUR 140 million to EUR 160 million, it could be EUR 155 million, but it could also be EUR 145 million. And then how it works out with the insurance cases. But we already are now -- I've already have now 2 projects which are delaying, as it always goes, because we get no permit for a new building. That takes 0.5 year longer. So that will shift again to '20. So that's -- so I think EUR 140 million between EUR 160 million, that's including the EUR 10 million to EUR 15 million...

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [137]

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Insurance.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [138]

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Roughly. But could also be close to the EUR 160 million. And then we manage that every 2, 3 months. We manage that with the team. And mostly it's delaying things. But my colleague will spend a lot. So we have a lot of plans in Material Technology for CapEx because he's very CapEx intensive. We have a big plan in -- somewhere in the eastern part of Europe. We can't say too much about that. So we have -- that's a big expenditure. But also in Insulation Technology a little bit less in '18. So there are nice plans because we have some product lines we're growing very fast so we have to add capacity there. And we are investing in distribution and assembly center in Insulation Technology in Zeewolde. So many good plans. But I will take this guidance including.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [139]

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Yes, definitely it's included in that number.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [140]

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And when you sit in the middle, you can't be so way off.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [141]

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So Oliver is going to spend it and another colleague has to reduce his inventories to finance for the CapEx. That's how it's going to work.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [142]

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And when that doesn't work, then, yes, we come back to Oliver. It's how it works.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [143]

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We have to -- last question...

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [144]

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(foreign language) So we have 2 questions from -- you have more questions, Philip? We have 2 questions from the webcast. Question one is from Mr. Wienen and he ask us, U.S. housing market seems to have weaker H2 '18. Question one is, to what extent has it impacted the U.S. Installation Technology business?

No, it hasn't impacted. We said that we have expected a little bit more from quarter 4. We even had our inventories. That's also to do with the December month because we think the 2 weeks -- the Christmas and the New Year were in 2 weeks. A lot of people took holidays. So we couldn't ship everything what was ordered. So yes, impact, yes, could be EUR 10 million to EUR 15 million lower, something like that. But the orders were good. So we will ship it out in this year. Hopefully, this is enough answer for Felix Wienen, (inaudible).

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [145]

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Question 2?

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [146]

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Question 2.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [147]

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Yes. Divestments?

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [148]

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Divestments.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [149]

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Arno.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [150]

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EUR 97 million annual business. What impact did the divestment have on group operating margins? A big part of these divestments is low margin business. So -- I think the second question is related to that, because did the divested business generate significantly below group EBITA margins?

Significantly is a little bit difficult to say, but it was below our group EBITA margins.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [151]

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Yes, 10%. Yes, I think also [Martin's] question before.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [152]

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So we normally do this to improve our portfolio. And let's say what I've said before, we don't normally sell off our pearls.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [153]

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But it can also be a noncore business, but there's a nice margin. Maybe get a nice price. So it's not always. But in this case, I think it was below average.

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Arno R. Monincx, Aalberts Industries N.V. - CFO & Member of Management Board [154]

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Majority is below average.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [155]

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The nicest thing when you have both. So noncore and low margin and no growth potential, that are the 3 criteria. No growth potential, noncore, no link with the group and low performance.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [156]

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Get a high price.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [157]

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Yes. And get a high price, yes.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [158]

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And only EUR 55 million of that was included in '18, as I explained before. So the impact is not EUR 97 million and the margin on that -- it's the EUR 55 million and the margin on that just to get the picture complete.

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Wim A. Pelsma, Aalberts Industries N.V. - CEO & Member of the Management Board [159]

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No more questions via the webcast. Are there more questions from the room here? No more questions. Then I would like to thank you all and also the people joining the webcast. Thank you very much.

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John Eijgendaal, Aalberts Industries N.V. - Former CFO & Member of Management Board [160]

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Thank you.