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Edited Transcript of KVW.AS earnings conference call or presentation 12-Nov-19 10:30am GMT

Q3 2019 Koninklijke VolkerWessels NV Earnings Call

Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Koninklijke VolkerWessels NV earnings conference call or presentation Tuesday, November 12, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alfred Vos

Royal VolkerWessels nv - COO & Member of Management Board

* Jan A. de Ruiter

Royal VolkerWessels nv - Chairman of the Management Board

* Jan G. van Rooijen

Royal VolkerWessels nv - CFO & Member of Management Board

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Conference Call Participants

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* Andre F. M. Mulder

Kepler Cheuvreux, Research Division - Analyst

* Christophe Beghin

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

* Martijn P. den Drijver

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

* Tijs Hollestelle

ING Groep N.V., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome at the Analyst Meeting and Call of VolkerWessels. Jan de Ruiter, Chairman; Jan van Rooijen, CFO; and Alfred Vos, COO, are present at the other side of the line.

I hand the call over to Mr. de Ruiter. Please go ahead, sir.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [2]

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Thank you, operator, and welcome, everybody, and to a bit of an unusual Q3 update call. We are going to discuss 2 things, I guess. First, the numbers; and then the offer that we simultaneously announced this morning.

The highlights of the numbers in our opinion. EBITDA, including OpenIJ, for the first 9 months came in at EUR 148 million, and that's EUR 18 million up over the comparable period last year. Order book at the end of September, slightly over EUR 9 billion, which is an increase of EUR 167 million as compared to the same period last year.

We made a very specific statement on OpenIJ, which is that the project is now approximately 76% complete. We think we have roughly EUR 200 million to go in construction. And we increased loss provision by EUR 1 million to EUR 115 million, which is the VolkerWessels' share of the loss. And we have also indicated that we expect that -- and we call that the managerial target. That the final project result will be in the range of minus EUR 110 million that would imply an improvement of EUR 5 million; and EUR 77.5 million negative and that would imply an improvement of EUR 37.5 million. The reason that we made that specific announcement on OpenIJ obviously is linked to the offer from Reggeborgh.

Then we do the second topic. We also announced, together with Reggeborgh, that Reggeborgh is making an offer for the shares in VolkerWessels that they don't own as yet at EUR 22.20 per share. That is a premium of 25.4% over the closing price of October 28.

A few words on the process that we follow. The letter from Reggeborgh was received on October 8 addressed to myself and to Jan Hommen and the members of the Managing Board and the members of the Supervisory Board.

We have formed a special committee which consisted of the independent members of the Supervisory Board, i.e., Jan Hommen, Sietze Hepkema and Frank Verhoeven; and from the company, Jan van Rooijen, Thomas Lampe, the Company Secretary and myself. And the purpose of the exercise, obviously, was to safeguard a very solid process in order to balance the interest of all stakeholders. And that has resulted yesterday in the signing of a merger protocol where we, as a Managing Board as well as the independent members of the Supervisory Board, unanimously recommend the offer to our shareholders.

And with those opening statements, I would like to give the floor to -- open the floor for questions. I suggest that we start in the room and that we, as we normally do, change to the phone whenever we feel that, that is a better balance of the question. Martijn, yes?

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Questions and Answers

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [1]

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Martijn den Drijver, ABN AMRO. In the numbers first, if you look Construction & Real Estate Development, you mentioned the impact of nitrogen, only mentioning that raising the low nitrogen emission norm could have an impact, a positive impact. Don't you think the other measures that the government is currently contemplating could be effective as well raising both -- lowering motorway speeds, regional balancing, (inaudible)? Are those not effective measures in your opinion?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [2]

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I think that basically, what we say is that if nitrogen -- if the norm for nitrogen deposition is increased, then it is more beneficial to Construction & Real Estate Development than it is to Infra and that has very much to do with to what level you increase the norm. The expectation was that the norm would be increased from 0.05 to 1.0. And I think that the latest is that, that is not going to happen or that the increase, if it happens, will be lower. And basically, the message is that Construction & Real Estate is helped by a smaller increase than Infra. But I think that it is very difficult to say how this will pan out.

We believe that if you separate the new permits from what they call the deposition, which has already taken place, the (inaudible) quarter, that is now connected. So they basically take the view, if you are close to the major 2,000 area, then any additional impact is significant, and hence, should be compensated or you are not allowed to do anything.

We believe that a better way forward is to do 2 things. Okay, new permits will be allowed if and when they are under a certain new higher norm; and secondly, the government should increase its measures, basically attacking the problem that already happened over the past so many years. So separation. And I think that it is highly uncertain how that will be panning out so far, but Alfred is the specialist here and we don't have a lot of confidence that this will be resolved immediately.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [3]

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And if that is the case, what will VolkerWessels imply for 2020 then?

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [4]

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Well, as long as there is no solution, then whatever the solution might be, we're not in control here, so here, the government needs to come with a solution. We have provided the government with solutions that are also applicable and also enforceable within EU, also within Dutch law and legislation. If the government takes those over, I think that the impact will be there for 2020 and also the years beyond.

But the damage will be, considering the circumstances, minimal. Because we do have disruption right now already, and it's disruption that we simply receive in our order book development in Infra and that also counts for the overall construction market in the Netherlands. I mean it's a fact that because I know that the mess right now, certain areas, and the pipeline coming from the government in terms of Infra projects, is slowing down, is actually to a standstill. So that effect will be noticeable over the next coming years.

If there is no solution or if there's going to be a hybrid solution that will make things even more complex, I think we will enter into some difficult times. Because the solution is not that difficult, how strange that might sound, but politically, it is a very complex situation. And if that's not resolved, then basically, the pipeline with Infra projects is right now -- at least there's not much coming to the market. And of course, the government is doing their best with the PR machine talking about infra projects being submitted to the market in different niches, in different areas. But that doesn't help our capacity reserves that we have as an industry not only as a large construction company but also our supply chain that holds the equipment, that holds people and that is not necessary to renovate bridges, how to build dikes or to renovate the flood defense systems in Amsterdam. We don't need claims. We don't need [asphalt machines] for that.

So it will cause a serious disruption in the market if there is no solution achieved in very short notice.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [5]

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If I may follow up on that, [Heijmans] have given some sort of indication, they said around 10% on total revenues. They're not disclosing whether that is for real estate or construction or infra. Would you be willing to give such a range as well or approximate percentage, just to give us a sense of what a significant impact may actually mean?

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [6]

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We can only point the current development of our order book in Infra. I mean that shows already some reduction, and that was not the expectation. And it's very difficult to say more at this stage because we simply do not know what's going to happen next. That's very dangerous. Whatever we say now might be a mismatch and might be too negative. And you're also used from us that we tell you what we know. And that if we're really firm about something, we will tell you. But we could also be dangerously -- or we could get into the danger zone to be either too negative or too positive, sorry.

I think that looking at our order book development already gives you an indication. If you just calculate the reduction and the more time it will take to come to a solution, the percentage you can almost extrapolate over a period of -- now going forward.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [7]

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But there'd be a big impact on your cost coverage, so your fixed cost coverage in the capacity of organizations are always bigger than the loss of revenue. And I think that the problem here is that we believe that there our solutions but it seems for now, I have to be careful, that there is a total lack of political will to implement those solutions. And that makes it very difficult to predict because if that political will overnight is there, then it's basically a couple of signatures. And that makes it difficult.

But the impact, I have to say, I use the metaphor it's like you have a bubble in the pipeline. The bubble already -- we saw it already happening with our half year results, so basically, fewer tenders and billable hours, people basically inside who have less work to do. That will slowly but steadily be seen outside as well because the whole thing moves out.

Now the quicker they resolve, the better the solution. But part of the accident has already happened because we have this bubble of air, which eases out. So there is today -- later today, there is again a session in The Hague and [SND] are trying to influence the debate at all levels as constructively as possible. The political will is political will, and that, we cannot influence. And there are parties who believe that this is potentially the best thing that ever happened to us in this country. Because we can reduce [capital], we can reduce this, that, God knows what. And that goes, I guess, at a cost. Yes, that's a given. Interesting to see that this -- that we are the only country in the EU that is having this problem, so it's completely self-inflicted.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [8]

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Okay. And maybe a question on the U.K. Very strong market share gains, I assume. Is that due to weakness of your competitors, your strong solvency? Can you elaborate a little bit on that strong performance?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [9]

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Albert?

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [10]

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The U.K. performance is primarily driven by a continuous focus on margin over volume. The U.K. provides -- the market provides good opportunity for projects that we like. The range of risk and reward categories that we pitch on and have continued, that pipeline continues to be strong. And we don't deviate from that.

I can't tell you anything about the circumstances about regarding our competitors. I can only tell you that this is the result of a continuous focus on margin over volume, solid contract payments, solid execution teams. It's actually not more complex than that.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [11]

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The growth in the third quarter was phenomenal, plus 30%.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [12]

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And also, if you look at the -- also, if you look the outlook, you may recall that we've mentioned a few times a comprehensive spending review that the U.K. government is going through and they have come up with a long-term Infrastructure Bill. But what we see right now continues to go into the market as order book potential for us and we're able to pick up good projects out of that pool of projects. This is frameworks or 2-stage tenders, where we can actually work with the client to reach the price agreement in a healthy environment that generates good balance between cash, return and risk.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [13]

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I think the bankruptcy of Carillion, to some extent, rationalized the nature of some client trends.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [14]

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In the midterm, I think we're probably benefiting somewhat from that. You do see some disruption right after the bankruptcy. But on the other hand, we also have been faced with some higher cost in terms of insurances, project bank accounts, banking fees, et cetera, because the Carillion bankruptcy also some caused issues in the profit and loss of some other secondary players in the construction market that were trying to earn their fees back on the future business. So in that sense, the cost is going up somewhat. But Jan is right, I think some customers come to sense that always buying for the cheapest is not the best procurement strategy.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [15]

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So it's does come down to solvency and reliability.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [16]

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And quality of execution and I would say the cost, spending a lot of time and money in digitalization and trying to optimize our workflow and that pays off.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [17]

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Very high employee satisfaction in the U.K.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [18]

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Yes, I think it's overall.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [19]

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And the final question from my side, just trying to learn as much as possible from you that the discussions with Rijkswaterstaat on the new contract forms, how is that evolving or has that been evolving since the summer?

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [20]

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That's continuing. It's -- we should have been done by now. So basically, what happened is that McKinsey wrote a report the end of last year that has been translated into a Rijkswaterstaat report which was published at the end of May. At the end of May, the Minister sent a letter to Parliament indicating that she would come with new measures before Christmas this year. And Rijkswaterstaat wanted to have pilot projects into the markets trying to get experience with new contractor. Not necessarily only alliance contracts but also longer-term maintenance contracts, which would allow the contractor to basically enlarge the scope for innovation. So if you have a longer period of time, you can obviously innovate more.

I think the whole nitrogen and PFAS debate basically derailed that to a certain extent. So the intention of Rijkswaterstaat is actually still there to start doing that. But right now, their focus is, as you can expect, 150% on these particular issues because their pipeline of bringing projects to the market basically is grinding to a halt.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [21]

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I appreciate that, including Rijkswaterstaat, you've actually -- I think you've mentioned once that the top of Rijkswaterstaat is willing to make those changes but that -- and maybe the lower below that -- lowers below that. Any chance for [people plugs]? Can you say anything about that? Or is that way too early?

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [22]

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Listen, I think, in general, and specifically to Rijkswaterstaat, I think that the same applies to us and it would apply to any other organization is that if you want to change the culture, it never happens overnight. And it starts with a few believers and those believers have to basically try to make the whole system move.

I am still 100% convinced that Rijkswaterstaat is looking for a different way to interact with the infra market because I've said it many times before, nobody is helped by a whole range of problem projects. Year 1, they have I don't know how many. So now we think that 1 is already enough, so I take the view that they have the same opinion.

The thing right now is that the piloting is a very good idea. They had 3 projects newly built, and they had 3 projects which would be in long-term maintenance they had basically earmarked, so setting into the market under new contract forms and whatever have you. And that is temporarily, I hope, derailed by nitrogen and PFAS. The willingness to do so in my opinion is unchanged. And the discussions that we do have from time to time with Rijkswaterstaat are continuing. I think that the next one is the end of this month, something like that, somewhere around. So this continues. So the willingness is definitely there. But everybody is temporarily, I hope, diverted, I think is the right word, by this whole self-inflicted Dutch problem.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division - Analyst [23]

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So let's say, solution from PFAS before year-end, that's your best guess when new type of contracts could be acceptable for Rijkswaterstaat so the whole infra market can breathe again?

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [24]

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Yes, but the problem is far greater than that because when you end up in the nitrogen, and nitrogen has 2 elements: one is the realization phase where you need permits; the other element is the exportation or the usage phase of a project. Both elements need to roll up into what they call an environmental permit, yet you didn't need that form before May of last -- actually, you needed that since 2011, but it was ignored and that's actually when the whole thing started. So the government underestimated that issue. And in the realization phase, we can still pull some projects forward.

But at the end of the day, we're just on the receiving end here. They need a client and this is a monopoly client. This is -- 90% of the Dutch infrastructure market is the Dutch government in its various forms, and that client needs to be comfortable that your projects are being permitted on various phases before they start spending money on tender processes or spending money to have the contractors calculate on a price and a concept for the projects.

So there are various elements that need to have a tick in the box. And the issue here is that the usage phase in marking the tick in the box as long as these levels are where they are, because the nitrogen deposition in the Nature 2000 areas in the Netherlands is always exceeding this level during the usage stage. Even though we might come with NOx filters and all kinds of other stuff that will allow us to be, let's say, NOx acceptable during the realization phase, that doesn't help the project. Because the project also needs to generate levels of NOx or nitrogen that do not exceed the new boundaries, the new levels enabled, to get those projects permitted, so it's a very complex problem.

And as again, Jan said earlier, we have provided the government and also various stakeholders with a solution that falls within those guidelines because we're very active on the background. But you need to have 2 to tango to get this over the bridge.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [25]

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Tijs Hollestelle, ING. Follow-up on Martijn's question. You have been around as a construction company and been marketed in most segments. I'm looking at the industry for about 20 years. And while I also get the question a lot what will be the impact, people tend to focus on well, we're going to lose 10% of revenue or 15% of revenue. So people are -- the media, probably investors tend to focus on the companies who lose the most revenue next year. But it might be also the case that the high-quality companies say, I'm not diving in price and mispricing rates. I've seen many times that the companies which are more financially distressed are more aggressively tendering for the few projects still out there, and then they appear in the beginning, in the initial phase to be the winners that we all know how it's going to end up 2 years from now. Is that what you typically see and you're already preparing your tender people guys, watch out, don't lower your risk? Yes, your price or whatever, how you price this, this had better be underutilized because you can calculate that loss, but you cannot calculate the loss you're going to make on this price project.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [26]

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It's a top key priority.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [27]

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And it's -- all over it's happening.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [28]

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Yes, but you also expect this to happen again because…

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [29]

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Oh yes, because there's an overcapacity. And then, if there are less projects, then there was already overcapacity before this issue started. So with this issue, there's even more overcapacity.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [30]

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Yes. And I think we saw it happening. So that's why we made this statement in the Q2 numbers.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [31]

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And it's already starting?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [32]

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Yes. Yes. Yes.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [33]

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To make it factual, there's overcapacity in the infra market because construction is not constructing.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [34]

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And it's not only the loss of the project margin or result, it's also because we have negative working capital in projects also and the loss of the -- basically defending by our clients, so I can imagine, and also for us, it's difficult to sort of decide on the tender strategy and be consistent.

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Tijs Hollestelle, ING Groep N.V., Research Division - Research Analyst [35]

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Yes, so in kind of worst-case scenario, that there's no decision or maybe, let's say, mid next year, probably there will be bankruptcies. For you, as a long-term strategy, would you kind of look for consolidation because everybody with an economical view looks at the Dutch market, way too fragmented, way too much competition, so the market is never really healthy. So these consolidations that (inaudible)

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [36]

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It's far too early to speculate on this. I think that we should give the politicians some room to come with a solution. I think that they communicated a date of the 1st of December and...

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [37]

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It's not there yet.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [38]

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It's not there yet.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [39]

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And I think it's...

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [40]

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We are not positive, but I think it's too sort of early to...

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [41]

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Early stage, let the process run its course.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [42]

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To speculate.

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [43]

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And what we need to do, Tijs, is just the business like we always do, so focus on margin over volume, so not volume but margin, acceptable risk. And if the projects are not there, then we have to size the business to the level where it needs to be. And we will size it again and again to make sure that we are, I wouldn't say, ahead of the curve but that we have the timing right on the decisions we need to make. And at the same time, don't underestimate the investments we have to do to make sure that we also prepare ourselves for the developments that we see in the market that will require -- that are required to make sure that whatever solution there will be, we believe that the end conclusion will always be we need to come up with a more sustainable way how we build our projects. By the way, this is not new. This is something that's been on our agenda even before the IPO. But we might have to push the throttle here and there a little bit more than we do today.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [44]

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Operator, can we take a question from the other side, on the phone?

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Operator [45]

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(Operator Instructions) And we have a question from Mr. Christophe Beghin, Kempen.

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Christophe Beghin, Kempen & Co. N.V., Research Division - Analyst [46]

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I have a question on the statements you make on OpenIJ. Can you elaborate a bit more where you -- numbers are based on the potential recovery amount of the loss provision?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [47]

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Yes. Now this is the statement that we make on OpenIJ. So what we do is we, for every single project that we have, we make an estimation of what we call the managerial outcome may be. And the only reason that we disclosed OpenIJ at this stage is that OpenIJ obviously has figured rather prominently during our listed history, recent listed history. And in order to inform everybody, on the same page we have given you these 2 numbers, this range. And we are not going to be more specific than that for especially commercial reasons.

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Christophe Beghin, Kempen & Co. N.V., Research Division - Analyst [48]

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Okay. And maybe one last question, if I may. The statement is in name of the consortium you make or only the name of VolkerWessels?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [49]

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Only in the name of VolkerWessels, but I have obviously informed my colleague, or BAM, that we would we doing so. But BAM has to make their own assessment, but they may not necessarily agree with it. I don't know. Okay. Andre?

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [50]

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Yes. Once again, on the nitrogen emissions, can you talk us through a bit more in detail about what your recommendations have been to government?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [51]

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Let's see, I'm thinking because I can say it's -- I think that the first thing I said at the beginning is that we try to disconnect -- rephrase: the current way on how a permit is being given is that the total picture is taken into account. So if you are working in an area, which is a Nature 2000 area, this is already badly affected. Then the logical outcome in the current decision-making is because of the existing situation, you cannot do anything any longer going forward.

The proposal that we make and that is, in our opinion, how the EU directives should be implemented in the first place, is just you disconnect the 2, that you look at the nitrogen deposition that is caused by a particular project, then you have to verify whether that has a significant negative impact on the existing situation. Whatever the level of significant negative is, you can determine as a country yourself and there are no guidelines from Europe on that. In the Netherlands, that level is set very close to 0, and that's where you go wrong. So that level should be increased.

The other way is say, okay, if we have affected areas, then we should have separate policies aimed at reducing the nitrogen deposition already there in those areas. As long as you continue to connect, you end up in a situation where you are today. If you disconnect, and also the Rijkswaterstaat is not against it, if you disconnect, then you can actively figure out policies to reduce nitrogen deposition, reducing cattle, whatever so the (inaudible) whilst you continue with your normal economic activity. Now that needs to separate.

The second one is in PFAS and there was a report last week that the way that it is being calculated or analyzed how much PFAS is actually in soil is rather, how do you say that, not very precise. So the model which is being used to assess the level of PFAS apparently is very questionable in that the outcomes are basically very, very uncertain. So basically, we believe that if you raise the norm for PFAS, then in real life, not a lot will change. But on the climate or on diversity, biological diversity reasons you can continue your activities.

So it almost seems that we have locked ourselves up in a model which has given the wrong outcomes, and we're all afraid that [this bill] will go forward.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [52]

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There are lots of possibility to lift the norm because you can lift it a big way and still be far more conservative than many other European countries.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [53]

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Correct. And the thing is that you now see is because nitrogen is singled out, that's the problem. And if you have a project -- sorry, if you reroute your logistics towards a certain project, this is causing you to drive 50 kilometers more in order to stay away from a particular Nature 2000 area, then that project can fly, but you are causing much more carbon dioxide, that's a given, but that's okay, yes? So I think that as long as you look at the problem in complete isolation, you get very strange outcomes. It is mind-boggling, in my opinion, that you are going to stop a residential project where the newbuild homes are energy neutral and whatever have you, yes, because of a tiny fraction of nitrogen, which is adding maybe to a problem which is already substantially big anyway.

So in order to solve that particular problem, I think that if you take [an area that] has far too much nitrogen already, so if you look at on these maps, it's all yellow. I'm not saying that adding more is not helpful, but the real measure is how can we find something which is actually going to decrease what's already there.

So I think it's -- we are, basically I'd say we are painting ourselves in the corner of the room and the paint never dries, yes? It's self-inflicted. And whatever you define as significant is up to Dutch politics. So this is political will, and the problem seems to be, but time will tell, that certain political parties are using this in order to reach other goals, which have nothing to do with the constructions and construction is responsible for 0.6%, rounded up to 1%. So whatever we do, it's insignificant anyway.

But it's the most curious debate that I've seen in this country, ever. You can quote me on that. And that's why we were also rather vocal in August, because the -- this whole -- the PFAS was agreed in 2012 or 2014, whenever it was. The color of a Parliament was less green than it is today. And clearly, at least we took the view that it would be far more difficult now, with the composition of this Parliament, to get alternatives passed in Parliament. And that's exactly what's happening because the coalition is under incredible pressure not to implode on the back of nitrogen. So everybody gets sort of semi, semi, semi-measures. So this is a real problem.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [54]

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And if we look at the results, just down to the numbers there, we've seen Infra moved up strongly in the first half, moved down strongly in Q3. Is that just partly anomaly? Or anything special there?

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Alfred Vos, Royal VolkerWessels nv - COO & Member of Management Board [55]

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Jan to answer.

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Jan G. van Rooijen, Royal VolkerWessels nv - CFO & Member of Management Board [56]

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Yes. I think part of it is the decision that we have. And Infra is a lot of smaller project, but also, of course, a few larger projects. And on balance, we did a little bit less in the third quarter than in the second quarter, but nothing really special.

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Andre F. M. Mulder, Kepler Cheuvreux, Research Division - Analyst [57]

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Seeing any other changes in the U.K.? You warned about Brexit. But I couldn't imagine why you would make that statement because of all the companies, you will probably be less -- least affected by this. Have you seen anything there? Because the numbers appear quite strong [I seem to recall].

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [58]

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Yes, I think it appears strong. But we say Brexit remains an uncertainty. So we haven't said Brexit has increased risk. We say it remains an uncertainty, which is still the case. Obviously, we are moving towards a solution. I think that the biggest uncertainty in my book would be that the election results on December 12 is a hung Parliament, that could be an outcome, and that would not be helpful. I think that if the polls are right and there will be a Tory victory, which will give them the majority of Parliament, then I think they will swiftly move with the Brexit. And then clearly, the next -- this is the withdrawal agreement that we are now talking about. Then we are going to enter the phase of between 2 and 5 years, in my opinion, which will be how are we going to define the new relationship with the EU.

So this saga, if you like, is not over. So far, it is not impacting our business. I think that the good news is that in the election manifestos, of course, the Labor party and the Conservative party, infrastructure is mentioned as a very important factor that both parties want to invest in. So you could argue that, that will be helpful for us also going forward. I fully agree. The only reason that I'm still a bit hesitant is if this outcome is a hung Parliament, then basically, we start all over again. So that was the reason on the Brexit.

Anybody on the phone, operator? Can you ask one more time?

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Operator [59]

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(Operator Instructions) No questions coming in from the call, sir.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [60]

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Have we got more to come?

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Unidentified Analyst, [61]

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A question on the outlook?

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [62]

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Yes, sure.

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Unidentified Analyst, [63]

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If I read this, such a further decrease of shareholding has become unrealistic. We are still a mile away from taking over for the whole company. If you cannot buy it, there could be a bit of patience there, but it's still just not any case you're going to buy the whole lot.

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Jan A. de Ruiter, Royal VolkerWessels nv - Chairman of the Management Board [64]

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Yes. This is obviously for Reggeborgh to answer, but they gave us -- they gave -- they were in the press conference this morning and what Henry Holterman stated is that he says, he took -- he takes the view that I own 65% of the company, I have 100% of the responsibility. Because of all the governance, I'm a bit further away than where I'd like to be. Further selling down will be perceived as very negative, and there will be [down] prices that I definitely don't want to be a seller.

He didn't want to be here because the original intention was sell down, become a significant minority shareholder. That has failed. That apparently, resulted in internal discussions with the family. And their view was to make the bid, and we basically have taken a very simplistic view on that because that is then for us a new reality. And with that new reality, we have followed with due process, which has resulted in a recommended offer. And that's it. And then it is for them smart or not smart, time will tell.

Anyone else? Nay? No more? Operator, then we're going to wrap up. Thank you for joining us on the call, everybody, and we'll publish our Q4 numbers before the bid of Reggeborgh will be done. So if it's down to me, we will have a meeting again in February to discuss the full year numbers. Thank you.

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Operator [65]

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Ladies and gentlemen, this concludes the event call. Thank you for attending. You may now disconnect your line. Have a nice day.