Compagnie de Saint-Gobain S.A. (SGO) Earnings Call Transcript & Summary

Hello, and good morning, everyone. It is my pleasure today to present together with Sreedhar, our CFO, our 2022 Results. In 2022, Saint-Gobain delivered excellent performance. Record results not only on the financial side, but also extra financial, new record highs on all our performance indicators, be it growth, operating income, operating margin, recurring net income, free cash flow, or return on capital employed. Before we dive into our figures with Sreedhar, I would like to share with you some of our significant achievements in 2022. First of all, I'm extremely grateful and proud of all our Saint-Gobain teams who have made our fantastic success be possible in 2022, despite multiple challenges, energy, supply chain, inflation, geopolitics. In our last employee survey, last fall, with more than 84% participation around the world for 170,000 employees, close to 90% of them told us that they are very proud to work at Saint-Gobain. They are engaged, working in a strong, resilient, country-based operating model. This gives me great confidence for the success of Saint-Gobain today and tomorrow. As part of our Grow & Impact strategic plan, we are actively rebalancing our geographic footprint to increase our exposure on North America and on emerging markets. In 2022, we invested EUR 4 billion of growth CapEx and acquisitions in these regions. As a result, 62% on a pro forma basis of our operating income comes now from North America and emerging markets. This is a very significant change versus Saint-Gobain 4 years ago. In 2022, we also strengthened our leadership position in construction chemicals with sales representing EUR 5.3 billion pro forma, thanks not only to strong organic growth, but also the very successful integration of Chryso and, of course, GCP, Grace Construction Products, plus 7 other bolt-on acquisitions in Mexico, Brazil, Egypt, Malaysia, India and Uruguay. Now switching to renovation, which is our #1 market, a very resilient market. It represents 50% of our sales. And we are more than ever very well positioned, the best position we could think of to take the benefits of this strong structural growth. Indeed, we set the tone on renovation. We shape the renovation market, thanks to our presence along the full value chain. Finally, some highlights on sustainability, which is extremely important to us. It is the core of our strategy, the core of our business model. And in 2022, we have achieved major milestones. In September 2022, we launched the world first low carbon, glass offer ORAÉ, which has 40% lower content of CO2. We have also launched the first plasterboard made of 50% recycled gypsum. On top of that, of course, we work on our own carbon footprint, and we have achieved major milestones with the first world 0 carbon production on Scope 1 and 2 for glass, for plasterboard and also a very low carbon glass wool insulation production. Thanks to all of this, we have reduced over the last 5 years, the carbon intensity of Saint-Gobain by 42%. So we can grow, save the planet and provide the best solutions for our customers. Of course, all these achievements on the ground are translated into financial results. 2022 confirms our excellent execution for the fourth consecutive year, delivering record results, and all performance indicators show record results. Record growth, plus 15.9%, above EUR 50 billion. Record operating income, up 18.4%, with a record margin, double-digit margin for the second year in a row at 20 basis points versus 2021. Record earnings per share, up 21.1%. Also record free cash flow, almost up 31%, 30.5% at EUR 3.8 billion. Last but not least, very strong value creation with a record return on capital employed at 16.1%. That being said, when you reflect a year ago, 2022 was not a walk in the park when you think of all the challenges, all the questions you were asking a year ago, we have delivered. We have delivered very consistent execution. Outperformance on organic growth. If I take different markets, we have outperformed so many markets, also a second year in a row of double-digit margin. We remain very disciplined on cash, on capital allocation, and we continue to deliver very well on value creation. We have been active -- very active also on portfolio pruning EUR 1.9 billion of acquisitions, very value accretive and EUR 3.8 billion divestments. So again, not a walk in the park when you think of the energy inflation, geopolitics, supply chain disruption, but Saint-Gobain has been there to deliver for the fourth consecutive year. So Grow & Impact. That was the second year. We are delivering great successes with our strategic plan, and I'm very confident that Grow & Impact will continue to drive successes for Saint-Gobain going forward. I now leave you with Sreedhar for all the group and the segment financials. Sreedhar, the floor is yours.

Thank you, Benoit, and good morning to everyone. Let me give you some more details about 2022 results. Starting with the sales growth. In 2022, we continue to outperform on our main markets and delivered the dynamic growth of 15.9% and an organic growth of 13.3%. We saw continued resilience in the renovation market, despite the slowdown in the new construction in Europe and Americas. The structural impact was negative coming from the continued group profile optimization to enhance our growth and profitability profile. And the exchange rate impact was positive. Regarding the working days, please note that for 2023, as a whole, this will have a negative impact versus 2022 of close to minus 1%. In terms of operating profit and income and the margin, we achieved records for the second year in a row, demonstrating how we continue to outperform despite the challenging environment, and you have seen a number of things we dealt with in the last 2 years. The operating margin now is 270 basis points higher than 2018 when we launched the transformation for the first time. Once again, we manage the price cost spread very well. In particular, we achieved the price cost spread positive even in the second half of the year. And this enabled us to protect the margin of the group. This was a very important event because you all know the inflation was significantly higher on the raw materials and energy costs, which was around EUR 3 billion in 2022. Our total materials -- raw materials and energy bills, was around EUR 13 billion in 2022, including EUR 2.3 billion for energy. We expect another year of inflation of 2023, but much lower than what we saw in 2022 with raw material and energy inflation of slightly more than EUR 1 billion. Given the embarked price effect of more than 3%, we are very confident to at least compensate this inflation, while remaining very focused on the positive price/cost spread even in 2023, the way we delivered in the last 4 years. Let us look at the other P&L lines before the operating income. Nonoperating costs average EUR 250 million over the last 2 years, aligned with what we said at the Capital Market Day. The asset write-downs is mainly linked to the divestment of assets during the year, and the most impact of the purchase price allocation for the recent acquisitions like Continental, Chryso, Kaycan and GCP. We achieved under the new record of EBITDA in 2022, which is over EUR 7 billion for the first time. When you look at the line on financing costs. It was managed very well. We took a lot of proactive steps, and you see that the overall financing cost remains at the same level of last year. Recurring net income reached a record level for the second consecutive year at EUR 3.3 billion, up 18.5%. And the recurring earnings per share is up 21%, a new record result. My favorite topic, cash. When you look at coming to the free cash flow, we have achieved a new record of EUR 3.8 billion free cash flow and a conversion ratio of 59%. Free cash flow generation is now 3x greater than what we had in 2018, underlying a huge change in cash culture. We have now pushed the working capital down 14 days in total in the last 4 years, demonstrating again a clear structural improvement. We want to make sure that we can -- at the same time, we continue to serve our customers well in a competitive world. So we would keep some flexibility to make the necessary adjustments in the inventory level, while remain focused on the way we serve our customers. The total CapEx was EUR 1.9 billion. We continue to optimize the maintenance CapEx and invest in the growth CapEx, again, in an identified markets. In 2003 -- 2023, we expect to spend the CapEx will be slightly more than 4% of sales, which is in line with the range which we defined in the Capital Market Day at 3.5% to 4.5%. When you look at the balance sheet, clearly, all the impact of the strong free cash flow generation for the last 4 years, due to the cash culture ingrained in all the businesses has allowed us to reinforce our balance sheet in a significant manner. And here, you see that the net debt-to-EBITDA ratio has halved since 2018 to 1.2x of EBITDA. We are committed to keep this balance sheet robust and strong and also keep our credit rating strong even going forward, as it gives us necessary financial resources to roll out our Grow & Impact strategy. When you look at the indicators of value creation, if you look back the last 4 years journey, you'll see that there is a significant improvement in value creation as our recurring earnings per share has more than doubled, and we have achieved a strong increase, both in return on investment and return on capital employed in the last 4 years. On all 4 -- if you look at the return on capital employed, all the 5 operational segments meet or exceed the target which we set in the Capital Market Day between 12% to 15% of return on capital employed in all our businesses. Now let's get into the details of reporting by segments. When you look at overall, in Europe, as Benoit said, we continue to see a resilient market in renovation despite a slowdown in the new construction. And when you look at Northern Europe, clearly, Nordic countries continue to grow, leveraging our positioning across the value chain. In the U.K. Over the last 2 years, EUR 3.5 billion of sales have been divested or in the process of being divested. This shows the significant change we have done in the profile of the U.K. business. And the country is also seeing a slowdown in both new and renovation market, unlike in other European countries. The German market slowed in the second half, but we benefited from our strong positioning in energy-efficient renovation. Eastern Europe saw a slower H2, but performed exceedingly well over the year, driven by our leadership position, by far the best full range of solutions that we offer to the market. The region achieved again a record operating margin of 7.8%. In the Southern Europe, we outperformed the renovation market, which was more resilient, thanks to stricter regulations, stimulus measures and a faster payback for energy-efficient renovation project, where Saint-Gobain is very strong with its comprehensive solution. In France, we continue to benefit from our unique presence across the value chain and our undisputed leadership position in the energy-efficient renovation. We are in daily contact with our trade professionals, and we know that they continue to have their order books, which is very healthy. Spain and Italy outperformed their markets with a very dynamic growth, thanks to the new operating model, which is very close to the customer, looking constantly their unmet needs and bringing the differentiation in the way we serve them. The region's operating margin remained at a very good level of 8%. In the Americas, we continue to see strong growth despite a moderate growth in new construction in the second half. The region reached a new record in operating profit with the U.S. now becoming the top contributor to the group's operating profit. The region achieved an operating margin of 16.1%. In North America, growth was driven by our complete solutions, the good dynamic in the light construction and our strong renovation presence through the roofing solutions. We expect the slowdown in the new construction to be limited by the structural need for the additional housing and the stock of the building sites already under construction. Latin America saw a double-digit growth, despite the macroeconomic environment still being difficult in Brazil. Mexico and Argentina continue to outperform and gain market share in a consistent manner. In the Asia-Pacific region, India showed an excellent performance, once again, thanks to the market share gains and an innovative offer across the many applications. This is the country where Saint-Gobain is clearly leveraging its strong brand recall. China maintained growth despite the disturbance in Q4 linked to the COVID. Southeast Asia had a dynamic quarter, especially in Vietnam and Malaysia. The region achieved once again a record operating margin of 12.1%. Now let us look at our global customer markets. Like-for-like sales accelerated in both price and volume in the second half, thanks to the recovery in automotive market in Europe. Our construction industry business continued to show a strong growth of 20%, outperforming the market. Chryso continues to outperform and deliver an excellent sales and profit trend. In mobility, our sales accelerated in the second half. We continue to outperform the automotive market, thanks to the particularly strong positioning in electric vehicle, where today, when you look at our sales is 30% of our mobility sales at the end of the year is coming from electric vehicle. Industrial markets saw double-digit growth, driven by both volumes and pricing, thanks to our solutions to help our customers decarbonize their processes. The operating margin of High Performance Solution was 12%, impacted short-term by negative mix and the progressive catch-up in price, particularly in the automotive segment in a very inflationary environment. I want to show you this slide, which I presented to you at the Capital Market Day. These are the numbers, which we, as a management team, committed to you all. And here, you will see that in spite of a very unsettled environment, we have delivered on every single financial targets consistently during the last 2 years. And we will remain focused on executing our Grow & Impact strategy, and we will consistently deliver strong results for Saint-Gobain. Now I pass on the floor to Benoit, who will take through the strategy and outlook.

Thank you, Sreedhar. Now let me share with you the highlights of our Grow & Impact plan, the key action plans and priorities. I want first to take a step back and reflect on the new Saint-Gobain, on the very successful transformation journey we have done over the last 4 years, this is a new Saint-Gobain. I start with our geographic footprint. Over the last 4 years, we decided to go through a deep transformation. We have consciously allocated our capital close to EUR 7.5 billion of our growth investment, CapEx and acquisitions in North America, Asia and emerging markets. As a result, we have doubled -- we have doubled over the last 4 years our operating income for North America, Asia and emerging markets. And we have today a well-balanced profile with close to 1/3 of our operating income in each geographic zone, be it North America, 30%; 32% Asia and emerging markets; and 38% Western Europe. In terms of sales split, we are already, after 2 years, on the target that we announced at the time of the Capital Markets Day 2 years ago. We have achieved this by deciding to place 70% of our growth CapEx in North America, Asia and emerging markets. We have done this in a very dynamic way, just last year, 18 new plants and over the last 4 years, close to 80 new lines or plants for Saint-Gobain. That's almost one every 3 weeks. This geographic rebalancing, of course, has been also the result of our active portfolio management. We have acquired EUR 3.8 billion of sales on attractive businesses in light and sustainable construction since 2018. And during the same period, we have divested EUR 9.1 billion of underperforming assets or noncore businesses. All in all, we have rotated around 1/3 of the group perimeter -- 1/3 of the group parameter since 2018. Now I would like to share with you where we are on some of those important acquisitions and give you an update on our key ongoing projects. I'll start with Kaycan that we bought in July 2022, the top siding player in Canada in line again with our strategy of light and sustainable construction to strengthen also our presence in North America. With Kaycan, we are now the leading building materials manufacturer in Canada, where there is a lot of growth, 2 million underbuilt units in Canada. We have expanded our product portfolio, notably on the exterior product side, plus on all different products in terms of product mix. We are delivering very well on the Kaycan integration with strong results in 2022, where we achieved $84 million of EBITDA, and we are nicely ahead of our plan on synergy, notably on the cost synergies of purchasing. Now Chryso. Since its integration into Saint-Gobain, Chryso is delivering very strong results, achieving 20% sales growth in 2022, maintaining the best-in-class EBITDA margin of the sector, despite the challenging raw material inflation. Chryso continues to be a leader in technology solutions also for sustainability with some World Premier last year for 0 clinker concrete with Hoffmann Green Cement and Bouygues in France. So technology leader to accelerate the decarbonization of cement and concrete. We are also deploying a lot of synergies with Chryso in every country, leveraging the global footprint of Saint-Gobain. You will see in a minute we have recorded a video with Thierry Bernard. All the synergy you will hear from Thierry within the group, leveraging cross-selling, organic growth and also bolt-on acquisitions. Of course, building on top of the success of Chryso, we finalized last fall, the acquisition of GCP. We are making very good progress on integration. The new construction chemicals business unit within High Performance Solutions. All this organization is already in place under the strong leadership of Thierry Bernard. In 2023, GCP EBITDA should reach $170 million with synergies above the $25 million target for the first full year since integration and the full potential of synergies have been confirmed. So I'm very confident that bringing together GCP with the best-in-class margin of Chryso will deliver excellent results. We'll continue to optimize the operations of GCP, whether on supply chain and purchasing, SG&A, there was quite a significant gap between GCP and Chryso, also leveraging Chryso product innovation and the integrated upstream polymerization manufacturing capabilities. Now I offer you to listen directly from our 2 CEOs, Mark Rayfield in North America for the portion of GCP, which is there connected to our roofing and siding businesses within certainty, and Thierry Bernard for all construction chemicals. They have been kind enough to record the video, and I think it's important to hear directly from them, the 2 of them.

The integration of Chryso is going well along with a great business performance. Amid very challenging supply chain dynamics across the globe, we have kept growing at a fast pace of more than 20%. Our 2022 EBITDA margin stays at high levels and is best-in-class in the industry, thanks to a solid value proposition for our customers, swift pricing management, operating leverage and productivity gains, bottom line is we have kept our agility. Beyond these results, I'm even more excited about the prospects of this integration into Saint-Gobain. We are really taking advantage of Saint-Gobain's comprehensive portfolio of building materials, gypsum boards, mortars, just to name a few. We have initiative cross-selling in numerous countries, selling, for example, solutions for flooring and screen applications through the vinyl channels. Chryso also benefits from Saint-Gobain's strong geographical footprint, enabling lower capital expenditure and faster organic and inorganic growth. In India, for instance, we are currently investing in a fifth admixture facility within a larger site operated by Saint-Gobain. Another good example is our 2 newly announced bolt-on acquisitions in Brazil and in Egypt. This model can be replicated in multiple countries. As for the sustainability revolution that the industry is facing, there too, the group is bringing us so much scale with the acquisition of GCP, broader technology platforms, powerful innovation, a dedicated structure to collaborate with startups and partner with the entire ecosystem. Regarding GCP, as expected, 2022 has been a transition year to a new ownership and a challenging year. However, we are on track to improve the performance and to fully leverage GCP's trend offerings and talented people. The new organization is already in place with a new management team. Our synergies for year 1 have already been identified precisely, and we expect them to come in ahead of expectations. So all in all, I am very excited and confident about the significant growth potential of the construction chemicals business within Saint-Gobain, and our ability to build a strong worldwide leadership.

In addition to the areas that Thierry mentioned, the GCP Specialty Building Materials North American integration and business are both on track and exceeding model synergy targets on the strength of purchasing activities. Meaningful progress has been made on stabilizing the supply chain and manufacturing. These improvements have significantly increased the plant's output and removed uncertainty in supply across the network. This has enabled significant growth in Q4 2022. GCP and certainty commercial and product management teams are aligned and working closely together. These realignments have confirmed significant commercial opportunities in both waterproofing and residential markets, be it for roofing or siding. Regarding the Kaycan integration, synergies are of the business plan on the strength of hard purchasing savings across the broad portfolio of raw materials as well as indirect spend. Sales synergies and expanding the certainty specialist siding offering are targeted for Kaycan Canadian branches in Q1 2023. Expansion of the Kaycan engineered wood and metal offering into the U.S. market is also on track for later in 2023 for key markets. And we're on track for U.S. and Canadian employees onboarding, thanks to the amazing job of our integration teams. No doubt they will continue to collaborate effectively and complete the successful integration of Kaycan and GCP businesses into North America according to plan. I am confident these integrations will strengthen our #1 position in Building Materials in Canada and resource our worldwide leadership in sustainable construction.

Thank you, Thierry. Thank you, Mark. So now I've explained the new Saint-Gobain. I will go deeper to illustrate our attractive and resilient strategic positioning for growth. First, we have created a very strong alignment between our vision, worldwide leadership in light and sustainable construction, our purpose, making the world a better home and our plan Grow & Impact. This has proven to be very powerful to engage our teams to walk the talk and also to engage our customers and deliver, of course, very consistent results over the last years. Our biggest end market is renovation, and we are ideally positioned on the resilient renovation market in Europe. This is clearly a structural -- there is a structural policy shift in energy efficiency renovation for buildings, whether it's private or public buildings. The EU is strongly committed to accelerating energy efficiency renovation not only for the climate, but also because of the energy crisis, the purchasing power of households in Europe. And this commitment is now becoming a reality with many initiatives across all countries on the ground. Those initiatives will be long-term structural growth drivers for Saint-Gobain in the coming decades, where we need to double or triple the renovation rate in Europe. We are the one-stop shop solution provider on renovation. And therefore, we are ideally positioned to capture this growth. In Europe, with our presence along the full value chain. We have a unique range of sustainable solutions for energy-efficient renovation. We provide our customers a holistic offer of solutions, not only the best products for energy efficiency, but also trainings, advice, services for craftsmen, training, logistics, recycling services and key account management for larger customers such as homebuilders country by country. With more than 60% of our sales in Europe on renovation, we are ideally positioned to capture this structural growth of this renovation market with a 2 to 3x increase in renovation rate needed, as I just said, for EU carbon neutrality target. Our solutions do bring measurable benefits on energy efficiency. Here, you have one example, one very concrete basic example of a traditional home insurance, where with a 4 to 5 years payback, EUR 250 per square meter, you can drop by more than 70% your energy bill move from G to C on the energy diagnosis performance, which is now in the regulation, and we are delivering at Saint-Gobain, more than 80% of the need. It's a proven case. It works, and we are delivering that and therefore outperforming the renovating market in France and in Europe. If I turn to North America, where we are growing fast, I explained that earlier, we are the #1 building materials manufacturer in North America with the most compelling offer for light and sustainable construction. We are also a unique, powerful commercial organization, which allows us to grow across multiple channels, of course, accelerate our top line, thanks to cross-selling and, therefore, ultimately gain market share. Despite some short-term slowdown in new build market, they are very strong growth perspectives for light construction, both in the U.S. and Canada, just heard from our CEO, Mark Rayfield, where there is still massive structural need for more housing. In emerging markets, we are constantly enriching our offer for light and sustainable construction in India. Sreedhar was pleased to say and highlight the performance of India for Saint-Gobain. We are already a leader in glass and leader in plasterboard. We have recently made strategic acquisitions in insulation, not only stone wool like in March last year, but you have seen 2 days ago, we entered into the glass wool market in India with the leader on top of what we have already in construction chemicals. You heard it also in the video of Thierry Bernard. In these emerging markets, we see a fast adoption of light construction, which is growing 3 to 5 points above traditional construction methods. And on average, the need for Saint-Gobain products such as plasterboard, insulation, siding and, you name it, is 2.5x larger in light construction compared to traditional construction methods. Finally, let me share some growth highlights on our global markets. They are driven by fast-growing sustainability imperatives coming from our customers. You have seen the numbers of last year in terms of acceleration and growth and overall performance. This sustainability imperatives, they are a fantastic playing field for high-performance solutions business to deliver a positive impact through innovation. It could be on specialty ceramics for furnace performance, where we have now digital twins to optimize furnace performance, high-performance glazing for electrical vehicles with double-digit growth over the last years, admixtures, where we have close to 40% of new products to deliver on concrete and cement decarbonization. Now you have here a snapshot of our comprehensive full integrated offer towards both resilient and growing end markets, which I just illustrated. Our actions, our strategy is that in each country, we are focused on leveraging our synergistic product lines to deliver the best sustainable solutions for our customers and, of course, create the best possible value based on our local leadership positions. Sustainability is at the core of our business model, and of our growth going forward. We have achieved, I said it in my introduction, a very significant milestones in 2022. Close to 75% of our solutions bring sustainability benefits to our customers. CO2 emissions have been dropped in absolute figures across all the group by 27% compared to 2017, even though we grew quite a lot the top line. We also have now more than 50% of carbon-free electricity. That has been the case in 2022, and this is set to rise to 2/3 in 2025, thanks to all the recent power purchase agreements that we have signed in the U.S., in Poland and in Spain, for instance. In a nutshell, this is the new profile of growth and profitability of Saint-Gobain. We have achieved a very significant step change. We are a new Saint-Gobain, very significant step change on sustainability. We are leading on sustainability. Very significant step change on solutions to our customers to outperform and gain market share, and of course, a very significant step change on our financial results since 2018. Of course, all this is benefiting to our shareholders with a record shareholder return in 2022 and 2023. We returned nearly EUR 1.4 billion to our shareholders in 2022, which is a record with EUR 835 million in dividend and share buybacks ahead of our target. Turning into 2023, we will set another record above EUR 1.4 billion, thanks to a strong increase of 23% in our dividend, and at least EUR 400 million in share buybacks for 2023. I will finish with the outlook. We expect a moderate slowdown in our markets in 2023 with contrasting trends, a decline in new construction in certain regions, but good resilience overall in renovation. In Europe, residence in renovation, while new construction slows. In the Americas, a slowdown in new construction, partly mitigated by demand on the renovation market. In Asia Pacific, good growth in most countries. And within High Performance Solutions market, good momentum supported by ongoing improvement in automotive. So amid a moderate market slowdown in 2023, Saint-Gobain is targeting an operating margin of between 9% and 11%, which is being in line with the Growth & Impact strategic plan target. We have constantly delivered over the last 4 years. You have seen the record results we have delivered in the last 2 years. I'm confident -- I'm very confident that 2023 will be another strong year, good year for Saint-Gobain. We'll continue to outperform our markets, deliver on margin and value creation and, of course, lead on sustainability. Thank you. And we now turn to your questions.

So we'll start as usual with the questions in the room, jean-Christophe. Does the mic works?

Okay. I have 2 questions if you allow me. The first one is a general question. In 2021, 2022, we had generally some supply and logistical bottlenecks. Could you give you more flavor on this? And could you maybe describe the measure taken to offset this? And second question is the margin -- the EBIT margin improvement in 2022. It's mainly driven by Northern Europe. I guess that -- it is due to the mix -- to the distribution mix. I guess that generally industrial activities are experiencing a slight decline of the margin.

So I will take the first and then Sreedhar will take the second. What is very important, and I think it explains the performance of Saint-Gobain in the last 3, 4 years is that we never stopped the plant and we never shut down customers or job sites. So the supply chain of Saint-Gobain has been, I would not say, immaculate, but extremely strong and well above our competitors. Why is that? Because this is our strong country-based operating model. Mark Rayfield, Thierry Fournier, Patrick Dupin in Northern Europe, they take decisions on the spot. They anticipate their needs in terms of supply. They know exactly in which channel we are going to grow faster than others, and they are extremely agile. So the supply chain, but not only the outperformance of Saint-Gobain. In fact, the volumes -- last year, the volumes in Q4 versus what I've read from our competitors, we outperformed, and this is due to the very strong operating model of Saint-Gobain. We have seen that on the pricing. We have seen that on the overall market share or volume performance. And we have seen that on supply chain. So clearly, we have been doing very well on supply chain. And today, we still had a bit of plans, notably in the U.S., which were on allocation end of last year. So a bit of delay, I would say, lead times to deliver, but we have been very good on supply chain. Also keep in mind that our supply chain is local. We have less than 1% of our supply that comes from China. So we were not impacted over the last 3 years because of disruption in China. So we are very local. We are strategic on our supply chain, and we are also very tactical, thanks to our operating model country-by-country. So doing well on that, and I don't anticipate any issue going forward. Of course, we had to manage, could I mentioned that the energy supply, we did very well on the energy supply. A year ago, a lot of you had questions about how many plants Saint-Gobain is going to shut down because of energy in '22? None. We delivered very well on all this kind of supply, including energy. Sreedhar?

So Jean-Christophe, it's true that Northern Europe has included margin. It's a record margin for them. But please don't forget that the Asia has also delivered a record margin. Southern Europe at 8%, it's a very good margin. It's not a big difference, very different from what you saw last year. Same in Americas, more than 16% margin. It's a very strong margin. Go back to what we had 4 years back. It's just significant progress we have made. I think this is at the end of the day, clearly reflects the focus of the new organization where every country CEO is looking into the margin. There is not even one single business review, which is done without seeing price cost spread, without seeing cash. So there's a lot of focus. So to me, I think every single business has done well. It's true that High Performance Solution is having a little short-term issues of mobility. I think there also, I would give a lot of credit to the team because this business is a business model, the customers, the OEMs, they are not used to giving a price increase. They are actually changing the rules of the game by taking a very tough posture, and you saw that impact in the second half is so visible that we are able to even get price increase in the OEMs, which never happened historically. So to me, I think the focus on margin is pretty strong in Saint-Gobain.

Another question on the back of the room.

Ebrahim Homani, CIC. Congrats for your results. I have 2 questions. The first one is about Chryso. Could you give us, please, the price and volume effects on the Chryso's top line, especially in the Q4? And the second question is about Isover. A few weeks ago, [indiscernible] has won on its 2023 guidance. What about Isover?

We'll not give you the details of price and volume of Chryso. We have shown the 20% performance. So I think that -- there is everything and also keeping the best-in-class margin of the sector. So that means we have managed both extremely well. And again, Chryso is strongly in line with the plan and bringing a lot to Saint-Gobain. On overall Saint-Gobain, we don't look at just one product line versus others. It's true that we have improved our margin in 2022. If I take some of our competitors, competitor A dropped by 90 basis points, competitor B by 130 basis points, excluding exceptionals, competitors C by 170 basis points and competitor D by 270 basis points. We improved by 20 basis points. And I think it's what unique in the sector. And it's not just because of Isover or Gypsum or Chryso, it's because we are pushing a full set of solutions. We have a strong country-based operating model. We are pushing a full set of solutions. And therefore, pushing the value of those solutions in the eyes of our customers. And then we are also very tactical, very agile on the ground. So this reflects the new Saint-Gobain. So I'm not going to comment about one product line in France versus Germany. But I can tell you, all the product lines country-by-country are pushing their margin, pushing their price cost spread. You have seen what we have delivered in 2022. So this is the operating model of Saint-Gobain. And in fact, when you are just not on one product line, you have the ability to leverage everything. So that's the strength of Saint-Gobain and why, whether it's volumes if I take Q4 or last year, whether it's margin, we did outperform some of our mono product competitors. Another question in the room? If not anymore, we can come back in the room always if additional questions, but let's take the questions on the call. So we'll start with Elodie Rall from JPMorgan. If you hear us, Elodie, please.

Congratulations on the very strong results. I have some questions on your guidance, if you don't mind. First of all, on the top line. So on -- I've noticed that on like-for-like sales. You haven't reiterated the 3% to 5% organic sales growth guidance that you have generated since your Capital Markets Day. So can we expect positive like-for-like sales growth? And two, third questions to that. Volumes, you are quantifying or expecting a moderate decline. So if you could maybe give up on that? Does that mean low single-digit volume decline in your mind, this moderate decline? And if you could comment on the price outlook, please, for '23. What kind of further pricing are you pushing through? And lastly, if I can just push a little bit on guidance generally, you've reiterated that 9% to 11% margin guidance. That's great. But at the same time, since you've issued it, you made some acquisitions, which are higher margins and divestments, which are obviously lower margin. So shouldn't this be actually a bit higher now than that 9% to 11% range?

Thank you, Elodie. So a lot of questions around the guidance. Let's step back a minute because all that is in line with our Grow & Impact plan. So as I said, in 2023, we'll continue to push our strategic priorities geographically balancing solutions, construction chemicals, growth platform. We are not going to stop sustainability on all those strategic priorities. That was our swimming lane on the strategic side during Grow & Impact Capital Market Day. Second, we have our swimming lane on the financials. And here, we want to deliver, and we'll continue to deliver. So we are bang in line in our margin. We are bang in line, of course, with our return on capital employed 12% to 15%. So we'll continue to deliver within this swimming lane. What we have put in terms of assumption is a mid-single-digit volume drop. This is our assumption behind the moderate decline in our markets. We, of course, continue to push for pricing. And pricing has been very important for us. We have delivered a very strong price cost spread. We are very confident that we'll at least more than compensate, of course, the price -- the cost inflation in our pricing. And you know the team of Saint-Gobain, you have seen that. When we have a guidance, we don't stop at the bottom of the guidance. We didn't stop in '21, in '22. So we are not going to stop at the bottom of our target, but we'll always push for the maximum. So that's give you a bit of flavor on the volume. On the pricing, there is an embark effect of a bit more than 3%, if I'm correct, Sreedhar. So that gives you a bit of room around that. And of course, our portfolio management will continue to push for acquisitive -- accretive sorry acquisitions on the margin and continue to improve the business profile of Saint-Gobain going forward. So that's the guidance. We are confident that '23 will be a good year of Saint-Gobain. Confident that we'll also continue to outperform our competitors, outperform on the market with our solutions.

Jean-Christophe.

The next question is from Glynis Johnson with Jefferies.

Let's go with Jeff, and we'll come back to the room here.

Glynis Johnson here, Jefferies. Yes, 2 questions, if I may. The first one is just in terms of -- we've seen changes to the Italian super bonus as we've gone through the last couple of months or so. Can you just give us a little update how that might impact your business?

Can you come closer to the microphone because we can't hear you?

Can you hear me now?

Yes, better.

And could you speak slowly, please? That would help, at least, me, maybe not Sreedhar, but me. Thank you.

Slowly and lightly. Super bonus in Italy, we've seen changes in terms of that package over the last few months and particularly the last few weeks. How will that impact your business? And are you anticipating any changes in other of the renovation packages that are out from some of the other countries? And then second of all, just in terms of your capital allocation, your balance sheet obviously looking incredibly strong. But what is in the M&A pipeline? Is that pipeline growing? Is that pipeline shrinking? What is your appetite for additional bolt-ons or deals of size?

Okay. So I'll take the first one and Sreedhar will take the second. There has been a slight change on the super bonus in Italy. South Europe and Italy, in particular, have done very well. You have seen, if you look at the Q4 performance of South Europe, it's very good because it compares with a very strong 2021. So I think we have clearly outperformed whether it's in France, in Spain, in Italy, in 2022 and particularly in Q4. So a slight drop on the super cash bonus in Italy. We are not worried. There is still a strong support on Italy for those measures. So it will continue to do well in Italy. And overall, in Europe, country-by-country, we see an acceleration of the support of different regulations country-by-country. If I take France, we have an increased budget MaPrimeRenov on other mechanism. We start seeing in France, which is good news, renovation on the public buildings and some projects being passed on the law for that in France. So country by country, it's more accelerating. It could be sometimes tax incentives like in Italy. It could be regulation in terms of bidding standards, or it could be just the different public owners accelerating on their own renovation. So it's more on the positive side than on the slowdown altogether in Europe. Sreedhar?

In terms of capital allocation, you have seen us the discipline that we have demonstrated consistently for the last 4 years. We have made very good acquisitions. You have seen GCP, Chryso, Kaycan, Continental Building Product was a big success. We -- our focus is to going to remain on value creation. So we want to make sure that everything we buy, we demonstrate the value creation done within 3 years' time frame. Now having said that, we will remain active in M&A. We will keep looking at all the opportunities. But I also want to tell you that we would not make any acquisition because we have a strong balance sheet, but we would make an acquisition because we see the value, we see the confidence of creating value for our shareholders. So the criteria for M&A would be based on value creation. And I want to also tell you that there are many processes in the last 2 years, we actually worked out, Benoit, we kept the discipline. And I can tell you, the operating team, and they are working on some of these projects, they are extremely motivated, and they want to secure it, but somewhere you need to take the back seat and say that, okay, is it going to make sense? Is it going to really create value? Are we 200% confident? And we have not had any hesitation to walk back on some of the transactions, and we were also surprised to see some of the transaction at tapping at a very crazy price.

The next question from Exane.

Can you hear me, okay? This is George Speak at Exane.

Yes, please go ahead, yes.

So my first question is just on outlook. So specifically, in this industry, visibility on orders is quite short, usually get about 3 to 6 months. So what's giving you confidence that there's underlying strength beyond that time horizon? And how can we be sure that is not just a catch-up of backlogs with limited and new activity coming through? So that's my first question. And then my second question was just on pricing. So clearly, the group is increasingly showing leadership on pricing. But to what extent is that putting pressure on market share? And do you see any risk of having to reverse price gains to stay competitive in this market?

Okay. As I said, we have a strong, resilient renovation market. We are outperforming on this market. If I take the different countries today, if I take France, instant, the order book of the craftsmen is full. And if you were to entertain some job site in France today, you would have to queue and to wait. So renovation is there in our important markets. And again, we have a lot of touch points across all the value chain for that. We have also the support of energy efficiency. If you set back 2 years ago, we didn't have such, I would say, unfortunately, but a perfect alignment between what's needed on renovation for climate. That was really the EU directives on the carbon neutrality target for 2050 to double, triple the renovation rate. Now what's needed on energy efficiency because of the energy price after the war in Ukraine, and the household purchasing power, it has in terms of impact, I showed one example on trend because this is the reality of the ground. So this is the support of energy efficiency renovation. Yes, new build is going to decrease in Europe. In North America, but we expect North America that it could be short-term. We are to 1.3 million, 1.3-plus million in housing starts. It's still above, keep in mind the 1.1 million, 1.2 million that we had in 2019 at the time we went after the acquisition of Continental Building Products. And behind that, you still have 4 million of needs in terms of units, housing units in the U.S. So I expect in the U.S. a bit of a short-term drop in new housing, but it's going to bounce back at some point. Mortgage rates went down in November, December, slightly recently, but they are stabilizing. And we see those impacts of stabilization, whether it's inflation or mortgage rates in North America. So all in all, we have those balancing markets. We have very good visibility in Asia, emerging markets. India is flying, Vietnam. We have good visibility within High Performance Solutions in terms of recovery. You have seen the volumes of last year. It's continuing. So we are confident that High Performance Solutions will have a good year in '23. That's also some good visibility in terms of backlog, in terms of some of the specialty materials I highlighted, the ability to invest in investment cycles of the [indiscernible]. Like Saint-Gobain, we don't drop our CapEx because we are confident about the mid-term, long-term growth of our markets. And we see that within our customers. And therefore, we are not delaying, postponing or canceling some of their investment plans. So that's also a good support in terms of visibility for High Performance Solutions.

In terms of pricing, it's a permanent challenge. I think the power of the new organization is that you have given all the necessary empowerment for the country CEOs to take a decision. Saint-Gobain today, pricing is not done through a top-down instruction going from Paris. The pricing is done based on what is happening in a customer's place. What are the other challenges? Who are the competitors? What is the value we bring on the table? Are we able to differentiate to get the premium? And that's where you are driving the leadership on pricing. So there is no simple answer. We are consciously managing the price and at the same time, making sure that we keep the customer because all of us, we want to have the customer with us. But we also don't want to have a situation where a customer is not willing to share the burden. And the mobility is a great example where we had the courage to take that position saying that, look, we can't continue to do like this business. You have to give the price increase. Otherwise, we are willing to walk out, which is again, a trade-off, a very conscious decision you have taken. So I remain confident of our ability to drive the pricing in a very smart way.

Next question from Yassine, On Field.

Yes. Congratulations for the very strong results over the past 2, 3 years. I just -- I had a couple of questions about like the margin direction. So the range is very wide between 9% and 11%. And we've seen some of your competitors, for example, in insulation in the U.S. in asphalt roofing in the U.S., in iteration in Europe, in flat glass and also in distribution, commenting about a potential margin erosion in 2023. I'd like to get your view on that, what you're feeling about those divisions like asphalt proofing, flat glass, insulation and maybe plasterboard as well where I think most industry observer are expecting margin to normalize a little bit? And then a second question, which is a little bit more on the medium-term. When you look at Saint-Gobain 10 years ago and Saint-Gobain today, there has been a lot of changes. I think you've made a lot of disposals in your flat glass, downstream division in distribution. And you've invested a lot in construction chemical and energy efficiency solutions. Where do we -- where should we expect the company to grow in the next 5 to 10 years? What would be the ideal profile of Saint-Gobain in 2025 or 2030 to address the need of our clients?

Thank you. The guidance we gave, it's bang in line with what we said, Grow & Impact 2 years ago. You have seen that -- I said it 2022, 2021, it was not walk in the park, supply chain, COVID in '21 again; 2022, energy crisis, war in Ukraine. You remember all the questions we were asked 6 months ago, 9 months ago, it was just not a rosy picture we delivered, and we delivered exactly or even above, Sreedhar mentioned and shared with you the slide at the Capital Market Day, we delivered on all our financial indicators on top of the other extra financials. So this is our commitment to continue to deliver in '23, even though the market environment is a bit more mixed contrasted with some ups and downs than what we could have seen 2 years ago when we launched Grow & Impact. We didn't anticipate the war in Ukraine. We delivered. We didn't anticipate EUR 5 million of inflation. We delivered. So even if there will be some ups and downs in '23, we will deliver on our margin guidance. And as I said, you have seen that the group doesn't stop because we have reached one particular target, we want to always do the maximum on all our indicators. I'm not going to comment more on our competitors. I think I highlighted competitor A, B, C, D in terms of margin evolution already in '22. You have seen that we at Saint-Gobain, the new Saint-Gobain delivered an improvement in our margin. So this shows the strength of our operating model country-by-country, the agility and the skills and the talent of our teams, the resilience of our markets, and also the benefits of our solutions in order to be able to do that. So we will continue to manage the group in the best possible way, both on the cost side, we have already taken in some areas, where volumes were down end of last year, we have already dropped some headcount, reduced shifts. But in other parts of the world, we are adding resources. So we are balancing price, margin, cost, all that in the best possible manner to deliver on our commitment in the different indicators. Now if you think 5, 10 years ahead of us, we have achieved what I said 2 years ago in terms of geographic split. I think we can go further. We are now at 55% Europe, 20% North America, 25% Asia emerging markets. We are in 76 countries. I think there is a potential for the group to continue to grow in North America and emerging markets could be 25%, 25%, 50%, if we want to make it simple and round figures. So geographic rebalancing to capture in new markets, in new countries, the growth potential based on GDP, based on population growth. Just look at India, India is now country #3 within Saint-Gobain. You did not mention it Sreedhar because it's modest, but India in terms of operating income, is country #3. We don't stop there. We are #1 in plasterboard, #1 in glass. I see other corporates exiting India. We are in India, and we invest in insulation, stone wool and glass wool. So we enrich our solutions, that's the second axis and reaching the solution that we can deliver to our customers so that we have the perfect portfolio of Saint-Gobain in every single country, when you think of a building, the roof, the partitions, the facades, the windows, the floor all this on acoustic and thermal and air quality, all that, we can deliver. We don't have it in every single country, but we want to enrich the solutions of Saint-Gobain, one category. Second category of growth is the geographic mix towards more Americas and emerging markets in the coming 5 to 10 years, and we have the resources to continue to do that at the right time and at the right price to create value for our shareholders.

Maybe a very small follow-up question. When we look at the beginning of the year 2023, can you comment on the trading condition? Is it in line with what you've seen in the first quarter? Do you see an improvement or deterioration?

No material change versus what we saw finishing the year end of 2022. And we have, in some areas, some price increase at the beginning of the year. So it's dynamic. It's -- we are in a dynamic environment. So we are dynamic, and no material change versus the finish of the year. Next is from Arnaud Lehmann from BofA.

Three questions on my side, if that's okay. Firstly, your guidance on CapEx seems to imply a little bit of an increase in euro terms, unless you're including the U.K. division disposals, but a bit more than 4% rather than a bit less than 4%. Where is the focus of this CapEx? Is it a lot of growth in Asia, in particular in the U.S.? Secondly, on working capital, decent performance, but also a couple of billion euros of increase in inventories in the last 2 years. As you know, expect volume to decline even a little bit and a bit of normalization, I guess, in the -- on the cost side, do you expect gains, cash inflows from working capital and reduction in inventories this year? And lastly, on GCP, I don't think you're disclosing the 2022 results for GCP at least I didn't see it in the presentation. And I'm not necessarily asking you to do that, but the question is, I appreciate that Chryso is doing very well, GCP for now not so well, and there will be some synergies, but how easy or hard it is to just say, "Hey, we're going to apply Chryso's formula to GCP. And certainly, the business will be better." How -- what are the main challenges to deliver on that?

Okay. Very good. So the guidance on CapEx, yes, there is an increase in euro will be a bit above EUR 2 billion. That's around 4% if you take the group total sales. And we have also delivered on our commitment, if you remember, the Capital Market Day, we wanted to normalize, standardize and therefore, reduce and optimize the maintenance CapEx. So we have done it. We are 2.2%, 2.3% on sales on the maintenance CapEx. So all the rest is our growth. So last year, it was 1.6%, 1.7% just on growth CapEx. And we have projects in North America, in Asia emerging markets. For instance, in North America because we are confident that the growth prospects of our businesses going forward. We have an increase on our roofing production that will start in mid-2024. We are also investing on GLASS MAT, which is a substrate that is needed for roofing manufacturing. We have a plan to increase on our gypsum production, but starting in '25. So all this will continue to push some of the CapEx in '23. We have a lot of products in Asia, notably in India. We are about to start our plant #6 of flat glass in '23. We are about to start our plant in Norway, the first 0 carbon manufacturing of plasterboard, which will be in Norway starting in mid-May. So very good to have a low carbon plasterboard offer in Norway. So a lot of initiatives, not only outside of Europe. There are some initiatives in Europe. We are going to start our plasterboard line in Romania. We just started our plant in Spain. And I can tell you, we are busy in plasterboard, if I take France and South Europe. We are importing plasterboard in France right now from Germany, from Spain, because we need plasterboard in France. We don't shut down our customers to the question of Jean-Christophe earlier today, but we are busy in plasterboard in France because the market is rather strong. So we are happy to start our new plasterboard line in Q2, we started the first products in a matter of few weeks. On working capital.

On the working capital, no, I thought you would be very happy with what we delivered and you're saying it's just a decent one. So it's -- I just want to remind, it's a 14 days reduction in the last 4 years. It's normal that inventory in euro terms, it will be higher because of all the inflation you have seen in the last 2 years was a significant inflation. So for me, it's like -- I think we have done a great job of focusing on this working capital. I think the team is very focused. A lot of credit goes to every single country CEO and the CFO, looking at this in a micro level detail. For me, I would rather say that we need to be pragmatic, keep some flexibility, the way we manage the working capital because I want to make sure that the customers are served well. This is one of the biggest differentiating factor. And when you look at the kind of supply chain issues, we've dealt with in the last 2, 3 years. Benoit insisted, I mean, he talked about it, that Saint-Gobain, we didn't let our customers suffer. We went out of the way to serve them. So service is one of the most important element. So be rest assured, we will continue to focus. We will continue to remain disciplined on working capital.

And on GCP, 2022 was a transition year, we worked 10 months. on our antitrust. So it's a bit disruptive for the teams. So it was slightly below their performance of 2021. That's for 2022, it's behind us, and it was disrupted a bit on margin because they were a bit late on pricing and also some supply chain difficulties. So what we have bought since then is 1st -- and from October 1, a very strong organization. It's in place. It has been rolled out country-by-country, not only at the regional level, but country-by-country. So Thierry Bernard and [indiscernible] Domus taken over and Mark Rayfield for the part linked to certainty roofing and siding has done it. Budgets have been done. So the management integration is done and all the corporate of GCP has been removed very early on in October. We have worked on the supply chain to fix because GCP lost some customers and lost a bit of sales last year because of supply chain disruption, lack of formal contract, lack of purchasing power vis-à-vis some suppliers. We share those suppliers. So it has been quite easy to fix that immediately. Second, we have qualified. There has been a very detail work from the Chryso team on the R&D side to qualify all the polymer that we're buying -- that were bought, sorry, by GCP to qualify the Chryso polymer that, that will bring upstream manufacturing integration and of course, synergies for Chryso on the that was one part of it. And the third, which is important is that GCP was not the superstar in terms of managing the margin, the pricing per customer. So if Chryso delivers the best-in-class margin of the sector, it's because they know exactly per customer, per product, what is the margin. So delivering this advantage to GCP will be a good addition. So all those actions are in place. You know that GCP will be a turnaround. We said at the time of the acquisition, it's more a 3 years plan than rather than the 3-month fixed. And this is what we paid for GCP below what was the share price for years before the acquisition. So it's a turnaround plan, but all the pockets of actions have been identified and we deliver a bit more than $25 million of synergies in the future, which is slightly ahead of plan. So I'm confident with the plan, but it's a lot of effort and thank David Molho for High Performance Solutions and all the teams of David Molho for everything they have done already in the last 6 months and what they will continue to do in the next -- in the next months. And I finish with one point because I did meet with some of them. What is very good is that the GCP on the ground, they are good. GCP had a turmoil on the corporate structure, 3 CEOs, 2 Board different in 5 years. But the teams for the ground, they are eager and extremely happy to join Saint-Gobain, whether it's on R&D, on commercial, and they are eager to learn, and they are good. So that's good news and they are now in a final good room of Saint-Gobain with the leadership of [indiscernible] Next question is from Gregor Kuglitsch from UBS.

Can you hear me?

Yes.

Yes.

Hello?

Yes, Gregor. We can hear you.

Go ahead, please.

Excellent. I want to come back to a few points. Maybe you said it, maybe I missed it in that case, apologies, what was actually the price cost spread last year? And just to be clear, what you're saying on price, are you saying that you've already, based on the price increases so far, carryover plus anything announced already locked in 3% for 2023, is that my -- the correct understanding?

Yes. We are saying that we have a carryforward effect of more than 3% for 2023. And we will remain focused on price. We would remain focused on price cost spread. I think the price cost spread is more important. I would not just look price in stand-alone. And that's what we have done, and we'll continue to remain focused on that.

And we have pushed prices -- additional price actions at the beginning of the year. So it's important, and I can tell you in some product lines, some countries, diligently, we will continue to push for prices and it's important to continue to do that. So clearly, we have pricing actions in a lot of countries -- almost all countries, they have pricing actions, pushing product ahead in 2023. There is still inflation, and we will continue to for pricing. It's very important regardless of the competitive environment.

So I think you said you expect around EUR 1 billion for this year in terms of raw mat and energy cost inflation, give or take. I wonder whether there's also something going on, on wages that we're hearing elsewhere, where there's pretty significant wage inflation. So I want to understand, do you have enough sort of -- historically, I think you compensate that was just efficiency gains. Do you think you need some pricing to offset that as well?

We had, early last year, around 4% of wage inflation. This year will be a bit higher than that. But overall, we have a lot of what we call world-class manufacturing actions, net manufacturing savings. And if they are some impact on the volumes. We have already reduced some shifts in some areas, so you mitigate a bit of that. So overall, we have managed well. It's the decentralized manner of Saint-Gobain. We have managed very well within each country because it's not just one wage increase for one country. It's detailed plant by plant and business by business. So we have managed quite well the overall wage inflation for Saint-Gobain in '22 and in '23, but it's mostly behind us. I think it's very important also on that side, if I may, is to make sure that our teams are very engaged. And I shared with you that we have 90% of our teams that are very proud to work at Saint-Gobain. And it's -- of course, the wage is important in front of the inflation. I'm happy to say that more than [ 60,000 ] employees bought shares of Saint-Gobain in April last year, a month after the outbreak of the war. They bought shares of Saint-Gobain. So they are confident, and we have a lot of ingredients also to continue to motivate our teams. I'm extremely happy that the variable pay of our teams in '22, like in '21 has been strong and increased within Saint-Gobain. That's a good reward of what we delivered in terms of results, and that's a good way to also continue to push for more and keep our teams actually engaged and motivating. So we are doing all this also on the wage balance of our teams.

Maybe I wanted to extras, if I may. So considering all the sort of actions you're doing, bottom up, your best view as sort of the decremental or incremental margin on volume losses is what these days, 20%, 30%? Or do you think you can do better than that?

25% to 30%, Gregor.

And then did you disclose the price cost last year? Sorry to follow-up on that.

No. But I want to confirm to you that we had a price/cost margin -- price/cost spread positive, not just for the full year, but also for the second half. So -- and it has been for all the segments. So that's a very important point to keep in mind. So pricing is -- a price cost spread is a focus for every single country CEO.

So a question from Cedar now from Morgan Stanley.

So my question is, why should we not be thinking about a double-digit margin for '23? And the reason I ask that is, in the release, you talk about a 240 basis point structural improvement as we move into '23 on margins versus the 2018 level, considering due some closes, which obviously gets us to above 10%. And then I'm also looking at the distribution business as a percentage of the group. It's only 30% now at the end of '22, which is obviously a big shift relative to where you were a couple of years ago. And if we look at that, will 3% pricing already coming into '23, it looks like you can offset your energy cost inflation. I appreciate what you said on labor, but you're also saying that you're getting more price increases coming into this year. So just to push you a little why are double-digit margins not a potential outcome in '23?

Cedar, I think Benoit said many times, there is no lack of ambition between Saint-Gobain, Saint-Gobain team. Everybody wants to do deliver the best possible results. But at the same time, we are not going to change the guidance we gave in the Capital Market Day. You have seen, we have said 9% to 11%. And we are delivering consistently for the last 2 years. So the message for you all is that you have Saint-Gobain, the management is committed to deliver the road map that we have defined in Grow & Impact strategy. So I'm not going to be more precise than this. I just want to reassure you that the management will remain ambitious. We will do every possible thing. Even if the world is so unsettled, that's what we have lived with in the last 3 years.

Okay. And just one quick follow-up on M&A. You've obviously sold a lot of assets in the last couple of years. Your return now is significantly improved and above where you guided to with growing impact. When we think about return improvement from here, should we still be thinking about further asset sales of underperforming businesses as part of the strategy? Or are we now more focused on organic business growth and margin improvement?

Thank you, Cedar. We have done mostly what we wanted to do in terms of reshuffling in a vast manner, the parameter of the group, around 1/3 in the last 3 years. We will constantly look and it's the routine of our managers, country-by-country, but how we can optimize in and out the offer to our customers. It was the question of what's the dream in 5 years, what the dream in 10 years, we can always enrich the offer. We can also make sure that if a business, for whatever reason, is underperforming, either we take decisions in terms of restructuring, in terms of management, in terms of pricing, whatever. So we are always looking at it's part of the routine and how to optimize the value creation, the offer to the customer, the margin country-by-country, and there could be some additional divestitures. But again, the vast majority has been done and all the businesses we have are within not only the ROCE, Sreedhar mentioned to you, that all the operational segments are within the range of 12% to 15%, but also all the different assets, whether it's our former distribution business is within -- clearly, within the guidelines that we gave 2 years ago. So the bulk has been done. We are more now looking at opportunities with a very strict discipline on acquisitions. So we'll stay between 12% and 15%. Because when you buy a company, there is a goodwill. So short-term, there could be impact on the return on capital employed. It was not the case in the last 2 years because the improvement over all of the margin could compensate. But clearly, we will keep moving and navigating also within this range of return on capital employed, which is massively -- in terms of value creation, it's massive impact overall when you think of the size of the balance sheet and the turnover of Saint-Gobain. So more a bit on the acquisitive side than the divestiture, but it's part of our routine, which is very healthy to look at that country-by-country. And across also the spectrum of the group, you may have noticed, we didn't issue a press release, but we closed end of last year the divesture of our Crystal business, which were far from the strategy within High Performance Solutions and our low-end commodity refractories for the steel market, which we divested also and last year. So it's also reshuffling the portfolio to optimize also the offer of sustainability within High Performance Solutions. Should we go back to the room, Jean-Christophe had one question, and then we'll take the questions on the web.

Yes, a follow-up question -- 2 follow-up questions. First, the traditional question of the price of the 4-millimeter including or not including?

Now 6 millimeters. It's now 6 millimeters. We cannot answer it.

Value addition.

And also maybe more transparency on the energy and raw materials bill, could we have the precise -- not a rounded number, but a precise number for 2022 and 2021?

Jean-Christophe, the price of 4 MM in January was EUR 6.3. In terms of your price cost, I gave when I presented, I said that EUR 13 billion is the raw material -- total raw material and energy costs. Within that, we have an energy bill of EUR 2.3 billion.

Okay. Last year...

This is for 2021 -- 2022.

2020 to 2021 -- in 2021?

2021, we said that the inflation -- overall inflation between '22 and -- '22 and '21 was EUR 1.6 billion. So that's what it is. And we said the half of the inflation was coming from the energy. So that's why you need to take that number.

Keep in mind because all those questions, frankly speaking, whether it's on hedging on energy, are very sensitive from a compliance standpoint, very sensitive from a customer standpoint. So at some point, accept that it's not because of lack of transparency that we don't answer precisely, but competitors are, of course, reading the transcript. Customers, if you ask the price cost spread, our teams do a very, very good job to value the solutions of Saint-Gobain and without disclosing just one number of price cost spread within Saint-Gobain. Otherwise, it makes the life or sales payroll on the ground, a bit more difficult because of the strong results of Saint-Gobain, it's easy to push back on any pricing actions. We will continue to look at pricing, but I don't want to be difficult for our salespeople who do a fantastic job on the ground on pricing actions and same on hedging. And so we have, at some point, to keep those information that are very sensitive commercially for us because otherwise, we could be able for complireasons of commercial results.

To make it simple, Jean-Christophe, you can just take EUR 13 billion for 2022 and EUR 10 billion for 2021. That will be easier.

I understand. I completely understand the industrial security issue.

I appreciate that.

We go now to the Internet. So could you -- take my glasses or could we show the...

We have Jerome.

In which order is it?

Go by like, I guess.

There is a question from, may we have some colors about what potential is the business running well now since you invest in plants in France? Yes. The business of the pipe business is profitable. We have improved nicely over the last years. We are indeed investing notably on low carbon manufacturing capabilities for electrical furnace. And overall, the perspectives in terms of water market, it was clear in Europe last summer with the drought. It's even worse starting the winter with no run in Europe. So I can tell you a lot of municipalities are asking for projects for water supply. So it's a good prospect in terms of activity, and we continue to improve the business. Second question was, is there still room for selling more distribution businesses? Again, we don't look at that like that because we look at the offer that we have within each country. And the fantastic integration that we have, if I take the Nordics, if I take France, we truly set the tone on the renovation market, and we outperformed. You have seen our volume performance. If I take South Europe in Q4, it's not a miracle because we have the full set not only the product, but the solutions and how we deliver credit, logistics, advice, services to all our customers. So we are extremely happy with those positions, and we'll continue to grow those positions going forward, based on wool for instance, that we have done 18 months ago in France. So that's part of the integrated offer of Saint-Gobain, and we are happy to grow it and continue to gain market share, thanks to that. And third question was do you expect, or do you see the lower purchasing power of households impacting the pace of renovation? If you were a household 4 years ago, the payback on energy efficiency was 10 years. So -- okay, attractive, if you stay 20 years in your house, if you think you are going to transfer it to your own fleet at some point, you would do it or if you think you are a good citizen for the planet and save on CO2. Now it's 4 years. And a lot of those renovation jobs, there are based on the personal savings of households. So I'm not worried about the impact of additional inflation on the overall inflation in the economy towards the energy efficiency renovation because the best way to protect your purchasing power is to insulate your house. I've seen -- I've shown you what it costs, what is the payback and how you are going to improve the energy performance of your house and improve the diagnosis of energy performance. I didn't mention that, of course, it's part of the equation. When you move from G to C in France on the diagnosis of energy performance, if you were to put the real estate value improvement of that move in terms of energy renovation, then you have a payback in just 1-minute, because keep in mind that in G, you cannot increase the rent as of now. And in 2025, you are not allowed to sell or rent your house unless you renew it on energy. So the real estate improvement that you bring on top of the drop of the energy bill is massive. A lot of that is driven by personal savings. It costs EUR 25,000 EUR 30,000 to renovate 100 square meters house in France. There are some subsidies, and all the Saint-Gobain products and advice are there. So we don't see a significant impact. It's more important, again, the inflation on new build because inflation means higher interest rates on mortgages and therefore, more difficulties of financing for the primary homeowner, which are 25 years old, 30 years old. So it's not the same picture at all on renovation versus new build. What is next? So a question from Nabil. How do you see energy and raw materials cost inflation in '23? How are you hedged? I think we answered that.

We answered.

On hedging, keep in mind that it's a very sensitive matter. So we prefer not to disclose. We do a good job on that. And we are continuing to do a good job on hedging, not only quarter-by-quarter, but thinking ahead and thinking strategically.

Same the next question also on the price cost spread. I want to say.

Another question from Nabil. Distribution is refocused on France and Nordics, a super powerful model as you are dominant? I would not say dominant, we are strong. Will you consider acquiring leading distribution players elsewhere in North America, U.S.? Answer is no.

No.

Do you need distribution to accelerate growth? No, because in the U.S., we have a fantastic offer. We have very strong partners with the big distributors in the U.S., whether it's with the roofing, ABC, SRS and others Lowe's. We gained a lot of market share at Lowe's, thanks to Continental Building Products, leveraging continental presence prior to the acquisition. And now we are seeing roofing, siding, insulation and plasterboard. So we are happy with the setup we have. So this is what we push. But if I take France and India, we opened, I think it's in our press release, 80 or 75 home centers in India, whether you call it distribution or not, I don't know, but it's a way to reach out private customers on Tier 1, Tier 2, Tier 3 cities in India and leverage and promote the Saint-Gobain offer. It's a franchise model. Is it distribution? I would say, no. Is it important for the Saint-Gobain presence in India to continue to capture market share? The answer is yes. If I take China, if I take Vietnam, we have QR codes on our products. That the end installer, the craftsmen could put the QR code and regardless of the wholesaler, the retailer and the final shop where he or she would buy the product. He had the QR code, and we can promote the loyalty club, the points and the rebates for these small end user or installer in the region of Vietnam or China. So that's the kind of e-commerce type of distribution or using leveraging digital towards increasing our presence on the markets.

The next question is on assumption of inflation on 2023? I said that it's a little more than EUR 1 billion. Then the question is on middle single-digit volume decrease, so Benoit?

We answered.

You answered.

Tobias Woerner, you have consistently referred on the path to further growth in operating income on a like-for-like basis. Why is it not the case this time? Do you expect '23 to show this kind of performance on the basis of your 9%, 11% margin target? It seems you are never happy to be at. For years, you were asking for a kind of margin guidance. You have it, which is new to Saint-Gobain. So I would rather celebrate the fact that we are guiding to a margin target, and we are bang in line to our commitment from 2 years ago. And that gives you a flavor of the new Saint-Gobain, the deep transformation of Saint-Gobain. I think it's important to capture that. It's a new Saint-Gobain. It's transformed perimeter. It's a new operating model, very powerful, and that means we can now guide on the margin. So this is the way forward. And again, for me, the quality of our earnings, this is important, the quality of earnings, the fact that all the segments last year delivered double-digit organic growth. This means it's not just North Europe or not just Asia High Performance Solutions. It's all the 5 segments of Saint-Gobain last year delivered double-digit organic growth. All the 5 segments delivered on return on capital employed between 12% and 15%. And we are all pushing for this quality of earnings that is reflected, I think, in the margin and the resilience of Saint-Gobain that we can drive the margin shows the resilience of the new Saint-Gobain.

And Benoit, I don't want to give up on Tobias, I sincerely hope after seeing this result, he's going to change his mind, and he's going to change his view on Saint-Gobain.

So another question on update on energy hedging, but I think we shared that.

Yes.

Do you benefit -- because the question is on hedging and prices of energy, gas and electricity decline materially? Do you benefit from this decline? The answer is yes. We benefit from this decline also from gas and electricity, whether it's in the U.S. or in Europe. And a question from Manish Beria from Societe Generale. We have this EUR 6 billion of cash in the balance sheet, and can this -- it's a gross cash. Can this could be used to reduce debt? Or is this needed for working capital needs? Sreedhar.

No. I mean, okay, we have cash. It's a great thing to have a cash liquid because then liquidity has got its own value in a volatile world. So let's not forget what happened when the COVID came in. So I believe in having a strong balance sheet and also the liquidity and Saint-Gobain can afford to have this liquidity, and it's not a big, big cost and it just gives you a lot of comfort and reassurance to the -- all the stakeholders.

I think we have exhausted all the questions from the room, on the Internet and on the call. So many thanks. You have seen you have a new Saint-Gobain. We are committed to continue to deliver consistently like we have done in the last 4 years. We are resilient. We have shown that we can improve our margin, while outperforming the market in terms of solutions, and we'll continue to push for that. '23 will be a good year for Saint-Gobain. I'm very confident. Thank you, and have a good day.