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

Thank you. Good evening, everybody. I hope that you have received our press release and that you have already been able to go through the main highlights. Together with Sreedhar, our CFO, we will present our solid third quarter performance. We continue to deliver very well on all the parameters that we control, be it price, cost, cash and margin. So I'm very happy about the operational performance of our group in the third quarter. Our teams are fully engaged and hands-on to new on their very good journey so that 2023 will be another record margin year for Saint-Gobain. Like-for-like sales were stable over the first 9 months of 2023 and decreased 3.1% in the third quarter, which is then in line with the consensus. Prices were stable sequentially in Q3, and we once again achieved a positive price-cost spread. Volumes remain in line with our expectation of a mid-single-digit decrease for the full year 2023. We continue to outperform our markets, thanks to our strong strategic positioning at the heart of the energy and decarbonization challenges and our very powerful local organization by country executing very well on the ground day in and day out. Our strategic choices are paying off today. 2/3 of our profits -- 2/3 of the operating profit are now generated in North America, Asia, emerging countries and construction chemicals. This markets with strong growth outlooks where we have had decisive and successful capital allocation over the last 5 years. So we are continuing to invest for the future in these attractive markets on additional capacity for CapEx and also with acquisitions such as Building Products of Canada, which I'm pleased to report we were able to finalize more quickly than expected. It's in our books since September 1. In Western Europe, over 60% of our sales are in renovation, both public and private buildings, which continues to be more resilient. Additional financing costs are temporarily impacting the new residential market in Western Europe which represents 12% of our total sales and which is still massively undersupplied in terms of housing. Our local organization allows us to manage the contracted situation between markets and between geographies with local teams able to proactively take decisions on the ground to adapt to the local environment with the necessary commercial, industrial and cost measures. This is what is allowing us to deliver a very solid performance and we continue to demonstrate Saint-Gobain resilience in a difficult environment, and we are confident to deliver a new record margin in 2023, which will mean a third consecutive year of double-digit margin. You may have seen already in the press release that we have accelerated our share buybacks over the last few weeks. We have bought back EUR 514 million of our shares as of today, significantly beyond our annual target of EUR 400 million. I now hand over to you, Sreedhar. And Sreedhar will give you additional information about our third quarter sales.

Thank you, Benoit, and good evening, everyone. As Benoit said, Saint-Gobain delivered a solid performance and once again demonstrated its resilience in a difficult market environment with a stable like-for-like sales over the first 9 months of 2023. While the currency and structural impacts were both negative, the currency impact has accelerated significantly in Q3. Both items need to be kept mind for Q4. The organic growth was minus 3.1% in Q3. Prices were up 1.9%, stable sequentially since the start of the year in an environment which becomes now less inflationary. This enabled us, once again, to achieve a positive price-cost spread in this quarter. It is also important to remember that we have a higher basis for pricing comparison given the price increases we successfully achieved in a proactive manner in the last few years, quarter after quarter. We have, once again, delivered price-cost spread positive even in Q3. Given the strong focus on price-cost spread of each and every country CEO, we remain confident in our ability to deliver a positive price-cost spread in Q4 and also for the full year. Volumes were down 5% for the quarter, in line with our expectation of mid-single-digit decrease for the full year 2023. This moderate slowdown in market continues to reflect a contrasting situation. A marked decline in new construction, but good resilience, overall, in renovation market. Note that we had a negative working day impact in Q3 of around minus 2%. Now let us look at the reporting -- the numbers by reporting segment. Overall, in Europe, we continue to see resilient renovation markets for both private and public buildings despite the slowdown in new construction. Order books and renovation continued to be strong with stringent regulations and larger subsidies, for example, in France. Starting with Northern Europe, where after several quarters of sharp volume decreases, Q3 saw a smaller decrease than Q2 against a less difficult comparison basis and despite the less working days. Prices managed well locally by the country CEOs on a much higher comparison basis and in a less inflationary environment. Nordic countries saw the sharp drop in new construction markets in Sweden and Norway, partly offset by our strong exposure to the renovation market. Turning to the U.K. The market remains challenging but with the local management's focus on driving more solutions in the U.K. market, we continue to gain market share in facade and Interior Solutions. Germany continued to suffer in a difficult macroeconomic environment, which hit the new construction market. Eastern Europe improved slightly in the third quarter after the sharp volume drop of around 15% in the first half. Coming to the Southern Europe, sales grew 1% over the first 9 months thanks to good resilience and renovation once again, where the new construction market continued to slow down. The prices were managed well locally by country CEOs on a much higher comparison basis and in a less inflationary environment. In France, we continue to outperform, thanks to our strong position in the B2B renovation market. The French government announced, in October, that the budget allocated to the renovation subsidy program, MaPrimeRénov, will double next year, taking it to EUR 5 billion in 2024. And it has also increased its target for the number of global renovations to 200,000 per year from 2024, which means 3x the number we had in 2022. This is, indeed, an excellent news. You know that Saint-Gobain is the reference in energy-efficient renovation in France and we will benefit significantly and also further strengthen our market position in energy-efficient renovation market. In Spain and Italy, sales were stable in generally resilient construction markets. In the Middle East and Africa, we achieved strong growth, especially in Egypt and Turkey, which are the 2 biggest countries in this geographic area in addition to South Africa. In the Americas, the growth of 2.2% over the first 9 months was supported by the increase in North American volumes. In North America, we continue to see volume growth with plus 3% in Q3. The smaller price effect was due to the high comparison basis, but prices rose sequentially, thanks to the price increase in roofing this summer. We achieved further market share gains, leveraging our Exterior and Interior Solutions for the light construction market. Some of you have witnessed our comprehensive solution offer during your visit in mid-September. The integrations of our recent acquisitions in North America are progressing very well and we are achieving the expected synergies. Building Products of Canada was consolidated more quickly than expected from the start of September, allowing us to reinforce our unique industry-leading position in Canada. We are excited about the significant growth potential in the North American market. And in addition to these acquisitions, we are investing, as we speak, in additional capacity in roofing and plasterboard. Lastly, I'm pleased to report that we have signed the third purchase price agreement in North America for the renewable energy. With this, we will now be able to cover 70% of our North American electricity needs with renewable energy by the end of 2024. Coming to Latin America, we suffered from the macroeconomic environment, particularly in Brazil. However, the August interest rate cut, inflation coming under control and the large construction sector component included in stimulus plan point to an improvement from the end of the year. Mexico continued to benefit from the good integration of impact in construction chemicals, which has enabled us to enrich our offer to the Mexican market. Other countries in the region continue to be supported by sales prices and enhanced mix and target acquisitions to enhance the range of solutions that we offer country by country. Coming to Asia Pacific region. We saw 5.1% growth over the first 9 months, and we continue to see a very good momentum in Q3 with 6.5% volume growth, while prices were impacted by a high comparison basis. India achieved another strong performance with market share gains, thanks to our innovative solutions approach, our targeted investments for growth with recent acquisitions in insulation in particular and new capacities that we added are helping us. We are a pioneer in low-carbon building in India with our solutions widely used in the country. China delivered good growth despite a more difficult market, due to the market share gains in the light construction and renovation markets. Southeast East Asia was stable on a high comparison basis. In Malaysia, we benefited from an enriched range of solutions, helping to strengthen our presence on the light construction market. Now let us look at our global customer markets. High Performance Solutions saw organic growth of 3.5% over the first 9 months, with Q3 turning slightly negative due to the decrease in construction industry, which is exposed to the new construction market in Europe, their higher comparison basis in mobility and more mixed industrial market performance. Our construction chemicals business showed a strong reported growth, mainly linked to the integration of GCP. Chryso and GCP continued to show good sales trends driven by the innovative solutions to decarbonize the construction industry. Chryso grew double digit in Q3, and GCP's margin improved sharply in line with our integration plan. This was driven by efficiencies from the new organization and the benefits of global supply chain. And industrial optimization was implemented in a very quick manner. We continue to make targeted investments, for example, the recently signed acquisition of Adfil in fibers for the concrete reinforcement that contribute to the reduction of its carbon footprint. Our mobility sales grew -- growth of 15% over the first 9 months was driven by the continued catch-up in the sales prices and our outperformance of our auto market, linked to our strong technological positioning on electric vehicles. Sales growth in the Americas and Asia remained good. And in Europe, we saw growth impacted by the higher comparison basis given the sharp rebound in European auto markets from Q3 of last year. Our businesses serving industrial markets held firm in a very weak industrial markets, especially in Europe, thanks to sales prices, and the need for our high-end materials and technologies to help our customers decarbonate their manufacturing processes. To sum up, you have seen we have once again demonstrated the resilience of Saint-Gobain even in the difficult underlying markets. And we are very confident to deliver a new record operating margin in 2023. We continue to achieve market share gains in many countries, and we continue to deliver a positive price-cost spread, and we remain confident to do so, including in 2024. Our cash performance remains very strong which actually reflects on our ingrained cash culture throughout the organization. And we will continue to proactively do everything that is under our control in order to deliver strong performance, both in terms of margin and cash, including in 2024. Now I pass on the floor to Benoit for the concluding remarks.

Thank you, Sreedhar. So a few comments to conclude. As I said in my introduction, I'm very proud of what our teams have achieved in terms of operational results and performance in Q3. This has allowed us to deliver another solid performance in a difficult market and macro environment, demonstrating, once again, the group resilience. North America, Asia and construction chemicals are showing good growth momentum. We expect renovation in Europe to remain strong going forward with the doubling of MaPrimeRénov in France and the target to triple the number of global renovations in 2024. Regarding new construction, we believe we are not too far from the trough in Europe. Overall, we are well on track to once again deliver on our commitments in 2023 for cash, for return on capital employed and to achieve a new record operating margin. And looking forward, all our teams, I can tell you, are fully engaged to use all the levers in our control to outperform and make intelligent trade-offs, investment for growth to achieve cost-price optimization and footprint optimization wherever necessary. I know that all your eyes are now turning more and more towards 2024. Of course, we'll talk about it in February. But let me tell you that I'm confident Saint-Gobain will deliver another successful year in 2024. So thank you for your attention, and Sreedhar and I are now happy to answer any question.

[Operator Instructions]. The first question is from Jean-Christophe Lefèvre-Moulenq of CIC. Please go ahead.

Bonjour. I have 3 specific questions if you don't mind. The first one is what you told us regarding the 2023 outlook, new record operating margin expecting double-digit for the third consecutive year, it is for the full year. You don't deliver any comments for the second half, isn't it? Secondly, the traditional question on the pricing of flat glass. And last question, specific in Northern and also in South of Europe, could we have, maybe, the share of the distribution around, so share of building distribution in Northern Europe and in Southern Europe in percentage more and less in the turn over?

I will let Sreedhar answer the number 2 and number 3. We give you a very strong margin for the full year and as I said, we are very confident to deliver a new record margin for the third consecutive year, double-digit margin for the third consecutive year and a record margin in '23, above the one of '21, and of course, the one of '22. That gives you confidence that we will deliver on all our commitments, as we have done over the last 5 years. We don't want to micromanage the guidance quarter by quarter, so I don't see how delivering on the new record margin for the year is anything different from what you say and what you asked in terms of questions, so I'm very confident that we will have a record margin in 2023 and it will be a very successful year for Saint-Gobain, beating the '21, beating the '22 margin. So also, we'll talk about the margin of '24 in due time, but as I said, I'm confident it will be a solid year for Saint-Gobain in 2024. So record margin in '23, I think it gives you a lot of color, a lot of flavor to know exactly what we mean. And we are confident that will deliver on the margin. And I prefer to stay on the full year margin, because this is what matters. For me, it's extremely important that for 3 years in a row, we delivered year after year record margin improving year after year. And this is what we'll do in 2023. You don't need me to be more specific quarter-by-quarter. I think it's clear enough on what we mean.

Jean-Christophe, the glass price of 4 mm was EUR 4.7 for the Q3. And the last question is on the distribution. I mean, Jean-Christophe, we don't run business like that. The way we operate is by country, and we had given the overall distribution figures for the group, which was 30%. So that's -- that number continue to be valid.

For the 30% of the EUR 50 billion turnover.

Yes.

The next question is from Arnaud Lehmann of Bank of America.

I have 2 questions. Firstly, on pricing, about 2% in Q3. And in particular, in the Americas, it's not stable. And in Asia, I think it's down 3.5%. Is it all related to base effect? Anything to mention there? And specifically for Asia, are there -- is the sort of pricing effect here any relevant at all? And secondly, on the share buybacks, as you mentioned, you accelerated. And clearly, you have space to do more on a slightly more structural basis. Do you think there is space for you to give a more -- a bit guidance on share buyback?

Thank you, Arnaud. So I'll take the second one and Sreedhar will come back to the first one. The share buyback, what is very important for us is to look at overall value creation and capital allocation. As you know, we have 3 balanced legs. The CapEx will be around EUR 2 billion of CapEx this year, accelerating on the growth CapEx because we have growth prospects going forward and growth in volumes in many geographies as we speak. Second, M&A, we have proven to create massive value if you think of Continental [ Cradle to Gate ]. And third, as you point out, the share buyback. So we want to keep the balance of those 3 legs, because we are convinced this is the best way to deliver value for our shareholders mid- to long term. You remember that 2 years ago, in October 21, we announced a EUR 2 billion buyback over 5 years. We have done EUR 1 billion over the first 2 years. Instead of the EUR 400 million, which would have been the average of the 5 years in '23, we're already at EUR 540 million end of October as of today. So that means we are also taking a pragmatic approach, opportunistic approach on the buyback. So we will complete, of course, and continue to add on buybacks for the rest of '23 and do that in '24. And then we will figure out. So we will keep this balance between the 3 legs. First, I want to finish the EUR 2 billion buyback program between '23 and '24, and before '25, which is the end of the program, but we may be a bit ahead of the timing.

So now coming on your question on pricing, this 2%, yes, the comparison basis was tougher, and that was the main reason where you would see that segment by segment. When -- but coming to Asia, particularly, in addition to the comparison basis, which was tough, but we also made certain conscious decision to focus on market share. It's a market especially in a deflationary environment and more so that we have a good price-cost spread situation. Keeping the trend of deflationary and the price-cost spread situation, we have made certain conscious decision in some of the markets, particularly where the price sensitivity was there. Otherwise, globally, the pricing is in good shape. There is a good discipline. Sequentially, we continue to remain stable, and that's why I remain very confident of getting -- delivering the price-cost spread, not only in Q3 but also in Q4. And I also said that I think this is now the way, country by country, the focus is there on price-cost spread by the country's CEO. It gives me a lot of confidence that we should continue to deliver the pricing power even in 2024.

And maybe one additional flavor on North America, we are in positive volumes, and we have been there over the last 2 quarters. If I take roofing, we are about to announce price increase for early next year in roofing. So the storms activity that we have seen over the last quarters will continue well until first half 2024. And overall, most of our plans, depending on the geographies, and we have visited one in the Northeast mid-September, but most of our plans are still pretty much on allocation. So there is a good momentum going forward on some pricing actions for North America into '24.

And the one we announced has gone through.

Yes.

The next question is from Elodie Rall of JPMorgan.

So I'll limit it to 2. First of all, on H2 margins. So you reiterated double digit for the year, but I've noticed that you dropped the 9% to 11% previous guidance range for H2. So if you could let us know why is that. And if that means that we should expect double-digit margin for H2 as well. And my second question is on volumes. If you run through the major regions, where would you say you're seeing signs of volume drops easing and where would you say you're seeing positive volume growth from here into '24? And if I can push it, if you could comment on renovation specifically. This has been resilient, but everyone is worried that given the consumer backdrop, it's going to get worse. So that would be helpful.

Okay. Good. So I think your first question is quite similar to the one from Jean-Christophe early on. So yes, indeed, we dropped the 9% to 11% because we think it's much more powerful to tell you that we will have a weaker margin for the full year. We are very confident to deliver that. Of course, it will be another year of double digit, but a record, above and beyond the one from last year, '22, which was above '21. And again, without micromanaging each and every one of you, I don't see how delivering a new record margin for the full year is anything different from the question you asked. I cannot be more precise, but I think I've been quite clear, and I'm confident that I'm extremely happy that even in a more difficult challenging environment, we delivered very well against the COVID, very well against the supply chain disruption, the war in Ukraine, inflation or this.\ And again, even against negative volumes, mid-single digit in '23, we will deliver a bigger margin above the last 2 years. So I think we are very clear and very precise on what we mean that and there. I'm very confident about what -- how the group is performing in Q3 and confident that it will continue in Q4 and therefore, for the second half. Regarding volumes, Sreedhar mentioned it in his comments. If you take France and Eastern Europe, Eastern Europe, the volumes, although still negative, are a bit better than overall Eastern Europe than in Q2. So that's something, I think, in some of the Northern Europe countries, we are not far, not too far from the trough, again, if I say, on the countries which have been quite challenging. South Europe, if I'd explain, Italy, it didn't move much. So I think both countries, maybe we are getting more share than elsewhere, but it's quite solid. France, on new build, could continue to worsen a bit for a few quarters. But again, I don't think we are very far from the trough. As you have heard, if I go outside of outside of Europe. Of course, Middle East, Africa will continue to be on the positive side, same in Asia, and we are already there. The good news is that we start to see some early signs that Brazil, which is an important country for us, will improve into 2024 on several fronts. So that's -- we had some early signs in the last few weeks, few months that, that's positive. North America, again, we turned into positive volume already in Q2 and following that, in Q3. Even if you look at -- on the new builds and housing starts, we had 1.35, 1.4, with 1 month up, 1 month down. We have been a bit more optimistic than markets, the financial markets in the beginning of the year. On North America, we are confident at the performance of our team, so I think that should resist quite well for next year. And I think the mindset around the interest rates and what the homebuilders are doing to ease the purchase of homes have been quite powerful in North America, so that's quite sensitive. On renovation, for me, a very good sign, and we should not underestimate that is the fact that there is a strong support from -- if I take France, which is an impact country for us, doubling the support of renovation subsidies is meaningful, making it easy also for the households which have less purchasing power, i.e., the ones which were, who were a bit excluded from those activities in recent past. So for me, that's significant. Don't forget also that public buildings are moving into the right space. So for me, the renovation is there. Sometimes you see and you read some debate country by country, but I can tell you the mindset of households, the fact that energy is expensive, and you need to save energy, by having the right renovation, I think it is there to stay. So in every country of Europe, you have this minimum energy efficiency rationale. Keep in mind that we are not in do-it-yourself. We are in hot stuff of must-have renovation, be it energy or be it roofing renovation in the U.S. So I think on the renovation, we are quite confident that we are with a large offer gaining share, and that is something which will be a good support into '24.

And the order book continues to remain very good, Elodie.

For the customer.

Evidently for the customer.

So if I summarize, do you think we could hope for '24 volumes to actually be stable? Or slightly up?

It's too early, Elodie, like on the overall guidance for '24. It's, of course, too early to say, and we'll take it one by one. Again, we are extremely happy about how we deliver in '23. It will be another record year for Saint-Gobain, so that's great. And I think it too that the resilience, the momentum, the dynamic, the engagement of the teams is absolutely there. '24, we'll talk about it. But I can tell you that I'm confident that it will be a year of success for Saint-Gobain. I'm confident that the teams are very focused on the priorities and sometimes it's growth investment. If we think of the North America, sometimes it's making sure that on cost, on head count, on industrial footprint, we are delivering exactly what we need when it's negative volumes in Europe. So all teams are hands on deck to make sure that we have solid actions with a small set of priorities they must embattle to deliver strong performance in '24 on everything we control. There are things which sometimes are out of control, the geopolitics, but everything we control. It's our duty and it's our commitment to continue to deliver well, like we have done for the last 9 semesters.

The next question is from Yassine Touahri of On Field.

I would have a couple of questions. First, you're discussing about the new residential construction potentially being close to a trough. Can you comment about the new nonresidential conduction. I think we see some indicators in the U.S. I think the architectural bidding index getting a little bit weak. The business confidence in Europe is a little bit weak. Do you feel that -- when you're discussing your team, when you're discussing with your clients, do you feel that there is a risk of a further deterioration in the coming quarter in new nonresidential construction? And also, if you -- I think you gave us the number of your exposure to residential construction at 12% of the group. Do you have this number for new nonresidential construction? And then a second question on energy. So we start to see with the political crisis, in the Middle East, energy prices picking up a little bit or at least being volatile. Have you started to hedge your gas and electricity and fuel costs for next year? And if so, if you can give us a bit more color about the way you're thinking about it.

Two questions for you, Sreedhar.

Yes. So coming to new nonresidential, we have to split this nonresidential into 2 parts. One is, if you're talking of some offices -- and offices. Yes, there is a negative news where you see that in particular in the U.S. But when you look at industrial investment, which is happening in a big way, the industry is growing. You also see that the general other hospitals and schools are -- investments are happening. And then this is very true, even in Europe where you see that clearly, this is an area where the state can intervene, because clearly, they have identified this as one region, one area where they need to improve the overall -- the efficiency, energy efficiency. And Saint-Gobain, you know that, we have very nicely carved out the full solution for each of the segments. If it's a hospital, we have a full range of solutions. Similarly for the schools and universities with a very good use case and data point. I think we are positioning ourselves to clearly leverage our organization, new structure to grow further in this market. And as your question was not residential, where is -- for the full overall, for group it is 15% and the new residential, you already said, it's 12%.

Residential Europe.

Yes.

It's 12% and total new residential is 22%.

Yes, 22%. And for our nonresidential, it's 15% for the full group.

And the second, on energy, Sreedhar.

On the…

I can take it. Your question was on the '24. Yes, we have started to hedge. As you can understand, it's a sensitive commercial information, so we will keep it for us because it's something which is sensitive in the eyes of our competitors in terms of how you price, depending on your cost. But of course, like we have done in recent years, we started to hedge and we are always proactive on those measures.

And I just want to tell you that when you look at some of the statistics, the stock of the gas, which used to be last year, before entering into the winter, clearly, we are in a much, much better situation. I mean, we have close 100% stock, which was not the case last year. You would also see that after the crisis, which we had in Ukraine War, the number of alternate source is also significantly built. So I think there are a lot of good things have happened over a period of time, and we continue to monitor this very closely.

The next question is from Yves Bromehead of Societe Generale.

Maybe 1 question on 2024. Benoit, you mentioned that you expected another year of success. Can you define what you mean by success? Are we talking about earnings growth? About margin progression? What do you exactly mean by another year of success? And my second question is just going to the underlying pricing by region. I understand that the U.S. is improving sequentially thanks to the roofing, et cetera. High Performance Solution also was quite strong. But when I look at Europe, it seems that we are starting to see, for the second quarter, some signs erosion. So when I put this in the context maybe of your distribution margin, can you help us maybe clarify whether there is a situation here, especially after some of the U.K. distributors? And I know you aggregated the market, have profit warned, so just wanted to understand the outlook for -- especially for distributor margin in Europe in this context.

So like I answered to Elodie, we'll talk about 2024 in late February when we publish our '23 results, and we'll give you the guidance and the perspective for '24. But I can tell you, I'm confident about all what the teams are delivering based on the growth initiatives, based on the acquisitions. When I see how well we integrate GCP, Chryso having double-digit like-for-like growth of Chryso in the third quarter, be it the Construction Chemicals worldwide at more than 3% organic growth in the 9th month of '23. All this is, I think, gaining share on Construction and Chemicals segment. So all those parameters, I think, will be also part of the successful support for '24. So it's a lot of parameters, be it financial, strategic team, engagement and further strategic moves that will continue to deliver in '24. On the pricing, specifically by region, what is important for us, as you know, is that when we do strong double digit for the margin for the group. It means 13% and above for our manufacturing businesses, and it means 6% to 7% for our distribution margin, and we are there. So I see good resilience, good performance. Why? Because we are very strong in those geographies, Nordics and France. We are setting the tone, as Sreedhar said in his comment, we are setting the tone on [ relation ] in France, same in the Nordics. So that helps, of course, delivering and continue to deliver even in more challenging environment, a very good margin, bank in line with our expectations, for those assets, in the Nordics or in France. And yes, we are happy that timing is of the essence of everything for acquisitions and divestitures. We are happy that we sold in due time. And with the right multiples and EV, do some business in February or March of this year.

And I think the most important indicator that we look at, every single business is the price-cost spread, and I'm confirming to you that every single, segment, including Europe, which you mentioned EV that we have a positive price cost spend.

Next question is from Cedar Ekblom of Morgan Stanley.

Thanks very much. I'm not going to ask you about what you think your volumes will be in 2024 because I understand that it's too early and you don't have visibility. But what I would like to understand is what level of volume growth you think you need in order to deliver neutral or positive operating leverage in the context of fixed cost inflation that we have. Because you talk a lot about price-cost spread being positive, but clearly, that's price variable cost, and at the end of the day, we're in a negative volume environment with inflation in some buckets, like labor. So I'd just like to understand, not your guidance on '24. I get why you're not commenting on that. But could you give us some sort of understanding of what you think that volume number needs to be before we need to start thinking about more drastic cost cutting measures.

Yes. So Cedar, if you go back to the leverage, we have always said that we should see 25% to 30% leverage in the volume. And when you look at the current year, especially when we are talking about delivering 1 year of another new record margin, that also reflects that our ability, to offset, not just a variable cost inflation, but also the fixed cost inflation. We have 2 things to keep in mind. One is the structural WCM, the world-class manufacturing program where it is run in a very systematic manner in every single plant, which enables us to offset many of these fixed cost increases, mainly through the productivity improvement, and that's something which we have been able to successfully do. Second thing is you need to remember that when you look at the total fixed cost, we have something like EUR 16 billion, 1/3 of this fixed cost is actually semi-variable. I think the semi-variable gives us a lot of leeway. And that's one clear area where we have been able to identify country by country, especially when we anticipated a slowdown, it's as early as June 2022. Benoit addressed the top 150 leaders talking about country by country, looking at where are the indications and anticipate and start looking at all these semi-variable costs and address those costs. So that's how we have been able to -- in spite of the fact that we have a low volume in this year, we have been able to continuously deliver a good margin. So there are plenty of -- a lot of things we do. And, when it comes to cost, the simplest thing is when you -- in a distribution business, when you stop replacing the people, the attrition level, which is normally, reasonably higher than what you see in the industrial businesses, that still brings down the cost structure in a very mechanical manner. We do a lot of discretionary cost actions and that's another way of managing the margin. So it's not as simple mechanical where you just put the numbers, you will see volume, this is the kind of number we need to get. So there are plenty of levers. I'm sorry, I'm not giving you a very precise number and answer. But there are plenty of things we can do to protect the margin and deliver the margin in a consistent manner.