Fosroc International Ltd. (SGO) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Saint-Gobain Acquisition of FOSROC, a leader in construction chemicals Conference Call. [Operator Instructions] Our hosts today are Mr. Benoit Bazin, Chairman and Chief Executive Officer; Mr. Sreedhar, CFO; and Mr. Thierry Bernard, CEO of Construction Chemicals. Gentlemen, you have the floor.

Thank you. Hello, and welcome to our analyst and investor call on the acquisition of FOSROC. So I have with me Sreedhar, our Group CFO; and Thierry Bernard, CEO of Construction Chemicals, who most of you have met during our Investor Day on construction chemicals last November. As you know, Thierry is the former CEO of Chryso that we have developed very successfully over many years, integrated well into Saint-Gobain and combined successfully with GCP. I'm very pleased to announce the signing of a definitive agreement to acquire FOSROC, the leader in construction chemicals in India and the Middle East. This acquisition will constitute a further step in stand-alone strategic growth in construction chemicals. As you know, one of our two priorities for growth and capital allocation in the past 5 years, along with geographic development in high-growth regions. I think all of you have the slide show. So I will refer to the slide number and go for one now. So I'm now on Slide #2. The acquisition rationale is simple and very compelling. For FOSROC, this is ideally next step to strengthen Saint-Gobain's global competence in construction. Five key points for this takeaway. First, FOSROC is another important step in our strategic growth trajectory in construction chemicals, a fast-growing market that is crucial for the sustainable construction industry. Second is geographic profile strengthens the group presence in high-growth emerging markets, mainly India and the Middle East. Third is solution portfolio, we reinforced under brand's existing offering and bring the leading and well-known brand with strong technical competency. Fourth, FOSROC has a strong track record of profitable growth, outperforming its markets. And finally, the integration of FOSROC will unlock significant synergies, hence, securing strong value creation for Saint-Gobain's shareholders and customers. As you see, FOSROC does tick both boxes of our strategic priorities in one go, high-growth regions and construction chemicals. I move now to Slide #3. I would like to come back on Saint-Gobain's journey in construction chemicals that has sharply accelerated in the last 3 years with strategic acquisitions and also expanded in terms of technicity, technology and high-value offer. First, the big move of Chryso in 2021, strong innovative leader in concrete admixtures with very well-structured leading positions in Europe, Turkey and Africa. Second, GCP in 2022, strengthening our portfolio in cement additives, high-performance membranes and digital solutions and with a geographic complementary footprint with strong positions in the Americas, both North and Latin America and Asia Pacific. And FOSROC, the third step with a comprehensive portfolio across construction chemicals solutions and strong position in fast-growing India, the Middle East and Asia Pacific. With these 3 acquisitions, Saint-Gobain is really a strong construction chemicals growth platform, both global in geographic scope and comprehensive in terms of application offer and technology. I turn now to Slide #4 to look at FOSROC in more detail. FOSROC is a global leader in construction chemicals that has been built over the last 30 years, $487 million in sales expected for 2024, 18.7% EBITDA margin. Outstanding growth with 11% annual growth since 2021, outperforming its markets. Also a sustained overall proportional EBITDA growth, 2 technical expertise combined with a recognized trusted iconic brand and a comprehensive portfolio with roughly 1/3 of sales in additives and admixtures and 2/3 in specialty building materials. And even more in specialty, exceptional deals in terms of know-how, verification, technical and commercial success. So we are very, very eager and enthusiastic to welcome them into the renewed team of Saint-Gobain construction chemicals. I move to Slide #5. You can see that India and the Middle East account for close to 75% of FOSROC sales equally split, which will strengthen Saint-Gobain's platform in these regions. The growth perspectives are appealing both for infrastructure and buildings, all these being linked to demographic trends. As you know, India benefits from a strong underlying construction market fueled also by the infrastructure sector. Within this infrastructure market, we see an accelerated penetration of competent [indiscernible], driven by requirements for better quality, stronger productivity on the side and also enhanced performance. We witnessed a strong evolution towards ready-mix versus traditional on-site meeting. As a policy of measuring this, we follow the evolution of cement being sold in bulk. In India 10 years ago, bulk was missing about 15%, 1-5, of cement sales. It is now 35% to 40%, and it will keep moving up. So this is a very strong driver of growth for concrete and ensures going for long. And what the booking number is also, demand is growing quickly due to flat roof construction and also increased extreme weather conditions. Then in the Middle East, again a strong underlying construction sector driven by the demand in infrastructure and multiple major projects that you will have heard about. I switch now to Slide #6. If we take a step back to look at Saint-Gobain's growth goal in construction chemicals in the past few years, with the acquisition of FOSROC, we will have more than doubled our size in construction chemicals from EUR 2.8 billion in 2019 to EUR 6.2 billion, where we have effectively built a solid global platform in 73 countries, 300 sites, 13,000 employees. Thanks to a very clear investment strategy we targeted and value creative capital allocation, all this being executed in a decisive manner. We have done 3 acquisitions and also thanks to organic growth and CapEx with 31 new production lines built in 25 countries since 2021. I think it's very [ important to note ] that it is because we have such an attractive platform in terms of organization, in terms of teams that we are able to land and attract successful bilateral discussions like the one that we had on FOSROC over the last month. I turn to Slide #7. Let's lean on India. FOSROC will partially complement our position on this market, which is a key growth driver for the group and a very successful country for Saint-Gobain. We are indeed already a leader in light and sustainable construction in India, record-time leader in glass, in gypsum and insulation. We have altogether 35 industrial sites, including 9 in construction chemicals, more than 9,000 employees. And as you know, a very successful journey with double-digit growth for so many years and of course, double-digit margin. FOSROC, we tripled, times 3, Saint-Gobain's sales in construction chemicals in India, and it will bring a very bright future for us with a network of over 7,000 retail point of sales, a strong position in infrastructure, for instance, FOSROC was official supplier of admixture for the [ Puzhal ] dam of Chennai Metro tunnel in India and a portfolio of high-performance products. So overall, iconic brand and presence in India. By joining, we'll be able to increase cross-selling opportunities for the benefit of our clients, utilize SG&A or optimize our supply chain. I now hand over to Thierry, who has been extremely successful in discussion and instrumental in giving our construction improved platform over last 3 years. Thierry, over to you.

Thank you very much, Benoit. Now commenting on Slide #8. And of course, in addition to stellar growth and profitability track record, we are very excited to soon integrate FOSROC into Saint-Gobain. First of all, we are absolutely convinced that this company is the perfect fit within Saint-Gobain construction chemicals platform. Let me remind you that we know FOSROC well. We have followed the development very carefully over the past years. And some of you may know that Chryso in the past have acquired from FOSROC some assets, both in France and in South Africa. So this is a company which we know well. More importantly, we have the right team and [indiscernible] to confidently integrate FOSROC and generate value quickly through this integration. This is the exact same team that has developed Chryso over the years and that successfully integrating Saint-Gobain that will manage this integration. We are all there to continue to drive success to leverage the Saint-Gobain worldwide, geographic and technical platform, which I can tell you. But having spent almost 20 years of my professional life in construction chemicals, I had the willingness when joining Saint-Gobain in 2021, but we could write a fantastic new chapter together. And here we are combining in just 3 of kind: Chryso, Weber, GCP and FOSROC is an extraordinary buildup that we do methodically in the right order and at a global scale. We may do that right. And all my team is releasing the one. And you remember, when we met all together in November for its Investor Day dedicated to construction chemicals. I told you that we were still looking after additional opportunities and here we are. In terms of integration track record, as a reminder, I'd like to state again that with Chryso and GCP, we are going to deliver EUR 50 million of synergies ahead of plan in 2023. And when I look after the combination of Chryso and GCP, we have improved the EBITDA margin by 400 basis points in just the first year of integration. And I can tell you that 2024 is continuing to progressing well on multiple homes and are confident that we are moving the combined business towards best-in-class performance level. Continuing to comment on Slide #8. I'd like to share with you very similarly to what we've done with Chryso and GCP, we will leverage 4 main levers to generate value. Number one, innovation. I will deep dive a bit later, but I am so convinced that the combination of FOSROC's deep market knowledge in India, in Middle East and in Asia with Chryso's and GCP's best-in-class offerings with high server force. We will be back on concrete admixtures, cement business, waterproofing and lockup technology. From a supply chain standpoint, we will combine our industrial sites. That will enhance our [indiscernible], delivery performance for our customers. I remind you that an efficient, consistent and reliable supply chain is a key success factor in the construction chemicals space. As well, and this is something which has been commented at length with the acquisition of GCP, taking advantage of previous polymerization capabilities from our facilities either in Europe, in Turkey or in India, will improve our cost position. And as importantly, it will improve the capabilities to design bespoke differentiated solutions for FOSROC's customers. We have a large network of 9 regional development centers that will support FOSROC's formulations and new products in production capabilities. And finally, on product complementary team that was commented, but FOSROC has developed a very strong and comprehensive offering, in particular, on the infrastructure space. We will leverage this know-how into new geographies, whether group is present and [indiscernible] is not taken. With GCP, we also have acquired solid niche offerings in injection railings, bridge deck waterproofing, [indiscernible] for winning applications, and this will be great additions as well to FOSROC's offering in the market where the new business. Let me now move to Slide #9. We will be, of course, able to unlock exciting cross-selling opportunities within acquisitions. This will reinforce high-demand offering for low-carbon countries by combining FOSROC's [ intimate relation of exposure to the legalese coming down ] construction market will trigger innovation. Combining as well FOSROC's specialty building materials portfolio with GCP's offering in Brazil, [indiscernible] will strengthen FOSROC's capabilities to answer to any complex request on a larger set of job sites. We will, therefore, reinforce for such differentiation capabilities in the businesses where they are. And here, FOSROC will benefit from a greater level of vertical integration than today. I remind you that GCP and recent acquisitions that we've done in India is giving us manufacturing capabilities in high-performance numbers. And so before -- I'm sorry, and as I will be finished, we have -- we will be in a way to leverage for their regular presence to expand for such distribution channels. As commented by Benoit, FOSROC is currently serving a network of 7,000 retail points just in India, but fast-growing good market channel in India, and we will obviously expand that capability with the best offerings, leveraging what FOSROC has been very successfully over the past year in India, in particular. And so before handing it over to Sreedhar, who will tell you more about the synergies and the transaction in detail, I'd like to say once again how excited I am about promises that in Saint-Gobain's successful joining business construction chemicals growth platform, not only do I believe in the very strong complementarity of FOSROC and Saint-Gobain's assets and capabilities, I'm also convinced of the cultural fit between our organization that will be absolutely core to our integration. I've had the pleasure to work closely with the FOSROC team over the last months on this acquisition and getting to know and work with them in a fully natural and constructive way. I am very much looking forward to continuing to advancing with them in the very near future. Over to you, Sreedhar.

Thank you, Thierry. We indeed have an exciting journey ahead. Moving to Slide 10. We expect synergies of $54 million in year 3. Of these, the vast majority will be cost synergies. $11 million in procurement and formulation engineering with purchasing savings on input chemicals, for example, and the optimization of product recipes. On operations, we expect $12 million of synergies, similar to what we have done with GCP. We will leverage Chryso's production platform to integrate polymer production, as Thierry said. We have also identified very clearly $16 million of SG&A savings in the countries where FOSROC is operating. Finally, we have also identified close to $15 million of gross synergies from the cross-selling and portfolio engagement as we did by team. These synergies will be realized across our construction chemicals platform and our wider construction solutions in all these countries. If we just take the High Performance Solutions construction chemicals sales, these synergies would be representing around 3% of sales. I want to assure you all that these synergies are backed with a very detailed analysis, and I'm very confident that we will achieve this, as we have demonstrated in the case of Chryso and GCP. Moving on to Slide #11. Now let's see the transaction overview. Our offer price represents a multiple of 11.3x of 2024 estimated EBITDA pre-synergies. If you take post-synergies multiple, it will be 7.1x. The transaction is value creative by year 3, meeting our strict financial criteria for any acquisition. The transaction will be fully financed in cash and will have a limited impact of around 0.1x on our leverage ratio. That means we will remain at the low end of our target range, which we gave during the Capital Market Day of 1.5x to 2x,, even if taking into account Bailey and CSR acquisitions. The management team is very experienced, and we are looking forward to welcoming them to join Saint-Gobain. Closing is expected in H1 of 2025, subject to all customary conditions. Importantly, the integration will be managed by the same team, led by Thierry, who piloted the integrations of Chryso and GCP so successfully. I will now pass on the floor back to Benoit to make the concluding remarks.

Thank you, Sreedhar. Thank you, Thierry. So on the last slide, #12 and to conclude, let me say again that I'm very excited by this acquisition. I'm also very confident about the value it would bring to Saint-Gobain shareholders and customers. I'm very confident in the success of the smooth integration just like what the team has been built on Chryso and GCP. I want to deeply congratulate David Molho, our CEO of High Performance Solutions and Thierry Bernard for the impressive journey already achieved in construction chemicals and also for this very successful discussion relative to the FOSROC combination. With this acquisition, Saint-Gobain's construction chemicals platform has an even more balanced and attractive geographic footprint with most increase over to the fastest-growing markets. FOSROC will leverage the strong initial platform of Saint-Gobain around the world. To deliver the value of the solutions, we need to meet the world's sustainabilities. And finally, frankly speaking, the [ acquisition will lead a ] stronger and more experienced team to deliver the synergies and profitable growth. We will be extremely happy to welcome the FOSROC teams. They have a fantastic track record, competitive positions in some countries. And I would like also to convey my strong appreciation and congratulation for the strategic development achieved by FOSROC over 7 years under the leadership of Dr. Jim Hay, the current shareholder of FOSROC. Thank you for your attention. And both Sreedhar, Thierry and myself, we are ready to take your questions now.

[Operator Instructions] The first question comes from Ebrahim Homani of CIC.

The first one is about the market share of FOSROC in some countries. Is there any antitrust risk regarding this acquisition? The sequence is about them. The synergies, is there any synergy and synergies identified between CSR in Australia and FOSROC? The last question on the FOSROC exposure, and I understand that the main market is being construction market. What about the data market [indiscernible]?

Thank you. So I take the first two questions, and Thierry will take the third one. So FOSROC has a well-established presence in their different countries. We are not going to give you the details of their market share. There will be antitrust filing. It would take some time. Neither one, we don't anticipate the closing before the first half of 2025. But we think this acquisition will go to, for one, country by country. So we don't anticipate any difficulty and a significant issue on antitrust, but of course, we will have those discussions bilateral one by one in the different countries, but it has been well identified because as you have understood, we have several months of discussion with FOSROC. The second, no, there is no presence of FOSROC in Australia. So in the very short term, there will be no synergies there. As you know, thanks to GCP, the book of business of construction is doing good in Australia, but we intend to grow. One, when we disclose, of course, will help leveraging the very strong footprint of CSR in Australia. But what we will bring going forward on top of the both of the existing business of GCP is, for instance, the technologies that FOSROC has developed in so many countries. Of course, we will have the ability to bring back to Australia, but it's not part of the synergies that we have completed in the slide that we shared last year. Thierry?

Yes. On your third question regarding the exposure to final markets. What you see from their geographical exposure is -- and from the origin of each company is that they have, let's say, a stronger focus on infrastructure which, to some extent, is on the [ fixed assets ] because typically in infrastructure, the technical requirements for quality, the performance of the products are usually higher than more, let's say, traditional, potentially residential business. So the brand FOSROC has been built on extraordinary track record and performance of [indiscernible] in Middle East, in India, in Southeast Asia for the products. So the focus is definitely on infrastructure. Now let's be clear, they also do business in commercial buildings and residential. I was commenting a few minutes ago with the more that they have developed in India through the retail segment, typically this retail go-to market is much more dedicated to the commercial buildings or residential buildings and for the infrastructure. So FOSROC has a focus on infrastructure, yes, but they also do business in residential and commercial business.

The next question is from Cedar Ekblom of Morgan Stanley.

So a couple of questions. Can you just talk about when you started having discussions with FOSROC and how this deal actually came about? Then on Slide 4, there's a little bit of detail on all the different product segments. I don't know if you could give us some high-level numbers on how much additive and admixtures contribute to revenue, and then maybe how much the specialty building materials contribute so we can get a little bit of a better understanding on either portfolio? And then Thierry, a question for you. Can you just comment on sort of the approach to integration of the assets? How you're going to get your local teams to make sure that the integration goes smoothly? How much is going to be done at the head office level? That would be really helpful.

Thank you, Cedar. I think the first one or the third, so discussion started late last year. But as you have understood from the presentation from Thierry in new environment for many years. So because Chryso is buying from stock assets in France and South Europe, so the presentations, bilateral discussions on this transaction started in late '23, have been very detailed, and this is one from certain synergies. We have divisions, [indiscernible], all the plans have access to the management. So the plan is already well prepared and have been discussed on both sides. So -- but that's the timing of the institutions. On Slide #4, I mentioned in my presentation that it's [ 14 months term ], around 1/3 concrete admixtures and cement additives and 2/3 on the other specialty building materials segment. So that's the role split in terms of sales. And Thierry, if you want to add color on that or via process.

Yes, for sure. The same one, much more comfortable about what we've done with GCP on the integration. And -- but one of the reasons why we saw a bit about this acquisition is our organization is ready today to integrate FOSROC. When we've combined entity, we designed a detailed and a new organization purposely to make it an attractive consolidation platform capable to look after admixtures, specialty building material here very decentralized, where these concrete and powered to develop the businesses in the different sectors. Today, this organization is ready. And interestingly, FOSROC organization is very clear. FOSROC is an organization which is driven by its countries with support centrally from verticals, which are here in concrete admixtures, in additives especially building materials. So the model of FOSROC is extremely similar to the one which we have built within Saint-Gobain over the past year. And that's why I'm very confident about the quality of the integration. The other things that I have not commented during the conversation is very similar to Chryso, the FOSROC leadership team is made of very similar managers who have been in the business for many years. They know the market extremely well. They are knowledgeable about their product families and offerings. So I'm absolutely confident. But with them, we will build a strong management team. We will do in a very same manner as with GCP, very fast execution of plans. As Benoit commented, we have been in a position to discuss with them in collectively long bilateral discussions, which is giving us a very good level of confidence on what needs to be done and how we will move quickly, again, redesigning the proper integration plan once the closing is done. I would say the experience, the recent experience of the GCP acquisition is given -- to face complacency. But at least we have a strong experience of integration, of integrating multi-countries or continents of global businesses.

The next question is from Elodie Rall of JPMorgan.

Maybe first question here, just two questions. Can you talk a little bit about the like-for-like growth of top 14 recent years? And how have margins been for this particular business compared to the 18.7% now? And how do this margin compare to Saint-Gobain's overall construction chemical margins? And second, I was wondering if following this acquisition, if there are still some application offers or technology or geographies that you'd like to expand into what is still missing to complement your construction chemicals footprint.

So Sreedhar will take the first and Thierry will take the second question.

So you are seeing that if you look at the last few years, FOSROC has actually grown at the rate of 11%. It's a very nice growth story. And this is something which you see that because of the presence in countries like India and Middle East, this is a country which are fast-growing countries and we have also seen in Saint-Gobain's businesses. We have always grown in the last 10 years, if you see, double-digit growth. So it's a fantastic growth story. And just because of that double-digit presence in the countries which are structurally growing faster. In terms of margin, you're seeing the margin, we have talked about 18.7%. It's very good, best-in-class. It's a margin which is high, fantastic. And in terms of comparison with Saint-Gobain construction chemicals, overall, when you look at it, it's a combination of Chryso. You know that Chryso is best in class. We have demonstrated consistently more than 20% of EBITDA margin, whereas the GCP is in the journey of turning around and you've seen that the very first year, we have delivered the combination of Chryso and GCP, which is 400 basis point and other businesses of construction chemicals is not very far from the average. So overall, it's a fantastic platform that we are building to have a very profitable growth story. And in general, I would say that we are not very far from an average of 18%.

Thierry?

On the second part of your question, two topics that I would like to comment. The first one is related to what I was commenting earlier about the infrastructure offering of FOSROC. Certainly, FOSROC has demonstrated lately with its capability to have a very comprehensive offering for solutions, which are related to infrastructure projects starting at the early stage or from concrete admixtures, which is the typical entry point on the job side when you start to grow concrete, then complemented by a set of solutions that are used by the general contractors in the course of a job site. Actually, we do concrete usually, we do waterproofing of the basement or the foundation. When you need your grout format, when you need the protection solution, then you need some flooring solution. In fact, you need to have potentially in bridge solutions, some structure which are necessary for the solutions in precast countries. So that's typically what FOSROC has designed extremely well over the past decades and the strength of what they're having, but there have been references in multiple countries for us. And this is what we will use and leverage because it's almost ready to go. And I'm pushing a bit the envelope, but the offering is there and it is exactly what we will leverage in inventory. So that's the first part of what we will leverage, which is not necessarily related to technical training, but you see the very specific skill in terms of marketing in the retail development -- the good market related to channel development and retail. What we have done over the past years in India is extraordinary, developing a network of 7,000 retail points over a couple of years is something which requires specific skill and I want that we learn from that and potentially developing as well some good markets related to this channel in countries where retail is an important part of the building material distribution, that will be something important in what I see the interest of [indiscernible]. Finally, I like as well to finish my comments on one important thing related to sustainability. If I would say, of one weakness of a portfolio, they have relatively limited exposure to Europe. And Europe is believing continent in terms of sustainability and this is where we are extremely strong, and this is where [indiscernible]. And this is where we are totally embarked with multiple stakeholders in innovating solutions for a sustainable construction. In Europe, [ Regis ] is partnering with key accounts, large accounts, partnering with universities, partnering with start-ups to develop the future of building materials for the next decade, the next 20 years in terms of low carbon footprint, heavy building materials. All these skills, all these offerings, all the innovations, we are going to bring them and to support for such incremental edge [indiscernible] in line office area to broadcaster with these solutions in this region. And I can tell you, every time I travel to the region, I see an incredibly growing appetite from these regions towards sustainable solutions. So again, combining Saint-Gobain and Fosroc, will help Fosroc to unlock opportunities of development coming from the innovation capabilities that [indiscernible] has developed over the past year, in particular in Europe in terms of sustainability. Thank you, [ Chairman ]. Go to the next question.

The next question is from Brijesh Siya of HSBC.

I have two, if I may. The first one is on the retail points sir, you were talking about 7,000 retail points.

Could you speak a bit louder. [indiscernible].

Is it clear enough?

Clear.

Sorry, the first question is, clearly, you talked about the 7,000 retail points being the kind of the driving force for Fosroc. Could you give us a little more sense about how the distribution [indiscernible] segment is for Fosroc and what it is for the residual construction chemical business for Saint-Gobain. Then, the second one is on the kind of the overall market size. Could you give us what's the kind of the market size you are kind of -- Saint-Gobain as a group has now, the kind of target market sizes? Is it INR 100 billion, INR 110 billion? And within that, how much the India Construction Chemical business, if you can just give us sense of it, that's great. And then the third one is on the Fosroc's 11% growth with the combination and the cross-selling and the distribution network would you have. Would you say that, that growth is there for the next couple of years? Or you've seen the acceleration coming in that as well?

So maybe I'll answer the 2 and 3 and [indiscernible] number one. So we plan to read the 100 billion overall consequential markets in late November, so we are there. To some extent, the energy markets of countries like India, they start on the small but are a lot -- so we will take more in share. I don't know if you have more precise figure [indiscernible] in the condition, the evolution of the cement in [ bank ] versus [indiscernible] over the last 10 years, which tripled, but it's still low, it's 35%, where it's 95% plus in Europe and North America. And 11% annual growth rate, yes, and this is what we have factored going forward. So we clearly main those geographies, like we have done in the last 3 years. [indiscernible] GSP and [indiscernible] to continue in both our growing markets on a double-digit organic growth. As far as the -- for your first question, that's a clear first main channel is direct to customers whether it's general contractors for, let's say, the large projects, whether they are in the Middle East or in India and Southeast Asia or direct to regulate customers or precast customers when you talk about the concrete and [indiscernible] solutions. So the main channel is the [indiscernible]. However, as I've commented earlier, since that a smart move to develop a new channel in India. I don't believe that they have [indiscernible] channel into other geographies. But in India, they have done a very good job in expanding into this retail channel, which is not only be for them, obviously, towards more simple residential or low scale commercial [indiscernible], which tend to go through the retail channel from small contractors to buy billion [indiscernible]. So it's a combination of largely direct growth and retail in India. As you know, I think the border picture across all Saint-Gobain. We have a very, very deep presence by [indiscernible] now inflation just [indiscernible] in India on Tier 1, Tier 2, Tier 3 cities. And by design and by definition, we will leverage the whole Saint-Gobain presence and name which is actually powerful in India. Also in Southeast Asia, we have, for instance, a full 100% digital [ bogo ] strategy for [indiscernible] in Vietnam. It's one country, which is relevant for Fosroc. In Indonesia, we have already 6 plants of [indiscernible]. So in Southeast Asia, there are numerous constituents [indiscernible] or in Saint-Gobain presence, including our reduction. You know that our history with Saint-Gobain India the distribution side versus the direct technical applications and the [indiscernible] added for to further accelerate. So we are glad that they are already have a very strong retail presence in India. We are, of course, on the broader scale of Saint-Gobain, much larger across the board and strong states in India, but also in other countries. So [indiscernible] the interesting improvement between Saint-Gobain and [indiscernible] and Fosroc in multiple geographies, including Southeast Asia.

Understood. Then if I just ask you a follow-up one. So on the construction chemicals, what's the kind of distribution and direct sales exposure for you currently or on a pro forma basis it will be.

Consequently, it's very dominantly a direct shareholder throughout either ready-mix players or contractors. And when you think of [indiscernible] vendors that has been the starting point of Saint-Gobain in '21, then it's more than 80% retail. So this is the components when leverage across the board, been [indiscernible].

The next question is from Yassine Touahri of On Field Investment Research.

Just a couple of questions. First on the depreciation that you would expect. Is it like 2% to 4% of sales for Fosroc. Another question is that you're giving a view about 2024 sales and EBITDA. Could you give us an approximate trend of what those sales and EBITDA were in 2023? And how do you factor in the growth? What are the underlying assumptions? And then if we look at what you've achieved in Construction Chemicals, it's quite impressive. Over the next 5 years, do you see scope for more growth through M&A in the future? Or do you think that you're happy with your current footprint of the Fosroc?

The depreciation should be around 2.5% for this business. And when you look at the EBIT margin, you need to factor that because 18.7% is what we said to you for EBITDA.

On the second -- on 2023, I will not enter into the details, but the business has grown the EBITDA has grown over proportionally and there has been a good operating leverage from Fosroc management team. The top line is definitely growing, driven by India and the Middle East. And again, other proportional EBITDA goes through leverage and not [indiscernible].

Anyway, we have given you the compounded annual growth of 11% for the last few years.

And on your last question, yes, we continue to see scope for growth, of course, organic. You have seen a number of production sites we have added and sometimes very fast, leveraging the I think [ Terry ] highlighted what we have done India within [ nitration ] plant the [ transocean ] 3 weeks ago, where we did last [indiscernible] in either a plant in [ China ]. So multiple opportunities on organic growth on top of innovation and R&D drive. And this further opportunity to consolidate the geographies and acquisitions. So this we are very happy about what we have built, but we are not going to stop there because we see good growth profitable momentum with fantastic value creating acquisitions. So we are there to continue to build this strong leadership. And we have, as you understood, the platform, the brand, the muscle, the [indiscernible].

Next question is from Arnaud Pinatel of On Field Investment Research.

First of all, I would like to say it is impressive and comprehensive development in Construction Chemicals, especially in administered and concrete-related products, so it's great. But my question is around the additive. With [indiscernible] you're acquiring also position additive. During the call, you mentioned the benefit of this integration for Fosroc and I would like to know what is currently the percentage of the additive within the Construction Chemicals for division of Saint-Gobain and do you need more critical [indiscernible] on this segment? And is it something you intend to develop?

Thank you, Arnaud, for the nice comment. And on additives, it's a small portion today. So we will continue to be pragmatic and opportunistic. But it's a very small portion today. So this is not the major part of it. If there are opportunities going forward, we will look at it, but it has not been the #1 [indiscernible]. There is so much to do in the cement additives [indiscernible] and all the specialty [indiscernible] in at application. So it's more [indiscernible]. And this [indiscernible] is not the #1 priority.

Next question comes from Tobias Woerner of Stifel Europe.

Just a couple of checks. When you said bilateral discussions, were they always bilateral or did it start off with an option process or process? That's the first question. Secondly, where will you consolidate this business in HPS or in Asia Pacific? And then thirdly, moving on you have -- looking at the managers on the Fosroc website, you have an impressive list of biographies there. Are they all going to stay? And how are you going to keep them? And maybe just lastly, in terms of India, more general question. Where are you now in terms of exposure to the country as a percentage of sales? And where would you want to go eventually? You talked about expanding other products.

Thank you, Tobias. So yes, discussions are always being bilateral at our initiative to start the discussion. So that started with last year, and they have been validated and [ stable ] like that. On the -- reporting net would be HPS, all of Fosroc will be HPS. I would say high level on India, the goal we have and Sreedhar will give you more follow-up, but it's always going to be [indiscernible] means this is what we did this [indiscernible] vision for [indiscernible].

I think we have a great platform in India, and you know that as brand recall is very strong as compared to what even you have in France. So we have a fantastic base and also a great team to work, and we are -- India is a very peculiar also in a way that because [ Saint-Gobain ] is present in almost every single production -- product line, which you offer for the light construction and also with a leadership position. So I think that also brings some huge value. And the India is going to grow, as you all know, with the population growth and also the number of people moving towards from rural to an urban economy. And there is an aspiration in the country, and [ Saint-Gobain ] will benefit significantly from this aspiration and the growth which would come in the years to come. So I am personally pretty excited about this acquisition, and Thierry knows about it. I think this is fantastic additions to the Indian market.

And one interesting point to that is for several decades with new [ alternative ] in India on flat glass. And then capable we are -- the one in flat glass, number one, [indiscernible] with the plants in [indiscernible]. Then, of course, for the [ British Petroleum ] acquisition, recently, we have -- and we started our construction [indiscernible] journey with [indiscernible] also recently. We have showed that we can start to make very attractive value accretive acquisitions in the [ installation ] 2 years ago. Now, it's a double-digit EBIT margin, double digit growth, and we are #1. And so first half, of course, it's a global acquisition, but we have a very strong presence in India, and this is the #1 country in terms of profit. But it shows that now we have found a way to also accelerate in acquisitions in India. So we have added the plans. We have demonstrated organic growth but also some acquisitions in India. So I stop there and [indiscernible] the management in a way. As far as the management is concerned, it's very straight call off [indiscernible] organization. It's a successful organization. We've [ commented ] the growth. We've [ commented ] the profitability. This is -- which has been done through a successful long-standing management team. We are absolutely relieved to be working with them, retaining them with the discussions we have with Fosroc management team basically. They see a strong interest themselves in journey what we now are considering a successful and [indiscernible] organization in construction chemicals. They are happy to participate with us to the development of our global construction chemicals [ platform ]. So yes, indeed, we do plan to retain the management team of construction.

If I may follow up with one question in India, [indiscernible] got a probably one of the larger competitors. Who else is there in India, which is of size? Or a -- what can you mention?

Many small players. I think they are [ spread ] under 2 large players, could be [ ourselves ]. Then there are [indiscernible] players in India.

It is a fragmented market.

Is there any Indian listed construction chemicals company, as an [ aside ]?

[ Delight ], which is a local company in India, is more -- correct, more in the [indiscernible] and sealants, they are not into so much entirely [indiscernible] and out so far.

It's truly an [indiscernible] company in India.

[Operator Instructions] The next question comes from Glynis Johnson of Jefferies.

I have a couple for Sreedhar and a couple for Thierry. In terms of -- Sreedhar, can you just tell us estimated cost of doing the integration? And then also the cost synergies, actually had a big proportion of the cost base of Fosroc. And I'm wondering whether or not that's the right context we should look at it or whether we should be looking against the cost base of Saint-Gobain in [ data ]. In which case, what is that number? And then for Thierry, you talked actually about that retail go-to-market that you took to leverage in places where that was perhaps the great opportunity. Obviously, one of your peers has done that very successfully in China. But what geographies are you talking about in terms of where you look to push that retail offering? And then just in terms of technologies, [ digital ] polarization, is there any technology that Fosroc is [ offering ] that the group as a whole [ technically have ] that you could actually leverage into your other businesses?

In terms of synergy, Glynis, if you look at -- you're right, it should -- you have to look at the broader cost base. As I mentioned before, it will be around something like 2%. And this is the kind of synergy that what we said even for GCP and [ Criso ], which we have delivered very clearly, even ahead of a plan. So for me, I'm super confident that this synergy is credible. And the number of details that Thierry and the team have got from the discussion gives me a lot of confidence and comfort.

I'd like to complement on Sreedhar's answer. I think what's important in this acquisition is the sequence. And I'd like to come back to [ Benoit's ] presentation. First was [ Criso ], where the synergies with the group are mostly related to accelerating [ loss ]. Then we've done the GCP acquisition an overlap between [ Criso ] and GCP [indiscernible] and cement additives and vertical integration. The business was -- GCP was about [ 60% ] of [ mixture ]. Now we move to the next stage with a business which is [ 40% ], of which [ 7% SDN ] with a broader overlap with the current group offering. So in fact, [indiscernible] is the best entity to leverage synergies for prospects going forward because of its extraordinary geographical and product offering overlap. And this is why we show in our numbers a high level of costs -- a relatively high number of cost synergies and a high level of confidence in executing that.

And when you take the overall picture of standard [indiscernible] improved in the relevant geographies, we are around 4% of the combined sales, 3% to 4%. So it's very reasonable and very achievable to be in mind that it's a growth combination. But leveraging 3% to 4% cost synergies across the multiple aspects we highlighted is truly within reach. As far as retail is concerned, two things to comment. There are still lots of headroom in India. The players potentially in [indiscernible] businesses to construction chemicals. Some of them do have retail assets to over 40,000 retail points across India. So we are still [indiscernible] in the early stage of the retail development. Also, [ customers ] is still not profitable in India. Then we most likely move, but we will be in terms of retail management in South East Asia, we are very -- have definitely room to do that, leveraging, in particular, what the group has built in Indonesia or in the plant where we'll have access to accelerate this type of strategy. In terms of technology, I would look at it today, in terms of pure technologies, I think the group will bring more to [indiscernible] bring to us, whether it's on the [indiscernible] side, commenting on [ Criso ], on the cement [indiscernible] coming from GCP on the digital side. And then coming from GCP, we will bring to [indiscernible] a lot for them to bring it to our customers. And what [indiscernible] will bring to us is a large set of preferences, as I said, in the construction space, where obviously, we see a risk-sensitive [ RAR ]. But of course, any project with a [indiscernible] in infrastructure is a plus for us to develop that going forward. So technology will be more throughout the group today to us [indiscernible].

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

Two questions, if I may. The first one, just could you give us an indication of the book value of Fosroc? And how much goodwill you estimate at this stage from the deal? And the second question is around the drivers of future growth for this business. Obviously, in Europe and North America, there's a big push by cement companies and concrete, producers to decarbonize, reduce CO2 emissions, and you're helping them with that. I guess, at this stage, CO2 emissions is a little bit less of a focus in places like India or the Middle East, although that might come eventually. So what do you think drives the penetration of Fosroc products with its customers? Is it essentially the growth of the underlying market?

So Arnaud, on this goodwill, it's too early to be very precise. But if I had to estimate, I would say that with the PPA, the purchase price allocation adjustment, it should be around [ 0.5 billion ].

So on the second previous question, your [indiscernible] in Europe, North America, things are course-driven by sustainability targets, and we know that we are helping our customers to do so in the energy world, which, as you know -- as you said, it's not just sustainability, but this is coming, I can tell you. In particular, the Middle East, I had a couple of meetings with people who are looking in the new projects that the [ Kingdom ] is working on. We work on low carbon solutions [indiscernible]. But let's be clear, the main [indiscernible] in emerging markets is about the productivity and performance. This is not construction chemicals, do grow faster than the construction itself because construction chemical solutions bring productivity levers to the construction industry, [indiscernible] the transformation of the concrete market in India, [indiscernible] cement and the job site to regulate concrete. At the end of the day, what we are talking about here is productivity on the job [ site ]. And these countries bring productivity. And similarly, construction chemicals, we bring performance at a lower cost by reducing rising labor costs in many geographies, any productivity gains [indiscernible] construction chemicals do grow faster than the construction underlying growth in emerging markets. So I'd like to thank all of you for your participation in this early call. As you have understood, we are very, very enthusiastic. And again, a big to [ congrats ] to David and Thierry for that. I think we keep 3 boxes with [indiscernible]. And also, we treat the presence of [indiscernible] infrastructure and technology applications, not only residential, new renovation, not only commercial, but also infrastructure. So a fantastic nice goal. We will see further next week in the U.K. for some of you, if you [ register ] right now with Thierry and [ Trevor and Gina ] for those you can come to our day on Investor Day on detail with fantastic [indiscernible] for our large-scale one for all the retrofits and builds with new standards in detail. And then we have our results published on the 25th of July and [indiscernible] 26. You may know, I mentioned that to some of you that we are in the final finish line for [indiscernible] in Australia, where we expect early second half to close. So as you can see, in both times, where some could comment that it's a bit turbulent [indiscernible] and just a good side of wherever a particular aspect, we know exactly where we are heading. We continue to deliver a very deep strategic milestones [indiscernible], Australia and North [indiscernible] so we are confident about the guidance that we gave for the year and very happy to reconvene presently that to you on the 26th of the of the [ line ]. I wish you a very good day. Thank you.