Imerys S.A. (NK) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the 2020 first half results conference call. [Operator Instructions] I would like to advise you that your conference is being recorded today, Monday, the 27th of July 2020. I would now like to hand the conference over to your speaker today Alessandro Dazza. Please go ahead, sir.

Good evening to all of you, and thank you for joining us today to discuss Imerys first half 2020 financial performance. With me here this evening is Olivier Pirotte, our CFO; and Vincent Gouley, our Investors Relations VP with his team. I'm on Page 4 now, and I would like to start by sharing with you a few key messages, which characterize this first half of the year. All end markets and geographies were severely affected by the spread of the COVID-19 pandemic with unprecedented and rapid decline in business activity. In this context, Imerys is showing an adaptive and resilient business model, as we will see later in our figures, helped by an effective implementation of cost reductions and cash preservation measures. As you certainly recall, we filed an agreement with a Creditor Committee on the potential resolution of all historic talc-related liabilities in the U.S. on May 15 this year, a milestone in this process. This agreement is now pending final approvals by the relevant U.S. courts. In the current crisis context, the Board of the company decided to reduce the dividend by 20% and offered the option for payment in new shares, which was largely accepted, including by our majority shareholder, GBL. As a consequence, 88% of the dividend was paid in shares. The remaining 12% in cash with an outflow of EUR 16.1 million. I think this shows the shareholders' confidence in our company. We recently made some changes in the group Executive Committee, which will become effective on August 2, Monday next week, basically. Olivier Pirotte will become Chief Strategy and M&A Officer and will work close to me to develop Imerys in the future. Sebastien Rouge, an experienced professional in this job has joined the group and will be appointed CFO from next week. If we now move on to the next slide. We can have a look at our H1 financial performance, which confirms Imerys resilience. We noticed a significant drop in revenue in Q2, a 23.5% negative compared to last year, clearly attributable to the COVID-19 outbreak worldwide. Let -- This led to an overall decline of 16% in revenues in H1 versus 2019. Even in this difficult context, we managed to keep a positive price-mix. The cost savings measures we announced in relation to COVID-19 at the beginning of April were implemented and delivered results in line with objectives and targets. In addition to the continuation of the Connect & Shape program. Our current EBITDA in H1 reached EUR 290 million, which represents 15.2% on revenue showing a limited margin erosion compared to last year. Very positive news came from Imerys capacity to generate cash with a strong current free operating cash flow at EUR 139 million, reflecting a strict management of expenses and operating working capital. Imerys continues to show a solid balance sheet and a good liquidity position. If we now take on Page 6, a closer look at our end markets. We can see clearly the dramatic drop in business activity in Q2. Though consumer goods markets continued to fare quite well, we had to face clear and strong headwinds in all other industrial markets, which caused an overall drop in volume of approximately 25% alone in the second quarter compared to last year. The deterioration of the manufacturing activity in the world is illustrated in some of the figures you see on the bottom of this slide. 70% drop in automotive production in Europe and in the U.S.A. in the second quarter compared to the same period of last year. Steel production is down between 28% and 35% in our main markets, Europe and U.S. Clear acceleration in the decline in paper markets at 30% minus in Europe and 37% minus in the U.S.A., a drop, though less important, of about 10% and of the global construction market. But probably, I would say, the market that is currently recovering at a fastest pace at the moment. As said before, on the next page, 7, even in this difficult market environment, we have once again managed to maintain a positive price-mix effect of plus 0.5% on revenue. Those pricing efforts resulted in a contribution of approximately EUR 8 million to our EBITDA. I really think that this is even more remarkable, considering that the group managed to benefit from a reduction in variable costs, around EUR 6 million only in this quarter, obtained, thanks to the downtrend in certain raw materials and energy, but also to the excellent work of our purchasing team. If we now take a look at fixed cost and overheads, I can confirm to you that the decrease is in line with set targets. As the pandemic started or exploded hitting the economy in April. The management, you might recall, had launched a specific action plan to limit the adverse impact of the volume shortfall on the financial performance and cash flow of the company. The Connect & Shape transformation program, which continues and continued to deliver as per plan, generated savings of approximately EUR 12 million per quarter this year, leading to a cumulative savings of EUR 53 million at the end of June, including last year, of course. And I remind you that this transformation program aims to achieve EUR 100 million gross savings by 2022. In addition to this, the specific action plan previously mentioned and relating to COVID-19 helped reduce fixed cost and overheads by a further EUR 37 million in the second quarter alone, representing approximately a 4.2% decrease on our fixed cost base. At this stage, the group still utilizes mostly temporary measures to decrease staff costs in order to be ready to serve the market upon its recovery. Maintenance and other costs were reduced in line with the level of activity with specific and strict control on overhead expenses, especially. If the economy moves forward, towards a progressive recovery, we should be, at the end, in the lower end of the range of savings for the full year which, I remind you, were assessed to potentially be between EUR 70 million and EUR 130 million at the beginning of April. If we now move on to the next slide, Page 9, on cash. The net current free operating cash flow reached EUR 139 million in H1, a level which is above last year, despite a significant drop in EBITDA of more than EUR 100 million. This was possible, thanks to cost reduction measures and a very strict management of working capital. Capex, a second topic we addressed. CapEx control started to deliver also in Q2 with CapEx booked dropping approximately 8% versus last year. Though CapEx paid are higher than 2019 due to the completion and therefore, payments in early 2020 of large projects, which were started last year. In particular, one above all, the new minerals cableway at our flagship operations in Luzenac in France, a reduction in income tax also contributed to the positive cash figure. On Page 10, you have last but not least, and just as important, an update on our strong and continuous commitment towards sustainability. Also in the first half of this year, we achieved significant improvements on the 3 pillars of our sustainable strategy. We launched our diversity and inclusion 3-year program with the ambition to reach 30% women in senior management positions, starting from today at 21%. Occupational health and safety which remains a top priority for the group, further improved with the total injury frequency rate below 3 for the first time. Regarding our pledge for the planet, we decided to introduce an internal price for the ton of cO2 in order to support projects, which will help our long-term ambition to reduce our CO2 emissions by 36% until 2030. We also launched a program to purchase low carbon electricity for the group. In May, we have also renewed our act for nature engagement for the period 2020-2023 to show our full support and commitment to biodiversity. As far as product sustainability is concerned, we launched the EcoVadis supplier CSR assessment involving 100 strategic suppliers, and we completed an additional 16 life cycle assessments for our products in H1. This for our normal ongoing activities, but COVID-19 was also an opportunity to show a commitment to different stakeholders. We donated masks, gloves, respiratory units and food kits to several local hospitals and communities worldwide, which are estimated to have exceeded EUR 100,000 in value in the last month. We reduced, as you remember, by 25%, the remuneration of the Chairman of the Board and the Chief Executive Officer for the period during which Imerys employees are involved in short time work schemes. This was followed by the decision of the Executive Committee and senior managers to voluntarily reduce their own salary by up to 15% for the same duration and to contribute these amount to solidarity purposes in relation to COVID-19. As a result, we have just recently donated EUR 250,000 to some organizations like UNICEF and Institut Pasteur. I'm really particularly proud of these actions we came purely on a voluntary base. I would like now to hand over to Olivier, who will give us -- will give you more details on our financial results. Olivier?

Thank you, Alessandro. Good evening, everyone. Let me walk you through our first half financial performance in more detail, starting with revenue on Page 12. What does this chart tell us? First, sales reached EUR 1.9 billion, end of June 2020 and are reported down 16%, basically explained by the organic change in both of which volumes dropped EUR 376 million over the semester, mainly due to COVID-19 impact. Second, it happened in a context where Imerys maintained a positive 0.8% price-mix that contributed EUR 17 million to revenues for the period. Third, the majority of the perimeter effect remains linked to the deconsolidation of the North American talc subsidiaries in the first quarter for EUR 17 million after they file for the protection of the U.S. Chapter 11 legal procedure. Additional perimeter impact, minus EUR 3 million corresponds to the net residual disposals impact of nonstrategic assets in the portfolio. And lastly, revenue also included a positive currency effect of EUR 15 million, primarily reflecting the appreciation of the U.S. dollar against the euro. Now let's move onto the current EBITDA analysis on Page 13, a KPI we decided to increase focus on. Obviously, you still find our current operating income, the EBIT bridge in the appendix. Current EBITDA for the first half reached EUR 290 million, down 26% year-on-year. This evolution of reflects lower volume contribution for EUR 184 million with an average ratio on sales of around 50%. This was partly affected as previously explained by the Alessandro Dazza by a continuing positive price-mix and more favorable variable costs, but also the improvement of EUR 50 million of fixed cost and overheads, net of inflation or other items, resulting from a strong contribution of the so-called COVID-19 contingency action plan in addition, to the savings of the Connect and Shape transformation plan. All of that were in line with our targets. Finally, each of the currency and the perimeter effects were also positive during the semester. In such a context, current EBITDA margin decline was limited to 2.1 points, reaching 15.2% in the first half of 2020. Let's now address developments in our 2 business segments and their respective markets. Starting with the Performance Minerals segment, whose activities generate 57% of the group's turnover, with global sales of EUR 1.90 billion in the first half. As you read, on the slide, Page 14. This business segment has been more impacted in Q2 with a 19.2% drop in revenue versus Q1. All regions saw a deterioration of the trend, particularly in EMEA and Americas and to a lesser extent in APAC that was already affected in Q1. If we take a look at the applications in a nutshell, while consumer markets, the combined filtration, life science, agriculture, food and pharma were quite resilient in Americas and EMEA. Ceramics, construction-related and automotive-related markets were negatively impacted by the crisis. Construction markets showed some signs of recovery in Europe and in the U.S.A. As a reminder, we acquired Cornerstone in the U.S.A., a company producing high-quality perlite for horticulture. In this context, current EBITDA was firm at EUR 202 million, down 18.5%. The decline in volumes was partly offset by the measures implemented to mitigate the negative effect of the COVID-19 pandemic as well as by the savings associated with the Connect & Shape transformation. Looking now at our high-temperature materials and solutions. Our second business segment that groups together, respectively, high temperature solution and Refractory Abrasive & Construction business areas, it totaled EUR 826 million in the first half of 2020, being down 20.5% compared to last year in the second quarter. Relatively weak market conditions prevailing in the iron and steel, abrasive and foundry sectors in Q1 deteriorated in all regions in Q2. The building infrastructure segment mainly around specialty segments. It was quite preserved in Q1, started to be more impacted in the second quarter, although it bounced back at the end of the quarter, both in Europe and in the U.S. As far as developments are concerned, we recently closed a small bolt-on acquisition in India, Hysil, a EUR 5 million business in specialty board used for thermal insulation projects. Current EBITDA for the segment totaled EUR 88 million or 10.6% of revenue in the first half of 2020. Let's look at our summarized income statement on Page 16. As you will read, net income from current operations ended at EUR 73 million down 54% in the first half. Net financial result was negative at EUR 29 million in the first half of 2020, EUR 11 million higher than in the first half of 2019, which benefited from the repayment in March of the private placement denominated in Japanese yen. The income tax expense of EUR 29 million corresponds to an effective tax rate of 28% compared with 29% in the first half of 2019. Net income from current operations, group share and per share was down 54% to EUR 0.91 as mentioned by Alessandro Dazza, the exercise of 88% of the rights in favor of the dividend in shares resulted in the creation of 5.7 million new shares, representing an increase of some 7% of the share capital. Finally, net other operating income and expenses at EUR 16.2 million are significantly below last year's level as a result of the decrease of Connect & Shape implementation costs. Consequently, net income group share totaled EUR 57 million in the first half of 2020. On Page 17, it shows that Imerys generated a high net current free operating cash flow of EUR 139 million, up 40% versus prior year in the first half of 2020 and that despite a decrease of roughly EUR 100 million in current EBITDA. As explained earlier, this has been achieved, thanks to a tight and disciplined control of expenses and working capital requirements as part of our COVID-19 contingency plan. Referring to operating working capital requirements, it significantly improved, being up EUR 46 million compared to last year. In particular, through dedicated actions on all items and notably, inventory reduction and accounts receivables collection. This EUR 139 million current free operating cash flow generation in H1 used to cover more than the cash outflows of the first half. Among others, a EUR 19 million of debt servicing cost, EUR 33 million of other income and expenses, mainly restructuring expenses, EUR 32 million in acquisitions, net of disposals and a limited EUR 60 million, as previously said for dividend payment. As a result, the net debt, excluding FX exchange, reached EUR 1.670 billion as of June 30, a slight deleveraging to the end of last year level, as you can see in the above bridge. At the end of June versus 2020, net financial debt represented ratio to current EBITDA of 2.6x and to equity of 48% pre-IFRS 16. And therefore, well below the group's only bank covenant capped at 160%. Finally, the strength of the growth balance sheet is supported by a high amount of cash, circa EUR 1.1 billion. As significant undrawn bilateral credit lines for EUR 1 billion, representing both together EUR 2.1 billion of significant liquidity as of end of June 2020. The group's bonds with an aggregate principal amount of EUR 1.9 billion have a 4.7 year average maturity and limited repayment over the coming years. The EUR 224 million bond repayment scheduled for the end of November 2020 is therefore fully covered. The group has also renegotiated some credit line facilities in the second quarter to extend their average maturity profile to 2.06 years. Imerys is therefore in the fortunate position to have a strong balance sheet and adequate liquidity. And I will now leave the floor to Alessandro for the outlook.

Thank you, Olivier, for your detailed explanation of the figures. So before we open the floor for questions, I would like to make a few final comments on what to expect, what we expect going forward. I think we are, unfortunately, far away from the end of this crisis, but the Imerys model will continue to show resilience, thanks to its capacity to adapt production to demand, to keep costs and expenses under control to generate cash, and to take advantage of its geographical footprint and portfolio of specialty minerals. This being said, we do -- I do expect a certain recovery in H2 in main markets. And June was definitely trending in the right direction, though in the current global sanitary and economic environment, the magnitude and the speed of such rebound is still very difficult to estimate. All Imerys sites are currently operational, even if with varied rates of utilization to do -- due to low demand in certain sectors of the industry. We will, however, continue to monitor the situation and adjust our production levels accordingly with measures that might become of definitive nature rather than of temporary one as it is the case today, if the expected recovery does not materialize in size or speed. Cash generation will continue to remain a top priority for our group. In this context, it is very difficult given the uncertainties to give a reliable guidance on the potential results of this year. Last, but just as important, Imerys liquidity remains strong and its financial structure sound also during the covenant in crisis. Thank you again for your attention, and we will now take your questions, if any.

[Operator Instructions] And the first question comes from the line of Sven Edelfelt from ODDO.

Yes. A couple of questions. Regarding June, you mentioned an improvement in June. If my calculation is correct, volume should have declined 20% in June. Is that correct, can you confirm? And can you perhaps give us an indication of what July look like, as you mentioned, market recovery in H2? So presumably, July is already better. The second question is on the Olivier period ahead of M&A. Does that mean Imerys is at the cornerstone of a new story based on M&A and asset rotation? Or shall we expect some change in continuity? Yes, that's all.

Thank you, Sven. I will address all of them. We normally do not publish monthly sales. And therefore, I let you make your assumptions. But what I can confirm that looking at the quarter, June was definitely or put it differently, May was definitely the bottom of this crisis for our group, and I think also for most of the economy. So we saw this V-Shape coming in from April to May and then back to June. Being June, probably the best month in the quarter. It's a bit early to assess what July is. We do see in the main markets, a certain recovery. And I can give you more details on the markets, if you wish, it's simply too early to say how July will be. Once again, I think we have, for the time being, the worse behind. We do not count our plan with the second wave, but we don't have a crystal ball either, and that's why we have to remain very prudent, very vigilant and very ready to act if here and there regionally or by markets, there are new lockdowns or new restrictions. In terms of M&A and Olivier, I'm very glad to have Olivier move from his finance role to the M&A and Strategy. I don't think it is a message that we will start an asset rotation. I think it's a message of a very loyal person to the group, very capable, moving very close to me to define the Imerys of the future. I think we will be more dynamic, yes, and we will look at our opportunities. But as I said our last -- during our last call, this COVID is setting us a bit back a few months in our assessment and analysis. So it's too early to tell you now what would be our future strategy. But clearly, we are analyzing opportunities. And having Olivier next to me is important. He knows the group inside out since a long time, and I think his acumen and analytical capabilities will help any analysis we will do.

And the next question comes from the line of Benjamin Terdjman from Kepler Cheuvreux.

Yes. Can you hear me?

Yes.

Thank you for taking my questions. I just have few. Regarding the market recovery that you expect on H2. Could you maybe provide what have been the triggering sales? And when do you expect first signs of restocking effects from the clients. Have you seen anything in the coming months? And regarding the talc business, so do you confirm that you will not bid for the assets? And could you please possibly explain why? I will -- yes, that's all my questions.

Okay. Benjamin, yes. First, on markets, what can we say on markets? I will start with the easy one, consumer goods, typically food, drinks, pharma, filtration, life science. These markets, yes, slow down partly, maybe a bit more in Europe for what is in relation to wine, beer, filtration. Most of the other applications in this range fared relatively well with some exceptional results in everything relating to pharma, which you might recall, we supply carbonate to specific plastic applications in the pharma industry making gloves, making masks. You can imagine this business has been booming. We supply fantastic products for filtration of blood and plasma, which is one of the selected treatments for COVID, booming. So overall, consumer goods fared relatively well in some areas of the world like the U.S., even up compared to last year. So the least affected market, and I don't see it slowing but rather staying on a healthy path, perhaps. And if the industry comes back, sports, let's say, Martin, then also the more frivolous frequent consumption like beer and wine and similar will definitely come back to former shape. Construction, which is our single largest market. Construction had a very strong Q1. We entered Q2 in April, when we talked last time, where we saw the first signs, and then we noticed a collapse. Basically, when construction sites were vacated worldwide, because it happened worldwide, no matter if it was residential, industrial or infrastructure, all -- all work in progress, where oil construction sites were vacated, and the business had a tremendous drop, specifically in May. We saw a pickup in June, and we clearly saw we see -- clearly see strong signs of recovery, really strong. My question is, is only a catch-up of what was ongoing to finish it? Or is it simply back to normality, plus the need for catch-up. But definitely, the most promising market at the moment with strong levels of activity in Europe, even in the U.S. Hopefully, there will not be further lockdowns that stop it otherwise, I am convinced that this market will continue to fare very well going forward. Then we have a big question for us, which is the automotive industry. You'll see numbers here on our Page 6. I think never seen before. 70% drop in one quarter is just incredible. This has caused also a bit of inventory in the pipeline of carmakers because there is a lot of unsold vehicles. But there is a strong push by, not all, by several governments to support this industry. In some countries, a key industry, Germany, France, U.S., some of these countries have launched programs to support new purchases by replacing all vehicles or moving to the new generations, including electric vehicles, all of them, for the time being, are positive for Imerys because they carry cables, plastics, polymers, e-vehicles, our graphite and carbon specialty products, iron and steel, abrasives. So no matter which car you pick, any car is good for us. The question is really what will be the impact of the government measures on the overall demand in the countries where they apply it and what will happen in the countries where it is not applied. It is really too early to see. We do see some -- sorry, we see all companies restarting. We cannot yet assess the speed, are they ramping up to 100%, 90%, 70% production? It's a bit too early. I think everybody is waiting for figures to come out new, say, car sales to be published, really too early. Indirectly, this impacts iron and steel, which remains relatively depressed, partly because of what I was saying. The construction industry helps, the automotive industry is the next largest consumer. So a lot will depend from that. In this specific market, I expect anyway a very slow recovery because it was the last industry to stop production. These are typically very, very large production units. We know very well in France, Arcelor. Typically, you run until you can because stopping and restarting is extremely expensive and lengthy. Therefore, I think the world produced more than needed at that time. And therefore, there is some pipeline effect in this specific market. Plus some areas like Europe are not necessarily defending -- is not necessarily defending its interests with duties on imports. And therefore, we see in Europe, more imports coming from countries like Turkey, Russia and China. Whereas the U.S., we have seen a pickup immediately now because imports are curtailed by definition and by duties. So iron steel remains, for me, slow. And we will see a slow recovery, a recovery by a slow one. And last, I would say, paper, structurally declining, as we know, less impacted in Q1, a dramatic decrease in Q2. You see the numbers, 30% to 40% never seen before in paper, mostly due to some areas of paper, partly printing. If there is no office, no school, people tend to use less. So this will come back as people go back to offices, as schools will reopen in September. So this will come back. Magazines, advertisements and so on, slowed down due to less traveling, less purchasing, therefore, less need of campaigns. I think these will come back to a large extent. So these are the markets and the trigger events that we are seeing. That's why, yes, recovery. Yes, June was trending positively. Yes, July is not disappointing. Markets are showing a recovery worldwide. But it is -- there are still a lot of question marks ahead of us. On your second question on out process is ongoing. The sales of the North American talc assets has been launched, approved by the court and launched. It is ongoing as we talk. As we have communicated, we have agreed with the Creditor Committee not to participate. It was a common decision strongly supported by the Creditor Committee because it was considered that our presence would have complicated significantly the process and therefore, to guarantee a fair, rapid resolution, we have agreed to -- not to participate. Fortunately, what we hear is that there is a high interest now in the market for this very nice assets. And therefore, we are confident that the process will be successful, rapid and to the benefit of everybody, the claimants, Imerys and our former colleagues in this business.

Okay. Just another follow-up question. In terms of restructuration for the full year, what could we expect? Would you expect a similar amount than in H1? Or could you maybe provide kind of bracket?

Restructuration, you mean restructuring costs?

Restructuring costs, yes, sorry.

Okay. Olivier, do you want to comment?

Yes. So you observed that the level of, let's say, exceptional item or nonrecurring items is in the tune of EUR 16 million for the first half of the year, mainly actually linked to additional cost and accrual related to the Connect and Shape transformation program. It has nothing to do to the contingency plan we put in place. It's too early to talk about that. As explained by Alessandro and so forth -- what we say, I mean, we are actually well engaged in our Connect & Shape transformation program. So there's going to be some remaining costs probably during the year. But obviously, I cannot assess them by such by definition. Otherwise, there is no more exceptional. But what we have seen in the past is that the total cost associated with the Connect & Shape transformation plan is a bit -- is roughly a year, a bit more than a year of savings. The global savings are, as you know, EUR 100 million, and we are actually close to have booked this kind of amounts over the last, let's say, 2 years, 2019 and 2020. So no more to come in a big magnitude, probably the same kind of level as the first half of the year and certainly related to Connect & Shape.

Therefore, significantly before the previous year. Yes.

And the next question comes from the line of Pierre Bosset from HSBC.

I have 3 questions, if I may. The first one is on the pricing mix. It was still positive in Q2, plus 0.5%. But I wonder, our difficulties to push some price increase in the current environment where all the clients are expecting a pickup in the recovery, but it's still not at full speed. So what can you anticipate for Q3 and Q4? My second question is on the CO2 emission and the fact that you linked now the CapEx decision to internal carbon pricing. Would that change your CapEx decision last year and the year before, if you can give some example, whether or not it would have been very different? And my third question is on the replacement of Olivier Pirotte. I wonder why you have the best candidate who was outside the group because Imerys is a relatively complex group. Usually, the CFO comes from within the group or within GBL. So what have you to find the suitable candidate outside the group?

Okay, Pierre, I'll start on the price-mix components. As you correctly noticed, it is small, but it is still positive. And I think what is important for me is not really to assess the absolute value of the price/mix impact as such, but the price-mix combined with the variable cost, increasing prices in an inflationary world where variable costs grow, it is easy or easier. In a world of declining variable cost of deflationary environment, keeping prices stable or even increasing it becomes very difficult. So to answer your question, yes, it's not easy. On the contrary, it is very difficult. And even more, I am proud of what our sales teams are doing because keeping prices up when we perfectly know that our variable costs are dropping and dropping quite significantly, as you can see post-inflation, we are even negative. I'm very glad to see, I'm very proud to see it. So will it stay, I count the answer is yes. We did it in Q1, we did it in Q2. I tend to believe that we will do it in Q3 and Q4 as well. It is in our DNA. We do it well. We sell value. So I'm confident we can keep it. And I'm sure we will keep a positive balance if we included the variable costs. And on that, I'm 100% sure. What we see currently is with the small recovery or the slow recovery or recovery, we clearly see, and there are some public indexes that you can track. We clearly see that some indexed raw materials or energy products have changed the direction. Fuel oil, low sulfur is going up, BDI, the typical, shipping index has raised dramatically the last 3, 4 weeks. These are all signs that there is more demand than there was before. And then people do expect a recovery coming. We are still far away from historical figures. Oil is also a good example. I mean, we are back to reasonable prices, far away from peak prices. But far away from the $20 or the even negative values we saw 2 months ago. So this to say that probably the pressure on prices might ease going forward. Our duty will be more to continue keeping variable costs under control. But I remain confident. On your second question on CO2, the answer is clearly yes. When you run a Capex, you expect a certain return being any of IRR or a number of years. If you apply a CO2 price in one direction or the other, it can be a discount if you move to a technology with less CO2, then you can -- and we have put a price of to give a reference of EUR 50 per ton of CO2, it's purely internal decision, but it's significant. And some people do EUR 20, EUR 30, we have decided to put EUR 50, which is a significant number. Therefore, and I give you a good example. If you have a burner today or a kiln running on coal, replacing coal with more CO2 or low CO2 emitting combustibles, being gas or even natural would saw dust, peanuts has moving to others, it has a cost, the entire change in the system and only maybe a little savings in terms of pure fuel price difference. If you start putting the tremendous reduction in CO2 emission, then a CapEx like this might become interesting and therefore be promoted and done. This is only one of many, but it does -- it would have changed certain decisions, and it will change decisions in the future. Heat exchanger that typically have very long payback, the moment that you put against it a CO2 savings, then they might become interesting and viable. That will trigger many other discussions on how to finance certain projects and so on. But this is story of tomorrow that we will deal with when it comes. For the time being, we are happy to have done this, and we will look at projects in a different way. On the contrary, if you come with a technology or a process or a product that is heavily CO2 emitting, there is a high probability that it will be refused, not in this Imerys. Last one on the organization, I would like to remind you that even Mr. Pirotte, my friend Olivier was external when he came, and before him, I think we had, for a short time, a Greek colleague that was also external. So not necessarily it's always internal. I think it should always be a blend. Every once in a while, a group needs some fresh blood, new ideas. I think it's important that Olivier stays with us and keeps -- his knowhow, knowledge and experience and dedicated to developing this group, knowing it inside out. And I think we have found an external candidate that today was really fitting all our requirements in terms of business knowledge, experience in leading listed companies. And I think a person that fits, very well, my Executive Committee team. Therefore, I'm very pleased to have taken this decision with the full support of my ComEx and governance. And only time will tell, but I'm confident that we have a good solution going forward. And you will meet him personally soon. Therefore, over time, you will make up your mind.

[Operator Instructions] And the next question comes from the line of Mourad Lahmidi from Exane.

My question is regarding cash generation and the working capital inflow that you got in the first quarter. I was wondering how much of that is mechanical, i.e. due to decline in activity and how much from the measures put in place by the group and should we basically roll over this kind of benefits in the second half.

I'll let Olivier comment. I'm not sure the connection was not perfect. But just to make sure you said how much?

How much of the working capital inflow that you got in H1 was mechanical, i.e., due to the decline in activity? And how much was driven by the measures you put in place? And the follow-up one would be, should we roll over this working cap inflow for the second half as well?