NV Bekaert SA (BEKB) Earnings Call Transcript & Summary

Hello, everybody. Welcome to this conference. Please be informed that the meeting will be recorded and published for replay on our website after the meeting. I refer also to our safe harbor statement on this slide, which applies to the presentation that we use today as well as to the statements made by the speakers. Oswald Schmid, CEO; and Taoufiq Boussaid, CFO, will guide us through the news that we are sharing today, including the appointment of Oswald as CEO of Bekaert; the full year results for 2020; and the outlook for 2021. The CEO will start the meeting by lifting the veil on some of our strategic pillars and what steps we have already taken in 2021 to move us forward on our transformation towards higher-level performance. I now give the floor to Oswald Schmid, CEO.

Thank you very much, Katelijn. A warm welcome, on behalf of Taoufiq and myself, to all of you. I hope you are safe and healthy. And of course, I was quite pleased what you have seen in the morning about the appointment to my permanent CEO position, but honestly, you also see me today as a very proud CEO. Why is that? I'm proud to announce the results we have achieved in 2020. These are achievements of 27,000 people in our organization. We have done a tremendous job in an environment of ambiguities and uncertainties. COVID is not only a health crisis but also an economic and a financial one, but first of all, let me see how I view Bekaert after 1 year being an interim CEO of the company. But honestly, I have to confess I know Bekaert already quite a little bit longer in my previous professions, but I -- the Bekaert you know is we are preferred partner to -- in our industries. We are recognized as a global leader in steel wire transformation and coating technologies. We have a global platform. We supply our customers all around the world. And we have seen in these times, when we have shortages and interruptions on the supply chain, this footprint helped us really to serve our customers. We have more than 27,000 engaged people that form one team within this corporate socially responsible company, but I think there's much more behind this company, and allow me to explore a little bit on this one. I see a company which has quite unique and unmatched products and solutions for customers across a wide range of industries, a company that has transformed into a high-tech solutions leader with 1,800 patents and patent rights in portfolio, a company owning one of the most advanced manufacturing processes and capabilities in the industry as well as engineering capabilities. This company has experienced teams with deep understanding of local customer needs in all layers and departments of the business. And what else is we are sharpening our ambitions and actions to become a totally sustainable business. What is our ambition? Our ambition is very clear. It's to create sustainable value for all our stakeholders, our customers, for our employees, for shareholders and communities. Our ambition expresses our commitment to create sustainable value for all our stakeholders, and let me start with our customers. We want our customers succeed in their business. We want to make them successful, offering differentiated solutions and services and being a technology partner for innovative developments in the products and services we supply. Our aim is to be our customer's first choice to be the partner of choice. About employees, our ambition is [ that big sophisticated work ], a great place to work. And you know our baseline, better together; and this applies to all stakeholders. It's not just a slogan. It's reality. And I can tell you I felt it in this year very much. [ It's because ] we have an engaged and experienced workforce; and a culture of accountability, performance but also pride. This is a part of our DNA. With the same spirit, we work better together with our customers, suppliers and communities where we are active and all stakeholders. Thirdly, we commit to high performance. We deliver on the priorities. We deliver on our promises, and we are raising our ambitions for the future. Lastly but not least important, we care for the world around us. Also this is an important field whilst we are raising our ambition and shaping our strategy in offering sustainable solutions to the markets. There are 3 key strategic imperatives which are defining our strategy and which I would like to go through. This is about performance. This is about transforming, and this is about growing. Let's start with performing. I think we can state that the results show that we have been strong on execution in 2020. We delivered our objectives. 2020, we focused on our priorities, which were to improve product in the business mix, moving into higher-value-added portfolio to accelerate the robust profits restoration. I think what we have initiated, particularly in SWS, [ will be achieved ]. And as a remarkable milestone, all 4 business units generated 7% underlying EBIT margin or even more in 2020. And all 4 generated a double-digit EBITDA margin, and this is the milestone, driving the processes of excellence across the company. And this touches the areas of operations, of commercial, supply chain and also other operational and process improvements. And thanks to the tight control on working capital and CapEx and the high EBITDA, we were really able to have a strong debt deleveraging. The second thing was, and we did this from the very beginning, we have a very effective and agile response to COVID-19. We had a lot of protective measures in order to secure the health and the safety of our peoples on a global base. We constantly benchmarked ourselves that what we do are these really best in class, and we got a lot of feedback and certifications that we are here in a leading edge. Customer centricity is the second one, in turbulent times, to be close with the customers to support each other in order to serve their final end customers. To make sure that the supply continuity is given was the second priority. And of course, to protect the company, it's about costs and liquidity management. So when we summarize the building blocks for the performance part, it's really go for the full potential; make sure that the operations are in excellent shape, the commercial part linking with customer is absolutely working. And then it leads to leadership and accountability which makes this happen. So now let's have a look how this really results in some figures of our actions in 2020. We could not escape from a sharp decline in the first half of the year, but we still could make it happen that we stay the preferred business partner, that we are resilient to the external factors and that we have a fast return. And this is what you see. After a strong decline of 13% in the sales on the whole year, we were able to increase our underlying EBIT [ as well at ] 13%. We were further able to have a solid cash generation, increasing from EUR 414 million to EUR 449 million. And we have a chance to significantly reduce the working capital from a high of EUR 699 million to EUR 535 million. And last but not least, the net debt leverage went really down by 38%. [ Further is ] a proposal, which was [ part to the Board and we'll vote at the ] AGM, to pay a dividend of EUR 1. And this is in comparison to EUR 0.35 in 2019, but I would not like to go too much in the details of figures. I'm sure Taoufiq will be very happy to do that. Let's go to the second strategic imperative, transformation. We transform. It's about strengthening our portfolio and building capabilities to drive the value creation. And we have done quite some adjustments in several areas, in footprints adjustments and structural improvements for our business models. We realize the full potential in our core business. And this helps us in '21 to have the benefits what we have installed in '22 and 2020 in order to benefit in '21, but we also add additional transformational leadership to really reinforce the drive for value creation. It means further active portfolio management to improve the business mix and to address the needs of the customers in close cooperation with them. We further developed the differentiating, innovative products and services that addresses mega trends, mega trends such as e-mobility, smart cities, smart logistic solutions and obviously renewable energy on top; and markets where we have been progressing with [ our offering ]. And that was really promising for us for the future. Digitalization is all around the world. I think we are here in this meeting one of the example how far digitization is progressing, but this is not only in the way of communication. This goes really how we interact with our customer; how we define our processes; how we are getting a data-driven company and use a lot of modern technology, automation, robotics in other areas. We have very clear ambition what we would like to do in sustainability. It's about not only environment. It's about social and it's about governance. So when we look on the building blocks of the transformation we're aiming for, it's really a strict and positive portfolio management; to really look on the differentiation, what can we do better than the competition, what helps then our customer to succeed in their business; and of course, the digital offering on the one side to create more revenues, on the other side to [ reduce costs ] as a key factor. And the impact is on our sustainability always in our minds. The last strategic imperative is growth, sustainable growth, value-creating growth. In 2020, we are also able to get some seeds for growth already out. And this is the customer centricity, make sure that the supply chain is not interrupted; and this was really beneficial. We saw that we could gain further market share, in comparison to competitor, as we were able to supply in appropriate time, for example, in RR in India and Russia but also in SWS and in other areas. We already concluded some important supply agreements in 2020 which support the growth in '21. This is in WS as well, in RR but also in fiber technology where we have, for example, an interesting product [indiscernible] for wind mills. Further, we went into partnerships. And let me just give you a few example on these ones: AGRO-Bekaert's joint venture in Colombia kicked off very successfully; a partnership with CCL, a global expert in construction engineering, creating adjacent market opportunities [ and economics ]; BBRG partnerships with Ideol [ to develop ] synthetic mooring lines for floating offshore wind and with Applied Fiber through a license on synthetic rope terminations. What are the focus in the growth areas? It's really in the markets where we go into we want to have a leadership position. This is important to really capture the [ profits pool ]. There must be new products and solution in existing markets but also in adjacent markets. There will be investments commitment in capacity to meet the higher demand that we see in some areas. In innovation, we'll get the differentiation, but also in capability building of our people. Of course, then this needs to revise also our organizational capabilities for the future trends, so it's really about the leadership position, the new products and solutions, the investment commitment and the organizational capabilities. And I will be very happy to explore and explain a little bit more at the next Capital Market Day. And we will [ reschedule ] this capital market day to the end of the May because, with the announcement of this morning, I would like to take a little bit the liberty to prepare and before organizing in the most optimal way, but what I shared just with you about our ambition, we are taking it from here in performing, transforming and growth; and [ address ] already what we have in the focus of our future strategy. Allow me to give you a quick overview of very, I will say, different markets, what we have experienced normally in 2020. The first half, we had the full hit. And all of our businesses were under strong pressure, especially in the Rubber Reinforcement. Let me give you an overview what we have seen on the market development in the second half. The demand of the tire and automotive came back very strong and, to a certain extent, unexpected. Especially in the replacement markets, the demand was extremely high. EMEA and Asia, they were back and above pre-COVID times before, but the OEMs still were a little bit subdued. And North America as still of today is below the recovery rates we have seen in other areas. What about construction and infrastructure market? There is still some hesitation in EMEA and Latin American construction markets. The elevator business is a very solid business. It caused a little bit of cyclicality, but it's normally quite solid. Stimulus programs, of course, on the one side, can boost off these infrastructure projects as well. When we go on energy and utility markets. The remaining one was really very solid. And we have seen particularly renewable energy areas and data networks, which have a really underlying strong demand. There was less projects we could see in the business of oil and gas in the second half of the year. Growing presence, we have seen in offshore wind, and this is also, I think, in line with the mega trends what we see. Very strong was the demand in agriculture area. This remained solid. It's always seen, as it's considered as an essential sector. And of course, there's the trend to shift towards local cultivation with short supply chains. So allow me then finally say, as a conclusion, our performance in 2020 is not a one-off. It's not a coincidence [indiscernible]. It's the result of focus and execution on delivering on all the priorities we have set in effectively capturing the opportunities of the rebound we have seen in H2 after efficiently countering the impacts of the health crisis in H1. And we will prepare to it to emerge stronger from this market. So -- and now finally I would like to hand over now to Taoufiq, who will for sure guide you [ inside a ] deep dive in the financial [indiscernible].

Thank you very much, Oswald. Good afternoon, everyone. Let me kick off this part of the presentation with some details around our sales results for 2020. So as we already quickly mentioned, our full year basis -- on a full year basis, our sales were down 13% with a significant dip in H1 which was followed by a rebound in H2 and which was also of around 13%. From a segment perspective, what we see is that RR was down roughly 17.3% on a full year basis, with a significant catch-up that has happened in H2 where we recorded a sales increase of almost 28% versus H1. Our overall volumes in the Rubber Reinforcement business were down 11.5% on a full year basis. And by region, we see that the volumes were down between 15% like in China and EMEA; up to 30%, for instance, in North America. We started seeing a steep demand rebound which started actually in Q3. Q3 was 50% up versus Q2, and our Q4 was almost at the same level of the last quarter. If we move to Steel Wire Solutions. So sales were down 8% versus 2019 and mainly triggered by lower volumes as well. So we kind of see the same pattern as in RR with a strong rebound in Q3, roughly 16% up versus Q2; and overall 8.6% increase in H2 versus A1 -- H1. In Latin America, which has accounted for almost 12% of the sales contraction -- and we saw also other regions recording a decrease, typically Southeast Asia where we have a sales drop of 14% as a result maybe of the closure of our site in Ipoh in Malaysia, but also we see -- we saw another decrease in North America of roughly 5% with the closure of Shelbyville. I mean we have other regions which have performed quite well. So that's typically the case of EMEA, where we saw a sales increase of 9.4%; and China as well, where we did see growth despite the crisis. And China [ did overperform ] versus last year in the range of 11.2%. Moving to the specialty business, a sales decrease of roughly 6% on a full year basis compared to 2019. Looking at it by segment and starting with Building Products, we saw an organic sales decline of roughly 7% mainly due to the impacts on the demand in the construction markets, but we did see a further strengthening of some innovation-driven businesses. On the Fiber Technologies, we saw an organic sales decline of 5%. This was mainly triggered by the weak demand in automotive, aerospace and aviation applications, which have to some extent managed to be partly compensated by a strong growth in filtration solutions, particularly Asia. Sawing wire and the combustion business did report flat sales year-on-year. Last but not least, BBRG sales saw an overall decline of 13.2% versus last year primarily driven by volume contraction which was triggered by our own strategy to reduce our presence in lower-margin ropes applications. When we look at it by different type of application, we'll see that the oil and gas was relatively weak, especially in onshore business in North America. Mining was weak as well, with the exception of Australia. The crane and industrial was soft, but it was showing signs of improvement in several regions. And we had a very strong business in the fishing and marine segment. The advanced cords business did suffer from a decreased sales in automotive markets -- and solid demand from elevator and timing belt markets. So back to the overall financials for the company and to take you through some of the financial KPIs, I would like first to start by highlighting, again as we mentioned it for the sales, a very strong rebound, which has impacted many of our financial KPIs during the second part of the year. This has impacted EBITDA, EBIT. And we see also some of the impacts in some of balance sheet-related metrics. So starting with our underlying EBIT. So we reported an overall uEBITDA just short of EUR 480 million. That's a 2% improvement versus last year. And with this strong performance, we are able to deliver a solid double (sic) [ double-digit ] margin on sales of 12.7%, which has also been triggered by an even stronger uEBITDA performance during the second half which has reached 14.2%. Oswald has already mentioned it, but I think it's important to mention it once again. All our 4 BUs generated double EBITDA margin, which is one of the milestones that we have set for ourselves. If we move to the underlying EBIT, so EUR 272 million, out of which EUR 181 million was delivered in H2 which is twice the performance that we reported in H1. The uEBIT is up 13% from last year on a sales decrease of 13% as well, a quite remarkable performance. And this is allowing us to post an EBIT margin of 7.2% versus 5.6% last year, another milestone achieved there as well since all our 4 BUs have also generated 7% EBITDA -- EBIT margin or more during 2020. The EBIT is reported at EUR 257 million, a massive increase versus last year by 65%, which is resulting in a margin of 6.8% versus 3.6% last year. Underlying ROCE, significantly up as well, 12.2%, while it stood at 9.5% in 2019. And with this performance, we were able to post an EPS at EUR 2.38, corresponding to an increase of EUR 1.65 versus last year. A third milestone was achieved with our working capital. Oswald has quickly touched on that. The tight control on our balance sheet has allowed us to post a working capital reduction of 23% versus last year, which is leading us to a ratio on sales of 14% at year-end and 16% average during the year. Resulting from this strong performance is a solid operating cash flow which is standing at EUR 449 million. That's corresponding to another increase of 8% versus last year. And the combined effect of our focused management of our balance sheet and the good EBITDA performance is allowing us to hit another and a fourth milestone with the net debt [ and which is ] standing at EUR 604 million, down from EUR 977 million at the close of 2019, which is also resulting in leverage of 1.26 multiple, down from the 2.1 that we posted last year. Oswald has already mentioned it. The Board will propose to the AGM on May of this year to distribute a gross dividend of EUR 1 per share, which is EUR 0.65 up from last year. If we move to some additional details on the P&L and recapping some of the highlights I have provided earlier. We have lost EUR 500 million of sales versus 2019, but at the same time, we have delivered a 2% higher gross profit at almost EUR 600 million. The gross profit on sales has improved by 230 basis point at 16% versus 13.6% in 2019. This performance has been delivered in a context where, as you know, we have suffered from significant negative impacts coming from lower volume triggering the underabsorption of our fixed costs and also lower margin generation from the sales that were not delivered in 2019. So the combined effect of these 2 event has impacted us negatively for EUR 146 million altogether. So with the reduction of our overhead, which we have also reduced by [ almost 8% ] in 2020, we are able to deliver an underlying EBIT margin on sales of 7.2%, which is EUR 30 million, roughly, increased versus the last year, which is corresponding to a 13% improvement as well. Moving to the next page. So I think that this waterfall does allow to visualize some of the building blocks I have referred to. So as you can see on the external levers part and the gray building blocks, you see a massive loss of EBIT generation combined -- compounded from the loss of volume and also the cost underabsorption, which has driven a degradation of EUR 156 million, partly compensated also by another external lever which is the variance versus last year that we see in terms of inventory valuation. So again this is a relative value compared to last year. The absolute-term valuation of this inventory impact is much more limited. It's only EUR 1 million that we have reported during 2020. So we have offset, managed to offset a significant part of these deviations through a couple of levers. I will start with all the costs-related ones. So you see that we have delivered on the full plan that we initially aimed at in terms of COVID mitigating actions. So this has allowed us to generate an upside of EUR 96 million. We have also crystallized a certain number of structural cost improvements both in fixed costs and variable costs, which is giving another EUR 23 million upside. And we have benefited as well from our optimized business mix, which is driving an improvement of EUR 43 million, leading to the EUR 272 million that we are posting for the full year. So looking at the performance by business segment, and I will start with the Rubber Reinforcement business unit. I will not comment further on the sales but just to give you some highlights in terms of P&L performance. So the BU was first hit very hard. So I think that, given the size of this BU in our overall portfolio, it had a significant impact overall. So during the first half of 2020, we started already implementing some mitigating actions to offset the negative impact resulting from the loss of sales. We started seeing, as I mentioned as well earlier, a full rebound during the second half. So we had our -- all our actions already implemented, and this has allowed us to stabilize the level of performance and has also allowed us to post the strong underlying EBIT margin of 12.6% in H2. The same applies to EBITDA as well, uEBITDA, with an 18% margin in H2 2020. So on a full year basis, EUR 144 million of uEBIT reported, with a solid 8.8% margin on sales slightly above last year performance. If we move to Steel Wire Solutions, so a robust underlying EBIT result of EUR 96 million and a strong underlying margin on sales of 7%. This is the double of the margin of last year. This is coming from different activities which have been carried out within the business unit. We have made a reference every time through the profit restoration plan that were carried out in the segment as well as the different footprint optimizations. We refer to the closure of the plants in Malaysia and North America in Shelbyville, and this has allowed us to reduce the impacts of some lower-margin activities. We have complemented these tactical measures by some actions around stringent cost control. And also to -- we have made sure to deliver as well on all the mitigating actions that we could identify. So as you can see from the chart, an extremely strong performance improvement with significant progress both for 2020 full year and particularly during H2 of 2020. If we move to specialty business, so an underlying EBIT result of EUR 45 million, so 13% below last year. This is leading to an underlying EBIT margin on sales of 11.4%. The contraction that we see primarily resulted from inventory write-offs and also some other adjustments that we have booked in the combustion technology business. We did see a lower result in the Fiber Technologies due to weaker demand for some high-value-added -- high-value-adding products, and as well a higher loss generation in the diamond sawing wire versus last year. The building product segment did deliver a strong result, so a 14.2% EBIT versus 12.3% last year; and have managed to successfully mitigate the adverse impact from the organic sales decline which was almost of 7%. Then moving to BBRG, so an underlying EBIT at EUR 34 million; a margin on sales of 7.9%, more than tripling the margin of the previous year, a confirmation that the transformational plan and the profit restoration plan we have implemented is gaining traction. And given very strong results with that, our underlying EBITDA is reaching the stronger margin of 15.1% compared with 9% delivered in 2019. BBRG has, as I mentioned, accelerated the implementation of the profit restoration plans for ropes activities and have further boosted the profitability from their different products portfolio by selecting more intelligently what we want to put in the market and trying to select and to get rid of some more loss-making or less-margin-generating type of products. As anticipated, the sales and margin in ropes did trend lower in the second half of the year mainly due to weaker business conditions in the Americas and also less project business than initially anticipated for the second half of the year. We also had to deal with some seasonality effects as well during the second half of the year, but all in all on a full year basis a very strong performance which has been delivered. So drilling down into some additional lines of the P&L, we'll go through them very quickly. So you see that our net interest expenses did reduce by EUR 10 million, mainly as a result of the lower interest on financial instruments. The other financial results was EUR 12 million more negative, mainly impacted by the adverse currency translation effects. The income tax rate -- the income taxes amounted to EUR 57 million. The overall tax rate dropped from 73% to 33%, mainly driven by rebound in the profitability, with less impact from some loss-generating entities. We also had some reversal of provisions for some tax cases which have been settled in the meantime. And we also saw the good result of some tax measures that we have taken in order to improve our overall ETR. The share in the result of the joint venture and associates is standing at EUR 34 million. That's an improvement of EUR 5 million versus last year. This is reflecting the strong performance of our joint ventures in Brazil. And the results attributable to the noncontrolling interests does include the profit which is attributed to the minority stakeholders in the non-fully owned companies mainly in Latin America. So moving to the balance sheet and the cash flow. So the cash flow from our operating activities amounted to EUR 505 million, a small decline compared to 2019 mainly triggered by the decrease in the working capital which we have reported in 2020 which was a bit lower than the one we have achieved back in 2019. A significant movement in the cash flow from financing activities which is amounting to a negative EUR 83 million versus a negative EUR 269 million last year. The difference between the 2 years is mainly due to higher debt repayment last year as well as lower dividend payout in 2020. So in summary, a net increase in cash and equivalent -- and cash equivalent of just short of EUR 400 million in 2020. That's an [ improvement of EUR 164 million ] versus last year. This is leading to a cash on hand of EUR 940 million at the end of 2020. This has been driven or impacted significantly by the good performance that we are reporting in terms of working capital. So we see overall in terms of working capital a reduction, EUR 165 million. So that's a 23% decrease versus last year. We have managed to decrease our inventories by EUR 100 million. The trade receivables decreased by EUR 63 million. We have, as usual, used some off-balance-sheet factoring from an amount of EUR 152 million, slightly increasing versus the ending position at 2019, an increase corresponding roughly to EUR 30 million. The trade payables were about stable. And with that, we're reaching, as I mentioned, an average working capital on sales of 16.4% and a low point at year-end at 14% on sales. I will conclude this section with this slide where the relevant information -- well, actually all the information is relevant, but the key one is related to the EPS. I already also quickly mentioned on that. So a significant improvement compared to 2019 performance and a EUR 1.65 increase versus 2019. So this brings me to the outlook. I mean I read some, we have read some of the notes which have been published by you this morning. So indeed we do remain prudent for 2021 but with certain doses of optimism, I have to say. The reason why we remain prudent is that we still consider that we're dealing with a quite volatile situation. We can elaborate later on, on that with Oswald. So again, prudence combined with certain doses of optimism, which is mainly relying on the solidity of our fundamentals. So I think that we are significantly progressing towards the crystallization of our margin improvement performance. We have implemented and will continue to implement strong discipline in terms of cash management and management of our balance sheet overall. And we have the very comfortable position of our very strong balance sheet. So what we see, for the moment, for the start of the year is that the indicator do seem to be green for the moment. So our order book seems to be rather good. We are projecting a strong start of the year. We do see a good progress and a continuity in the actions that we have implemented to further improve our performance. And this is leading us to confirm our guidance in terms of sales, which will be at least around EUR 4 billion. We are improving our expectation in terms of margin, and we are setting an ambition for ourselves to be (sic) [ exceed ] 40 to 60 bps versus the performance delivered in 2020. We have delivered above 7% in 2020. That was our mid-term guidance. We are 1 year, if not more, ahead of the plan. And we want to, again, solidify our expectation to move to the next milestone in the next coming years and quarters. So this will conclude this part. And with that, I will hand it back to Katelijn.

Thank you, Taoufiq. We now invite our covering research analysts for a Q&A session. [Operator Instructions]

I noticed that Frank Claassen was the first one to raise his hand.

Yes. First of all, a question on the cost savings. Could you, yes, give us an idea how much of structural cost savings will kick in, in 2021? And last time, you also talked about some, let's say, temporary COVID-related savings which could be sticky, so yes, could you elaborate on the cost savings going forward? Then on the working capital, is this it? Is this the room for improvement, or is there more to come? Or could we expect maybe some investments in working capital? Some words on that, please. And then finally, maybe on competition: I remember that, last time, you talked about when the -- yes, the recovery came after the Q2, that some local competitors were struggling to get wire rod. What is the current situation with these local competitors? Has this improved? Do you see them coming back with tenders? What is the situation there?

Oswald, I will kick it out with the costs and the working capital parts of the question. So in terms of costs. So again there's -- it's a continuous effort. I mean I stated many time when the question was asked I do think that we have many areas where we need to continue our efforts in terms of optimizing our cost base. We have built into our 2021 significant assumptions in terms of cash conversion, cost optimization. This is one of also the reasons why we are saying that we're confident about 2021, because we don't see these improvements kicking in and generating results in our P&L. And I will distinguish 2 type of cost optimization exercises. So there is all what we see as structural resulting from the different actions that we have taken in terms of restructuring some sites. So I mean we restructured Belgium in 2019. We closed Malaysia. We closed the U.S. This is generating recurring, healthy savings. So we did estimate the saving coming from these 3 areas in the range of EUR 20 million recurring savings. As you know, we have continued to do some optimizations in our footprint. So we have closed some sites in BBRG. We have done some tactical adjustments. So some small sites like Belton in the U.S. We have announced the closure of Pointe-Claire in Canada. We have also realigned our flex pipe operations in the U.K. and in the U.S. And all this is meant to drive additional cost optimization going forward. So we will continue to look as well at our overall overhead. So out of the significant savings that we did generate in terms of overhead during 2020, there is a part of it which would be sticking that we have also embedded into our assumptions. So we do consider that there is roughly EUR 15 million of recurring savings that we can crystallize. And we will continue to optimize our overall overhead by understanding how we can rely better on digitalization, making sure that we do our back-office activities in the most cost-efficient country and so on. So we have a plan. The plan is in place. It's running. It's giving the results. We're confident that it will generate some upsides. It did in the past and we don't see any reason why this should change on the short term. In terms of working capital. So again, over the last 2 years, we did a significant effort to reduce and optimize the working capital. I think that we shouldn't drop the ball on that. I think that there is still an opportunity to further optimize it. We need to better assess how this working capital will evolve with increased activity that we're projecting throughout 2021. I mean the discipline is in place. The governance is in place. The controls are in place. The tools are in place, so we want to rely on these further. So we will need also to start probably thinking out of the box and see how we can drive it to the next level. I did say that we tackled the low-hanging fruits in some of our previous discussions. Now it will be a matter of starting thinking ahead and beyond what we have done. So again it will probably not be the massive volumes of working capital optimizations delivered in '19 and '20, but we still do see some potential to go further and beyond.

Thank you, Taoufiq. Then I will take over the third question, which was about competition. And of course, we closely monitor the markets and our competitors, yes. And what I said at the beginning, we have a big advantage with our global presence. And what we have seen over the last, I will say, couple of months is we have gained business even from customers which have not been ordering before. And this is, of course, always a big opportunity. And when I talked about the full potential, it will really translate this in a recurring business. There are some smaller competitors, I will not go into details, which seem to have some liquidity topics. This is also very clearly where we look on if there's an opportunity for whatever, consolidation. The other topic is what we have seen, especially for SWS in Latin America. This went very well, but there are also areas where we gained further market share. This was for the Rubber Reinforcement in India and in EMEA and Russia. And one of the reasons was that our supply chain -- even if the wire rod was sometimes in a very scarce situation, that we could -- with the relationship we have with our suppliers built up of a long tradition, that we had a little bit of a priority, yes. And of course, this is it's always easy when things are going well, but if you can really supply your partner when things are not going so well, this is normally a sign where relationship pays off. And a long-term relationship really comes on a deepening of the corporation. So we are watching this very carefully, but on the other side, it's not only getting market share. We have also, for example, when we talk about SWS in North America. There's a big investment from the government coming from this Rural Digital Opportunity Fund. This is of the areas which are not so central and where they need to be -- invest to make also North America digital and there where we have applications which support all these mega trends. So there is also new developments we have. And this topic is really that we focus on the areas we would like to be in. And here we want to have a strong, I will say, position here. We're also investing in the capacities to really serve these markets, but we've -- sorry. Siri was listening to me. Sorry about that. I said something which triggered a music. Sorry for that. And also we have seen with BBRG we've won a big and important contract with Equinor, and this is supplying mooring lines. And here we want to go because this is the future also of the mega trends. So it's not only that we capture business out of that where competitors may be not so strong. We're really going in core business and in adjacent businesses as well.

The next one, I would like to invite Matthijs to -- raise your questions, Matthijs. You might be on mute, Matthijs, yes.

Yes, yes, yes. Okay, there I am. Okay, Matthijs Van Leijenhorst, Kepler Cheuvreux. The first question is related to a comment that was made earlier during the presentation. Oswald, you mentioned the you signed some investment commitments related to partnerships. In this context, how should we look at your CapEx profile for this year and as for next year? I believe for this year it's EUR 150 million, but is it fair to assume that CapEx might increase as from next year? And the second question is related to raw materials. Is there any risk from rising raw material prices? Those are my 2 questions.

Thank you very much. I think, Taoufiq, maybe you take the CapEx and I take the wire rod at the beginning. The wire rod, when it was -- I will say, when you take as a starting point the January level, it went down during July. And then it came up again. It was all linked a little bit because in the second -- the first half of the year, also the steel mills were struggling that the capacity was going to be supplied to the market. There was not sufficient demand, and they also reduced the production capacity. And then the strong rebound was coming, and you have seen it. The scrap went up. The iron ore went up. The oak went up. Of course, this translated in a higher price. And in addition, of course, into the costs there's always the factor of demand and supply situation, if this goes beyond the cost situation and higher margin. When you look on the profitability of the steel mills. They are still not there where we would -- that we wants to be for many, many years, you could even say. And the key questions, I think, what you really address is can we transfer this price increases to the market. Or do we have to suffer and to digest them? In most of the cases and, I think, the biggest part of our business, which is RR, we have indexes, yes. This is normally where the price increases are really translated into the formulas, and the formula is going to be applicable. There might, some timing delay, but from this point of view we can say for RR normally this is, I will say, one to one being transferred in the way it's possible, maybe even with some upsides. A key topic for this was also the transportation costs. There have been shortages on containers. There have been shortages on all the connections we have all throughout the world, and also the transportation costs went up. And here the customers are fully understanding that they have to join in, in bearing the costs with us. So this was also possible to [ reach out ]. There are sometimes other areas of where the wire rods, of course, is freely negotiated but here also in most of the cases maybe with some time delay. This was also possible to relay these price increases to the market. Taoufiq, you want to talk quickly on the CapEx?

Yes. So I think that, as far as CapEx is concerned, there is a short and there is a long answer. I will try to summarize them. I think that, when it comes to CapEx, it's true that we're coming from a history where over 2 years in a row we did understand or at least perceived as being understand that there is potentially a need to catch up. To some extent, we do recognize that we will need to catch up. So our guidance for 2021 in terms of CapEx is between EUR 140 million to EUR 150 million, but I think that, beyond the simple absolute value of how much we need to invest, there is also a question of where we want to invest, how we want to invest and to which return we -- for which kind of return we want to make these investments. So having said that, I think that what we are doing right now is to better correlate our investment plans with our strategic plan. So we have finalized it and Oswald disclosed it with the rest of the team during our Capital Markets Day. So there is a very strong intention and plan to make sure that all the euros we're investing do generate a significant amount of return. I'm not saying that, that wasn't the case in the past, but we want to approach it from a more dynamic point of view. CapEx is not something that in our industry is something which remains flat over years. So I mean it depends obviously on the nature of the project that we have. We might have for given years some major programs. So I mean you are aware of our plan in Vietnam. So this might potentially at a given point of time generate some hikes in the overall spend, but what we want to make sure is that we want to correlate our overall CapEx spend with our cash flow generation. So we don't want to penalize too much our cash flow generation. We want to leave -- to allow ourselves to still generate a significant amount of cash. And we will be balancing our investment needs depending on the cash that we are projecting for the future. So we reiterate the guidance that we have communicated in terms of CapEx for '21, EUR 140 million to EUR 150 million. And we will reassess the future based on our strategic initiatives.

Wim Hoste?

Yes. Also a couple of questions from my side. Can you maybe elaborate a little bit on, yes, how you look at your balance sheet as it is today? It has significantly strengthened. If you achieve the margin improvements you target with the CapEx still, yes, not too exuberant, I think there will be still healthy free cash flow also in the years to come. And yes, how are you planning to -- yes, to spend that? Is that mainly looking at M&A? Is that further significant improvement in dividends that can be considered, share buybacks? So your thoughts around all these topics would be helpful. That's the first question. The second question is your overall U.S. presence and strategy. I think you have -- it has been reviewed with the past U.S. administration. Now that there is a new administration in place, are you considering making any changes to your U.S. presence or strategy going forward? And then last question is on, yes, Rubber Reinforcement or the tire cord business in China. How is the competitive landscape there evolving? Is it still you pushing technology further and improving further and the others trying to catch up? Is there -- is that where the market is increasingly growing? Do you see other segments being established with lower-margin products? Can you maybe comment around that as well? That's the third question.

If that's okay, Oswald, I will start with the question on the balance sheet. [ And then you can ] take the U.S. strategy and the China competition. So indeed we have a very strong balance sheet as it stands now. We have some key milestones, as you know. So we are supposed to repay our convertible bond in June. That's EUR 380 million. We're still aiming at a good cash generation for 2021, and our strat plan does show the same pattern. And the approach that we have towards that is, and I think I touched on that earlier in the previous question, we want to better align our capacity -- the capacity that we have freed up both in terms of cash generated and potentially additional indebtedness to assess our strategic options. And strategic options are business related or corporate related. So when it comes to the corporate-related initiatives, you refer to the share buyback and things like that. We will think around the options. We will make proposals to the Board and the Board will decide on what to do on that. As far as potential M&A or additional investment and things like that: So I think that we have both a plan which is relying on 2 pillars, organic and inorganic. So we want to be -- to drive as well our investments in technology, in digitalizations and things like that; or the cornerstones [ which are made ] to sustain the strategy that Oswald has summarized in the first part the presentation. And we also want to see what is deriving from our strat plan approach to potentially consider further inorganic moves. So this is being assessed. And I guess that, during the next Capital Market Day, we should be able to provide more light on that.

Okay, thank you, Taoufiq. I will -- Wim, I will go through your question on the U.S. presence. I think this was the second one. And I think what we do -- in fact, when you look on BBRG, for example, we are really consolidating all our North American operations in U.S. And we're going to serve out -- service [ out of this also for ] the Dramix production. So -- and Dramix then moves together to the BBRG hubs, so this is a real strong center. I mean we talk about the strategy. I think it's really that [ there is some boon ]. This is where we -- a lot of investments [ will take haste ], and I mentioned [ this road to digitization ]. This is expanding the strength [ in the lesser ] activities in Bekaert Van Buren. So I think North America is for us a very important market. We are doing the footprint optimization, as you'll see from Pointe-Claire, moving it to the States, but when we have seen also from the market share point of view, we have been really benefiting also there from a strong demand and a strong [indiscernible]. The third topic you had was China, yes. And in China I think we have a very strong position. Yes, we have. From the technology point of view, we're always a leading company, but in China they are very fast coping. And they are very busy. And they do it as well, but what we see, we could have -- we have gained market share in China. We see that there are some significant players in the tire market, the young companies coming up and joining us in to do something together. So it's not that there is competition -- yes, there is a very fierce competition always around. The specifications might be different, maybe what they use in their tires, but I think that solutions we can provide are quite interesting for them, yes. But of course, we always have to make sure that a -- that we have a competitive environment and that we can [ deliver ] competitive solutions. And from the market share point of view, we were able to absolutely be in -- on line with that what our expectations are.

Okay, can I just follow up on that? There's also been some consolidation at your customer level, Cooper Tire, et cetera. Anything -- how do you see your -- I would say, your customer base, both and -- the global ones and the Chinese domestic ones? How do you see that evolving? Is that getting also in China more scattered from a customer perspective, or on the contrary? Can you maybe give some commentary on that as well?

Yes. I think, when you see Goodyear and Cooper -- I think this was a logic, I will say, step. And it was, I would say, many have expected that; and honestly, for us, we appreciate very much because maybe this gives -- it gives a simplification of all the production, et cetera. So I think we all have been already in touch, and I think this gives us a -- good combinations. We have with both, I will say, a very well-established relationship. When we talk about the Chinese topic, there is also maybe a part of consolidation taking here, but we have with all of the [ key 5s ], I will say, in China very strong relationship. And they come to us, and I think we can provide them technologies and solutions for a lot of applications they are looking for. So this is I think China, for us, is a huge market. And I think it's an important market. And we're going to be there as well the leader we want to be; and we want to stay there as a leader, [ very clear ].

Okay, very clear. Congratulation with your nomination.

Thank you very much. Thank you, Wim.

I now invite Martijn den Drijver. Martijn?

Yes. My first question is a bit of detailed one. I was hoping that you could share with us the inventory revaluations in the second half per division because for the full year it had an effect of EUR 29 million. First half was EUR 6 million, so EUR 23 million in the second half. Specialty was minus, so there's EUR 28 million of positive revaluations somewhere in RR, SWS or BBRG. And to understand the underlying performance, I would really like to know where those positive revaluations were recognized. That's question one. And then sorry, Taoufiq. I have to come back to the cost savings. I didn't quite understand your answer. I think you mentioned that the recurrent savings in 2021 from all the measures that you took in 2020, along with those in December and early January, were going to be EUR 50 million, so 5-0. Is that the correct understanding?

No, no. I said EUR 15 million. And this is the EUR 15 million which is related to the part which we consider is going to stick out of the EUR 96 million that we have delivered as part of the COVID mitigating actions. On top of that, we will have other structural savings that we will be delivering during 2021, but only for the part which are related to the so-called COVID mitigating action that you see in the waterfall that we have provided we do consider that, for 2021, EUR 15 million will be recurring...

Okay, that's clear. And you have no -- you would not like to add -- as to all those measures that you've mentioned, Pointe-Claire, engineering, you wouldn't like to add a number to that yet.

It's not included in this EUR 15 million. It will come on top. And we have not completely quantified them for the moment.

Okay. And then my final question then is on working capital, and hopefully, you come back to the first question. You mentioned that you still have an opportunity to improve working capital. You obviously have because, if you adjust the accounts receivable for the higher factoring, your DSO is actually up quite significantly, but your DPO is also up. And in fact, it's been -- [ say payables have been ] stable, meaning that the DPO [ hasn't ] gone up considerably. Assuming that normalizes again in 2021, where are you going to get the additional working capital savings from? Is that solely from the inventory? Or can you elaborate a little bit on that one, please?

Yes, okay, okay. I will first start answering your question on the FIFO adjustments. So indeed it was impacting Steel Wire Solutions and Rubber Reinforcement. Most of it did happen in H2. And it was a EUR 15 million, 1-5, with SWS; and a EUR 10 million with RR, okay? And these are deltas versus last year, where we had a significant drop in terms of FIFO valuation, okay? The absolute number which has hit the P&L or impacted the P&L, not in terms of variance but in terms of absolute value in terms of variance and embedded into the EUR 272 million, is around EUR 1 million. So what it means is that basically the broad -- the band of the variation is getting smaller over time. So -- and on the working capital: So I think that -- beyond the tactical measures in terms of using some financial instruments and so on, I think that in terms of payables we do still have some possibilities to improve our overall collection rate. So now we're running with a DSO which is around 90 -- 85 to 90 days, a DPO which has increased towards Q4 in the range of 120 days. And we have a DIO which is around 75 to 80 days. So I think that, when you look at these 3 KPIs, there are ways to further optimize them. If I look at each one of them. So I think that, inventories, we have the internal related measures to make sure that we have a higher reliance on our material planning and sales projections in order to build up our inventories. In terms of raw material, I would not dream of having a just-in-time type of setup like the automotive industry, but I think that there is still some potentials that we can do there. And there are other technical ways of approaching it through consignment stocks and other measures like that. In terms of receivables, sort of I don't think that we will be running after factoring. I mean it's something that we have done in a very opportunistic way and very tactical way. There is no need to run out of it. And I think that the improvements that we will be performing there is just to improve our performance in terms of collection of our receivables and to be sure that we have aligned across the geographies all the payment terms that we are giving. And in terms of payables, we have also started an exercise where we're looking at how we can better adjust our payment terms. So just to give you a simple example: For the same supplier, we might have different payment terms which are given depending on the geography or the -- yes, the region where we are doing these purchases, so we want to make sure that we're getting the best possible conditions around the world with global contracts which are defining or based on the same conditions. So I think that a combination of these levers plus some other [ more ] should still give us potentially some upside on the working capital. Obviously, it not -- will not be as quick as what we have delivered in '19 and '20, but we still believe that we have the possibility to further improve our working capital.

I now invite Emmanuel Carlier to raise his questions.

Yes. Emmanuel Carlier from Kempen, yes. So I missed part of the conference call. Sorry for that. So I hope the questions I will raise have not been asked yet, but my first one is with respect to the top line. So you guide for top line growth of around -- yes, ahead of 6% in 2021. I was just wondering if you could give a little bit more color on how that is build up with respect to volumes, price, mix, M&A, et cetera. Second question is on the underlying EBIT. So I think you guide at the midpoint of the margin guidance for an uplift in REBIT of around EUR 30 million, EUR 35 million. Could you provide us with the key drivers for that? So I believe it's mainly higher volumes and cost savings and then being partly offset by some corona savings that are not structural and the impact from inventory valuation. And then the final question is on your ambitions. So you mentioned in the outlook that you will raise your ambitions, but you don't quantify them. So yes, the question is if you could come up with some quantitative statements. Or is this a topic that will be discussed at the CMD next weeks?

Sorry. I was on mute. So in terms of guidance [ and so for the ] top line. So what we're saying is that we're aiming at a top line in the range of EUR 4 billion, at least EUR 4 billion. So if we put this into context, I mean... [Technical Difficulty]

I just want to check something. Did we lose connection with Taoufiq only, or do we all have connection problems?

I can here you clearly, Katelijn.

Yes, me too. I hear you, [ certainly me too ].

Yes. Well, then okay. Sorry. We thought we had lost the full connection. We will take contact with Taoufiq...

Yes. I'm back, yes. I'm sorry. I'm calling from my phone because I lost the WiFi connection at home. I'm really sorry for that.

Okay, no problem. And we lost you, yes, about at the start of your answer, Taoufiq.

Yes, okay. So no, I was just explaining the reasoning behind our guidance for the top line. So what I was referring to is that we are in a process of recovering our top line to our pre-crisis levels. We don't think that this will happen already in 2021. We do see demand evolution certain uncertainty which does remain quite high, and we also, unfortunately, do think that the visibility remains a bit limited. That's the reason why we are now projecting our top line to be in the range of EUR 4 billion. What we see, so far, in Q1 -- and I think that there is different type of typologies, depending on the segments and the regions we're looking at, but if we start with so far the situation as of today in RR, we see -- we think that we will still have a good demand at least continuing in Q1. So this is mainly backed up by the fact that the passengers [ might driven ] in Mainland Europe countries and are between 70% to 80% of the January 2020 levels. They're increasing, significantly increasing, in countries like India, Brazil and the U.S., but at the same time, we see that the truck mileage is much more resilient for -- based on what we see. As a consequence of that, the tire demand is expected to increase for the trucks, and we do expect as well a recovery in passengers. And this will potentially lead us to a situation where the tire cord volumes in 2021 are expected to be at the level of 2019. For steel wire solution, we do see and project a strong order book across the regions. The demand in agricultures and -- agricultural and utilities is projected to remain quite high, with a rebound in automotive which, hopefully, will continue over time. In specialty business, the performance is expected roughly to be in line with 2019, with building product managing to drive the major part of this performance within this segment. And some of the actions that we have taken in specialty business in terms of improving our positioning will allow us to step up our performance. For BBRG, we do project strong sales in China construction equipment as well as in hoisting and some as well other improvement across geographies in the order book. So again there are a set of positive signs which makes us feel confident about the projection that we're making in terms of top line. Having said that, there are still some uncertainties that we'll need to clear, hopefully, between now and the end of Q2 -- yes.

Did I hear well that you expect Rubber Reinforcement volumes to recover already to 2019 levels in 2021? Or was that just on the truck part? [Technical Difficulty]

Sorry. I'm really sorry. I missed your question. My connection is terrible. I really apologize for that.

Yes, no problem. No, the question was, did I hear well that you expect the volumes in Rubber Reinforcement to recover already to the 2019 levels in 2021? Or was that comment just for the truck business?

No, that was mainly for the truck business, where we see a higher level of visibility. We do think that for the passenger business this will probably take more time before we get to these levels.

Yes, okay. And with respect to sales, do you take into account any positive price, mix effects mainly driven from higher wire rods pricing?

Well, I mean, the higher wire rod pricing is not really the element driving the price, mix effect, at least the way I see it. I mean I think that many of the improvements that we have delivered in terms of better positioning of our product offering should stick. I mean you saw typically one of the most obvious example is with BBRG, where because we are more selective in the applications we're putting in the market, we're able to drive a high level of profitability. We don't want to compromise -- or we will need to balance volume around -- against profitability. I think it's something which has given results and we want to continue optimizing this approach and this strategy. In terms of the wire rods pricing. So I think it's also something on which we're putting a strong focus. So I think that the name of the game is how do you pass-on the price evolutions that we see in raw material to our final customers. I think that one of the things which does help us, and typically you see it in the Rubber Reinforcement business, is that a significant portion of our volumes are index-driven. So there is formulas which do allow us to adjust our selling price. And for the rest, I mean, we have active sales campaign which do allow us to secure the fact that we pass-on the price increase. There is -- just a small caveat is that there is a timing effect when you do that because, I mean, there's the order intake timing delay. So you might see a quarter delay between the moment where you incur the price increase and the moment where you are able to pass-on these prices. Because you cannot reopen the negotiation on order intake which has been already captured.

Emmanuel, then I maybe will come to your first question. Well, maybe you missed it a little bit. What I said is we have defined our ambition and this ambition has 3 strategic imperatives. It's about performance, about transformation and about growth. And I said -- and I asked you for a little bit of understanding. With the announcement of today, I wanted to take a little bit more time to prepare this and organize this in a very professional way. And this is why I asked to shift the Capital Market Day from the 10th of December until the end of May to prepare this properly; and give you also my insight on the mid-term, I will say, guidance we will present to you then later on. I hope you can have an understanding, but in my new role, which is an old role, I just take the liberty to really -- after the year [ of -- in 2020 ], that we look more on the strategic part but also to prepare this in a proper way.

Yes, sure. And then with respect to the second question I had with respect to the guidance on 2020 underlying EBIT, could you disclose the main moving parts?

Well, the main moving parts are mainly related to the volume. So I mean you know that the volume is driving a significant or generates a positive impact in terms of overabsorption, which has a knock-on impact overall on the P&L. So we count on this volume to happen. We will continue seeing some positives coming from our segmentation. And we will crystallize some of the actions that we have implemented in terms of cash conversion, cost optimization and also some overhead and structural cost optimization. So these were -- these are the main 3 levers that we see. I don't know, Oswald, if you want to add up anything to that.

I was -- a little bit lost, I mean, the connection. Could you repeat the last sentence, Taoufiq?

No, no, I was just summarizing the 3 levers which are driving the projected bottom line performance and our EBIT guidance; and referring that we're basically counting on the volume, the cash conversion optimization and our segmentation of our product offering to maximize the margin generation [indiscernible].

Absolutely. So this also goes in the terms of portfolio management, what I said also in the beginning; and then to focus on the operation excellence, all what we do in our plants, all what we do with our customers, absolutely, Taoufiq. Nothing to be added.

Maybe a very quick one as well on working capital. So you have discussed this in much detail, but you stated that you believe you can still improve that. Is that on the closing of 2020? Or is that the average working capital over sales that you had in 2020?

Well, the closing of 2020, I think it's really a record low. I don't think that we can use this closing figure to drive the average throughout the year. So for the moment, I mean, our guidance is that we will be in the -- below 17% net working capital on sales, but we will proactively look at all the different tools and measures that we have to further optimize it.

Are there any more questions from anybody? If not, I hand it over to Oswald.

Yes, thank you very much, Katelijn. And this is just about the calendar. On the 26th of March, we will have the publication of the annual report and the sustainability report. There will be the next first quarter trading update for '21 on the 12th of May. The General Annual Meeting of the Shareholders, including the quarter 1 trading update, hosted by the Chairman and myself will be on the 12th of May. The dividend will be dealt on the 14th; and later on, upon the vote of the AGM, on the 18th. And I really would like to invite you. And we will have the date, hopefully, very soon to be communicated to you -- and to join our Capital Market Day. It will be hosted by the Chairman, by myself, the CFO and other members of the BGE. And there is really the idea that we come a little bit from the mid-term point of view, after having done the 2020 and having already started in '21, to give a little bit of a foresight what we intend to do in the near future. So thank you very much for joining us here today. I hope you all stay well and hope to see you soon. And take care. Thank you very much.

Thank you.

Bye-bye.