NV Bekaert's (BEKSF) CEO Matthew Taylor on Q4 2015 Results - Earnings Call Transcript

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NV Bekaert SA (OTC:BEKSF) Q4 2015 Earnings Conference Call February 26, 2016 8:00 AM ET

Executives

Matthew Taylor - CEO

Bruno Humblet - CFO

Analysts

Matthew Taylor

Welcome to our results presentation on 2015. We’re very pleased to have you here. I think you've probably already seen the press release from this morning so we'll try and go reasonably quickly through the presentation and allow for questions for you as we go through. Bruno and I will share this as we go through but I'll kick off and talk about the highlights and again I think you'll have seen this but sales grew by 14% up to 3.7 billion on a consolidated basis and my 9% to 4.4 billion on a combined basis. There was a big currency impact within that 270 million or 8% on the consolidated sales and a 150 million or 4% on combined sales.

Gross profit which is where it all starts really saw a significant increase with margin going up from 15.1% to 16.3% and a 120 million of increase up to nearly 600 million of gross profit. Our EBIT that did flow, a lot of that flow down into EBIT and EBIT at 223 million was nearly 60 million up on 2014 and it was a whole point of margin better than we had seen in 2014 at 6.1%. We then had non-recurring items which were negative 3 million for 2015 compared to positive 7 million in 2014 so we also saw a 50 million growth EBIT. EBITDA which is really important because this is a cash generation capability of the business, we saw grow around about €100 million up to 441 million which is a margin of 12% versus 10.6%. And where that is really important is the impact it has on net debt as well, so our overall cash generating capability had a big influence on where we finished the year on net debt where our net debt to a EBITDA ratio was 1.9 compared to 2.5 at the end of 2014.

And that is despite the fact that we had around about 235 million of net cash out on M&A activity in the year. So finishing off the Pirelli deal the acquisition of Arrium steel ropes in Australia, buying out our Chilean partners in the ropes business, our partners in Southeast Asia. Our partner in Specialty Y [ph] business in China and on the divestment side, the divestment of carding solution. So net 235 million of cash out and despite that we still were down to 1.9 multiple on net debt to EBITDA and that’s then drives earnings per share of €1.83 as compared to €1.57 at the end of last year and the Board of the back of that decided to increase the dividend from €0.85 per share to €0.9

We will look a little better at the economic environment, it is a fairly tough world as we look at it at the moment. Slower overall growth rate across a lot of different sectors in the industries in which we compete and we're seeing that not just in 2015 but also continuing and in fact aggravating as we come into 2016 as well. Slow growth rate particularly in China means that we're seeing a lot more overcapacity particularly in the sectors in which we compete the steel industry in particular and that is the attempts to use that capacity creating real pressure across a lot of markets and that pressure manifests itself in low prices and we see that effect particularly in Southeast Asia and Latin America really on a global basis as well.

The low commodity prices that we're seeing and the lower oil prices also have a disproportionate effect in our business on Latin American businesses or South American businesses as a whole. Now obviously there are impacts across the world but the one positive side of lower oil prices a very positive sign from our perspective is that there's a very straight correlation between fuel prices at the gas station and the amount of kilometers driven and therefore the number of tires and cars being bought and that's had a very strong impact on the overall tire industry automotive industry and has helped our business in 2015 and we see it continuing in 2016.

One of the other factors that we have to bear in mind is predictability of currency movements and they become more and more volatile as we went through 2015. If we look quickly at by region, in Europe we did see the markets remaining stable at quite a strong level again driven primarily by automotive but also by construction. Obviously they all price coming down did weaken the oil and gas sector for us. One of the key highlights for us was the integration of Pirelli business obviously three of the plants are in Europe with that business and they had a very positive impact on our overall European business.

We also got out of loss making businesses with our divestment of carding solutions and exiting of the Stainless Steel Y businesses and because we continue to focus very strongly on cost controls across the business and operating excellence as well as optimizing our portfolio that’s been a key to driving the underlying profitability in Europe.

In North America we saw continued strong demand in automotive there as well but because of the fire that we've had in beard wire [ph] plant in Rome Georgia. We weren’t really fully able to take advantage of that and that hit our profitability for the year. In the industrial sectors we see continued weakness in those sectors with strong capacity which means you see price is being driven down and that's had quite a big impact on our North American business as a whole. One of the sectors which is very weak there is oil and gas as well which had been strong with expansion of Shell Gas previously. We look at Latin America, this is from an economic perspective probably the toughest of the regions at the moment as both economic and political instability in the region but despite that we've been able to see a very significantly improved performance. A lot of that down to building off the scale and strength that we have in the markets, the high level of market share allowing us to also push pricing, take advantage, some currency movements to fight back harder against the Chinese imports there both in Brazil as well as the Latin [ph] markets that we have.

In Brazil in particular the purchase of the Pirelli business in Sumare has contributed significantly to the strength in Brazil and again we've been able to fight off imports better there as well. Bruno will talk a bit more about Venezuela but we have had to shut our operations in Venezuela for a six week period for the time being due to the absence of raw material, we weren’t able to make any products. In Asia Pacific we did see a slowdown in the growth rate in China, still grew as the market overall but slowdown in the growth rate and still is very strong the impact of overcapacity specifically within the market in China the tire market, actually that market did shrink for the first time in a long time in China in 2015. However, we did not we grew in terms of volume and we regained market share in the tire markets and we did that by a fairly focused strategy on product innovation and moving away from just the emphasis on commodity, products and commodity pricing.

We also saw in China and this is been important for our business, quite a robust growth from the solar markets and for us as well and again in the same way as we have on tire cord we focus on a different product mix and really attacked with some better protected products into key growth sectors and took very strong market share there which helped our solar wiring [ph] business grow in 2015. The other big factor in Asia which drove profitability for us was turning around loss making activities in Southeast Asia and also in South Asia where we also got out of the stainless

steel business. But in Southeast Asia buying out our partner and starting the turnaround process of our operations in Malaysia in Indonesia. The divestments of carding solutions and stainless steel were also contributors to the improvement in performance and one of the really encouraging things for us is to see actually our EBITDA margin growing again in Asia allowing for solid cash generation in that region as well.

I just maybe looking at the regions and the segments we report in. On a consolidated basis Europe growing at the fastest rate, Latin America growing at the fastest rate actually and followed by Europe and it actually means that you're now seeing Europe as a third of our total sales on a consolidated basis as they strengthen significantly particularly with Pirelli coming into play.

On a combined basis because of the situation in Brazil Latin America grows a lot less and therefore shrinks a bit in terms of its contribution to the total business in Europe grows again and it's up to 28% to the total but probably one of the more interesting charts as we look at this chart and I draw your attention here to the to the pie charts and you compare to if you still have the books from last year, you compare it to the ones from last year. What you'll see in particularly in Europe and in Latin America is the red slice of the pie which is the automotive one has increased significantly and this is a combination of the strength of the automotive industry together with the acquisition of the Pirelli businesses and that's driven our overall mix of automotive business to over 40% of our total sales.

With that I will give you an opportunity to get into more details on the numbers. I'll hand out over to Bruno.

Bruno Humblet

Thank you, Matthew. I will starts with looking a bit more in detail at the sales as indicated by Matthew our sales increased with 14%. Now an important element of that of course is the inclusion of the acquisitions for about 9%. We also still had the positive impact from exchange rate movements for about eight mainly in the first half of the year but also in the second half, there were still some positive effects. But then very importantly we see an organic growth of 2% in our sales line and that's a combination of different things. First of all, we do have a positive mix effect. The mix effect is driven by the fact that we are constantly improving our product portfolio, that's the areas where we are growing faster are the ones with the higher value both on the top line as well as also on the bottom line. So therefore that mix is crucial part of the improvements which we have seen.

It has been partly offset by a small volume decline, that volume decline is purely into the first half of the year actually second half we started to see small volume increase. So through the year the volume momentum came back. We started a very weak as we indicated in quarter one, but volume momentum came back and actually the second half we saw a small increase as well. But on the total year a minus one and then of course there's always the pricing mainly in Asia China, tire cord China where there's a lot of price pressure that remains. So overall about 1% of sales increase related to price erosion. One of the elements which we continue to flag and because it's so significant now we really want to highlight it separately is that because of the lower steel prices the wire rod prices for us it has a direct impact on our sales price because we pass on as all of our competitors do. We pass on that to our customers, that had in total a negative impact on our top line for about 5%.

Important on this slide is also to look at the gross margin, the gross margin which increased from 15% to 16%. We have been over the past years being stuck at about at around 15% and that has been the key focus area by improving mix, by cutting costs to get our gross margins growing again and we're very pleased to see it growing to over 16% in 2015. If I didn't look at the indirect cost total SG&A as a percent of sales stays flat at about 10%, we do see increases in selling expenses but that's mainly reflecting exchange rate movements because all of the selling expenses are of course in the countries where we are selling our products and therefore we have the exchange rate impact there and we also have remained applying the very prudent way of accounting for potential bad debt reserves and we increase these reserves with about 5 million.

On the admin side, we do see an increase of 23 million, now a big part of that is due to one-off effects, one-off effects related to consultants which we asked to help us in the different programs which we have mainly this year in the work which we are doing in optimizing our total manufacturing footprint but also all of the M&A activities we were supported of course by lawyers and some bankers to help us get through all of them in total for about 14 million.

Next to that our admin expenses are increasing a bit due to the fact that we have more activities into our portfolio, the Pirelli plants as well as the ropes business in Australia. The reason why you don't see that same popping up in the selling line is because we were able to integrate those sales teams much easier into the existing platforms which we have.

And then there's also part of FX impact there. In the R&D part, the increase mainly relates to the inclusion of the Pirelli Research and Development Team into the [indiscernible] team. With that we get to an EBIT of 223 million, a full percent increase in the margin and therefore we get above 6% for 2015.. The non-recurring smalls shows a small negative here but really it is building up from impairments in Asia as well as cost related to the optimization of our overall structure. Those are elements which will be helping our overall economics moving forward. Now this year those one off costs have been offset by gains on the divestments of the carding business as well as defined the proceeds of the fire in Rome. So all in all they balance out each other but it's important to note the interventions which we made in the impairments for Asia as well as the cost optimizations are offset by some other elements.

The strong cash generation remains very important. If we then look at the REBIT bridge, the first two parts which you see in there the FX and the cost inflation are the parts which I would say are kind of out of our control. One thing which I want to flag here is that impact of cost inflation is lower than what we've seen in the past few years and that's it really reflects the increase in wage costs which we continue to have but it's has being partly offset by lower energy costs, of course lower oil prices, gas prices help to keep that cost inflation more under control. If we then look at the big block around acquisitions and divestitures the 45 million there that really indicates the strengthen of the businesses which we acquired and a very smooth and successful integration of the Pirelli tires cord plants and of the ropes facility in Australia and then there is a block of about four different items which really relates to the organic part of the business. The small volume decline all of it's related - all of it due to the first half of the year and again as I indicated second half that actually started to turn into a small positive and then of course pricing we will continue and we also in the future expect to continue to see further price erosion. We always have that in our business as Matthew indicated, there still is, overcapacity in certain areas but margins are decreasing also for our competitors but we do expect to see a negative number there.

The very important thing for this year is that we've been able to offset it with two things, one is the product mix so driving more higher value added products is really helping to increase the profitability and of course all of the efforts which we're doing in the area of cost savings and then some onetime items which I indicated related to consultants which we had to help us get through this year and some other swing items between the two years then bring us to total of 223. If I now take a bit of time to look at how does this go by segments and starting with Europe here in Europe. I think we can say that we had a very strong year again in Europe. And overall growth which was driven by an acquisition but also by organic volume increase mainly in the second half of the year there as well which was partly offset by the lower wire rod prices which we've seen. But all we know a very strong year there. Second half of the year is always weaker in the first half, there's the typical seasonality in there as well as the lower steel prices which explain the difference between the first and the second half of the year.

But again and this is the second time in a row a record profitability in 2015 of over 10% even now 11%, a very strong margin also held by the positive mix which we see there. If we turn to North America there the picture is very different and we do see some sales increase of about 7% but that is really all driven by the exchange rate movements in the first half of the year. It was close to 20% benefit it still was a small double digit in the second half of the year but we had to an organic sales decrease year mainly of course driven by the volume loss related to the fire in the Rome plant. The Rome plant which is back up and running but of course the volume is now starting to come in again, we do expect for 2016 that a big part of the volume which we lost in 2015 should be able to recuperated in 2016.

Now next to that to be fully transparent it is not only Rome, also our wire business has being going through a difficult period. Weaknesses in the agricultural area as well as in the overall industrial wire segments. With all of that therefore resulting in margins below our expectations at about 3%. The profitability on REBIT base has been helped in and then mainly in Rome thanks to the proceeds of the fire in Rome which now is all settled with the insurance company everything is paid there and that was closed in the final quarter of this year.

If you look at Latin America, a very, very different picture there with the growth of 21%. The acquisitions of the Pirelli tire cord plant in Brazil helps in there. There was some positive exchange rate impact mainly in the first half of the year because in the second half we saw some currencies slipping away reflecting the very difficult economic situations in some of the Latin American countries. But what's important here is the impact of the wire rod prices given that's wire rod is an important part of the cost structure in Latin America even more so than anywhere else. You see that impact of the wire rod prices there as well. But here it has been fully offset by positive mix. There is a strong focus already for years in Latin America to try to upgrade the overall product portfolio and even in difficult conditions it starts to pay and we see our sales therefore increasing with mix which is offsetting the decrease because of the wire rod prices. All of that results in strong profit improvement and very healthy cash generation so good return on invested capital in Latin America.

I want to take a few minutes to talk on Venezuela because we've seen lately with some of our customers and also some other companies giving their results for 2015. For some of them they were very significant announcements related to impacts of Venezuela, both on top line as well as REBIT, now for Bekaert this is not the case and I just want to quickly run through what we've been able and how we have been managing the business in Venezuela. We always accounted for it in a very prudent way. Starting even in 2010 where we impaired 50% of the total assets because we knew that some of those assets would be generating less cash or transferable cash in the future but mainly as of the end of 2012 so starting 2013 we changed and introduced hyperinflation accounting meaning that we actually started to use the actual exchange rate instead of the official exchange rate which therefore meant that the sales as well as a total REBIT of Venezuela becomes way less significant in the total business of Bekaert.

Meanwhile we've been writing off all of the collaterals and provisions which we had and we also have that again into this year. All of that means that moving forward we again don't expect any impact or major impact from a sales point of view because for the moment there's only 20 million or 19 million of sales sitting there. Also REBIT, it will be marginal and the only part which is there, which is significant is the CTA and that's something which is impossible to get out of our balance sheet. It's only would hit our P&L, it's absolute non-cash element but it would hit the P&L the moment we lose control of that business and this is something which I just wanted to flag next to that there actually is no impact which we do expect moving forward from Venezuela.

What is the situation today? As much you already indicated for the moment the situation in Venezuela is very difficult we do not have wire rod so we cannot produce which is why we had to announce a temporary closure of our facilities for six weeks and we'll see whether and hopefully we can reopen our facilities as fast as possible but of course without steel we cannot produce. But just wanted to reconfirm that Venezuela has no important impact on the overall economics for Bekaert not in 2015 and also not moving forward.

If I then look at Asia, the sales increase in Asia has to do with the movements in the currency as well as the acquisitions. The acquisition here is the ropes acquisition in Australia and some impact also of the Pirelli tire cord plant in China offset by some lower volumes, the lower volumes really are all related to the first half of the year. In the second half of the year volumes started to be equal to the same period last year. We also have an important impact from lower steel prices as you know, the steel prices which are going down all over the world are driven by China bringing the steel prices down which is why you see an even bigger effect in the Asian market here. But the price erosion which we have has been fully offset by a better product mix. And that also explains why the profitability in the second half of the year is increasing significantly. There are actually three building blocks that explain that profit improvement.

First of all is that we were able to stop the losses in our businesses in Southeast Asia. As Matthew indicated we took full control of the businesses in Malaysia and we were able to further restructure it and optimize the cost structure. Secondly there is again, a good momentum in the overall solar markets. We continue to be the market leader in sewing wire [ph] but also the team have been constantly improving through additional innovations the mix in our serving wired adding value to our customers and therefore being able to also continue to have a very strong market share in that segment and that starts to also help again he overall profitability in the Asian business mainly in the second half of the year and then finally the improvement of our tire cord business, tire cord China still represents about 50% of our business in Asia. The improved product mix, the improved cost control also driven by the fact that we start to have a better volume momentum and start to increase our market share all of that helps to contribute to improve profitability overall. So those three points combined that the margin in Asia in the second half of the year was getting close to 10% again with the cash generation at nearly 20%.

So with that I would like to move to the more financial parts of the P&L starting with the interest income and expense which we were able to keep stable thanks to the fact that we kept our total net debt stable and this in spite of 235 million net cash outflow related to acquisitions and divestitures. We do see an important negative in other income expenses, other financial income and expenses that is a very volatile number which is very difficult to forecast or actually rather impossible to forecast and we do hatch as much as we can but there are always open positions and given that the more volatility on a global basis in the currencies the more this number can churn up and down. Last year was close to zero, we had the few years where we had positives of 20 million to 30 million, this year we are hit with about 34 million.

About 20 million of that relates to un-realised exchange realized and un-realized exchange rate movements. The additional parts relates to one off areas like when we acquired the business in Australia there's a stamp duty which is reflected in here and we also took some reserves for potential exchange rate issues related to Venezuela. So it's about 20 million and the balance is in those two elements and then finally the taxes, the income taxes overall show a number slightly below what we had last year in spite of higher profitability but that has been helped by the impact of some deferred tax assets allowances. Those relate to the fact that we are getting and we are bringing everything ready to start the merger of the [indiscernible] business with Bekaert ropes business and to do that we are putting off the right legal structure for our ropes business and that generated that windfall on the tax bases. Without that our tax would have been slightly above 50 million, the number which we always guided to towards so this is a deferred tax change which helps us, again the normal taxation would have been slightly above 50 million.

And then the result in the joint ventures, this is mainly of course the Brazilian business. The Brazilian business which remained actually very solid in an extremely difficult market. The number is lower than last year because it now also includes the negative impact, the losses which we had in Jiangsu [ph] in China a business which we have flecked as managing as part of the joint venture structure and all of that then results for the group above 100 million, a 17% increase versus last year. If we then look at the cash generation focusing on the cash from overall operation 584 million, it really reflects the healthy EBITDA which we had but also the working capital improvements of course place a very important role in there.

At the same time you see the cost from investment activities those reflect the 235 million net investments which we had in M&A activities and the CapEx, the capital expenditure because we're not only investing and wanted to grow through M&A, there is still an important organic growth pillars to our strategy and there you see the investments in CapEx for about 170 million.

Working capital, few words more on the working capital, the decrease which we see is really in all of the lines, inventory receivables and payables with a very good working capital reduction in there. One could also note that actually the result is even better than what you see here because 2015 also includes about 50 million of working capital from the newly acquired businesses. So a true breakthrough in managing the working capital on average also as a percent of sales we see dropping from 27% to 25% on average.

And that then leads us to the balance sheet, I don't think there are any specific elements in here. The normal movements but nothing really to go in detail. And then that brings us to the net debts, one of very positive elements I think what you see here is the impact of the healthy cash generation and the net debts is down in spite of the important investments in CapEx and in the M&A activities and thanks to the also healthy cash generation. Our net debt to EBITDA which we have as a long term target to bring it's below two because of all of the acquisitions it was at about 2.5 last year and we were able to bring it in one year's time again below the two mark which of course indicates the strength of the company which we have and the bench which will have to further grow our business from there.

And with that, I would like to hand it back to Matthew to go through the outlook.

Matthew Taylor

Thank you very much, Bruno. In terms of outlook starting from an economic perspective in the markets which we operate we don't see a huge amount of change as we go into 2016 from 2015. We expect the prevailing conditions to continue in the same relatively negative way as they have been through 2015. We are seeing probably deterioration in some markets, Europe seems to be a little bit slower on lower levels of optimism and the same in the U.S. So it's not a great environment within which to be doing business that creates more of this emphasis on where does the capacity go that people want to build in their factories and that's going to manifest itself in I think continued pricing pressure in all areas of business and across all segments and we mentioned before that lower prices do effect a lot of the industrial sectors in which we play but the really strong element for us is that they do drive a higher automotive sector as well as stronger automotive sector and so we continue to forecast strong automotive in 2016.

And I think the recent data that came out showing record production on the automotive industry in January indicates that that still holds strong as well and automotive is now over 40% of our sales and if we look at just on a year on year basis where the steel prices are right now. So assuming no further change and it does seem to still be going down that would have 5% negative impact on our sales versus the first half of last year just taking steel prices where they are today.

So even though we may struggle to beat on sales numbers, I think volumes again we hope that we can continue to push hard on those but what we are confident about is that we will be able to show even within this environment improvement in our margin.

Looking at by region, I think Europe is meant to be go I think we expect that to continue relatively strong driven again by automotive primarily. I do think there'll be some more slowing down in Europe and I think with the strength that we have in Automotive that we will be able to hold reasonably strong there. We expect to be able to improve profitability in North America again driven by a strong automotive and the ability to use [indiscernible] now to produce and take more of the automotive businesses available to us together with cost actions and operational improvements that we're driving across the other layers of our business in North America.

When we look at Asia Pacific, I think the turnaround that we've already seen in 2015 will gain momentum and continue driving us forward in those I think quite difficult markets as we go through 2016 I don't think we've reached the top of our potential in that turnaround and then in Latin America I just think that our very strong market position and the agility of the teams in Latin America to be able to take actions which optimize pricing, optimize product mix and take quite aggressive cost cutting actions were needed as well will help us strengthen our position in the market even in what I think will be a very tough environment to grow the business.

So I think it's going to be tough there, but again I think we will keep holding our own. Where we do have real confidences that the transformational activities that we're driving through the business at the moment, we will continue to drive improvements in our overall business structure and we feel that providing there is no sudden shock in terms of what's going on, nothing exceptional or unforeseeable. We think that we will be able to continue outperforming the markets in 2016 and we'll be able to take another significant step towards the goal that we talked about of our EBIT target of 7%. So, we're pushing on that.

In terms of the how I think we talked last year about our vision, I'm not going to go through this again it's - you've got the information from before our field of play and our five core strategies what I do want to spend a bit of time on is talking about how we are delivering on those strategies and where things are going now. And is this drive for value creation throughout the business that is enabling us I think to deliver on these profit improvements and we think the actions that we're taking have just begun to have their impact and we will gain in traction, we will gain in momentum over the coming years. I want to just single out three areas that we're working on. The first one is the business portfolio and we call it create the winning business portfolio, and this is about being able to prioritize where we want to grow and how we want to grow and to do that we've been narrowing down our focus taking complexity out of our business so that we can put our efforts behind the areas of business where we know we can differentiate ourselves where we know we have strengths and where they can generate either better margin or better cash generation and that's evident I think in the acquisitions that we've done. So you know the Pirelli steel cord acquisition, the Arrium ropes acquisition, the recently announced deal with OTPP [ph] to bring together the Bridon and Bekaert ropes businesses. I think that’s all demonstrative of focusing on those higher margin, higher differentiation opportunities for us.

We're also going to impact our margin by the other side of the coin which is a divestments and exiting, so if we get out of loss making businesses and that takes cost out of our business without necessarily affecting our bottom line at the same time so they're positive and the exits from carding solutions and stainless steel wire is going to I think have a positive impact for us in 2016. And the last one and we touched on it a little bit and we're talking before, in terms of taking complexity out of the relationships and the partnerships we have been as well where they're not generating the value that complexity warrants.

So things like getting out of the partnership in Malaysia, out of us especially steel wire partnership in China [indiscernible] buying out the partner in Boston for building products in Australia. Buying the Chileans out of ropes partnership in South America, all of those things enable us to take more control to focus on the things that we think are going to make real changes in those businesses and driving forward as well as taking out administrative burden and cost of our business as well and whilst they are not new in terms of their presence in our results because all of those were businesses we were already consolidating.

I have put them on to this chart because it's still a big part of reducing the complexity in the way of working, the biggest underlying complexity of the business and allowing us to get our focus right in the areas of growth that we want to achieve. The other two areas that I want to just talk are about the real transformational programs within the business which are about driving operational excellence in terms of our capabilities throughout the business and again these are beginning to have impact certainly the manufacturing excellence one is and we will grow in its impact over coming years.

Manufacturing excellence program is essentially again we've talked about this before, it's essentially the part of the equation that says we want to stay competitive in a world where you’ve tough cost competition, top price competition to be competitive in the market we've got have an outstanding cost base and our operational excellence of manufacturing excellence program is geared at optimizing safety, quality, delivery capability to our customers and productivity to really give us that competitiveness so that we can take on anybody in the market in that sense.

The other side of it is we then and just launched this year what we call our customer excellence program and whilst manufacturing excellence is about competitiveness, customer excellence is about differentiation. It's about focusing on your ability to grow the business and to improve your margin by offering the right solutions at the right price your customers. Four core objectives for us within our customer excellence program, it's about making sure that we have a very strong customer centric mindset throughout our business. It's about being able to differentiate ourselves in the market with unique solutions that offer greater value to our customer we provide that superior value to our customers that will enable us to drive sustainable profitable growth as we go forward and then the last bit is that we want to use the capabilities that we bring to the organization to our customer excellence program to create a truly world class commercial capability throughout our business and these are the things that we think will underpin our move towards a much more sustainable and higher level of performance as we go forward over the coming years.

If you look at Bruno's REBIT bridge and Bruno talked about the four bars sort of in the middle there being the organic or controllable let's say bars of what we need to focus on. And this is really where this balance of operational excellence and managing on the one side your cost base and your competitiveness and on the other side driving your ability to increase volume and margin come into play. So the more we can drive those two green bars in terms of product mix and cost savings the more we can offset what we know we're going to be the real negatives that are going to be out there in the pricing environment. And as we can keep the green bars bigger than the red bars essentially will keep driving our profitability forwards and that's how we want to drive it.

So really that’s it in terms of talking about the performance of the business, we will come back on it for sure on the question but there were just a couple of other things I wanted to touch on and the first one is announcements that you also have this morning of changes in the Board that we've been making and there are five members of our Board stepping down and we're actually appointing six new members including four women and I think this is a real testament to the ability to attract a very diverse group of people into our board from different backgrounds, different nationalities and obviously different genders as well. In general we're also bringing down the average age of the board quite significantly with the changes that we've made over the last couple of years in this year and I think it gives us a very strong, a very experienced board with a wealth of different sets of experiences that can help me and the rest of the Bekaert team to really drive the improvements that we're striving to make at the moment. So I think the next slide just shows that the makeup of the board itself but that's basically just with the people you’ve just seen on the photograph.

And the last thing I then want to touch on is the announcement as well that we are increasing the dividend payment this year from €0.85 per share to €0.09 per share. I think the Board of Directors decision to do that reflects the confidence that they have in the strategy that we've established with the business. The future perspectives that we have as a business and the ability of the team in the business to deliver on the goals that we've laid out and I think that's it. I think that’s our last slide.

So over to you for questions.

Question-and-Answer Session

Operator

[Operator Instructions].

Unidentified Analyst

There were two largest things driven by big performance in China, can you talk a bit about current trading today? What your reaction was? I mean you had based on market, what was your reaction for your main competitors and how do you see market in 2016?

Matthew Taylor

Because of the focus that we've had in China hasn't been a pricing focus. It's difficult for our competitors to really take us head on that, we've focused very strongly on product. We have seen some of the better players try and also follow that take advantage of an overall attitude towards trying to lift up the capability of the sector. So people actually are also following in terms of their focus on hiring products, but it's our ability to deliver those solutions to the customer which is really differentiated us.

It's also allowed us to lower the mix of let's say fill a product that we need to put into the factories to be able to keep the factories full. So not only have we did in the better mix and that's helped us from a pricing perspective but it's also enabled us to take more cost out because we keep the factory occupation levels high but more of it with high end product and that's a very good combination. So that's been a key driver of why in China that success has been there the market in China and it's not in response to us or anything else continues to be tough and pricing continues to go down, why rod pricing continues to go down and pricing in the end markets a little bit faster probably than the wire rod but I think we have been able to not follow that as aggressively as other people have had to. So I think our position in China has strengthened and it's why we grew market share and I think it's a big part of why we improved our EBITDA margins.

But I wouldn't forget the other two elements of Bruno mentioned because on the overall Asia picture the sewing wire business continues to strengthen but strengthens off the same basis it's about a very clear about how we can provide differentiated products which are our competitors struggled to follow but our customers really want to need and actually brings you know one of the things I think we do best in the sewing wire business is really understand the value chain that our customers operate within and provide them with solutions which bring down a total cost then and therefore increase value for them and their end customers and it's the ability to keep floating on that which I think that drives that business in our market share there and then finally also to turn around in the Southeast Asia or Malaysian businesses in particular primarily through cost actions.

Unidentified Analyst

And maybe second question is on the working capital work which was quite speculator the improvement, it seems that collective cash [indiscernible] you think later to some extent does it potentially weigh on your margin?

Bruno Humblet

Not really, it was not that we of course there's always it's always a difficult balance but it's not that we've instructed to really go and get all kind of rebates or impact on margin because as you can see the margin actually is not affected, it's actually affected in the other way. So it really has been a drive on all of the different elements, a lot of focus from the purchasing team on the supplies that is true also a lot of focus from the salespeople to try to ensure that we can collect our money in the right time with our customers mainly in Asia, mainly in China that has a double benefit I would say, one clearly it helps the working capital but secondly and I think also very importantly it avoids long payment terms and therefore potential overdue so when the market gets more difficult which then risk return into bad debt.

And then the final one I think the very important improvement in inventory it's all about manufacturing excellence, the planning because the number may not seem as significant but you need to take into account that includes also the additional businesses which we brought in there. So actually from an inventory point of view there also has been an important element. So it's not purely buying ourselves into lower working capital it's really structural focus which we now had over the last 24 months and which will continue to drive in the organization.

Matthew Taylor

And I will add a one little bit on to that as well, it's also that standardization of approach because we haven't actually lengthened or shortened payment terms and we haven't actually lengthened or shortened receivable terms from our customers. What we've done is standardized them more. So we've taken an approach and said no this is what it's going to be across the board and we don't really allow deviation from that and that discipline together with standardization approach has been a key driver of actually just improving on both fronts on payments and receivables and then as Bruno mentioned, the discipline not of shortening payment terms for example in China where we probably already have the shortest payment terms in the market because the payment terms they have been pushed out and out. It's actually about the discipline of not allowing for overdue payments and so you bringing in the bad payers in a much more disciplined way.

Unidentified Analyst

[Microphone Inaccessible]

Matthew Taylor

There is an FX impact, yes.

Bruno Humblet

And there will be also in the inventory a bit into lower steel prices therefore lower value but that if you look at the total it's actually a small part that gets it in the different direction in the payables as well so - but all in all you see it as a percentage of sales, you see it and the good thing is you see it through the quarters and it continued to get that momentum.

Unidentified Analyst

I think I have six or seven but I limit myself to two and three and then leave the floor to my neighbor. First of all thank you for getting a bit more broader and more granular guidance for 2016. When I hear you talk there is still upside to your numbers in Asia Pacific, there is more potential from what you're doing but your REBIT is up 22 million from the first half to the second half. If I just annualize that into next year, that's another 22 million that’s 10% of your EBIT, so that gives you double digit growth, all else remaining equal if we just keep your Chinese, Asia Pacific at least at the same level. Am I missing something or is that already driving part of your comfort?

Matthew Taylor

I think if we be mathematical about everything we didn't in our business it would be a lot easier. The reality is it plays a part yes, so we do see improvement there. There were one offs, there movements between bad debts in the first half, of the second half which have helped that growth in that number which obviously don't repeat themselves but at the same time we just expect the pricing environment to continue to be extremely tough and so how much of the benefit will it continue to wipe out or not we don't know. So we will continue down the same route with the same strategy and we think that's why we talk about upside from a we've been so far. Is it a straight forward and saying we continue at the same rate of benefit from it. I'd love to believe yes I'm not quite sure it is tough, but it certainly is part of, it's one of the factors why we have confidence here.

Unidentified Analyst

And then second question is on the EBIT bit, which is always the most interesting graphs in the presentational but the good thing is you now have are two elements working for you the product mix and the cost savings competing against the price declines. Now the 15 million you say there is still overcapacity [indiscernible] continue to see price declines but looking at numbers from your competitors do they still have room to keep on lowering prices by the same order of magnitude because they must be close to burning cash, some are burning cash--

Matthew Taylor

I don’t know [indiscernible] I think this is just perspective. We keep thinking of now they don't have any more room and yet they keep going but it's not just we expect that pricing pressure just in China so for example can they keep going in China I think some of them are absolutely burning cash today and they can't continue doing that or at least we don't believe they can, can they take their cost further down and maybe they can. But we've already seen the impact of that pricing in Southeast Asia. We've seen it in Latin America, we're beginning to see it in India. We're not yet seeing it through a high degree in Europe or North America and so our caution in terms of why we're so aggressive on what we want to do on cost and on product mix and all is because some stage we believe some of that flows through into other parts of the world and when that happens it will unless they are ready for it, it will hurt us. So the more we can do that ahead of the curve the better for us, but at the end of the day I think we've got to be realistic and say in a global market you do get those global pricing pressures and maybe if one year we gain one year more of cost advantage than we do the pricing disadvantage, great we will go into the margin but it won't be necessarily a sustainable business.

Bruno Humblet

The thing which I wanted to add to what Matthew said is a lot of the price erosion which we've seen actually over the past years and also again this year has been mainly in the tire cord China area, as Matthew indicated the risk is that some of that this is getting into the rest of the world but also outside of tire cord. I mean getting into an overall economic slowdown one needs to be prepared that also in other areas we might be facing some point in time some potential prize erosion which is why the continuous focus on getting new products in the markets where we actually can compensate for potential for price erosion which is always there and being in a position where we have the offsets through mix and through further cost reduction which will need to continue to drive because assuming that the price erosion will be done. Most probably will mean that our margin would go down, if we don't have the offsets. So we just assume that there will be price erosion.

Unidentified Analyst

And one final question on the Rome plant in U.S. so it's back online now. You just said that you hope to be recuperate a big part of the volumes that you’ve lost and I always understood beat wire lower margin business but margin in the U.S. for the region is low. Is it going to help margins with the Rome plant being online or [indiscernible] has a big impact on the margins as such?

Bruno Humblet

There are two elements in there, indeed beat wire is at lower margin and the situation with the fire in Rome also made it, it is going to be a very competitive field out there for the time being because other people took that position and we are going to have to take that position back not only through pricing but also through the overall package which we deliver which is the closeness of supply, the quality of what we produce and so on. Will it help overall? Yes. Otherwise we would have not gone forward with the investment. It is a value contributing business to us but it will be a tougher start in the beginning of the year but also for the overall volume for the total North America business it is important to get a bigger volume momentum for the total business which we have there which will we do expect over time help our profitability moving forward.

Unidentified Analyst

Couple of questions from our side. Maybe first to start with sign wire [ph], obviously it seems like the business has been grown quite a lot of 2015, if I'm not mistaken based on my notes I thought that you were already at about 10% of total sales in Asia Pacific in 2014. So can you give us a more precise indication on how important sign wire is in Asia Pacific then on the margins also there just to double check but I thought that sign wire had margins about equal to EBITDA margins for the region, with that debt command of course that here the EBIT and EBITDA margins are equal so it doesn't mean that business has an REBIT margin of let's say 15% to 20%, then more from sector perspective. Of course it has being quite some kind of capacity idled couple of years ago, we you see some of [indiscernible] or getting back on the market.

Bruno Humblet

On the overall numbers, so we are now - it's increasing so now it's about 12% of - so it's growing - an overall growth and then going from 10 to - so you continue to see it growing there and you're right at the margins given that we have impaired most of the assets. We still stick to the indication that indeed the EBIT margin there is close to the EBITDA of the region. So, very healthy margins.

Unidentified Analyst

So that range 15 to 20 is okay?

Bruno Humblet

Absolutely.

Matthew Taylor

It has improved a bit last year because the mix of product that we saw was better so we did improve margins [Technical Difficulty].

Bruno Humblet

Because sewing wire again I think it's a think like [indiscernible] one should think of sewing wire as being just one wire, we have lower end part where it's much more competition and we do constantly increase also the hurdles for our competitors through innovation and on those new type of entries into the markets we have better margins but the overall mix which you're looking at is correct. And we have been restarting some of those facilities which were idle before we also restructure it EBIT total set up in making sure that everything is more centralized from a production point of view to further increase the capacity utilization. But yes we have been able to use some of the equipment which was idle and restart some of that up again to cope with the it.

Matthew Taylor

But I think your question also on competition and we haven't seen a huge amount of that. We've seen some effort from some of their competitors to get back in that essentially we kept going right through the period. So a lot of people who idle just got out to the market and actually they've struggled to not just reactive the machines that's relatively straight forward but actually then to win back the business is quite difficult. As we stayed there throughout the period I think we gained a degree of loyalty as well with the customer base and that served us quite well and there is always risk of it, it tends to be as Bruno said there is different categories and it tends to be at the lower end and we are lowering our mix of lower end product and focusing more at the higher end and that’s where we're growing as well.

Unidentified Analyst

And secondly, has there been any significant impact from oil [ph] price fluctuations on your REBIT?

Bruno Humblet

I would say the important - there of course is the way we would call it FIFO impact, so there is a negative impact you would say because your prices are going down, your inventory is more expensive and you need to sell it at a lower price however we have been very actively managing that with our suppliers and with our customers and we have been able to basically manage it in a rather neutral way I think.

Unidentified Analyst

And then finally on steel cord China and building a little to form the discussion people already had that going back to first off results presentation, you’re mentioning some indications or hopes that the sector would rationalize. You saw the same kind of comments and seen releases, is this happening at this stage? Do you see something?

Matthew Taylor

No, we don’t. I mean there--

Bruno Humblet

We don’t see it in the tire industry either yet which has even lower levels of utilization in the tire cord industry. We do fundamentally believe that some of those players are burning cash. But at the end of the day if they are happy to burn then they seem to be able to keep going and we do not see evidence of people falling by the way yet.

Unidentified Analyst

So based upon your comments you understand that utilization for the sector overall is even declining further towards--

Matthew Taylor

No I wouldn't say declining because - well I think last year yes it would have done because the overall market was down last year about 3% to 5%. So I do think there will be even a lower overall level of capacity utilization. I think ourselves [indiscernible] continue at high levels relatively of capacity utilization and as a result of that it probably means the rest getting even lower in that sense. This year I'd expect the industry to be flat to maybe very slight growth over last year on tire cord but as we don't see any operations closing then therefore the capacity utilization is still going to remain very, very low.

Unidentified Analyst

So for sector overall let's say utilization of 65% is that a group?

Matthew Taylor

No, I think it's much lower than that.

Bruno Humblet

It's more overcapacity than that.

Unidentified Analyst

If you guys at over 85% and seeing over 19.

Matthew Taylor

Again it's all going to depend a little bit on how you measure capacity because that's a little bit subjective because at the end of the day if you have zero complexity and you can just run a machine at a constant pace with one product and then you generate a high level of complexity and you can make different products that lowers it.

But I would say we're probably a little bit lower than that. I'd say [indiscernible] are a bit lower than that right now because they opened a new operation as well last year so I think they're probably a little bit lower than that 90 odd percent but I do think the sector is lower than that 65% as a whole. Our sales at [indiscernible] between us probably have about around about 50% of the market so there's still another half of the market in which that capacity goes but their levels of capacity utilization aren't low.

Unidentified Analyst

Final question, on price pressure, it would look compared to price too less let's say 12 months, just for the raw material prices how would prices compare then?

Bruno Humblet

I think for tire cords? I think the decline which we would see there is mid-single digit decline on top of the wire rod prices I would say and that's something which we continue to see which then also translates as I indicated to most of the important part of the decrease which we've seen in which reflect as price erosions.

Operator

[Operator Instructions]. Your first question comes from Martin Becker [ph].

Unidentified Analyst

I’ve four questions, shall I ask them one by one?

Matthew Taylor

That's a good idea.

Unidentified Analyst

My first question is in the world flow chart there's €60 million in cost savings and I was wondering how much of that is generated by the initiatives, the field of play that you talked about towards the end of the presentation. My understanding is that it still largely needs to be rolled out. So I mean can you clarify that?

Matthew Taylor

On field of play in terms of cost savings coming out of the field of play actions, not a huge amount, maybe in the range of sort of 5 million to 10 million I would say in that range, more coming out of the manufacturing excellence program as we look at the impact of last year but again it was its first year of operation. So we're not yet seeing the bigger impacts on that but that would probably also have been in the range of 5 million to 10 million. The reality is the rest of the cost actions are a huge variety of things on focus on structure, focus on even simple things like travel and entertainment, reduction of projects across the business. There's the whole series of different activities and then what gets done in every single factory around the world on an going basis on cost reduction. So it's - at this stage not a single big ticket items.

Unidentified Analyst

So I mean the bulk of the initial stocks you talked about the [indiscernible] still needs to be rolled out?

Matthew Taylor

Yes.

Unidentified Analyst

Is there some color that you can provide on what these initiatives will bring in terms of cost savings, is it some feel or guidance which you can provide?

Matthew Taylor

No I'm not going into that at this stage. What I'd say is it's focused on offsetting what we've got on price reduction at the end of the day in some years it'll be ahead of it, in some years behind it. Net I think over time so what I’ve said it's about driving competitiveness in the marketplace from a cost perspective and so I would expect us to be able to offset the pricing activity that happens in the market. Hopefully maybe even more than that but I'm not going to say that here because I do think that the world is going to see a lot more pressure on pricing not just our sectors but really on everything and so all I would say is it's designed in terms of its structure to offset the pricing threats that we have.

Unidentified Analyst

My second question is you mentioned, there still will be a positive impact from those activists they were loss making and sold in 2015. Can you indicate what those activities contributed in losses for carding and stainless steel wire?

Matthew Taylor

Carding was more of breakeven I suppose by the time we sold it but it had cost between 5 million and 10 million that's a century the key bit that I was referring to in terms of its impact on last year. Stainless steel losses were little bit more but not of huge significance.

Unidentified Analyst

I get the impression that for the EMEA division there was quite some pick up in the volume momentum in the second half of the year, can you confirm whether that's right or not and if yes what has driven it?

Matthew Taylor

Indeed volume was actually pretty solid in EMEA in the second half, also in the final quarter. As indicated the seasonality was a bit less this year than what we normally saw and of course as Matthew indicated also automotive, automotive remains very strong and automotive is now merely 50% of what we have in Europe and therefore that actually has been a key contributors to a very solid business in Europe also and mainly also in the second half of the year.

Bruno Humblet

Just one thing to be clear, volumes were up year on year in the second half. They were down second half against first half, because you get a normal seasonality effect. So it's just a year-over-year on impact that we saw that I think in particular certain areas like building products, strengthened in the backend of the year as well.

Unidentified Analyst

Finally question, to what extent did he lower prices help the margin. I mean you passed them through but I can imagine that you tried to pass them through with some delay. Did it help the margin development in 2015?

Matthew Taylor

No I don’t think so. I think as Bruno said in fact there is more negative to it because FIFO application so if your raw material pricing is decreasing faster than your decreasing your stocks or you’ve always got a little bit of potential that you won't be able to price pass or recover price change as quickly as you’re having to pay them. So no I would say really a fairly neutral impact.

Unidentified Analyst

Okay. What has the FIFO impact being in 2015?

Matthew Taylor

Well again net it's very difficult to say because you look to manage the pricing as much as you can to work with both Bruno said the suppliers and the customers so that you time it to offset those but I would say no more impact in 2015 that it had been in 2014. And just coming back into I know Philip but maybe I should just ask me, either of you gentlemen have a question to ask before we jump back to Philip?

Unidentified Analyst

Two other questions, please. Arrium will start to impact the numbers of their the card as of January 1, 2016 whether if you can tell us what sales and REBIT was in 2015 and how we're treating commissions at the moment, in oil and gas not very buoyant.

Bruno Humblet

To be clear the business which we acquired in Australia has been in our business before it's - if you’re looking at the Bridon merger it's also rose [ph] but it's a different one. There the target is still to try to close the deal in the sense that get merger control agreement from the different authorities by as we said in the first half of the year, so in quarter two and that is still the target so whether where in quarter two it's going to be. We are working and we have filed in parallel in all jurisdictions and we are now working with all of the authorities to get it through. So expectation is that this will still be impacting as of the second half of the year, let's put it like that.

A few words, the business, again we only have limited visibility because we are competitors today so we cannot completely understand and start working. What is true is that the Bridon business had to announce a restructuring in their European business related to their low volumes that they see mainly in the area of oil and gas. That's already something which was known to us and taking into account when we were working on the complete, on the total deal but given that oil and gas actually the situation didn't improve to say the least therefore they had to go through a restructuring program in their entities in the U.K. which they are in the process of executing as we speak so that's basically the only thing I can to that - at this stage.

Unidentified Analyst

So there's no visibility what they did in the second half in terms of margins.

Matthew Taylor

I mean as we indicated before the business which we are contributing is slightly above the margins that they have but this is really driven by the simplicity of the business and they of course being much more into the oil and gas have been hit harder than our ropes business was and that therefore will be slightly more so for the time being.

Unidentified Analyst

And then how should you think about CapEx in 2016, so 2015 was a pretty CapEx heavy year, 170 million more or less. Are you going to keep on investing at the same level or and where are you going to invest?

Matthew Taylor

We will continue to I think the expectation should be that we would have an investment about in the same magnitude as what we've seen into this year, in 2015. Areas of investments will of course depend on where the requirements are but we will - the most important thing here is that we want to ensure that we can further optimize the utilization of our overall infrastructure which we have and we've seen that in places like Asia, China tire cords for instance where we've invested an awful lot and where we are trying to further optimize the utilization of what we have. So there is a very strong focus to see that we can actually keep that very much under control. One of the elements to take for instance into account we look at last year we had so 2014, about 130 million, this year we’re at about 170 million which is of course significantly up but about 20 million of that increase actually relates to the rebuilt of the Rome plant after the fire. So, excluding that's exceptional investment if you want. It would have been in real equipment machines and so on it would have been more in the 150 range. So strong focus in making sure that we optimize as much as we can but the expectation is there are quite some aggressive growth program. So I would expect it to assume to be in the 150 - 170 range again for next year

Operator

The next question comes from the line of [indiscernible]. Please ask your question.

Unidentified Analyst

A question on the consultancy fees which negatively impacted the results in '15 by about 40 million, any reason to assume this cost will continue into '16 or is this a bit of one-off that’s all not again appear in the results for '16.

Secondly on the provisioning for bad debt, it is all taken into the second half of the year or is it evenly spread through the year and a final question on the simplification or standardization programs, what extent will it negatively impact your top line due to the fact that you're probably discontinuing some of the lower and more commoditized products. Thank you.

Bruno Humblet

I'll take the first two questions, you take the complexity question. On the consultancy fees I think we need to make - we should make a difference between two parts, one is the health which we had related to the manufacturing excellence program that those costs are behind us but as Matthew indicated we are also looking at starting up other program in the commercial excellence area and therefore some of the cost which even though they're really one off we do believe that we will have the benefit in strengthening also the organization and the teams in that area. So, therefore some of those costs will be and that's about 2/3rds of that so close to 10 million we might see back coming back because of another program.

The M&A driven costs it will depend of course on which type of M&A activities there would be still coming into this year otherwise they really are related to the initiatives which we do and a big part of the cost related to the announced potential merger of the Bridon and Bekaert's businesses have been included into 2015 so the bulk of that is in there but there will be another program started in the commercial excellence and for the bad debt reserves just looking at Europe, most of them were sitting in the first half of the year. In the second half of the year some of them were released but news [ph] made so second half is rather neutral, most of those reserves were actually sitting in the first half of the year.

Matthew Taylor

And looking at the portfolio side of things, yes there will be some top line impact but again we believe that the ability to then allow ourselves to focus on businesses where we know we can differentiate ourselves and provide stronger value solutions to our customers means we offset that lost business with new business in those sectors and our focus sector. So generally speaking we don't look at those as a huge impact on top line, though inevitably the carding solutions business did have an impact, yes but at the same time a big part of the sale of the carding solutions business was to retain our long term supply agreement which actually will still provide us with the bulk of the revenue that we would have had from the carding business.

On stainless, it's not a huge amount that we'll see reduced in the business and we'll see what else in terms of going forward whether there is other exits or disposals that we look at doing but not all of them are poor businesses that we look at. We also have to - our field of play is very clear, it's what are we good at and where do we know that we can add value. So some things can be relatively good margin but still not necessarily be core to us. So we will look at different areas as we try to really optimize what we do and how we do it.

Unidentified Analyst

Shorter questions, first just to be clear on this one. The acquisition of the 35% minority stake in Bekaert ropes has it financially been completed in December?

Matthew Taylor

Yes. So there was spaces in December so that's included in our net debt and that’s part of the 235 million which we expensed if you want to--

Unidentified Analyst

And then the fasten [ph] group, it was little bit of surprise announcement, can you give some clue why often - over 10 years I think he was prevailing seller [ph].

Matthew Taylor

I mean we continue to have a partnership with Fasten, we had essentially two partnerships with them one of which was tire cord business Jiangsu [ph] and other was especially steel wire business. When the partnership started they were also in the wire business and it was a fairly good coming together of different capabilities. As we've moved forward and particularly as we expand the product range that we want taken into China as particularly their automotive market becomes more sophisticated and we want to bring some of the products that you know some of our success here in Europe, into China. We began to have a bit more conflict of interest and trying to align those conflict of interest with the partner there, we both felt uncomfortable about the potential of solutions that would have compromised either our business or their business and it was a very amicable discussion about what is best route forward and the way we felt that the best route forward in that area where we end up being competitors was not be in a joint venture. So it's an amicable decision, they still remain with us as a partner and still our core business and they are still - and someone we value very strongly as a partner as well.

Matthew Taylor

Okay. No more questions. If no more questions, then thank you all very much for coming on here today and hopefully we being able to answer everything that you wanted to ask and if not I'm sure there will be other opportunities. Thank you all very much and thank you to those online as well.

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