Compagnie de Saint-Gobain (CODGF) CEO Pierre-Andre de Chalendar on Q1 2016 Sales Call (Transcript)

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Compagnie de Saint-Gobain (NYSE:B)

Q1 2016 Sales Call

April 27, 2016 12:30 PM ET

Executives

Pierre-Andre de Chalendar - CEO

Guillaume Texier - CFO

Analysts

Paul Roger - Exane BNP Paribas

Jean-Christophe Lefevre-Moulenq - CM-CIC Market Solutions

Eric Lemarie - Bryan Garnier

Elodie Rall - JPMorgan

Will Jones - Redburn Partners

Josep Pujal - Kepler Cheuvreux

Mike Betts - Jefferies

Nabil Ahmed - Barclays Capital

John Fraser-Andrews - HSBC

Gregor Kuglitsch - UBS

Muriel Fellous - Societe Generale

Pierre-Andre de Chalendar

Good evening everybody. I hope that you have all received our press release and that you have been able to go through the highlights of our first quarter sales. Let me first sum up in a few words the trading conditions we experienced in the first quarter. Consolidated sales for the first quarter were at 9.136 billion including a negative currency impact of minus 3% and a negative group structure impact of minus 0.7%. Organic growth was plus 1.8% due to improving trends in volumes plus 2.3% in all our regions including France, the slight effect was a small negative minus 0.5% amid a more deflationary environment, however also reflected in our decreasing costs of raw material and in energy.

I now hand over to Guillaume who will give you additional information by business sector and geographic area.

Guillaume Texier

Thank you, Pierre-Andre and good evening to everyone. Let me give you more details about our first quarter sales. As Pierre-Andre told you sales were up 1.8% like-for-like over the first quarter. As a remainder this compares to 0.4% last year full year and the [indiscernible] of 0.4% over the last quarter last year. This was achieved despite the adverse and expected impact of our pipes business which was approximately one point of growth at the group level. On the reported basis sales are down 1.9% because of an exchange rate effect of minus 3% and the structure effect of minus 0.7%.

Let me give you more details on those two figures. The negative 3% of currency effect is primarily due to the strong depreciation against the euro of late in American currency among which the Brazilin real and Argentine and Mexican peso. We also had negative effects to a lesser extent in the UK and in Norway. By business, this currency effect was especially significant for industrial business sectors due to the exposure to Latin America. Innovative materials at minus 4.2% of exchange rate in Europe, which flood gas especially, impacted at minus 5.6%. Construction for this was at minus 3.2% with in particular external solutions at minus 3.9%.

We also had as I said a minus 0.7% group structure effect. This mainly comes from several 2016 U.S. insurers and building distribution, in line with our portfolio conditions strategy especially in the U.S., Germany, Czech Republic and Hungary. This negative effect is compensated for house by bolt-on acquisition mainly in construction for this for example VTI in Vietnam, structures in the U.S. our Mortars acquisition in Indonesia and Brazil, but also high performance materials mainly in the U.S., Brazil and Turkey and also in building distribution mainly in the Nordics.

Coming back now to the most important figure the 1.8% organic growth, I would like first of all to underline the fact that volumes were up 2.3% in Q1 and were positive in all business sectors and all main geographic areas for the first time since 2011, France not only stopped declining after four years of negative figures but actually grew in volume in Q1. Thanks to better construction in France and this despite the adverse effect of pipe. Price edged down 0.5% in Q1, we clearly faced a more deflationary environment which impacts our price but also our raw materials and energy cost in the industry and our product processing costs and distribution. This is especially the case in building distribution and in construction products in Europe and in the U.S.

I will now comment on each sector starting with innovative materials which was up 4.3% organically over the first three months. Flat glass rallied 4.9% in line with last year's dynamic driven by strong emerging countries especially Asia. Conditions in Brazil remained tough both in automotive and in construction but were more than compensated by good trends in other Latin American countries. Trade in Europe continued with good dynamics in automotives and improved in construction. Price gained 2.8% overall in flat glass with strong figures in emerging countries but also slight progression in Europe where upstream glass price saw solid positive trend. High performance materials posted positive organic growth of 3.6% over by Asia in emerging markets and resilient U.S. industry that we continue to monitor cautiously. We grew in all businesses of HPM remembering that we don't have the negative comparison effect of proppants anymore in ceramics. Price for HPM was up 1.5%.

Moving on now to construction products, this business sector reported organic growth of 0.9% over the first three months heavily impacted by the price negative impacts, this positive 0.9% can be broken down between plus 2.7% in volumes and minus 1.8% in price. Interior solutions delivered a strong 5.8% organic growth driven by good volumes in all regions. Western Europe that including France and Germany, the U.S. bounced back double-digit, Asia and emerging countries continued on their growth paths, price overall was slightly down for the division at minus 0.8% impacted by continued pressure in Western Europe especially France and Germany and also in the U.S. on the back however of the current deflation environment, which benefited the business on the energy side.

Exterior Solutions reported a 4.4% decrease in like-for-like sales only driven by pipe, which experienced a sharp growth of minus 20% in line with Q4 2015. This business continues to suffer from low activity in all regions compared to our high comparison basis in the first half of 2016. Other exterior solution businesses grew in Q1 2016, roofing posted healthy volume growth keeping that the comparison basis is now normalized as we renewed our policy of no winter discounts already applied last year. Price continues to be under pressure in roofing but less than asphalt cost decrease which bodes well for this business. Mortars were driven by good growth in Asia and emerging countries price overall for exterior solution was down 2.9% in a deflationary environment both for pipes and roofing.

Lastly building distribution posted 1.4% organic growth. Growth was productive in all our foreign countries or regions. France after a long lasting crisis finally picked up helped by better construction indicators. The Nordics, the UK and Germany recoded continued organic growth. On the contrary, Brazil continued to face more difficult trends. Overall, building distribution price decreased by 1.3% reflecting lower purchasing cost across Western Europe especially in France, finally, let me give you some comments on organic growth by geographic area. France was already close to stable at minus 0.2% despite lower selling price with good trends in all of the businesses. As a reminder France was down 4.1% last year. Although Western Europe countries grew by plus 2% positive in all our three main areas mainly Nordics, UK and Germany, this figure in line with last year's trend of plus 2.1%. North America moved up 3.2%, rebounding from a negative year in 201r which was distorted by the proppants decrease.

Construction in North America delivered double digit volume growth that experienced continued pricing pressure in the lower cost environment especially asphalt. Industrial markets proved fairly resilient. Lastly Asia and emerging countries continued their good momentum of 2015 with plus 4.5% growth performing well in all our regions namely Eastern Europe, Western America and Asia. Pressure on Brazil and China was more than compensated within their own region by strong growth elsewhere for instance in Mexico and India.

I will now hand it over to Pierre-Andre for concluding remarks.

Pierre-Andre de Chalendar

Thank you, Guillaume. I would just say a few words about the outlook for the rest of the year. The group is maintaining its outlook for 2016 as a whole France stopped being a drag thanks to improving trend in construction while pipe we continue to suffer mainly in the first half of the year. Western Europe should continue with the good momentum, North America should advance driven by volumes in construction despite some continuing pressure on pricing. Industrial market should be resilient even if they are still some uncertainties. Our businesses in Asia and emerging countries should continue to deliver good positive growth despite the slowdown in Brazil. Regarding the years priority to focus on trade prices we've been maintained in a more deflationary environment. We are on track with our cost cutting program targeting €250 million in cost savings calculated on the 2015 cost base.

As announced in February we will pursue our capital expenditure program of around €1.4 billion and maintain our commitment to invest in R&D in order to support our strategy of differentiation and high value added solutions. We will continue to target high free cash generation and the plan to acquire a controlling interest in Sika will be confidently pursued, the agreement signed with the Burkard family has been extended. To conclude given the macroeconomic environment I just described and thanks to our ongoing cost cutting program we can confirm our objective of further like-for-like improvements in operating income.

Guillaume and I are now happy to answer any questions you may have.

Question-and-Answer Session

Operator

[Operator Instructions] We have our first question from Paul Roger from Exane BNP Paribas. Sir, please go ahead.

Paul Roger

Three questions to start, if I may, the first one on High-Performance Materials. The trends in Q1 are obviously very encouraging. I wonder if you can say a bit more about what's actually driving the upturn. And then when we look for the full year, is there a situation where like for like growth could actually be positive overall for 2016? The second question is on France. Essentially you haven't really changed your outlook or the wording even though we've seen some better data recently, especially for the new build side. Trying to get a sense of to what extent you are just being conservative. Could there actually be some upside risk to your guidance for France this year? And then finally, in Exterior Solutions, to what extent can the better margins in U.S. roofing offset those pressures in pipe for the division overall?

Pierre-Andre de Chalendar

So, I will also respond and Guillaume will also answer to your questions. In France no, I have not changed my outlook view on France. We have stopped to decline which I think is important and our volumes are positive in the first quarter we have a big drop in our pipe business but the rest of the activity we had a reasonably good quarter and in fact positive in volume. But I think it is too early to say that there is a clear recovery in the French construction market although, in new construction some indicators are -- continue to be positive. I think that the weather in the first quarter was relatively mild and if I look at evolution of our sales, I would say that on the very shorter basis I would say that it has been a bit bumpy above the last three months. And for instance we had a good March the outlook for April is bit slower. So, I think today I confirm what I said, we are stabilized, we have stopped the decline but it's too early to call for recovery in our sales and the market in France. I hope to be able to give you more positive trends I just don't see them actually at the moment.

Paul Roger

And do you think the 2017 election could have any impact on your business in the country?

Pierre-Andre de Chalendar

It's too early, it's too early -- generally I don't -- elections have an impact on infrastructure. So, that could be an impact on pipe, but given at the moment in Europe the finance of a lot of local authorities, I don't think we should get too excited. And for the rest I think France is in terms of macro economy at the moment is pointing to slight improvement. We, as you know construction has been behind in the last two years, I think that construction is not anymore drag. But is construction going to be ahead of the general economy? I hope but I think it's too early for me to say it at the moment.

Guillaume Texier

On high performance materials, as you said we had good growth in the first quarter, this is mainly due to contract which are little bit irregular by nature, especially in ceramics. I wouldn't transform that into a trend for the year, as I said in my commentary, we are still concerns and watching very carefully as the evolution especially of the U.S. industrial environment. So, I would remain cautious when it comes to transforming the first quarter trend into full year trends for HPM. Your other question was about exterior solutions, clearly in exterior solutions, we have two different trends, as I said pipes is very negative for the quarter with minus 20% growth and we expect that even though the second half is going to continue even though the second half has a better comparison basis as the year is going to continue to be difficult in pipes. On the other hand as I mentioned the other two activities mainly exterior products in the U.S. and Mortars benefit from good volumes which we experienced in the first quarter and which we see continuing.

Operator

The next question is from Jean-Christophe Lefevre-Moulenq from CM-CIC Market Solutions. Sir, please go ahead.

Jean-Christophe Lefevre-Moulenq

[Foreign Language] I have three questions or so. First one, could we have more flavor in the trends in building distribution by your country? They are positive but could we have more flavor especially in UK? In UK last quarter we had a slowdown, do we have still this trend now also maybe in Germany and the Nordics? The second question, did you announce some price hikes in the U.S. plasterboard and also installations? And the last question is regarding the negative pricing trend the consolidated days could maybe repeated this negative trend over year 2016 or can we still expect the slight price positive price effect for Saint Gobain? Thank you so much.

Pierre-Andre de Chalendar

So on building new solution in fact if I look at the first quarter, I would say that we are relatively similar trend in the various counties in Europe. The only area of distribution which is negative is Brazil and in Europe we have very similar trends close to the average that Guillaume mentioned, so slightly adopted percent on average is to below in France and which above that in Nordics. UK is a little bit better I would say the first quarter that it was in the last quarter of the year. And Germany it's clearly better than last year, but I would say that these trends in central is a confirmation of the overall trend, you need to have in mind that in distribution the first quarter is not a huge quarter and whether impact I think globally has been helping us a little bit but not huge way.

Guillaume Texier

On price increases in the U.S. in insulation I mean Gypsum, in Gypsum we have price increases in month of April up to 10% and insulation we have tentative price increase at the beginning of the year, but the result was not positive in the end and we don't have any other price increase announced. I think the overall trend in pricing as we have various trend, we have negative trend in distribution which is mostly in Europe, which is compensated by the purchasing cost in distribution. Clearly there is some significant competitive pressure in the market and at the moment it's very difficult to say that this trend is going to change over the next few months and concerning our obstruction products I will say that we have some clear -- we have some clear download trends in the U.S. in exterior products linked to the asphalt costs. We have added some deflation in Europe in France and in Germany. This could moderate but today it's not clear for me whether the pricing will be positive for the overall year. The most important thing at this point was to focus on the price versus cost spread.

Operator

The next question is from Eric Lemarie from Bryan Garnier.

Eric Lemarie

I've got actually three questions. On building distribution, do you think you are gaining or losing market share in the distribution business, especially in France? What is your sentiment regarding this issue? On roofing, I understand that Owens Corning was mentioning that they have benefited from Strom at the quarter this year. Could you confirm that? Have you benefited from that as well for your roofing business? And the last question, in Brazil, a very general question. You know the country very well. What is your view on the current political and economic situation? And do you think that the macro could start to improve this year or maybe next year in 2017 in Brazil?

Pierre-Andre de Chalendar

So I'll start with Brazil, I was in Brazil last week, so I was at the moment of the vote in the Congress. I think that Dilma Rousseff is going to be impeached. I think that was economic a stunt point and a political stunt point is a good step but it's not enough. I think she was clearly a problem but I am not sure that we cannot say at the moment that the next government will take the measures which are strong measures, which are really to restore first better public final situation and second to restrict confidence. But I hope this will happen and whatever operating tool I think that we are going to have a difficult situation in Brazil for the next 18 months. The macro trends will be difficult to collect weekly. I maybe owned because in Brazil has been the country which has given us surprise by thinking that the situation today is difficult from an economic standpoint and I hope the government would take some measure which may not add the economic very short term but could be good later.

As well being which could transact is the world of significant changing raw material prices triangle on the world because Brazil is clearly very much dependent on that. I would if you were there in some urgency now last week and there is the very interesting comparison between the two countries. I think Argentina from very strong measures have been taken in the last three months I think it will have a negative impact for one of supporters then quite optimistic that Argentina will bounce back and will have a good and backward economy starting from time in the second half and so that's Argentina has been we have been doing a quite well.

In Brazil I must say that in this framework which is not very positive and commenting to see our resisting well we have very strong market share and I think that we could have the opportunities in Brazil to consolidate our position. On the distribution in France I think it's a globally I would say that we maybe at this point slightly ahead of the market but not very significantly and it's not in at this stage I must say of the year it's more filing than I don’t have that actual work to correct that but I just feel we are doing a little bit better I'll let Guillaume answer on roofing.

Guillaume Texier

Yes on the roofing your question was about storms you are right that they were storms at the very end of the quarter and those hailstorms hit the urbanized area, especially in Texas in the Dallas suburbs, overall I think it's a positive news of the industry in general and for us in particular I don’t think there was a meaningful impact in terms of volumes in the first quarter of 2015 between 2016 sorry as far as the overall impact it's a little bit too early to say how much it's going to be so that will be going to be a positive but it's still to be a accessed.

Operator

The next question is from Elodie Rall from JPMorgan. Madam, please go ahead.

Elodie Rall

Could I ask first of all if you could give us the like for like growth split by region, by division, between volume and price? Second, given the deflationary trends, does that mean that you will review your previous guidance on cost inflation? I think you had guided for about 100 million tailwinds on a parity income. And lastly, could you remind us the split of France between the separate divisions, including pipes? Thank you.

Pierre-Andre de Chalendar

Okay on the breakdown by division of price and the volume I will repeat what I said during the presentation. Flat glass grew by 4.9% overall, out of which 2.1 is volume and 2.8 is price high performance materials grew 3.6% in total, out of which 2.1% is volume and 1.5% in price. Construction products was up 0.9% and with the negative priced effect of 1.8% and a positive volume effect of 2.7% and in construction product I will give you the breakdown also between interior solutions and exterior solutions. Interior solutions is at 5.8% internal growth with minus 0.8% price effect and exterior solutions is at minus 4.4% like for like growth with minus 2.9% price effect and the minus 1.5% volume effect. And lastly distribution is increasing like for like by 1.4% with minus 1.3% in pricing and plus 2.7% in volume. As far as the inflation effect or more precisely the deflation effect I think we didn’t give guidance of I don’t remember the guidance of €100 million tailwind I think what we said at the last results that we would have the tailwind of more than €50 million. I think at this stage I think what the evolution is we could have pay that to say that tailwinds probably is going to be more little bit broad to €100 million. And the last question was about the general split of France by business we usually say that in France three quarters of our business approximately are distribution and approximately 90% of the business is linked to construction one way or the other.

Operator

So, we're going to take the next question from Will Jones from Redburn. Sir, please go ahead.

Will Jones

Three questions as well linked to prices and margins please. The first, just to clarify, the commentary on distribution, it's the lower price in the context of lower cost of goods bought. Can we just assume from that that what you are effectively saying that gross margins are still stable in that division? Second, just to come back on that comment there around managing raw materials deflation, I think it sounds like you're going to have a similar deflation there for just over 100 million in 2016 as 2015. But I think last year, industrial divisions were up about 0.4% on price from memory, and it looks like they may be flat to fractionally down this year. Is that the right way to read it, that maybe the price-cost spread in the industrials divisions might be a little bit tougher, at least relative to last year? And then I guess just pulling that together, is there anything -- you gave us a quite helpful divisional margin guidance kind of commentary back in February. Is there anything to have changed your mind on any particular division either way in the subsequent two months?

Pierre-Andre de Chalendar

As you know on quarterly basis we only talk about sales and we don't talk about margins, but we can give you a few elements. On the distribution yes there is no very significant movement in our trade margins, there are some competitive pressures, you are aware, but overall I would say that there is no significant change in our margins. On the…

Guillaume Texier

The second question was about spread in the industry and your calculation is right, basically in the industry in the first quarter the price effect was approximately flat and what I just mentioned the fact that we would have tailwind in terms of cost of raw materials and energy of more than €100 million as we say it's knowing what we know, the spread would be positive in the industry. And I think the last question was about your guidance, there is a significant change at this stage in compared to what I said at the end of February and what we expect in the various divisions.

Operator

The next question is from Josep Pujal from Kepler Cheuvreux. Sir please go ahead.

Josep Pujal

Three questions for me please. When you talk about tailwind and the €50 million and the €100 million now, are you talking about the spread between those cost inflation and the prices, or are you talking just about the tailwind from the cost inflation of energy and raw materials? Also, on energy, I wanted to know if you have revision clauses that you could use very quickly without having to wait for next year if there was a sudden surge in energy costs. My last question is on France. The volumes are roughly flat this quarter. What has been the impact of pipes for France? You have said that, at the group level, it has cost around one percentage point. Is it more or less the same in France, or not?

Pierre-Andre de Chalendar

Yes, I will answer your first question about the 100 million and when I'm talking 100 million it's is the difference between 2016 and 2015 in terms of energy and raw materials build and the price effects on this energy and raw materials built, so it doesn't take into account all price effects that you would have to add to that if you want to do a spread between price and cost. That being said as I just mentioned it just so happens that the price effects on our side in the industry is approximately zero in the first quarter, so it is not a big difference. In terms of our energy policy in general as you know we have approximately 45% of our energy consumption which is electricity, 45% more or less which is natural gas and the rest which is into oil. We have different types of contracts, usually a little bit more long term on the electricity side, usually a little bit more call it short term on the natural gas side and we tend to have a hygiene policy which is progressive along the year. So, all that we say is that there is no precise rule. It depends, very much business-by-business, energy-by energy and country-by-country in most case we would be able to switch and to adapt it to quick evolution of the energy prices.

Josep Pujal

Excuse me maybe my question was not clear. It was more on your ability to pass price increases to your clients to reflect a sudden let's imagine increase in energy costs?

Pierre-Andre de Chalendar

That is always difficult to anticipate. I would say that if you look at the fact we have been able to do that. I think we have a good track record on passing that. I think at the moment we are not able to increase prices but impact of energy and raw materials is negative impact is largely compensating the negative impact in price. So that's way we're trying to manage, so I cannot say that we will absolutely be able to do it, but if you look at our track record I think it's pretty good on that subject. And it may vary by country, by business, right it's very difficult to predict but I evaluate in the last seven years I evaluate given priority to pricing and we will continue to do so. If I switch to your question on France I think I want to correct something you've said because that's not what I said and you've said that we're have in the first quarter overall positive volume in France with price including. So we have that and I said that parts of that maybe related to some weather impact, but there is clear positive volume trend in France in the first quarter. I would say that the price impact in France is bigger than in other countries because we have significant option of our pipe sales that we report our sales by origin and which is very similar to definition for most division. The only exception being pipe where we have significant parts of our sales which are counted for in France which are in fact export. And I would say that in price both the domestic market and the export market but even more the export market has been very difficult. All-in all it means that if you take out the pipe division the interval brought in France instead of being minus 0.2 would be bit below 2%, so there is a significant impact of price activity in France in the first quarter.

Operator

The next question is from Mike Betts from Jefferies. Sir, please go ahead.

Mike Betts

Yes, I've just got two left, which are kind of related I guess. My first question, in terms of the volume growth, it's the strongest volume growth for I think seven or eight quarters. You've indicated a couple of times that weather may have played a bit of a part, but earlier you indicated not much. Should we take from that that you've got a clear trend in terms of improving volumes in the first quarter even if we took weather out? And then, as I say, related to that, my second question. Could you explain a little bit more the strength in volume in Interior Solutions? When I look at the written comments, it seems to be everywhere, but it's by far the strongest volume growth of the divisions in the first quarter. So just a little more detail if you could please. Thank you.

Pierre-Andre de Chalendar

Yes, overall it's true that we have much better volume than the last quarter you are absolutely right. I am not able to quantify the weather. It is always difficult. We have had very different weather in the first quarter in the last five years. I don't think this year the impact has been huge. There has been probably a positive impact probably more in the U.S. than in Europe but little bit in the Europe. In Europe as well, so yes at the moment there is an improving trend in volume and I've pointed out in February significant change is coming from the fact that France was strongly declining last year and now you know I think stabilizing in fact it's positive in volume in the first quarter. And so that's I don’t think we see of the all significant change in the trend in the rest of Europe. I think the trend in volume is clearly much better in the U.S. especially in interior solutions and that's reason for possibly answer to your second question. So progressively yes volumes are improving in line with what we were accepting. Now in terms of interior solutions the first answer is clearly the U.S. but we have seen reasonably good volume everywhere emerging countries where we have had a number of additional plants in Gypsum over the last five years and we're seeing reasonably good growth in many countries and better so I would say that we are rather good quarter first quarter in Gypsum with some new products in collection so I think we are helping our sell side measures as you call them from coming from our development teams and installation as generally add also better trend than the construction market because of the energy efficiencies so these two businesses are generally better than the trend in concession and we continue to see that it's a bit accelerating at the moment I guess so because of the U.S. on one side where we have a clear improvement and the trends in France.

Operator

The next question is from Nabil Ahmed from Barclays. Sir, please go ahead.

Nabil Ahmed

I've got three actually, two quick ones and probably a more complex one. The first one, you mentioned the small impact of weather. I was curious if there is an impact as well of the number of working days in the volume growth in Q1. The second question is probably more clarification on the €100 million cost tailwind. Did I hear it correctly that it excludes the costs of products sold in distribution, i.e. it is only the cost tailwind in the industrial division? And my third question is on the building distribution. The pricing is negative at minus 1.3%. All of a sudden it doesn't have an impact on the trading margin, but what about the operating margin? How do you maintain operating margin in a deflationary environment?

Pierre-Andre de Chalendar

I will answer the third because I think I had really talked about that in February that's one reason why the cost cutting products have been more important. So clearly they are needed to maintain the same operating margin which you are in the different environment.

Nabil Ahmed

Does it mean you are shutting down shops, outlets?

Pierre-Andre de Chalendar

No we are not we are trying to work on back office cost and logistics and improving our supply chain mostly.

Guillaume Texier

On your second question we are talking about the €100 million as those are related to zero materials and energy bill which is related to the industrial side of the business clearly. And your first question was about the impact of the number of days. As there was a small impact of the number of days but it was really negligible for this quarter, a small negative impact.

Operator

The next question is from John Fraser-Andrews from HSBC. Sir, please go ahead.

John Fraser-Andrews

I've got two questions, the first on price cost. You've said that it's been neutral in Europe and America. Could you give some commentary on emerging countries please? And secondly, current trading, you've indicated in April France has been a bit slower, but could you talk about the rest of Europe, and also U.S. and EM? And within that, could you just give an update on the energy transition decrease that should be coming soon? Thank you.

Pierre-Andre de Chalendar

On the April trends I would say that in most I don’t have the clearer view on the all countries but I don’t see at this moment a significant changes I would say it is a bit slower at the moment in France but that doesn’t mean that it's not very clear it's relatively better in Germany. I think the U.S. is positive there is clearly a continuation and of the downward trend in Brazil and for the rest I think that it's in line with what we have seen so far. Concerning the energy transition low I guess in France we have been waiting for as you said decrease there have been they are not been publish yet and we expect that to happen in the next three to six months, so in fact this should not be very significant until a few more months at the end of the year, what has been helping has been other measures in terms of tax incentives that has already been in place and that is im think more positive impact.

Guillaume Texier

On your first question which was about emerging countries, usually the price effect in emerging countries which are higher inflationcountries is more positive, that being said, on sell side we don't give details about the cost effect country-by-country.

Pierre-Andre de Chalendar

It's very different from one country to other. So, it's, I would say that the overall trend is not very different from what we see elsewhere but you could have if you go into detail you could see some very different situations.

John Fraser-Andrews

Are we talking about decent price increases in emerging countries [Multiple Speakers].

Pierre-Andre de Chalendar

In most of them yes but not everywhere. There is much less inflation in India than it used to be, inflation is relatively high in South America. It's higher in South America than it is in Asia. That India used to be significant, at the moment India there is less inflation.

Guillaume Texier

But we enjoy at the other end very good volumes in India.

John Fraser-Andrews

And on the other side, are you getting, as part of that 100 million reduction, do you have visibility that that will also be shared in emerging countries or is that mostly developed markets?

Pierre-Andre de Chalendar

I think it's -- no, no, yes, there is part of it which is in emerging countries and I would say there is no big difference between the relative shares of emerging countries and developed countries. So, clearly there is some in emerging countries.

Guillaume Texier

Yes, we're quite positive of all of the emerging countries across everybody's concern.

Operator

The next question is from Gregor Kuglitsch from UBS. Sir, please go ahead.

Gregor Kuglitsch

I have two questions next please. Sorry to come back to this 100 million. Just to be 100% clear, are you saying that you think that 100 million will basically drop straight down to EBIT, or should we be thinking about other cost items? Thinking in the past has obviously been I think the way to build a significant -- other costs which obviously tend to go up. So I just want to understand what you're trying to communicate on the 100 million, bearing in mind all of that you've said already. The second question is can you give us an update where you see pricing it moved a lot [Technical Difficulty] large across the world but can you give us an update where you think the profit impact on a full year basis stands at this point?

Pierre-Andre de Chalendar

We're not, I'm sure on the second question you'll have to wait a little more. On the first one…

Guillaume Texier

On the first question it's -- the 100 million is a net pricing effect on the cost of the raw materials and energy which is going to drop straight to the bottom line, that being said it doesn't mean that the other costs are not moving in one way or the other and in particular what Pierre-Andre mentioned about the evolution of fixed costs usually are slightly inflating every year.

Pierre-Andre de Chalendar

Before our cost cutting…

Guillaume Texier

Before our cost cutting so, you would have to take into consideration the slight inflation of fixed cost, the positive evolution of the pricing in our raw materials and energy build and there's a certain component of the evolution would be the cost savings program and what we said about the fact that we would save €250 million in costs this year plus the price and volume effect.

Gregor Kuglitsch

So if you take the last year, can you give us a sense of what -- let's take all three items together, what was it in the end in 2015? So the energy, fixed costs, less the cost savings, was it zero or was it positive?

Pierre-Andre de Chalendar

I think what we said is that cost savings were at €360 million at the end of the year. In terms of the inflation we said that -- the raw material inflation.

Guillaume Texier

[Indiscernible]

Pierre-Andre de Chalendar

It was also a little bit about 100, so you had 350 of cost savings, a little bit of the 100 of raw material and energy savings and for the rest in terms of fixed cost evolution, there was an inflation overall on the base that which is I mean for example the salary base is around 8 billion and -- but we didn't give precise guidance on that.

Gregor Kuglitsch

Okay, but it's fair to say that last year wasn't a -- it was close to zero it wasn't sort of a massive tailwind or anything like that?

Pierre-Andre de Chalendar

Yes, at the end of the day you remember what the evolution of the floating purchase was, in the end it comes down to the evolution of the floating [indiscernible].

Operator

The next question is from Muriel Fellous from Societe Generale. Madam please go ahead.

Muriel Fellous

I had two questions. First of all, I wanted to have an idea on the price increase you may have, especially in high performance materials and flat glass, because usually you do have some price increase in April. So, would you have any price increase scheduled for overall the Group and in particular for those two divisions, and my second question is on the volume in the distribution. I'm sorry, but I wanted to have a sense of what was the volume in France really in the distribution in Q1, and how do you view that going forward?

Pierre-Andre de Chalendar

I think I already answered two or three times of the question on France. But I can repeat what I said, I said that the volumes were a positive in line with more or less the volumes in the overall we had in distribution in Europe so that's.

Muriel Fellous

So that's overall the 2.7% will apply for France as well?

Pierre-Andre de Chalendar

Yes, it's given the fact that you have to deduct Brazil it's little bit more than that.

Muriel Fellous

Okay. And going forward, would you say the impact of the weather was not so strong at the end or…?

Pierre-Andre de Chalendar

Going forward I didn't want to -- it's not clear to me. It has varied by months and I think it's still bumpy I mean as you I cannot talk about a clear recovery at this stage.

Muriel Fellous

If I could add on France because I've read some article where unions are actually I would say challenging a bit statistics in France, saying that the sense they have in a single-family home are not showing in the housing starts still because they changed the calculation. I mean would you agree a little bit with that, or [Multiple Speakers]?

Pierre-Andre de Chalendar

I don’t know. I think that when you look at -- it still as the changes in the housing starts statistics have been important. If you look at the last 10 years, you see also that there has been a different act for various periods between permits and starts. So they tend to reconcile but it has not been always clear. So honestly there some uncertainties, I think that the all indicators are positive. The magnitude of the positive honestly for me it's still a bit unknown. As I said in February you know on this subject of France construction I am [indiscernible]. I will talk about the recovery when I see it in our numbers.

Muriel Fellous

All right, okay. Fair enough. And what about the…?

Pierre-Andre de Chalendar

About flat glass, this year has been different from the other years it's a first year where we had not price increased during the first quarter. So I think we have already, add some price increase in flat glass. So there is no specific action in April, but if we can at some point increase prices the prices are positively going up so we have had a good trend in the last five months in Europe in price.

Guillaume Texier

And I think you have the same question on the High-Performance Materials. High-Performance Materials is a little bit different you know it's a niche business where we have -- where the pricing depends very much on our differentiation and is done on the contract by contract and product by product basis without because of oil price increases. So I would say that there is no price increase in second HPM but overall it's the kind of business where we have usually a very good pricing power. Thanks to our differentiation.

Operator

We have no other questions for the moment. [Operator Instructions] We have another question from Jean-Christophe Lefevre-Moulenq from CM-CIC. Sir, please go ahead.

Jean-Christophe Lefevre-Moulenq

Yes, I have an additional question if you don't mind regarding the absolute price level of flat glass in Europe for the first quarter?

Pierre-Andre de Chalendar

At the moment I should say that basic 4 millimeter which as you know is less and less for me relevant but as you're interested in it I would say that at the moment it is slightly above €3.

Operator

We have no other questions.

Pierre-Andre de Chalendar

We have no other or another?

Operator

We don’t have any other questions.

Pierre-Andre de Chalendar

Well, thank you then for your participation in this conference call.

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