Wendel (MF) Earnings Call Transcript

Ladies and gentlemen, welcome to our 19th Annual Investor Day. Today, we mainly review unlisted companies in Wendel's portfolio. I'm André François-Poncet, Wendel's Group CEO. With me today in person are David Darmon, Deputy Group CEO; and Jérôme Michiels, Executive Vice President and Group CFO. We also have our Investor Relations team, Olivier Allot; and [ Lucy Lock ], who are in the room with us. David, as Deputy CEO; and Jérôme as EVP, have now been in their respective capacities for over 1 year. And combined, they have about 30 years of experience at Wendel and a lot of positive energy, which I'm sure will transpire today. We pray that you're all doing well. And quite frankly, we also pay right now that our Internet connection allows a productive session. Obviously, we would have preferred to be with you in Paris, as we usually do, but circumstances have made this impossible. So right now, we're in TV networks facility in Paris, complying with all public health guidelines, and we have done everything we could to ensure that the meeting is the most interactive possible. If technical problems occur, we apologize in advance for these issues. We will be joined by Internet connections by 4 CEOs of Wendel portfolio companies: Loïc Derrien at Cromology; Huub van Beijeren at Stahl; Pim Vervaat at Constantia Flexibles; and Tony Jace at CPI. They will each make a short presentation, and they will take your questions. I shall first provide the general update. Joe will present our current trading and our September 30 NAV. And finally, David will update you on portfolio management and investment strategy in the context of Wendel's 2024 road map which is currently being devised under his leadership. I trust that you will particularly enjoy our CEOs' presentations. It is a unique opportunity for you to put your finger on the pulse of what is going on in important parts of the world economy. And this is one of the fascinating part of your jobs and our jobs. For obvious regulatory reasons, IHS will not be covered today. Neither will Bureau Veritas, which weighs heavily in our NAV, but which has its own investor and analyst events. I'd rather tell you right now, so you're not surprised or disappointed later. A quick word on BV though. We are proud with the way BV led by Didier Michaud-Daniel has handled the current crisis. You probably saw that they beat expectation for sales in Q3 by quite a bit, and that they're on a good path for sales and margin recovery, provided the environment doesn't deteriorate significantly. Importantly, BV's financial communication refers to what Didier calls the green line. It's a concept you may want to get familiar with in [ BV Parlons ]. It's the numerous services and solutions, which benefit from tailwinds as well as the significant development opportunities relating to all facets of sustainability. Very exciting. We feel that BV is no longer the cyclical, France newbuild and oil price exposed firm than it once was, and this perception is expected to change materially going forward, as highlighted by recent analyst research reports. On Slide 3 in front of you, I hope, about process today. When we get to Q&A, if you would like to ask questions, you can do so either by writing directly via the web platform or by calling the telephone number in English, one referred to in UK here. Just note the unfortunately the French line doesn't work for Q&A. So French speakers can also use the UK line -- still before Brexit. The -- so you'll have simultaneous translation, and I trust this will work. In either case, presenters will address your questions at the end of their presentations. Now on to the update. I'm speaking from Slide 5. Wendel's NAV stood at EUR 145.3 per share at September 30, up 4.9% since June 30, positively impacted by an increase in listed peer multiples and by updates in aggregates used for the valuation of our unlisted assets. In this EUR 145.3 figure, CPI is held at cost as per our methodology. Its valuation will move to a comparable company-based approach starting December 31. But Jérôme will give you some more color on this with the directional approximation of what this valuation might become. Our discount to NAV reached a very high point at 44.4%. And we will come back to that. Regarding the business, 9 months consolidated sales reached EUR 5.5 billion, 9.1% down overall, and down 7.4% organically. Our financial structure was, and remains very solid, with an LTV of only 6.4%, with modestly leveraged portfolio companies, for the most part, and with roughly EUR 2 billion of liquidity. I'm turning now to Slide 6. And I remind you of several actions, which were taken this year to date at Wendel. The sale of our remaining stake in Allied Universal, maintaining our dividend in the face of potential pressure in France, rightsizing our international office footprint, which you may or may not realize meant letting go roughly 15% of our company's staff, which is a significant step, accelerating on ESG and transferring our Tsebo shares to the company's lenders investment arms in an orderly manner, which we hope will benefit the company in due course. At portfolio company level on Slide 7, we've been very active. We recruited a new CEO for Constantia, Pim Vervaat, who has an outstanding track record at RPC, and for those of you who have not met him in our PC days, you will meet today for the first time. IHS successfully amended contract terms with key clients in Nigeria, and the company announced exploring a potential registered IPO in the United States. Stahl successfully amended and extended its debt, benefiting from favorable conditions. We worked closely with our companies to address the COVID crisis. Each one was a special case. Some were more impacted than others, but all focused on health and safety, on costs, on cash preservation, while remaining -- retaining, I'm sorry, growth options and while rolling out compliance and ESG programs, very busy. Several have pursued or are pursuing acquisitions in a disciplined manner, of course. We expect to keep management teams motivated in what are extraordinarily difficult times at personal and at professional level. On Slide 8, we list some attractions of the Wendel story at the present time: a more simplified and more agile organization; a financially resilient and refocused portfolio overall; comparably low leverage, both at the level of Wendel and its portfolio companies; a stable and, we hope, a well-defended dividend generating a roughly 3.5% yield at current levels; cash on hand, which is plentiful and available to be deployed for investments; a high trading discount to NAV, which is way above the average of the past 10 years, even accounting for the upcoming write-down on CPI, which we hope and we believe does not reflect meaningful value loss. Lastly, for my part, on Slide 9, and related to the above, we plan to reinitiate an opportunistic share buyback program of up to 0.75% of issued capital by the end of 2020, which is the regulatory limit for Wendel in light of our ownership structure. As a reminder, the firm has returned EUR 1.8 billion to shareholders over the last 10 years, roughly 60% through dividends and 40% through share buybacks. I would add that on a personal note, I'm considering ways to acquire more shares as well. Jérôme, the floor is yours.

Thank you, Andre, and good afternoon, ladies and gentlemen. I will now go through the Q3 trading update, our net asset value and our financial situation. Let's start with the update on consolidated revenues on Slide 11. Overall, 9-month sales came in at roughly EUR 5.5 billion, down 9.1% in total and minus 7.4% organically. Whilst the organic trend has been improving strongly over the third quarter, the negative impact of foreign currencies has been accelerating with minus 4.2% in the quarter. As you will remember, the second quarter was where the impact of the various lockdowns throughout the world was felt by most -- by our most affected portfolio companies. Most lockdowns being lifted in May, June, we have seen a good recovery of your Q3, translating into a less negative organic growth of 3.4% versus minus 15.6% in Q2, and minus 9.5% for the first 6 months. Moving to Slide 12. When looking at monthly sales indexed at 100 for the graphs displayed here, you can clearly see an uptick at CPI, Cromology and Stahl in the last month. Although Stahl and CPI have not yet fully caught up with 2019 levels, Cromology has even registered sales above prior year in certain months. Constantia has been very resilient since the beginning of the year, with no noticeable impacts on its sales. We are closely monitoring the impact of the new lockdowns announced a few days ago in multiple countries and hope that the positive trends will continue over the last quarters. In terms of net asset value now on Slide 13, we are reporting a value of EUR 145.3 per share, down 12.6% year-to-date. Compared to the latest reported NAV, which was at the end of June, we nevertheless registered a slight increase of 4.9%. As already explained by Andre, this change has essentially been driven by the increase in value of our unlisted assets, which was up 12%. Within this increase in value, around 60% can be attributed to the increase in listed peers multiples and the balance is the result of our companies having adjusted their forecast for 2020 following a better-than-expected performance in the third quarter. The breakdown of our net asset value as of September 30, presented on Slide 14, is very simple. Around EUR 3.1 billion of Bureau Veritas, barely up versus June 30, and close to EUR 3.8 billion of unlisted assets. Bear in mind that CPI is still valued at its acquisition price in our September 13 NAV as per our methodology. When including our EUR 1.15 billion of cash balance, the total gross value of our assets amounts to EUR 8.1 billion, from which we deduct the value of our bonds outstanding, which is EUR 1.5 billion to derive our roughly EUR 6.5 billion of net asset value. The implied discount at the end of September was roughly 44%, an historically high point, in line with some of our peers. Let me now touch base on the topic of CPI's valuation on Slide 15. As already explained, our investment is still valued at cost in the September NAV in compliance with our methodology. This remains so until the first year anniversary of the closing, which occurred on December 31 -- 23, sorry, last year, for CPI, meaning that we will switch to peer multiples valuation as of the net asset value of December 31, 2020. Now given the very specific nature of CPI's business, there are no obvious pure comparable listed companies out there, but we have identified a preliminary list of companies, each displaying similar characteristics in terms of business model at some level that we think would qualify for a proper valuation approach. These companies typically operate in license or subscription-based environments, like training or certification in governance, risk, compliance, services or data. This analysis is still very preliminary and needs to be finalized and validated, but should CPI's valuation be based on the average multiples of contemplated peers, the total net asset value of Wendel as of September 30 would still have been up slightly versus June 30, taking into account the payment of the dividend, which occurred in the interim. As you can see on Slide 16, the trend in terms of net asset value since the end of last year has been a tale of 2 stories. At the end of March, just a few days after lockdowns have been announced in all major countries, stock markets were plummeting. And this, combined with the required evolution of the weighting of IHS peer sample and some downward revisions of forecast for 2020 by some of our portfolio companies, drove our net asset value down to EUR 118.2. Since then, the recovery of the stock market, combined with improved forecast for 2020 following the better-than-expected performance in Q3, has led to an increase of our net asset value to EUR 145.3 per share. As said previously, the increase in September has mostly been driven by the value of our unlisted assets, while the payment of a EUR 2.8 dividend per share that took place in early July, consequently reduced the value by this very amount. Moving to Slide 17. As you know, a lot has happened over the past few years, but the financial profile of Wendel has remained very strong and healthy. As you can see, we have decreased our LTV ratio down to 6.1% starting from 2018, and have remained pretty much in this ballpark since then despite the impact of the coronavirus and the accelerated portfolio rotation executed over 2019 and 2018. Our net debt has also been quite consistent at around EUR 400 million to EUR 500 million. I now hand it over to David for an update on our road map and our investment strategy.

Thank you, Jérôme. Good afternoon, everyone, David Darmon speaking. I will now describe the group priorities and where we are currently putting our energy on. On Slide 19, first and foremost, we are working with our portfolio companies to make sure they adapt to this new environment. Each company went through some kind of reshaping to adjust either their business model or their cost basis. As an illustration, CPI transitions all its training online and had to design new teaching methodologies to adapt to this crisis. Cromology, for another example, developed significantly its click-and-collect approach. Beyond protecting the organic growth and the margins, we're also looking at various bolt-on acquisitions. We are selective, but we can see some interesting situation with strong strategic rationale. On the front of new investments, we are selectively looking at some opportunities. As you know, everything is expensive nowadays in the context of a global flight to quality. I will come back on the next slide on our criteria for new investments. Last, we want to globally reposition our group towards higher growth businesses and more favorable CSR trends. That means more focus on situations with high single-digit organic growth and on companies having a positive impact on the planet or the people. I'm turning now on Slide 20. Considering our growth in CSR objectives, our investment strategy has been slightly evolving. We will continue to build a somewhat balanced portfolio of public and private assets with a very open-minded approach regarding control. We will always favor a situation where we can have an influence. As discussed previously, we are focusing our efforts on new opportunities with strong growth, and we have resumed our effort on the Wendel Lab, and we will commit a moderate but growing part of our balance sheet in growth funds and growth situations. In terms of geography, we will narrow our focus to Western Europe and North America. We have recently reviewed our offices footprint to match this new focus. Regarding ESG, we have changed our internal processes to put it at the core of everything we do. ESG is the starting point for opportunity selection with an exclusion list. We also systematically include a CSR due diligence, and we have strong CSR objectives in our 2024 road map, and I will touch more on this later on in this presentation. On Slide 21, we detail here the grid we follow when looking at new opportunities. You can see a slight evolution. This is not a revolution. ESG and growth has been prioritized, and we continue to focus on high-quality companies led by great management teams. We are looking for companies with most of those attributes that you can see on this slide. Turning to Slide 22. For Wendel and all our portfolio companies, we have set up 2023 ESG road maps, including objectives and some KPIs we are closely tracking. Several ESG priorities are addressed with special efforts on improved compliance, higher gender balance and climate change notably by better monitoring of our CO2 emissions. Wendel took some public commitments and signed the UN PRIs and France Invest Parity Charter. On Slide 23, a few words to show where we stand as of today on those topics. Our efforts are being acknowledged on many fronts. First, on the feminization rate at the holding level, Wendel is a best-in-class among the SBF120 women in leadership ranking. It's also worth mentioning that the transparency we want to provide to our investors is recognized, and Wendel ranks #4 out of the SBF120 Index at the Labrador Transparency Awards. Last, we are working with rating agency to track the progress we make, and we are pleased with the progress we made this year. I will now leave the floor to André for conclusion and look forward to our Q&A session at the end.

Thank you, David. So here are my final remarks. Wendel is well positioned to seize further opportunities. We have a resilient portfolio overall with significant exposure to companies benefiting from ESG tailwinds. Leverage is conservative. We have a well-prepared road map to deploy our capital. We have an opportunity to embed ESG deeply into the firm for competitive advantage. Our organization and portfolio are tight and agile with strong focused, new leadership and renewed energy. Thank you for your attention. And now it's time for Q&A.

[Operator Instructions] So the first question from the web. Bureau Veritas is quite big in your portfolio, could you in the medium term, reduce your stake in this company?

So first, I'd say it's nice to see Olivier as in CNN being the moderator. So thank you, Olivier, for this first question. We get asked the question about the very large exposure to BV in pretty much any one of our meetings. I understand that coming from an asset management background. It's very atypical, constructing a portfolio for bottom up that you would ever have such a large position. Having said that, we have this position. As I said, we think the company has a lot going for it. And I'd say, in all scenarios that we consider for the future, BV will play a big role in those scenarios.

Thank you. You have another question from the web. Generally speaking, what is your view about the potential impact on your companies of the current lockdowns versus lockdowns of March and May?

Well, I will start, and David, maybe you want to continue. The -- in most countries we operate, particularly in Europe, where these days -- and some others like India and other big markets, the lockdown was extremely severe with the total -- effectively a total shutdown of everything, but essential activities. As we currently speak, particularly standing here in Paris, as you can see, we continue to work. It's really our social life which has been very significantly reduced, and a number of industries, which are audience attracting traffic-generating audiences, which have been hit businesses in retailing, for example. So we do -- it would be naive to think that there will be no impact. There will be an impact. We can't quantify it. It's so recent. Every one of our companies is looking at it right now. So it will certainly be factored into our thinking. It will be much more modest, we hope, than what has happened to date. Maybe a general comment before I ask David to add anything he'd like to this or Jérôme. Effectively, the view here is that we're going to be into this for quite a long time. As you know, the virus has morphed, at least in Europe. So it's now -- we're chasing a moving target. There are a number of studies showing that you can catch the virus again in its new version, and therefore, we have to think -- and we have to keep that in mind that it could be with us for many more months. Thank you. David?

I would just add that even if it's difficult to quantify the impact because we don't know the length of this new wave, we don't know if there will be additional waves, but what we know is that our companies are better prepared this time than last time. They have developed new products. They have revised their supply chain. They have made new hirings that were needed for this extraordinary time. So even if it's difficult to quantify, we feel pretty well equipped in all our portfolio companies for what it's come.

Okay. Thank you. Would you say that the increase in the valuation of unlisted assets between 30 June and 30 September was largely driven by IHS?

It's a factor, undoubtedly, in this valuation increase, but I can't be more explicit, unfortunately.

Okay. You are not the only holding company with important discount to NAV. What are the main reasons for that important discount? How would you grade your visibility on assets, or remaining debt or the liquidity of your assets?

That's a very difficult one. As I joke sometimes, I started my career back in 1985 at Morgan Stanley, and I visited CGIP, which is today's Wendel, and I lectured them extensively on the discount. There have been high discount moments, low discount moments. Ultimately, we debate this quite a bit in the team. Ultimately, it's supply and demand. I think we have high discounts in moments when there isn't a lot of demand. And therefore, the stock price has adjusted to that. In terms of our characteristics, well, we share this very high discount with others who have very different strategies, whether it's [indiscernible] according to some research reports that I have seen or whether it's XO or whether it's FFP actually has a higher discount than us to pick a number of our related peers. We clearly have a large stake in BV, which weighs on the discount. We clearly have a somewhat moderate liquidity of our shares, although I think it's enough for many. And I don't think it can be -- we have holding company costs, which we watch carefully, but not enough to explain a significant discount like this.

I would just add that maybe during downturns, companies like ours see typically the discounts to widen. So it's a natural movement from investors to move away from, I would say, more complicated stories than doing upturn.

It tends to adjust. In other words, at some point, you basically rebound from the level, and it becomes a very attractive buy because it adds the reduction of the discount to the momentum in the portfolio. And I'd say we feel, rightly or wrongly, it's really you, the investors and you, the analysts, who need to form these judgments, but you will have noted that we are resuming our share buyback.

Thank you. I have many, many questions. Some are the same. Any news regarding IHS IPO?

Well, no. Sorry about that.

Okay. When Wendel looks at the ESG characteristic of a potential investment, a bad ESG score will be a no-go or a reason to invest in order to improve ESG and make the investment better?

David? David gets the easy ones. I'm joking because, of course, this is a very profound one.

Well, we -- I think we are proud to work with portfolio companies to improve their ESG rating. So even for companies in our portfolio who are -- don't score where we want them to score, we put as much effort as we can to improve their core. It doesn't mean that we are pleased are not pleased with where they are. But regarding new companies, we want at least to have companies which are neutral and not having a negative impact. So it's a no party, but it could be a no party for another investors. We do want to invest in companies which are already focusing in with the mindset of having a positive influence and impact on people.

Yes. I think we're in the mindset of you don't fight the tape. In other words, there may be improvements to be made, but if you have headwinds, the world is going away from you and your asset, your company may be much less desirable going forward with some people who simply will not even look at it. So we have to bear that in mind.

Okay. The implied write-down in the value of CPI seems large, given the impact on our NAV going from plus 5% to flat. Could you add some color on what peers you will compare it? And what, in general, multiples those companies comment?

So I'll just turn to Jérôme for another easy one here.

Well, first, as I said, the estimate is very preliminary. We haven't yet finalized the list of comparables to be used. We've run the sensitivity; based on what we currently know. That is the level of the multiples of the companies that we have identified as potential candidates. The current aggregates of CPI, which has been affected -- which have been affected by COVID in 2020. When we will switch at the end of the year to the market multiples methodology, we will take into account 2021 budget. We will also finalize the list of comparables, and we will take the -- then prevailing multiples. So a lot of uncertainties. We thought it would be useful for investors to get a sort of broad estimate at this stage, but this is very preliminary and, again, not to be taken for granted.

I'd like to make a few additional comments. One, I don't like bad surprises. So we made the quantification, and we'll be more specific down the road. Two, our methodology includes no controlled premium, no trading company discount. So when we integrate the company in the portfolio that we have bought in the M&A market, i.e., at a premium, you shouldn't be surprised that, oftentimes, this translates into an initial negative NAV. Thirdly, in our portfolio, this is one of the companies based on social interaction, which has been the most affected. I really don't think they have reacted so well, and you'll be able to tell it from yourselves with listening to Tony, that I don't feel personally that there's substantially value being impaired, but we have a mark-to-market approach and we need to apply it, and we always do.

Okay. Thank you. One last question on the web, and then we will go to the phone question. Can you elaborate a bit on the new strategy for the Wendel Lab?

David?

Well, it's not a new strategy. I think we talked about it last year. And what we're saying is that we continue the strategy and we accelerate on it. So we want to be more exposed to the long-term trends we can see in terms of technology and higher growth segments. And so we are looking to deploy more capital, providing capital to some external managers in investing in the sort of fund of funds, so giving money to the best managers out there who can deploy in those companies. And at the same time, for our own benefit and our portfolio companies, we want to get more exposure to the strength and knowledge and create some interactions with our portfolio companies and the portfolio companies of those funds. So it's both investing more and creating more interaction between those investments in our current portfolio companies.

Okay. Thank you. So we are moving now to oral question. May I ask the operator to give us the first question by phone, please?

Our first question is from [ Pierre Louie ] from XXXXXXXXXXXXXXX .

So I'm sorry.

Perhaps we move to the next one and then we can come back.

Is there are no phone question -- another question. Okay. So question asked on the web. With no dividend coming from BV this year, what will be the P&L of the holding company look like in 2020?

Well, there is no impact from the dividend received from BV in terms of P&L. The impact is on the cash flow of Wendel. So having received no dividend in 2020 represented a decrease versus an average year of about EUR 90 million, 9-0, but the fact that we've been reducing very much our financial interest over the past years and having such strong financial structure puts us in a position to withstand the cuts from BV -- the dividend cut from BV.

If the question is, indirectly, will this affect the dividend next year? The answer is not a key consideration at all.

Okay. And a very last question from the web. What are your objective of new investments in the next 2 years? Have you any figures to give us? Or can you justify to be so much exposed to BVI while diversification is highly required by equity investors?

I think I've addressed the first point, which is obviously the critical point by saying that it's a historical investment that we have, that we recognize the -- that indeed, there is a very significant weighting, that we think it has a lot of headwind, that we intend to have it play a big role in the portfolio going forward. And the other question, would you like to address the other question?

Yes. I would say that it's not the way we think. While we put a number out there, and we're going to match the number to deploy capital. We have the means to invest. We talk about our liquidity and the strength of our balance sheet. And if we find attractive opportunities at reasonable attractive valuation level, we will deploy capital.

The bottom end of the range we've announced in the past is EUR 200 million, the top end, more EUR 700 million. We're minded to look for opportunities which are closer to the bottom end of the range or the bottom half of the range.

Thank you very much. We must now turn to the next presentation. We would now like to welcome Loïc Derrien, CEO of Cromology, who will present his company from his locations in Clichy, France. After the jingle, there will be a short introduction by Andre. And then the presentation is up, please launch the jingle. [Presentation]

Well, it's a great relief to have seen your picture, Loïc, and to see that the connection seems to have worked. We will shortly have the proof in the pudding. So I'm very happy to introduce Loïc. Just a quick reminder on Cromology itself. Cromology is one of the leaders in decorative paints, a market which is resilient. Cromology operates in a number of jurisdictions, mainly in Southern Europe, but not only in Southern Europe. And it has strong brands. Loïc has been leading a turnaround of Cromology, which is what's the left of the Materis acquisition many years ago. And he joined us a little over 1.5 years ago from PPG, where he was one of the senior leaders. He was responsible, in particular, for the decorative paints business in Europe, Middle East and Africa. And together with Pierre Pouletty, who is the Chairman, it's a very dynamic duo, which has considerable achievements to their credits already. And Loïc, the floor is now yours, and welcome.

Good afternoon, Andre. Good afternoon, everyone. Thank you for having me. It's great to be here. I'll start with a quick overview on the company. And just to say that, obviously, we are a paint manufacturer. That means that we are designing, producing and distributing a wide range of paints, but also decorative product that we mostly sell through our captive networks. 70% of our business is made out of paint and 30% out of this good for resales, again, mostly sold from our captive network. We are a leading player in Southern Europe, with an average segment share of 10%. We leverage our very strong portfolio of local brands to go-to-market with our integrated stores for 60% of our sales, but also independent and DIY distribution networks. 65% of our business comes from France and 35% from Southern Europe, but also more across Switzerland and also a bit of export activity. In this business, we are mostly exposed to renovation and a little bit less than 20% to new construction, which makes us a very resilient business in general. Moving to the next slide, please. So how did we react or were impacted by the COVID-19 situation. First of all, we had to readily adapt to the lockdown on another basis because depending on the country, we either had to go through a full shutdown for 2 weeks in France, for instance, in Switzerland to partial or no shutdown at all like in Portugal. March and April were basically half of normal months. So there was a significant impact on our business, but we were fortunate enough to see a bounce back as of mid-May. The pattern that we face across all our geography was quite similar. First of all, we saw a recovery of our independent channels. They restarted first. Then integrated stores as we progress reopen them and then finally, DIY distribution. The demand from DIYers was extremely strong from the very beginning, as stores reopen. And we saw a more progressive resuming of the activity of the professional painters who actually faced more difficulty in operating given the new safety environment. Our top priorities as a company during the crisis was definitely health and safety for our customers, for our people as well, of course, and our partners, compliance with the demand of regulations -- sorry, the demands and regulation from the local authorities, and also preserving the customer relationships, even though from a distance or also our business and company assets. Moving on to the next slide, please. So what is it we did during these times to adapt to the situation. First of all, we basically had to reinvent the way we are operating from plants to stores, with new hygiene protocols, with new team organization, obviously, a home office, but also new customer-facing rules when it comes to meeting our customers either on site or from our stores. We adapted our processes in plant and store to remain productive because, at first, we were definitely impacted by that. We had to set up new communication and management routines because it was critical that we remain with high morale across the company and keeping a strong link with management, but also through regular communication or with Works Council was actually critical for us. Also, we learn on how to maintain customer relationship from a distance. So as I said, it was a new practice for us. Then we had to work a lot on our digital platforms, our IT platform. So first of all, we had to leverage and enhance our existing B2B commerce websites, mostly in France, where we had already some experience there with click-and-collect. Then we launched in less than 4 weeks 2 B2C websites also in France. And further along the way, we introduced new digital color selection tools and color samples delivery because it's critical in the buying process of paint that you are confident that the color you choose is actually the right one. And being able to do it from your couch, basically, is essential. Our IT teams have been extremely active. Obviously, I'd say 2 major achievements was to set up in record time the e-learning platform that we had in the pipeline, but also our e-recruitment platforms because we did hire people during the crisis. We had to take -- we took the opportunity of this period to invest heavily in sales skills and sales management skills, even though via e-learning. We, for instance, worked a lot on our pricing discipline in our stores through this program. And we also had to move production across plants and countries to face demand peaks because it was extremely erratic over the past months, and we had to face some instant capacity issue given the stronger demand peaks. Moving on to the next one, please. So that's the financials. You can see on the left top hand side, the sales where you see the drop in March and April and the recovery starting May, and definitely since June, we've been above last year, months after months. We had a strong rebound of demand, but also very favorable customer and product mix. We implemented immediately contingency costs and also continued on our structural action to decrease our cost base. So end of the day, the H1 for us is a EUR 40.4 million EBITDA, which is an 8% increase versus last year, and it's a 320 basis point margin year-on-year, which is, obviously, good news given the circumstances. Our cash flow conversion rate ratio was 65% over the period. So that meant for us that we were able to stabilize our debt and slightly improve our debt on EBITDA ratio. Moving on to the next slide, please. So what's coming next? In the near future, we do expect that demand remains bumpy in all geography given that we see some outbreaks popping up here and there, especially in France at the moment. On the good news, I'd say home improvement remains high in the agenda of consumers and many people, given that there is less money to spend in traveling and other type of leisures. So I would definitely recommend to everyone listening to use paint as a way to relax and improve their own. The next month's focus for Cromology are going to be around the same line as what we've done over the past months, definitely making sure that we operate safely because we do see some more cases of COVID XXXXXXXXXXXXXXX in our team, even though we managed them pretty well so far. We are still executing on our transformation program and reduction of nonvalue-adding cost. We will -- we have already and we will allocate more sales and marketing resources to the promising segments because you have to be extremely flexible in the current circumstances to address the segments that are performing better than the others. We'll keep on investing in our digital capabilities, not only on the front lines where we still have a lot to do, but also all along the supply chain where we have some improvement to make. We'll beef up our product development activities, especially in the field of ecofriendly product, if I can call them like this. And finally, we're currently looking and we look on bolt-on acquisitions in Europe. Moving on to the next one, please. Obviously, more than ever, CSR is key for Cromology as a company, but I would say for Cromology as a team. We've worked during the period on our CSR priorities. And you see on the left-hand side of the chart, the 5 building blocks that we've chosen to focus on. We will definitely keep on acting upon those priorities in the coming months and years. So as to deliver on our mission that you see on the right-hand side of the slide, in a responsible way for -- with respect to all stakeholders and also the planet, I would say. Moving on to the next slide. So key takeaways. First of all, the good news is that we've managed to improve our EBITDA in value and margin in a very tough environment. We've benefited definitely from a rebound from the end user demand, but also strong price discipline and tight cost management. On the cash flow generation side, we did improve it as well, thanks to our improvement in profitability, but I'd like to recognize a very strong performance of the sale and finance team on account receivables and inventory, which are critical in our business and especially in tough times, and they've managed to steer them to a high level of excellence. Working on cost, as I mentioned a couple of times already, has been key, and we've seen everyone reacting extremely fast to the situation internally. So we have done that on a very ad-hoc basis but also on a more structural way because we have kept on implementing our structural cost reduction initiatives as they were planned in our business plan. Looking at the future, definitely, we have refocused our supply chain, marketing and sales efforts on the key topic or hot topics to secure our top line. So that's a safe working and shopping. It's very basic, but it's actually being safe at work. Providing a safe shopping environment is actually critical for both employees and customers at the moment. Product availability is critical. The new digital channel ramp-up, e-commerce, click-and-collect, digital color choose, as I mentioned, and we have more to do there and more coming in our pipeline. More than ever, I think we have acted in line with our health and safety values during the crisis and both customers, but even more employees have recognized how well we have made sure that they were safe at work. And we get really the benefit of this in our current team motivation and commitment. Our CSR priorities are clear, and we work on them for -- since some time and even more focused as they are clarified to everyone. Moving forward, I'm happy to report that we are ahead of our BP, business plan, thanks to the really engaged team I just mentioned. And we are now working on the next phase of Cromology transformation towards more profitability even and more [indiscernible]. With that, Olivier, maybe I would take a few questions.

Yes. [Operator Instructions] So I will start with the first question from the web. Can you share your expectations regarding the impact of new lockdowns in Europe on your business?

Okay. That's a tough one. I'd say, in France, at the moment, we are lucky that current French rules or regulation allow us to run our factories as well as our shops. So painters are so far authorized to work and our distribution channels are considered as a wholesale, which enable us to operate almost in normal condition. And we can also offer paint to DIYers as long as they use the click-and-collect and all the DIY apps. The week before the lockdown, we actually have seen a strong activity in our stores. So October has been a good month. And the first days of November are fairly reasonable. So we face no specific problems in our supply chain at the moment. So I would say we are -- we look very cautiously, but I wouldn't say optimistic -- not being too optimistic, but we see a reasonable trend as we speak. And last but not least, November and December are kind of low seasonality months for us. So we are less exposed in these months than we were in July, for instance.

Thank you. To what extent are bolt-on acquisition value creative? Can you elaborate a bit on the targets you are looking for, which countries, which segments, any assets up for grab at the moment?

That's a very confidential question. But I'd say we've cleaned the house. And I'd say wherever now where we operate, we do have strong business with strong teams and stronger and stronger operating discipline and software. So I would say with that, we are ready to look for acquisition in markets where we are strong. That could be France, that could be Italy, Spain or Portugal because most of these markets are still highly fragmented, especially Italy, Spain as well. So they are targets that we discussed with at the moment in various geographies. And they will, however, remain in the field of deco specialty because that's where we like to operate at the moment. And if any opportunity -- interesting opportunity could pop up in Northern Europe, why not going there as well. I'd say when it comes to why should we do that to create value? It's definitely scale effect that you get out of that and being able to help companies operating under the normal performance of the deco business to raise their bar into -- in terms of performance. That's what we can bring through acquisitions.

Thank you. Another question. Can you describe the nonfinancial help you receive from Wendel?

The nonfinancial help. We get a lot of support from Wendel because I'd say it starts with the Board that we meet on a monthly basis. We have all sort of committees -- audit committees that help us operate to always taking us to the next level of excellence. I would say we definitely get a lot of help when it comes to acquisitions because that's definitely topics that we discuss with the Wendel team. And Wendel is a very well-respected company in France and in Europe. And I would say just the fact of being part of the Wendel family is, for our employees and for our partners, a very strong asset.

Thank you. Could you please elaborate on e-commerce in your industry?

Yes. E-commerce, we kind of -- we tend to be an old-fashioned industry in many ways, but we've seen this changing rapidly over the last few years. So e-commerce means for us being able to provide the same service as we do in our stores from a web platform. So that can materialize as the sales through our store -- websites. But it also can be through the platforms of our big customers and distributors like Leroy Merlin or Castorama and soon Amazon. There was, in the past, some difficulty of shipping paint in -- rapidly to the end consumer or even the professional painters, but this has been addressed in the industry and as well as Cromology.

Okay. It seems we have absolutely no question by phone. So a very last question from the web. Who are your minority shareholders?

I'd say, I'm part of them. And so there is definitely, the management team as our minority shareholders plus some shareholders that were along with Wendel for a long time and the Materis deal.

Thank you. So the time alluded for the question has now expired. We must now turn to the next presentation. We now welcome Huub van Beijeren, CEO of Stahl, who will present his company from his location in Waalwijk, Netherlands. After the jingle, there will be a short introduction by André François-Poncet. and then the presentation itself, so please launch the jingle. [Presentation]

Now moving to Stahl. Stahl is an outstanding company, which we like very much and has been part of our portfolio for a long time. Stahl is a leader and a market consolidator. It generates a lot of cash flow, and it still has a lot of opportunities ahead. Right now, times are difficult, especially in the current sanitary and economic crisis, but management, led by Huub, has been very reactive. The EBITDA margin has been preserved, thanks to strong focus. Huub is a regular at the Wendel Investor Day. But for those who are attending for the first time, he has been Stahl's Chief Executive Officer since 2007. He's led the company through the financial crisis. He has succeeded in making Stahl the world market leader in surface treatment and coating solutions for a wide variety of materials. Huub, it's a great pleasure to have us now -- to have you now, I beg your pardon, and the floor is yours.

Thank you very much, Andre. I would like to take the opportunity to say to everybody, welcome to Waalwijk, because you're here in Holland. And I would also like to take the opportunity to thank you all because you're all customers of Stahl. You are indirectly using all kind of components that Stahl is providing to our customers. So you buy cars, you buy shoes, you buy all kind of sorts of things in houses that hold Stahl material. So thanks for that. And the second one I want to thank is the people of Stahl because they have done a fantastic job in bringing Stahl where it is at the moment through the crisis. And I think that also deserves a very big thank you from us. So thanks for that. And now moving to the presentation. Yes, Stahl is the world market leader in surface treatment and coating solutions for flexible materials. We are the leader in responsible chemistry. In 2019, we had EUR 809 million sales, and we had a percentage of EBITDA margin of 22.6%. Our biggest part of the turnover is Leather Chemicals, as you know, which is accounting for about 2/3 of the turnover, and the rest is what we call Performance Coatings, which is normal. Yes. Sales per region, we're well spread over the world. We have about 40% in Asia, 36% in EMEA and 26% in the Americas. And we have a diverse portfolio if it comes to the end applications. Many everyday materials you are using and they are having coatings. And those coatings are being put on there to enhance the properties of the products. But also, it's a reason. They last longer, they are softer, they're better resistant, all those kind of items are very, very important for coating. Next slide, please. So okay, we had a very good start of the year. Q1 was good. Apart from the sales in China, of course, in February and March, they were already down. But overall, we had a very good quarter. And then 45% less sales in the second quarter, that was heavy. I'd tell you, it's smack in the face. It came there. And of course, we were reacting immediately. And again -- and that's why I'm thinking the people, the quality of the people of Stahl has made as, I think, very resilient in this crisis that we had to face. That we were, I think, very active in taking all kind of measures. If it comes to taking measures, Stahl, I think, always has been very reactive and responsive if it came to difficulties. So I think we immediately said, listen, let's have our CMC philosophy. And the CMC philosophy is cost, margin and cash. In a market like this, when really your customers are canceling orders, and we had many days that we had more cancellations of orders than incoming orders, then it doesn't bring you so much to go to your customers and ask if they want to buy more from you. You cannot really influence that. But what you can influence is, of course, the things that you can really have a handle on and that is cost. So I think that's -- that we were good at already, and we did again. I think we went -- as I said, we went through the right watches on the costing side. We were also concentrating on the margins, keep the margins at a higher level, and I think we surprised in that, and we did very, very well. And then apart from that, we sought, well, as cashes came, let's concentrate on cash. And I think we did well over there. And in fact, what we did reduced the debt with EUR 100 million by good working capital management. All the usual things that you have to do. CapEx were very, very slim. So I think that also led us to the -- led to the situation that our underlying EBITDA margin is basically the same at the same type of level. So I think that entrepreneurial spirit that you always have in Stahl, which is embedded in the DNA of Stahl people I think, has brought us to we were now. Because gradually, after the second quarter, the sales started to increase again, though. The customers were coming back, they were getting orders. And you saw an improvement of the order book, a constant improvement of the order book, leading in September, October to levels of sales close to last year. That means also, of course, that the bottom line with cost control, good cost control, good margins that makes them also that your bottom line is going gradually better and it's at a very good level at the moment. Okay. I say, the recovery was starting quickly in China already. And in China, we're really making record months. So it is better than last year, far better than last year. And also the Polymer division did a very good job worldwide. Next slide, please. Okay. New ways of working with customers. Listen, we -- as you all know, is Stahl always had an enormous intimate relationship with its customers. We have 600 technicians. We call the golden hand that salespeople working with customers, and that had to change, that had to change because they couldn't travel anymore. So we were really accelerating our engagement if it came to the digital side of things, really digital got traction at Stahl because it is. We were working on digital, but it really got at a very, very high professional level because of -- I think because of the COVID situation. We had to talk to our customers. We had to talk to the brands. We had to talk to the automotive industry. We had to talk to the NGOs, and we did that. And I think we listed it at a very good professional level. What we also did, we kept supplying because the customer who, again, gets orders once we supply quickly, we supply it quickly. And I think that is what we did. We also improved our ESG performance and also helped our customers to do the same thing. Because we have many customers who are talking about it, but I think they need help, and I think we did. We need -- we also help them on the, say, the technical applications of things to our studios that we have are technical centers. And we were regularly sending newsletters, organizing webinars and things like that. And at the same time, I think it really Stahl origin, keeping 2 feet on the crowd. And executing on your CMC philosophy, cost, margin and cash. Next slide, please. Okay. And then I think we also did understand that you go into a crisis as everybody else, nobody can help that. But at the same time, you go into a crisis, I think you should already realize how do you want to get out. You want to get out stronger than your competitors. You want your relative position to improve. And I think that is what we immediately also wanted to do. So we accelerated all kind of initiatives that were already being taken earlier, like open innovation. We -- I think now we have an innovation officer at the management team. So I think that is very important with the team of people driving open innovation, working with partners, working with universities, working with suppliers, say, leveraging on the knowledge that Stahl has and other people have and combining that. Digital transformation, major impact on the company, as I said already. Renewable carbon feedstocks. Well, we're driving processes to make sure that we are not dependent if it comes to fossil fuels because there is an end to it and we have to steer the company in different ways. So we are working on natural resources and biotechnical feedstocks, those kind of things we're working on, I think, in a very concentrated way. And then, of course, ESG is in our DNA, and I think we are working on that very strongly. So next one was that luckily, we have a very strong regional organization. I think we benefited from that a lot. Think global and act local is in the DNA of Stahl and is making the company strong. Whilst some of our competitors are very centrally-led, while we gave a lot of, I think, responsibility and opportunities to our local organization. For instance, in Brazil and in China, we have a very strong organization. And that goes for all, I think, for all the regions that we have in the world. And then we also launched a Chinese website, a real Chinese website. Because the normal Stahl website was very difficult to access in China. So we built one in China. It is really a Chinese one. Next slide, please. Monthly sales. You see the big dip was in the second quarter. We're close to last year's levels again. So that's good, as I told you. EBITDA level, yes, margin was protected. So we stated at a very good level, I think. Leverage staying at the same level. And I think it shows a resilient business, the resilient business. Next slide, please. Expanding Stahl's leadership on ESG. Yes, I think ESG has been already for several years, been very important for Stahl. So we have concrete commitments if it comes to the years to come. We want to do the things better and better. I think that is in the way we operate. So we can, I think, do things a lot more professional by really concentrating on them. So if it comes to the ESG reporting and compliance, I think it's important also that we are, I think, have really a team concentrating on the progress that we made. So we have our goals. And I think if it comes to the progress, it is also being measured the duty of care at EFPD, which stands for Extra Financial Performance Declaration. That is an ESG legislation, which is 4 listed companies. But since Stahl, of course, is part of Wendel, we are doing those kind of things. And I think we take it very seriously. Yes, and we constantly are upgrading the Stahl ESG annual report. Next slide, please. The takeaways. Okay, we took swift action and then strong focus on cost, margin and cash. The quality of our people helped us through this whole crisis. New ways of working, we've spoken about it with our customers and it's strengthened Stahl's business model. We have a very strong regional setup, and that means a strong relationship with our customers in the different regions. We have established an ESG roadmap and as clear commitments that we have and they are measurable. And of course, the conditions at the moment are unclear. Nobody knows what's going to happen. And it's getting worse in Europe if it comes to COVID. But I think we have shown that we have a very strong organization to face the challenges even if they would come back. So thank you very much for that. That was the last slide, I think.

Yes. Thank you very much, Huub. So time for Q&A now. [Operator Instructions] So the first question from the web, you are quite exposed to Chinese Asian markets. Can you give us more insight to what is going there for you?

Yes, very good question. Thanks very much for that. China is a very important country. Of course, we have a production location. We have a full-fledged organization over there with a very good management. And we've been very successful in the last, say, 5, 6 months. After the COVID crisis over there, I think the market has improved enormously. As I said, we're making record turnover at the moment in China. And that is based on the internal market for big part. So we've been really been successful not only in the automotive industry, but also in all kind of other industries. So happy with China, and I would like them to grow -- to keep on growing. If it comes to the Rest of Asia that part of the world has been more difficult because they were far more, say, exposed to export markets like Europe and U.S. But at the moment in the last couple of months, it's increasing. And again, last month, we had a record month in Rest of Asia. So things are improving there because also the demand from the export markets are coming back.

Thank you. Could you give example on how you support your clients on improving their ESG performance?

Yes, indeed, we can. We have very good customers, and we have big customers, big multinationals who are doing all kinds of things on their own. Of course, they have their full staff, but we also have middle, what you can say, middle-sized family type of businesses who sometimes need some help if it comes, for instance, to sustainability, and we have a lot of experience. We have our technical centers where we educate people and also on the part of sustainability, and that is very well appreciated by the customers. They can send up their people to us, not at the moment, but that's what normally happens. And there, I think we do a lot of good by helping them to get further on the road to sustainability.

Thank you. So Stahl has historically grown through large acquisition, Clariant, BASF. What are the future growth drivers for your company? And what growth rate can be expected over the medium term?

Yes. Always difficult. Because indeed, we had a couple of very good and big successful acquisitions, very happy with that. But always difficult to time things because we want to create value and we don't want to destroy value. And that makes you, of course, critical if it comes to the opportunities. We, of course, are looking into the market. I think we're busy with several things. But it is a matter of timing if those kind of things are coming to fruition. So there, I cannot really tell you if that's going to go quickly or that we have to have a little bit of patience. But definitely, with the help of Wendel, we're always, I think, very active to look for the right opportunities.