Prosegur Cash SA

MAD:CASH

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Prosegur Cash Q1 2024 Results Presentation. At this time, all participants are in a listen only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Miguel Bandrés, Head of IR. Please go ahead.

[Miguel Ángel Bandrés Gutiérrez, executive]

Good morning to everyone, and thank you for joining today's call. I'd like to welcome you to our 2024 Q1 results review that will be led by our CFO, Javier Hergueta and myself. The presentation will last around 30 minutes in which we will share the main events that have taken place in the period and how they've affected us as well as the drivers behind our performance. We will also review our key financials, our geographical performance and our transformation effort with specific dive into our core bank initiative. After we will open a Q&A session. Should we not get to respond everything today, we'll get back on remaining topics on an individual basis. I want to again thank you all for your attendance and remind you that this presentation has been prerecorded and is available via webcast on our corporate web page that you can find at www.prosegurcash.com. Now before letting the floor to Javier, I would like to share some news regarding cash that have lately appeared in the media. They range from the appreciation Germans have for cash to the predominance of cash in Latin America, the growth of froth claims for banking transactions or the widespread failure of digital payment systems, all of which only but increase the relevance of cash for the system. In the first means, we can read in an economy a on the strong preference Germans have for using cash over electronic payment meant for the daily transactions. They rely so strongly that they carry on average between EUR 100 and EUR 150. We asked on what they must worry about cash, they underline it's the privacy it provides you with. And we can see this is a feature of growing importance among citizens across the world. Second, I'm now reading from Semana in Colombia, where we learned about a study from Bain & Company that in 2023 in countries as relevant as Peru, Mexico or Colombia, the use of cash exceeds 60% of the total transactions. This is particularly relevant since these are markets where diesel payments are thriving, but showing them to be mostly competing amongst themselves for consumer preference. In the next piece of news, we can read from Cinco Dias that the amount of fraud claims placed before the Bank of Spain related to banking transactions continue to raise and have more than doubled in the last year, exceeding EUR 6 million. This is not at as this type of product is only increasing, showing the weaknesses of noncash transactions for consumers. And in the fourth news, we can see that digital payment failures continue to occur in a widespread manner. After the severe failures reported in Spain and Portugal, more important problems have occurred in all regions, from France or the U.K. to Colombia and Australia. These events claim for the importance of having a robust cash infrastructure to assure the proper reliability of the payment system, so the economy can keep on moving. The resilience cash provides for the system is definitely second to none. After this brief news update, I will share today's agenda. First, Javier will review the highlights for the period. He will then follow to review the key financials for the quarter as well as updating on our transformation strategy with a specific type asset into our core bank business, after which I will review key aspects for region. And then Javier will share the key takeaways before opening the Q&A session. So without further delay, I turn to Javier, so we can share with us these previous highlights.

[Javier Hergueta Vázquez, executive]

Thank you, Miguel. Good morning to everyone, and thank you for attending. I will with pleasure to share the highlights of this first quarter of 2024. We are reporting sales that are slightly below those we saw 1 year ago by 1.4%. The main reason behind this being the deconsolidation of our Australian operation as well, there continues to be a relevant impact from currencies. When factoring out these effects, there are several very important aspects I would like to underline. First, the 2.7% growth of our sales when we exclude M&A effects despite the mentioned currency impact; second, the fact that we consistently see strong double-digit organic growth across all the geographies where we operate, both in emerging and in more mature markets. And thirdly, we start to see the important gradual compensation in Argentina for the devaluation. After last year's December devaluation, we have seen how the currency has gradually devaluated at a moderate 2% to 2.5% per month, whilst inflation despite being lower month after month, with January reaching plus 20%, February around 18% and March at 11% has been substantially larger than the former. The translation of this inflation will be captured as the year progresses. Regarding margins, we can see that in terms of EBITDA, this has reached 10.7% of sales. This figure is the result of an overall strong business performance that has been mainly affected by restructuring costs in Australia, which I remind have no cash flow impact and the important effort we are making to continue to open Forex stores in what is by nature its lowest quarter of the year. We are opening 40 stores in the first 4 months compared to the 50 opened in the last year as a whole. I would outline the important growth in our net profit as compared to the one reported a year ago by 25.2%, fundamentally on lower financial costs and a more efficient tax performance. On the transformation front, which you all know is very relevant for our company's strategy, I am very proud to share that it now has a share of 31.7% of total sales. It continues to grow clearly surpassing the 30% mark and levered on the delivery of the key 3 solutions being it Cash Today, Corban and Forex on whose growth we continue to invest, as I have just mentioned. Regarding cash flow for the period, we have generated EUR 1 million. This figure is fundamentally affected by, on one side, the fact that the quarter close has been during Easter week, which has, to some extent, affected collections and as well by the investment required to grow on Forex. Other relevant events that have taken place in the period our MSCI rating has been upgraded to BB proving an important recognition to our ESG-related efforts and our active management of the risks associated to it. We have redeemed 2.5% of our treasury stock in the period, which evidently results in a higher participation of current shareholders in their company and has an accretion effect on EPS and the fact that we will consolidate India from April 1. This is a very promising market we know well and where important development is taking place. We are confident this will be a key pillar of our growth in the near future. I will now turn to the key financials for the quarter. When we look at this quarter's sales figure, we can see they have reached $470 million, which is a slight 1.4% decrease over the same figure 1 year ago. It is important to note in this environment, the very relevant organic growth of close to 52% as well as the still significant currency effect impact of over 49%. It is, however, the negative impact of inorganic sales that brings the absolute figure to $470 million, driven mainly by the deconsolidation of our Australian operations. It is important to underline that when isolating M&A, sales grew despite the above-mentioned strong FX effect. At the EBITDA level, we reached EUR 81 million, which implies a relative profitability versus sales of 17.2% and a decrease of close to 5% versus last year. This decrease is affected by restructuring costs of our Australian operation, the opening of new currency exchange stores and the effect of Forex and country mix. Depreciation totaled EUR 31 million with an increase versus 2023 of $6 million, due mainly to the exchange business. With this, we reached an EBITDA of EUR 50 million, 10.7% of sales and EUR 10 million lower than last year due to the aforementioned reasons. We expect to see an improvement of the margin beating last year's levered mainly by the Argentinian, German and Forex businesses evolution. Amortization remains at EUR 6 million, with which we reached an EBIT of EUR 44 million, representing 9.3% of sales. The financial result is of EUR 11 million, showing a significant improvement over the prior year fundamentally because of a lesser currency impact. Earnings before taxes reached EUR 33 million, 7% of sales and a significant 13.5% improvement over the prior year. When turning to the tax rate, it is a relative 46.5%, showing an improvement of 500 basis points versus the one in 2023 first quarter. With that, we arrived to a net profit of EUR 18 million, which is EUR 4 million better than the 1 year ago, a 25.2% improvement and represents 3.7% of sales. It is in the bottom part of the P&L where we see a very substantial improvement, which we are confident we'll keep on seeing as the year progresses. With this all, we can as well see that our earnings per share have climbed by over 28% to 1.188 cents. Turning to Page 5. We can see how our cash flow and debt position have evolved in the period. departing from the EUR 81 million EBITDA we saw in the prior page, provisions and other items account for EUR 6 million. Income tax outflow totals EUR 16 million, and CapEx expenditure increases to EUR 22 million and continues to be driven by an increase in customer base revenue-generating assets, such as Cash Today and Forex openings. And working capital amounts to EUR 35 million, a EUR 3 million increase over that reported 1 year ago. The main reason for this is that the quarter close has taken place during Easter having had a delay impact in some collections that have been already recovered in the first days of April. With these effects, we reached a free cash flow for the period of EUR 1 million. However, we expect free cash flow to significantly recover in coming quarters on the back of the business improvement and the recovery of temporary effects in working capital. Interest payments for the period totaled EUR 10 million, M&A-related payments reached EUR 26 million. And the other slide as well, experiences a substantial decrease to EUR 6 million in line with what we anticipated in previous presentations. All in all, total net cash flow is of EUR 40 million, representing a EUR 4 million improvement versus that of 1 year ago, with higher impact from M&A payments, which go straight to reducing total net debt. With this, we reached a net financial position at the end of the period of EUR 664 million, as notably, there is no exchange rates impact in the quarter. IFRS 16 debt has increased by EUR 7 million to EUR 122 million, driven fundamentally by the growth in the Forex business, deferred payments have seen a reduction of EUR 24 million, totaling EUR 125 million, and we see as well a reduction of treasury stock to EUR 6 million after the aforementioned redemption. This treasury stock redemption is, as you can see, the main reason for the increase in net debt. With all this, we reached a total net debt of EUR 905 million. Our leverage ratio reaches 2.8x EBITDA being temporarily affected by the 2023 fourth quarter currency impact. We are sure this is a set of temporary effects and despite it, we are well below our covenants as well as we are maintaining our rating. With this, I will now go over to update on our transformation efforts, which we can see in Page #6. Our transformation products continue to grow in a very healthy manner, and we are very proud to say that their penetration over total sales only continues to grow. They now amount EUR 149 million. When compared to 1 year ago, we have grown by 11.5% or EUR 15 million, while our penetration has increased by 370 basis points, and it now reaches 31.7% of total sales. Customers continue to show a very positive response to our transformation products, and this is the case across all geographies, all of which have already surpassed at least the 25% mark over total sales. All transformation products continue to show strong growth, but it is once again Cash Today, Forex and Corban that are performing especially well. Cash today is growing strongly in all geographies. Corban is delivering strongly in LatAm, and Forex is doing particularly well in Europe. In Page #7, I would like to share with you some further details of our Corban business line, which, as you know, is a pillar of our transformation strategy. With this business line, we are currently present in 6 relevant Latin American countries, these being Uruguay, Brazil, Honduras, Peru, Ecuador and Colombia. We have developed capabilities of different types to serve these markets. The main benefits for our customers, mainly financial institutions are that it provides a complete control of the cash cycle in one single partner. It provides with clear distribution network efficiencies since we are able to attend markets in a more economical manner. Through pairing with third parties, we are able to substantially increase the reach of our partners towards their end customers. we as well have increased the number of available services with which to attend end customers. And all of the above levered on a top-notch technology can platform as well as with a very developed operational platform, both of which result in greater efficiencies and scalability. And all these achieved through 3 main Corban models we are offering to our partners. First, we have the robust model under which we can run a dedicated facility for our partner and in which there is a clear direct cost are rates. Second, we have the retail model in which we partner a retailer to provide the Corban services in its own facility. Here, the retailer gains traffic into its business as well as a fee for generating transactions, whilst our partner gains distribution reach and is able to diversify services and so do in a more efficient manner. And third, we have the digital model complementary to the previous ones and where the customer interaction is fully digital. It is the latest, most efficient method and needs an extension to digital banking. The key benefits for Prosegur Cash are clearly encouraging the use of cash in society since it multiplies the points at which it can be made available as well as it facilitates transactions that can be settled in cash. It allows for synergies with the core business as servicing points are or can be within our logistics umbrella. It as well enables cross-selling other cash products and enables us to offer services both in physical and electronic environments in a similar operational scheme, and it results in a scalable platform from which to continue growing once we have acquired and developed the needed capabilities. Last but not least, from a KPI standpoint, its current revenues are in the EUR 100-plus million range and growing organically in a strong manner. From a profitability standpoint, average EBITDA margins are in the 14% to 16% range, hence above our average level. We have so far established over 1,000 robust-sized as well as over 40,000 retail ones. We have over 10 banking partners for the robust model and thousands of partners to which we serve, for instance, allowing for the payment of utilities, telecom services or other recurring expenses, generating over 164 million transactions yearly. We are sure this business will be a key growth in China for our future, both in the physical and in the digital world. As of now, it's already a very established reality in Latin America, and we are confident that this model will be exported to other geographies since the service and the cost it provides for banking partners is second to none. I will now turn to Miguel so he can update us on our regional dynamics.

[Miguel Ángel Bandrés Gutiérrez, executive]

Thank you, Javier. Regarding Latin America that accounts for 63% of total sales, revenue has reached EUR 297 million in this first quarter. This implies a $7 million reduction versus the same quarter a year ago, driven by currency impact. I would like to highlight the healthy organic growth all across the region. However, transformation in the region has improved accounting now for 33.3% of its sales after having grown by 7.8% and reaching EUR 99 million. When considering Europe that makes up for 1/3 of total group sales, this have reached EUR 155 million in the quarter, incline a 14.3% increase and EUR 19 million more than a year ago. It's important to highlight the strong performance of organic growth in the region, which reaches 11.3% as well as the positive contribution of inorganic growth of 2.6%. The Transformation as well shows a very relevant improvement in Europe, with sales of EUR 46 million, having grown by 34.1% and EUR 12 million versus 1 year ago and reaching now almost 30% of renewal sales. This strong transformation growth is driven by a very good performance of both Cash Today and Forex solutions. Lastly, when looking at the Asia Pacific region, which accounts for 4% of total sales, we can see they've reached EUR 18 million, a 15.2% decrease versus 1 year ago. It's important to underline that the fall in this region is driven by the deconsolidation of our Australian operations. If we net this out, we can see that organic performance has reached a very healthy 12% growth. Transformation products have reached EUR 5 million in the period, which despite being almost 42% less than 1 year ago, it makes up for 25.6% of total sales in the area. This means transformation products penetration has increased by 370 basis points. With this, I hand over to Javier, so he can conclude.

[Javier Hergueta Vázquez, executive]

Thank you, Miguel. I would like to summarize what has been an important first quarter where our net income has seen a very significant increase of over 25%. We have been able to grow our sales when excluding Australia's deconsolidation by 2.7%, while achieving double-digit organic growth in all geographies, and we have been able to gradually compensate in Argentina for the valuation. In terms of margins, we've reached 10.7% of sales in relative terms, affected by restructuring costs in Australia, which have no cash flow impact and as well affected by the opening of 4 stores in what is its lowest quarter by nature. The idea behind being to continue growing business line and have more stores ready for the higher performing second and third quarters. With different efforts on the transformation side and with the support of our customers' transformation sales reached now 31.7% of total sales levered in the above-mentioned Forex business as well as a very strong performance in Cash Today and Corban. In terms of cash flow, we have reached EUR 1 million in the period, affected by the calendar effect of closing the quarter during Easter weekend, hence, affecting collections as well as by the investment effort we are incurring in the Forex expansion. As well, it's important to remember that our ESG strategy has been once again recognized by, in this case, MSCI, upgrading its rating to BB. We have redeemed 2.5% of our treasury stock with the corresponding accretive impact to our shareholders. And lastly, India is to be freely consolidated from April 1 this year. It's a country where we are being present for a number of years now, a market we understand well and which we are sure will bring a lot of important growth opportunities in the future. As you can see, many things have happened, and we have the base ready for many more important things to occur. We are very confident that as the year progresses, our figures will recognize such an improvement. And now I would like to thank you for your attention and open the floor for any questions you might have.

[Operator]

[Operator Instructions] We will now take the first question coming from the line of Miguel Gonzalez Toquero from JB Capital.

[Miguel González Toquero, analyst]

Yes. I got 3. Firstly, on your strategy to open new stores for Change Group. Maybe you could clarify this era bit like how much you expect this could imply in terms of CapEx or leasing for this year? Secondly, on India, you mentioned you will be consolidating this division in April. So why this -- did you require any additional stake and what impact should we expect in terms of sales or net income? And lastly, on Argentina, from what you just commented, the lower depreciation and higher inflation so we have a positive impact on P&L. But given the inflation this quarter, I want to hold the pass-through is going. And if you think we could see a strong rebound in terms of cash flow already in the second quarter? Or maybe you saw weaker volumes that might offset or despite effect? And what related to this, you think free cash flow for this year could be about EUR 100 million this year.

[Javier Hergueta Vázquez, executive]

So on the first one, related to the new stores on the Forex business, I could say that the strategy here is more on accelerating the openings in Q1 so that they are at full speed in Q2, Q3, which are the strongest quarters for the business, it is pre seasonal in nature. So the acceleration is not something that should be extrapolating going forward. There will be some more openings, but not at the same path that we have undertaken in Q1. So I would say that maybe this quarter, this effort created additional CapEx, which would mean that we, I would say, around $3 million or so. But you should not extrapolate that going forward. So I think that it's part of the strategy of the business, and that's something that we should be on every year in order to have [indiscernible] the commercial space as a running at full speed, but you should not extrapolate that going forward. Okay. Secondly, in relation to India, this is just because certain agreements related to the governance of our joint venture in India have taken place right now, and that's the only reason for it. No additional stake being acquired or any other thing early agreement that has taken place right now. And that's why it's 1st of April, the moment in which we are consolidating. We think this is a very good opportunity for providing visibility for a very good business, which is significantly growing. And we think that, that should be seen in the figures and the impact it may have in our numbers. In terms of sales, I think you might be assuming on a run rate basis, that it could be contributing in the region of around EUR 80 million with double-digit margin, close to double digit margin in terms of EBITDA. So it's something that should be quite significant itself. And in relation to Argentina, we feel very positive about Argentina right now. We think that there's a very promising context in the coming quarters. And that's the fact for several reasons. First, because there's an ongoing catch up, as we mentioned, an ongoing process in the inflation versus evaluation trade-off, which will significantly increase as the year progresses and should show the positive impacts of the coming quarters. But secondly, the pricing review mechanics, which are going pretty well and the rule of passing through 100% of the customer is being made in all geographies. In the case of Argentina, there's always a time lag in the implementation of the price increases and the impact coming from the highest inflationary bonds in the end of Q4, mid Q1 and '24 is something that we are starting to see now in April in the networks. And therefore, it's in the coming months and in the coming quarters. So it's not yet fully reflected in the numbers we are seeing today. And thirdly, one more thing to bear in mind is that you know that there's an ongoing process of issuing higher denomination notes in the country. The equivalent to pay us will be there in Q2 on the [indiscernible] in Q3, and that compares to maximum face value of EUR 1 or very marginally EUR 2 today. So that should allow us to generate very significant efficiency or efficiency gains that will arise, therefore, in Q2 and Q3 onwards. So all in all, when we put that together, we are very positive about Argentina in the near future.

[Operator]

We will now take the next question from the line of Francisco Ruiz from BNP.

[Francisco Ruiz, analyst]

Miguel. Just one first to clarify, you say EUR 18 million or EUR 80 million in India in sales?

[Miguel Ángel Bandrés Gutiérrez, executive]

We said EUR 80 million.

[Francisco Ruiz, analyst]

So I have 2 more questions. The first one is also in Argentina. I mean, it's very visible, the possible impact of the current situation according to the accounting rules on presentation in sales and EBITDA. Do you think that is going to be the same in terms of cash flow? And the second one is on Australia. So could you give us what's the amount of the one-off in Australia or the impact if they will continue in the future quarters? And also what is the contribution of associates? Thank you.

[Javier Hergueta Vázquez, executive]

[indiscernible] additional 2 questions, Margo, in terms of Argentina but in cash flow, I think, yes, we are also very positive in terms of the cash flow contribution that might be coming from Argentina. Because if you look at it on an overall perspective, 2024 versus 2023, what we see now is that the unofficial exchange rate is not very different from what it was last year. So we are seeing the business growing very significantly in local currency terms. So a lot of the cash flow that we repatriate, which is much more in Argentinian pesos. It's going to be brought at exchange rate, which is not very different than the one last year. So much lower cost entering to the attrition of the cash and more pesos being brought to the private company. So when you look at it net-net, I mean we could have a much stronger cash flow attribution overall. And in relation to Australia, the impact in the quarter for this integration cost might be close to EUR 2 million. And I think we should still expect that to be there for the coming quarters, at least for a couple of quarters. The integration process is 100% complete, which is ongoing right now. I didn't capture the your last part of the question about contribution. Can you repeat that one?

[Francisco Ruiz, analyst]

Yes. It's mainly on the contribution of Australia in your equity accounted in associates because you put it all together and I would like to know what it is?

[Javier Hergueta Vázquez, executive]

Okay. Well, for the time being, I would say that most of the delta year-on-year is basically concentrated in these one-off costs. So we shouldn't see a very significant impact other than that right now. So on the integration, as I said, is ongoing, and we expect the contribution to be much more visible once the integration is fully completed.

[Operator]

Okay. We will now take the next question. from the line of Alvaro Lenze from Alantra Equities.

[Alvaro Lenze Julia, analyst]

Just looking at Latin America, it's been difficult to know the moving parts in Latin America due to the significant impact of Argentina and the lack of country-by-country disclosures. So if you could plan us through how is the performance going in other countries in Latin America other than Argentina and if those are growing in euro terms in terms of sales and profits? And then my second question would be on M&A, if I am not mistaken, most of the EUR 25 million M&A payments that you have done this quarter related to pending M&A payments. If we could expect more payment of the pending earnouts or if we should see some additional M&A? Or if instead, you are going to focus on shareholder remuneration via both dividends and buybacks?

[Miguel Ángel Bandrés Gutiérrez, executive]

With regards to the LatAm moving parts, I think a good reflection on that is that if you take out Argentina of the perimeter, the figures show that there's a significant growth in euro terms. And therefore, the whole of the region is in very good shape all across the board. So I think that's the best reflection you can make out of that. And I would say that, that's even accelerating when you take Argentina. So very good behavior in all of the countries in the real. And I think that the figures we are focusing on a minus 2.5% are directly related to the impact on the exchange rate coming from Argentina. But when you take that out, I mean it's, as I said, a significant growth in euro terms. With regards to M&A, 100% of the EUR 25.6 million we are posting in the M&A line is related to payments from previous transactions, so related to the earnouts. Going forward, I would say that you should expect more payments in this line, again, related to the earnouts of previous acquisitions. But additional M&A, if any, should be marginal. And I think that the intentions were most of cash flow within the capital allocation mix to be oriented towards shareholder remuneration and net debt reduction.

[Alvaro Lenze Julia, analyst]

And if you could please, as a follow up, maybe provide us some ballpark numbers of what is the contribution of Argentina in a range now between 10% and 30% of revenues in Latin America are between 20 and 50 something like that.

[Miguel Ángel Bandrés Gutiérrez, executive]

Well, we don't disclose on a per country basis. But as you can imagine, the weight of Argentina in total Latin America is reducing due to these exchange rate effect we were mentioning before, Argentina and Brazil have typically been the 2 main [indiscernible] every year. And after the devaluation, as you can imagine Brazil is weighing significantly more than Argentina. Just to give you some color on that.

[Operator]

We will now take the next question from the line of Enrique Yáguez from Bestinver Securities.

[Enrique Yáguez Avilés, analyst]

I have 3 questions. The first one is regarding your new strategic plan for the period 2027. I know that Prosegur & Company said that the aim of this plan will be cash flow generation and efficiency and that in turn, the objective was accelerating the new product development. But I don't know if you could give us some broad indications about the Financial objectives of this plan or at least when we will know about those financial objectives in the case of process. Second, in terms of profitability, EBITDA margins for this year, I don't know if you could give us some guidance or at least an indication of what kind of profitability should we expect with the process of but fruit will be completed. Finally, in terms of CapEx, you mentioned expansion with new products that require some CapEx. And my guess was that the CapEx was going to increase this year, but CapEx remains flat in this first quarter. How should we look at CapEx for this year also. Thank you very much.

[Javier Hergueta Vázquez, executive]

Good morning again. So one by one on the strategic plan. I would say that the main pillars of the plan will be focused on efficiency and profitability gains on the one hand, acceleration of the transformation on the second and thirdly, and clearly a strong pillar, enhancing and focusing on cash flow generation. So when you put that into figures, I mean, we have not disclosed that. We're not going to move today, but I think that if you look at the 2030 guidance that we gave in the Capital Markets Day keeps being a valid reference as of today. So we just take that a very good market. In relation to the guidance, I think that 2024, we believe, will be a very good year for us. So we are firmly convinced that we can beat consensus, which I think is now slightly over EUR 1,900 million for sales at around EUR 270 million for EBITDA. So that implies around 40% margin. So we think that the figures in the consensus are visible, and we are firmly convinced about that. And all in all, we are pretty sure that we will deliver very strong EPS enhancement in 2024. And in relation to CapEx, I would say that on a full year basis, you should not be expecting an increase versus last year. So CapEx should remain more or less in line. We are investing into the new products, but we did so last year. So that should not be very differential from 1 year to another. So that's more or less the level that you should be taking into consideration.

[Operator]

[Operator Instructions] We will now take the next question from the line of Manuel Lorente from Santander.

[Manuel Lorente Ortega, analyst]

Just a follow-up on India. Sorry, but I missed the explanation of why it's tapping the full consolidation of India at this stage. And also to confirm that the EUR 80 million sales contribution is on a full year basis or starting for -- sorry, starting since the beginning of April.

[Javier Hergueta Vázquez, executive]

On the reasons for consolidating India, as we have said, it's simply because we have reached some agreements with our partners in India related to the governance of the joint venture that we have there, and that has happened right now. So that's the only reason for starting consolidation and agree first. And with regards to the impact, the EUR 80 million I was mentioning was on a run rate impact. So if you look at the full year or so from 1st of April till December, you should consider more or less something around EUR 60 million to EUR 65 million. That's what we should be expecting that.

[Miguel González Toquero, analyst]

And up to April, how was this Indian segment consolidating?

[Miguel Ángel Bandrés Gutiérrez, executive]

It was consolidated under the equity method, has been the case for a while already since we invested in India.

[Manuel Lorente Ortega, analyst]

Okay. So my second question is on the [indiscernible] volumes on the European market, 11% organic growth for Europe looks pretty solid. It's fair to say that the vast majority of that growth is coming from, let's say, new developments or transformation segments. But I would like whether you can give us an idea whether the volume pricing trends for the more proved transport and cutting transit business because doing the math reversely, looks like that pure core business is roughly flattish or slightly down, but I will want to double check my feelings with you guys.

[Javier Hergueta Vázquez, executive]

We give the numbers in Europe in Q1 and what you can track from there is that the traditional business is growing at a high single digit, and we can do but the math afterwards. And that is a consequence of inorganic activity from here on a year ago and the organic growth on a 50-50 basis, more or less. So the organic growth will be a very significant figure if you consider Europe to be a material margin. And there's, of course, a price volume mix in on that. So I'm happy to take the last awards but the impact is, as I said, more on a high single-digit impact in traditional in Europe rather than flattish as you were pointing.

[Manuel Lorente Ortega, analyst]

Okay. But that high single digit is organic also inorganic?

[Miguel Ángel Bandrés Gutiérrez, executive]

As I said, so the high single digit is the combination of both organic and inorganic, and that's more or less 50%. So the organic implicitly is growing at a healthy rate.

[Manuel Lorente Ortega, analyst]

Okay. And excluding the inorganic contribution, the pure organic, let's say, low to mid-high single digits, it's pricing driven or a mix between price and volumes?

[Miguel Ángel Bandrés Gutiérrez, executive]

There's a combination of both price and volume.

[Manuel Lorente Ortega, analyst]

Okay. And just my last question is on the net debt phasing throughout the year, do you believe that this roughly EUR 900 million is the peak of the year and we should gradually go down. And if that is the case, we will really appreciate that indication of up to what levels. It's returning to the end of last year a reasonable assumption? Or is any specific situation, whether that should be clearly above or clearly below that level.

[Miguel Ángel Bandrés Gutiérrez, executive]

So in relation to net debt, as you know, our first course is typically seasonal in terms of net debt increase and the pattern is more an increase in Q1 and better reduction going forward. Actually, this year, the seasonal impact in Q1 has been lower if you exclude the share buyback variation. So from now to the end of the year, you should be expecting a gradual reduction in terms of net debt. Typically, Q3 is the strongest in terms of free cash flow generation. So you should see also a similar impact in terms of net debt reduction, which could go down to a little around the one we had last year, below around that figure. The integration that the dividend we just announced will be paid in the coming quarters, and that also plays a role. So -- but that's embedded into that gradual reduction that I was just mentioning. So we should be down to more or less where we were last year.

[Operator]

Thank you. There are no further questions at this time. I would like to hand back over to Javier Hergueta, for closing remarks.

[Javier Hergueta Vázquez, executive]

Thank you. Thank you all for taking the time. We just want to highlight once again that this first quarter, we have posted a 28% increase in EPS, which we think is a very good signal. And this is just the starting of what we anticipate will be a very good year for us in which we are sure that this positive trend will continue going forward. I'm happy to speak to all of you again in the coming quarters and hopefully review our figures and the delivery of those. And in the meantime, if you even further clarifications, as always, our Investor Relations team is available for any queries you may help. So thank you once again speak next quarter. This concludes today's conference call. Thank you for participating. You may now disconnect.