Bureau Veritas SA

PAR:BVI

Earnings Call Transcript 2018-Q1

[Operator]

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to your Bureau Veritas 2018 First Quarter Results. [Operator Instructions] I must also advise you that your conference is being recorded today on the 26th of April, 2018. I'd now like to hand the conference over to your host, Didier Michaud-Daniel. Please go ahead.

[Didier Michaud-Daniel]

Thank you. Good afternoon, and good evening to everyone. Thank you for joining Bureau Veritas' Q1 2018 revenue call. Nicolas Tissot, our CFO, is here with me to present the financial review. Q1 2018 confirms the acceleration of our organic growth compared to last year. Our 5 growth initiatives continue to gain traction. Revenue for the quarter was EUR 1.10 billion, up 4.7% at constant currency, with organic growth of 2.6%. All our business growth, apart from Marine & Offshore, 5 out of 6 businesses grew at 3.6% organically on average. Among the best performers, Certification, growing at 6.7%; Consumer Products at 5.9%; and Buildings & Infrastructure at 4.1%. This growth is primarily led by our 5 growth initiatives which are up 6.2%. On the M&A side, acquisitions continued to bolster our growth, adding 2.1%. We have closed 5 strategic acquisitions since January, supporting the Buildings & Infrastructure, Agri-Food and OpEx growth initiatives. As anticipated, the currency impact was negative minus 8%. Our full year outlook is confirmed.We can move to Page 6. Before having a deeper look to the group's performance as released yesterday, new changes to the organization will go into effect on May 1. The management of our commodities, industry and facilities business in Europe will be split in 2 with the objective of being fully aligned with our market-centric organization. Africa will be now covered with France, including Government Services. In parallel, we will concentrate our efforts on the right of Europe, notably Italy, Spain, Benelux, the U.K. and Germany. We are pleased to welcome Jacques Pommeraud coming from SAP and Laurent Louail coming back from BV operations in Australia to the Executive Committee.Page 7. In 2018, we started the year adding around EUR 80 million of annualized revenue with 5 acquisitions, all supporting our growth initiatives; EMG and lubrication management, which we announced during our full year results, focusing on B&I and OpEx, respectively. And 3 acquisitions in the Agri-Food space, completing our footprint notably in Asia, which totaled EUR 6 million of annualized revenues. Labomag in Morocco, Shandong Cigna in China and in Japan, Food and Environment Analysis Center. Now I will hand it over to Nicolas for the financial review.

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Thank you, Didier. Starting with the revenue bridge for the first quarter of year 2018, organic growth reached 2.6% despite the slight negative impact of calendar day. Acquisitions had a 2.1% contribution to top line growth with a negative impact of 0.3% at the group level due to the 2017 divestment of nonstrategic NDT activities in Europe. ForEx had a negative 8% impact, which is mainly attributed to the appreciation of the euro against the USD and pegged currencies as well as emerging countries currency. Should the euro-USD rate remain in the 1.20, 1.25 range, we would expect the full year 2018 top line to be negatively impacted by around 4 % and adjusted operating profit to be negatively impacted by around 6%. All in all, revenue growth reached 4.7% at constant currency.Turning to growth by business. First point is that most of the portfolio, 5 out of 6 businesses, representing 93% of the group's revenue reached a very healthy pace of organic growth of 3.6% on average. Three businesses reached mid-single-digit growth and industry returned positive organic growth. Only Marine & Offshore remains under pressure as anticipated. Secondly, B&I achieved double-digit growth at constant currency boosted by a strong contribution of recent acquisitions.Growth remains supported by both the base business and our 5 growth initiatives. The base business is up 0.9% organically year-on-year with most of the activities performing well apart from Marine & Offshore and Oil & Gas CapEx-related activities. Excluding these, the base business grew organically at 3.4%. In addition, our growth initiatives have continued to perform well, up 6.2% organically.Looking further at our 5 growth initiatives, they have delivered a sustained pace of organic growth. B&I performed strongly, up 12.5% organically. OpEx grew slightly, penalized by challenging comps as we started several large contracts in Q1 2017. We expect growth to improve throughout the year. Automotive is impacted by the end of a large contract in China. The contribution from acquisitions was strong as all our M&A efforts are supporting the growth initiatives. Overall, we delivered a 12.8% total growth at constant currency and therefore continue to progress as planned with the deployment of these growth initiatives.I now turn it back to Didier for the business review.

[Didier Michaud-Daniel]

Thank you, Nicolas. We are going to start with Marine & Offshore. As anticipated, the business was down 8.5% in Q1 as a result of double-digit decline in New Construction in the context of challenging comparables and continued low level of activity in Asia due to the time lag, slight decline in Core In-Service due to the unfavorable timing of inspections and some price pressure, although the level of laid-up ships was stable, the reduction in offshore-related activities due to the lack of deep-sea projects and the reduction of risk assessment studies continues notably in Asia and in Americas. On the upside, new orders amounted to 1.8 million gross tons at the end of March 2018 compared to 1.3 million a year ago, confirming the recovery of the market. The order book, which stood at 12.9 million gross tons at the end of the quarter has now stabilized, being slightly up compared to December 2017. Commercial wins include contracts of bulk LNG in China and South Korea and also in specialized segments. We expect full year organic growth to be slightly negative. The In-Service activity should remain resilient. Given the lead time, the New Construction should further decline. All in all, H1 will be negative with Q2 better than Q1 while we still expect H2 to be stable to positive.Page 15. Looking further at the Marine & Offshore market, we can observe further positive trends in New Construction, in particular, containers and LNG carriers, the most complex ships for which BV has a leading position. According to Clarkson data, the level of new ship orders worldwide is expected to be back to its 20-year average in 2019. Agri-Food & Commodities. The business continues to improve with revenue up 3.1% organically. By subsegments, Metals & Minerals confirmed recovery, up 8% in organic growth, supported by double-digit growth for upstream activities across most geographies. However, trade remained stable due to really strong comps and general slow start to trading conditions. Agri-Food recorded a healthy 8.3% organic growth for the first quarter, led by solid performances for both Agri and Food products. This is primarily led by Latin America and Asia, as our footprint is expanding. Oil & Petrochemicals is up by 1.6% organically, reflecting mixed situations by geography. Solid performance in Europe, thanks to market share gains, slight growth in Asia and strong growth in Africa. In the same time, it has been more difficult in North America due to unfavorable weather conditions. Lastly, government services were down by 7.1%, still penalized by the end of PSI contracts in Guinea and Mali. We expect improved growth over 2017 showed by recovering Metals & Minerals market, healthy Agri-Food businesses and stabilizing Government Services.Turning to industry. The good news is that as a result of our successful diversification, industry is back to positive growth, up 1.5% organically after 10 consecutive quarters in negative territory. Oil & Gas CapEx-related activities, now 15% of division revenue, remained under pressure with the end of large contract. Oil & Gas OpEx was stable as volume increase is offset by price pressure. We achieved a 12.7% organic growth in Power & Utilities OpEx, one of our key focuses, with the ramp-up of large contract wins. For 2018, we expect the business to return to slightly positive organic revenue growth overall. Our strategic diversification will continue to pay off. For the year, we expect to see Oil & Gas CapEx markets bottoming out with decline in H1 and stabilization in H2.In B&I, Page 18. Revenue increased by 4.1% organically with a stronger organic growth in construction-related activities and a more GDP like growth in the building and services activities. Q1 was negatively impacted by 1 less working day which will reverse in Q2. Even though market conditions are improving in France, Construction and In-service activities were both impacted by the negative calendar effect. We saw double-digit organic growth in Asia, driven essentially by China with 16% organic growth and by the more mature Japanese market, up 11% organically. Our geographical diversification is well underway. Chinese business now represents 14% of B&I revenue, and North America, 11% due to our recent acquisitions included EMG. The outlook for the business remains overall positive with strong growth in Asia, notably China and LatAm, improving growth momentum in Europe, notably in France, driven by both CapEx and OpEx.Certification. Certification is again our top-performing business in the first quarter of 2018, delivering 6.7% organic growth with a good performance spread across most regions and categories. Growth was supported by renewed standards like ISO 9000, 14000 and IATF in the Automotive sector. We also launched new products and services which supported our growth. This includes enterprise risk taking on cybersecurity, anti-bribery and business continuity which together grew at 20%. Supply Chain & Sustainability grew by double-digit. We expect the business to remain robust and deliver sustained growth with a stronger first half. Although we anticipate a weaker second half due to the end of the transition of revised standards.Consumer Products now. Consumer Products recorded a solid organic growth of 5.9% with growth across all regions and categories. Electrical & Electronics grew by mid-single digit organically, primarily driven by Automotive and, to some extent, IoT testing. Hardlines also achieved high single-digit growth while Toys significantly recovered, up low double-digit following a stable quarter in Q4 2017. Softlines delivered a high single-digit led by new contract wins in Europe. Commercial wins in the quarter include contracts with Google, HTC in U.S., China Mobile and Continental in Germany. In 2018, we expect Consumer Products to maintain mid-single-digit growth, reflecting strong growth in Electrical & Electronics led by SmartWorld and Automotive initiatives, solid growth for Hardlines helped by stabilizations in the Toys subsegment.The outlook. For full year 2018, our outlook is confirmed. We expect an acceleration in organic growth revenue compared to full year 2017, a slightly improved adjusted operating margin at constant currency and improved cash flow generation at constant currency. Thank you. This concludes our presentation, Nicola. We can now open the Q&A session.

[Operator]

[Operator Instructions] Your first question today comes from the line of Will Kirkness from Jefferies.

[William Kirkness, Equity Analyst]

I've got 3 if that's okay. Firstly on FX. It looks like it's moved to the bottom of the previous range you guided to, so that's likely to be at least 30 basis points headwind to the margin for the full year. Just wondering if your sort of underlying progress can offset that? Secondly, the base business is down 0.9% for the first quarter from the 2.6% in the fourth quarter. So I want to check whether that slowdown is really all attributable to Marine. And then lastly, just on consumer, the new contracts you've won, just wondered just a bit more about those processes perhaps in terms of sort of competitive dynamics or whether it was service, sort of what drove those contract wins.

[Didier Michaud-Daniel]

Okay, I'm going to start with the FX with the impact. Nicolas, you want to comment?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Yes, we do confirm that if we remain in the current 1.20 to 1.25 range for the euro-dollar parity, we still expect to be impacted negatively around 30 basis points on the margin, which is reflecting a top line impact of 3% to 4% negative and the bottom line impact around 6%. We confirm these numbers. As you can expect, we'll not guide on whether we will overcome this with the underlying margin evolution.

[Didier Michaud-Daniel]

Okay, Nicolas. Thank you. Your second question is about the 2.6% of organic growth compared to Q4 last year. Clearly, it's coming mostly from the Marine division, and the fact that Marine has quite a negative growth. Marine -- and I'm sure you remember, last year, in Q1, it was more or less flattish. It was minus 1%. So of course, as we know, there is an impact which is a late cyclical impact. So this impact has started second part of the year last year and Q1 this year. For the Marine business, the good news for me is that Q2 should be slightly negative, flattish and H2 should be slightly positive, which is showing that we are clearly recovering in Marine & Offshore. If you think, for instance, that at the end of March, we recorded already 1 -- we have recorded already 1.8 million gross tons. When in 2016, we recorded for the full year 1.9 million gross tons. There is clearly a recovery. The second reason why the 2.6% organic growth is at that level is the fact that we have 1 less day in the first quarter, which represents probably something like 30 basis points impact. So you can make your calculation, and you will see it's quite an important impact knowing that, in Q2, we'll have 1 more day. Regarding the Consumer Product division, I think your question was about contract wins in CPS?

[William Kirkness, Equity Analyst]

Yes.

[Didier Michaud-Daniel]

We are doing very well with CPS because we decided to implement a new strategy 3 years ago to be less dependent with the top retailers in the U.S. And we push for what we call mega vendor strategy. And by doing so, we are working now directly with the vendors, and you can see that we perform very well. And I'm optimistic for the year, thinking that by pushing this strategy for Tier 2, Tier 3, we are more diversified, meaning that we should be a lot more resilient, and we expect mid-single-digit type of organic growth for the year.

[William Kirkness, Equity Analyst]

Okay. Can I just check then is that -- so have you won global framework agreements essentially and then you've already seen the revenues coming through with their suppliers?

[Didier Michaud-Daniel]

Yes, it's true, but we also now work directly with the suppliers. So we have some, as you said -- you know the business well, some framework agreements. But on top now, we work directly with the mega vendors. And they -- certifying their product, they can knock on the door of the top retailers in Europe and in the U.S. So it strategically makes total sense because with less big contracts, many, many mega vendors. So in terms of diversification, we stabilized our business at a level which is a lot better. And this the way we decided to work 3 years ago and in Spain of today.

[Operator]

Your next question today comes from the line of Paul Sullivan from Barclays.

[Paul Sullivan, Director & Analyst]

Just a few for me. Firstly, just coming back to Marine. On that 1.8 in terms of the GRT, do you sense that can strengthen from here as we go through into the second quarter and third quarter? I don't know the visibility you've got on the -- on new orders coming through there. Secondly, on Certification, what are your thoughts post-September? I don't know if you can sort of quantify the boost that you've seen over the last sort of 12, 18 months as we reach that sort of standard deadline? And then what happens sort of to replace those revenues thereafter and how big the sort of drop-off could be? And then just finally, M&A contribution over the year or year -- full year impact from M&A announced to date. If you could just verify that, that would be helpful.

[Didier Michaud-Daniel]

Okay, Paul. Okay, first on your question on the Marine division. As you know, we do not guide on quarterly new orders, of course, by being at 1.8 million gross tons already. But last year, we recorded 4.9 million, the year before, 1.9 million; 5 million last year and the 1.9 million before. So being at 1.8 in the first quarter means that we are in a good -- on a good trend to achieve at least last year orders. On the Certification question, which is a very good one, you're totally right. In fact, we benefited from this standards update. Clearly, after September, it will slow down a little bit. We are going to have a very good H1. H2 will be a little bit lower. But we took the opportunity of this -- the fact that we knew that it would come to develop some new Certification schemes and new Certification programs, for instance, in terms of cybersecurity or data protection and also specific schemes on the supply chain. On the M&A. Your question, I don't know if you have the answer, Nicolas, the precise answer. But the good news here on the M&A is that we are on the right track. If you think about our strategic plan, we need to achieve EUR 150 million of revenue per year being, of course, selective and selecting the right potential acquisitions. We are on the right track to achieve this number this year, meaning that M&A should probably have a positive impact of 3% in the range on 2018 top line.

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

As you saw, we were quite active during the beginning of the year on the M&A front, and that means that we have already a great deal of that in the bag today.

[Didier Michaud-Daniel]

Okay, Paul?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

We lost you, Paul.

[Operator]

It appears we've lost Paul, I'm afraid. But we'll now take our next question from the line of Rajesh Kumar from HSBC.

[Rajesh Kumar, Analyst]

On -- in your basically Oil & Gas business, you talked about volume growth was very strong offset partially by what you saw in pricing. Could we get some color on how that trend has progressed on pricing? Is it stabilizing, getting better, getting worse? That would really help. The second one is when you'll hear about trade wars and things like that, have you carried out any sensitivity around your business? Which are the segments which might be affected or benefit from any such move, please?

[Didier Michaud-Daniel]

Okay. I can answer your first question. Clearly, the pricing erosion is slowing down now. But as you know, oil and gas companies decided to cut cost in the past 2 or 3 years. We can still see some pressure coming of course from renegotiation, in particular in OpEx of contracts last year, which were in the range of something like 5%. So of course, because we had to give some discount last year, it has an impact this year on the OpEx Oil & Gas. We have not seen yet a near recovery in terms of CapEx. We talked a lot about it, as you know, and the price -- the oil price is -- the barrel is at $75. But for the moment, we have not seen any significant trend there which could support our growth in 2019. And this is what I could say for oil and gas. I'm sorry about your second question. There was a line issue so I could not hear you.

[Rajesh Kumar, Analyst]

There seems to be a lot of discussion in the press about trade wars in terms of how U.S. or Europe might behave. What are the potential opportunities and risks you wanted to have assessed for Bureau Veritas?

[Didier Michaud-Daniel]

No. So today, we talk again a lot about trade war. If you think about steel and aluminum, we're not exposed to this type of business, so it has 0 impact, clearly with these 2 major points. For the rest, we are extremely diversified, as you know, and the spectrum of activities, markets and products means that we -- I do not see today any -- clearly any negative impact on our business. We are mainly on prototype testing-related products. And again, there is a limited volume after. If you think about the softlines and even the hardlines, I do not think that the middle class in the U.S. will accept a 30% increase, price increase. So I do not see it changing so much tomorrow. And last but not least, we've diversified also the geographical exposure, notably because we are in Asia, not just in China now, but in a lot of low cost countries, I would say. And we are also diversified because not all our clients are in the U.S. clearly, in Canada but also in Europe.

[Rajesh Kumar, Analyst]

Okay, that's interesting. So for example, if we look at consumer testing, you do a contract with say Walmart or one of the U.S. retailer. But the service is being delivered in Asia, in Asian cost base and that enables you to earn an attractive margin. Do you see that dynamic somehow being affected by such a change? I was not actually thinking about steel and aluminum only. I was talking more broader across the business.

[Didier Michaud-Daniel]

Well, Walmart, as you know, is selling mostly softlines products than hardline products. For the moment, there is no more tax on these products. And again, if you put 30% of tax, I do not see what the reaction of the middle class is going to be in the U.S. So for the moment, the risk is extremely limited. And on top of it, as you know, we work most of the products in China. Now we do it in other countries in Asia. And tomorrow, we could relocate in the U.S. because we also test product in the U.S.

[Rajesh Kumar, Analyst]

Understood. No, that's very clear.

[Operator]

Your next question today comes from the line of Tom Sykes from Deutsche Bank.

[Thomas Richard Sykes]

I wondered just is it possible for you to give the aggregate expenditure on acquisitions that you've made in the first half of this year at all. Also just -- and I know this is a revenue call, but the consensus free cash flow number is forecast to increase by 14% this year after FX. Do you think that's a credible outcome for this year even though you've obviously guided to constant FX free cash flow improvement? And then, just on the Agri-Food & Commodities division. In Metals & Minerals, do you see any potential for the growth rate to improve or you're hoping just to maintain that level of growth? And would you see after a slow start in trading conditions in oil at all or in Metals & Minerals, any improvement in trading conditions, please?

[Didier Michaud-Daniel]

Okay, thank you for your question. The first question of course, I'm not going to answer in the detail. But I can tell you that we are still making acquisition at a multiple which is for this one between 7 and 8. Why between 7 and 8? Usually it's 7 in average. Between 7 and 8 for this one because EMG is a bigger one. And of course, the multiple was a little bit higher. So I'm not going to give you more information on that one. For the free cash flow, it's too early to talk about it. I will give you more details after H1. We are talking about organic growth during this call. And then we'll be very happy to give a more precise answer to your question after H1. Last but not least, you are right. Agri-Food, as you know, is doing very well. We still anticipate a very good organic growth this year, coming from the fact that we won very big contracts in Brazil. And second, the fact that we -- last year, we built more than 10 labs overall in food, and we knew already that these labs are going to be along the year filled with a lot of stampers. So your point is very valid. The second one is about Metals & Minerals. So Metals & Minerals upstream as we started, clearly, and we can see progressively all of our labs being loaded by samples. In terms of trade on Metals & Minerals, it will continue clearly to do well and accelerate. Regarding the Oil & Gas, clearly, we can see now that further reserves which have been made during the time the oil price was very low are now coming in the market. And we tested them in the past. So there is a little bit of slowdown at the beginning of the year, but it should recover progressively through the year.

[Thomas Richard Sykes]

Okay, that's great. And just a sort of follow -- I know you're not really answering the questions on the cash. But are we right to assume just with the movement in FX, the fact that you've made a comment about your net debt in the statement and you've spent the money on acquisitions that actually the leverage has gone up slightly because of the movement of the euro versus the currencies in your mix of debt?

[Didier Michaud-Daniel]

Your point is right, but I should probably add the fact that we've decided to launch a new initiative within Bureau Veritas which we call move for cash. And we are really now working hard on cash. So it's a little bit too early, as I said. I would like of course to compensate, if possible, this year what we spent for acquisitions. But again, after H1, I could give you more details about it.

[Operator]

[Operator Instructions] Your next question today comes from the line of Edward Stanley from Redburn.

[Charles Edward Stanley, Research Analyst]

In the presentation, you say that in the Industry division, that you can refocus on gas and offset some of the weakness in Oil & Gas or the minus 17% in CapEx. I wonder how big that market opportunity is in gas and how quickly you can refocus on that or whether that's actually not a massive delta that you expect for the rest of the year. And secondly, I'm looking forward to your 2020 ambition, 5% to 7% organic growth. And if I look at the growth initiatives, which have gradually been, albeit, very high have been fading over the last few periods. Do you expect a re-acceleration in your 5 growth initiatives? Because, otherwise, it's quite tough to bridge to that 5% to 7% organic growth that you expect.

[Didier Michaud-Daniel]

I'm going to start with your second question. When you think about the fact that the -- we had 6.2% of organic growth for the 5 initiatives. Of course you shouldn't measure from a quarter to another, right because, for instance, we had the Chinese New Year in February instead of January. You have 1 less day. So it would be better if we could compare probably at the end of H1. Knowing that at 6.2%, we are clearly still delivering a good organic growth with our initiatives. I do not see any slowdown today. In fact, we should have a good year again this year with these 5 initiatives. On the Oil & Gas, if I understand well, we -- you want -- your question about -- was about refocusing on gas, am I right?

[Charles Edward Stanley, Research Analyst]

So yes. On the industry slide, you say that for the 2018 outlook for Oil & Gas CapEx, you are going to focus on gas because there are no large CapEx projects coming.

[Didier Michaud-Daniel]

Yes, that's absolutely true. And you will see in the near future that we already won some very nice contracts. We're focusing -- if tomorrow there are some new CapEx in oil, we will be there, of course. So we want to, of course, keep a close eye on the picture of CapEx in all. But gas is really an opportunity, so we are working on gas as well.

[Operator]

And your next question today comes from the line of George Gregory from Exane.

[George Nicholas Gregory, Research Analyst]

I had 3, please. Just starting getting back to the subject of currency. The impact on profits, I think you suggested, Nicolas, would be around 6%. Previously, I think you had indicated 4% to 6% back with the full year numbers. I'm just wondering if there is any particular dynamic that is leading the impact on profits to be towards the bottom end of that prior range. Secondly, on the subject of marine, I noticed earlier this week, Clarkson warned of client spending transaction on financing peers, and I think that was pretty new trend for them given that it was only a month ago that they were flagging continued growth. Just wondering whether that is an indication you've seen or any thoughts on that comment. And finally, just going back to the topic of trade wars. We've seen some restrictions around certain Asian firm manufacturers who use U.S. components are being banned from using those U.S. components. Is that -- does that kind of -- presumably that kind of dynamic poses a risk to prototype development, E&E prototype development out in China?

[Didier Michaud-Daniel]

Okay. Thank you for your questions. So maybe, Nicolas you would like to comment on the currency side?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Yes. Basically, we are still with the same vision since we are -- we were looking at the evolution of the euro-dollar currency, and we've seen more -- I mean, we've seen the evolution closer to 1.25 so we are more guiding today with that type of assumption which leaves us to more a 4% negative impact on the top line and more a 6% negative impact on the bottom line. So this is the -- I would say, the shift isn't clearly reflecting the evolution of the currency as we saw it in the last few weeks. And this is still with the same basic assumptions on the sensitivity.

[Didier Michaud-Daniel]

But when you look at the evolution of the currency, you could see today, we are trending to 1.20s or at that level, are we going to be at -- sorry, 1.21?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Yes, correct.

[Didier Michaud-Daniel]

Yes, so it's going to be closer to 4%. So it's really -- again, it's not -- we should talk about the impact on the margin and so on in H1. It's too early and it should not be the theme of this call. I'm sorry but I will come back on this very important question, of course. And you're right to ask it. But again, for the moment, it seems that the currency, the dollar rate is at 1.21. So we will see what it's going to be in the next 2 or 3 months. On the Marine, clearly, when you look at the Clarkson index, the market has restarted. And I had the opportunity to meet some ship owners in the past 2 months, and they confirmed that this market has restarted and we could be more optimistic in terms of orders for the future. And again, recording 1.8 million gross ton already at the end of March. We have not seen that for quite a while. So it's giving good signals for the future. On the trade wars, you talked about the U.S. components and the control impact. It's too early to measure it. For the moment, we do not see any impact. And knowing that most of the electrical and electrics, in particular, electronics components that are used in China for mobile phone and so on are coming from Taiwan and not from America.

[Operator]

And your next question today comes from the line of Andy Grobler from Credit Suisse.

[Andrew Charles Grobler, Analyst]

Just a couple of questions from me, if I may. Firstly on pricing, you talked about pricing within OpEx and some of the overhang from the renegotiations last year. What are you seeing incrementally in terms of any contracts that are getting renegotiated through 2018? And kind of on a similar theme, you mentioned some pricing pressure in Marine within the In-Service business. Is that -- can you quantify that to any great degree and on a -- what is the rationale behind that? And then on a different topic, just going back to FX. You've quantified the impact of kind of current FX rates on EBITA. Is there any offsetting or incremental benefit headwinds at the interest line that we should take into account?

[Didier Michaud-Daniel]

You could maybe answer the question, Nicolas, on the FX part and the potential interest impact?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Yes. I mean, obviously quite a number of lines below the OP, so not only interest. But we have yet part of the debt in USD so which would be impacted by the evolution of the currency obviously.

[Didier Michaud-Daniel]

So I'm coming now on your question regarding the OpEx renegotiation. I would say that, of course, we had some pressure because of -- and we know it, the lack of investment on gas company. At a certain point, by the way, they will have to do some inspections because they will need it, clearly. But the good news for us, and you will see it -- and I cannot talk about it today, is the fact that we can now get some bigger contracts because, with this pressure, some small suppliers are disappearing and bigger oil companies prefer coming to big key companies like ours. So meaning that we should have incremental revenue in the structure coming from these negotiations. On the Marine business, your question on the -- I'm talking about the In-service business, we had some pressure last year in particular with the trade, an international trade slowdown. So it's probably discount, but we could estimate it at 2%. It's very low. We have decided to restructure the In-service business, thanks to the digital tool that we decided to implement 2 years ago. Now we are ready to restructure this business, and we have started this restructuring plan on the In-service business this year which should pay off in the future.

[Andrew Charles Grobler, Analyst]

Okay. And sorry just going back on the interest tax and everything else line or lines. And you were quite precise that at current FX rates that you will be about a 6% impact to EBITA. Can you give any guidance of what kind of percentage impact you would expect or an absolute terms impact you would expect below the line, please?

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

I mean, this is not something -- I mean, we are not releasing any elements of margin, profitability, whatever. So this would be more -- sorry, but this would be more a topic for H1 release, I'm afraid.

[Operator]

[Operator Instructions] Your next question comes from the line of Aymeric Poulain from Kepler.

[Aymeric Poulain, Head of Support Services Research]

Most of my questions have been answered but perhaps 2 follow-ups, if I may. The first is on the Certification and the initiatives you mentioned around cybersecurity and data protection. We have obviously this regulatory environment that is favorable in Europe from May onward and might be even boosted by the recent Facebook scandal. So do you have an estimated size of the market opportunity of data protection for the tech industry? And how do you think you can grab that opportunity over the next couple of years? That would be the first question. And second, the consumer product sales continue to be very strong with some positive development on the mix side as well. So I was wondering, I know you don't talk about say about the margin but you gave a sense of the outlook for the group. What kind of operating leverage we can assume from that strong sales performance?

[Didier Michaud-Daniel]

Good try on the margin. So we'll answer this question at the end of H1. Now for the Certification, again, it's a very pertinent question. We estimate the market today to be around -- I'm talking about the tech market, which means ISO 27001. We estimate the market to be around EUR 150 million, and we also anticipate the fact that this market is going to grow by 20% per year. So you are right, it's a very interesting market for Bureau Veritas. And after we know that GDPR regulation is mandatory after May 25. So it's going to help us to -- of course, to grow the business in Certification. And last but not least, we have more and more demands on the cybersecurity effect. So we are ready now to answer the needs of our clients, and this is clearly a market which is growing fast. I will answer your question at the end of H1 about the margin, but your point is true.

[Aymeric Poulain, Head of Support Services Research]

Just to complete the certification progress following May 25, you think it's going to be a gradual adoption of these standards, or do you expect a much more significant acceleration in the second half?

[Didier Michaud-Daniel]

It's going to be a progressive adoption. I don't think it's going to be a huge acceleration. But as you said, with scandals like the one that occurred with Facebook, people are more and more concerned about it. So we know that this market is going to become a worldwide market, not just a European one. But again -- and I can see it already, companies are going to implement it but progressively. I do not see again a very, very important acceleration, a very significant acceleration.

[Operator]

Your next question today comes from the line of Srini Sarikonda from HSBC.

[Srinivasa Raju Sarikonda, Analyst]

This is Srini from HSBC. Could you give us some color on staff change you're seeing right now? And also, the wage inflation in Asia and the dollar [indiscernible]?

[Didier Michaud-Daniel]

So you are talking about staff change, you mean the attrition rate?

[Srinivasa Raju Sarikonda, Analyst]

Yes, yes.

[Didier Michaud-Daniel]

So the attrition rate in our company. If you think about the management attrition rate, it's still lower than 5%. So people are extremely loyal to Bureau Veritas. Now of course, it's very different country to another. If you are in China, it's more something like 15% to 17%. Just because we talk about lags and the low level people want to move which is good from one company to another. At a group level, it is 10%. And you have some countries, in mature countries, think about Europe or the U.S. where the attrition rate is extremely low, mid-single-digit. So it is very different country to country. But for me, it is not a concern. I mean, today, it's not a concern for the company. There is a lot of loyalty knowing that our company business to society company, people enjoy working for it. Your second question was about -- regarding staff, am I right? The wage inflation. We control it again very, very well. You need to know that I decide country by country what should be the wages increase. And when you think about the type of margin that we deliver, it shows that we control it very well.

[Srinivasa Raju Sarikonda, Analyst]

Okay. But in terms of attrition, do you see any change compared to last year? Do you see any increase in attrition?

[Didier Michaud-Daniel]

No, no, no. No increase in attrition.

[Operator]

Your next question today comes from the line of Emira Sagaama from ODDO BHF.

[Emira Sagaama, Analyst]

This Emira from ODDO. I just have 2 questions remaining. On B&I, I was wondering if the sequential slowdown versus Q4 last year is mainly explained by the working day less or is there something else? And also, on Toys, there is – the recovery is a positive surprise. I was wondering if you it as sustainable?

[Didier Michaud-Daniel]

Thank you for your questions. So on the B&I side, clearly, it's coming mostly from the working day. As you said there is 1 less and in particular in France and in Europe. So it's affected the -- it's affecting the result, the revenue organic growth clearly, mostly in OpEx and CapEx B&I. So we will see what Q2 will be. Regarding now the Toys business. The good news for me it has a stabilized. It has bottomed out, so we can see some growth. But of course, the comps were becoming quite low, so it's a good news for us. But again, we did a very good job by diversifying our portfolio, are now a lot less dependent on the Toys testing. So this is clearly less a drag, but there is not really a big upside on it. The good news again, it has stabilized at a low point, and now it's becoming an opportunity. But we focus too much on other products. But again, the good news that we are less dependent. Now it's 10% of the divi of the consumer -- less than 10% of the Consumer Product division, so.

[Operator]

We now have a follow-up question from the line of Tom Sykes from Deutsche Bank.

[Thomas Richard Sykes]

It was just a very quick one. So just given the 3.6% organic growth forecast for the year, we're – and that's just implying around about 4% for the next 3 quarters. Would you just confirm you do expect the next quarter this one we're in Q2 to be faster than Q1? And it's not just all second half weighted, please?

[Didier Michaud-Daniel]

Yes, I know the contract said 3.6%. My announcement is accelerating compare -- accelerating organic growth compared to 2017. Q2 for sure will be better than Q1.

[Operator]

We have no further questions. So I hand the floor back for closing remarks.

[Didier Michaud-Daniel]

Thank you for your attention. I wish you good afternoon and good evening.

[Nicolas Alain Marie Tissot, CFO and Executive VP of Finance & Legal Affairs]

Thank you. Bye-bye. Bye, everyone.

[Operator]

Ladies and gentleman, that does conclude your presentation for today. Thank you all for participating, you may now disconnect.