Bureau Veritas SA

PAR:BVI

Earnings Call Transcript 2018-Q3

[Operator]

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Bureau Veritas 2018 Q3 results conference call. [Operator Instructions] I must advise you the conference is being recorded today, Thursday 25 October, 2018. I would now like to hand the conference over to your first speaker today, Didier Michaud-Daniel. Please go ahead.

[Didier Michaud-Daniel]

Yes. Thank you. Good morning, and good evening to everyone. Thank you for joining Bureau Veritas' Q3 revenue 2018 call.On Page 5, I am delighted to be joined by François Chabas, our new CFO since beginning of September. So a few may have met François during our recent [Foreign Language]. François has been with BV for 15 years, during which time he has held a number of managerial positions in both financial and operational roles.His experience means he has excellent knowledge of the group, our operations, our clients and our people.Okay. Let's move to the key highlights regarding the third quarter. Q3 stood at EUR 1.2 billion, up 8.6% at constant currency. Organic growth rose 4.8%, up from 3.5% in H1. All 6 businesses are now growing organically. Our late-cyclical markets, Marine & Offshore and Oil & Gas CapEx are bottoming out and showing the first signs of recovery.Our growth initiatives performed strongly, generating a 7.9% increase in revenue organically.Our full year 2018 outlook is confirmed and our transformation plan continues on track.Now, I will hand over to François for the financial review. François, please?

[François Chabas, Executive VP & Group CFO]

Thank you, Didier. Good Morning, good evening to all. So I'm on Slide 7, starting with the revenue bridge for the first 9 months of 2018. Organic growth reach 3.9%, acquisitions had a 3% positive contribution and, as previously noted, ForEx had a negative impact of minus 5.7%, mainly due to the appreciation of the euro against the dollar and pegged currencies.For the full year 2018, at current spot rates, we continue to expect around minus 4% on revenue and minus 6% on adjusted operating profit.All in all, for this first 9 months, revenue growth has accelerated 6.9% at constant currency.Moving or taking a closer look to our Q3 2018 performance, slide 8, we see that organic growth has accelerated to 4.8% to be compared to 2.6% in Q1, then 4.4% in Q2. So this is Bureau Veritas' best quarterly organic growth in 6 years.Acquisition had a 3.8% contribution to the top line growth. ForEx, a bit more limited, minus 2.9% negative impact after minus 7% in the first half of the year.So all in all, revenue growth moved up 8.6% at constant currency.Now turning to growth by business on Slide 9. As you see and as mentioned by Didier, all our 4 businesses delivered positive organic growth in the third quarter. B&I, Agri-Food, Consumer Products, all delivered solid growth. Worth specific mention, though, are Certification, which, as you see, recorded close to 15% organic growth thanks to the positive impact from the revision of standards.Industry, which confirmed its return to positive growth after posting a 3.5% organic growth supported by both our OpEx growth initiatives and the stabilization of the CapEx market.And third, Marine & Offshore, which is now bottoming out, achieving 1% organic growth after almost 2 years of decline.Moving to Slide 10 and focusing again on the third quarter, you see that the growth was fueled both by the Base business, accounting for 2/3 of the group revenue and our 5 growth initiatives. Base business is up 3.2% in the quarter organically, so showing a gradual recovery as you see on the chart. While our growth initiative, which represents 1/3 of the group revenue, delivered a strong growth, up 7.8% organically in Q3, in line with our ambition to grow at a high single-digit rate.Looking further at the 5 growth initiatives, B&I on Slide 11. B&I performed well, up 5.7%. OpEx confirmed the improvement that we've seen already in Q2, with a strong 15.1% organic growth in the third quarter, thanks to the ramp-up of large contract wins.Agri-Food grew 1.9% with strong performance in food, offset by some poor market conditions in Agri Europe.Automotive recorded 9.9% organic growth, led by connectivity testing. While a finally SmartWorld grew 0.9%, but this compared to a particularly strong performance in Q3 last year, which, for the record, was up 17.3%.So overall, our total growth stands at 15.4% and 20.1% at constant currency.We'll now hand it back to Didier for the business review.

[Didier Michaud-Daniel]

Thank you, François. Thank you. Okay. We move to Page 13. Starting with Marine & Offshore. The business delivered positive organic growth in Q3, up 1%. Confirming the recovery in the sector, new orders amounted to 4.8 million gross tons at the end of September 2018 compared to 4.1 million a year ago.New Construction benefited from improvement in the new equipment certification services. Core In-Service was slightly down, but this is compared to a very strong Q3 last year. Offshore was driven by the expansion of the services offering and the stabilization of risk-assessment studies.For the full year 2018, we continue to expect full year organic growth to be slightly negative. The In-Service activity should be remain resilient. For new construction, H2 should be positive, benefiting from the ramp-up of recent order wins.Moving now to Agri-Food & Commodities. The business continues to improve with revenue up 5.3% organically in Q3. As a reminder, it was up 4.8% in Q2. By sub-segments, Metals & Minerals confirmed its strong recovery, up 8.8% in organic growth. Upstream activities grew 14%, notably in Africa and in the Americas.Trade achieved low single-digit growth after a good Q3 last year. Agri-Food grew by 0.5% organically. Food delivered true growth but this was offset by the weak Agri segment in Europe. Growth resumed in Latin America with the end of the truckers' strike in Brazil, which had impacted exports.Oil & Petrochemicals was up by 2.4% organically with robust performance in Europe, thanks to new services and market share gains. North America remained stable in the period. Lastly, Government Services were up by 12.6%, thanks to the ramp up of VOC and single-window contracts.For the full year, we expect improved growth versus 2017, fueled by a recovering Metals & Minerals market, healthy Agri-Food businesses and stabilizing Government Services.Turning to Industry. The business confirmed its positive growth, up 3.5% organically, a result of our successful diversification. Oil & Gas CapEx related activities, being 16% of divisional revenues, have now stabilized, being slightly up in Q3 after a decline of 12% in Q2.Oil & Gas, OpEx recorded double-digit growth with strong volume increase across all geographies, largely offsetting price pressure. The recent Qatar gas contract has also been a key driver.We achieved 7% organic growth in Power & Utilities OpEx with the ramp up of large contracts in Latin America.For the full year, we expect positive organic revenue growth overall for Industry as our diversification strategy continues to pay off.We are also seeing the early signs of recovery in Oil & Gas CapEx, where markets are expected to improve. Some details about Industry on Page 16. This recovery is, at this stage, being driven by new small-size CapEx projects. This is where we are currently seeing the [ thundering ] activity. Again, considering the lead time on these projects, we would only expect the benefits to flow into our P&L in a meaningful way towards the end of 2019, early 2020.In Building & Infrastructure now. Our revenue increased by 4.6% organically, with a broadly similar organic growth in both construction-related activities and on building in-service activities. Organic growth performance was good in Europe, led by high single-digit growth in France, 39% of revenue. OpEx-related activities perform particularly well in France, which benefited from 1 additional working day.Good in the Americas, now 22% of divisional revenue, thanks to solid performance in the code compliance market in the U.S. as well as in South America.Finally, in Asia and China, the pace of growth was solid and prospects remain strong in Chinese infrastructure projects.For the full year 2018, the outlook for the business remains positive overall with good growth in Asia, Americas and Europe, driven by both CapEx and OpEx.Certification, Page 18. Certification was again our top-performing business in Q3, posting a 14.9% organic growth.We experienced double-digit growth in Europe, Asia and North America. Supply Chain and Global Certification grew by double-digits.Some details on the Certification business. As you can see, Page 19, on the left-hand side of the slide, starting from Q4 2017, we have enjoyed strong growth in our Certification business, driven by the revision of standards for which the transition deadline was September 15.This has generated strong revenue, but is obviously dropping off. As announced earlier in the year, we expect H2 to be much lower in H1, implying a negative Q4. Looking ahead, we expect the next main drivers for the growth of this business to lie in the corporate risk area. Certification concerning data privacy, cybersecurity, brand reputation, et cetera, will be where we will notably focus our growth efforts. Moving to Consumer Products. Consumer Products recorded a 3.2% organic growth across all major service categories. Softlines delivered mid-single-digit growth, led by the ramp up of new contract wins in Europe. Hardlines achieved growth below the divisional average, as this compares to a very particularly strong Q3 last year.The Electrical & Electronics subsegment grew low single digits, primarily driven by Automotive and by South Asia and Europe. The classical electrical products experienced a slowdown both in China and in the U.S. The implementation of tariff increases has led to some wait-and-see attitudes among some customers and triggered the postponement of some product launches.Nevertheless, the Chinese domestic market continued to develop steadily.For the full year, we expect Consumer Products to maintain mid-single-digit growth, reflecting strong growth in Southeast Asia, Europe and led by automotive initiatives.Some words on the tariff increase. I wanted to take the opportunity of this call to put U.S. trade tariffs on China into context of our [ raw ] data.First, tariffs concern only our consumer product business, which represents 14% of group revenue. Of this, 95% of business is, today, outside the scope of U.S. tariffs. We estimate that around 5% of Consumer Products business is within the scope of tariff increases.Secondly, we are closely monitoring the situation, and we have engaged proactively with all our clients. In the past, we have supported them in new manufacturing countries such as Cambodia, Vietnam, Bangladesh and Turkey. We have the capacity to follow any manufacturing relocation. We are working on various scenarios to accompany them.Thirdly, this may also provide an opportunity for us as our services will become even more important to ensure the quality of products is maintained. Lastly, as the demand for TIC services for the Chinese domestic market is increasing, we are well positioned to seize that opportunity.We have taken strong measures to accelerate our development in the Chinese domestic market and outside of the U.S. In Southeast Asia and in Europe, notably, but also in Africa eventually.Moving now to the outlook and to conclude, Page 23.So to conclude for full year 2018, we confirm our outlook. 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 for your attention. This concludes our presentation. François and I will now answer any questions you may have.

[Operator]

[Operator Instructions] The first question comes from the line of Edward Stanley.

[Edward Stanley, Equity Analyst]

I've got 3, please. I guess, we've got to ask on the trade war. Do you have any feeling for quite how much of a drag it has been in Q3? And I'm just trying to gauge, if 95% is currently outside the scope and it was an 80 bps drag or a 50 bps drag in Q3, I'm just trying to think how that might play into next year. Secondly, on the Marine ramp-up and the new business you're winning there, is that a favorable mix, i.e., is that tending to be higher margin new-build ship construction? And thirdly on -- a question for François, I'm interested to hear what's top of your priority list for 2019 to get done first?

[Didier Michaud-Daniel]

Okay. Thank you, Edward, for your questions. Let's start with your first question on the drag of it. We think it's very, very, very small, close to nul, in fact. The only drag we have, for the moment, is some postponement from some clients which are just thinking about what could be their future situation, but they are moving progressively back. So for the moment, the impact is extremely small, extremely small. For the Marine ramp-up, maybe Philippe, you would like to answer the question. Philippe Donche-Gay is with us. He's in charge of the Marine & Offshore business. It might be the best solution for him to answer your question. Philippe?

[Philippe Donche-Gay]

Yes. The question about the mix of the new orders. It's relatively good. Seems we had, contributing to our growth in H1, new orders for LNG-fueled container ships for CMA CGM and several cruise ships, as well as a strong demand for LNG carriers. So these are rather high-value vessels, which, in turn, should lead to relatively good margin when we deliver the construction of those vessels.

[Didier Michaud-Daniel]

Okay, Philippe, thank you very much. Francois, your -- good question on your priorities.

[François Chabas, Executive VP & Group CFO]

Yes, thank you. Thanks, Edward, for the question. Well, I'll make the same statement that I did with a lot of you guys that I have met over the last few weeks. My priorities are twofold, very easy. It's about making sure that the company shows operational leverage in terms of margin. As you know, we have a guidance which is -- into our plan 2020, which is to show, at that stage, a margin of 17% at 2015 exchange rates, which, in a nutshell, stays at 16.5% to date. So we have some action here to be taken, and I will make sure they are taken. And the second one is to improve the cash generation of the group to bring it back to where it was, perhaps, a couple of years ago.

[Didier Michaud-Daniel]

Thank you, Francois. Another question?

[Operator]

The next question comes from the line of Tom Sykes.

[Thomas Richard Sykes]

If you please, could you maybe just make some comments on your French businesses overall? And particularly, B&I in France? And whether the rate of growth there is going to continue where it is? Could you maybe just say, at the group level, do you expect your Q4 organic growth to be same, above or higher -- or lower than where you were in Q3? And just clarifying some of the comments you had on consumer, because you're saying, for the full year, that you expect mid-single-digit organic growth. So just to clarify, you were at 4.4% for the 9 months, so are you expecting that to improve a little bit despite the trade drag? It was just not quite clear what you're saying there, please.

[Didier Michaud-Daniel]

Yes. So there is no -- as I said, for the moment, there is no impact due to the tariffs. Clearly, we confirm our mid-single organic growth for consumer products, okay. So this is confirmed for the year. The second question was about the French operations. Two months ago, François, you were still in charge and the CFO for Europe, so you know trends very well. Maybe you would like to comment on this and answer this question to Tom.

[François Chabas, Executive VP & Group CFO]

Sure, Didier. Tom, when it comes to B&I France, as you know, it's made of 2 components. The CapEx part, as mentioned earlier on, is a bit disappointing on those sides with a moderate growth. However, as mentioned by Didier, it's more than compensated by OpEx activities, on which we have posted, for the first 9 months, a very strong growth on the back of several large contracts. Obviously, what we have ahead of us is a bit tougher in terms of last quarter. We have a very high comparable on the OpEx side as this growth has actually started mid, end of last year. So to be within the level of comfort, I can give to you, will be more mid -- low mid-single overall for the last quarter.

[Didier Michaud-Daniel]

Thank you, François. So your first question about -- was about Q4?

[Thomas Richard Sykes]

Yes, just the group level organic growth, yes.

[Didier Michaud-Daniel]

Yes. So in light of our first 9 months performance, of course, we confirm over 2018 outlook of duration of the organic growth versus last year. We achieved 3.9% organic growth in the first 9 months. We cannot expect it to be so high in Q4. Last Q4, 2017 was particularly strong and second, of course, as you know, there will be 2 main moving parts. The first one, 1 positive coming from Marine & Offshore, but which could probably not compensate the negative on Certifications.So we can expect the Q4, probably, a little bit down to Q3, but overall, we confirm our organic growth performance for the year means acceleration against last year.

[Thomas Richard Sykes]

Okay. Sorry to be a bit of a pedant about this, but you mentioned 3.9% at the 9 months, and then you said you would be slower. And sorry, are you saying you expect to be below 3.9% in the Q4? Or you just expect to be below the Q3 level, which could be above 3.9%?

[Didier Michaud-Daniel]

With the detail of information I have today, but it needs to be confirmed because, of course, we are still -- just after one month, we think we could be probably a little bit less than 3.9%.

[Operator]

Your next question comes from the line of Alexander Mees.

[Alexander Mees, Head of UK Small and Mid Cap Research]

There are 3 questions, please. Just on certification, first up. I wonder if you can give us some thoughts about the outlook for 2019, whether it's realistic to expect positive organic growth then? Secondly, on Marine & Offshore, it's great to see moving into positive territory on organic growth. I wonder what your visibility is for the ongoing recovery over the next few quarters. And finally, if you could just remind me what proportion of your Chinese business is focused on the domestic market rather than the export market, please?

[Didier Michaud-Daniel]

Okay. I'm going to start with your first question. For the moment, again, it's too early, and we will discuss in February, but we anticipate Certification, probably, to be negative next year. But as you may know, we launched a lot of new certification schemes, which could compensate a part of the fact that, this year, we had to -- our clients had to update their certification against the new standards at the end of September. So, too early to talk about it. We will discuss in February. But again, when you look at the fantastic performance we had this year, you could anticipate probably something which can be negative, but too early to talk about it in Certification. Okay. The second point is Marine & Offshore, maybe Philippe, you would like to answer?

[Philippe Donche-Gay]

We expect the market, at least from a new orders perspective, to remain at the same level, which is about between 50 million to 60 million gross tons new orders in the market. Difficult to predict beyond, as usual, in Marine. And still some uncertainty about the impact of the new regulations, notably, the sulfur regulations for 2020. It is currently being debated at the MEPC of IMO whether they will enforce it as of January 1 or have a transition period. So that can impact the pattern of new orders. And for the time being, it is creating some uncertainty among people.

[Didier Michaud-Daniel]

Okay. Philippe, thank you. Now I come on the questions about China. So I would say, it's 50/50, 50% domestic, 50% exports. As you know, we have several businesses in China. I count, in the export, the job we do for the built-on-order program, [ outwards ] China, that we do with some Chinese clients. And of course, the Marine business because the new building is mostly in the shipyards in China. But when you look at it, it's 50/50 today, domestic and export. Regarding B&I, it's 100% oriented to China today.

[Operator]

[Operator Instructions] You're next question comes from the line of Rory McKenzie.

[Rory Edward McKenzie, European Support Services Analyst]

Just 2 for me, please. Firstly, on the Industry ongoing recovery. Can you talk about the trends you're seeing into Q4 on both the Oil & Gas CapEx and OpEx sides? In particular, what type of projects are you seeing in CapEx? And what discussions might be coming through there? And then, the other area I wanted to ask about was actually in Agri-Food and commodities. Again, sorry to mention Oil & Gas again, but can you talk about the price pressure you're still seeing in Oil & Petrochem and whether there's any signs of that easing?

[Didier Michaud-Daniel]

Okay. Regarding your question about Industry, we can clearly see a recovery and you can see it on the presentation made today. There are 2 main points I would like to make. The first one is our strategy to turn to more OpEx in Oil & Gas and Power & Utilities is paying off. We are now winning some nice contracts in OpEx. Qatar Gas is a good example, and we are still winning some very nice contracts in Power and Utilities OpEx. Good news for the resilience of the company, and you know that it is a clear organic growth initiative that we took in 2015 to increase the resilience of the company. Regarding now the CapEx in Oil & Gas, clearly, it's accelerating with more tenders compared to what it was at the beginning of the year. So these are not the same type of contracts that we enjoyed in the past, which is probably good news in terms of value, I mean, lower value, more oriented to onshore or offshore in shallow waters, more oriented to Middle East and the U.S. We are working on these tenders. We will give you more color, of course, in February. But clearly, the Industry business is growing again and is recovering.Q4 will be, of course, okay, but we anticipate, of course, Industry to continue to perform in the future, knowing that we bottomed out in Oil & Gas and now we have new projects. So next year, Industry should start to have -- to enjoy better organic growth.On the Agri-Food & Commodities business. So it depends. You are talking about mostly Oil & Petrochemicals business.

[Rory Edward McKenzie, European Support Services Analyst]

Yes. In South America.

[Didier Michaud-Daniel]

That's what you asked, I think. So we have the same price pressure. There is nothing more, nothing less. I would say, it has stabilized at a certain level now. I cannot say it's -- I cannot say it's more, I cannot say it's less today. As you know, we enjoyed the 2.4% organic growth in Oil & Petrochemicals. It has stabilized a little bit compared to what it was when the oil price was extremely low, for obvious reasons. But now it seems that it has stabilized at the level, which should stabilize the margin for the year. But I'm not going to talk margin now. I'm talking about the one for Oil & Petrochemicals.

[Rory Edward McKenzie, European Support Services Analyst]

Yes. Okay, sure. And maybe one more on the Agri-Food division, if I may. The weakness in Agri in Europe, do you think that's just a temporary issue, given some of the seasonal patterns? Or do you think you'll see a bounce back into Q4 into next year for the Agri in Europe?

[Didier Michaud-Daniel]

It depends on the weather. As you know, and I think you know it very well, it's totally linked to the weather, less water in the years that we have the very warm weather and, of course, less crops due to the fact that there was less rain this year, in particular, in Germany and the Ukraine. So it is purely the impact of the weather.

[Rory Edward McKenzie, European Support Services Analyst]

Okay. So there is no impact on the contract losses in there or anything like that?

[Didier Michaud-Daniel]

No. Absolutely not.

[Operator]

The next question comes from the line of George Gregory.

[George Nicholas Gregory, Research Analyst]

I'll go with the traditional 3, I think. Firstly, just on consumer. I -- perhaps, I didn't fully follow this, but should we expect Q4 growth to be slightly higher? I'm not clear on how the comps are in the subcomponents in the fourth quarter. I see the Q4 growth last year was a little stronger overall, but I think there were some working-day fluctuations there. Secondly, on M&O, Philippe, you gave us some useful color there in terms of the sulfur regulations and the potential transition period. I just wondered if you could maybe elaborate on that. Is that impacting current orders? And have you seen a more recent slowdown in IMO-lead orders, which had already picked up? Maybe just a bit more color around that discussion would be helpful. And finally, François, on the currency impact. So I think your prior guidance for the year was -- maybe your predecessor's guidance was down 4% revenue and a bit more on margin. I just wondered, if you could update us on your full year expectation for both revenue and profit, please?

[Didier Michaud-Daniel]

George, we like the 3 questions -- the traditional 3 questions, now it's becoming like this. Okay, maybe François, you would like to answer first on the currency impact and after, Philippe, and I will finish with the Consumer.

[François Chabas, Executive VP & Group CFO]

Thank you. Well, to make it simple, we maintain our guidance on the impact. As you know, so the -- approximately 4% and 6%, as you mentioned. You know as good as me that we are very exposed to USD and emerging markets. The trend has kind of reversed in the third quarter compared to H1. But by and large, it remains within our guidance. So at that stage, we really confirmed the guidance that was given by my predecessor as you kindly mentioned.

[Didier Michaud-Daniel]

Thank you, François. Philippe on M&O.

[Philippe Donche-Gay]

Yes. The question today that you have in the market, as everybody knows, is about these new regulations for the 0.5% sulfur content and the decision to install scrubbers or not. And some ship owners already have decided, some very big ones to put scrubbers on the new construction and to retrofit the old ones. I would say that some, perhaps, midsize, notably, but carrier owners are perhaps waiting to see whether there will be a transition period or whether they have to rush now. It has not vastly affected the market because big players already made their choice to go either to low-sulfur fuel or to installing scrubbers and has not slowed down their decision

[Didier Michaud-Daniel]

Okay, very clear. Thank you, Philippe. On the Consumer Products side, clearly, I'm not going to give a quarterly guidance, but I confirm the mid-single-digit for the full year 2018. So I know you all will be very good to do your math for Q4.

[Operator]

The next question comes from the line of Andy Grobler.

[Andrew Charles Grobler, Analyst]

Three for me as well, please. Just on Government Services, which picked up very nicely in -- during the quarter. Given that was driven by some new contract wins, is that now pretty set at the high single-digit, low double-digit growth rates through the next 6, 9 months, would be first? Secondly, just going back to tariffs and you mentioned that only 5% of that business was in the scope for the tariffs. When you talked about some clients postponing decisions through Q3, were those clients that have products are in scope? Or is it kind of a more general caution that maybe that the scope will increase? Or other kind of realities of trade between those 2 regions will come into play? And then thirdly, just in terms of Oil & Gas, the CapEx is back to growth, which is excellent. What's the pricing environment like? As there is a bit more activity, are you getting some pricing tension back in the market? Or is it just too early for that to be a reality?

[Didier Michaud-Daniel]

Okay. Thank you for your questions. Of course, I'm going to start by your last question. It's -- you are right, it's a little bit too early. But of course, as long as there is more volume, the prices will be better because you know the story of the market and supply and demand. So the volume coming back, we could expect, of course, the price to be better. The good news, as you know, is that CapEx has always been with a better margin than OpEx. On the tariffs, it's a very good question. I met, in fact, a lot of our clients when I was in the U.S. 3 weeks ago, and I had the opportunity because we decided to have like a function with a lot of retailers. So I had really a lot of discussions about the tariffs. It was interesting, by the way, to see that one client, I cannot mention, of course, said to me "But this is fantastic for Bureau Veritas" because 10% more means that we could have an issue of quality. There are jobs, to be sure, that the quality is going to be at the same level. Because we don't want the Chinese manufacturing to work on quality to find the 10%. So I thought it was a very good point. And today, when you think about the actual market conditions, the scope is the one we gave to you, meaning 5% could be impacted, which has not been the case yet. On the Government Services we did very well. In fact, we have some good contracts in VOC and single window, which are ramping up. Expecting double digit overall next year is probably not sustainable, but we should -- we are back on track with good contracts, and we are quite happy with what is happening now with Government Services business.

[Andrew Charles Grobler, Analyst]

Okay. Just going back to the tariffs. I know it's a very broad question. But just when you talked about some clients postponing decisions, were they -- were those clients that were directly in scope? Or were they in other areas?

[Didier Michaud-Daniel]

Yes. They are mostly, to be extremely transparent with you, in electronics. They are not in softlines for the moment, neither in hardline. Mostly in electronics products. The good news is that we test all the soft in Taiwan. So it has no impact. It's more on where -- or what do they do in terms of the manufacturing of the product in the future. It's always, in a way, for the moment, it has no real impact on us because the testing is done in Taiwan not in China. But some of these clients are just already thinking about why not shifting their supply chain in some countries. The good news is we are already in Cambodia, we are in Vietnam, we are in India, we are in a lot of countries where they could decide to shift, but it's too early to talk about it. It seems, again, and take it -- take my point with precaution, when I discussed with them, they said, but 10% at the end of the day, depending on the evolution of the RMB, is probably not such a big impact. Of course, I'm talking about the actual market conditions.

[Operator]

We have no further questions at this time. Please continue.

[Didier Michaud-Daniel]

Okay. Thank you very much. I wish you all a good afternoon and a good evening.

[Operator]

Thank you. That concludes the conference for today. Thank you for participating. You may all disconnect.