Bureau Veritas SA

PAR:BVI

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the Bureau Veritas Q3 2021 Revenue Presentation. My name is Val, and I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]I will now hand you over to your host, Didier Michaud-Daniel, Group CEO, to begin today's conference. Thank you.

[Didier Michaud-Daniel]

Thank you. Good morning, good afternoon and good evening to everyone. Thank you for joining Bureau Veritas' third quarter 2021 revenue on the webcast and on the call. Francois Chabas, our Group CFO, is here with me to present our results, along with Laurent [ on floor ].During the third quarter and still today as we speak, some regions continue to be affected by the pandemic, notably in Asia. We continue to take every possible measure to ensure the health and safety of all our employees. This is an absolute priority for the management team. In the quarter, we accompanied and helped our clients in managing their risk and in running their operations in the best possible conditions. I would like to thank once again all of our teams around the world who remain highly mobilized and proactive. Before talking about the Q3 revenue, there have been some key developments of particular interest during the quarter. First, the strength of our organic development driven by strong underlying trends. This demonstrates, again, our resiliency and the benefits of our past diversification. Secondly, the strong demand for our BV Green Line of services and solutions as the focus of health, safety, quality and environmental stewardship continues to gather momentum and prominence. Two examples, as an illustration. I could have taken a lot more, of course. In Consumer Products, we have won a large social compliance contract from one of the Middle East's largest online retailers. This is covering a wide range of consumer categories from softlines to hard goods and electronics. This confirms Bureau Veritas' leading role as a provider of ESG sustainability social solutions to online retailers. In Marine, our teams have delivered, on approval in principle, to Dutch renewable energy company, SolarDuck, for its offshore floating solar solution. This is the first time such an approval has been granted to an offshore floating solar technology. Thirdly, our entry into Euronext CAC 40 ESG Index, which identified the 40 companies among the 60 largest listed that demonstrate the best environmental, social and governance practices. This is a testament to our constant efforts regarding sustainability and our commitment to act responsibly in order to shape a better world.Looking now at the figures. In Q3 2021, revenue for the quarter was EUR 1.25 billion, up 8.5% year-on-year. The organic increase was 7.5%, showing a solid underlying performance with an organic revenue growth of 3.5% compared to Q3 2019 level and 3.9% year-to-date against 2019. Amongst our businesses, 4 delivered particularly strong organic growth: Industry by 10.4%; Consumer Products by 8.7%; Building & Infrastructure by 8%; and Agri-Food & Commodities by 7.7%. We confirm our full year 2021 outlook even if the pandemic still creates inefficiencies in the short term.We continue to benefit from the balanced portfolio we have established over the past 6 years. In the pie chart, you see the diversification benefits. First, all of our activities are fueling the growth. Each business contributes to driving the group forward. Second, our strong franchise covering all continents. In the third quarter, growth was driven across more geographies with a significant positive impact from the Americas.Our growth platform is in place across the whole of the group. We are uniquely positioned to benefit from strong drivers such as sustainability and growing local trends requiring the expertise of a third independent party to play a role in managing operating risks. I now leave the floor to Francois to comment the financial and business dynamics. Francois?

[Francois Chabas, Executive VP of Finance & Group CFO]

Thank you, Didier. Hi, everybody. So moving to the revenue bridge on Page 10. As Didier mentioned, we delivered EUR 1.25 billion in the third quarter with another increase of 8.5%; organic growth, 7.5%, benefiting from strong underlying trends in most end markets despite more challenging comparables in Q3 2021. The comparables will remain tough moving into the fourth quarter of 2021.The scope effect was positive 0.2%, reflecting the impact from prior year disposals, offset by the 5 bolt-on acquisitions realized in the first 9 months of 2021. During this quarter, we made the acquisition of AET France, a company specializing in laboratory testing, product developments and sustainability testing for consumer good markets. And to be noted, for the first time since 2019, ForEx had a positive impact of 0.8%, mainly due to the appreciation of the U.S. dollar and paying the currencies against the euro.Turning to the view by business for the quarter. Four businesses delivered a strong organic performance between 8% and 10%. Industry was the best performing business with organic growth of 10.4% across the board with most regions delivering growth. The Power & Utilities segment was a key growth driver of this portfolio. Consumer Products, 8.7%, continued its recovery, mainly led by a pickup of activity across most product categories in China. Agri-Food & Commodities, plus 7.7%, was led notably by a strong Metals & Minerals activity. And finally, Building & Infrastructure, plus 8%. The performance was driven by the Americas as well as the Middle East and Africa. Double-digit organic revenue growth was delivered in construction-related activities, while the building and service activities achieved low single digits.And in the meantime, Marine & Offshore and Certification grew organically by 2.7% and 0.8%, respectively, with solid underlying trends despite, as mentioned, challenging comparables following catch-up audits in 2020.So to give you more detail, let's move to the business review so that we can share with you the highlights of the third quarter for each of our 6 businesses. First on Marine & Offshore. The business achieved a solid 2.7% organic revenue growth in the quarter with mid-single-digit growth in the core in-service activity. It was fueled by the fleet's modest growth and a continued decline in laid-up ships. We benefited from a favorable timing of inspection. This trend will reverse in Q4. In the third quarter, the shipping market confirmed its sharp rebound, driven by the demand for containership and the energy market. Bureau Veritas new orders achieved 6.6 million gross tons in September '21. This brings the order book to 16 million gross tons, up 13% compared to December last year. For the Agri-Food & Commodities business, we delivered a strong organic revenue growth of 7.7% in the quarter. Two elements are worth noting. First, the oil and petrochemical trade market showed some improvements due to the higher fuel consumption and easy comparables. We saw a strong demand for non-trade related activities and value-added segments, including sustainability-driven solutions such as carbon-14 analysis for biofuel and plastic-to-oil analysis. Second element, Metals & Minerals, double-digit organic growth was achieved. Exploration drilling activity stayed strong in the quarter for all major commodities in the context of high metals and mineral prices, as you know.Moving to Industry now. Industry was the best performing segment with an organic growth of 10.4%. The Power & Utilities segment continued to be a growth driver with mid-single-digit organic performance. This illustrates the good execution of our diversification strategy. In the Oil & Gas, the performance further improved as many projects which were put on hold finally resumed. In the medium to long term, renewable energies are providing significant growth opportunities for the business. As you know, oil and gas companies are currently accelerating the shift towards cleaner energy: solar, wind, hydrogen, aiming at meeting ambitious decarbonization targets. Bradley Construction Management acquired by the group in the first quarter of 2021, was awarded several large contracts for solar energy construction projects in the U.S. over the quarter. Moving to Building & Infrastructure. The business posted a strong organic revenue growth of 8%. The group is well positioned, thanks to 3 growth platforms across different geographies: North America, Europe and Asia Pacific. Overall, the performance was very strong for CapEx activities, up double digits organically. For OpEx-related services, the growth was good, up low single-digit organically against tough comparables, following a catch-up of regulatory-driven business, again, in 2020. By region, we delivered very strong growth in the Americas, led mainly by the U.S., combination of strong dynamics for data center commissioning services, where the group has a leading expertise and strong momentum in project management assistance for OpEx-related services. In Asia Pacific, a slight revenue decline was recorded due to China as a result of very tough comparables following the restart of large infrastructure project last year once the travel restrictions were lifted. However, bear in mind that the Chinese underlying trends are unchanged with an organic growth up 6.2% versus the last -- the quarter 3 of 2019.Moving now to Certification, organic growth was 0.8% in the quarter against very challenging comparables. Again, had a lot of catch-up in Q3 2020 due to postponed audits. So it benefited from the effect of recertification deadline for several schemes. This will disappear as from Q4 2021 onwards. Within the group portfolio, double-digit growth was achieved in sustainable development and CSR, certification of organic food products as well as supply audits. During the third quarter, Bureau Veritas' Sustainability Services grew by 11.3%, still driven notably by strong demand for greenhouse gas emission verification and food management system certification. Finally, Consumer Products. The business continued its recovery in the third quarter with organic growth of 8.7%, mainly led by a pickup of activity in China, as I mentioned earlier. Testing activities grew strongly, while inspection and audit services have slightly declined. Many countries in Asia are being disrupted by restriction on mobility and shipping shortage issues.By geography, the growth was mainly led by northeast Asia, with China growing double digits. Both Turkey, Mexico have delivered very high growth and illustrated the first benefits of the group geographic diversification strategy. Conversely, activity levels were under pressure in Southeast Asian countries, essentially Vietnam, facing temporary lockdown measures since the end of August. So all in all, it's another strong quarter. While there are still uncertainties in the short term, the underlying trends and the local execution components of our operations bring confidence in our portfolio positioning. And I hand back now to Didier for the outlook for the rest of the year.

[Didier Michaud-Daniel]

Thank you, Francois, thank you. The excellent performance year-to-date allows us to confirm our outlook for the full year. Obviously, as commented previously, this includes, of course, a slower growth in H2 compared to H1 due to challenging comps. Assuming that there are no severe lockdowns in our main countries of operation, we continue to expect to achieve strong organic revenue growth, improve the adjusted operating margin and generate sustained strong cash flow. Our past pro forma transformation has been of considerable benefit on our growth pattern. Moving forward, Bureau Veritas is well positioned to benefit from strong macro drivers such as sustainability. With the 2025 strategic directions, we will capitalize on our growth platform and continue our successful journey of delivering value-creating strategy.I take this opportunity to invite you to our Investor Day on December 3 in a virtual format. Thank you very much for your attention. Francois and I are now ready to answer your questions on the call or on the webcast.

[Operator]

[Operator Instructions] And the first one comes from the line of George Gregory from Exane.

[George Nicholas Gregory, Research Analyst]

I had a couple of questions, please. Firstly, Didier and Francois, I wondered if you could perhaps help us better understand the phasing into the fourth quarter. You identify a few helpful trends in the third quarter, which you expect to fade in the fourth quarter. I'm not sure if there's a way to sort of quantify those. Or conversely, to perhaps think about the 2-year trend with Q3 3.5% ahead of 2019, which is pretty similar to the second quarter. Just any thoughts as we model the fourth quarter, please? And my second question is specifically on the Consumer Products business. In the statement, you talked about being -- seeing the initial impact of disruption from either lockdown measures or supply chain. Is that something you saw deteriorating through the quarter and having a perhaps greater impact in the fourth quarter? Any color there would be appreciated.

[Didier Michaud-Daniel]

George, thank you very much for your question. Maybe on the phasing part, Francois, you could answer and I will come on the Consumer Products question.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, George. Well, to -- it's now 2 years that comparables are an interesting science, considering that the year 2020 has been very uneven, the same for 2021. So we have a tendency, even though we report, of course, numbers versus 2020, to look at those trends against 2019, which for us is the last normative year in terms of performance. So the comment we've made on Q4 and tougher comps are primarily aiming at 2020, where, as you may remember, we had a lot of catch-up, especially in the Building & Infrastructure business, where several regulatory-driven services could not be delivered in Q2 and went strongly to load or performance in Q4, the same on Certification in particular. And that's where as well where we started to regain traction on CPS. But for me, the more interesting part is the underlying growth against 2019, which is where really we have a focus. You've seen that we've delivered more or less 5% in Q1, 3.3% in Q2, 3.5% in Q3. When we look ahead of us, you've heard that we have reiterated our guidance in terms of growth. The way you can model it into your numbers is, bear in mind, in my view, 2 elements: the first element is the last quarter of 2019 was historically the strongest in BV history, driven by very high activity in the industry. So don't expect, I would say, our current Q4 on Industry to be able to match that type of level on a quarterly base. That's, I would say, lesson 1. Lesson #2 or takeaway #2 is the seasonality of our Marine & Offshore business, where we have benefited and, to some extent, being frank, we do more than what we are expecting on the seasonality, which is of the in-service inspection. That represents roughly a good 60% of what we do in Marine and where we have very little grasp on when the inspection takes place. This is really the client with -- calling upon us to have the inspection. And we had, I would say, most of the year delivered in third quarter, where usually we have Q4 being more active. To make the link with your second question on supply chain, it is not completely disconnected as shipowners want to have their ships inspected in a very short time frame because there is a scarcity of transportation. So we had much more inspection, regulatory yard inspection during the first 3 quarters than we ever had in BV history. And as you know, it's -- we have one inspection per year, so what you do in the Q1, Q2 or Q3, you don't do it in Q4. That's mathematics. So I think those 2 elements in mind that helps you perhaps to better project our Q4.

[Didier Michaud-Daniel]

Okay. Francois, thank you very much. Now regarding the consumer product. First, I would like to start with the supply chain disruption. In fact, when you look at the disruption, we have a very limited impact at the group level, given our diversity of activities and geography. And we are not exposed to, as you know, to mobile, to automotive. So meaning that the exposure to -- and the risk linked to supply chain disruption is really not relevant for Bureau Veritas. But your point about Consumer Products and the impact was more about the fact that Vietnam, Bangladesh, these countries were locked down and are still locked down today. And because they were locked down, some supply -- there were some supply chain moves between notably, Vietnam and China. In fact, some manufacturing sites moving back to China. The good news is that we have a large footprint in China and because of that or thanks to that, we had very good performance with Consumer Products division in China because we tested a lot of products in China. And as you can see, our revenue resumed very well with the Consumer Products division. And we expect having quite a good year compared to 2020 in 2021 in -- with this division.

[George Nicholas Gregory, Research Analyst]

And sorry, if I could just quickly follow up on the M&O benefit seen from inspections called forward. Core in-service grew, I think, mid-single digit. So excluding that effect, would you have expected it to have been more flattish year-over-year? Just trying to get a sense of the benefit you saw in that division.

[Francois Chabas, Executive VP of Finance & Group CFO]

Well, I think when you look at the in-service part, which represents, as I said, roughly 60% of what we do, usually, on a normal year, the driver behind the potential growth in this segment are twofold: price and volume of the fleets, right? So normally, in a normal world, I would say it is something that is meant to grow 2%-ish on a yearly basis.

[George Nicholas Gregory, Research Analyst]

Okay.

[Francois Chabas, Executive VP of Finance & Group CFO]

On a full year basis, I mean, right, 12 months.

[Didier Michaud-Daniel]

Thank you, George.

[Operator]

The next question comes from the line of Andy Grobler from Credit Suisse.

[Andrew Charles Grobler, Analyst]

Just a couple from me, if I may. First one, just on pricing. There's lots of discussion around inflation for most companies, so I wondered what you were able to push through to your clients in terms of price increases. You mentioned something for Marine just now, but across the broader group. And then secondly, on B&I, kind of following on from the theme of the previous questions. That looks to have slowed a little on a 2-year stack in Q3 versus 2019. Could you just go through why that was the case? You mentioned France in the write-up. Is there anything else that we should be aware of?

[Didier Michaud-Daniel]

Regarding B&I, first, when you look at the balance that we have now between, let's say, Asia, North America, which is performing extremely well and Europe, we are very happy. And if you look at our Q3 results, we are still delivering what I consider as a very good organic growth level.So we are still very optimistic regarding B&I for several reasons. And one of them is the fact that there will be a lot of renovation linked to the sustainability development. The investment with the European Union, as you know, which has decided to go for the Green Deal, and there will be millions, billions even, of development in Building & Infrastructure in Europe. Same story in the U.S. with the infrastructure. And in China, we know that the 5 years plan regarding infrastructure development and energy is still going to provide good organic growth. So I am quite optimistic regarding B&I for today and for tomorrow. On the pricing inflation, it's a good question. In fact, we were very proactive in some countries. The first country where we decided to put the price up by 4% to 5% was the U.S. because in February, March, we immediately thought that the inflation could come back. And we decided to push the prices proactively again by 4%, 5% with quite the good results, knowing that on the pricing point, we -- as we have multiple small contracts with more than 400,000 clients, we can clearly push our price up. We are doing the same thing in some countries in Europe, in particular, in France and in Spain, so we are really working on it and again in a proactive manner.

[Andrew Charles Grobler, Analyst]

Can I just ask on that? For the year, where do you think price increases will average out for the group? I know there's lots of differences across the portfolio, but on average would be really useful.

[Didier Michaud-Daniel]

It's a good question, very good question. How to estimate it? Honestly, not as easy. It would -- giving you an answer for the whole group is quite challenging. I would probably say below 2%, but we will probably give you more color at the end of the year when we'll go deeper in the details, and in particular, because we will discuss and we will, of course, give the margin that we will achieve at the end of the year, which is going to be good news.

[Operator]

The next question comes from the line of Paul Sullivan from Barclays.

[Paul Daniel Alexander Sullivan, Director & Analyst]

Just a few from me. Firstly, just on the flip side of pricing, are there any sort of signs? Or how would you talk about cost pressures and inflation impacting the business on the margin side or on the cost side of the business? Secondly, you talked about sort of China and the year-on-year comp there. Should we be somewhat concerned about slower China growth going forward on B&I? And could you perhaps also then finally just look into your crystal ball in terms of the Marine cycle into next year? It feels like with your order book, you should have fairly good visibility into next year now.

[Didier Michaud-Daniel]

Of course, we will discuss the Marine in February, but I have some very good news already. The market is up, and clearly, we are recording good wins, in particular, on LNG ships and containerships. So we will give you more color in February, but this year is going to be a good year and we know it already in terms of orders. We are already, more or less, at the same level, even better than last year at the end of the year. So it gives you an idea of the performance that we will record this year. We are doing a very good job with Marine. So -- but as we are recording wins, which are for more technological ships, and we will again discuss it in February, we may see the positive impact on revenue in Marine, probably next year, third quarter, first quarter, not before because again, we are talking about ships which are extremely technologically advanced. On the China growth, again, when you look at the 5 years plan from Xi Jinping, you can see that there will be still a lot of investment in terms of infrastructure and energy. So the underlying trend remains very solid. We achieved more than 6% in Q3 versus Q3 2020, when in fact, in Q3 2020, we had already some catch-up so it's quite a good news. On the cost pressure, we have no -- I don't see any cost pressure. You want to add something, Francois, about it because we had some...

[Francois Chabas, Executive VP of Finance & Group CFO]

On cost, I think we are getting the same communication and as many companies from the usual IS and IT suppliers trying to increase their price perhaps more and more in a more violent way than the usual. But beyond this for -- when you look at the cost structure of Bureau Veritas, as I'm sure you do, the biggest part of our cost is personnel costs. And I think we'll be -- every time we're happy when those personal costs are growing because it means that we got more business and we need to deliver with those people. However, there is -- I just wanted to have one point there, it's on salary pressure. And I think what we start to see those days is most countries, we manage to keep the salary pressure to, I would say, a very decent level, with one exception that goes a little bit with scarcity of resources, which is the U.S. where here, we start to see, in some segments of our activities, cost pressure from the salary part that we have to absorb. And that's why Didier indicated, we had preventively started to implement price increase in the U.S. I would say to me, if I have to really point at a situation in a country, that would be the U.S. today in terms of cost pressure coming from salaries.

[Operator]

The next question comes from the line of Julien Fouché from Societe Generale.

[Julien Fouché, Equity Analyst]

Just 3 for me, please. Firstly, just to follow up on Consumer Products on a 2-year view. It seems that there is a bit of a sequential slowdown in Consumer Products. So excluding the lockdown measures in Southeast Asia, are there any other reason for this slowdown? Secondly, regarding the improvement in your trade activities, do you see increasing momentum for this activity going into the fourth quarter? And how should we look at this for 2022? And lastly, are you able to share with us the exit rate in September?

[Didier Michaud-Daniel]

Okay, so I'm going to answer your question, Julien, on the trade activity. I'm sure you are talking about Oil & Petrochemicals. On this one, we touched the floor, which is quite good news. As it restarted, honestly, not yet. But the good news, again, is that we touched the floor so we don't see any more deterioration. And we -- because of the consumption of oil, we believe that we will probably record some potential growth in the future. But for the month, again, we are flattish in this -- with this activity. On the exit rate, Francois, maybe you will take the Consumer Products question?

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes. So starting with Consumer, just to set the context and ensuring we talk about the same thing in terms of sequential growth when we -- I don't compare to 2020 for reasons I've mentioned already. But against 2019, this is minus 3% in Q1, minus 1.7% in Q2 and minus 2.6% in Q3. So that may perhaps be the -- what you mentioned by deterioration. Let's be frank, I think with Didier, we were hoping I would say, 3, 4 months from today to be able to post a Q3 which would be back at 2019 level. And clearly, one thing we could not see coming was the situation we had to face in Vietnam, in particularly, that has forced us to ship back some test assignment from Vietnam back onto the Chinese platform, with -- obviously, as you clearly understand, some loss of efficiency in the process. But with that have the willingness to serve our clients to the best of our capabilities. So is it a change in trend? No. Would we be more happy if we would have been back to 2019? Yes. Are we there yet? No. And most probably say we won't be able to close on the full quarter being back at 2019 level this year. So that's for the Consumer Products. For the exit rate, so thanks for your question. Frankly speaking, I think we stopped reporting on exit rates because today, they simply do not make any sense. I would say the years are complicated and sequentially enough not to add another picture at some point in time. So we'll not disclose exit rate for September and most really not for December.

[Didier Michaud-Daniel]

If I can complete your answer, which was very good already, Francois. On the Consumer Products side, we decided and we discussed it in the past to move some labs from China to Vietnam and to Bangladesh to have a good footprint there. So we are happy because we -- these labs are in Vietnam and Bangladesh. Okay, today, there is a lockdown. We hope that this situation is going to be improving in the future and that COVID-19 will disappear, but more than anything here that these countries will not be locked down anymore. And when it will be opened again, we are optimistic that the samples will go back to our labs and we -- the organic growth will resume because it's really mostly because of the lockdown of these 2 countries.

[Operator]

The next question comes from the line of Simon LeChipre from Stifel.

[Simon LeChipre, Analyst]

Three questions, please. First of all on Consumer Products as a follow-up to one of the previous questions. You said in the statement, you are paying close attention to the chip shortages in the Technology division. So just like to better understand what sort of impact you have seen at this stage. And how do you expect it to evolve as it looks like the chip shortage is not about to improve over the very short term? Secondly, on Certification, trends have accelerated, interested on a 2-year view. I understand you benefited from the idle cycle. So just would be keen to understand what should be a sort of normative trend for the coming quarters. And lastly, on the outlook and taking a first look to 2022. Just looking to consensus expectations according to sort of mid-single-digit growth next year. So just wondering, is that something you are comfortable with?

[Didier Michaud-Daniel]

Okay, LeChipre. Thank you for your questions. So chip is -- there is no impact for us. So I'm not -- I cannot say more than that because it's insignificant for us. On the Certification side, which is a very good question, with Bureau Veritas, we are not just now an ISO 9000 type of certification body. We have decided to accelerate a lot on what we call second-party audit. And we know now that with the certification regarding ESG KPIs, we have a lot of opportunities in front of us. You know that we launched the Green Line. A part of the Green Line for us is certification. And we can see an acceleration now of the demand coming from companies, which committed on sustainability ESG KPIs and now more and more Board and final consumers are asking these companies to prove that what they say declare is true. And as an independent body, of course, we are proposing solutions now to test, audit, inspect what they declare to the market, to their Board or to their consumers. So again, you have this part of ISO 9000, which is very resilient and which is, of course, good news for us because it is very resilient and we have long-term contracts. We are now clearly visiting our clients. And you know that we are a leader in Certification and assurance to propose our services regarding ESG. And this is clearly a trend which is accelerating very fast. On the outlook on consensus, Francois?

[Francois Chabas, Executive VP of Finance & Group CFO]

So if we got it right, your question was on the outlook for Certification?

[Simon LeChipre, Analyst]

No, no, at the group level.

[Francois Chabas, Executive VP of Finance & Group CFO]

At the group level, okay.

[Simon LeChipre, Analyst]

For 2022.

[Francois Chabas, Executive VP of Finance & Group CFO]

Yes, okay. Just to make -- just a precision for Certification though. As you know, there are -- you mentioned there are a lot of moving pieces between catch-up from 2020 and recertification deadlines. But I would say the underlying trend, all things put aside is mid-single digit for this business. And Q4 would be a bit smaller, but all in all, mid-single digits remains the underlying trend for the business. When it looks at -- when we look at the group, we don't give the quarterly outlook, as you know. And we maintain for this year, the outlook we've mentioned by the end of -- or in July, and we get more about it by when we post our final year-end results.

[Simon LeChipre, Analyst]

Actually, my question was for 2022 when looking to consensus basically analysis mid-single-digit growth?

[Didier Michaud-Daniel]

No, LeChipre. We will discuss '22 in February, if I may.

[Operator]

We have another question in the queue, and that comes from the line of Rajesh Kumar from HSBC.

[Rajesh Kumar, Analyst]

Just thinking about your positioning for 2022. In terms of headcount and capacity, do you think you are well positioned for your future growth? Or do you need to start investing sooner to basically prepare yourself for that growth? How much of that this cycle is likely to be driven by headcount versus automation? That would be quite interesting to understand.Second, when you say ESG-driven growth, can you give us some color in terms of which part of ESG? So is it energy certifications? Is it more around upstream supply chain verification of conformity of practices? What is it that you're seeing growth in? And do you think it's a one-off revenue source? Or is it a recurring revenue source? And finally, let's, for simplicity of discussion, say, assume that we end up in an inflationary world, do you think you have sufficient pricing power to pass through inflation to clients? Or is it specific to geographies or end market segments?

[Didier Michaud-Daniel]

Okay, thank you very much for your questions. So I'm going to start with the positioning for 2022. It's too early to talk about what could be the outlook, of course, for '22, and we will communicate in -- at the end of February regarding '22. Now if you think about our headcounts, our capacity today, knowing the vector that we have, honestly, I have no worry about the fact that we will deliver 2022, and we'll give you more color in February about 2022.We decided to digitalize the company. We accelerated, for sure, pushed by what happened in 2020, in particular on the remote inspections and we continue to push on remote inspection. After, when you think about our portfolio of orders, renewables, B&I, energy efficiency program and so on, we have quite a good backlog for next year. But again, we will discuss and we'll give you more color in February.Now on ESG. On ESG, it's energy, it's social audits, it's supply chain, it's recyclability of the product, it's waste management. You can see now that companies are taking -- are making commitments to their Board and to their consumers about sustainability. And the good news is that with Bureau Veritas, 80,000 people, 140 countries, this is our job to inspect, to audit and to test. So clearly, the demand is accelerating and this is going to be, for Bureau Veritas, a huge market already and in the future because again, today and you can see it, our clients are doing safe declaration to agencies. It's not enough. If you look at the bonuses of the CEOs worldwide now, most of them have 10% to 15% -- 10% to 20% of their bonuses, and even LTIP, calculated with ESG results. But today, these results are not checked, so meaning that again, it is self-declaration. This will have to be audited and inspected, no doubt about it. And we are touching everything. I could give you a ton of example because we already consulted a lot. It could be on social audits from suppliers in Asia, for instance, for big clients in the U.S. or in Europe. It could be on the supply chain because we have a client, and we will talk about it before the end of the year, probably in our Investor Day, for instance, which has asked us to inspect all the suppliers and we're talking about a big client regarding the suppliers' ESG commitment. I'm thinking about another client that I met this week, which asked me about waste management, water management. So you can see that clearly, this is going to be a great opportunity for Bureau Veritas for our Certification business. There is no doubt about it. Is it a one-off? No, it's not a one-off. I mean, when you will get a certification contract to check, test, audit the results or the commitment and the KPIs, achievement of the companies, it will be recurring contracts. We'll have to do that every year because again, today, companies that have to report to the market about ESG results. So it's going to be long-term contracts. And in fact, probably more and more demanding because risk management because the pressure that you know regarding ESG and sustainability. So no, it's not going to be one-off. The point here is to be the one Bureau Veritas, the first on this market because the contract that we will get will be, for some of them, forever, as long as we deliver a good service. On the inflation and the pricing power, at the end of the day, the only answer I could give you is what's going to be the margin at the end of the year. If the margin is a good one, close to what we enjoyed in the past, it means that we are managing price very well. And we are doing a good job in increasing our prices to mitigate the inflation issue. So we will discuss that in February. But I'm sure you can feel in my smile that it's going to be probably good news.

[Operator]

The next question comes from the line of Neil Tyler from Redburn.

[Neil Christopher Tyler, Research Analyst]

Two left from me, please. One, I suppose, following on from previous questions around the audit and inspection work, specifically in Consumer Products division, you mentioned that some of that has been interrupted. Is there any way that you can frame the level of business that you're achieving currently in those areas compared to 2019 year-to-date, would be helpful, just to give us an idea of the momentum in that component of the consumer activities? And then secondly, a specific question within Agri-Food. You mentioned that the food testing activities hasn't really delivered a great deal of momentum. Do you see that specifically as a consequence of lockdown interruptions in the areas you mentioned in the statement? Or is there a sort of wider inertia facing those activities?

[Didier Michaud-Daniel]

So thank you for your question. On the audit and inspection with the Consumer Products division, in fact, it is slightly down versus 2019, not versus 2020 because it's largely up against 2020. It's slightly down. And for the simple reason that I talked about before, this is the issue with Vietnam, Bangladesh and Thailand and these countries and even India, where because of the situation with the COVID-19, we could not access the sites. And even some manufacturing sites, as you may know, are closed in these countries. So it's exclusively because of the sanitary situation.On the food part, we had Q3, which was a little bit weaker due to mobility restrictions in our labs, in particular, in Australia. You know that we have a large presence in Australia, and again, the lockdown in Sydney and some big cities in Australia. But in fact, we could not -- I think about Melbourne, which is our largest lab in China -- sorry, in Australia. We just could not -- because of the mobility restriction, we just could not bring the samples to this lab. Apart from that, we had a good activity level everywhere else. So again, Australia is moving progressively in the direction of not being locked down anymore, so which will -- we will be back to a normal situation and maybe with a little bit of upside because for a while we had -- we could not test the samples in our labs, in particular, in Melbourne, where we have a very big lab.

[Operator]

The next question comes from the line of Geoffroy Michalet from ODDO BHF.

[Geoffroy Michalet, Research Analyst]

I have 2. The first one on Marine & Offshore. Is it fair to assume that you currently have an extra pricing power in services because your clients are in a hurry? And so this could translate directly into margins and be a good surprise for H2.The second question is about China. Are you somehow worried by the current financial situation of large real estate companies such as Evergrande or some others?

[Didier Michaud-Daniel]

So we are not affected by -- again, what I decided to do in 2015 was not to be in the residential market. So Evergrande is residential, okay? So we have very little exposure to this type of company in China. Again, we are working on large infrastructure projects or energy project. And these are not managed by Evergrande or by another company that was mentioned...

[Francois Chabas, Executive VP of Finance & Group CFO]

[indiscernible]

[Didier Michaud-Daniel]

Yes. Yes. So even with [indiscernible], we do nothing. So again, the good news is because we decided to move strategically in the right direction, we are not so much affected. On the Marine & Offshore, your point is valid, for sure, and we will discuss that in February.

[Operator]

The next question comes from the line of Oscar Val from JPMorgan.

[Oscar Val Mas, Analyst]

Just one quick question for me. It's a follow-up on what Julien asked on oil and gas commodities. You said that volumes have bottomed, but in Q2, you referred to intense price pressure in those markets. Can you just provide us an update on price pressure in oil and gas commodities?

[Didier Michaud-Daniel]

You are talking about Oil & Petrochemicals products trade, am I right?

[Oscar Val Mas, Analyst]

Correct, within Agri-Food & Commodities, yes. O&P, correct.

[Didier Michaud-Daniel]

So there was some price pressure. There is some persistent price pressure. It has unchanged. Again, the good news is it seems that we touched the floor. As long as the demand is going to increase, which will, for sure, happen because of the oil consumption and the fact that the trade is restarting progressively, the volumes will gradually improve. And as long as the volume improve, of course, we will have less pressure on pricing because the demand is going to be maybe even over the supply because some labs, I'm not talking about Bureau Veritas, were closed here and there. So it's going to be an interesting time as long as the volume is coming back. But I do not see any more deterioration today. Thank you. We are done for today, I think? Okay. Thank you very much for your attention. I wish you all good afternoon and good evening.

[Operator]

Thank you for attending today's call. You may now disconnect.