SEB SA

PAR:SK

Earnings Call Transcript 2019-Q1

[Vincent Leonard, Senior Executive Vice President of Finance]

Welcome to all. Welcome to this Q1 earnings release. You presumably have received our presentation, so built along the same lines as usual, so I'll skip the agenda that you have on Page 3 and jump right into Page 5 and the overview, the highlights of our performance over Q1.We're starting the year strong, as you can see here with the very robust like-for-like sales growth at 8.5% and with a little bit of tailwind on FX and a few acquisition impacts, we will report -- we are reporting 10.4% sales growth. ROPA was EUR 138 million, up 12%. That includes a negative FX impact of EUR 7 million, positive impact from our acquisitions, Wilbur Curtis, that was consolidated -- that has been consolidated starting at the beginning of February. And our -- the expansion of our Egypt JV, those 2 for EUR 3 million in ROPA as well as an IFRS 16 implementation impact in ROPA of EUR 2 million favorable. So all these included in the EUR 138 million ROPA for Q1.Debt stands at EUR 2.214 billion, up EUR 636 million versus 2018 year-end, including in particular the impact of IFRS 16 implementation for EUR 351 million, the acquisition price of Wilbur Curtis as well as a rather high working capital reflecting strong March sales basically, hence high receivables and an anticipated strong Q2, hence fairly high inventory. So that's the highlights.Going into the split of our revenues on Page 6 by Professional and Consumer, you can see that momentum was good on both sides, with Consumer delivering a very solid 7% like-for-like growth, 8% reported at EUR 1.539 billion. And Professional further boosted our overall growth with like-for-like growth 24.4%, including a little bit of Wilbur Curtis and favorable FX impact. We'll see that in a minute.On Page 7, our quarterly growth that we put here in context -- yes, in the context of the last 3 years, as you can see, and I think, yes, we could have shown given another year, we will -- we are delivering our 17th quarter of like-for-like growth above 5%. So not this is our key measure of success, but this is certainly a good indication of the health of the business that we robust -- continuing to deliver very robust growth quarter in, quarter out.On Page 8 the buildup of our sales, again, 8.5% organic. Currency effects, currency impacts were a favorable 13%. It's been a long time I think since we've seen a positive impact on the sales, so 0.8% additional growth from FX. And then the impact of the consolidation of Wilbur Curtis for not quite 2 months as well as the Egypt -- the expanded Egypt joint venture representing those additional EUR 17 million in this.On Page 9, the split of that FX impact, so EUR 13 million favorable. So you can see, most developed currency -- developed market currencies were strengthening against the euro, in particular the CNY and the U.S. dollar, and most emerging market currencies were down versus the euro. Combination of all that was a favorable EUR 13 million on our sales number.On Page 10, split of our growth by main regions. So again, 8.5% at the bottom right -- at the bottom of the right column. EMEA basically solid in both regions, Western Europe at plus 3%. Other countries at plus 6.9%. Isabelle will go through the details, but mostly solid performances in most markets there.Americas, it's nice to see the both regions within the Americas in positive territory at 4.2% in total, North America at 3.8%. You can see here the impact of currencies between -- right, the third and fourth column, strengthening of the U.S. dollar, 3.8% like-for-like growth translating into 11% reported growth. South America 4.8% like-for-like growth, translating into minus 3.4% reported, reflecting the weak real, Colombian peso and Argentinian peso.Asia was -- delivered another solid quarter at plus 11.3%, China 13.4% on top of 24% last year. And other countries than China, mostly good growth in those markets with a few, I'd say, contained exceptions that Isabelle will go through, so 2.5% growth there. And here, again, you can see the impact of currencies with the strengthening of the Japanese yen and Korean won. So that 2.5% translating into a reported 7.3% growth in other Asian markets.So all that for a 7 -- very solid 7% Consumer growth, and Professional adding strong growth at 24.4% within that. So this is mostly coffee. As you know, coffee was up 27%. Hotel was slightly up at 2%.And I'd say, the key point there is -- the key learning for us is we don't need China to be 25% to deliver very strong growth. So that's the -- really the strength of our portfolio in terms of markets and categories enabling that growth to continue quarter in, quarter out.On Page 11, split of our business by region, pretty stable I'd say, although as usual, in Q1, very much sort of biased towards Asia, with China above 30%. As it was last year, 32% China, reflecting obviously strong performance on CNY sales and the rest of the portfolio pretty stable. Some pressure, these are reported growth, so some pressure on other EMEA from FX, but underlying performance was, as we saw, quite strong.The split of our business between emerging and mature countries is right on 50-50. Actually, it was exactly the same last year. So that's -- again, that's a Q1 kind of split. On a full year basis, you would expect mature markets to be closer to 45% and 50% in -- and emerging markets closer to 55%.All right. And with that, I'll hand over to Isabelle for more detail on the markets.

[Isabelle Posth]

Yes. Yes, good evening. We're going to go a little bit around the world, starting with Western Europe and France in which we qualify the performance as satisfying. We have, in fact, a slight drop in revenue versus high comps in Q1 last year in -- and last year was in value a record year for Groupe SEB France. It was the ever highest quarter in Groupe SEB France life. So it was a high comp. So that's the first thing I would like to mention. The second thing is that we have offered to take into account that as we mentioned earlier in the year, we had a bad Q4 last year due mainly to an unsuccessful -- that's difficult to say, loyalty program. And we had some returns on that loyalty programs in the first quarter and that was due to low traffic, you remember, and yellow vest protest at the end of last year. So excluding this effect, as a matter of fact, we would have been positive in the first quarter this year. So not that bad performance, and that's the reason why we qualify it as satisfying. In a market which was growing in small electrical appliances, meaning all categories but linen care, we have had a very good start to the year. Revenue was up, driven by vacuum cleaners. And you know the all-in-one vacuum cleaners, the versatile ones, steam and clean; the fully automatic espresso machines; food prep, Cake Factory, the cake appliance; Cookeo, the multi-cooker; brunch sets that have been doing very well; and also yogurt makers that are coming back. So a very good business for us in a small electrical appliances in the first quarter, with, at the end of the day, slight market share gains by groups at France.In Cookware, the story was a little bit different. As I mentioned before, we had this loyalty program return partly and that was done in a market which was down, too. So it was a difficult to start to the year for Cookware. But nevertheless, in this difficult start in this difficult market, we have gained market share. And as all-in-all, we continue to reduce the gap between online and off-line market share for the group. So a rather good start to the year for France. In the rest of Europe, the market, the SDA market, has been trending positively overall. And our performance of 3% like-for-like growth was kind of subdued by the VMS consumer business, and also the Nespresso business. As you know, we have ended our sales to Nespresso boutique. And as a matter of fact, this has cost us a certain number of millions of euros over the time. This is the last quarter in which we register such a loss. So all in all, taking this into account, performance would have been much better than what you see actually.Starting with Germany, we have had an outstanding and broad-based performance, excluding VMS, in a brilliant market that was fueled by all categories [ that didn't carry food prep ].E-commerce has been a strong growth driver again, and we have been relying on our champion products like Cuisine Companion, which is called Prep&Cook in Germany, fully automatic espresso coffee machines, vacuum cleaners, cookware, blenders, and all in all, we have gained market share in Germany.In Italy, growth again on good comps, fueled by firm core business and also loyalty -- sorry, loyalty programs with our best sellers that are still the same, Cookeo, vacuum cleaners, personal care, where we have launched trimmers and bathroom scales. And again, we've gained market share in Italy.In Spain, an ongoing positive trend, steady growth, despite high historical comps that was driven by all our major flagship products over there. And also VMS where we -- we're having a very nice story in Spain. It's still a small business but it's growing fast, more than 20% growth. We've got 2 stores over there in Spain. They're going on quite well. We have a premium, nevertheless, kind of multichannel approach. And this is a strong success story in Spain.In the Netherlands, where we had posted high growth last year, we continue to have this overall successful stance, with cookware being up, core business as well as loyalty program and the same vacuum cleaners, fully automatic espresso machines, but also oil-less fryers. And all in all, we've been outperforming the market and continue to gain market share.The major country in which the story has been more difficult is the U.K., where our sales are sharply down in a sluggish market, very promotion-driven market, very competitive, fierce competition, not only in our segment but also in the distribution industry. And as such, it has been a very tough first quarter. So that's for Western Europe.Continuing in the other EMEA countries, overall, as you can see, we have had a solid momentum that was noted by both growing core business but also significant loyalty programs and on high comps if we look at Q1 last year. So most of the big markets for the group have contributed to sale expansion, and I'm going to focus on 3 countries. The first one is Poland, which is, in fact, the only country in Central Europe belonging to our top 20 countries where we continue to have a double-digit growth, with all categories contributing in a very good and positive market. Just as a reminder, this market in Poland is 50% made out of 2 big categories: fully automatic espresso coffee machines and vacuum cleaners. And in these 2 categories, we have had sharp sales rise, with market share gains that are very significant. So we continue a very nice story in Poland.In Russia, continued growth also in a positive market, which was driven -- and growth was driven by cookware and kitchenware. But also, all our main flagship product, linen care, vacuum cleaner, kettles, we have huge success in glass kettles in Russia and with a very strong leadership. Food preparation, with all the different categories, meat mincers, blenders. Blenders, we've more than doubled our sales over there. So a very good stance also in Russia and a strong leadership also.And Turkey. Turkey, the third big country in this area where the macroeconomic context is very uncertain, as you know. Exchange rate have been better -- has been better than expected, but nevertheless the market is very competitive, very promotion driven. Demand is under pressure, purchasing power is under pressure. In this context, our sales growth is mainly due to prices. Volumes have been down and we have had a mixed picture depending on categories, with some categories up, some other categories being down. And we continue to focus on local for local products that are either made in Turkey or come from our joint venture in Egypt.North America, well, as you can see, we had a base of [ comparation ] which was not very difficult last year, but all countries -- all the 3 countries have been positive in Q1 2019. In a context which has not structurally changed, the retail industry is still very difficult and is crossing very difficult times. But nevertheless, in this context, we have had growth in all the 3 countries in the U.S., plus around plus 4% like-for-like. This is mainly due to Cookware sales, which was -- which were driven by excellent selling for All-Clad, both in the off-line trade but also online. Q4 sales were geared and boosted by an important deal with one of our customers for a jumbo cooker. And Mooca is still doing great and maintaining a very solid growth momentum. On the other hand, it's been more difficult in a small electrical appliances and mainly linen care, where garment steamers, in fact, fade to affect the job that we had in irons.In Canada, it's the same story, so I'm not going to elaborate more that the retailer environment is very difficult, and our business has been more or less similar to what I just described in the U.S.Mexico, flattish sales, like-for-like, with a strong momentum in cookware and a more challenging situation in small electric appliances and in particular in linen care.In Latin America, Brazil, as you can see, we have a good recovery in Brazil. That was -- yes, that was against the backdrop with -- which was a little bit more positive, all in all, but still ARNO and Groupe SEB evolved in a market which is very competitive and very promotion driven, and this has not changed over time.Overall, our performance has been very good in small electrical appliances. That was mainly driven by fans, where sales have been dramatically up. Also, Dolce Gusto, where we have benefited from strong campaigns of Nestlé, and also electrical cooking with oil-less flyers and grills doing quite well. On the other hand, sales have been more difficult in food prep and in linen care.Regarding Cookware, things are improving. We, of course, as you know, we are passing on low comps. Nevertheless, the business -- our business has been improving significantly on the base of a much better situation in our plant in Itatiaia and that bodes well for the next quarters.In Colombia, slight decline in revenue that was mainly linked to the traditional channels, which are more challenging and crossing some more difficult times, but also quite mixed in terms of product categories with some good areas and some more difficult areas.Now regarding China. Double-digit growth in China, as expected, which was fueled, in fact, by all product categories, with e-commerce continuing to be a growth measure, a key growth driver on the market, here representing not quite 40% of our sales. The trend has been, as you can see, has been consistent with Q4. So overall, the market, off-line and online, is estimated to grow around mid-single-digit, which means that we have continued to outperform the market and to strengthen our market share.Cookware sales have been up double-digit, pots and pans and steamers, woks, but also kitchen tools and kitchen utensils like travel mugs and bottles and also consolation boxes.In kitchen electrics, our sales were up also double digit, driven by innovation. So all the new models that we have launched in rice cookers, in electrical pressure cookers, in kettles and you've heard already about these health cups, for which we have more than doubled sales, but also all classical kettles, blender, high-speed blenders up 45%. So all these categories have been fueled by innovation and new models have been very successful. Still this -- we have this premiumization trend, which is ongoing and where we continue to make inroads.In HPC, so home and personal care, growth has been very solid, over 20%, with new launches in vacuum cleaners very successful and good growth in market shares. Garment steamers remain also a strong catalyst, and we continue to strengthen our leadership off-line. The only category which has been down has been in fact air purifiers.And in the large kitchen appliances, also steady growth, albeit a little bit slower than before. And still a strong momentum for extractor hoods and also a promising start for water purifiers. That was for China. And now to finish with other Asian countries, where you can see the growth is around 2.5%, like-for-like. It's a mixed picture with some outstanding performances in a certain number of countries and some more difficult situations. If we focus on the 2 major countries, which are Japan and South Korea. Japan, very solid start to the year in a kind of flattish market. We do continue to capitalize on our flagship products, like Cookware and kettles, where we have robust growth, and we continue to ramp up our new categories, with a special word on the Cook4me multi-cooker, which is a great success that you probably remember that we launched it last year and it's a great success. Blenders, we're not as good at forecast because we were a bit short in inventories, so it means that should be better in the coming weeks.South Korea, sales were down, but this is mainly due to the overstock that we had -- that one of our distributors has in garment products. Excluding this effect, our sales were slightly up, with mixed performance according to product lines, but overall, not a bad performance. And apart from Vietnam and Australia, where we expect a turnaround in Q2, business has been growing in all the other countries in this area.

[Vincent Leonard, Senior Executive Vice President of Finance]

Very good. Thank you, Isabelle. Moving to Page 20, as usual, we remind you that Q1 is not representative of the full year. As you know, relatively small part of our sales in ROPA take place in Q1. So that is true here. Nevertheless, obviously, this is a strong start to the year and gives us confidence in the overall year.The environment remains uncertain, and we do have our share of challenges in some markets. But overall, the fundamentals are firmly in place, and we have confidence in our ability to grow both our small domestic equipment business and our Professional business this year.So this puts us fully in a position to confirm our guidance to further grow sales, organic sales growth -- deliver organic sales growth and further increase our operating results from activity.And with that, we will be happy to take your questions. Please go ahead.

[Operator]

[Operator Instructions] The first question comes from Charles Scotti from Kepler.

[Charles-Louis Scotti]

Charles-Louis, Kepler Cheuvreux. A couple of questions from my side. The first one, can you give us an idea of the contribution of loyalty program to your organic sales growth in Q1? My second question, you mentioned the plus EUR 5 million impact from Wilbur Curtis and IFRS 16, is it EUR 5 million each or EUR 5 million together on your Q1 ORfA? Then, my third question, can you give us an idea of the impact of IFRS 16 on the full year, maybe it's under the following metrics, EBITDA, EBIT, net profit and net debt, that you are expecting for full year '19? And my fourth question on the -- your guidance, you mentioned at the end of the press release that this kind of organic growth cannot be extrapolated in H2, does it mean that it can be at least extrapolated in Q2? And then my last question on the potential M&A deal. What kind of firepower do you have to pursue your M&A strategy in the Professional Coffee machine business? And after WMF and Wilbur Curtis, will you be ready for sizable transaction if a very attractive one were to present?

[Vincent Leonard, Senior Executive Vice President of Finance]

Thank you, Charles, lot to cover here. Contributions from LPs was slightly more than 1 point of growth in the quarter. So I think I've mentioned that in a couple of places, all right, we had big LPs and that's the overall impact on the Consumer...

[Isabelle Posth]

Mainly, EMEA.

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes. Mostly in the -- in Western Europe. Yes. Trying to clarify for you the Wilbur Curtis impact on ROPA, so I'm going to go back to my earlier comments. ROPA includes the consolidation of Wilbur Curtis from first half of February and that added about EUR 1.5 million of ROPA -- to our ROPA -- ROPA to our numbers. The other parameter, the other impact from acquisitions was the expansion of our Egypt JV, and that's another, make it, EUR 1.5 million as well. So EUR 3 million in total included in the EUR 138 million ROPA.On top of that, we have the ROPA impact of our IFRS 16 implementation in the quarter, and that's another EUR 2 million. So maybe the EUR 5 million you were referring to is the sum of all of this, all right? Another EUR 2 million in ROPA. Now those IFRS numbers are our best estimate to date. They are unaudited. We are working on this, and we'll give you a lot more detail in July. So we will not today share estimates of impacts on other aggregates. We've actually included in the appendix, the page on IFRS and what it does to directionally to our financials. So let me maybe comment that very briefly. The IFRS impact, as I said, will come mostly from our own stores, right? I mean, the lease contracts of our retail stores, offices, more classical offices, warehouses, and to a small extent, vehicles. And what it's going to do on our financials is, on net debt, we anticipate, again, best estimate, unaudited, we need to go through that with our auditors, but an estimated EUR 350 million net debt increase, right? EBITDA will be up, but we will wait until July to have estimates for you. Operating -- I mean, ROPA will be up as well. And net results will be slightly down, at least in the year 2019, which is the year of implementation and where the way these accounting pronouncement works, it leads us to book more interests in the early years than later on. So it's going to be slight negative in the years and in the maybe first 2 years of implementation, and that will reverse in the following years. So that in total, it's a net wash at the net income level, but this year a slight negative. Obviously, none of that has any cash impact. This is all just accounting. So that's for IFRS.On Q2 growth, I -- it's too early, Charles, to give you indications on that. We wouldn't want to do that today. So I'll leave you -- I'll leave it at that. But no particular concern in Q2, let's just say that, okay.And then on M&A firepower, well, we -- as you know, we came back -- we came back down to below a debt-to-EBITDA ratio of 2 at the end of last year, so that basically gives you an idea of the at least financial firepower that we could mobilize for further acquisitions. And acquisitions remain fully part of our ongoing strategy. And then I'd say that the other thing is, from a management point of view, 2 years -- 2.5 years into the VMF acquisition, I'd say from a management point of view, also, we are ready to consolidate the industry or strengthen our footprint in Professional Coffee. So that's pretty much where we stand today, as the Wilbur Curtis acquisition shows, right?

[Operator]

The next question comes from Nicolas Langlet from Exane.

[Nicolas Langlet, Research Analyst]

I've got three question, please. First on China. Do you think the 13% you posted in Q1 is a good indicator of what you could generate in 2019? And do you have any initiatives planned in the coming quarter that could potentially boost a bit this growth? Second question, so on the IFRS impact in Q1, it was EUR 2 million. Is it fair to extrapolate this EUR 2 million for the coming quarters, which implies EUR 8 million positive impact on ROPA on the full year basis? And then on M&A, what impact do you expect from Wilbur Curtis and the JV initiative on the full year basis, if it's possible? And last question, at the full year results, you were guiding for around EUR 50 million of headwind coming from [indiscernible] and FX. Are you still expecting this impact?

[Vincent Leonard, Senior Executive Vice President of Finance]

Thank you, Nicholas. On China, we'll stay with what we said before. We think in China we have several years ahead of us of double-digit growth. We still believe that is the case, and we very much believe that is the case because of all the fundamentals -- fundamental trends working in our favor and because of, I suppose, sort of excellence in the market. So I will not give you an estimate for the year, but we fully ambition to deliver double-digit growth on a full year basis in China. Tough to tell you more than that, right? It's -- we obviously continue to invest, have tons of initiatives and hope -- expect to deliver double-digit growth.IFRS, well, yes, as much as we don't want you to extrapolate typically our Q1 numbers, I think it's fair to say, with the caution note, that even that EUR 2 million number is unaudited and is to be confirmed, but if this is confirmed, then yes, it's pretty much linear. You can multiply that by 4 and get to your full year estimate, right? Again, with the caution note that this is unaudited to date.M&A, based on what we've said before, I think you pretty much can figure out that we expect -- Wilbur Curtis is $90-plus million business, and we expect it to grow. I'm not going to give you an expected growth number, but it's modest growth in the filter coffee business over there. And it's quite profitable. Its profit -- it's in our standards of profitability for Professional Coffee. So that's what I'd say. Egypt, we consolidated Egypt, we reported the sort of additional sales from the expanded JV. We reported that for the full year last year in Q4, and that was EUR 15 million, right, in Q4. So that's actually the size of the additional Egypt business we are consolidating. And again, Egypt is growing nicely. So you can estimate from there the impact this year. But I mean...

[Nicolas Langlet, Research Analyst]

And you said ROPA impact from the JV was EUR 1.5 million in Q1, right?

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes.

[Nicolas Langlet, Research Analyst]

Okay.

[Vincent Leonard, Senior Executive Vice President of Finance]

Okay. And just since we're on Wilbur Curtis, we mentioned that in the earnings release, in the press release, we do not today have any estimate yet as to the PPA entries, the purchase price allocation entries, that we will have to book for Wilbur Curtis. So this is something that we will be able to comment on in our Q2 earnings release in July. We need to do that work. But there will be some -- both -- one of PPA impacts related to inventory revaluation and order book and then potentially ongoing impacts, ongoing PPA impacts from customer lists, right, mostly, I would think. So no estimates on that yet, and we'll -- clearly, this is Q2 work for us, all of that noncash, obviously.On FX, yes, I think we've seen a slight improvement versus when we last talked at the end of February, slight improvement mostly in emerging markets. What that means is, because it's in emerging markets, we are likely to -- as you know, we're pretty agile with pricing in emerging markets, so we're likely to give some or most of that back in the market in the form of either promotional intensity or price adjustments. So I would not bank on too much upside from that, even though as we usually say, there's always a slight lag impact to our actions following FX movements. But in this case, since it's mostly concentrated in emerging markets, I think it's fair to say that actions will likely have to be pretty quick. And the other thing, as we said, when FX was going the other way, we obviously sort of pilot our investments in the market partly based on what's happening -- what kind of FX pressures we have. So that is to be taken into account as well. But overall, yes, FX has slightly improved versus the end of February. This is super volatile, so you're hearing me being very prudent because from one week to the other we see big swings.

[Isabelle Posth]

And you remember, the last year, in fact, we had to update the estimate every quarter. So for the time being, it's better not to give too...

[Vincent Leonard, Senior Executive Vice President of Finance]

And ended up being -- we ended up in quite a different place.

[Isabelle Posth]

We remain cautious, yes. On raw materials?

[Vincent Leonard, Senior Executive Vice President of Finance]

Raw materials. Raw materials, so far no change, I'd say, versus what we've said before. There were some improvements. Now you're seeing the barrel of oil go up sharply. So I'd say at this stage no change to our initial estimates.

[Operator]

[Operator Instructions] The next question comes from Alessandro Cecchini from Equita SIM.

[Alessandro Cecchini, Analyst]

My first one is about pricing and competitive environment in Europe. You stated about some competition, some pressure. I would like to better understand these points, in particular, on some countries you spoke about. I would like to better understand these and if you expect this trend to continue over the year? My second question, if you could quantify the impact of Wilbur Curtis acquisition in terms of net financial position, so in terms of cash out for the first quarter? And finally, sorry to back on IFRS 16, if you could share to us an estimation for the full year in terms of EBITDA, so additional EBITDA coming from the IFRS 16?

[Vincent Leonard, Senior Executive Vice President of Finance]

Okay. Thank you. Yes, I mean, I think Isabelle commented that the environment remains very promotional, very competitive. That's a general statement that frankly we can make pretty much every quarter. That's our business. We face a number of very aggressive players and in the environment we operate in, it's always very competitive. I think that means that it's really tough to -- unless currencies force you -- really force you to, you don't see a lot of pricing in the market. That's true for us. Even though we are -- we tend to be the -- leading the charge in terms of increasing pricing. So as a leader in the industry, we take that -- we play that role and we try wherever can to selectively increase prices and to -- in order to protect our margins. But it's fair to say that there's not a lot of pricing, let's say, not a lot of net-net pricing in -- to be expected this year. As you know, instead, we work very hard, year in, year out, quarter in -- I mean, day in, day out, on improving the mix of our sales, and that is a key lever of our ROPA growth. So this year will be no exception to that. Hard to be much more specific, Alessandro, on pricing. This is our day-to-day life.

[Isabelle Posth]

Actually, innovation is the way to get out of it.

[Vincent Leonard, Senior Executive Vice President of Finance]

Indeed, yes, right. I'm going to disappoint you on your last -- on your second and third questions. We have indicated that we will not disclose the price paid for Wilbur Curtis -- the Wilbur Curtis acquisition. That's part of the agreement we have with the family selling the business to us. And IFRS, the slide that I went through is about as much as we can say today. We really need to go through that in detail with our auditors. There are a number of assumptions. This is not a purely mechanical exercise. There's a number of assumptions. Just to mention a key one about the renewal of the extent to which leases will be renewed and what assumptions you take on that, that has a big impact on those numbers.So we will just stay with our best estimate today of that impact, that's EUR 350 million and ROPA impact in Q1, that's EUR 2 million positive.

[Alessandro Cecchini, Analyst]

Okay. So basically, don't you have an impact of the EBITDA level for the first quarter of IFRS 16?

[Vincent Leonard, Senior Executive Vice President of Finance]

We do, as we will on every quarter. We just don't report EBITDA in Q1.

[Alessandro Cecchini, Analyst]

Okay. Okay, but...

[Vincent Leonard, Senior Executive Vice President of Finance]

We don't disclose that. We don't disclose, we don't publish during Q1.

[Alessandro Cecchini, Analyst]

Okay. It was just to better understand in order to, of course, consolidate the new standard if you added the first quarter EBITDA impact. But no way, no problem. And then...

[Vincent Leonard, Senior Executive Vice President of Finance]

Of course, yes. We fully appreciate that this is an information that will be very useful. We'll be -- we'll go through that in detail in July.

[Alessandro Cecchini, Analyst]

Okay. About -- last question, about growth drivers, just to understand, is the first quarter -- so in this quarter you expanded -- you increased on a year-over-year basis growth drivers importantly or not so much and then you expect to spend more over the next quarter? Just to understand. Of course, you cannot quantify the number, but just to better understand the trend in the first quarter and so on?

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes. More or less, Alessandro, even though we don't go into a lot of detail on that, we did increase growth driving expenses pretty much in line with sales.

[Alessandro Cecchini, Analyst]

Okay. Okay. Not dilutive on margins? Okay.

[Operator]

The next question comes from Steve Levy from MainFirst.

[Steve Levy, Analyst]

I have two questions. The first one is on France. Can you confirm -- just first, I would like to have your point about the economic situation and the consumption in France in Q1. And if you confirm that France will have a low comparison base in 2019 compared to '18? Second question is on China. And just to give -- to have your point of view about the measure from government on consumption and the fact they want to increase internal consumption? And on the Supor -- third question on the Supor. I saw-- there was a press release on Supor, just trying to understand why the operating cash flow is negative? You -- it's consumption negative cash flow on the -- at the Supor level, just to better understand the why.

[Vincent Leonard, Senior Executive Vice President of Finance]

Okay. Thanks, Steve. On the French economic situation, I'm not the one to comment on that, but maybe on our market, right? Our markets were very contrasted between SDA, which was -- which experienced -- the market experienced decent growth with a wide variety of situations across categories. But the SDA market overall, I think Isabelle mentioned, was positive. And instead, Cookware, overall, the market was significantly down. So obviously, being a big player in Cookware, we suffered from that. It's clear in France that other than in Q1 we will have a fairly low base of comparison. Our performance in France last year was not great, particularly in Q4. So that does provide a low base for comparison. And let's say we hope to stabilize France and be back in the black number in -- in positive territory. But I'd say, we need to be reasonably careful about situation here. It's -- we need to -- we are very big in categories that are not the most buoyant ones. So our answer to that is a lot of innovation, and that is certainly true this year. We think the pipe of product we're bringing into the market is pretty good, and hopefully that will help grow the business in France over the balance of the year.China, the measures from the government I guess you're referring to, we -- so first, we obviously welcome measures by the government to boost domestic consumption. What's been -- what we've heard about recently were measures mostly aimed at large...

[Isabelle Posth]

White goods.

[Vincent Leonard, Senior Executive Vice President of Finance]

White goods, yes. White goods, right? So -- and we actually hear that might be delayed now. So -- but nevertheless, this is -- this has no impact. So no impact on us. So we were not expecting much help from that, and we're not concerned if this is actually delayed. But the overall policies of the Chinese government towards domestic consumption, which remain very positive, obviously benefit us and will continue to benefit us. And that's one of the fundamental reasons why we think we have a lot of growth ahead of us in China.Supor, negative OCF. It's probably related to -- I think we mentioned at the end of the year that -- and that's typical in China that Supor cashes in at the end of the year or gets cash from customers -- advance payments from customers for pretty large amounts. And that's typical over there. This was certainly true at the end of 2018. And therefore in Q1 they certainly continue selling, but don't cash in as much. So that's probably a big driver of what you noted in their OCF number.We're also increasing CapEx. I think we mentioned that this would be a fairly high CapEx year for us, and that happens in particular in China where we've started to build capacity and logistic setup for VMS, for LKA, our large kitchen appliances business, and continuing to expand capacity at Shaoxing. So this might be reflecting the numbers.

[Operator]

The next question comes from [ Charis Harry Malta ] from CSI Market Solutions.

[Unknown Analyst]

I only have one question. About the Professional Coffee business, if you could come back a little bit on your performance this year. I understand that there has been no big -- no major deal in Q1, but if you expect some deal in for Q2 or Q3?

[Vincent Leonard, Senior Executive Vice President of Finance]

All right. On PCM -- no, instead, Q1 was a big month in part because -- in good part because of shipments related to big deals we signed late last year. So Q1 we delivered 27% growth on Professional Coffee. A lot of that is in the U.S. where we secured these 2 major deals last year. And Q1 is a big delivery month for those deals. It's actually important to keep that in mind as we project Professional Coffee performance over the balance of the year. This is by nature a somewhat volatile business because of those deals. There's obviously a large part of the business that is steady indeed, but a growing part of the business relates to these deals, and it's truly an integral part of the business. And it does drive, it will drive volatility in the business. If you remember, last year we had slow growth in Professional Coffee in the beginning of the year and then we ended up with 2 quarters, Q3, Q4, at 33% growth. So this year we're starting very strong and expect to deliver a good year in PCM. But we cannot expect this kind of growth every quarter through the year.

[Isabelle Posth]

And in terms of phasing, we had low comps in Q1. Still going to be modest in Q2 and it's going to be higher in the second part of the year.

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes. That's 33% Q3, Q4, last year. Yes. So the business doing extremely well, both base and -- I mean, base, sort of nonbig deals and big deals. But let's be prepared for volatility in the growth numbers as we had last year, and we are expecting overall a very good year.

[Operator]

The next question comes from Alessandro Cecchini from Equita SIM.

[Alessandro Cecchini, Analyst]

Just a very quick follow-up on the performance of Wilbur Curtis. If I am not wrong, so basically, you reported EUR 1.5 billion of ORfA out of EUR 12 million of sales. That leads to 12%, roughly speaking, EBIT margin. Probably, just to better understand, do you see some seasonality effect on this business, because 12% seems to me a low level for Professional Coffee? Just to understand if first quarter is low season part of the business, then do you expect some ramp up over the year?

[Vincent Leonard, Senior Executive Vice President of Finance]

I'm using rounded numbers, Alessandro, so I think the 12% is too precise a calculation for that. I would just stay with the fact that Wilbur Curtis delivers the kind of profitability that we see on the rest of our Professional Coffee business. It's a high-margin business and it's doing well. It's just not growing, we should not expect the kind of growth we see on full auto Professional Coffee machines, but good profitability.

[Isabelle Posth]

It's quite steady, less volatility than PCM.

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes. Yes, less volatility.

[Alessandro Cecchini, Analyst]

Okay. Okay, thank you, sorry. Sorry for the question.

[Vincent Leonard, Senior Executive Vice President of Finance]

No, no, no.

[Operator]

The next question comes from Christophe Chaput from ODDO.

[Christophe Chaput, Analyst]

Only one question for me remaining. Can you tell us -- I mean, the business of WMF consumer seems to be so difficult in Germany but good for the rest of Europe. As a whole, is it declining? So that's the first question. And what is the impact on the food performances of the division Western Europe plays? So you reported a plus 3% like-for-like for Western Europe. What would it have been without or excluding the WMF consumer business?

[Vincent Leonard, Senior Executive Vice President of Finance]

Thank you, Christophe. Yes, VMF consumer business overall remains difficult. It's in negative territory. However, I say that this performance is more -- much more contained than it's been. It's basically limited to Germany, and admittedly Germany is big in VMF's portfolio. And we see -- we're seeing international starting to pick up in most markets, with one notable exception that Isabelle mentioned earlier, which is Korea, South Korea, where unfortunately we are dealing with a very high inventory situation we inherited from before, and it's just taking time to saw through that. But this is not a major concern going forward.So the good thing is, we're starting to -- the teams we set up, the investments we're making, the focus we're bringing to the brand in international markets is starting to show results. And we mostly have to continue working on the Germany situation, which is -- it's not a VMF-only situation. It's really a premium Cookware market situation that you can link back to the situation of some channels, the difficulties of some specific channels in Germany. And so we just have to work our way through that. It's taken more time than expected, there's no doubt about that, but there's no doubt even -- either that we will sort that out and restore, stabilize that business.In terms of impact, sorry, so we don't report those numbers. But it's -- my guess, it's a good couple of points on our Western Europe performance.

[Christophe Chaput, Analyst]

Okay. So it could have been 5% or 6% roughly, let's say?

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes, on Western Europe.

[Christophe Chaput, Analyst]

Okay. And just another one, if I may. On the loyalty program, you say that, [ public forgo ], it has a positive impact by 1% on the Q1. What are your estimates for the full year? Is it expected to be neutral or positive, which means that you're going to have more loyalty program than last year?

[Vincent Leonard, Senior Executive Vice President of Finance]

At this stage -- last year was a sort of slightly low -- soft year in terms of LPs. We're clearly starting stronger. Again, it's hard to say until you've signed them. But it's probably going to be slightly better than last year, I'd say. That's a somewhat soft comment because we don't -- until and unless you signed them, you really don't know. But last year was a soft-ish year.

[Operator]

There are no further questions, so I now give back the floor to the speakers.

[Vincent Leonard, Senior Executive Vice President of Finance]

Okay. Okay. I just wanted to give it maybe a few seconds, make sure that everyone has had a chance.

[Operator]

[Operator Instructions] Yes?

[Vincent Leonard, Senior Executive Vice President of Finance]

Yes. I think we'll close there then. Thank you very much to you all. And so we are obviously quite happy with this -- with how -- the way we're starting the year on pretty much all fronts. So that's very -- it's very encouraging for the overall prospect for the year. All right, thank you very much, and we'll see you -- when will we see you? At the shareholder meeting.

[Isabelle Posth]

Perhaps at shareholders' meeting, some of you, on May 22.

[Vincent Leonard, Senior Executive Vice President of Finance]

On May 22. All right. Thank you. Goodnight.

[Isabelle Posth]

Thank you. Bye-bye.