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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Tarkett Q1 Results 2019. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, 25th April 2019.I would like to hand the call over to your speaker today, Fabrice Barthélemy, CEO of Tarkett. Please go ahead.
Good morning, ladies and gentlemen. Thank you for joining this call today. I'm Fabrice Barthélemy, CEO of Tarkett. And I will share this presentation with our CFO, Raphaël Bauer. We released yesterday our Q1 numbers. You probably know that Q1 is by far our smallest quarter due to relative seasonality in some of our businesses. Nevertheless, we're encouraged by some of those results.In a few minutes, Raphaël will give you more details on the numbers. But before that, let me share with you the way I am looking at those numbers. First, we have posted a top line growth of 10%, thanks to the combination of organic growth, the acquisition of Lexmark and other smaller bolt-on acquisitions and also thanks to a favorable euro-dollar exchange rate. EMEA and Sports are the biggest contributors to organic growth with 5.8% in EMEA and 19% for Sports. Let me remind you that Sports is one of the divisions where the seasonality is the most marked. So the 19% in Q1 should not be extrapolated to a full year basis.Another encouraging sign beyond those 10% top line growth is that for the first time, our selling prices are fully offsetting the raw material and freight inflation. Overall, it's a 1.4% selling price increase out of the 3.7% organic growth number. And in absolute value, it's about EUR 8 million of -- effect of selling price increases, fully offsetting, again, raw material and freight inflation costs. As a consequence, we are pleased to see that the margin is progressing by 50 basis points. And that is of course before the effect of IFRS 16, the new norm dealing with these contracts that Raphaël will detail a little bit more later on.The last point I wanted to insist on is that we are acting swiftly on the footprint optimization, as we have said we would do at the beginning of the year. Let me expand a little bit more on the industrial footprint review that we have launched at the beginning of the year. And we said we would be reviewing our footprint, and we also said that we would not wait for the strategic plan disclosure and announcement to act on it. So let me come back on those 3 projects we have announced in Q1. First, LaminatePark is a JV, 50-50, with a Portuguese company, Sonae Arauco. The JV manufactures HDF boards and laminated flooring. And the rationale of this project is that: one, we do not see a lot of future potential in that product category in EMEA where we are generally a small player, although it's an important category in some markets. The second point was that significant CapEx would have been needed to upgrade the plants and to comply with the tighter regulations, especially environmental regulations. And the third point is that we have in this market other solutions actually to satisfy our customers. We are not obliged to buy -- to make everything we sell, and we will find alternative solutions for our customers.So this plant employs 230 people, and we are currently in the discussion process with the employee representatives. And the plant is today operating normally, but it should be closed by the end of this year.The 2 other projects are in North America. The first one in Waterloo, in Ontario. It's a satellite site of a bigger site we have in Ohio, making wall base products or accessories, extruded wall base. We have now expanded our Ohio site, and we are taking the opportunity to consolidate the 2 sites. This makes a lot of sense in terms of fixed costs, of course, but also in terms of logistics flow and freight costs. The last one is in Nova Scotia, in Truro, so in Canada as well. It makes broadloom carpets. And the consolidation of Truro with the Lexmark site in Georgia was part of the synergies that we have planned when we acquired Lexmark, with savings on fixed costs and also on logistics costs and freight.So we are expecting these 3 projects to develop during the course of the year and to be finalized by the end of the year. The restructuring costs we are expecting are in the range of EUR 25 million for 2019. And on the full year basis, these projects should generate about EUR 10 million of annual gains on the -- again on the full year basis. We will -- should see the first effect of the projects in Q4 this year and these are included in the productivity targets that we have previously announced.Obviously, our 2019 priorities remain unchanged. We have -- we are facing still a very high inflation of raw material and freight. And we maintained our goal to fully offset that with selling price increases, and Q1 is actually demonstrating that this is possible. Productivity is a combination of ongoing productivity delivered across the group, of course, but also as you know, the recovery of normal operations in 2 sites in North America that penalized us last year, especially in H2 last year. Also, we will increase our focus on automation and realize the synergies we are expecting from Lexmark. I commented earlier on the industrial footprint that are 3 major projects for this year. And of course, one of our priority is to deleverage the company this year. We ended up last year with a leverage ratio of 2.8x last 12 months EBITDA, which is a bit higher than our midterm objective. So we are optimizing our working capital, especially with working on inventory. We are controlling our CapEx tightly. And as you know, we have proposed the scrip dividend option that is going to be voted at the AGM tomorrow, which, our controlling shareholders, the Deconinck family have already elected to take.This means also, this deleveraging priority that we should not expect any sizable M&A in the next few months, but we will, of course, carry on with the very small bolt-on acquisitions that we have done successfully in the past, especially in the Sports division. So there could be some very small, a couple of million acquisitions in the next few months. With that, I'd like to hand over to Raphaël, who will give us more color on the financial numbers of Q1.
Thank you, Fabrice, and good morning, everyone. So as Fabrice commented, the organic growth in the first half is significant. Let me just adjust the slide because there seem to be a small issue in the presentation, I apologize for that. But the sales slide is not displaying actually properly. On the webcast, you're seeing actually the EBITDA slide and not the sales side. So I will comment very quickly, sales, and I will switch to the division -- to the segment view. Sales have increased by 10% on reported sales, owing first to strong organic growth of 3.7%. This organic growth benefits fully from the selling price increase that was commented by 1.4%. And actually, 2 segments grew significantly, EMEA and Sports, and drove this strong organic growth. We see also the full benefit of the acquisitions that are positively impacting the top line.Let's now zoom on the segments, starting with EMEA. In EMEA, we saw robust organic growth of 5.8%. But let's remember that the first quarter of 2018 was down organically by minus 4.6%, so the basis of comparison was actually low. And this year in 2019, the countries that drove most of the growth were also the countries that were significantly down in the first quarter of last year. We had a good growth in the Nordic countries, above expectations, but let's remind ourselves that in the Nordics, for the year, we have a more cautious view of the market. The U.K. grew also in the quarter, but again, the comparison basis was really low for U.K. last year. And some of our customers have also increased inventory level in preparation to a potential Brexit that did not occur at the end. We're seeing good trends -- continuing good trends, I should say, in Germany and Poland, in line with the past quarters. And in terms of product category, LVT is still growing above average in EMEA.Looking at North America. North America is reporting a flattish organic growth. Three things to be noted: first of all, the resilient business that grew strongly last year is down in volume in the first quarter. But this is being offset by selling price increase, which are significant in North America and more than offsetting inflation of purchase. Commercial carpet, which you probably remember was an issue in the past 2 quarters, is stabilizing and sales are leveling out. So that's a good sign. The reported sales, of course, benefit from the integration of Lexmark, the commercial carpet for hospitality company that was acquired in September last year.In the CIS, APAC and Latin America segment, organic growth is down by slightly more than 2%. In the CIS and in Russia, the market is still soft with still some volume decrease, but we are encouraged by some mix improvements. And also, the action that we've taken last year in terms of selling prices are paying off and we were able to more than offset the negative impact of the currency devaluation of last year on EBITDA. We've also seen some nice successes in Latin America where not only volume grew but we were also able to increase selling prices and offset the impact of the weakened currency in Brazil.Our last reporting segment is Sports. And Sports is posting very dynamic organic growth, above 19%. Let's not forget it's a seasonally low quarter. There are much lower installations in the first quarter, mostly owing to weather conditions. And it's not a proxy for the rest of the year. Once we said that, the year is starting well, and it's in line with our growth expectations.So looking at EBITDA. We are pleased to see improvement in EBITDA even before the application of the IFRS 16 norm, an improvement of EUR 6 million from EUR 29.8 million last year to EUR 35.8 million this year before application of IFRS 16. That's a 50 basis point improvement. Let me first point out the positive impact of the selling price management. Sales price in EMEA, North America but also Latin America is contributing positively for EUR 8 million and more than offsetting the purchase price increase in raw materials, in freight and in energy, which is EUR 7.7 million negative. The selling price management was also effective in the CIS countries. That's the second bar of this bridge chart, almost EUR 1 million positive. That is the net impact of the price increase in CIS and the adverse effect of currencies.Now looking at the volume and mix. The sales growth of the quarter is not fully impacting the EBITDA. Volumes are contributing positively, but on the other hand, the mix is not positive. The mix is negative, owing mostly to the much larger share of Sports in the total sales mix of the group.In terms of salary increase and SG&A, we see a cost increase of EUR 5 million. 2/3 of that is normal level of salary increase. And we've had in the quarter some investment in marketing, in particular, for instance, a higher participation to some trade shows in the industry. Our productivity level is improving sequentially, slightly above EUR 4 million positive impact from manufacturing productivity. And that's owing to the progressive recovery of the 2 factories that have penalized us in the past 2 quarters. So productivity is improving. The last effect in this chart is, of course, the contribution from the acquisition, Lexmark, but not only, also some acquisition in Sports, leading to an EBITDA comparable norm of EUR 35.8 million. The reported EBITDA of the group is EUR 43 million, and that's including the application of the IFRS 16 norm. So you'll probably recall that last year, we had estimated the full year impact of IFRS 16 at around EUR 28 million. We are still in line with that estimate. It's a EUR 7 million positive impact on EBITDA in the first quarter. And actually on a full year basis, estimate is now around the EUR 27 million impact. And here, we've included the detail of this full year impact segment by segment so as to ease your update of the financial model of Tarkett Group.Let me remind you also that this norm will have a significant impact on the reported net debt of the group. Based on the existing lease contracts, the impact on net financial debt at the end of March is an increase of net debt of EUR 100 million. No -- that has no impact on our financial covenants. We already commented that. All our financing in place is at the constant -- at constant reporting norm, so without the impact of IFRS 16.I will now hand over to Fabrice for conclusion.
So before we open to questions, let me wrap up in a few words. We are rather pleased with Q1 since we are making progress on the initiatives that we highlighted as our priorities in terms of pricing management, in terms of cost management and launching key initiatives on the footprint. We're also pleased with the top line growth. Nevertheless, we remain cautious on the environment for the rest of the year. As we said a couple of months ago, we expect that the demand environment will be more difficult than it was in 2018. There are some construction markets that could show signs of slowdown. Residential in North America is often mentioned. The uncertainties in Europe about Brexit remain. We probably saw a positive impact of Brexit expectation in Q1 because some of our customers increased their stocks in Q1, but there would be the knock-on effect later on. And in CIS and in Latin America, the economies remain rather depressed. So we don't expect a great rebound there.What is also true is that the inflationary environment is clearly not behind us. Last time we spoke to you, it was 2.5 months ago, the oil price was at $65 per barrel. It's now up to $75 per barrel, which is why we have reviewed our expectation for raw material and freight increase from EUR 15 million to EUR 20 million this year. Nevertheless, we maintained our objective to fully offset this impact through price increases that we are both carrying over from last year and implementing this year in some markets.So the result of that is that the improvement in profitability, which is a key target and a key priority for 2019, will not come from the tailwinds from the environment, but will come from our self-help. And this is what we are concentrating, on with a lot of focus on productivity gains and synergies. That should come around EUR 40 million for the full year with an acceleration in H2 and also with the worst basis of comparison in H2 because as you know in H2, last year, we suffered from dysfunctioning in 2 plants in North America. Of course, we will also focus on deleveraging the company through a very tight cost management and that's also the last priority for us. As you know, we will announce our new strategic plan mid-June, on the 19th of June. And we will at that point give a bit more clarity on the objectives for the midterm, both financially and our priorities for the next 3 years.With that, I would like to thank you very much for your attention, and we are now ready to take questions.
[Operator Instructions] Our first question comes from the line of Charles Scotti from Kepler.
Charles-Louis Scotti from Kepler. A couple of questions from my side. The first one is on the restructurings. Do you see further room for industrial reorganization in the U.S. or Europe? And what about Eastern Europe? Do you think your industrial footprint there is already state of the art? My second question is on the productivity gains. You still target EUR 40 million on a full year basis, which means around EUR 12 million every quarter. I saw only 4 million in Q1. Can you give us a little bit more color on where do you expect to generate these productivity gains, please? And my third question is on the integration of Lexmark. That contributed to almost EUR 4 million EBITDA in Q1 compared to an expected contribution of EUR 17 million over the full year. Is there any seasonal impact? And can you update us on the integration process of Lexmark? And my last question is on Sports. Do you think double-digit growth in Sports is sustainable in 2019? And where this strong organic growth comes from?
Thank you, Charles-Louis. So on restructuring, the plan we have announced -- of new projects we have announced in Q1 are not the end of it. The review is still ongoing. So yes, there is further room, not necessarily for full site closures, we have not determined that, but it's not excluded. But there could also be some adjustments between sites in North America and Europe or elsewhere. Having said that, these projects take resources and time, so we don't want to rush neither the analysis nor the execution. In Eastern Europe, our footprint is essentially the right one. But we have already -- without communicating a lot on it, but we have already downsized some of the sites to face the lower demand. You know that since 2013, the demand in the CIS countries has dropped pretty massively, and we have -- this has been reflected in our numbers. And we've always adapted the workforce in the plants to adapt to a lower demand when it was necessary, but without shutting down the plants, of course. And maybe you should keep in mind that in Eastern Europe, our footprint is more concentrated. We have in Russia the largest vinyl flooring plant in the world, not only for Tarkett. So it's -- these sites are already very much optimized in terms of fixed cost absorption.
So to your second question, Charles-Louis, Raphaël speaking. On productivity, we have identified several items that will contribute to this EUR 40 million target. First of all, let me remind you that last year in the second half due to the very low performance of 2 industrial sites in North America, we were negatively impacted by around EUR 10 million. So recovery in those 2 sites should bring back those EUR 10 million in 2019 compared to the low performance of 2018. Looking at the rest of the productivity, around EUR 30 million, we have several pieces here. We have, first of all, the continuous improvement action plan that we are systematically deploying in all the factories. On top of that, we are also rolling out an automation plan. We mentioned, in particular, on the modular product what we could do in terms of packaging for instance, but not only, quality control is also more and more automized. And last, we have also included in this target the first benefits of the manufacturing footprint optimization actions that will benefit toward the end of the year. So in terms of sequencing during the year, that's true that a significant share of this improvement is expected to benefit in the second half.
On Lexmark, Charles-Louis, the integration of Lexmark as a company is going on well. Lexmark is now in charge of the hospitality segment in North America, with further opportunities to expand globally. And they are actually adding LVT to their current product offering. Their profitability is in line with our expectation. In the past, maybe the beginning of the year is a bit slower than we would have hoped. Having said that, it's a small -- it's a rather small activity. So 1 or 2 large projects can always play a big role when you compare year-on-year. But we -- the performance of the company and the cost management of the company and the synergies we expect from that acquisition are still in line with the plan. On the Sports, we are pleased with the start of the year, of course. But as I indicated, due to the seasonality of the business in Q1, Q1 can actually exaggerate some year-on-year variances both ways actually, but right now, it's in the positive side. 19% is not the number we are targeting for the full year. Double-digit growth has been actually achieved in the past couple of years. So it's not out of reach. But the more it goes, the more difficult it becomes. The fundamentals are still the same. First, there is a strong market in the U.S. of conversion from natural grass field to artificial turf or for creation of new artificial turf fields. Secondly, we have an offer that is not unique but very specific on the market of turnkey projects where we can take responsibility for the entire field including the design and civil engineering part of the field. And we also have made a lot of innovation both in artificial turf and running tracks that allow us to win some very sizable projects. So -- and the last point, as you also know, is that there is a wave of replacement fields that is growing year after year. So there is also a recurring part of that market that is benefiting to us. So we have been very positive on that activity, but 19% is a bit north of what we can expect for the rest of the year.
Your next question comes from the line of Rajesh Patki from JPMorgan.
Hello, can you hear me?
Yes. You are back online, Rajesh. Please go ahead.
Sorry about that. My first question is on North America. You mentioned difficult outlook for the residential market in the U.S. Can you provide some color on the nonresidential market as well? And at the same point, despite an easier comparison base, Q1 saw like-for-like decline in revenues. Do you expect like-for-like trend for the full year to be better? And the second question is on the EBITDA bridge that you've provided. Price increases have contributed EUR 8 million in the first quarter and were sufficient to offset inflation. I mean, assuming similar run rate, you should be able to comfortably offset the expected inflation of EUR 15 million to EUR 20 million. But your comments suggest there's some uncertainty for the rest of the year. If you can provide some color on how you see this.
Thank you, Rajesh. On the nonresidential market in our segments in North America, it all depends on how the economy evolves in North America. Right now, it's reasonably oriented. But we remain cautious because, globally, we think that the signs of potential slowdown are actually more present than they were a couple of years ago. So for the full year, we still hope to grow in North America, but we -- it's very difficult to predict because as you know in our industry, the length of order book is very short. So we don't have a very easy way to forecast our activity more than a couple of months ahead. So we don't have the full visibility of the orders for the full year as other industries may have.
Regarding your question on pricing, Rajesh, let's be careful because it's true that we see a positive impact of EUR 8 million coming from selling price in the first quarter. But by comparison, this is the quarter where we expect the highest impact from the selling price increases that were implemented during the course of last year. And they were implemented in the second quarter and started to benefit toward the end of the second quarter and then benefited fully in the third quarters -- in the third quarter and going forward. And then we also had some additional adjustments in North America, for instance, to offset the tariff increases. So you cannot extrapolate the EUR 8 million on a full year basis just by multiplying that by 4, for instance. Once we said that, looking at the range of inflation in purchasing price of EUR 15 million to EUR 20 million, yes, we believe this can be offset, but not only by the carryover impact of the selling price increase of 2018, but also with some targeted selective additional price increase in 2019.
Your next question comes from the line of Pierre Sylvain Rousseau from Barclays.
I guess the remaining question is on the expected savings that you are targeting at working capital level. I wonder if you have any kind of indication or quantification for that in the full year. And the second question will also be on the restructuring costs. You give EUR 25 million guidance for the full year. I guess this concerns all the projects that you have. Is it likely that we will see that number evolve if you announce more projects into the remainder of the year?
Okay. Thank you very much, Pierre, for your questions. First of all, on working capital, yes, we are working on working capital, but, in particular, on inventory level. This is where we believe we have some opportunities. As you probably have that in mind, but our seasonality pattern has it that working capital increases by the end of June. And in the first half, we increase inventory to manage the high -- the peak season in the third quarter. But towards the end of the year, we are targeting a positive contribution from working capital on cash flow. That's not the only action we are taking to deleverage towards the end of the year. We've also said that we would limit capital expenditures to EUR 120 million. We're also offering a scrip dividend option, and the Deconinck family has opted for the scrip dividend, leading to almost EUR 20 million cash savings. So we are taking some actions to come back in a leverage zone where we are more comfortable around 2.5x EBITDA towards the end of the year. To your second question on restructuring, as we've explained, we are progressing in the analysis of cost base and our industrial footprint. We've announced the first measures. So yes, those EUR 25 million reflect the impact of the measures that we have identified so far. Of course, this review, as Fabrice explained, is still in progress, and we will communicate more largely in June. Potentially, that could be adjusted somewhat if there are other projects. But that's where we stand as of today.
[Operator Instructions] Your next question comes from the line of Eric Lemarié from Bryan Garnier.
Three questions for me, please. The first one on pricing. Have you already passed or tried to pass some price increase since January this year?And second question regarding management, regarding the new Head of North America, Jeff. Could you explain why you apparently needed an interim period for Jeff? I was a bit surprised because, after all, he's in the group for a while now. So just a question about that. Why this interim period for Jeff? And the last question on the expected contribution of the acquisitions for the full year. When you look at the Q1, the EBITDA margin from the scope impact was pretty high at 22%. I know Lexmark is very profitable. But should we expect an EBITDA margin from the scope effect for the full year in 2019 to be close to what we have observed in Q1, around 22%? Is it a good guess?
Thank you, Eric. So on the pricing, yes, we have already posted some new price increases. For example, in Europe, in EMEA, we have in some countries, in the U.K., in the north of Europe implemented -- or in Germany, implemented new pricing and price increases as of January this year. So there are new -- of course, new initiatives. In the North America, it's not been the case because actually, many price increases have been posted -- several price increases have been posted in the second half of the year last year. But yes, this is very dynamic. So we are also working a lot on projects -- on contracts where our prices are done every day. So increasing prices and increasing our pricing power is a key priority for all our teams worldwide. On management, I mean, the interim weeks of Jeff in North America were only related to some governance issues and more the time we needed to obtain all approvals. But as you understood actually Jeff has been in the company for a long time. He was the natural successor to Andrew, who unfortunately could not stay in position because he could not relocate his family to Ohio, where our headquarter for North America is located. So inasmuch as I regret Andrew's departure, we had with Jeff a natural leader and a successor to Andrew. On your third question related to contribution of acquisitions, yes, we've always indicated that -- the main acquisition last year was Lexmark, which has a profit margin and EBITDA margin higher than average of the group and more in the region of 20% plus. So yes we should expect a positive contribution of scope in the region of 20% margin going forward for the rest of the year -- until -- Lexmark was closed at the end of September last year, so until the end of Q3.
[Operator Instructions]
Actually, there is one question on the web. Interface -- it's from Pierre Bosset from HSBC. Interface has just reported 2% organic growth in Q1 versus Tarkett at minus 0.6%. Do you think that the market share from Tarkett in the U.S. have stabilized? How disciplined are the largest flooring producers in the U.S. in terms of pricing?
So Pierre, I don't know if you are on the call or not. I -- it's not my habit to comment on competitors' results. I'm not exactly sure if the 2% that are mentioned are only for the U.S. or globally in the Nora business or Interface. Anyway, we believe that market shares have been fairly stable in Q1. Generally speaking, what we have observed in the U.S. is that the market is rather disciplined in terms of pricing. And our price increases are sticking well in the U.S. You saw last year when the government announced increased tariffs on imports from China, all players actually increased their prices to offset those tariffs. And those price increases are sticking pretty well. So yes, we believe that in the U.S., we are in the market that is more aware of inflationary pressure and more likely to offset this inflationary pressure. Having said that, our position is not the same. We are not the leader in the U.S. There are players that are bigger than us. So in terms of pricing, we tend to be more of a follower than a leader in that region.
We have a question on the line from the line of Thomas Alzuyeta from Kirao.
Just a quick question. You mentioned 1.4% contribution from the selling price for the group. Can we have the breakdown by division, please?
Raphaël Bauer speaking. We indeed mentioned that 1.4% is the average contribution from the group. A significant portion of that is coming from North America, where we increased last year more substantially the prices. But it's also coming from EMEA and Latin America, where we were successful in increasing selling prices. So we are not providing more details, but that's to give you the color.
Your next question comes from the line of Eric Lemarié from Bryan Garnier.
Yes. I've just got 2 follow-up questions, if I may. First, could you share with us your view on the organic growth you can generate for the group for the full year in 2019? And the second question, could you confirm or not that you are still comfortable with consensus figures for the EBITDA this year?
Thank you, Eric. We do not provide guidance on the full year. So I mean -- and especially in such a volatile macro environment, it would be a bit foolish for me to give a guidance on organic growth. But certainly, midterm, we have as an objective to grow faster than GDP, which is a leading indicator in the construction market. And you see that the Q1 is actually quite in line with that type of numbers. The consensus as far as I'm aware of is around EUR 286 million EBITDA for this year. If that's the number you have in mind because that's the number we have on our screens, yes, we are comfortable with that number.
[Operator Instructions] We have a question from the line of Charles Scotti from Kepler.
Yes, sorry, just a quick follow-up. When you said you are comfortable with EUR 286 million, does it include the EUR 27 million from the impact of IFRS 16? And my second question is on the group financing of your revolving credit facilities for 2020. Have you already refinanced that? And do you expect lower financing condition?
Thank you, Charles-Louis. Regarding your first question on the consensus, the figure is excluding IFRS 16 impact. And I mean, again, it needs to be looked at with the big blocks. We've mentioned that this year, we are not betting on the macro. We are aiming at offsetting inflation. We are aiming at some productivity. So yes, we believe that we should see EBITDA and EBITDA margin improvement in 2019 without IFRS 16 impact. To your second question on financing, one of our main financing facility, the revolving credit facility is indeed in the process of being renegotiated and refinanced. This is going on well, and we indeed see good market conditions that should allow us to secure it with -- at a slightly lower costs. But then all in all, given the fact that, that level is higher than in the past, we should not expect any major evolution on the financing -- on the all-in financing cost. I remind you that last year, the all-in financing cost was around 2.5%. This is going on well and it should be finalized actually fairly quickly now.
[Operator Instructions]
One more question on the web from Amiral Gestion, Julien Faure. Can you please update us on the penetration of artificial first -- turf, sorry, in EMEA and North America versus natural grass? Any change in your market share versus competitors?
So we don't communicate numbers on penetration rates, but these are still actually fairly low given the size of the natural grass market. So there's a lot of potential. What is clear is that the North American market is more advanced and more mature in terms of penetration rate of artificial turf versus natural grass. It started earlier. And it's also not structured in the same way because in North America compared to Europe, there is a higher proportion of privately owned fields or privately owned schools that have actually bigger budgets to convert to artificial turf. Conversion to artificial turf is an investment. It's a one-off investment that is normally paid back through savings on maintenance, on mowing the grass, on watering, on fertilizers, et cetera, which is a business model that actually resonates much more with private owners than with municipalities or communities in Europe, which are very frequent owner of fields who have more difficulty actually to generate savings from fields because they have employees that they don't want to let go. So they have -- the business model for them is not as of use from a financial standpoint. But then you have all the other aspects or benefits from artificial turf, which are the ability to use it whatever the weather, around the year with a much more intensity and, of course, saving on fertilizers and water. So we still expect and what we still see today is more potential in North America than in Europe and growth rates that are actually faster in North America than they are in Europe. In terms of competition, no major change in the competition. This is a business for artificial turf for projects that requires some engineering in the products because the products are actually high-performance products, some engineering in the design of the field. So we -- the competitors are pretty much the same as they were before. And the customers actually value the reliability and the know-how of the large firms like Tarkett. And I remind you that we are the #1 in artificial turf fields and running tracks in North America. And we are among the top 3 in Europe.
There are no further questions at this time. Please continue.
If there are no further questions, it's time to end this call. So I thank you -- would like to thank you very much for attending this call. I would like to end on the positive note that I started with. We are encouraged with the first results of Q1, especially with the top line growth and with the fact that our price increases are sticking and enabling us to offset fully the raw materials. We are acting on the first initiatives of our plan with the footprint optimization project that we have launched both in Europe and in North America. And we are extremely focused and committing on restoring and improving the profitability of the group and deleveraging the company so that later on we can carry on again with our M&A strategy. Thank you very much for your attendance and questions, and I wish you a good day.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.