Tarkett SA
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Ladies and gentlemen, thank you for standing by, and welcome to the Tarkett Full Year 2020 Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. And now I would like to hand the conference over to your speaker today, Mr. Fabrice Barthélemy, CEO. Please go ahead.
Good morning. This is Fabrice Barthélemy. I hope you are all in good health. This morning, I'm calling from our headquarter in La Défense, and I'm with -- on the call with Raphaël Bauer, our CFO, who will also share the presentation -- part of the presentation with you. Let's turn to the highlights of 2020. First, I believe 2020 has shown that Tarkett in a way is COVID-proof, and we've demonstrated our business model resilience. You will see that in H2, we saw a sharp recovery, sequential recovery of our sales and revenues. We were very successful in implementing mitigation plans on costs and also in implementing our structural cost savings. And therefore, our adjusted EBITDA margin is up versus last year by 120 basis points. Also, the solid -- very solid free cash flow enable a strong deleveraging, and we are now at the bottom end of our midterm guidance for leverage. During that year, we also progressed on our strategic objectives. We'll talk about the leadership we leveraged in some of our segments. We'll talk about cost reductions as well. And again, our structural cost reductions were above our initial plans. We have also progressed significantly on the sustainability road map, and I will share with you some of the key points regarding that. We believe we have very solid fundamentals to cope with what we expect to be a muted -- somewhat muted recovery in '21 and '22. So let's start with a few words on Q4. And you see that Q4 showed a sequential improvement over Q3. We -- organically, we are very close to the level of 2019, although reported net sales are down 7.9%, mostly due to weaker currencies and weaker U.S. dollar compared to the euro. The adjusted EBITDA margin is up 300 basis points. Of course, this is a result of our progress on cost. And also, it was favorably impacted by the receipt of cyber insurance indemnification. We received EUR 15 million from our cyber insurer, and those EUR 15 million are offsetting costs that we incurred in Q2 during the cyber attack that we faced at the time. A bit more detail on the improvement -- sequential improvement we saw in H2. That was mostly in flooring. In Sports, H2 was a bit more weak than H1. H1 registered very well despite the pandemic. But in H2, we started to see some projects being delayed and a few of them being canceled. On the flooring side, there is a strong correlation when we look division-by-division between the result on revenues and the exposure to the residential segment. You see that in CIS, where we are -- we have 80%, 85% of our business in the residential segment, we actually grew organically during the second half. In North America, where we have the smallest exposure to residential, we -- and the higher exposure to Workplace and Hospitality, our sales continued to suffer, although less than in H1. And in EMEA, which is a bit in between, with about 1/3 of activity in residential, we had a strong sequential improvement but was still -- we were still slightly below 2019 in H2. But overall, a clear sequential improvement from one semester to another. So yearly numbers, yearly revenues are down 9.5% organically, 12% on a reported basis. With performance on adjusted EBITDA that we think is very good, adjusted EBITDA in value is almost stable compared to 2019, which results in an improvement in margin by 120 basis points, now back to a double-digit margin at 10.6% points of sale.We are also proud of the cash flow generation and with a free cash flow of EUR 164 million. So that compares with EUR 231 million the year before. But that year was very specific because in 2019, we implemented some new factoring lines amounting to EUR 126 million. So like-for-like, if you want, we strongly improved our free cash flow generation, and Raphaël will come back to that. The result of that is that our net debt has significantly reduced to EUR 474 million. And leverage is much improved because it's now at 1.7x of EBITDA, so way within our midterm objective of 1.6 to 2.6x. I think last year was also a year where we made very significant progress on our cost-saving plans, both on SG&A and on the manufacturing and footprint. We have shut down, over the past couple of years, 4 manufacturing sites without any disturbance at all. And actually, 2 of those sites have already been sold, and the third one is in a good process of being sold as well. We have achieved, including that footprint, EUR 53 million over 2 years in productivity gains. Our automation plan is being rolled out in all geographies. The review of underperforming BUs also has given birth to some turnaround plans, and the turnaround plan of residential in the U.S., for example, is well engaged. And of course, as we announced back in mid-2019, we've worked on simplifying our processes and reducing our SG&A, and that has generated EUR 26 million of cost reduction since 2019. So over 2 years, EUR 79 million in a plan that was planning actually for EUR 30 million per year. So we are ahead of that plan. We also had specific priorities for the year. When the pandemic started about a year ago, we needed to protect our employees, and we've done that pretty well. We don't -- we didn't have any cluster at Tarkett, and we protected well the workplace environment. We ensured also business continuity with seamless deliveries maintained to our customers. In some cases also, we've adapted our offer to support customers in the new environment, adapted the way we interact with them more remotely, of course, and with webinars with a specific setup put in place to dialogue with our customers. We protected profitability. Again, in addition to the structural cost savings, we've done some more COVID-related cost savings. So in total for the year of 2020, we've saved EUR 106 million in our costs, and that's what enabled, of course, to grow the EBITDA margin by 120 basis points. And of course, managing cash and preserving liquidity. Liquidity was very high on the agenda a year ago. We've done very well on that with our cash flow -- free cash flow generation. And we have contained CapEx, but you will see that's still a reasonable number of capital expenditure preparing the future. And working capital has been very tightly managed. Now I'd like to elaborate a little bit on the growth potential that we see in our key end-user segments. We know we operate in a variety of end-user segments. Starting with Health & Aged Care, we see there growth potential in the short term. We see also a potential benefit from government stimulus plans. And the need for Aged Care facilities is structural and actually is still very much on the agenda. So we are very positive on that segment, and we are very well placed with our product offering to serve that segment. Education is a bit the same. Actually, we see positive trends. There will be also probably public investments and stimulus plan that will benefit that segment in the near term. And the last segment that is actually growing and has started already to grow in the second half of last year is Residential. I mentioned that in my comments on H2. In all geographies, Home improvement has grown actually quite fast. And this -- our customers are telling the same as well. So obviously, some households are reallocating cash to Home improvement as opposed to traveling and leisure. So this is actually benefiting us in the geographies where we are strong in Residential. Of course, on the other side, the recovery is likely to be more muted on Workplace and Hospitality in the very short term as the lockdowns are still in place in many geographies. But we are positive on the midterm because, in Workplace, even if some corporates want to reduce their floor space, they will have to do some revamping and reorganize their floor space, and they will need efficient, acoustic and circular solutions for their spaces. Likewise, in Hospitality, investment is at a low point right now. But as soon as the traveling resumes, hotel chains will want to ensure the best possible performance in terms of hygiene and acoustic to their customers, and we will be well placed to serve those customers as well. Sports, fundamentals are very solid on the long term even if, right now, as we speak, demand has been a bit weaker. We are very positive about the fundamentals of the Sports business. And let me remind you that we sell artificial turf on the basis of savings on maintenance cost and on water usage. So this is very well -- very appropriate to the challenges of our times. We show some recent projects. Just to show you that even if in a year of COVID, there are very, very large projects installed. In Healthcare in Asia, 2 projects above 100,000 square meters that were installed with our products. So these are very sizable hospitals and well above the average size of hospitals in Europe, for example. Even in Workplace as well, there were also sizable projects, as you see. And in Residential, on the following slide, we see a very nice project in Serbia, very high end project where we fitted our wood packet for 10,000 square meters, which is also a very large project. Sports, you see examples of running tracks, indoor running tracks or outdoor artificial turf for -- in Australia. 2020 was also a year of increased digital adoption, I think, in all industries, and it accelerated certainly for Tarkett in all geographies. We give here some examples of what we've done in EMEA with a new web portal for our customers, from our B2B customers, and the adoption is being very fast. In Russia as well, both with our direct customers, our distributors and some others, we are moving massively on digital platforms in our interactions with them. Brazil is a good case in point because Brazil was ahead of the game. And you see that even in a country that was already very much digitalized, there has been an increase in 2020 versus 2018. 2020 was also a year for innovation, and we are launching, in the next weeks, a new LVT collection in EMEA featuring the best technologies in terms of surface treatment, in terms of appearance with a very matt aspect and performance in maintenance, so very easy to clean, and resistance to scratch and to stains. This is also a very innovative collection where we offer to our customers 100 designs that are available in all constructions and all formats, tiles, planks and with different width, thickness of one layer, also with a high number of very high-resolution designs digitally printed. And all these collections are manufactured 100% in Europe. We have also a very wide portfolio of environmental-friendly solutions. We have linoleum. We are 1 of the 3 companies in the world manufacturing with linoleum, which is 100% made of natural materials. We have phthalate free, heterogenous vinyl collections with more than 20% recycled content and ultra-low VOCs. We have the iQ natural collection of homogenous vinyl, which is the first floor with bio-attributed vinyl and bio-based plasticizer, which is manufactured 100% with renewable electricity and a 60% lower carbon footprint than the average homogeneous vinyl floors. And we also have non-PVC flooring solutions, fully recyclable for our customers who want non-PVC flooring in their applications. 2020 was also an important year in -- or important landmark, where we measured also the progress on some commitments we made 10 years ago on sustainability and also that we are making -- we made 2 years ago for renewing some of the commitments. We've made great progress and we are still making great progress on Circular Economy. We have a target to increase the share of recycled raw materials to 30% by 2030. And we have already increased from 10% to 13% in the past couple of years. So this is a KPI that is progressing year-after-year. And we see our customers more and more keen and motivated to participate in those closed-loop solutions and take back schemes. We have also beaten our target of carbon footprint reduction. We wanted to reduce by 20% our carbon intensity between 2010 and 2020. We've actually achieved 27%. And this is measured in intensity, so per square meter of floor produced. So it does not -- there's no windfall benefit from the COVID crisis at all. This is really the implementation of actions to reduce actual greenhouse gas emissions. And we are on our way to reduce by another 30% between 2020 and 2030. So we are ahead of the target here. We also are very well on track on improving our safety performance from a frequency of 9, 10 years ago, to 2.6 last year and towards the frequency of 1 accident per million of our works -- of hours worked, sorry, by 2025. This is a key target for us. And a level of 1 would put us really among the few percent of worldwide manufacturing companies that can achieve that level. We've also committed to have 30% of women among the managers and executive managers. And last year was a strong year for supporting local communities. Especially during the first lockdown, we were called by customers to set up emergency hospitals. That was the case also during the summer in Beirut, where we managed to refurbish very quickly some hospitals that have been heavily damaged by the explosion. All this progress have been recognized by major institutions. The CDP, the Carbon Disclosure Program, and EcoVadis have both improved their rating of Tarkett. CDP, we went from C to B as a score. And EcoVadis, we've reached the highest possible level with a platinum medal that only very few companies are -- actually are reaching. So we are very proud of that. And this is important also in our discussion with our customers. This is -- these are ratings and performances that are more and more valued by our customers when we sell our solutions to them. So great progress on this part of the strategy as well. With that, I would like to hand over to Raphaël who will go a bit more in-depth with the financial results. And then we can close the presentation and turn to Q&A.
Thank you, Fabrice. Good morning, everyone. I'm now turning to the Page 19, Q4 revenues. As you've seen, we're only slightly down organically, minus 1.5%. That's mainly thanks to good growth in the CIS. You know that we are largely residential in that region, and demand has been sustained. As commented by Fabrice, this is true also globally. Residential has grown in the quarter. It's also the case in EMEA and in North America. Commercial segments are weaker, and we've seen contrasted situation with Healthcare, for instance, trending better, but Workplace and Hospitality being more subdued. The results in EMEA, we still see some slight decrease, organic. In North America, we're posting a minus 1.1% organic decrease. But let me remind you that it's comparing to a relatively low baseline in 2019 that had been penalized by the difficulties post our ERP implementation, SAP, in the commercial carpet business. Sports is down on the quarter, less so than Q3. But clearly, we see the impact of project being delayed or sometimes canceled. So lower volumes had an impact on EBITDA, but the EBITDA of the quarter is solid. The lower impact -- the impact of lower volumes is minus EUR 16 million. But we have been able to more than offset that impact by cost reduction. Cost reduction are almost EUR 22 million, both coming from short-term cost flex actions and structural cost reductions. Raw material prices were still favorable in the quarter but less so than Q3. It's clearly fading away, and we'll come back to that. Selling prices were up due to the actions that we've taken, particularly in countries where currencies have weakened or devaluated, the case in Brazil for instance. Fabrice commented quickly earlier on -- about the cyber insurance indemnification, it's EUR 15 million, here reported in the one-off bucket of the bridge. This is making up for the loss of margin due to the loss of activity in the second quarter when the part of the activity of the group was tough due to the cyber attack. So on the full year bridge, you will not see that in the one-off column, but it's being reported under the volume and mix effect to offset the loss of margin from Q2. Moving on to full year revenues. Organic decrease is 9.5%, and it's clearly a stronger negative impact in segments that are more into commercial, in the case in North America with minus 15% organic decrease. Conversely, in the CIS, Asia Pacific and Latin America, we are down only 2%, and it's owing to a good performance in the CIS that is -- that are actually stable on a full year basis. So EBITDA for the year has been maintained almost stable in value compared to 2019, EUR 278 million, and margin has significantly improved. So of course, we were penalized by the lower volumes. It's EUR 114 million negative effect, so that's quite significant. But the success of the year is that we've been able to almost offset that through cost reductions, 160 -- EUR 106 million of cost reductions coming both from short-term actions to flex costs, but also to the acceleration of our structural action plans, and that's a EUR 46 million positive effect in the year. We are in advance compared to our plan, and it's a real success of the year. On a full year basis, raw materials were a tailwind of EUR 28.5 million, but that's mostly coming from the third quarter after the sharp drop of the oil price in the second quarter. So in a nutshell, we were successful to adapt to the much lower volumes, and that's why explaining on the following Slide 23. We have adapted our cost structure very rapidly and very early on, actually, at the very beginning of the pandemic at the end of March. As you can see, half of our costs are fully variable. So the other half is fixed in the short term. Fully variable costs are raw materials and freight, the rest being personnel cost and the other overhead cost of the group. On the right side, you see that variable cost has been variable in line with activity. But the rest has been really well flexed, minus 7% for personnel costs, owing to measures such as, as follows, partial work, salary reductions, and all the other cost measures that are benefiting the other cost bucket for -- that have been able to decrease by 13%. So that's how we've been able to significantly increase EBITDA margin and reached 10.6%. We've also included in the presentation some highlights on our key segments, starting with EMEA. You can see here that there is a clear improvement sequentially in the second half, and that's being driven by residential and some commercial segments also such as Healthcare and Education, where we see better trends. We commented already that Workplace remains penalized. Some countries actually in H2 have done particularly well in terms of improving, in the case in France and Germany. We are seeing in EMEA segment a very solid margin improvement. That's mostly owing to the improvement in the second half. And that's due to cost flexing, structural savings and also lower raw material purchasing costs. In North America, you know that we are more exposed to commercial. It's 85% of the activity. So although we saw a really good growth in Residential, particularly in the last quarter, organically, we are still down 9% in the second half and 14% on a full year basis. We have taken measures in North America. You know that we have a new management in place since July. We have also simplified new organization by business units, and we've taken measures to make it leaner, to simplify the support function, the SG&A in particular. And that's giving good results, and we are seeing the benefit of the cost reductions. We're also seeing the benefits of the Residential turnaround, not only at the top line but also in the cost structure. So progress are well on track in North America. We'll not come back to the good sales performance in the CIS driven by Russia and the CIS countries and our Residential -- our strong position in Residential there. What's really remarkable is that we have improved very significantly the margin on a full year basis, above 18% in spite of a negative currency effect. The ruble has weakened throughout the year. However, we've kept our selling prices stable and with improved margins, thanks to solid productivity gains, thanks to cost flexing and also increasing localization of raw materials that has given good results and allowed to reduce purchasing costs on top of the pure effect of oil. So real solid performance in CIS, Asia Pacific and Latin America. In Latin America, we've also increased very significantly prices to offset the currency devaluation, and that's a strong success. We've maintained volumes in Brazil while increasing double-digit selling prices. In Sports, let me remind you that the coming end of 2019 from a record year after 3 years of double-digit growth. Of course, the pandemic has an impact. It's a project business, and we've been quite resilient in the first half. But in the second half, we're seeing the impact of projects being postponed. We're addressing mainly the Education market in North America. And of course, the current lack of visibility leads to project being delayed. Once we said that, sales have decreased in artificial turf, but we've seen good level of demand and actually growth in running tracks, but also in the landscape business and in indoor. So there are also some good success in that segment. And we're actually quite satisfied with the level of margin in spite of the sharp drop of activity, above 10%. It's a good level of margin, and actually, it's quite stable compared to 2019, where we had a one-shot positive effect of an IP settlement that improved the margin that year. So that was the review by segment. Let me give you a few comments on the rest of the P&L before moving on to the cash. Our reported EBIT is down at EUR 47 million in spite of the stable adjusted EBITDA. You recall end of June, we have booked a significant noncash charge, the impairment of assets for EUR 53 million due to the weaker outlook in some businesses and, in particular, the Hospitality segment. So we have impaired some of the assets from Hospitality. It is also that we've incurred EUR 15 million of restructuring charge in 2020, slightly below what we commented last year, but that has allowed to deliver the cost savings in the plan. Our net income is negative, minus EUR 19 million, but that's also owing to the net effect of the impairment charge of the first half. Without that impairment charge, the net income would have been positive at EUR 23 million. And actually, H2 net income is positive. There's also one line here that may catch the eye, the income tax line at negative charge of EUR 32 million. It's above last year. It's actually owing to 2 significant noncash bookings. The first one is a tax asset write-off, and we've reassessed the potential to use our tax assets. And in some countries, owing to the lower activity and lower visibility, we've taken a cautious stance and written off EUR 6 million of our tax assets. There is another effect which is related to the ruble devaluation. In the CIS, where we report in -- as a functional currency with euro, so not the local currency, the IFRS norms has it that we have to measure the impact of currency fluctuation on nonmonetary assets, so -- or fixed assets, such as factories or machines. And we must book the corresponding tax impact of that fluctuation. It's a deferred tax impact of EUR 7 million negative in 2020. It was EUR 4 million positive in 2019, but it's a purely noncash impact in tax. And it's also the last year that we are seeing that because we -- in 2021, we switched to local currency as a reporting currency, functional currency in the CIS countries.The other success of the year on top of the EBITDA margin growth is free cash. Fabrice has mentioned the very strong level of free cash flow, EUR 164 million. Actually, the operating cash flow behind that is improving. Last year, cash was -- 2019 cash has been boosted by the setup of factoring programs for EUR 126 million. Let me highlight also that those factoring programs are stable, actually slightly up at the end of 2020, so we're also satisfied from that level, and we have deployed a few additional programs. The strong cash flow is really being driven by the good management of inventory. You can see it on the right hand, significant decrease in inventory in value but also in terms of inventory. As announced, we've tightly controlled CapEx. We're coming from 2 years of high CapEx both in capacity but also productivity, automation and safety and also IT. Our historical overage is more between 3% and 3.5% of sales. So with the level of CapEx in 2020, we are contributing to a good cash flow generation without -- and still investing properly in automation, in innovation, as we mentioned, and safety. That leads to low debt of EUR 474 million. Our leverage or reported leverage including IFRS 16 lease liability of 1.7x is at the lower part our midterm objective. So that's a real success. And we are ending the year in a solid situation. All the more solid that we have very strong level of liquidity, EUR 1.2 billion. And recall that at the beginning of the crisis in April, we have negotiated additional safety facility, the short-term credit facility, under the form of an RCF of EUR 175 million. The good news is that we have not needed to -- we have not had to draw on that RCF, and it's not drawn at all at the year-end. We have set up also a PGE, prêt garanti par l'état, of EUR 70 million. We are clearly contemplating reimbursing that in 2021 and not using it anymore given the liquidity situation. Let me remind you that we have no major debt repayments until April 2022. So we have a solid financial situation to start this year, 2021. Let me now hand over back to Fabrice to comment on the outlook and conclude.
Thank you. So we are clearly starting 2021 with a very strong financial position, low leverage, improved EBITDA margin last year. But it's not a surprise to you that we have limited visibility on the timing of recovery, especially in some commercial segments. As long as the lockdowns remain in place, even if there are partial lockdowns, as long as traveling is reduced or, if not, prohibited, segments like Workplace and Hospitality are very unlikely to rebound very sharply. So that's why we are basing our scenarios on a muted recovery spread over '21 and '22. And we already know that Q1 in those commercial segments will remain challenging, especially compared to the Q1 of last year, which was nearly normal or close to normal until mid-March. We still expect that Residential will continue to grow well, and that should help us. What should help us as well is that not only are we in advance on our plan for cost reduction but we also intend to realize an additional EUR 30 million of productivity targeted this year, in 2021, and we are well on track to do that. We have, though, another challenge to cope with. You know that since the end of last year, actually, purchasing costs of several many raw materials and freight costs have soared very massively, really very, very rapidly. Difficult to estimate fully the impact. But to -- right now, we estimate an impact on -- for the full year of '21 to about EUR 50 million, so it's a significant headwind. The good thing is that we have proactively started to increase our selling prices since the beginning of this year. So we have not lost any time there. We will increase prices to mitigate that impact. But we know that in some cases, it takes a bit of time just because, on projects, for example, there is a lag between the time we bid and the time we invoice, and that lag can be, of course, 6 to 12 months. So new challenges in 2021. That being said, our midterm objectives are still valid. We expect to grow above GDP and regain share. And we started to regain share -- to gain share in some segments. The adjusted EBITDA margin objective is still the right objective, we think, for the business. But we have also to be realistic. The timing of that could be slightly delayed due to the headwind we just mentioned on raw material cost and freight cost inflation and also, of course, the pace of recovery, which is another reason of uncertainty. Nevertheless, that 12% remains the right objective for Tarkett in the short- to mid-term. And financial leverage, of course, the objective is still valid, and we are already, at the end of 2020, very well within that objective, which gives us a lot of -- more room to maneuver, if you want, and we are really well within that objective. So with that, you see, I would say, cautious optimism. We know the environment is not going to be very easy in the short term. But having said that, we have very strong fundamentals. And the -- what we have achieved last year, in a year that was very special for all industries, gives us a lot of trust and confidence in our ability to implement our strategic plan and win in the years to come. That was what we wanted to share with you this morning. And of course, I'm going to hand over back to the operator for questions and answers if you have some. Operator, back to you.
[Operator Instructions] And your first question comes from the line of Charles Scotti from Kepler Cheuvreux.
I have a few questions, 5 questions exactly. The first one, on the raw materials headwinds. How much of the EUR 50 million headwinds do you believe you will be able to offset through price increases? The second one, still on raw materials. Can you help us modeling the phasing of the impact of those headwinds on a quarterly basis? The third question, on cost savings. Out of the EUR 44 million COVID-19-related savings in 2020, how much do you think will remain -- will stay in place in 2021? Fourth question, on cost savings. You are guiding for EUR 30 million additional savings in 2021. Can you confirm that it will add up to the carryover impact of last year action? And also, can you help us quantify that -- the carryover impact for 2021? And finally, can you detail with us where those EUR 30 million additional cost savings will come from?
Thank you, Charles-Louis. First, I'll take your first question on the raw material headwinds and how much we can offset. So just to clarify, the EUR 50 million is our estimate to date, and it's a growth impact. So it's before any mitigation. Of course, it could evolve. As you know, the situation is a bit fluid. You heard about the cold wave in Texas that has made things a bit difficult in the short term in the U.S. on the supply chain. If you look at the recent history, I'm talking about 2018, when price -- raw material prices increased like that, very steeply, we can offset about 50% during the first year. The good thing is that this year, we really started very, very early. I mean we saw it coming a bit, and we increased prices starting in January. So we are very much on time. And we see that the whole industry is facing similar challenges. So we see that in some geographies, like in the U.S., other players have announced price increases ranging from 5% to 9%, so it's very significant price increases. In the CIS, we are the leader, and we have announced increases being the first ones, but the market is very likely to follow. In Europe, it will take a bit more time because there's a higher proportion of projects and on projects, we -- what we bid today will be invoiced later during the year.
So on the -- you had a question on the phasing also, Charles-Louis, it's early in the year. So I cannot be too specific, but let me remind a few things. You know that between the oil price and our purchasing price, there is a 2 to 3 months lag. And between our purchasing price and when we recognize it in the P&L, there is a 2-month lag, which is our inventory. So as we speak in January, we are seeing purchasing prices going up, but still in the P&L, the prices that we recognized are the -- what we purchased 2 months ago. So we expect Q1 raw material inflation to be still relatively muted and the effect to be more significant in Q2 and in particular in Q3, actually. So it's more towards the second part of the year, but you should expect already a significant inflation in Q2. You had a series of question on cost savings. And I understand it's not easy to factor in 2021 after the -- all the measures that we've taken in 2020 and, in particular, the short-term COVID measures. The way we're seeing it actually is that we're looking at net further decrease of our cost base of EUR 30 million in 2021 based on the cost base of 2020. So that already includes also the short-term flex actions. Of course, some of these short-term flex actions, such as furloughs, salary reductions may not be -- may not occur again in 2021. But some of them, typically travels, fairs and exhibitions or some of the way we used to work, this will not fully come back. So some of the short-term measures will remain also in 2021 that -- in that perspective. But the way to see it is really an additional EUR 30 million cost decrease compared to the cost base of 2020. So in the sequence, this means that the advance in terms of structural cost reduction that we've taken on our plan, almost EUR 20 million advance at the end of 2020, we'll maintain that advance and will overachieve the initial cost reduction target of EUR 120 million over 4 years.
And the next question comes from the line of Pierre Bosset from HSBC.
I just would like to come back to your ESG positioning and your recycling and CO2 emission. I would like to understand how do you rank compared to your competition in your sector, especially against Forbo in Europe or against Interface and Mohawk in the U.S. And you mentioned tender offer and project related, how important is it in the tender offer? Can you win a tender offer just on the [indiscernible] Can you justify a slightly higher price when you have a better environmental offering by your teams?
So I would not comment on a competitor-by-competitor basis. Thank you, Pierre, for your question. I can say a few things. We are -- we were the first manufacturer to go 100% phthalate free in all our vinyl products globally. And that was some years ago, so -- back in 2012. So we are the first one to be fully phthalate free. The other thing is that we are also, so far, the only one to have a fully circular solution for carpet tiles in Europe, where we take back and fully recycle carpet tiles at the end of their use in partnership with the supplier, and that we are the first one to make. Now everyone has initiatives in our industry. We believe we are at the forefront of that ESG commitment, especially on Circular Economy. I have seen -- with regard to customers, I have seen personally over the last 3, 4 years a real change in the way our customers approach these topics. It used to be an add-on, very nice to have. Now it is more and more part of the specification and part of the dialogue that they want to have with us. That being said, I cannot tell you, you can win a project just based on ESG. You also need to have the right performance in terms of acoustic maintenance, all the technical performance. You will -- you have to have the right service and the right price. So -- but it becomes more and more a mandatory criteria and especially in some segments like Workplace, like Hospitality, where the large customers, they actually want to achieve a nice ranking. So far, it does not allow a very clear price premium, but I will -- I strongly believe that it will come and especially as regulations become more and more stringent, especially for the end-of-use treatment of flooring products.
Okay. And may I ask another question, just to come back to your EUR 30 million cost reduction target, will it include another plant closure?
At this stage, Pierre, we don't have any new plant closure in -- announced or in the plan. But as you know, in manufacturing industry, plants can be -- I mean we can reorganize production based on the evolution in demand and evolution in the environment. But at this stage, in the EUR 30 million, we don't have any plant closure included.
Okay. And sorry, a very last question regarding M&A. Do you have in your pipeline more opportunities than before COVID? Or can you comment if there is some competitors which are in a more difficult situation?
Yes. We -- it's a good question. In our pipeline, we have some ideas about bolt-on acquisitions. We are certainly more open to those now that we have gone back to a leverage that is well within our objective. And as you know, the merger and acquisition market is quite dynamic these days. So it's true that there are some opportunities that come to our attention. We'll see how that develops.
And your final question over the phone lines comes from Jean-Francois Granjon from ODDO BHF.
The first question concern the top line trend for 2021. Do you expect -- do you choose the good level in Q3 with a minus 1.5% for organic decrease in Q3 -- in Q4? Do you expect positive organic growth in 2021? It's the first question. The second question, do you expect, despite the raw materials impact, improvement for the EBITDA margin in 2021? And my third question, on the CapEx level, after the low level in 2020, what do you expect for 2021? And my last question concern the dividend. Why you decided to cut the dividend despite the strong level of free cash flow last year?
So I will answer those questions. Thank you, Jean-Francois. As we said, we -- the visibility on commercial segments is a bit unclear right now. But I would say that yes, normally, given that there should not be a big impact in Q2 as we had in 2020, we should grow our top line in 2021. We can reasonably expect to grow in 2021 unless there is a real fast resurgence of the pandemic or the vaccine doesn't work, et cetera. But we -- in the current scenario, we think overall for the year, we should be in positive territory. The improvement in EBITDA will depend on the scenarios. I think we are very confident with our ability to reduce cost. We've started very early increasing selling prices. What is less clear is whether the rise in freight cost will stay where it is -- freight costs will stay where they are today for the rest of the year or whether they will weaken a bit; same for raw materials. But obviously, our target is to improve the -- our EBITDA margin. We know this year, we're facing some specific headwinds. The CapEx level in 2021 might be slightly higher than 2020, but not massively higher than 2020. We are back in a situation where we intend to spend 3% to 3.5% of sales in CapEx, which is the average historical level over the last 10 years. So we don't have any huge pent-up project that we absolutely need to spend. We are well invested. And in all categories, both in manufacturing, in IT and in innovation, we are reinforcing. So we are reallocating some CapEx budget according to geographies and specific projects, but you can easily model a CapEx spending between 3% and 3.5% of sales for 2021 and beyond actually.
As far as the dividend is concerned, you know we have a controlling shareholder with a family and who is fully on board actually with that dividend policy. And they -- with us, they want to put the emphasis on organic growth, first and foremost, so really reinvested -- reinvesting the cash in the business. And later on, we will resume our dividend policy. But we know -- you know we -- our dividend policy is 30% to 50% of net results to be distributed. Net result was negative last year. So we've restructured to plan that dividend policy.
There are no further questions over the phone at this time. Therefore, I would like to hand back to the speakers for the web questions.
We have questions on the improvement in profitability in 2021 from [ Maxime Lafleur ], but Fabrice has already answered to these questions. So let's move to the questions we received from AlphaValue. First question, do you see the same ForEx effect in 2021 occurring than in 2020? Second question, is the new LVT collection unique in Europe or what makes the difference with peers? Third question, despite of the dividend policy, were you allowed to pay the dividend if you wanted? I'm referring to the government bank loan that's prohibited if it's drawn. Fourth question, how do you see working capital evolving in 2021? Viewing the low inventory, I'd say negative, but how much?
You answer on the FX?
On the FX, yes. Thank you for your question. So on the FX, this year, looking only at the P&L impact, we've had 2 things. We have the translation effect of the U.S. dollar that [indiscernible]. And we've had the -- and we have the effect of the ruble. So if we take those 2 currencies, as we speak, they have stabilized. So for -- at the moment, in our scenario, there is still a negative effect from currency -- from those 2 currencies, but definitely not the same magnitude of impact as what we have seen in 2020. And if we sum up those 2 impacts, currency and lag effect in 2020, we are close to EUR 25 million negative. It will be as significant in 2021 provided those 2 currencies stay stable and other currencies are not moving in the wrong direction. Let me remind you also that we've been successful in countering currency devaluation in countries like Brazil, like Norway. The U.K. also have some price increase to fight the currency impact, which, of course, difficult to forecast. But at least in the central scenario, the effect is much less than in 2020.
Regarding a question on LVT, it's always difficult to say it's absolutely unique because there are many other suppliers of LVT. But we think it's a real breakthrough compared to the collections that it replaced, especially to the -- in terms of simplicity of choice for the customers and between design and formats, the ability to have -- to choose by design and then choose separately the format you want and to be able -- not to be constrained by the format, and also in the use of digital printing to really improve the quality and rendering of designs. And lastly, with the [indiscernible] surface treatment, we are really best-in-class in terms of product performance and resistance to use, whether it's scratch or stains. So we are really very positive with that LVT line, which once again is manufactured in -- fully in Europe. And you know some of our customers import today massively from Asia. But we believe that also -- that the current trend on sea freight will be an opportunity for European manufacturers like us to take back some share against Asian manufacturers.
You were -- on the dividend, you were right to point that out. I mean, the -- currently, the PGE, the state-guaranteed loan, when it is drawn, forbid the dividend payment. We also intend to reimburse it quickly this year because, as you've seen, we have EUR 1.2 billion liquidity, so we don't really need that state-guaranteed loan. And I think it's the right thing to do as a corporate citizen to reimburse these loans as they are no longer needed right now. In terms of working capital, which was your last question, yes, we end up the year with a low level of working capital, but nothing exceptional in that. I mean customers paid on time, suppliers were paid on time, and the level of inventory has been reduced, but it's a level that is sustainable. So the only thing that would justify a strong rise of working capital would be some pickup in demand. But we intend to keep a tight control of working capital -- on working capital generally.
If there are no further questions, I would like to thank you all for attending this call today. Again, we are quite proud of the results we've achieved last year in a very difficult year. We know that 2021 comes with a new set of challenges. But I think Tarkett, as a group and as a corporate team, has really demonstrated its ability to sail through bad weather as was last year, and that gives us a lot of optimism for the short-term and midterm future. Thank you, again, and I wish you a great day today.
Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.