Bureau Veritas Sa

Good day and welcome to the Baruch Veritas Q1 2024 Revenue Conference Call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask a question and this can be done by pressing star 1 on your telephone keypad to register your question. At this time, I would like to hand the call over to Hinda Garby, Chief Executive Officer and Francois Chabat, Chief Financial Officer. Hindia, please go ahead.

Thank you. Good morning, good afternoon, and good evening to everyone. Thank you for joining Bureau Veritas today on the webcast and on the call. François Chabat, our group CFO, is here with me to present our Q1 2024 revenue and answer your questions. In the first quarter of the year, Bureau Veritas maintained a strong growth trajectory in line with our expectations for the year and our commitments following the unveiling of our LEAP 28 strategy. First, starting with our revenue performance in Q1. Revenue for the quarter was 1.44 billion euros, up 2.5% year-on-year. The organic increase was 8%, exceeding our expectations and confirming the strong underlying market trend. The growth was broad-based across divisions, with three out of six businesses delivering more than 13% organic growth. The scope effect was a positive 0.1%, reflecting the contribution from recent bolt-on acquisitions, offset by the impact of a small disposal last year. Forex had a negative impact of 5.6% in Q1, primarily due to the depreciation of some emerging market currencies against the Euro. Excluding Forex, our growth was up 8.1%. For the first quarter of 2024, I'd like to share with you the key events. We have launched our LEAP28 strategy both internally and to our investors. Our strategy execution has started across the organization with defined plans and agreed deliverables. To execute our 200 million share buyback program announced in March 24, we completed the acquisition of circa 0.8% of the group's own shares on April 4, 2024. This was executed under the Vandell placement. The remaining 100 million will be done throughout 2024. Finally, I'm pleased to announce the first long-term credit rating of Bureau Veritas with an A3 rating from Moody's and a stable outlook. This reflects the group's strong financial structure and competitive advantage. When it comes to our CSR commitment, in the first quarter, we have continued our efforts to be exemplary in terms of sustainability around environmental, social, and governance practices. We continue to work on delivering our CSR commitments, updated in line with our 2028 strategy targets. Those metrics will be evolving throughout the year. We received new recognition by several non-financial rating agencies, including a first ranking by Sustainalytics. We also joined the United Nations Global Compact the world's largest initiative related to corporate social responsibilities. Looking at our business and regional mix, these results have been driven by all business lines and regions and included high growth from sustainability, decarbonization, and energy transition solutions. Looking at the mix, marine and offshore industry and certification continue their strong growth momentum in line with previous quarters. Robust low to mid single digit organic revenue performance was achieved in BNI and agri-food and commodities. Our consumer products further improved with an organic growth up 6.1% in the quarter thanks to earlier seasonality and a pickup in product launches. From a geographical standpoint, all regions performed well with Africa and the Middle East leading the pack. In line with our LEAP28 strategy, we aim to build our new strongholds in consumer technology testing. This quarter, we realized three acquisitions, one tech and cost tech in Korea and high physics in India. These capabilities strengthen our position in the electrical and electronics consumer products testing in South Asia and in the consumer tech R&D platform of Korea. This follows the recent acquisition of ANSI in Mexico, announced in February 2024, which allows us to enter a new market that will serve as a springboard for expansion into North America consumer market. Across the group, we are pursuing our M&A programs to expand leadership and create new strongholds. Our M&A pipeline is robust, and we expect to announce new deals in the coming quarters. I'll hand it now to Francois.

Thank you, Inda. Starting with the revenue bridge, so we delivered 1.44 billion euros in the quarter with a strong organic growth of 8%. It shows our execution capacity combined with the good momentum of our secular growth trends. This is now the seventh quarter of organic revenue growth at or above 8% in the last two years. On the scope side, acquisition added 0.1% on the net scope basis, reflecting the impact of the bottom acquisition just mentioned, and offset by the disposal of our non-core automotive inspection business in the U.S. last year in July. As presented in our Capital Market Day, we continue to actively manage our portfolio. Forex impact represents a drag of 5.6%, leading to a total growth of 2.5% on the net reported basis, This is mainly attributed to the strength of the Euro versus several emerging market currencies. From H2 onwards, we expect easing the negative impact due to easier comparables. When it comes to the performance of different businesses in the first quarter, all businesses delivered good growth. Three activities that they rose, marine offshore, industry certification. Like in the last quarter of 2023, they all delivered strong double-digit organic growth in the quarter. on the back of continued momentum in sustainability services, including marine decarbonization and renewable energy projects. Interestingly, consumer product services recovered to 6.1% on an organic basis and confirmed the gradual recovery that we've seen already in H2 last year. And finally, agri-food and commodities and BNI both delivered low to mid-single digital revenue growth. BNI was led by the infrastructure segments, growing double-digit. Agri-food and commodities growth was driven in particular by the strong demand for agri-food products. On the specific topic that we've communicated upon during this publication, I'm pleased to announce the first long-term rating of Bureau Veritas, credit rating. The decision by Moody's to assign an A3 rating with stable outlook confirmed more strong financial structure. a leading market position, and a solid business model, together with a strong track record of positive free cash flow. This long-term credit rating will support us in further diversifying our source of fundings, enhancing access to capital markets, and managing debt maturities in line with our new 2020 strategy. That's it on my side. I now hand back to Inda for the business review.

Thank you. Thank you, François. Let me share with you now the highlights of the first quarter for each of our six businesses. Starting with marine and offshore, Q1 was another strong quarter for this business with a 13.6% organic progression. It's ranked amongst the best performing divisions within our portfolio. It's important to highlight that it is a multi-year growth dynamic as the maritime industry decarbonizes, renews its fleet and becomes more energy efficient. In this quarter, it was driven by growth across all sub-segments. We grew double digits in the new construction business, supported by strong and diverse order book. We grew double digits in the core in-service activity. This resulted from a combination of price increase and volume growth, driven by the increasing number of classified new vessels and by our efforts around reduction of contract leakage. We have a healthy backlog, growing 9.7% year on year, driven by LNG-fueled ships and specialized vessels, giving us a good visibility on future revenue. In recognition of our innovation capabilities, we have been awarded the world's first prototype certification for a floating offshore solar infrastructure for a Scandinavian company, SolarDust. Moving on to our agri-food and commodities business. The division recorded an aggregate 3.2% organic revenue growth with different dynamics among the sub-segments. Oil and petrochemicals recorded mixed single-digit growth. It benefited from market share gains in Europe. It also sustained a good traction from recent investments to diversify into non-trade activities such as oil condition monitoring, bio and sustainable fuels for shipping and aviation. Metals and minerals revenue was stable. On-site laboratory strategy remains a key growth driver with an important win in Latin America. Trade activities performed well, owing to a favorable mix from some metals such as copper. Agri-food achieved mid-single-digit organic progression. The agri subsegment benefited from double-digit growth in trade-related activities led by Europe. The food business benefited from a good traction in Asia and the continued recovery of the Australian operation. Lastly, government services delivered a slight contraction this quarter from unfavorable comparables and temporary volume reductions for some verification of conformity contracts. The pipeline of new opportunities continues to develop. For industry, the organic growth was 16.3% during the first quarter and was broad-based across most subsegments and most geographies. Customer spend remains strong in all energy sectors, driven by energy security and transition needs. Across other industrial sectors, we see good growth. Bicep segments. In oil and gas, new global projects spanning both oil and gas drove double-digit organic revenue growth for OPEX and CAPEX-related services. The power and utilities growth was offset by unsavorable comparables. Growth was positive in most areas, aside from Latin America, where we have decided to exit low profitable contracts in Brazil and Chile last year. For renewables, growth accelerated with high double-digit organic performance delivered across most geographies. This was particularly the case in the US, where we supported multiple customers' renewable projects. We won many small contracts in solar and wind as we started to benefit from early opportunities linked to the Inflation Reduction Act. For industry product certifications, we grew high single digit organically led by price increases and increased activity for pressure and welding and electromechanical and advanced technology sub-segment. In terms of sustainability achievements, we were selected for the engineering and quality assessments and control services for the construction of a 490 megawatt solar facility in Arkansas in the US. During the period, we also signed a partnership with the Bourgogne-Franche-Comté region in France and INSEE, a renewable energy and hydrogen producer, to launch Europe's first large-scale hydrogen storage test site. On the BNI front, we achieved an organic growth of 3.6% in the quarter. During the period, OPEX business grew faster than the CAPEX activity. By geography, in the Americas, we delivered solid growth with the U.S. operations benefiting from its diversified portfolio of activity. Double-digit growth was maintained for the data center commissioning business, fueled by continued geographical expansion. Code compliance was stimulated from population migration increase and the associated high housing demand in southern states, allowing us to grow high single digits organically. Growth in Europe was robust overall, up 4.9% organically. In France, with a predominantly OPEC services mix, growth was above average thanks to positive pricing and new services. Growth in the rest of Europe was driven by the increase of infrastructure spend, especially in Southern Europe. In Asia Pacific, Middle East, and Africa, we grew strongly led by India, Australia, and Saudi Arabia. In China, activity remained moderate with solid trends in energy-related construction activity boosted by the energy transition, while spending remained weak on transport infrastructure and other regional projects. We continued to develop sustainability solutions for buildings. In the first quarter, the group was selected to carry out energy audits mandatory compliance for all shops located in Spain for a large European retailer, We also performed soil pollution audits for 40 sites in France for another leading retailer. Moving on now to certification. Once again, the business posted a strong performance over the first quarter of 2024, recording a 13.7% growth on an organic basis. This performance is the result of both good volume traction and robust price increases. All geographies grew organically, with high performance mainly in the Americas, Middle East, Africa, and Asia. The recertification cycle occurring this year helped the group achieve a robust performance in QHSC solutions, especially in Europe, where it recorded a double-digit organic growth, thanks to Bureau Veritas' leading position and broad coverage. The segment also benefited from strong tailwinds linked to the recertification requirements around specific schemes in the automotive industry. Sustainability-related solutions and digital certification activities representing a third of our divisional revenue grew high double digits on an organic basis. They benefited from the excellent traction around environmental and carbon services, food sustainability, and increasing demand for cybersecurity assurance. In France, the public outsourcing contract with the Direction Generale de l'Alimentation provides inspection services around food safety is ramping up. During the quarter, we won numerous contracts in the sustainability field. We have been selected by a large online retail company for a contract covering environmental training and advisory solutions in 13 countries. In the US, the group also delivered Forestry Stewardship Council label certifications to assure sustainable practices in forest management by the Maryland Department of Natural Resources. Finally, for consumer product services, we delivered a 6.1% organic revenue performance over the first quarter, confirming recent improving trends, supported by an earlier Chinese New Year and early spring product shipments. Asia is progressively recovering, especially in China, while the Americas and the Middle East are benefiting from an organic growth from last two years' acquisition. Looking at the subsegments, soft lines, hard lines, and toys, so high single-digit organic growth due to product launches resuming and earlier spring shipments addressing Red Sea logistics disruption. Our healthcare subsegment, including beauty and household products, delivered double-digit organic growth in Q1. This performance is driven by contract wins with new customers in the United States. supply chain and sustainability services recorded a very good double-digit performance from the restart of inspection activities, new product shipments, and new sustainability solutions. On the technology front, we saw a mid-single-digit contraction in the first quarter, affected by decrease in demand for consumer electronics and delayed product launches. In sustainability, In the first quarter, we were selected to carry out social audits for a large online retailer in more than 800 new locations across Asia. The group was also awarded a contract to execute environmental audit and sustainable claims services for an American luxury department store chain. Moving now to the outlook. We expect to deliver for full year 2024 mid to high single-digit organic revenue growth. This reflects our confidence in our healthy sales pipeline, high customer demands for new economy services like sustainability and energy transition solution and a strong underlying market growth. An improvement in adjusted operating margin at constant currency and strong cash flow with a cash conversion above 90%. Reflecting our comparable base, we also expect second half of the year organic revenue growth to be above first half with stronger Before taking your questions with Francois, I would like to close by saying that our with clear expectations around deliverables and timelines. Our performance for the first quarter on pricing traction. This bodes well for the rest of the year. We are confident in our 2020 is by applying across most businesses. The positive secular market trends are boosting our multi-year growth dynamic and Bureau Veritas is well positioned to leverage this dynamic. Thank you all for your attention. Francois and I are now ready to take your questions on the call or on the webcast.

And as a reminder, if you do have a question over the telephone, please signal by pressing star one. The first question today comes from Annalise Vermeulen of Morgan Stanley. Please go ahead.

Hi, good evening, Mahinda and Francois. I have three questions, please. So, firstly, on consumer products, I know you've touched just now on the verticals and geographies where you're seeing some strength and some weakness. I'm just thinking about some of those segments you called out. So, you know, the better performance in soft lines, hard lines and toys due to some earlier shipments. How confident are you in that growth continuing to improve as we move through 2024 notwithstanding easier comps and clearly and also on technology still contracting there do you have much visibility on that going into the next couple of quarters and also how do we think about the fact that you've highlighted 5G smartphone testing in China as a business highlight in that segment when technology overall is still contracting if you could have bridged that for me that would be helpful. That's the first one. The other two aren't so long, I promise.

Okay. All right, all right. I'll address the first one. Hi, and thanks for the question. Look, as we said, I think since Q4, we said that we are expecting a recovery in the consumer division, which we have seen starting in – in fact, as we started saying that in Q3, and we've seen it in Q4, it continues on in Q1, and we expect that the recovery will be there for the rest of the year. Now, of course, I want to highlight that in Q1, not only we had this seasonality change with the early Chinese New Year, that means that you have more time to do work than you recover earlier than previous years, but also the disruption we've seen in the Red Sea meant that a lot of retailers and brands have actually advanced their shipment versus previous years. So spring collections were being shipped in Q1, much, much earlier in Q1, if you will, versus other years. So that's important to keep in mind for Q1. But in terms of recovery, we're seeing product launches resuming on the soft line, hard lines, and apparel. We are executing our integration plans on many of the acquisitions we've made in healthcare, and therefore we expect that we continue to grow there. And the supply chain and sustainability services as product launches resumes, inspection resumes, and that is also in general and deniably higher demand for sustainability services in consumers. So, on that front, I think we are reasonably confident of the growth going forward. Now, on the technology front, I just want to be clear that the wireless activity specifically, the 5G wireless activity actually has been soft for a number of quarters. And we know just from general market information that there is lower demand for these particular products. And that's why when we talked about our technology subsegment, it's all about diversification both in terms of sectors, but also in terms of geographies for us as we go forward. So we're still seeing contraction from That lack of consumer demand for some of these electronics, specifically wireless, but also overall, I would say, and that is affecting the overall activity. But we have mentioned a few times in the past that the technology segment, we have a very clear diversification strategy to ensure that we are well positioned for the subsegments of this market that are growing very healthily.

Very clear. Thank you. Second question I wanted to ask about data centers. Again, you mentioned it during your comments on BNI. Clearly, with the ongoing rapid proliferation of AI, demand for data centers is only increasing further. Have you heard anything from your customers around BNI? how they're trying to cut lead times for getting sites online and connected to the grid, and particularly in the U.S., low single-digit growth in America's BNI. Could we expect to see that accelerate through the year on the back of this rapid take-up or build in data centers?

Yeah, look, I think the data center sector is quite healthy. You're absolutely right, and this is around the world. There is a concern around the load that these data centers are putting on the grid, subjecting them to risk of failure, which means that there is quite a bit of work being done by utility companies to basically address some of that. I think for us, the growth has been very healthy. That is still an extension around the world. Not everywhere is saturated, so we're seeing quite a bit of increase in data centers in general, and we grew double digits, in fact, in that particular activity. BNI in the U.S. actually had a solid growth, and the reason two things are important for the U.S. on BNI. First of all, we have a diverse portfolio, and we have talked about that a few times, and that is on purpose to make sure that we have a resilient portfolio. revenue growth and we have activities covering data centers, covering code compliance, code compliance growing actually double digits, covering or high single digits rather, covering OPEX and covering other activity in the CAPEX. So the growth at around slightly above 4% is actually quite healthy and we expect to, as we move to H2 as well, we will see less impact of some of the comparables that are still actually being unfavorable specifically around some of the contracts we have stopped last year. We mentioned that in Q3 last year.

Perfect. Thank you. And then I was just on competitive dynamics. Clearly, some of your peers have outlined fairly industrious growth and margin targets for this year and beyond, and I'm just wondering if you're seeing that in any change in the competitive dynamics in any of your markets. I'm thinking also you've got a new listed peer in the U.S. as of a couple of weeks ago, so any change, anything you've seen in any of your own markets? Thank you.

Sorry, Anneliese, I didn't catch the start of your question.

I was just about competitive dynamics, whether you've seen any changes from any of your peers or any other of the large players as they seek to deliver on their own growth and margin targets as well.

I'm not going to comment on the competitive plans. We've obviously observed the entry or the listing of a respected player in the US, but No, I have no comments on competitor plan.

Yeah, the question was more around any change in competitive dynamics in behavior in the market.

Not that we have seen today, no.

Okay, perfect. Thank you. Thank you. Our next question is from Suhasini Varanasi of Goldman Sachs.

Please go ahead. Hi. Good evening. Thank you for taking my question. Just a couple for me, please. Did you see any trading day impact in 1Q? And if so, how much was it and is it going to reverse in 2Q? The second one is if you take the effects that you had in 1Q and using the current spot rate for 2Q, what is the current impact on margins for the first half and full year, please? Thank you.

Okay.

Well, I think, Svetlana, thank you for your two questions. No real trading day impact, you know, by and large. You know, trading day, if you start to mix it with various holidays here and there, you end up into a sophisticated computation that we don't want to enter in because you will talk Chinese New Year, then whatever, Ramadan, and then so no trading day in simple terms impact on Q1. And then on ethics, so I will just open up a bit your question on ethics. I mean, you mentioned rightfully the impact is relatively strong in Q1, 5%-ish. You may have seen that the Chinese currency, the Australian dollar in particular, on the year-to-date basis, so we are here comparing year-to-date rate Q1 24 against year-to-date rate Q1 23. are down more than 5%, so that, as you know, we have exposure to those two countries. I would not be in a position to comment on margin, but I think, you know, you could take an estimate of the margin impact of last year, and you shouldn't be too far off in terms of margin impact on each one.

Thank you. That's good.

You're welcome.

Thank you. Thank you so much, Amy.

Our next question is from Sylvia Barker of JP Morgan.

Please go ahead. Hi, thanks for taking the questions. Three questions, please. First of all, on the wireless business, how much of that E&E business actually is kind of smartphone related? Obviously, you talk about diversifying, but how much of that business is smartphone related today? And then within E&E, some of the divisions, so in consumer and in industry, you've got obviously some audit-type activities. Could you maybe talk about why they're not reported within certification, and are the margins on both activities around the 20% mark?

I'm really sorry.

Very well. Just to make sure I caught the questions correctly, you're asking about in the tech side and on wireless, I couldn't catch the rest of that question. It is better?

Yeah, please go ahead. Sorry, sorry about that. Let me just repeat. So question number one, how much out of your tech business is smartphone related essentially? Question number two, you've got some kind of certification type activities within consumer products and within industry. So are these coming in at 20% margins? like the certification division or is there a different profitability profile there? And then finally, just on pricing, as no one has asked it so far, how much of organic was pricing and which divisions did it sit in mainly? Thank you.

Okay, thank you. The line was really bad, but I think I caught what you were referring to. Just let me start with the audit activities. And the certification, as you call it, in consumer are specific activities. They're not the certification activities we have in our certification business. So that's very specific to consumer. The industrial products are under industry, and that's a very specific scheme of certification. The certification business includes the traditional QHSE ISO certification, certain specialized schemes, includes sustainability and cyber, and includes some training. But that's really what we... In terms of pricing, again, I didn't catch the question very well. But it's suffice to say that our growth is essentially volume-driven with some traction around pricing, and we're not guiding on pricing at this point. I have talked and we explained in our press release that there are a number of businesses that benefited from the dynamic of pricing, and we continue in some cases because these are good practices we have. I talked about our marine and offshore where we have good dynamic around management of our contracts and making sure we manage the contract leakage and we benefit from that. We have some price movements in certification, for example. So these are very specific programs, but this is a volume-driven growth. And then the other question on tech and wireless was really very, very hard to hear. But essentially, if I can just explain there, there is a reduction in consumer demand for wireless products. That's your cell phones, your iPads, any of these wireless products. And therefore, we are seeing a reduction of volumes in these and a reduction of new products being launched by most players, which means that these activities, I would say, for everyone, for the whole market, have reduced. And that, I think, will continue for a little while, particularly on the wireless. Now, when you look at the markets themselves, while the wireless market has lower growth, we have other segments in the technology space that are growing healthily. You still see good growth in medical, very reasonable growth in electrical appliances and essentially retail E&E, what we call retail E&E. The new mobility is suffering from a a short-term skepticism, but mid-term will continue to grow. And again, that is a very important market, electrical vehicles, basically, and any intelligent vehicles, not only electrical. I hope it answers your question, Sylvia, but it was really hard to hear.

Thank you very much for about that. Thank you.

Thank you. The next question comes from Carol Rainsford of Varenberg. Please go ahead.

Hi, good evening. Hopefully you can hear me. It's probably the first question.

Yeah, I can hear you very well. Thank you. Perfect.

Yeah, I've got three. Sorry, they're a little bit more specific, just what I've got left. So within power and utilities, there's an exit of the lower profit contracts in Latin America. So perhaps you can give a little colour on the size of those and if they should translate well to margin at H1 or are they not material enough to impact that? The second business, again, if you could give some color on the size of the Argentinian B&I. And then finally, just within the industry segment, there's 29% of revenue in there just labeled as other. So should we be thinking of that as purely procurement or other operations in there too? Thank you.

So just on the last question there, Carl, could you please repeat that? The industry you're saying?

Yeah, so in the industry segment, there's sort of 29% of revenue which isn't sort of labeled within the breakdown. So I'm just wondering if that's purely sort of just procurement revenues or if there are other operations, really.

Yeah, okay, okay. So first of all, I will answer these questions. First of all, we don't, of course, guide on specific segments or sub-segments profitability for the future, but you're absolutely right. We did We did last year, in our efforts to make sure we improve our pricing, we have decided to stop certain contracts because we found that we weren't able to move pricing on those and we made the decision to do some arbitrage on some of the contracts. So we expect, of course, that that will be accretive by doing that, but we don't give specifics on the segments or subsegments. And then... The other question was on Argentina. Now, there is not a major reduction in our BNI activity specifically in Argentina. And then the last question, industry has multiple elements in it or multiple subsegments. You have oil and gas. And in oil and gas, you have activities around CAPEX and OPEX. mostly working on risk assessment, QA, QC, and then you have also integrity in general across all assets in ONAGAS. We also have PNU that includes low-carbon energy projects, everything from renewables to nuclear, but also we have contracts around OPEX PNU where we do inspections of grid systems and things like that. And then, of course, and we have, of course, also procurement across any supply chain where we do quality control and procurement projects. for customers on large capital projects. I hope that answered the question. I don't know, Francois, did you need to add anything to that?

No, just to underline that the procurement services, just for clarity, we are not, you know, acting on behalf of anybody to procure something. These are more really what Inda mentioned, inspection along the industrial supply chain. Yeah, yeah, thank you.

Absolutely, yeah. Yeah, we do not act to purchase on behalf of customers, no.

Thank you. Thank you.

Next question comes from James Rose of Barclays. Please go ahead.

Hi there. I've got two things based on building and infrastructure. You know, I started the year a bit lower than expected, perhaps, and even mid-single-digit in the U.S. Is that perhaps a little bit below or below your plans? I wonder if you could just talk through some of the, any of the reasons there. And then secondly, how should we think about how BNI should grow for the rest of the year?

I wouldn't say it's below expectations. I think the important thing is this is a global business where we operate around the world. We have, and there are different seasonalities and different dynamics in the businesses. I think if I look at it geographically, and I alluded to that in the prepared remarks, we've seen solid performance in the U.S. Now, we recognize, of course, while we have double-digit growth in data centers and high single-digit growth in code compliance, we know that some activities around transactions, for example, where you have major commercial real estate changing hands, we tend to do diligence around that. That is slow, undoubtedly. But in general, we are managing to balance all that. If I look at our European activities, actually, we see very strong activity around our OPEX in France, for example, or in Europe in general. So, there again, actually quite a healthy activity. Where we have seen softness, and I mentioned that again in our prepared remarks, is around China, where typical infrastructure projects have slowed down. Anything to do with energy transition projects, the civil works that are associated with that actually continue to be robust. Emerging markets continue to be reasonable. If I look at some of the activities we have around the Middle East, Saudi Arabia or South Asia, for example, in India, or some of the activity we see in Oceania. I think the important thing to say on BNI is the fundamentals of this market remain very strong. We have explained in our LEAP 28 strategy that we have our intention, clear intention, to expand our position in this market, which means that we will be looking at gaps both from a portfolio capabilities perspective and geographically, and we continue to grow that. So, in general, I think it's a decent performance.

Thank you. And then just on the sort of second half of the full year, how should we think about our growth for the?

So, while we don't necessarily guide by segments, I think it's fair to say that we expect to continue to grow in BNI. Okay.

Thank you.

Thank you.

Our next question is from Carol Green of RBC.

Yeah. Thanks very much. Good evening. I've got two questions on the industry segment, please, I think I've calculated accounted for about over 40% of group organic growth in the first quarter. The first one is just around the FX dynamics there. So you've seen an FX headwind of about minus 14% over the last three quarters. So the question that flows from that is how much of the organic growth within industry is volume related versus simply devaluation related price adjustments. And then the second question just around the FX is which countries specifically are driving those very significant headwinds, please.

Thank you. Francois, do you want to take the FX question?

Yeah, sure. So on the FX, I've mentioned when it comes to the adverse impacts, it's mainly to, so we're talking here about translational impact, of course. As I mentioned, we have several currencies which are playing against the euro at least in the first quarter, so I've said in particular China, which is around minus 5 percent, Australia, which is around minus 5 percent. Those two are among the top five countries in the company when it comes to exposure, and as you know, there is a, we have a good chunk of industry that is as well Chinese-based, so this is true. that if you bundle this with Latin America, where we have an industry exposure as well, this segment so far is the one being the most exposed to ethics. It wasn't the case last year. I think it's kind of changing. We could not derive out of this, you know, long trend or whatever specific dynamic. But we age depending on the countries we are. And, you know, at that stage, the answer is yes. China, Australia, and a bit of Latin America. When it comes to the price dynamic or versus the not so much inflation, you have the usual, you know, I think if all of you know about Latin America, there is always an element of pricing that we need to incorporate into our usual routines in terms of price indexation, contract, and so on, which continues. It's a bit more difficult in other jurisdictions, namely China. Speaking of China, we have a negative FX, but no or very little price dynamic because here there is very little inflation. So, I mean, there is no one-size-fits-all answer here. I think you're right pointing at that quarter. It's industry. It will be different in the next quarters. We'll think the time will tell.

Okay, great. But just to be clear, would it be fair to assume that the industry segment pricing was a bigger driver than volume in the first quarter?

Well, I think it's very true, but perhaps not for the reason or the combination, because you should not forget, I think we've said it very clearly as early as June last year, We have taken deliberate measures starting summer last year to discontinue contract in the industry segment, which has actually delivered very strong results in terms of margin improvement last year. If you remember, the last year margin of industry was growing or evolving very positively compared to the previous year. That was part of the plan we had delivered. So if you indeed mentioned or had this what we have delivered last year in terms of contract reduction, a good chunk of the growth on industry is price, and we are actually happy to show some volume growth despite what we've done in terms of contract discontinuation. It's a policy we have, and I think we've come Kind of to the end of it, I'm not, I think, going over my mandate here, but I think the bulk of what we had to do has been done in summer last year, and I think the last decision was taken in October for another large contract, especially in the P&U segment, so power and electricity industry. So this is very clear that in H1, this is not the segment where the volume component is the strongest. because we've agreed to discontinue. But overall, there is some growth. So we are very happy with the fact that we have discontinued contract. We continue to grow organically by business development on profitable segments. Yeah. Okay. Thanks very much, François. You're welcome.

Thank you. The next question comes from Arthur Creslov of CIFI.

Hi there. Thanks so much for taking my questions. First question, so just wondering on organic growth, are you expecting Q2 to be below Q1 from an organic growth perspective? And if so, sort of how specifically? And I guess with that in mind, if the second half is going to be above the first half from an organic growth perspective, then why did the guidance not nudge up to high single digit? And then the second question was just a bit of housekeeping. What are you expecting in terms of contribution from M&A and, indeed, contribution from FX for the full year? Thank you.

Thank you. Look, first of all, just let me answer the second part of your first question first. It's too early in the year to resize to change the outlook at this point. We've been quite consistently saying that we expected H2 to be above H1. Q2 last year is important to remember was an important quarter where we had very high growth. So comparables in Q2, we were always expecting them to be a little less favorable. So we are at this stage confident in our outlook as it is. And as I said, it's a bit too early to change that. In terms of effects, I'll let François address the effects. I think that was the question on the effects. In terms of M&A, we have a program, we stood up a program in line with our LEAP 28 strategy, specifically on the expand leadership businesses, the new strongholds, and we have quite a pipeline of of companies we are targeting and we expect that in the coming quarters we'll be able to announce those. I'm not going to be able to guide you right now about what quantum of scope that will be, but definitely this is an important program for us and it's critical to the execution of the strategy. Francois, I want to take the effects question, please.

Yeah, so as usual, I mean, we count forecast effects, otherwise I wouldn't be sitting with you talking. I would be on an island. If I knew how FX would go. But we expect if everything goes as planned and no dramatic change in the world, as I mentioned, H2 should be softer than H1 on FX.

Does that answer your question, Arthur? No, I think we...

I was just wondering more on the M&A. If you just factored in the stuff you've done to date, how significant would that be from a contribution perspective to revenue on the full year? And again, just on the FX, it was only really considering where FX rates are today. What would that mean in terms of the revenue for the full year? That was what I meant more than how is it going to change going forward, if that makes sense.

yeah yeah it's it's it's uh i think it's uh it's uh we're not going to be able to to guide on the effects of part of what francois said but on the mna again we i am reluctant to give you exactly the quantum because we are pursuing different opportunities and that will take us the coming months and quarters to execute but but what is very clear and we shared it in our LEAP28 strategy discussion, is that M&A is central to focusing our portfolio and filling in the gaps in capabilities in many of our businesses, and specifically new strongholds. When I look at activities around the renewable sustainability and cyber, it's actually extremely important that we execute on that. Our M&A program is ongoing. We have stood up the resources to support that. We have the full organization focused on it, and we'll be able to announce those as we close them.

Thank you.

And as there are no further questions at this time, we will conclude the Bureau Veritas Q1 2024 Revenue Conference Call. We thank you all for your participation, and you may now disconnect.