Bureau Veritas Sa

Welcome to the Bureau Veritas Q3 2024 Revenue Conference Call. My name is Alan and I'll be your coordinator for today's event. Today we will be hosted by Indah Garbi, CEO, and Honsua Shaba, Group CFO. Please note, this call is being recorded and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. If you require assistance at any time, please press star 0 and you'll be connected to an operator. I'll now hand you over to your host, Indra Garbi, to begin today's conference. Thank you.

Thank you, Alan. Good morning, good afternoon, and good evening to everyone. Thank you for joining us today on the webcast and on the call. I'm here with François Chabat, our group CFO. We'll be presenting our Q3 2024 revenue update, and we will then take some questions. In the third quarter, we continued our growth momentum, delivering strong top-line growth while actively managing our portfolio in line with our LEAP 28 strategy. I'm grateful to our colleagues around the world for their work, efforts, and dedication in delivering these results. First, starting with our revenue performance. Revenue for the quarter was 1.55 billion euros, up 8.8% year-on-year. The organic increase was 13%, exceeding expectations for some businesses and confirming the associated underlying market trend. This resulted in a 10.5% organic growth on a year-to-date basis. It is key to mention that the growth was driven by the entire portfolio. The scope effect was a positive 0.5%, reflecting a higher contribution of 1.1% from recent Bolton acquisitions, partly offset by the impact of small targeted divestments. Forex had a negative impact of 4.7% in Q3 due to the appreciation of the euro against most currency. Excluding foreign exchange, our growth was up 13.5%. In light of our resilient nine-month performance, our robust backlog, and our focused operational execution, we are upgrading our 2024 revenue outlook for the second time this year. Looking at the mix this quarter by business and by geography, our diversified portfolio delivered across the board with all business lines and regions posting high growth continued our growth momentum from previous quarters. Our third quarter performance also confirms customers' high demand for sustainability and energy transition services. This underpins to a large extent the double-digit organic increase in marine and offshore industry and certification. Additionally, consumer products, buildings and infrastructure, and agri-food and commodities all achieved solid high single-digit organic growth. From a geographical standpoint, all regions performed well with the fastest growth recorded in the Middle East and Africa as well as in the Americas. This broad-based growth underscores the strength of our business model and the successful execution of our strategic priorities. Turning now to our CSR commitments. Our organization is executing CSR programs across our operations in line with our 2028 commitment. In these first nine months, our CSR performance indicators progressed as planned through well-defined actions across our different businesses. Our governance programs are notable for the high impact they have as they ensure we have well-trained, independent, and an impartial workforce. I'm proud to report that our sustainability efforts have been recognized by leading non-financial rating agencies like the SNP, MSCI, and EcoVadis. These ratings are a testament to the dedication of our global teams as they embed sustainability practices within our operations and in our daily tasks. In this quarterly call, I would like to share an update on our focused portfolio progress. I'll specifically comment on our M&A program actions so far this year. Year to date, we have completed or entered into agreements for the acquisition of seven companies expected to add around 80 million in annualized revenue. These acquisitions fall into two key streams. First, companies that will help us expand our leadership in sectors where Bureau Veritas is already a leader, Second, companies that will allow us to build new strongholds in fast-growing markets. In parallel, we have divested or entered into agreements to sell two businesses, representing around 165 million in annualized revenue. Both divestments will help strengthen our balance sheet and will support our M&A plan. The first divestment announced in half one results was a B&I technical construction supervision business in China And the second concerns our subscale food testing operations, which I will detail in subsequent slides. Now, let me share details about some of our recent Q3 transactions. Starting with our expand leadership and existing stronghold stream. As a reminder, this stream involves businesses where we want to strengthen our existing leading market position through market share gains and services expansion. This ambition will be achieved through a combination of rapid organic scaling, and acquisitions that broaden our business portfolio capabilities or geographical coverage. Our recent acquisitions are for our buildings and infrastructure portfolio. Our key priorities for this business involve building a comprehensive CapEx platform for both buildings and infrastructure projects, and then developing new positions in OPEX services. In October, we announced one transaction aligned with these objectives, and we expect others to be completed in the near future. We acquired the IDP Group. This company is a leading independent provider of building information modeling, project management assistance, and digital twin services for the public and private sector in Spain. This acquisition brings key digital enablers that will enhance our services and operational capabilities in BNI. With this acquisition and others in our pipeline, we are reinforcing our leadership in the building and infrastructure sector. This will enable us to better serve our clients and to capture growth opportunities across this large and dynamic market. Moving now to our Create New Stronghold stream, we intend here to develop the small businesses we currently have in markets where customer demand is very high. These markets are mostly driven by sustainability, energy transition, cybersecurity, and digitalization and connectivity. In half 1.24, we completed four acquisitions. Three were for our consumer technology testing business to augment our capabilities in Asia, and one was for our cybersecurity business to develop our North America services platform. As we execute our well-defined acquisitions roadmap in this new stronghold stream, we have completed this quarter two new strategic acquisitions. First, we acquired Aligned Incentives, a U.S.-based provider of sustainability solutions. This acquisition augments our capability in the rapidly expanding sustainability transition services market, as I will detail in the following slide. In the second one, we acquired ArcVera Renewables, a leading player in the U.S. new energy space, This transaction enriches our capability to support renewable energy projects and to complete our offering for this fast-growing market. Let me now spend a few minutes on our most recent acquisition, Alliant Incentives. This addition is a good example of what we aim to do as part of our LEAP 28 strategy. This company will help us complete our portfolio of transition services in the fast-growing market of digitally enabled and AI-powered sustainability solutions. When it comes to sustainability reporting, the market demand is shifting from a model relying on high-level estimates at corporate levels today towards more transparency and granularity in footprint assessment. It will rely on more accurate custom lifecycle-based data, taking into account not only the emissions footprint, but also the impact on many other resources, like water, for example, for every product across a corporate portfolio. Aligned Incentives is an innovative US-based provider of AI-powered enterprise sustainability planning solutions. They bring deep expertise in areas like greenhouse gas accounting, climate risk, and ESG data management. By integrating this technology-augmented solution into our portfolio, the group will be able to bring differentiated solutions to help our clients measure, manage, and report on their environmental, social, and governance impacts with unprecedented accuracy and speed. Moving now to the third stream in our focused portfolio strategy pillar, optimize value and impact. In line with our LEAP28 strategy, we have been assessing the progress of the businesses classified under this stream to ensure that they are performing as planned. Earlier this month, we entered into an agreement to sell our food testing business to Merieux Nutrition, a global leader in the food testing business. Our food testing global operation generated 133 million euros in revenue in 2023, and employs over 1,900 experts across 34 labs worldwide. Post-closing, this divestment will be accretive to our margin and will have a neutral impact on our adjusted earnings per share by 2025. To summarize now this strategy update around our focused portfolio, I'd like to emphasize that we have clear, granular, and defined plans for every business in our portfolio and we are working diligently to execute those plans. In the coming weeks and months, you will see more progress, particularly on the M&A front. I will now hand over to François for the financial review.

Thank you, Inda. Good afternoon to everyone. Taking now a closer look at the revenue bridge. In the third quarter, we delivered 1.55 billion euros in revenue, representing a strong organic growth of 17%. And this performance demonstrates our continued execution capacity and the benefits of our circular growth trends. This marked the ninth quarter of organic revenue growth at or above 8% over the last 11 quarters, so very close to over the last three years. Accelerated acquisition realized over the last 12 months added 1.1% to the group's revenue. and 0.5% on a net-code basis, as it was partially offset, as Indah mentioned, by the disposal of our non-core Chinese construction business in July this year, and a small automotive divestment the year before. For your information, the deconsolidation of our food testing business will occur early next year, most probably. When it comes to forex impact, it represents a drag of minus 4.7%. leading to a total growth of 8.8% on a reported basis. This is mainly attributed to the strength of the euro versus several emerging market currencies. In Q4, we expect the FX to remain a headwind, although we expect it to ease sequentially. On a nine-month basis, the Bureau of Etats delivered €4.5 billion of revenue. We achieved 10.7% growth at constant currency, with organic revenue growth increasing by 10.5%. while the acquisition net of disposals contribute to 0.2. The strong organic performance highlights the strong momentum around the secular growth drivers, and Forex Impact represents a drag of 5.1%. When it comes to the performance of the different businesses in the third quarter of the year and for the first nine months, you see both numbers, first third quarter in the middle and year-to-date numbers on the right. I'm pleased to say that both the third quarter and the nine months are pretty much comparable. All businesses delivered good growth. Visually, three activities led the growth, marine offshore, industry, and certification. They all delivered double-digit organic growth in nine months, including the third quarter. On the back of continued momentum in sustainability-driven services, including marine decarbonization, renewable energy, and certification schemes. Agri-food and commodities and building infrastructure both recorded mid-single-digit organic revenue growth in the first nine months, with an improvement in the third quarter of high single-digit organically, as both benefited from improving trends in the U.S. markets. It will be noted as well that B&I benefited from favorable comparables in Q3. Finally, consumer product services continued to recover at a high single-digit base for both Q3 and 9 months, benefiting from new product launches and stabilization of the technology business in the sub-bottom. From a scope point of view, which is in light gray, the contribution is mainly concentrated on CPS, where M&A took place earlier this year. The various acquisitions that have been described a few minutes ago will start to impact our P&L as the year progresses. but they aren't yet to be seen from a P&S point of view. So we expect the next quarter to start materializing those, especially on B&I, on certification, and on industry. And the divestment of our lab testing business will impact the Agri-Food Committee Division, as I mentioned, most probably in Q1 or starting Q1 next year. And I'll pass it back to Hida for the in-depth business review.

Thank you, Francois. And I'll share with you the highlights of the third quarter for the six businesses. Our marine and offshore division delivered another strong performance, boasting a 13.2% organic increase. This continued growth momentum underscores our differentiated positioning as the maritime industry accelerates its decarbonization, its fleet renewal, and its digitalization efforts. If we drill down into the different activities, we grew double-digit across both new construction and our core in-service. In new construction, the dynamic global shipbuilding markets led by Asia and China fueled this expansion. Our core in-service business grew at a rapid pace, driven by our increased number of class vessels, disciplined pricing, and rising demand for retrofits and upgrades to meet new environmental regulations. In the first nine months of this year, we have secured 10.8 million gross tons in sales, bringing our backlog to 27 million gross tons, up 24% year on year. This work was secured by winning contracts for new LNG-fueled ships, container ships, and other specialized vessels. This record backlog gives us higher visibility on future ship construction activity and pace. While we remain confident about our ability to navigate this dynamic market environment, we believe that in 2025, shipyard capacity will be fully utilized, which will slow the conversion of our backlog versus this year. When it comes to innovation, the business contributed to the development of low-carbon emission technologies and issued an approval in principle to French luxury cruises operator PONO for its new wind-assisted propulsion system. passenger vessel. In the third quarter of 2024, the agri-food and commodities business recorded a high 8.5% organic revenue growth, delivering a 5.9% performance on a nine-month basis. By segment in Q3, oil and petrochemicals achieved once again a high single-digit organic growth. This performance was mainly fueled by market share gains in Europe, and the ramp-up of contracts in the Middle East. For metals and minerals, we recorded a sequential recovery, posting double-digit organic growth in both upstream and trade activity during the quarter. Our on-site laboratory strategy and the ramp-up of a significant contract in the Middle East contributed to this good performance. The agri-food segment delivered mid-single-digit organic growth. The agri-side leveraged new development with key players in Latin America and Europe, while the food business benefited from pricing and services diversification initiatives. Finally, strong performances from African and Middle Eastern countries contributed to the government services segment's low single-digit organic growth. In terms of sustainability accomplishment this quarter, we secured an R&D contract with a Finnish oil refining company to provide services for product and feedstock quality optimization. We were also awarded a laboratory testing services contract for a European leader in sustainable aviation fuel. Moving on now to our industry business. In Q3-24, we recorded 23.8% organic revenue growth with double-digit growth across the main segment. Year-to-date, the division has achieved 19.7% organic growth, primarily led by the buoyant energy sector. We are increasingly working on green objects alongside our traditional services in the oil and gas. The power and utilities business recorded a high double-digit rise led by strong OPEX activities in the Middle East and Latin America. We also maintained good momentum in CAPEX services for nuclear and renewable power. The oil and gas segment remained robust in both CAPEX and OPEX activities, benefiting from the ramp-up of major capital projects, especially in the Middle East and in the Far East. This quarter, we secured a key contract to perform quality assurance and quality control inspections for an offshore gas project in Vietnam. Industry product certification services performed well from high levels of activity in North America, China, and France, driven by high demand for pressure vessel testing, welding inspections, and raw materials testing. On the sustainability front, we are benefiting from an accelerated pace around energy transition projects. In Q3 in China, we conducted a hydrogen storage tank project review, and in France, we secured a water analysis and data monitoring services contract for a new nuclear European pressured reactor project. For BNI now, we achieved an organic growth of 9.3% in the third quarter of 2024, representing sequential improvement and recovery from the 4.3% organic performance in the first half. During the period, the CapEx business grew at the same pace as the OPEX one. In the Americas, we delivered double-digit organic performance in Q3, driven by very strong performance in the U.S. Our data center and mission-critical infrastructure business maintained strong double-digit expansion, while regulatory services and infrastructure CAPEX project also showed a strong traction. In Europe, we achieved high single-digit organic growth, led by Italy benefiting from the country's infrastructure multi-year investment plan. France also contributed to this strong growth, where our OPEX-focused activities grew in volumes and leveraged productivity gains. The Asia-Pacific region grew at a mid-single-digit pace, boosted by strong performances in South and Southeast Asia, as well as in Australia. China's public spending constraints continued to weigh on transport infrastructure, moderating as a result overall growth for the region. Finally, in the Middle East and Africa, we grew double-digit organically, driven primarily by large-scale project wins in Saudi Arabia. We continue to develop sustainability solutions for buildings. In the third quarter, we were selected by several California school districts to conduct facility assessments, including energy audit and the development of net zero energy reduction plans. We were also awarded inspections around electrical equipment for electrical vehicle charging stations in Italy. Moving now to the certification business. The division recorded strong organic growth of 17.7% in Q3, a similar growth trend to the last two quarters. This was led by strong volume increases and price escalation. It also reflects high market growth where comprehensive brand protection and sustainability commitments are fueling strong customer demand. Our quality health, safety, and environment and specialized scheme solutions, particularly in automotive, posted double-digit growth benefiting from recertification cycles. This activity is also supported by the development of innovative solutions in response to clients' demand for customized and voluntary schemes. Additionally, we continue to develop public outsourcing services to address government and local authorities' needs. In line with a recent outsourced government contract secured in France, the group was awarded a food second-party audit and training services in Madrid nursing homes in Spain. sustainability-related services, and digital certification activities also recorded double-digit organic growth. This performance is benefiting from tightening regulations and is driven by high demand for carbon and emissions verification, forestry audits, ESG-related supply chain audits, and cybersecurity assurance. To grow faster this business, a key focus of our LEAP 28 strategy, we continue to leverage our footprint in critical services, and to create scale through targeted acquisition. During the third quarter, we continued to grow services around assurance of sustainability reporting. As an example, in France, we helped a medium-sized enterprise to evaluate its CSR maturity, its double materiality analysis, and to complete a gap assessment ahead of CSRD reporting. We also completed the orders of supply traceability and compliance, with European deforestation regulation for a leading producer of natural rubber in Africa. Lastly, for consumer product services, we delivered a 7.5 organic revenue performance in Q3, confirming the improving trends of the last few quarters. Geographically, Asia is leading with good organic growth, led by China, Vietnam, and Bangladesh. Looking through the segments now, in the soft line, hard lines, and toys segment, we delivered high single-digit organic growth, primarily driven by volumes recovery in China and Southeast Asia, with strong activity in hard lines. The healthcare sub-segments, including beauty and household products, posted solid double-digit growth as we successfully scaled the services of the acquisitions completed in the last two years in the United States. Supply chain and sustainability services record very strong double digit growth, benefiting from increased demand for CSR audits and green claim verification services. Finally, the technology segments recorded low single digit growth and improvement from the negative trend in half one. This market remains challenging with low product launches and wireless and slow down in new mobility equipment, particularly in China. Electrical appliances performed well, though, and benefited from improved consumer spending. In terms of sustainability services development in the third quarter, we were awarded a contract with an Austrian furniture chain to support their suppliers with sustainable claims certification. We also performed environmental emission management services for one of the largest clothing companies in China. Moving now to the upgraded outlook. We now expect to deliver for the full year 24 an organic revenue growth in the range of 9% to 10%. This is comparing to a high single-digit guidance at Health 124. This reflects our strong nine-month track record and our confidence in our business execution for the rest of the year. An improvement in adjusted operating margin at constant currency and strong cash flow with cash conversions above 90%. Before opening for questions, let me leave you with a few First and foremost, our customer focus and operational excellence combined with a robust backlog have enabled us to outperform throughout the first nine months of the year, including a strong performance in Q3. Second, as we execute our LEAP28 strategy, we have made tangible progress, accelerating our M&A activity and actively managing our portfolio as shown by the food testing business adjustment we announced this quarter. Finally, we remain confident that the key secular market trends underpinning our strategy remain strong. This gives us confidence in the future growth trajectory of our Leap 28 plan. I am proud of the progress we have made in the first year of our strategic plan, and I am confident in the opportunities that lie ahead for Bureau Veritas. I'd like to reiterate my thanks to our teams across the world for the excellence in execution they have shown and the commitment to our strategy execution as we ramp it up. Thank you all for your attention. Francois and I are now ready to take your questions on the call or on the webcast.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. You'll be advised when to ask your question. We will take our first question from Swasini Varanasi, Goldman Sachs. Your line is open. Please go ahead.

Hi, good evening. Thank you for taking my questions. Just a couple from me, please. Given you've delivered 10.5% organic growth already in the nine months to date, Looks like you probably need maybe 8% or 9% growth in fourth quarter to get to the 10% number, which is the upper end of your range. Can you maybe discuss the moving parts that will get you to either the lower end or the upper end of the range? What is your key concern at this point in time? The second one is on BNI. I think in Europe, the CAPEX activities did benefit from Paris Olympics. What was the extent of the benefit which we should expect should reverse in the coming quarters, please? Thank you.

Thank you for the question. So look, the guidance here we updated just to give you a range of what we expect for the rest of the year. I think our assumptions overall on execution having changed dramatically. We take into account that Q4 tends to have different, some cyclicality for some businesses. We want to make sure we are actually prudent about that. So overall, I think it's a reasonable prediction for the rest of the year with the visibility we have today. We don't expect major dynamic change overall, and that's why we decided to provide this guidance at this point. Now, on the BNI question, the Olympics Games in France were a good opportunity. They created quite a bit of volume here in France for a limited period. it had some impact on our business to the tune of roughly $2 million. So it's not massive, but it was reasonable to participate in this.

Thank you very much.

We will take our next question from Carl Green, RBC. Your line is open. Please go ahead.

Yeah, thank you very much. Good evening to you. I've got three questions. The first question, just in terms of the reported revenue growth in the first nine months of 5.6%, is that materially different from what you'd expected at the start of the year? And then kind of linked to that, is there any chance you could estimate your real rather than nominal pricing power this year, just allowing for those emerging market inflationary dynamics to The second question, very simply, just on the Americas, organic growth of 18%. Can you just split that between North and South America, if possible? And then the final question, just about, if you could remind us what the group's luxury goods exposure is. So thinking about consumer products, soft lines, perhaps certification overall, just kind of any kind of quantification of the group's exposure to the luxury industry. Thank you very much.

Excuse me, we're really having difficulties hearing you. Could you please come back to the second and third question?

Sorry, yes. The second question, just very straightforwardly, whether you can split the America's organic growth of 18% between North and South America. And then the third question was just a reminder of the group's exposure to the luxury industry, perhaps across consumer products and certification, please. Thank you.

Thank you. Thank you. So look, the revenue, if I heard you well on the first question, the 5.6 on a reported basis for the nine months, that is built on a 10.5% organic growth. I'm not sure I heard very well the question, the first one.

Yes, it was just the first question was whether the reported growth was materially different from what you'd budgeted for at the start of the year.

So whether, forget the organic for a minute, but whether that... Maybe I'll ask you a comment in terms of foreign exchange.

Go ahead. The question went into it, and apologies, the line is not great here. I hope it can be yours as well. So on the reported growth, I think... Basically, we are not counting on having, you know, an FX drag as strong as what we've seen. I think we thought we knew Q1 would be with negative, but I think it's been dragging along. You've seen what happened as well on the US dollar over summer. As you know, we report in euros. So that's a little bit stronger than what we thought. And if you remember well, I think I was even... you know, saying around July cold that we would expect Q3 to be materially lower in terms of ethics, you know, closer to two and a half, three percent. We're still above four. So, sequentially, it's easing, but not at the pace we would have hoped for. I mean, not much we can do about it. And second question. So, you know, we don't really report on those two geographies, but, you know, to give you kind of an idea, I would say the northern part of the Americas is closer to 15%. The southern part is closer to 20% in terms of growth by big blocks. So double-digit on both cases.

Okay. Thanks, François. On the luxury exposure, it remains a small percentage of our divisional revenue for consumer products. It's an interesting space. It's a space we actually invested in, I think, was perhaps in 2015, 2016. We have some presence in the luxury space across traditional services, but also we have invested in some activities in Italy in the past. It remains, again, a market of interest that we continue to monitor to see if there are opportunities there.

Thank you very much.

Thank you.

We will take our next question from Sylvia Barker. JP Morgan, your line is open. Please go ahead.

Thank you. Hi, good evening, everyone. Good evening from me as well. Firstly, on BNI, just going back to how you mentioned And to the FX impact, apologies, but can you just clarify which are the main currencies that have led to that negative 14.5 in BNI specifically? Then the second question on marine and offshore, could you maybe elaborate a little bit around that comment that the limited capacity at shipyards is finally starting to have an impact What would you expect for that new construction part of the portfolio from Q4 and into next year? And then finally, around margins, no change to the view there, but anything to say around the mix on the margin relative to where we were the half year? Thank you.

All right. I think, Silvia, the currency impact on BNI in Q3 is only negative 1%. So I think you weren't referring. You were referring to industry, perhaps. Silvia? I was indeed. Sorry.

That's my bad.

Yeah. You were referring to industry. OK. You want to comment on the effect? Yes. Sorry.

I said yes. Yes, I was.

It's OK. It's OK.

Just wanted to make sure.

It's been a long day for sure. We'll get to that. So industry 14.5% FX impact indeed over the quarter and kind of the same on the year-to-date basis as you may have seen as well. Here the bulk of the impact is coming from weaker currency geographies. A chunk of it is Argentina. We all know that inflation is there and ethics as well, both sides. So to put it straight, it does represent slightly less than 5% of our business in industry. And now if you want to have a more clear view here, should we remove Argentina, all the regions we have under this segment are all growing very solid double digits for the reason that in dimension in terms of dynamics of the energy market across the board, whether this is Middle East, you know, Middle East itself is above 30%. So I would say the bulk of it would be this one currency with a very strong momentum. And for those who are really interested, I encourage them to have a look at the inflation decelerating in Argentina and you'll see that will not last for very long. So we will re-rationalize in Q4. So I think that answers part of your question. As you know, the Argentinian devaluation took place in December last year.

And perhaps to build on that, I think it's important to mention is the industry growth is structurally sound in general because we see fundamentals of this industry both on older energies, if you will, fossil fuel things, and on new energy where we're seeing... real planning around capacity increase, we see real investments, a backlog of projects. We're actually actively working on finding acquisition targets to expand our capabilities both geographically and in terms of specific skills we need to be able to offer customers, particularly in the new energy space, a full portfolio. Investment is there. Capital projects have been kicked off in oil and gas. And then on the new energy and renewable, there are a number of big projects starting a bit around the world. And we will see that a lot of the investment that was mostly in the north, in the global north, if you like, and there is now questions about how it's going to move into the global south and what does that mean. and many of the issues of supply chain and people availability that remain, you know, big challenges for the new energy space. We're starting to see some solutions. We're starting to see some positive dynamic there. So, as I said in my opening remarks, the underlying trends for energy transition are solid and will continue to grow. So, and we'll continue to invest on that. To come to your question, second question on marine and offshore, So, we have been quite consistent in saying that the marine sector has a major issue of renewal for two reasons. One is decarbonization needs with the legislation and regulations starting to come into effect from this year and next year and going forward. And then the second one is the fleet is very old. So that basically triggered quite a rush to build new ships, and that's why today our backlog is 27 million gross tons, lots of good work being done by our teams, and we're focusing on certain type of vessels. We're very focused on LNG-propelled vessels. We're focused on certain type of container ships and other specialized vessels, and we're investing in different technologies and knowledge around those technologies to help customers. So very solid in terms of outlook. Now, the key thing, though, that we don't control as a company, as a classification company, is how the shipyards manage this influx of orders. What we are seeing today is there is such a massive volume of work going to the shipyards that they are starting to hit full capacity. They are today full from what we understand. They're fully booked. until late 26 and probably now until late 27, which means that the ships that will be built are already in the roster to be built and are in the planning. Any problems in the shipyards will be a slowdown factor and any additional winds cannot be converted until that capacity that is being, that volume that is being executed in the shipyard has been done. So that's why We have been for a while explaining that we expect from 2025 to see a bit of moderation in the new construction growth, not because there is no work, because there is no additional capacity. And to create new additional capacity is not a simple thing, and I don't expect it to occur in a very short term. So that's really where that comment is coming from. And then on the third question, Sylvia, we don't comment on margins in Q3, and I think we will we will stick to that and we'll be able to discuss fully our margins in the full year update in February. Thank you.

We will take our next question from Arthur Trusler, Citi. Your line is open. Please go ahead.

Thank you very much. I have three from me, if I may. Thank you very much. So just following on from Suhazini's question on the organic growth. So I think in Q4, if you're going to hit 10% organically on a full year basis, that probably implies about eight and a half in Q4. And if you're going to hit nine, sort of near a 5%. I guess my question firstly is kind of what are you expecting to slow? And is that because comps are getting a bit tougher or is there some other something else we should be thinking about? Second question, while I know you're not going to guide for next year at this point, when I look at Visible Alpha, consensus organic growth for next year is about 6.9%. And I just wondered whether you were happy with that, in what scenario you'd expect to materially exceed that, and what would mean that you would miss it. And then finally, If you just think about the FX headwind that we've seen year to date, are you able to give us an idea, mechanically, what impact that would have on margin or not? Thank you.

All right. Francois, you want to comment on the Q4 specifics?

On the Q4 specifics, we don't guide on the quota, but I think we've been pretty precise on the lending. Nine to 10 doesn't leave a big, big area for doubt here. You're right in your computation. We should not forget that while we grew last year in Q3 by 5.8%, we grew almost 10% in Q4 in 2023. Comparables are actually pretty tough for Q4. If I want to sum it up, I would say that's 85% of the explanation. You have a little bit of seasonality in certification to be expected, but that's Again, the big chunk of the explanation is the comp after a very strong Q4 last year. That's really the number one topic.

Okay. Thanks, Francois. So on the next year, look, I think when we introduced our strategy this year, we made a commitment that we will be growing mid to high single digits on an organic basis. during this plan from 24 to 28 for the five years. When I look at the market and the trends, there is nothing that makes me doubt that possibility. So for me, our guidance remains valid for the five years that we will grow mid to high single digits on an organic basis. We saw happen this year that we have a very good year, but that doesn't change our guidance for the remainder of our strategic plan. And then the Forex question. Jonah, go ahead.

Well, so far, from a pure mathematical point of view, the picture hasn't changed compared to H1. So we are talking 20, 25 basis points. And with all our focus on, as we did in H1, getting operational leverage in order to organically cover for this.

Thank you very much.

Thank you, Arthur.

Once again, if you like to ask a question, please press star 1 on your telephone keypad now. We will take our next question from Himanshu Agarwal, Bank of America. Your line is open. Please go ahead.

Hi, Hinda. Hi, Francoise. Thank you for taking my questions. Three for me. The first one, can you just talk about the price versus volume contribution in Q3? And also, when we think about next year, as inflation is rolling over, we are seeing pricing coming down faster than inflation in some other sectors. And when you think about 2025, do you see that as a concern in terms of your discussions with these clients? So that's the first one. Second, I think in Q3, I'm quite pleased to see that technology finally shows some growth, low single-digit versus a decline in the last few years. Are you confident that we have passed the inflection point in that business? And going forward, it should continue to improve and also benefit from easier comps. And then thirdly, on the CSRD, you won a few projects in this quarter. Can you talk about next year, how much can it contribute to the organic growth in the certification business? Thank you.

Thank you. I'll answer the question on price versus volume. But just to talk about tech. Look, if you recall in previous calls, we talked about our plans for CPS technology and we explained that we have to work on diversifying our portfolio in that particular sub-segment of technology. and that diversification requires that we look at geographical footprint in a different way, and we have to enhance our capabilities beyond the mix we have today. That includes expansion into the electrical appliances side of things. It includes that we will be looking at capabilities in some of the new energy, some of the medical space, and we said that we will diversify geographically beyond Asia and beyond some of the traditional footprints we had in Europe. So we did some of the acquisitions late last year with the ANSI acquisition in Mexico. We did some acquisitions earlier this year in Korea so we can actually strengthen our position there and in India to create a new front of growth. You know, I'm not going to say we're done with technology. We still have a lot to do. We need to continue to execute our strategic plan. It's good to see that we are starting to stabilize the performance, but I continue to think that there is a lot to do on this business. So I'm not going to guide on a sub-segment level, but all what I can say is we are squarely on the roadmap we have designed for this business and we continue to execute that. Look, CSRD is, of course, an interesting dynamic that is driving demand from customers, both big and small. It will contribute to the sustainability growth that we have under our certification business. If you see today, that sustainability bucket under certification is growing higher teams, almost 20%. and I don't see why that will change or will reduce, so expect robust growth in that area. The quantum, exactly, I won't be able to give you that at the moment, but we definitely expect the CSRD dynamic to drive quite a bit of demand from customers. François, you want to comment on price versus volume?

Yes, on the price versus volume, I think what we foresee for your hand is... that we keep our view expressed in June. That means that the growth is two-thirds volume, one-third price. I would say there is no material element in Q3 that is changing this view. So with obviously a diversity of situation, whereby if you would take a BNI in China, there is no secret that the price element there is more negative than anything else. and some more positive momentum, especially in the certification business. But, you know, all in one surprise to sell the volume for the year-end.

And, sorry, just a follow-up on the inflation rolling over into next year. So, are you seeing any pushback from your clients in terms of pricing?

I think perhaps just a comment on pricing in general. So inflation is one component, of course, right? But it's not the only thing in pricing. It's also some of the work we're doing on our contracts, some of the work we're doing on value pricing for some things. So we're trying to move beyond just equating pricing to inflation, which is important, but it's not the only thing we need to do. We're a knowledge-based business, so we're trying to leverage that availability of certain resources in a very tight market for some specialty businesses. services. So there's quite a bit, I guess, my point beyond inflation.

I wanted to add exactly the same. We're working and take the marine offshore business. I think we have executed a very focused program on marine offshore started last year. It's executed this year and a part of the growth in the marine offshore division of Burea Fas is clearly led by the pricing in a sense that we work on contract terms, we work on contract leakage, we work on prices. So it's an active pricing discipline and we expect these type of projects to be developed further in the group in order to sustain a pricing dynamic in the years to come, not only in dimension being a pure reflection of inflation, et cetera. So that requires time, that requires discipline and industrialization. But I think it's part of where if you remember, performance pillar when it comes to the plan, ensuring that all operations have a good pricing discipline, which I think, again, is reflecting the quality of the services we deliver.

Thank you. Thank you.

We will take our next question from Annalise Vermeulen. Morgan Stanley, your line is open. Please go ahead.

Hi, good evening. I have two quick follow-up questions. So firstly, on the active portfolio management, if you could comment on the margin implications. I think you said that the divestments are margin-accretive, but are the acquisitions also margin-accretive, the ones that you've made this year? And then just secondly, coming back to the very strong organic growth in industry, you've commented on the FX impact, but could you comment more specifically within that very strong organic growth on price versus volume, as I'm just wondering how much of a hyperinflation impact is in that 24%. Thank you.

All right. I think, Francois, you'll comment on the price point. Look, on the active portfolio management, we were very clear that the divestment will be accretive on a margin basis. And when we look at investments, we look at the growth prospects. We also look at the margins. And in general, we have business plans that ensure that we are actually taking synergies into account and that we have a very good plan of integration to realize these synergies. So I think for me today, the dynamic of M&A is very clear on that. Our teams know what to do to to realize the margins we want from these businesses and we don't expect dilution from our acquisition.

Just to add one thing on M&A, obviously as well we remain very disciplined in terms of valuation. You see that we've managed to monetize very decently the sale of the food testing activities. But conversely, we remain very disciplined in terms of valuation when it comes to M&A, so ensuring that it contributes to the overall multiple of the company. On the industry side, I think a simple way to look at it would be to say on this segment, price against volume will be closer to 50-50 than 1-3-2-3. So 50% price, 50% volume. I think that's probably the easiest way to think of it.

That's helpful. Thank you.

You're welcome.

We will take our next question from James Ross Barclays. Your line is open. Please go ahead.

Hi, thank you. Just one for me.

Hi, James.

Hi. For your business lines which have order books or forward revenue which you have visibility of through contract wins, could you comment on how how these have evolved throughout the year. Does it also imply good growth heading into FY25?

Would you please repeat? Really sorry because we're doing this call from an off-site. Could you repeat again? Thank you very much.

It was just on those business lines which have order books or the areas of the business where you have visibility of forward revenues from contract wins. Can you comment on how those metrics have evolved through the year and if it implies good growth for FY25?

Generally, in aggregate, we are between 50% to 60% visibility on secured work, in fully secured work when we start the year, and then we will have a good 20% that is actually ongoing, and then the yet to find is the balance. not all businesses are like that. We have some mass market business, of course, in some of the OPEX business, some of the certification, and we have frame agreements that we have to really actively pursue. But a lot of the longer cycle businesses, you see it in some of the BNI CapEx, you see it on some of the industry, we have good visibility ahead of time. And that's why for us, monitoring our sales very closely and monitoring within our sales portfolio the strategic portfolio priorities that we look at very closely gives us a good sense of where the growth is going to be. And that's why, as there was, I think, an earlier question where the comment about the outlook ahead, we guided our strategy based on a mid to high, based on how we look at that backlog and the sales and the composition of the sales. So we have quite clear visibility on a number of businesses, and we monitor that very closely. I hope that answers your question.

That's great. Thanks very much.

Thank you. Alan, do we have any other questions?

Thank you. We will take our next question from Neil Tyler, Redburn Atlantic. Your line is open. Please go ahead.

Thanks very much. Good evening, Hinda. Hi. snuck in there at the end one left or two on two really on certification if you don't mind firstly are there any elements in the in the acceleration and growth in certification which represent a recertification cycle you know sort of a cyclical effect in some of the sort of more traditional activities and then secondly within this sustainability bucket that you referred to you know, inside of certification. Can you help us understand sort of how much of that or, you know, is CSRD? And, you know, and more importantly, sort of whereabouts do you think you are in the journey to where you can get to based on sort of the journey to where you can get to based on current legislation? You know, where does that entire sustainability bucket sort of, sit on the road based on the current legislative picture. Thank you.

Right. So look, first of all, just to give you a sense on the certification composition, it was in my prepared remarks at the start. The QHC and specialized schemes represent 55% of the revenue of certification. And of course, traditional schemes of ISO and some others do go through recertification cycles. So, yes, this year there was a recertification cycle, and we see it a lot in the automotive certification space, for example. So that's absolutely part of the story this year. Sustainability and digital, we lump them together, and that represents roughly a quarter of our certification revenue, and that is growing double digits. The way we're looking at sustainability, we've been doing a lot of work. to really structure our portfolio around transition services. And we look at it in five subgroup of services, if you will. One is basically looking at ESG corporate reporting in general. We look at carbon measurements specifically. That is quite a bit of work and high demand for product circularity. So life cycle of products and traceability elements. That is a lot of work on the supply chain. That's number four. And of course now increasingly we're seeing interest in biodiversity and nature, things around nature and impact on nature and on resources. So we're really structuring our portfolio. The CSRD, the interesting thing about the CSRD is a transverse regulation. It looks at everything. It's very comprehensive. Of course it has a big chunk around emissions, but it covers everything else. If you are in a CSRD dynamic as a customer, you have to look at all these items. And that is really the multiplier factor of the CSRD. So even if you don't do everything for them, just complying with the CSRD reporting requires that you transform what you do. And you have to basically call on us to get some of this work done, be it on your products, be it on your supply chain, be it on your carbon or climate risk assessments, for example. So, again, I like to think of the CSRD as a federating kind of legislation because it forces companies to fully transform, right? And, of course, there are a number of other regulations that can go through. The CBAM, for example, the Carbon Border Adjustment Mechanism. You have the deforestation regulations. You have a number of other regulations around supply chain resilience. And in Europe, for example, beyond the European legislation, you have also country-specific legislations, right? So there is quite a peak of momentum and, frankly, huge load on customers to deal with this. And they tend to today try to work with different players, but there is a lot of volume in the market coming up.

Great, thanks. That's very helpful. So when they're just, and this I completely understand, when those customers do call on you and the services you provide, Are you just sort of helping them report the numbers of the performance? Are you helping them sort of improve those numbers and performance?

It's a combination thereof. Sometimes they might call you for reporting assurance. Sometimes they will call you because they need help with the supply chain. They could call you on everything all at the same time, right? And that's really the beauty of this. So the more capabilities you have and the capacity to manage not only the tasks but the data, the more actually robust is your offering. And that's why our aligned incentives acquisition actually gives us a very nice tool to work around products. Thank you.

That's great. Thank you very much. Thanks.

All right. Thank you very much, everyone.

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