Operator: Good day, and welcome to the Bureau Veritas Q1 2024 Revenue Conference Call. Please note this conference is being recorded. [Operator Instructions] At this time, I would like to hand the call over to Hinda Gharbi, Chief Executive Officer; and Francois Chabas, Chief Financial Officer. Hinda, please go ahead.

Hinda Gharbi: 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. Francois Chabas, 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 EUR 1.44 billion, up 2.5% year-on-year. The organic increase was 8%, exceeding our expectations and confirming the strong underlying market trends. The growth was broad-based across divisions with 3 out of 6 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 would like to share with you the key events. We have launched our LEAP | 28 strategy, both internally and to our investors. Our strategy execution has started across the organization with defined plans and agreed deliverables. To execute our EUR 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 Wendel placement. The remaining EUR 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 target. Those metrics will be evolving throughout the year. We received new recognition by several nonfinancial rating agencies, including a first ranking by Sustainalytics. We also joined the United Nation's 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 -- Marine & Offshore industry and certification continued their strong growth momentum in line with previous quarters. Robust low to mid-single-digit organic revenue performance was achieved in B&I and Agri-Food & 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 LEAP | 28 strategy, we aim to build our new strongholds in consumer technology testing. This quarter, we realized 3 acquisitions: ONETECH and KOSTEC in Korea and HI PHYSIX 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 ANCE 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 program 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. :

François Chabas: Thank you, Hinda. Starting with the revenue bridge, so we delivered EUR 1.44 billion 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 2 years.

On the scope side, acquisition added 0.1% on a [ net co ] basis, reflecting the impact of the bolt-on acquisition just mentioned and offset by the disposal of our noncore 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 impacts represent a drag of 5.6%, leading to a total growth of 2.5% on a 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 led the growth, 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 consumer momentum in system services, including marine decarbonization and renewable energy projects. Interestingly, Consumer Products 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 & Commodities and B&I both delivered low to mid-single-digit organic revenue growth. B&I was led by the Infrastructure segment growing double digit. Agri-Food & 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 confirm our 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 2028 strategy. That's it on my side. I now hand back to Hinda for the business review. :

Hinda Gharbi: Thank you, Francois. Let me share with you now the highlights of the first quarter for each of our 6 businesses. Starting with Marine & Offshore, Q1 was another strong quarter for this business with a 13.6% organic progression. It ranks amongst the best-performing divisions within our portfolio. It's important to highlight that it is a multiyear 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 subsegments. 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 our floating offshore solar infrastructure for a Scandinavian company, Solarduck's. :

Moving on to our Agri-Food & Commodities business. The division recorded an aggregate 3.2% organic revenue growth with different dynamics among the subsegments. Oil & Petrochemicals recorded mid-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 & 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 operations. :

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. :

By subsegment, in Oil & Gas, new global projects spanning both oil & gas drove double-digit organic revenue growth for OpEx and CapEx-related services. The Power & Utilities growth was offset by unfavorable 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 U.S., 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 in welding and electromechanical and an advanced technology subsegment. 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 U.S. During the period, we also signed a partnership with the Bourgogne Franche-Comté region in France and [indiscernible] renewable energy and hydrogen producer to launch Europe's first large-scale hydrogen storage test site. :

On the B&I 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 the predominantly OpEx 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 continue 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 a leading -- 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 QHSE 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 1/3 of our divisional revenue grew high double digit 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 [indiscernible] 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 U.S., the group also delivered Forestry Stewardship Council label certification to assure sustainable practices and 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 2 years acquisition. :

Looking at the subsegments, Softlines, Hardlines and Toys saw 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 mid-single-digit contraction in the first quarter, affected by a 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 demand 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 [indiscernible]. :

Before taking your questions with Francois, I would like to close by saying that our -- with clear expectations around deliverables and timeline. Our performance for the first quarter [indiscernible] comprising traction. This bodes well for the rest of the year. We are confident in our 2024 [indiscernible] pipeline across most businesses. The positive secular market trends are supporting our multiyear 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. :

Operator: [Operator Instructions] The first question today comes from Annelies Vermeulen of Morgan Stanley.

Annelies Vermeulen: I have 3 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 the better performance in Softlines, Hardlines, 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 then 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 bridge that for me, that would be helpful. That's the first one. The other 2 aren't so long, I promise. :

Hinda Gharbi: Okay, all right. All right. I'll address the first one. Hi, Annelies, thanks for the questions. 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 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 the 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 shipments versus previous years. So spring collections were being shipped in Q1, much, much earlier in Q1, if you will, before versus the 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 Softline, Hardlines, 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 resume, inspection resumes and there is also, in general, undeniably higher demand for sustainability services in consumer. 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 this particular product. So -- and that's why when we talked about our technology subsegment, it's all about diversification, both in term 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 it 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. :

Annelies Vermeulen: Very clear. Second question I wanted to ask about data centers. Again, you mentioned it during your comments on B&I. Clearly, with the ongoing rapid proliferation of AI, demand for data centers is only increasing further. Have you heard anything from your customers around 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 Americas B&I, could we expect to see that accelerate through the year on the back of this rapid take-up in or build in data centers?

Hinda Gharbi: Yes. 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. There is still an expansion 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 digit, in fact, in that particular activity.:

B&I in the U.S. actually had a solid growth, and the reason, 2 things are important for the U.S. on B&I. 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 revenue growth. And we have activities covering data centers, covering code compliance. Code compliance is 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. :

Annelies Vermeulen: Perfect. And then 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 end markets?

Hinda Gharbi: Sorry, Annelies, I didn't catch the start of your question.

Annelies Vermeulen: Apologies, it 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.

Hinda Gharbi: I mean, I'm not going to comment on the competitor plans. We've obviously observed the entry or the listing of a respected player in the U.S. But no, I have no comments on competitor plans.

Annelies Vermeulen: The question was more around any change in competitive dynamics and behavior in the market, but...

Hinda Gharbi: Not that we have seen today, no.

Operator: Our next question is from Suhasini Varanasi of Goldman Sachs.

Suhasini Varanasi: 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 FX that you had in 1Q and using the current spot rate for 2Q, what's the current impact on margins for the first half and full year, please?

François Chabas: Well, I think, Suhasini, thank you for your 2 questions. No real trading day impact, by and large. Trading days, if you start to mix it with various holidays here and there and 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 FX, so I will just open up a bit your question on FX. 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 a year-to-date basis, so we are here comparing year-to-date rate Q1 '24 against year-to-date rate Q1 '23, down more than 5%. So that's -- as you know, we have exposure to those 2 countries. I would not be in a position to comment on margin, but I think you could take an estimate of the margin impact of last year. You shouldn't have been too far off in terms of margin impact on H1. :

Operator: Our next question is from Sylvia Barker of JPMorgan.

Sylvia Barker: Two 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 some of the divisions or 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 like...

Hinda Gharbi: 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.

Sylvia Barker: Sorry about that. Let me just repeat. So question #1, how much out of your tech business is smartphone-related essentially? Question #2, 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?

Hinda Gharbi: Okay, thank you. Our 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, [indiscernible] in consumer, our specific activities [indiscernible] as they are 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 very specific schemes of Certification. The Certification business includes the traditional QHSE ISO certification. Certain specialized schemes include sustainability and cyber and includes some training, but that's really what we [indiscernible]. :

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 will continue, in some cases, because these are good practices we have. I talked about our Marine & 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 & 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, your -- 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. There is reasonable growth in electrical appliances and essentially retail E&E, what we call retail E&E. The new mobility is suffering from a short-term skepticism, but midterm will continue to grow. And again, that is a very important market, electrical vehicles, basically and any intelligent vehicle, not only electrical. I hope it answers your question, Sylvia, but it was really hard to hear. :

Operator: The next question comes from Carl Raynsford of Berenberg.

Carl Raynsford: Yes, I've got 3-piece, sorry. They're a little bit more specific just what I've got left. So within Power & Utilities, it was an exit of the lower profit contracts in Latin America. So perhaps you can give a little color 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 can give some color on the size of the Argentinian B&I [indiscernible].

And then finally, just within the Industry segment, the 29% of revenue in there, just labeled as other. Should we be thinking of that as purely procurement or other operations in there, too? :

Hinda Gharbi: Sorry, just on the last question there, Carl, your -- could you please repeat that? The Industry you're saying?

Carl Raynsford: Yes. In the Industry segment, there's sort of 29% of revenue, which isn't sort of labeled within the breakdown. So I was just wondering if that's purely sort of just procurement revenues or if there are other operations really.

Hinda Gharbi: Yes. Okay, okay. So Francois and I will answer these questions. First of all, we don't, of course, guide on specific segments' or subsegments' profitability for the future. But you're absolutely right. 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. No, there is not a major reduction in our B&I activity, specifically in Argentina. And then the last question, Industry has multiple elements in it or multiple subsegments. You have Oil & Gas, and in Oil & Gas, you have activities around CapEx and OpEx. CapEx, you are mostly working on risk assessment, QA/QC. And then you have also integrity in general across all assets in Oil & Gas. We also have P&U that includes low-carbon energy projects, everything from renewables to nuclear. But also we have contracts around OpEx P&U 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 -- do you need to add anything to that? :

François Chabas: No, just to underline that the procurement services, just for clarity, we are not acting on behalf of anybody to procure something. These are more really what Hinda mentioned, inspection along the industrial supply chain.

Hinda Gharbi: Absolutely. We do not have to purchase on behalf of customers now.

Operator: Next question comes from James Rose of Barclays.

James Rosenthal: I've got 2 please based on Building & Infrastructure. B&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 expectations 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 B&I should grow for the rest of the year?

Hinda Gharbi: 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 a 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 are 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, and in India or some of the activity we see in Oceania. I think the important thing to say on B&I 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. :

James Rosenthal: Okay. And just on the sort of second half of the full year, how should we think about that growth for the...

Hinda Gharbi: So while we don't necessarily guide by segment, I think it's fair to say that we expect to continue to grow in B&I.

Operator: Our next question is from Karl Green of RBC.

Karl Green: I've got 2 questions on the Industry segment, please, which 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 3 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 second question just around the FX is which countries specifically are driving those very significant headwinds, please?

Hinda Gharbi: Thank you. Francois, you want to take the FX question?

François Chabas: Yes, sure. So on the FX, I mentioned the -- when it comes to the adverse impact, it's mainly -- so we're taking 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 as I've said in particular, China, which is around minus 5%; Australia, which is, as well around minus 5%. Those 2 are among the top 5 countries in the company when it comes to grow FX exposure.

And as you know, there is -- we have a good chunk of activity in the 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 FX. It wasn't the case last year. I think it's kind of changing. We could not derive out of this long trend or whatever specific dynamic. But we edge in depending on the countries we are, and at that stage, the answer is China, Australia, and a bit of Latin America.:

When it comes to the price dynamic or versus in this case is not so much FX inflation. You have the usual. 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 contracts and so on, which continues. It's a bit more difficult in other geographies, namely China. Particularly China, we have 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 that, that quarter, it's Industry. It will be different in the next quarters when we think that time will tell. :

Karl Green: Okay, great. But just to be clear, would it be fair to assume that the Industry segment, price seems a bigger driver than volume in the first quarter?

François Chabas: Well, I think it's very, very true but perhaps not for the reason or it's a combination because you should not forget we -- I think we've said it very clearly within the -- as early as June last year, we have taken deliberate measures starting summer last year to discontinue contracts in the Industry segment, which have actually delivered very strong results in terms of margin improvement last year.

If you remember that 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 mention 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 them. I'm not 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 were taken in October for another large contract especially in the P&U segment, so Power & Utilities industry. So this is very clear that in H1, this is not the segment where the volume component is stronger because we've able to discontinue. But overall, there is still some growth so we are very happy with the fact that we have discontinued contract. We continue to grow organically by business development and profitable segments. :

Operator: The next question comes from Arthur Truslove of Citi.

Arthur Truslove: 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? :

Hinda Gharbi: Thank you. Look, we -- 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 FX, I'll let Francois address the FX. I think that was the question on the FX. In terms of M&A, we are -- we have a program, we stood up a program in line with our LEAP | 28 strategy, specifically on the expand leadership businesses, the new stronghold, and we have quite a pipeline 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 is critical to the execution of the strategy. Francois, you want to take the FX question, please? :

François Chabas: Yes. So as usual, I mean, we can't forecast FX. Otherwise, I would not be sitting with you talking. I would be in 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.

Hinda Gharbi: Does that answer your question, Arthur?

Arthur Truslove: 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 what -- how is it going to change going forward, if that makes sense.

Hinda Gharbi: Yes, yes. I think it's -- we're not going to be able to guide on the FX part of what Francois said. But on the M&A, 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 what is very clear, and we shared it in our LEAP | 28 strategy discussion is that M&A is central to expand, to focusing our portfolio and filling in the gaps and capabilities in many of our businesses and specifically new stronghold.

When I look at activities around the renewable sustainability and cyber, it's actually extremely important that we execute on that. So 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. :

Operator: 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.

Earnings Transcript for BVI.PA - Q1 Fiscal Year 2024

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