EuroBusiness Media (EBM): Wendel, one of Europe's leading investment companies, reports results for 2011. Frédéric Lemoine, welcome, you are the Chairman of the Executive Board of Wendel. How did it go in 2011 overall for your portfolio companies, after financial markets took a downturn beginning in the summer of last year?
Frédéric Lemoine: Actually, the year 2011 has been a good year for all our companies. But it was not something we were sure about during the summer. It’s clear that in the first part of the year, the trust developed pretty well in all markets, including the financial markets, and that suddenly, in the summer, the market dropped and it raised some doubts about the sustainability of economic growth. But in all our markets we could see 5-8% organic growth in all our major companies. It’s true for Bureau Veritas, for Legrand, for Saint Gobain, and also for Materis. And it was supported by some very high growth in emerging countries, but also by significant growth in the more mature markets. It was a good year. However, it ends with some doubts about the economic conditions throughout 2012, which leads us to be quite cautious in our investment plans and to have worked since the summer with our companies on plans if and when the market and the economic conditions get worse.
EBM: Wendel remained active in its portfolio. What are the highlights of some of your more recent deals?
Frédéric Lemoine: It’s true that we did a lot of things in 2011. We sold some of our shares in Legrand – twice, by the way, in March and in October – reducing our stake in Legrand down to 5.8%. It enabled us to reimburse a lot of debt. We reduced our debt by €1.6 billion during the year. But we also made some more creative deals. For instance, we de-SPAC'ed our German structure, called Helikos, meaning that we invested it in a private German company, called xceet, which is developing very fast – 40% growth in 2011 – and it’s a big success that we achieved in July. We also sold all our puts on Saint Gobain, which is something we have behind us now, and we prepared the future with the sale of Deutsch.
EBM: Pursuant to the planned disposal of Deutsch, which should yield you a net proceed of €960 million, you will be able to reduce your debt to below €3 billion. Does that mean that the issue of deleveraging Wendel is now behind you?
Frédéric Lemoine: It’s true that the project we announced last November to sell Deutsch is a major step in our development and it really ends a three-year period that we started in the beginning of 2009. Deutsch, I remind you, is a leading company in connectors, notably connectors in harsh environments. It’s a company that we acquired in California in 2006, which has been developed globally and that we are about to sell to TE Connectivity, which is the world’s global leader in connectivity and which is an American company. The price and the industrial conditions that we obtained from TE Connectivity are unanimously found extremely good. And it’s true that we will take nearly €1 billion out of this company; that is more than 2.4 times the amount invested or reinvested. So it will enable us to have a lot of means, a lot of financial means, to contemplate new projects.
EBM: What are your comments on Wendel's 2011 full-year results?
Frédéric Lemoine: These results were good. For the reasons I mentioned, but also because we have grown our net result from business sectors, which is the key metrics that I think is significant in our accounts because it shows the contribution of our companies. And all of our companies contributed to the growth of 26% of these results, at €321 million. It also shows the efforts we performed to reduce the costs of Wendel, which have declined by 8.5% last year, both for financial costs and also the costs of our structure.
EBM: In a few words, what are your medium- to long-term goals?
Frédéric Lemoine: After the sale of Deutsch, we will have in our accounts €1.5 billion of cash. So the question you ask is, “How will we use that?” Of course, we will keep our existing assets. We have made a lot of disposals over the last three years; we don’t plan to make so many in the future. We have our assets, we will develop them. And we have this amount of cash which we will use for two other objectives, which are to maintain a strong financial structure, having a lasting access to financial markets, and also to have a lot of means to invest in bigger projects than the ones we bought last year, bigger companies – I would say €200-€500 million equity per deal – which will enable us to create value for the future. But I don’t forget the first objective, which is the strength of our existing assets, because when you look at Bureau Veritas, Saint Gobain, Legrand or Materis’s plans in five years’ time, there is a lot of value to create in these companies.
EBM: Regarding future turnover of your portfolio, could you detail for us the types of companies that you would like to acquire, whether by geographical zone or by sector, for example?
Frédéric Lemoine: We want to invest in sectors and geographies that we understand, we know well, like Benelux, Germany, France and some others. Clearly in non listed assets, because it’s what our shareholders want from us and that’s where we can have a lot of hidden value, like we show clearly with Deutsch. We want to invest in sectors that are diversified. Diversification is a key word. So we don’t want to invest anymore in the building materials sector. We believe in it a lot, I’m very convinced as an investor that this sector of construction will go up tremendously in the future. However, we are strongly involved in that sector through at least four companies, so we will invest in other sectors, maybe manufacturing. We have a lot of experience in that, but also services – Bureau Veritas or Parcours are good examples.
EBM: Today Wendel is very exposed to the construction sector. What are your views on the outlook for a rebound of this sector in the short term?
Frédéric Lemoine: In the short term, I can’t say. It’s very dependent on the economic conditions. But I’m a long-term investor and in the medium- to long-term I’m pretty convinced that for many reasons, both in Europe, the US, and in emerging countries, the building sector will be very dynamic. It will be very dynamic because of demographic reasons, population growth, notably in urban environment in Brazil, in India, in China, in South East Asia, etc. But also because of the evolution of the techniques used to build or to renovate the housing. We need more techniques adapted to energy efficiency. We have to save energy because of the rising cost of energy, be it oil or other sources. And this will be more and more regulated in the future and people will want more added value products to save energy costs. And that’s what our companies produce. So I’m very bullish about that in the medium- to long-term.
EBM: You propose to increase your dividend by 4% to €1.30 per share, combined with an exceptional pay-out of 1 Legrand share for every 50 Wendel shares owned. Why this exceptional dividend?
Frédéric Lemoine: We have a lot of trust in the future. We know we have achieved a lot over the last three years. The dividend has been increased, by the way, by 25% last year. So we wanted to show something confident, but at the same time cautious. So our ordinary dividend increases by 4% and we expect this to be replicated more or less every year. But this year, because we are confident in the future – because we are confident in the future of Legrand, which has been a strong contributor to our results last year, for the different block sales that we made – we have decided to link directly our shareholders with Legrand and to enable them to benefit from the growth of this company which has recently joined the CAC 40.
EBM: Frédéric Lemoine, Chairman of the Executive Board of Wendel, thank you.
Frédéric Lemoine: Thanks to you.
