Chargeurs’ willing new boss organised a field trip to the main plant of Chargeurs Protective Films, the most profitable business line of the group. We were impressed.

The new CEO, Mr Fribourg, has clearly changed the dynamic of the group by invigorating a fresh entrepreneurial mood while retaining a keen eye on profits of the ROCE variety. This is worth stressing as shareholders can only smile.

The plant visit is the second one (the first one was a year ago for the Technical Substrates division) and a complete departure from the previous governance communication choices.

The growth push that Mr Fribourg is fostering is essentially achieved on an unchanged asset basis. This amounts to sheer good management to seize better pricing opportunities, by moving upscale, by avoiding lost business /quality issues, etc.

The Protective Film business is a case in point as its underlying markets are immense, provided that they are tackled under economic conditions.

As a reminder, Protective Films are used to protect fragile surfaces of all sorts in transport situations as well as manufacturing ones so that the finished product is perfect. There is no limit to potential applications as long as it is promoted as a cost saving to industrial users.

The 2016 surge in Protective Films’ EBIT margin to an all-time high (11%) led us to believe that it would be hard to see much progress from there.

Cyclical growth will help certainly going above current levels but we have been impressed by the across the board efforts to chase better margined premium usage, by the attention to detail in the running of complex machinery with a very high level of home grown digitalisation, about logistics and solid shop-floor work practices, all aiming at improving productivity by small steps.

The other convincing move is the pursuit of higher integration to widen margins through more service content. The very recent acquisition of two manufacturers of ad hoc machinery that sticks the protective films on the surfaces to be protected goes in this direction.

The productivity gains offered to clients are worth a bundle and should be charged accordingly. And obviously this provides an even better understanding of clients’ needs.

Our take is that Chargeurs’ management is successfully implementing its well-flagged strategy of disproportionate profitability gains through small but well thought out incremental investments.

There is a clear case to believe that Chargeurs can deliver more on the sales return front than the already excellent figures posted in 2016.

Our current forecast is for the group’s underlying EBIT margin at 8.34% vs. the 8.06% of last year.

Protective Films are seen at 12% vs. 11.2% in 2016. The issue is simply whether the strong organic growth recorded in Q1 17 (+10.8%) has legs moving into the year. We stay put with our current expectation (+7% organic).