Earnings Call: H1 2021

Aug 20, 2021

Good afternoon all and welcome to today's Kingspan Interim Results for the 2021. My name is Adam and I'll be your operator I will now hand you over to Jean Kingsman, interim results for the 2021. My name is Azim and I'll be your operator today. I I will now hand you over to Jean Marta to begin. So Jean, please go ahead when you are ready. Good morning, and thank you very much, and welcome everybody To the 2021 interim results at Kingspan, we'll take you directly into the presentation on Slide number 3, Title H1 2021 in summary. So in essence, it was a remarkably strong period for Kingspan. Revenue was up 41 percent to €2,900,000,000 trading profit up 64% to €329,000,000 And just interestingly, those two statistics, when compared against 2019, were up 30% 43%, respectively. So Very strong period for us by any measure. And that's resulted in earnings up 66% at just over €1.32 So just by division in brief, we'll go through this in much more detail later. Panels were up 44%, boards up 36 Light and Air, up 39%, which was largely reflective of the integration of the Colt acquisition. Our Water and Energy business was up 36% and Data and Flooring, up a pure 22% year on year. Just moving to Slide 4. I think our mission is well understood in the sense of our desire to accelerate the drive towards 0 emissions buildings. And we deliver that externally clearly through the product solutions that we provide, but also internally through the Planet Passionate program, which we'll go through in some more detail Further on in the presentation. But just in summary, the insulation systems that we will deliver to market this year We'll over the life of the buildings that they're involved in, deliver carbon reductions of almost 200,000,000 tons. That's literally the amount of material we put into the market in a single year is going to deliver those sort of carbon savings over the life of the buildings that they're in. So it's really pretty extraordinary what our systems deliver. From an internal perspective versus 2019, We expect to deliver an 8% absolute reduction in scope 1 and 2 CO2 emissions this year versus 2 years ago. And clearly, we have a very robust plan to reduce that much more significantly into the future. From a circularity We set a goal a few years ago of delivering an integrated System from our Synthesia business whereby we recycle plastic bottles essentially into insulation. We set a target of 1,000,000,000 bottles For 2025, and we're well on track to that expecting this year to upcycle over €800,000,000 of those, Which is very serious. And then from a water conservation perspective, again, the systems that we will put into the market this year From both the European and particularly our Australasian businesses, we'll deliver rainwater harvesting figures of Over 40,000,000,000 liters of water in a single year. So fairly compelling numbers there. Then in terms of how we do it, it's clearly about the envelope and increasingly what we call the arteries, which really relates to ducting and pipe insulation. So our whole agenda is around having the broadest possible selection of materials that deliver energy efficiency around the envelope and the archeries. And again, we'll go into that in much more detail later on. But our strategy is fundamentally about increasing our exposure All of these areas in our business and on a global scale. Excuse me. Just moving to Slide number 7, Which is titled Buildings for the Future. And here we just want to, I suppose, talk a little about the emerging sectors The fast growing sectors that we're increasingly aligning ourselves with, and we've talked about for a number of years now. So In brief, if you look at the auto industry and in particular the EV market, so that's a market that grew at 43% in 2020. But still even at that level, it's still less than 5% of global penetration. So it's a large and growing part of our business. And obviously, with the expectations for most of the industry to move towards 0 emission vehicles by around 2,000 and The growth for that sector is clearly going to be pretty extraordinary, and we expect to continue to align ourselves even more closely with that. Similarly from an online retail perspective, it's been actually a big part of our business for a very long time, not just online, but distribution in general. And overall, if you take a look at Western Europe, still even post pandemic or during pandemic, Well under 15% of retail is via online. So again, this is an area that we would expect to see significant growth in the future. And it's an area where we're extremely well embedded in right across the globe, in fact. From a data center solution business, Again, both through our flooring, our insulation business, our industrial insulation business and our insulated panels businesses, These are all represent opportunity for the right across essentially the product portfolio of the group. So even in the last 5 years, Traffic across that segment has grown by 10x. And even from that base, it's expected to triple over the next 5 years or so. So again, a key end market for us to increasingly become exposed to. And then finally, just in terms of emerging sectors, I know you might think It's way out there. But the space economy is something that's clearly growing and it's going to grow largely around the delivery of Internet and So that's going to require increasing infrastructure on the ground. And as Kingspan, we're again aligning ourselves with The key operators in that segment and it's going to become a growing part of our business globally. So So I'll just hand you over to Katrina now on some IPC stuff. Good morning, everybody. And just on Slide 8, Talk a little bit about the role that buildings play in carbon emissions and the role that they can play in reducing carbon emissions And helping to maintain temperatures to 1.5 degrees above the industrial area level. So we conducted research in Kingspan. And as everybody knows, buildings are account for about 39% of carbon emissions. And much of that is in the operational building, much of that is in space heating and buildings. So really, As positioned as you build new builds, it can't really address the issue with the building stock that's out there. And the key Reducing carbon emission in buildings is really in addressing the envelope first. So there's a good deal that needs to happen in terms of renovation. We believe it needs to be about 4 times the level it is now in residential and 2 times the level it is now in industrial And really optimizing the efficiency of the building envelope is going to help optimize the services inside the building and reduce the pressure As businesses and buildings try to electrify and clearly installations will play a key role in deep energy renovation as it relates to buildings. On to Slide 9, Kingston will be there with our insulation across the board. So not only In the very advanced sector, but we can satisfy the needs of insulation across the spectrum. Clearly, there's a demand driven aspect at the lower performance end. And Kingsland sets about converting specifications of building to the advanced specifications and advanced solutions at The right hand side of the spectrum with Quad Core and CoolTerm and PowerPanel moving forward. And clearly, Product integrity on Slide 10, just to talk to that for a moment, is a cornerstone of what we stand for and what our products stand for. So just a little bit of on what we've done on that over the last 8 months. I mean, it's always in the cornerstone of what we've done. But We have had the group compliance system accredited to ISO 37,301. And actually, we're among the first Manufacturing facilities in the world to be accredited to that standard and the first in our industry. We expect to have 20 facilities accredited to ISO 3701 3 0 1, excuse me, in the first half of twenty twenty two. Our compliance team has audited 50 of our manufacturing facilities and we'd expect to have a further 30 facilities audited by the end of this year. And it's something that maybe not Understood very well. We have constantly product audits conducted by external parties Throughout the year, we have over 250 product audits conducted so far this year by external parties. And clearly, there's a huge commitment on this agenda across the group. And I'll hand back to Jean there. Great, Katrina. Thank you very much. We'll take you now to Slide number 13, please, which is titled Climate Fashionist. And this is a program many of you will be very aware of. We're deep embedding this right across the organization. In terms of progress in even the year to date, it's been very significant. So building on the back of year 1, which was 2020. And just to highlight a couple of the areas that we're and bear in mind that these are generally in absolute terms. And so despite the growth that we're seeing across the business and the growth we're seeing in the number of manufacturing facilities, most of these are absolute improvements year on year. So in terms of direct renewable energy use, that's moved up to 30%. We have a target of 60% right across the group by 2,030. In terms of solar PV systems on all of our wholly owned facilities, again, we have a target of 100% there. We're up to 29% already, and we've got 8 or 9 years to go in terms of that target from a net zero carbon manufacturing percentage. And again, this is real year on year reductions. It was over 5% in 2020 and we expect to deliver at least 4% Further reductions in absolute terms this year. And then internally from a company funded vehicle perspective, The annual conversion grew from 11% up to 25% this year. And again, we've a 100% target there by 2025, Which we'd be very confident of achieving. In terms of our supply chain, clearly, that's one of the more one of the ones we have We're making great progress in terms of the dialogue with our industry partners on us. But as of yet, we're not able to Speak about specific targets, but we can assure you that there's deep engagement with a wider partner base and I think a growing realization of the necessity of making some progress on their own carbon footprint. So we expect to be able to show some meaningful figures as we go forward on that, but not as of yet. From a waste to landfill perspective, again, it's not a big feature of our business. We don't have huge waste landfill by comparison to some of our competing industries. But again, in absolute terms, we expect that to go from around 18,500 tons down to 17,000 in the current year. And we have some very interesting Programs in place to make sure that goes significantly lower over the future of the business. We spoke about the PET upcycling, Quadco and then from a water harvesting perspective, again, a target of 100,000,000 liters of rainwater to be harvested across our own facilities and we expect to We'll be up close to around 25,000,000 liters in the current year. Slide 14, title circularity. Obviously, there's a very broad spectrum of solutions across the group, and it's difficult to go into them in much detail on a call like this. But Suffice it to say, and it's probably not fully understood that the vast majority of products in Kingspan Are reusable, not to mention recyclable, but actually reusable because of the modularity of the systems that we produce. And they are also recyclable. So both the steel is clearly recyclable. The chemistry is recyclable. And we're working on Lots of projects there to make sure we have kind of again meaningful examples of that to be able to display what we do into the future. But the simple message is The products are reusable, fully recyclable. And in terms of recycling hubs, we're in the process of setting up A number of those. But again, what I'd stress here is that the appetite isn't there in our particular product yet because We're still a relatively young business. Our products aren't in the market for really very long. And so the demand for stripping down buildings with our solutions Really has yet to materialize, but we'll be ready first. And the important thing is it's entirely physically possible To integrate that into our business. From a global organic expansion perspective on Slide 15, Again, you'll have seen some of these before. Lots of progress. We've started a new line in Russia. We started a new cool term facility in Sweden. Work is ongoing in Sydney on a mineral fiber panel plant. We've opened The new line in Brazil just earlier this year and again another one under construction for next year. In the U. S, as the penetration of our systems grows, I think, quite radically at the moment. Again, in the Northeast U. S, we're in the process of building a new facility. And over the course of the last couple of months, we've just signed off on Another greenfield facility, which will be delivered over 2022 and 2023 in Midwest USA. So lots of work ongoing from an organic perspective. Just worth mentioning there as well, obviously, the facility in Sweden, the Kulturb facility is fully electric And actually, we'll get net 0 and generate 20% of its needs on-site. Yes, Absolutely. And that's the plan going forward clearly for all of our new greenfields. And then just in summary before I hand you back to Jeff on Slide 17, I think The result of all this is basically 17% compound growth over the last 20 years or so. Thanks, Jean. I'm now on Slide 20 just to deal with the financial highlights of the interim results. Group revenues at €2,92,000,000 up 41% on the first half of last year, and I'll come to the components of that shortly. Trading profit of $328,900,000 up 64 percent earnings per share up by 66% driven by the Strong trading profit performance. We've declared an interim dividend of €0.199 which is 15% of our half year earnings, Which is in line with our revised dividend policy, which we articulated in February of this year. Free cash flow of EUR 141,800,000. We in light of the strong sales growth In the first half of this year, there was an investment in working capital, which I'll come to when talking about cash flow. Net debt At the end of the half year was €601,700,000 leverage of in terms of net debt to EBITDA of 0 point eight three times. Our trading margin of 11.3% was up 160 basis points half year on half year, And I'll deal with that by division in a second. Our effective tax rate in the first half was 17%. And that's our full year guidance In terms of effective tax rate as well for full year 2021, we continue to incrementally build Our returns on capital employed, and that's a fundamental measure that we drive through the business. Turning to Page 21. On the right hand side of that slide, you'll see that for each half year from 2017 through to 2021, We've grown our profitability on a compounded basis by a little under 17%. From a margin perspective, We delivered a very strong margin performance in the first half of the year, and pretty much all of the divisions contributed very strongly to that. And that was against the context and backdrop of pretty acute inflationary pressures where we'd annualized inflation of in excess of €600,000,000 Which had to be recovered through the business. By division, insulated panels had a half year margin of 11.6%, up 60 basis points on last year's full year margin. And there was a number of factors driving that. We had strong operating leverage as a consequence of the 30% underlying volume growth In the first half of the year as well as a strong recovery effort on inflation. Insulation boards delivered a 16% margin in the first half, in line with last year's full year margin. And again, that was delivered in the context of the inflation, But also strong underlying volume growth of 27% in board volume in the first half of the year. Light and Air, a modest Trading margin in the first half of the year, it's very much a second half weighted division. And this year, we consolidated The cold business for the full first half, whereas in 2020, we took up ownership of the business in April of 2020. So we didn't have the seasonally light Q1 in 2020. But the business the Light and Air business is trending towards full year revenues of the order of EUR 550,000,000 and a trading margin in the region of 8% For the full year. Water and Energy delivered a very strong first half. Its underlying sales were up by 24%, which was A key contributor to the strong margin performance of 9.4% in the first half. And Days and Flooring consistently delivers strong margins and the first half of twenty twenty one was no different in that regard at 12.9%. Turning to Page 21, just bridging group sales and trading profits and just to deal with Sales in the first instance, our total group sales were up by 41% in the first half. Acquisitions contributed 8% to sales growth of EUR 166,000,000 and underlying sales contributed 36 points out of the 41 points of sales growth in the first half of the year. So very strong underlying revenue growth. Trading profits grew by 64% on the first half. So if If you go back to 2019, just for context, our 2019 trading profit was €230,000,000 So Strong growth over that 2 year period as well as versus the first half of last year. FX clipped 3% or $5,700,000 off trading profit in the first half. Acquisitions contributed 7 percent of profit growth of $14,800,000 and underlying profit grew by a a little under $120,000,000 or 60% versus the first half of twenty twenty. Turning to cash flow on Page 23. We had a strong free cash Delivery of $142,000,000 in the first half of the year. The strongest dimension to that evidently That was EBITDA of $373,000,000 Working capital was an outflow of $118,500,000 The KPI that we monitor closely in respect of working capital is the working capital to sales ratio. That measure was 9.7 percent of sales at the end of June 2021, so actually lower than the 11 point During the first half, which had to be backed up by working capital. Our interest outflow was 18,500,000. We expect that to be €3,000,000 lower in the second half of the year due to the maturity of a 10 year private placement loan notes at a higher coupon than is now our average. Our tax outflow of was $40,900,000 in the first half, And our net capital expenditure was €60,300,000 Our full year CapEx guidance is approximately €160,000,000 Bearing in mind some of the plans that Jean ran through earlier. In terms of the reconciliation of net debt versus our last year end. That's set out on Page 24. Cash flow reduced debt by 142,000,000 Acquisitions was an outflow of €431,000,000 We also repurchased 600,000 shares at a cost of €46,900,000 And we paid the 2020 final dividend of €39,600,000 So they were the key constituents of debt movement in the period. Page 25 sets out our return on capital employed. As I mentioned at the outset, we continue to measure this and drive this right across the business. We've seen further incremental improvement On the measure through the first half at 18.9% versus last year's full year measure of 18.4%. And then finally for me for now, just on geography on Page 26. The key Geographies are set out on that particular slide. Our largest territory, which is Western and Southern Europe, It's now 37% of the business compared to 35% in the first half of last year. Central and Northern Europe is 93% compared to 21% the Americas 18% versus 21% and Britain in line with The first half of last year at 16%. With that, I'll hand back to Jean. Great. Thanks, Geoff. So lots of detail there In the slide deck by division, but we'll just take you all the way to Slide number 33, if you don't mind, which is titled Outlook. So in terms of looking ahead, we've obviously had a great start in the slide deck by division, but we'll Take you all the way to Slide number 33, if you don't mind, which is titled outlook. So in terms of looking ahead, we've obviously had a great start And we have an extraordinarily high backlog at the moment, almost problematic to the extent that our lead times have been pushed out significantly. And if anything, that's kind of reflected in near term order intake, which is being is a little bit more subdued than what it has been. Construction activity though generally is buoyant across most of our key markets. And I think as a segment and as a business, I think we've Continue to grow share even through these pandemic times. In terms of just what sort of base we have going forward, Honestly, it's difficult to assess what that is. We're going through a period of extraordinary growth, all kinds of reasons for that. But we would in our assessment, it's to some degree of abnormality to what's going on at the moment. And the business is coping exceptionally well with it. But I think the key for us really is that we continue to focus on all the structural positivities that there are around our business, our products And the segments that we're involved in. And the macro will be what it will be. But as a whole, I'd say that the group is Extremely well placed to take advantage of whatever comes our way down the line. So with that, we're happy to throw it open to Q and A. Our first question today comes from David O'Brien from Goodbody. David, please go ahead. Your line is open. Good morning, everyone. Thanks for taking my questions. Firstly, Jean, I just I think you just touched on it there. I guess the question is, given all the supply constraints and challenges that we're seeing out in the marketplace You guys are kind of facing day to day, how has that impacted your own market share versus the general insulation market And more broadly, I think secondly, you've touched on some of the organic development pipeline. What does the M and A pipeline look like at the moment? Is there size in there? Is it more bolt on in nature? It's been Quite busy period for you guys. And then finally, if we look at the log store businesses is now under ownership, you could Maybe talk through some of the potential there and maybe some of the benefits we could see as it works a little bit more closely with the data and flooring business. Absolutely, David. Thank you very much. So yes, the supply constraints have been pretty acute across our business and Across the segment the sector rather generally. But even in the face of that, I think we've been able to make significant progress. And by the way, we would expect those supply constraints to become a lot more alleviated into the second half and certainly into 2022. But in terms of it affecting our share, if anything, I think we've been growing share. We're conscious to become a lot more alleviated into the second half, certainly into 2022. But in terms of it affecting our share, if anything, I think We've been growing share. We're conscious of what's been said out there by other industries. But if you just look at just the harsh numbers, like our business even versus 2019, Which I suppose is the real comp at a revenue level is up around 30% year on year. And From what we've seen from numbers issued by competing industries, it's broadly flat in that segment. So I I think just at a crude level, it would seem to me that our business certainly has been growing share quite significantly. From an M and A pipeline, we've been busy, David. You've seen what we've done so far. There's a very healthy pipe, to be quite honest. And we had a great mix of bolt on, which is bread and butter for Kingspan and also some interesting opportunities of scale. But as always, you can expect us to be disciplined on the entry in acquisitions. It served us very well Over time, and we stay committed to that discipline. But lots of opportunity, I suppose, is how I'd characterize the M and A opportunity. And then from a log store piece, yes, so that business now is fully plugged in. Naturally, there's a process in terms of Full and deep integration, but going very well so far. A really impressive set of products, a very impressive The team that we're on boarding that we really look forward to working with and lots of opportunity to grow, in particular, the district heating opportunity for Kingspan And the wider Technical Insulation segment. One area that we've called out before in terms of being of particular interest is The data segment is clearly growing. Data is a little bit unpopular in the sense of the amount of, I guess, waste heat, it just blows out through windows. And there's a significant opportunity for the district heating Solution to become more embedded into what the data center waste energy side is. So That's an area that we'll be focusing particularly on with the Logstor team and indeed the existing Kingspan team. So, yes, exciting. Great. Thanks very much. Our next question is from Arnold Layman of Bank of America. Arnold, please go ahead. Thank you very much. Good morning, everybody. I have three questions, if I may. Firstly, I think you commented About a slightly more subdued order intake recently, do you mind giving us a bit of color there? Is it just because there was so much pre buying in the first of what's going on in the business in July August. Secondly, on the pricing, I mean, very impressive price increase already implemented in the first half. Do you need more of those in the second half to cover cost inflation? Or are you seeing now more, let's say, neutral Price cost dynamics and you've done what you have to do for the year. Do you need more of those in the second half to cover cost inflation? Or Are you seeing now more, let's say, neutral price cost dynamics? And you've done what you had to do for the year? And lastly, welcome effort on the product integrity. Thank you for the details on that. As you've done these audits, have you identified any small or big issues that needed resolving? Thank you. Yes, absolutely. So yes, in terms of the order intake, Like that's very recent and just worth referencing. Like bear in mind, we're going through kind of a summer period and I wouldn't put too much thought to it. But worth noting, nonetheless, that in some of the key categories, our order intake is broadly similar to what it was prior year, Which is lower than clearly what it's been for the first half. The backlog, I just have to add, is really very, very significantly up. So we've got a huge amount of that to work through. And as I mentioned, our lead times have been pushed out. And to some extent, that will affect our ability to Take orders in the short term. So it's not so much that there's been pre buying because we've only so much ability to supply, but there's probably been a fair bit of pre ordering. And the second half of last year was a very strong period for Kingspan. So naturally, we'd expect those comps To become a little bit more challenging. From a price increase perspective, no, we've got a lot more to go actually, to be honest. Broadly speaking, the inflation in the business was around 10% in the first half, and we would expect that to expand actually in the second half. So we're still experiencing some increases in raw materials, obviously, tightness in supply that we've referenced before. So any of those increases we expect coming through, we will do our utmost to recover. So that's incrementally, we expect our sales prices to be higher again actually in the second half. And then from an order perspective, naturally as you expect when you're doing hundreds of audits, Not everything is absolutely as it should be. That's naturally what the process is meant to throw up. But from a materiality perspective, absolutely nothing of concern. Very clear. Thank you very much. Next question is from Flora Donahue from Davy. Flora, please go ahead. Thank you. Good morning, everyone. Just a couple from me. One is just In the documents, you referred to penetration growth in panels in a number of geographies. Bit more color on that would be appreciated. Secondly, on panels, just if you could give us an update maybe On the mix, and I guess we're trying to find out here where some of the kind of categories of potential growth Over the coming years are currently. And then just finally, maybe, I'm just wondering really, Ward, How much of the growth the kind of categories of potential growth over the coming years are currently? And then just finally, maybe, I'm just wondering really, Ward, how much of the growth do you think has been possibly driven by short term supply chain disruption, kind of things like the race to bills, distribution, logistics facilities. Has that been a factor in your view? Thanks very much. Thanks, Flor. So just in terms of penetration growth, like it's been fairly resounding in some markets, to be frank. Like the North American market, We've been grinding away at that for quite some time. The big opportunities there are against tilt up concrete, Which from a carbon perspective and in its manufacture, but also in its life in the building is just really Not a positive solution. So on the walls, we've been focused on that area and on roofs, focusing on built up traditional built up metal or even uninsulated So we've got traction. And an awful lot of the very large projects that we're winning right now in North America would even 3 or 4 years ago have definitely gone traditional. So there's momentum there. Brazil, I would say, is similarly, Really resounding penetration growth and category growth there against traditional systems. And then even in Europe, markets such as France, I'd call it out as an area where we've made really significant progress to the point that It's our single largest market actually globally as a country. So France has grown to that extent, clearly through some acquisition, But the organic growth has been really compelling there in the first half. And from a the point what was the second point, Flor? Panels update on mix, category and distribution data. Yes. Oh, yes. So those segments are They're growing as a share of our business. And as I said, some of them have been long embedded. In particular, distribution has been long embedded with Kingspan. But the type of distribution is clearly changing and online is becoming increasingly prevalent. So that's been big and it's And I'd say similarly for data and naturally for the EV market, which is, as I said, is really at a very embryonic stage. And it's an area where we naturally don't win every job that's out there, but I'd say we've become a reasonable authority in terms of the solutions we provide to that sector. And then from how much of the growth has been due to a short term rush? Like It's really hard to ascertain how much of it has been that. I don't think I'd characterize it as a short term rush. I think there's fundamental shift in some of these sectors that we expect to kind of compound over the future. Like if you look at some of The very natural big household names in online retail and so on. They're really only getting going when you look at the project pipelines they've got out in the future. And we're clearly well engaged with some of the, as I say, the names you'd know and lots of the names you wouldn't know. So yes, maybe a little bit of a squeeze right now, but we'd expect Thank you, Jean. Thank you very much. Our next question is from Eith Bromhead from Exane BNP Paribas. Your line is now open. Please go ahead. Good morning to all of you. I have 3 questions, if I could. Hi. Number 1 is on the Fit for 55. There's quite a big focus on public renovation, the run rate about 3%. It's probably fair to assume that a lot of those works will be on the facade. It's unlikely that those public buildings will want to lose space internally. So I was wondering, are you already getting some requests, information or any sort of bespoke type of work From the public side, if that would be the case. My second question is just on Slide 10 related to product integrity. Can can you quantify what is the actual €1,000,000 impact of hiring new compliance officers, getting the new ISO accreditations? And generally just more auditing work, I guess, if there is a material impact or not. Also, could you remind us what's the time line on the Granfelt report related to module 2? And maybe lastly on the M and A France, you've been quite active, but it's been ex lock store, it's been mostly bolt ons. And I guess Closing deals in panels and board is a bit more complex. The membrane and the technical installation is also a bit more competitive. So Can you maybe help us to understand, are there any divisions, verticals, industries where you're maybe not present or present to a small stage that you think The market is less attentive to, but where there is a great deal of attractiveness and excitement from your perspective. Yes. Thank you. Okay. I think that was 4 or maybe 5, Eves. But anyhow, so on the 5th or 55, As always, we'd be pretty calm about these kind of government initiatives, if you like. And as they flow through, That will be tremendous, but it's not something that we necessarily kind of build our business on. From a renovation perspective, You're right. A lot of it will be external. And we have super solutions for that In terms of in general, it's going to be probably rendered for SADs in a lot of instances. And we have a number of solutions for that. But I couldn't point towards any specific opportunities that have been coming in the door, but there's an attractive pipeline, let's put it that way, in our insulation board business. And I would say the renovation generally speaking, renovation as an end market for insulation board business has been growing and we'd expect it to grow disproportionately to Newbuild over the longer term well. That's at least our thinking. In terms of the Slide 10, we don't have an absolute cost Just a hand for you on that. But to be honest with you, whatever it takes to be right on that whole side is what it will take. But I don't have a number for you right now in terms of what that's entailing. And what I would just say on that is we've You have historically already made a very significant investment in our compliance function across the business. So the incremental investment that we've made, Fael, it's significant. It's not material in the context of our profitability. It won't be evident in terms of that. It's a significant compliance spend across the business and much of that was in place historically. And then Grenfell timetable? Granville timetable. We have no real hard visibility on that just yet. The final Granville report isn't expected until 2022 at the earliest. But we don't that's a timetable that we don't control and that has ebbed and flowed a fair bit over the last couple of years as well. So we just have to await developments there. And then finally, I think in terms of other opportunities, Eve, I think we've It's clear in terms of industrial insulation. It's clear in terms of the existing categories we're involved in. But we would be enthused about the opportunity in flat roofing or membrane roofing in essence. And We've so far failed to get proper traction on it, but it remains an area of significant focus for us. And not because we're interested in the waterproofing per We're interested in the insulation that, that waterproofing can drive. And that's fundamentally We remain focused on it. But yes, that's an area that we expect to make some progress in the future. Thank you so much. Next question is from Manish Beria from SocGen. Manish, please go ahead. Yes, hi, good morning. So congratulation on very good set of numbers. So I have two questions. The first one in the first half, Did the price cost was positive or negative? And also if you can comment by division in panels and board the price costing? The second question is like if I look at your volume growth in the first half, it's like 10%. In Q2, it's 15% versus 2019. So of course, a clear acceleration from 5% in Q1 to 15%. So how should we think about the second half? Like it still remain at 10% All this 15% continue, Bhavat, you are already seeing order intake is lower and things like that. So maybe 10% looks a good number for the second half in volume versus 2019. So So these are my 2 questions. Thank you. Yes. Thanks for those questions. Firstly, on the price cost Dynamic in the first half, largely the cost was fully offset by price in the first half, and that's reflected in the margins. We don't expect volume growth in the second half versus the second half of twenty twenty To be as strong as the growth was in the first half because we had a reasonably decent second half last year. So I would say volume growth is more likely high single digits than the 10% you outlined there. But this 2019, sorry. Yes. Yes, versus 2019, not too far off 10%, correct. Okay. And also if you can comment This price cost by division, panels and board in the first half? What I would say is without getting into specifics on it because there are some sensitivities around it, you can take it that in the case of both panels and boards, Because they had different dynamics in terms of chemistry, steel and the various inputs around that. But in both cases, we got recovery. We don't split that out by division. Thank you. Very good. Thanks, Manav. Our next question is from Gregor Kluglitsch from UBS. Gregor, your line is now open. Hi, good morning. I've got a few questions. Maybe firstly, coming back to the Exposures, this is your high growth categories. I know this fluctuates sort of period to period. But if you could just give us a sense I don't know for the panels business and for the group as a whole, what the sort of percentage exposure is, rough numbers would be helpful. The second question is, I thought it was interesting. I think you're actually building a fiber plant In Australia, could you just have to remind us how much of your business is overall fiber rather than sort of chemical Insulation, is that an area that you think you'd want to grow a little bit more into? And obviously, it's not the historical core and not of the proposition, but nevertheless, you are investing. And then maybe a question sort of the early thoughts into Next year, obviously, you called out this year being kind of extraordinary. But if you can just give us your early thoughts and appreciate there's plenty of time to go until we're actually by the end of 2022. But what you how you kind of see things shaping up. I mean, so we see many dynamics with potentially some deflation on the commodity side in the future, the comparison basis, etcetera. Thank you. All right, Gregor. Thanks very much. Yes, in terms of the high growth sectors that we've been focusing on and we've We'd say approximately 25% of our panels business would be in that area. And probably you know that 25% is growing naturally as those segments grow. But that's in essence it's something in that order of our business. From a fiber perspective, now to be clear, we're not building a fiber plant and we've no desire to ever do that. It's a fiber panel plant. So where we buy fiber from the usual suspects and essentially integrated into our products. So globally, approximately 10%, 11% of our insulated panel business has a fiber core. And actually, that's not been growing as a proportion. And I think that's a I'd say that's a reasonable proxy as well incidentally for what's happening More broadly because we just we provide a broad palette of solutions. And as I said, the fiber core is slightly north 10% of that and not growing. So it's a solution we provide as opposed to one that we promote. It's as you know well, it's an extremely inefficient product. It's very thick heavy, very carbon intense. So it's not really something we want to get any bigger at, but where there's insofar as where there's demand for it, we'll supply it. And very often it ends up being one elevation of a building, for example, a partition wall between different buildings or something. So 3 quarters of it goes with, for argument, say, quad core and then one elevation goes with fiber or whatever. So It's there to kind of, if you like, supply demand rather than something we're going to focus more on. And in terms of the long term? Yes. In terms of just the long term and early expectations around 2022, Gregor, I mean, firstly, it is early days. But I think secondly And most importantly, 2021 is shaping up to be a very special year for Kingspan. If you take the numbers that we've announced here this morning, We expect consensus to land at 6.85 or 6.90 trading profit for 2021. Doing that again And repeating that performance in 2022 will take some amount of delivery. And if you were to compare A number of that order for 2022 with 2020, so over a 2 year cycle. 2020 was a record year for Kingspan, Where we delivered a trading profit of $508,000,000 and a number of $690,000,000 or $700,000,000 implies 35% trading profit growth over those 2 years. So I think we just need to be calm and measured about The expectations for next year of what is a very special year this year. That's pretty clear, Jeff. Thank you. Thank you. Our next question goes to Yassine Touare from On Field Investment Research. Yassine, your line is now open. Yes, good morning. So I would have three questions. You mentioned that your backlog is very significantly up. Could you quantify how much is it year on year? Then you mentioned my second question is on prices. So I understand that prices in board and panel were 10% in H1 and you are implementing some sequential price increase. What kind of price increase would you expect In H2, year on year. And then you're mentioning as well that you had some cost inflation of 10% in And that you expect more in H2, what kind of cost inflation would you expect in H2 2021 versus H2 2020? Okay. Thanks, Justine. So from a backlog perspective and globally, clearly the picture varies by country. But generally speaking, it's been very strong in most places. So in terms of quantifying it, suffice it to say it's well in excess of 50% higher than what it was 12 months ago. So it's in that order. So it's very significant. And bear in mind, our lead times for a lot of our key products are probably double what they would have been a year ago as well. So the market's kind of getting market has to train itself a little bit For longer lead times as supply constraints remain. But numbers wise, that's broadly what it's like. From a price inflation perspective, as you rightly say, about 10% increase in the first half. And year on year, we'd expect that to be approximately 15% Year on year in the second half. But bear in mind, we're still going through a period of unpredictability in terms of where the prices of our raw materials go. But Our expectation is that most of them will increase again in the second half. And if that requires further price increases, well, we'll have no option. But broadly speaking, I would expect this H2 inflation year on year to be higher than H1. And I kind of answered it there in terms of just Further cost increases, it was around EUR 300,000,000 in the first half, and it will be at least the same again in the second half is what we'd expect. The next question comes from Yuri Sarov from Redburn. Yuri, your line is now open. Hi, good morning. I only have 7 questions. That's fine. No, listen. So let me find them out and you tell me what you can answer. Insulated panels margin, yes, you previously were saying that your normal margin is 10% to 11%. You delivered something higher than that in the first half. Now you have done that in the past, but this was a panels margin, yes? You previously were saying that your normal margin is 10% to 11%. You delivered something higher than that in the first half. Now you have done that in the past, but this was a very extraordinary year with very high cost inflation When we usually expect margins to be lower rather than higher, does that suggest that your margin expectation In a structural way for the future is going to be reset to a high level. Secondly, you're talking about volumes in the second half of Low single digit or whatever single digits. But you just said that your backlog is up by 50%. How do I square those two things? Thirdly, acquisitions, you said you have a lively pipeline and acquisitions are opportunistic. We all know that you cannot predict how much But let me ask you the question this way. So if I were to say to you, you're going to spend $1,000,000,000 on acquisitions in 2022, is that realistic? Is that possible? And then Grenfell, you say nothing in the report about Grenfell. I understand that it's no longer an issue. But still just curious if you could quantify how much you're seeing in terms of claims and what you will expect them And then finally, and sorry, I'm being very greedy here. But Light and air, you explained that there are reasons why the comments was it was. But for me and outside are looking at the numbers, it looks very poor. Can you please explain what is happening there? Do you still like the segment? Do you think you can improve the profitability? Or are you happy with the profitability at this level? Thank you. Okay. So in terms of the insulated panel margin, no, I don't think we'd say that that's a fundamental reset. We're going through a period of lots of ins and outs and ups and downs and all sorts. And it's just it's a very unstable market at the moment. So What I'd say really is that our teams have been particularly successful in cost recovery. And in some markets, We've probably even over recovered, but that's in anticipation of further cost increases, as I've said, into the second half. So it's worked out well for us so far. And I suppose in essence, it shows the pricing power that our business has at a time like this. From a volume perspective, yes, how do we square an order bank so high with volumes up? I don't think we said volumes are going to be up Single digit in the second half. What I would say just generally on that, Yuri, is our underlying sales were up 36% in the first half. We expect that growth rate to ameliorate in the second half of the year. It will be half that or there or thereabouts in terms of an overall Percentage growth in the second half of the year in terms of underlying sales growth. Yes. And then from a lively pipeline perspective, you're right, it's lively and it's entirely unpredictable as you know well. Is it possible that we would do EUR 1,000,000,000 of acquisitions in 2022? I'd say, yes, it's highly possible. But it's also highly unpredictable. So if we can have the right opportunities at the right valuations, absolutely, we'd be we'd really welcome opportunities like that that we could onboard. And we're well prepared for it. From a Grenfell perspective, we don't report it because There's nothing specific to report in the last number of months. That process is ongoing. We remain as committed to it as we've ever been. And from a claims perspective, it's not been particularly significant. Yes. No material move in the claims experience first half of the year. So And we're working I'm sure that job by job, issue by issue. But as we said 6 months ago, Despite how we were depicted, like our products are extremely sound. And as we work through these job by job, that's Okay. Can I just clarify, you said nothing material to report? So last time when we were talking about this, you were suggesting numbers of EUR 30,000,000 In total or maybe 20. So what is it coming out to, 5? What I'd say on that, Yuri, is that those numbers That I gave in February were indicative of what the potential outcomes could conceivably be. It's nothing like that. So, yes, it's not anything like that €25,000,000 or €30,000,000 number. But it may be. What it may be. Maybe. As we said, this stuff runs for years. So and we'll take it as it comes. From a Light and Air perspective, you're right. Absolutely, at a first glance, you said 2.7%. Isn't that very disappointing? Of course, and we would agree with that. But you got to bear in mind two things. This is an acutely second half business, Number 1, we on boarded the coal business, which essentially this organization goes through heavy losses typically in Q1. So year on year, you got to bear that in mind. And we're committed to it. We're as committed to it as we ever were. And let's say, we're intensifying focus as well on growing the business and growing it through acquisition as well. So We're completely committed to it as a segment. Very good. Thank you so much. Thanks for answering all of them. Thanks, Yuri. Thanks, Yuri. Our next question is from Cedar Ekblom of Morgan Stanley. Cedar, your line is now open. Thanks very much. Hi, gentlemen. I've got one question on your scope 3 ambitions. I appreciate that it's very early But I wonder if you could give us any other three ambitions. I appreciate that it's very early in the process, but I wonder if you could Give us any understanding on what you think your scope through ambitions may mean for your cost base? And also if you could give us some color on what percentage of your customers have expressed an interest to buy Product which potentially have lower scope 3 emissions, but could also come at a higher price. Just some early indication of what's actually happening on this initiative. Thank you. Yes, very interesting topic actually. So everyone wants the cleanest product until you get to sit down and talk about the price. So I think it's early days on that. From where we stand right now, Let's call it a green premium. That's going to exist. We expect in some of our raw materials that naturally the processes that are required To clean up some of those areas are going to require significant capital. And in some cases, there'll be a fundamentally higher Cost as an input. So it will be an interesting contest and all really yet to unfold to see What the real appetite is when the cost is understood. But we would expect this top tier organizations, Certainly, public sector are just going to have to look across the cost increases and just get involved In the solutions, because to be honest with you, unless that happens and unless the demand is there, the supply side won't adjust. Why would it? So, yes, it's unfolding, but there is a significant interest, I would say, from top tier end market For lower carbon solutions, very significant effect. Great. Thanks very much. Nothing further in the queue, so I hand back to the management team. That's excellent. Thank you all very much and we look forward to engaging with you all over the coming days weeks. Thank you. Thank you. Thank you.