Ladies and gentlemen, welcome to the Sika Half-Year Results 2019 conference call. I am Emma, the conference call operator. I would like to remind you that all participants will be in a listen-only mode and that the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Mr Dominik Slappnig, Head of Communication and International Relations of Sika. Please go ahead.
Good afternoon and welcome to the Sika first half results conference call. We published our figures this morning at 5:00. Now, our CEO, Paul Schuler, and our CFO, Adrian Widmer, will provide further details on the results. Afterwards, we will be ready to take your questions. With this, I hand over to Paul to start with the highlights of the first half year.
Good afternoon and thank you for joining the call. I'm happy to inform you about a very motivating first half year result. We had an excellent sales growth of 9.6% in local currency, with record sales of CHF 3.7 billion. All our were able to grow. We posted excellent double-digit growth rates in Asia with 15.6%, North America with 11.5%, and 22.6% in Africa. High single-digit growth in Eastern Europe with 9.2%, and Latin America with 7.7%. Growth in the major European market developed moderately. We were pleased to see that in Austria, Switzerland, and Germany, we are around 4%. A difficult time in the U.K. with -3%, and Spain, Italy also not so strong. In the automotive business, the number of new vehicles dropped by 6.7% or 4 million cars. The Global Business recorded a growth rate of 4.9%.
Despite the drop in automotive and the slow market in a part of Europe, organic growth is 3.1%. With higher selling price to our customers, we could increase our gross margin from 53.6% to 53.8%, and strict cost control management led to a record high operating EBIT of CHF 481.7 million. An overall proportional growth of 8.3%, and this despite the one-off effect from the Parex acquisition. The Parex acquisition, closed end of May, is well on track and integration is working outstandingly well. As I mentioned several times, this is not just a one big acquisition. This is an acquisition of 23 countries, and in 21 of the countries are already integrated in the Sika organization and working since day one under one leadership team. The synergy teams from procurement, logistics, and production are exploring all opportunities.
I'm also pleased to see many successful cross-selling opportunities as discussed in the last years and the first six weeks, revealing the strengths for our combined market and customer presence. Well advanced six weeks. On the other acquisition, we are pleased that with King, with CHF 61 million, a leading manufacturer of concrete repair system in Canada, and Belineco, a specialist in manufacturing foam system in Belarus. We could close two other deals. The integration is well underway. Further, our acquisition pipeline is full, and we hope to close one or two additional acquisitions this year. We continue to invest in future growth in emerging markets by expanding our production in Senegal, Egypt, and Qatar. With this, I would like to hand over to our CFO, Adrian Widmer. He will guide you through the financial information. Adrian?
Thank you, Paul, and good afternoon. Following our CEO's business summary and highlights presentation, I will now give you further insights into the financial results. In the first six months of the year, the business showed a strong growth of 9.6% in local currencies. Organic growth was 3.1%, while acquisitions added another 6.5%. Currency effects reduced local currency growth by two percentage points to 7.6% in CHF. Negative currency development was primarily owed to the weaker EUR, the AUD, as well as a number of emerging market currencies. Again, all regions contributed to the growth in the first six months of the year. Region EMEA grew sales at a rate of 7.7% at constant currencies. Organic growth was 3.5%, while acquisitions contributed 4.2%.
We recorded strong growth in Africa and Eastern Europe, while major European markets developed more moderately and were impacted by a lower number of working days in Q2. Foreign exchange effects, mostly related to a weaker euro, had a negative impact of four percentage points. Region Americas continued to record strong growth at 11.4% in local currencies, supported by acquisitions, which contributed 7.1 percentage points, while organic growth accelerated in Q2 compared to Q1, particularly in North America. Business developed well in Brazil, Colombia, and Peru, while the government change in Mexico and the impact on infrastructure projects continued to weigh negatively. Foreign exchange effects in the region were slightly positive at 0.5%. Growth in Asia-Pacific was a strong 15.6%. Organic growth was most dynamic in China and in India. The acquisition of Parex contributed 12.9 percentage points of growth in the region, particularly in China.
Foreign exchange impact at -0.8% was slightly negative. The segment Global Business achieved a growth of 4.9% at the backdrop of a very weak market, with car build rates down almost 7% in the first six months. However, structural growth driven by mega trends such as Lightweight Construction and E-mobility, and the residual growth impact of the Faist acquisition led to a continued increase in content per vehicle. Foreign exchange impacts were negative at -1.8%. On gross result level, we have been able to increase margin as a percentage of net sales by 20 basis points. Very pleased with the price increases. We were able to push through various initiatives on the procurement and R&D side, as well as the reducing negative impact of material cost inflation. On a net basis, though, material cost impact was still negative year-on-year, but less pronounced and still relatively volatile.
If we exclude one-time and acquisition-related dilution effects, organic material margin increase would have been 40 basis points. Operating costs, which include both personnel as well as other operating expenses, increased underproportionally by 5.2%, versus a net sales growth of 7.6%, but were influenced by a number of special effects. On the one hand, we recognized CHF 24 million of acquisition and integration related costs, primarily for Parex, which compares to the CHF 23 million of one-time costs related to the dispute resolution with Saint-Gobain in the same period of last year. On the other hand, application of the new leasing standard, IFRS 16, led to changes in the recognition of lease related expenses, increasing depreciation and amortization expenses by CHF 33.6 million, while reducing other operating expenses. Organically and excluding one-time effects, non-material costs grew underproportionally at the rate of about 75% of organic sales growth.
In consequence, EBITDA increased by 14.5% to CHF 623.8 million, up from CHF 544.8 million in the same period last year. Driven by the change in recognition of lease-related expenses, as well as higher intangible amortization coming from acquisitions, particularly Parex, depreciation and amortization expenses increased by 42% vis-à-vis the prior year period. Resulting EBIT growth of 8.3% was nevertheless over proportional, driven by a higher material margin as well as disciplined cost management and efficiency improvements. In absolute terms, EBIT increased from CHF 444.6 million to CHF 481.7 million. Higher debt, mostly due to the share buyback in connection with the revolution of Saint-Gobain last year, as well as the financing of the Parex acquisition in early 2019, led to an increase in interest costs as well as in other financial expenses. Net interest costs increased by CHF 16.7 million. This amount also includes interest component related to lease obligations according to IFRS 16.
Net other financial expenses increased by CHF 5.1 million. Of the combined CHF 21.8 million increase, CHF 6.7 million are non-recurring in nature and related to the Parex transaction. Group tax rates reduced slightly from 24.7% in the previous year to 24.5% in the first half 2019. Net profit is up by 3.9% to CHF 330.7 million, up from CHF 318.2 million. Cash generation in the first half year 2019 was very strong. operating free cash flow is up by CHF 168 million, from CHF 11.5 million to CHF 179.7 million in 2019 year to date. Cash from operating activities increased by CHF 104 million, driven by higher profitability, high depreciation and amortization expenses, as well as a significantly lower working capital buildup, and in spite of higher cash taxes.
CapEx at CHF 86 million compared to CHF 148.7 million in the same period last year, was also lower. The previous year included the buyout of two operating leases in the amount of CHF 70 million. June 2019 balance sheet saw a significant expansion related to the acquisition of Parex, as well as King Packaged Materials Company, Belineco and Arcon. On the asset side of the balance sheet, purchase price allocation led to an increase in goodwill of CHF 1.98 billion, as well as customer relationship trademark and IP intangibles of CHF 875 million, which are being amortized over their useful lives. Pro forma annual P&L expense related to this amortization will amount to about four percentage points of Parex sales initially.
Replacing the initial bridge financing facility, the purchase price for Parex of CHF 2.5 billion was refinanced through an inaugural dual tranche Eurobond issue in April 2019 of EUR 1 billion, with a maturity of 8 and 12 years respectively. Earlier in the year, we issued a mandatory convertible note of CHF 1.3 billion, due in January 2022, with a coupon of 3.75%. The mandatory note is split into an equity and a liability component for accounting purposes and has received a high equity credit by Standard & Poor's. In addition to the new leasing standard, IFRS 16 led to the recognition of CHF 328 million right of use assets, as well as a corresponding financial liability of CHF 335 million on the balance sheet. ROCE on a reported basis is 17% per the end of June, but is forecasted to increase towards 20% by year-end 2019.
With this, I conclude my initial remarks and hand over to Paul Schuler for the outlook.
Okay. Thank you, Adrian. Our Sika outlook 2019. The strong results support our full-year targets. We are expecting an increase in sales for the first time more than CHF 8 billion, along with a double-digit EBIT growth. With the Parex acquisition and a full pipeline of big, newly won construction projects, many new products, and a lot of initiatives, we are confident to deliver, even in headwinds from the different markets assumed. Thanks for the commitment of our employees and the strength of Sika growth model, we can look forward with high confidence to the end of 2019. Any questions, remarks?
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question is from the line of Tom Wrigglesworth with Citigroup. Please go ahead.
Thank you, gentlemen, for your presentation. Two questions, if I may. The first one is on the price-cost mix. Obviously, you started to see gross margins up in the first half. Looking forward into the second half of 2019, will we start to see raw material pressure abate? Do you think that could lead you to starting to hit your EBIT margin target of 14%-16%, maybe ahead of the 2020 target, i.e., is there 50 basis points of price cost spread available? The second question, if I may. Obviously, you've had five weeks of owning Parex. Could you share with us your first thoughts and any areas of surprise, positive or negative, now that you're in full control of the business?
Okay, Tom, I handle the second question first with the Parex integration. We closed it already in January, we worked quite intensively with the whole management team. We had several meetings. We have some projects together. We had a preparation time of around four months. The first day was for us very important. We had a great management in all the countries. We announced a new organization. We started to streamline pricing customers. We are in a very good way. The positive is really that the people are construction people. They understand their business, together we really can move on. I think it's a great collaboration. Also very positively, the mood of the sales force, they really like to work together. They started in the first six weeks very.
On the negative side, I think we had no surprise except a little bit in the U.S., the market is a little bit slower than anticipated for the Parex sales, but set off by a really strong China market, so that's a little bit bad disappointment if I look at the U.S. market. Overall, also good growth rate, and especially in China, very good. That's the point from the Parex. Adrian,
Yes. On the pricing, we are targeting from today's perspective, about a two percentage point price increase for the full year. We are working towards that target, have made very good progress. As I mentioned on the material cost side, the situation is still, I would say, not clear in terms of the direction. We have seen certain raw materials in the first half year continue to go up. Others have come down. The situation generally is quite volatile, but are confident and are, of course, aiming to even increase the material margin. The positive comparison towards the last year in the second half year as the comparable should get a little bit easier.
Sorry, Adrian, just as a follow-up, could you disclose or remind me what the price effect was in the first half? You say 2%, is that for the full year? What was pricing up in the first half in the bridge?
Around 1.5%.
Okay, great. Very helpful. Thank you both.
Thank you, Tom.
The next question is from the line of Martin Hüsler with ZKB. Please go ahead.
Yes, thank you for taking my questions. Two. First about your sales guidance of CHF 8 billion. Facing a tougher, let's say, Forex environment in the second half. What's your implied assumption on the organic growth in order to achieve this CHF 8 billion? The second question is turning to the Global Business area. If I calculated correctly, you had an EBIT margin decrease by about 130 or so basis points in the Global Business. I was just wondering whether this is more pricing pressure, if it's a mix effect, or is it only a volume effect? Thank you.
Okay. Thank you, Martin. I take the first question regarding our growth and our anticipation of organic growth. I think we still feel that U.S. is still going strong. It's a good situation there. We positive also a bit Americas. We see the same similar growth rate that we had. If we go to EMEA, I believe that the rate we have, the 3% or 4% traditionally, we can help that, we can hold that. Depends a little bit on several sanctions, still positive for the next six months if I look at the pipeline. If challenges, of course, Brexit, U.K. business is quite a business with us. Assuming it's not a disaster there, we still stay in our growth rate, this 3%, 4%. Asia, we are slightly more positive. China is still going strong. We see no weakened there.
Japan is stable, also no big weakened. An improvement we see in Southeast Asia. Overall, I guess, we go with our growth rate of this 3%-4% during the year.
Your question on the segment profitability of Global Business. I would mention the sort of the volatile raw material situation. The area where we still have the biggest increases in raw material cost is Global Business, is automotive, particularly on the polyamide and bitumen side. Which, of course, also in the automotive industry on existing platforms, it takes longer to increase prices. That's one effect of the margin. The other one is the lower leverage we have, a very disciplined cost management, but here a bit missing leverage, but we have quite a number of improvement projects in the pipeline. We should also improve that margin going forward.
Okay. Thank you for the detailed answer. Just maybe on the Global Business, what's your best guess for the second half organically for Global Business?
Thank you, Martin, for that. Very nice. I think if you look at the automotive market, they really have now the perfect storm out there. If you look to the car builders, the suppliers, they all expect a slowdown. We are with our 7% to 10% area for the whole organization is not really critical. We also feel if they cannot solve the issues, we will be also feeling the thunder and the difficult market. We would say we will have a positive growth until end of the year. We don't see a decline as overall.
Okay, thank you.
The next question is from the line of Tobias Byman with Morgan Stanley. Please go ahead.
Hello, gentlemen. If I could follow up on the first question on the margins. Obviously, you have changed your guidance a little bit from the over-proportion growth to double-digit growth. Could you talk a little bit, what was the intention behind that, and are you no longer confident with the margin improvement versus last year? Then maybe a follow-up on this one, and again, it was asked earlier, but back in February, you confirmed your 14% margin target for 2019. Are you still confident with that? Thank you.
I think we have been very consistent in saying that we will over-proportionally grow and EBIT pre Parex. We very much hold on to this. It is very much unchanged. It is very clear given the magnitude that there is a certain initial dilution coming from Parex, somewhat not in a major way, but lower entry EBIT, but also a four percentage point amortization, which gets added on top of it. We also have one-time costs, which we already had EUR 30 million in the first half year. There is more to come. We're working through integration. It's going very well. At this point, we cannot just say that we will be able to basically, with our organic and pre Parex improvements to fully mitigate these effects because as well, material costs remain very volatile.
Of course, we have made great progress on the material margin. We will continue this, but it's just too early to be very precise here.
Okay, that was the intention on the change in the outlook. May I just quickly ask, for Parex dilution effect, how big is it approximately?
We will have this, as I said, the four percentage points of amortization, you can also assume that the initial EBIT was a bit lower than our 14%, so you can make the calculation what it will be. Of course, the variant here is also the one-time costs.
Okay. That's very clear. Thank you very much.
The next question is from the line of Martin Flückiger with Kepler Cheuvreux. Please go ahead.
Good afternoon, gentlemen. Martin Flückiger from Kepler Cheuvreux. I have four questions. I'll take one at a time, please. Firstly, on your Parex acquisition effect, I think it was CHF 152 million in Q2. Could you talk a little bit about how much organic growth was for Parex in Q2 and H1? That would be my first question.
Yes, Martin. Parex is growing very well. The H1 growth has been around 8%.
Organically.
There is a bit of an acquisition effect in there, but it's less than 2%.
Okay, thanks. Next one, coming back to the raw material price developments, could you elaborate a little bit whether the increase was overall on average in Q2, whether the increase versus Q1 was still positive, and also maybe provide an average increase year-over-year? Possibly also what you think is your best guess for the outlook 2019?
The best guess for the outlook is really very difficult. As I said, there is different movements region by region, raw material by raw material. The negative for the net negative effect has been a lot lower than in last year. We're talking here 1%, 2%, not more. There is a chance that this will further recede, but as we have seen on some parts, there is an increase. It's always also dependent on force majeure. We have not seen really a very broad decline overall. That's why we remain cautious.
We remain cautious of it. Overall, I would say it's a little bit easier to get enough material. It's easier to negotiate, and we are able to move material around from one to other suppliers, so we are much better back in the game than just 12 months ago. The market has certainly changed. We'll see how it remains, but we have more bargaining power than 12 months ago.
Very good. Thanks. My third question is on the EBIT margin in Asia Pacific. I think it was also down by around 20 basis points. Was that also raw material price-driven, or what was that movement about?
Yeah, it was mostly raw material price-driven. That was one of the areas which, at least in the first quarter, saw a very steep increase. It's now receding a bit. We have also caught up on the pricing side, but that's the main impact.
Great, thanks. My final question is, could you provide with all the effects, IFRS 16 and Parex and PPA, could you provide an overall number of what you expect for group depreciation and amortization for 2019? Related to that question, when is the PPA effect washed out of the P&L? How many years from now?
In terms of the overall effect, in the first half-year, we had an increase basically by about CHF 40 million year-on-year. I would expect the overall depreciation and amortization for the full year to be around, I would say CHF 320 million, including about CHF 70 million IFRS 16 effect for the full year. The question on the PPA amortization, this depends on the, let's say, the intangible in the various areas. It's between five and 20 years. Of course, as we continue to grow, the percentage impact will also become smaller. This is, of course, an effect that is not just short-term, but the impact will be less material over time.
Perfect. Thank you very much.
Thank you, Martin.
As a reminder, if you'd like to ask a question, please press star and one. The next question is from Bernd Pomrehn with Vontobel. Please go ahead.
Yes, good afternoon. Two questions left. Firstly, thank you for providing the purchase price allocation for Parex. In your H1 report, we can see that you paid CHF 1.7 billion in cash and additionally acquired CHF 1 billion in debt with Parex, which gives me an enterprise value of just below CHF 2.7 billion, which compares with your indication of an enterprise value of CHF 2.5 billion in January. Is my calculation correct? If yes, why did you pay more than initially indicated? Then secondly, you took over debt of a good CHF 1 billion with the acquisition of Parex. What kind of debt is this, and what is the average interest rate of this debt? Also, do you see some kind of refinancing for this debt? Thank you.
Okay. Thank you, Bernd. Your calculation is not quite correct. The CHF 1.7 billion here, the equity in Swiss franc is correct. The debt number, you have to net out the cash there, and it also includes the newly assessed IFRS 16 leasing. We're actually almost exactly at the CHF 2.5 billion as an enterprise value. In terms of the debt, this is also more, I would say, technical because we have not paid this to the seller, but we have basically immediately retired the debt we have taken over and repaid it to the banks. It's basically coming now at the rate where we have issued our bonds. If you look at our total growth debt, the interest percentage there is around 1.1 percentage points for the full debt we carry on our balance sheet.
Okay, excellent. Thank you, Adrian.
Okay. Thank you, Bernd.
The next question is from the line of Daniel Jelovcan with Mirabaud. Please go ahead.
Yes, hello. Only small questions left. Can you help me in Asia Pacific, you mentioned the acquisition effect was 12.9%, which is quite significant, so that's about CHF 70 million. According to my memory, it's only Parex, and Parex has a monthly sales of about CHF 40 million in APAC. What exactly is the difference here? Is June maybe a seasonally strong month for Parex? I don't know. That's the first question. The second question, you mentioned the CHF 31 million restructuring one-off costs in the first half. You guided for CHF 40 million for the full year and CHF 20 million for next year. What can we expect for the second half? Is it possible that you take more costs now and maybe less next year? That's the second question. The third question, organic growth in EMEA, according to my calculation, in the second quarter was about 1%.
It's very clear it's less working days. Every company mentioned that. According to my calculation, the effect must have been maybe 2% or 3%, maybe 3%. Adjusted for working days, your organic growth must have been rather 3% or 4%. In EMEA, is that the correct calculation? I know it's only a quarter, but still to get an idea. Thanks so much.
Yeah. Okay. I'll try to do this one by one. On the Parex growth in Asia Pacific, there is actually almost 50% of the sales are in Asia Pacific. This contribution of around CHF 70 million for this one month and the few days in May is correct. The biggest part there is China. On the acquisition cost, yes, you recollect correctly. I would assume that we will probably have rather a bit more of the one-off cost this year versus the next year as we continue to integrate fast. I'd probably rather from today's perspective, but this is a very rough number, at around CHF 15 million for the second half.
15? One five?
15, yes.
Okay. Mm-hmm. The organic growth in EMEA?
The organic growth, yes, there is about one or two days in EMEA, which is around 2 percentage points for the quarter. If you basically align the working days and adjust the growth for EMEA, we would basically in a half year be above 4%, 4.5%, which is, as Paul mentioned before, in line with the years before, maybe with the exception of last year, where we had a very strong growth in EMEA.
Mm-hmm. Can you maybe shed some light on which more relevant European countries were a bit softer in Q2?
As I mentioned a little bit before, U.K. was very soft. We had a negative growth there. I think they really feel now more pressure on the market. We have to see how this ends up. Crystal ball, I don't have. It's clearly last year we grew by 9%-10% in U.K. This year we are rather below last year, that's a real hit in overall growth. Spain were quite slow. Italy were quite slow. With France, we are also on around 3% growth rate, including today we would also be around four or five. It's mainly U.K., it's mainly Spain, Italy, which we are really challenged. Of course, we have the GCC also in EMEA. In GCC, we also have a negative growth rate. That is because we stopped shipping to customers.
We stopped a little bit just to make sure we collect the money. We wanted to make sure we have no future issues. In the moment, they very tight on the money. The government don't pay the builders, the builders don't pay us. It's a little cautious that we don't grow there. That's the real two weak points in EMEA. The rest of the countries, as I said, Eastern Europe, double digits, Nordics, good. We have a lot of strong companies, and also pleased to see 20% growth rate in Africa. Overall, still confident that it's not falling apart.
Sure. Thanks so much.
Okay. Thanks, Daniel.
The next question is from Andrew Fraser with HSBC. Please go ahead.
Thank you. Good afternoon, gents. Couple of questions from me around Parex, then one on working days, please. In Parex, the pro forma sales, just over CHF 500 million. I heard, Paul, you say the 8% organic growth, or perhaps Adrian said that, in the first half. That clearly there's quite a big half two, half one split there if you also make the CHF 1.2 billion sales of last year in that business. Perhaps you could sort of flesh that out, please. On the margins in Parex, I note the personnel expenses were up as a proportion of sales, and this was acquisitions. I imagine that's Parex as well. Perhaps you could just give an indication of where Parex's margins are versus the group. Secondly, on working days. I imagine that it wasn't just EMEA that was held back by working days.
Perhaps I would have thought Global Business had an impact. Was there any impact in any other region? In the rest of the year, does working days become a positive, perhaps in Q3? Thank you.
Okay. I'll take the first question with the working days. Yes, the Global Business was definitely also in the same boat as EMEA, and the same in Latin America. We had the same effect. Overall, if we would account that would be another 2% growth rate on the overall. Yes, we had this day less, so the growth is lower. If we would have it, then a 2% more.
On the Parex, if I understand your question right, they have their first half-year growth rate of around 8%. They're growing very well, but it's the same as everywhere in our business. They had a little bit weaker U.S., which I explained before. That's a little bit disappointing. They lost a big customer last year, and they struggle now to recover that. On the other side, very positive is the growth in China. They grew by 20%. Overall, we are quite pleased with that they achieved the results, what they had last year and are rather on the same growth rate. I think it fits to our strategy that they also should be by 6%-8%, but we have to see. We believe with the cross-selling, it takes us another few months to really set it up, to really leverage.
Positive in the future to keep this momentum on growth.
Maybe lastly on sort of the cost elements or the margin contribution. Of course, it's still very early now with basically, having five weeks consolidated there. On the personnel cost side, they don't have a sort of a higher personnel cost as a %. It's just the fact that, of course, there is no leverage or no improvement on the acquisition side initially. Of course, there is a certain element of cost inflation on the overall wages we have, but it's actually quite contained, not more than in the years before. This is managed very well. There's no, let's say, additional or higher cost on the personnel side coming from Parex.
On the personnel side, we had also, as we said before, all the management are new aligned, we will gain something on that level. Also on the corporate organization, we will save some. We are positive to bring it to our level and quite fast.
Thank you. Does that mean that, excluding Parex, there was an improvement in personnel expenses? As a note, you saw an improvement in operating expenses, but did that apply to personnel as well on the core business?
Yes. I think on the organic growth rate would exclude all the other small acquisitions. We are quite efficient in personnel and in other expenses. I think we are really under proportional growth there.
Thank you.
The next question is from the line of Simon Rowe with Janus Henderson. Please go ahead.
Oh, good afternoon. I just wanted to ask one further question about the EMEA growth rate. Did you actually answer the question about working days effect in the second half of the year? I'm not sure I heard that.
Yes. On the second half year, it's the very same number of working days as in the previous year. There will be no effect in the second half year.
Okay. Just turning to the Americas, could you just remind me again what exactly happened? Because I remember in the first quarter, North America was a bit disappointing. Now it seems a little bit better. What do you feel the outlook there is, and what's going on?
The first quarter was also a surprise for us, and talking to a lot of customers and also looking at the results of the competitors. The first was weak. I hate to say, but it was really a bad weather and a bad condition there. When the weather turned better, they had not enough labor to really do it in all the jobs. The second quarter really then turned strong, and the pipeline for us is very full. We are very positive for the next few months in U.S.
Okay. Can you say anything about what sort of growth rate you target in North America?
Mid-single digit as organic growth and then a part of the Parex. Should be mid-single digit, high mid-single digit.
Thanks. Thank you very much.
Thank you, Simon.
We have a follow-up question from the line of Tobias Byman with Morgan Stanley. Please go ahead.
Hi, thanks for taking the question. Just a very quick follow-up on your cash conversion. I know you have the target of 10% or more cash conversion from revenue, and it has been below that for the last two years, I believe, and now it was a bit weaker. How can we think about this going forward? Thank you.
I think we had actually quite a strong cash conversion. Most of the cash we're actually converting and delivering in the second half year. Very pleased with the first half year, particularly also the containment of the working capital buildup, and that's really driving cash conversion first half versus second half year. Good initiatives there. On the CapEx side, in that sense, I think very pleased. Of course, the major part of cash will be delivered in the second half year due to seasonality.
Okay. We can still go to the 10% for this year?
Yes.
Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dominik Slappnig for any closing remarks.
First, I want to thank everyone who participated on the call. I wish you a very relaxing hot summer, and I hope the construction moves, which we believe, and also the car manufacturers. A nice summer for everyone, and Dominik.
Yes, thank you for listening in. Have a nice summer, absolutely, bye-bye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Good.