Ladies and gentlemen, welcome to the SECA Half Year Results 2019 Conference Call. I am Emma, the Chorus 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. The conference must not be recorded for publication or broadcast.
At this time, it is my pleasure to hand over to Mr. Dominic Slapnik, 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 o'clock. Now our CEO, Paul Schuller and our CFO, Adrian Wittmer, 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 3,700,000,000 in Swiss francs. All our reach were able to grow. We posted excellent double digit growth rates in Asia with 15.6 percent, North America with 11.5 percent and 22.6 percent 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. However, we were pleased to see that in Austria, Switzerland and Germany, we are at around 4%. A difficult time in the U. K. With minus 3% and Spain, Italy also not so strong.
In the automotive business, the number of new vehicles dropped by 6 0.7% or 4,000,000 cars. The global business recorded a grow rate of 4.9% Despite the drop in automotive and the slow market in the 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 SEK481,700,000 and overall proportional growth of 8.3 percent, and this despite the one off effects from the Parex acquisition. The Parex acquisition closed end of May is well on track, and integration is working outstanding 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 SIK organization and working since day 1 under 1 leadership team. The synergies and 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 1st 6 weeks refilling the strength for our combined market and customer presence. So well advanced 6 weeks. On the other acquisition, we are pleased that we came with CHF 61,000,000, a leading manufacturer of concrete repair system in Canada and Telenenko, a specialist in manufacturing foam system in Belarus, we could close 2 other deals.
The innovation is well underway. Further, our acquisition pipeline is full, and we hope to close 1 or 2 additional acquisition this year. We continue to invest in future growth in emerging markets by expanding our production in Senegal, Egypt and Qatar. And with this, I would like to hand over to our CFO, Adrian Wichtmer. 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 1st 6 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 2 percentage points to 7.6% in Swiss francs.
Negative currency development was primarily owed to the weaker euro, the Australian dollar as well as a number of emerging market currencies. Again, all regions contributed to the growth in the 1st 6 months of the year. Region EMEA grew sales at a rate of 7.7 percent. 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 4 percentage points. Region Americas continued to record strong growth at 11.4 percent 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, and the acquisition of Parex contributed 12.9 percentage points of growth in the region, particularly in China. Foreign exchange impact at minus 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 1st 6 months. However, structural growth driven by megatrends such as lightweight, construction and e mobility and the residual growth impact of the Pfizer acquisition led to a continued increase in content per vehicle. Foreign exchange impact were negative at minus 1.8%.
On gross result level, we have been able to increase margin as a percentage of net sales by 20 basis points and very pleased with the price increases. We were able to push through various initiatives on the procurement and R and 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 onetime 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 on the proportionally 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 24,000,000 of acquisition and integration related costs, primarily for Parex, which compares to the CHF 23,000,000 of onetime costs related to the dispute resolution with Fangoma 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 33,600,000 while reducing other operating expenses. Organically and excluding onetime effects, nonmaterial costs grew under proportionally at the rate of about 75 sales growth. In consequence, EBITDA increased by 14.5 percent to SEK 6 123,800,000 up from CHF 544,800,000 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 a 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 SEK 444,600,000 to SEK481,700,000. 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 cost as well as in other financial expenses. Net interest cost increased by CHF 16,700,000.
This amount also includes interest component related to lease obligations according to IFRS 16. Also, net other financial expenses increased by CHF 5,100,000. Of the combined CHF 21,800,000 increase, CHF 6,700,000 are nonrecurring in nature and related to the Parex transaction. Group tax rate reduced slightly from 24.7% in the previous year to 24.5% in the first half twenty nineteen. As a result, net profit is up by 3.9 percent to DKK330,700,000 up from DKK 318,200,000.
Dollars Cash generation in the first half year twenty nineteen was very strong. Operating free cash flow is up by €168,000,000 from €11,500,000 to 100 and €79,700,000 in 2019 year to date. Cash from operating activities increased by CHF 104,000,000 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 80 $6,000,000 compared to $148,700,000 in the same period last year was also lower, but the previous year included the buyout of 2 operating leases in the amount of SEK 70,000,000. June 2019 balance sheet saw a significant expansion related to the acquisition of Parex as well as King Package Products, Berlin Eco and Arkon.
On the asset side of the balance sheet, purchase price allocation led to an increase in goodwill of $1,980,000,000 as well as customer relationship, trademark and IP intangibles of $875,000,000 dollars which are being amortized over their useful lives. Pro form a annual P and L expense related to this amortization will amount to about 4 percentage points of Parex sales initially. Replacing the initial bridge financing facility, the purchase price for Parex of CHF 2,500,000,000 was refinanced through an inaugural dual tranche Eurobond issue in April 2019 of CHF 1,000,000,000 with a maturity of 8 12 years, respectively. Earlier in the year, we issued a mandatory convertible note of 1 point 3,000,000,000 due in January 2022 with a coupon of 3.75%. The mandatory note is split into an equity and the liability component for accounting purposes and has received a high equity credit by Standard and Poor's.
In addition to the new leasing standard, IFRS 16, led that the new leasing standard IFRS 16 led to the recognition of SEK328,000,000 right of use assets as well as a corresponding financial liability of $335,000,000 on the balance sheet. ROCE on a reported basis is 17% for 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 Schuller for the outlook.
Okay. Thank you, Adrian. Our Sika outlook 2019, the strong result supports our full year targets, and we are expecting an increase in sales for the first time more than CHF 8,000,000,000 along with a double digit EBIT growth. With the Parex acquisition and a full pipeline of big newly won construction project, many new products and a lot of initiatives we are confident to deliver, even in headwinds from the different markets soon. Thanks for the commitment of our employees and the strength of the CECO 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. 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. But looking forward into the second half of twenty nineteen, will we start to see raw material pressure abate?
And do you think that could lead you to starting to hit your EBIT margin targets of 14% to 16% maybe ahead of the 2020 targets, I. E. Is there 50 basis points of price cost spread available? The second question, if I may. Obviously, you've had 5 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 all have several meetings. We have some projects together.
So we had
a preparation time of around 4 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.
So we are in a very good way. The positive is really that the people are construction people. They understand the business And together, we really can move on. I think it's a great collaboration. Then positively, the mood of the sales force.
They really like to work together. They started in the first 6 weeks, wherein 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. However, overall, also good growth rate and especially in China, very good. That's the point from the Parex agent
for yes, on the pricing, we're targeting from today's perspective about a 2 percentage point price increase for the full year. We're working towards that target, have made very good progress. And 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 they are confident and they 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?
Yes, around 1.5%.
Okay, great. Very helpful. Thank you, both.
Thank you, Tom.
The next question is from the line of Martin Heusler with Zadkabi. Please go ahead.
Yes. Thank you for taking my questions. 2. Maybe first about your sales guidance of SEK 8,000,000,000 facing a tougher, let's say, a ForEx environment in the second half maybe. What's your implied assumption on the organic growth in order to achieve this SEK 8,000,000,000?
And the second question is turning to the global business area. If I calculate it 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 like more pricing pressure, if it's a mix effect Or is it only a volume effect?
Okay. Thank you, Martin. I'll take the first question regarding our growth and our anticipation of organic growth. I think we still feel the U. S.
Is still going strong. It's a good situation there. We positive also EBITDA Americas. So we see the same similar growth rate as we had. Then 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 sanction beds. Still positive for the next 6 months, if I look at the pipeline. If challenge is, of course, Brexit, U. K. Business is quite a business with us.
But assuming it's not that these assets there, we still stay in our growth rate at least 3%, 4%. Asia, we are slightly more positive. China is still growing strong. We see no weakness there. And Japan is stable, also no big weakness.
An improvement we see in Southeast Asia. So overall, I guess, we go with our growth rate of this 3% to 4% during the year.
Your question on the segment profitability of Global Business, The and 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 poly amide and bitumen side, which of course also in the automotive industry on existing platforms, it takes longer to increase prices. So 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. And so we should also improve that margin going forward.
Okay. Thank you for the detailed answer. But 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 build, the super suppliers, they all expect a slowdown. However, we are with our 7% to 10% there for the whole organization is not really critical. However, we also feel if they cannot solve the issues, we will be also feeling the thunder and the difficult market.
However, we would say we will have a positive growth until end of the year. So we don't see a decline as overall.
Okay. Thank you.
The next question is from the line of Tobias Simon 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 proportional growth to double digit growth. Could you talk a little bit what was the intention behind that? And are you no longer confident with an improvement versus last year?
And 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.
Yes. I mean, I think we have been very consistent in saying that we will over proportionally grow an EBIT pre Parex. And this we very much hold on to this is very much unchanged. But 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 4 percentage point amortization, which gets added on top of it. We also have onetime costs, which we already had €30,000,000 in the first half year.
There is more to come. We're working through integration. It's going very well. But 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 cost remained very volatile. 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. So that was the intention on the change in the outlook. And may I just quickly ask for Parex dilution effect, how big is it approximately?
We will have this, as I said, the 4 percentage points of amortization. And 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. And of course, the variant here is also the onetime costs.
The next question is from the line of Martin Flugiger with Kepler Cheuvreux. Please go ahead.
Yes, good afternoon, gentlemen. Martin Flugiger from Kepler Suri. I have four questions and I'll take one at a time, please. Firstly, on your Parex acquisition effect, I think it was EUR 152,000,000 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 80%.
Organically?
There is a bit of an acquisition effect in there, but it's less than 2%.
Okay. And 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 And possibly also what you think is your best guess for the outlook 2019?
Yes. The best guess for the outlook is really very, very difficult. I mean, as I said, there is different movements region by region, raw material by raw material. The negative or the net negative effect has been a lot lower than in last year. I mean, we're talking here 1%, 2%.
And no more there is a chance that this will further exceed, 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. But 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 1 to suppliers. So we are much better back in the game than just 12 months ago.
So the market has certainly changed. We'll see how it remains, but we have more bargaining power than 12 months ago.
Very good. My third question is on the EBIT margin in Asia Pacific. I think it was also down by around 20 bps. Was that also raw material price driven? Or what was that movement about?
Yes. It was mostly raw material price driven. That was one of the areas which at least in the Q1 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. And my final question is, could you provide some with all these effects, IFRS 16 and Forex and PPA, could you provide an overall number of what you expect for group depreciation and amortization for 2019? And related to that question, when is the PPA effect washed out of the P and L? How many years from now?
Okay. In terms of the overall effect, I mean, the first half year, we had an increase basically by about SEK 40,000,000 year on year. I would expect overall depreciation and amortization for the full year to be around, I would say, euros 320,000,000 including about a €70,000,000 IFRS 16 effect for the full year. The question on the PPA amortization, it depends on the, let's say, the intangible in the various areas. It's between 5 20 years.
But of course, as we continue to grow, the percentage impact will also become smaller. But 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.
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 $1,700,000,000 in cash and additionally acquired $1,000,000,000 in debt with Parex, which gives me an enterprise value of just below EUR 2,700,000,000 which compares with your indication of an enterprise value of EUR 2,500,000,000 in January. Is my calculation correct?
And if yes, why did you pay more than initially indicated? And then secondly, you took over debt of a good €1,000,000,000 with the acquisition of Parex. What kind of debt is this? And what is the average interest rate of this debt? And also, do you see some kind of refinancing for this debt?
Okay. Thank you, Bernd. While your calculation is not quite correct, the SEK1.7 billion here and the equity in Swiss francs is correct. The debt number, you have to net out the cash there, and it also includes the newly assessed IFRS 16 leasing. So we're actually almost exactly at SEK2.5 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. And 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, Eduardo.
Okay. Thank you, Bernd.
The next question is from the line of Daniel Jelofsky with Mirabel. Please go ahead.
Yes, 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 EUR 70,000,000. And according to my memory, it's only Parex. And Parex has an annual sorry, a monthly sales of about EUR 40,000,000 in APAC. So what exactly is the difference here? Is it was it or is June maybe a seasonally strong month for Parex?
I don't know. That's the first question. And the second question, you mentioned the €31,000,000 restructuring one off costs in the first half. You guided for $40,000,000 for the full year and $20,000,000 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. And the third question, organic growth in EMEA, according to my calculation, in the second quarter was about 1%. And 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%. So 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 quarter, but still to get an idea. Thanks so much.
Yes. Okay. I'll try to
do this 1 by 1. In on the Parex growth in Asia Pacific, there is actually almost 50% of the sales are in Asia Pacific. So this contribution of around €70,000,000 for this 1 month and a few days in May is correct. The biggest part there is China. On the acquisition cost, yes, you recollect correctly.
Me. And also, I would assume that we will probably have rather a bit more of the one off costs this year versus the next year as we continue to integrate fast. So I'd probably rather from today's perspective, but this is a very rough number at around €15,000,000 for the second half.
€15,000,000,000, 1.5,000,000?
€15,000,000, yes.
Okay. And organic growth in EMEA?
Organic growth, yes, there is about 1 or 2 days in EMEA, which is around 2 percentage points for the quarter. And 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, very strong growth in EMEA.
And can you maybe shed some light on which more relevant European countries were a bit softer in Q2?
I mean, 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. So crystal ball, I don't have that. It's clearly last year, we grew by 9% to 10% in U. K. This year, we are rather below last year.
So that's real hit in overall growth. And Spain were quite slow, Italy were quite slow. And with Frost, we are also on around 3% grow rate. Including today, we would also be about 4% or 5%. So it's mainly U.
K, then it's mainly Spain, Italy, which we are really challenging. And then, of course, we have the GCC also in EMEA. And in GCC, we also have a negative grow 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're very tight on the money. The government don't pay the builders. The builders don't pay us. So it's really was conscious that we don't grow there.
So that's the real two weak points in EMEA. The rest of the countries, as I said, Eastern Europe, double digit. Nordic is good. So we have a lot of strong companies and also pleased to see 20% grow rate in Africa. So 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 for me around Parex and then one on working days, please. So in Parex, the pro form a sales just over EUR 500,000,000 I heard, Paul, you say the 8 percent organic growth, or perhaps Adrian said that in the first half. So that clearly, there's quite a big half to half one split there if you also make the EUR 1,200,000,000 sales of last year in that business.
So perhaps you could sort of flesh that out, please. And then 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. So perhaps you could just give an indication of where Parex's margins are versus the group? And then 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? And in the rest of the year, does working days become a positive perhaps in Q3?
Okay. I'll take the third question with the working days. Yes, the global business was heavily also in the same boat as EMEA. And the same in Latin America, we had the same effect. So overall, if, if, but it's not, if we would account that, that would be another 2% growth rate on the overall.
So yes, we had to stay less. So the grow is lower, but if we would have it then 2% more. Then on the Parex, if I understand it right, your question, 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 we there is offer now to recover that. On other side, very positive is to grow in China. They grow by 20 results what they had last year and rather on the same growth rate. And I think it fits to our strategy that they also should be by 6% to 8%, but we have to see.
Then we believe with the cross selling, it takes us another few months to really set it up, to really share it. So 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 5 weeks consolidated there. And on the personnel cost side, they don't have sort of a higher personnel cost as a percentage. It's just the fact that, of course, there is no leverage or no improvement on the acquisition side initially. And 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.
So this is managed very well. But 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. So we will gain something on that level. And then also on the corporate organization, we will save some. So we are positive to bring it to our level and quite fast.
So thank you. Does that mean that excluding Parex, there was an improvement in personnel expenses. So 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 and would exclude all the other small acquisition, we are quite efficient in personnel and in other expenses. So I think we are really under proportional growth there.
The next question is from the line of Simon Roe with Janus Henderson. Please go ahead.
Good afternoon. I just wanted to ask one further question about the EMEA growth rate. Could 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. So there will be no effect in the second half year.
Okay. And then just turning to the Americas. Could you just remind me again what exactly happened? Because I remember in the Q1, 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 Q1 was also a surprise for us and talking to a lot of customers and also what not result of the competitors. The first was weak. I hate to say that it was really a bad weather and a bad condition there. And then when the weather turned better, they had not enough flavor to really do it in all the drops. And the second quarter really then turned strong and the pipeline for us is very full.
So we are very positive for the next few months in U. S.
Okay. And so what sort of can you say anything about what sort of growth rate you target in North America?
Mid single digit, that's organic growth and then a part of the Parex. So should be mid single digit, high mid single digit.
We have a follow-up question from the line of Tobias Simon 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 2 years, I believe, and now it was a bit weaker. So how can we think about this going forward? Thank you.
Yes. I think we had actually quite a strong cash conversion. You have to see I mean, most of the cash were 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.
Also on the CapEx side, in that sense, I think very pleased and of course, the major part of cash will be delivered in the second half year due to seasonality.
Okay. So 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 Dominic Slapnik for any closing remarks.
Okay. 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. So a nice summer for everyone. And Dominik?
Yes. And thank you for listening in. Have a nice summer, absolutely, and bye bye.
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