Ladies and gentlemen, a warm welcome to the Wienerberger Earnings Call on the first three quarters of 2021. Our board representatives today are our CEO, Mr. Heimo Scheuch, and our CFO, Mr. Gerhard Hanke. They will lead you through the presentation today, discussing our performance in the first three months of 2021, and giving an outlook for further opportunities for growth for Wienerberger in the future. After the presentation, we are ready to take your questions. I will now hand over to Mr. Heimo Scheuch for the presentation.
Thank you, and a warm welcome, and good afternoon from Vienna from all of us, and welcome to our Quarter Three conference call on the results and the development of our group, Wienerberger. If we look at the Quarter Three of 2021, we can say it has been a very successful one, and one that has been marked by exceptional growth. Exceptional in the sense that we continued our growth throughout the third quarter, and with an external revenue growth of +14%, showed that we are a real strongly growing company on the organic front. Organic growth has been in the center of our activities over the last decade. If I look at Wienerberger's average growth rate over the last 10 years, it was 6% on average, and therefore clearly outpacing the market growth in North America and in Europe.
Also in this quarter, with +14%, we've clearly outperformed the market. Not only on the top line, and if we look also on the ESG front, for example, we clearly outperformed our own goals. With -6% of CO2 emissions compared to last year, we have clearly overachieved our own target. You remember that, we have set a clear target of -15% till 2023 with respect to the emissions of CO2. Here again, Wienerberger has set clear targets and not mid- and long-term targets that are difficult to evaluate right now. Short-term, -15% in only this short period of time, is an incredible challenging job to achieve. Again, here we have set new standards with -6% already in the first nine months of this year.
As I said at the beginning, growth is very important for us and growth matters. We successfully completed and also are integrating already a number of companies that we bought and acquired in the first nine months of this year. We closed in the third quarter a very important and strategically, I would say one of the most important steps in recent history of this company in North America by the acquisition of Meridian Brick. I say this because it brings us in a completely different league in North America, and with the substantial synergies and cost efficiencies to gain a very beneficial deal for Wienerberger.
Also in Ireland and England, with respect to Cork Plastics and FloPlast, a very good acquisition when it comes to piping and some smaller ones in continental Europe, make up for about EUR 500,000,000 spent on M&A. Clearly, Wienerberger has now set then a new basis for future growth in all these economies and regional markets. The strong performance, and my colleague, Gerhard, will elaborate in much more detail on the numbers a little later, has made us to adjust our guidance for this year and lift it up to EUR 650 million. This doesn't include the EUR 15 million coming from these acquisitions that I just mentioned. This is our new guidance, EUR 650 million EBITDA like for like, plus the EUR 15 coming from these acquisitions.
When we look at the numbers very briefly of the third quarter, we have achieved with slightly above EUR 1 billion turnover, +14%, as I said. 15% EBITDA, slightly above EUR 200 million. This leaves us with a margin, a little bit above 20%, which is very satisfactory for this quarter. Again, up strongly from last year's comparable numbers. The net result has obviously improved dramatically to EUR 115 million compared to EUR 73 million from last year. Here again, it shows that our initiatives on the cost side and this policy to counter inflationary cost increases paid off very well when we look into the details of this sort of strong set of results.
Let me say a couple of words with respect to the markets that we are operating in before we go in more detail. The markets on the Newbuild side have performed well in Western Europe, especially the U.K. and Belgium are doing well, and also France has now picked up strongly. The rest of Western Europe, with the exception of the Netherlands, which is still a little weaker because of internal issues, has done well. Central Eastern Europe in the third quarter has slightly picked up, and markets. You remember that at half year, I told you that Poland, the Czech Republic, and Hungary are lagging behind because of initiatives that the governments took there. We're still sort of in a position, in a waiting position.
We have seen that the skies have cleared in the third quarter, and we have here now a stronger demand, especially in new build in Poland and Hungary. The Nordic markets are stable, and the Baltic ones have proved to be rather robust. The renovation, again, a very important part of our business, and I underline this because it's a growing part of our business with all the activities that Wienerberger has set, and especially our roofing segment, which is a strong contributor with respect to results, is a part of this major business in renovation, has done very well in Western and Eastern Europe, so a strong wave of renovations throughout Europe, and this is going to continue.
Infrastructure has seen also good markets in Western and Central Europe, and also from a perspective of the Nordic countries where we are very strong, we have seen a robust demand level. In North America, obviously, when we come to infrastructure, a very strong market, because, obviously, of public spending and strong demand coming in from public investment projects. Also housing has seen good numbers in the third quarter, where we can say that the Canadian and the U.S. business have taken advantage from. All in all, a very favorable environment to operate in from Wienerberger's perspective. As I said at the beginning, M&A plays an important role for the future growth of Wienerberger. We successfully completed the Meridian Brick acquisition, which gives us a strong basis for future growth in North America and Canada.
As we have elaborated in a special call, we have now started the integration phase after the Department of Justice has given the approval for the acquisition as such. We are selling off the remedy package that was requested from us. All in all, I think here we have again a strong set of markets that we will integrate. Don't forget that we have a strong exposure to Texas, the most dynamic market in housing in the U.S. and also the highest brick consumption in the U.S. Strong exposure to the Ontario market around in Toronto, in Canada. Here also combined with our existing business, strong potential for future growth. In the east, where we have the combined operations, we see a lot of synergies coming through.
Therefore, we said clearly that from our perspective, we will reach the already communicated EUR 120 million EBITDA combined because we have here the potential to have the synergies, even if we have to sell the remedy package for about $23 million that are not part of our future development in this deal and have to go to the competition. All in all, I think when you look at the deal and you see it in the presentation with a net cash out of roughly $200 million and coming in from Meridian, a contribution after year three of around EUR 50 million, it's again a very strongly value-enhancing deal for Wienerberger with a cash multiple of around 4x.
Again, if you look at the operations in North America over the last decade, we have been growing by 24% a year on EBITDA level and clearly again outperforming the market. If we move now to the U.K. and Ireland with Cork Plastics and FloPlast, we have here the right fit for our operations in order to grow the business successfully because we get an exposure to the RMI market and renovation in this less cyclical area of the market is important for us to grow the business. It's for Wienerberger, again, a strategic move because we enter the U.K. market and therefore can be here a strong player in the next decade in order to grow our position.
I recall, and, those of you who are following us longer, how we entered the U.K. market, with bricks at the time being, and that we are now a strong player in this field as well. The same will happen on the piping front, where we'll create additional value coming from those acquisitions. All in all, I think we have set here a new basis for future growth. You will see us active in the future as well, and these sort of very targeted acquisitions that create future value will be part of Wienerberger's development in the years to come. On the ESG front, the strong commitment of Wienerberger, as I said, is clearly measurable on the decarbonization front, on the circular economy front, and the biodiversity front.
All of our sites will get a biodiversity plan, and these are more than 200, so you imagine that we have a huge impact on maintaining and developing biodiversity in different countries, and also on the circular economy front, having a huge impact when it comes to reusing or recycling of our material. Again, from Wienerberger's perspective, people matter, the planet matters, and we create additional convenience through to our new innovative solutions for our clients. I think a lot of you have asked yourself the question, what does Wienerberger mean when they talk about solutions?
I think you can see it now more clearly that we combine different solutions when we talk about the roof, where we take water and energy together with our roofing concepts and provide the clients and customers with a complete set of solutions to manage these aspects. This becomes more and more important. The same goes for the facade, the same goes for the wall. Above all, also in the infrastructure, especially the infrastructure, where we offer water and energy solutions when it comes to piping, and combine those different products and sell it on to our customers. On the front of ESG, again, we have made huge progress when it comes to the whole supplier management. Here again, also clear code of conduct in place and also from an availability perspective.
I just want to recall also that during this very difficult year of 2021, we had no supply issues. We got as necessary supplies. We implemented our forward-looking inflationary policy when it comes to buying raw material or energy, and also in the internal front, completed our implementation of the code of conduct with whistleblowing and others in sort of tools that are giving the people the possibility to make us even a better place to work for. Wienerberger is clearly set from our perspective for growth and improving the quality of life of the people working for it, but also the stakeholders and especially our customers. With this sort of general remarks, I hand over to Gerhard, who will give you a much more detailed outlook and a detailed analysis of the numbers in quarter three. Gerhard.
Thank you, Heimo. Happy to do so. Ladies and gentlemen, I'm very happy to announce these new all-time high results what we see after the first nine months. Yes, we are in a positive market environment, as Heimo mentioned. Also on the other side, we are in a quite difficult when it's about inflationary environment, a very volatile environment. Yeah. Thinking on our supply chain management issues, on cost developments, availability of products. We were in a very interesting environment till now in 2021. Therefore, the more happy we are that we were able to develop our top line with a +14% compared to 2020.
Let me also do a comparison to 2019, because still you remember that 2019 was our last record year, basically, which we announced, and we are even with 9% on our revenue above the 2019 figures. That means also on an EBITDA level that we are compared to 2020, which was affected by the pandemic. We are with +18% above prior year, but also again, with a +9% above 2019. The main drivers for these successful three quarters, what we have seen so far, is an excellent top-line development, what we see. Also our procurement department did an excellent job so far.
I think also our self-help program, meaning the operational excellence initiatives which we have in place are really paying off and which finally supporting the EBITDA development, what we see. Not only the EBITDA development in absolute amounts, also the EBITDA margin, which is on a group level after the first nine months on a level of 18%, and which is also a new record for Wienerberger. All three business units developed exceptionally well. I think let's do a deep dive really per business unit to better understand where results are coming from. Let's start with the business unit Building Solutions. There you see a margin of improvement of around 0.8 basis points. This margin improvement is mainly driven by strong volumes and by high utilization rates in our plants.
You still remember that the first quarter was due to the weather conditions, a rather difficult one for us. Still, we are happy to have this high profitability after the first nine months in the business unit of the Building Solutions. Also, the implemented self-help measures, which we have done so far, supported the profitability and led finally also to lower cost structures in our manufacturing environment. The implemented price increases are covering the inflationary costs. Finally, we show an EBITDA margin of almost 21% after the first nine months. Looking to the business unit Piping Solutions, we have a different development. The first six months was strongly driven by volume, and you still remember we communicated this with our half year closing.
The central eastern part of the piping segment in Europe was very strong, and this also led to exceptional strong sales volumes. Most of you might recall that the second quarter was when it's about margin development also a difficult one in the northern region of Europe. We had there a time lag in pricing, and therefore, in the third quarter, we did some additional pricing measures. You can see that the profitability of the piping segment already picked up significantly and improved by 0.6 basis points only in the third quarter. We are almost on the level of last year.
I'm positive, even in this difficult market environment where we are in this year, when it's about raw material price development, that we can finalize and secure the profitability of the piping segment on the level of last year. When it's about North America, I think we see also there are different developments between the brick and the infrastructure segment. On the infrastructure segment, let me start with that. We see that there is a strong demand level on the infrastructure side in the States and also strong material price impacts on our profitability. The United States are using mainly PVC as a raw material for our piping business. PVC, as most of you most probably know, were increasing heavily the first half year, but also in the third quarter, PVC was further increasing in pricing.
We were able to benefit out of that, and also in the third quarter, we were able to get additional margin out of these additional price increases, what we have seen in the PVC market. In the Building Solutions segment, we were able to benefit from the positive market environment and develop the market and the volumes accordingly to the market environment where we are in. All three business units basically show an excellent development and led finally to the strong group results, what we just mentioned, which is an EBITDA of almost EUR 510 million.
As I mentioned at the beginning, we are in a positive market environment, but also the input market when it's about cost development, availability on raw materials, on energy, on packaging, on logistics is a rather difficult one and is still a difficult one. Therefore, cost management is key. Let me also elaborate a little bit more on the cost management side and also finally on our self-help program, because these two topics are definitely two key topics which are supporting the profitability of our first nine months. We mentioned it earlier, we have a centralized procurement department, so we were able to act fast and rather and quite proactive. We set the right measures and took the right decisions on time. What we did, and what was also crucial for us, we formalized our internal and external communication channels.
That means that we were in a constant alignment with our suppliers when it's about contracted volumes, meaning the stock holding levels at our suppliers, the alignments on forecasts, monthly, quarterly forecasts with our suppliers. Finally, also, we were in a constant alignment with our operations when it's about production output. What definitely also helped is our local business model. Based on the local business model, we were able to benefit from the flexibility which we have locally when it's about supply chain management, inventory level, but also when it's about availability of logistics. Finally, the last point when it's about cost management is energy. We are basically having energy based on our policy, which we have implemented, that we forward buy energy on a regular basis.
We were able also to balance out the constant market price increases in energy during the last months, which gave us a favorable average price in energy. Let me also talk a little bit more on energy. As mentioned, we do already for many, many years, we do forward buying on energy. We are basically for the next years and also for the rest of the years, we are well covered when it's about fixing volumes and prices. Thanks to that, we are able to mitigate one of our major cost risks what we have. As you know, that in the Building Solutions, in the business unit Building Solutions, energy is a major cost driver in our cost structure. For the next months, basically, or for the rest of the year, the gas is fixed for almost 100%.
Also for the next year, 2022, the demand is almost 100% also fixed. For the year 2023, we have already fixed a significant part. This is not only valid for gas. We are doing comparable procedures for electricity. Here we have comparable rates where we are covered in our expected demands. On the cost management side, very successful measures which paid off in a high or highly supportive on our margin development. Let me also give you an update on our self-help program. You know that the contribution of our self-help program is an essential part of our organic growth strategy. Heimo mentioned it before. We expect this year EUR 40 million out of our self-help program. Where is it paying off?
You see basically the contribution in this year in the top line development by focusing on the product mix upgrade, but also in increasing our share in systems and solution selling. Next to the top line improvement, we also see an improvement in the profitability of our cost structure by focusing on the operational excellence, mainly in the manufacturing environment. This led after the first nine months to an EBITDA contribution of EUR 31 million, and we are positive to achieve our target, meaning that we will contribute EUR 40 million to our organic growth figure only out of the self-help program. This strong operating performance and this disciplined cost management, what I just described, finally led also to a strong cash generation after the first nine months.
When we look to our cash flow statement or to our cash generation, we see that we were able after the first nine months to generate almost EUR 80 million higher gross cash flow than last year. Looking on our free cash flow development, we even have EUR 100 million higher free cash flow after the first nine months compared to last year. We also see that the working capital development is higher than last year. This is also mainly driven by the seasonal increase in the trade receivables, which are also due to the pricing development, also higher basically the nominal value than the last years. When we look to our investment CapEx, you see that we have invested around EUR 290 million in M&A projects.
As Heimo mentioned before, this will further increase to almost EUR 500 million till the end of the year. We settled around about EUR 300 million as dividend, and there's a buyback program for the hybrid bond in the first half year to the shareholders. Out of the disposal of our treasury shares, we received EUR 80 million in the first nine months concerning our cash position. This strong cash generation and positive cash development also basically reflects our strong and solid balance sheet, what we have. Let me also give you some KPIs on our balance sheet development. We have, after the first nine months, an equity of round about EUR 2 billion, an equity ratio of above 40%. Our leverage ratio, net debt, EBITDA, is with 1.6x , clearly below our internal target of 2.5x.
Working capital ratio in relation to revenues is slightly below 20%, which is considering our inventory levels on the rather low side. Let me also once more give you more information on the leverage ratio. The leverage ratio or the balance sheet management is simply an important topic for us just to secure also the capital structure of our company. The expected leverage ratio for the end of this year, 2021, which was also, I think, part of the presentation, which you will find on our website, is considering already all transactions, all announced transactions, M&A transactions, what we did. That means the acquisition of FloPlast in Great Britain, the acquisition of Cork Plastics in Ireland, Meridian Brick in North America, as well as Struxura in Belgium.
This amounts in total of around the EUR 500 million, which we invested in M&A activities. We expect some operating deleverage in the coming months, and as you know, we also had some cash inflows out of the disposal of the treasury sales. The expected leverage ratio is seen in the range of 1.8-1.9, which is perfectly covered by our internal target of maximum 2.5x at year-end. I think this solid financial position provides us also comfortable headroom for further growth. With basically these final words and statements, I would like to hand over again to Heimo.
Thank you, Gerhard. From my side, it is to close our presentation with the outlook on 2021. As you have all experienced, we still live in a rather volatile environment, when it comes obviously to inflationary cost increases, the inflationary environment as such. We come also to the shortage of labor that we face, on both sides of the Atlantic within our business, but also in the world of installing our products and in the construction industry as such. We face instability on the political front in certain areas. We face increasing instability on the COVID side. Again, unfortunately for all of us, and obviously we operate in a big part of our business with full capacity, which obviously makes it very important that we accurately plan, maintain our plans.
I recall to all of you that we operate with raw material in a big chunk of our business that is called clay. Clay is not a material where you press a button and you get products out there, which is in perfect quality. You need to work it, you need to have it on a consistent basis, and this is not always very easy. Winter months and wet weather is obviously very difficult for this industry. I say this not to caution anything, but just to recall again that from an industrial perspective, all things have to come together in order to achieve such a set of results. That is for all the teams around Wienerberger's business a major challenge to keep this high degree of performance.
Based on these assumptions and operating under this continuously volatile environment, we have again achieved a strong set of organic growth. We will continue for the rest of the year. We will offset all the inflationary cost increases by price increases. The contribution from our M&A activity, we have been very disciplined, as Gerhard put it, in his presentation. On the maintenance CapEx side, it was EUR 120 million. We have also been disciplined on the growth CapEx side and the S&G CapEx side, where we will spend about EUR 155 million on these projects this year, and they are all sort of paying off very well. All in all, this increases our guidance to EUR 650 million.
On the market side, we have added also a chart for your benefit in order to explain how we see the markets for the rest of the year. This is pretty much the same what I explained to you with one little exception, that the markets in Nordic part of Europe and the Newbuild arena are decreasing slightly. Quarter four must obviously, under this assumption, perform well again. We've given you an indication that, with respect to, EBITDA like for like growth, it's about 7% compared to the strong, last quarter of 2019. Again, I think 2019 was a quarter where we have increased prices and where we have done a lot, in order to have a good environment. It shows that our growth plans are ambitious when we talk about guidance.
In order to achieve it, we have to outperform 2019, the fourth quarter by 7%. This on the back of already very low inventory levels, which you can see also in the slide that we have added to you in our presentations, and where we obviously explained to you that we have managed not only working capital down, but we are on in some countries and business areas on a very low level when it comes to inventory levels. More growth is literally not possible in these product segments because we have now reached such level of inventory and capacity utilization that there's not much growth potential left in this area. All in all, it gives us the possibility to tell you EUR 650 million is our EBITDA guidance for this year, like for like.
The contribution from the M&A activity will be EUR 15 million. Gerhard has explained in very detailed way that our buying forward strategy for energy pays off, and that we have obviously here offset the strong pressure on us on the cost side when it comes to inflationary cost increases. The maintenance CapEx discipline was EUR 120, and the rest was EUR 155. You see also on the bridge that we were able to achieve or will be able to achieve EUR 50 million additional EBITDA compared to like-for-like 2020 by growth, most coming out of organic growth. Self-help, as detailed by Gerhard, contributes EUR 40 million, so this adds up to 650 and a substantial increase obviously of EBITDA in 2020.
I think from our perspective, a very strong set of results for this year and especially for the third quarter. Ladies and gentlemen, before we go in this Q&A mode, let me just say one thing. We will have a capital markets day on November 25. All questions regarding to the future 2022 onwards and strategy, I would like to keep them for the 25th, because here we will deliver all the material to you as always up front, so you can study it and then we can discuss it. I would rather concentrate Q&A now to this quarter and to the outlook of 2021, if I may. Thank you very much for your attention and the floor is yours for the questions and hopefully the satisfactory answers by Gerhard and myself. Thank you.
Ladies and gentlemen, at this time, we will begin the question and answer session. One moment for the first question, please. The first question is from the line of Yves Bromehead from BNP Paribas. Please go ahead.
Hi, Heimo, Gerhard, and Elisabeth. Hope you're all well. I understand we need to ask questions about 2021. A lot of my questions were looking a bit more medium term. I'll try to rephrase a few and think more near term then. I guess, can you just break out the organic growth in Q3 in pricing and volumes? Looking at Q4, is it correct? Have I understood correctly that you're saying that essentially you're running flat out and you can't increase your production levels at this current rates? That'd be my first question.
What I've said is indeed that we are running in a lot of areas full capacity and flat out. You won't see additional growth. By the way, the markets as such as well are sold, are pretty much from a skilled labor perspective, and digesting projects are also at this level. I don't see an impressive sort of growth in the fourth quarter. Keep in mind also that weather will play definitely a strong role in the fourth quarter. We will see how mild the next couple of weeks are till the end of the year. All in all, I think the 7% growth is again a very ambitious target for us. Gerhard?
Right. I think we are running all our operations at full speed. We are also already looking forward basically to the building season, which starts in the beginning of next year. Yes, our stocks and our inventories are on a low level. Therefore, also we are cautious because also next year in February, March, we also want to control our supply chain management very carefully and to secure that until now, we were always basically able to deliver to our customers what they need, and we want to keep this like it was also in the past.
Can you break between what is the organic growth at the top line and between price and volume?
Basically, I think, if we explain that we have to look more into a business unit per business unit. As I mentioned before, when we start with the business unit Building Solutions, we had a strong
Volume development also when we compare it to 2020, which I think is also clear and makes sense, remembering that we had this year a rather difficult start due to the weather conditions. Last year, second quarter was the pandemic. This year, basically what you can compare real own performance is the third quarter, and the third quarter was also again positive and very strong, as Heimo mentioned, when it's about volumes. When it's about pricing, we were able to cover our cost inflation and maybe also when it's about cost inflation, we see simply also that the cost inflation of the third quarter is higher than the cost inflation of the first six months. But in the business unit Building Solutions, the revenue, the top line, is strongly driven by volume development and also finally the EBITDA.
When it's about the piping segment, also there, I also mentioned it before that the EBITDA is driven in the first six months by volumes. We communicated also that we had an extraordinarily strong quarter in the Central Eastern region of Europe in the piping segment. We have seen that the summer months was more or less volume-wise on the level of 2020, but we have seen again a very strong September development on volumes. Pricing-wise, as I mentioned, we announced a second broader price increase across Europe, but mainly in the northern region, in Scandinavia. This also supported the margin improvement what you have seen or what I just explained before.
When it's about North America, it is basically the main driver in the infrastructure, in the piping segment, is pricing. We are sold out on our location in the infrastructure segment and on the brick, on our traditional business. Basically, we are benefiting from additional volumes. They are definitely EBITDAs driven by volumes and not so much on the price level. When it's about next year, yes, we have some additional capacity due to the acquisitions. When it's about North America, we will get a huge industrial footprint also, which will help us also to further serve the demand on the U.S. market.
Great. Well, that was a very detailed response, so I won't take up much of your time and let the other ones ask questions. Thank you very much and have a good afternoon.
Thank you.
The next question comes from the line of Matthias Pfeifenberger from Deutsche Bank. Please go ahead.
Yes. Good afternoon, Elisabeth, gents. Thanks for taking my questions. Firstly, congrats on the set of results. Really impressive. Also on the flawless execution. We saw the plastic pipes turnaround in the first half and now the gas price turnaround, so very well done. The first question is actually on that. Are your price increases based on spot rates, on the spot curves? Are you showing them to your clients or based on your hedged costs? We have another furnace operator in Europe that was willing to share these details. Then also, is there a risk that when, let's say, gas prices normalize, like implied by the forward curve, you have to give back pricing to the customer? Has this ever happened to you giving back prices just on a raw materials basis? Thanks.
Matthias, thank you very much for this question. I appreciated that. Let me be very straightforward here. Wienerberger has always been and will always be, under our management, a company that has a foreseeable for our customers, also predictable pricing policy. We are not a company that is speculating with input costs. We are not speculating with energy or raw material. We are industrialists and planning ahead and long ahead our sort of procurement policy and then take very sort of cautious and long-term decisions. I explain myself.
When we set our policy for buying forward energy, we take into consideration, first of all, the volumes that we need, that what we predict as production volumes in the future, in the next years to come, and therefore buy the necessary volume to have this available, because availability is a very important subject to us. It's nice to talk about prices only and costs, but we have experienced in the not too distant past also availability issues on gas. You remember that. Therefore it's for us, the availability is top priority. Second priority is to give our customers the insurance and the predictability of our prices because they plan whole projects with our products and want to understand that if this is a long-term sort of relationship or just a weekly relationship.
I appreciate how other industries are doing it, but I don't think it's the right way forward. We have proven to have long-term relationships with our clients. All in all, this explains, not in detail or gives an answer to your question, but I will say the following. We have done this sort of price increases based on our cost increases and not on spot prices, and therefore these.
Yeah.
Customers are used to this from Wienerberger, and therefore, we have also certainly some gains in market shares and some better performance in different markets, be it in plastic pipes, where the availability was there for us and not for other players in the industry or in gas, where people have now hikes in prices of 40% because they are not covered, for example. From our perspective, this is a long-term relationship. You remember, I always said, Matthias, Wienerberger is a company that values sustainability highly also to our customers and stakeholders.
That's basically no risk to give back because you took a quite conservative approach on the pricing anyways.
I wouldn't say it's conservative. I think it's a fair approach that industries take that have long-term relationship with their clients.
Yeah. That's definitely a fair point. We have other companies also being extensively hedged via forward purchases, but basing the pricing on spot rates, it's also possible, by the way. My next question would be-
I don't wanna have the last word, Matthias, but everything is possible in this world.
No, no.
You are then confronted with the situation with strong pushbacks.
Right.
Yeah.
And it turns around-
I really think it's a fair approach that you take, and it will be definitely acknowledged by our customers. Yeah, that's my view.
Mm.
Just on the M&A, you're maybe busier for a couple of quarters with the integration. How is your appetite on larger deals? Is there a plan to skew future M&A larger, but also potentially towards renovation and then maybe also more towards commercial and infra because that's where the Green Deal will start? Thanks.
Definitely. I think, Matthias, if you look at the variety of deals that we have achieved and done in Ireland and England, it's clearly in the RMI market and then also in the infrastructure. You look also at our investments when we talk about especially CapEx and gross CapEx, where we invest in the north of Europe, strongly in new plants and new capacity in infra and also in Eastern Europe, for example. Wienerberger is clearly shifting gears when it comes to these end markets and trying to sort of have here a stronger presence. This is true for M&A, as it is true for internal growth, both.
Currently, we are looking at a multitude of potential deals, and as you have seen from the past, we are ready to do actually bigger deals as well because Meridian and the deals on the piping front are not smaller ones. They're already mid-sized ones, I think, from our perspective.
Yeah.
We are digesting them very well with strong management. We just have been in the U.S. and the integration of Meridian is running very well and also in Ireland and in England. I think here we, when you say about appetite, Wienerberger is ready to take on additional growth.
Great. Thanks a lot. Looking forward to the Capital Markets Day.
Thank you.
The next question is from the line of Yassine Touahri from On Field Investment Research. Please go ahead.
Yes. Good afternoon, and congrats for the very strong set of results. A couple of questions. First, the single family market in the U.S. was close to 1.2 million housing units last summer, but the recent numbers are much lower, at approximately 1 million units. Similarly, when we look at the U.K., the mortgage approvals have come down by nearly 15%-20% since the summer. Do you see a risk of a slowdown in the coming months in the U.S. and the U.K.? Question on Eastern Europe, could you explain what is driving the very strong trends in Poland, Hungary? Is it consumer confidence?
It would be very useful to have just a bit of color on the market. Then last question, to what extent do you see a risk that you might give back market share to smaller competitors if PVC becomes more available in piping?
To the last one, I think, I don't see a major risk because we are developing our product range and, actually, getting closer and closer to our end customers. Here, obviously, as I said earlier, when I answered the question to Matthias, it's about long-term relationship, and people are obviously, appreciative if we can deliver in difficult times and for the right pricing. I'm not so afraid that we have to give up market share in this field. On Poland and Hungary, I see this as a confidence from the market. You might call it also consumer confidence, but also encouraged by the state and the government that took the right measures in order to stabilize the market. The VAT reduction in Hungary is especially a good sign.
The sort of also the incentivizing people to invest in housing and renovation, a good sign as well. I think the Eastern European markets have been a little lagging behind, but now obviously have set the right measures, and therefore, the activity will pick up. Your first question about the U.K. and U.S. with respect to housing starts and permits, et cetera. I think we live through volatile times. That's what Gerhard and myself have tried to explain, ups and downs. We will see this for the next coming years, I would say, and there's a lot to be said about this. Numbers like the ones in the U.S., I will always see with caution because you have to see where Wienerberger is present, and we see very different developments state by state.
We have strong numbers coming out of Texas, and still they are very strong. We have strong numbers coming out of Ontario, where we are strong. The East also, the pockets like Nashville, Atlanta, are growing market areas and also in some parts of Georgia and Carolina where we are active. I think here, again, you need to distinguish, like in Europe, it's very different when it comes to local regional areas, and therefore, I'm not so afraid that we have here different trends in the next months to come. In the U.K., we see still very good demand levels, and actually from a demand side, there's undersupply in the market, so we obviously face delivery times in this market.
I think from the next six months or so, I don't see a major change in the local market in the U.K.
That's very clear. Thank you very much.
Thank you.
The next question is from the line of Priyesh from HSBC. Please go ahead.
I thank you very much, and congratulations for a great set of results. I have two questions. The first one is on your capacity. Now you talk about it's kind of running full in many markets. Could you give us kind of an indication of what's the kind of capacity utilization you are running, especially in the bricks business? And for pipes, if you can, just to understand what's the firepower left in you when we look into 2022 or beyond. The second question is on the systems and solution. You helpfully put that slide where you kind of provide more solution-based projects.
How much that constitute as percentage of group revenue and I know you have a long-term ambition, but at this point in time, how big is that? How it is contributing to margin expansion.
Thank you for your two questions. I think from a capacity standpoint of view, let me just say it doesn't play that important role in the piping operations, because here capacity utilization is important as such, because you reach once a level where you can't produce any more pipes because you're full. It's not as strict and as complicated as on the clay side, if I may say so. On the clay side, we are running in overall between 85%-90%. This doesn't necessarily mean that we have 15% or 10% spare capacity because it depends then on the products and the product mix that you are running in plants. If you sell higher value-added products, then you can't basically utilize this 10% fully, but less.
It's for you a very complex situation in such. It doesn't help you in calculating spare capacity from Wienerberger's perspective. What we are doing currently, we are debottlenecking in certain areas. We are shifting products from one factory to the other in order to free up capacity, for example, or we're just diluting some of the old portfolio in order to introduce new one, and obviously also some shifts. By shifts I mean night shifts, et cetera. Here I can tell you that we face also issues around Europe especially, and a little bit also in the U.S., by the way, to find personnel, meaning human resources, because skilled labor is not easy to get. All in all, I think from a capacity utilization, that's the range that I can give you.
When you talk about solution and solution-based business, you see, this is something depends a little bit what we define, and we have our internal definitions about this. But I would say from an overall perspective, from our thing, I keep my sort of statement that I've given to you at half year results. It's between 10% and 15% of our group turnover that we sell solution-driven businesses or products. So that means that this is for the year still valid. We will certainly give you then an update on the capital markets day, what the future will bring. Yeah?
Okay. Fine. Thank you.
Thank you.
The next question is from the line of Cedar Ekblom from Morgan Stanley. Please go ahead.
Thanks very much. Hi, gentlemen. I've got a question on the growth potential and M&A of the business. It sounds like from an organic basis that the volume upside is probably quite limited and that organically it's more about improving mix and lifting pricing. Would you agree with that? Then secondly, on the inorganic or M&A-driven growth. This isn't a question about the future because I know you want to keep that for the CMD. It's more about the M&A that you have delivered year to date. With Meridian, I think we can all appreciate that the multiple is very compelling and there's potentially a lot of upside there. I'm thinking more about FloPlast and Cork Plastics here.
If I look at your cash flow statement, it looks like you've deployed EUR 184 million in M&A in the nine months, and with most of that coming in the third quarter. I'm gonna assume that most of that applies to FloPlast and Cork Plastics, considering the revenues of your other asset that you bought in the quarter were very small. If I'm looking at the slides, which give us a bit of understanding of FloPlast, it says that this is a EUR 100 million revenue business with more than a 20% EBITDA margin. Round numbers, I'm thinking maybe EUR 20 million-EUR 25 million of EBITDA associated with that business.
I'm just backing out round numbers and EV, EBITDA multiple for those two assets of around 14x before synergies, of course. I see after synergies, you think that that can fall to 7x. What I'd like to understand is we haven't had any of the specifics on those assets. Can you give us some understanding of what you paid for those businesses, considering the importance, I think of M&A in the growth story going forward with the organic picture may be more about mix and pricing.
Thank you.
Volume.
Thank you. Sure. Thank you, and I appreciate the two questions. I think on the first one, obviously from an organic front, obviously our growth will be much more focused on mix and the solutions sort of part of our business. Because capacity-wise, we are indeed on a very high level. From already what Gerhard has explained, the major part of the growth has been coming from volumes also this year already compared to last year, and pricing played an important role, but not the most important one. I think you can sort of fairly assume our growth rates to continue in this way also for the foreseeable future.
On the growth part, when it comes to M&A, I think for all of these numbers that you have given, I think we need to elaborate a little bit more on the Capital Markets Day in this respect to give you a better understanding. From a perspective, we always said that from a payback perspective, we are in the range of 7x after three years in synergies. If you have as above EUR 35 million EBITDA for these businesses, keep this in mind, then you have, I think, a good indication where these businesses are to be situated.
Could you confirm if that 35 is post synergies and where the pre-synergy number sits, just so we can get an understanding of what value you think you can create from M&A, considering that's an important part of the growth trajectory?
Sure. I mean, it's the same like you see it in Meridian also. I mean, here we have obviously from a. It's an after synergy one, and you were not so far off when you made your calculations with the EUR 25 million EBITDA. Yeah. Current year.
Okay. Perfect.
You see that-
Thank you very much.
That's then you can extract a little bit sort of the value that we create from these M&As. Yeah. By the way, this synergy-
Sorry, just one-
Sure, go ahead.
Sorry, carry on. Just on-
Oh, no. I was just.
The synergy number. If I look
Yeah. No, no, go ahead. No.
You go ahead.
No, no.
Okay.
No, I have finished.
Okay. If I look at that synergy number. Apologies, this is the life of the virtual world we live in with delays. If I look at that synergy number, EUR 10 million, and I would look at that relative to the sort of cash costs then implied in that business, about EUR 75 million at the moment. It's quite a large number. How do we think about that EUR 10 million synergies, costs versus revenue synergies? Is it all cost synergies, or is there a revenue opportunity that you're thinking about there as well?
I laugh, and I have a big smile on my face because this was exactly what I wanted to tell you before you asked the question. We were thinking along the same lines. I said it's not only cost to EUR 10 million, it's obviously revenue synergies. As you remember, we said it when we presented this deal, that when we shift these product lines through our distribution channels and with our customers, we have a significant growth potential. From my side, you know, cost is still difficult to evaluate. We are in the middle of it, but I will give you a transparent sort of picture there. I would say half-half right now, something like this. Yeah, that's probably a fair estimation, but don't nail me down, Cedar, on this one right now.
Okay. Thanks so much. I appreciate all the color.
Yeah. Thank you.
The next question is from the line of Tobias Woerner from Stifel Europe. Please go ahead.
Yes, Heimo and team. Thanks for taking the question. Well done on these results in what was a very difficult cost environment. Three questions from my side, if I may. Number one, I just wanna delve a little bit more into the margins you delivered by division in the first nine months and put them in context of history. The Building Solutions today 20.9%, which is a good level, but in 2004, it seems to have been more like 25.5% with Central and Eastern Europe at, you know, almost 30%. Central Europe, it's 23%, and Northwestern Europe, 21%.
In context of that, I'd like to understand where you feel, because you don't keep the split anymore between the sort of subregions, where you are closer to the better margins or where you're further away and where there's still more upside. Whether you, in general, agree that, you know, that is a potential upside or it's a different world we live in today. With regard to the Piping Solutions where you've achieved 11.4%, which is a great result. One of your competitors called Aliaxis has achieved a 19.3% margin in H1 this year. It's a different proposition, but maybe just give us an idea what the value creation potential is from your side relative to this company. Then just lastly, North America, 17.1%.
Historically, when I look back at my spreadsheet, 21%, again. Given that your size is significantly bigger, you're the number 1 player now versus probably being number 3 or 4 player, is there more upside to this?
Thank you, Tobias. I just, I take one by one. North America and especially the U.S., when you say 21%, I don't have the reference year in front of me, but it is certainly not a year that it has been in the last 15 years or so. Yeah.
That is '04. 2004 .
2004, yeah. 2004, I can't compare Wienerberger's activity in North America with today's activities. Very different. Very, very different. Obviously, when you take and when we discuss a post Meridian integration EBITDA margin, it will be again higher. I think from a perspective of business that we have today with all the trading activities, different products and the exposure, we will have a stronger EBITDA margin. That, that's what we also said was if you take then the EUR 120 million combined business after Meridian integration, you will see that the margins are significantly higher. Yeah. Whatever reference here you take, I think, from a business perspective, we need to be clear what is comparable. Yeah.
I can only say from the current industrial footprint and exposure, we have still room to improve in North America, and the margins will go up. That's my first one. On the piping front, to compare us with somebody who has a completely different exposure to end market and product, it's very difficult for me now to make an analysis because Aliaxis has nothing to do with our business. Probably we are better off to take Uponor, which is also quoted in the stock exchange, and there you will see a much lower margin in their businesses, especially in infrastructure, compared to ours. We have outperformed them significantly.
I'm not saying that we don't have room to improve, but the room to improve is now more on the mix side in the piping and not so much on the commodity side. Because on the commodity side, we've done our homework in sense of cost utilization and also exposure. I think when you look at the future of piping and by disposing of some of the assets or closing some of the lower margin-driven business like Greece, for example, and some other parts where we were active, we have improved also. I think at the year-end, you will see a closer to what is a normal EBITDA margin in piping based on the current footprint, again, with mix and industrial footprint. Then there we will work our way up when it comes to product mix.
When you talk about products in the clay division, I think here again, the reference here, if you take a reference year 2001 or 2005 or 2004, I wouldn't do that because, Tobias, then you are completely in another world with respect to products. Because if we had the same products as in 2004 in clay blocks, for example, we wouldn't be on the market anymore because these are technically different. They are from a whole sort of different standards. So this cannot be compared, I'm sorry. When I look at margins, we are already at, in certain areas and in certain countries on, I would call it pre-crisis margins. Definitely. Yeah. With a completely different cost structure when it comes to production.
Because I remember, and you have the benefit to have somebody here with Gerhard and myself who know the products and the production costs in the early 2000s, they were very different from the ones that we have today. Obviously, margins have improved since, and we have a completely different portfolio. It's very difficult to make any comparison and analysis from 2004 to 2021.
Okay. Much appreciated. I mean, one more follow-up question or one and a half, if I may. When you look at your past again, I'm sorry to harp on about the past, good years used to come in threes and fours, at least, you know, some of the periods. Do you feel that we may be at the beginning of such a better period given what's happening with the EU's NextGenerationEU, or is this wishful thinking?
Again, I think, not to be evasive, Tobias, but the times have become more volatile and pandemics and others, and political instability hit us regularly. Unfortunately or fortunately, we deal with these things. The past is the past, and we can learn from it, certainly, but I can't tell you or can't confirm this. These are cycles of three or four years to come. It's very difficult for me to evaluate it.
In any sense, I think what we do and what you hopefully appreciate, we steer the company for growth also in these volatile times with new product portfolios, with portfolios that are much more oriented towards the future and which gives us exposure to plans like the green plan in Europe or future generation plans in other areas of the world in order to be here a strong player and propose a high value-added solution and solutions with high convenience for our clients. That's what we are doing.
Okay. Then the final half question, which follows up into that. Some of your peers say that they're starting to feel the effect of the EU's NextGeneration Recovery Plan. Do you sense the same development, or is that not something you perceive at this point in time?
They fear to feel it or they feel it?
They feel the positive effects of the.
Ah.
-program.
Yeah, I think from our side, we will see this filtering through in countries in Europe takes a little longer than in the U.S., for example. In the U.S., you feel the strong impact of the infrastructure spending programs. You feel also the plans coming through from the U.K. government and all the measures that they have taken. EU funds take longer to really come through. I think you need to make the distinction here. In certain countries, measures have been implemented very early. I said, for example, Belgium and also Denmark had very early measures for renovation. We felt this very strongly this year already. Some countries take a little longer, like France, but France is shifting dramatically in building code, for example, and regulations there. Therefore, you have a strong activity right now in the market.
There's a lot of local regulations and local implementations that drive markets these days and less European ones.
I appreciate your answers. Thank you very much.
Thank you.
Ladies and gentlemen, in the interest of time, please limit yourself to one question only. The next question is from the line of Miro Zuzak from JMS Invest. Please go ahead.
Yes, hello. Thanks for taking my questions. I would have had two, so I stick with one. Your selling cost is now considerably lower compared to 2019 in terms of percentage of sales. Is this a sustainable level, or do you expect this to increase again now with Meridian Brick coming basically on board and also with the focus on growth going forward? Thank you.
I think what you have to consider when you look at this ratio that you had extraordinary price increases, yeah, on our group revenue, basically. We had due to the input price development on the granulates. As we also communicated before, we were able to to cover cost inflation. That means also that there are high percentages which are driving the revenue also when it's about revenue development and the selling costs. In relation to that, definitely, yes, there is a cost inflation when it's about logistics and other selling costs which are directly related to our revenue. The relation to that is definitely different. The development is different, and therefore, what we see today after this first nine months is something which is also influenced by this extraordinary environment where we are in, when it's about inflationary cost development.
The answer is no, it's not sustainable.
No, it's not sustainable, yeah.
Thank you.
The next question is from the line of Malte Schmitter from Petrus Advisers. Please go ahead.
Thank you for taking my question. Just quickly on the revenue line, do you see any pull-forward effects from clients that want to lock in orders now before prices rise further? Thank you.
No. The answer is no.
Okay, thank you. Maybe just a quick follow-up question on a different topic that we touched on before. Can you add a bit of color on price increases per kind of relevant materials in the sector? We understand your hedging strategy, but still would like to understand price changes in the industry a bit better.
Well, I think the comments I have given in quarter one and quarter two are still valid, and the energy one was exceptional. That's why I touched upon it. The price increases that we currently have performed are completely covering these cost increases, wages and others. The geographies are so different within Wienerberger that obviously that would lead us to a long discussion about what we needed. I think generally speaking, Gerhard, that's what is the case. We can probably give the numbers again.
Right. Yeah, we would have to dive in really segment and per segment, per country, per business unit. I think on a high level, we can give some information, but I think it doesn't make sense really to dive in, yeah, because it increases complexity of discussion enormously, yeah. Basically, I think we
Mr. Hanke, please unmute your microphone.
Sorry. I just was on the mic. Just to repeat once more. I think when we speak about price development, we have to speak about the brick side, because here we have the most stable development. When it's about piping, as the share of granulates is so high, you also have a high volatility, basically the pricing as you steer the business more on the margins and on the pricing. When it's about the brick, we speak about price increases, which are in the size of 3%-4%, at least, maybe partly even up to 5%, which we see to cover cost inflation.
Okay. Thank you very much.
Thank you.
Thank you.
Excuse me. There are no more questions at this time. I will indicate the end of the question and answer session.
Okay. Thank you very much, operator. Ladies and gentlemen, thank you very much for dialing in today. The next investor call will be on February 23 for our results on the full year 2021. I would also like to take the chance again today to invite you to our Capital Markets Day on November 25. For today, I can only wish you a nice remaining afternoon. Thank you very much for dialing in again, and goodbye.