Earnings Call: H1 2021

Aug 11, 2021

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome and thank you for joining the conference call on VinaBurgers Results on the First Half Year twenty twenty Taitian. All participants will be in a listen only mode. The presentation will be followed by a question and answer session. On your touchtone telephone. You for standing by. I would now like to turn the conference over to Elizabeth Feichtner, Head of Investor Relations. Please go ahead. You. Ladies and gentlemen, a warm welcome to the Wienerberger Earnings Call for the First Half Year of twenty twenty one. Our Board representatives today are our CEO, Mr. Helmer Scheutz you. And our CFO, Mr. Gerd Hanke. They will lead you through the presentation today discussing our performance in the first half year of twenty twenty one, also give you an outlook of the remaining business year. After the presentation, we are ready to take your questions. I will now hand over to Mr. Geist for the presentation. Thank you, Elizabeth, and good afternoon from all of us here in Vienna. Thanks for being on the call and we will try to go briefly through the presentation that you have received. Obviously, we are delighted to report the best ever half year result in the history of our company. You. And I think it shows and confirms that our sort of strategic repositioning of Wienerberger you. It's working and we have built a resilient business model and we sort of can create substantial organic growth on one end you. Through innovation and digitalization of the company and on the other hand are successful in our M and A you. Sort of work and developing the company further. When you look at the first half year with the revenue you. Slightly under €1,900,000,000 we have a 14% increase to last year. You. Strong EBITDA increased by 21% and obviously from our guidance perspective, we will talk about this in a minute, you. But we have increased it to 620 to 640. We position the company again and will do so for the future you. On 3 strategic pillars, innovation digitalization, we'll give you a couple of examples, operational excellence, The strong sort of contribution from our self help program in the first half, again, EUR 20,000,000 and then the M and A sort of project pipeline you. That is really interesting for us for the future to grow the company. Saying all of it, it's you. Very important, I think, especially these times when we talk about climate change and the responsibility for all of us to contribute you. In order to prevent these further disasters and really now make changes to the business model and In the sense of how we live together, Wienerberger has made a strong contribution decarbonization. We've already achieved in 1st half more than 5% CO2 reduction. We are pursuing the circular economy move in the sense that all new products you. So when you need more detail and obviously all of the more information is in the sustainability report. We put a lot of emphasis on this aspect you. And we'll make Wienerberger one of the leading companies in the field of ESG in the building material sector. When we look at the market environment you. As such, very briefly and very quickly, and we distinguish between the newbuild market, Western Europe, you. Strong rebound in Western Europe, especially the UK and Belgium. France is now also picking up. Germany is slightly positive And obviously lagging behind is at the Netherlands in this area. When we talk about Central Eastern Europe, we have here obviously the markets like Poland, Czech Republic, Slovakia and Hungary that are below levels of 2019. So we have not seen the recovery there In the sense that we have seen it in Western Europe, permits are lower, completions are lower in these countries. But as you can see from our Our business and how we perform, we actually did very well in this region. As I said earlier, due to the fact that we changed our portfolio of products And especially the self help part. The Nordics are more flat. If we look at renovation, second core market for Wienerberger, strong markets in all areas Western Europe, Central Europe, especially in the segment of you. Roofing, yes, very strong contribution volume wise and profitability wise. Infrastructure, you. Western Europe, again, strong increase and good catch up effects. Central Eastern Europe also and the Nordics has slightly positive development, not as strong as the other ones, but still from a very healthy level, they have improved their performance. You. When we look at North America, new build, we have seen a very good growth rate in the first half when it comes to new residential housing, you. Strong improvement there and obviously from the fact that we have the state funded programs on infrastructure, A very strong contribution from our piping business due to the fact that here we have a clear strong impact from public infrastructure spending. You. As I said, when we look at the different focus areas, when you look at the first half of twenty twenty one, You see that we have increased despite this sort of weaker markets in Central Eastern Europe, our turnover, it's above the level of 2019. You. And here again, as I said, it's the key message here is we are on organic growth track in the sense of new products, innovation and system approach. We have also improved the EBITDA compared to 2019, obviously, through our self help program and our discipline when it comes to cost management. You've seen obviously that supply chain management has been very well. Gerhard will talk about it on the raw material side, How we were able, 1st of all, to ensure availability, very important because we gained some market share in the Piping business you. And also very disciplined on the Brick side when it comes to the input cost on the energy side. So here, good supply chain management. Through all the Business units, we have seen good growth rates. The numbers are there. We have a slight margin suspension on the building solution, on the piping solution, we have from an EBITDA perspective also good growth. Here we had to digest obviously the strong Raw material price increases in certain areas, very important increases and as I said, manage the availability. And in North America, you have seen again a strong margin due to the fact of a healthy market, price increases and a good cost discipline. When we look at Wienerberger's Strategic growth model, as I said, we will continue with our operational excellence. Gerhard will elaborate a little more. We have contribution of you. The €20,000,000 to €40,000,000 is obviously on track for the whole year. Innovation and digitalization are the major drivers for for the growth. I give you a couple of examples. And as I said, very important in the system, a little different here, our move in order to improve our business continuously you. Let's have a couple of examples when we talk about new technology, especially when it comes to production in the Wienerbecker plant. We have spent some research money and resources in the last couple of years and see here good returns when it comes to you. New sort of optimized production technologies. Here for example, we have on Slide 14, a good example for New heat pumps and obviously optimizing the heat recovery from our kilns into our dryers, where we can save up to about 80% of energy consumption in the drying process. So again, we will roll this out through our plants step by step, here a good internal sort of research and development project that will help us tremendously reducing the energy consumption. We've introduced also on the product side, so called electron icoscopes, very small ones in order to obviously you. Monitor the weight to produce lower frying temperatures, improve thermal insulation of our products and therefore you. Obviously, it makes here a major change, a game changer when it comes to thermal insulation to increase it by 15%, which is Actually substantial in our field of product. So here, you see that there's a multitude of efforts that we put in place in manufacturing. You. We are also not sort of staying back and not investing in our plants. On the contrary, we have here a strong track record of improving our plant structure and I give you an example in North of Europe where we are the leading company now when it comes to Water Management and especially modern one in Sweden with the biggest sort of production unit in the North of Europe when it comes to piping systems and also a very new production line in Helsinki in Vanta when it comes to special products like pumping stations or device chambers and bigger tanks. You. On Slide 16, you see here what we mean by this. We have now emerged from a simple pipe producer to a system approach. What we talked about and what you try To make you understand what Srinabaga about, we are not just telling to the water companies in this part of the world the simple pipes. We are you. Talking here about large urban infrastructure projects when we talk about bigger retention tanks that we produce with all the accessories needed. You. We also have the digital solutions. You remember that we acquired a Dutch company in order to integrate this in our business. You. And here, obviously, the water companies can now better monitor and control their water, not only the volumes, but the quality you. And make their life easier. Stormwater management, obviously, when you talk about the massive rainfalls that we have seen throughout Europe is a big issue now how to manage this flooding and here we have good solutions for the urban areas when we use the stormwater management systems that we have in place in order to prevent flooding in this area. So, There is, when you talk about Wienerberger, a clear positioning of our company in water management, in smart and intelligent water management future from drinking water to obviously wastewater management here, a vast sort of activity that we will develop through the key markets that we are active in. Another word on the M and A front, here we have selective growth projects. As I said, we are working on the acquisition of Meridian. We are in good shape with the Department of Justice you. In Washington, I think we will have here sort of minor remedies, meaning selling off some assets, but this is not of major concern. It will not Our synergy potential and I'm confident even due to the fact that we had administration change in the U. S. And you. As you well are aware, because you read it from the paper and other news flows that a lot of projects get delayed currently in the U. S. Due to the fact The administration can't keep up with the pace of these mergers and acquisitions. So, we are in good shape, and I think we get you. Our sort of acquisitions through in the Q3 of this year. We have made also a very for us strategically important small acquisition with Flow Plastics and Cork Plastics in Ireland and in England. Here again, if we look at this in more detail and you. We've added a slide for you and you can also click through obviously on a video and get a better understanding. It's an integrated system from rain to drain Where we use obviously the water from the roof and here comes obviously this concept of again integrating our systems from the roofing side the water management side, use the water, store it underneath and also clean it and then use it for water supplies in the garden obviously for watering, but also in the house for the need that is required. You. So here again a system that is not only in the new build, but strongly In the renovation side, so it's a good add on for us and it will sort of improve its performance you. Because we can use it with our existing customers, social housing companies, big developers, house builders in the UK and have here A smart in house system solution, again for water combined with energy efficiency and durability. You. So again, a very good acquisition for us. Revenues about €100,000,000 turnover and profitability also About 20% EBITDA margin, so it adds to the margin improvement of the Piping business. Again, from a valuation perspective, a 7 times after you. 3 years of synergies included here, a good and attractive valuation from our perspective, you. Especially when you look in the UK. And it gives us and this is I think the key message to you, you. It has a strong foothold in the UK to grow, because here we see a tremendous potential for us to grow as a piping company in the UK. From our perspective, it fits perfectly those M and A activities in Our sort of strategy, geography wise and market wise, it enhances our exposure to renovation, which we want to grow obviously you. And therefore make Wienerberg even more non cyclical when we come to sort of the exposure to end markets. You. And it addresses the issues of climate change. As I said earlier, when you talk about water management, prevents obviously flooding, you. Adds to the water storage. So, when there's not enough water we have available, especially when you talk about Watering and water in the gardens, etcetera. It's also a major addition, I'm sorry, to population growth And the housing demand where we can obviously deal with these issues better with this integrated solution and you. We have the right answer to the rapid urbanization that is taking place and the water management in respect to this urbanization you. It is perfectly in line with all the European Green Deal and all the requirements that you have in the UK and in Ireland. And I think here, obviously, again, it shows that we as a company are strongly committed you. To provide convenience to our clients in a much more advanced way in order to meet the ESG targets that we as a company, but also the people and customers have in the different countries. It's For us, a clear must to improve the quality of life of people where we are active in to improve obviously the standards and the availability of water. So this is again I think a strong commitment of Wienerbeger before I hand over to Gerhard Schroden for the numbers you. Thank you, Einu. Happy to do so. Ladies and gentlemen, you. Our resilient business model and our solid balance sheet laid the ground, respectively, supported our further growth development for the 1st 6 months, which we are reporting today. You. Growth not only in the sense of record revenues and results, but also in the sense of a better profitability, in the sense of a you. We'll see what we are presenting while keeping and respecting our strong financial profile all the times you. With an EBITDA multiple of 1.6 times. Wienerberger generated, as Jaime already mentioned, you. A record revenue of €1,900,000,000 in the first half year and like for like EBITDA of €308,000,000 which is a plus of 21% compared to prior year. You. And with this excellent operating performance, this translates to a strong profit generation and consequently you. Into a net result which is close to €113,000,000 compared to a minus €29,000,000 in 2020. You. When we look to the EBITDA like for like presentation respectively to the reconciliation to Between as reported and like for like, which adjustments which we did, I think there are basically 2 things what we adjust you. Which are material, the one is that we did the currency devaluation on the U. S. Dollar and on the Turkish lira. And secondly, we had in the reported results some one offs out of the sale of non operating assets as well you. Some structural adjustments, which were neutralized and finally to end up with the 308,000,000 which is the EBITDA like for like. Let me give you also a brief overview on the cost management. Also Wienerberger was challenged in the first Let's say in the last month, by a very volatile raw material market environment and this what we see from a today's perspective will keep and you. We will stay in this environment also for the next 6 months most probably. Thanks to our centralized procurement department, we were acting you. Very fast and I think in a very proactive way. We set the right measures and took the right decisions on time. You. What we did basically is we secured the availability of raw materials, helped and supported by our long term supplier contract, what we have in place. This ensured that we were basically always during the last months with raw material availability which was close to 100%. The hedging policy which we implemented already during The last year's pays off now in this volatile energy environment where we are in. Basically all the Gas and electricity needs what we have are hedged for a very big part and this balanced basically out the constant market increases which we have you. And finally, our decentralized business model, our local business model, what we have in place enabled us you. To manage our local supply chain and also to manage properly our local inventory levels. This basically you. By implementing these measures on time and taking the right decisions, this brought us in a very good way during the 1st 6 months. You. With our implemented price increases, we covered our procured cost inflation. And thanks to our implemented procurement initiatives what I just mentioned, we were able to fully cover the demand of our customers in the 1st 6 months. You. Let me give you an overview and let me give you some more details on our self help program. You know that the contribution of our self help program is an essential part our growth strategy. Next to the MOD activities, organic growth is the strategic focus area of Wienerberger. You. We are well on track in achieving our targets and we expect for the 1st 6 months an EBITDA contribution of €20,000,000 you. The program is basically embedded in our strategic focus areas. That means that the biggest contribution In the 1st 6 months came out from commercial excellence and manufacturing excellence. What does it mean exactly? When we speak about manufacturing excellence, The key aspects are the continuous upgrade of our industrial setup, meaning the optimization of our plant network. This field we have seen major contributions in the first half year. Here strongly embedded is the continuous improvement culture which is part of the DNA of Wienerberger. When we speak about commercial excellence, when we look a little bit deeper you. In there, we see that the strong contributions coming from the product mix upgrades and from additional margins you. From new products and services out of our focus area innovation and digitalization. We keep focusing further on the transformation to be a full system provider expanding our portfolio with new products and digital services. From today's perspective, we are confident you. To reach our target contribution of €40,000,000 for the year 2021. You. On the next slide, on Slide 30, I would like to give you an overview about our clear capital allocation, which we follow. You. To support our long term growth ambition, we follow a clear capital allocation guideline. Basically first, you. Our strong and resilient operating model generates high cash flows with a constant improvement of profitability, what we have seen in the last years. The business model is embedded in a sound balance sheet management. Secondly, to foster further growth, you. We invest our money very consequently and consistently. 1st, in the ESG roadmap. Secondly, in growth CapEx, you. Which are supporting innovation and digitalization and third, by investing money in value creating M and A transactions. You. And finally, we serve our shareholders with a reliable remuneration, which is on a yearly base 20% to 40% of our free cash flow. You. Consistently, we respect and implement this key guideline which supports our long term growth ambition. You. On the next slide, I would emphasize once more the strong cash flow generation, which I mentioned before. I think it is also very obvious to see you. What we have earned in the 1st 6 months, we generated €50,000,000 higher gross cash flow and even 100,000,000 you. Euro higher free cash flow during the 1st 6 months. And what we also see out of the cash flow statement is you. That we round about €300,000,000 were allocated to our shareholders as dividend payment or as a buyback you for the hybrid bond, which we settled in the first half year of twenty twenty one. You. On the next slide, on the Slide 32, we present a net debt bridge where we compare H1 2020 to H1 2021 where we see that we basically kept the net debt level more or less stable. You. We also see that we significantly invested in our business and that also a big part of our cash flows were allocated to the shareholders. You. Basically, this usage of the cash flows was more or less generated out of our gross cash flow respectively by some working capital cash generation. You. Concerning the balance sheet, which is presented on the next slide, on Slide 33. You. As mentioned before, our resilient business model is embedded in a very sound balance sheet management, which is generating high profitability and creating value for the shareholders. You. ROCE improved in the 1st 6 months for almost 4 basis points to close 11% and our net debt ratio you. It's with 1.6 times clearly below our internal target of 2.5 times. Our strong and solid financial position provides you. Comfortable headroom for growth investments and value creating M and A transactions. Let me you. I'll give you a brief overview also on the next slide about our maturity profile and our liquidity position. You. Basically, with half year closing, our liquidity position was at around €820,000,000 And combined with the majority profile, what you see on the slide, this gives us you. Let's say some certain financial flexibility also for the next years. We almost have no settlements you. Due in 2022 2023, as mentioned last time, the next bigger settlements which we foresee is the bond you. In 2024 and also the last year's bond which we issued in 2025. On the last slide, you. We tried once more to emphasize the importance of our solid balance sheet management respectively our solid financial guideline or profile which we follow consequently. The chart shows the expected net debt you. EBITDA ratio for year end 2021, considering the announced M and A transactions, meaning we considered here The cash out for FlowPlas and Quark Plastics acquisition what we did in July, the expected closing of Meridian Brick, in North America and next to the operational deleverage, the ratio will be supported by additional funds you. Out of the disposal of the treasury shares and considering all these projects and transactions, basically we still expect you. And leverage ratio by the end of the year, which is still under 2, which is perfectly covered by our internal target of maximum 2.5. You. With these final words, I would like to hand over again to Heimer Schreich. Thank you, Gerhard. And For me, just to sum up on the outlook. If you look at the different markets, we have newbuild market that you. More or less, I would say, on the level that we have seen the first half of the year stable for the rest of the year in Western Europe, Central Europe And in the Nordics also in the same as in the beginning of the year, a slightly decrease. America will be further growing for the rest of the year. That's our you. Renovation, you will see up for the whole markets, different end markets, The infrastructure more stable on the European front and slightly up in North America. You. On the input cost side, we've talked about raw material, we've talked about freight costs, energy and labor. I think all of these aspects challenges that we face we are dealing with on a day to day basis in all our different markets, try to incorporate this in our pricing policy you. And make sure that we have enough freight available to move our products around, have enough labor available to lay or install our products and make it also simpler to do so for the people concerned. And all in all, I think what we want to show you here is that we are dealing it with this issue on a day to day you. From a guidance perspective, you have here obviously the bridge from last year's 560 to our guided you. 620 coming from organic growth again and obviously the self help program. You. So I think we have here again an ambitious sort of set of numbers and targets in front of us for the rest of the year, you. But we are moving in the right direction. So thank you very much for your attention. We are now ready to take your questions. You. Ladies and gentlemen, at this time, we will begin the question and answer session. You. You. The first question comes from the line of Yves Formehan with Exane BNP Paribas. Please go ahead. Good afternoon, gentlemen. Thank you for taking my questions. I'll have 3, if I can. First one is on the guidance. Two parts in that question. I mean, firstly, on the volume, If we look at the map, correct me if I'm wrong, Jaime, but you just mentioned that for the rest of the year, you expect flat newbuilds In Europe and then down in Nordics. And you're sort of mentioning your thought process from an H2 But your slide is for the full year. And given the H1 sort of implies that actually there's a deceleration in most markets in H2, which Which is not necessarily what we see in the leading indicators. And the second part of the question is on the EBITDA front. I you. I mean, looking at what you would need to bridge the gap to your $620,000,000 $640,000,000 and if you take out the self help in H2, it just It means essentially you've got a negative operational leverage or just no volume growth, in fact volume decline or price cost pressure. So you. So I'm just trying to reconcile your thought process and whether or not this is too conservative and if there's clearly some upside On what you're seeing right now? And then my final question is just on the ESG side of things. You mentioned the exciting investments In the heat pump system reducing by 80% the energy needed on the drying process, how much is the drying process as a percentage of energy that is being used in a kiln or in the plant or the manufacturing process, however you want to define it? Thank you very much. You. Steve, I mean, this is a we can make it long or shorter discussion about conservative or aggressive or whatever. I think from our perspective, we need to look at a multitude of markets that we are active in. I've mentioned that some of the key markets in Europe, starting with Poland, the Czech Republic down to Hungary are weaker than expected also. And I don't expect them to recover for the rest you. So I think we see them at this level right now throughout the year as well. So don't underestimate you. The contribution of these markets on an EBITDA front margin wise is higher, has always been made by the way. So this is, I think, you. One of the things that I want to mention here, nothing to worry about, but as I said, they are adjusting and some of the political measures that they were undertaking are not yet Sort of being positively perceived in the markets like in Hungary with the VAT decrease, etcetera. You. So what I'm trying to say for the rest of the year in this part of the world, we won't see a rebound. We remain on these levels and therefore, I think you need to keep an eye on that when you talk about EBITDA expansion. We had obviously a very good run-in the 2nd quarter, don't underestimate also. We obviously alerted to you that the Q1 was weaker due to weather reasons. So we had here also some you. Activity that was stronger in the Q2. I'm not saying that I'm pessimistic for the rest of But on the other hand, we see also issues like shortage of labor supply. We might see also some issues on construction sites where other materials are not available due to shortages and therefore the projects get delayed. So this is also something we need to be careful and look at. Again, it shouldn't sound that Haimo is now you. Looking for all sorts of excuses in order to say if you're I'm not conservative, but there's you. Still, we have come couple of months to go and the $620,000,000 to $640,000,000 and if you take the upper end with $640,000,000 is still an ambitious And I think we all will work hard. Don't underestimate also on the piping front, we'll have to digest some raw material pricing. You. Even if we have done very well in the first half of the year, this will level out in the rest of the year. So here again, there are some aspects where you need to take into consideration. You. I agree with you from a volume perspective. If markets are improving or if markets are doing better, then we will take Honestly, all benefit of it and will certainly not be shy of selling our products. You. And finally, I just wanted to say one word also on the inventory levels that are dramatically low in Wienerberger. So, We have sold a lot of our stock already and we are actually running extra shifts, especially in the roofing area In order to satisfy demand levels. So it is something which is a little bit more complex just to say 1 and 1 you. It's actually should add up to 3. That's what you expect from me at the end of the day. But again, I think we have an ambitious Sort of target here in front of us and we'll, 1st of all, meet it and then think about if it's getting better or if we have a fall that is also very strong and not weather impacted, then obviously we'll do better. So I think let us stop here. I think I I gave you some of the thoughts and some of the reasoning behind our guidance and hopefully I could put some light into it. You. Gerhard, we had another question on the The percentage of drying in the production process. You. It's obviously compared to what we use in energy and the kiln miner. Yes, so when you you. Take an overall percentage point, we are talking here more in the 25% to 30% range percentage wise, but still obviously every item that we can sort of improve, we will. But the major impact is then on the kiln front when we make here you. Technological wise or on the resource of energy major changes. You. Great. Thank you very much. Thank you, Yves. The next question comes from the line of Matthias Schweinfenberger with Deutsche Bank. Please go ahead. You. Yes. Hi. Good afternoon, ladies and gentlemen. Couple of questions from us. I hope the reception is okay. So firstly, coming back on the new build, some of the earlier slides showed actually a large recovery there and you're still pointing it flat you. Thank you for kind of the outlook for the markets for the full year. So what so it's kind of leveling off. So what would be required to get this new build, especially in Western Europe going? And then related to that renovation has been strong across the board. Can you confirm you are not seeing any slowdowns? And then secondly, on the input cost versus price, you. Can you give us a bit of color what the pricing has been so far in Q2 or the second half? You. And how you think about pricing going forward when especially gas prices continue to rise? I know you're largely hedged, But maybe also into next year in terms of pricing versus additional cost inflation? Thanks. Mattias, thank you very much for your two questions. From our side, when I look at renovation and throughout our different end markets in Europe and also I see it as a strong market and this will grow further because obviously you have a lot of incentivized sort of ways that governments are using now to improve the rate of renovation. So, I think we'll have some good years in front of us. First of all, and Keep in mind that the roof renovation is the best one in order to save energy because it's more or less 60% of the energy consumption goes through the roof basically when you have It's not well insulated. So this will be certainly a good business for the years to come. I don't see a major change. The only change the only caveat that I would like to make is, we need to always and I'm sorry if I repeat it, but the availability of labor is going to be key. You. It's key because you don't find roofers in a lot of countries in Western and Eastern Europe, people that work on the roof and that are trained to do so. You. It's a limited resource and therefore you can't see always only growth here. You. I think that's why I'm saying it's leveling out due to the fact that capacity wise in certain countries, they can't deal with small projects. You. On the newbuild front, when you say, yes, I'm saying it's leveling out a little bit on these levels that we have seen this improved level stored compared you. Last year and therefore also here capacity wise, the people that are there are not you. We don't have so many masons around. We don't have so many installers around when I talk about Belgians, the Netherlands, for example, or even in parts of France you. And the U. K. So I think we can what we can see is here that it is a good underlying trend and it will remain and we are happy about it Because obviously, we're shooting up in one go more and more than we will have all sorts of issues from delivery, logistics and shortages. So I think The current situation is very satisfying on this, but and I think new build in Western Europe will remain on a good level for the rest of the year. That's what I said. You. And I have no visibility for next year at this stage. And on the Eastern Europe, I am sorry, I told you about countries where it's a little weaker compared to the years before. And Gerhard, you will deal with the pricing issue? You. Basically on the pricing issue, I think this was your question on pricing and cost inflation and maybe we have take here one step deeper and look at it from business unit to business unit because on the brick side, we see simply different dynamics than on the piping side. On the brick side, As we announced earlier, we see our price increases, which we implemented around 2% to up to 3%. This is Fully enough to cover our cost inflation, our consumed cost inflation. What we see for the second half is that you. Our procured cost inflation will increase. That means also that we will that we already have announced second or even third pricing For the second half, to secure that also in the second half, price increase covers cost inflation. On the piping side, it is different. As you know, we are steering the business much more on the margin, on the gross margin side. You. And there, we were in most of the countries, especially in the Eastern part of Europe, a bit that we could pass on basically you. The price increases to our customers where we had or where we basically while our pricing were under pressure, this was more in the northern part of Europe, you. Where basically the channels, where we're going via merchants and where the share of the project business is also differently than other parts of the Europe, you. Where we were not able to pass on basically all the increases of our input costs and this also when you looked at the you. On the EBITDA margin of the Piping segment, you also have seen that the margin itself is a little bit under pressure, you. Which we expect and hope that we can cover basically in the second half of this year. Concerning energy, you asked for the hedging percentage. And yes, you. We have big part of the energy on gas and electricity we have hedged for the whole year of 2021. You. We speak about more than 90% and which basically means also to be sure that for 2022 already we have percentages you. Where we have secured this rather a price level which is clearly significantly below the market level for which is roundabout you. 70% to 80% for 2022 already. Okay. Thanks a lot. Thank you, Matthias. The next question comes from the line of Briaish Sia with HSBC. Please go ahead. Hello. Good afternoon, all. I have Two questions, if I may. The first one is on the pricing again. So you clearly talked about building solutions you have you are going for second and you. So would that mean that the price increases for this year in Building Solutions would look like more like 3% to 5% rather than 2% to 30% which you have achieved in first half. And on coming to the piping solution, so you have removed that €20,000,000 of negative impact So does that indicate that you would be you are now confident that you. You'll be fully recovering all the cost increase in plastic granular prices to price increases in second half. Hence, You're kind of coming to an equilibrium position. Now on second Sure, if I may interrupt you there. I think we don't you. We shouldn't have a misunderstanding because I think when you say we have removed the €20,000,000 of our guidance, we didn't do that. Yes, we said actually We still have an issue and my colleague Gerhard explained it on the raw material input cost side that has dramatically increased. You. We were not able to offset everything in the first half and we would try to offset as much as we can in the second. We didn't say that we can offset everything. You. So there will be certainly a remaining part for the year when we talk about this raw material, dramatic raw material price increases because we talk here you. About really sharp increases, yes. So when you say we have improved and this was my also my you. Trying to make my answer to Yves earlier is to say that we organically grow stronger and also the self help program and also you. The sort of the overall business contributes more to the growth in EBITDA and that we don't only get the EBITDA growth by withdrawing the €20,000,000 of negative impact of this potential raw material price increase. So you. Just to I hope I made it clear. Sorry to interrupt you, by the way. No, that's okay. So this €20,000,000 is small part of It is part of the now the underlying business rather than it's a specific line item in the guidance. Correct. Absolutely correct. You. All right. And coming to my second question on energy cost inflation. I mean, you rightfully explained about the you. Hedging policy with a strong one in 2021 and a majority of 2022 being already achieved at a lower market price. You. But looking at the cost increase in the energy prices and what we are seeing at persistent high price all through of 'twenty one, how do you look So pricing situation will evolve in 2022. Do you think this normal your usual 2% to 3% price inflation to hold or what's the kind of magnitude of price rise you need to do in early 2022 to ensure your cost inflation are being fully covered? You. Well, if I may before Gerhard goes into the details. We have never and I think it's too early to talk about 2020 you. Right now, because we will see how this develops. We've always given you a very good indication on cost inflation and how much we need to cover then through price increases. Might be the case that we need a little bit more price increases next year if cost inflation is higher, you. Might be, I'm not sure yet. And as Gerhard has put it earlier, we obviously are doing price increases in all of our products areas in order to address the situation this year that has been a little bit exceptional, if I may say so, in a lot of fields when it comes to the input cost you. Sorry to interrupt you, Gerhard. No, no, absolutely right. And I think it is too early. I think Emma mentioned it could be that we need maybe a little bit more, but I think to come here to a final conclusion is too early. You. Give us more time, we will anyhow have a better view for 2022 in most probably after September, October. And then I think with The Q3 announcement, I think it is much more clear what is needed for 2022. You. Sorry, Gareth, if you can ask probably to push you a bit on this. The 70% which you have secured for 2022, you. What kind of price rise you need to have that fully covered? Well, this is obviously in the sense that we had in the past. This is you. The 2%, 3% that we have regularly put into the market. Yes, that would cover the situation. Okay? Thank you. You. Thank you. The next question comes from the line of Yassine Touare with On Field Investment Research. Please go ahead. You. Yes. Good afternoon, gentlemen. I would have two questions. First, have you drafted a roadmap to become you. Carbon neutral by 2,050. And have you made any assessment of how much it would cost in terms of CapEx to switch from fossil fuel to carbon neutral energy for typical clay brick or tile plants? That would be my first question. And then my second question is, what margin of maneuver do you have to address The availability of labor in a context where renovation demand is likely to increase quite a lot long term in Europe, Especially if the continent is going to achieve carbon neutrality. Can you invest yourself in training program for new you. Sir, can you partner with universities? Or do you really need action from the States and from Europe? You. Ladies and gentlemen, you. The line of the presentation has been dropped. We will reconnect them and come back to you shortly. Thank you for holding. You. And the speaker line has now been reconnected. Please go ahead. I don't know if you could hear my questions. You. We broke away or broke out of this when you were saying, if we have a roadmap to become carbon neutral by you. 2,050, the answer is yes. And then, so the second part of the question is, have you made any assessment you. Of how much it would cost in terms of CapEx to switch from fossil fuel to carbon neutral energy For typical clay brick or clay tile plants? And then I had a second question, which is you. What margin of maneuver you have to address the availability of labor in a context where renovation demand is likely to increase Dramatically medium term, if Europe want to achieve carbon neutrality. Can you invest in training program for new roofer? You. Can you partner with universities or do you need to see action from Europe or from member states? When you talk about availability of labor. The first one, making our systems easy to install quicker, faster And for people actually to use also less qualified labor. Couple of examples, you remember the sort of installation of of the electrical sort of supply system in the house is plug and play and easy to install system that we have here. We have systems now also on the brick side, which will help people to install prefabricated walls very quickly, much easier, 2.5x, 3x faster than the traditional approach. You. So innovation and here also due to the means that we have available new products will help. Second one, we have improved and we have put a lot of emphasis in training using also digital means, not only physical training, but digital training by YouTube and other sort of very Easy to communicate methods for installers and people who use our products, but we will certainly improve this more and more because it's And as you correctly say, if we need more sort of projects to be realized, we need also the skilled labor to do so or the labor as such. You. And we'll make sure that our training is here a key factor of success and we will improve our performance there as well. And as I said, The new products will help as well. So innovation is a key role element there. Then you had your second questions because I answered your question when I said we have a roadmap. And the second one was, What are you actually contemplating on the CapEx front when it comes to changing to different energy resources? Let me say it in this way. You. When you actually would use hydrogen as a combustible or as a resource of energy, you. Then I think from our change perspective in the Tierra, we can rather well handle that with a CapEx that is foreseeable or manageable. We have done some tracks, but it's a little too early because, obviously, we don't have this you. Combustible available right now in big sort of means where we could run the plant and optimize it But I'm confident that we can handle this rather well. On the side of when we move To electricity, for example, then you have 2 fields. Then you either can change completely their production and move to energy, electricity driven kilns, but then you change a lot of the layout of the plant and this is more expensive. You. We are doing currently trails and we will have some testing results in October, November of this year because we run the 1st electrified in Belgium. So you need to give us a couple of months and then we'll give you an insight of what this costs and what sort of advantages it brings. You. And therefore, I think, yes, it's possible. That's the first good news. And secondly, we'll try to make it you. On a CapEx front, acceptable to all of us. But the electrification will be certainly more expensive than changing from 1 combustible like you. It doesn't. I'm just curious about the hydrogen market. You. As you're suggesting right now, it's like very limited. Do you think that the hydrogen market is going to expand medium term or Visibility is still limited at the moment? For the moment, it's still very limited. But I would say that in certain countries, I see, for example, The Netherlands moving very aggressively to hydrogen and therefore also the industry will have access, I I would say in a couple of years because they really push it. And I'm confident talking to some researchers in the universities, but you know that you. There's a lot of efficiency discussion when you switch from electricity to hydrogen, how much you use as an effectiveness. But I think here improvements will be made over the next years and then obviously availability will grow by means of this. And you. I'm confident this is going to be one of the alternative resources that we can use. On another front, biogas is also Something we can contemplate, we have it now. Even with the aid of or the support of the state in Denmark, where they actually use already in the public system biogas. And therefore, I think we will see a lot of developments. We are at beginning of this phase. And I think in a couple of years, we will see much more or much more detailed terms what we can use, what is you. I think preparing Wienerberger for this being open for these different technologies is the way forward. And here, you. I think we are in good shape and putting research and development into it. That's taken. Thank you very much. Thank you. The next question comes from the line of Ceta Ekblom with Morgan Stanley. Two questions left on my side. On the M and A front, most of the deals that you've done so far in Europe have been in the piping business And have been more bolt on in nature. I wonder if you could give us a little bit of color in terms of how you see your M and A strategy moving forward from here. Is this a case of the market is basically set up for bolt on deals? Or is there you. Something more transformational that you could do in Piping to speed up the growth path in that division? You. And then secondly, on the solutions point, could you give us a bit of color in terms of what percentage of your revenues today you. You would classify as solutions and how you see that developing on a 3 year view. And then maybe also give us a little bit of color in terms of understanding where you see the solution potential being more promising. Is it in the Piping business? Is it in the Building Solutions business? Thank you. Thank you for the two questions. And on the M and A front, yes, we did some you're absolutely right, we call them also bolt on deals on the piping side. You. It's only logic because we here we have seen that we want to improve our product offering and our margin mentioned obviously due to the fact that we have these accessory or additional products and so qualified solutions. And the market as such is interesting for us because we have some small and medium sized players, you. Which I would call national heroes in certain areas. And when they have some succession planning you. Transformational deals, If there are some and if they come at acceptable sort of valuation, we would look at it. You. It's always an issue about creating value with those transformational deals. And this goes, by the way, not only for piping, but also for Building solutions where we also have interesting projects. We don't talk so much about all the projects because some of them are under the radar screen and probably next time you. I will sort of elaborate a little bit more on the investments in sort of start up businesses and smaller businesses like prefab and others where we are quite active at this stage and where the capital allocation get is not as high as in these deals, so you. And promising by the way. So yes, we have here a good pipeline of smaller, mid sized ones. We carefully look at The bigger ones as well, but as I said, under the condition that they make sense and create substantial value for us. So this is the critical part. You. Because as you say, as you are perfectly aware, valuations have increased dramatically throughout the geographies. And therefore, I think A deal like we have put together for Meridian will be difficult to achieve right now on this valuation perspective in other countries and other scenarios. But on the second question, when you talk about solutions, it's you. The definition for us from solution perspective is obviously when you combine certain products or services to create a you. When you look at Wienerberger's whole turnover, I would say from our perspective, We have in this overall sort of exposure about 10% to 15% solutions you. And it's trading up. It's trading up with the acquisition like FloPlast and others, but it's trading up also through innovation and creation of additional sort of service components that we develop or buy in like smaller issues or developing our own digital solutions. You. Our aim is certainly to get here also to north of 30% for the whole group. I think that would be something where you. I see us rather quickly in the next couple of years. Yes. And again, you. I'm probably my colleagues will then say I'm too conservative or humble because we have developed you. And bricks and other things and accessories, we could combine them and say it's a solution. Yes. And therefore, you. Then we could say it's probably even today already 30% of our turnover. But let me be a little bit more conservative you. And a lot of my colleagues and I say from my perspective, solutions that we have in the turnover of Wienerberg, really solutions is about 15%, you. And we are moving gradually to about 30% on the short notice. I think that's what we're going through. Okay? Can I just ask one follow-up? If we think about the Piping business relative to your brick and roofing business, do you think that the potential on that business is higher than 30% On a 3 year view or would you say that's a clear answer? Yes, that's a clear answer. Yes, absolutely. Yes, absolutely. You. And could you give us any color on that or is it just too early to think about specifics? You. Yes, I think it's in all of these businesses. I mean, when we talk about water, about energy and in house business, I think here we are talking about The next question comes from the line of Tobias Werner with Stifel. Please go ahead. You. Yes. Good afternoon, Jaime Bragerty. Two questions from my side, please. The first one, I just wanted to check on you. We have a couple of numbers with regards to the M and A. Net debt to EBITDA of 1.6 on a 12 month rolling basis, which implies €600,000,000 roughly €601,000,000 you talk about the acquisitions adding you. To that, which on the basis of my math would be roughly about €420,000,000 And if strip out the $250,000,000 for MRIdian, that would leave you with the 2 plastics acquisitions adding roughly about €210,000,000 Does that make sense? Is Is that the way I should see it? Or am I getting something wrong here? That's the first question. And the second question is about MRIdian. You. You talked about a run rate of EBITDA in the 1st year of in 2021 of $85,000,000 you. You delivered a really strong result in North America. Is Would that imply that your 1st year could be better than we so far expect? Many thanks. You. Well, I think your second question first, I think Meridian will not contribute so much this year, because we will you. When we talk about the Q3, there won't be a lot of sort of months left for the remaining part. You. But if we then look into next year and it's again too early to make judgment about the market in the U. S. And everything. You. But yes, you're right. We should have a good contribution from the combined business. Also considering the fact that obviously we will have one time effect of certain restructurings on the overhead and other, so that's the normal procedure when you integrate business. But If we look at it from a like for like perspective, it's going to be a good year for or should be a good year for the American business, yes. You. And for the arithmetics and the math, I will hand over to Ger. Tobias, we could follow basically your questions. As you know, we you. We clearly agreed not to announce the purchase price. We therefore, yes, you. Your mathematics is what we could understand. But as we said, I only can confirm from my side, we will not announce any Okay. If I may then follow-up with some questions and thanks for clarifying this. The 20% EBITDA margin for the 2 add on acquisitions, you mentioned minimum 20% EBITDA margins. Does that include the synergies already or is that before synergies? That's before synergies. That's before synergies. Great. And then just lastly with MRIdian, I don't know the term for it, but I should do. Won't you benefit from the cash generated From the announcement of the deal to the closing of the deal, isn't that how it works? And you should, because of that, you. Have a lower acquisition price? Apologies for that. Yes. We have a lockbox principle. Yes, you're right. Lockbox, that's it. Yes. You. Tobias, and yes, we take advantage of this and Gerd can probably say a couple of words. Right. Basically, in the log box, I think it you. As agreed with 1st of January where we have the lockbox in and that means even if the closing is laid down that the cash which is in the company will basically move to Wienerberger with closing date. Yes, of course. You. Both directions, a lot of box goes both directions. But as we have cash, we'll be having cash within due to the strong development and performance of Meridian that we'll be cash. You. So that should reduce your acquisition price? Yes. Basically, the net purchase price. You. Excellent. Thank you so much and have a good rest of the summer. Thank you. You too. Thank you, Doris. You too. The next question is from the line of Miro Tuttak with JMS Invest AG. Please go ahead. Yes, hello. Thank you for taking my question. Just a quick one you. On Page 26 of the presentation, you see the you show the income statement and you. Whereas last year, you basically corrected for €23,300,000 of impairment charges to assets, you. You didn't do so this year. So I can see 0.0. However, if I look at your cash flow statement in the report, you. And I see quite a similar number in the line impairment charges to assets and other valuation effects. You. Maybe you can clarify what the difference is between the impairment charges you took this year compared you. To last year, whether they are actually booked in this line in the cash flow statement, I'm not 100% sure. And you. And where do you see it in the cash flow statement just to be sure? It's the 4th line. The 2018 last year was 18.386 and you. I see it was 20.253. I got it. Yes, I've seen it. Maybe to answer directly on this question, as we had last year and I think here we have you. To be clear, what has been booked last year. Last year, we really had impairment on assets, yes? So that means this come back It goes back on impairment testing according to IAS 36. This year, we did not have any triggering events out of asset impairment. You. You know that we had an impairment on the goodwill, which is roundabout €10,000,000 But on the asset side, so really on the fixed assets, there was on the tangibles, there was no Impairment trigger on that. We had some small write offs for closing down the 1 or the other plant in line with our optimization of our you. Plant network, but this is not according to IR36 on impairment testing. What you see in the cash flow statement basically that Next to the impairments you see in the position other valuation effects, you also see all non cash effects from derivatives what you have for financial instruments. Therefore, it is a position which also neutralizes other noncash effects. You. It has nothing to do with any impairments, which are in here in this position. You. Okay. And the reason you didn't basically correct it for it in your adjustments is because it's not based on IFRS 36. You. Exactly. The different reason that you are not allowed according to IFRS, if it is not based on an impairment testing, You are not allowed to show it also in the separate line. We have the small write offs what I mentioned before. When you look back to the P and L statement, you. There is a position which is called other operating expenses in the line, other. There is a small amount on write offs you. Well, I think 2 or 3 small mod bonding or closures of lines or production sites, Which is considered the year, but which is not connected with an IAS 36 impairment testing and that's the difference. Okay, you. Thank you for clarifying. Thank you. Ladies and gentlemen, we have time for one short follow-up from the line of Matthias Schweigenberger with Deutsche Bank. Please go ahead. You. Yes. Thanks a lot. The remaining one would be maybe you want to comment on the Treasures share sale. I mean, it's you. I don't know was it a good share price level. You also commented on the €4,000,000,000 market cap this morning in the press conference. You. Or is it just balance sheet containment, even though you just mentioned relations going up, you. Likely no transformative deals. So is this a good time to sell the shares given that you. Obviously, leverage is going to go lower with cash generation. Thanks. Matthias, to be very perfectly honest, we you. We get good sort of level of demand in shares of VienaBerg and some sort of investors have indicated that they would take up you. Some shares and therefore we thought that the treasury shares are well sort of used in this sense because you. Being on the balance sheet from our perspective is not very useful. So we would sort of sell them off to some of these investors. You. Ladies and gentlemen, at this time, there are no further questions. I hand back to Elizabeth Wagner, Head of Investor Relations for closing comments. Thank you very much, operator. Ladies and gentlemen, thank you for dialing in today. The next conference call will be on November 9th for our results in the Q3. And for today, I can only wish you a nice remaining afternoon. Thank you very much for dialing in again and goodbye. You. Ladies and gentlemen, this concludes the Winnebagger conference call. Thank you for joining and have a pleasant day. Goodbye.