Compagnie de Saint-Gobain S.A. (SGO) Earnings Call Transcript & Summary

Good evening, everybody. I hope that you have received our press release and that you have been able already to go through the highlights. Together with Sreedhar, we will comment our Q1 sales and take your questions. I'm very satisfied with our start of the year and the excellent dynamic that we have been able to deliver again in this first quarter. Let me sum up what has been a new record as the first quarter sales performance. We have achieved very dynamic organic growth in Q1, up 16.4%, making the most of supportive underlying markets and being very focused to leverage our pricing power and accelerate our price increases in a timely manner in the face of higher inflation. As a result, all our 5 segments have achieved double-digit like-for-like growth. This reflects the group's strong strategic positioning as the worldwide leader in light and sustainable construction. Also a strong governance country by country to offer unique innovative solutions. And finally, a commitment to strong execution from our teams on very clear operational priorities. As I said, we saw an acceleration in organic growth compared to the second half of 2021 across all our segments. Our volumes are up almost 2% in Q1 against a high base last year and up 8.3% versus 2019, which is our pre-COVID comparison basis. All this driven by, in particular, continued good trends in renovation in Europe and construction in the Americas and Asia. We are confirming our guidance for 2022, our medium and long-term drivers are strong with a clear need for light and sustainable construction as the world strive towards its net zero carbon goals. The current critical focus on energy, whether this is driven by high energy prices for consumers or by geopolitical reasons, is making energy-efficient renovation even more urgent. I'm very confident that our organization has demonstrated again its ability to overcome tough challenges, whether supply chain, high inflation, or geopolitical crisis, and will allow us to continue to outperform as we have done in recent years. I now hand over to Sreedhar, who will give you additional information about our first quarter sales.

Thank you, Benoit, and good evening, everybody. Let me give you more details about our Q1 sales. We achieved an acceleration in our organic sales in Q1 as compared to H2 2021, up 16.4% on supportive underlying markets. The currency impact was positive at 2.6% mainly linked to the U.S. dollar, the British pound and the Brazilian real. We saw a negative structure impact of 3.3% in Q1, reflecting, in particular, the divestments in distribution, Lapeyre, the Netherlands, Spain and Graham in the U.K. as well as pipe in China, and several small glass solutions in various European countries. In terms of acquisition, you have the impact mainly of Chryso, consolidated since October 2021. Now coming back to the like-for-like growth. Pricing accelerated to 14.5% in Q1 after 10.3% in Q4 last year against the backdrop of increasing inflation in raw materials and energy. This allowed us to achieve a positive spread in Q1. After the recent geopolitical events, we now expect raw materials and energy inflation of around EUR 2.5 billion in 2022. Energy is one of the big drivers of this increase, especially in Europe. Our energy cost is now hedged at around 80% for 2022 and at around 50% for 2023. We will continue to increase our hedge for next years as and when we get the right opportunity during 2022. Given the progress that we are making on pricing quarter after quarter and the new price increases in Q2, we are very confident in our ability to continue to offset the inflation in raw materials and energy expected for 2022. In terms of exposure to Russian gas, the countries where we are most sensitive are Germany, Poland and Czech Republic. We have drawn up various plans to mitigate supply cut of Russian gas in these countries. Thanks to the levers at our disposal, we estimate we should be able to limit the impact to something like 2% of group sales. Volumes were up 1.9% in Q1 versus 2021 with good trends continuing despite the difficult geopolitical situation and various supply chain disruptions. We continue to have a particularly good dynamic in renovation in Europe and construction in the Americas and Asia. I will now give some more details by segment. In Northern Europe, we saw organic growth accelerate to 19% with double-digit like-for-like sales in all our main countries. Nordic countries continue to see solid growth with the renovation market supported by energy-efficient renovation projects. The U.K. showed good growth driven by a dynamic renovation market. Germany accelerated its growth, thanks to our strong positioning in energy-efficient renovation solutions. Eastern Europe continues to see a very good momentum everywhere. We saw good sales trend in our light and thus more sustainable offer. Now coming to Southern Europe, organic sales grew 16%. All countries showed double-digit growth as our unique offer of comprehensive solutions helped us to outperform a growing renovation market. France continued to show good trends driven by the structurally supportive renovation demand. The stimulus plan for households, MaPrimeRenov, continues to be a success and the order backlogs for craftsman continue to be firm. Our complete offering of sustainable and innovative solutions, which help customers to gain productivity, is allowing us to make the most of these strong trends. We have launched our CapEx investment of EUR 120 million in insulation in France to expand our capacities, which includes EUR 20 million, specifically targeting the decarbonization of our plants and our increased presence in recycled materials. Spain and Benelux are growing, especially in light and sustainable construction solutions, and Italy continued to benefit from its countrywide support program for energy-efficient renovation. The installation of photovoltaic panels on our Italian installation factory in Vidalengo demonstrates as one of the examples among many, how we are continuously investing to improve our energy mix. In the Middle East and Africa, we saw continued good growth benefiting from the opening of new factories to make the most of the dynamic underlying markets, especially in Turkey and Egypt. Turning now to the Americas, which also saw an acceleration for the second half 2021, with organic growth up 17%. North America grew 16% with good trends in light construction solutions from roofing and siding for the building envelope solutions designed to deliver comfort in any living space. The local organization allowed us to once again minimize the negative impact of the supply chain tensions as well as the disruptions in the workforce seen at the start of the year due to pandemic. We are making progress on our more than EUR 400 million CapEx plan to increase our production capacities in plasterboard, roofing and insulations in the U.S. Latin America continued to see strong growth with organic sales up 18% despite a less dynamic macroeconomic environment in Brazil. As we told you already a few months ago, growth in our other countries in the region such as Mexico and Colombia continue to be supported by new production facilities and targeted acquisitions. Our Asia Pacific region saw strong sales growth with like-for-like up 25%, again, an acceleration from the second half of 2021. India achieved an excellent performance with market share gains and our integrated and innovative offerings for facade as well as the light and resource-efficient buildings. China also saw growth supported by market share gains despite pandemic restrictions worsening from March. Southeast Asia is picking up again after the pandemic-related issues in 2021, especially strong in Vietnam. Our High Performance Solutions saw organic sales up 10%, benefiting from the improvement of its market apart from the European automotive market. Our businesses serving global construction customers achieved record sales and outperformed the market with 22% growth, continuing to benefit from external thermal insulation demand for sustainable construction. Chryso continued to see very good sales trend and the integration process is going on very well. Mobility continued to see good sales growth to the Americas and China, especially in electric vehicles, which continues to account for more and more of our business. The European market, however, continued to deteriorate, especially at the end of the quarter as the geopolitical backdrop and the COVID situation in China weighed on supply chains. Nevertheless, our mobility business continue to clearly outperform the automotive market, achieving a slightly positive like-for-like sales for the quarter, thanks to our strong positioning on green mobility. Industries saw good growth, supported by activities related to our customers' investment cycles like specialty ceramic refractories surpassing 2019 levels, and benefiting from our innovative technologies to help our customers decarbonize their processes. To sum up, a record quarter, acceleration in pricing with a positive spread in Q1, and we are confident to offset the full year inflation. Underlying trends remain strong in our key markets. Our sustainable and performance-driven solutions combined with customer-centric organization by country are allowing us to strengthen our market position. I will now hand over back to Benoit for concluding remarks.

Thank you, Sreedhar. So now I would like to make a few comments about the outlook and our strategic priorities. Despite a difficult geopolitical environment, along with ongoing disruptions to global supply chains, in 2022, the group should continue to benefit fully from good momentum in its main markets. Especially renovation in Europe as well as construction in the Americas and in Asia. And we affirm its excellent operating performance, thanks to a solid, focused and well aligned organization. In this environment and provided there is no new major impact related to the coronavirus pandemic and the geopolitical situation, Saint-Gobain expects the following trends for each segment. In Europe, a supportive renovation market, requiring comprehensive solutions along the full value chain that increase efficiency and save time for customers country by country albeit with a high comparison basis in the first half of last year. In the Americas, a bit market trends, particularly in residential construction in North America, and in Latin America grow despite a less dynamic environment in Brazil. In Asia Pacific, market growth with continued good momentum in India and a gradual recovery in Southeast Asia with short-term uncertainties in China related to COVID restrictions. For High Performance Solutions, market growth with supportive long-term trends in sustainable construction, demand for innovation and new materials for industry decarbonization and green mobility despite uncertainties regarding the automotive market in Europe. So under our Grow & Impact plan that we shared together last fall, our strategic priorities are: first, to accelerate the group growth and impact by outperforming our markets, thanks to our comprehensive range of solutions, offerings, sustainability and performance for our customers, further strengthening our key role in building a carbon-neutral economy, thanks to our positive impact solutions. Also by the ongoing optimization of the group profile, where we will see in 2022, the full effect of the Chryso integration, and where we are preparing for the GCP acquisition. We'll continue this dynamic and targeted and value-creating divestments such as our specialty distribution business in the U.K. or in Poland that we have announced in recent weeks and acquisitions such as IMPAC in Mexico on construction chemicals or early this week Dalsan in plasterboard in Turkey. Second, we'll continue our initiatives focused on profitability and performance, maintaining robust margins and strong free cash flow generation. To conclude, in this context, Saint-Gobain confirms that it is targeting a further increase in operating income in 2022 compared to 2021 at constant exchange rates. Sreedhar and I are now happy to answer any questions you may have.

[Operator Instructions] We have our first question from Yves Bromehead from Exane BNP Paribas.

I'll have 2, maybe 3, but let's stick to 2 for now. The first one is just looking at the split by country and the development in terms of like-for-like, just noticing that France is a bit shy of the rest of the group and assuming that you had the same type of pricing growth in France as with the other countries, it would assume a negative volume. So just wanted to understand if you could sort of split maybe and give a bit of granularity in terms of what you're seeing in France. And maybe post the election, is there anything in the bag within the Macron reelection that you think could come? My second question, maybe for you, Sreedhar. On the price/cost spread, can you elaborate what is the absolute amount in Q1? Could the group actually keep the positive price/cost spread going forward even if you see more inflation? And maybe last but not least, a third question on margin overall. Last time you spoke to the market, you maintained the 10% being sort of a floor assuming price/cost spread is positive in Q1 and flat for the rest of the year or even better, assuming volume is good, mix is positive. I mean, is there enough here for margins to actually be well above 10% and closer to the top end of your medium-term or longer-term range to 11%?

Thank you, Yves. So I will answer first question number three, we confirm our ambition for the year of a double-digit margin that what we said end of February. So we confirm that clearly. Question number one, when you look at the France has had a very good first quarter, keep in mind that it was super, super strong in the first quarter of last year, the first quarter of last year was extremely high. And in the -- if I take the -- I think the relevant comparison basis over 3 years, if I jump over the years 2020 and 2021, we have above 25% like-for-like growth in France with an average of 9% volume. So that's 3% per year. So we continue to roll out a very strong underlying trend in France and the rest being in prices. So we have a good momentum in France versus the first quarter of last year. The comparison was slightly higher for France versus the other countries. But on a 3-year trend, we are very confident of what we have delivered and what we see ahead of us. And to the second part of this first question, yes, when I see and read through the lines, what has been declared by our President, the success of MaPrimeRenov, close to 700,000 projects filed in just 1 year. He has almost committed, of course, it will have to go for the new government to that for the next 5 years. So it's very good news. We knew it would be already there for 2022. He declared very loud and clear that will be one of the top measures going forward for the next 5 years. So for me, and I take France as an example, but it's particularly true for all Europe. We always said that energy efficiency was high. I always said that the best energy is the energy you don't pay when it's even higher in price, point number one. And second, when it does create now geopolitical issues, the alignment between the planet's carbon neutrality, the purchasing power of households in France and in Europe. And third, the alignment with geopolitics make energy efficiency super, super supercritical. So we have already heard the declaration from President Macron. We know that in all countries, you can read the German newspapers, you can read in the U.K., you can read everywhere, energy efficiency obligation is even higher than what it was when we published our results end of February. Sreedhar?

Yes, on pricing, on the spread, Yves, as we said in end of February, Jan was neutral. And then February and March were positive. As you have seen, we have been increasing prices proactively clearly ahead of inflation curve. I think we have to remain focused on this because it's not just compensating the inflation. It's important that we continue to push the prices up to ensure that we protect our margin. Benoit just now confirmed that our ambition of double-digit margin remains. So it's important that we continue to remain focused on this price cost spread. I think you have seen us, our capability of doing it consistently quarter-on-quarter. So I remain very confident. Given all that new price increase we have announced in the second quarter, I remain extremely confident that we should be able to compensate the inflation for the full year.

Great. Do you have a number for Q1 or you don't want to give it?

It's too early, I don't want to give a precise number. I would certainly give you in July.

It's a rolling setup of actions. We continue to push up prices in April, in May, in June. So this is ongoing and will continue. We didn't stop on March 31.

I think what is important is to know that Jan was neutral and February and March were positive. So I think that's a good trend.

So we have another question from Jean-Christophe Lefèvre-Moulenq from CM-CIC.

Yes. I have 3 questions. First, energy. I think that's most critical issue is Europe and across Europe, mainly power electricity cost. Can we elaborate more on your hedging policy on power? Are you also hedged at 80% like gas or less or higher? Also an issue with French system. You have industrial so far had a very good protection with the RN system. But what is the future in France, RN is probably diminishing it's coverage? Second question, could we have more color on energy cost in -- for plasterboard and insulation, which is a share of energy in the cash cost of both insulation and wallboard, plasterboard. And last question, could we have the consolidation impact of Chryso? Could you quantify it?

You take all the energy question, Sreedhar. On Chryso, what I can tell you is that the integration is doing extremely well, extremely well. And we are, of course, already preparing the next step of what will bring GCP on top of it. I'm happy to share with you that Chryso had a 26% like-for-like increase versus the first quarter of last year. So that shows the extremely strong performance of Chryso and the fact that we are even accelerating the performance of Chryso within Saint-Gobain. So that's a very good performance.

No, go ahead. Go ahead, Sreedhar.

No, go ahead. Go ahead.

Yes, just to quantify the sales of Chryso in the third quarter, maybe?

Chryso last year was in the above EUR 400 million range. They are ahead of their quarterly performance, I don't want to give you the exact absolute amount. But you could divide not exactly by 4 and add 25% on it, 26%, and you come up with more or less outside of the exchange rate impact with the right figures. So very good settlement and very good set of actions also on pricing because like any other business, they face some inflation on raw materials.

Yes. So coming to the energy cost, Jean-Christophe, you know that we have -- 2021, we said it's EUR 1.5 billion is the total energy bill. We have the natural gas, which is slightly above 50% of the total, and the rest of them -- rest is electricity, mainly electricity. When I say 80% hedging is for both gas and electricity together. So this is something which is done across on a very -- monitor on a regular basis. And this is something which we will continue to monitor and increase as and when we have the right opportunity as we make progress during the year.

Okay. And also in France, with the critical RN issue.

Yes. So when I say 80%, it all covers.

Okay. And maybe more color on the energy cost of plasterboard and insulation. What is the share of energy in the cash cost of these 2 business units, please?

We don't communicate specifically on that, Jean-Christophe. You would appreciate that it varies a lot country by country. And if I take the U.S., we have a very minimal energy inflation in the U.S. So in the U.S. the first part of the cost cake would be more gypsum, paper and transportation. In Europe, today, indeed, the energy content will be the first part of the cost cake, but it's in the 20%, 30% type of range. When energy is expensive, again, we have hedged our energy purchase in Europe. So it varies a lot country-by-country, again, very minimal or much lower in the U.S. compared to Europe. Very similar for insulation. And ultimately, like for the rest of the group, what matters is to push up our prices and to have a price cost positive, we look at that country by country. And within the countries, we look at that product line by product line. So all those actions are in place, including for gypsum and Insulation. I can tell you the pricing dynamic is strong. To give you some examples in the U.S. where we had a very strong pricing dynamic, the volumes are very strong. We have a lot of plants on allocation. So all the volumes are dynamic. And keeping in mind that in most of our geographies, whether it's Europe or the U.S., #1 topic for our customers is availability of materials, availability of materials. It's true for insulation, it's true for plasterboard, it's true for roofing. So -- and it's true in Europe and in the U.S.

So we have another question from Matthias Pfeifenberger from Deutsche Bank.

I've got 2. The first one is on this 2% of sales guidance you gave for basically the Russian gas situation. So is this scenario where the Russian gas is basically going to 0 in those countries and including the mitigation measures, and that's probably the delta from the EUR 1.6 billion cost inflation to the EUR 2.5 billion, just to confirm? And then a second one on pricing? Do you see a lot of price pushbacks at these high pricing rates you're calling and any demand destruction there on the ground?

I take the first one, since the outbreak of the war on the 21st of February, we have worked extensively in some operations in Europe. As we wrote in the press release, we are talking mainly about Germany, Poland and Czech Republic. So it's not related to the EUR 2.5 billion of energy and raw materials inflation that Sreedhar alluded. It's the analysis of what are the operations in those 3 countries and what would happen in the case, in the scenario, there would be a cut of Russian supply in those countries and what are the operations related to gas as a supply. And second, what is the proportion of Russian gas in those 3 countries. I highlighted already that it was very early on end of February, what are all the measures. Of course, we have worked extensively on contingency plans since then. First, we qualified as a priority industry in those countries for glass. For instance, on the 1 to 12 scale in Poland, we are second to the hospital, of course, hospital being #1 in terms of priority. Second, on alternative energy sources, keeping in mind that we have 13 floors in Europe. We have only 4 that consume Russian gas, 2 in Germany, 2 in Poland. In Germany alone, we have 4 floors. We have 1 which is relying purely on Dutch gas. We have another one, which is already on heavy fuel oil and 2 others. So that's measuring the impact of those 2 floors. And similar for Poland. The last point that we have also worked on is, of course, the flexibility of our various production capacities and analyzes the different scenarios and what kind of supply we could move from one country to the other. So altogether, we come up at something which could be in a bad scenario of 100% cut in those 3 countries, around 2% of our sales, which would be impacted now. Of course, it depends on how long, when or how much we know perfectly how to drop 10%, 20%, sometimes 30% of gas supplied to one plant. So if you take Poland, we know that they are going to be independent from Russian gas by the end of the year. They are now filling up their storage capacities for the fall and the winter. So it's just a matter of which is happening as we speak, our foot lines, our operations in Poland are running perfectly fine even after the announcement of the Russians 2 days ago. So we wanted to give you in the worst-case scenario, the magnitude of what will be impacted. And of course, to reassure you that we have worked on contingency plans for different product lines. In order countries, if I take France, all our insulation businesses are running on electricity. France is relying on 15% gas coming from Russia and our businesses have been on a super high priority list. So that's why we focus only on those 3 countries.

Yes. Okay. So the 2% on top of the EUR 2.5 billion, which is basically the inflation you're already seeing in the market. Understood.

No. The inflation is the increased purchasing cost of raw materials and energy versus the bill we had last year. What we are talking about in terms of 2% is what would be at risk of lower production related -- so in terms of sales, I'm talking.

Okay. Understand. Okay.

Related to the 3 countries we mentioned, and within those 3 countries, the impact it could be on some operations running with gas.

So coming to your question on pricing, the market dynamic is very good. You have seen in our numbers that we have been able to make progress, sequential progress quarter after quarter. If you recall, we were at 8.7% in the third quarter and the fourth quarter was 10.3%, and then now it's 14.5%. So this clearly demonstrates that the market dynamics are good. There is no big pushback. We are able to push the prices up. I think the fact that there is an inflation, it also makes the market to understand and we are able to influence the markets consistently across the board. Now you see that if you look at segment-wise price increases, it is very high in Europe is 16%, Americas is 17%, 18% and your Asia is again 17%. So -- and it's across, like if you take the glass, glass has sequentially improved from last quarter to this quarter 14%. So there is an across the board, we are able to push the prices up. And that's why we are -- in spite of the fact that the inflation is so high, we have been able to deliver the positive price/cost spread in the first quarter.

Okay. If I can sneak in a last one. Just on housing, you mentioned upbeat momentum, and I think it will continue for the majority of the year. But what do you make of increasing mortgage rates in the U.S. and recession risk there? We just saw a big reversal there in the GDP growth today?

No, we are confident about the underlying trends. We talked at length about renovation in Europe, energy efficiency being a super high priority. If I look at the U.S., we don't see a slowdown today. We are running big and on allocation for most, if not all, our product lines. Keep in mind that there has been a huge underbuilt in the U.S., close to 4 million housing units over the last 10 years, versus the big financial crisis of 2008, you have much more fixed interest rate as mortgage for the household owners in the U.S. So we are confident about the trend for 2022 and going into 2023 in the U.S. Again, we don't expect that to jump by another 10%, 20% next year. But if we keep a good 1.7 million housing start in the U.S. that's good, and that will make a very solid market for us this year and into next year. Another parameter we look at is the lag between starts and completion. And it has been big. Why? Because there has been a lack of workforce, builders across the country, sometimes because of COVID, sometimes because of resignations, et cetera. So you still have a lot to build in the U.S. for the coming years. We are confident about that.

So we have another question from Glynis Johnson from Jefferies.

Two, if I may. The first one, just in terms of Northern Europe, the like-for-like actually for the division is higher than the countries you've broken out. So I'm wondering if you can just give us a bit of color. You referenced Eastern Europe. But I'm just -- can you give us a bit more color in terms of the other countries within that Northern Europe that have clearly done better than the ones you detailed out? And then secondly, on the GCP, I wonder if you could just give us an update what competition authorities are we waiting to hear from? Which ones do you need to get before this one crosses the line?

Sreedhar, you take the first and I'll take the second one?

Yes. So if you look at the segment by segment, you have clearly, the France, which has -- in terms of like-for-like, the France has -- primarily is driven by the pricing. And it's mainly because the comparison basis for stuff in the last year. Then you have -- you wanted only for the Northern Europe?

It was Northern Europe. Sorry, the average of the region being above the countries we highlight. So it's mostly relate to Eastern Europe.

Okay. Sorry. So if I have to come to Northern Europe, you have -- clearly, Eastern Europe has been one of the biggest reason because Eastern Europe has grown significantly in the first quarter. And so that -- I would say that's the main reason there.

Can you give us any breakdown in terms of price, volume, country. Just a little bit more color on that Eastern European business. It's clearly a growth you can...

Overall, I would say the dynamic on pricing has been even above the average, there is a clear lack of products in most of those countries on top of very good volumes. So we have the perfect match between strong pricing, strong volumes and also, I can tell you, good strong outperformance from our teams, whether it's in Poland, in Czech Republic, in Romania, in all those countries and teams are fully leveraging the Grow & Impact plans and all the benefits of the last 3 years of reorganization under Transform & Grow. So a very good performance in Eastern Europe. A few points on GCP for your second question. Well, first, you have seen that we received no surprise, but the approval from shareholders in early March. So that's done. Related to antitrust, we have received merger approvals in the country in Continental Europe where we had to file. So that's done. There is still progress in other jurisdictions. As a matter of principle, I would rather not comment on these other jurisdictions. We just had the approval of Brazil this morning. It was a bit longer than expected for administrative reasons, but we just had the approval from Brazil, and it's making good progress in other jurisdictions, but I prefer respecting those authorities not to make some comments. So we are confident that we'll be able to obtain all necessary approvals and to close by year-end 2022. This is what we highlighted at the time of the acquisition. And the third point I would mention on GCP is that the spirit, also the excitement between the 2 teams because we meet, of course, with the presence of lawyers, because we are still competitors, of course, during all this process of filing, but we can still introduce to each other and prepare the integration and the spirit of integration planning is extremely positive. So that's what I would like to share with you regarding GCP, and we'll update you in due course end of July.

So we have another question from Yassine Touahri from On Field Investment.

Yes. I would have 2 questions. First, coming back to GCP, the margins of the GCP were a bit disappointing in the second part of 2021. Do you see a risk that the margin of GCP could continue to be under pressure before you acquire the business? And how confident are you in your ability to bring the GCP margins to a level which is closer to the one of Chryso or Sika? And then maybe a second question on volume. Have you seen any cancellations or postponements of construction projects because of higher construction costs or building material shortages in your geographies?

So on GCP, they mentioned in their 10-K, which had been released on March 1. They mentioned that there is some disruption on their ongoing global supply chain, no surprise. We all face the same. Their priority number one is to compensate this higher cost in their pricing actions, and they are working on it. But of course, I cannot discuss that with them because we are competitors. So we are very strict on those legal parameters. It's something you remember when we announced the GCP that we had analyzed in depth the gap on GCP performance versus what we have within Chryso or what you could see within the industry keeping in mind that Chryso is above any other peer in the industry. And it was a combination of 2 things, SG&A, and that's not rocket science to work on SG&A once the integration will be done. So we know how much we can gain on SG&A. And second, yes, have a very rigorous customer management, various actions on innovation. All that will be part of our plan that we highlighted to you at the time of the acquisition. Another parameter, which is something super strong in terms of cost synergies is that GCP, the difference of Chryso and Sika were the only 2 players integrated vertically on the polymers they buy. We make -- we manufacture polymers within Chryso and instead of buying them on the market like GCP, that's a benefit, both on the cost side and innovation that we will bring to GCP and to the benefit of GCP customers in terms of innovation, best offer as soon as we can integrate. So yes, we have clear ideas in mind on how to fix all those different points. In the meantime, they are going to suffer from that. And we knew from day 1 that GCP in terms of improvement is not a walk in the park, and it will not happen in 1 or 2 quarters. It will require several years, but it's well embedded in our business plan. Thierry Bernard, the CEO of Chryso, is very focused on that. We know what to do on the [ energy ] piece. And we know also what to do on what we call the SBM, so the waterproofing membranes that will be integrated as part of Certainteed roofing business in North America. So the plan is well highlighted and pressure on the margin in 2022 for sure, like anyone in any industry, but it's all about pricing actions. And it's all on our side about preparing the detailed action plans once we can fully close the transaction.

There's a second question. Did we see any construction project cancellation? We didn't see any such cancellation in anywhere. This is something we monitor very closely. It's important parameter. When it comes to the renovation market, today, I think the biggest challenge is to get the right skilled workmen and get things done. So there's so much backlog, as Benoit said, we are talking of a backlog of more than 3 months. So there's so much work to be done. So that is, as of now, we don't see that as an issue from a volume perspective.

So that's particularly true. And -- sorry, on renovation, we might see for 2023 in some new build in Europe, not in the U.S., but in Europe, there might be a bit of slowdown. It's too early to say, but there might be a bit of slowdown for 2023 in some -- which is not the bulk of our market. I'm just talking about new build in Europe, renovation is very strong, renovation will continue to accelerate. Keep in mind the Fit for 55 from the EU. We need to triple and it was prior the war in Ukraine and the energy crisis we face. We need to at least triple the renovation rate in Europe to be on par with the carbon neutrality targets. So renovation will accelerate, if anything, new build in some countries could a bit decelerate or squeeze a bit some projects, instead of giving a large apartment, a larger house, you could squeeze a bit on the square meters.

Even if that happens, you will have more craftsman available for the renovation work. So to me, I think it is -- today, the biggest challenge in the renovation work is the availability of people.

So we have another question from Tobias Woerner from Stifel.

Benoit and Sreedhar, can you hear me?

Yes, very good, Tobias. Thank you.

Three, If I may, and I'll make them very short. Number one, can we also apply the logic you gave to us in the first half results that a price increase of 6% to 7% on the industrial businesses sales should be able to offset a EUR 1.6 billion inflation cost impact to the numbers we've just seen, i.e., the EUR 2.5 billion and your 14%? Is that -- can we follow that logic? That's the first question. The second question. A number of your peers, but also other industries pursue a pricing approach or an invoicing approach where they currently sell their price increases on the basis of energy surcharges. Do you pursue that methodology as well? Basically, they're saying to their clients, if energy costs are going down, in the future, we will reverse those, rebate you on those prices. And then just the last question. This morning Ifo published a survey, which showed that there was severe supply shortages of building materials again in Germany, probably the highest we've ever seen on the back of steel and electric parts missing. How does this impact your business in not just Germany, but across the world?

You take the first, Sreedhar.

Yes. So to answer, Tobias, if you look at our industrial businesses, we're talking about close to EUR 25 billion. So if EUR 2.5 billion is the inflation, which we are talking about. So we need around 10% price increase for the year. So you have seen what we are at 14.5%. I think we are in good shape. And I said that we continue to remain focused on price in second quarter. We have made some more announcements. So compensating the inflation for the full year, we are very confident.

On your second question. So the answer is no. We -- with one small exception, which is our ADFORS construction industry business, where early this year, we applied an energy surcharge on top of prior price increases, all the rest, it's, I would say, plain vanilla price increase. So I guess, the back of your question is if energy at some point does moderate or does come down, there will be no automatic changes of the prices. Keeping in mind that our pricing dynamics, it's on one side, to offset the cost inflation we face. And second, #1 priority for our customers around the world is availability of building materials. It's related to your third question. So craftsmen, builders and customers, they are happy when they have the products on the job site. We invest on our side on raw materials. We invest to secure our supply chain. And I would like also to contribute to our local organization and the empowerment of our country CEOs, first, to deliver the exact pricing they need. So it's not Sreedhar and myself dictate to the center that they should increase prices by 10%, 8% or 12%. If they can do more in their country, they do more. If they should do a bit less to secure more volumes and then balance improve their P&L, they do it. So we have a very pragmatic value creative approach. Again, it's very different from the past. In the past, if the guy heading all glass worldwide was happy with a 5% price increase. If myself in Poland, I could deliver 6 and 7, maybe I would have stopped at 5% and maybe in the U.K., I would have pushed 5%, but screwing up on the volumes way too big instead of a 3% or 4% price increase. Now we have country CEOs optimizing exactly the pricing they can land on the market based on their good service, which has been the #1 priority for us, their intimacy with the customers, and at the same time, of course, coping with any kind of supply chain disruption they have on the raw material. So it's a good transition, I would say to your third question. Yes, we have been managing over the last 18 months, supply chain disruptions. Frankly speaking, we thought end of last year, beginning of this year, it would ease a bit and it was easing a bit. If I take our large presence across France, talking and selling to all craftsmen and that's why we gained so much market share on renovation in France because we talked to 400,000 craftsmen, thanks to our digital outlets. We were at 7% to 8% stock out in June last year. It was down to 1% and 2% end of this year, beginning of this year, we have invested on inventory. I talked yesterday again to our business over there. And today, we are still at 2%. But I guess it drives a lot by country and also by players, depending on how much you have invested, how much you have secured on your supply chain, on your inventory and raw materials. So it's deteriorating a bit clearly because of the war in Ukraine, because of some disruption we are seeing or we could see out of China. But all this for us is quite minimal. China supply is below 1% for Saint-Gobain, China supply getting out of China. And on many, many occasions, we have learned and we have prepared the last 2 years since the COVID outbreak to prepare a second or a third source of supply. So yes, this is coming back on top of the pile, I would say, supply chain disruption, but we are managing it, I think, quite well versus what I see in different markets. One point I would like to highlight also is that we have several competitors who had major presence in Russia. If I take one example, we have a strong Finnish insulation business, which was, over the recent years, under pressure on pricing from supply from Russia. I'm not going to give names, but you know who are the names supplying from Russia. All this have been cut. So Finnish customers are happy to buy from a Finnish plant, and that gives you a good availability, for us, better pricing, better margin. If I take the glass in Europe, we have half of the exposure of Russia and Eastern Europe compared to our competitors. So again, there is a changing dynamic, and we are taking as much as we can to outperform the market. But supply chain, you are right, is back on top of the list, this explains also why we see such a strong pricing dynamic.

So we have another question from Sven Edelfelt from ODDO BHF.

Yes. I'm a bit surprised you are not guiding a little bit more of the market, especially for H1. We are already end of April. And given the very strong Q1 on the 3 months backlog that Sreedhar just mentioned, I would like to understand why you are so cautious? I mean is it a discussion you had at the Board level? That's the first question. And then the second one would be a clarification on your cost raw material guidance, the EUR 2.5 billion you mentioned, we're talking at constant volume here, meaning that it only includes the price increase portion?

You want to take the second and I take the first?

Yes. So the inflation is based on what you have on the -- you're right, Sven. At the end of the day, you need to take the base figure. So the base figure is to the reference year is 2021.

And to your first question, we guide, I think, well the market. We guided the market end of February. I can tell you that April has been good. I answered clearly your question or the prior question on the margin. We will update you in due course. We can see good trends in the different markets. We are confident about the midterm, long-term drivers. We are confident, as we said, about our ability to offset raw materials and cost inflation, also about the strength of our local organization to adapt to any different challenges. In April alone, we have seen some slowdown in China. China is a bit less, than around 3% of our total sales. But clearly, there will be an impact on China in the second quarter. We told you like already in April that Brazil is softer than last year. But last year, we had 25% volume growth in Brazil. So we expected that. Auto Europe in April and in Q2 will be a bit more challenging. But altogether, we are confident with our guidance. On the second quarter, keep in mind that the comparison basis from last year is high. We are confident about volume growth for the full year. It's too early, I would say, in our business. First quarter in terms of seasonality, you still have a bit of winter. So it's too early to think differently. I think we have given you quite a lot of colors on where we stand, the focus on our teams and how we run the business going forward.

So we have another question from Arnaud Lehmann from Bank of America.

Three, hopefully, brief questions from my side. Firstly, do you mind commenting again on High Performance Solutions. I think you are about 5% volume growth in Q1. That's quite, I guess, encouraging considering the automotive trend. So would you mind helping us understand what's the underlying driver and if they are sustainable. Secondly, in your statement, you are mentioning that the optimization of the portfolio continues country by country. Are there any more kind of meaningful asset disposals in the pipe that we need to consider, and I mentioned the pipe already? And lastly, just a follow-up on GCP. Do you need the approval from the Chinese competition authorities?

Thank you. So on GCP, no, we don't need the approval from Chinese authorities. HPS indeed has had a very strong first quarter. Sreedhar told you about the very good dynamic on our sustainable construction overall segment. We have had also a very good dynamic on some specialty materials for industrial applications. So that's a good performance, and it's driven by innovation by the [ coal ]. It was something we highlighted during the Capital Market Day. We have a lot of industrial customers that are asking -- big ones that are asking new technologies, new materials to decarbonize their own processes. So we have kept increasing the backlog of orders on those materials, which is good, and we have a good dynamic of both volume and prices. And I must say that even in mobility, we have been slightly up -- so of course, up in Americas and Asia, down a bit in Europe, but altogether up, and that means we have outperformed the market clearly overall. And this is due to our strong positioning of electrical vehicles. So overall, a good dynamic on High Performance Solutions. So we'll see a good sequential improvement also on High Performance Solutions for the margin versus the second half of last year. On your second question, it's portfolio optimization. It's a routine of our managers. We are extremely pragmatic driven by value creation country by country. And we keep pushing for that, both on acquisitions and divestments. There is no taboo solutions have to fly, that there is no taboo. So we'll continue to do that. In due course you have seen some recent announcements. So we'll continue to work on that. Some of them were focused on our U.K. especially distribution banners, Tadmar was distribution in Poland. We are working also on some downstream glass solutions businesses. So we continue to work on that, improving the businesses sometimes before we sell them. So that's part of the routine. And I can tell you everyone is focused on that. We review that, Sreedhar and myself regularly.

So we have another question from Martin Flueckiger from Kepler Cheuvreux.

This is Martin Flueckiger from Kepler Cheuvreux. I've got 2 questions. Firstly, I guess, for Sreedhar, if I understood you correctly, you were mentioning the required selling price increases to cover the EUR 2.5 billion cost inflation. Now if I -- again, if I understood Benoit correctly, you're actually -- or actually Sreedhar, you're actually targeting not only to offset cost inflation in absolute terms, i.e., in euro terms, but you're actually targeting to hedge the operating income margin. So my question is how much pricing do you require to safeguard the operating income margin, not the absolute operating income level? And then my second question is, again, margin related. I was wondering how much margin accretion do you expect from the change in scope in 2022. Leaving GCP, the uncertainty with regards to the closure of the GCP acquisition aside, leaving GCP side for now, just what we know as of today, what kind of changes in scope you will have? What kind of margin accretion we will see this year?

Yes. So you're right that our ambition is to protect the margins. So we have to -- we will continuously look for not just offsetting in euro terms the inflation, but beyond that. So if you have to mechanically calculate, you need to -- you're talking about instead of 10%, we're talking of 11%. So that's what you need to target to make sure that there is no impact.

Only 11%?

Yes, instead of 10% for the full year.

It would be 11%, okay. Just that small difference, okay.

Yes. I mean, again, you have to go back to the 10% is the margin of the group, so you just have to apply that simple logic.

Okay.

Okay. So -- and coming to the impact of -- the structural impact, margin-wise, it's very limited. But what we said is from a euro terms, it will have something like 1% to 1.5% in 2022.

Sorry, I didn't quite get that.

I said in terms of euro terms, the impact on absolute improvement in the profits would be around 1% to 1.5%. And in terms of margin, it will be very, very minimal.

So we have another question from John Fraser-Andrews from HSBC.

And 2 for me, please. The first on the volume impact of 1.9%. Perhaps you could identify what the volume anticipation effect was in Q1 '21 so we can identify exactly how strong that 1.9% was in underlying terms. And within the volumes, you've called out High Performance Solutions and Asia Pac for their volume growth year-on-year. It sounds like Southern Europe because of the high -- very high base in France, there wasn't much volume growth, but perhaps you can give some color on the other regions. So that's the first question. And then the second is, in China, did you see some volume growth in China in the quarter year-on-year? And could you perhaps comment on the property market there? Is it just COVID, do you think that's causing a little bit of disruption? Or do you think the underlying market is weakening with some of the data points that are coming out of China?

Okay. So I'll take the second question, and Sreedhar will give you more color on the volume versus the volumes of last year. So yes, we have seen some volumes up in China in the first quarter in the range of 2.5% to 3%, decelerating of course, in March versus a very strong start of the year. So for me, the volume impact is entirely related to COVID lockdowns and restrictions. We expect, I don't know whether it will take 1 month, 2 month, but we expect that to bounce back very strongly. To some extent, I would say, unfortunately, we already went through that over the last 2 years. I would say 3 times in India, up and down, lockdown, come back strongly. We experience that also in China. So it's entirely related to COVID restrictions. Auto was strong in China for us, but now has been dropped a big way in April, same for construction across all different product lines, particularly light construction and plasterboard. So we expect that to come very strongly. And I would highlight one point, which is maybe not in your radar, the Chinese government came recently with some very strong directives and guidelines for energy-efficient buildings and light construction for the next 5 years. We don't have time to cover that in detail, but that's something which should support our offer in terms of light construction, plasterboard, plaster construction chemicals in China going forward because they are asking for recycling, they're asking for CO2 lower-weight products. So that will be another reason to bounce back strongly after the end of the lockdown.

Yes. So coming to the volume increase, if you take Northern Europe, it was 3.1%. Southern Europe was 0.1%. We just have to keep in mind that here is the comparison basis. So it's good to see the numbers in the last 3 years' comparison versus 2019. We are talking about around 2.5% per year volume growth in Southern Europe. Americas, again, it was negative 0.9%. Here also, when you compare last 3 years' average, it's more than 5% per year. So again, very strong volume growth. So it clearly shows that there was a comparison basis was tough last year. And then you have Asia, which was 7.3% and High Performance Solution was 4.7%. So as Benoit said, overall, we remain confident to continue to deliver the volume growth for the full year.

So we have another question from Rosemarie Morbelli from Gabelli.

Rosemarie Morbelli with Gabelli Funds. I was -- you had already a few questions on GCP, but I was wondering if I could add another one. Could you give us a little more details on how you are preparing for the integration of that particular business? And then regarding the regulatory approval and its status, I understand that you cannot give details, but are you expecting any issues in the U.S., for example? And with the situation in Russia, and I believe you do need their approval, can you bypass that approval? Or do you expect things to go as in the past?

So Russia it's extremely minimal. So we don't need approval in Russia. In the U.S., no, I don't anticipate any particular point. We are in the process, it's just a matter of time, I would say. But again, I prefer not to comment, respecting the different antitrust authorities. Preparation means, again, not talking about business, because we are competitors. That means who are the different people on both sides. So our teams from High Performance Solutions and CEO of Chryso went to Singapore to say hello and present Saint-Gobain, present Chryso to the GCP teams, which we are extremely happy about that and what would be the R&D policy, the different footprints of our plants in Asia. We did the same in Latin America. We did the same in the U.S. several times. So it's mostly on the people side to tell them we are there. This is a fantastic evolution of the business that we are going to create together when we are together and all the benefits for the customers in terms of best service, in terms of innovation, in terms of increased offer. So we are preparing that, plus some, I would say, obvious back-office stuff. What about the IT, how do we plug their IT to our IT, what about the payroll, what about the health care medical in the U.S., I would say, all the administrative work that you have to make in such an integration. So it's a combination of -- on our side, of course, we have a lot of internal plans on the business side. But what we share with the GCP teams is more the high level of who is Saint-Gobain, what is the footprint of Saint-Gobain Brazil. Fantastic, you have 19 plants of construction chemicals. That would be a great combination and the likes of those discussions. All that, all the time with lawyers because we are competitors and we need minutes from the meetings with lawyers. I personally visited several plants. I talk to the GCP CEO once a month, at least, if not more. I did that again with lawyers yesterday, and we change on the high-level IDs, we change, for instance, on retention of managers. Right after the acquisition, we highlighted together a list of, I think, it's 160 managers where we have put a retention bonus, so that they are there when we close, and we are happy to welcome them. We review where they are, if they need clarification, et cetera, et cetera. So those are the -- we have done it in the past. I've done it personally already with Continental Building Products. So we know how to do that, and we are paying attention to all the details because it's critical. And the more you probe, the faster you go after that.

So we have another question from Manish Beria from Societe Generale.

Yes. Just a very quick one. So what was the pricing in distribution and the industrial business, so 14.6 or whatever, if you're going to split into industrial and distribution?

It was in the same range of what we have for the whole group.

And we look at that, we manage country by country. So for me, what is important is when there is a strong dynamic, when there is a strong demand on renovation, when we have a strong market share, how do we leverage our end-to-end solutions across the value chain country by country. So we look at that, I look at the performance of the synergies, of the teams on a very pragmatic way country by country. And this is how we manage the business. This is how we have managed the business for the last 3 years.

And one more if I can add. So can you confirm that in the distribution business, you will -- you are able to maintain your margins?

Again, it's a country-by-country approach. The answer is yes. The answer is yes because you do it immediately. You do it immediately. So country by country, yes, we are able to pass the overall inflation on the materials, the Saint-Gobain building materials. And of course, we coordinate all this together on a smart way, and of course, other building materials country by country. So the U.K. is different than Sweden, which is different than Norway, which is different than France.

So we have another question from Cedar Ekblom from Morgan Stanley.

Three questions on costs for me. In the full year numbers a couple of months ago, you had guided to cost inflation of around EUR 1.5 billion, and you gave us some guidance on being hedged on energy. And we're now sitting 2 months later and the cost guidance is EUR 2.5 billion despite that energy hedging. So I'd just like to understand how effective the hedging is that you have. And does it really provide you any insulation from what's going on in the energy markets and raw material markets more broadly? So just how do we think about the effectiveness there? The second one is on incremental costs to switch your energy sources in those assets that you spoke about should you get into a situation where Russian gas is not available. So we understand the revenue impact if you have to turn those assets off. But how do we think about the costs that you may have to incur to keep them running? And then finally, on the EUR 2.5 billion headwind that you flagged on raw mats and energy, could you break out how much of that is energy and how much of that is other raw material costs?

Sure. Okay. So we just have to keep in mind that I gave EUR 1.6 billion, and I indicated EUR 1.6 billion inflation, which was similar to what we had in 2021 end of February, where the Ukraine war was just announced. So it was like we didn't have a good visibility of how long this will continue. And it's clearly with the sustained high level of energy costs. It is now clearly impacting across all the raw materials, packaging, transportation, so this is not just energy costs. So we are talking about an increase of around EUR 900 million increase. So if you have to take, again, a split of this EUR 2.5 billion, around 50% of increase is coming from energy related, when I say energy-related, gas, electricity, transportation, asphalt. And then you have another 50% is across all the raw materials is coming. So this is -- again, this is not just in one, it is across the board. And I confirm to you that the hedging is very efficient. And it is not something which is -- if we would have not done hedging, I think we would have been in a deep problem, I can tell you. So this is a very, very effective, and we have been monitoring it very regularly. And to me, this is something we have started thinking about '23 -- to 2023 now itself. So that also reflects that we anticipate, and at appropriate time, hedge our exposure.

On the second question, Sreedhar, I can answer the -- when we switch to heavy fuel oil, it's actually cheaper today. The reason why we didn't do that in the past is that, unfortunately, it's not good for the CO2. So in terms of carbon footprint, it's not the right decision, but we do it if we have to do it in order to save the gas supply, but it's something that we had dropped years ago in terms of a way to supply and to heat furnace because of the higher CO2 content, but it's actually quite significantly cheaper as we speak versus, let's say, the spot market of natural gas or even the hedge price that we pay for natural gas.

Is it cheaper when you take into account you'll be paying for carbon? So your carbon emissions will go up, right?

Yes, sorry, I've not made the math in those details because we have quotas and we have in excess of quotas.

That's not our ambition. That's not...

It's a short-term fix. I tend to think that it would still fly based on the gap today if I were to take a spot price of natural gas and heavy fuel oil. But it's not something we are happy to do again because of the CO2 impact. It's just, I would say, a backup plan.

So we have another question from Elodie Rall from JPMorgan.

Sorry for asking so late some questions. Just a couple left on my side. First of all, did you disclose the distribution like-for-like growth for Q1? I don't see it. Sorry, if you did. Second, in terms of volume for Q1, have you observed any prebuying ahead of the new price increases that are being announced? And maybe a last question on the measures that you're seeing coming through for incentives with regard to energy efficiency and decarbonization that EU brings it on it, et cetera. I mean we talked a lot about the MaPrimeRenov. But once that's done, like what other measures are you seeing that are coming through to give you the confidence that energy efficiency innovation will increase from next year?

So as far as distribution like-for-like is concerned, is almost in line with the group average, Elodie.

And as you know, the new organization is by country. And we have aligned our reporting effective 2019 by country with one exception on distribution overall during the transition period over the last 3 years. It's done. It's over. We don't have any owner. There is not a single manager running this P&L within Saint-Gobain. We have completed the transformation as planned. We have actually reached a very healthy margin at 47% operating margin for distribution end of last year on the perimeter that we have kept. We are extremely happy to give you color country by country on the dynamic, whether on pricing and whether on volumes. We continue country by country, whether it's on insulation when we sold some EPS firms in France and Germany 2 years ago, some glass solutions or some distribution assets like our specialty business in the U.K. or Poland recently. So we continue to optimize also our different distribution assets country by country. But I want to be relying in terms of reporting with the way we manage distribution, which is by country with a country CEO owning the full presence on the value chain. Now on your second question, yes, we have seen a bit of pre-buy end of last year. So the start of the year in some product lines was a bit softer. Even Saint-Gobain in some of our -- if I take France distribution, coming back to the prior question, we did buy a bit of extra inventory end of December last year to before the price increase of January 1 or February 1. So there was a bit of prebuy. And therefore, in some countries or product lines, we have seen a bit of the impact in Q1. Your third question on energy efficiency, I'm very confident that it will in France stick, and it has been a clear debate during the short but efficient campaign we have seen energy efficiency for households, for public buildings, we'll start to push and see that in 2022, is on top of the agenda. There was not a single paper, article from journalists talking about what needs to be done in terms of carbon neutrality road map for France in the coming years without talking about energy efficiency. On a broader scope, across Europe, this is the case as well. When you see Italy is spending on the cash bonus 110% still for the next years until 2025. When you see the turmoil in Germany in terms of geopolitical dependence on energy, there is a strong push towards renewable energy on one side, and there is a strong push to accelerate the energy efficiency of homes. So it's on top of the agenda everywhere. And I'm very confident that for not only carbon neutrality like in the past, not only cost efficiency, when you renovate your home with -- that was a use case we showed during the Capital Market Day, all the good Saint-Gobain products and the solutions delivered by our distribution, we save 70% on the energy bill, and it's even higher in terms of payback when the energy price is higher. So second, it was based on purchasing power for the households. And third, now it's in line in terms of geopolitics in Europe. So the Fit for 55 on tripling energy efficiency renovation in Europe is getting now a geopolitical parameter, which I'm afraid is not going to disappear. It's going to further accelerate. So yes, I'm confident that we are going to see that. And we are, as you know, expanding our capacities on light and sustainable construction, whether it's for insulation in France, whether it's a plasterboard in Romania or in Spain recently, we are adding some, what we call spinners in some of our plants running 5 shifts. So we are pushing all Eastern Europe is out of capacity of insulation. I get some products were coming from Ukraine and Russia in the past, some competitors are shut down or cannot supply. If you take Poland, Romania, Czech Republic, the super high like-for-like growth we just highlighted a bit earlier during the call, it's related to all those product lines where we have a good presence and a good offer.

So we have another question from Nabil Ahmed from Barclays.

I have 2, actually. The first one is about HPS margins. Could you please help us understand how much benefit you expect from the adaptation measures over the last 2 years? And maybe if you could confirm that you would expect margin to increase even if there is no recovery in European O2 volumes this year? And the second question was on the acquisition pipeline, maybe if you could elaborate on the state of the acquisition pipeline. And I guess the question is to understand whether we could see a larger acquisition this year or if the priority for now is to close GCP first?

Well, on HPS margin, so we are confident that sequentially versus the second half of last year, we will improve in the first half without offsetting the negative -- of mobility being weak in the second quarter. So even with that, we are confident that we'll improve the margin in the first half versus the second half of last year. We have a good dynamic within High Performance Solutions. So I think we'll come back to good healthy levels of margins within High Performance Solutions. So we forecast for the full year, a further improvement versus the margin we had last year. And the dynamic is strong. We have a good organization and a very good team. In terms of pipeline for acquisitions, we continue to look at several segments across different geographies. Construction Chemicals is one. We have been happy to close a significant one in Mexico end of March, light construction like plasterboard, it's a partnership. It's not an acquisition, but it will make us by far the #1 in Turkey. So we are already very strong in insulation and very strong in Construction Chemicals. Chryso was also strong in Turkey. So that Dalsan partnership is a very good one. We are looking on 2 axes; one, completely aligned with our strategy on light and sustainable construction. Second, in terms of geographies, I highlighted, North America and Asia emerging markets. That's a trend we would like to continue to push. And third, which is extremely important for us, to be very disciplined on value creation. We did pass on some acquisitions late last year in some of our businesses. We want to be extremely disciplined on value creation and we know where to stop. So we are going to make some acquisitions before the end of the year or before the close of GCP. But in the small to midsize that we like, where it's easy to integrate, where we know where are the mergers and where are the alignment on the strategy, on the geography and on the value creation financially is extremely strong. So we continue to be active.

So we have another question from Tobias Woerner from Stifel.

Sorry, apologies for a follow-up question, but I'm just trying to check a logic here. Sreedhar, you earlier said 10% needed for the EUR 2.5 billion. Clearly, in the first quarter of 2021, the price increase was 2.6% and then sequentially got higher, up to 10.3%. If I do the math, it seems like you need sequentially plus 2% as the year progresses to get to 10%. Does that make sense?

When you look at -- if you take the base effect, we are at this point of time, mechanically translates to 10%. So you're right. I mean if at least maybe additional 1% or 2%, if that's something which we will continuously focus on.

And we have country CEOs who are fully empowered to maximize the P&L of Saint-Gobain. We insist loud and clear on their pricing actions, their margin actions and also their volumes because we're going to continue to outperform the market. So they make a combination of all this to maximize the P&L of Saint-Gobain. So it's not just running prices like crazy, but the expense of volume outperformance. We have been happy to gain market share, whether it's in France, in the U.S., in the Nordic countries, in India, et cetera, in several markets at the beginning of the year. So it's a combination of all those parameters that we keep in mind with a good balance.

So you really need to fine-tune this approach for the rest of the year, if I hear you correctly.

Once we have covered the price/cost spread being positive, once we have secured the margin, the third topic in terms of priority is to continue to outperform in terms of volumes, leveraging the very strong end-to-end solutions of Saint-Gobain across all the value chain. So we have to keep this parameter in mind. And we are doing that running Saint-Gobain. I told you that during the Capital Market Day, we highlighted a small set of financial parameter. When we were not double-digit margin within Saint-Gobain, that means we deliver a very healthy return on capital employed. It was above 15% last year. When we are there, the motto is to accelerate organic growth. We were in the 1%, 1.5% for the last decade. We have been running well above that in the last 3 years, outperforming our peers. We want in terms of absolute value creation for our shareholders to continue to maximize that. And therefore, the top line is also important once we have secured such a high level of value creation in terms of kind of 14%, 15% [ ROCE ].

So it was the last question. We have no further questions at the moment.

So thank you very much for your attention. I will just flag if you have still 1 minute of attention that our first half results are going to be published on Wednesday, the 27th of July. Sorry to introduce this huge disruption in your calendar. It used to be the Thursday evening. This time, for agenda reasons, it's going to be on the Wednesday. So we will be happy to host our investor analyst call on the Thursday morning and the results will be published on Wednesday evening. So please, we'll be happy if you could mark that in your agenda.

And we'll be happy to see you in-person. And hopefully, everything will be all right.

In between, absolutely, and see you indeed, yes. So thank you very much, everyone. Be safe, and have a good evening. Thank you.