Eurocell plc (ECEL) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the Eurocell plc Investor Presentation relating to the half year results for the 6 months ended 30th of June 2021. [Operator Instructions] I'd also like to remind that this presentation is being recorded. Before we begin, we'd like to submit the following poll. I would now like to hand over to Mark Kelly, CEO; Michael Scott, CFO of Eurocell plc. Good afternoon.

Good afternoon. Thank you very much indeed, Paul and a very warm welcome to everybody to this Investor Meet Company platform for an update on Eurocell's interim results. Today, I'm joined by Michael Scott, Eurocell's CFO. We're going to turn our cameras off for the presentations to allow you to concentrate on the slides and the words that are coming through but we'll turn them back on for the Q&A session at the end of the presentation. As per normal, Michael and I will be taking you through our slide deck and there'll be an opportunity to ask questions at the end of the presentation. We will follow our normal agenda. But as promised in our trading update, we have devoted a couple of slides to providing targets and insights as to our ESG credentials. So moving on to the overview slide, Slide 2. Just to recap for those who are new to our business, we have 3 larger divisions. Our Profiles division is the largest, extruder PVC profile, which is subsequently made into windows by circa [ 430 ] independent window fabricators. The profile can be used to make windows, skylights, patio doors or indeed even conservatories. Next, we have our Building Plastics division. Anything made out of wood on the external of a building can be replaced with maintenance-free PVC. This product is sold through a wholly owned network of 212 branches. Additionally, these branches sell all of the products plus a range of ancillary items like silicones, nails, PPE, et cetera. Lastly and very importantly, we are the largest recycler of old PVC windows, which we then turn into resin to use as part of our window profile extrusion process. Moving to Slide 4. I can give you a little more detail on the profile business. In our financial accounts, the profile divisions manufactures all of the products we sell through our business. It also utilizes the recycled resin and extruse it through the center of our window profile in a process called coextrusion. We then envelope it with virgin resin to ensure we have strict control over color and UV stability. And as you can see from the right-hand chart, recycled resin continues to grow in its importance in our business. Rigid profile is sold into a fabricator base who then supplies windows to the trade, new build or into commercial users. We have sales teams to ensure we meet the needs of our customers and assist in meeting building regulation compliance. This knowledge means we are always creating new products to meet the changing needs of the market and this helps to ensure we develop specifications, which drive the requirement for our product. Over the years, we've acquired a number of businesses that add products to fill out our product portfolio. Lead of these is Vista doors, who are gradually seeing their product gain significant traction in the new build market. Turning to Page 4. I would like to update you on the market for Profiles. As most of you would have seen in peer group results, the RMI market has been very strong. Whilst the market may not continue to trade at current growth levels, we still see that we have ample opportunity to continue growing share. And therefore, with Board support, we have made commitments to considerably increase our extrusion of foiling capacity. The capacity starts coming on stream through September with 5 new extruders pulled forward and orders already placed for a further 5 to be delivered by the end of half 1 2022, along with additional foiling and resin mixing capacity. Particularly in new build and commercial, we're seeing the huge impact from building regulation changes around moving to higher energy-efficient buildings. This requires an increasingly technical response from our teams to ensure our customers' compliance. This means that a number of our clients lean very heavily upon us to support them technically and this leads to the development of a differentiated and therefore, tightly specified products, which again ensures the expansion of future demand. Most of our competitors have not invested in this technical sales capability. We will continue to invest in new products to ensure Eurocell increases its market share. A plethora of our products use recycled resin as part of their makeup, giving us a clear differentiator from competitor for those customers that wish to lower their carbon footprint. At current run rates, we will prevent more than 3 million windows going to landfill this year. Next, I would like to turn to Slide 5 and a review of the branch business. As previously described, the branch business sells a range of products for making a house maintenance-free. The branch business has delivered an excellent 23% like-for-like sales increase from the estate of 212 branches with a further 8 planned for the rest of the year. The new format stores are on track for a breakeven at circa 12 months, so a considerable improvement on the previous 2 or 3 years. All product categories have performed well but we believe that all will continue to progress as we deliver more capacity. Whilst average sales per branch continue to increase, we now have over 70 branches with sales run rates in excess of GBP 1 million. We've seen excellent take-up in new product categories like decking, garden rooms and fencing. So these have become important categories in their own right and bring new customer segments into our branches. We have new product categories already agreed for national rollout in 2022. Our customers are normally builders plus roof line and window installers. However, the new product introductions are increasingly seeing landscapers coming into our depots and buying decking, fencing and garden room products. And of course, once they've seen the other products that are on offer to them, they often extend their purchases. Moving to Page 6. We can discuss the future development program for the branches. It is still our strategy to develop an estate of 270 to 300 stores utilizing the current footprint or format. But we will be trying a new format in 2022, which we believe may allow us to open an incremental 100 stores without cannibalizing our existing sales. This is likely to follow a smaller footprint, more locally based, particularly in cities. The market is still mostly served by independents, so we have plenty of space for growth. We are conscious that it's not only through our people that we can -- that -- sorry, we are conscious that it is only through our people that we can meet our aspiration to be #1 for service to our customers. To this end, we are putting a lot of work into growing our staff. We've introduced excellent training plans across the business and are fully engaged with the Kickstart initiative, as we bring young people into our business and train them in the Eurocell way. We've recently upgraded the pay for all branch staff to ensure that we're able to attract and retain the right candidates to continue driving our business forward. The new format branches really work, the space available and drive larger ticket sales as well as more -- being more accessible for consumers who are becoming a bigger, albeit still small part of our mix. We're currently benefiting from the highest level of active customers and accounts in our trading history. We continue to work our online consumer trial and have remodeled our websites based upon the learnings from the first 6 months of operations. We are now ready to launch with the full finance capability. Now on Page 8, I would like to confirm our strategy. The 7 strategic pillars continue to serve us well with good progress being made against all of them. We continue to believe that Eurocell has the opportunity to drive share gains through the continued implementation of this strategy. The investments made in operational capacity will ensure that we have the means to further increase the efficiency of our manufacturing units but also increase the levels of service for our clients through the coming years. All of this is done with a huge underpin of sustainability. Whilst we appreciate there's a general understanding of this differentiator, we believe it is necessary to be very clear about our targets going forward. And I will elaborate further on this, Michael has taken you from -- after Michael has taken you through a quick review of the numbers starting with Page 8.

Thanks, Mark. So let me start with the key headlines for the period. We've enjoyed a great first half to the year. With our strategy delivering, we recorded very strong financial results and I'll cover some detail on the H1 numbers in a moment. Recycling sits right at the heart of our business and underpins our powerful sustainability credentials which is somewhat unique in our sector. And you can expect to see us communicate much more on this and our ESG agenda more generally going forward. Looking ahead, based on continued good trading in Q3 and with sales momentum and customer confidence, particularly in the RMI sector, proving to be robust, we have again raised our expectations for the full year. Finally, on this slide, we are very pleased to confirm a return to dividends with an interim distribution to be paid in October. Moving on to the financial highlights on Page 9. And just to say, from the outset, for most of this review, I'll compare our H1 financial performance to the first half of 2019, which is a more meaningful comparator given the disruption to last year. We delivered strong financial results for the first half. Total revenue up 23% on H1 2019 reflects the continued success of our commercial strategies and high levels of demand in the RMI market. Looking at the 2 divisions. Profiles up 19% is driven by our trade fabricators who are mainly focused on the RMI market and a strong performance from Vista doors, as well as good sales in new build with increasing housing market activity supported by high levels of mortgage approvals and demand. Building Plastics up 27%, includes an excellent performance across our range of manufactured and traded goods, with manufactured products alone up more than 30%. We've recently spoken about the success of our outdoor living products, which include decking, fencing and garden rooms. Outdoor living sales were substantially higher in the period at GBP 5.1 million compared to GBP 1.3 million in H1 2019. These H1 growth rates also include approximately 5% from selling price increases and surcharges implemented to recover cost inflation. We lifted our selling prices at the beginning of the year, which covered resin and other known cost inflation to that point. The surcharge has been levied progressively through the period to recover subsequent further cost inflation and is adjusted monthly in arrears in response to price changes. To give you a sense of scale, it had climbed to 12% by June. It has increased again since and it's doing its job, successfully recovering the cost inflation we're incurring. Gross margin includes the benefit of operational gearing and increased recycling offset by the effect of the surcharge. In terms of raw material costs, PVC resin prices started to rise significantly in Q4 2020 and have continued that trend since. Our resin price today is more than 60% higher than it was at the end of last year and other raw materials have followed suit. The surcharge has been successful in recovering the pound note's cost of raw material cost inflation. And although it has been dilutive to our gross margin percentage, we do intend to recover that through selling prices in 2022. Overheads up 16%, reflects the direct labor and transport costs associated with higher production and sales volumes. Taken all together, that gets us to a profit before tax for the first half of GBP 14.2 million, up 37% on H1 2019 and with an improving return on sales. Earnings per share are 9.9p, up 14%, reflecting a higher tax rate and an increased number of shares versus the comparative period. We are very pleased to reinstate the interim dividend at 3.2p per share. And I'll talk about how dividends fit into our framework for capital allocation later in the presentation. Finally, net cash at the end of June on a pre-IFRS 16 basis was GBP 1.3 million compared to net debt of GBP 9.9 million at the end of 2020. This is also a good performance and reflects strong cash flow generation and good working capital management through the period. We are well positioned going into the second half of the year. Trading in Q3 to date has been robust. And whilst supply chains, labor and transport availability all remain tight, we are managing those challenges and as a result, we have again increased our expectations for the full year. And I want to spend a few moments on CapEx with the detail of our substantial ongoing investments set out on Page 10. CapEx so far in 2021 is GBP 7.3 million. This includes approximately GBP 2 million to expand manufacturing capacity and GBP 1 million to complete the fit out of our new warehouse. The work is now complete with total spend on the fit out project at GBP 9 million as expected. Other CapEx of GBP 4 million includes recycling, new and refurbished branches, IT and maintenance CapEx. Our total guidance for 2021 is for total CapEx of approximately GBP 18 million. The new warehouse unlocks the geographical footprint of our business. As planned, we're now in the process of converting our old warehouse to a specialist manufacturing facility. We have relocated our foiling operation from 1 of our 3 main extrusion sites to the old warehouse, which creates the space for around 20 new extruders, which can be added progressively over time as volumes increase. This future proofs our extrusion operation, creating a potential uplift in capacity of around 33% compared to the end of last year. In terms of phasing, in 2021, we are adding 5 new extrusion lines and the associated tooling and simultaneously upgrading our PVC compound mixing plant to support higher volumes. With the opportunities for growth that we have, further expansion with 5 machines is now planned for 2022. And including deposits on that plant, extrusion expansion investments in 2021 will be around GBP 7 million. Warehouse CapEx of GBP 2 million this year includes completion of the fit out, plus additional mobile plant to support higher-than-planned volumes. We will invest GBP 1 million in recycling and GBP 2 million in new branches and branch refurbishments with the balance of GBP 6 million for the year, covering IT and maintenance CapEx. In summary, this guidance represents another substantial investment in the expansion of our business. We're performing well, have good momentum and see many more opportunities to take market share. We're therefore investing to create the capacity for future growth and drive improvements in operating capacity. Turning to Page 11. Before handing back to Mark, I thought it would be timely to provide an update on capital allocation. Our recent cash flow generation has been good. So I'd like to share our thinking on the potential uses of cash. Moving left to right across the chart, over the last few years, we have been investing to expand the operating capacity of our business. And as a result, we're now delivering improving returns. As I said earlier, the new warehouse unlocks the geographical footprint of the business to further expansion. With robust market conditions set to continue for the foreseeable future and a full pipeline of opportunities identified for future growth, we intend to continue with this expansion. And I covered some of next year's plans on the previous slide. Moving to dividends. We've enjoyed strong support from our shareholders, not least through the disruptive events of last year for which we are very grateful. And we recognize the importance of distribution to our investors. Having now returned to dividend payments with an interim for 2021 to be paid in October, we will now revert to a dividend cover target of 2x through the cycle with approximately 1/3 of the total paid as an interim. Moving on, although organic growth opportunities are the focus for our investments now, acquisitions do remain one of our strategic priorities. There's nothing on the horizon at the moment but we will continue to take a very disciplined approach to potential M&A. And any acquisition we do pursue must have a clear strategic fit and a compelling financial justification. Thereafter, we will look to maintain an efficient balance sheet. I've said before that in a normalized through-the-cycle basis, we would aim for net debt to be 1 to 1.5x EBITDA on a pre-IFRS 16 basis. That remains unchanged and we will consider supplementary distributions as and when appropriate. And with that, back to Mark.

Thank you, Michael. Thank you very much indeed. As promised in our trading update, we have detailed our key performance indicators for tracking our ESG footprint over the coming years. We are the largest recycler and user of PVC windows in the U.K. Unlike most companies, we're doing the right thing for the planet, actually costs more money. Our investment in recycling technology means that we are able to produce and recycle it at a significant positive variance to virgin resin. It's worth emphasizing that doing the right thing for the planet and our customers means improving our bottom line. It makes Eurocell quite unique and the carbon savings are real. 36,000 tonnes of carbon saved in 2020 with further increases planned. Whilst continually reducing our waste generation, we recycled 79% straight back into our production process, reducing waste going to landfill. Taking our lead from the UN sustainability development goals, we have chosen 8 where we think we can have a direct impact and listed our current position and our targets through into 2025. We already use closed-loop water cooling to ensure that we keep down the demand for water on our sites and have recently switched all of our mechanical handling equipment, forklifts, et cetera, in the new warehouse to be powered by electricity instead of gas. Whilst our car fleet is mostly leased, as they come up for replacement, we're increasingly offering hybrid and electric solutions and have recharging points outside the majority of our sites. We've already funded -- self-funded moves to digital lighting in our offices and across our owned estate and are currently looking at the installation of solar PV on our freehold properties. Particularly important to us is the engagement and appropriate remuneration of our colleagues. We've just conducted a staff survey with over 60% engagement to ensure that we have a base from which to track our development. As you will see, it is our intention to be paying everyone above the national living wage by 2023. We've also very actively engaged with finding ways to bring young people into our business and give them their first break with a view to having them as a long-term career with us. Now onto a more detailed update on recycling on Page 13. Recycling remains at the heart of our sustainability credentials, delivering carbon savings, economic benefit and assisting our customers to meet their objectives for carbon reduction, both by installing our windows but also in manufacturing with recycled content. At all times, with new tools and products, we are designing out waste and engineering in a larger proportion of recycling content. It is impressive that our percentage use of recycling continues to grow even whilst our sales volumes are showing growth above 20%. Our teams are also finding new ways of processing our recycling waste so that it becomes a value to new customers, thereby improving the yield from each tonne of windows collected and halting any waste products ending up in landfill. It should also be kept in mind that PVC can currently be recycled 10 times before its properties start to denigrate, providing a recycling opportunity for decades to come. We are quantifying the carbon savings in layman terms, so everybody can understand how they benefit from using our products. We expect to take this message further with the recruitment of a new marketing director who will start with us in November. We look forward to welcoming her to the team and a high priority for her will be engaging with all customer groups to ensure that they positively discriminate for a recycled product. Designing and revising for manufacture, thereby reducing waste generation and then at all times engineering into our recycled products is key to us continuing to make Eurocell's PVC a truly sustainable product. On Page 14, I want to turn to our view of the trading outlook. The RMI market continues to be very robust. End customers are coming to terms with the implications of hybrid working, are going to be spending more time at home, not traveling to work is saving them a lot of money in travel cost, miscellaneous food and drink plus clothing. Investing in their home makes sense as they are around to enjoy more. We've seen no letup in demand and indeed expect it to grow as industry service levels return to normal and as we get top side of the growth. As we improve the consistency of supply, lead times will reduce and volumes will grow. New build continues to be strong as consumers want to move out of flats and sure they'll have gardens for the future. And Eurocell will continue to expand its technical ability in this sector. We're only just starting to see real drive coming out of the commercial sector but again, we have a strong pipeline of work secured. Eurocell has a proven ability to drive sales and market share. This has been in part held back by the ability of operations and logistics to keep up, which has meant that we didn't always achieve the aspired to [ drop throughs ]. With the investment in new warehousing capacity and further extrusion, foiling and mixing, these issues are moving behind us, which means we'll be able to really get back to driving the top line in the certain knowledge that it'll translate into earnings. So finally, on Page 15, I return to the summary. We believe the case for investments in Eurocell remains compelling and with the increased capacity coming on stream it's certainly getting stronger. Recent approved investments will allow us to increase manufacturing capacity by over 25%. Our strategies are delivering and our chosen markets continue to be robust. However, if it comes off a little, we can still drive market share through bringing new fabricators on board, thus assisting our current fabricators to grow while driving increased branch openings and developing new product categories. We have proven our ability to move price inflation into the marketplace and will benefit from labor and material markets steady. All of this is supported by a market-leading recycling capability that we intend to keep growing both in terms of efficiency but also in terms of volume. We believe that Eurocell is match fit and ready for the challenges and opportunities that lay ahead. Thank you very much for your time and interest. As you can see in the presentation, there are a number of additional slides, which give more detail on the financials and further detail about the business. But for the sake of brevity, we have tried to pick out the headlines. So without further ado, I'm going to hand back to Paul and then we'll work through some Q&A.

Fantastic. Mark, Michael, thank you indeed for a very comprehensive presentation there. [Operator Instructions] I'd like to remind you that a copy of the slides and a recording and the publication and along with the published Q&A, you'll be able to be found on your investor dashboard on the Investor Meet Company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation is ended, you'll be redirected for the opportunity to provide feedback in order the company can better understand your views and expectations. Mark, Michael, before we move into the live Q&A, we did have a pre-submitted question and Mark, I think, if I can just address that to you, please. It reads as follows, the excellent results achieved, on which the management team has to be congratulated, do the Board feel that some of the GBP 7 million government COVID funding should be returned?

Look, we recognize this is a very delicate area. But now, the Board doesn't feel that furlough income should be returned. And let me just explain that comment. For us, the furlough scheme absolutely did its job, in that, despite being closed for a good proportion of the first half of last year and reporting a loss for the full year, we were able to keep almost all of our employees employed. And that meant that we were able to come out of the blocks very fast in the second half with a fully motivated team, securing their employment. And that has been a huge driver of the financial performance that you've seen in the business since. And don't forget that in addition to the furlough benefits, we were also supported last year by GBP 17 million that we raised from investors, by an increase of GBP 15 million in our bank facility. We also cut CapEx and did not pay a dividend. So furlough was just one part of the action that we took last year to secure the financial position of the business. And to reiterate, it did its job, meaning that we kept all of our employees secure in that employment.

Michael, and obviously, you can see the guys -- investors [indiscernible] number of questions during the presentation itself. And if I may just ask you just to click on that Q&A tab and hand back to you and where appropriate to do so, if you could read out the question and give your response that will be most kind.

So the first question comes from [ Arie ] and it goes, regarding your new product lines, garden rooms decking, fencing, roof tiles, do you have an estimate of how large these markets are that would be addressable by Eurocell? And then second question, what are your ambitions for market share in these markets? And outside of new product lines above, are there any new product lines Eurocell is working on and introducing particularly with recycled PVC? So [ Arie ], the answer to that is, I don't know if we know the size of these markets. PVC, in some of these areas, particularly things like fencing, we're seeing here a huge growth in garden rooms and also indeed in conservatories, where conservatory market, which has been in decline for the last 10 years, we've seen a doubling in the number of enquiries. I guess, where people are looking to have cheap extensions in their houses because I think a number of people have been locked down and particularly, if they've been doing Zoom calls or working from home, they will have worked out of their homes, aren't quite big enough for everything they want to do in the future. It's driving a lot of the demand that we're seeing coming through at the moment. So we're confident they're sizable markets. The big one is, it's like on decking, how much can wood composite decking, which is basically wood and PVC mix together, how much share can that steal from the wood decking market, which, of course, is sizable. So next call, I'll come back with some numbers, which will hopefully address that but I think this is a changing market and the scale of it is changing very quickly. But where we want to have here is, we want to have large market share of these. On -- sorry, I've got to another -- just moved here. Are we working on more -- we are -- the big thing about the recycling is, there is still some product which we find difficult to use. It's normally small particulate size or it's not white. We are looking for a lot of white PVC to go into our profiles. We're starting to find but we generate a lot of brown PVC as well. We're finding more and more ways of using that, particularly we have a product which is called Cavalok, which is a cavity closure product. And that we make mostly with brown PVC and then we'll put a white skin on it. But we -- but decking products could be another place where we could use a lot of this product. All the time, we're trying to improve the yield and also get other customers. So we have customers who buy our white product, who are putting products into non-visible areas that we've been able to move them over to a brown product that uses our product that we would not be able to use ourselves. But also means that they get a better deal because we're able to reduce the price of it. So all the time, looking for more utilization of our products. So there's one just come in here from [ David O ], how quickly do new extrusion machines ramp-up? And when do they become breakeven or profitable? Michael, do you want to take that one?

Sure. Well, it's -- in terms of bringing new extrusion machine online, the biggest delay is the lead time for the equipment, which today is a little extended. I mean, ordinarily, we think of 6 months, it's probably closer to 9 months today. Once the machine is on-site, it can be up and running and performing to its full potential relatively quickly. We allow 3 months for that process to be firing on all cylinders but the reality is it can be done a lot quicker than that. If all goes to plan and it's profitable immediately, assuming it's running. We have a mid-teen hurdle rate for organic capital investments and the returns are comfortably in excess of that. Just looking one down here on the questions, Mark, one from Ryan.

Yes, go ahead.

So what input price pressures are you seeing? And how beneficial is the recycling offering in controlling this? Is it a competitive advantage? I said in talking about sales that 23% sales growth in the first half, 5% of that came from price and the surcharge mechanism that we have. That's about GBP 6 million in absolute terms and probably is a good approximation for the level of raw material and other cost -- other raw material and resin cost inflation that we saw in the first half of the year. The ramp-up was most significant in sort of March, April, May time frame. We're still seeing some increases now but the trajectory is a little lower. But I would emphasize again that the mechanisms that we've got in place are doing what they need to do in terms of recovering the cost -- the incremental cost to the business. And looking into next year, in all likelihood, the majority of the surcharge will be, if not all, will be consolidated into price. In terms of recycling, we think of recycling as a hedge against high resin prices. And therefore, at the moment, with resin prices, I think I said, 60% higher now than they were at the beginning of the year, it is a huge benefit to us in terms of cost saving. And again, to put a number on that, we used 8,500 tonnes of recycled material, the 28% of our raw material consumption in the first half. And the difference in price between brand-new or virgin PVC compound and the all-in cost of making recycled PVC compound through the first half period was approximately GBP 500 per tonne. And therefore, by utilizing 8,500 tonnes of recycled material, we saved over GBP 4 million of -- well, improved our gross margin by GBP 4 million relative to the cost of using virgin compound. So you can see that it's a huge benefit in terms of cost saving but also, as Mark outlined, the sustainability benefit of the carbon savings from the recycling operation are also substantial.

[ Simon ], you mentioned the role of smaller stores, what turnover do you think these can add? And does this dovetail into your digital strategy as a more local pickup offering? So this will be the third leg of our -- or the third type of platform that we have in the branch business. The first stores are about 4,000 - 4,500 square feet. And our plan there, were to be -- have about 280 of them. We have a larger format store, which is at about 8 -- sorry, 10,000 to 11,000 square feet. And those have a specific role, which is normally, they sit on cities by the ring road and where major trunk road bisects. Normally, you'd find them where large car showrooms are, that sort of nature of product. And they have a lot of engagement from consumers but they're easy to get to. There'll only ever be, we think about 18 of those in the U.K., 18 of the large format stores. The smaller format stores, we are concerned that in big cities, it is not possible for our customers to easily get to some of our stores. So I'm thinking of a city like Bristol, where we have branches in the Southwest. If you're on the east side of Bristol, it's going to take you 40, 45 minutes to get around to one of our branches. And to be quite frank, you're not going to do that. So we wondered if there's a role, rather like Travis has done and [ BenQ ] have done and there's other people. So whether we can have a 500-square foot branch with 1 operator in it, maybe 2 and it will just be a collect branch, you'll go in there, you can order, you can order products to be delivered later on from our hub branch but you'll be able to pick up some essential items from that. We've got some -- a couple of smaller branches. They seem to cap out about 400,000 to 450,000 square feet. But remember, the -- albeit, well, attributable to those branches will be much lower than normal. So we think that's a usual -- an interesting way of being able to increase our density. Like I've said, we haven't actually tried that yet. We were just talking about it by way of a trial in the first quarter next year. [ Matt G ] has written in, could you comment on the current situation with respect to ethylene capacity? Right. So the -- so the PVC ethylene is part of the PVC market, one of the raw materials used in the making of PVC, along with caustic soda. The real issue is, there's a shortage of material in Europe right at this moment and demand is very high. The reason for that is because the American producers were hit very hard by the frosts earlier on in the year, preceded by hurricanes. So just as they got back up and running, they were hit by frosts, which took out a whole lot of plants in the Gulf of Mexico. And also U.S. demand is very strong. Now U.S., normally send a lot of their product out to Turkey and Egypt. With them satisfying U.S. demand, that product has not been coming through. And so that has meant that the Europeans have supplied into that marketplace, meaning capacity is very tight. Also, the resin manufacturers have to do, maintain their plants and they're required to do so to maintain their operating licenses. So we're seeing a lot of force majeures at the moment in Europe caused by the essential maintenance of these plants. So capacity is very, very tight. We thought the Americas were just about to come and start supplying in again and then Hurricane Ida went through and took out a number of the plants again. My understanding of the situation out there is, what is missing now is, the plants haven't actually been damaged that badly but there are huge interruptions on electrical supply. So as soon as the electrical supply gets up and running, hopefully, the Americans will start supplying into Europe again but probably it'd be the tail end of the year and we might get some relief on the resin prices. But it's quite difficult. And I don't think there's an awful lot of capacity being built by the resin houses because probably demand and their current capacity is in balance, if it wasn't the shortage of Americans supplying into Europe. So I think it's going to be difficult till the end of the year but may -- we may see some relief in the first quarter. Nick has written in. What opportunities do you see for international expansion and would you take in recycled products from overseas. Let's answer that question in reverse order. Very difficult to take in recycled product from overseas because there is demand for it all over Europe. So most countries in Europe recycle their windows. There's not -- they're more likely to be taking it from us. In fact, one of our competitors in that space in the U.K. sends a lot of their product to Germany. And we have no plans for international expansion at the moment. We are growing market share in the U.K. and we understand the U.K. market and we are going to continue focusing on that right at this moment. [ Arie ] has written in with another question. What do you see as the upper limit on recycling tonnage for Eurocell based on the market supply for all PVC windows? So the PVC window market for windows is about 120,000 windows going into the marketplace a week. 15,000 to 20,000 of those are going into new builds. So that -- the rest are basically PVC being replaced with PVC. So they drive product coming out of the marketplace. We're probably taking about 40% market share of that. So we think we can probably get up to 30%, 35% recycled content in our extrusion profiles but more than that, then probably given that there are competitors out there who -- if it gets very competitive, will drive price of [indiscernible] materials. We think that's probably as far as we'll be able to get. David is back again for more. How has Eurocell's ability to secure raw materials impacted customer service or market share? David, the truth of that is we are getting the vast majority of the materials we need right at this moment. Sometimes it's on the knife edge. Sometimes, we've had to balance incoming materials out of stock. What we've struggled to do is make [ the stock ]. And that is causing some shortages and some inefficiencies, particularly because often we're running lines to customer order as opposed to running them into stock. As we get freer availability of raw materials and as we get more capacity on site and I think you will see the factory efficiencies will continue to drive forward and continue to improve. And hopefully, some of that will drop to the bottom line.

Mark, Michael, thank you again. You've been very generous, as always, with your answering of every single question that's come through. And I may remind the attendees and thank you for submitting them that any further questions that will be submitted, the team will obviously have the opportunity to review those questions, we'll publish responses where appropriate to do so on the Investor Meet Company platform. Mark, perhaps I could just ask you for a few final words before we redirect the investors to give you some feedback.

Yes. Thank you very much, indeed, Paul. Thank you, everybody, for taking interest in us today. I think a number of people are a little bit nervous about the top of the RMI market has been breached because it's obviously very hot, right at this moment. I think the RMI market is probably 10% or 11% up. We're 23% up. So we're quite clearly gaining market share. I'm not concerned. We're not concerned as a business, if it comes off a little bit, which it may well do. The RMI market is normally driven by consumer confidence and consumer confidence, I've been in the building industry for a fair few years now, consumer confidence is normally only undermined in my experience by job losses. And right at this moment, there's no reason for people not to have a job. If you want a job, you can have one, have one working for us, to be fair. It is -- labor is very tight out there. And so -- and we're having to pay more for it. So I think there's going to be wage inflation as well. So people should feel, despite the fact that we're seeing here goods inflation, people should feel relatively, fairly comfortable, I think. And they're going to be working more from home. So if the market comes off a little bit, we'll drive some more market share. Just keep in mind, for the last 5 years, despite being constrained on volume through 2018 and 2019, we still had a compound annual growth rate of 12%. So we have a proven track record of being able to drive share also without impacting sales margins. We don't buy share. So I think we can do that. We'll get on top of this volume and then we'll go after some more share. So I'm really hoping that the next couple of years are going to be very good for Eurocell and all of our investors. So thank you very much indeed for your time.

That's wonderful. Mark, Michael, thank you again for updating investors today. Could I please ask investors not to close the session, as you'll be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and is greatly valued by the company. So on behalf of the management team of Eurocell, I would like to thank you for attending today's presentation. That now concludes today's session. Thank you and good afternoon.