Wienerberger AG (WIE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Haley, your Chorus Call operator. Welcome, and thank you for joining the Wienerberger conference call on the results on the full year of 2019. [Operator Instructions] I would now like to turn the conference over to Mrs. Anna Maria Grausgruber, Head of Investor Relations. Please go ahead.

Thank you. Ladies and gentlemen, a warm welcome to the Wienerberger earnings call on full year 2019 results. Our representatives today are our CEO and Interim CFO, Heimo Scheuch; and our CPO, Solveig Menard-Galli. Heimo Scheuch is going to give you an executive summary on the highlights of 2019 as well as an outlook for 2020. And after his statement, we will be ready to take your questions. I will now hand over to our CEO, Heimo Scheuch.

Thank you, Anna. And a warm welcome from all of us from Vienna to you on the phone. Obviously, we are very glad to report to you a record set of results for 2019. 2019, our sort of milestone in the history of our company, being the 200th-year anniversary of our company, so we're obviously very pleased with this strong set of results. In light of the economical and the general sort of situation that we were operating in last year, and I will elaborate this -- on this shortly, it's a strong set of results because sales were up with about 4% on a like-for-like basis to reach a nearly EUR 3.5 billion turnover, a record high in the history of the company and also from an EBITDA perspective like-for-like a strong increase with about 24% to nearly EUR 588 million. The strong cash flow again showed that we are optimizing our structures. We are focusing on cash flow and having a cash flow plus -- free cash flow level of plus 5%, reaching EUR 286 million is a strong message from the operations that we operate on a high degree of efficiency. Obviously, it's important to note that from an EBITDA margin perspective, we were able to increase it from about 14% to about 17%, our like-for-like margin. So again, it shows that from a perspective of cost control and the portfolio and product mix, we optimized our structure again in an important way. Showing the strong set of results, let me make 2 further comments. First of all, I think it's important to note that during 2019, we were focusing again not only on an organic growth, where we have achieved great results and where I will elaborate a little bit more in detail, but also on the operational front, where we, with our Fast Forward project, have achieved or overachieved our own ambitious targets by reaching EUR 50 million contribution to our results already in '19, so again, I think a strong sign of our company, of our structures and organization to focus on the efficiencies within the company. On an M&A front, we have dedicated about EUR 50 million to small, midsized companies that we integrated in our portfolio to deepen our product range, to add to our existing ones in order to enhance value for our customers. Very good steps forward, especially when it comes to accessories in roof in the U.K. and that we will roll out over the whole of Europe during the next years when it comes to a whole set of products that we sell with respect to our roofing business. And also when we talk about pipes, we have made great inroads in different aspects of the business and, obviously, have achieved here a strong performance. In light of an overall development, I'm -- I think it's important to note that, obviously, when you look at the reported EBITDA figure, we have reached EUR 610 million in 2019. Please remember that when we go back in the history of our company, in the year of 2015, when we talked about the midterm target, we said it should be around EUR 600 million, EUR 600 million incorporating M&A activity, a strong one, which actually we didn't sort of have integrated its results in 2019, and obviously, very strong performance on the market as well. So we are still, as far as markets are concerned, under the level that we originally projected for the EUR 600 million target and, obviously, we had much more M&A into this target. So I think it's important to note that Wienerberger, 1 year early, has achieved its result of EUR 600 million, is now progressing nicely in the futures, and we have set, obviously, to grow further as we speak. Just one more sentence on the achievement of '19. I think important to note that from a dividend perspective and to return to shareholders, we again make an important improvement, about EUR 86 million returned to our shareholders by dividend and share buyback, and we will continue this throughout our planned strategy of returning 20% to 40% of our free cash flow to the shareholders by share buybacks or dividend. That's why we'll propose to our general assembly in May of this year an increase of 20% when it comes to dividend to EUR 0.60 a share for 2019. When we talk about value management, I think it's important to note that our midterm target of 10% ROCE we were able to achieve in 2019 as well coming in at about 10.6%. So again, a significant improvement as far as the value management within the company is concerned. And all this, when you look at the balance sheet, we have kept our strict discipline on financial targets. We remain at 1.4% -- 1.4x EBITDA to net debt in 2019, despite obviously -- that we took on more than EUR 200 million due to the fact that, obviously, from an accounting standard perspective, we had to change the leasing obligations, so we put them additionally into our debt level. So again, I think a strong performance when we talk about our strict discipline. On the working capital perspective, also consider that we have been on a very extremely low level in 2018. We slightly increased it a little bit, but still are at about 16.9% of sales, so clearly, under our internal target of 20% of sales. So again, a strong performance even under the consideration that we obviously increased our activity, have added some activities towards the year-end. And I think it shows that we are strongly committed to manage our working capital well. Let me just go a little bit to the market development. Market development in 2019 was somehow mixed. We saw a strong start into the year. You will remember a strong first quarter from a demand perspective in our markets. Mild weather has obviously helped this development. And then we saw, obviously, in the third and fourth quarter a sort of softening of markets. And here, again, I think it's important to note that even in such a flattish market environment, we were able to grow significantly our performance. And this shows that Wienerberger consistently moves away from a traditional company in the sense of product-driven to a more solution-driven one, a more resilient one in the sense of economical cycles. And I think it's important to note that because we made this strong performance on the back of such markets in Europe, in infrastructure, renovation and new build as well as in the U.S. when we talk about new build, renovation and infrastructure. So again, I think it shows that Wienerberger focusing on innovation, and here, it's important to note that 30% of our turnover of EUR 3.5 million is coming from innovative products. And especially when we look at the Wienerberger Building Solutions side, where we were able to improve our sales by 6% and then the like-for-like EBITDA by 23%, it shows obviously the strong growth potential that we have when we sell higher value-added solutions. So again, I think here a clear signal that we want to grow in this aspect and grow our share in the envelope of the house, being roof, being wall, being for sale. So we see attractive growth potential for Wienerberger in this field. On the Piping Solutions side, I think it's important to note that we are now nearly reaching about EUR 1 billion turnover in this segment, significantly improving our like-for-like EBITDA, which reached in '19 EUR 100 million, were up 43% compared to last year, so a strong improvement. You see also the margin is coming up nicely. We have still some spots that we will focus on in '20 to improve our margin, but we are getting closer to our target margin of 12%. Again, by focusing on in-house solutions, we talk here about hot and cold water, about electro accessories and electro installations and, obviously, when we talk about the agricultural business and the energy sector business, which has improved very nicely. Finally, in the North American market, we had to digest a little sort of softening in the Canadian market due to regulations that were put in place by the Canadian government, but also a sort of market that I would consider is very competitive, not on the pricing side, but also on the volume side in the U.S. But here, again, we improved our performance. And considering these aspects and some weather-related aspects, we have a strong set of results coming out of the U.S. as well. And we consider our business as one that we can improve by M&A and that we see as a potential in these markets. So when I resume the strategy of Wienerberger, focusing on organic growth, focusing on operational excellence and focusing on growth projects and turning around our portfolio is going to continue also in '20 and the years ahead. So you will see us, obviously, focusing dramatically on new products, speed and digitalization, innovative solutions, value-adding applications and especially market proximity. It's without saying that I'm very glad that we have launched the first CO2-free and neutral brick in Germany and Austria, and we see here good inroads when we talk to our walling system. The Fast Forward segment is contributing nicely, and we'll add another EUR 50 million of additional improvements by 2020. And obviously, the M&A activity that we performed in 2019 will continue also in 2020 in order to improve our portfolio and deepen our value creation in the different aspects of our business. When we come to the financials, very briefly, I think you see the strong development in the EBITDA front, the EBIT front, obviously, where we see a plus of 50% again compared to last year up to about EUR 363 million this year and, obviously, also on the net results being -- nearly reaching about EUR 250 million compared to EUR 133 million last year, so up 87% compared to last year. From a cash flow perspective, strong gross cash flow -- free cash flow, so slightly above last year, about 5%. We invest in the business with about EUR 100 million in improvements relating to Fast Forward, relating to other optimizations of the product portfolio, about EUR 50 million in M&A and then obviously share buybacks and dividends, and we bought some hybrid back, which brings us more or less to a 0 result when we come to net cash flow. So again, here, a very disciplined approach when it comes to investments and the balance sheet management. From the net debt development, I think it's important to note that, obviously, from a business perspective, we digested the investments of around EUR 300 million, the hybrid buyback and the coupon and the dividend very well and added, obviously, from an accounting perspective, to the EUR 250 million of IFRS 16 lease liabilities in order to achieve a level of about EUR 870 million of net debt that reflects on the balance sheet about 1.4x EBITDA to net debt, so on the level of last year, so you see how strict we manage our balance sheet. On the financing structure, I think not much to talk about. Only one thing I think which is important, the corporate bond coming to an end in 2020. We refinance it by cash that we have on our balance sheet and a EUR 170 million loan, a green loan, the first one in this area for our industry here in Austria and which saves us about EUR 10 million on the financing cost. It's a loan around sort of 1% and -- interest rate and is linked to our performance in the field of sustainability. Let me come now to the outlook of 2020. I think if we look on the back of '19, a very successful year, and we want to grow on this basis. It's a basis where I see from a market perspective. And let me be clear on this. I don't see major changes to '19, but I would say the following. In the new build and renovation markets in Europe, we will see a flattish to slightly softening activity, slightly softening in certain countries due to intervention in the sense of tax regime changes and some sort of interventions that you see from a general perspective as economical ones, but no substantial ones that should frighten us at this stage. Yes. We will see some sort of lower demand, but not dramatically, and on the renovation side, a more stable business. In infrastructure, slightly growing in Eastern Europe and flattish in the Northern European markets. So on an overall perspective, from today's perspective and knowing what we are seeing now in the market, I would say a fair assumption is that we sort of position ourselves in a situation where we'll see a 3% decline in volumes for the whole group in 2020. So this is our sort of estimate in February of this year. In North America, it's more a flattish environment where I don't see major changes, slightly improving in Canada. All in all, when we see this development from a market perspective and volume perspective, I need to draw your attention to the fact that, obviously, we have some, in some parts of our business, significant inflationary cost increases which we will be able to offset with price increases. So again, it shows our strength in Wienerberger in such a market environment to clearly pass on the inflationary cost increases to our customers. So again, I think on this aspect, nothing to worry about. When we look at the general strategy, I think Wienerberger will, as I said earlier, focus on its clearly determined 3 pillars. And we will enlarge our sort of activity in this field by focusing also on -- strongly on a midterm perspective on sustainability targets. And these are actually, when I say that, obviously, the base of Wienerberger, being a very solid one and based on strong ethical values, strong entrepreneurial values, where we had no incidents of corruption in the last 10 years, no incident of antitrust issues and a very strong corporate culture that we focus on and that we have established over the last 10 years, that we will sort of position ourselves as the leading company when it comes to decarbonization of our product range to the absolute enforcement of circular economy, so that every product of Wienerberger can be recycled and that we preserve and encourage biodiversity in all of our 200 sites. So these are clear signs of Wienerberger in a strong year and looking forward that financial excellence and best financial performance can be combined with world-class performance when it comes to sustainability. And that's what Wienerberger is about when it comes to the building material arena and actually delivering solutions into the building market. When you look at our 3 segments, Building Solutions Europe will obviously deepen its product range to become a major supplier when it comes to the envelope of the house, increasing its value there and obviously improving its product range. So you will see us exceeding the active year in developing new solutions and obviously doing M&A activity. The midterm EBITDA target remains above 20%. So we're certainly focused on optimizing it and certainly in growing this segment with this strong EBITDA margin. On the Piping side, a clear focus on in-house solutions in water and energy management and the agricultural industry for drainage and irrigation and focusing on an EBITDA improvement up to more than 12%. So we are in good ways. And as I said earlier, we will sort of straighten and address the issues that we see still in the business in 2020 to get above this margin of 12%. North America, again, focusing on our end markets, better penetration, a stronger solution business and obviously improving here the margins also above 12%. And when we talk about decarbonizing our portfolio, what I mean with it is all of our products, during their life cycle, will positively contribute to the decarbonization and therefore have a positive impact when it comes to climate change. And you see here some examples. I gave you one where we have really breakthrough innovations when it comes to technology. Remember that we have 160 brickworks in our business. So here, again, if we reduce consistently on the way forward our energy consumption, we will make here a very positive contribution. On the circular economy, you will see us move extremely aggressive on recycling already material and putting it back to our production process, and on the biodiversity, as I said, for 200 sites, having a clear set of targets in place, how to improve it and how to maintain biodiversity in our neighborhood is of major importance. And Wienerberger is already a leading company in this field, especially when it comes to Western European operations in the Benelux. And here, we see obviously good and then promising progress in order to improve our performance in these fields. When it comes to the final outlook for 2020, we see on the back of such market developments that we see at this stage, and we are not, by no means, negative or pessimistic or conservative. I think Wienerberger is well geared for further growth. So in a market where, obviously, we have certain geopolitical and other issues coming our way and uncertainties, I think, from our perspective, a guidance between EUR 625 million and EUR 645 million is the best we can give you right now, but we obviously are determined in order to adjust if there is a better market environment and certain risks go away. We have a Fast Forward project that contributes about EUR 15 million -- EUR 50 million in 2020. The ROCE target will remain in place above 20% (sic) [ 10% ]. And our net debt-to-EBITDA ratio remains in place. And the working capital will be as below 20% as well. On the maintenance CapEx, we will invest EUR 140 million. And on special CapEx and M&A, we will, discretionary from a management perspective, devote these funds to different projects if we see that they are creating immediately value and if we see that there is, obviously, the right moment to do such investments. So again, I think, from our perspective, we are looking to 2020 with excitement for further growth, bringing Wienerberger to an even higher level of profitability and a stronger performance, even considering that we have reached already a very high level in 2019. So I think from my side, we are ready to take your questions. Thank you very much for your attention.

[Operator Instructions] And the first question comes from the line of Matthias Pfeifenberger of DB.

Congrats for the results. Really very well done. A couple of questions from my side. I would like to know how the minus 3% volume prospect interacts with the guidance. So on the one hand, you're saying the tax is up to 3%. Now -- right now in the presentation, it was more like that's what you're already seeing. Like maybe you can shed some light, of the regions, how much is Eastern Europe still moving ahead, how much -- how weak is Western Europe, and what's the Q4 blip in the Pipes business on the revenues. So is it like if we get to minus 3%, it's going to be EUR 625 million because of operating leverage, you lose some of the Fast Forward gains on the operating leverage side? Or is this basically now at minus 3% and the range depends on what's to come in terms of geopolitical events from here?

I think you nicely covered the ground and have answered basically the question the way I would have answered it. And just to put some light into this on top of what you already said and concluded, the month of January was a very satisfactory month to start the year with, good weather around Europe, good demand levels, nothing to worry about. February is obviously, from a weather perspective, a little different. And I think what we see only when we talk about the 3%, that there are some things around Europe that obviously can materialize and they must not materialize. I'm very clear on that, but if they can, then obviously it isn't a sort of prediction from us, from management, looking at countries. I give a couple of examples, like Hungary, where the VIT changes and -- are put up again from a very low level of 4% to up to 19% when it comes to building materials, et cetera. So here, obviously, you will see a different development in demand levels. Obviously, the Netherlands were affected by decisions of -- court decisions last year. So it will take time that this comes back, for example. France is still at a very low level. So there are things happening in the market. Nothing -- as I said, nothing to worry. I do fully understand that all of you are looking for indicators, but there's nothing to worry about. But we see a little trend that we sort of predict throughout the year. It might change. Obviously, it might get a little sort of not worse, but it may confirm it. We have things like the virus out there for the moment. And there's a lot of sort of nervousness out there. But I would say, generally speaking, we remain very positive about our end markets. Interests are low. There's a demand level that is strong. There's a positive sentiment out there, especially when it comes to Europe and North America. So again, I think we just wanted to alert to you that there is -- could be a sort of slightly negative volume trend. It's a little softening of end markets, but nothing dramatic.

Okay. Just quickly, do you want to comment on the Pipes blip in the fourth quarter, like minus 4%? It was also the weakest quarter of the year. Is this -- I don't know, oil prices have an impact on polymers or just a high base? And then the second set of questions is on M&A. You said earlier this morning that, obviously, the pipeline is very attractive. Last time, we also spoke about moving potentially towards larger targets, like EUR 300 million plus EV. I'm just looking at Bloomberg right now. There's a statement where you say acquisitions take time and they are tough to predict. So are you close to closing on a larger one? Or is it like depends?

No, thank you for the 2 questions. They are very important, and thank you for them. I think when we talk about the Piping segment, you need to be aware of the fact that we have indicated that we deliberately leave certain commodity markets that are very low margin or even negative margins. And that's why you see this volume drop in the fourth quarter. On the other hand, you see dramatic improvement on the profitability side. There you see obviously that we have left those segments and what impact they had, yes? So I think nothing -- again, nothing to worry about. It's a deliberate decision that we, as management, take to move away from this very, very commodity and low-end areas and move the company in a much more high value-oriented company when it comes to products and solutions. So I think this is hopefully addressing your concern. On the other hand, when we talk about M&A, it is true, and I can only restate what I said, when you talk with families and when you talk -- I take, for example, the acquisition that we did successfully in Denmark. I remember very well, more than 10 years ago, talking to these people about an acquisition and about a potential transaction. It takes time. And it has to come at the right moment when succession comes in, when the family feels it's the right moment. And on top of it, I think it's important that we, as Wienerberger, are not overpaying in these transactions, and we are very disciplined. So again, we are not today signing a transaction or tomorrow. Otherwise, I would tell you that. But we are working on a number of very interesting ones for us to bring us forward. So that's what I'm trying to say to you. And we have, obviously, also the financial capabilities of doing that. And be assured, if we do those, they have significant potential of synergies and cost efficiencies that we can then put into place as soon as we take them over.

The next question comes from the line of Yves Bromehead of Exane BNP Paribas.

Three, if I may. My first one is on the U.S. and your comments that you made on the competition pressures that you're seeing. Could you maybe expand on that? And is this related to kind of the 2 Australian players, with one being in a more difficult position than the other, especially in Australia? And also, just curious, why don't you expect any strong volume growth when single-family permits in the U.S. is booming right now? My second question is on your EBITDA outlook. So at the low end of guidance, if you strip out the EUR 50 million of cost savings, it implies a decline in EBITDA. I think we can all understand that you probably have that minus 3% volume decline. But still, when I think about energy costs with gas coming down significantly in Europe since the last 6 months, I just wanted to know what kind of assumptions you've built on the cost side here. And my last one is on the strategy. And I just wanted to get your vision in terms of where you want to bring Wienerberger in the next 5 years. With the end of the Fast Forward program, end markets being relatively low, what's kind of the next leg of the story here and what do you see as opportunities?

Thank you very much for these 3 important questions. Let me start with the U.S. I think here, your take is right. We have a competitor that is in a joint venture together with a private equity company in the U.S., and they are currently running the biggest brick operations in North America. They are under significant pressure. It goes without saying that from a profitability basis, we are largely ahead of them and doing, obviously, a much better performance than them. And they're falling behind and, obviously, they're struggling and fighting for cash in certain areas. So we have, in certain areas, not everywhere, certainly, a little bit of competitive pressure, not on prices, but they are there. Because we, as Wienerberger, run a completely different model. On the other hand, we are glad to have another Australian company, Brickworks that is buying into the market and consolidating it and behaving as a good competitor. So I think here, we will see some sort of competitive landscape change pretty quickly in the U.S. in order to sort of then come to a different setting in the industry and which is obviously then much more and profitable and promising in the future. To your second point, when we talk about cost, obviously, this year, we have a certain cost inflation. It goes without saying that wage is up, that other sort of input costs are up and, therefore, I said clearly, we will be able again to cover those cost increases, that, to some extent, are substantial, especially when it comes to Eastern Europe. And here, we will be able to offset them by price increases, again, due to our efforts that we all make in excellence projects when it comes to sales, product mixes or better performance. So again, strong signal on the back of flattish markets, cost increases. We can put this through to our customers. And when we look forward, you're absolutely right, energy is coming down. We are more or less hedged for 2020, so we won't see this positive impact in '20. But going forward, we certainly will sort of take into consideration to buy certain amounts of energy in advance and, therefore, bring our cost level down. And we will clearly, as always, in the past, report this accurately and transparently to you. And the third very important question on strategy. I think what we always said, and I go back a little bit, I may make a very personal note here, when I took over in 2009, the company was around EUR 1.6 billion turnover. We are now closing, 10 years later, EUR 3.5 billion. We have, from a perspective of EBITDA, improved it from EUR 150 million to above EUR 600 million. So I think here, we are set for growth. And I think if -- you will appreciate if I say, we will definitely, in light of our balance sheet power and in light of our growth power that we have today, grow the company and certainly have very positive developments in the years to come in the next 5 to 10 years to come because, obviously, I think from a managerial perspective and from a product mix perspective, Wienerberger is very different today than it was 10 years ago. So I see it as a company that will show strong growth, return, as I said, cash to the shareholders. When you look at our dividend policy and our sort of share buy policy, look at the last couple of years, we have returned more than 400% to the shareholders. So a very strong performance here. And I think it's this long-term vision that is important that Wienerberger is a company that focuses on long-term growth and has a strategy that is consistent and is put in place consistently over the years.

If I just may, on the energy side. I mean if you're not going to see it in 2020, does that mean that, actually, you're hedging way ahead of the kind of 12-month curve? And when should we expect you to kind of see the energy and the gas falling down?

'21. Yes, from -- but Solveig, please.

Yes. Just to add to that, obviously, our hedging policy goes over several years with different percentage level that we cover. But of course, we try also to be flexible in a way that we can reopen positions without taking too much risk because that's the point of the whole hedging policy. You don't want to be completely exposed to a market that is swinging up and down. So we need to secure supply that's on one side, but also at manageable costs in that sense. So that's what we're doing. And therefore, we are, of course, looking forward to 2021 with just our hedging policy. So now this year, we are close to 80% hedged for 2020.

The next question is from the line of Markus Remis of RCB.

Two questions, if I may. Firstly, on -- coming back to 2019 revenues. You usually gave some breakdown in terms of volume, price mix development and M&A contribution, which I did not find in the financials this time. So if you could break that down, please. And also, coming back to the cost question, how much of price mix inflation -- top line inflation you would need from your point of view to keep the equilibrium in 2020? That would be the first question. And then coming back to the Fast Forward program, apparently, you made a big jump in the fourth quarter, which I personally found a bit surprising. Given that it's rather a small quarter, so it must have been like EUR 15 million of incremental savings. So I would be interested to hear what kind of measures were particularly kicking in here. And if you could, with regards to 2020, give us some breakdown where you see the biggest potential. Is it -- of course, given the size, it must be in Building Solutions, but some granularity on the kind of segmental impact, please.

So let me take the Fast Forward question first. Just as a reminder, we set this program up in 2018 based on 2017 results and analyzed our whole structure in the different areas and said where do we have the potential to sustainably improve our results. And that goes across different areas, from, of course, production manufacturing, where it's about cost structures, to commercial excellence, where it's about product portfolio and the way we address the markets as well, to procurement, obviously, where we also did a significant step change in how we set up our procurement from quite local teams, to much more central commodity management from a central perspective and, therefore, also bundling and strengthening our purchasing power next to supply chain optimization and administrative optimization. So what it is and what we did is really setting up a comprehensive program, and we were running a huge number of initiatives in parallel in the different streams. And you need to consider that this is always, first, an analysis of what we want to do, how we want to improve. And normally, you do have a pre-investment to be done, so with extra teams, with extra project costs, before you really can realize the benefit. So there is -- this is not a year -- quarter-over-quarter, same amount that comes in. We do have quarters with higher cost impact because we invest in certain areas, and then only a quarter later we get the benefit. And this is what you see. If you followed us over the quarters in 2019, there was not always the same impact per quarter, depending on exactly these different spread of the cost that we have related to this program. So what we do report is always the net effect, the net impact that we create. And that is the sustainable impact that we can hold also over the coming years. So now looking forward to what are the -- where are the biggest opportunities also in 2020. We continue, of course, focusing on manufacturing. Here, we did a lot of pilot projects also in 2019. We're in different areas, especially automation, but also energy saving, optimization of scrap rates and so on. So it's really process efficiency. We did several pilot projects, where we said in one plant, we tested to see how much it gets out of it. And if it works well, roll it out. And as you know, our plant network is quite big. And there you get a quick spread over several plants, and you can repeat the benefit. So this is one of the drivers for 2020. We still continue, of course, with our procurement initiatives to bundle and exchange resourcing and sourcing and strategic supplier relationship management. But also, in commercial excellence, we run through our portfolios. We continue to evaluate, let's say, low-margin products and product ranges, which we might take out again and, therefore, optimize our offer in a structural way, so bringing up average gross margins step-by-step. So this would definitely be also the focus areas for 2020.

And from your first question's perspective, from -- when you say volumes, as indicated, flattish end markets and, to a certain extent, slightly below last year sort of volumes were around 1% to 2% minus. And the revenue growth came obviously from the price side and the mix side. So this, obviously, you can determine pretty easily from the turnover perspective and the consolidation effect, I think, about 2%.

The next question comes from the line of Tobias Woerner of MainFirst.

Yes, congratulations. A great way to celebrate your big birthday. Two questions for me, if I may. Number one, when you look at your portfolio of products today compared to about sort of 5 years ago, what is the percentage of value-add products in there, let's say, accessories compared to, let's say, 5 years ago? Number two, when you look at your 160 plants, brick plants around the world, what is the capacity utilization at this point in time? And number three, Eastern European outlook, when looking actually at the permits and starts at the end of last year, it seems to be relatively well set, so your 3% volume decline seems, in context of that, maybe [indiscernible] conservative.

Okay. I think your 3 questions, so one on capacity utilization throughout the group. Obviously, the one that we focus on is the clay business, basically U.S. and Europe. And here, we have around 80% capacity utilization. When you talk about Eastern Europe, we have seen, obviously, growth in Eastern Europe. There, you are right, but we have seen also flattening markets in Poland and also in Romania and Hungary. So I think it is -- I would say it's a mixed picture also going into 2020. Political instability in certain regions might add to this, and that's why probably we see -- we not only look to permits, but we look to sort of the market sentiment in these markets. And I'm not saying when I say, on the group level, we see minus 3%, that it is necessary in Eastern Europe 3%. So it's on the group level and, therefore, I think we want to clearly indicate to you that the growth region still remains in Eastern Europe. When you talk about value-added products, I mean, if you take a comparison very roughly 5 years ago and today, when we talk about 30% of our takeover being in innovative products, I think there you have a good indicator already of where we are. And obviously, when you add this a little bit, then we are above 30% compared to 5 years ago when it comes to value-added products and better solutions. Yes. So we are clearly above the 30% of turnover.

So if I may ask one more question, the U.K., what are your expectations for the U.K.? And when I look at the profit of that business, which is public, I think it's about 15% of growth, EBITDA or EBIT. Where do you see the market going this year?

When I look at '19, it's about -- the Wienerberger business in the U.K. turnover-wise is about 10% of the business -- of the overall group. So it's a strong business where we are very -- have a very good track record. We have again gained momentum in the U.K., even if the market was, to some extent, also flattish in certain areas, not as well as you are well aware of from our colleagues, what they had published in their documents. But I think from Wienerberger's perspective, a very good run in '19. I have no reason to believe that this is changing in '20. The demand levels are still strong. Pricing is very, very good. And here, also from an operational perspective, our plants are running well, so cost structure is very much under control. So there's nothing specific to report as far as the U.K. business is concerned.

The next question comes from the line of Xintong Ouyang of On Field Investment Research.

Good afternoon, ladies and gentlemen. So 3 questions from my side, if I may. The first one is on your margin improvement of the Piping business. So this year, we're around 10% and your aim at 12%. So I'm just wondering how -- especially given that you've already exited some of the low-margin commodity markets, so in midterm, how do you intend to improve the margin? Is it by product mix or by price cost and probably by other kind of measures?

So I can answer this very straightforward. We will definitely exit further low-end products or, as I said, due to the fact that we turn around our position in certain markets like where we have a big commodity or low-margin business in order to get synergies by combining businesses and then, obviously, finally, moving up the value-added products when we come to the electro part of the business or the agricultural one. So it's a mixture, depending on the geographic portfolio because we run already, within our 5 segments, very high-margin businesses, especially when it comes to the Nordic part of the business. And as I said earlier, in Eastern Europe, we have still some progression to make, for example, and in Western Europe, in certain areas, in order to improve our margins. So clearly, the targets, as I said, the areas identified, and we are moving on this in 2020.

All right. I see. So then the second question is on your return on capital employed. So basically, in 2019, you've already achieved the 10% midterm target. So I'm just wondering -- looking forward, do you intend to raise the target or you're willing to stay at, say, 10%, 11%?

Well, I think -- yes, I think the midterm targets are clearly there to show that we, as management, have a clear vision of what we should deliver to you as investors or to the financial community. So we are not going to change our midterm targets every 6 months. I think it shows that we are working in the right direction. Obviously, as we report so transparently, you will see it on a regular basis. And if we do acquisitions, obviously, this is also a very strong indicator that we will clearly focus on value creation. So also, I think it's important to note that Wienerberger is not managing -- or we are not managing Wienerberger in a sense that we just want to be spot on with 10%. It, I think, should give comfort and reassurance that we obviously are focusing on the right targets, on the right developments and allocating the cash to the right parts of the business. That's what the midterm target is about.

I see. I understand. Well then, in this case, say, if you do some kind of acquisition, how do you intend to bring up the margins of the acquired target onto your level to retain this 10% return on capital employed?