Wienerberger AG (WIE) Earnings Call Transcript & Summary

Ladies and gentlemen, a warm welcome to the Wienerberger Earnings Call on Q2 and Half Year 2020 Results. Our Board representatives today are our CEO, Heimo Scheuch; and our CFO, Carlo Crosetto. Both will lead you through the presentation today discussing our results in the COVID environment but also giving an outlook for further opportunities for growth for Wienerberger in the future. After that presentation, we are ready to take your questions. I will now hand over to Heimo Scheuch for the presentation.

Thank you, Anna. A warm welcome from us here in Vienna. Obviously, as an opening statement, I do believe that from Wienerberger's perspective, we have been very transparent and straightforward when it comes to the communication throughout the COVID crisis in the last couple of months. So I don't have to go in every detail, but I think it's important to note that due to our decentralized organizational structure and our local supply chains and especially the experienced management team, we were able to cope with this crisis in more than 30 countries very well. We have been very quick in implementing our measures. Obviously, above all, cost control and cash preservation were driving the performance in these very important periods of time when it came to lockdowns and severe impact on our business in different market environments. So I think all of this shows and this is, I think, the major message that I wanted to relay to all of you, that the Wienerberger business is today a much more resilient business, a stronger business and resists crisis like this one. And if you go to the slides 4, 5 and 6, you see, obviously, how strong the impact was with all the lockdowns. And obviously, the month of April, most affected with minus -- more than minus 20% of sales. Nearly 20% minus in May. And then, obviously, a strong recovery in June when we compare to last year, last year being record levels for Wienerberger, plus 4%. So you see that, obviously, the pent-up demand that has built in these months of lock down, we were able to recover it quickly. We have been very quick in starting up our operations again. You will understand that this is always an issue to bring down plants and then start them up again. All in all, I think a great performance. Great performance also when you look at the health and safety of our employees, which was the utmost attention for us in this period of time. And closing the first 6 months of this year with a performance on the turnover side 5% down to the record levels of '19, coming in at about EUR 1.6 billion turnover is a strong aspect. Let me just put in this perspective also that we have been very strict when it comes to pricing. We've been able to offset all the inflationary cost increases with the additional price increases that we put into the marketplaces. So this, obviously, was a successful operation of all our local management teams that are operating in different countries. The EBITDA level with a like-for-like EBITDA of EUR 255 million compared to EUR 290 million last year, only 12% down, again shows that we have been able to manage costs very proactively and fast. And also, obviously, our Fast Forward program contributing even in these difficult times when we were not able to bring people across borders and not pursuing as planned our projects that we'll have EUR 15 million coming in Fast Forward in the first half is a strong indication that we are working on always improving our performance. As you can see on Slide 8, we have been very strict when it comes to cash preservation compared to last year by holding back on about EUR 50 million in the CapEx area. Strong liquidity. Team of Carlo has been very proactively managing our liquidity by increasing it to up approximately EUR 800 million. We have successfully placed a bond that was oversubscribed nearly 3x, so with EUR 400 million and a 5-year duration with a coupon 2.75%. So a good financing structure here in place. Again, important to note that even in this crisis scenario, we were able to bring down the net debt-to-EBITDA ratio to 1.6x compared to last year. So strong balance sheet, strict control here on the financing side. And obviously, from a rating perspective, also stable. When we look at the ongoing business, we didn't only manage crisis. And this is, I think, important for all of you to know that we can focus on cost. We can manage the business very -- in strict and close terms, but -- and this is the important part. We focused also on the future. And this goes without saying that the ESG issues are one of the most important elements from our perspective, strategically speaking. So not only we have updated on the recent events and on our road map that we have put in place for 2020. So here, successful implementation of all the measures and issues that we had to put in place. We obviously take it very serious when it comes to the measurement and the KPIs. So you see it, our rating has been confirmed in this respect, and we are moving now on new targets that we will communicate a little later this year. Successfully also launching the first climate-neutral brick in Austria and Germany. And second, very important pillar, innovation. Remember that we always focus on these new products, new solutions. And again, I'm happy to report that here, again, we have made big steps when it comes to innovation, launching the world's first certified pipe to transport green hydrogen in the Netherlands. So very important to enter this market, a future market and a very interesting one. Then again, in our traditional portfolio of phasing bricks, for example, to launch new products that are highly energy-efficient when it comes to Ecobrick where we further decarbonized our product range. Very important solution here, again. The digital enforcement of our presence here, when it comes to customer solutions, has proven the right track in this crisis times because it allowed us to ensure distribution and ensure the logistical part of our business. And therefore, we engaged even more in this aspect, providing additional solutions for all of our customers in the different markets. And again, on the waterfront, smart asset management when it comes to water networks. Here, again, improving our product range significantly. And obviously, when we look at the overall performance here, I think Wienerberger has made a great step forward in providing new solutions in practically every product range that we serve. And with this, I would like to hand over to Carlo, who walks you a little bit through the numbers. I mean we can do the business units. You have the numbers in front of you, but we can comment on this probably a little later.

Yes. Sure, we can do that. Thank you, Heimo, and also good morning from my side. We're very pleased considering the situation that we've been facing in the second quarter with the overall results that we were able to achieve in the first half. Heimo has shown in the slides, previously, we started April with a significant drop in revenues of minus 23%, ended June at a high level of 4% to 5% above previous year. So clearly, we are showing a significant recovery from the beginning of the COVID crisis. And thanks to the great effort of our team in the different organization, we were able to deliver a result that maybe just 3, 4 months ago was probably difficult even to assume. A drop in revenues of 5% in such a difficult phase is something that we are -- we were able to accept in the sense that it did affect also our fixed cost coverage, especially on the factory side, on our Building Solutions side. But nevertheless, thanks to pretty cautious cost-cutting and, to a certain extent, also subsidies received from some of the markets where these subsidies were available plus a very stringent working capital management, we were able to maintain our free cash flow levels and our working capital levels to a very satisfactory level and actually lower than they were a year before. So very conscious management of our expenses and very conscious management of our working capital, and especially inventories. Fast Forward delivered results of EUR 15 million in the first half of the year. And given our decision to be careful in the second quarter with regards to special CapEx spending and also to hold back on some of the projects which were supposed to deliver better volume opportunities in the future, given the uncertainty that we were facing in the second quarter, we have reduced the expectation of savings and efficiency improvements coming out of Fast Forward for the rest of the year to EUR 30 million. And the remaining EUR 20 million, we will be, of course, delivering in the year 2021. It's important to mention that this is mainly driven by our conscious decision, as I said, to be careful on the additional investment as liquidity management was, for a short period of time at least, very critical and probably even more a priority than delivering results, especially in the middle of the crisis. Today, we have a much better feeling, and we have a significant higher cash position. Heimo mentioned that we have over EUR 800 million worth of liquidity at our disposal. And we do expect the second year to deliver decent results as we go forward. So we are in a much stronger position also to put money again back into Fast Forward activities. Our like-for-like comparison that you see on Page 18 was obviously influenced by lower sales, mainly volume-driven. We were -- thanks to the great effort of our sales organization to maintain our pricing and cover the inflation rate increases, so it was really purely volume-driven and shutdown-driven. The other effects that you see in the walk from reported to like-for-like are mainly driven by sale of noncore assets in Germany, a few consolidation effects due to the acquisition in Denmark of our Building Solution last year, and the FX impact was pretty minimal with EUR 3.6 million. The revenue -- or the income statement, excuse me, was influenced heavily, obviously, by the impairment decision that was taken in the end of Q1. As you know, in Q1, we had the significant triggering event, which was the COVID-19. And at the time, given the limited visibility of how we were expecting our business to develop in the coming years, given that we had to make this decision in a very uncertain time, we felt that it would be prudent to write off mainly our U.S. goodwill, which probably in today's hindsight, given the stronger performance in -- especially in June of our U.S. operation, we could argue that it may be a bit too aggressive. But at the time, we felt that given the different scenarios that we calculated that it was probably a prudent approach to take. Other effects on the income statement were related to less administrative and selling expenses due to cost-saving measures, and -- that we were implementing and also expecting, given the shutdowns or a managed cost reduction, but also a cost reduction driven by the temporary government-imposed shutdowns. We also had an improvement on the financial results mainly driven by the fact that we were able to optimize our funding structures or replace facilities and bonds at a higher interest rate with lower ones. So Heimo mentioned the successful placement of the EUR 400 million bond at 2.75% coupon. So we also had additional facilities that we were able to secure with banks and also with other institutions so that we were able to significantly reduce the cost of funds while securing additional liquidity for the group. Taxes are basically including also deferred tax expenses. The pure current tax expenditure is actually lower given the slightly lower results for the first half of the year. We're very pleased with our cash flow development that we were able to achieve in the first half of the year. The change in working capital was significantly better than it was for the same period last year, basically an improvement of nearly EUR 60 million. So thanks also to the organization for managing this very difficult phase of shutting down and restarting operations, and obviously, that's not so easy to manage working capital in such a phase, and also the conscious decision of the Board and the management to be a bit more stricter on the special CapEx, at least in this critical phase, that we hope we have behind us. M&A activities, as Heimo mentioned in previous call, was put on hold, but it does not mean that Wienerberger will not consider the right acquisition going forward. Inventory level in absolute terms were down EUR 28 million, indicating also a strict cash control and working capital management. And our debt -- our net debt is as of June 2020, with EUR 928 million, EUR 60 million lower than it was at the same time in 2019. Here, I would like to highlight, however, that the dividend payment, which was approved, will be paid in October, which, obviously, in the figures of 2019, it already included a payment of the dividend. So if you add that payment, which is planned for October, it would probably bring the net debt level to a similar level as it was in 2019. But again, given the difficulties of COVID, it is, I believe, a strong result of the group. And the net debt-to-EBITDA level of 1.6% indicates the strict cash discipline. In the following slide, we see a walk of the net debt development. And you see that the main expenditure or cash outflows were for investments, share buyback, dividend, hybrid coupon and the lease repayment. So even in this period of difficulty -- of uncertainty, I would say, although this obviously includes also the cash flow development of the half -- second half of last year, we have kept delivering also to meet the expectations of our shareholders by buying shares back and by trying to improve also the contribution to our shareholders. The last slide that I would like to briefly touch upon is the financing structure, which basically is much more balanced throughout the year. Obviously, the bond is a lump sum payment in 2025, but I would say that we have a much more structured or a better maturity profile than we had just a quarter ago. As we were talking last time and the indication that the 2021 hybrid call date is also going to be due to decision if we're going to call the hybrid will be made in December. So we will decide and inform you accordingly what our position is. I can say that as -- from today's perspective, we have enough liquidity to cover a potential decision -- a potential favorable decision to call this if we decide to do so.

Right. Thank you very much, Carlo. And let's move back to operations, to our 3 segments or 3 units. Building Solutions Europe, heavily impacted in quarter 2, obviously, by the lockdowns, especially in Western Europe, big markets like the U.K., France, Italy and parts of the rest of Western Europe. So again, if you look at the performance on Page 12 of this division, it's a considerable and remarkable comeback in June in order to offset these lockdowns and well managed in the sense of costs to keep margins on such a high level. We have seen good trading also in July, and I will come back to this in a minute. Piping solutions, even, I think, very important to manage that, here, we have been able to increase the EBITDA margins and have moved up in performance due to the fact that here, obviously, we pursue our value-added solution strategy. And you see here also on the impact side from the COVID-19 situation that, obviously, by 5% sales were down, but strong performance as far as products and pricing is concerned. North America, 2 words on this. The longest shutdown in our operation is Canada. Very profitable business, 3 months down. But you see, obviously, here, also a very good performance and strong management team in North America was able to offset it by good cost discipline, forward-looking working capital management and a very good trading in the June -- months of June and July already again. So here, we offset this lockdown situation due to better performance in the recent months. All in all and obviously based on this good trading results in June and July, we looked into the business, analyzed the situation and obviously analyzed it also in the respect that we -- obviously, due to these lockdowns, we have a pent-up demand that we currently see. We, from a management perspective, see also that this will flatten out in the next couple of weeks and months. So all in all, we foresee in our end markets, the 30 markets that we operate in, about an average of 10% down on the end market. That doesn't mean that Wienerberger is down 10%, but obviously, we want to outperform in certain markets. But as I said, administrations were not working under... [Technical Difficulty]

Okay. Ladies and gentlemen, very sorry, we had a technical issue here. Now we are back. And again, over to Heimo Scheuch.

Okay. Thank you very much. We apologize for the technical breakdown. And I will continue, obviously, with the segment Wienerberger Piping Solutions where I said that, obviously, due to the strong efforts that we put in place to upgrade our product portfolio, we have been successfully increasing our margins. And in North America, due to the fact that we had strict cost control and also good performance in the local markets with pricing, we were able to recover very quickly in the -- in Canada and the U.S. So all in all, this leads us to a situation where we, as management, consider that our end markets will be down for the rest of this year or for the year as a whole about 10%. That doesn't mean that we are down 10%, but we want to be better than that. However, as I said, there are certain issues when we look at planning permissions, when we look at the work on administration side to issue such permissions and that this will affect, obviously, the rest of the year. Setting this aside, we assume that, obviously, there is no further second or third wave of COVID and that, obviously, our prices, as we have seen this throughout the 6 months, are stable at this level and that we have a contribution from Fast Forward, as Carlo has explained it, approximately EUR 30 million to our business. All in all, then we are -- we foresee that we will have an EBITDA like-for-like in the range of EUR 480 million to EUR 500 million, which is significantly up from our first scenario that we have put place in the early weeks of May. So here, you see that we have worked a lot on our performance, and we are confident that we will reach this throughout the year. From a CapEx perspective, we have about EUR 120 million to EUR 140 million on the maintenance CapEx side that we'll put in place. I think when you look, even considering that the visibility right now is still short and it's difficult to predict developments in the next months or so in Europe, in North America and in the U.K. right now, but the general macro trends that we see out there are good, are very encouraging because all the state aid programs that are put in place in the U.S., in Canada, in the U.K. and in the EU are indicating that investments will be dedicated for infrastructure, for renovation and for social housing. And I think here, Wienerberger is well positioned to take advantage of that. I draw you to -- your attention that the current turnover of our group is in the range of about 20% in renovation, 25% in infrastructure. So a strong exposure to these 2 fields of activity. This also proves that Wienerberger is more resilient than in the past when it comes to the overall business model. In recent days, we have also, together with the Supervisory Board, have worked on our Executive Board structure. And I'm happy to announce that 2 colleagues, Solveig Menard-Galli, who has been the performance manager and responsible for Fast Forward moves into an operational role being the COO on the Board for the Building Solutions side; and Harald Schwarzmayr, a long-standing manager that has been successfully putting our U.K. business up in the last 10 years, is now head in the Piping division as CEO. And both of them will be responsible for further developing our 2 major business divisions in Europe. Again, I think here, we have a clear strategy in place to develop those 2 units and to develop the North American business in the way that we obviously improve our product range when it comes to higher-value-added products and solutions that we want to sell. And I will show you in -- on Slide 31, for example, the strategy forward for North America where we see a potential for growth, for further consolidation. And we are ready to consolidate the market even further because we consider that Wienerberger is the natural consolidator for the industries that we are operating in, in North America and in Europe and the U.K. So positive housing sentiment in the years to come, as I said earlier. We see that our strong and strict cost management, very efficient and experienced management structure allows us to add on businesses. We have done so successfully in recent years. And therefore, I think a further consolidation in the U.S. will bring the positive effect. On the Wienerberger Piping side, we want, obviously, also to grow our business. Especially when we look our -- to our exposure in Central Eastern Europe, we see here some important and substantial potential for further improving our market share. So we'll move on that. We will also move on very specific applications when it comes to energy management; water management, especially; and renovation solutions. So this is an attention point for the management in this division, Piping Solutions. And Building solutions, again -- here, again, to further improve our range when it comes to highly energy-efficient solutions for renovation, for roofs, for facades and also for the new build when it comes to bricks in Central and Eastern Europe. It goes without saying that Wienerberger today is a company that has a strong attention and focus point on ESG. We had this in the past. We'll continue and certainly reinforce our performance in this field. It is a clear target of us to decarbonize our product range to, here, make sure that all of our solutions and all of our products positively contribute to climate change and have a life duration that is extremely long and add, obviously, to the performance of buildings and renovation solutions and infrastructure solutions. Furthermore, and I think this is also very important and not to neglect, that any solution and product of Wienerberger is 100% to be recycled and can be added into the circular economy. So we see here a big advantage of our products compared to the competition. And running more than 200 production sites worldwide, we feel responsible that we do a positive contribution to the biodiversity locally, be it in the local communities or regions, be it in all sorts of respect of the surroundings of our sites or within our sites. And we'll have here clear plans and report on all of these aspects transparently, as we did in the past. Obviously, and finally, when we come to Slide 35, you see that we have a clear vision when it comes to capital allocation. We have clearly said to the shareholders that we want to return 20% to 40% of free cash flow by dividends and potential share buybacks. So that's what we have done in the past, we'll continue to do so in the future. Secondly, we have a strict balance sheet management when it comes to financing. And especially when you look at our ratio today, we have been very disciplined net debt to EBITDA, and we want to keep it below the 2.5% that we impose on ourselves. And this leaves us with, obviously, the opportunity to grow. We have our maintenance CapEx where we always said clearly that EUR 120 million and EUR 140 million, in this range, we need for maintaining and improving our business. We have also a clear vision then in the future to put CapEx into ESG targets, and this will also drive our sustainability performance in the future. So we will have a clear measurement with respect to these targets and the KPIs that we will put forward when it comes to investments in this direction. And finally, the discretionary investments that we will put in place by special CapEx, as you have seen in the past, especially performance enhancement. And then finally, M&A where we see ourselves as the natural consolidator in the industry and in industries next to us in order to strengthen our portfolio. So here, again, I think we want to move forward to create a Wienerberger that is more a system and solution supplier than a product supplier and continue the successful path in the upcoming year. So I think, ladies and gentlemen, we have given you, together with Carlo, an update on the current situation financially, performance wise and also with respect to strategy and are ready to take your questions.

[Operator Instructions] The first question comes from the line of Yves Bromehead from Exane BNP Paribas.

I have three questions, if I may. My first one is on your comments for the month of June. I'm sorry, but I didn't hear that correctly. Was this 4% to 5% below or above 2019 levels? And given that comment, does that imply that July was running at a higher level than June? That's my first question. My second question is, just wanted to better understand your guidance. Is your EBITDA guidance of EUR 480 million to EUR 500 million based on market expectations of minus 10% versus what Wienerberger could actually achieve? And then lastly, on the M&A side, especially in the U.S.A., you've done a specific slide. There is a real need for larger consolidation in the U.S. versus Europe. So just trying to understand, does this mean that you're feeling a bit more comfortable around potential larger deals, especially with the U.S.?

Thank you, Yves. We'll clarify this again. On chart or Slide 6, we have clearly said that our trading or revenue performance in the month of June is 4% above record levels of last year. So you clearly see there was this pent-up demand in June after the lockdowns. Your second question related to the performance in July. Obviously, we have seen a good month of July. Not at this record levels, but more in line with our expectations. Our guidance implies that, obviously, our end markets are down by 10%. And that doesn't imply that Wienerberger is down by 10%, but it implies that we are operating in a market that is declining by 10% overall for the year 2020. So this is on the front of guidance. When you come to M&A, I think you mentioned the U.S. I'm -- obviously, I will comment this in a minute, but I'm just saying Wienerberger is ready, obviously, to move as a consolidator in industries, being Piping or being Building Solutions as well as in the U.S. or North America, in Europe and also in the U.K., if the right opportunities arise. We are not forcing anything. We are not under pressure to do anything, but we are saying that from a balance sheet perspective, operational perspective and management perspective, we are ready to do such deals. Yes, they can be a little bigger. It can be, obviously, not only bolt-ons, like we have seen it in recent years. And we will continue, by the way, to do those bolt-ons, but if the right opportunity arises, we'll also do a bigger one.

Just, sorry, on the guidance side, I'm sorry, but I still struggle to understand. If you are able to achieve better than the 10% essentially, in other words, this is incremental to your EUR 500 million upper range. Is that correct?

You heard my answer, no. Sorry, are you still there?

Yes.

Yes. I said no.

The next question is from the line of Matthias Pfeifenberger with Deutsche Bank.

Congrats to the very resilient results. I ask a CapEx question first. Can you maybe share with us what the total CapEx budget would be, let's say, in no further lockdowns? You're resuming some of the special CapEx, and you're obviously engaging in this new line item, ESG CapEx. What could be -- will be looking at in total, ex M&A?

For this year, I don't -- I can't give you a solid guidance when it comes to this, sorry.

Just in general, yes, when we are back to normal, what could we see in terms of a total run rate?

Well, I think the total run rate, as I said, from EUR 120 million to EUR 140 million, and the maintenance CapEx, I think, is that one we confirmed. On the discretionary side, as I said, we will decide then how much we want to allocate into the businesses. Carlo explained, when we feel more confident, we will allocate a little more then to special CapEx, for example, towards the second half of this year. But it will be well below last year's levels, by the way. And M&A is, as I said, driven by opportunities. And by -- when you refer to the ESG part, then I think you will get an update and the clear vision when we do our Capital Markets Day a little later. I think it's planned for the beginning of October where we'll give you more than 1 year outlook because, I think, this is project where we really want to make a difference when it comes to the environmental and sustainable performance of Wienerberger.

Okay. Any sneak peek there in terms of the ESG program that you envisage for the next 5 years? I mean would this go as far as working on the [ cumes ] structure -- the energy structure of the [ cumes ]? Or is this just on a products basis?

No. It's definitely a yes to what you're saying -- what you have said, Matthias. It's a work on the technology side, it's on the industrial footprint. So it's a major project that will keep us busy, not only for 2 or 3 years. I think there, the vision is considering the lifetime and the lifespan of our plants, more than a 10-year project. And therefore, it needs to be embedded in a long vision, and then we must step -- do a step-by-step implementation. We can't rush into 1 -- in all the markets at the same time. We need to implement this. But what we have seen throughout the last years where we consistently worked on technology and improvements, and Fast Forward is a good example where we see efficiency gains, tremendous ones, here, we want to implement them now in a very structured way forward. And so we will give you a clear guidance and also the necessary KPIs to it. But it's a major project.

Okay. Great. Looking forward. The last one is really on the guidance, and I really don't want to nag you on this because, obviously, it has been too good to be true anyways with regards to you raising the targets for the third time and -- for the second time. This is just about when we think about, let's say, you do minus 7.5% for the fiscal, like you always did better than the market, the run rate on a year-on-year basis is still close to minus 10% for this quarter. So it's not really such a slowdown in terms of the Q2. So my question is do you see a big shortfall from, let's say, July -- June, July to August, September? Is that already visible in terms of the conversations you have with the customers? Or, and that's the other scenario, I guess, you're maybe still preparing for a weaker Q4. Is this really Q3 where you see it already? Or is this just precaution for the fourth quarter? And then also on the margin, it's obviously a weaker margin in the second half, but it's a lot of seasonality and low visibility. I get that. But especially also the pipes business was a big surprise in terms of absolute EBITDA up and also margins up. So probably this is going to be up on a fiscal basis. So my overall question is how bulletproof is this second half guidance really?

Well, I think bulletproof when you refer to if we can achieve it, I think it needs hard work, obviously. It will not come by its own, as didn't the results of the first half, by the way. And I think Carlo alluded to it, it has been difficult market environment out there, and especially when you consider our pricing, it is holding, and we are working on that every day. Also the new products that we have introduced in the market. But yes, it's -- I think all -- I perfectly understand you and your colleagues want to understand better what the visibility is, but I must say also, our visibility today is not very long. And I see only that in markets -- also in Eastern Europe, demand levels are -- or have been under last year's levels and will continue to be under last year's level. So there's no major change because, obviously, there is shortage of labor, there have been some fiscal policy changes by local governments, other political issues, et cetera, that are important to note. So all in all, I think when you look at our guidance, the EUR 500 million, it has already a lot of optimism in it. And especially, I just want to recall where we are coming from because I think 3 months ago, nobody really believed that there is an EBITDA at the end of the day. [indiscernible] So let's see. Let's move through this year. I think we give you confidence, we give you a sort of good outlook at this stage. If something major changes, we'll update you regularly. But for this moment, I think this is our best estimate that we have.

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

So my first question is on the underlying market. So you've been mentioning that there's a level of uncertainty concerning [indiscernible]. But then we also see a lot of healthy measures, for example, from the U.K. where they're trying to change their planning system. So I'm just wondering, do you see other similar measures in other European countries, which are going to help the new build industry, especially from the [ projects ] side? And my second question is on...

Xintong?

Yes?

Sorry. Your connection is very bad. We couldn't get your questions. We don't know if you can move...

Sorry. Can you hear me now?

Better, yes.

Much better.

I'm sorry. Sorry about the connection. So my first question is on the underlying market. So you've been saying that the lack of, say, building permits or the planning system is going to affect the new build market, at least for the rest of the year. But then we also see, for example, the U.K. government is trying to ease up their planning systems to make new builds market a lot easier. So I'm just wondering, do you see any other similar measures in other European countries, which are going to make the new builds market, say, less pessimistic on the administrative side? And then my second...

Can I ask -- can I just sort of answer your first question? Not at this level. I think I don't see any sort of measures by any other government to ease up this sort of permit process for the moment. And I would sort of say also, if and in the event the U.K. government says things, we will need still to see the results of it. So I think you will not see immediate effect here. It's a good intention. We all applaud, but we need to see it then materialize, okay?

Okay. All right, great. That's clear. And then my second question is on your renovation split. So you've said that 20% of group revenues come from renovation activities. But then I'm just wondering how much of this 20% actually is targeting energy efficiency, like, as in the sense that deep renovation instead of light renovation where you only save around, say 30% -- I don't know, a very small portion of the energy consumed?

All of it is in high energy efficiency, I mean all of our renovation solutions, because they are linked to facade and roof, especially. And when you renovate the house, the most energy that you lose in a not renovated house is through the roof, by the way. It's an old saying, but it is the right thing. So if you start insulating the roof, you will save more than 40% of your energy, then the facade, then the doors and windows. So these are the most important things that you need to do. So clearly, when we talk about energy efficiency and energy savings by renovation, the roof and the facade are the clear winners, yes?

Okay. But then in that case, do you have any plans, for example, in M&A whatsoever to expand your solutions for the renovation solutions in the Building Solutions division? Like, do you consider acquiring other products, like, insulation or water-proofing products?

Well, we do, and we did already. I think we bought small businesses in the Benelux. We just bought a business in the first half of this year, which we signed recently in Germany in order to provide these solutions. It's a multitude of businesses that we currently are integrating in our existing and therefore, get a stronger performance here. So it is yes, the answer to your question that we will certainly look carefully in opportunities when it comes to renovation.

Right. And then the third -- the last question I have is on the ESG side. So based on your updated 2019 sustainability report, it seems like you have achieved most of the targets you set for 2020. But then as for the CO2 emission from primary energy source in the bricks and tiles segment, you targeted, say, 20% decrease versus 2010, but you've -- and you achieved 6% decrease in 2019. So I'm just wondering what caused this gap. And is it still achievable because we're in the middle of 2020?

Thank you for this question, and I think this is very important that, as you mentioned it. We are obviously on a journey. And as I said, we -- when we put this target together, it was in '12 or '13, so it was a long time ago, and we were very ambitious already. But I think what we have done, we have learned, and we have experienced. We have put new technology in place. And today, we're much more confident that we will reach targets that we will then communicate to all of you. I think when you take this specific one, I will say probably not everything will be achieved in 2020 because it's a really tough goal to hit. But we see in certain product changes and then on certain sites already the significant improvement. So what I tried to explain to your colleague, Matthias, is that with this experience, we will put now in place a major ESG effort for the next 10 years where we will substantially reduce energy consumption and therefore, CO2 emission.

The next question comes from the line of Ami Galla with Citi.

A couple of questions from me. First, on the July demand trends that you see, can you talk a bit about the product mix? Which products have actually experienced a much stronger demand as the market picked up? And also in the markets where you sell through intermediaries, have you seen any bigger restocking effect in the sort of demand that -- over June in July? My second question is on the Piping Solutions margin again. Sorry for the follow-up, but the improvement -- as you mentioned, the improvement has been driven by your value-added strategy. I was wondering if you could quantify what portion of the improvement was really driven by the benefit of lower input costs. And should we still expect -- is it reasonable for us to expect that the year-on-year margin improvement can be held into the second half in this business? My third question is on working capital management. I mean has there been any signs of increases in bad debts or signs of customers requiring extension of credits in your business?

If I take your three questions, I'll start with the last one on the working capital side. We didn't see any sort of major changes when it comes to customers or payment terms, et cetera. So this is very well managed. You've seen from Carlo's presentation also that inventory levels have been managed very well. So all in all, nothing to report on this issue. When your -- first question was relating to products, and we see, obviously, an increasing trend and better trading in the roofing products and in the facade product. So this is the -- clearly the pent-up demand that you see there in this area. And from my perspective, when you talk -- your other question about the Piping segment, here again, obviously, as I said, we have here a better margin because deliberately, I told you about also when we talked about '19, we left certain markets, certain commodity markets. So we exited certain product types and therefore, have more focus on this higher-value-added one. So that's a natural effect that we have here. And secondly, I think when you talk about solutions, like the -- on the electro part when it -- the spider solution that I described, I think, the last time when it comes to a plug system, so preinstalled system for electro installations. So these are taking momentum as we speak. And the input costs, yes, they have been a little lower in the first half. You can't sort of foresee that will continue in the second one because we have already here seen that the raw material prices are trading up, so don't foresee this for the second one. And I think from a general perspective, we always said that we are working on the level of profitability of the segment. And obviously, we have a good way forward. And the target levels that we have set ourselves have been 12%. And then I've indicated to all of you colleagues that 12% is not the one that I'm satisfied for the long term. We will certainly work on that over the years. But I think what you should -- what you see here that this segment, due to a very experienced management team, is now moving in the right direction.

The next question comes from the line of Rushil Paiva with MainFirst Bank.

Just a couple for me, if I may. Just starting with the impact of COVID upon the business, just in terms of the -- a twofold, I should say. In terms of -- can you quantify the benefits that the company received from government employment schemes and the like? But also can you estimate the cost of shutdowns and site closures and how that impacted the business?

Well, the first question is, I mean, this is a minor effect, I think, from an overall perspective to be neglected. The state aid things, it's really minor. And we -- from a reporting perspective, we can ignore this basically. On the overall performance, obviously, you see the results in quarter 2, the shutdowns, the -- all the impact that we had here. I mean quantifying it, it's certainly a substantial amount because, obviously, it impacted us in the certain quarter -- in the second quarter. And I think you can easily deduct it from our results, if I may say so.

Okay. Great. Moving on to the Fast Forward program as well. If possible, it'd be good to know the savings by divisions that were achieved in the first half of 2019, the first half '20, and also just how that remaining EUR 35 million will be split by division, if possible, just to give us a good idea of the underlying earnings and how they could move.

Well, I think it's not so much by division. It's -- when you look at the year 2020, we have promised to deliver pre-COVID-19 EUR 15 million for the whole of Wienerberger. And when you look at the impact, the severe impact that we have seen in the first half with -- EUR 15 is a strong performance. We also indicate to you that EUR 15 million will come. So we have an overall performance of EUR 30 million. And I'm very confident and Carlo is as well that the remaining EUR 20 million will be then achieved next year. But I think from our perspective, it's a strong performance in -- especially when it comes to manufacturing because these are the major ones that Carlo was indicating earlier where we do our projects and where we'll dedicate also the special CapEx, too. So you will see it mostly coming from manufacturing, and this is certainly mostly also on the Building Solutions side where we do these projects.

Okay. Fantastic. And just the last question. Just on trading in July and August, sorry to go back to this because I know you did respond to questions earlier, but if you are able to provide a bit more color on the split between volume and pricing and how that's trended because the data that we follow shows that pricing, for example, in North American bricks has tended to accelerate in July. So I was just interested to see what you're seeing in the market and if you're able to provide any more color on that basis.

Well, I think it's pretty much in line, as I said, with expectations, the trading in July. August is too short now to give you an indication but from a volume perspective and price perspective, we're pretty much in line with the overall performance that Wienerberger has shown so far.

The next question from the line of Anastasia Solonitsyna with UBS.

I've got two, please. First one on pricing. Do you see any room for the positive spread on prices versus cost inflation in the rest of the year? And how do you see potential benefit from energy cost decline? Is there any benefits already realized in second half? And how big of an input it can be into the next year? And my second question is a follow-up on M&A. What criteria do you use to determine attractive M&A targets for you? And what levels of returns you are looking at, potential targets? And also on -- related to this question on SG CapEx you're looking to put in place. What levels of returns we can expect on it as well, and over what period?

Thank you for your questions. I think from what I tried to explain on the pricing side, we are very -- feel very happy that we can cover cost inflation this year, and we do so for the remaining year. So there's nothing to be expected on top. So that's it. From the input costs side, when you talk about energy in particular, you remember that we buy forward. So we have, call it, hedge, sort of, bought for with the energy already. So we don't see here a favorable environment for the rest of the year either on the cost side. So this is basically all built into our guidance, if I may say. If you bear with me 1 second, I think we will give you then the update at the Capital Markets Day for '21, so not yet because we are in the middle of this forward buying process and getting this organized. So in October, we'll give you here a stronger sort of guidance when it comes to the input cost side for next year. Then you had a question on the -- yes, the potential targets on M&A and the ESG CapEx levels. So from a return perspective, we will, certainly, as I said to your colleague, Matthias, give you a better -- a more detailed plan on this overall policy and strategy that we'll put in place and therefore, then also return targets that we will have with respect to this CapEx. So if I say this, there will be returns, so that's the positive news to it. And it's not only an obligation to do so. So that's one part. And the second one, M&A targets. Yes, we are looking at numerous targets, and we have been doing so in the past. You have seen how disciplined we have been in the past and will remain very disciplined. As I said, if the right opportunity comes in these markets, we will certainly move on them. You know our track record when it comes to M&A, so they have been well and transparently communicated as far as multiples and return KPIs are concerned. So we'll certainly remain in this range when we talk about potential targets in the future.

[Operator Instructions] Next question comes from the line of Lush Mahendrarajah with Berenberg.

I think I've got three. The first is on Austria. I think I sort of saw in the report that the lockdown was shorter there and you sort of saw the initial recovery, and then it's slowed since then sort of -- given some of the permit issues that you've already discussed. I just wondered if you could give us some color on where sort of Austria has settled versus maybe 2019? And given -- I get the sense that they may be slightly ahead of other markets. And the second question is on -- just on energy. I know one of your competitors, obviously, had a big loss on sort of disposing hedged energy in sort of current spot market. I just wondered if that was material to you guys at all in H1. And then the third question is on Fast Forward. I know sort of when you launched the program of sort of EUR 120 million, it was based on flat volumes. Given you sort of expect to get it complete by 2021, do you think volumes can get back to '18, '19 levels by then? Or is there just sort of more you've found on the cost side?

I think I will hand over for the Fast Forward question to Carlo.

Yes. I mean we -- I mean I think the key message on the Fast Forward expectation with regards to the EUR 20 million is that part of the reason for this delay is the conservative approach in dealing with special CapEx. And we don't do special CapEx for fund. We do it, obviously, to improve the operational excellence of our operation and to grow the business, and we felt that it was better to focus on liquidity in the short term. But we remain committed to the Fast Forward initiative beyond 2020. And this EUR 20 million and probably more will come in the following year. So it's just a mindset change, and it's the attitude that the business have of making sure that we'll become efficient, and these tools and mindset is embedded in the organization. So we're pretty confident that there will be additional savings, and these savings will increase as revenues and market sentiments improve, obviously. So it's not going to be finished, it's going to be a continuous process.

And I think if I may add to this color, if you see the performance in the first half that -- with declining markets, we were able to achieve these positive results. It proves that, obviously, if markets are coming back and are manufacturing -- especially when they come more from the manufacturing side, we have additional leverage there.

Yes. Correct, yes.

Your second question was on Austria, and I think we have seen here permits down about 8%, if I'm not mistaken, something like this in Austria. And I think it will level out at this stage here. It's also regionally very different. And obviously, it's not always in the markets that we are active in when we talk at multi-residential housing and multi-store housing. So it's something we monitor very closely but does not always affect our markets as such, yes? So that's my response to this. On the energy side, you know that our policy is very different from competitors. We buy forward, that means volumes, and we don't hedge, basically. So we buy volumes. We insure them. And obviously, we have been in contact with our suppliers very early this year and tried to push back this for, obviously, volumes in order not to have penalties. And I think so far, we're in good shape with these negotiations, and we'll not see major issues coming from this cost wise.

At this time, there are no further questions. I hand back to Ms. Grausgruber for any closing comments.

Okay. Thank you very much, operator. Ladies and gentlemen, thank you very much for dialing in today. We will come back with a date for our Capital Markets Day later on in autumn. The next conference call will be on November 5 for the Q3 results. And for today, I can only wish you a nice remaining afternoon. Thank you very much for dialing in, again, and goodbye.