Wienerberger AG (WIE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome, and thank you for joining the conference call on Wienerberger's Results on the First Half Year 2021. [Operator Instructions] I would now like to turn the conference over to Elisabeth Falkner, Head of Investor Relations. Please go ahead.

Ladies and gentlemen, a warm welcome to the Wienerberger Earnings Call for the First Half Year of 2021. Our Board representatives today are our CEO, Mr. Heimo Scheuch; and our CFO, Mr. Gerhard Hanke. They will lead you through the presentation today discussing our performance in the first half year of 2021, but also give you an outlook of the remaining business units. After the presentation, we are ready to take your questions. I will now hand over to Mr. Scheuch for the presentation.

Thank you, Elisabeth, and good afternoon from all of us here in Vienna. Thanks for being on the call, and we will try to go briefly through the presentation that you have received. Obviously, we are delighted to report the best ever half year result in the history of our company. And I think it shows and confirms that our sort of strategic repositioning of Wienerberger is working, and we have built a resilient business model, and we sort of can create substantial organic growth on one hand through innovation and digitalization of the company, and on the other hand, successful in our M&A sort of work and developing the company further. When you look at the first half year with revenue slightly under EUR 1.9 billion, we have a 14% increase to last year. Strong EBITDA, increased by 21%. And obviously, from our guidance perspective, we'll talk about this in a minute, but we have increased it to EUR 620 million to EUR 640 million. We positioned the company again and will do so for the future on 3 strategic pillars: innovation and digitalization. We'll give you a couple of examples, operational excellence, the strong sort of contribution from our self-help program in the first half, again, EUR 20 million, and then the M&A sort of project pipeline that is really interesting for us for the future to grow the company. Saying all of it, it's very important, I think, especially these times when we talk about climate change and the responsibility for all of us to contribute in order to prevent these further disasters and really now make changes to the business model and in the sense of how we live together, Wienerberger has made a strong contribution, decarbonization. We've already achieved in the first half more than 5% Tier 2 reduction. We're pursuing the circular economy move in the sense that all new products are reusable or recyclable and the biodiversity plan is running already throughout our operations and our sites. So when you need more detail and, obviously, all of the more detailed information is in the sustainability report. We put a lot of emphasis on this aspect and will make Wienerberger one of the leading companies in the field of ESG in the Building Materials sector. When we look at the market environment, as such, very briefly and very quickly, and we distinguish between the new build market, Western Europe, strong rebound in Western Europe, especially the U.K. and Belgium. France is now also picking up. Germany is slightly positive and obviously lagging behind these are the Netherlands in this area. When we talk about Central and Eastern Europe, we have here, obviously, the markets like Poland, Czech Republic, Slovakia and Hungary, that are below levels of 2019. So we have not seen the recovery there in the sense that we have seen it in Western Europe. Permits are lower, completions are lower in these countries. But as you can see from our business and how we perform, we actually did very well in this region, as I said earlier, due to the fact that we changed our portfolio of products and especially the self-help part. The Nordics are more flat. If we look at renovation, second core market for Wienerberger, strong markets in all areas, Western Europe, Central Europe. Especially in the segment of roofing, we have very strong contribution volume-wise and profitability-wise. Infrastructure. Western Europe, again, strong increase in good catch-up effects, Central-Eastern Europe also and the Nordics has a slightly positive development, not as strong as the other ones, but still from a very healthy level. They have improved their performance. When we look at North America new build, we have seen a very good growth rate in the first half when it comes to new residential housing, strong improvement there. And obviously, from the fact that we have the state-funded programs on infrastructure, a very strong contribution from our piping business due to the fact that here we have a clear strong impact from infrastructure -- public infrastructure spending. As I said, when we look at the different focus areas, when you look at the first half of 2021, you see that we have increased despite this sort of weaker markets in Central-Eastern Europe, our turnover is above the level of 2019. And here, again, as I said, it's -- the key message here is we are an organic growth track in the sense of new products, innovation and system approach. We have also improved the EBITDA compared to 2019, obviously, through our self-help program and our discipline when it comes to cost management. You've seen obviously that supply chain management has been very well. Gerhard talk about it on the raw material side, how we were able, first of all, to ensure availability, very important because we gained some market share in the piping business and also very disciplined on the brick side when it comes to the input cost on the energy side. So here, good supply chain management. Through all the business units, we have seen good growth rates. The numbers are there. We have slight margin expansion on the Building Solution. On the Piping Solution, we have, from an EBITDA perspective, also good growth. Here, we had to digest, obviously, the strong raw material price increases in certain areas, very important increases, and as I said, managed the availability. And in North America, you have seen again a strong margin expansion due to the fact of a healthy market, price increases and good cost discipline. When we look at Wienerberger's strategic growth model, as I said, we will continue with our operational excellence. Gerhard will elaborate a little more. We have a contribution of EUR 20 million. The EUR 40 million is obviously on track for the whole year. Innovation and digitalization are the major drivers for further growth. I'll give you a couple of examples. And as I said, very important in the system, it is the front here, our move in order to improve our business continuously and make a positive impact on the environment. Let's have a couple of examples when we talk about new technology, especially when it comes to the production in the Wienerberger plant. We have spent some research money and resources in the last couple of years and see here good returns when it comes to new sort of optimized production technologies. Here, for example, we have, on Slide 14, a good example for new heat pumps and obviously optimizing the heat recovery from our kilns into our dryers, where we can save up to about 80% of energy consumption in the drying process. So again, we will roll this out through our plants step by step. But here, a good internal sort of research and development project that will help us tremendously reducing the energy consumption. We've introduced also, on the product side, so-called Electron microscopes, very small ones in order to, obviously, monitor the weight, to produce lower firing temperatures, improve thermal insulation of our products and, therefore, obviously, make here a major change -- a game changer when it comes to thermal insulation to increase it by 15%, which is actually substantial in our field of products. So here, you see that there's a multitude of efforts that we put in place in manufacturing. We are also not sort of staying back and not investing in our plants. On the contrary, we have here a strong track record of improving our plant structure. And I'll give you an example, in north of Europe, where we are the leading company now when it comes to water management and especially modern one in Sweden with the biggest sort of production unit in the north of Europe when it comes to piping systems and also a very new production line in Helsinki in Vantaa when it comes to special products like pumping stations or device chambers and bigger tanks. On Slide 16, you see here what we mean by this. We have now emerged from a simple pipe producer to a system approach, what we talked about and we try to make understand what's Wienerberger about. We are not just selling to the water companies in this part of the world the simple pipes, we are talking here about large urban infrastructure projects when we talk about bigger retention tanks that we produce with all the accessories needed. We also have the digital solutions. You remember that we acquired a Dutch company in order to integrate this in our business. And here, obviously, the water companies can now better monitor and control their water not only the volumes, but the quality and make their life easier. Stormwater management, obviously, when you talk about the massive rainfalls that we have seen throughout Europe is a big issue now how to manage this flooding. And here, we have good solutions for urban -- the urban areas when we use the stormwater management systems that we have in place in order to prevent flooding in this area. So there is, when you talk about Wienerberger, a clear positioning of our company in water management in smart and intelligent water management of the future from drinking water to obviously wastewater management here, a vast sort of activity that we will develop through the key markets that we are active in. Another word on the M&A front. Here, we have a selective growth projects. As I said, we are working on the acquisition of Meridian. We're in good shape with the Department of Justice in Washington. I think we will have here sort of minor remedies, meaning selling off some assets, but this is not of major concern. It will not substantially influence our synergy potential. And I'm confident, even due to the fact that we had administration change in the U.S. and as you well are aware because you read it from the paper and other news flows that a lot of projects get delayed currently in the U.S. due to the fact that administration can't keep up with the pace of these mergers and acquisitions. So we are in good shape, and I think we get our sort of acquisitions through in the third quarter of this year. We have made also a very -- for us, strategically important small acquisition with FloPlastics and Cork Plastics in Ireland and in England. Here again, if we look at this in more detail, and we have added a slide for you and you can also click through, obviously, on a video and get a better understanding. It's an integrated system from rain to drain where we use, obviously, the water from the roof and here comes obviously this concept of, again, integrating our systems from the roofing side to the water management side, use the water, store it underneath and also clean it and then use it for water supplies in the garden, obviously, for watering, but also in the house for the need that is required. So here, again, a system that is not only in the new build, but strongly in the renovation side. So it's a good add-on for us, and it will sort of improve its performance because we can use it with our existing customers, social housing companies, big developers, house builders in the U.K. and have here a smart in-house system solution, again, for water combined with energy efficiency and durability. So again, a very good acquisition for us. Revenue is about EUR 100 million turnover and profitability also above 20% EBITDA margin. So it adds to the margin improvement of the Piping business. Again, from a valuation perspective, a 7x after 3 years. So synergies included here, good and attractive valuation from our perspective, especially when you look in the U.K. And it gives us and this is I think the key message to you, has a strong foothold in the U.K. to grow. Because here, we see tremendous potential for us to grow as a piping company in the U.K. From our perspective, it fits perfectly those M&A activities in our sort of strategy, geography-wise and market-wise. It enhances our exposure to renovation, which we want to grow, obviously, and therefore make Wienerberger even more noncyclical when we come to sort of the exposure to end markets. And it addresses the issues of climate change. As I said earlier, when you talk about water management, prevents obviously flooding adds to the water storage. So when there's not enough water, we have available especially when you talk about watering and water in the gardens, et cetera. It's also a major evolution, I'm sorry, to population growth and the housing demand, where we can obviously deal with these issues better with this integrated solution. And we have the right answer to the rapid urbanization that is taking place and the water management in respect to this urbanization issues. It is perfectly in line with all the European Green deal and all requirements that you have in the U.K. and in Ireland. And I think here, obviously, again, it shows that we, as a company, are strongly committed to make convenient solutions to provide convenience to our clients in a much more advanced way in order to meet the ESG targets that we, as a company, but also the people and customers have in the different countries. It's, for us, a clear, must to improve the quality of life of people where we are active in to improve, obviously, the standards and the availability of water. So this is, again, I think, a strong commitment of Wienerberger before I hand over to Gerhard Hanke for the numbers and for the financials.

Thank you, Heimo. Happy to do so. Ladies and gentlemen, our resilient business model and our solid balance sheet laid the ground respectively, supported our further growth development for the first 6 months, which we are reporting today. Growth not only in the sense of record revenues and results, but also in the sense of a better profitability, in the sense of a stronger ROCE what we are presenting, while keeping it respecting our strong financial profile all the times, with a net debt-to-EBITDA multiple of 1.6x. Wienerberger generated, as Heimo already mentioned, a record revenue of EUR 1.9 billion in the first half year and like-for-like EBITDA of EUR 308 million, which is a plus of 21% compared to prior year. And with this excellent operating performance, this translates to a strong profit generation and consequently, into a net result, which is close to EUR 113 million compared to a minus EUR 29 million in 2020. When we look to the EBITDA like-for-like presentation, respectively, to the reconciliation to -- between as reported and like-for-like which adjustments which we did, I think there are basically 2 things what we adjusted, which are material. The one is that we did the currency devaluation on the U.S. dollar and on the Turkish lira. And secondly, we had in the reported results, some one-offs out of the sale of nonoperating assets as well as some structural adjustments, which were neutralized and finally to end up with the EUR 308 million, which is the EBITDA like-for-like. Let me give you also a brief overview on the cost management. Also, Wienerberger was challenged in the first -- let's say, in the last months by a very volatile raw material market environment. And this, what we see from today's perspective, will keep and we will stay in this environment also for the next 6 months, most probably. Thanks to our centralized procurement department, we were acting very fast and, I think, in a very proactive way. We set the right measures.and took the right decisions on time. What we did basically is we secured the availability of raw materials, helped and supported by our long-term supplier contracts what we have in place. This ensured that we were basically always, during the last months, with raw material availability, which was close to 100%. The hedging policy, which we implemented already during the last years pays off now in this volatile energy environment where we are in. Basically, all the gas and electricity needs what we have are hedged for a very big part. And this balanced basically out the constant market increases, which we have seen during the last months. And finally, our decentralized business model, a local business model, what we have in place, enabled us to manage our local supply chain and also to manage properly our local inventory levels. This -- basically by implementing these measures on time and taking the right decisions, this brought us in a very good way during the first 6 months. With our implemented price increases, we covered our procured cost inflation. And thanks to our implemented procurement initiatives what I just mentioned, we were able to fully cover the demand of our customers in the first 6 months. Let me give you an overview, and let me give you some more details on our self-help program. You know that the contribution of our self-help program is an essential part of our growth strategy. Next to the M&A activities, organic growth is the strategic focus area of Wienerberger. We are well on track in achieving our targets, and we expect for the first 6 months an EBITDA contribution of EUR 20 million. The program is basically embedded in our strategic focus areas. That means that the biggest contribution in the first 6 months came out from commercial excellence and manufacturing excellence. What does it mean exactly? When we speak about manufacturing excellence, the key aspects are the continuous upgrade of our industrial setup, meaning the optimization of our plant network. This field, we have seen major contributions in the first half year. Here, strongly embedded is the continuous improvement culture, which is part of the DNA of Wienerberger. When we speak about commercial excellence, when we look a little bit deeper in there, we see that the strong contribution is coming from the product mix upgrade and from additional margins from new products and services out of our focus area, innovation and digitalization. We keep focusing further on the transformation to be a full system provider, expanding our portfolio with new products and digital services. From today's perspective, we are confident to reach our target contribution of EUR 40 million for the year 2021. On the next slide, on Slide 30, I would like to give you an overview about our clear capital allocation, which we follow. To support our long-term growth ambition, we follow a clear capital allocation guideline. Basically, first, our strong and resilient operating model generates high cash flows with a constant improvement of profitability what we have seen in the last years. The business model is embedded in a sound balance sheet management. Secondly, to foster further growth, we invest our monies very consequently and consistently: first, in the ESG road map; secondly, in growth CapEx, which is supporting innovation and digitalization; and third, by investing money in value-creating M&A transactions; and finally, we serve our shareholders with a reliable remuneration, which is on a yearly basis 20% to 40% of our free cash flow. Consistently, we respect and implement this guideline, which supports our long-term growth ambition. On the next slide, I would emphasize once more the strong cash flow generation, which I mentioned before. I think it is also very obvious to see what we have earned in the first 6 months. We generated a EUR 50 million higher gross cash flow and even a EUR 100 million higher free cash flow during the first 6 months. And what we also see out of the cash flow statement is that we -- round about EUR 300 million were allocated to our shareholders as dividend payment or as a buyback for the hybrid bond, which we settled in the first half year of 2020. On the next slide, on the Slide 32, we present a net debt bridge where we compare H1 2020 to H1 2021, where we see that we basically kept the net debt level more or less stable. We also see that we significantly invested in our business. And that also a big part of our cash flows were allocated to the shareholders. And basically, this usage of the cash flows was more or less generated out of our gross cash flow, respectively, by some working capital cash generation. Concerning the balance sheet, which is presented on the next slide, on Slide 33. As mentioned before, our resilient business model is embedded in a very sound balance sheet management, which is generating high profitability and creating value for the shareholders. ROCE improved in the first 6 months for almost 4 basis points to close 11%, and our net debt ratio is with 1.6x, clearly below our internal target of 2.5x. Our strong and solid financial position provides comfortable headroom for growth investments and value creating M&A transactions. Let me give you a brief overview also on the next slide about our maturity profile and our liquidity position. Basically, with half year closing, our liquidity position was at around EUR 820 million, and combined with the maturity profile, what you see on the slide, this gives us some -- let's say, some certain financial flexibility also for the next years. We almost have no settlements due in 2022 and 2023. As mentioned last time, the next bigger settlements, which we foresee is the bond in 2024 and also the last year's bond, which we issued in 2025. On the last slide, we tried once more to emphasize the importance of our solid balance sheet management, respectively, our solid financial guideline or profile, which we follow consequently. The chart shows the expected net debt-EBITDA ratio for year-end 2021, considering the announced M&A transactions, meaning we considered here the cash out for FloPlast or Plastics acquisition, what we did in July, the expected closing of Meridian Brick, the acquisition in North America. And next to the operational deleverage, the ratio will be supported by additional funds out of the disposal of the treasury shares. And considering all these projects and transactions, basically, we still expect a leverage ratio by the end of the year, which is still under 2, which is perfectly covered by our internal target of maximum 2.5. With these final words, I would like to hand over again to Heimo Scheuch.

Thank you, Gerhard. And for me, just to sum up on the outlook, we -- if you look at the different markets, we have new build market that is more or less, I would say, on the level that we have seen in the first half of the year stable for the rest of the year in Western Europe, Central Europe and in the Nordics, also in the same -- as in the beginning of the year, slightly decreased. America will be further growing for the rest of the year, that's our more or less estimation, including also Canada. Renovation, you will see up for the whole markets, different end markets. The infrastructure, more stable on the European front and slightly up in North America. On the input cost side, we've talked about raw material, we've talked about freight costs, energy and labor. I think all of these aspects and challenges that we face, we are dealing with on a day-to-day basis in all our different markets, try to incorporate this in our pricing policy and make sure that we have enough freight available to move our products around, have enough labor available to lay or install our products and make it also simpler to do so for the people concerned. And all in all, I think what we want to show you here is that we are dealing it with this issue on a day-to-day basis. From a guidance perspective, you have here, obviously, the bridge from last year's EUR 560 million to our guided EUR 620 million, EUR 640 million, coming from our organic growth again and obviously the self-help program. So I think we have here, again, an ambitious sort of -- set of numbers and targets in front of us for the rest of the year, but we are moving in the right direction. So thank you very much for your attention. We are now ready to take your questions.

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

I'll have 3, if I can. First one is on the guidance. Two parts in that question. I mean, firstly, on the volume, if we look at the map, correct me if I'm wrong, Heimo, but you just mentioned that for the rest of the year, you expect flat new builds in Europe and then down in Nordics. And you're sort of mentioning your thought process from an H2 perspective, but your slide is for the full year. And given the H1 sort of implies that actually there's a deceleration in most markets in H2, which is not necessarily what we see in the leading indicators. And the second part of the question is on the EBITDA front. I mean looking at what you would need to bridge the gap to your EUR 620 million, EUR 640 million and if you take out the self-help in H2, it just means essentially, you've got a negative operational leverage or just no volume growth in fact, volume decline or price cost pressure. So I'm just trying to reconcile your thought process and whether or not this is too conservative. And if there's clearly some upside on what you're seeing right now? And then my final question is just on the ESG side of things. You mentioned the exciting investments in the heat pump system reducing by 80% the energy needed on the drying process. How much is the drying process as a percentage of the total energy that is being used in a kiln or in the plant or the manufacturing process, however, you want to define it?

Yves, I mean, this is -- we can make it long or shorter discussion about conservative or aggressive or whatever. I think from our perspective, we need to look at a multitude of markets that we are active in. I've mentioned that some of the key markets in Eastern Europe, starting with Poland, the Czech Republic down to Hungary are weaker than expected also, and I don't expect them to recover for the rest of the year. So I think we see them at this level right now throughout the year as well. So don't underestimate the contribution of these markets on an EBITDA front, margin-wise is higher, has always been, by the way. So this is, I think, one of the things that I want to mention here. It's nothing to worry about. But as I said, they are adjusting and some of the political measures that they were undertaking are not yet sort of being positively perceived in the markets like in Hungary with the decrease, et cetera. So what I'm trying to say for the rest of the year, in this part of the world, we won't see a rebound. We remain on these levels. And therefore, I think you need to keep an eye on that when you talk about EBITDA expansion. We had obviously a very good run in the second quarter. Don't underestimate also we obviously alerted to you that the first quarter was weaker due to weather reasons, so we had here also some activity that was stronger in the second quarter. I'm not saying that I'm pessimistic for the rest of the year that I didn't. But on the other hand, we see also issues like shortage of labor, supply. We might see also some issues on construction sites where other materials are not available due to shortages and, therefore, the projects get delayed. So this is also something we need to be careful and look at. Again, it shouldn't sound that Heimo is now looking for all sorts of excuses in order to say if you -- I'm not conservative, but -- there's still we have a couple of months to go, and the EUR 620 million to EUR 640 million and if you take the upper end with EUR 640 million, it's still an ambitious thing to achieve. And I think we will work hard. Don't underestimate also on the Piping front. We will have to digest some raw material pricing. Even if we have done very well in the first half of the year, this will level out in the rest of the year. So here, again, there are some aspects where you need to take into consideration. I agree with you from a volume perspective. If markets are improving or if markets are doing better, then we will take, honestly, all benefit of it and will certainly not be shy of selling our products. And finally, I just wanted to say one word also on the inventory levels that are dramatically low in Wienerberger. So we have sold a lot of our stock already, and we are actually running extra shifts especially in the roofing area in order to satisfy demand levels. So it is something which is a little bit more complex, just to say 1 and 1 adds up to 2. It actually should add up at 3. That's what you expect from me at the end of the day. But again, I think we have an ambitious sort of target here in front of us. And we will, first of all, meet it and then think about if it's getting better or if we have a fall, it is also very strong. And not weather impacted, then obviously, we will do better. So I think let us stop here. I think I gave you some of the thoughts and some of the reasoning behind our guidance. And hopefully, I could put some light into it. Gerhard, we had another question on the...

Yes, on percentage of drying in the production process.

It's obviously compared to what we use in energy and the kiln miner, yes. So when you take an overall percentage point, we are talking here more in the 25% to 30% range percentage-wise, but still, obviously, every item that we can sort of improve, we will, yes. But the major impact is then on the kiln front when we make here sort of technological-wise or on the resource of energy major changes.

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

A couple of questions from myself. I hope the reception is okay. So firstly, coming back on the new build. Some of the earlier slides showed actually a large recovery there, and you're still pointing it flat for kind of the outlook for the markets for the full year. So what -- so it's kind of leveling off. So what would be required to get this new build, especially in Western Europe going? And then related to that, renovation has been strong across the board. Can you confirm you are not seeing any slowdown? And then Secondly, on the input cost versus price, can you give us a bit of color over pricing has been so far in Q2 or the second half? And how you think about pricing going forward when especially gas prices continue to rise? I know you're largely hedged, but maybe also into next year in terms of pricing versus additional cost inflation.

Matthias, thank you very much for your 2 questions. From our side, when I look at renovation and throughout our different end markets in Europe and also the U.S., I see it as a strong market, and this will grow further because, obviously, you have a lot of incentivized sort of ways that governments are using now to improve the rate of renovation. So I think we'll have some good years in front of us. First of all, and keep in mind that the roof renovation is the best one in order to save energy because it's -- more or less 60% of the energy consumption goes through the roof basically when you have -- it's not well insulated. So this will be certainly a good business for the years to come. I don't see a major change. The only change -- the only caveat that I would like to make is, we need to pick always -- and I'm sorry if I repeat it, but the availability of labor is going to be key. It's key because you don't find roofers in a lot of countries in Western and Eastern Europe, people that work on the roof and that are trained to do so. It's a limited resource. And therefore, you can't see always only growth here. I think that's why I'm saying it's leveling out due to the fact that capacity-wise in certain countries, they can deal with more projects. On the new build front, when you say, yes, I'm saying it's leveling out a little bit on these levels that we have seen this improved levels toward -- compared to last year. And therefore also here, capacity-wise, the people that are there are not -- we don't have so many masons around. We don't have so many installers around when I talk about Belgium, the Netherlands, for example, or even in parts of France and the U.K. So I think we can -- what we can see is here that it is a good underlying trend and we do remain, and we are happy about it because, obviously, if we were shooting up in one go, more and more, then we will have all sorts of issues from delivery, logistics and shortages. So I think the current situation is very satisfying on this. But -- and I think new build in Western Europe will remain on a good level for the rest of the year. That's what I said. And I've no visibility for next year at this stage. And on the Eastern Europe side, I told you about the countries where it's a little weaker compared to the years before. And Gerhard, you will deal with the pricing issue.

Basically on the pricing issue, I think this was your question on pricing and cost inflation. And maybe we have taken here one step deeper and look at it from business unit to business unit. Because on the brick side, we see simply different dynamics than on the Piping side. On the brick side, as we announced earlier, we see our price increases, which we implemented around 2% to up to 3%. This is fully enough to cover our cost inflation -- our consumed cost inflation. What we see for the second half is that our procured cost inflation will increase. That means also that we will -- that we already have announced second or even third price increases for the second half to secure that also in the second half, price increase covers cost inflation. On the Piping side, it is different. As you know, we are steering the business much more on the margin, on the gross margin side. And there, we were in most of the countries, especially in the eastern part of Europe, happy that we could pass on basically the price increases to our customers where we had or where we basically were -- pricing were under pressure. This was more in the northern part of Europe, where basically the channels where we're going via merchants and where the share of the project business is also differently than other parts of the Europe, where we were not able to pass on basically all the increases of our input costs. And this also when you look at the -- of the margin -- on the EBITDA margin of the Piping segment, you also have seen that the margin itself is a little bit under pressure, which we expect and hope that we can cover basically in the second half of this year. Concerning energy, you asked for the hedging percentage. And yes, we have a big part of the energy on gas and electricity we have hedged for the whole year of 2021. We speak about more than 90%, and which basically means also to be sure that for 2022, already, we have percentages where we have secured rather a price level, which is clearly significantly below the market level, which is around about 70% to 80% for 2022 already.

The next question comes from the line of Brijesh Siya with HSBC.

I have 2 questions, if I may. The first one is on the pricing again. So you clearly talked about Building Solutions. You have -- you are going for second and third price increase. So would that mean that the price increases for this year in Building Solution would look like -- more like 3% to 5% rather than 2% to 3%, which you have achieved in first half? And coming to the Piping Solution, so you have removed that EUR 20 million of negative impact from the guidance. So does that indicate that you would be -- you are now confident that you're fully recovering all the cost increase in plastic granular prices through price increases in second half, hence you're kind of coming to an equilibrium position? Now on second...

So if I may interrupt you there, I think we don't -- we shouldn't have a misunderstanding because I think when you say we have removed the EUR 20 million of our guidance, we didn't do that. Yes. We said actually, we still have an issue and my colleague Gerhard explained it on the raw material input cost side that has improved -- has dramatically increased. We were not able to offset everything in the first half, and we will try to offset as much as we can in the second. We didn't say that we can offset everything. So there will be certainly a remaining part for the year when we talk about this raw material -- dramatic raw material price increases because we talk here about really sharp increases, yes. So when you say we have improved, and this was my -- also my -- trying to make my answer to Yves earlier to say that we organically grow stronger and also the self-help program and also the sort of the overall business contributes more to the growth in EBITDA that we don't only get the EBITDA growth by withdrawing the EUR 20 million of negative impact of this potential raw material price increases. So just to -- I hope I made it clear. Sorry to interrupt you, by the way.

No, that's okay. So this $20 million, a small part of it is part of the -- now the underlying business rather than it's a specific line item in the guidance.

Correct. Absolutely correct.

All right. And coming to my second question on energy cost inflation, I mean, you rightfully explained about the hedging policy with a strong one in '21 and a majority of '22 being already achieved at a lower market price. But looking at the cost and increase in the energy prices and what we are seeing at persistent high price all through of '21, how do you look the pricing situation will evolve in 2022? Do you think this normal -- your usual 2% to 3% price inflation will still hold? Or you -- what's the kind of magnitude of price rise you need to do in early 2022 to ensure your cost inflation are being fully covered?

Well, if I may, before Gerhard goes into the details, we have never -- and I think it's too early to talk about 2022 right now because we will see how this develops. We've always given you a very good indication on cost inflation and how much we need to cover then through price increases. Might be the case that we need a little bit more price increases next year if cost inflation is higher, might be. I'm not sure yet. And as Gerhard has put it earlier, we obviously are doing price increases in all of our products and areas in order to address the situation this year that has been a little bit exceptional, if I may say, so a lot of fields when it comes to the input cost side. But sorry to interrupt you Gerhard.

No, absolutely right. I think it is too early. I think Heimo mentioned it could be that we need maybe a little bit more. But I think to come here to a final conclusion, it's too early. Give us more time, we will anyhow have a better view for 2022 in -- most probably after September, October. And then I think with the third quarter announcement, I think it is much more clear what is needed for 2022.

Got it. If you can ask -- probably to push you a bit on this. The 70%, which you have secured for 2022, what would -- I mean, what kind of price rise you need to have that fully covered?

Well, this is obviously in the sense that we had in the past. This is the 2%, 3% that we have regularly put into the market, yes, that would cover this gradually.

The next question comes from the line of Yassine Touahri with On Field Investment Research.

I would ask 2 questions. First, have you drafted a road map to become carbon neutral by 2050? And have you made any assessment of how much it would cost in terms of CapEx to switch from fossil fuel to carbon neutral energy for a typical clay brick or tile plants. That would be my first question. And then my second question is what margin of maneuver do you have to address the availability of labor in your context where renovation demand is likely to increase quite a lot long term in Europe, especially if the continent want to achieve carbon neutrality. Can you invest yourself in a training program for new roofer? Can you partner with universities? Or do you really need action from the states and from Europe?

Ladies and gentlemen, the line of the presentation has been dropped. [Operator Instructions]

I don't know if you could hear my questions?

We broke away or broke out of this when you were saying if we have a road map to become carbon neutral by 2050. The answer is yes.

And then the sort of the second part of the question is have you made any assessments of how much it would cost in terms of CapEx to switch from fossil fuel to carbon-neutral energy for a typical clay brick or clay tile plants? And then I had a second question, which is what margin of maneuver do you have to address the availability of labor in context where renovation demand is likely to increase dramatically medium term if Europe want to achieve carbon neutrality? Can you invest in training program for new roofer? Can you partner with the universities? Or do you need to see action from Europe or from member sites?

I will address your last question now, if I may. We are working today on 2 aspects when you talk about availability of labor. The first one, making our systems easy to install quicker, faster and for people actually to use also less qualified labor. A couple of examples. You remember the sort of installation of the electrical sort of supply system in the house, this plug and play, and it's easy to install system that we have here. We have systems now also on the brick side, which will help people to install prefabricated walls very quickly, much easier, 2.5, 3x faster than the traditional approach. So innovation and here also due to the means that we have well new products will help. Second one, we have improved and we have put a lot of emphasis in training, using also digital means, not only physical training but digital training by YouTube and other sort of very easy to communicate message for installers and people who use our products. But we will certainly improve this more and more because it's a key element. And as you correctly say, if we need more sort of projects to be realized, we need also the skilled labor to do so or the labor as such. And we'll make sure that our training is here a key factor of success, and will improve our performance there as well. And as I said, the new products will help as well. So innovation is a key role element there. Then you had your second question because I answered your question when I said we have the road map. And the second one was what are you actually contemplating on the CapEx front when it comes to changing to different energy resources? Let me say it in this way. When you actually would use hydrogen as a combustible or as a resource of energy, then I think from our change perspective in the Q, we can rather well handle that with the CapEx that is foreseeable or manageable. We have done some tracks, but it's a little too early because, obviously, we don't have this combustible available right now in a big sort of means where we could run a plant and optimize it. easily. But I'm confident that we can handle this rather well. On the side of when we move to electricity, for example, then you have 2 fields, then you either can change completely their production and move to energy, electricity-driven kilns, but then you change a lot of the after layout of a plant, and this is more expensive. We are doing currently trails, and we will have some testing results in October, November of this year because we run the first electrified killed in Belgium. So you need to give us a couple of months, and then we'll give you an insight what is cost and what sort of advantages it brings. And therefore, I think yes, it's possible. That's the first good news. And secondly, we will try to make it on a CapEx front acceptable to all of us. But the electrification will be certainly more expensive than changing from one combustible like gas to hydrogen. Did I -- hope...

It doesn't -- I'm just curious about the hydrogen markets. As you're suggesting right now, it's like very limited. Do you think that the hydrogen market is going to expand medium term? Or visibility is still limited at the moment?

For the moment, it's still very limited. But I would say that in certain countries, I see, for example, the Netherlands moving very aggressively to hydrogen and, therefore, also the industry will have access, I would say, in a couple of years because they really push it. And I'm confident when talking to some researchers in the universities. You know that there's a lot of efficiency discussion when you switch from electricity to hydrogen, how much you use is in effectiveness. But I think here, improvements will be made over the next years and then, obviously, availability will grow by means of this. And I'm confident this is going to be one of the alternative resources that we can use. On another front, biogas is also something we can contemplate. We have it now even with the aid of -- or the support of the state in Denmark, where they actually use already in the public system biogas. And therefore, I think we will see a lot of developments. We are at the beginning of this phase and I think in a couple of years, we will see much more detailed terms, what we can use, what is available, et cetera. But I think preparing Wienerberger for this being open for these different technologies is the way forward. And here, I think we're in good shape in putting research and development into it.

The next question comes from the line of Cedar Ekblom with Morgan Stanley.