Ladies and gentlemen, welcome to the Sika Half Year Report 2021 conference call and live webcast. I'm Moira, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Dominik Slappnig, Head of Communications and Investor Relations of Sika. Please go ahead, sir. Thank you, Moira, and good afternoon, and welcome to our half-year results conference call. Present at the call with me today is Thomas Hasler, our CEO, Adrian Widmer, our CFO, and Christine Kukan, our Senior IR Manager. We published our half-year figures this morning at 5:00 A.M. Thomas and Adrian will provide further details on the results and the outlook. Afterwards, we will be ready to take your questions. I hand over to Thomas to start with the highlights of the first half-year. Thomas, please. Thank you, Dominik, and welcome everybody to this half-year update of Sika. I guess, for most of you, this is a standard procedure. For me, it's the first time and a premiere, so I'm excited to be able now to present to you the first six months results of Sika, and I'm also excited that I can start with record results on all key figures for the first six months. On the top line, we grew 23.5%, very strong. Especially, we have seen very strong growth momentum in China, in some European and American countries, as well as an exceptional well business on residential and distribution outlets. Overall, we are gaining market share, which is our utmost target. We grew above market level based on our strategy, the pillars that we have outlined in the Strategy 2023. This contributed, of course, together with our operational leverage, our efficiency initiatives, and the synergies from M&A to a record operating EBIT of CHF 685 million. For the first time, we have crossed the 15% EBIT margin with 15.4%. Another record. Further down, this was also in the free cash flow, an overproportional growth of 26.4%. Nevertheless, it has to be noted that the first six months, they were not a stroll in the park. We had a lot of challenges. Here, of course, the supply chain situation disruptions, the various disruptions to supply and logistics have also impacted our business. I would start there probably on the customer side, where customers, and here particular automotive, was hammered by unavailability of semiconductor chips and other commodities, which led to a 4 million loss of vehicle build in the first six months. They recovered nicely from last year, the CHF 4 million would have been the demand that they couldn't supply, and, of course, also for us is a lost opportunity. Other businesses were also impacted by this situation. Of course, also we had a tough time securing the availability of our raw materials to make sure that our customers can be supplied on time. Through the organization, we took firm, early, and decisive actions to counter this momentum from sales to operations, procurement, R&D. The whole organization was engaged in offsetting these supply chain challenges, and ultimately was able to deliver this outstanding result. We do have other highlights in the first six months, which I would briefly outline here. On the M&A side, we had three acquisitions closed in the first six months: Kreps in Russia, BR Massa in Brazil, and DriTac in the USA. We also signed the acquisition of Hamatite adhesives in Japan, which we intend to close in Q4 2021. Overall, you can see there is now, again, much more action ongoing on the M&A front when we compare to 2020, where we had a rather low activity level due to COVID. In addition to that, we also expanded further on our organic footprint and built up production facility in Sweden as well as in Qatar. Our investments also go into our innovation pipeline. Here we made the announcement with our very innovative reCO2ver process in processing concrete waste material into raw materials for future buildup of cement structures. We also reinvest in our organization. Our organization, our 25,000 employee are the ones that are carrying this company forward. We celebrated on June 11, a global Sika Day, where all employees participated, and we were joining in activities locally, and at activities from local social engagement, like we see here on the picture in Algeria, at the beach, cleaning the beach, to barbecues and so on. It was a day to come together after a long COVID period where we had to stay home, and this was a great event also reinvesting in our organization. With that, we have another highlight that we announced earlier this week, the acquisition of American Hydrotech. It's not related to the first six months, as I just mentioned. It just happened this week. It's another highlight, another investment into the future, showing the green roof activities in North America, where American Hydrotech has a leading position, roughly 30% of the market share in green roofs. This is a position for us to grow further in this fast-growing segment, where green roofs are going to play a much more vital role going forward. Sika has the leverage through its organization in North America to drive this momentum further. Now I hand over to Adrian to give you a bit more insight into the set of figures that we have communicated earlier. Well, good afternoon. Good morning, everyone. Thank you, Thomas, here for the business summary and the highlights. I will now give you further insight into the financial results. Let's start with the top line again. We have, as you have seen and heard, delivered strong double-digit growth in all the regions in the first six months of the year, with a local currency growth of 23.5%. Organic growth was 22.4%, while acquisitions added 1.1 percentage points. In addition, this growth represents the residual impact of the 2020 acquisitions, as well as the initial contribution of the last transactions, as just highlighted, namely DriTac, Kreps, and BR Massa. Currency effects were relatively mild, reducing the local currency growth by 0.4% only. Negative currency development was primarily owed to a stronger US dollar and the number of emerging market currency. Corresponding growth in Swiss franc was a strong 23.1%. In looking at the regions, we have the region EMEA, our largest region, which grew 24.1% at constant currencies. Organic growth was also here very strong, 21.9%, on the back of very solid growth across the region. Particularly the distribution business as well as renovation activities in the residential sector were very strong. Growth was most dynamic in Europe South, the U.K., and also the African continent. While the pandemic impacted Q2 last year, provided an easier comparison, organic sales growth in comparison to 2019 was also double digits. The residual acquisition impact of Adeplast, Modern Waterproofing, as well as the newly acquired Kreps in Russia, contributed another 2.2 percentage points of growth. Foreign exchange effects were mildly positive in this region in the first six months at plus 1.1%. Region Americas. Region Americas recorded a growth in local currency, which was quite strong, 19.5%, primarily organic. We saw a strong bounce back in development in Latin America, namely Colombia, Brazil, Peru, and Chile, throughout H1, while the U.S. was still a bit muted in Q1 but gained good momentum in the second quarter. Particularly large-scale maintenance projects and new distribution and data centers were key drivers here. Foreign exchange effects continued to weigh negatively in the Americas in H1 with a negative impact of -3.7%. Sales in Asia Pacific increased by 26%, driven by China, with strongly double-digit growth rates across the board, particularly further increase of the available point of sales and the focused shop-in-shop strategy contributed to the strong sales growth. Southeast Asia, and particularly India, showed a partial recovery despite the prevailing difficult situation due to the pandemic. Here, foreign exchange impact, they're mildly positive at 0.4%. In the global business, as mentioned by Thomas, this segment achieved a growth of 27.6% in the first half year. Here, while the volumes recovered compared to the pandemic-related shutdowns in Q2, the automotive industry experienced major bottlenecks in the supply chain for semiconductors. Geographical and OEM mix was unfavorable in the first half, but has started to reverse in Q2. Here, foreign exchange impact remained negative at minus 1.2%. On the gross result level, and now we're sort of moving down the P&L, material margin contracted by 130 basis points to 53.3% net sales. This was primarily driven by strongly increasing raw material costs as a result of the global supply chain disruptions and strong demand. Through formulation efficiency initiatives, structural procurement savings, and particularly pricing actions, we were able to mitigate a large portion of this increase. Acquisition-related dilution also contributed a negative 20 basis points to the lower material margin. On operating cost level, and this includes both personnel costs as well as other operating expenses, they increased only under proportionally by 9.1% versus a sales growth of 23.1%, due to a very strong operating leverage, disciplined execution of the many operational efficiency projects across the organization and functions, as well as a continued good synergy capture related to Parex and the other acquisitions. As a result, we were able to significantly increase the EBITDA margin to 19.5%. This is up from 16.4% in 2020. As a result of the reduced CapEx in 2020 and the limited acquisition impact in terms of intangibles, depreciation and amortization expense decreased slightly in absolute terms to CHF 181.1 million in the first six months, providing further leverage. As a result, EBIT increased very strongly by 67.2% to CHF 685.9 million. A record EBIT ratio of 15.4%. Also here, strong increase compared to the previous year, which was 11.3%. If we move below the EBIT, net interest expense also decreased by 15.6% compared to the same period of last year, to CHF 21.1 million. This is related to lower debt and higher interest income, whereas the other financial expenses decreased very sharply by almost CHF 10 million, from CHF 14 million in 2020 to CHF 4.4 million in the first half year of 2021. This is primarily due to much lower hedging costs and also lower foreign exchange valuation impact. Overall, net financial expenses decreased very strongly by almost 35%. Looking at the group tax rate, we had a slight decrease from 25.8% in the previous year to 25.1% in the first half of 2021, on a slightly positive country mix, but no major impacts otherwise here. As a result, net profit increased strongly, over proportionally to 79.5% to a record level of CHF 494.7 million or 11.1% of net sales. This ratio is up from 7.6% in the same period of last year. On the back of this higher profitability and modest capital expenditure level, as well as a disciplined yet higher net working capital buildup, and this is related to the strong volume development, operating free cash flow even exceeded the strong previous year level and increased by a further CHF 67 million to CHF 318.4 million for the first six months of the year. The balance sheet as at the end of June 2021 shows a healthy cash balance of CHF 1.13 billion, which is seasonally lower than at year-end due to the aforementioned seasonal working capital buildup effect, but also to the dividend payment of CHF 355 million back in April. As a result, however, net debt only increased by CHF 172 million compared to year-end 2020 to CHF 3.03 billion. Financial leverage based on net debt compared to a trailing 12-month EBITDA reduced further to 1.7 turns on a reported basis. This is down from 1.9 turns at year-end 2020. With this, I conclude my remarks to the financials and hand back over to you, Thomas, for the outlook. Thank you, Adrian. Coming to the outlook for the fiscal year 2021. Here, we are positive and confident regarding the full-year outlook, as indicated in prior statements and in line with our long-term strategy. We have, on the top line, further narrowed in our double-digit growth expectation to a mid-teen number of 15%, ±2%. We remain confident regarding our bottom line evolution, providing over proportion of increase in EBIT, and also reaching 15% EBIT margin for the first time in Sika's history. Looking further out, we can absolutely confirm our long-term strategic target for a sustainable, profitable growth as outlined in our strategy. Okay. Thank you, Thomas. We are now ready to take your questions. Please. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets while asking a question. Anyone with a question may press star and one at this time. The first question is from Yves Bromehead from Exane BNP Paribas. Please go ahead. Good afternoon. Thank you for taking my questions. I'll have three if I can. My first question is on margins. Can you maybe help us to understand how we should think about margins in H2, given the rising inflationary headwinds in Q3? At this point, given what you're seeing in terms of raw materials, is it fair to assume margins in H2 should be lower than in H1? Do you expect an improvement sequentially? My second question is on the divisional margin evolution. There's quite a big difference between Europe and Americas, which has improved in H1, still at very high levels versus the Asia-Pacific and the global business, which saw some sequential margin decline versus H2 2020. Can you maybe give us some color here? I'll leave my last question maybe to the end, if that's okay. Yes, Yves. Maybe I'll continue here with the second question you had on sort of the raw material and evolution. It's clear the situation is quite volatile and dynamic, given the disruptions here we have been facing. It's still obviously difficult to predict the exact magnitude and particularly when the impact will be peaking. We are clearly driving price increases here to mitigate the situation. I think we're on a very good track, but it is fair to say that the raw material cost will continue to go up, but so will our pricing impact in the second half year, as we have already initiated quite some strong actions and more will follow. Maybe more broadly on the margin evolution, obviously we are delivering here on all the different buckets of basically our model. We have operational efficiency, which will clearly continue very good traction there to deliver the 50 basis points. In the second half year, we have an additional contribution on the M&A side. Here, integration activities, synergy realization is going quite well. We will also see further operational leverage. Obviously, the comparison will not be quite as easy as last year, given the recovery we already had in the second half of last year and also the quite low cost level. There will be further leverage to come in the second half year as well. On the material margin, again, the expectation is not that we will have a significantly bigger additional impact looking out. There is typically, sequentially, the second half year is a little bit lower than the first one on the material margin. As I said, input cost development is still quite volatile and not entirely predictable. Maybe just a couple of words on sort of the regional margin development. If you look across the regions, we have actually in all the cases, quite a strong increase compared to 2020, the first half year. There is a different, let's say, seasonality typically, depending on the region, so it's not quite fair to, let's say, compare it to the second half. The better comparison is to the first half of the year. Typically, as there is quite some differences. The direction in all the regions is quite clear, but we also have a somewhat different impact on the material margin side. Overall, we're actually quite happy with the development in looking at all the regions. Thank you, Adrian. Maybe just a quick follow-up on the first question. At the current spot levels of raw material, assuming they stay at this level when your price increase goes through, would you expect margin H2 to reach at least the levels of H1? Yeah. Obviously, the spot levels are typically not the best indicator for our business as if we don't buy spot that typically. Some of the spot levels have peaked, but still very different development also region by region, material by material. I would still expect somewhat bigger impact in Q3. Okay. Maybe just one last question for Thomas. Given your previous experience in the group Global Automotive, can you maybe share your vision and strategy for this division and where do you see the attractive opportunities medium-term? Thank you very much. Yes. There we have to decouple a bit the short term, let's say, turmoil in the automotive industry from the longer term evolution of this industry. This industry is moving away from traditional combustion-driven vehicles into electric-driven vehicles. We have outlined that this even further, let's say, increases the potential for us to participate in this industry. We have also made major progress in these regards on the battery side, on the charger side, but also on the traditional, conventional technologies, which also slightly change the adhesives, the usage of adhesives, the acoustic counter measurements, they need to be tuned to the new setup of the cars. That, again, provides for us great opportunities as we have the competencies and the solutions to adapt and provide, therefore, more value to these vehicles. Absolutely, we are far from the peak production volumes of 2017, 2018, where we reached CHF 95 million. Last year, it was CHF 72 million. This year, it may be CHF 82 million, could also be CHF 80 million. I'm not too optimistic about the fast recovery on the supply situation. We still see that Q3 will have an impact. We should not be derailed by these short-term issues. Long term, this is, for us, a fantastic segment to be in, and we have a strong position also to support this industry into the future, into the CO2 neutral future of the cars. Thank you so much. Have a good afternoon. The next question is from Yassine Touahri of On Field Investment Research. Please go ahead. Yes, good afternoon. I would have two questions. My first question is that we've seen many building material companies, along with private equity firms, that have accelerated the purchase of construction chemical assets over the past two years. Do you see more competition on merger, on acquisition? In this respect, could you share the average multiples that you paid for your recent acquisition? Maybe give us some color on the returns that you expect from those operations. I would have the second question, which is related to raw material. It's a bit crazy at the moment. What are you monitoring in terms of potential normalization? What could be the trigger for raw material costs to come down? Is it related to the container liners? Is it related to force majeure issue? Is it related to the oil price? If you could give us a little bit more color about what we should monitor to better understand the development of the raw material situation. Yeah. Well, thanks for these questions. Let me take the two first ones. On the M&A side, we continue to operate in a very, very fragmented industry, to start with. You have seen our sort of strong execution on the M&A pipeline, which is actually, and continues to be, quite full at various stages. We have now also been able to increase execution speed again. Of course, there is competition in these transactions, typically. With many, we have actually quite a strong and longstanding cultivation, which sometimes goes over a number of years. We continue to see very good opportunities for us and also our ability to continue to execute and close transactions. From this regard, no major change compared to a couple of years ago. On the multiple side, I would say it's fair to say there has been a bit of a re-rating, but it's not been, I would say, excessive in terms of the multiples we pay. We're anyway not too hung up on sort of static multiples. We look at each case individually, what it will bring as a platform, as an additional growth driver, but also on the cost and synergy side. We continue to see quite good opportunities, and there is still also quite a big range of multiples, which is typically sort of between, I would say, 9x-12x. Maybe your question regarding the raw material, I take that up. It would be almost too easy to say we do have one indicator to guide. What we can clearly say is that it is very, very different from the regions, from Asia, China or outside China, Asia, from North and South America and Europe. We have to stay very close to the base chemicals. There, the force majeure play a role, but this role is really the more regional than a global. We can clearly see also that the traditional, let's say, shortages and then the importation from other regions is not happening at the moment. That's why these shortages tend to prolong longer than usually, and also that the return to normality will take more time. Therefore, our expectation that Q3 is kind of going to be the peak doesn't mean that Q4 is normal. It will just be a bit better than Q3, hopefully. Here really, we have to look at all these regional aspects, where, for instance, in EMEA or North America, some of the raw materials are actually on allocation. They are still available on a high price level in Asia. For us, I think we cannot change those circumstances. With our global footprint, we have done quite a good job in making sure that we help each other. We bring raw materials from one region to the other to help out and compensate the inavailability or also the peak pricing in certain locations. There's not one that really drives it across the globe. This is very, very specific to the situation. There are a few suppliers of base chemicals in North America and Europe, in China, in Korea, and the situation is different from those places to each other. The very strong increase in shipping rates or containers had an impact on your cost? Could we see a normalization of the shipping rates in next year or maybe in 2023 when you've got more container liners that are coming on the market? Okay. I got the question. I hope you can hear us as well. Yes, good point. The transportation limitations are not going away so soon. We don't see a free-up. Actually, we see further increase in cost. The containers are not coming back. The ships are not coming back as we would hope for. This is going to last into 2023. The short lead times that we used to have, and let's say rather modest transportation cost between the regions, this will probably not come back also in 2022. We have to expect that to remain a challenge. Thank you very much. The next question is from Matthias Pfeifenberger from Deutsche Bank. Please go ahead. Yes, good afternoon, gents. Couple of two questions from my side. Sorry to come back on the margin point. I appreciate you mentioned obviously a higher input cost in the third quarter, but last time I heard you say that you were going for price increases of 3%. Now, we spoke before the quarter. I think you're now going for 4%, so incrementally better, and also the higher top-line guidance would suggest even better contribution from operating leverage. Is this really what's happening in terms of material margin? Do we have to expect a weaker margin in the second half? You said previously that material margins on the full year basis would trend down to the lower end of the 54%-55% range. Are you now saying it's rather going to be 53%? Am I missing something in terms of mix or related to that, maybe do you expect the strong residential and distribution momentum to slow down? Are you already seeing something like that? Thanks a lot. Yeah. Thanks for the question. I think coming back to the input cost dynamics here as already previously indicated, it's been very difficult to have clear visibility, particularly on the timeline, what the impact will be. I think it's fair to say that the dynamic has certainly still stayed quite high as commented, we expect this to be a bit more prolonged, hence also the yet again increased action on the pricing side. I think important to understand is that this is a temporary effect, I would also, from today's perspective say that we will stay obviously below the 54% for the full year. We will continue our path here. We will compensate this at some stage. We do this in a very measured and sustainable way, and particularly when it comes to the tipping point where input costs will decline again, we will be able to retain that benefit. It's more a timing and therefore it's also relatively difficult to exactly pinpoint the quarter impact this will have. We're here basically on a very good track in our execution. Thanks a lot. Your second question was in regards to residential and distribution business. Here, this is certainly a key driver during the pandemic that we saw much more momentum there than on sites and on large projects. It's still going strong, but it's correct that we also expect that it will rather than come down a little bit in the future, it won't stay on that level. At the same time, of course, we also see now clear indication that investments from private and governments are picking up. Projects are coming again to the forefront, especially North America. We have very good momentum also in Europe. This is, to us, not a concern, it's just the balance of the two that will generate for us the, let's say, the underlying base market growth. With our activities where we want and are above the market trends, this will fuel future growth, independent on these two segments' evolution. Yeah. Okay. Thank you. Fair enough. The next question is from Shardul Mubasha from Citigroup. Please go ahead. Hi. Thank you for taking my question. Just two, please. You provided some commentary around the weakness in the APAC margins, and I think you highlighted that there was some integration cost. Is that related to the Parex Integration and putting Sika's products in higher number of stores? If that's the case, can you give us an update as to how many stores that we are with Sika products and how should we see this margin tracking in the coming years as the integration continues? The second question is, probably is back on the margins. Given that the second half is expected to be a bit more of a headwind in terms of raw mats, so potentially lower than the 54%-55% guidance range. On the other hand, you've kept your EBIT guidance at 15%. Is this something that you're doing between the material margin and the EBIT line that's helping you or giving you the confidence that you can achieve that 15%? Just some thoughts on that would be helpful. Thank you. Yeah. Good. Yeah. On Asia-Pacific or the regional margin again. It's not so much a question of one-time cost, but also if you, let's say, compare the development of the margin in Asia-Pacific compared to last year, we had about a sort of a 300 basis points improvement here, relatively speaking. Which is actually quite similar to the other regions. EMEA was a bit higher. I think here we can, let's say, see that obviously quite good development on efficiency and leverage. Whereas in Asia-Pacific, and you mentioned it, particularly the former Parex business, we obviously continue to invest in growth where the leverage is a little bit less pronounced, but obviously very strong growth, increased penetration. As I mentioned before, we're quite happy with the development overall. It's just some sort of regional differences. If you go back and compare it to 2019, we have obviously additional amortization effect in here coming from M&A, then here, obviously Parex, we had a large impact in Asia-Pacific as more of 50% of the Parex business is actually in that region, again, most notably in China. Overall, actually quite a good development. On the overall EBIT guidance, and here very clear, we absolutely continue to be very firm and confident on this 15% level. Again, as said, the second half from a, let's say, operating leverage perspective, given the strong recovery already in the last second half-year of 2020 is a bit less pronounced, but we will continue to see leverage. We'll continue to execute on the other areas, which will also contribute here. Obviously we have the material margin impact, which particularly in comparison to the second half year of last year, where we were at 55%, which is historically clearly the high point and was driven by still declining input costs last year, is a bit more challenging. Again, mostly timing, and therefore, we believe we're quite well on track. Thank you very much. The next question is from Arnaud Lehmann from Bank of America. Please go ahead. Thank you very much. Good afternoon, gentlemen. Three, if I may. First, firstly on COVID costs. I'm sure you haven't been traveling that much in the first half of this year, but I guess things are starting to get back to normal progressively. How much, let's say, savings did you have in 2020 related to COVID around travel, maybe marketing? Has any of that come back in the first half, or when do you expect it to come back? What could be the order of magnitude? Secondly, very impressive performance on the top line, in the first half, including in the second quarter. Do you think Sika gained market share relative to some of the competitors, in the first six months? If that is the case, in which region in particular? Lastly, if you don't mind saying a word on your recent announcement around the recycling of old concrete technology, how that works and how much potential could this business have? Thank you. Thanks, Arnaud. I'll take the first two ones. On COVID and the related cost, it's probably the question how you look at it. In terms of, for example, the positive impact we had last year on reduced, let's say, salary and labor cost due to the various programs available worldwide. We had a decrease in cost or a positive impact last year of around CHF 26 million in the first half year, which was not available again this year across the group. In terms of travel costs, were actually still, if you compare first half year at around the same level of last year. Obviously, a bit skewed in terms of quarter. Certain increase in the second quarter, whereas in the first quarter last year, we were still at the normal level. It's actually quite balanced. This will continue to increase slightly, but also not expecting this to go to the 2019 level in the third quarter. It's rather a gradual increase again to more normal levels. Overall, I think we're managing this in a quite a disciplined way in terms of also the cost build-up, and particularly in combination with all these efficiency programs we have running. Okay. Coming to the question regarding our concrete recycling process reCO2ver, as we launched this earlier in H1. We are now building up the first industrial plant in this regard. We have prototype plants going, which indicate a very strong case here that we can, through our chemicals, make this process not only efficient but also that the output, the fractions that come out of this process are of higher value, meaning active ingredients which can be placed into concrete as supplementary cementitious material. This is one element where we can, let's say, monetarize this process. Another very interesting aspect and still to be verified, that in this process, we can roughly bring 50 kg of CO2 back into the mix, and it will be absorbed by the recycled material and also act as active ingredient in the output. This offers, of course, for us the possibility that we can here go into the certification of the process and again add value for the user of such cements. We have generated a very high interest from the market and we are here now working with many strong partners, bringing this as fast as possible into the next phase. Very promising. Still to be said that we still have to do some homework on the verification. Exciting project, top innovation from Sika. Thank you very much. Just my question around market share. Do you think Sika gained market share in the second quarter? Absolutely. That's our underlying measurement, how we look into the different segments. We have our, let's say, baselines and we monitor how we are doing against those baselines. In some industries, by, let's say, given standards from the market. In others, it's build rate, like in automotive. Absolutely. For us internally, we want to see that we grow above the market and, that's in most cases, also what we see delivered in the first six months of 2021. Thank you very much. The next question is from Cedar Ekblom from Morgan Stanley. Please go ahead. Thanks very much. I've got one question on your China business. You've delivered a very strong increase in your store rollout in that region over the last couple of quarters, and it continues to be a very big driver of the revenue growth story in the Asia Pacific region. I wanted to understand where you think you are in the organic growth story in China. How many more quarters of double-digit growth do you think we can look forward to from an organic perspective? Can you also talk a little bit about how you see the M&A opportunity in China? Is that something that you would look to in that market, or is your strategy very much focused on organic growth there? Thank you. Okay. Shall I take the question, Adrian? On the store penetration or the rollout in China, again, this is a market that is by itself growing very fast. There is a change from on-site to pre-packed solution. This by itself is giving us a growth potential of, let's say, 4%-6%. We have a very aggressive growth plan, which certainly is expecting double-digit growth also in the coming years. For how many years? That's a bit loaded question, but the expectation is that the underlying business evolution would support this, and we are also investing in this regard so that, as you mentioned, the stores, but also the footprint. The extension of the footprint is a top priority for us. We see our opportunity here to play an important role in China, in this specific segment. In regards to acquisition. Acquisitions are a topic everywhere. We see them as a means to further accelerate and extend our organic strategies and therefore also in China. This is absolutely an option. I just remind that we, what is it, 18 months ago or maybe two years ago, we made an acquisition into an adhesives company in China, which has very well performed. It is nicely integrated, we don't see any reason why we would exclude China. Let's say, the prospects, they look a bit different than a typical European or American company, we have to deal with certain, let's say, issues or situations. We have a strong team in China. We can handle this. We can integrate, China is clearly a market for us also up for acquisition. Fantastic. Thanks very much. The next question is from Patrick Rafaisz from UBS. Please go ahead. Thank you. Hi, everyone. Two questions from me, please. The first is on the growth outlook or guidance you provided, the 13%-17%. Given the 23.5 you reported for H1, this leaves quite a wide range for the second half. What are your scenarios for the lower and the higher end of that range, in terms of local currency growth? Is it really the pipeline execution M&A, or is it also uncertainty around the organics? The second question is on the acquisition this week of Hydrotech. Do you also see an opportunity for green roofs outside of the U.S.? Is that something you'll be looking to roll out across the globe as well? Thank you. Okay. Thank you, Patrick, and absolutely correct. The aromatics groups. In this case, we have an expectation of 4%-11%. That's the range for the second half to make up our mid-teen expectation for the full year. Yes, in here we see some, let's say, further recovery possibilities, which would push it up to the upper range. We also have to be cautious. We see that the pandemic is by far not behind us, and some markets like Southeast Asia are going in the wrong direction. We have there further lockdowns, and the incident rate is coming up. The vaccination rate is rather low. Questions around the effectiveness of certain vaccinations, so most of China is not excluded, could become a topic. We have many, many factors that we have to factor in. As mentioned before, we see that on the automotive side, for instance, rather compared to last year, a negative probably evolution in the second half, so far from normal, and therefore, I think the range of 4%-11% is actually pretty narrow and considering all these variations. How much M&A would you build into that? We have the M&As that have been announced. That includes also our latest one, the Hydrotech announcement. That's in, but other than that, we cannot factor M&A in that we have not yet closed. Okay, thanks. Okay. To your questions in regard to green roof. Here, I would say that green roof trend has its origin in Europe. We have many more green roofs in Europe than in North America. North America, I would say, is just about to get started. That's why we are all so excited that we can leverage our competencies from Europe over to North America and further utilize this platform. It's of course, demand-driven, and in the past, the demand wasn't that big in the U.S., but certainly with the regulations changing, with the building codes changing, there is a lot of momentum there, and I think we are spot on with this acquisition to benefit from the growth potential in North America. Okay. Did you already have a green roof business in Europe that's sizable enough that it's worth mentioning? The roofing business in Europe is a little bit different in its structure than in North America. North American roofing business is very much system-driven. That means that you're selling full system, where European roofing systems are more divided into different components. There we participate with our solutions, but less on complete systems like the Hydrotech, which offers a complete system. That's again, the markets are different in Europe than in North America. Yes, absolutely, we are in the green roof in Europe, but not the same way as in North America, to bring it to the point. Okay, thank you. Thank you very much. Next question is from Markus Mayer from Baader Helvea. Please go ahead. Yeah, good afternoon, Thomas Hasler, Adrian Widmer, Dominik Slappnig, and Christine Kukan. I have four questions, still two add-ons and two more in detail. Maybe I start one by one. Can you quantify the effect of the chip shortage at your automotive customers in the first half, and also what you expect for the second half? That would be helpful, maybe as the first question, and then follow up with the other questions afterwards. Okay. Here I can give you quite precise numbers because these numbers are collected by IHS from the car manufacturers. In the first quarter, it was 1.4 million units that were impacted, and in the second quarter, it was 2.6 million units that were not built due to the shortages. There is a rolling forecast which currently comes close to 1 million for Q3, you have to see these numbers are updated every month. I can just give you an indication. One month ago, the indication for Q3 was down at 300,000. Now we are close to 900,000, almost 1 million. If you ask me what will it be in a month, it's probably again, above 1 million. These are recorded by car maker, by model, and so on, through the association. This is also then linked to the volumes or the demand you see from your customers? Because normally you're growing 7%-10% ahead of the market. That's basically linked then also to your demand. Yes, absolutely yes. Clear. Okay. My second question, again, would be on this market share again. You already answered this. Can you give us any specific regions or competitor groups, maybe smaller competitors where you have gained market share? I guess that smaller competitors might have had more supply chain issues than you, and as such, you might have then chances to get market share. Also, how sustainable do you think are these market share gains you have had in the first half? This is a bit tricky. This is similar to the question on the raw materials and the indicators. We are very close to the market, which means that when we talk country by country, we are very specific. Also, our, I would say, M&A activities give us a very good understanding. Our management locally has a very good understanding on the local situation, who is participating to what percentage in which segment. Then, of course, we are following up on those figures and do this then with the individual countries to compare the evolution of us versus the rest of the market. This is really only, I would say, in automotive where we have precise numbers globally speaking by customer, by region. That's probably the most precise. When it goes then down into the construction segments, we rather then take the French, the German, the U.S. by itself and look at the specific market figures. There are also numbers from the associations, then we have to break it down more specifically into our real competitors and the market participants. Okay, understood. Thank you. My third question would be on D&A and CapEx. D&A went down somewhat, and not so much, a little bit basically. What should we expect then for the second half or the full year? The first half D&A, good run rate for the second half. Given this high demand, we currently see, are there any changes from the CapEx guidance assumptions for this year or for the next year? Also then potentially also for D&A for next year. Yep. Thanks, Markus. I'll take this one. Obviously last year we had a lower than, let's say, average CapEx spend. We were also quite restrictive on newer projects. That's also something you can still see in terms of the cash out in the first half of 2021. I would expect that the second half is going back to, let's say, more normal levels in isolation, which means 2.5%-3% of sales. In combination for the full year, I would probably not expect a cash out that is meaningfully more than 2% of sales. Okay. Thank you. That's very helpful. Then last question again on this concrete recycling. If I remember correctly, also BASF has such a technology now. It's owned by Lone Star. Can you explain me the difference of your technology versus the BASF technology? If I remember correctly, BASF already presented this technology at least two years ago, and therefore I'm not sure if you have a market move advantage or if BASF technology is already in the market. Maybe some more information on this would be helpful as well. Okay, maybe we take BASF out of the equation because this is no longer related to BASF. It's MBCC, that's the name of the Lone Star acquired company. I assume you are referring to the MBCC LC3 technology. Yeah, exactly. That was the name. Yeah. Yeah. That's a different process. That's not comparable to our reCO2ver process. The LC3 is another way, it's a way, a path to reduce the cement by bringing in calcined clay and replace then cement in this way. Our process is taking the waste material, breaks it down again and makes it an active ingredient. It's not just, let's say, separation, milling, and recycling. These two processes have nothing in common. Of course, in common is the drive to reduce the cement consumption for concrete, and there are multiple ways. The LC3 is also something that our R&D is working on, helping our customers to reduce their footprint. We have absolutely no, let's say, bad feelings about it. It's just a different approach and many other companies are also engaged on the LC3 side. Many companies are also engaged on the crushing concrete recycle. Again, that's crushing, that's recycling in the traditional way. Our reCO2ver process is really unique and different to those. Okay. That was very helpful. Thank you so much. The next question is from Manish Beria of Societe Generale. Please go ahead. Yes. Good afternoon. I will take question one by one. First question is on the M&A. I thought at the start of the year, you were talking about doing couple of large deals, but it seems you are progressing well, but this is still smaller ones. Just any update? I mean, you are still pursuing those large deals or it has not worked out? Well, let me take this. I'm not sure whether this came across in the right way. I think we have been commenting, and this continues to be the case, that we're obviously An M&A for us continues to be very important to look and deliver additional growth platforms that our pipeline is quite full. We had some limitation in execution and continue to do so. Given the market composition, the fragmentation, the large number of transactions will always be small and mid-sized deals. Obviously, we are also looking and are open to look at somewhat larger transactions. There is not that many available that make sense, and this is of course, also something we continue to do. I think I would put Hamatite into that basket or bracket transaction that will close sometime in the fourth quarter. Clearly we're not limiting ourselves to the small bolt-ons, but continue to work across the spectrum. Yes. Thanks for that. The second one is also on the margins, but not really talking really about margins, but in another way. We know the pricing. You did 2% pricing in the first half. You say 4% pricing for the full year. That implies 6% pricing growth in the second half. We know the pricing more or less. raw mat is 5% higher in the first half. What is the raw mat inflation in the second half? Is it 10% or much above that? Yeah. Again, it's a bit crystal ball reading, given the evolution, but also that the regional differences Thomas was alluding to. Again, we assume that the material cost inflation in the second half year will be higher than what we will see in the P&L in the second half. How much exactly in which quarter is, from today's perspective, very difficult to say. Again, very important message here. We continue to do this, particularly on the pricing side, in a very sustainable and targeted way. We'll also obviously adapt our pricing levels depending on the evolution here. Eventually we will be able to catch up and basically deliver the full pricing impact, mitigating and reversing that margin trend. If I'm getting you correct, you are saying the second half gross margins will be better than the first half 2021 margins, correct? Sequentially, it will be better, the gross margins. What I said is that, let's say, the input cost increase compared to the first half year will be higher in the second half, probably peaking in the third quarter. Obviously price impact will also go up. The timing is a bit difficult to say. On a full year basis, as I said, we expect this to be below the 54%, but we should not be dropping below the 53%. Okay. I understand. Also if you can quantify the scope impact on EBIT in first half 2021. What was the acquisition that you have done? What was the impact on the EBIT from those acquisition in the first half? On the EBIT, that's very limited. We had about a CHF 45 million sales impact. Typically, EBIT levels, particularly initially, also given the PPA, is clearly below the group average. It's only a few or a couple of CHF million. The last one. Just trying to understand, you have already given your guidance about this operational efficiency that will bring you 50 basis point margin expansion. There are formulation and procurement efficiency. Just to get it right, this is different from the operational leverage. Whatever the volumes you get, you'll get some margin improvement because of operating leverage, and this operational efficiency, formulation efficiency is top of those operating leverage. Is that correct way of thinking? It is correct that these are two different things. When we talk about the operational efficiency initiatives, these are structural, continuous, specific improvement initiatives, which we do on local level. Dedicated initiatives which will lift EBIT margin on an annual basis by 50 base points. Here we're very well on track to deliver the 50 base points for the full year 2021, as well as we have done last year, and will continue to do in the years to come. The operational leverage, when we talk about this is more sort of the volume effect on leveraging the existing fixed cost and resources, and not including these specific improvement initiatives. Yes, perfect. Thank you so much. Thank you. The next question is from Christian Arnold from Stifel. Please go ahead. Yes. Hi, everybody. Sorry to come back on the gross margin topic again. Assuming your 4% price increase or planned price increase and your view on the raw material being peak-ish in Q3, is this price increase sufficient to go back to your 54%-55% gross margin range next year? It will clearly depend on the development of the input cost increase, the magnitude, and also the timing and basically the tipping point. Again, here we're actually quite measured and clear in our approach to the extent it will need more, we will do more. It's more a question of timing. Again, it's a bit difficult to very much pinpoint this in detail, when and then how much, but it's clear that we will move back into the 54%-55% range. Okay. Thank you. My second question would be on EMEA region, and there you were talking about this very dynamic performance of the private residential sector. I wonder if there was a difference between Q1 or Q2. Has there been a change in the momentum? What's your view on the residential sector in EMEA going forward? Maybe then also compared to the commercial sector and infrastructure sector, what are your expectations here for the EMEA region? Thank you. Maybe in terms of the momentum, obviously the comparison is a somewhat different one. Obviously last year, the big pandemic impact was in Q2, so obviously this dwarfs everything. In terms of the underlying momentum, we have not really seen a difference or a meaningful slowdown in the activity. It has remained very robust. I think just also coming back to Thomas's comments, let's say the distribution residential sort of refurbishment has been quite dynamic, continues to be dynamic. It's probably fair to say that at some stage, it will come back to, let's say, more normal growth levels, but we clearly do not anticipate that there will be a reversal or that certain demand has been sort of advanced. Clearly not. This will then be complemented and somewhat replaced by particularly the initiatives driven by the various governments, be it the stimuli packages on the infrastructure side. The building envelope, the drive for more sustainable solution and also how you can operate buildings. This will continue to have a very positive impact, particularly on the refurbishment side. Okay. Is the commercial sector ready to tackle this sustainable construction already in the short term? Absolutely. When we had this high impact soon after the peak of the COVID, it was probably more private-driven activities. The applicators doing this, they are also in the area of the commercial buildings, and they are ready for this. The demand will change, and demand will probably be fueled by many initiatives to upgrade the building codes, and that will then also, let's say, further incentivize renovation on commercial buildings. Well, residentials probably will then at that time be a bit less in the focus, but the applicators doing the job, they are diversified and ready to move into the commercial part as well. Thank you very much. The next question is from Alessandro Foletti from Octavian. Please go ahead. Mr. Foletti, your line is open. We cannot hear you. Yes, I was on mute. Sorry for that. Good afternoon, everybody. Thank you for taking my questions as well at this late hour. Try to make it quick. I just have two more. One on restocking. I heard many other companies reporting now that they were saying there was restocking effects in H1. Did you notice anything of that, and can you quantify? Yeah. Alessandro, I'm happy to do so. Restocking is really not an issue in our business. If you think particularly of the direct project business, these systems we deliver, they're typically for a certain application, a project, which you either do or you don't. It's not feasible from a logistical point of view to really stock these materials if you don't need them. There is very little in this. I think also in most of the distribution channels, these are big volumes. You might see this in one or the other country, if let's say, a big price increase is announced from, let's say, one month to the other, but it's very limited. On a global scale, there is no impact on our business. Okay, thank you very much. My second question on the recycled concrete. Can it be used in all applications? Like, remember when we were in New York and we saw all these tall, high-rise buildings that require super strong concrete because they are built up one story every day, and so on. Could you imagine recycling concrete and using it also in this type of application? I don't know, tunneling or bridges? I can imagine many things and of course, the question will be what kind of a waste stream do you have? If you have a high-quality waste stream, you can most likely also expect to get a high-quality output that you then can reutilize also for, let's say, the high-end applications. If it is more a mixture, then you have to be more careful, and then probably you will rather use it in, let's say, mid-grade or in the lower-grade concrete. Theoretically, it's really input related, and if the input is clean and this is of high quality, I couldn't see any reason why not. We are not yet there because we are in the, let's say, scale-up phase. From a theoretical point of view, absolutely feasible. Thank you. Thanks, Alessandro. That was the last question. Okay. We thank you for listening to our call and for your interest in Sika. We take this opportunity as well to highlight the date of our next Capital Market Day. It will be held in Zürich at October 7th. Please note this down in your agenda. We wish you now all the best, stay safe, and have a great summer. Bye-bye, everybody, from my point. Thank you all. I hope that next time we have more opportunities to meet face-to-face, or in the meantime, maybe on an individual basis. Looking very much forward to meet you in person sometime in the future. Thanks. Thank you very much. Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating. You may now disconnect your lines. Goodbye.