Rockwool A/S

Good day to everyone and welcome to Rockwool AS conference call regarding the result for the first quarter of 2024. My name is Kimming Andersen. I'm the CFO of Rockwool AS. Today, I'm pleased to present CEO Jens Bjørsson. For the first part of this call, all participants will be in a listen-only mode. As a reminder, this conference call is being recorded. First, Jens Bjørsson will go through our presentation and give an update on the results for the first quarter of 2024. Afterwards, we'll be ready to answer all your good questions. Before I hand over the word to Jens Bjørsson, I must ask you to notice slide number two, which is the forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to next slide, which is slide three. Jens Bjørsson, I'll hand over the word to you.

Good day. With the microphone on this time. Good day, good morning, everyone. Looking at the numbers for this quarter, we started off in January with maybe the first two weeks a little bit slow. You never know what happens in January. But as the quarter progressed, business picked up and... turned quite strong. There was quite a big mix shift. We have very little residential business. We see very little activity still on the residential side. But on the heavy densities, the non-residential, and there we talk flat roofs, sandwich panel, basically everything going in the industrial segment that started to grow. And I'm very happy with that top line. And considering... that last year we kind of held back on resources. We have trimmed a bit of cost, but not too much. When that growth came, together with the price level that was stable, that turned into a nice and profitable quarter. In terms of volume, due to the shift from... overweight on the heavy densities, we actually have a double-digit volume growth in there compared to last year, again, comparing with the relatively easy comparable. Move to slide, take slide four, please. Higher growth in The insulation business, so we have 9%, again bearing in mind that it was quite a hefty winter in some areas, especially Eastern Europe last year, Q1. On the system business side, we see a decline. but that's picking up. We believe that systems will get back into growth territory from now onwards, so it's looking better, especially ROCFON had a very slow start of the year, but it's looking better now. Go to slide five. Regional sales development. Everything pretty slow in Western Europe. It should be said, though, Germany had quite good growth. It has recovered a little bit. It's still on a low level, and it's not a double-digit growth, but it started to grow, but it was so extremely low for us last year. But that's a positive. All the other countries are around the zero. No particular good news anywhere. But there is a solid business and possibly a trend of growth in some of the Western European market. Eastern Europe, then, there is a broad-based growth, volume and top line. And to sum it up, I think there is only one country where we didn't grow. All the others grow. and a lot of countries that grow double digits. So that's good. I think that fits with this. We try to understand why is that happening. It's heavy densities, it's industrial buildings, it's non-residential segments. And I think it has to do with that people that invest in factories and those type of buildings, they now see the end of the downturn and they've started to invest again nearshoring possibly impact this, and planning to be ready by the time the business cycle is improving. So that's what drives the business. In North America and Asia, we have double-digit growth in both places. Japan, where we made the acquisition, I was there in Q1. It's still a very small business, but we had very significant growth, and we're starting to get some volumes into our factory, so that's nice. It's still a small business, but it's encouraging the growth numbers we see. Slide six, profitability. We had slightly... lower prices compared to end of last year and just slightly below Q1 last year. We're talking so basically stable prices. We see logistics, radius, increase slightly, the mix impact our profitability a little bit negative, but materials are lower and energy are lower, so profitability is up, plus the volume growth, the big volume growth that also adds to the profit, and we didn't need to add any much resources to produce that growth, so that goes through nicely to the bottom line. In terms of provisions, we declare provisions, most of the time we don't talk about it, but quarter last year and quarter this year is roughly neutral, so it's a margin improvement without impact of any provision taking or restructuring or anything like that. Slide seven. Nice development in profitability on insulation. You see the margins has improved from a bit above 10% to more than 15%. Nice, and that's driven by the business I mentioned. On the system division, we also had a healthy development. Last year, we were on 10.4 and now 14.2, which is a more normal margin, so we're happy about that. Q4 23, I just want to remind you that we had a 60 million restructuring project that we booked in that quarter, so that's not representative. But the system division has improved also, which is nice. Slide eight, investment activities. We just keep investing. There are a couple of things that have happened. One is that we have started up the flume rock plant. That was probably the main investment there. We also commissioned a new paint line for rock panel. And we keep doing that. So that has continued. And we... We haven't had anything especially notable in this. We just keep executing on the plan and we haven't drawn back. We did also, we see an increase, a couple of factors. Our technical insulation business, part of it due to competitors' exit from the marine business, but also a general increase in technical insulation demand. We have also invested in Bohemian in increased capacity, and that business is growing nicely. Moving on to slide nine, the electrical melter in Flumrock. Okay, not everyone would know that, but it's in Switzerland and it's in Flums. That's a 100 million euro investment. We made this acquisition, and in the business plan, we made it several years back, it has been tremendously successful, but we made a commitment to secure this location in Switzerland, and this factory is in Switzerland for Switzerland, which is quite unusual in our sector. We have now completed that investment of 100 million euro. It started up on the day. It's the largest electrical melter in the world and there are also another couple of extras in that plant that we have never tried before that has worked out and it has been a beautiful project. CO2 reductions will be something like 75% with that and we will have green energy driving that, so that's a really good project. It will also improve our ability to take back old products and do circularity or upcycle them. We were almost at the limit of what we could handle but now with the this electrical matter we can put in a higher content of non-verdian products so that's good just to give you a little bit of feeling for this project the total shutdown i mean we prepared everything and then we did the total shutdown of five weeks and to get through that those weeks and supply the customers you know in many markets we can take in products from neighboring countries in switzerland that is a little bit more difficult due to the nature of the products i they prefer in that country and we had we had built up a strategic stock of 100 000 pallets and it worked out really well and because we kept the customers supplied Slide 10, free cash flow, good. As usual, net working capital is not a big issue for us. It's on a healthy level. Some of the reduction is also caused by the increase in deliveries and that we now have relatively low stocks. We are ramping up capacities. I'm not worried about being able to deliver good growth in Q2. We are ahead of the curve and we should be able to grow more. The share buyback program is progressing as planned and I would say we are surprised, but we don't have debt again, so more than 200 million surplus again, net debt free, so very healthy balance sheet position. Over to the outlook, slide 12. We had already pre-announced the outlook. We didn't change that now. So mid-single-digit growth, 50% margin, and we just maintained CapEx forecasts. So that's the outlook, and you had factored that in already in your estimates, I think, when we did the profit warning a few weeks back. Over to questions.

We will now begin the question and answer session. To ask a question, you may press star and one or your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and two. At this time, we will pause momentarily to assemble our roster. Our first question Thank you very much.