Rockwool A S Ser B

Thank you very much, and good afternoon, everybody. Sorry for the delay. We had some technical challenges here in Chennai from where we're taking the calls. Today, first of all, of course, I'm Kim Jung Andersen, the CFO, and with me here I have the CEO, Jens Biggersen. And today we will present to you the first half result, and then afterwards we go into Q&A. Before we start, I'd just like to remind you on slide number two, the forward-looking statement, and please be aware that this presentation contains uncertainties. And with this, we can quickly go into the presentation on slide number three.

Good morning, good day, everyone. It's Jens here. Kim and I and the whole board of directors of Rockpool, including my successor, Jess Munch, We are in India, in Chennai, and the reason we are here doing a board meeting is that about 90 kilometers southwest of Chennai, what was previously called Madras, we have bought a piece of land and we have approved a factory project for our second factory in India, where we have had quite a successful last couple of years filling up our first factory. So that's the reason we are here. calling from here, and I really can't blame India for the technical problems. Everything works here. It's some other issue that creates problems here. So if we move to slide three, the H1 results, as you know, I normally don't comment on here very much, but the contrast between H1 and Q2 is a little bit interesting. So in H1, we saw 8%, quite broad-based growth, but as we have seen in previous, probably in the last one and a half year, is the commercial side of the business going. We don't see much growth on residential, rather the opposite. So the residential is still a trouble, but we are doing fine on the commercial side of things. We looked at the results year-to-date. The EBITDA margin is 17.7%. And that has been achieved on more or less neutral pricing. We have a fraction of a price reduction. There's a mix of markets. In some markets, the price is going up. For example, North America and parts of Asia and the others where the price is just holding. And somewhere they are down, but we... We're kind of monitoring our market share and how we get that. So overall, we are very happy with the first half here. Moving on to slide four, second quarter highlights. Comparable differs a little bit. So Q2 wasn't very strong last year. Q1 wasn't strong either last year. I would say we have a really broad-based growth and record growth in North America. I don't think we ever had a bigger growth number and higher sales that goes for both Canada and the US. Overall sales, nominal, we always talk budget rate. Good to see that we crossed a billion. I'm not sure if that's the first time, but very, very strong quarter. And then on the EBIT margin, we reached 18.7%. And that includes... seven million euro ukraine uh provision or donations and uh just to sum up we are adding q1 q1 plus q2 is a little bit more than 13 million that we have donated let's move to slide five um i just gonna i'm not really gonna comment this but if you look at the up on the right is systems divisions growth. You see minus 1%. We did divest Charlesville, so on like-for-like numbers, system division have two percentage point better growth that's shown there. If we now shift to slide six, we see Q2. And what's pleasing here is to see that Here, obviously, the insulation business is growing very, very much. It's a super good quarter, but maybe from my perspective, even more pleasing is that the system division has gained a little bit of momentum. So if we add back the 2% last top line for Charlesville, we have about 5% on the comparable level. basis. So we are looking now in the coming quarters whether the growth will increase a little bit in the system division. The main driver for the system division growth is VoxPanel and GrowthOn that have had very strong development. If we turn to slide seven, the regional sales development, starting with It's a very scattered picture in Western Europe. We have some countries growing 20-30%. We have Sweden growing surprisingly quite well. Germany, single-digit growth, healthy growth back, turning the corner, although we don't see Germany on the residential side turning up at all, but that's on the commercial side. Then we have countries like Spain, France, UK that are around the zero, slightly negative, so quite a widespread on that. Moving to Eastern Europe and Russia, you see several countries with... very solid double-digit growth numbers, and one or two of the smaller ones are negative. And we are not listed here that Russia had a very good quarter, but so did Poland, and so did, for example, Ukraine. We are small in Ukraine, but we grew some 40% in Ukraine. Moving on to North America, Asia and others. quick summary of the whole thing that is China's negative US and Canada is on record growth and Southeast Asia, including Japan, very good growth. So Thailand, Malaysia, Indonesia, and where we are now, India, all very good growth. We are getting closer to a point where we can sell more, but it's nice to see that we are growing out here and also in North America. Let's go to profitability on slide eight. Margin has increased quite a lot. If you look there on the right-hand diagram, the EBITDA margin up to 25%, the EBITDA margin now 18.7%, which is a lot higher than a year back, so the trend upwards have been healthy. We have listed some of the factors, obviously volume growth, stable sales, prices. Input costs have kept stable. We see now maybe inflation coming back a little bit. We have had some favorable factors coming in, obviously, compared on the inflation, but we see also many materials kind of ticking up with normal inflation. One item here that is worth noting, if you look at the headcount, we are about 100 employees or so higher in the headcount compared to a year back. And that is with a 10% growth. So obviously we have a tremendous productivity improvement. They're almost 9%, 10% productivity improvement, and that gives us nice overabsorption where we don't fix costs on the factory or on the rest, and you see that flow through to the bottom line. So it's nice to see that that scalability is there in the business. I'm also quite happy with this quite sudden increase ramp up in the factories, where, for example, in North America, we have to step up capacity very quickly, and also some European countries step up. Germany, for example, increased the ships, but we have been able to do that relatively quickly, and that has helped us in supporting this growth. If we move to slide nine... Here, I only want to comment on margins in Q2 2024. And I guess I spoke about the 5% like-for-like growth of system division. Here, I'm quite pleased with that. The system division is up on around the 15% margin again. Of course, insulation at that margin is doing very well. And I also want to maybe clarify that the whole Ukraine donation has been put on insulation, so that you are aware of that. Look into the investment activities. No... nothing noteworthy. You recognize most of these things, but we have done a small acquisition in Vietnam. We have signed, and we are very close to close, I think, four to six weeks. And just to underline that we are here with the board in Asia, and we have since a while been working here in Asia to step up our efforts. It's a very small acquisition, but yet an important bridgehead into Vietnam. Many of us might not know that even a country like Vietnam has 100 million people and a very great outlook at the moment. So I'm happy that we could get that one because, again, it's clearly growth markets and it's good to have the more or less only stonewall factory in the country. We are also working on some other targets in the region. It's not a lot around, but we are scouting. Move on to slide 11. Networking capital percentage 11.5% down compared to a year back from 13.4%. Nothing special with that. It's nothing we really need to focus a lot on. It sits inherent in the business that we don't tie up too much networking capital. If we had one wish on that number, due to the volume growth, we perhaps would have liked to have a little bit more finished goods inventory. We had to sell a little bit more than we wanted to sell. We're going to work now maybe to bring that inventory up in the coming quarters. And then the last one up there, the net cash position, around 200 million net cash positive, and that's after the dividend, and it's after the share buyback. We are on track. We had about 160 million euro buyback planned for this year, and we are pacing relatively well on the curve. That's also good cash, and in spite of high investment, obviously, with the earnings level we have now, we have... a lot of cash in the company, so good to see that. Slide 12, as we normally do in the half-year report, we normally include one or two slides on sustainability. We have done that also here. There's not much drama about that. We have the five sustainability goals outlined, that with the time horizon to 2030, we're on track or ahead on all of those. I'll just pull out a couple of data points here. Okay, I'll take it from my memory. So if you look first on the CO2 emission intensity, this is the goal we defined before. Science-based target existed. As an engineer, that's a good metric. Here we have achieved with the index 2015, 100 in terms of ton CO2 per produced ton stonewall. We had the reference level 2015 of 100, and now inherently in the business we have reached the index 84, so that's 16 points, so 16% down. can produce through productivity improvements, conversions, green energy, and some other actions. And we will see this number now continue down over the coming years because we are investing and we are taking actions. In the annual report, on the sustainability report, you will see a number below the 84. So that's progressing well. And you know the green investment on the Catholic slide. You see what type of money we put into that. We are also working now, as we said, on... on our energy supplies and the contracting around that to see if we can get out of this extreme volatility the next round we have an energy crisis or something like that. So that work is ongoing. Science-based target that we also have a goal for talks about CO2 equivalent emissions in absolute terms, excluding acquisitions. We have a goal for that too. And it's quite pleasing to see that when the business is growing volume at top-line double-digit, that our CO2 emissions only increase with 6% or more than 10% volume and sales growth. So that's good. That shows that that kind of emissions per ton is working. It also shows the underlying challenge we have on 2030 and onwards of really, really convert the whole company more or less into electrical melting driven by green energy. So it's a really challenging target that we are working on. At this stage, we don't feel that it's impossible we have the technologies we have the investment plan but then of course the more we grow the more challenging that goal becomes so at the moment I would say the long term growth outlook is quite positive so it's a challenging goal but we are working and we can see that the actions we are taking are good on the rock cycle is Here it's referred to as the reclaimed waste schemes, where we take back our own products and upcycle them, recycle them. We have added now also Poland to the countries where we offer this service, and we have now 22 countries in the scheme. And the goal is 30 by 2030, so we are well ahead of that. We will beat that goal. We will be ready much before 2030. And then on safety, the safety goal, no serious accidents and no fatalities in the first half year. It's what we like to see. That's how we do it all the time, but as you know, we have a big, big operation with many factories, and at these factories, things can happen, but we are working very seriously on that, and it's good that we have a good first half here. Going to the outlook, slide 14. Going forward on sales, we haven't seen any change or any dramatic developments in the market, but we are stepping in a couple of quarters where we have more challenging comparables. So on the top line, that mid-single-digit percentage growth seems like a good outlook still. although we are ahead of that until now, but that's because of comparisons. But as we see it now, we see the business pretty much continue. That's good. On the EBIT margin, around 17%. Also there, we are a little bit ahead, but then, as you know, we have the December effect going the way. We also have the summer in France, profit of business for us. impact a bit, but we feel comfortable with that outlook. And on the investment, nothing really to report on that. We are on track to invest what we have planned to invest for the year. I should say, though, on the investment side, we have had more setbacks. Our new plant in France, we were surprised, I must say, that we got a negative verdict on one of the lawsuits. So we are regrouping on that. We have not at all given up the new factory in France, but we need to look at that and see how we keep pushing the plant in France. We thought we should be able to start building it now, but this was a setback, and we can expect a further delay. Possibly we'll move the resources and accelerate another project. We have a number of projects started, but we have absolutely not given up on the project. Keep working through that. Over to questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We will start with the two questions per participant. Please respect this. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Klaus Almer with Nordea. Please go ahead.

Thank you. Yeah, two questions from my side. I'll do them one by one. The first question goes to inflation. Jens, you mentioned that you do see a... It sounds like a small inflation. Does that mean you're going to raise prices, or will you have to absorb that in your P&L, so to speak? That will be the first one.

Yeah. So, Klaus, thanks for introducing yourself. We don't have the normal screen, but we can see who asked the question and who you are. So, great if you can... Introduce yourself like that so we know. No, yeah, I see. I mean, the inflation doesn't go away. We had the energy benefit and some other benefits, but we have several markets where we foresee that we will do a small drumbeat price increase to cover that inflation. There could be competitive dynamics in some places where... We might not do that, but the overall direction is that we are ready to do a small price increase to pass on the inflationary pressures.

Okay, and then leading to the next question, which is, you know, the implicit second half guides, and you did touch upon this in your slides, but implicitly you guide for around 16% EBIT margin in the second half, so down versus first half also if we adjust for the Ukraine donation. Is this only due to France and December sale, as you said, or is it also... the inflation impact. You have previously said it's not easy to raise prices in all markets, so you had to be more specific about these price increases.

Yeah, I saw your headline in your initial comment, and I would say we are not... You have seen some companies that have released... earnings report now, and that I've seen decline in top line, and that is quite a mixed picture in different related sectors. So we haven't seen any of that. So we are not pessimistic. We are not pessimistic on the prices. I think we can do most of that. Yes, we believe there is inflationary pressures, but We have the ambition to pass it on. So that's the outlook. And then we did upgrade. I was at 18th of July to 17%. We felt to make an assessment now is not prudent. We feel comfortable with the 17%. We obviously have no ambition. to reduce the profitability, but the acknowledgement of the December effect and the France effect, as we always do. So I will leave that to my successor to kind of nail that outlook and his maybe first earnings call.

And you know that we're coming closer and closer to the autumn period where many of our markets will negotiate 2025 prices. There's also a little bit of timing there.

So I wouldn't do straight to mathematics and say we have concluded this and that. We'll come back on that forecast when we're a little bit deeper into those discussions and I also say, you know, we feel comfortable with the 70%. You know, the next time we will know more.

Fair enough. Thank you so much for the answers. Thanks. The next question will come from Peter Sehested with ABG. Please go ahead.

Great. It's Peter from ABG. Thanks for taking my questions. I have two. The first one is on France. The Marinov-Trimonov program has noted an increase in applications following their return to the normal application procedures. And I guess that these applications will probably not hit the market in the second half. Is this something that you have taken into account in your guidance? Because I know that in France, the renovation program has been a very important driver for Farroko for the past... Yeah, it's accounted for.

We have a good, profitable business, and France is slightly in the negative territory. in the quarter, and we haven't factored in any hopes and dreams from the scheme. So we have a good conservative or realistic forecast, and that's included.

Good. And just going back to the guidance, because your wording on pricing is essentially the same as you had, you did in Q1 and Q4, also with respect to And we have sort of the usual thing about the December impact. That's also something that you typically iterate around this time of year. Is there anything that is sort of different this time that it has been, let's say?

No, it's very much business as usual. You know, we drive a very strict pricing process in the company. We stay on top of the markets, and we try to take that very serious. And there isn't any dynamics out there that is different to another year, of course. And we don't have the situation we had in the autumn 2022 with the hyperinflation and all this. So I will say business as usual, and there is a slight inflation, and we've been trying to go after it, and there's no drama about the whole thing. But then, of course, you have... You know, some markets, some segments, competitive pressures, we worked on all that. But so far, so good.

Thank you for sharing my questions. And also, I'd like to say thanks for your effort and what you've done at Roku. I think you've set, you and Tim and the team have set a very high, let's say, benchmark for the incoming CEO. So good luck to him as well.

Yeah, yeah. Thank you, Peter. Thank you very much, Peter. We have the same team in place, but we get a very strong pair of hands taking over the business. So I'm very optimistic about the future. Thanks. Next.

The next question will come from Arnaud Lehman with Bank of America. Please go ahead. Thank you very much.

My name is Arnaud Lehmann from Bank of America. My first question is, I guess, related to pricing, margin and returns, staying on that topic. You indeed have done very well on margins. And that drove an improvement in ROIC, which you publish, I think 23% is the printed number in the H1 report over the last, I think that's 12 months, rolling data, which compared to 15% last year. I appreciate there's an element of... Let's say inflation in capex and the cost of adding new plants has gone up. But on the other hand, I don't believe you have a broad-based plan to increase capacity. It's more of a selective process. So I guess my question is, you know, beyond pricing and margin levels, do you believe that these sort of returns are sustainable going forward or is there a possibility for some sort of normalization over time?

Yeah, I would like to, I would give just a brief flavor on that reflection on it and then Kim should comment on it because he continues. My view on that is that we are not still, you know, we want to have 15% or above, but the biggest job as a CEO or what I've seen is that for me it's not so important if it's 23% or 16% or whatever, it's important that we keep supporting the volume growth. And at the end, in our industry, if you have the capacity, you can deliver the volume. So from my perspective, I think, yes, we want to have a good cash generation with a good margin. but we would like to invest more. And sometimes we get delays, like now in France, the plant. We would really like to build that. And that would be a burden for quite a while, such a big plant on the return on capital employed. And quite frankly, I'd rather have a couple of percentage point lower return on capital employed and get that plant built because that's better for the long term for this business. So that's how we look at it. So I think that now you have a combination of that some projects are hanging and yes, we are building plant in India, plant in Romania, we are building one in Sweden. In the U.S., you know, we are building. It's not just selected. We are building and we're going to step up CapEx, but it's quite hard to build. So it's not a goal in itself for me to keep it at 23.

But I should let... You know, at the short term, 23 or 24, close to 24 compared to 15 last year. The last year was a bit abnormally low because that was impacted by the 2022 downturn in performance. And maybe this year is a bit abnormally high since we have relatively low working capital from the beginning of the year. So I think a normalization would be around the 20s. But as Jens said, it's not something that we steer towards necessarily on these short-term trends. RICs. We do the 15 plus target setting internally and then we go for this. But we will step up investment in the coming years. So, yes, and myself will maybe not be able to present 24% RIC short term. In the short term, that's where the numbers are.

Very good. Thank you. Thank you for that. My second question, if that's okay, is regarding Russia. I mean, no change as far as I can tell in terms of the way you're thinking about the ownership of these assets for Rockwool. Should we expect a change with a new management in the future, I guess? Maybe something.

You know, we have a very... We have worked this through in detail. My successor... is still until the 1st of September a board member. He's part of it. We haven't seen the external environment on the reasoning for not continuing what we do. We haven't seen anything change. And we see the companies that take the other route. It impacts very negatively companies. So we see no reason to change, and there is no intention to change the strategy because of the new CEO of the company, and we are all aligned on this. Thank you very much.

The next question will come from Yasin Tauri with Onfield Investment Research. Please go ahead.

Yes, good afternoon. So, two questions on my side as well. First, could you comment a little bit about the pricing trends and the volume trends that you've seen in July and August? Is it fair to assume that there is no change on pricing? Or have you announced some additional price increase? I think in the U.S. there were some price increase. And on volume, have you seen any improvement or deterioration versus the second quarter? And then my second question would be on the new entrance. In an environment where margins are relatively high today, do you see a risk for new companies to enter the European or North American mineral wood industry? Or do you think it's too hard because of regulation and they could face the same issues that you're facing in France? Yeah.

So in France, we see some price impression in the residential segment of the light walls, because the activity is relatively low. We haven't seen much of a change. I mean, it's around the zero, slightly negative, slightly up. Nothing dramatic, and I think we need some, I don't know, governmental programs taking action to get that up. Overall in Europe, on the GDP side of things, We probably haven't seen a case for a broad-based upturn. It has weakened a little bit lately in Europe. So for us, it's around the zero, slightly negative. Not really dramatic on price. It's a bit down, but the segments, we can increase the prices. So that's on that side. And then price increases are some markets where we... There is no issue whatsoever with the price. For example, the U.S., we just launched an 8% increase, and that's in line with what's happening in the market on Glasswood and Stonewall. That's moving. The last question, just to make sure I understood, you asked me how difficult it is to enter the Stonewall business. Was that the question?

Do you see a risk because the margins today are much higher than they were 20 years ago? Yeah. Do you see a risk that you will see new players coming into the market?

Yeah. Obviously, there are people that look at Stonewall now and think, oh, this is a fantastic business. Let's enter this. You have, you know, 80% debit margin and the rest. And I think having a single plant versus our quite big machine now with a lot of economics of scale and also considering how difficult it is to start up a plant and run a really, really productive outfit, I think you will see some entrants. But I must say there hasn't been an entrant for a long time that come even close to our margins because it's very, very difficult to run a small network or just one plant without brand and without the service level and all the rest. So I'm not particularly worried about new entrants. But, yes, some people will announce new plants. We'll deal with that when that comes. But the trend historically has been that the plants are announced and very much delayed because it's also very, very difficult to build the plants. You need to be very persistent in some geographies to get your plant built in today's world. And I think their scale is also important because we have... the means and the persistence to just keep working until we can build our plants. So it can be very challenging to get all the permits and you get the permits and then you have cultists or whatever as it is in many industries in Europe at the moment.

And maybe just a very last point, which is just like not a question, but more a comment about the fact that you've delivered such a great growth for the company. I think it's quite impressive what you've been able to do in terms of margin and productivity. So just wanted to wish you the best of luck for your future endeavour. Thank you.

Thank you very much, Yacine. And you mentioned an aspect there that is an important one to us that we don't talk about too much, and that is our productivity, that economics of scale of the business. That's an underlying big advantage of Rockwell that we have in the culture, and that's a strong point. Thank you for those words.

The next question will come from Burgess Kumar Sia with HSBC. Please go ahead.

So, I have a couple as well. Just on the pricing, right, it's interesting that you keep talking about pricing in the quarter. But looking at Eastern Europe, Eastern Europe growth is up 28% in Q2. Given some of your competitors, not Direct One, but a different segment a little bit, but they talk about when the volume has bounced back, they see some pricing pressure. Is that something... is also impacting you because I recollect historically Eastern Europe has been a different market where competition is a little more intense compared to Western Europe. So any comments around that will be very helpful. And within that, if you could just give a little more flavor into the Western Europe when everybody is talking about interest rate cut coming through, do you see similar risk panning out in Western Europe as well when the volume bounce happens? maybe towards the end of Q4 or maybe into 2025. So that's my first one. I'll come back on the second.

Okay, thank you, Brijesh. So in Eastern Europe, we have the classic country, for example, Poland, where price competition is fierce. Whenever volumes go down, wherever it is down, you see the whole EPS competition in several segments, flat rules. and in facades. So there we really live it. But then there are also some Eastern European markets where, you know, Romania, Hungary, but we don't see much of that, but it's more Western in the dynamics. But for sure, that effect is there. It's no secret that Poland is challenging balance volume and price, and it's kind of schoolbook really, really a lot of competitors that want volume for any price. And we do well on the really big projects where you want really our fire safety, you want delivery safety, you want the logistics. Those projects we still can take with good margins. And on the other, we need to play it a bit more by the year and then correct some of that when the upturn comes. So that's the same pattern. as we have discussed many times, but there are also quite a few Eastern European markets that don't have that Polish dynamic. Then in Western Europe, on the trends, on the dynamics, I think fundamentally in Western Europe, what you see is that sometimes there could be You know, there could be circumstances that means that there goes three, four months and you get simply too many projects. And then someone doesn't get enough, and then it turns into a bit of a seasonal panic in all of the competitors. And that is nothing unusual of that. We have seen it, for example, in Germany several times where Someone really, really wants volumes. And our approach has traditionally been that, okay, if it's not on the sustainable level pricing, we'd rather step away from those projects and then the market would normalize. And I must admit, I have not seen any other trend in Europe. I don't see any change to the fundamental dynamics to Western European pricing until now.

Perfect. And my second question is more into the U.S. You're talking about U.S. You are nearing full capacity. Then looking into 2025 and 2026, and I guess your new plant is not coming on stream until 2027. So what kind of U.S.? I was talking about U.S., sorry. Yeah. So I was asking you about... Sorry, if I just finish the question, is that you have near full capacity right now and looking into 2025 and 2026, what kind of volume headroom you have to continue to grow this number or you see there is a kind of a really a capacity constraint that's limiting your growth in the near to medium term until the new plant comes in 2027? Yeah, yeah.

So they're the normal... two or three factors here on full capacity that can be quite confusing for our business. Because if we don't, if we miss a few months that we are not on full capacity, we are frozen capacity and we can never catch up back in the year. And so what happened here was that we had some challenges with delivery time. So in the U.S., we Didn't expect the ramp up. The business went down in 2022, early 2023. And then the step changed up. We didn't have the ships in place. We battled to get blue-collar workers in to shift up and to train them and all the rest. And then we sat with this more than six months backlog of orders on delivery times. During that period, we didn't increase prices. We just focused on one thing, to work back lead times. And then we go up on full capacity. So this doesn't mean we don't have more capacity in the plant, even though we run a couple of months at full. So going into next year, we will counter that if we see a good next year with more seasonal stock and running more close to full the rest of the year. So we have more growth in the business, and that will take us through one or two years, I think. And then, of course, after that, We do what we normally do if we run out. We use capacity from other parts of the world and supply the demand. Although we don't make a lot of money on that, our ambition, and we have done a lot of that in Europe. You remember last time we were up on very high utilization. We shipped from even Norway down to Germany. We use those type of means because our priority, if we have that demand list, to supply the customers. And here, we might get into that next year or the year after where we actually have to bring in certain grades of Stonewall into the U.S. And we will be ready for that when it's needed.

Okay, that's great. Thank you. Thank you, Hans, for all your kind of effort. And I think, yeah, you've done a great job, as my colleagues have already told. It's kind of probably the pricing initiative we've taken in the last nine years has been simply pretty impressive. And that's what we can see with the margin. So thank you very much, and good next innings. Thank you, B.S. Farewell.

Thanks. The next question will come from Harry with Goad. Please go ahead. Harry, your line is open.

Yes, hi, can you hear me?

Yeah, we can hear you.

Yeah, okay, great. Yes, Harry at Barenburg, I've got two, please. So firstly, just coming back on a couple of remarks you've made on the margin, I think it may be in response to Ana's question, but just for clarity, I appreciate your point that both margins and returns on capital could move around, but were you indicating that around 15% in terms of EBIT margin is the right way to think about a sort of through cycle average margin and obviously having had a big increase this year. The second question, please, is around sort of pricing and competition. And when we're thinking about that, should we be thinking about your product relative to other stonewall providers or should we actually always be thinking about it relative to the broader suite of insulation products? Thank you.

Yeah. So I will hand over the 15% margin question to CFO Kim. I'll take the other one first, and then Kim will answer the average cycle margin, which I don't feel I'm the right one to answer at this moment. On pricing and competition, I would say that, yes, it probably attracts people through the market. Stonewall is a great product. It has a very clear cut-out space in the market, and to meet the climate goals, our insulation, among other insulation products, will be needed. Obviously, we think it's the best. I think we can see some new entrants, but again, I don't see anything happening there quickly due to the nature of the business. In the last couple of years, the inflation on equipment, this nearshoring drive that has happened in Europe and the U.S. is just expensive and complicated to build. And we have a lot of in-house engineers doing a lot of this work. It's not easy. So I wouldn't factor in that you will have big new entrants that come in five, six factories very quickly. That's not likely to happen. But sure, we're going to have new entrants.

normalized margin. I don't think necessarily it exists. Of course, in the coming few years here, in 2025 and into 2026, we have no plans to open any new factories, so there will be no major depreciation change coming. That will change, of course, once we start to get the big factories open in Europe and in the U.S. So that will definitely impact the EBIT. We are working on margin improvements. We have told you previously about our efforts to reduce the manning in our factory. That is definitely a margin possibility. But besides that, I think we just work towards having constant focus on productivity and then hopefully to maintain or improve margins. That's really our aim. But as I said, from 2007 onwards, there will definitely be more depreciation coming from the planned investments that we're doing over the coming years.

Thank you very much. The next question will come from Zane Bigawa with J.P. Morgan. Please go ahead.

Afternoon, all. Just two questions for me. The first one is I noticed there's a slight mixed effect in the regional sales. Can you just remind us on the impact this has on the margins, particularly by region, and then secondly on your hedging for the year and into 2025, please? Thank you.

Okay, I'm going to leave the hedging to Tim. Actually, with the recent success we have had in North America, we don't have so much regional effects of the margins. We have always said France is a very good market, but we have a lot of other markets now that are on the same level. So when you have North America versus... Europe, on average, you don't see much country mix effect anymore because we're up on scale and we start to have that mass profitability in North America. Then Asia is still too small to impact the picture. It doesn't matter if they grow 20%. They won't impact all the numbers because they're still too small. There are some effects. We still have more difficult markets like Poland and Some other markets, if that really grows a lot, it dilutes. But at this stage, I won't say a country-mix effect is big. And then in the residential segments, actually, our margins per unit is a little bit higher. That one is low. On the other hand, we get this beautiful overabsorption from all the... commercial heavy density products, and that's also given an effect. So I won't say we have any great mix impacts at the moment. But for sure, if we wouldn't have had the volume growth that we have now, all these big projects, heavy, flat-through projects would have diluted the margin a bit because that margin on the paper is slightly lower, but with this absorption, it's fine.

On the hedging side, Seamus, we have this with the Foundry Cup, which is still our biggest energy source. There, we can only take prices a quarter at a time. Right now, we don't have a week for 2025. On electricity and gas, we do have long-term contracts. For the best of the consumption on electricity and on gas, we have covered a quarter into June and June 2 next year. That's it about now.

The best year we have for most of our expected consumption. Perfect. Thank you for those answers. And Jens, best of luck on your future endeavors also.

Thank you very much. Thank you. The next question will come from Marcus Cole with UBS. Please go ahead.

Hi, Marcus Cole from UBS. I've got two questions as well. I was reading in a statement that you've recovered some share in Europe. I was just Wondering if you're willing to put some numbers to that. And then the second question is, just on the volume growth strength in H1, are there any one-offs in there that we should be aware of that you don't think that can be repeated in the rest of the year? Thanks.

Okay, so Mark could share our view on this. You know, I've been staring quite hard at maintaining it. In some countries, we don't doubt the decimal because there are associations looking at it, and sometimes we don't know exactly. So the market share has remained pretty stable, and there could be country differences. Obviously, the U.S., where we are growing, and we have a very low market share in the total market, we have a high market share within stone, but there's still only a couple of percentage points on the overall installation market. We are taking market share out of the inflation market, but I don't think anyone is noticing that because everyone is going. So market share is stable, improving in some places, slightly down in others, but overall, we are happy with the way we managed that. What was the other question? We don't have any special one-offs. No, no one-offs, no. We have some big projects, but, you know, the biggest project we ever get is like 4 or 5 million euros or so, and there's not many of them. So we have gotten some big projects, but nothing that impacts.

Okay, thank you very much, and best of luck for the future, Jens. Thank you.

The next question will come from Axel Stassi with MS. Please go ahead.

Good afternoon, everyone. Thanks for taking my question. I just have one remaining. If I understood correctly, the commercial market drove the upbeat margins in the first half year. So how should we look at pricing in the residential market going forward? And I'm asking this question specifically based on your comment on the key focus on volume growth. So is it fair to assume we could see some pricing risk in the residential market when volumes pick up? Or did I not understand it correctly? Thank you.

We unfortunately have a very disturbance of the lines, so we could not hear that question. Could you maybe just repeat one more time?

Keep it very short.

Yeah, sure, sorry. So the commercial market drove the upbeat margin in the first half year of the year. And based on your comment on key focus on volume growth going forward, is it fair to assume that we could see some pricing risk in the residential market going forward to gain share?

We're just going to try to... Just a second. We mute you and we just see if we can... Okay. Yeah, okay. So I think the residential market at the moment is a bit of a falling knife. So we clearly don't have an ambition in the market. If you look at the new housing starts in Germany, it's down to even lower level than last year. I can't remember how much, but it's really, really low. So we don't have a plan yet. to attack in any way and take market share. We just try to stay in And when the market is that low, it's better to focus on where we have some volume growth and where we have an opportunity to just ramp up and get nice business in. So I don't think the timing to go after market share growth in residential is a good one at all, because I think it will just result in... in a negative price spiral. So we try to take care of our market share, and then we hope that at some stage this market comes around.

Okay. Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to our host for today for any closing remarks. Please go ahead.

Yes, from myself and Jens here, I would like to thank you very much for the call today. I'm sorry the line broke up a little bit here at the end. If you have questions afterwards, of course, you're welcome to give me a call. And for some of you, we will see you next week. Thank you very much. Have a nice day.