Rockwool A S Ser B

Good day to everyone. Welcome to Rockwool AS' conference call regarding the result for the full year 2024. My name is Kim Jung Andersen. I'm the CFO of Rockwool AS. Today, I'm pleased to present CEO Jes Munch Hansen. 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, Jes will go through our presentation and give you an update of the results for the full year and the fourth quarter of 2024. Afterwards, we'll be ready to answer all your questions. For time restrictions, please allow yourself two questions at a time. Thank you. Before I hand over the word to Jes, 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 the next slide, which is slide number three. Jes, I will now hand over the word to you.

Thank you very much. My name is Jes Munch Hansen. I'm the CEO of Rockwool. Welcome to this conference call. I'll start my presentation on slide number three. And I'm sure you have all seen our press release, but I'll add some flavor to the various numbers here. We had a very strong growth this year. It was primarily driven by volume and took our top line up with 6% in local currencies, 7% in reported numbers. Our earnings also were in line with what we told you last time at the latest outlook. for the full year ended at 17.5% EBIT. I do want to highlight the North American performance, which is very strong, but we'll come back to that in more detail in a couple of slides. Great to notice that net profit is at the highest we have ever achieved, allowing us to declare a dividend to our shareholders of 63 Danish kroner per share, which is almost a 50% increase over last year. The strong cash flow also allows us for a new share buy program of 150 million euro for the coming periods. I move to slide number four. If I look at Q4 highlights, the weather was with us. There was much asked and discussed in the last call, but the weather turned out in our favor, and we had a normal end to the year with no major disruptions to construction activity. So in Q4, we grew 4% on the top line. 2% of these are acquired growth, so 2 percentage points of the two acquired companies we had. Hence, 2% organic growth. We saw a very good growth in the U.K. and again in the U.S. markets, which was partly offset by decline in France, Poland, and in our Russian arena. In the quarter four, we ended our EBIT at 16.7. I'll move to slide five. the full year 2024 revenue, which was up 6% in local currencies, as I said. If we look at the segments, insulation segment revenue was up 8% last year, which we are very satisfied with. One of the drivers of growth was a strong demand for our technical insulations. The system segment revenue experienced low growth, mainly due to Grodan and our ROG Phone businesses declining, while our smaller units in ROG Panel and Lapinus had positive growth. And the ROG Phone business I can add here, which is our acoustic products, was particularly affected by low activity level, investments in renovation in offices in Europe. a look at slide number six our q4 revenue is up four percent in local currencies as i said before and here the q4 revenue view you can see for the two segments insulation segment for the quarter revenue was up six percent compared to the year before and this includes acquisitions of the two companies, which 2% was added to the growth. The system segment revenue was down 3% in the quarter, particularly with ROC4 North America and ROC Panel showing positive growth trends. Then I'll move to slide number seven. And maybe two of you quickly noticed a small change on this slide. We have added North America as a now separate reporting region. And we have done this because the growth that we're encountering right now, particularly in the United States, calls for that we want to increase the transparency on this region's importance to the overall group. If I just walk us briefly through on the slide the various regions, you see Western Europe up 2%, and that was mainly driven by the acquisitions in the UK, where the UK itself and Spain performed well, and then we had some declines in our own home market, Denmark and Italy. Eastern Europe down 3 percent, and revenue decreased in the quarter level in Poland, Hungary, and particularly in the Russian arena. However, Romania remains a strong growth for us. And then you have the new reporting region, so to say. We now can see that we have 15 percent growth, also in reported figures. with a very strong performance both in Canada and the U.S. Last but not least, Asia, up 12 percent. However, four percentage points of these are the acquisition of our Vietnamese factory. So I hope you appreciate this increased granularity, and you can also then see on the slide to the right that North America now is 19 percent of our total reported sales. I move to the next slide. When I look at Q4 profitability, it improved again year over year, and we are very pleased with that, of course. We got a little bit of help, as I mentioned, from a favorable year-end weather condition. However, we performed also well operational. You can see EBITDA up 14% and EBIT up 21% year over year. It is, however, just important just to notice that we had a gain of 8 million euro on the sale of a warehouse in Baltimore in the U.S. If I move to slide number nine, where we look at profitability by business segments, our Q4 profitability in the insulation side of the business continues to perform at very healthy margins, and we did also see an improvement in our system segments margin development. I do want to highlight, though, that the variability you see in the system side, also the comparable, is driven by this impact of the sale of the warehouse in Q4 24, and the comparable in 23 had a negative impact from a ROC phone restructuring in Sweden, just to be aware of that. I move to slide number 10, which is our Q4 investment activities. Yeah, we continue to be very optimistic about the future. And hence, we continue to invest in new capacity and new technologies to meet the demand for products, of course. And I believe I said this last time, I just want to remind everyone that we, in 2024, committed to building new factories in the United States, a new factory in Sweden, and a new factory in India. And we have also probably committed to additional production lines in Romania and also new production line in the US in our Mississippi factory. We have brought land for additional factories lately in the UK and then of course the two acquisitions I mentioned a few times are part of the investment activities in Q4. We have also bought land in Washington state, of course related to this new factory in the US. Last of the big capex expenditures in Q4 is the conversion, wrapping up the conversion of our email technology in our Swiss factory in Flumrock. And you can see up on the graph the 139 million capex spent during the quarter. And also there you can see the high level of capacity expansion of 81. Importantly, when we look at cash flow on page 11, the free cash flow was impacted by this row of acquisitions and investments that were made. The two acquisitions and the land purchase in UK Birmingham are hitting the quarter there. Nonetheless, we generated a net cash possession of 281 million euro at the end of the year, which we believe is very satisfactory. Page number 12, as already mentioned, the good cash flow and our balance sheets allowed us to start a new program of 150 million euro share buyback. I should maybe have started by saying that we completed now the buyback program that we started last year. The last shares were bought in January, bringing it up to... almost these 160 that were announced, and now we're starting a new round of 150. So much for the financial numbers we've decided on this call and on next slide you will see that we would like to elaborate a little bit on our new reporting requirements here in EU and the next three slides will give you a little bit of a flavor on those parameters. As you know this is the first time that we publish an integrated annual and sustainability report I'm sure some of you have noticed that it also makes the report substantially longer. Nevertheless, we want to give you some more details looking at our sustainability performance in 2024 and also a little bit in the past. I can tell you that we are progressing very well, both on the SDG-related goals, where we have a baseline in 15, and then the science-based targets, where we have a baseline in 19. So this slide you see in front of you here, on the left are the SDG targets. As I said, that's a baseline 15. And on the right is... the science-based targets which have the different baseline year of 19. Arguably the most important one is the CO2 emission intensity, which is basically how much CO2 we emit per ton produced. And you can see up in the left corner under this SDG target that our emission intensity is ahead of target. It's a great performance, but of course also something we're committed to continuing to do throughout the period 2030. We're also on track on the other SDG-related goals. We had a little disappointment in the just completed year on the landfill side, but overall we're also on track on that. It was just a little setback for the year. I do have to unfortunately highlight an unsatisfactory element, and that is of course our safety scores, where we very unfortunately had a fatality, a contractor who passed during work in our Thailand factory, which of course is unacceptable. with any measures, and of course also impacts this report. If I move to the next slide, which is specific to design space targets, give you a little bit more flavor on that. By the way, that's a picture of the factory in Switzerland that you see there, where we have installed this new e-melter that is performing on a very high level. You can maybe recall that we in 2020 set absolute emission reduction targets. That's part of the science-based target setting. We did that in 2020. And these, I must say, remain absolutely ambitious goals for a company like Rockwell, who is a fairly energy-intensive manufacturing company. I do want to say we are well on our way, and we are almost halfway there towards these absolute targets that we have set for 2034. Very detailed, I can say it's 47% we have reached of the targets we have set for 2034. Last year, the scope one reduction was mainly driven by the conversation of this electric melter you see in the picture in Switzerland. And just as an example, when we bring in our high-end technologies there, our rapid CO2 reduction technologies, we see a reduction of CO2 of 75%, which actually accounts for around 25,000 tons of CO2. Good. And again, I will highlight that electrification of our footprint is the biggest lever that we have. And that is, of course, what we keep on working on and that we have a very specific roadmap for. We have a very specific roadmap in converting our coal-driven to low-carbon electricity. And as I said, shown here, we're making very good progress. The last slide on the sustainability side of our reporting is slide number 15. This is about the EU taxonomy alignment. I'm not sure that everyone on the call are from Europe, so just two sentences. The taxonomy, really, the EU taxonomy really covers activities that are making substantial contribution to six environmental objectives set out by the EU. And we are doing well up against these. And we are... eligible for these categories of taxonomy, because construction and energy efficiency are part of the overall taxonomy framework. If I start from the left on the slide, the alignment is highest for revenue, and that is simply because insulation contributes directly to improvement in energy efficiency. and hence to reduce energy consumption, which of course in turn reduces emission. So that's why we have the highest alignment against the taxonomy framework. The alignment in CAPEX, if you're wondering, is a little bit lower. And it is simply because it's harder to match up capex spent to the taxonomy framework, because it sometimes can be difficult to identify specific acquisitions of assets, you know, machines or other assets, to what degree they contribute directly to reduction of emissions. But overall, we're very pleased with the progress on that. It was a lot of work to put together this extensive reporting this year, but we're very pleased with not only the reporting, but more importantly, what we have delivered over the period. Good. I'll take a deep breath, and then we'll look into a sip of water. Then we look into 2025, the year that of course already has started. And again, you have seen in our press releases the key outlook dimensions that we report on. Sales at a low single-digit percentage, EBIT around 16, and investments around 450. If I can offer some flavor to it already before the questioning, I will say we expect the continuation of the market dynamics that we saw in 24, which is of course characterized by a very slow growth in European construction, if growth at all. We see modest growth and pockets of growth in North America, and then country by country some growth in Asia. Importantly to you also that after a long period of relatively stable prices in aggregate, we have initiated modest price increases for the coming period. We call it our drumbeat that we have instilled here again. And despite the political market and you can say economic uncertainties that we see in 2025, we still expect revenue growth in the low single digit percentages. And that's of course also in local currencies. Also, our four businesses under the system segments are expected to contribute positively to growth in this calendar year. When I look at the two acquisitions we made last year, the Weatherby Building Systems and our Vietnamese insulation business, these will combined contribute around one percentage points of growth to the group in 2025. Two notable developments we would like to highlight that have had significant impact on our 2024 business performance was and is that the U.S. is delivering above group average margins, and we believe that is sustainable also for the outlook into 2025. Secondly, the business in Russia improved our group margins by one percentage point in 2004 over 2023. However, we do not see that as a sustainable contribution to the group. Lastly, I would like to say that we have assumed a higher level of operating expenses for this year, and this is driven by a very specific decision to increase our resources in several areas, primarily for the planned investments in capacity and sustainability-related projects, as well as a few digital initiatives benefiting both our factories and customers. So these are basically engineers and IT and marketeers that we are hiring here. Based on these assumptions, we hence forecast the EBIT margin around 16% for 2025. And this, I should also say, includes an expected donation of 100 million Danish kroner to the foundation for the Ukrainian reconstruction. That completes my walkthrough and I'd like to open up for the questioning.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keyboard. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Efrem Ravi with Citigroup. Please go ahead.

Thank you for the opportunity to ask the question. The two questions. Firstly, can you give us a sense on the main moving parts between your margin of 17.5% in 2024 and the outlook for 16% in 2025? Specifically, how much do you see in price and how much in cost? Given the low single-digit growth in revenue, the delta would be mainly in cost. Would that be a correct thinking? And secondly, on your investment plan for $450 million, which is almost double what it was six or seven years ago, can you break that down into how much is maintenance, decarbonization, and growth? And in that growth investment, I suppose it's mostly the new factories in U.S., Sweden, India, and the new line in Romania. Thank you.

I think I'll allow myself to answer these two questions. I think the moving parts between the 2023 margin, as I heard that you were asking about, around 13%, and then up to 2025, the guidance for 15%. It is obviously a lot to do with a lowering of input cost in a period where we have been able to keep sales prices stable. That is a main driver. There is also, however, this country mix where North America plays a more important role in 2025 as they did in 2023. So those are sort of the two main explanations behind that. On the CAPEX side, and if I had to do sort of a very rough split, which we do, we are committed to spend about 100 million euro in sustainability investments annually. So that's one of the benchmarks that we have. We would have anywhere between 120 to 150 million euro maintenance, and then the remaining part will then be capacity investment. That means the bulk part of the investment next year, about half of it, will be capacity investment related.

Thank you. The next question comes from with HSBC. Please go ahead.

Hi, yes. Hi, Kim. Good morning. So, two questions from my side as well. Starting with the low single-digit local currency growth, which you sound like flat volume growth assumption in that. So, can you just tell us what the kind of... How should you look at the residential and non-residential end market there? How do you see that? Or what are the kind of the base assumptions around those end markets? And within that, if you can just give us as well the pricing, I believe you have started the discussion already with the customers. How has that journey been in the last one, one and a half months? Because at the end of Q3, you probably would have already communicated to the client. So any early breakthroughs in that, anything you can highlight there? Then I'll come to the second one if you can answer the first. Sure.

Thank you for your question. I'll start with the pricing. First of all, as I said before, we have instilled, again, a pricing drumbeat across our businesses. It is something we've practiced quite a lot the last few years, and I can tell you that I'm personally involved in this because of the importance for the group. the prices are quite nuanced from country to country and application to application but when we look at it in aggregate we see a opportunity to raise the prices one to two percent so in the early part If I should elaborate a little bit on the growth next year, again, also there you really need to segment it at least by continents, Europe, is in a very low activity level. Nobody expects a significant increase in activity level, neither in residential or in non-residential activity. Our benefit is that we are mainly in non-residential and we're mainly in renovation, and that gives us, like it did last year, an opportunity to find growth in sub-segments. In the U.S., yeah, and residential is not super important to us in Europe. And that's why you, of course, see the low housing starts. A little bit same with housing starts in U.S. Not a big drive of growth for us also there. We are mainly in commercial arena and mainly both in renovation, but also in some new start commercially.

Great. And the second one is on the margin, the 16% margin guidance. Two things here. One, what are the key risks to that margin, downside risk to that 16% margin? And the second part of the question is about you talked about system division. You're trying to kind of revive that margin again. I guess Q3 was talking about it. And Q4, we haven't seen much of an improvement. Is that something which you are kind of planning to do over 2025? And if so, what kind of magnitude of improvement should expect in system division margin?

The risk side on the margin is mainly a volume. I feel more comfortable on the pricing that we're instilling now. And then you have to consider Russia, where it's impossible for us to guess what's going on there. They have contributed historically with good numbers. So, those are the risks that we see right now. The system division, we are constantly working with, of course, actively with our portfolio of strengthening that margin profile there. But they are, as I said before, mainly in markets in Europe that are subdued right now. So, there's less opportunity for short-term gains in margin there.

Fair enough. Thank you very much. The next question comes from Alexander Kramers with Kepler Server. Please go ahead.

Hi. Yeah, two questions from my side. So, last year, you put forward a EBIT margin of 13%, ended up with 17.5%. This year, you put forward a 16% margin target. So, yeah, probably I sound like a broken record from my previous analyst here, but considering that's one of the highest margins you ever guided, I was just wondering, do we still need to see this as a conservative guidance? as it was in the past, or do you think this is a reasonable guidance? And then maybe the second question would be on gas prices. I think last time we discussed gas prices, you stated that you hedged the early part of 2025. Did this change in a way for 2025 that you are so confident from the 2025 EBIT margins? Thank you.

Thank you, Alexander. I will allow myself to answer these two questions. First of all, I think we have done a fair assessment of the outlook for the year, as we did last year, based on the assumptions that we know at hand. As you know, we are a business that doesn't have a lot of data points moving forward. Coming out of a period of 2022-2023 with the energy crisis, we were a bit hesitant to put forward a more optimistic margin. At the same time, it's no secret that we got surprised by an unexpected upturn in Russia and also the very strong performance in North America. For this year, we don't see as high a risk on neither our possibility to get the pricing in place, modest pricing in place, nor for that matter on the energy side, energy cost side. And we also know that North America has already a good start of the year, so we have less uncertainty. So I think it is a fair assessment. Whether it's conservative or not, I think the market performance will will show us. But for the time being, I think it's the best and most fair assessment we can make of the market. Returns to the gas and for that matter electricity purchases, we have done forward coverage of about 40% for the first half and a little less for the second half of the year. And as you know, we cannot buy forward our founder cook, which is still our main energy source. But here we have fixed the the purchase price for the first quarter already, and that was lower than what we saw last year. I hope that was a good answer to your questions.

Answered it perfectly. Thank you.

The next question comes from Klaus Almer with Nordea. Please go ahead.

Thank you. Also, a few questions from my side. The first is around factories and building new factories. And I know the ones you have mentioned already. But yes, you've been out in local press at least talking about a comprehensive CapEx program ahead of us. So do you have more factories in the making, so to speak? That will be the first question.

Yes, I listed the ones before, and you also heard that I told you about land that were purchased. That should give a good idea of the next five, six factories that we are building, which is quite a lot also for Rockwool to build five, six factories over a time period of six, seven years. I cannot announce more factories at this point in time, simply also for competitive reasons. But we are modeling, of course, where even additional factories should be both in North America, in Europe and in Asia. So that's something we're doing already.

So does that mean we should think in one factory per year or it takes two or three years to build a new factory? Going along, we'll have three projects ongoing all the time. And the flip side of that, I think over a longer time period, you have been investing, I think it's 11% of revenue in average. Is that the way we should think about CapEx going forward?

You're right about this assumption of the overlapping factories. So I think that's a good way to put it. And the capex numbers are probably a tick higher than what you said, probably more in the 13 to 14 ratio.

So, you know, rest of the decade, maybe even longer into the future. So that's the new normal.

That I simply don't have vision for yet.

Fair enough, fair enough. Then my second question goes to Russia. First of all, as I understood, it was a plus one percentage point to the group margin in 24, and that is expected to go away in 25. That must mean that the profitability in Russia must be really, really high in 24. That's pure math. Is that correct? Or is it rounded numbers, so maybe you shouldn't put too much into this 1%?

Yeah, what you just said, you shouldn't put too much into it. It's rounded numbers. It was satisfactory. It was not more than that. And then there was this unusual situation with inflation and a fairly stable ruble that makes it all quite unusual.

So this property you're doing in Russia, is it actually possible to get the money out of the country?

We have gotten dividends out on an ongoing basis, but it's always a big delay. So you apply for dividend payouts, and we have lately been waiting for the next round of dividend payouts. But it is a very delayed process, so you're typically one and a half years behind from application to payout.

Okay, but even with the delay, you are expecting to get the money out. So that's, of course, the most important part.

Correct. We see no change on that.

Okay, thanks. That was all from my side. Thank you so much.

The next question comes from Axel Stasse with Morgan Stanley. Please go ahead.

Hi. Thanks for taking my question. Actually, a follow-up on this Russian division. Can you give us an idea what is the sense, how much sales Russia was out of Group in 2019 versus what it is today, and then for profitability to have a better idea on the impact of the Russian business on Group in 2024? That's my first question.

No, I cannot give you that because it is so small that it's not part of our reporting structure. So... We don't report on individual countries that are that size.

Okay. Then on M&A, what is the idea going into 2025? Is your goal to get more exposure to specific end markets, such as renovation that you mentioned previously, or specific countries like North America? Or is it just to increase your wallet share? Try to understand a bit more what the goal here is for 2025 and where we are heading to. Thank you.

Yeah, but both. We constantly look, of course, for acquisition opportunities, and I think it's right to divide them up into two categories. One is capacity acquisitions like we've done in Vietnam. There's not a lot of those around because we are a pure player in Stonewall. And the other one is acquiring within... Exactly what you said, you know, more value-added products or sub-segments. So, of course, we are constantly looking for relevant acquisitions that match our strategic intent, but I don't have anything more to say for the reasons you know very well.

Okay, thank you very much. And if I can follow up on the energy prices. Is it fair to assume that 50% is still electricity going into 2025 and the remaining is 15% gas and 35% cooking coal?

As I said, the composition of our energy purchases is still that foundry cook is by far the most important power source that we have. And then comes electricity and gas. An increasing amount of electricity, though. And it is, if you take it roughly, and I know that I've given that sort of ratios before, if you take raw material and energy combined, is around half of our input cost.

Okay, thank you.

The next question comes from Peter Thested with ABG. Please go ahead.

Thank you very much. Most questions have been asked. I have actually a follow-up on Russia. I have looked at the figures historically. I mean, this is typically a sort of boom-bust market with margins jumping between minus 2% to plus 20%. And since sales are down right now, so where are we right now? And what is the risk going forward? Thank you.

Your observation is correct, but we have close to zero visibility on Russia, because we have no dialogue with the local management or no market insight. We lead it in this passive ownership form, and then you know the sanctions are in place. So I really don't have any visibility into it.

Okay. All right. Perfect. Then just one more, just to fill up my quota. When commenting on the guidance assumption, previously you stated EU, that's probably flat. U.S. modest growth and decent country growth in Asia, all in all, that suggests at least some kind of volume growth embedded in your guidance assumption. Adding to that, let's say, 2% price, you're sort of in the 4% range, and that would call out for, let's say, mid-single-digit click guidance. Isn't that more appropriate?

Yeah, then you forgot to deduct some elements, including Russia and Eastern Europe. where we see it down.

I just wanted to get... No, it's fine.

But I cannot break it down further than that. Again, Kim said before, our visibility and our data points forward only allows us at this point in time to guide on this level.

I just wanted to poke it from another side. But sort of the US off to a good start. Is that at least better than what you have put in your assumptions?

The U.S. is off to a good start, but this is baked into the assumptions.

Okay, good.

Thank you. The next question comes from Yacine Touari with On-Field Investment Research. Please go ahead.

Yes, good morning. I would have three questions. First question on strategy. So, you've been heading Rokul for nearly half a year. When you look at the business in the next five to ten years, what would you like the ideal asset portfolio of Rokul to be in the mid-term? And I think I'm asking this question because I see a lot of the insulation companies, Kingspan, Saint-Gobain, and other competitors, they are increasingly focusing on developing a system on not only selling insulation, but selling accessories such as a plasterboard, roofing membrane, to offer solutions to the clients and to the contractors. What's your view on that? I appreciate the small acquisition that you've done. Where do you see the group? In a world where the situation is challenging for your client because you've got a lot of insulation to do, you've got skilled labor shortages, and we really see a change in the competitive landscape. I'd like to understand what it means for Okul and what do you think for the midterm strategy of the group?

That's a dangerous question to ask a CEO on an earnings call, because I can talk about that for great length. But let me try to boil it down to a reasonable amount of headlines here. First of all, I think it's extremely important to say that we with Stonewall, and we are pure play in Stonewall, have fantastic growth opportunity for the foreseeable future. So we are focused on Stonewall. That is what we do. And continuing playing as a pure player also enables us to continue investing in technologies and resource sets around Stonewall. Others, as you know, can make Stonewall, but I would claim that none or few can make it as productive and as high quality as we do. So we're very focused on Stonewall. And then you're right, stone wool can both be used for insulation, but also for higher value added products, including systems. Let me get back to that. But the big drivers of growth the next few years is, and that's also our first priority, is the implementation of the European EPPD regime. The European... energy performance building directives. I almost got that wrong. that you know Brussels has passed here in May and where all countries by December this year have to come back with specific plans. We see that as a major growth driver for our business and also why we invest so much in capacity in Europe, which is still our home market, so to say. So that is a major driver and major driver for investments for the foreseeable future. Then we also see some opportunities on a global scale. I think I've highlighted the U.S. a few times to you. And there, what really is happening is that the growth is very much driven by a category shift from plastics, foam types, and glass into stone wool because of the benefits that that provides. Today, stone wool only makes around 3%. of the U.S. market, but of course the total market is very, very large. So just some small category shifts gives us significant growth. And just to complete the global outlook, we see Asia on a smaller scale, but we see countries like India where you see our investments happening right now as an interesting play for us with our products. So you will see the group become more global in nature than the very European-centric approach that we've had maybe historically. You'll see more happening in the U.S. and in Asia. And I'll try to wrap this up because this is something, of course, that occupies me a lot. But investments in technologies are the key driver for our competitiveness. We have specific programs where we envision the future factories and logistics systems in our arena. And that's where we spend our capex. We also see outside of the manufacturing footprint investment opportunities in the digital customer journey. And that speaks a lot to what you said before. It's all about productivity and being the most competitive player in this arena, both on manufacturing, logistics and go-to-market. So that was the highlights.

Thank you so much. And the second question, I'm sorry to ask again about Rocha, but I think it's a question in the mind of a lot of your shareholders. When we look at the federal tax services in Rocha, I think they're publishing the number for your subsidiaries, and it looks like Rocha might have generated an EBIT of nearly 100 million in 2023. which would mean that it would be between more than 15% of Rokul operating income. So, it might be wrong because I might have done the wrong calculation on consolidation or Russian accounting, but it would be great to at least get a sense of whether this number is, the ballpark number is accurate. I think that in the past, you mentioned that Russia was 5% to 10% of sales. Is it fair to assume that it could be more than 15% of EBIT or it's too sensitive and you cannot communicate on it?

I'm simply not willing to comment on it because what I said before.

Okay. And the second question, and the third question. which is the, I think, historically, the guidance.

I think, Jacin, we have to move on on the list, because there's quite a long list after you.

Okay. The next question comes from Christian Tournet with SEB. Please go ahead.

Yes, thank you. Two questions for me. First one on the Q4 cash flow. There is 18 million in adjustment of non-cash operating items. Is this reversal of provisions, or could you please elaborate on that number?

You cut me out. I didn't bring my detailed cash flow. I have to revert to you, Christian. I don't have the details here.

All right. It's a sizable number. So if you have reverse provisions of 18 million, that obviously makes a big difference. But let's catch up on that. Then my second question is on your U.S. business. So obviously, let's see what happens to tariffs. But can you maybe elaborate on the level of imports you're doing from Canada to the U.S. and what flexibility you have should there be enforced tariffs?

I can give you a flavor for it because we have three factories in the U.S. and two in Canada. Our exposure is manageable and baked into our outlook. We have a very granular understanding, of course, of what gets produced in Canada and what could be produced in the U.S. going forward and also what countermeasures we will instill in case of a tariff. So it is already baked into our forecast.

So when you say it's baked in, so the forecast assumes that there will be some level of tariff payments from Canadian imports?

Our countermeasures allow us, for instance, to do the obvious, which is price increases. Again, we are basically in a sold-out situation in the U.S., so there we are very firm about our ability to both navigate in subsegments, but also to raise prices. So I'm not super concerned that we cannot handle it. But now we already, I don't like speculating about what tariffs are coming when, because unless you know something, I don't know. We simply don't know what is coming, but we're prepared.

I'm not sure anyone knows. Thank you so much.

The next question comes from Arnaud Lehman with Bank of America. Please go ahead.

Thank you very much, gentlemen. My first question is about Western Europe. I think you're guiding to, let's say, relatively stable trends in the region going forward. Can you give us a bit of color on the different geographies within Western Europe? Are you seeing some improvements in some countries and maybe incremental deterioration in some others?

Yeah. The countries that are doing well, if I may just stay with them for a moment, because you're right, in general, it's flat. But the countries we see quite a few activities in and also an uplift is UK and Spain. And the UK is also driven by the renovation, but also we can see the first increasing interest, I would say, around non-combustible insulation material. I'm sure you know about the Grenfell incident. And more and more of these medium-sized, I think we call them low-rise buildings, need to be renovated. So, UK is definitely a growth area. Spain also doing very well. And then last but not least is to take, I know you asked for West Europe, but just to throw in another European country, Romania, we truly see some growth in.

So you're implying that places like France or Germany or the Nordics are still soft?

They are flattish. They are.

Okay, thank you. And my second question, I mean, it's not about Russia, it's about Ukraine. There are talks about, you know, potential ceasefire, peace agreement, and eventually some reconstruction effort. Do you see Rokhul having a chance of taking part to a future reconstruction effort? You've made some donations to Ukraine over the last few years. You were also at one point, I think, on a sort of list in Ukraine. So what's your position on Ukraine reconstruction, please?

Yeah, but first of all, I, like you, hope for peace soon. I think we can contribute greatly in many aspects, mainly, of course, on the reconstruction side of residential and non-residential buildings. And we can serve that in the short term from factories we have nearby. That means mainly from Romania, which is a good driving distance, and two significant-sized factories in Poland. And then we're in really good dialogue with Ukrainian authorities, also for the little bit more long run. But there, of course, we need to see a completely different change in the security situation.

Thank you very much. The next question comes from Zain Bikara with JP Morgan. Please go ahead.

Thanks for taking my questions. Just to come back on hedging, I understand less so in H2. So kind of what assumption is baked in your guidance for those key energy inputs in the second part of the year?

Yeah, but we normally do, we tend to go in and look at the forward rates that is available now. So that's kind of a guidance that you can use.

Sure, thanks. And maybe just to come back on the previous question on the potential Ukraine rebuild, do you see any risk to benefiting from that rebuild, given some of your assets in Russia have been screened less positively? I think there were some negative headlines in 23 with the Danish authority.

No, I don't see that. I don't. Okay. Thanks for taking my questions.

The next question comes from Marcus Cole with UBS. Please go ahead.

Hi. Thanks for taking my questions. Most of them have already been asked. But in terms of the first one, can you call out any geographies where you see any pricing risk? I think you called out Eastern Europe on the Q3 call with some technical insulation, price deflation. And then in terms of the shift to more electricity-powered plants, can you talk about the cost differential between electricity and the foundry coal-powered plants? Thanks.

Let me start with the last one, so don't forget it. It's fairly cost-neutral on the VPCs when we electrify it. And that's also why I highlight it as one of our strengths going long term, that we have these technologies. On the pricing side, I mean, first of all, it is modest price increases that we're coming with. It's more normalized pricing. And I don't see any, I mean, of course, there's differentiated, but then now I'm really down on country by country level and application by application level. And it's not something I can talk into. But we have become really, really good at adjusting our prices on a tactical level, so really meaning application by country. But that is really a granular level I don't want to walk into. But no, they're not very concerned at all.

The next question comes from Pucciarini Ghosh with Bernstein. Please go ahead.

Hi, good morning and thank you for taking my questions. I have one broader question on your capital allocation. So we've seen that you've always been heavily investing in organic capex and also returning a lot of cash to shareholders with dividends and buybacks. But recently, we saw a slight uptick in your M&A activity. So how should we think of inorganic CapEx going forward? And, I mean, if at all you have, you know, an M&A pipeline that you're looking at, could you share some more details on that? And my second question is on the price cost. So if we look at your operating costs, 23 and 24. And you've been saying that for 24, the price impact was relatively flat. This year, you're increasing prices again by around 2%. So how sustainable do you think this is? I mean, at some point, don't you have to pass on the cost decrease to customers?

I would answer both of them. To your first point, I think I elaborated on that before, that there are sometimes opportunities to make acquisitions. However, Rockwool is a company that is mainly organic-oriented. That's also why you see our many factory openings and investments in infrastructure, whether or not it's production, logistics or go-to-market. So the non-organic acquisitions are fewer and far between. The drumbeat price increases, I see in the markets fairly, you know, the prices are sticking and we can hold the prices. And that's also why we guided like we did on the 16 percent. We see that that is firm. And what happens in two and three years from now, I don't want to speculate in, but I think it's healthy to have a drumbeat price consideration every single year. It's harder for me to get closer than that.

Okay, okay, thank you.

The last question comes from Pierre Rousseau with Barclays. Please go ahead.

Hello, thanks for taking my question. I'll be quick. You mentioned in the past some contribution from productivity, and you've reasserted the need to remain the most competitive in stonewall production. Could you give us some clarity on the kind of contribution it had in 2024, and if the productivity improvement plan that you have should deliver further benefits going forward? That would be question one.

In general, we have a 5% productivity target that we set ourselves every year. So that's the closest I can get to that. And again, it is driven by constant investments in technologies and, of course, process improvement. And these days, of course, also digitalization. But 5% is our, you can say, frame we work around.

Understood. Thank you. And just a quick follow-up on the organic growth plan with all the capacity coming online in the coming years. What's the rule of thumb for revenue potential? Can we use one for one? Any comment on this would be useful. Thank you.

Thank you. I will try to give you a little bit of rough numbers. I mean, one very large factory saying 100,000 tons would give you anywhere between, depending on the location, between 140 to 160 million euro equivalent in revenue potential.

Okay, and maybe a very quick follow-up on the situation in France. Do you have news and hopes that you could finally start building that factory?

Yesterday we learned that the French Supreme Court has accepted our case for their consideration, which of course gives us hope that we are on the right on that.

Perfect. All clear. Thank you very much.

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Yes, and I thank you for your participation today in our earning calls and also for the many questions. That said, I know that there was a list still of people on the question list, but as always, you're welcome to call the excellent investor relationship service we have. After this call, I will rush up to my office and be ready for your call. And please be informed also, on March the 6th, we will have our ESG investor call dedicated to the Rockwell Sustainability Statement of 2024, where Mirela Vitale will be the host for the call together with myself. With that, I bid you a very good day. Thank you.