Rockwool A/S

Good day to everyone. Welcome to Rockwool's AS conference call regarding the results for the first nine months of 2025. 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 listening 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 first nine months and third quarter of 2025. Afterward, we'll be ready to answer all your questions. 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 now hand over the word to you.

Good morning, everyone. And I start on slide number three. As you all know, the construction industry is still challenged in the macro context, owing to uncertainty, geopolitical turmoil and continued hesitations in the market. We don't expect this to change in the near term. Revenue in the first nine months increased 1% in local currencies. Acquisitions we made in October 24 contributed with a 2% increase in local currencies. So excluding acquisitions, group revenue decreased slightly. Pricing had a 1% impact in the first nine months. An impact from inflation was thus offset, but the sales price increases. The EBIT margin declined 2.1 percentage points. Overall, we think the result is acceptable given the very difficult market circumstances. Next slide is our Q3 highlights. Revenue in Q3 increased 2% in local currencies. Excluding acquisitions, group revenue growth was flat. In Q3, sales and earnings were negatively affected by a short-term sales decrease in the UK, where large flat roof projects were cancelled or postponed. In addition, A longer than planned production stop reduced available capacity in the UK market. At the beginning of Q4, UK sales were back to normal levels. In Canada, which has been hard hit by the tariff situation, the construction market is in a challenging period. Here we don't foresee any quick recovery. On the EBIT margin, the Q3 result was affected by three main factors. the lower performance in the important and profitable UK market, reduced efficiency in several factors as well as a decline in operating cost leverage, and last but not least, a continued decline in the Russian business. All in all, and in short, it was a challenging environment in Q3, but I believe we navigated it well. I will jump slide 5 and go directly to Q3 revenue. So slide 6. The continued decrease in Russia had a negative impact of 2 percentage points in Q3. Excluding Russia and acquisitions, the group revenue increased 2 percentage points in the quarter, hence 2% organic growth ex-Russia. On the insulation segment, revenue increased 3% in local currency, with strong sales performance notably in Poland, in Romania, in Spain, in Italy, and importantly also in France. Excluding Russia, the insulation segment revenue increased 5%. Just to repeat, acquisitions contributed with a 2% revenue growth. In the system segment, the 1% revenue decrease in the quarter was driven primarily by challenges in the GrowDan business. Slide 7, where we'll talk about our regional revenue for the quarter. In Western Europe, there was a double-digit growth in Italy, a double-digit growth in Spain in the quarter. On the negative side, Germany declined as did UK, as I just noted on the previous slide. In France, importantly, the revenue is back to a growth, a slight growth, but a growth after several quarters with declines. And in Eastern Europe, many countries are back to real growth, including Poland and Romania. Russia continues with double-digit revenue decrease. Year-to-date Q3, Russia accounted for around 7% of the total group revenue in reported figures. In the United States, we are also back to good growth, while, as I said before, the Canadian market is facing headwinds from the trade tensions ongoing. In Asia, revenue excluding the 24 acquisition increased slightly. However, sales in China decreased double-digit. Slide number 8. A few comments to our Q3 profitability. In short, EBITDA is down 11% from 241 million euro to 215 million euro. This results in a 2.9 percentage point lower EBITDA margin due to unfavorable country and product mix. Reduced efficiency in several factories as well as a decline in operating cost leverage also contributed to the lower EBITDA margin. The longer than planned shutdown of our factory in Wales and the slowdown in the market had a 5 million euro impact in the quarter compared to the previous forecast. And the lower sales in Canada obviously also reduced earnings. The continued decrease in Russia had around 1 percentage point impact on the group EBIT margin. So EBIT margins are at 15.5%, down 2.6 percentage points. Considering the global situation, again, we believe these results are acceptable, although from a very mixed performance in very different market situations. Slide number 9. a little bit about the profitability by business segments. We'll talk about the insulation segment first. Looking at profitability here, EBIT margin in the insulation segment was down 2.2 percentage points compared to last year. In the system segment, EBIT margin decreased 1 percentage point from lower earnings in Grodin. And the Grodin business is challenged by lower volumes in the medical cannabis market and an unfavorable product mix coming from the lower margin vegetable business. Slide number 10 on our investment activities and just in short our biggest investments in Q3 related to the electrification of production lines in the Netherlands and in France and what we previously have talked about the capacity expansion in Romania as well as the large factory project in the United States. A few comments to our cash flow on slide 11. On net cash position we landed at 100 million euro, of which 230 million euro was restricted cash in Russia. Net book value of the investment in the Russian business as per the third quarter was 425 million euro. Free cash flow decreased 92 million euro compared to the same quarter last year, mainly from the lower earnings, a less favorable working capital development and higher investments. The negative development in working capital was mainly due to softer demand and therefore higher inventory, including in UK and Russia, as well as in Germany and Canada. Now let's turn our attention to outlook for the remaining of the year. Slide number 13. Q4 started as expected with a small sales growth in October and so based on that and on the performance in the first nine months of 25 we maintain our full year revenue outlook that will be at level with last year in local currencies. The production-related incident in the factory in Flums, Switzerland in October will have a reported impact on EBIT of around 15 million euro in quarter four. And as we see it now, we expect production to be up and running again in the beginning of the first quarter, which is important to us because we need to be ready for the important spring season. In the UK, Pipeline and quoting activities now suggest that we will be back on track from the start of 2026. In Canada, however, we anticipate that both the insulation and groudon businesses will continue to be challenged. As previously announced, we forecast an EBIT margin between 14 and 15 due to the incidents in Flumrock and the softness, especially in Canada and Russia. Our large investment projects are on track and the investment level around €450 million excluding acquisitions for the year is maintained. We believe in the long-term demand for our products and we remain optimistic about the future. In Europe we continue to work at the member state level on implementation of the energy performance of buildings directive I must also note that so far we have only seen limited impact on sales from the renovation wave and also don't expect much from it in the near term. We will continue investing in capacity build-up, marketing, public affairs and digitalization, supporting the anticipated growth during the energy efficiency agenda in Europe and our expansion in the United States. These were my introduction comments. And we will now go into the Q&A session.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on 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 then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Christine Torno with SED. Please go ahead.