Rockwool A/S

Hello to everyone. And with a little bit of suspense, I welcome you to Rockwell AS's conference call regarding the result for the full year and fourth quarter of 2025. My name is Kim Jung Andersen. I'm the CFO of Rockwell AS. Today I'm pleased to present CEO Jes Munch Hansen. For the first part of this call, all participants will be in a listening-only mode. As a reminder, this conference call is being recorded. First, YES will go through the presentation and give an update on the results for the full year and fourth quarter of 2025. Afterwards, we will be ready to answer all your questions. Before I hand over the word to YES, I must ask you to notice slide number 2, which is a forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is slide number 3.

Yes, I now hand over the word to you. Thank you Kim and good morning to everyone. I start on slide number three. Overall we consider the full year result to be positive and the full year revenue increased by 1.1% in local currencies, slightly above expectations due to a good finish to the year. Acquisitions made back in October 24 accounted for 1.2% of growth. The group revenue grew around 3%, 2.7% to be exact, excluding the Russian business. As you all are aware of, on January 13 this year, Russian authorities installed external administration on our four factories in the country, thereby taking control of the business there. Consequently, the value of the net assets and liabilities related to the Russian subsidiaries of 392 million euro was written down to zero in 2025. For more information about the financial performance of the Russian subsidiaries, please refer to note 1.5 in the annual report. Moreover, at the end of this presentation we have prepared an extra slide with the numbers to help you establish full transparency on this event, and we will walk through that at the end of the presentation. The EBIT margin before the Russian value adjustment ended at 14.7%, down 2.8 percentage points. Of that amount, the Russian performance accounted for around 1 percentage points, and additionally, one-offs including two factory closures and the Flomrock incident also contributed to the margin decline with about 0.6 percentage points. We maintained good pricing discipline and benefited from stable input cost. On the other side we invested heavily in several areas including capacity expansion, decarbonization and digitalization. Overall we find this a good result given the very challenging market conditions in 2025. Further, on slide 4, group revenue, excluding Russia, increased 2%, mainly driven by North America, South Europe, and our OEM business and ROCFO. We are pleased to inform that production is again up and running at the Flomrock factory in Switzerland, and I can confirm that the incident was not related to fundamental e-militar design or proprietary technologies. The production incident did, however, affect overall revenue growth in Switzerland. The Q4 EBIT margin ended at 11.8%, excluding the Russian value adjustment. The Q4 EBIT margin was negatively affected by the Flomrock incident with around €4 million, and the decision to close the oldest of our two factories in China with around 15 million in impact. Slide 5 that talks to the full year revenue. Total revenue in 2025 excluding acquisitions was broadly in line with 2024 in local currencies. As noted on the previous slide, excluding Russia, revenue grew 3% in local currencies. Price increases accounted for about half of the growth. And then to a change in our segment split. Before we move on and talk about the segment performance, it's important to note that we have changed our segment reporting. ROC4 North America is now managed under the North American insulation business, and this Lepinus has been allocated to another insulation business, namely our OEM. The changes reflect market structures as Insulation and ROC4 North America share overlapping customers and channels. And in practice, Lapinus operated as an OEM business and therefore now is consolidated into our OEM business within Insulation, also called Core Solutions. As a result, around 140 million euros of revenue has been reclassified from system segment to installation segment. All quarterly figures have been restated accordingly and can be found in our annual report. Installation segment grew 3.4% in local currencies, excluding Russia. There was solid revenue growth in North America, as well as in Eastern and Southern Europe. This was offset by low single-digit decline in our main markets, namely France and Germany. The system division delivered a fairly stable top line in 2025, despite a challenging market. And ROC Panel delivered a solid growth, where ROC Phone Europe and Asia remained stable. while our Cordain business declined mainly due to a weaker cannabis market in North America. And I'm just looking at the technicians to make sure that everything is good. Yeah, thank you. Slide number six. Group revenue increased two percentage in the quarter, excluding Russia. Insulation revenue grew 2.1% in local currencies, excluding Russia, and growth was driven by the insulation business in North America, our OEM business in particular. Revenue decrease in the UK and Switzerland due to the Flomrock incident pulled the numbers down. In the system segment, the year ended on a positive note, with revenue growth of 1% and a good commercial momentum going into 2026. ROG Phone Europe Asia and ROG Panel performed well, while revenue in the Godin declined. Let's take a look at our regions for the quarter. In Western Europe, revenue declined with 0.5%. The good growth in Southern Europe was offset by market-driven decline in the UK and the production stoppage as mentioned in Switzerland. In the United States, we continued with good growth in Q4, while the Canadian sales improved after having some difficult quarters. In Eastern Europe, revenue grew 4%, excluding Russia, with solid growth in Poland, Hungary and Romania. In Asia, revenue declined 5%. Sales in China, Thailand and Malaysia decreased, while Japan and our important Indian market continued to grow, despite the Indian factories being in a sold-out situation. A few comments on our profitability in Q4 on slide 8. The margin of the quarter were impacted by several large developments. First of all, the China factory closure and the Flomarok incident had two percentage points of negative impact, while the lower performance in Russia had a negative impact of around one percentage point on our EBIT margin in the quarter. Regarding China, due to the dramatic industry overcapacity and a systematic or systemic unattractive construction market, we decided in December to close the oldest of our two factories in China, as part of optimizing our footprint. In addition, the factory was coke-fueled and facing sustainability investments that were not economically viable in the current Chinese market. The closure resulted in a restructuring provision and impairment of the assets of €15 million. The Flammarok incident caused a lengthy production stop. While stopped products in the Swiss markets were sourced from other Rockwell factories, although with reduced profitability. The incidence has in total cost a loss of around 19 million euro, of which 15 million euro has already been covered by insurance in 2025. The continuous slowdown in Russia also had a significant impact, which was partly offset by continued deflation on raw materials and moderate tactical sales price increases. Let's look at the profitability by business segment for the quarter. Looking at profitability by segment, EBIT margins in insulation was down 5 percentage points compared to last year, impacted by the closures as just mentioned in China, the Flomrock production incident and a slowdown in Russia. In addition, it should be noted that the comparison numbers from last year include the 8 million gain from the sale of the Baltimore warehouse back in Q4 2024. In the system segments, EBIT margin decreased 2 percentage points, mainly due to lower sales to the cannabis market in North America. higher depreciation following recent capacity investments and limited ability to pass on prices in an increasingly competitive environment. A quick look at our investments for the quarter, where our biggest investments in Q4 related to the construction of new factories in the United States and India, as well as the second production line in Romania. and of course our expansion of our technical insulation production line in Marshall in the US. The sustainability investments mainly related to the conversion to electric melting technology for two production lines, one in the Netherlands and one in France. Moving to cash flow on page 11 for the quarter, The net debt position landed at 168 million euro, mainly due to loss of cash in Russia of 243 million euro. Free cash flow decreased 13 million euro compared to the same quarter last year, mainly due to lower earnings, less favorable working capital development and higher investments. The negative development in working capital was mainly due to planned stock building, as well as timing differences in other receivable related to VAT and pre-payments. And this time we have added a few more talking points to our sustainability in connection with, of course, wrapping up the 2025 achievements. So slide number 12. Starting with our most important, which is safety, which remains our top priority at Rockwell, with, of course, having an aim of zero fatalities and zero serious accidents. However, during 2025, two fatalities were reported from our Russian business, a place where we, of course, have no insights on exactly what has happened and have had no chance to follow up on these incidences. In addition, in the group, we have had five serious incidences. Nevertheless, we still have improved overall lost time incident rate, though we clearly still have more work to be done on our safety performance. Another sustainability measures we are progressing very well, both on the SDG-related goals with baseline year 2015, and you see that here in the left column. and the science-based target-related Scope 1 and 2 with 2019 as a baseline year. And you see that here in the column on the right. The most important thing today is to highlight on the SDG side is our Scope 1 and 2 CO2 emission intensity goals. That is emission per ton produced. You see them on the top of the left of the slide. We set our original goals back in 2016 with a target year of 2030. And we have actually, in fact, met the original goal way ahead of schedule in 2024. And that's why we now have raised our ambition levels. What you see on the slide is hence the new goal. to reduce our CO2 emission per ton of stone wool, also called intensity, produced by 50% in 2034. We'll come back to that on the next slide. We are on track with the remaining SDG-related goals, though we did in fact use more water in 2025. due to using less recycled and less reused water, as well as increased cleaning and maintenance activities. And now to the SBTI side, the science-based target side. To the right you see on the slide, we also updated in 2025 our scope and methodology of how to measure scope-free emissions. As a result of this more refined approach, we now report an increase in scope 3 emissions, though the 2034 targets remain the same. And importantly, we are confident that we will meet that target. Then we have an extra slide on decarbonization and our commitments and ratings on slide 13. Just to elaborate a little further on our sustainability performance last year, let me highlight a few specific developments and then also talk about why this is important to us. On the decarbonization front, I spoke on the previous slide about having achieved the original emission intensity reduction goal ahead of schedule, and thus having set an even higher goal. On other development, group management's short-term incentives are now also linked directly to the decarbonization progress. And there's more on the strong commitment front. We also increase our ambition level on the absolute emission reduction target. And we're now committing to aligning with the stricter 1.5 degree emission reduction pathway from the previous well below 2 degree pathway. We have submitted the updated plan for the science-based target validation during this year, and just to remind, the well below 2 degrees reduction plan was also validated by SBTI. Further, we will also submit a net zero by 2050 commitment for SBTI validation for the first time, and this will also happen this year. A little bit about ratings. and we come to hear our improved ratings and we're very pleased to have achieved an A- rating from CDP on both areas where we report and this is climate change and water security. This rating improvement reflects both stronger operational performance as well as transparency and better transparency in our reporting. So all in all, we're very pleased to get this additional recognition for our efforts. And just to sum it up, we continue to making substantial sustainability investments, both because it's good for the climate and importantly because it is being very good for our business. Investing in electrification, in new binders and other efficiencies makes us stronger and more competitive in the market. And very critically, there's a direct correlation between our decarbonization efforts and better environmental performance declarations on our products, the so-called EPDs. So yes, it's very much about competitiveness and about business value as it is about doing the right thing for the climate. And this is why our sustainability investments remain a very high priority for us. That was for 2025 and a little bit already on 26 on sustainability, but let's look at the outlook for 26 on page number 15. And just to state the obvious, this outlook is excluding the Russian business. In 2026, we see a slight positive outlook, but with regional differences. Construction activity in Europe is still expected to be relatively low and we expect to see continued pressures in parts of Eastern Europe and Canada. On the other hand, the United States continues to offer solid long-term growth potentials and we see selective opportunities driven by EU renovation and demand for non-combustible insulation. Across the business, markets are generally stable to flat with pockets of growth and we expect prices increases in line with inflation to support ongoing investments in capacity, sustainability and market expansion. With this in mind and recognizing that it is still early in the construction season, we look out for 2026 revenue to be between 2-4% growth in local currencies compared to 2025 revenue of €3,616,000,000, excluding Russia. Excluding Russia-related matters, the Group EBIT margin for 2025 was 14%, with most businesses performing well despite the challenging conditions. In 2026, we expect sales prices to balance input cost and inflation, while increasing spending on capacity expansion, electrification and sales and marketing that will raise the cost base, resulting in an expected EBIT margin between 13 and 14%. Lastly, our investment levels, major 2026 investments will include capacity expansion in India, Romania and the United States. These are ongoing projects. Then also acquisition of land for further manufacturing sites. And importantly, the restart of the French factory project following clarification of the building license. We are also pursuing large fracture conversions to electric melting and expect sustainability investments to remain relatively high. In total, investments are expected to be around €650 million in 2026, excluding acquisitions. This concludes the normal set of slides, and then we have prepared one extra slide, two actually, that Kim will make a few comments on, in order to help you with transparency on the Russian situation.

Yeah, thank you very much, yes. And if I go to slide number 16, which is sort of the traditional slide with quarterly results, and full year results you can see that we have for your benefit added in a line with EBIT before value adjustments of the Russian business and if you go to slide number 17 we have prepared what we will consider as a fair comparison For 26, the 2025 numbers excluding Russian-related matters. What does that mean? That means we have taken the 2025 result and excluded the financial performance of our subsidiaries in Russia, and the donations for the Ukraine Reconstruction Fund and the reversal of that liability we had in the parent company. So I hope you will find this useful in your analysis of both 2025 and 2026. Thank you very much. We are now ready to start questions, and please try to contain yourself with two questions at a time, and then we'll see how many we can manage to squeeze in in this half an hour. Thank you.