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.

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 are using a speakerphone, please pick up the 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 at this time. We will pause momentarily to assemble our roster. Please note, please restrict to two questions per participant. We take the first question from the line of Ben Radamartin from Goldman Sachs. Please go ahead.

Hi, good morning, Yez and Kim. Thanks for the questions today. I just had two, please. My first is on the 2026 margins. You highlighted, I guess, some of the investments you're making on the cost side this year, speaking about new capacity, electrification, sales and marketing. What kind of investment would that drive in terms of basis points in your margin this year? I'm just interested in, I guess, bridging the gap between the 14% margin you did ex-Russia and donations in 2025 and the 13% to 14% you're guiding this year with a reasonable backdrop in terms of organic growth And then the second one would just be on the CAPEX envelope for this year as well. You mentioned that a portion of it will be tied to new land acquisitions. Can you maybe talk about the regions that you're interested in looking at and any geographies in particular that you have kind of earmarked for future factories? Thank you.

To the first, it's a plethora of activities that drive extra cost. But mainly it is additional engineers for our many factory builds and conversions, and that drives the cost in the start. But in addition to that, we're also spending significant resource on digitalization of the company, which is very much around our operations. productivity measures. We have a whole program called Factor of the Future that requires more digitalization. And then last but not least, very important efforts in sales and marketing, also very much driven about modern sales tools. So those are the big categories. I can't give you the, I won't give you the exact numbers. When it comes to additional capacity expansion, as you know, we already have announced seven factories right now, five in Europe, one in India and one in North America. The next areas we are looking at is additional capacity in India. where I mentioned before we are in a sold-out situation, and we are looking also for the next factory in the US, simply from the perspective that there's so much market to convert from competing insulation products to Stonewall.

Great, thank you. Thank you. We take the next question from the line of Anders Christian Pritzman from Danske Bank. Please go ahead.

Yes, hello. Yes, and Kim, and thank you for taking my questions as well. Just going back to the CapEx here, I mean, you previously communicated that CapEx going forward would be in the range of around 13% to 14% of sales. But with your new guidance on $650 million for 26%, That's quite above that range, even including the Russian business. So is this level of capex representative for the rate going forward into 27 as well, or should we expect then a lower or even more elevated capex level for 2027? That's my first question. My second question is, in addition to the elevated capex level, can you please share some thoughts on your capital distribution policy Would you perhaps consider adjusting your capital structure to allow for, say, a new share buyback program, or are you content right now with the current payout levels? Thank you very much.

Yeah, thank you very much, Anders. On the CapEx, it's true that the original guidance was a higher CapEx rate of net sales. That, of course, was at a time when we also had the robust business insight. I think it's fair to say that with the programs that we have started up now, this will also carry forward into the years beyond. As you know, we are opening up the first of the seven factories that we have lined up here in 26. That's the one in India that has the least capex cost. the next one is in Romania in 2027 and followed by both the TI installation and the US factory in 2028 and the ones we are talking about is coming after that so there will be sort of a continued long-term plan of investments we have not yet guided on CapEx levels after 2026, but it will be at a higher level than in the past. capital distributional structure there is no plans. We will continue to adhere to our dividend policies of paying at least one third of net profit and I know the board will use the share buyback as an ad hoc tool to channel excess cash back to shareholders when you can say they feel the time is right for this.

All right. Thank you very much.

Thank you. The next question comes from the line of Anna Schumacher from BNP Paribas. Please go ahead.

Hi, everyone, and thank you for taking my question. Again, I have a couple on this topic. So could you provide a bit more of a specific breakdown of the $615 million investment? For example, how is it split between growth, maintenance, and decarbonization, and which one is driving the large step up? Secondly, as a link, the EU this week suggested that the EU quote loosen the regulation surrounding EPS and slow down the reduction in free allowances. How could this change of regulation impact you? and would it make you reconsider the paid install size of your deprogrammation investments in the coming years?

Anna, we had a little bit of a hard time hearing you acoustically. I think we got the first question. Do you mind repeating the second one?

Yeah, sorry. So the second question was that there's been some news this week suggesting that the EU could loosen some regulations surrounding ETS. and possibly slow the reduction in free allowances. How would this change in regulation impact you, and would it make you reconsider the cadence or size of your decarbonisation investments in the coming years?

Let me try to give you an answer on this one here. On the breakup of the capex amount of 650, most of the increase will be in what we call capacity investments, given the many new build days. We have continued investment in sustainability and we will invest at least 100 million Euro in that annually for quite a number of years and then we have our normal maintenance level. But most of the increase will be capacity related. On ETS scheme, as you know, we have allowances on our balance sheet that can cover us for some years We are following this closely and I think it makes good sense for EU to try to extend some of these periods because there are so many constraints in converting. I think our conversion is not so much driven by this ETS scheme rather than it's driven by other good business reasons and our sustainability commitments. Thank you.

That's great. Thank you.

Thank you. We take the next question from the line of Chase Coughlin from Lanchcote Kepin. Please go ahead.

Yep. Hi. Good morning, everyone. Just a question regarding the electric furnaces. You mentioned that, of course, there's a business element here and it can make your products more competitive, but just from an economic standpoint and a margin standpoint, could you give any more details around Yeah, the comparison in OPEX costs between the natural gas furnace and electric furnace in terms of energy, or is there a difference in labor standpoint? Just for sort of my understanding.

Yeah, but there's several elements to it. But the installations we've done so far are in themselves good business cases and competitive from a manufacturing perspective from that. I missed your question about the labor. There's not a big labor difference between the different technologies to be noted. If you thought there was a different structure on that. So I would say they are very competitive and we also of course select conversions where we see that it makes sense from a financial perspective. It does influence our decision which factory we convert first. if we have access to the grid, what the infrastructure costs are to get access to the grid and of course also keep an eye on the electricity prices in the area. And then there is the other one which is the most important is that the demand for products with low footprints are definitely accelerating. So this is a competitiveness issue from a product standard point of view, the so-called EPDs, environmental performance declarations. And this is what is important to us, that we are competitive with the most premier product, not only in the usual qualities, but also on the environmental footprint side.

Okay, that's very helpful. And then my second question, regarding obviously the big step up in CapEx and now you sort of lost control of the relatively high cash-generating Russian business, how do you view sort of your debt profile at the moment? How much can you draw down, let's say, and you still feel comfortable with within the one-times covenant, especially given you have this large expected cash-out associated with CapEx this year?

Yes, we are still quite confident that there is no plans to do that, to keep within that leverage of one times EBITDA, and that's still the plan. As you know, we are, even outside of the Russian business, we are quite rich in cash generation, and the plans that we have allow us to keep within that coverage.

Okay, perfect, thank you, gentlemen.

Thank you. The next question comes from the line of Alexander Kremes from Kepler Chevro. Please go ahead. Good morning, thank you for the presentation and taking my questions. So on the 2026 outlook, I just wanna come back on that comment on the increasing sales and marketing as a percentage of sales in 2026. I'm just wondering like why, In a year where we expect volume growth, why don't you expect some operating leverage? Second question would be on, you mentioned in the annual report that you see increased competition for rock panel. I'm just wondering whether this is increased competition coming from pier-based cores or stonewall cores, if you could just highlight that. And then the third question is just to double-check something. The Russian activity was 100% insulation activity, correct? So those are the three questions. Thank you for taking that.

I think that was three questions. I just started thinking of writing down while you were talking. Sorry. So I might return to your third question. So operating leverage... Yes, I mean the growth is still moderate out there and a lot of our investments, as you know, are longer term. It takes us four to five years to build a factory, so you do encounter not only capex but also cost before you have a factory not just up and running but at a capacity that contributes positively. It takes more than that to create operating leverage in the short run. But we are, as you know, both investing in capacity and in sales capabilities and digitalization, as I mentioned before. But it is all about having higher productivity and competitiveness. The rock panel question. Sorry, a little bit hard to hear. Did you ask about which specific competitors we encounter or Not totally sure.

Yeah, where are you seeing the increased competition from? Is it from peer-based, is it Stonewall cores or something else?

The increased competition we're seeing is not so much on the panel side actually, even though there are new entrances, for instance in Europe, it is more on the ROC phone side of the systems business where there's been increased competitiveness. Not so many offices being renovated as we would like to see, and that of course just increases the pressure in the market. Notable also, Knauf has opened a factory, and they are of course also trying to gain some share in this market.

Okay, thank you. And then the last one was just to confirm something, that the Russian activity was 100% insulation segment, correct?

Yes, that was only insulation, yes.

Thank you. Thank you. The next question comes from the line of from JP Morgan. Please go ahead.

Good morning. Thanks for taking my questions. The first one is just on the margin guide of 13 to 14. Can you just sort of depict what gets us to the top end versus the bottom? And then secondly, in the U.S., where demand is going to exceed capacity, What do you think that means for pricing in the region? Could this be above the drumbeat 1% to 3% and actually more high single digit? And actually, if I can sneak one more in, it's just on the hedging actions you've taken for 2026 on the energy front. Thank you.

It's super early in the year to become more precise on the margins, so I won't do that. US pricing. We have plans for how to handle the situations where we could be in a sold-out situation. We have capacity available in other places that we can supply into the market and that we will do tactically also just to keep momentum and serve our customers. How the pricing exactly looks going forward I don't know yet, but of course you can just study the price points in the US building materials industry in general are very robust and has also been a market that has been, let me call it, more rational about price increases than, for instance, the Europe market that is more fragmented and sporadic in its pricing. That's as close as I can get to it.

And on the energy hedging for 2026, I can inform you that we have covered About 75% of the gas and electricity for the first two quarters and 50% for the third quarter. And then, as you know, we have this quarterly price setting for foundry coke. That means we have fixed the prices for quarter one.

Sorry, can I confirm, that was 75% for Q1, Q2?

Yes.

Thank you.

Thank you. We take the next question from the line of Pujarini Ghosh from Bernstein. Please go ahead.

Hi. Thanks for taking my question. So my first question is a little bit looking into the P&L of Russia. So previously you had announced around 78 million for 2025. And in today's presentation, thanks for the details, we see that your group net income was 47 million for 2025, and excluding Russia, it's 357. So on the net income line, the delta seems to be around 81 million. So please could you explain a little bit on why the impact on the net income line could be more than the EBIT? I mean, maybe we're missing something here. So that's the first question. And the second question is on your pricing increase. So you just announced or highlighted that, you know, for 2026, you expect pricing to be in line with inflation. So how does that compare to the 1% to 3% drumbeat pricing increase that you normally would adhere to? Thanks.

Yeah, I'll take the first one. The 78 million is the EBIT for the full year. And as you know, in Russia we had quite a large amount of cash sitting there on the banks, and there's quite a high interest rate that you earn on that cash. So that's the reason for that the delta on the net income is higher.

And on the pricing? Sorry. On the pricing side, I think it fits quite well with our usual drumbeat to cover inflation with the price increases in the range of 1 to 3. Price increases, however, are very different from market to market. What we're talking about here is an average for the world. It varies greatly and we are sophisticated enough to handle pricing, of course, also by market and competitive situation.

Right. Thank you. Could you explain a bit more, like, which markets could potentially see higher pricing?

No, we don't give that kind of data points.

Okay. Thank you.

Thank you. We take the next question from the line of Christian Tourneau from SEB. Please go ahead.

Yes, thank you. Two questions from my side. First one on the CAPEX, I appreciate this fit into the three focus, sustainability, maintenance, and capacity. Could you talk a bit about your return requirements for these three kinds of investments? I mean, what return on invested capital are you assuming for the three various kinds of investments? And then my second question is on the the guidance you can say on this deliberate choice to increase your cut space to capture the potential of uh renovation activity in in europe so i'm just curious on on your visibility on this pickup in demand uh it has anything changed do you think you have better this is now than you had 12 months ago if you could just uh expand a bit on that one so thank you

Yeah, thank you, Christian, for the categories of the CapEx amount. We have sort of a general rule of thumb on the capacity-related investments. We have sort of a threshold of 15% return on investment capital pre-tax. On the sustainability investments, we allow up to eight years of payback, and then maintenance is typically a shorter payback period, much shorter payback period than that. So that's sort of our general rule.

And I will comment on the investments and the renovation wave that is mainly in Europe. I think it's super important to say that by far most of our investments and activities are not driven only by the logic of the renovation wave. We're fairly conservative in our expectations of when what will come. So the factories that we have decided, for instance, in Europe are underlying increase in capacity demand and not yet by the renovation wave. The same, of course, for Asia and for the U.S. When it comes to the renovation wave, we have of course also noted, not surprisingly, that the political system in Brussels and also particularly the local countries is taking the time it takes, so to say. However, we are following them closely. And it is in May that the EPPD, the transposition of the rule sets, has to be effectuated in the countries. And we see the first countries being in place and ready. But we must say we're also conservative and don't expect much out of those, you can say, regulatory-driven growth pockets in 2026. So our plans are not based on that that will materialize in great deal.

Understood. Thank you. Thank you. The next question comes from the line of Daniel Caginori from Morgan Stanley. Please go ahead.

Good morning, gentlemen. One question from me. North America presents a great opportunity. Could you walk us through how the economics will stack once we have that program, what sort of margins and return on capital you expect, and how you'll go to market strategy versus distributors and large contractors? I assume the latter is direct. Thank you.

We had a little bit of a hard time hearing you acoustically, but I understood you would like to know a little bit more about the opportunities in the U.S. and how we go to market. I think I also heard you asking for specific numbers. The specific numbers we don't disclose on the US level other than the ones we showed on the slide. But the opportunity in the US is converting the categories from glass and foam into stone. So we are not depending on, you could say, the activity level in construction industry in the US very much. Because we come from a very low level of market share, a couple of percentage points, where we in most other markets, including Canada, have significantly higher market share with Stonewall. So it is a true conversion of categories from those two I mentioned into Stonewall. An appreciation by customers that the qualities of stonewool, and I'm not going to list them all here today, but particularly the fire capabilities, non-combustibility of stonewool is increasingly appreciated in the U.S. So it is really a strategy of conversion, it's a strategy of expansion, and that includes some of the elements you mentioned. It's about setting up the right distribution in wholesale and in retail, I should note, where we are absolutely present in the big box, namely Lowe's and Home Depot. You will find us in most of their addresses. but setting up the wholesale distribution channels also in states where we are not present today, and that's why we have quite a lot of capacity and opportunity and growth opportunity ahead of us.

Thank you.

Thank you. The next question comes from the line of Allison Sun from Bank of America. Please go ahead.

hi good morning i have two questions um so first is on the the market outlook uh i think you mentioned that canada is probably still expected to be weak throughout 26 and eastern europe you're expecting cells to decline by single digit number um i mean if you could tell us if high or low single digit number would be great but is it fair to say you are mostly expecting the Western Europe to recover and start a solid market growth in the US to drive up the South. Is that a fair comment? The first question. I will ask the second question after this one. Thank you.

Yeah, now you almost took me around the world. There was many I need to comment on, but let me try to take it from the West. We do see that Canada is somewhat stabilizing right now, but it's an industry, sorry, construction industry area that is really hard hit and heavily influenced by the ongoing tariff and just in general political environment with the U.S., Canada is like a huge geography, so we have territories in Canada that are up, so you can see activity going up in Quebec, but the very important Ontario area that has driven growth and investment, namely in automotive and data centers, is down. So it's a nuanced picture. It has stabilized, but we don't see a lot of upside in the year. If I go to Europe, Again, also, I think I said it also in the last call, the picture of having a southern Europe in good shape with growth and development, namely countries like Spain, Italy, all the way over to Romania with strong growth rates, strong activity levels, developing nicely. And then the two big markets, France and Germany, where we had declined last year, also being somewhat lethargic, still struggling with getting some of the programs that they have announced, getting them activated. France just announced a row of initiatives that should play favorable into this year. In Germany you have heard about the funds that they have at least announced now more than a year ago, but we're still waiting to see them in the market. So it is also a very nuanced picture in Europe.

Okay, thank you. My second question is a bit nuanced. I think the sweet bar fire that happened in New Year, I saw there's some news with the photos that say the Rockwood products are potentially involved. I mean, I don't know if you have any comment or comment you can add because we should think Rockwood products is non-conductible. Thank you.

We know very little of what has happened. We have of course also registered that there are some pictures that I believe are all the way back from 2015 circulating on the internet where our brand is on the pictures. Those are from 2015. We have not been contacted by the authorities yet. And I don't know more than what you just said about this terrible tragedy at this point in time.

Okay, thank you.

Thank you. We take the next question from the line of Julian Badlinger from UBS. Please go ahead.

Yeah, thanks very much, guys. So, First of all, getting back to the French tax incentives that you just mentioned, I'd love your thoughts on what you think the effect of that could be on new build and or on renovation. I think a lot of people are trying to figure out whether this could be something that really gets demand going. And I'm sure you guys have looked at that more closely. And then my second question is, talking about the UK market specifically. So within Europe, it seems like that's the market that'll see some of the most capacity additions in 26 and 27, specifically from your competitors. And then you're adding more capacity yourself, I think in 28 or 29. Is there a risk at all of maybe some temporary overcapacity at all in that market just because of how much capacity is coming in there in the next few years?

Thank you very much. Of course, we are also trying to understand exactly what this will mean to the market and to us. Similar to other political statements, there can be a difference between what is stated and the effect it takes out in the market. However, France has been quite effective and good at, or historically we have seen, working with the so-called white certificates, fairly executable programs, not too bureaucratic. And I must say we see some positives in these new programs, but we don't have enough detail yet to actually trying to convert that into, you can say, real growth expectations. But of course it's positive that they're leaning into it and that they are setting up these programs that they have had successful in the past. Regarding capacity, Of course we monitor that. I would say many of the things that you mentioned have been announced, but we haven't seen actually build up of capacity yet. And as you also know, our products don't travel very far. So it is very, very local whether or not there is a surplus or lack of capacity. So you really have to dissect it by country and most often also by product category. But we're sticking to our plans. We don't see anything that will dramatically change the trajectory that we are on right now.

Got it.

Thanks very much. Thank you. We take the next question from the line of Isaac Osio from On Field Investment Research. Please go ahead.

Morning. Thank you for taking my question. First of all, regarding your 2026 EBIT margin guidance, are there any material one-off items we should be thinking about? And then second question, so in Q3, you had flagged an incident in Switzerland and reduced efficiencies across some factories. Have you identified the underlying root causes? Could you maybe describe them and what concrete measures are you putting in place to prevent similar disruptions going forward?

Let me comment on the incident in the factory. We know very, very well what went wrong, and I can narrow it down to a particular valve that failed, a mechanical installation that regulates the flow of the lava, the melt. If you've seen pictures of our production, it was a mechanical error, and the redundant measures were not strong enough to take over. So it's been a fairly, you can say, very specific issue and an issue that has been easy to correct from an engineering perspective. And we have, of course, gone back in our own footprint to ensure that the proper dimensions have been upgraded and that redundancy measures are in place. There was no big need to, for instance, change standard operating procedures or the like, but that was the driver of it.

Yeah, and just to come back on the margin outlook, we have not included any one-off, i.e. that we have not, for instance, included or forecast any donation for the Ukraine Reconstruction Fund.

All right. Very helpful. Thank you.

Thank you. We take the next question from the line of Pierre Rousseau from Barclays.

Hello, gentlemen, and thank you for the presentation. Maybe just a quick follow-up on planned capacity additions for the other European factories, so, you know, the four remaining, including Romania. Are you able to provide a slightly more precise timeline at this stage, and in particular for the French plants, which was permitted end of last year? And then the second quick question would be on labor inflation into 2026. What are your expectations there, please?

Thank you. Yeah, but like Kip said before, what we can share with you is that the next factory opening will be next summer in India, in China. sorry, this summer in India, in Chennai, and then 12 months later it will be the Romanian factory where we are adding a line to our existing facilities. Those are the ones we can give you specific dates on. Will you take the labor inflation? I can also do it. Labor inflation on a group level we see around 3%.

Understood. Thank you.

Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to the management for their closing comments.

Yes, Monk Hansen and I, Kim Jumanasen, thank you for joining today's earning calls. We would like to thank you for all your questions and the audience for listening in on today's call. We appreciate your interest in Oracle AS. If you have further questions, please feel free to reach out to me. You may find awkward contact details in our investor sections on our Corbett website. Thank you very much. Have a very nice day.