Rockwool A/S

Hello and welcome to Rockwool AS conference calls regarding the result for the first quarter of 2026. My name is Kim Jung Andersen. I am the CFO of Rockwool AS. Today I am 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 Jes will go through our presentation and give you an update of the results for the first quarter of 2026. Afterward, we will 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 will now hand over the word to you.

Thank you, Kim. Also welcome from my side. And as Kim said, I will start on slide number three, where we have our key numbers. The Rockwell Group delivered resilient performance in Q1, despite a challenging operating environment, with revenue growth of 2%, primarily driven by Eastern Europe, the United States, and Southern Europe. The EBIT margins, as you can see, reached 13.2%, what we believe is a satisfactory result, though 2.2 percentage points below the record high level of last year. Reconstruction market, particularly in Canada and United Kingdom, pressured the margin as did higher logistic cost and an increased cost base. Turning to page number four, let's focus on the revenue in Q1. where overall the construction market continued to be affected by the geopolitical turbulence and macroeconomic uncertainty. Additionally, the first two months of the year were impacted by adverse weather across Europe and North America. However, volume demand recovered from March and onwards. We successfully restarted the Swiss factory in Flumrock, during the quarter, but the production stop did have an impact on performance in the quarter. Additionally, the conversion to electric melting and upgrades to one of our production lines in our Vermont factory temporarily reduced output. The growth was driven by higher volumes and a minor increase in overall sales prices. Page number five. where you see the revenue by business segments. Insulation revenue grew 2% in local currency with solid growth in the United States and key markets across Eastern and Southern Europe. That growth was partly upset by decline in United Kingdom, Germany and Switzerland. In our system segment, revenue grew 4% in local currency. ROC Phone Europe Asia delivered solid growth across key markets Godin achieved growth mainly in Europe while our rock panel business had a stable quarter. Page number six, where we look at the regional revenue in the quarter. In the United States, we sustained the growth momentum while Canadian revenue declined in a very challenging market characterized by weak residential demand and ongoing trade uncertainties. In Western Europe, revenue declined 1%, as solid growth in Southern Europe was offset by market-driven declines in the UK, and the delay in construction activities due to the hard winter in January and February. Eastern Europe delivered strong 15% revenue growth, driven by solid growth in Romania and Hungary, while Poland increased slightly in the quarter. In Asia, revenue grew more than 7%, with decent growth in several of our markets there. Page number seven, where we look at the profitability in the quarter. Although the EBIT margin was down 2.2 percentage points, we consider this a good result, given the challenging market conditions and the comparison to a record high profit level last year. Margins in the quarter were impacted by several factors. First, a very weak construction market in Canada and the United Kingdom. Second, higher logistic costs and a higher cost base. Third, additional costs related to the production incidents in Switzerland and the planned production stop in the Netherlands related to the electric conversion and other upgrades of the production line there. Overall, these two challenges accounted for about one half of the decline in margin. That is equivalent to approximately one percentage point. While production is up and running in Switzerland, we do expect the run-in cost for the new melting technology and these other upgrades in Netherlands to affect the margin for the rest of the year. Last year, first quarter included donations to the Foundation for Ukraine's Reconstruction of 6 million out of the total donation of $13 million, while no donation was recognized in 2006. On the next page, we look at the probability by segments. First, the insulation segment. Looking at profitability by segment, the EBIT margin in insulation, while satisfactory, was down 1.7 percentage points compared to last year. The result was impacted by several factors, including the ones I just mentioned. In the systems division segment, the EBIT margin decreased 3.7 percentage points driven by inflation on input cost that were not sufficiently offset by sales price increases. Additional factors include increases in bad debt provisions, as well as increased scale-up costs in our new business area, which is part of the system segment. These new businesses mainly consist of our water management system and our prefab construction business. Let's look at our investments in Q1. Our biggest investment in Q1 related to the construction of new factories in the United States and India, and a new technical insulation production line in the United States, and the production expansion in Romania, as well as a large logistic automation project in Germany. The new factory in India is expected to come online during this summer. The sustainability investments are mainly related to electric conversions in the Netherlands and in France. On May 5th, we signed an agreement to acquire Ravago's Stonewall factory in northeastern Hungary with a capacity up to 40 kilo tons. The acquisition will support our long-term priority to meet regional demand. The transaction is expected to close in Q4 26 of course, subject to customary closing condition and regulatory approvals. The acquisition is not expected to materially impact our 2026 financial outlook. And then we have our cash flow for the quarter. As expected, financial positions turned into net debt of €306 million. That brings our leverage ratio at the end of Q1 at 0. 0.4, which is well within our policy of maximum ratio of one. At the end of Q1, we had an unused credit facility of 400 million euro. Cash usage for working capital during the quarter was unchanged compared to Q1 last year. The negative development in working capital ratio was mainly due to the planned stock build and a higher than usual seasonal increase in trade receivables due to the revenue uptake towards the end of the quarter. Free cash flow decreased 68 million euro compared to the same quarter last year, mainly from higher investments and less cash from operations. And last but not least, to our outlook on page 12, The revenue, as previously already announced, we are now expecting revenue growth to land between 3 and 6% in local currencies, and the growth outlook is based on the increased activity we saw in March and thereafter, as well as sales price increases in the range of 6 to 8%, which will mainly take effect from the mid-year. We continue to closely monitor, of course, the ongoing geopolitical turbulence, and macroeconomic uncertainties around us. The EBIT group margin for 2026 is still expected to be between 13 and 14%, as the announced sales price increases are expected to offset input costs and logistic inflation, whereby maintaining profit margins. And investments Our major investments in 2026 include capacity expansions as already mentioned in India, Romania, United States and France, along with acquisition of land for further manufacturing sites in several countries. Overall, our total investments are expected to reach around €700 million in 2026, excluding acquisitions. That concludes my run-through of the key data points, and I hand back over to Kim.

Yes, thank you very much, and I know the operator will invite in for questions. I just have a small request for you. Even if we limit to two questions at a time, please allow us to answer one question at a time. Thank you very much.

We will now begin the question and answer session and we will separate two questions from each questioner. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. First question is from Ben Radda-Martin, Goldman Sachs.

Great. Thanks very much, Jez and Kim, for your time today. My first question was on cost inflation. Thank you for providing some of the colour in terms of the pricing changes. you're looking to put into the market. I'd be interested in what you're seeing in terms of energy cost inflation and transport inflation as we go into the back half of the year. I think energy cost was, you know, maybe towards half a billion euros and similar to delivery costs. That would just be my first question. Thank you.

Yes, allow me to answer that one, Ben. We have seen already an increase in cost inflation, including transportation. It is so that, as you know, our energy consumption consists of three main energy uses. One of them is foundry coke, which is by far the largest energy source. And then, of course, we also have electricity and then gas that we also use in the manufacturing site. Foundry Coke is where we have these fixed price agreements at quarter at the time. And that has not increased significantly between quarter one and quarter two. So there's not so much inflationary pressure there. Of course, on the gas and electricity, they are more correlated to the general sort of energy conditions. inflation in the market and there we have seen increases we have as mentioned before we have a coverage in place for like half of the expected consumption for the second half of the year and That means we have, of course, cushioned this a bit. But there is inflation coming in the second half, also in transportation, mainly in North America. But we still believe that the 6% to 8% price increases should be enough to cover the inflationary impact in the second half.

Excellent. And maybe just a second one on capacity expansions outside of the ones that you're investing in now. I'm thinking some of the European facilities, UK, Sweden, Italy. Could you maybe share an update on some of the timelines for these projects? I'm interested just given, I guess, the uncertain economic backdrop in Europe, what we've seen in terms of interest rates moving higher and, I guess, some excess capacity in the market. Could some of these later facility openings be flexible in, I guess, their opening times, or how are you seeing the timelines for some of those additional factories, particularly in Europe?

Thanks. I can give you a couple of data points there. Now, you spoke specifically into Europe, so let's take those. Next year, we open up Romania factory. where we are adding capacity to our existing facility in Romania. There, of course, you should also notice that the capacity we have bought in Hungary adds 40 million kiloton. That is relevant also for Romania and why we bought it. Just a small little detail, Romania could is better served from Hungary due to the mountain range going through Romania but that's a small little detail so Romania will come online next year and then the acquisition will add another 40 kilotons there then the next one coming online in Europe will be our Soissons factory in France in 29 is that expected to open up and Yeah, that was for a song. And then I don't want to give too many details on the other ones that we have announced, but where we haven't set a date yet. But after 30, it will be Italy, the one in Birmingham, and outside of Stockholm are the main European capacity expansions. I think it is important when we talk capacity also to talk about productivity. We are very focused on, of course, also optimizing existing footprint. We are a manufacturer that pays a great attention to productivity. The usual approach is with Lean and Kaizen, and there's quite a lot more than we can pull out of our existing footprint to maximize capacity utilization, not just in Europe but throughout the group.

Excellent. And maybe just to follow up on that, it seems like maybe the France factory is slightly a little bit delayed versus the original plans there. Is that a contraception on your side or some of the progress is taking a little bit longer to move on that path?

It's not significantly delayed. I mean, you know the delay that originally was caused by getting building permits. That's what's pushed it originally, but else the project is very much on time. The timing of all these factories, of course, what we're trying to hit here is this expected up-pick in Europe in what we call the renovation wave. As you know, in Europe, in Brussels, the new EPPD regulations that now are falling in place. We are following very, very closely, country by country, and are modeling what volume uptake will take place the next few years. It is, of course, a modeling, but it is very much driven, our logic is driven by the expected uptake due to the EPPD regulations.

Very clear. Thanks very much.

Next question is from Anna Schumacher, BNP Paribas.

Great. Thanks, everyone. Thanks for taking my questions. So the first one, could you provide a bit more detail on your volume expectations for this year, possibly by region and season? It's just that if I take That gives foliar price increases of about 4.5%, which is the new mid-quint of your local currency guide, so it would issue a new growth. Yeah, any detail here would be helpful.

Anna, we had a little bit of trouble with the sound, apparently. Could you maybe just repeat the question short? Thank you.

Sorry, sorry about the sound. So could you just provide a bit more detail on your volume expectations for this year, possibly by region and cadence?

Yeah, thank you very much. I mean, we have seen, as Jess said, a volume pickup here at the beginning of the year, driven by some positive moves in some of our key markets. And we can also see that in the second quarter, we also see a higher volume growth. Most likely that there are competing materials that are increasing prices faster and higher than we are. But our price increases are mainly coming around July 1st. So in our forecasting assumptions, we have assumed that we will have a little bit of stagnation on volume in the second half. You know, still to be seen, but that will be realized. But that is at least the assumption that we have put in, in the 3% to 6% growth for the full year, is that that volume will start to be a bit stagnated compared to last year in the second half of this year.

Anna, was there a second question?

Anna Schumacher, your line is open.

Hi, sorry, I was on mute. So you call out quite solid growth in the U.S., Southern Europe, and Eastern Europe. From your comments, it sounds like it's mostly volume. What is driving this? Is it new build, renovation, new channels? Yeah, anything to add with that?

Okay. Okay. We had a little bit hard time hearing you acoustically, so we just repeated it to each other here. I understood your question was targeted towards southern and eastern Europe, the volume pickup we've seen lately. Yeah, as you know, it is very important to understand we compete against glass and we compete against foam plastic products. And when we look at the developments in cost, We do believe that the foam plastic products are harder hit than we are on price input cost and we can also see out in the market or at least observe that their price points and availability are under strain. So we are winning I believe market shares across and that drives quite a bit of the volume growth in East Europe where there's a lot of products, and in Southern Europe it's been a growth trajectory we've been on for quite a while. I do think we should highlight again that the fire regulations in Europe, particularly also again in Eastern Europe, Romania, Poland, are getting more and more attention. And when we become more competitive as a stonewool product, price point-wise, against the flammable products, then there's a tendency to shift over to stonewool. So that is definitely driving some of the growth.

Great. Thank you.

Next question is from Zayim Bekawa, JP Morgan.

Good morning, yes, and Ken, thanks for taking my question. The first one is just on pricing. So you've announced 6% to 8%, but given your hedging levels and also the comments that you've made on foundry code being flat between Q1 and Q2, how much of that announcement do you actually need to be realized to protect your margins this year?

First of all, it is important to understand that input costs, of course, vary across regions. It's a different profile on input costs in North America than it is in Europe. Just as an example, we are harder hit on transport costs in the U.S. because we have longer, further transport patterns in the U.S., And the diesel price that has gone up in GWAS hits us there. So input cost depends a lot on the regional profile, so to say. And our pricing is, of course, also adjusted to local market condition and product groups and applications. So it's not like one for all, that all products, all regions, all customers get exactly the same number. But in totality, in order to balance out the inflation, it is going to be around the 7% that we need to harvest in order to balance out inflation.

Okay, thank you. And then my next question is just on some of the one-offs. I think you called out specific factors, Canada, UK, but also Netherlands, Switzerland. How much of this would you expect to be a sort of continue for the remainder of the year? And on the topic of one-offs, I think you mentioned India starting online this summer. Will there be any one-off startup costs related to that? And is this already in guidance?

To take your last sub-question first, because it's the quickest to answer, India, it is minimal what you will see affecting the numbers. So it is single-digit in India. But it is already in the guidance for that startup. That is well planned. The bigger issues, you could say the bigger challenges, that also will take longer time to get resolved is the market in Canada and the market in the UK. Both are down a lot. You can just read the public market reports about construction industry in Canada. Canada is hugely affected by the trade uncertainties with the US. Investments in commercial, industrial and in residential has stalled. They're actually down quite significantly. So that I don't think will resolve quickly. I do want to note that we believe we are winning share in this suppressed market, but because the overall market is down so significant, even market share gains from our side does not result in growth in Canada. The UK is a different story, but has been somewhat quick in decline the last six months now. and it's caused by a couple of things. Our read on it is that the macroeconomics in the UK is generating a lot of uncertainty and hence a subdued willingness to invest in construction. That is one thing. The other one is that the UK has instilled a new process for building permitting which we believe in the long term will benefit us a great deal because it is very much focused around fire and fire regulations. But they are struggling with getting the bureaucracy of this new permitting process to get up and running. So the backlog of permitting is dramatic in the UK right now. So we do, as that results, we do see an improvement in the situation in the UK But else the UK market will also simply depend on the macros in that market.

Thank you. And sorry, can I just follow up on sort of the other issues of Netherlands and Switzerland? So would that be a drag again in Q2 and beyond?

It won't change much in those two markets, but they're small for us, so you won't really see the material impacting the overall numbers. Perfect.

Thanks for taking my questions.

Next question is from Klaus Almer, North Bear.

Thank you. Also a few questions from my side, which I will do them one by one. So the first question goes about this price hike. As I understand, there is a three to five month of delay between energy cost inflation to your new and higher prices. Is there a reason for this long delay? Not least, this appears to be later than your main competitors. That would be the first one.

Klaus, it is quite different in the various markets. There are different traditions and different laws that govern and also commercial contracts that govern how you can increase prices. So some places we can increase prices faster and some it simply takes a three-month warning period. Yeah, I don't think that's unusual.

I know it's not an all-fair question, but it's also more compared to your key peers who seem to be a little bit more aggressive or faster in implementing these price increases. Maybe they have a bigger problem than you have. That might be the reason.

There can be many reasons. That's not why we have records that are in the market on our direct peers. And we have also not used force majeure or instruments like that. But you could be very right that some of the foam and... and plastic products are in a very different situation because their input costs have gone up dramatically more as they are based on petrochemical products almost completely.

Then the second question, is there any of your more meaningful markets where you have decided not to raise prices?

No, there's none of those.

Okay. Thank you so much.

Next question is from Andreas Christian Pettersmann, Danske Bank.

Thank you very much, and hi, yes, and Kim, and thank you for taking my question. My first one is on the recent acquisition you've made in Hungary. I was wondering if there's signals now preference for doing acquisitions in capacity-constrained markets, and whether you could maybe give us some examples of other markets where you could do similar transactions to be important.

Yeah, I think your observation of that it is a somewhat consolidating market is correct. But we don't have a very strict, you can say, M&A search process. We are a little bit more opportunistic in our approach, and we'll only do it where it makes sense, obviously, which means where we need the capacity, but also where the acquisition target has a high technological level that fits into our quality levels. And that simply limits the opportunities that arise.

Thank you very much. I thought so too. My second question is on the data center opportunity in the U.S. I mean, yes, you've mentioned in the recent interview that The U.S. pipeline alone, that includes around 1,500 potential data center projects, which does underline the sizable medium-term opportunity for you guys. But I was wondering if you were able to quantify this a bit for us, maybe what the average ticket size is for a data center project, and considering your situation in the U.S. right now, would you even have available capacity to meet these demands?

First, I have to start and say that we have not been a big player in that arena the last few years, but the way data centers now are constructed is turning in our favor, and let me explain briefly why. A few years ago, the main focus was building what you call data centers, mainly data repositories. It was cloud solutions. So there was a lot of focus on bits and bytes and building that. And that had a certain building envelope that was not demanding what we can offer with our products, not to the same degree. As these investments now move over to a slightly different type of data centers, namely AI data processing, the equipment in these facilities are becoming significantly more expensive. It's basically high-end processors, as you know. and they require both more cooling and more stringent fire protection. And that is moving into our strength, the cooling insulation from our technical insulation team and the fire protection. And the numbers are big, yes, it is around 1,500 projects. They are in very different stages. Some of them are early, early planning, and some of them are being implemented. But it's a big pipeline, and of course we have organized around ourselves harvesting that increasingly. Just to give you an idea. for the two and they are of course all different sizes but to just give you an idea it is mainly the big four that we work with in this arena but we won two big projects I don't want to mention the customer name but that alone generated around a million US dollar in fire protection and in cooling insulation But please don't multiply that with 1,500.

Next question is from Alexander Klymers, Kepler Sugar.

Hey, hello. Thank you for taking my questions. My first question would be on the networking capital. It was somewhat higher, I think, than that 14.2% of 12-month sales. So it's almost a percentage point higher than usual, or at least than last year. And in your report, you mentioned negative seasonal developments, that there was planned higher inventories. I'm just wondering what you are planning for, considering you mentioned that H2 sales volumes should stabilize.

Yeah, thank you, Alexander. When we build inventory, it is not to keep that inventory for several quarters. It's typically to keep inventory for a few months. So the build-up of inventory at the end of quarter one was to cater for some maintenance shutdowns in some of the factories, amongst others in Norway. We also had a you can say all the growth that we had in Q1, in fact, came in March. So there was a higher sales in March compared to March last year, and that simply built up accounts receivable. We're typically collecting within 20 days after the month. So there was a buildup in accounts receivable, and then there was a higher inventory due to this inventory buildup to be used in the second quarter.

Okay. Thank you for that. Now, the second question I would have would be on the margin. A colleague of mine already alluded to it, but basically with the 7% price increases that are taking effect as of Q2, I guess it's reasonable in relative terms that there's going to be some dilution effect on the margin. So I'm wondering if the prices remain where they are and if volumes don't change dramatically, that basically we would end up with a 13% to 14% guidance more towards the bottom end of that range and less towards the upper end. Is that correct?

We are guiding in the range of 13% to 14%, but I think it's... Fair to say that what we see, the volume growth we're seeing here in quarter one and also in quarter two are mainly within our flat roof segments. And that's where we have an average selling price that is slightly lower than the average. So that's one element of it. I would say to quantify whether it's going to be close to the bottom of the range or in the upper end of the range, I think I'll just wait until I see the Q2 results, and then I can guide you slightly better on this one here. Because it is mainly in Q2 we're going to see the bulk impact before prices started to pick up.

Okay. Thank you. Next question is from . on field investment research?

My first question, thank you very much for answering. My first question would be on your CapEx program. So I understand that this year you're probably targeting nearly half a billion euros of investment in capacity and sustainability. It's probably the largest investment that you're doing in the group history. And I understand that this is going to continue for the foreseeable future, like this half a billion euro investment area. What kind of economics do you target on those investments? What kind of return? And if you can explain a little bit how does it work, the timing, and the potential impact on earnings in the coming years.

I mean, for sure, yes, it is clear that to build these four capacity expansions at the same time in parallel is a step up. Having said that, they are, of course, being built in different geographies, and we see growth in all three geographies, Asia, Europe, and North America, so that we need to build capacity. I would have wished that we could have built the factory in France two or three years earlier. That would have sort of smoothed now the bit of capex in that case. We haven't opened a new factory since 2021, so it would have been fantastic to have that factory in France a bit earlier. Having said that, we need the capacity and and they are now coming sort of in subsequent years, going live into the market. Whenever you open a factory, you typically have the first 12 months of running in cost, and that is typically for the larger factories, not the one in India, but for the three other ones, are typically in the range of 10 to 15 million euro as a one-off cost in the first 12 months of operation. After that, it sort of becomes normal operations. And these factories, of course, are all with the latest technologies. That means they will hopefully, when they are fully utilized, will be the most profitable and most effective factories we will have in the group. how to put a number to that We have not really done that exercise, but it is, of course, part of the plan that they will contribute to a very good return once they're up and running. But we are in an industry where it takes three to five years to build these factories, and that means we have to be patient, shareholders have to be a bit patient, because we do need that capacity to continue to grow the company and also a profitable growth.

I'm trying to understand that when we look at, for example, historically, when you were investing 100 million euros, you were able to generate approximately 100 million of sales, or a bit more of the case, depending on the investment, with mid-teens margin. Is it what we should expect?

No, no.

Sure, the same 500 million, we could expect that. additional sales for the sign with a return of a marginal degree of the group?

There is no one rule or something. We are building in North America. It's the most expensive place in the world to build, but it's also the place where we have the highest both sales and contribution profit per produced tons. So it all sort of links in. France also have a relatively high capex number, but again, it is also price-wise and contribution profit-wise in Europe, one of the most attractive places. Romania... is a place where you can say the sale prices are lower, but the capital stores are lower. So it's all sort of ties in, and as I said, all of the factories will be more productive than any of the existing ones. But I don't have sort of a one number to give you, that if we spent... Spent, you know, 100 million euros...

Yeah, but I understand that when we look at this number, which is quite high, with 500 million of addition of capex on top of maintenance, and I think a lot of investors try to understand what returns do you target on those investments. Do you have a minimum number that you're targeting?

All of them are living up to sort of our internal sort of thresholds, which I have We have said before that we have sort of a threshold around 15% return on invested capital. And there are sort of all of them living up to that. But as I said, it's very different market to market.

And the 15% is before tax?

Yeah, that's before tax. Okay. Thank you.

Next question is from Alison Sun, Bank of America.

Hi, good morning. Thank you for taking my questions. The first question, I just want to confirm, Kim, you mentioned the Swiss bond and the Netherlands electrical conversion as one percentage point in the margin in Q1. Is that correct? And should we expect some margin recovery in Q2 if operations normalize it?

Yeah, the Swiss one was not the conversion. That was the factory breakdown in the autumn that stretched into the beginning of Q1. That factory is up and running now, so that impact is not going to continue into Q2. whereas the one in Vermont is a sort of a bigger conversion we are doing on a major line down there, and that will impact also the result in Q2.

Okay, thank you. And my second question is maybe more specific on the return on CapEx in this Norway fund where you have 15 million added. What kind of, I mean, what is your right and what timeline should we be expecting? Is this going to still be at 15% as you just mentioned?

No, the investment we're doing in Norway, I think I alluded to some ways, it's just a warehousing that we have decided to to acquire a land and construct a warehouse instead of renting several warehouses in the area. So that's not a factory per se. It's just a warehousing project.

Okay, thank you. Next question is from Lujarini Gosh Benskin.

Hi. Thanks for taking my question. I have just one. So on your recent acquisition, could you give us some color into the transaction value, how much sales you expect from the plant once it's fully consolidated so we have some numbers around it?

Yes, hello. I mean, as I said, the plant has this capacity of 40,000 tons, and the acquisition price, which will be revealed in the annual report anyway, is sort of in the mid-40s million euro. It will not have a substantial impact in the financial results for this year, neither on sales or on earnings. As I said, there is a regulatory sort of period until we can start to consolidate this into the group.

Yes. So you mentioned that this year it's not going to have so much of an impact. But once it's fully consolidated, do you have any, like, you know, expectation of how much sales it could generate?

Well, we will not reveal that. So we do have an expectation, yes. But so it will be blended into the entire group once we release the 2027 numbers. It is a running business.

Okay. Thank you.

Next question is from Julian Radigler, UBS.

Yeah, good morning, gentlemen. Thank you very much for your time. Two questions for me. They're both on YouTube. So the first question is, for you, and I think this has been asked a few times, in one way or another, but can you talk more specifically about the margin impact you expect for Q2 just from the fact that you're not increasing prices yet and you may have some of that input cost inflation? And is there any way for us to just understand if you isolate that price versus cost headwind, is that meaningful at all? How should we think about that?

Julian, we will not do an output quarter by quarter, so you just have to be a bit patient with us. But as I said, my take it at least in the forecast assumption is that we will have, you can say, an impact from the higher input cost in Q2, and then we will cover margins gradually in Q3 and Q4, so the full year that we have, you can say, the same expectation for margins on EBIT for the full year. That means we will most likely do a bit better in the second half compared to the previous outlook.

Understood. And then switching to the top line. So the market challenges in the UK and Canada are very clear. But Canada specifically declined quite meaningfully last year in Q2. I remember this well. I think it was one of the reasons for your profit warning at the time. So my question is, with Eastern Europe accelerating so meaningfully like we've already seen in Q1, and the base effect in North America becoming meaningfully easier, for Canada and the U.S. still doing well anyway. Is it fair to think that volume growth in Q2 could be well ahead of Q1?

No, as Kim said before, we don't think Q2 will be way ahead of Q1 on the volume side. We don't see that. So no to that.

Do you follow my reasoning, though, with the base affecting significantly easier in North America? Is there something I'm missing?

Yeah, but there's also based on easier comparables in the latter half of Lahti. Then I agree.

Okay. Thank you very much.

Next question is from Chase Colgan. Hi.

Good morning, everyone, and thank you for taking my questions. I also just have two. Personally, on the systems margin, It's obviously still under quite some pressure, and you explained that there was some inability to pass through prices in time to offset rising costs, bad debt provisions, and so on and so forth. Could you explain a little bit about your expectations for the rest of the year? Are a lot of those problems, primarily pricing, going to be recovered throughout the year, or how should I think about the phasing of that divisional margin for the remaining quarters?

Yeah, I can give you some insight to that. First of all, the bad debt, of course, we're still working on getting secured. And then we do expect an improvement in the profitability in the system division as our measures take effect in those markets. Some of them are in systems, as you know, more project-based businesses, and it takes a little bit longer to flush it through. depending on how the projects are set up. But we do expect an improvement in that area.

Okay, perfect. And my second question then, I recognize you just mentioned that you don't necessarily expect volumes in the second quarter to be much above the first quarter, but something that's been, I guess, spoken a lot about sort of across the entire building materials sector is this idea of pre-buying in the second quarter ahead of price increases. Is that not something you think could potentially impact volumes going into the second half, I guess?

Yeah, yeah, Chase. I mean, the... We didn't comment on the second quarter. I did comment on this. I think the volume in the second quarter for sure will be positive. It's the volume in the second half that in our assumption that we are giving you three, six months, there we have assumed that volume will be stagnant compared to last year. Whether this is going to be the case, we don't have an order pipeline, as you know, more than two months out. So we are still sort of a bit uncertain how the autumn season is going to pan out in this uncertain times. and and they as you know that there might be a little bit of pre-buying here in quarter two but you know our distributors similar to us we cannot pre-buy a lot of physical products because it simply take up so much space you typically see if they buy forward a single day it's a it's like a five percent growth in a month but that that small is it but i don't think a lot of um pre-buying will be will take place simply because the physical constraints that that that our customers will have on their own storage space.

Okay, great. That's very helpful. Thank you for the clarification, gentlemen.

The final question is from Sam Bekawa, JP Morgan.

Thanks both. I just had a quick follow-up. With regards to Germany, I think you called out that in the declining Q1. Was that solely due to weather, and so were the trends in April also good? Thank you.

It was a significant impact, not only in Germany, that the weather was so bad. All outdoor work, whether or not roofing or, you can say, facades, were at a very, very low level in northern Europe. And, yes, the improvement has continued. Great. Thank you.

This concludes our Q&A session. I would like to turn the conference back over to the management for any closing remarks.

Thank you very much. Jes and I thank you for today's earning call and for all your very good questions. We appreciate your interest in Oakwood. If you have further questions, please feel free to reach out to me. You may find the Oakwood contact details in the investor section and our corporate website. Have a very nice day. Thank you.