Rockwool A/S

Good day, everyone, and welcome to Rockwool A.S.'s conference call regarding the result for the first half of 2026. My name is Kim Jung Andersen. I'm the CFO of Rockwool A.S. Today, I'm pleased to present CEO Jes Munk Hansen. For the first part of the call, all participants will be in listening-only mode. As a reminder, this conference call is being recorded. First, Jes will go through our presentation and give you an update on the results for the first half and second 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.

Also a welcome and good morning from my side. My name is Jes Munk Hansen. I'm the CEO of Rockwell. I'll start on page three. And as you have seen, the group delivered revenue growth of 6% the first half year. Importantly, this was driven by volume. The EBIT margin reached 13.1%, a good result despite inflation on energy and mainly transportation prices. Persistent market challenges in a few countries as well as higher depreciation from investments. Free cash flow was impacted by the larger ongoing capacity and decapitalization projects. Page 4. To the quarter, the group delivered a strong 10% revenue growth and reached a record high quarter revenue of just north of a billion euro in Q2 2026, different by volume growth across regions. EBIT margin was 12.9%, a good result considering the circumstances. When cash flow from operations was good, investments around €200 million in the quarter led to a free cash flow of negative €32 million. I'll just jump directly to slide 6, just jumping the half year detail, but on Q2 I think we should spend more time on that. The revenue from the very strong 10% growth. The growth was mainly driven by significantly higher volumes, partially from market share gains, where we benefited from favorable market dynamics with a narrowing price gap to competing combustible insulation materials. Somewhat more broadly and less directly related to the quarterly results, we do observe in the market that higher oil and gas prices are driving a greater interest in energy efficiency in the built environment. So while we are affected on the cost side of course, we also expect to benefit from the greater focus on energy efficiency that results from the higher energy prices in the market. At the same time, the tragic wildfires in South Europe and in North America over the summer are generating more awareness about the importance of non-combustible materials such as stonewall. This should too become visible in higher demands over the next period. Okay, let's get back to the report. In the quarter, we saw pre-buying activity ahead of the announced price increases, not surprisingly, which mostly took effect from the price increases from July 1st. We estimate that this pre-buying contributed to around 1-2% points of the second quarter's growth. However, sales price increases were also realized, especially in the latter part of the quarter, and accounted for 1 to 2 percentage points of the growth, partially offset by negative product and country mix. I'll also skip page 7, which is just a summary of the half-year revenue, and go to the second quarter revenue. On the segment level, the insulation segment revenue grew 10% in the quarter with strong growth in the United States and across Europe. The revenue in Canada, United Kingdom and Switzerland continued to decline, though the rate of decline moderated in UK and Switzerland compared to the first quarter of the year. And in our system segment, revenue grew 9% with a good growth across the business. Slide 9, where we take a look at the geographies. If we start from the left, from the west side of the map, United States continues to perform well, with momentum accelerating into double-digit growth in the second quarter. And it's also worth noting that stone wool is growing as a category in the United States, and that rock wool is gaining market share in the total insulation market. And this is, of course, in a soft overall market. Here the growth is also driven by greater focus on non-combustible insulation solutions in a row of segments including the façade segments. Revenue in Canada declined in a challenging market as the Canadian economy has contracted now for two consecutive quarters in a row. West Europe showed improvement compared to previous quarters, and key markets like Germany and France gained momentum, which was partially offset by the challenges I mentioned in the United Kingdom and Switzerland. And Eastern Europe delivered a staggering 31% revenue growth, reflecting double-digit growth across the entire region. And in Asia, we grew 17% with double-digit growth in all major markets, except China, where revenue remained flat year over year. To slide 10 on our profit. The quarterly profit was impacted by rising oil and gas prices. However, this also creates opportunity for us as elevated and fluctuating energy costs drive a much greater focus on energy efficiency in building, strengthening the overall demand for our insulation solutions. DBDA in absolute figures was up 6%, which we considered a good result. Let me note that Q2 in 2026 benefited from a one-time 7 million gain related to a settled claim against a former transport supplier in the UK. That said, margins in the quarter were impacted by several factors, such as the weak construction market in Canada and the United Kingdom, as I mentioned, and then, importantly, higher logistic costs and an expanded cost base, especially related to energy and oil-based raw materials. And announcement sales prices increased. This first took effect late in the second quarter. We believe we are good at addressing challenges like these. Among other things during the quarter we also took the opportunity to refine our marketing and branding and I hope you have noticed our emphasis on core value drivers like energy efficiency and fire safety. We also redirected the product flows and resources from softer markets into high demand regions and adjusted our capacity expansion strategy based on long-term market condition expectations. The EBIT in absolute figures was up 3% and the EBIT margin ended at 12.9% in the quarter. And EBIT was impacted by higher depreciation related to investments and a one-off 9 million write-off on some reprioritization of our capacity investment base. And last year, Q2 included donations to the foundation of Rukarin's reconstruction of 7.4 million euro out of the total 13 million donated. And this year, there was no donations recognized. Let's look at the segment on page 11, profitability by segment. On the left you see our insulation segment and looking at profitability, the EBIT margin insulation was good and landed just short of 12%. The residual salt mainly reflects timing, lags between inflation and price increases, and costs from electric conversion shutdown in Netherlands and the 9 million write-downs I just mentioned in reprioritization or capacity expansion. and this was, as mentioned, partially offset by 6 million gained from the settled transport supplier claim. I deliberately said 6 million because the other million you can find in the system division. The system segment EBIT margin was 12.6% and this is a good result considering input cost inflation and lower performance in our Grudan business in North America. And here, as just alluded to, the 12.6% margin included a 6 million out of the total 7 million claim gained from the supplier settlement. Page 12 shows our investment in new capacity and decarbonization. And our major investments in Q2 were related to the new factory constructed importantly in the United States and India. If I can just stop up a second and say I just a few hours ago saw pictures of the first commercial wool coming off our factory in India. And investments in the new technical insulation production line in the United States and production expansions in Romania and our logistic automation projects in Germany. I just said that the Indian factory has gone online and this will of course support the growing demands for stone wool in that particular market where we see high growth rates. The sustainability investments may be considered of electric conversions in the Netherlands and in France. As part of our electrification strategy and to strengthen our in-house technical capabilities, we acquired the remaining stakes in the Swedish company ScanArc Plasma Technologies back in June 2026, a critical technology in our so-called JEDI conversion activities. Page 13, where we look at our cash flow. And operating cash flow improved by 31 million compared to Q2 last year, demonstrating underlying good cash generation. And the net working capital at end of the half year, 2026, increased as per the usual season compared to year end 2025. And the increase related partially to higher trade receivables from the increased quarterly sales. and partially offset by higher trade payables. Cash flow ended at minus 32 million euro, reflecting the ongoing large capacity investments. And our net debt position increased to now 461 million euro at the end of the quarter. And that brings our leverage ratio to 0.6, which is still within our policy of a leverage ratio below one. A few comments to our sustainability and safety. You can see on page 14. Just briefly a few comments. Safety remains our top priority in Rockwool with aim of course of a zero fatality and zero serious incidents. That's almost logic that it should be zero. But we recorded two serious incidents in the first half of 26. But besides, despite these incidents, the overall lost time incidents frequency rate improved significantly now at 1.6. And that is almost a 40% improvement compared to the first half in 2025, which to us demonstrates that our efforts are working. The CO2 emissions, just very briefly on that, you can see on the slide that our Scope 1 and 2 CO2 emissions, their intensity shows a 25% reduction compared to the baseline of 2019. Nonetheless, the Scope 1 and 2 greenhouse gas emissions increased by 1%, reflecting the higher production volumes. But the intensity, as mentioned, is down significantly. In 2025, we adopted new targets for renewable energy, and now we aim to reach 40% renewable on our energy consumption by 2034. And in Q2 2026, we reached 22%, showing a solid progression on that target as well. I also won't comment on the other targets. You can see that we are pretty much on target in general. Then I jump all the way to slide 16. Importantly, our outlook for the remaining of the year. As you noticed yesterday, We made upwards adjustments to our outlook and after a record high Q2 revenue driven by volume we expect the broad based momentum to continue through the second half of 2026 and the revenue growth will be driven by both volume and now also sales price increases which we introduced to compensate for inflation on energy, raw materials and transport. However, we expect the growth to be partially constrained by sourcing limitations, such as in the North American arena. We therefore forecast full-year revenue growth of 5-7% in local currencies. At EBIT, we maintain our expectation for the full-year EBIT margin in the range of 13-14%. And while sales price increases will support this margin, the benefit will partially be offset by North American sourcing constraints and elevated maintenance cost and less favorable product and country mix. Last but not least, our investments. Our projects are largely on track and we do have some timing on our capex. So significant supplier contracts were being finalized and are being finalized in 2026. And this timing of down payments are expected to drive our investment outlook to around 750 million for the year. These were the initial slides and I hand over now to questions.

We will now begin the question and answer session. 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. In interest of time, we kindly ask to limit yourself to two questions only. At this time, we will assemble momentarily our roster. First question is from Pujarini, Gross Beringstein.