Wienerberger Baustoff Ag

Good morning, ladies and gentlemen, and a warm welcome to Wiener Berger's conference call. Our board representatives today are Heiner Scheuch, CEO, and Gerhard Hanke, CFO. They will walk you through the presentation and are ready to take questions afterwards. I will now hand over to Mr. Scheuch for the presentation.

A warm welcome. Good morning from Vienna to all of you. Thanks for joining us in this early conference call. Hope you all well and enjoy the summer around Europe. I'm glad, obviously, to go with Gerhard through our half-year results. They are a solid and very satisfactory performance in the light of, I would call it, the little sluggish residential housing markets in certain parts of Europe and North America. But let's now move a little bit to the results in detail. When we look at revenue half year, they are more or less in line with expectations, with 2.2 billion. And as I said, when you look at Wienerberg, and we will elaborate shortly a little bit more on that, it's a strong performance with respect to the end markets that we are operating in. And it shows also how important it was to redirect Wienerberg's strategic focus on renovation and on infrastructure to markets that are doing much better these days compared to the new buildings. Operating EBITDA at 400 million, that's in line with our expectations with respect to the first half of this year. EBITDA margin also strong, a little bit above 18%. Consider also, and we will talk about this, that we had extensive stand stills and capacity cuts in the first half and therefore it's impressive that we can reach this sort of AVTR level even in this depressed market environment. Stencil costs, as I said, about 50 million for the first half year and the capacity utilization, especially in Ceramic Europe, with 57% on a very low level but you see how profitable we still can operate at such levels. Cost management is very strong. We have done a lot of proactive measures. Remember last year at the end of the year we told you that we need to do some measures because we foresee already that some markets will be down in 2024. We got confirmed some are actually down more than we originally expected. That's why we intensified the measures and a little shy of 30 million cost cutting and the measures to improvement were contributing positively to our results. Very happy with the acquisition of Terrial. It's the biggest acquisition of the company in its history. It was the right decision to do at the right moment. even in these markets, Germany and France, because it gives us the positioning, the right one in order to improve not only the manufacturing footprint, but also commercially. Not even a couple of months after the closing of the acquisition, we already with one sales force in the market in Germany and in France, very strong delivery on synergies and very performant teams also on the cost side when it comes to administration and overhead costs so a very strong contribution from the terrial side also If we look then on the market exposure side, as I have told you, that's the first time actually that the new residential housing segment for Wienerberger is less than 50% in its turnover. So it's a historic moment that you see that Wienerberger is shifting its attention more to renovation and infrastructure, two segments that we will continue to work on in the years to come. And obviously we'll take advantage of the upswing of new residential housing in North America and Europe with the existing capacity that we have in place especially in the ceramic segment that means clay blocks and facing bricks and rooftops. So all in all, I think what is interesting to look at when you look at the slide number five of our presentation, that especially in the single family housing market, which is a very important market when it comes to Wienerberger's end products with clay blocks and facing bricks and roof tiles, how poorly this market has performed in 2024 compared to the last really financial crisis, 2009 and 2011. And we took here the average numbers in 2009 and 2011. And even when we take those and compare it with this year, how sharply this very specific market is down. You see it in France, you see it in Germany, Austria. These are especially markets that are hit hard right now. So this is what we have to digest in the end markets. And I think you can appreciate now more how we manage costs and adjust our capacity to this. Also, when you compare 2024 and 2023, it is very interesting to look at the recovery in Eastern Europe, Poland up with about 15% in this segment, Hungary obviously up even more, and a certain stabilization trend in other Eastern European countries. Here again, it shows clearly that we have seen the worst in Eastern Europe and moving out of this low numbers and increasing activity, we can confirm that. And we can also say that obviously in these Western European markets, especially Austria, Germany, France and Belgium and the Netherlands, We are right now at the bottom and we will see this bottoming out effect for the rest of the year and we will see some growth next year. So this is what we see in the end markets. Obviously, people talk a lot about interest rate and the impact on new residential housing. That's true. It's absolutely right. And we had no cuts or no significant cuts in order to stimulate new residential housing construction. However, we see also that the political side has made mistakes. There was instability due to elections, especially in Europe. Some wrong decisions were taken. People were not confident enough to invest. And so I think momentum is building on the European level and on national level. in the sense that they need to do something about affordable housing, about social housing, about housing in general. So this is going to be confirmed by housing commission on the European level and this will certainly play in our favour in the years to come because I see a decade in front of us with quite some substantial growth in new residential housing construction. in Europe and in North America, which is based on demographic change. You have a lot of migration. You have a lot of underlying demand in these countries. And step by step, I think, will increase the construction rates throughout the economies that we are active in. And you see some measures are already put in place, they are discussed, they are voted in certain parliaments in Europe, so this will play in our favour from 2025 onwards. And we see also obviously some substantial aid coming from the European Union when the new Commission is voted in later this year. So, all in all, I would say, from our perspective, to give you a clear message, we are through the worst in Eastern Europe. So, it's a positive development in new residential housing. There's a good trend, actually, and I'm also very positive with the UK and especially with Ireland when it comes to new residential housing construction. We see here good numbers coming through and also growth rates. We are partnering out in Central Eastern Europe, as I said, especially Austria, Germany, France, Belgium and the Netherlands. These are important markets for us when it comes to these segments of new residential housing. And we see a temporary slowdown in Canada and in the North American and in the US market. It's a little bit different. Canada is more the political and economical situation and in America it's the election and interest rates that play an important role here. So all in all, I would say that the rebound of the new residential housing market is only pushed a little bit back. When we gave you our forecasts for the whole year and our guidance, we assumed clearly that in the second half of this year there will be a pickup in activity and there will be some interest rate cuts. Unfortunately, they are not happening. But as I say, this is for me something that is delayed and we will have a substantial buildup of demand to come with. I didn't talk too much in my introduction about the infrastructure market and the renovation market. And here are a couple of words. Renovation is very stable, slightly positive in certain countries, very important for our roofing business. 60% of our roofing sales go into renovation. Also other solutions that we have, thin brick and other facing solutions that we sell. So these are important markets. Renovation also when it comes to piping and paving, two aspects that we don't talk too much about. When it comes to piping, a lot of renovation is done with respect to water and also to energy. So here again, a growing segment and paving also a segment that is important in certain European markets that we are active in. Infrastructure as such, we see good spending trends from the US to Europe when it comes to governmental initiatives. Water especially is a big issue, sewage is a big issue, and also energy, where the governments and the regions are investing heavily. So it helps us in the respect of our piping business in these respective regions. Let's have a little look at the quarter two results. And here you see in slide 10 very clearly how affected ceramic business was in Western Europe. These are the economies where we basically talked about. And you see that when you take out the UK and Ireland, which had positive trends, that it is more focused on France, Germany and the Benelux. So a negative trend there when it comes to volumes and piping, as I said earlier, a good trend. in this segment. Ceramic ease, the pickup is confirmed. Here the 13% plus compared to last year. Piping also in the positive terrain. So nearly compensated the upswing in Eastern Europe, our overall activity in Europe. Ceramics in the US also a little bit weaker due to the effects that I told you about in the housing part. with about 11% down and the piping more stable, plus 1%. So again, I think from an overall perspective, group-wise in the second quarter, a very strong performance with 2% only decline in volumes. When we take the revenue bridge, here you see this 2% also when it comes to volumes is minus 17 million. We have here from a mixed perspective, a rather stable development price. And let me elaborate here a little bit also on the price side with this negative 3%, 35% comes mainly, and this is, as I say, mainly out of Eastern Europe. And I will explain this, how this comes about. Eastern Europe is a different market. It's a more do-it-yourself, it's a more individual market. It's not driven by big project developers, etc. So you need to be very careful when such a quick upswing is taking place that none of your competitors take too much market share or gets excited about this volume increase. So that's why we acted proactively, Wiener Berger, in order not only to defend our market share but also to make sure that there's nobody contemplating capacity increases or putting back additional capacity in the marketplace. So this is a deliberate action. I call it an action that is strategically planned by us. You will appreciate also Gerhard will show you that from a margin perspective, Wiener Berger keeps its margins. So it's no pricing pressure that some people might allude to. It's a strategic decision that we take. We can also sort of work in another way in the future if we see that the market is now stabilizing more. But as I said, it's a very deliberate and from us planned decision that we put in place due to this specific market that we find in Eastern Europe. FX is, I think, very clear, and obviously the scope has an important aspect here that is mainly coming from Terreal, a little bit the smaller acquisitions that we did, but important acquisition on the piping side and in the US. So here, all in all, an increase in revenues and a good performance, as I said, considering the underlying market. The ABTR bridge, as such, Let's focus on this in a minute. When you look at the APTR from the side of the sales volumes, including the stand stills, there is a little drop here, but not that significant. Price over cost. I explained this coming out of Eastern Europe, a little bit of Western Europe, but this is not nothing of significance, but I would say this is digestible for us. And then you see the great contribution from the self-help and the cost management that we put in place, bringing in 16 and 12 million respectively. So obviously, including the scope, additionally coming in from the Terrier and the other acquisitions, we have a growth in the EBITDA to 285 million euros. So I think here a good underlying trend when it comes to the second quarter and perfectly in line with our expectations. Let me take a deep dive also in restructuring so that you have an idea what we are doing. We are obviously mothballing and closing down operations very quickly, very proactively. So we have done so with about 10 plants in different regions, especially in the Western European hemisphere when it comes to facing with clay blocks and roof tiles. So here adjusted the manufacturing pace. We have also most bold certain production lines. That's six. We will monitor this very closely and over the next half year might be some more that we adjust. Keep in mind that also when we do investments these days, and I will talk a little bit about this in a minute, we also expand our capacity inside. So we regroup them. So it's an efficiency improvement on the long run that Wienerberger makes. We make ourselves even stronger in the market. So again, very well adjusted to the market demand and very quickly and rapidly you've seen the impact on the personnel side and the capacity side. So with this, I would hand over to Gerhard who will walk you through the results of the first half.

Thank you, Heimo. As Heimo mentioned, we had basically some positive momentum dynamics in the second quarter, especially in Eastern Europe. Considering that, and you still remember when we reported on quarter one, which started later this year, we had a rather weak quarter. which we still feel basically in our first half year volumes. We are in the first half year, as we mentioned before, minus 6% in sales volumes. We see that based on the confirmed recovery in Eastern Europe that we have now in Eastern Europe more or less a flat development for the first six months. And here we expect definitely for the second half a more positive development. which we already have seen in the second quarter. We also spoke about the development in Western Europe in some selective countries, which are linked to the new residential decline and we see here minus 13% and again here on the infrastructure side a much more stable development for the first half year when you also look across Europe just a minus one and in North America a plus six. So infrastructure as we said developing positively, stable positively, renovation stable and the volume the missing volumes, let's say it in that way, what we see are basically linked to the weaker new residential developments in selective countries in Western Europe. When we look to the revenue bridge, you see that we have slightly higher, let's say stable, slightly higher Revenues, which is driven by the scope, by the additional revenue of Terrial and by the smaller activities, which we bought in the first six months. We also deconsolidated, respectively, divested the Russian business, what we should keep in mind still. which is also impacting basically first half year numbers. You see the 6% in volume. We spoke about the minor three in pricing and also Heimo mentioned it is mainly allocated to the Eastern European hemisphere. So I will see it, I will show you later on also where you see that basically it is in Eastern Europe, this pricing initiatives, which we consciously have taken more in the range of, let's say minus five and the rest slightly stable or let's say stable, some slight lower prices in selective countries in West. and a positive price in the ceramic part of North America. But we also have prepared a slide on that later on. Let us look to the cost inflation because here I think we are outperforming also what we have originally have expected. We ended the first half year with a minus 1.5%. the beginning of the year maybe a little bit more conservative on the performance of our energy and of our granulates where we have foreseen or expected that that decline in cost inflation is not that high so we are having now for the first six months a minus four in energy and a minor 13 in granulates, and here we was more conservative, if you remember. I was assuming during our last call more cost inflation between 0% to 1%. This was somehow a target to move more to a zero cost inflation. And thanks to the development in energy and in granulates, we ended up for the first half here with the minus 1.5%. When we look to the overview where we basically compare the sales prices and we spoke about the sales prices already and the cost inflation, you see that the price cost spread is with 1.8%. This is the 34 million, what Heimo mentioned also before, where we spoke about the negative price-cost spread basically for the first six months, which you see later also in the APTA bridge. You see that the pricing initiatives which we have taken in the ceramic part with Mino 3 are mainly allocated to the eastern perimeter of Europe. And you see also on the piping side where we have lower prices, you see also that the granulates are going down. You know that granulates are making roundabout from the cost price around about 60 almost to 70% of the cost price. So it is an essential part of our cost price and also on the cost inflation of our costing. And therefore, you see that we have been able to mitigate basically the sales price decline also by a reduction in the granulates price. You see it in Europe as well as in North America, meaning that the margins, the profitability in this case is stable, so that the pricing itself or the negative price-cost spread, we're mentioning in the beginning is mainly to allocate on Eastern Europe. And this is a conscious decision also what we mentioned to pick up some market and also to position ourselves against the more fragmented market competitors which we have in Eastern Europe. Utilization, I think also we heard in the beginning that utilization rates are lower. We had, as we said, a later start into 2024. We also started up our production capacity a little bit later this year. You remember in the first quarter, we also mentioned this round about 50 million on standstill cost. They are still there for sure. We have seen them also in the beginning. We have basically a lower utilization rates and still, as I said, we are able to perform and to have an EBITDA margin of above 18%, which is also thanks to the cost management what we did because this utilization rates are basically also showing that we took out quite some capacity very fast and also showing that there is enough spare capacity or headroom capacity when markets are picking up. We have done this exercise mainly also basically to bring inventories levels down and I think also this was mentioned in the first quarter call when we spoke about the inventory levels in Ceramics Europe, where we said, okay, a more normalized inventory level, a Finnish good stock level for Ceramics Europe is around about 400. The upper range is 440. This excludes, please, Terreal, so this is legacy business what we show here. And you see that against the seasonal upswing, what you normally have in the first half year that we decrease basically our inventories levels and so that means also we have done our exercise when it's about inventory adjustments in that field so that we feel comfortable to keep going basically into the second half of 2024. Cost management, we had significant contributions in the first six months. What you see here is around about 30 millions. The big part is still coming out of the cost initiatives which we implemented in the second half of 2023. You remember we had last year a 60, then we said, okay, we will have an overspill of 20 out of the program 2023. We did some extras in the beginning of this year, which adds up to the 29 for the first six months. And this time we have shown we have implemented now a second program, let's call it, on initiatives to adjust accordingly. And this will also still contribute in the second half, but also mainly will contribute into 2025. This brings me to the EBITDA bridge. A lot of the things I think was already explained. We have an impact of basically the weaker market volumes of around about 100 million. We have the price-cost spread. And we have significant steps initiated implemented as we have explained before when it's about the self help initiatives when it's about our cost management. So all the things are almost when you add them up almost 70 million and which also. supporting basically our 400 millions. And we mentioned it also in the second quarter when we spoke about I think the 285 where we also were able to show a small organic growth basically in our second quarter performance. Let me explain you also some of exceptional items. We have some exceptional items in our P&L. First of all, we have an operating EBITDA, as we just explained, of 400 million. As we do also usually, we have eliminated or excluded some sale of assets. Here we have some smaller assets in which we sold, non-core assets, but here is also included the sale of the Russian business, so the deconsolidation of the Russian business. In this 10 million, what you see here, minus 9.5, and then you have a bigger position which is around about 70 million and this is mainly the restructurings what we call so what you see here is mainly severance payments devaluations one-off costs which are linked to the most falling or the closure of production sites or also with some other restructurings measures in the overheads but this is a clear one-off positions which basically we eliminate eliminate from our operating ebta secondly It's not only the EBDA which is impacted by some one-offs, it's also basically some other positions in the P&L. You remember the restructuring cases, what I just mentioned, led also to some special write-offs in the size of around about 49 million euros. These are basically special write-offs on assets where we decided to shut down production facilities, and this led to an exceptional depreciation, a one-off depreciation of 49 million. The 69 I just explained before, and then there was the recycling of the FX reserve due to the deconsolidation of the Russian business. Although this was already explained in the first quarter, that means you find back the deconsolidation of the Russian business basically in two line items of our P&L. First of all, it is The sale of the Russian business or the gain is included in the other operating income and the recycling of the ruble reserve is included in the other financial results. But if you add them up basically you see it's a significant one-off amount of 100 50 million roundabout, which is impacting our profit after tax and what you also have to consider basically in your calculations when you calculate earnings per share, et cetera, that there is a significant one-off included in the first half year. Let's quickly walk through the regions. We spoke already a lot about it. I think in the western region, it was already explained the reason why EBDA is lower than a prior year. Still a 15% EBDA margin considering their new residential housing, what Heimo showed before in these countries, Germany, France, which are suffering heavily at the moment, the new-build sector. So it is still, I would say, a remarkable performance, a 15% margin, and this definitely is supported. by our renovation and infrastructure business. So still a satisfactory development considering the market backdrop or the challenging market backdrop where we are in. Eastern Europe, here you see that all the initiatives as Eastern Europe was basically moving into a decline more or less earlier than the Western perimeter in the new build sector. And we also initiated last year, so last year our cost management initiatives were mainly focusing on Eastern Europe and you see that this is already contributing. heavily also to our cost structure, let's say profitability structure. EBITDA margin is slightly above prior years and EBITDA margin in this environment of 20% is also for us more than satisfactory. EBITDA level almost in line with prior years, so strong performance of our Eastern Europe business. The same for North America. very happy and satisfied, EBTA margin of 26%, EBTA almost in line, with prior year, keeping in mind that still the new-built market, especially in the second quarter, was slowing down, and we see and feel that there is some uncertainty in decision-making due to the upcoming elections in November, so also there we're expecting a more positive trend basically in the beginning of 2025. That's in a nutshell about the numbers. Heimo, back to you.

Thank you, Gerhard. Let's have a quick look at the sustainability program 26. It's perfectly on track in all its different aspects. So from the CO2 reductions to all sorts of water management, circularity, and biodiversity. We're working on the different issues, implementing our measures in order to reach our ambitious targets there. So all the KPIs are well in line with our expectations. And here a word also on how we run the business and invest in the business. From our perspective it's very important that sustainability is the driving force for our business forward and we obviously put a lot of emphasis and we speak a lot about innovation but we do even more on innovation when we talk about our business. If I compare ourselves to the peers in the sector meaning ours in our industry that still have built plants with old technology and and certain aspects that have been done 10 or 15 years ago, we obviously at Wiener Berger are putting down state-of-the-art plants right now in different areas of our business. Just let me mention a few. When we talk about roof tiles, Here we are currently completing a completely new site in concrete rooftops in the UK, out of the south-east of London. Here this will be in production at the end, towards the beginning of next year, state-of-the-art when it comes to recycling using sustainable resources. The same goes with its sister company, if I may say so, also in the eastern part of Hungary, also now under construction of a highly modern new facility, a state-of-the-art facility that will come on stream beginning of next year. Then obviously in Austria, a clay block facility that is completed in carbon. Neutral, the first one in our group, so this is already also in good shape and will be then running as of next year. So here you see projects where we invest heavily in the future of Wiener Berge and where Wiener Berge is well positioned for any sort of future developments when it comes to new residential housing and also renovation. Important also that you see here in England when it comes to clay roof tiles that we are building the first 100% renewable energy unit for roof tiles that will be next year running in the north of England and when we move then into the piping operations the biggest and most efficient and modern site in piping and plastic piping in PVC piping in Sweden. So, completely recyclable here and adding all the products to recycle one to production. So, again, a state of the art unit that comes on stream later this year. So, here you see that Wienerberger is really focusing on innovation, on new products, on new technology especially. We are not just talking about it, but we are putting the action in place and really focusing on these new technologies in the different parts of our business. That's not enough. We are also tackling the value chain. Here you see a picture of a robot that is already active and not only one, there's a few of them already in operation in the Czech Republic. And people are already working on construction sites, so it's something that's not only tested, but it's already operational in place. And we'll revolutionize the building, especially when it comes to bigger projects in Central and Eastern Europe. So here again, Wiener Berger, not only production and technology, but also the value chain that we try to sort of modernize when it comes to the installing of our products. Saying this and being excited about this future development of Wiener Berge and what we do and what we put in place, let me just focus a little bit on the Outlook 24. Here again, I don't need to speak too much about what is still ahead of us. in the sense of politically, instabilities that you see around the world and the other places also, the elections that are coming up. So here interest rates not being cut so quick as we expected. So all in all, what I said at the beginning, we anticipate that the markets, the end markets, especially when it comes to new residential housing, remain more or less the same as we have seen them in the beginning of the year. So, the recovery that we talked about is certainly shifting into 2025. So, on top of it, when we look at our real acquisition, and here I said that also at the beginning that we're very happy it's on track. So, here again, great job by the teams in integrating, realizing the synergies. We've taken our expectations back from 90 million to 80 million contribution. That is due mainly to the weak German market, especially. The French market is also down, but we are doing here better in the activity rate in the market as such. So it comes mainly from Germany. It is sort of 10%. But the good news is when we look at the plan forward, the higher synergies that we can realize and the better performance will reach 150 by 2027. When we look at the two most important things that we need to talk about is obviously how we see the net debt development, and I will do this under the close supervision of my colleague, my dearest colleague Gerhard. But you see that the debt level is about 2 billion right now at the end of June. We are managing down with gross cash flow from the business. We do some investments as we have shown to you. We will work on the capital and the working capital and we will work it down also to come to a sustainable level that is a little bit more in the range of 20, a little bit above percent of net sales when you talk about working capital. So on our net debt level for the year end, which we can predict more or less at this stage, is about 1.6 billion that we will have. So this is about the two time when you take 800 million as a target EBITDA. So when we look at the performance EBITDA for the rest of the year, here again sales volume more or less in line with what we have seen in the segment. quarter. So price-cost spread will be improving compared to H1, as I said, because these actions are less pronounced than in the first half of the year. So we will intensify our cost measures, improvement measures. So if I take last year's half-year results with 357, we will be up a little bit and then in the range of 400 and 420 for the rest of the year this year. So that's what we are working on and that's what we see as a good sort of performance in this market that we are operating in. So I would say the operating EBITDA guidance for 2024 for the whole year is around 800 to 825. for the whole of Wienerberger. So this is, I think, when we look at 2024 as a year where we see a bottom building when it comes to new residential housing, a rather stable one in renovation and a rather good one in infrastructure, the performance that Wienerberger delivers. And keep in mind, this is under such circumstances that we deliver 800 to 820 million. So with all the potential that we have now on the side from capacity, from the investments in new technology and the increasing sort of presence in renovation and in infrastructure for the years to come, I'm fully I'm fully certain and convinced that we will reach our targets in the mid-term. In 2025, you will see contribution from state aid programs, from programs when it comes to new residential housing. Our full cost effects, saving effects will kick in. So, when we reach normalized market levels that are far below 2021 levels, by the way, in 2026, then we will certainly be in a position to deliver above 1 billion, so in the range of 1.2 billion, as we have said, and we confirm this clearly as a mid-term target. So I would say it's, from our perspective, we're excited about what has happened this year. It's a difficult year, especially in the new build segment. However, when we look at our performance, how we tackle the pricing issue, the cost issue, how we manage capacity and can bring down working capital, it's a year where we show that we have a high degree of performance and outperform our colleagues in the markets where we're active in. And that's important. And I think it makes us very optimistic for the future. Thank you very much for your attention. I'm sure that all of you will have one or two questions that we will eagerly answer, Gerhard and myself. Thank you very much.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of your screen and then raise your hand. If you are connected via phone, please press star followed by one on your telephone keypad. If you wish to remove yourself from the question queue, you may press star followed by two or please press the lower hand button. Anyone who has a question may click the Q&A and raise your hand button or press star one at this time. One moment for the first question, please. And the first question comes from Priyash Sia from HSBC. Please go ahead.

Good morning. I have a couple of questions. To start with the cost management side, So you had in Q2 cost management of $16 million and self-help of $12 million. And, Gareth, you talked about most of the activities are in $16 million. Most of that came from Eastern Europe from last year, and you have done some action in Western Europe. So what's the kind of run rate we should look for second half in terms of cost management as well as for self-help?

For the self-help, we are striving for around about 40 to 45 million for the full year. And we are now with cost management of around about 30. I think we have 29. And here I expect... around about the 20 in addition to the 30, and once more a bigger share in 2025, mainly when then the initiatives which we implemented in the second quarter this year, a big share of that will contribute to 2025 results.

Okay understood and now coming to the capacity one which you have cut down to near about 57% utilization you have right now. Is that utilization calculated after those plants excluded those who have mothballed or closed or including those plants as well?

It is including the mothballed capacity what you see here. The operational capacity utilization is higher This is really headroom capacity when you call it.

And what's the kind of operating or operational capacity calculation we are looking at this one in time?

It's a buffer. It differs, yeah, like always from product group to product group, but it is somewhere between 60 to 70.

Okay. And third one is on your pricing side. You talked about pricing down by 3% because of Eastern Europe, and that's a strategic move, you have done it. So when we look at the market share of yours in Eastern Europe, without this price action, would you say those market share would have fallen and you are at this price, what you were previously, or you have gained market share?

Gained market share.

Okay, okay. So those double-digit volume growth which we talked, which we got it in Q2, without the pricing action, would that be more looking like high single-digit increase?

Sorry, you dropped out on me a little bit. Can you just repeat it? I'm awfully sorry.

No, I was just talking about the Eastern Europe volume growth. In Q2, you had a 15-odd percent volume growth in Q2. without the pricing action, that number would have looked like a high single digit. I'm just trying to understand what was the market growth in Q2?

Well, the market growth was in certain countries in a high even to double digit. Yeah, so there was a good underlying demand.

Ferran, I'll talk to the Q, yeah.

Thank you.

And the next question comes from Marcos Remes from RBI. Please go ahead.

Hi, good morning. I hope you can hear me. I actually have just one question related to the all-year non-operating expect. If you could provide some more granularity on what to expect in the second half year as regards restructuring and asset disposals. And I'm just... Reading also through my Q1 notes, and back then you were guiding for a full year impact from this restructuring of 25 to 30 million. So, I mean, that was mid-May, so I'm wondering how it was possible to act so quickly. Yeah, that would be it.

Maybe to the first one. We have seen them, let's say for 90, 95%, we have seen them, the restructuring initiatives. We consciously speed it up. We didn't want to come up with salami that we come every quarter with some restructuring. Therefore, we speed it up and adjusted our capacity network or our industrial footprint accordingly to the market assumptions or market environment, which we have seen in the second quarter. uh yes we were more uh conservative in the beginning of the year but also there we had a different market picture let's call it that way especially on the new residential side and the restructuring decisions what we took basically uh coming out of the the weaker new residential markets in western europe

Yes, and I think another thing Gerhard I would like to add is obviously when we discussed these numbers, our colleague is mentioning beginning of May, we were not yet in a position to assess 100% the market drops in Germany and in France, especially French elections came later. And due to the fact that the exposure of Wiener Berger with respect to the Terrial acquisition is much bigger to these two economies, we were deciding deliberately also to cut quicker and faster. And this is obviously one of the aspects as well.

But just to confirm once more, there will be no big amounts in the second half. So the 150, what I explained for the first half year, will be more or less the amount for the full year. Right.

And on the positive side, the asset disposals, usually they're kind of skewed towards year end.

It depends a little bit. It depends a little bit. We have a couple of them under negotiations. We can't push it because it depends then on the buyers. But I'm fairly optimistic that the one or other will be realized. And we are talking here more about asset deposits in North America and the UK. So this should be in good shape. Okay, thank you. Thank you.

And the next question comes from Gregor Kuglic from UBS. Please go ahead.

Oh, hi. I have a few questions. Could I start with pricing, please? So I think if I look at the slides, we're down kind of 3%, I think, both in Q1 and Q2. I guess, firstly, I want to understand, I think when you spoke on your Q1 call. I don't know. I certainly can't recall down three. So I want to check sort of whether there's a mix effect or whether you were talking about a different number back then. But I guess more broadly, what I do want to understand is why do you think pricing is starting to sort of come under pressure? I think you called out some voluntary cuts in Eastern Europe. I guess I want to understand as a market leader, why are you doing that? And I suppose sort of your picture of where do you think pricing is directionally heading in the future? That's my first question. Do you want me to ask all of them or should I go one by one?

Yeah, that's fine. Let's take your questions and then we'll go.

And then the second question is on roofing. So obviously, I think you trimmed a little bit also in Terrial. My question is, Are you confident that there's not sort of a lagged impact on the sort of renovation side so that we're sort of going to be at the trough on the roofing side also this year? But then the final question is, can you just update us what your CAPEX guidance is maybe for this year and maybe next year? Where do you think CAPEX will land? I'm guessing you're cutting it back, but I didn't see a specific guidance. I just wanted to double check. Thank you.

Right. Let's, from a CapEx perspective.

Maybe we can take this first. We expect, I think you see it, Gregor, on the wrong slide, where we show the net debt development for the second half. It will be, I think, 220 in the second half. This is mainly, there is some CapEx considered for a share buyback. And the rest is basically maintenance capex and special capex.

Okay, so your full year capex guidance is what these days?

It's basically the full year is 340 on maintenance capex and on special capex.

Okay. And you're spot on. We cut back on capex, especially on the maintenance side. Yeah, that's definitely it. Yeah. When you were referring on roofing, you see from our perspective, yes, we've cut capacity also in roofing, especially in Germany, to a lesser extent in France. But we have already adjusted to the lower new build demand in roofing. And on the renovation side, we have seen a rather stable order intake. And renovation is a more longer-term business, not this sort of... short term so that we have a better view on the intake of orders. So from my perspective, I think here when from a capacity and utilization rate and availability of products, we are in good shape. Okay. Pricing. You see, as I said, you are absolutely right. As a market leader in developed markets like Western Europe, like North America, we don't do any actions or we don't move deliberately on pricing because we set the price and we actually show as a leader the pack where to go, if I may say so. And this is with all due respect to all of our competitors. But in Eastern Europe, it's a little bit different. First of all, some of them are smaller markets. Some of them are not so rational competitors there. And we were seeing that the market picks up rather quickly and rather fast. And there, Gregor, you need to be careful not to give them too much room to breathe, if I may say so. If you just lead by example the price and they sort of get all excited that the BRICS leave their yard and they want to start a new line and so, then it becomes a bigger issue for the rest and then it's difficult to get the capacity again out of the market. I would say you need to trust us that we don't have here pricing pressure. It's something and we are not making a price war. It's just to show them that they should basically stay what we have as a business and not be overreacting in the marketplace, if I may say so.

Okay, and then just coming back, I think back on the Q1 call, you said your price was up slightly.

guess now if you just piece together h1 and q2 what you put today i think we just pricing was kind of down three maybe there was a mix effect or what's going on in terms of i think in the in the first quarter is basically pricing is still i think difficult to grab you have a lot of movements i think we were not positive that price is up but we also had not really we were assuming more flat pricing We had some countries where we have seen that pricing is going up. This was at that time the U.S., which is confirmed. But we also have seen Western Europe, which was stable pricing, and we were not sure, honestly, about in the first quarter where Eastern Europe pricing will walk through. Therefore, what I have in mind, I think we communicated a stable pricing in the first quarter.

Okay. Thank you. Thank you, Gregor.

And the next question comes from Tobias Werner from Stiefel. Please go ahead.

Yes, good morning, gentlemen. Thanks for taking my questions. I have three, if I may. If I look at the Q2 numbers for Eastern Europe, it seems to me as if you've got a good operating leverage there, unless there is some terrial EBDA or sales and EBDA in the numbers.

There is no, sorry, in Eastern Europe, there's literally nothing, just a little bit from Italy, but that's to be neglected. So this is a good operational leverage, as you say.

Okay, so because what I see here is a 5% top-line growth in the second quarter and a 44% EBDA growth, which would be huge. Is that a fair observation?

It is. As I tried to explain before, most of the cost initiatives which we implemented in 2023 were basically focusing on the cost structure of Eastern Europe. And yes, we have seen after all the standstills basically were done in Eastern Europe in the first quarter. Mainly, I would say most of the plants were operational in the second quarter in Eastern Europe. We also have seen the positive operational leverage based on the, I would say, optimized cost structure what we have in place.

Okay. If I look at my rolling three-month production of bricks in Poland, then they were up in June 11.7%, so Q2 was up 12%. Maybe that's one of the reasons why you're cutting price, you want to regain We gained volume there. But the key question is really, you've hit a low in December 2023 at minus 30%, and then the rebound came. So it took less than a quarter to rebound. Is this the sort of pattern you would expect for Western Europe as well?

No, clearly no, because it's the market dynamics. The Eastern European ones, as I said, more to do with yourself as more smaller ones so that they are quicker when it comes back and reacting also on interest rate cuts quicker and faster. The Western European ones are more driven by bigger project developers and it's taking more time to come back. So I would not be so optimistic that we have only a quarter here. That's why I'm saying also it needs to get a little bit more time, about six months, that we will see here the recovery. areas like the Netherlands for example will be first that's my estimation because here the government is making already good inroads with respect to housing so you will see better activity then the Belgians will follow hopefully then the the French when they get a new government in place. And I must disappoint you in Germany because I don't see here a governmental change. We'll have elections in more than a year in Germany, so not a lot of things will happen there. That's at least my estimate, Tobias.

And by definition or by implication, the UK is already ahead of the Netherlands.

Sorry, I didn't include the UK. It's on a completely different growth path already and has already left this behind. The UK and Ireland are doing better. Honestly, I say it with a little bit of pride, and I'm allowed to do this on this conference call, because I've looked carefully at the numbers of our colleagues at Ibstock, and if I take Wienerberger's performance, it's much better. Honestly, I'm very happy with our performance in the UK and Ireland.

Okay, great. The two last questions to help me or us in terms of modeling. Terreal seems to earn a run rate annualized. You give us the 80 billion EBITDA, but the top line seems to be pointing to around 500, 520 million. Is that fair?

I think that's on the low side. I would move to the 600. And this is from today's perspective as good as we know the numbers of Terreal as of today. But this is where we expect that it is more 550 to 600 in that range.

That's helpful. Thank you. And then just lastly, a bit masked by the FX impact, the net financial results,

you know you kindly set it out in your 150 million sort of bridge to the net income level um but what would you say is your cost of debt now so that we can model this uh more accurately i'm considering a moment a 20 plus compared to prior years so i have an interest result of 100 million in it a small 100 million as an interest result okay Thanks, very helpful. Keep in mind the tax rate. We are moving slightly up with the tax rate. We have now more Western European exposure due to the Terreal and Kreaton editions. So I'm basically expecting a tax rate of around about 22, 23% for the full year.

Great, very helpful. Thank you. By the way, the CMD, are we going to have a CMD later in the year? Sorry, just remind us.

Yes, there will be one. Yeah, absolutely. You will get invited. Thanks. Definitely. Happy summer. Yeah. Same to you. Thank you very much.

And the next question comes from Harry Gord from Bernberg. Please go ahead.

yeah hi good morning thank you for um taking my questions i've i've got two please so so firstly um thank you for the information you gave us about your utilization rates in europe that's very interesting um i appreciate it'll vary country by country but can you give us a bit of a high level feel for what you've seen competitors doing with regard to capacity around europe and and then just on that can you remind us about the process of reopening production capacity, you know, how long does it typically take? You know, what have you seen in the past with regards to catalysts for reopening from competitors? And then the second one, very different one, The 2026 EBITDA number that you've kept, I think it was 1.2 billion. I appreciate you're not going to give us 2025 guidance at this point, but can you just remind us what the sort of general assumptions in terms of sort of market growth and pricing and other factors that drove that 2026 number? Thank you.

First of all, when we take the sort of competitive landscape, it's very different between wall, roof and facade because the structure is very different. In roof, we have more or less very... I call it now consolidated situation in Europe, so the capacity utilization is more or less the same, and it's traditionally a little higher than in the other segments. So from this aspect, I think here we are fine, and market-wise, the most, I call it, overcapacity is in Germany right now due to the low market there. But the rest in Europe is more or less, I would call it, in good shape. And there's no one sort of creating additional capacity or bringing on additional capacity to the market. Facing Bricks is the UK and the UK market is to be excluded from this because it's three PLCs that run the market here so it's a very rational behavior. The Nordic markets are also Belgium and the Netherlands are actually the core here and here you have family businesses that are also very reasonable when it comes to this sometimes a little bit more aggressive and then sort of in line with expectations. But as I explained to Gregor earlier, here we are market leader, here it's a different structure, here it's a more, I would call it a more organized in sense of that you don't break out and do crazy things on capacity and price. So that's under the, as far as I can go saying this in an antitrust perspective, we've never, in contact with people, we don't talk with them, but it's a thing that is in place for 20 years. Eastern Europe and Western Europe when it comes to clay blocks is a little bit different. Why? The competitive structure is different. Here you have small ones, here you have one and two site producers, maximum we have two sites or so. So they can't close down a lot, so they reduce capacity, they reduce production output, and they probably close one line and have it mothballed. Mothballed means that you need about three to six months, depending how long you have mothballed the line, to bring it back and prepare it. So it's a delay of three to six months. In our company, we count about three months between the decision to take it back and then running. so that's with mosfet if you close down something for good then it's obviously we decide to move out of the site so we won't bring it back so this is a clear decision gerhard talked about this earlier when he talks about the impact on the p l of this year so uh when we to come back to what you've said do we see here um activity as I said to colleagues of you and you also here, that why we moved a little bit quicker and proactively in Eastern Europe on volume and prices in order to keep the stability in the market, not that some are over enthusiastic and then start additional capacity. That's what this decision was about, to go proactively on volumes and prices in Eastern Europe. Thank you. Thank you.

It was just that, sorry, there's that second question around the 20, the assumptions of the 2026.

Yes.

Thank you.

Well, I think from, you know, I'm not in a position to give you here guidance and I think it's too early. We'll have time enough to talk you through this. But when you take all the measures that we put in place cost-wise and also from a capacity for new products and innovation, you will see here good organic growth rate. The underlying market assumptions, if you see from a spread now, renovation and infrastructure growing at the pace that we have right now. So that's fine, that's our underlying sort of assumption for this development of 1.2. And then obviously the new residential housing market coming back, as I said, not to the levels of 20, one, but below them. So we said about 80, 85% of these markets that we have seen in 25 is required to hit this 1.2 target. Thank you very much. Thank you.

And the next question comes from Axel Stasse from MS. Please go ahead.

Yes, good morning, everyone. Thanks for taking my questions. I have a couple of ones. The first one is on the UK market. So as you mentioned, some of your peers struggled in the UK in the first half year. And they even suggested, you know, pricing stable with some competitive pressure on pricing. Can you just explain how Wiener Burger has been able to outperform and actually deliver growth in the UK? Just so I can understand how you're a B-tone in the UK differs versus your peers and making sure you're not cutting prices here. That's my first question.

We are not cutting prices in the UK. Not at all. Not at all. No, no. And I think from our perspective, you need to understand that our UK operations consist obviously of bricks on the one end. We have an exposure to the RMI market with roof tiles also. We are very strong here in the performance when it comes to RMI and new build, both with roof tiles, concrete and clay. And the third exposure is not only to infrastructure, but also RMI and U-Build with our piping activity, which is doing very strong. So I think from our aspect here, the performance of the underlying part is very important. And there's one thing obviously from a pricing aspect. I think you must not underestimate that we obviously bring products in from the continent. As we have explained, these products are always priced a lot higher than the products that are produced locally. Here we are talking huge price differences, about 30, 40, up to 50% higher prices. And obviously due to the high-end market that has eroded also a little bit in the UK, less products are coming. These are the high-end products. So you have more local production with lower pricing and not that high. So I think from this aspect, From pricing one, we are perfectly in line with the others in the UK. Okay, totally.

My second question is about the piping business. Can you just provide an update on your profitability levels there? Are you on track with the guidance you provide for 1026 in the piping slash infrastructure and market? And actually, can you remind us the profitability guidance you provide in the C&D?

The guidance, I think we gave you a little bit of a EBITDA sort of range, yeah?

There was no profitability guidance.

No sales, I think. You provided, I think, a sales guidance of 2 billion. I just wanted to check if I missed the profitability guidance.

No, I think we talked about the target to come up to about 2 billion sales in this business. So when you take the US and the continental European and UK operations together, I think, Gerhard, I speak under your control, we will end up this year about 1.5 or so.

We had some smaller acquisitions, what we mentioned also, we mentioned grain plastics in the Netherlands. We did some aerial, which was also located in the Netherlands. So we are doing some small steps, very localized, and also adding the right product ranges or products to complement basically the range. And this is also the way forward, basically, to move in the direction of the 2 billion. There is a part of organic growth, which is scalable volumes, basically, out of some small acquisitions, but also further M&A steps in the years to come.

Okay, okay, very clear. And then the last question, thank you, is about the leverage ratio, which has substantially increased here in the first half year. And I guess depending on the volume recovery, we'll also see capex and working cap change accordingly. So how does this change your approach on M&A particularly? Do you have a leverage ratio that you still feel comfortable to... Can you hear me?

Yes, yes.

No, we lost you for a second. So I was just asking on M&A, given the leverage ratio which has increased, Has this changed the way you approach M&A? What is the level of leverage where you still feel comfortable to do M&A? And if so, which are the end markets that you are currently looking at to support your top-line growth?

First of all, I think we confirm to you that we feel comfortable with a range of 1.5 to 2, so we are approaching this 2, obviously due to the fact that the EBITDA has come down a little bit and we will end the year, as you have seen in our presentation, about 2 times the EBITDA to net debt. We feel comfortable with this level. You see also that we do some smaller mid-sized M&A and we will continue to do so because these are very good bolt-ons. We are talking about two to four times payback, so here it's a very lucrative and interesting one and we will keep ourselves active in this field. Obviously, and you are absolutely right, on the big scale or big transaction, we are not sort of moving here actively in some sort of we are monitoring the market we're understanding what's happening there and we're looking carefully and if we see here some possibility to move then we will uh sort of consider it but for the moment i think we are fine we're comfortable with our leverage ratio and we will keep it in this way okay thank you very much thank you

And the next question comes from Nitesh Agarwal from Citi. Please go ahead.

Hi, thanks a lot for the presentation. I have a couple of questions. First one is on gas consumption in 2024. I think last year you were at about 6.6 terawatt hour, if I'm not wrong. And considering the mothball plants and production lines, what do you think your consumption will be for this year?

Slightly above six terawatt. It will be below. We have basically less operations. We have less plants in operations. So also the consumption will be less. It will be somewhere between 6.3, somewhere there I would expect.

Okay, and keeping that in mind, if you look at your total energy consumption going into second half, and of course, your buying forward strategy,

so would that mean that it will be somewhere more or less and at the same level as first half or uh you expect a slightly lower inflation you you speak about price basically cost uh the cost development on electricity and um now the price level what we have seen in the first half uh is moving uh plus minus through the second half okay okay we got it uh and uh

Finally, on the price-cost spread, I think as a follow-up to this question only, you have said that this will be more or less again similar to that in first half. Does that mean, can we look at it as lower prices partly offset by lower costs, overall cost inflation?

We assumed a slightly better price-cost spread in the second half. We will basically

drive back our intentional price adaptions what we did in the first half in Eastern Europe this we will basically slow down and therefore we the price cost spread will improve in the second half okay perfect I have one final question so basically roof as I see it has been your highest margin product and you have a few projects for roof tiles under development But overall, do you see any specific opportunities to increase your market share within this product within Europe?

Well, I think we have now, after the Terrial acquisition, a very good market position and certainly we'll grow it organically. And organically means not only with products for the roof but also with accessories. We are becoming also a big supplier of accessories that are linked to the roof, on the roof, under the roof. will give you a better update than in our capital markets day a little later this year but here is obviously some substantial goals for wienerberger thank you so much thank you so it seems there are no further questions at this time and so i would now like to turn the conference back over to therese krenkel for any closing remarks And before we do that, I will say thank you, everybody, for participating. And I wish you all from Gerhard and myself a lovely summer. Enjoy it. And great to see you in the fall and some of you in London later when we do our roadshow. Thank you very much, Teresa. You might close the call.

Thank you, Alfred. Ladies and gentlemen, thank you very much for taking the time and dialing in today. Our next conference call will be held on November 12th, 2024, on the release of our results for the first three quarters of 2024. For today, I wish you a pleasant day. Goodbye.