Wienerberger Baustoff Ag

Good morning and welcome to the Wiener Berge conference call on the 2024 Q3 results. My name is Therese Jander and you are always welcome to reach out to me and the IR team should you have any questions after the call. With me in the room I have our CEO Mr. Heimo Scheuch and our CFO Gerhard Hanke who will present the results and take you through the questions afterwards. And by that I hand over to Mr. Scheuch.

thank you very much and a lovely good morning to everybody from vienna i hope all of you are well and let's uh jump into our quarter call on the quarter three of 2024. um from our side the wienerberger side we have obviously a very exciting year um so far in the sense of growth we successfully integrated already. Terial, our biggest acquisition in the history of the company. We'll come back to this a little later because we move due to the subdued markets, especially in Germany and France, much quicker and faster on the integration as originally planned. On the other side, we have done a lot of great steps forward when it comes to modernizing our plant network. We'll speak about this also in a minute. And we continue our successful, I call it bold on M&A track, with smaller acquisitions in the northern part of Europe, where we create a fantastic water business that is highly integrated and adds value to our customers from a water management perspective, especially in Norway, Finland, and sweden and here we see continuous growth in the business by the way so we move here really towards a system provider with all the support from software to smaller accessories that are necessary to build the pumping station and all the necessary software that is used for this purpose on another note also in central eastern europe as we say we have a strong pipeline of smaller mid-sized bolt-ons. One of them was also in the Czech Republic where we moved forward in a very good segment for us where we're very active in the Czech market with concrete pavers and insulation material, rocks for sound insulation. So this is a nice add-on for our strong Czech operations. And as I said, we decarbonize continuously our sites throughout Europe, especially with two examples. One in Romania, where we have completely reshaped the factory in the eastern, northeastern part of Romania. and here again with a strong decrease in CO2 emissions, but not only in CO2 emissions, but obviously also in energy consumptions as such to make the whole production highly energy efficient and obviously from a perspective of performance even better than before. So a very good cost structure there in this new factory and it works perfectly well. It's a new technology that we have put in place for the drying of our bricks and which runs successfully. in this site. The other one is a world first, I would call it, because it's the first industrial kiln of this size where decarbonized bricks can be produced. It's in Austria. We are already now in the upstart and the running process of the kiln. It will be formally opened by the end of the month. So this is obviously a fantastic new innovation by Wiener Berger, by our engineering team, and that will go on stream this year and we will see how we can then roll it out through the company. But it's a 100% reduction in the kiln from a perspective of CO2 emissions. So a very, very important step in innovation for Wiener Berg on the technology side. I think when we summarize, we have successfully moved away from a single product producer to a multi-product and multi-solution business. We have now a very strong organization throughout all of the Wienerberger countries, which is geared towards growth, organic, and obviously also due to the fact that we have strong organizational footprints. that can integrate fast businesses. It's ready for M&A growth in the different regions. And I think when we look at our very disciplined capital allocation with a strong M&A record that we will continue to roll out in the future. but let's come now to the first nine months of the year i'm as you all know i'm very long in this industry and i've seen a lot of things in my life and if i look back on 2024 it was an exciting year by all means but also a surprising year i've never seen so many elections so many political changes in Europe and especially in North America. So many instabilities geopolitically speaking. So it was a year very difficult to predict, very difficult to feel and see the developments coming. But I think we steered the business very, very consciously and very quietly through these turbulent times. when you look at especially the new residential housing markets that are at very low levels in Europe due to this political turmoil, not only due to the interest rates but to a sort of lack of leadership in the political scene in Europe. We have also had some sort of activity drop in the US because of the elections and not sure what this election outcome would be. So you saw that builders didn't build so much before the elections. But I think now, obviously, as all of these things start to stabilize and that we have, especially on the North American front, a very clear picture, politically speaking, for the years to come, I'm very positive when it comes to the new residential housing market infrastructure and also renovation. In Europe also, when I look at the Commission and I followed very closely the first steps of the Commission with respect to new residential housing, I see also here a better attitude towards industry on one side when it comes to the whole aspect of energy management and the CO2 and the whole sort of regulatory framework for industry in Europe the Commission has a better attitude here and also to the new housing that things are coming. Very important is obviously to view and to monitor the German elections and must say here also outspoken from my side I'm happy that we have elections much before September of next year because I think that we will have in the first quarter of next year already also a clearer picture on Germany, which is important for us because it's an important market and is a driver for growth in the whole region. So this is things that I view very positively when we talk about new residential housing market for the months to come. For this year, it was obviously when we look at the activity, a very, very subdued and depressed market, because when you look at the level of new residential housing construction, it was below the lowest level that we have seen in recent years. So even when I look back in the crisis Lehman 2009 in some countries we were below those levels so we managed well as Wiener Berger we were able to cut costs very sharply very proactively you see also in the presentation of my colleague Gerhard that we managed very well a working capital and the inventory so I think with this strong focus on cash we managed very well this special situation, as I call it, in 2024. When you look at the results, I think from a revenue perspective, more or less flat compared to last year. And very important also when you look to ABTR, the ABTR margin especially, that was about 18%. We were performing here very well in this environment. Keep in mind when the capacity utilization of about 60, 65% in our ceramic business And especially in some parts of Europe, even below that, we had enormous standstill costs, but we managed this well on the self-help and the cost management side with about 84 million of better cost structure and savings. The territorial acquisition contributed very nicely with 56 million in the first nine months. Obviously a little lower than expected as I mentioned due to the German market and obviously the last couple of months also the French market being a little down. So these are, in a nutshell, the first couple of thoughts on 2023, and I would hand over to Gerhard for the Q3.

Thank you, Heimo. Good morning, ladies and gentlemen. Let me walk you through Q3 results. And, yeah, interesting time, as Heimo mentioned. third quarter was a challenging one revenue wise we are up with nine percent uh ebda wise with 202 slightly below uh last year we realized the net result of 47, which is also impacted not only by a lower activity, but also by a little bit higher financing result. But still, and as we said, we have the margin, the profitability in the focus, and which is with 17% in quarter three, considering also the standstill costs, what we had during the summer. on a high and solid level. Volume-wise, when we dive into the volumes of the third quarter, you see that the third quarter is impacted by lower volumes in the U.S. for several reasons, but mainly, and we also mentioned that already in the second quarter or respectively in the half year, that there are some uncertainties due to the, at that time, upcoming elections. Also consider that We had floodings in September, especially in the Carolinas where we also have our business located, which costs us also at that time some shipments, I would say some three, four shipment days. So this is something, yeah, what we see and there is no reason for the US that the US is kind of a weak market. We see there's a temporary, weakness in the US and we are positive, basically looking forward into 2025. In Europe, we are sequentially improving from quarter to quarter. We see that volumes are picking up. Heimo mentioned it. We see a confirmed demand in the UK. We see that Europe East is further improving. slightly at the lower pace, but still improving. And West also improving, but still on a lower level. Looking to the revenue bridge, we are up with 9% on revenues. Volume minus two in the third quarter and pricing is with minus three. during or let's say along the year 2024 stable. So we keep our pricing on a stable level. As we said, there is a high focus and attention on on pricing to keep the minor three what we have seen already in the first quarter we keep also during the year and we even expect also as we mentioned in the first half year results that pricing would slightly improve in the fourth quarter as it is mainly driven by some flexibility in Eastern Europe. This brings us to the EBDA bridge. As mentioned, we are moving from 211 to 202, impacted by lower utilization rates, mainly during the summer. We could compensate a big part of it by more intensified cost measures and efficiency measures so that we finally ended on an EBITDA of slightly above 200 million. Let me quickly walk you through the regions. Yes, the regions are impacted also by the Terrial acquisition, mainly by the Terrial acquisition. The results per quarter, as we said, you see basically the biggest impact, I would say, in North America and in Europe West. And Europe West, it is mainly that the two countries, France and Germany, are still bottoming out. We see that the Netherlands recovered already in the meanwhile, and we are positive also for the rest of the year for the Netherlands. So we are focusing at the moment mainly on Germany and France in the West. For the first nine months, we closed our books and you heard already the results from Heimer, so I will not repeat them. I think, keep in mind, there was quite some standstill costs in the first nine months in our P&L due to the low utilization rates and the 65%, what we have seen in the first nine months, yes, there is. some of the plants are even running at the lower pace. But this will basically improve and as soon as markets are picking up, we will also benefit there from the operating leverage of these kind of businesses. Let me walk you to the volumes quickly because minus five slightly improved for the first nine months. And basically, to see it from a more helicopter view, yes, when you look to the volume development for the first nine months, it is mainly continental Western Europe, which is lagging behind in the new-build sector, and it is the US, which is lagging behind, where we basically see a positive sentiment for the next year when it's about the new residential markets, what we said before. Revenue wise, we show a revenue which is on the level of 3.4 billion roundabout. I think volume we explained, pricing only can confirm once where we keep our prices stable. Pricing is in the focus. So the minus three, what we have seen during the last quarters will slightly improve in quarter four. Let me do a short deep dive on inflation because we see that inflation was basically in the first six months. We have seen a rather strong deflation. You remember in the first half year we had a deflation of our cost structure of around about 1.5%. This is moving more to minus 0.6. And this also what I expect for the whole year that we are moving more to a slight positive cost inflation, what we have to consume. The main drivers out of that is in the range of energy costs and granulates, which are compared to last year, see a slight increasing development compared to last year. As we mentioned before, we intensified our cost management measures and efficiency measures due that we have seen more headwinds during the second half of this year. So we expect for this year around about 100 million on countermeasures to support and to protect our profitability. divided between, let's say, 60 million out of cost initiatives, cost management measures, mainly driven due to cost cuttings in the production and in the overhead cost structure. And the rest is out of our self-help program where we expect the 40 million for the rest, for the whole year 2024. Please keep also in mind, in the first half year, we had major one-off items of around about 150 millions, which is impacting our P&L on different positions. I mentioned at that time already, yes, it is the major part we have seen on cost-cutting measures or on one-off items. Yes, it is, and you see that we only see slightly, I think it is a plus 5 million on one-off items, mainly on structural adjustments, which we implemented in quarter three, and also for quarter four, we do not expect major additional one-off items. And this brings me finally to the EBDA bridge for the group, and You see basically that this year results is impacted by volumes and standstill costs, which are the major driver basically for the EVDA development. We have implemented substantial initiatives to compensate and to protect profitability. And you see that with 50 million, around about Terrial and all the other acquisitions are contributing during the first nine months to the operating EBITDA of the group. Let me finalize and also summarize quickly the regions. Many things was already mentioned. In Europe West, we see that UK Island is recovering continuously, so we are positive there. We expect that France and Germany will bottom out in the next months. We are positive about the Netherlands, which is also a major market for us. And we see that also here in the Western European region that Terreal is positively contributing to our revenues and to our results. Europe East is continuously improving. We see that volumes are going up step by step and we also see for next year basically a more positive development when it's about new residential. North America we spoke also about was hit maybe a little bit harder in quarter three. As we said, we see it as a temporary impact. We are positive about the next year. There is a positive sentiment about North America. So this what we see here, this slight weakness of results for Quarter three is nothing what we see as a kind of continuous development also for the next month. So basically, we are positive also about the U.S. And with that, I give back to you about the outlook for this year or for the rest of the months.

Thank you, Gerhard. And as I said at the beginning, I think it was a challenging year. It was a year full of surprises in 2018. 24 comes to an end with a couple of weeks left actually all of us and when I look back it was obviously from a perspective of steering the business to these stormy waters quite a challenge but I think from our perspective we managed it very well come to the cash flow and that level and all of the performance in a minute From a housing perspective, I mean, we have today's split of businesses. Wienerberger has more than half of its turnover in renovation and infrastructure. So you have seen it was much more stability in this part of the business throughout the whole year of 2020. And I see also the trend continuing not only in the last couple of weeks of this year, but also well into 2025. So this is, I think, the good news that we have now a very resilient portfolio in Wiener Berge. The second one, when we look at the new build segment, I think there are some bright spots already that I would qualify as growth areas to focus on as UK and Ireland, obviously in the Western hemisphere, as Gerhard has explained. And the weather and political instability for a couple of months in the US were responsible for a weaker demand level in residential housing for quite some weeks here. But I would say also into next year, we will see here a pickup of activity in this part of the world. Europe, as such, from a perspective of new residential housing, the European East development is encouraging. It's a step-by-step approach, not shooting up and skyrocketing immediately, but it's a solid recovery and an underlying recovery, as I would call it. Obviously, the countries Austria, Benelux, Germany, France are more suffering in this new residential housing business during the whole year of 2024. We are now bottoming out in these countries. political stability comes back in the national governments and therefore initiatives will come through slightly when we talk into the year 2025. 2024 is already basically over and done so I think this is if somebody will ask me later is the worst behind us I would say yes it's behind us and we are moving to new residential housing. I think very important also from a takeaway from this call is, and Gerhard mentioned it a couple of times, on the pricing front, especially in the ceramic business in Eastern Central Europe, here stability is slightly trading up. Again, you remember we told you that we deliberately were a little bit more proactive in this field. But here, obviously, we have defended our share. We have increased our position. So this was in line with our expectations. On the terrial front, everything is running very well. Teams are integrating fast. I said earlier also, we use this time of slower demand or lower demand levels in Germany and France, especially now, to integrate faster. Cost-cutting measures are put in place and restructuring where necessary are done. So this is the major focus, isn't it? change anything on the mid to long-term trend of the business. Here we are very well positioned and profitability is trading up when the capacity utilizations will come as we speak. Very important, I think this is a key message from us to you. When you look at our performance of Wiener Burger, it's an impressive nearly 200 million free cash flow change compared to last year. yeah where the strong focus has been on the ceramic business especially in europe to manage inventory working capital but also the whole cost structure and you see how even in these depressed markets we are able to create a very very strong free cash flow which is a strong signal for a very healthy, solid and forward-looking business. This obviously in light of the net debt development is important to note because this net debt which I show you on the chart is including our acquisitions. If I would take only the legacy business that has delivered the 200 million, we would have been deleveraging also considerably. So we were able, in such a difficult year, to digest a major, actually the biggest acquisition B&B has ever done. And so I think it shows also from a financial aspect how disciplined and how forward-looking we are managing our operations. So as a summary, all in all, I think from all the headwinds and all the difficult things that I've mentioned at the beginning and Gerhard and myself were referring to have been managed, and we are now at the end of 2024, looking at a very strong cash generation, very well-invested business, focusing on the things like energy consumption reduction, CO2 emission reduction, forward-looking technology. I was not talking so much about the major innovations that we have in our water business, for example, when you have seen it at the Investor Day, some of you in October, how far we are already with integrating businesses here. There's a lot going on in our company. We've used this time wisely to prepare the company for strong organic growth in the years to come. So this is a major focus for us. Robust demand will remain in renovation and infrastructure. We have prepared for this. And the new build, I think I'm here now much more confident than I was six months ago when I looked at the political environment in Europe especially. Stability comes back and therefore also the framework for investing in new build is a better one. For this year, I see that we will end it on an EBITDA side of 750 to 770. This will depend a little bit on some weather issues, which if we hit there at lower, or the higher part of the range. But this is, I think, a normal procedure at the end of the year. So from our perspective here, I think this is what we can show you and tell you about the development of 2024 so far and look with optimism into the next months that are coming our way. So thank you very much for your attention. We are all here to answer your questions if you have Yep, thank you very much for your attention.

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 zero. If you wish to remove yourself from the question queue, you may press star followed by two or please press the lower your hand button. Anyone who has a question may click the Q&A and raise your hand button or press star followed by one at this time. one moment for the first question. As a reminder, 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 or press star one on your telephone. So the first question comes from Tobias Werner from Stiefel. Please go ahead.

Yes, good morning, gentlemen. Thanks for taking my questions. It seems everybody else is shy this morning. Obviously a very tough quarter. You refer to state or government programs which are not forthcoming. I would argue that maybe the price-cost spread is slightly more worrying here or concerning when we look at publicly available data for Western Europe. Ceramics prices are down mid-single digit roughly in countries such as France, UK and Germany. You show it in your price-cost spread, which has gone a bit worse to minus 2.4%, if I'm not mistaken. How do you see the pricing situation developing from here on out? And then the US, clearly the weather was really, really difficult in the US, especially below the Mason-Dixon line. um where a lot of your businesses are maybe just remind us how much of your business is uh more uh southern buyers than than what what is uh elsewhere the case and uh whether we should assume because of the weather that there is any catch-up effect not just in north america but also elsewhere in the group thank you very much

Tobias, wonderful good morning. You are never shy, and this is a compliment to you. We all know, we all know, Heimo. Yes, indeed. Even in this early part of the morning, so that's great. No, you mentioned two important, very important matters. I mean, let's start with the weather effect. You know, weather comes and goes. You're right. These harsh influences, especially in the southern part where the majority of our business is actually, it's far above 50% of our turnover is in the south. of the United States, but that includes Texas and other parts of the country as well. The Carolinas, Floridas, and all these Alabamas, obviously in Tennessee, were affected by the storm as well. So it's not only a local issue, it was a much broader one. And if it's a couple of shipping days or not, you know, it's the groundbreaking that is delayed for construction sites. You're right. There's a certain effect, obviously. And this will spill over, I would say, into the next year, especially when we talk also about Europe, because the flooding, Czech Republic, Austria, also Romania, these parts take longer than to dry up until you don't start construction projects when the ground is very wet. So, yes, you will see some effects. I can't quantify it honestly, but it will be some effect that we'll see beginning of next year. Pricing, I let also obviously Gerhard answer to this question. But honestly, I wouldn't remain or be here sort of worried about this. I think we are managing it very, very tight and forward-looking. So from what Gerhard has said, inflationary cost increases that we have to tackle and to offset with price increases and all this press management, I think it's moving in a good direction.

Right, Gerhard? Right. And we don't see the price pressure, what you mentioned, in the West. Basically, we keep also there our price levels. For us important is during the year to keep the prices where they are. We had as we said during half year decided to go for a little bit more flexibility in the east and also there this is bottoming out. So I expect even for quarter four slightly improvement on our price year on year comparison where we are working on and I mentioned that is the cost inflation itself. We had in 2023 in the second half declining development of resin prices in the most stable development in energy prices. We see now in this year that resin prices on the year-on-year comparison a little bit up and the same for energy. So it is more the cost inflation where we are working on. We are optimistic on the price level. So I don't see there that we are coming under pressure in the other side we are preparing ourselves for next year because you know if you want to have price increases in the market yes we are going out now already now and informing the market that we will increase prices next year because we expect also next year is like cost inflation and therefore we are preparing at the moment everything for 2025 when it's about price setting for the next year

Okay, if I may just follow up with two things. Terreal likely to add 70 million euros of EBITDA this year. You have this nice chart which shows an upward trend there, but doesn't give us a sense, or doesn't give us an absolute number really. Could you give us a sense of what that could be next year in terms of incremental contribution, roughly, if possible? then secondly you sort of alluded to 2025 people are already looking to 2025 um and uh it would be good to hear what what your thoughts there are uh from a base perspective for for for the earnings and then a lot of people also speculating about ukraine

know directly probably little but indirectly what your thoughts are there sorry for the many questions but there's nobody else no no it's early in the morning and there all of us have a lot of questions when you start the day and yeah sorry no but um you coming back to the serious part of your questions is uh I would say from the 70, which we indicated as a contribution this year, we would gradually move up to about 100 next year. That's what you can sort of see there or a little bit above. But I give you the direction where we are moving from a two-digit number to a three-digit number. So this I would see for the Terrial part. And, yeah, well, I mean, when you see 2025, I mean, when you look at the capacity utilization, here we will move up. There's operational leverage in the business. We said some countries, regions will recover a little bit. So there's room for improvement next year, right, Gerhard?

Right, definitely. Yeah. Coming back once more maybe to the Terrial, what I just mentioned, the 70, you know, was for 10 months this year. So I'm positive that it will be above the 100 on a 12-month space. We indicated, I think, in the beginning of the year, I think 120. Let's see if we will reach that. I'm a little bit more cautious on the 120, but I'm optimistic that it will be above the 100. And, yeah. I think to add and to confirm what Heimo said on the operating average, you have seen the standstill costs which are hitting basically this year our P&L and this is mainly due to the utilization rates in the new build related production facilities. As soon as markets are continuously, let's say, further picking up, And this is, I think, the major key driver for next year, that also coverage for the standstill costs will show up.

But that we will be on an ABDR level. I mean, I'm not giving a guidance for 2025 as much early, and we will do this then at the appropriate time. But that we will be well above 800 is for sure.

Thank you very much. Thank you.

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

Thank you. It may sound a little bit repetitive, but I guess I'll push again. So this year, I guess it's probably fair to summarize. Yes, volumes were disappointing, but obviously price cost was negative, I guess. You kind of suggested in your answer before that you're looking for more positive pricing into next year. I don't know if that's a fair summary. And if not, perhaps you could just tell us what your sort of stance is on pricing. Are you going to try to sort of cover cost inflation next year, clearly this year?

No, sorry to interrupt you, but you're spot on. That's what our message is from a pricing perspective.

Okay. And then regarding the standstill cost, appreciate the material, but principally, those don't change unless volumes recover, basically. So what you're saying is you need more volume to absorb those fixed costs, basically. So it's just, in essence, then a call on volume delivery. Or is any one-off, I guess, is my question this year in the numbers that we can think about that falls away mechanically.

Mechanically, what falls away is an impact out of terrial. We took over on the day, on 1st of March, basically relatively high inventories. And so we were also on the terrial side, on the lower production output, and this will basically fall away. And this I would say as a kind of a one-off, because we have to bring down inventories on a more normalized level, which fits to our Wienerberger standards and that means also that we will see we've seen the major impact this year but we will see also something next year okay but that's i guess relatively immaterial so there's not in the core business in essence it's then down to volumes coming back volumes yes it is the major driver uh inventory wise you have seen that we are basically running our plans at the moment on a rather low level. We optimize our inventory levels till the end of the year to have the right inventory levels by the end of this year for the next year. So yes, there is some impact and also keep in mind the restructurings, all the restructuring measures, what we did in the in the second quarter. You also have some implementation time which generates some inefficiency. Yeah, and this basically should disappear next year. Okay.

And then I saw... I wouldn't call them insignificant. There are certainly some. Your question goes in the sense that if we assume stable volumes, are we doing better next year or not? Yeah, that's what you're saying.

Yeah, yeah. So, you know, I'm trying to figure out, okay, you did whatever, 760, add 30 for Terrial, maybe whatever is one-off. So you're already telling me a bit above 800 and then, you know, I get to take the view.

Well above 800, yeah. But I think here, obviously, yes, there is obviously this, this, this measures that Gerhard was alluding to the, you know, optimization measures, et cetera. So they are all coming through. So there is even in the, in the unlikely event that the, the, the numbers and volumes would stay stable on a demand level in the ceramic business in Europe, then obviously we would have a, a quite a significant contribution on the EBITDA.

Okay. And then maybe sort of a detailed question. I was just looking, maybe this is a coincidence in this quarter, but it seems like you're, I think, well, certainly in the European regions, the pipe business is actually doing worse than the ceramic business from a volume perspective. And I guess it's not very intuitive, right? Because it's sort of supposed to be the most stable bid with infrastructure. Do you have any views why that is? Or maybe it's just the quarter and it doesn't really matter, but.

Yeah, I think it is. Don't focus too much on the quarter itself. I think we have seen some trends. We have seen also some I would say with the weather extremes with some impacts which was influencing basically the standalone quarter. So I would be careful not to conclude too much out of third quarter as there was with some impacts from the elections with the weather. So it was yeah, it was a little bit

a different and challenging quarter itself so i think we have to be careful not to conclude too much out of it when it's about volumes okay and then final question um so some of your peers sort of had i think the doj knocking on their door in the us pbc um segment and i think you're one of the defendants i want to just understand what your position is on on what's going on, I guess, with regard to the U.S. plastic pipe business.

Yeah, I think... You are right that some of the major players in this field have been affected, and there's an investigation running. From our perspective, as you know, we are a single unit or a single location producer in the South, so we're not so much affected by the overall development in this industry. As you know, we have very tight policies when it comes to these issues like market pricing and etc. And so from ours, we look relaxed in this sort of investigation. Thank you. Thank you.

And the next question comes from Axel Schlosser from Mong Stanley. Please go ahead.

Hi, good morning, everyone. I have two, if I may. Can you quantify the pricing elements per region, like Eastern, Western, and North America, to better understand the price-cost spread here? And then my second question was about 2025. You mentioned the pricing increases. Can you elaborate a bit more on this? Can we expect a 1% to 2% price increase next year? And actually, to follow up on this, if you think again about the cost-saving plan, do you expect to further work on this and announce another one next year? If so, to what extent can we expect another cost-saving program? Yeah, that's it from my side. Thank you very much.

Well, on the cost-saving side, you see, Axel, we will continuously optimize our business. And as we grow and integrate business, there's room for further optimization. Not per se we will announce a plan, but this is part of our ongoing business. Right, Gerhard? Right, it is.

I think your question on the... on the pricing across the region. And I think we mentioned it also that we have the minus three is divided by around about minus five in the East and West is I think minus one and North America is plus one. So it is mainly driven by the East. And also keep in mind that the cost inflation and I'm speaking now about labor costs or personnel costs, Here we have also a higher cost inflation basically in the East and therefore the price cost spread or the pressure on the price cost spread is definitely in the East higher than in the West. I'm speaking now about Eastern Europe than Western Europe. No issue in North America. And as we said in Western Europe, we are keeping pricing level. We see some turn from deflation into inflation but I would say from the inflationary development when we speak about regional development you see the the stronger development when it's about inflation definitely in the east and this is also driven strongly by personal costs as we simply have there a higher pressure on labor costs still in 2024 than in other parts of Eastern Europe.

What about 2025? Can we expect then a 1% to 2%?

For next year? I would say, yes, you can think in this range. I expect for next year cost inflation, which is roundabout Plus minus three, three and a half percent, I guess. And I would assume and price development, which is between two and three percent. This in this range, what we will what we plan to materialize. OK, thank you very much. With more clarity on that in our February meeting anyhow.

Yeah, sure. Thank you very much. Thank you, Axel.

And the next question comes from Yacine Touari from Onfield Investment Research. Please go ahead.

Yep, thank you very much for allowing me to ask a question. The first one would be just a follow-up on the question of Gregor. So if the volume were stable in 2025, what you're suggesting is that you would increase prices by a couple of percent that would offset inflation of 3, 3.5%. Right. So it would have no impact. Then you would have an additional impact of TRL, which would be an extra, let's say, 30 million, or maybe a bit more. So it would come back, if I look at the mid-range of your guidance, what it means is that you would have only a DBDA of 790, maybe 800. So it's not well above 800. I think you are not very clear on the impact of inventory and is it something that you can quantify? I think a lot of investors are a little bit confused about the volatility of your results between Q2, Q3. And if you could just really help us understand what is the number excluding this destocking effect, that would be very helpful. Because when I look at what you're mentioning, I can get to an ABDA of a little bit less than 800, but I cannot get to anything higher, assuming the volume is stable. That's my first question.

I think your assumptions, what you took, your assumption was stable volume development, I think, what you just mentioned. We expect, as we have seen this year, that markets are continuously further improving because we see that from quarter to quarter volumes are picking up, and this is something what we also expect for next year. And I'm speaking now about the residential new-build markets, especially in Western Europe and in the US. But also keep in mind that 2024 was a transition year where we have still seen in the first half a little bit weaker development, which we are picking up constantly during the year. It was improving. So next year, even with stable volume developments, we will basically hit the 800. just also what we said before yes we will have cost inflation covered we have a contribution from terry i would say of 30 plus and i would say don't underestimate and please also understand it is also difficult to to uh to quantify but the inefficiencies what we had in this year due to the restructuring measures definitely will support the development, the EBD of next year. We generated also with the restructuring measures which we implemented in the second half savings which will materialize next year on a 12-month basis. Please keep this also in mind and this is something which is a material amount.

Is it an amount that you can quantify or even if it's a range? Is it something, could it be like 30 million, 50 million of additional EBITDA?

Justine, you quantified yourself when I said earlier we will be well above 800 and you make your math on your things that you assume right now, then you get to this amount.

My second question would be on the margin in Europe West. So the margin was quite a substantial decline, despite I think the volume was not surprisingly weak. But the margin was quite weak. Is there a mixed effect because of TRL that didn't do a very good quarter and that is diluting margin? Or is there something which is due to a lot of restructuring costs, a lot of spatial effects? I'm a little bit confused that the margin in Europe East being quite okay despite pricing pressure and the margin in Europe West being under heavy pressure despite pricing being relatively resilient.

Keep in mind once more, it was Europe West, we are still finalizing our restructuring measures. All what we did last year in Eastern Europe, which is now contributing to the profitability this year, basically we have now the impacts in Western Europe this year results. And this is also what I mentioned before, you will see the benefits of our restructuring measures, what we are doing this year in Western Europe, mainly in Germany and in France, this will materialize. in 2025. And yes, we have basically booked and announced our restructuring measures in the second quarter, but still you have some efficiency by implementing the restructuring measures in the second half. So you have seen that we had rather high standstill costs or inefficiencies in the third quarter. and they were mainly allocated to Western Europe. And this is related as we are adjusting basically the network, the plant network in Western Europe. So it is also logic that we have a lower margin in Western Europe as we had also last year in Eastern Europe during the restructuring phase. So this will basically pay back in 2025 if we have basically these inefficiencies out and benefiting from the savings. And this is also, I think, answering your first questions. Yes, this will help us and will contribute to EBITDA of 2025.

And just to understand a bit more concretely, what does it mean standstill related to restructuring? Is it like you're shutting down a plant permanently or you're shutting down a line and then while you are shutting down the line, you still have some fixed costs with no revenue. And then as soon as the plant is permanently shut down or permanently restructured, those fixed costs go away. I'm just trying to understand concretely what does it mean, these standstill costs, if you look at an example of a specific plant or a concrete example, that would be very, very helpful.

Yes, it is both of them. What you said is this temporary standstills, but also if you stop and restart and killing, yeah, you have inefficiencies. And also when you basically focus to optimize your inventory levels at the year end, yes, you also bring down the speed, the, the, the, the push rate of a killing. And this is influencing basically your profitability. And, uh, You have to keep in mind that this inefficiency you have if you restructure your plant network.

Yes, to explain it very briefly to you. First of all, you have the option that you restructure a business and close an operation down, meaning a plant site. So closure, that means that you actually cut fixed costs and then you have restructuring costs and you book this out of your asset base. Yeah, that's it. So that's gone. What we are referring to, Gerhard and myself, and this year was complicated for us to adjust to these slower markets and to the markets that were very volatile. Our ceramic business in Europe to these market demands and by two means. First of all, you have a running plant and you go down with capacity cut shifts or temporary cuts. close it for a couple of months that's what Gerhard is referring to and you don't lay off the people but you keep them you keep the site obviously but you are out of production for a three or four months period so this is obviously from an inefficiency perspective a rather terrible moment because you go down with the kill and you go down with the whole production and you have to restart it and these are the inefficiencies and if you have this inefficiencies at a couple or a few sites or per country, this obviously influences your results dramatically. Second is the mothballing. If we see that, for example, capacity is not needed for a certain amount of time, meaning more than six months, we mothball a plant. There we cut cost also from a fixed cost perspective to a minimum, but we keep the plant maintained and keep some people on the site. So you have a lower level of fixed cost, but you still have the plant available. So these are the three things how we adjust our capacity to market demand. 2024, as I alluded to, was a complicated year in all of our regions because of these volatile demand levels. That's why we had these inefficiencies that both of us talked about that we think and we believe strongly they will go away in 2025.

And just maybe, I'm sorry to insist, but just a clarification on the situation. If I understand well, your level of production was lower than your level of shipment because you had to reduce your inventory. And as a result... In the ceramic business, you're right. Yes, in the ceramic business.

Yeah.

And in the ceramic business, and this means that you had to do some mothballing and some temporary shutdowns. That means that will, and if next year you don't need to reduce your inventory anymore, your level of production, even if volume are stable, your level of production will go up and your fixed cost absorption should be better. Is it the way to look at it?

Yes, correct. Absolutely right. This is what it is.

And you don't see any, do you see any need to further reduce inventory or you will be, when you look at your inventory today, you're happy with your working capital?

We have done the necessary steps in order to adjust it to the right level now. Yeah. Okay. Thank you. Thank you.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Therese Jander for any closing remarks.

Thank you. Thank you very much for taking your time dialing in today. Our next conference call will be held on the 26th of February next year, 2025, where we will release the full year results for 2024. With that, I wish you a pleasant day and goodbye.