Wienerberger 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, 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.