Ladies and gentlemen, welcome to the Rockwool report on the first quarter of 2020. Today, I am pleased to present CEO, Jens Birgersson, and CFO, Kim Junge Andersen. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. As a reminder, this conference call is being recorded. I will now turn the presentation over to your host. Please begin.
Hello. Good morning, everybody. Welcome to the conference call regarding Rockwool International's result for the first quarter of 2020. My name is Kim Junge Andersen. I'm the CFO of Rockwool International. As the presenter said, I'm with our CEO, Jens Birgersson. Jens will, as usual, go through the presentation. Then there will be time afterwards for questions. Before I hand over the words to Jens, I would like to notice the slide two regarding the forward-looking statement. Please be aware that this presentation contains uncertainties. We can go to slide three and the presentation. I give over the words to you, Jens.
Okay. I hope you all see slide three out there. Good morning to everyone. First, a little bit of an update, what happened with COVID-19 in Q1. We were a little bit fortunate. We had some people negotiating a deal in China early in the quarter, and obviously, we have our Chinese operations. We got alerted to this potential situation quite early, and that meant that already in February, we actually put even a group management team member in quarantine on his way back from China. We also had three or four people that were in Ischgl, right in the zone, and they got corona, several of those people. We had quarantine rules in place already when they got home. Three or four people never brought it back to the office. It probably helped both Germany and certainly Rockwool.
When I just sum up where we are today, we have just a couple of handfuls of cases in the whole of the group, although we are more than 5,000 people. One observation with discipline management, distancing, daily follow-up. We have the masks where we need it, sanitizers. We have had all of that all the time. You can run business and you can run factories, but it should also be said that as the crisis spread and governments got into taking action, we also had four or five plants shut down, not because of demand, but because of governmental intervention. Often, that has settled after a couple of weeks, and we've been allowed to restart. Obviously, we had China manufacturing shut down for about a month in the quarter. It's not such a big market for us.
We saw good development in the quarter, all the fundamentals in place towards stone wool, maybe a little bit better than we expected. Towards the two last weeks in the quarter, you saw the actual spreading. At this stage, all factories run. We take maintenance stops, obviously, in most places, we are not up and running as much as last year. You saw the April numbers. I'll come back to that. We are pushing, trying to see what's good with this. Obviously, good to see how great our organization work at managing. Our people do a really good job, we are focused on customers all the time. In some markets, we have even seen competition send everyone home, which has increased demand for us. We have this keep safe and deliver to our customers, and that has worked.
In terms of now, opportunity of the crisis, we see talk about one or two trillion on EU level stimulus packages, and we are pushing and arguing for that you should put some of this into energy efficiency renovation. While you restart the economy and make a green restart, that you not only create jobs, but you make sure they are CO2 positive jobs that you put us in a better position. There, EUR 1 billion invested with energy renovation will give 20,000 jobs, and that's one of the highest returns. Certainly, for every invested euro, there is nothing that is more CO2 saving or efficient in terms of CO2 reduction than energy renovation. That's a potential upside, and we are working on that quite hard. In terms of starting up offices and the business, I'll give you an example.
In Denmark, we talk now from two-meter social distance to one meter. We don't do that at Rockwool because we worry that if you have one meter, it very easily slips down to zero meters because people want to be together now. That means we maintain there is not an award for being the quickest here. We'd rather stay safe, so we keep two meters. We also run the business. I obviously want to have everyone back in the office as soon as we can, but I don't want to risk the business. We have three principal ways of running our offices. Gear one, everyone at home. That has worked great, but it's not as efficient for people collaborating.
Gear 2, that's what we are in now in some places where half the crew is at home, half in the office, and everyone that we feel they're a high-risk person are at home. That means that we offload the public transport system, and we get a lot of space in the office so that we can make sure people keep the 2 meters. We will stay in gear 2, also in Denmark, for a while until we see if there is a recoil from the restart. That's working well and our people are doing good. Next slide. If you look into Q1, in spite of China and the last two weeks, the numbers are the best numbers we've had in the Q1, both the top line and the bottom line and the margin.
That's pleasing, and it doesn't matter now we are in a different situation, but I thought many of the cards were in place to have a really good year, if we won't talk about the pandemic now. Should also say that we have seen a deflationary environment. We score a bit from that. We have seen it in the margins. Many of you make this comment, all the prices has gone sour. They haven't. We have increased prices, not so much. Overall, prices are up. In Q4 last year, we discussed the price development in Eastern Europe. We are working hard to cut capacity and getting prices back up there. Overall, across the business, prices are slightly up.
When you look at the corona impact or COVID-19 impact, we see that the main area where we pay attention on the top line is to get the money at all. We are guarding very carefully overdue payments, and that has increased a little bit, but we have it in hand, and we take action on that if it's slipping away too much. Nothing to worry about. Cash flow, normal seasonality. We always go negative in Q1 when we build the seasonal stock. We don't change our stock curves because of this year. We run it up to a certain stock curve, you see that seasonality plus on top you have the CapEx. Actually this cash flow is pretty good, a little bit due to a grant we got also. Okay. Q1.
Slide five.
Yeah, next slide. Q1, if you look in the businesses, small Parafon effect. We had two months. Okay, two months of that. Obviously not a high season for that business. We had two months of that. You saw that the system division grew with flat insulation. System division grew. That's pretty much spread across all the businesses. Good development. Should be said that Grodan has grown the most in there. That effect we probably see would strengthen because food production, that market doesn't go down when people stay at home and eat more. Regional sales development. In Q1, not so many markets.
Six.
What's that?
Just saying when you.
Yeah. In Q1, not so many markets were dramatically impacted. You saw Italy obviously was early into this, they have a solid negative number. They started off earlier and shut down earlier. Spain and France had slight declines, from very positive development into negative territory. U.K., Netherlands, and Denmark, all really good development. I will say that Denmark has accelerated throughout. North America, patchy in the U.S., Canada going up, a bit split in Asia. We are below last year in China, it's kind of recovering and it's already on a good level. North America had a good quarter in terms of top line. We move on to April. As you shouldn't expect us to give monthly numbers.
Since we have suspended year-end, we felt it was in place to give you the -20% number there, because I hope that benefits your thinking of the business. We have seen a whole array of actions. I give an example. France was in a very high, strong growth mode, and the approach to the lockdown and the corona situation was to shut down, at first, building sites. It might not even have been the intention, but that happened. Also the outlets, the big box outlets of building material. That went into very strong negative. Starting to open up now. While, for example, in Denmark, the effect was absolutely opposite. Building sites were kept open. I think municipalities accelerated projects, and all the home office work in some corners were turned into home office improvement projects. We see solid double-digit growth in Denmark.
Canada had a similar pattern also. It's interesting to see that it's very variant. Then U.K., after very strong growth, went into quite a severe lockdown, where they also put a subsidy scheme in place that almost rewarded people from shutting down the businesses and the people home permanently. I don't think that scheme was ideal if you want to keep the economy going. That's the situation there. I'm sure I'll get some questions on what we think about the coming months. EBITDA, good EBITDA development, good EBIT development, margin improvement on both counts, and as I said, prices are higher compared to last year, but not so much, and costs are down.
Number nine, if you look at the segments, good profitability in both, and part of the improvement in insulation is due to a mix from you saw some heavy segments like flat roof maybe slow down a little bit, and then the GBI lighter mix, higher contribution margin mix maybe shifting up, and that contributed some also apart from the cost situation. The bump on Q2 2019 or the hill there on systems, that is the DKK 10 million North American settlement, the legal settlement. It has improved in both instances, good to see. Investment activities high, and the two main draws there are obviously Ranson in West Virginia and Neuburg, the German factory. That has been progressing. Then on the sustainability part, it's mainly the Moss project.
Both Neuburg and Moss, we had to shut down due to governmental rules. We are now busy starting those projects up again. We see some delays, but not dramatic. In North America, we have been able to keep the site running. The cash flow also includes the deduction payment for Parafon. On the cash flow side, we reduced or we improved from a cash perspective, the change in net working capital. That contributed. We also got how much, Kim, DKK 20 million?
19.
19 million from the Chinese deal to move or rebuild the factory on a different site. That's not the whole deal, but that was the first installment, and that came in the quarter, so that contributed. Update on the share buyback program. We set up to a maximum of DKK 80 million. We have kept going with that, and possibly the constraint will not be the DKK 80 million, but the number of shares if the share price stay like this. It's progressing, and I should also say that I get from journalists, why don't you cancel the dividend? Why do you do the share buyback? My argument on this is we have a very solid balance sheet still. It's super solid.
We have paid taxes for the profit, and the dividend already belong to the shareholders, and I see it as quite serious to not pay out the dividend, A, because I think pension funds and also private people that are shareholders expect that they have the money and spend it in society. It's also quite a serious matter to not have the Rockwool Foundation that is roughly a quarter. They get roughly a quarter our dividend, and that they don't have a budget because they do important things. It's not only economic reasons, but we like to keep a steady policy and do that. Since our balance sheets can do it, we are committed to do the share buyback. Sometimes it's a benefit to have a good balance sheet, and here we show to you that we just stick to our plan. We don't change so easy.
With that, on the outlook, there not much to say about that. We gave you April, and due to the turbulence in the market and very difficult to predict, Kim and I feel that we can't really make a sensible forecast if it's not dependent on hundreds of assumptions. We suspended the forecast, and as soon as we feel we can make a forecast, we make it, but at this stage, it's just too many variables in the equation that we cannot predict. Over for questions then.
Ladies and gentlemen, if you have a question for the speakers, please press 01. Please limit yourself to two questions at a time. After this, you may enter the queue again for more follow-up questions. We kindly ask that you respect these instructions. Please hold while we have the first question. Our first question is from Yves Bome from Exane BNP Paribas. Please go ahead. Your line is open.
Morning gentlemen. Thank you for taking my questions. I hope you're well and safe. I'll keep it to two to follow the instructions. First question is on the EBIT margins. Q1 2020 was another very strong performance in what is normally a seasonally low quarter. I'm keen to understand what were the drivers behind this, and whether or not there's any timing impact of maybe lower maintenance in there. How should we think about the D&A charges, going forward with the new capacity? Any colors on price versus cost as well as ramp-up cost and, therefore the kind of employee hiring that you did in the last few quarters. How should we think about margins for the rest of the year? My second question is on the raw materials. Coking coal and gas have now fallen-
Was that the first question?
Yes.
Okay. It's a margin question, the first one?
Yes. Do you want to go one by one, maybe? If that's better for you.
No, no, take the other question.
All right. Yeah, the second question is on the raw materials. Just trying to understand on the coking coal and gas deflation, which is quite substantial now. Can you help us to understand how much of your DKK 1 billion production cost is energy, in percentage terms? That would be really helpful. Thank you.
The second question I will hand to Kim, and I will do the first. On the EBIT margin, what you saw in Q1, I don't think we highlighted that, but it's actually the best Q1 we ever had. Top line, bottom line. You're right in that, and the margin is high. That's not under the most favorable conditions, but fundamentally what we saw, yes, logistics might have become a little bit troublesome towards the end of the quarter, but raw material costs were down. We have a bit of a deflation, and we still managed to get the price slightly up, and that's the main reason. It wasn't really maintenance. The question is where a shutdown like in China, where would that show up? It's relatively small, it's one or two factories.
Fundamentally what we did, we had good productivity in the plants, we had good efficiency, not much waste. We did all scheduled maintenance. It was not less maintenance, price minus cost, that was a net positive. That's the reason. We look at the margins over the quarter going forward. You'll end up short-term with obviously a bit of a mix effect of it because what goes down here might be, for example, projects into sea or cruise ship applications, oil and gas might go down. Some of that business is low margin, some high, we need to look at it. Fundamentally, it seems to be going towards the lighter spectrum, GBI business that go up with the higher margin. You will have some mix effects, but I'm not going to try to predict them.
I think over the coming quarters, you get into more of volume. You get less top line, that hits your margin. We are working on adapting the cost situation to more the steady state run rate in the markets where we then start tuning the margins. Of course, we use subsidy schemes or short-time work schemes. We aim to do that in some countries in Q2, not Denmark, for example, but in some other places. There, again, there will be some effects of that to bolster the fact that we are not quick enough and we don't have the intention to cost overhead and fixed cost without knowing what number we're shooting for. A little bit of an underabsorption that we may or may not compensate with subsidy schemes, or we will not.
You will see a margin deterioration due to that reduced top line.
Thank you.
Kim, number 2?
The raw materials, there's no big science to this. Do spend quite considerable amount on our coking coal still, and we do also buy electricity. Yes, we will have a benefit, as long as the prices are as they are compared to last year. As you know, Yves, you've also said we will simply buy forward only a quarter at a time. We are just following the market trends.
Okay. sorry, how much is the overall energy bill as a proportion of the production cost in percentage terms, just so we can get a rough idea?
No, but we will not disclose that. If you combine both the
coking coal and the energy, it is a substantial part of our input cost.
Okay. Yes, thank you.
Our next question is from Claus Almer from Nordea. Please go ahead. Your line is open.
Thank you. Yeah, I will also only do two questions. The first question goes to the performance in April. Is maybe you could give some flavor on how April went, excluding the markets that were in a total standstill, like Southern Europe. Would that be possible to get that number? That would be the first question.
We haven't given a bottom-line number.
No, how also sales. I think, Claus, you have a little bit of flavor of it because we did mention North America and Northern Europe that was growing, we mentioned also where we are seeing a higher sort of negative development input.
Yeah. Basically, if I could comment on the top line, not the bottom line. North America, still doing okay. Canada doing better and the U.S. patchy. That means some places growing, some places not, by state, by city, high variability. The question there is, and this is incredibly hard to predict, will Trump manage to restart the economy, but it will be slower, and we are waiting for a worse quarter, the worst is ahead? Is he managing to restart or kind of rescue it before it goes down? Don't know. My personal bet might be that it looks like U.S. is in for quite some challenges, but I don't know. We haven't seen anything. We look in Europe, you see that some countries are doing pretty okay. I mentioned Denmark. Well, Denmark, very fine actually. Sweden is doing good.
Russia done pretty okay too. Yeah. I must say, even though we cutting some shift, but doing fine. France, really, really down. They stopped everything, and that we hope now that that should reopen. Italy, obviously the extreme of the extremist. They really shut everything. That's the only country where I think we had a truck we couldn't get in on the day we wanted. Italy can't get any worse, I will say. That really was extreme. Spain, somewhere in between, better than France, but still down. Germany, not catastrophic. In Asia, I think China kind of keep this. If we're going to discuss about the outlook forward, you could say China had this really deep dip, and then from that steady up, but not up in 100% yet. It's kind of just progressing up towards that point.
I hope that is a bit of a flavor of how the market's moving.
Yeah, sure. Thanks, Jens. Maybe the impossible question, but I will try anyway. When do you think you will hit the top quarter or top month? Would that be in May, June when the backlog has been delivered? Is there any view on that one?
I can just give an array of thoughts on it, and I'm not committing to any of them. Maybe could say it like this, if the rest of the world behave like China, then that model will be Q2 is the worst, and then it gradually improve. Then there will be a provision in that during the downturn, there is a lack of building approvals, maybe commercial projects, uncertainty, and a more [long] pipeline impact, but also general commercial confidence issue that would come in. That would be kind of a deep down. That's the Chinese model. Is that going to happen in Europe? Not sure. Is that going to happen in U.S.? Not sure. That's one way of looking at it. Basically, we would have believed the whole world was a Chinese model.
I probably think we would have been able to make some sort of forecast plus minus 5%, because that looks very steady. You saw even a country like Singapore went down, up, and then a little bit down again. They are super skilled at handling these type of things. That's one aspect. You have the other, if you have the potential pipeline vacuum and the shift hold, but then you have this, the green restart. We saw after the finance crisis that France and Germany, they just 12 months, and then they were back in growth territory for us, because they went in with action into renovation, housing, et cetera, to create jobs. EUR 1 billion into energy renovation gives 20,000 jobs, and it gives them quite quickly, and it goes into SMEs, 90% in companies with less than 10 employees.
Great for jobs and the best investment to save CO2. The EU are talking about EUR 2 trillion into stimuli, two annual budgets. Even if that's only one annual budget, it's still a whole lot of money if some of it goes into energy renovation. I think that's really the big question. You have the business cycle recession threat, and then you have the underlying trend for stone wool is there. Will some of that stimulus go into energy renovation? I think that's the biggest single factor we are dealing with. I simply can't predict. As always, some countries will do it well no matter what. They will pull that off, but not every country, then the EU, will that happen broad-based and actually get out? Don't know. We are working on it.
Yeah.
We are pushing for it, and we are promoting.
Sure. You mentioned something like 5%-10% I missed. What was the reference to this 5%-10%?
I'm saying that if the whole world behaved like China, what we have seen in China, then we probably had something that was reasonably predictable. These countries all do it differently. Me and Kim, we don't feel we can make a forecast at this 5%-10% accurate at this stage.
No. Okay. Sorry. Okay. Yeah. Sure.
That was my point.
Okay. Thank you so much.
Okay, thanks.
Our next question is from Bård Stole from ABG. Please go ahead. Your line is open.
Yes. Hello, Jens and Kim. I'll take one question at a time for the two questions. First of all, I heard on the first question that you mentioned, Jens, those prices were slightly up during the quarter. I see on page three in the Q1 report that they were under pressure. Could you give some details in regards to these price pressures that you were facing and perhaps also any flavor on sort of product competition, which their raw material prices being plastic might be lower.
Yeah.
Could you give some details there?
Yeah. Prices were under pressure, which means that in some markets, people reacted with reduced prices. We have Poland as an example that started already last year. We had pockets of that, and that meant that we have launched price increases, and we have stuck, but we have gone a little bit less. We are working as we do, cut capacity, keep the price, et cetera, and focus on payments. The real battle ground has been that, but in this environment with the raw material going down, we kind of lowered our ambition for price increase a little bit to match the fact that we see on aggregate probably a deflationary environment due to the crisis. It's a pressure, but so far so good.
To confirm, you're not losing market share to other product competition. My second question is for the systems division. You mentioned that Grodan performed very well exposed to, especially in North America and Russia, and continues to do so. Could you give some details on Rockfon in Europe, which got this new management in 2018, and how that is being affected?
Okay
into April also?
Yeah. We served our customers all the time, and not everyone was able to do that. As far as I know, we were the only tile suppliers, the Rockfon tile supplier that can deliver to every country all the time. I don't think we should talk about gaining market share because we had the delivery capability. I know, for example, in one very big country, one supplier just went for a subsidy scheme, and we didn't see much of them, and we delivered the market. We have seen some small cases like that, so I'm pretty sure that in Q1 and also April, we haven't lost market share. Okay?
Also you can just look always at competitors. There's nobody who has any sort of significant growth in Q1.
Yeah. That's on the market share. What was the other question now?
Second question was on-
Sorry
Grodan and systems obviously performed very well in-
Grodan. Yeah.
Rockfon, could you give some details on Rockfon for that segment?
Yeah. Just to say that the European performance has been very good.
For Rockfon?
Yeah.
Also in the-
Good growth, good development, good pricing. It's all relative, but typically when you have a downturn like this, the Rockfon businesses, they can deliver off stock, and those products come at the very end of a product. I will not go into the segment, but I can say the Rockfon business together with the Grodan business, Grodan obviously have very special drivers, but Rockfon has done fine. Very good.
Thank you very much.
Our next question is from Christian Johansson from Danske Bank. Please go ahead. Your line's open.
Thank you. First question is regarding the competitive dynamics in the markets where capacity is expanding. You have a competitor who's expanded in both Poland and France, as I recall it, and you're also expanding in some markets. Obviously, in the light of the volume decline, does that impact pricing, or what is the reaction in these markets?
I'm not quite sure. I don't think this crisis here hasn't People are worried about keeping their people safe, and I don't think the main worry of get deliveries through, get the PPE equipment in, and some people haven't pulled that off. They had to shut because they couldn't. I haven't seen this yet turn into something capacity-driven price war or anything like that. People have reduced capacity, multiple plants, and that's the behavior we have seen until now.
Okay, fair enough. On these potential energy efficiency renovation stimulus, have you seen anything concrete yet? Do you have any examples from markets which have already acted, or is it still more of a hope that something will happen?
Yeah. I would say best in class so far is probably Italy. Italy give 110%.
Just now.
Tax.
Ecobonus.
Could be.
Oh, okay.
110% tax credit.
110% tax credit in Italy. Italy have been quick on it. They had already good framework, and they're expanding it, and I think that will help to restart Italy. I don't know if you noticed on Monday, we were in a call with the energy minister and the foreign minister, but Denmark is pushing the thought of this, and helping to make a green restart. We know also in the EU. In terms of countries, I would say Italy is the earliest one out of the box.
Okay. Thank you.
Okay.
And-
Got it. Christian. Thanks. Next.
Our next question is from Tito Etlam from Morgan Stanley. Please go ahead, your line is open.
Thanks very much. Good morning. I've got two questions. Can you give us a high-level breakdown on how we think about your costs from a fixed versus variable percentage? Secondly, can you give us a bit of color on how we think about ramp-up costs for new assets, and how these are phased over the next two quarters? Thank you.
Thanks.
Let me just take the ramp-up cost, which we have dealt with before. We had already mentioned last year that we had ramp-up costs both for our factory in Romania and also our factory in Germany. Of course, Romania went live last year, so they are just part of normal operating costs. In Germany, we still have, as also included in the Q1 data, we still have a ramp-up cost the first three months, and we will also have a bit in the second quarter. Then, of course, we will go live, and it just becomes part of normal operating cost.
Can you give us a number?
Part of the-
Can you quantify what the ramp-up costs are in Germany out of interest?
We had said last year it was about EUR 12 million last year. That means EUR 1 million per month. It's more or less the same level this year.
Okay. Thank you. High level fixed versus variable costs, I don't know if you would share how you see your costs next?
Sorry, I didn't have the number here, but it's part of our. You can also do your calculation just looking at our numbers, but we are disclosing the numbers. I think if you don't mind, I'll look at it afterwards because I don't have a calculator here to sit and do the calculation.
Perfect. Okay. Thank you.
Our next question is from Michael Peterson from SEB. Please go ahead. Your line is open.
Hi. Thank you for taking my question. I have a question regarding your logistic costs. You say these are up. Is the reason for this that due to the lockdown of some factories, you had to produce it somewhere else and then transport it a longer distance, or why is this?
It's a good question, Michael. We had the case, when we had one plant in Malaysia shut down, and we took product from Thailand into the market. When you end up in that the market kind of semi or into lockdown, and you have under absorption, basically because you [get to quit] the logistic cost for that distance drowns in the under absorption effect of the two weeks. You have a few of those.
I also have to say the delivery cost was at the same amount as last year. Of course, there is a little bit of extraordinary cost. We also had a bit of extra warehousing in Norway in connection with the two. The underlying cost, the actual cost, the reported cost is the same as last year.
I also like to give you a number. We managed the business to a stock curve. We have two areas where we've added stock. We're talking about 6% extra stock globally because of that. That's to have the product ready during the changeover in Norway. We have prepared the product so that when we start to change the electrical melter, that we will start here in the summer, and that goes on till probably Q4 sometime. We have extra there. The same in Germany for the factory there. We also built a little bit of extra stock, and that together, we're talking a couple of %, and that will draw some extra logistic costs, but in a way, that's part of the start-up cost thinking. Again, relatively marginal effects.
Okay. Thank you. To my next question, this relates to your current utilization level. Since you are ramping up capacity and you are seeing flat sales in Q1, and I expect Q2 to be down, what kind of mitigating actions are you doing to handle this low utilization? Is it simply just reducing shifts, like from working six days a week to only five days a week? Or what examples can you give?
Obviously, it would have been a better situation if it would have just continued without re-adding capacity. The location of that capacity is still fine midterm, but then you have this, and you lose top line. That's, of course, not ideal, but you never know that, and we need the assets. We're going to need the assets. We're going to fill those factories. Typically what we do in that situation, that we analyze the demand, and then we just fill up optimum, and we do this, it's a quite sophisticated calculation run. Then we fill up the shifts in the best total competitiveness manner, and then we switch off other assets or draw down shifts. Let's assume 5 shifts is just running 24/7, and then 4, 3, 2.
Our plants are quite flexible, down to two, three shifts, you can still have a very profitable business. After that, you might choose to mothball the whole line and load up another line next door instead. That's how we operate with that. Even if we have to go down quite a lot on volume and capacity in a factory, on the blue-collar side, the direct labor side, we typically can keep productivity high on the same level, even when we produce at a lower level. Depreciation stays, it is where it is. That we can do. The challenge and the work that needs to be done then is, of course, when you know the level, you then need to adapt the fixed cost, the overhead personal expenses and the rest, because we don't believe subsidies will help us. We don't count on that.
We want to have a competitive business. It means that if I have a market with one factory and a run rate that is 10% down, we will look into fixed cost, obviously external cost consultants, and the labor side. The labor side comes first, because if we don't produce, then we take actions on that, and there's a whole array of ways of doing it, and it varies by country. Fixed cost needs to be adapted too, if you sit in a market with a permanently lower top line. Well, permanently, my language is 12 months or something like that.
Okay. Thank you very much.
Our next question is from Brijesh Siya from HSBC. Please go ahead, your line is open.
Thank you. Hi, good morning to both of you. I have two questions, if I may. The first one is on April 20% volume decline. If you could give a little more flavor by end market, so like residential, non-residential, and renovation. A little more flavor on that would be appreciated. The second one is on-
Yeah
Given that you have a very good balance sheet strength, have you seen any further opportunity in the market? Are you looking at it? If you can give a little more flavor on how you see the competitor dynamics shaping out?
Yeah. Obviously, you saw Parafon, we paid that now, and that was just before. We keep looking. There's great opportunity for us, and we have a couple of smaller things we look at, and if they come out now, we don't hesitate. Yes, we are looking, but nothing significant. Okay? On the segments, there hasn't been a segment shift yet in the market. What has happened was Q1 was normal. Happened the lockdown, where most things stopped. There are a couple of trends worth noticing that could just be factors, that we will see how they crystallize going forward. One is, for example, technical insulation into oil and gas. With this oil price, what will the oil and gas guys do? One could assume that that might lead to less maintenance and less new plants. Could be a possible trend.
Cruise lines, it's not a huge segment, but it is a segment. Will people build cruise lines now? Between the compartments in a cruise line ship, stone wool is a very popular product. I'm not saying we are dominant in that. We have a very good market share. There are other materials, too. There are segments that are going to be impacted. New build and GBI and renovation, there, I think the big factor is that if energy renovation comes, that's the sweet spot for stone wool. If you shift over more from new build residential to renovation of renovation, there is more stone wool in that shift. On the other hand, in the commercial segment, Amazon centers, lot of stone wool in that. Car factories, lot of stone wool.
You have all the rest of the commercial business, where if the commercial and office buildings go down, there are some segments there that have quite a lot of stone wool that we like to go after, and that might decline. I think the overriding aspect here would be that if you see renovation come up, it's a good thing for stone wool. Yeah. Another trend, maybe one more trend. Energy renovation and external wall insulation, there we see, especially in Germany, an increasing shift from plastic foams to stone wool in the facade insulation from the outside. That's also another trend, but that trend has been there for four or five years, and it seems to keep going. Okay. Did I answer? Yeah. Good. Thank you.
Our next question is from Frans Hoyer, from Handelsbanken. Please go ahead, your line is open.
Thanks very much. I've got one question, and it relates to, you mentioned that April down 20%, and how do you see the next few months on that metric, and how does that play relative to your pricing strategy of raising prices and so on? I guess you mentioned there was some in Q1, but the bigger quarters for that, as I understand it, is Q2 and Q3. How will that unfold, those two together?
On the price, we have launched the price increases, and they're out there, and we're executing on them. In some markets, you have had the traditional two price increases in a year, and now we focus on getting the price increases we have already launched and stay to that in Q2 and Q3. Okay. That's on the prices. On the volumes, I'm not going to give a forecast on May and June, but my observation is that many countries come out of the lockdown. If they were to behave like China, you would expect a Q2 that is the worst, and then it will start to climb. You could say, would it start to climb in May or June already or in June? Hard to predict, but some sort of V or U scenario there now.
You have a lot of dark horses in this. I don't have a forecast for May or June, but you saw how dramatic the impact from the first quarter average to April, how that was, how sudden, and I think in some markets, you will see also a sudden uptick when they open up if they had, like France, shut down the building material outlets and all the rest. When you open them, you're going to get to deliver again. I don't give a forecast, and I can't promise that that's the worst month, because you also have effects this year of working days, holidays. You also have countries that might say, "Okay, we have one holiday week this week. We shut the business for six days here because demand is low." This can happen.
As you know, in May and June, you have a whole lot of these weekends that lend themselves for if you need to take capacity out on the building site or anywhere, lend themselves to add a few extra working days, and we are dependent on working days to get deliveries. Yeah.
All right. Thank you very much.
Okay. Thank you.
Our next question is from Tobias Turner from MainFirst. Please go ahead. Your line is open.
Yes, good morning. Thank you for taking my two questions. Number one, you talk about the relative strength in the Scandinavian markets. You mentioned Denmark here, and for obvious reasons. I just try to get a little bit better understanding of what your exact exposure is to the Nordics at this point in time in terms of revenues. If I count your plants, it seems it's like a bit around 10% of your total group plants. Maybe you can give us a better indication here, and the same for Germany. The second question relates to the U.S. It seems to me that the downward trend for the overall category, mineral, thermal insulation pricing, the decline in pricing has started to come to an end, and as a matter of fact, the last month I've seen, they were up 3%-4%. Is that something you see as well?
Let's just start with the first one, with Germany, Scandinavia, and the Nordics. Finland doing fine, in spite of a very substantial lockdown, but not super growth. Sweden and Denmark growing. Norway went into not a good situation. They stopped building sites and all sorts of things. It varies. I keep my commenting on those Germans on that level, and the reason is that I don't have a single competitor that give country data. We are the only ones, basically. For competitive reasons, I don't want to go into the percentage of the regions and this and that. The Nordics is an important market. We take it serious. It's home market, but it's obviously not our biggest market.
We always said that Germany and France are heavyweight, and together with the U.K., but especially the first two, and we keep it at that level. On the pricing in the U.S. and Canada, we have never declined, gone down on prices. We have improved pricing quality straight through last year, the year before, and also Q1. Okay?
Okay. Thank you.
Yeah. There could be something maybe on glass wool, but I shouldn't comment. I've obviously read what there is on that, but I think generally the pricing climate in the insulation categories, the glass or stone wool, all the mineral wool I call it, has been quite positive. There are many other building materials where you have seen other patterns.
Thank you very much.
Thank you.
Our last question is from Miguel Pedersen from SEB. Please go ahead, your line is open.
Hi. Thank you. I have a follow-up question. Jens, previously you mentioned that in some markets, your competitors were shutting down due to subsidies, and you being the only supplier of products. Can you maybe clarify what market that was? Then maybe also would your growth have been at the same level in Q1 if your competitors would've been taking the subsidies and shutting down?
First of all, these are anecdotes. These are just small examples of the approach. We have an approach. We don't put priority on subsidies and meeting requirements. We put the focus on keeping our people safe and delivering to the customers, and I want every customer to know that. That goes back to our purpose and our style of running business. Therefore, I say it here, it doesn't have a material impact. If you compare to competitors that have announced, you will see that we do pretty well on profitability and top line. Yeah. That was more a message about our culture and our approach to running business. Okay? Does that answer your question?
Yeah, kind of. You can't say what markets that you saw competitors shutting down.
No
received subsidies? Okay. Thank you.
Thanks.
There are no further audio questions. I will hand it back to the speakers for any final comments.
Thank you very much. Thank you for participating today. Please be informed that on the 29th of May, we will have our next investor conference call with the topic on ESG. You're welcome to participate. Thank you for joining the conference call today.