Good morning to everyone, and welcome to Rockwool's conference calls regarding the result for the first quarter of 2025. My name is Kim Junge Andersen, and I'm the CFO of Rockwool A/S. Today, I'm pleased to present CEO Jes Munk Hansen. For the first part of this call, all participants will be in listen-only mode. As a reminder, this conference call is being recorded. First, Jes will go through our presentation and give you an update on the results for the first quarter of 2025. Afterwards, we'll be ready to answer all your questions. Before I hand over the word to Jes, I must ask you to notice slide number two, which is a forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to slide three, which is next slide, which is number three. Jes, I'll now hand over the word to you.
Thank you, Kim, and good morning. We had a solid start in Rockwool, a solid start to the year in a difficult environment. When we look at the Q1 highlights, revenue for the first quarter reached EUR 959 million, and that's an increase of 4% measured both in local and in reported figures compared to last year. 2% of this increase comes from the acquisitions we made in October last year, and the other 2% comes from volume growth throughout the group, where pricing had a neutral impact in Q1. In short, we are quite pleased with our growth performance in this otherwise subdued construction market. EBIT landed at EUR 154 million, generating an EBIT margin of 16%. Slide number four.
Looking at revenue in the insulation segment, we actually had a 5% revenue growth, which was primarily driven by our business in North America, and this was offset by a somewhat slowdown in East Europe, a particular slowdown in Russia. Just to repeat, this is where the acquisitions accounted for 2% of the revenue growth, meaning here in this segment. In the system segment, Rockpanel and our Lapinus business, Lapinus business is our OEM business, grew, and our Rockfon business was stable. We saw a revenue decline in Grodan, our horticulture business, driven by lower sales in the legal cannabis market in North America. Slide number five. Here we are looking at our regions.
When I look at our Western European business, particularly our biggest market, Germany actually delivered some growth, but the markets, particularly Germany, seem to be waiting for what the German government is going to do about the new investment programs that hold a lot of promise. We also had positive developments in countries like Switzerland, strong performance in countries like Spain and the U.K. In another one of our main markets, France, we do experience price pressure, especially in our professional flat roof application segment.
The United States continues to perform on a very high level with 15% growth, but like a few markets in Europe, you can notice a little bit of a wait-and-see mode where some of the customers, some of the market players, are looking for more clarity around the macroeconomics, particularly the interest rates and mortgages, before placing orders on the projects already in the pipeline. If you look at slide six about profitability, very short here, EBITDA numbers are up in absolute terms from EUR 206 million to EUR 223 million. Our EBIT margin continues at a high level, as you can see, 16% EBIT margin, mainly supported by stable pricing and stable input cost. We are, of course, very pleased to see that. When I look at profitability by segments, we achieved a strong EBIT, 15.6% in the insulation segment, which also somewhat benefited from a positive country mix.
In the systems segment, profitability declined this quarter compared to last year, and this was mainly driven by the revenue decrease and profitability decrease in Grodan. Unfortunately, we in the short term do not expect the situation in Grodan to improve meaningfully. Next to last, our investment activities on slide eight. As you can see, our total acquisitions volumes were EUR 93 million in Q1. That is EUR 9 million more than last year's quarter. Our main investments are relating to capacity buildups, our new factory in Romania, electrification of our two large lines in the Netherlands, and then our large factory project in the United States of America. Cash flow for the quarter was free cash flow was EUR -47 million. However, our net cash position landed at EUR 231 million. That's, of course, very positive, a super solid cash position for the group. So much for the quarter.
A few comments to our outlook. As you have seen, we maintain the outlook for the year. We have now, of course, put away one quarter, but when we balance the satisfaction quarter one that we have had against the macroeconomic uncertainty we see, we maintain our full year outlook for a low single-digit revenue growth on the top line. Again, also earnings levels for Q1 were solid, and we, of course, always stay very alert and monitor our activities across our organization. We adjust capacities and activities locally as needed, and based on this, we maintain our outlook of an EBIT margin around 16%. Last but not least, our investment projects are on track. We maintain the investment level for a level of EUR 450 million for the full year. These were the initial comments to our first quarter.
Would you like to begin the question?
We go to the Q&A.
Thank you very much. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset when pressing the keys. To withdraw your question, please press star, then two. At any time, we will pause momentarily to assemble our roster. The first question comes from Brijesh Siya of HSBC.
Hi, good morning, Jens. I have two questions. The first one is on the guidance. In Q1, you had obviously in line with what you expected, the Q1 margin [audio distortion]
Yes, you are breaking up quite a lot. I do not know if you can do anything about your mic.
Okay, is it clear now?
Yeah.
News on Reuters says that Subaru is raising prices in the U.S. [audio distortion]
Is it clear now?
No, no, there's a second voice coming in over your.
Oh, okay. It's clear. Hopefully, this is clear now.
Much better.
Okay, sorry. The first one is on the full year guidance. Obviously, Q1, you landed there bang in line with the expectation at the EBITDA margin level. But when you are moving to the second half of the year, or specifically Q2, I think you can comment a little more. Given what you call seasonality, you should expect the margin to improve as the year progresses. Um and then if you can give a little more flavor about how you think the margin progression is going to happen and the Russia dilution, which you talked a bit near there, whether that is in line or anything incremental you expect to come the rest of the year. That is my first one. I will come to the second one later.
There is some seasonality in our business, although not a lot. When we balance it out about the uncertainty that we see in the market, we think it is a reasonable outlook to call it 16% on EBIT.
Okay, fair enough. The second one is the systems division. I guess a couple of quarters that we are talking about, you're making some kind of plan in the business to improve the profitability of the systems division. I guess Grodan is probably the underlying market weakness, but anything that's under your control you're trying to do to help improve the performance of systems?
Yes, we have put together some plans, a catalog of improvements for the systems divisions. As you know, it's five different businesses, so it's quite different things that need to be done in them, ranging from supply chain and production to price positioning and product rationalizations. Yes, we're working on that. Each of them also are affected by different market factors, whereas just as an example, the Rockfon business is very influenced by office renovations in Europe and the horticulture business by completely different parameters. It is a very diverse portfolio.
Okay, fair enough. Okay, I'll step back to the queue. Thank you.
The next question is from Alexander Craeymeersch of Kepler Cheuvreux.
Hey, good morning. Alexander from Kepler Cheuvreux here. First off, of course, congratulations to Jes Munk and Kim Junge and the Rockwool team on a nice set of results. It's quite impressive, especially starting where we're starting from a high base of Q1 last year. Two questions from my side. It's nice to see that you continue to support the Ukrainian reconstruction initiative, but do you plan to continue this support for the remainder of the war? The second question would be that I've noticed that several plants are now undergoing maintenance, and it's actually several big plants. Could you give us some granularity on how much capacity has been taken out of the market?
And of course, maybe hint towards how much capacity or the organic initiatives that you're undergoing right now, how much plant additional capacity do you have in the next year or two? Thank you.
To the first one, I can confirm that at the AGM, the shareholders voted for donating another EUR 100 million to the Ukrainian foundation. Whether or not they do that again next year, that's up to the shareholders at the AGM. Your question to capacity is a little bit harder to answer because we don't have insight into all our competitors' capacity. It's not only about stone wool capacity. It's, of course, also about capacity in adjacencies or competing products such as glass wool. I don't have an exact number.
And on Rockwool specifically, maybe?
Yeah, Kim here. Here, as you know, Alexander, we are adding capacity in three different sites currently. One of them is in India, where we will come online mid next year. We are adding also in Romania the second factory line that will come online early 2027. The bigger factory in the western part of the U.S. will also come online late 2027, early 2028. That is the capacity that we are adding right now. Of course, we have some options that we are considering, but for the time being, that is what the plans are for us.
Okay, thank you. Back to you.
The next question is from Zaim Beekawa of JP Morgan.
Morning. Thanks for taking my questions. The first one is just on France. Can you maybe comment on the magnitude of that pricing pressure you're seeing and what's really driving that? Secondly, obviously, strong performance in North America. How much of that is to do with some pull forward in demand? If we look into Q2, how do you see the trends evolving in this market given you've got July price increases, so maybe some further pull forward, but that's against some tougher comps given the strikes in 2023? Thank you.
Yeah, let me start with the U.S. I'm just writing onto here. It is not a pull forward we see in the U.S. due to, you know if I assume you mean that there should be a pull forward because of announced price increases in the summer, but that's not what we see. It's not a pull forward that drives our demand. We have quite a healthy pipeline in the U.S. As you know, we have very low market shares, and we're gaining market shares in the U.S., have a very healthy pipeline. When I mentioned a little bit of softness in the U.S. market, it's simply that we can see some of the big contractors delaying projects into the next few quarters.
Again, I mean, with the growth we have in market share and the pipeline strength, we foresee that we will stay at the growth level that we're delivering already today. France, it's mainly in the professional segments, I would say, that we see the price pressure, and it's very nuanced. Let me try to explain. When I say professional segments, it's mainly the flat roof business and sandwich panels business. This is really products that go into distribution centers, data centers, and renovation of commercial industrial buildings. It is a very nuanced project from project, so more tactical movement around winning the right projects, the ones that fit us the best. Overall, it's approximately a percentage point in price that we're encountering there. That's an average, so you have to really look at it by project by project.
Great. Thank you.
The next question comes from Yassine Touahri of On Field Investment Research.
Yeah, just a follow-up question on your strong performance and market share gain in North America. I understand that you're delivering 15% sales growth when Owens Corning in glass wool is only delivering 1% growth. What is driving this market share gain? Is it the fire safety property of stone wool? Is there something like it would be great if you could walk us through what marketing strategy you think is successful and whether you think it's sustainable in the coming years this impressive performance?
I think it's paramount to understand that our market share in the U.S. is very low. We are today around 2%-3% of the insulation market. When I compare that to a market like Canada, where we are above 10% market share, then there's no reason why you could say from a structure perspective why we shouldn't have a much higher market share in the U.S., as buildings are built more or less the same in Canada and in the U.S. What we're driving here is really a market share gain, as I said before. To your questions, we're really playing on a row of dimensions. It is new customers, it is new channels, and it is, of course, also offering new products into the U.S. market.
Most notable, of course, what we are known for are fire resistant insulation, which is something that is getting more and more recognized as an important factor. It is really a channel, custom, and product play that we're executing here.
The second question is that when we look at the beginning of April and May, do you see the same kind of trends that you've seen in the first quarter around your portfolio?
Yeah, but I don't. [crosstalk]
Because of all those political uncertainties.
I don't have any numbers for Q2, of course, now, but there's no significant change in the dynamics. We do see that some big construction companies, also in the U.S., as I said, are holding back. When I talk to U.S. customers, and I've just been there recently, they report very strong pipelines, many projects that they are quoting, but hesitation to execute P&Os. Again, our numbers are very high compared to the rest of the market, and it is simply because we are expanding into new customers, new channels, and gaining market share.
Your last question, which is a bit more long term, but if I look at the situation in the European stone wool industry, I think you still have a few single plant owner of stone wool. I think those companies will have to switch at some point from a Coppola to an electric melter. I guess it's probably going to be difficult if you've got only one plant. You have to be out of the market for six months or a year. Do you think that these difficulties could drive some consolidation in the stone wool market, where some of the small plants might decide to sell?
I think it's a fair statement to say that it's difficult to be in this industry if you have a very small footprint for a row of factors: scale, access to technology. One of the ones you mentioned is, yes, the conversion from fossil melting technologies into electric. There's not a lot of factory capacity that are singles or you can say small footprints, but there has been an ongoing consolidation. Whether or not that will accelerate the next few years, I don't know yet, but I think your overall observation is correct.
Do we have any update on the plants in Poland that were being sold by the government?
No, there's no real development in that. What you're referring to is, yeah, that the Polish government is trying to sell an asset they withhold in Poland, but there's no real news there.
Okay. Thank you very much.
The next question is from Claus Almer of Nordea.
Thank you. Also a few questions from my side. If we go back to the U.S., I think you mentioned a bit about growing into new parts of the various channels. Just to be sure, the strong growth in Q1, was that mainly driven by the share of wallet going up in the existing customers, or are you actually adding new customers and new regions of the U.S.? That would be the first one.
It's a little bit of both. We have actually, for a long period, been on an allocation program where we simply do not have enough capacity to serve the market. We have been on an allocation program. Our existing customers, also the ones I met with recently, still have an unfulfilled demand. We continue developing not only the existing channels, but also new ones. I could mention one. They are called affiliated distributors, which is a very large buying group of the independent distributors with thousands of outlets. They expressed great interest in our products, not only the insulation, but also some of our other products. The U.S. is truly a market for us for the long run that can be developed and should be developed much more. That is, of course, also why we invest in significant capacity now in the state of Washington.
Yes. That might be the follow-up question. I guess last year you talked about being more or less sold out, at least in the high season. Q2 last year was pretty strong, as I recall. Can you really grow volumes in Q2? You have maybe some import from Canada and Europe, but then you have tariffs. How do you see the whole volume trend moving forward in this year for the U.S.?
You spotted that right. It is a very difficult comparison. We had a very high, also for some shifting around of volumes last year that were released, a very high level of volume moving last quarter. That will be hard to beat. Of course, we are constantly working with our portfolio, moving volumes into the areas that we think are most valuable. We work with our pricing and then, of course, also with existing footprint to optimize the output of the existing production lines. There is always some things you can do there.
Sure. Okay. Just my final question goes to this more intensified price competition in the subsegments where you're up against the foam-based products. To what extent does this really impact group level or group performance? Should we be concerned about this?
It does not as such influence our group performance. It is more a tactical ongoing discussion about price points vis-à-vis the main competing products, not just the foam-based products, but also, for instance, glass. It varies a lot from market to market, what is appreciated by the customers, but also what price points we can command. It is more on a tactical level that we adjust. On a total aggregated level, it does not have a significant impact.
That makes a lot of sense. Thank you so much, and congratulations with the solid start for the year.
The next question is from Marcus Cole of UBS.
Good morning. The first question is just on what pricing developments have been made in Q2 so far. The second one is, what do you think a realistic outcome for cost-based inflation for the full year is factoring in your current energy hedges? Thanks.
Yeah, we started off with having some of our businesses implementing price increases from April 1st. We just sort of continue the trend with the pricing dropped with a 1%-3% in more and more markets. I think the next bigger one is the one in North America from July 1st, as we had talked about before. That is going to be around 8%. On the input cost, Marcus, I think we have said we are covering both electricity and gas. For the remaining part of the year, we have covered about 70% in average. Foundry Coke, which is still our biggest input cost, we can only take a quarter at a time. I see a very small decline in Q2, like a percentage points decline compared to Q1. That's it.
Okay. Thank you very much.
The next question is from Pujarini Ghosh of Bernstein.
Hi. My question is on your local currency growth of 4% that you achieved in Q1. Of that, we know 2% is from acquisition. Could you give us the split between volume and price for the remaining 2%? I'm assuming it's largely volume because pricing you're increasing in April and July, as you just mentioned.
Of the organic growth, it is almost all volume. It is a small price effect from last year at this point in time.
Okay. Thank you.
The last question is a follow-up from Brijesh Siya of HSBC.
Hi. Thank you again. Just on the fire safety and regulations around Europe, have you seen any marked development in any of the countries, any movement in those regulations, and what you hear from the European Commission in terms of kind of moving ahead these overall European regulations?
Yeah, but let me start by saying that I sit in my best suit right now because I'm jumping in on a plane in half an hour going to Brussels to meet with Danny Jørgensen and a row of parliament members to discuss this subject. So it's something we spend quite a lot of our time on. And that gets a little bit longer answer. But we have the last 6-12 months really scaled up on our public affairs capabilities and had a lot of dialogues with the individual countries. Because the trick here is that one thing is what Brussels has dictated, you can say, in the new directive, but where the real test is, is of course country-by-country implementation of these new directives. So we work very much on a country-by-country level with our local teams.
We monitor that, we influence that, and we see some very meaningful programs running in countries like Romania, Poland, and Germany also with their new packages has a couple of, and France, by the way, also quite some ambitious goals for what they want to achieve the next few years. As you know, also funding is starting being established. I think we're into the next six months, we can also here going forward, share in the next few meetings how we see these individual, because that's really where you have to look at it, individual markets developing and catering for this new European performance directive on buildings.
Great. The second one on the sandwich panel acquisition, which you have made towards the end of last year, how has been the progress, and do you see any further opportunities in that to kind of expand the product portfolio across the broader group?
Just a small correction. It's not a sandwich panel business. It is a wall system, also called ETICS system, which is an external insulation system that we made in the U.K. It's been quite a successful acquisition. I mean, it's still early days for an acquisition, but they're performing very well. One of the things we did do was convert this business fully into a stone wool-based offering, which resonates very well with our U.K. customer base. That has been a really good addition to our portfolio.
Great. Thank you very much. Good luck.
Gentlemen, we do have a final question from Axel Stasse of [audio distortion]
Yeah. Good morning, everyone. Thanks for taking my question. Just a follow-up on the organic growth guidance. You mentioned some pricing hikes in Q2, high single-digit pricing in July in North America. You stick to your low single-digit organic growth guidance for 2025. I would assume this then implies volumes going down for the remaining of the year while you're actually ramping up assets. Is there anything I'm missing here, or is it you guys that are just being conservative, given limited visibility on volumes going forward? Thank you.
No, you're not missing anything. We don't expect a large volume growth. There's a slowdown everywhere and a hesitation. As was both said and wrote, we do see a slowdown, particularly in East Europe, and one of the markets is Russia. That does affect our totality numbers. I wouldn't call it conservative. I think that is very much the picture that we see now.
Okay. Thank you very much.
That was the final question. I'd like to hand it back over to you, gentlemen, for any closing remarks.
Thank you very much. Jes and I thank you for today's earning call. We would like to thank you for all your questions and the audience for listening to today's call. We appreciate your interest in our call. If you have further questions, you always feel free to reach out to me. You can find the details on our investor section in our corporate website. Have a fantastic day. Thank you.