Ladies and gentlemen, welcome and thank you for joining the Wienerberger Conference Call on the full year 2023 results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may click the Q&A button on the left side of your screen and then raise your hand. If you are connected via phone, please press star followed by one on your telephone keypad. For operator assistance, please press the star key followed by zero on your telephone keypad, or press the Operator Assistance button on the bottom left side of your screen. I would now like to turn the conference over to Therese Jandér. Please go ahead.
Good morning, ladies and gentlemen. A warm welcome to the Wienerberger Earnings Call on our full year 2023 results. Our board representatives today are Mr. Heimo Scheuch our CEO, and Gerhard Hanke our CFO. They will walk you through the presentation and are ready to take a question afterwards. I will now hand over to Mr. Scheuch for the presentation.
Thank you very much.
You are now in silent mode.
Hello from Vienna to all of you. Thanks for participating in the call, and we both will walk you through rather quickly through the year 2023 and then give you an outlook with respect to this year. When we look at the year 2023, we can say again, and this is important to note, that the Wienerberger business model has significantly developed over the last years. We are now much less cyclical than we used to be. We have a more resilient business model with an exposure to about 50% to new residential housing, increasing exposure to renovation, and especially also to infrastructure. And this helps in volatile markets, as we will describe to you we find in 2023. Again, very strong the innovation rate, very important for pricing and very important for positioning with respect to our end markets. Also a very strong improvement on the cost side.
I recall here that we have had a project in place for three years, and we fully met the expectations with the 136 savings. This is not one-time savings. This is actually we have improved our processes, especially manufacturing, but also in purchasing and overhead structure. This is for the long term. Also, I think when you look at our very, very strict M&A management, we are very proud to say that our paybacks are less than 5x after year three of the buy and the M&A activity. If we look at the year again in a nutshell, very important was also that we were an early mover, early mover with respect to the market.
I remember very well discussions with you at the beginning of 2023 when we said we see actually a little sort of dark clouds on the sky with respect to new residential housing, and we moved quickly in order to cut costs. Gerhard will elaborate on this much more. The strict cost management and the price discipline, pricing very strong in all Wienerberger region, helped us and enabled us to keep our margin above 19%, a very strong signal again in such declining market environments. EUR 811 million EBITDA for the whole year, which obviously underlines again this is the second best result of Wienerberger in its history and in a very depressed market environment. I recall only to you, for your benefit, if I go back a couple of years in 2017, which much higher markets, end market levels, we not even reached EUR 400 million EBITDA.
So we have improved dramatically our company, our structure, our portfolio, and our efficiencies. ESG is part of our day-to-day management. Strong performance in the first program 2023, all the points finalized, achieved and an attractive payout for our shareholders to be foreseen as a dividend. If I go on the next slide to the markets, and here you see again the sharp drop in the European new build and new residential housing market. At the end of the day, it was a decline of 35% that we had to face in the market environment of new build in Europe, also about 20% in North America, and renovation has been also substantially down in Europe, especially. Infrastructure, on the contrary, and this was the positive surprise, came in stronger, especially in the second half of the year with good projects and a good pipeline of projects in the infrastructure business.
So all in all, the end market of Wienerberger in Europe and North America were weaker than originally expected at the beginning of 2023. But, and this is the strong signal and the strong message of Wienerberger, we outperformed those in a rather significant way. So if we look at the overall performance, innovation rate above 30%, cost management, a strong cost as I said, cost management contributed about EUR 80 million to the business. The self-help measures with EUR 46 million, this was included in the first chart when I talked about EUR 136 million of savings over the last three years.
The price over cost, strong outperformance by about 4%, and the capex we obviously reduced about 32%. In a nutshell, when we look at the whole picture, and this is from a market perspective, very interesting for you to track. We go back here to 2018 and show the market development. The end market at its peak was in 2021 when we achieved about EUR 700 million EBITDA. You see that they declined dramatically, and we are now at about 72% when you look at the index for end markets compared to the 2021 level. So again, you see the strengths of our cost structure, the strengths of our business model in order to resist in these difficult times.
As I said earlier, sustainability plays an important role. We have achieved all the targets of 2023 in our program, especially the reduction of CO2 emissions, circularity, biodiversity, and the diversity and social commitments that we have. I think here a strong, transparent, clear communication to the market what we are doing, and within the company, a strong focus on ESG as such. This led us obviously to reformulate our 2026 targets because we believe very strongly in these sort of medium-term programs for ESG. Here you can align your whole management structure around those, the targets, the KPIs, and have to some extent improved them. I just want to show you very briefly with two examples the aspect of the way forward to climate neutrality for Wienerberger.
We will further reduce till 2026 25% of our CO2 emissions and also include Scope 3 the first time with a further reduction here of 10. Again, clear structure, measures in place, investments in place, focus in place, and technology that has been now proven in order to reduce our energy consumption and therefore the reduction of CO2 emissions. So I'm very confident that we are on the right way as far as climate neutrality for Wienerberger is concerned and meet the targets even earlier. At the end of today, an important subject is also the products and systems that contribute to net zero energy consumption buildings. And here again, our clear aim is to improve such sort of portfolio from an impressive already 70% of the whole company's turnover to 75%. So this is also clearly measured, audited, and communicated to everybody. Strategic highlights very shortly 2023.
I think here, very important, we are a company that focuses on progress and on innovation and have put in place a very strong team within the company that focuses on artificial intelligence when it comes to all parts of the business, especially, and I don't want to go in every detail, but especially when we talk about manufacturing and managing our manufacturing base, therefore reducing our emissions, which is key to us, saving resources when it comes to input from raw material and others, and increase obviously and optimize the output and reduce waste. So here we have real sort of made a huge progress and will certainly increase on this basis further within a network that is increasing. M&A brings new sites in our portfolio, and there we can optimize them rather quickly. Water solutions are of key importance and exceedingly so in Europe and North America.
Here, saving water and preventing the loss for the public transportation system of water is a key element. And therefore here we have solutions for that that are implemented, that are working, and we have, that's most important, happy clients on the public side with respect to water management. When we look at the self-help program again, I've told you and Gerhard and myself explained to you the program 2021 - 2023, which we successfully completed. We have gained experience. We've gained here momentum, and we are happy to announce that we continue this program further and will have another efficiency enhancement program that is launched and is running already with an additional EUR 100 million that will be contributed to the business and tracked and communicated. And you will see here about again the necessary contribution coming in at around EUR 40 million for this ongoing year.
When we talk about M&A focus last year, there were some smaller parts in the north of Europe and in Germany consolidating our position, very good businesses, high-quality business, well-invested business. I draw it to your attention to a small business, Wideco. Why? Because it's interesting to see that we in our portfolio buy now also some smaller businesses, startup businesses. This is a sensor business, by the way, for water leakage detection, but you can use it also for climate in-house and heating, etc. So this has huge potential for us for growth, and we are currently having a couple of those and recently also done some of these investments in sort of startups. These are very low amounts of cash contributed to these businesses, but the leverage that we can offer them operationally speaking when we add them to our business is huge.
And I do think that we will do a couple of EUR 100 million of turnover in the next years to come out of these businesses. So again, I'm glad to announce that with Terreal we are approaching the finishing line. It took us a year. Actually, we were very happy to get the approvals from the antitrust authorities in France, Germany, and other countries very quickly. I had to wait for the secondary transaction. I draw your attention to the fact that we are not acquiring the Polish, the Hungarian, Austrian business of the ex-Creaton and Terreal businesses. So this goes to a Swiss company called SwissBorg, but confident that they have now also the necessary approvals, and the Austrian authorities are the last ones to do so this week.
So next week or the week after will come to a final sort of finishing line here for this process, and then we can start with the overall integration. We have here obviously due to a certain delay, obviously compared to our original plan, we have put here some numbers in for your models where we show very clearly the contribution for this year with EUR 90 million. So this is the contribution that the Terreal deal will give to the Wienerberger results this year. And for the years to come, as we said accurately and very clearly, it will contribute the EUR 150 million, including all of the synergies coming from this commercially and cost-wise to Wienerberger. Last word on Russia. You remember that we told you last year that we have organized the management buyout and everything was working fine.
We assessed the situation thoroughly year-end of 2023 into this year, beginning of this year, and came to the conclusion that the political risks are too high with respect to Russia and the managing buyout, and therefore concluded a final transaction with a Russian family, a very serious, very good family, and not on the sanction list, etc. We were happy to announce that we finally exit Russia by this way, and we have already received the funds from this transaction in Austria. So everything is concluded nicely. So there's the exit fully achieved. I hand over to Gerhard to give you some impact, some of the impacts in analyzing this transaction to Wienerberger.
Thank you, Heimo. Right. The Russian business is closed. The sale of the Russian business is closed in the beginning of February. So what you will find in the financial statements of 2023 is only some notes under the subsequent events, but from an accounting perspective, you find the transaction back in our quarter one numbers. This is, I think, important to keep in mind. In the quarter one numbers 2024, the financial implications, what we will have is that you will see again from the disposal in the range of EUR 9 million, and you will also find the recycling of our FX reserve, the ruble reserve. When we initially invested in the Russian business, the ruble was round about 45 to the euro. You know that the ruble now is more in the range of the 100.
These movements in the FX reserve you basically digest during the other comprehensive income during the year. But if you exit, if you deconsolidate the business, you have to digest it via the financial results. That means you will find from a bookkeeping perspective a non-cash effect of EUR 40 million via the financial result in quarter one. This brings us to the financials. Just to summarize once more the strong financial performance, what we see for 2023. Let me focus more on the cash flow position and on the financial leverage. The numbers are in line with expectations. Where we are slightly above is on the net debt position, which is linked to the working capital, but I will basically come back on that once more later this presentation. But all in all, a strong set of numbers considering the harsh environment which we are in currently.
Looking to the regions of 2023, how they developed, and we mentioned it quite often that when we start with the Eastern European region, that yes, the environment was strongly influenced by higher financing costs, respectively by high interest rates linked to the high inflation rates. We see that since the second half, more or less, that a more stable development on inflation rates and on interest rates, respectively. Inflation is already coming down since the second half. So this was impacting strongly the year 2023. As we mentioned earlier, Europe East was affected more strongly in the first half of 2023 and was stabilizing more in the second half of 2023, while we have seen in Europe West the declines, the market declines stronger in the second half of 2023. North America was more or less developing as expected.
We expected in the beginning of the year last year a -20%, and basically we confirmed also looking back that new build market developed with a -20%. I think what was a positive development, what we have seen, is the infrastructure business, which started up in 2023 rather weak and which improved during the year. We have seen definitely some positive developments, slightly increasing market developments in the second half of 2023. When we look to the quarter four developments, and I think important is that we have seen no surprises neither from the market perspective nor from the financial result perspective. Financially, the quarter four developed as expected. We materialized or we realized an operating EBITDA in the last quarter 2023 of round about EUR 150 million, which is perfectly in line also with our expectations.
What helped us definitely is that a major part of our cost-saving initiatives materialized in quarter four. We realized EUR 80 million, as Heimo mentioned before during 2023. And out of that, EUR 30 million materialized only in the fourth quarter. Looking into the regions also there, what was impacting the quarter four development, financial development, was that there was yes, the winter came a little bit earlier than compared to last year. We had already some snowfalls and harsh weather conditions by the end of November. So yes, this we have seen. And this had also not so much an impact on our financial performance or on our EBITDA performance, more an impact basically on our inventory levels, which are slightly above than we originally have planned. So quarter four, no surprises, as I mentioned. We have seen in Eastern Europe, as I mentioned before, a more stable development.
Western Europe, the new build came down, especially in the second half. So this was continued also by the fourth quarter. And in North America, also there, no surprises in the last quarter. Volumes and EBITDA developments in line, I would say even slightly better than we originally have expected. Looking to the full-year revenue bridge, we had a net revenue. We ended up with revenues round about EUR 4.2 billion, which is round about 14%-15% below prior year. We have a volume decline of round about -20%, a price increase, as we announced earlier of +8%. And then a mixed effect mainly from U.S. and British pounds and Turkish lira and some Scandinavian currencies, which are impacting basically also our top line.
But all in all, we were able also by strong pricing to compensate part of the volume decline what we had during 2023. EBITDA-wise, the operating EBITDA developed to EUR 811 million. You know that in 2023, we have seen some exceptional items in our P&L. We see 2022 from a sustainable level, more from a EUR 900 million and not from the EUR 1 billion. But anyhow, we ended up with these exceptional items last year, which brought us to the EUR 1 billion. I think important to mention that is that the EUR -200 million, what you see on operating EBITDA, there are sustainable countermeasures in it. Heimo mentioned them. There is a cost management contribution of EUR 80 million in it. There is a self-help contribution of EUR 46 million, and there is a strong contribution of price over cost performance of more than EUR 150 million.
So we gained almost EUR 300 million on countermeasures which we implemented and which compensated this strong market decline which we realized in 2023. I mentioned it before, cost initiatives, fixed cost savings. We took out on a full-year base EUR 80 million. And definitely, what was helpful looking back, and we announced that we started implementing already first fixed cost initiatives in the second half of 2022. So we were able to realize this big part of fixed cost savings of EUR 80 million in 2023. And we expect another EUR 20 million out of these initiatives which we have implemented in 2023 also in 2024. So the whole program of 2023 had EUR 100 million on fixed cost savings.
The reconciliation on EBITDA, on operating EBITDA and reporting EBITDA, I think here once more you see that from an operating EBITDA perspective that we lost only EUR 100 million, which is keeping in mind in which market environment we are in, which is a very strong financial performance. We had also to digest some of the restructurings. So as we mentioned, we had some Mossballing and also some shutdowns of our capacities. And this is also shown here in the line of structural adjustments, which then leads finally to the reported EBITDA of round about EUR 780 million. From a balance sheet perspective, I mentioned it before, net debt slightly above our expectations with round about EUR 100 million. This is directly linked also to our working capital.
There, maybe when you look to the working capital KPI, we were moving from 16% - 23%, whereby you know that in 2022, working capital, especially inventory, was significantly too low. Therefore, we had also planned a certain buildup of working capital in the range of up to 20%. We arrived on 23%, which is mainly driven that in the inventories, we had higher levels or higher inventories, especially on the raw materials side. The second impact what we had is also that our trade payables ended lower than we originally had planned. These two effects basically also led that working capital revenues was not round about 20%, was round about 23% compared to the target what we have set. To summarize once more, Heimo, if I hand over to you for the 2023 year.
Yep. Thank you, Gerhard. Ladies and gentlemen, I think you have seen here from what Gerhard and myself have explained, the teams at Wienerberger were very quick in adjusting and adapting to this new situation. Cost cutting, cost measures, and efficiency enhancement were the key in order to drive results in 2023. I'm very proud of the teams at Wienerberger. Keep in mind also that in such a strong decline when it comes to new build, especially in certain areas of Europe, Germany, but also Eastern Europe, we have not lost a cent to bad debt or something like this. So very well managed. There were a lot of bankruptcies in the sector, but Wienerberger didn't lose a penny. So again, very strict and disciplined management. The numbers themselves speak, I think, out, and we have commented enough on this.
And also, I think when you look at the significant shareholder return that we have created over the years now, it's in line with the expectations that we always have provided you with in sense of return as much as we can to the shareholders from a dividend perspective, share buyback perspective. And we are obviously open to all of these measures if and in the event necessary and the right opportunity arises. So we will recommend to the General Assembly in May of this year a 90% dividend. It shows the confidence in the business model. It shows also the confidence in the way forward. So I think it's in considering these circumstances, these volatile circumstances that we are living in, a strong signal from the Wienerberger side. Let me come now to the outlook. We are living already in 2024.
It's going to be a very interesting and challenging year for all of us. Geopolitically speaking, I think we can all agree that it's going to be characterized as unstable and continuing to be so. There's a lot of political changes due to elections coming up and a lot of different sort of outcomes that might sort of hit us in the one or other market. So there's, as I said, volatility around. Inflationary threats and trends, I think we have managed them down, and there's less risk from this side. Also from an interest development side, obviously, it's unsure. But from what we understand and what we feel, it's trading down, not up this year. So as I said, lower inflation gives us rise to optimism. The absence of interest rate hikes has also brought momentum to the market.
And you see it also that people are more willing to engage in projects already and slowly thinking about it. There is, and this is the strong, strong, and very positive signal from us to all of you, there's a huge demand in housing in all the markets that we are operating in. So there's no oversupply. There's undersupply. There's especially also undersupply in social housing where a lot of our products go to. And I think also with the regulation and with energy-efficient buildings, etc., we are very well positioned for this. So on the midterm, I see here a very bright outlook for Wienerberger. The first half of this year, however, we'll see compared to last year a lower activity volume. That's for sure. That's, I think, clear for everybody that the comparables are such that we will be in activity end markets lower than last year.
As I said earlier already, for the second half, we expect an upward trend. However, if something better comes, and you have seen it from the presentation of Gerhard, our cost base and our sort of innovation rate is such that we will do certainly much better than the market. Anytime there's an upswing coming or something that we don't foresee right now, I think we will outperform this market development. As we speak, we see the following market trends with respect to our end markets. Let's start for a change with infrastructure. Infrastructure in Europe and in North America should be stable to slightly up in a lot of areas. I say slightly up because there's some political tension that moves away in Eastern Europe. The Cohesion Fund will bring money to this area again.
So I see here the one or other positive trend coming through in infrastructure, especially also in North America. So we are ready for this growth and can satisfy such growth. Renovation should be stable slightly up in North America. In Europe, still in certain areas down because one or the other big country in Europe will not be as active in the renovation as it used to be. And I talk here about France and especially Germany. The new build sector, and here we see again, and that's what I told you earlier, the first half of the year will be weaker. So therefore, you have a downward trend. It will be a couple of percentage points. Some of you will ask me immediately after this call how much.
So that's why I'm sort of saying to you we will be in the range of about 3%-5% depending on the market in Europe and below 5% in North America. So this is the range that we currently see and where we are operating in so for the new build. Let's move on then from the market side to the cost of the business. We see here inflationary cost increases by about 2%-3%. You have here split out from personal cost and raw materials to granulates. Obviously, the bigger part comes from the personal cost. Keep in mind that wages have been up strongly, especially in Central Eastern Europe. So this contributes, obviously, to the cost inflation heavily. We will need a 1%-2% sales price increase to cover this.
We are confident again to put this in the market, and we're successful in getting the price increases through. So in an overview, when we talk about 2024, we see here effectively managing our cost base again, very important, and as a strict focus of management. As I said earlier, the self-help program that we put together again to roll it out, contributing about EUR 40 million, EUR 40 million again in this year. So you see how strongly we are focusing on this aspect. Again, when we talk about the cost management side, that are the day-to-day costs. And Gerhard explained that we have already done EUR 80 million last year. We'll do another EUR 20 million this year. So here again, a very strong focus on this aspect. Inflation and cost increases and price increases are very important for us, as you know, to keep our margins.
So there will be a strong price discipline throughout the Wienerberger business for 2024 in order to keep the margin at the level that we have currently. So here again, when we look at the guidance, and we put a bridge for you together to, and I would like to walk you through, if we take last year, 2023, we have seen an end market index, as you have seen in our charts earlier, of around 72%. This is the end market index, all markets, end markets combined. We see, as I said, a certain decline. You see it on this chart here to about a 69% index for the overall exposure of Wienerberger. So this would obviously lead to about EUR 85 million, including the Russian disposal that Gerhard has mentioned, the EUR 5 million.
So this is what we see as a potential sort of downward trend when we talk about volumes, volumes, and then obviously related into EBITDA. Then obviously on the positive side, the self-help was the EUR 40 million, the EUR 20 million on the cost side, and the scope coming from the Terreal transaction with about EUR 90 million. So this all in all adds up to about EUR 860 million-EUR 890 million. As I said, if the markets start to pick up, we will do much better than that. If they are as they are, then we will be more or less in such a range. And if you look with me again to the next chart, that's the guidance for 2024 with respect you see the overall EBITDA structure over the last couple of years and the index.
You see again that even in this downward trend still and now stabilizing out at this level for this year, we have a strong increase again in EBITDA. So you see the resilience of the Wienerberger model. You see the overall strong performance when it comes to proactive cost management, to the pricing discipline, and the innovation rate in our business. So all in all, I think here a very, very strong way forward. Let's not forget also the midterm because obviously we are currently living through a rather difficult market sort of situation as we speak, especially in Europe. But if you look at Wienerberger and its end markets, we have a wonderful place to be in because here there's so much demand coming from the infrastructure side, from the new build side, and from the renovation side. Wienerberger is well geared for this.
We have a strong industrial base around Europe and North America. We have the right products. We have obviously energy-efficient products. We have the sort of approach in the CO2 reduction that is on the right track. So all the regulatory requirements we meet and obviously with such strong brands that we have in the end markets, we are here certainly of the position to take a strong advantage. We have obviously in North America with the increasing presence of our businesses in the North American markets, Canada, especially Ontario, the Southeast of the United States, and also Texas, a strong exposure to the right growth markets. And here we can obviously take advantage of these demographic developments, the positive ones in Canada and North America and the US as well. So if we look at the overall performance, we ended up last year about EUR 811 million.
There is obviously a clear road to the EUR 1.2 million that we showed to you EBITDA-wise in last capital marketplace with all the necessary measures in place on the CapEx front, the growth front, the M&A front. I will comment on this in a second. I think here from an underlying business perspective, Wienerberger has never been better positioned than now with respect to its cost structure to tackle this growth potential that we have out there in the market.
And obviously, I mean, if somebody will ask me, "Heimo, is EUR 1.2 billion your target for 2026?" I say, "We will do better if the markets are doing better." But I think this I just wanted to give you a clear sign that here the potential is there and that we will reach this EUR 1.2 billion in the next couple of years because we have such a strong base for growth. Ladies and gentlemen, if you look at the strong cash generation of Wienerberger, and you have seen it also last year, and Gerhard talked to you about it, and how quickly and how fast we can digest a transaction like the Terreal one, cash-wise, financing-wise, etc., we are optimistic about the pipeline of deals that we can do. Why?
Because this difficult time provides us also with unique opportunities: businesses that are in term or businesses that are in financial difficulties and also succession problems because people come to their age where they want to dispose of their businesses. On both sides of the Atlantic, in Europe, but also in North America, we have a strong pipeline of potential deals. I say this loud and clear also because I've seen in the sector people buying businesses at huge multiples. We are not going to do this. You have seen us very disciplined on this front.
We will remain disciplined because our main goal is to deliver value to our shareholders either by growth or by sort of buying back shares in the marketplace if there's not the right opportunity for growth or if there is another financial issue in the sense of the market is weak. So here again, I think Wienerberger, all in all, well geared for growth, very happy about the results, very confident with respect to this year considering the certainly difficult and volatile market circumstances. But with this sort of sound degree of optimism we go into this year, the team out there fighting every day, and we will certainly come back to you at the end of the year saying it was a great year for Wienerberger again. 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 "one" on your telephone keypad. If you wish to remove yourself from the question queue, you may press "star" followed by "two" or please press the "Lower Your Hand" button. Anyone who has a question may click the Q&A and raise a hand button or press "star" followed by "one" at this time. One moment for the first question, please. Our first question comes from the line of Brijesh Siya with HSBC. Please go ahead.
Hi, Heimo. Hi, Gerhard. Good morning. I have three questions, one for Heimo and two for Gerhard. To start with, the guidance of your EUR 860 million-EUR 890 million, and you tell us that you expect the underlying market to be down 3%. I'm just curious to understand if a 3% decline would kind of trigger an EUR 85 million EBITDA upcut, which is roughly a 10% decline if we exclude Russia. When I compare with last year, it's kind of yeah, it's around 11% decline on a 9% volume decline. So curious to understand how you see the market. And you have been saying that you're outperforming the market. So should we assume that you will be outperforming the 3% decline which you are guiding for the market? So that's the first one. And two more for Gerhard. The first one is on inventory.
If you could give us the split between the EUR 1.1 billion of inventory into what's the raw material and finished goods split in that, and if you could compare that with last year, how it was. And the third one is on the net debt guidance for 2024 of EUR 1.5 billion. If you could walk us through the different dynamics from EUR 1.2 billion of this year to next year, EUR 1.5 billion.
Right. Do you want to start, Gerhard, or should I?
Maybe you start, Heimo. I'll look in the meanwhile for some numbers.
Yeah, sure. No problem. From my side, you see when you talk about the performance and the markets, its underlying markets development, the numbers that I give you for this year, for the ongoing year, is a scenario. I have no accurate numbers because it's so volatile, the environment and such. As I said, we are confident that we will outperform even this year our markets, our end markets. That's for sure. However, if I said also that in the first half of this year, the markets, the underlying markets, especially in the new build, will be weaker than last year. That's why we come to this decline in the marketplace in Europe and North America. And this is something because the comparables, when you look at 2023, come the first six months have all still been advantageous because there was an overspill of 2022.
So the market was better. The projects were still coming through. And you saw the decline in the second half. So that's why I said at the beginning of my presentation that we always are in the building material world six months later when it comes to developments like decreases or uptick. So this is the major thing from my side. I hope I addressed your point here.
Yeah, thank you. Just as a follow-up on that, in November, you said to us that EUR 400 million is possibly the run rate you would expect for 2024 in half one, half two. And that's probably the absolute level you would do it. Now, considering what you have seen and what you are telling us for H1 2024, would you say that that EUR 400 million is more looking like EUR 300 million-EUR 350 million in H1 and possibly a higher number in H2?
You are splitting the EBITDA already. Yes, I can't guide you in all the details, but you are moving in the right direction, if I may say so, with your assumptions. Yeah? And then I'll hand over to Gerhard.
Let me start with the net debt development. Let me walk you through the net debt guidance of around EUR 1.5 billion, including the Terreal deal. We started or we will start basically with the EUR 1.2 billion, what you see here also in the slides. We expect a gross cash flow of around let's say, EUR 600 million. The Terreal deal, so the net cash out will be around EUR 500 million. We foresee CapEx of EUR 0.3 billion, dividends and a release of working capital, which basically net out together. So the dividend is around EUR 100 million.
And we also expect that the raw materials, what I mentioned before, that the working capital is around EUR 100 million too high, this will come back as we strive, as we mentioned, for a 20% working capital to revenues also for 2024. If you add these numbers up, you end up around about EUR 1.4 billion-EUR 1.45 billion on net debt, including also the Terreal acquisition.
And Gerhard, when you said EUR 600 million of gross cash flow, does that include any component of Terreal coming in that as well?
That includes, sorry?
Does that include Terreal's nine months contribution?
Right. This is including also basically the Terreal, so the EUR 90 million what we mentioned before. So this is based on the guidance of EUR 860 million-EUR 890 million on EBITDA. That's the first one. The second one on the inventories, as I mentioned, as I tried to explain, is I think in a first step, inventory levels was in by the end of 2022 too low, So we had anyhow to increase during 2023, especially on the roofing side, because there was such a strong business development by the end of 2022 or in the second half of 2022, which brought down finished goods levels, basically especially on the roofing side, which was too low. So we still had another strong development in the first half of 2023.
And we are fine when we look to our finished good levels. Where we simply slightly too high is on the raw materials, on resins, on packaging costs, on spare parts. Why? As also, we basically brought down the plants, the capacities, the operations, especially in the fourth quarter. So also, the activity was basically quite low. And also, if you have a low activity in your operations, basically, it also means that you have a certain impact on your inventory development in the fourth quarter.
Therefore, this EUR 100 million what we're speaking about is mainly in a first step related to the raw material side. On the payable side, as I mentioned, also there, you know that we saved some CapEx and that we had also out of that, we had lower CapEx than the year before. If you have, if you invest less, basically, that means also that you have less trade payables outstanding. And they were also compared to last year higher. So these two impacts basically driving the slightly higher working capital in relation to prior year.
Understood. And would you be able to split that into raw material and finished goods?
I think it is. I just was looking if I have the number with me. But round about, it is, I think, 50/50. If you basically have finished goods, and then basically, you consider all the raw materials. Basically, the clay blocks what we have, the packaging. So everything which is around inventory, I would say it is round about 50/50.
Similar to your last year, it would be around 60/40 towards raw material.
Yeah, this is almost, I would say, almost too aggressive, I would say. But it was finished goods was last year by the end of 2022 slightly lower. As I mentioned, we had in 2022 a very strong market activity, which brought inventory levels on the finished goods side on a too low level, basically, what we normally foresee.
Understood. Very clear. Thank you.
Our next question comes from the line of Markus Remis, RBI. Please go ahead.
Yeah, good morning, Chance. A couple of questions also, please. Firstly, related to the pricing side, you're flagging quite a decent discipline in 2024. I was wondering if you could shed some light on the, how should I say, on the pricing environment on a segmental or on a product level. So maybe some qualitative comment, which pockets of your business you perceive as stronger and where there's more pricing pressure emerging. That would be the first one.
Well, I think from a pricing pressure perspective, you have always in certain regions, as I said, throughout the whole year of 2023, you have family businesses that are active. You have competitors that are active. But from our perspective, as the market leader in ceramic material in North America and in Europe, we are also here a firm believer in a very disciplined price management. So that is going to continue for this year as well. And keep in mind that the mix as such is trading upwards.
So therefore, I'm confident, as I said, and that's the most important and the key message that I can give to you that from a pricing side, we are in a terrain where we'll get the prices up in order to compensate cost inflation for this year. So this is very important because this is the margin that is otherwise at risk. It shows the strength of the Wienerberger business model. When you move to pipes, pipes is a different animal altogether because, obviously, you have the granular prices that drive the pricing as such. And here you have seen that they are trading down. And we have in certain areas, obviously, here downward trend in pricing, not as quick as we have sort of planned. So it was good that we could keep prices up in certain regions last year.
But you will always see here from a pricing perspective because the transparency in the market is such that people and customers understand that when granular prices go down, we give this onward to the clients, will go down as we speak this year. But it's not a pricing pressure as such. It's the way the business is structured. Yeah?
Sure. Okay. And then on Terreal in the EUR 90 million contribution that you expect in the current year, can you shed some light on how much of the synergies are baked in? Or in other words, I mean, compared to the point in time when you announced the consolidation, how did this business develop organically? Can you shed some light, please?
I think it developed more in line with our business, especially when you talk about the French business, which is the major contributor of EBITDA and to this EUR 90 million. And what we will see here when I look into 2024 is, again, the same mechanism as I talked to you with respect to the end markets when renovation and new build are slightly down. It's the same trend for Terreal. So that's what we have built into the contribution expectations. And from a synergy perspective, I think when we start, you can count on us in April or May to work on this because that's the time that you need to when you integrate and start integration. Then you have part of the synergies this year and then the full package next year.
But as I showed you in the slide, we will be on spot with all the synergies. So it's indeed in the EUR 90 million included some of the synergies, not the full amount. I think in the first year, I had EUR 10 million or so. Yeah? So there's not going to be the full EUR 10 million this year. But this is then, obviously, next year will be more than EUR 10 million already. Yeah?
Okay. All right. Very clear. And then a topic which is probably less in the limelight at the moment, but the gas reserves that you've secured in Haidach. I think it was in 2022. Some of your fellow Austrian industrials had to take revaluation charges in their recent results release. Was there anything comparable that you had to book or digest, any figure of relevance?
No, nothing because our one was very small, very, very small indeed. So to be neglected and, obviously, consummated it. And it's nothing to worry about on the very least. Nothing to. Absolutely not. Yeah.
But you still keep that reserve? And is it kind of a working reserve now rather than a strategic reserve or?
For us, there's no need.
How's that treated?
Let's put it this way. For us, it's no need to have a strategic reserve there. It was not at the beginning either. So we did it because we were kindly asked to do so.
Sure. Okay. Fine take. Thank you.
Yeah. Thank you.
The next question comes from the line of Harry Goad with Berenberg. Please go ahead.
Yeah. Hi. I've got a couple of questions, please. Firstly, Terreal, and maybe it's a bit unfair because you don't own the business yet. If I look at the run rate you've talked about for that business, I think it's about EUR 100 million of EBITDA in the last two years. Then you're talking about EUR 110 million in 2024. Can you give us any insight in terms of what the volume and price trends that are there? I mean, is it right to think this is a business that hasn't seen volume contraction in the last couple of years? Or is there volume contraction that was offset with pricing power?
And then the second question was around the U.S. And I can see you're obviously guiding to some further weakness in housing markets, which I think is maybe a little bit surprising. Have you seen evidence of that already coming through in terms of further contractions at the beginning of the year? Or is that just you being conservative, I guess, after a tough 2023? Thank you.
Thank you for your two questions. I'm afraid to say it doesn't come as a surprise in the US because we've seen it in 2023 that the market as such has contracted. So it's not a surprise by no means. And what I said also here that it is continuing into this year as we speak. And there's nothing to worry about. It's the normal things that I see here. And if and in the event, obviously, you have here a change in interest rates and the approach of people in the market and financing, especially, then obviously, you have a strong uptick because the inventory levels in the US when it comes to new homes are very low, very low. And therefore, there's a huge pent-up demand. People will build immediately if the customers, the potential customers, the clients can finance it.
So that's the issue here. It's more a financing issue. And when you talk about Terreal, let us do the following. When we are in the after the first quarter and then, obviously, in the mid-year, we will give you a clear picture of Terreal because here, obviously, it's too early to talk about this. Keep in mind that, obviously, a roofing business has a strong exposure to renovation. So it's about 60% of its business goes into renovation. So it has been more resilient in the last couple of years. And therefore, the performance was good. So as I said, the contribution of the business overall is about EUR 100 million, yeah, and on an ongoing basis. Obviously, it will, as I said, contract a little bit due to the decline in renovation. That's normal. That's how I guided you all and gave you the necessary information on this.
Okay. Thank you.
Thank you. The next question comes from the line of Gregor Kuglitsch, UBS. Please go ahead.
Hi. Good morning. I've got a few questions. So the first one, maybe this is a two-part question. Firstly, on gas, can you remind us sort of where roughly you're hedged? Because I believe, at least I think when you last disclosed this, you were basically bought out nearly for this year. So are you still competitive with the current TTF pricing? Because obviously, it come down a lot. And then related to that is, are you seeing any evidence that competitors are sort of starting to pass that lower gas price to the customer? Or I guess you sort of said no, but I want to just confirm that that's the case. The second question, just coming back to Russia, can I just confirm, was that already out of the EBITDA?
Or is it an incremental EUR 5 million scope out this year just for the avoidance of doubt? And how much cash did you actually receive? I don't know if I maybe that's somewhere I may have missed it. And then finally, the EUR 40 million that you flagged, I presume that's a charge, just to be clear. Maybe then third question, Terreal, can you confirm what you now expect the payment, the enterprise value consideration to be? I think at the time, you said EUR 600 million, but I don't know if that's changed, any sort of adjustments in the interim. And then maybe a fourth and final question, which is on North America, specifically on the pipe business. So I think a few years back, you kind of flagged that this is an asset that kind of may be over-earning.
Can you just actually tell us how much the pipe business made last year? And where do you think is a normalized run rate for that business sort of once the cost price spread perhaps normalizes? Thank you.
Thank you. There were a lot of questions, but we walked through them. The piping business in North America, yes, we talked a lot about it. And it has been a very strong performing business, not only from a volume perspective, but as you correctly pointed out, margin perspective. Normalized EBITDA, difficult to tell because now we're after three years with very good EBITDA contribution. We can say it's the normalized EBITDA. But as you are well aware that the U.S. special projects when it comes to roads and the spending is obviously boosting the business as such. And the whole market in the U.S. is here quite or very strong. So I would say contribution of the business is slightly above EUR 100 million EBITDA, right? And a normalized one is probably 20% lower. Yeah? And then I'm very honest with you as always. Yeah?
Thank you.
And then when we talk about the Terreal side of the business, you were asking about the enterprise value, right?
Yeah. What was the final or what will be the final consideration? Gross.
Correct. Yeah. The consideration will be around EUR 500 million.
Net of the share issues, yes?
Yes. Net of the share issues. Correct. Then you had Russia on your list, right?
Yes.
Yes. And the EUR 5 million is EBITDA, right? It's still included in 2023 and not included in 2024.
Right. And if it is a charge, as you said, Gregor, it is basically from a bookkeeping perspective what you have to book out because it was handled so far via the other comprehensive income. So it was basically something what you see as a movement in the equity. If you deconsolidate, you have to book it out via the financial result. So the EUR 40 million will be a financial expense, a non-cash expense in quarter one. Yeah?
How much did you receive for the business in terms of cash?
We gladly received money. And that's, I think, the good news. Very good to get out of Russia. And it was a satisfactory amount with a single-digit multiple buyer.
Okay. I think that was it.
And we have it on our bank accounts. That was for us the most important thing. Right.
I think everything is in. And I think converted in euros. So everything is in and fine. And Russia is closed finally now. Yeah? This is the most important. Right.
Perfect.
The last one, Gregor, on the hedging levels. We basically maybe start with the prices, yes? We feel comfortable. Yes, we are aware the prices are down. But still, with the hedging levels, what we have or with the volumes and with the prices, what we have fixed, we are still in the money, which is important for 2024. On the gas side, we are round about 80%. And also there, for that moment, we feel comfortable with the volume, what we have fixed, and also with the prices, what we have fixed.
Market-wise, we don't see any pressure when it's about the lower energy prices, what you see on the market. This leads currently to some, yeah, price pressure due to the energy costs. Yeah? So this is not what we basically see on the market.
Okay. Thank you.
Thank you.
Thank you.
The next question comes from the line of Nitesh Agrawal with Citi. Please go ahead.
Hi. Thanks a lot for the presentation. Hi. Thanks a lot for the presentation. Actually, most of my questions are already answered. Just one remaining on the new build volumes this year. So basically, if we look at the building permits in Europe last year, they were down approximately 20%. So taking about 50% new build share in sales, that would mean year-on-year volume decline of about 10% this year in Europe if all else remains flat. Is that assumption more or less correct?
No. This is too conservative.
It would be too conservative.
What we expect is more a low single-digit number, as Heimo said in the beginning, yeah, which is definitely lower for the U.S. We expect here on a year-on-year comparison on the new build sector somewhere around 3%-4%, in Europe, a little bit higher. Yeah? But we don't speak about or we don't expect 10% on a full-year base. Definitely not. And you have a kind of a dynamic between first half and second half of 2024 on a year-on-year comparison.
Perfect. Thanks. That's very helpful. And actually, one question on your energy costs. So you talk about -3% for this year in your presentation. And I think the last year gas consumption that I remember from our discussion during the first information last month was about 6.6 TWh, around that level. So assuming that stays flat more or less, so is that the consideration that you are taking in this -3%? Or is there something else at play? I mean, of course, there is some price benefit as well. But if you can give me some kind of a distribution between the total amount of gas consumed and the price that is leading to this -3%.
Right. So the volume, what you assumed, this 6.5 terawatt are fine. Yeah? This is what we also foresee from today's perspective. And it was in 2023 slightly higher. It was, I think, as you said a 6.6, 6.7 in this range. But we foresee round about the same level of gas consumption what we had in 2023.
Perfect. Thanks.
Thank you.
The next question comes from the line of Tobias Woerner with Stifel, please go ahead. Yes. Good morning, gentlemen.
Thanks for taking my questions. 3, if I may. Number 1, with regard to cost inflation, I was looking through the report, but couldn't find a number. Maybe I missed it. In Q4, what was it? You talk about a price-cost spread of 4%. I think it was about 4.5% or 4%-5% in Q3. So just to get a sense of how that unfolds. And then secondly, when you look at your guidance or actually, when you look at the market outlook, the 3% differential between 2023 and 2024, as you said, there'll be a skew towards the second half.
Could you give us a sense of that 3% on balance? i.e., should we assume that it should fall, let's say, 5% in the first half and then less so in the second half? And then the third question, the structural adjustments, again, I may have missed it, EUR 38 million. Can you give me or us a better sense of how that breaks up and what it exactly is? Thank you very much.
The structural. That's it.
Right. It is exclusively, basically, restructuring costs. There are some Mossballing of capacities in Germany and basically and then across Eastern Europe also. So it's termination costs also for personnel, yeah, what you basically release when you shut down or when you Mossball, basically, a capacity. Also here in the headquarters, we had also to do some restructuring cases. So it's mainly, basically, personnel costs, what you see in the EUR 38 million.
And Gerhard, if I could follow up on this, please, what is the headcount which was reduced?
Round about 1,000 in 2023.
That's a big number. Thank you.
Yep.
The cost inflation, if I may follow up, cost inflation in the fourth quarter was the question, I guess, so? Yep. Right. Correct. Yes. Only really on the fourth quarter on a standalone base, but the fourth quarter was ±0. Yeah?
So basically, the price effect was 4% in the fourth quarter. The like-for-like declined 17%, I think. So the volumes would have fallen 21%. Is that fair to say?
A little bit too much. We have 19% volume decline in the fourth quarter. Prices are up with 3% roundabout. And then you have a cost inflation of ±0. Okay.
Great. Thank you. The split first half, second half in terms of that market adjustment scenario you painted. I appreciate that it's beginning of the year. It's a scenario.
Indeed. It's a scenario. This will be able to give a much more or a better sort of outlook after the first quarter. But today, it's a little difficult to say how it will turn. Yeah?
Thank you very much.
Thank you.
As a reminder, anyone who has a question may click the Q&A and raise a hand button or press star followed by one at this time. We have a question coming from the line of Yassine Touahri, On Field Investment Research. Please go ahead.
Yes. Good morning.
Good morning.
Yes. Good morning. Can you hear me?
Absolutely.
Yes. We can hear you. Fantastic.
Thank you so much. I just wanted some clarification on the debt increase that you are planning for 2024. I think it's approximately EUR 300 million. So on the working capital, I understand that you want to reduce your working capital as a percentage of sales. Do you expect any working capital inflow in 2024?
Yes. Okay. Sorry. Just keep going.
That would be just one element. Then in terms of cash interest paid and cash tax paid, do you expect any substantial increase because of, for example, the acquisition of Terreal and a change in the tax rate or a change in the interest rates because of your banking relationship? That would be the second element. And then on CapEx, if I look at your CapEx, do you expect an increase in CapEx in 2024 compared to 2023? And then the last point is that you were planning to sell 6 million shares, treasury shares. What is the price?
I think I remember it was EUR 26. And I don't come to the EUR 500 million of EV after the sale of treasury shares. I come to something which is a little bit lower. So maybe there is something wrong in my calculation. But I'd like to understand a little bit better the split between the EUR 600 million of EV that you're paying and the cash that you expect to receive from the shares.
Sorry. There's a misunderstanding here. When we talk about the transaction, we are not selling the shares. It's part of the purchase price.
So the purchase price would be EUR 500 million, so what would be the cash outflow excluding the shares?
The EUR 500 million. Yeah? So what we communicated before, what we explained before is a EUR 500 million cash out plus shares of round about EUR 150 million. Yeah? And this basically brings you back to the, I think, slightly above the EUR 600 million, what you have in mind, basically, as enterprise value. Yeah?
Okay. On the working capital, tax, interest, and CapEx?
Maybe I walk you through once more what we basically ended the year with EUR 1.2 billion. As I said, we expect a gross cash flow of around EUR 600 million for 2024. For Terreal, we expect as we just said of EUR 0.5 billion. We expect CapEx of EUR 0.3 billion. The dividend will be around EUR 100 million. We expect EUR 100 million cash inflow from working capital. If you add these numbers up, you end somewhere between EUR 1.4 billion and EUR 1.5 billion on net debt for 2024. This is also what we have mentioned here in the presentation, around EUR 1.5 billion by the end of the year 2024.
But it could be the EUR 1.4 billion-EUR 1.5 billion. The EUR 1.5 billion is a little bit cautious. It could be closer to EUR 1.4 billion if things on the contribution of Terreal, the contribution on cash flow is going to be limited in 2024. Is there anything specific that could improve in 2025, the cash flow contribution of Terreal?
The synergy is what we explained before. We expecting already in 2025 a higher rate of synergies this year as we basically have round about 9 months what we contribute to the EBITDA of Wienerberger. We will realize mainly cost synergies. Yeah? These are the EUR 10 million which we mentioned before. It will be maybe slightly a little bit below. But let's say the commercial synergies, the synergies out of the supply chain of the network will be more or less starting then in 2025 and ongoing and then finally ending up to the EUR 150 million what we have also communicated so far.
Just a very last point to understand the gross cash flow development. So in 2023, you published a gross cash flow of EUR 609 million. And you're suggesting that the gross cash flow would decline in 2024 despite an increase in EBITDA from EUR 810 million to let's say, EUR 875 million?
It will not decline. It will be even slightly above. I'm only using basically cautious numbers. And therefore, as you said, the EUR 1.5 billion is on the cautious side, let's say it that way. Yeah?
Is there any way to imagine that because you're guiding on an increase in EBITDA of approximately EUR 60 million, but at the same time, the EUR 600 million of gross cash flow suggests that this increase in EBITDA does not translate into any incremental cash flow? Is it because it's early in the year and that you want to guide conservatively? Or is there something that you're concerned?
We are concerned on that, definitely. But also keep in mind that our financial result will be slightly higher. Financing costs are higher than in 2023. We had very favorable financing costs in 2022, still in 2023. Keep only in mind that we have issued a sustainability-linked bond with a coupon of 4.8%. So this will hit or this, basically, we will see back for 12 months in 2024. So you have also there an impact from the financing costs which will be higher than in the past. Yeah?
And is it something that you can quantify? Is it like when I do the calculation, I get approximately EUR 20 million increase in financing cost?
I would assume a little bit higher. I would see it more on the 30. Yeah?
On the EUR 30 million. But if you're delivering the EBITDA increase of your guidance, again, the EUR 600 million of gross cash flow might be on the cautious side. And the EUR 1.5 billion of net debt could be actually lower than EUR 1.4 billion.
Absolutely right. Yeah?
Yep. That's very clear. Thank you so much for your help.
Thank you. I guess we are. Yeah. Sorry. Go ahead, operator.
There was a last question. And I'd like to hand the conference back over to Ms. Jandér for any closing remarks.
Thank you.
Thank you, operator. Ladies and gentlemen, thank you very much for taking the time and dialing in today. Our next conference call will be held on May 16th where we will release our results for the first quarter 2024. For today, we wish you a pleasant day. Goodbye.