Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining the Wienerberger conference call on the results on the third quarter of 2019. 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'd like to ask a question, you may press star followed by one on your touch-tone telephone. If any participant has difficulty hearing the conference, please press the star key followed by zero on your telephone for operator assistance. I would now like to turn the conference over to Mr. Klaus Ofner, Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Also a warm welcome to the Wienerberger earnings call on Q3 results from our side. Wienerberger representatives on today's call are Heimo Scheuch, CEO, Elisabeth Reid, CFO, and Solveig Menard-Galli, CPO. At the beginning of today's call, Heimo Scheuch will summarize the key developments in our financial performance in the first nine months and speak about our expectations for the remainder of the year. After this introductory statement, we will take questions. I now hand over to Heimo Scheuch for the executive session.
Thank you, Klaus, and a warm welcome to all of you from Vienna. Thanks for being on the call. Going into our set of results, we are obviously very satisfied with the performance during the first nine months of this year. We have achieved a strong increase in revenues, about 6%, which led obviously to a substantial increase in EBITDA by 27% to a little bit more than EUR 450 million, and an impressive growth of net profit to more than EUR 200 million. All in all, I think a good set of results, satisfactory considering also the market developments in 2019, which I would consider throughout the Wienerberger Group and the activities where we are active in different countries of a more broadly flat market environment. We have been able to do so mainly for three reasons.
First of all, we have continuously focused on our self-help program, which is contributing in a very satisfactory way, the EUR 35 million during the first nine months to this set of results. The continuous efforts that we put into our Fast Forward program are paying off, and we are confident for this year to reach the EUR 40 million as predicted. Secondly, and this is, I think, obviously of a major importance also, that Wienerberger has been focusing during the last couple of years in improving and developing its product portfolio and turning towards more innovation in its product assortment and to provide more solutions and services to our customers. Therefore, it is possible also in such market environments that we're currently active in to grow our business. I think that's the strong message that Wienerberger sends across. Thirdly, and finally, obviously, we are continuing to focus on M&A.
You've seen us doing some smaller deals and recently also in the north of Europe with respect to our brick operations. These are strongly value-enhancing M&A activities that we want to pursue. We have still a good and strong pipeline of such potential deals in front of us. If we look a little bit into this, I would like to elaborate on three items before we go into the discussion. As I said, I draw on your attention to the fact that Fast Forward was delivering the EUR 35 million during the first nine months, the program is well on track. We are focusing on all the different projects in different work streams around the business. It's not only that we are confident about the EUR 40 million that we will achieve this year.
We are confident also that the EUR 60 million that we are aiming at for 2020, we are well on track in preparing all the projects for achieving such target for next year. I think here, a confident message on our self-help program within the company. During our capital markets day in London in September of this year, we focused also on our portfolio, and we looked carefully into our portfolio and indicated that we have businesses in the range of about EUR 350 million turnover with a lower margin than the group margin, and significantly lower, by the way, and that we are very determined in either turning those businesses around by repositioning them, adding certain aspects and efficiency to them, that's mainly due to Fast Forward project, or also to reposition them by a means of M&A, as we did in certain countries like Germany and Austria.
The final one is obviously, if we don't see any option in developing such businesses to sell it as we did last year with the Austrian paper business. Coming to this, I'm glad to announce again that we have been able to conclude and finalize the transaction in Denmark, where we put ourselves in the position to have around roughly EUR 100 million of such turnover that was underperforming. We were able to find a right good target where we can improve our market position, where we can grab synergies, and where we can bring efficiencies towards such a business in order to improve our position and our operations.
This is a clear example for turning around our business and making it a better performer, and a performer that is in line with our group margin. Second very important item that I would like to draw your attention to is, again, our CapEx policy and how we handle CapEx within Wienerberger. We have given a clear guidance, and this is, I think important to note, that Wienerberger has a maintenance CapEx requirement around EUR 120 million-EUR 140 million a year. By the way, this year it will be around, roughly EUR 135 million. We have discretionary CapEx, which we call special CapEx, that we put into the business for different reasons. Different reasons for, as we said, the performance enhancement measures, for organic growth measures, or also for stronger digitalization or innovation in our business.
This year, this will be EUR 120 million that we put into this business, and that will have a certain payback in the future. By the way, a very good payback. This is the growth aspect that we focus on in Wienerberger. Thirdly, we have M&A activity, and you've seen our track record over the last years. Again, a very disciplined and discretionary way of going into this M&A field. This year, up till now, it's about roughly EUR 34 million. Obviously the transaction in Denmark will add to this in the fourth quarter. We will, as you see, reasonably spend money there and money that will enhance our value. These are the items that I briefly wanted to talk about. There's nothing special to report in the different segments of our business. You see the numbers, you have the numbers in front of you.
A strong set of results. The margin improvement, obviously, in especially also the pipe area, is impressive and strong. It confirms that we are working in the right direction with respect to our pipe business, value enhancing product, and also the discipline on the cost side. If we look for the whole of 2019, with the focus on further enhancement of our product portfolio, with a strong focus on innovation, and as I said, to focus on the performance enhancement measures, we are confident to reach EUR 570 million-EUR 580 million. I am perfectly aware, and I anticipate some questions from you on the call that you will sort of say that probably there's some more to be done in quarter four.
Obviously, I think not that we are prudent, but the quarter four is always a weather issue, and winter comes and projects might come to a standstill. There's still a significant effort to be done by Wienerberger and by all of us to achieve this target. It's not a home run, as some might say in the U.S. on a football perspective. It's still some serious effort that we have to put into the business. We see this EUR 570-580 as an ambitious target still for this year. As I said, the maintenance CapEx will be around EUR 135, special CapEx around EUR 120 for this year. In a nutshell, very satisfactory development. The strong improvement of our results, I think as we have guided them at the beginning of the year, is achievable.
We have put all our efforts and all our teams are working hard in order to achieve that. As I said, in this environment, I think it's a good and satisfactory set of results. This is a short summary of our quarter three results, and I will hand over to Klaus for the questions. Operator, we're ready to take the questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question comes from the line of Yves Gromaid with Exane BNP Paribas. Please go ahead.
Yes, good afternoon, gentlemen. Three questions, if I may. My first one is on the regulatory change in nitrogen. Could you clarify exactly what is impacting the building industry and if there has been any progress recently on trying to mitigate these measures given permits are down high double digits now? My second question is on the U.K., where some of your peers and some distributors have been commenting on a much more bearish view on the overall market. Can you also here maybe comment on what you're seeing and if there has been a deterioration in Q3 and if you expect that to continue? My last question is on Eastern Europe, where margins are at already very high levels, probably not far from the last peak or above. How should we think about next year given some markets are a bit weaker now? Thank you so much.
Thank you, Yves. Willy? Well, as a Belgian, I'm always happy to report on the Netherlands. That's good. First of all, the Dutch government, as far as I'm informed, is coming out tomorrow with announcements on how they will mitigate this issue about nitrogen. It's about that. The issue for those who are not aware of the thing is that
There's been a high court in the Netherlands who have ruled that nitrogen consumption as a total had to decrease, especially around some of the natural preservations they have in the Netherlands. It has nothing to do as such, and I reiterate that with our products or any of our products, it is just about the processes and how can you make sure that you do not issue nitrogen in the construction industry. Secondly, the biggest nitrogen issue is within the agriculture and not in the construction industry, there already it's a small thing. It has been recognized by the Dutch government that they do not want to stop construction in the country because that would hamper a market which is very sound and still in high demand of housing as well in the Netherlands. We are waiting for the measures to be announced tomorrow.
What we have read in the press and what we have heard already on the market is that they will alleviate the concerns and certainly in the construction industry, probably remove part of that. We look forward for a further sound Dutch market with a good demand in product.
On the U.K., Yves, I think what we have seen in quarter three is also in line with our forecast and our expectations. We've seen the demand levels being more or less in line with what we have seen the months before in the new residential housing construction and in renovation. No major changes in the residential part of the business. For the rest of the year also, I don't see any major change as far as we can see and with the visibility we are having in the U.K. Demand levels are on a level that we have seen throughout the year. Eastern Europe has also, after the summer, stated expectations from at our levels.
Again, I think here you're rightly pointing that the margins have been up, please be aware the margins have been up mostly also by means of our own self-help and our discipline, not only in pricing but also on the cost side in Eastern Europe. I would say that we as Wienerberger will put all efforts in and obviously, also in this part of the world to keep the margins at this level. I don't exclude that we have obviously some wage increases in Eastern Europe that are definitely high and some pressure from this the next year, because you all know and are all aware that these pressures on wages are high in this part of Europe. As I said, we will manage and try to do our best in order to offset this with price increases. This is a little early to say.
We'll see this into then, as I said, in February of next year. As we are working right now, we are confident to achieve the numbers that we have indicated to you for this year.
Okay. Just on the U.K., can you confirm whether or not the volumes are actually down year-on-year as of Q3? The industry was up in H1 2019. Just so I understand clearly what you mean by in line with your forecast.
I sorry, Yves, if I may interrupt you. I can't confirm that the numbers are down in Q3.
Sorry, say again?
I cannot confirm that the volumes are down in Q3 in the U.K.
Okay. Thank you.
Next question comes from line of Paul Charbon.
Hello. Good afternoon, gentlemen. Thank you for the presentation, and thank you for taking my question. Three question, if I may. The first one on the price increases. It looks like at the group level that your price increases in Q3 were higher than expected, and actually maybe, tell me if I'm wrong, but somewhat higher than in Q2. See, during H1 results, you had commented about the fact that we should see erosion of price increases throughout the year. My question is actually simple. Is there any reason for which we would not see the same price momentum in Q4, the same price momentum that in Q2 and Q3? One question on the USA, it would be really helpful if you could comment on what you're expecting in terms of pricing for the full year 2019.
Finally, if you could share an update on your M&A pipeline. Is there any sizable deal in your pipeline?
Well, I will start with your third question, as my colleague will take over then after that. M&A activity, as I said in my introductory statement, we are working on deals and, as you know us, we are very disciplined, so we are not aggressively moving on deals. As they are more or less deals that we do with family businesses, they tend to take some time. It is not by calendar year or by quarter that we can announce something. Sometimes, if I take this Danish one, we work for more than five years on such a deal in order to complete it. What I try to say is that we have very interesting deals out there, that the pipeline is very nicely filled. As I said, we are moving at our speed and our pace.
The most important thing, I think, is to create value with such transactions and not to do it in a speedy way. I think you would count on us that we will deliver M&A activity throughout the years to come also, and especially values that are very interesting and value enhancing for Wienerberger. This is on the M&A, and then if we move to the U.S.
Yeah, on U.S. expectation, I think it's, at the moment, a good market. We see a good momentum on both volume and pricing to continue for the rest of the year in the absence of any adverse weather conditions. On your question about price erosion, I don't think we hinted to price erosion. What we've said is throughout the year, of course, the comparatives are getting tougher. If you remember, we had last year price increases throughout the year. That's also what I alluded to. If you look to Q4 last year, we already had price increases put in the market. We will try the same thing this year. What we have into the course of the year, of course, is more pressure from certain costing inflations which came through, being energy and being a little bit on wages. That's actually what is going.
Against that, we have our Fast Forward measures that work, and of course, the performance of the group as a whole.
At a certain stage also, the product mix that plays a role and, obviously continuously, I think you will see this in Wienerberger, that as we move with our product portfolio to more value-adding product and systems, that obviously the pricing is better.
Yeah, actually, my question was related actually to product mix. I was trying to understand if we could see the same benefit in Q4 that we are seeing in Q3 and actually in H1.
As I said, I just want to restate what Willy said. It's going to be to a lesser effect because the price increases last year have kicked in, obviously, in another significant way in Q4. That's why.
Okay. That's very clear. Thank you very much.
Thank you.
Next question comes from line of Markus Remis with RCB. Please go ahead.
Yeah, good afternoon. Firstly, a question related to your energy bill. If you could provide some granularity on how it will develop for the full year 2019, kind of giving your hedging policy, if you could already give us some visibility on your expectations for next year. That would be the first one. Secondly, looking ahead into the fourth quarter, should we expect more restructuring charges and also if you expect more of asset disposals, or to which extent asset disposals will impact 4Q earnings? Thank you.
On energy this year, we have in total, I think a figure of close to about EUR 10 million, which is on a price and volume increase. Both of the energy bill as a plus. At this moment, I think I would refrain from giving further guidance into 2020. I would like to package that together in the full guidance for the full year. As you know, we hedge forward, we are not open to spot prices and whatever. We have already moved into 2020 to give us a certainty also on the pricing. Q4, on restructuring, I can reiterate what we said earlier. It's going to be lower than double-digit figure for the full year. I do not expect at this stage anything major to come along.
Okay, on the asset disposals?
Asset disposals, not really as a contribution. What you're trying to figure out is how much will we have for the like for like comparison. I see no larger things on the agenda at this moment.
All right. Thank you. Maybe one question, for clarification. In the report, you referred to the further implementation of optimization measures in Germany, Austria, Switzerland. Is that just the implementation of already kind of agreed measures, or are you mulling plans for a further kind of restructuring already going into next year?
Nope. Clear answer, no.
Okay. Thanks.
Thank you.
As a reminder, if you'd like to ask a question, please press star followed by one. The next question comes from line of Gregor Kuglitsch with UBS. Please go ahead.
Gregor?
Gregor Kuglitsch seems to have withdrawn his question. We move on to Ami Galla with Citi. Please go ahead.
Thanks, guys. Just two questions from me. The first one is really a clarification or a follow-up on the pricing questions. I was wondering if you could give us some color as to what was the mix effect within the sort of price effect for the nine months period. The second one is if you could give us some more color on the regional split of the Fast Forward benefit that you have accrued so far. Again, are there any additional businesses or divisions which you're looking to in terms of the restructuring side of things? Thank you.
Yeah. I will hand over to Solveig, who will answer the Fast Forward question.
As we explained, Fast Forward is.
That's correct.
Is a program that goes over three years. We have a full program, set it up in the different streams that we do with a focus on commercial excellence, manufacturing, procurement, also supply chain and administration. The three big ones are commercial excellence, manufacturing, and procurement. Obviously, in commercial excellence, procurement, it's not about restructuring, it's about optimization, how we do things, and how we enhance our efficiency, how we improve our product portfolio and set up our sales force on the commercial side. Procurement is really how we do our supplier relationship management, how we bundle contracts on a group level, and how we optimize the way we do this. Of course, they are very much countermeasure inflation rate on our input costs. Now the area in where it's really about optimization, considering also FTEs, is the manufacturing part.
Of course, there is an element in it with automation that we do. This is not a specific region or anything. This is across all our 200 plant sites. This is what you very broad initiatives. We go in all sites. We analyze them very deeply on what's the cost structure, what's energy, what's scrap rates, what are process inefficiencies, and we take them very structurally out. That's what we do. There are left and right, of course, reduction of people, but not on a broad scale.
For the pricing, Willy?
For the pricing, you know we are running our business on a regional scale. Yeah. The regional scale means that you follow there the mix of how things are going. If you would guide you on a group level on the mix, it would be wrongly guiding because you then have to consider in what regions are you selling certain products more, and we would have to start getting a mix of countries and products, and that would not be correct. We'd rather not misguide you to anything mix effects.
Can I have a follow-up on the Fast Forward question? Is that fair to assume then that the EUR 35 million of benefit is evenly spread across the Building Solutions and the Piping Division?
It's spread according to their share.
Yeah.
-solution division is much bigger and heavier also in terms of assets and number of sites that we have. Obviously they have a bigger share than the other divisions.
Yeah, that's fine. Thank you.
The next question comes from line of Anastasia Zolotukhin with UBS. Please go ahead.
Hi. Sorry, it's actually Gregor Kuglitsch. I pressed the wrong button. I hung up instead of unmuting, there you go. I've got three questions, please. The first one is, can you just actually tell us what the volume and price effect was for the nine months for the group? I think you gave zero and 6% for the first half, if I'm not mistaken. Just interested what the nine months trend is. Just coming back on the guidance, I know you kind of preempted the question, but on my math, it kind of suggests a flat to even down EBITDA for the fourth quarter, kind of excluding the impact from M&A and IFRS. I just want to understand, is my math right? I guess why would that be?
Is it because last year had a good end to the year, or you're just trying to make sure you don't miss because of an early winter, as you kind of suggested, which is unpredictable? Finally on CapEx. This year, if I take the two CapEx lines together, I think you're EUR 255. Can you give us sort of a direction of travel into next year? Will that be down, flat, up? I appreciate you're not guiding specifically, but if you could just give us a directionality, it would be helpful. Thank you.
Gregor, thank you for the three questions. The third one on the CapEx front, I would say it's a little down. Certainly not up and not flat, but down. I hope that's enough for this stage, and you will bear with me, hopefully, till February to have an accurate guidance. You have a first feel. On the guidance to quarter four, I'm not arguing against your math.
But-
Last year, we had a fantastic season up to the very end of the quarter with uninterrupted delivery in nearly all the markets where we are. I'm not going to forecast any weather or anything, this was really a fantastic run. Yeah. It was a good run. We also said that very clearly last year.
Understood. Volume and price, roughly?
Volume and price, we said we're not going to guide.
No, just the nine months, just what you actually, the history.
No, the nine months. You've seen what the evolution is. You know that the contribution of both FX and of M&A is low or lower. Yeah, not big as a percentage. We hinted for flat markets. There you have your answer.
Okay. Thank you.
Thank you, Gregor.
Are there any further questions? Please press star followed by one. We have a follow-up question from Mr. Bromehead, Exane BNP Paribas. Please go ahead.
Yes. Hi. Sorry again. A follow-up, actually, on a previous question on the energy cost this year. Willy, I think you said that you had EUR 10 million of cost inflation on energy, and that includes price and volume. Is that correct?
Yep.
Sorry, would that imply that in H2 you're actually looking at some energy cost decline already?
No, I said we are hedging forward. We are not spot. Yeah, we are not open.
Okay. All right. Thank you so much.
You're welcome.
Excuse me, Mr. Ofner, there are no further questions at this time.
Thank you. At the end of today's call, I would like to look ahead and invite you to join us again for earnings call on full-year results, which is scheduled for February 26th next year. All that is left for today is to thank you for dialing in and to wish you a good afternoon. Goodbye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephones. Thank you for joining, and have a pleasant day. Goodbye.