The conference is now being recorded.
Ladies and gentlemen, welcome and thank you for joining the Wienerberger C onference Call on The Results for the First Half Year of 2024. 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 or left side of your screen. I would now like to turn the conference over to Therese Krenkel. Please go ahead.
Good morning, ladies and gentlemen, and a warm welcome to Wienerberger's conference call. Our board representatives today are Heimo Scheuch, CEO, and Gerhard Hanke, CFO. They will walk you through the presentation and are ready to take your questions afterwards. I will now hand over to Mr. Scheuch for his presentation.
A warm welcome. Good morning from Vienna to all of you. Thanks for joining us in this early conference call. Hope you're all well and enjoy the summer around Europe. I'm glad, obviously, to go with Gerhard through our half year results. They are a solid and very satisfactory performance in the light of, I would call it, a little sluggish residential housing markets in certain parts of Europe and North America. But let's now move a little bit to the results in detail. When we look at revenue half year, they are more or less in line with expectations, with EUR 2.2 billion.
As I said, when you look at Wienerberger, and we will elaborate shortly a little bit more on that, it's a strong performance with respect to the end markets that we are operating in. It shows also how important it was to redirect Wienerberger's strategic focus on renovation and on infrastructure, two markets that are doing much better these days compared to the new build segment. Operating EBITDA at EUR 400 million. That's in line with our expectations with respect to the first half of this year. EBITDA margin also strong, a little bit above 18%. Consider also, and we will talk about this, that we had extensive standstills and capacity cuts in the first half, and therefore, it's impressive that we can reach this sort of EBITDA level, even in this depressed market environment.
Standstill costs, as I said, about EUR 50 million for the first half year, and the capacity utilization, especially in Ceramic Europe, with 57% on a very low level, but you see how profitable we still can operate at such levels. Cost management, very strong. We have done a lot of proactive measures. Remember, last year, at the end of the year, we told you that we need to do some measures because we foresee already that some markets will be down in 2024. We got confirmed. Some are actually down more than we originally expected. That's why we intensified the measures, and a little shy of EUR 30 million cost cutting and the measures to improvement were contributing positively to our results. Very happy with the acquisition of Terreal. It's the biggest acquisition of the company in its history.
It was the right decision to do at the right moment, even in these markets, Germany and France, because it gives us the positioning, the right one, in order to improve not only the manufacturing footprint, but also commercially. Not even a couple of months after the closing of the acquisition, we are already with one sales force in the market in Germany and in France. Very strong delivery on synergies and very performant teams also on the cost side when it comes to administration and overhead costs. So a very strong contribution from the Terreal side also. If we look then on the market exposure side, as I have told you, that's the first time actually, that the new residential housing segment for Wienerberger is less than 50% in its turnover.
So it's a historic moment that you see that Wienerberger is shifting its attention more to renovation and infrastructure, two segments that we will continue to work on in the years to come. And obviously, we'll take advantage of the upswing of new residential housing in North America and Europe with the existing capacity that we have in place, especially in the ceramic segment. That means clay blocks and facing bricks and roof tiles.
So all in all, I think what is interesting to look at when you look at the slide number 5 of our presentation, that especially in the single family housing market, which is a very important market when it comes to Wienerberger's end products, with clay blocks and facing bricks and roof tiles, how poorly this market has performed in 2024 compared to the last really financial crisis, 2009 and 2011. And we took here the average numbers in 2009 and 2011, and even when we take those and compare it with this year, how sharply these, this very specific market is down. You see it in France, you see it in Germany, Austria. These are especially markets that are hit hard right now.
So this is what we have to digest in the end markets, and, I think you can appreciate now more how we manage costs and, adjust our capacity to this. Also, when you compare 2024 and 2023, very interesting to look at the recovery in Eastern Europe, Poland up with about 15% in this, segment. Hungary, obviously, up even more, and a certain stabilization trend in other Eastern European countries. Here again, it shows clearly that we have seen the worst in Eastern Europe and moving out of this, low, numbers and increasing activity, we can confirm that.
We can also say that obviously in these Western European markets, especially Austria, Germany, France, and Belgium, and the Netherlands, we are right now at the bottom, and we will see this bottoming out effect for the rest of the year, and we will see some growth next year. So this is what we see in the end markets. Obviously, people talk a lot about interest rates and the impact on new residential housing. That's true, absolutely right, and we had no cuts or no significant cuts in order to stimulate new residential housing construction. However, we see also that the political side has made mistakes. There was instability due to elections, especially in Europe. Some wrong decisions were taken. People were not confident enough to invest.
So I think for me, momentum is building on the European level and on national level, in the sense that they need to do something about affordable housing, about social housing, about housing in general. This is going to be confirmed by Housing Commission on the European level, and this will certainly play in our favor in the years to come. Because I see a decade in front of us with quite some substantial growth in new residential housing construction in Europe and in North America, which is based on demographic change. You have a lot of migration, you have a lot of underlying demand in these countries, and step by step, I think we'll increase the construction rates throughout the economies that we are active in. You see some measures are already put in place.
They are discussed, they are voted in certain parliaments in Europe. So this will play in the on our favor from 2025 onwards. And we see also, obviously, some substantial sort of aid coming from the European Union when the new commission is voted in later this year. So all in all, I would say from our perspective, to give you a clear message, we are through the worst in Eastern Europe, so it's a positive development in new residential housing. There's a good trend, actually, and I'm also very positive with the the UK and especially with Ireland when it comes to new residential housing construction. We see here good numbers coming through and also growth rates. We are bottoming out in Central Eastern Europe, as I said, especially Austria, Germany, France, Belgium, and the Netherlands.
These are important markets for us when it comes to these segments of new residential housing. We see a temporary slowdown in Canada and in the North American market and in the US market. It's a little bit different. Canada is more the political and economic situation, and in America, it's the election and interest rates that play an important role here. So all in all, I would say that the rebound of the new residential housing market is only pushed a little bit back. When we gave you our forecast for the whole year, in our guidance, we assumed clearly that in the second half of this year, there will be a pickup in activity and there will be some interest rate cuts.
Unfortunately, they are not happening, but as I say, this is, for me, something that is delayed, and we will have a substantial buildup of demand to come with. I didn't talk too much in my introduction about the infrastructure market and the renovation market, and here are a couple of words. Renovation, very good, very stable, slightly positive in certain countries. Very important for our roofing business. 60% of our roofing sales go into renovation, a little bit. Also, other solutions that we have, thin brick and other facing solutions that we sell. So these are important markets. Renovation also when it comes to piping and paving, two aspects that we don't talk too much about, but when it comes to piping, a lot of renovation is, was done with respect to water and also to energy.
So here, again, a growing segment, and paving also a segment that is important in certain European markets that we are active in. Infrastructure as such, we see good spending trends from the U.S. to Europe when it comes to governmental initiatives. Water, especially, is a big issue, sewage is a big issue, and also energy, where, whether, or the governments and the regions are investing heavily. So it helps us in the respect of our piping business in these respective regions. Let's have a little look at Q2 results. And here you see, in slide 10, very clearly how affected ceramic business was in Western Europe. These are the economies where we are basically talked about.
And you see that, when you take out the UK and Ireland, which had positive trends, that it is more focused on France, Germany, and the Benelux. So, a negative trend there when it comes to volumes. And piping, as I said earlier, a good trend in this segment. Ceramic East, the pickup is confirmed. Here, the 13% plus compared to last year. Piping also in a positive territory. So nearly compensate the upswing in Eastern Europe, our overall activity in Europe. Ceramics in the US, also a little bit weaker due to the effects that I told you about in the housing part, with about 11% down, and the piping, more stable, plus 1%.
So again, I think from an overall perspective, group-wise in Q2 , a very strong performance with 2% only decline in volumes, as we speak. When we take the revenue bridge, here you see this 2% also when it comes to volumes, is minus 17 million. We have here from a mix perspective, a rather stable development price. And let me elaborate here a little bit also on the price side, which is -3%. 35 comes mainly, and this is, as I say, mainly out of Eastern Europe, and I will explain this, how this comes about. Eastern Europe is a different market. It's a more do-it-yourself, it's a more individual market. It's not driven by big project developers, et cetera.
So you need to be very careful when such a quick upswing is taking place, that none of your competitors take too much market share or gets excited about this volume increase. So that's why we acted proactively, Wienerberger, in order not only to defend our market share, but also to make sure that there's nobody contemplating capacity increases or putting back additional capacity in the marketplace. So this is a deliberate action. I call it an action that is strategically planned by us. You will appreciate also, and Gerhard will show you, that from a margin perspective, Wienerberger keeps its margins. So it's no pricing pressure that some people might allude to, it's a strategic decision that we take.
We can also sort of work in another way in the future if we see that the market is now stabilizing more. But as I said, it's a very deliberate and from us planned decision that we put in place due to this specific market that we find in Eastern Europe. FX is, I think, very clear, and obviously, the scope has an important aspect here. That is the mainly coming from Terreal, a little bit the smaller acquisitions that we did, but important acquisition on the piping side and in the U.S. So here, all in all, an increase in revenues and a good performance, as I said, considering the underlying market. The EBITDA bridge as such, let's focus on this in a minute.
When you look at the EBITDA from a side of the sales volumes and including the standstill costs, is a little drop here, but not that significant. Price over cost, I explained this coming out of Eastern Europe, a little bit of Western Europe, but this is not nothing of significance, but I would say this is digestible for us. Then you see the great contribution from the self-help and the cost management that we put in place, bringing in EUR 16 and 12 million, respectively. So obviously, including the scope, additionally coming in from the Terreal and the other acquisitions, we have a growth in the EBITDA to EUR 285 million. So I think here a good underlying trend when it comes to Q2 , and perfectly in line with our expectations.
Let me take a deep dive also in restructuring, so that you have an idea what we are doing. We are obviously mothballing and closing down operations very quickly, very proactively. So we have done so with about 10 plants in different regions, especially in Western Europe, when it comes to facing bricks, clay blocks, and roof tiles. So here, adjusted the manufacturing pace. We have also mothballed certain production lines, that's six. We will monitor this very closely, and over the next half year might be some more that we adjust. Keep in mind that also, when we do investments these days, and I will talk a little bit about this in a minute, we also expand our capacity inside, so we regroup them.
So it's an efficiency improvement on the long run that Wienerberger makes. We make ourselves even stronger in the marketplace. So again, very well adjusted to the market demand, and very quickly and rapidly, you've seen the impact on the personnel side and the capacity side. So with this, I would hand over to Gerhard, who will walk you through the results of the first half year. Gerhard?
Thank you, Heimo. As Heimo mentioned, we had basically some positive momentums, dynamics in Q2 , especially in Eastern Europe. Considering that, and you still remember, when we reported on Q1 , which started later this year, we had a rather weak Q1 , which we still feel basically in our first half year volumes. We are in the first half year, as we mentioned before, -6% in sales volumes. We see that, based on the confirmed recovery in Eastern Europe, that we have now in Eastern Europe, more or less a flat development for the first six months. Here, we expect definitely for the second half a more positive development, which was basically which we already have seen in Q2 .
We also spoke about the development in Western Europe, in some selective countries, which are linked to the new residential decline. And we see here -13%, and again, here on the infrastructure side, a much more stable development for the first half year. When you also look across Europe, just a -1%, and in North America, a +6%. So infrastructure, as we said, developing positively, stable positively, renovation stable, and the volume, the missing volumes, let's say it in that way, what we see are basically linked to the weaker new residential developments in selective countries in Western Europe.
When we look to the revenue bridge, you see that we have slightly higher, let's say, stable, slightly higher, revenues, which is driven by the scope, by the additional revenue of Terreal and by the smaller activities which we bought in the first six months. We also deconsolidated, respectively, divested the Russian business. What we should keep in mind still, which is also impacting basically first half year numbers. You see the 6% in volume. We spoke about the -3% in pricing, and also Heimo mentioned it. It is mainly allocated to the Eastern European hemisphere.
So I will see it, I will show you later on also, where you see that basically it is in Eastern Europe, this pricing initiatives, which we, which we consciously have taken are more in the range of, let's say, -5, and the rest, slightly, stable, or let's say stable, some slight lower prices in selective countries in West, and a positive price in, in, in the ceramic part of North America. But, we also have prepared a slide on that, later on. Let us look to the cost inflation, because, here, I think, we are outperforming, also what we have originally have expected. We ended the first half year with a -1.5%.
We were in the beginning of the year, maybe a little bit more conservative on the performance of our energy and of our granulates, where we have foreseen or expected that the decline in cost inflation is not that high. So we are having now for the first 6 months, a -4% in energy and a -13% in granulates, and here we was more conservative. You remember, I was assuming during our last call, more cost inflation between 0% to 1%. This was somehow a target to move more to, to a zero cost inflation, and thanks to the development in in energy and in granulates, we are ended up for the first half year with a -1.5%.
When we look to the overview, where we basically compare the sales prices, and we spoke about the sales prices already and the cost inflation, you see that the price-cost spread was 1.8%. This is the EUR 34 million, what Heimo mentioned also before, where we spoke about that the negative price-cost spread, basically for the first six months, which you see later also in the EBITDA bridge. You see that the pricing initiatives which we have taken in the ceramic part in with -3% are mainly allocated to the Eastern Europe. And you see also on the piping side, where we have lower prices, you see also that the granulates are going down.
You know that granulates are making round about, from the cost price, around about 60% almost to 70% of the cost price. So it is a essential part of our cost price and also on the cost inflation of our costing. And therefore, you see that we have been able to mitigate basically the sales price decline, also by a reduction in in the granulates price. You see it in Europe as well as in North America, meaning that the margins, the profitability in this case, is stable so that the pricing itself or the negative price-cost spread, what we were mentioning in the beginning, is mainly to allocate on Eastern Europe.
And this is a conscious decision also, what we mentioned, to pick up some market and also to position ourselves against the more fragmented market competitors, which we have in Eastern Europe. Utilization, I think also we heard in the beginning, that utilization rates are lower. We had, as we said, a later start into 2024. We also started up our production capacity a little bit later this year. You remember, in Q1 , we also mentioned this round, about EUR 50 million on standstill costs. They are still there for sure, and we have seen them also in the beginning.
We have basically lower utilization rates and still, as Heimo said, we are able to perform and to have an EBITDA margin of above 18%, which is also thanks to the cost management what we did, because this utilization rates are basically also showing that we took out quite some capacity very fast, and also showing that there is enough spare capacity or headroom capacity when markets are picking up. We have done this exercise mainly also basically to bring inventories levels down, and I think also this was mentioned in Q1 call when we spoke about the inventory levels in Ceramics Europe, where we said, okay, a more normalized inventory level, a finished good stock level for Ceramics Europe is around about EUR 400, the upper range is EUR 440.
This excludes, please, Terreal, so this is legacy business, what we show here. And you see that against the seasonal upswing, what you normally have in the first half year, that we decrease basically our inventories levels. And, so that means also we have done our exercise when it's about, inventory adjustments in that, in that field, so that we feel comfortable to keep going basically into the second half of 2024. Cost management, we had significant contributions in the first six months. What you see here, this around about EUR 30 million, the big part is still coming out of the cost initiatives, which we implemented in the second half of 2023.
You remember we had last year 60, then we said, "Okay, we will have an overspend of EUR 20 million out of the Program 2023." We did some extras in the beginning of this year, which adds up to the 29 for the first six months. And as Heimo have shown, we have implemented now a second program, let's call it, on initiatives to adjust accordingly. And this will also still contribute in the second half, but also mainly will contribute into 2025. This brings me to the EBITDA bridge. A lot of the things I think was already explained. We have an impact of basically the weaker market volumes of around about EUR 100 million.
We have the price-cost spread, and we have significant steps initiated, implemented, as we have explained before, when it's about the self-help initiatives, when it's about our cost management. So all these things are almost, when you add them up, almost EUR 70 million, and which are also supporting basically our EUR 400 million. And we mentioned it also in Q2 when we spoke about, I think, the 285, where we also were able to show a small organic growth, basically, in our Q2 performance. Let me explain you also some of exceptional items. We have some exceptional items in our P&L. First of all, we have operating EBITDA, as we just explained, of EUR 400 million.
As we do also, usually, we have eliminated or excluded some sale of assets. Here we have some smaller assets which we sold, non-core assets, but here is also included the sale of the Russian business, so the deconsolidation of the Russian business. In this EUR 10 million, what you see here, -EUR 9.1 million. And then you have a bigger position, which is around about EUR 70 million, and this is mainly the restructuring, what we call. So what you see here is mainly severance payments, impairments, one-off costs, which are linked to the mothballing or the closure of production sites, or also with some other restructuring measures in the overheads. But this is a clear one-off positions which basically we eliminate from our operating EBITDA.
Secondly, it's not only the EBITDA which is impacted by some one-offs, it's also basically some other positions in the P&L. You remember the restructuring cases, what I just mentioned, led also to some special write-offs in the size of around about EUR 49 million. These are basically special write-offs on assets where we decided to shut down production facilities. And this led to an exceptional depreciation, or a one-off depreciation of EUR 49 million, the 69 I just explained before. And then there was the recycling of the FX reserve due to the deconsolidation of the Russian business. Also, this was already explained in Q1 . It means you find back the deconsolidation of the Russian business, basically in two line items of our P&L.
First of all, it is the sale of the Russian business, or the gain is included in the other operating income, and the recycling of the ruble reserve is included in the other financial results. But if you add them up, basically, you see it's a significant one-off amount of EUR 150 million roundabout, which is impacting our profit after tax, and which—what you also have to consider, basically, in your calculations, when you calculate earnings per share, et cetera, that there is a significant one-off included in the first half year. Let's quickly walk through the regions. We spoke already a lot of about it.
I think in the Western region, it is, it was already explained, the reason why EBITDA is, is lower than prior year. Still a 15% EBITDA margin, considering the new residential housing, what Heimo showed before in these countries, Germany, France, which are suffering heavily at the moment, the, the new build sector. So it is still a, I, I would say, a remarkable performance, a 15% margin, and this definitely is supported by our renovation and infrastructure business. So still a satisfactory development considering the market backdrop or the challenging market backdrop where we are in.
Eastern Europe, here you see that all the initiatives as, Eastern Europe was basically moving into a decline, more or less, earlier than the Western Europe, in the new build sector. We also initiated last year, so last year, our cost management initiatives were mainly focusing on Eastern Europe, and you see that this is already contributing heavily also to our cost structure, let's say, profitability structure. EBITDA margin is slightly above prior years, and EBITDA margin in this environment of 20%+ is also for us, more than satisfactory. EBITDA level almost in line with prior years, so strong performance of our Eastern Europe business. The same for North America. Very happy and satisfied. EBITDA margin of 26%, EBITDA almost in line....
With prior year, keeping in mind that still the new build market, especially in Q2 , was slowing down. We see and feel that there is some uncertainty in decision making due to the upcoming elections in November. So also there, we're expecting a more positive trend, basically, in the beginning of 2025. That's in a nutshell about the numbers. Heimo, back to you.
Thank you, Gerhard. Let's have a quick look at the Sustainability Program 2026. It's perfectly on track in all its different aspects. So from the CO2 reductions to all sorts of water management and circularity and biodiversity, we're working on the different issues, implementing our measures in order to reach our ambitious targets there. So all the KPIs are well in line with our expectations. And here, a word also on how we run the business and invest in the business. From our perspective, it's very important that sustainability is the driving force for our business forward, and we obviously put a lot of emphasis, and we speak a lot about innovation, but we do even more on innovation when we talk about our business.
If I compare ourselves to the peers in the sector, meaning ours, in our industry, that still have built plants with old technology and certain aspects that have been done 10 or 15 years ago, we obviously, at Wienerberger, we are putting down state-of-the-art plants right now in different areas of our business. Just let me mention a few. When we talk about roof tiles, here we are currently completing a completely new site in concrete roof tiles in the UK, out of southeast of London. Here, this will be in production at the end, towards beginning of next year. State-of-the-art when it comes to recycling, using sort of sustainable resources.
The same goes with its, sister company, if I may say so, in, in the eastern part of Hungary, also now under construction, a, highly modern new facility and state-of-the-art facility that will come on stream beginning of next year. Then, obviously, in, Austria, a clay block facility that is completely then carbon neutral, the first one in our group. So this is, already also in good shape and will be then running as of next year. So here you see projects where we invest heavily in the future of Wienerberger, and where Wienerberger is well positioned for any sort of, future developments when it comes to new residential housing and also renovation.
Important also that you see here in England, when it comes to clay roof tiles, that we are building the first 100% renewable energy unit for roof tiles, that will be next year running in the north of England. And when we move then into the piping operations, the biggest and most efficient and modern site in piping and plastic piping, in PVC piping in Sweden. So completely recyclable here, and adding all the products, recycle ones to production. So again, a state-of-the-art unit that comes on stream later this year. So here you see that Wienerberger is really focusing on innovation, on new products, on new technology especially.
We are not just talking about it, but we are putting the action in place and really focusing on these new technologies in the different parts of our business. That's not enough. We are also tackling the value chain. Here you see a picture of a robot that is already active, and not only one. There's a few of them already in operation in the Czech Republic, and people are already working on construction sites, so it's something that's not only tested, but already operational in place. And will revolutionize the building, especially when it comes to bigger projects in Central Eastern Europe. So here again, Wienerberger, not only production and technology, but also the value chain that we try to sort of modernize when it comes to the installing of our products.
Saying this and being excited about this future development of Wienerberger and what we do and what we put in place, let me just focus a little bit on the outlook 2024. Here again, I don't need to speak too much about what is still ahead of us in the sense of political instabilities that you see around the world and the other places also, the elections that are coming up. So here, interest rates not being cut so quick as we expected. So all in all, what I said at the beginning, we anticipate that the markets, the end markets, especially when it comes to new residential housing, remain more or less the same as we have seen them in the beginning of the year. So the recovery that we talked about is certainly shifting into 2025.
So on top of it, when we look at our the Terreal acquisition, and here I said that also at the beginning, that we're very happy it's on track. So here, again, great job by the teams in integrating, use realizing the synergies. We've taken our expectation back from EUR 90 to 80 million contribution. That is due mainly to the weak German market, especially. The French market is also down, but we are doing here better in the activity rate in the market as such. So it comes mainly from Germany. It is sort of EUR 10 million less EBITDA contribution. But the good news is when we look at the plan forward, the higher synergies that we can realize and the better performance will reach our 150 by 2027.
When we look at the two most important things that we need to talk about is obviously how we see the net debt development, and I will do this under the close supervision of my dearest colleague, Gerhard. But you see that the debt level is about EUR 2 billion right now at the end of June. We are managing down with gross cash flow from the business. We have—We do some investments, as we have shown to you. We will work on the capital, net working capital, and we will work it down also to come to a sustainable level that is a little bit more in the range of 20%, a little bit above, of net sales when you talk about working capital.
On our net debt level for the year-end, which we can predict more or less at this stage, is about EUR 1.6 billion that we will have. This is about the 2x when you take EUR 800 million as a target EBITDA. When we look at the performance EBITDA-wise for the rest of the year, here again, sales volume more or less in line with what we have seen in Q2 . Price-cost spread will be improving compared to H1, as I said, because these actions are less pronounced than in the first half of the year. We will intensify our cost measures, improvement measures.
So if I take last year's half year results with EUR 357 million, we will be up a little bit and then in the range of EUR 400 million and EUR 420 million for the rest of the year this year. So that's what we are working on, and that's what we see as a good sort of performance in this markets that we are operating in. So I would say the operating EBITDA guidance for 2024 for the whole year is around EUR 800 million to EUR 820 million for the whole of Wienerberger. So this is, I think, when we look at 2024 as a year where we see a bottoming when it comes to new residential housing, a rather stable one in renovation and a rather good one in infrastructure, the performance that Wienerberger delivers.
Keep in mind, this is under such circumstances that we deliver EUR 800 to 820 million. So with all the potential that we have now on the side, from capacity, from the investments in new technology, and the increasing sort of presence in renovation and in infrastructure for the years to come, I'm fully certain that, and convinced that we will reach our targets on the midterm. 2025, you will see contribution from state aid programs, from programs when it comes to new residential housing. Our full cost effects, saving effects will kick in.
When we reach normalized market levels that are far below 2021 levels, by the way, in 2026, then we will certainly be in a position to deliver above EUR 1 billion, so in the range of EUR 1.2 billion, as we have said, and we confirm this clearly on a midterm target as Wienerberger. So the... I would say it's from our perspective, we're excited about what has happened this year. It's a difficult year, and especially in the new build segment.
However, when we look at our performance, how we tackle the pricing issue, the cost issue, how we manage capacity and can bring down working capital, it's a year where we show that we have a high degree of performance and outperform our colleagues in the markets where we are active in, and that's important, and I, I think it makes us very optimistic for the future. Thank you very much for your attention. I'm sure that all of you will have one or two questions that we will eagerly answer, Gerhard and myself. Thank you very much.
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 Your Hand button or press star one followed star at this time. One moment for the first question, please. The first question comes from Brijesh Siya from HSBC. Please go ahead.
Good, gents. Good morning. I have a couple of questions. To start with the cost management side. So you had in Q2 cost management of EUR 16 million and cost self-help of EUR 12 million. And Gerhard, you talked about most of the activities are in EUR 16 million. Most of that came from Eastern Europe from last year, and you have done some action in Western Europe. So what's the kind of run rate we should look for second half in terms of cost management as well as for self-help?
...For the self-help, we are striving for around about EUR 40 to 45 million for the full year, and, we are now with, cost management of around about EUR 30 million. I think we have EUR 29 million, and, here I expect, around about the EUR 20 million in addition to, the, to the EUR 30 million, and once more, a bigger share in 2025, mainly when then, the initiatives which we implemented in Q2 this year, a big share of that will, contribute to 2025 results.
Okay, understood. Now coming to the capacity one, which you have cut down to near about 57% utilization you have right now. Is that utilization calculated after those plants excluded, those who have mothballed or closed, or including those plants as well?
It is including the mothballed capacity, what you see here. The operation and capacity utilization is higher. This is really headroom capacity, when you call it, excess.
What's the kind of operating or operational capacity utilization we are looking at this point in time?
It's about. It differs, yeah, like always, from product group to product group, but it is somewhere between 60-70, yeah.
Okay. And third one is on your pricing side. You talked about pricing down 5.2% because of Eastern Europe, and that's a strategic move. You have done it. So when we look at the market share of yours in Eastern Europe, when without this price action, would you say those market share would have fallen and you are at this price, at what you were previously, or you have gained market share?
Gained market share.
Okay, okay. So those double-digit volume growth, which you had got it in Q2, without the pricing action, would that be more looking like high single digit increase?
Sorry, you dropped out on me a little bit. Can you just repeat it? I'm awfully sorry.
Sure. Oh, no, I was just talking about the Eastern Europe volume growth. In Q2, you had a 15-odd% volume growth in Q2. Without the pricing action, that number would have looked like a high single digit. I'm just trying to understand what was the market growth in Q2?
Well, the market growth was in a high single-digit to double-digit in certain countries, yeah. So there was a good underlying demand.
Fair enough. I drop to the queue. Yeah.
Thank you. Okay.
The next question comes from Markus Remis from RBI. Please go ahead.
Hi, good morning. I hope you can hear me. I actually have just one question related to the full year non-operating effects. If you could provide some more granularity on what to expect in the second half year as it regards restructuring and asset disposals. And I'm just reading also through my Q1 notes. In fact, then you were guiding for a full year impact from this restructuring of EUR 25 to 30 million. So, I mean, that was mid-May, so I'm wondering how it was possible kind of to act so quickly. Yeah, that would be it.
Maybe to the first one. We have seen them, let's say for 95%, we have seen them, the restructuring initiatives. We consciously speed it up. We didn't want to come up with salami, that we come every quarter with some restructuring. Therefore, we speed it up and adjusted our capacity network or our industrial footprint accordingly to the market assumptions or market environment, which we have seen in Q2 . Yes, we were more conservative in the beginning of the year, but also there, we had a different market picture, let's call it that way, especially on the new residential side. The restructuring decisions what we took are basically coming out of the weaker new residential markets in Western Europe.
Yes, and I think, too, another thing here that I would like to add is, obviously, when we discussed these numbers, our colleague is mentioning beginning of May, we were not yet in a position to assess 100% the market drops in Germany and in France, especially French elections came later. And due to the fact that the exposure of Wienerberger with respect to the Terreal acquisition is much bigger to these two economies, we were deciding deliberately also to cut quicker and faster, yeah? And this is obviously one of the aspects as well.
But just to confirm once more, there will be no big amounts in the second half. So the EUR 150, what I explained for the first half year, will be more or less the amount for the full year.
Right. And on the positive side, the asset disposals, usually they're kind of skewed towards year-end...
It depends a little bit. It depends a little bit. We have a couple of them under negotiations. We can't push it because it depends then on the buyers, but I'm fairly optimistic that the one or other will be realized, and we are talking here more about asset disposals in North America and the UK. So this should be in good shape.
Okay. Thank you.
Thank you.
The next question comes from Gregor Kuglitsch from UBS. Please go ahead.
... Oh, hi. I have a few questions. Could I start with pricing, please? So I think if I look at the slides, we're down kind of 3%, I think, both in Q1 and Q2. I guess, firstly, I want to understand, I think when you spoke on your Q1 call, I don't know, I certainly can't recall down 3, so I want to check sort of whether there's a mix effect or whether you were talking about a different number back then. But I guess more broadly, what I do want to understand is why do you think pricing is starting to sort of come under pressure? I think you called out some voluntary cuts in Eastern Europe. I guess I want to understand, as a market leader, why you're doing that. I suppose sort of your picture of where do you think pricing is directionally heading in the future? That's my first question. Do you want me to ask all of them, or should I go one by one?
Yeah, that's fine. Let's take your questions, and then we'll go-
Yeah, yeah.
Okay.
And then the second question is on roofing. So, obviously, I think you trimmed a little bit also in Terreal. My question is, are you confident that there's not sort of a lagged impact on the sort of renovation side, so that we're sort of gonna be at the trough on the roofing side also this year? So then the final question is, can you just update us what your CapEx guidance is, maybe for this year and maybe next year? Where do you think CapEx will land? I'm guessing you're cutting it back, but I didn't see a specific guidance, so I just wanted to double-check. Thank you.
Right. Let's from a CapEx perspective,
Maybe we can take this first. We expect... I think you see it, Gregor, on the one slide where we show the net debt development for the second half. It will be, b-b-b-
Two hundred.
I think EUR 220 in the second half. This is mainly, yeah, there is some CapEx considered for share buyback, and the rest is basically Maintenance CapEx and Special CapEx.
Okay, so your full year CapEx guidance is, is what these days?
It's basically the full year is EUR 340 on maintenance CapEx and on special CapEx. Yeah.
Okay.
You are spot on. We cut back on CapEx, especially on the maintenance side. Yeah? That's definitely it. Yeah. When you were referring on roofing, you see from our perspective, yes, we've cut capacity also in roofing, especially in Germany, to a lesser extent in France, but we have already adjusted to the lower new build demand in roofing. On the renovation side, we have seen a rather stable order intake, and renovation is a more longer-term business, not as sort of short-term, so that we have a better view on the intake of orders. From my perspective, I think here, when from a capacity and utilization rate and availability of products, we are in good shape.
Okay.
Pricing. You see, as I said, you are absolutely right. As a market leader in developed markets like Western Europe, like North America, we don't do any actions, or we don't move deliberately on pricing, because we set the price, and we actually show, as a leader, the pack where to go, if I may say so. And this is, with all due respect to all of our competitors. But in Eastern Europe, it's a little bit different. First of all, these are very small, some of them are smaller markets, some of them are sort of not so rational competitors there. And we just, we were seeing that the market picks up rather quickly and rather fast.
There, Gregor, you need to be careful not to give them too much room to breathe, if I may say so. If you just lead by example, the price, and they... They, they sort of, you know, get all excited that the, the bricks leave their, their yard, and they want to start a new line, and so then it becomes a bigger issue for the rest, and then we get... It's difficult to get the capacity again out of the market. So, I would say, you need to trust us that we, we are, we don't have here pricing pressure. It's something... We are not making a price war. It's just to show them that they should basically stay what we have as a business and not be overreacting in the marketplace, if I may say so.
Okay, and then just coming back, I think back on the Q1 call, you said your price was up slightly. I guess now, if you just piece together H1 and Q2, what you put today-
I think we-
Just pricing was kind of down 3%. Maybe there was a mix effect, or what's going on in terms of-
I think, in Q1 , is basically pricing is still, I think, difficult to grab. You have a lot of movements. I think we were not positive that price is up, but we also had not really, we were assuming more a flat pricing. We had some countries where we have seen that pricing is going up. This was, at that time, the US, which is confirmed, but we also have seen Western Europe, which with stable pricing, and we were not sure, honestly, about in Q1 , where Eastern Europe pricing will, which we will walk through. Therefore, what I have in mind, I think we communicated a stable pricing in Q1 .
Okay. Thank you.
Thank you, Gregor.
The next question comes from Tobias Woerner, from Stifel. Please go ahead.
... Yes, good morning, gentlemen. Thanks for taking my questions. I have three, if I may. If I look at the Q2 numbers for Eastern Europe, it seems to me as if you've got a good operating leverage there, unless there is some Terreal EBITDA in or sales and EBITDA in the numbers...
In Eastern Europe, there's literally nothing, just a little bit from Italy, but that's to be neglected. So this is a good operational leverage, as you say.
Okay. So because what I see here is a 5% top line growth in the second half, Q2 , and a 44% EBITDA growth, which would be huge. Is that, is that a fair observation?
It is, as I tried to explain before, we—most of the cost initiatives which we implemented in 2023 were basically focusing on the cost structure of Eastern Europe. And yes, we have seen, after all the standstill costs basically were done in Eastern Europe in Q1 . It mainly... I would say most of the plants were operational in Q2 . In Eastern Europe, we also have seen the positive operational leverage based on the, I would say, optimized cost structure what we have in place, yeah.
Okay. If I look at my rolling three months production of bricks in Poland, then they were up in June, 11.7%, so Q2 was up 12%. Maybe that's one of the reasons why you're cutting price. You want to regain volume there. But the key question is really, you've hit a low in December 2023 at -30%, and then the rebound came, so it took less than a quarter to rebound. Is this the sort of pattern you would expect for Western Europe as well?
No, clearly no, because it's the market dynamics. The Eastern European ones, as I said, more to do-it-yourself as more smaller ones, so they are quicker in when it comes back and reacting also on interest rate cuts quicker and faster. The Western European ones are more driven by bigger project developers, and it's a little. It's taking more time to come back. So I would not be so optimistic that we have only a quarter here. That's why I'm saying also, it needs to get a little bit more time, about six months, that we will see here the recovery. In certain areas, like the Netherlands, for example, will be first. That's my estimation, because here the government is making already good inroads with respect to housing.
So you will see better activity, then the Belgians will follow. Hopefully then, the French, when they get a new government in place, and I must disappoint you in Germany, because I don't see here a governmental change. We'll have elections in more than a year in Germany, so not a lot of things will happen there. That's at least my estimate, Tobias.
And by definition or by indication, the UK is already ahead of the Netherlands.
Oh, yeah. Oh, yeah. I'm sorry, I didn't include the UK. It's on a completely different growth path already and has already left this behind. So this UK and Ireland is doing better. And actually, honestly, I say it with a little bit of pride, and I'm allowed to do this on this conference call because I've looked carefully at the numbers of our colleagues of Ibstock, and if I take Wienerberger's performance, it's much better. So honestly, I'm very happy with our performance in the UK and Ireland.
Okay, great. The two last questions to help me or us in terms of modeling. Terreal seems to, on a run rate, annualize. We, you give us the EUR 80 million EBITDA, but the top line seems to be pointing to around EUR 500 to 520 million. Is that fair?
I think that's on the low side. I would more move to EUR 600, and this is from today's perspective, as good as we know the numbers of Terreal as of today. But this is where we expect that it is more by EUR 550 to 600 in that range, yeah.
Mm-hmm. That's helpful. Thank you. And then just lastly, a bit masked by the FX impact, the net financial results. You know, you kindly set it out in your EUR 150 million sort of bridge to the net income level. But what would you say is your cost of debt now, so that we can model this more accurately for the full year?
I'm considering at the moment a 20+ compared to prior years, so I have an interest result of EUR 100 million in it, a small EUR 100 million as an interest result.
Okay.
2020. Yeah.
Thanks.
Keep in mind the tax rate. We are moving slightly up with the tax rate. We have now more Western European exposure due to the Terreal and, Creaton, addition. So, I'm basically expecting a tax rate of around about 20% to 23% for the full year.
Great. Very helpful. Thank you. By the way, the C M D, are we gonna have a CM D later in the year? Sorry, just remind us.
Yes, there will be one.
Yeah, absolutely. You will get invited.
... Thanks.
Definitely.
Happy summer.
Yeah.
Same to you.
Thank you very much.
The next question comes from Harry Goad from Berenberg. Please go ahead.
Yeah. Hi, good morning. Thank you for taking my questions. I've got two, please. So firstly, thank you for the information you gave us about your utilization rates in Europe. That's very interesting. I appreciate it, it'll vary country by country, but can you give us a bit of a high-level feel for what you've seen competitors doing with regard to capacity around Europe? And then just on that, can you remind us about the process of reopening production capacity? You know, how long does it typically take? You know, what have you seen in the past with regards to catalysts reopening from competitors? And then the second one, very different one, the 2026 EBITDA number that you've kept of, I think it was EUR 1.2 billion.
You know, I appreciate you're not gonna give us 2025 guidance at this point, but can you just remind us what the sort of general assumptions in terms of sort of market growth and pricing and other factors that, that drove that 2026 number? Thank you.
First of all, when we take the sort of competitive landscape, it's very different between wall, roof, and façade, because the structure is very different. In roof, we have more or less a very I call it now consolidated situation in Europe, so the capacity utilization is more or less the same, and it's traditionally a little higher than in the other segments. Yeah? So from this aspect, I think here we are fine, and market-wise, the most I call it over capacities in Germany right now due to the low market there. But the rest in Europe, it's more or less I would call it in good shape, and there's no one sort of creating additional capacity or bringing on additional capacity to the market.
Facing bricks is the UK, and the UK market is to be excluded from this because it's three PLCs that run the market here, so it's a very rational behavior. The Nordic markets are also... Belgium and the Netherlands are actually the core here, and here you have family businesses that are also very reasonable when it comes to this. Sometimes a little bit more aggressive, and then sort of in line with expectations. But as I explained to Gregor earlier, here we are a market leader, here it's a different structure, here it's a more, I would call it, a more organized in sense of that you don't break out and do crazy things on capacity and price.
So that's as far as I can go, saying this in a in an antitrust perspective, we've never in contact with people, we don't talk with them, but it's a thing that is in place for 20 years. Eastern Europe and Western Europe, when it comes to clay blocks, is a little bit different. Why? The competitive structure is different. Here, you have small ones. Here, you have one and two site producers who maximum we have two sites or so. So they can't close down a lot, so they reduce capacity, they reduce production output, and they probably close one line and have it mothballed. Mothballed means that you need about three to six months, depending how long you have mothballed the line, to bring it back and prepare it.
So it's a delay of three to six months. In our company, we count about three months between the decision to take it back and then running. So that's with mothballed. If you close down something for good, then it's obviously we decide to move out of the site, so we won't bring it back. So this is a clear decision. Gerhard talked about this earlier when he talks about the impact on the P&L of this year. So, to come back to what you've said, do we see here activity? As I said to colleagues of you and you are also here, that's why we moved a little bit quicker and proactively in Eastern Europe on volume and prices in order to keep the stability in the market, not that some are over-enthusiastic and then start additional capacity. That's what this decision was about, to go proactively on volumes and prices in Eastern Europe.
Thank you.
Thank you.
There was just that. There's that second question around the assumptions of the 2026.
Yes.
Thank you.
Well, I think from you know, I'm not in a position to give you here guidance, and I think it's too early. We'll have time enough to talk you through this. But when you take all the measures that we put in place cost-wise, and also from a capacity for new products and innovation, you will see here good organic growth rate. The underlying market assumptions, if you see, from a spread now, renovation and infrastructure growing at the pace that we have right now. So that's fine. That's our underlying sort of assumption for this development of 1.2. And then, obviously, the new residential housing market coming back, as I said, not to the levels of 2021, but below them. So we said, about 80%-85% of these markets that we have seen in 2025 is required to hit this 1.2 target.
... Thank you very much.
Thank you.
The next question comes from Axel Stasse from MS. Please go ahead.
Yeah. Good morning, everyone. Thanks for taking my questions. I have a couple of ones. The first one is on the UK market. So as you mentioned, some of your peers struggled in UK in the first half year. And they even suggested, you know, pricing stable, with some competitive pressure on pricing. Can you just explain how Wienerberger has been able to outperform, and actually deliver growth in the UK? Just so I can understand how your beat tone in the UK differs versus your peers, and making sure you're not cutting prices here. That's my first question.
We are not cutting prices in the UK. Not at all. Not at all, no, no. And I think from our perspective, you know, you need to understand that our UK operations consist obviously of bricks on the one end. We have an exposure to the RMI market with roof tiles also. We are very strong here in the performance when it comes to RMI and new build, both with roof tiles, concrete and clay. And the third exposure is not only to infrastructure, but also RMI and new build with our piping activity, which is doing very strong, yeah. So I think from our aspect here, the performance of the underlying part is very, very important, yeah?
And there's one thing, obviously, from a pricing aspect, I think, you must not underestimate, that we obviously bring products in from the continent. As we have explained, these products are always priced a lot higher than the products that are produced locally. Here we are talking huge price differences, about 30%, 40%, up to 50% higher prices. And obviously, due to the high-end market that has eroded also a little bit in the UK, less products are coming. These are the high-end products. So you have more local production with lower pricing and not that high. So I think from this aspect, from pricing one, we are perfectly in line with the others in the UK.
Okay, that's clear. My second question is about the piping business. Can you just provide an update on your profitability levels there? Are you on track with the guidance you provided for 2026 in the piping/infrastructure end market? And actually, can you remind us the profitability guidance you provided in the CMB?
The guidance, I think we gave you a little bit of a EBITDA sort of range, yeah?
There was no profitability guidance.
No profitability-
No, sales. The sales, I think. You provided, I think, a sales guidance of EUR 2 billion. I just wanted to check if I missed the profitability guidance.
No, I think we talked about the target to come up to about EUR 2 billion sales in this business, yeah? So when you take the U.S. and the continental European and U.K. operations together, I think, yeah, I speak under your control, we will end up this year about EUR 1.5 billion or so.
1.5.
Yeah.
We had some small acquisitions. What we mentioned also, we mentioned Grain Plastics in the Netherlands. We did some aerial, which is also located in the Netherlands. So we are doing some small steps, very localized, and also adding the right product ranges or products to complement, basically, the range. And this is also the way forward, basically, to move to in the direction of the EUR 2 billion. There is a part of it, organic growth, which is scalable volumes, basically, out of some small acquisitions, but also further M&A steps in the-
... in the years to come.
Okay. Okay, very clear. And then my last question, thank you, is about the leverage ratio, which has, you know, substantially increased here in, in the first half year. And I guess depending on the volume recovery, we'll also see CapEx and working cap change accordingly. So how does this change your approach on M&A, particularly? Do you have a leverage ratio that you still feel comfortable to-
Oops.
Can you hear me?
Yes, yes. Now we-
We hear you.
Sorry.
Lost you for a second.
So I was just asking on M&A, given the leverage ratio, which has increased, has this changed the way you approach M&A? And if so, which are the end markets that you are currently looking at to support your top line growth?
First of all, I think we confirmed to you that we feel comfortable with a range of 1.5 to 2, so we are approaching this 2. Obviously, due to the fact that the EBITDA has come down a little bit and we will end the year, as you have seen in our presentation, about 2x EBITDA. To net that, we feel comfortable with this level. You see also that we do some smaller, mid-sized M&A, and we will continue to do so because these are very good add-ons. You know, we are talking about 2 to 4x payback, so here it's a very lucrative and interesting one, and we'll keep ourselves active in this field.
Obviously, and you are absolutely right, on the big scale or big transaction, we are not sort of moving here actively in some sort of. We are monitoring the market, we're understanding what's happening there, and we're looking carefully. And if we see here some possibility to move, then we will sort of consider it, but for the moment, I think we are fine. We're comfortable with our leverage ratio, and we will keep it in this way.
Okay. Thank you very much.
Thank you.
... The next question comes from Nitesh Agarwal from Citi. Please go ahead.
Hi, thanks a lot for the presentation. I have a couple of questions. First one is on gas consumption in 2024. I think last year, you, you were at about 6.6 terawatt-hours, if I'm not wrong. And considering the mothballed plants and production lines, what do you think your consumption will be for this year? Yeah.
Slightly above 6 TWh. Will be below. We have basically less operations, we have less plants in operations, so also the consumption will be less. It will be somewhere between 6, 6, 6.3, somewhere there, I would expect.
Okay. And keeping that in mind, if you look at your total energy consumption going into second half, and, of course, your, you know, buying forward strategy, so would that mean that it will be somewhere more or less, and at the same level as first half, or, you expect, slightly lower inflation?
You speak about price, basically cost, the cost development on electricity.
Yes.
No, the price level, what we have seen in the first half, is moving plus minus through the second half, yeah.
Okay. Okay, got it. And finally, on the price-cost spread, I think, as a follow-up to this question only, you have said that this will be more or less, again, similar to that in first half. Does that mean, can we look at it as lower prices, partly offset by lower costs? Overall cost inflation, inflation-
We assumed a slightly better price-cost spread in the second half. We will basically drive back our intentional price adaptations, what we did in the first half in Eastern Europe; this we will basically slow down, and therefore the price-cost spread will improve in the second half.
Okay, perfect. I have one final question. So basically, roof, as I see, it has been your highest margin product, and you have a few projects for roof tiles under development. But overall, do you see any specific opportunities to increase your market share within this product, within your in Europe?
Well, I think we have now, after the Terreal acquisition, a very good market position, and certainly we'll grow it organically. And organically means not only with products for the roof, but also with accessories. You know, we are becoming also a big supplier of accessories that are linked to the roof, on the roof, under the roof. We'll give you a better update than in our capital markets day, a little later this year. But here is obviously some substantial growth for Wienerberger.
Thank you so much.
Thank you.
It seems there are no further questions at this time, and so I would now like to turn the conference back over to Therese Krenkel for any closing remarks.
And before we do that, I will say, as Heimo Scheuch, I thank everybody for participating, and I wish you all, from Gerhard and myself, a lovely summer. Enjoy it, and great, great to see you then in the, in the fall, and some of you in London later when we do our roadshow. Yeah. Thank you very much. Therese, you might sort of close the call.
Thank you, Alfred and Mr. Scheuch. Ladies and gentlemen, thank you very much for taking the time and dialing in today. Our next conference call will be held on 12 November 2024, on the release of our results for the first three quarters of 2024. For today, I wish you a pleasant day. Goodbye now.