Ladies and gentlemen, thank you for standing by. I am Yote, your chorus call operator. Welcome, and thank you for joining the Wienerberger conference call on the results for 2017. 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 press star followed by one on your touchtone telephone. If any participant has difficulty hearing the conference, please press the star key followed by zero on your phone for operator assistance. I would now like to turn the conference over to Mr. Klaus Ofner, Head of Investor Relations. Please go ahead.
Thank you, operator. Ladies and gentlemen, welcome to the Wienerberger earnings call on our 2017 results. Thank you for dialing in today. Wienerberger representatives on today's call are Heimo Scheuch, CEO, Willy Van Riet, CFO, and Stefan Huber, Head of Corporate Reporting and Treasury. Heimo Scheuch will open the call with a summary of the key developments of 2017. After that, he will speak about our outlook as well as our strategic priorities. Following the opening statement, we will take questions. I now hand over to Mr. Scheuch for the presentation.
Ladies and gentlemen, good afternoon. A warm welcome from Vienna. Thank you very much for joining the call. I will try to focus on the first part of my little opening speech on 2017, then move on to the strategic issues and the strategic development of Wienerberger, and then finalize with the outlook 2018. If you look to 2017, we have achieved a number of very notable milestones in 2017. Utmost obviously, that we have got in the turnover to more than EUR 3 billion. That is the highest sales number that the company has achieved in its history. So a +5% coming in at EUR 3.1 billion, a very good achievement in 2017. On the EBITDA front, we have achieved a 3% increase to EUR 415 million and again, the fifth consecutive year that we have been able to increase our EBITDA.
On the net profit, an impressive 50% increase to EUR 123 million, so the net profit is on a 10-year high level if you see in the history, compared to the history of the company. All in all, if you look to the performance in particular of revenues, EBITDA, and net profit, we have achieved over a period of five years, the last five years, an average growth of about 6% in revenue and a margin expansion of 400 basis points and a very strong earnings growth up to, as I said, in 2017, EUR 123 million. All in all, a very successful year 2017. If we look more in detail, which is also important for 2017, we have been able to realize a number of very successful and value-creating acquisitions in the brick business, but also in the pipe business.
Here again, very important to note that all of these acquisitions will contribute more than 11.5% CFROI to the group. When we look at those acquisitions, some of them are already closed, some of them are still pending because we are in front of antitrust authorities, like in Romania with the acquisition Brikston. All in all of them will contribute EUR 90 million revenues to Wienerberger's revenues and an EBITDA of EUR 16 million to Wienerberger's group results. Again, a very strong signal from our company that we are also growing by means of acquisition. If you look more in detail to our balance sheet, you see that even after such acquisitions, we have been able to reduce net debt again by 10% in 2017.
A strong signal that we focus on our financial discipline and that we create with a 1.4x EBITDA to net debt, a very strong balance sheet, which gives us the opportunity to realize further growth and strong growth throughout the next years. Also, on the working capital front, you remember that last year in 2016, we were able to come down to 17% of sales. We have, again, after acquisitions and also by expanding our business, remained at 17% of sales working capital. Again, a very disciplined and strongly managed working capital within the Wienerberger Group. On the capital expenditure front, again, when you look at the normal CapEx, we have remained more or less stable.
We invest in our industrial platforms, the necessary amounts in order to make them competitive, improve their performance, and ensure that we have the innovative products that we need to be successful on the market. A very strong signal also that we act disciplined as far as capital allocation to our businesses is concerned. Again, when we look at the operational excellence, we have been able to keep our promises. We guided for EUR 10 million cost savings throughout 2017. We delivered slightly more, EUR 11 million, and this is a number of small and mid-sized initiatives that we take through our plant network, our overhead structures, and our sales structures in order to optimize the business.
It shows clearly that this cost efficiencies and the work in this respect is part of our corporate culture and our DNA within Wienerberger, and we want to continue on such pace and create further efficiencies in the years to come. If we look on the share performance and the return to the shareholders, we will propose in June at our next general assembly, a rise and an increase of 11% to our dividend. To come to a dividend of EUR 0.30 per share. We'll also introduce a special dividend this year coming from the foundation that was founded early 2000 to have non-operating asset in Austria in it, and the beneficiaries of this foundation are the shareholders of Wienerberger.
Due to the fact that we have been able to sell some of this real estate, the shareholders will get EUR 0.10 per share as a special dividend in 2017. As you are well aware, we have introduced a share buyback program, coming up to 1% of the shares issued, so 1.2 million shares. That has been started in December, and that we will continue to realize. When you look at the shareholder return in 2000, the total shareholder return in 2017 was 24%, and for this five-year period, you have over 200% shareholder return that we have been able to realize. Summary. In 2017, we have been actively and significantly delivering on our growth plan. We have continuously enhanced the sustainable operations, made them better, focusing on the efficiencies, and by the end of the year, we have delivered an outstanding financial performance.
2017 gives us the opportunity to further look into our strategy and the development of Wienerberger with optimism. We have, over the last years, ladies and gentlemen, created very strong platforms in Europe and the United States and in our industrial activities, focusing on infrastructure, renovation, and new build. Such platforms gives us obviously a leading edge in the industry, and we see here the opportunities by having very strong and capable local management to add on such platforms and to create here additional growth. The focus has been in the last years, and we have shifted the company from clearly a production-oriented company to a customer-oriented and innovative product company. A strong local active company that really is in touch with the final decision makers. Based on such principles, we will further develop our potential growth by focusing on organic growth, operational excellence, and growth projects.
Such three pillars will obviously contribute, as they did already in the past, positively to the development of the Wienerberger Group and over the upcoming years. If we look at the organic growth in more detail, as we did already successfully in the past, we will clearly focus on our innovative products, the services, and the solutions that we provide with it. We will further increase the market proximity, in the respective market that we are operating in. We are excited as a company that we are a front runner in digitalization when it comes to the building material industry and will further to develop this competitive edge that we have developed over the last couple of years.
If you look at the Wienerberger business model, we have very strong, as I already said, platforms, industrially speaking, but also distribution-wise because we have strong sales forces in the respective countries that we operate in. We will take advantage of those in order to put through new and innovative products as we did, for example, with the infill clay block successfully in the southern parts of Germany, now in Austria and the Czech Republic, in Poland, and also in France. Here you see a clear example of a successful platform that we use in order to further strengthen our local market shares and our local performance. The next growth pillar, operational excellence. It's a continuous process of cost efficiencies and process optimizations.
We focus on our approach of a sustainable management orientation in order to create value by developing our employees, by environmental protection in production, and by sustainable products. It is our clear focus to reduce further our energy consumptions by 20% up to 2020. We are on good road, as you see in the presentation. We made big efforts. We make already the necessary investments in this respect, in research and development with people, but also focusing on our industrial base. Again here, maintaining lean organizations, being best in class as far as energy consumption is concerned. We contribute here, as I said earlier, successfully to these annual savings that we target within the Wienerberger Group. On top of it, we don't stand still as Wienerberger.
We want to improve further our operations. We have identified in 2017, operations that are not at the level we want them to be. We talked throughout the year 2017 about a certain weakness in the French piping operations. We talked about a certain sort of weakness in the German operations. We addressed those very quickly, very fast. Again, when we look at 2018, we will intensify those steps and measures that we implement there in these operations. It will cost us an overall one-time cost of EUR 30 million that we will have to invest in order to streamline these operations and make them stronger and more efficient. Such cost will contribute positively, obviously, to the savings at the end of today.
We will have, in 2018, total savings of EUR 15 million, EUR 10 million coming from the ongoing cost savings projects that we have been establishing over the last years, and EUR 5 million from this new efficiency improvements that we currently are about to implement. Such measures that we are currently implement will contribute in 2019 another EUR 10 million of savings that you can add to the calculation. We will have EUR 20 million of total savings in 2019. Again, a strong signal of Wienerberger to commit itself to further performance increase in the operations. Obviously, we also look carefully at non-operating assets. You remember that we successfully concluded a first project that we had of sales in the range of EUR 93 million of non-operating assets in 2017.
We stepped up efforts in 2017, again, focusing on non-operating real estate throughout the group and realized out of this originally planned EUR 70 million up till 2020, already EUR 40 million in 2017, due obviously also to the positive overall business environment in Europe where the most of these real estates are located. Again, a strong commitment to Wienerberger to realize value out of non-operating assets. We will continue this process in the next coming years, depending on the availability of planning permissions and obviously also interest in these real estates that are mostly located these days in Eastern Europe, and coming from closed down sites in the past. Operational excellence and organic growth are top of the agenda. On top of it, we'll focus on growth projects. We want to enrich our existing platforms by acquisitions that create more value and that improve our margins.
You remember that we did, for example, a pre-wired pipe business acquisition in Belgium last year, Preflex. This is a perfect example how we want to go further in the development of our portfolio. Why, ladies and gentlemen? Because we see the need in the market to have technical simplicity when it comes to the products that we propose and the solutions that we propose to the clients and customers. They need products and solutions that are easy to implement, to lay on the construction site, to install. This is the major driving force for Wienerberger to improve its product range over the years. We, as Wienerberger, are a local company. We operate locally in Finland, we operate locally in Italy, in Ireland, or even in Russia. That's very important.
We have very strong local management, strong local brands, and a strong customer orientation, where we, by means of digitalization, by means of services, but also being the trusted partner of the decision-makers in the local market, can improve our performance and outgrow continuously our markets where we operate in. This is obviously the basis for our future growth when we look at acquisitions. We have, as of today, the platforms industrially where we can add on, and therefore have a good and very interesting and attractive pipeline of opportunities ahead of us that we, especially within family businesses in Europe and the U.S., can then add on our existing platforms. Obviously, this goes without saying, we as management are strongly committed to our financial discipline that we have implemented within Wienerberger.
The 11.5% CFROI is to be applied to all such acquisitions, smaller, medium size, or bigger size acquisitions. They must produce this return in order to be on the list for such investments. Why the CFROI for Wienerberger? Because it's a very transparent and clear metric in order to value such steps of growth, but also look carefully in the past, because it's the historical capital employed that we take into consideration with respect, obviously, to the performance of EBITDA in order to determine the value creation. I think it's the best one for you as shareholders, you as experts of the financial market, but also to measure management. Therefore, it's a key management measurement instrument that we have implemented throughout the group so that people understand clearly that they are responsible for such historical capital employed in order to improve the performance.
We also are very strict on our current portfolio. We look carefully into the strategic fit, into performance of it, and then argue and discuss if we have the necessary platforms in order for the further growth. If we find out that such platforms locally in the regions, et cetera, are not of strategic interest, we'll certainly move on the disposal of such ones. We have set ourselves a clear target that we will Due to this investigation, come up with about EUR 100 million of disposals in the next 18 months-24 months and realize such disposals. We'll reinvest the proceeds of these disposals in higher margin business that better fits with our future growth.
All in all, we are excited about this new future of Wienerberger, building the future on these very strong industrial platforms in our core markets in Europe and the U.S., infrastructure, new residential, and renovation. We have built a very strong team of management locally, regionally, in order to realize such acquisitions, integrate them, and improve the performance of such acquisitions. We have geared the company to a very strong customer-oriented and innovative product-oriented company. An exciting growth story for the years to come. If we look finally more in detail to 2018, we find a sort of organic growth despite mixed market sentiment throughout Europe and the United States. Wienerberger sees itself obviously always exposed to a little different developments throughout the world.
Generally speaking, we see ourselves well-positioned to grow our businesses as we did in 2017 in this environment, which I would qualify at this stage as volatile. There's good sentiment in certain areas, stable sentiment in others. Generally speaking, I think we are set here for a good trend as far as organic growth is concerned. We'll, as I said earlier, enhance and intensify our operational performance by putting operational excellence top of the agenda. We'll further put emphasis on acquisitions to add to our core platforms, and we will dispose of non-core assets throughout the year 2018. All in all, when you look at our guidance, we see ourselves in a situation where we can give you, at this year's beginning, a guidance in EBITDA like for like between EUR 450 million-EUR 470 million. Why a range?
Obviously, as I said, there is volatility out there in the marketplace. We are set for certain timing issues as far as acquisitions are concerned, but also on the front of optimization projects, because obviously it depends on labor law and the respective timing here, and therefore you have here a range of EUR 450 million to EUR 470 million. On the CapEx front, keep in mind that we've expanded our asset base already, and therefore the EUR 160 million guidance for the current asset base that we have available and the gross CapEx of EUR 200 million that we will devote to projects that are already signed and are executed in 2018, but also projects that come our way, as I said, in this very interesting pipeline of projects that we have. All in all, I think we are set for growth and geared for growth on the Wienerberger front.
We are excited to have this strong company that is now obviously set in a sense of innovation, digitalization, but also on the M&A front for a very successful 2018. Thank you very much for your attention, and obviously we are ready to talk with you and take all your questions that you might have. Thank you.
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 leave the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from the line of Sophia Sotomayor with Exane. Please go ahead.
Good afternoon. Thank you for taking my questions. I have three questions. The first one is on Great Britain. Last year, your outlook on the U.K. was relatively pessimistic, even when domestic volumes were much stronger than anticipated. How should we think about volumes and prices in 2018, since capacity additions are taking place and whether or not this will affect margins? The second question is whether or not margins in Eastern Europe will be able to get back to pre-crisis levels around 28%, this considering that the group took out a lot of costs and multiple capacity in the region, and whether or not there are any reasons why it couldn't go to these 28%. Lastly, how should we think about tax rate going forward, in Belgium, and France, in particular? Thank you.
Thank you for your questions. If I may, my colleague, Willy Van Riet, will start with the tax rates going forward, because that's the most difficult.
Okay. Thank you. Obviously, we have, of course, already incorporated in our results, the lower tax rate in the Belgium market, which we already put in there. France as such, not really, and U.K., also not that of a big effect. You know that we are high taxpayers traditionally in Western Europe. I think it should have a lowering effect on our average tax rate, which we always guide around to 25%, excluding any one-offs like deferred taxes like we had this year. It would temper, I think, the tax rate a little bit downwards. I would not put too much of a too big emphasis on the whole thing, because usually when governments announce lower nominal tax rates, they start deleting some of the tax deductibilities of other items, so it's always a bit of a rush.
I understand. Thank you.
Your first question was about the U.K., let me just slightly correct what you said. Wienerberger has not been pessimistic about U.K. in 2017. Not at all, by the way. We just said, obviously, in the whole overall Brexit discussion, things can develop either way. However, if I look at what we have achieved as Wienerberger, we have seen solid, strong growth as far as volumes are concerned. We have certainly had a very satisfactory year in the U.K. market. Price-wise, volume-wise, we have seen also a strong increase in our imports into the U.K. A very satisfactory 2017 for Wienerberger. If we look into 2018, again, I think the same is true as in 2017. I think it's too early to say and to give you a trend there.
We think at Wienerberger, we can obviously take advantage of our strong position, perform accordingly to the market demand, and also on the price side, I think we will see a satisfactory year 2018 in the U.K. That's the most I can tell you at this stage from a U.K. perspective. Coming to Eastern Europe, your second question, I think what you have seen also in our Eastern European division, when you look at the margin expansion in 2017. It was a strong one, where you see that the operational leverage has come completely through that we have promised. We are at slightly above 24% of EBITDA margin. You refer to pre-crisis as peak levels of 28. I think if you look at the capacity utilization rates and the market and the roofing business, here again, I think the 28, obviously, if everything then goes right, is achievable.
There's no reason why not.
Thank you.
Which would be a very strong performance, because if you look back to the translation rates in 2007, we had stronger Eastern European currency than we have now. A part of the margin, the high margin, came out of the currency. The like for like, if you want to, is inherently stronger.
Makes sense. Thank you.
The next question comes from the line of Matthias Pfeifenberger with Deutsche Bank. Please go ahead.
Yes, good afternoon, gents. I've got three questions to start with. Firstly, on the like for like EBITDA growth, it was 7% this year, and you're implicitly guiding for 13%-15%. What explains this acceleration in the like for like EBITDA growth? Is it really the measures, the closures, the disposals? Is it better top-line momentum or just even stronger operating leverage in Eastern Europe? Secondly, maybe you can help us bridge the delta between like for like and reported EBITDA bit in 2018. It's the EUR 460 midpoint minus the EUR 30. I think the EUR 15 million is included in the like for like. I guess you can compensate the EUR 30 maybe by maturity with M&A and closure. I don't know, is EUR 450 a good level before FX changes? Also on the M&A, it's a EUR 200 million budget.
The simple question is it really a good point in time in the cycle to accelerate the M&A when multiples are that high? Thanks.
Matthias, thank you very much for your questions. I will take your third question immediately. You have seen our disciplined approach in 2017. I refer to the multiples, that is about six and a half that we have realized the acquisitions. There's no whatsoever reason to go away from such principles that we have implemented. I've clearly stated also that the 11.5% is our clearly measurement target within the company, but also for acquisitions. You won't see management of Wienerberger moving away from these principles and start buying companies for crazy multiples. I think I clearly addressed this issue. When you look at your first question, where you refer to 7% EBITDA growth like for like in 2017 and 14%, I think for 2018, I tried to put forward the measures that we put in place, and I think they are important.
They are certainly contributing to this improvement. We'll see also organic growth, and we have seen improvements as far as products and innovation rates are concerned. It's a mixture of a lot of incentives, measures that we put in place in order to get us to this growth of 14% in organic EBITDA. The last one is for Willy, that's on the guidance.
On the bridge, I will not bridge, Matthias, because we look at the figures as they come. We've given a clear guidance where we see the EBITDA going to. We have hinted on what the cost savings are going to be. We have hinted also where we can see the M&A contribution, because we said for a full year it's going to be EUR 16 million EBITDA contribution if all acquisitions that we put there on the map are going to be realized. To add to Heimo's point on the M&A budget, but take into account as well, we have not spent the full EUR 85 million that we guided for in 2017 on M&A. Some of the projects, like the Brikston one in Romania, we still have to close. We closed the Brenner one in 2018.
Part of the EUR 200 million, a fair chunk of that is further closure of those acquisitions that we have already announced. We will also buy out the minorities in Tondach, which will take a fair amount of money. It is not all new, and it will be smaller M&A acquisitions. Coming back to the bridge, I think that we have guided for the two major parts. I think the rest we must leave up to your appreciation on how markets will develop and how they will go. We are clearly hinting where we see markets are going to.
Just to clarify the EUR 16 analyzed, how much is that in 2018 terms? Maybe can you give us a number in terms of if you spend the whole EUR 200 million, there will be an incremental M&A accrual for earnings. What could it be in total, like EUR 25 million in total?
It's a nice try the 11.5% CFROI on the EUR 200 million.
All right.
Excluding the Tondach, which is a buyout of a minority.
Okay, maybe a last one. In the fourth quarter, the pipes business was really looking quite bad. It was, I think negative in Western Europe. Maybe some more light on that. What's happening? What measures have you taken? What are you going to take?
Yes. As I'm going, we closed one factory in France, basically, that has provoked, I think the booking of an additional provision of what we already had as exceptionals throughout the year of roughly EUR 11 million in the last quarter. That hits our results there pretty hard. For the rest, I think the underlying business was moving positively. We also took in some, of course, we had a write down on this factory also to a certain extent. That was provoking the results in the pipes.
Okay, thanks a lot.
You're welcome.
The next question comes from the line of Miguel Borrega with UBS. Please go ahead.
Hi, good afternoon, everyone. I've got two questions, both on your guidance. The first one is on the EUR 450-EUR 470. I understand that EUR 12 million of scope is included in that figure. That is broadly 10% like for like, an acceleration from the 7%. I just wanted to get some color around where do you expect an acceleration of trends versus 2017? Is it specifically in clay, Eastern Europe that is exceeding your expectations? My second question is about the margins in the pipes business. Can you just comment on your expectations for EBITDA margin in 2018 and over the long term? I just want to understand if the margin performance in 2017 was more of a one-off, as you said, on the provisions, or is it structurally difficult to turn around back to 11%? Thank you.
No, the pipes margin should return back to the 11% we had earlier. There's two main reasons for this. One, you hinted very clearly to is the restructuring cost we've seen in France and the underperformance in the French market as a result of that in 2017. By the end of the fourth quarter, we've also managed to get our prices up and to reflect price increases, especially in our Nordic markets, where we were lagging a little behind as we hinted throughout the year. As you know, we have a high margin business in long length diameter and in SoluForce pipes, which virtually had no activity in 2017. That's a high margin business, well above the average pipe margins. There we see, I would say at least in the beginning of the year, we have already booked a number of real orders in that.
We will come back to a more, I would say, normalized level there in 2018. On your first question about where do you see the growth, I think we clearly hinted Eastern Europe is, of course, the sweetest spot, if I may say, so from a market perspective. We are, of course, working on also our own projects and getting also the cost savings in. We hinted to the EUR 15 million that we want to see come in. We, of course, what we should not underestimate is also some of the Western European markets are developing positively. That together with an improvement in our pipe business should give us the comfort to get where we got in our guidance.
Just to follow up on that. Are your expectations for the U.K. for further growth into 2018 versus 2017? Is it mostly on volumes or prices? Thank you.
You've seen the map where we've described what we believe about the U.K., I think that's the way it is. We will see where the market takes us. We had a good run, as Heimo explained, in 2017. We believe it's going to be stable-ish in 2018, that's where we see it at this moment. We are not depending upon the U.K. as well. I think that's a point I want to make clearly as well. We see in our Western European businesses, a good performing France, a good performing Benelux market as well.
Very clear. Thank you.
Thank you.
The next question comes from the line of Stephan Trubrich with Kepler Cheuvreux. Please go ahead.
Good afternoon, gentlemen. Thanks for taking my questions. I would like to follow up on the EUR 200 million growth CapEx guidance. Could you be maybe a little bit more specific? Because I think in the morning press conference, you provided a breakup here that some of that, as you said, is going to the buyout of Tondach. Can you maybe share with us how much that will be? I think you also said that you are not looking at large scale acquisitions, it will be several smaller bolt-ons. Is that correct?
Okay. One thing to be perfectly clear, I think we said clearly that in this EUR 200 million, certain acquisitions are also taking into consideration that we have already signed or are in process of executing, because like the Romanian brick one, we are depending in front of the antitrust authorities. This obviously is already committed. Also committed is the more or less EUR 30 million to the buyout of the minorities of Tondach. There you have already elements to work with. We said clearly, all these small or mid-sized acquisitions that we can influence, control, or are able to handle, we take them into consideration. We have obviously in this EUR 200 million, no big acquisition, because bigger acquisitions are when companies decide to sell their divisions or put them on the market.
Obviously this is not part of this because this is driven by other parties and not us. Here we are talking about this clearly, this bolt-on activities as you have seen them in 2017.
Also what we have included, like we also did in 2017, are some larger industrial projects where we increase our capacity, and that's roughly, I think, about EUR 20 million at this stage.
Okay, because I think, and you mentioned also in the press conference, that you had some asset write-downs at some mothballed or of mothballed facilities where you decided that it doesn't make sense to bring them back and rather invest into existing sites. Of this EUR 200 million growth CapEx, you allocated EUR 20 million to EUR 30 million basically to expand existing capacity at already running facilities.
Yep.
Okay. When you talk about the divestments of EUR 100 million in, let's say, non-core assets, can you give us some more color in which direction is this going? Might this be in pavers or is this single sites, maybe also in clay blocks? Or is this also related to the, let's say, asset write-down you did that you considered this as potential selling candidates? Thank you.
No. First of all, it's not about non-core assets, it's about underperforming assets. Assets where we believe that the performance does not fit. We will not say at this moment where we see the potential, because it's a study that is still on its way. It is clearly not those that are written down because they will come at a certain stage when we see time fit. When we see that the value is there to be realized, they will come in our non-operating assets sale program. They will be part of what we had in the past, our EUR 90 million or EUR 70 million programs in future. That's not being said that that's going to be this year, next year, or whatever.
One of the good things we've done also in the past is we waited until the value was there before we realized our sales. We cannot disclose at this moment where we're going to sell underperforming assets, but they can be everywhere in the group, and they will be everywhere.
They are not necessary-
Let me say this very clearly also. As I said earlier, strategically, we are looking at all our portfolio and where we see that in the future, the growth rates are not at the level we want them to be. If we see here that such assets are better off with other owners, we will move on those assets. This is going to be criteria that we will impose and implement here. It's a process that you will see us put in place within the next 24 months. We've clearly said we right now think that there are assets out there in the range of about EUR 100 million.
Okay. What kind of EBITDA contribution do they currently have?
No, we are not in a sales process today.
Okay, fair enough. When you said that in the real estate disposal program you delivered already EUR 40 of the targeted EUR 70 million, this means there are EUR 30 million left, but it could be theoretically upped, given that you just basically did some write-downs on some assets. Is that correct?
Not necessarily on those assets, because we will also see what we can do with the existing asset base that we still have on the balance sheet and which are up. As I had mentioned earlier, some of the projects have taken us a longer time because we have to change the final destination. We have been managing assets from, I would say, agricultural to construction sites and then being able to sell them off. This goes all over the assets that we have. It's not just because we have written down some assets.
Okay. Maybe some housekeeping questions. I see usually with the guidance provided also or hinted towards the absolute amount of depreciation or the net interest result. Is there a specific reason why you didn't do it this year? Can you help us out a bit here? Thank you.
If you look at the financing, it's going to be in line with what we've seen this year in 2017, because the debt will more or less, with the acquisitions that we will pay out, will remain stable. What you will have as well is the depreciation, I think, will hover around EUR 190 million. Again, depending upon which businesses we take on board or not. Also that is not yet factored in.
The very last question, I was just wondering when browsing through the slide deck, is there a reason why you don't show this slide with the plus EUR 600 million EBITDA by the end of 2020? Have you, let's say, revised or put this target on hold for the time being, or is this still up?
No, not at all. First of all, I think when you look at Wienerberger, the world doesn't end in 2020. That's the one reason and the most important reason, because we see the company obviously there for a much longer period of time. As I said, for us, we want to move clearly fast, quick and grow the company also in 2018, 2019, 2020, 2021 and 2022. I think here we are not focusing on only one year, but on the growth on the midterm and in the next years to come.
All right, good. Thank you very much.
The next question comes from the line of Markus Remis with RCB. Please go ahead.
Good afternoon, gents. Just two smaller ones left from my side. Regarding the Pipelife business, you indicated a pickup of the international business. Do you see that rather as a kind of a spot business, or could you imagine that we're going to see a more broad-based improvement as we go forward? Also, if you could provide some details on the geographies where business is picking up. Then on Belgium, the growth you're flagging on the map, is that a base effect because 2017 was held back by this insulating material issue, or is this to be understood as a kind of an underlying growth?
On the Belgium front, very quickly, I think we have all talked about this last year with the lack of insulation material and the problem that it had on the construction market. We have indications that this has eased somehow and somewhat so that the normal trends are coming back. Obviously, we see that there have been some backlog there, and therefore you will see some growth. I think that more or less explains the development on the Belgium market. On the international business and the projects business is a spot business because it depends on projects. If we get projects in South America or in Asia, that's then coming through and contributing positively. It is a business that you would qualify as a spot business.
Basically what we said earlier, the long length diameters, the whole world is our market. On the SoluForce, which is the oil and gas industry, it's mainly the Middle East. Where we see business picking up.
All right. Thank you.
The next question comes from the line of Flor O'Donoghue with Davy. Please go ahead.
Thank you very much. I have just two questions. The first one's quite generally just an update on your thoughts on various input costs, be it plastic granulates, energy, people. The second one, just looking at roof tile volumes in Western Europe. It looks like they were down in the second half of the year. I think you might have referred to renovation markets being sluggish or weakish. You might just give us a little bit more detail around that if you could, please. Thank you.
On the energy front, I think the question is flat on the gas side of the clay business and the granulate as of this moment, I think we've seen some developments that we've covered. However, I would remain also cautious throughout the year because there is some volatility in these products. As you have seen last year, when it comes to such volatilities, there are regions where we can ease it with prices rather quicker and others that are more difficult and have had a sort of timing lag when we can put prices through. These, to your first question, and I think on the roof tiles, yes, you have seen in certain markets, and I think we referred to these issues, especially on the markets and the bigger markets in Western Europe, that renovation is somehow sluggish or down.
This is obviously because there's a lack of initiatives coming from the government. The only government, by the way, that moved on this is the Belgian one, where they have decided to give incentives on renovation, especially on the roof one. We have not seen something coming through by the French one nor by the German one, therefore obviously these markets remain somehow sluggish. That's why you have obviously a certain decline in volume in Western Europe.
Great. Thank you very much.
The next question comes from the line of Bruno Carraro with Petrus Advisers. Please go ahead.
Yes, good afternoon. Can you shed light on the areas and functions where you found room for further cost savings? I'm referring also to slide number 29. Maybe give us also some color on the costs related to the restructuring initiatives or additional cost savings initiatives that you're working on.
Right. When you talk about the cost, it's a one-time cost that we calculated EUR 30 million.
These are basically redundancy costs, closure costs that you have here when we are talking about the individual restructuring efforts. If you look at those efforts, they concentrate firstly on the pipe operations in France, where we, as my colleague Willy has explained, cut capacity, cut obviously staffing in the factories and concentrate ourselves now on a very small sized and operation that doesn't focus on commodity products, but more upscale products. This is the first major attention point, which was an underperforming operation in 2017. We have focused also on our clay pipe business in Germany and Belgium, where we close one site in Germany. That's the biggest site, and to take out here capacity and lay off the people.
Overheads.
Overheads also, and from area also in this respect. Here is a major part of the EUR 30 million coming from this restructuring. Obviously we focus on the German and Austrian clay block activities or clay activities, where we see also potential for further improvements. By the way, we have closed two smaller sites in Austria.
Yeah.
Have announced that already, as you have seen, and will move also in overheads and structures in these two countries to improve the performance. These are the attention points that we have under construction at this point.
Okay. Thank you. One follow-up question, or actually two. On French pipes, given that obviously there's a lot going on there. You spent EUR 12 million, if I'm not mistaken, in 2017, and if I understand correctly, EUR 11 million of which was in Q4, correct?
Yep.
In Q4, if I just add back these EUR 11 million Q4 EBITDA for Western European Pipes & Pavers business, had a margin which was about 90 to 100 basis points lower compared to last year. I was wondering whether you could give us a sense of, again, what's going on there quarter versus quarter.
The lack of international projects.
Okay.
If you look at this, exactly what you are doing, you are adding the French restructuring back, then you see the lack of international project activity that we have seen in 2017, and that obviously negatively influenced our business in Western Europe. If you see the operations that are focusing on the local business in the Nordics and in the Netherlands, they were slightly up actually and trading better than in 2017. The only negative effect was this international project business that has obviously a better margin, a higher margin than the operations and therefore negatively impact the overall margin in Western Europe.
I see. The other question is, again, another area that is, I think, impacted by the restructuring costs or restructuring initiatives that are in place is the clay business in Germany. Obviously also in the report you hinted at a few difficulties that you're having. Is it something that is idiosyncratic, i.e., relates to Wienerberger only, or you think the market is by and far slowing down? What's your sense there? Can you give us some color on what you're seeing in the market?
No, the market, I think the market for bricks is a very local one in Germany. It's not an overall German market. You have actually southern Germany that is more brick-minded and some parts of the mid-German markets that are brick-minded. You don't find hollow blocks in the north of Germany. That's the first thing. The second one is obviously due to competitive issues as well, because in certain areas you have stronger competition, local one, regional one, that influences not only prices but also the supply in this area. As you have seen in Germany, the bricks go into one and two family houses, mainly. Nearly 80% or more go into this segment of the market and not going into multi-housing units.
There are other products going into these units, and therefore obviously when the German market is shrinking in this one and two family houses, the brick market is going down as well. These are the elements that influence the German market. It's not a discussion about Wienerberger and the rest, it's about the brick utilization in certain parts of the market. What we are doing, obviously, we are changing our footprint there in order to optimize it, cutting back on overheads, cutting back also on the production units in order to improve our capacity utilization and therefore the cost structure. That's the clear target and therefore bringing up margins considerably.
Okay. Quickly back to the pipes business. Can you give us an update on the eventually the ability that you had and whether you were able or not to pass through the increased cost of raw materials to customers, or broadly speaking, to eventually price up your products?
Well, I think as we explained throughout the year 2017, we were able, especially in the Nordic region, where this was the major impact, bring up the prices and obviously cover these price increases of granulate and therefore restored the margin in this area of Europe. This is the positive news of 2017. Keep in mind that obviously the Nordic market is a market that operates with a high degree of concentration. You have big dealers there, and therefore price increases are only coming through with a certain delay, and we talked there about three months plus, nearly up to six months in certain areas.
I think the positive news that we can give you that here we have been able to increase the prices and restore the margin.
What about other regions, again, obviously France and other regions?
France is obviously of less importance because it's more driven by this restructuring. Netherlands has been well sort of structured also on the price side, and Eastern Europe is more a business that is project-oriented, and therefore the prices can be here adjusted easier.
Okay. North America, are you satisfied with the return on capital there? Because it's obviously lagging behind your internal target of 11.5%. I was wondering whether you have some plans to eventually increase the return on capital there.
Well, I think if you look at the North American business, you have seen a strong increase in the return here because you see the EBITDA is strongly coming up. We see that the measures that we have taken there and the measures of cost-cutting, efficiency improvements, capacity utilization is going up. Therefore, the performances can come up impressively. If you compare us to our colleagues and competitors, our increase is far above those. If you look at Meridian, for example, the strongest competitor out there, but also Glen-Gery, that you can measure when you take their numbers. We have clearly outbeat them. I do think that the potential is there to improve our North American operations even further.
Obviously, if you look at the historical invested capital, we are suffering here from a lot of cash that has been invested there. The returns are getting better. The potential is there to further improve them.
Okay. It's still a long way, I mean, from 4% to 11.5% plus. Probably it will take a few more years.
Yeah. Well, I think you need to give us also the opportunity to do so. Therefore, we can show that we are on the right track. Obviously, I think if you improve this, you have seen it also in other parts of the group in the years 2010, 2012, 2011, 2013, where we have been at very low CFROI numbers and have improved gradually. I think this is the story of operational leverage. That's the story of the cost improvements that we make. I remain confident that we have here the right assets in the U.S. to improve our performance.
Yeah. Just one last question. Can you give us some color on the process that led eventually to your contract extension for a few more years? Eventually you're a longstanding CEO and CFO of this company, so I was wondering whether you could give us a sense of where the board stood when it came to renewing your contract. Again, obviously in light of the increased cost savings initiatives, I was wondering whether you're confident to reach or beat the EUR 600 million EBITDA target you have set for 2020. If that is the case, whether you would consider potentially coming up with a more challenging target, given that you have a rather long time horizon in which you will still be in the driver's seat.
Sure. I think if you look at our performance over the last five years, and I clearly pointed in my presentation to this, what we have done and how we improved the performance of the company. We're strongly, and really strongly committed, both of us, to continue to do so. I think also the board was very supportive in giving us the strong signal of confidence and trust that we continue our growth plan. As I said earlier, it's not only one target that matters in one year, it's obviously to take Wienerberger completely to a new level by improving the performance of the company. We have done so in the past. We have shown the track record. We are confident that we can go further.
Obviously, we will put all the necessary efforts in place over the years to come to even beat a target that we put out there. You see also the ambitious EUR 450, EUR 470 target that we have out there for 2018, the current year. I think both of us, as I said, are confident and strongly committed to realize and take the company completely to a different level as far as profitability is concerned.
Mm-hmm. Are you committed to putting also your money where your mouth is? I.e., would you consider eventually investing more in Wienerberger stock?
Definitely. Obviously, I don't only put the money where my mouth is, but I'm convinced, and I'm already strongly invested in Wienerberger and I'm strongly committed and clearly will also invest in the future in this company because I'm a strong believer that there is value to be created in the years to come.
Okay. Thank you so much.
Okay. Thank you.
The next question comes from the line of Ami Galla with Citi. Please go ahead.
Thank you. Just two from me, please. My first question is on Pipes & Pavers. In the results comment you mentioned that you will be taking measures to optimize capacity and reduce admin costs. Is the charge on these measures included within the overall EUR 30 million number that you have flagged? Just a clarification, the range of your guidance for 2018, the EBITDA guidance, the numbers are more dependent on outlook of those markets in addition to the overall pace of your optimization gains? Is it incrementally dependent on markets in Western Europe? Sorry, another follow-up. Last one, please, here, is just a clarification on your 2020 EBITDA guidance of EUR 600 million. As far as I recall, it was based on 2015 FX rates. Can you give us what that revised number looks like at current FX rates, please?
Thank you.
Pipes & Pavers, where we talk about the restructuring, there it is clearly the French restructuring because that's in pipes and it's in France.
Okay.
That's included.
Okay.
If you look at our markets, one of the strengths of our company is that we are active in a lot of different markets. We are not depending on one or the other market. I think I said earlier, as well, we are not depending upon the U.K. or anything else. We have a broad portfolio of markets which are at the moment performing and are getting better. It's not like it depends on the turnaround of one or other market to realize where we are in the range. I'm sorry, I do not constantly recalculate the 2020 target that we put out.
Okay.
That's a figure I don't do. In the meantime, the world changes, the composition of the group has changed as well.
Can you give us some guide as to how far that number has moved based on the FX moves across your markets?
I believe.
I would think that mix also does change based on the acquisitions that you have made.
We have a EUR 5 million EBITDA translation loss this year. I think we had a similar figure last year. That's more or less where it is.
Okay, that's helpful. Just one to add to my existing set of questions. Can you talk a bit about the margin differential between the infill clay blocks and the standard blocks? How does that margin look versus the overall average margin within the wall division that you report separately?
I think we have on average, we have about a 15% better margin.
Okay. That's helpful. Thank you.
If you would like to ask a question, please press the star followed by one on your telephone. Excuse me, Mr. Ofner, there are no further questions at this time.
Okay. Thank you. Ladies and gentlemen, thanks again for dialing in today and for all your questions. We hope that you will join us again on the ninth of May. That's the day we release our Q1 results for 2018. All that is left for today. Thank you for your attention. Have a nice day, and goodbye.
Ladies and gentlemen, this concludes the Wienerberger conference call on the results for 2017. Thank you for joining, and have a pleasant day. Goodbye.