Earnings Call: H1 2016

Aug 17, 2016

Ladies and gentlemen, thank you for standing by. My name is Yasmeen, your Chorus Call operator. Welcome and thank you for joining the Winnebago Conference Call on the Results for the 2016. 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. I would now like to turn the conference over to Mr. Claus Oefner, Head of Investor Relations. Please go ahead, sir. Thank you, operator. Ladies and gentlemen, welcome from our side as well to the Winebetter earnings call on the results for the first six months 2016. Thank you for dialing in. Winebetter representatives on today's call are Jaime Schoich, CEO Willy van Rijde, CFO and Stefan Huber, Head of Corporate Reporting and Corporate Treasury. Jaime Schoich will open the call with a summary of the key developments and the results of the first six months and speak about our outlook and goals for the second half of the year. Following the opening statement, the line will be opened for questions. I now hand over to Mr. Joyce. Please go ahead, Mr. Frankie's summary. Thank you, Claus. On behalf of all of us, a warm welcome to our conference call and greetings from Vienna. If we look at our half year results 2016, we can clearly say from Wienerberger's perspective, we have shown strengths again on the operational front with respect to the performance of our company. The turnover from the first half year is more or less on the level of last year's, so stable turnover. EBITDA slightly down by 1%. Please keep in mind that from an FX perspective, we had a negative impact on the revenue of about €30,000,000 and on the EBITDA about €5,000,000 due to the Czech currency effects this year, especially coming from, obviously, the English pound, but also Norwegian kroner and the zloty that affected negatively our results. If you look from an operational perspective, so excluding such effects and then on top of it that we sold last year a significant amount noncore real estate that affected positively our EBITDA. We have organically been growing about 9% our EBITDA, so a strong EBITDA growth this year again. And this, if I may use Pilot's language, only with tailwind but with some significant headwinds in certain of our markets that I will sort of elaborate a little bit more in detail in a minute. So from a net result perspective, again, a strong increase from DKK6 million last year to DKK27 million this year. Especially on the cost front, we have, I think, to extensive optimization measures over the last year, a good result and good contribution here from our production from the operations overall through Wienerberg. But let's come a little bit more in detail to the different divisions and regions. Let's start with North America. We have seen here very good development with respect to the housing market. So we have foreseen and predicted about 10% at the beginning of the year. We can confirm this running rate. Actually, our businesses performed a little better than that. We have operational growth in the range of about EBITDA 36% this year. So we have a good pricing environment, and the volumes have been significantly up in our core markets in the Southeast and also in our Canadian operations. We foresee this trend to go on for the rest of the year. In the plastic pipe operations, you will recall that we have one plant in the South Of The United States, in the state of Kansas. We have seen volumes at satisfactory level. However, pricing activity is not at its best at the moment. So we have a rather fierce price competition. Therefore, have been negatively affected in this part of the business in The United States. Let's move over to Europe. And here, we have seen, obviously, in our markets, a different development over the first half of this year. The whole of Eastern Europe has shown a very strong and good operational trend. We have seen housing activity picking up from Poland to Bulgaria, positive trend, especially in the one and two family house building environment where we are active. So our roof tile and our clay block business have been positively impacted by this business. And therefore, you see also good and solid growth rate in this area. So volumes up in this area. And also our utilization rates have been better. Therefore, we have obviously a better cost structure in this region. As far as the region itself is concerned, we see these positive trends to continue throughout the year. Positive impact come obviously also from governments like the Hungarian one, also the Romanian one and the Polish one, where we see positive signs as far as the housebuilding activity is concerned. The only market to be mentioned which we have a small exposure to is Russia, obviously, where we have seen a decline still in the first six months. However, also there, we see a certain stabilization trend on these low levels as we speak in the last couple of weeks. So this is from an operational perspective in the especially Brick segment in Eastern Europe. Let's move to the Brick and Roof Tile segment in Western Europe. Here, we have seen, obviously, starting with Germany and France, a good trend. We have seen growing housing activity in the one and two family houses in these two markets, also positively affecting our clay block business. When we move then to The Netherlands, we have foreseen at the beginning of this year a rather strong increase in the market. I think the increase is there. We have a good dynamic in this market. However, it's a little lower than originally expected and certainly a little, I would call it, influence from The U. K. That has affected the activity in The Netherlands or Dutch market. The Belgium one is obviously of significant importance for us. And therefore, also, we see the decline that has occurred in these markets is, for us, important. Therefore, obviously, we will see and closely monitor Belgium and especially the positive trends coming out of the government as far as renovation and newbuild is concerned recently. So we see here obviously, some positive trends coming through from the public and the administration. However, this year, I think we will see and confirm this decline in the Belgium housing market. The Swiss market has also been in a certain decline mode, and this is to be confirmed for the rest of the year as is the Italian one. Now let's move over to The U. K. Obviously, very, I would call it, impacted and affected by all the discussions around the referendum, high volatility and instability before the referendum, some sort of buildup of stock in the whole distribution chain at the beginning of the year. I would say at this perspective, all of this has cleared out, especially on the level of stocks and the inventory in the distribution chain. So I think we are now back to normal running rates. If I look at July, obviously, the running rates are more in the range of last year. So one would suggest that we have digested the referendum, and we are living now in a new era. However, volatility is low in The U. K. As we speak. Positive signals come, obviously, from the government with a strong indication that housing will remain important for the government and stimulate the activity from the government will be one of the key items for it in the future. So obviously, there is demand in the market and a positive impact from the government will help over the next couple of years. However, it's too early to say what will happen for this year. We, as Wienerberger, expect the market to go down by about 5%. So this is a significant change with respect to our guidance that we had at the beginning of the year before the referendum. If we then move away from the newbuild more to the renovation business, you know and you're well aware that our roof tile businesses are affected by the renovation market. And there, we see, obviously, a somehow slower trend in renovation, especially in Eastern in Western Europe. I do apologize, Western Europe and in big markets like France and Germany and, to some extent, the Benelux region because, obviously, there is the austerity measures from the public budget on the one side, so no major subsidies for renovation. And obviously, the cheap energy doesn't give the incentive to people to really renovate their roofs at this stage. So we see here a somehow declining trend in the range about 3% in this area of our business. If we move then to the pipe and pavers operations, picture. Why? Because we have, obviously, two areas of the business that got affected, again, by, first of all, public domain, I would call it, when we talk about infrastructure in Eastern Europe. A lot of infrastructure spending, especially when it comes to sewage and wastewater systems, gets heavily subsidized by EU money. And here, we have seen somehow a slower trend, a changing of administrations in Eastern Europe that lead to a certain, I would call it, restriction at this stage, and then probably we shift the projects in the next couple of years because administration is currently changing in Poland and Romania, very two very important markets for us, especially for piping in plastic and in ceramic, where we sell, obviously, high volumes in these two markets. So again, here, public influence, it's nothing, I would say, to worry long term because the need is there. We see this as a trend that is on its midterm way to be expected and to clear out in the years to come. On the other hand, we have obviously an exposure to international projects as far as our domestic pipes are concerned, especially to the oil and gas industry on one side and in international energy projects for big dimension pipes. Both of these piping systems come out of our Western European piping division. And here, we have obviously seen a decline in sales in both domains. So therefore, these rather profitable businesses are a little weaker compared to last year, and the order intake this year has been lower compared to last year also. On the other hand, we have seen a good development of our business in the Nordic region, especially Norway, Sweden and Finland have performed well in our piping operations and also the takeover of a small competitor and the specialist in the switch pipe systems in the Helsinki area in Finland has helped also the operations there. So generally speaking, as I said, mixed picture, good performance in countries like the Nordic, like the Dutch business and the Austrian business in the piping, weaker so in our business also in the piping front in France due to the local effects there with distribution and supply to the market. When we look to the paving business, that's our SemiRock business in Eastern Europe, I would say, a rather solid business in most of the countries, a little weaker again when it comes to infrastructure spending in Poland and also some pricing competition in Poland in this product range that we have to deal with at this stage and for the rest of the year. So when we look at the overall businesses and again, the outlook, I think here, we have some markets that are performing well, especially in the new residential one, a little weaker in some infrastructure markets in Eastern Europe and also in the renovation market in Western Europe and to a certain extent, a little weaker market in The U. K. All in all, this leads us, obviously, to a guidance that we maintain our operational performance with the EBITDA of $4.00 €5,000,000 However, we see this $4.00 5,000,000 as a guidance pre currency. So that means any the currency changes and fluctuations will affect our result. We have seen first effect half year about €5,000,000 If we take this for the whole year and extrapolate it, it's about €10,000,000 that we have to take into consideration. But this is obviously, at this stage, only a guess with respect to currencies. But again, as I said, operationally, we feel comfortable with this EUR405 million. We also have the EUR15 million coming from the real estate. We will feel comfortable that we get those. All the projects that we are realizing and will realize in the second half are well on track. When we look at the input costs, we have obviously the major part coming from energy. Let me just precise there as well that we have guided at the beginning of the year about €6,000,000 coming additionally from the energy side with respect to lower energy prices. At this stage, we can confirm that this will be higher than €6,000,000 I think the overall positive impact will be more in the around €13,000,000 I think an additional 7,000,000 that will come from this area of cheaper energy costs, especially gas, obviously. So here, we see this positive inflow coming in on the cost side. However, I have to state that we look cautiously, obviously, to the markets like The U. K. And Belgium, where we will certainly adjust in the second half our production in such a way that we bring down capacity and then adjust to market demand. And therefore, if I may call it, it will compensate this CHF7 million in savings on the energy side, our higher cost of idle capacity in these areas of the business. There will, however, be and we don't see any need of restructuring or closures of plants in bigger magnitude in Western Europe. I think we see we are well positioned in order to manage such intermediary downturn in these markets. We maintain our plant network. We don't see that there's a need of capacity reduction because in both countries, especially in Belgium and The UK, there is important demand to be foreseen for the future, and our plant network is well positioned for the local market. So we will make this, if necessary and required, this very quick and fast cost adjustments if required in the second half. But they won't have a major impact, as I said, on the overall cost side because we have this €7,000,000 coming in from the energy lower energy costs. On the project side, meaning growth projects, we are well on track this year. We have realized, as I said, this takeover of small competitive sewage specialists in the Helsinki area. We have taken over a brick plant in West Of Poland, which is well on stream already. Romania, we have taken over a plant in clay blocks also near Bucharest or in the greater Bucharest area. And we have finished our concrete paver plant in South Of Vienna, and this will be on stream also in the next couple of weeks. So the major part of our growth spending will be achieved, And the contribution from these projects will be minor this year because, obviously, we are in the project of in the phase of realizing those projects. So we'll see coming in the benefits of this early next year. On overall spending, I think we are obviously keeping an eye on our spending side, but the foreseen €145,000,000 shall be sort of the target that we will have here for this year. On the pricing side, we have seen price increases on an overall group level of about 1%. So you can see that, obviously, even in such environment, we are able to increase our prices and offset, obviously, the inflationary cost increases, which we see due to the fact that there's a lower energy cost coming in about 1.1% for the whole of this year. When you look at the second half of the year, obviously, we have a challenging second half of the year ahead of us, but we we are confident that we can realize our targets. Please also, when you make your estimates or calculations, keep in mind that last year, we had a onetime restructuring cost last year in the second half of about €17,500,000 that we won't have this year. So you keep this also under consideration when you make your estimate. I think I probably covered very quickly in a nutshell a lot of points, but I think William and myself are now ready to take your questions, please. Thank you very much. Ladies and gentlemen, at this time, we will begin the question and answer session. And the first question is from Mr. Matthias Palfenberger of Deutsche Bank. Please go ahead, sir. Yes. Good afternoon, gents. A set of questions on U. K, please. You mentioned the minus 5% market growth rate that you expect. Can you maybe elaborate a bit on H1 versus H2? You mentioned July volumes flat, Brexit almost digested. So is it a fair assumption to assume that you might be flat because you always outgrow the market? So what are expecting for market growth in the second half? And how could you outperform that? I will jump in rather quickly, I think, from our perspective. First of all, I just want to make one thing clear. The when you say Brexit digested, we don't see a Brexit. It's the referendum that is digested. So for what the future brings, we I think nobody right now knows, and this will continue for a while till the English government has figured out what it wants to do. I'm just saying that normality and stability is back in the market and that running rates are more or less flat compared to last year in July. And if I the visibility is obviously such at this stage that we can't say it's three or four months. We are living by the months right now in The U. K. And therefore, you can also confirm the assumption that we are more or less flat for the rest of the year. May I remind you, we have Matthias, when we guided after the first quarter, we remained our guidance that we've been giving in the beginning of the year because we did not after the first quarter, there is not really visibility. But at that moment, we already hinted that the plus 4% may look overstretched to us, and that was still at the time before the referendum. Is that Yes. So that's my point. I mean, Q1 was probably up. Q2 was probably already down. For the weaker and now we're more at this moment for the month of July beyond the level of last year. And maybe we are a bit overcautious, but I think we'd rather be cautious than anything else. What I want to get at is that you actually imply a very steep decline in the second half, is that correct, for the market? No, no, because I think the plus 4% was already a bit overstretched as well, yes. Okay. But still, if it was more or less flat in the market in the first half, the minus 5% doesn't look very great for the second half, right? It is a decrease from a flattish market that we saw in the first quarter to a slight decrease in the second quarter to what is now to be seen. But what we have seen as a first reaction after the referendum is taking is confirming rather a flattish market. And that's we believe. The minus 5% could turn out too conservative in the end if, let's say, this flat environment persists? There's, at the moment, no guidance at all about The U. K. Market. The CPA, who usually give guidance, has now postponed its next guidance to next year, which is easy, yes? So I think we are looking at what we believe is coming, and we're trying to guide the market to something. At this moment in July, it's not there yet. Okay. And I think if you look at also at our competitors that have given their guidance, I think recently that you well monitor, I think all of us say the same more or less that we see over the last couple of weeks a flattish trend. Before and around the referendum, there was a high degree of volatility because nobody knew what's going to happen. As I put it, we all have not the visibility for the rest of the year. But I mean, I would say it's a fair guess that the market will, to some extent, decline compared to last year, yes? You think there's also some lag, the people that just started or were about to start did go ahead? And then now with all the uncertainty, it might be Q4 that's Yes, basically the that size depends then on the confidence rate in The UK. And here also, I think when you ask people from different institutions, you get all sorts of answers. And I think, again, visibility is low at this stage. And I would say we prepare ourselves and we are prepared for any sort of scenario. We can produce bricks as much as possible and needed very quickly. On the other hand, we don't want to build up inventory either in The U. K. So we'll sort of monitor it on a even, say, weekly basis. Okay, great. And then maybe an add on to that. You mentioned capacity cuts are being initiated, but in the call just now, you mentioned that those would be ready, if necessary, in Belgium and The U. K. So I guess since you are running flat or even better still, are you already taking measures or not? And what would those be? Would it be reducing exports, reducing utilization or even mothballing? Yes. We are taking measures now or preparing to take measures in The UK, where we will take out some shifts in selected factories, not everywhere and not minor, but adjusting capacity with a few percentage points. And the reason for that is to be proactive in our inventory control for the year end, yes. Think that's main reason why we do it. We do not at this moment are enacting anything on the continent, but if necessary, we will do it. And that's the usual way we react, pretty quick and pretty flexible. Okay. The last one in U. K. Would be on pricing. Now all your comps have also announced capacity measures. How is pricing looking in The U. K? Yes, okay. Just a housekeeping one. The guidance now excludes FX movements, but it's called operating EBITDA. Now typically, we assume FX to be an operating item. But how can we think about the guidance going forward? Would you say that this one was more extraordinary because of the referendum move in the sterling and that going forward, this might again Or be will you switch to something called underlying EBITDA? Well, we will go to, I don't know yet. That will depend on I think what this the Brexit also took us, to be honest, a bit by surprise, and especially the strong sterling devaluation, which took place. So that's half of the whole thing is already only on sterling. So on top of that, we have also seen that we have still weaknesses in quite some of the Eastern European currencies, which normally we will not separately guide for. But I think this time, we thought it was too strong to call it, just forgive it also just take it as a part of the operating bit. So as from next year, we'll probably be on equal terms or whatever because we see there's more and more volatility in currency markets. I think it's fair to agree, Matthias, this took all of us, not only Wienerberg as a surprise and this impact on the referendum and then the currency market is a substantial one this year and we view it as extraordinary also. And may I just add one thing, this is only translation, yes? Whatever we export from the continent to The UK, we fully hedged at pre referendum exchange rates. Yes, I get it. Fair enough. Thanks, gents. And the next question is from Mr. Yassine Tuare of Exane. Please go ahead, sir. Yes, good afternoon. A couple of questions. My first question would be on the margin evolution in Western Europe for your brick and tile business. In the second quarter, you had margin pressure when you had the margin expansion in the first quarter. Is it mostly because of the decline in the British activity where you have higher margin? It is in the British, but also in the Belgian activities. And the Belgian activities is purely related to the market, where we already hinted in our guidance that the market would go down by 6%. And what is happening in Belgium exactly? Is it consumer confidence? Is it the incentive on housing? What is explaining the decline in the market? We've seen a slump in housing permits, which is taking effect now. Since February, we've seen housing permits are going up again. So we are getting more positive on also what is coming for maybe the remainder of the year and certainly for what is following. It is consumer confidence. Mind you, the country has been hit by various events. That is one thing. And secondly, there's been and it's a very typical Belgian thing, but unfortunately, it's true. This is a market which is very conscious of whatever fiscal measures are announced. And there has been again uncertainty on whether certain renovation, especially, it's mainly in our roof tile business, whether renovation subsidies would still be available, yes or no. It has been confirmed now that they are available. So we might see business picking up again. And the same question on your Pipe and Paver business in Western Europe. The first quarter margin expanded substantially, but came under pressure in the second quarter. Is it mostly because of deterioration in your international project activity where you got higher margin than for the rest of the business? Yes, you're very right. We hinted to that already in our full year guidance. And of course, what we still did, we still have delivered and invoiced some of the projects that we already started in 2015 that flew over in the first quarter, which is a low quarter anyway. So, these high margin activities in a low quarter make your margins jump up. And do you see any sign of a change in activity in the second part of the year or your order book suggests that we could see the same kind of decline as what we've seen in the second quarter? We have no visibility on we have a visibility on the pipeline, and we know there's a lot in the pipeline. Now before the pipeline becomes an order book and before the order books get produced and sold, we will be way into the second half of the year. So you've got limited visibility for next couple of quarters in this division? Yes. Therefore, we rather say that's going to be nothing because if you have no visibility, those things don't drop out of heaven. And on just to come back on The UK. So I understand that the second quarter was negatively impacted by destocking. The month of July has been better than the second quarter. Is that correct? July has been better, yes. And then we don't know about the rest of the year. And perhaps a question which is a bit about number, which is about the your guidance and the one off in your guidance. I just want to make sure that I understand properly. So you've got an EBITDA guidance after FX of three ninety five million euros Correct. Yes. And then in this, you've got €50,000,000 of non operating assets disposals. So excluding sales of non operating assets, it would be something like €380,000,000 Yes, correct. But then you also have integrated a €7,000,000 negative impact of restructuring? No, that was last year. No, euros 7,000,000 sorry, 7,000,000 impact of restructuring this year. Is it correct? Because you're mentioning that you will have some restructuring costs that will be compensated by additional energy costs. Does it mean that you've got €7,000,000 of restructuring costs? That's compensated by the energy. Yes, but the energy costs remain where it is At some point, those one off restructuring costs will be that year, while the energy cost is something which is recurring? Sorry, sorry. First of all, I've mentioned it's not restructuring costs. We have lower running rates, yes? And if we take, as I said, the possibility that we act on our working capital and that the market decline in certain areas that we have described, we will adjust our capacity and therefore have idle costs that will affect our EBITDA. Okay. So it's just lower volume in The U. K. And Belgium? And this will be compensated by better or lower energy costs of €7,000,000 And your guidance, therefore, suggests that you're expecting an organic EBITDA growth in the second half of something like 10%, which is better than what we've seen in Q2. Is it a correct calculation? Or am I missing something? It is guiding for an operating for a better operating performance in the second half of the year, than in the first half of the year, clearly. And why it would be driving this better operating performance? Is it because you've got an easier base effect in France and Germany? Is it because that The U. K. Will not be as bad? What will drive this better performance? Look at some of the other markets. The U. K. Is 10% of our group turnover. We see a better performance now coming into Eastern Europe, yes, that is creeping in, and that's usually more back loaded towards the second half of the year. We see that our piping business, are going to stay probably flat on the business that we have, excluding the Windsor. So and we will get some of the additional benefits of some of our cost restructuring still through. That's very clear. Thank you. Very last question on the restructuring cost. So last year, you had €17,500,000 And when was it exactly that it was mostly in the fourth quarter, is that it? Was the fourth quarter because it was linked to the closure of some capacity and really the final closure in Germany, two plants, a plant in France in pipes and a plant in Belgium. Okay. Thank you very much. And this year, if you just want a complete picture, we have €2,900,000 of closure costs for a factory in U. S, sorry, United States Of America, where we are putting capacity together to boost the performance. Okay, very clear. Thank you very much. Our next question is from Stalash Mahantaraja of Berenberg. Please go ahead, sir. Good afternoon. Thanks for taking my questions. I have three, if I may. Firstly, back on The U. K, your outlook for new residential construction of minus 5% seems a bit more negative versus what some of your peers are saying. Why is this? Also in terms of the volumes there, am I correct in saying destocking started in Q4 last year? Would there be easier comps there or not? Yes. The last February 2015 were already a bit weaker because we hinted also there to destocking, which went on still in the first quarter of this year. We believe most of that is done now. So the comparatives will be relatively different. But as we said earlier in the call, we don't know what the remaining five months of this year we're going to be. Yes. And is there any reason why you're maybe I know you sort of touched on this earlier, but why you're more negative in sort of in terms of new residential in The U. K. Than in the peers? It regional No, or is it no, it's nothing to do with regional. I think it's probably that we take a more pragmatic approach, if I may say so, at this stage, yes. And I think nobody really knows for sure what the end of the year comes out, but I think it's fair to say that on an overall estimation, it's our own estimation that we see the market going down by about 5%. Okay. And then on sort of France, Germany and Netherlands, I think there's sort of the in terms of Western Europe where you've adjusted your outlook in terms of housing starts. What have you seen that should change of view? Is it just change in start date? Are you seeing something on the ground? And also in terms of Germany, is what you're seeing sustainable? Because I think previously, sort of the trend was towards multifamily housing. Sort of what's changed there? Yes. Actually, when we talk about our estimates, and you appreciate it if I say it's our own experience on the ground especially not so much on statistical side. If I walk you through, I mean, has seen from you remember the events that took place in France, the fortunate and unfortunate events that I don't want to comment in the first half, but also social unrest and other issues led to obviously a weaker environment in certain areas of France. Logistically, it was rather difficult to get around. And then obviously, from an overall perspective, I think here we will see still a very good development because you remember that we turned the corner in France last year, and here we see a positive now back to growth mode in the French housing market when it comes to one and two family houses, which are important for us, yes? And so I think this is to be continued. You also noted next year, we'll have an election year in France, but I do assume that at this stage, we have more or less turned the corner, and we are back into a growth mood in France. The Dutch market is also solid growth here on the ground. Probably, as I said at the beginning of the year, everybody was in especially in Western Europe, more enthusiastic. And certainly, the referendum, the discussions, all of it led a little bit to a weaker environment. But still, with a good growth rate in the Dutch market, I think we are happy, we can take benefit of this positive environment. Again, please keep in mind that next year, we are up for national elections in The Dutch and in The Netherlands. So again, here I think we will see certain changes. And I think all of these discussions that we hear out of the local election campaigns and political discussion lead us to believe that there are strong signals in favor of residential housing markets, renovation, etcetera, so positive signs there. To your last question, Germany, also, you're absolutely right. We were cautious at the beginning of the year because urban construction is still going on residentially in Germany. But and this is, I think, the positive takeaway from the second quarter, Germany has somehow been able to stimulate also the one and two family houses outside the bigger cities. And here, obviously, we can take more advantage of it because bricks usually tend to go into these constructions type of constructions. And therefore, for our, especially, clay block business is a positive sign. And let me also say in this context one thing, I think we have been ready together with our operational team back down in Germany to propose solutions for refugee homes that are very long term oriented and then are developed together with governmental institutions where we can obviously contribute here positively also to the rising demand for such homes in Germany. Okay. And finally, just a housekeeping one really. How should we look at tax rates this year and next? Tax rates? Ask me an easier question. I can guide you a bit on the tax cash out. I think that's the easier bit to look at. We have now €11,000,000 of cash out for the first half of the year. My working hypothesis will probably end up between 20,000,000 and $25,000,000 for the full year. Okay. Thank you very much for that. The next question is from Mr. Stefan Troubresch of Kepler. Please go ahead, sir. Yes. Good afternoon, gentlemen. Thanks for taking my questions. There are a couple of left. First of all, I would be interested in some more details on the volume development because I didn't really understand it because looking at your half year report and you provide for the clay blocks facing bricks and roof tiles for the regions, the volume development, which apart from the facing bricks in Western Europe has been across the board surprisingly positive. And also I mean, North America, are up nicely. So my question is why is then in the top line bridge the volume growth almost only flat is the reason that the sharp volume decline in the pipes and pavers? If you could provide some more color here, that would be appreciated. Secondly, I would be interested in your view on The U. S. Market. I mean, you sounded quite optimistic, I'm seeing 10% growth. However, according to latest census data, I mean, residential housing permits have turned down recently. Maybe if you could touch the current development, that would be appreciated. And the third question would be on your further business development pipeline. You mentioned a couple of smaller bolt on acquisitions. However, if I recall correctly, your 2020 vision of plus 600,000,000 EBITDA would also imply, let's say, a larger acquisition? Is there currently something in the pipeline or, let's say, project that could materialize anytime soon? And in which region would you try to become more active on the acquisition front? Thank you. Right. Well, I will focus on your last question on the M and A and then on The U. S. Willy will comment on the, I would say, the volumes. On the volumes, you're quite right. It is we've seen a good volume growth in most of our European markets in clay building materials, but that's, of course, offset by volume decreases in pavers, ceramic pipes and also in plastic pipes. Very clear. Okay. But there must have been some very sharp declines then because given the significance of the clay products sort of bricks, the pavers and pipes must have come down quite drastically? It's not double digits, but it's also a question about how you weigh volumes in the total picture. Yes. That's, of course, the difference. Rest assured, it is none of them is in double digit region. Okay. Thanks. To The U. S, I can only confirm what I said earlier. We believe that The U. S. Housing market will grow this year again by about 10%, especially in the regions where we are active. And also the Canadian market, especially in the Ontario area, shows good signs of strength. I remain with respect to The U. S, honestly, coming what's coming after the elections and with the new president is going to be then, I think somebody I've knocked my glass ball in front of me, what's going to happen there. But generally speaking, we remain positive about The U. S. Housing trends should be our democratically. We need the houses in The U. S. We are now building also in our areas, again, more with the brick facing facades. So here, again, also the positive signs remain intact. When we go to your last question as far as M and A activity is concerned, let it put me in such a way. We have now focused very, very thoroughly on improving our portfolio, adding in markets where we can quickly create value and have a very good payback like we have done in Finland, like in the Eastern European one and with the paper plant in Austria. So you will see us move very cautiously, very focused on certain targets that we view important for our company. Willy has explained to you our high degree of discipline when it comes not only to the balance sheet, but also on the financing. And we obviously, as a group, will focus on this very thoroughly in the months and years to come. When you talk about our, call it, midterm, long term target 2020, obviously, a group like Vinavergne, if we continue on our growth path, we will come across opportunities, but not this year and not next year when we talk about M and A activity. And then we will clearly develop our focused approach again in order to strengthen our position in the European market where we are active and in The U. S. Market. However, let me say one thing at this stage. You have seen us moving from a production oriented company in the last years to a more market and more customer driven company. You see it with our pricing, with our innovation. And this will be the key drivers in the next coming years. So, Wienerberger will certainly shape more and more its approach to market and being very close to decision makers and therefore focus thoroughly on the distribution front in order to improve pricing and also the margins in the product segments that we are active. That's our key focus for the years to come. Okay. Just one follow-up question on The Netherlands, where you said that due to the Brexit decision to leave the EU, there are some spillover effects, and that's why you lowered your growth expectations for the Dutch market. I mean, this mainly or is it driven or influenced by other competitors that were servicing The UK market that now also try to address the joining market, so I. E. Shipping from The UK to The Netherlands like you did when The UK market was booming, shipping from The Netherlands to The UK? Or if not, could you provide us some color what is the reason behind the lower growth expectation? Well, it's nothing to do with competitive landscape or so. This is a very stable one in The Netherlands already for a decade. Recall that we had obviously very low market activity there, people know how to operate their plants. And so it's nothing to do with this or market share shift, nothing at all. We see only that, obviously, the there was a high degree of optimism in the Dutch market at the beginning of this year. And if I may say so, spillover effect is much more a psychological one than something material because, obviously, people are a little bit more cautious, I would say, waiting a little bit more on certain decisions. And therefore, the whole year will turn out a very positive one for the Dutch market, a very positive one with good growth rates. I mean, you look at the growth rates, it's actually very high for construction market in new residential housing, but it is still a little lower than originally expected. And this is to be seen under the light that people probably have lowered their enthusiasm a little bit after the referendum. There's general weakening in the consumer confidence because The Netherlands are a big export market, not on bricks, but on other materials into The U. K. And that's what is hampering the confidence a bit in The Netherlands at this moment. Okay. Thank you very much. The next question is from Florence O'Donnell of Davy. Please go ahead, madam. Hello. Thank you. Just one for me actually. Sorry, going back on the whole UK side again. I was just wondering, can you help us on how much of your brick revenues that you generate in The U. K. Are via the export channel that are actually imported into The U. K. From your European production? No. No. Sorry, Florence, but that's That's okay, Willy. And just I suppose just Yes. We take a fair share of the imports into The U. K. Sure. Okay. And just on that, I know you said earlier on about your hedged out pre Brexit rates. Does that unwind looking into next year? Is it a possible challenge as we look into 2017 given what's happened with Sterling more recently? Yes. That's great. Thank you. And it will be the same effect as the Sterling, yes. The next question is from Samik Betts of Jefferies. I've only got one left as well. You're referring some of the statements to the wet weather in June. Is there any way you can kind of quantify what that might be or guide? I mean, companies talk about sales in April and May and then a step down in June or volumes. Is there any kind of guidance you can give us as to what impact that might have had on Q2? Thank you. Very difficult, Mike, to really to quantify that all over the market. We know that especially Benelux, UK, parts of France have been hit by very strong rain. So that definitely has hampered our roof tile sales. And for some of we heard from some of the markets also comments that, especially on the facing brick side, it was very difficult to start breaking up and then but it's difficult to see how much of that is really quantifiable and also in a way that we could communicate it. So I'm sorry for that. Would love That's to know it as well, so understood. I mean is the expectation that, that will be made up in the remainder of the year? Is that the way you look at it? Obviously, it depends on the weather. But if we just get normal weather, is it potentially possible for the market to make that catch that up? I doubt it's really this catching up is happening. You still see that there is, I would say, a reluctancy with a lot of construction companies to hire additional people. So they work along what they're doing. So I will I do not see really a big push there up, certainly not in the summer months because remind you, July, August typically in those countries are holiday months. So if we see something, the spillover would be rather in, I would say, probably in the fourth quarter, it's something like more realistic because the rest is booked, the rest they are busy with. And they've not I've not heard any of the countries where they shifted their holidays and where we have seen a different pattern in deliveries either. Understood. Thank you very much. The next question is from Mr. Daniel Porter of UBS. Please go ahead, sir. Good afternoon, gentlemen. Just a few from me actually. Can we just go through a little bit of an EBITDA bridge very helpfully in the past you've given that before. If we're assuming that we're sort of getting nothing on volume, process sort of dropping through about $15,000,000 or so, can we just talk a little bit about the cost tailwinds that you got through the first half as well? And any restructuring benefits that you got through from the restructuring undertaken last year? I believe there was a couple of loss making plans that were closed. Could just guide us through what might have been the EBITDA benefits of those? Okay. The main effects are really on the pricing that has come through. A little bit of volume effects and then again, we have to be careful not to go into too much regional figuring out. But as you can imagine, and yes, you can see in our figures, our margins are significantly up in Eastern Europe in bricks, where we, of course, we have a better utilization of our factories. On the cost restructuration on the twenty seventeen closures, there's not that much effect already in the first nothing in the first quarter and only marginally starting to kick in, in the second quarter. So I expect more of that to come in, in the second half. We guided, therefore, $3,000,000 to $5,000,000 3,000,000 to $5,000,000 okay. Yes, that's helpful. And then just on underlying cost as well in terms of energy costs, you're looking at $7,000,000 for the full year. What was No, the We have our guidance being 5 to $6,000,000 Now we're saying we get an additional 7,000,000 on it, which will probably be consumed by some of the capacity measures we will have to take, and we have to eat some of our fixed costs anyway because that's what's going to happen. So the All right. So 5% to 6% really becomes 12 to 13 Is that how we should be thinking of it? Yes, it is. Yes. Got you. Understood. Can I just ask to just in terms of your growth CapEx that you've undertaken and have guided to for this year, can you just talk about the benefit to EBITDA for 2017, what you might be expecting for that and what synergies you might be sort of anticipating to Sage as well? Yes. Well, part of the growth CapEx is, of course, a new factory that we are building on paving. So the benefit of that will only start kicking in next year. We have the benefits of the acquisitions itself, we said it's very small in the first half of the year. And I think it's around $500,000 in the first half. So it will probably go $1,000,000 in the second half and a tad more maybe in the second half of the year. So but not really that big. And we are still integrating and starting with the brick factories, and they have they're fine, they're operating, but we still have to get them integrated to the system. Yes. Okay, understood. And then can I just ask about inventory as well? You just touched earlier that in The U. K, you're looking at sort of managing your inventory position there a little more through the second half now. Is it fair to assume that over the last two years, you've had fairly big inventory builds in The UK just in anticipation of stronger growth? Should we be thinking about a fairly significant unwind in the inventory position there in light of that? And then just how does that sort of factor into your thinking in terms of cash and net debt for the end of the year? No. I think we will move down our inventory a little bit in The UK, but I see our inventories growing alongside with the growth that we see in other markets. It's question of balancing out. And we are precautious precautiously taking the measures now in The U. K. To slow down the production, but we will see how the market evolves, and maybe we'll jack it up again. So this is just really, I think, good housekeeping and just do it that way. Yes, just being prudent. Understood. Okay, thank you very much, gentlemen. The next question is from Tobias Luskamp of HSBC. Please go ahead. Three questions, please. Firstly, you showed some improvements in the operating cash flow. Is it mainly inventory linked or is there something else to it? And is that sustainable improvement that we should see for the full year or will that reverse in the second half? Second question that I have is basically, can you remind us on the share of piping and clay building product sales in North America? And finally, my part of question on The U. K. I mean, you have previously said that Q1 was flat, Q2 was down. Is it for the market? Or is it for your sales, including, let's say, negative destocking effect? Cash flow effect, the majority of that is, of course, coming out of our stocks, which we are managing down. And I think that's only the reflection of more looking at also our pipes, not only of The UK, because it's not like we have we also look because we know we have less market activity in our piping activity. We have also managed down the stocks over there. So it's mainly on that part as well that we've improved. If you take it on turnover base, but that's, of course, always dangerous because you're comparing two different product and product groups, it's 20%. 20% is pipes? Yes, in turnover. And then in terms of profitability? That is that's the two detailed granular information that we don't like to give. The majority of the results come out of the brick. And you had one other question on On The U. K, just to clarify on when you said the first quarter was flat, second quarter was down, is that basically for you how the market behaved? Or is it your sales and that already includes some destocking effects? That was our sales, but did not yet include any destocking effects because that's only starting in the second half of the year. Just want to clarify, so the destocking I thought so that your destocking, when I thought about the market has destocked from, let's say, second half okay. Because we did not destock basically in the first half of the year in The U. K. We just had the normal running part. How much of that is related to the destocking? I can't really I can't tell. Okay. No, all right. That's fine. Thank you. The next question is from Ami Galla of Citigroup. Please go ahead. Thank you. I just have a couple of questions, please. Firstly, in The UK, can I ask, do you have any when do you have the pricing negotiations with your customers next? And for next year, could you think of passing on the costs from the FX headwinds for the imports component? My second question is if you could give us some color on the cost moves input cost moves in your pipes division and what do you expect for next year there? You will appreciate if I say the following at this stage, and it's not only true for The UK, but for all of our countries. We usually get together our pricing and strategy as far as pricing is concerned in the later part of the third quarter into the fourth quarter of every year for the following year. And then we thoroughly investigate the market, the potential for market growth or decline and how we position ourselves against competition, not only in our products but also potential substitution products. And therefore, it is at this stage much too early to make any judgment call with respect to pricing in certain regions of Wineberg. However, I can tell you the one thing that as you have seen over the last years, we always have been very, very clear that we want to put on inflationary cost increases to our customers if possible and if the market allows it. So we will clearly focus on this also in areas like the facing rig market. But when you look at exports and imports, this is a different story because obviously you have transportation costs, you have currency fluctuations, etcetera. Actually, these are things that the client as such or the customer doesn't want to see because he buys locally and obviously pays locally for it. So we will, as I said earlier, investigate thoroughly the situation. We are not there yet. It's too early. We will see it at the later stage of the year. And your second question was related to input cost pipes? Yes. Yes. There were actually we've seen a bit of fluctuation in the PVC price. I think it's actually going up a little bit, but not really to an extent that we believe we are not able to pass on with the usual delays and some of the price increases there. So it's not really spikes back and forth. I think it's that is that part is fine. And can I also have a follow-up on The UK again? If sterling remains at current levels, would imports for next year, would imports be margin accretive to the group at all if you import product to The UK? We've imported brick into The UK in the years at the height of the financial crisis during 02/2012. The products that we sell in The UK, which are made on the continent, are an integral part of our product offering in The UK because they cannot be made in The UK. So we will continue on selling them. We will see, as Jaime said, how we can deal with the margin and the currency pressure on the margin. To answer your question clearly, yes, we make margin on this quarter. Thank you. There are no further questions at this time. I hand back to Mr. Oefner. Ladies and gentlemen, thank you very much again for dialing in today. As the final point for today's call, I would like to remind you of our Capital Markets Day, which we will host on September 15 in Graz, Austria. If you have questions about these events and require further details or want to register, please get in contact with the IR team. Thank you very much for dialing in. All that's left to say for today is have a nice day, and talk to you again at the latest in our Q3 conference call on November 8. Thank you. Bye bye. Ladies and gentlemen, this concludes the Wiener Berger conference call on the results for the first half year twenty sixteen. Thank you for joining, and have a pleasant day. Goodbye.