Group revenues up 32% to €507.3 million, EBITDA up 51% to €83.9 million, continuation of successful expansion and investment course, goal above-average growth in earnings compared with the building materials sector.
Wienerberger AG started the 2007 Business Year by recording impressive results for the Q1. Sound development in the construction environment across Europe and the mild weather supported an increase of 32% in revenues to €507.3 million and 51% in EBITDA to €83.9 million. This growth was realized in spite of an earnings decline in the USA, which resulted from a slump in new residential construction that was intensified by a severe winter. „We plan to continue our successful expansion course in 2007 with further growth projects as well as the optimization of production capacity. This strong start in 2007 has demonstrated that our decision to strengthen the Group’s geographic portfolio was correct”, commented Wolfgang Reithofer, CEO of Wienerberger AG, on the results announced today.
Sound growth above all in Europe
The clear two-digit growth in revenues and earnings for the Q1 was driven by solid demand on nearly all European markets. The strongest development was recorded in Central-East Europe, but higher earnings in Central-West Europe and sound market development in North-West Europe also contributed to an improvement over the comparable prior year period. The downturn in new residential construction in the USA and the weaker US dollar triggered a decline in revenues and earnings in this segment, despite the first full- year consolidation of Robinson Brick.
Increase in EBIT and positive financial results
EBIT rose by more than 100% to €39.1 million. This improvement was supported by higher sales volumes as well as price increases and, above all, the better utilization of production facilities and lower costs of idle capacity. Financial results for the Q1 were positive at €3.0 million (2006: €9.5 mill.) due to a book gain of roughly €10 million on the sale of securities as well as an increase in income from associates. The tax rate declined to 21.0%, compared with 24.7% for the first three months of 2006. Earnings per share rose from €0.08 in the Q1 of the prior year to €0.39 (after the deduction of the coupon for the hybrid bond).
Improvement in equity ratio through hybrid bond
Net debt fell from €1,159.8 million in the Q1 of 2006 to €764.7 million for the reporting period, while Group equity rose from €1,591.4 to 2,098.9 million. „The issue of a €500 million hybrid bond in February of this year and the resulting inflow of funds - which we used to repay liabilities - strengthened our equity base. This will give us greater flexibility for future growth”, analyzed CFO Willy Van Riet. Since IFRS require the hybrid bond to be treated as equity, the coupons are not shown under financial results on the income statement but as part of the use of earnings, and are therefore payable from profit after tax (similar to a dividend). The calculation of earnings per share is based on profit after tax as in past periods, but now also reflects the deduction of the coupon.
Record results in Central-East Europe
Central-East Europe reported the best results of all segments for the Q1 of 2007 with a plus of 111% in revenues to €156.5 million and 311% in EBITDA to €39.5 million. „Wienerberger recorded excellent development in this region during the past quarter. In particular, strong demand in Poland, the Czech Republic, Romania and Slovakia supported a massive increase in sales volumes of bricks. Price adjustments to offset higher costs also made a positive contribution”, explained Johann Windisch, member of the Managing Board with responsibility for Central-East Europe and the USA, on business in this segment.
Germany and Switzerland with positive impact on Central-West Europe
The Central-West Europe segment also reported sound results, with an improvement of 41% in revenues to €87.3 million and 72% in EBITDA to €6.7 million. Heimo Scheuch, member of the Managing Board with responsibility for Germany, reviewed this development by stating, „In Germany, the companies acquired during 2006 are now consolidated for a full year. Furthermore, optimization measures and the better utilization of capacity through increased exports to Belgium and Poland had a favorable impact on the development of business.” The market situation in Switzerland was better than expected because of the mild weather and also had a positive influence on results. Italy reported a slight decline in earnings from a high level.
Growth in North-West Europe
In the North-West Europe segment, Wienerberger recorded an increase of 16% in revenues to €199.4 million and 14% in EBITDA to €37.4 million. „The growth in sales volumes of hollow bricks and facing bricks exceeded expectations, above all in Belgium. The Netherlands also made an important contribution with substantially higher revenues and earnings. France registered increases across all product groups, while Great Britain reported stable revenues and a slight improvement in earnings over the prior year”, reported Heimo Scheuch, the member of the Managing Board responsible for North-West Europe.
Market conditions remain difficult in the USA
In the USA, revenues declined 8% to €73.5 million and EBITDA fell more than 50% to €6.7 million. Johann Windisch explained this development by adding, „As expected, new residential construction dropped roughly 30% during the first three months of this year. High costs of idle capacity resulting from the underutilization of production facilities and the weak dollar also had a negative impact on earnings in this segment.”
Steady and strong development expected for Europe
Wienerberger expects positive development for the remainder of this year. Strong demand is forecasted above all on brick markets in Eastern Europe, especially Poland, Romania, the Czech Republic and Slovakia. Sales volumes in France and Belgium should also remain strong. However, new residential construction in Germany still shows no signs of lasting recovery. Wienerberger expects market development in Hungary to be reserved, despite the good start recorded earlier this year. In the USA, there is no indication that the current trend could begin to reverse: the National Association of Home Builders (NAHB) forecasts a further drop of 20% in new housing starts. After identifying the first signs of this development during the past year, Wienerberger began to actively counteract the trend by further optimizing its plant structures and relocating production to more efficient „mega plants” as well as increasing the focus on direct sales activities.
Continuation of growth course
„Our main goal remains unchanged - we intend to strengthen our market positions through the steady pursuit of our growth strategy. Including the planned acquisition of Baggeridge, we want to invest at least €400 million this year. These projects will be financed primarily from free cash flow. We will also continue to optimize our production capacity, especially in the USA. After a very successful start in 2007, I am confident that we will again be able to again increase earnings by an above-average rate compared with the building materials sector. Even though one needs to consider, that the Q1 has little predictive value for the full year in the building materials industry”, added Reithofer in conclusion. (marketwire.com)