Wienerberger AG (WIE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am [ Franci ], your Chorus Call operator. Welcome, and thank you for joining the trading update Q1 2022. [Operator Instructions]. I would now like to turn the conference over to Daniel Merl. Please go ahead.

Hello, and good afternoon, ladies and gentlemen, and a warm welcome to the investor call on the context of our Q1 trading statement published today. Our Board representatives are our CEO, Mr. Heimo Scheuch; and our CFO, Mr. Gerhard Hanke. They will lead you through our call today, discussing the key drivers of our strong performance in the first quarter of the year. Afterwards, as always, we are ready to take your questions. I will now hand over to Mr. Scheuch.

Thank you, Daniel, and a warm welcome and afternoon from Vienna. We have obviously 2 good pieces of news this afternoon from Wienerberger. First of all, I'll start with a personal one. Daniel has accepted to be our Investor Relations Manager and from now on is also permanently responsible for Investor Relations at Wienerberger and your first sort of contact point to Wienerberger. The second one, and this is also positive for Daniel, we started the year with a historic performance at Wienerberger. It's our best quarter ever and a very strong first quarter for Wienerberger in a very volatile and instable environment, I would call it, from a geopolitical point of view, from an economical point of view, but we have proved to have a strong, resilient business model, as we have explained to you all over last year and have explained what we are doing on a lot of fronts, and I will elaborate in a minute on those. They have certainly been the key pillars for the success that we were able to put in place at the beginning of this year. Wienerberger has seen strong growth, strong growth on turnover point of view, with more than 44% plus to a nearly EUR 1.2 billion turnover in the first 3 months. This is due to a strong demand that we have seen throughout the whole regions, meaning North America, Europe, and in all product segments, infrastructure, renovation and new build. So we have seen good demand levels throughout the whole business, and this is due to the fact that we obviously have worked hard on the innovative product front and have put a lot of new products in the marketplace. Secondly, also the solution business is picking up in all of our markets. And thirdly, I think it's important to note that Wienerberger is a reliable partner for all of our customers. We have been producing through the winter months, continuously, being available for our customers and ensuring the steady supply of products to infrastructure projects, renovation projects and new build projects. And we have certainly taken advantage of the fact that some of our competitors, direct ones in the roofing and in the brick segment, but also indirectly with other products or competition products have actually shut down due to the high inflation costs and to the lack of availability of some raw materials and key input factors. So certainly, a lot of demand has come our way also in -- expectedly to us in the first 3 months of this year. So strong top line growth and obviously very satisfactory. Also the EBITDA increased by 112% to EUR 225 million in the first 3 months. That's the highest EBITDA that Wienerberger has seen in the first quarter in its history. And this, as I said, is certainly due to the strong demand levels, the proactive pricing policy. We have seen the inflationary cost increases coming. My colleague, Gerhard, has explained it also very much in detail at full year's call, investor call. And from the beginning of this year onwards, we have set up prices in all of our product segments and markets, very consequently and very thoroughly and that this obviously helped with respect to pricing and to improve and get our margins on the satisfactory level. Keep in mind that when we compare this with the years before, pricing was always done in the way that we start with the price increases at the beginning of the year, and it takes about the first quarter to implement them. So from March onwards, we have a steady pricing environment. This year, we were more, as I put it, consequent. So it started already from January onwards and therefore, the positive impact also from the pricing side. So for both elements, price and volume, we have seen a good trend in the first quarter. Secondly, also important is, I think, that we have been able to see that the internal efficiency programs, the performance enhancement measures being implemented thoroughly and bring also the positive impact on the performance of the Wienerberger Group as far as EBITDA is concerned. So all in all, a very good development. In North America, here, we have seen obviously also the positive impact of the Meridian acquisition. It contributed about $100 million in turnover to the U.S. business. And we have seen also positive inflow from pricing and also from -- already from the synergies because our North American management has been very fast in integration and getting also the cost benefits out of this acquisition very quickly. Also in Europe, we have seen a steady supply in raw materials and energy over the third -- over the first 3 months. So no problems on the supply chain side, none in the clay business, in the Building Solutions business and none in the Piping Solutions business. We have seen that as far as plastic granular prices are concerned, we have had very strong inflationary cost increases, but we could manage on the price front again and have been able to put prices up in the necessary amounts in order to keep margins or slightly improve them also with respect to our product mix in the piping segment. As far as availability, and I will make here a point on energy, I'm fully aware and we all at Wienerberger are following this very closely, that due to the very unfortunate and regrettable war in Ukraine that there's a lot of speculation when it comes to energy, especially gas and a lot of talk about availability. We, at Wienerberger, can confirm that for the first 3 months, there was no issue on availability in none of our markets and in none of our plants that we operate in. So we had a steady flow of energy. By the way, I can also sort of put the facts here on the table that there was more energy available in Europe in the first 3 months this year compared to last year. So it's obviously unfortunate that there's so much negative talk about a lot of things these days, and there's a lot of pressure on the price and a lot of speculation. This is certainly not very positive. But I can ensure you, and we have been very proactive in this field, that Wienerberger has ensured its supply with buying forward nearly 90% of our needs with respect to natural gas. So we are here fully -- nearly fully covered. So the rest, we buy on the spot market. And here, you have seen obviously also a high volatility in the first 3 months going up to peaks nearly reaching EUR 200 and then down again under EUR 100. So a lot of volatility there. And therefore, we -- as I said, we have been covering ourselves already years back and have this proactive buying policy that we implemented. Nevertheless, I think that with this strong first quarter, I make from the point of visibility, a short comment on the second quarter of this year. We see the demand levels continuing into the second quarter in all of our markets. Just recently been traveling to all the Eastern European countries and working with the local management on the whole contingency plans as far as gas is concerned and the availability. So I can say that for the next 3 months, we are of the opinion that we have enough gas availability to have our plants running and to be able to satisfy the increasing needs with respect to our products. Keep in mind that we are also, from a company perspective, in a lot of countries, system relevant, as I call it. So we provide infrastructure products, we provide for water supply products and also for building. So obviously, we are considered as an industry that is important. And therefore, we work together with the state and its regulators in order to ensure supply. As I said, our supply contracts are with international companies. They are well-known stock-listed Western European companies that provide the gas. So obviously, here, we have no reason to believe that they are not able to supply. And again, the contingency plans are very different from country to country. We are operating in 28 countries. From our perspective, the most affected ones are some of the Eastern, Central European countries that are strongly dependent on gas coming from Russia. And here also some countries are developing already new concept, like Poland, to ensure supply from other regions, like Norway, like liquid, gas or like other resources coming into their country. So here, again, there's a lot going on right now. So I wouldn't say that we should be all worried all the time and believe the media with all its negative propaganda. I think here, again, we are vigilant as Wienerberger. We are agile when it comes to proactive measures. But as I said, for the second quarter, I remain positive that we have the necessary energy to produce because we need it also. There's a strong demand level in the market for the second quarter as well. From a pricing perspective, the inflationary cost increases that are more in the range of 7 and above percent, more actually. If I look at Gerhard, he shows to me more than that actually. And he is absolutely right. We're approaching, what, 10% in certain areas, and he will elaborate in a minute on those. But again, we covered this with our price increases and are, here also, I think, on top of things when it comes to the pricing policy. So all in all, we start well this year. We are positive for the second quarter. For the whole year, the visibility, especially under the circumstances, and you will appreciate that we are under extraordinary circumstances when it comes to this unfortunate war and its effects, therefore, geopolitically speaking and regionally speaking, it's very difficult to make here assumptions. There's a lot of scenarios, but any scenario that you put on this table will be probably in a day or 2, an old scenario again. So we -- from Wienerberger, we clearly say we are in a position to keep our guidance in this range of EUR 750 million to EUR 770 million for the whole year, and we will certainly update it towards the middle of the year when we have a better visibility on all the markets with respect, especially to the energy and its effect on the worldwide economy from a geopolitical perspective. So I think I've touched upon a lot of subjects that are important. I just -- before we open the discussion, please appreciate that this is a trading update. We have our full earnings call for the first quarter on the 12th of May. I know that you have a lot of burning questions, but I would kindly ask you to bear with us that we have the full set of numbers available then for May, and then we can answer them. But this is the general perspective and obviously if I may say some words also on certain economies, we see strong demand levels in infrastructure and new build in the United States and Canada, a very good and sort of trend in Western Europe, in all of the Western European economies, in Central Europe as well. Obviously, their interest rates are going up. So I would say in a certain part of the market when it comes to multi-residential houses and project developers, we will see probably a softening of the demand levels, especially in some Eastern European countries, but on the 1- and 2-family house, I think we see a good trend for the rest of the year. So this is my introduction remarks for the discussion. And obviously, you're more than welcome to ask us questions now. Thank you.

[Operator Instructions] The first question is from Adrian Cattley from CapeView Capital.

Can you hear me okay? Hello, can you hear me okay?

Yes. Go ahead, yes.

So yes 2 questions, please. So one, just on the demand side. Do you have a feel for sort of how much there was sort of demand pull forward into the first quarter from the rest of the year because of price increases or anything else? And then I guess sort of secondly, related to that, in terms of sort of the competitors who might be slightly stronger...

I just interrupt you for one second. I'm awfully sorry. The line broke away and I didn't get the first part of your question. Could you please, and I do apologize, repeat your question?

Sure. So the first question is just on -- obviously very good numbers, I'm very pleased. But do you have a feel for kind of how much was sort of demand pull forward rather than just sort of underlying good growth because of I know people wanting to buy in front of maybe the next set of price rises? And then sort of secondly, and related to that, do you have a feel for sort of how much of the supply in the different markets has sort of been curtailed by unhedged players being unable to produce and when, if any time, do you think they may come back?

I fully understand your questions. I mean they are definitely important. At this stage, it's very difficult to tell because obviously in a market that is driven by a lot of, I would call it, propaganda, fear and instability, it's difficult to really understand who is putting orders in, in the sense of protecting him- or herself against further inflationary cost increases, who is actually coming in because he or she can't get the products from competition. It's a little early for us to say. But I would say, we had a very good base trend, and we have continued to have it in the market and with respect to our product assortment and offering. But obviously, when you see the numbers and the strong growth, especially in the first quarter, it comes from -- also from quite a substantial perspective from also these effects, as you call it, so either ordering in advance of probably shortages or considered shortages or estimated shortages or delivery problems for the rest of the year. And the rest is obviously when you have no availability with respect to other competitors. But I can't give you a percentage point at this stage, it would be only guessing, and I don't want to do that.

Of course. And then I suppose just a second question, just you've called out the North American business, I guess, in particular, Meridian being strong. Are you running sort of ahead of your expectations in terms of delivering the operational synergies? Or is that as planned, and it's sort of the strong demand has been the benefit on top of that?

No, I can confirm to you that we are running ahead of our own expectations, that management has been very efficient in putting these measures in place. Integration is running very well, and we are running full speed in North America with our operations.

The next question is from Miro Zuzak from JMC (sic) [ JMS ].

The first one is regarding the market environment, in general. I have heard from industry sources that other classical brick and roof tile producers have partially switched off production because they have not secured gas supplies, and they're just no longer capable of basically running their plants profitable, so they stopped producing. Could you please comment on that? That will be the first one. And if okay for you, I take them one by one.

Yes, sure. And I can confirm this. Yes, you are right. There are some colleagues of ours, small ones, midsized ones, and even in -- within bigger groups, where certain sites have been on a temporary standstill, especially in the winter months. That explains, as I said earlier, also the strong demand towards our products and that we were able to ensure not only the availability of products, but also from a perspective of steady and customer relationship and good supply, we were there at the right moment. We assume that some of these players will come back in the next weeks and months because obviously with a certain easing on the supply side, on the energy front and obviously probably some dropping in spot prices, they will be back. But obviously, we can't say more because we are not -- we have no more insights than you in their sort of decisions and the strategy as far as their businesses are concerned.

Okay. Second one would be on -- sorry, just a clarification. You mentioned 100 million from Meridian Brick. Is this U.S. dollars or euros?

U.S. dollars.

U.S. dollars, okay. And just to confirm, this is much, much higher compared to what you expected at the time of acquisition, right? You expected, I think, around 300 million per annum, now you're running on $100 million run rate, that's much higher.

It is a little higher than we expected. You're absolutely right, yes.

Okay. And as of Cork Plastics and FloPlast, what was the contribution this quarter?

It was certainly in -- from a perspective of expectations, within the range of our expectations that we have originally planned. But revenue-wise, I think somewhere in the range of EUR 25 million or so.

That's euros?

Yes.

Okay. And just the last one, and if you don't want to comment on this, I understand, but could you please give us a bit of an indication about the split between the 3 segments in terms of organic growth or in terms of numbers, just an indication.

Normally, yes, I would sort of say and kindly ask you to wait for our full earnings call so that we -- the final numbers are not ready yet and Gerhard and his team needs to prepare that. But you can assume that the growth rates organically are strong and in line with obviously when you take our historical sort of performance that we have in the company, so more or less in line with those.

[Operator Instructions]

If there are no more questions, I mean, we are available for you guys, the whole team, and Daniel will answer your question when you have them. I appreciate your interest in our company and at the trading statement, the trading results for the first quarter. And as I said, Daniel, we invite everybody for our full quarter earnings call on the 12th of May.

Exactly, at 2 a.m. CT -- 2 p.m. CT, sorry, as always.

Thank you very much.

Thank you.

Thank you.

Ladies and gentlemen, this concludes the conference. Thank you for joining, and have a good day. Goodbye.