Wienerberger AG ($WIE)

Ladies and gentlemen, welcome to today's conference call of Wienerberger's Q1 2026 Results. I am Judith, your operator for today. [Operator Instructions] The conference is being recorded. [Operator Instructions] And with this, I hand over to Therese Jander.

Good morning, everyone, and thank you, Judith. Warm welcome to our Q1 results call. My name is Therese Jander, and I'm pleased to be hosting this call today from Vienna, our headquarters. And I'm joined here by Dagmar Steinert, our CFO. We will begin with a brief presentation of the key developments and our financials for the quarter, and then we will open the line for questions. So with that, I will hand over now to Steinert.

Yes. Thank you, Therese. Good morning, everyone, and a warm welcome from my side as well. Our CEO, Heimo Scheuch, is still recovering from an infection, and therefore, he is not participating today. So yes, let me start with the presentation and jump directly into it. And our first quarter is not a surprise at all. The soft start in the year is fully in line with our expectations, and it was driven by weather-related weakness, especially in January and February. Very important, we saw a clear recovery already in March and volumes picking up and our performance was back to prior year's levels. At the same time, of course, we are operating in an environment of increased geopolitical uncertainty. And of course, that's related to the conflict in Middle East, and that is heavily impacting visibility. Under these circumstances, we reiterate our full year guidance, while, of course, we see that visibility remains limited. But of course, we focus on execution, particularly in integrating Italcer, where we had the closing by the end of April and our disciplined cost and margin management. Now coming to our numbers. Our revenues are down by 7%. That reflects the soft start into the year and as you can see, our volume development, the market was down by 6%. Our operating EBITDA is close to EUR 100 million, which is significant below previous year's levels, but we've already seen a clear recovery in March. And let me just repeat it, it's not a surprise. We expected that. Important is maybe to mention that the first quarter 2025 was a strong quarter, so we compare a soft start in the year with a very strong quarter of previous year. So it's more like a transitional quarter rather than an indicative for the full year performance. Let me now come to the market conditions, starting with Eastern and Central Europe. As you can see, our volumes are significantly impacted by, let me say it again, the severe weather conditions early in the quarter and housing starts remained flat year-on-year. The renovation market was also temporarily affected by the weather conditions and especially in the roof segment. On the other hand, our infrastructure market in that region remained broadly stable. So overall, the region shows a mixed picture with selective recovery. For instance, Poland is a good example where the weak start was mainly weather-related. Underlying demand remains intact. In the Czech Republic, we saw early signs of recovery in permits and starts, but on the other hand, very aggressive competition continues. Austria and Hungary, the demand remains subdued, but of course, with affordability constraints and therefore, it's a mixed picture. Turning now to our region, Europe West. There, again, we see a mixed picture. And of course, volumes overall are down. Housing starts remained at a low level, while the renovation-driven demand was solid in that region. Infrastructure and energy transition supported overall our demand. But of course, the bad weather was the same issue in that region. And to give you a little bit more of a flavor from some countries, Germany was a very soft market in the first quarter and construction activity was still at a very low level, although we are expecting early signs of recovery. In the U.K., the situation continues to deteriorate, and we see declining construction activity and weak consumer confidence. Ireland, on the other hand, is positive. We see public investments on a better level. And yes, Netherlands is showing signs of recovery. And France is still a mixed picture, but we expect an early recovery as well. Belgium, for instance, was quite stable. Overall, the same picture, January and February soft and March far better. Coming now to North America, the North American market, and that was the most impacted region in our first quarter. We see a double-digit volume decline, and that was, of course, driven by the severe winter weather and as well weak new residential activity. The new construction activity remains subdued. Single-family market is stabilizing, but the multifamily market is at multiyear lows. The mortgage rates in North America remain at a high level. On the other hand, our roofing business benefited from a strong backlog and that allowed some more solid production volumes. In the piping business infrastructure, market remains somehow positive, but of course, due to the weather, we've seen there a strong volume decline. And in Canada, the situation is even more challenging. So coming now to some acquisitions. We bought the NEWS Group, and that is an activity with a turnover of around EUR 20 million annually, and we had a closing by the end of April. The NEWS Group that will strengthen our position in water management in the water management segment. It's a very attractive niche for us, and it's a growing market. It's a perfect strategic fit, and it complements our infrastructure and piping portfolio. It's a small transaction, but long term, we see there a big growth potential. Coming now to our recent acquisition, Italcer there as well, we had closing by the end of April. And I just would like to repeat a little bit to finance that acquisition, we don't need a capital increase. We have a strong balance sheet, and we will finance it by ourselves. We have a clear road map, integration, deleveraging, and of course, next year, we have with this call option, the opportunity to get the full ownership. With Italcer, we enter the high-end tiles market. It's strong in the renovation segment. And of course, we see synergies which will rise. And on the other hand, Italcer is active in the facade market, and that will even turn our synergies, which we see on a quite high level. Italcer in total is a company which is at the high-end, has high margins and is a strong multi-brand -- has a strong multi-brand position, not only across Europe but also in North America. Turning now to our numbers. Starting with revenues and EBITDA. Our revenues, as already mentioned, are down by 7%. Operating EBITDA even further, it came in at EUR 97 million. That is far below the previous year's number. But to remember you, the first quarter 2025 was a very strong quarter. The key driver for that, of course, is the reduced volumes we have seen. And here, again, March far better compared with the soft start in the year. Having a look at our revenue and EBITDA bridge, as you can see, of course, volume driven, we have a negative organic growth. So organic growth, our revenues are down by 6%. We lose a little bit on the currency side. And regarding our operating EBITDA, again, you see quite significant negative organic growth. But that's all volume driven and related to the soft start into the year, and that was already expected when we published our outlook. So it's not a surprise at all. We have seen in the first quarter overall a cost inflation of 2%, and that is, again, mainly driven by labor and energy cost. And we don't see in the first quarter more or less any impact of the conflict regarding the Middle East. That will be visible in the second quarter and of course, rest of the year. Our cost inflation with 2% is somehow moderate. And on the energy side, as you know, we have our fixed positions in not only natural gas, but as well, of course, in overall in energy. And there, more or less now 80% of our needed volumes are fixed. Therefore, we are there in a quite good position. We remain to focus on, of course, cost discipline and operational excellence. We are still working on optimizing our production. And of course, we are driving an active margin management to overcome all the pressure we see in the running year. Coming now to our regions, starting with Europe East. Revenues are down by 7%. That is in line with the group development. Operating EBITDA quite weak because it's even below the decrease within the group. There, we had not only the decreased volumes, what we've seen, but we've seen on the cost side, a higher inflation than regarding the group average and the volume decline hit all segments, all markets in the Eastern region, especially the pricing in that region was under pressure. But towards the end of the quarter, we are seeing here recovery as well. Western Europe, our, let me say, most stable region in the first quarter, revenues only down by 3% and operating EBITDA by 14%. As already mentioned, we've seen quite a strong renovation demand and that, of course, supported the performance of that region. Energy transition continues to drive our roof and piping demand. And the weakness was mainly in the beginning of the year from new build and, of course, the severe weather conditions. It's a mixed regional picture, but the most stable development in our first quarter. Coming now to our North America segment, that was the most challenging region because markets have been very soft, very weak and revenues are down by 21%, our operating EBITDA by 37%. As already mentioned, the very soft new build market with weak residential construction is still a topic in North America. And in combination with an ongoing pressure on prices in piping, of course, that's not a nice environment. The U.S. single-family market is stabilizing, but multifamily remains very, very low. And within North America, especially Canada, is more challenging than ever. With that, I'm coming now to our outlook. And just to remind you a little bit on our assumptions for the current year, we are expecting not a structural recovery in residential construction, flat infrastructure and renovation market. And of course, we expect that we cover the inflation, which will increase, of course, during the year due to the Middle East conflict, but price increases. But the Middle East conflict gives us as well a really limited visibility of the total year impact so far. We have mitigation measures already in place, and that's not only price increases. Of course, it's a strict and strong cost management with cost discipline. We have a strong execution. We are ongoing working on working capital management as well as having a focus on our CapEx and spending. And still the Fit For Growth program, which we implemented in autumn last year is, of course, in place and is running. And despite the high volatility and everything, we believe we are well positioned to deliver. And of course, we are supported by our mitigation measures. And with that, I would like to close the presentation, and I'm open to take your questions.

[Operator Instructions] We have Ephrem Ravi.

So firstly, could you quantify a little bit the volume recovery that you're seeing in March, maybe by region? I understand from your comment that your results were back to normal. Is it -- does it mean that the volume were stable in March? Or do you see a recovery? Do you have any -- also on the volume side, do you have any color on what happened in the month of April? My second question would be on the cost inflation. So I understand that you are hedged on gas and electricity, but you've got about 1/3 of your revenue, which is pipe, where costs have been historically correlated to PVC prices and oil price. When we integrate the recent move in oil price and PVC cost, what kind of cost inflation do you expect for 2026 at a group level? I can imagine it's going to be more than the 2% in Q1. And the third question would be on the magnitude of the price increase that have been announced. It looks like prices was relatively flat in Q1, so not much going on. What kind of action have you taken notably in the pipe business to recover the cost inflation? And do you see any traction on the ceramic business to increase prices in April or later during the year?

Okay. Thank you for your questions. There's a bunch of questions. Let me start with the volume. Overall, in March, we have in the whole group, middle single-digit volume increase and it's continuing in April. Looking into the regions, we see just March, we see a strong increase of volumes in Eastern Europe and Western Europe. So overall, in Europe, it's double-digit number. And we still have a decrease in North America. That is our weakest region so far. Coming to our like end markets, new residential, renovation and infrastructure, we see in March overall an increase. So that's a very nice development. Our cost inflation, the 2%, of course, for the first quarter will not be the number for the full year as originally expected because we will have an impact from Middle East, higher energy prices, but there, the impact for us is limited as we are fixed or most of the volume we need and just remaining volumes, we have to buy on the spot market. And prices, of course, for energy are going up and down. So it's highly volatile. On the other hand, we've seen in the first quarter a strong decrease in raw materials, plastics for our piping business. And due to the Middle East conflict, of course, that turned around, and we have a strong increase in plastic resin prices in the -- we will see it in the second quarter and ongoing. So therefore, of course, the development changes turns. So therefore, there will be a much higher inflation in the next quarters to come. And of course, we are increasing our prices. And overall, in, let me say, in Europe, we are talking about a middle single-digit number in -- regarding our infrastructure, our piping business, of course, we are talking about double-digit numbers. Does that answer your questions?

On the -- just on the cost inflation side, so we will see a much bigger cost inflation. Is it too early to quantify or maybe at least for Q2, is a number of something like 4%, 5% reasonable at the group level for inflation?

It's too early to quantify that. And on that there's a strong movement, not only, of course, on the raw material side, we have an impact on more or less every material we buy. We see higher logistics, higher transport costs. So therefore, it's across like more or less the whole P&L, and it's too early to quantify it. [indiscernible] we are working against it with price increases, which are already implemented and in place. And we are talking about single digit, but double-digit price increases, and it varies from country to country, of course. And for instance, in some Eastern countries, we are increasing our prices by 20% and of course, piping business, but it's across our whole business.

And do you have a view on the number that you mentioned that double digit for piping and mid-single-digit price increase for ceramics. Were those price increase announced in April? Do you have a view on how much of those announcements are being realized? Or is it again too early to say how much we will take?

No, that's too early to say it. Of course, we announced price increases, not all in April. We started at the beginning of the year. But of course, it takes some time until you see it in our P&L. And therefore, in the first quarter, there is not a big impact visible on pricing, but there's more to come. We will see much more in the second quarter and of course, in the quarters to come.

And to follow on that -- if you look at all the different parameters that you already know, how confident are you in your ability to recover the cost inflation related to the war? Is it one of the main uncertainty that you're mentioning in your press release? Or do you feel comfortable that the price cost dynamic could be neutral?

So far, we are quite confident. That's, of course, why we reiterate our outlook. On the other hand, I would like to point out there is a low visibility regarding the impact of Middle East. And therefore, we have to see how market develops. I mean we had a strong volume growth in March and April. On the other hand, there might be, of course, some advanced sales purchases due to expected price increases. So we have to -- we will see -- we will have a better visibility with the second quarter regarding the development of the full year.

So the question is more on the volume side, where it's unclear whether the mid-single volume -- the mid-single-digit volume increase that you see in March and April are prebuying or whether they reflect the better market. But on the price -- on your ability to offset cost inflation, you would say that there is -- you don't see a risk that competition prevents you to do that in a context where everyone is increasing prices. Is that the right way to look at it?

Of course, there is nothing without any risk. On the other hand, we are increasing our prices. Our competitors are increasing their prices. So that's absolutely normal operating business. And it depends now how the market develops and how big the impact of the Middle East conflict will be. I mean, so far, we don't have any bottlenecks in our supply chain and so on. But of course, it's possible that, that all turns into inflation.

And maybe if I may, a very last small question for modeling. What kind of EBITDA contribution do you expect from acquisition this year?

Well, in our EUR 810 million operating EBITDA is a number of EUR 50 million included for acquisitions for Italcer. And the NEWS Group, of course, is not included, but it's a very minor acquisition. It's more strategic with a big potential to grow, but the impact -- the positive impact we will see in the running year will be very limited.

We will move on to Anna Schumacher from BNP Paribas Exane.

So you mentioned at full year, you would implement cost savings of, I believe, roughly EUR 30 million this year. And you've mentioned you will increase that this year. I was wondering whether you could tell us by how much you expect that to be now? And can you give us some examples of what you'll be doing? And secondly, on M&A, given the more volatile macro and that you've announced two acquisitions, is your appetite still the same for more M&A this year? Or should we expect less?

Well, I will start with your second question regarding M&A and our appetite. My appetite is done because I'm looking at our balance sheet, and I have a focus on remaining or keeping a solid balance sheet. And therefore, of course, our ability to finance acquisitions with -- now with Italcer is somehow done. There might be another very small acquisition in the running year, but nothing medium-sized or nothing bigger because I want to keep our net debt on a -- for me, a solid reasonable level to have a leverage 2.2x, and we have a strong commitment towards our investment-grade rating. Regarding cost savings, of course, that is something which is an ongoing activity now for years. And with our like Fit For Growth program, we are streamlining our organization. We are getting like, let me say, more closer towards our customer and with all our, let me say, processes and operations. And that results, of course, in better performance, better processes and that saves costs. On the other hand, we are, of course, always looking at our production setup. We are bundling production sites. So we are going to taking out maybe one or the other capacity, but that will save costs, of course, but not resulting in as a burden for our customers that we are not able to serve them. On the -- another thing what we are doing this year, what I didn't mention so far is, of course, that we are going to sell noncore properties to support, of course, our cash flow. Does that answer your question?

Yes. Just on collection of this EUR 30 million that was roughly mentioned at full year, should we expect that to be a little bit more this year?

Well, the EUR 30 million, they are still well. It remain in place. And of course, we are trying to achieve already even more. But within the first quarter, it's too early to give you, yes, an updated number, but the EUR 30 million, that's definitely our commitment.

And we will move on with Julian Radlinger from UBS Limited.

So just a couple from me. So first of all, you've reiterated the EUR 810 million guidance, which after this Q1 means EUR 90 million more operating EBITDA year-on-year in the remaining three quarters versus last year or about EUR 40 million, excluding Italcer. So could you just elaborate -- I think you've touched on all the points already, but can you just elaborate what the main drivers for that year-on-year increase are now going to be, particularly if volumes won't be a big tailwind, and you still have that sort of locked in energy headwind that you've called out? And maybe related to that, if we think about price cost, so that was obviously negative in Q1, but I think that wasn't a surprise. You told us that was going to happen a couple of months ago already. When do you now think -- when should we think about price/cost flipping to positive? Is that already a Q2 story? Or is that more of an H2 expectation? So that's kind of my first question, the guidance and the price cost. And then just a couple of quick ones on nat gas. So first of all, how should we think about the unhedged portion? I know it's not big at all, but is there any headwind from higher spot or 1-month forward prices in TTF that's going to impact you at all? And then secondly, may I ask in how far Italcer is hedged on nat gas? Is it similar to your level? Or is it different?

Yes. Thank you for your questions. Regarding our performance in the current year, 2025 was a year where there was a stronger start. And during the year, the market came down. So the start of the year 2026 besides the weather, of course, was on a lower level. And we expect a stronger second half of the year compared to the first half of the year, and that reflects overall, let me say, a flat volume. So of course, there will be a volume or we expect a volume increase during the year 2026. But as we start at a low level, overall, that our expectations are that it remains then on the same level like previous year. And yes, that is reflected in our outlook, and that's still our expectation. The question, price over cost and when it flips, of course, we have a burden from our first quarter, which we have to carry, and we will see a much better second quarter, of course. And -- but as already mentioned, the second half of the year will be stronger than the first half of the year. Regarding the natural gas, we are fixed for roughly 80% in some countries a little bit more, in some countries a little bit less, but overall, it's 80%. And headwind from remaining volumes, which we have to buy from the spot market that will be very, very limited because, first of all, natural gas prices on the spot market came down. I'm not aware where they are today, but last week, it was around EUR 45. So it's not EUR 60-plus anymore. Therefore, it is -- the impact will be limited. Does that answer your questions? Or -- Italcer? Well, Italcer, of course, needs a little bit less energy than we do. But there, we have fixed volumes as well.

Okay. Perfect. That's really helpful. Can I just do one quick follow-up? So just to definitely get this right. So in Q2, when you're saying that price cost is going to be much better than in Q1, are you saying you would expect price versus cost to be positive already or just less negative? And I think this is an important point because as some of my colleagues already pointed out, raw materials are going up quite strongly. I think we all understand that. So for you to get positive price/cost would mean that you increase prices very, very fast sort of ahead of that, which when speaking to most other companies sort of in the construction industry, they're all kind of saying, even if price cost is going to be positive, there's going to be a little bit of a lag in the first few months. And so I just want to clarify that for Q2.

Well, for Q2, I mean, we are now in the middle of May. Therefore, of course, I have a visibility regarding April, but there is still half of the quarter to go. And I'm confident regarding price cost for Europe, but the North American market is for us at the moment, a difficult market. And therefore, I'm not able to give you a concrete or detailed answer on your question regarding the group performance, but I'm very confident for Europe.

And we will move on to Markus Remis from ODDO BHF Securities.

I would have a question related to the cash flow and your leverage target. I mean, can you remind us of your investment budget for the year and also shed some light on the kind of working capital trajectory that you expect over the course of the quarters? And if you feel still confident in the 2.2x EBITDA leverage by year-end? That will be the first one.

Yes. I feel still confident. And looking at our leverage target, which is 2.2x, of course, it's two sides of a coin. On the one hand, it's operating EBITDA. Of course, therefore, we have to deliver the EUR 810 million. And on the other hand, it's net debt, and we are working on both sides of the coin. We are working to optimize, to strengthen our profitability. On the other hand, of course, to strengthen our cash flow and to reduce net debt. We will see positive cash inflow or to reduce our net debt in the second half of the year because the second quarter will have the cash outflow for not only the purchase price of Italcer, the 50 plus -- 50% plus 1 share, which is EUR 160 million. We have as well the cash outflow, but that's minor. That's less, of course, for the other small acquisition. Therefore, with our half year figures, you will see a much higher net debt figure. And in the second half of the year, we are working on decreasing it. Looking at our working capital, in the first quarter, we already managed to reduce our working capital, let me say, a little bit slightly by volumes. But of course, there is a pricing impact due to inflation included, which, of course, has an impact on the working capital as well. But we are working and still our targets remain to reduce it. It will be supported by the disposal of noncore properties that will strengthen our cash flow. And our CapEx expectations for the full year is EUR 160 million, which we will spend for maintenance CapEx plus another EUR 20 million, which is our budget for improving health and safety in our plants. And for growth CapEx, which included our ESG CapEx as well, there is a number of EUR 100 million.

All right. And how much leeway would you have to reduce CapEx in case, earnings or working capital development is not kind of panning out as expected?

Well, we are having a focus and we, of course, monitor our CapEx and our projects. First, what is necessary, what do we have to do? And the second thing is that we are looking at our supply chain, do we have the right suppliers? Are we able to get better ones, which might help with some cost savings. But of course, nothing to reduce quality or something like that. But of course, there's always a possibility to cut a little bit to get some reductions. On the other hand, maintenance is important, and we have a focus on both sides and on quality as well.

If I may round it up with another question related to the cost picture, talking about energy. I mean, what's your strategy now looking beyond 2026 in terms of forward buying? Can you help us understand if you just carry on with the kind of rolling forward as usual? Or are you a bit more hesitant at this stage when it comes to forward buying for '27 already?

Well, our strategy is that we cover volumes for a period of time of, let me say, 3 years. But of course, everything which is beyond, let me say, 12 months with much lower levels. And of course, we are having our, let me say, energy committee where we meet like twice a month and if necessary, even more often, where we discuss how the prices going to develop? Are we going to increase our level to fixed volumes for '27 or '28? Or are we waiting a little bit. So that is something which we closely monitor.

And on the price increases, should we expect kind of a time gap between pipes and the ceramic part? Or do you see that being implemented at a similar pace?

No, that's implemented at a similar pace. Of course, the price increases regarding the pipe segment are more visible, yes, they are much stronger.

And we will move on with Daniel Khajenouri from Morgan Stanley.

Just a few follow-ups from me. First of all, you commented on some noncore property sales this year. Is that part of the guidance? And if so, could you comment on how much that is? And I also wanted to ask if there were any carbon credit sales during the quarter? It'd be useful just to understand if that happened or not when the underlying performance is. And I just wanted to have a follow-up question on some of your comments on the volume trends -- on the recent volume trends. Did prebuy and the positive volume development continue into May?

Well, starting with the noncore properties, of course, it's included in our guidance. And what we expect a number of -- it's more included in our cash flow than regarding our earnings. And my expectation is that we will gain something between, I don't know, EUR 20 million, EUR 30 million out of the -- as a result, out of the sale of noncore properties. And yes, there are no sales of CO2 certificates.

And just a follow-up question to the volume -- the comments on prebuying volumes into May. Did that continue this month?

Well, we've seen quite a strong volume development in March and April. But of course, it's difficult to identify what portion is like a prebuying and not. And so far, what I see regarding the beginning of May, it's still continuing like March and April.

That's very useful. And perhaps maybe just one more, if I could squeeze it in. On Italcer, the slide deck says it will be closing April 30, so I assume that's closed now. Is that correct?

Yes, that's correct.

And you said the hedging exposure for '26 has already been locked in for energy.

Yes.

And the last one is a follow-up from Julian Radlinger.

Yes. Just a very quick follow-up. I hope I didn't actually miss this, but back to the price increases. So on -- in the slide deck, you write that you're increasing prices across Europe, and you didn't mention it regarding North America. I'm not sure if you said it or if I just didn't listen, but is -- I assume you're also increasing prices for, at least for pipes in North America. Is that right?

Well yes, it is right. In the first quarter, of course -- not of course, but in the first quarter, prices came down in the piping business and turning the situation that raw material prices for piping are increasing, but that's mainly Europe. That's not the case in that extent in North America, of course, then prices are increased. But it's more a question of Europe. And in North America, we expect far less price increases.

And a quick follow-up from Markus Remis.

Yes. On the gap between reported and operating EBITDA, did I understand correctly that you assume something like EUR 20 million to EUR 30 million of one-off gains from the real estate disposals? And is there already any kind of visibility on, well, restructuring costs and the like? Any kind of indication you can share with us?

No, that's too early.

Right. But the EUR 20 million to EUR 30 million positive effect that might be realized?

Yes.

And with that, we do not have open questions left, and I will hand back to Therese.

Thank you all for joining us today and for all your questions. We hope to welcome you again in our next results call, which will be in August -- on the 12th of August. So with that, thank you, and goodbye, and enjoy your day.

Thank you very much. Goodbye.

Ladies and gentlemen, the conference is now over, and you may disconnect your lines. Goodbye.