Wienerberger France SAS (WIE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for dialing in today. I hope you're all well. So close to Christmas, we have announced today that we intend to acquire a substantial part of the Terreal Group. This highly attractive transaction marks a true milestone in the Wienerberger's successful history. So underlying the importance of this transaction, we have invited you to our conference call today. Our CEO, Heimo Scheuch; and our CFO, Gerhard Hanke, will guide you through our presentation. 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 also from our side, from Gerhard and myself. Thanks for joining the call, and so short indeed after year-end and -- before year-end and before Christmas that you make yourself available. It is indeed a very -- I would call it a landmark transaction for us for the Wienerberger Group. And we are delighted to present this transaction to you. And it empowers us to really take a strong growth path in the years to come. The transaction as such is, as already mentioned by Daniel earlier, is the Terreal Group of France and substantial parts of its assets and especially the activities in France, Germany, Italy, Spain and the U.S. that will be part of this transaction. That is the scope of the transaction. And when we mention Terreal or Terreal Group during this call or in our presentation that you have in front of you, that's what we are talking about. Not part of this deal are the operations in Poland, Austria and Hungary. And in Poland and Austria, Creaton runs factories, Austria is a sales organization. So this is staying with the existing shareholders and will be then probably sold to a third party. So this is the deal as such. It's a transformational deal for Wienerberger and for us. Why? Because obviously, it's a unique growth opportunity. It's a growth opportunity because we can actually enter in a much bigger and stronger way, 2 of the most important renovation and roofing markets of Europe, France and Germany. In both markets, our presence has been rather weak because we have been a smaller player on the roofing side in France and Germany. And with this transaction, we really become a strong player and especially our exposure to renovation increases dramatically. The other important thing, and we will walk you through this, Gerhard and myself, it's a very complementary transaction. Because from a product portfolio and industrially speaking, it is a perfect fit for Wienerberger. And therefore, it is so important that we create here a strong platform for further growth. Also important is that this transaction, obviously, in year 1 after closing is already EPS accretive. So a very strong and positive way forward for Wienerberger financially speaking. Let's come to the transaction in detail. When we look at the enterprise value for the scope that I have tried to describe at the beginning, we will have an enterprise value of approximately EUR 600 million. Why approximately? Because signing and closing [indiscernible] quite substantially. We talk about a year. It's all the antitrust approvals that have to be done and the procedures that we have to undergo. So obviously, the normal and customary adjustments in such a procedure will take place, and also potential remedies could influence the enterprise value at the end of the day. So around EUR 600 million is the enterprise value. The target as such makes in 2022, an estimated turnover of around EUR 740 million with a run rate EBITDA of approximately EUR 100 million and, therefore, a very attractive multiple also in this circumstances that we are currently living through with about 6x of EBITDA to the enterprise value. We, as Wienerberger, and that's what we have done in the past as well, if you look at our most recent transactions, for example, Meridian in the U.S. where we clearly indicated the measures that we put in place in order to streamline the business operationally speaking, also from a logistics front portfolio, industrial restructuring, cost synergies, et cetera. So here, we have shown, and you have all followed us very closely with respect to our North American transaction and the strong sort of profitability enhancement there as well due to the fast implementation of the integration, the cost synergies that came through. Here we do the same. And here, we show obviously on the slide of our presentation on Slide #5, how we actually want to improve the performance of the existing Terreal business from about EUR 100 million to about EUR 150 million. And by the way, when you look at this, we don't assume any sort of market growth. It is actually very important that we show to you here how we organically want to grow the business by implementing our operational excellence that we are doing right now in the group, and you know our fast-forward projects, et cetera. We are talking here about 29 sites. So we are integrating those sites in our performance enhancement program. We are integrating the whole portfolio in our logistical program. Also, the digital part is playing an important role. And through these sort of synergies, we create here a much stronger platform for the future and especially in these strong 2 markets, France and Germany. So if we go down a little bit to what has been happening on the roofing front in Europe, especially and also in North America, there is a strong movement into the roofing sector, not only us but other companies as well have seen that there are opportunities out there, opportunities with respect to renovation, changing sort of the old roof to a new roof. There's also from a billing perspective, there are certain changes and that's interesting actually that we, as Wienerberger, can create a very attractive multiple in such a trend because if you look at the trend of these recent months, actually, that's not before any cycle or so, we are currently in the same sort of cycle as others that have bought into the sector. And if you compare ourselves to these others, we can significantly outperform them with the 6x multiples because when you take the medium sort of multiple of all these transactions that recently took place, and we are talking here January '21 till now. So that's not a long time frame. It's above 11. So here again, we show our discipline that we have put in place over the last years, and we keep this with bigger transactions and see that we allocate resources to very attractive deals. So all in all, when we look at the transaction, again, a very attractive multiple. If we turn then to Slide 7 of the presentation, we see, again, if you look at this attractive financial framework of the transaction, that we will finance it obviously and financing of these transactions, you keep in mind, please, that closing won't take place until the end of '23 or beginning of '24, meaning the time that we need to get all the regulatory approvals, mainly Germany and France. So this is obviously a year away from now. And when we look at the balance sheet of Wienerberger today and what we are planning for the foreseeable future, this deal can be easily financed by the cash on balance sheet, obviously, because we -- as you have seen this year, we strongly generate cash. And under the control of Gerhard, I say, we are approaching obviously nearly EUR 1 billion EBITDA this year. So we will have a very solid cash generation this year, and therefore, a strong balance sheet. And when it's necessary, then obviously, with new debt facilities, but the existing one and Gerhard will just explain this a little bit more in detail. We have enough and substantial [ room in ] for further financing and at the same cost as Wienerberger's financing. So this is, I think, very important that you know that. And on the other hand, we have agreed with the existing shareholders of Terreal, that they will take shares in Wienerberger and you know that we have a substantial amount of treasury shares, and we agreed with them that they will take up to 6 million of shares of Wienerberger at the price of EUR 26. So again, we have seen -- we have tried to put here a very attractive package together for us, as Wienerberger to create immediate value. And if you look at the parameters here from a net debt perspective, at the year-end, we will be roughly at 1x or slightly above 1x at the year-end. From respective net debt-to-EBITDA and pro forma, if we would include this deal right now, it's about 1.4x. You see that is substantially a very strong way of financing this deal and not jeopardizing in any way our strong balance sheet. And I think this is the important message that we want to give you there with respect to this deal, financially speaking. When we look at Terreal as such in the group, let me just give you some sort of indications what we are talking about. As we have said, the scope includes countries, France, Germany, Italy, Spain and the United States. And we talk here about 29 sites in these 5 countries with about 3,000 employees that will then join the Wienerberger Group. It's a key player, Terreal is a key player, especially on the roof, which has some operations with respect to wall and facade, especially in France and in Italy and also in the United States. But this is the major activity, as you can see on our Slide 9, this roof with 80% of its turnover when we take the estimated turnover of 2022. So again, a very strong local player in its markets with strong market shares and with strong local brands. And this is very important because you know that the branding strategy of Wienerberger is a local one. We operate in these local markets and access to roofers, access to local decision-makers is very important. So for us to build the future success of this combined group on strong brands is very important. And Terreal and Creaton are especially brands that we have here. Nevertheless, and I would like to mention this as well in this context, Terreal has, and this is important for us as well, a strong team of local and regional management that can be easily integrated into Wienerberger because they share the same values as us and are very passionate about the business. And it's for us, obviously, an ideal opportunity to also acquire additional talent for our group, especially young talent. And I'm looking forward, especially to our French colleagues because they have a long tradition in clay production and expertise in technology to these strong schools and universities in France, especially in Limoges, near Toulouse, some very important hubs where we have future talent for the group, Wienerberger. If we look then a little bit on the side of exposure on different countries, and you find this on Slide #10. France has the biggest exposure, obviously, 60%. And therefore, obviously, combined operations, Wienerberger and Terreal will be sizable. We are talking here about very strong and big operations in Germany and France if you take Terreal and Creaton and Wienerberger together. So we are really a system and solution provider in everything which is linked to the facade, the wall and especially the roof. And this is I think, the major step forward. And if we move then to Slide 11, there you see very well how it fits together. I've mentioned at the beginning, that is an ideal combination because it's so important for us that we don't have to restructure major parts of the industrial footprint. On the contrary, it perfectly fits together. Look at the French exposure of Wienerberger, the dots in red and the blue ones for Terreal, how nicely this covers the whole country, and therefore, we become a nationwide player and can cover obviously very well the country as such, which gives us the scale effect and the cost advantages, as you can imagine, not only from a logistical and commercial point but also from an administrative point. And the same goes for Germany. Here, you see the strong integration. Keep in mind that Germany is a little bit divided in 2, if you take -- the famous German [indiscernible] as they always call it, from Frankfurt, South of Berlin into Dresden. Everything below it, and there you see the dots basically is clay and therefore, also clay roofing is here very strong, and the North is more leaning towards a little bit concrete activities. So here, again, you see the perfect fit of -- for the 2 operations. And keep in mind as well that for us, as Wienerberger, it's important because we double the size of our operations in Italy and enter here also the roofing market and then the roofing market also in North America. So again, this, I think, is a very unique opportunity for us, and I will leave it now Gerhard to little bit explain better the -- renovation market, roofing market and the bringing together of this platform.

Thank you, Heimo. And as Heimo just mentioned, we see this a really unique opportunity by joining forces, by bringing these 2 businesses together, as we strongly believe that roofing is a major topic when it's about renovation. And with this acquisition, basically, we would also increase significantly our exposure to the renovation market. You know that a large amount of energy is still lost by basically unrenovated roofs and that the renovation of the roof plays a major role also in the next years when it's about decarbonizing the European old housing stock, what we have today. So the major core driver for renovation, for roof renovation is the more and more strict regulatory requirements, which are already today in place and where we expect that they are getting even more strict in the years to come. These regulatory requirements are mostly also combined with some subsidies which are available and also, which is, I think, obviously, the rising energy costs, which we see also during the last 24 months and where we also believe that most probably also in the next years that a certain level of higher energy costs will also stay. So the whole topic of renovation where the roof itself plays a major role will become a major driver when it's about roof renovation. And I think also what we should keep in mind that the living space has become during the last years more and more expensive, which means also it is a kind of a possibility to create some affordable living space when you renovate basically the space below the roof. On the next slide, we try to summarize somehow the key aspects when it's about the regulatory aspects, which are already today in place. Top of the list is the topic of energy efficiency. You know that if we want to improve the energy performance of the buildings, so meaning to improve the energy performance of the European housing stock, to improve the decarbonization of the housing stock, it is about improving the energy efficiency of the building. As we said before, around about 30% of the energy is lost by an unrenovated roof. So by renovating the roof, it is also not only improving the energy efficiency but also basically significantly reducing the CO2 footprint of a building. What is already in place today next to the Green Deal, what we basically know till 2050, there are also in France and in Germany, there are clear regulatories, respectively, national requirements in place, which are somehow focusing on subsidies, tax incentives but also focusing on renewable energy carriers, which are strongly [ SEPA ] subsidized, especially in these 2 large countries, in France and in Germany. I think what makes these 2 large countries, also specialists that we have a rather overaged housing stock, around about 2/3 of the housing stock, as you see has been built before the '80s. So we see there a huge opportunity to improve basically the energy efficiency of these buildings. And I think also what we see in these 2 large markets is that there is a structural undersupply when it's about the new housing stock in these 2 countries. Joining forces, and I think this is the basic idea by bringing these 2 companies together and also you see what it means when you bring the sales power of Wienerberger and of Terreal together, you see that this new platform will generate more than 75 million square meters annually on roofing surface. And this is a surface hardly to imagine or to understand, but it is a size which you can compare somehow with New York as a surface. So it's really huge what we basically, on a yearly base, generate on roofing sales out of this new platform, which would exist. Next to that, as I mentioned before, when you renovate your roof, you also save around about 225,000 tonnes on CO2 emissions by installing basically a new renovated roof. It's around about the 3 kilo per square meter what you save on CO2 emissions when you have a renovated roof. When it's about cost savings, and Heimo mentioned it in the beginning, we expect out of -- simply by our organic power that we will be able to generate some earnings enhancement of around about EUR 50 million. And basically, we expect that this will come from around about 3 pockets and the 1 pocket is the cost-saving pocket, let's call it that way. In the next 3 years, we expect that we will earn some EUR 20 million additionally on EBITDA just by implementing our operational excellence measures. And as we heard before also, it is more -- it is in the direction of implementing Terreal also in our Fast Forward Program. So reducing the energy consumption, benefiting from scale effects from purchasing. So all the things what we do basically today also within Wienerberger, we would also then apply for the Terreal entities. And there, we would expect the EUR 20 million on cost savings. When we stick to the cost savings, just to make them complete because we spoke about EUR 50 million within the next 3 years. The EUR 20 million, as I mentioned before, we expect out of operational excellence, a EUR 10 million, we would expect due to gross selling by combining basically the product portfolio and service portfolio of Wienerberger and Terreal by bringing basically or shifting more revenues in the sense of accessories -- solar, accessories, insulation materials, by -- basically via this platform, we expect an additional EUR 10 million and then EUR 20 million on earnings enhancement in earnings improvement. We expect simply by using the platform by offering via this new platform, all our logistics services, our planning and design competence what we have using our digital business models in the sense of products and also services. And out of that, we expect the EUR 20 million. So out of the 3 pockets, as I mentioned before, a EUR 50 million on EBITDA enhancement during the next 3 years. We have a market coverage by around about 60 sites where we will cover basically mainly the European market. And as we heard before, we are approaching the market with very strong brands, not only company brands, but also strong product brands, which are in place today. Our vision -- this acquisition totally follows our clear vision, which we have in place. And I think this is known that we want to basically with this acquisition also, we want to strengthen our position as a leading international full-service provider of smart and innovative solutions in the entire building envelope and for the infrastructure and with this acquisition, we are able to expand our product range in respect of the pitched roof, including solar, accessories and also insulation. So this is the clear way forward. And what we have put also in the presentation and what you will see also during the next slides is also to get a better idea how complementary the deal is and also which products, Wienerberger and services Wienerberger offers today and which basically products you get via the acquisition of Terreal. So please also if there are some questions afterwards, please feel free. But this should give you some idea how this basically perfectly fits together and would complement to a new platform, what we can use to scale the business further and use it as a growth platform in the future years. And with that, Heimo, I would like to hand over back to you.

Thank you, Gerhard. And I think all of you understand now that we are so excited. Excited because joining forces for us means a step change, a step change, a transformational change for Wienerberger because we come really very expert for pitched roof in Europe, from Ireland to Romania, from Finland to Italy, we are the experts for pitched roof. And when it comes to renovation, we can offer the full range of products. And we will be in the next 3 years, including also, like Gerhard has mentioned, issues like insulation to our offering, all sorts of accessories on the roof and under the roof that we can sell together with the product. So we move away from a product-driven company, as we said, a couple of times to you to is really a solution and system provider. And this is very important, very important for a couple of things because we have created the digital means to sell these sort of combinations and solutions because all the digital platforms are in place by Wienerberger for the roofers, for all the decision-makers and we can add on nicely Terreal and its business, especially the strong business of Terreal in solar and in accessories. So that's very important. It's an immediate effect and gain that we can achieve here. And keep in mind, I mean, what Gerhard has said is so important. We double the size of Wienerberger when it comes to annual sales in square meters. 75 million square meters every year are sold by Wienerberger there. And this, together with the whole package of accessories and other products as we sell with it. So it's a major force that we create here on the pitched roof, and that we can develop together. And for Wienerberger, this means, obviously, also from an exposure perspective, and that's what you see then on the Slide 24, a stronger focus on renovation and we can build on this to create even more focus on renovation in the years to come. And keep in mind, when we talk about the EUR 50 million additional EBITDA coming out of this very important transaction for Wienerberger, It's one that we can realize by ourselves, independently from the market growth because the market grows if there is substantial market growth will come on top. So it's a very, very interesting and for us, changing transaction that we can here propose to you today. And let's look a little bit on the process and how this is going to develop. We have now signed a put agreement with the sellers. Why a put agreement because we need to go through the French process of getting the Works Council consultation going and the approval of the Works Council. So that's a typical French thing. And if this is done, then we'll sign the definite SPA. And then, obviously, the whole filing with the antitrust authorities that has already started as from today, will continue and this process goes then well into the next year. We estimate we have made our thorough review of all the antitrust issues. But obviously, there, you are completely in hands of the administration and the institutions. So it may take a little while. But we are confident that we can propose very good and very -- good solutions for them, and we don't feel here that there is a major threat for us. So we would see that normally, under normal conditions, the completion of such regulatory approval processes should happen at the end or a later part of this year, beginning or latest next year. So the closing of the transaction should happen in the third -- in the fourth quarter of this year and/or the first quarter of the year after. So this is how we see the procedure. And obviously, in between so that this is addressed as well, the business has run completely independently, and there's no interaction. And from our perspective, just to mention that not in the scope of the operations in Poland, Austria and Hungary that are sold to a third party and has nothing to do with Wienerberger. And let me summarize creating such an important platform in pitched roof is a game changer for Wienerberger as I said, with 75 million square meters annually, we become really here a powerhouse as far as the pitched roof is concerned and be expert in it. We create financially value from day 1 onwards. And after closing, obviously, the year after, we'll have EPS accretion already. So this is very important that you would take note of that. We have a very attractive multiple already at the beginning of this transaction is around 6x, but with the additional EUR 50 million coming from the improved performance of the business that going down to 4x is obviously extremely attractive for Wienerberger, and we can finance the deal from our own means by the balance sheet that we have the strong one and by using our treasury shares. So this is, I think, in a nutshell, what we can propose you today. It's, as I said, a very, very strong move for Wienerberger in this phase. And I think we have shown this year how we can deal with [ unstable ] times. We have experienced management in the field of clay roofing [ tiles ] and they will integrate this business speedy and quickly. And obviously, also the industrial platform has potential for improvements, as Gerhard has explained it with respect to operational excellence. So in summarizing all of this, we are excited that we can propose this to you, and this is in line, obviously, with our value-creative growth strategy of Wienerberger that we want to pursue. Thank you very much for your attention, and we are all ready now to take your questions. Thank you.

[Operator Instructions] The first question is coming from Matthias Pfeifenberger from Deutsche Bank.

Congrats to the announcement. I've got a couple of structural ones. Firstly, you mentioned potential revenues already in the footnotes, and you've got a lot of time for deal closing. So what's your best guess on remedies? Like, would this be your assets? Obviously, France, maybe a bit more color.

Well, thank you, Matthias, for the question. From our perspective, we will go in with a full sort of approval process because we think that we are well prepared and the antitrust authorities, the French ones should review it positively. However, obviously, we are prepared in the case they have another view to have some remedies. And what we are talking here about is probably one plant or so that is on our list that potentially we have to dispose in France.

Okay. Great. The second one is really on the multiple. I mean, you were also kind to show us the recent deal. So I'm starting to wonder why this has been so [ low ]. And maybe you can also shed some light on the seller, what's the thinking there. But also is the difference to this [ average ] might -- or maybe based on the fact that these are mostly U.S. deals or construction chemicals deals on the membrane side? Or is it really that the seller might have a different projection about the budget going forward? I mean the [indiscernible] guys had released their pricing. You outprice cost inflation via margins. So I don't know the underlying budget [ to be ] EUR 80 million in the minds of the seller.

Well, thank you very much for this one as well. I think when you look at the comparable transaction, yes, first not only U.S. ones, there are also European ones in it and they are not only building chemicals or not at all, but they are roofing ones. So we are clearly focused on this as well. All of them have roofing included in the substantial part, by the way. So I think here, we are in line with this one, and you can take a different view, et cetera. But I think what is important, obviously, you have always to find when you deal with the seller for a good solution. And I think we are obviously in a time where people who have been long with the business and the -- please keep in mind that they are more than 10 years invested already in this business. And I think here, they were looking for a good solution, for a solution to bring the business and the people forward and to create a new home for this business. And now all -- I understand perfectly well that all of us are very much sort of interested and attached to figures and numbers, but it's not only in business and in the industry about this. It's about the industrial assets, the people and the responsibility. And I'm glad to report that the sellers have not been under pressure to do anything, but they have really tried to find a good solution for Wienerberger, for Terreal and for the people. And keep in mind that they take also a substantial part of Wienerberger with 6 million shares. So they are interested in creating value with Wienerberger.

Okay. And the last one is just maybe -- one maybe for the CFO. What do you expect in terms of PPA? Would it be the usual, like, I don't know, 3% to 5% on top of the normal depreciation? And also, am I correct in thinking that you think this business to 20% margins just from the math? Or is there some growth on the top line baked into the jump from EUR 100 million to EUR 150 million EBITDA?

Basically, concerning the PPA, I think it is too early to take here any conclusions. We still have some time to go. When it's about basically profitability of the business, yes, we strongly believe that we can basically shift the business to a profitability level what we have today in place. And this I think, you know that we have profitability levels, which is even above the 20%. We know what we have to do. I think the potential is there. As Heimo mentioned, I think it is important to understand the EUR 50 million what we see, we believe we can do based on our methodologies and our homework, what we simply have to do to develop the business, it's 100% organic growth, basically what we expect -- markets basically are totally out of scope when we speak about the EUR 50 million. And therefore, yes, to move it or to lift it up to the EUR 20 million is something where we believe in. And we have 3 years' time. And therefore, we do our best simply to bring also the business on a level what we have basically today within Wienerberger in place.

The next question is coming from Patrick Steiner from Kepler Cheuvreux.

Congratulations on the transaction. I would have 3 questions. First one would be based on this 80/20 revenue split in terms of roofs versus wall and facade, which means that there's still -- there still should be substantial new build exposure for Terreal. Is this EUR 100 million EBITDA run rate sustainable going into 2023, given the current market distortions? That will be the first one. And second is why does the seller accept Wienerberger's shares at EUR 26 per share? And was it 6 million or up to 6 million?

Let me just clarify the 6 million. It's 6 million. Yes, indeed, 6 million shares. Sorry, if I was misunderstood on the up-to for the 6 million. And obviously, it's -- I'm surprised that you asked the question because we are a great company and taking shares in our company has a lot of potential, I would assume, and I'm glad to share existing shareholders of Terreal will see it the same way. So I'm enthusiastic, and it shows obviously, the confidence in what we do and how we drive the future of this company. And by the way, from an exposure perspective, it's the exposure to new residential is not -- is obviously in line with all of our exposures when you talk about the roof. So it's not a substantial part of the business. We talk here about when in a normal roof environment, about 30% to 40%, depending on the region that you operate in from a 100% perspective of roof. So 30% or 40% going to new build and the rest goes into renovation.

And especially -- and also keep in mind, basically, we have in [ both ] markets. In the wall market, you have -- and in the facade market, you have a certain share, which is exposed to renovation, which is clearly lower than the new build dependency on the other side, as Heimo mentioned on the roofing end market, you have a high share on renovation exposure and a rather low share, which is new build depended basically.

And also when you talk about France, especially because we are [indiscernible] France only because Germany has only roofing exposure, which is important to understand for you on the Creaton side. And the French exposure of Terreal is a little bit to new build as well. And here again, we also as Wienerberger see the French market much more dynamic on the new build side because demographically, the French are growing. And therefore, they need more houses and new houses to be built.

The next question is coming from George Speak from BNP Paribas.

Congrats on the deal. That's a pretty nice festive acquisition. So I just wanted to return to the point around normalized performance. Could you just give us a sense of what revenues and margins were in, say, 2019 or whatever was a more normal year for the industry?

You mean for Wienerberger, I guess, you know them. And for our takeover target, they were also higher because obviously, in this -- you are talking about the current situation when we talk about energy prices that are high, et cetera. But from a cost perspective, obviously, when you look at '18, '19 or especially '20 situation, here, obviously, with much lower energy cost sides and running rates that were pretty much similar in the roofing business, they had stronger margins in this environment.

That's helpful. Just when you spoke about '18,'19 and '18,'19, end market-wise, renovation market was not on that level what we see today. On the other side, you also that energy costs have an impact on EBITDA run rates. And therefore, I think this is what we tried to explain before.

Okay. That's helpful. And then one question just on how the acquisition affects your hedging coverage for the [ RPS ], whether it needs you more exposed to spot prices?

Basically, yes, it will impact our hedging levels. This is clear. We -- basically, we cannot announce. They are hedged basically also to a certain extent, not to that extent what we are hedged as Wienerberger.

Before we go into the -- sorry, Gerhard, if I interrupt you, so that we have a common understanding. We are not taking over the result of 2023, yes, because we only take over the business as closing. So therefore, if they are unhedged or not hedged, whatever in '23, that's not on our account. What we can do -- and sorry, Gerhard, if I continue, we can already now work on the future. So when we take over the business, for example, '24, we can obviously then prepare this and probably get some buying forward contracts...

This is what we do, basically. We expect to take over a closing beginning of 2024. We are focusing on contracts for 2024, and this is what we basically were -- what we are focusing on.

The next question is coming from [ George Kuglitsch ] from UBS.

I'm Gregor, not George, but that's okay. So a couple of questions. So the first one is just to be 100% clear. Are you saying the EBITDA of this business? I know it's changed and it's a carve-out and so on. It was roughly the same a couple of years ago as it is today, like I appreciate the margins are lower, but then energy costs, et cetera. So just to give us a sense...

Roughly the same. You're right. Roughly the same.

Okay. Okay. Okay. So this is the first question. The second question is, I mean, your sort of enterprise value, but there's sort of potentially a year and a bit to go. Just to be clear, the cash generation in the interim, is that your economics or their economics? Or don't you think it will be material? Or just to understand like once this all settles like you just got the economics of the cash flow for the next 12 months.

It is basically their economics, what you...

Okay. So you're basically paying [ 600 ] at the point of closing... Okay. Okay. That's fine. And then in terms of -- I mean the antitrust risk sounds low, but there's obviously a delay. So I want to understand, do you think there is a risk at all that the deal kind of doesn't proceed? Or do you think that's not material because you just put up the remedies that are required?

May I say 2 things on this. I've I went through the procedure in the U.S., it took much longer than originally expected. You remember, you asked me some questions on this. And I try to be here not conservative, realistic. There's a certain time spend that we have to accept. I'm positive that the deal goes through. So I give you this very strong optimistic view. And if we get some remedies, we will have to deal with it. But as I said at the beginning, from my point of view, I think we have a strong case, and we can make this case in front of the authorities.

Okay. And the carve-out, you did to preempt these, yes, is that correct? So Austria, Poland, et cetera, carved out just so you don't even run into major problems. Is that the reasoning for the split? Or is there another reason why you only decided to go for the asset?

As always, you are spot on.

Okay. And then maybe some technical questions. So the depreciation roughly as it is today. I appreciate the maybe PPA. What is it? So we can work out the earnings impact?

I think, Gregor, we have to come back on that. We are having today -- as of today, we have numbers for sure, but I would ask you that we maybe do that in a separate session with Daniel where you get basically the necessary numbers like depreciation to fill basically your...

And the interest you're saying you're just getting the -- I can't remember exactly what you have 3%, 4% or something like that...

It is basically [ free ] what we have. With this free what we have, a big part is basically fixed. And we expect also to be in line basically with Wienerberger financing cost.

Okay. And then sort of more strategic one. You talk about sort of the add-on, the accessories, that's been a sort of long-standing theme. But you talk a bit more about insulation and solar. So can you just give us a sense how that's done today and what you're going to change? Or is it sort of you buying externally insulation from third parties and then integrating it? Or do you want to do it in-house? I guess the solar will probably be external. Just give us a little bit of a sense what you are planning to do on value-added side.

Well, thank you for the strategic question because it's important. On the solar side, Terreal has successfully built a solar business in France, and they are currently rolling it out into Germany. We have now a rather successful business in the Netherlands. So this can be merged. And this is a double-digit growth business right now for Terreal and for us. So this is on the platform that we have and this 75 million square meters a year matter, obviously, because as you can imagine, we can put on all the roofs additional solar. So this is something where we assemble, and they do the same. [ The pie parts ], left and right, but they assemble them and sell the whole solution. So this is going to continue to be rolled out through all of our operations and other accessories, they produce themselves in certain locations. These are non-ceramic accessories, and we can build on this expertise and create even more capacity throughout Europe for this, and you have some of these bits and parts in the presentation in front of you. And last but not least, I think from what you have mentioned, insulation. We are already trading quite a substantial part of the insulation. But as I tried make reference to 75 million square meters roof, need a lot of -- or the same amount of insulation. So we are a big consumer in the sense of can package this. And I'm not excluding today that we will be producing insulation at the right one for the future. So I think here, again, I think you need to prepare yourself that Wienerberger moves and moves fast and there is a solution provider. And then it's easier for us to integrate this than to buy from third parties.

[Operator Instructions] The next question is coming from Yassine Touahri from On Field Investment Research.

So a couple of questions. Could you give us a bit more background about the buyers? So what I understand is that LBO France had to sell his stake to lenders in 2013. Are they debt investors, the seller of Terreal. And I think the reason I'm asking the question is that they will hold 6 million of Wienerberger shares. And I'm trying to understand why they would want Wienerberger shares instead of cash and whether they could consider to sell at some point because they are financial investors.

Well, I think every investor makes his all in mind. And I think we -- as I clearly said before, is in the -- we negotiated a deal with them, and they are very happy to be shareholders of Wienerberger. What they do with the shares in the future, they have a lockup period, and they will follow us developing, I think, as a company. So that's up to them like any other shareholder. But from our perspective, it's good to have them on board. The history, how they came into the company. Obviously, you're absolutely right. They bought some debt when the company was in a very difficult position and have accompanied more than 10 years the development of the company. So they are existing shareholders and have been developing this company together with management. Keep in mind that they have also successfully taken over Creaton recently, not more than a year ago. So they were actually interested in the industrial development of the company.

And what is the time frame of the lockup period?

It's around 6 months.

6 months. And another question about the assets. Do you have a rough split between clay tiles, concrete tiles and solar solution?

Well, when you take from the overall perspective, we have given you an overview of about 80% is in roofing. And the major part is clay roofing tiles. So this is the major part of it. And we have the solar business, and the rest of the business is roughly, I think, in the 15% or so.

So 15% would be the mix of solar and...

Yes.

That's very clear. And just to come back on the 2023 number or maybe like 2024, the perspective for the cash generation of the business. What are -- the [ environment ] is very volatile. Nobody really knows what's going to happen in terms of volume in -- on the amplitude of the recession. What are your feelings when you're discussing with the seller regarding just the next couple of quarters on the development of price versus cost, the development of volume for Terreal in 2023?

As I said before, 2023 is not for our account. So it's a transition year for the business first of all. It's very important that you take this away from this call. And however, I can tell you from our own business in France that we see in France, a reasonable good development also in renovation for the next year. So I think it's not going to be a major threat for us, and we acquired here a very sound, solid and very good asset in the company to develop further.

That's very clear. And have you -- the last question in terms of keeping talent. I understand that there might be like one full year of time frame before you become the owner of the assets. What is your strategy to avoid the risk of people leaving the company because it's a bit unclear because they don't know if there will be restructuring and headcount reduction? Have you communicated on that? Or are your plan to -- do you have a strategy to make sure that you can keep as many talented people as possible?

Sure. Just to give you an insight, already this morning after the announcement of this transaction, a lot of communication went out internally and via social media also to the employees of the Terreal Group together with the current management. And it's not only important that you ensure the people, but that you present them a clear industrial project. And I think everybody -- these people know us for a long period of time. We have been competitors and still are now for the moment. So they -- we value each other highly with respect to knowledge and expertise. And as I said earlier, for us, obviously, to have this resource of young and good educated people, especially out of France with research centers and schools in Limoges or in Toulouse, it's for us, important as a group that we get additional sort of know-how and all of them understand very well that they have a bright future within Wienerberger to develop them further. So a year is nothing for them or potentially. They will have so much work anyway and then they will prepare well the transition into Wienerberger.

The next question is from Tobias Woerner from Stifel Europe.

Congratulations on what looks an attractive proposition. From my side, just quickly following up on the questions before. When I look at your cores or your sites, are they all owned outright, i.e., freehold? Or are they owned by other parties or potentially the seller? That's the first question. The second question, the solar business, you put at 15% together with other businesses. What sort of -- where you said double-digit growth rates, but how do they compare to other products in the market in terms of efficiency and competitiveness and how you can roll out the product across the whole of Europe? And then just lastly, do you intend to grow the business further, the roofing business across Europe or potentially in the U.S. in that context into new geographies once all of this is done?

I take your 3 questions, Tobias and thank you. First of all, Terreal has the same policy as Wienerberger. So from a historical point of view, they have been very good in having their own resources of clay. So especially when you talk France and very important clay reserves that they have in the southwest of the country. So here, we acquire also these resources. So the sellers don't keep anything and nobody else. We are then the owners and that was [ for us ] key also in Germany, by the way. So most of them are controlled by the company. If there are some -- we -- all of us buy certain clays from different resources. So that's pretty much the same as Wienerberger. So no surprise, no hidden problems or whatsoever. And the clay [ research are ] when all of the sites, very good. This is a major point of concern always for us when we look at companies that we acquire. So this is, I think, very important. When you look at the current footprint, we are happy. And you see around Europe, we are already very strong in all the major markets of Europe in order to develop this platform further, and that's where we are and where we want to stay. We don't want to enter new geographies because I think that's clear from what we have presented this morning, Tobias that this development is key for us in the next years to come, and there we want to create value. And to your question on how we can sell this across our geographies because the system as such is very easy to install is very sort of efficient and compares, especially when you talk about the photovoltaic one to the best systems in the market. So there is no inefficiencies or whatsoever. That's why they obviously gain momentum right now with their system. And I think combined sales forces, combined presales forces between Wienerberger and Terreal in the future, will help to promote this even stronger in areas like the Benelux as I said, Germany but also parts of Eastern Europe.

If I may just follow up on the solar side, they are roof tile integrated or tile integrated PV systems, how do they compare to the competition at this point in time? Is Tesla actually already selling actively or not? I have tried myself but couldn't find something.

No, we all -- I mean, I don't want to comment on anything, but this company has so many announcements and announcement that has not been sold anything, right? So this -- don't feel here that there's a major threat. There are in Europe, and we have different climate zones also. This is very important that you understand that, that on top solutions are the only ones that really work well in certain geographies due to wind, to rain, to frost, to snow. And that's why, obviously, it's important to keep this in mind from a renovation perspective, from a pitched roof perspective. That's why we are really experts in the pitched roof in these matters. We have on top solutions. We have integrated solutions, and we have obviously also solutions that are completely new that we might be interesting in certain fields of applications.

Okay. And then just lastly, if I may, 1.4x pro forma net debt to EBITDA you mentioned earlier. Do you intend to bring this down even further in the next couple of years? Or are you comfortable at that level?

Basically, you know that we have 2.5x basically as our target at year-end, which is communicated. We always stayed below. We were more in the range between 1.5x to 2x. I also would like to keep that in this range, in this field of more in the range, close to 2x than to 2.5x. For that moment, the 1.4x is strong, and we feel very comfortable with that, what we have also announced in the presentation. It's a pro forma calculation based on 2022 year-end figures and the 1.4x is still something what we want to show is that we have a strong balance sheet, basically even after this transaction. We'll have to consume this transaction.

I mean you have a slightly higher operational leverage, would you ever consider bringing that 2.5x down to, let's say, 1.5x to 2x?

First of all, we don't have 2.5x. And I think Gerhard explained this very clearly. So we run today at about 1x and what we are saying that with this deal and growing the company, being in renovation and the strong exposure, obviously, in a cash-generative business, with certainly not bad new cash generation, you're right. But I think we feel very comfortable in this range where we are today.

There are no further questions at this time. I hand back to Daniel Merl for closing comments.

Thank you very much, operator. Ladies and gentlemen, thank you for taking the time and dialing in today. The next conference call will be on the 22nd of February on our full year 2022 results. For today, I wish you a nice remaining afternoon. If we don't hear from each other before, also Merry Christmas and a happy, healthy and successful New Year. Thank you very much. Goodbye.