Wienerberger AG recorded a 7% year-on-year increase in operating EBITDA to € 82.2 million for the third quarter of 2010. This improvement was based on the restructuring measures implemented in 2009, since new residential construction was negatively influenced by economic uncertainty, high unemployment and the resulting low level of consumer confidence. Against this backdrop, Wienerberger generated stable revenues of € 517.7 million (2009: € 518.5 million) for the period from July to September. Heimo Scheuch, Chief Executive Officer of Wienerberger AG, on the results announced today: “We were able to improve earnings based on our own strength, and that confirms our set course. There was still no tailwind from the markets because the uncertainty over future economic developments and the extent of government spending cuts has had a negative effect on consumer confidence and paralyzed the construction economy in many regions.”
Continued offset of negative first quarter results
Revenues for the first three quarters of 2010 amounted to € 1,343.3 million (-5%) and earnings equaled € 160.5 million (-10%), which represents a further offset of the negative earnings recorded for the first quarter. “Our strategy to build on our strengths in concentrating on our markets and customers and to pursue a proactive and market-oriented pricing policy, above all in Central-East Europe, proved to be successful in this difficult and highly competitive environment. We were able to stabilize the negative price effect and expand our position in numerous markets. Our strong financial position provided the necessary support”, explained Heimo Scheuch.
Central-East Europe: expansion of positions in tense market environment
The development of business in Central-East Europe was still negatively affected by weakness in the construction sector and resulting low volumes. This led to a further decline of 7% in revenues to € 174.2 million and 5% in operating EBITDA to € 36.8 million in the third quarter. To reflect this market environment, Wienerberger adjusted its selling prices. In consequence, the company was able to maintain or expand its position in many countries. The declining demand for building materials in Poland leveled off, but the markets in the Czech Republic, Slovakia, Hungary and Southeast Europe remained difficult during the third quarter. The downward trend in Romania and Bulgaria continued.
Moderate plus in revenues in Central-West Europe despite competitive environment
In the third quarter, revenues in Central-West Europe were slightly higher than the prior year at € 119.6 million (+2%). In Germany, moderate growth was recorded in volumes of bricks and roof tiles, but increasing competitive pressure was noted in the clay block segment. Volumes in Switzerland roughly matched the prior year but, as in Germany, sales volumes of roof tiles increased slightly in a steady renovation market. The Italian market was still characterized by weak demand, structural overcapacity and pressure on prices. Against this backdrop the operating EBITDA in the segment fell 3% to € 16.9 million.
Higher revenues and earnings in North-West Europe
The countries in North-West Europe, with the exception of the Netherlands, recorded higher revenues and earnings in the third quarter. The turnaround continued in Great Britain, but from a very low level. New residential construction in France developed somewhat better than expected at the beginning of the year, and largely offset the weather-related weak first quarter earnings. Revenues in this segment for the period from July to September totaled € 191.2 million (+5%) and operating EBITDA € 36.8 million (+53% over 2009).
Restructuring leads to positive operating EBITDA in North America
Demand in North America was slightly lower than the previous year. Revenues declined 1% to € 41.7 million in comparison with the third quarter of 2009. Operating EBITDA amounted to € 0.2 million and exceeded the prior year by more than 100% due to better capacity utilization and realized cost savings.
Expansion of Core Business
“We intend to strengthen and further expand the leading role of Wienerberger. Accordingly, our strategic goal is to expand the Group’s core business and to make meaningful additions to the existing product portfolio”, indicated Heimo Scheuch. The first steps toward the redirection of the industrial portfolio were announced in October with the acquisition of Steinzeug Abwassersysteme, an international producer of clay pipes, and the planned takeover of the remaining 25% stake in Semmelrock International, the leading supplier of exclusive concrete pavers in Austria and Eastern Europe. Wienerberger sees opportunities for long-term growth in both areas of business. In the pipe segment, development will be driven by the need for renovation in Western Europe as well as the necessary infrastructure development in Eastern Europe that will be largely subsidized by the European Union. In the concrete paver segment, the higher concentration on infrastructure and garden design as well as the demand for innovative, high-quality products, above all in Eastern Europe, will support further sound growth.
Asset and Financial Position
“We were able to reduce gearing to only 15% by September. Wienerberger has a strong balance sheet and a healthy financial base”, explained Heimo Scheuch. Net debt decreased from € 484.8 million on June 30, 2010 to € 389.9 million; these figures include the bond that was issued at the beginning of April 2010. The proceeds from the new bond were used to reduce refinancing requirements and to further improve the term structure of the Group’s liabilities. Approximately € 140 million of the 2005 bond that is due in April 2012 were repurchased, and part of the remaining funds was also used to repay other financial liabilities.
Gross cash flow of € 141.1 million
Gross cash flow totaled € 141.1 million, which represents a sound increase of € 67.1 million over the first nine months of the previous year. This improvement reflected the positive effects of the fixed cost reduction program as well as the absence of restructuring costs.
Strategy and Outlook
“I expect a continuation of the individual market trends up to the end of the reporting year. In Central-East Europe, I do not foresee any notable improvement in the construction sector. Central-West Europe should see a continuation of the modest recovery in Germany at a very low level. Developments should be positive in Great Britain and France, and stable in Belgium. In the USA, I do not anticipate any significant changes in this market, in particular because of the recently held congressional elections. I believe that the building materials sector will again be faced with a variety of challenges during the coming year. The decisive factor will be the development of consumer confidence in spite of the announced government spending cuts, uncertain economic development and high unemployment. Nevertheless, I view the future of Wienerberger with optimism because we have well positioned our cost structure and our products in the market. With our strategy to become a full-range system provider, as well as a clear focus on product innovation, we are well-equipped for the economic recovery”, emphasized Heimo Scheuch in conclusion.
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