Wienerberger AG recorded an expected year-on-year decline in
revenues and earnings for the first quarter of 2010. The most severe winter in
more than 20 years brought construction to a virtual standstill across Europe
and the U.S.
during the first two months of the year and triggered a decline in sales
volumes on nearly all of Wienerberger’s markets.
Revenues fell by 22% to €279.5 million (approximately $353.7
million), and operating EBITDA was negative at €22.6 million (~ $28.6 million).
“We postponed the start of production in our plants at the beginning of this
year because of the unusually long winter, and the costs of these extended
standstills had an added negative effect on our earnings,” said Heimo Scheuch,
CEO.
The development of business from January to March was
characterized by weak demand in almost all markets. Eastern
Europe registered the strongest declines due to the exceptionally
long winter, with lower volumes in all countries. Revenues also fell in Western
Europe, but to a lesser extent, while Great Britain was the only country
in the group to record a volume increase of 19% for the first three months. New
residential construction in the U.S.
also remained weak throughout the reporting period as a result of the weather.
In Central-East Europe, the unusually long winter and the
slow pace of new residential construction during March were responsible for a
36% drop in revenues to €59.8 million (~ $75.7 million). The costs of extended
plant standstills and lower average prices resulted in negative operating
EBITDA of €12.8 million (~ $16.2 million) for the first quarter of 2010. The
decline in average prices reflected a more flexible pricing policy in Eastern Europe, with adjustments from the second to
fourth quarter of 2009. Accordingly, the price level for the first three months
of 2010 was below the comparable prior-year period.
“Segment results were negatively influenced by the adverse
market and weather conditions, as well as the costs of extended plant
standstills,” said Johann Windisch, chief operating officer. “Market forecasts
for this region are particularly difficult since we cannot determine exactly what
part of the earnings decline is attributable to the bad weather and what part
reflects market weakness. We cannot exclude further revenue declines in
Central-East Europe during 2010, whereby we are more optimistic for Poland, Bulgaria,
Romania, and Southeastern
Europe than for Hungary, the
Czech Republic,
and Slovakia.
In these three markets, we expect that new building materials capacity will
further increase competitive pressure, which we intend to counter with a
flexible pricing policy and the launch of premium products.”
Central-West Europe reported a 16% decline in revenues to
€55.9 million (~ $70.7 million) for the first quarter, as well as negative
operating EBITDA of €5.9 million (~ $7.5 million). The costs of extended plant
standstills were the main cause of the negative earnings in this segment. “Italy and Switzerland
reported moderate declines, but Germany
followed two weak months with a slight increase in volumes during March,” said
Windisch. “The moderate rise in building permits over the past few months
supports forecasts for recovery on the German residential construction market
in 2010 from the very low level that has characterized recent years.
Central-West Europe should therefore see a moderate improvement in volumes and
earnings during the coming year, which will be based on positive impulses from
residential construction in Germany.”
Revenues in North-West Europe fell by 18% to €141.2 million
(~ $178.7 million) in the first quarter of 2010. Despite a slight year-on-year
improvement during March, all product groups reported lower sales volumes on
all Continental European markets for the first quarter. The development of
business in Great Britain
was positive, with increasing signs of modest recovery in new residential construction.
Wienerberger sold 19% more facing brick and roof tile at lower average prices
than in the weak first quarter of the previous year.
“The decline was not brought about by a price reduction, but
by a shift in the product mix,” said Windisch. “Project developers have
increased their use of commodity products, which are naturally less expensive.
This changeover was reflected in an above-average rise in these products as a
share of our total volumes, as well as a lower average price for facing bricks.
I would not call this a trend, but a temporary occurrence.”
Windisch expects a slight improvement in Great Britain and France
for the full year, as well as stable demand for building materials in Belgium.
His outlook for the Netherlands
is somewhat more pessimistic due to the limited availability of project
financing and government cost-cutting programs, and he expects a further
decline on the new residential construction market in this country.
The demand for brick in the U.S. also decreased at the
beginning of 2010 due to the unfavorable weather, but it stabilized at a low
level in March. Revenues in the North America
segment consequently fell by 21% to €27.8 million (~ $35.2 million), but
operating EBITDA improved from negative €5.8 million (~ $7.3 million) in the
first quarter of 2009 to negative €3.8 million (~ $4.8 million) for the
reporting period. “In the USA
we expect a bottoming out during the first half-year and moderate recovery in
new residential construction during the second six months,” said Windisch.
“Based on stable volumes and a substantial increase in capacity utilization
over the 2009 level, operating EBITDA should be positive in 2010.”
Seasonal effects prevent the first quarter from providing a
reliable basis for full-year forecasts in the construction industry. “That
means results for the first three months give us only limited information for
predicting the development of business during the rest of the year,” said
Scheuch. “I do not believe we will be able to completely make up for the weak
start into 2010, but expect a substantial improvement in earnings this year as
a result of the anticipated savings from the restructuring program and a
price-related reduction in energy costs. Net debt rose during the first quarter
due to seasonal factors but with gearing of 23% we still have one of the
strongest balance sheets in the construction industry. We intend to use this
financial strength and our leading role in the brick sector to launch new
products in existing and new markets, and thereby expand our positions.”
Additional details are available at
www.wienerberger.com.
