Against the backdrop of sound development in Central-Eastern Europe and a significant downturn in the U.S., Great Britain and Germany, Wienerberger AG was able to increase revenues by 3% to €1,263.6 million (~ $1,857.2 million) for the first half of 2008. A strong first quarter with revenue growth of 13% was followed by a second quarter decline of 4% below the record prior year level. Group EBITDA fell 8% to €235.6 million (~ $346.3 million) and EBIT was down 18% to €136.0 million (~ $200 million) for the first six months of 2008.
“Construction activity in Eastern Europe continued to accelerate during the first six months of 2008, but the relevant macroeconomic conditions on a number of key Wienerberger markets deteriorated substantially,” said Wolfgang Reithofer, chief executive officer. “Inflation and higher energy costs also triggered a steady rise in production costs, which we could not fully offset through price adjustments. Standstills and the costs of idle capacity had a negative effect on results for the first six months. Wienerberger is a highly cost-efficient company; we generate high cash flows and have a broad geographic portfolio, which allows us to moderate the effects of weakness on individual markets. We cannot disengage from the developments in these markets, but we are well-equipped to also maintain our position in difficult times.”
Wienerberger is adjusting its production, and thereby also its fixed cost basis, as best as possible to meet current conditions through accelerated optimization measures and active capacity management. In addition to restructuring in weak markets like Germany and Great Britain, mid-term optimization measures that were scheduled for the rest of the plant network will now be moved forward. Smaller and older factories will be closed and the production will be shifted to larger, more cost-efficient plants. These actions will involve the mothballing or shutdown of 25 plants. Up to seven plants will be closed in Germany and a total of 10 will be removed from the network in North-West Europe. As a reaction to the difficult market environment in the U.S., the extensive capacity adjustments of the past two years were followed by the shutdown of two further plants. The resulting restructuring costs are estimated at approximately €25 million (~ $37 million) in 2008 and will also include a further €25 million of write-downs. These measures are expected to reduce costs by roughly €30 million (~ $44 million) beginning in 2009.
Wienerberger expects the current climate of rising interest rates, higher inflation and credit shortages will trigger further weakness on European markets during the remainder of this year. For North-West Europe, the Group forecasts a slight decline in earnings as a result of the market slump in Great Britain. In Central-West Europe and North America, the costs of idle capacity and standstills will have a negative effect on EBITDA. Continued growth in Poland, Romania, Bulgaria and Russia, as well as the stable development of new residential construction in the Czech Republic and Slovakia, should make it possible for Central-East Europe to match the prior year level of earnings, despite weaker residential construction activity in Hungary. In addition, the company is forecasting price-related increases of €45 million (~ $66 million) in energy costs for the full year.
“I expect a decline of up to 15% in operating EBITDA for 2008,” said Reithofer. “However, this would still represent one of the best operating results in the history of Wienerberger. We plan to distribute an attractive dividend to shareholders, which will match or be slightly lower than 2007. The remaining cash flows will be invested selectively to continue our expansion strategy, above all in the growth regions of Eastern Europe and the emerging markets, in order to safeguard the sustainable development of Wienerberger over the long term. We intend to adjust the pace of our investments to reflect economic developments. Our plans call for nearly €450 million (~ $661 million) of growth projects this year and roughly €200 million (~ $294 million) in 2009.”
Additional details are available at www.wienerberger.com