- THE MAGAZINE
Wienerberger AG recorded a decline in revenues and earnings for 2008 as a result of the significant deterioration of the global economy in the wake of the financial crisis. Group revenues declined 2% to €2,430.1 million (approximately $3,074.8 million), and operating EBITDA before restructuring costs fell 20% to €440.1 million (~ $556.9 million). Operating EBIT before restructuring costs decreased 32% to €239.8 million (~ $303.4 million).
The Group recorded non-recurring restructuring costs of €55 million (~ $70 million), as well as impairment charges of €16.7 million (~ $21.1million), primarily related to goodwill in Great Britain. The company recorded also a one-off provision of €10 million (~ $13 million) for a fine imposed by the German antitrust authority for alleged agreements in violation of competition law (Wienerberger has filed an appeal).
As expected, the fourth quarter was substantially weaker than the previous months. From October to December 2008, revenues fell 15% below the particularly strong prior year to €503.3 million (~ $636.8 million), EBITDA by 41% to €75.4 million (~ $95.4 million) and EBIT by 60% to €27.4 million (~ $34.7 million).
“The construction sector was relatively stable in Western Europe at the beginning of 2008, while business was still growing in Eastern Europe,” said Wolfgang Reithofer, chief executive officer. “The spread of the financial crisis to Europe first led to the collapse of new residential construction in Great Britain. In the course of the year, it also had a significant impact on the economy and construction activity in most other Western European countries. The economic climate in Eastern Europe remained sound during the largest part of 2008, but the final months showed that the crisis had also started to take hold of this region. Central-East Europe reported a slight decline of 7% in EBITDA, which is still very good taking into account the high prior-year level and the continuing strength of the Polish market. The development of business in North America was much weaker than expected (EBITDA down 57%). A disappointing new residential construction market in Germany and rising pressure on prices in Italy continued to have a negative effect on Central-West Europe (EBITDA down 44%). Further declines in Great Britain, which have negatively influenced North-West Europe (-22 % EBITDA) have contributed to the 20% year-on-year drop in operating EBITDA.” The 2% decline in revenues reported for 2008 represents a decrease of 4% in sales volumes combined with price increases of 2%.
“2008 marked a clear turning point: The crisis has caused extreme uncertainty on financial markets but-and this is much more important-also in the real economy and among consumers,” said Reithofer. “We quickly took the right steps and implemented an extensive range of measures: since summer 2008, we have closed a total of 27 plants and shut down 11 production lines on a temporary basis. In addition, we also implemented a cost reduction program to cut administrative and selling expenses throughout the Group. The costs for these measures totaled €55 million (~ $70 million), of which €33 million (~ $42 million) represent cash costs and €22 million (~ $28 million) special write-downs.
“Extensive temporary plant shutdowns during the winter period formed an integral part of our active working capital management. Additionally, we have put our growth program on ice. We have not started any new projects and are only continuing work to complete the ones already in progress (these investments equaled €407.2 million, about $515.2 million, in 2008). We were also able to reduce maintenance capex from the prior year level to €98.4 million (~ $124.5 million).”
Wienerberger expects the financial crisis will also have a significant negative influence on the development of the real economy in 2009 and consequently lead to a further deterioration of the economic environment. For Central-East Europe, which only began to feel the impact of the crisis in recent months, the company forecasts substantially weaker market development this year, but high-quality products and an earnings-driven price strategy should allow Wienerberger to do better than its competitors in these countries. In the markets of North-West Europe, such as Belgium and the Netherlands, Wienerberger also expects a weak operating environment. A decline in new residential construction in France should be moderated by a further increase in the market share of clay blocks at the expense of concrete. Following the collapse of the construction sector in Great Britain, there are still no signs of recovery in this country during 2009. Current information also indicates that there are no signs of an upward trend in Central-West Europe because of the weakness in Germany and the strong pressure on prices in Italy. In North America, a further decline of new residential construction is expected.
“Economic forecasts that are revised on an almost daily basis make it clear that the crisis has not yet bottomed out,” said Reithofer. “From the current point of view, it is impossible to predict just how long and how deep this crisis will be. We still consider the protection of liquidity and our healthy financial base to be our most important objective. Our strategy was adjusted during the last year to meet this goal, and the maximization of cash flow was defined as our top priority. In 2009, we will also pursue this goal, take clear steps and use further shutdowns to ensure that our plant network is able to meet the changes in markets and sales volumes. We will also continue to focus on active working capital management and the reduction of fixed costs. Maintenance capex will not exceed €80 million (~ $101.2 million) this year, and investments to complete projects in progress will total a maximum of €100 million (~ $127 million). I am convinced that this strategy will place us on a solid foundation to master this crisis.”
Additional details are available at www.wienerberger.com.