May 18 2006
Wienerberger AG (Vienna, Austria) said that it again demonstrated the success of its profitable growth strategy with results for the first quarter. In spite of an extremely severe winter in large parts of Europe, the company reported revenues increased by 15% to €383.9 million. EBITDA improved by a more reserved 2% to €55.6 million.
The development of business was influenced by a sharp rise in energy costs compared to the first three months of the past year and price increases that took effect only during the first quarter of 2006. “We used 2005 to further strengthen our market positions with investments in bolt-on projects and the optimization of our production capacity. The two-digit top line growth and moderate improvement in EBITDA during the first three months show that we have chosen the right approach“, commented Wolfgang Reithofer, CEO of Wienerberger AG, on the figures presented by the company.
At the same time Mr Reithofer explained that the first quarter had little predictive value for the full year in the building materials industry due to seasonal reasons because results are highly dependent on weather conditions in the individual markets.
The growth in revenues during the first quarter resulted primarily from favourable developments in the North-West Europe and USA segments. Central-East Europe was able to record a significant improvement in revenues over the comparable prior year period, but earnings declined because of a sharp rise in energy costs as well as price increases that were only implemented in the course of the quarter. In the Central-West Europe segment, Italy and Switzerland showed further sound development and Germany also contributed to the improvement in earnings.
EBIT recorded by the Group remained stable at €16.1 million. However, profit before tax fell 37% below the prior year level to €6.5 million because of a decline in financial results due to higher interest expenses to finance expansion and lower income from associates. The tax rate was 24.7% compared to 9.9% in 2005, and earnings per share totalled €0.08, versus €0.13 for the first quarter of 2005.
Looking to the future, Wienerberger expects a significant improvement in the general economic environment during 2006. Energy costs are forecast to rise by roughly €45 million over the previous year, “but we believe we will be successful in largely offsetting these higher expenses with the selling price adjustments that were made during the last three months“, added Mr Reithofer. “In addition, we were able to secure 48% of required gas supplies for the current year by the end of April at prices that are below the basis for our calculations. A further 23% of our required energy supplies are purchased on regulated markets in Eastern Europe and cannot be negotiated.“
The development of brick markets provides Wienerberger with grounds for
optimism: in addition to Poland and Hungary, further growth in residential construction is also forecast for other countries in Eastern Europe, especially Romania. In Western Europe the company looks forward to a positive or at least stable trend. Construction activity in Germany could benefit from advance purchases as well as the expiration of a federal subsidy for first-time home builders in 2006. In Belgium and France Wienerberger expects new residential construction will remain strong and Holland should register moderate growth. Housing starts are forecast to remain at a stable level in Great Britain while brick shipments in the USA are not expected to weaken over the next months even if new residential construction should show a slight overall decline.
“Our strategy for this year is focused on continued growth. We are pursuing a large number of bolt-on projects in all regions and plan to invest at least €250 million in this program during 2006. From the current point of view, we will invest this money mainly on the construction of new plants and the expansion of capacity. Of course, we will also evaluate larger acquisitions, but will only complete these transactions if they are interesting from a strategic standpoint and, above all, create value. Against this backdrop and, based on the development of earnings during March, I am optimistic that we will be able to meet our goal to increase earnings by 10% this year“, stated Mr Reithofer in conclusion.