Sep 6 2006
Wienerberger AG (Vienna, Austria) was able to continue its profitable growth course and further expand its market positions during the first half of 2006. Group revenues rose by 10% to €1.012 billion, supported by a 7% improvement in sales volumes and an average increase of 3% in prices. The largest increase in sales volumes was recorded by hollow bricks with a plus of 10%, followed by clay roof tiles with 7% and facing bricks with 3%. However, said Wienerberger, this sound development will only be reflected in earnings at a later date – EBITDA for the first six months declined by a slight 2% to €196.9 million.
“Our growth strategy has been successful. Alone in the last 12 months, we have launched production at ten new plants. However, start-up and integration costs in the areas of production, administration and sales have had a temporary impact on earnings“, explained Wolfgang Reithofer, CEO of Wienerberger. Energy costs also rose steadily throughout the first half of the year and caused an additional charge of €32 million, whereas selling prices were adjusted gradually over this time. The reduction of inventories to optimize working capital led to a decrease in earnings but, at the same time, supported a strong improvement in free cash flow. Moreover, the unusually long winter affected production efficiency and negatively impacted earnings. “Based on the current development of sales volumes in all areas of business, we are confident that our company will record sound development for 2006. Our goals for the full year remain unchanged“, added Reithofer.
Central-East Europe recorded the largest growth in revenues at +16%, with sales volumes of hollow bricks exceeding the prior year level by 13%. In Central-West Europe Wienerberger was able to sell more products and raise prices slightly in Germany, but sales volumes decreased in Italy. In total, this segment reported a plus of 7% in revenues compared to the previous year. The 9% growth in revenues recorded by North-West Europe was due above all to an increase in sales volumes of hollow bricks in Belgium and France as well as higher price levels. In the USA Wienerberger registered a slight decline in sales volumes but was able to raise prices despite first signs of weakness on the market, for an increase of 8% in revenues.
Besides organic development, growth projects represent a key element of the Wienerberger expansion strategy. The group will spend more than €250 million on its current growth programme during 2006. In addition Wienerberger took a major expansion step in the USA during June with the acquisition of the Robinson Brick Company (RBC). “In the past, our US activities were concentrated east of the Mississippi. With RBC we have found an ideal geographical addition in the western part of this country, and expect roughly US$5 million of synergies through the integration with General Shale beginning in 2008“, commented Reithofer. “In mid-August we also announced an offer to acquire the publicly traded Baggeridge Brick PLC in Great Britain”, indicated Reithofer. Baggeridge operates five plants, and will create attractive opportunities for synergies and growth on this largest facing brick market in Europe. Growth projects will total €400 to €550 million in 2006, depending on the possible acquisition of Baggeridge Brick. Financing will be provided from cash flow as well as additional debt.
EBIT for the group totalled €116.8 million, or 5% less than the comparable period of 2005, due to higher depreciation caused by last year’s investments. Financial results totalled -€12.9 million, compared to -€11.7 million in the first half of 2006. Due to the higher tax rate of 21.9% (2004: 20.4%), profit after tax declined 9% to €81.1 million. Earnings per share totalled €1.09 compared to €1.20 during the first six months of 2005. The weighted average number of shares outstanding remained unchanged at 73.3 million. The acquisition of Robinson Brick will only be reflected in earnings during the second half of this year.
“We assume that the previous market developments will continue throughout the last six months of this year and the decline in US housing starts will only have a limited impact on brick demand. During the second half of 2006, Wienerberger will focus on the optimization and integration of new business activities. Current forecasts lead me to expect an additional annual charge of roughly €50 million from the increase in energy prices. For this reason, we are intensifying our efforts to use alternative energy sources and steadily reduce our dependence on primary energy. We also plan to offset these higher costs by again raising our selling prices in some regions. We are confident that the favorable development of sales volumes will allow Wienerberger to record a further improvement in earnings“, added Reithofer in conclusion.