Frequently asked questions

Wienerberger is the world’s largest producer of bricks and Number 1 in the clay roofing market in Europe. Wienerberger runs 227 plants in 27 countries. Wienerberger is a pure free float company with a market capitalisation of € 1,502 mill. at year-end 2009 and is listed on the Vienna Stock Exchange (WIE).

Wall: Clay blocks are used for load-bearing exterior and interior walls as well as for non-load-bearing partition walls or fill work. A wall made of clay blocks is normally not seen after completion because it is covered with plaster or paneling.

• Wienerberger's clay block business is run under the brand POROTHERM (POROTON in Germany)
• In FY 2009 it was responsible for 34% of Wienerberger's revenues.

Facade: Facing bricks are used in visible brick architecture: facades and interior walls are made from or covered with these bricks. The necessary functions of the load-bearing walls are provided by hollow bricks or other building materials such as concrete or calcium silicate blocks.

• Wienerberger's facing brick business is run under the brand TERCA
• In FY 2009 it was responsible for 30% of Wienerberger's revenues.
  

Roof: Clay roof tiles are used primarily to cover pitched roofs. They not only provide sustainable protection for houses from the weather, but also represent an important design element for architects. Clay roof tiles are not only used in new construction, but also to a large extent in the renovation of existing buildings.

• Wienerberger's clay roof tile business is run under the brand KORAMIC
• In FY 2009 it was responsible for 25% of Wienerberger's revenues.
  

Surface: Pavers by Wienerberger are produced as clinkers made of clay or as concrete pavers and slabs. These materials are used by homeowners (for driveways, paths, terraces and garden design) as well as in public areas (sidewalks, open areas and pedestrian zones).

• Wienerberger's paving business is run under the brands TERCA (clay) and SEMMELROCK (concrete)
• In FY 2009 it was responsible for 11% of Wienerberger's revenues.

Wienerberger operates in four regions¹⁾:

• Central-East Europe (32% of revenues)
• Central-West Europe (22% of revenues)
• North-West Europe (40% of revenues)
• Northamerica (8% of revenues)
  

¹⁾ Revenues 2009

In recent years Wienerberger has experienced significant growth and since 1986 has evolved from a local brick maker to the Number 1 brick manufacturer in the world and Number 1 in the clay roofing market in Europe. In addition it holds leading positions in the European pavers market. Since then, the number of production facilities has risen from 11 to 227 plants in 27 countries across Europe and the USA. In 1999, Wienerberger advanced expansion activity to become a global player through the acquisition of General Shale in the USA.

The brick and clay roof tile business is capital intensive. It requires a high initial investment and generates stable cash flows. Maintenance capex in the core business averages roughly 60% of depreciation in normal business years. The resulting free cash flows can be used to reduce net debt, pay dividends and invest in growth projects. In the years before the economic crisis, our strategy was focused on profitable growth in the core business through acquisitions and new plant construction. This strategy was adjusted following the spread of the financial crisis to Europe and the resulting change in the economic environment, and the maximization of cash flows to strengthen and protect liquidity was defined as the top priority.

In order to reach this goal, we implemented a strict cost reduction program that
included proactive capacity and working capital management, the reduction of
administrative and selling expenses, and a cutback in investments. Our primary
task was to adjust fixed costs as quickly as possible to reflect the deteriorating
market climate and declining sales volumes. Since summer 2008 we have closed or mothballed a total of 58 primarily older plants, including 31 in 2009. Extended plant standstills were also ordered in nearly all countries to reduce inventories as part of our active working capital management. These steps did not – and will not - impair our supply capability, since production was shifted to other plants. Investments were limited to € 134 million during 2009 (2008: € 506 million), with € 71 million directed to growth projects. Only previously started projects were completed, and
no new investments were committed. In 2010 we expect to spend a further € 25 million on growth investments. Maintenance capex was also cut to a one-time minimum of € 63 million (or 33% of depreciation) during the reporting year. However, this did not endanger the performance capability of our plants or shift capex requirements into the future. We expect to spend roughly € 95 million (nearly 50% of depreciation) on maintenance, which will result in a total investment of
approximately € 120 million for 2010. The measures implemented during 2009 brought cost savings of € 160 million as well as a decrease of € 224 million in working capital, and consequently supported a reduction in net debt (also due to the capital increase) from € 890 million to € 408 million.   Wienerberger now has lean
cost structures as well as a solid balance sheet and – after the capital increase – is stronger than ever. We intend to use this leading position for further, above all organic growth.

Our reactions to the changed market environment also include a reduction in investments to a minimum. This decision reduced growth investments from the originally planned volume of more than € 500 million to roughly € 407 million in 2008, and in 2009 we expect to spend approximately € 100 million to complete the projects still in progress. Maintenance capex was also reduced: instead of the budgeted € 120 million, we only spent about € 98 million for maintenance in 2008 and are budgeting approximately € 80 million for the coming year. However, it should be noted that these measures will in no way endanger the technical capability and performance of our plants.

Generally, the brick and roof tile industries are made up of local producers that serve regional markets. There are several regional manufacturers and only very few international producers.
 
The brick business requires high initial investment and relatively low subsequent replacement investments. It is a seasonal industry, with low levels of sales occurring during the winter months. The primary market segment of the Group’s products (approximately 80% of revenues) is the new residential housing construction. The choice of products typically depends on traditions and the availability of raw materials and climate. Commercial construction (e.g. office or public buildings) and renovation each account for 10% of revenues.
 
For bricks, the competition consists of producers of brick substitute products like aerated concrete or limestone blocks and other brick manufacturers. For clay blocks, Wienerberger is the world’s largest producer and does not have any competing international industrial groups. Wienerberger’s brick competition arises mainly from family businesses and smaller emerging groups. For facing bricks, Wienerberger is number one in Europe and faces competitors such as CRH and Hanson (HeidelbergCement) and family businesses. In the USA, Wienerberger is a co-leader with Boral, and other competitors are ACME, CRH and Hanson (HeidelbergCement). The big five account for two thirds of the facing brick market share in the USA.
 
Within its roof tile activities, the Group competes with producers of substitute products for pitched roofing like metal covering, asphalt shingles or natural stone and with other clay and concrete roof tile manufacturers. In this product area, Wienerberger’s competitors in Europe are Lafarge and Etex (businesses of global and European scale) as well as Imerys and Terreal (both in France and surrounding countries). Consolidation in the roof tile industry is further advanced than in the brick industry.

This decision Demand trends are best illustrated by the residential construction sector, which accounts for the vast majority of hollow brick and facing brick demand worldwide. The remainder represents commercial and public building demand and renovation for roof tiles. Brick sales are mainly driven by single and two-family housing starts. Due to its exposure to the residential construction sector, the brick industry is subject to typical macroeconomic drivers such as GDP, consumer confidence and to a lesser extent long-term interest rates (i.e. mortgage rates). In addition, weather is an important external factor affecting demand, as bad weather negatively impacts house builders ability to operate.