Snowy winter leaves mark on first quarter results 2010

Vienna, May 4, 2010 – Wienerberger AG, the world’s largest producer of bricks and the number one in clay roof tiles in Europe, recorded an expected year-on-year decline in revenues and earnings for the first quarter of 2010. The most severe winter in more than 20 years brought construction to a virtual standstill across Europe and the USA during the first two months of the new year and triggered a decline in sales volumes on nearly all Wienerberger markets. Revenues fell by 22% to € 279.5 million and operating EBITDA was negative at € 22.6 million. “We postponed the start of production in our plants at the beginning of this year because of the unusually long winter, and the costs of these extended standstills had an added negative effect on our earnings“, explained Heimo Scheuch, Chief Executive Officer of Wienerberger AG, on the results presented today. The development of business from January to March was characterized by weak demand on almost all markets. Eastern Europe registered the strongest declines due to the exceptionally long winter, with lower volumes in all countries. Revenues also fell in Western Europe, but to a lesser extent, while Great Britain was the only country in the Group to record a volume increase of 19% for the first three months. New residential construction in the USA also remained weak throughout the reporting period as a result of the weather.

Operating EBIT falls to € -69.5 million
Operating EBIT was negative at € 69.5 million (2009: € -29.0 million). After adding tax benefits at a tax rate of 12.7% (2009: 16.5%), profit after tax fell from € -61.0 million in the prior year to € -69.0 million for the reporting period. Based on a 40% rise in the number of shares outstanding (weighted) after the capital increase, adjusted earnings per share totaled € -0.68 (2009: € -0.39). 
  
Low gearing of 23% despite seasonal rise in net debt
Despite a seasonal increase in net debt from € 408.0 million at the beginning of the year to € 584.8 million as of March 31, 2010, Wienerberger has comparatively low gearing of 23%. First quarter results do not include the bond issued in March 2010 because the transaction was settled on April 7. As a result of the strong over subscription, Wienerberger increased the issue volume from the originally planned € 200 million to € 250 million. “The demand for the bond reached nearly € 460 million, which significantly exceeded our target. I view this as a strong sign of investors’ confidence in Wienerberger“, indicated Willy Van Riet, Chief Financial Officer of Wienerberger AG, on the successful placement. When asked about the reasons for the issue, Van Riet indicated that, “Our goals were to reduce mid-term financing requirements and further improve the term structure of our loans. We therefore used part of the funds from the new bond to prematurely repurchase roughly € 140 million of the 2005 bond that is due in April 2012, and will use the remaining proceeds to repay other financial liabilities. Important objectives for these transactions from my point of view were to maintain our strong balance sheet and capital structure and to hold gearing at a low level.“

Group equity totals € 2,510.0 million

Cash flow from operating activities was negative at € 111.6 million due to the decline in earnings and the seasonal increase in working capital. “We were able to cut investments for maintenance and the completion of new projects to € 20.1 million, which is less than half the amount spent during first quarter of 2009. The after-tax loss was more than offset in comprehensive income by € 75.7 million of positive currency translation differences. Group equity declined from € 2,547.0 million at the beginning of the reporting year to € 2,510.0 million, above all due to the payment of the hybrid coupon“, commented CFO Willy Van Riet.   Weather-related revenue and volume declines in Central-East Europe In Central-East Europe, the unusually long winter and the slow pace of new residential construction during March were responsible for a 36% drop in revenues to € 59.8 million. The costs of extended plant standstills and lower average prices resulted in negative operating EBITDA of € 12.8 million for the first quarter of 2010. The decline in average prices reflected a more flexible pricing policy in Eastern Europe, with adjustments from the second to fourth quarter of 2009. Accordingly, the price level for the first three months of 2010 was below the comparable prior year period. “Segment results were negatively influenced by the adverse market and weather conditions as well as the costs of extended plant standstills“, explained Johann Windisch, Chief Operating Officer of Wienerberger. He continued his analysis of developments in Central-East Europe by adding, “Market forecasts for this region are particularly difficult since we cannot determine exactly what part of the earnings decline is attributable to the bad weather and what part reflects market weakness. We cannot exclude further revenue declines in Central-East Europe during 2010, whereby we are more optimistic for Poland, Bulgaria, Romania and Southeastern Europe than for Hungary, the Czech Republic and Slovakia. In these three markets we expect new building materials capacity will further increase competitive pressure, which we intend to counter with a flexible pricing policy and the launch of premium products“.

Slightly higher volumes in Germany since March

Central-West Europe reported a 16% decline in revenues to € 55.9 million for the first quarter as well as operating EBITDA of € -5.9 million. The costs of extended plant standstills were the main cause of the negative earnings in this segment. “Italy and Switzerland reported moderate declines, but Germany followed two weak months with a slight increase in volumes during March“, indicated Johann Windisch. “The moderate rise in building permits over the past few months supports forecasts for recovery on the German residential construction market in 2010 from the very low level that has characterized recent years. Central-West Europe should therefore see a moderate improvement in volumes and earnings during the coming year, which will be based on positive impulses from residential construction in Germany.“
 
Great Britain with double-digit volume growth in first quarter

Revenues in North-West Europe fell by 18% to € 141.2 million in the first quarter of 2010. Despite a slight year-on-year improvement during March, all product groups reported lower sales volumes on all Continental European markets for the first quarter. The development of business in Great Britain was positive, with increasing signs of modest recovery in new residential construction. Wienerberger sold 19% more facing bricks and roof tiles at lower average prices than in the weak first quarter of the previous year. In response to a question on the weaker average prices, Johann Windisch explained, “The decline was not brought about by a price reduction, but by a shift in the product mix. Project developers have increased their use of commodity products, which are naturally less expensive. This changeover was reflected in an above-average rise in these products as a share of our total volumes as well as a lower average price for facing bricks. I would not call this a trend, but a temporary occurrence.“ Windisch expects a slight improvement in Great Britain and France for the full year as well as stable demand for building materials in Belgium. His outlook for the Netherlands is somewhat more pessimistic due to the limited availability of project financing and government cost cutting programs, and he expects a further decline on the new residential construction market in this country.

USA remains weak
The demand for bricks in the USA also decreased at the beginning of 2010 due to the unfavorable weather, but stabilized at a low level in March. Revenues in the North America segment consequently fell by 21% to € 27.8 million, but operating EBITDA improved from € -5.8 million in the first quarter of 2009 to € -3.8 million for the reporting period. Johann Windisch describes the outlook as follows: “In the USA we expect a bottoming out during the first half-year and moderate recovery in new residential construction during the second six months. Based on stable volumes and a substantial increase in capacity utilization over the 2009 level, operating EBITDA should be positive in 2010.“

Strategy and Outlook

Asked about the outlook for 2010, CEO Heimo Scheuch referred to the fact that seasonal effects prevent the first quarter from providing a reliable basis for full year forecasts in the construction industry. He continued by stating, “That means results for the first three months give us only limited information for predicting the development of business during the rest of the year. I do not believe we will be able to completely make up for the weak start into 2010, but expect a substantial improvement in earnings this year as a result of the anticipated savings from the restructuring program and a price-related reduction in energy costs. Net debt rose during the first quarter due to seasonal factors but with gearing of 23% we still have one of the strongest balance sheets in the construction industry. We intend to use this financial strength and our leading role in the brick sector to launch new products in existing and new markets, and thereby expand our positions.“
  
 
The Report on the First Quarter of 2010 with detailed information is available for download below.   

For additional information contact:
Barbara Braunöck, Head of Investor and Public Relations
T +43(1)60192-471 | communication@wienerberger.com