Full Year 2023 Rockwool A/S Earnings Call
Okay.
Good day to everyone and welcome to <unk> conference call regarding the the salt for full year 2023.
My name is Kim your line is I'm. The CFO of hopefully is today I'm pleased to present CEO in speed lesson.
For the first part of this call all participants will be in a decent only moat.
As a reminder, this conference call is being recorded.
First in speakers I will go through our presentation and give you an update on the results for the full year and fourth quarter of 2023 afterwards, we'd be weighted to answer all your questions there.
Before I hand over the word trillions I must ask you to notice type two which is a forward looking statement. Please be aware that this presentation contains uncertainties.
Now we can go to the next slide which is slide three interviews and I will now handle the way to you.
Good morning.
I would just say a few who arts to this slide before we move on to the quarter saw.
When we went into this year be burned a little bit more pessimistic about the outlook. There was a lot of macroeconomic factors some quite big on Occupancies restart.
We started off with guiding at a decline of up to 10% on the top line in.
Margins around 10% to 12% in us we have progressed through the years.
We have kind of improved the quarters versus the previous year and this last quarter boss.
Yes.
The strongest quarter of the year compared to the previous year on be ended up down minus 4% top line for the whole year.
And.
Around 14% 14, 3% EBIT margin for the full year. So we are we are satisfied with let's look into the next slide the accused tier four.
Going through the numbers here is the first the first quarter of 'twenty to 'twenty, four, but we actually had a bit of growth.
Like for like Yeah.
Process.
We were up 2% we have quite a few.
Negative currency effects spot.
And the happy to see that every month or quarter, how to growth the bottom volumes and Oh I'll say, it's so that's nice.
Comparing Brad to diverse song.
So Brad the differences in different regions. So in some cases, rather might've played into December.
But if you look at the overall temperature and read the chart.
Aggregated it was pretty much the same weather.
Trying to trend to and trying to trend to three at the end of the year.
Yeah.
The EBITDA margin in Q4 landed at 14.4%. So it's obviously significantly up from the previous year, but we still have that race.
Race between raising prices.
And it just shocked that started in Q3 last year or the previous years 'twenty to 'twenty two.
That said proceeds during that we had quite a quite a big one off in Q4, our factory the biggest one being the factory close closer of the factory, we acquired a few spike in Sweden.
The profit debated took was good in Q4.
Looking at net profit that that just hold the only you know basically flat thus greatly impacted by by the unrealized exchange rate losses, but the underlying layer on the EBITDA line, but a bit to such rights.
Good.
Kim can answer more questions on that later, let's move on to I think the skip slide five fully around the go to slide six.
I'm looking at the quarter, we have had a 2% growth and <unk>.
Basically both businesses more or less the same so marginal difference at 4% exchange rate difference.
The growth in systems.
Came in at.
The slightly lower than the installation.
And the reason for that are basically two main contributing factors to wellness rock core North America Barbie.
<unk> done quite well on installation in North America that continuous.
But on the rock phone aside we have suffered a little bit on all tied to how do we read a good top line quarter and then overall rock panel has some tied to a great quarter, and Kurt and Tussled topline it hasn't been anything until some market share or anything like that it's more than their segments.
<unk>.
Suffering from the current downturn in the residential on their type of project. So it's it's it's just up there a little bit more exposed both of them have experienced them there are significant businesses.
More than double digit declines in Q4.
If you look into the regions.
Western Europe minus 4%.
Yeah, there you have some contraceptive doing well, Spain, Norway U K.
But obviously countries like.
Germany.
The whole of Nordics, Denmark, Sweden fin dumbed down quite a lot.
So generally breast in Europe did and didn't do rounded with a few exceptions are there are on the other hand, there wasn't anything surprising when we looked at the quarter before the quarter.
Pretty much what we expected to happen or a little bit better played out so no surprises and not in eastern Europe, a whole lot of countries that are doing quite well in Q4 part of that is that it was a very very challenging quarter last year.
How destocking slowdown in a market energy prices son, so so part of that just because of the comparable.
Also some of these markets have been different a different win win to pattern compared to last year, but but anyhow eastern Europe positive up 22%.
North America, and Asia summed up.
China also normal to say small, but China is not doing well and if you read.
The financial press proceed that China is still a bit of trouble is so small that for us it doesn't really matter as.
Asia overall healthy double digit development.
You don't need a P M.
That's fine and then in North America, we had a quite equaled Canada U S growth.
But we have a capacity constraint off after district, we have been a bit of a back on the back foot fab backlog, we need to work through and we could do we could not deliver as much as we want it done so it wasn't a market constraint it was a deliberate constraint.
Kept up single digit.
Slide eight profitability.
Yeah.
We experienced a quarter, where compared to Q3 energy prices remain stable there are some differences.
Some of that in Utah, and it talks about talk a little bit somewhat down but in aggregate. They they were stable.
And then on pricing.
Pat for Q3.
Pricing was stable, we didn't shift pricing up not down roughly stable and then we do with the.
A stable cost position them then.
Made it.
Improve the profitability the comparable to last year. If you go back to Q3 'twenty two in Q4, 'twenty to dull smog and especially in Q3, that's where the energy energy shocked kicked in on the bar incorrectly price to deal with that nor chance to adapt so quickly and then we stop.
To get to drive it.
In Q4 last year still on the lower level and then throughout the year rehab, there and got a better balance between cost and price although the price in this year, you could say on margin or the off or flattish.
Slide nine.
Yeah.
And nothing really to comment there except for that we have the 60 million euro.
System Division of one offs.
And as you know, we very seldom talk about one offs, but when it's this magnitude we need to.
Two.
To kind of make it visible to us so it's not that the business has deteriorated apart from that it is a one off and we also see that in our.
New small business segments. For example, we have two incubation businesses walnuts prefab houses and the other is a rain water systems when when times are tough, especially the prefab houses that goes mainly into residential.
That software, so a little bit extra extra marching about time so we.
We see that we lose a little bit to margin by having those businesses. It doesn't mean, you're going to be going to stop doing them, we keep working but it does impact the margins a little bit.
Slide 10.
Investment activities. If you just keep going no no real change, yes, or no projects say you don't recognize the main wall Neste a flaw in Rockwall and then also in France, where we now have the.
Tamper lifting all the legal blockages Saab.
The building permit.
So be crude on the paper proceed full live but we have opted not to do that with just some light construction work put top defense.
Pulled in electricity under side for the construction, Cuba called soldier construction Hearts and believe it adapt them that'd be a rating out during Q3 to tidy up those final.
Q1, sorry, sorry, thanks, Kim so in Q1, but then foresee that the legal system and work through this and make that.
The format of Icl's decisions up to be predictive with Hopkins. So at this stage, we see we see a lower risk for that that would not be cleared up but I should also say differentially ecosystem duston tab clear.
Clearly defined time timelines for when things should come up in court, we have some estimates today, but.
Our our our assessment at this moment as such it would be done in Q1.
Slide 11 cash flow.
Nothing much to say about that it's fundamentally more EBITDA.
And find it.
Such as factor in networking capital management, so that contributes to the cash flow and I think now came in Ulster precise number 239, mainly on your own negative depths will be up come out dog.
Of the two we had the little depth for awhile, but not be are net cash positive.
And.
In light of that the dividend onto share back program, especially the share back program also not logical logical thing so on the next slide.
Well, you'll see the share back program, we have put.
Put out to starkly not announcement on that but.
Read my mathematics, if you add those two up you end up at about 5% total needs onto share.
Is expected under normal 2% I don't want to keep.
Move on to the next slide.
A little bit of feedback on the sustainability.
We have issued a sustainability report secondly, yeah, we do that in February.
Together with the annual report.
Europe, one could say house, maybe lost a little bit of pace on this small, but all the macroeconomic and political geopolitical turbulence rehab and close focus on this we have kept going.
And if you look at the gold as you see here are two sets of goals.
Did one set of goals back in 2016 for 2030.
Davor STG related goals and we had the mid point target level trend to trend to two between 2015 and I'm trying to third give you put milestone and admittedly a head on everything there and is progressing well.
What will be important here rich scope, one and two sue to emission reductions will be that the market kind of supports us with b B b can sell products and the recent appreciation for products are.
Lois you too intensive as we tried to put those investments maybe to see the market is more.
But coming to it.
And then below baseline year 2019 that day Youll see the science based targets and that's that's also progressing them that that target is challenging because it's an absolute value. So when we grow organically kind of <unk>.
Make it worse for ourselves if we acquire companies we can add it to the target on the baseline, but not not further organic growth in us we primarily grow organically that's.
A little bit of a challenge, but rehab.
The means to achieve this on the one hand, we are working on energy efficiency and production.
And we also work on the technology innovation, where we had gotten very far on that.
Trickle melting technologies and also gas melting biogas.
S an intermediate step.
So that's the conversion thing where youll see B now gonna do the commercials in Switzerland.
Iraq business and we also now launched quite a big program in the Netherlands launched it but we also have other innovations we need to work on for example, the binder, but about putting in more.
I would just say natural binder, so to reduce emissions and reduce C O two under greenhouse gases.
And then obviously circularity plays a role.
All in all so we are driving our circularity agenda sought to improve the situation overall at this stage we.
We are committed to spend about 100 made around 100 million.
Wondered maybe on your year on the Green part letter on it might be Morris, we grow about $100 million keep keep going on that and then we have also added one new commitment next slide and that this is <unk>.
<unk> greenhouse gas goal by 2050, how that works is that you take scope, one two and three and in our case the baseline year August 2019, and then basically we need to reduce that with 90% and the rest we can deal with offsetting measures.
That's what that called means we haven't committed to that before and.
And the reason we didn't commit whilst we did not understand.
What the definition was and now we've seen that if you get to 90% and then you can do some offset to immerse yourself talk.
As engineers and our engineers can see a way through and and therefore, we commit to we didn't want to commit before the definition, where clear should be say it said, though.
Even more important that that commitment is that we deliver on our trends are to enter into 'twenty.
34 goals are not leave leave all the work to the next management to take care of so so we are working hard on that then you may also have seen that the U S. Now talked about the 24th to gold.
Personally to move to trying to 50 goal to try and to 40.
Doesn't change much I think it's more important to put to go on that is really in the mandate period of the people taking the decisions. So one would have hoped maybe that they put tougher goals into next four or five or six years, and then that we progress towards them.
Let's go to the outlook.
Yeah.
Next slide.
To start with the top line what is it we are seeing we have said at this stage. Obviously, we don't have any backlog for the second half of the year, we don't have any.
Better reports of market development that you have.
Have continued.
Political and macroeconomic what tabular turbo down so we cannot foresee that so things can happen along the way, but basically receipt to two effects on the top line we see.
Industry.
Hospitals education less sure office says.
We also see age fact based snakes precede heavy density facade business, we see that business kind of picking up and I think that is because there have been investments that have been fro sun.
And now some of the business us on onshoring of Nearshoring. They see that's okay, if you're going to have a recession or a continual slow slow down by the time, we now have built what type of if you're going to build them.
Get into trend to 25 and on the situation will improve and I also think that people have stopped worrying about the interest will increase so now they can calculate with an interest rate and then decide along the way.
Probably the interest rate would be the same or lower.
Probably lower than that means.
Some of that backlog of stock projects have started to move a bit on the other side on the residential side both the newbuild.
And on the renovation side, we see almost the opposite trend, especially on the new event that we are at very low backlog levels very little financing them new bid projects.
And energy efficiency Manav, you see in Germany for example, 16 or 17 billion uncommitted.
Somebody just started to take effect so those two effects.
<unk>.
Playing out so we have said, we cant exactly decide which one will win and we had NMDA renovation came around so we just put our forecast straight in the middle There and then we monitor that as we move at all on the profitability mix change a little bit of a heavier mix in our outlook due to the.
Those factors I described and therefore be put up around 13% and again as we move through the year to see how that mix swings we haven't assumed.
And a significant price increase as we said we're going to basically manage our.
Managed price and cost and at this stage, we see relatively stable costs, but again there is this aspect of decidedly refreshes in Europe it sector.
That will land us before a five 6% three <unk> percent that should become increasingly clear during the spring at the moment I guess, a fair assumption as say four 5%.
Our salary increases in personnel expense increases with some some regions doing much more if you look at North America has been under severe sadly refresher under job that are now in the U S again.
Very very yeah, so a lot of job creation and its tight to get people to work.
So that would probably speak for even higher salaries in the U S on the other hand.
We don't see much of a challenge in passing that through.
On price Soar.
We can balance our thoughts it's nothing we are concerned about.
With that I would like to hand over for questions.
We will now begin the question answer session to ask a question.
One of your telephone keypad.
Using a speakerphone please pick up your answer before passing to Keith.
Anytime you question has been addressed.
We told you a question. Please press Star then two.
Okay.
First question comes from the line of Alexander <unk> with <unk>.
Please go ahead.
Hi, good morning.
On the next set of results and just wanted to confirm do you hear me correctly.
I hear Ya, Yes, we hear you.
Okay.
First question would be on the call.
The utilization rate.
I know you don't typically state dose.
Of course, according to our calculations that the capacity utilization rate should be around 75%.
Despite these low utilization rates.
<unk> came in really high which was a bit of a <unk>.
Outlier, so I wonder if this can be explained by some capacity out of the market from markets like Russia that are inaccessible.
Inaccessible or the maintenance and Jim plants.
Wondering how we can squared is and how you how you see the capacity utilization.
Going into 2024.
And then the second question would be if you could maybe give an update on your pricing strategy versus competition.
In 2024, because we read.
Let's don't players are increasing their prices with 8% to 10% and Europe Western Europe, whereas we see stone players like yourselves, maybe increasing price with 204% is that correct and weather.
And how should we see them.
But at this placing a real cool in the market. Thank you for that.
So.
We protect the capacity thanks for the for the good questions and I see no I'm, a little bit constrained in answering that but I can say like base and.
Loading or capacity utilization in North America, and Asia is high Okay and in our Asia business is small so you'll have a situation that we really need more capacity.
It doesn't mean, we don't have a capacity in the U S. It's just that the way our business works as it doesn't matter. If we are in full capacity during the high season, if we have wasted their capacity during the low season, then the capacity has gone. So we have some more capacity, but we are running.
On a very high utilization at the moment to catch up on delivery times and all the rest so bad you don't tab absorption issues.
Then you look in Europe, what we did and that we did already trend D 22 in the autumn we did it.
<unk> deep cut.
Scott of capacity down so be basically pulled it down and then I won't say if it's.
70, 865, whatever they say, but we took a deep cut plant capacity and we have also taken.
The all blind, we're not producing we use short time work and job and if you do all of this mash ups, but this is something we have practiced.
Quite a lot.
So that.
So we pretty much set the business for this volume level.
It's not.
It's not perfectly optimize because we don't Wanna, especially on the white collar side.
More than than than we have done if we can have I avoided because as you see the profitability is fine and if you go back to say 2014.
Riyadh.
11, and a half Towson drive some people and that's what we have today too. So we have had a big productivity improvement across the company. During the last nine years, so be take a little bit of beating on productivity consciously.
We have learnt a lot about how to make a lot of the costs bearable and also to operate the factories.
Sharply when you go down and shaped so maybe one to produce Monday to Friday seven by 24 are some factor is even less so.
We have learnt a lot about how to do that without getting into massive under absorption.
On the pricing then I would say the following.
It's a little bit of a wait and see obviously in North America Asia different story.
Normal markets and all we have to do it should be said there'll be a we are a good business in North America, but we did deliver.
Issues, we have our priority is to make sure we can deliver to customers.
So maybe.
Maybe a little bit more careful in the pricing start to do that.
In Europe, I would say.
The fundamental view would be with the current inflation outlook that the drumbeat pricing, 1% to 3% will be in place, but it varies.
Between the segments you know on the residential side, depending on what class will dos.
We have to adapt because we don't want to lose.
As masses amount of market share so that's a bit determined by how they do but.
Occupancy prices may be go down there and in some markets, but overall, we would like to say small price increases single digit this year, but again being conscious about brand inflation goes and right competition goes so I've always said my best outlook at the moment would be.
A couple of percentage point up for the whole group, but at the moment with what we did in Q4.
We see it are quite good level reasonable level in relation to the inflation.
Okay.
Okay. Thank you for that.
So to my colleagues.
The next question is from <unk> <unk>.
<unk> with Jpmorgan. Please go ahead.
Good morning. Thank you for taking my questions. Just two for me I was hoping you could provide the latest developments with regards to your hedging strategy.
And then secondly, you've kind of mentioned the four factories in facade inflation that traditionally have lower margin.
And was just curious to know how materially lower these margins out versus kind of the other products. Thank you.
Now I hand that question over to Kim because the hedging here.
He is doing that.
This aim.
We have we have and enter it to sort of midterm contracts, one in France, and one in Norway falah consumption of electricity and they continued throughout 2020 full as well and even into 2025.
I sort of had a major sort of.
Because they have both electrical plants sites on the gas and short term hedging for electricity, we have call. It quarter, one and we had we had started taking a view that we do this quarter by quarter.
So that's where we stand right now.
<unk> B is still not decided.
To fully color into quarter two yet so we're just monitoring it was just that Theres no big drama.
So and so we just take it a quarter at a time.
Okay.
And then on the margins.
But you've got a bit of growth.
On the flatter side that metrics such as write also the lowest priced products per unit inputs. So to say so the graph gross margin.
It's lower par.
Uh huh.
Per unit to produce on the other hand the projects are more.
More they're bigger.
And you tend to run longer so you'll have different setup cost.
Some of those projects you can also produce to stock instead of produced order so.
There is a difference, but but what determines that says if you have a bit of volume growth and do they have a density of them. We do a pretty okay constant volume growth, we will earn less but we're talking a couple of percentage points, but again it depends on country. There's some that so it is very hard to say sometimes to dip.
France Yeah.
Between.
<unk>.
The two segments of one country it could be outweighed by a contribute to higher price on a flat roof.
Gross instead, so there's all sorts of mixes, but generally said.
A slight negative mix.
But if you get volume growth you can make up for it.
Hey, thanks for taking the questions.
The next question comes from the line of Noncritical with UBS. Please go ahead.
Good morning, Thanks for taking my questions.
Just on pricing I think you previously mentioned.
A bit more sensitive to price them quite yet.
I Wonder if you could update us on your.
Latest thoughts.
And then on the energy performance Directive I, just wondered if recap your.
So to get them to that and then in terms of the plant to convert from coal how many if you've actually done to date. Thank you.
Two.
Two two questions Richard wants to want me to take Parker's.
All of them are high.
Our cash so that we start with what was the first one.
Okay.
Project pricing I would say the situation pretty much continues so we have been very successful on the big ones.
And we put quite a big focus to get to know about what we have seen now lately as such.
The project backlog has.
There are more out there to quote on their more reality assertion and the competition is tougher on the smaller smaller projects than the big Gabon and we also have.
More competition from P M for depending on the type of factory or box building their building. So I wouldn't say anything has changed but obviously.
If.
There will be.
A higher number of projects released depress should ease a little bit. So I don't think it will get worse it might ease a little bit but the most likely is subject will continue are roughly as we added last year.
On the energy performance.
The building directive.
There are two aspects to it one is all of this renovation.
Renovation targets and all the rest and the other is are the goals on the solar PV installations on older of some new roofs.
And.
Both of those in his current forms are.
A very positive very positive so nabil predict that the parliament.
Decided on that when this umbrella Hugo.
No.
The demand the member states has to get around to do it.
Yeah. So we we we need to see how the member states. So our focus now is to work locally on those and see what they actually do about it and for example in Germany energy efficiency as they averaged 670 billion Mark we need to see what it what they actually decide and the member States and then.
Then ran beyond the startup better if you're going to redo our calculation of how much business that gives us.
And my my prediction, though is that we will find that the calculation with Gabe.
Tremendous business projection and then we get back to the normal constraint of rare or the people to do the work and quite frankly, I don't think is a good situation now where.
Where are.
You have such a super low energy renovation and new boot dress Sudan shall happening that actually construction workers, leaving the industry.
And this is a very bad timing, so I hope governments would do something to take care of the 930000 construction workers in Germany and make sure no. One leaves because when that starts to hit the ground youre going to need more of them. So I think the constraint would be there. So we do both ways, we're going to calculate what golar stood account.
<unk> set on that and we tried to estimate what do the actual I believe going to happen. So I think we have reason to be.
Very optimistic about that but again the timing we haven't factored in a step up this year, that's not what's in our outlook. So maybe we can see something next year, maybe some countries start already this year than on the PV to.
Solar panel part of that.
We definitely see something happening in our market and they are just won that.
<unk> clarified that the EU doesn't put requirements on safety for that they don't say well it should be.
Under the solar PV, but we definitely see a market coming our way because when you put a big PV installation on our concrete buildings steel building whatever building. It makes a lot of sense. If you are or insurance company or you own the building.
Yeah to put Stonewall underneath to make sure you don't Todd.
Fire spreading in into solar plants sort to say between the patents have been.
Run some of them are short circuit. So we see we see already quite a significant impact in those segments. So I think it's fair to say now is getting quite exciting quite exciting to see when this volume to start to hit again I haven't factored that in for this year.
Yeah.
A question on conversion I mean from my memory.
My memory.
We have done we did.
Denmark Homebuyer gas bid did.
Germany U S to gas, we have done Poland one to gas.
So Denmark, Paul onto a melter rehab dawn electrical in Norway, China, we are doing on in Spitz, Saddam rehab one in Germany.
And then we have approved another set of projects, we will do <unk> two in Netherlands into coming years somebody would do.
And we will.
Electrical electrical mounted or so so basically basically what we have to keep doing at the pace. We have done and then we need to decide where we actually do them.
Okay. Thanks very much.
The next question is from the EBIT from Manhattan.
Please go ahead.
Hi, Good morning. Thank you for taking my question. The first one is on your margin guidance of 13%.
Clearly you were talking about price.
In 2024.
The margin improvement from what <unk> been saying over the last few months.
On your voting that Luc I appreciate it's too early in the year, but it looks like it's at least flat and then your cost curve is declining.
And it quite fast pace now into the first two months of the year. So yes.
Just making a rough math on the 13% looks very conservative so I guess I.
Im wondering what is it today that makes you a bit more worried as we go into the second half of the year, which is presumably where you don't have much visibility at this point.
My second question is on capacity.
You are obviously, adding.
A new plant in France, and you've got some projects in Romania.
You keep on talking about how fast the U S is growing and appreciate also in the UK has been phenomenally strong for Rockwell over the last five years in premium to be in the next five years or so what's the situation there and can this timeline of adding capacity in the U K and the U S. Thank you.
Yeah very good a very good question on soup and.
So I.
I think you explained the outlook quite well, but I wouldn't say, it's conservative, but you have logistics road tax C. O two tax you'll have salaries those costs are going up.
Have a competitive environment also saw there are also some negative factors. So you are right and Coke for example is not going down it's actually going up. So we have some costs going up sadler of being one of them and then no visibility in the second half of the year I mean in terms of backlog or battery.
All makes.
Germany worsen even more.
Real real Debbie how much of a residential worse you know so so that's pretty much a so so 13% feels like a reasonable forecast I want to call. It a cross sell but I'd just say with what we know that you do simulations up and down Fat Fair fair assumption.
Then Dan you're right on the U K.
And U S.
Yeah in terms of the U S as I said before.
Railroad that'd be a yeah hi.
Depreciation for our product, we have positioned it well and we have a very good and growing business. So youre right, we need we need to build something and we haven't said talked we want it's just a question of getting the last piece pieces in place and then then we come back and announce that in due course, so we are working on that.
We are securing all of the pieces saw.
So you you arrived U K, it's a little bit further out we have we have three lines in the U K.
We still have some capacity, but again the market is good and in U K for U K, it's a very good throughout today.
The biggest challenge to it.
Spanning into U K is probably to find land that we always keep a lookout for land, but youre right. If we keep growing like this in the U K, we would need more capacity and I I is a big market. So so so si.
I agree with all of what you say so it's more a matter of us now coming around to announcing a couple of things should be said that we have ample capacity in mainland Europe.
They still need more capacity in France on that project you know the same in Romania, keep keep expanding into that corner of Europe, you're going to continue that so.
That's basically the summary says up to me and came to come back with some investments, but it's not today.
Okay. Thank you guys.
The next question is from Andrew I'm sorry.
With Bank of America. Please go ahead.
Thank you very much good morning, gentlemen.
Three quick questions.
Okay.
Just I mean.
If we look back at 2023 on pricing right and mounting trends, obviously very favorable you talk about lower input cost.
Well pricing to which extent Q think that is sustainable into 2024, when we shift from.
Next question inflation, so you'll variable costs right now.
It looks like theyre going to be ready.
Hey, Sean that two months.
The salaried et cetera.
Does that work.
We view our.
Customer base, and then the competitive environment in terms of the pricing outlook in the price adjustment.
My first question. My second question is on the Capex the 375.
A good guide.
As a steady state or do you have some catch up effect in there I think you mentioned you couldn't spend as much as you.
As your client in 23 <unk>.
<unk> hundred 70 fives, the wrench, they've all towards the medium term or do you think that could come down a bit and lets see if you could just remind us what your end market exposure.
No. It's 50 50 between Raytheon none really.
Just wondering is that still broadly valid thank.
Could you just recap the last questions I couldn't hear that one.
Yes.
The exposure is it still 50 50 between residential and nonresidential.
Ah Okay. So I'll start thanks for the questions.
So on the price.
Our.
We generally have never applied surcharge pricing that could be some exceptions would be fundamentally see it does we need a sustainable EBIT margin is what we can do all this.
Our shows we can keep investing in the business and supply the market. So.
There is a market minus pricing approach. So we don't say that because the salary and not to coke or the energy on this and that there are sometimes easier to argue but fundamentally we want to keep out tomorrow.
Margin margin and.
What's the sustainable level Esa one can discuss but our ambition is.
Two.
Regardless of this sustainable level of business for us to prove it.
So that's on the pricing and then Brad that costs come from as long as we are productive competitive and all the rest.
In my mind doesn't make such a big difference than would come under Capex in India Capex. Another 375, you are right. If we don't start to new product, we don't get a.
Project Greenfield or brownfield it will on top of and so we have we have factored in here.
Obviously, the France is the project that we get clearance or it can start to work on that.
Or is that not all the capex come in one ear spread over three years, and then B also factored into our factor than they ever need just to decide whether it is and not.
And now the green for you to starting up somewhere and.
And Romania is also moving into a heavier face. So it's it makes up those through Romania is getting into the higher capex spend portion of the project, France, hopefully get the green light not.
To really get going and then.
In the year here, we plan to start up and other projects that we haven't announced and that came in I would just need to.
To decide where ever do that.
And I've been called back or not so that's that's fundamentally it then again estimation so.
Yes.
And then the end to end market out of that 50, 50 quite honestly I I don't look at it turned out Trey So I I don't have that number in the same way as we don't have a central sales manager for the company. We look at each market. So it will vary by market. So I.
To be honest you know if its four to 50 or 60 in the market. We can discuss that we won't go into those details, but the dish in that range back and forth and if the global average is 50 50.
It depends also by you put renovation of residential renovation multi unit a single or a house. We are very different in those two segments. So I can't I can't say anything but clear is up the.
The residential portion is lower now.
Our business, because new build and renovation and that segment is lore historically, it's very low now okay.
Very good thank you so much.
The next question is from Josh speak with BNP Paribas. Please go ahead.
Hi, gentlemen, thanks for taking my question.
How do you think you actually can you remind us what the lag is between declines in construction permit.
I, just thought that would've been more volume pain to come.
Given the 20% drop off in European glass.
The last question.
And then on pricing sorry to keep coming back on this but I guess last yet.
A lot of us expected pricing to come under pressure given volumes pass that.
But that didn't really happen.
So I was just wondering whether that's actually more risk on pricing guidance.
No the end markets are improving and you're competing for a share of the volume recovery.
Just color on pricing.
Yes.
The did lag on permits to construct shows.
Aye.
That might be a pattern there, but it's very hard to.
To figure it out because if you look at the low volume and trend to 'twenty three.
There are a huge amount of permits around the Germany, but then everyone stops novel Das anything so I.
Oh boy.
It doesn't work that way to see it.
You know if if the macroeconomic changes they stopped the project, even though they have the permit.
Well I would maybe think that the number of apartments will have an effect and where theres a lag effect is residential building permits now and some countries that are on a lower level and they're simply not there. So there isn't a permit backlog to execute on so there is a lag in that would indicate that that.
Market doesn't turn around thus far us I dare to say on that of course for every market. We have we follow with whatever data.
Yeah.
Frequency there is in a country a number of apartments number of build to do all of that but quite frankly, when the market change you can't say much but one thing's for sure. If there are no apartments into markets won't jump start immediately and build them.
And then on the price.
You know we tried to be extremely disciplined last year, we are monitored market share.
We have avoided to overreact.
And when you have that type of cost position, we need to get back on the EBIT margin. So that's pretty much how we are navigating.
Get to the year end and I'm I'm sure there would be some segments this year, where.
Do you mind type of a bit of a toss it in a market down there, but I don't see from our perspective that we.
Should behave any differently there theyre there if you could navigate last year.
My basic assumption is that we should be able to navigate this year too.
So that because we have done it not so many years and we have pulled it off and.
Extra ordinary difficult, yeah, like awesome trend to trend to and also in 'twenty to 'twenty three saw so I'm I'm optimistic that we'd get through also this year.
Okay. Thank you.
Yeah.
The next question is from <unk> <unk>.
We don't see an investment research. Please go ahead.
Yes, good morning, I would ask three questions.
My first question would be on the what I thought.
In terms of volume on crises in 2023.
I think you mentioned that the organic growth is down 12%.
Is it fair to assume that you have.
Let's say mid single digits, 5% with an increase at the beginning of the year.
And then a ton relatively stable during the first quarter that would be my first question.
Between alumina prices in 2023.
Then my second question would.
Would it be on the outlook for 2024.
You mentioned stable stable.
Yes.
33 feet.
That volume could be down.
Could you give us a bit more color on.
When do you seen from countries do you see growth in eastern Europe growth in the U S and maybe a bit of a decline in France, Germany, and then Alex.
That would be my second question.
And then myself question would be on your plan to invest could you give us a bit more color on that.
On capital improvement that you expect to generate on that.
New content.
Any color that you could give on the cost of a new plant on the amount of sales that you generate would be would be very very helpful.
Kim we'll take the first question I'll take that.
First again, just it tends to be minded to it to everybody on the call. We try to make this as efficient as possible. So it doesn't take too long to conduct so please limit yourself to two questions.
On the is on the 2023 at price and volume development, Eric and we normally do not go into level of details, but there was a positive pricing.
<unk> high single digit in 'twenty, three and then obviously, we have both a volume impact and also in <unk>.
<unk>, both countries and product mix, so they will be a negative.
William impair.
The impact for 2023, but I think that's as much as we can we can say so a high single digit pricing and a negative volume impact in.
For 'twenty three I believe 24 to <unk>.
So 10 to 24.
You are right that there is a mix.
Mix aspect, but so we would we were probably at this stage to assume that with the mix. We have a process and that you have basically flat volume or slightly volume op.
So that's.
That's how I see it so moderately up or flat, that's how I hope to come out of the year, but saying that on the light side and our general building insulation and nothing happened there you'll see a decline and this can vary massively between countries North America is it completely different.
And then also in Asia, and then on the heavy solar projects ethics facade.
Normally in India renovation that debt that seems to be coming factory buildings.
Adults investment in that that are also a lot of volume.
So I would say slightly.
Oh up there.
And then regionally I've covered.
With you, but you are right, France, Germany is.
Nobody had a good development in eastern Europe, compared to a very bad comparable in Q4, but.
Thank you arrived France, France is probably a little bit more under pressure. This yes, we see it a snowball and big distributor is doing quite quite a lot of personnel reductions maybe not force, but they're drawing down on people. So I think France, and Germany generally at the moment doesn't look great, but again we have.
Seen France before when that happens they take action on the Manish to get may be energy efficiency.
<unk> in place quicker than animal now so they're the main market at the moment certainly it doesn't look.
They look more like a further decline then we go into the U K there are experienced at that.
It matters a lot.
Really not so much what the market does because we have this underlying growth and are in the Noncombustible segment.
In terms of plants.
Yeah.
When you invest in a plant.
Look at return on.
On an invested capital the capital employed I mean, our threshold. This summer on our Apache is 15%.
And and that we would like to meet on this plants, but.
With all the depreciation.
Even though our plant would be good that generating cash we want to plant that is not.
Two.
Accretive at the beginning because we need we need to fill it over 234 or five years, otherwise we built the two small one so generally the return on capital employed is you know if we can get 15% or more.
Then we keep running our old plants really well that the average works works out fine.
Thank you very much.
Yes.
Yeah.
The next question is from them, but he Jess Kumar.
HSBC. Please go ahead.
Hi, Good afternoon, I had two questions. The first one is on Europe.
Okay. Thanks, Juan so given that you've.
Guiding between 75.
You don't see that good margins, because we can do it all.
Would you say that you will have more cash.
Yes.
Et cetera.
The buyback piece.
So kind of getting into near term at least.
Given the markets.
Thank you Mike.
Thank God.
Goodbye.
Yes.
My first one.
One is on the.
The installation on the roof.
Solar panel you talked about.
Is that something you.
You can do kind of.
How do you kind of looking at it.
Got it okay.
<unk> antibody.
No.
In fact, something and when it does.
Mike I think golf ball, expanding given that yes, I think so Mike.
See in future.
And then the roofing.
You bet.
Yes, hi, two very clever questions. So no good good questions.
On the Capex on the buyback I mean, we have it we have a very good cash flow and even if we keep investing like us we have money in our equity ratio is high but again.
I cannot sit here and promise for top of next year. This this goes year by year and it depends on how much we invest in.
Our board's view on uncertainties in the market and all the rest, but we definitely felt that it was a very good time now to do share buyback, but came on I cannot commit to that we do that every year. Okay. Then on the installation of roof.
A couple of things we can do on that I mean, we have not onto knob. We have never said, we will do a membrane so anything ads, but certainly what we have started to do we have developed some new products. For example in Germany, we have a product called solar rock that is incredibly high.
Hard and good so it is a product with a hard hard shell on it that fits and it is very interesting.
What people say should be then.
De lever more on a flat true but.
I'm sorry to disappoint, just so far we haven't made the decision to do that but it's a very interesting question that is worth thinking about do you see a trend in the in the market for the sum.
Companies are trying to get into that business and we observe it we'll see how they do it and.
Certainly look at it but we have not decided to do that okay.
Yeah.
Okay understood. Thank you.
The next question is from Casper Blom Danske Bank. Please go ahead.
Thank you very much and I have two questions also first of all I was hoping you could elaborate a little bit on the Polish acquisition that you announced just before Christmas.
It is expected to close what impact do you see on your revenue from this and what what the price of it and also.
Impact from this acquisition.
As part of the revenue guidance.
Yes flattish guidance on local currencies.
And then my second question is regarding your initiation of a buyback program to date and has there been any statement regarding what position.
Rockwell Foundation and your other main shareholders will take in connection with that buyback will they be participating pro rata. Thank you.
Okay. So I leave the second question for Cam I'll take your first question. Thank your customer so.
The Polish acquisition desktop client space.
There was a lower made in Poland on the previous government.
That.
The sanction there.
Owners of this factory in Poland.
And in that law, our read is sort of two ways.
To buy it because it has been decided by the Polish government, but this should be solved that.
That two ways. The one way is to buy make an agreement by the shares.
From the old nurse.
But the money you pay will go into an escrow controlled by the Polish government.
And the other way is.
The Polish government under an administrator does not control the webpage to factor it cetera, I'm not sure if they are producing.
Sell assets and.
At two two somewhat in a bid around and that's just a main part of this thing.
These two owners have not they're not on a sanction list according to the EU or the U S.
Polish sanction this our view on this was.
Yeah.
Yeah.
If you go over the first method.
You make an agreement.
You agree a price I would not read the price now.
And then the Polish Gaba and all of this is subject to the tax authority proving and after the tax authority a whole lot of other.
Polish.
Oh authorities. So I think there are four that needs to approve and it starts with the first one and antitrust approval is one of them, but that's in a way.
In a very later because nothing would happen on any of that before the Polish government has decided to do so how I see this acquisition is from our side.
We don't like to be involved in legal problems. So we bought b will not participate in.
And auction of assets, where the ownership of the assets are unclear.
So we don't want to participate in the acetyl thing because we are not quite sure that is sufficient that someone into previous Polish government says they have a law that can do this so that's that's one therefore, we opted for the first version.
And the first version is something that is fully politically determent.
And that means that the Polish new government and it's mixed up with the old government under a different partners as I see this sort of an acquisition that is fully determined by politics in Poland.
In politics in Poland or in any other country is probably not.
Our that's not our expertise so we have taken the approach for this debt.
Things like this can go either way, it's politics, and we haven't factored anything into our forecast nothing. It is just one of these things that we saw it come up.
We felt we don't want to be involved in 10 years lawsuits along the line.
The second so we tried to first part of the process and then we see what happens. So that's that's that's my view on that I hope that explains a bit.
And again the end result of the two ways of doing it.
As all of us the Polish government deciding where the money goes I also want to make that very clear. There is no difference between these as we understand it okay over to Kim.
And then the last one.
We have in connection with the share buyback program not had any interaction with the foundation of all of the main shareholders.
And so I do at this point do not know whether they want to participate compared to last time in 2020, when Theyre Aqua Foundation participated with a pro rata sort of the sale of shares. We have now also the option for them to do a conversion of Acs to BCS, but as I said, we have no not yet any indication that of course, we will.
Just be part of the weekly and the update of <unk> announcement.
There will be a participation. Thank.
Thank you.
Okay.
Okay. Thanks, a lot.
Okay. So we are very pleased.
Three people, who want to ask questions.
Overtime, but we will do it but please limit to two questions and we tried to to work. These are three two.
Okay. The next question is from Christian <unk> with Seb. Please go ahead.
Thank you I will actually get to one question.
And then it's about that market instead of the bridge from the.
Since your guidance so in 'twenty three year reported 14, 3%.
But you've also had some.
Nonrecurring costs. So you got the 27 million for the Ukrainian retail fund.
In Q3, you had some some coupon right.
Around 12 million.
And then you have these 16 million in restructuring.
So rough point here in Q4.
So when I add that up that's.
Roughly $55 million.
Non recurring items. So you should adjust for the axiom Mark you would actually have been 15 eight.
So when you are guiding for 13% and an unchanged.
Guiding the market is down almost three percentage points or.
100 million euros.
So you said I mean 100 million users.
Tracy level you are expecting.
He came can go through some more one off sales so I hand over to him.
We have also have some one off costs in the year somebody have also done some impairments into business.
Other things but.
And new things can happen, but I hand over to Kim.
Now I will not go into too many details. It is true that there has been some of these.
One off costs during 2023.
We will also in 2024 make a donation to the Ukraine Reconstruction fund.
Yeah. So so that that is that the debt is included in our forecasting.
Where are we going to have more one offs. During 2024, we do not know, but it says you can sit there has been both positive one offs, but has always been a negative one offs. So.
We don't sort of specify it out because I don't think it has a meaningful.
A meaningful impact on the result.
Okay.
Okay.
Clarify in your guidance have you assumed another 27 million donation then.
No we have assumed a donation, but it's up to the board to announce that at the AGM.
You don't want to quantify how much conviction.
At the AGM, you will get a you'll get the number.
So that's a board decision, but we have included.
A donation in 'twenty four.
Okay.
Understood. Thank you.
Uh huh.
The next question is from outside of the REIT note. There. Please go ahead.
Thank you.
Coming back to Christian's question about this donation to Ukraine, I think is kind of important to understand your guidance. What did you say round numbers that could be so you can't help us.
You know, it's a bit of understanding of what it could be.
That'd be the first one.
I think you just have to be patient until April close at the ATM because again this is a shareholder decision support they.
Our recommendation to the to the shareholders that will be approved at the at the AGM.
Okay and then the second question is if you go one quarter back in and.
Thinking about your Mark if you at that point.
Thing for Rockwell.
Cause improved getting worse or was more or less the same and they're both talk about pricing environment and the volume outlook.
Aye.
It's a good question what's changed I mean in Q3.
We borrowed about the construction markets in residential.
And.
And and also the renovation, but we don't see I mean, it was frost tomorrow is a new node the market in Denmark.
How bad it is singing from analysis and all the rest so.
I think.
What has happened since is such we didn't hold for that that will turn around we didn't predict it but I would say the gotham bars on the other hand, when it gets worse. It also becomes more urgent for government to do something and it is.
And all you had this 18000 names in Sweden, but under them into government construction workers as said, we don't type jobs, you need to do something.
So I think that on the residential or gotten worse, but the fact that you do get worse also board encourage people to countries to do something on energy efficiency not only because they need.
To brain tissue to emission storm, but they need to secure jobs, because it's not a good idea to lose as fewer billing workers fab.
So and then and the change from.
Well last time, we spoke clause on the outlook I think that we predicted that the interest rate would probably max out and start to decline and that inflation would improve on the central banks in Europe will start to discuss when they lowered the interest rate.
I think what's more positive on that front too.
Backlog of projects that were not started.
We know I predict that is better now because with this.
Anticipated recession, the most anticipate the recession or downturn whatever I think there is.
It's slightly bigger belief in Europe never mind U S North America and Asia.
As such this is I think there is a bigger hole businesses up it's time defined the downturn.
Therefore, I think it's a little bit better and I think we have seen that in our volumes here in month, one two and three of the fourth quarter and I think we have a good opportunity to see that in the coming months on the on on heavy density more industrial applications.
Yeah.
If that continues later on in the year, that's too that's too early to judge its too early to judge, but definitely I think it looks a little bit better short term.
On the industrial side.
Okay.
That makes a lot of sense. Thanks, so much for that color. That's all for me.
The last question will come from the line of get at the Goldman Sachs. Please go ahead.
Thank you and sorry for running over question would be on the competitive landscape I mean, you've been very successful to varvara.
Two very benign yieldco space in recent years.
Wondering how you're seeing your competitors have adjusted to the current environment I've, just seen a number of lines being shut.
Shut down as well and what do you mean that the military market shares and just wondering if some of these lines.
If they want to come back when when would that be in your view.
Last question and then second question quickly can you remind us your energy Bill.
All sort of energy exposure as of 2023. Thank you.
The entity I gave it took him because he is the custodian of how much we share on that I have the numbers in front of me, but.
Yeah. So so the trend is on the energy we have already covered.
I I can only answer for myself from the capacity.
Bid, what's coming up in the market.
In energy efficiency was actually needed in Europe.
I I I don't see on the storm Ola under glass wall. If this energy efficiency drive comps that they're going to be enough.
The capacity will be used so I think as a matter of being very disciplined now and I can only speak for myself, we've been super disciplined on.
<unk> monitoring our market share and.
Yes in some segment, we'll lose a little bit of share or and we are fine with that because it's impossible to keep everything perfect everywhere, but we are super disciplined on it and we cut capacity I mean, just try to navigate that because we know one thing with our business.
We cannot.
We don't want to reposition Stonewall before an op upmarket, where you don't get a sustainable business. So that we can keep investing in these plants not just going to cost more and more to build in and the environment. There. Yeah. So saw so that's how we do it and how they are there.
Do it I cannot swear about US you saw last year net in net there has at least be haven't seen big market share moves around the very many many countries. Thus my observation, but of course, we look at our own situation and that's what we manage.
And can you precise how much kept that Steve addressed that actually.
I gave a number and it's not an absolute but just just to give an example of that.
2022.
In the auto and we have done other things since that but.
At the time I mentioned it in rough numbers, but we took out over six months shift and we have this it doesn't fit with the head count it doesn't fit with the head count you see because we have set up the lines with a lot of temporary workers and contractors that don't show up in <unk>, but in the autumn 'twenty to 'twenty two.
To be pulled down like 800 manufacturing jobs.
Around.
And and that capacity, we took out.
And exactly what we were talking 10% to 20% capacity takeout.
Yeah.
Fair to say, thanks, a lot.
Super.
This concludes our question and answer session.
Like to turn the conference back over to deal for any closing remarks.
Yes, sorry about the last one.
And then just on the on the any deep ability.
Do not of course disclose exactly what is the proportion, but but coke is still our largest entity.
Cost.
And then I would say normally will be gave us some sort of debt.
<unk> combined with raw material is about half of our input costs. So it is a quite a significant one.
So with that.
I'd like to thank you for today's call.
And for all the good questions it took a bit longer than usual. So please remind yourself to keep it for two questions Youre always welcome to give me a call or sent me a questions afterwards.
And then at the very latest I want to inform you that on March eight we have a E.
<unk> Investor call, but have you also have mirrored vitale.
Sending the sustainability report for 2023.
Thank you very much and have a very nice day.
Okay.