Q2 2026 Rockwool AS Earnings Call

Speaker #1: Good day, everyone, and welcome to Rockwool A/S's conference call regarding the results for the first half of 2026. My name is Kim Andersen, and I'm the CFO of Rockwool A/S.

Kim Junge Andersen: Good day to everyone, and welcome to ROCKWOOL A/S conference call regarding the result for H1 2026. My name is Kim Andersen. I am the CFO of ROCKWOOL A/S. Today, I am pleased to present CEO, Jes Munk Hansen. For the first part of the call, all participants will be in listening only mode. As a reminder, this conference call is being recorded. First, Jes will go through our presentation and give you an update on the results for H1 and Q2 2026. Afterwards, we will be ready to answer all your questions. Before I hand over the word to Jes, I must ask you to notice slide number 2, which is the forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is slide number 3.

Speaker #1: Today, I'm pleased to present CEO Jes Hansen. For the first part of the call, all participants will be in listen-only mode. As a reminder, this conference call is being recorded.

Speaker #1: First, Jes will go through our presentation and give you an update on the results for the first half and the second quarter of 2026. Afterwards, we'll be ready to answer all your questions.

Speaker #1: Before I hand over the word to Jes, I must ask you to notice slide number 2, which is the forward-looking statement. Please be aware that this presentation contains uncertainties.

Speaker #1: Now we can go to the next slide, which is slide number three. Jes, I will now hand over the word to you.

Kim Junge Andersen: Jes, I will now hand over the word to you.

Speaker #2: Also, welcome and good morning from my side. My name is Jes Hansen. I'm the CEO of Rockwool. I'll start on page 3. As you have seen, the group delivered revenue growth of 6% in the first half-year. Importantly, this was driven by volume.

Jes Munk Hansen: Also, welcome and good morning from my side. My name is Jes Munk Hansen. I am the CEO of ROCKWOOL. I will start on page 3, and as you have seen, the group delivered revenue growth of 6% the H1. Importantly, this was driven by volume. The EBIT margin reached 13.1%, a good result despite inflation on energy and mainly transportation prices, persistent market challenges in a few countries, as well as higher depreciation from investments. Free cash flow was impacted by the larger ongoing capacity and decarbonization projects. Page 4. To the quarter, the group delivered a strong 10% revenue growth and reached a record high quarter revenue of just north of EUR 1 billion in Q2 2026, driven by volume growth across regions. EBIT margin was 12.9%, a good result considering the circumstances. Cash flow from operations was good.

Speaker #2: The EBIT margin reached 13.1%, a good result despite inflation on energy, and mainly transportation prices. Persistent market challenges in a few countries, as well as higher depreciation from investments.

Speaker #2: Free cash flow growth was impacted by the larger ongoing capacity and decapitalization projects. Turning to the quarter, the Group delivered a strong 10% revenue growth and reached a record-high quarterly revenue of just over $1 billion in Q2 2026.

Speaker #2: Driven by volume growth across regions. EBIT margin was 12.9%, a good result considering the circumstances. Cash flow from operations was good; investments of around $200 million in the quarter led to a free cash flow of negative $32 million.

Jes Munk Hansen: Investments around EUR 200 million in the quarter led to a free cash flow of -EUR 32 million. I will just jump directly to slide 6. Just jumping the H1 details, but on Q2, I think we should spend more time on that. The revenue from the very strong 10% growth. The growth was mainly driven by significantly higher volumes, partially from market share gains, where we benefited from favorable market dynamics with a narrowing price gap to competing combustible insulation materials. Somewhat more broadly and less directly related to the quarter results, we do observe in the market that higher oil and gas prices are driving a greater interest in energy efficiency in the build environment.

Speaker #2: I'll just jump directly to slide 6, just skipping the half-year detail, but on Q2 I think we should spend more time on that. The revenue from the very strong 10% growth.

Speaker #2: And the growth was mainly driven by significantly higher volumes, partially from market share gains, where we benefited from favorable market dynamics with a narrowing price gap to competing combustible insulation materials.

Speaker #2: Somewhat more broadly, and less directly related to the quarterly results, we do observe in the market that higher oil and gas prices are driving greater interest in energy efficiency in the built environment.

Speaker #2: So, while we are affected on the cost side, of course, we're also expected to benefit from the greater focus on energy efficiency that results from the higher energy prices in the market.

Jes Munk Hansen: While we are affected on the cost side, of course, we also expect to benefit from the greater focus on energy efficiency that results from the higher energy prices in the market. At the same time, the tragic wildfires in South Europe and in North America over the summer are generating more awareness about the importance of non-combustible materials such as stone wool. This should too become visible in higher demands over the next period. Okay, let's get back to the report. In the quarter, we saw pre-buying activity ahead of the announced price increases, not surprisingly, which mostly took effect from the price increases from 1 July. We estimate that this pre-buying contributed to around 1% to 2% points of the Q2 growth.

Speaker #2: At the same time, the tragic wildfires in southern Europe and in North America over the summer are generating more awareness about the importance of non-combustible materials such as stone wool.

Speaker #2: This should too become visible in higher demands over the next period. Okay, let's get back to the report. In the quarter, we saw pre-buying activity ahead of the announced price increases, not surprisingly, which mostly took effect from the price increases from July 1.

Speaker #2: We estimate that this pre-buying contributed around 1 to 2 percentage points to the second quarter’s growth. However, sales price increases were also realized, especially in the latter part of the quarter, and accounted for 1 to 2 percentage points of the growth, partially offset by negative product and country mix.

Jes Munk Hansen: However, sales price increases were also realized, especially in the latter part of the quarter, and accounted for 1% to 2% points of the growth, partially offset by negative product and country mix. I'll also skip page seven, which is just a summary of the H1 revenue, and go to the Q2 revenue on the segment level. The insulation segment revenue grew 10% in the quarter, with strong growth in the United States and across Europe. The revenue in Canada, United Kingdom, and Switzerland continued to decline, though the rate of decline moderated in UK and Switzerland compared to the Q1 of the year. In our system segment, revenue grew 9% with a good growth across the business. Slide nine, where we take a look at the geographies.

Speaker #2: I'll also skip page 7, which is just a summary of the half-year revenue, and go to the second quarter revenue. On the segment level, insulation segment revenue grew 10% in the quarter, with strong growth in the United States and across Europe.

Speaker #2: The revenue in Canada, the United Kingdom, and Switzerland continued to decline, though the rate of decline moderated in the UK and Switzerland compared to the first quarter of the year.

Speaker #2: And in our System segment, revenue grew 9%, with good growth across the business. Slide 9, where we take a look at the geographies.

Speaker #2: If we start from the left, from the west side of the map, the United States continued to perform well, with momentum accelerating into double-digit growth in the second quarter. It's also worth noting that stone wool is growing as a category in the United States, and that Rockwool is gaining market share in the total insulation market.

Jes Munk Hansen: If we start from the left, from the west side of the map, United States continued to perform well, with momentum accelerating into double-digit growth in the Q2. It's also worth noting that stone wool is growing as a category in the United States, and that ROCKWOOL is gaining market share in the total insulation market. This is, of course, in a soft overall market. Here, the growth is also driven by greater focus on non-combustible insulation solutions in a row of segments, including the façade segments. Revenue in Canada declined in a challenging market as the Canadian economy has contracted now for two consecutive quarters in a row. West Europe showed improvement compared to previous quarters, and key markets for us, like Germany and France, gained momentum, which was partially offset by the challenges I mentioned in United Kingdom and Switzerland.

Speaker #2: And this is, of course, in a soft overall market. Here, the growth is also driven by greater focus on non-combustible insulation solutions in a range of segments, including the facade segments.

Speaker #2: Revenue in Canada declined in a challenging market, as the Canadian economy has contracted now for two consecutive quarters in a row. Western Europe showed improvement compared to previous quarters, and key markets for us, like Germany and France, gained momentum, which was partially offset by the challenges I mentioned in the United Kingdom and Switzerland.

Speaker #2: And Eastern Europe delivered a staggering 31% revenue growth, reflecting double-digit growth across the entire region. In Asia, we grew 17%, with double-digit growth in all major markets except China, where revenue remained flat year over year.

Jes Munk Hansen: Eastern Europe delivered a staggering 31% revenue growth, reflecting double-digit growth across the entire region. In Asia, we grew 17%, with double-digit growth in all major markets except China, where revenue remained flat year-over-year. To slide 10 on our profit. The quarterly profit was impacted by rising oil and gas prices. However, this also creates opportunity for us as elevated and fluctuating energy costs drive a much greater focus on energy efficiency in building, strengthening the overall demand for our insulation solutions. The EBITDA in absolute figures was up 6%, which we considered a good result. Let me note that Q2 in 2026 benefited from a one-time EUR 7 million gain related to a settled claim against a former transport supplier in the UK.

Speaker #2: Turning to slide 10, regarding our profit: the quarterly profit was impacted by rising oil and gas prices. However, this also creates opportunities for us, as elevated and fluctuating energy costs are driving a much greater focus on energy efficiency in buildings, strengthening the overall demand for our insulation solutions.

Speaker #2: The EBITDA in absolute figures was up 6%, which we considered a good result. And let me note that Q2 in 2026 benefited from a one-time $7 million gain related to a settled claim against a former transport supplier in the UK.

Speaker #2: That said, margins in the quarter were impacted by several factors, such as the weak construction market in Canada and the United Kingdom, as I mentioned, and then importantly, higher logistics costs and an expanded cost base, especially related to energy and oil-based raw materials.

Jes Munk Hansen: That said, margins in the quarter were impacted by several factors, such as the weak construction market in Canada and United Kingdom, as I mentioned. Importantly, higher logistic cost and an expanded cost base, especially related to energy and oil-based raw materials. Announced sales prices increased. This first took effect late in Q2. We believe we are good at addressing challenges like these. Among other things, during the quarter, we also took the opportunity to refine our marketing and branding. I hope you have noticed our emphasis on core value drivers like energy efficiency and fire safety. We also redirected the product flows and resources from softer markets into high-demand regions and adjusted our capacity expansion strategy based on long-term market condition expectations. The EBIT in absolute figures was up 3%, and the EBIT margin ended at 12.9% in the quarter.

Speaker #2: And announced sales price increases first took effect late in the second quarter. We believe we are good at addressing challenges like these, among other things, during the quarter.

Speaker #2: We also took the opportunity to refine our marketing and branding, and I hope you've noticed our emphasis on core value drivers like energy efficiency and fire safety.

Speaker #2: We also redirected product flows and resources from softer markets into high-demand regions, and adjusted our capacity expansion strategy based on long-term market condition expectations.

Speaker #2: The EBIT in absolute figures was up 3%, and the EBIT margin ended at 12.9% in the quarter. EBIT was impacted by higher depreciation related to investments, and a one-off $9 million write-off due to some reprioritization of our capacity investment base.

Jes Munk Hansen: EBIT was impacted by higher depreciation related to investments and a one-off EUR 9 million write-off on some reprioritization of our capacity investment base. Last year, Q2 included donations to the foundation of Ukraine's reconstruction of EUR 7.4 million out of the total EUR 13 million donated, and this year there was no donations recognized. Let's look at the segment on page 11, profitability by segment. On the left, you see our insulation segment. Looking at profitability, the EBIT margin insulation was good and landed just short of 12%. The residual result mainly reflects timing lags between inflation and price increases, and costs from electric conversion shutdown in Netherlands, and the EUR 9 million write-downs I just mentioned in reprioritization of our capacity expansion. This was, as mentioned, partially offset by EUR 6 million gained from the settled transport supplier claim.

Speaker #2: And last year, Q2 included donations to the Foundation of Ukraine's Reconstruction of $7.4 million out of the total $13 million donated. And this year, there were no donations recognized.

Speaker #2: Let's look at the segment on page 11, profitability by segment. On the left, you see our Insulation segment, and looking at profitability, the EBIT margin for Insulation was good and landed just short of 12%.

Speaker #2: And the result mainly reflects timing lags between inflation and price increases, and costs from electric conversion, the shutdown in the Netherlands, and the $9 million write-downs I just mentioned in reprioritizing our capacity expansion.

Speaker #2: And this was, as mentioned, partially offset by a $6 million gain from the settled transport supplier claim. I deliberately said $6 million, because the other million you can find in the Systems Division.

Jes Munk Hansen: I deliberately said EUR 6 million because the other million you can find in the system division. The system segment EBIT margin was 12.6%. This is a good result considering input cost inflation and lower performance in our Grodan business in North America. Here, as just alluded to, the 12.6% margin included EUR 6 million out of the total EUR 7 million claim gained from the supplier settlement. Page 12 shows our investment in new capacity and decarbonization. Our major investments in Q2 were related to the new factory constructed importantly in the United States and India. If I can just stop up a second and say I just a few hours ago saw pictures of the first commercial wall coming off our factory in India.

Speaker #2: The Systems segment EBIT margin was 12.6%, and this is a good result considering input cost inflation and lower performance in our Grodane business in North America.

Speaker #2: And here, as just alluded to, the 12.6% margin included a $6 million out of the total $7 million claim gain from the supplier settlement.

Speaker #2: Page 12 shows our investment in new capacity and decarbonization. Our major investments in Q2 were related to the new factories constructed, importantly, in the United States and India.

Speaker #2: If I can just stop for a second and say, I just a few hours ago saw pictures of the first commercial wall coming off our factory in India.

Speaker #2: And investments in the new technical insulation production line in the United States, production expansions in Romania, and our logistics automation projects in Germany.

Jes Munk Hansen: Investments in the new technical insulation production line in the United States and production expansions in Romania and our logistic automation projects in Germany. I just said that the Indian factory has gone online, and this will, of course, support the growing demands for stone wool in that particular market where we see high growth rates. The sustainability investments mainly considered of electric conversions in the Netherlands and in France. As part of our electrification strategy and to strengthen our in-house technical capabilities, we acquired the remaining stakes in the Swedish company ScanArc Plasma Technologies back in June 2026, a critical technology in our so-called JEDI conversion activities. Page 13, where we look at our cash flow. Operating cash flow improved by EUR 31 million compared to Q2 last year, demonstrating underlying good cash generation.

Speaker #2: I just said that the Indian factory has gone online, and this will, of course, support the growing demands for stone wool in that particular market, where we see high growth rates.

Speaker #2: The sustainability investments mainly consisted of electric conversions in the Netherlands and in France. As part of our electrification strategy, and to strengthen our in-house technical capabilities, we acquired the remaining stakes in the Swedish company ScanArc Plasma Technologies back in June 2026—a critical technology in our so-called Jedi conversion activities.

Speaker #2: On page 13, we look at our cash flow, and operating cash flow improved by €31 million compared to Q2 last year, demonstrating underlying good cash generation.

Speaker #2: And the net working capital at the end of half-year 2026 increased as per the usual seasonal pattern compared to year-end 2025, and increased partially due to higher trade receivables from the increased quarterly sales.

Jes Munk Hansen: The net working capital at end of the H1 2026 increased as per the usual season compared to year-end 2025, and the increase related partially to higher trade receivables from the increased quarterly sales and partially offset by higher trade payables. Cash flow ended at minus EUR 32 million, reflecting the ongoing large capacity investments. Our net debt position increased to now EUR 461 million at the end of the quarter. That brings our leverage ratio to 0.6, which is still within our policy of a leverage ratio below one. A few comments to our sustainability and safety. You can see on page 14, just briefly a few comments. Safety remains our top priority in ROCKWOOL with the aim, of course, of a zero fatality and zero serious incidents. That is almost logic that it should be zero, but we recorded two serious incidents in the H1 of 2026.

Speaker #2: And partially offset by higher trade payables. Cash flow ended at minus €32 million, reflecting the ongoing large capacity investments. And our net debt position increased to now €461 million at the end of the quarter.

Speaker #2: And that brings our leverage ratio to 0.6, which is still within our policy of maintaining a leverage ratio below 1. A few comments on our sustainability and safety.

Speaker #2: You can see on page 14, just briefly, a few comments: Safety remains our top priority in Rockwool, with the aim, of course, of zero fatalities and zero serious incidents. It's almost logical that it should be zero.

Speaker #2: But we recorded two serious incidents in the first half of '26. But despite these incidents, the overall lost time incidence frequency rate improved significantly, now at 1.6.

Jes Munk Hansen: Despite these incidents, the overall lost time incidents frequency rate improved significantly now at 1.6, and that is almost a 40% improvement compared to last half in 2025. Sorry, H1 in 2025, which to us demonstrates that our efforts are working. The CO2 emission, just very briefly on that, you can see on the slide that our Scope 1 and 2 CO2 emission intensity shows a 25% reduction compared to the baseline of 2016 2019. Nonetheless, the Scope 1 and 2 greenhouse gas emissions increased by 1%, reflecting the higher production volumes. But the intensity, as mentioned, is down significantly. In 2025, we adopted new targets for our renewable energy, and now we aim to reach 40% renewable on our energy consumption by 2034. In Q2 2026, we reached 22%, showing a solid progression on that target as well. I also will not comment on the other targets.

Speaker #2: And that is almost a 40% improvement compared to the first half of 2025. Which, to us, demonstrates that our efforts are working.

Speaker #2: Regarding CO2 emissions, just very briefly on that—you can see on the slide that our Scope 1 and 2 CO2 emissions, at their intensity, show a 25% reduction.

Speaker #2: Compared to the baseline of 2019. Nonetheless, the scope 1 and 2 greenhouse gas emissions increased by 1%, reflecting the higher production volumes. But the intensity, as mentioned, is down significantly.

Speaker #2: In 2025, we adopted new targets for renewable energy, and now we aim to reach 40% renewables in our energy consumption by 2034. In Q2 2026, we reached 22%, showing solid progress on that target as well.

Speaker #2: I also won't comment on the other targets. You can see that we are pretty much on target in general. Then I jump all the way to slide 16—importantly, our outlook for the remainder of the year.

Jes Munk Hansen: You can see that we are pretty much on target in general. I jump all the way to slide 16. Importantly, our outlook for the remaining of the year. As you noticed yesterday, we made upwards adjustments to our outlook. After a record high Q2 revenue driven by volume, we expect the broad-based momentum to continue through the H2 of 2026, and the revenue growth will be driven by both volume and now also sales price increases, which we introduced to compensate for inflation on energy, raw materials, and transport. However, we expect the growth to be partially constrained by sourcing limitations, such as in the North American arena. We therefore forecast full-year revenue growth of 5% to 7% in local currencies. At EBIT, we maintain our expectation for the full-year EBIT margin in the range of 13% to 14%.

Speaker #2: As you noticed yesterday, we made an upward adjustment to our outlook. And after a record-high Q2 revenue, driven by volume, we expect the broad-based momentum to continue through the second half of 2026.

Speaker #2: And the revenue growth will be driven by both volume and now also sales price increases, which we introduced to compensate for inflation on energy, raw materials, and transport.

Speaker #2: However, we expect the growth to be partially constrained by sourcing limitations, such as in the North American arena. We therefore forecast full-year revenue growth of 5 to 7% in local currencies.

Speaker #2: And the EBIT, we maintain our expectation for the full-year EBIT margin in the range of 13 to 14%. And while sales price increases will support this margin, the benefit will partially be offset by North American sourcing constraints, elevated maintenance costs, and a less favorable product and country mix.

Jes Munk Hansen: While sales price increases will support this margin, the benefit will partially be offset by North American sourcing constraints and elevated maintenance cost and less favorable product and country mix. Last but not least, our investments. Our projects are largely on track, and we do have some timing on our CapEx, so significant supplier contracts were being finalized and are being finalized in 2026. This timing of down payments are expected to drive our investment outlook to around EUR 750 million for the year. These were the initial slides, and I hand over now to questions.

Speaker #2: Last but not least, our investments and our projects are largely on track. We do have some timing on our CAPEX, as significant supplier contracts were finalized, and some are being finalized in 2026.

Speaker #2: And this timing of down payments is expected to drive our investment outlook to around €750 million for the year. These were the initial slides, and I hand over now to questions.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then 1, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In interest of time, we kindly ask to limit yourself to two questions only. At this time, we will assemble momentarily our roster. First question is from Pujarini Ghosh, Bernstein.

Speaker #1: To withdraw your question, please press star, then 2. In the interest of time, we kindly ask that you limit yourself to two questions only. At this time, we will assemble our roster momentarily.

Speaker #1: First question is from Pujarini Ghosh Beringstein.

Speaker #3: Hi, and thanks for taking my questions. So, if we talk about your guidance, you have now raised the local currency growth guidance already twice this year.

Pujarini Ghosh: Hi, and thanks for taking my questions. If we talk about your guidance, you have now raised the local currency growth guidance already twice this year. Could you explain the changes in your assumptions on pricing and volumes, which has led to this latest upgrade, and how much price and volumes are being baked into the full year guidance of 5% to 7% overall? On the other hand, you have not taken up your margin guidance. You did mention it's possibly because costs are also rising in line with the pricing. Could you just explain a little bit more why the margin expectation is also not rising in line with the top-line guidance, or are you being a bit cautious as of now? Those are my questions. Thank you.

Speaker #3: Could you explain the changes in your assumptions on pricing and volumes that have led to this latest upgrade? And how much price and volume are being baked into the fuller guidance of 5% to 7% overall?

Speaker #3: On the other hand, you have not raised your margin guidance. And you did mention it's possibly because costs are also rising in line with the pricing.

Speaker #3: But could you just explain a little bit more why the margin expectation is also not rising in line with the top-line guidance? Or are you being a bit cautious as of now?

Speaker #3: So those are my questions. Thank you.

Speaker #2: Yeah, the market has been developing over the last six months, and that's why we have made this progressive lift in our outlook. I think we have told a few, in previous calls, that we don't have an outlook and cannot see developments six or twelve months into the future.

Jes Munk Hansen: Yeah. The market has been developing the last six months, and that's why we have made this progressive lift in our outlook. I think we have told a few in previous calls that we don't have outlook and cannot see development six or 12 months into the future. We can only, of course, adjust as we see the market develop. It has been very favorable the last quarter on, as I just reported, mainly on volume. But now, for the next H2, we do see a little bit less volume and more price that we have of timing differences. It's at the H2 that the price comes in. Will you comment on the specific numbers that you see, Kim?

Speaker #2: So we can only, of course, adjust as we see the market develop. It has been very favorable the last quarter on, as I just reported, mainly on volume.

Speaker #2: But now, for the next half year, we do see a little bit less volume and more price, which we have due to timing differences. It's at the half year that the price comes in.

Speaker #2: Will you comment on the specific numbers that you see, Kim, or...?

Speaker #4: Yeah, I can do that. I mean, what we see is, previously we had expected a 0% volume growth in the second half of the year.

Kim Junge Andersen: Yeah, I can do that. What we see is where previously we had expected a 0% volume growth in the H2, we now expect to reach 1% to 2% volume growth, and then on top of that comes then the impact from the pricing. We do see a slower Q3 in France and Germany, some of the bigger markets. So we ending up at this 6% growth also for you can say for the H1, and then hopefully between the 5% and 7% in the H2. Did we answer your question?

Speaker #4: We now expect to reach 1–2% volume growth, and then on top of that comes the impact from pricing. We do see a slower Q3 in France and Germany.

Speaker #4: Some of the bigger markets, so we’re ending up at this 6% growth also for, you can say, the first half, and then hopefully between 5% and 7% in the second half.

Speaker #2: Did we answer your question?

Speaker #3: Thank you. And on the margin guidance?

Pujarini Ghosh: Thank you. And on the margin guidance?

Speaker #4: The margin guidance is just unchanged. The whole purpose with us doing the sales price increase on July 1st was to defend the full-year EBIT margin.

Kim Junge Andersen: The margin guidance is just unchanged. The whole purpose with us doing the sales price increase on 1 July was to defend the full year EBIT margin. And I think that is still the expectation that we are able to do this. So there is no change particular to the dynamics between the full year guidance for the EBIT margin compared to what we did in May.

Speaker #4: And I think that is still the expectation, that we are able to do this. So there is no change particular to the dynamics in the full-year guidance for the EBIT margin, compared to what we did in May.

Speaker #3: Okay. Thank you.

Pujarini Ghosh: Okay, thank you.

Speaker #1: Next question is from Andres Christian Feldman, Danske Bank.

Operator: Next question is from Andres Christian Røpke, Danske Bank.

Speaker #5: Yes, hi. Yes, I'm Kim, and thanks for taking my questions. I would like to ask about the U.S. sourcing constraints that you mentioned. My first question is: how much of the U.S. demand do you expect to be met by European imports through H2 '26 and into '27?

Andres Christian Røpke: Yes. Hi. Jes and Kim, thanks for taking my questions. I would like to ask about the US sourcing constraints that you mentioned. My first question is, how much of the US demand do you expect to be met by European imports through H2 2026 and into 2027, maybe expressed as a share of the expected US volumes. My follow-up question to that is, should we maybe be viewing shipping volumes from Europe into the US as maybe a permanent way to capture an additional US demand, or is this strictly a bridge until the new plant opens in 2028. In other words, should we expect to keep importing into the US for as long as demand exceeds the US supply, which I suspect could go on for many years. Or would you rather reap on the margin expansion potential for the group. Thank you.

Speaker #5: Maybe expressed as a share of the expected US volumes. And then my follow-up question to that is: should we maybe be viewing shipping volumes from Europe into the US as perhaps a permanent way to capture additional US demand, or is this strictly a bridge until the new plant opens in 2028?

Speaker #5: Or, in other words, should we expect it to keep importing into the US for as long as demand exceeds the US supply? Which I suspect could go on for many years.

Speaker #5: Or would you rather reap the margin expansion potential for the group? Thank you.

Speaker #2: Yeah, I can answer that. For the foreseeable future, it's still limited what we need to import from Europe to the US market. But the aim is overall to keep growth and momentum developing in the US, to prepare for when our very large factory in the US opens—our new factory that we're investing in and building right now in the US.

Jes Munk Hansen: Yeah, I can answer that. For the foreseeable future, it is still limited what we need to import from Europe to the US market. But the aim is overall to keep growth and momentum developing in the US to prepare for when our very large factory in the US opens, our new factory that we are investing in and building right now in the US. So we get, you can say, a high utilization rate when it opens in approximately two years from now. So it is what you call a bridge, and its financial benefits show not only because it generates business in the short term, but as I said, then we can start the factory with a high utilization when it comes online. But this becomes very detailed. Some product categories that are beneficial to import, it has to do with weight and volume and what is meaningful to import.

Speaker #2: So, we get, you can say, a high utilization rate when it opens in approximately two years from now. So, this is what you call a bridge.

Speaker #2: And it's financially beneficial not only because it generates business in the short term, but as I said, then we can start the factory with a high utilization when it comes online.

Speaker #2: It is also, but this becomes very detailed. Some product categories are beneficial to import; it has to do with weight and volume, and what is meaningful to import.

Speaker #2: And so it is. Some products are not affected at all, and some are affected more because of available capacity and/or simple practicalities around shipping logistics.

Jes Munk Hansen: Some products are not affected at all, and some are affected more because available capacity and/or simple practicalities around shipping logistics. But yes, you can consider it a bridge, but here for the foreseeable future, it is limited. We just wanted to share with you that we can satisfy the growth and the demand in the US market with capacities from Europe. That is doable and also sustainable for the period we need to.

Speaker #2: But yes, you can consider it a bridge. But here, for the foreseeable future, it is limited. We just wanted to share with you that we can satisfy the growth and the demand in the US market with capacities from Europe.

Speaker #2: That is doable, and also sustainable for the period we need to.

Speaker #4: Obviously, Andres, these imports, of course, come at a lower margin. But we always have this hurdle rate. They said it has to be a cash-positive import.

Kim Junge Andersen: Obviously, Andres, these imports of course come at a lower margin, but we always have this hurdle rate that said there has to be cash positive import, but it is in the short time, of course, the imported part will have a lower margin compared to the locally produced products.

Speaker #4: But it is in the short term; of course, the imported part will have a lower margin compared to the locally produced products.

Speaker #5: Thank you very much.

Andres Christian Røpke: Thank you very much.

Speaker #1: Next question is from Zaheem Bekawa, JP Morgan.

Operator: Next question is from Zaim Bhaloo, JPMorgan.

Speaker #5: Good morning. Thanks for taking my questions. The first is just on capex. I think you've increased from 700 to 750, largely due to timing.

Zaim Bhaloo: Morning. Thanks for taking my questions. The first is just on CapEx. I think you have increased from EUR 700 million to EUR 750 million, largely due to timing, but then we also increased from EUR 650 million at Q1 due to warehouse investment. How should we be thinking about CapEx next year? Should this be more around the EUR 600 million mark? Secondly, on price and costs, can you comment on your hedging position for the remainder of the year, and if you see a risk of supply of natural gas, or you have enough security there? On price, do you still think that the 6% to 8% from 1 July is enough to compensate some of the recent price cost inflation, or do recent developments need higher pricing? Thank you.

Speaker #5: But then we also increased from 650 at Q1 due to warehouse investment. So how should we be thinking about capex next year? Should this be more around the 600 million mark?

Speaker #5: And then secondly, on price and cost, can you comment on your hedging position for the remainder of the year? And do you see a risk to the supply of natural gas, or do you have enough security there? A little on price—do you still think that the 6% to 8% from July 1st is enough to compensate for some of the recent price-cost inflation, or do recent developments need higher pricing?

Speaker #5: Thank you.

Speaker #4: Yeah, hi. Same, Kim here. The only, sort of, major—not major, but the only capex that is going out this year, of course, is the factory in India.

Kim Junge Andersen: Yeah. Hi, Kim here. The only CapEx that is going out this year, of course, is the factory in India. The other three main factories of insulation capacity and also the technical insulation project in US will continue into next year. So I expect to have also an elevated CapEx next year. We have not yet detailed out again the timing of the contracts when payments are falling due, but in 2027, as you know, we will have the Romanian factory opening up in the middle of the year. So in 2028, hopefully that CapEx will be gone as well. But next year will be elevated as well. We have not yet made the exact number, but we expect it to remain about the same level. Second question about the hedging.

Speaker #4: The other three main factories of insulation capacity and also the technical insulation project in the US will continue into next year. So I expect to have an elevated capex next year as well.

Speaker #4: We have not yet detailed again the timing of the contracts when payments are falling due. But in '27, as you know, we will have the remaining factory opening up in the middle of the year.

Speaker #4: So, in 2028, hopefully that capex will be gone as well. But next year will be elevated as well. We haven't yet made the exact number, but we expect it to remain about the same level.

Speaker #4: Second question about the hedging. We have now covered up to 75% of the Q4 electricity and gas. As you know, we cannot cover forward foundry coke, but there has not been a big price development in that particular energy source.

Kim Junge Andersen: We have covered now up to 75% of the Q4 electricity and gas. As you know, we cannot cover forward, foundry coke, but there has not been a big price development in that particular energy source. For the first two quarters next year, we will start to cover of this. We are still in a period where we have to determine the pricing drum beat plan for 2027. That has not yet, and does not yet have to be decided, but we need to decide that here in the autumn, before we start negotiating with our customers.

Speaker #4: And then for the first two quarters next year, we also started to cover this. But we are still in a period where we have to determine the pricing drumbeat plan for '27.

Speaker #4: That has not yet, and does not yet have to be, decided. But we need to decide that here in the autumn before we start negotiating with our customers.

Speaker #5: Right. Thank you.

Zaim Bhaloo: Great. Thank you.

Speaker #1: Next question is from Christian Turner, who says.

Operator: Next question is from Christian Tornehuus, SEB.

Speaker #5: Yes, thank you. Two questions. The first one is on guidance. To the previous question on why you have been raising growth guidance but not margin guidance, you primarily referred to the price increases you've done to safeguard EBIT margin.

Christian Tornehuus: Yes. Thank you. Two questions. First one is on guidance. To the previous question on why you have been raising growth guidance but not margin guidance, you primarily referred to the price increases you have done to safeguard EBIT margin. In my view, that was more the explanation behind the change you did back in May. My question is: Has anything changed in your assumption on pricing and input costs since May? Therefore, why is this additional 1% to 2% points which you raise your growth guidance now versus May not yielding an increase to the margin guidance?

Speaker #5: But in my view, that was more the explanation behind the change you did back in May. So, has anything changed in your assumption on pricing and input costs since May?

Speaker #5: And therefore, why is this additional 1 to 2 percentage points—in which you raised your growth guidance now versus May—not yielding an increase to the margin guidance?

Speaker #4: Yeah, Kim here. I mean, the full-year guidance, as I said, we will maintain. And of course, it would have been nice to see an impact from that higher sales growth that we are having.

Kim Junge Andersen: Yeah. Kim, the full year guidance, as I said, we will maintain. Of course, it would have been nice to see an impact from that higher sales growth that we are having. There is a little bit of a negative product mix or less favorable product mix in the top line that means that it does not in itself lift the margin. Then, as I said, we also have a continued higher maintenance spent in some of the factories, mainly in Roermond and also in the US. So it is just a factor of those things coming in that we are seeing. I think you could say the inflationary impact, both on H1 but also on the H2, is mainly on the logistic cost. As I said, we are simply just transporting more goods around, and it has become more expensive to use this transport.

Speaker #4: There is a little bit of negative product mix, or less favorable product mix, in the top line. That means that it doesn't, in itself, lift the margin.

Speaker #4: And then, as I said, we also have continued, sort of higher, maintenance spend in some of the factories, mainly in Vermont and also in the US.

Speaker #4: So, it's just a factor of those things coming in that we are seeing. I think the inflationary impact, both on the first half but also on the second half, is mainly on the logistics cost.

Speaker #4: And I said we are simply just transporting more goods around, and it has become more expensive to use this transport. So we also have just a slight, sort of increased or assumed increased logistic cost for the second half compared to the first half.

Kim Junge Andersen: We also have just a slight increased or assumed increase the logistic cost for the H2 compared to the H1.

Speaker #5: Okay, understood. And then my second question goes to these sourcing limitations in the US. Now, you, in the previous question, spoke about imports, but just to clarify, exactly what do you mean by these sourcing limitations?

Christian Tornehuus: Okay, understood. Then my second question goes to the sourcing limitations in the US. You in the previous questions spoke about imports, but just to clarify, exactly what do you mean by these sourcing limitations?

Kim Junge Andersen: There is a row of operational things, but one of them is maintenance. You have to do maintenance on our factories in certain periods, upgrade. By the way, also, we want to expand how much capacity we can drive out of each factory. It is lean and kaizen activities, and that means that you have to take the factory out of the loop for a while. So there are some effects there. But it is also the growth, and that is of course also why we are building more factory capacity, both in technical insulation and in general insulation materials. So I think it is a very good solution we have found in selecting products that can be imported from Europe.

Speaker #2: We have a row of operational tasks, and one of them is maintenance. You have to perform maintenance on our factories at certain intervals, as well as upgrades.

Speaker #2: By the way, also, we want to expand how much capacity we can drive out of each factory. It's lean and Kaizen activities, and that means that you have to take the factory out of the loop for a while.

Speaker #2: And so there are some effects there. But it is also the growth. And that's, of course, also why we are building more factory capacity, both in technical insulation and in general insulation materials.

Speaker #2: So, I think it's a very good solution we have found in selecting products that can be imported from Europe. By the way, we're not hit with tariffs on that.

Kim Junge Andersen: By the way, we are not hit on tariffs on that, so we can actually import from Europe and satisfy that demand until our large jumper lines go online in approximately 2 years from now.

Speaker #2: So we can actually import from Europe and satisfy that demand until our large jumbo lines go online in approximately two years from now.

Speaker #5: Understood. Thank you.

Christian Tornehuus: Understood. Thank you.

Speaker #1: Next question is from Daniel Kayanor, Ray Morgan, Sunday.

Operator: Next question is from Daniela Costa, Morgan Stanley.

Speaker #5: Hi, good morning. Thank you for taking my question. Just to follow up on the guidance—top-line guidance—and if I missed it, apologies.

Daniela Costa: Hi. Good morning. Thank you for taking my questions. Just to follow up on the guidance, top line guidance, and if I missed it, apologies. But you delivered 6% local currency growth in H1, mainly volumes, while 6% to 8% price increases are rolling through from the beginning of Q2, and the new guidance is 5% to 7% local currency for the full year. This begs the question on price realization and volume trends into H2. My understanding is you are seeing good price realization but so far disappointing volumes. Is that the correct read into the earlier answer?

Speaker #5: But you delivered 6% local currency growth in H1, mainly volumes, while 6 to 8% price increases are rolling through from the beginning of Q2.

Speaker #5: And the new guidance is 5 to 7% in local currency for the full year. So this begs the question on price realization and volume trends into H2.

Speaker #5: My understanding is you're seeing good price realization, but so far disappointing volumes. Is that the correct read into the earlier answer?

Speaker #4: Yeah, that is, Daniel. That is correct. And we do see a good price realization. Right now, as we move into Q3, it stands at around 6%.

Kim Junge Andersen: Yeah, that is, Danny, that is correct, and we do see a good price realization. Right now, as we move into Q3, it stands around 6%, which is within the framework that we have, that we talked about. We are pushing hopefully a little bit more up to the autumn season. We had also anticipated that the volume will go down. We had quite a good run on both in France and in Germany and also in Poland, other Eastern European countries. We had already foreseen that that would sort of tamper down a bit in the H2. That's why previously forecast was a 0% volume for the H2. Now we're adjusting that slightly upwards to 1% to 2% volume growth. There is a distinct difference compared to the H1 that was mainly volume-driven and very limited price-driven.

Speaker #4: Which is within the framework that we have, that we talked about. And we are pushing, hopefully, a little bit more into the autumn season.

Speaker #4: We had also anticipated that the volume would go down. We had quite a good run in both France and Germany, and also in Poland and other Eastern European countries.

Speaker #4: And we had already foreseen that that would sort of tamp down a bit in the second half. And that's why the previous forecast was a 0% volume for the second half.

Speaker #4: Now we are adjusting that slightly upwards to 1–2% volume growth. But that is a distinct difference compared to the first half, which was mainly volume-driven and very limited price-driven.

Speaker #5: Okay, that's very useful. And just to follow up on the capex—maybe I'll get back in the queue. You gave an idea for 2027, which is very useful.

Daniela Costa: Okay. That's very useful. Just to follow up on the CapEx, maybe I'll get back in the queue. You gave an idea for 2027, which is very useful. Given the schedule of FID assets being built globally from 2027 onwards, should we expect this to stay at elevated CapEx levels, or should we expect that to start to slowly come down towards 2030?

Speaker #5: But given the schedule of FID assets being built globally, from 2027 onwards, should we expect to stay at elevated capex levels, or should we expect that to start to slowly come down towards 2030?

Speaker #4: Yeah, thanks, Daniel. I mean, we have right now sort of four large of them—India, opening this year. One is in Romania, opening in 2027.

Kim Junge Andersen: Yeah. Thanks, Daniel. We have right now four large capacity investments ongoing. One of them India, opening this year, one is in Romania opening in 2027, and then one in France to be opened in 2028, and one in the US to be opened in 2028. We have not yet announced any further capacity expansion plans. That means once we sort of get those online, the best guess right now is that the CapEx amount will go down as we open up these factories. To what level then it will be in 2029, once we have opened all the four factories, I think we will have to revert to that. That is so far in the future that we have not yet even internally decided if there's room for further CapEx expansion. There's nothing planned and announced at this time after 2028.

Speaker #4: And then one in France to be opened in 2028, and one in the US to be opened in 2028. We have not yet announced any further capacity expansion plans.

Speaker #4: But that means once we sort of get those online, the best guess right now is that the CapEx amount will go down as we open up these factories.

Speaker #4: To what level, then, will it be in 2029 once we have opened all four factories? I think we will have to revert to that.

Speaker #4: That is so far out in the future that we have not yet even internally decided if there's room for further capex expansion. But there's nothing planned or announced at this time after 2028.

Speaker #5: Right. Right. That's very useful. Thank you.

Daniela Costa: Right. That's very useful. Thank you.

Speaker #1: Next question is from Klaus Almer, Nordea.

Operator: Next question is from Klaus Alma Naude.

Speaker #3: Thank you. Yeah. Also, a few questions from my side. The first question goes to guidance. If you look at the capex guidance, these extra $50 million you are increasing your guidance with, should we think about this as less $50 million next year?

Klaus Alma Naude: Thank you. Also a few questions from my side. The first question goes to guidance. If you look at the CapEx guidance, these extra EUR 50 million you are increasing your guidance with, should we think about this as less EUR 50 million next year, given this timing of the milestones? That would be the first one.

Speaker #3: Given this timing of the milestones, that would be the first one.

Speaker #4: Yes, Klaus, you can think of it that way. It is a timing difference of down payments.

Kim Junge Andersen: Yes, Klaus, you can think like that. It is a timing difference of down payments.

Speaker #3: Okay, very helpful. Then, about the P&L guidance: as you said, you're going to raise your price so far by 6%, and you'll get an additional maybe 1% in addition.

Klaus Alma Naude: Okay. Very helpful. Then about the P&L guidance. As you said, you are going to raise your prices so far by 6%, and you will get additional maybe 1% in addition. When you look at Q2, limited ASP impact, as you said, so key driver was volume. When I look at your gross margin, it seems to be down by 2% or 3% this point year-over-year, given, I guess, energy cost. Is it fair to assume if you had introduced your price increases earlier and thereby being able to fully offset the energy cost, then your EBIT margin in the quarter would have been 2% or 3% higher than reported?

Speaker #3: When you look at Q2, limited ASP impact, as you said, so the key driver was volume. When I look at your gross margin, it seems to be down by 2 or 3 percentage points year over year.

Speaker #3: Given, I guess, the energy cost, is it fair to assume that if you had introduced your price increases earlier, and thereby been able to fully offset the energy cost, then your EBIT margin in the quarter would have been like 2 or 3 percentage points higher than reported?

Speaker #4: I mean, obviously, in, as you know, in my perfect Excel world I live in, I could easily have put prices up in the second quarter.

Kim Junge Andersen: Obviously, as you know, in my perfect Excel world I live in, I could easily have put prices up in Q2. But in real life, we could not. We have contractual obligations with customers, and we didn't judge this exercise to be a force majeure. So we had to adhere to the notice periods that contractually we have with many of our key customers, and that is typically eight to 12 weeks, i.e., it takes two or three months in order to effectively get pricing into the market. On the supplier side, we got hit immediately with the higher transport cost. So that just hits us immediately, and that is just a timing difference. As I said, the plan has always been to maintain the full year EBIT margin, 13% to 14%, knowing that we have a number of one-off this year that disturbs the picture a bit.

Speaker #4: But in real life, we could not. We have contractual obligations with customers, and we didn't judge this exercise to be a force majeure. So we had to adhere to the notice periods that contractually we have with many of our key customers.

Speaker #4: And that is typically 8 to 12 weeks at the IE. It takes 2 or 3 months in order to effectively get pricing into the market.

Speaker #4: On the supplier side, we got hit immediately with the higher transport cost. So that just hits us immediately. And yeah, that is just a timing difference.

Speaker #4: As I said, the plan has always been to maintain the full-year EBIT margin at 13 to 14 percent, knowing that we have a number of sort of one-offs this year that disturb the picture a bit.

Speaker #4: But that is included in this 13 to 14 percent EBIT margin guidance.

Kim Junge Andersen: But that is included in these 13% to 14% EBIT margin guidance.

Speaker #3: Sure. So Kim, what I'm trying to figure out is what is the underlying—everything has been introduced and implemented in terms of price increases. So as I understand your reply, when you look at Q3, all else equal, then probably the gross margin and the EBIT margin should be 2 or 3 percentage points better than what we saw in Q2.

Klaus Alma Naude: Sure. So what I'm trying to figure out, what is the underlying, everything has been introduced and implemented price increases. So as I understand, your reply is that when you look at Q3, everything equal, then probably the gross margin, EBIT margin should be 2, 3 percentage point better than we saw in Q2. Is that a fair way of looking at it?

Speaker #3: Is that a fair way of looking at it?

Speaker #4: Moving upwards, definitely. I'm not sure we can say everything because I also know about some of the things that we are looking at in terms of these maintenance costs.

Kim Junge Andersen: Moving upwards, definitely. I'm not sure we can know everything there, because I also know of some of the things that we are looking at in terms of these maintenance costs. But everything equal, yes, we should move upwards by a few percentage points.

Speaker #4: But, everything equal, yes, we should move upwards by a few percentage points.

Speaker #3: Great. Thank you so much.

Klaus Alma Naude: Great. Thank you so much.

Speaker #1: Next question is from Julian Radlinger, UBS.

Operator: Next question is from Julian Radlinger, UBS.

Speaker #2: Hey guys, thanks. Thanks very much for taking my question. So, I have a couple. The first one is the easier one. Sorry to come back on the guidance.

Julian Radlinger: Hey, guys. Thanks very much for taking my question. I have a couple. The first one is the easier one. Sorry to come back on the guidance. I still do not understand something here. So you did 6.3% local currency growth in H1. You are guiding 6% at the midpoint for the full year, so basically 6% in H2 as well. Now you have got price, which is at least 6% you are saying in H2, but you are also saying 1% to 2% volume on top. That gets me to 7% to 8%. What am I missing here?

Speaker #2: I still don't understand something here. So, you did 6%, 6.3% local currency growth in H1. You're guiding 6% at the midpoint for the full year.

Speaker #2: So basically, 6% in H2 as well. And now you've got price, which is at least 6%—you're saying in H2. But you're also saying 1 to 2 percent volume on top.

Speaker #2: That gets me to seven to eight. What am I missing here?

Speaker #4: You're missing a little bit of negative product and country mix. That's it, Julian. Some of this growth is coming in markets where the average selling prices are just lower than the average.

Kim Junge Andersen: Well, you are missing a little bit of negative product and country mix. That is it, Julian. Some of these growth are coming in markets where the average selling price are just lower than the average. So that is really just the gist of it. There is nothing really strange to this. This is just both a product and a country mix. On the product side, it is mainly because we are selling a lot more flat roof insulation also in the second half, and that has a lower average cost than our normal insulation.

Speaker #4: So, that's really just the gist of it. There's nothing really strange about this. And this is just both a product and a country mix.

Speaker #4: On the product side, it's mainly because we're selling a lot more flat roof insulation, also in the second half, and that has a lower average cost than our normal insulation.

Speaker #2: Okay, okay. Understood. My other question is a bit more of a big-picture one, so I want to get back to this capex increase. You've been open about the capacity expansion in the coming years.

Julian Radlinger: Okay. Understood. My other question is a bit of a bigger picture one. I want to get back to this CapEx increase. Look, you've been open about the capacity expansion in the coming years. You've made it clear CapEx is going up because of that and it's temporary. But now you've increased it twice this year, and you've not really indicated whether next year is going to be up or not. I know you just said it might be on a similar level, but nonetheless. You haven't really helped investors understand how to think about the returns on that CapEx. Aside from, of course, saying the incremental ROIC will meet your own hurdle rates. The stock is now down 10% in two days, or since yesterday, and I think that's actually largely because of that.

Speaker #2: You've made it clear capex is going up because of that and it's temporary. But now you've increased it twice this year, and you've not really indicated whether next year is going to be up or not.

Speaker #2: I know you just said it'll be on a similar it might be on a similar level, but nonetheless. So you haven't really helped investors understand how to think about the returns on that capex.

Speaker #2: Aside from, of course, saying the incremental ROIC will meet your own hurdle rates, the stock is now down 10% in two days, or since yesterday.

Speaker #2: And I think that's actually largely because of that. And so, assuming you won't provide more help on those funds in today's call—which is, of course, not the right forum necessarily.

Julian Radlinger: Assuming you won't provide more help on those fronts in today's call, which is, of course, not the right forum necessarily, is this a concern to you? Are there any plans that you have to provide some numbers and some visibility on this CapEx over the next few years, and more specifically, the returns over the next few years from when you open these plants in the form of an analyst day or just something to give investors a bit of a toolbox to get more comfortable around this and get more comfortable about buying into this? Big question. Sorry. Thank you.

Speaker #2: Is this a concern to you? Are there any plans that you have to provide some numbers and some visibility on this CapEx over the next few years?

Speaker #2: And more specifically, the returns over the next few years from when you opened these plans—in the form of an analyst day, or just something to give investors a bit of a toolbox to get more comfortable around this and get more comfortable about buying into this?

Speaker #2: Big question. Sorry. Thank you.

Speaker #5: Kim and I are looking at each other and nodding, and saying yes. Fair question, fair comment. And definitely also something we have discussed here, and without promising too much, let me start somewhere else.

Jes Munk Hansen: Kim and I are looking at each other and nodding and saying, yes. Fair question, fair comment, and definitely also something we have discussed here. Without promising too much, let me start somewhere else. Again, there are four factories announced, like Kim just alluded to. They will be completed over the next two years. So yes, CapEx will be elevated and then come down as these four major footprint projects are getting finalized. We have realized that it would be good for the investor community and in general to give some more granularity on not just on a macro level, but also opening up a little bit for the individual projects of what that means on return on invested capital as the capital flows out in establishing this capacity, but also when the, you can say, the volumes and the capital starts flowing the other way.

Speaker #5: Again, there are four factories announced, like Kim just alluded to. They will be completed over the next two years. So yes, capex will be elevated and then come down as these four major footprint projects are getting finalized.

Speaker #5: We have realized that it would be good for the investor community, and in general, to give some more granularity not just on a macro level, but also to open up a little bit on the individual projects—what that means for return on invested capital.

Speaker #5: As the capital flows out in establishing these capacities, but also when, you can say, the volumes and the capital start flowing the other way.

Speaker #5: So, it's a little bit premature to promise you the exact date when we'll come back to it. But if I can just park it here and say that we want to give you some more insight into it, and we're right now discussing what should be the forum and format to open up—to give you that insight into the capital movements.

Jes Munk Hansen: So it's a little bit premature to promise you the exact date when we come back to it. But if I can just park it here and say that we want to give you some more insight to it, and we're right now discussing what should be the forum and format to open up to give you that insight into the capital movements.

Speaker #2: That's fantastic. Thank you very much, Jes. I think people are really going to appreciate that. If I can actually just throw on half a question, just a little last one.

Julian Radlinger: That is fantastic. Thank you very much, Jes. I think people are really going to appreciate that. If I can actually just throw in half a question, just a little last one. I am really, really sorry about this, but really easy question. You are importing from Europe because you are sold out in the US. Why are you not importing from Canada if Canada is down?

Speaker #2: I'm really, really sorry about this, but really easy question. You're importing from Europe because you're sold out in the US. Why aren't you importing from Canada if Canada is down?

Speaker #5: We are. And we always have, by the way. The Canadian factories have been the backbone of our US business as well. It becomes very granular to explain this—it depends on the product type, and whether or not our factories are the same.

Jes Munk Hansen: We are, and we always have, by the way. The Canadian factories have been the backbone of our US business also. It becomes very granular to explain this. It depends on the product type, whether or not our factories are not the same. So some factories are better at producing certain product types, more efficient, and have more capacity available. So it is always a mix. But we want to ensure, and this is the most important thing, we want to make sure that our growth and momentum that we have in the US market is satisfied and not limited by capacity. And we can do that as one of your colleagues called the bridge, until our very large factory in Wallula goes online. So it is typically heavier products.

Speaker #5: So some factories are better at producing certain product types more efficiently and have more capacity available. So it's always a mix.

Speaker #5: But we want to ensure, and this is the most important thing, we want to make sure that our growth and momentum that we have in the US market is satisfied and not limited by capacity.

Speaker #5: And we can do that as one of your colleagues called the bridge, until our very large factory in Vallula goes online. So, it's typically heavier products.

Speaker #5: I mean, it's typically heavier products that travel well, just to give you an idea. But now we're into logistics numbers.

Julian Radlinger: Understood. Thank you very much.

Jes Munk Hansen: I mean, it is typically heavier products that travel well, just to give you an idea. But now we are into logistic numbers.

Speaker #2: Got it. Thank you very much, guys.

Julian Radlinger: Got it. Thank you very much, guys.

Speaker #6: Next question. It's from Alexander Kepler Sugár.

Operator: Next question is from Alexander Kreimer, Kepler Cheuvreux.

Speaker #7: Hey, good morning, Jes and Kim. Thank you for taking my questions. So, my first question is basically on the question I even asked on last quarter's call.

Alexander Kreimer: Hey, good morning, Jes and Kim. Thank you for taking my questions. First question would be basically on the question I even asked the last quarter's call. I flagged that if the H2 top line growth would be price driven rather than volume driven, the EBIT margin would likely land at the bottom of the 13% to 14% guided margin range. I asked you whether that was the right assumption, and your answer at the time was to wait for Q2, so here we are. Q2 is actually usually some of the stronger quarters, normally it is above year average margin. Yet with volume growth solid this quarter, EBIT margin barely touched 13%. The question I have is twofold.

Speaker #7: So I flagged that if the H2 top-line growth would be price-driven rather than volume-driven, the EBIT margin would likely land at the bottom of the 13 to 14 percent guided moderate margin range.

Speaker #7: I asked you whether that was the right assumption, and your answer at the time was to wait for Q2. So here we are. Q2 is actually usually one of the stronger quarters.

Speaker #7: Normally, it's above the year-average margin. Yet, with solid volume growth this quarter, EBIT margin barely touched 13%. So, the question I have is twofold.

Speaker #7: First, what gives you the confidence to keep that 14% on the table? And what would specifically have to change from here on out to reach that top end?

Alexander Kreimer: First, what gives you the confidence to keep that 14% on the table, and what would specifically have to change from here on out to reach that at top end? Second, if conditions stay exactly where we were and exactly as budgeted, where do we land? Do we land on the upper end, on the lower end of the range? Then second question would be on Dutch plant. It has been taken out. I thought it actually was only taken out recently. Could you elaborate on how long this Dutch plant has been taken offline? How long do we expect this conversion to take? Considering that this is the largest plant, how much volumes or capacity are lost because of this? Thank you very much.

Speaker #7: And the second—if conditions stay exactly where we were and exactly as budgeted, where do we land? Do we land on the upper end or on the lower end of the range?

Speaker #7: The second question would be on the Dutch plant. It has been taken out. I thought it actually was only taken out recently. So could you elaborate on how long this Dutch plant has been offline, and how long do we expect this conversion to take?

Speaker #7: And considering that this is the largest plant, how much volume or capacity is lost because of this? Thank you very much.

Speaker #5: Yeah, I can start with the plant question. Then Kim comes back to your margin question. In Romania, there are three large production lines.

Jes Munk Hansen: Yeah, I can start with the plant question, then Kim comes back to your margin question. In Roermond, there are three large production lines. It is only one of the three that was taken out for electrification, and it is back online. We will at a later point also, actually in the near future, also electrify the next production line. But the first one has been electrified and is now running stable.

Speaker #5: So it's only one of the three that was taken out for electrification, and it's back online. We will at a later point, actually in the near future, also electrify the next production line.

Speaker #5: But the first one has been electrified and is now running stably, so

Speaker #3: Yeah. And I don't want to go into detail on the margin. We have, of course, a spread on the margin there to allow us to have a little bit of uncertainty in the forecast, which there is.

Kim Junge Andersen: Yeah, and I do not want to come into the detail on the margin. We have, of course, a spread on the margin there to allow us to have a little bit of uncertainties in the forecast, which they are. And what will drive it towards the upper end, that will be more growth, obviously. It will be growth in markets where we have available capacity, i.e., France, Poland, Germany, Poland, and the Nordics. But so far we are just in the, you could say, in that broader segment. So there is really just nothing more to comment on that particular range.

Speaker #3: And what will drive it toward the upper end, that will be more growth, obviously. It will be growth in markets where we have available capacity—that is, France, Germany, and Poland.

Speaker #3: And the Nordics, but so far we are just in, you can say, that broader segment. So there’s really just nothing more to comment on in that particular range.

Speaker #7: Okay, I'll come back and treat them. Thanks.

Alexander Kreimer: Okay. I will come back on Q3 then. Thanks.

Speaker #6: Next question. It's from Yasin on field investment research.

Operator: Next question is from Yassine Touahri, On Field Investment Research.

Speaker #4: Yes, good morning. Thank you very much for answering my question. The first question would be, coming back to Julian's question. After your factories in India and Romania, I think you have an expansion in Mississippi, a new US factory, and a new factory.

Yassine Touahri: Yes, good morning. Thank you very much for answering my question. The first question would be coming back to Julian's question. After your factories in India, Romania, I think you have an expansion in the Mississippi, a new US factory, a new firm factory. After all those factories are fully operational, which I understand should be by the end of the decade, could you give us a very rough idea of the additional EBIT this investment could generate? I understand that you might not give a precise number, and that you might do a capital market there, but even just a ballpark number would be extremely helpful.

Speaker #4: After all those factories are fully operational, which I understand should be by the end of the decade, could you give us a very rough idea of the additional EBIT this investment could generate?

Speaker #4: I understand that you might not give a precise number, and that you might do a capital market there, but even just a ballpark number would be extremely helpful.

Speaker #4: My second question—could you give us, sorry.

Kim Junge Andersen: Yeah.

Yassine Touahri: My second question, could you give us Sorry.

Speaker #3: I mean, yes, we cannot give you that because that's exactly what we're working on—trying to get an idea of, as we replied to Julian, if we have sort of a midterm outlook. We need to work on this still and find a timing to do that.

Kim Junge Andersen: Yes, indeed. You know we cannot give you that because that's exactly what we're working on, trying to get an idea of, as we replied to Julian, if we have sort of a midterm outlook, we need to work on this still and find a timing to do that. So I cannot here on this call give you an idea of this.

Speaker #3: So I cannot, here on this call, give you an idea of this.

Speaker #4: You don't even have a range of outcomes.

Yassine Touahri: You don't even have a range of outcome?

Speaker #3: No, thank you.

Kim Junge Andersen: No, thank you.

Speaker #4: And the second question would be, could you just give us a bit more color on the volume and pricing development in July?

Yassine Touahri: The second question would be on, could you just give us a bit more color on the volume and pricing development in July? Are the trends that you are seeing consistent with your H2 guidance of volume up 1% to 2%?

Speaker #4: Are the trends that you're seeing consistent with your H2 guidance of volume up 1 to 2 percent?

Speaker #3: Yeah, yeah. I mean, pricing for sure. For sure, we alluded to the fact that there was some pre-buying in June, and that, of course, we can see in the July numbers, where volume and growth are down.

Kim Junge Andersen: Yeah.

Yassine Touahri: Pricing and mix of 4% or 5%?

Kim Junge Andersen: For sure. We alluded to that there was some pre-buying in June. That, of course, we can see on the July numbers, where volume and growth is down, then we expect this to pick up here in August or September again. So there is nothing dramatic about July. It sits there with a flat volume and a small-

Speaker #3: And then we expect this to pick up here in August and September again. So there's nothing dramatic about July; it sits there with the flat volume and a small, so a small pickup.

Yassine Touahri: But you can see the price increase sticking?

Speaker #4: Do you think you can see the price increase sticking?

Speaker #3: Yes, yeah, yeah. There is a price increase, but you can say the volume was impacted by this pre-buying. So, there was a few percentage points of pre-buying in Q2 that affected July's volume for sure.

Kim Junge Andersen: Yes. Yeah. There is a price increase, but there's no You can say the volume was impacted by this pre-buying. So there was a few percentage points of pre-buying in Q2 that affected the July volume, for sure.

Speaker #4: Thank you.

Yassine Touahri: Thank you.

Speaker #6: Next question is from Alexander at Bank of America.

Operator: Next question is from Alison Tan, Bank of America.

Speaker #7: Hi, good morning. I have two questions from my side. First, what's your expectation for Eastern Europe in the second half? Should we expect them to keep the good momentum we saw in Q2?

Alison Tan: Hi. Morning. Two questions from my side. First, what is your expectation for Eastern Europe for the H2? Should we be expecting them to keep the good momentum we see in Q2? The second question is, you mentioned about the market share gain in some flat roof markets. Which regions exactly are we talking about? Thank you.

Speaker #7: And the second question is, you mentioned the market again in some flat roof markets. Which regions exactly are we talking about? Thank you.

Speaker #5: I couldn't hear you for a second. Just acoustically, I couldn't hear what you said.

Kim Junge Andersen: I could not hear you a second. Just acoustically, I could not hear what you said.

Speaker #7: Sorry. So the second question is on the flat roof market share gain. Can you tell me exactly which regions we see the market share gain?

Alison Tan: Sorry. The second question is on the flat roof market share gain. Can you tell me exactly which regions did we see the market share gain? Thank you.

Speaker #7: Thank you.

Speaker #5: Yeah. Let me start there. It is in our large markets that we see the flat roof—where we gain flat roof share. And it is because we are more competitive against our foam products.

Kim Junge Andersen: Yeah. Let me start there. It is in our large markets that we see the flat roof, that we gained a flat roof share. And it is because we are more competitive against our foam products, but also this bigger awareness of fire protection in France, Poland, Germany. As people put PV solar panels on their roofs in commercial buildings, they need to be fire safe. So that is in our main markets. East Europe, we grew at 31%. That will not continue at that level going forward. We see more aggressive pricing from the foam and plastics, so it will come down a little bit from where we are right now.

Speaker #5: But also, there's this bigger awareness of fire and fire protection in France, Poland, and Germany. As people put PV solar panels on their roofs, in commercial buildings, they need to be fire safe.

Speaker #5: So that's in our main markets. In Eastern Europe, I mean, we grew 31%—that will not continue at that level. Going forward, we see more aggressive pricing from the foam and plastics.

Speaker #5: So it will come down a little bit from where we are right now.

Speaker #7: Okay. Thank you.

Alison Tan: Okay, thank you.

Speaker #6: Next question is from Case Colgan, then Landshot Kempen.

Operator: Next question is from Chase Kogan, Hauck Aufhäuser Lampe.

Speaker #4: Hi, good morning all, and thank you for taking my questions. I just have two. You mentioned in the report that you are expecting a bit of margin pressure from what you said to be elevated maintenance costs.

Chase Kogan: Hi, good morning all, and thank you for taking my questions. I just have two. You mentioned in the report you are expecting a bit of margin pressure from what you said to be elevated maintenance costs. Could you explain a bit what that is and when you expect that to sort of fade out? Was that related to the US sourcing issues you mentioned earlier? Then my second question, I think more of a clarification. You referenced the 1x net debt EBITDA. Is that an internal policy, or is that a sort of a debt covenant, a harder debt covenant? In the context of that, how are you looking at M&A at the moment, given obviously the higher CapEx spends and such? Is that still something you're-

Speaker #4: Could you explain a bit what that is and when you expect that to sort of fade out? Was that related to the US sourcing issues you mentioned earlier?

Speaker #4: Then my second question, I think, is more of a clarification. You referenced the one-times and that EBITDA. Is that an internal policy, or is that sort of a debt covenant—are they harder debt covenants?

Speaker #4: And in the context of that, how are you looking at M&A at the moment, given obviously the higher capex and such? Is that still something you're rising up, or maybe just sticking with the smaller strategic investments or smaller bolt-ons?

Chase Kogan: Sizing up, or maybe just sticking with the smaller strategic investments or smaller bolt-ons? Thank you.

Speaker #4: Thank you.

Speaker #5: No, that's internal policies—that we keep our leverage under one. And we can run our investment programs within our policies. The maintenance costs come from a range of areas, but now it becomes very operational. We have had to upgrade some things in our electric melter in Norway—that was planned—and the large electrification in the Netherlands is part of those costs.

Jes Munk Hansen: No, that's in turn policies that we keep our leverage under 1. And we can run our investment programs within our policies. The maintenance costs come from a row of areas, but now it becomes very operational. We have had to upgrade some things in our electric melt train in Norway that was planned, and the large electrification in the Netherlands are part of those costs. When you shut down a big production line like that, then of course you also take the benefit of having the line stand still, and then you upgrade a whole row of other things that make sense to do while you are offline, so to say.

Speaker #5: When you shut down a big production line like that, then of course you also take the benefit of having the line stand still, and then you upgrade a whole row of other things that make sense to do while you are offline, so to say.

Speaker #4: Okay. Yeah. How long do you expect those to remain elevated, then?

Chase Kogan: Okay. Yeah. But how long do you expect those to remain elevated, then?

Speaker #3: These maintenance runs don't normally take more than weeks and weeks, but then it's just a matter of how to forecast and foresee whether these are happening.

Jes Munk Hansen: These maintenance runs do not normally take more than weeks. But then it's just a matter of how to forecast and foresee whether these are happenings. And so far we have had a few more incidents than we have normally had. But, yeah, we do not have any sort of specific forecast for this chase in the outlook.

Speaker #3: And so far, we have had a few more incidents than we have normally had. But, yeah, we don't have any sort of specific forecast for this case in the outlook.

Speaker #4: Okay. No, that's still helpful. Thank you very much.

Chase Kogan: Okay. No, that's still helpful. Thank you very much.

Speaker #6: Next question is from Anna, BNP Paribas.

Operator: Next question is from Anna, BNP Paribas.

Speaker #7: Hi, everyone, and thanks for taking my questions. Most have been answered, but I just have one last one on North America. So, the local currency growth of 4% was much softer than the growth.

[Analyst] (BNP Paribas): Hi, everyone, and thanks for taking my questions. Most have been answered, but I just have a last one on North America. The local currency growth of 4% was much softer than the group. What was driving this? Is it the sourcing issues? Is it end market weakness, price discipline, share loss? Any thoughts would help. Thank you.

Speaker #7: What was driving this? Is it the sourcing issues? Is it end market weakness? Price discipline? Share loss? Any simple words to help? Thank you.

Speaker #5: We're struggling a little bit with hearing what you said, but just double-checking with my colleagues.

Jes Munk Hansen: We are struggling a little bit with hearing what you said, but I am just double-checking with my colleagues.

Speaker #3: I think—and just repeat that again, because the sound was not so clear here.

Kim Junge Andersen: Anna, just repeat that again because the sound was not so clear here.

Speaker #7: Sorry about the line. It was on North America. Softness—what was driving this? Was it the sourcing issues? Is it end market? Any color here would be helpful.

[Analyst] (BNP Paribas): Sorry about the line. It was on North America softness. What was driving this? Was it the sourcing issues? Is it end market? Any color here would be helpful.

Speaker #5: Yeah, then we have to differentiate a little bit. Canada is, as you can read in the press, just now for two quarters in a row technically in a recession.

Jes Munk Hansen: Well, then we have to differentiate a little bit. Canada is, as you can read in the press just now, for 2 quarters in a row, in technically a recession, and the building construction industry is just at a very low level. So that's Canada. We also don't see that improve dramatically, although that's stabilizing a little bit right now. So that's Canada. We are then benefiting from that we can use that wool in the US, so that doesn't hit us as hard as it would be if we were having overcapacity. In the US, the construction market, then you really have to go down by region and see where. There are some areas where there still is quite a lot of commercial industrial growth, and there's some areas where there's also residential. So it's more nuanced, but we grow because we're gaining market share.

Speaker #5: And the building construction industry is just at a very low level. So that's Canada. We also don't see that improving dramatically, although it's stabilizing a little bit right now.

Speaker #5: So, that's Canada. And we're then benefiting from that; we can use that rule in the US. So, that doesn't hit us as hard as it would be if we were having overcapacity.

Speaker #5: In the US construction market, you really have to go down by region and see where there are some areas where there still is quite a lot of commercial and industrial growth, and there are some areas where there's also residential.

Speaker #5: So, it is more nuanced. But we grow because we're gaining market share; both the stone wool market is getting better and bigger, and we, of course, gain market share both in stone wool and in totality.

Jes Munk Hansen: Both the stone wool market is getting better, bigger, and we of course gain market share both in stone wool and totality. So when you put it all together, then it's 4%.

Speaker #5: So when you put it all together, then it’s 4%.

Speaker #7: Okay. Thank you.

[Analyst] (BNP Paribas): Okay. Thank you.

Speaker #6: Next question is from Daniel Kayanori, Morgan Stanley.

Operator: Next question is from Daniel Kay, Morgan Stanley.

Speaker #4: Hi, sorry. My follow-up question was already answered. Thank you.

Daniela Costa: Hi. Sorry, my follow-up question was indeed answered already. Thank you.

Speaker #6: Last question is from Pujarini Ghosh, Benson.

Operator: Last question is from Pujarini Ghosh, AllianceBernstein.

Speaker #7: Hi, thanks for taking my question again. So, a couple of times today you highlighted that stone wool is gaining market share in the US, and you are gaining market share, probably within the stone wool space as well.

Pujarini Ghosh: Hi, and thanks for taking my question again. A couple of times today you highlighted that stone wool is gaining market share in the US, and you are gaining market share probably within the stone wool space as well. As I remember, I think in a previous presentation you had mentioned the share of stone wool in the US was around 3%. Do you have an indication of how much that share could be today, and then how much your share is within that space? Thank you.

Speaker #7: As I remember, I think in a previous presentation you had mentioned the share of stone wool in the US was around 3%. Do you have an indication of how much that share could be today, and then how much your share is within that space?

Speaker #7: Thank you.

Speaker #5: Yeah, and we have a nice slide we sometimes show you, so I think you can download it from some of the other presentations. But as it looks now—and this is not exact science, please bear with me a little bit—but the numbers we see are that the share of the total insulation market, stone wool, is moving from 4% up towards 5% these days.

Jes Munk Hansen: Yeah, and we have a nice slide we sometimes show you. I think you can download it from some of the other presentations. As it looks now, and this is not exact science, please bear with me a little bit, but the numbers we see is that the share of the total insulation market, stone wool is moving from 4% up towards 5% these days. When we look at other markets, including Canada, which is a comparable market, just simply from how you build houses in North America is comparable. Then you are looking at markets where stone wool are close to 20% of the total insulation market. I am not suggesting that we will get the 20% total market share in the US in the very near future. Our growth is driven by what you could call a category shift away from flammable foam

Speaker #5: But when we look at other markets, including Canada, which is a comparable market—just simply from how you build houses in North America is comparable—then you look at markets where stone wool are close to 20% of the total insulation market.

Speaker #5: So I'm not suggesting that we will get 20% total market share in the US in the very near future, but our growth is driven by what you could call a category shift away from flammable foam and plastics into non-combustible stone wool.

Kim Junge Andersen: And plastics into non-combustible stone wool.

Speaker #6: Before closing our Q&A session, I would like to turn the conference back over to management for any closing remarks.

Operator: This concludes our Q&A session. I would like to turn the conference back over to the management for any closing remarks.

Speaker #3: Yes, and I thank you for joining today's earnings call. We would like to thank you for all the questions and the audience for listening in to today's call.

Kim Junge Andersen: Yeah. Jes and I thank you for joining today's earning call, and we would like to thank you for all the questions and the audience for listening in today's call. We appreciate your interest in ROCKWOOL A/S. If you have further questions, please feel free to reach out to me. You may find the ROCKWOOL contact details in the investor sections on our corporate website. Have a very nice day. Thank you.

Speaker #3: We appreciate your interest in Rockwool A/S. If you have further questions, please feel free to reach out to me. You may find the Rockwool contact details in the visitor sections on our corporate website.

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