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[August 2009]
New Wienerberger CEO Implements Comprehensive Action Plan
Wienerberger AG (Vienna, Austria) recorded a 29% drop in revenues to €898.1 million for the first six months of 2009. After a weather-related very weak first quarter (-37% year-on-year in revenues), the second quarter decline was more moderate in comparison (-22%). Results for the first half-year were the consequence of a stronger than expected downturn in new residential construction markets across Europe and North America in the wake of the global economic and financial crisis. The loss of consumer confidence and above all a lack of financing have notably slowed the pace of new construction.A drop in sales volumes, lower average prices and costs arising from extensive standstills throughout the group's plant network to reduce inventories as part of active working capital management triggered a decline in operating earnings for Wienerberger: operating EBITDA (before restructuring costs) fell by 57% to €100.6 million and operating EBIT by 94% to €7.8 million for the first six months of 2009. Profit after tax was negative at –€204.0 million, above all due to €59.1 million of restructuring costs for optimisation measures as well as €28.1 million of impairment charges to property, plant and equipment from the write-down of real estate and €125.4 million of impairment charges to goodwill.
Record prior year results in Central-East Europe were followed by the strongest revenue and earnings declines in the group due to the spread of the global financial crisis to the construction industry in this region. Weaker demand, especially in the UK, had a negative impact on revenues and earnings in North-West Europe. Earnings in Central-West Europe were influenced by continuing weakness in the new residential construction market in Germany as well as the costs of extended plant standstills at the beginning of this year. The USA reported a further decline in housing starts during the first months of 2009 from the very low prior year level.
Heimo Scheuch, who started as Wienerberger's CEO on 1 August 2009 in a very difficult market environment, summarised the situation by commenting: "Exceptional times require exceptional measures. Stronger-than-expected declines on our markets during the first half-year called for further action, and we responded quickly to the very weak first quarter by extending our restructuring program. Specifically, we implemented an action plan that includes additional adjustments to production capacity, active working capital management, a reduction in fixed costs and a cutback in investments to a minimum.
“This year we intend to close or mothball 26 plants, instead of the originally planned 20, to adjust our capacity to reflect the weaker demand and also reduce inventories. We estimate the costs for these measures at €100 million, whereby approx. €60 million represent special write-downs. Wienerberger took 18 plants off-line during the first six months, which resulted in €59 million of restructuring costs and unfortunately also involved nearly 1,000 jobs. In addition, extensive temporary standstills were scheduled throughout the entire plant network to reduce inventories. Together with the mothballed production lines, these temporarily closed locations represent a substantial capacity reserve that we can reactivate quickly as needed."
The new Wienerberger Managing Board has also introduced added measures to optimise administration and sales as a means of cutting fixed costs and limited investments to the necessary minimum.
In spite of the tough times, Heimo Scheuch draws a positive picture: "During the past half-year we were able to realize savings of €90 million in personnel and maintenance costs compared with the first six months of 2008. This reduction in fixed costs resulted mainly from capacity adjustments and the optimization of administration and sales beginning in mid-2008, but also includes positive effects from measures launched in early 2009. Maintenance capex totaled €30.7 million, which is 38% or roughly €19 million less than the first half of last year, and growth investments of €60.3 million will only be used to complete the projects started in 2008. Even though the operating environment is adverse we were able to generate free cash flow of €7.9 million for the first six months.
"Active working capital management also helped us to reduce inventories by roughly €58 million during the first half of 2009, even though the building materials market remains difficult. I am therefore confident that we will be able to reach our goal to reduce net debt by €100 million this year."
ENDS