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[March 2008]
2007 an Extremely Successful Year, Says Wienerberger
Wienerberger AG (Vienna, Austria), the world's largest producer of bricks and the number two in clay roof tiles in Europe, was able to exceed its earnings targets in 2007 and again record double-digit growth in revenues and earnings. Supported by a mild winter, the European construction industry showed significant strength throughout the year. The development of business in Central-East Europe was outstanding. Additionally, Belgium, France and the Netherlands reported solid growth. This was more than able to offset declines in the North America and Central-West Europe segments. Furthermore, Wienerberger realised growth investments of more than €525 million during the past year.
Group revenues rose by 11% to €2.477.3 billion, operating EBITDA by 17% to €551.2 million and operating EBIT by 18% to €353.1 million. "At mid-year we raised our earnings targets to reflect the outstanding development of business in Central-East Europe – and finally even exceeded these targets – although the downturn on the new residential construction markets in the USA and Germany was much stronger than expected," explained Wolfgang Reithofer, Chief Executive Officer of Wienerberger AG, on results for 2007.
"The past year was characterized by extremely strong earnings growth, whereby the unusually high increases from the first six months normalized as expected beginning in the summer. This development was driven by a high pace of residential construction in Eastern Europe, above all in Poland, Slovakia, the Czech Republic, Bulgaria and Romania, as well as sound growth on the new residential construction and renovation markets in Belgium, France and the Netherlands. However, our business was negatively affected by a further 25% drop in US housing starts and the disappointing condition of new residential construction in Germany - where housing completions fell to a historical low during the past year," commented Reithofer. Reithofer sees the 2007 results as clear confirmation of the success of Wienerberger's balanced geographic portfolio, which allowed the group to more than offset declines on the two largest individual markets - the USA and Germany - and also minimise market fluctuations and risks.
Wienerberger generated profit after tax of €295.8 million and earnings per share rose by 17% to €3.46 (after hybrid coupon payments). This growth resulted above all from the improvement in operating earnings and also reflects an increase of two million in the weighted number of shares outstanding to 75.5 million after the capital increase in October 2007. Financial results improved from €-20.2 million to €5.3 million; this figure contains a book gain of €10.1 million on the sale of securities but does not include interest expense for the hybrid coupon. Higher income from the investments in the Pipelife Group and Tondach Gleinstätten also made a positive contribution to financial results. The tax rate declined to 17.4% (2006: 21.3%) due to a higher share of earnings generated in East European countries with lower tax rates and the tax deductibility of the coupon on the hybrid capital.
"We now want our shareholders to benefit directly from this growth. The Managing Board will therefore recommend that the Annual General Meeting on May 9 approve a 12% increase in the dividend to €1.45 per share, whereby the capital increase raised the number of shares to 83.9 million," announced Reithofer. This represents a yield of 3.8% on the closing price of the share for 2007. "In the future we will continue to offer our shareholders an attractive minimum return on their capital in the form of appropriate dividends," he added.
Wienerberger continued its expansion course in 2007 with more than 50 projects and growth investments totalling €525 million: 43% of these investments represent larger acquisitions, 19% smaller acquisitions and 38% new plant construction or capacity extensions. These activities were financed from free cash flow of €293.8 million and the hybrid bond that was issued in February 2007.
"Our main objective is to maintain a sound equity base in order to safeguard the continuation of business and the payment of dividends as well as the continued pursuit of our expansion strategy. At the same time, we intend to protect our investment grade rating. In addition to the hybrid bond, we therefore carried out a capital increase (net proceeds: €424 mill.) to accelerate our growth program in 2008 and the following years," explained Van Riet. Net debt equalled €566.8 million as of 31 December 2007, which is more than 50% below the prior year level.
The Wienerberger strategy is focused on increasing the value of the company. ROCE reached 10.1% in 2007, which not only exceeds the 9.4% recorded for 2006 but also the Group's 7.5% weighted average cost of capital (WACC).
"We are also optimistic concerning the development of business in 2008 and assume that Wienerberger will again be able to outperform the building materials sector with above-average growth in operating earnings (approx. 10%), despite the continuing uncertainty over the effects of the financial crisis in the USA. This confidence is based on the expansion program we have pursued in recent years as well as the related steady development and strengthening of our geographic portfolio. Supported by growth in Europe - especially Eastern Europe - we will be able to more than offset declines in weaker markets," said Wolfgang Reithofer optimistically.
"In 2008 we expect continued positive market development in Central-East Europe. The new plants built in Romania, Bulgaria and Russia during the prior year as well as a strong new residential construction market in Poland will allow Wienerberger to profit from the dynamic momentum in this region," commented Johann Windisch, member of the Managing Board of Wienerberger AG with responsibility for Central-East Europe and North America.
"In France we anticipate stability in new residential construction as well as an additional increase in the market share of hollow bricks and steady high demand for clay roof tiles. The integration and consolidation of Baggeridge and Sandtoft in Great Britain and Korevaar in the Netherlands will also support a further increase in revenues and earnings. In Germany there are no signs of a major recovery in new residential construction at the present time, but slight growth may be possible in 2008," analysed Heimo Scheuch, member of the Managing Board of Wienerberger AG with responsibility for North-West Europe and Germany.”
"In the USA, housing starts are projected to drop by a further 20% to 1.1 million in 2008. However, the capacity adjustments made in 2007 as well as the further optimization of our plants and the consolidation of Arriscraft should lead to an improvement in earnings for the North America segment", concluded Johann Windisch on his outlook for the group's markets in 2008.
"I am extremely confident that Wienerberger will continue its sound growth during the coming year – especially because of our diversified geographic portfolio, which has proven to be the right strategy at numerous times in the past. The further acceleration of our growth program in 2008 and the following years is intended to strengthen this diversification. We are planning to invest over €600 million in 2008, with €125 million of this total directed to maintenance capex and €100 million to strategic acquisitions. More than €400 million will represent bolt-on projects – above all new plant construction and capacity extension in the growth markets of Eastern Europe," added Reithofer in conclusion.
ENDS