Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rockwool AS (STU:R90, Financial) reported an 8% broad-based growth in H1, driven primarily by the commercial sector.
- The company achieved an EBIT margin of 17.7% year-to-date, with a notable increase to 18.7% in Q2.
- Record growth was observed in North America, with significant sales increases in both Canada and the US.
- The company has successfully ramped up productivity, achieving nearly 10% productivity improvement year-over-year.
- Rockwool AS (STU:R90) is making significant strides in sustainability, reducing CO2 emissions per ton produced by 16% since 2015.
Negative Points
- The residential sector continues to struggle, showing no signs of growth and negatively impacting overall performance.
- Inflationary pressures are expected to persist, potentially necessitating price increases in some markets.
- The new plant project in France has faced legal setbacks, causing delays and potential future investment reallocations.
- The company is nearing full capacity in the US, which may limit growth until the new plant comes online in 2027.
- Eastern Europe, particularly Poland, remains a challenging market with intense price competition affecting margins.
Q & A Highlights
Rockwool AS (STU:R90) Q2 2024 Earnings Call Highlights
Q: Jens, you mentioned that you do see a small inflation. Does that mean you're going to raise prices? Or will you have to absorb that in your P&L?
A: We foresee that we will do a small drumbeat price increase to cover that inflation. There could be competitive dynamics in some places where we might not do that, but the overall direction is that we are ready to do a small price increase to pass on the inflationary pressures as far as we can. - Jens Birgersson, CEO
Q: Implicitly, you guide for around 16% EBIT margin in the second half, so down versus first half. Is this only due to France and December sale, or is it also the inflation impact?
A: We haven't seen any decline in top line and are not pessimistic about prices. We believe there are inflationary pressures, but we have the ambition to pass that on. We feel comfortable with the 17% outlook, acknowledging the December effect and the France effect. - Jens Birgersson, CEO
Q: With the renovation program in France, is this something that you have taken into account in your guidance?
A: Yes, it is accounted for. We have a good profitable business, and France is slightly in the negative territory in the quarter. We have a good conservative or realistic forecast, and that's included. - Jens Birgersson, CEO
Q: Beyond pricing and margin levels, do you believe that these sort of returns are sustainable going forward?
A: We aim for 15% or above. It's important to support volume growth. We want to invest more, and sometimes we get delays like in France. We would rather have a couple of percentage points lower return on capital employed and get a plant built because that's better for the long term. - Jens Birgersson, CEO
A: Short term, 23% or close to 24% compared to 15% last year. Last year was abnormally low, and this year is a bit abnormally high. Normalization would be around 20s. - Kim Andersen, CFO
Q: Do you see a risk for new companies to enter the European or North American mineral wool industry?
A: There are people looking at stone wool now, but having a single plant versus our large network is very difficult. We haven't seen an entrant come close to our margins. It's challenging to build plants, and we have the means and persistence to keep working until we can build our plants. - Jens Birgersson, CEO
Q: Could you comment on the pricing trends and volume trends in July and August?
A: In France, we see some pricing pressure in the residential segment. Overall, in Europe, we haven't seen a case for a broad-based upturn. In the US, we just launched an 8% increase, in line with the market. - Jens Birgersson, CEO
Q: How should we look at pricing in the residential market going forward?
A: The residential market is a bit of a falling knife. We don't have a plan to attack and take market share. We try to stay in and focus on where we have volume growth opportunities. - Jens Birgersson, CEO
Q: Can you remind us of the impact of regional sales mix on margins?
A: With recent success in North America, we don't have much regional effects on margins. Country mix effect isn't big at the moment. Residential segment margins per unit are slightly higher, but commercial heavy density products give beautiful over absorption. - Jens Birgersson, CEO
Q: On your hedging for the year and into '25?
A: For foundry coke, we can only hedge a quarter at a time. For electricity and gas, we have covered the quarter into Q2 next year. - Kim Andersen, CFO
Q: Are there any one-offs in the volume growth strength in H1?
A: No special one-offs. We have some big projects, but nothing that significantly impacts overall numbers. - Jens Birgersson, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
