Apr 5 2006
Wienerberger AG (Vienna, Austria), the world’s largest brick producer and number two in European clay roof tiles, confirmed that it further increased its earnings in 2005 despite an unfavourable business environment. At the annual results press conference the Managing Board said that group revenues rose 11% to 1.9546 billion euro, and operating EBITDA increased 6% to 428.4 million euro. In spite of a high level of investment activity in 2004, operating profit (operating EBIT) grew by 5% to 270.3 million euro. “In 2005, Wienerberger successfully continued its strategy of profitable growth, despite a difficult business environment”, said Wolfgang Reithofer, CEO of Wienerberger AG.
“Several factors shaped the development of Group results in 2005. Returns from growth projects initiated in recent years had a positive impact, whereas lower demand on three key markets as well as significantly higher energy prices had an adverse effect“, he added.
The success of the expansion strategy was clearly demonstrated by the fact that the decline of EBITDA in Germany, Poland and Hungary totaling 26.6 million euro, as well as an additional 30 million euro in energy costs, were more than offset by higher earnings in Belgium, France, Czech Republic, Romania, Slovakia and the USA and increased profitability at Semmelrock.
Financial results improved by 30% to -18.3 million euro, in which case the rise in interest expenses and related cost was more than offset by the significantly higher income from investments in associates at Pipelife and Tondach Gleinstaetten. The effective tax rate for the reporting year rose slightly to 21.8% (2004: 21.4%). These factors led to an 8% growth in the profit after tax to 196.4 million euro. Earnings per share rose 5% to 2.66 euro, although the number of shares outstanding climbed by 5% as a result of the 2004 capital increase. Adjusted earnings per share totaled 2.67 euro, after adding back the balance of non-recurring income and expenses amounting to 0.8 million euro.
“Thanks to our geographic portfolio and profitable growth strategy, Wienerberger once again achieved a new record in its results, albeit ’ hard-earned’ – and managed such a feat although the overall business environment was clearly less favorable than in 2004”, added a satisfied Wolfgang Reithofer. “Our shareholders should also benefit from these solid results. The Managing Board will therefore recommend that the Annual General Meeting approve a further increase in the dividend by 10% to 1.18 euro per share.”
The dividend represents a yield of 3.4% based on the average share price for 2005 and a profit distribution amounting to approximately 45% of the total net profit. “We aim to maintain the current dividend policy in the future, and thus provide our shareholders with an attractive minimum return on their investment”, added Wolfgang Reithofer.
Commenting on future trends, Reithofer said: "In 2006, we expect a more favorable business environment than in 2005. We anticipate an increase of 45 million euro in energy costs. However, if there is no significant deterioration on individual markets, we should be able to compensate for the major part of these cost increases by adjusting our selling prices. The long winter in large parts of Europe during the first quarter of 2006 was certainly not conducive to construction activity. Nevertheless, due to the limited importance of this period for the entire year, this development is not likely to have a decisive impact. We assume that in the upcoming months, we will be able to compensate for any potential decline in sales volumes during the first quarter."
At the end of 2005, the market situation in Poland and Hungary stabilised. Following capacity adjustments and the start-up of new plants, Wienerberger said it was striving to improve earnings in these countries. It forecast a continuation of its growth course in all other Eastern European markets, in particular with high expectations for Romania.
“We basically anticipate that the market development in Western Europe will show a positive trend or at least remain stable. In Germany, there are indications of an impending change in the economic climate, which could also have a positive impact on construction activity. I once again anticipate a continuation of the positive trend in new residential construction in Belgium and France, whereas slight growth is assumed for the Netherlands”, explained Reithofer.
A stable level of new residential construction is expected in Great Britain. In the USA a slight decline in housing starts cannot be excluded, but currently there are no signs for it. Assuming that high interest rates are the reasons for a slowdown, Wienerberger expects that the low-price segment, in which bricks are not of major importance, will be particularly affected. Therefore, demand and pricing for facing bricks in the USA are expected to remain strong.
“We took advantage of the year 2005 to further optimize our capacities and cost structures. Together with the successful implementation of our growth strategy, I am therefore optimistic that we will succeed in achieving our goal of 10% earnings growth in 2006. In line with our expansion efforts, we also envision growth investments of at least 250 million euro . From today’s perspective, the major part of this investment volume will be devoted to new plant construction or expanding production capacities. In addition, we will also evaluate potential larger acquisitions, if they make sense strategically, and above all, if they are value-creating”, concluded Wolfgang Reithofer.