Rockwool (RKWBF) Q1 2025 Earnings – Full Coverage

Thank you, Kim, and good morning. We had a solid start in Rockwell, a solid start to the year in a difficult environment. And when we look at the Q1 highlights, revenue for the first quarter reached 959 million euro, and that's an increase of 4% measured both in local and in reported figures compared to last year. 2% of this increase comes from the acquisitions we made in October last year, and the other 2% come from volume growth throughout the group, where pricing had a neutral impact in Q1. In short, we are quite pleased with our growth performance in this otherwise subdued construction market. EBITS landed at 154 million euro, generating an EBIT margin of 16%. Slide number four. Looking at revenue in the insulation segment, we actually had a 5% revenue growth which was primarily driven by our business in North America, and this was offset by a somewhat slowdown in East Europe, particular slowdown in Russia. And here just to repeat, this is where the acquisitions accounted for 2% of the revenue growth, meaning here in this segment. In the system segment, Rockpanel and our Lapinus business, Lapinus business is our OEM business grew, and our rock phone business was stable. And then we saw a revenue decline in Cordane, our horticulture business, driven by a lower sales in the legal cannabis market in North America. Slide number five. And here we are looking at our regions. And when I look at our western European business, particularly our biggest market Germany, actually delivered some growth, but the markets, particular Germany, seem to be waiting for what the German government is going to do about the new investment programs that hold a lot of promise. We also had positive developments in countries like Switzerland, strong performance in countries like Spain and the UK. In another one of our main markets, France, we do experience price pressure, especially in our professional flat roof application segment. The United States continues to perform on a very high level with 15% growth. But like a few markets in Europe, you can notice a little bit of a wait and see mode where some of the customers, some of the market players, are looking for more clarity around the macroeconomics, particularly the interest rates and mortgages, before placing orders on the projects already in the pipeline. Look at slide six about profitability. And very short here, our EBIT numbers are down in absolute terms from 260 million euro to 223 million euro, and our EBIT margin continues at a high level, as you see, 16% EBIT margin, mainly supported by stable pricing and stable input cost. And we are, of course, very pleased to see that when I look at the profitability by segments, we achieved a strong EBIT of 15.6% in the insulation segments, which also somewhat benefited from a positive mix. In the system segment, the profitability declined this quarter compared to last year, and this was mainly driven by the revenue decrease and profitability decrease in Cordane. Unfortunately, we in the short term do not expect the situation in Cordane to improve meaningfully. Next to last, our investment activities on slide eight. As you can see, our total acquisition volumes was 93 million euro in Q1, that is 9 million more than last year's quarter. And our main investments are relating to capacity buildups: our new factory in Romania, electrification of our two large lines in the Netherlands, and then our large factory project in United States of America. Cash flow for the quarter, free cash flow was minus 47 million euro. However, our net cash position landed at 231 million euro, and that is of course very positive, a super solid cash position for the group. So much for the quarter. A few comments on our outlook. As you have seen, we maintain the outlook for the year. We have now, of course, put away one quarter, but when we balance the satisfactory quarter one that we have had against the macroeconomic uncertainty we see, we maintain our full year outlook for a low single digit revenue growth on the top line here. Again, also earnings levels for Q1 was solid, and we, of course, as always, stay very alert and monitor our activities across our organization. We adjust the capacities and activities locally as needed, and based on this we maintain our outlook of an EBIT margin around 16%. And last but not least, our investment projects are on track, and we maintain the investment level for a level of 450 million euro for the full year. These were the initial comments on our first quarter. You like to begin the question? And now we go to the Q&A.

Thank you very much. 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're using a speaker phone, please pick up your handset when pressing the keys. To withdraw your question, please press star then two. At any time, we will pause momentarily to assemble our roster. The first question comes from Brides SA of HSBC.

Hi, good morning guys. I have two questions. So, the first one is on the guidance. So, in Q1 you had obviously in line with what you expected, the Q1 margin in line with your expectations. Priest, you're breaking up quite a lot. I don't know if you can do anything about your mic.

Yeah. So news on Reuters says that Subaru is raising prices in the US.

No, no, there's a second voice coming in over your...

Much better. Okay, sorry. So the first one is on the full year guidance. So obviously Q1 you landed bang in line with the expectation at the margin level, but when you are moving to the second half of the year or especially Q2 I think you can comment it a little more, but given the what you call seasonality you should expect the margin to improve as the year progresses. And then if you can give a little more flavor about how you think the margin progression is going to happen and the Russia dilution which you talked about a bit there, whether that's in line or anything incremental you expect to come the rest of the year. So that's my first one. I'll come to the second one later.

There is some seasonality in our business, although not a lot. And I simply, when we balance it out about the uncertainty that we see in the market, then we think it's a reasonable outlook to call it 16 on EBIT.

Okay, fair enough. And the second one is the systems division. I guess a couple of quarters that we talking about you're making some kind of plan in the business to improve the profitability of the systems division. I guess it's probably the underlying market weakness, but anything that you are under your control you're trying to do to help improve the performance of systems.

Yes, we have put together some plans, catalog of improvements for the system divisions. As you know, it's five different businesses. So it's quite different things that need to be done in them, ranging from supply chain and production to price positioning and product rationalizations. But yes, we're working on that. And then each of them also are affected by different market factors, whereas you know just as an example, rock phone business is very influenced by office renovations in Europe, and the horticulture business by completely different parameters. So it's a very diverse portfolio.

Okay, fair enough. Okay, I'll step back to the queue. Thank you.

The next question is from Alexander Kash of Kepler Cheuvreux.

Hey, good morning Alexander from Capu here. So first off, of course, congratulations to Jasmine, Kim, and the Rockwell team on a nice set of results. It's quite impressive, especially starting with we're starting from a high base of Q1 last year. So two questions from my side. It's nice to see that you continue to support the Ukrainian reconstruction initiative, but do you plan to continue this support for the remainder of the war? And the second question would be that I've noticed that several plants are now undergoing maintenance and there actually several big plants. So could you give us some granularity on how much capacity has been taken out of the market? And of course maybe hint towards how much capacity you're or the organic initiatives that you're undergoing right now. How much planned additional capacity do you have in the next year or two? Thank you.

To the first one, I can confirm that at the AGM the shareholders voted for donating another 100 million Danish kroner to the Cine Foundation. Whether or not they do that again next year, that's up to the shareholders at the AGM. Your question to capacity is a little bit harder to answer because we don't have insight into all our competitors' capacity. And it's not only about stone wool capacity. It's of course also about capacity in adjacencies or competing products such as glass wool. So I don't have an exact number. And on Rockwool specifically maybe, yeah Kim here. As you know Alexander, we are adding capacity in three different sites currently. One of them is in India where we will come online in mid next year, and then we are adding also in Romania the second factory line that will come online early 27, and then the bigger factory in the western part of the US will also come online late 27 early 28. So that's the capacity that we are adding right now. Then of course we have some options that we are considering, but for the time being that's what the plans are for us.

Okay. Thank you. Back to you.

The next question is from Zima of JP Morgan.

Morning. Thanks for taking my questions. The first one is just on France. Can you sort of maybe comment on the magnitude of that pricing pressure you're seeing and what's really driving that? And then secondly, obviously strong performance in North America. How much of that is to do with some pull forward in demand? And if we look into Q2, how do you see that the trends evolving in this market given, you know, you've got July price increases, so maybe some further pull forward, but that's against some tougher comps given the strikes in 2023. Thank you.

Great. Thank you.

The next question comes from Yasin Toari of Onfield Investment Research.

Yeah, just a follow-up question on your strong performance and market gain in North America. I understand you're delivering 15% sales growth when Owens Corning in glass wool is only delivering 1% growth. What is driving this market again? Is it the fire safety property of stone wool? Is there something like, would be great if you could walk us through what marketing strategy you think is successful and whether you think it's sustainable in the coming years, this impressive performance.

I think it's paramount to understand that our market share in the US is very low. We are today around 2-3% of the insulation market. When I compare that to a market like Canada where we are above 10% market share, then there's no reason why you could say from a structural perspective why we shouldn't have a much higher market share in the US, as buildings are built more or less the same in Canada and in the US. So what we're driving here is really market share gain. As I said before and to your questions, it's really we're playing on a row of dimensions. It is new customers, it is new channels, and it is of course also offering new products into the US market. Most notable of course what we are known for are fire resistant insulation, which is something that is getting more and more recognized as an important factor. So it is really a channel, customer, and product play that we're executing here.

And the second question is that when we look at the beginning of April and May, do you see the same kind of trends that you've seen in the first quarter around your portfolio?

Yeah, because of all those political consequences, I don't have any numbers for Q2 of course now, but there's no significant change in the dynamics. But we do see that some big construction companies also in the US as I said are holding back. When I talk to US customers and I've just been there recently, they report of very strong pipelines, many projects that they are quoting, but hesitation to execute the POs. But again, our numbers are very high compared to the rest of the market, and it is simply because we are expanding into new customers, new channels, and gaining market share. And your last question which is a bit more long-term, but if I look at the situation in the European stone wool industry, I think you still have a few single plant owners of stone wool, and I think those companies will have to switch at some point from a cupola to an electric melter. And I guess it's probably going to be difficult if you got only one plant, you have to be out of the market for 6 months or a year. Do you think that this difficulty could drive some consolidation in the stone wool market where some of the small plants might decide to sell?

I think it's a fair statement to say that it's difficult to be in this industry if you have a very small footprint for a row of factors: scale, access to technology, and one of the ones you mentioned is yes, the conversion from fossil melting technologies into electric. There's not a lot of factory capacity that are singles or you can say small footprints. But there has been an ongoing consolidation. Whether or not that will accelerate the next few years, I don't know yet. But I think your overall observation is correct. And do we have any update on the plants in Poland that was being sold by the government? No, there's no real development in that. What you're referring to is that the Polish government is trying to sell an asset in the withholding in Poland, but there's no real news there.

Okay. Thank you very much.

The next question is from Claus Armor of Nordea.

Thank you. Also a few questions from my side. If you go back to the US, I think you mentioned a bit about growing into two new parts of the various channels, just to be sure. So the strong growth in Q1, was that mainly driven by the share of wallet going up in the existing customers or are you actually adding new customers and new regions of the US? That would be the first one.

Yes. And so that might be the follow-up question. I guess last year you talked about being more or less sold out at least in the high season, and Q2 last year was pretty strong as I recall. How can you really grow volumes in Q2, and then you have maybe some imports from Canada and Europe but then you have tariffs. So how do you see the whole volume trend moving forward in this year for us?

Sure. Okay. And then just my final question goes to this more intensified price competition in the sub segments where you're up against the foam based products. To what extent does this really impact group level performance? Should we be concerned about this?

That makes a lot of sense. So thank you so much and congratulations with a solid start for the year.

The next question is from Marcus Cole of UBS.

Good morning. So the first question is just on what pricing developments have been made in Q2 so far, and the second one is what do you think a realistic outcome for cost based inflation for the full year, factoring in your current energy hedges? Thanks.

Okay, thank you very much.

The next question is from Pujari Nigosh of Bernstein.

Hi. My question is on your local currency growth of 4% that you achieved in Q1, and of that we know 2% is from acquisition. So could you give us the split between volume and price for the remaining 2%? I'm assuming it's largely volume because pricing you're increasing in April and July as you just mentioned.

But it is of the organic growth, it is almost all volume. It is a small price effect from last year at this point in time.

Okay. Thank you.

The last question is a follow-up from Brides Shia of HSBC.

Hi. Thank you again. Just on the fire safety and the regulations around Europe, have you seen any marked development in any of the countries, any movement in those regulations, and what you hear from the European Commission in terms of moving ahead with this overall European regulations?

Yeah. Let me start by saying that I sit in my best suit right now because I'm jumping on a plane in a half an hour going to Brussels to meet with Danielson and a row of parliament members to discuss this subject. So it's something we spend quite a lot of our time on. We have, over the last six to 12 months, really scaled up on our public affairs capabilities and had a lot of dialogues with the individual countries. Because the trick here is that one thing is what Brussels has dictated in the new directive, but where the real test is, is of course country by country implementation of these new directives. So we work very much on a country by country level with our local teams. We monitor that, we influence that. And we see some very meaningful programs running in countries like Romania, Poland, and yes Germany also with their new packages has a couple, and France by the way also quite some ambitious goals for what they want to achieve the next few years, and as you know funding is starting being established. So I think that in the next six months we can also hear going forward share in the next few meetings how we see these individual markets developing and catering for this new European performance directive on buildings.

Great. And the second one on the sandwich panel acquisition which you've made towards end of last year. How has been the progress and do you see any further opportunities in that to kind of expand the product portfolio across the broader group?

Just a small correction. It is not a sandwich panel business. It is a wall systems, also called EIFS system, which is an external insulation system that we made in the UK. It's been a quite successful acquisition. I mean it's still early days for an acquisition, but they're performing very well. And one of the things we did was convert this business fully into a stone wool based offering, which resonates very well with our UK customer base. So that has been a really good addition to our portfolio.

Great. Thank you very much. Good luck, gentlemen.

We do have a final question from Axel Staff of FMS.

Yeah, good morning everyone. Thanks for taking my question. Just a follow up on the organic growth guidance. You mentioned some pricing, high single digit pricing in July in North America, but you stick to your low single digit organic growth guidance for 2025. So I would assume this then implies volumes going down for the remaining of the year while you're actually ramping up assets. So is there anything I'm missing here or is it you guys that will just be conservative giving limited visibility on volumes going forward? Thank you.

No, you're not missing anything. We don't expect a large volume growth. There is a slowdown everywhere and a hesitation, and then as was both said and wrote, we do see a slowdown particularly in East Europe and one of the markets is Russia, and that does affect our totality numbers. So I wouldn't call it conservative. I think that is very much the picture that we see now.

Okay. Thank you very much.

That was the final question. I'd like to hand it back over to you gentlemen for any closing remarks.