United Kingdom Market | Products | Strategy | Outlook
Harald Schwarzmayr, Managing Director Wienerberger UK December 2, 2010
Content
General UK market information Wienerberger UK Trends and Wienerberger product solutions Conclusions
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1
Economic Data UK Unit
Inhabitants Real GDP
2007
2008
2009
2010
2011
2012
1,000
60,975
61,393
61,794
62,222
62,649
63,074
1,363
1,295
1,312
1,337
Source Euroconstruct 06/2010
GBP bn
1,364
1,369
CPA Autumn 2010
GDP growth
%
2.7
-0.1
-4.9
1.3
1.9
2.4
CPA Autumn 2010
CPI
%
2.3
3.6
2.2
3.1
2.8
1.8
CPA Autumn 2010
Unemployment rate
%
5.4
5.7
7.6
8.2
8.0
7.0
Euroconstruct 06/2010
GBP mn
108,278
41,124
11,625
10,403
n.a.
n.a.
Bof E 08/2010
1,000
26,652
26,838
26,955
27,120
27,270
27,395
Euroconstruct 06/2010
Net change in volume of mortgage loans Housing stock
Public and consumer spending will remain low due to government measures and tightening fiscal control
Mortgage availability is declining, despite of low interest rates; first-time buyers are squeezed out of the housing market Note: Figure in blue indicate that forecast is not available – replaced by Wienerberger estimates 3
Average Growth of 6% in Housing Starts Expected Until 2014
Housing starts in 1,000
250
Apartments
Others
200 150
CAGR 2010 114
114
110
100
68 98
101
93
65
98
83
85
89
43
45
46
48
53
2009
2010e
2011f
2012f
2013f
66 50
- 14: 6%
111
60
0
2005
2006
2007
2008
2014f Data: CPA Summer 2010
Euroconstruct is more optimistic about 2011 and forecasts an increase of 18% in housing starts We are more conservative and follow the Construction Product Association forecasts: - flat housing market expected for 2011 - mid-term: 6% average growth rates expected until 2014
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Trend Toward Terraced Houses 60%
Reverse trend
50%
from apartments to terraced houses and semis
40%
30%
Î Brick/tile consumption per plot is increasing
20%
10%
0% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Detached Houses
Detached Bungalows
Semi-detached Houses
Terraced Houses
Attached Bungalows
Flats and Maisonettes
Source: NHBC 5
UK Has the Lowest Number of Housing Starts per 1,000 Residents in North-West Europe 10,0
Housing starts (residential) per 1,000 residents 1)
8,0 Western European average 2003-2008 = 5.95
6,0 4,0 2,0
5.2
5.0
3.9
3.2
1.8
Potential
0,0 F
2)
NL
BE
SCAN
UK
Î Significant pent-up demand for new homes
1) Source: Euroconstruct (June 2010), data for 2009 2) Housing completions 6
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Trends for the UK Construction Market
Short-term - Flat housing market expected in 2011: reduction in number of flats and increase in family housing
- Largest drops in the commercial and public sector
Long-term - Public and commercial sector will remain at low levels - New residential construction will be main driver for growth - RMI market will further gain importance (improve energy efficiency of buildings)
Key drivers for new built and RMI will be unemployment rate, inflation and mortgage availability 7
Wienerberger UK
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Wienerberger History in the UK 2001
Market entry via acquisition of Optirock, pure trading player
2004
Acquisition of tbb (the brick business), strong production base in the North and the South of the UK – number 3 in bricks in the market
2007
Acquisition of Baggeridge Brick, strong player in the Midlands, gaining a national footprint
2008
Acquisition of Sandtoft Roof Tiles – number 3 in the market overall and market leader in clay tiles in the UK
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UK is the Largest Facing Brick Market in Europe
Engineering Bricks
Wirecut Bricks
Handformatic Bricks
Stock Bricks
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Wienerberger Brick Plants and Sales Locations Operating brick plants Mothballed brick plants Distribution centers
2010: production < sales
Glasgow
~40% of capacity closed
Eldon
Todhills
Belfast
or mothballed
Hull
~20% capacity reserve
Cheadle
Denton
Kingsbury
from plants in operation
Sandown
Ipswich Sedgley
Waresley
Hartlebury 1/2
Warnham
Purfleet Smeed Dean
Highbridge
Ewhurst Steer Point Rudgwick 11
Structure of the Brick Market Commercial /Public 19%
RMI sector increased significantly as a result of low housing starts Residential New Built 41%
Commercial/public sector will decline further in the coming years due to the cuts in public spending
New-built sector will be the growth driver over the next years Residential RMI 40%
Estimates by Wienerberger 12
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Development Brick Market Sales vs. Production vs. Stock UK Brick Stock Levels vs. Production and Despatches
1.200 1.100
3.000 1.000 2.500
900 800
2.000
700 1.500 600 1.000 Jan. 97
Stock Quantity 000's
Production & Despatch Quantity 000's
3.500
!
500 Jan. 98
Jan. 99
Jan. 00
Jan. 01
Jan. 02
Rolling 12 Month Production
Jan. 03
Jan. 04
Jan. 05
Jan. 06
Jan. 07
Rolling 12 Month Despatches
Jan. 08
Jan. 09
Jan. 10
Monthly Stock
Source: BDA 13
Summary Brick Market 2010
For 2010 ~ 15% growth of the brick market is expected, driven by - increase in new built (peaked in Q2 2010) - move to detached houses from apartments
Trend that big customers are starting to consolidate their supply base
Creation of national footprint pays off
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Product Portfolio Roof Tiles
Clay Tiles
Concrete Tiles
Recycled Slates
Roofing Accessories
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Wienerberger Roof Tile Plants and Sales Locations
Local North-Eastern player in roof tiles
Roof tile plants Distribution centres
Use stocking facilities of brick business to get a national footprint Broomfleet Heckmondwike
Goxhill Sandtoft
Waresley
Ewhurst
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Structure of the Roof Tile Market
RMI sector increased
Commercial 5% New Built 45%
significantly as a result of the low number of housing starts but will remain strong due to the need of reroofing
Commercial/public sector is RMI 50%
small due to the building type (flat roof)
New-build sector will grow in line with increase in housing starts
Estimates by Wienerberger 17
Summary Tiles Market 2010
The market is growing by ~15% in 2010 Market remains competitive Clay tiles are outperforming concrete tiles in 2010
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Trends and Wienerberger Product Solutions
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Requirements for the Future Create individual added value for each sales channel
Developer - Being able to scale the speed of construction and to deskill it - Complying with building regulations
Specified/smaller builder - Aesthetics (shape, color, texture)
Merchant - Enhance their supply chain - Use the merchant’s logistical power 20
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Wienerberger Solution: Added Value - Developer Large format clay roof tiles pass almost all planning requirements and are easy and quick to install
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Cost Savings per Installed m2 Traditional Roof Covering
Sandtoft Alternative
Clay Plain Tiles 20/20
Interlocking natural clay plain tile
Potential Saving
40-50%
Concrete Plain Tiles Thin leading edge large format clay tile
>50%
Natural Slate
CASSIUS
Fibre Cement
RIVIUS
Riven edged large format clay tile
45%
Pantiles (clay/concrete)
OLYMPUS
Clay double pantile (large format)
30%
Clay double roman
ROMULUS
Clay double roman (large format)
30%
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Guarantees for the Entire Roof We guarantee the roof if all components are purchased from Sandtoft (incl. non-ceramic accessories) => social housing
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Testing Clay Blocks in the UK
Promote the cavity wall concept with facing bricks Focus on large organizations in the housing and construction industry, main USP’s are
- Speed of construction => cost savings - Quality of the build work (thermal mass, compressive strength)
Strategic goal to win projects in the commercial and housing sector
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Projects POROTHERM – Accreditation/Manual NHBC have accepted in writing POROTHERM for use as the inner leaf of a cavity wall following the issue of the CERAM Research report
Acceptance for outer wall and monolithic was granted as well in September 2010
POROTHERM complies with BS EN 771-1:2003 and carries a CE mark
Note: NHBC = National House-Building Council is the standard setting body and leading home construction warranty and insurance provider for new and newly-built housing in the UK 25
Test Sites in the North-East: POROTHERM vs. Concrete Blocks Focus on large clients from the construction and housing industry
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Prefabrication Facade Next to the already launched ARGETON cladding solution, we added our CORIUM solutions to our product portfolio
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Added Value Merchants – Recycling Concrete Roof Tiles in Partnership with Roofing Merchants
Return to Sandtoft, grinding and reuse
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Conclusions
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Main Findings on the UK Market
Housing starts have bottomed out in 2010 Mortgage availability continues to be key for further growth New-built market will be the driver for future growth Building systems will become more interesting to large developers once the market returns to levels seen before 2008
Roof tiles RMI market will benefit from trend to insulate and/or put solar onto private homes
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Outlook 2011
Stable volumes and revenues expected, based on - flat housing market - stable RMI market
Improvement of EBITDA margin expected, mainly driven by - better capacity utilization (2010: production < sales) - shift in product mix - price adjustments in line with cost inflation
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Mid-term Strategy UK 2011+
Benefit from the recovery of the British housing market Revenue growth mainly driven by - recovery in new residential construction - stronger RMI market - large format clay roof tiles will gain further market share - accelerated growth in the more profitable merchant channel due to our national footprint
Earnings and margin growth mainly driven by - operational leverage (spare and mothballed capacity) - higher average prices due to system sales approach and an increasing product offering of high value products 32
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Wienerberger Investor Relations Wienerberger AG, A-1100 Vienna, Wienerbergstrasse 11 Tel +43 1 60192 - 471, Fax +43 1 60192 - 466
[email protected] | www.wienerberger.com
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