Wienerberger AGConference Call on the current situation (Covid-19)

March 31st 2020 | 14:00 CET

Transcript

Speakers:

Heimo Scheuch

Anna Maria Grausgruber

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Anna Maria Grausgruber Ladies and gentleman, a warm welcome from Vienna to our conference call on the COVID-19 developments. The first two months of the business year 2020 have been very strong, satisfactory and in line with our expectations.

In March, however, the virus already started to affect some of our operations and Wienerberger reacted very quickly in all the 30 countries. We will therefore launch a series of these regular COVID conference calls to give you an update on the developments on our markets and also very clearly show you how Wienerberger is reacting accordingly.

For today, please take into account that this is not an earnings call and we will update you with regards to financials in one of our next calls once we have more visibility. Our CEO, Heimo Scheuch, will now lead you through the presentation provided and we are then ready to take your questions. I now hand over to Heimo Scheuch.

Heimo Scheuch Thank you, Anna, and also from my side, a warm welcome to all of you. Thanks for being on the call and, as always, we will try to give you a very transparent picture of the current situation.

It goes without saying from my side, at the beginning, that this unprecedented event, the COVID-19 outbreak and the events that took place, especially in the last two weeks in Europe, are certainly extraordinary events and very, very particular and we all have to deal with it on day-to-day basis, and it poses us, also in the business environment, with serious issues.

However, I want to stress that what is important to us and to me personally, that the 17,000 people that work for us, their health and their personal situation are, at this moment, my major and only preoccupation.

I can say from personal experience and what we have seen and experienced in the north of Italy, we have worked throughout closure, that means two weeks ago, without any incident of COVID-19 in our factories and I think this is a great achievement.

All the colleagues have worked diligently together and have implemented, in very, very short time, all the necessary, not only local and other measures that are required. No. It is with huge respect that we treat each other and that we deal on all levels, on a home office level, and also in the shift patterns, etc, where obviously we deal on a day-to-day level with this issue and manage it very well.

And, I’m proud of all the 17,000, how they have addressed it in this short time. I think this is very important that you, the stakeholders and investors, understand that also from our side.

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I think Anna has already mentioned it. We have had a great start in this year and I’m very positive and optimistic about the first quarter. We’ve seen good results coming through in all countries and are perfectly on track. Obviously, the current situation will affect us and will affect the whole value chain, and that’s why I think it’s important that we discuss this on such a call.

Wienerberger has reacted very quickly, and I will give you an update on the different countries in a minute. I just want to draw your attention to the fact that obviously, in a 48-hour timeframe, we decided to shift completely our focus from growth, from expansion, to one that addresses the crisis.

What does it mean? We immediately addressed capex for example, put everything on hold. Obviously, when you look at the capex, it’s the special capex especially. We have invested, last year, about €100 million in this area. So, this is on hold completely.

We have stopped our M&A projects. We are currently not pursuing any active project right now and everything is on hold and there is no obligation of Wienerberger to consume any transaction right now. So, that shows you how quick and how fast we were in implementing everything.

Also, from a personal perspective, we are focusing on there’s a hiring stop in the whole company, obviously. We have addressed all the benefit cuts, the wage cuts. We have already launched in certain areas, where it is necessary, some redundancies but very important, I think, what we have done very quickly is work in the different countries, and this is very important.

We have in Europe and also in the US, different systems, social systems and, especially now, systems how to address temporary compensations for shorter labour, for cuts when it comes to time, etc. So, in all the countries we have our plans ready.

We are already in this mode and from 1st April onwards we will take full advantage of the different options that we find. In countries like the UK it will be 80% of the salary costs will be taken over by the state, in Italy it’s 75%, in France it’s about 60%. So, it’s a very different sort of scenario that we have to work in but, and again, we have moved very fast and very quick and are reducing here and adjusting and aligning capacity as we speak.

When it’s necessary, if there are public shutdowns, then we obviously consume these from these, I call it advantages or help or assistance, from the state in the respective country.

This leads me to another observation. The Wienerberger business model is obviously a local one. We produce locally and have a local supply chain and in such very critical situations, it’s

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a help because we can source locally and we can sell locally, and that’s why it’s so important that we keep our distribution chains up.

And, there again, I think this is my second important point to all of you. It is not without saying that it is important that we have focused so intensively on the digitalisation of Wienerberger because, obviously, right now, it helps tremendously in selling our products and shifting it to the construction site.

This is, I think, for you, important to note. Austria had a shutdown last week. All construction sites were down and we had delivery rates of 50% of normal delivery. Why? Because we can shift products to smaller sites to repair work, etc, and people can get products from us due to our digital means.

So, that means that, actually, we are already prepared for the next phase of changes after this crisis, when it comes to a much more digital way of dealing and getting the products and the services to our clients.

But, I think very important to note from a crisis perspective, Wienerberger is local, top local management, very fast in implementing all these changes and adjustments without any delay. We source locally, have no big issues on international supply chains and we have, obviously, the digital means in order to shift our products into the marketplace.

On another note, I just want to say, obviously, when we talk about the project and you remember the Fast Forward one, it was very difficult and it’s obviously literally impossible right now to shift people across borders. Technicians cannot travel, so we can’t do the projects that we want, so there will be some delay there but that goes without saying. In the future, in the event that travel bans are lifted, we can continue with this work also in a timely and speedy way.

So, again, if I may say, strict cuts when it comes to cost. All discretionary costs are frozen for the moment, so we are not doing anything in spending. We are just focusing on the day-to-day operations, getting the production out where it’s needed and sold, not the marketplace. And, where there is the compete shutdown, we don’t do any maintenance, any costs and obviously we are waiting to, then, start up the production as we are allowed to do so after that.

When I am talking also I think some of you will ask this question anyway, so I would like to address it right at the beginning. I think, as we have seen a rather strong first quarter. From a cash perspective we are confident. I’m confident, also, when it comes to the liquidity situation of Wienerberger, roughly, and I will come to this in one of our next calls in more detail but, roughly, we

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have 0.5 billion on liquidity for Wienerberger, so we can face the following months without any preoccupation.

And, on top of it, we are negotiating about the same amount currently with our banks. We get great support. You see this on the back of a record result of last year, so we are in good relationship with our banks and this will be no issue for us to ensure this sort of liquidity.

By the way, just to draw your attention, I think some of you mentioned this also from a covenant perspective, at the year end we were at 1.4x net debt to EBITDA. Our current covenant that we have in our agreements is 3.9, so we have quite, here, also a lot of headroom. And, as we are disciplined on M&A, as I said, no M&A, and we are disciplined on special capex, we are in good shape on both of them.

So, I think, from my perspective, when we address this issue right at the beginning, you get a clear message that we are in a rather good and comfortable situation to address the coming months because, obviously, when we talk about the different countries, these are going to be the critical ones due to the shutdowns and due the situation that we find in certain areas of Europe.

But, let’s now move to the different countries. If we look to Western Europe, and with a little bit of experience that we have and when I look at the Italian situation, our exposure to Italy is about 2% of our overall turnover, so very small. However, it’s interesting to look at it.

We have delivered and produced products throughout the whole period of time till the moment that the government in Italy decided to pass to a total shutdown. So, actually, in such an environment we had better sales than last year, stronger than last year and a very good, satisfactory running rate. So, it shows actually, that building and the construction can go on and it’s not affected by this crisis when, there is not a public shutdown.

Then, when it shuts down, we have still, as I said between 10% and 30% deliveries, depending on the smaller projects that are still carried out or renovation work, especial on the roof. So, this is an experience that we have.

If we look at the different countries, obviously we have certain restrictions and the mobility of people is limited. And, also, one thing I think is important to know. Wienerberger was ready due to the fact that we timely and speedily executed and put in place a business resilience team to be in a mode to work home office for all of our employees throughout Europe very quickly.

So, in a couple of days we were ready to move this business from a normal business, I would say in office buildings, into one

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where we interact also from home and different locations. I think, here, also it shows from a crisis perspective how strong we are in interacting and adjusting to new challenges within our environment.

When we look at the different countries, and you have the map in front of you, you see, that today we have a situation where we are in a public shutdown in Italy and France and, since Friday, requested by the prime minister of Ireland, we were passing also in a shutdown.

We have piping operations there, just to draw your attention to this small country, but we were in a position to shut it down so quickly that on Sunday night the last employee left the factory in good order and we actually can also comply with the local authority’s regulation there in a very short time and very speedy. So, again, here I think it shows how quickly we can adjust to this.

What does it mean, obviously? It means that we ensure on our stock here, it’s a minimum activity, we keep the distribution and the value chain open. If people require the products, we have the digital means in order to serve our clients and they can obviously be in contact with us and we executed fast cost reductions.

Ladies and gentlemen, it’s now too early to discuss all these in detail, the cost reductions, because we are currently facing in this phase. Obviously, we’ll be down in these countries as of 1st

April, so then we will see in a couple of weeks how this develops. And, I think it’s not about the cost reduction programme, it’s about a very tough and quick reaction to the situations in order to save costs, to cut back on expenses and capex.

That’s what we are currently doing but it’s not something where we give a weekly update on numbers. This is not, now, I think, necessary. You should have the comfort that we will manage this through and obviously will ensure, and this is the clear message from Wienerberger, that we can deliver products in all of these countries.

We will see, certainly, a more mode of shutdown in countries like Austria and Switzerland and Belgium because we will move in this phase also where we take advantage of the state, on the possibility to partly shutdown and a big part of the salaries and the wages are taken over by the state.

So, we’ll do this in an orderly way. We will run in these countries, then, on a reduced capacity. In Germany, we are running, at this very moment, at a somehow reduced one but not very much, actually a couple of percentage points, and the same goes for the Netherlands.

Again, here, you see the picture. Obviously, in the UK we have

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moved also to a shutdown. The whole industry, by the way, has shut down and this is the same in other countries, as well, like France, like Italy, like Austria, where you see that the whole business is shut down, the competitors as well. This puts, obviously, not a lot of pressure on working capital and on inventory and later on prices. So, I think we are facing here a good entry into this crisis mode and this adjustment mode of capacity.

In the Nordic countries, Sweden, Finland and Norway, we are obviously less affected from this. Our piping operations run well up there, fully in line with expectations when it comes to 2020 expectations and no adjustments at this very moment ordered by government or by the market, necessary.

When we move to Eastern Europe, again, here, also a picture which is different from Western Europe. We have still, in most of the countries, with the exception of Slovakia and Austria, no capacity cuts and then obviously temporary closures. And, Poland, the Czech Republic and the rest, they are running at the levels that we were expecting to them to do so.

But, it goes without saying that we will communicate in a timely order to you if there are some changes or if some governments move here and give some sort of instructions to industry to stop or to temporarily close down, but there is no indication at this very moment on this.

Again, here, when we moved, like in Slovakia and Austria, very quickly, very effectively in cutting shifts and cutting down, obviously, production in order not to have high working capital or stock levels. So, here, on this note, a very short note on Eastern Europe.

North America is also affected, obviously, by the COVID-19 crisis and, again, here we have installed also short labour, white collar rotations are taking place, home office, teleworking. Blue collars, I obviously already addressed this situation very quickly here.

We had some issues with state intervention in the state of Pennsylvania, where we had to shut down one of our factories, Watsontown. I think it’s then probably easing up a little bit in a week’s time and they will reopen it but this is also something where you see things are moving.

Canada is down for the moment because this is obviously like in Europe. The state is supporting the workers and the business and therefore we take advantage of the situation.

So, from my perspective, as I said, and I summarised very quickly, we are addressing it day-to-day because, obviously, the first two weeks were literally crisis mode and you got different

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information from governments and they moved in a not very coordinated way throughout Europe, so we addressed everything.

We did the necessary things and decisions very quickly on a management level and put it down on the local one. We ensured local distribution of our products, we ensured the continuity of our business and we respect and this is, obviously, of utmost importance, the safety of our employees.

I think, in a nutshell, this was my opening statement and we are ready to take your questions. Thank you very much.

Operator Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press * followed by 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * followed by 2. If you are using speaking equipment today, please lift the handset before making your selections.

Anyone who has a question may press * followed by 1 at this time. One moment for the first question please. The first question comes from the line of Matthias Pfeifenberger, with Deutsche Bank. Please, go ahead.

Matthias Pfeifenberger Yes, good afternoon. Thanks for this call and sharing all the details. I would have two questions. One is on the supply of housing, your ability to supply housing. Can you maybe go into a bit more detail on the dynamics of, first of all, like in the case of Austria when the construction sites are now being resumed because there is like a reduced distance requirement and obviously heightened precautions which would then, obviously, increase your rate of deliveries from one to 30 to, maybe, I don’t know, 50-60.

Then, you mentioned on the other way, you are still shutting down because you want to basically benefit from the short work scene. So, in case of Austria, how is that playing out, your ability to supply but then also trying to get some of the costs covered?

Then, secondly, more from a demand perspective, how is this playing out? Is this a big consumer and house builder shock and people will take time to do new decisions for building a house or would you rather even expect a positive medium to long-term benefit from the crisis such as particularly people want to move out of cities with high population density and maybe move green belts and build their houses there? Maybe some thoughts on these two questions. Thanks.

Heimo Scheuch I will take your macro and trend question a little later, and I think it’s a very interesting one, by the way, Matthias. The first one is obviously on the short-term supply and demand level.

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As you are well aware, obviously, during the winter months we were running, so logically we built up working capital for the spring period and March and April are usually months where a lot of material is taken out to construction sites.

In Austria, we saw good demand levels in the first two months and, obviously, with this current crisis, you’re absolutely right. It went down and remained a little bit of 20-30% because, obviously, and you appreciate this as well, we are delivering to these smaller sites in a country where people are do-it-yourself and repair work and build still. So, we have this basic business, I would say, that is going through and will pick up literally a little bit.

I think the bigger sites will have problems because, obviously, when you take the big companies Strabag and Porr, they went down with the construction sites and a lot of their workers are from Eastern Europe. So, they had to leave and they will big difficulties getting them back in short notice because, obviously, with the current health issues, they won’t get them across borders very quickly.

So, I think, here you will see a certain time lag and this will play out over the next, I would say, three months or the second quarter. That’s why I’m saying we better prepare ourselves in time and go down with production right now, not in order to build up too much working capital. And, on top of it, take advantage of the state measures that are currently in place, that are very favourable for us, by the way.

Your second question is relating to trends and I think, obviously, at this very stage, everybody living in Copenhagen, in London, in Paris, in Vienna, dreams of a house in the countryside, dreams of a house to go with the kids outside, go biking, hiking in the woods and not sit in this apartment.

I think this is certainly something which will be affecting our way of life and our way of thinking. If it’s possible for everybody, I doubt it, but I think a fair amount of people will think twice again about the future, what they need, and where they can find a job.

So, in the long run, I think Wienerberger is, again, very well positioned with the products and the lifestyle that people want and if we play this well, the healthy and the sustainable one is very important.

I think also, Matthias, when I look at today’s perspective, people want to source locally. I think we have a trend that goes a little bit away from globalisation to local, local suppliers, local producers. That’s why I’m saying Wienerberger is ideally positioned.

We have local plants that service the surrounding areas. We are

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Hungarian in Hungary. We are Polish in Poland. We are French in France. And, that’s why it’s so important, I think, Wienerberger is a local company and adds to the value creation locally and I think thousands of people work with our products and this is important if we can communicate this well in the future.

I think here, again, to play the sustainable advantages of Wienerberger is a very important point in our sales efforts and in the efforts, obviously, to choose our products. And, on top of it, I just want to restate it again, all the efforts with respect to digitalisation are helping, helping in this way where no physical contact is needed.

You can, as a truck driver, come into our stockyards right now. You don’t need to interact with anybody. You get loaded and you can drive out of the stock yard and everything is done automatically and I think this is important that we, even from time to time by some of our friends call it an old industry, we have changed our way of doing very fast and are very modern in certain respects, how we interact with their whole distribution chain.

Matthias Pfeifenberger Thanks a lot for sharing those views. Maybe, I will add one on the demand. What do you think how deep the shock on the house building side will be? How was it in 2009? Right now interest rates are still very low. What do you think will be the lag when we see a V shaped recovery in the second half? How much longer will people hesitate to do house building decisions because they are kind of in a shock because of short work and job insecurities? Will that resume right away or is there a certain six-month lag where people just want to get more comfortable and then go ahead and build a house?

Heimo Scheuch Matthias, I fully appreciate it and everybody and all of us get a little older and myself was through the last crisis in 09, 10 and 11, as well, but I think it would be not very wise today to take this other crisis, which was purely, I would say, a financial one with this one.

Here, it’s a more complex one and it’s not really to do anything with financials. It’s to do with health, which becomes very political, and which has to do, then, obviously, with confidence and I strongly have to state one thing. Building and investing is about trust and confidence in the future.

Liquidity won’t be the issue, I guess, at the end of this in probably three or four-months’ time when certain bans are lifted. I think the big issue is do I have a job, do I have confidence in the future, as you rightly say. And, this has to be worked out by the countries, by the politicians, by the statesmen that are currently managing very eagerly, this crisis, because they are in the media every day.

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But, I think what we need to prepare very quickly is a plan how we exit this whole situation and where we get confidence back. And, as I said earlier, with work shortage and experience, the people on construction sites, we will need some time that people come back to these construction sites very quickly and timely because obviously they had to leave to their home countries, most of them in Eastern and Central Europe.

Matthias Pfeifenberger Thanks a lot, Mr Scheuch.

Operator The next question comes from the line of Markus Remis at RCB. Please, go ahead.

Markus Remis Yes, good afternoon. First question would actually be more a clarification. I’d be interested to get a sense to which extent the capacity reductions you are implementing are just the reaction or the response to the government-enforced shutdowns or whether you are already preparing for a lower level of demand so, in a sense, that you consider already mothballing and idling plants for a longer period of time. That would be the first point.

Heimo Scheuch I fully appreciate your question but actually, right now, as Anna and myself told you, we are coming from a very high rate of activity. January/February was very strong and also demand levels and order intakes in March very high. So, we had actually not to adjust anything and I think we were sailing in very promising waters, if I may say so.

And, the public shutdowns, the enforced actions that we had to take because of this situation in the number of countries that I showed you earlier is purely because of this. As this stage, I think we are not envisaging doing something else than that. If and in the event, in the next couple of weeks, we see that there is a change or there is a dramatic shift in confidence or everything, then obviously we will talk about measures.

But, at this stage, I think we have done the necessary steps that are required by law and by regulations and also by good order, that we had to put in place and then we’ll see what will play out in the second quarter.

Markus Remis Okay. Very clear. Then, can I ask you on the dividend, the proposed 60 cent dividend? We’ve seen a lot of companies kind of taking back dividend proposals. Is that anything that you would consider in the current circumstances?

Heimo Scheuch I think we are two weeks into this situation. I’ve clearly made the point that from a liquidity perspective Wienerberger is a very good shape. We are a strong company with a very strong balance sheet and we have done well last year. I think it’s worth to consider this also and, to some extent, also think of our shareholders.

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They are in this situation with us and I’m not rushing into conclusions. As you see, I’m trying to manage this situation and the health of our employees first and then we will address it.

I know that we will have our general assembly very soon, but we will put, in due time, a proposal up. But, if you consider the points that I’ve mentioned, I think you can make up your mind.

Markus Remis All right. Thank you.

Operaot The next question comes from the line of Ami Galla, with Citi. Please, go ahead.

Ami Galla Yes, thanks guys. Just a couple of questions from me. The first on the covenants. I understand your point on the balance sheet being reasonably strong but I was wondering if there is scope or has there been early discussions with your lenders to be more relaxed on the covenants if this disruption goes longer than what we currently see at this stage.

My second question is really in countries where you’re still operating, albeit with a reduced capacity. Can you give us some colour as to the mix of construction activity that is still going on? And, more so, what implications does that have on the product mix that is actually going through in terms of the demand pipeline? Thank you.

Heimo Scheuch Thank you very much. If I may take your second question, I think what you see here is the smaller projects are going on. These are projects out in the countryside. Roof repairs, for example, is something that continues. Extensions are continuing and some small new building and one-family houses. These are the projects that you have there. I call it the bread and butter business for Wienerberger because this is clearly the one that is important for us and where we have solid and strong client demand.

Sorry, I apologise, but your first question, acoustically, I didn’t get everything. I think it had to do with public funding and this but could you kindly repeat it.

Anna Maria Grausgruber Yes. It was really on the financial covenants. If this disruption goes longer than what we currently see, is there scope or a plan to have a discussion with your lenders in terms of relaxing any of the hard line covenant limits that are there on the balance sheet?

Heimo Scheuch I fully understand that. I think, as I said, the covenant that is important to look at this stage is the 3.9x EBITDA to net debt and I think, here, we are far away. I’m saying, even in a stressed scenario, that we are doing a lot of scenarios and looking at that.

We think we have enough liquidity in order to have this but, obviously, we are talking about a completely different set of issues if there’s two years no activity at all and a complete

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shutdown, but I don’t envisage that, by the way, then obviously you will have discussions.

I’m going from one extreme to the other but I try to make you understand that obviously I think we are mature people in business and we will discuss and even our lenders with have the situation to address this. I think, here, I see a common understanding of this from a financial institution side and from ourselves to handle this well and in a very professional way.

Anna Maria Grausgruber Thank you.

Operator As a reminder, if you would like to ask a question, please press * followed by 1 on your telephone. The next question comes from the line of Gregor Kuglitsch, with UBS. Please, go ahead.

Gregor Kuglitsch Hi. Thanks for this call. A few questions. Just a point of clarification on the covenants, just to be clear. I think it was 3.5 to 4.0, maybe it was the previous IFRS. Is that the adaptation to the new accounting standard?

Heimo Scheuch Correct, Gregor.

Gregor Kuglitsch Great. And, then, the second question is on liquidity. I’m actually quite surprised it is as high as you said, which obviously suggests you had good cash in the first quarter which, I think, is quite unusual because normally you have working capital outflows as you suggested before.

If you could just shed some light on that point because I look at the refinancing you did earlier in the year and it suggests to me it would more like 400 rather than 500. And, maybe it’s a bit of a point of detail but just for clarification.

Then, perhaps one on fixed cost and sensitivity. If we take a scenario where, I don’t know, you lose 100 million of sales because of COVID-19, I know the answer will be it depends, but if you kind of take a holistic view or average view, including all the stuff you can do, temporary unemployment and all that sort of stuff, how much EBITDA do you think you’d lose in these sort of circumstances? I think normally I would say it’s 40-50% of that but perhaps it’s less given some of the numbers or some of the initiatives governments have put in place.

And, then, one final point on capex. Can you just confirm how low you can go on maintenance? I think last year you did 140. How low can that go because, obviously if you’re shutting down plants, I guess you need less maintenance, so if you just give us a little bit help what the direction could be?

Heimo Scheuch Thank you, Gregor. All of your questions are very valid and I’m certainly not being evasive on that if I use the word, as you said, it depends, but when I come to your capex question I think it’s also depending how long we are down with certain plants and

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how many plants are down in our network.

But, you can be assured that, obviously, from this level we will manage. We will certainly not use the whole amount of maintenance capex because some of the plants will be down and are currently down.

But, keep in mind also when you have to start them up again, you need also some maintenance and, all in all, I think you need to understand that we will do it in a very diligent way and very focused and not overspend anything this year.

You know our bracket that we have given, what we need as a group, 120-140, we have given, this year, guidance, in normal circumstances 140. This doesn’t necessarily mean that we have to spend 130 or 120 or whatever, but I think you understand, from our perspective, that we do it very diligently and will limit our spending. Is this a fair answer to your question on capex?

Gregor Kuglitsch Yes, that’s fair. Thank you.

Heimo Scheuch And, on your EBITDA front, I think in your estimates, you’re right again with your first quick shot on this 130-140 million but, at the end of the day, again, it depends a little bit how much the state is taking over on the salary cost and, again, here when I have counties like the UK with 80%, it makes a big difference and we have other countries with 55% or 60%. So, again, here, I think you have a little bit of shift, the general tendency a little lower than you have mentioned. You’re absolutely right.

Gregor Kuglitsch And, on liquidity?

Heimo Scheuch On liquidity, you are talking to the CEO. I’m not the CFO. Next time I will have Carlo with me on this call.

Gregor Kuglitsch Okay. Fair enough.

Heimo Scheuch He will be more accurate but it doesn’t play out, a couple of million, if I want to say that. Is this okay but we had a good start.

Gregor Kuglitsch Yes, that’s fair. Okay. Thanks a lot. Than you. I appreciate it and good luck.

Heimo Scheuch Thank you.

Operator The next question comes from the line of Tobias Woerner, with MainFirst. Please, go ahead.

Tobias Woerner Yes. Thank you for taking the questions and good afternoon. Two, if I may. Number one, Heimo, the liquidity you mentioned negotiated, you said could be as high as the one currently in hand. Did I understand that correctly, i.e., that it could double? That would be the first question.

And, secondly, clearly you’ve all worked very hard at

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Wienerberger over the last decade to change the group and improve it. Can you, in your mind, just set out what you think is different today than to back then, which should help you in this scenario over and above your balance sheet at this point in time? Thank you.

Heimo Scheuch Absolutely. Thank you for both questions. I think you understood me very accurately and, as I said, we’re working on this and diligently on the cash and the liquidity side. Yes, what you heard was right. I said this and we’re working on it. I’m pretty confident we’ll get there.

And, on the second issue is, I think, two things that I want to mention. I could mention a lot but I think very important is when you look at our innovation rate and our digitalisation, both of them are helping us considerably these days because, obviously, with these products that we have developed you are much quicker in installing them, you need less labour and you can be very effective on the construction site.

Because, these days, when you install products and you are not so close to each other and you can work faster, it means a lot of gain and it means safety for the people on the construction side. And, I think this is key when it comes to the success of Wienerberger in the future and what we have changed dramatically.

I’m referring to systems like Spider, when we talk about electrical installations. I’m referring to gluing bricks together because it goes faster and you don’t need so many people around the site. So, all these things are very important, especially in such crisis scenarios.

And, secondly, look at the portfolio. When you look at the map look at the Nordic countries where we are strong in piping, where we have been growing our business. They are not so affected by certain things.

Look at the spread that we have throughout Europe and the different distribution channels. I think here you see that Wienerberger is not only focused on one market and this makes us stronger, better and more resilient also.

Tobias Woerner Okay, thank you very much. And, maybe, one last question if I may. You should see a working capital inflow in the context of volume decline. I have a rule of thumb in the back of my mind but, first, do you think you will see some working capital inflow when the revenue line or the top line comes down, which normally would be the case, and to what extent?

Heimo Scheuch Again, I think it’s a little early. We start with the measures right now. You will see the effect probably. The first effect is in two weeks or some time or three times and we will have the next

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call, anyway, in two weeks or so and I think, then, I can give you a better feel for that. It’s a little bit too early to shoot to here and we will see the markets develop, the dynamics in it.

Just one thing, the French are currently also already discussing, again, to start up construction sites. Let us go through the Easter period now and after Easter I think I can give you a better feel for that, if this is okay, Tobias.

Tobias Woerner Absolutely and good luck to you.

Heimo Scheuch Thank you.

Operator The next question comes from the line of Xintong Ouyang, with On Field Investment Research. Please, go ahead.

Xintong Ouyang Hello. Good afternoon. I have two questions, if I may. The first is I’m wondering if you can give a little bit more colour on the volume and present scenario now in the key markets in Europe. For example, I know that the shipping is about 10-30 in Italy but what about in France, in the UK? Is there a more specific number? And, also, I’m thinking given this underlying market situation, are you still seeing a pretty solid pricing scenario or your having to some kind of adjustments?

And, the second question is more about the long-term. I’m thinking this has been a very long time since people have to stay at home for months and staying in their houses and probably they will notice more flaws or advantages in certain design. So, I’m just thinking, in that case does it give people more new direction for M&A in the sense that how do you improve your building envelope offerings and, if so, in what directions? Thank you.

Heimo Scheuch Yes. And, I think I will take your second question first. We all, I think, not us only in Wienerberger, especially, will think about new solutions, new ideas, because this is certainly not the last health issue that will affect us and I think, here, carefully, housing and planning and all of this will be adjusted.

And, again, we can offer solutions with industry. We can work on it and you’re absolutely right, from an innovation perspective, we will try to come up with some solutions that we probably haven’t even thought of right now but, then, it’s to the governmental institutions to approve them to make them available to the public and to install them.

So, I think here it’s going to be a process but you remember I talked very openly about heatwaves in the summer and that certain buildings need to be changed and I think, here, also, you have this discussion. And, as I said earlier, the sustainable aspect even after this crisis plays out, will remain a very important one and especially when it comes to the health of the

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people, we will have to consider this more and more. And, here, again, I think Wienerberger and our product portfolio is well positioned and we will even position it stronger with new products and some new ideas.

To your first question, I think, from a pricing perspective, we see that pricing is holding. I think here, again, it’s important what I said earlier, that the whole industry is going down and therefore there’s not a pressure on pricing at this very stage. We will monitor it very closely. We will do the necessary things if they are required but at this stage I think we are in the right situation, as we speak.

On the volume side, please be aware. I gave you some indications in order to give you a feel for this but let us go a little bit into it and see what comes through because I think we get mixed signals from the markets every day and it’s not a day-to-day thing that I want to do with you, but I will give you a more detailed update the next time we talk, if it’s okay for you.

Xintong Ouyang Okay. All right. Great. Thank you. Take care.

Heimo Scheuch Thank you.

Operator If there are any further questions, please press * followed by 1 at this time.

Anna Maria Grausgruber Thank you, operator. Thank you, everyone, for dialling in today. At the end of the call I would like to mention again that we will provide these COVID calls on a regular basis from now on and I will inform you in due time about the next date. Thank you very much and I wish you a good afternoon. Goodbye.

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