Gibraltar Industries, Inc. Price & Performance (ROCK)

It was primarily driven by volume. And took our top line up with 6% in local currencies 7% in reported numbers. Our earnings also were in line with what we told you last time at the latest outlook. [indiscernible] For the full year ended at 17.5% EBIT I do want to highlight the North American performance, which is very strong. Great to notice that net profit is at the highest we have ever achieved. Allowing us to declare dividends to our shareholders of [indiscernible] per share which is almost 50% increase. Over last year. The strong cash flow also allows us for new share buy program of 150,000,000 for the coming periods. I move to Slide number four, If we look at again Q4 highlights, The weather was with us. It was much asked and discussed in the last call. But the weather turned out in our favor. And we had a normal end to the year with no major disruptions to construction activity. So in Q4, we grew 4% on the top line 2% of these are acquired growth, so two percentage points. Of the two acquired companies we had. Hence, 2% organic growth. We saw very good growth in The U. K. And again in The U. S. Markets, which was partly offset by decline in France, Poland and in our Russian arena. [indiscernible] [indiscernible] the quarter four, we ended our EBIT at 16.7 I'll move to Slide five.

The full year 2024 revenue which was up 6% in local currencies, as I said. If we look at the segments, Insulation segment revenue was up 8% last year, which we are very satisfied with. One of the drivers of growth was a strong demand for our technical insulations. The Systems segment revenue experienced growth growth low growth mainly due to Cortein and our Rockwool business is declining, while our smaller units in Rock Panel and Lapinus had positive growth. And the Rockwool business, I can add here. Which is our acoustic products, was affected by particular affected by low activity level in investments in renovation in offices in your If we look at Slide number six, our Q4 revenue is up 4% in local currencies, as I said before. [indiscernible] And here, the Q4 revenue you can see for the two segments. Insulation segment for the quarter, revenue was up 6% compared to the year before. And this includes acquisitions of the two companies, which are 2% was added to the growth. The Systems segment revenue was down 3% in the quarter, particularly with Rockford North America and Rockpanels showing positive growth trends. [indiscernible] [indiscernible] And maybe one of the two of you quickly noticed a small change on this slide.

We have added North America as a now separate reporting region. And we have done this because the growth that we're encountering right now particularly in United States, calls forward that we want to increase the transparency this region's importance to the overall group. If I just walk us briefly through on the slide the base regions, you see Western Europe up 2%, [indiscernible] And that was mainly driven by the acquisitions in The UK. Where The UK in the South and Spain performed well. Then we had some declines in our Own home market Denmark and Italy. Eastern Europe, down 3% and revenue decreased at the in the quarter level. In Poland and Hungary. And particularly in the Russian arena. However, Romania remains a strong growth force. Then you have the new reporting regions, so to say, where now can see that we have 15% growth also in reported figures. With a very strong performance both in Canada and The U. S. Last but not least, Asia. Up 12% However, four percentage points of these are the acquisition of our Vietnamese factory.

So I hope you appreciate this increased granularity. You can also then see on the slide to the right that North America now is 19% of our total reported sales. I move to the next slide, When I look at Q4 profitability, it improved again year [indiscernible] We got a little bit of help, as I mentioned, from a a favorable year end weather condition. However, we performed also well operational You can see ABDARE up 14%, and EBIT up 21 year over year. It is, however, just important just to notice that we had a gain of €8,000,000 on the sale of a warehouse in Baltimore in The U. S. If we move to Slide number nine, where we look at profitability by business segments, our Q4 profitability in the insulation side of the business perform at very healthy margins. And we did also see an improvement in our System segment's margin I do want to highlight though that the variability you see in the system side also the comparable is driven by this impact of the sale of the warehouse in Q4 'twenty four and the comparable in 'twenty three had a negative impact from a Rockfone restructuring in Sweden, just to be aware of that.

I move to Slide 10, which is our Q4 investment. Activities. And yes, we continue to be very optimistic about the future. And hence, we continue invest in new capacity and new technologies [indiscernible] demand for our products, of course, And I I believe I said this last time, I'll just want to remind everyone that we in 2024 committed to building new factories in United States new factory in Sweden and a new factory in India, publicly committed to additional production lines in Romania and also new production line in The U. S. In our Mississippi factory. We have brought land for additional factories. Lately in The U. K. And then of course, the two acquisitions I mentioned a few times, are part of the investment activities in Q. For We have also bought land in Washington State. Of course related to this new factory in The U. S. Last of the big CapEx expenditures in Q4, is the conversion, wrapping up the conversion of our [indiscernible] in our Swiss factory in Flomrock, And you can see up on the graph the €139,000,000 CapEx spend during the quarter. And also there you can see the high level of capacity expansion of 81.

Importantly, when we look at cash flow on Page 11 The free cash flow was impacted by this row of acquisitions and investments that we made. Two acquisitions and the land purchase in K. Birmingham are hitting the quarter there. Nonetheless, we generated a net cash position of €281,000,000 [indiscernible] as already mentioned, the good cash flow in our balance sheet has allowed us to start new program of €150,000,000 share buyback. I should maybe have started by saying that we completed now the buyback program that we started last year The last shares were bought in January, bringing it up to almost these 160 that were announced and now we're starting a new round of 150. So much for the financial numbers. We've decided on this call. And on next slide, you will see that we would like to elaborate a little bit on our new reporting requirements here in EU. And the next three slides will give you a little bit of a flavor on those parameters. As you know, this is the first time that we published an integrated annual and sustainability report I'm sure some of you have noticed that it also makes the report [indiscernible] substantially longer.

Nevertheless, we want to give you some more details. Looking at our sustainability performance in 2024. And also a little bit in the past. I can tell you that we are progressing very well both on the SDG related goals, where we have a baseline in 2015 [indiscernible] science based targets where we have a baseline in [indiscernible] The slide you see in front of you here on the left are the SDG targets As I said, that's a baseline 15. [indiscernible] on the right, the science based targets, which have the different baseline year of 2019. Arguably, the most important one is the CO2 emission intensity. Which is basically how much CO2 we emit [indiscernible] produced. And you can see up in the left corner under this SDG targets, that our mission intensity is of target It's a great performance, but of course also something we are committed to continuing to do throughout the 2030. Also on track on the other SDG related goals. We had a little disappointment in the current just completed year on the landfill side. But overall, we're also on track on that. It was just a little setback for the year. I do have to unfortunately highlight an unsatisfactory element and that is of course our safety scores [indiscernible] a contractor who passed during work in our Thailand factory, which are course is unacceptable.

With any measures. And of course also impacts this report. If I move to the next slide, which is specific designs based targets Give you a little bit more flavor on that. By the way, that's a picture of the factory in Switzerland that you see there. Where we have installed this new e mailter. That is performing on a very high level. You can maybe recall that in 2020, set absolute emission reduction targets. That's part of the science based target setting. We did that in 2020. And these, I must say, remain absolutely ambitious goal goals for a company like Rockwell, who is a fairly energy intensive manufacturing company. I do want to say we are well on our way and we are almost halfway there. Towards these absolute targets that we have set for 02/1934. Very detailed, I can say, it's 47% we have reached of the targets we have set For [indiscernible] Last year, this scope one reduction was mainly driven by the conversation of this electric melter you see in the picture. In Switzerland, just as an example, when we bring in our high end technologies there, our rapid CO2 [indiscernible] [indiscernible] we see a reduction of CO2 of 75%.

Which actually accounts for around 25,000 tonnes of CO2. Good And again, I will highlight that electrification of our footprint is the biggest lever that we have. That is, of course, what we keep on working on. And that we have a specific roadmap for. We have a very specific roadmap in converting our coal driven to low carbon electricity And as I think shown here, we're making very good progress. The last slide on the sustainability side of our reporting is Slide 15. This is about the EU taxonomy alignment. I'm not sure that everyone on the call are from Europe, So just two sentences, the taxonomy really the EU taxonomy really covers activities that are made are making substantial contribution to six environmental objectives set out by the EU. [indiscernible] And we are doing well up against these. And we are It's eligible for these categories of taxonomy because construction and energy efficiency are part of the overall taxonomy. [indiscernible] If I start from the left on the slide, the alignment is highest [indiscernible] And that is simply because insulation contributes directly to [indiscernible] improvement in energy efficiency and hence to reduce energy consumption, which of course in turn reduces emission.

So that's why we have the highest alignment against the taxonomy framework. Diliman in CapEx, if you're wondering, is a little bit [indiscernible] [indiscernible] And it is simply because it's harder to match up CapEx spend to the taxonomy framework because it sometimes can be difficult to identify specific acquisitions of of assets, machines or other assets, to what degree they contribute directly to reduction of emissions. But overall, we're very pleased with the progress on that. It was a lot of work to put together this extensive reporting this year, but we're very pleased with not only the reporting, but more importantly what we have delivered over the period Good. I'll take a deep breath and then we'll look into sip of water. Then we look into 2025. Year that of course already has started, And again, outlook dimensions that we report on. Is sales at a low single digit [indiscernible] EBIT around EUR 16,000,000 and investments around EUR €450 If I can offer some flavor to it already before the questioning, I would say we expect the continuation of the market dynamics that we saw in 2024 So is of course characterized by very slow growth in Europe, European construction, if growth at all.

We see modest growth and pockets of growth in North America. And then country by country some growth in [indiscernible] Importantly to you also that after a long period of relatively stable prices in aggregate, We have initiated modest price increases We call it our drumbeat that we have instilled here again. And despite the political market and you can say economic uncertainties, that we see in 2025, we still expect revenue growth in the low single digit percentages. And that's, of course, also in local [indiscernible] Also our four businesses under the system segments, I [indiscernible] positively to growth in this [indiscernible] When I look at the two acquisitions we made last year, the Werberby Building Systems and our Vietnamese Insulation business, These will combined contribute around one percentage points of growth to the group in 2025. Two notable developments we would like to highlight that have had significant impact on our 2024 business performance. Was and is that The U. S. Is delivering above group averages margins. And we believe that is sustainable also for the outlook into 2025. Secondly, the business in Russia group margins by one percentage points in 2024 over '23. However, we do not see that as a sustainable contribution to the group.

Lastly, I would like to say that we have assumed a higher level of operating expenses for this year. This is driven by way specific decision to increase our resources In several areas, primary for the planned investments in capacity and sustainability related projects. As well as a few digital initiatives benefiting both our factories and customers.

So these are basically engineers and IT and marketeers that we are hiring here. Based on these assumptions, we hence forecast An expected donation of DKK100 million to the foundation for the U. K. Rio Union reconstruction. That completes my walkthrough and I'd like to open up for the questioning.

We will now begin the question and answer session. We will pause momentarily to assemble our roster. The first question comes from Efrem Ravi with Citigroup. Please go ahead. Thank you for the opportunity to ask the question. The two questions. Firstly, can you give us a sense on the main moving parts between your margin of 13.5% in 2024 the outlook for 16% in 2025, specifically how much do you see in price and how much in costs given the low single digit growth in revenue, the delta would be mainly in cost Would that be a correct thinking? And secondly, on your investment plan for €450,000,000 which is almost double it was six or seven years ago Can you break that down into how much is maintenance, decarbonization and growth And in that growth investment, I suppose it's mostly the new factories in U. S, Sweden, India and the new line in Romania. Thank you.

Thank you, Efmann. I think I'll allow myself to answer these two questions. I think the moving parts between the 2023 margin, as I heard that you were asking about, around the 13%. And then of to 2025, the guidance for 15%. It is obviously a lot to do with with a lowering of input cost in a period where we can have been able to keep sales prices stable. That is a main driver. There is also, however, this mix country mix where North America plays a more important role in 2025 as they did in 2023. So those are sort of the two main explanations behind that. On the CapEx side, and if I had to do sort of a very rough split, which we do, we are committed to spend about €100,000,000 in sustainability investments annually. So that's one of sort of the benchmarks that we have. We would have anywhere between €120,000,000 to €150,000,000 maintenance then the remaining part will then be capacity investment. That means the bulk part of the investment next year, about half of it will be capacity investment related.

Thank you.

The next question comes from [indiscernible] HSBC. Please go ahead.

Hi, yes. Hi, Ken. Good morning. Two questions from my side as well. Starting with the low single digit local currency growth, which you sound like flat volume growth assumption in that. Can you just tell us what the kind of how should we look at the residential and non residential end market there? How do you see that or what are the kind of the basis on some around those end markets? And within that, if you can just give us as well the pricing, I believe you have started the discussion already with the customers. How has that journey been in the last one, one point five months? Because at the end of Q3, you probably would have already communicated to the client. So any early breakthroughs in that, anything if you can highlight there Then I'll come to the second one, if you can answer the first.

Thank you for your question.

I'll start with the pricing. First of all, as said before, we have instilled again a pricing don't breed drumbeat across our businesses It is something we've practiced quite a lot the last few years and I can tell you that I'm personally involved in this. [indiscernible] Because of the importance for the group The prices are quite nuanced from country to country and application to application. But when we look at it in aggregate, we see opportunity to raise the prices 1% to 2% [indiscernible] [indiscernible] the early part, If I should elaborate a little bit on the growth next year, again also there you really need to segment it at least by continents. Europe is in a very low activity level and nobody expects significant increase in activity level neither in residential or In non residential activity, our benefit is that we are mainly in non residential and we're mainly in renovation. And that gives us like it did last year an opportunity to find growth in sub segments. In The U. S, yes, and residential is not super important to us. In Europe, that's why you, of course, see the low housing starts. A little bit same with housing starts in U. S. Not a big driver of growth for us also there.

We are mainly in commercial arena and mainly both in in renovation but also in some new start commercially.

Great. And the second one is on the margin, the sixteenth percent margin [indiscernible] what are the key risks to that margin down set risk to that 16% margin?

And the second part of the question is about you talked about system [indiscernible] talking about it. In Q4, we haven't seen much of an improvement. Is that something which you are kind of planning to do over 2025? And if so, what kind of the magnitude of improvement we should expect in system division margin?

The risk side on the margin is is mainly a volume I feel more comfortable on the pricing. That we're instilling now. And then you have to consider Russia. [indiscernible] it's impossible for us to guess what's going on there. Then they have contributed historically with good numbers. So those are the risks that we see right now. The system division, we are constantly working with of course, actively with our portfolio. Strengthening that that margin profile there. But there are, as I said before, mainly in markets in Europe, that are subdued right now. So there's less opportunity for short term gains in margin there.

Fair enough. Thank you very much. The next question comes from Alexander Kramers with Kepler Cheuvreux. Please go ahead. Hi.

Two questions from my side.

So last year, you put forward a EBIT margin of 13%, ended up with 17.5%.

This year, you put forward a 16% margin target. So yes, probably I sound like a broken record from my previous analyst here. But considering that's one of the highest margins you ever guided I was just wondering, do we still need to see this as a conservative guidance?

As it was in the past? Or do you think this is this is a reasonable guidance. And then maybe the second question would be on gas prices. I think last time we discussed gas prices, you stated that you hedged the early part of twenty twenty five. Did this change in a way for 2025 that you are confident from the twenty twenty six twenty twenty five EBIT margin? Thank you. Yes.

Thank you, Alexander.

I will allow myself to answer these two questions. First of all, I think we have done a fair assessment of the outlook for the year as we did last year. Based on the assumptions that we know at hand. As you know, we are business that doesn't have a lot data points moving forward. Coming out of a period of 'twenty two, 'twenty three with the energy crisis, we were a bit hesitant to put forward a more optimistic margin. At the same time, it's no secret that we we got surprised by an unexpected up we don't see as higher risk on neither our possibility to get this the pricing in place modest pricing in place, nor for that matter on the on the energy side energy cost side. And we also know that North America has already a good start of the year. So we have less on [indiscernible] Whether it's conservative or not, I think the market there or the market performance will will show us. But for the time being, I think it's the best and most fair assessment we can make of the market. But turns to the gas and for that matter, electricity purchases, we had done four coverage of about 40% for the first half and a little less for the second half of the year.

And as you know, [indiscernible] forward our foundry cook, which is still our main energy source. But here we have have fixed the purchase price for the first quarter already and that was lower than what we saw last year. I hope that was a good answer to your questions.

The next question comes from Claus Almer with Nordea. Please go ahead.

Thank you. Also a few questions from my side. The first is around factories and building new factories. And I know the ones you have mentioned already But yes, you've been out in local press release talking about a comprehensive CapEx program ahead of us. So do you have more factors in the making, so to speak, That will be the first question.

Yes. I listed the ones before and your [indiscernible] that I told you about land that were purchased that should give a good idea of the next five, six factories that we are building. Which is quite a lot also for Rockwall to build five, six factories over a time period of six, seven years. I cannot announce small factories at this point in time. Simply also for competitive reasons, But we are modeling, of course, where even additional factories should be both in North America, in Europe and in Asia. So that's something we're doing already.

So does that mean we should think in one factory per year or it takes two three years to build a new factory. So you going along, we'll have three projects ongoing all the time. And a flip side on that, I think over a longer time period, you have been investing, I think it's 11% of revenue in average. Is that the way we should think about CapEx going forward?

You're right about this assumption of the overlapping factories. So I think that's a good way to put it. And the CapEx numbers are probably a tick higher than than what you said, probably more in the 13% to 14 ratio So rest of the decade maybe even longer into the future? So that's the new normal That I simply don't have vision for yet.

Fair enough. Then my second question goes to Russia. First of all, as I understood, it was a plus 1% percentage point to the group margin in 2024, and that is expected to go away in 2025. [indiscernible] That must mean that the possibility in Russia must be really, really high in 2024.

That's pure math. Is that correct? Or is it round in numbers, so maybe we shouldn't put too much into this 1%? Yes.

What you just said, you shouldn't put too much into it. It's rounded numbers. It was satisfactory. It was not more than that. And then there was unusual situation with inflation and a fairly stable ruble that makes it all quite unusual.

So this profit you're doing in Russia is actually possible to get the money out of the country?

If we have gotten dividends out on an ongoing basis. But it's always a big delay. So you apply for [indiscernible] [indiscernible] have lately been waiting for the next round of dividend payouts, but it is a very delayed process So you're typically one point five years behind from the application to payout.

Okay. But you still even with the delay you are expecting to get the money out. So that's of course the most important part. Correct.

Correct. We see no change on that.

Okay.

Thanks. That was all my side. Thank you so much.

The next question comes from Axel Stasse with Morgan Stanley. Please go ahead. Hi. For taking my question. Actually, a follow-up on this Russian Division. Can You Give Us An Idea What Is The Sense How Much Sales Russia was out of group in 2019 versus what it is today? And same for profitability to have a better idea on the impact of the Russian business on group in 2024?

My first question.

No, I cannot give you that because it is so small that it's not part of our reporting structure? So we don't report on individual countries that are that size.

Okay. Then on M and A, what is the idea going to 2025? Is your goal to get more exposure to specific end markets such as renovation that you mentioned previously, also specific countries like North America? Or is it just to increase your wallet share? Trying to understand a bit more what the goal here is for 2025 and where we're heading to. Thank you.

Yes, but both when we look we consider look of course for acquisition opportunities, and I think it's right to divide them up into two categories. One is capacity acquisitions like we've done in Get them. There's not a lot of those around because we are are a pure player in Stonewall. And the other one is acquiring within exactly what you said, more value added products or sub segments. So of course, we are constantly looking for relevant acquisitions that match our strategic intent but I don't have anything more to say that for the reasons you know very well. [indiscernible] And if I can follow-up on the energy prices is it fair to assume that 50% is still electricity going in 2025 and the remaining is is 15% gas and 35% cooking coal. [indiscernible] [indiscernible] composition of our energy purchases is still that foundry coke is is by far the most important power source that we have. And then And it is if you take it roughly I know that given that sort of ratios before, if you take raw material and energy combined, around half of our input cost.

Okay. Thank you.

The next question comes from Peter Svezda with A. ABG. Please go ahead.

Yes. Thank you very much. Last questions have been asked.

But I have actually a follow-up on why should Sort of have looked at the figures historically. I mean, this is typically sort of boom post market with margins jumping between minus 2% to plus 20%. And since sales are down right now, so where are we right now? And what is the risk going forward? Thank you.

The observation is correct, but we have close to zero visibility on Russia. Because we have no dialogue with the local management or no market insight. We [indiscernible] passive ownership form. And then you know the sanctions are in place So I really don't have any visibility into it.

Okay. All right. Perfect. Then just one more just to fill up my quota. When commenting on the guidance assumption, Previously, you stated EU, that's probably flat.

U. S. Modest growth and there's some country growth in Asia. All in all, that suggests at least some kind of volume growth in embedded in your guidance. Adding to that, let's say, 2% volume sorry, price you sort of in the four percentage range and that would call out for, let's say, mid single digit guidance isn't that more appropriate?

Yes. Then you forgot to deduct some elements including Russia and Eastern Europe. Where we see it down So I just wanted to get But I cannot break it down further than that. Again, Kim said before, our visibility and our data points forward only allows us at this point in time to to guide on this level.

And I just wanted to poke it from another side, but sort of the U. S. Off to a good start. Is that at least better than what you have put in your assumptions?

The U. S. Is off to a good start, but this is baked into the assumptions? [indiscernible] The next question comes from Yastine Tuare with On Field Investment Research. Please go ahead. Sir. Good morning. I would have three questions. First question on strategy. [indiscernible] for nearly half a year.

When you look at the business in the next five to ten years, what would you like the ideal asset portfolio of ROCE will be in the midterm. And I think I'm asking this question because I see a lot of insulation company, Kingspan, Saint Gobain and your other competitors, They are increasingly focusing on developing system on not only selling insulation, but selling accessories such as a plasterboard, roofing membrane, to a first solution to the clients. And to the contractors. What's your view on that? I appreciate your the small acquisition that you've done. Where do you see the group in a world where where the situation is challenging for your client? Because you've got a lot of insulation to do. Got skilled labor shortages. And we really see like a change in the competitive landscape. I'd like to understand what it means for O'Kuhl and what do you think for the medium strategy of the group?

That's a dangerous question to ask CEO on an earnings call because I can talk about that for great length. But But let me try to boil it down. To a reasonable amount of headlines here. First of all, I think it's extremely important to say that we were Stonewall and we are pure play in Stonewall. Have fantastic growth opportunity for the foreseeable future. So we are focused on Stonewall. This is what we do. And continuing playing as a pure player also enables us to continue investing in technologies and resources around Stone Others, As You Know, Can Make Stonewall, but I would claim that no none or few can make it as productive and as high quality as we do. So we're very focused on Stonewall, And then you're right, Stonewall can both be used for insulation. But also for higher value added products, including systems. Let me get back to that. But the big drivers of growth the next two years is and that's also our first priority is is the implementation of the European ePPD [indiscernible] The European Energy Performance Building Directors? I almost got that wrong. That you know Brussels has passed here in May.

And where all countries December this year, they have to come back with specific plans. We see that as a major growth driver for our business and also why we invest so much in capacity in in Europe, which is still our home market, so to say. So that is a major driver and major driver for investments for the foreseeable future. We'll also see some opportunities on a global scale. I think I've highlighted The U. S. A few times to you. And there, what is really is happening is that the growth is very much driven by a category shift. [indiscernible] from plastics foam types and glass into stonewall because of the benefits that that provides. Today, Stonewall only makes around 3% of The U. S. Market, but of course the total market is very, very large. So just some small category shifts gives us significant growth. And just to complete the global outlook, We see Asia on a smaller scale but we see countries like India where you see our investments happening right now. As an interesting play for us with our products. So you will see the group become more global in nature than the way of U. S. Eurospine Centric Approach That We've Had Maybe Historically.

You'll See More Happening In The S. And in Asia. And I'll try to wrap this up because this is something of course that occupies me a lot. But investments in technologies are the key driver for our competitiveness. We have specific programs that [indiscernible] the future factories and logistic systems in our arena. That's where we spend our CapEx. We also see outside of the manufacturing footprint investment opportunities in the Diegeltsel customer journey. And that speaks a lot to what you said before. It's all about productivity. And being the most competitive player in this arena. Both on manufacturing, logistics and go to market. So that was the highlights Thank you so much, Sean.

On the second question, I'm sorry to ask again about Russia, but it's think it's a question in the mind of a lot of your shareholder. When we look at the federal tax services in Russia, I think they're publishing the the number for your subsidiaries. And it looks like Russia might have generated an EBIT of of nearly EUR 100,000,000 in 2023. Which would mean that it would be between more than 15% of Rockwell operating income So it might be wrong because I might be I might have done the wrong calculation on consolidation or Russian accounting. It would be great to at least get a sense of whether this this number is ballpark number is accurate. I think that in the past, mentioned that Russia was 5% to 10% of sales.

Is it fair to assume that it could be more than 15% of EBIT? Or it's too sensitive when you can't communicate on it?

I'm simply not willing to comment on it because what I said before, Okay.

And the second question and the third question, which is the I think historically your the guidance I think we have move on the list because there's quite a long list after you.

Okay. The next question comes from Christian Tornet with SEB. Please go ahead.

Yes. Thank you. Two questions for me. So first one on the Q4 cash flow. There is EUR 18,000,000 in adjustment of non cash operating items. Is this reversal of provisions? Or could you please elaborate on that number? You caught me out. I didn't bring my detailed cash flow. I have to revert to you, Christian. I don't have the details here.

All right. It's just it's a sizable number, so right? So if you reverse provision of €18,000,000 that also makes a big difference earnings. But let's catch up on that.

Then my second question is on your U. S. Business. So obviously, let's see what happens to tariffs but can you maybe elaborate on the level of imports you're doing from Canada to The U. S. And what flexibility you have should there be imposed tariffs?

Yes, I can give you a flavor for it because we have three factories in The U. S. And two in Canada. Our exposure is manageable and baked into [indiscernible] We have a very granular understanding of course, of what gets produced in Canada and what could be produced in The U. S. Going forward. And also what countermeasures we will instill in case of a tariff So it is already baked into to our to our forecast.

So when you say it's baked in, so the forecast assumes that there will be some level of tariff [indiscernible] [indiscernible] Canadian imports.

We have a countermeasures allow us, for instance, for the to do the obvious, which is price increases. Again, we are in a we're basically in a sold out situation in The U. S. So there, we have a firm about our ability both navigate in sub segments, but also to raise prices. [indiscernible] So I'm not super concerned that we cannot handle now we're already don't like speculating about what tariffs are coming when because unless you know something, I don't know. We simply don't know what is coming, but we're prepared.

I'm not sure anyone knows. You so much.

The next question comes from Arnold Lehman with Bank of America. Please go ahead.

Thank you very much, John Lehmann. My first question is about Western Europe.

I think you're guiding to let's say, relatively stable trend in the region going forward. You give us a bit of color on the different geographies within Western Europe? I think some improvements in some countries and maybe incremental deterioration in some others? [indiscernible] The countries that are doing well, if I may just stay with with them for a moment, But you're right in general, it's flat. But the countries we see quite a few activities in and also an uplift is U. K. And Spain. And The UK also driven by the renovation, but also we can see the first interest increasing interest, I would say, around non combustible insulation material. I'm sure you know about the Grenfell Incident. And More And More Of These Medium Size, I Think We Call Them Low Rise Buildings Need To Be Renovated. So UK is definitely a growth area. Spain also doing very well. And then last but not least just to take I know you asked for West Europe, but just to throw in another European country Romania. We truly say here some growth in So you're implying that place is a lot France or Germany or the Nordic Coast They are flattish.

Okay. Thank you. And my second question, it's not about Russia, it's about Ukraine.

That talks about potential cease fire, peace agreement and eventually some reconstruction effort Do you see Rockwell having a chance of taking part reconstruction effort You've made some donations to Ukraine over the last few years. We also at one point, I think on sort of list in Ukraine. So what's your position on Ukraine reconstruction, please?

Yes. But first of all, I like you hope for peace soon. I think we can contribute greatly in many aspects Mainly, of course, on the reconstruction side of residential and non residential buildings. And we can serve that in the short term from factories. We have nearby.

That means mainly from Romania, which is a good driving distance. And two significant sized factories in Poland. Then we're in really good dialogue with Ukrainian authorities also for the little bit more long run there, of course, we need to see a completely different change in the security situation.

Thank you very much.

The next question comes from Zaim Bikarra with JPMorgan. Please go ahead. Thanks for taking my questions.

Just to come back on hedging, I understand less so in hedge So kind of what assumption is baked in your guidance for those key energy inputs in the second part of the year?

Yes. But we know normally do we tend to go in and look at the forward rates that is prevalent I mean, that is available now. So that's kind of a guidance Sure, thanks. And maybe just to come back on the previous question on the potential Ukraine rebuild. I think Do you see any risk to benefiting from that rebuild given some of your assets have been in Russia has been screened less positively? I think there were some negative headlines in 2023 with the Danish authority.

No, I don't see that. I don't.

Okay. Thanks for taking my questions. The next question comes from Markus Cole with UBS.

Please go ahead.

Hi.

Thanks for taking my questions. Most of them have already been asked. But in terms of the first one, can you call out any geographies where you see any pricing risk? I think you called out Eastern Europe on the Q3 call with some technical insulation price deflation. And then in terms of the shift to more electric power plants, can you talk about the cost the cost differential between electricity and sort of the foundry coal power plants? Let me start with the last one.

So don't forget it. It's fairly cost neutral. On the On the VPCs, when we electrified? And that's also why I highlighted as one of our strengths going long term that we have these technologies. On the pricing side, mean, first of all, it is modest price increases that we're coming with. It's more normalized [indiscernible] And I don't see any I mean, of course, that's differentiated, but then now I'm really down on country by level. And application by application level, and it's not something I can talk into. But we are we have become really, really good at adjusting our prices on a tactical level. So really meaning application by country, but that is really a granular level I don't want to walk into. But no, they're not very concerned in overall.

The next question comes from Puja Rinne Ghosh with Bernstein. Please go ahead.

Hi, good morning and thank you for taking my questions. I have one broader question on your capital allocation.

So we've seen that you've always been heavily investing in organic CapEx. And also returning a lot of cash to shareholders with dividends and buybacks. But recently, we saw a slight uptick in your M and A activity. So how should we think of inorganic CapEx going forward? And I mean, if at all you have an M and A pipeline that you're looking at, could you share some more details on that? And my second question is on the price cost. So if we look at your operating cost as percentage of sales, it improved almost 3% between 'twenty three and 'twenty four. And you've been saying that for 'twenty four price, the price impact was relatively flat. This year, you're increasing prices again by around 2%. So how sustainable do you think this is? I mean, at some point, don't you have to pass on the cost decrease to [indiscernible] So both of them To your first point, I think I elaborated on it before that there is sometimes opportunities to make acquisitions. However, Rockoule is a company that is mainly organic [indiscernible] That's also why you see our manufacturing openings and whether or not it's production, [indiscernible] logistics or go to market.

So the non organic acquisitions are a few and far between. The drumbeat price increases I see in the markets a fairly the prices are staking and we can hold the prices and that's also why we guided like we did on the 16%. We see that that is firm. [indiscernible] And what happens in two and three years from now, I don't want to speculate, in, but I think it's healthy to have a drumbeat a price consideration every single year. It's harder for me to get closer than that.

Okay. Okay. Thank you.

The last question comes from Pierre Russo with Barclays. Please go ahead.

Hello. Thanks for taking my question. I'll be quick You mentioned in the past some contribution from productivity, then you've reassessed the need to remain the most competitive in stone wool production.

Could you give us some clarity on the kind of contribution you had in 2024? And if the productivity improvement plans that you have should deliver further benefit going forward? Would be question one.

In general, we have a 5% productivity target that we set ourselves every year. So that's the closest I can get to that. And again, it is driven by constant investments in in technologies and of course, process improvement. And these days, of course, also digitalization. But 5% is our, you can say, frame will work around Understood. Thank you. And just a quick follow-up on the organic growth plan. We have all the capacity coming online in the coming years. What's the rule of thumb for revenue potential? Can we Any color on this would be useful. Thank you. Thank you, Pierre. I'll try to give you a little bit of rough numbers. I mean, one very large factory is 100,000 tons. Give you anywhere between depending on the location between 141 hundred and €60,000,000 equivalent. Revenue potential. [indiscernible] Okay, great. And just maybe a very quick follow-up on the CET1 news and hopes that it could finally start building that factory.

Yesterday, we learned that the French Supreme Court has accepted our for their consideration. Which of course gives us hope that we are in the right Thanks, Lucille. Thank you very much.

This concludes our question and answer session. I would like turn the conference back over to management for any closing remarks.

Yes, and I thank you for your participation today in our earnings calls and also for the many questions. That said, I know that there was a a list still of people on the on the question list. But as always, you're welcome to call the excellent investor relationship service we have. After this call, I will rush off to my office and be ready for your call. And please be informed also on March 6, we will have our ESG investor call dedicated to the Ocwen Sustainability Statement of twenty twenty four, where Mirella Vitale will be the host for the call together with myself. With that, I bid you a very good day