(For other news from the Reuters Central European Investment
Summit, click on
http://www.reuters.com/summit/CentralEuropeanInvestment10)
By Sylvia Westall and Christian Gutlederer
VIENNA, Oct 13 (Reuters) - The building materials market in
emerging Europe has gone through a "crazy phase" and there is no
sign of a pick-up on the horizon, the chief executive of the
world's largest brickmaker said on Wednesday.
Wienerberger <WBSV.VI>, which makes half of its profits in
the region, has seen either a continued downturn or flat demand
in its markets there and warned against premature optimism for
the sector.
"There is weak demand in these markets and I don't see a
pick-up in the later stage of the year," CEO Heimo Scheuch told
the Reuters Central European Investment Summit in Vienna.
"From our perspective we can only be better from our cost
structure and our performance. We have no tailwind from the
local markets in eastern Europe."
Wienerberger, which has more than 200 plants worldwide, was
hit hard by the crisis because it is almost entirely geared to
residential construction and had little to gain from
infrastructure spending lifted by state stimulus programmes.
The Vienna-based group raised core earnings by 20 percent in
the second quarter of this year as residential construction
improved slightly in some markets and cost cuts helped.
It is running at just under 60 percent of capacity and plans
to keep this stable in the coming months, Scheuch said. The
company mainly makes clay bricks and roof tiles which are the
staple items used in residential buildings.
Scheuch, who took over as CEO in August last year, said the
emerging Europe region was still in "a state of shock" after the
financial crisis and economic downturn.
"You're careful about interest rate developments, you are
careful about your own money. Even if you want to invest, the
banks, contrary to what they say, are not giving money away."
ON TRACK
Scheuch did not expect a major turnaround in Hungary, where
new housing unit construction has dropped by 70 percent compared
to 2006. There is no turnaround in the Czech Republic and some
stablisation at a low level in Slovakia, he said.
In Romania and Bulgaria there is a need for construction but
customers cannot get credit to pay the bills, he said.
The remainder of 2010 and 2011 will be challenging for
European building materials companies due to continued depressed
demand in residential construction, according to a report
published by Moody's on Oct. 5.
The ratings agency downgraded Wienerberger's outlook to
Ba1/negative in May after its core loss in the first quarter.
Thanks to its cost measures, Wienerberger will be able to
increase its full-year earnings compared to last year, Scheuch
said.
"Considering the market consensus, we are on the right
track."
Analysts on average expect its 2010 EBITDA to rise 14
percent to 237 million euros ($328.5 million), according to
Thomson Reuters I/B/E/S. This implies its second-half EBITDA has
to rise some 58 percent from a year earlier.
The 191-year-old company is being cautious about
acquisitions and wants to keep a close eye on its debt and
liquidity, Scheuch said.
"We want to move forward through innovation and new
products. It's not about major acquisitions. What you do right
now is to position yourself and take market share in the future.
There will be no multi-billion acquisitions."
(Editing by Michael Shields)
