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Ladies and gentlemen, welcome, and thank you for joining the Wienerberger Conference Call First Quarter Strategic Update Outlook 2024. [Operator Instructions] Now I would like to turn the conference over to Sarah Salchegger. Please go ahead.
Good morning, ladies and gentlemen. I hope you are all well. A warm welcome to the Wienerberger conference call. Our Board representatives today are our CEO, Mr. Heimo Scheuch; and our CFO, Gerhard Hanke. They will walk you through the presentation and are ready to take the questions afterwards.
I will now hand over to Mr. Scheuch for the presentation.
Thank you, Sarah. A warm welcome from my side as well. Good morning to everybody, and thanks for joining the call. Just a couple of things before we start. So that there's complete alignment on what we do and how we communicate. First of all, I think from my side, it's very important to note that we had a pre-close call a couple of weeks ago and have laid out the quarter 1 and the results and the outlook. So again, from my [Technical Difficulty]
before we start the presentation, there's nothing new today because everything is in full alignment as far as numbers, performance and outlook is concerned compared to the pre-close call. So there is no difference with respect to the performance as far as numbers.
Secondly, we said clearly that we won't do a full first quarter report and publish such a report because the first quarter in our business is a very insignificant one, and we judge it as not important to have all the sort of reporting -- sort of quarter reporting issues here in the first quarter. We want to focus on the half year and the full year outlook. So this is important to note here as well. So we won't publish the future first quarter independent report as we did in the past.
So this is just a clarification. Obviously, we provide you with all the numbers in details and we have today a presentation that is more than just the quarter presentation. Why? Because it's important that we share some of the strategic elements that are key for Wienerberger, for example, the capital allocation policy that we have redefined and have made even more investor friendly. So I think this is an important aspect that we want to focus on today as well. And on the M&A front, what we are doing and how we are developing. So these are things that we want to update you on also today. That's why it's a strategic update. The outlook '24 and the midterm outlook are unchanged and are actually underpinned by this policy of capital allocation and growth. So this is to start with very shortly in a nutshell and then I go to the presentation as such. As you have seen from the numbers, '22 and '23 and the first quarter, here, we have stronger, more resilient business model at Wienerberger das a successful transformation of Wienerberger to an innovative ecological solution provider has been done and is successfully embedded in our business model. You see it when we look over the last 10 years that our exposure to renovation infrastructure, especially have increased dramatically and will increase during the integration of Terreal when we come to the full integration and especially with respect to our exposure to renovation again. So a more resilient business model than we had in the past. Also on the innovation side, a strong focus on innovative solutions and the share of this product and solution systems. We have here a clear target that we have reached with more than 30% in 2023, and we target for '26 even stronger share of turnover with 35%. So here also full alignment with our own strategic targets and we are progressing here very well.
The third very important pillar is that we have been able, after you remember, we had a very strong contribution from self-help in the past. But also in the last 3 years, we had a very strong contribution with more than 160 -- EUR 136 million coming from this, optimizing our business, optimizing our supply chain and making our business more efficient throughout the whole operations. And here, again, ladies and gentlemen, important to note that this EUR 136 million remain as savings in the business.
When we look at the revenues also by region, very interesting to see how even we are split throughout the regions. Obviously, Europe West is our strongest one. We have in Europe West also had our U.K. operations and our Irish operations, and the Continental European operations. So this is the strong restart. But North America with 20% and Europe East, 28%, you see here a strong focus on these 2 areas as well. Interesting and also important for all of you to know that Wienerberger has developed, obviously, in a multiproduct provider with piping as the biggest single unit with 35 -- 34% turnover, wall, Facade, and roof obviously, at a more ceramic part of the business. Also interesting to note that the share of roof after Terreal, which is not in the 16% yet, will grow also rather dramatically. So we will have a strong foothold in different areas of applications and markets, making our business even more resilient.
Very interesting also that you see here that from an EBITDA contribution perspective, North America has become a strong contributor in EBITDA and the EBITDA margin as such, and also the European businesses have done well under the market conditions. But you see here the strong improvement.
And if we look a minute into the different products and applications, here, you see because some of you have been obviously always interested in the piping division, for example, that we have become in this division in only a couple of years, a leading company when it comes to EBITDA margin, with an EBITDA margin of 19% in piping. The wall and facade are doing fine and considering the depressed market in the new build, you see that we have strong contributions from these businesses, and the roof with a strong margin of 27%, shows how right it is for Wienerberger to increase its presence with Terreal because we have here a strong EBITDA margin coming from this business.
Also very important, and this is, I think, that you keep in mind is the solid forward-looking sustainable financing policy with Wienerberger has with strong balance sheet, with about 50% equity ratio, we have a solid liquidity reserve. We have done, obviously, as you have followed us very closely, EUR 600 million financing also very favorable terms, long term and have here full flexibility. The leverage target remains about 1.5 to max 2x net debt to operating EBITDA leverage. And here also to confirm that Moody's has positively rerated us with respect to our performance and has given us a very, very positive feedback with respect to our business model.
But let's base on this focus 1 minute or 2 on the capital allocation policy because, ladies and gentlemen, it's so important that you understand what we are doing in the next couple of years. If I look back the last 3 years, Wienerberger has a very high degree of free cash flow. EUR 1.3 billion in these 3 years coming in as a free cash flow. We have a strong financial discipline as I explained a little earlier, and a very strong cash conversion with 84% in this period of time. So it gives us a real strong basis for our capital allocation.
Here, we have actually different pillars. Our dividend policy and share buyback policy together, we say that 20% to 40% of our free cash flow will allocate it to return to the shareholders. So what we plan in the future as you have seen is a good dividend policy, providing our shareholders with returns from the dividend, but also foreseeing the years now to come, a 1 to 2-point -- percentage point of our share capital to buy back and cancel the shares in order to return also here value to the shareholders. Obviously, this depends on the free cash flow, as I said, 20% to 40%, and the outlook but this is what we want to return to the shareholders in the years to come. The company as such needs today a maintenance a CapEx of EUR 160 million and EUR 180 million of CapEx to maintenance CapEx for the group. And this is important because we maintain well our assets. We make them fit for the future. Obviously, this CapEx depends on the size of the asset and what sort of growth we have but it's in this range that we need maintenance CapEx. We have done, obviously, in difficult years with less and can do so. But this is, I would say, a forward-looking running rate of EUR 160 million to EUR 180 million.
The growth CapEx in order to grow our business organically, including ESG and the performance for energy in the sense of reduction of energy consumption and making our business ESG conform also when it comes to our climate targets. Here, we need about EUR 200 million. And this is also discretionary depending on the outlook and the capacity utilization. So all in all, these are parts of the businesses have also the growth CapEx and payback. And here, again, also very important to note that Wienerberger is here the leading company in the [indiscernible] when it comes to CO2 reduction, for example but not only also in efficiencies and improving the quality of our assets.
Then obviously, the M&A, and here, we have shown also in the past that we have a strong commitment when it comes to M&A. Because, obviously, when you look at the return on capital in employed, it's pre-tax so that our growth is also comparable to all the peers in the sector. When we take 2023, we have a 14% ROCE and we want to grow this ROCE to about 17% in '26. So again, ladies and gentlemen, this is the update I wanted to give you with respect to capital allocation and performance of the business. So here, a clear set of targets that we have implemented and put ourselves as a target.
When we look -- talk now about acquisitions and the value creating a it. Let's have a quick look about the track record. The track record in the last 10 years, we have done more than 40 acquisitions, all of them strongly value-enhancing and having an average payback of 5x. So here, after the integration of these companies and relicense synergies, we have as about a 5x running rate of payback. So again, strong focus on value enhancement and improving it.
When we look today and what we have in front of us, I see a very strong and attractive deal pipeline in the same respect. So in the same sort of performance and value creation possibilities for Wienerberger in North America and in Europe. So I'm confident that we will continue our path with respect to M&A growth in the future. let's have a quick look on Terreal. It has now been successfully closed, as you know, in the first quarter and is already contributed to the business. As we've seen, we will have a EUR 90 million of EBITDA coming from the business to Wienerberger this year, gradually then growing in '25 to EUR 120 million, EUR 130 million in '26, and 120 -- and EUR 150 million in '27. So everything is on track in this. The company is running well. Integration is well underway and there's nothing to report on this running in the right direction.
We have announced earlier this week also an acquisition in the Netherlands, GrainPlastics, a leading company in cable protection and water management. You see here also a very focused growth for our piping division in an area where we are very strong in the Netherlands, for example, where we can add value again. It's about a EUR 30 million revenue company with 2 sites in the Netherlands and fit perfectly in our network, and where we can grow in 2 growing businesses. We have here the drainage, that's water management, especially for agriculture, where we have a strong growth and renovation business for the years to come. And therefore, it's a key value driver for us in the piping division in the Netherlands, and also in cable production because the Netherlands invests heavily in the grid and therefore, obviously, a potential for us to grow with this increasing spending of the Dutch state and the Dutch electricity provider. So again, future growth insured in the piping division here in this area. And this is, again, a typical M&A transaction we sold, which I would call bolt-on, very higher synergies and good fit for the business for us and good organic growth potential.
And with this update, on strategy, capital allocation and how we move the business forward in the years to come, I hand over to Gerhard for the first quarter.
Thank you, Heimo. Ladies and gentlemen, quarter 1 result should be no surprise for you. We basically communicated already a big -- let's say, the major drivers during our pre-close call. But I will try just to walk you once more through the quarter 1 results. To start with the market assumptions, we confirm basically our market assumptions for the full year, that means that we expect a slightly lower market level than 2023. I would even say from today's perspective, after having 4 months basically of 2024, and understanding the dynamics of the first quarter, respectively, the first 4 months, yes, we see some positive momentum in the new build. So maybe even the 69% what we just have seen may be moving more a little bit up and hopefully coming closer, hopefully above the 70%. But let's see, we see at least some positive momentum, and this is also basically what we want to share with you.
Coming to the first quarter results, the market level of the 1st quarter is slightly above the last quarter and basically slightly above also the second half of 2023 but still significantly under the first quarter of 2023. And keep in mind, the first quarter of 2023 was market-wise still very strong and also result wise. It was, I think, our record result in company's history. So the EUR 209 million last year was exceptionally high, and now basically, we're comparing also a quarter 1 of 2024 with quarter 1, 2023, where we have a significantly different market levels.
I will say some words later, basically to the end market exposures, but let me just repeat once more, and this slide is not new. We also shared it with you during the pre-close call. So let me give you some more details basically on the quarter 1 results. First, as I just mentioned, we have in the first quarter significantly lower market levels than in 2023, especially in the Continental Western European markets, we see simply that the market activity was compared to last year, significantly lower the EBITDA impact out of that is around about EUR 40 million on our first quarter results.
Secondly, we had in the first quarter, extensive standstills. We decided to reduce inventory levels to go basically for a longer standstill in quarter 1. We extended them and decided to go for basically 1 standstill and not for 2 standstills, simply from a cost management perspective, this makes much more sense to go for one. And therefore, we decided also left and rights to have some of the plants in the longer standstills, then basically -- not originally planned, it was planned, it was foreseen, and -- but it has a cost impact basically of almost EUR 50 million. And the plants, which was basically affected is the plants in Continental Europe and also most of them in the ceramic business in Continental Europe. And thirdly, there was last year kind of a onetime effect in the inventory revaluation last year due to the high inflationary cost increases what we have between 2022 and 2023. And this also had an onetime effect of around about EUR 20 million in last year's EBITDA of 2023. And the last 1 is that we also have realized already the major part of our cost management savings. You remember, we had communicated that we expect around about a EUR 20 million on cost -- fixed cost savings out of the initiatives, which we have initiated in 2023. And the major part, meaning '17, we have already realized in the first quarter this year. So all in all, all these things are no surprise, have known for us already a long term ago. And I also and not me only but also of us basically communicated that the first quarter will be significantly below the first quarter of 2023. So it is no surprise and therefore, all these things are also factored in, in our guidance and part of our guidance. And I think this is important also to repeat once more. The numbers, we closed the first quarter with revenues, which were around about EUR 950 million, so close to EUR 1 billion, 9% minus versus last year, mainly volume-driven. This is basically due to the lower market levels, what we see. Operating EBITDA, EUR 115 million. EBITDA margin, 12%, and basically from our initiatives, meaning from our self-help program contributed with EUR 9 million. As mentioned before, the cost management savings EUR 17 million in the first quarter and Terreal contributed with 6 months basically -- sorry, for EUR 6 million for 1 month EBITDA, and this is also considered in the EUR 115 million.
Let me quickly zoom in basically to 2 numbers to 2 KPIs. The one is the EUR 115 million, the other one is the 12% on EBITDA margin that I think important to understand and to keep in mind, as I just tried to explain, the extended standstills. If you consider basically the extended standstills, the impact on EBITDA of around about EUR 50 million in the first quarter but also considering the one-off last year in the first quarter, to EUR 20 million out of the revaluation of the inventories consider both effects basically, you will see that our profitability is very closely in line basically with the profitability, which we realized last year. So also that we see that the profitability of the business, meaning pricing, cost structure is very well managed and is on the way or is, let me say, as expected. And this is also confirmed in our April results, as we already see that the standstills are going back to a normalized level, let's say that the operations are producing at the moment already on a normalized level, and we see that results are coming back on the expected level.
Some more details on the regions. We mentioned before that we see in Europe in the new build sector, some stabilization. We see in the European East or in the Eastern European countries, first signs of recovery, especially in Poland but also in Czech, Romania, Hungary, we see that volumes are picking up. We see that volumes are already above prior year, which is a positive sign. And we see, as I mentioned, also the stabilization in the Western European countries. And really, I speak about the Continental Western European countries because also U.K. is developing more positive than we originally have expected.
Renovation, stable. Also there, we see some first signs of slight improving activity, especially also here in the East and infrastructure in Europe is basically the activities on a solid level and the demand is basically much more stable and is also there on a rather high level. For North America, new build also solid on a stable level and no surprises there. We are on a low level. But here, I think we are doing and -- doing a very well business. We see a very well business development. infrastructure also on a high level.
Let me translate this in our numbers. Revenues, as I mentioned before, minus 9% after the first quarter. You see that Europe West only minus 5%, but this is impacted also by the consolidation effect by Terreal. If you take out Terreal here, you are having basically, on the revenue side, around about a minus 13% on a year-on-year comparison. And you see in the North America moderate decline of minus 9%. The operating EBITDA is impacted by the effects which I tried before. It's mainly the extended standstills in the ceramic business in Europe, which you see. And you see immediately also on the numbers in Europe, West and in Europe East that we are missing around about 50% on a year-on-year comparison. And this is simply due to the extended standstills what we had in the ceramic business in Europe. North America, rather moderate decline of minus 12%. So we see also that North America is developing on a low level but on a very profitable and high level basically when it's about results.
Let me do one side step, and we initiated in the beginning of the year already a kind of an asset sale program where we expect in the next 24 months an cash inflow of around about EUR 100 million also to additionally strengthen our liquidity and this will also contribute positively to our financial leverage. So this is something what is also up and run. And out of that, we -- as I mentioned, we expect around about EUR 100 million, additionally, cash inflow besides our cash inflow from the operational business.
To continue with the outlook, and I think also there are no surprises. As we mentioned in the pre-close call, we confirm our guidance 2024 of EUR 860 million to EUR 890 million. As mentioned before, our assumptions for our end markets are unchanged. The pricing policy develops as foreseen, self-help deliver what we expect. Cost management, I expect honestly a little bit more. We communicated so far around about EUR 20 million. I expect from today's perspective more in the range of EUR 35 million to EUR 40 million. So here, we still see that the cost-saving measures and the initiatives, which we have implemented last year and which we are still implementing are coming through the P&L and therefore, also will contribute in 2024 to the results or to the guidance of EUR 860 million to EUR 890 million.
Terreal. We closed Terreal by the end of February, successfully Integration is up in Jan and is developing as planned. We confirm also the EBITDA contribution of EUR 90 million for 10 months of Terreal scope, basically in 2024. And to give you a first outlook also on the first half year, respectively, on the quarter 2, and I mentioned it also during our pre-close call already, what we are seeing also out of April results and how the markets are developing during May -- in the first days of May, we closed the first quarter with EUR 115 million. We expect for the first half year, around about EUR 400 million on EBITDA, and we try to do it with different colors basically that you also see how the EBITDA of the second quarter redevelop. You know that we had last year around about EUR 285 million. On EBITDA, we will have a contribution from Terreal and I also expect that our second quarter will be above the second quarter of last year. And this will bring us then to round about an EBITDA of EUR 280 million to EUR 290 million, coming up to this around about EUR 400 million for H1 2024. And this consequently means that in the second half, of 2024 that we expect then an EBITDA of EUR 460 million EUR 490 million, which is perfectly in line with our guidance of EUR 860 and EUR 890 million. And also there once more, just to repeat, is included a EUR 90 million, 9-0, for 10 months of Terreal contribution.
Right. Then I will take over from Gerhard. Thank you very much. And to summarize very quickly our presentation from today. First of all, Wienerberger has a clear sustainable strategy. We have KPIs on all our ESG targets. We have set the new project and program for '26. '23 has been successfully closed, as you know. And here, again, fully on track with respect to these targets.
The financial strategy was clearly laid out to you today with respect to capital allocation. I think it's very important that we have been focused value creation also for our shareholders with regular share buyback and cancellation of shares, 1% to 2% every year that we will allocate to this and the dividend policy. And then obviously, on top of it, maintenance CapEx, growth CapEx and the M&A, as I have laid out to you today. So very important on this.
I summarize in a couple of words very quickly. First quarter, absolutely in line with our own expectations. We are focused on working capital adjustment. We told you that there will be extensive standstill, this has affected us. But when I look at -- and as Gerhard has put it, numbers of April and May, fully in line with this outline of this -- of the guidance and the performance is perfectly in line with respect to what we foresee for the business. So everything is on the cost side under the controlled price side, under controlled end markets, as I said, also are coming slightly back in Eastern Europe. On the infrastructure side, well underway on the new build also a little better already and renovation picking up as well. The U.K. and North America doing under the circumstances, actually very well and very pleased with the performance there.
So all in all, I think financial strategy clearly in place and the industrial strategy, we're building on it strong plans performing well, and we have invested in the efficiency of our plants and keeping our strengths here as well. When we look at the midterm target here with respect to 2026, we have to see a slight recovery of the market. We always told you from an indication that it's around 70%, we need to move up to the 86% of markets. You remember we have the index based on 2021. So normalized margins with respect to this and coming back of the market slightly, not very important, actually, the recovery that we need to get up to this operational performance. The organic growth based on the buybacks of our CapEx, the innovation and obviously, the contribution of the value-creating acquisitions, will lead us to a company that will generate about EUR 1.2 billion of EBITDA in '26. We see that Wienerberger has a very strong growth platform in the markets in North America and in Europe for renovation, for the infrastructure of water and energy management when it comes to pipes. And you have seen here the strong performance in the margin -- on the margin side and the really, really strong business in new build, and I see the potential coming also now because Europe, especially, but also the U.K. and U.S. need new housing, need investment in new housing in all of the different markets that we are currently operating in. So we are effectively based very well when it comes to growth potential for the future in the next couple of years.
So thank you very much for this -- for listening in. I think from -- as I said at the beginning, this is a little extended presentation goes beyond the quarter presentation because I think it's important that you understand where we are going. We've given you an update on the Terreal transaction and the integration that is running update on the M&A policy that we are currently running through, and I do hope we have answered hopefully, a lot of your questions that you had on your mind this morning. And I open now the floor to the Q&A session.
[Operator Instructions] The first question is from Brijesh Siya with HSBC.
So a couple from my side. Starting with the market development and Heimo, thank you for kind of painting it, the [ printed ] M&A are looking good. When you look at the numbers, compare that with H2 last year and Q1, would you say that April and May is probably a couple of percent higher than Q1? And then within that, I think you have mentioned Eastern Europe is really doing well. And if you can just throw a little bit light around Germany and France, how they are doing in Western Europe?
And the second question is on the -- your pricing, I guess, at the pre-close, you were talking about pricing is in line and not -- no major issues. Given the market is showing some signs of recovery, are you seeing any competition pressure, anything coming through, and that will be kind of helpful if you can just so what's -- how the pricing is looking?
Sure. Thank you very much for the 2 very important questions. I think from the market perspective, you are spot on with this one, 2% better. As you have mentioned, we see this coming through. As I said, Eastern Europe has ended this decline earlier. As you remember, we were talking about 2 years ago, and therefore, the recovery is also a little earlier. However, it stays still at a low volume, if I may say so. But we are seeing this positive signals coming through. Interest rates have come down in these countries from Poland to Hungary and Romania. So people are more positive. I think that the next sign will come from -- also political trends from European trends, investing more in residential housing, in renovation and in infrastructure. And I do think that also this region will benefit very strongly from a potential, I would call it even -- don't take me wrong, right, that this sort of war seen in the Ukraine will probably come to a hold and pause a little bit, and here positive momentum might come also to the real estate sector in Eastern Europe. So these are my expectations for the year.
Western Europe, as you correctly mentioned, went later into the crisis, we have still a very low level of activity in Germany, definitely, France has entered it. But I see France taking measures also to counter this. I spoke with some representatives with the government -- French government earlier this week. So I think some measures will come there and hopefully hit the market positively next year. This year is too late, I would say, we will go through a low activity of build new building in France and Germany for the rest of the year. So this is fully in line with our expectations. On the pricing side, when I look in the past, in all the different regions, we are active, we have local competition. So there might be some pricing issues locally sometimes and will remain so also when the market picks up. But generally speaking, I think our prices hold well. We are very satisfied with the pricing. And then we always said we cover our inflation this year and not more. And that's what Gerhard also explained, we are spot on here for the rest of the year.
And just on the Q1, the release, right, it has probably came again a little late. Was it kind of a late decision to kind of not publish any press release or report and just put out the presentation?
I may say it loud and clear. I take the blame on me. I thought we communicated it clearly. I'm sorry if we didn't do that and you can blame me for that because I'm the CEO, and I should have done that probably earlier. But I thought it was clear for everybody that we won't do a report and press release on this. So but there's nothing to hide actually. I thought everything was clear anyway. That's why I was so relaxed on this. Sorry, and I apologize.
No problem. And Q3 will be as usual, Q2 would be like this?
You mean the Q2 numbers will be based...
Q3 press release. I mean you will have Q3 press release as well as report.
Right. Basically, we keep the -- what we want to change for the future is only Q1. As it is, as Heimo said in the beginning, it is -- for us it is so early in the season that it is from the -- basically from the information content on other low level, we believe. And therefore, we concentrate on first half. q3 and Q4, basically, these are for us, the relevant quarters. And therefore, in the future, we will do less information on quarter 1 numbers.
Yes. Exactly. And I think if you listen to this call today, we gave much more than only a quarter 1. When I listen to my colleague, Gerhard, he has given the guidance on quarter 2. So it was very clear for you all that the picture was -- is a very clear one for the performance of Wienerberger for the rest of the year. And again, I say with all clear transparency, I thought everything was clear anyway after our pre-close call and also the information that we have provided you always. So the only difference I say it loud and clear was that we didn't issue a press release in the morning and the presentation. But actually thought as everything was clear anyway, so we did it in this call, and I wanted to make sure that all of you have the same amount of information at the same time. That was, for me, important to treat everybody equally. And especially when we talk about capital allocation policy and the strategic elements I wanted to make sure that everybody has it. So that's it. So thank you very much for being so comprehensive.
No problem. No problem. And just a suggestion, if you can publish the presentation a little early before the call, it will be helpful just to go through. And if you have any questions you can basically come up in the call and after that.
Point well taken, and we will consider that. Yes, absolutely.
The next question is from Tobias Woerner with Wienerberger (sic) [ Stifel. ]
Tobias, you're not on our pay list. Sorry, I need to clarify.
This is Tobias Woerner from Stifel.
What an introduction. Thank you, Tobias.
Excellent. I know I maybe misentered it. Okay. So back to the questions, 3 if I may. Number one, you didn't give the sales impact for Terreal in the first quarter so that we just get a like-for-like or maybe you can give us a like-for-like in any case in case there's anything else? The second question just to double check or confirm your assumptions as you set them out for the full year in terms of cost inflation and price increases are the same? Or have you marginally changed them somewhat? And yes, let's leave it at those 2 for the time being.
Maybe let me start with the last one, Tobias. We -- from a price increase, we communicated, I think, in the beginning of the year that we strive for a 1% to 2% price increase and the cost inflation of 2% to 3%. At the moment, we are gaining -- we are working hard on our cost inflation. We see that in North America, we are basically further increasing prices in Europe, we are stable at the moment, maybe slightly above and we are with our cost inflation more in the line of 0 to -- between 0% to 1%. So what we are focusing at the moment is really on the cost inflation and keep the prices in Continental Europe stable. As said, in North America, we are able still to increase prices for the full year, I expect around about 3% to 4% even.
And the second question was the sales impact of Terreal or the revenue impact, which is out of mind around about, I think, EUR 40 million to EUR 45 million in the first months, which means it's somewhere 4% to 5%, something like that, what is basically the scope impact of the revenues.
Okay. Great. And then the third question came back to me. If I look at your income statement, which you also published this morning, you have a minus EUR 41.4 million other financial resolved in the P&L and then you have in the cash flow and other noncash income and expenses of plus EUR 42.4 million. Can you elaborate on those 2 things, please?
Yes. Basically, both of them relate to Russia -- to the sale of Russia. I explained it during our full year results call in the middle of February. We had to recycle an FX difference, which we had in our equity. What you -- if you exit a country, if you deconsolidate basically, then you have to recycle via your financial result. This was a EUR 40 million in the financial result, which is a noncash item from an accounting perspective. and has to be considered in the financial result. And this, you find back in the cash flow statement as a neutralization basically of your operational cash flow. And therefore, you add up again the EUR 40 million. And as you just explained, it is in the line other noncash income and expenses, there is a position of EUR 42 million, and this is exactly this neutralization of this FX recycling, what I explained earlier this year.
And just to -- I should know but it slipped by memory. The maintenance CapEx or the CapEx guidance that you've given, I look just now in the full year presentation, I couldn't see any there. Is that new guidance as is the return on capital employed, 17%?
Basically 2 things. The CapEx, what we guided in the beginning of the year was just increased by Terreal, by the Terreal impact. We had at that time and you remember for the maintenance CapEx, EUR 125 million excluding Terreal and we had growth CapEx between EUR 150 million and EUR 200 million excluding Terreal. Knowing now let's consider Terreal, I expect that with Terreal, we will show our maintenance CapEx for this year, around about EUR 125 million to EUR 130 million. And we confirm the growth CapEx, they will stay in the middle of the EUR 150 million to EUR 200 million, so somewhere in the range of EUR 180 million from today's perspective. So no changes there, even including the Terreal scope.
The last one, I think Tobias was on the return on capital employed, I think. This is...
[indiscernible] target.
Right. This is the target for 2026. And as you have seen also, we published the calculation method. So the formula basically what we use, we're go into a pretax return on capital employed, we realized the 14% in 2023. And our target, also what Heimo mentioned, which is linked to the EUR 1.2 billion on operating EBITDA for 2026. We also linked an ROCE target to that of 17%, 1-7 on ROCE before pretax basically.
But just to be clear, you didn't give us that before that number, right?
No, it is.
That's the new content of, I think, the important 1 to date, absolutely. A very important piece of information to be as you're right. The 17% pretax ROCE is the new one. The capital allocation policy and the impact also when we say we want to buy back shares, 1- 2% a year and cancel them, is a very important information for you as well. And as we said, the capital allocation with respect to maintenance CapEx on an ongoing and forward-looking basis, especially also growth and M&A is also for you, an important piece of information.
The next question is from Markus Remis of RBI.
Couple of questions have been answered. I would have a few more specifications. Firstly, on the asset disposal program. Can you shed some light on the scope, where you're going to -- or in which regions, which business areas you're going to sell the assets? And if you can also provide a bit of granularity on kind of the book value and if you think that will have a material earnings impact?
Yes. The real -- this is nonoperating real estate. And as I always said in the past, we're working on those disposals, trying to get the permits and some of them have been -- we were working on a couple of years now. So the major parts come from the U.K. and North America. These cities are currently in the process of getting ready for disposal. So that's why we say in the next 24 months. So we expect those inflows from about [ EUR 100 million ] and some significant ones also on Continental European basis. But I would say the more important ones are coming from the North American and the U.K. operations. So this is -- 1 is, obviously, you have seen us being very active in M&A and this positively puts a light on the Meridian transaction again because we get a lot of money in this one again. And also in the U.K. some very good transaction in the past where we can materialize now the impact. On the -- I give you -- it will have a material impact also on the P&L will be significant, double-digit.
We will also -- it is basically something that we anyhow will present and explain separately as it is it will be if the sales basically materializes anyhow, we will basically explain it, and we'll show it separately.
Right. So just to get it straight, that's excluded from the operating EBITDA target?
Absolutely. Absolutely.
Okay. That's what I thought. And then on the capital side, the share buy buyback policy, 1% to 2% the capital annually. Is it fair to assume that there are certain, I should say, price thresholds underlying debt? Or is that kind of regardless of the price or implied valuation of the shares that you will buy back this 1% or 2% every year?
I think we will look carefully, obviously, at the valuation of our company, but we see at current levels that this is achievable and can be done. And that's what I said, it's a matter of looking at the overall shareholder return. You appreciate if I say this, some investors are also listening to this call, some preferred dividend, others don't because for tax reasons. And so I think we give us the opportunity as a company to look as an overall return. And here, the share buyback and the cancellation of shares is a good perspective also to be utilized. Yes.
Okay. So it's an optionality as it was the case in the past. It's not...
I would put it more than an optionality. It's more because when you say it as management in a policy, then you clearly commit to this, yes, and this goes further than optionality.
Okay. Got the point. And then -- yes, the last question relates to the 2026 EBITDA target because on the -- on this slide, just going forward, it said that the contribution of value creating -- sorry, contribution of value-creating acquisitions. So I mean, that, of course, raises the question, how much is baked into that number?
Well, you are referring to Slide 34 of the presentation and I fully appreciate that. And I think it goes without understanding that, for example, Terreal transaction is fully here included, yes.
Yes, of course. But that's not including future acquisitions, so to say.
Not in the size of Terreal but if I've explained to you also for us an important step is like GrainPlastics that we've, there is a smaller one but these are included to be very transparent. Yes.
The next question from Yassine Touahri of On Field Investment Research.
Just a couple of questions about the end market. I think you discussed about France, Germany, Eastern Europe. Could you give us a bit of color about what do you see in Netherlands, Belgium, and the U.K. and maybe the Nordics as well? Do you see the activity still under pressure? Do you see a recovery? I think some of your -- on of your peer research mentioned that the U.K. is picking up. Do you see the same? And do you see -- like it would be great if you could give us a bit of color on those markets?
And then second question, on the second quarter results, it looks like you're expecting a 15% increase in EBITDA in the second quarter, is it fair to assume that it means that your underlying EBITDA is relatively stable and that the 15% increase in EBITDA is going to be mostly driven by Terreal? Those would be my 2 questions.
Let me start with the markets and Gerhard will take over on your EBITDA question. Indeed, we see a very satisfactory development in the U.K., as you say, some of our competitors have communicated as well, and we can confirm that the underlying market is positively developing. So picking up slightly. In the Nordics, I would distinguish between infrastructure, which is running well. And you know our major exposure of Wienerberger goes into infrastructure in the Nordics due to our piping activities. New residential housing is still somehow depressed in the major economies, Denmark, Sweden, Norway and Finland. We don't see yet a pickup here in the new build. However, please keep in mind our exposure is here minor.
When we move to the important markets for Wienerberger, Netherlands and Belgium. Here, I think both markets are I call them more stable than France and Germany but have seen also declines in both markets in the new residential housing. Our exposure there is obviously stronger due to our strong brick operations. However, I would say that when you look at these 2 countries, there is a strong underlying demand in both of them, especially in Flanders and in the Netherlands, I'm sorry if I say Flanders and not the whole of Belgium but that's the region that is economically the strongest. And therefore, here, the underlying demand is strong. And I would say that we will -- we have seen here the bottom building already in these markets and a slight upward trend for the rest of the year will come. Infrastructure spending and business in both areas with respect to piping is good. Renovation, also the renovation rate is now turning positively from a negative trend last year in a more stable, slightly upward trend. So all in all, I would say the picture is here in this economy is not gloomy but slightly positive also. And now I hand over to Gerhard.
Your second question was about the second quarter results. And maybe let me walk you through what we see from today's perspective on development. We closed the first quarter with EUR 115 million. We had last year an EBITDA in the second quarter of EUR 245 million. I expect for Terreal contribution of around about 30. And I expect from the legacy business plus EUR 10 million to EUR 15 million above last quarter or let's say, quarter 2023. And this adds up to the plus/minus EUR 400 million. So we expect also that the quarter 2 will be without Terreal above the quarter 2 of 2023.
The next question is from Gregor Kuglitsch of UBS.
So could I just probably view -- and maybe the answer is simple but just to give us sort of the volume price for Q1 please, just for the avoidance of doubt. Secondly, a question on H1. I mean maybe we're splitting hairs, but I thought on the pre-close you were suggesting EUR 400 million ex Terreal, now it's in Terreal, maybe I misunderstood but just maybe perhaps you end up at the same place for a year but just to sort of clarify there. And then Terreal, looking at the cash flow statement, it looks like you, in the end, paid 5 -- well, I don't know if that's all Terreal, about EUR 595 million, right, for acquisitions. I'm guessing the net of the treasury to adjust your cash out. If you can just explain think there's a bit more maybe some adjustments, just explain to us, please? And then related to that, I think your debt was a bit over EUR 2 billion net debt, I think, as of Q1, but maybe you can give me the precise number. Can you update us what you now expect or where you expect net debt to head to, but let's say, by the end of the year, maybe ideally in an absolute figure, if possible?
Let me make this out already with the last one, Gregor. We are now close to EUR 2 billion. We are, I think, with EUR 1.950 million, somewhere there, close to EUR 2 billion round about. Net debt after the first quarter, we expect for the full year a net debt position, which will be between EUR 1.5 billion, EUR 1.6 billion. We stick to our guidance when it's about EBITDA development. We will work on our working capital. We will also expect a certain inflow. And yes, M&A when we maybe switch already here to April, the EUR 594 is basically -- the major part, yes, is including Terreal. There is also basically some other ones. We acquired [indiscernible] the beginning of the year. [indiscernible] we did a small acquisition in the U.S. And also keep in mind that there was also a working capital mechanism in the Terreal equity bridge. Finally, so that the purchase price was between EUR 500 million and EUR 550 million, somewhere there. We are still basically working on the final purchase price. This will be basically closed by the end of May. So we paid based still on the preliminary purchase price. So the way we purchase price adjustment by the end of May, so the final purchase price, you will see for Terreal what will be explained in the notes by the first half year numbers.
Okay. So just to be clear, does your guidance obviously includes some bolt-ons that you've done, including the one that you just announced. So I don't know, are we talking EUR 100 million there? And does it also include the sort of 1% to 2% buyback that you've announced today?
Correct, right. Correct. This is all factored in, right?
Great. Then you had your questions on price and volume and H1, right?
Correct.
Yes. Basically, it is, as I said before, the major part is from volume. Volumes are down in the first quarter. with around about 12%, 13%. As I mentioned, we have roundabout the scope impact out of Terreal of roundabout 4%, 5%. Pricing is a slightly at 0.5% but this is, yes, I would say, flat in the first quarter.
And the H1 guidance includes Terreal.
It is included. I think it was a misunderstanding, Gregor. We said EUR 400 million including Terreal. So it was already in our pre-close call. Yes, we know we speak about it, that was included.
The next question is from Harry Goad of Berenberg.
I've got a couple of questions, please. Just firstly, on cost. I think I'm right in the 2% to 3% inflation number was confirming what you previously said. Can you just remind us what the moving parts of that in terms of the bigger cost items, I guess, in particularly thinking wages and energy costs and just an update where you're at with natural gas more generally and forward purchasing, that's question one, please. And then the second one is, the U.S., I think you talked about sort of signs of stabilization in new residential. Do you think we see any sign of grow or can you see any sign of growth going through in the second half? Or is that more of a 2025 issue?
Thank you, and I will pick up on the second one. I would say it's fair to assume that we will have a good run rate up to the elections in the U.S., the presidential ones. I think that the market as such will remain more sluggish for a couple of months after until the new administration gets together and then we might see some growth into next year. But I would say now the market is still working fine. I'm not American, I'm not U.S. expert but in the sense of politics but my sense is or my best guess is that if we approach the elections, then the market will slightly sort of stabilize or not move much for the rest of the year. That's how we have put our expectations together.
Right. And the first question, Harry, was about the cost inflation, yes, we are -- today we are striving to lower cost inflation, the 2% to 3% what we communicated in the beginning of the year. It was already at that time, mainly driven by labor costs of around about plus 5%, and this is also what we confirm from today's perspective. Where we are working on is energy, we see -- we expect for 2024 lower energy costs, the same for the resins. We also expect lower resin prices compared to what we originally have expected. And when we speak about all the raw materials, the packaging, et cetera, we have considered a plus 2%, and we are today more in the range of 0% to 1% and we are basically trying to reach a 0% for that, which adds up to a total cost inflation for this year. And this is really an ambitious one of around about is 0 -- between 0% and the 1%. And this is basically what we try to reach. So we are working much more intense basically on the cost inflation to bring it down in the -- yes, close to the 0% basically for 2024 for the whole year 2024.
The next question is from Patrick Steiner of Kepler Cheuvreux.
It's Patrick speaking. Two questions left from my side. Firstly, why is the operating market much better for the roof-related product offering compared to wall or facade in the presentation? Is this more of a snapshot effect from weaker new build in 2023? Or should we view this margin advantage as this long-term dynamic? That was the first one. And the second one, can you give us more info on this kind of larger discrepancy between operating EBITDA in Q1 and Q2? And give you -- could you give us also some more details on the source of the one-off expenses related to the standstills in Q1?
I think I will take the first question and then I had over for the second one with the operating EBITDA to Gerhard. The margin roof is always better. Why? Because you have a 60% exposure to renovation. Therefore, here also from a pricing perspective, it's product that has another sort of positioning in the market and always used to be different, yes. So this is something that you will see going on forward. The difference or we will have a higher-margin EBITDA margin in the product roof. We sell obviously also more accessories here in this and higher value-added product. So all in all, we have more system approach in the roof part compared with facade and with wall. And keep in mind that facade and wall is mostly driven by new build. And here, obviously, the effects of capacity utilization plays an important role. So the one -- the margins that you have seen for the whole year of 2023, are obviously considering also standstills and this sort of non-utilization of full capacity costs that you have to incur when you run these businesses. So this is the major difference from the roof to the other ceramic businesses.
And on the EBITDA margin, and I understood you correctly, Patrick, is that the EBITDA margin in the second quarter is basically always higher due to the run rate basically of our operations. In the first quarter, the EBITDA margin was impacted by this extensive standstills, what I explained. And therefore, also assumed in the presentation once more to the EUR 115 million and the 12%, which is impacted basically by this additional standstill costs of EUR 50 million. And we see, as mentioned before, that in April, most of the plants were already up and run basically in April, in May, everything is basically operational again. And therefore, automatically, you have higher EBITDA margins than you have in the first quarter. Even if I exclude basically all the one-offs, what we explained before, it is due to the seasonality of our business model, you have also a seasonality if I may say so, in the profitability of the business model, which reaches its peak in the second quarter and in the third quarter.
Okay. Understood. Can you just give us a bit more details on the one-off expenses related to the standstills? I think if I remember correctly, it was -- you leveled that with EUR 50 million. Where exactly did this come from?
It is uncovered fixed cost. It is simply if you have -- if you're in a standstill and you are not terminating the contracts of the employees or you don't get simply [indiscernible] subsidies from the state, then you have fixed costs, which are not covered by operations by your running machines. So that means as soon as if you start up again, basically, you capitalize your fixed costs. So these costs basically has nothing to do with our cost management initiatives or all the other things. These are simply costs, which we keep due that the plans are not operational. And we -- as soon as we start up again, we capitalize them. And this is the impact of this EUR 50 million mainly. This is standstill costs, let's say, uncovered fixed costs due to the standstills or also inefficiencies in the fixed cost coverage due to lower utilizations or lower run rates of the plant. So these are the 2 major effects, how this EUR 50 million comes together.
Okay. Understood. So we should view this more as some kind of underutilization effects?
Lower utilization.
The onetime effect, yes.
Exactly.
The next question is from Nicolas Kneip of Wiener Privatbank.
Can you hear me?
Yes, we can hear you.
Perfectly fine.
2 more left. One, first one, concerning your Q1 EBITDA, there is a delta of around EUR 10 million from your operating EBITDA to your reported EBITDA. Where is this coming from? And what do you expect there for the second quarter and from today's perspective also for the full year? And then secondly, just to confirm about the reporting going forward. So if I understood correctly, for the third quarter, you want to release a press release and a report again. And going forward, for the first quarter, you're not going to report -- release the report. Is that correct?
I repeat this, I answered the question earlier during this call. I clearly said we will have all the necessary informations that are required, including a report for the quarter 3 in the future. And for quarter 1, we won't have a special report out there. That's the only difference in the future Yes. Press releases are not for the financial market, they are for the media community and that's a different story. But we will feed you with the reports as discussed half year and quarters and full year.
Yes. And deposition, which is the EUR 10 million what we just mentioned is mainly adjustments in our Plant network, which is EUR 10 million in the first quarter. And we expect for the full year between EUR 20 million to EUR 30 million, around about. The only out of this, I would say, network adjustments for the full year, which we also show in this line, what we discussed before is if we do a sale of noncore assets of real estate, then basically, this will also show in the line of structural adjustments. So it is basically when you go from reported EBITDA to operating EBITDA, you have mainly 2 adjustments in it. The one is the sale of local assets, mainly real estate and other one is restructuring in your -- mainly in your plant network or if you have basically restructuring in your overhead, all these things basically shown there.
Okay. So basically, from your guidance for the operating EBITDA, you can deduct EUR 25 million to EUR 30 million to get from today's perspective to the reported EBITDA?
You're right.
[Operator Instructions] There are no more questions registered this time. I would like turn the conference back to Sarah Salchegger for any closing remarks.
Thank you, operator. Ladies and gentlemen, thank you very much for taking the time and dialing in today. Our next conference call will be held on the 14th of August 2024, where we will release our half year results for 2024. For today, I wish you a pleasant day, and goodbye.
Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.