1 July 2015, 13:58
Dear shareholder, As the new CEO for the ROCKWOOL Group, it is a particular pleasure to address you, our shareholders, for the first time in this publication.
I have deliberately devoted almost all of my time since I started at ROCKWOOL on meeting customers, understanding the competitive space and visiting our operations and employees in Europe, Asia and North America to get their view on our strategy, strengths and weaknesses. Even though many things are still new to me, I am beginning to understand our business, the industry and the context we act in. The honeymoon is officially over and it is time to focus on taking the business forward.
Our recently published first quarter results illustrate some of the challenges we have.
Our sales in the first quarter grew 3.1%. This is a good figure given the relatively low economic activity in the Western European economies where we have approximately 60% of our sales and the challenges in Russia.
We did see signs of recovery in a number of markets in Northern and Southern Europe but the core of our European operations in Germany and France are still struggling. Contrary to expectations, the new German legislation for increased energy renovation was once again postponed. France on the other hand has passed a strengthened energy renovation legislation which may inspire other countries to do the same. The increasing global environmental challenges require improved Energy Efficiency and Sustainability and this will remain a solid long term macro driver for our excellent stone wool products and solutions.
Outside the EU, we saw mixed market activity. The uncertainty in Russia remains and we expect the market to remain at a low level for a foreseeable future. We have four factories in Russia and it remains one of our key markets. North America is, at the moment, our main engine for growth with strong double-digit growth and a new factory. Our US factory is improving after a difficult start-up.
Our challenges are bigger when we turn the attention from the topline to the bottom line. Our operational EBIT margin was 5.2% in the first quarter which in my opinion is too low for this type of capital intense business and also below last year. There is a striking difference between our traditional building insulation business and the business areas gathered in our Systems division. The System businesses turned in a stellar performance during the first quarter with the bottom line increasing by 39% in the first quarter on a top line that increased 13%.
Apart from continuing to drive profitable and sustainable growth in the System business it is a key priority to address the profitability of the insulation business. We have embarked on a business review which we want to conclude during the second half of 2015. Our aim is to identify a few tangible levers that we can focus on to improve the insulation business performance. More to follow in this context during the second half of the year.
I want to emphasise that the review exercise should not be seen as a strategic revolution. We stay firmly committed to our strategy to be the global leader in stone wool and we will stay true to our core and continue to develop stone wool solutions to address the challenges of the world.