Wienerberger Strategy CEE Outlook on FY 2007 / 2008 Johann Windisch, COO Content Wienerberger growth into CEE Economic environment in CEE CEE Countries A detailed view Semmelrock Outlook on CEE 2 1
Growth into CEE in Concentric Circles Hungary: 90 Czech Republic & Slovakia: 92 & 93 Poland: 94 Croatia: 96 Slovenia: 99 Romania: Estonia: 03 Russia: 06 Bulgaria: 07 3 Strong Track Record in the Past Market entry with own production 1990 Hungary # of plants today 23 Thereof brick plants 13 1992 Czech Republic 22 10 1993 Slovakia 6 3 1994 1996 Poland Croatia 19 5 14 1 03 06 1999 Slovenia 4 2 2003 2006 2007 Romania Estonia Russia Bulgaria 5 3 1 1 2 2 1 1 94 92 93 90 99 96 03 07 Wienerberger plants Wienerberger export markets Baltic States, Ukraine and Bosnia 4 2
Hollow Bricks in Eastern Europe a Traditional Product 100% Market share of bricks as % of walling materials 80% 60% 80% 80% 70% 60% 50% 50% European average: 60% 40% 40% 20% 0% Croatia Hungary Slovenia Czech Rep. Slovakia Romania Poland Source: Wienerberger rough estimates; Note: weighted average 5 Why Could We Grow So Fast? Growing economies emerging markets Stong brick tradition and increasingly Western oriented Outdated existing local structures: - Management skills and roll out - Inefficient plant sizes and assets new technology - Low quality of bricks introduction of industrialized products GDP real (yoy in %) 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 2007 2008 2009 Russia BUL PL CZ ROM HUN Growth potential for developed products 6 3
The Economic Situation in CEE Good skilled and highly motivated people Investments are a key driver for growth / large share of FDI Improving labor market supports consumption and confidence Economies benefit from EU accessions 7 Current GDP/capita Levels in Eastern Europe Indicate Pent-up Demand GDP real per capita 2006 (in TEUR) 37,00 33,00 Ø Western Europe at 32.0 29,00 25,00 21,00 17,00 Strong growth potential throughout the region 13,00 9,00 5,00 1,00 SLO CZ HUN SK Baltics CRO PL RUS ROM Serbia BUL BiH UKR Source: WIFO Austria, CEE Research BACA 8 4
Current Housing Start Levels in Eastern Europe Offer Long-term Potential 8,0 Housing Starts per 1,000 residents, Forecast 2007 7,0 6,0 5,0 4,0 Growth potential Ø Western Europe at 5.1 (excl. Spain and Ireland) 3,0 2,0 1,0 0,0 * * A CZ PL SK HUN ROM BUL CH I GER F B SCAN NL UK USA Central-East Europe Central-West Europe North-West Europe North America Source: Euroconstruct June 2007 * building completions 9 Growing Mortgage Share Provides Potential for New Residential Construction 41,0% 36,0% CAGR 2006-2009 38% 68.7% 37.1% 27.4% 23.8% 23.2% 11.8% figures in % = mortgage share of GDP 31,0% 26,0% 24% 21,0% 16,0% 11,0% 6,0% 1,0% EUROzone 1,3% 7,2% 7,3% 11,5% Austria Russia Bulgaria Poland Czech Republic 2,4% Romania 11,4% Hungary 10 5
Growth Potential in CEE Strong pent-up demand for housing Demand for developed brick products Good skilled and highly motivated people New technology Efficient local management 11 CEE Countries - a Detailed View 6
Hungary One of the Most Mature Markets Key data: - Area: 93,033 km 2 - Population: 10.1 mill. - GDP p.c. ( 06): 8,900 - Housing starts 1) ( 07): 3.48 1) Per 1,000 capita 13 Hungary Market entry 1990 Wienerberger growth: - Strong brick market (market share today: >80%) - Growing housing market Building up market position and consolidation of the market Due to fiscal policy (increase of taxes) slow down of housing market Exports to Romania, Bulgaria and Ukraine in 2006/07 Revenues in mill. 115 106 102 89 92 68 2001 2002 2003 2004 2005 2006 2007e 14 7
Hungary 2008+ Market: - Slight recovery of domestic market - Shift in demand to value added products Wienerberger: investments in value added products - Market penetration with planed bricks (adjustment of 3 plants) - Uphold exports (to Bulgaria, Romania and Ukraine) 15 Poland One of the Largest Markets Key data: - Area: 312,685 km 2 - Population: 38.1 mill. - GDP p.c. ( 06): 7,100 - Housing starts 1) ( 07): 4.20 1) Per 1,000 capita 16 8
Poland Rebound in 2006 Market entry 1994 Wienerberger growth: - Growing housing market - Establishing industrialized products After a slump in 2005 strong market growth in the last 2 years Today: strong market position with further growth potential Revenues in mill. 152 102 110 78 65 54 2001 2002 2003 2004 2005 2006 2007e 17 Poland 2008+ Market: - Pent-up demand as driver for the housing market - Lack of skilled workers Wienerberger: investments in all product areas planned: - Hollow bricks: extend capacities by 30% until 2009 (extension Lebork and Tobre Construction of Olesnica project pipeline for further plants) - Facing bricks: extension of Torun plant (double capacity) Total investments: 60 mill. 18 9
Czech Republic and Slovakia Key data CZ: - Area: 78,867 km 2 - Population: 10.3 mill. - GDP p.c. ( 06): 11,100 - Housing starts 1) ( 07): 4.46 Key data SK: - Area: 64,589 km 2 - Population: 5.4 mill. - GDP p.c. ( 06): 8,100 - Housing starts 1) ( 07): 3.86 1) Per 1,000 capita 19 Czech Republic and Slovakia Market entry 1992/1993 Wienerberger growth: Revenues in mill. - Strong brick markets (market share today: 50%) - Growing housing market, pent up demand Strong market positions 96 112 134 143 149 173 Housing markets on good levels 2001 2002 2003 2004 2005 2006 2007e 20 10
Czech Republic and Slovakia 2008+ Markets: - CZ: solid development of the housing market - SK: growth potential triggered by heavy FDI Wienerberger: investments in hollow bricks and value added products - Construction of hollow brick plant Hodonin at the CZ/SK border to serve regional markets (scheduled begin of 2009 capcity: 140 mill. NF, investment: < 25 mill.) - Increase market penetration of planed bricks 21 Russia Key data: - Area: 16,995,800 km 2 - Population: 142.2 mill. - GDP p.c. ( 06): 5,500 - Unemployment rate: 6,9% Key drivers for growing economy: - Budget surplus - Natural Resources - Growing FDI - Increase in Exports - Energy 1) Per 1,000 capita 22 11
Large Market Potential in Russia Through Regional Areas and Migration to Cities Potential due to: - Growing middle class - Renewal Renovation - Migration to cities Living space per capita in sqm Russia 21 European average 40 USA 66 23 Federal Program for Affordable Housing as Growth Driver Started by Putin in 2005 Very ambitious (double construction of new living space per inhabitant within 5 years) Strong driver for housing market Construction of New Living Space in mill. m 2 41,0 36,4 33,8 43,6 50,6 57,9 65,3 72,6 Target communicated by the Russian government 80,1 2002 2003 2004 2005 2006 2007e 2008e 2009e 2010e Source: UBS Research 24 12
Russia Is Not ONE Market Not ONE market but several regional fast growing areas: - Moscow and surroundings: 17 mill. inhabitants - Rostov & Krasnodar: 9 mill. inhabitants - Tartastan & Barschkortostan: 9 mill. Inhabitants Regional areas are centers of economic development and growth 25 Russia 2008+ Market entry in 2006 with the first plant in Kiprevo (Moscow area) Accelerated investment in hollow bricks until 2012 - Currently 2 hollow brick plants under construction (extension of Kiprevo and construction of Kazan until second half of 2008 - Plan to build 6 more plants within the next 5 years in the fast growing areas Investment approx. 250 300 mill. 26 13
Ukraine Challenging Environment Key data: - Area: 603,700 km 2 - Population: 46.9 mill. - GDP p.c. ( 06): 1,800 - Housing starts 1) ( 07): 1.9 Local organisation in place Market served via imports from PL, HUN and SK Construction of greenfield plant 1) Per 1,000 capita 27 Ukraine 2008+ Market: - Difficult legal environment - Pent-up demand for housing - Only small brick formats available Wienerberger: market entry by greenfield project - Start of construction of a hollow brick plant scheduled for 2008 - Challenging environment 28 14
Semmelrock Semmelrock Strong Growth Revenues CAGR: 22% EBITDA CAGR: 32% 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 30 15
Strongly Growing Company in CEE Founded by Wolfgang Semmelrock in 1958 Since 1996 a 75% subsidiary of Wienerberger AG Market leader for high-quality concrete pavers in CEE International presence with 14 plants 2007 and the Future Goal is to increase position as the leading supplier of high-quality concrete pavers in Central-East Europe: Investments of more than 45 mill. in growth projects from 07 09 - Expansion in existing markets and development of business in new countries - Increase production capacity in CEE by 50% and strengthen market positions Stronger presence in growth market Poland Expansion in Croatia and Romania plus market entry in Bulgaria 32 16
Outlook on CEE 33 Strong Revenue Growth in Central-East Europe Segment Revenues ( mill.) CEE CAGR: 16% Consensus 828 607 345 397 455 490 503 2001 2002 2003 2004 2005 2006 2007e 34 17
and Even More Impressive EBITDA Growth EBITDA ( mill.) CEE CAGR: 18% Consensus 223 108 127 142 137 158 82 2001 2002 2003 2004 2005 2006 2007e 35 Outlook on Building Material Markets 2008+ Mature markets with further potential - CZ, SK, HUN, SLO Strong long-term growth potential in - PL, ROM, BUL and Ukraine: due to pent-up demand for quality housing and increasing wealth Strong growth in Russia, due to governmental focus on residential construction Long-term growth trend with ups and downs 36 18
Wienerberger CEE Strategy 2008 Central-East Europe - Expansion of capacity mainly in Poland, Bulgaria, Romania and Baltics - Development of market position in Balkan states - Market entry into Ukraine Russia - Further capacity expansion through extension of existing and construction of new plants in Kiprevo and Kazan 37 Planned Growth Investments 2008-2012 Focus bolt-on program in CEE: - Approx. 25 new hollow bricks (HB) plants in Eastern Europe until 2012-8 new HB plants in Russia - 17 new HB plants in Eastern Europe, mainly Rumania, Bulgaria, Poland and Ukraine - Massive increase in capacity (nearly doubeling from 4.0 bn. to 7.0 bn. units) - 6 new paver plants in Poland, Croatia, Romania plus market entry into Bulgaria (investment > 45 mill.) 17 8 38 19