Rockwool A/S (ROCKB) Earnings Call Transcript

Good day to everyone. Welcome to ROCKWOOL A/S' conference call regarding the results for the full year 2022. My name is Thomas Harder. I'm Director of Group Treasury and Investor Relations of ROCKWOOL A/S. Today, I'm pleased present CEO Jens Birgersson and CFO Kim Junge Andersen. [Operator Instructions] As a reminder: This conference call is being recorded. First, Jens Birgersson will go through our presentation and give you an update on the results for the full year and fourth quarter of 2022. Afterwards, we will be ready to answer all your good questions. Before I hand over the words to Jens Birgersson, I must ask you to notice Slide #2, which is the forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is Slide #3. Jens Birgersson, I will now hand over the words to you.

Thank you, Thomas. Good morning, everyone. If we look at the full year. We -- it was the third unusual year in a row. We have had -- and -- but when we look at the outcome, we are quite satisfied with that from ROCKWOOL, EUR 3.9 billion top line, up 23%; EUR 400 million in EBIT; and if we set aside the Ukraine provision, 10.6% EBIT margin. So considering where we were, at Slide 4, please, and we look into Q4, the background to that was a Q3 where we only had 6.2% EBIT margin and surging energy prices. And when we looked at our forecast in Q3, our challenge was to get the balance between the price and the surge in energy prices. Energy price did come down a little bit in Q4. We got, successfully, pricing up; and that gave us then a top line of about EUR 1 billion or EUR 955 million; and an EBIT of EUR 101 million; and more -- a more normalized EBIT margin around 10.5%. Obviously not up on the 12%, but considering the very extreme energy cost increases and that we reached 12% if we set aside the Ukraine provision, we are happy with that. I suspect we haven't -- I haven't checked the numbers, but we probably haven't delivered more EBIT in a Q4 actually and definitely not for the full year. What also happened in that quarter was that we saw how the construction market started to get impact as -- by the very high material prices, energy prices, interest rate and the general macroeconomic climate, so while we had very good growth starting 2022, a little bit less in Q2, in Q3 and Q4 we went into negative territories. While we were delivering that fourth quarter under profitability, we pulled down our factory capacity. And actually, in Q4, we reduced about 500 jobs in manufacturing and we pulled the capacity down to more normal levels. Remember, in Q2 and beginning of Q3, we were on extremely high capacity utilization. It should be said also that, that reduction of 500 factory jobs, we have that kind of as part of our system where we mix permanent employees with temporary employees, so it's something we can do. It's not easy but relatively easy, and we have done it many times over the last years. So outcome was good, but again we saw a slowdown. And when we spoke last, end of February, we were quite open with that. We see that the wider construction industry, especially in new build, started to decline in -- not every market, obviously. At the same time, we saw Asia waking up. And we saw Canada and U.S. in a pattern where, during the autumn, U.S. was down quite a lot and Canada still growing and that switching between the different months. If we go to Slide 5, full year sales. Not much to say about that but that, for the year, the growth was driven by Insulation, up 29%, more than EUR 3 billion sales. And the majority of that growth comes out of improved price. Slide 6, looking into the quarter. Most of the Insulation -- or the Insulation growth in that quarter is solely referring to price because we had volumes down and the slowdown. December was okay, not a disaster, not special in any way but also an okay December, but that's always a low month. If we look into the system division, where the growth stepped up a little bit: We saw basically Rockfon Europe, North America doing quite well, especially North America. Rockpanel generally had a good year straight through with good top line. Grodan, from a negative growth early in the year mainly driven by the situation in the U.S., came back to slight positive growth in Q3. And then in Q4, they were up on double digit. I still would say that it's too early to say whether we have turned the corner, but at least we had now 2 quarters, for quite a long time, where we had growth in Grodan. Slide 7, if we look into the regional development. In Western Europe, it was quite a uniform pattern with declining volumes but good, healthy price realization. So we basically had growth across Western Europe but obviously less than Q3. Eastern Europe did quite well in Q4, but Russia was down double digit, not triple digit but double digit. And that took Eastern Europe and Russia down to 2%. North America, up single digit around the 5% mark. And there, during the autumn, we saw U.S. quite stagnant or flattish and Canada still moving forward quite well. Asia, very good development outside China but China down some 20%, 30%. And that, we expect that to continue a bit more, but the Chinese economy and the construction market has not recovered. Again the size of China in ROCKWOOL -- this should be perspective. We are small in China, so it doesn't really make, have a big impact. Slide 8, energy pricing. And Q4 energy prices, if we take gas, we take electricity, we take coke, higher than last year, but we experienced an easing compared to Q3, so that was very welcome. In [ Q1 ], depending if you look on the forward price or the spot price, we would expect it to continue down for now slightly, but let's see what really happens as the quarter plays out. Slide 9, profitability, nothing much to say about that. Basically the margins came back in Q4 due to price compared to Q3. And we are back on the same level that we were a year back, so that was good progress. Price increases, from the beginning of the year, in most businesses has been around 25% to 30% year-on-year. And it's a little bit more because, Q4 1 year back, we had slightly lower prices than we brought toward the end of the year. Q4 profitability, same effect in the 2 businesses, a recovery back to more normal level. And it's basically due to price. Investments. We invested EUR 93 million, EUR 22 million into the sustainability investments. I come back soon to some of the results out of that. The big ones we are doing here is Flumroc in Switzerland where we put in a green melter, an electrical melter. We also added some Grodan capacity in Canada and Rockfon capacity in Poland. We plan to continue investing not only in the green transition but also in capacity and sustainability. Whatever happens this year in the market in terms of turbulence and challenges, we remain positive about the outlook for ROCKWOOL, so we are not easing off. Or that's not a plan. We will continue to invest in new capacity. Q3 (sic) [ Q4 ] cash flow, no comments, Slide 12. No comments to that really other than saying that there is not an increase in overdue payments or anything like that. The slight difference you see in working capital, that's basically inflationary-driven. It's the value of the stock and not the amount of the stock. So we have actually kept quite tight control of not building up too much stock when the volume dropped, so that was worked out. Slide 13, sustainability goal achievement. Back in 2016, before we had defined a science-based target, we set some sustainability goals up to 2030. And then we put in a halfway house goal. In most of the cases, we divided the goal 2030 by two and put it as a mid-term goal; and this slide represent what we achieved on that. So if you look at, for example, the CO2, this is not CO2 equivalent. This is just CO2 emitted per tonne or per unit stone wool produced. We have managed to reduce that by 17% already since 2016. That's very good progress and it's quite far beyond the target we had. And I would say, as we have moved along, we have learned quite a lot. And we have developed quite a few -- done quite a few technology developments that are helping us here. And for example, if you look at 2022, we took our Marshall plant in Southern U.S. from coal to gas. That also reduced the cost. And we did the same in Poland, where we transitioned one big line from coal to gas. That was at a higher cost because gas then, of course, went very expensive after we have done that, but for the sake of CO2, we still did it. And I remind you for -- of what we did in Denmark where we went to biogas, where we dropped CO2 emissions with almost 90%. So good progress on the CO2 intensity. And reclaimed material. Rockcycle is the concept. We call it Rockcycle. We have now launched that in 19 countries, and we had a goal to launch it in 15 by 2022. Generally I will say that program has gone from strength to strength. And there is quite a lot of enthusiasm about that, for obvious reasons. Energy efficiency in our own offices: And since we don't have so many white collar staff, it's not a massive impact on the environment, but we have traditionally not been great at insulating our own buildings. We have done about 17 offices now. And typically the reduction is about 80% when we do it, and we are on 39% reduction, so well on track, yes, to achieve that goal. We got a little bit delayed due to corona because it was very hard to renovate offices. We do this office renovation with quite a deep engagement of our own staff, yes, so we lost almost a year during corona. And in spite of that, we are ahead of the plan. And part of the reason is that the energy savings are a bit better than we expected, so quite happy about that development. Water. This is not -- or it's almost a free good. Water doesn't cost very much anywhere, but we have said we will reduce our water intensity. We are putting in closed-loop system, rainwater collection and all the rest. Most of these projects are, in a way -- I wouldn't say -- they're near to loss making because water is so cheap still. On the other hand, some of these projects have already helped us keep production running where notices come out that there's water shortage and all the rest. We become less and less dependent on the municipal water line into our plants. And obviously when a big consumer like we don't need to consume as much, it helps the community around us, so the 14%, I'm very happy with that number. Landfill waste. And that is what we don't manage to get through production and recirculate in the systems, any landfill from our factory sites. We have cut that by 50%, so far, and I think we should continue to get to 85% reduction. And obviously we don't mind getting there before 2030. And then on health and safety, we put that red. Yes, the lost time incident ratio is down. Also other type of incidents are down, but we had a fatality, so we still marked that red. We had a fatality in Poland last year, so although the overall statistics has improved, it's overshadowed by that person lost his life, from one of our lines. We have analyzed that very carefully and we are taking learnings from that, but we also have very big machines. And in this case, we had an employee that climbed into a machine that wasn't stopped. It shouldn't happen, but we are taking long and hard think about how can we ensure that no one climbs into one of these machines because it's obviously super dangerous. Then a little bit after 2016, we did then -- we committed to the science-based target. And the science-based target, just to remind you of the differences, that's an absolute emission goal. It doesn't matter how much we grow. And it's also CO2 equivalent, so if it's another gas and, for example, pure CO2, you have a multiplier on it. You know all about that, but we have set a goal to reduce scope 1 and 2, so that's everything inside the factory fence plus the electricity, by -- with 38%. And then by -- while we do this, we believe automatically a lot of the scope 3, everything outside the fence, will follow, but basically -- it doesn't look like much progress now, but if you go down and see what we are doing there and the fact that we have been growing quite a lot, I'm quite happy with those 4%. And we have also had the chance now to test some of the technologies. In terms of achieving this goal, basically every greenfield that we do now needs to come with more or less a zero CO2 emission footprint, so we need to put absolutely emission-free technology or close to it in all the new build. And we need to convert the plants we have. So the most recent one is Flumroc, where we have started a project to replace that melter. It's quite a substantial project that's happening as we speak, and that will drop the footprint because we feed the electrical melter with green electricity. Another example where we've taken action, we did a relocation of the factory in China. That wasn't really a relocation, but we got a big grant from the Chinese government to move, almost EUR 40 million. And while we moved, we then, of course, replaced all the equipment and put in electrical melter. So that has been done. And when we look at the next greenfield, where we're waiting still for the building permit, in France, obviously we are putting in an electrical melter that is running off green electricity. So that will reduce the footprint compared to if we do a traditional plant. So this work will have to continue, and obviously we will just stay on course with this. And you see the green part of the CapEx. That will have to continue. And we probably talk -- I haven't announced specific figures, but it's not cheap. You need to -- we plan for spending those EUR 100 million a year, roughly; and keep doing that for 10 years, at least. And it will take even longer than that before we are done, but we are aiming for our sustainability goals. And I'm very happy with the technologies we have in place now and the fact that we can make large-scale conversions, so all good about that. Then we get to the outlook, I guess, the main focus of today among some of you. We have said and we have flagged that we see the construction market go down. That is it is impacted by interest, inflation and war in Ukraine and what have you, yes. So we have seen a softening, so therefore, we have put the range up to about -- up to 10% drop from a very high level of the top line. Obviously it's very hard to forecast. And we have also allowed ourselves to play a bit with price, so volume is down, price, to work this so that we roughly maintain market share in this downturn that we see now. It hasn't at all changed our optimistic outlook. We see Germany putting money to renovation now. It's a plan of 30 billion in this year, not all insulation obviously. We see France doing it, Italy doing it. And there is a list of countries, but it's not happening very quickly. But the cooling off of the new build market might help as it frees up labor. So mix of ability to respond on price; and balance on capacity, price and margin, that will impact that 10%. And just because we say down to 10% is not that minus 10% is the more likely. I'm just saying it's very, very hard to predict here. And we have seen already during the autumn a slowdown and we had a record first half year last year, so I think those are the main reasons for that up to 10%. Then on the EBIT, we sit now with a situation that the energy prices are down. They are lower in Q1, that's our prediction, than in Q4, yes. And they are also lower -- potentially they could be lower than Q1 2022. So that's all good news, but we see a risk in that, that -- when China wakes up again, that energy prices will increase. If China's economic activity stays as low as it is now, then the risk of that is smaller, but fundamentally, how long can China be on extremely lower economic activity level that we see now? Other impact on the margin would be that we are -- we have reduced capacity, 500 jobs. We have reset the business on the current run rate. That's done. It was very quickly done, swiftly done, but on the white collar side we see a more moderate [ adoption ] to the downturn we see now. And the reason for that is that fundamentally we want to be ready for increased renovation rate and a market that gets into growth mode again. And we can't exactly say where it is, but our position now is to be a little bit careful with overreacting to the downturn in our muscle, our engineering muscle. We will keep building and all the rest; and then when we have a volume drop, not fully adapt on it on every cost but get ready for the upturn and keep investing. And then on the investment side, as I said, EUR 400 million, keep it on that level. And the first greenfield that I see construction work start on is most likely the one in France in the coming 2, 3 months or something like that. With that, I would like to hand over for questions.

[Operator Instructions] We have a question from Kristian Johansen with SEB.

Probably not so surprising, my first question is on your margin guidance. Can you maybe just clarify exactly this 8% to 10%, what the assumption on prices and energy costs are? So have you assumed your prices up or down year-on-year? The same on energy cost, is that assumed to be up or down in your guidance range?

Okay, I'm with you, Kristian. So at the moment -- obviously there are 3 impacts on the margin. It's the absorption, so to say, the amount of absorption in the factories, depending on the volume. And then it's the price and then -- and versus the energy prices. So what we have assumed now is kind of a picture where we said that we match roughly the price effect and the energy effect, yes, and that we see an absorption impact. And then we don't have an accurate approach to, when the price increase, if we will be -- the energy price, if it increase, that would be late again, so we are kind of not -- it's not our intention to dilute. If energy prices go down, our product pricing will go down, but we see also that we have a certain homework to just give ourselves a little bit of room to protect market share if it's needed. At the moment, we sit with high or slightly increasing prices in January, but we need to balance this with the volumes and the absorption. So it's between that, but I would say energy price and price, they should go a little bit hand-in-hand. But obviously, in some segment, we do less. Some regions, it's less, but there is some price element there adjusting with the energy price.

So just to clarify. So what you're saying is the same gross margin assumed in 2023 as you had in 2022.

That's a hard one because we had so many different gross margins in [Audio Gap]

I mean -- Kristian, Kim here. Gross margin is assumed to go up a little bit. The thing is that, as Jens said, we are holding back a little on the white collared staff, so we will have a -- you can say, a more fixed cost balance than the volume would allow for.

Great. So it's primarily the negative operating leverage which takes your margin down year-on-year. That's what you're saying.

That's the idea. And then there could be a competitive effect if we get with these volume declines in selected market that we need to defend market share. And then I want to have some strength for that in case that's needed.

Sure. And then that was actually just my other question here because -- I mean, what have you seen specifically which make you mention the need to defend market share so specifically? So have you already seen competitors be aggressive on price?

You -- I mean there are so many competitive dimensions here. You have pricing now into plastic foam, certain segments, some of the raw material prices going down that has been very high. So that might increase the competitive environment there. Then if you have a volume drop in some markets, you have some stone wool suppliers that then want to keep capacity. I mean we cut capacity immediately when we saw this and adapted it to what we feel is a good level, but you -- I mean basically in every year we see a little bit of that all over the place, but if the volumes go down, we certainly see it. And it can vary by segment. For example, in the new build segment at the moment, single-family houses new build, where -- it's not our main, main segment, but obviously the competition in there is tougher now because that is one of the main segments for glass wool. And they lose a lot of volume in some countries and then it also [ wraps over on us ]. So we see a mixed bag of that. And I guess my approach would be to say we'll -- as always, we believe we should keep pricing sound in relation to the costs position and for the product we sell but that we also will react when needed. And that's the approach. And yes, we're seeing some segments that it's happening, but it's hard also, so early in the game to see exactly what the reason is because -- for example, we have had years in Poland where, without the market changing that much, destocking can impact 2 quarters. So it takes a while to understand what actually happen on the end customer side. And we are in that process now. I'll give an example. In the U.S., there we had a couple of months last autumn where we had very low business volumes. We just stuck to price because we were convinced the business volume was down but that it was a destocking. We just stuck, and now the business is back up again. And we are doing further price increases because it was just a massive destocking that looked like a massive market decline, but it wasn't as dramatic as one would judge by the production volume. So we have this. We just need to navigate through. And it's not one recipe everywhere, but one thing is for sure. I will not sit with a high price and have a competitor that keep capacity up and just going to take my volume. Then I will respond, okay?

Absolutely. I will get back in line.

We will take our next question from Brijesh Siya with HSBC.

I will go back to that 8% to 10% margin guidance again. And if you could explain to us, what is changing between Q4 '22 to 2023 to suggest that 11.9% margin comes down to 8% to 9%? Because I'm coming from a point that the residential end market was remarkably weak in Q4, and that possibly is improving as we speak. Not that it's coming back to the original level, but it's still down but nevertheless a sequential improvement. And if you could just give, what's your volume adjustments within that by end market there.

Yes. So Brijesh, I don't give specific volumes, as you know, but I can give you flavor. I agree with you that the residential market came down in many markets. I mean Denmark and Sweden being prime examples which really stopped. So that, we saw, but what I've seen now is the project pipeline where we look into, say, flat roofs. You have the example of some of the data centers projects canceled. You have a famous example here in Denmark. You have Amazon where they had expansion plans. And they were not public in that respect, but we knew about them; and where you talk about 4.5 million square meter of projects, flat roofs that kind of are postponed or not happening or canceled. So -- and then you look into, say -- we take a country like Poland and -- has been an extreme, extreme high activity level, and what we look into now in Q2 is just fewer projects. So I would say you will see a bit of decline also in other segments happening because the economic outlook is uncertain, commercial business, nonresidential business. And then some of it, if you look into Eastern Europe and Russia, you see maybe Russia not improving either. It's not a huge effect, but it is a negative effect. So I would say you can add a few more segments on top of the residential. And then on the projects side, projects needs to be completed, but then you need new projects to come. So I look at the pipeline and the start of new projects, and it looks to be lower.

Okay, so what you are suggesting is that, the 15% to 20% volume decline you had in Q4, that is residential is majorly in Q4, but when we look into '23, would you say that the residential will be down double digit, and nonresidential also?

I'm not sure I said 15% to 20%, Brijesh, but I think we'll have a mixed bag going forward of that you have a bit tougher competition on flat roof. You have a bit more capacity. And you have new projects not coming to the same extent because, the economic outlook, it does not [ bit ] into the pipeline and there is just less in the pipeline. I should say, at the moment, it's not still on a level where we have sound production, but we definitely see that it has come down. But that's a -- I think, a short-term effect that we see now. We then want to bridge this into the next stage, which is [ where -- this ] labor capacity used for renovation and that some countries will use renovation and the green agenda to provide a bit of stimuli or reach the goals that the EU now has mandated for the countries. And that -- so I think we are talking about -- I don't know if this is a gap year or gap half year or a gap 1.5 years, but there's some sort of gap we are looking at. But overall, a little bit long term, you'll just take the next box in your spreadsheet or 2 boxes down your spreadsheet. I'm very confident about the growth.

Okay. Sorry to press on this: Would you say that your guidance for up to 10% is the [ most bearish ] you could have and, if anything, you could beat that?

We always have the spirit of beating. We look at each other in this team. When you look at what we did between Q3 and Q4 in all the countries and price realization, that was well done. We know we are agile and we know we can manage. Here we are creating room to -- what's driven by the construction decline, whatever that number is, I'm fine with it. I'm fine with that you have a decline, but I need to balance our muscle for the future here, if this is relatively short lived, with capacity reductions. Sure, we will reduce also fixed-cost overheads on that, but we'll be not going extreme on it because we are so optimistic about the future when this starts to grow again. So I think that's the main item, that the market size will define how much it is. And then there are some short effect that an extreme peak in energy pricing again can lead to a challenging quarter for us, so we need to keep in mind that, if we have 1 of these 6% margin quarters again because the energy market explode, that can also be a case that we know -- because we have decided again we are hedging only a fraction because we haven't found 1-year hedges. There are some countries where we have really good schemes in place. And we are much better positioned than last year, but on aggregate we see that it hasn't made sense again for us to hedge very much; and that means that we have that risk also. So we have been making a wide window so that we have covered most of them, and then as we move through the years, of course, we hope to improve the situation.

Okay, okay, fine. Then I guess you answered my first question about the 8% to 10% margin versus 11.9% because you are alluding to the fact that you will -- you are allowing your margin for a 6% EBIT margin quarter as well, right?

Yes, yes, yes. And then also to sum up: I mean we go into Q1. It's one thing what happens in Q1. We are, in a way, in a good place in a market that is declining, but then the rest of the year is just incredibly hard to predict. It's not like a 2% to 3% year that we had before, 2018 and '17. It's another one of these turbulent years we have ahead, and we have reflected that in the outlook.

We'll take our next question from Claus Almer with Nordea.

Also a few questions from my side. Jens, you said several times that you want to protect your market shares. If you look at the low end of your revenue growth guidance, does that imply a loss of market share? Or it is stable market share. That will be the first question.

Stable market share.

Okay, so you -- and as you said, foam products are enjoying cost deflation. So what would happen if they start to lower their prices? As you said in previous calls, there is a certain difference between a stone wool and foam where a client will start to favor one technology over the other.

We have analyzed that. And actually the vast majority of, for example, flat roof that we get, that has a fire component to it, non-combustibility component, so it's not a direct competition. There are buildings where both can work, but the segment we play, most of that, the majority of that, is with a fire component, so -- and it can vary between countries. In Netherlands, no one cares about fire properties. Germany, they do. Denmark, they do, et cetera, so it is a very, very scattered picture, but just because raw material prices goes down on [ peer and pro ], it doesn't mean that become crazy competition everywhere, where it's just price war. Because we are positioned differently, and we still adhere to that, that when we have the right product in the right segment, it should have a sound profit margin. And that's how we drive the business. I just created room in case we need it. And this stable market share, it's incredibly different -- difficult to measure precise market share in all the segments we are in, but roughly speaking, that's the approach.

Okay, that makes sense. And then you said you expect or you fear that energy costs could go up again when China picks up, so what about your hedging strategies? Have you started to hedge energy? Or you're still running on the spot market.

We have run -- obviously we are working on a strategy with PPAs, power purchase agreement. We have made some. For example, in France, the government came with a great approach and we tied that up for 2 years. Then on gas, we don't like hedging with the way the market done, but we have done a fair amount to just make sure that -- if it goes crazy on gas, that we numb the feeling. But our analysis at the moment is that when we simulate different -- for example, last autumn, we didn't hedge because our conclusion was it would have cost us maybe 40 million in the quarter. It turned out that we were right on that. So it's still the cost of a hedge, with this 1-year perspective as we see it now, still comes with a very high-risk premium. When we run hedging policies -- the last 10 years -- and you go a little bit longer hedging policy, a rolling longer hedging policy. It seems that the market works. It's no difference in the costs actually. You just have more stability, but we haven't found that sweet spot yet. And therefore, we have largely left it, except for some gas to just numb because we see that, if the gas goes crazy with China LNG in the autumn, we at least have numbed the effect of a portion of it.

We'll take our next question from Yuri Serov with Redburn.

Can you hear me? Listen: Going back to your revenue guidance [ then ]. There were -- there are people who are questioning you about your price assumptions. And from your answers, my feeling is that it's not really clear what [ price you're going to do next year ], so I presume that...

I -- we can't -- Yuri, we can't hear you on this side. You're breaking up.

Hold on a second. Can you hear me now?

Yes. It's better, I think. You [indiscernible]...

Yes. I was saying that there was questioning about the prices, and the answers you have given suggest to me that you're not quite clear what is going to happen to price. So let's assume that it's 0. So that suggests to me that, minus 10% revenue guidance, the majority of that, you think, is going to come from volume. [ Is that correct ]?

Yes, I think it's fair assessment. I, we have -- I believe that there is a good chance that energy prices are lower this year than last year, but you have the -- there might be other factors too, but you have -- the main one is the China effect, yes, that they open up and you have Asian pull on energy. So that's the main one that we have allowed us a bit of room for, but fundamentally I believe that, if that doesn't happen, energy prices should be lower. And there we said we hope. Our goal is that we match pricing with energy costs somehow. And the rest is the absorption effect and maybe some competitive elements here and there, but the absorption effect is the main one.

Yes, I understand, but going back to what you just said that you agree that the majority of minus 10% is from volume, to me that is quite extreme because in previous conversations you said that, during the global financial crisis, your total drop in volumes was minus 10%. And we are talking about a significantly milder recession now. And most people are actually not even seeing [ recession chances ], even in Europe. I'm just surprised that this is what you're assuming.

Yes, but I think the different -- a mild recession. The housebuilder says -- we might have -- we don't even have a recession in Denmark, but you have a super drastic negative impact on construction in Denmark. You're talking about somehow suppliers -- I have a friend who owns a house supplier, 1,000 houses a year. It's not Denmark. It's in Sweden. They sold 1 house in 6 months. So recession and GDP are linked to the construction market in certain segment. It's not the same levers, so I agree with you. Let's hope for a mild recession, if any recession. The German numbers now came up a little bit, so -- IMF even said Russia would be on flat this year. That might be the case. It could be worse, but in the construction market I see something slightly different. And how long that will be, it's hard to judge.

Well, that's still surprising because the global financial crisis was a construction-led recession and we saw how huge the impact was. And you're effectively describing something similar now, but I hear you. Listen: The other thing, about prices and competition. You have hinted a few times that competition is acute, especially in some segments, but overall it feels like it is. And again I remember previously, when you were telling us about price evolution in 2022, you were expecting that, from the beginning until the end of the year, the prices would go up by 35%, but today you just said that they actually went up by 25% to 30%. That means that in Q4 you couldn't really raise the prices, so can you just talk to us about that, [ please ], and then why -- insulation is a good industry. The capacity utilization is quite good. I mean it's falling, but it's high. And the competition seems to be quite acute.

Yes. I mean, Q4, we delivered all the price we wanted. And here is more a matter of comparison, Q4 '21 average versus the end year. So the price...

Average...