Welcome to H+H International 2024 H1 conference call. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press 5 star on your telephone keypad. This call is being recorded, and I will now hand it over to speakers. Please begin. Thank you, and good morning, and welcome to H+H conference call covering the first half of 2024. My name is Niclas. I am the Head of Investor Relations and Treasury. Joining me today, as always, our CEO, Jörg Brinkmann, and our CFO, Bjarne Thorsen. Yesterday evening, the half year report and related documents, including the presentation to this call, was put on our investor relations website. During today's call, management will present the annual or the interim financial report, after which there will be a Q&A session. Please note that this conference call is being recorded and will be made available on our investor relations website after the call. Before I hand the call over to Jörg and Bjarne, I would like to direct your attention to the disclaimer on page 2. During this call, the executive board may share future plans and expectations for our business that go beyond historical facts. These forward-looking statements rely on current assumptions, and therefore come with some risk and uncertainties, and as many factors could significantly change the outcomes. For more information about these risks, please see the 2023 annual report. With that, I'll now turn the call over to Jörg. Yeah, thank you, Niclas, and good morning, everyone. Thank you for dialing in. Please turn to page 3 for the key highlights in the second quarter, and I'm happy to share with you our first half outcomes and where we are managing through the current conditions. So let me start with a couple of highlights. In total, 4 things I really wanna call out here. Number 1, starting off with markets, and I wanna lead you to U.K. and Poland first. When you look into the results, we are happy to report that U.K. and Poland continue the positive trend from Q1 also into Q2, with both countries delivering double digits revenue growth, which is really encouraging for us to see. As a consequence of that, in both countries, actually, we are already in the process of reinstalling capacity that works in a different way. In Poland, it's more about increasing shifts and, yeah, output. And in U.K., we have taken the decision to ramp up our mothballed plant in Pollington again. So that was one decision we've taken last year to take that plant out of the network. We needed to adjust the capacity, but now with the positive, yeah, signs and environment we see, we believe it's the right time to bring Pollington I back into operations, which is encouraging to see. So yeah, two encouraging markets, opposite in Germany, unfortunately. The new big market in Germany is further going down, and that leads us to a situation where we can't see the effects of our business improvement program or the cost savings we have executed yet. So we're gonna talk about that a little bit later, but certainly this focus area for us, how to operate in Germany, and it's a market that is trending in the other directions than the other two. And then finally, I think also a positive outcome, you know, also in Poland, we have closed plants. One of these plants we have closed is the plant in Warsaw, actually at an attractive location, and so we were able to enter into a conditional agreement to sell this plant, and we're gonna talk about this a little bit in more detail. But certainly this will—it's still conditional, but if this is materializing, it will certainly improve liquidity and then also, yeah, have a nice impact on our financial gearing and get us closer to our long-term financial targets. So this is the highlights. When you look at the numbers, certainly the positive development in U.K. and Poland, you can see that in our sales volumes, which are growing compared to last year. That is encouraging. When you look into earnings, they are still impacted by the situation in Germany and also the fixed cost leverage this is causing. Bjarne will talk about that a little later. And then there's two special effects still in the first half and also in Q2, which is still unfavorable gas hedges, and then we've reduced our stock significantly, which had an impact on earnings. But as I said, Bjarne is certainly the better speaker to get you a little bit closer to what we are seeing here. And then finally, gearing is high. However, it's within our covenants, which is important. And then, as I said, given the better outlook into the second half, and then also the likely sale of that Warsaw land will certainly improve gearing also going forward. And with that, let's get a little bit closer to our key markets on page 4. Yeah, starting off with the U.K.. As I said, encouraging signs from U.K.. As a company, we are always looking into 2 major indicators to really get a view on where these markets are going to. 1 is building permits, or in U.K., it is building registrations. And then the other KPI for us is to follow the mortgage applications, so literally what private home builders are asking for to finance their new build programs. Both indicators going in the right direction since January. We're seeing month-on-month increase, which is really encouraging. And then you follow that there was an election in the U.K.. The new Labour government actually put new builds really in the center of their campaign with a clear target to build 1.5 million homes over the next 5 years. Still is a target, but it's definitely a very strong statement. And next weeks and months will show how this will materialize and what the programs will be behind it. In this environment, we are pleased to see a revenue growth of 11% compared to Q2 last year. And then as I said, and I just come from Pollington, so I was there Monday, Tuesday with the team. And so we were following the ramp up of the plant. So we are expecting to bring the plant back into operations in the fourth quarter this year, so that we are ready to serve the market, also from Pollington I plant, into 2025. From U.K. moving to, over to Poland. Also in Poland, as I said, very positive development, revenue growth in Q2, 36%, really remarkable. And certainly, we were talking about that in these calls here, certainly was boosted by the 2% loan program. A very simple, very effective program. I wish more governments in Europe would look into that and take this as an example. Certainly it was a triggering event to boost new build across the country. The thing is that this program has been exhausted. It was so successful actually, so that is the, let's say, the funding is exhausted. However, when we look at the underlying mortgage applications, we also see yeah, a better trending compared to where it was last year. And then also certainly the there's an order book actually, that will also hold into Q3, Q4. The Polish government is working on a successor program of that two percent program. Will not be exactly the same, so it is still a work in progress. The current expectation is that this will be something for 2025. We are following and observing it. Certainly, those support programs have a, have really an impact on new build activity, thus our business in those markets. And then in Poland, next to volume, I'm also pleased to see that we were able to gradually increase prices, which is, yeah, which is going in the right direction, and certainly after some correction in 2023, also a nice positive impact from Poland. And as I said, we are ramping up shifts in Poland, following the efficiency of plants. So really throughout the whole crisis, that is what we have done, making sure we're keeping the shifts in the most efficient plants, and that is what we're gonna continue doing so that supply meets demand. Germany, as I said, very positive outlook in Poland and U.K.. Unfortunately, Germany is going in the wrong direction, and that is leading us to a revenue loss actually in CWE of 25% in the second quarter, so really significant. The indicators in Germany are actually proving that. So we are seeing roughly 30% less building permits compared to last year. So, there's not a lot of activity going on. And when we look into what are the reasons actually for that? Actually, we are seeing three. The first reason is interest rates are still on a high level, despite the ECB correction, actually, there's nothing moving on the mortgage rates, which is having an impact. Second, construction costs are fairly high from, yeah, from really high regulation, especially towards the energy efficiency of buildings. That is the second driver. And then there's no effective government support programs in place. A lot of complicated programs, hard to understand for people, and that is certainly... This mixture actually is leading to a, let's say, holding position. The demand is high to build, but obviously it's a more clever strategy for people at the moment to pause and wait, and that is impacting our business, especially in Germany. Despite a challenging market, there are two things we are really focusing on. The first is that we're making sure to further increase sales prices. In the first half, we're seeing early early positive signs, but we need to go further steps, and that is why we've announced further price increases effective first of September this year. As I said, is needed to cover inflation and then also the cost to entertain that network of plants. And then also the cost side, we've delivered significant cost savings throughout the last one and a half years. However, as I said, with the lower activity, it's hard to see them coming through in the P&L. However, we are looking to further streamlining the organization, and making sure we're further adjusting costs. So that's really the focus, price, quality, and then cost, further cost optimization. With that, let me talk a little bit about the business improvement program on page 5. So yeah, what you can see here is really from the start of the beginning of the crisis, January 2023 to now, so one and a half years, being in that mode, actually. So this is what we have done. So when we started off, 32 plants were operating almost full steam. So we've adjusted that. Today, it's 23 operating plants, 4 of them are mothballed. One of them we're gonna get back, is the Pollington one. So, from next year on, there will be 24 being in operations. But a significant adjustment of our plant network certainly helping increasing the overall efficiency in the network. Then second point is really the stock, and here you can see the effect compared to last year. So last year, we were really significantly increasing stock. End of Q1, we had a stock which was three and a half months, which is way too much for our company. So we brought that back to one and a half months overall, which is in line with our target. So that is normally what we're having. So, that exercise is done, and yeah, was our major focus for the first half of this year, and I'm happy that we brought them back to normal levels. Then certainly for adjusted fixed cost of the company, with lower activity, that was an important exercise. So you can see in Q1 last year, we were still operating on DKK 250 million of fixed costs in our operations. And as we speak, we're looking to a more 200s number. So it's a DKK 50 million savings on quarter, DKK 200 million annualized actually. So significant adjustment of our fixed cost base, which was an important exercise. And yeah, that came along with definitely letting people go. It was hard, but without alternative. So, today it's 1,000 people working for us. And then a little bit more qualitative here, but we've also used and changed the way we're operating. So, last year, Q1 was a lot of individual plants, right? And now we're looking into it more like a network of plants, really making sure we're managing overall capacity and then the supply of the market, following the margins and making sure we're keeping the margins of the network instead of optimizing individual plants. Also, throughout the year, we've upgraded the plant in Borough Green. I mean, we've done things. This plant is our biggest plant now, and, yeah, that will operate on 20% higher capacity also going into next year, which is, which is positive. And so, yeah, there's a lot of stuff happening in the network. And, we've used, the, let's say, crisis to also improve the way we operate. And with that, I will now turn over the call to Bjarne, who will, update you on our financials and add a little bit more color on what I explored here. Bjarne? Thanks for that, Jörg, and good morning to everyone on the call. I will take you through the financials, and we can start with the volumes and the revenue on page six. Before going into the details, you will, you'll hear me repeat a number of the messages from previous quarter because there's a lot of the underlying structures that are the same. If you start looking at the volume and top-line development, it is, based on also what Jörg explained, driven by Poland and the U.K.. Also, compared to last year, there is a country mix effect that becomes, in particular, visible when we look at the organic growth. So despite a 8% volume increase, we know that prices have been is trailing behind last year, in line with plan. But then on top of that, we have this strong country mix, where we are selling more volume in Poland, which is the lowest priced market in our network, and then with less sale in in some of the other markets with higher prices. So that is what is driving the organic growth into negative territory. Then if we move on to page 7, we have our gross margins, and just like in the first quarter, they are again impacted by gas and by destocking. The gross profit is at DKK 132 million in this quarter versus DKK 178 million last year, and gross margin is 18% versus 24%. But there are two these two effects we need to take into account. During 2024, we have destocked around DKK 200 million, and with that comes that we have the indirect production cost that was sitting in stock at the beginning of year, together with depreciations, also sitting in stock, flowing into the P&L this year and significantly reducing our gross profit, as we still have the fixed cost sitting in our P&L this year. With the, let's say, normalization, our stock levels like Jörg referred to, around one and a half months, on average, then we're in a position now where our destocking project has come to an end. So for the second half of the year, the balance between sales volume and production volume are more or less in line, so there won't be this impact in the gross margin for the coming quarters. Additionally, we have, in the first half, had impact from the unfavorable gas hedges from the past. That has also impacted gross margin, and again, we have sold out the remaining inventory that has been produced at these excess costs. So going forward, there will not be any impact in the P&L from the gas costs. We still have a cash flow impact from it, but we leave that for later. So the overall message is that despite the headline number for the gross margin is low, we understand the difference between now and last year, and we also are confident that going forward, we'll be within the range that we have been operating in within the past. If we move to the next slide, which is slide number 8, we have an overview of our restructuring costs and special items. We had DKK 13 million restructuring costs in this quarter. It is supporting the optimization of our CWE region. As Jörg explained, we will have to do further as the market has deteriorated more than anticipated. So in addition to what we already have announced, we expect to use additional restructuring costs in CWE for the remaining part of the year, and that will be treated as special items. Then we have the gas settlement, also as special items, that is all settled in the first quarter of this year, but impacting the total for the year. That will, to a large extent, be offset by the expected sale of the land in Poland. The transaction as such will be treated as special item. In Danish kroner, the sales price is around DKK 190 million, and we expect a net gain from the transaction in the region of DKK 140 million-DKK 150 million, and it's all settled in cash. So it won't impact our full year guidance, but it will have a positive impact on our debt situation. More on the debt situation on the next slide, which is slide number 9. On the left-hand side, we have a bridge from when we entered the quarter with a little bit more than DKK 1 billion in debt. We have a positive EBITDA in the quarter, and we have positive net working capital impact. Then we have payment of provisions, which is predominantly related to the old gas contract, but also some pension payments, and then some CapEx and some interest payments. So we are still around DKK 1 billion in debt, but trending in the right direction. If we look at the financial gearing, that has increased from last quarter, but all in line with plan. And the reason for that is that we, in the second quarter of last year, had a stock build, and we did not have any gas costs in the P&L. So when we are on a running 12-month basis, make our EBITDA, it is worse on this last 12 months than it was in the previous quarter. But as mentioned, with the expected improvements on our gross profit in the quarters to come, it will improve our debt situation. Everything is in line with our bank covenants, and then we expect the financial gearing to be boosted with the cash proceeds from the cited sale of land in Warsaw. With that, we move on to page ten. That is on our outlook for the year. We have updated that and narrowed it. Our original guidance on organic growth was minus 5%- 5%. We've narrowed that and say now it is around 0%, and on EBIT, before special items, our original guidance was from DKK 50 million to DKK 150 million, and we've narrowed that to DKK 50 million-DKK 100 million. That is driven by the situation in Germany, where the market is performing to a less extent than expected, and then the financial impact from the closure of the Borough Green plant during July this year. And as mentioned before, the sale of land in Warsaw will be a specialized item, so it won't impact our guidance. With that, I'll hand over to Jörg, to do his final remarks before we do Q&A. Yeah, thanks, thanks, Bjarne, for elaborating on the financials. And, yeah, let's turn to page 11 for key takeaways. So again, encouraging signs from U.K. and Poland, with double-digit growth in both countries. So that is certainly encouraging, going in the right direction, and also supported by the, let's say, political environment to really help developing the new build market, which is needed, actually. So that is good to see. The second really encouraging piece is that we are back in the process to reinstall capacity. I think it's the right thing to do to reopen Pollington I. So we did a careful decision here, but all the indicators and signs proving that this is the right thing to do. So it's exciting to see to bring that plant back into operations after having closed so many plants, actually, over the last six quarters. And then, yeah, definitely Germany, it is a challenge. The market is not recovering. New build activity is on a really low level. And yeah, despite we've done really a lot of cost savings and business improvement, we are not seeing the effects yet. And also, we are in the process to execute further of those measures to really yeah cope with the situation. But then, as Bjarne said, certainly that likely land sale in Warsaw, that is, I think that is a positive outcome and will improve the cash and then the gearing with a substantial value of DKK 119 million. That is definitely meaningful for our business. Yeah, and with that, let me open the call up for questions. Thank you. Now, if you do wish to ask a question... If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. We will have a brief pause while questions are being registered. And first up, we have Sebastian Growe from BNP Paribas Exane. Please go ahead. Your line will now be unmuted. Good morning, guys, and thank you for taking my questions. I have a few, and I'll just take them one by one. First question is on the gross margin here. So, reported gross margin was around 18%. It was 17% in Q1. And last quarter, Bjarne, you stated that the underlying margin performance was seven percentage points better than the reported, i.e., when you adjust for both the destocking effects and the gas hedges. So, could you maybe update on what's the underlying margin performance here in Q2, i.e., adjusting for both destocking and gas hedges? That will be my first question. ... Thanks for that, Sebastian. As I mentioned initially on my part, it is a little bit of a repetition because the underlying impact is on the same level. If you roughly do the math, you will see this destocking of the DKK 200 million in, that's for the first half. We know, roughly speaking, that around a third of our costs are indirect production costs. So as I say, they are sitting there with a double impact. So roughly speaking, that has a value of around DKK 60 million, and then we know for the first half, the gas has been in the region of the DKK 30-something million. So when you adjust for that, you get into this 24%-25% range as the, let's say, clean gross margin impact if we adjust for these events. Okay, that's very clear. And you also stated that you're aiming to operate in at a gross margin range as you have done in the past. And I mean, the past, you've operated at a gross margin of up to 30%. So is that... Should we think of your gross margin trajectory towards a 30% margin, or is it- should we think more of it as a H2 2022 margin, i.e., around the 24%-25%, or what should we think of it going forward? If we take it, let's say, in a little bit longer time perspective, the 25%-30% is definitely our aspiration to be within over the cycle, where the 30% is where we really have the tailwind also from the pricing, where you have the underlying momentum in the market. In a situation like this, where not all markets are performing, and particularly in Germany, we see this need for further price increases. There, let's say, the 25 is, let's say, our aspirational baseline gross margin, and then we need to develop it step by step by that as the markets improve. Okay. Okay, that's fair. But I mean, on the gross margin, in the little longer term here, so 30% you say is around peak cycle. But I guess with considering the restructuring efforts that you have done here over the past years, shouldn't the sort of the base case be higher than the historical base case, given the restructuring efforts? That's of course our aspiration, but it also depends on the cyclicality and the way the market moves, because there are these times in the cycle where we get this pricing momentum because there simply is a shortage. And there should be some quarters where we are above that, but let's say, to smoothen it and simplify the story around the corridor, it would be the 25-30, but definitely there should be some of the peak quarters that are above the 30. Okay, got it. My next question is on the SG&A base. So a bit puzzled here, it was up from last quarter despite the restructuring efforts. So can you expand on this? What is the dynamics here, and what should we think of sort of the SG&A base going forward, in absolute terms? There are some one-off effects, you know, through the quarters. There's always some phasing, depending on when there are some certain marketing activities, and so on. Mm-hmm. But the cost we've taken out, it is in this runway region. You need to see it going forward. And also, there will be some further restructuring, as we have announced, but it is more, let's say, to make sure that the costs are under control. The real benefit to drive the overall performance of the business will come above the gross margin line. Okay. Then on the capacity adjustments. Now you're turning up the capacity here in Poland, you increase shifts, and you state that in U.K., you are reopening the Pollington factory. So can you expand a bit more on the decision here to reopen this factory? Does it mean that you're currently running at more or less 24/7 in your existing factories, or what should we think of sort of the current capacity utilization, given the fact that you're choosing to put in sort of what seems to be significantly more capacity? So essentially, the strategies throughout the whole crisis was to keep our really high, efficient plants up and running, right? So throughout the whole situation, our plant in Borough Green, so the one close to London, was always operating 24/7. And so, the Pollington II, you know, we have two plants there, as we speak, is also running 24/7. So that leads us to a situation where we are in a situation where we need to reopen that Pollington I plant, right? The real advantage we have is, it is two plants, but on the same site. So that means we can manage shifting resources from one to the other. So we still have the knowledge also on the ground, so which is... It makes it a little easier actually to ramp it up, right? And then also to balance out the shifts, so that literally from the location, Pollington I, we meet exactly the supply we need to meet the demand. So that is the situation there. Okay. And what is the cost of ramping up a factory like Pollington? The total cash effect out will initially be close to GBP 1 million. Some of it is also restarting equipment and so on, so some of it will be capitalized. So for the impact for the year, we expect to be around zero in as a P&L effect, because we'll start selling out of the products we produce in the fourth quarter. And so that comment—does that should mean that you are currently sort of undersupplying the market from the existing point on, given that you are able to sell out more incremental from the new? Is that the right way to hear it? Okay. Yes. And it has two impacts. It has, let's say, our sale is depending on production running to schedule. And secondly, it also means that we are driving products a bit further, so the distribution pattern are not optimal, before we get that factory up and running. Okay. And then just last question. Oh, sorry, sorry, just go ahead, Jörg. It's also important to understand is that this destocking, right, also happened in the U.K.. So we were serving the market this year with a yeah, in the first half, by destocking our yards. And so going to next year, actually, we'll be starting on a significantly lower stock base, right? So that is, that is why, yeah, you need to put that into the equation. Yeah. Yeah, I got it. And then last question on sort of you update or you narrow your guidance towards the lower end. Maybe you could expand a bit on sort of your assumptions behind the current guidance and then sort of your visibility on the H2, and sort of how comfortable you feel about achieving this updated guidance range. Yes, as mentioned, there are two things driving it. We had the Borough Green event over the summer, where we simply lost a little bit more than a week's production. And with having already destocked, it had financial consequences. And then, of course, with the market situation in Germany, we are taking a more cautious approach. We have announced these price increases from first of September. There's of course always the day-to-day battle in the sales challenge to get it through, but we have a firm resolution on doing that. The Polish market, we continue to see being strong, so we are confident that they will contribute with their share. As I mentioned, for the U.K., it is about making sure production runs to schedule, and then we have a visibility among the house builders that makes us confident that we can meet the guidance. Okay. That's very clear. Thank you for taking my questions, guys. Thank you. As a reminder, if you wish to ask a question, please press five star on your telephone keypad. As there are no further questions, I'll hand it back to you for any closing remarks. Yeah. Thanks, everyone for dialing in and, yeah, looking forward to see you, soon. Bye-bye.