Ladies and gentlemen, welcome to the ROCKWOOL A/S conference call regarding the results for the first nine months of 2022. My name is Thomas Harder. I am Director of Group Treasury and Investor Relations of ROCKWOOL A/S. Today, I'm pleased to present CEO Jens Birgersson and CFO Kim Junge Andersen. For the first part of this call, all participants will be in a listen-only mode. 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 first nine months and third quarter of 2022. Afterwards, we'll be ready to answer all your good questions. Before I hand over the words to Jens Birgersson, I must ask you to notice slide two, which is the forward-looking statement. Please be aware that this presentation contains uncertainties. Now we are ready to the next slide, which is slide number three. Jens Birgersson, I'll now hand over the words to you. Good morning to you. We will go through the deck, not every slide. Some of the slides are not so interesting. We will hand over to questions as soon as we can. If we look at the year-to-date numbers, it's a nice top-line development, but we have seen volumes declining. We still have a volume growth in that 27% sales increase. Moving down to the EBIT margin, just to sum up a little bit what has happened this year, we started out Q1 with where we were taken by surprise, I will say, a ramp-up of inflation. Although the top line was okay in Q1, the bottom line was not. We have this lead time on passing prices of six, eight, sometimes 12 weeks, some OEM businesses or even six months. In those days, it was a year. Now we changed some of those contracts. We have a challenging Q1. We corrected that, and then we had a really good Q2 where margins were back, and it looked in balance. We predicted that the summer wouldn't be so dramatic on energy and inflation. Towards the end of Q2, we saw that something is about to happen, we got back into the office, and we started to raise prices. Those prices we put into the market there had the usual lead time. We knew that depending on how bad Q3 would be in terms of inflation, including energy, we couldn't do much about it. We could impact September, we couldn't really impact July and August when we were at the end of June, when we started to see the curves pointing up on all the costs. That was kind of the... how the year has played until now. Looking at the net profit, down EUR 61 million. Actually, that profit is quite stable if you take out the unrealized exchange rate loss of EUR 57 million or EUR 60 million. That has held up. Free cash flow is down. What are the reasons for that? Fundamentally, it's networking capital that has increased, and a lot of it is growth driven. It's also the inventory valuation that is up quite a lot. It's not a volume increase in the inventory, it's a value increase. We have actively actually managed volumes down a little bit in the inventory to make sure that doesn't go up. Also trade receivables, obviously, with the sales increase is up, but not overdue. Nothing that surprises, we'll say. Going back to this situation before I comment on the Q3 numbers that you have all seen. At the end of Q2, we started to see slide four. If you look at June, the gas prices started from mid-June to just skyrocket. In some markets, for example, in France, we had EUR 1,500 per MW hour. Compare that to, you know, per kilowatt hour that you buy at home, you know, 15 EUR per kilowatt hour, where most of you are used in the last 10 years to pay maybe EUR 0.20 to EUR 0.50 at the most. I mean, it's extreme. Extreme. Why did that happen? We have been digging quite into that, and as you are aware, the last 10 years, probably the optimum strategy for us was to never have hedge. We have gone back and looked at it. Would we have done better with hedging? No, we wouldn't. Anyhow, we came out of that, so we sat pretty much unhedged into Q3. The main factors for why the price spikes was obviously the Ukraine War and the gas story, also that the governments and municipalities keep buying gas for storage no matter what the price was. With the way the pricing mechanisms work, where the last generated kilowatt-hour sets the price for electricity, that of course contributed tremendously, not only to the gas price, but also to the electricity price. Possibly the biggest effect is the margin call aspect of when you sell electricity, the ones selling, even though they have a low production cost, need to cash up in case there is a margin call. That limited the output in the market. We have met electricity generators that sat with the price of EUR 800 in the market and didn't sell electricity that cost EUR 50 to produce for the reason of that they didn't have cash to put in to protect against the margin call. You had the French nuclear that was down more than 50%, still is down, also the hydropower depletion. There's all these factor play together, and I think some of those factors have disappeared. The margin call aspect has, in some places, been mitigated a bit with governmental guarantees and also in some extra different payment conditions for energy customers. What were the numbers in terms of inflation? We saw inflation up of 74%. Obviously, energy was the massive part, but also other materials, for example, binder was up 60%. If you put that 74% in contrast to, say, Q2, we talk EUR 55 million-EUR 60 million jump in cost, in inflationary cost, just between Q2 and Q3, and we simply didn't have that in the price of 29%. Quarter on quarter, year- on- year, Q3, almost EUR 200 million. That was dramatic. We still came in after that, thanks to September, that was a little bit better. We still managed to get year- to- date, about 10%. I come back to the guidance yesterday. With then the uptick and the new pricing coming in and a slight calming down on the energy market, we still then are quite happy with that the guidance can be maintained. We haven't changed the top line and the bottom line guidance. Obviously, without this quarter, we would have been more towards the top. Yes, we didn't want to only earn EUR 68 million, as you see on slide five, but nevertheless, we can maintain the guidance. If you then look at Q3, yes, volume is down 7%-8%. We see a slowdown, especially in new build. We see companies, for example, like Amazon, canceling or postponing very big projects in Europe. I think generally we have a downturn. On the other hand, the energy prices are high, and that keeps supporting in the midterm the need of our product insulation. I come back to that in a little bit. In the scenario you have seen here with all the energy prices, the gas and electricity was really skyrocketing. Coke and coal did increase, but not to the same extent. That acted a little bit like a normalizing hedge, if ever energy cost increase of 74% can be seen as anything normal. Move on to slide six. I don't feel there is much to comment on that other than to say that on the system division, the biggest impact to that growth there is still Grodan. That's the big contributor, and especially North America. We move on to slide seven. Just to comment one single thing. System division has picked up a little bit on that picture. That's 11% growth. The reason for that is that Grodan has a better... It seems to be flattening out the decline in the North American market. There you now have a smaller decline than you have in Q2. Moving on to the regional development on slide eight. Western Europe, obviously individual price increases, I don't go through here, volume is single-digit decline, but with the price, we have a good growth. In Eastern Europe, we see strong volume decline. In Russia, obviously, it's impacted by the sanction, but actually Eastern Europe is growing small percentage points, about 2%. North America, Asia, and others, you have a whole drama of different scenarios or happenings. Asia is up 20%. China is down, at least not double digit, but single digit, 6%, 7%. In North America, in the quarter, there was a very dramatic destocking. New housing sales is down, it's like the whole market decided to destock, at least our customers. That we actually saw a slight sales decline, we saw a very dramatic volume decline, that has since now started to tick up again. It was one of these quarters where everyone in North America in our customer base wanted to get rid of stock. Moving to slide. I don't think this... Yeah, move to slide. Maybe move to slide 10. Here you can see that due to the transfer pricing mechanism between systems and insulation for system division product, you saw that this very sudden impact of the inflation, it hit the insulation business the worst. We were quite happy with having gotten the insulation business up to double-digit to 10% in Q2, here it was obviously thrown back due to that. Move on to slide 11. Investments, no particular change here. We guided down a little bit, products we don't need in the next one and a half year, we pushed them out a little bit, no real big changes. We are now looking at getting an approval, we hope in Q4 for the France project, we hopefully could start building that towards the end of Q1, you know, commence the project. If we don't get that, it's all looking good. It's not on sound grounds in my mind, this lawsuit between the government and a local mayor. What we have seen, it looks good. Again, let's wait and see if that can come through so that we can start construction. Slide 12, I've already commented the cash flow elements. We move to slide 13. What you see here are a couple of the factors that speak for us. My view is that short term, we're gonna see a recession, we're gonna see lower new built activity on residential, absolutely, almost across the board. Quite dramatic here in the Nordic, what we have seen so far, Sweden, Denmark. Some commercial also down obviously with the high interest and the high inflation and generally, recessionary territory we are in. We are probably a bit more pessimistic still about the GDP outlook for next year than the macroeconomic experts. Still a little bit puzzled why they adjust the forecast down so little every time they come out. I conclude they do adjust them down. If you look at, for example, the PMI, manufacturing PMI for Germany is down on 45, which is extremely low number, very pessimistic outlook in Germany. If you go back to this, the case for renovation on our product, climate action is still there. COP27, I didn't go, head of marketing didn't go. We don't spend too much time on that because I don't feel we can impact much there. We rely more on that the EU will actually get something on the way. The case for energy independence, when we do our calculations for gas and gas availability next year, our conclusion is that with a little bit colder houses, a little bit more saving, a bit more demand destruction, we are not quite so pessimistic about that there will be gas next year. We obviously don't worry this year, but again, touch wood, anything can happen nowadays. When we see what's happening to demand, and we look at the LNG, the freedom gas coming in, I think there is a good chance of that. The case for energy dependence is still there, and you can't achieve it without reduce improving energy efficiency. That speaks for us. The energy efficiency case is also there. Italy continues. We haven't seen much activity. Politicians in the EU, they talk about it, but we don't see this big rollout of it. The EU funding available is about EUR 16 billion per year in the period 2021-2027. That money needs to be deployed, and there is a further funding financing of roughly the same amount, so it should have an impact. I must admit, we don't see a step up yet. I want people, I guess, to be a bit careful with expecting the step up to happen very quickly. I sometimes ask myself, will the step up happen because someone wanna avoid the temperature to rise 3 degrees Celsius? Is that the reason they will step up quickly? Somehow I start to doubt it. Things happen quickly, if they're outside Italy, France doing something, but still relatively quickly. If we have a little bit more serious recession, then I think this, the, we are made up more the C model, the C benefits of renovation, where the first thing is social, you know, the social aspect, and then you have the economic and the environmental. If energy efficiency is about the environmental case, if you have a downturn and people run out of money, and you wanna provide stimulus to the economy, having all building workers unemployed is not a smart strategy. Get them back to work and put them not on new build, but put them on fixing housing, and that will have a social impact, which is incredibly important when it's bad times, and it will obviously have a great economic impact. Who knows? Maybe the recession combined with the climate need and the more SE benefits will speed things up. outlook, no comment on that. I comment on the CapEx investments, would probably say that we are relatively happy with that we could keep that in spite of a quarter like that. obviously we would have done better without that quarter, but the fact that we could stick to it and navigate this, says a lot about how swiftly our local managers out there are to adapt to a very rapidly changing circumstance. We are happy about that, even though of course, we would have liked to avoid a quarter like we had in Q3. Over to questions. Ladies and gentlemen, if you have a question for the speakers, please press star one. Please hold until we have the first question. We will start with two questions per participant. Please respect this. We have a question from Brijesh Kumar. Please go ahead, sir. Can't hear you, Brijesh. Can you hear me? Is that clear? Now it's clear. Hello. Oh, great. Thank you. The first one is from me about pricing. You talked about 7%-10% price increase in Q1, and we understand that you will be around 35% higher YOY in Q4 2022. With that price increase and looking at your competitors like plastic foams, they have already kind of looking to cut prices. My question is around what is going on in terms of competitive dynamics in the market within the stone wool as well as with the competing materials in insulation? If you could just give us whether you are kind of going to hold your market share, that means you have to compromise on pricing, or you would rather leave the market to be taken somebody else so that you can hold on to your margin. Yeah. Okay. Thanks, Brijesh. I tried to answer that. First of all, we have now high inflation. 7%-10% is across the world, and obviously for example, in the U.S. we don't have the same energy inflation even though in the U.S. press you read horrible prices, but compared to what we have in Europe, it's nowhere near. Then, parts of Asia you have different levels, and China you have different levels. This is the average across the world. In Europe, you have markets that need bigger price than that. My view on pricing and why this level of inflation is so incredibly dangerous for society is that if you have inflation on 2%, 3% and you make a mistake on your pricing, sure, you earn a little bit less money, but you're gonna be cash positive, you're gonna service your debt. We don't really have debt. If you have debt, it's not so dramatic. When inflation goes to this territory of 10%, if you don't pass that on, it doesn't matter what volume you have. If you have what I believe we are stepping into now, there are gonna be segments that are different of course, but on aggregate, I think we have a slowing down market. We have a case where you have close to or double-digit inflationary numbers. My view on it is that if this continues, you need to pass on that because otherwise it's gonna end very, very bad. Of course some companies that haven't experienced this situation, they're gonna be tempted to believe that by reducing prices they can get more volume and that will save them, and that might work a little bit in a 2%-3% inflationary environment. It doesn't work in an in-inflationary environment with 10%. That's what I see. I don't exclude that some players in some markets with lower prices, but we are taking a shot at doing it, and there are gonna be segments where we don't do it. Generally, we need to pass on the inflation, and we need to get on that, you know, keep staying on that train, otherwise cash flow is gone. If we look at EPS, I don't have the same information as you. I don't necessarily agree with that's happening in the EPS market. Second question, Brijesh. Sorry. Yeah, the second one is on the cost side. I take that point that the inflation has kind of suit up and especially the gas and electricity is really hurting you. Looking inward, and looking at Rockwool, what is in your control and what we could do in future differently to make sure your energy dependence comes down? It's a very good question. Clear is that what we have been doing the last 10 years, you know, that worked. As we move more and more into electricity, when we make our footprint greener, gas and especially electricity will be more and more important. What we do now is that we have a sizable team working on issues like PPAs, virtual PPAs, other agreements. We, for example, made a deal in ARENH, deal in France, where we secured electricity pricing for next year. We have a big, it's a real battle group working on this, and we are reading up quickly and working through our hedging policy, our sourcing policy, and all the rest of it. All new investments now, we also check against, you know, before we push the button, we like to know that we, with the energy deal or the energy pricing will be competitive when we go online. We are working through all of that, and we will change a number of things. Obviously we wanna get out of a situation where we have 74% in one quarter. That's kind of a ridiculous situation to be in. So that work is happening, and I share more as we move on. We have already started to secure a few things. It should also be said that even until now, we have 50% gas hedged up to year-end. When we do the math in the current environment, the premium on a mid and short-term hedge is high. It's still at the moment when you, when you are where you are, it doesn't really make sense to hedge as we see it. When you step into it, you either need to look for an opportunity or that you can live with because you probably don't beat the market. Otherwise, you roll into a system that will act two or three years out, and then, but by the time you arrive, you're gonna be on a sound level. It's not a quick fix, even though the French deal was a quick fix that worked out nicely. Understood. Sorry. Okay, I'll just get back to the queue. Thank you. Thank you very much. Yeah. As I said. Next question. One more comment on that, Brijesh, we also keep agility on pricing, as you saw. Again, it's a lead time. We have the intention to pass on inflation via price. Our next question comes from Kristian Johansen from SEB. Your line is open, sir. Yes. Thank you. Please go ahead. Thank you. Two questions from me as well. First one is on pricing and the sort of effect into next year. Obviously you've raised prices continuously through 2022, and then you're now giving us a number for what you will do in Q1 as well. On my rough calculation, your revenue next year should benefit by around 20% from just the full year impact and the Q1 pricing alone, all things equals. Is that a fair calculation? I hand that over to Kim. I think of course, we will be careful to comment on 2023 because that's just one element of the moving parts. Of course it has mathematically quite a significant impact on the top line. I'm not totally off with an estimate of 20%, that's what you're saying? Kristian, we haven't commented volumes for next year. You have a recession coming, so... No, I'm not asking for volumes, and I know you don't guide for next year. I'm simply asking for you to help us understand the full year impact of the pricing you've already done and then what you have now announced in Q1. Kristian, in a perfect Excel world that I live in, very often, of course, if you only have one pricing point that's 7%-10%, and you don't think about the other quarters, then mathematically you are right. Of course, we don't know what is happening in quarter two, quarter three, quarter four. I should also. I fully understand. I should also say, there is another dimension to this. That is that compared to 2007 and those years before me, there wasn't much of a dialogue with customers about price. We have told customers that Q3 will be a challenge. We have a dialogue about it. That also means that if energy prices go down, this case is different because then of course we're not gonna sit with pricing for energy that is this high if the energy isn't that high, and that's a little bit different to previous cases. Again, we haven't done this as surcharges. That should also be said. We have priced it in. It's not a surcharge formula. If energy prices, let's hope they do go down a little bit, we will also lower some prices. Understood. Then my second question is on guidance. Jens, you sort of repeatedly say that you've been able to keep your guidance unchanged. That's also what slide 15 indicates. Even though you hit it well on page nine in your report, you do say you expect the margin to be in the lower end of your range. To me that's the same as downgrading to 10%-11%. Can you just elaborate a bit on why you now expect it to be in the low end, which to me was a bit surprising considering the decline we have seen in energy prices towards the end of Q3 and into Q4? Yeah. It's all philosophy. You sit and look at this paper. If we would have changed that guidance now, our reasoning would be, first of all, we are within the guidance, and there were things flying around. We still have the Christmas weather, and you name it. Of course, when you are this close, the denominator is there, and you only have a very short span to generate something more. What I guess I don't wanna be, and I don't wanna be in that every year, of course, when I get to first of December, I know more than I do first of September. Our argument was, if this is the guidance we had in a very fluctuating environment, I think we had the guidance from May or whatever, yeah. We kept it because otherwise we would have every year to go within a percentage point, and that type of guidance I don't think is very helpful to try to be that accurate all the time. Therefore, we just kept it and said that we are there, and let's see where the year ends. You know, still some time left. Sure. I mean, given that you had to add the comment of expecting to be in the lower end, you must be looking into something which is slightly worse than what you did in August when you presented this 10%-12% guidance. Can you just elaborate sort of on the assumptions? I would have loved to make EUR 40 million-EUR 45 million more in Q3 for sure. It is predominantly I mean, the remaining portion of Q3, which you didn't know in August, which is different. Basically, you have July and August where we really suffered, That's it. Has to change. Fair enough. I'll jump back in the queue. Thank you. Our next question comes from Claus Almer from Nordea. Thank you. A few questions from my side. Coming back to this energy headwind, yes, you've mentioned this a number of times. In the quarter, we had a EUR 200 million headwind year-over-year, which is around 20% of revenue. The EBIT margin was down by 6.5 percentage points, something like that. How does this compare to the price increases you have implemented? I think in August you said you expected prices to come up by around 35% full year. Yeah, the price in the quarter was up-. Sorry. The price in the quarter was up 29%, Kim. I would say you have 23, 24 margin percentage point impacted by the inflation, something like that. It's a bit less than 200. I'm rounding, yeah. The price is then what? 80%, 90%, the difference is basically the margin percentage deterioration. That's what it is. Yeah. If 29% up in Q3, that means there will be less or not that much extra in Q4, just to be sure. Have you increased this 35% number you have mentioned in the past? Yeah, we keep up. We keep going up in Q4 to roughly that number you mentioned. Then, you know, when we sit like this, you have a slope in this thing. It's not like first of the quarter you have a certain price. It's a sloping thing, and it's hundreds of thousands of transactions. It's roughly there. Okay. Just trying to do the math, energy is up 20%, you raise prices by 29%, yet your margin is down by 6.5%. I know there's other things than energy in your costs, it seems like something else did also really, you know, dilute your profitability in the quarter. No, energy is up. How much was volume down? No, energy is up 74%. EUR 200 million headwind year-over-year is about 20% of your revenue in Q3, right? Yeah. Maybe we should take it offline. My second question goes to renovation. You mentioned in the report that the new build seems to be cooling off. When I read what you write about renovation, you seems uncertain when you think this renovation will pick up. Is that correct? Is that how we should think about renovation part of your demand? I think that's definitely correct because you go from... I mean, only two. We take Denmark as an example. You're talking three months back, record every month in deliveries, and suddenly you have a house builder that cut capacity with 50% or something like that. Obviously, that changes quickly. Then you look at financing of renovation projects, you will see that some people won't have money to do that. I think stimulus packages are needed to get it to get it done. Even though the EU is committed to do it, they have the budget to do it, they have extra money that they can also finance it apart from giving money to it, the pickup will happen when you put those things in play, and that hasn't happened. They are committed, they haven't put it in play. Yes, Italy continue, and that works. In the other places, if I had a house and I wanted to renovate it, I would wait until those packages come. I wouldn't start renovation now. I feel pretty certain that it won't pick up very quickly until subsidies are there, so to say. Okay, thanks. That was That was all for me. Our next question comes from Yuri Serov from Redburn. Yes. Yes, good morning. I just wanted to ask you, in your press release, you had a very definitive statement where you said that the EBIT margin recovered in September and October. That's the language that you used. Can you please quantify that, what it means? The word recovered, does that mean that your margin in September, October was 13% or something else? Yeah, you know, we don't comment within that. I mean, the prices that we passed end of June that start to impact the end of September and into October, I just wanted to signal that after that horrible margin we had in Q3, if year to date, EBIT margin is now what? 10.2%. Closing the year again with December, where we always jump around on EBIT margin depending on snowfall, they close the sites or whatever they do. We always have the risk of one-third of the quarter be honestly, we have seen every variant in the book on that. I would just say it's back on reasonably good levels so that we can keep our guidance. But the percentage we don't give. The other thing that impact margins now, and that's not real money, is of course, work in progress. I mean, stock evaluations or such things in the accounting system. That should also distort a little bit where the margins end, when you have increase in cost. The margin has recovered very much so compared to July and August. You say July and August. No, sorry, not July and August. September, October, you call it reasonable level, and it's up to us to decide what reasonable level means. Yeah, we never guide on per month what the margin is, but you have our year-end guidance, and you have the year- to- date, so. No, it's I was a bit interested in what exactly you meant by margins recovered. You said that stock will impact margins. What does that mean? What will that do? I didn't get that one. You said that Inventory movements will impact margins. What do you mean by that? No, that's why it doesn't make sense to comment a month, right? Okay. Yeah. I mean, if you reevaluate your inventory for a cost change, for inflation, and you book that in a month, you might have a month with a higher margin or a lower margin, depending on what way it goes. That's not really interesting for the spreadsheet. So it's all about timing when you do that. So we don't get down and comment months. The only thing I said is that now the price and inflation roughly right from a cash profit perspective, it's not as bad as it was in July and August. With this generation, we should be able to deliver the forecast. The second one, can you give us a sense as to what you think your total volume change for the year will be in the installation segment? You know, what you have seen so far. You know, I know that December is unpredictable, but, you know, what's the best guess? You, Kim here. We will not go in and disclose volume development by segments. I think we gave some indication at the group level, which I think is useful, but we will not go in and be more detailed about these things. Okay. What is it at the group level? We said as we said, we are still year- to- date on a positive volume development quarter as in year- to- date quarter three. We also said that we are in the quarter three itself, we were down about 8% volume-wise. Thank you. Our next question comes from Zaim Beekawa from JP Morgan. Morning, thank you for taking my question. Just a couple for me. Coming back to Q4, I think what the margin implies, if we take a 10%, that's kind of a flat EBIT in Q4. Do you think that's achievable? Secondly, sorry to push on kind of the end market. You've mentioned renovation, it's, you know, not really going to pick up. Do you anticipate that we could have sort of a slowdown in 2023, kind of a mid-single digit decline? Would your best guess be that new build activity declines, sort of -10%+? Thank you. I mean, the mathematics for Q4 with the guidance, you know, you can do that math yourself. Since I'm talking to newspapers, I think it's fair to say that, and we have kept this line since May, we believe that there is a decline in the construction market, especially new build. I mentioned Amazon, both in the U.S. and in Europe, quite substantial projects are pushing out or canceling or postponing, but they are not happening. I believe declining market activity next year. You always have a dark horse in this situation, which is the U.S. If you go through the last couple of turbulences in economics, downturns, they're always quicker down, they go deeper, and they come up quicker. Honestly speaking, I don't know whether U.S. will pull it off and get out of this and get into positive territory next year again. I simply cannot say, but it's not unheard of, so it could get a lot worse than we see. It'll also be one of these where the U.S. just do it brutally, and then they come up with it, and they start to grow. There, I don't know. In Europe, my view is that when you look at the German PMI outlook and the fact that we tend to see macroeconomic forecasts that just moderate down, down, step by step, very little, is some of that we kind of not deal with it. Therefore, I feel at least my message is that I'm planning for lower volumes next year. Okay? That's the way, that's the approach to business with what we see, because there's so many negative factors. It doesn't mean I'm ready to guide for next year, but I'm saying I believe we have a recession next year. Dark horse, again, would be the EU renovation money in our particular case. Again, we haven't really seen politicians act quickly so far. I mean, just look at this whole thing with the gas subsidy. Spain, there were Romania, there were some country that ultra quick came up with something EU is still discussing, right? Soon, Germany will come with a proposal because they don't wait. It's a very strong proposal they are making, but it's this slowness of the whole thing. I think we need to get ready for that. It can be a year that is lower than this year. I don't want to guide. I'm just saying GDP factors, recession, that's what I see. Again, we will come back to the guidance in February. Great. Thank you. Our next question comes from Cedar Ekblom from Morgan Stanley. Thanks very much. I've just got a follow-up on the pricing targets for the first quarter. The energy costs have obviously rolled, in the fourth quarter, based on your guidance, you're getting, you know, more than a 10% EBIT margin. Just in terms of thinking about that incremental price increase that you're thinking about pushing for next year, are you assuming that energy costs go up from here and that's why that price increase is necessary? Is it actually that there are items below your raw material line, like labor, logistics, et cetera, that we should be thinking about? Because I'm just wondering about the quantum of that price increase, why the number is as large as it is, considering that you seem to have recaptured a lot of the margin in the fourth quarter with energy costs rolling. Thank you. Yeah. Thanks, Cedar. We believe Q1 from an energy perspective, and this is not our own forecast, but if you look at the forward rate, you look at the experts in the field, generally people believe that energy pricing will be up in Q1. What happens for the whole year, we might be a little bit more optimistic, remember, we can always adjust the price if we are wrong in Q2. For the year, the market seem to talk about that gas will be super difficult next year. I'll leave that one open, but my kind of own calculation is, or deliberation maybe, is that there is a chance that it won't be quite as bad as people think. In Q1 we feel that pricing will be up. You then look at Consumer Price Index, both in the U.S., Canada, and the European, it's a four-letter abbreviation, but the European inflation index with and without energy, they are up. They are up. Based on that, the 7%-10% is basically the inflation that we're gonna see that keeps coming. You know, if we are wrong, great. You know, if the economy goes back and we don't have that inflation, great. That's easy to fix. Yeah. Okay. That's really helpful. Thank you so much. Our next question comes from Yassine Touahri from On Field Research. Yes, good morning. A couple of questions. You mentioned that the volume were down 7%-8% in the third quarter. Have you seen any deterioration in October or at the beginning of November, or have you seen any improvements in an environment where there is an early low winter? The first question on volume. It- Sorry. Yeah. Hi, Yassine. I answer that one first. There are definitely markets, not significant. We saw, for example, an improvement in the U.S. in the last couple of four or five weeks. That went down, and then we saw an improvement. I don't know if that would hold. The new housing sales seems to be permanently, say, 15% low with that worse. I have no view. We saw an uptick after that extreme reaction in Q3. Asia, we see growth. In Europe, I see that we are before U.S. I think it will worsen. I think it will worsen on volumes, and I think it's spreading. My second question is on your ability to adjust your cost structure if there is a prolonged, if there is a deep recession. Could you give us a little bit of color on what you can do to maybe, like, reduce your fixed cost or semi-fixed cost? Are you planning contingencies in terms of, like, reducing the shifts at your plant? What margin from another do you have to deliver cost savings if the volume are declining again a lot in 2023? Okay. On the manufacturing side, the blue-collar side, we come out of a situation where we were on a extremely high capacity utilization. When volumes go down in Europe, we had obviously shift down the factories. We are quite good at doing that. We have worked the last five, six years on creating flexible manufacturing with temporary workers, so that in many cases this can be done without cutting into permanent employees. We are quite used to doing that. That aspect is well managed. In terms of factory overalls and all the rest, maintenance cost, we are relatively good at that to adopt it as long as we don't need to go down on super low number of shifts. We come into the white-collar side, the indirects. There we have a combination of that we have raised productivity quite a lot over the last couple of years, and we have a balance between we are not overly fat in any way. There are a lot of things to work on in the company. There we still need to see whether we believe, you know, is this a short dip we are seeing? When is renovation coming, and how much can we do? We have no, you know, we have no intention to sit with fixed cost longer term that is not competitive. When the situation come, we always have to sit and look at our cards and see what do we believe, how long is it, how much should we do? I don't have a number yet. I look at this, I see how much, you know, what do we need for different scenarios, but we haven't made up our mind because it's so sudden, it varies. We wait a little bit with that, and then we see what we need to do. Thank you very much. Thanks. Our next question comes from Manish Beria from Societe Generale. Yes, hi there. I have two. The first one is on the pricing. I know it's a mathematical calculation or a spreadsheet based, but you said, I mean, the pricing impact would be like 15%-20% next year with the rollover. That means EUR 800 million of extra revenues next year. You see your cost base, I mean. That lot doesn't imply like 10% because cost base could be like EUR 3.2 billion or something like that, counting everything. You have to have an inflation of like 20%-30% to cover that. Is my understanding correct? Is just to cover the cost or also to recover from margins or the negative operating leverage that you could have from the volumes here? I'll have the second next. Manish, I will hand that over to Kim because we get into the whole area of guidance, and he's just very good at knowing what we normally do and don't do. Kim, could you please elaborate that question? Yes. Hi, Manish. Obviously the sales prices. I also said early on, the sales price increase for next year with the 7% and 10% plus the carry forward this year will be the 15%-20% if you disregard everything else. Beyond that, I think, we still need to look at how the year ends here, and also how the market develops at the beginning of the year, and we will give you a full guidance in February for 2023. Okay. I have another one, maybe this is on this year guidance. If you see your guidance carefully, I mean, the sales guidance is 20%-25%, no. That means, I mean, this year you are guiding for a revenue of EUR 3.7 billion-EUR 3.85 billion or something like that. If you do a 10% lower end margin, this EUR 3.75 billion-EUR 3.85 billion, right. Your sales, I mean, because you see the progression, if the nine-month is already up 30%, your sales will not be like what you are guiding. It will be much more than that, maybe like more than EUR 4 billion. Where we should apply this 10%, to your sales guidance that you are guiding or what we see in our model the sales could be for 2022, no? Obviously, again, you have to do the math. I mean, we believe that the full year guidance at 20%-25% is a fair guidance. I know it's a large range, but that also implies obviously, further volume decline in Q4. You just have to put that into factor. Kim, I mean, you have done like 32% growth in the nine months, and then you see the pricing impact in the Q4. I mean, volume could be down, but still the revenue will be up. If you do the math, you do the addition, I mean, you cannot be 25%. It has to be more than 30% growth or something like that, the sales growth. I mean, should we look at the margins or, I mean, at the absolute EBIT number- It's- -implies from your margins or- It's just to clarify, we are guiding in local currencies, and we have year-to-date September, 27% in local currencies. It is correct that there are positive currency impacts for four percentage points year-to-date September. You know, with the even a weakening dollar, but still with a relatively strong dollar, we believe that those will be a positive currency impact for the full year. It's the 27% you have to take as the starting point when you do the math for the 20%-25% full year. Okay. Yeah. Thanks for clearing. Yeah. Thank you. Thank you. Our last question comes from Casper Blom from Danske Bank. Thank you very much. A completely different topic. I was hoping if maybe you could give just an update what's what's happening in Russia, if there is any news to add in terms of how the plants are being run over there, and how you see your Russian operations into 2023 also, and including also the ability to actually extract money from Russia. Thank you. Yeah. Okay. Very good question, Casper. First of all, you look at the sanction environment, where we follow everything, we check everything every week. We have quite big controls also if we sell something to Turkey, Abu Dhabi, any country, you know, the changes in the customer pattern where we don't know the end customers. We are checking it really, really carefully. Due to the fact that mineral wool, i.e. glass wool and stone wool, is on the sanction list, there is a rule. Our interpretation of the rule is that we are not allowed to exercise management control. That means we don't, you know, take management decision, we don't set price, we deal with... We can't even approve investments, and we have said we won't invest in Russia, so definitely no money going from here. We see the numbers. That's where we stand on that side. Should also be said, with and I don't hide behind this. The current interpretation from various ministry with the sanctions is that if the product is on the sanction list of products you cannot export to Russia, you cannot sell the business. We have not pushed that argument in the press because we feel we don't wanna hide beside, but that's how it is today. Some of the companies that wanna exit, we advise it is a breach of sanctions to sell it. We look back at the fundamentals for what we do and our option to select the least bad, where we homed in what we decided to do, and we are checking that rationale all the time. The first thing is holding on to IP. These are among my best factories. They have all our world-class manufacturing technologies. They're super plants, and they rank very high. Our rationale to not lose control of this IP to give a multi-billion Danish kroner gift to someone or a regime or a competitor because there is a war, that ethical and moral and strategic for ROCKWOOL conclusion is still there. It doesn't make sense to give it away. If I look at what I read now about battery technology, 75% is produced by China. You have AI, you have wind going over to China, you have 80% of all solar now supplied by China and others. If something would happen with Taiwan, for example, you have the country with all the semiconductors. I think there are some very important technologies. Obviously, we are not in the scale of solar PV, but we are a green technology, and we're unique because it's in-house technology. We still have the ethical, moral, and business rationale to hold on on that, no matter if we make money in Russia or not. What we then do with the money, yes, we can still take out royalty. We can still take dividend. There are rules for that, and that's happening. Yeah. We continue to do that, and there our rationale is by us owning those shares of those four factories in Russia, that's better that we do that we get it than that we leave it in the country in the hands of a new owner that got it for a zero price. That's our ethical, moral, and business rationale, and nothing has changed. I should also say, you know, nuclear war, World War III with NATO, of course, we would reassess all of this. For now, we feel our rationale holds, but we're checking it every week. Of course, no one has taken more beating, I think, than we have for this. We would only take that beating if we felt that looking back at this in 10 years' time, and we have given this stuff away, a competitor has taken it, and it's now in the hands of others that. You know, believe it or not, one day things will normalize, and we're gonna regret it in the same way we regret that we lost control of technology in Finland and Sweden once upon a time, and that went into Paroc that now is Owens Corning. That's how we see it. The rationale is the same. Yeah. Again, highly volatile environment, something could happen overnight any day. Thank you for that elaborate, question. I don't know if I am allowed to ask a second question after we've passed 12:00. Of course, Casper. You'll get one more. Great. Thanks a lot. Just on the energy topic, I mean, we heard you back at Q2 talking about how you might shift between different fuel sources, coke, gas, electricity, et cetera. I was just wondering, I mean, how fast can you actually do this given the very, very volatile pricing that you have in all these energy markets? I mean, there must be a desire to sort of quickly turn around and use something one day and other source another day, but how quickly can that actually be done in real life? It's not quick. We have two scenarios. One scenario we don't wanna do, that is if the gas runs out, we have an emergency investment we are doing so that if gas will run out, which we don't believe it will do, I think the risk is reduced. We have a way where we're installing some equipment so that we can keep running without gas and produce, say, 50% of the output to just make sure we can deliver to hospitals and whatever there is left of the economy, if that's the scenario for Europe. That program is going ahead. Once we have it, we can shift into that mode for a portion of the capacity very quickly. It takes us almost a year. Now we have maybe half a year left, not even that, maybe 4 months left, before we can do it. That is in Europe. We don't need that in Asia, don't need. That's not really a melting process. It's to keep the curing and some other processes running. That we can do quickly once it's in place. We have some unique plants where we can shift between biogas, natural gas, and coal very quickly because we have kept equipment, but that's very small portion. For the rest, it's produce varying everywhere from 4 months, provided the electricity is there, to shift from coke and coal to electricity to very much longer produce to replace the whole melter with new electrical melting. Again, we are still on the majority of our melting is done on of coke, and there isn't a threat to that at the moment. We have the greenification plan going electrical, but in a way, at the moment, the coke softens a little bit the blow of what we see on the gas side. In Denmark, for example, we run fully off gas, biogas, and there it's quite tricky to go back if we don't have gas. Okay? It's, you know, big machines, it takes time. Thanks a lot. Yeah. That's understandable. Thanks a lot. Ladies and gentlemen, we will now close the Q&A session. I will now turn over to your host for final remarks. Please begin. Thank you. Ladies and gentlemen, we would like to thank the equity analysts for all your good questions and the audience for listening in on today's call. We appreciate your interest in ROCKWOOL A/S. If you have further questions, please feel free to reach out to me, Thomas Harder. You know my contact details, or you may find them in the investor section on our corporate website. Jens, Kim, and I thank you for joining today's earnings call. Have a great day.