Wienerberger Warns Weak Demand and Pound Will Hit 2016 Earnings

By Natascha Divac

Austria's Wienerberger AG, the world's largest manufacturer of bricks, said its 2016 earnings would be hit by subdued demand in the U.K and the weaker pound after the country's vote to exit the European Union.

"The outcome of the referendum at the end of June resulted in turbulences and fluctuations in the foreign exchange markets, effects that were also felt by Wienerberger," Chief Executive Heimo Scheuch said Wednesday.

Demand in the U.K., one of Wienerberger's major markets for facing bricks, slowed in the run-up to the EU referendum, and prompted the company to cut output. Results were also hurt by the devaluation of the pound as well as the Polish zloty, it said.

"We initiated adjustments in our shift work models ahead of the referendum and will prolong the standstill of some production sites over the summer months," the company said in its half-year report. A spokeswoman declined to elaborate on how many of the company's 14 U.K. sites were affected.

Wienerberger, which has 203 production sites in 30 countries, makes clay blocks for walls, bricks for facades and clay roof tiles, as well as pipes and concrete pavers.

It confirmed its full-year target of 405 million euros ($455 million) in adjusted operating earnings before interest, tax, depreciation and amortization, and excluding currency effects. Negative currency effects, however, are expected to shave EUR10 million from full-year Ebitda.

Operating profit came in almost flat at EUR86.4 million in the three months ended June 30. Revenue fell to EUR858 million from EUR862 million, hit by currency effects, as well as lower gains from real-estate sales.

"Wienerberger's second-quarter results fell short of both our and consensus expectations," said analysts at Baader Helvea, adding the company "virtually lowered its outlook."

In the second quarter, British construction output fell 0.7%. Construction companies noted that weaker order books continued to hamper business activity in July, according to data firm IHS Markit. The firm's survey respondents said uncertainty after the EU referendum clouded client confidence and spurred greater risk aversion.

An array of companies from different sectors have been hit by the weakened pound and lower consumer demand in the U.K., including the car industry, the banking sector and travel companies. Many banks warned they expect more financial volatility across the eurozone, economic headwinds and currency impact as a result of the vote.

Wienerberger employs more than 15,000 people worldwide, some 1,200 of them in the U.K., where it generates about 10% of its annual revenue. In 2008, Wienerberger acquired a majority stake in Sandtoft, a British clay roof tile producer.

The company declined to comment on what effect capacity adjustments would have on its U.K. workforce. There will be more details on the issue later this year, a spokeswoman said.

Write to Natascha Divac at [e-mail]

(END) Dow Jones Newswires

August 17, 2016 08:28 ET (12:28 GMT)

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