Wienerberger to Diversify Offering to Help Offset Building Cycle
Stock Chart for Wienerberger AG (WIE)
Wienerberger AG (WIE), the world’s biggest brickmaker, plans to diversify further into plastic fittings and other higher-margin building products to counter homebuilding swings on traditional bricks and tiles.
Expanding in household fittings, including guttering and hot and cold plastic pipes, will help Wienerberger tap more of the renovation market, Chief Executive Officer Heimo Scheuch said in an interview in London today. The traditional clay-tile and brick businesses will be fine-tuned to lower costs and maximise efficiency, he said.
“We got hit hard in the new-build crisis,” said Scheuch, who began his career as a lawyer after studying in France. “Now, we’re moving down the value chain. It’s going to be a stronger company with two legs: renovation and new-build.”
Wienerberger is emerging from an overhaul that stripped away 200 million euros ($266 million) in costs as it sought to weather the global slowdown and Europe’s debt crisis. The Austrian brickmaker is in the midst of buying out Solvay SA (SOLB)’s share in an 800 million-euro plastics pipe joint venture. Sewage and rain-water management account for 45 percent of Pipelife’s revenue.
Pipelife sells to building-product merchants as well as through its own outlets in Austria. Monier Group, a former unit of Lafarge SA (LG), Uponor Oyj (UNR1V) of Finland and Georg Fischer AG (FI/N) are among its competitor in the industry.
“That’s the charm of Pipelife, it’s something you can take and develop,” Scheuch said. “It gives the company another dimension and room for further growth.”
Scheuch’s strategy is a departure from that of his predecessor, Wolfgang Reithofer, who acquired brick and clay assets to extend Wienerberger’s lead in those markets. It mirrors that of Mexichem SAB, which this month agreed to buy Dutch plastic-pipe maker Wavin NV for about $704 million as the Mexican chemical maker seeks to expand away from commodities toward materials and products geared for consumers.
Wienerberger returned to profit in 2011 after two years of losses. Scheuch forecasts further profit growth this year. He declined to be specific. Earnings will get a boost from a recovery in U.S. operations, which were unprofitable in 2011. This year, the U.S. division should at least break even, he said.
Mothballed plants in the U.S. will be kept, and when the market recovers, it will rebound fast, according to the CEO. Under Reithofer, Wienerberger had considered expansion into emerging markets, including Libya, though that ambition is now taking a back seat to diversification and growth in Europe, especially eastern parts of the region, he said.
The Austrian company, based in Vienna, has climbed 29 percent this year, giving it a market value of 1.06 billion euros. The stock was 1.3 percent lower at 9.04 euros as of 12:28 p.m. local time.
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