RHI Insulating: significant increase in results with new structure suited to the market

 

• RHI’s Insulating Division will meet the restructuring targets in the financial year 2002.
• The unfavorable construction industry in Germany and stable demand in Austria, however, require two steps to secure the restructuring targets in the long term:
  – Promoting our strength in the Eastern European markets
  – Rationalization measures and increase in efficiency in the core markets
• Therefore, the RHI management is reorganizing the division in accordance with its processes and customers:
• As of January 1, 2003 Österreichische Heraklith GmbH will be transformed into Heraklith AG and operated as independent insulating materials group within the RHI Group.
• The organization will in the future be based on three operating business units and the management of the investments abroad.
• The Board of Management expects this to result in a 50% increase in EBIT.

The Heraklith segment contributes approx. € 170 million or just over 10% annually to the consolidated sales revenue of the RHI Group. An analysis of the difficult framework conditions in the core markets (especially the unfavorable development in Germany) has led the RHI management to actively counteract the difficult cyclical situation in the Insulating Division and to implement structural changes consistently and quickly. The strategy pursues two main objectives: Promotion of the market strength in the region of Central and Eastern Europe, which grows relatively fast, with a particularly intensive focus on Russia, Ukraine, Romania, Bulgaria and the successor states of former Yugoslavia. Sales revenue from this region currently comes to approx. € 44 million, which is nearly 30% of the overall sales revenue of the Insulating Division, with a still increasing tendency.

Consistent rationalization measures (especially in the area of overheads), location adjustments and increase in efficiency in the core markets in Germany and Austria as the market shows no growth potential due to the persisting weak construction industry.

The result is a new form of organization, which focuses on processes and especially customers and gears business procedures to their needs and changed requirements. It pursues clear objectives:

• Reduction of complexity and simplification of business procedures
• Short reaction times to changed market requirements and a lean, efficient structure with clear responsibilities
• Highest transparency
• Cutting costs in the short term, increasing efficiency in the long term

With these structural measures, we expect EBIT to increase by approx. 50% in 2003 as compared the current financial year (less one-off effects). The Insulating Division will thus make a decisive contribution to reorganizing the RHI Group.

The new structure essentially includes:
The transformation of “Österreichische Heraklith GmbH“ into „Heraklith AG“ as of January 1, 2003. This step underlines the operating independence and autonomy of the Insulating Division within the RHI Group and increases the transparency of the business procedures significantly.

The operating structure is fully adapted to the strategic orientation and is based on four pillars.

• Business Unit Structural Engineering
• Business Unit Heradesign
• Business Unit Industrial Insulating Materials
• Investment Management of Foreign Companies

The Board of Management of Heraklith AG will be made up as follows:
Roland Platzer changes over to the new Heraklith Board, where he will exercise the functions of CEO and COO and thus be fully integrated into operating business in the future. Dr. Eduard Zehetner assumes the function of the CFO in personal union with his tasks as RHI Board Member. Dr. Helmut Draxler, CEO of RHI AG, will be Chairman of the Supervisory Board. Amongst others, former Wienerberger Board Member Dr. Paul Tanos, an internationally experienced and acknowledged expert for building materials, will be a member of the Heraklith Supervisory Board.

The current financial year has been difficult for RHI’s Insulating Division in Western Europe due to the ongoing weak construction industry and is overall falling short of the targets set for sales revenue. However, through permanent cost management and the consistent implementation of the rationalization measures, the budgeted positive EBIT margin exceeding 3% was reached in the first nine months of 2002. (Detailed results of Q3/2002 will be published in a press release on November 26, 2002).

The Board of Management of the RHI Group is convinced that the strategic changes and the establishment of clear structures in the Insulating Division have created a basis, which, on the one hand, supports a sustainably positive business development of Heraklith AG in the best possible manner, and, on the other, optimally prepares all possibilities for future partnerships.