Egger Group has closed the first half of their financial year with a consolidated sales of €2.26bn, which is a 14% increase compared to the previous year.
According to the group, this increase in sales is primarily due to the sharp rise in costs for raw materials, energy and logistics, which led to higher sales prices.
The many uncertainties and crises and their effects on the energy and raw material markets, as well as massive inflation and the resulting loss of purchasing power, have caused a noticeable decline in demand. The outlook for the second half of the year is therefore reserved.
Thomas Leissing, CFO of Egger Group and the speaker of the group management, said: “The very strong results of the previous year are due to the extremely high demand following the cocooning effect that resulted from the COVID crisis, and can therefore be classified as exceptional.
“This boom in demand has noticeably decreased since spring 2022. In the meantime, we are seeing a decline in demand in almost all markets. At the same time, we continue to face a multitude of uncertainties.”
Egger Group reported a 26.1% decrease in EBITDA to €353.7m. The decline in earnings is spread across all divisions, taking into account that the same period of the previous year was also characterised by an exceptionally good market environment and margin level in all areas.
The decline was most pronounced in the Building Products Division, which had achieved record results in the previous year due to the construction boom.
In the Decorative Products Division, volume increases were achieved only in the newest plant, in Lexington, North Carolina, US. The eastern European plants, where the effects of the Ukraine crisis were felt most directly, posted the largest declines in earnings.
Earnings in the Flooring Products Division also declined due to falling demand, especially in the DIY sector.
Even so, Egger continued investing in existing plants to keep them at the latest technology. In H1 of FY2022/23, investments amounted to €229.7m, compared to €141.1m in the same period last year.
This capital expenditure went in particular to projects for backward integration, for increasing sustainability performance in production, as well as for optimising the internal flow of materials and increasing efficiency in warehousing.
With high raw material prices and their availabilities under pressure, Egger commits to their top priority of securing the supply of the essential raw materials wood, chemicals and paper to all plants and to reliably supply customers.
With regards to a potentially threatening energy shortage, Egger reported that they are well secured at all major locations with their own biomass power plants. With this strategy, Egger is striving to decouple itself from fossil fuels as far as possible, while at the same time avoiding the purely thermal utilisation of raw materials and promoting the cascading use of the valuable raw material wood.
The overall economic outlook remains fraught with uncertainty for the coming months and will continue to be strongly influenced by the challenges on the energy and raw material markets, according to Egger. This means that earnings expectations for H2 of FY2022/23 are also reserved.
In the medium term, Egger expects price levels to remain high and sales to remain stable, but with moderate demand from the main markets. In the long term, they will continue to exploit the production advantages of its industrial base, and aims to emerge stronger from the challenges.