CEO COMMENT: BUSINESS UPDATE

03 February 2016

Compared to the latest developments in the world economy, the ROCKWOOL Group has been blessed with much more positive developments, some thanks to our own efforts and some given by the outside world.

Dear shareholder,

As I am writing these lines, the stock markets of the world are taking another tumble as data from the Chinese economy as well as falling oil prices continue to worry decision-makers in the world economy. Compared to that setting, we have in the ROCKWOOL Group been blessed with much more positive developments, some thanks to our own efforts and some given by the outside world.

Let me start with the UN climate change agreement where the countries that met at COP21 in Paris managed to seal an agreement which for most observers was on the positive side. Our evaluation is also cautiously optimistic. This is not so much due to binding commitments which are more or less absent. Rather we believe in a continued public pressure on the governments to live up to the higher ambition expressed in the wish to limit global temperature increases to 1.5 degrees. In a couple of years, we can hope to see the benefits of stronger climate policies in the building sector. A sector that today stands for around 40% of global CO2 emissions.

Another positive event was our publication of better results for 2015, presented to the stock market on 12 January, on the back of efficiency improvements and tailwind from lower raw material and energy costs. It is good to see that we are slightly ahead on the implementation of our Business Transformation Programme and already reap the first benefits in 2015. This will be one of our top priorities in 2016.

The same goes for our plans to expand the highly profitable ceilings business in the US. We announced in November 2015 the decision to build a local ceiling plant next to our existing insulation factory in Mississippi. The plant is expected to open roughly one year from now, meaning that our expansion in the US – the world’s biggest market for suspended ceilings – can accelerate. We have high expectations for this market which is today quite unfamiliar with the advantages of our ROCKFON ceilings.

All is not expansion out there, however, and we have seen major challenges in the important Russian market. The market has contracted in 2015 and is likely to experience a challenging 2016 as well. Nevertheless, we stay firmly committed to our leadership position in the market, we are still nicely profitable and our experiences from earlier crises are that we come out even stronger.

With the best wishes for a positive 2016,

CEO Jens Birgersson

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