CUBE: Bathroom August 2007 - BRG Building Solutions...largest quality porcelain tile producers, with...

Bulgaria Spanish ROCA Expects 30% Rise in Sales in Bulgaria in 2007Egypt LECICO EGYPT - 2nd Quarter ResultsGermany Profits Rise at VILLEROY & BOCHIndia PARRYWARE ROCA to Capture 20% Market Share in Two YearsJapan INAX to Build New Bathroom Products Plant in VietnamRomania MONDIAL First Half 2007 Sales Up 6.5%Russia KINGFISHER Expands in RussiaSaudi Arabia Production Doubles at SAUDI CERAMICSSweden NOBIA To Enter Spain and Expand in France and the UKUK DEVA TAP Company Acquired by METHVENUK WOLSELEY Plc - Pre-Close Period Trading StatementUSA AMERICAN STANDARD to Sell Bath and Kitchen Business to BAIN

CAPITAL for $1.755 BillionVietnam THANH TRI VIGLACERA Sanitary Wares Exports to Thailand

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Bathroom Newsletter August 07

International Market Strategy

International strategic market research and consultancy on building product and related markets

UK The UK Bathroom Products Market

Monthly Special

BRG Consult NewsletterBathroom August 2007

Bulgaria: Spanish ROCA Expects 30% Rise in Sales in Bulgaria in 2007

The Spanish sanitary ware manufacturer ROCA expects its sales in Bulgaria to rise by 30% in 2007 and keep growing over the next few years as a result of growing output and exports, ROCA Bulgaria'smanagement board chairman said.

"Last year, our revenue increased by 30% and this year we see a growth of 30% again, to 28 million levs ($19.5 million/€14.3 million)," Luis Sabanes told SeeNews in a recent interview. The company's earnings before interest, tax, depreciation and amortisation [EBITDA], which is equal to 10% of its annual revenue, will shadow the rise in revenue, he added.

"Growth is due to two factors - first, growth in the domestic market, where we are increasing our market share, and then exports," he added. "Next year, with the expansion of the factory, the growthwill be even stronger," Sabanes added.

ROCA BULGARIA is investing some €13 million ($17 million) in a new plant in the north-eastern Bulgarian town of Kaspichan. The new plant will start operations in the middle of 2008 and it will allow ROCA BULGARIA to raise its output capacity to 1.5 million pieces of sanitary ware from one million nowadays.

Sabanes said that most of the output of the new plant will be exported. ROCA BULGARIA now exports 50% of its output, mainly to France, Germany, Great Britain, Italy, the Netherlands and Spain.

The company says it holds nearly 60% of the Bulgarian market of bathroom fixtures with its ROCA, FAYANS and LAUFEN brands. Sabanes said the company would aim to increase it over the next fewyears but gave no target figures.

ROCA BULGARIA's key competitor in the country of 7.7 million people is the US AMERICAN STANDARD which has said it would sell its two Bulgarian-based production units in September.

He added that the recent fast growth of the Bulgarian market has been fuelled by foreign investors streaming into the real estate sector of the EU newcomer state in anticipation of rising yields. Bulgaria, which joined the European Union in January, drew €4.1 billion in foreign direct investments (FDI) last year and expects about €4.5 billion in 2007.

ROCA has so far invested €22 million in Bulgaria. The company entered the country in 1999 after acquiring Swiss ceramics firm LAUFEN, the majority owner of Bulgaria's FAYANS. ROCA BULGARIA has recently opened euro 4.0 million retail centre in the Bulgarian capital Sofia.

Source: SeeNews

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Egypt: LECICO EGYPT - 2nd Quarter ResultsLECICO EGYPT announced consolidated results for the second quarter of 2007. Revenue for the quarter was up 29% year-on-year at LE 239.5 million driven by sanitary ware exports and the consolidation of SARREGUEMINES. Operating profit (EBIT) was up 15% at LE 40.2 million (margin down 2.0 percentage points to 16.8%). The drop in EBIT margins reflects the consolidation of SARREGUEMINES, the impact of energy price increases in Egypt and changes in product mix and destination. Net profit was up 41% at LE 27.5 million.

Elie Baroudi, LECICO EGYPT MD, added, 'second quarter results are heartening and we are looking forward to a good second half with a continued roll-out of new capacities and positive demand picturein most markets. However, there remains a risk of further energy price increases and we are continuing to focus on efficiency improvements in our factories. Furthermore, the challenges of rollingout new capacity and investing in people and processes to better serve our customers are likely to have negative cost implications in the short term. We remain focused on our longer-term objectives:expansion into new markets, improving market share in existing markets, and focusing on optimisingquality and improving efficiency.'

Source: AFX CNF

Germany: Profits Rise at VILLEROY & BOCHVILLEROY & BOCH, the German ceramics Group, saw turnover rise by 5.3% to €496.6 million in the first six months of 2007. This is being attributed to strong business abroad and acquisitions.

In addition, profit before tax and interest was up 42.1% to €18.9 million. This was also due to reducedcosts.

Interim Report (1st January - 31st March)

Sales for the VILLEROY & BOCH GROUP were up 5.2% after the first quarter of the 2007 financial year, at €247.9 million, compared to the same period in the last year. The Bathroom & Wellness Division increased sales by a total of 15% to €137 million (excluding the acquisition of sanitary plantsin Mexico the increase in sales comes to 3.9%).

Sales of German bathroom fittings continued to grow satisfactorily. The strongest growth though hasbeen recorded in Northern and Eastern Europe, the Alpine countries and the Far East. Thus, for example, the region of Russia, the Baltic states and Ukraine increased sales by 30%. Similarly high growth was achieved in Hungary and Romania, where VILLEROY & BOCH dominates the market with its own plants. The strongest growth was however achieved in the countries of Far East with extra sales of 37%.

Source: Handelsblatt and www.villeroy-boch.com

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India: PARRYWARE ROCA to Capture 20% Market Share in Two Years

PARRYWARE ROCA Private Ltd joint venture of PARRYWARE and ROCA aims at capturing 20% share of the RS 100 crore high-end premium products market in India in a couple of years, a senior company executive said recently.

With the premium sanitary ware segment growing at the rate of 25% annually, the company would setup a total of 55 showrooms across the country this year, its Managing Director Ranganathan told reporters.

As PARRYWARE alone has 46% market share of RS 800 crore sanitary ware market (excluding RS 100 crore premium segment) in India, it would be possible for ROCA to capture a share of the premium market with its high-end products, which are being preferred by the present generation builders and customers.

At present PARRYWARE, with RS 320 crore turnover, has 8-10% market share in the premium segment.

ROCA, which was launched in March, was catching up in India, since consumers were becoming more aesthetic about bathrooms, Renganathan said.

The company would start manufacturing ROCA products at its Perundurai plant in Erode district, which would utilise 100% capacity in two years, from the present 60%.

Source: Indian News

Japan: INAX to Build New Bathroom Products Plant in VietnamINAX will build another factory for bathroom and other sanitary products in Vietnam, as a result of growing demand for high-end sanitary ceramics in Vietnam and elsewhere in Asia. Construction of the new factory, which will have a monthly capacity of 1,000 tonnes, will begin as early as next year atan estimated cost of 2-3 billion yen (US$16.7 million-US$25 million). The plant will manufacture mostly upmarket sanitary ware to be sold outside Japan.

Currently, INAX operates three production sites and is constructing a fourth plant in Vietnam, where the firm commands a 50 per cent market share, and another in China.

Source: Asia In Focus

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Romania: MONDIAL First Half 2007 Sales Up 6.5%Romanian ceramic tiles and sanitary ware producer MONDIAL said its sales rose 6.5% year-on-year to €17.2 million ($23.67 million) in the first half of 2007.

Sales of sanitary wares accounted for 88% of MONDIAL's total sales in the first six months of 2007, while sales of its wellness segment made up 10%, and metal structures and bathroom furniture accounted for 1.1% and 0.9% respectively.

The company forecast a profit of €2.3 million ($3.17 million) and a turnover of €33.437 million ($46.02million) for full-2007.

MONDIAL doubled its initial investment budget of €1.3 million ($1.79 million) for this year, and plans to finance production development, as well as marketing and promotion projects, country manager Garz Sorin said.

The company owns a plant in Lugoj, western Romania, where it employs 990 people.

MONDIAL is majority owned by the German pottery, ceramics and porcelain manufacturer VILLEROY& BOCH, which took over a 51% share in the Romanian company in 1996 and later increased its holding to 99.56%.

Source: Balkans Business Digest

Russia: KINGFISHER Expands in RussiaKINGFISHER, Europe’s biggest DIY retailer and the third largest in the world, intends to open 50 CASTORAMA stores in Russia within the next ten years. The Group is prepared to invest £250 million (€ 372 million) in the project. At present the Group has four outlets in Russia after the latest opening in Moscow this month. The company believes that the Russian DIY and home improvementmarket could be worth £10 billion (€15 billion) and is growing by 12% a year.

Source: DIY Global

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Saudi Arabia: Production Doubles at SAUDI CERAMICSThe doubling of production capacity at SAUDI CERAMICS (SCC), which commenced in 2005, continues.

The Saudi Arabian company, one of the oldest Middle Eastern ceramic producers, aims to reach an output of 32 million square metres by 2008.

The first phase of the project, completed in 2006, has made SAUDI CERAMICS one of the region's largest quality porcelain tile producers, with an annual output of seven million square metres.

Source: www.saudiceramics.com

Sweden: NOBIA To Enter Spain and Expand in France and the UKSwedish kitchen and bathroom furniture Group NOBIA AB said on July 19, 2007 it has decided to enter the Spanish market by introducing its HYGENA brand, and to expand the number of its stores inFrance and the UK.

Initially, NOBIA will open four stores in the Barcelona area, and will then roll out the brand across Spain region by region.

NOBIA will potentially open some 50-75 HYGENA stores in Spain, CEO Fredrik Cappelen told Swedish newswire Nyhetsbyran Direkt.

HYGENA, part of NOBIA since 2006, is a French flat-pack kitchen and bath retailer, with some 140 wholly owned showrooms in the country. NOBIA plans to expand in France by opening 50-75 stores,based centrally in major cities, as well as in other locations.

NOBIA will expand in the UK by 100 stores, of which some 30 are scheduled to open in 2007. In theUK, NOBIA currently operates 193 stores of the MAGNET brand.

The NOBIA Group consists of 14 business units with more than 20 brands across Europe. NOBIA's after-tax profit rose to 487 million Swedish crowns ($73.4 million/€53.1 million) in the first half of 2007,from 446 million crowns ($67.2 million/€48.6 million) a year ago.

Source: Nordic Business Digest

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UK: DEVA TAP Company Acquired by METHVENMETHVEN, New Zealand’s leading designer, manufacturer and supplier of tap and shower heads hasentered a conditional agreement to buy DEVA TAP Company for $59 million (NZD). Completion will take place on 31st August this year.

The acquisition will see METHVEN more than triple its direct distribution for its unique range of shower products through DEVA’s trading relationships with most of the UK’s major plumbing and building merchants and DIY groups. It will also see Lancashire-based DEVA - the UK's largest independent supplier of bathroom, kitchen and shower brassware - become the centre-piece of METHVEN's European growth strategy.

DEVA in turn will benefit from cost savings in procurement, engineering, quality assurance and product sourcing whilst expanding its product development capabilities across a wider market with selected products going to strengthen METHVEN’s Australasian product offer.

'We have long achieved excellent growth in a competitive UK brassware market,' explains DEVA Managing Director Rob Pryde. 'Our success is founded on a quality, cost competitive offering and responsive customer service under a capable and committed management team which will remain with the business. And like METHVEN – whose Australian tap and showerware sales were up 54% for the year ended 31st March 2007 – we too have a sound track record of profitability.

'METHVEN clearly considers DEVA as highly complementary to its existing business and follows our recent exclusive distribution of its revolutionary water saving SatinjetTM shower system earlier this year. We are obviously excited by the new opportunities our acquisition will bring and looking forwardto playing a key role in the continued growth of the business.'

METHVEN Chairman, Richard Cutfield, continues: 'As an ambitious growing business, our acquisitionof DEVA will enable us to further leverage our strategic capabilities in design innovation and brandingon an international level whilst increasing shareholder value. Our revolutionary patented products - including SatinjetTM – along with our branding and design capabilities will add differentiation and value to the current DEVA offering and market proposition in the UK.'

The DEVA TAP company’s Lancashire headquarters and distribution site will continue to operate under its existing identity and there will be no job losses.

Source: THE KBZINE

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UK: WOLSELEY Plc - Pre-Close Period Trading StatementWOLSELEY Plc, the world's largest specialist trade distributor of plumbing and heating products to professional contractors and a leading supplier of building materials, issued its regular trading statement for the 11 months to 30th June 2007, prior to entering its close period. The preliminary results for the 12 months ending 31st July 2007 are due to be announced on 24th September 2007.

Overview

The results announced recently demonstrate the benefits of the Group's diversity and its ability to react swiftly to changing market conditions. Although the US new housing market, which affects around one quarter of WOLSELEY's revenues, has slowed significantly, the Group has continued to invest in the business for future growth, made acquisitions that further increase diversity and restructured its operations to reduce costs and improve margins.

Against this background, Group revenue for the 11 months to 30th June 2007 was up by almost 15%,after currency translation and including the effect of acquisitions. Trading profit for the same period was up about 2%. In constant currency, revenue and trading profit would have been a further 6% higher.

As previously indicated, the Group's results have also been affected by lower lumber and panel pricesin the USA, as well as adverse currency translation and one-off restructuring costs. The effect of these factors has been partially offset by good organic growth in the US plumbing and heating business (FERGUSON), an improved performance in continental Europe and the contribution from acquisitions.

Further details of market conditions and financial performance in each of the Group's business segments are set out below.

North America

In North America, revenue for the 11 months to 30th June 2007 in sterling, including acquisitions, decreased by about 4% compared to the corresponding period in the prior year. Trading profit in sterling, including acquisitions, was down by around 17%, after charging previously announced one-off costs relating to headcount reductions and branch closures.

In the USA, the new residential market continues to be challenging, but the repairs, maintenance andimprovement market ('RMI') and the commercial and industrial sectors continue to provide opportunities for growth. Aggregate local currency revenue from the Group's US businesses, including acquisitions, was about 5% higher but US trading profit was down by around 10%. US Dollarweakness has led to an 8.5% adverse currency translation impact when US results are reported in sterling.

FERGUSON showed a strong performance continuing to take market share, with revenue in local currency for the 11 months to 30 June 2007 up by around 15%, of which approximately 6% was organic growth. Trading profit was up by about 20% on the equivalent period in the prior year. The higher trading margin reflects the diversity of the business and of the specialist product offering as

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well as a focus on cost efficiency.

WOLSELEY Canada achieved modest local currency revenue growth, although trading profit was lower compared to the equivalent period in the prior year, primarily due to lower activity levels in the exploration industries in Western Canada. With effect from 1st August 2007, WOLSELEY Canada will be integrated into FERGUSON, operating within the same business group structure which focuseson specific customer types, and will benefit from leveraging the US operations, including the distribution centre network.

Europe

In Europe, revenue in sterling, including acquisitions, increased by more than 45% in the 11 months to 30th June 2007, whilst trading profit was up by around 35%. Excluding DT Group, European revenues and trading profit were up by about 15% and more than 5%, respectively.

WOLSELEY UK, including Ireland, achieved strong revenue growth of more than 15%, including around 10% organic growth, reflecting market share gains across most brands. Trading profit, including acquisitions, was up more than 5%. The trading margin was lower as a result of competitivemarket conditions in the first half and the effect of the previously announced one-off costs and investments in the business, but has shown the expected upward trend in the second half.

WOLSELEY France achieved double-digit revenue growth, approximately half of which was organic. Its underlying trading margin improved slightly, after adjusting for the net impact of one-off items in thecurrent and prior year.

DT Group's trading in the Nordic region in its first nine months of WOLSELEY ownership continues toexceed expectations at the time of acquisition. Over that period, revenue increased by approximately15% and trading profit increased by more than 20%, compared to the comparable period in the prior year.

Central and Eastern European businesses showed strong revenue growth, despite most principal markets remaining broadly flat. Overall, in sterling, revenue was up more than 20%, with double digitorganic growth, and the trading margin also improved. There was a one-off charge of around £3 million in July, relating to restructuring in Italy following the opening of the new distribution centre.

Acquisitions

Since 1st August 2006, a total of 41 bolt-on acquisitions have been completed for an aggregate consideration of approximately £374 million. These 41 acquisitions are expected to add approximately £656 million to Group revenue in a full year. In addition, on 25 September 2006, the Group completed the acquisition of DT Group for a consideration of £1,339 million which brings aggregate acquisition spend for the year to £1,713 million.

Outlook

There are no signs of any upturn in the US housing market and the timing of any recovery remains uncertain. The RMI and commercial and industrial markets are expected to continue to provide good

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opportunities for growth.

In the UK, recent sales trends have been positive although the market signals are difficult to interpret following the recent interest rate rises. Housing starts in Ireland are expected to continue to slow fromthe extremely high levels seen in recent years.

Markets across Continental Europe and the Nordic region are expected to be generally positive andWOLSELEY's operations in those areas are expected to show further progress.

Source: www.wolseley.com

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USA: AMERICAN STANDARD to Sell Bath and Kitchen Business toBAIN CAPITAL for $1.755 Billion

AMERICAN STANDARD Companies Inc. recently announced that it has signed a definitive agreement to sell the company's worldwide Bath and Kitchen products business to funds advised byBAIN CAPITAL Partners, LLC, a leading global private investment firm, for $1.755 billion in cash.

Upon completion of the sale, BAIN CAPITAL will acquire all of AMERICAN STANDARD's Bath and Kitchen business with 2006 annual sales of $2.4 billion, 26,000 employees and 54 production facilitiesin 23 countries worldwide. The business manufactures and markets products under brand names such as American Standard®, Ideal Standard®, Armitage Shanks®, Porcher®, Jado®, Ceramica Dolomite® and Vidima®.

The sale closing is expected to occur early in the fourth quarter. The company intends to use proceeds of the sale primarily to repurchase common stock and reduce debt to keep the company at investment-grade standards. The sale is subject to normal regulatory approvals and customary closing conditions. Shareholder approval is not required. The buyer has secured firm financing commitments.

On Feb. 1, 2007, AMERICAN STANDARD announced plans to separate its three businesses by selling Bath and Kitchen, spinning off Vehicle Control Systems and retaining its largest business, AirConditioning Systems and Services. Today's announcement is the final step needed for completion of those plans following the spinoff of Vehicle Control Systems as an independent publicly traded company to be known as WABCO. In March, the company sold VENESTA Washroom Systems, which was part of Bath and Kitchen. Combined with VENESTA, proceeds for the sale of Bath and Kitchen total $1.92 billion.

Following the spinoff and the sale, AMERICAN STANDARD Companies will change its name to TRANE. TRANE is the flagship brand of its global Air Conditioning Systems and Services business,which last year generated sales of $6.8 billion. TRANE will retain the AMERICAN STANDARD brandname for its heating, ventilating and air conditioning (HVAC) and related products, while the newly formed Bath and Kitchen business will retain the name for its markets.

Source: www.americanstandard.com

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Vietnam: THANH TRI VIGLACERA Sanitary Wares Exports to Thailand

Vietnam-based THANH TRI VIGLACERA Sanitary Wares, a member of Glass and Construction Ceramics Corp, on July 31 exported the first four containers of products to Thailand worth nearly onebillion dong (Bt1.9 million).

The expansion of export markets to regional countries, especially ASEAN member countries, has been a new strategy for the company, along with maintaining traditional markets such as Russia, Ukraine, Italy, Belgium and Taiwan.

THANH TRI VIGLACERA is expected to earn some US$ 2 million (Bt68 million) from exports this year, accounting for 30% of the company's revenue and up 10%against the same period last year.

Source: Thai News Service

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Monthly Special: The UK Bathroom Products MarketKey Economic Trends/Drivers

The UK economy recovered in 2006, following its subdued performance in 2005. GDP grew by 2.6%and is forecast to grow by another 2.6% in 2007. The OECD preliminary figures of June 2007 predicted a growth in private consumption of 2.1% for 2006 compared with 1.4% in 2005.

The Bank of England has now raised interest rates five times since August 2006. Interest rates havebeen increased twice in 2007, both to curb inflationary pressures and to take the steam out of house prices, with many buyers being priced out of the housing market.

House prices have been rising fairly spectacularly over the past few years. Following the Bank of England's attempts to steady this price rise, through the use of increased interest rates, price rises have started to fall away more recently.

Construction Trends

Construction levels improved in 2006 after a weak performance in 2005. In 2006, housing RMI grewby 1.5% despite the slowdown in consumer spending and an increased pressure on public finances, caused by the hike in interest rates at a time when consumers have pushed borrowing to high levels.

Non-housing construction grew by 7.7% in 2006, as a number of projects delayed from the previous year were completed. From 2007 onwards new build activity is set to continue growing. The successof the bid to host the 2012 Olympics is also likely to increase non-residential construction output.

Housing - Starts/Completions

In 2006, housing completions grew by 0.6% to reach 193,600. Completions are forecast to continue to rise by 0.7% in 2007. Housing construction looks set to continue recovering from its low level of recent years as measures are taken to relieve housing shortage, especially in the South East. On theother hand, there are signs that the boom in house prices may be coming to an end in the face of rising interest rates.

Overall Trends in the Bathroom Products Market

Overall, the bathroom products market experienced a slight recovery in 2006, after the decline seen in2005.

Following a rare decline in 2005, the baths market grew again in 2006. This growth was predominantly driven by strong sales of steel baths for replacement within the social housing sector.

The overall trend in UK residential construction is towards apartments rather than houses, which haveless floor space and therefore often have just a shower installed. This goes some way to explain thecontinued growth of the shower tray market in recent years, although growth in this sector actually slowed in 2006, due to a decrease in RMI purchases.

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The overall ceramic sanitary ware and alternatives market continued to experience difficult market conditions, with an overall decline of just under 3% in 2006. The overall average price of ceramic sanitary ware has continued to decrease as imports continue to flood the market.

The taps and mixers market grew by just under 2% in 2006, which represents something of a recovery after a difficult year of 2005. Overall the market appears to have been less affected by the fall in consumer spending than some other sectors.

The markets for showers and shower wall products both saw growth in 2006.

If you wish to receive more information on the UK Bathroom Products Market, please email Stephanie Bloxham at [email protected] or call +44 1227 766 810.

Source: BRG CONSULT

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