Geberit AG

I'm I'm I'm I'm Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our conference call on our Q1 results. and local currency, the strongest quarterly growth rate in more than 10 years.

Profitability reached new record levels with net ETA margin of 34.6%, which is 280 points above last year's already excellent. As a consequence, at the wrong time, with further improved profitability, net income increased by 27% I'm I'm I'm I'm I'm a whole improvement trend induced by the COVID-19 lockdowns. Eventually, we end up with a distribution channel, due to increasing price levels and increasing challenges with regards to product availability, also in the period of construction. And thirdly, a first-base effect from the COVID-19 hitting our business in China in June last year in the main market, as of March last year. or have been the first corner of 2019 to hit low, and that gain in Q1 grew by 14.3%. This two-year comparison, at the spring high-dose level of 2019, demonstrates the strong market share gain the AG has steered the COVID-19 crisis. Let me now briefly comment on national data thank you growth of 17% in local guarantees. Since the income system is down to 18% in most, from the home improvement trend, the rate of income has been an issue for the house value era for the last few years. The price and loss of system tax rates grew by 13%. The system grew down and underproportioned due to an ongoing weaker new mills and grocery business. the operating and financial results. The OTA increased proportionally at 21% to 315 million francs with a strong margin expansion of 200 base points versus Q1 2020. The main drivers for this margin expansion were the operating leverage from the strong logging growth, increased The strong operating leverage demonstrates the high flexibility of our operations and our capabilities to maintain a very high efficiency level also in an environment of extraordinary growth. and the EBIT margin reached 30.4%, 248 points of all Q1 projects. Trade income increased by 27% disproportionately to 233 million CHF thanks to a better financial result. Earnings per share increased also disproportionately by 28% I will now comment briefly on the current business environment. Consultant sites are in most countries open and running. Showrooms, however, are restricted to their operations in most countries due to local shutdown measures. Recently, most affected were our operations in India, where the national lockdown led to a temporary closure of our the ongoing uncertainties around the COVID-19 pandemic, but also due to the general very low visibility of our business, we refrain from seeing a market outcome like this for any time. For example, it is very difficult to predict when and how the current strong home improvement trend will come to an end once the lockdown measures are lifted and consumers are dispensed with funding for other consumption opportunities. which are installation systems from substantially increasing raw material price. In other words, you can just absorb some of the raw material price This results confirm our ability to deliver extraordinary results in times of crisis, gain market shares and maintain our market leading productivity and profitability also in times of high volatility and continue to emerge stronger from this unprecedented crisis and environment. Thank you for your attention. We are now ready to answer your questions.

Ladies and gentlemen, we will now begin our third round of questions. If you have a question for us, please have T-Style 01 on the elephant's head and press the Q. The question has been announced. If you have a question, please press the Q. My first point is on demand.

Through the review we can see that you are running well ahead of the 2019 level and I appreciate that the home improvement trend is very difficult to predict but I guess my question is more on the type of when I listen to the term that you use, it still seems like a cause of concern as you come out of the first year of COVID. Some of this data is still projecting going forward, actually, here. So can you maybe give us more generalities as to what you're seeing in this product category and how we should think of things going forward, given that this probably has a bit more credibility of the app? This will be my first question. I don't know what's been limited in terms of questions, but I'll ask the second one if I can.

Pipeing business is going a bit weaker than the other two product areas which we believe is driven by a weaker new build business and also a weaker project business driven by the COVID-19 crisis and has started to emerge already in the second half of last year The market needs time to be in the first quarter. They were slightly low the first quarter of last year, but that was very much driven by extraordinary costs which we had last year for our brand normalization exercise. Excluding one-time tax, we have been able to spend the normal marketing lectures as planned on the crisis level.

Thank you very much. The next question is from Yacine Touari of Confusion.

Yes, good morning. I have a question on pricing. Could you give us the price increase that you would expect after 2021, after your 15% like-for-like growth? As you have announced, we assume from the swing, a 10% of price increase for the second quarter of 2021 and for the full year. That would be my first question. And my second question is on the margin pressure. Would you expect a growth margin pressure as soon as Q2 2021? or is it going to be a little bit later?

First question regarding pricing. There are two pricing procedures here. The first one is a low one which we implemented out of Aprilville. long to around 1.5% as usual and the second one what I mentioned before will be the factory price of H2 is an extraordinary price increase of around 7.5% covering around 6% of our business that leads to the second question this price increase we have also carried the chart in our presentation on slide number 7 showing what we expect in terms of raw material price pressure for the first and the second quarter and we are not fully compensated therefore we expect a significant impact from pricing in the second quarter in terms of daily prices versus raw material prices and on the first quarter the price increase was like 1% in the first quarter of 2021 The first quarter was around 1-1.5%.

Thank you very much.

Next question is from Arnaud Liman of Agosan Retailer.

Thank you very much. Good morning. First, to follow up on the cost inflation side, I understand that the 1.5%

that's covering the cost inflation that we have seen in the last two months but then more recently you have seen an increase in negative trends on the plus side and that's why you are now seeing this H2 price increase for 50% of the business and my second question just coming back on your in the bathroom system at the same time you mentioned that there are some restrictions because of the showroom so how do we understand that some of the showrooms are closed and still you manage to get very good sales in the bathroom system thank you so first in first quarter we

it's not a mathematical exercise where we exactly want to compensate the price increases The second question is on bathroom systems. We do not believe that the current restrictions of showrooms will have a material impact on our bathroom business, because the showrooms were mostly affected also last in the showroom has a rather limited effect on our business. That's one of the surprises that will have a major impact. It doesn't seem to be very much the case.

Thank you very much.

You're welcome.

you're going to have to take a look at what what what what what what what what what I'm just wondering, since we're already almost half into Q2, could you provide us with a rough estimate, or guess if you like, of the expected net pricing impact on the EBITDA margin in Q2? That would be my first question. And the second one is regarding the development of the home improvement trend. I guess most people, including myself, were kind of surprised by the strength of this trend. what are you seeing in terms of this computing trend and associated with it the home improvement and renovation trend that you see you know how dependent is that really on um the fact that people are going on holiday currently and you know might return from going on vacation in the second half and definitely into next year um what are you seeing there you know basically what i'm trying to do that is hope improvement is going to remain with us beyond uh the lockdowns that we're currently seeing

We do not do consumer service, but what we see is a strong, obvious demand for I'm I'm I'm I'm I'm I'm I'm I'm all cool cool cool cool cool cool cool cool cool cool and that we are focusing on end consumers to improve up-to-end ambassadors. As I mentioned before, that was part of our first quarter. Once that's over, what people and consumers will do, actually we are not the experts. Okay. Next question is from .

Yes, good morning. Also two questions. Pre-hiring in first quarter due to the price increases you announced for April. Is there any indication or maybe the underlying trend in April was it still same positive-ish as in the first quarter? That's the first question.

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The next question is based on your case about Europe and countries where all countries were growing. I would be more interested in the countries that didn't have such a huge impact last year in, let's say, March, COVID-related, so Germany and Switzerland. I assume that those two countries clearly were below average growth compared to the overall growth in Europe. Is this a fair assumption?

I don't want to go into details about the reasons why we are not presenting them, but I can tell you that both countries, Germany and Switzerland, developed well, with a nice growth also in the first quarter.

Okay, thank you.

You're welcome.

And the next one is from .

Good morning gentlemen. First question concerns the margin. You said that the raw material prices will have a significant impact. Do we have to expect a lower margin in Q2 compared to Q1 this year, this is 34.6%? Or will the margin be lower also than Q2 2020, which is exactly 0.1%? And my second question is You said the trend for home improvement is difficult to predict how long it will last. Is it safe to predict for the moment? And the third, just an understanding question, you said your price increases in A2, the extraordinary, would it be 3.5% or 5%? I got the 5% the first time. I start with 3 and the holes.

It's not covering the entire business, it's only covering the two product areas in relation to the platform system and up to 60% of the system. That brings us to the first question, we will not give a guidance for the ABT margin in the second quarter, but what I said is that raw material prices increased in the second quarter

Next question is from Matthias. Yes, good morning. Just one question from my side. You mentioned previously that basically the motions were referred to the usual corridor like 28-30% but in a 31% now very strong very very strong margins in Q1 and obviously a very controlled margin impact in the second half with potential upside from the home improvement continuing for longer than you would expect so is it a fair assumption that it's not going to fall below 30% for the full year?

We will provide, as usual, a PDA market guide for the full year with our H1 results, not at this point in time.

Welcome.

The next one is Patrick Rapp, I ask you to be at Europe Designs' house.

Thank you and good morning everyone. Good question for me, please. The first is on the EU bridge for this year. You already talked about taxing expenses, the objective pre-crisis levels. You also mentioned additional digital investments for the EU, the N15 million. would you anticipate any pull forward in one time for digitalization efforts, something has changed there, on threat, and also in terms of marketing expenses. If you plan and you have achieved, as I said before in the first quarter, a normal pre-crisis marketing budget, marketing spending, we forecast also again for the full year additional marketing expenses of 25 million. It's given the one-time effect from the plan harmonization And the second question was around... Yes, that's what we expect. There will be a full-time inspector into the extraordinary price increase as of April 10th. Okay, thank you. You're welcome.

Thank you very much for taking my question.

I don't know

And the lag is six months, something like that?

Great, thank you. And on the marketing expenses, I don't think all the details have been provided so far.

I wanted to understand a little better how this will play out later in the year when, assuming we begin to travel again, It kind of ramped up to the pre-COVID level already without travel, and when the travel kicks in, is the plan to then have a kind of a structure with higher marketing spend, or will you then be swapping out the current virtual digital activities for real customer interactions and managing the overall marketing spend to be at that one plus 15 million specifically?

the the the the the the

Great, thank you. And regarding the call you said you can't get it, I'll just check to see if anything changed. Quantifying the restocks or quantifying the stock on hepatite G1, is that possible at all?

No, that's not possible for us.

Okay. The final one, last call, you mentioned in the answer to the question on acquisitions, you mentioned potential for Volcom, sort of nothing international. I just wanted to check if anything has developed in that area, in terms of acquisitions, given, obviously, the demand for funds has turned up a bit and the disinvestors are more willing to come forward now.

Nothing changed in that area either. Nothing on the screen at the moment. Thank you very much, Professor. You're welcome.

The next one is from Tristan Arnaud of ETH.

Good morning, gentlemen. I have a question on your production capacities. Assuming now that the demand will stay on this high-level sales of 900 million tons or something like that, will you have enough production capacities to handle that? When will you receive additional capacities We do have enough capacity for this volume, we are telling at the moment, but we are continuously expanding our capacity. For example, and we talked about that with our figure results in March, we expand our plant, all of our plants in Germany, where we are manufacturing installation frames. and we always plan also for their capacity. Therefore, if you are comfortable with our current capacity and our plans and investments to enable, to manufacture the current volume in the different countries. Okay. Do you have any shortage of your suppliers, or do you have a shortage of, I think, the but we are able to manufacture all the raw materials and we are able to deliver the assortment to the customers. The 2.5% price increase will be July 1st. back in March you presented your sales and marketing activities at the customer presence at the customer training part of what you were saying mainly on behalf of your social initiatives and I wondered if you could give us here some thoughts how it looked like that you won it didn't look like I don't have the exact figures in front of me, but I see and I hear that that is going very well. For example, with Geparit Innovation Days, which you have rolled out, in terms of number of participants and the feedback from customers. So from that perspective, we believe we are doing very well over the first quarter, but I don't have the exact figures in my right hand at the moment. Okay. Thank you very much. You're welcome.

Thanks for taking my follow-up. Actually, I've got three. Just two of them are clarification questions on what you said earlier on. When you talk about 3.5% ex-owner pricing prices to 60% of the business, does that imply 2.1% for the group? that would be my first question. Then the second clarification question is on the marketing expenses that, if I understand you correctly, we were saying, Christian, that we would be up to $25 million in 2021, including the impact of land harmonization last year. Now, if I remember correctly, land harmonization's incremental spend was $10 million in 2020. So, and we're talking about a net increase of 15 million for 2021 competing expenses. So that's my second question. And the third one is if you could provide us with an update on the latest survey in soil oil costs in Germany. Thank you very much. So the first question, correct, 50% of real oil costs in France.

and the third question, the latest survey in Germany is that the order backlog has increased substantially. It's now at 14.5 weeks, a new record level, a substantial increase, also confirming a strong home improvement trend going on in Germany. Thank you very much. You're welcome.

Next question is from Manish Kauria of Societe Veneraal. Your line is now open. Keep going.

So, this is also on the pricing. So, you say extraordinary price hike, 3.1%. So, also 1% is a normal hike. So, we should be something like 3% price impact per year. Is this the correct way to look at it?

and the next one is from Claire Assall of Backstage and I have no questions, go ahead

In a few months now that you have extra support for ending energy renovation in countries like France, the UK, Italy. So I was wondering if you could update us with your thoughts on the energy wave, how good that is for your design system.

Do you still think it could be some competition for your first categories? Any thoughts would be welcome. just part of the COVID-19 situation due to home improvements and there is in many countries a high demand for renovation for example in Germany there are a high number of apartments which need to be renovated so that is an ongoing need for renovation in many European countries and we have big proportional exposure to renovation, therefore we are rather in position to benefit from renovation demand.

Ladies and gentlemen.

Good morning. It's very much a follow-up question on the last one. You were mentioning what I would like to walk a little bit away from this quarterly view to hear more about your long-term expectations and especially about the renovation needs. I remember that after the German reunification, there was a big spike in new place activity for almost 10 years. So that has, I guess, had an impact on your medium-term demand in renovation, especially in Germany. Do you have any numbers to what was done 30 years ago and what you could expect, let's say, in the next 10 years to come?

You're right. The peak of those new builds is certainly one critical. the the the the the the the the the the the the

it was very much home improvement but the new build is also quite a strong driver so if the new build slows down could it be more than compensated by a pickup and renovation utility? ok ok ok ok ok ok ok thank you very much

The next one is from . Thanks very much. Two questions for me. The first one is a point on capacity.

Rather than a production capacity, can you talk about what you're seeing in terms of your installed network? In the past, you have flagged low skills or bottlenecks in the environment network as a potential handbrake to the revenue growth, and I'm just surprised considering how strong the growth has been in the first quarter that you have made in that part of the capacity discussion and then another point on margins in the first quarter your growth margins were lower year on year and your EBITDA margins rose and I just wanted to understand if we should think about a higher weighting of things like labor costs I don't remember you talking about

you're going to use our of the person having our people made not the teams but literally connected to our customers paid off now we are also going to manufacture and keep our everything is a high level of here so any one element and the second one is ready one of our main drivers our office so selling higher and it doesn't take any more installation capacity or installation time to install the shower body, for example. So it's up to the potential to deliver growth in an environment where we have still capacity applications for qualified installers. The next question I would ask Roland is to answer. Yes, your perversion of the installation system I I I I I I I I I

Hello, good morning. I was wondering, do you have any data at all that would explore a little bit the relationship between

ok ok ok ok ok ok ok ok ok ok

it might be over the case that I'm building I'm waiting for it I'm going to go and I could have a negative impact especially in markets where we can carry that could then I'm not going to have to have all in order to get me that he's

I was wondering what kind of do you see the markets does this cautiousness materialize or do

Um, that's a very good question. Again, we don't have any exact figures, data, to give you a sharp answer. But again, in the nation, tithing is still going weak, and as Robert proposed, there is 19 in the nation that these segments are, as I said before, there's maybe millions of large projects which are suffering more, or they're more exposed to tithing, which is typically correlated to hotels, or these, let's say, COVID-19 suffering segments, like the recent bookstore, materializing for example

question is on your workforce that increased by roughly 200 people since the beginning of the year. I was just wondering whether this is investment in Salesforce or if those are now digitalization people. Maybe you can give us some more light.

It's mainly driven by additional people and also temps in the operation in the plant to reduce the volume and to lower it and also by increase in estimations for example for our distribution initiatives.

Okay, thank you.

And the last question for today is of Martin Fritzinger of K2C.

Yes, thanks for taking my final question. Let me follow up again, and correct me if I'm wrong, but if I understood you correctly, you were saying that the extraordinary selling price increase of around 2.1% in H2 would still lead to an overall increase in price for the whole year 21 of around 1.5%. Now, at the risk of appearing a little bit authentic, I would rather talk about 1.5% to rather 2% than maybe 1.5% or 1 to 1.5%. Of course, it has very little impact on the growth, but there will be a significant impact on the market, and hence my follow-up question.

So I think that's a good understanding. Let's try to ask again. 3.5% commercialized for 80% of the segment, and and and and and and Thank you very much for your attention. You need all the great things.