Geberit AG

Thank you for the introduction and good morning, ladies and gentlemen. Welcome to our full year sales conference call. We will first comment on our fourth quarter sales figures, then review our full year sales performance, followed by our guidance for the operational and financial results in 2024, and then finish with the outlook for this year. Let me start by giving you some comments on the sales development in the last quarter. Net sales declined by 1% and reached 685 million Swiss francs. The unfavorable currency development affected net sales negatively by 40 million Swiss francs, or minus 2%. In local currencies, group net sales grew by 1%, entirely driven by volume growth. The continued volume growth in the fourth quarter is a further testament of our strong business performance last year, where most building construction markets were in sharp decline. Let me now comment on the sales development in local currencies of the regions and countries in the fourth quarter. In Europe, net sales increased by 1%, driven by growth in Central Europe, with Italy growing 6%, Benelux 5%, Germany 3%, Switzerland 1%, and Austria being stable year over year. Eastern Europe declined by 1% after strong growth in Q4 of 2023 of 33%. Northern Europe decreased by 4%, negatively affected by the divestment of the Nordic shower business per end of 2023, with a negative effect of minus 2% on net sales. Western Europe decreased by minus 7%, driven by declines in France and the UK. Outside Europe, net sales increased in Middle East Africa by 10%, despite an already very strong growth in the previous year quarter of 41%. And in America by 2%, also despite a strong previous year quarter. In Far East Pacific, net sales decreased by minus 9% due to weak sales in China, partially offset by India. I continue with the sales development per product area in Q4, again in local currencies. Installation and flushing systems grew by 4%, while piping systems and bathroom systems both decreased by minus 1%. The relatively weaker development of piping systems is driven by its higher exposure to the new-build sector. whereas bathroom systems was negatively affected by the divestment of the Nordic shower business per end of 2023. We will now comment on the full year 2024 sales performance. Net sales in Swiss francs were stable at 3.1 billion Swiss francs, negatively affected by strong currency effects. Negative currency effects led to a net sales loss of 76 million Swiss francs, or minus 2.5%. In local currencies, net sales increased by 2.5%, almost entirely driven by volume growth. We consider this volume growth as very strong, since the building construction market experienced a significant downturn last year. The three main reasons for our volume growth are, first, selective restocking of wholesalers and respective base effects in H1, Secondly, we have further expanded our market position by maintaining our sales and marketing efforts since mid-2022, when the building construction markets began to decline. The third volume driver were strong sales with new products such as Flowfit, the new supply piping system Mapres Therm and the new shower toilet Alba. Moving now to the net sales growth per region. Again, all growth figures refer to growth in local currencies. In Eastern Europe, net sales increased by 7% supported by a base effect. In Italy, net sales increased by 6% in a favorable market environment. In Benelux, net sales increased by 4%, driven by growth in the Netherlands. In Germany, Net sales increased by 3% despite the strongly declining market. Our growth in Germany was supported by a base effect, but also driven by relentless sales and marketing efforts and the introduction of new products. In Austria and Switzerland, net sales were stable year over year. In Western Europe, net sales declined by minus 3%. driven by sales declines in France and the UK. Net sales in Northern Europe decreased by minus 4%, negatively affected by the divestment of the Nordic shower business per end of 2023, with a negative effect of 2% on net sales. Let me now turn to the regions outside Europe. In the Middle East and Africa region, net sales increased by 17%, driven by the Gulf region. In America, net sales increased by 3%, and in the Far East Pacific, net sales were stable with strong growth in India, offset by the market decline in China. Let me now comment on the sales development per product area, again in local currencies. Installation flushing systems grew by 5%, while piping systems and bathroom systems both increased by 1%. Insulation and flossing systems benefited more from stocking effects of wholesalers compared to the other two product areas. Furthermore, the relatively weaker development of piping systems can be explained by its higher exposure to the weak new-build sector, whereas bathroom systems was negatively affected by the already mentioned divestment of the north shower business per end of 2023. Let me now comment on our guidance for our 2024 operational and financial results. The ABTA margin for the full year is expected to be slightly below previous year. The full year tax rate 2024 should be between 19 and 20 percent and capex is expected to be around 180 million Swiss francs. Before I come to the outlook for the year, Let me briefly update you on our share buyback program. In total, we bought back 230,000 shares for a total amount of 121 million Swiss francs last year. This means that we distributed, together with the dividend payment, 540 million Swiss francs to shareholders in 2024. This corresponds to around 18% of net sales last year. Let me now comment on our market outlook for 2025. After the significant decline of the building construction industry since mid-2022, we expect overall demand to stabilize in the course of 2025. In Europe, building permits almost stabilized in the first nine months of last year with a slight decrease of minus one percent. However, In our key markets, Germany, the Nordic countries and Austria, building permits still fell double-digit, overall by minus 12% in the first nine months of last year. Due to this geographical exposure, the new construction market relevant to Geprit is expected to continue to decline in 2025, however, at a much lower rate than last year. Unlike the new-build sector, we expect a stable to slightly positive development for the renovation market, which accounts for around 60% of our business. Since several market indicators, for example real estate transactions, show first signs of a stabilization or even a slight recovery. Let me now turn to the regions outside Europe where we expect a mixed picture for the building and construction industry in 2025. We expect in several markets, for example in India or the Gulf region, a strong demand. other markets, for example China, will be in a decline, mainly driven by the residential sector. After this market outlook, let me now come to the Gaborit outlook and our priorities this year. Regardless of the market environment, we will continue to execute on various strategic initiatives this year, such as further expansion of our piping business with the new products Flowfit, Maples Therm and Supertube. The shower toilet business with a focus on the entry-level model Alba launched last year. And as a third example, our specialization strategy of our ceramic plants. Furthermore, we will also again increase our expenditures this year for dedicated sales initiatives in emerging markets and for investments in IT and digitalization. In total, we will increase operational expenses for these initiatives by 20 million Swiss francs in 2025. In terms of pricing, we decided to implement a regular sales price increase of around 1% as of Q2 this year. With regards to our two largest P&L cost positions, We expect a wage inflation of around 4% this year and stable direct material prices in Q1 compared to Q4 last year. Let me finish our dev rate outlook with two important adjustments of our operations footprint. As part of our continuous improvement strategy, we decided in 2023 to specialize our ceramics manufacturing network. The Ceramic Specialization Initiative pursues the goal to specialize each ceramic plant to specific products or product families according to specialized competences and know-how, following the manufacturing principle of one product, one plant. This approach will not only improve efficiency, but also improve product quality, product availability, and the sustainability footprint of our ceramics manufacturing network. In the light of this specialization strategy, we decided to close our site in Wesel per end of 2026. Wesel is the smaller of our two ceramics plants in Germany. Around 300 employees in the plant will be affected by the closure. There are three specific reasons for the plant closure of Wesel. the current competences and expertise of the plant will become less relevant over time in the context of the specialization strategy. Second, the infrastructure is old and restricted in terms of growth potential. And third, the network specialization and further process optimizations enable the absorption of the sub-critical size of waste. The product portfolio is not affected by the closure. The products currently manufactured in Wiesel will be transferred to other existing ceramic plants, including the second ceramic plant in Germany. Total closure and transfer costs are estimated to around 40 million Euro, 25 million as one-time expenses and 50 million for write-offs. As a financial benefit, we expect annual savings of around €10 million as of 2027. A second major initiative in operations is the establishment of a new additional site for distribution logistics. As part of our long-term capacity planning, but also in the light of risk mitigation, we have decided to build a second distribution center beside our currently existing main logistics center in Fullendorf. For this purpose, we have secured a suitable plot of land in Ebenbüren in northern Germany to build a new greenfield logistics center. We will initiate the planning phase this year and plan to ramp up operation of the new center as of 2029 or 2030. Let me close our introduction with a short summary. 2024 marked a further strong sharp decline of the building construction market. Despite the significant market contraction, we managed to grow our volumes and to keep our margins on a high and industry-leading level. These results confirm that we are successfully navigating through the significant market decline of the European building construction sector since mid-2022 and that our two guiding principles during this downturn operational flexibility and strategic stability are paying off. For 2025 we expect overall demand to stabilize in the course of the year. Regardless of the market environment we will continue to execute on our strategic initiatives on top and bottom line to further strengthen Gabriels' market position. Our confidence is based on the fundamental need for our products, our resilient strategy and business model, and our long-term focus and track records. Thank you for your attention. We are now ready to answer your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and 1 on the touch-tone telephone. you will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested with only answers while asking a question. Anyone with a question may press star and one at this time. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Happy New Year. I have three questions, if possible. Two are very quick, but the main question is regarding the footprint actions you're doing in ceramics. I think in past analyst meetings, you had targeted a productivity improvement in ceramics of 3%, I think, between 23% and 28%. How much of that is this one action? And Is there other things to follow for further structural improvements in ceramics? That's my main question. The other two are quick clarifications. When you say pricing has off Q2, do you mean the normal April price increase? And then the third question is regarding, you mentioned restocking at wholesalers in the first half. You don't mention second half. Has it stopped? What have you seen there? Thank you.

I start with question number three. We have not heard of any stocking effects of wholesalers in the second half of the year in either direction. Question number two, you're right. This is a normal price increase as of April of around 1%. To the first question, I have to correct you a little bit. The 3% typically productivity improvement, which we have achieved in the plants in the recent years, was not only ceramics, that was the entire manufacturing network of all the 26 plants. With this decision to close Basel, we expect that this benefit will now contribute to the future productivity improvement, which we in average also expect to be around 3% every year. And the last question was, do you expect further changes of the network? No, we do not expect any further adjustments at the current moment.

Thank you. The next question comes from Martin Flueckiger from Kepler-Chevreux. Please go ahead.

Good morning, gentlemen. Thanks for taking my question. I've just got two. I was wondering whether you could provide us with an update on the Q4 performance of your shower toilet business and particularly how Alba performed in the final quarter of last year. And then secondly, there was a sharp fall in momentum in the Middle East Africa region and I realized that the comps were wobbly over the last few years, but I was just wondering whether there was actually any fundamental reason behind that. Thanks so much.

Question number one, the shower toilet business did very well in Q4 versus Q3 and Q2, especially or almost only driven by Alba. Or in other words, Alba was growing in the fourth quarter, significantly growing compared to Q3. Second question, Middle East Africa growth of 10% in Q4, a little bit less than what we have seen in the quarters before. This is only driven by a very strong comp. We have had a growth of 41% already in Q4 2023. So if you add these together, we have been growing around 50% over two years. we don't see any weakening of the market in Q4 in the Middle East Africa region, especially in the markets which are strong, which is the Gulf region.

The next question comes from Martin Huesler from ZKB. Please go ahead.

Yes, good morning everyone. I have two questions as well. Maybe first on the new logistics center in Ebenbüren. Can you give some more details, for example, why you didn't choose to increase capacities further in Fuldendorf and maybe what might be the impact over the next couple of years on CapEx or if this is within the ordinary capex of, I guess, roughly 150 to 200 million. That's the first question.

So the first reason why we have chosen a new location was that we have certain limits in Fullendorf as well. So we also thought to expand the logistics further in Fullendorf, but it would have become more and more complicated. It's quite dense already in Fullendorf. But it has also to do with a risk considerations. As you know, Volendorf is the logistic center for the classical give-risk portfolio. So if there's anything where we would have any issues in that logistic center, we will be impacted quite substantially. So it's also from a risk perspective, the moment where we said it makes sense to build up a greenfield new logistic center. We just secured the land, so we are basically at zero at the moment. We are now starting a planning phase and then we will also have more clarity about investments, but it's clear that we expect that investments will be more than 100 million for this new logistics center, which will be part of our Investments which we have in our mid-term plans, we expect around 200 million annual capex mid-term and this distribution center should be paid out of this mid-term capex expectation.

Okay, thank you. And maybe the second question. I guess Q4 all in all was a bit better than you expected end of October. What was the main reason that you see that you underestimated in October?

That was basically across geographies. It was not a specific geography. Germany was a bit better. Benelux, Middle East, Africa was also a bit better. We just said before then what we expected. There was one reason. And the second was the new products which we have introduced. I mentioned before ALBA, which accelerated Q4 versus Q3, but also MAPRES-TERM did very well with above expectations in Q4 compared to what we have expected end of Q3.

Okay. Thank you.

The next question comes from Yacine Touhari from Onfield Investment Research. Please go ahead.

Good morning and thank you very much for taking my question. A few questions first. You are announcing a normal price increase of 1%. Do you feel it's going to be enough to offset the wage and the fixed cost inflation? Or do you need also productivity improvements? I'm just trying to understand. if you feel comfortable that you will be able to offset all the increasing costs. And the second question, it's about the German election. How do you see the impact of German election on your business? And I think there is a lot of backlash against immigration policy. Do you feel that if there is stricter immigration policy in Germany, it could impact demographics and on the long-term housing need in the country?

Question number one, if we just take these two drivers, sales price increases and wage inflation, the answer is that price increase will not be sufficient to compensate for wage inflation. Why? Keep in mind that the sales price increase of around 1% will only affect the full year with three quarters. So it's already lower, and the 4% around wage inflation has an impact which is more around about 1 percentage point on the margins. So that will not be sufficient if you just take these two elements. With regards to the German elections, we don't want to speculate. We will see what will happen in February, and then we take it from there. Our strategy and channel and our activities are not driven by elections. We can't change markets and also not governments and elections. We will take it as it will be. Therefore, I don't want to speculate what the impacts are on Gabri.

Thank you. Maybe just to come back on the question on the pricing, you're also doing a lot of work on productivity gain. Do you feel that this productivity again might help mitigate the wage cost inflation and help you protect your margin?

We not only feel, but we are convinced that the productivity improvements will obviously also support and help our margins this year, but I can't quantify it.

Thank you very much.

You're welcome.

The next question comes from Arnold Lehman from Bank of America. Please go ahead.

Thank you very much. I have two questions, please, gentlemen. Firstly, you talk about a stable market outlook for 2025. We know you have ambition to outperform the market thanks to Geberit initiatives. At the same time, the base effect will be a bit higher in a few quarters because of the restocking last year. So assuming no further restocking or destocking in 2025, do you feel that your volume outlook for Geberit is either stable or positive for 2025? That's my first question. And could you maybe comment a little bit more on the cost outlook? We've seen, I guess, natural gas prices a little bit higher in some parts of the world. On the other hand, we have industrial metals still at a pretty depressed level. What do you see in your cost trends at the moment? Thank you.

I take the first question and number two will be answered by Tobias. To be precise, we said we expect a stabilization in the course of 2025. This means some point in the year we expect that we should see the lowest point. secondly we also have the ambition to expand our market position next year as usual however as you know we only provide a guidance for our top line and therefore also for the volume only with our H1 results therefore I don't want to comment on your questions about our volume expectations of GEBRIT this year and question number two will be answered by Tobias

From the raw material, we're only commenting on Q1, where we expect the raw material cost to be roughly on the level of Q4 of 24. Bear in mind that we announced roughly 20 million higher cost, especially for sales initiatives and IT slash digitalization. And finally, in terms of cost, also keep in mind the roughly 4% wage inflation that we are guiding for 25%.

Thank you very much.

The next question comes from Patrick from UBS. Please, go ahead.

Yes, thanks, and good morning, everybody. Two questions, please. The first is on the costs. The 20 million increase in sales initiatives and digitalization I assume that is on top of the 30 million that we saw in 24, so incremental, and also related to costs, the closure costs of 40 million. How should we spread them over 25 and 26? That's the first. Okay.

Thank you. So for the costs, the 20 million, indeed, they do come on top of most of the costs that we announced last year. On the closing costs, the 15 million write-off will be taken this year, and the remaining 25 million are to a very large extent as well P&L effect in this year. Cash effect, however, will mostly be in 26.

Okay, understood. That's helpful. Thank you. And then the second question is around the margin guidance for 24. I just noticed the slight change in wording where you're saying slightly below 24 versus Q3 where you said around 29 and a half. Is there an implied change or marginal upgrade in there, or just a different choice of words and it's still 29 and a half?

No, it is a marginal upgrade. It's just driven by the fact that volumes were a tick better in Q4 than what we expected, and that is reflected in these different words.

Okay, so we're looking for something like 29.7, 29.8, I guess.

We are looking for something slightly below previous year level.

Okay. Thank you for taking my questions.

I have two.

So firstly, on Western Europe, Q4 saw a very strong decline versus your position at 9M. Please, could you talk a little bit more about the different countries? So we know France isn't doing very well. UK is probably close to the trough and Iberia should be doing well. So could you just elaborate on that?

Q4 in Western Europe was driven by a decline in France and also in the UK. In France we have heard and seen that the market has become in tendency more weaker throughout the year and in Q4 we have, that was a special gateway effect, a very strong base because we had a strong Q4 for specific reasons in Q4 2023. The third region, the Iberia Peninsula, is growing. is nicely growing, also our business, driven by obviously a strong market environment, especially in Spain, but also some well-working initiatives of GEBRIT. However, Averia is, in terms of share of sales, invested in Europe relatively small, so it's not sufficient to compensate for the decline in France and the UK in Q4.

And how should we expect this to evolve over the next few quarters?

Sorry, invest in Europe, you mean? Yes. Oh, we do not provide guidance on a quarterly basis for some regions. That's too detailed.

Okay, okay. And my second question is slightly more longer term. So if we think of your net debt to EBITDA and you've announced CapEx plans of around 20 million per year and your dividends and if we include the 300 million share buyback, I see a strong deal leveraging over the next few years versus the 1x at the end of 2023. And you've guided to reaching about 1.5x in the medium term. So how should we think about capital allocation, which would, you know, increase your net debt to EBITDA levels to your guidance range?

So we maintain that we think that roughly 1.5 times net debt to ABTA is an adequate level for our business. That considers all our business plan and expectation, including the capex that was mentioned before with Christian, and also keep in mind the share buybacks that we are executing on a regular basis.

Okay. Okay. Thank you.

The next question comes from John Reville from Thomson Reuters.

Please go ahead. Thank you for taking my questions. I was just wondering, I know the United States is not a big particular market for Geberit, but I was wondering, can you give an overview of what's your outlook for the market there, the construction market there this year, and in terms of new build versus renovation and what sort of levels of growth or not do you see there this year? and also you guys going to invest more in there as a result of this or what's the kind of investment plan? Thank you.

Sorry, we didn't get the country you were referring to.

United States. United States.

Okay, so United States we have, as you know, a kind of separate business. The government business is a bit different over there. It's at an arm's length. We have expectations that the market should be for us stable next year, 2025. But also there we have the ambition to further expand our market position and to become stronger. But all in all, we are quite, I wouldn't say optimistic, but let's say we expect a stable, slightly positive market in the U.S.

Right. And are you doing any more investments in there to, I don't know, are you building any more plants or distribution centers or is there any plans?

nothing beyond the current normal investments which we do we have two plans there sorry we have two plans there we reshored some of the supply chains already a couple of years ago so there's nothing if this is behind your question which we have to adapt to the context of the of the new president coming in next week so there is no adaptation which we have to do we did some of them already a couple of years ago but that's okay now excellent thank you

The next question comes from Remo Rosenau from Helvetische Bank. Please go ahead.

Yes, morning. Even considering a restocking effect during H1, the growth of 3.2% in Germany during last year was quite remarkable, also compared to Switzerland and Austria, which most likely indicates additional market share gains. Do you have any idea how much of this growth was due to restocking and how much was driven by real underlying growth and growth Was this growth mainly driven by your new product launches or were there also other elements having an impact? That is my first question.

Unfortunately, we do not know and we don't have any quantitative idea how much these restocking effects were in Germany in the first half of the year. We only got the qualitative feedback. With regards to the products, that was more in the year or to the end of the year, which have been accelerating then. compared to the first half of the year, and some of them we only introduced as of Q2. For example, MAPRES-TERM, the new supply piping system, or also ALBA, we only introduced as of Q2 last year. So that accelerated within the year, also in Germany.

But the notion of gaining market shares is obvious, right?

Absolutely. We don't disagree on that notion, not at all. Okay.

then how large was the disposal effect of the Nordic shower business over the full year and in the fourth quarter?

The total sales which we have sold was around 6 million. I only know the effect on the Nordics because that is where the business basically was. On the Nordics the effect is around 2% throughout the year but also in Q4. And then you can do the math what it is on the group. Not that much, obviously.

Okay, good. And my last question. You talked about additional extra costs in 2025. But on the other hand, we have also some extra costs falling out of the picture in 2025. For instance, the cost for the 150-year anniversary. Could you quantify it now? In retrospect, you should be able to do that. How much do you spend for this 150-year anniversary, which will not occur again this year?

This is correct. We know obviously what the figure was. It was well invested, although it was high, but it was a mid-single-digit million amount. But that falls off your right. But we will take this amount, and we will take it especially, for example, in the shower-toilet business, to accelerate from that perspective also the activities, for example, for Alba. So it's not a massive fallout of marketing costs compared to last year.

Okay, good. Thank you.

The next question comes from Thomas Paul from AEWP Finanznachrichten. Please go ahead.

Yes, good morning. I just had a question for the closure in Wesel. Will there be layoffs? You're right, about 300 employees affected. And how smoothly can such an operation be carried through with regulation or trade unions and so on?

So there will be many terminations because we completely closed the plant and currently we employ even a bit more than 300 people but we estimate with all the natural fluctuation that about 300 people will be affected end of next year. how smooth it will be. Obviously we are very well prepared. We are currently starting right now today the negotiations and discussions with employee representatives. I can't give you a forecast how smooth it will be. We will do our best to also stick to our responsibility with regards to the 300 employees. We hope that we have more clarity in the first half of the year and then also have a smooth process until end 2026.

Thank you.

The next question comes from Benjamin Trebe from NZZ. Please go ahead.

Good morning and thank you very much for this opportunity. I got two points regarding your key market, Germany. First of all, you mentioned some relentless efforts in the last year that you undertook to grow in the market. What were these efforts in particular?

Most importantly, we did not reduce or adapt our sales organization in Germany. we clearly defined already two and a half years ago if and what happens the market will go down we do not reduce our efforts for example even retirement in the sales organization need to be refilled and that is what we call relentless marketing efforts as a second example as you know we do a lot of training of professional customers planners plumbers in Germany we have a lot of activities we do not reduce our activities, for example, customer events or trainings somewhere or in-house. So zero reduction. We also even invested over the last two and a half years, as you might know, into a new customer center in Germany, which will be opened this year. We invested 37 million over the last two and a half years. That obviously did not help to generate sales yet, but it was a clear signal to the market of our professional partners that we don't stop our activities that we believe into the German market also in that time frame.

Thank you. And secondly, I want to ask if you could add a bit of context here regarding to Germany. I guess the downturn in the construction market has been quite long and quite severe. How hard was that compared to previous downturns in Germany? And do you expect to outgrow the market in the future or for how long do you expect that? Or will there at some point be operational adjustments in Germany because it's just too heavy what's going on?

So the first question, if you compare the current downturn in Germany for the building construction market and specifically for the sanitary part where we are playing, I would say that the downturn this time is worse, heavier compared to 2008 and 2009. The second question with the adaptation of our footprint in Germany has nothing to do with the German market, as we said in our introduction. It has nothing to do that we have a weak market in Germany. This is just part of our continuous improvement where we are regularly reviewing our network. In that case, we came to a conclusion that this German ceramic plant has no long-term future, so we have to take this decision. Some of the product portfolio, by the way, which will be transferred from Wesel, the plant we close, will be to the other plant in Germany, which is in Haldensleben, which will manufacture in the future part of that portfolio. Also, the fact that we have decided to invest into a new logistics center, Greenfeed, in Germany is also a clear sign or signal that we are not looking at the German wheat market, which is not triggering any investment positions. Over the last five years, to give you a number, we invested 370 million Swiss francs. That's around 43% of our total capex, only in Germany. Although, we only generate 30% of sales in this market.

Okay, thank you very much. You're welcome.

The next question comes from Tobias Wörner from Stifel. Please go ahead.

Yes, good morning, gentlemen, and thanks for taking the question. Three, if I may, please. Number one, I want to get a sense of where the inventory levels are in Germany. And when I look at the order books for house builders in Germany, they have been at the lowest point three months and the highest point during COVID at 5.9 months and over the cycle are at 4.4 months. In December, they've moved up to four months, i.e. from a low of three months. So I'm trying to understand Do you believe that we've hit the trough in terms of the inventory levels at your customers? And if so, you're saying you see no move either way. What is the balance of risks of it going one way or the other? Thank you, number one.

Yeah. The inventory level of wholesalers in Germany is below what we used to call normal level, so it's below 2019. Maybe this is now the new normal level in the life of this market environment. What we expect, what seems to be quite sure, that the whole stocking and key stocking effect should come down also as of 2025. Because, as you know, the main reason for this stocking effect were the massive inflation, which we have experienced also in our sector. That led to buying forward, building up stocks, and this also led afterwards then to destocking. Since we don't have this high inflation environment anymore, we hope that we will have much less impact of whatever inventories might do 2025 in Germany.

If I may follow up on that question, we've got elections in Germany at the end of February and likely a new government. Are there, in your views, any regulatory effects which could lead the wholesalers to pre-buy or not?

I don't know, and as I said before, we don't want to speculate, and I don't have really a view on that, how wholesalers will react on the governmental decision. There is one specific law which might be of interest. This is the German energy law for buildings, which might be done with a new government, might have a different view on that. That might have a certain impact, but apart from that, I don't have a view on that.

Okay, then if I go on to the country-specific questions, number two. Italy you've seen a very good growth there in q4 and that was a bit of a surprise to me you know growing at 6.2 percent your construct has forecast for the year 24 and 25 still down high single-digit levels including renovation why did you perform so strongly there first of all we think that the market is well last year in Italy

also driven by subsidy programs you aware of this super bonus program which had a positive effect on the market and on the second hand it's similar to what I said to other companies before we are doing very well with new products which we also introduced in Italy very good and then just lastly when I look to the Benelux which is a reasonable sized market for you

it seems that the current lead indicators are bouncing back quite strongly. You've seen Q4 up 4.8%, indicating that that is also for you the case. Do you feel comfortable with this market going into next year?

Especially with the Netherlands, I would agree. We are quite rather optimistic to the Netherlands. This is one of the countries where we think that demand started to pick up again.

Great. Thank you very much.

The next question comes from Christoph Dolleschal from HSBC. Please go ahead.

Good morning, gents. Thanks for taking my question. Most of them have been answered, but probably three follow-ups. The first one on Germany again, because you said they did better than expected, and we've heard a couple of reasons. What about also, do you see less competition from the heating solutions? Did that play a role as well, or is it mainly because of the sales organization that you didn't touch and basically all driven by the sales performance.

As you know, we don't have facts and figures about heating solutions, but if we talk to our wholesalers, we did not hear that the heating solution effect in whatever direction had an impact on our performance in Q4.

Okay. Thanks. The next one is on Nordics. Because even if we strip out the disposal effect of the shower business, we are still down 2% local currency, 4% reported. What are the reasons why the Nordics keep on being bad? I mean, what do you expect in terms of the market? Are we reaching a bottom now? Or is it continuing to be weak? Because I mean, they've been like Germany, weak for a while, but Germany is turning and Nordics are not.

Nordics belonged to the market last year which was the most difficult one because of especially the new build sector. You might remember that the building permits in the Nordics in 2023 were significantly down. I can't remember the exact number. It was something like 25%, massively, especially in Sweden. So that was obviously hampering the market last year. And where are we now in the Nordics? If you look now, the building permits are similar to Germany. It's not as down as it was in 2023, but in the first nine months last year in Sweden, in Finland, in Norway, they are down 15 to 17 percent. Still negative for the new build, not as severe as 2023.

Okay, thanks. And the last one on the price increase. So you're again doing the regular price increase, which you had skipped last year. Do you have any idea how much pre-buying that typically leads to in the first quarter? Because obviously I would expect some of the wholesalers then trying to at least save the 1% or 2% that typically come in there.

I don't have a quantitative idea or answer to that, but there is typically a pre-buying, which you also would expect... This year with this regular price increase, but I can't quantify it.

Okay, thanks.

The next question comes from Harry Down from Redburn Atlantic. Please go ahead.

Yes, thank you. Morning. I think we have three questions if possible. Just firstly on the sales growth initiatives for this year, we need to give a bit more color on sort of where they're being put to use. I know some of that was outside Europe last year. Is that the same? case this year and secondly in relation to that do you think that's an ongoing sort of investment and we should think maybe the 20 to 30 million that we've seen over the last two years is something that we should factor in for you know the next sort of two three years as well just sort of from a modeling perspective and then finally I think in the release you mentioned an expansion of the piping business in 2025 I just wondered if is that a further rollout of

products like flow fit and super tube to new countries or is that an aim to increase the penetration within the existing footprint thank you question number one we have started and we continue with four specific markets outside europe where we will further invest this year these are the markets in saudi arabia our organization in india where we will accelerate also in vietnam and in egypt these are the four regions, countries where we are accelerating our activities this year outside Europe. The second question about the 20 million additional expenses, that depends always on what we are focusing on is there a specific initiative we mentioned now already the second year IT and digitalization might be that that will continue definitely that we have to further expand there we don't know so I would not take it as a number which you just put in for the coming years it depends every year case by case what we are doing on the operational side mainly And the third question, further expansion of piping systems, this is not about geographical expansion. It's about further penetration increase of new products in existing geographies.

Great. Thank you very much.

As a reminder, if you wish to register for a question, please press star followed by one. The next question is a follow-up from Martin Huesler from ZKB. Please go ahead. Mr. Hüttler, your line is open. You may proceed with your question.

Thank you. Two follow-ups. Just to clearly understand the closure of Wesel in terms of sales, you would not expect any impact because you think you can fully compensate this by network optimization. Is that rightly understood?

This is correct. We don't adjust the product portfolio. We just move products from Wesel to other plants where they will be manufactured.

And then a very detailed question, but why did you show an FX impact in Q4 for Switzerland?

The good question is a very small one. We have a few finished bathrooms. You know we have a site in Austria where we do prefabricated bathrooms. and they are invoiced in Euro if they are installed in Switzerland. And this has a little minor impact.

Okay, thanks a lot.

So the numbers are correct.

Also, the next question is a follow-up from Martin Flückiger from Kepler-Schöbre. Please go ahead.

Yeah, thanks for taking my follow-up question. Just a quick one on the specialization initiative costs. What was it again? 40 million. Are you going to report those as exceptional items or is that all going to be part of the usual EBITDA and EBIT numbers? Are we going to see a difference between EBITDA adjusted and EBIT reported in 2025, I guess is what I'm asking.

We haven't finally decided on that, but we will make sure that you always can differentiate what costs are associated to it.

Okay, thanks.