Geberit AG

Good morning, ladies and gentlemen, and welcome to Gebreit's half-year results conference call. Gebreit achieved convincing results in the first half of the year. Let me start, as usual, with the three key statements for H1. First, we achieved a net sales growth of 4% in local currencies despite a continued challenging market environment. Excluding one-time costs for the closure of our ceramics plant in Wesel, we kept operating margins stable. And third, we achieved an EPS growth of 6% if the plant closure costs and negative currency effects are excluded. Let me begin our review with a few comments on the top line for the first half of the year. Net sales increased by 2% to 1.66 billion Swiss francs, negatively affected by currency effects. Negative currency effects led to a net sales loss of 37 million Swiss francs, or minus 2%. In local currencies, net sales increased by 4%, driven by growth in almost all countries in Europe, and the continued strong development of new products. The top line growth was fully driven by volumes. The sales price effect was around zero in H1, since the positive effect of the sales price increase in the second quarter was compensated by a technically driven negative price effect in Q1, and selective price adjustments in Switzerland due to the strengthening of the Swiss franc over the last years. This brings me to the regional net sales development. All growth makers refer to growth in local currencies. In Austria, net sales increased by 10% thanks to strong growth with our new products. In Germany, net sales grew by 6% with double-digit growth in bathroom systems. In Benelux, net sales grew 6% with growth in both countries, Belgium and Netherlands. In Italy, net sales were up by 3% in a softening new build market. Net sales in Eastern Europe increased by 2%, negatively affected by a strong phase effect. In the Nordic countries, net sales grew by 1% with growth in all countries excluding Norway. Switzerland and Western Europe were the only two regions in Europe which recorded a safe decline both by minus 3% in the first half of 2025. Switzerland was affected by selective price adjustments due to the strengthening of the Swiss franc over the last years and Western Europe was negatively affected by a market decline in France which was only partially offset by strong growth in Iberia. Let me now turn to the regions outside Europe. In the Middle East Africa region, net sales increased by 25%, driven by Turkey and South Africa. In America, net sales grew by 10% due to the strong US faucet business. Net sales in Far East Pacific declined by minus 5% Driven by declines in China, partially offset by strong growth in India. Let me now comment on the sales development per product area, again in local currencies. Installation of flushing systems and piping systems, both increased by 3%. Bathroom systems, net sales grew by 6%, driven by strong growth of our shower toilets and the US faucet business. Let me now comment on the sales development in the second quarter. Net sales declined by minus 2% and reached 787 million Swiss francs in Q2. The negative currency effect accelerated versus the first quarter and affected the top line negatively by 34 million Swiss francs, or minus 4%. In local currencies, Group Net Sales increased by 3% with one working day less than last year. The sales price effect in Q2 was around 0% since the positive effect of the general sales price increase as of April was still limited due to the fact that deliveries in April and even into May were mostly still on old price levels and because of the before mentioned currency driven price adjustments in Switzerland. Let me turn now to the regional development again in local currencies for Q2. In Europe, net sales increased by 1% a slight slowdown versus the first quarter due to more challenging comps in the second quarter and wholesale rebalancing of the pre-buying before the April price increase. Outside Europe, net sales increased in the Middle East Africa region by 36%, driven by very strong growth in Turkey and in America by 15%, partially due to the pre-buying of customers in anticipation of tariff-related price adjustments. Net sales in the Far East Pacific declined by minus 8%, driven by declines in China, partially offset by growth in India. I continue with the sales development for product area in Q2 again in local currencies. Installation and flushing systems and piping systems both increased by 1%, while bathroom systems increased by 6%, driven by the strong growth of the shower toilet business and the US faucet business. I come back to the first half of the year with some comments on the operating and financial results. The negative current effect as well as the one-time charges related to the closure of the Wesel plant led to a declining operating results in Swiss francs on all levels. We booked 17 million euro one-time costs for the site closure in Wesel in the first half of the year. 12 million euro on OPEX level already fully booked in Q1 and 5 million euro on depreciation level There are 2 million already booked in Q1 and 3 million in Q2. Excluding the side closure costs and excluding negative currency effects, all bottom line results increased mid single-digit versus previous year. Let me continue with the discussion of the APTA development. in Swiss francs decreased by minus 1% to 514 million Swiss francs in the first half of the year. Excluding negative currency effects, EBITDA increased by 2%. The EBITDA margin reached 30.9%, decreasing by 70 basis points, which can almost entirely be attributed to the already mentioned one-time operating expenses of 12 million euros related to the closure of the ceramic plants in Basel. Excluding this one-time effect, the ABTA margin in Swiss ranks would have reached 31.5%, only 10 basis points below previous year's level. The positive effect from the operating leverage on the ABTA margin was offset mainly by three factors. First, the wage inflation of 4%, Second, 21% higher energy prices. And third, investments in several dedicated growth initiatives in emerging markets and additional expenditures for IT and digitalization. EBIT margin reached 26.0% in the first half of the year, a decrease of 110 basis points. also almost entirely driven by the plant closure, costs of 17 million euro. Excluding these one-time charges, the EBIT margin would have reached 27.0%, again only 10 basis points below previous year's level. Net income reached 339 million Swiss francs, a decline by minus 3%, which resulted in a net income margin of 20.3%. Earnings per share reached 10 Swiss francs 28. Excluding currency effects and excluding the side closure costs, EPS would have reached 11 Swiss francs 18, an increase of 6% versus previous year. EPS growth also benefited from our share buyback program launched in 2024. CapEx decreased by 8 million or minus 12% to 55 million Swiss francs due to varying project timings. Free cash flow increased double digit by 40% to 247 million Swiss francs due to timing of tax payments and CapEx. Let me now comment on our market outlook for the full year 2025. which does not differ significantly from our outlook given at our Q1 result communication in May this year. In Europe, we still expect a slight decline in new build activity as building permits fell by 2% in 2024 and continued to decline slightly in the first quarter of 2025 by minus 3%. This decline should be offset by a positive renovation segment, which contributes around 60% to Gabriel's sales, as indicated by several indicators, for example, increased real estate transactions. In sum, we continue to expect building construction demand in Europe to stabilize in 2025 overall. Outside Europe, we expect a mixed picture for the building construction industry. Strong demand is forecasted in several markets, for example in India and the Gulf region. In China, on the other hand, we expect a continuation of the market decline due to the challenging residential sector. The now effective US tariffs are not material for the Gabrit Group. Since the share of our US business is only 3%, and most of the products sold in the U.S. are also manufactured in our two plants in the U.S. On the supply side, we expect for Q3 a sideways development of direct material prices compared to Q2. Let me now briefly comment on the Geprit priorities this year. We will continue to have a strong focus on new products. For example, the new Duofix installation element but also important new products introduced over the last years like Flowfit, Maplis Therm and the shower toilet Alba. Other important initiatives this year are dedicated sales activities outside Europe, for example in India, and increased OPEX in the area of IT and digitalization, for example for AI initiatives and digital marketing efforts. Let me continue with our full year guidance. Despite the overall stabilizing building of the production market, the short-term future is still difficult to predict due to the increased geopolitical and macroeconomic uncertainties and our general low visibility. Under the assumption of no material changes of this fragile environment, we expect for the full year net sales growth in local currencies of around 4% and an EBITDA margin of around 29%. Net sales in July were above previous year's level and grew in line with the full year top line guidance. Please also note that the full year EBITDA margin guidance of around 29% includes 16 million Euro side closure costs. Thereof 12 million Euro already booked in H1 and another 4 million Euro expected to come in H2. This brings me to the update for the total closure costs for the site in Wendel. At this stage we expect a total of 25 million Euro for the site closure. This is less than the previously communicated 40 million Euro. The main reasons for the reduced closure costs are lower depreciations caused by higher value of land and buildings and expected transfers of machines to other plants, and an updated view on OPEX. The expected total closure cost of 25 million will be fully booked in 2025 and 2026 and consists of 18 million Euro in OPEX and 7 million Euro in depreciation. Let me close our introduction with a short summary. Gebrit delivered convincing results in the first half of 2025. with a net sales growth of 4% in an overall stabilizing market environment. Operating margins were previously at level, excluding the one-time effect of costs related to the Basel plant closure. This means that earnings per share, excluding closure costs and negative currency effects, grew by 6%, which we consider as a strong result in this still challenging market environment. For 2025, we continue to expect a stabilizing market demand in Europe and the mixed environment overseas. GEBRIT is well prepared to continue its outperformance in this environment, as already demonstrated several times in the past. Our confidence is based on the fundamental need for our products, our resilient strategy and business model, and our long-term focus and track record. 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 the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to disable the loudspeaker mode while asking a question. Anyone with a question may press star and 1 at this time. The first question comes from Gosha Pajurani from Bernstein. Please go ahead.

Hi, thanks for taking my questions. So first question on pricing. So in April you had already started the pricing increase, but when we look at your results today and see the Thank you very much. Why is it still zero in Q2? Did you have to further cut some prices in Switzerland? And following from that, on the price-cost side, so pricing was flat and raw materials have been slightly down, leading to the net positive pricing impact. But then when we look at wage and energy inflation, Could you talk about the levels of wage and energy inflation in Q2 and would that then imply negative overall price cost for Q2? Thanks.