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.

I start with the question about pricing in Q2 and Tobias will answer then the questions around wage inflation and energy cost in Q2. The safe price effect in Q2 was still around Thank you very much. were still made on all price levels. So order intake still until end of March, but the deliveries were still into May on the lower price level. That's the reason why if you round numbers, price effect in the second quarter was still around zero. And wage inflation and energy will be answered by Tobias.

Wage inflation in Q2 was at 5.8%. That will be the highest level in the entire year. That is also due to certain one-time effects. that are also booked in Germany with salary increases. Energy inflation in Q2 has only been slightly up a couple of percentage points, so that is not really material. However, these two points do not flow into the net price increases. These would be reflected under other costs, so that is not an impact on the 0.4 or the margin bridge.

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

Good morning, gentlemen. Thanks for taking my questions. I've got two and I'll step back in line afterwards. Firstly, if I understood your press release correctly, the second quarter after the announced price increase as of April 1st saw some wholesaler inventory rebalancing. Can you talk a little bit about your impression you got from your discussions with wholesalers, what their inventory management behavior is going to look like in Q3 and Q4? Any indications here would be helpful. Thanks. That's my first question. And then the second one is on... The trading update for July, if you're willing to talk about that. If you could provide us with an indication as you have done over the last two quarterly results in terms of like-for-like sales growth in July, that would be helpful. Thanks.

First question, indication about inventory behavior of wholesalers in the second half of the year. We don't have Good insights what wholesalers will do in the second half of the year. However, what we got qualitatively as a feedback is that the inventory levels as of end of June were more or less on a normal level. So it was not still inflated by the price increase as of April, but it was also not on a lower level than normal. So at the moment, normal level, no indication what could happen in the second half of the year with the wholesaling levels. Sales in July were up. and also like for like, there were inline, we have full year guidance, top line guidance of a growth of 4%. As I said before, there was also like for like, so adjusted for working days and courages.

Thanks.

The next question comes from Christian Arnold from Oddo, BAHF. Please go ahead.

Yes, good morning all. On Switzerland, could you quantify the negative price effect or at least give us a kind of an indication? Are we talking here about 1%, about 5%, about 10%?

That depends on the product categories because it was a selective price adjustment. We did not do a price adjustment across the board. because that depended very much on the currency, that depends on the manufacturing location, so therefore I can't give you that one number, but I can give you an indication that volumes were around zero in Switzerland in the first half of the year.

Okay, thank you. Then on Germany, I know you are not, usually you are not talking about quarterly or QQ1, Q2, Thank you very much.

also driven by the sales price increases and pre-buying and rebalancing thereafter, maybe even a little bit more pronounced than what we have seen on a group level.

Okay, but similar, kind of slightly, yeah.

A little bit more dynamic than what you see on a group level in Germany.

Okay, very good. And my last question would be Gebrits Fokus in 2025. If I compare your press release of Q1 and now today, you added one bullet point and that is this dual fix. So maybe you can elaborate a little bit here. Why have you added this focus here? Is it already major or materially impacting your development in 2025?

Two reasons. First of all, as you know, DuoFix is one of the most important products which we have in terms of share of sales, so it's of high importance. And secondly, also the internal activities are very much focused at the moment on the introduction of the new DuoFix 4. It was not the intention to put that into the media release that you might believe that it had an impact on the top line, maybe, if this is your question. It's more about the activities and the importance of the product.

Okay, thank you very much.

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

Yes, thanks and good morning everybody. A follow-up on pricing. I think you explained well the various drivers, why the number was zero in Q2, but what should we then anticipate for the rest of the year where pricing would be below the 1% because of the offsets in Switzerland, maybe half a percentage point, or do you still think 1% is the right number for the rest of the year? That's the first question. Second question on the outlook. Bathroom systems clearly stood out. You mentioned the pre-buying or the strong faucets business in America and shower toilet. Would you, in your guidance for 4% local currency growth, Does the H2 picture by product category look similar as well to H1 or will there be different drivers? And then lastly, third question on this pre-buying you mentioned in America. How much of a pull forward effect do you anticipate here that we need to factor in for the second half? Thanks.

Question number one about pricing outlook for the full year. So for the full year obviously we will not reach a 1% safe price effect due to the fact that we have around about a zero effect in the first half of the year and also keep in mind that this negative effect from the price adjustment in Switzerland obviously have also an impact in the second half of the year. The rest, so the effect that we still have or the deliveries like in April and into May on all price levels, obviously that will not be the case anymore. So that will accelerate in the rest of the sales area that this price effect should become obviously clearly possible. Second question, what are the drivers in the second half of the year for the full year top line guidance of 4%? Pretty much the same drivers as what we have seen in the first half of the year, so we also expect on a full year basis that the bathroom system might outperform the other two product areas. Question number three, U.S. prebuying in anticipation of tariff-related price increases. We think that we have already seen in Q2 some of these prebuying effects because although we are manufacturing in the U.S., we also have some material which we buy from outside the U.S. which will be affected locally by tariffs. Therefore we expect or we believe that already in the second quarter we have seen some pull forward of customers in anticipation of potential tariff related price increases.

Great, thank you for this.

The next question comes from Elodie Rahl from JP Morgan. Please go ahead.

Hi, good morning. Thanks for taking my questions. My first one is on the impact from working capital in Q2. You mentioned less favorable impact in Q2, so I was wondering what your expectation is for the year, together with the CapEx timing, since you mentioned a bit of easing and maybe delays. So if you could give us expectations for the year as well on CapEx. and my second is on margins. Usually H2 margins are seasonally lower than H1, if I'm not mistaken, but you had a lot of one-offs in H1 this year, so I was wondering if you still think the seasonality effect will be seen on margins H2 versus H1 this year. And finally, my last question is on expectations for a European recovery. Is it still expected

I start with the third question about the European outlook and question number one and two will be answered by Tobias. As said in our introduction, we still expect a stabilization of the European market this year. Do we see a recovery towards the end of the year? No, it's just a stabilization. The indicators do not show that we expect on the short term a recovery. What will happen next year? We don't know yet. As usual, we'll provide you with a market outlook then beginning next year with regards to 2026.

And coming to Networking Capital and CapEx. On the CapEx, the slight decrease compared to last year in H1 is purely timing related. The full year outlook remains at the 180 million communicated already early in the year and therefore on a very similar level to last year. So that is pure timing of project, which last year were more H1 loaded and this year we are more H2 loaded but there are no delays in the projects. When it comes to net working capital, a single quarter is always a bit coincidence what comes out, especially if you look at the networking capital commodities. Overall, networking capital and the cash conversion cycle is very stable with us and evolves with the business activities. We have seen in Q in H1 overall networking capital from operating activities increased by 5 million but decreased from other activities so that is net only 1 million impacts from networking capital in H1 and however in Q2 the networking capital in fact was larger with minus 12 million and minus 11 million from other activities but again a lot of that is pure timing related in the quarter so if you look at the half year which is a more meaningful period there's basically no impact from networking capital.

The next question comes from Charlie Feirenbach from AWP. Please go ahead.

Good morning, gentlemen. I'm not quite sure if I missed your guess for the wage inflation in the full year. Thank you.

The wage inflation for the full year remains at 3 to 4% like stated already in Q1.

Okay, thanks a lot.

You're welcome.

As a reminder, if you wish to register for a question, please press star followed by 1. The next question comes from Harry Dow from Rothschild & Co. Please go ahead.

Yeah, thank you. Good morning, everybody. I think I've just got two questions. Thanks. Firstly, just on the drop-through from volumes, I think if we look at the first half, the impact from improving volumes, even if we exclude kind of the one-off plant and currency, our margins were still quite small. And I think that's down to some of the operating investments in IT and sales and things. How should we think about those investments in the second half relative to the first half? Should the drop through be higher from the improving volumes in the second half relative to the first half? And maybe as we go also into 2026, should we expect some more investments kind of in IT and sales and other things as well to think about? And then just secondly, on the performance of new products relative to, I suppose, some of the core products in the portfolio, I don't know if you can give any colour on the performance of I start with the second question around the new products and the ALBA development. We have achieved a very good first of half of the year, also a good second quarter also with ALBA.

and not only ALMA but also the other two important new products MAPREST HERM and FLOGFIT were important contributors to growth in the first half of the year and we are confident that they will do so also in the second half of the year. Question number one will be answered by Tobias.

Of the 20 million we announced for higher marketing, digitalization, etc., we had less than 10 million in H1, and we're still expecting the 20 million for the full year. Let me also quickly come back to the second or third question of Elodie Rahl before which I did not answer on the seasonality of the margin. I mean we communicated the one-offs of the link to the closure of the basal plant and excluding these we would expect exactly the same seasonality than we have normally.

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

Yes, good morning, everybody. It seems to me that in the current still quite difficult environment in the market, you are gaining quite some market share, particularly in Germany. How are actually your competitors in Germany reacting to that, like Viego or Grohe, or are they just, you know,

I don't want to speak in detail about competitors or specific names but there are no extraordinary reactions or let's say surprising reactions which you see in the market for example what you mentioned in terms of price wars or pressure from the pricing side, we don't see these kind of reactions. Maybe we see that some of the competitors who reduced their activities during the downturn of the last two or three years might start again to build up certain activities and also strengthening their fundamentals again. but there is nothing surprising or anything where we have now to react which we observe at the moment especially in Germany with regards to competitors.

Okay, good for you. And then on the plant in Germany, the closure, do I recollect it correctly that the initial number was rather 40 million for the closure costs And now it's 25. Is that correct? And if so, what has turned out better than expected? And could you remind us on the annual savings you expect out of that?

So starting with the end of the question, the annual savings will be roughly 10 million euros starting as of 2027. Then, yes, you understood that correctly. We had previously 40 million of total costs consisting of 25 million OPEX and 15 million depreciation. The new figure is 25 million in total. and the better results are due to on one side higher length and building costs and also more machines being able to be transferred to other sites therefore decreasing the need for depreciation and on the other side also a more realistic view on total OPEX costs which consists of closure costs Retention costs, social plan, etc. and transfer costs. So a better overall view of the OPEX, which lets a more positive view.

Okay, great. Thank you very much. That's it for me. You're welcome.

We have a follow-up question from Martin Flueke from Kepler Chevrolet. Please go ahead.

Yeah, thanks so much. Just a follow-up on the topic of energy costs. Could you, Tobias, please provide us with a guidance on how much you expect the energy costs to bite into margins in 2025? That would be helpful, thanks.

So we don't have a clear visibility, but for Q3 we expect roughly the same level than in Q2, which is slightly above previous year's level. But really, again, talking only a couple of percentage points in overall energy is a relatively small amount for us compared to cost of material, for example.

Okay, thanks.

The last question is a follow-up from Christian Arnold from Adobe HF. Please go ahead.

Yes, thank you. Also on energy, I just wanted to clarify, did I hear you correct in H1 you actually had energy cost went up 21% as a whole and then in Q2 actually only slightly up?

That is correct. We had very steep energy price increases in Q1. They were at the plus 36%. and therefore easy to calculate, age Q2 was only slightly up. So the total is then 21% up for the half year.

Okay, thank you for the clarification.

Welcome.

We have a follow-up question for Mr. Fevenbach from AWP. Please go ahead.

Yeah, thanks again. Given the flat volume development in Switzerland in first half, can you make a kind of an outlook of the situation in Switzerland? You are back in the second half year in the construction area. Thank you.

I can only talk about the market not about our volumes because we don't want to give volume outlooks country by country for our sales but in general we are quite optimistic for Switzerland that the building construction activity should be positive and also the second half of the year so we are positive in Switzerland and negative for the market.

Okay, thanks a lot.

Ladies and gentlemen that was the last question. I would now like to turn the conference