Geberit AG

Good morning, ladies and gentlemen. Welcome to our Q1 results conference call. Gebrit had a successful start into the year 2026. Let me start with the key statements for Q1. First, an encouraging net sales growth of 3.4% in local currencies, negatively affected by pre-buying of wholesalers in December last year and the cold weather in Northern Europe in January and February this year. Second, stable operating margins if one-time costs from the previous year and currency effects are excluded. And third, a growth of earnings per share of 4% in Swiss francs and 10% in local currencies. Let me now comment on our net sales development in more detail. Net sales grew by 3.4% in local currencies to 873 million Swiss francs, equally driven by volume and price. A strong negative currency effect of 35 million Swiss francs, or minus 4.0%, led to a net sales decline in Swiss francs of minus 0.7%. We come now to the regional development. All growth figures refer to growth in local currencies. In Europe, net sales increased by 3%, with growth in all markets except the Nordics due to the bad weather in January and February. In the Middle East Africa region, net sales increased by 13%. Sales in March also increased despite the war in Iran. Only a small portion of the business in March was affected by the war, namely shipments that were logistically disrupted due to the closure of the Strait of Hormuz. this currently still disrupted business accounts for less than 1% of group sales and is therefore very limited on group level. The remaining business in the Gulf region, which is not served through the Straits of Hormuz, has been and continues to operate at normal levels. This brings me to the other two international regions. In America, net sales decreased in Q1 by 4% due to a softer project business And in Far East Pacific, net sales declined by 1%, driven by declines in China, partially offset by growth in India. Let me now comment on the sales development per product area. Installation and flushing systems grew by 4%, and piping systems and bathroom systems both increased by 3%. I will now comment on the operating and financial results. I'll start with the ABTA developments. ABDA increased in Swiss francs by 2% and in local currencies by 7%, driven by the base effect from one-time costs booked in the previous year. The ABDA margin reached 32.5%, an increase of 100 basis points, which can be fully attributed to the one-time costs last year. Excluding this one-time effect and in local currencies, the ABTA margin remained stable. In Swiss francs, the ABTA margin decreased only slightly thanks to our strong natural hedge. Positive operational margin drivers were a positive net price effect driven by increased sales prices and slightly lowered direct material prices. Secondly, positive operating leverage from the volume growth and thirdly, efficiency gains. These positive margin drivers were offset by wage inflation of 3.4% and secondly, dedicated investments in marketing, IT, and digitalization. The EBIT margin increased in line with the EBITDA margin by 90 basis points and reached 28.0%, supported by the before-mentioned base effect. Similarly, the net income margin increased by 110 basis points to 22.4%. Earnings per share increased by 4% and reached 5 Swiss francs 94. In local currencies, EPS increased by 10% versus previous year. Let me start our market outlook with some preliminary remarks. The outbreak of the war in Iran and the heightened geopolitical tensions significantly increased the macroeconomic uncertainties. This makes the forecast of inflation, interest rates and consumer confidence, all important drivers for the construction industry, very difficult. The following market outlook therefore excludes potential impacts of the war in Iran on building construction demand outside the Gulf region, as these effects cannot be reliably quantified. Under the assumption, we continue to expect slight growth in Europe in the course of 2026. However, no broad recovery yet. Based on the stabilized building permits last year, we expect a stabilization of the new build activity this year. For the renovation demand, which represents around 60% of our business, we are more optimistic and expect a slight growth in Europe this year. Outside Europe, we foresee a mixed picture for the building construction industry. Some markets should see good demand, for example, India. Other markets will continue to decline, for example China, due to the collapse of the new-build sector in China. We continue to refrain from a market outlook for the Gulf region. However, and as already mentioned, the direct sales impact from the war remains very limited. Less than 1% of group sales are currently affected due to the closure of the Strait of Hormuz. The remaining business in the Gulf region is still running at normal level. This brings me to the impact of the Iran war on the supply side. Regarding the availability of raw materials, we are not experiencing any interruptions. We continue to receive all raw materials required for our production facilities in the necessary quantities. On the pricing side, however, we are affected by substantially higher plastics and higher energy prices. Overall, we expect direct material prices to increase by mid to high single digits in Q2 compared to Q1 this year and also versus Q2 last year, driven by higher plastics and energy prices. To compensate for the absolute cost impact of these price surges, we decided to implement an extraordinary sales price increase as of June this year. This sales price increase affects only plastic and energy-driven products, and the magnitude will be differentiated by product categories. Overall, across the entire product range, this extraordinary price increase as of June amounts to approximately 2% of group net sales. Together with the regular price increase as of April and the already communicated extraordinary price increase for copper piping systems as of April, we expect for the full year 2026 an overall sales price effect of 2 to 2.5%. Let me finish our outlook with a trading update for April. Like-for-like net sales in the month of April were up mid-single digits. Let me now briefly comment on the GEPRIT priorities this year. We will continue to have a strong focus on new products this year. For example, the new shower solution launched in April, but also important new products introduced over the last years, like for example, the new DuoFix, Flowfit, Marpres Therm, and the shower toilet Aldo. Other important initiatives this year include new marketing initiatives and further effort in the area of IT and digitalization. In total, we are increasing our operational expenditures by 20 million Swiss francs this year for these initiatives. Let's close our introduction with a short summary. Geberit had a successful start into the year 2026 with an encouraging net sales growth in local currencies. We increased our operating margins thanks to a one-time effect last year. Excluding the space effect and current effects, we kept operating margins stable despite significant wage inflation and increased OPEX for various strategic and operational initiatives. For 2026, We expect a slight growth of the building industry in Europe and a mixed environment overseas under the assumption that the war in Iran has no significant impact on the building demand outside the Gulf region. The direct sales impact of the war in Iran is very limited. Less than 1% of group sales are currently affected due to the logistical constraints to the Strait of Hormuz into the Persian Gulf. On the supply side, We are not experiencing any disruptions and continue to receive all raw materials required for manufacturing. On the pricing side, we will implement an extraordinary sales price increase effective June this year to offset the absolute cost impact of substantially higher plastics and energy prices. Furthermore, and irrespective of the market environment and increased geopolitical and macroeconomic uncertainties, we will continue to invest this year in sales and marketing initiatives, in innovation, in efficiency, and in capacity to further strengthen our market position in and outside Europe in the short and in the long term. 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 one on the 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 two. Participants are requested to disable the loudspeaker mode 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 thank you I have a three questions if possible but first I guess given you announcing the price rise in June do you see any pattern of stocking up at wholesalers in 2Q or any worry that they will actually destock even the pricing levels that the products are getting to then second thing just on raw materials you very clearly said you don't really see any particular tightness or issues in getting hold of raw materials but are you considering like stocking up more intensely and how should would that impact sort of like free cash flow generation this year if so and then the third one just if you can do your usual comment for April start thank you