Geberit AG

Thank you for the introduction and good morning, ladies and gentlemen. Welcome to Gebrit's nine-month results conference call. We will start with the third quarter figures, then comment on the nine-month development and finish, as usual, with an outlook. Gebrit delivered strong results in Q3. Let me start with the key statements for the third quarter. First, a net sales growth in local currencies of 5.2% driven by all three product areas. Second, an APTA merit margin only slightly below previous year despite substantial higher direct material and energy price. And third, a strong EPS growth of 6.7% in local currencies and 8.5% in Swiss francs. Let me now give you some comments on the sales development in the third quarter. Net sales in Swiss francs increased by 5.3% and reached 824 million Swiss francs. For the first time in five years, we did not have a negative currency effect on net sales. In local currencies, group net sales increased by 5.2%, supported by a sales price effect of around 3%. Let me turn to the regional development, again in local currencies. In Europe, net sales increased by 4%, driven by strong growth in most markets. In particular, we achieved very strong growth of 8% in our core markets, Germany and Switzerland. Outside Europe, net sales increased in Middle East Africa by 23%, driven by strong double-digit growth in the Middle East, despite the ongoing conflict in the Gulf. Net sales in the Far East Pacific grew by 16%, with growth in all main markets, including China. Net sales in America increased by 12%, supported by easier comps in the previous year period. I continue with the sales development of the product area, ECU3, again in local currencies. Picing systems grew by 6%, insulation and flushing systems by 5%, while bathroom systems increased by 4%. The relatively strong growth of piping systems was supported by the stronger extraordinary price increase in this product area. Let me now turn to the operating and financial results in Q3. We managed to grow all bottom line results from ABTA down to EPS both in local currencies and in Swiss francs. The APTA margin reached 30.2%, which represents a slight decrease of minus 40 basis points despite the significant increase of input prices. Direct material prices were with 8% significantly higher than in Q3 last year. Energy prices were even up 33% in Q3 compared to Q3 last year. However, in absolute terms, APTA still increased. both in Swiss francs and in local currencies and even when adjusting for the one-time costs in the previous year. Net income increased disproportionately in local currencies by 5% and the net income margin reached 20.1%. Earnings per share reached 5 Swiss francs per 13 and grew in local currencies stronger than net income by 7% Thanks to our shared buyback program. Let me now continue with a review of our net sales development in the first nine months of the year. Net sales increased by 3.6% to 2.53 billion Swiss francs, negatively affected by strong currency effects. Negative currency effects led to a net sales loss of 52 million Swiss francs, or minus 2.1%. In local currencies, net sales increased by 5.7%, driven by an improved market environment in Europe and strong demand for our products across most markets and all three product areas. The top-line growth was driven by volume with a growth rate of around 3.5%. Increased sales prices contributed around 2% to top-line growth. This brings me to the regional net sales development in Europe in the first nine months. Again, all growth figures refer to growth in local currencies. All main countries and reporting regions, except Western Europe, delivered strong growth. In Switzerland, net sales increased by 9%, supported by a base effect and strong market demand. In Benelux, net sales grew 6% with growth in both countries, Belgium and the Netherlands. In Eastern Europe, net sales grew by 6% with particularly strong growth in the Adriatic region and Poland. In the Nordic region, net sales grew by 6% in an improved market environment. Net sales in Germany increased by 5% despite a strong comparison base. Over the last three years, we achieved a cumulative sales growth of 14% in Germany, despite the significantly declined market. Net sales in Italy increased by 4%, despite the softening market. In Austria, net sales grew by 3%, despite a very strong comparison base, with a growth rate of around 10% already last year. The only region in Europe where sales stagnated was Western Europe, with strong growth in Iberia partially offset by market-driven declines in France and the UK. Let me now turn to the regions outside Europe. In the Middle East Africa region, net sales increased strongly by 20% despite the ongoing conflict in the Gulf. Net sales in Far East Pacific grew by 9% with double-digit growth in India and Australia, partially offset by the continued but fading market decline in China. In America, net sales were flat, with the previous year being distorted by extraordinary growth following the tariff announcements. Let me now comment on the sales development by product area, again in local currencies. Installation of flushing systems as well as piping systems grew by 6%, while bathroom systems increased by 5%. All three product areas benefited from strong growth with established and new products. I'll continue with the operating and financial results in the first nine months. All operating and financial results grew, even in Swiss francs and even when adjusting for the one-time costs in the previous years. I'll start with the discussion of the ABDA development. ABDA increased in Swiss francs by 3% and in low currencies by 6%. The ABDA margin reached with 30.7% almost previous year's levels, supported by a base effect from last year's one-time costs. Excluding the one-time effects in the previous year, the ABDA margin decreased by 70 basis points, We managed to mitigate these negative margin drivers with the following levers. First, Our efficient and flexible production network, coping with the strong volume growth, while at the same time keeping costs under control. Second, a positive safe price effect of around 2%, and thirdly, further efficiency gains in production and logistics. Thanks to our long-term oriented natural currency hedging strategy, the significant currency losses had no material impact on our operating margins. EBIT grew in the first nine months by 4% in Swiss francs and by 7% in local currencies. The EBIT margin increased by 10 basis points and reached 26.0%. The net income margin increased even by 70 basis points due to an improved financial result and reached 20.9%. This led to a net income growth of 7% in Swiss francs and 9% in local currencies. Earnings per share increased by 8% and reached 16 Swiss francs 23. In local currencies, EPS increased even by 10% versus previous year, disproportionately higher than net income thanks to the accelerated share buyback program. The share buyback program launched in September 2024 was completed ahead of schedule in early June. Under this program, a total of 560,000 registered shares were repurchased for a total of 300 million Swiss francs since September 2024. We launched a new share buyback program directly thereafter. The new program with a maximum volume of 300 million Swiss francs runs for a period of maximum two years. In total, under the completed and the newly launched share buyback program, we repurchased in the first nine months 509,000 shares for a total amount of 269 million Swiss francs. This brings me to a few comments on CapEx and free cash flow in the first nine months of the year. CapEx increased by 20 million or 21% to 112 million Swiss francs driven by higher investments notably in logistics. Free cash flow decreased slightly by 3% to 449 million Swiss francs primarily due to higher paid capex. Let me now comment on our market outlook for the full year 2026. Our view has not changed since our H1 communication in mid-August. Shared political risks and the associated macroeconomic uncertainties remain high. However, we continue to expect for the full year 2026 a slight growth of the European building construction industry but no broad recovery yet. The new build sector, we see positive momentum emerging as indicated by the ongoing turnaround of building permits, which grew in Europe by 5% in the second half of last year and by 6% in the first half of this year. In particular, the residential building permits in Germany are recovering with a growth rate of 13% over the last 12 months. In the renovation sector, which accounts for 60% of our business, we expect the positive dynamics to continue. Outside Europe, we foresee a mixed picture for the building construction industry. Some markets see good demand, for example India. Other markets continue to decline, for example China, due to the collapse of the renewable sector. However, at a slower pace than in previous years. On the supply side, we expect sequentially for Q4 slightly higher direct material prices and higher energy prices compared to Q3. Let me now briefly comment on the gathering priorities this year. We continue to have a strong focus on new products. For example, the new shower solution launched in April, but also important new products introduced over the last year, like the new DuoFix, Flowfit, Maples Therm, or the shower toilet also. Other important initiatives this year include new marketing initiatives and further efforts in the area of IT, digitalization, and AI. We are increasing our operational expenditures by 20 million sales francs this year for these initiatives. Let me continue with our full year guidance. Under the assumption of no material changes to the current market environment, we expect for the full year a net sales growth in local currencies between 5 and 6% and an APTA margin around previous year's level. Please keep in mind that we are facing somewhat more challenging top-line comparables in Q4. In line with that, we expect sales development in October to be weaker than in Q3. For CapEx, we expect around 200 million Swiss francs this year. Let me close our introduction with a short summary. Gebraert delivered very strong results in the first nine months of 2026. with a net sales growth in local currencies of 5.7%. These were the strongest first nine months of the year since the COVID-related boom four years ago. Despite the sharp increases in direct material and energy prices since Q2, as well as higher OPEX related to various strategic and operational initiatives, we managed to keep like-for-like operating margins almost on previous year's levels. Earnings per share grew strongly by 8% in Swiss francs and by 10% in local currencies, supported by the accelerated share buyback program. For 2026, we continue to expect slight growth of the building and production industry in Europe and a mixed environment overseas. But irrespective of the market environment and geopolitical and macroeconomic uncertainties, we continue to invest in sales and marketing initiatives, innovation, 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 who has a question may press star and one at this time. Our first question comes from Elodie Rall from JP Morgan. Please go ahead.

Hi, good morning. Thanks for taking my questions. First of all, on cost, we took you for. What kind of evolution are you seeing and could you remind us the composition of your cost especially in terms of energy cost exposure? You've done a great job it seems in Q3 in terms of maintaining that as low as possible and only up sequentially versus Q2 but you're gating for cost to increase a little bit also just in Q4 so if you could give us some color there about the composition. and my second question which is related to that is your margin guidance for the year implies if I'm not wrong a 20 bps increase in Q4 but in Q3 you had a margin decline in Q4 you're getting for cost up and maybe some weakness in volumes so how do you get margin up in Q4 does it take some does it require some further actions Thank you, Elodie.