Geberit in the headwind of the construction industry
Published: Wednesday, Jan 17th 2024, 11:30
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Geberit generated less sales in the 2023 financial year than in the previous year. The sanitary technology group was held back by the weak construction industry, but also by the strong Swiss franc. It seems unlikely that the tide will turn quickly in the current year.
"We expect the environment to remain challenging," said CEO Christian Buhl during a conference call on the sales figures for 2023. He expects demand in Europe to remain subdued due to higher interest rates and increased construction costs.
In line with the sharp decline in building permits, the new construction business is also likely to remain weak. He forecasts the sharpest decline in new residential construction in the Nordic countries and in Germany, the most important single market. "The new construction business is likely to hold up best in Switzerland," he said.
By contrast, the renovation business is likely to remain more robust overall in 2024. When asked whether Geberit would be able to compensate for the slump in sales in the new construction business with renovations, Buhl said: "At least in Germany, this will not be the case."
Interest rate cuts would help
However, he also identified more positive signs: According to the CEO, the trend among investors to invest more in heating and less in the sanitary sector is likely to continue, but not become any stronger. He also hopes that the expected interest rate cuts by the central banks will stimulate demand.
In the 2023 financial year, Group sales fell by 9.1% to 3.08 billion Swiss francs, as Geberit announced on Wednesday. Excluding negative currency effects, however, there was a more moderate organic decline of 4.8%. Price increases had a positive impact on sales of around 8%.
Geberit explained the decline in sales by saying that the volumes sold were significantly lower due to the strong prior-year period and the weak construction industry in Europe.
In geographical terms, the markets in Europe in particular, where around 90% of sales are generated, suffered from what Geberit describes as "exceptionally difficult conditions". In Germany, the most important single market, sales in local currencies fell by more than 10%, in Switzerland by 4%.
Growth in the fourth quarter
Nevertheless, the situation improved somewhat towards the end of the year. Currency-adjusted turnover increased by more than 8% in the fourth quarter.
With regard to earnings, the statements made last November were formulated with even more confidence. Accordingly, the operating cash flow margin (EBITDA) should reach 30% in 2023 as a whole. The previous forecast was 29 to 30 percent.
As usual, Buhl did not want to make any specific margin forecasts for 2024 this early in the year. However, he announced additional operating costs of around CHF 30 million above and beyond the usual level, including for customer events in connection with the 150th anniversary.
The cautious outlook was acknowledged on the stock market by late morning with the share price falling by a good 4 percent.
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