Geberit raises margin forecast despite construction slump in Europe
Published: Thursday, Nov 2nd 2023, 08:10
Updated At: Friday, Nov 3rd 2023, 00:54
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Geberit continues to feel the effects of the slump in Europe's construction industry. As a result, sales clearly declined in the first nine months of the 2023 financial year. Profitability nevertheless increased, prompting the company to issue a slightly bolder margin forecast.
Sales from January to September fell by 12.3 percent to 2.39 billion Swiss francs, the sanitary technology group announced on Thursday. However, excluding the negative currency effects of 119 million Swiss francs, the organic decline was more moderate at 7.9 percent.
In the third quarter, however, the downward trend eased somewhat with an organic decline of 4.8%. In the first half of the year, Geberit still contracted by more than 9 percent in local currencies, and in the second quarter by over 14 percent when viewed separately.
Customers invest in heating instead of plumbing
The business environment was exceptionally difficult, according to the report on business performance after nine months. Volumes sold were significantly lower than in the record period of the previous year and due to the decline in the construction industry in Europe. In addition, the sanitary industry in some countries continued to be impacted by the shift in demand from sanitary to heating solutions. By contrast, price increases had a positive impact of around 10 percent.
In regional terms, currency-adjusted sales fell most sharply in Austria, Germany and Eastern Europe, with double-digit declines. Italy and Western Europe held up better, with only minor sales declines. In Switzerland, Geberit's nine-month sales were almost 6 percent lower than in the previous year. In Europe as a whole, the decline was 9.2 percent.
As Geberit's various price rounds from the previous year have meanwhile been able to absorb inflation and raw material prices have recently tended to move sideways, profit fell at a lower rate than sales, which had a positive impact on the operating margin.
Significant increase in operating margin
Operating profit at EBITDA level decreased by 2.4 percent to CHF 749 million, while the corresponding margin increased by 3.2 percentage points year-on-year to 31.3 percent. At the same time, net profit decreased by 4.6 percent to 516 million Swiss francs, burdened among other things by a more negative financial result compared to the previous year.
Geberit expressed its satisfaction with the result in terms of margin. In view of the environment and the declining construction industry in Europe, the results were "convincing", it said. Operational flexibility, lower energy prices and price management contributed to this.
The previous outlook for the full year 2023 is confirmed with regard to sales. Accordingly, a mid-single-digit percentage decline in sales in local currencies is expected. The forecast for the EBITDA margin, on the other hand, has been raised to 29 to 30 percent from the previous "around 29 percent.
Geberit sees two specific challenges for the sanitary industry in particular in the immediate future: pull-forward effects from the Covid-related home improvement trend of recent years and the shift in investment from sanitary to heating solutions, especially heat pumps.
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