Geberit AG (GEBN) Earnings Call Transcript & Summary

Good morning. I am the Arkadin operator for this conference. Welcome to the Geberit Conference Call on the First Information 2020. [Operator Instructions] And the conference is being recorded. [Operator Instructions] This call must not be recorded for publication or broadcast. At this time, I would like to turn the conference over to Mr. Christian Buhl, CEO; accompanied by Mr. Roland Iff, CFO; and Mr. Roman Sidler, Head of Corporate Communications and Investor Relations. Please go ahead.

Thank you for the introduction. Good morning, ladies and gentlemen. Welcome to our full year sales conference call. We will first comment on our fourth quarter sales figures, then review our full year sales performance, followed by our guidance for the financial result in 2020 and finish with an outlook for Geberit this year. I start with the fourth quarter. We recorded another strong quarter with a net sales growth of 6.8% in local currency, driven by a very strong November and December. The main drivers were: no material restrictions for the building construction industry during the second pandemic wave; second, a strong growth in Germany, supported by the temporary VAT reduction; third, a buildup of safety stocks of wholesalers during the second pandemic wave, the opposite effect compared to the lockdown wave in spring; and fourthly, pull-forward effects in U.K. and Russia due to Brexit and extraordinary currency-driven price increases as of January this year. Let me now comment on the development in the various regions in Q4. In Europe, currency adjusted net sales increased by 6.4%. In Germany, net sales grew double digit by 13%, supported by the before-mentioned temporary VAT reduction until the end of the year. Switzerland was up 9%; Austria, 6% from 5%; Benelux and the U.K./Ireland, plus 3%; and Nordic and Eastern Europe, both up 2%. The only region with decline in sales was Iberia with minus 4%. Outside Europe, we increased net sales in Far East/Pacific by 16%, driven by very strong growth in China. We achieved strong growth also of 12% in America, driven by increased demand for electronic faucets. In Middle East/Africa, sales were up 1%. The product areas have again developed differently in the fourth quarter. Installation & Flushing Systems grew by 10% and Bathroom Systems by 8%. Piping Systems showed again a much slower growth dynamic with plus 2%, indicating the weakening newbuild segment and project business also during the fourth quarter. I will now comment on the full year 2020 sales performance. Net sales in Swiss franc decreased by 3.1% to CHF 2.99 billion. The sales decrease was driven by a negative currency effect of minus 4.4%. In local currency, we managed to increase net sales by 1.3%. We achieved this result despite the COVID-19 crisis hitting all the building industry in the second quarter. The crisis led to a historical sales decline in Geberit in Q2, the weakest quarter for Geberit at least since we got listed at the stock exchange in 1999. However, we managed to compensate this historical decline with a recovery in the second half of the year. Overall, we gained further market shares in 2020. This was also driven by the conscious decision not to reduce our customer presence during this unprecedented crisis and the conscious decision to avoid short-time work when demand collapsed in the second quarter. Today's development vary substantially by conflict depending on the degree and length of the lockdown and the business restrictions imposed on the building construction industry in the second quarter. In markets where construction sites were closed, corresponding around 20% of our business, sales declined in average by around 10% over the full year of 2020. These countries include France with minus 7%, Italy with minus 8%, Spain with minus 13%, the U.K./Ireland with minus 16%, South Africa with minus 17% and India with minus 24%. The remaining countries were also impacted by lower construction activities during the first lockdown wave in Q2. However, the losses were compensated or even overcompensated again in the second half of the year. We recorded the strongest growth rate in 2020 in our core markets, Germany, Switzerland and Austria, representing about 50% of our business. In Germany, net sales grew over whole year by 7%, in Austria by 5% and in Switzerland by 4%. These growth rates in our core markets confirm our ability to gain market share despite our already strong position and high market shares in these countries. The fastest-growing product area was Bathroom Systems with a double-digit growth rate in these 3 core countries. Sales in Eastern Europe and in the Nordics each increased by 3% with high single-digit growth rates of behind-the-wall flushing business. Sales in Benelux stayed on previous year's level. The strong growth of 7% in Netherlands was compensated by a decline in Belgium where construction sites were much heavier restricted than in other countries. In Americas, sales were up by 2%, driven by strong growth of electronic faucets due to the increased demand for the hygiene-related touchless products as a consequence of COVID-19. Sales in Far East/Pacific declined by minus 7%, mainly driven by the before-mentioned costs in India. Sales in China increased for the full year despite the lockdown in the first quarter. And finally, sales in Middle East/Africa decreased by 14%, driven by the before-mentioned decline in South Africa and a difficult environment in the Gulf. Let me now comment on the sales development per product area in 2020, again, in local currencies. Bathroom Systems were up 2 -- 3%, supported by the ceramics business and the strong growth of the shower toilet business. Installation & Flushing Systems grew with 2.1%, driven by the disproportional growth of behind-the-wall flushing needs. Piping Systems declined by 0.8%. The weaker development of Piping Systems was driven by the second half of the year, indicating the weakening newbuild segment and weakening project business. We now comment on our guidance for our 2020 financial results. The EBITDA margin for the full year is expected to be around 31%. The substantially improved profitability level is mainly driven by lower raw material prices, not incurred marketing expenses of around CHF 25 million and CHF 10 million savings of not incurred travel expense due to the COVID-19-induced business restrictions. The full year tax rate should reach around 15%, and CapEx is expected to be around CHF 150 million. Before I come to the outlook, let me briefly update you on our share buyback program. Despite the crisis, we continued our share buyback program in 2020. In total, 356,000 shares have been bought back last year. Thereof, 262,000 shares at an average price of CHF 406 under the program launch in June 2017. Under the new program launched in September, additional 94,000 shares were bought back. Let me now comment on our outlook for 2021. Obviously, the uncertainty due to the COVID-19 crisis remain to be very high. The situation around the various lockdown is changing week by week. Also, the timing for a return to a more normal life cannot be predicted today. And as you know, we have a general very low visibility in our business with an order book of less than 2 weeks. Therefore, we refrain at the moment from providing an outlook for the building construction industry and overall mature markets. However, let me comment on some of our key business priorities this year. As mentioned before, the COVID-19-related restrictions led to reduced marketing expenses of around CHF 25 million last year. We aim to reverse this effect again this year and to increase marketing spend again on normal pre-COVID levels. To overcome the still existing restrictions for physical marketing events and activities, we will further and significantly shift the marketing needs to more digital activities this year. For example, we will replace physical fairs in the first half of the year by complete digital events, so-called Geberit innovation days for our professional customer groups. Another priority this year will be new product launches. Among others, we will introduce a completely new supply piping system called FlowFit with several benefits and advantages for installers. And the third priority this year will be the further expansion of our digitalization efforts with dedicated initiatives in marketing and products, including the buildup of additional IT capacity. In total, we will increase our spending for digital initiatives by another CHF 15 million compared to last year. Let me close our introduction with a short summary. Also, the building construction industry and Geberit has been hit by the COVID-19 crisis with a historical sales collapse in the second quarter. However, the decline has been compensated in the second half of the year, and we were able to gain further market shares in this crisis year 2020. At the same time, costs remained on a low level as the COVID-19-induced restrictions did not allow to pursue the business in a normal way. In combination, with the normalized sales level, it led to an extraordinary and abnormal circumstance, not repeatable profitability level. The main reasons for these strong results on top and bottom line were: a strong financial supplement; a prudent crisis management, avoiding overreactions; our conscious decision not to diminish our customer presence throughout the crisis; and finally, a high flexibility of our organization. It is worth to mention that we achieved these results without restructuring or any people layoffs, without changing our strategic agenda or hardening our future potential, without material short-time work and without financial support from the public sector or taxpayers. The crisis year 2020 has proven the resilience of our strategy and our business model, now also including the ceramics business, the quality and strength of our customer relations, the robustness of our supply chain, our undiminished pricing power and our ability to generate strong cash flows also during the crisis. Finally, I want to close this introduction with the announcement of a change in the executive order. Roland Iff will retire at the end of this year after being 27 years with the company. Although Roland will remain fully onboard until the end of the year, I want to thank him already now for his large contribution to the development of Geberit, especially in his role as CFO over the last 17 years. The search for his sector has been initiated. This is the end of our introduction. We are now ready to answer your questions. But as outlined before, we do not answer any questions regarding the outlook of the building construction industry or raw material markets due to the obviously high uncertainties and the lack of visibility.

[Operator Instructions] And the first question is from Yves Bromehead, Exane BNP Paribas.

Happy new year to all of you. Just a few questions on my side. Number one, I think in the last call, you mentioned that you had about CHF 20 million of brand costs in 2020, but also I think you had some extraordinary IT spending. I just wanted to check the magnitude of those and whether if you could confirm that this will not be -- any of those costs will reverse in 2021. And then I guess my second question, I think in the beginning of the call, I didn't necessarily understand completely what you said, but I think you mentioned some extraordinary price increase in January. I just wanted to know if you could comment on those in light of the recent raw material increases that we have seen. And maybe just a last question related to Germany. You mentioned that a lot of the demand came through because of VAT reduction. On the other hand, we've also seen many households are -- have seen their savings go up quite significantly in 2020. And it looks like in 2021, we're starting the year all at home again, so spending is likely to revert back to the homes. Can you maybe comment on that and if you're seeing this as a structural effect for the foreseeable future, although this is really hard to assess at this point? But any color on that would be really key given the magnitude of the growth you've seen in this market.

Thank you. Question number one, we had extraordinary costs for the brand harmonization in 2019 and 2020. And in each year, we spent CHF 10 million for this brand harmonization. This will not occur anymore as of next year because the brand harmonization is finished. Secondly, we had extra or additional costs last year for increased activities in digitalization of CHF 15 million last year, 1-5. It will continue this year. And on top to that, we may had another CHF 15 million because we are further increasing our efforts in this area. Second question, we made 2 extraordinary price increases as of January 1, purely driven by currency devaluation. One country was the U.K. and the other one was Russia. And these extraordinary price increases as of January led to a strong prebuying effect in November and December of last year. And the third question, I did not 100% understand. If I understood correctly, you were talking about the home improvement trend in Germany. We see a home improvement trend, not only in Germany, across the countries. But end consumers are investing into their homes also in their bathroom and that we are also benefiting from this trend.

Yes. I guess the question was this, but also I just wanted to know if the VAT reduction was the main driver for the growth in sales or if you think that that home improvement trend was also a key driver. I'm just trying to figure out, out of the double-digit growth, which is what.

Yes. Home improvement was also a driver. Was the VAT the more important driver? We don't know. VAT played definitely a role, but we do not know the extent of that. We were growing in Bathroom business in the second half of the year in Germany double digit.

And the next question is from Daniela Costa, Goldman Sachs.

I have one question. Historically, over time, you've said you didn't want to have margins which were above 30%. And I wonder, first, if that comment is still valid. And at the time, you mentioned you did reinvest when margins got above that level. You're now above that level. Can you give us a little bit of color on, if the end markets continue to be strong, what are you going to do in terms of how will you reinvest those margins? You already have returned quite a lot through the dividend and the buyback. So how shall we think about what incremental growth can you get from that reinvestment going forward?

Our target range for the EBITDA margin of 28% to 30% is still valid. We don't want to go above the 30%. The reason that we have been above the 30% last year were basically 2. One is we had record low raw material prices. And secondly, as I said during my introduction, we have not been able to spend, especially marketing, as originally planned. We estimated that we have not been able to spend around CHF 25 million last year, and we plan to invest this marketing budget again this year back to a normal level. And the last reason was also COVID-19-related restrictions, for example, of traveling, where we have not been able to spend, which we will spend again once the pandemic crisis is over.

The next question is from Martin Hüsler, Zürcher Kantonalbank.

And I have 2 questions. First of all, what's your assessment of the new lockdown measures in Switzerland? Are wholesaler shops open? Or are only showrooms being closed? And what do you expect is the impact if you would compare it to the last year's lockdown in Switzerland?

As far as we understand, this morning, the showrooms for sanitary products will be closed as of Monday in Switzerland. But the business relating to professionals, for example, pickup shops where you can pick up sanitary refills will be opened as of next week. That is our current understanding. Therefore, we do not believe that there is a material impact at the moment on our industry driven by the measures communicated yesterday by the government in Switzerland.

Okay. And maybe the second one. You don't want to talk about raw material prices. And I was just wondering a bit why are you so cautious about this topic because we've been seeing movements upwards in the fourth quarter, which should already kind of hit your raw material prices and your purchasing of raw materials. Just why are you not giving a guidance as usually?

Because these are 2 different topics. We are not giving an outlook for raw material prices, but I'm happy to comment on the recent development, what happened over the last couple of weeks. And there, you're right, raw material prices went up substantially over the last couple of weeks. Also in January, they went up substantially. To give you a flavor, commodity plastics, an important raw material for us, is up 10% in January, special plastics are even up 20% in January. Also, steel went up substantially over the last couple of weeks. We expect steel prices in January to be 15%, 1-5, above the levels of the fourth quarter. So we have seen a recent strong increase in raw material prices. The only thing what we don't want to do is to give an outlook for raw material prices for the next coming weeks and quarters because, as you know, we are not hedging our raw material prices. We are exposed to the volatility, and the volatility and uncertainty is high.

The next question is from Andre Kukhnin, Crédit Suisse.

I'll just pick up on the last one. Did you plan any further price action beyond the -- what you dubbed FX-related in U.K. and Russia?

We planned a regular price increase as of April of around 1%, 1%.

And is it safe to assume if spot prices stay where they are, you would increase by the higher percentage to offset? Or do you…

At the moment, we do not think about any extraordinary price increases driven by the raw material price development.

Even at the current spot prices?

Yes. We're not thinking about extraordinary price increases at the moment.

And finally, I'll just ask on German market, kind of thinking about the discussions we've had under the last few years, the kind of market that was constrained by capacity and underlying demand was there, but struggled to grow in full extent. And now it took COVID pandemic for it to grow 7% for you. Do you think there are any learnings there in terms of maybe how Columbus now operates and what they were able to do in the second half of 2020 that can be taken forward? Or was it just kind of restock and extraordinary measures, extra time, work, et cetera?

Yes. One of the important drivers for our development in Germany last year was that we have been able to gain market share during this crisis. As I said through my introduction, we did not reduce our customer presence. We even intensified our interaction with customers also in Germany. And secondly, we also used some issues of competitors who have delivery issues also in Germany. That was one of the reasons why we have been able to gain market share. And the second one is, in general, the fact that Geberit, as you know, in these markets like Germany, but also in Switzerland and Austria, we are growing and outperforming the market largely by our upselling strategy, selling higher value-added products, which do not require substantially more installation time or capacity of installers. And the best example, obviously, is shower products. We have been growing double digit with the shower toilets in these markets also in Germany, and that allows us to gain market share also in these times of constrained capacity of installers.

Very clear. And maybe just lastly, on the tax rate for 2021. Can you comment now already?

Again, the tax rate should remain somewhere between 15% and 16%.

The next question is from Remo Rosenau, Helvetische Bank.

In the Q3 conference call, you were actually quite cautious on the margin for the fourth quarter already pointing to increasing raw material prices. And if I'm not mistaken, you even guided for a potential reduction of the margin year-on-year, not only sequentially. Now as it turns out, with this 31% EBITDA margin guidance for the full year, it seems that the Q4 EBITDA margin will be around 300 basis points above the prior year. So what was responsible for this quite significant better margin development in the fourth quarter compared to your view on the conference call just about 3 months ago?

There was one. First of all, you're right. There was one main driver. It was that top line developed much better in November and December than what we expected. Sales went up in November and December of around 11%. We didn't foresee that for various reasons. And that is the reason why we are now expecting also a substantially higher EBITDA margin in Q4, driven by the operating leverage of its volume growth in November and December.

Okay. Great. Then my second question is, you mentioned that the introduction of a new innovation, which should benefit the installers in 2021, but I didn't get it really. What is this exactly?

It is a new supply piping system. So it's for drinking water, basically a building. It's a complete new system. It's based again on a pricing technology, but it has substantial advantage for installers. It's easier to install, it's safer to install, faster to install and has sell advantages. We will comment that -- present this new system at our full year conference there in March, also some pictures to get a better flavor.

The next question is from Patrick Rafaisz, UBS.

Three questions, please. The first would be, with Q3, you gave us -- you provided us with a comment around the order books, German installers. I believe it was around 12 weeks. And where does this stand now and going into 2021? And the second question is on the pull-forward effect, as you mentioned, especially U.K. and Russia. Any chance you can give us an estimate for the magnitude of that? And then lastly, question number three. You explained in detail the marketing expenses, the general expense effects. Can you give us a guidance on how -- in terms of timing, how this will ramp up again throughout 2021? I would assume travel expenses will remain low throughout the first quarter, at least before we start creeping up again. Maybe same for marketing. I'm not sure about digital investments. Any help on that would be [ appreciated ].

First question, order backlog of German installers, we don't have new information. It's still [ 12.11 ] weeks coming from October last year. Second question, we're not able to quantify the pull-forward effect driven by the extraordinary price increases in the U.K. and Russia as of January. It has a strong growth [ profitability ] these 2 markets of the company quantify. Number three, timing of SG&A costs this year. For travel, you're right, at the moment, we are [indiscernible] spending travel expenses, that will obviously depend on the question when we are back to normal business. For Market Day, as I said before, we shifted substantially our marketing activity to digital. And the digital activity will start already in the first quarter, the separate innovation phase, which I mentioned before, which will be, by the way, a replacement of the ISH, our important fair in our industry which will not take place [ this year in ] March. These activities will start already in the first quarter. Therefore, at the moment, we expect that marketing expenses should be relatively equally distributed over 4 quarters this year.

The next question is from Martin Flueckiger, Kepler Cheuvreux.

First one is on AquaClean. It sounds to me like the shower toilet business was up double digit in Q4. Am I right in my assumption? And has anything changed with respect to the targets for AquaClean in 2021? That's my first question. I'll take one at a time.

Yes. Shower toilets were up double digit in the fourth quarter. And no, we don't change our aspirations and business plan.

So that means it's double digit also for the 2021?

Correct.

That's helpful. And secondly, regarding the search process for the succession of Roland Iff. I was just wondering whether this is -- whether your focus is more on an internal candidate or whether you're looking for external, new people? What are your thoughts here? That would be helpful.

Very simple. Our focus is on the best candidate, be it, externally or internally.

And the next question is from Christian Korth, HSBC.

And congratulations on these strong numbers. I have 2 questions, please. The first one is about new product releases. You talked a little bit about the Piping System, but is there also something more for, let's say, the front of the wall, like new products in this earnings business or anything like a design update for existing products? The second question is about the diverging development of the product group. So when we look at the half year results, by then the Piping Systems business was the one that performed best. And in the second half of 2020, we saw significant outperformance of Installation & Flushing Systems as well as Bathroom Systems. Now the trend that we saw in Q3 accelerated in Q4, it seems, and I just wanted to ask you where that comes from. So this is -- do you think there was more renovation work done than new construction, for example? Or was there any other expansion?

The first question, we have also new product launches in the area of Bathroom Systems this year. Let me just mention 2 of them. One is we didn't extend our April 1 offering, this new bathroom system we introduced 2 years ago. And 2021 will be trade number 2, with an extended offering around Geberit ONE. The second example, in front of the wall, we will also introduce a new improved technology around ring-free toilets. You're aware of the ring-free toilet technology. We have additional or having further improved this technology, and we'll introduce corresponding toilets this year. Second question, the difference between piping systems versus Installation & Flushing Systems and Bathroom Systems -- in the second half of the year. The driver for that is that new build business and the project business has weakened in the second half of the year, most probably driven by the COVID-19 crisis. Piping Systems have a higher exposure to new build and also project business. That's the reason why they suffered more compared to the other 2 product areas.

The next question is from Arnaud Lehmann, Bank of America.

Two questions on my side. So you achieved new guide for 31% EBITDA margin for 2020, a very impressive performance. I think you haven't been there since your Sanitec acquisition a few years back. And you've been very helpful highlighting the moving parts in the cost base, including marketing, utilization, et cetera. On this basis, I guess the message is that the cost base, to some extent, will increase in 2021, including also raw materials. Are you planning any, let's say, cost-cutting initiatives or productivity gain for 2021 to try to compensate for the increase in some of the cost items and frankly [indiscernible] the kind of 30-plus EBITDA margin? That's my first question. And secondly, at this stage, I appreciate the solid base, but are you able to give us an indication of where you expect the net debt to land at the end of 2020?

We do definitely not plan to cut costs this year. But of course, as usual, we have many projects in the pipeline to improve our productivity as part of our continuous improvement program. So we expect also 2021 to improve our efficiency in the various areas, especially, of course, in operations, meaning plans of logistics. And the second question, I didn't acoustically understand. Can you repeat the question?

Yes. The question was whether you can indicate to us already what you expect the net debt of the Geberit to be at the end of 2020, please?

We do not provide any further guidance, as I mentioned in the call. And we do also not give any guidance on net debt levels.

The next question is from Charlie Fehrenbach, AWP.

After the supporting effect of the value-added tax in Germany in Q4 falls apart in Q1. Is the assumption wrong that the sales in Germany, at least, should be lower in Q1 than in Q4? Maybe you can [indiscernible].

Obviously, the VAT reduction ending end of last year had a positive effect on sales in Q4. But I don't want to make any statements because I don't know, if this effect is so big that we will see things being lower in Q1 compared to Q4. So there is an effect. But no one knows and I don't know how to quantify this effect, therefore, I can't give you a precise answer.

Okay. And maybe a second question, just for my understanding. Did you say that the profit level of 31% is not sustainable because of the rising marketing costs [ first time ], I guess?

Yes, exactly, because we have just been restricted by COVID-19 in marketing, but also in traveling, of course, and if we would have had the opportunity to spend the CHF 25 million marketing, we would have spent last year.

And the next question is from John Revill, Reuters. I'm afraid, we can't hear you at the moment. Perhaps you're still on mute?

Can you hear me now?

He's very far away. It's very, very quiet. The volume is very low.

Could you hear me now? Is that better?

Yes, please go ahead.

So sorry about that. Yes, just my question sorry. Just a quick question. On currencies, [indiscernible] in local currencies sales went up, but in imported currencies sales went down, so it's back to the story of the strong Swiss franc again. I wondered, could you give us a bit of -- what's your thoughts on the current situation and how much of a headache is the Swiss franc thought about? And secondly, how does it affect profitability at the company? And linked to this, are there any kind of -- what plans are there to kind of counter this? I mean you said there's no further price increases but -- as in addition to your normal one in April. But is there anything else you can do to deal with it?

The currency development is not really a headache for Geberit because we have a almost perfect natural hedge. Which means that currency devaluations or changes do not have a material impact on our EBITDA margin. The only headache which could come up is that we would be forced in terms of sales prices to adjust our prices, for example, in Switzerland. But the Development at the moment and all the development last year of the euro versus the Swiss franc did not trigger any need to adjust our prices in Swiss franc. Maybe -- and one answer is, what is very important to us and we do that constantly, long term, we always try to balance our currencies. In many of our projects, you always ask the question, does it support our natural currency hedge? And we do that on a long term. And if that -- currencies come down like last year, we benefit from this long-term strategy and thinking.

Right. What -- Can you explain the situation of why would you be forced to adjust prices in Switzerland? Would you start to cut prices in Switzerland to prevent people going to Germany? Or what's the mechanics of, if you had to do that, but you obviously haven't. But what's the mechanics of that, could you explain that?

Very simple. Very simple, if currency driven cross-border business would go up substantially, we would consider or think about price adjustments, for example, in Switzerland. But that is not the case at the moment.

Okay. And so there's no price increases planned for the Eurozone and to tackle the Swiss franc strength at the present or in the U.S. because of the dollar decreasing in value substantially?

Well, we did 2, as I mentioned before, in the U.K. because of the devaluation of the pound. And in Russia, because of the strong devaluation last year also.

Nothing planned in the -- in addition in Europe Eurozone or U.S.?

No.

And the next question is from Christian Arnold, Stifel.

First of all, a clarification. You said before that in November and December, you achieved a growth of 11% after a weaker October. This 11%, were you referring to Germany or to the whole group?

No, that was the whole group.

That was the whole group?

Yes, it was.

Then on Germany, I mean, this tremendous Q4 organic growth of 13%. I mean you stated the different reasons. I wonder if you can give us a comment on the inventory levels at wholesalers. Compared to maybe 3 months ago, compared to 1 year ago, where do we stand here at the inventory levels for Germany, especially, but maybe in general as well?

In general, we believe -- actually, we do not know. But we believe that inventory levels at the end of the year had been rather high at wholesaler level, especially also in Germany. In Germany, due to the VAT effect, but also by in general behavior of wholesalers in the second pandemic wave, which is different to the first pandemic wave. In the first pandemic wave, especially in April and May, wholesalers in general reduced their inventory level. And we've seen that in the second pandemic wave, although the construction industry has not been impacted by any large restrictions, wholesalers didn't want to make that same mistake again and increase inventory level, that's at least for the year from 1 or 2 customers.

Right. Any guess what does it mean for Q1?

Again, the same answer as I gave before to Charlie Fehrenbach, and obviously it's not helpful or not helpful in the sense that if that is true then we'll have some negative impact on Q1. But interesting question, obviously, what is the amount, the quantification, we do not know.

Next question I have is on the supply chain. Is there any interruption you see? Any shortage of electronic components maybe for showers, toilets, et cetera?

No, at the moment. We do not have any interruption in the supply chain, but it has become very challenging, especially in terms of transportation. So in some of components -- in some of the components, which we source, especially for shower toilet from Asia, it's not that they're not available, but the big challenge at the moment is to find logistics capacity containers to ship these products from Asia to Europe. Prices for containers, shipping containers went up dramatically over the last couple of weeks. But at the moment, we have all the products we need, but the situation is challenging.

The next question is from Cedar Ekblom, Morgan Stanley.

One question from me. Given strong relationships with your wholesalers and trained installers is key to the market position and revenue growth potential of the business, you're speaking about increasing your digital marketing presence going forward, which is obviously a bit of a shift from the in-person relationship that you had. Should you think that this can present a bit of a risk to the stickiness of your installer or wholesale relationship?

No. Actually, we think that is an opportunity. If I look at last year, we have been able to increase our contact with customers despite the crisis. Overall, our customer contacts made with installers went up by 9% last year. And that was driven by the shift to much more digital interactions. We tripled the number of digital interactions last year with our customers. And they made around 40% of our interactions on our digital -- has been digital last year. Our effective element, which also gives the confidence that we are able keep or even strengthen our consolidation still this year, with all the restrictions we have, we increased substantially our number of customer trades last year. Actually, it is more concentrated last year than in the year before, substantially more because the shift to digital, online training of companies. We trained last year, just as one number, we trained 50,000 with digital training tools last year.

The next question is from Marta Bruska, Berenberg.

I have couple, start it one by one. I was just wondering if you could give us a little bit more detail on when do you base your statement of the market share gains, especially that you, at the same time, do not really want to quantify those one-off effects with full regard to VAT impact, to the pricing impact, to the prebuying impact and you don't give us any outlook either. So in this context of the extreme lack of visibility, as it seems, I would like to know a little bit more on what are you actually basing your confidence that you outgrew the market, please?

Very simple. Very simple. We do not believe that the build and construction market, and especially the sanitary building construction has been growing last year. That is a simple observation why we believe we have gained market share. And especially if you go company by company, and of course also, if you compare where we have competitive figures, we are very confident that we have gained market share.

So you think there was no growth in the sanitary systems and air conditioning industry at all and the industry association, like, for instance, from Germany. This is just not overlapping 1:1 with your markets. What's the reason for this discrepancy?

Overall, we do not believe that the market for sanitary products in our geographies already are active, has been growing last year.

Okay. And then I would like to ask you about your digital initiatives, which I think it's very cool you are doing it, and it's quite encouraging to see already 40% of your interactions last year was being digitalized. Now I heard from other industry players that they had been planning to launch a digital [ tour ] showroom already last year, fully digitalized in Europe. Have you seen any such larger moves with some of your largest competitors in the region? And what do you think like of the change in the dynamics in this space? And I have one more question only.

I don't have a comment on competitors and their marketing activities, but I can comment on our own marketing activity. We also shifted fairs last year to digital showrooms. We reached a substantial number of customers with digital showrooms. For example, in Germany, where we planned originally to be present at a fair, which we then switched to pure online, showroom forward, which was very much appreciated by the customers. So we did that as well last year. And I'm confident that this format will also work this year. I mentioned before the [indiscernible] innovation [ phase ], that will be a kind of a virtual fair for the various professional customer groups we are serving.

Okay. And then lastly, with regard to your Piping system for the drinking water supply, I mean, it has been a very active area for many of your key competitors in there and for most of the products on the market already, as seen with being [indiscernible] to a fully digital monitoring of the water quality, including like some [ as equals ] to [ crop ] for different bacterias and germs in the water in the real-time, [ continuing ] your Piping system has such features.

I'm very sorry. Can you repeat the question? I didn't understand.

Yes. I'm asking about the digital monitoring features of your new Piping system for the drinking water supply. So from the competitors, I have seen real-time monitoring of the quality of the water in their Piping systems, launched in the market over the last few years. And I'm asking what is in your Piping system in terms of digital features?

There, we have been precise in digital [indiscernible]. We are selling pipes, and our competence and products are for the transportation of water. The water management, for example, monitoring, measuring, cleaning, whatever you want to call it, is not the category where we are active.

Our next question is from Alessandro Foletti, Octavian.

I have 2 questions, firstly. We have spoken a lot about Germany, but not so much about Switzerland, and the growth rate there was also very strong. Can you explain that growth rate?

I think there were 2 main reasons in Switzerland. One is the before mentioned home improvement trend, which is also taking place in Switzerland. And secondly, we have seen a very strong nice development of shower toilets in Switzerland over the last year. And as you know, shower toilets is a very important category for our business in Switzerland.

So more relevant in Switzerland than in Germany, for instance?

I'm sorry, say again?

Is that more relevant in Switzerland than in Germany?

Share of sales? Yes.

Okay. And is there also a similar read across in Austria because that was not so stellar, but also quite strong and definitely better than expected in Q4 as well?

The same statement for Austria as well, same drivers.

Okay. And then on all these, if we take [ Germany and ] Switzerland off here, what's your best guess on how sustainable this growth now is? I mean we heard about stocking, destocking, VAT, and so on. But if you sort of summarize everything in your brain, and you say, okay, of all this you've seen, [indiscernible] is not sustainable.

Yes, [indiscernible] that there is something in my brain. But it's not a crystal ball. It's not a crystal ball in my brain, okay? There's something there, but I don't want to talk about the outlook, as I said, during my introduction. We don't -- really don't want to talk about the outlook. And coming back to Q4, end of October or beginning November, when we had our Q3 conference call, we expected that Q4 will be weak, was very strong. We had a low visibility. Uncertainties are high. Last year was definitely the year with the highest monthly volatility of Geberit sales most [ of the ] ever. And therefore, we just refrain from talking about the short-term future of our business.

Fine. Maybe then on last one, we did not speak about personnel cost development. Do you have an indication on that side?

We expect this year, in average, wage inflation of around to 2% for 2021.

And the next question is from Martin Flueckiger, Kepler Cheuvreux.

Just a quick clarification question. I'm not sure whether I understood you correctly. So we were talking -- or you were talking about digitization costs of CHF 15 million in 2021. And if I remember correctly, you already had CHF 15 million in 2020. And then what I didn't understand, did you say that there was going to be, on top, another CHF 15 million -- so incrementally now CHF 15 million versus 2020 for 2021? That's my question.

It is correct. It's another CHF 15 million, or in other words, compared to a baseline of 2019, it's CHF 30 million more now in 2021.

The next question is from Manish Beria, Societe Generale.

So congratulation on very good results today. I'm very surprised at your margin comment because you are already at 31%. So I understand we see at the high point and the headwind next year. But you also commented, I mean, the growth rate in Switzerland, Austria and Germany is also driven by Premiumization. So I'm just wondering, because you are already at 30%, 31% and you'll benefit because of [ numeration ], some margin benefits from there. So how could your margin not be like more than 30% over the medium term?

As I said before, marketing expenses going up again. While COVID is over, we'll have both a normal level of traveling expenses. And as I also mentioned before, another CHF 15 million this year or CHF 30 million compared to pre-COVID for digitalization. And don't forget, another point, we have reached record low raw material prices last year, actually more like December, last year. And the raw material prices, as I outlined before briefly, have started to grow again and accelerated in terms of growth over the last couple of weeks. So take all that into consideration, we have had last year a historical low level of raw material prices.

But is it a fair assumption to make if your shower toilet and the premiumization continues, that will be margin benefit for the company?

The growth of shower toilet does not have a differential and fuel impact on the margins because of retention the margin is comparable.

And the next question is from [indiscernible].

The Nordic region is your third largest market, and you achieved an organic growth of 3% in this region last year, which is good. But it is lower than in your core markets, Germany, Switzerland and Austria. While actually the lockdown in Scandinavia was less severe, the trend towards home improvement is very strong and your market penetration behind the wall is still -- has room for improvement. So how confident are you that your combined product offering in Scandinavia will result in higher growth going forward in this region in the coming years?

We are confident because -- and I also indicated in my introduction that, for us, important growth driver that already behind the wall and behind all flushing systems and this behind the wall flushing system, again, grew almost double-digit last year. However, the share of this business is still relatively low. And this is over the reason why we have benefited in the savings spend from big crisis in the Nordics compared to our core market, the German speaking countries. But we are confident that midterm, we are also able to outperform the market based on behind the wall systems in the Nordics.

And the next question is from John Revill, Reuters.

It's just a quick factual question. What was the level of price increases that you did in Russia and Switzerland in January? Could you tell me, please?

It is a bit product by product, but in average around 5%. 5% the average in U.K. and Russia.

And the next question again is from Christian Arnold, Stifel.

Yes. Question on the product area again. I think in the past that Installation & Flushing Systems have the highest margins, with EBITDA ahead of Piping Systems and Bathroom Systems. I wondered, I mean, having all this integration broke with Sanitec, all the brand outpacing done with Sanitec and also the strong growth in Bathroom Systems and coming from shower toilet. We have a fair assumption that Bathroom Systems now has a very similar profitability compared to Installation & Flushing Systems?

No. Clearly not the case. The margin is still lower from Bathroom Systems compared to Installation & Flushing Systems. And we do also expect that, that will change short or midterm.

Okay. Okay. And Similar to piping?

Yes, similar. Yes.

Okay. And just a brief technical question on CapEx, what do you expect for '21, '22?

'21, we have a budget of around CHF 180 million, again, higher than last year. We expect last year to be finally at around CHF 150 million. Because although, in terms of investments, we have been restricted by COVID-19, we wanted to spend more -- some delays due to the COVID-19 restrictions. And this year, we plan [indiscernible] again for a normal level of CHF 180 million.

And in '22?

We don't know yet. But midterm, we expect around 50% of our net sales to be invested into CapEx.

And this concludes the Q&A session, and I hand back to the speakers for closing remarks.

So. Thank you for your interest. We wish you all a good day and see or hear you most probably at our full year conference in mid-March. Thank you.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.