Geberit AG (GEBN) Earnings Call Transcript & Summary

Good morning. Ladies and gentlemen, welcome to our full year sales conference call. We will first comment on our fourth quarter sales figures and review our full year sales performance, followed by our guidance for the operation and financial results in 2024 and then finish with the outlook for this year. Let me start by giving you some comments on the sales development in the last quarter. Net sales declined by 1% and reached CHF 685 million. The unfavorable currency development affected net sales negatively by CHF 40 million or minus 2%. In local currencies, group net sales grew by 1%, entirely driven by volume growth. The continued volume growth in the fourth quarter is a further testament of our strong business performance last year, where most building construction markets were in sharp decline. Let me now comment on the sales development in local currencies of the regions and countries in the fourth quarter. In Europe, net sales increased by 1%, driven by growth in Central Europe with Italy growing 6%; Benelux, 5%; Germany, 3%; Switzerland, 1%; and Austria being stable year-over-year. Eastern Europe declined by 1% after strong growth in Q4 of 2023 of 33%. And Northern Europe decreased by 4%, negatively affected by the divestment of the Nordic shower business at end of 2023, with a negative effect of minus 2% on net sales. Western Europe decreased by minus 7%, driven by declines in France and the U.K. Outside Europe, net sales increased in Middle East, Africa had 10%, despite an already very strong growth in the previous year quarter of 41%; and in America by 2%, also despite a strong previous year quarter. In Far East Pacific, net sales decreased by minus 9% due to weak sales in China, partially offset by India. I continue with the sales development per product area in Q4, again, in local currency. Installation & Flushing Systems grew by 4%, while Piping Systems and Bathroom Systems both decreased by minus 1%. The relatively weaker development of Piping Systems is driven by its higher exposure of -- to the new build sector whereas Bathroom Systems was negatively affected by the divestment of the Nordic shower business per end of 2023. We will now comment on the full year 2024 sales performance. Net sales in Swiss francs were stable at CHF 3.1 billion, negatively affected by strong currency effects. Negative currency effects led to a net sales loss of CHF 76 million or minus 2.5%. In local currencies, net sales increased by 2.5%, almost entirely driven by volume growth. We consider this volume growth as very strong since the building construction market experienced a significant downturn last year. The 3 main reasons for our volume growth are, first, selective restocking of wholesalers and respective base effect in H1. Secondly, we have further expanded our market position by maintaining our sales and marketing efforts since mid-2022, when the building construction markets began to decline. The third volume driver were strong sales with new products, not just FlowFit, the new supply piping system, Mapress Therm, and the new shower toilet, Alba. Moving now to the net sales growth per region. Again, all growth figures refer to growth in local currencies. In Eastern Europe, net sales increased by 7%, supported by a base effect. In Italy, net sales increased by 6% in a favorable market environment. In Benelux, net sales increased 4%, driven by growth in the Netherlands. In Germany, net sales increased by 3%, despite a strongly declining market. Our growth in Germany was supported by base effect, but also driven by relentless sales and marketing efforts and the introduction of new products. In Austria and Switzerland, net sales were stable year-over-year. In Western Europe, net sales declined by minus 3%, driven by sales declines in France and the U.K. Net sales in Northern Europe decreased by minus 4%, negatively affected by the divestment of the Nordic shower business per end of 2023 with a negative effect of 2% on net sales. Let me now turn to the regions outside Europe. In the Middle East and Africa region, net sales increased by 17%, driven by the Gulf region. In America, net sales increased by 3%. And in Far East Pacific, net sales were stable with strong growth in India, offset by the market decline in China. Let me now comment on the sales development per product area, again in local currency. Installation & Flushing Systems grew by 5%, while Piping Systems and Bathroom Systems both increased by 1%. Installation & Flushing Systems benefited more from stocking effects of wholesalers compared to the other 2 product areas. Furthermore, the relatively weaker development of Piping Systems can be explained by its higher exposure to the weak newbuild sector, whereas Bathroom Systems was negatively affected by the already mentioned divestment of the Nordic shower business per end of 2023. Let me now comment on our guidance for our 2024 operational and financial results. The EBITDA margin for the full year is expected to be slightly below previous year. The full year tax rate 2024 should be between 19% and 20%, and CapEx is expected to be around CHF 180 million. Before I come to the outlook for the year, let me briefly update you on our share buyback program. In total, we bought back 230,000 shares for a total amount of CHF 121 million last year. This means that we distributed, together with the dividend payment, CHF 540 million to shareholders in 2024. This corresponds to around 18% of net sales last year. Let me now comment on our market outlook for 2025. After the significant decline of the building construction industry since mid-2022, we expect overall demand to stabilize in the course of 2025. In Europe, building permits almost stabilized in the first 9 months of last year, with a slight decrease of minus 1%. However, in our key markets, Germany, the Nordic countries and Austria, building permits still fell double digit overall by minus 12% in the first 9 months of last year. Due to this geographic exposure, the new construction market relevant to Geberit is expected to continue to decline in 2025, however, at a much lower rate than last year. Unlike the newbuild sector, we expect a stable to slightly positive development for the renovation market, which accounts for around 60% of our business. Since several market indicators, for example, real estate transactions, show first signs of a stabilization or even a slight recovery. Let me now turn to the regions outside Europe, where we expect a mixed picture for the building construction industry in 2025. We expect in several markets, for example, in India or the Gulf region, a strong demand. Other markets, for example, China, will be in a decline, mainly driven by the residential sector. After this market outlook, let me now come to the Geberit outlook and our priorities this year. Regardless of the market environment, we will continue to execute on various strategic initiatives this year, such as the further expansion of our Piping business with the new product FlowFit, Mapress Therm and SuperTube. The shower toilet business, with a focus on the entry-level model, Alba, launched last year. And as a third example, our specialization strategy of our ceramic plants. Furthermore, we also again increased our expenditures this year for dedicated sales initiatives in emerging markets and for investments in IT and digitalization. In total, we will increase operational expenses for these initiatives by CHF 20 million in 2025. In terms of pricing, we decided to implement a regular sales price increase of around 1% as of Q2 this year. With regards to our 2 largest P&L cost positions, we expect a wage inflation of around 4% this year and stable direct material prices in Q1 compared to Q4 last year. Let me finish our Geberit outlook with 2 important adjustments of our operations footprint. As part of our continuous improvement strategy, we decided in 2023 to specialize our ceramics manufacturing network. The ceramic specialization initiatives pursues the goal to specialize each ceramic plant to specific products or product families according to specialized competencies and know-how, following the manufacturing principle of 1 product, 1 plant. This approach will not only improve efficiency, but also improve product quality, product availability and the sustainability footprint of our ceramics manufacturing network. In the light of this specialization strategy, we decided to close our site in Basel per end of 2026. Basel is the smaller of our 2 ceramic plants in Germany, around 300 employees in the plant will be affected by the closure. There are 3 specific reasons for the planned closure of Basel. First, the current competencies and expertise of the plant will become less relevant over time in the context of the specialization strategy. Second, the infrastructure is old and restricted in terms of growth potential. And third, the network specialization and further process optimization enable the absorption of the subcritical signs of Basel. The product portfolio is not affected by the closure. The products currently manufactured in Basel will be transferred to other existing ceramic plants, including the second ceramic plant in Germany. Total closure and transfer costs are estimated to be around EUR 40 million, EUR 25 million as onetime expenses and EUR 15 million for write-offs. As a financial benefit, we expect annual savings of around EUR 10 million as of 2027. A second major initiative in operations is the establishment of a new additional site for distribution logistics. As part of our long-term capacity planning, but also in the light of risk mitigation, we have decided to build a second distribution center beside our currently existing main logistics center in Pfullendorf. For this purpose, we have secured a suitable plot of land in Ibbenburen in Northern Germany to build a new greenfield logistics center. We will initiate the planning phase this year and plan to ramp up operations of the new center as of 2029 or 2030. Let me close our introduction with a short summary. 2024 marked a further strong sharp decline of the building construction market. Despite the significant market contraction, we managed to grow our volumes and to keep our margins on a high and industry-leading level. These results confirm that we are successfully navigating through the significant market decline of the European building construction sector since mid-2022, and that our 2 guiding principles during this downturn, operational flexibility and strategic stability, are paying off. For 2025, we expect overall demand to stabilize in the course of the year. Regardless of the market environment, we continue to execute on our strategic initiatives on top and bottom line to further strengthen Geberit's market position. Our confidence is based on the fundamental need for our products, our resilient strategy business model and our long-term focus and track records. Thank you for your attention. We are now ready to answer your questions.

[Operator Instructions] Our first question comes from Daniela Costa from Goldman Sachs.

I have 3 questions, if possible, 2 are very quick. But the main question is regarding like the footprint actions you're doing in ceramics. I think sort of in past analyst meetings you had targeted productivity improvement in ceramics of 3%, I think, between 23% and 28%. How much of that is this 1 action? And is there other things to follow for further structural improvements in ceramics? That's my main question. The other 2 are quick clarifications. When you say pricing as of Q2, do you mean the normal April price increase? And then the third question is regarding you mentioned restocking at wholesalers in the first half. You don't mention second half. Has it stopped? What have you seen there?

I'll start with question #3. We have not heard of any stocking effects of wholesalers in the second half of the year in either direction. Question #2, you're right. This is a normal price increase as of April of around 1%. To the first question, I have to correct you a little bit. The 3% typically productivity improvement, which we have achieved in the plants in the recent years, was not only ceramics, that was the entire manufacturing network of all the 26 plants. With this decision to close Basel, we expect that this benefit will now contribute to the future productivity improvement, which we, on average, also expect to be around 3% every year. And the last question was, do you expect further changes of the network? No, we do not expect any further adjustments at the current moment.

Next question comes from Martin Flueckiger from Kepler Cheuvreux.

Just got 2. I was wondering whether you could provide us with an update on the Q4 performance of your shower toilet business and particularly how Alba performed in the final quarter of last year? And then secondly, there was a sharp fall in momentum in the Middle East, Africa region. And I realize that the comps were wobbly over the last few years. But I was just wondering whether there was actually any fundamental reason behind that.

Question #1, the shower toilet business did very well in Q4 versus Q3 and Q2, especially almost only driven by Alba. In other words, Alba was growing in the fourth quarter, significantly growing compared to Q3. Second question, Middle East, Africa, growth of 10% in Q4, a little bit less than what we have achieved in the quarters before. This is only driven by a very strong comp. We have had a growth of 41% already in Q4 2023. So if you add these together, we have been growing around 50% over 2 years. We don't see any weakening of the market in Q4 in the Middle East, Africa region, especially in the markets which are strong, which is the Gulf region.

The next question comes from Martin Husler from ZKB.

Yes. I have 2 questions as well. Maybe first on the new logistics center in Ibbenburen. Can you give some more details, for example, why you didn't choose to increase capacities further in Pfullendorf? And maybe what might be the impact over the next couple of years on CapEx or if this is within the ordinary CapEx of, I guess, roughly CHF 150 million to CHF 200 million? That's the first question.

So the first reason why we have chosen a new location was that we have certain limits in Pfullendorf as well. So we also thought to expand the logistics further in Pfullendorf, but it would have become more and more complicated, it's quite dense already in Pfullendorf. But it has also to do with risk consideration. As you know, Pfullendorf is the logistics center for the classical Geberit portfolio. So if there's anything where we would have any issues in that logistics center, we will be impacted quite substantially. So it's also for risk perspective, the moment where we said it makes sense to build up a greenfield new logistics center. We just secured the land, so we are basically at 0 at the moment. We are now starting a planning phase. And then we will also have more clarity about investments, but it's clear that we expect that investments will be more than CHF 100 million for this new logistics center, which will be part of our investments, which we have in our midterm plan, we expect around CHF 200 million annual CapEx midterm. And this investment -- sorry distribution centers should be paid out of this midterm CapEx expectations.

Okay. And maybe the second question. I guess Q4, all in all, was a bit better than you expected end of October. What was the main reason that you see that you underestimated in October?

There was basically across geographies. It was not a specific geographies. Germany was a bit better Benelux, Middle East Africa was also a bit better, which is better than what we expected. There was 1 reason. And the second was the new products, which we have introduced, I mentioned before, Alba, which accelerated Q4 versus Q3, but also Mapress Therm did very well with above expectations in Q4 compared to what we have expected end of Q3.

The next question comes from Yassine Touahri from On Field Investment Research.

A few questions. First on the -- you're announcing a price increase of -- a normal price increase of 1%. Do you feel it's going to be enough to offset the wage and the fixed cost inflation? Or do you need also productivity improvements? I'm just trying to understand if you feel comfortable that you will be able to offset all the increase in costs. And the second question, it's about the German election. How do you see the impact of German election on your business? And I think there is a lot of backlash in immigration policy. Do you feel that if there is strict immigration policy in Germany, it could impact demographics and on the long term housing need in the country?

Question #1, if we just take these 2 drivers, sales price increases and wage inflation, the answer is that price increase will not be sufficient to compensate for wage inflation. Why? Keep in mind that the sales price increase of around 1% will only affect the full year with 3 quarters, so it's already lower. And the 4% around wage inflation has an impact, which is more around about 1 percentage point on the margin. So that will not be sufficient if we just take these 2 elements. With regards to the German elections, we don't want to speculate. We will see what will happen in February, and then we take it from there. Our strategy in channel and our activities are not driven by elections. We can't change markets and also not governments and elections. We will take it as it will be. Therefore, I don't want to speculate what the impacts are on Geberit.

Maybe just to come back on the question on the pricing. You're also doing a lot of work on productivity gain. Do you feel that this productivity gait might help mitigate the wage or cost inflation and help you protect your margin?

We don't not only feel, but we are convinced that the productivity improvements will obviously also support and help our margins this year, but I can't quantify it.

The next question comes from Arnaud Lehmann from Bank of America.

I have 2 questions, please. Firstly, you talked about a stable market outlook for 2025. We know you have ambition to outperform the market, thanks to Geberit initiatives. At the same time, the base effect will be a bit higher in a few quarters because of the restocking last year. So assuming no further restoking or destocking in 2025, do you feel that your volume outlook for Geberit is either stable or positive for 2025? That's my first question. And could you maybe comment a little bit more on the cost outlook. We've seen, I guess, natural gas prices a little bit higher in some parts of the world. On the other hand, we have industrial metals still at pretty depressed level. What do you see in your cost trends at the moment?

I take the first question, and #2 will be answered by Tobias. To be precise, we said we expect a stabilization in the course of 2025. This means at some moment, at some point in the year, we expect that we should see the lowest point. Secondly, we also have the vision to expand our market position next year as usual. However, as you know, we only provide guidance for our top line and therefore, also for the volume only with our H1 results. Therefore, I don't want to comment on your question about our volume expectations of Geberit this year. And question #2 will be answered by Tobias.

On the raw material, we're only commenting on Q1, where we expect the raw material costs to be roughly on the level of Q4 of '24. Bear in mind that we announced roughly CHF 20 million higher costs, especially for sales initiatives and IT/digitalization. And finally, in terms of cost, also keep mind the roughly 4% wage inflation that we are guiding for, for '25.

The next question comes from Patrick Rafaisz from UBS.

And 2 questions, please. The first is on the costs. The CHF 20 million increase in sales initiatives and digitalization, I assume that is on top of the CHF 30 million that we saw in '24, so incremental. And also related to costs, the closure costs of EUR 40 million, how should we spread them over '25 and '26? That's the first.

Thank you. So for the cost, the EUR 20 million, indeed, they do come on top of most of the cost that we announced last year. On the closing cost, the CHF 15 million write-off will be taken this year, and the remaining EUR 25 million are to a very large extent as well P&L effect in this year, cash effect, however, will mostly be in '26.

Okay. Understood. That's helpful. And then the second question is around the margin guidance for '24. I just noticed the slight change in wording where you're saying slightly below 24% versus Q3 where you said around 29.5%. Is there an implied change or marginal upgrade in there? Or just a different choice of words and it's still 29.5%?

No, it is a marginal upgrade. It's just driven by the fact that volumes tick better in Q4 than what we expected, and that is reflected in this different wording.

Okay. So we're looking for something like 29.7%, 29.8%, I guess?

We are looking for something slightly below previous year level.

The next question comes from Ghosh, Pujarini from Bernstein.

I have 2. So firstly, on Western Europe. Q4 saw a very strong decline versus your position at 9M. Please, could you talk a little bit more about the different countries. So we know France has been doing very well. U.K. is probably close to the trough and Iberia should be doing well. So could you just elaborate on that?

In Q4, in Western Europe was driven by a decline in France and also in the U.K. In France, we have heard and seen that this market has become in tendency more weaker throughout the year. And in Q4, we have -- that was especially Geberit effect, a very strong base because we had a strong Q4 for specific reasons in Q4 2023. The third region, the Iberia Peninsula is growing. It's nicely growing also our business, driven by obviously a strong market environment, especially in Spain, but also some working -- well-work initiatives of Geberit. However, Iberia is in terms of share of sales in Western Europe, relatively small. So it's not sufficient to compensate for the client in France and the U.K. in Q4.

And how should we expect this to evolve over the next few quarters?

Sorry, in Western Europe, you mean?

Yes.

We do not provide guidance on a quarterly basis for sub regions, that's too detailed.

Okay. Okay. And my second question is slightly more longer term. So if you think of your net debt-to-EBITDA and you've announced CapEx plans of around CHF 20 million per year and your dividends, and if we include the CHF 300 million share buyback, I see a strong deleveraging over the next few years versus the 1x at the end of 2023. And you guided to reaching about 1.5x in the medium term. So how should we think about capital allocation, which would increase your net debt-to-EBITDA levels to your guidance range?

So we maintain that we think that's roughly 1.5x net debt-to-EBITDA is an adequate level for our business. That considers all our business plan and expectations, including the CapEx that was mentioned before with Christian. And also keep in mind the share buybacks that we are executing on a regular basis.

The next question comes from John Revill from Thomson Reuters.

I was just wondering, I know the United States is not a big particular market for Geberit. But I was wondering, can you give us a view about how -- what's your outlook for the market there, the construction market there this year? And in terms of new build versus renovation, and what sort of levels of growth or not do you see there this year? And also, you guys are going to invest more in there as a result of this? So what's the kind of investment plan?

Sorry, we didn't get the country you were referring?

United States.

United States, okay. So United States, we have, as you know, a kind of a separate business. The Geberit business is a bit different over there, it is at an arm's length. We have expectations that the market should be, for us, stable next year or 2025. But also there, we have the ambition to further expand our market position and to become stronger. But all in all, we are quite, I wouldn't say optimistic, but I'd say we expect a stable, slightly positive market in the U.S.

And are you doing any more investments in there to, I don't know, are you building in your plants or distribution centers or is there any plan?

Nothing beyond the current normal investments which we do. We have 2 plants there. We reshored some of the supply chains already a couple of years ago. So there's nothing -- if this is behind your question, which we have to adapt also in the context of the new President coming in next week. So there is no adaptation that we have to do. We did some of them already a couple of years ago, but that's okay now.

The next question comes from Remo Rosenau from Helvetische Bank.

Even considering a restocking effect during H1, the growth of 3.2% in Germany during last year was quite remarkable. Also compared to Switzerland and Austria, which most likely indicates additional market share gains. Do you have any idea how much of this growth was due to restocking and how much was driven by real underlying growth? And was this growth mainly driven by your new product launches? Or were there also other elements having an impact? That is my first question.

Unfortunately, we do not know, and we don't have any quantitative idea how much this restocking effects were in Germany in the first half of the year, we only got qualitative feedback. With regards to the products, that was more in the year or the end of the year, which have been accelerating then compared to the first half of the year. And some of them, we already introduced as of Q2. For example, Mapress Therm, the new supply piping system, or also Alba, we only introduced as of Q2 last year. So that accelerated within the year also in Germany.

But the notion of gaining market share is obvious, right?

Absolutely. We don't disagree on that note, not at all.

Okay. Then how large was the disposal effects of the Nordic shower business over the full year and in the fourth quarter?

The total sales, which we have sold, was around CHF 6 million. I only know the effect in -- on the Nordics because that is where the business basically was. Even on the Nordics, the effect is around 2% throughout the year, but also in Q4. And then you can do the math what it is on the group, not that much, obviously.

Okay. Good. And my last question, you talked about additional extra costs in '25. But on the other hand, we have also some extra costs falling out of the picture in '25. For instance, the cost for the 150-year anniversary. Could you quantify it now in retro-respect, you should be able to do that? How much you spent for this 150-year anniversary, which will not occur again this year?

This is correct. We know obviously what the figure was. It was well invested, although it was high, but because it was a mid-single digit million amount. But that falls off, you're right. But we will take this amount and we will take it especially, for example, in shower toilet business to keep or to accelerate from that perspective also the activities, for example, for Alba. So it's not a massive fallout of marketing costs this year compared to last year.

The next question comes from Thomas [indiscernible].

I just had a question for the closuring Basel. Just will there be layoffs with -- you're right about 300 employees affected? And how smoothly can such an operation be carried through with the regulation or trade unions and so on?

So there will be many terminations because we completely closed the plant and currently, we employ even a bit more than 300 people, but we estimate with all the natural fluctuation that about 300 people will be affected end of next year. How smooth it will be? Obviously, we are very well prepared. We are currently starting right now today the negotiations and discussions with employee representatives. And I can't give you forecast how smooth it will be. We will do our best to also stick to our responsibility with regard to the 300 employees. We hope that we have more clarity in the first half of the year and also have a smooth process until end of 2026.

The next question comes from Benjamin Triebe from NZZ.

I got 2 points regarding your key market, Germany, First of all, you mentioned some relentless efforts in the last year that you undertook to grow in the market. What were these efforts in particular?

Most importantly, we did not reduce or adapt our sales organization in Germany. We clearly defined already 2.5 years ago, if and what happened, the market will go down, we do not reduce our efforts. For example, even retirements in the sales organization need to be refilled, and that is what we call relentless sales and marketing efforts. As a second example, as you know, we do a lot of training of professional customers, planners, plumbers in Germany, we have a lot of activities. We do not reduce our activities, for example, customer events or training somewhere or in house. So it's still a reduction. We also even invested over the last 2.5 years, as you might know, into a new customer-centric Germany, which will be opened this year. We invested CHF 37 million over the last 2.5 years that obviously did not help to generate sales yet, but it was a clear signal to the market with our professional partners that we don't stop our activities, that we believe into the German market also in that downturn.

And secondly, I want to ask if you could add a bit of context here regarding to Germany. I guess the downturn in the construction market has been quite long and quite severe. How hard was that compared to previous downturns in Germany? And do you expect to outgrow the market in the future or for how long do you expect that? Or will that at some point be operational adjustments in Germany because it's just too heavy what's going on?

So the first question, if you compare the current downturn in Germany for the building construction market and specifically for the sanitary part where we are playing, I would say that the downturn this time is worse, heavier compared to 2008 and 2009. The second question with the adaptation of our footprint in Germany has nothing to do with the German market as we said in our introduction. This has nothing to do that we have a weak market in Germany. This is just part of our continued improvement where we are regularly reviewing our network. In that case, we came to a conclusion that this German ceramic plant has no long-term future, so we had to take this decision. Some of the product portfolio, by the way, which we transferred from Basel, the plant we closed, will be to the other plants in Germany, which is in Haldensleben, which we'll manufacture in the future part of that portfolio. Also the fact that we have decided to invest into a new logistics center greenfield in Germany is also a clear sign or signal that we are not looking as German a weak market, which is not triggering any investment decision. Over the last 5 years, to give you a number, we invested CHF 370 million. That's around 43% of our total CapEx only in Germany, although we only generate 30% of sales in these markets -- in this market.

The next question comes from Tobias Woerner from Stifel.

Three, if I may, please. Number one, I just want to get a sense of where the inventory levels are in Germany. And when I look at the order books for housebuilders in Germany, they have been at the lowest point 3 months and the highest point during COVID at 5.9 months and over the cycle are at 4.4 months. In December, they've moved up to 4 months, i.e., from a low of 3 months. So I'm trying to understand, do you believe that we've hit the trough in terms of the inventory levels at your customers? And if so, you're saying you're seeing no move either way. What is the balance of risks of it going one way or the other? Number one.

The order -- sorry, inventory level of wholesalers in Germany is below what we call, used to call normal levels, so below 2019. Maybe this is now the new normal level in the light of this market environment. What we expect, what seems to be quite sure that the whole stocking and destocking effects should come down also as of 2025. Because as you know, the main reason for the stocking effect were the massive inflation, which we have experienced also in our sector. That led to buying forward, building up stocks and this also led afterwards then to destocking. Since we don't have this high inflation environment anymore, we hope that we will have much less impact of whatever inventories might do in 2025 in Germany.

Okay. If I may follow up on that question. We've got elections in Germany at the end of February and likely a new government. Are there, in your view, any regulatory effects, which could lead the wholesalers to prebuy or not?

I don't know. And as I said before, we don't want to speculate and I don't have really a view on that. Our wholesalers will react on the governmental decision that there's 1 specific law, which will might be of interest. This is a German Energy Law for buildings, which might be done with the new government might have a different view on that, that might have a certain impact. But apart from that, I don't have a view on that.

Okay. Then if I go on to the country-specific questions, number two, Italy. You've seen very good growth there in Q4. And that was a bit of a surprise to me, growing at 6.2%. Your construct has forecast for the year '24 and '25 still down high single-digit levels, including renovation. Why did you perform so strongly there?

First of all, we think that the market did well last year in Italy, also driven by subsidy programs. You're aware of this super bonus program, which had a positive effect on the market. And on the second hand, it's similar to what I said to other companies before, we are doing very well with new products, which we also introduced in Italy.

Very good. And then just lastly, when I look to the Benelux, which is a reasonable size market for you, it seems that the current lead indicators are bouncing back quite strongly. You've seen Q4 up 4.8%, indicating that, that is also for you the case. Do you feel comfortable with this market going into next year?

Especially with the Netherlands, I would agree, we are quite rather optimistic to the Netherlands. This is one of the countries where we think that demand started to pick up again.

The next question comes from Christoph Dolleschal from HSBC.

Most of them have been answered, probably 3 follow-ups. The first one on Germany again because you said they did better than expected, and we've heard a couple of reasons. What about also, do you see less competition from the heating solutions? Did that play a role as well? Or is it mainly because of the sales organization that you didn't touch and basically all driven by the sales performance?

As you know, we don't have facts and figures about heating solutions. But if we talk to our wholesalers, we did not hear that the heating solution effect in whatever direction had an impact on our performance in Q4.

Okay. The next one is on Nordics. Because even if we strip out the disposal effect of the shower business, we are still down 2% local currency, 4% reported. What are the reasons why the Nordics keep on being bad? I mean what do you expect in terms of the market? Are we reaching a bottom now? Or is it continuing to be weak? Because I mean, they've been like Germany, weak for a while, but Germany is turning and Nordics are not.

Nordics belong to the market last year, which was the most difficult one because of especially the new build sector. You might remember that the building permits in the Nordics in 2023 were significantly down. I can't remember the exact number. It was something like 25%, massively, especially in Sweden. So that was obviously hampering the market last year. And where are we now in the Nordics, if you look now the building permits, it is a bit similar as it is in Germany, it's not as down as it was in 2023. But in the first 9 months last year in the region, in Finland and Norway, they are down 15% to 17%, still negative for the new build, not as severe as 2023.

Okay. And the last one on the price increase. So you're again doing the regular price increase, which you had skipped last year. Do you have any idea how much prebuying that typically leads to in the first quarter? Because obviously, I would expect some of the wholesalers then trying to at least save the 1% or 2% that typically come in there.

I don't have a quantitative idea or answer to that. But there is typically a pre-buying, which we also would expect this year with this regular price increase, but I can't quantify it.

The next question comes from Harry Dow from Redburn Atlantic.

I think I have got 3 questions, if possible. Just firstly on the sales growth initiatives for this year. I wonder if you can give a bit more color on sort of where they're being put to use. I know some of that was outside Europe last year. Is that the same case this year? And secondly, in relation to that. Do you think that's an ongoing sort of investment and we should think maybe the CHF 20 million to CHF 30 million that we've seen over the last 2 years is something that we should factor in for the next sort of 2, 3 years as well, just sort of a modeling perspective? And then just finally, I think in the release, you mentioned an expansion of the piping business in 2025. I'm just wondering is that a further rollout of products like FlowFit and SuperTube to new countries? Or is that an aim to increase the penetration within the existing footprint?

Question #1. We have started and we continue with 4 specific markets outside Europe, where we will further invest this year. These are the markets in Saudi Arabia, our organization in India, where we will accelerate, also in Vietnam and in Egypt. These are the 4 regions, countries where we are accelerating our activities this year outside Europe. The second question about the CHF 20 million additional expenses. Than depends always on what we are focusing on. Is there any specific initiatives. We mentioned now we are in the second year IT and digitalization, might be that, that will continue there, that we have to further expand there, we don't know. So I will not take it as a number, which we just put it in for the coming years. It depends every year case-by-case what we are doing on the operational side mainly. And the third question, further expansion of Piping Systems. This is not about geographical expansion. It's about further penetration, increase of new products in existing geographies.

[Operator Instructions]The next question is a follow-up from Martin Husler from ZKB.

Two follow-ups. Just to clearly understand the closure of Basel in terms of sales, you would not expect any impact because you think you can fully compensate this by network optimization. Is that rightly understood?

It is correct. We don't adjust the product portfolio. We just move products from Basel to other plants where they will be manufactured.

And then a very detailed question. But why did you show an FX impact in Q4 for Switzerland?

A good question. It's a very small one. We have a few finished bathrooms. We have the site in Austria, where we are, 2 prefabricated bathrooms, and they are invoiced in euro if they are installed in Switzerland. And this has a little minor impact. but the numbers are correct.

Also, the next question is a follow-up from Martin Flueckiger from Kepler Cheuvreux.

Just a quick one on the specialization initiative costs, what was it again, CHF 40 million. Are you going to report those as exceptional items? Or is that all going to be part of the usual EBITDA and EBIT numbers? So are we going to see a difference between EBITDA adjusted and EBIT reported in 2025, I guess, is what I'm asking.

We haven't finally decided on that, but we will make sure that you always can differentiate what costs are associated to it.

There are no further questions. Back over to you for any closing remarks.

So thank you for your questions and for your participation. We wish you all a great day. Thank you. Goodbye.