Value-oriented management

Aspects of the value orientation are applied in many areas of the Company.

The remuneration model for Group management as a whole involves a remuneration portion dependent on Company success that is calculated based on four equally weighted Company figures – included among them the return on operating assets. Details in this connection can be found in the → Corporate Governance section.

Investments in property, plant and equipment above a certain investment amount are subject to strict standards, without which no approval is given. For example, it is mandatory that an investment return be achieved which is greater than the costs of capital plus a premium.

It is also in the sense of a value-oriented management that Group-relevant projects are tracked over the long term after the project has been completed, and the achievement of objectives is evaluated. A corresponding Controlling is presented twice annually to the Group Executive Board and discussed in this council.

Strategic success factors

The success of the Geberit Group is based on a series of success factors. The most important of these are:

• a clear, long-term strategy,
• significant sustainable drivers of growth, so that - with the current innovative product range, with the AquaClean product range and with the various organic growth initiatives (OGI’s) - many already existing but under-penetrated Geberit markets can be developed,
• high market entry barriers, which are substantiated by the strong brand, the comprehensive know-how in the sanitary market, the relationships with the decision-makers built up over years by the sales team and by the numerically important field service team,
• an innovative and comprehensive product range developed in accordance with the needs of the customers,
• a proven push-and-pull business model, and
• a lean, high-performance organization with optimized processes.

Ambitious medium-term goals

Geberit has set itself the target of establishing the standards in sanitary technology worldwide and supporting them in the long term through sustainable actions. This management approach is to be reflected among other things in sales growth above the industry average. Basically, Geberit is aiming at achieving its sales targets while at the same time maintaining its industry leadership in terms of profitability and the ability to generate high cashflows. Additional growth through acquisitions is not precluded. However, any potential acquisition will have to satisfy strict strategic and financial requirements. From a medium-term point of view, an average growth in sales after currency adjustments of four to six percent and an operative cashflow margin between 23 and 25 percent should be achieved annually.

The medium-term growth contributions come from standard business activities, organic growth initiatives (OGI’s), new product launches and from the Geberit AquaClean business. For this, around one third of the growth should result from new products and from the Geberit AquaClean business.

OGI’s are organic growth initiatives in marketing and sales that are based on the existing product portfolio – although selectively adapted to local requirements. Additional financial and personnel resources are provided for these initiatives in order to achieve defined financial targets by means of an implementation plan. Value is placed on a clear measurability of intermediate and final objectives. At present, a total of nine OGI’s are underway: four in the European Sales Area (Nordic Countries, United Kingdom, France and Spain) and five in the International Sales Area (Russia, India, China, Australia and North America). The initiatives were on track at the end of the year under review. In addition, at the beginning of 2009, a concerted internationalization strategy for the Geberit AquaClean business was started with the objective of establishing the shower toilet product category in Europe and to position Geberit as the market leader in this category. The objectives set in the context of the AquaClean internationalization strategy have to date been exceeded.

The entirety of these measures (OGI’s and AquaClean) will have a negative effect on the operating margins. In the medium term, however, substantial growth contributions should result from these activities.

In order to be prepared for the expected growth, Geberit intends to invest around CHF 100 million in property, plant and equipment in the coming years as well.

Strategy

The Geberit vision is to achieve a sustained improvement in the quality of people’s lives with innovative solutions in sanitary technology. The proven and focused strategy for this is based on the four strategic pillars “Focus on sanitary technology”, “Commitment to innovation”, “Selective geographic expansion” and “Continuous business process optimization”. This is practiced daily by the highly motivated and qualified employees.

The Company will continue to concentrate on sanitary technology. At the same time, the focus is on those business areas in the sanitary industry for which in-depth know-how and core competencies are available in the Company. Essentially, these are sanitary systems and technologies – including piping systems – for water transport in buildings. Here, superior-quality, integrated, water-saving sanitary technology is offered.

For Geberit, continuously optimizing and extending its product range is crucial for future success. Innovation strength is founded on basic research in areas such as hydraulics, statics, fire protection, hygiene and acoustics. The insights gained are systematically implemented in the development of products and systems for the benefit of customers.

The accelerated penetration of markets such as France, the United Kingdom, the Nordic Countries, Eastern Europe and the Iberian Peninsula is an important factor for long-term success. Outside Europe, Geberit concentrates on approaching the most promising markets, which are the following: North America, China, Southeast Asia, Australia, the Gulf region and India. In these regions, the Company mainly operates in project business, except for North America and Australia. In this respect, the Company always adheres strictly to the existing high standards in terms of quality and profitability.

Another strategic focus relates to business processes. Through continuous process optimization, Geberit intends to ensure a leading, competitive cost structure in the long term. This is achieved, on the one hand, via Group-wide projects; on the other hand, employees are identifying potential improvements in their day-to-day work and are thus able to make a major contribution towards positive development.