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Interview Albert M. Baehny, CEO Geberit AG

 

Editorial

Despite the challenging environment, the Geberit Group can look back on a convincing 2012. It once again successfully defended its excellent market position and gained market shares. Healthy sales growth was a major factor in raising the results slightly above the prior-year level, and this despite substantial additional investments in organic growth.

Sales reached CHF 2,187.8 million for 2012 as a whole, which represents growth of 3.1%. At +4.5% in local currencies, total sales were in line with the medium-term growth expectation of 4 to 6%. Operating margins were negatively affected by rising customer bonuses, higher personnel expenses and the substantial price reductions introduced in Switzerland at the end of the previous year. The stabilization in the cost of materials and the effects of the insourcing of shower toilet production at the new plant in Rapperswil-Jona (CH) supported margins. Operating profit (EBIT) grew by 2.9% to CHF 462.3 million. The EBIT margin reached 21.1% (prior year 21.2%). Net income increased by 2.2% to CHF 392.3 million, with a return on sales of 17.9% (prior year 18.1%). Earnings per share rose by 4.8% to CHF 10.29. Free cashflow grew by 1.3% to CHF 391.0 million.

In addition to the successful development of the business, 2012 was also marked by a number of highlights. Against the prevailing trend, the labor-intensive production of shower toilets was newly integrated within the Geberit organization. Easy access to the target markets in Europe, around 80 new jobs in Rapperswil-Jona (CH) and the greatest possible proximity to bundled know-how at headquarters were convincing arguments in favor of insourcing, which was completed during the course of 2012. The Italian sales company symbolizes the move to more design: On the fringes of Milan's Salone Internazionale del Mobile, Geberit held a vernissage at the heart of the artistic neighborhood of Brera under the motto of "Innovation Democracy". Video installations and performance interludes provided the exclusive framework, enabling everyone to experience the Geberit design brand. In terms of new products, there were two outstanding highlights: the revolutionary Sigma80 touchless actuator plate, which only requires a wave of the hand to initiate the dual flush process, and the lavatory taps, which perfectly combine ecological and functional aspects. A small generator uses the energy of the tap water to ensure that the taps are supplied with electricity in a self-sufficient and hence sustainable manner. Products were also introduced for the growing markets in Asia. The Monolith sanitary module was launched in China and the Alpha cistern in India. Port Elizabeth in South Africa was the scene of Geberit's latest aid project, where the company's own apprentices from Europe spent two weeks renovating the WC facilities at a schoolhouse. The 850 children are not the only ones to benefit – the apprentices themselves returned home having gained another valuable experience in life. Last but not least, 13 years after going public (IPO) we were delighted to be admitted to Switzerland’s most important stock index, the SMI, at the beginning of June 2012. We view this promotion to the top league of Swiss listed companies primarily as recognition of the excellent work of Geberit's employees.

The Board of Directors intends to let the shareholders participate in the positive development of the business and will maintain the attractive distribution policy of the previous years. A distribution of CHF 6.60 will be proposed to the General Meeting, an increase of 4.8% over that of 2012. CHF 2.80 of the distribution will be paid out – as in the previous year – in the form of a tax-exempt payment to shareholders taken from reserves from capital contribution, CHF 3.80 as a regular dividend. The payout ratio of 63.6% of net income would therefore be in the upper range of the 50 to 70% corridor, which was increased by the Board of Directors as a result of the reassessment of the use of liquid funds at the beginning of 2011. The share buyback program launched in January 2011, by means of which additional liquid funds flowed back to the shareholders, was concluded at the end of December 2012, earlier than planned.

Due to scheduling conflicts, Susanne Ruoff has decided to step down from the Board of Directors at the next General Meeting in order to concentrate fully on her new role as CEO of Swiss Post, which she took over at the beginning of September 2012. It will be proposed to the 2013 General Meeting that Felix R. Ehrat be elected to the Board of Directors as a new member for a three-year term of office. From the point of view of the Board of Directors, his high reputation and broad legal expertise in an international environment make him a suitable candidate, capable of playing a significant role in shaping the future success of the Geberit Group. Alongside his wide-ranging legal knowledge, Felix R. Ehrat brings to the Geberit Board of Directors great leadership skills and practical experience of working for large listed companies. The current Lead Director and Vice Chairman of the Board of Directors, Robert F. Spoerry, is standing for reelection for another three years.

We credit the convincing results in 2012, which surpassed those of the prior year, to the outstanding commitment, high motivation and skills of our employees in 41 countries. We wish to express our thanks and appreciation for their exemplary performance. Our customers in the commercial and trade sectors are again deserving of special thanks for their solidarity and constructive collaboration. Last but not least, we also wish to express our gratitude, esteemed shareholders, for your continued confidence in our company.

Owing to the challenging parameters, 2013 will be a demanding business year for the Geberit Group. The construction industry will continue to be dominated by a slowdown in growth momentum and by political and macroeconomic uncertainties. The objective, not only in the construction markets that are still healthy, but also in those that are shrinking, is to achieve convincing market performances. The focus in this connection will again be on the concerted marketing of the products newly introduced in recent years, on various organic growth initiatives, on developing new markets and on the very promising shower toilet business. The Geberit Group remains well equipped to achieve the ambitious goals that have been set. With the performance capability of our competent and motivated managers and employees, our effective, efficient and market-oriented organization and the continued cooperation based on trust that we enjoy with our market partners, we look to the future with confidence.

 

Signature Albert M. Baehny Signature Robert F. Spoerry
Albert M. Baehny
Chairman and CEO
Robert F. Spoerry
Lead Director and
Vice Chairman