Geberit expects 2024 organic sales to remain on par with 2023, defying analyst growth expectations. The forecast is influenced by sluggish construction activity in Europe, notably Northern Europe, leading to a 3.9% drop in Geberit's shares. Despite a 1.7% sales increase in H1 2024, Geberit faces challenges from a sharp decline in the German property market and inflation-driven construction delays. The company projects a slight EBITDA margin decline to 29% and a mixed performance outlook for the latter half of the year. Geberit aims to adapt through innovation and cost-efficiency strategies amidst the sector's downturn.
Gdansk - Swiss plumbing materials supplier Geberit has recently announced that it expects its organic sales for 2024 to mirror those of 2023. This news comes as a surprise to some market analysts who had anticipated modest growth. Geberit attributes the stagnant sales outlook to the slow pace of construction activities, particularly in Europe.
As a result of this announcement, Geberit's shares fell by 3.9% during early trading on the STOXX 600 index, marking a difficult day for the company amid broader market trends. The ongoing downturn in the construction industry is particularly pronounced in Northern Europe, including Germany and Austria, where Geberit sees the sharpest declines. According to CEO Christian Buhl, the German property market, now in its third consecutive year of decline, is facing its most severe downturn in decades, which further compounds Geberit's challenges.
Geberit's recent performance was mixed, with the company reporting a 1.7% increase in sales during the first half of 2024 when looking past currency fluctuations. However, the sales forecast points to an organic decline in the latter half of the year, largely driven by higher comparisons with last year's sales figures and uncertain inventory levels at wholesalers. Such factors have led analysts at Jefferies to revise their expectations, as they had projected an organic growth rate of 1.1% for Geberit.
The construction industry's struggles can largely be attributed to record inflation rates and rising interest rates, which have prompted consumers and businesses to postpone renovation and new build projects. This has created a ripple effect across the sector, impacting other suppliers of construction materials as well; for instance, companies like Heidelberg Materials and Holcim have also reported decreased sales figures recently.
Notably, Geberit, known for its range of products including piping systems, bathroom ceramics, and shower toilets, expects its EBITDA margin to be around 29% this year, a slight decline from 29.9% last year. Interestingly, while Geberit's half-year EBITDA dipped by 1.6% to 518 million Swiss francs (approximately USD 599 million), the company still managed to maintain a solid EBITDA margin of 31.6%. However, the expectation of a decline in the second half of the year reflects typical seasonal variations.
As Geberit navigates these market challenges, the company remains focused on innovation and adaptation. Looking ahead, the plumbing materials supplier aims to enhance its product offerings and strengthen its market position, even in the face of economic difficulties. Industry experts suggest that companies in Geberit's position will need to prioritize cost efficiencies and find new market opportunities to sustain growth during this slowdown.
In conclusion, while Geberit's expectations for 2024 may appear cautious against the backdrop of a struggling construction sector in Europe, the company is strategically positioned to leverage its strengths and adapt to the evolving market landscape. As construction activity remains sluggish, the broader implications for the industry will continue to unfold, raising questions about future growth prospects for companies like Geberit.
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