Geberit, a peer of CRH provided a trading update this morning that shows a solid outturn for the group during the Q4 period, bringing a successful 2013 to a close. For the quarter, sales increased to CHF 525.3 million (+4.8% YoY) which came within the company’s medium term target range of achieving sales growth of between 4-6%. The quarter marked also marked an improvement on earlier quarters in the year (sales growth rate: Q1: +1%, Q2: +1.2%, Q3: +8.1%, Q4: +4.8%) and followed on from a very strong Q3 run rate. As a result, sales for the full year 2013 amounted to CHF 2.291 billion (+4.7% YoY) with currency adjusted growth amounting to 3.6%. <p>
As has been a feature of Geberit and the construction materials sector at large in recent years, there continues to be significant differences in terms of the performance of individual countries, particularly in Europe. Geberit saw sales increase in Europe by 3.7% (UK/Ireland +18.3%, Germany +7.4%, Nordic countries +7.4%, Central Europe + 4.1%, Iberia +3.9%, Switzerland +2.9%, France +1.0%) while sales fell across countries that have been difficult environments for some time (Italy, -5.0% Benelux countries -1.7%, Austria -1.8%) and also in the US (-.8%) as public sector and state spending remains stagnant. China also came under pressure with sales declining (-3.8%) being offset to a degree by growth in the Middle East (+23.8%). <p>
In terms of profitability, Geberit benefitted from lower material costs leading to an expansion of the EBITDA margin that is now guided to be between 25-26% for the full year. <p>
Overall, this is a solid trading update from Geberit which remains one of the more expensive stocks in the sector (FY 2014: P/E: 22.4, EV/EBITDA: 16.2) but is supported by a strong balance sheet (FY 2013f: Net cash: c. CHF 500 million). A key question for the company will be what they use excess cash levels for going forward. <p>
It is also worth nothing the strong performance exhibited by the UK and German markets which we expect to continue to record growth going in to 2014. Our preferred name in the heavy side buildings material space is HeidelbergCement that has significant operations in both of these countries (UK: 10% of revenue, Germany: 7% of revenue) and we believe the company is very well positioned in each of these markets.
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