Good morning, ladies and gentlemen, and welcome to our half year results conference call. Geberit achieved in a difficult market environment convincing results in the first half of the year. Well, let me start with the three key statements for H1. First, a slight net sales growth in local currencies of 2%, despite a decline in building construction market in Europe. Second, a stable profitability on very high level with an EBITDA margin of 31.6%. And thirdly, a significantly increased tax rate due to the new OECD minimum taxation law in Switzerland. Let me begin our review with a few comments on the top line in the first half of the year. Net sales decreased by 1% to CHF 1.64 billion, negatively affected by currency effects.
Negative currency effects led to a net sales loss of CHF 52 million, or -3%. In local currencies, net sales increased by 2%, of which 1% came from volume growth. The slight volume growth was driven by two factors, which compensated for the declining end market demand. A positive base effect from destocking of wholesalers in the previous year, and secondly, selective restocking of wholesalers this year. However, stock levels at wholesalers were not yet back on normal levels end of H1. This brings me to the regional net sales development. All growth figures refer to growth in local currencies. In Eastern Europe, net sales increased by +11%, driven by a strong base effect. In Italy, net sales increased by 6%, supported by a still quite favorable market environment.
In Germany, net sales increased by 2% due to a strong base effect. Note that last year's H1 sales in Germany were down -15%. In Benelux, net sales increased by 1%. In Austria and Switzerland, net sales decreased slightly by -1%. In Western Europe, net sales declined by -3%, driven by France and the UK. Net sales in Northern Europe decreased by -5%, negatively affected by the divestment of the Nordic shower business through end of last year. Let me now turn to the regions outside Europe. In the Middle East and Africa region, net sales increased by 9%, driven by the Gulf region. In Far East Pacific, net sales increased by 6%, with strong growth in India and Australia, partially offset by a decline in China. In America, net sales slightly increased by 2%.
Let me now comment on the sales development, the product area, again, in local currencies. Installation and flushing systems and piping systems both increased by 3%. Bathroom systems net sales were on previous year's level, due to less stocking effects versus the other two product areas, and the divestment of the Nordic shower business per end of last year. Let me now give you some comments on the sales development in the second quarter. Net sales increased by 4% and reached CHF 801 million. The currency impact weakened versus the previous quarters and affected the top line negatively by CHF 9 million, or -1%. Hence, in local currencies, group net sales increased by 5%, all driven by volume. This volume expansion was caused by three factors. One, additional working day. Secondly, a strong base effect.
We reached in Q2 last year, historically low volumes, and thirdly, selective restocking of wholesalers this year. These positive factors overcompensated the declining end market demand in Q2. Let me turn to the regional development again in local currencies. In Europe, net sales increased by 5% in the second quarter. Outside Europe, net sales increased in the Middle East, Africa by +21%, driven by a very strong growth in the Gulf, and in Far East Pacific by 5%, driven by strong growth in India. Net sales in America declined by 2%. I continue with the sales development per product area in Q2, again in local currencies. Installation and flushing systems and piping systems both increased by +7%, while bathroom systems increased by 1%.
The weaker development of bathroom systems is driven by less restocking effects in bathroom systems, the disproportionate high exposure of bathroom systems to the very weak Nordic markets, and the already mentioned divestment of the Nordic shower business through end of last year. I come back to the first half of the year with comments on the operating and financial results. The substantial negative currency effect led to declining operating results in Swiss francs on all levels. However, in local currencies, EBITDA, EBIT, and EPS increased versus the previous year. I start with the discussion of the EBITDA development. EBITDA in Swiss francs decreased by 2% to CHF 518 million. Excluding the negative currency effects, EBITDA increased by +3%.
The EBITDA margin decreased marginally by 10 basis points and reached 31.6%, since the negative and positive margin drivers compensated each other. The main positive profitability driver was reduced direct material prices, which were on average 7% lower than in H1 2023. Main negative margin drivers were a wage inflation of around 5% and several dedicated growth initiatives, marketing efforts, and additional expenditures for IT and digitalization. And thirdly, also the currency effect, which lowered the margin by 50 basis points. EBIT and the EBIT margin development was in line with EBITDA and EBITDA margin. Net income in Swiss francs decreased slightly by 1% and reached CHF 550 million. This, compared to the operating results, disproportional decrease was driven by a significantly higher tax rate due to the new OECD minimum taxation law in Switzerland.
Earnings per share reached CHF 10.57, and increased by 1% in local currency. A better development versus net income due to the continued share buyback program. The share buyback program started in 2022, was completed in June this year, with 146,000 shares bought back in the first six months, for a total amount of CHF 76 million. In total, and as planned, 1.267 million shares were bought back for a total amount of CHF 600 million during the two years duration of the program. CapEx decreased by CHF 19 million or -23% to CHF 62 million, due to the phase out of investments into strategic plant expansions in H1.
Free cash flow increased double digits by +17% to CHF 217 million, due to a better working capital development and lower CapEx. Let me now comment on our market outlook for the full year 2024. We expect an ongoing challenging environment with an overall decline in building construction market this year. The increased building costs and interest rates over the last two years significantly dampened demand for building construction activities, especially in the new build sector. Building permits in Europe declined by -15% last year, mainly driven by the residential sector, leading to a contraction of the European new build construction business this year. Building permits in Europe continued to decrease this year, however, with -5% in Q1 at a somewhat slower pace. We see the strongest decline of the new build sector in Northern Europe, Germany, and Austria.
Unlike the new build sector, the renovation business, in which we generate around 60% of our sales, is more robust, mainly driven by the fundamental need for renovation in several European countries, and no additional pressure from the shift from sanitary to heating solution as experienced last year. Despite the overall negative sentiment for the building construction industry, we experienced several positive catalysts for the sanitary construction markets this year. For example, the general and structural trends to better sanitary standards and a strong demand in several markets outside Europe, for example, in India or the Gulf region. On the supply side, we expect for Q3 a sideway development of direct material prices compared to Q2.
However, keep in mind that the benefit from lower direct material price compared to previous year will considerably weaken in the second half of this year versus the first half, as you can see on page eight of our PowerPoint presentation. The overarching objective this year remains for Geberit to gain further market shares in this declining market environment. We stick also in 2024 to our two guiding principles, strategic stability and operational flexibility. This means that we continue to execute on our strategic agenda as presented at the Capital Market Day last October, and that we will further invest into our businesses, into innovation and into efficiency. Important initiatives are, for example, our prefabrication strategy, our dedicated sales initiatives in emerging markets, or our specialization strategy in our ceramic plants. Another priority this year remains our shareholder-friendly distribution policy.
Based on a healthy balance sheet and a good cash generation, we will launch a new share buyback program in Q3 2024, as already announced with our Q1 results. The new program amounts to a maximum of CHF 300 million and will run over a period of maximum two years. Let me continue now with our full year guidance. In the light of the difficult market environment, with declining volumes and our generally low visibility, it's hard to predict the short-term future.
Specific volume uncertainties for Geberit emerge from the macroeconomic and interest-related uncertainties, and especially the unknown and unpredictable wholesaler inventory strategies in this declining market environment. Under the assumption of no material changes of this fragile environment for the building construction industry, we expect for the full year, net sales in local currencies at previous year's level and an EBITDA margin of around 29%.
Net sales in July were like for like, slightly above previous year's level, driven by the low comparison base from still weak sales in July last year. Let me close our introduction with a short summary. Geberit delivered convincing results in H1. Despite a very difficult environment with declining underlying demand, currency-adjusted net sales were slightly above previous year, and margins reached previous year's high level. Earnings per share were currency-adjusted slightly above previous year, despite this market environment and a significantly higher tax rate, driven by the new OECD minimum taxation. For the full year 2024, we continue to expect declining market environment. A specific margin challenge for H2 emerges from the less favorable base effect from falling direct material prices in the course of last year.
However, Geberit is well prepared for these uncertainties emerging from this environment, and already demonstrated several times during the past. Our confidence is based on the fundamental need for our products, our resilient strategy and business model, and our long-term focus and track record. Thank you for your attention. We are now ready to answer your questions.
We will now begin the question- and- answer session. Anyone who wishes to ask a question or make a comment, may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets when asking a question. Anyone with a question may press star and one at this time. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead, madam.
Hi, good morning. Thanks for taking my questions. I actually have two. The first one more shorter term, and the second one more medium term. But the first one regarding your organic sales growth guidance for flat for the year, that implies, I guess, negative for the second half, when you just mentioned July slightly up. Is it just because of Q4 sort of tougher comparables, or how do you think about, like, the restocking? Is it sort of you have no confidence on the restocking? You mentioned stimulus from rates, for example, in your release. So can you talk about sort of like the makeup of why negative in the second half to start with, and then I'll ask my second question.
There are two main reasons. One is that we will have a challenging fourth quarter, where the comps will become more challenging. Last year in Q4, we have had volume growth again, and the second one, as you mentioned, are the uncertainties around the inventory stretches of wholesalers.
Okay, and then regarding just more longer term, your pricing strategy historically used to be 1-2% up every year, regardless of what the makeup of inflation was. Obviously, then we had a 2022, 2023, like, exceptional situations. Now that we're back in a more normalized scenario, is there any reason why we think sort of in future years you won't be back to the normal pricing strategy?
I agree that we are more back to normal waters in terms of inflation and pricing strategies. However, we have not yet taken any decisions if that is behind your question, what we will do with pricing 2025. But the environment in general is much more normal than what we have experienced over the last two years.
Okay, thank you very much.
You're welcome.
The next question comes from Martin Hüsler from ZKB. Please go ahead.
Yes, good morning, and thank you. I have three questions, actually. First of all, on your qualitative outlook for specific markets, I think you now include Austria, Austria as a weak country in terms of new construction. What is the reason there for Austria?
The main reason is that in the first quarter, where the decline of building permits has somewhat softened, that was not the case in Europe for Austria. In Austria, in the first quarter, the new building permits were down -18%. That's quite a significant number. That is the reason why we included also Austria in this list of most difficult markets in terms of new build.
Okay, thank you. And then the second question is, looking at the gross profit margin, I was surprised that in the second quarter, actually, the gross profit margin was even a bit higher than in Q1, even though the direct material costs seemed to trend it up. What's the reason there?
Sorry, can you repeat again the question?
Yeah. So maybe I rephrase.
Yes.
So I think in Q1 2024, the material cost in percentage of sales were a bit higher than in the second quarter, and this looks, but if I look at the red line where you show the material cost-
Okay.
It looks like those trended up.
Yeah. Let's say, you know, the one is really the pricing, and then there's always a slight delay until that materializes in the P&L. So that's basically the main reason for that. But it's marginal shift, you know, it's marginal up, and it's a marginal percentage down, so it's really very small effect.
Okay. Okay. Then maybe last question: Can you give us the trends in shower toilets? And maybe this time it's more interesting, volumes and value, because of the new low-priced product that you introduced.
The development of shower toilets in the first half of the year is very good. We have a significant double-digit volume growth, especially since Q2, and that is only driven by the new product, Alba. And we are also growing double digits in value in the first half of the year, also driven obviously by Alba, which gives you a hint that we have not seen, or we did not experience, large cannibalization of this new entry-level shower toilet versus the existing product portfolio. So we are very happy, double-digit growth in volume and in value in the first half of the year.
Thank you. That's very helpful.
You're welcome.
The next question comes from Christian Arnold, from Stifel Schweiz. Please go ahead.
Yes, good morning, gentlemen. Just to follow up on Alba, you haven't mentioned it actually anywhere, I think, and not in a press release, not in the slides. So was it. I mean, you were saying it's double digit up, your shower toilet business, but it's still not that significant. Would we expect a more significant impact from Alba in the second half of this year? Yeah, that would be my first question.
It depends what you mean with significant. Obviously, it's very significant for the shower toilet category. However, to be fair, this one single product, in terms of significance for group sales, that is however, somewhat limited, not comparable, for example, with FlowFit. And that will also be the case in the second half of the year. But we are very happy, we are above budget and above the numbers what we planned for, and also the quality feedback of customers now really installing the product is extremely positive. So therefore, we are really happy. But in terms of significance for group sales, it's still a low number, and that's the reason why we didn't mention it in any press release or PowerPoint presentation.
Okay. You are not going to mention it?
Maybe we could.
Okay, second question, on restocking. Could you give us here a little bit more insight, which markets actually are benefiting most from the restocking at wholesalers?
It's geographically, typically the ones which also were suffering last year, obviously, from destocking, that's predominantly Germany, Benelux countries, also in some Nordic countries, where we have seen this destocking effect, or to come from the other side of the list, where we have seen less stocking effect. Also less stock build-ups obviously than this year, for example, is Italy, but also Switzerland, where we had less of the destocking effect.
Okay. The last question would be on your growth initiatives, which are, I think, taking place mainly in Asia Pacific and Middle East Africa, if I'm not wrong. These areas actually also show the above-average growth in Q2. Is this now already a result of your growth initiatives, or are they just the markets which are better, hence the growth initiatives, the positive impact will come later?
No, I would say it's predominantly market and good work, which we've done so far with existing initiatives. The new initiatives, mainly people which we added on this year in these regions, did not have yet a significant impact on top line. That takes a certain period of time.
Next year's?
Well, hopefully.
Thank you very much.
You're welcome.
The next question comes from Martin Flueckiger from Kepler Cheuvreux. Please go ahead.
Yeah, thanks. Morning, gentlemen. Just a couple, just two, three questions from my side, please. First one is a clarification question. Did I understand you correctly, that you, Christian, that you were talking about volume growth of 1%? Was that for H1 or was that for Q2? That would be my first question. Then the second question is, again, sorry, on inventory restocking by wholesalers. Just wondering what your impression was.
Now, I realize that it's difficult to quantify and, you know, I guess your assessment is your best guess at this point in time, but I was just wondering whether you're seeing improving momentum in Q2 versus Q1 on that front, you know, whether anecdotal or empirical, up to you. Then finally, on the selling price development, if I remember correctly, we had a delay effect in Q1 of around 1%. Was that also the case in Q2, or did it weigh in towards 0%? That's it for me. Thanks.
I start with the last question. So we had, you're right, a positive price effect of around 1% still in Q2 to some delay effects last year. There was no price effect anymore in the second quarter, so the whole 5% growth in local currency was driven by volume. This brings me to your first question, if I understood correctly, the volume growth in the first half of the year was around 1%, driven by the 5% plus in the second quarter and a volume decline of around -3% in the first quarter, if that was your question number one. And then the second question about the dynamics or the difference of market dynamics, what we hear from customers in Q1 versus Q2, I would say we didn't hear any significant changes in terms of the negativity of the dynamics and also the quite, let's say, pessimistic market environment in Q2 versus Q1.
Thanks.
You're welcome.
The next question comes from Arnaud Lehmann from Bank of America. Please go ahead.
Thank you very much. Good morning. My first question is just a follow-up on pricing. Could you comment by division? Have you seen any divergence between the three divisions in terms of pricing trend? My second question is more, let's say, medium term. In terms of the competitive environment, are you seeing any change in the market? I mean, you've got some restocking, but underlying demand is still quite weak. Are you seeing any new behavior on the pricing side, or are you seeing any new entrants in the market? Thank you.
First question, no significant differences in terms of pricing, among these three product areas. Very similar pricing dynamics, nothing specific to mention. Second question, also, they're quite a stable environment, if I understood the question correctly. Quite a stable environment in terms of pricing, no signs of huge price changes in whatever direction, and also no significant new market entries with, I guess, you would assume, lower price points in the European market. Nothing which is really significant, which we should mention here.
Thank you very much.
You're welcome.
The next question comes from Remo Rosenau from Helvetische Bank. Please go ahead.
Yes, thank you. Good morning. At the beginning, I think you mentioned that the inventories at wholesalers are not yet back on normal levels by Midyear, despite the restocking effect. Now, my question is: how do you know that? I mean, there are no statistics. Is this just coming from anecdotal evidence, from talking to some of your wholesalers, or where do you get this view from?
Exactly. That's it. It's a very simple question to a wholesaler. Where are you with your inventory levels of every product at the moment compared to normal levels, meaning 2019, 2020, before COVID? And then the answer is lower. That's exactly the source.
Okay, and is there some kind of quantification to that? I mean, when we were, when 100 is the normal level and they went down, you know, with the supply chain crisis, they went to 120, then they went down to 80, or they're now at 90 or, or, you know.
We obviously would love to know that. We, from time to time, we even, again, try to ask exactly these questions. We don't get an answer. We don't get an answer because that is clear. I, I also would not give the answer if I would be a wholesaler. You know, this number, this indication, is one of the numbers, how a com- how a wholesaler is fighting against his competitors, the other wholesalers, because that's obviously a very crucial number for a wholesaler, how he is managing the inventory, especially in this environment. So I would love to have the number. We don't have a number. What we have is a quality statement it from several, not only one wholesaler, obviously, that we have restocked, but we are still not that well on the level what we have had pre-crisis, pre-COVID, 2019, beginning 2020.
Okay, and the last adjacent question to that is, I mean, assuming that the stock levels will reach normal levels at some point again, could be in October, could be in December, who knows? But the market will not improve. The end market, then, there might again be a problem, right?
So let me take your question to answer around what happened in the first half of the year. We are convinced that the fundamental market demand for our product was down, but that was overcompensated by restocking. The second answer to your question is, maybe the normal level is also changing in that dynamic. So what does it mean if a wholesaler talks about a normal level, if the expectation of the demand is lower? So the more challenging part might be then the second half of the year, what is normal in this environment?
Okay. And that is one of the reasons, this complexity, why you are so more cautious on the second half in terms of the organic growth?
Combined with the tougher comps in the fourth quarter.
Okay. Got it. Thank you.
You're welcome.
The next question comes from Patrick Rafaisz from UBS. Please go ahead.
Thanks, and good morning, everybody. Also three questions from me. The first is follow up on your comments on the July trading, which was slightly up in local currencies. Is it fair to assume that from last year in Q3, July still saw sort of the last bits of that significant wholesale destocking that we witnessed in Q2, and that through August and September, these relative base effects will become smaller? Is that a fair assumption within the quarter?
Yes, that could be. I can't remember August and September now, out of my head, last year, but I remember July last year, sales were down minus 10% in July 2023, and in Q3 we had a minus 5%. So that, I think you're right, as of August and September, it started to be better last year.
Okay, great. Thanks. And then, just a detail, but could you maybe quantify the effect of the Nordic shower divestment in bathroom systems?
It had an effect in the Nordic region of around 2%. In Northern Europe, we had a decline of -5% in the first half of the year, including the divestment. If you exclude this effect, it would have been about -3%.
Okay. That's very clear. And then the last question, looking at the EBITDA bridge for the year, the margin in H1 was more or less flat, and you've talked about all the elements within the H1 bridge. Now, the guidance for 29%, of course, implies a lower margin in the second half. And if I look at these bridge elements, will both the price cost and call COGS or inflation be negative contributors, or would you expect price costs or the gross margin to be flat and the bigger impact will be from higher OpEx inflation and growth investments?
The main reason for a more negative expectation for the margin development in the second half of the year are the direct material costs. If you look at our price index for direct materials on page eight of our PowerPoint presentation, you see that obviously that is narrower in the assumption that direct material prices stay stable after the rest of the year. And this narrowing effect, that's the main driver why we are more negative for the margins in the second half of the year. Or in other words, if you look at the bridge, the net price effect will become much more under pressure, so to say, in the second half of the year compared to the first half of the year.
So the net price, the net pricing effect could become negative then in the second half?
I said more negative, more under pressure.
Oh.
I didn't say negative.
Oh.
It will become definitely smaller.
Yeah.
I can't exactly quantify how small, how much, but it will be smaller. That is, that is the main reason why we are more negative for the margin in the second half of this year.
Okay. Thank you very much.
Welcome.
The next question comes from Harry Goad from Redburn Atlantic. Please, go ahead.
Yes, thank you. Morning, everybody. Just I think three questions from me. Firstly, on the shower toilet, the new shower toilet, Alba, I know you mentioned that in both value and volume, sales were up. I just wondered, just given the price difference, I think to the mid-range model, I think it's called the Sela, what sort of reasons or functionality a consumer would have to sort of trade up to that Sela rather than sort of the Alba, given just the price difference?
And then secondly, just on more the macro view, I just wonder if there's any evidence of weakening activity in Italy. I know that the government there has pulled back the super bonus scheme coming into this year. And then finally, just on the GBP 30 million of investment into operating costs, I wonder if you could give us an idea of how much of that was spent in the first half, and how much is to come in the second half. Thank you.
Question number one, around cannibalization of Alba, we see a little marginal cannibalization of the mid-level product, so-called Sela, and we haven't seen any cannibalization of the premium product, which is Mera. In Italy, the market is still quite positive, although the public subsidy program has been lowered, but it's still in effect, and at the moment we see still quite a healthy market environment. It will be challenging, most probably, what will happen next year, but at the moment it looks to be quite okay in terms of market dynamics in Italy, despite the lower or a little bit weaker subsidy program.
As of the CHF 30 million, we had very few in Q1, as said at that time, so it started in Q2, but the bulk of it is expected in H2. An accelerating trend in H2.
Great. Thank you very much.
The next question comes from Christoph Dolleschal from HSBC. Please, go ahead.
Yeah, good morning, guys. Three quick ones from my side as well. First of all, the normal question that you always get is on the German plumber levels. Where are we in terms of weeks?
That is, at the moment, 12.9 weeks, the order backlog of German plumbers, which is 27% below the level of last year. So again, coming back to the question before, different feedback of fundamental and consumer demand in Q1, in Q2. If you look at this number in Germany, it hasn't, there was no change. It's still quite difficult. Not only driven by sanitary, to be honest, it has also a lot to do with heating, but the order backlog came down substantially for German plumbers.
Okay. Thank you. Then the next one, on CapEx. CapEx, at least I see, was relatively low in H1 with CHF 62 million, and I think you guided for about CHF 200 million for the year. Is, is there a, a huge pickup in H2, or are some of the investments being shifted?
No, there's no shift in CapEx, so we continue with the strategic stability. It's a pure phasing of within the year, so no, no change to the guidance at that stage.
Okay, so it means we're gonna be expecting around about CHF 140 million then for H2, right?
Correct.
Okay. And last but not least, a bit more like longer term, because your strategy as you pointed out a few times is about winning market share, and basically positioning yourself in that direction. Do you already see that happening, or is it too early to tell? Are we seeing that you're winning share against competition?
I think it's too early, if you take just this year, six months, to assess this question quite precisely. Quantitatively, we hear from here and there that we are doing better than competitors. We hear that also, by the way, from wholesalers from time to time, but it's a bit too early to really make the bold statement that we have gained market share, but we are pretty confident that it really happens.
When will you basically then see the evidence, at the end of the year, sometime next year?
We typically look at. The minimum is a year that we look at numbers and compare ourselves to other companies. It's at least a year. Maybe this environment will be more two years, but not before the end of the year.
Okay, thank you. I'll go back in line.
The next question comes from Nitesh Agarwal from Citi. Please go ahead.
Hi, thank you so much for the presentation. I have two questions, please. So first one is basically on the renovation demand. Can you please share which are the top countries within Europe where you're seeing the strongest demand from the renovation business?
Oh, that's a very tough question because we, as you know, we don't have exact numbers, how our business is going into these sectors, new build and renovation. Because we're going to wholesalers, they're going to plumbers, and actually only the plumbers know if it is a renovation project or a new build project. So the only, again, the information we have is quite qualitative, and there I couldn't now, I couldn't mention specific countries in terms of renovation, where we see significant, huge differences. That's much more, let's say, in parallel compared to new build, where we have much more different dynamics, country by country.
Understood. And, so my second question is basically on the material prices. You have mentioned that the prices, material prices were down about 6% versus last year in the second quarter. Can you please give a little bit of detail in terms of where you saw the biggest drop and where, if any, you saw an increase in the prices versus last year in the second quarter?
It was basically in both areas which we have the most exposure. One is the metal direct materials related to metal, but also the direct materials related to plastics. In both of these most important categories, we have seen decreases compared to the previous year. It was a bit less on the semi-finished goods, because there, the inflation of the value-adding function before had obviously a more negative effect. So it's, from a category perspective, relatively equally distributed. However, it's more on the raw material side and obviously less on the semi-finished product side.
Thank you so much.
You're welcome.
The next question comes from Alessandro Foletti from Octavian. Please go ahead. Mr. Foletti, your line is open. You may proceed with your question.
Yes, good morning. Thank you for taking my questions. Do you hear me?
Yes, we do.
Okay. Thank you. Just on curiosity, you mentioned that you didn't take decision on 2025 prices yet. Is this normal because you only do it in the budgeting in September, or is there something else behind it?
No, that's absolutely normal. We never took a decision of pricing for the next year already in August or beginning of August, it's just too early.
Okay. And the second question on the interest rates, which you have mentioned now for a couple of times in your press releases, do you see any effect from that already?
Well, we did not understand what-
Interest rates.
Interest rates?
Interest rates, yeah.
Difficult to say. I would. Again, that's very far away. We have seen a direct effect. Very difficult to say. Maybe more on the mood side, but not, maybe most probably not on the read, on the number side. At least we didn't get any feedback from the customers, for example, telling us we have now gained the project again because interest rates came down there and there. Not yet enough, let's say, fact-based feedback to give you a clear answer.
But do you normally would get it or?
No, in general, the economics is clear. The lower interest rates, the higher incentives to build again.
Yeah, sure. But this is the macro side. I'm talking about the discussions that you have with clients, et cetera. Would you normally hear really something from them, or it will still remain a very qualitative discussion, if at all?
It's first of all qualitative, and the main customers we talk to, our plumbers and the wholesalers, they are also only indirectly, let's say, the wholesale only indirectly discussing with these people. Obviously, we have also discussion with direct investors, where we try to pre-sell our products. There we didn't have now that sort of or direct feedback. Okay, we go on now with that project which we stopped so far because interest rates are still too high.
Okay. My last question on the margin for H2. When I look at the implication from your guidance, it means that the year-over-year decline over H2 last year is pretty steep, and we are accustomed to have a lower margin in the second half of the year because of kind of weak Q4. But why is it that this year we have a much bigger step down than last year, for example?
Again, it's, as I said before, we had a benefit in the first half of the year of 7% lower direct material price, 7%. This number will be substantially lower in the second half of the year. Substantially, you see that on the graph on our slide number eight in our PowerPoint presentation. If this number is significantly lower, you have a significant impact on the margins. Simple as possible.
Okay, good. Thanks.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Axel Stasse from Morgan Stanley. Please go ahead.
Hi. Good morning, everyone. Thanks for taking my question. I have two, if I may. The first one is on pricing for next year, so we'll come back to that. I just want to understand how you are deciding about the price increase. Is this a debate you have with the wholesalers at the beginning of the year? Or like, I just want to understand how this works.
So the process is that we decide how we want to increase our prices, and we increase obviously list prices. And then that's, by the way, not Geberit specific; that's industry standard. And then you negotiate with the wholesalers individually rebates and bonuses, and that brings you then to a net effect, which is obviously then a little bit lower than what you have done on the list price side. That's the normal process.
Okay. Okay, very clear. Thanks. And then my second question was about working cap development going into the second half of the year, given your top line guidance. Do you have a full year guidance that you can provide for us on the working cap over sales?
No, we're not making a full year guidance on working capital and free cash flow. But you know, apart from some working capital, but CapEx, which we mentioned before, we do not expect any significant shifts outside the usual seasonality that we have, which is obviously, as mentioned before, quite pronounced.
Okay, very clear. Thank you very much.
We have a follow-up question from Martin Flueckiger from Kepler Cheuvreux. Please go ahead.
Yeah, thanks for taking my question. It's actually quite a small one. Christian, if I remember correctly, at the beginning of your presentation, you were explaining the drivers for the volume growth. And I think you also mentioned working days. Just wondering, what that quantitative impact was in terms of number of working days. Was it one or two, or what was it? Thanks so much.
It was one working day more in Q2 versus Q2 last year. So that's in other words, it's about 2% or something like that.
Thanks.
You're welcome.
Also, the next question is a follow-up from Christian Arnold from Stifel Schweiz. Please go ahead.
Yes, thank you. On the other OpEx, this additional CHF 30 million you have this year, you mentioned that the bulk of this CHF 30 million actually will come in H2. But I think to remember that when it comes to marketing efforts or especially anniversary event you had, that actually took place, most of it, in Q2. So I thought this, yeah, a good part of this CHF 30 million actually occurred in H2. So maybe if you could split up this CHF 30 million, what is growth initiatives, what is marketing efforts, and what is IT digitalization projects, to give yeah a little bit more flavor here?
So first of all, you underestimate our capacity to celebrate an entire year. So, the anniversary costs are not yet totally over, but I granted that. A big part has been done. However, the rest of that, which are the growth initiatives in Asia and also the investments in digital and IT, that is, as I mentioned before, ramping up, and therefore, that's the reason why the bulk of that is in H2.
Okay. But would it be fair to assume that one third is growth, one third is marketing efforts, including anniversary, but maybe also Alba, and one third is IT digitalization?
We don't go in that level of detail.
Okay. Thank you.
Ladies and gentlemen, that was the last question, and I would like now to turn the conference back over to Christian Buhl for any closing remarks.