Earnings Call: Q1 2021

May 4, 2021

Good morning. I am the entity operator for this conference. Welcome to the Geberit's Conference Call on the First Quarter Results 2021. Please note that for the duration of the presentation, all participants will be in a listen only mode and the conference is being recorded. After the presentation, there is an opportunity to ask questions. This call must not be recorded for publication of purpose. At this time, I would like to turn the conference over to Mr. Sotheby Bruel, CEO, acontanized by Mr. Roland Hisl, CFO and Mr. Roland Hisl, Head of Corporate Communications and Investor Relations. Please go ahead. Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our conference call on our Q1 results. We had an exceptional first quarter with extraordinary strong sales growth and a record profitability. Net sales grew by 13% in local currency, the strongest quarter growth rate since more than 10 years. Profitability reached new record levels with an EBITDA margin of 34.6%, which is 200 basis points above last year's already excellent result. As a consequence of the strong pipeline With further improved profitability, net income increased by 27% and EPS by 38% in the 1st quarter. I can now comment on our net sales development, a bit more in Nikke. Net interest in Swiss francs increased by 14.0 percent to CHF910,000,000. Total currencies Net increase increased by 13.0%. Main driver for the exceptional loan growth across all regions were: 1st, a strong home improvement trend were: 1st, a strong home improvement trend induced by the COVID-nineteen lockdowns 2nd, Eventually, we pulled up the distribution channel due to increasing price level and increasing challenges with regards to product availability, Also in the Construction segment. And thirdly, a first base effect from the COVID-nineteen hitting our business in China in Q1 last year in the remaining markets as of mid March last year. Compared to the Q1 of 2019 years ago, net sales in Q1 grew by 14.3% in core currencies. This 2 year comparison The pre crisis level of 2019 demonstrates the strong market share gains we achieved during the COVID-nineteen crisis. Let me now briefly comment on regional development of the Q1 this year. In Europe, net sales increased by 12% in both With growth in all sub regions, respective countries. In Middle East Africa, Net sales increased by 44% with growth in all major countries. Net sales in Asia Pacific In Americas, net sales were up by 7%, driven by the strong demand for electronics. Let me now comment on the sales development scenario. The strongest growth was recorded in bathroom systems Net sales growth of 17% in local currencies. Since Platform Systems is benefiting most From the home improvement trend, the base effect from a slight gain issue for the tower in the year on in the previous year. Installation and Valshi Systems then did grew by 13%. Valshi Systems grew 9% under proportionally Due to an ongoing weaker newbuild and project business. I will now comment on the operating and financial results. EBITDA increased disproportionately by 21% to CHF 315,000,000 We saw strong margin expansion of 200 basis points versus Q1 twenty nineteen. Main drivers For this margin expansion were operating leverage from the strong volume growth, increased taste prices There is still a limited impact from the strongly increasing raw material prices since the beginning of the year due to the still relatively high comparison level in The strong operating leverage demonstrates the high flexibility of our operations and our capabilities to maintain a very high efficiency level also in an environment of extraordinary growth. The currency development had a major negative effect on the NDA margin of 30 EBIT increased in Swiss francs by 94% to CHF 273,000,000 And the EBIT margin reached 30.4%, 2 40 basis points above Q1 2020. Net income increased by 27% disproportionately to CHF 233,000,000, Thanks for better financial results. Earnings per share increased also disproportionately by 28% to CHF63 due to the positive impact of the share buyback program. I'll now comment briefly on the current business environment. Construction sites are in most companies open, up And Ronny, showrooms however are restricted in their operations in most countries due to local shutdown measures. Recently, most affected were our operations in India, where the national lockdown led to a temporary closure of our Local plant for 1 week. However, this will not have any impact on group sales, even if the plant is very small and has already had a hamstring for the local market. Let me now comment on our outlook for the coming months. Due to the ongoing uncertainties around the COVID-nineteen pandemic, But also due to the general very low visibility of our business, we refrain from getting a market outlook at this point in time. For example, It is very difficult to predict when and how the current strong home improvement trend will come to an end Once the lockdown measures are lifted, then consumers start to spend and for other consumption opportunities. For raw materials, however, we expect a further strong price increase of 4% to 5% In Q2, sequentially versus Q1, driven by increased metal and plastic prices. Driven by the strong raw material price increases, we decided to implement the next ordinary price increase As of H2, we will increase the prices for the 2 product areas most affected from recent raw material search, Which are installation and washing systems and piping systems. In average, we increased prices By around 3.5 percent across these two product areas, which cover around 50% of our sales and business. Please note that we do not intend to compensate the entire raw material price increase with the extraordinary price increase. Last year as of Q2 from substantially decreasing raw material prices. In other words, We will absorb some of the raw material price increases in favor of our customer relations and we will accept A certain negative margin. Let me close my financials with a short summary. Truitt achieved international and record results in the Q1 after having delivered already strong results in H2 2020. These results confirm our ability to deliver extraordinary results in times of crisis, We gained market share and maintained our market leading productivity and profitability also in times of high volatility and high uncertainty. These results confirm also in our crisis management and our anticipation taken 1 year ago. We give us confidence to continue to emerge stronger from this unprecedented crisis and environment. Thank you for your attention. We are ready to answer your questions. Dear ladies and gentlemen, we will now begin our question and answer And the first question we received is from My first one is on demand. Clearly here, we can see that you're running well ahead of the 2019 level. I appreciate that the growth improvement trend is very difficult to predict. I guess my question is more on the pipeline where when I listen to the tone that you use, it still Seems like a cause of concern as you come out of the 1st year of COVID. But the data still suggests that you're growing quite nicely here. So Can you maybe give us more granular details to what you're seeing in this product category and how we should think about it going forward given this probably has a bit more visibility of the outlook? This will be my first question. I don't know what's going to be limited in terms of questions, but I'll ask the second one if I can. This will be occurring in Q1 or will it be more Q4 weighted? Thank you very much. Piping business is going a bit weaker than the other two product areas, which we believe is driven by a weaker newbuild business and also a weaker projects business driven by the COVID-nineteen crisis that has started to emerge already in the second half of last And continued in the Q1 this year with a disproportionate or somewhat lower growth in the ecosystem. With regards to marketing expenses in the Q1, they were slightly below the Q1 of last year, but that was very much driven by extraordinary cost, Which we had last year for our brand harmonization exercise. Excluding this one time effect, we have been able to spend a normal marketing budget as planned On prices level, for example, we spent a dedicated campaign We support the home improvement trend, the extraordinary marketing budget, but we have been able to spend normal pre prices level in the Q1. Thank you very much. Next question received is from Yacine Touarey of Confusion Research, your line is now open. Please go ahead. Yes, good morning. I have a question on pricing. Could you give us the price increase that you registered in the Q1 of 2021 Out of your 13% like for like growth and the pace of the capital price increase that you have announced, I assume, From April, in terms of price increase, are you expecting for the Q2 of 2021 and for the full year? That will be my first question. And my second question is on the margin pressure. Would you expect gross margin pressure as soon as Q2 2021? Or is it going to be a little bit later? First question regarding pricing. There are 2 price increases this year. The first one is a regular one at plant, which We implemented as of April 1% to around 1.5% as usual. And the second one, what I mentioned Before, we'll be effective as of H2 is an extraordinary price increase of around 3.5%, covering around 60% of our business. That leads to your second question. These price increases will not cover the currently We have seen and expected raw material price increase. We have also provided a chart in our presentation on Slide 7, Showing what we expect in terms of raw material price pressure in 1st and the second quarter, and we will not fully compensate. Therefore, we And on the first quarter, is it fair to assume that the price increase was like 1% in the Q1 of 2021? The first quarter was around 1% to 1.5%. The next The next question is from Anur Zivman of Bank of America. Your line is now open. Please go ahead. Thank you very much. Firstly, just a follow-up on the cost inflation side to make sure I understand it properly. The The 1.5% regular pricing for the vehicle, that is covering the cost inflation that we have seen in the last Few months. But then more recently, you have seen an incremental negative trend on the cost side, and that's why you're entering this H2 Price increase for 50% of the business. So incremental concentration, that was more recent. That's my first question. And my second question, just coming back on your strong sales in the bathroom systems, At the same time, you mentioned that there are some restrictions in terms of the showrooms. So how do we understand the fact that So first in the Q1, we still had a positive effect from base price increases Versus raw material price effect. And price increase which we implemented beginning of April, the regular one was independent of the raw material price development. Since raw material prices started or remained To increase heavily, now starting into the Q2, we decided to implement this extraordinary price increase. And I repeat again, Not a mathematical exercise where we exactly want to compensate the price increases, the current raw material price Inflation is just to compensate part of the strongly increasing raw material price environment. The second question regarding bathroom systems. We do not believe that the current Restrictions of showrooms will have a material impact on our Bathrooms business because the showrooms were mostly affected also last year in spring And then as of awesome and obviously we have been able to generate strong growth. So we believe that this effect of Reflections in the showrooms has a rather limited effect on our business. That's for example, one of the surprises 1 year ago, we believe that Welcome. The next question is from Martin Skibbino of Kepler Cheuvreux. Your line is open. Please go ahead. Yes. Good morning, gentlemen. Thanks for taking my questions. I've got 2, and then I'll go back in line. First one is on the raw material price impact that Now I realize how difficult it is to protect raw material prices. I was just wondering, Since we're already almost half into Q2, could you provide us with a rough estimate or the estimate, if you like, On the expected net pricing impact on the EBITDA margin in Q2? That would be my first question. And the second One is regarding the development of home improvement trend. I guess most people, including myself, were Kind of surprised by the strength of this trend. So just wondering, what are you seeing in terms I guess, You're doing consumer surveys or you're reading a lot of consumer surveys. What are you reading in terms of this concluding trend And associated with it is the home improvement and renovation trend that you see. How dependent is that really on the fact that people are going on holiday Currently, and might return going on vacation in the second half and definitely into next year. What are you seeing there? Basically, what I'm trying to get Is home improvement going to remain with us beyond the lockdowns that we're currently seeing? The first question, I can't answer correctly. I can repeat that raw material prices expect To increase by 4% to 5% in Q2 versus Q1, I mentioned our base price increase before. So you just have to do math and then you see the impact on EBITDA margin. 2nd question about the home improvement trend. We Do not do consumer service of ours, to be honest, but what we see is a strong, obvious demand for bathroom related product, For example, shower toilets, which we believe is very much driven by a strong demand from end consumer spending their money in their house and we hear For many customers, that seems to be the case. What will happen in the future? I don't know. I'm not an economist. I'm selling toilets. Don't know exactly what consumers will do once they have their savings ready to stand for other opportunities. My best guess Would be once you are able to travel again, for example, you will spend your money for travel again. That is our best guess at the moment that that would be To a stop or let's say a request, a reduction of this home improvement trend, maybe it has even the impact You will see that there was a kind of a pull forward of certain elements that could have an equity impact. That's all crystal ball. We do not know. Well, we have done recently and I mentioned it before since the beginning of the year, we are trying to benefit from this home improvement trend. We spent we are running a dedicated marketing initiative, very much digital initiative, where we are focusing on end consumers To improve upgrade their bathrooms, as I have what I mentioned before, that was part and also our marketing budget and what we said for the Q1. Once the talk comes over, what people and consumers will do, actually we are not the experts. Okay, thanks. The next question is from Martin Hoesler of Deutsche Bank. You may now open. Go ahead. Yes. Good morning. Also two questions. Maybe about pre buying In Q1, due to the price increases you announced for April, can you give there any indication or maybe The underlying trend in April, was it still same positive ish as in the Q1? That's the first question. April was obviously very strong because of the rate effect. Keep in mind, last year, April was down minus 30% minus 29% of EBITDA. So we had a strong April. If we exclude this base effect, we still had a good April, but not as good That's what we have seen in the Q1. Okay. And the next question, I appreciate that you Based on indication for Europe, the countries, all countries were growing, I was a bit more interested It is a conflict that didn't have such a huge impact last year in, let's say, in March COVID related, so I assume that those two countries clearly were below average growth Compared to the overall growth in Europe, is this a fair assumption? I don't want to go into details of countries, that's the reason why we are not Then to them, I can tell you again that both countries, Germany and Switzerland, developed well Nice growth also in the Q1. Okay. Thank you. Welcome. And the next one is from Charlie Gjerndorf of AWP Finance Marich NAG. Your line is now open. Please go ahead. Good morning, gentlemen. First question concerns the margin. You said the raw material prices will have a significant negative We have to expect a lower margin in Q2 compared to Q1 this year, this 34.6% Or will the margin be lower than also than Q2 2020, this is 30.1%. And my second question is, you said the trend for home improvement is difficult to predict how long it lasts, but And the 3rd, a 2nd understanding question, you said your price increases In H2, the extraordinary, would it be 3.5% on average or 5%? I could say 5% the first time. Maybe I'm wrong. I'll start with number 3, 3.5%. 3.5%. The average is not covering the entire business. It's only covering Two product barriers in relation to last year and that is roughly 50% of the business. That brings me to your first question. We will not give a guidance for the EBITDA margin in the Q2. But what I said is that raw material prices Increase in the Q2 will be stronger than what we are able to compensate with sales price increase in the Q2, Which means that there will be negative pricing impact from sales prices and raw materials on the EBITDA margin. The second question around the home improvement trend is currently persisting at the moment. It is still strong. Thank you very much. You're welcome. The next question here is Matthias Steffenarera of Deutsche Sir, the bank is now open. Please go ahead. Yes. Good morning, gents. Just one question from my side. You mentioned previously that basically, David, the margins were referred to the usual corridor like 28% to 30%, we hit in a 31%. Now Very strong very, very strong margins in Q1 and obviously a very controlled margin impact in the second half With potential upside from the home improvement trend continuing for longer than you probably expect, is it a fair assumption that It's not going to fall below 30% for the full year? We will provide, as usual, The next one is Richard Grafries of UBS Europe. Your line is now open. Thank you, and good morning, everyone. Two questions for me, The first is on the EBIT bridge for this year. You already talked about operating expenses With regard to pre crisis levels, but you also mentioned additional capital investments for the year around 15,000,000 And just wondering if we are on track for that number, if that's still the correct figure we should assume for the full year, whether that's already started by Q1. And the second question is a follow-up on an earlier question around potential pull forward demand, not necessarily because of your Regular price increases, but with the extraordinary price increases from the second half, Would you anticipate any pull forward demand here to occur in the Q2 before the price increases are in place? Thank you. First question, still the same. We plan to spend around 15,000,000 for digital digitalization efforts. Nothing It has changed here. On track. And also in terms of marketing expenses, we still plan and we have achieved that we had before in the Q1, A normal pre crisis marketing spending. So we forecast also a gap for the full year Additional marketing expenses of €25,000,000 excluding the onetime effect from the brand harmonization effect loss. And the second question was around Yes, pull forward call Adam, the 2nd quarter. Yes. That's what we expect. Most likely, there will be a proof of effect in Q2 due to the extraordinary price increase as of Q2, yes. Before we take the next question, And the next question is from Andre Kukhnin of Credit Suisse. Your line is now open. Please go ahead. Good morning. Thank you very much for taking my question. I'll just go one at the time. Firstly, on raw materials, thank you for clarification for the 2nd quarter. At the current spot rate, do you expect further increase in second half for Q3 versus Q2 or will Q2 be full in Mr. Kukhnin, the same answer. As in every call, I don't know. If I don't know where the raw material prices Go in the second half of the year, I will not set that on table. I just don't know. We are not hedging, as you know. We have very short term contracts. We do not. And this was not a question about Where the steel prices will go is more about that's the current steel prices, given the lead times that you have from those into P and L. So will do you see the full impact? Or is this still kind of a follow on? We've seen, obviously, some of the coal prices trended up during Q1. I would assume that we will see continuously raising prices in our P and L throughout the year because we have this lag in our And the lag is 6 months, something like that? That depends on the raw material price, I would say, maybe even less. Great. Thank you. And on the marketing expenses, again, thank you for all the details you provided so far. I wanted to understand a bit better how this will play out Later in the year, when assuming we're beginning to travel again, just kind of ramp up to the pre COVID level already without travel and when the travel kicks in, is the plan to then have a kind of a structurally higher marketing Or will you then be swapping out current virtual digital activities for real customer interactions and managing Overall, margins tend to be at the plus to €13,000,000 specific position? The level we expect to be quite Stable throughout the year, but the mix will change. At the moment, obviously, also in the Q1, it was a higher share of flexible Marketing spend as soon as restrictions are listed, we are able to do again physical events that will shift back to more physical activities. In total, the amount should stay roughly. Great. Thank you. And you cited before, you said you can't, but I might just check-in case anything changed. But quantifying the restock or quantifying the stocking up effect in Q1, Is that possible at all? No, that's not possible, sorry. Okay. The final one, last call, you mentioned And on the question on acquisitions, you mentioned potential for bolt ons, sort of nothing transformational. I just wanted to check if anything develops in that area in terms of your position given obviously that demand trends are slowing down a bit and And the recent results, more willing to come forward now? Nothing changed in this area neither. Nothing on the screen at the moment. Thank you very much, Jose. You're welcome. The next one is from Christian Arnold of Bifel. Your line is now open. Please go ahead. Yes. Good morning, gentlemen. I have a question on your production of asset base. I mean, assuming now that the demand will stay on this Very high level sales of €900,000,000 plus also in the next couple of quarters. Do you have enough production capacities to handle that? When would you see additional capacities to be installed? We do have enough capacity for this volume we are selling at the moment, but we are continuously expanding Our capacity, for example, and we talked about that with our full year results in March, we spent our plant on one of our plants in Germany, in Liechtenstein, where we are manufacturing installation frames, we are also expanding capacity, meaning building and equipment In Follendorf, our main production plant, that is a continuous process. We always plan also to air capacity. Therefore, we feel comfortable with our current capacity and our plans and investments to be able to manufacture the current volume from customers. Do you face any shortage It's a very challenging situation. It's tight for many raw materials, but we are Happy that we are able to get material, sometimes a bit delayed, but all in all, all the material impact. I think that has also to do with the fact that we treat our suppliers very much in a partnership way. I think that is off right now, but it is a very But we are able to manufacture with the raw materials and we are able to deliver the assortment to the customers. Okay. Thank you. And a clarification, the 3.5% price increase, that will be July 1st? That will have an impact as of July, correct, yes. Okay. And my last question will be, Back in March, you presented your sales and marketing activities as increased customer presence. So for example, customer trading was up 100 and 40%, mainly on the back of your digital initiatives. And I wonder If you could give us here some thoughts, how it looked like in Q1, it will look like in Q2, if we see again some kind of This massive increase of customer training, so thinking about your CapEx Innovation Day. How does it compare to the year before you're confident to your customers. I don't have the exact figures in front of me, but I feel and I hear that that is going very well. For example, the Geberit Innovation case, which we have rolled out And organized in more than 50 countries was quite a success in terms of number of participants, In terms of feedback from customers, so from that perspective, we believe we are doing very well for the Q1, but I don't have the exact figures now right at hand, to be honest. Thank you very much. You're welcome. The next one is from Martin Flueckinger, CJS of Actually, I've got 3. Just Two of my clarification questions on what you said earlier on. When you talk about the 3.5% extraordinary price increases 60% of the business, does that imply 2.1% for the group? That will be my first question. Then the second clarification Question is on the marketing expenses. If I understood you correctly, we were saying, Christian, that we were going to be up by €25,000,000 in 2021, Excluding the impact of brand harmonization last year, now if I remember correctly, brand harmonization incremental spent was €10,000,000 in 2020. So are we talking about a net increase of €15,000,000 for 20 20 On marketing expenses, that's my second question. And the third one is if you could provide us with the update on the latest survey on For the first question, Correct. 50% of 3.5% is around 2% correct. Number 2, not actually not 100% correct. We spent last year €7,000,000 for the brand amortization. Originally, we planned for €10,000,000, but actually we spent only €7,000,000 So your marketing bridge is minus €7,000,000 from last year, plus €25,000,000 what we expect To extend this year for regular marketing. And the third question, the latest survey in Germany on which we have is that Your order backlog of your course increased substantially. It's now at 14.5 weeks, A new record level, a substantial increase also confirming strong home improvement trend going on in Germany. Thank you very much. You're welcome. Next question is from Manish Iria of So, Citi Generale, your line is now open. Please go ahead. So, again, also on the pricing, So you see extraordinary price hike 2.1%. So also 1% is a normal hike. So we should be something like 3% Price effect for the full year, is this the correct way to look at it? For the full year, we have the 1 On a group sales level, but only as a Phase 2. So for the full year impact, obviously, if it's only as a Phase 2. Okay. Okay. I understand. So I don't have any more questions. Thank you. And the next one is from Pierre Asoo of Barclays. Your line is now open. Please go ahead. Yes. Good morning, gentlemen. It's been a few months now that we have, Tekitra, committed support for Building Energy Innovation, in countries like France, the UK, Italy. And so I was wondering if you could update us with your I think the most important trend we talked about quite a lot now is this home improvement trend, which is obviously typically renovation in residential sector. But in general, just part of the COVID-nineteen situation, reducing this home improvement in many countries, High demand for renovation. For example, in Germany, there are a number of apartments which need to be renovated. So that is An ongoing need for renovation in many European countries. And we have big proportional exposure to renovation. Therefore, We are very, very positioned to benefit from this renovation demand. Understood. Thank you. And for the The next one is from Lothar Lukhanyczynski of It's very much a follow-up question on the last one. You were mentioning the what I would like to do is walk a little bit away from this quarterly view To hear more about your longer term expectation and especially about the renovation needs, I remember that after the German reunification, there was a big spike And newbuild activities for almost 10 years. So that must, I guess, have an impact on your medium term demand In renovation, especially in Germany, do you have any numbers to what was done 30 years ago And what you could expect, let's say, in the next 5 to 10 years to come? You're right. The peak in terms of newbuild in Germany was mid of '90s as a result of the reorganization. I don't have the number exactly now in my mind. The number of new build apartments was significantly higher in 90s than what we see Still today, I don't have the figures in mind at the moment. And you're also right, The new 2019 should lead to a renovation wave maybe 20, 30 years later. So maybe it has already started. We should benefit or the market should benefit from this renovation demand also in the coming years in Germany. When I look at your business, It was very much home improvement, but newbuild is also quite a strong driver. So if newbuild slows down, Would that be more than compensated by a pickup in renovation activities? That's difficult to say. We have about 60% of our business in close to renovation and 40% in new build. Obviously, if positive trend in renovation is compensating the negative, maybe more negative than newbuild Depends on the development of the 2 sectors which we don't have. We do not have clear figures on that because we do not know when we're selling product About the segment, it's even more difficult talking about growth rates of these 2 different segments. But I can't precisely answer because I just can confirm, We have a big operational exposure with our quota to serve them to the renovations effort versus newbuild. That is strong clearly The next one is from Zira Ekblom of Morgan Stanley. Your line is now open. Please go ahead. Thanks very much. Two questions for me. First Juan, just to your point on capacity, but rather than production capacity, can you talk about what you're seeing in terms of your installed network? In the past, you had flagged low skills or bottlenecks in the end of the network as a potential handbrake to the revenue growth. And I'm just surprised considering how strong the growth has been in the Q1 that you have made on that Part of the capacity discussion. And then another point on margins. In the Q1, your gross margins were lower year on year and your EBITDA margins rose. And I just wanted to understand if we should think about a higher Number 1, there is still above net profit dollars of qualified installed in many companies that is before the number in Germany. Our growth is driven by 2 factors. Number 1, market share gains. I think our cautious decision last year helped to reduce our customer presence, Having our people maybe not in the field, but digitally connected to our customers pays off now. We have also been able to Manufacture and to keep our availability on a high level last year. So that is one element. And the second one is In Germany, one of our main drivers is our upselling strategy. So selling higher value added product, installation time, we install a shower for it, for example. So, its operating strategy is up to potential We deliver growth in an environment where we have still capacity limitations for qualified In stores. The next question I would ask Olam to answer. Yes. Your observation is correct. The gross margin was slightly But nevertheless, there was still a positive impact on EBITDA, E line out of pricing, the 30 basis points we are showing in our margin, which The push on EBITDA margin comes from our operating leverage due to the high volumes. And we do not exactly have that We will have significant changes in the personnel expenses. You remember, we Everything we see here in Q1 by 1.3%. We expect something around 1.5% for the rest of the year, but no significant cost savings related to COVID-nineteen. Great. Thank you very much. You're welcome. The next question is from Martha Pascua of Berenberg. Your line is now open. Please go ahead. Hello, good morning. I was wondering, do you have any data at all that would To investment type, as we think investment opportunities, please. Well, I'm sorry, we don't have such kind of consumer data. We don't So what do you expect? We expect from the energy obviously, there are 2 effects from that. One is a positive one that if someone then consumer is renovating his house apartment due to energy saving measures, It has a positive effect also for our business. Most probably, you also renovate your bathroom or maybe you even renovate your piping system. On the other hand side, that is the negative part. And since our products are not really contributing to energy saving, it might be also the case That these efforts are growing more in obviously energy saving elements of a building, isolation, insulation, for example, windows, heating obviously, That could have a negative impact, especially in markets where the installer, that's in Switzerland the case, in Germany the case, doing heating and sanitary. That could then shift capacities of these installers to heating and not let into a bathroom. So that will connect this effect. Therefore, all in all, we believe that the guestimate that these renovation efforts driven by energy trading has more or less a neutral impact on our business. Okay. Thank you. The next one is from Martin Muysner of Burydek and General Bank. Two follow ups, please. I remember that on the annual conference, you were quite cautious for the sector hotels, retail, Obviously, I was just wondering what trend do you see in the market? Does this cautiousness materialize? Or do you See already some improvement here. That's the first question. It's a very difficult question. Again, we don't have any exact Figures data, to give you a sharp answer. But again, in relation, the timing is still going weak and the other 2 product areas Might be an indication that these segments are suffering, as I said before, that's maybe difficult and large projects, which are suffering more or they're more exposed to piping, We can typically correlate it to hotels or let's say COVID-nineteen offering segments like the retail, pet store, Shopping centers, hotels, restaurants. Therefore, we believe that is materializing to what extent is very difficult. As we said in the full year conference, we estimated around 20% of our total business is exposed to this COVID-nineteen related or suffering segments, as you mentioned before. Okay. And second question is On your workforce that increased by roughly 200 people since the beginning of the year, I was just wondering whether this is Investments in Salesforce or if those are now digitization people, Maybe you can give us some more light. It's mainly driven by additional People and also temps in the operation in the plant to produce the volume and to a lower extent also by an increase In SG and A people, for example, for our digitalization initiatives. And the last question for today is of Martin Flueckiger, Thank you. My final question. So I have a follow-up again, and correct me if I'm wrong, but if I understood you correctly, You were saying that the extraordinary selling price increase of around 2.1% in H2 would still lead to an overall Decrease in pricing for the whole year 'twenty one of around 1.5%. Now at the risk of appearing a little bit Antik, are we rather talking about 1.5% to rather 2% than maybe 1.5% or 1% to 1.5%. Of course, it has very little impact on the growth, but there will be a significant impact on the margin and hence my follow-up question. So I think that's a misunderstanding. Let's put the math again. 3.5% as of July for 60% of the segment Means about 2.1% for the group as of H2. Since H2 is half a year, if you buy It's around 1% on the annual price increase, the impact of the extraordinary price increase implemented as of As we receive no further questions, I hand back to the speakers for closing remarks. Thank you very much for your attention. We wish you all a great day.