Good morning, ladies and gentlemen. Welcome to our analyst conference via webcast. Together with Roland Iff, I'm pleased to present to you our full- year 2020 results. Our presentation is structured as follows. First, I will give you an overview of 2020 and comment on the sales development. Roland Iff will present the financial results. I will talk about the impact of the COVID-19 crisis on our business, followed by an outlook for the building construction industry and Geberit this year.
At the end of the presentation, you will have the opportunity to ask questions via chat. Let me start with our key figures. Geberit achieved very good results in 2020. Net sales grew in local currencies by 1.3%, despite the crisis also hitting the building construction industry in the second quarter. The EBITDA margin increased by 170 basis points to 31.0%.
All operating and financial results increased disproportionately in local currencies, with EPS rising by 6.0%. Free cash flow increased for the third year in a row, double-digit by 11.4%, despite the negative currency impact, and reached a new record level of CHF 717 million. This corresponds to a free cash flow margin of 24.0% of net sales. Finally, we reduced relative CO2 emissions by -8.4% versus 2019. In total, we reduced relative CO2 emissions by 33% since the Sanitec acquisition five years ago.
The board of directors proposes a dividend of CHF 11.40 per share, which reflects a stable payout ratio compared to previous years. Let me now continue with an overview of our sales and marketing activities. Due to the COVID-19 crisis, we adapted our way to approach customers very quickly and switched many physical customer interactions to digital interactions.
Thanks to this, we even increased the number of customer interactions. The number of customer sales contacts, for example, increased to 472,000, 9% more than in the previous year. The number of customer trainings reached 79,000, significantly above previous year, thanks to newly introduced digital training modules. Two-third of all customer trainings were conducted digitally. A new format were virtual showrooms and virtual fairs, with which we reached 30,000 professional customers.
Also, the website traffic increased significantly by 48%. This fast switch to digital customer interactions was only possible thanks to our significant investment into digital activities in recent years and our conscious decision not to introduce short-time work in our sales and marketing organization. Let me give you two examples how we switched physical customer events to digital activities last year. We replaced physical fairs in Germany by a Geberit web fair.
This newly developed format included 3D tours, webcasts, and podcasts, and focused on know-how topics for installers, planners, wholesalers, investors, and architects. Another example is the Geberit virtual showroom. In several markets, virtual showrooms for end consumers have been launched to compensate for closed showrooms, especially during the second lockdown wave. The virtual showrooms focused on Bathroom Systems, especially on Geberit AquaClean, also to leverage the COVID-19-driven trend to home improvement.
In Germany, for example, we created 5,000 digital end consumer contacts during the second lockdown in Q4 through our virtual showroom. Beside these new digital formats developed in the context of the COVID-19 crisis, we further executed on our long-term digital marketing roadmap. Let me give you also, again, a few examples. We introduced a new digital tool for installers last year.
This digital calculation tool allows for planning of our most important pre-wall installation systems, Duofix and GIS, and is especially suitable for smaller projects or single bathroom renovations. We also continued to extend our building information modeling, or in short, BIM activities. We further rolled out our plugin for a dedicated BIM software solution for sanitary planners in more than 20 countries. Our BIM plugin offers sanitary planners a real-time connection to the Geberit information system and hence ensures automatic access to latest and real-time product data. We had, by the end of the year, more than 5,000 regular users connected to our system. We also made further progress in the area of digital activities for end consumers. First, we rolled out our digital and integrated end consumer campaign, Better Bathrooms, Better Lives. The campaign runs now in 15 markets.
This B2C campaign consists of online videos, banners, Google Search, and editorial content. A core and integrated element of the campaign is the new website and our new B2C CRM system, which we also rolled out in 12 further markets last year. The cloud-based CRM solution allows for a systematic management of end consumer leads, of which we generated more than 17,000 in 2020. Obviously, this end consumer campaign and B2C tools were and still are an important element to benefit from the COVID-19-induced home improvement trend.
An important project last year was the phase-out of another three ceramics brands. We spent CHF 7 million last year for this brand portfolio simplification, somewhat less than the originally planned CHF 10 million. With the replacement of these three brands by the Geberit brand, we successfully executed our brand simplification roadmap as part of the ceramics integration.
In total, we spent CHF 17 million in 2019 and 2020 for the brand portfolio simplification. Total marketing spend last year amounted to CHF 95 million, corresponding to 3.2% of net sales. This is significantly less than in the previous year due to COVID-19-related restrictions. For example, for fairs, physical events, or physical trainings. A substantial part of the marketing expenses was obviously spent for digital activities. Let me now comment on our innovation activities last year. I start with a few examples of newly introduced products. In Bathroom Systems, we modernized the Geberit Renova series, one of our most successful ceramic bathroom series. In Piping Systems, we introduced new installation elements for the roof drainage system, Pluvia. The support sets ensure a safer installation and an increased stability.
In Installation and Flushing Systems, we introduced the Geberit CleanLine80, a new model for our successful shower channel solutions. A last example are the new Geberit actuator plates with modern colors and material combinations. The new actuator plates allow for more individualization and to address color trends. We again substantially invested into our innovation pipeline last year, independent of the COVID-19 crisis. In total, we invested CHF 75 million in R&D, corresponding to 2.5% of net sales.
We registered again a high number of 37 new patents last year, largely driven by combined innovations behind and in front of the wall. This high number of new patents confirms that we continue to leverage innovation synergies between technical installation knowhow and ceramics knowhow. We increased the annual number of new patents from around 20 per year to 33 per year since the integration of Sanitec in 2016.
Let me now comment on our CapEx in 2020. CapEx was at CHF 150 million, 10% below previous year. The reduction of CapEx was driven by COVID-19-induced restrictions, not allowing to carry out all CapEx projects as planned. Investments in new products correspond to 24% of CapEx. 40% of investments were dedicated to modernization and rationalization, and 36% to capacity expansions. Let me briefly highlight some of our key investment projects last year.
We continued with the installation of new machinery and tools in our newly built plant for metal supply piping systems in Langenfeld in Germany to improve our efficiency. New lines for stainless steel fittings have been installed in 2020. Additional new production lines will follow in 2021. In total, we invest EUR 10 million into the new equipment. Another important project was in our main factory in Switzerland, in Jona.
We not only expanded the capacity for the production of actuator plates, we also further improved the efficiency. The investment amounted to CHF 4.9 million with a payback of three years. In our plant in Givisiez, also in Switzerland, we invested in a new laser welding and laser printing technology for our multilayer pipe production. The new technology is not only more efficient, it also reduces the waste rate significantly by 50%. This investment amounted to CHF 1.6 million with a payback of 2.8 years.
Beside these large investment projects, many mid-sized and smaller improvement projects were implemented as part of our continuous improvement strategy. These efforts led to a productivity improvement of our 29 plants of 3.4% last year, which is a very remarkable result considering the lack of volume growth and the tremendous supply chain challenges last year due to COVID-19.
The productivity improvement last year is fully in line with the long-term annual productivity improvement of 3.4% since 2014. Let me now comment on the development of our number of employees. We consciously decided not to restructure or to lay off any employees due to the COVID-19 crisis. This led overall to an only slightly lower number of employees per end of 2020. The number of employees in SG&A even slightly increased, driven by our long-term growth and digital initiatives.
This increase was more than offset by a slight decrease of employees in manufacturing and logistics, mainly temporary employees, due to the lack of volume growth. We also consciously decided to offer the same number of new apprenticeships in 2020, despite the COVID-19 crisis. Since we consciously decided to avoid short-time work, we used the COVID-19 driven underutilization in the second quarter to strengthen our competencies.
The chart on the right shows that we more than doubled the number of internal digital training sessions last year, largely conducted during the phase of underutilization in Q2. Sustainability has a very long tradition at Geberit. The first sustainability strategy was defined already more than 30 years ago, back in 1990. This included also already in 1990, the buildup of a dedicated sustainability team to continuously improve our environmental footprint. Geberit's first comprehensive sustainability report was already published in 2004.
Let me now comment on the sustainability achievements last year. Last year, we again reduced our environmental impact by -8.9%, relative to net sales, even by -10.1%. Since the acquisition of Sanitec in 2015, which increased our environmental footprint by a factor of five due to the energy-intense ceramics production, we reduced the relative environmental impact by, I think, impressive 35%.
Main contribution was energy consumption, which we reduced by -33% in relative terms or -21% in absolute terms since 2015. In line with energy consumption, we reduced our Scope 1 and Scope 2 CO2 emissions last year by -8.4% in relative terms and by -7.2% in absolute terms. Since the acquisition of Sanitec, we reduced CO2 emissions by -33% relative to net sales. The absolute reduction amounts to 51,000 tons of CO2, which corresponds to the entire CO2 footprint of the Geberit Group before the Sanitec acquisition. The main drivers for this significant reduction were energy-saving burner technologies in ceramic plants, renewable energy sourcing, and upselling of our ceramics product portfolio. Beside Scope 1 and Scope 2 reductions, we also contribute to Scope 3 CO2 reductions with our product innovations. Let me give you three recent examples.
Geberit DuoFresh is a ventilation system within the toilet, extracting and filtering bad odor directly out of the toilet. This avoids opening windows in a bathroom and leads to annual energy savings of around 50 liters of heating oil or 135 KG CO2 emissions per unit installed. We adapted our shower drainage channel, CleanLine, to reduce the share of energy-intense material like steel. We reduced the share of material by 85% and packaging by 30%. This effort led to an annual reduction of 7,300 tons of CO2. A third example is our new Nordic flush tank, which was previously manufactured by a third-party supplier as part of the Sanitec legacy. This newly developed and in-house manufactured flush tank requires 13% less material and uses post-consumer recycling plastics. These efforts translate into an annual reduction of 1,000 tons of CO2.
In the context of our longstanding corporate social responsibility activities, we again funded and carried out several social projects in 2020. We again consciously sourced products and services from workshops which employ disabled or disadvantaged people, like long-term unemployed. Over the last years, we constantly increased our sourcing from these workshops from CHF 6 million in 2015 to CHF 9 million in 2020. With this conscious sourcing, we support around 500 disabled or socially disadvantaged people. Finally, let me give you two examples of social projects which we conducted in 2020. We supported a hospital in Bucharest with donations for the construction of a sanitary facility, and we donated sanitary products to diverse orphanages and children's homes in Moldova. After this short overview, let me now comment on our sales development in 2020 in more detail.
Net sales in CHF achieved 2.99 billion, which is 3.1% below previous year's level. The net sales reduction was driven by the unfavorable currency development, which led to a net sales loss of CHF 136 million, or -4.4%. In local currencies, net sales grew, as already mentioned, by 1.3%. The quarterly growth rates last year were heavily impacted by the COVID-19 crisis. COVID-19 started to materially impact our business as of mid-March and led to an already relative weak Q1 with +1.5%. Q2 was severely impacted by the first lockdown wave, with a sales decrease of -10.7%, the weakest quarter, at least since Geberit was listed at the stock exchange in 1999. In Q3, catch-up effects from the lockdown in Q2 and the emerging home improvement trend led to a strong recovery with a growth of 8.5%.
The ongoing home improvement trend, inventory rebuilding of wholesalers during the second lockdown wave, and the temporary VAT reduction in Germany supported the strong growth in Q4. Overall, we gained further market shares last year. An important reason for that was our conscious decision not to introduce short-time work when demand collapsed in the second quarter. Let me now comment on the development in the different countries and regions. We recorded the strongest growth rates in our core markets, Germany, Switzerland, and Austria, representing about 50% of our sales. In Germany, net sales grew by 7.3%, in Austria by 5.0%, and in Switzerland by 4.1%, supported by the COVID-19-driven home improvement trend. These strong growth rates confirm our ability to gain market shares despite our already strong position in these countries.
Main drivers of our market share gains were our undiminished customer presence during the lockdown, our upselling strategy, and especially our shower toilet business. Sales in Benelux stayed on previous year's level. The strong growth of 7% in Netherlands was compensated by a decline in Belgium, where construction sites were much heavier restricted than in other countries. In Italy, net sales decreased by 8.3%, driven by the closed construction sites during the first lockdown wave in Q2. Let me now comment on the development of our European expansion markets. We achieved a net sales growth in markets with restricted but open construction sites during Q2. In Eastern Europe, net sales grew by 3.2%, and in the Nordic region by 2.9%. Main driver was a strong growth of behind-the-wall flushing systems.
Net sales in France, U.K., and on the Iberia Peninsula decreased due to the completely closed construction sites during the lockdown in Q2. In the Far East Pacific, net sales decreased by 7.2%, mainly driven by the closed construction sites and the corresponding sales collapse in India in Q2. Net sales in China increased over the full year, despite the lockdown in the first quarter. In Americas, net sales were slightly up by 1.7%, with strong growth of electronic faucets due to the increased demand for hygiene-related touchless products. Net sales in the Middle East and Africa region were down by 14.1%, mainly driven by the closed construction sites in South Africa in Q2 and the difficult market environment in the Gulf region. The sales development by product areas differed last year.
Strongest growth was recorded in Bathroom Systems with a plus of 2.3%, supported by a strong growth of the shower toilet business. Installation and Flushing Systems grew with 2.1%, driven by the disproportional growth of behind-the-wall flushing systems. Piping Systems declined slightly, by minus 0.8%. The weaker development was driven by the second half of the year, indicating to weakening new build activities and a weakening project business since COVID-19. Roland Iff will now lead you through the financial results.
Good morning, ladies and gentlemen. I start the result presentation with an overview of the key figures. For 2020, the Geberit Group can again present very good results. As already mentioned, net sales increased in local currencies by 1.3% and decreased in CHF by -3.1%. The EBITDA grew by 2.4% and reached CHF 925 million. The EBITDA margin could be increased by 170 basis points to 31%, despite the already high level.
The EBIT grew by 2% and reached CHF 772 million, resulting in an EBIT margin of 25.8%. This corresponds to an increase of 130 basis points. Net income decreased by 0.7% to CHF 642 million, and EPS decreased by -0.1%, excluding the negative currency translation effect, EPS would have even increased by 6%. The free cash flow increased by 11.4% and reached CHF 717 million despite the negative currency translation effect.
Looking at the individual cost elements, cost of materials decreased by -8.3%, driven by lower raw material prices and currency translation effects. The biggest impact resulted again from the plastic materials, metal prices also declined. Adjusted for currency effects, raw material prices decreased by -3.5% on average. With a -0.2%, personnel expenses remained almost unchanged. Currency effects compensated the underlying growth. Again, high average wage inflation of 2.2%, after 2.9% in the year before, and higher pension costs had a negative effect.
Depreciation decreased by 0.6%. Here, currency effect more than compensated the underlying growth from higher investments in the previous years. Amortization increased by 36.7%. The increase results from an impairment charge in the amount of CHF 7 million related to one of the ceramic brands. Other operating expenses decreased by 8%. About half of the decrease results from currency effects.
The main drivers for the decrease in local currencies were lower marketing and lower travel expenses. Responsible for the lower marketing expenses were COVID-19 related savings, lower expenses for the second step of the brand portfolio simplification, and a positive base effect resulting from the expenses for the ISH trade show, which took place in 2019. The reduction in travel expenses was obviously also due to COVID-19. The EBITDA bridge shows the most important factors that influenced the EBITDA margin in 2020.
The volume and product mix effect led to a margin expansion of 10 basis points. Due to our price increase and the lower raw material prices, the net price effect added 180 basis points to the EBITDA margin. However, again, significant wage inflation had a negative impact on the margin. This negative impact was compensated by the already mentioned COVID-19 driven savings.
As a result, the development of the other costs was neutral. As in the previous years, the strength of the Swiss franc did only have a minor impact of minus 20 basis points on the margin, due to our continuous effort to optimize the natural currency hedge. With 31%, the EBITDA margin exceeded our target corridor of 28%-30%. The special circumstances in the year 2020, low raw material prices and COVID-19 related savings, combined with a relatively good sales development, made this possible.
In other words, the margin level reached is not repeatable in a normal environment. Let me now comment on the positions below the operating results. The financial result was weaker, mainly driven by higher foreign exchange losses caused by the strong Swiss franc. Financial expenses were at previous year's level. With 14.8%, the tax rate was 190 basis points higher than in the previous year.
Main drivers were the new Swiss corporate tax law, valid as of 2020, and positive one-off effect in the previous year. Despite negative FX effects and the higher tax rate, net income only decreased by 0.7%. EPS decreased by 0.1%. The better EPS performance is a result of the ongoing share buyback programs. Free cash flow increased double digit for the third year in a row. Net cash flow from operating activities increased by 7.9%. Despite Corona, the net working capital remained stable.
Changes in provisions had a positive impact, as in the previous year, still significant payments were made related to the closure of the two French ceramic sites. Additions to the pension accruals were lower in 2019. Lower investments in PP&E increased the free cash flow by 11.4% despite the negative currency effect. This resulted in a record level of CHF 717 million.
The free cash flow margin reached 24% and the cash conversion ratio 78%. From the free cash flow, CHF 670 million left the company. CHF 404 million were distributed as dividend. CHF 167 million were used to buy back share under the second-line program, and CHF 46 million to buy back shares under the first-line ESOP-related program. For CHF 53 million, debt was paid back. The cash balance increased by CHF 40 million. In the balance sheet, there were only a few significant movements. The increase in PP&E is the result of the capacity and efficiency-driven investment project. The goodwill and intangible asset position decreased mainly due to ordinary amortization and the minor impairment already mentioned. Total debt significantly decreased to CHF 779 million, as the EUR 325 million bond was only replaced with a CHF 300 million bond.
In combination with the increased cash balance, this resulted in a significant decrease in the net debt position of almost CHF 100 million to CHF 310 million. Therefore, the balance sheet remains very solid. The equity ratio slightly increased to 51.2%, and net debt to EBITDA was with 0.3 X below the previous year level. At the same time, we could slightly increase the return on invested capital to 23.2%. Based on the good results and considering the very stable financial situation, the Board of Directors proposes to the annual general meeting a dividend of CHF 11.40 per share. This corresponds to an increase of 0.9% versus prior year. On that basis, CHF 409 million will be distributed. The payout ratio remains stable at about 64%. The annual general meeting will be held on April 14th.
Subject to the approval by the General Meeting, the dividend will be paid out on April 20, 2021. As announced last year, we have launched a new share buyback program in September 2020. Under this new program, up to CHF 500 million can be invested over two years. At the current share price level, this corresponds to about 2.5% of the share capital.
By the end of 2020, we have bought back 94,700 shares for a total of CHF 51 million under this new program. The program started in 2017, has been closed in the first half of 2020. Under this program, we have bought back 261,500 shares for a total of CHF 106 million in 2020 at an average price of CHF 406 per share, thus leveraging the stock market weakness in March. Under the entire program, 1,026,000 shares for a total of CHF 440 million were bought back.
This corresponds to 2.8% of the registered share capital. All shares bought back under the old program and all shares bought back until the end of February 2021 under the new program will be canceled at the upcoming AGM. In total, the number of shares will be reduced by 1,167,000 shares or 3.2%. With the dividend proposal and with the new share buyback program, Geberit continues its stable and attractive distribution policy, which is applied since many years. I would like to finish my presentation with a brief look at the result the shareholder-friendly policy delivered over the last five years. Since 2016, Geberit has generated about CHF 3 billion free cash flow. This represents an average free cash flow margin of 20% and an average cash conversion ratio of 70%.
From this accumulated free cash flow, the amount of CHF 2.4 billion or 80% have been distributed back to the shareholders via an attractive mix of dividend payments and share buybacks. These numbers confirm the ability of the Geberit Group to generate stable cash flows over a longer period and on a high level and reflect our shareholder-friendly distribution policy. With this, I give the word back to Christian.
Thank you, Roland. Based on the full- year results, you might have the impression that Geberit was not really hit by the COVID-19 crisis. Let me take a few minutes to show how the COVID-19 crisis has hit Geberit last year and how we have navigated through this crisis so far. I think a crisis, the resulting pressure and the performance during a crisis is always a good opportunity to get insights about the fundamentals and the quality of a business or a company.
I start with a simple question, if and how Geberit was hit by the crisis? The short answer is, yes, also our business has been hit hard. As of mid of March, sales literally collapsed. In April, net sales declined by -29%, by far the weakest month for Geberit since decades. In markets with closed construction sites, net sales collapsed by almost -80%.
Also in markets with open construction sites like Switzerland, Germany, net sales were hit severely with a historic decline of -19%. In May, net sales declined by another -15%, still a stronger decline than in the weakest month during the financial crisis 2008, 2009. Hence, the severity, speed, and simultaneity of sales decline across all our geographies was also, for Geberit, unprecedented. Let me therefore share with you our key decision, which we took end of March at the beginning of the crisis. We decided not to restructure or to change our strategic agenda. On contrary, we saw and still see the crisis as an opportunity for a strong player.
Therefore, we consciously decided at the beginning of the crisis to maintain our customer presence, to avoid short time work, to gain market shares, both short and long-term, to use internal underutilization for housekeeping and to strengthen our competence, and also to leverage the stock market weakness by accelerating our share buyback program in March. To address short-term cost management, we executed a targeted bottom-up cost containment program and strived for maximal flexibility in our plants and logistics. The decisions above also included our willingness to invest margin during the crisis, which was finally not required since the collapse was massive but also relatively short, and followed by a strong catch-up in the second half of the year. One of the biggest challenges last year was for the supply chain. It was the unseen volatility in demand.
This chart shows how the 29 production plants have managed the demand collapse in April and May. The plants managed to maintain their productivity on their already very high level during April and May, despite an average volume collapse of -18% over these two months. 10% of this volume decrease was absorbed by the high flexibility of personnel, mainly through reduction of temps, expanded flex time models, and holiday planning.
This high personnel flexibility over two months is not evident for an industrial company, especially not for Geberit, with an order book, and hence a visibility of only two weeks and normally a very stable business. This was only possible thanks to strong and trustful employee relationships and a strong company culture built over years. Another 8% volume decrease was compensated by a conscious inventory buildup, which was a competitive advantage during the catch-up phase in H2.
All in all, as mentioned before, the production plants managed this historical collapse without losing any productivity. Let me finish my comments on the COVID-19 crisis with a few key learnings. The three main success factors during the collapse of the business last year were availability in terms of cash, products, and especially customer presence, our flexibility and not short-time work, and lastly and most importantly, the avoidance of overreactions. The crisis also revealed that Geberit is crisis-resistant, including the ceramics business. Our combined business behind and in front of the wall is resilient. We have undiminished pricing power, and also the combined business creates value and strong cash flows during a downturn. The year 2020 also proved Geberit's agility, despite our strong focus on stability and continuity.
2020 has also shown that we were well prepared for the significant step in digitalization last year, which we obviously will leverage beyond the crisis. Let me now comment on the outlook for the building industry this year. The uncertainties around the COVID-19 pandemic and the corresponding restrictions are still high. Italy, for example, just tightened the lockdown in several regions this Monday again. Risks associated with virus mutations, but also the challenges related to the speed of the vaccination campaigns lead to still high uncertainties about the ending of the lockdowns and government-imposed restrictions.
Moreover, the development will differ country per country. This makes also for us the market outlook very difficult. However, there are different drivers for the building construction industry this year, positive ones and negative ones. Let me briefly talk about these various drivers, although the magnitude and the overall direction is still unclear.
Let me start with the positive drivers. The COVID-19-driven home improvement trend should continue. This trend could also come to a fast stop once the restrictions are released and end consumers spend their savings for other goods or services again, for example, for a vacation. Positive stimulus is also expected from public stimulus programs or business segments or categories benefiting from the COVID-19 pandemic, for example, hospitals or the trend for more hygiene-related sanitary products. The lowered interest rates remains to be a general tailwind for the building construction industry, although interest rates have recently started to rise again. The most important negative market driver is the expected decline of the heavily COVID-19 affected business sectors. This includes construction activities from hotels, restaurants, entertainment or retail sector, or office buildings.
These COVID-19 affected sectors are a large part of our non-residential business and represent around 20% of Geberit's total sales exposure. Also a general lower investment sentiment due to a sluggish recovery of the economy, increased public deficits, and the increasing unemployment might negatively affect the building construction industry. One signal for this negative sentiment is the falling building permits in Europe. Residential and non-residential building permits declined substantially since the COVID-19 crisis hit Europe in March last year. Unlike actual construction activities, which rapidly recovered in the third quarter last year, no short-term catch-up effect was visible in building permits after the collapse in Q2. On the contrary, building permits declined on average by -19% for residential and by -15% for non-residential buildings during Q2 and Q3.
This is the strongest decline in building permits since the crisis in 2009. This might affect also Geberit since we generate about 40% of our business in the new build sector. Now, I would like to give you an outlook on the current year at Geberit. 2021 is an extraordinary year in terms of new product introductions, demonstrating our strong innovation capabilities. Therefore, let me start with a selection of important new product introductions. We will introduce a new supply piping system called FlowFit. FlowFit is based on a completely new pressing technology, allowing for faster, safer, and easier installation. A key benefit is that only two tools are required for installation instead of eight tools for the eight pipe dimensions. In addition, FlowFit is optimized against pressure loss, allowing for smaller diameters, improving the hygiene in drinking water systems.
This new supply piping system was the largest R&D project over the last couple of years. Therefore, let me show you a short video to introduce FlowFit. In the area of Installation and Flushing Systems, we introduce this year a new concealed cistern called Alpha 12 centimeter for our international markets. Alpha 12 centimeter is an entry-level model for less trained craftsmen who can easily and reliably install the new cistern. The Alpha 12 centimeter includes a modern flushing technology and will be introduced in Asia Pacific, Middle East, and Africa.
In the area of Bathroom Systems, we will further extend our bathroom series Geberit ONE by addressing the mid and upper price segment. Along with the enlarged assortment, we also introduce an online wash place configurator for end consumers and showroom employees with more than 2,000 different variants. The extension also includes a new and intuitive lighting concept.
A second important new innovation in Bathroom Systems is a new Rimfree WC technology for the mid-price segment. This new Rimfree toilet improves flushing performance and enables an easier installation. Moreover, the new technology makes the WC also more hygienic and easier to clean. In the space of digital products, we will introduce two innovations this year. First, we will launch an AquaClean remote service offering in Switzerland and Germany. This allows a connection of the Geberit service center to the installed shower toilet at home via a Geberit app. This allows to resolve selected issues or defects remotely without requiring an on-site visit of a service technician or an installer. Secondly, we will introduce a concealed cistern with an integrated hygiene flush. The hygiene flush prevents water stagnation and potential hygiene risks in a drinking water system.
The system will be operated by the end consumer via a Geberit app on his mobile phone. The technology is not visible and allows for design freedom through compatibility with most actuator plates. Let me now comment on some of our key investment projects this year. Driven by the strong growth of behind-the-wall flushing systems in recent years, we need to expand our plant for installation frames and prefabricated installation systems in Lichtenstein in Germany.
CapEx for the additional buildings and the new fully automated production lines amounts to EUR 40 million, spread over the coming years, with a payback of 3.1 years. Another important investment this year is the new assembly line for concealed cisterns with increased automation in Pfullendorf in Germany, also driven by the strong growth of behind-the-wall flushing systems. CapEx amounts to EUR 3.1 million with a payback of 0.9 years.
Due to the strong growth of our noise-insulating drainage pipe system, Silent-Pro, introduced back in 2016, we need to add capacity in our plant in Villadose in Italy. Total investments amount to EUR 4 million spread over 2020 and 2021. As last example for our investment projects this year is our ceramics plant in Ekenäs in Finland. Here we build a fully automated high-pressure casting production cell for wall-hung toilets. The investment amounts to EUR 4 million, spread from 2020 to 2022, and will increase the capacity for Rimfree wall-hung toilets by 60,000 pieces per year. Another priority this year is the continuous expansion of our digitalization efforts. Firstly, we will further strengthen our dedicated team for software, connectivity, and data topics. Secondly, we will extend our capacity for digital product testing and digital product quality.
Thirdly, we add further IT capacity in order to support our sales, marketing, and product management initiatives. In total, we invest another CHF 50 million per year in the area of digitalization as of 2021, mainly for personnel and operating expense. Let me now comment on the marketing outlook for this year. Last year, we saved around CHF 25 million marketing expenses due to the COVID-19-related restrictions. We aim to reverse this effect again this year. To overcome the still existing restrictions for physical marketing activities, for example, the canceled ISH fair, we will further shift the marketing mix to digital activities. For example, we will replace physical fairs in the first half of the year by a newly developed digital format called Geberit Innovation Days. Geberit Innovation Days will focus on our new products, key digital tools, and competencies.
The series of global digital events will be streamed live to over 30 markets in 26 languages and will be hosted through a dedicated digital platform, allowing customized programs and interactive live chats for customers. Let me finish our outlook with an outlook on raw material prices. Raw material prices increased significantly since December 2020, as indicated by the monthly raw material price index 2021, the red line on this chart.
For Q1, we expect, therefore, a raw material price increase of around 4% versus Q4 last year. This is one of the strongest quarterly increases since many years. As the graph shows, we expect as of Q2 2021, substantial headwind from higher raw material prices, not only due to the increased level in Q1, but also due to a base effect from dropping raw material prices as of Q2 last year.
Let me close our presentation with a short summary. Geberit delivered very good results during this unprecedented crisis with several record results. We leveraged the crisis to gain further market shares based on a successful crisis management, avoiding overreactions, but focusing on customer relations and a maximum flexibility in operations. We achieved these results without any layoffs, salary cuts, material short-time work, or financial support from the public sector or taxpayers.
Thanks to our efforts in recent years, we made a significant step in digitalization, especially in customer relations. The year 2020 revealed the strength of our focused strategy, avoiding distractions, the resilience of our business model, including the ceramics business, and our ability to create value and strong cash flows also during times of crisis. The ongoing uncertainties around COVID-19 make a market outlook very difficult. There are positive and negative drivers impacting the building construction industry in 2021.
However, the overall direction and magnitude is still unclear. Clear is that raw material prices increased substantially since December, leading to significant headwind as of Q2. Key priorities for Geberit in 2021 will be the further digitalization of our marketing activities, including a normalization of marketing spend on pre-crisis level. The further strengthening of various digitalization efforts with dedicated initiatives, and a strong focus on the many important new product introductions in 2021.
We are confident to deliver good results also this year, and to gain further market shares. The crisis year 2020 has demonstrated and proven the strong fundamentals of Geberit, we believe, which are a focused strategy with strong execution capabilities, a decision-maker-oriented business model, a strong focus on innovation and sustainability, an efficiency focus with continuous investments, a functional and lean organization, and a strong down-to-earth company culture.
Based on these fundamentals, we have delivered industry-leading results since the Sanitec acquisition in 2015. We achieved over the last six years, including the acquisition of Sanitec, an annual currency-adjusted net sales growth of 8.0%, an annual currency-adjusted EBITDA growth of 8.6%, an annual currency-adjusted EPS growth of 9.5%. Despite the currency losses, an annual free cash flow growth in CHF of 7.7%, an annual reduction of relative CO2 emissions of minus 8.0%, and finally, an average number of 33 new patents per year, which is 50% higher than before the Sanitec acquisition. With this, we are at the end of our presentation. On this slide, you see our financial calendar with our key dates for this year. Thank you for your attention. Roland Iff and myself are now ready to answer your questions.
Please type your questions into the chat window format, and Roman Sidler will then ask your question, hearable for the entire audience, live to us here in the studio.
Let me start with two questions from Martin Hüsler. First, if I calculated correctly, raw material cost in Q4 was 160 basis points below last year. What were main drivers, and what is the outlook for 2021?
The main drivers were basically across the board. I'm sorry, the question was about the raw material quota?
Yeah.
Oh, sorry. Do you want to answer the quota?
The quota was also driven by, on the one side, lower raw material prices. Q on Q, it was on average 3%, for the full- year, 3.5%. We could see that already in Q4, it narrowed. On the other side, our price increase, which was a little bit more than 1%. That's the main reason for the difference in the quota.
Regarding outlook, as I've shown during my presentation, we have seen already a strong increase of raw material prices in the first quarter. We refrain from giving an outlook further out into the year because the situation is too uncertain, too volatile, and it would be too much of speculation.
The next question from Martin Hüsler again, from Zürcher Kantonalbank. What's your view on personnel cost 2021? How high were positive one-time effects in 2020? Anything we need to consider apart from inflation and FX impact?
We expect for the personnel cost this year, wage inflation of around 2%. That is slightly less than last year because in several countries, the salary increase was less, also driven by the crisis, than in recent years. Do you want to comment on the Forex impact?
We do not have any significant one-off or special effects in personnel cost, because we did not go for short-time work. We did not restructure. There, you should not, apart from probably quarterly volatility, but for the full- year, you should not expect any significant base effects or one-off effects.
We are having questions from Daniela Costa, Goldman Sachs. First one, how much of the H2 growth do you think was driven by stay at home? Would be helpful to hear your views on top line sustainability.
That is obviously very difficult to say, since we don't have a direct invoice relation with end consumers. An indication might be the different development between Piping Systems and Bathroom Systems, but that is not only the home improvement trend. Keep in mind that piping was also affected by weaker new build and project business. That is two elements which explain the difference. How much is home improvement? We don't have a clear figure.
Next question from Daniela. Is there still a bottleneck on plumbers shortage in Europe?
Nothing has changed there, especially for the largest markets for us, Germany, but also Austria. For Germany, for example, the order backlog of installers is still at the high level, which is in line with pre-crisis inventory backlog.
Another question as well from Daniela to the shower toilet business. What is your lowest price point shower toilet now, and how is demand for that pre and post-COVID?
The entry-level model for shower toilets is around CHF 1,500, end consumer price. This product developed very nicely. It was introduced around two years ago. We have seen, like for all other shower toilet products, a strong demand, also last year, positively influenced by the home improvement trend.
The last question from Daniela Costa: Does the crisis open any potential consolidation opportunities? Assume many smaller competitors have done not as good as Geberit did.
As I said during our presentation, we do not change our strategic roadmap or strategic agenda. This also includes our M&A appetite, no changes. We are not looking for any specific acquisitions, especially not driven by the crisis.
Okay. Next questions come from Andre Kukhnin from Credit Suisse. Could you please update us on your pricing intentions for April 1st and 2021 overall? Do you still plan any only usual 1%-1.5% price increases, or do you plan an additional one, give further strengths in raw material spot prices?
At the moment, we plan and will implement our regular price increase as of April 1st, 1%-1.5%. At the moment, we do not plan any extraordinary price increases driven by the recent hype or increase in raw material prices, because we are also willing to absorb some of these increasing raw material prices and to invest that into customer relation. Keep in mind that we have benefited substantially over the last year, over the last two years, from lower raw material prices. Therefore, we are also willing to absorb some of it. Obviously, we will carefully observe the situation, especially the question about the sustainability of this raw material price increase in the first quarter. No extraordinary price increases planned at the moment.
Next question from Andre as well. On market share gains, conceptually, do you envisage these to accelerate, decelerate, stay the same in 2021 versus 2020?
I do not see any reason why our potential to outperform the markets in 2021 should be substantially different than what we have seen in 2020.
Okay, the last question from Andre. Extra CHF 15 million digitization spend that you highlighted for 2021, how has this developed year- to- date, and do you still expect even ramp-up across H1, H2 of 2021?
That has developed according to plan. That is a ramp-up since the beginning of January. Nothing specific to consider in that area.
Okay. The next question comes from Manish Beria. First, at present spot rate, what sort of cost inflation we are staring at in 2021?
I assume cost inflation is referred to personnel cost inflation. That's what I answered before. We expect around 2% wage inflation for 2021. Raw materials, I commented before, we don't make any outlook apart from the first quarter what we just presented in the presentation.
Will you look for non-organic growth?
I think also already answered. Nothing changed. We stick to our agenda. Bolt-on acquisition could be, but nothing transformational.
Third question from Manish Beria from Societe Generale, how big is your shower toilet business? Any colors on the present penetration and future potential?
The same answer since many years. We are not disclosing the sales volume of our shower toilets, not because we don't want to know you how much it is. It's just for competitive reasons. We are the market leader in this category. We have the best market knowledge, and we do not see a reason why we should share that with our beloved competitors.
A question from Hitoshi Miyayamo. Please update current status of two French factories which are planned to close down.
I think that question is very old. The plants have been closed already a couple of years ago, so that is done. All payments are done. That is really history.
Next question from Marta Bruska, Berenberg. Looking at 5-year average organic revenue growth in local currencies for the years 2011 to 2015 of 5% versus 4.1% achieved since the acquisition of Sanitec for the year 2016 to 2019, excluding the pandemic year 2020, what was, in your view, the major reason for the deceleration and why it should accelerate now?
This question has been answered many times over the last one, two years. The main reason is that, the period 2016 until 2019, 50% of our sales was, still is, exposed to markets with limited market growth. Germany, with the limitations of bottleneck of installers, the Nordic region, 10% of our sales, which are in a cyclical decline, and also Switzerland, which came out of a real estate boom until 2014, 2015, which is still running very well, but on a high level.
Next question from Arnaud Lehmann, Bank of America. Are you confident to be able to protect your margins in 2021 in the context of raw material cost inflation?
I gave a flavor before with my answer that. We are also willing to absorb some of the raw material price increases to invest that into our customer relation, because we try to balance obviously short-term profit potential, so to say, versus long-term customer relations. To what extent? That will depend on the raw material price development. As I said before, we are closely observing the current situation. At the moment, we do not plan for extraordinary price increases.
Next question from Arnaud Lehmann again. What are your capital allocation priorities for 2021, considering the strengths of the balance sheet, could you consider acquisitions?
I think that question was already asked. No changes also there. Capital allocation, as almost all our activities are independent of the crisis. I think that's what I tried to show during the presentation. We stick to our strategic agenda. For example, CapEx plans and projects for this year are the ones we had in our pipeline already one year ago, which are now due to get implemented. No changes also there, be it M&A, be it internal CapEx or resource allocation.
A question from Bernd Pomrehn from Bank Vontobel. Last year, you reduced the consumption of plastics and minerals by 5% and 7%, respectively, but you increased the consumption of semi-finished products by 12%. Is this part of an active outsourcing strategy, or how can this be explained?
No. The answer is no. We have not an active outsourcing strategy. On contrary, it's rather that we, over time, insource more and more elements. That always depends on critical volume. In general, we are more insourcing because of volume growth being above critical mass for certain areas, and it's definitely not more outsourcing. That detailed figure, to be honest, I can't comment. I have to go into detail there.
Some questions from Martin Flueckiger, Kepler Cheuvreux. Has the home improvement and bathroom modernization trend continued to boost the trading environment in January and February? What are the latest demand developments in the European non-residential markets suggesting for the Piping Systems business in 2021?
We believe that both trends, the home improvement trend, but also the observation that the new build sector and project business has become weaker, continued at the beginning of this year.
Okay. A follow-up as well from Martin Flueckiger to the shower toilet business starting 2021. What is management's latest assessment of increasing competition in this business?
In shower toilet businesses?
Yeah.
I would say a relatively stable picture. Not only this year, but also the last one, two years, the competitive level more or less stayed at the same level. On contrary, I would even say that we have moved a little bit more forward because, as you know, we introduced a couple of new products in shower toilets over the last couple of years. No structural competitive differences expected this year.
Next question, again from Martin Flueckiger. In which Eastern European countries does Geberit see further low-hanging fruit in terms of market penetration, and which specific measures are foreseen to achieve this target?
I don't want to put a spotlight on a specific country in Eastern Europe with regards to this question. That is basically true for all the Eastern European countries. Obviously, the local implementations, how we are addressing the markets, are different because the local habit, but also the local customer landscape is different country by country. I wouldn't take one country specifically out. We expect from all these countries an ongoing penetration of our systems. I wouldn't call that low-hanging fruits, to be honest, because it's a lot of work also in there, but it's across the board in Eastern Europe.
From Martin Flueckiger to the ISH. The ISH fair in Frankfurt in two weeks' time will be digital. What does that mean for Geberit in terms of marketing efforts and costs and for the expected impact on group sales?
We will also participate in this digital ISH forum, like many other suppliers. Obviously, that has cost benefit because it's much cheaper. As I have shown as an example in my presentation, we take this money and invest it into other additional formats. This Geberit Innovation Days, which will be after the ISH, is a significant investment into marketing and marketing activities. Also to, let's say, compensate, maybe overcompensate even some of these fairs like ISH, where we might not reach the same customer number, also in terms of quality or the quality relations as usual. Therefore, we expect that we are able to spend the marketing spend what we had pre-crisis also this year with a shift to digital, and also already in the fourth quarter last year, marketing expenses were almost on pre-crisis level, not significantly below anymore.
Two questions from Remo Rosenau from Helvetische Bank. First one, could you update us on the development of the Geberit ONE launch, and if it was seriously slowed due to the pandemic? Are you satisfied with the acceptance in the market?
Yes, we are. No impact from the COVID-19 crisis. Might even that we have a bit benefited from the home improvement trend because Geberit ONE is a bathroom system series addressing not only benefits for the installer, also benefits for the end consumer. It's running according to plan. As you have seen in the presentation, we are doing our second step, important step. We extend the assortment, a little bit lower price points. The products we introduced 2 years ago were really premium. This one introduced this year is more the mid-level, upper mid-level, therefore very satisfied and also sales wise, and looking forward to the future of this product this year and afterwards.
The second question, in the January conf call, you mentioned a major innovation for 2021, a new supply piping system for installers. Could you tell us a bit more about the advantages of this new system versus the old ones? Will it be introduced gradually over years or simultaneously all over Europe?
It is the FlowFit supply system, which you have seen a film, a movie before. There are several advantages, but one of the main advantages, as I also said in my presentation, normally to install a supply piping system, you need a tool for every different dimension of the pipe. Small pipe, medium-sized, many, many tools. The new system, you only need two tools. For the five smaller ones and for the three larger ones. This is a big advantage because you have less weight to carry. It's easier to change from dimensions, and is one of the advantages which makes an easier and faster installation. The second important part of the new system, it is a pressure loss optimized systems. This means that the pressure in the shower in the third floor is at a higher level than if you take a regular piping system.
That is not really an important benefit for you as an end consumer. You wouldn't even feel it. Less pressure loss means you can use smaller diameters to transport the water up in the house. That has the advantage that you have less water in the system, and you have less risks in terms of hygiene. The more water you have in the system, the higher the risk of hygiene problems. That's two examples. There are many others.
Okay, questions from.
Sorry, to be fair, there was also a question about the rollout. Sorry. We start with the Central European market with this product. Especially the German-speaking countries. These are also the most important markets, obviously, for this product. There will be a couple of markets where we will never introduce this new FlowFit system. For example, outside Europe, because the system is far too advanced for the market demands outside Europe.
There is a follow-up from Remo Rosenau, maybe partly already answered. Due to the strong increase of raw material prices, would you consider an extraordinary price increases later this year?
As I outlined before, at the moment, no. Obviously, we are observing the situation. I will not exclude it, but at the moment, no.
Questions from Yassine Touahri from Onfield. What kind of growth CapEx, especially for new products, should we be looking at for the upcoming years? Is the 24% for new products this year a good run rate? What is the progress of market penetration of through these new products?
Overall, we expect CapEx in total to be around 6% of sales also over the coming years. The shift within CapEx or the segments within the CapEx, that can change year by year. 24% last year was rather on the higher end, very much driven by FlowFit, as I said before. It was one of the largest, or the largest R&D project over the last years. That might come down this year and then it goes up again, so that's a bit volatile. In terms of sales potential, obviously, new products are very important. It's an important part of our annual growth aspirations. Although the impact is always with a certain delay. For example, FlowFit, we do not expect material sales already this year.
A question from Delphine Brault from Oddo. What is your view on the German market demand currently, and are the showrooms open there?
The showrooms are open in Germany, but they are restricted. You are only allowed to visit the showroom on demand or Then you are able to go in the showroom, but as far as I know at the moment, they are publicly closed.
Okay. Questions from Cedar Ekblom from Morgan Stanley. Can you please remind us on how much renovation versus new build and residential versus non-residential matters for revenue?
About 40% of our business is exposed to new build, and about 35% is exposed to non-residential.
Also renovation?
Obviously the rest, 200%, is then renovation or residential. I assume calculation can be done.
Thank you. Again, a question from Cedar. Does digital market increase competition between players? What are you seeing in the market? Related to this, how do you differentiate in digital marketing world?
I think, as I tried to show during my presentation, we have made a significant step in terms of digital marketing, digital interaction with customers. Obviously, that's quite difficult to compare to competitors who also efforts in that area. I have the impression also some feedback from customers that we did very well. I think if I look at the numbers, which I presented before, that also gives me confidence that we did very well in this digitalization of our customer interactions, which is not a given in our industry. As you know, our industry is very traditional, it's very driven by physical contact. To a certain extent, you could say it was a surprise that we have been able to digitalize this interaction in that way like we did.
I think we started quite early, a couple of years ago, to build the fundament in terms of digital tools, activities, and we delivered them last year. I think we were rather the benchmark last year in terms of digitalization of our activities, and definitely not below average.
Questions from Yves Bromehead from Exane BNP Paribas. What is the revenue contribution from the shower toilets in % of group sales or in absolute in CHF, and what level of growth are you see there?
The first part is already answered. We don't disclose figures, we expect double-digit growth for shower toilets also this year.
The next one from him as well. A few sources suggest there is an increased shortage of, or constraint of PVC-P and other polymer-based resins. Are you experiencing some supply issues?
A lot of challenges. This is true not only for commodity plastics, it's across the board. It's a very challenging situation to get raw material, obviously correlated to the increase in raw material prices. Far, we don't have any issues. We are able to produce, but it is a very tight and challenging situation, not only from raw materials supply, for example, also in terms of logistics, which is also a very scarce resource at the moment. At the moment, we are able to produce, we get the raw materials which we need.
Again, from Yves Bromehead. Can FlowFit be used by non-qualified installers, or is it reserved to plumbers?
I'm able to install it, therefore, basically, I can use it, and also non-qualified could. Obviously, it's a system which is targeting with all the benefits and also the tools to the professional customers. As I said before, the main countries this year where we are focusing on are the Central European countries with a high qualified customer base of installers. That is the main target group.
Questions from Christian Arnold from Stifel. In which quarter did you book the impairment of your ceramic brand?
50% in Q2 and 50% in Q4.
The second one as well from him, what was the negative COVID-19 impact in Q1 2020?
Top line, we had already an impact. As I said, the 1.5% was already hampered by a weak second part of March. Cost-wise, we did not have yet an impact in the first quarter.
Again, from Christian Arnold, what is the CapEx guidance for full year 2021 and 2022?
For 2021, about CHF 180 million. 2022, what I said before, we don't have yet the concrete plans, but we estimate an average 6% of net sales midterm.
A question from Ricco Friedrich. Can you elaborate how easily you are able to pass on raw material costs with 2008 as a comparison?
There are two parts to this question. Number one is we could easily pass on prices, the second part of the answer is would it be a wise decision to pass on immediately every raw material price increase? It's always a balance, as I said before, optimizing profit versus investing into long-term customer relations. We have, as I said before, benefited substantially from lower raw material prices over the last two years. More than three percentage points of our EBITDA margin increase over the last two years was driven by lower raw material prices, increased price increases. That's even more if you look back five years, it's more than four percentage points. There are moments where you also should think about investment into your customer relations, especially in an industry which is very long-term oriented.
The short answer, yes, we could, but the second part is, we think about it.
A question from Patrick Rafaisz from the UBS. Trading in Q1, did you see a sequential impact from the German VAT and pre-buying in U.K. and Eastern Europe? You talked about volumes up 10%-11% in November, December 2020.
As usual, we don't comment on our sales in January and February at this point in time. The only comment I want to repeat, I made it already before, is that we have seen an ongoing positive trend from home improvement, but also the negative side, an ongoing trend from a weaker new build and a weaker project business.
There is a follow-up question from Bernd Pomrehn, Bank Vontobel. Can you please provide a tax rate guidance for 2021 and ongoing?
2021, we think it's between 15% and 16%, and I would also put that in the years after that.
Okay, again, a follow-up from Andre Kukhnin from Credit Suisse. Question on behind-the-wall systems penetration across the markets in Europe, please. Could you share your assessment of where it is in U.K., France, Nordics, Iberia, and Italy? Even if rough color would be helpful.
Sorry, no, we don't share this information. As you know, Mr. Kukhnin, we never share this information. Same rationale why we don't do it for shower toilets. We are the market leader. You can be ensured that it is constantly increasing. A large part of investments, CapEx investments last year, also this year, is related to capacity expansions for concealed systems, be it for the frames, for the system, be it for the actuator plates. That gives you an indication that we are doing very well, especially in markets where the penetration is still rather low, what we call the expansion markets in Europe.
Okay, there are no more questions.
Okay, thank you for your attention in this very special webcast. Obviously, we hope to see you again, physically very soon, hopefully next year at the normal analyst conference where we also can see each other physically. Thank you very much for your attention. We wish you all a great day.