Good morning, ladies and gentlemen. I am the operator for this conference. Welcome to the Geberit Conference Call on the Half Year Results 2020. Please note that for the duration of the presentation, all participants will be in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. This call must not be recorded for publication or broadcast. At this time, I would like to turn the conference over to Mr. Christian Buhl, CEO, accompanied by Mr. Roland Iff, CFO, and Mr. Roman Sidler, Head of Corporate Communications & Investor Relations. Please go ahead.
Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our conference call on our Q2 results. Geberit delivered very good results during the COVID-19 crisis in the second quarter. Let me start with the key statements. The EBITDA margin reached, in the second quarter, previous year's level, despite a substantial decline in net sales of -16%. The resilience of the margin in the second quarter led to an increase of 70 basis points of the EBITDA margin in the first half of the year and reached 31.5%. The EBIT margin reached 26.3%, almost previous year's level. The net income margin decreased slightly by one percentage point in the first half of the year to 21.4% due to an increased tax rate and a weaker financial result.
Before we discuss the financial results of the first half of the year, let me briefly summarize our sales results, which we already communicated on July 6th. Net sales in CHF decreased in the first six months by -9.8%, driven by the COVID-19 crisis and a negative currency development. In local currency, net sales decreased by 4.5% in the first half and by -10.7% in the second quarter. The negative COVID-19 impact on demand varied substantially by geography, depending on the degree of the local lockdown. In markets where construction sites were closed, around 20% of our sales exposure, volume declined substantially, or in some cases even collapsed in the second quarter. These countries include Italy, France, Spain, the U.K., India, and South Africa.
The remaining countries were also impacted by lower construction activity imposed by COVID-19 restrictions, which led to a sales decline in Q2, however, much less pronounced. Let me now comment on the operating and financial results in the first half of the year. EBITDA decreased under-proportionally compared to net sales by -7.8% to CHF 462 million. The EBITDA margin reached 31.5%. Despite the net sales decrease of -10%, we were able to increase the EBITDA margin by 70 basis points. The main drivers for this margin improvement were fast and targeted cost containment measures, a high and even further increased flexibility in production and logistics to cope with the substantial decline in volume, lower raw material prices, and increased sales prices. It is worth to mention that these results were achieved without restructuring, salary cuts, or support from the public sector, for example, through short time work.
The public support from short-time work was minimal, since we consciously decided to introduce short-time work only very selectively and for a very short period of time in France, U.K., and Italy, the countries which were most hit by the lockdown. The negative currency effect of -5.3% on net sales in the first half of the year had only a minor impact on the EBITDA margin due to our strategy and our continued efforts to achieve a natural currency hedge. EBIT decreased in the first six months by -10.5% to CHF 386 million in line with net sales, leading to an EBIT margin of 26.3%, 20 basis points below previous year's level. The slightly weaker development of the EBIT margin versus the EBITDA margin was driven by higher depreciation costs from higher investments in previous years.
Net income decreased by 13.9%, slightly disproportionally to EBIT, to CHF 350 million due to a higher tax rate driven by the new tax regime in Switzerland effective as of this year and the weaker financial results in 2020. Earnings per share decreased by -13.5% to CHF 86.77, positively affected by the share buyback program . In the first half of the year, 262,000 shares have been bought back under the program launched in June 2017, at an average share price of CHF 406. In total, 1,026,000 shares have been bought back since 2017. For a total consideration of CHF 440 million. The share buyback program has been finished in April this year, according to plan. Free cash flow decreased in the first half of the year by -32% to CHF 174 million. This overproportional decrease was driven by two factors.
First, a negative base effect with an extraordinary strong free cash flow in the previous year, when free cash flow increased by 35%. Second, an increase in net working capital due to the strong sales dynamic within Q2, starting with a substantial decline in April and the recovery towards the end of June. In order to leverage the low interest rate environment and the strong debt capacity of our balance sheet, we issued in April a standard CHF bond in the amount of CHF 300 million, with a maturity of two and a half years and a coupon of 35 basis points. With this, Geberit remains to be very solidly financed. At the end of June, we hold a cash position of CHF 350 million and an unused revolving credit facility of CHF 500 million.
Let me now comment on our outlook for the remaining year. Let me start by saying that ongoing uncertainties around the COVID-19 crisis make an outlook still very difficult and uncertain. Accordingly, our outlook is subject to uncertainties and based on the assumption of no lockdowns or material business restrictions driven by the COVID-19 pandemic. Let me start with the current business performance. In July, sales were slightly above previous year level, driven by stock rebuilding effects of wholesalers in countries which were severely hit by the lockdown. For example, in Italy or in France. Under the assumption of no COVID-19 imposed lockdowns or material business restrictions, we expect in the second half of the year a further normalization of the building construction industry.
However, delayed or stopped projects, especially in the non-residential segment, and the temporary closure of customer showrooms in the second quarter, might have an increasingly negative impact on demand during the second half of the year. Under these assumptions, we expect currency-adjusted net sales in the second half of the year to be slightly below the second half of 2019, and an EBITDA margin for the full year slightly below 2019 level. The weaker outlook for the EBITDA margin in the second half of the year, compared to the margin increase we achieved in the first half of the year, is driven by three factors. First, generally increasing costs again due to the normalization of the business after the sharp decline in Q2. For example, for marketing or the relief of the hiring freeze.
Second, raw material prices, which started to increase again in June and thus will come from lower raw material prices in the second half of 2019. Thirdly, a higher wage inflation, since several tariff increases this year become all the effective as of the second half of the year. Let me close our introduction with a short summary. The last couple of months were marked by an historical business collapse in terms of speed and extent. However, Geberit delivered very good results. First, our supply chain was not materially affected by the COVID-19 imposed restrictions, and the availability of our product assortment was ensured. The stability of our supply chain was largely driven by our strategy to pursue a high degree of vertical integration in manufacturing, decreasing the dependencies from suppliers, and our strategy to source and to manufacture locally, close to our customers in our end markets.
Secondly, we were able to maintain our industry-leading profitability on previous year's level, despite the unprecedented collapse in volume in the second quarter. This without restructuring efforts or support from the public sector. Lower raw material prices helped but were not the main driver. The main reasons for the strong profitability were a fast and consequent crisis management based on short decision-making processes and the lean organization, the continuous investments in further optimization and process flexibility over the past years, and finally, the flexibility and the high commitment of our employees based on good and trustful relationships between employees and management. This unprecedented crisis revealed the fundamental strength and resilience of our strategy, our business model, our stability, and our strong company culture, key assets during times of crisis. Thank you for your attention. We are now ready to answer your questions.
Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question is from Andre Kukhnin, Credit Suisse. Your line is now open. Please go ahead.
Good morning. Thanks so much for taking my questions. I wanted firstly to follow up on your raw materials comment with stock prices increasing and obviously the comps that we see from last year. Do you expect Q3 raw materials to be up, down, or flat year- on- year or sequentially?
Sequentially, we expect increasing raw material prices now in the third quarter compared to the second quarter. Year-on-year, the level will be still below our previous year's level.
Thanks very much. The second follow-up I had is on your comment on July sales development. Would you say you'd still be up year-on-year X, the restocking effect, if that's possible to quantify at all?
I don't know. I can't answer that because I can't quantify the restocking effect.
Okay, fair enough. The main question I have really is about emerging stronger on the other end, as you said, this is clearly a demonstration of resilience. We see your R&D flat year-over-year, your IT personnel is up year-over-year, as you say in the statement. Could you maybe talk a bit more about what is in the pipeline? What are you working on? What is there that we can expect from Geberit over the next 12 months in this kind of digital effort in new product introductions and how you'd expect that to influence the performance?
We did not make any compromises on our lead pipeline. We are on track with new product introductions, which will come to the market next year. For obvious reasons, I do not want to go into detail about our innovations next year, but we will have important and significant innovations in all areas where we are active next year.
If I may, anything kind of specific to post-COVID? Are you working on introducing new products to address the kind of touchless, frictionless trends that we see emerging? Is that something that we can also look forward to at Geberit?
Sorry, can you repeat the question? It was difficult to understand.
Sorry. I was asking specifically if you have new products in the pipeline that respond directly to post-COVID trends that we see emerging, which is more touchless operations, more frictionless buildings. Is that something that is also in the pipeline?
Not only in the pipeline, we have it actually already in the assortment. We have already today touchless products. For example, the flushing toilet, but also in the area of faucets, electronic faucets. We have seen a substantial increase in demand already over the last couple of weeks and months driven by the COVID-19 crisis for these touchless products. Of course, also in the pipeline, we have further products coming in the area of touchless activations.
Got it. Thank you very much.
The next question is from Martin Huesler, Zürcher Kantonalbank. Your line is now open, please go ahead.
Yes, good morning. I have a couple of questions. First of all, turning to slide number 10 on your presentations. I'm surprised by the strong positive effect of other costs, which was + 0.7%. I think in the first quarter it was a minus of 0.2% or 0.5%. What were the main drivers? You mentioned some on a high level, but maybe a bit more detail, and what should we expect for the second half of the year?
There are two main drivers for this good development of other costs. Number one, the fast and consequent implemented cost containment measures. For example, in marketing, for example, in administration. Some of them were easy to achieve because we were not able to travel, for example. Others were a conscious decision, which we took to adapt our organization very fast to the new market reality. That is the first bucket. The second bucket is the flexibility mainly of our personnel in plants and logistics. We achieved a high flexibility driven by temporary workers, but also a flexibility of permanent staff in the plants. For example, by vacation planning or using the flexibility from flex time models, which we have in place in the plants, the logistics in some of the plants, we even increased the flexibility during the crisis in alignment with the employee representatives.
Okay, thank you. Maybe adding to that, you were mentioning that in the second half, you envisage wage inflation. I was just wondering whether there is no room to renegotiate with employees because of the economic environment and the pressure on wage inflation shouldn't be that high in this state of environment.
I give you two answers. The first answer is no, there is no legal room, because that is negotiated by the Tarifverbände with the company representatives. We do not have any influence. By a certain coincidence this year, mainly in Germany, the tariff increase is happening more in the second half of the year than in the first half of the year. My second answer is, even if we would have the flexibility, we would not start to renegotiate our wages in the second half of the year if we have seen the results this organization and these employees delivered, especially in the second quarter.
Okay, well understood. The very same question, the amortization of immaterial assets was a bit higher than I was expecting in the second quarter. Any one-offs there, or is this now the run rate for the next couple of quarters?
There was a one-off of CHF 4 million in that line item, linked to a small impairment.
Okay. Thank you.
The next question is from Charlie Fehrenbach, AWP. Your line is now open. Please go ahead.
Good morning, gentlemen, and thank you. Can you give us an idea of your expectations of the development of the demand in Germany and in Switzerland in the second half? Second question I have, has the Corona situation nothing changed on the situation with the lack of capacity of installers in Germany? Last, is it still planned a new share buyback program to start it in Q3 or Q4, or you have other ideas yet? Thank you.
Regarding the demand in Switzerland and Germany, we are fundamentally positive for the second half of the year for the demand in these two countries. As I said before, also in these countries, we have seen that certain project checks have been delayed or even postponed in the second quarter that might have a more negative impact in the course of the second half of the year. The second question is around the bottleneck of installers in Germany. The bottleneck came down in April quite substantially, as we already talked about in July, and started now to begin to increase. In July, the order backlog came back again. It's actually at 11.8 weeks. Still somewhat below previous years' level, substantially higher than during the lockdown in April and May. Your third question around the share buyback program.
We have announced that we will launch a third program. It is prepared. It is mandated to a bank, and it is expected that the bank will start the share buyback program in the course of the second year.
Thank you.
Second half of the year.
This still means Q3 or Q4.
Exactly.
Okay, thanks.
The next question is from Bernd Pomrehn, Vontobel. Your line is now open. Please go ahead.
Yes. Good morning, gentlemen. Three questions, if I may. Firstly, can you share a little bit your view on some developing markets where you are active, like Middle East, South Africa, and India? Obviously, a little bit more difficult usually to track for us. Secondly, can you quantify the additional IT costs for your digitalization initiative in the first half? Finally, CapEx was just slightly down in the first half year. Is this also your guidance for the full year? Thank you.
The development in the emerging countries is still quite challenging. Especially in India and in South Africa, it's visible that it's much more difficult that these countries are coming back to a normal level. As I said before in July, we have seen quite good sales again in Italy and also in France, for example, driven by restocking effects. South Africa and India are still struggling much more. The second question, the additional investments for the digitalization efforts this year is CHF 15 million for the entire year, but I can't split it in the first half of the year, the second half of the year. I do not know the exact figure. Question number three, Roland.
The CapEx is always a little bit volatile between the quarters. The guidance for the full year is CHF 160 million.
Okay. Excellent. Thank you so much.
The next question is from John Revill, Reuters. Your line is now open. Please go ahead.
Yeah. Good morning, gentlemen. A couple of questions, if I may. You say you expect the second half of the year to be slightly below last year's level. Can you give us any kind of quantification on that and any kind of numbers, how much below you think it'll be below last year's second half? That's my first question. The second one is, you are seeing some kind of recovery in markets, and I was wondering, can you give a bit more color to that? Where are you seeing a kind of improvement, and how much? Which of the countries are coming back, and how much are they coming back? Thank you.
I cannot quantify how much we believe that the sales level in the second half year will be below previous year's level. It is slightly below previous year's level, but I will not quantify or not provide any figures because there's too much uncertainties around the COVID crisis. The second question, also there, difficult to give you a country-by-country view, but I think there's one observation which we have seen over the last month. It might be that it's also the case for the second half of the year, that in general, weaker economies, obviously with weaker health systems, are recovering much more slowly than other countries. As I gave before the example, Italy, France are coming up relatively fast. On the other hand, India, South Africa, still very much struggling. The U.K., somewhat in the middle.
Thank you.
The next question is from Christian Arnold, MainFirst . Your line is now open. Please go ahead.
Yes. Good morning, gentlemen. I have a follow-up question on the raw materials. In your introduction comments, you said that you expect some higher material prices in the second half, which is one reason why EBITDA margin is going down in the second half according to your guidance. You said that Q3 actually sequentially increasing that year-over-year, we still have a positive impact. That implies that in Q4, you expect quite a harsh increase in material prices year-over-year. Is that correct? Could you give us here some more flavors in terms of which material prices you expect to increase quite substantially in Q4?
In terms of materials, we expect a stronger increase, especially from the industrial metals, because the spot prices for industrial metals, aluminum, copper, zinc, they are basically all back to the level of the beginning of the year. Obviously, we have not seen that yet in our purchasing prices because there's certain delay. Also on the plastic side, we have seen increasing prices, not as severe as on the industrial metal side. For Q4, we do not have a clear view of the Q4 raw material prices development, obviously. Don't forget that last year in Q4, raw material prices were already stable again versus Q3.
Okay, thank you. Second question I have is on the personnel costs. Usually, Q3 shows a quite favorable pattern when it comes to personnel costs versus sales. Do we expect a similar pattern, a normal pattern, or do we expect something completely different given the fact that you asked for flexibility of your personnel in Q2?
I would expect a pattern which is not too different from what we have seen in the past. What you said is correct. Some of the flexibility we used in Q2 will probably harm us in Q3 so that the positive effect we have from taking vacation might be a little bit lower this year than in the past. It's very difficult to assess right now.
Thank you.
The next question is from Alessandro Foletti, Octavian. Your line is now open. Please go ahead.
Yes. Good morning, gentlemen. Thank Thank you for taking my question. I have one, again, a follow-up on raw materials, and I'm sorry I have to go back to an issue related to the Q1. I looked up all my notes, and I didn't find the answer. I remember in Q1 you mentioned that there was a one-off in the raw materials, and can you remind me what that was? Particularly if this one-off remained a one-off or if it continued in Q2, or just to understand a little bit better that element. Thank you.
You're right, we had a one-off effect on the raw material product in the first quarter that was mainly driven by projects within production and logistics, growth harmonization, and growth improvement with a positive effect on the raw material product, which was only Q1 one-time effect, so it will not have an effect in the rest of the year.
All right. Thank you very much.
The next question is from Martin Flueckiger, Kepler Cheuvreux . Your line is now open. Please go ahead.
Yeah, good morning, gentlemen. Thanks for taking my question. Just one actually, because all the others have already been touched upon. I was just wondering what your impressions and observations particularly have been over the last couple of weeks with regards to wholesalers' order patterns and with the indication or the guidance of showroom effects being expected for H2. I was just wondering what you've seen on the ground and whether it's more Q3 or more Q4, when you expect those showroom effects to take place and in which countries, too. Thank you very much.
The most important behavior of wholesalers impacting our business at the moment is obviously restocking effects that we have seen already in June in the countries which were less affected, for example, Germany, but also in Switzerland. Now, as I say, with delay in the countries which were materially affected by the lockdown in Italy and France, as I mentioned before, with a good sales development in July. With regards to the impact of the showroom closures, that's quite difficult. We do not have a clear view, also not clear indications from wholesalers, how big the impact could be and how fast or when it actually should come. There's one agreement, or that's what we hear from the wholesaler, is that it is a negative impact and not always be a positive impact.
Very difficult to quantify and very difficult to define the timing or refine the timing of this effect.
Okay, thanks.
The next question is from [uncertain ], Morgan Stanley. Your line is now open. Please go ahead, ma'am.
Thank you very much, and good morning. Could you please give a bit more details on the trade receivables, please? We see a large increase. Is that purely due to timing or COVID sort of lockdown and recovery? Or should I expect it to go back to normal levels, or is that the new norm? Thank you.
No, that's not the new norm. It has to do with the seasonality within the second quarter, the recovery we have seen starting mid-May, and until the end of the quarter. You can see that in the EBITDA, that's already in the results, but you don't see it in the free cash flow, i.e., it's still sitting in the accounts receivables.
Great. Thank you.
The next question is from Cedar Ekblom, Morgan Stanley. Your line is now open. Please go ahead.
Hi, gentlemen. Two follow-up questions from me. On the raw materials, can you give us a little bit of an indication of how important industrial metals versus your plastics raw materials are in terms of the mix? Is the industrial metals 20% of the mix, 30%? Maybe some broad guidance there would be helpful. Then just for my understanding, can you explain why showroom closures in Q2 can be an impact to wholesaler volumes in, say, the end of Q3 and into Q4? How does the order processing actually work? I would expect with the showrooms now open again, the wholesalers come back. Is this just a case of having a very long order book at wholesalers, so it takes time for this to filter through? That would be helpful. Thank you.
The raw material split is around 40% metal-oriented, industrial metal-oriented, 25% of our raw materials are plastics, commodity plastics and special plastics, and about 35% is obviously the rest, packaging, electronics, components, rubber parts, etc., furniture. To the showroom question, first, it's important to mention that in many countries where we are operating, the showrooms are operated by wholesalers. That is true for Germany, for Austria, for Switzerland. Secondly, there is a delay because you as an end consumer, you choose your product in a showroom, and then it takes some time until your project starts, maybe even the house building starts, and then a bit later on, the sanitary equipment is required, and that leads to a time lag to actually ordering at then the wholesalers and delivering from the wholesalers.
Okay. That's helpful. Thanks very much.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press zero and one on your telephone keypad now. The next question is from Remo Rosenau, Helvetische Bank . Your line is now open. Please go ahead.
Yes, thank you. During tough times, the market leaders should actually be able to gain market share probably more quickly than usual. Do you have any indications yet that this is actually happening right now, also looking at the ceramics business in particular?
First, I think it's a little too early to talk about the market share gains. It's a couple of months now, but I feel quite comfortable that we are able to gain market share, and I think we have some indications because some of our competitors have not been able to keep open their plants. There were some delivery issues in Chinese players, but also in ceramic players, and we did not have, and we made use of that. Most probably that means that we are doing better at the moment than competitors.
Okay. This might also be a marginally positive impact in the second half of the year and next year.
I think the closure of plants of competition, I would say no, because these plants are open again. I think now it comes more into play that we did not restructure, that we did not cut any R&D budgets, that we did not reduce our sales force. For example, in Italy, our sales force was never in short time work. I think these more longer term oriented measures during the crisis will now help for the rest of the year, next year, to emerge stronger than competitors from this crisis.
Exactly. Great. Thank you.
You're welcome.
We have a follow-up question from Alessandro Foletti, Octavian. Your line is now open again.
Yes, thank you for taking my follow-up. If we forget a little bit about COVID, we have been speaking about that for six months now and looking into more normalization and so on.
What kind of growth rates would you expect or envisage in the next, or maybe intuitively expect in the next months and maybe next year et cetera? Of course, we also see building permits not growing so much anymore. Economic activity will pick up. If you try a mental exercise to normalize business, what kind of organic expectations would you then envisage? Thank you.
No, there are too many what ifs and too many assumptions in your question. I think it's still too early. Of course, if the economy normalizes, it has an impact on us as well. It's not too much uncertainty in this question. Obviously, I will not give you a profit figure. I think, what we have on our table, we have of course, different scenarios. We have different macro scenarios. Whatever scenario will happen, we will not change fundamentally our management division, be it strategically, be it operationally. Therefore, we do not spend that much time on thinking about the different scenarios because we basically do anyway the same thing, and that is much more important.
All right, we speak about it in the next quarter.
The next question is from Manish Beria, Société Générale . Your line is now open. Please go ahead.
Hello. Yes, good morning. Congratulations for a very good result. My first question is on raw materials. How much the raw material price declined in Q2 as well as in the first half? The second question is, you said there is a time lag between the raw material price development and the impact on your profit and loss statement. Can you just highlight, what is the general time lag between the raw material price development and the P&L impact? The third is I wanted to know, you said you did CHF 160 million buyback in this quarter. What was the average buyback price for this buyback? Also wanted to understand, because you are going to do third buyback program.
Is this just an opportunity like you just do, like if you have the cash flow and you do the buyback, or you take a call on the share price, if the valuation is right to do the buyback? What is the process behind? It's just the cash flow availability or also, and consideration that the company cheap and things like that?
First question, raw materials in the first six months were down by 3.5% compared to the first half of the year 2019. If you compare the second quarter this year with the first quarter, raw materials were down by 5% sequentially. Your second question was, can you repeat the second question briefly or?
Yes. You say there is a lag between the raw material price development in the market and the P&L impact. How much is the lag?
That is very big mix between the raw material price difference. We have some of the raw materials relative short-term, because we are not hedging. We are at monthly contracts for other materials. It's quarterly, even half-year, so we do not have an exact figure, a weighted average time lag figure I can't provide you. It's something between one month up to six months, selectively even yearly prices. The third question about the share buyback. The share buyback program, fundamentally, we want to have a mix of dividend payment, an attractive payout policy. Also, secondly, giving back the money via share buybacks to the shareholders. It's not driven by the actual share price. It's always a delegated mandate to the bank where we define its volume and the time frame. No operational decisions.
I have to correct myself, sorry, the -5.1% I mentioned before in terms of raw material prices was Q2 2020 versus Q2 2019. The sequential effect this year, Q2 2020 versus Q1 2020, was only -2.4%. I'm sorry about that.
Okay. Thank you.
The next question is from [uncertain ], DP Asset Management. Your line is now open. Please go ahead.
Thank you. Good morning. Lots of question on the short-term COVID impact this morning in the call. Maybe more on a long-term view. Can you comment a bit on the lasting effects of the post-COVID world from a product perspective, where I think virtually all commercial bathroom in Europe will need to be renovated due to distancing rules. What are the feedback from the experts, from the developers, and from the architects, and what are you doing on the product side? Thank you.
We have already an assortment which fits, let's say, to the new COVID environment. As I said before, some example, touchless products, hygiene products. Obviously that is not only in COVID-19, an important element in our innovation portfolio and for our development guides. Just to give you an example, also the new bathroom series, which we introduced last year, the Geberit ONE bathroom series, basically it's also addressing not only, but also hygienic topics. Obviously, shower toilets fundamentally address hygienic topics. We will not stop in terms of development of shower toilets or new products for shower toilets, of course. Therefore, I think we have good opportunities in the long run to benefit from the more demand for hygienic solutions in public bathrooms, but I would also think in the private bathrooms during the COVID-19 crisis.
We did not have to adapt tactically or short-term our innovation timeline, because that was anyway one of the important areas for innovation even before COVID-19.
Okay. One can expect a stronger demand on these, especially from the commercial side.
Absolutely
the distance that you need, the space that you need in the bathroom.
Absolutely
buildings and shopping malls, they need to restructure their bathrooms.
We already see it. The growth, for example, we have an actuator plate for WC flushing, which is electronic. I don't have the figure exactly in mind, but it's a high double-digit growth rate of this product, which is basically only going to commercial bathrooms, public bathrooms.
Thank you.
You're welcome.
The next question is from [uncertain ], UBS. Your line is now open. Please go ahead, sir.
Good morning also from my side. Just a short question. Are there any potential defaults which you are maybe expecting or following, which might have an impact on your business in regard of suppliers, wholesalers, let's say a whole bunch of end markets and suppliers which you are dependent on?
We have not seen any defaults, neither on the supply side nor on customer side, and we also do not expect any defaults in the future.
Thanks, sir.
We have a follow-up question from Andre Kukhnin, Credit Suisse. Your line is now open again.
Good morning. Thank you very much for taking the follow-up. I just wanted to come back to the bathroom stores closure impact. Given what you said in Germany, about Germany with the backlog extending for plumbers, would it be right to think that this is not an issue for Germany, the closure of bathroom stores?
I don't understand the question.
In your outlook, you said that one of the concerning factors is this effect from bathroom stores being closed for a few weeks and depleting the backlog. Given that the German plumbers backlog is now rising up again in nearly three months, are we right to think that this bathroom stores closure impact is not going to be the case in Germany?
Might be, yes. I do not spend that much on thinking about this question, to be honest.
Which are the countries that we should worry about in terms of this impact from bathroom stores being closed for a few weeks?
There are no specific countries we are worrying. I think the most worrying, as we said, of course, before, is are there any material restrictions coming up again from this COVID-19 pandemic? That is worrying up to a certain extent, but looking at different views or developments per country, is not really helpful. It doesn't change our strategy, our operational decisions, therefore that is not really relevant for us.
Got it. Thank you. If I may, just last one. In this situation of being on the acquisition opportunities, are you looking potentially at more companies?
No, we also to that extent, we do not change our strategy. Our strategy is that we are growing organically. We always look at bolt-on acquisition possibilities. We have always a small list, but on this small list or let's say ideas, nothing changed due to COVID-19, which would now make an M&A transaction, a small one, more probable.
Got it. Thank you very much for your time.
You're welcome.
The next question is from Martin Flueckiger, Kepler Cheuvreux. Your line is now open again.
Yeah, thanks for taking my follow-up. Just going back to the raw material price quotes you gave a couple of minutes ago, Mr. Buhl. I'm a little bit confused looking at my notes from the last conference call. If I remember correctly, at that time back in July, you were saying that raw material prices had declined by 2.4% in Q1. That my understanding then with that was that this was a year-on-year development, Q1 2020 versus Q1 2019. Is that coincidence that you're talking about 2.4 again for Q2? Or is that a misunderstanding? Because at the time, you were also mentioning that raw material prices had been down by 3.3% in the five months, January through May. It looked like it was an acceleration of a decline in Q2, and now the numbers you are mentioning speak of a deceleration. What am I missing here?
Thanks.
It's a coincidence. These two figures are by coincidence the same. I repeat. In the first quarter 2020 compared to the first quarter 2019, raw material prices were down 2.4%. In the second quarter, raw material prices were down 5.1% versus Q2 2019. That adds up together to H1 - 3.5% versus H1 2019. By coincidence, in the second quarter, raw material prices were also sequentially 2.4% down versus Q1 2020.
Makes a lot of sense. Thank you very much.
You're welcome.
Sir, no further questions at this point. I hand back to the speakers for closing remarks.
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