Good morning. I am the event operator for this conference. Welcome to the Geberit conference call on the first quarter results 2020. Please note that for the duration of the presentation, all participants will be in a listen-only mode, and the conference is being recorded. After the presentation, there 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 and Investor Relations. Go ahead, sirs.
Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our conference call on our Q1 results. Geberit delivered, in a challenging environment, very good results in the first quarter. Let me start with a few key statements. Net sales grew in local currencies by 1.5%, despite the negative impact from the COVID-19 pandemic since March. [audio distortion] and all operating results on the EBITDA, net income, and EPS level, in local currencies, increased proportionally to net sales. However, the strong Swiss Franc led to a negative translation effect and a decrease of our reported figures on all levels of our P&L. Let me now start with a brief summary of our sales development in Q1, which we already communicated on April 6th. Net sales in Swiss Franc decreased by 3.9% to CHF 798 million due to a substantial negative currency effect of -5.4%.
In local currencies, group net sales increased by 1.5%. The COVID-19 crisis had a negative impact on sales in two dimensions. First, a temporary production interruption in our plants in China and for the shower toilet model Mera. Second, a severe sales decline since the second half of March in a selected number of countries where the COVID-19 imposed restrictions led to a de facto shutdown of construction sites. I will now comment on the operating and financial results for the first quarter. EBITDA slightly decreased by 0.7% to CHF 260 million due to negative currency development. In local currencies, EBITDA increased and the EBITDA margin reached 32.6%, an increase of 100 basis points. This margin increase was driven by a positive one-time effect on raw material costs of almost 1 percentage point in the first quarter, which we will not see during the rest of the year.
Excluding this one-time effect, the operating margin would have been only slightly above previous year's level. Positive drivers for the margin were lower raw material prices of -2.4%, increased sales prices, various efficiency projects, and a high-cost discipline. These positive effects were almost compensated by substantial tariff-related increases in personnel expenses and dedicated investments in strategic initiatives for digitalization and the brand harmonization. The negative currency development had only a minor impact on the EBITDA margin due to our continuous efforts to maintain a natural currency hedge. EBIT decreased in Swiss Franc by -1.2% to CHF 224 million, and the EBIT margin reached 28%, 60 basis points above Q1 2019. This slightly lower margin improvement on the EBIT versus EBITDA level was driven by higher depreciation costs due to investments last year.
Net income decreased by 4.4% disproportionally to CHF 184 million due to negative currency effects and a slightly higher tax rate. Earnings per share decreased by 4.3% to CHF 5.60, also driven by the negative currency translation effect. In local currencies, EPS grew proportionally to net sales. Let me now comment on the current status of the COVID-19 impact on Geberit and our business. I will start with the demand side. Demand in almost all our countries is negatively affected by COVID-19 imposed restrictions on our end markets. In a selected number of countries, demand declined severely due to a de facto shutdown of construction sites, either by local authorities or due to voluntarily discontinued operations of other market participants.
These countries, which are affected most, include, per end of April, Italy, France, U.K., Spain, and outside Europe, India and South Africa, two countries where activities came to a complete standstill. These shutdown countries represent around 20% of our sales. Last year, [audio distortion] again to reopen and by April, demand started to recover. The remaining countries also recorded a substantial decline in demand, although less pronounced, driven by a lower activity level of the building construction industry imposed by COVID-19 restrictions. The only country where demand is on normal level again is China. Overall, sales and order entry at group level are down by a lower double-digit percentage in April. However, there are some positive signals. First, customer showrooms for sanitary products are starting to reopen across various countries. Second, several countries with a more or less complete shutdown of construction sites announced to reopen construction activities during the coming two weeks.
Let me continue with the status of our supply chain. Our supply chain is, despite the COVID-19 restrictions, intact, and access to all important key materials and components. At the moment, two smaller sites are still closed due to governmental decrees, our ceramics plant in Italy and the plant in India. However, these two plants are not material in terms of volume, and we have enough products on stock. Let me now comment on the financial situation at Geberit. Geberit is financially very strong and very healthy. We have a very strong balance sheet. For end of April, we hold a cash position of CHF 350 million and an unused revolving credit facility of CHF 350 million. Furthermore, we have no covenants on outstanding debt. We completed our share buyback program as planned.
In total, we bought back 1,026,000 shares since June 2017 for a total consideration of CHF 440 million. To maintain our strong balance sheet and to strengthen our interim liquidity, we issued a standard Swiss Franc bond in the amount of CHF 300 million with a maturity of two and a half years and a coupon of 0.35%. Let me now comment on our priorities and how we want to navigate through this unprecedented economic crisis. First, we will not change our strategic agenda or operational priorities. We will continue to think long-term, to invest, and to execute our strategic and operational initiatives. Second, we do not see a need for restructuring. We are financially very strong and consciously decided to invest some of our margin into the business to emerge stronger in times of market disruptions and turbulence.
Third, we adapt our daily activities and projects to the current market realities. It means that we stop or delay certain activities or projects which are not feasible, necessary, or meaningful in the current environment. However, we will not make any compromise on our fundamentals or take measures which would harm our position or future growth potential. For example, by reducing our R&D efforts and costs. We refrain, in the current situation, from providing an outlook for the building construction industry and raw material markets, since the implications of the COVID-19 crisis are fast-moving and impossible to predict. Let me close my introduction with a short summary. Geberit achieved very good results in the first quarter. On ly minor impacted by the COVID-19 crisis. Geberit is immune against the economic crisis emerging from the COVID-19 pandemic.
We see a significant impact on our H2 and 2020 results, although the clarity is still unclear. However, Geberit is a highly efficient organization with highly automated plants and logistics producing in Europe for Europe, with a strong balance sheet and industry-leading marketing, which will allow us not only to navigate through this period of disruption and turbulence, but also to emerge stronger from this unprecedented economic 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 one on your telephone keypad now to enter the queue. Once you are announced, you can ask your question. If you think your question is answered before pressing the key, please dial zero two to cancel your question. If you are using speaker equipment today, please mute the handset before making your selection. One moment please for the first question. The first question received is from Andre Kukhnin of Credit Suisse. Your line is now open. Please go ahead.
Good morning and t hank you very much for taking my questions. I firstly wanted to follow up and just to calibrate a little bit to your comment on the low double-digit run rate in April. Can we interpret that as 10%-20% range? Alsl, do we think about the mathematical low double digits, like spanning 10%-19%?
The lower double-digit percentage, so mathematically it's between 10% and 15%.
Okay. If I can try a different way, some of your lateral peers talked about somewhere around 25% and 35%. Would you be able to help us placing your run rate in that range?
No, I just repeat what I said just before, lower double-digit percentage , between 10% and 15%.
All right. Yes, of course. In Austria, because I think that is the only country so far apart from China, where we have had the shutdown and restart, how far back to normal are we now?
As I said before, back to normal, we are only in China. In all other countries, we are not back to normal. Almost all countries are affected by this crisis. In Austria, the dynamic it has is severe since mid of April since construction sites started to reopen, but also in the second half of April, we have seen a substantially lower demand still in Austria. Not as severe as the first half of April or the second half of March.
Thank you. Then in countries that did not shut down, Germany and Sweden, again, just trying to really calibrate the model. We've seen from read-a crosses of companies reporting stable development, some talk about still down 10%, 20%. Where is the demand for sanitary products in those countries from your perspective, as a run rate kind of annual market for them?
I do not want to quantify, again, also not for these countries, but it is a substantial decline also in these countries across the board, where construction sites are officially open but impacted by restrictions from COVID-19.
Right. Substantial starts at 10% for you? Is that [audio distortion]?
No, the reason why we refrain from giving complete figures is very simple. The world is very volatile. It's a high uncertainty. It's very fast-moving. I think, and we think it's not worth to discuss individual state figures on a monthly level, especially in our industry, where we have a very low visibility. Keep in mind, our visibility is low, only two weeks. That is the reason why we want to refrain from discussing too many detailed figures, even not on country level for a single month.
I understand. Th e answer is not to be taken as indication either way of the future. I t's just to understand the current situation and to have a base to model from. I appreciate being given as much disclosure as you decided to give. Last final question was on raw material to pick up on your comment that Q1 benefit is something you don't expect in the rest of the year. Do you expect raw materials in Q2 to be up sequentially versus Q1, and could you give a bit more detail on which pieces have gone up?
As I said during my introduction, due to this highly volatile environment, we refrain from any outlook, also not from raw material markets. But what we have seen in the first quarter, the raw material prices have been down by 2.4% compared to the first quarter 2019. No outlook for Q2. Too uncertain, too less visibility.
Got it. Thank you, Christian. I appreciate it.
The next question received is from Fabian Haecki of UBS. Your line is now open. Please go ahead.
Yes, good morning, and thank you very much for taking the questions. The first one is, what do you see, how do wholesalers react to the crisis in Europe? Have they started to reduce inventories and cash management, or are they rather doing the opposite and actually restocking for recovery? Is there any substantial kind of impact you have seen so far?
What we have seen during March, more or less, before the shutdown of the countries, we have seen that wholesalers started to build up their inventory. At the moment, it is quite difficult to have a detailed view how it is today, but I would assume that a further piling up of stocks would not be possible because they were at a very high level already end of March. If at all, rather reducing, but not increasing stocks during April.
Okay. So, they have increased inventories in March, but in the second half of March, you had a sharp drop in revenues, right?
Driven by demand, of course, yes.
Yeah. At least by the build-up of inventories or things that happened rather in the first half of March.
Sorry, repeat again.
So, you had a sharp decline in the second half of March despite the build-up of inventories from wholesalers, right? Due to the demand and outweighed the build-up of inventories.
Yes. As a consequence of the first half of March, which was rather strong, which we think prepped the build-up of stock levels of wholesalers, sharp decline in the second half of March.
Okay, thank you. Maybe a word on short-time work. You said last time you introduced them in France and the U.K. Did you expand it into other countries like Germany or Switzerland?
No, we didn't. From a group perspective, we have not introduced short-time work on a material group level, only in the two countries, U.K. and France. We reduced activity level by about 50% in selected functions only. No changes and no material short-time work on group level.
Thank you. And a last one on the prices. I think in your presentation, you said before you increase your sales price normally by 1% in April, but now, with the low oil prices already, extra discussion you see with wholesalers on that front?
We implemented our price increases as of April as planned.
Price discussions or raw material discussions, raw material did not have any effect on your price discussions?
I don't want to go into detail of our pricing discussion with our customers. We implemented our price increases as planned as of April.
Sure. Understood. Okay. Thank you very much. These are all my questions.
The next question received is from Denise Molina of Morningstar. Your line is now open, m adam. Please go ahead.
Thank you so much for taking my questions. I have two questions, please. Really, on the variable cost, so, i f you think about the cash payments to customers, vendors, and the difference that you used to report, I think that was somewhere around 11%- 12% of gross sales. Just wondering if that's all variable now, because it helped you during the GFC in terms of marking the margin. Then, the other variable cost, I guess, you talked about before is the raw material. I'm assuming that those two buckets are variable. Then, on the fixed side, if you look at the personnel, it looks like you've got about 6,000 or so manufacturers, j ust wondering why you haven't done anything in terms of reducing work hours or reducing your exposure to that, because I imagine a lot of those employees are idle at the moment.
I'm not 100% sure if I understood your questions correctly. I think you were talking about sales deductions and if they are fixed or variable. Sales deductions basically are variable costs. Raw material costs are predominantly variable costs, and personnel costs are predominant fixed costs.
Yeah. Thanks for confirming the variable portion of those two buckets, the first two buckets. In terms of the employees that you have in production, which I think you have around 15% of your employees for production, like 26% for sales and marketing. I'm just wondering why you haven't reduced more of that spend in the short term, assuming that you're not producing as much as you did before, and you've got most of your employee base on the production side. Are you not reducing their work hours and doing anything proactively to reduce your fixed cost structure on that side?
That's right. I try to give you a more general high- level answer. I think the question is how can we adapt our organization, especially our operations, to the fluctuation in terms of demand and declining demand. I think, so far, we have managed quite well to adapt our operations, production, plans, logistics to the fluctuations in demand by temporary workers, which we have, but also by flexibility part-time and increased flexibility of our permanent staff.
Okay. Just one last follow-up on that. In terms of the number of employees that you have relative to the GFC, you have almost doubled the number of employees. Would you say that you're not taking as many measures as you did then because you think of this as being more short-term or again, cannot determine?
As I said in my introduction, we decided consciously not to restructure our organization. Of course, in terms of short-term measures, we have in place a hiring freeze in this time of uncertainty, but no restructuring plans.
Okay, great. Thank you very much.
The next question received is from Martin Hüsler of Zürcher Kantonalbank. Your line is now open, sir. Please go ahead.
Yes, good morning. I have a couple of questions. First of all, maybe coming back to the personnel costs. In local currencies, it seems like they increased quite substantially by about 6% or so. I was just wondering what was the main reason for that, and if you could remind us how digitization costs and also rebranding costs impacted in the first quarter personnel and other operating costs.
May I ask for all this to answer the first part of the question? Your observation is correct with regards to the increase in local currency. Remember, in Q1, we did not yet take any measures like hiring freeze, et cetera, related to the COVID-19 pandemic. In that number, we have a build-up related to our initiatives. You mentioned digitization. That started as planned. We have substantial tariff increases, again, 2.5% this year, and o ur employee participation programs, which always are charged in Q1, relate always to the year before. That was a good year, so the cost was a little bit higher. Those were the main reasons why, in local currency, personnel cost was up. The second part of your question regarding the impact of specific initiatives, for example, digitization, that has an impact on personnel costs and other operating expenses.
About 50/50?
Well, I don't want to go into these details.
Okay. Maybe a second one then, and that's of course a high-level question, but, you know, from your experience, coming out of crisis in China, what's a good assumption for actually Europe, coming out of crisis in the second half? I don't expect you to give any concrete number, but is it reasonable to expect that in the second half, we will have kind of a normal situation again if you compare it to China?
I rephrase your question. I don't know what happens in the second half of the year, but I think the fundamental part of your question is, do we expect any catch-up effects if the lockdowns are over? In China, we have now this first observation. The production sites are running normal again, and we have seen that demand came back to normal previous corona level, but we have not seen a significant catch-up. That is not what we also expect in Europe on the short term, significant catch-up effects just driven by the limitation of installation capacity, because people have to install our products and you can't suddenly increase your capacity of installation or double your capacity of installation. Therefore, if there is a catch-up effect, you would expect that it's distributed over a longer period of time and not in a short period of time.
Okay. Well understood. Then just the very last one, the one-off impact in the raw material costs, 100 basis points impact. What was this exactly?
That was mainly driven by inventory revaluations due to process optimizations. We had some projects, we optimized processes and had an impact on our inventory valuation, a positive one, and that led to this one-time effect of almost 1 percentage point in the first quarter on raw material cost, which we will not see in the remaining year.
Okay. Thank you.
The next question received is from Arnaud Lehmann of Bank of America. Your line is now open, sir. Please go ahead.
Thank you very much, and good morning, to you. I guess, going to something more medium long term, we would expect existing buildings, whether it's in the housing or the commercial sector, to be completed, but h ave you seen any sign that we could see new projects or future projects being delayed or canceled with potentially a bit of a medium-term effect into the second half or into 2021? That's my first question. My second question is on your product mix. Considering the economic crisis, would you expect, over time, maybe, sort of an effect with more low-end products being more popular relative to your more expensive range? Thank you.
We have seen, to your first question, an impact on projects which are delayed currently due to the restrictions. I can't comment if these projects are more mid-term oriented or short-term oriented. I do not know, but in general, we see a delay in projects currently. I don't know what the impact will be next year. Second question regarding product mix. What we could expect in terms of product mix, the impact on our product mix is that the showroom closures which we have seen in the middle of March will have a stronger impact on Bathroom Systems compared to Piping and Installation and Flushing Systems. If there is an impact in terms of pricing levels, I think that it is too early to have an opinion or we do not have any signals so far. The biggest product mix impact we expect is more on the product areas.
What will be on the pricing levels, we will see.
That's very helpful. Thank you very much.
You're welcome.
The next one is from Martin Flueckiger of Kepler Cheuvreux. Your line is now open. Please go ahead.
Yeah, good morning, gentlemen. Thanks for taking the questions. I've got two, actually. First one, looking at your EBITDA margin bridge, I see that the impact from the so-called other costs block was quite low, only like 50 basis points minus, much lower than what I had anticipated. I'm just wondering, firstly, what was the impact from cost containment measures on that cost block, what you call other cost effects? If you could provide a range for this cost block for 2020. I realize it's difficult, but I guess a range would probably be rather appropriate going forward. My second question is just some clarification questions. Sorry, that run rate, that double-digit run rate you were talking about in April, did I understand correctly that this is for organic growth? And also, the inventories question that you answered previously, the acoustics were very good.
Just double-checking, d o you say that you expect inventories to be worked down again going forward? That would be my second question. My third question, actually, j ust wondering, which countries are you seeing starting to reopen showrooms? Also, maybe, on your initial thoughts regarding end customer traffic going back into those showrooms and in this respect, not only talking about showrooms, but also construction sites, c ould you just repeat very quickly in which countries you are seeing a reopening of construction sites? Thank you so much.
The first question on the other cost impact in our EBITDA margin bridge, which show in our presentation, t he main impact there is that this one-time effect from raw material costs we talked about before, it has a positive impact on other costs. That is maybe the main reason why you have a more negative margin. That is the main reason, because this one-time effect does affect the other cost effect there. Second, regarding inventory, the only thing I said is that we believe that the inventory levels of wholesalers were at a higher end versus end of March, starting due to pileup of inventories during the first half of March. We do not know what happened during April, but if at all, then the inventory levels would have been lower during April and not higher because they were more or less at a max level end of March.
Third question, reopening of showrooms. Actually, these countries which are in general open, like you can read in the newspapers, that are also these countries which are reopening showrooms. For example, in Switzerland, showrooms will start to reopen again. Also in Germany, showrooms started to reopen. Of course, in Italy, showrooms are still closed. Also in France, they are closed, but they are announced to reopen during the next two weeks. So, it's pretty much the countries with the completely closed construction sites, they are also more restricted on showrooms. The other open countries, how we would call them, there you see the most openings of the showrooms at the moment.
Okay, thanks. Just to clarify, in case you forgot the organic growth clarification question, that was on organic growth, that double-digit run rate, right?
Yes. Organic, you mean local currency, local currency organic. Yes. Not taking into account any currency effects.
Perfect. Thank you so much.
The next one is from [Charlie Ferrenbach] of [RPG]. Your line is now open. Please go ahead.
Good morning, gentlemen. Is the assumption correct that the biggest influence on your EBITDA margin, the biggest positive influence is coming from the raw material prices? Thank you.
It's a combination of raw material prices and also base price increases.
Thank you.
We go on with [Monique Veron] of Societe Generale. Your line is now open. Please go ahead.
Yes. Hi, good morning. I have three questions. The first one is on your fixed cost, variable cost. I know you have said like you are not doing any big restructuring, but just wanted to see, I mean, if these fixed costs somehow can be converted into some sort of semi-variable cost. I mean, obviously, 2020 will be down. Maybe 2021, you might see volume decline. Obviously, you have to make some adjustments. Just want to understand if that can be like semi-variable sort of things. The second question is on the depreciation. I know you talked about higher depreciation because of increased investments, but I was wondering, I mean, because of the CHF, the case of appreciation and euro depreciation, you should see some impact of depreciation going down because of the Forex. We have not seen in Q1, but maybe this is just a timing issue.
When you remake your balance sheet, probably you see this impact, depreciation coming down later. This is the second question, and the third is you have not mentioned anything about the new buyback program that you have initiated. Is it still on or that is off now?
I'll start with the second question. The increased depreciation level will remain and will not go back because we are doing a higher investment last year. That will be the level for the rest of the year, more or less. Your third question about the new share buyback program. We are now preparing the new share buyback program, and depending on the further development, we will start in the Q2 or Q3. The first question, we didn't really understand. Can you try to phrase it again?
Yeah. Basically, you said you are not doing any big restructuring, I mean, despite knowing that 2020 will be a bad year in terms of volume decline and things like that. There are some fixed costs in your business, like personnel, and there are maybe some other costs that are fixed. I just wanted to understand, even if you're not doing big restructuring, can it be turned into a semi-variable sort of thing? I mean, can be some measure where it doesn't remain fully fixed? I mean, it is slightly semi-variable.
I'm sorry, I still didn't understand. I recommend that we take that offline, this question, if that's okay for you, afterwards.
Okay, sure. No problem.
Okay.
The next question is from Christian Arnold of MainFirst . Your line is now open. Please go ahead.
Good morning, gentlemen. I also have a question on the EBITDA margin growth you show here, on the volume and product mix effect, which was basically flat plus 0.1%. Looking at the product line performance, I would have assumed that we would see a positive product mix effect as Installation Systems and the Piping Systems rather than the Bathroom Systems for the decline. Could you comment on that?
We have seen a positive impact from product mix. That is right.
That means that you actually had a negative volume effect?
No, you might get the price effect in the first quarter was quite strong. We have still the price effect from last year's price increase, which was more over 12.5%, not around 1%. If you take that into your consideration, then it works out.
Okay. Then I try to get a qualitative answer. Maybe I'm not successful, but I try. Let's assume that we have in the second quarter a decline in volume of 10%-20%. This volume of product mix effect, assuming we have the same product mix, what would we see here? Is it -100 to -200 basis points? Is it more, is it less?
Of course, I will not go into the details of numbers. But of course, if we have a negative volume, we will have also a negative volume effect, of course. Since we are not restructuring our operations, we keep more or less the same setup, this effect is more or less symmetrical. Meaning, downwards the same as upwards.
Thank you.
Welcome.
The next question is of Remo Rosenau of Helvetische Bank . Your line is now open. Please go ahead.
Yes, good morning. I've got a little bit of a similar question as Christian, a more general view about the operating leverage. I mean, if, just for sake of the argument, you would assume that in a given year, your organic growth would be something like -15%, organic, not Swiss Franc, i n a full year, not in a quarter. Taking into account that then you certainly would have some contingency plan in the cupboard that you would then pull out, w hat would the effect on your EBITDA margin be? You know, 15% decline in a full year of your top line organically, what would then the effect be on the margin EBITDA?
Again, I repeat the same answer as before. Since we are not fundamentally changing our setup, not fundamentally restructuring, the operating leverage of the company is the same in a positive world as in a negative world. We have taken some measures to adapt the organization. As I said before, we delayed some projects, but nothing fundamental. The operating leverage of the company remains more or less the same as it has been pre-crisis. That applies for positive development and negative development. If you look at the past of Geberit, you have a good indication about the operating leverage of our operations.
Yes. But what I'm saying is, obviously, you're kind of expecting a recovery, not in two years. If we say in a full year, it would really go down 50% organically, you would, most certainly, change something on the structure, or am I totally wrong here?
No, that's exactly. I have to repeat that what I said during my introduction. We are not fundamentally restructuring. We are, we took the conscious decision to invest margin in that period of crisis.
Okay.
We accept lower margin levels due to this stable operations, more or less, because we are not fundamentally changing something. We want to invest during this period, for example, R&D budget, and that has, of course, an impact on our margins.
Okay. Do I understand you correctly that if the second quarter, which will certainly be quite a bad quarter, obviously, would you keep the path in Q3 and Q4, so there would be no recovery through the rest of the year? It would still continue like that.
At the moment, if the situation is developing what we see currently, we do not have any plans for restructuring. I also do not believe that we will change this decision after the second quarter.
Okay. Thank you.
The next one is a follow-up from Andre Kukhnin of Credit Suisse. Your line is now open again, please go ahead.
Thank you very much for taking my follow-up. I just wanted to check on the raw materials one-off that you flagged in Q1. You quantified it at 100 basis points. That's 100 basis points of sales. Is that right?
Yes, correct. It's almost 1%. In terms of sales, yes. Correct.
Got it. Thank you very much. On the cost measures that you have taken, is there any way to kind of scope them out? I think you had a lot of questions, so I'm trying to kind of address it in many ways. But I guess if we think about your labor bill or number of employees, is there any way you can help us quantifying that kind of buffer that you're creating with these cost measures?
No, we do not quantify these cost measures. As I said before, it is based on projects that are not feasible at the moment, hiring freeze. It has a certain impact, of course, but we are not quantifying.
All right. In terms of taking down working hours, that's just the countries like U.K. and France where you're using short time schemes, but not elsewhere? Are you taking 10,000 working hours elsewhere down?
No, that's what I said before. Short time work, we only implemented, limitedly implemented in France and the U.K. From a group perspective, it's not material.
Right. The cost measures you're taking, are you letting go temps or something like that? Or are you negotiating short working weeks or something like that with workers outside of the government schemes?
Yes, as I said in one of the previous questions, we are able to adapt our operations, mainly plants and logistics, by both fluctuation in demand by using temp workers, but also by some flexibility for permanent workers in working hours, but also vacation planning and so on. Of course, we use as much as possible flexibility in these areas.
Thank you. Finally, what is the percentage of plants that you have kind of running normally, so say as of January 2020?
Maybe 10%. I don't have an exact figure, a compromising exact figure.
All right. Thank you very much. Goodbye.
Thank you.
The next one is of Alessandro Foletti, your line is now open. Please, go ahead.
Yes. Good morning, gentlemen. Thank you for taking the questions. I have three, hopefully, quick questions. Maybe, can you provide a CapEx guidance for the year? I saw the company is reducing CapEx from previous levels. Just would like to have an idea, how much down are you going in Swiss Franc? And then, could you repeat, please, the answer on the previous question regarding the cost of rebranding and digitalization? Sorry about that. My third question, maybe a little bit more general. Do you already have an idea on how the customer behavior related to social distancing basis, basically when it comes to accessing your showrooms, i.e., do you expect them to, I don't know, go back as before? Go back, or do you have to implement measures? What kind of activity level can we sort of try to estimate in the showrooms going forward?
Our CapEx guidance for this year is around CHF 150 million, slightly lower than what we previously guided for. Previously, we guided CHF 180 million. That is driven by the currency effect and by, as I said before, some projects which we are not able to completely execute this year. Again, the good sign, or we should sign that we also implement the restructuring. We keep our CapEx budget more or less on the planned level, around CHF 150 million this year. Our investment in the initiatives of digitalization and brand harmonization this year are unchanged. This means we invest about CHF 15 million in the additional digitalization efforts and CHF 10 million in the brand harmonization this year. Third question about customer behavior and social distancing.
Social distancing is exactly one of the reasons why we see in all of the countries a decline in our demand, because social distancing has an impact not only in showrooms, but also on construction sites, which leads to a delay. There is a negative impact from social distancing across the countries on our business.
All right. Thank you very much. I imagine, for the time being, you can't expect this behavior to change quickly.
You know, I have the same knowledge as you. I have the same knowledge as you, but it's all industry specific. If you know the answer, I'm happy to hear it.
All right. I'm going to send it to you as soon as I have it. Thank you very much.
You're welcome.
The last question for today is from Marta Bruska of Berenberg. Your line is now open, madam. Please go ahead.
Hello, good morning. Thank you for taking my question. I just wanted to clarify, as most of the questions were already answered. From the CHF 25 million for rebranding and digitalization costs, how much is booked in Q1? Thank you.
I would say it's around, I don't know the exact figure, but there is not a lot of seasonality in these figures in general.
CHF 2 million, CHF 3 million, or CHF 6.5 million?
That's your assumption. Not much seasonality in these figures across the year.
Okay, thank you.
You're welcome.
As there are no further questions for today, I ask our speakers for closing remarks.
It seems there are no further questions. Thank you for your participation. We wish you all a great and healthy day. Goodbye.
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