Good morning. I am the entity operator for this conference. Welcome to the Geberit conference call on the third quarter results 2019. Please note that for the duration of the presentation, all participants will be enlisted only, 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 may also 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. Please go ahead, sir.
Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our nine-month result conference call. I will start with the third quarter key figures and then comment on nine months development. Geberit achieved very good results in the third quarter, with a strong top-line growth and an excellent profitability, supported by weaker comparison basis from the third quarter last year and one additional working day this year. Sales increased by 1.8% to CHF 784 billion, negatively affected by the weaker euro. In local currency, sales growth reached 5.5%. We achieved positive sales growth in local currency in all quarters. Double-digit growth rates were recorded in Benelux with 18.7%, Middle East Africa with 17.2%, Far East Pacific with 16.2%, and Austria with 10%.
Single-digit growth rates were realized in Switzerland with 7.4%, Eastern Europe with 5.1%, the Nordic region with 4%, Germany with 2.2%, France as well with 2.2%, U.K., Ireland with 2.1%, Italy 1.8%, Spanish Peninsula with 1.3%, and North America with 0.2%. Turning now to the product areas. Installation and flushing systems sales increased by 8.7% in local currencies, Piping Systems by 4.2%, and Bathroom Systems by 3.4% in the third quarter. Let me now comment on the financial results of the third quarter. Group EBITDA increased by 8.4% to CHF 231 million. EBITDA margin increased by 190 basis points to 30.7%. This accelerated margin improvement in the third quarter compared to the first half of the year was mainly driven by three factors.
First, the operating leverage from stronger volume growth in Q3, second, lower raw material prices this year, Thirdly, easier comps from raw material prices, which peaked in Q3 last year. Net income increased in Q3 by 11.6% to CHF 171 million compared to the adjusted previous period level. Earnings per share reached CHF 4.64, an increase of 12.9% compared to the adjusted previous number. Let me now comment on our nine-month performance. Sales in local currencies grew by 3.9% to CHF 2.4 billion. This sales growth in local currency was almost completely compensated by a negative currency effect of CHF 81 million, or minus 3.4% versus previous year. All markets delivered in the first nine months positive growth rates in local currency with the exception of Italy. In Germany, sales were up by 4% with strong growth in installation and flushing systems and piping systems.
In Eastern Europe, sales were up 1.4%, negatively impacted by a sales decrease in Russia and Turkey. In the North region, sales increased by 2.3% with strong growth in installation and flushing systems. In Switzerland, sales grew by 3.8%. Sales in Benelux grew by 9% with similar growth rates in all three product areas. In Italy, sales declined by 0.4% in a weaker market environment and due to strong comparison. Sales in France increased by 1.3% with strong growth in installation and flushing systems, but a sales decline in Bathroom Systems due to the exit of a low-margin business in France. In Austria, sales grew by 6.9% with growth in all product areas. Sales in the U.K. increased by 7.6%, driven by strong sales in Piping Systems. Sales on the Iberian Peninsula went up by 5% with strong growth in Portugal. In the Americas, sales were at previous year's level.
In Far East Pacific, sales were up by 13.1% with strong growth in China. Sales in Middle East and Africa region increased by 2% with strong growth in Southern Africa and a sales decline in the Gulf region. Let me now comment on the sales development per product area in the first nine months, again in local currencies. Installation and flushing systems increased by 5.8%, with strong growth behind the wall flushing systems. Piping Systems grew by 5.9% with strong growth in both product lines, supply piping and drainage piping. Not consistent sales were on previous year's level, driven by a weak market environment in the Nordics, lower sales from Keramag due to the brand phase-down, the exit of low-margin ceramics business in France, and the strong comparison from strong sales for shower toilet in the first half of 2019.
Now let me update you on the 9-month financial results. Geberit EBITDA reached CHF 732 million, corresponding to an increase of 4.8%. The EBITDA margin reached 30.8%, an increase of 130 basis points versus previous year. 50 basis points of this improvement were driven by the new accounting standard, IFRS 16. The remaining operational margin improvement was achieved despite the highest salary increases in 20 years and extraordinary marketing expenses for the brand harmonization. The four main drivers for the margin improvement were, firstly, lower raw material prices. Secondly, a positive product mix due to upselling of our product portfolio. Thirdly, increased base prices. Fourthly, efficiency projects and measures combined with strong cost control at group entity. The currency fluctuations had no influence on the operating margin due to our continued efforts to maintain a strong natural currency hedge across the entire group.
The operating profit increased in the first nine months by 3.2% compared to the adjusted previous year's level, negatively affected by the currency translation. The EBIT margin reached 36.3%, 70 basis points off the comparable nine-month 2018 level. Net income increased over proportionally by 4.1% compared to the adjusted previous year's level, mainly due to positive one-time effects on the tax rate in Q3. Earnings per share increased to CHF 46.88 or 5.5% versus the adjusted previous year's level, positively affected by the share buyback program. Free cash flow increased significantly by 19.7%, mainly driven by the strong operating performance and the positive development of the net working capital. The share buyback program has been continued according to plan. For as of September, 765,000 shares have been bought back for a total consideration of CHF 323 million. Let me now comment on our market view for 2019.
The picture has not significantly changed since our publication of H1 results in August this year. The uncertainty and volatility of the economy and the building industry remain, and selected markets are slowing down, driven by a weaker U.S. residential sector. In Europe, we see overall a favorable but mixed construction market environment, although with a declining number of residential building permits in H1 2019. We remain confident about the construction demand in Germany, although the limited qualified installation capacity might remain a bottleneck. The building industry in Switzerland remains at high level. In the Nordic region, the market is at best stagnating, driven by a positive environment in Denmark, a slight growth in Norway, a stagnation in Finland, and decline in Sweden. In Italy and France, the markets are stagnating, driven by a declining new build segment compensated by a more robust renovation segment.
We see overall a declining market environment in the U.K., driven by the non-residential sector due to the Brexit uncertainty. In Austria, the construction market is positive with a slight growth. We are also positive for Benelux, although the strong construction growth in the Netherlands over the last years led to shortages of qualified installer capacity. The construction markets in Eastern Europe remain mixed with weak environment in countries like Russia or Turkey. Finally, the building construction sector on the Iberian Peninsula is further recovering. In North America, the institutional construction, the most important market segment for Geberit, is weaker than expected at the beginning of the year. In Asia Pacific, we see a mixed picture across the region with a moderate increase of the residential construction market in China and a declining environment in Australia.
The building and construction industry in India is affected by the challenging general economic environment. Let me finalize our market review 2019 with the Middle East and Africa region. The market environment in the Gulf region is weak, with the building construction market in South Africa steady. The markets in Northern Africa and the Near East region remain mixed. Now a few words about the raw material price environment. The raw material markets remain uncertain and volatile due to the increased uncertainties in the global economy. After slightly decreasing raw material prices in the third quarter, we expect for Q4 a mixed picture with overall again slightly increasing raw material prices, mainly driven by stainless steel prices. Finally, let me briefly update you on the overall outlook 2019.
We expect towards the end of the year, somewhat weaker sales for ceramics due to the brand phase-down of further brands as of 2020. Q4 will also be negatively impacted by one working day less compared to Q4 2018. The sales growth in local currency for the full year should be in the range of 3%-4%. The EBITDA margin for the full year is expected to be around 29%. The full-year tax rate should reach around 13%, and CapEx is expected to be in the range of CHF 170 million-CHF 180 million. This is the end of our introduction. We are now ready to answer your questions.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial 01 on your telephone to join now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has answered before it's your turn to speak, you can dial 02 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 Fabian Haecki , UBS. Your line is now open. Please go ahead.
Yes. Thank you for taking my question. My first question is on the EBIT margin guidance of 29%. If I calculate correctly, that would imply 23% EBIT margin in Q4, down 80 basis points year-over-year, despite the 50 basis points benefit from IFRS 16. Isn't this a bit too conservative? As of at Q2 results, you already said Q3 raw materials will be mixed. Now it's also similar wording. It will be mixed, slightly higher raw materials, but it seems a bit overly conservative. Could you elaborate a bit on your Q4 EBIT or full-year guidance? Thank you.
First of all, keep in mind that we have a seasonal volatility for the EBIT margin. We have substantially lower margin levels in Q4. The implied EBIT margin guidance for Q4 is not substantially different compared to previous years. There are three specific effects this year for Q4. First of all, we expect a slightly lower sales growth, also driven by one working day less. That has an impact on the operating leverage. We expect to see the margin improvement from operating leverage. Secondly, we are expecting overall higher raw material prices, particularly within mixed, but all in all, we expect a higher price level in Q4 compared to Q3. The third reason, we have the full impact of the extraordinary marketing cost for the brand harmonization, but also the full impact of the increased carriage increase in Q4.
That is the reason why we have a full year guidance of around 29% for EBIT margin.
Okay. Thank you. Another question on the Keramag phase out. Have your wholesalers, have they kind of reduced inventories upon this event, or did you see a relatively smooth Q3 here on, or what had you expected to Q4, on this phase out?
We have observed that wholesalers reduced their inventory levels already in Q2, driven by the phase out of the Keramag brand, and we do not expect that this reduction will be recovered in Q4. Basically what the wholesalers did, they used the brand harmonization to get rid of slow-moving inventory articles. That's the reason why we do not expect a rebound effect in Q4.
Okay. Thank you. The last one on APAC, which was up 16%. Of course, there was also a good base effect, but at the same time you were saying that the market in APAC is quite mixed. What was driving your growth specifically in that region, also in the sense of China, India, other Asian markets?
It is basically driven by China growth, by India, to a lower extent by Australia. Of course, the market environment is still in Australia, quite challenging. The two big drivers for growth are China and India.
Okay. Do you expect it to be sustainable into Q4?
It's very difficult in these markets to make outlooks on a quarterly basis. As you know, we have a lot of project business in these markets where sales levels also increase. Therefore, quarterly outlooks are very difficult in these emerging markets.
Okay. Thank you very much.
You're welcome.
The next question is from Ms. Jing, Credit Suisse. Your line is now open. Please go ahead.
Hi, good morning. Thank you for taking the question. I've got a few if I may, and we can perhaps go one by one. The first question is on Germany. I appreciate that we might be a bit semantic here, but the wording on the market outlook seems to have been tweaked slightly. Principally it was stated as, "Is likely to remain limited due to the capacity constraints," and now it's reworded to, "Remains limited." I wonder if this change of wording is just because we are now towards the end of 2019, so we are seeing happening and have a bit more certainty on the capacity constraint limiting the amount there, or it's just a change of environment there as well?
No, there's nothing changed on our market view in Germany, and also in the wording, there's nothing changed. We have still the same expectation for Germany, strong demand, but impacted basically by the bottleneck of installers. Nothing has changed there.
Great. Thank you. The second one is on raw materials. I wonder if you could give maybe a sense on the 2020 development based on the current rates.
Can you repeat the question? Sorry.
Yeah. On raw materials, you've guided for Q4 to be higher year-on-year, and wonder if we could have an indication for 2020 as well, just based on current rates.
I understand. No, we do not give an outlook on 2020 for the raw materials. The simple reason that we don't know, it's far too uncertain to have an outlook for the raw material prices. That is the reason why we are only giving you a guidance for Q4 and not for 2020. There's too much principle.
Okay. Understood. The third one is on marketing spend. You mentioned previously that, in Q4, we are going to see the full impact of some marketing spend kicking in. I wonder if you give some color on sequentially how marketing spend is going to develop in Q4 versus in Q3?
That statement refers to our extraordinary marketing expense for the brand harmonization this year for Keramag, a phase out. In total, we spent this year CHF 10 million for brand harmonization. We just started as of Q2. We didn't have a full impact in the first nine months. In the last quarter, we will spend about one third or roughly CHF 3 million from that brand harmonization exercise.
Sequentially, Q4 should be of similar level to Q4.
Correct.
Okay. Thank you. The very last question. You've seen very strong growth for the quarter or actually year to date in regions like Benelux, Switzerland, and Austria. I wonder if it's because Geberit is taking share in those regions or you're expanding the addressable market or because there are maybe some lumpy pricing in those growth.
I think you are referring to Switzerland and Austria, if I understood correctly. We believe that in both markets over the last nine months, we have been able to gain market shares, although we have already high market share in these countries, as you know. Very much driven by our value and upselling strategy.
Great. What about Benelux?
In Benelux, the same. We are doing very well in Benelux. We believe also there that we have one market share, especially in the Netherlands. The business is growing very well. We have growth in all product areas, especially Bathroom Systems are growing nicely, driven by a good development of ceramics, but also an excellent growth in our shower toilet business in Netherlands.
Okay. Thank you.
You're welcome.
The next question is from Remco Zijlstra, ING Bank. Your line is now open. Please go ahead.
Could you potentially tell us how the growth between Bathroom Systems would have looked like, excluding the effect from the phase out of the low-margin products and the Keramag brand switch, and what the breakdown between volumes and pricing looks like in this product area?
I start with the second one. In general, the price increase in the first nine months this year for all three product areas was around 1.5%, somewhat higher than in previous years. If we look into the three product areas, there are no substantial significant differences in terms of price increases. Also in Bathroom Systems, we increased prices close around 1.5%. Regarding the sales effect from the Keramag phase out exactly, we do not know the figure ourselves, of course, because that is basically a figure which was decided by the wholesalers. We have just seen that we have clearly a slowdown of growth in Q2, but we can't quantify it, and therefore we cannot just kind of guess the growth figure side of the thing. I'm sorry.
Okay. The same is true for the phase out of the low-margin products?
No. That we could, of course, because there we know it was one single customer. We do not want to disclose because it's one single customer, and for competitive reasons, we do not want to disclose this figure. This figure had a material impact on the growth in France, the exit of this low-margin business for ceramic in France. I can tell you that, but I can't give you the short figure. I'm sorry.
Okay. Fair enough. One more question, a bit more general one. Looking back to the whole Sanitec acquisition after a few years, in retrospect, if you are completely open with us now, in which areas have you been somewhat disappointed compared to your initial expectations? We know where you are happy because that is going to be here all the time. Where have you been somewhat disappointed because there surely are some areas where your original expectations were higher than the effective outcome.
That is the true answer. We can tell you, we are happy with the acquisition. If you look at the top line, one of the main rationale was the growth, faster growth of installation and flushing systems. We have been able to accelerate the growth of behind the wall systems to around 6% annual growth over the last three, four years, thanks to the synergies with ceramics. That was the main rationale. Secondly, we are much stronger in the shower toilet business nowadays compared to three years ago before Sanitec. You have realized we have completely renewed the portfolio for shower toilets. That was also driven and strongly supported by the acquisition of Sanitec.
The reason why we are not in our midterm growth range of 4% to 6%, also this year we do not expect to be there, it is not driven by Sanitec, it is driven by a market fact. The three largest markets where we are operating, Germany, Switzerland, and the Nordics, they are not growing at normal growth levels. In Germany, we have the constraints of installers. In Switzerland, the market is doing very well on a very high level. It is not growing again like we have seen it between 2010 and 2014. In the Nordics, as you know, the building stock market, especially in some countries, is really starting to be in a physical decline. Therefore, coming back to the overall answer, we are happy with the acquisition and the integration. Of course, on a detail level, not everything is perfect, but overall, it should be fine for us.
Okay. About the implementation of all these cross-selling potential and synergies and so on is, how much of that is now already effective, and is there still more to come?
As I said before, the main synergy for sales is on installation and flushing systems. We are growing by 6%, 15 of 18, also the first time on this year, we are growing strongly. For example, 8.7% growth of installation and flushing systems in Q3 was driven by double-digit growth in the European extension markets due to the synergies of ceramics. We do not expect a further acceleration of that business due to the synergies in ceramics. That's the level which we want to keep in terms of growth aspiration for the future in the European extension markets.
Okay, great. Very clear. Thank you very much.
You're welcome.
The next question from Pierre Rousseau, B arclays, your line is now open. Please go ahead.
Good morning, gentlemen. Thank you for taking my question. The first one is on the Bathroom Systems. I think there's an inflection point there in terms of revenue growth. Could you maybe elaborate on what is driving that? We've talked about the better pricing earlier, but in terms of volumes, what's driving it and what are your initiatives behind that? What could we potentially expect in terms of incremental initiatives into 2020? I'll go for the second question after your answer. Thank you.
If I understood your question correctly, you were asking about the acceleration of Bathroom Systems in third quarter compared to the first half of the year. That was mainly driven by two factors. Number one, in the first half of the year, we had still a negative base effect from strong growth of shower toilets in the previous year. Secondly, the beforementioned phase-down effect of the Keramag brand in Germany, which had a negative impact in the first half of the year.
Thank you. Going forward to future growth in Bathroom Systems, do you have more initiatives coming, or is it mainly going to be driven by the penetration of shower toilets? What are you working on at the moment?
There is a mix of measures. One is shower toilet growth, which is important for that area, but it's also the continuous modernization of the ceramics portfolio, and thirdly, new, more fundamental innovations for bathroom ceramics. You might have heard or seen that we introduced a new bathroom series this year, Geberit ONE. This is the first product which we have brought to the market based on the joint development of ceramics, our former Sanitec, and also the installation competencies of Geberit Group. It's a mix of shower toilet growth, modernization of the existing portfolio, and structural new product introductions.
Understood. Thank you. The second question would be more on capital allocation in the midterm. Obviously, we know the share buyback continuation, but longer term, how do you see your capital allocation policy and where would you like to take the Group, both in terms of geographies, product areas, a few quick comments would be on that. Thank you.
Our strategy is based on an organic growth strategy. That means we do not foresee any considerable amount of money required for M&A. That means for capital allocation, that we basically want to distribute our free cash flow to shareholders in a combination by dividend payment and share buyback programs.
Understood. Thank you. The last question on tax. The full-year guidance is quite low at 15%. What do you see as a normal rate going forward?
The answer this year, we guide around 13% and starting in 2020 and the years after, that will be around 16%.
Understood. Thank you for your answers.
The next question is from Christian Arnold, Bank Vontobel. Please go ahead.
Yes. Good morning, gentlemen. A few questions from my side. In terms of shower toilet, are we back on double-digit growth again in Q3, as the comps are not that high anymore? You're planning to phase out three additional brands in 2020. What does it mean in terms of the effects we have seen now from Keramag? Are you expecting the same effect, so having some slowdown on top line on the back of that in the first half and then a normalization thereafter? In terms of costs, do we also see a similar negative impact of CHF 10 million next year? Timing-wise, maybe from Q2 on to Q4. The last question from my side would be on the material cost. You are guiding for slightly higher Q4 material cost versus Q3.
Am I right in my assessment that year-over-year, Q4 material cost will be still quite lower than the Q4 material cost in 2018? Thank you.
Question number one, yes, we were growing double digits again in Q3 with shower toilets. Question number two, brand harmonization 2020. To remind you, we will phase out three brands next year. The first brand will start already at the beginning of the year in Q1, and the third brand will be phased out as of the second quarter. Of the experiences of Keramag this year, we still expect also for next year, maybe similar effects on a wholesaler level, meaning that they use this brand harmonization to lower their inventory level. We expect somewhat lower ceramic sales growth next year. Third, costs. We expect the same marketing spend basically for next year. Again, CHF 10 million for these three brands. CHF 3 million, more or less, roughly per brand, distributed over the entire year, most probably. Third question, the material costs. You're right.
Although raw material prices are expected to increase gradually after Q3, the level should be still below Q4 last year.
Thank you. Maybe a follow-up on the growth pattern from the two order product areas. We have seen the installation system and Piping Systems. Here we saw a clear increase of growth in the installation system versus a somewhat slowdown, but still a very good growth in Piping Systems. Is this somewhat linked to, let's say, more renovation work versus new construction work, or do we have some other things playing a role here?
No, I would not put too much emphasis on that. That is really just volatility quarter by quarter. There is nothing specific to read into that.
Okay. Thank you.
You're welcome.
The next question is from Jörg Schlimbach, Berenberg. Your line is now open. Please go ahead.
Yes, good morning. Thanks for taking my questions. I actually just have a few follow-ups on the previously asked ones. Again, on the regions. I was a bit astonished by the strong growth in Switzerland. I think it's also the only region where you've changed your wording compared to the first half. I think it was from slight decline from high level to now remain at high level. You mentioned market share gains. Is there anything else that has changed maybe in the market here? If so, maybe one by one, I wait for your answer on that.
In terms of markets, we have seen a slightly better market, but a tick better maybe than what we have expected at the beginning of the year. That is one effect. If you just look at Q3, the strong growth of 7%, that is mainly a base effect. We had a weak Q3 last year, which was driven by the price increases of the first half year 2016. Basically, base effect, a slightly better market than what we expected a couple of months ago.
Thank you very much. Second question on the rebranding. You mentioned one third of the remaining costs will be allocated in the fourth quarter. The third quarter, this quarter, was also one third of the CHF 10 million. Is that correct?
Correct.
Okay. Last one on the order backlog in Germany, I think you mentioned in the first half results was increased around 13 weeks. What's the current state here?
No news. That is still the same thing that we have. The order backlog of installers is around 13 weeks in Germany. Nothing new there.
Thank you very much for the support.
You're welcome.
The next question is from Charlie [audio distortion] , AWP. Your line is now open. Please proceed.
Good morning, gentlemen. Yeah, my first question, I think it was right out now. There's no change in the situation about the shortage, about the qualified installers in Germany? No improvement, no deterioration. Second question, maybe you could give us a figure what the growth potential in Germany would be if you wouldn't have this problem with the workforce? The last question would be, do you see any positive developments or problematic topics coming onto you in 2020? Thank you.
Question number one, as I said before, no changes regarding the topic of raw material bottleneck. The growth potential, if we would not have a raw material bottleneck in Germany, I can't give you an audited figure, but I can confirm it would be higher than what you see currently.
Okay.
Could you repeat the third question? I didn't get that one sorry.
Any developments, problematic or positive, coming onto you in the next year, 2020?
In general, we do not foresee a completely different picture, although, as I said in my introduction, the markets are uncertain and we observe the slowdown in selected markets mainly driven by the new construction center. If you look, for example, on European level on the residential building permits, residential building permits were in the first half of the year slightly down around 2% minus after having been growing over the last couple of years. No substantially different picture, a mixed picture, challenged picture also for 2050.
Thank you very much.
The next question is from Manish Deora, Société Générale. Your line is now open. Please go ahead.
Yes, good morning. Congratulations on very good results. I will go one by one. I have three questions. The first one is, what was the raw material price inflation in Q3 and the nine months?
In Q3, for the first nine months, raw material prices were 1.6% below nine months 2018.
For the nine months?
Sorry, that was nine months. Sorry, I misunderstood. That was nine months. For the first nine months, raw material prices were 1.6% below previous year. Q3 versus Q2 this year were -1.2%.
YOY it will be like 2% maybe?
Maybe even a bit more. I don't know exactly the figures.
Okay. Yeah. Fine. The second was on your gross margin, it improved by 160 basis points in the Q3. You talked about the mix impact. I understand some part is also coming from this raw material cost inflation, plus you are raising the price more. There is a net price impact there. How much is really coming from the mix impact? Also can you elaborate, I mean, what is this mix impact? Is it because the lower margin ceramic is growing slower or maybe you are getting a higher growth in Sanitec, that will be high margin or the installation system. Maybe you can elaborate more on how you got this mix impact.
The product mix effect is coming from two kind of product mix effects. One is on a several product area. That's the Installation Systems, Flushing Systems growing faster than Bathroom Systems. That's number one. Secondly, also within the product areas, within the product lines, the upselling of our product portfolio is supporting the product mix positively.
How much it is in the gross margin of 160 basis point for that mix impact?
It is a relevant part of it. It's a material part of it. We do not want to quantify it. That's too much detail.
Okay, I understand. The third one is you talked about these tariffs. That is not fully built in in Q3. Maybe you can remind, I mean, what was the tariff increase in the first half and how much it is in the Q3, and what you expect for the Q4?
Can you repeat the question? Sorry.
The wage cost, the wage tariffs, you talked about it is a fully backed maybe in Q3. Maybe how much it was in the first half, how much it is in the Q3, maybe how much it is in the Q4? You can just give some numbers there.
Yeah. Understood. In the first nine months, we are now at 3% tariff increases. I don't have the figure exactly in mind, but in the first quarter or first half, it was a little bit lower. I can't give you the exact figure, but it's a little bit lower reason is that the implementation of the higher tariff increase was not everywhere at 1st of January. That was somewhat delayed, normally delayed to later quarters. The 3% which we have seen now for the first nine months, that is also what we expect now for the full year, including Q4.
Okay. Thanks. Yeah.
You're welcome.
The next question is from Martin Flueckiger, Berenberg. Your line is now open. Please go ahead.
Good morning, gentlemen. Thanks for taking my question. I actually have only one left. Looking at your EBITDA margin bridge, as was previously pointed out during the call regarding pricing, net pricing was pretty good. I was just wondering if I look at the price effect, was it all just because of lower raw material prices or did you again in Q3 raise some selling prices in some countries and why?
No, we did not increase sales prices in Q3. In fact, you see in the presentation it's always both. It's raw material prices. It's the lower raw material prices and also increased sales prices. No specific sales price increase in Q3.
Perfect. Thanks.
You're welcome.
The next question is from Alessandro Foletti, Octavian. Your line is now open. Please go ahead.
Yes. Good morning, gentlemen. I have as well, only one last little question. On the depreciation and amortization, can you give a guidance for the full year and going forward, please?
There's no significant change to what we have seen now quarter by quarter. It will remain, unfortunately, on more or less the same level.
On what level?
We expect around this close to CHF 20 million.
Okay.
For amortization. Also depreciation will develop linearly.
Okay. Thank you.
The next question is from Marta Bruska in Berenberg. Your line is now open. Please go ahead. Sorry. We do have a brief technical issue here. The next question is from Martin Flueckiger at JPM, a follow-up. Mr. Flueckiger, your line is now open. Mr. Flueckiger, your line is now open for your follow-up question.
Yeah. Sorry. Hi. Thanks for taking my follow-up question. According to my calculation, the tax rate was 10.7% in Q3. Could you elaborate what was driving that? That's significantly lower than what we've seen in H1, and what is the expectation for Q4 and the key drivers there for the tax rate? Thanks.
Your calculation is correct. It was 10.7%. It was a one-off. We could release some accruals for Q4. For the full year, we are guiding a tax rate of 13%. That means Q4 will be just a little bit below that. That means more or less in line with what we have seen last year in Q4. It's a one-off for 2019. As I said before, 2020 and the year after that, maybe also due to the change in the Swiss tax law, we expect around 16%.
Yeah, sorry. What was that tax off exactly? That's one-off in taxes exactly in Q3?
The ease of accruals, but we do not give any more specifics.
Okay, thanks.
There are currently no further questions. As a reminder, if you would like to ask a question, please press zero one on your telephone keypad now.
Okay, it seems that we do not have any further questions. Thank you very much for your participation and wish you all a great and good day. Thank you. Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.