Investing.com -- Shares of Geberit (SIX:GEBN) fell on Thursday following the company's second quarter results and updated guidance, which fell slightly short of analysts' expectations.
At 5:25 am (0925 GMT), Geberit was trading 4.1% lower at CHF 506.60.
As per analysts at UBS Global Research, Geberit’s reported results for the second quarter were broadly in-line with consensus forecasts, but the revised guidance points to potential downside for the full year.
Geberit reported Q224 sales of CHF 801 million, reflecting a 5.2% increase in local currencies, though a 1.1% decline in foreign exchange rates impacted the reported figure. This was close to consensus expectations of CHF 799 million and UBS's estimate of CHF 818 million.
On an organic basis, sales growth was slightly better at 110 basis points. The company’s EBITDA came in at CHF 243 million, falling marginally short of consensus estimates of CHF 245 million and UBS’s projection of CHF 252 million.
The EBITDA margin was 30.3%, slightly below consensus expectations of 30.6% and UBS's forecast of 30.8%. Despite a year-on-year margin improvement of 30 basis points, driven by higher utilization and price/cost benefits, this was offset by wage inflation and growth investments.
Net profit for the second quarter was CHF 160 million, also falling short of consensus estimates of CHF 163 million and UBS's forecast of CHF 176 million. Free cash flow (FCF) saw a slight increase to CHF 246 million, up 4.7% year-on-year. The company’s net debt increased to CHF 1.34 billion compared to CHF 0.97 billion at the end of FY23 and CHF 1.28 billion at the end of H123.
Geberit’s performance varied across regions. All regions except America showed organic growth in Q2, with Europe growing 4.8% in local currencies, Middle East/Africa up 21.4%, and Far East/Pacific increasing 5.4%.
Conversely, America reported a decline of 2.1% in local currencies. Segment performance was mixed, with Bathroom Systems remaining broadly flat year-on-year with a 0.7% increase, while Installation and Flushing Systems (+7.1%) and Piping Systems (+7.0%) exhibited more dynamic growth.
The company’s EBITDA margin bridge indicated that pricing and volume/mix contributed positively by a net 290 basis points, but this was more than offset by other costs, including energy, which led to a net reduction of 220 basis points. Foreign exchange impacts were minor, reducing the margin by 40 basis points.
Geberit has revised its full-year guidance, now forecasting net sales to remain at the prior year’s level in local currencies and an EBITDA margin of approximately 29%. This aligns with the mid-term target range of 28-30%.
Analysts at UBS Global Research anticipate organic growth of 1.1% for FY24E, compared to their previous estimate of 1.2%, and an adjusted EBITDA margin of 29.5%, slightly above their forecast of 28.8%. Assuming no growth in local currencies and a 1.3% decline due to foreign exchange, the projected EBITDA for FY24E is approximately CHF 880-885 million.
This indicates a 3% downside risk compared to the consensus EBITDA estimate of CHF 911 million and UBS’s estimate of CHF 887 million.
“With org. growth of 1.7% recorded for H124, the guidance implies a decline in the seasonally softer H2 of c-2%. This is consistent with our view that growth momentum will slow as easy comps fade out,” analysts at UBS said.