Market development

The Sanitary Equipment Division recorded total revenue of CHF 144.8 million, a figure that was 1.3% below the previous year's value (CHF 146.7 million). The currency-adjusted revenue development amounted to –4.1%. Noticeable difficulties were experienced in the very challenging markets in France and Germany in particular, while Switzerland saw pleasing developments. At CHF 11.7 million, the EBITDA figure was unable to match the previous year's value (CHF 14.0 million). Excluding special effects, the division achieved an EBITDA of CHF 12.5 million (previous year: CHF 16.9 million). At CHF 7.2 million, EBIT was also below the previous year's level (CHF 9.9 million). Excluding special effects, EBIT amounted to CHF 8.2 million (previous year: CHF 12.8 million).

In the previous financial year, the division was once again faced with increasing raw material prices, rising labour costs and, lately, higher freight and customs costs. The large number of changes and innovations in relation to production continued to have a negative impact on productivity. The effects of the CHF/EUR exchange rate also had a detrimental impact. High pricing pressure and the challenging competitive situation meant that it was not possible to fully offset the cost effects in all markets. However, numerous measures have now been implemented successfully and various further initiatives to boost revenue and increase efficiency have been initiated.

The general trend which presents the bathroom as a place of well-being continues unabated, a fact that is borne out by consumers' willingness to purchase high-quality sanitary products in the domestic markets. However, in Germany, the division's most important sales market, the widespread shortage of skilled workers in the sanitary and heating trades meant that the limited capacity was frequently taken by the booming new construction industry and, in particular, by the heating sector. This therefore had an adverse effect on the renovation and modernisation market which is far more important to the division. As a result of this and the acquisition of the Koralle brand in 2016, the division was forced to accept transitional losses in Germany during the reporting year. By contrast, revenue development in Switzerland followed a positive trend, supported by a stable construction industry and continuing high demand for customised shower solutions. In France, challenging changes in the market and a general downtrading trend made sales activities difficult, meaning that the division, along with its distribution partner, was forced to accept losses.

Important strategic decisions also shaped the reporting year for the Sanitary Equipment Division, in terms of both production as well as sales and service activities. In relation to manufacturing, a number of measures to optimise processes and increase efficiency were launched at the start of the year. The aim was to make even better use of the opportunities afforded by the consolidation of production activities in Plattling (D), which was completed in 2017. Against this backdrop, the reporting year can therefore be seen as a transitional year. The division also regarded the capacity shortages experienced in the installation sector as an opportunity and decided to further expand its already broad range of sales and service activities in order to meet the needs of the specialist and wholesale trade. Together with its market partners, the division took advantage of the opportunities presented by digitisation to further optimise processes. The division took a proactive approach in response to the increasing significance of own trade brands and developed target-group-specific solutions which are tailored to the needs of the commercial and trade sectors.

Products, technology and innovation

The continuing and increasing trend for customised shower solutions – particularly for floor-level showers – is one that the Sanitary Equipment Division is following closely by offering a wide range of design options. Although offering this range of variants presents particular challenges, it also allows the division to continually enhance its development and production expertise.

On 1 January 2018, Koralle was successfully integrated into the SAP ERP system, which the division has been using for many years. Over the course of the year, processes have been continuously fine-tuned – work which has been a pleasing learning curve for all users. During the introduction of the system, it was possible to standardise almost all internal processes as well as those that are not related to specific customers and brands – the fruits of which the division will continue to benefit from for years to come. This will also allow the division to tap into further potential, particularly in relation to purchasing, production and logistics.

Object construction is accounting for an ever-increasing proportion of the division's activities. In addition to classic applications in the hotel and rental property sectors as well as the construction of retirement homes, it has been possible to approach new target groups, such as the shipbuilding sector. One recent success saw a shipyard award the division the contract for the production of around 2300 shower cubicles. The continuous transfer of know-how regarding product technology, processing and sales enables the division to maintain a high level of performance in the increasingly strong object-oriented business.

With respect to digitisation, a number of individual processes, particularly in relation to the incoming orders process, were able to be condensed and optimised. Spare parts ordering is already fully digitised and the provision of BIM data for the division's products has already been implemented in many areas, as has the development of social media activities. The online product-specific search function for wholesalers has also met with strong approval. End customers have the option to search directly for local wholesalers or tradespeople who have the product they are looking for in their showrooms.

At the Plattling (D) site, structural modifications were made which will optimise incoming goods processes. In addition, projects to further enhance automation in production have been started. In spring 2018, the division invested in new machines and tools for the Kermi brand for the launch of the "PEGA" series and additions to the "NICA" and "LIGA" series. For the Koralle brand, this process took place for two new series in the third quarter. Further investments and initiatives relating to digitisation are also already in the pipeline.

Sustainability

Work to optimise packaging is an ongoing process which was further accelerated in 2018. In order to reduce transport weight, the wooden slats that had previously been used were replaced with lighter honeycomb boards made from cardboard. These boards offer comparable protective properties but have a much lower environmental impact. The optimised packaging density and, as a result, the improved utilisation of transport pallets led to a significant decrease in transport and logistics costs as well as sustainably reducing the burden on the environment.