Geberit AG (OTCPK:GBERY) Q1 2022 Earnings Conference Call May 4, 2022 3:00 AM ET
Company Participants
Christian Buhl – CEO
Tobias Knechtle – CFO
Roman Sidler – IR
Conference Call Participants
Yves Bromehead – Exane BNP
Daniela Costa – Goldman Sachs
Martin Hüsler – Zürcher Kantonalbank
Arnaud Lehmann – Bank of America
Cedar Ekblom – Morgan Stanley
Remo Rosenau – Neue Helvetische Bank AG
John Revill – Thomson Reuters
Charlie Fehrenbach – awp Finanznachrichten AG
Emrah Basic – Baader-Helvea
Alessandro Foletti – Octavian AG
Martin Flueckiger – Kepler Cheuvreux
Manish Beria – Societe Generale
Christian Arnold – Stifel Schweiz AG
Marta Bruska – Berenberg
Stefanie Scholtysik – Mirabaud Securities
Matthias Pfeifenberger – Deutsche Bank
Operator
Good morning. I am the NTT operator for this conference. Welcome to the Geberit Conference Call on the First Quarter 2022. [Operator Instructions] The conference is being recorded. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Christian Buhl, CEO, accompanied by Mr. Tobias Knechtle, CFO; and Roman Sidler, Head of Corporate Communications and Investor Relations. Please go ahead, sir.
Christian Buhl
Thank you for the introduction, and good morning, ladies and gentlemen, and welcome to our conference call on our Q1 results. Geberit had a good start into the year. Let me start with the key statements for the first quarter.
We achieved an extraordinary strong sales growth in local currencies of 13% despite a very strong comparison basis. Secondly, significant headwinds from the unfavorable currency development led to a strong negative net sales impact of minus 5.2%. Thirdly, the unprecedented surge of raw material and energy prices led to a reduced but still excellent EBITDA margin level of 30.9%. And finally, despite the margin decrease, we managed to grow all bottom line results in local currencies, thanks to the strong top line. EBITDA, for example, increased by 2.5% or EPS by 3.7% in local currency.
Let me now comment on our net sales development in more detail. Net sales in Swiss francs increased by 7.8% to CHF 980 million. The unfavorable currency development negatively affected net sales by CHF 48 million or minus 5.2%. In local currencies, group net sales increased by 13%.
Half of this growth was driven by increased sales prices of 6.4% in average across the portfolio and geographies. This price increase is somewhat stronger than expected due to favorable mix effects. The strong volume growth was achieved despite an already strong previous year’s level and was driven by a still strong building construction market with a still healthy home improvement trend, some forward buying effects due to sales price increases and 1 additional working day.
I come to the regional development. All figures refer to local — to growth in local currency. In Europe, net sales increased by 13% with growth in all subregions [Indiscernible] countries. The war in Ukraine did not materially affect sales in Q1 since sales in Ukraine stopped only as of March and demand in all other Eastern European countries remained to be strong.
In Middle East/Africa, net sales increased by 15% with growth in all of major countries. Net sales in Asia Pacific grew by 20%, driven by strong growth in India and North Southeast Asia. In America, net sales were up by 5%.
Let me now comment on the sales development per product area. The strongest growth was recorded in Piping Systems with a net sales growth of plus 19% in local currencies, driven by a stronger price increase compared to the other 2 product areas and the very good development of the new FlowFit piping system. Installation & Flushing Systems net sales grew by 14% and Bathroom Systems net sales grew by 6%. The lower growth of Bathroom Systems was driven by a stronger base effect from the strong Q1 2021 and smaller sales price increases in Bathroom Systems compared to the other 2 product areas.
I will now comment on the operating and financial results. EBITDA in Swiss francs decreased by 3.7% to CHF 303 million due to the substantial negative currency effect. In local currencies, EBITDA increased by 2.5%. The EBITDA margin decreased by 370 basis points versus the record-high level in the previous year and reached a still strong level of 30.9%. This is slightly below the prepandemic margin level of Q1 2019.
Main negative margin drivers were: an exceptional strong raw material price increase of 24%; and an unprecedented energy price increase of 94%; an average wage inflation of 2.3%; and lastly, the strong devaluation of several foreign currencies with a negative impact on the EBITDA margin of 50 basis points. The positive drivers for the margin were sales price increases of 6.4% at the operating leverage from the strong volume growth.
The EBIT margin decreased in line with the EBITDA margin by 360 basis points and reached 26.8%. Net income in Swiss francs decreased by 5.3% to CHF 220 million, driven by the negative currency effect. Earnings per share decreased disproportionately due to the share buyback program by minus 3.7% to CHF 6.29. In local currencies, EPS grew by 3.7%.
The share buyback program has been accelerated in the first quarter with 341,000 shares bought back in the first 3 months for a total consideration of CHF 207 million. In the preparation of refinancing of our CHF 300 million bond, which is due in October this year, we launched, mid-March, a new standard Swiss franc bond in the amount of CHF 150 million with a maturity of 5.5 years and a coupon of 0.75%.
Let me now comment on the current business environment. The demand for building construction is still strong, both for the residential and nonresidential sector but also for the newbuild and renovation segment. The trend to home improvement is somewhat weaker but still healthy. Price inflation and increased interest rates had not a broad-based impact on demand so far, on the one hand, due to the general time lags in our industry and on the other hand, due to the substantial backlog of building projects.
Our supply chains are intact, albeit, the situation is extremely tense. Thanks to extraordinary efforts of our supply chain organization, we still manage to get the relevant raw materials and logistic capacities without major impact on the availability of our products. Overall, we achieved a good sales level in April with a mid-single-digit growth rate.
Let me now briefly give you an update on the situation in Ukraine and Russia. Our business in Ukraine and Russia accounts for around 2% of group sales. Most of our 590 employees in Ukraine are at home or in the western part of the country. Only a few employees fled with their families abroad and were received by Geberit organizations in other countries. Several Ukrainian employees are drafted to the army or voluntarily supporting the civil defense.
Our office in Kiev and our plant 300-kilometer west of Kiev are unharmed. Since the war activities have been shifted more to the eastern part of the country, the situation in Kiev and in the area of our plant has calmed. Therefore, the local team decided to restart production in the plant again, however, on a very low level and only as long as the safety of the employees is not at risk.
In Russia, we suspended all business activities for end of March. However, we continue to pay the salaries of our 70 local employees. We have developed contingency plans for our ceramic plant in Germany and Poland in case of delivery interruptions of natural gas from Russia. The basic idea is to prepare these plants to switch to the alternative LPG gas. All other ceramic plants are not at risk since they operate in countries which are not dependent on Russian gas deliveries.
Let me now comment on our outlook. We live in a new world of realities where one crisis follows another, creating one challenge after another and unprecedented uncertainties and risks. The war in Ukraine increased geopolitical risk and further increased the already preexisting supply chain issues and disruptions from COVID-19. Furthermore, the global fight against the COVID-19 pandemic is also not yet over as the renewed outbreak and the massive lockdown in China has demonstrated.
In the light of these developments, raw material and energy prices continue to surge to new historical price and deflation levels, pressure on wage inflation and an increased interest rate. In this unprecedented environment of multiple and overlapping crises, a serious and reliable outlook and forecast is not possible.
However, despite this unknown environment, we have defined the following priorities for 2022. First, consequent pricing management to address the extraordinary raw material price inflation. In Q2, we expect a further acceleration of raw material prices. Overall, we expect raw material prices in Q2 to be around 10% higher than in Q1. This means that raw material prices in Q2 will be around 28% above the level of the previous year’s second quarter.
This is why we decided to implement another extraordinary price increase. We will increase sales prices in average across product areas and countries by 7.5% as of July this year. With this, we stick to our goal in pricing management to compensate raw material price inflation, not on a quarterly basis but over time.
The second priority this year are our newly introduced products with a strong focus on our new supply piping system, FlowFit, which we roll out to further countries this year. Thirdly, we will continue to execute various important capacity expansion and improvement projects along our strategic agenda, for example, in the area of digitalization.
And finally, based on our strong balance sheet and strong cash generation, we will launch a new and increased share buyback program compared to the existing loan. The new program amounts to CHF 650 million and will run over a period of maximum 2 years. It will be launched directly after the completion of the current program latest in Q3 this year.
Let me close our introduction with a short summary and our key messages. Geberit achieved good results in the first quarter with an extraordinary strong top line growth, equally driven by price increases and volume growth. Despite massive headwinds from record-high raw material and energy prices and record results in the previous year, we managed to grow our bottom line results in local currency in Q1.
Due to the expected acceleration of raw material price inflation, we will implement another extraordinary price increase in average of 7.5% as of July this year. Due to our strong balance sheet and our strong cash generation, also during times of crisis, we will launch a new and increased share buyback program latest in Q3.
The overall demand for the building construction industry remains strong in all relevant market segments based on a somewhat weaker but still healthy home improvement trend and a solid backlog of building projects. However, our longer-term outlook is very difficult due to the significantly increased geopolitical risks and still ongoing uncertainties in relation to the COVID-19 pandemic and especially the increased supply chain risks. Nevertheless, Geberit is very well prepared to also master these challenges and uncertainties emerging from the unprecedented environment as demonstrated already several times in the past.
Our confidence is based on our resilient strategy business model, our pricing power, our strong innovation capabilities, our continued efficient improvement, and finally, our long-term value-creation focus and respective track record.
Thank you for your attention. We are now ready to answer your questions.
Question-and-Answer Session
Operator
[Operator Instructions] We have a first question. It’s from Yves Bromehead of Exane BNP Paribas.
Yves Bromehead
Thank you for taking my question. I’ll have two, if I may. The first one is on demand. I mean, once again, your underlying trends have surprised positively versus your initial expectations, but you’re sort of flagging pull forward of demand, first of all, but you’re also flagging that April was up mid-single digit, which, given the pricing that you’re putting through, would imply volumes are now down year-on-year. So just wanted to understand here what do you see? Is it inventories at the wholesale level coming down? Anything here that could help us? And how do you think about sort of the outlook for volume, if I could say, in the near term but also in H2? Do you expect any sort of demand destruction as part of the very strong price increases that you’re putting through?
And my second question is, could you just remind us, you flagged a plus 7.5% in July. Is that sort of the July increase? Or it’s the run rate in July? If it’s not the run rate, could you also give us the mains of the price increases that you’ve put through in April? Because you’re saying that it’s above the sort of run rate of 1.5 billion that you typically have.
Christian Buhl
Thank you for the question. Number one, first, we have not seen destocking effects of wholesalers in the first quarter. What could have happened postpandemic, but we didn’t observe that.
Secondly, volumes are also good in April, as you mentioned rightly, also driven what we believe on the backlog of a couple of projects. Therefore, at the moment, we also see a positive environment still for volume.
To the second question, the 7.5% is not the run rate. It’s on top. It’s an additional price increase as of July. So I briefly run you to the price increases which we have implemented this year. At the beginning, we have — of the year, we have implemented an extraordinary price increase of around 1.5%, followed by a regular price increase in April of around 2.5% and now on top to 7.5% as of July.
Yves Bromehead
Sorry, but I was mentioned that actually, in April, volumes were down. I think if you’re up mid-single digit with pricing up already 6.4 in Q1, I would have thought that April volumes would be down. Is my math correct? Or am I missing something?
Christian Buhl
No. You’re correct that the volumes were more or less on previous year’s level in April.
Operator
The next question is by Daniela Costa of Goldman Sachs.
Daniela Costa
I have a couple of quick clarifications actually, 2 on this and then my other 2 questions. On the 7.5% that you just mentioned, for July, why would you announce this now? Is there like a risk we have also again a lot of prebuy? Just interested on the timing. That’s one.
Then on the April comment also just now, can you just repeat what you — exactly you said on volumes? Did you say this was — did you quantify it? Did you say it was mid-single digit? Was it volume? Was it pricing? Or I’m not sure I’ve heard it correctly. So that’s the 2 clarifications.
And then just in terms of like my actual 2 questions, personnel costs, they don’t seem to move at all year-on-year. We’re hearing a lot about inflation. Can you talk to like what you’re doing to mitigate this and why these are not going up?
And the final thing, just can you give again the level of inventories at distributors? And sort of what do you think about the sustainability versus prior cycles of where we are now?
Christian Buhl
The first clarification questions, the timing of the July price increase extraordinary was driven by the fact that we expect an acceleration of raw material prices in Q2. I refer to our presentation on Page 7 where we provide you with an index chart how our raw material prices are developing. And from this chart, you see that we expect an acceleration in Q2, and this is the main reason for the timing of our extraordinary price increase as of July. I repeat the messages for April. Volumes were on previous year levels. Sales were growing mid-single digits.
And I finalized my part with the wholesaler question number 1 will be taken by Tobias. The inventory levels of wholesalers are still on a record high level.
Tobias Knechtle
And as for personnel, we have slight increases. We managed to compensate any increases with efficiency gains, productivity gains, which were very high again in Q1. However, bear in mind that some of the tariff increases of 2022 only come into effect as of April, like, for example, in Switzerland. But even afterwards, the increases will be clearly under-proportional to the other cost factors and to the sales increases.
Daniela Costa
Sorry, how much is the tariff increase? Did you say?
Tobias Knechtle
2.3%.
Daniela Costa
2.3% on average? Okay. And sorry, on the first question on July, I still didn’t quite get it. We hit the 2Q forecast raw material price increase. Why don’t you put all the prices up already in April?
Christian Buhl
Sorry, can you repeat the question?
Daniela Costa
On the first question, on the July timing, I’m not sure I’m still quite clear on this because, if it’s a 2Q forecasted raw material price increase that you want to cover for, why don’t you already put all in once a price increase in April and give all this anticipation of 3 months?
Christian Buhl
Very simple. Because we didn’t know, first of all, how raw material prices will develop in the second quarter when we decided for the regular price increase as of April. And secondly, you have normal delay in our industry of 2 to 3 months how you implement price increase. That’s a general industry standard.
Operator
The next question is by Martin Hüsler, Zürcher Kantonalbank.
Martin Hüsler
Also about the price increases, obviously, you are the market leader in Europe, and you are also kind of the flagship regarding prices. I was just wondering whether you see within your competitors similar behavior? Or are you the first one to announce price increases for July?
And does your market intelligence show that you — or would you be willing actually to suffer from the market share losses in order to keep prices high but maybe lose a bit on volumes? Just a bit of the strategy about volume versus prices, I guess.
Christian Buhl
So I don’t want to go into details about pricing development of our competitors. As you can imagine, I don’t want to share this part of the market intelligence. We consider that as a very important proprietary knowledge on our side. Sorry for that.
But to your second part of the question, overall, our goal is to gain market shares also in times of crisis, also in times of an inflationary environment, if that is a sufficient answer to your questions.
Martin Hüsler
No, it’s not, but that’s okay. And maybe the second question, you’re still refraining from giving an outlook for the full year. And obviously, uncertainties are high, obviously. But would it be too bold an assumption that you would reach, in this year, your ordinary sales bracket of 4% to 6% for the full year? I mean, you start — you had a very great start, I think, now up to April, double digit, I guess. And you have a strong pricing effect in the second half on top of that. What kept you away from giving sales indication in the range of 4% to 6%?
Christian Buhl
First of all, also in normal times, as you know, we don’t provide a guidance for our top line at this point in time, very much driven by our general low visibility. And secondly, now in this extraordinary times, it’s even tougher to give any top line guidance or margin guidance at this point in time. And I think, to be honest, we are right with being very careful with giving forecast. If anyone in this call would have expected a year ago that our raw material prices in Q2 this year will be 30% above last year, I think that demonstrates how uncertain the world is at the moment. And this is the reason why we don’t want to provide any outlook or our guidance, top line or also the margin at this point in time.
Operator
The next question is by Arnaud Lehmann of Bank of America.
Arnaud Lehmann
Two questions on my side. Firstly, just following up on your comments in the introduction about Russian gas supply. Could you indicate us just how many plants or what is the share of production that is relying on Russian gas supply? And anything you can do to switch to another supply? That’s my first question.
And secondly, just looking down at the details of Q1, I noticed that the operating cash flow and the free cash flow are down and the net debt is also slightly up a bit more than I expected. Could you give us a bit of color on these trends, please?
Christian Buhl
I take question number one. Number two will be answered by Tobias. We have, in total, 10 ceramics plants, 4 of them — or 2 of them are in Germany, and 2 are in Poland, and these 4 plants are relevant plants in terms of volume. What we do, we have developed plans — contingency plans to switch these plants in Poland and Germany to other gas — into other gas, which is basically LPG gas because they’re currently running on natural gas also delivered from Russia. And question number two is…
Tobias Knechtle
Two questions again. The first is on free cash flow, why is it down? First of all, it’s a normal seasonality of free cash flow going down in Q1. Why is it lower than on the previous year? That has mostly to do with the net cash from operating activities. And there are 2 factors: one is the — in real currency, the slight decrease of the EBITDA; and the other one is higher net working capital stemming from accounts receivable, which comes from a low year-end figure 2021 versus 2020. So it’s mostly a timing effect in there.
On net debt, which is higher than you expected, your second question, that on the other side is mostly driven by the acceleration of the share buyback program, which works on an algorithm, and therefore has accelerated the buying [Indiscernible] the one of this.
Operator
The next question is by [Indiscernible] Investment Research.
Unidentified Analyst
Just have a question. Have you seen any anecdotal evidence of a slowdown of cancellation in construction projects because of very high cost inflation or because of building material shortage or supply chain distribution? I understand that the backlog is good, but you see those backlogs in [Indiscernible] right now? And do you see a risk for the second part of the year for 2023?
Christian Buhl
We didn’t hear any or didn’t feel any impact of the price inflation on a broader base also if you look into our volumes in the first quarter. But of course, there are selective with observation projects, which are a little bit delayed, maybe also a little bit questioned at the moment if it’s too high in terms of pricing or not but not on a broad base at the moment.
Operator
The next question is by Cedar Ekblom of Morgan Stanley.
Cedar Ekblom
One question to follow up on the inventory point that you made. Is there any way that you can quantify the inventory level at your wholesalers? You’re saying it’s at a record-high level, but I wonder if you could put some numbers around that, maybe how much above what you would think a normal inventory level it is in percentage terms or in days of availability just to get a little bit of a sense on what the risks to volumes could be if we do get a softer macro picture in the second half?
Christian Buhl
I would love to give you an answer, but it’s not possible because we can’t quantify this stocking effect because we don’t get any numbers, figures from wholesalers. So therefore, it’s just a qualitative statement, and I can’t quantify it.
Operator
The next question is by Remo Rosenau, Neue Helvetische Bank AG.
Remo Rosenau
Coming back once again to the price increase in July. So this is across the board, including ceramics, right? However, is it fair to assume that the price increase might be a bit lower than 7.5% in the ceramics product range and a bit higher in your traditional product range? That is my first question.
Christian Buhl
It is correct. It’s a differentiated approach as the other pricing, which we [Indiscernible] last and this year as well. And the price increases are typically higher in Piping System because the inflation has a bigger impact on Piping System metals for example, but also plastics, and is somewhat lower in Bathroom Systems.
Remo Rosenau
Okay. And lower in ceramics as well than in the rest of your product range?
Christian Buhl
I don’t want to go into too much detail, also again, due to competitive reasons. I’ll give you a general answer. In terms of pricing of ceramics, the energy price increases obviously play also an important role.
Remo Rosenau
Okay. Now did you announce this price increase for July to everybody today, i.e., also for your customers? Or did they know that already earlier?
Christian Buhl
We started it country-by-country. We started already end of March to communicate this extraordinary price increase. And throughout April, at this point in time, all markets and customers are informed about these extraordinary price increases.
Remo Rosenau
Okay. I mean, given this unprecedented price increase in July, we should expect another prebuying effect in the second quarter, right? However, in April, volumes were flat, so you didn’t see a prebuying effect really in April yet. But probably, we will see one in May and June, right?
Christian Buhl
I understand your logic, but at the moment, that’s a correct observation, and I follow your observation, but that’s exactly the challenge at the moment because there are so many price increases, inventory affected quite hard anyway to quantify but to get the feeling. And as I said before, inventory levels are already on a very high level when we announced this new extraordinary price increase. So there are also physical limitations of inventory, obviously, therefore, it’s hard to say how big will be the prebuying effect of this strong extraordinary price increase at the time.
Remo Rosenau
Okay. Got it. Then a clarification. Did I hear that right that you bought back 341,000 shares in the first quarter? And could you also tell us the average price of these 341,000 shares?
Tobias Knechtle
We have it on the first page of the presentation. Sorry, yes. So we bought back 207 million. That’s in Q1 over the presentation, and that’s 341,000 shares.
Remo Rosenau
Okay. 207 million, very good.
Tobias Knechtle
Exactly on where that get to the average price.
Operator
The next question is by John Revill, Thomson Reuters.
John Revill
Could you just give a bit more clarification and a bit more detail on the Ukraine decision? Is the factory — is it in Slavuta the factory? And what does it make? And what was the thinking about restarting there? And also the office in Kiev, is that reopening? That’s my first question, please.
Christian Buhl
The Kiev office is still closed, so the sales organizations work from home. And the plant in Slavuta is a ceramics manufacturing plant. And the reason was the local management with the employees decided to restart production on a low level is basically that the situation has calmed down, still not normal, obviously, but has calmed down a lot in this region, and people really start — wanted to start to work again.
John Revill
And also could you just give us a bit more detail on the gas situation? You said you moved 4 of your plants from Russian gas to another gas? What’s the other gas that you’re looking to switch to? And how long is this process going to take, do you think?
Christian Buhl
The other gas is LPG. This is liquid petroleum gas. And it’s running on compressed natural gas. So this is the kind of thing, and I don’t want to go into details in terms of timing.
Operator
The next question is by Charlie Fehrenbach, awp Finanznachrichten AG.
Charlie Fehrenbach
How is the situation about the availability of materials? Does this have any impact on your production? That’s my question. And one clarification question about these ceramic plants in Germany and Poland. Is — are you just considering to switch to gas? Or is this decision already taken?
Christian Buhl
The first one, we are able to get raw materials to produce. So we don’t have material supply chain issues, but the situation is very challenged and intense. It’s really a high operational workload at the moment to get materials, also logistic capacities. But at the end, we are able to use and we are able to keep up a good availability level of our products.
And with regards to the plants in Germany and Poland, this is the plan. We did not yet switch. This is a plan. If it materializes, that there would be a shortage or a deliberate stop of Russian gas.
Operator
The next question is by Emrah Basic, Baader-Helvea.
Emrah Basic
Two to three questions, the first one being whether you could give some insight on the regional development or actually, more specifically, which countries develop better and which worse than maybe you initially expected. Also in which countries did you maybe see the highest construction demand?
And then maybe similarly, also regarding the development in the commercial or residential market. Do you see there any large deviation? And then I have a last clarification question.
Christian Buhl
With regard to the countries, we have been growing first quarter in all the countries or regions which we are looking at. I would say maybe the biggest positive surprise maybe was the strong growth in Eastern Europe, where we haven’t seen any negative impact from the war in Ukraine on the neighboring countries like Poland, Czech Republic, et cetera.
Resi and nonresi are going both well. You see that also if you look into our product areas, for example, the strong growth of piping is also an indication that the newbuild segment seems to work — it seems to be very strong at the moment.
And then you had a third question?
Emrah Basic
Yes, exactly. The first one was just regarding what you mentioned in April, your mid-single-digit growth. Did you mean that in local currencies or in Swiss francs?
Christian Buhl
Always in local currencies. Obviously, we have strong currency effect also in April.
Operator
The next question is by Alessandro Foletti, Octavian AG.
Alessandro Foletti
I have a question on the share buyback. You made CHF 200 million in Q1. You’re saying that you’re completing the outstanding buyback. Let’s call it another CHF 100 million in Q2, makes CHF 300 million. Then you start the new one, another CHF 300 million, plus the dividend. You’re paying out this year probably 150% of free cash flow. Thereby, you are increasing your leverage. So I wonder why this magnitude? And also why now?
Christian Buhl
So it is correct that the share buyback that was it accelerated this year, and the slightly increased new share buyback will temporarily increase leverage. However, we see that as a sign of confidence in our overall development, and the strength of the balance sheet makes it very easy to do that.
And I think it’s — the increase of the share buyback is a conscious decision. The acceleration is algorithm-based, so that is largely a mechanical effect. And that’s why I said also a temporary increase of the leverage is expected and is acceptable.
Operator
The next question is by Martin Flueckiger, Kepler Cheuvreux.
Martin Flueckiger
Looking at your main market in Germany, I recently saw that consumer sentiment is now lower than it was in March 2020, i.e., at the onset of the pandemic. And I was just wondering what your thoughts and expectations are for underlying demand going forward? And if you could talk a little bit about any feedback you’re getting from installers and particularly also their backlog and update here would be really helpful. That’s my first question.
And then the second question is with regards to showroom visits. And I’m not just talking about Germany. Actually, I’d be interested across your main markets, the whole range of main markets in Europe. If you could talk a little bit about these showroom visits, the frequency and maybe some qualitative feedback you’re getting from wholesalers on those visits what people are thinking and maybe what that could imply for the second half? That’s really my question.
Christian Buhl
First question with regards to Germany and consumer sentiment in Germany. We have seen a good demand in Q1 also in Germany, especially also for Bathroom Systems. And this is not only true for Germany. This is true for the rest of Europe. If you look at our bathroom sales in Q1, we were up in terms of volume compared to Q1 last year, which means that this home improvement trend and also the sentiment at the moment seems to be still quite good. The order backlog of plumbers is at the same level. I don’t have any new information. It’s still 13.7 weeks. We don’t have any new number or new information. Still the same information that we provided already in March.
The second question with regards to showroom frequency, also there, same message as mid-March, we hear, qualitatively, some lower visit or number of visits in showrooms compared to the, let’s say, peak of the pandemic, but there’s still solid demand also in the showroom and qualitative feedback from our customers.
Operator
The next question is by Manish Beria, Societe Generale.
Manish Beria
So if I read your price increases and try to calculate probably the pricing impact will be something like 10%, 11% for the full year ’22. And going by your raw material charts, it seems like if there is no further inflation in raw mat, that will increase by 25%. So if you see the math tying in, the price impact is CHF 350 million, and the raw material impact — price impact is CHF 250 million, so you are getting a delta of CHF 100 million here. So I mean, I was of the impression that probably you want to just reach price cost neutral here, but you are trying to also gain something here. So is it just an anticipation that the raw mat will rise more from here? So what is the reason, I mean, you are doing pricing ahead of raw material cost inflation right now?
Christian Buhl
The reason why we did the 7.5% as mentioned in my introduction is basically the accelerated raw material price increase what we expect for Q2. I refer again to Page 7 in our short presentation. I can’t give you an answer for the full year because that obviously depends on the raw material price development in the second half of the year. Therefore, I can’t give you a precise answer with regards to the numbers in your calculations.
Manish Beria
Okay. So I understand that part. And the wage cost, I mean, was down Y-o-Y. That’s because of currency, right? I mean — and underlying, it was still rising, the wage cost, personnel cost?
Tobias Knechtle
Yes. So personnel costs, yes, been rising per asset on the proportional and the other one as well, it’s a — what you see is the currency effect largely as a [Indiscernible].
Manish Beria
The third one, the last one, probably. So if I see your volume development on a 3-year basis versus pre-COVID level, so your volumes are up like 19%, so that’s on an annualized basis, like 6.5% or something like that, 6%, 6.5% volume growth each year. So of course, not normal, I mean, you were growing 3%. Now you’re at 6.5%. So what is your sense? At some point, do you see a negative volume development? Or I mean, it can just continue with a flattish to volume growth still, I mean?
Christian Buhl
First, I agree with your numbers. And this is very much driven, I believe, also by the work we have done over the last 2 to 3 years but also how we managed the COVID-19 crisis. And of course also driven by some tailwinds from the markets but also by, I think, a strong development in terms of market outperformance of our strategy penetrating technologies in new markets, upselling our product portfolio, introducing new products.
Mid-term, however, we expect still a lower volume growth mid-term. That is the reason why we also stick to our mid-term growth guidance of 4% to 6%, which includes pricing, obviously, but a normal pricing in normal times. So mid-term, we don’t expect that the volume growth of 6%, 7% is sustainable.
Operator
The next question is by Christian Arnold of Stifel Schweiz AG.
Christian Arnold
A couple of questions from my side. First, maybe again on the ceramic production, am I right to assume that you have maybe — or preproducing, increasing your inventories in order to secure the availability of these products once a stoppage would occur?
Christian Buhl
Correct. We are producing as much as we can, obviously, in these plants, but demand is also good. But we are producing as much as we can in the plants in Germany and Poland.
Christian Arnold
And is that only true for ceramic for this plant you just mentioned? Or is it a general — yes, thing you’re doing right now to increase your inventories to secure capability?
Christian Buhl
Basically, the answer is no because demand is so strong. We had a volume growth of around 6.5% in the first quarter. So everything was — we manufactured was also sold more or less. Therefore, inventory levels didn’t really go up in the first quarter.
Christian Arnold
Okay. On the logistics, you also mentioned there that you were able to actually get all the materials you have. Now thinking about your production site in Shanghai, there I believe you mainly produce for the local market. But at least in the past, you also produced some products or components for the global markets, thinking about valves. Is there any impact from the port situation in Shanghai that you don’t get reduced product out of Shanghai out of China?
Christian Buhl
We have been impacted in our plant in Shanghai, this is correct, in April for about 2 or 3 weeks. Not because of shutdown of our plant but exactly what you mentioned because of logistics issues. So in and outbound logistics didn’t work anymore for 2, 3 weeks. This is the reason why we had also more or less no sales out in these — from this plant. But as you mentioned correctly, it’s only a plan for the local markets, local means the regional market in Asia, nothing relevant for Europe. And deliveries are starting to work again since last week. So now it’s getting back to normal, but we had some issues in the China plant.
Christian Arnold
Okay. Then on shower toilets, did you go back to double-digit growth in this year? And could you remind me what the growth was last year?
Christian Buhl
We had a very strong double-digit growth last year, especially in the first quarter, supported by the home improvement trend. This is the main reason why in the first quarter, shower toilet sales was on previous year’s level. But this is also another indication why we believe that the home improvement is still healthy. So we more or less sold the same amount of shower toilets in the first quarter this year compared to Q1 last year, which was strongly growing last year.
Christian Arnold
Okay. Last question maybe on the raw materials. Which raw materials are the most difficult to get at the moment?
Christian Buhl
That’s — honestly, a long list of raw materials. And also some smaller things like pallets, for example, for logistics. So it’s really across the board, and I can’t highlight specific one. And honestly, it changes also every week. Every week, we have a new challenge to find this and that and some materials which you never thought are really that much relevant. But at the end, they are relevant. So it’s a challenge across the board.
Operator
The next question is by Marta Bruska of Berenberg.
Marta Bruska
Actually, I have one on the last. So with regards to the currency effect on your EBITDA margin, you reported today 50 basis points. I remember very well the discussions for maybe a year or 2 ago when you were reporting you have a perfect hedge — regional hedge, so you don’t have any currency effects. So before that, there were other years that you also showed some currency effects. I just wanted to check what is changing in the business of Geberit that this currency effect appear and disappear periodically?
Christian Buhl
Yes. Your observation is correct. Basically, nothing has changed. We still have, in normal times, a perfect natural hedge. However, there are certain smaller currencies which strongly devaluated in the first quarter, even though the sales proportion of these countries are small as like the Turkish lira, the Russian ruble, and it’s also Ukraine. And that had that effect, which is unprecedented but as well will not likely to repeat itself. So the big currencies, euros and dollars, the natural hedge is still and will remain perfect.
Operator
The next question is by Stefanie Scholtysik of Mirabaud Securities.
Stefanie Scholtysik
I would be wondering what raw material is used to produce ceramics besides energy and how this raw material price was behaving? And then could you give us maybe an update on the situation of installers in Germany? Has the situation eased? Or is it still a bottleneck for you? And then maybe if you could also give us an update on Geberit ONE, how is this system being received by the market?
Christian Buhl
The major raw material for ceramics is clay and some minerals. However, the share of the cost of materials is low or relatively low compared to other product there. The main driver is, especially in terms of inflation now, is energy. But also clay and minerals were going up but not as much as energy. So therefore, the main driver for cost is energy interim.
Question number two, the situation of German installers is unchanged, as I answered before. The order backlog of — or the order book of installers is still at 13.7 weeks. That is the same number and the same information as we had in mid-March.
And everyone is doing well, especially the WC. We are very happy with development. It’s growing nicely and still not material from a group level, but it’s growing nicely and also supporting our marketing activities in the markets in communication with our plumbers to also demonstrate our strength in terms of technology within ceramics, so we’re very happy with Geberit ONE.
Operator
The next question is by Matthias Pfeifenberger, Deutsche Bank.
Matthias Pfeifenberger
Two questions. Firstly, a lot of the questions circling around when volumes would finally turn down, and you’re still reporting flat volumes in April despite heavy prebiased record wholesale inventories despite wartimes, despite people probably doing a lot of holiday reservations these days and also maybe the focus shifting towards energy efficiency renovation. So my question is, are we or parts of the spectrum here underestimating the resilience and limited demand elasticity of premium RMI and also your scope of market share wins?
And the second question is, on margins, your commentaries are suggesting, obviously, weaker — sequentially weaker margins in the second quarter, at least potentially, given acceleration of the raw mats and the price increases only coming through from July. So how much weaker? I mean, could you provide some color? Is the old 28% to 30% margin corridor in reach in the second quarter?
Christian Buhl
First of all, we are addressing, more or less, especially in Europe, all the market segments, not only the premium because it’s driven by our market, for example, Installation & Flushing Systems, we are a large part of the market. Therefore, it’s not just driven by the premium. But I think you’re right. The volumes which we have seen in the first quarter were strong. They are resilient still in April. And maybe that is a general observation in the building construction, we have always some delays. It’s not a fast-moving industry also in terms of demand, maybe also not in terms of price elasticity, and therefore, any effects in our industry are a little bit slower maybe than compared to other industries.
And as I also mentioned, we have always a certain order backlog where you still have open orders of building projects, which obviously delays certain effects. This is the reason why we’re also saying at the moment, demand is still strong, and we don’t expect the collapse right now in terms of volume at the moment.
That question, margin Q2. As you know, we don’t provide any margin gaps for the full year. Therefore, we also don’t provide any guidance for Q2. Just to highlight again, obviously, we will have that clear substantial negative impact from raw material prices. The new extraordinary price increase will only kick in as of July. So therefore, it’s obvious that we will have strong headwinds in [Indiscernible].
Operator
The next question is by John Revill, Thomson Reuters.
John Revill
I just wanted to clarify a point on the gas, sorry, with the plant. Is that a contingency plan? If you say, is this a contingency plan if you have problems getting Russian gas? Or you’re going to switch to LPG gas anyway? Sorry about that.
Christian Buhl
This is a contingency plan. We implemented it [Indiscernible].
John Revill
And you will change to LPG gas, yes?
Christian Buhl
To LPG, yes, correct.
Operator
[Operator Instructions]
Christian Buhl
It seems there is no further questions, so thank you for your attention and your questions. We wish you all a great day. Bye.
Operator
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.