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Geberit AG
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Good morning. I am the Arkadin operator for this conference. Welcome to the Geberit Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] 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. Please go ahead.
Thank you for the introduction. Good morning, ladies and gentlemen. Welcome to this conference call. The coronavirus pandemic led to an unprecedented global economic crisis and changed business realities over the last 3 weeks at a speed never seen before. The objective of this communication outside of our regular financial calendar is to inform you directly and promptly about the current situation at Geberit. We want to ensure that the capital markets are informed simultaneously and equally about the current situation and the impact of the COVID-19 crisis on our business.We will cover the following 3 topics in this call. First, the net sales development in Q1; secondly, a status update on the COVID-19 impact on Geberit; and thirdly, our priorities going forward.Let me start with our net sales figures. Geberit had a solid first quarter with a net sales growth of 1.5% in local currency. The COVID-19 crisis had a negative impact in the first quarter in 2 dimensions: first, a production interruption of our plant in China in the shower toilet model, Mera; and second, a substantial sales decline in March in a selected number of countries where the COVID-19-imposed restrictions led to a shutdown of construction sites. In Swiss francs, net sales decreased by 3.9% to CHF 798 million due to substantially weaker foreign currency.Let me turn to the regions. Net sales in Europe increased by 2.7% in local currencies and in America, by 0.8%. In Middle East/Africa, net sales decreased by 15.3% driven by weak sales in South Africa and Israel. In Asia Pacific, net sales decreased by 21.6% driven by very weak sales in China in the first quarter.Turning now to the product areas. In the first quarter, Installation & Flushing Systems net sales grew by 2.2% and Piping Systems by 2.3%, both in local currencies. Bathroom Systems net sales were on previous year's level, negatively affected by the production interruption of the shower toilet model, Mera.Let me now comment on the current status of the COVID-19 impact on Geberit and our business. I'll start with the current market situation. The main driver for the demand of Geberit products is the activity level of building construction sites. In the majority of countries in which we are active, building construction sites are still open. In a few countries, however, building construction sites are largely shut down or closed, either by local authorities or due to discontinued operations of other construction companies.The countries where today building construction sites are largely closed are Italy, France, U.K., Spain, Austria and outside Europe, also India and South Africa. These countries represent around 25% of our sales exposure. Customer showrooms for sanitary products are largely closed in all countries, in line with the public shutdown of the retail sector.Let me continue with the current situation at Geberit. Since mid-March, the COVID-19 crisis had a negative impact on our demand. Overall, order entry in March was down by a low double-digit percentage. This decline was mainly driven by a substantial decrease of demand in the before-mentioned list of shutdown countries since mid of March. The remaining countries also recorded a decline in demand, although much less pronounced driven by a lower activity level of the building construction industry imposed by COVID-19 restrictions.Let me now comment on the status of our supply chain. We produce mainly in Europe for our European markets and source most of our raw materials and components from European sources. Furthermore, our plans and our logistics are highly automated. Our supply chain is, despite the COVID-19 restrictions, still intact and runs on normal level. So far, we have access to all important key materials and components.The 2 plants in China are up and running again. At the moment, 3 smaller sites are shut down, the ceramic plant in Italy and France and the plant in India. However, none of these 3 plants is material in terms of volume, and we have sufficient stock for the coming weeks. Currently, the biggest short-term risk for the supply chain are supply shortages from component suppliers, for example, from Italy, and a forced shutdown of a material plant at Geberit.Geberit is financially very strong and healthy. We have a very strong balance sheet with a strong cash position of CHF 300 million and an unused revolving credit facility of CHF 500 million per end of March.The current share buyback program is not impacted by the actual situation and has been further executed according to plan. 261,000 shares in the amount of CHF 106 million have been bought back in Q1. There is a minor part of the current program left. The program will be terminated in Q2 as planned.The dividend in the amount of CHF 400 million, which will be paid out tomorrow, has not been changed due to the COVID-19 crisis. The payout ratio is in line with previous years.Let me now comment on our priorities going forward. We reviewed, over the last 3 weeks, the impact, the risk and the opportunities emerging from the COVID-19 crisis and came to the following conclusions. First, there is no need to change our strategic agenda or operational priorities. We will continue to think long-term, to invest and to execute on our strategic and operational initiatives. We also do not see a need for restructuring. We rather prefer to invest some of our margin into the business to emerge stronger from this crisis and to leverage the opportunities as a strong and financially very healthy player in times of market disruptions and turbulence.Of course, we will and already started to take measures to adapt our daily activities and projects to the current market realities. This means that we will stop or delay activities or projects which are not feasible, not necessary or are not meaningful in the current environment, and we will manage underutilization due to temporary demand shortages or forced site closures. However, we will not make any compromises on our fundamentals or take any measures which would harm our position or future potential, for example, by reducing our R&D efforts and budgets.In this context, we define the following 4 operational priorities in this extraordinary situation: first, the safety of our employees; second, the support and management of our customers; third, business continuity management to ensure the availability of our products; and finally, an increased focus on liquidity in times of high uncertainties.To maintain our strong balance sheet and to strengthen our midterm liquidity, we will issue a standard Swiss franc bond in the amount of CHF 150 million or more, with a maturity of around 2 years. The final terms will be subject to market conditions. This will allow us to leverage the currently still-attractive financing conditions, to free up our [ CS ] capacity for our net working capital management and to prepare the refinancing of the Eurobond, which is due next year.We refrain in the current situation from providing an outlook for the building construction industry and raw material markets due to the high level of uncertainties and the lack of visibility.Let me close my introduction with a short summary. Geberit achieved a solid net sales growth in the first quarter, negatively impacted by the COVID-19 crisis in March. Hence, Geberit is not immune against the economic crisis emerging from the COVID-19 pandemic. We will see an impact on our 2020 results, although the severity is still unclear. 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 margins, which allow us not only to navigate through this period of disruptions and turbulences, but also to emerge stronger from this unprecedented economic crisis.Thank you for your attention. We are now ready to answer your questions.
[Operator Instructions] We received our first question. It's from Andre Kukhnin, Credit Suisse.
I'll start with the resilience of your aftermarket sales, please, first. Could you share with us the experience you have had in countries like Italy, Spain, France, in the last couple of weeks of March, where the construction sites are closed, but was there any activity into existing buildings and replacement demand?
If you refer to the countries, which we call currently shutdown countries, referring to the shutdown of construction sites, the level of activity was, of course, very low. So for example, in Italy, there was a very low level of activity of construction sites. And obviously, showrooms are more or less completely closed. And that has an impact on our demand and already sales in March for these countries.
Yes. It was exactly what I was wondering, but understanding shutdown of construction sites, but in terms of sales kind of into existing buildings and replacement demand, was that also at kind of near 0 activity?
If we refer to construction sites, we refer to new build and renovation. We do not make a big difference. If the construction sites are closed down, you're also not allowed to do renovation work, in general. So there's no difference.
Got it. Got it. And just a follow-up on that. In countries that shut down the earliest, like Italy or Spain, are you seeing any signs or any initial moves towards thinking of reopening in the coming weeks?
I can only refer to the figures which we see per end of March. And per end of March, we do see nothing in terms of normalization or recovery.
Got it. And a broader question on the last points you were making on the priorities and assessing the situations from kind of all perspective and obviously, from also a position of strength of Geberit. Is there an opportunity in this situation for you beyond just the normal, kind of, stronger companies get stronger, weaker get weaker in these kind of cataclysms? Is there anything you can do in terms of -- I remember, in the crisis, you used this as an opportunity to train a lot of plumbers in places like Spain. Obviously, right now, there are restrictions of moving people and meeting people. But is there anything that you see right now that you can potentially utilize?
Yes. We define 3 priorities for our sales organization in these times of underutilization. Number one is an ongoing support of our customers if possible, maybe via phone or more digital instruments, if the customers are still operating, of course. Some companies and customers also closed. Number two is strengthening our competencies. So we are training our organization via digital tools and other means. And number three is what we call housekeeping, making sure we clean our house in these times, for example, CRM databases, et cetera, to make sure that we are emerging stronger from this crisis afterwards.
And the next question is from Fabian Haecki, UBS.
I got 2 questions. The first one is on the Middle East. Was the double-digit decline already an impact we've seen from COVID? Or is there any other reason or just general volatility here? That's my first question.
It was driven, on the one hand, by COVID already. In South Africa, we have seen very weak sales in March. And also Israel. Israel is a relatively small country for us, but if the decline is very substantial, it has impact on that region. And the second reason was a generally weak environment in the Gulf. I would assume also without COVID-19, we would have a difficult first quarter in the Gulf anyway.
Okay. And then my next question is based on trying to look back in 2009 and compare a bit how your revenues behaved and your margins and your revenues being down also in the mid- to higher single digits, but you had a record margin in that year of 32%. It's not all comparable, I know, but also mainly thanks to lower raw materials and also now, raw materials are coming down. Do you expect -- I mean I don't want to call for a record margin, but your margin will be similarly resilient? Or is this time, are things clearly different versus 2009?
I will not make any statement around the margin expectation for this year. But I think what could be comparable to 2009 is, and that is the high-level conclusion of the crisis in 2009, we emerged stronger from this crisis. And I'm convinced that we are also able to emerge stronger from this crisis, but I refrain from making any comments on margin expectations for the full year.
Okay. And maybe a last one. You said there's no change in strategic priorities, R&D. Does that also include your digitalization projects and the extra costs for this year?
Correct. That is one of the examples.
And the next question is from Martin Flueckiger, Kepler Cheuvreux.
Martin Flueckiger from Kepler Cheuvreux. I've got 3 actually, and I'll go 1 at a time. Just firstly, on your containment measures that you have started to implement. Do these include short-time work as well? That will be my first question.
As a last resort, we would also include short-time work. At the moment, that depends, of course, on the country situation and also on the function. At the moment, we implemented short-time work in 2 countries, in France and in the U.K. In France, as you know, the market is very much retail-driven, so DIY stores are completely closed. And in the U.K., there is a public COVID-19 retention scheme, which led to the reality that most customers closed their businesses. That is the reason why we implemented short-time work in France, U.K., not to 0, of course. Both organizations are running about at 50% still, but we adapt the organization to the very low activity level of customers at the moment. In all other countries are no plans. Currently, we have implemented short-term -- short-time work.
Great. My second question would be on the development on -- of raw material prices that you have seen over the last 3 months. If you could talk a little bit about those and what you're expecting for Q2 at this stage. I know you gave some guidance 4 or 5 weeks ago, but I guess a lot of things have changed in the meantime.
Raw material prices in the first quarter came down compared to the fourth quarter last year, so that will support our margins in the first quarter. I refrain from making any outlook for the second quarter.
Okay. And -- okay, I guess you're not going to answer that question either then, but just for the sake of it, from an analyst point of view, estimating the current impact of COVID-19 is, to put it nicely, a nightmare. Could you provide any kind of reference of how you would look at the growth opportunity or the decline opportunity, I should say, for the second quarter in terms of sales?
I think we are sitting in the same boat in that context with that point of view. And we do also have not had any comparable whatever. I really think that is an unprecedented situation, especially to speak of what happened over the last 3 weeks. Therefore, I can only say sorry, but we are in the same boat as you do. I don't know.
And the next question is from [ John Revill ], Reuters.
I have a couple of questions, if I may. Can you tell me, are there any kind of job cuts? Or how do you see job cuts or financial size of -- sorry, besides of cost savings that you're planning to deal with this downturn? That's my first question. And then the second one is could you give a bit m color on why you decided to keep the dividend when some people, actually, Rolls Royce today, they're not paying their dividend after all. Could you give a bit more color on why you decided to keep the dividend in place and the share buyback?
Question number one, about job cuts. As I said, we do not plan or do not see any far restructuring. So we have not any plans to cut jobs. But of course, we put in place a hiring freeze in these times of very high uncertainty, but no job cuts or restructuring plans are foreseen. The second question, we didn't really understand. Can you repeat again?
Well, sorry. Yes. Could you give just a bit more background on why did you decide to keep the dividend this year when a lot of companies have decided actually to keep the money in-house to deal with the situation, basically?
Yes. We were financially -- or our balance sheet is financially strong enough that we can pay out the dividend. Also, the liquidity situation was strong enough. The share buyback program, that was the old share buyback program, which we have almost terminated now in the first quarter. So obviously, the second share buyback program, there, we continue with the preparation, but that will not be started until we have a better visibility of the development of the situation.
And the next question is from [ Rami Nahishvega ], Zürcher Kantonalbank.
My first question would be about China. You mentioned that the plants are up and running. I mean all my companies, they tell me their plants are up and running. But I mean they are ready to work, but there is no work to do, I assume. How do you see the situation in your plants in China?
So the plants are up and running, but I think you're referring to the question about demand in the market. Demand is coming back to China over the last 2, 3 weeks, but it's not yet at normal levels, pre-COVID-19 crisis.
At what level are they then? Is it a 10, the demand?
Sorry. Say it again.
At what levels is the demand back then?
Difficult to say because there's a lot of volatility. I would rather estimate about 50% of the pre-COVID-19 demand. But keep in mind, China is a relatively small country for Geberit in term of share of sales.
Yes. Okay. And then this press release you published this morning was not scheduled. You scheduled a later date in the year. So what is the reason that you had to release that press release?
The reason was just to make sure that we communicate simultaneously and equally to the capital market in these times of very high uncertainty and in these times of very volatile information flow. So that was the main reason why we said we want to communicate as fast as possible about the first quarter, which we see as a good solid quarter and to give you a status update about our situation. That was the only reason why we decided, on short notice, to communicate today already the sales figures and the status update at Geberit.
And my one last question, the influence of foreign exchange rates was rather a stronger negative than we thought, Martin Hüsler thought. Then -- so why is that? Which currencies were especially weak?
I can't answer the question because I don't know what Martin Hüsler thought. Therefore, we just gave [indiscernible], which are out there, public information.
Yes. Sure. But did you see some currencies especially weak to mention?
No, of course, the euro is very weak, 65%.
Yes. I mean except the big ones we know.
Surely, it's important, it's about 55% of our sales are exposed to euro, 5% are exposed to U.S. dollars, and that these are the main drivers, all currencies are good, not many to say...
Okay. I'm sorry. I'm not so familiar. I'm calling for Martin Hüsler, who is otherwise engaged. So I'm not so familiar with Geberit. I'm sorry for that.
No problem.
And the next question is from Arnold, Christian, MainFirst.
It's Christian Arnold, MainFirst, in Zurich. A clarification question first. You were mentioning that your orders were down low double digit in the last 3 weeks. Were you referring to the overall group? Or were you referring to the closed -- or the construction closed companies?
No. I was referring to the entire March, and I was talking about the order entry for the entire March, which was down by a low double-digit percentage, the entire March, the entire group. The main driver -- the main drivers were, of course, the shutdown countries since the second half of March.
Okay. And what kind of lead time do we have here?
Not really long. We have a visibility of about 2 weeks, at best. That is simply our order book level, and that's also currently the case.
Okay. And then a question on the performance of the different product lines. I mean we have seen a pattern which was quite similar to what we have seen last year. So Installation Systems as well as Piping Systems outperforming the Bathroom Systems by a certain extent. Now looking at the situation where all the showrooms are closed, do we have to expect a larger gap between the, let's say, traditional business and the Bathroom Systems business going forward?
No, I think the showroom effect is too early. It does not have yet an impact on Bathroom Systems. So first of all, you are right, the showroom effect is mainly on Bathroom Systems, but with a certain delay. And showrooms are closed since around 3 weeks maybe in Europe. So we did not see that effect yet in the figures. The reason for the underperformance of Bathroom Systems in the first quarter is mainly the production interruption of our shower toilet, Mera. Keep in mind, Mera is our premium model and has, of course, the biggest impact on our shower toilet business, that we were not able, as you know, to produce for a couple of weeks these shower toilet and to deliver due to the lack of a component from China. That is the main reason for the underperformance in Q1.
Okay. But thinking now about the closed showrooms, it would be fair to assume that the gap will widen going forward?
It's fair to assume that the showroom closure will have mainly an impact on Bathroom Systems. From that perspective, your hypothesis is correct.
Okay. And then maybe last question on your centralized logistics center in Pfullendorf, I mean, you are producing for Europe, but I think all products, more or less, are going through your logistics center in Pfullendorf. Did you have any hiccups so far in terms of logistics, in terms of shipping around the goods to the center and out of the center? Is it slowing down? Or you don't experience an effect at all?
I wouldn't say not an effect at all, but the logistics is running relatively normal. We have, from time to time, some issues with capacity of logistics suppliers. But that is solved. So at the moment, it's really running relatively normal, if you talk about the logistics.
Okay. Very good. Maybe last question and attempt. I don't know well if you can give us here some color, but nevertheless, I'll try. Germany, as your most important single market, I mean, how did the demand develop here? What do you see here in Germany? Any color would be appreciated.
As I said during my introduction, also in countries where construction sites are technically open, they are running, for example, in Germany, we have also seen a somewhat lower demand. Of course, not to the same extent as Italy, France or the U.K., but we have also seen impact. And that impact is mainly driven by the restrictions of COVID-19 also in markets like Germany. Basically, there are 3 reasons why it has also a lower activity level. First of all, social distancing, also implemented in Germany or in Switzerland, has an impact, a slowing impact on construction sites. Secondly, keep in mind, a lot of construction workers in the countries are foreign construction workers, so people coming from Poland to Germany working on construction sites. Of course, they are restricted. That's another impact on construction sites.And number three is, we are in a component business. A building is one product made out of several components. If you have a delay for one of the components, whatever it is, that has an impact on the rest of the components. So that means that also in other countries, where construction sites are open and running, the activity level is somewhat impacted. And that is also the case for Germany, and therefore, we have also seen somewhat lower demand since the second half of March in these countries.
And the next question is from [ Angele Kargruber ], Tages-Anzeiger.
You mentioned the forced shutdown of a plant as one of the biggest risks. So I was wondering if there was a big discussion about the safety of your employees between employers and unions, how you see that, and whether it was possible to adjust your production facilities to make them corona-safe for people at risk.
Of course, we are in an exchange with our employee representatives constantly. But I can say we have very good relationships with our employee representatives, that we are informing each other very openly. And we did not have any, like, the heavy discussions or disputes or conflicts coming from this very challenging situation also for the plants.
So the forced shutdown does not come from these restrictions for employees...
Yes. Now we have to differentiate plants by plants. We have 3 smaller plants. India is closed down because of the local authorities. They have shut it down. The same is true in Italy. The ceramic plant is shut down because of the governmental restrictions. And the smaller plant in France is just more like down because of demand, but also some employees which were unable to come in. It's a smaller plant.
I see. And I would have one more. Is it a concern for you that, especially in countries where construction sites are shut down, all the plumbers might have problems and there might be bankruptcies as they are your sales force, kind of?
That will be a question which will come up. So far, we have not seen any impact from this crisis directly on customers or wholesalers, installers going bankrupt. It's a bit too early to answer this question.
And the next question is from Remo Rosenau, Helvetische Bank.
Is it right to assume that in the countries where construction sites are closed, basic plumbing -- plumber services are, however, are still available in kind of an emergency. I mean if there is a problem in the building with the plumbing, you obviously need to fix it. So are the plumbers still there to work for repairs even in Italy? Or how is the situation country by country?
I do not know all the detailed legal restrictions on country level, but I assume as you said that for emergency cases, also in Italy, you are allowed to work. I do not know the details in Italy, but I would assume, yes. So this is service business, you mentioned, technically it will be available in all the countries, especially in emergency cases. But we see -- what we see is an impact that, let's say, for your small little bathroom equipment replacement, you might currently refrain as an end user to call your installer because you don't want to have installers or foreign people in your house. So for emergency cases, I would say, yes. For reworks, for the general service level, also at a much lower level than normal.
Okay. And then what about the price increase, which should have been implemented on 1st of April in most of the countries? Have you been following through that or no?
Yes. Yes. We did not change anything with our price increase, we implemented them as planned.
The next question is from [ Evan Keller ], Independent Credit View.
Some of them have already been answered, so just 2 left. So the one would be to get a feel, a bit more about the flexibility of that to your cost structure to this new situation. This would be the first question I have. And the other one, you seem quite confident from a liquidity point of view as you still pay the dividend. And now you're tapping the bond markets. So what do you feel -- and given that you have to feel that you're going out with -- stronger than before? What -- how do you see M&A and M&A targets? So can this be also an opportunity for you to look more intensively to M&A transactions? Do you feel that your rating is actually -- can be held on an A+ level?
First question around the flexibility of our operations. Keep in mind that we are highly automated in our plants but also the logistics. And the workforce, of course, is partially flexible. We have, in some plants, temporary workers, so we are able to adapt to a certain level also the capacity in operations, but there is a limit, of course, to that. Second question. No change on our M&A agenda due to this disruptive crisis. So it's not that we have currently more appetite on M&A than what we would have had before. Currently, it's all about maintaining the business and making sure we get stronger out of this crisis than we have been before.You asked about the impact on our rating. I ask Roland this.
Look, we don't see or we have any -- don't have any indications that our rating should be impacted or changed for the moment. And we assume that the strong balance sheet, together with the rating, will help us to go successfully to the bond market.
And the next question is from Bernd Pomrehn, Vontobel.
Just one question left. In Austria, Strabag and Porr, they announced a week ago that they are -- would open their construction sites in Austria, again, gradually. Is this something you are also seeing? So are you again seeing some activities in Austria?
Not yet, but we expect this week that the picture should improve in Austria. I think it's a good example which shows how fast things are changing. So Austria should, again, be better this week because large construction companies are reopening their construction sites. So we expect this week, a positive effect.
And the next question is from Pierre Rousseau, Barclays.
So you mentioned the rate of decline of low double digits for March. Can you give us the number for the last 2 weeks or maybe for the last week of March? That would be a better indication of what the current shutdown implies for you.The second question would be on ceramics. You've mentioned the Italy plant was closed. So I was wondering if you could give us some details on the supply chain in that specific business and if there are any consequences on the rest of your bathroom operations?And the last one would be on CapEx. You mentioned that all your priorities were unchanged. So is right to assume that CHF 180 million is the right guidance for your CapEx in 2020?
First question around the order entry in March. As I said before, for the entire March, order entries were down in a low double-digit percentage driven by the second half. In the first half of March, we even have seen a stronger order entry. Of course, there were some pre-orders, stock orders from wholesalers. And the second part of March was, of course, much worse -- or was worse. I do not give or cannot give you any details in terms of figures.Number two, the ceramics plant in Italy, in Gaeta, does not have a material impact on our operations. It's a smaller plant, and we have also a lot of stock there. And it's also a plant which is manufacturing strongly for the Italian market, which is anyway, down.Third question, CapEx 2020, we expect now lower CapEx than originally guided for. We planned originally CapEx of around CHF 180 million. That will be less this year because some of the projects we are not able to pursue due to the restrictions. So that will automatically lead to a lower CapEx budget this year. But as I said before in my introduction, we do not want to cut systematically the CapEx budgets to save our liquidity.
The next question is from [ Yonah Kenner ], Reuters.
Just a bit of a clarification. You said that the order intake in March was down to sort of low double-digit range. Could you give us a bit more clarification on that because that's -- could be anything from 10 to 99? So is it 10 and 20, or can you just give a bit more -- sort of a bit more of a ballparking kind of area there, please?
I don't want to give you a more detailed figure. And the reason is very simple. We talk about more than 2 weeks, and the volatility is very high. So if you talk about a figure now, maybe we are all, you and ourselves, are speculating too much. That's the reason why I stick to my guidance before, low double-digit percentage. But between 10 and 99, obviously, closer to 10 than 99 because it's low double-digit dollar, maybe much smaller...
And we have a follow-up from Andre Kukhnin, Credit Suisse.
I just wanted to come back to Austria and what you said on a couple of questions earlier. Frankly, I haven't followed it as closely as some other countries. Could you give us an idea on kind of when they shut down and for how long we've seen those shutdowns for? And just broadly, is there any reason why this is not the playbook for kind of the rest of the countries in Europe, in your opinion?
So in Austria, it was not basically driven by the government to close construction sites. The major influence was coming from a large construction company, Strabag, which decided and also, Porr, the second one, to close their construction sites around 2 weeks, 2.5 weeks ago. And as explained before, in a question or in an answer, Strabag is reopening their construction sites as of last week. That would have a positive impact, which is a large player on the construction sites in Austria.
Okay. So the key difference is that it's actually industry-driven rather than government?
Exactly. That's what I said before. No, it's not always the case that you are not allowed to work on a construction site. Also, in the U.K., construction sites are not officially closed. But if some players or large players, so many players decide not to work, that has an indication on the entire construction activity, of course.
Got it. And then in terms of your -- just if I may, another follow-up. In terms of your repair activity -- or kind of back to what I was asking originally, if you look at your sales mix, could you quantify at all how much of it is that kind of essential repair activity. Do you have any idea on that? I would appreciate if you go through same channel.
It is -- as we always say, about 2/3 of our business is exposed to renovation, RMI, and about 1/3 is exposed to new build.
But within that renovation segment, is there a -- kind of there is a part of it that is just literally replacement demand when something is broken down, and it will be replaced as it's usually an emergency. Do you have any estimate of how much that is?
No. No estimates.
The next question is from Christian Korth, HSBC.
I just would like to ask if you have changed anything in your approach to working capital. I'm thinking especially about receivables. So do you now require more prepayments from your clients to protect yourself? Or have you maybe relaxed prepayments to support the remaining demand? Have you changed anything in this regard?
No. Today -- up until today, we have not changed our approach to working capital management. We are paying our suppliers normally. Obviously, we keep a close eye on our outstanding receivables, but no major changes so far.
And the next question is from Marta Bruska, Berenberg.
Actually, most of my questions were already asked -- answered so far. So maybe just one follow-up with regard to the lead times. I was a little bit surprised with an indication of 2 weeks from orders to the -- to actually the sales for you? And if you could please tell us a little bit more of a dispute between the -- how this differs when you sell directly to the construction site and when you sell to the distributors through the wholesalers?
So the first question, our order book level is about 2 weeks. That is normal. That's the case in years. That's the case in our industry because the inventory management to cope with the fluctuation in demand in our industry is basically in our favors. That is the reason why we have a relatively low visibility and a relative low order book.The second part of your question, I didn't really understand. Can you repeat it again? The quality was a bit difficult.
I'm sorry. It's from the mobile. So perhaps, can you tell -- remind us what the split in your sales between the sales to the wholesalers and directly to the construction sites for larger projects? I mean such projects, when you have the renovation of the entire building and perhaps you sell some products directly to the construction site, and how the lead times differ for those.
Not too great.
No. But we are always selling to wholesalers, and I'm still not to have understood your questions. We only sell to wholesalers. And these wholesalers sell then to installers, maybe sometimes directly, I don't really know, but we only sell to wholesalers.
So you never sell directly to the construction sites?
No. No.
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