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Geberit AG
Earnings Call Analysis
Q1-2024 Analysis
Geberit AG
Despite navigating through a challenging market environment marked by currency fluctuations and increased taxation, Geberit reported a stable performance. Net sales marginally declined by 1% in local currencies, mainly driven by a slight decline in volume, offset partially by a positive price effect from last year’s price increases .
While overall net sales in Europe saw a decline of 2%, individual markets such as Italy and Eastern Europe demonstrated slight growth. The Americas showed a healthy increase of 6%. The standout performer was the Far East Pacific region with a 7% increase, despite a sales decline in China .
Operationally, Geberit maintained a strong EBITDA margin of 32.8%, slightly down from the previous year due to negative currency effects. However, in local currencies, the margin saw a slight increase owing to lower direct material prices, which were 9% below the previous year’s levels .
Significant wage inflation and strategic investments in growth initiatives, marketing, and IT impacted margins. Despite these increased expenditures, the company upheld its pricing power and stabilized sales prices .
Earnings per share (EPS) declined by 4% in local currency, largely due to the new OECD minimum taxation law. The company continued its share buyback program, repurchasing 99,000 shares worth CHF 51 million, with plans for a new CHF 300 million buyback program over the next two years .
The outlook for the building construction market remains tough, with building permits in Europe falling by around 15% in 2023, primarily in the residential sector. The new build sector is expected to contract significantly in Northern Europe and Germany, with Switzerland being more stable due to lower inflation and interest rates. The renovation sector is anticipated to be more resilient .
The company expects positive influences from structural trends toward better sanitary standards and strong demand in markets outside Europe, like India and the Gulf region. Geberit aims to gain further market share despite market declines and plans to increase operational expenditures by CHF 13 million in 2024, focusing on emerging markets and IT investments .
April sales were slightly above the previous year’s level, driven by restocking effects. This indicates an optimistic short-term sales development even amid a complex market environment .
Geberit demonstrated its resilience and strategic stability amid a volatile market. While facing currency challenges and increased taxes, the company maintained strong operational margins and continued to invest strategically for future growth. The continued focus on market share expansion and robust shareholder returns through share buybacks highlight its long-term commitment to value creation .
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Good morning, ladies and gentlemen, and welcome to our conference call on our Q1 results. Geberit delivered in a continued difficult market environment, good results. Let me start with the key statements for the first quarter.
First, the unfavorable currency development impacted the entire P&L negative. Second, net sales reached in local currencies almost previous year's level. Thirdly, operational margins remained stable on a very high level. And fourthly, the tax rate increased significantly mainly due to the new OECD minimum taxation law in Switzerland.
Let me now comment on our net sales development in more detail. Net sales in Swiss Francs declined by minus 6% to CHF 8037 million. The unfavorable currency development affected net sales negatively by CHF 43 million or minus 5%. Hence, group net sales declined in local currencies by minus 1%. This decline was caused by a volume decline of around 2%, which was partially offset by a positive sales price effect of around 1%.
The small positive price effect was driven by carryover effects from slightly delayed price increases at the beginning of last year. The volumes were slightly below previous year's level. Adjusted by the [ OneMain ] working day, volumes have been on previous year level in the first quarter. The volumes were driven by 3 factors: a positive base effect from destocking of wholesalers in the previous year. Secondly, a decline in end market demand; and thirdly, selective restocking of wholesalers this year. However, stock levels at wholesalers will not get back on normal levels end of Q1.
We come now to the regional development. All growth figures refer to growth in local currencies. In Europe, net sales declined by minus 2%. Net sales declined in all subregions and current countries, except in Italy and Eastern Europe, where a slight growth was achieved. In Middle East Africa, net sales increased only by 1% due to a very strong Q1 and Q4 in the previous year. Net sales in Far East Pacific increased by 7% despite the sales decline in China. And in America, net sales increased by 6%.
Let me now comment on the sales development per product area. All 3 product areas showed a similar sales dynamic, installation and flushing systems and Platform Systems sales declined by minus 1% and Piping Systems by minus 2%. I will now comment on the operating and financial results. The operating results decreased due to a substantial negative currency effect. However, in local currencies, operational results reached previous year's level.
I'll start with a discussion of the EBITDA development. EBITDA in Swiss Francs decreased by minus 7% to CHF 275 million. In local currencies, EBITDA reached previous year's level. The EBITDA margin decreased by 30 basis points and reached with 32.8%, at an excellent level. The margin decrease was driven by the negative currency development. local currencies, EBITDA margin slightly increased by 30 basis points, thanks to lower direct material prices. Direct material prices were in Q1 9% below the Q1 level last year. However, sequentially, prices in Q1 were only 2% below Q4 2023.
Despite the significantly lower direct material prices, we kept our sales prices stable, confirming our pricing power. Main negative margin drivers in Q1 were a wage inflation of around 5% and several dedicated growth initiatives, marketing efforts and additional expenditures for IT and digitalization. EBIT and EBIT margin decreased in line with the EBITDA and EBITDA margin. Net income in Swiss francs decreased by minus 11% to CHF 119 million, in local currencies, the decrease was minus 5%. This decrease was mainly driven by a higher tax rate due to the new OECD minimum taxation law in Switzerland.
Earnings per share reached CHF 5.73 and declined by 4% in local currency, slightly better versus net income due to the continued share buyback program. Excluding the negative currency effect as the new OECD minimum taxation law in Switzerland, EPS would have been almost on previous year's level. The share buyback program was continued with 99,000 shares bought back in the first 3 months for a total amount of CHF 51 million.
Let me now comment on our outlook, which does not differ significantly from our outlook given at our full year analyst conference in March. We expect a very challenging environment with an overall decline in building construction market this year. The increased building costs and interest rates over the last 2 years significantly dampened the demand for build construction activities especially in the new build sector.
Building permits in Europe declined by around 15% in the full year 2023, mainly driven by the residential sector, leading to a contraction of the European new build construction business this year. The stronger decline of the new build sector is expected in Northern Europe and Germany. The most robust new build sector should be seen in Switzerland due to lower inflation and lower interest rates.
Online renewable sector, we expect the renovation business in which we generate around 60% of our sales to be more robust, mainly driven by the fundamental need for renovation in several European countries and no additional pressure from the shift from sanitary to heating solutions as experienced last year.
Despite the overall negative sentiment for the building construction industry, we expect several positive catalysts for the sanitary construction markets. For example, the general and structural trend to better sanitary standards and the strong demand in several markets outside Europe, for example, in India or the Gulf region. We also expect challenges with regards to Direct material prices. First, we expect sequentially increase in prices in Q2 versus Q1.
Secondly, Direct material prices peaked last year in March. Since then, material prices were continuously falling. In other words, our margins will benefit less and less in the coming quarters from a positive base effect from higher material prices in the previous year, as you can see on Slide 6 of our PowerPoint presentation.
This brings me to the Geberit priority this year. The overarching objective this year remains to gain further market shares regardless of the declining market environment. We stick also in 2024 to our 2 guided principles strategic stability and operational flexibility. The purpose of this principles remain to manage the volume uncertainties in 2024 with a maximum of flexibility, but without harming the midterm potential of the business. This means that we continue to execute on our strategic agenda as presented at our Capital Markets Day last October, and that we will further invest into our businesses, into innovation and into efficiency.
Furthermore, we will increase our expenditures for dedicated sales initiatives in emerging markets for marketing efforts in the context of the launch of our new shower [indiscernible] and our 150th anniversary this year and for investments in IT and digitization.
In total, we will increase operational expenditures for these initiatives by CHF 13 million in 2024, further ramping up as of Q2.
Before we close the introduction with a short summary, let me briefly comment on the sales development in April. Net sales in April were like-for-like slightly above previous year's level, driven by restocking effects from wholesalers. Another priority this year remains our shareholder-friendly institution policy, based on a healthy balance sheet and a good cash generation, we will launch a new share buyback program this year. The new program amounts to a maximum of CHF 300 million and will run over a period of maximum 2 years. It will be launched after the completion of the current program in Q3 this year.
Let me go to our introduction with a short summary and our key messages. Geberit delivered good results in Q1. Despite a very difficult environment with weak demand, currency adjusted net sales and margins reached previous level. supported by restocking of wholesalers and easy comps for direct material prices due to still peak levels of direct material prices in Q1 last year. Earnings per share reached also previous year's level, excluding the effects from the strong negative currencies and the new OECD minimum taxation law in Switzerland.
For 2024, we continue to expect a declining market environment. Specific charge emerges from the phasing positive base effect for the margins due to the falling direct material prices in the course of last year. However, Geberit is well prepared for the uncertainties emerging from this environment has already demonstrated several times during the past. Our confidence remains based on the fundamental need for our products, our resilient strategy and business model and our long-term focus and track record.
Thank you for your attention. We are now ready to answer your questions.
[Operator Instructions] The first question from the phone comes from Arnaud Lehmann from Bank of America.
A couple of questions on my side. Firstly, on the CHF 30 million increase in cost that you mentioned for the anniversary and the investment in sales, et cetera. Can you give us an indication of the phasing through the year? I think you mentioned that Q2 will be higher than Q1 and then what we would expect into the second half?
And secondly, we have seen a rebound in the cost of some industrial metals and also of natural gas. Does that create a bit of risk to your margins going forward? Or would you consider a new price increase to offset the cost inflation?
The first question with regards to the additional expenditures of the CHF 30 million that already impacted Q1, however, a little bit disproportional as we expect a further ramp-up as of Q2. With regards to direct material prices, they are expected to increase in Q2 versus Q1, but this does not trigger any thoughts around sales price increases. So we don't plan to increase sales prices due to the slightly increasing raw material prices in Q2 versus Q1.
The next question from the phone comes from Husler, Martin with ZKB.
Yes. I have 2 questions. First of all, do you have any feeling of how much was the impact of the restocking effect of the wholesalers on your sales development?
And the second question would be about the launch of Alba, the new shower toilet, is there already a certain impact in Q1, maybe even a negative one because everyone was waiting for the shower toilet and did not buy, let's say, a substitute product.
First question, it is very difficult to quantify the impact of restocking what we have heard from selective wholesalers that they started restock their very low stock levels in the course of Q1, but we can't quantify how much it contributed to our sales in the first quarter.
Second question around the new shower toilet Alba, there was no significant impact in Q1, neither that we had the presales, for example, or that we had a negative effect on other products of shower, toilet because the customers waited for Alba. However, the feedback, which we got so far from customers along the value chain is very positive, and we are looking very much forward now as of April since we are selling the product since April this year.
The next question comes from Flueckiger, Martin with Kepler Cheuvreux.
I've got 3, and I'd like to come back firstly to the inventory restocking by wholesalers. I seem to have heard that you mentioned it was selective. Could you elaborate a little bit on that? Because I'm wondering how broad-based it was because I understand how difficult it is to quantify, but just to get another feel on it. That's my first question, and I'll go one at a time.
Selective means first, that we only have selective feedback of wholesalers. It is not a systematic feedback from wholesalers. And secondly, those selective with regards to geographies, there are some companies where stocking effects play much less of a role, for example, in Italy, where we haven't seen neither stock increases, decreases or restocking this year. So it's selective in terms of customers and geographies.
Okay. Great. And the second one is on the carryover effect from last selling price increases. Can you remind us, which round that was from last year's selling price increases? And were you -- it sounded to me at the time, like you are guiding for more or less 0% pricing impact on organic growth this year. So were you a little bit surprised about the magnitude of this plus 1%.
First answer, no surprise. We also always have some delay effects that was in the range of expectations. And it refers to the last price increase, which we implemented in January 2023, which was around 1.5%.
Okay. And finally, on the -- looking at your EBITDA margin bridge for Q1, it looks to me like the other cost effect were a little bit higher than what I anticipated. Judging by the magnitude, it looks like it's around, I don't know, high CHF 28 million, something like that, incremental impact on the margin. I realize that we have wage inflation, which is an important part there. But I would have thought that energy cost would offset that. So is there anything in there that we should be aware of in that other cost effect block?
No. Actually, that's really -- it's really wage inflation as the main driver. And then as already said, there was the start of the ramp-up of the plus CHF 30 million that's also in there, and then the rest are minor effects.
The next question from the phone comes from Arnold, Christian from Stifel AG.
Three questions, if I may. First, on the share buyback program. With CHF 300 million is smaller than in the last 10 years. Any reason for that? Any signal you want to send?
I wouldn't say it's small. The CHF 300 million corresponds to 100% distribution policy, so to say. But you're right, it is smaller than the recent share buyback program, which was maximum CHF 650 million over 2 years. But the reason for this stronger share buyback program, which we launched 2 years ago was that we wanted to leverage the capacity of the balance sheet in a better way. We have done that now, and now we are back to a more 100% distribution policy.
Okay. Then maybe a word on the sales development in March. I mean, you said in April year-over-year, it's slightly above previous year's level. That was probably also true in March, right? Despite the fact that we actually had a quite negative impact on -- from the business base.
It is correct. Yes. March was also like-for-like from previous year level, correct.
Okay. And then maybe last question on personnel costs. is the increase in salaries fully reflected in Q1 already? Or is there more to come? I remember that sometimes wage inflation only kicks in later in the year? I mean is the salary increases, has they already taken place in all countries? Or is there more to come?
No, you're right, that's not all the majority, but not all of the salary increases as 1st of January, therefore, there's more to come in the coming quarters.
But is it substantial more or?
No. It's more, but in bulk case as per January.
Okay. And then I have just a follow-up. I don't know if I missed it. Your guidance for CapEx this year is about?
CHF 200 million.
The next question comes from Touahri, Yassine with On field Investment Research.
Yes, my first question would be on the development in April. I think you said the organic growth was slightly above. Is it something that you can quantify? Is it like 3%, 4% above? And is it fair to assume that it's mostly volume and that prices is stable because there is no more lag effect?
We can quantify or we don't want to quantify because we don't want to go into details on a monthly level with numbers that will not make sense. At price effect, we don't know yet. I would assume it's much smaller than what we have seen in Q1.
And is it fair -- did you have also like a positive impact of working day in April because of the timing of Easter?
This is true. But I said like-for-like, it was slightly above previous year. If you add the working days, obviously it was much better, but we will have less working days now in May. So therefore, I would not thought too much on the working days.
And then the second question on the outlook. When we look at what happened in Germany, in Switzerland and Austria, the activity declined quite a lot in terms of new housing. Do you feel that we are close to the bottom? And do you think you could go back to a level of volume that is in line with what you achieved before COVID in the next few years if interest rates come back down?
This is a very difficult question to answer because we have, as you know, the destocking effects, which are overlaying much the demand on the underlying demand question. Therefore, we can't give you a precise answer to that question, we just don't know that the volumes will come back to a certain level to the 2019 levels. We are absolutely convinced. The question is only when. And there, we don't have the answer.
The next question comes from Rosenau, Remo with Helvetische Bank.
If I remember correctly in Q1 of last year, you profited from around 100 basis points positive margin impact due to energy subsidies in Italy and Poland of around CHF 8 million, right? I mean was it -- could you remember -- or remind me, was it around CHF 8 million? And I mean, if that is true, the underlying margin this year actually improved by around 70 basis points, it didn't decline by 30, or has there also been any special effect in Q1 '24 we should think about?
No first, you're right, we had a positive onetime effect last year in Q1 due to energy subsidies of the amount, which you just mentioned. But keep in mind that for the rest of the year, we will have significantly less tailwind from the raw material prices. If you look at Page 6 of our presentation, you see that the raw material prices last year peaked in Q1 and continues to decline since then. So we will face much less tailwind from raw material prices this year that might compensate this onetime positive effect, which we have experienced last year in terms of energy subsidies in Q1.
No, that is clear. But still, just looking at Q1, there was basically underlying margin improvement and not decline, right?
Correct.
The next question comes from Foletti Alessandro with Octavian.
I was wondering, you mentioned in the your introduction that you expect the renovation market to be more robust than new build. Can you sort of quantify that, what you mean with that or give more color on this?
Yes. quantified. We expect that the new build market this year in Europe should be down double digit. Building permits were down in the full year last year by minus 15% in Europe. And more robust means that the development in renovation should be much better. If it's also a decline or even a slight growth, it's very difficult to say, especially for our business. Since our renovation business is also very much affected by the question of the shift to heating solutions, which we have experienced last year, which we experienced less this year, and that might have an impact on our renovations.
Right. So you're already starting to answer the second question. Can you give a quantification on this shift to heating?
No, because we don't know how and why -- we don't know how we should do that on -- we don't have any number, sorry.
All right. And can you maybe give an update on the order backlog that you sort of gave always in terms of weeks, et cetera, and it's more on the heating side.
The order backlog of Germany dollars is at the moment at 15.5 weeks. This is significantly lower what we have seen a year ago, where it was about 20.1 week, if I remember correctly. But this high record number last year was very much driven by the heating sector. So it came down, and I would assume we don't have any effect behind that statement, but we would assume that this decline was mainly also driven again by less veneration activities in the area of heating solutions.
But if I remember correctly, before this whole heating boom took place, we were round about at this level I have 13 weeks in mind that you mentioned in one of the calls. Could that indicate that the heating versus sanitary has now sort of renormalized?
I don't know. I think that's maybe -- I agree with the number. First, I agree with the number, it was around 13, 14 weeks, before that whole week transition topic started, if that is solely contributable to now to the heat this heating discussion. I don't know. I don't know.
Okay. Okay. Just one last one maybe for the CFO. On the tax rate, which you mentioned again, can you remind how it will sort of trend?
For this year, it will be around 19%.
19%. And then it trend higher still, is that correct? Are we reaching in '25, '26.
'25, '26, it depends on a lot on the -- obviously, on the evolution of the country mix, et cetera, but there's no structural effect that would impact the tax rate further.
The next question from the phone comes from Fehrenbach, Charlie.
I'm not sure if I missed your guidance for the wage inflation for the full year. Is this still around 5% to 6%?
Correct.
Okay. And can you make -- you may have an idea that the negative ForEx effects in Q1, how this will develop in Q2? Will this be similar?
Unfortunately, we don't have a crystal ball on that FX, but right now, the effect obviously is much lower in Q1, if I look at the rate this year compared to last year. So if things were to stay like it is, the FX impact would be lower in Q2.
The next question comes from Rafaisz, Patrick with UBS.
I have 2 or 3 questions, please. The first, a follow-up on the wholesale restocking. You mentioned that this continued in April. What is your best estimate? Will that still impact most of Q2 when also the comps are still very easy and then it's over by Q3? Yes, that's the first question.
Unfortunately, I don't have the answer to be very short. I don't know.
Okay. And then on the growth initiatives, the extra spending. Can you remind us, is that only for '24? Or will these -- will this extra spending potentially also continue in '25? What's the current planning?
I would say the -- most of it will continue in '25, some spending for the 150-year anniversary, which, of course, is only for this year. But the other initiatives like growth initiative, digitalization, et cetera, will continue.
Okay. And then the last question, within EMEA, I know you don't disclose the details on the country level, but -- can you maybe still highlight some outliers that are significantly better or worse than what you reported for the region?
In EMEA, you mean Europe, Middle East, Africa?
Yes.
So in the positive outliers in Europe were Italy, which were positive. In general, I would say, Italy is a positive outlier, not only in the first quarter. There, the business is going significantly better compared to the rest of Europe. And another outlier is Eastern Europe, which was also positive in the first quarter. There is no specific reason behind that.
On the more negative side, outliers in Europe, I would mention the Nordic region, which is declining -- significantly declining in the first quarter, very much also driven by the very weak new build business in Sweden and maybe which is of importance for you in Germany is more or less in line with what we have seen in Europe.
Middle East, Africa, looking at the Gulf region, which was not that strong in the first quarter, but driven by the fact that we had strong business in Q4 last year, Q1 last year. The goal is very much project business, you have a lot of volatility in the quarters. But fundamentally, the market is still very good in the Middle East region.
The next question comes from Scholtysik, Stefanie with Mirabaud Securities.
I would have some questions on the Alba shower toilet. So is it right that you started the rollout in Switzerland in April? Or are there other countries that where the product will be rolled out? And can you give us the detailed not a rough plan when they plan to roll out in other countries as well?
The rollout of this plant has started in all countries in Europe as of April, not only Switzerland.
Okay. And then at the Capital Markets Day, you were also talking about that the Alba toilet would see a push also going into hotels and apartment blocks. How is the adoption rate there? Did you see a success than just coming from residential. So as it used to be more a consumer product, you also would see that it's more coming from the commercial side?
There, we have received very positive signals. We know of a couple of projects, residential projects, which are now installing Alba, for example, in rental buildings in Switzerland or Germany, they buy Alba. I have not yet have heard about hotel projects directly, but I'm pretty sure that will also be a positive demand driver for demand for Alba.
And I think last time you said you don't need to increase capacity for this product. Is this still the case? Or do you need additional investment?
No, there are no additional investments needed for the Alba manufacturing.
Okay. And then maybe another one on the product side on FlowFit. How much did FlowFit help to drive growth or decline growth, let's put it this way, in the first quarter and which of the countries you rolled it out in Q1 and what other countries are coming on?
We did not roll out FlowFit to further companies this year. We are happy with the countries which we have in rollout now in Europe around 10 countries, 12 countries. And secondly, the sales development was very positive also in the first quarter, strong growth. We are even above budget with FlowFit in the first quarter.
[Operator Instructions] The next question comes from Dolleschal, Christoph with HSBC.
Most of my questions were already answered, but probably a follow-up on some of them. Again, on the wholesaler levels. You said at the beginning that you said stock levels are not yet back to normal. And you've now said a few times that you don't really -- you can't really quantify. But I mean that idea comes from somewhere. So why do you say we are not back to normal yet? So what is the reason for that?
That's just what we hear from the wholesalers, when we ask them the same question, and they say, yes, we are not back to normal levels. That has a lot to do with the short-term market outlook, I would assume that has to do with the stock level of other product categories. So the answer just comes directly from wholesalers asking them the same question.
Okay. And does that probably have something to do? I mean when we look in Germany, for example, we've seen a huge slump in heat pump sales to the wholesalers. Do you think that is replacement business? Or is that a different kind of animal.
What do you mean with replacement business -- can you reflect more..
The wholesalers obviously, have stopped buying heat pumps and basically have probably some space left or some money left to again, restock other stuff because obviously, the demand -- I mean, the problem is that we don't really know what that means for the end demand in heat pumps, right, in Germany. We just see that the wholesalers have stopped buying them? And how does that impact your business as such?
This might be a driver for restocking. I agree it might, but we don't know exactly.
But do you think this could benefit you, say, in the medium term, also from the installers point of view?
Benefit in what sense meaning into?
Well, if obviously, the heat pump discussion is fading, and we also see that in the numbers, how much time would it take for a consumer to basically take the decisions say, okay, well, I've now basically decide on the heat pumps and now I'm back to sanitary installations. Does that typically come with a time shift? Or is that immediately? I would assume with the time shift right?
To be honest, I don't know because it's such a onetime experience. You never experienced this great situation around heat pumps, therefore, we never experienced how we come out of this great situation. What we can say, what we have heard in the first quarter is that demand for heat pumps was much lower.
That's what we said already at the beginning of the year. We expect less pressure on our business from this transition to heat pump, for example, in Germany. This pressure was significantly lower in Q1. Midterm, I would assume we will find a new balance that there is a balance again between sanitary and heating.
Okay. And then last but not least, also in your statement, you say that interest rates cuts could fuel demand. Now how much of your, let's say, guidance is -- or not guide -- implicitly you don't give a guidance, we know that, but how much of your say, implicit outlook is based on interest rate cuts because obviously, they probably take longer than expected?
Almost. There is no direct correlation. Obviously, interest rates are important for end customer demand in our business. And that's what we are referring to a lower interest rate should positively influence demand, but what is the direct impact of the share of this driver for demand, we don't know. It's just a matter of fact that lower interest rates obviously would trigger more demand for construction.
The next question from the phone comes from Stasse, Axel with MS.
The first question I have is about the installers and the wholesalers. How optimistic are there in terms of recovery, especially in new builds. Can you provide maybe a feedback from the discussions you have with them? And maybe some countries that they highlight that could surprise positively in the near term?.
So first of all, we don't have systematic reviews, feedback from plumbers across Europe. We don't do that. That's quite time-consuming. Secondly, if you ask plumbers, these kind of questions, they give you the answer more or less, I don't know and why should they know. They have much more maybe an idea the next 6 months, are they have open orders or not. They have hardly a view, especially on the plumber level, what the new build segment will do in the next 6, 9 months. What they live at all, what they would do, they refer to the building permits as what we do as well.
From the wholesale view, it's a bit different. That's what I said before there you get, let's say, a more broader feedback. And what I referred to before that the wholesalers seen at least by restocking effects to come to a bit higher expectation in terms of their stock level, but they don't have seen a clear view on new build segment either.
Okay. My second question was about energy pricing picking up again. Is this not representing an opportunity for you guys to pass on this price increase? I know you said no to another question previously asked, but I just try to understand why you do not and take the opportunity to offset some of the volume weaknesses that you can see this year with some price increases. Is this solely driven by your wish to gain market share or higher competition? Or yes, I just wanted to understand this.
Two answers. Energy prices or energy is around less than 2% of our net sales. So whatever energy prices do in the second quarter, even if they're up 10%, that doesn't affect our margins, really. And secondly, we have reached an EBITDA margin of almost 33% with a volume level, which is lower than 4 years ago, if you look at our competitors, we are miles away with our margin. So there is no reason pressure to even if energy prices would have an impact on the margins to immediately increase our prices.
And keep in mind, raw material prices in the first quarter year-on-year were 9% below previous year's quarter, and we kept sales price stable. So this is definitely not the environment to talk about price increase.
Okay. Okay. Very clear. And should we then expect and EBITDA margin in H1, I think it's usually it's H1 that you speak about the EBITDA margin guidance. But should we then expect your EBITDA margin guidance to be at the upper end of the 28%, 30% initially guided? Or.
We will, as usual, only give an EBITDA margin guidance in our -- guidance our H1 results, but one additional comment, again, refer to our Slide 6 in our PowerPoint presentation, where you see that this tailwind of 9% lower raw material prices will come down over the next 2, 3 quarters substantially.
Okay. Last question on my side. Given the fact that you have reduced your share buyback, is there any risk that you also reduce the dividend for 2024? Or actually, because of the lower share buyback, you now feel comfortable with the leverage of the balance sheet?
No. We've increased the dividend for 13 years in a row and actually almost every time since the IPO, we plan to continue to have at least a stable dividend.
We have a follow-up question from Mr. Husler with ZKB.
For the first time, I think in several quarters, you increased your staff slightly. And I was just wondering if this trend is about to continue and in which areas or functions you actually increase your workforce.
The driver of the sales organization outside Europe, we increased personnel around 3% in the region outside Europe, mainly for these dedicated sales initiatives, which we talked about at our Capital Markets Day, but also at our full year press conference.
And should we expect now this number more or less to stay because you hire now those people? Or should we see further increase in number of staff over the course of the year?
So for the sales organization, you could assume that this number will be more or less stable or we will further ramp it up in the market outside Europe. On group level, it's difficult to answer because that depends on the volume development. depending on the volumes, we will then also adjust our organization, mainly in the operations area.
That was the last question. I would now like to turn the conference back over to Christian Buhl for any closing remarks.
So thank you for your attention. There are no more further questions. We wish you all a great day.