Geberit AG
SIX:GEBN
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
478.2
568.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CHF.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Geberit AG
You don't have any saved screeners yet
Good morning. I am the Arkadin operator for this conference. Welcome to Geberit Conference Call on the Third Quarter Results 2018. [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 call 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, sir.
Thank you for the introduction. Good morning, ladies and gentlemen, and welcome to our 9-month results conference call. I will start with the third quarter key figures and then comment on the 9-month sales development as well as the financial results.Sales increased in the third quarter by 1.1% to CHF 741 million. Adjusted by currency effect, the sales growth rate reached 0.7%. Sales in Europe grew by 0.8% in local currency. Positive sales growth was achieved on the Iberian Peninsula, with 16.9%.; in Central/Eastern Europe, with 5.6% and the U.K. and Ireland, with 4.7%; Germany, with 3.7%; and Italy, with 2.1%. A sales decline was recorded in France, with minus 1.7%; Austria with minus 2.3%; Benelux with minus 2.4%; Switzerland with minus 2.9%; and the Nordic region with minus 5.8%.In North America, sales grew by 6.5%; in the Far East/Pacific region by 3.1%. Sales in the Middle East/Africa declined by 12.2%.Turning now to the product areas. Installation & Flushing Systems sales increased by 2.2%, Piping Systems sales grew by 3.2% and Bathroom Systems sales declined by 3.0%.Overall, sales growth in Q3 was, to some extent, below our expectations. Let me therefore give you some comments on the recent development of the market environment.The building industry fundamentals and underlyings are still positive. However, the local volatility of the building industry has increased due to higher uncertainties in the global economy. And secondly, there are signs of a slowdown of the building industry in selected markets with strong growth rates in the past, namely in Austria, Netherlands, France and Sweden. There are no signs of a broad downturn. Generally, we still see a positive environment for the building industry in Europe, supported by several industry indicators. The European GDP, for example, is expected to grow by 2.3% in 2018 and 2.0% in 2019. Residential building permits in Europe are up by 2.5% in H1 2018 and official market forecast expect a growth of the European building industry of 1.3% in 2019. Also, the renovation sector, as the largest market segment, is resilient and supports the positive outlook. However, this increased volatility will most probably become more common in the next quarters. Combined with the slowdown in selected countries, we therefore expect overall slightly lower growth rates of the building industry in the next quarters.Let me give you 2 examples of how the building industry environment impacted Geberit sales growth rate in the third quarter. Sales in Russia grew in H1 by 28% and were down by minus 19% in Q3. Sales in the Gulf were up 18% in H1 and down by minus 27% in Q3. This increased volatility of these 2 relatively small markets for Geberit had a negative impact of 1 percentage point on the sales growth rate of the entire group in Q3 compared to the first half of the year.Second example. The before-mentioned weaker market dynamic in Austria, Netherland, France and Sweden, combined with the effects of the price increase in Switzerland in H1, had a negative impact of 2 percentage points on the group sales growth rate in Q3 compared to the growth rate in H1.Despite this new market reality, we will continue to deliver positive top line growth, also based on our own proportional exposure to the more resilient renovation segment.Let me now comment on the financial results of the third quarter. Geberit EBITDA reached CHF 213 million, corresponding to a decrease of minus 2.2% versus the adjusted EBITDA margin of the third quarter 2017. The EBITDA margin decreased by 90 basis points to 28.8%. This margin development was driven by the following factors: first, a negative currency impact of 30 basis points due to the strong devaluation of several emerging market currencies, like the Turkish lira, the South African rand or the Russian ruble; secondly, substantially higher raw material prices, which however has been fully compensated by increased sales prices; and thirdly, substantially higher personnel tariff costs, which have been only partially compensated by efficiency gains due to the lower volume growth in the third quarter.Adjusted net income declined by 8% to CHF 153 million due to a higher tax rate in Q3. And adjusted earnings per share reached CHF 4.20, a decrease of minus 6.9%.I will now comment on our 9-month performance. Overall, we achieved good results, with a solid sales growth and a high profitability on previous year's level despite substantial headwinds from various cost inflation.Group sales reached CHF 2.4 billion, an overall increase of 7.7%. This sales growth includes the currency effect of CHF 101 million or 4.6% versus previous year. The sales growth in local currencies reached 3.1%.Sales in Europe increased by 2.7%. All markets delivered positive growth rate, with the exception of the U.K. and the Nordic region. In Germany, sales were up 3.8%, with growth in all 3 product areas. In the Central and Eastern European region, sales were up by 8.9%, with growth in all key markets. In the Nordic region, sales declined by 2.9%, with a positive sales growth in Finland. In Switzerland, sales grew by 2.4%. Sales in Benelux grew by 2.8%, with growth in the Netherlands and in Belgium. In Italy, sales grew by 5.3%, with strong growth rates in Installation Systems and Bathroom Systems. Sales in France remains at previous year's level. In Austria, sales grew by 0.8%. Sales in the U.K. declined by 4.2%, but with positive growth of Installation & Flushing Systems. Sales on the Iberian Peninsula went up by 11.7%, with double-digit growth in Portugal. In America, sales were up by 4.5%, with double-digit growth of Installation & Flushing Systems. Far East/Pacific sales were up by 13.8%, with strong growth in China and India. Sales in the Middle East and Africa region increased by 2.2%, with single-digit growth in Southern Africa and developed region.Let me now comment on the sales development per product area in the first 9 months, again, in local currency.Installation & Flushing Systems increased by 4.2%, Piping Systems by 4.5% and Bathroom Systems by 0.7%.And now let me update you on the 9-month financial results. Geberit's EBITDA reached CHF 699 million, corresponding to an increase of 7% versus the adjusted EBITDA of the previous year. The EBITDA margin reached with 29.5%, previous year's high level, despite substantial headwinds from higher raw material prices and higher personnel tariffs. The strong increase of raw material prices has been fully compensated by sales price increases due to our strong pricing power. The high personnel tariff has been compensated by efficiency gains and the benefit from a site closure in France last year.The adjusted operating profit increased by 6.7% to CHF 607 million, corresponding to an adjusted EBIT margin of 25.6%. The adjusted net income increased by 5.9% to CHF 550 million. Adjusted earnings per share increased in line with the operating profit by 6.8% to CHF 14.10. The only remaining one-off costs; related to the Sanitec acquisition in 2018 are the amortization for intangibles. These one-off costs amounted to CHF 22 million on net income level.Free cash flow increased strongly at double-digit with 17.3% despite higher CapEx and payments from restructuring provisions. The share buyback program has been continued according to plan. For end of September, 442,000 shares has been bought back for a total consideration of CHF 193 million. The equity ratio has further strengthened and reached 49.6% to September this year.Stepping out, give you an update on our view about the individual construction market. As already mentioned, the fundamentals of the building industry remain to be solid and we expect overall a positive marketing environment. However, the volatility of the local building industry has increased as selected markets show signs of a slowdown.Let me now comment on the individual company outlooks. We remain confident about the construction demand in Germany, although the limited qualified installation capacity might remain abundant. In Switzerland, we expect a stable market, running on a high level. In the Nordic regions, we expect overall a stagnating environment. We are positive for the building construction industry in Denmark but expect a stagnation in Norway and Finland and a decline in Sweden.In Italy, we are more cautious due to the political uncertainties. We foresee a lower growth in France after indicators for the residential construction sector have further weakened. We expect the overall declining market environment in the U.K. driven by nonresidential sector due to the Brexit uncertainties. In Austria, we expect still a growing construction market, although at a substantial lower pace compared to the last 2 years. We are positive for Benelux, although the strong growth in the Netherlands in 2015 led to shortages of qualified installed capacity, and consequently to lower market growth.The outlook for the Eastern European markets remains mixed, with a positive outlook for markets like Poland. And finally, in Spain, we expect an ongoing recovery of the building construction sector.In North America, we foresee a moderate improvement of the institutional construction market, while both relevant segments for Geberit, the health care and the education sector should contribute to growth. The residential construction sector should also do well and further grow in 2018.In Far East/Pacific, we see a mixed picture across the region. We expect a moderate increase of the residential construction market in China. We are positive for India and we expect overall, a stagnating building construction market in Australia.Let me finalize our market outlook 2018 with the Middle East and Africa region. We are more cautious for the Gulf due to liquidity issues and expect a stagnating building construction market environment in South Africa. And we remain cautious for the North Africa and Near East region with a mixed picture.And now a few words about the raw material price environment. Overall, we expect average raw material prices in Q4 to stabilize versus average prices paid in Q3. But keep in mind that raw material price level in Q4 will be substantially above Q4 level last year due to the continued increase of price levels during the last nine months.Let me now comment on the outlook for the Geberit business for the remaining year. We expect overall, a sales growth rate in local currency for the full year 2018 of around 3% and an adjusted EBITDA margin of around 28%. CapEx are expected to be at around CHF 170 million, and the tax rate should reach around 14%.To date, we also announced the launch of a cash tender offer of up to EUR 175 million related to the EUR 500 million bond issued in the context of the Sanitec acquisition. The rationale of the tender offer is to avoid negative interest rate payments and to optimize our debt maturity profile. The tender will be financed using the already existing revolving credit facility.Finally, let me now summarize our introduction.Geberit achieved good results in the first 9 months of 2018, with a solid sales growth. We managed to keep the profitability on the high level of the previous year despite substantial cost inflation from higher raw material prices and personnel tariffs. And free cash flow increased strongly, with a double-digit growth rate.The building industry fundamentals and underlyings remain to be positive. There are no signs of a broad downturn. However, the volatility of the building industry has increased and selected markets show signs of a slowdown. Uncertainties of the global economy has increased, that make an outlook for 2019 even more challenging. Therefore, we expect overall more volatile and slightly lower growth rate of the building industry in the coming quarters.Despite this more challenging market environment, we will continue to deliver positive top line growth, with high operating margins and a strong and resilient cash flow based on our strong market position, our innovative product portfolio and pipeline and our strong reputation.This is the end of our introduction. We are now ready to take your questions.
[Operator Instructions] The first question is from Andre Kukhnin, Crédit Suisse.
This is actually Andre's colleague, Iris, speaking. And I have actually got 3 questions on behalf of him. So shall we go one by one? And firstly, if -- on price increase. There was 3 bps in active margin impacts in the quarter from currency depreciation in Turkey, Russia and South Africa. So I wonder if you plan further on price increases in those regions to offset that.
Yes. We already implemented and also planned for the price increases in these countries where the currency is strongly devaluated to protect our margin in these markets.
And so do you expect neutral net pricing, including FX in those regions into Q4 and 2019? If the FX rate stays at current level?
We expect to compensate the devaluation of the currency by price increases.
Very clear. And secondly, is on the market outlook. I appreciate the comments. And could you maybe give a bit more color on the market outlook versus Geberit's performance? Because for example, the outlook statement still points to positive market environments in countries like Austria, France and Benelux. But as things start in quarter, Geberit actually saw inactive growth rates in those regions. So would it be great if you could elaborate on this a bit.
I didn't really understand your question. We have given you guidance in terms of sales development, margin development for the full year, and we provided you a market outlook in general across the countries. What is exactly your question?
Because -- we were more on comparing the market outlook versus Geberit's performance -- organic sales in those regions. And in the outlook statement, it was said that in countries like Austria and France and in Benelux, the market outlook is still positive, despite some slowdown of momentum. But in Q3, the organic growth in those regions were inactive. So we were just trying to reconcile the differences here.
I understand. I'm sorry, we do not never give any outlook on a country level. We only give an outlook for the Geberit development on a group level. And we don't give you individual country-level phase outlooks. Sorry, I can't answer your question. The third question?
Yes. If we could just have one, just quickly, on Germany. So just on the transportation costs, because we're hearing from companies talking about an increase in transportation cost because of the lower water levels. I wonder if you see any impact from this in Germany in particular.
Yes. We expect also increasing transportation costs, but that will hit us, most probably out of 2019 only.
The next question is from Denise Molina, Morningstar.
I just wanted to ask on pricing. So it sounds like you've been able to successfully pass through pricing. But I was wondering if you could give us some color on whether or not you've done that across all markets. So if you are looking at markets where maybe the take-up isn't as good as you expected, if you're trying to maybe selectively increase prices to make the product more attractive? And also thinking about some of the emerging markets, it sounds like you've been able to increase prices enough to offset the currency, but I just wanted to confirm that.
First of all, the price increases are driven by 2 factors. Number one is the raw material price environment. And the increased raw material prices, we have been compensated in all geographies and in all the markets. And the second driver for price increases this year is the devaluation of currencies. And as I've said before, we increase in the respective countries at the prices to make sure that we save our local margins.
Okay, that's great. And then just one question on ceramics, if you could just talk about how that's going in terms of the take-up of cross-selling, the cistern installations in showrooms, where you have the strong presence in ceramics?
That is going on. As we have seen in the last couple of quarters, we are able to cross-sell in both directions, ceramics, with concealed cisterns and an accelerated growth of concealed cistern tanks through the ceramics portfolio. So there is nothing new.
The next question is from Fabian Haecki, UBS.
A few questions. Firstly, on the potential rebranding costs, so this exercise you start next year, is there any guidance you can give us or any flavor on that?
We do have rebranding costs as of next year, but we can't give you yet a quantity figure because we're still in the planning and finalization process. As soon as we have the figure, we will provide you the figure, most probably with the first info, 2018.
Then on the market, on Switzerland, specifically, was there any major prebuying effect we had ahead of the price increase, which reversed now in Q3? And then secondly, looking a bit ahead and also the change in tax regime, no longer being able to deduct the mortgage interest and also renovation work, so part of that, particularly on the renovation side. Do you think this could negatively impact your business in Switzerland midterm?
Question #1, about the development of Switzerland in the third quarter. That sales decrease was driven by the price increase of the first half of the year, or during the first half of the year, where distributors pulled forward some sales. So that sales decrease in Q3 was as expected. And we do not expect a special impact of the new mortgage rules you mentioned in Switzerland. Overall, we foresee a stable market environment in Switzerland.
Okay, and you think that this kind of reverse of the prebuying effect from distributors, that this will be over in Q4? Or do you think there was a bit of -- had a bigger negative impact in Q3? Or could it be lower?
It will not have a direct impact, but it will have an indirect impact because we will have a negative base effect in Q4 in Switzerland. Last year, Q4 was very strong in Switzerland. It was up 16%, driven by pulling forward sales from distributors due to price increase. So we have a negative base effect in Q3 and 4 due to the price increases implemented at the beginning of the year.
Okay. And then the last one on your ceramics business -- sorry, the Bathroom Systems, which was down 3% in Q3. Was this mainly because of the ceramics exposure to the Nordics or more of a regional topic or was it the ceramics market as such was suffering?
It was a regional topic because in Nordics, we have had a weak market environment. And as you know, ceramics, in the Nordics is the most important market for ceramics. So of course, that affected also sales development of Bathroom Systems in the third quarter. Secondly, we have not seen very strong growth of AquaClean in the third quarter. That was driven by specific marketing campaigns in the first half of the year, where we had a strong growth in AquaClean, and that pulled forward some demand from Q3. That is the reason why we overall have seen a negative sales growth in the third quarter of Bathroom Systems.
The next question is from Martin Flueckiger, Kepler Cheuvreux.
Martin Flueckiger from Kepler Cheuvreux. Just going back to your Q3 organic growth rate. It looks like Benelux, Austria and France were the, I'd say, at least from my point of view, the surprises. Could you talk a little bit about the weakness that you have seen in these 3 markets, Benelux, Austria and France? And just coming back to Switzerland, in respect to the organic growth rates, I mean, considering the very strong prebuying effects you've seen there, I would say Switzerland, actually, it wasn't that bad, the decline that you saw there. Were you not a little bit surprised? Or what offset this prebuying effect then in Switzerland in Q3? That will be my first question, and I will go one at a time.
We are happy with the sales development in Switzerland. If you look at for the nearest 9 months, we have a sales growth of 2.8%, and that is according to our expectations. So we were not surprised at Q3 in Switzerland. Talking about the 3 markets, Netherlands, Austria and France, where we have seen signs of certain slowdown. These markets have been growing quite substantially in the last past years. For example, Netherlands had a strong growth since 2015, as the market was recovering, with growth rates above 5% every year. And this market is now running at a high level and it seems that the market growth rate has started to normalize. You see that also with the shortage of installers. But also, the demand has come down. For example, the residential building permits, which did grow double digits for many years, did not grow anymore in the first half of the year in Holland. And also the sales of new build houses have started to decline. So it's not a crisis, it's not a decline, but it's a slower growth in Netherlands after the strong growth of 3 years. A similar picture is in Austria. As you know, the market in Austria developed very strongly over the last 2 years. The market was growing between 5% to 7% in 2015 and '16 and '17 year-by-year. And that was very much driven by the realization of many formerly delayed projects. With most of these projects now completed, the market is also now normalizing and returning to a more normal growth level. The third country you mentioned was France. Also in France, the construction market did very well and it started to grow and to recover in 2016 and '17, with solid growth rates. But as of the second quarter of this year, the residential building indicators started to weaken again. For example, the residential building permits still grew by 8% for Q1 this year in France, but this growth rate turned into a decline of minus 5% per end of Q3 this year. Or the residential building starts in France also decelerated from a growth rate of 12% to Q1 to only plus 3% per end of Q3 this year. Also there, you see a slower growth dynamic of the market.
Very helpful. Then my second question, on your EBITDA margin bridge, looks like -- when I compare the 9-month bridge versus the H1, it looks like mix was more of a negative impact. Was that just related to the different growth dynamics between Piping Systems and Installation & Flushing Systems? Or what was the key impact there? Why was mix apparently negative in Q3?
We don't see -- we didn't see a significant change in the mix between Q3 and H1. Maybe a little bit less positive, and that has to do with the more accelerated growth rate in Piping Systems, you're correct. But it's not a significant impact.
Okay, perfect. And then my final question is, could you provide us with an update on the bottlenecks in the German sanitary installer industry? And do you have the latest number on the order books in terms of weeks?
Yes, the bottleneck of installers in Germany is not resolved. The latest statistics now from summer 2018 report an order backlog of 11.8 weeks, which is still a record level. But this bottleneck seems to have stabilized, since the order backlog did not increase anymore this year, unlike last year, you remember, when the order backlog grew double-digit. So it remains on a high level, but it seems that it's not growing anymore.
And our next question is from Charlie Fehrenbach, AWP.
Can you maybe tell us which markets finally did develop worse than you expected? And what was finally the main reason to reduce the sales guidance for the full year?
As I said during my introduction, we have observed 2 things in the third quarter: First of all, a generally higher volatility of the local building industry markets; and secondly, a slowdown of a handful of markets, that is Netherlands, Austria, France and Sweden, where we have seen that the growth has come down. And that is the main reason why we expect also for the entire year a slightly lower growth rate compared to our H1 publication.
The next question is from Bernd Pomrehn, Bank Vontobel.
One question left. The other operating expenses increased at an over-proportional rate in the third quarter. What was the driver for this increase? Was it freight cost, energy cost, marketing cost?
The other operating expenses compared to last year you mean, or to...?
Year-over-year compared to Q3 2017, yes. They grew at 3.5%, while sales just increased by 1.1%.
Yes, we had some negative one-offs in Q3, which were the main reason of that. The underlying increase was not so strong.
The next question is from Manish Beria, SocGen.
You said about some selected markets showing negative growth rate, but the overall construction market is still doing good. So I wanted to ask, is it still good enough to maintain your 4% to 6% revenue guidance for the medium term, and also the operating margin guidance?
First of all, the midterm guidance is a midterm guidance. It doesn't mean that we want to reach that midterm guidance every year. And secondly, the midterm growth target -- midterm growth guidance assumes a normalized market growth. And obviously, this year, we do not expect to reach 4% to 6%, due to the aforementioned reasons: A higher volatility in the market, higher uncertainty and slowdown of selected construction markets in Europe.
Okay, so I also have the second one. I also wanted to check with you what was the price increase in Q3 and the 9 months? And also, the raw material price increase in Q3 and the 9 months?
Raw material prices increase in the first 9 months by 3.3%. In the first half of the year, it was 2.7%. So we have seen a further increase in the third quarter. And the sales price increases were around 1%, slightly above 1% for the first 9 months.
There's a follow-up question of Andre Kukhnin.
It's a very quick housekeeping one, really. Just on the base effect into Q4, is there anything we should be aware of? Because we remember 2 years ago, I think there was a positive effect of Christmas falling on a weekend, which resulted in a very productive week. But then, last year, the base effect was negative. And so I wonder, how shall we think about this year of the holiday calculation because Christmas seems to be on a Tuesday this year.
Technically, you will have 1 working day more in the fourth quarter, but it's always difficult to assess the impact of the working-day effect in the fourth quarter because of the circumstances of the working days around Christmas. So we have technically 1 working day more, but it's difficult to assess the direct impact. The most important base effect you should take into account is the one I mentioned before, and it's Switzerland, where we had a strong growth rate last year of 16% in fourth quarter.
We have a next follow-up question from Martin Flueckiger.
Yes, just coming back to that remark by Mr. Iff on the negative one-offs in Q3. Could you elaborate a little bit on that, what kind of one-offs they were? And maybe also provide the magnitude? That will be very helpful.
The underlying development of the other OpEx was more like flat. And one-offs also had to do with our recall, or our -- multi-cleaner topic, in the -- related to the shower toilet business.
So there was a recall in the shower toilet business?
Not the recall, multi-cleaner topic, which we had related to the shower toilet business.
We have our next question from John Revill, Thomson Reuters.
Just one clarification, if you will. Mr. Buhl, when you were talking about the countries went down earlier on in your presentation, was that talking about this year or is that for the next year when you went through Austria, Spain, North America and everywhere? That's the first question. And then the second question is, what sort of -- you say you're seeing more volatility and caution out there in the building market. What sort of risk do you see of it actually turning negative? I mean, is that a possibility at all? And aside from the actual, obviously, volatility and caution out there, what's kind of driving that then, do you think? Is it sort of trade concerns that people are holding back on building projects? Or obviously, the global sort of mounting trade tensions, that kind of thing? Or what do you think has been beneath the actual, the volatility, as it were?
Question #1, the outlook refers basically to the end of the year and the start of 2019. But it's difficult to really have already now an outlook, especially driven by the higher uncertainties of the global economy, into the full year of 2019. So it's the end of the year and beginning of 2019. Higher volatility means that there's a higher probability that selected local markets will show more negative, but maybe more positive growth rates, that we see higher fluctuations or higher impact on the group sales growth rate. And the third reason why -- or third question why we see more volatility in the local building industry, I mean, that is very much driven by the uncertainties around the development of the global economy on the back of the trade war-related uncertainties, the tighter monetary policy, but also the economic instability of selected emerging markets like, for example, Turkey, Russia or South Africa.
And what sort of risks do you see of it actually turning negative? Do you think that's a possibility or...
Sorry? Say again?
What sort of risk do you see of it turning negative? I mean, you think slower growth, but do you think it could turn negative?
As a group, no.
No, but for the building industry overall?
The building -- no, that's what I said. We are generally positive still for the building industry outlook overall. The fundamentals are still intact. Don't forget that the renovation sector is the largest part of the market and the renovation sector is much more resilient. And we do not expect a decline in the renovation sector. Even the new build sector in Europe is still predicted to be positive. Building permits are still growing the first half of the year by 2.5%, as I mentioned in my introduction. We do not expect overall a negative building industry. It's a more volatile building industry, with selected markets -- with a lower growth rate in selected markets.
At the moment, we have no further questions. [Operator Instructions]
It seems that there are no further questions. Thank you very much for your attendance. We wish you all a great day. Thank you. Goodbye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.