GROHE 2009: A position of strength

Profit growth in the face of the economic crisis

These are challenging times and this is also felt in the sanitary fittings industry. But there is one brand which has done its homework early and its name is GROHE. The company is well positioned to weather the recession. As innovation and investment continue to strengthen the brand, GROHE is all set to brave the crisis both in Germany and in the international markets.

Excellent liquidity, clear strategy

Despite the financial markets crisis, GROHE is now operating from a position of strength following the company’s successful transformation. 2008 saw continued earnings growth at GROHE, with EBITDA rising by six percent to EUR 216 million. Coming in at EUR 1.01 billion, consolidated sales were almost on par with the prior year. At the same time, cash holdings were maintained at a high level and amounted to EUR 275 million at year-end. These figures demonstrate that GROHE is well-placed to withstand the crisis in the global economy.

Grohe AG has attained this position by focusing on five strategic priorities which remain in place also in this year’s challenging environment: protection of liquidity, market share growth, margin improvement, productivity gains and optimisation of overhead structures. The next objective is to generate additional business potential and to further expand the availability of the brand’s products in the global markets.

Assured profitability and long-term financing

An important factor which gives the company great flexibility in responding to external developments is the almost 100 percent cost variability which has been achieved. What this means is that GROHE has changed the relationship between costs and sales in such a way that even a clear decline in sales would trigger a commensurate decline in costs. This has been made possible by, amongst other things, a 20-item cost reduction programme finalised in December. This programme will allow to save approximately EUR 30 million this year. As a result, GROHE would maintain its high profitability and its liquidity even in the event of an appreciable downturn in sales.

In addition, GROHE is funded through bonds until 2014. The annual interest is comfortably covered by cash holdings. Given that no redemptions are due prior to 2014, the cash flow, which has more than doubled since 2005, is available for the operative business. “In contrast to publicly listed companies, we are not subject to the usual quarterly performance pressures but can rather follow a sustainable long-term path. Also, we do not have to pay out dividends which would detract from our liquidity,” says David J. Haines, Chief Executive Officer of Grohe AG.

Depending on the intensity of the crisis in the individual countries, GROHE will apply a differentiated marketing approach in order to raise its market shares around the globe. This means that the company will invest in general growth in some countries, while pushing ahead its project business in others and focusing on its core business elsewhere.

Innovative products offering best value

At the same time, all markets will equally benefit from innovation as GROHE continues to invest in the development of new and sustainable products which deliver genuine added value for customers. This commitment is also reflected in the leitmotiv chosen by the company for this year’s presence at the ISH show “GROHE Best Value. Always.” While independent tests prove the quality and longevity of the products, advanced technologies enhance the water experience and help reduce water consumption at the same time. Moreover, the company’s award-winning designs created by its in-house team of international designers are being elevated to an even higher level mapped out by the unique GROHE Design DNA, resulting in an unmistakeable language of form.

Highlights in the year 2009 include GROHE Blue, a product which exemplifies GROHE’s resolve to embark on new ways and offer new solutions. By installing this unique tap water purification system in the kitchen, consumers can forget all about carrying heavy mineral water bags from supermarket shelves to their kitchen cupboards and still enjoy great-tasting water at any time. Comprehensive tests have shown that tap water filtered through GROHE Blue tastes at least as good as still mineral water from a plastic bottle.

Numerous new additions to the company’s faucets and fittings, showers and flushing systems ensure that GROHE customers get best value, always. Even in times like these Grohe AG remains committed to inventing and developing exciting and innovative concepts as an investment in the company’s future. GROHE Ondus® Digitecture™ is one such concept – a modular bathroom collection blending digital technology and architecture. At this time this is still an idea at the development stage but it will not be long before this collection will enthuse people around the globe.

GROHE 2009: A market leader operating from a position of strength.

10.03.2009


For further information please contact:
Dr. Ulrike Heuser-Greipl
Vice President Public & Investor Relations
Press Officer
Telephone: +49 (0) 211 9130 – 3001
E-mail: ulrike.heuser-greipl@grohe.com
Grohe Holding GmbH
Feldmühleplatz 15
40545 Düsseldorf
Germany



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