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By John Revill
ZURICH, Jan 14 (Reuters) – Geberit became the latest Swiss company to be hit by the surge in value of the Swiss franc during 2020, with the plumbing supplies maker reporting on Thursday how the rise in the safe-haven currency during the COVID-19 crisis cancelled out higher sales in other currencies.
The problem is expected to hit other Swiss companies such as foodmaker Nestle and pharmaceuticals firm Roche , which generate most of their revenue abroad but whose reporting currency is the turbo-charged franc.
During 2020 the franc appreciated 3.7% against the euro and 12% against the dollar on average, causing a headache for Swiss companies with their biggest sales in the euro zone and particularly the United States.
The Swiss National Bank massively stepped up its currency interventions to more than 100 billion francs in the first nine months of 2020 to tame the franc, which it describes as “highly valued”.
Geberit, which makes bathroom ceramics, shower, toilet and piping systems, said the stronger franc had stripped out 136 million Swiss francs ($153.15 million) from its sales during 2020.
As a result although its local currency sales rose by 1.3%, when converted to francs they were 3.1% lower compared with a year earlier.
The company, whose results are seen as an indicator for the broader construction market, said it had seen a recovery in many markets, particularly Germany, during the second half of 2020 after shutdowns were eased.
“As a result, it was possible to increase sales despite the crisis and gain further market shares,” Geberit said.
Swiss construction chemicals maker Sika earlier this week reported the Swiss franc denting its reported sales.
“We currently anticipate the euro to stay around the same level during 2021 and the dollar to weaken, so it’s likely the strong franc will remain a factor this year as well,” Chief Executive Paul Schuler told Reuters on Tuesday.
Roche in October highlighted the weakening dollar, although Chief Financial Officer Alan Hippe said the company was managing the situation through natural hedging – buying raw materials, and making and selling products in one country so currencies had less of an impact.
The stronger Swiss franc is another problem for Swiss watchmakers, like Swatch Group, already reeling from the COVID-19 crisis, as they have most of their production costs in Switzerland, but generate the majority of their sales in Asia and the United States.
Geberit which is due to post full-year earnings on March 10, said it expects an operating cash flow margin of around 31% for 2020, above the 29.3% level for 2019, helped by lower raw materials prices and spending less on travel and marketing during the crisis.
Separately, Geberit also said Chief Financial Officer Roland Iff would retire at the end of 2021 after 17 years in the post. A search for a successor has begun. ($1 = 0.8880 Swiss francs) (Reporting by John Revill, additional reporting by John Miller Editing by Riham Alkousaa and David Evans)