Grohe

A family-owned enterprise is strengthening its market position

In 2007, Germany’s biggest manufacturer of bathroom fixtures, GROHE, exceeded a turn-over of more than 1 billion Euros, for the first time throughout its company history. This development continued in 2008, when GROHE was able to maintain its EBITDA-growth and raise its consolidated earnings before interest, taxes and depreciation by six percent, to 216 million Euros (preliminary), coming from 203 Million in the previous year. Compared to 2007, and in spite of an economic crisis, the consolidated turn-over remained fairly stable, at 1.01 billion Euros (preliminary). As a result, the company achieved an operating margin of nearly 21 percent (2007: 20 percent). Cash in hand was sustained at a high level and amounted to 275 million Euros, at the end of the year. With respect to the German market, GROHE improved its turn-over to six percent and thus clearly increased its market share. All of this is evidence of a lasting success story. And the result of an intensive transformation, which began in the middle of 2005 and which fundamentally changed the face of a company that had always been famous for its high-class workmanship and innovative bathroom design.

At the beginning of this decade, GROHE found it increasingly difficult to cope with a number of negative market influences: recession, a highly aggressive competitor from the Far East, runaway commodity pricing and a drooping building industry. It was quite obvious: GROHE would need to reposition itself and become leaner, more flexible and more cost-effective  and it would need to internationalize: 82 percent of GROHE’s turn-over were generated outside of Germany, whereas back in 2005, the company’s cost structure was primarily governed by its German manufacturing facilities.

“When we acquired 50 percent of GROHE in 2004, we were quite aware that we had first and foremost invested into a brand, into a gem of the German economy”, Dr. Matthias Calice, a member of the GROHE board of directors delegated by international holding company TPG, explains. “But we also knew, that GROHE would only be successful in the medium-term, if we took some crucial decisions, setting the course for the future.”

When these decisions were aired in the summer of 2005, they caused a storm of protest even though management, workers council and investors were in agreement on their necessity. Meanwhile, all observers have realised that the measures taken were the foundation for today’s success. Currently, 2.300 employees out of the total staff of 5000 working for GROHE, are still based in Germany. Allegations of “a retreat from the domestic market” were quickly exposed as polemics. And even today, GROHE constitutes by far the largest employer within the German sanitary industry.

GROHE’s transformation, initiated by chief executive officer David J. Haines and his team, has resulted in corporate growth rates and increases in market shares well above industry average, over the course of the last two and a half years:

Product development and product design have been revitalised. 54 percent of the current turn-over is generated through products no older than three years.

The sales division was professionalized and the distribution structure was thoroughly globalized. Today, GROHE serves international markets through twelve distinct sales regions.

During 2007 and 2008, production facilities in the three German manufacturing plants were upgraded to the most up-to-date technological standards. 25 million Euros were invested into machinery and all changes were made without disrupting production.

Sound financing, secured right up to 2014 by virtue of two bonds, and a much improved cash-flow situation have optimally prepared GROHE for the impending shake-out in the sanitary industry.

The investors did not withdraw any dividend, they massively increased capital expenditure and they always were at the disposal of the local management, assisting them on their course of expansion.

“In contrast to many of its competitors, GROHE today benefits from having initiated cost-reduction programmes and having reorganised production, at a very early stage. As a result, we are now more powerful and better positioned than ever before, enabling us to take advantage of the current global economic crisis. In less than three years, we have turned a German exporter into a global player and dramatically raised our company value whilst doing so. The effort invested over the past three years will safeguard GROHE’s future.”, says David J. Haines.