Annual Review 2006 - Grohe

Annual Review 2006

GROHE Annual Review 2006 

In this review 

GROHE 2006: A record year 02 

Introduction by David Haines 03 

The sanitary products industry 08 

Understanding our business 10 

Our winning team 12 

Our brand value worldwide 14 

WaterCare 16 

Performance review 18 

Sales 20 

Cost of Sales 22 

Expenses 23 

Profitability 24 

Cash Management 24 

Liquidity and Funding 25 

Investing for Growth 25 

Sustainable and profitable growth 26 

Innovation, inspired by demand 28 

Design 30 

Quality 32 

Technology 34 

Sales and customer relationships 36 

Heritage, corporate responsibility 

and sustainability 38 

Global recognition 

As the world’s leading single-brand 

manufacturer and supplier of sanitary 

fittings, our brand gives us an invaluable 

edge in a highly competitive market. 

Details on page 14 

GROHE WaterCare 

Water is a precious resource and 

sustainability is increasingly important. 

We deliver better shower experiences 

and our products use up to 30% less 

water than our competitors. 


Award-winning 

Our products have been publicly 

recognised for design and innovation, 

receiving 30 design awards since 2004. 


Financial summary 40 

Summary consolidated operating 

information 40 

Summary cash flow information 41 

Notes 42 

Our global presence 

IBC

GROHE Annual Review 2006 01 

Who we are 

€939m 

Revenue +12% 

€171m 

EBITDA +12% 

GROHE is the global market leader and the world’s 

largest single-brand manufacturer and supplier of 

sanitary fittings, offering a broad range of products 

for handling water in bathrooms and kitchens. 

We focus on the medium to high-end mass market 

for sanitary fittings and sell our products in 130 

markets through 23 sales subsidiaries, 15 branch 

offices and more than 80 unaffiliated sales agents 

worldwide. We are the market leader in Germany, 

France and the Benelux countries, Austria, Russia 

and many Middle Eastern countries and for 

European-style sanitary fittings in many markets 

including the United States and Japan. 

Established in 1948 and headquartered in Hemer, 

Germany, GROHE currently employs 5,200 people 

worldwide, including 3,200 in Germany. We 

operate six production facilities, which are located 

in Germany (three), Portugal, Canada and Thailand 

as well as an assembly plant in China. 

We operate four business categories: Bath and 

Special Fittings; Showers and Shower Systems; 

Kitchen Fittings; and Sanitary Systems. Over 90% 

of our sales are from products marketed under 

the GROHE brand, which is renowned worldwide 

for product quality, technical leadership and 

innovation and superior design. 

Find out more at www.grohe.com

02 

David J. Haines, CEO & Chairman of the Management Board


03 

GROHE 2006: 

A record year 

1 

2 

3 

4 

5 

12% growth across all 

regions and categories 

39% revenue from 

products launched 

since 2004 

More than €100m 

in costs saved through 

restructuring 

11% productivity 

increase in factories 

15% increase in 

cash generated 

from operations 

before exceptionals 

and financing 

Dear stakeholder, 

Under the leadership of our new management team, 

we have now largely completed our restructuring 

programme and have built a leaner, stronger global 

company that is fit for the challenges that lie ahead. 

In 2006 we delivered a record year with sales 

growing 12% to €939 million, operational EBITDA 

growing 12% to €171 million and €133 million in 

cash generated from operations before exceptionals 

and financing. This clearly demonstrates that our Fit 

for the Future strategy, which we began two years 

ago, is on track and producing excellent results. 

Our sustainable competitive advantage 

is our single global GROHE brand, 

which allows us to connect with 

installers, trade customers, wholesalers 

and consumers in 130 markets 

worldwide. We are one brand and 

we are the preferred brand. 

We are proud of the changes GROHE 

has made over the past three years 

and we expect our performance will 

continue to improve in 2007 and 

beyond. Our recent €800 million 

senior floating rate note issuance in 

January 2007 was welcomed by our 

investors, priced competitively and 

had an order book that was more than 

two times over-subscribed. 

As we embark on the next stage of 

our profitable growth, I am pleased 

to report that GROHE is positioned as 

a leaner, more efficient global market 

leader in the sanitary industry. 

When we look at the year in more 

detail, 2006 was characterised by 

two distinct halves: 

In the first six months, we completed 

the two-year major restructuring of 

our teams and factories, delivering 

more than €100 million in cost savings 

since 2004. We re-launched the 

GROHE brand worldwide and 

successfully replaced a majority 

of our core product lines. In the 

second half of the year, we increased 

revenue 14% compared with the 

second half of 2005, with growth 

coming in most markets due to our 

revitalised sales team supported 

by our new product lines. We also 

successfully brought our global 

production footprint up to full capacity, 

operating to a consistent and 

world-class level of GROHE quality 

performance across all our plants. 

At the end of the year, we had 

generated €133 million in cash from 

operations due to the successful 

implementation of our GROHE Lean 

Cash Management Programme.

04 Fit for the future 


Turnover 

€ million 

05 838 

06 939 12% 

In 2006 we delivered 

a record year with sales 

increasing 12%. 

05 06 

In 2006, the unprecedented rises 

in the costs of our raw materials, 

particularly brass, have caused a 

fundamental change in the way our 

industry operates. We endured almost 

a threefold increase in our hedged 

brass cost, adding approximately 

€50 million to our costs. We were able 

to counter this through our ongoing 

cost restructuring programme and a 

successful 5% price increase in July. 

Because of our actions, we were able 

to increase operational EBITDA by 

€18 million (12%) to €171 million. 

Our Competitive Strengths 

We believe the following four 

strengths differentiate us from our 

competitors and make us unique, 

special and better: 

1 Strong Global Brand 

The global strength of the GROHE 

brand is one of our key competitive 

advantages. In many markets around 

the world, GROHE benefits from high 

levels of brand awareness and loyalty, 

not only from consumers but also from 

the professionals and trade customers 

who buy, fit and supply our products. 

In 2006, we generated over 90% of 

our sales from products marketed 

under the GROHE brand. Furthermore, 

we achieved the highest worldwide 

sales for fittings in terms of value 

under one single brand, and we have 

more non-domestic sales than any 

of our competitors. 

2 Established Reputation for Product 

Quality, Design and Innovation 

Only with GROHE can you get the 

perfect balance of quality, technology 

and design. Over the past 70 years 

GROHE has acquired a reputation 

for delivering products of the highest 

quality that exceed our customers’ 

expectations. Our expertise in the field 

of water technology shines through 

in every product we produce: they 

not only look beautiful but also function 

to perfection for a lifetime. We are 

innovation leaders and invest to 

develop new technical features that 

are superior to our competition. We 

define these benefits as “Moments 

of Truth” where professionals and 

end users can physically witness the 

superior performance of GROHE 

products. Our products have been 

publicly recognised for their design 

and innovation, winning 30 design 

awards since 2004. 

3 Scale – Leading Market Positions 

and Global Presence 

We are the global leader and largest 

single-brand manufacturer and supplier 

of sanitary fittings. We focus on the 

medium and high-end segments of 

the sanitary fittings market, and we 

are the market leader for these 

products in Germany, France, the 

Benelux countries, Austria, Russia and 

many Middle Eastern countries. We 

also hold leading positions in the 

market for European style sanitary 

fittings in many overseas markets, 

including the United States and Japan. 

We sell our products in 130 markets 

through a global sales organisation of 

over 1,150 employees. 

4 High Customer Loyalty 

We have strong relationships with 

wholesalers, showroom owners, 

installers, designers, planners and 

architects, who choose us as their 

preferred provider of sanitary fittings. 

We believe this is primarily attributable 

to our single global brand, the quality of 

our products and our comprehensive 

relationship management. We 

invest significantly in understanding 

our customers’ requirements, 

communicating our brand effectively, 

maintaining our personal relationships 

and offering a broad range of services. 

We believe these strong customer 

relationships translate into significant 

repeat business.


Fit for the future 05 

25% 

Renewal rate target 

leading to the freshest 

portfolio 

Best of the Best 

Strategy and our Five Objectives 

Our vision is to become the leading 

global premier brand for water 

technology products. We will 

achieve our vision by focusing on the 

following five strategic objectives: 

1 Strengthen and Leverage the 

GROHE Brand 

We are further strengthening the 

GROHE brand with a new brand 

strategy. The enhanced GROHE 

brand essence of “Performance you 

can enjoy” is communicated with a 

new claim, “Enjoy Water ® ”, and we 

are highlighting key performance 

characteristics of GROHE products 

through “Moments of Truth”, such as 

GROHE SilkMove ® enhanced water 

control and GROHE TurboStat ® water 

temperature control for safety. 

We aim to improve awareness, 

increase our reputation and strengthen 

customers’ preferences for our 

products. By doing so, we aim to 

increase our market share and 

to expand into new distribution 

channels and geographic regions. 

2 Enhance Demand-Led Innovation 

to Deliver the Freshest Portfolio 

in the Industry 

Over the past two years, we have 

introduced a new ‘demand-led 

innovation’ process that has improved 

the appeal of our newest products, 

reduced their time-to-market and 

increased our throughput efficiency. 

Our primary focus is to enhance 

customer utility by adding innovative 

functions and features, creating water 

and energy saving solutions, facilitating 

the installation process and optimising 

the use of bathroom space. 

We have increased our investment 

in R&D significantly and reduced 

our time-to-market by more than 

half. We aim to reduce this still further, 

accelerating the development of 

our faster-growing and higher-margin 

product lines. 

We are committed to having the 

freshest portfolio in our industry and 

we have set an internal benchmark 

of a 25% renewal rate – meaning 

that 25% of our sales will come from 

products less than two years old. In 

2006 we launched more than 20 new 

product lines and we will launch over 

50 in 2007. We plan to continue this 

rate of innovation in the future. 

3 Capitalise on Growth Opportunities 

in Advanced and Emerging Markets 

We intend to capitalise on a variety 

of growth opportunities in both 

advanced and emerging markets, 

further strengthening our presence 

geographically and across all relevant 

sectors of demand and distribution. 

In advanced markets where we have 

a leading position, we plan to grow our 

sales by addressing increasing demand 

for certain styles, functionality, water 

saving and efficient use of bathroom 

space and by developing new 

distribution channels (including selective 

do-it-yourself retailers and kitchen 

studios). In North America, we intend 

to further broaden our customer base 

and distribution network, introduce 

more local style products and expand 

our position in the project business. 

In emerging markets, in particular in 

Eastern Europe, the Middle East and 

the Far East, we intend to expand our 

business by broadening our distribution 

network, strengthening our customer 

relationships (for example, in 2006 we 

added close to 100 sales professionals 

to our team in China) and introducing 

products tailored to local tastes 

and requirements. 

4 Become the Leanest Company 

in our Industry 

GROHE Lean Production: 

When we began our restructuring 

programme two years ago, our cost 

footprint was 80% German while 

our revenue footprint was just 20% 

German. Over the course of our 

corporate transformation, we have 

changed this balance, transforming 

our operations from a German to 

a global footprint.



Operational EBITDA 

€ million 

05 154 

06 171 12% 

Cash from operations before 

exceptionals and financing 

€ million 

05 116 

06 133 15% 

05 06 

05 06 

Our lean mentality now encompasses 

everything we do, from procurement 

and production to distribution and 

delivery. We aim to improve our 

operational performance with the 

ongoing standardisation and 

modularisation of components, the 

further development of the skill levels 

of our workforce and by increasing 

working hours flexibility. 

Since 2004, we have invested 

approximately €60 million equally in 

our manufacturing facilities inside and 

outside Germany, closing one of our 

German factories. In our remaining 

three German plants we have increased 

our capability to manufacture more 

technically complicated products and 

increased our production flexibility. 

In our factories located in Thailand, 

Canada, Portugal and China, we have 

invested in new capacity and also 

ensured all our factories now meet 

exactly the same standards for 

GROHE quality and reliability. 

We have made excellent progress and 

by the end of 2006 we had achieved 

over €100 million of cost savings. 

This new global manufacturing 

footprint has enabled us to reduce our 

manufacturing costs by 11% in 2006. 

Through further lean initiatives and 

investments in additional equipment, 

we believe we can increase our total 

production capacity a further 5-10% 

per year. Additionally, we have reduced 

the headcount of our German plants 

by 30% from 2,953 to 2,062 while 

investing in a new global sourcing team 

with expert procurement specialists 

now located in Germany (43), 

China (35), Canada (5), Thailand (5) 

and Portugal (4). As a result, we have 

increased the share of our components 

sourced from low-cost countries to 

over 20% of our total purchase costs. 

We have reduced the number of 

products we make by almost 60% 

to focus on those that deliver the right 

mix of volume and margin. Although 

we have reduced our supplier network, 

we do not rely on any single-source 

supplier, with our 10 largest suppliers 

accounting for approximately 26% 

of our total purchasing. Additionally, 

we have invested significantly in our 

e-procurement capabilities and the 

ongoing migration of our information 

technology systems to SAP R/3. 

GROHE Lean Cash Management: 

During 2006, our cash management 

situation was also a story of two 

halves. In the first half, we required 

cash to fund our restructuring 

programme, to increase inventories 

as we transferred production to lowercost 

countries, upgrade our product 

portfolio and fund our sales growth. 

In the second half, we generated cash 

as we completed the restructuring 

and introduced the GROHE Lean Cash 

Management Programme, which 

reduced our inventories, reduced 

markets and head office expenditure, 

reduced our Days Sales Outstanding 

(DSO) performance and improved our 

Days Payable Outstanding (DPO) 

performance. Overall in 2006, we 


our operations before exceptionals and 

financing. This is a 15% increase on 

2005. The GROHE Lean Cash 

Management Programme will continue 

to produce results into 2007. 

5 People, people, people 

Over the past year, we have 

strengthened our senior management 

team with world class professionals 

to lead GROHE into the future. In 

October, Eckehard Betz was appointed 

Executive Director of Operations 

responsible for all our production. 

Eckehard previously worked for Magna 

International Inc in the automotive 

industry. In February 2007, Thorsten 

Knopp was appointed Chief Financial 

Officer. He previously worked at 

Diageo plc. 

We have continued to rebuild and 

update the quality of our teams 

at all levels in GROHE including a 

comprehensive strengthening of 

most of our sales teams around the 

world. Our team now benefits from 

an unprecedented breadth and depth 

of talent and experience from some



5 Priorities going forward 

Lean working capital 

1 › 

2 

Improve Days Sales Outstanding 

(DSO) 

› Reduce inventory 

› Improve Days Purchasing 

Outstanding (DPO) 

3 

› 

› 

› 

› 

› 

› 

Sustainable profitable growth 

Manage pricing 

Increase profitable volume 

Introduce new sales practices 

Mix and margin improvement 

Improve product mix 

Reduce unit costs 

Introduce new manufacturing 

processes 

4 

5 

› 

› 

› 

› 

› 

Productivity improvement 

Reduce current factory costs run rate 

Increase sourcing productivity 

Reduce complexity in components 

Overhead reduction 

Keep overheads flat in 2007 

Reduce in 2008 

of the world’s largest and most 

successful consumer and professional 

services companies, including Nestlé 

S.A., Mars, Incorporated, The Procter 

& Gamble Company, The Coca-Cola 

Company, Bain & Company, McKinsey 

& Company, The Black & Decker 

Corporation, Motorola, Inc., Diageo plc 

and Honeywell International Inc. 

This upgrading of our talent base 

is already playing a significant role in 

enhancing our growth opportunities 

and our operational effectiveness, 

providing the foundations for further 

development in the years to come. 

Besides improving our talent, we 

have installed new human resource 

processes with linkage between 

performance and rewards, supported 

by tailored coaching, to ensure we 

can improve the performance of our 

people and help us all achieve our 

full potential. I am fully confident this 

stronger management team will work 

closely with me to implement our 

strategy with energy and consistency. 

How We Behave 

In 2006 we implemented new risk 

controls and compliance programmes 

supported by an increased investment 

in our global audit function. All of our 

top 50 managers were trained in 

these new GROHE compliance rules 

and regulations. In early 2007, we 

implemented a GROHE Code of 

Business Conduct. This Code embodies 

the standards of behaviour we 

expect from our employees and the 

commitments we share with our 

stakeholders and the environment. 

As part of this Code, we have installed 

a confidential telephone number where 

employees can report any misconduct. 

We have experienced an EU-wide 

investigation into the sanitary fittings 

industry in connection with enquiries 

of alleged cartel law infringement 

through to 2004. We are co-operating 

fully with the investigation, evaluating 

the objections carefully and will respond 

as appropriate. 

Our 2007 Priorities 

Looking ahead to 2007, we are 

prepared for the challenges and 

opportunities we face as a leader 

in the global sanitary fittings market. 

We will continue to implement our 

Fit for the Future strategy focusing 

on the five priorities listed above. We 

have appointed a management board 

member to lead each of these projects 

to ensure successful delivery. These 

five priorities should continue to drive 

sales in 2007 and 2008, improve our 

gross margins and EBITDA margin 

while generating excess cash. 

We are pleased that the study by 

Germany’s Federal Ministry of Finance 

compiled by the European Business 

School, TU Munich, confirmed that 

“GROHE is an example of a successful 

restructuring which is now generating 

value sustainably. Following the 

restructuring, GROHE is able to drive 

the globalisation of its brand and 

assure its long-term future”. 

It is with satisfaction that I look back 

on 2006 and ahead to 2007. GROHE 

is successfully executing its strategy 

for profitable growth. The Management 

Board would like to thank all GROHE 

staff for their contribution to our 

achievements in 2006, and their 

dedication and commitment to our 

success. I look forward to reporting 

back to you in 2008 with equally 

strong achievements. 

David J. Haines 

CEO & Chairman 

of the Management Board



The sanitary 

products 

industry 

Global Market for Sanitary Products and Water Technology Products 2006 

Global Market for Sanitary Products €48 billion 

Global Market for Water Technology Products €12.7 billion (27%) 

Bathroom Equipment Products €20.2bn 

1. Most of BEP market €19.6bn 

2. Shower Panels €0.6bn 

3. Sanitary Fittings Products €11.4bn 

4. Sanitary Systems €1.3bn 

5. Most of STP market €15.1bn 

Sanitary Technology Products €16.4bn 

Bathroom Equipment Products (BEP) 

Sanitary Technology Products (STP) 

Water Technology Products (WTP) 

4 

5 

STP 

WTP 

3 

BEP 

2 

1 

› 

› 

› 

We compete in the sanitary 

products industry, which is 

generally classified into three 

product categories as follows: 

bathroom equipment products, 

such as bath tubs, whirlpools, 

ceramics, bathroom furniture and 

accessories, shower enclosures 

and cubicles, and shower panels; 

sanitary fittings products, 

such as bathroom and kitchen 

faucets, showerheads and related 

accessories; and 

sanitary technology products, 

such as flushing and installation 

systems, water pipes and 

plumbing fittings. 

GROHE offers products from each of 

these three product categories which 

are used for handling water at all water 

outlets in residential bathrooms and 

kitchens as well as in commercial, 

industrial and institutional sanitary 

installations. We refer to our offerings 

as “water technology products”. 

€48 Billion Industry 

We estimate that the total value of 

the global sanitary products market 

in 2006 was approximately €48 billion, 

including a total value of the global 

market for water technology products 

of approximately €12.7 billion. Of the 

water technology market, we estimate 

that approximately €11.4 billion was 

attributable to sanitary faucets and 

› 

› 

› 

showerheads, approximately 

€0.6 billion to bathroom equipment 

(shower panels) and approximately 

€1.3 billion to sanitary technology. 

Europe accounted for approximately 

39% of the global market for water 

technology products, followed by 

North America, excluding Mexico (33%) 

and the rest of the world (28%). 

Drivers of Growth 

We estimate that both the global 

sanitary products market and the 

market for water technology products 

have on average grown by approximately 

6% per year over the past 10 years. 

We estimate that global volume 

demand for sanitary products grew 

by approximately 2% during the same 

period whereas price increases and 

product mix improvements accounted 

for approximately 4% of the growth. 

From a global perspective, the industry 

is characterised by strong, consistent 

and sustainable growth. Quantitative 

drivers of this growth include: 

a growing number of households 

and rising disposable income; 

an increasing focus on the bathroom 

and kitchen, resulting in expanded 

room space and more water outlets 

(for example, showers in addition 

to bathtubs); 

increasing renovation activities 

associated with the aging of building 

stock and changes in design; 

Global Market Water Technology 

Products €12.7billion (27%) 

1. Bathroom Faucets €7.3bn 

2. Kitchen Faucets €2.2bn 

3. Showerheads & Shower Panels €1.9bn 

4. Sanitary Systems €1.3bn 

3 

2 

4 

Global Market Water Technology 

Products €12.7billion (27%) 

1. Europe €5bn 

2. North America €4.1bn 

3. Rest of the World €3.6bn 

3 

2 

1 

1

GROHE Annual Review 2006 Fit for the future 09 

Sanitary Industry Demand 

By volume ‘000 pieces 

• New residential 

• New commercial 

• Residential R&R 

• Commercial R&I 

130 

120 

110 

100 

90 

80 

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 

Source: GROHE estimate based on EUROCONSTRUCT figures 

Ref: Western Europe excluding Scandinavia and Switzerland 

› 

› 

› 

› 

the introduction of innovative product 

types, styles and features (such as 

shower panels and thermostatic 

control of water temperature), resulting 

in accelerated renovation cycles and 

improvements in product mix; 

increasing demand for water- and 

energy-saving products and systems; 

the growth of urban professional 

middle classes in rapidly urbanising, 

large-scale emerging economies 

(combined with a growing popularity 

of Western sanitary standards); 

the growth in tourism. 

Sources of Demand 

Demand for sanitary products is driven 

by private households (worth about 

70% of the global market value) 

and project business (30%). New 

construction activities account for 

about 30% of purchases, while 

replacement and renovation activities, 

which are less cyclical in nature, 

account for about 70%. 

Purchasing decisions for sanitary 

products to be used for private or 

residential purposes are typically 

influenced by end-users, installers, 

and showroom sales personnel, 

while decisions for larger scale projects 

are commonly made by planners, 

designers, architects and builders. 

The vast majority of the distribution 

of sanitary products – around 75% – is 

still via traditional channels of sanitary 

wholesale merchants selling to installers 

or retailers. Professionals in this channel 

are characterised by a high level of 

loyalty to trusted brands they are familiar 

with in their everyday work practice. 

Three Major Industry Trends 

We foresee three major trends 

influencing our industry in the future: 

1 Scarcity of Water vs Increased 

Demand 

Water is scarce. In many parts of the 

world, water is more expensive than oil. 

In our homes and offices, the usage of 

water is increasing. At the same time, 

the increasing scarcity of water requires 

us to act more responsibly, reducing 

and conserving our usage. At GROHE 

we have recognised this dilemma for 

some time and we have responded. 

All our products are designed and 

built to minimise waste through 

leakage and maximise effectiveness 

through technology. 

2 Premiumisation and 

Commodisation 

Over the last 10 years, the market for 

sanitary fittings has grown overall at 

a sustainable annual rate of 6%. Yet 

on closer analysis, the premium end 

of the market is growing faster driven 

by the increased demand for higher 

quality, better designed total bathroom 

and kitchen solutions. The lower end 

of the market is also growing faster 

than 6% but not as rapidly as the top 

end, driven by lower-priced products 

coming from China. The mid-market 

is in decline as consumers either tradeup 

or down. GROHE is well positioned 

to capitalise on this trend with most 

of our products targeting the mass 

premium segment. However, we 

have also witnessed fast growth in 

our lower-priced entry level products. 

3 Consolidation and Globalisation 

Currently, the overall global sanitary 

market is relatively fragmented with 

several hundred manufacturers 

of sanitary products, most of 

which concentrate on a particular 

geographic region. Globally, the top 

six manufacturing groups in the 

sanitary industry only account for 

an estimated 26% of sales. 

However, the past decade has seen 

an accelerating pace of consolidation, 

as manufacturers and wholesalers 

alike seek greater economies of scale. 

The emerging, larger and more 

professional wholesale players are 

seeking to reduce their portfolio of 

suppliers. As the sanitary fittings 

industry continues to consolidate, 

we believe there are opportunities 

for growth among high-performing 

manufacturers like ourselves with 

established premium brand names, 

global distribution capabilities and 

long-standing relationships with 

wholesalers and trade affiliations.



Understanding our business 

We focus on the 

premium mass market 

for sanitary fittings. 90% 

We generate more than 90% 

of our sales from products 

marketed under the GROHE brand 

GROHE is the global market leader 

and the world’s leading singlebrand 

manufacturer and supplier of 

sanitary fittings for bath and kitchen. 

The GROHE brand is renowned 

for product quality and durability, 

technical innovation and 

superior design. 

We focus on the premium mass 

markets for sanitary fittings and 

sell our products in 130 markets 

through 23 sales subsidiaries, 

15 branch offices and more than 

80 unaffiliated sales agencies 

worldwide. 

Headquartered in Hemer, Germany, 

we operate six production facilities 

located in Germany (three), 

Portugal, Canada and Thailand, 

and one assembly plant in China. 

Our Brand and Heritage 

We generate more than 90% of our 

sales from products marketed under 

the GROHE brand, making us the 

largest single-brand manufacturer in 

the sanitary fittings industry. Our brand 

is associated with premium fittings 

distinguished by innovative design, high 

quality and leading technology. We are 

committed to supplying one of the 

broadest portfolios in the industry with 

one of the highest renewal rates of new 

products every year. 

Since the company was founded in 

1948, the name GROHE has stood for a 

commitment to tradition and innovation, 

for high durability and functionality, 

sustainable, balanced design and 

reliable, long-term partnership with 

professional customers. 

Our Market Positions 

We are the market leader for sanitary 

fittings in Germany, France, the Benelux 

countries, Austria, Russia and many 

Middle Eastern countries. We hold 

leading positions for our European-style 

sanitary fittings in many overseas 

markets, including the United States 

and Japan. Approximately 82% of our 

sales are currently generated outside 

our home market of Germany. 

Our Channels 

We primarily sell our products 

to wholesalers, who sell them to 

professional customers such as 

developers, architects, designers, 

retailers and installers including 

plumbers, who in turn sell our products 

to both residential and commercial endusers. 

We provide a comprehensive 

and professional service and support 

that helps build loyalty from our 

professional customers. We also 

sell our products direct to consumers 

through upmarket showrooms 

and boutiques. 

Our Products 

Our products are used for handling 

water at all water outlets in residential 

bathrooms and kitchens as well as in 

commercial, industrial and institutional 

sanitary installations. 

The majority of our product offerings 

are bathroom and kitchen faucets, 

showerheads and related accessories 

as well as shower panels and flushing 

and installation systems. We refer 

to our product offerings as ‘‘water 

technology products’’.



Sales by region 

% 

1. Other European countries 53% 

2. Germany 18% 

3. Middle East and Asia 15% 

4. Americas 14% 

3 

2 

4 

1 

Sales by category 

% 

1. Bath & Special Fittings 41% 

2. Showers & Shower Systems 32% 

3. Kitchen Faucets 13% 

4. Sanitary Systems 11% 

5. Other GROHE products 3% 

3 

4 

2 

5 

1 

Where we operate: 

Germany 

Americas 

Other European countries 

Middle East & Asia 

Our business categories: 

Bath 

Showers 

Kitchen 

Sanitary 

Our products are divided into four 

strategic product groups: Bath and 

Special Fittings, Showers and Shower 

Systems, Kitchen Faucets, Sanitary 

Systems; and a smaller division 

specialising in private label products. 

The GROHE Bath and Special Fittings 

division, which includes a wide range 

of premium bathroom faucets and 

specialty electronic fittings, represents 

our largest division accounting for 

41% of our sales in 2006. 

Our market-leading range of 

Showers and Shower Systems, 

which includes hand-held and 

wall-mounted showerheads and 

integrated shower systems aimed 

at a premium audience, is our 

second largest division, accounting 

for 32% of our sales in 2006. 

Our Kitchen Faucets division, 

which includes single-lever and 

two-handled faucets aimed at 

the premium residential market, 

accounted for 13% of our sales 

in 2006. 

The GROHE Sanitary Systems 

division, which represents our 

mechanical and electronic flushing 

systems for toilets and urinals 

as well as concealed installation 

systems, accounted for 11% of 

our sales in 2006. 

› 

› 

› 

› 

GROHE offers distributors, installers 

and consumers value-added products 

characterised by high functionality, 

including simple, intuitive operation 

and installation. Our products are 

renowned for their durability and sparepart 

availability for years to come. 

Our Competitive Strengths 

We have developed four sustainable 

competitive strengths: 

Strong global brand with high level 

of brand awareness, preference and 

loyalty of professionals and end-user 

customers around the world. 

Established reputation for product 

quality, design and innovation, 

recognised by numerous awards. 

Leading market positions in many 

markets around the globe, including 

market leadership in Germany, France, 

the Benelux countries, Austria, Russia 

and many Middle Eastern countries 

as well as leading positions in the 

market for European-style sanitary 

fittings in many overseas markets 

(including the United States and Japan). 

Long-term business relationships and 

high customer loyalty with numerous 

wholesalers, showroom owners, 

installers, designer, planners and 

architects around the globe. 

Our Five Principles 

1 Quality 

Always best value 

2 Responsibility 

Take the monkey 

3 Lean 

Spend the company’s money 

as you would your own 

4 Mutuality 

Win-win 

5 Freedom 

Cash allows us to control 

our destiny

12 Fit for the future GROHE Annual Review 2006 

David Haines 

Gerald Mulvin 

Hans-Gerd Füchtenkort 

Our 

winning 

team 

A key part of GROHE’s recovery has 

been to revitalise our management 

team by hiring leading talent with 

valuable experience from across 

the business spectrum. 

We now have a proven and multinational 

leadership that is driving 

GROHE to compete on the global 

stage with world-class lean 

efficiency. We have installed 

new business processes and 

systems to support and improve 

decision-making. 

GROHE’s board of management 

now consists of six members, 

each bringing an array of 

knowledge, skills and experience 

gained within and outside the 

water-products industry. 

David Haines 

Chief Executive Officer 

and Chairman of the Management Board 

Year appointed: 2004 

David J. Haines is Managing Director 

of GROHE Holding GmbH and GROHE 

Beteiligungs GmbH. He has been 

Chief Executive Officer and Chairman 

of the Management Board of 

GROHE AG and its predecessors 

since September 2004. 

David is also Chairman of the Board 

of Directors of VimpelCom, the NYSE 

listed leading Russian mobile phone 

operator. He has held this position 

since July 2005. Prior to joining 

GROHE, he served as Global 

Marketing Director at Vodafone Group 

Plc (2000-2004) and led many of 

the marketing successes of that era. 

Before David joined Vodafone, he was 

Deputy Division President of The Coca- 

Cola Company Germany (1998-2000). 

From 1989 to 1998, he held a number 

of executive positions with Mars, 

Incorporated, including CEO of Mars, 

Incorporated in Sweden and Vice 

President of Mars in the C.I.S. in the 

growth period 1995-1998. David holds 

a first class honours degree from the 

University of Greenwich, London. 

Gerald Mulvin 

Chief Marketing Officer 


Gerald Mulvin joined GROHE as Chief 

Marketing Officer in September 2004. 

Previously, he was a Partner at the 

management consulting firm Bain & 

Company (1995-2004). Before his 

career in consulting he was a software 

design engineer. He holds bachelor 

and master degrees in electronic 

engineering from University College, 

Dublin, and an MBA from INSEAD. 

Hans-Gerd Füchtenkort 

Executive Director of Global Sales 


Hans-Gerd Füchtenkort joined GROHE as 

Executive Director of Global Sales in May 

2005. For the five years prior to joining 

GROHE, he was a Managing Partner 

of Dr Rochus Mummert & Partner and 

owner of his own consulting firm. From 

1996 -1999 Hans-Gerd was a Member 

of the Global Management Board and 

President of Europe, Middle East and 

Africa for AC Nielsen. From 1994-1995 

he was Chairman of the Management 

Board of CJ van Houten AG, Zurich. From 

1976-1994 he held a number of executive 

positions with Mars, Incorporated 

including CEO of Mars, Incorporated 

Denmark, CEO of Mars, Incorporated 

Germany and a Member of the 

Management Board Mars Confectionary 

Europe. Hans-Gerd holds a masters 

degree in business administration.



Eckehard Betz Thorsten Knopp Detlef Spigiel 

Eckehard Betz 

Executive Director of Operations 

Year appointed: 2006 

Eckehard Betz joined GROHE in 

October 2006 as Executive Director of 

Operations, responsible for purchasing, 

production and supply chain 

management. Previously, he was 

Executive Vice President of the 

Closures Group Europe, a subsidiary 

of Magna International Inc where he 

was responsible for a complex lean 

production system. He also has 

extensive experience in the automotive 

industry, working in the UK, the US 

and Germany where he implemented 

TQM and lean productivity practices. 

He holds a degree in production 

engineering from the Technical 

University of Munich and wrote a 

thesis on lean management 

at Imperial College, London. 

Thorsten Knopp 

Chief Financial Officer 


Thorsten Knopp joined GROHE as 

Chief Financial Officer in February 

2007. Prior to joining GROHE, Thorsten 

held senior positions at Diageo plc 

(2002-2007). His experience includes 

CFO Africa, he was also Senior Vice 

President Strategy and Vice President 

Finance Supply Chain, North America. 

Prior to joining Diageo plc, Thorsten 

worked at The Procter & Gamble 

Company (P&G) from 1989-2002 

where he held senior finance and 

management positions including 

a leading role in the restructuring 

of P&G, based in the US, in the 

late 90s and early 2000s. Prior to 

working in the US, he held various 

financial and business strategy 

positions for various brands across 

Europe. From 1987-1989, Thorsten 

worked at Philips Medical Systems 

as a development manager. 

He holds a first class PhD degree in 

Industrial Science from the University 

of Herisau, Switzerland and a degree 

in Strategic Management and Logistics 

from the Wirtschaftsakademie, 

Hamburg. 

Detlef Spigiel 

Executive Director of Personnel 


Detlef Spigiel joined GROHE in 

August 2000. In November 2006 

he took up his current position as 

Executive Director of Personnel. 

Detlef has held various R&D and 

operations positions in the automotive 

industry and has also served on the 

board of a ThyssenKrupp subsidiary, 

responsible for production, sales, 

human resources and controlling. 

He graduated from the University of 

Dortmund with degrees in production 

engineering and business studies. 

Importing New Talent 

– Throughout the Company 

Our philosophy of invigorating 

our management with experience 

and expertise from outside the 

water-products sector is particularly 

evident in our sales leadership team, 

where the majority of our country 

and regional sales managers have 

been replaced by experienced 

business leaders from some of 

the world’s best-known consumerproducts 

companies, including: 

Mars, Incorporated, Nestlé S.A., 

The Procter & Gamble Company, 

Motorola, Inc., The Coca-Cola 

Company, Honeywell International Inc., 

Kohler Mira Ltd, Villeroy & Boch AG, 

Hasbro, Inc. and The Black & Decker 

Corporation. 

A Balanced and 

Productive Workforce 

In 2005, we closed our production 

facilities in Herzberg and reduced 

our workforce in our German plants. 

Despite this reduction in our workforce, 

we did not suffer any work stoppages 

or decreases in productivity. In fact, 

we have not suffered material work 

stoppage or a strike within the 

past seven years. 

We now have a workforce that is 

geographically balanced to reflect 

the global nature of our business, 

significantly increasing our workforce 

in Thailand, Portugal and China 

during 2006.



“I love surprises. 

But not under my shower.” 

Dr. Ármann Höskuldsson, 

President of the Geoscience Society of Iceland 

“Either you control water, 

or water controls you.” 

Micah Lester, 

Surfing Pro, Mermaid Beach, Australia 

Our brand value worldwide 

Our global brand gives us an 

invaluable edge in a crowded 

and highly competitive market. 

We combine outstanding design 

with a unique combination of 

quality and innovative technology 

to build a unique, special and 

better position compared to 

our global competitors. 

Pre-eminent Brand Position 

We achieve the largest worldwide 

sales under one global brand. We 

achieve the highest proportion of sales 

outside our domestic market of any 

competitor, making us the most 

diversified brand in our industry. 

We believe this strong competitive 

position is largely founded on the 

global appeal of the GROHE brand. 

Wherever our products are – in a hotel 

in Hong Kong, the Olympic Stadium 

in Beijing, a home in North America 

or a public building in Germany – our 

customers and consumers see the 

same brand, differentiated through 

a unique combination of quality, 

technology and design. 

In the bathroom and kitchen 

renovation market, which accounts 

for approximately 70% of our business, 

people are spending more on their 

bathrooms and kitchens and need 

more reassurance that the brands 

they choose are reliable, will last a 

long time and will work with the latest 

trends in interior design. They require 

assurance of value sustainability to 

ensure they earn a return on their 

investment. Our brand delivers that 

assurance. GROHE products are 

frequently mentioned by developers 

and designers as justification for high 

quality, durability and good design. 

One Global Brand 

Our global brand strategy not only 

provides orientation and clarity to 

professionals and end-users, but 

also provides economies of scale. 

Our single brand allows us to 

focus our investment on reinforcing 

relationships with our key 

stakeholders: installers, designers, 

specifiers, trade customers and 

end-users. 

› 

› 

› 

› 

As a result, we enjoy high customer 

loyalty, forging strong business 

relationships with wholesalers, 

showroom owners, installers, 

designers, planners and architects. 

Their professional endorsement is 

a powerful marketing platform and 

we systematically build it into our 

communications. The strength of 

our global market-leading brand 

permits us to position ourselves 

as the premium lifestyle brand in 

our industry and communicate 

this through our premium pricing. 

The single global brand has other 

benefits including: 

enhancing customer acceptance 

of new products 

increased cross-selling for designers, 

specifiers, installers and wholesalers 

increasing our share amongst 

consolidating wholesalers, which 

stock fewer global brands. 

facilitating expansion into new 

geographic markets.



“Some places better stay 

cold forever.” 

Dr Dieter Piepenburg, 

Institute for Polar Ecology, 

University Kiel, Germany 

Above 

Advertisement which forms part of a 

global campaign promoting the brand 

Our products are used 

in hotels, apartments 

and buildings, cruise liners, 

spas, airports, arenas 

and hospitals 

85% 

85% of consumers prefer 

a GROHE shower to their 

previous brand. Source: 

a study by University 

of Göttingen and 

The Consumer View 

Customer Preference 

Professional and consumer research 

conducted around the world confirms 

GROHE is one of the most preferred 

brands in our industry. For example, in 

the US professionals who have fitted 

GROHE recommend GROHE above all 

other brands. We have also conducted 

end-user trials for our products. For 

example, research conducted by the 

University of Göttingen and the 

research agency, The Consumer View, 

who tested RainShower, Movario 

and Relexa with over 400 families, 

revealed that 85% preferred these 

showers to their previous showers. 

Further endorsement comes from 

trade bodies who perform 

independent tests on our products 

against competitors, including our 

thermostats and flushing systems. 

In both cases our products emerged 

as clear winners. 

Additional endorsement also derives 

from the prestigious international 

locations where our products have 

been selected. The Grand Hyatt Hotel 

in Dubai, the Kunsthaus in Graz, the 

ZhongGuanCun Financial Center in 

Beijing, the Estadio da Luz in Lisbon 

and the Norwegian Jewel cruise ship 

are just a few of the premium projects 

that help to leverage our brand credibility. 

Brand Benefits 

The GROHE brand strategy aims 

to satisfy a broad and diverse set 

of needs from our target groups of 

installers, specifiers, designers and 

architects, trade customers and 

end-users through a comprehensive 

value proposition of a premium 

performance lifestyle brand. 

Our brand essence is based on GROHE 

being more than just a product, but 

an experience. The GROHE brand 

articulates ‘performance you can feel’. 

We are global water technology 

experts, delivering a product 

performance that gives the end-user 

the most rewarding experience through 

product appeal, product handling 

and water impact, delivered through 

superior quality, technology and design. 

These three factors – quality, 

technology and design – are the root 

of the functional benefits of the 

GROHE brand. 

They are the reason GROHE is unique, 

special and better in the sanitary 

fittings market. We are differentiated 

through our quality because our 

products are the best-built in the 

market, offering peerless levels 

of durability and reliability that won’t 

let the end-user down. 

Our commitment to design goes 

beyond ornamentation and superficial 

aesthetic appeal. For us, beautiful 

design means products that are easy 

to use and answer real human needs. 

When we design we design in front 

and behind the wall to ensure our 

products are fast, easy and safe 

to install. Each of our new flushing 

systems is 20% faster to install 

than leading competitors’ products. 

Moments of Truth 

Our six Moments of Truth are 

examples of how proprietary GROHE 

technology delivers tangible benefits 

for the end-user and illustrate how 

GROHE products are demonstrably 

better than the competition. We 

integrate Moments of Truth into 

our lifestyle-orientated marketing 

campaigns, which are building 

GROHE’s premium positioning in the 

marketplace. Over the last 12 months, 

we have invested in marketing to 

continue our strategy of building more 

value, and economies of scale, into 

our globally potent brand. 

For the future, we will seek to build 

an increasingly emotional bond with 

consumers. While we will continue 

to lead the field with our technological 

innovations, we will always highlight 

the advantages these have for 

improving people’s experience, and 

the quality of their lives.



Our commitment to the 

environment with WaterCare 

Water is life. Water is quality of 

life. As a company, water inspires 

everything we do and sustains 

our business. 

And yet water scarcity is one 

of the most pressing problems 

facing the planet. 


Today, some 700 million people around 

the world are short of water. Although 

two-thirds of the Earth is covered with 

water, only 2% of this can be used for 

drinking. As our population increases 

and climate change accelerates, 

experts predict that if nothing is done 

to protect this most precious natural 

element, the number of people 

suffering from water scarcity could 

rise to more than three billion by 2025. 

As a leading player in the sanitary 

fittings industry, GROHE has a vital 

role in sharing the responsibility 

for protecting this most precious 

resource. Around two-thirds of water 

consumption in private households 

is accounted for in bathrooms with a 

WC or urinal. And as much as a third 

of water consumption is flushed down 

the toilet. Washbasins and showers 

account for another third of household 

water consumption, but people 

routinely run water in their bathrooms 

when it is not needed at all, sending 

more wasted water down the drain. 

GROHE has long been committed 

to the ecological and economical use 

of natural resources, the protection 

of the environment and the active 

management of water resources. 

This commitment takes centre stage in 

all of our activities and is encapsulated 

in the GROHE WaterCare promise. 

Through this, we ensure that all of our 

products are designed to use the least 

amount of water possible. 

1 Our dual flush technology, allows users 

to select between a small or larger flush 

and is designed to use 50% less water 

than conventional flushing systems; 

2 Our GROHE TurboStat ® technology 

protects water and the environment by 

reaching the desired temperature 40% 

faster and using 20% less energy*; 

3 Our GROHE DreamSpray ® shower – 

the technology that lies at the heart 

of all our showers – requires up to 

30% less water to deliver a perfect 

shower*. And GROHE SilkMove ® 

also helps to save water by ensuring 

ultra-precise control of water flow 

and temperature. 

* compared to equivalent products from 

leading competitors



“In some parts of the world 

water is more expensive than oil.” 

Best Quality, Technology 

and Design 

A key facet of our philosophy and 

competitive strength in the market 

is for our products to distinguish 

themselves through the best quality, 

technology and design. Our ability 

to win acceptance for products that 

combine great style and ease of use 

with responsible water consumption 

is an important part of this. At the same 

time, the unparalleled service lives of 

our products, achieved through their 

outstanding build quality, means they 

need to be replaced considerably less 

often than competitors’ products. 

Over time, this reduces waste and 

the use of raw materials. So, by 

buying a GROHE product, customers 

are assured they can enjoy their 

experience of water while acting in 

an environmentally responsible way. 

Ultimately, our aim is to combine 

lifestyle and enjoyment with intelligent 

technology that saves water and energy. 

Thanks to our in-house design team, 

we are able to gain deep insights into 

the latest consumer demands and 

market trends so we can see that 

consumers share our desire to sustain 

water through the enhanced design 

of bathroom and kitchen fittings. 

Demand for water-saving devices 

in the home is stronger than ever, 

as better-informed and educated 

consumers expect companies like 

ours to use their knowledge to 

benefit the environment. 

Our designers are rising to the 

challenge with enthusiasm and 

inspiration. Our adoption of wireless 

digital technology in the bathroom 

is a perfect example of how our 

out-of-the-box thinking is meeting 

heightened expectations for premium 

lifestyle and environmentally friendly 

products. With digital temperature 

presets, we can help save water by 

allowing people to find their perfect 

water temperature faster. 

Features like these will become 

ever more important on all our 

products, and, as industry leader, 

we will continue to push the 

boundaries of balancing superb 

performance, economy 

and ecology. 

GROHE is happy to take up 

the challenge and is proud of 

its responsibility. 


Five Commitments 

1 Climate 

We aim to make all our operations 

carbon neutral in the next five years. 

We’ll maximise our use of renewable 

energy and using off-setting as a 

last resort. 

2 Waste 

We will continue to reduce all waste 

from our operations and our packaging. 

We will recycle an increasing 

percentage of our waste and set up 

a programme to retrieve and dispose 

old products responsibly. 

3 Sustainable Raw Materials 

We will endeavour to source raw 

materials from environmentally 

friendly suppliers and mining. 

We will protect the world’s natural 

resources for future generations. 

4 Responsible Partner 

By being a responsible partner, 

we will select and work closely with 

suppliers, investing where necessary 

to minimise environmental impact. 

5 Health 

Water is good for you. We will 

continue to develop products 

to improve the delivery of pure 

water in the developing and 

developed worlds.


19 

Performance review 

82% 

We continued to grow our presence 

in markets around the world, with 

82% of our sales generated outside 

our home market of Germany 

11% 

Productivity increase in our factories 

2006 was a year of record performance for 

GROHE, with double-digit growth in sales, 

operational EBITDA and cash from operations. 

Our increased operational momentum, together 

with our investment in product development, 

resulted in top-line sales growth of 12% to 

€939 million, improvement in our gross margin 

of 6% to €379 million and operational EBITDA 

growth of 12% to €171 million. We generated 

€133 million of cash from operations before 

exceptionals and financing by the end of 2006. 

Despite a threefold increase in the cost of brass 

over the last two years, we have successfully 

controlled our margins through a strategic 

hedging programme, leaner management 

of our working capital and well-managed price 

increases across our product lines. 

Our lean mentality and relentless focus on 

operational discipline were the foundations 

of our robust performance over the last 

12 months, resulting in better management of 

procurement, manufacturing and distribution 

capabilities. Moreover, as the benefits of these 

initiatives continue to materialise, GROHE is 

well-positioned to continue building on its 

achievements in the years to come.

20 Performance review 


Sales 

€ million 

05 838 

06 939 12% 

2006 2005 

€m % of sales €m % of sales 

GROHE Bathroom Fittings 384.7 41% 343.7 41% 

GROHE Showers & Shower Systems 302.3 32% 254.8 30% 

GROHE Kitchen Faucets 122.5 13% 113.2 14% 

GROHE Sanitary Systems 104.7 11% 93.7 11% 

Other GROHE products 25.0 3% 32.3 4% 

Total 939.2 100% 837.7 100% 

05 06 

For GROHE, 2006 was a year 

of record growth with strong 

performance across all regions 

and strategic product groups. 

Our increased operational 

momentum, together with 

our investment in product 

development, resulted in 

double-digit growth in sales 

and operational EBITDA 

to €939m and €171m, 

respectively. 

Sales 

2006 was a watershed year with 

sales increasing 12% to €939 million 

compared to €838 million in 2005. 

By the end of 2006 we had completed 

our sales turnaround which included 

the recruitment of the majority of our 

new management team, the rollout 

of our professional sales management 

process, and the launches of new 

products in thermostats, faucets, 

showers and sanitary systems. In July 

2006 we successfully raised our prices 

by 5% to compensate for the tripling 

in the price of raw materials, particularly 

for zinc and copper, the building blocks 

of brass. Despite this price rise, sales 

grew 14% in the second half of 2006 

compared to the second half of 2005, 

with growth coming from all regions 

and categories. We believe this 

performance provides strong top-line 

momentum heading into 2007. 

We continued to grow our presence 

in markets around the world, with 

82% of our sales generated outside 

our home market of Germany. Other 

European (excluding Germany) and 

Middle East/Asian markets, which 

grew 14%, and 19%, respectively, 

were followed by strong performances 

in the Americas (7%) and Germany 

(6%). We grew our relative market 

share by approximately 10% across 

all our regions. 

All our strategic product groups 

performed strongly in 2006. The 

GROHE Bathroom and Special 

Fittings division, our largest product 

group, generated sales of €385 

million, or 41% of our total sales, an 

increase of 12% on last year driven 

by the relaunch of our Eurolines range. 

Showers and Shower Systems 

generated sales of €302 million, or 

32% of our total sales, a 19% increase 

on 2005, driven by the relaunch of our 

Grohtherm thermostatic ranges, the 

launch of our Relexa product and 

Rainshower range and the introduction 

of the Digital Shower Controller in 

the UK. Our Kitchen Faucets division 

generated sales of €123 million, 

or 13% of our total sales, an 8% 

increase on 2005, driven by the 

relaunch of Ladylux in the US and 

the introduction of the K4 and 

Essence product lines. GROHE 

Sanitary Systems generated sales 

of €105 million, or 11% of our total 

sales, a 12% increase on 2005, 

driven by the launch of Rapid SL. 

Other GROHE products accounted 

for €25 million, or 3% of our 

total sales.



Fit for the Future, introduced in 2004, 

focuses on improving our operational 

performance through adopting lean 

processes and mentality. 

Fit for the Future: 

Our Lean Mentality Mission 

Fit for the Future, introduced in 2004, 

focuses on improving our operational 

performance through organic sales 

growth, an accelerated rate of 

product innovation and significant 

cost reductions of €150 million 

throughout the organisation by 2008. 

These savings exclude the effects 

of inflation, cost increases for brass 

and other raw materials, transition 

and restructuring costs, increased 

sales and marketing activities and the 

costs of improving our organisational 

structure. By the end of 2006, we 

had achieved over €100 million of 

this ambitious cost savings target, 

and we are a better, leaner company 

as a result. 

Strategically, Fit for the Future 

capitalises on five key operational 

elements: profitable growth/demandled 

innovation, mix and margin 

improvement, lean productivity, 

lean working capital and overhead 

reduction/cultural transformation. 

Some of the highlights of our 

efficiency initiatives so far include: 

Smarter Procurement 

We have reduced our costs for 

sourcing parts, components and 

services by transferring more of 

our procurement function to lower 

cost countries, including China. 

We now have 35 full-time local 

procurement specialists working 

to deliver €35 million of components, 

equivalent to 22% of our total 

component budget in 2006, from 

our Chinese partners. 

Our switch to lower-cost sources 

resulted in net savings of 20% on 

our total procurement costs (excluding 

brass) during 2006. Additionally, 

we have invested significantly in our 

e-procurement capabilities and the 

ongoing migration of our information 

technology systems to SAP R/3. 

Leaner Supply Chain Network 

We have reduced our number 

of suppliers from 7,500 to 3,000, 

to simplify our procurement and 

supply chain processes. We now 

focus on those partnerships that 

offer the most profitable growth and 

value. At the same time, we have 

significantly reduced the number of 

products and components that need 

to be sourced, produced and managed 

from 17,000 sales units to 6,500, 

allowing us to focus on the most 

profitable products that offer higher 

sales growth and better margins. 

Although we have reduced our supplier 

network, we do not rely on any singlesource 

supplier for our components 

or raw materials used in our products. 

In 2006 our 10 largest suppliers 

accounted for approximately 26% 

and our 40 largest suppliers accounted 

for approximately 54% of our total 

purchases (including those for raw 

materials and non-production materials). 

Dedicated, Simplified 

Production Lines 

We have lowered our manufacturing 

costs by closing less efficient plants, 

including our Herzberg plant in Germany, 

and moving more of our production 

to our facilities in lower cost countries. 

In 2006 we reduced our workforce 

in Germany by approximately 

900 employees while expanding our 

production capacity in Thailand from 

456 to 1,041 employees and Portugal 

from 473 to 708 employees. 

Our improved operational efficiency 

is demonstrated by our lower monthly 

factory run-rate costs (measured 

quarterly) which declined 11%, 

from €19.6 million at end 2005 to 

€17.5 million at end 2006 (normalised 

for the year excluding December). 

Overall, our manufacturing costs in 

2006 were €210 million, compared 

to €235 million in 2005. 

We now operate a fully-integrated 

production and distribution capability 

from our six production facilities located 

in Germany (three), Portugal, Canada, 

Thailand and our assembly operation in 

China, which provide our products to 

130 markets around the world. 

Additionally, we only subcontract nonessential 

production parts with 

relatively lower production complexity 

and smaller lot sizes to better manage 

our production capacity.



Operational EBITDA 

€ million 

05 154 

06 171 12% 

Factory monthly run rate costs by quarter 

€ million 

2005 19.6 

Q1 2006 20.4 




2006 (normalised) 17.5 

05 06 

05 Q1 Q2 Q3 Q4 06 

06 06 06 06 

Cost of Sales 

In 2006 cost of sales increased 

€80 million, or 17%, to €560 million 

from €480 million in 2005. As a 

percentage of sales our cost of sales 

increased from 57% to 60%. The main 

driver of this increase was the rising 

costs of brass which were partially 

off-set by the 5% price increase in July. 

Conquering the Brass Effect 

Over the past two years, prices for 

brass (and its raw materials copper and 

zinc) have increased significantly. As a 

result, our costs for purchases related 

to brass, copper and zinc increased by 

approximately €50 million in 2006. 

These costs represented 11% of our 

sales in 2006, compared to 7% of 

our sales in 2005. 

We have successfully offset these 

increased costs through a strategic 

price hedging programme, factory 

restructuring and efficiency gains, 

and increasing our sourcing from 

China. In July 2006, we introduced 

a 5% brass-related price increase, 

followed by a second increase of 

8% in January 2007. 

We believe our premium position 

in the sanitary market has ultimately 

protected us against the impact of 

these sharp rises in brass prices over 

the past few years. Compared to 

manufacturers of lower-end sanitary 

fittings, whose costs for raw materials 

comprise a larger portion of the total 

costs of production and whose 

customers are more price-sensitive, 

we believe we are better able to pass 

on at least a portion of our higher costs 

to our customers through wellmanaged 

price rises. 

Purchasing and Raw Material Costs 

Purchases of components and finished 

products amounted to €168 million 

and accounted for 38% of our total 

purchases, whereas purchases of raw 

materials (such as brass, copper, zinc, 

thermoplastics and rubber) amounted 

to €104 million and accounted for 24% 

of our total purchases. 

Non-production materials (primarily 

consisting of services, office supplies, 

materials other than raw materials, 

parts, components and finished goods, 

capital expenditures, maintenance 

and repair expenses, fleet expenses 

and energy costs) amounted to 

€168 million and accounted for 38% 

of our total purchases. 

Manufacturing and Production 

As part of our Fit for the Future 

initiatives, we reduced our costs 

for purchasing, manufacturing and 

production throughout 2006. Our 

improved operational efficiency is 

demonstrated by our lower monthly 

factory run-rate costs (measured by 

quarter) which declined 11%, from 

€19.6 million at the end of 2005 to 

€17.5 million (normalised excluding 

December) at the end of 2006. The 

fourth-quarter monthly run-rate in 

2006 was lower at €16.3 million due 

to factories closing for Christmas. 

We have realised cost benefits by 

harmonising the manufacturing 

processes for most of our products 

across our production network. 

The production process for faucets 

generally can be divided into five 

main steps that comprise (i) casting, 

(ii) machining, (iii) grinding and polishing, 

(iv) surface finishing (e.g., chrome 

plating) and (v) assembly. We conduct 

all five steps at our own production 

facilities and therefore maintain 

a high level of control over the 

production process. 

All our plants, except for the one 

located in Canada, specialise in 

either brass sanitary fittings, plastic 

shower heads and high-end surface 

treatments, or sanitary systems. 

In 2006 we estimate the average 

utilisation of our total production 

capacity was 82%, with our production 

facilities in Thailand and Portugal 

operating at full capacity. We believe 

that our total production capacity could 

be increased by approximately 5% to 

10% by streamlining processes and 

investing in additional equipment.



We now operate a 

fully-integrated production 

and distribution 

capability from our six 

production facilities. 

Brass price increase 

€ million post hedge 2006 by quarter 

Q1 6 

Q2 11 

Q3 14 

Q4 18 

Q1 Q2 Q3 Q4 

German Factory 

Headcount Reduction 

Full time equivalent at quarter end 

Q1 2005 2,953 

Q1 2006 2,410 




Q1 

05 

Q1 

06 

Q2 

06 

Q3 

06 

Q4 

06 

Distribution 

We estimate that in 2006 we 

distributed approximately 97% of our 

sanitary products sales by value through 

wholesalers and DIY outlets (served 

indirectly). The remaining 3% of 

our sanitary products sales were 

mainly through original equipment 

manufacturers (OEMs). 

Expenses 

Selling Expenses 

Selling expenses include costs related 

to employee compensation, marketing 

and advertising, commissions and 

freight. Selling expenses increased 

€24 million or 13%, to €209 million 

from €185 million in 2005. The 

additional selling expenses were 

incurred to relaunch the GROHE brand, 

to launch the 21 new product ranges, 

to upgrade sales capability and training 

and to pay for our outside services 

and commissions to outside agents. 

In 2006, our global sales organisation 

consisted of over 1,150 employees, 

of which over 950 were involved 

in sales activities and over 190 in 

logistics and services. 

We have recently reorganised our 

global sales function to more closely 

match our distribution network. 

The global sales organisation is 

responsible for showroom support, 

international trade shows, customer 

relationship programmes, point-of-sale 

communications, showroom 

strategies, business planning and 

review, training programmes for 

customers and our key accounts and 

project management. We compensate 

our sales force partially through 

performance-based incentives. We 

have entered into agency agreements 

with independent sales agents inside 

and outside of Germany under which 

we pay sales commissions. 

Our sales and marketing strategy 

is designed to reach all decision 

makers responsible for the purchase 

of sanitary products, including private 

and commercial end-users, plumbers, 

installers, showroom sales personnel, 

planners, architects and wholesalers, 

through a variety of marketing, sales 

and service activities. Advertising 

expenditures in 2006 amounted to 

€39 million, an increase of 22% 


We coordinate marketing and sales 

of all GROHE branded products at our 

headquarters in Hemer, Germany, 

which works together with regional 

division heads to ensure consistency 

in our brand strategy and advertising.



We are building on the lessons we 

have learned and the operational 

momentum we have achieved in 2006. 

Research and Development 

We continue to invest significantly 

in new product developments to 

accelerate the rate of our product 

innovation. In 2006 we spent €28 

million, or 3% of our total sales, on 

research, development and design. 

R&D expenses, in fact, reduced in 

2006 by €3 million. This is due to 

faster than expected new product 

development enabling lower than 

planned costs. Our investment is 

already yielding impressive results, 

with new products comprising 25% 

of our product portfolio, and 39% 

of our sales attributable to products 

introduced within the last three years. 

G&A and Other Expenditure 

General & Administrative expenses 

relate to employee compensation, 

consulting and legal fees and 

information technology-related 

expenses. Our head office expenditure 

was almost flat in 2006 at €28 million 

versus €27 million in 2005 due to strict 

controls on head office spend. Other 

income amounted to €20 million and 

relates to notional currency adjustments 

for our US dollar hedges in 2006, 

release of provisions and increased 

income from the sale of waste materials. 

Operating Profit (Operational EBIT) 

Operational EBIT increased 21% 

to €135 million from €112 million 

in 2005. Operational EBIT as a 

percentage of sales increased 1% 

to 14% in 2006 from 13% in 2005. 

Operating Profitability 

(Operational EBITDA) 

Our operational EBITDA amounted 

to €171 million, an increase of 12% 


Overall the major contributors to this 

improvement were the sales increases 

achieved after the strengthening of our 

sales organisation, the relaunch of the 

GROHE brand and new product lines, 

along with cost improvements. 

Despite the increase in our posthedged 

brass cost, our Fit for the 

Future efficiency programme, together 

with our strategically-timed price 

increases helped us achieve a 

Operational EBITDA margin of 18%, 

the same as in 2005. 

Cash Management 

Over 2006 our sources and uses of 

cash followed a pattern of two halves. 

In the first half of the year we used 

cash to invest in the transformation 

and rejuvenation of our business. We 

paid for the redundancies in our German 

workforce and increased our inventories 

to maintain availability as we transferred 

production from Germany to our 

factories in Portugal, Thailand and 

Canada. As we started to grow our top 

line we used additional cash resources. 

In July 2006, we embarked on our 

Lean Cash Management Programme 

which focused on generating cash 

€133m 

Cash generated from operations 

before exceptionals and financing 

22% 

Increase in advertising spend 

from last year 

Cash flow from operating activities 

before exceptionals and financing 

€ million 

Q1 2006 -4 

Q2 2006 17 



Q1 Q2 Q3 Q4



Research and Development 

€ million 

03 24 

04 27 13% 

05 31 14% 

06 28 -9% 

Geographic growth 

% 

1. Germany 6% 

2. Americas 7% 

3. Other European countries 14% 

4. Middle East and Asia 19% 

4 

1 

2 

According to a study by 

Germany’s Federal Ministry of 

Finance compiled by the 

Technical University in Munich, 

the European Business School 

and the legal firm White & 

Case, “the private equity 

companies have created 

sustained value and positioned 

the company on a sound 

footing, in particular in the 

international arena.” 

03 04 05 06 

3 

through inventory reduction and 

significant improvements in our Days 

Payable Outstanding (DPO) and Days 

Sales Outstanding (DSO) performance. 

Overall, before considering the effects 

that do not reflect the long-term 

performance of our business such 

as cash restructuring and certain 

foreign exchange effects, we 


operations which is an increase of 

15% compared to 2005. 

Going forward, we intend to continue 

reducing our working capital further 

through our Lean Cash Management 

Programme. Improvements in our 

business planning and logistics 

processes, including our migration 

to the SAP R/3 operational software, 

will also improve our inventory 

management. 

Liquidity and Funding 

In January 2007, our €800 million 

financing, via an offering of senior 

secured floating rate notes due in 

2014, was well-received by investors, 

with an order book that was more 

than two times oversubscribed, 

further demonstrating their confidence 

in our strategy and operations. 

The refinancing greatly improved 

our capital structure. In addition to 

repaying our existing senior debt, 

we are now well-positioned to improve 

our operational and financial flexibility, 

re-invest additional cash flow in product 

development and explore new 

international growth opportunities. 

As part of the refinancing, we agreed 

a new €150 million senior secured 

revolving credit facility with our banking 

partners (of which approximately 

€60 million was utilised upon the 

refinancing date). The facility is 

available for use in the form of 

revolving loans or letters of credit 

for working capital, acquisitions and 

general corporate purposes. 

Investing for Growth 

Going forward, we intend to capitalise 

on a variety of growth opportunities in 

both advanced and emerging markets 

to further strengthen our global 

presence. In North America and the 

UK in particular, we are broadening 

our customer base and distribution 

network by introducing 16 new localstyle 

product ranges and expanding 

our position in the project business. 

In emerging markets such as the 

Middle East, Far East and Eastern 

Europe, we are expanding our 

business by broadening our distribution 

network, strengthening our customer 

relationships and establishing local 

production facilities or joint ventures 

with local partners producing products 

tailored to the needs of local tastes 

and requirements. 

Partnerships for Growth 

Our private equity investors, TPG 

Partners and DLJ Merchant Banking, 

have supported us through our 

transformation period and enabled us 

to achieve robust performance while 

retaining the innovation and creative 

culture that is paramount to GROHE’s 

success. Their long-term view and 

support has enabled us to attract 

high-calibre professionals and build 

a global process and infrastructure 

at GROHE. As we go forward we will 

continue to realise the benefits from 

these partnerships. 

Outlook 

As we embark on the next stage of 

GROHE’s development, we are building 

on the lessons we have learned and 

the operational momentum we have 

achieved in 2006. Going forward, 

we will continue to improve efficiency 

throughout the entire organisation 

to deliver on the targets we have set 

for 2008 and beyond. In this way, 

GROHE will continue demonstrating 

our efficient operational discipline 

while building our market-leading 

position as a premium lifestyle brand 

in all our markets around the world.


27 

Sustainable 

and profitable growth 

20+ 

New products 2006 

50+ 

New products 2007 

39% 

Revenue from new products 

less than 3 years old 

25% 

Renewal rate 

Our strategy means all GROHE operations are 

geared towards delivering reliable growth across 

all our product lines and markets. 

The process begins with deepening market and 

consumer insight. Our ability to track market 

developments as well as consumer preferences and 

their levels of interest in new product features, 

together with our in-house design team and 

proficiency in engineering, production and quality 

management, means we can bring innovative, high 

quality products to market regularly and quickly. 

Our insights give us the confidence 

that our new products are fully adapted 

to market requirements and will drive 

increased demand while our new 

manufacturing flexibility means we 

can meet that demand swiftly. 

Our commitment to rapid and 

sustainable new product delivery is 

refected in our product renewal rate 

of 25% every two years – providing 

GROHE with the freshest portfolio 

in the industry. This commitment 

to innovation and understanding our 

customers leads to our higher product 

success rates and clearly differentiates 

every new GROHE product through 

its unique combination of quality, 

technology & design. 

We call this dynamic and insight-driven 

approach to product development 

‘demand-led innovation’. 

Our quality, technology and design 

distinguish us in the market as 

demonstrably better than the 

competition, promising products 

and a user experience that is unique, 

special and better. This link between 

product performance and brand is 

a powerful driver of growth. 

Our growth is also driven by the 

professionalism of our new (and better) 

international sales force. Our track 

record in penetrating new markets 

is not only based on our brand and 

products but also on our professional 

sales approach, and the strong 

relationships we share with our 

customers across the globe. 

Our expertise in customer relationship 

management, gained through years 

of experience of working with some 

of the world’s leading consumer-facing 

companies, is helping GROHE build 

sustainable and profitable growth.

28 Sustainable growth 


Innovation, 

inspired by demand 

€28m 

We have stepped up our investment 

in research and development by 

16% to €28 million since 2003 

GROHE leads the market by 

systematically investing in 

capabilities and processes that 

optimise the rate and quality 

of our innovation. 

Consumers look to us for the 

highest levels of quality, delivered 

through the latest ideas and 

applications of technology. 

This is as important for consumers 

as it is for the professional installers 

and architects who value our 

expertise and recommend us to 

their customers. Product lifecycles 

are also declining in many markets, 

as the rate of home renovation 

increases. This makes it ever more 

crucial to boost our research and 

development efforts. 

Increased Investment in R&D 

To deliver on our market leadership 

promise, we have stepped up our 

investment in research and 

development (R&D) by 16% since 

2003, equivalent to €28 million, 

or 3% of our revenues in 2006. 

We aim for 25% of our sales to be 

generated by products launched in 

the last two years – giving us by far 

the leanest, freshest portfolio in the 

industry. We know this is what our 

customers want – because in 2006 

39% of our sales came from new 

products whereas in 2004, new 

products accounted for 17% of our 

sales, demonstrating a step-change in 

our rate of successful innovation. 

In 2006, we launched more than 

20 products and product lines. We 

relaunched Grohtherm 1000 / 2000 / 

3000 ranges of thermostatic mixers, 

the four Euro line products; Plus, Disc, 

Style, Smart, the Relexa range of 

showers, and the LadyLux kitchen 

faucet. We also introduced new 

products including the innovative 

Grohtherm Wireless, with its 

minimalist design, wireless control 

and convenient installation, the 

Rainshower line of showerheads, 

new kitchen product lines such as 

Essence, Minta and K4, and the Rapid 

SL flushing system. 

We reduced the time-to-market of 

our newly developed products by 

more than half. Accelerating our rate 

of product innovation is a cornerstone 

of our Fit for the Future programme, 

which seeks to grow our brand 

through intelligent new product 

designs and operational efficiencies. 

Linking Innovation and 

Customer Preference 

The quality or our innovation process 

is based on our ability to track consumer 

preferences and levels of interest 

in new product features as well as 

discovering “hidden potentials” in 

undisclosed customers’ wants and 

needs, combined with our in-house 

design and production proficiency. 

This ability allows us to sustain 

this rate of product renewal, tightly 

linked to current and anticipated 

market demand. For each of the 

many products we introduce we 

are responding to genuine unmet 

human needs while raising the bar 

for excellence in quality, design 

and technology.


Sustainable growth 29 

A growing number 

of households, with higher 

disposable incomes, 

are among the factors 

fuelling growth. 

Factors Driving Demand 

We go to great lengths to understand 

the key drivers for growth in the 

sanitary fittings industry. A growing 

number of households, with higher 

disposable incomes and an increasing 

focus on the bathroom and kitchen, 

are among the factors fuelling growth. 

In addition, demand is being driven 

by faster renovation cycles, with 

approximately 70% of worldwide 

activity in 2005 attributable to 

replacement and renovation activity. 

In this market, as well as in new 

construction, there is a growing 

appetite for products with higher 

design standards and more advanced 

functions and features. 

This is noticeable among city-dwelling 

professionals, especially in rapidly 

urbanising emerging economies, 

where there is a strong appetite for 

Western sanitary standards and 

products that highlight water and 

energy efficiency. 

These macro trends all inform and 

direct our innovation strategy. But we 

are also aware of the subtler social 

factors that shape patterns of demand. 

We understand key changes in the 

way people live their lives, and the 

impact those have in the home. One 

noticeable shift is that people are 

reacting to the increasing pressures of 

life by treating their homes as havens – 

places to be at one with their families, 

to pamper themselves and find peace. 

Luxury walk-in showers, whirlpools, 

deep bath tubs, creative lighting 

solutions and the introduction of 

entertainment media into the 

bathroom all combine to create 

spaces that invite people to relax 

and indulge in privacy. 

The bathroom has evolved from a 

functional cleaning area to a sanctuary 

of wellbeing. It has become a truly 

special place, and people are looking 

for equally special solutions to fire 

their imagination and meet their 

heightened expectations for aesthetic 

design and performance. 

On the other hand, the bathroom is 

changing its place in the home, with a 

shift towards bathing areas integrated 

into the bedroom. This creates 

demands, not only for products that 

perform with less noise, but that also 

blend harmoniously into different 

environments. We pay attention to 

regional differences, and design our 

products accordingly. We have noted 

that water pressure in the UK tends to 

be lower than in mainland Europe, and 

have optimised our faucet and shower 

designs to suit. In Japan, we know that 

people like to bathe in water 2-3˚C 

higher than in Europe – information 

that also helps us tailor products to 

consumer preferences. 

The kitchen has become the social 

hub of the home where we are 

constantly anticipating shifting 

styles and usage patterns. For 

example, the popularity of industrial 

and professional-style kitchens in 

stainless steel has influenced our 

development of faucets and fittings 

that combine robust multi-functionality 

with modern interior design. 

We also note that 90% of customers 

would like more water outlets in their 

future kitchen, leading us to develop 

a multi-functional faucet concept 

modelled on trends that are popular 

in American kitchen design. 

Ultimately, our investment in 

innovation, combined with a deeper 

insight into application, is creating 

the products that meet basic human 

desires. In turn, it is a strategy 

that is helping to transform the 

business of the new, lean and 

future-looking GROHE.



Paul Flowers, Vice President Design 

Design 

Design is one of the key pillars of 

the GROHE strategy. In the sanitary 

fittings industry, eye-catching 

design is everywhere, but the 

GROHE approach to design sets 

it apart. 

At GROHE, we believe that good 

design surpasses form and 

function. It is about delivering 

the perfect balance of quality, 

technology and design to create 

products that make an emotional 

link with the user, by enhancing 

their experience of water and 

delighting them throughout the 

lifecycle of the products. 

Design that Makes a Difference 

We believe in using design to 

communicate with our users: the 

aesthetics of our products makes 

a promise of superb performance, 

and the prowess of our engineering 

ensures that promise is delivered 

for a lifetime. 

Our design is driven by consumer 

insights, and characterised by a 

specific GROHE Design Language. 

This philosophy, applied across our 

portfolio, can be summed up in three 

words: human, easy and performance. 

These core values are present in 

every product. They will always be 

approachable, unintimidating, easy 

to use and will radiate performance 

and quality. 

In-house Design Team 

We pride ourselves on our superb 

design, and we work hard to ensure 

it is deeply rooted throughout our 

business. To this end, GROHE is 

unusual in the industry for having one 

of the largest, and most international, 

in-house design teams. Rather than 

outsourcing to ‘guest’ consultants, our 

in-house team gives us a consistent 

design mentality, shared amongst 

people who understand and speak 

our GROHE Design Language. 

Their international outlook and expertise 

brings a wealth of varied knowledge, 

but applies it through consistent 

GROHE values and standards. 

This in-house capability carries 

numerous advantages. Most notably, 

compared to the ranges of our 

competitors, it creates a unique and 

coherent portfolio of products that 

consistently reflect the GROHE brand 

values of superior quality, technology 

and design. 

It also makes us more market 

responsive as our team is able to 

constantly track shifts in demand 

and new styles and trends. 

Having a deep understanding of our 

manufacturing processes and systems 

for quality management allows our 

designers to create products that are 

not only relevant and desirable to 

consumers, but that can also be 

brought to market faster than our 

competitors. In 2006, we improved 

our internal processes further with 

the introduction of software to support 

close cooperation between design 

and brand management.



Our design values are: 

Human 

Easy 

Performance 

Ultimately, we believe our in-house 

design capability is one of the key 

ways in which GROHE leads the 

market by systematically investing 

in processes that optimise the rate 

and quality of our innovation. 

GROHE Design Center 

The GROHE Design Center, located 

at our headquarters in Hemer, is the 

creative hub of the company and plays 

a crucial role in sustaining our design 

ingenuity. It contains an ‘Aqua Lab’ 

for experiencing and enjoying water, 

a ‘Materials Library’ for analysing the 

latest materials and a ‘Trends’ section 

for sharing insight into consumer 

behaviour. It also contains every 

product in our portfolio, displaying 

our design ethos in its entirety. 

The goal of the Design Center is to 

create an environment where anyone 

from the company can cross-fertilise 

ideas and discuss how we can 

improve our designs and products. 

An Award-Winning Design Culture 

Our products have been publicly 

recognised for their design and 

innovation, with GROHE receiving 

30 design awards since 2004. 

Products such as our new minimalist 

design lines, Allure and Lineare, 

our K4 and Zedra kitchen faucets, 

our Rainshower Cosmopolitan and 

Movario hand-held showers, and our 

new Rainshower system have all 

won prestigious awards. 

In 2007, the new GROHE Ondus range 

was the winner of the coveted ‘red 

dot’ design award, presented by the 

North Rhine-Westphalian Design 

Centre. More than 4,000 entries from 

40 countries make it one of the biggest 

design competitions in the world and 

the ‘red dot’ is regarded as the 

international seal of design quality. 

Recent Awards 

Red dot design award 

2004: F1 Basin mixer, F1 3-hole bath 

combination, F1 Thermostatic bath / 

shower mixer 

2005: Rainshower System 

Design Plus 

2001: Freehander 

2005: F1 Basin mixer 

Industrie Forum Design Award 

Hannover 

2004: F1 Thermostatic bath / 

shower mixer 

2005: Rainshower System 

2006: Lineare Basin mixer 

Designpreis der 

Bundesrepublik Deutschland 

2004: Movario Handshower, Movario 

shower set, F1 Basin Mixer, F1 3-hole 

bath combination, 

F1 Thermostatic bath / shower mixer 

2006: Rainshower System 

MATERIALICA 

2004: Zedra 

2005: F1, Surface XT 

Stahlinnovationspreis 

2003: Zedra



Quality 

An independent test by the LGA 

QualiTest GmbH in Würzburg 

has shown that the Grohtherm 

thermostatic fittings are the best 

in the European market in almost 

all categories 

Uncompromised product quality 

across all categories and price 

points has always been perceived 

as the core characteristic of 

GROHE. It thus remains the 

most fundamental anchor of 

the GROHE brand. 

At GROHE, we believe quality 

is defined by highest levels of 

craftsmanship, outstanding 

durability and longevity, high 

levels of functionality, long lasting 

design and convenience of use. 

GROHE Quality 

Ensures Products for Life 

Throughout our long history, GROHE 

has established one of the best 

reputations for quality in our industry, 

and quality remains the chief factor 

that influences consumers and trade 

customers to choose our products. 

Longer lifetimes, lower maintenance 

costs, reliability and functionality are 

the hallmark of GROHE and are key 

factors underpinning our competitive 

strength and market share. This is 

especially the case for upper massmarket 

and top-end sanitary products, 

where the GROHE brand has a 

particularly strong position. 

Here, sanitary products are typically 

used for upscale private and residential 

renovation, new construction and 

higher-end projects and where purchase 

decisions are typically influenced by 

quality, additional features, aesthetic 

design and superior functionality. 

Typically, consumers in the upper massmarket 

and top-end sanitary products 

market are less price-sensitive. 

As a result, we take quality extremely 

seriously and have built a GROHE 

quality-management system that far 

exceeds common industry standards. 

GROHE Quality System 

GROHE quality is designed and 

engineered by the most experienced 

designers and R&D professionals in 

our industry. All products are produced 

along external process certification. 

As well as external certifications 

according to ISO 9001 and ISO 14000, 

we subject our products to internal 

inspection processes and long-term 

tests that simulate the daily use, over 

many years, of the typical shower 

system or kitchen faucet. For example, 

instead of the 90,000 temperature 

changes required by ISO 9001, 

GROHE faucets must complete twice 

as many cycles before being approved 

for mass production – equivalent to a 

25-year lifetime. 

Through these rigorous self-imposed 

processes, performed in our GROHE 

Life-Testing Centre, we guarantee 

that all of our products, and their 

components, achieve a quality level 

and a product lifetime that no 

competitor can match. 

For example, we exhaustively test the 

performance of the ceramic cartridge 

that lies at the heart of the GROHE 

SilkMove ® system to ensure its lifelong 

smooth operation. And the highly 

responsive thermostats within the 

GROHE TurboStat ® system are tested 

to provide life-long performance. 

We go into every detail. GROHE quality 

means that even the hot and cold water



markers of the temperature selector 

must be as legible after 20 years as 

on the day the faucet was installed. 

All of our faucets and showers are 

plated with GROHE StarLight ® 

chrome, a high-gloss, fully scratchresistant 

and shockproof finish. In 

addition, some of our kitchen faucets 

are made from GROHE RealSteel ® – 

a high-quality stainless steel that is 

both hard-wearing and hygienic. 

Everything is subjected to a battery 

of tests, including resistance and 

endurance measurements and, 

over and above what is officially 

required, GROHE’s own abrasiontesting 

procedures. 

GROHE Quality Consistency 

across all Plants 

A significant achievement during 

our recent restructuring has been to 

maintain these market-leading levels 

of quality control, while realigning our 

global production footprint. Having 

closed our Herzberg plant, we have 

reduced our level of production in 

Germany and transferred production 

to facilities in lower cost centres 

in Thailand and Portugal. 

However, thanks to sustained 

investment in equipping and managing 

the quality control processes in all of 

our plants, we can guarantee that full 

GROHE quality is consistent wherever 

our products are made. As well as 

making our plant in Thailand 

manufacture to German quality 

standards, our investment has made 

our facility in Germany more flexible 

– enabling it to produce higher-value 

products and to quickly adjust 

production cycles to meet specific 

customer demands. 

This global consistency of quality also 

applies to our environmental, health 

and safety standards. 

Quality in GROHE DNA 

We believe that maintaining marketleading 

quality, produced at a lower 

cost and with greater flexibility and 

responsiveness, is a formula that will 

sustain our business in the long term. 

Ultimately, we see quality as a human 

as well as a technological process. It is 

not just about the reliability and longlasting 

performance of our products, 

but how, through GROHE’s superior 

design and innovation, they add value 

to people’s lives and enhance their 

enjoyment of water. And building 

quality into our DNA is about instilling 

a quality mindset in our staff. Everyone 

at GROHE understands the heritage 

of GROHE quality and its role in 

sustaining our business. 

In that way, we work hard to ensure 

that quality is engrained in our past, in 

the products we bring to market in the 

present and in the strategies leading 

us into the future. 

25yrs 

Instead of the 90,000 temperature 

changes required by ISO 9001, 

GROHE faucets must complete 

twice as many cycles before being 

approved for mass production – 

equivalent to a 25-year lifetime


Decades of research and 

development have resulted in 

a range of products that are 

renowned worldwide for their 

technical excellence. 


304 

solid 

high grade 304 

stainless steel 

Technology 

Advanced technology is at the 

heart of every GROHE product. 

Ever since GROHE pioneered the 

application of thermostats 

50 years ago, it has pushed the 

boundaries of technology in the 

sanitary industry. 

Technology with a Purpose 

Today, GROHE is setting standards in 

design and technology, which means 

that its products not only look beautiful 

but also last for a lifetime. 

As with everything it does, GROHE 

pursues new technology not just 

for technology’s sake, but for real 

benefits. Advanced GROHE 

technology is designed to make life 

easier for the user, the installer and 

also to save time, energy and water. 

GROHE offers its distributors, fitters 

and consumers well thought-out 

and added-value solutions, where 

technology has been harnessed 

to deliver specific advantages that 

clearly differentiate GROHE faucets, 

fittings and installation systems from 

comparable competitor offerings. 

These advantages are encapsulated 

in what we call our unique ‘Moments 

of Truth’. Each Moment of Truth stands 

for a specific user benefit for the 

installers and users of our products 

and systems, and each is an example 

of proprietary technology, developed 

by GROHE, that makes our products 

demonstrably better than others on 

the market. They provide us with 

unique selling points for consumers 

and set standards for the industry 

as a whole. 

Look to the Future 

Looking ahead, GROHE is leading 

the sanitary industry into the digital 

revolution, reinventing our use of 

the bathroom and kitchen with 

technologies that deliver personalised 

water experiences. The groundbreaking 

GROHE Ondus range 

encapsulates this, spearheading 

the use of wireless technology into 

the bathroom. 

Grohtherm Wireless is a revolutionary 

programmable and remote-controlled 

thermostat which enables the user 

to personalise their shower by storing 

their preferred blend of flow rate and 

temperature. Hi-tech products such 

as these look to the future but 

continue our long tradition of using 

the latest technology to deliver real 

human benefits. We like to call this 

Digital Pleasure.



GROHE Moments of Truth 

30% 

GROHE DreamSpray ® 

uses 30% less water 

than its competitors 

70yrs 

GROHE StarLight ® technology 

has been refined over the 

past 70 years, creates a 

deep and even layer and is 

known as one of the best 

surface finishes in the world 

GROHE SilkMove ® 

GROHE faucets are known for their 

smooth operation. This smoothness 

derives from the unique cartridges, 

manufactured in-house from an 

advanced ceramic alloy and coated 

with a special Teflon lubricant. 

As a result, GROHE SilkMove ® 

technology ensures a lifetime of 

maintenance-free comfort and 

reliability. The smoothest handling 

of the lever creates effortless 

precision and ultimate comfort. 

GROHE TurboStat ® 

We have increased the sensitivity of 

the thermo element and restructured 

the internal waterways in our new 

thermostats so that they react twice 

as fast as before to abrupt changes 

in water pressure. They are also nine 

times more accurate in terms of 

temperature setting than our leading 

competitor’s product. 

With GROHE TurboStat ® , you always 

have the right shower temperature 

reached in a fraction of a second and 

offering greater convenience, comfort 

and safety. 

GROHE StarLight ® 

Our dazzling chrome finish is in a class 

of its own thanks to GROHE StarLight ® 

technology. Our chrome-plating 

process, refined over the past 70 years, 

creates a deep and even layer and is 

known as one of the best surface 

finishes in the world. It offers a 

mirror-like sheen that is soil repellent 

and resists scratches and tarnishing – 

ensuring good-as-new looks for 

years of use. 

GROHE DreamSpray ® 

GROHE DreamSpray ® technology is 

at the heart of all our showers. This 

is an advanced ‘shower engine’, built 

from multiple single parts which 

efficiently distribute an equal flow of 

water to every single nozzle. The result 

is a shower system that combines 

a second-to-none user experience 

with water and energy efficiency, 

as GROHE DreamSpray ® uses 30% 

less water than its competitors. 

GROHE CoolTouch ® 

Enhanced safety is at the heart of 

GROHE CoolTouch ® technology, 

eliminating the risk of scalding on hot 

chrome surfaces. 

This is especially valuable for children, 

who often lack an adult’s sense of 

what’s too hot to touch. To counter 

this, GROHE showers feature an 

innovative ‘cooling channel’, creating 

a barrier between the hot water and 

the outer surface so it never exceeds 

the temperature of the shower water. 

GROHE Whisper ® 

For peace, comfort and design freedom, 

our concealed cisterns feature GROHE 

Whisper ® technology. 

This is achieved thanks to decoupled 

pipe supports, which prevent any 

sound being transferred to the 

structure of the building when the 

water is released from the cistern 

to the bowl. Increasingly, designers 

and fitters want more freedom in 

where they can locate the WC. 

With GROHE Whisper ® there 

is no need to worry about 

excessive flushing noise, allowing 

the WC to be located without fear 

of disturbing others.



Professionalising 

our sales team and 

building better 

relationships with 

our customers. 

We have fundamentally overhauled 

our sales leadership, hiring 

in country and regional sales 

heads from some of the world’s 

top-selling organisations, including 

The Coca-Cola Company, The 

Procter & Gamble Company, The 

Black & Decker Corporation, Mars, 

Incorporated and Motorola, Inc. 

Our Sales Professionals 

These highly experienced and talented 

managers are revitalising our sales 

performance and installing the bestpractice 

processes that GROHE, 

as a world-class company, can use 

to grow its business. 

The enhanced professionalism of 

sales will help us capitalise on growth 

opportunities around the world. We 

restructured our sales organisation 

into 11 regions supported by a lean 

global centre. All regions report 

directly to the Executive Director of 

Global Sales which ensures close 

involvement and support at all times. 

Global Sales Training 

We hold comprehensive sales training 

workshops, designed to maximise 

the efficiency and effectiveness of 

our sales teams. We have introduced 

common sales processes in account 

and field management. The most 

exacting controls and measures have 

been put in place to ensure we can 

precisely track our sales performance 

and forward forecasts. We also 

closely monitor our sales fulfilment 

performance and cash management 

and ensure our factory production is 

tightly aligned to ongoing demand. 

Strong Performance 

Already, the revitalisation of our 

sales capabilities is bearing fruit, 

contributing to our dramatic sales 

turnaround since 2005. In the second 

half of 2006, our sales increased 14% 

compared with the same period in 

2005. We have achieved double-digit 

growth in all meaningful markets and 

product segments. The global reach 

of our sales force is also evidenced 

by the fact that 82% of our sales in 

2006 were from outside Germany. 

This illustrates the success of our 

operational objective to boost sales 

in multiple markets around the world. 

Our strong sales performance is all the 

more impressive given the dramatic 

surge in raw material costs. Significant 

recent increases in copper and zinc 

prices represented a considerable 

sales challenge. We were forced to 

introduce a 5% price rise, and, thanks 

to our close and carefully managed 

client relationships, our sales teams 

were able to ensure that 80% 

of our targeted price increases 

were achieved. This helped us deliver 

improved operational EBITDA in 2006 

versus 2005. 

Broad and Global Customer Base 

Our top 20 customers account for 33% 

of sales with the top two accounting 

for 8% and 6% respectively. 

Maintaining excellence in customer 

relationship management is one of 

our top priorities. Our lasting customer 

relationships are attributable to the 

quality of our products, and also to 

our in-depth understanding of our 

customers’ requirements. To this end, 

we have a focus on traditional channel 

distribution through wholesalers, 

installers and specialised retailers. 

This helps us to maximise coverage 

of the medium and upscale markets, 

build the loyalty of our professional 

endorsers, and mitigate pricing



Clockwise left to right 

Kunsthaus Graz Museum, 

Graz, Austria 

Turning Torso, 

Malmö, Sweden 

McLaren Technology Centre, 

Woking, England 

Norwegian Jewel cruise ship 

Le Rêve, Dubai 

Le Méridien Montparnasse Hotel, 

Paris, France 

pressure experienced in the lower-end 

and do-it-yourself distribution channels. 

We believe that these strong customer 

relationships translate into significant 

repeat business, which contributes to 

a higher overall stability of demand 

and acceptance of premium pricing. 

The loyalty of installers, plumbers 

and architects helps to counterbalance 

increasing levels of wholesale 

purchasing power. 

Key Relationships 

We are experiencing considerable 

consolidation in purchasing patterns 

in the sanitary fittings industry, making 

it vital to build strong relationships 

with a relatively small number of key 

accounts. Our single global brand 

strategy fits well into this consolidated 

buying trend, with the biggest accounts 

favouring the strongest and most 

internationally consistent brands. 

GROHE’s scale, logistics capabilities, 

broad product ranges and global brand 

power make us well positioned to take 

advantage of these trends. 

Our customer relationships are not 

only vital for the value of business they 

generate, but also for the prestigious 

endorsement they give to our products. 

Pre-Eminent Showcase Locations 

Showcase locations which have 

chosen GROHE sanitary fittings 

include Le Rêve – an exclusive and 

distinctive 50-storey apartment 

building in Dubai – and the 956- 

room Le Méridien Montparnasse 

Hotel in Paris. Our design expertise 

is evidenced by our products being 

chosen for the avant-garde Kunsthaus 

Graz Museum for contemporary art 

in Graz, Austria. 

Looking ahead, GROHE products 

are due to be installed in a number 

of international showcase locations, 

including the new £4.3 billion Terminal 

5 at London’s Heathrow Airport and 

at the Olympic Stadium in Beijing. 

8 Stage Sales Programme 

1 Recruited new talent 

2 Upgraded sales capabilities 

through tailored sales training 

programmes and account and 

field management processes 

3 Rolled out sales best practices 

through account and field 

management processes 

4 Introduced annual Integrated 

Operating Planning and 

Forecasting system 

5 Increased transparency 

6 Implemented new Remuneration 

and Salary structure 

7 Designed and introduced a new 

trade terms system 

8 Restructured back office to 

increase front-line investment 

and personnel



Heritage, corporate responsibility 

and sustainability 

GROHE’s commitment to 

sustainability is integrally tied 

to our history as an ethically 

and environmentally conscious 

corporate citizen and employer. 

As a formerly family-owned 

company in the business of water 

technology, we are devoted to 

understanding and protecting 

our most precious natural 

resource. This not only reflects 

our commitment to our planet 

but helps us nurture better 

relationships with our suppliers, 

consumers and customers. 

Acting responsibly towards the 

environment, our employees 

and our communities underlines 

GROHE’s mission around 

the world. 

Building Sustainable Products 

GROHE products are designed and 

built to last – which is why our faucets 

are renowned for their 25-year 

lifecycles. Sustainable product quality 

comes on a result of high-proficiency 

engineering, precision manufacturing, 

product optimisation through extensive 

testing and long-term availability of 

spare parts. 

Respecting our Environment 

Water is our most precious resource, 

which is why GROHE is committed to 

protecting our natural environment and 

the way in which our operations 

interact with their local surroundings. 

All GROHE facilities and operations are 

environmentally responsible, complying 

with all applicable environmental laws 

and regulations (including ISO and 

European Union regulations) as well 

as GROHE’s own strict environmental 

standards. 

At GROHE we pride ourselves on 

our modern environmental policy. 

Wherever possible we are reducing 

our greenhouse gas and air emissions, 

lowering our energy usage, reducing 

packaging, choosing eco-friendly raw 

materials and using efficient 

transportation methods for the 

distribution of our products around 

the world. All our factories are focused 

on minimising their carbon footprint 

and we have an extensive recycling 

programme that optimises our use 

of scarce materials. 

All of our suppliers are assessed for 

environmental and human rights 

standards. 

More broadly, we consider our 

‘green’ mentality a benchmark 

of our performance, weighing the 

environmental implications of all 

our major business decisions and 

encouraging our business partners 

to achieve a similarly high level of 

environmental awareness. All GROHE 

employees receive environmental 

training in eco-friendly production 

practices and waste reduction. We 

have a common Code of Business 

Conduct, which details how we jointly 

commit to the way we behave with 

each other at GROHE, with our 

customers, our distributors, and our 

suppliers. It also describes how we 

should interact with local communities 

and the environment. All senior 

employees are required to read, 

commit to and sign our Code. 

Respecting our Employees 

At GROHE, we recognise and 

encourage the uniqueness of each 

employee’s individual contribution to 

our business. Our core values promote 

openness and teamwork, invite 

challenges and encourage trust in 

people. We will not contribute directly 

or indirectly to human rights abuses. 

We are committed to full and open 

communication with all of our 

employees, and respect their right 

to join or not to join unions and other 

groups that promote common goals. 

In Germany, where we reduced our 

workforce by over 900 employees in 

2006, we are in compliance with our 

social plan (Sozialplan) under which 

we are making severance payments 

and are providing funds for training and 

re-qualification of these employees. 

In the past seven years, we have 

not suffered any material work 

stoppage or strike and we consider 

our relations with employees, works 

councils (Betriebsrat) and unions to 

be satisfactory.



“We do not inherit 

the earth from our 

ancestors, we borrow 

it from our children.” 

American Indian proverb 

Our Heritage 

Respecting our Communities 

Corporate citizenship balances 

responsibility to society and the 

environment with acknowledgment 

of our right to trade freely and our 

expectations to be treated fairly. 

By being a good corporate citizen, 

we aim to make a positive contribution 

to the well-being of our stakeholders 

and to the economic, social and 

environmental sustainability of the 

communities in which we operate. 

European Union Ruling 

In November 2004, the European 

Commission carried out inspections 

in the sanitary fittings industry to 

investigate anti-competitive practices. 

GROHE fully complied with the 

investigation. At the end of March 

2007, the Statement of Objections of 

the European Commission was served 

to market participants in the industry, 

including GROHE. We believe that 

there is a substantial likelihood that 

the proceedings following will result 

in fines being imposed which could 

be an amount up to a maximum of 

10% of the company’s total turnover 

in the year preceding the 

Commission’s decision. We expect 

the final Commission decision in 2008. 

GROHE will evaluate the objections 

carefully and will respond to them 

within the set deadline. 

1936 

Friedrich Grohe leaves his father’s 

manufacturing business to strike out 

on his own. He acquires Berkenhoff & 

Paschedag, a manufacturer of 

bathroom fixtures, based in Hemer, 

near Dortmund, Germany. 

1948 

The company is renamed after its 

owner: Friedrich Grohe Armaturenfabrik. 

The company, making kitchen and 

bathroom sanitary fittings, prospers 

during the post-war construction boom. 

1956 

Grohe acquires Carl Nestler, 

a manufacturer of thermostats. 

This becomes a subsidiary, Grohe 

Thermostat GmbH. 

1961 

Grohe begins expanding internationally, 

establishing its first foreign subsidiary 

in France, followed by Austria in 1965. 

1968 

Friedrich Grohe sells a 51% stake 

in the company to International 

Telephone & Telegraph (ITT) of the US. 

1975 

The company establishes a subsidiary 

in the US, opening an office on the 

outskirts of Chicago. Grohe America 

Inc. was established in 1976. 

1983 

Friedrich Grohe dies. His heirs buy 

back ITT’s majority stake. Grohe 

America launches the Ladylux, the first 

pull-out spray kitchen faucet in the US. 

1991 

The company goes public, under the 

name Friedrich Grohe AG. The Grohe 

family retain a majority stake in the 

company, while the IPO allows 

GROHE to finance growth-focused 

acquisitions, such as the bathroom and 

flushing equipment-maker, DAL / Rost. 

1996 

GROHE opens a factory in Thailand, 

followed by a second overseas plant, 

in Portugal, in 1998. 

2000 

GROHE is delisted from the Frankfurt 

Stock Exchange as the company is 

acquired by a consortium of investors 

led by the European investment firm, 

BC Partners. 

2001 

GROHE opens an assembly plant 

in China. 

2004 

GROHE is acquired by our current 

shareholders TPG Partners IV, L.P., 

a fund advised by TPG, and the DLJ 

Merchant Banking Funds.

40 Financial summary 


Summary consolidated operating information 

Year ended 31 December 

2006 2005 (1) 

Note € ‘000 € ‘000 

Sales (2) 939,189 837,743 

Cost of sales (3) (559,820) (479,770) 

Gross profit 379,369 357,973 

Research and development expenses (4) (27,665) (30,519) 

Selling expenses (5) (208,775) (184,738) 

General and administrative expenses (6) (27,538) (27,235) 

Other operating income (expenses), net (7) 19,511 (3,768) 

Operational EBIT (8) 134,902 111,713 

Add back depreciation and amortization expenses (9) 36,348 41,788 

Operational EBITDA (8) 171,250 153,501 

The accompanying notes are an integral part of this summary consolidated financial information. 

Summary consolidated operating information as a percentage of sales 


2006 2005 (1) 

Note % Sales % Sales 

Sales (2) 100.0% 100.0% 

Cost of sales (3) (59.6%) (57.3%) 

Gross profit 40.4% 42.7% 

Research and development expenses (4) (2.9%) (3.6%) 

Selling expenses (5) (22.3%) (22.1%) 

General and administrative expenses (6) (2.9%) (3.3%) 

Other operating income (expenses), net (7) 2.1% (0.4%) 

Operational EBIT (8) 14.4% 13.3% 

Add back depreciation and amortization expenses (9) 3.8% 5.0% 

Operational EBITDA (8) 18.2% 18.3% 

The accompanying notes are an integral part of this summary consolidated financial information.


Financial summary 41 

Summary cash flow information 


2006 2005 (1) 

Note € ‘000 € ‘000 

Operational EBITDA (8) 171,250 153,501 

Changes in working capital 

Change in inventories (19,512) (9,760) 

Change in trade receivables and receivables from associated companies (15,013) (4,967) 

Change in other provisions & accrued liabilities 284 1,449 

Change in trade payables 33,335 18,486 

Effect of FX rate changes on working capital (3,179) 5,042 

Total change in core working capital (4,085) 10,250 

Change in other assets, receivables and prepaid expenses 5,802 (5,048) 

Change in other liabilities and special items according to German GAAP (8,040) 2,682 

Change in pension provisions 7,205 4,082 

Capital expenditures, net of disposals (25,855) (35,542) 

Income tax payments (13,267) (14,340) 

Cash flow from operating activities before exceptionals and financing (10) 133,010 115,585 

Purchase of minority interests (1,464) 0 

Restructuring charges/exceptional items (77,294) (60,500) 

Notional currency adjustment (11) (11,030) 0 

Net proceeds from the sale of subsidiaries 0 33,056 

Cash flow before financing (12) 43,222 88,141 

Interest payments, net (80,811) (80,184) 

Acquisition and financing related transaction costs and other (6,279) (11,583) 

Change in financial debt 66,317 (23,925) 

Change in cash before effects of foreign exchange rate changes on cash 22,449 (27,551) 

Effect of foreign exchange rate changes on cash (1,040) 1,184 

Cash at 1 January 36,436 62,803 

Cash at 31 December 57,845 36,436 

The accompanying notes are an integral part of this summary consolidated financial information.

42 Financial summary 


Notes to the summary consolidated financial information 

The summary consolidated financial information included 

in this report for Grohe Holding GmbH and subsidiaries 

(the “Company”) has been derived from the consolidated 

financial statements of Grohe Holding GmbH that were 

prepared on the basis of German GAAP. Certain 

adjustments were made to eliminate events and 

transactions that the Company does not believe to reflect 

the long-term operating performance of the Company. 

The information provided in this report therefore should 

neither be construed as being in compliance with German 

GAAP nor with any other accounting standards. Our audited 

consolidated financial statements prepared in accordance 

with German GAAP are available at the offices of Grohe 

Holding GmbH. 

(1) In the third quarter of 2005, we sold our subsidiary AQUA 

Rotter. German GAAP requires to include AQUA Rotter in 

our consolidated financial statements until 31 August 2005. 

In order to provide financial information on a like-for-like basis, 

we have eliminated AQUA Rotter from the presentation of 

the consolidated financial information set forth in this report 

for fiscal year 2005. 

(2) We generate sales from the sale of products from our five 

strategic product groups across all sectors of installation, 

including residential, commercial, industrial and institutional 

uses. In 2006, we generated over 90% of our sales from 

products marketed under the GROHE brand. 

(3) Cost of sales includes raw material costs, purchased parts 

and direct labour, research and development expenditure, 

as well as manufacturing overhead and depreciation. 

The primary raw material is brass and brass components. 

The primary components of purchased parts are brass and 

plastic materials. Certain expenses related to the restructuring 

of our business, which are comprised of consulting expenses, 

expenses related to the social compensation plan, expenses 

for redundancy payments and other expenses related 

to restructuring measures, have been excluded from cost 

of sales as presented here. Research and development 

expenses, normally presented as part of cost of sales in our 

consolidated financial statements, have been presented as 

a separate line item in this summary financial information. 

(4) Research and development expenses include employee 

compensation, expenses for outside services and include 

expenses related to our design activities. 

(5) Selling expenses include employee compensation, 

advertising and sales promotions, commissions and freight. 

Certain expenses related to the restructuring of our business 

have been excluded from cost of sales as presented here. 

(6) General and administrative expenses consist of employee 

compensation, consulting and legal fees and information 

technology related expenses. Certain expenses related 

to the restructuring of our business have been excluded 

from cost of sales as presented here. 

(7) Other operating income (expense), net, as presented 

here includes income from associated companies, foreign 

currency gains and losses, gains and losses from the 

disposal of fixed assets, income from the release of special 

reserves and other gains from the release of provisions. 

Other operating income (expense), net, as presented 

here for fiscal year 2006 also includes a notional currency 

adjustment of €11.0 million. The notional currency 

adjustment relates to our US dollar hedges for 2006. 

In order to present operational EBIT and operational 

EBITDA, we have included an adjustment for the difference 

between the actual rate of US$1.34 per €1.00 resulting 

from our foreign currency hedging and an assumed rate 

of US$1.25 per €1.00. The adjustment is calculated based 

on US dollar denominated sales in an amount of US$204.3 

million from our German subsidiary Grohe AG to our 

subsidiaries in the United States, Canada, Singapore and 

China and US dollar denominated direct export sales from 

Germany to our customers in the Middle East. In addition, 

other operating income (expense) as presented here 

excludes (i) amortization and depreciation expenses on 

fair value step-ups on fixed assets and goodwill recognized 

in the consolidated financial statements, (ii) expenses 

related to acquisitions of subsidiaries and expenses related 

to financing transactions, (iii) restructuring charges, and 

(iv) certain exceptional and non cash items such as non 

cash currency gains and losses resulting from consolidation 

measures, non cash expenses and income from the 

valuation of forward purchase contracts for materials, 

non cash expenses from the write-off of step ups of 

current assets held for sale and certain legal expenses 

and the gain realized on the sale of AQUA Rotter.

GROHE Annual Review 2006 Financial summary 43 

(8) Operational EBIT and operational EBITDA are not measures 

of a company’s financial performance or earnings and are not 

recognized under German GAAP or any other accounting 

standard. Operational EBIT and operational EBITDA should 

not be viewed as an alternative to net income, operating 

profit or other measures of earnings or as an alternative to 

cash flow from operating activities or as a measure of liquidity 

as presented in the full set of the Company’s consolidated 

financial statements. A full set of the consolidated financial 

statements of the Company is available at the offices of 

Grohe Holding GmbH. We believe that operational EBIT 

and operational EBITDA assists in comparing the 

performance of the Company on a consistent basis, without 

regard for factors that we believe do not reflect the regular 

operating performance of our business. As not all companies 

do calculate EBIT and EBITDA and similarly titled financial 

measures in the same manner, other companies’ disclosure 

of EBIT and EBITDA may not be comparable with Operational 

EBIT and Operational EBITDA as presented herein. 

(9) Amortization and depreciation as presented here excludes 

step-up amortization and deprecation. 

(10) Cash flow from operating activities excludes cash payments 

that we do not believe to reflect the ongoing operating 

performance of our company such as restructuring expenses, 

effects from the notional currency adjustment and the 

proceeds from the sale of subsidiaries. We believe that 

this presentation facilitates a comparison of our operating 

cash flow on a like-for-like basis. Cash flow from operating 

activities as presented here differs from the presentation 

according to German GAAP. 

(11) Reference is made to Note (7) for a description of the 

calculation of the notional currency adjustment. 

(12) Cash flow before financing is defined as change in our 

cash position before interest payments, net, repayments 

of principal and proceeds from the issuance of debt, 

and certain cash expenses related to acquisitions and 

financing transactions.


Our global presence 

Designed and produced by Addison Corporate Marketing, London and printed by Granite Colour Ltd. 

Production and 

assembly plants 

Strategic partners 

Branch offices 

Sales subsidiaries 

Production and 

assembly plants 

Germany: 

– Hemer 

– Lahr 

– Porta Wesfalica 

Canada (Mississauga) 

Portugal (Albergaria-a-Velha) 

Thailand (Rayong Province) 

China (Shanghai) 

Strategic 

partners 

Brazil 

Branch offices 

China (Beijing) 

China (Chengdu) 

China (Hong Kong) 

China (Guangzhou) 

China (Shenzhen) 

GROME Cyprus 

GROME Dubai 

GROME Egypt 

GROME Libanon 

GROME South Africa 

GROME Turkey 

Norway 

Romania 

Sweden 

Ukraine 

Sales 

subsidiaries 

Austria 

Belgium 

Canada 

China (Shanghai) 

Czech Republic 

Denmark 

France 

Germany 

Hungary 

India 

Italy 

Japan 

The Netherlands 

Poland 

Portugal 

Russia 

Spain 

South East Asia 

Switzerland 

UK & Ireland 

USA 

Eichelberg 

Tempress

GROHE AG 

Industriepark Edelburg 

58675 Hemer 

Postfach 1361 

58653 Hemer 

Germany 

Phone +49 (0) 23 72 / 93 - 0 

Fax +49 (0) 23 72 / 93 - 1322 

www.grohe.com 

info@grohe.com

Annual Review 2006 - Grohe

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