Geberit, based in Rapperswil-Jona, said sales increased to 2.81 billion Swiss francs (2.32 billion pounds) from 2.59 billion francs a year earlier.

The figure was marginally ahead of the average estimate of 2.79 billion francs in a Reuters poll.

When adjusted for currency fluctuations and the impact of acquisitions, Geberit's sales rose 6.4 percent, ahead of the 5 percent rate the company had targeted in October.

Geberit's results give an insight into the health of the construction market, with around a third of its sales coming from new building projects while two thirds comes from renovation work.

The company said 2016 was shaped by a positive development in the construction industry, as well as the integration of the Sanitec ceramics business it bought for $1.4 billion in 2014.

It said the sales growth was due to "convincing developments in many markets and a reduction in order backlogs in the shower toilet business that particularly took effect in the third quarter".

It said the situation in the construction industry was also better in several markets compared to the previous year.

An anticipated slowdown in the fourth quarter did not materialise, as sales grew by 6.3 percent when adjusted for currency and acquisition effects, faster than the 6 percent rate for the third quarter.

Analysts had expected business to slow in the final quarter due to fewer working days and because projects had been brought forward to the third quarter in key markets.

The company said it expected a 2016 adjusted operating cash flow margin of around 28.5 percent, up from 26.7 percent a year earlier. It is due to report earnings on March 14.

Geberit's largest market, Germany, which generates roughly 30 percent of its revenue, increased 2016 sales by 4.7 percent when adjusted for currencies.

In Switzerland, another large market for Geberit's pipes and shower toilets, sales rose 6.4 percent while in the Nordic region sales rose 11.1 percent.

($1 = 1.0078 Swiss francs)

(Reporting by John Revill; Editing by Michael Shields)

By John Revill