(Adds analyst, details, premarket indication)
ZURICH, March 13 (Reuters) - Shower toilet and piping supplier Geberit reported better-than-expected net profit on Tuesday and said it expected the overall construction industry to be "generally favourable" this year. Its 2017 net profit fell 3.8 percent to 527.4 million Swiss francs ($556.5 million), ahead of expectations for 521 million francs in a Reuters poll of analysts, as it battled higher prices for raw materials. Geberit, whose results are seen as reflecting the health of the broader building and construction market, in January reported its 2017 sales had risen 3.5 percent to 2.91 billion francs. It said it expected the recovery in Europe to continue during 2018 although problems remained in Germany, its biggest market, where it said growth is "severely restricted" by a shortage of installers.
The bottleneck and the use of cheaper fittings in homes built for refugees and migrants in Germany weighed on Geberit's sales in 2017, the company said in January.
It forecast favourable conditions this year in Austria, France and the Benelux countries, although it predicted a downward trend in Britain, which Geberit attributed to the effects of the Brexit vote to leave the European Union.
The company's 2017 profit was hit by higher raw material prices. In the first half of 2018, raw material prices are likely to rise, driven mainly by higher prices for industrial metals and for plastics, it said.
The Swiss company's positive outlook was tempered somewhat by its proposed small increase in the dividend to 10.4 Swiss francs per share from 10 francs, missing expectations for a payout of 10.7 francs in the Reuters poll.
"The dividend increase is in line with the increase in adjusted earnings per share, but the market will have been expecting a little bit more," said Bernd Pomrehn, an analyst at Bank Vontobel.
The analyst highlighted the company's better-than-expected operating cash flow margin. Geberit's stock was seen more than 2 percent higher in pre-market indications.
Geberit's stock has lost 1.3 percent in the past 12 months, underperforming the Stoxx Europe Construction and Materials Index, which is 0.8 percent lower.
$1 = 0.9477 Swiss francs Reporting by John Revill; Editing by Michael Shields