2015-07-21 07:00:00 CEST
2015-07-21 07:00:05 CEST
REGULATED INFORMATION
Uponor - Interim report (Q1 and Q3)
Interim report Q2/2015: Uponor’s performance improvement driven by North America and Uponor Infra
Uponor Corporation Interim report January-June 21
July 2015 08.00 EET
Interim report Q2/2015: Uponor's performance improvement driven by North
America and Uponor Infra
-- The U.S. markets maintained their strength while weak demand continued to
burden the European building solutions business; Uponor Infra reported a
solid profit improvement
-- Net sales for April - June totalled €277.6 (264.5) million, up 4.9% or 0.3%
in constant currency
-- Operating profit for April - June came to €22.5 (17.6) million, up 27.9%,
driven by Building Solutions - North America and Uponor Infra • Net sales
in January - June totalled €514.7 (495.4) million, up 3.9% or -0.6% in
constant currency
-- Operating profit for January - June came to €33.8 (22.4) million, a change
of 50.6%
-- January - June earnings per share amounted to €0.23 (0.17)
-- January - June return on investment was 14.0% (8.8%), and gearing was 47.8%
(56.9%)
-- January - June cash flow from business operations totalled -€19.8 (-18.7)
million
-- Uponor repeats its guidance for the year 2015, announced on 12 February
2015: The Group's net sales and operating profit (excluding any
non-recurring items) are expected to improve from 2014.
(This interim report has been compiled in accordance with the IAS 34 reporting
standard, and is unaudited. The figures in the report cover continuing
operations unless otherwise stated. ‘Reporting period' refers to January -
June.)
President and CEO Jyri Luomakoski comments:
-- We report continued strong performance in Building Solutions - North
America in the second quarter, as a result of strong growth in the U.S.
Over the last four years the business has almost doubled its net sales and
more than doubled its operating profits in local currency. Aimed at
satisfying future demand, our manufacturing expansion is progressing as
planned.
-- In stark contrast, Building Solutions - Europe is suffering from the
lacklustre recovery in the European business landscape, with only a few
markets reporting growth in the second quarter. In Germany, our largest
national market in Europe, development has been unsatisfactory and this has
also impacted on our European supply chain. We have initiated a programme
to achieve annual cost savings of around €3 million in order to mitigate
the impact of uncertain market development.
-- Uponor Infra's restructuring is starting to bear fruit and, despite flat
demand and tight public finances, we can report encouraging improvement in
profitability.
Webcast and presentation material
This release and the presentation material related to this interim report are
available at http://investors.uponor.com > News & downloads.
A webcast will be broadcast in English on Tuesday 21 July 2015 at 10:00 EET.
Connection details are available at http://investors.uponor.com. Questions on
the webcast can be submitted in advance to ir@uponor.com. The recorded webcast
will be available at http://investors.uponor.com > News & downloads shortly
after the broadcast.
Uponor Corporation will release its interim report for January - September 2015
on Thursday 29 October 2015. During the related silent period from 1 to 29
October, Uponor will not comment on market prospects or factors affecting
business and performance, nor will the company discuss events or trends related
to the reporting period or the current fiscal period.
INTERIM REPORT JANUARY - JUNE 2015
Markets
The second quarter of 2015 saw an acceleration in the economic trends witnessed
in the first quarter. In Europe, some countries returned to growth, albeit
marginal, while development was flat overall. In North America, some
fundamental economic indicators have softened but construction market
indicators have generally been on a par with expectations.
Within the Nordic construction markets, Sweden has continued to grow despite
the high growth rates already witnessed during previous quarters. The Finnish
market remained very weak, with no signs of a turn-around visible. Compared to
the prior year, both the Norwegian and Danish markets picked up slightly, the
opposite trend to that witnessed in 2014.
In Central Europe, the German construction market continued to underperform
compared to the wider economy. While the overall economy was doing
exceptionally well and has rebounded strongly from the autumn slowdown, the
construction sector remained relatively subdued. Some bright spots, such as the
new multi-family segment, demonstrated growth in an otherwise flat market. The
Dutch market continued to make sizable gains compared to the very low activity
levels of previous years. Switzerland and Austria remained rather soft.
In Eastern Europe, geopolitical events have continued to dampen demand. In
Russia, elevated caution throughout the industry was only partially countered
by pent up demand for apartments. In the Baltics, construction activity
remained brisk in general.
Among the markets in South and West Europe, the UK has continued at a healthy
level but the consistent year-on-year growth seen over the last two years has
stalled. The French market continues to be weak, but its downward trend has
slowed. Other national markets have stabilised at a low level.
In North America, the U.S. construction market was improving despite the
fluctuation caused by the particularly cold and snow-laden weather in large
geographic regions of the country during the winter months. In spite of caution
due to doubts about the continuing strength of the wider economy, permit levels
and builder confidence reached pre-crisis levels and non-residential
construction grew compared to the previous year. The Canadian residential
market was fairly flat, mainly being supported by the multi-family segment,
while the non-residential market weakened.
The market for Uponor's infrastructure solutions has remained challenging.
Although the Nordic region has benefited from an uptick in civil engineering
projects, the non-residential markets have remained muted. The largest
international market, Canada, has remained positive in general.
Net sales
Uponor's net sales for continuing operations in the second quarter came to
€277.6 (264.5) million, a rise of 4.9 per cent year on year. Currency
translations in April - June 2015, mainly coming from the U.S. dollar,
influenced net sales by €12.4 million, bringing net sales growth without the
currency impact to 0.3%.
Net sales in Building Solutions - Europe declined, reflecting the flat or
declining markets in most of Europe. The largest drops were reported in
Germany, Finland and the UK. Brisk growth was noted in the Netherlands and also
in France, which is starting to recover from the sales drop in 2014. In Eastern
Europe, healthy growth continued in the Baltic countries and in Poland, while
Russia fell sharply. In terms of application areas, the heating market in
Central Europe was particularly soft due to the fact that low energy prices
undermined the incentive to modernise building heating systems and make them
more sustainable. In Germany, a lack of installation professionals also limited
business to some extent. It should also be noted that a comparison to 2014 is
difficult, since the first two quarters of 2014 were artificially lively due to
pent up demand.
In Building Solutions - North America, the U.S. net sales development continued
to be brisk in a healthy market, and was also driven by successful customer
conversion and the strengthening of Uponor's market position in low-share
territories. Some of the improvement in the second quarter marks a transition
from the first quarter, when installations were curbed by a long spell of cold
weather. Net sales in Canada grew modestly in local currency.
Uponor Infra too suffered from the weak European business environment. The
segment reported a significant decline in net sales in Finland and Sweden,
while strong progress was evident in Canada. Adjusted for the divestments of
two smaller infrastructure solution units in the first quarter of 2015, Uponor
Infra reported growth of 1.6% in the second quarter.
Net sales by segment (April - June):
M€ 4-6/2015 4-6/2014 Change
--------------------------------------------------------------------
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Building Solutions - Europe 119.0 122.0 -2.4%
Building Solutions - North America 69.8 49.5 40.8%
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(Building Solutions - North America, USD 77.6 67.9 14.3%)
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Uponor Infra 89.7 95.3 -5.8%
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Eliminations -0.9 -2.3
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Total 277.6 264.5 4.9%
January - June net sales came to €514.7 (495.4) million, an increase of 3.9 per
cent on the comparison period. Currency translations in January - June 2015 had
a positive impact of €22.2 million on Group net sales, most of which came from
the U.S. dollar. Adjusted for currency translation, consolidated net sales
growth thereby totalled -0.6%.
Net sales by segment (January - June):
M€ 1-6/2015 1-6/2014 Change
--------------------------------------------------------------------
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Building Solutions - Europe 231.6 242.9 -4.6%
Building Solutions - North America 126.7 90.0 40.7%
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(Building Solutions - North America, USD 140.8 123.4 14.1%)
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Uponor Infra 158.0 166.1 -4.9%
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Eliminations -1.6 -3.6
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Total 514.7 495.4 3.9%
Results and profitability
Uponor's consolidated gross margin for continuing operations in the second
quarter was 35.5 per cent, showing a year-on-year increase of 2.7 percentage
points. This is mainly attributable to a more favourable product mix in
Building Solutions - North America, whose relative share has also grown, as
well as the benefits flowing from raw materials purchased in a lower input cost
environment.
Operating profit for continuing operations in the second quarter totalled €22.5
(17.6) million, up 27.9% per cent in year-on-year terms, including a positive
impact of €2.7 million from currency translation. Profitability measured in
terms of the operating profit margin came to 8.1 per cent, compared to the 6.6
per cent reported for the rather strong second quarter in 2014. Operating
profit for April - June, excluding non-recurring items, came to €23.3 (17.1)
million, up 36.4%.
The improvement in operating profit in the second quarter was mainly a result
of continued strong performance development in Building Solutions - North
America as well as a rise in Uponor Infra's operating profit. Uponor Infra's
operating profit grew, supported by the savings achieved from the restructuring
programmes and the favourable impact of input costs materialised before the
current quarter, offsetting the higher manufacturing costs due to resin
availability issues in the second quarter. Due to reporting practices, the
higher input costs that arose after the emergence of challenges in resin supply
in the second quarter were not yet visible in Uponor Infra's reported
performance. Building Solutions - Europe's negative performance trend continued
and the segment reported a clear decline in operating profit, i.e. -36.1% or
-22.6% excluding the non-recurring items. The drop in profits was largely a
result of the disappointing volume development in Germany and some other
markets. The new distribution centre in Hassfurt, Germany is now fully
operational but its introduction involved temporary added warehousing costs.
Additionally, €0.8 million in non-recurring costs were booked in the second
quarter 2015 in relation to the streamlining programme just launched in
Building Solutions - Europe.
Operating profit by segment (April - June):
M€ 4-6/2015 4-6/2014 Change
--------------------------------------------------------------------
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Building Solutions - Europe 6.2 9.6 -36.1%
Building Solutions - North America 15.0 8.6 76.5%
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(Building Solutions - North America, USD 16.8 11.7 43.2%)
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Uponor Infra 3.0 0.4 684.9%
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Others -1.4 -0.7
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Eliminations -0.3 -0.3
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Total 22.5 17.6 27.9%
Profit before taxes for April - June totalled €21.2 (14.0) million. Taxes had
an effect on profits of €7.9 million, while the amount of taxes in the
comparison period was €4.6 million. Profit for the second quarter came to €13.3
(9.4) million.
The January - June operating profit came to €33.8 (22.4) million or €34.6
(25.7) million without non-recurring items, up 50.6 or 34.6 per cent
respectively from the comparison period. Key contributors to the development
were Building Solutions - North America with its solid growth and careful
overhead cost management, as well as Uponor Infra which benefited from input
costs and the savings achieved through successful restructuring measures,
despite flat net sales.
There were €0.8 million in non-recurring items in the reporting period, related
to the streamlining programme started in Building Solutions -Europe, while in
January - June 2014 non-recurring items totalled €3.3 million, mainly due to
the new distribution centre in Building Solutions - Europe. Thus, Building
Solutions - Europe's operating profit, excluding non-recurring items, was €13.1
(18.5) million, a drop of -29.1%.
Profitability, or the operating profit margin for the first half-year, was 6.6
per cent, against 4.5 per cent in the comparison period in 2014.
Earnings per share, both basic and diluted, for January - June totalled €0.23
(0.17). Equity per share, both basic and diluted, was €3.08 (2.80).
Operating profit by segment (January - June):
M€ 1-6/2015 1-6/2014 Change
--------------------------------------------------------------------
--------------------------------------------------------------------
Building Solutions - Europe 12.3 15.3 -19.9%
Building Solutions - North America 23.1 13.0 77.9%
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(Building Solutions - North America, USD 25.7 17.8 44.3%)
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Uponor Infra 1.7 -3.8 143.9%
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Others -2.7 -1.5
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Eliminations -0.6 -0.6
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Total 33.8 22.4 50.6%
Short-term outlook
As far as Uponor's key geographic markets are concerned, the economic outlook
for the second half of 2015 is estimated to remain similar or slightly weaker
to that for the first half of the year.
The European markets continue to face various challenges, such as the
geopolitical development in and around Ukraine, the impact of the Greek debt
crisis, and the slow and fragile recovery of the European economies from the
prolonged slowdown. All of these are influencing developments in the building
and construction markets, in particular.
In terms of the European building industry in particular, the outlook for the
second half of 2015 is therefore bleaker than it was for the first half of
2015. Building activity in Germany, the largest nation, is still expected to be
on a fair level but demand has weakened since 2014 in spite of the country's
general economic strength. No meaningful growth is expected in the other large
markets on the continent either.
In North America, the U.S. economy is expected to develop steadily and the
building market there is expected to grow further. In Canada, demand for
building and construction is expected to continue to be fairly flat.
The shortage of plastic resin witnessed in Europe in the spring and summer is
expected to ease after the summer period, but the unbalance between supply and
demand is likely to keep prices high for the foreseeable future. Uponor
continues to focus efforts on managing the situation well and expects to be
able to serve customer needs satisfactorily in the third and fourth quarters.
Uponor repeats its guidance for the year 2015, announced on 12 February 2015:
The Group's net sales and operating profit (excluding any non-recurring items)
are expected to improve from 2014.
Uponor's financial performance may be affected by a range of strategic,
operational, financial, legal, political and hazard risks. A more detailed risk
analysis is provided in the section ‘Key risks associated with business' in the
Financial Statements 2014.
Uponor Corporation
Board of Directors
For further information, please contact:
Jyri Luomakoski, President and CEO, tel. +358 20 129 2824
Riitta Palomäki, CFO, tel. +358 20 129 2822
Tarmo Anttila
Vice President, Communications
Tel. +358 20 129 2852
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www.uponor.com
Uponor is a leading international provider of plumbing and indoor climate
solutions for residential and commercial building markets across Europe and
North America. In Northern Europe, Uponor is also a prominent supplier of
infrastructure pipe systems. The Group employs approx. 3,800 persons, in 30
countries. In 2014, Uponor's net sales exceeded €1 billion. Uponor Corporation
is listed on NASDAQ Helsinki in Finland. www.uponor.com
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