2012-02-10 07:00:00 CET
2012-02-10 07:00:12 CET
REGULATED INFORMATION
Uponor - Financial Statement Release
Financial statements bulletin 2011: Uponor's net sales grew, profit impacted also by non-recurring items
Uponor Corporation Financial statements bulleting 10 February 2012 8.00
EET
Financial statements bulletin January - December 2011: Uponor's net sales
grew, profit impacted also by non-recurring items
-- Net sales growth continued in October-December, but the weakening
profitability was further burdened by non-recurring items
-- Net sales 1-12: €806.4 million (2010: €749.2m), change +7.6%; organic
growth at 4.9%
-- Operating profit 1-12: €35.4 million (€52.4m), change -32.4%; operating
profit without non-recurring items at €45.9 million, change -12.5%
-- Earnings per share at €0.03 (€0.34), earnings per share excluding
non-recurring items at €0.32 (€0.34)
-- Guidance: Net sales are expected to grow organically from 2011 and
operating profit is expected to exceed €50 million
-- The Board's dividend proposal is €0.35 (€0.55) per share
President and CEO Jyri Luomakoski comments on the reporting period:
-- Despite the decrease in economic activity, plastic resin prices moved
rapidly up in 2011, impacting negatively our gross profit. Price increases,
implemented throughout the year, lagged behind and had a full impact only
towards the end of the year. Still, this price inflation had a negative
impact of 0.9 percentage points to our 2011 gross profit margin.
-- In January 2012, we signed a deal to divest our non-core German OEM
manufacturer Hewing GmbH. We had a long and successful history together,
but more recently, the changes in the industrial landscape had weakened its
strategic role for us, putting pressure on our consolidated performance.
Long-term, I believe both parties will fare better after the agreement
reached.
-- I am very disappointed at the large non-recurring items that are included
in our Q4 figures, such as the Finnish tax authority decisions and the
impairment of the vendor note relating to our 2008 divestment of the
UK/Irish municipal infrastructure business.
-- Our cash flow for 2011 remained strong despite weaker profitability. The
decision to reduce inventories in the uncertain environment burdened our
gross profit in the last quarter through poor capacity utilisation in our
operations while the absolute year-on-year reduction in inventories was a
good achievement.
-- For 2012, we see a rather stable but geographically inconsistent demand
outlook. We expect the raw material price environment to be less volatile
than in 2011. Our enhanced cost efficiency in operations and actions
initiated to offset inflatory overhead cost pressures give us a good basis
to improve our operating profit in 2012.
Non-recurring items in financial statements 2011:
In the fourth quarter of 2011, Uponor's profit for continuing operations was
impacted by the following items which the company considers to be non-recurring
items:
-- €10.5 million impairment write-down related to the divestment of Hewing
GmbH, booked in other operating expenses
-- €6.0 million impairment of UK vendor note, booked in financial expenses
-- €3.2 million interest on delayed payments related to the Finnish tax
decisions, booked in financial expenses
-- €1.9 million surtaxes related to the Finnish tax decisions, booked in
income taxes
During the first three quarters of 2011, no non-recurring items were recorded.
Income statement excluding non-recurring items
M€ 10-12/2011 1-12/2011
Net sales 197.0 806.4
Gross profit 70.0 292.9
- % of net sales 35.5% 36.3%
Operating profit 7.4 45.9
- % of net sales 3.8% 5.7%
Financial expenses, net 4.1 8.5
Profit before taxes 3.3 37.4
Taxes 2.7 13.9
Profit from the continuing operations 0.6 23.5
Earnings per share, € 0.32
(All figures above are excluding non-recurring items.)
The Board's dividend proposal
The Board's dividend proposal at €0.35 per share is based on the company's
dividend policy, the cash flow before financing at €0.40 per share, the
earnings per share excluding non-recurring items at €0.32, as well as the
company's financial situation and the outlook for 2012.
Information on the financial statements bulletin
This document is a condensed version of Uponor's 2011 financial statements
bulletin, which is attached to this release. It is also available on the
company website. The figures in brackets are the reference figures for the
equivalent period in the previous year. Figures refer to continuing operations,
unless otherwise stated. Any change percentages were calculated from the exact
figures and not from the rounded figures published here.
Webcast and the presentation
A webcast in English from the results briefing will be broadcast on 10 February
at 10:00 am EET. Connection details are available at www.uponor.com >
Investors. Questions can be sent in advance to ir@uponor.com. The recorded
webcast can be viewed at www.uponor.com > Investors shortly after publishing.
The presentation document will be available at www.uponor.com > Investors >
News & downloads.
Next interim results
Uponor Corporation will publish its Q1 interim results on 27 April 2012. During
the silent period from 1 April to 26 April, Uponor will not comment on market
prospects or factors affecting business and performance.
Interim results October - December 2011
Compared to the previous quarter, no great changes occurred in the market
situation or trends in the fourth quarter of 2011. In all geographic areas,
demand for Uponor's solutions and services more or less held firm, at a level
similar to the third quarter. In the Nordic countries, the mild autumn and the
late onset of winter extended the season for infrastructure-related building in
particular, but this was offset by concerns about the European and
international economies, which began to impact on consumer confidence and
export industries.
Net sales
Net sales development in Building Solutions - Europe reached a satisfactory
level, while North America continued to post strong figures as in the previous
quarter. In Infrastructure Solutions, growth in net sales weakened, despite the
mild autumn, mainly due to weakening demand and growing customer uncertainty,
reflecting mounting concerns about international economic developments.
Breakdown of net sales, October - December:
M€ 10-12/2011 10-12/2010 Change
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Building Solutions - Europe 133.0 123.6 7.6%
Building Solutions - North-America 32.0 26.7 20.0%
(Building Solutions - North-America, M$ 43.2 35.8 20.7%)
Infrastructure Solutions 34.3 33.4 2.7%
Eliminations -2.3 -2.0
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Total 197.0 181.7 8.4%
Profits and profitability
Uponor's quarterly gross profit margin at 35.5% (37.4%) weakened due to an
active reduction of inventories and the resulting unfavourable capacity
utilisation in manufacturing. Price increases implemented throughout the year
had a full effect in the last quarter, considerably offsetting the decline in
gross profit margin due to higher raw material prices.
Operating profit ended up negative at €-3.0 (8.6) million as a result of the
€10.5 million impairment related to the divestment of Hewing GmbH, announced in
January 2012.
Breakdown of operating profit, October - December:
M€ 10-12/2011 10-12/2010 Change
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Building Solutions - Europe 7.8 8.8 -15.4%
Building Solutions - North-America 1.8 1.0 +75.1%
(Building Solutions - North-America, $ 2.4 1.4 +72.9%)
Infrastructure Solutions -1.5 -0.9 +58.5%
Others -11.1 -0.5
Eliminations 0.0 0.2
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Total -3.0 8.6 -139.9%
Financial statements January - December 2011
Markets
Overall macro-economic development in Uponor's key market areas in 2011 began
with reasonable optimism. However, towards the mid-year trends took a more
negative direction. Market demand also clearly varied depending on geographical
area. In terms of residential and non-residential building markets, the Central
European market, driven by lively demand in Germany in particular, maintained
its resilience throughout the year. South West European markets, already at
very low levels, continued to deteriorate, driven by weakening building
activity in Italy, Portugal and Spain, in particular. Somewhere in between
these markets were the Nordic countries, in which demand was relatively stable,
while declining slightly from the previous year, and North America where
builder confidence was at its highest since 2007, although in a flat market.
Infrastructure market demand in the Nordic countries and nearby markets
continued at a somewhat similar level to the previous year.
The overall market trend of weaker new build activity and a higher share of
renovation particularly favoured demand for Business Group Plumbing products,
which are ideally suited to such projects. Demand for heating and cooling
solutions, i.e. Business Group Indoor Climate, mainly followed new build market
trends, with some support from increasing interest in radiant heating and
cooling solutions, due to their low energy footprint.
Net sales
Uponor's 2011 net sales from continuing operations amounted to €806.4 (2010:
€749.2) million, up 7.6% year on year. All segments managed to increase their
sales organically, with Building Solutions - North America posting the
strongest relative growth, in local currency.
An organic growth of net sales, i.e. excluding the impact of the Zent-Frenger
acquisition, was 4.9 per cent, with equal contributions from sales price
increases and volume growth. Fluctuations in foreign currencies decreased 2011
net sales by €1.2 million.
Net sales by segment for 1 January - 31 December 2011:
M€ 1-12 1-12 Reported
2011 2010 change, %
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Building Solutions - Europe 543.9 504.4 7.8%
Building Solutions - North America 121.5 114.6 6.0%
(Building Solutions - North America (M$) 170.1 151.1 12.6%)
Infrastructure Solutions 149.7 138.3 8.1%
Eliminations -8.7 -8.1
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Group (continuing operations) 806.4 749.2 7.6%
The largest 10 countries, in terms of net sales, and their respective share of
consolidated net sales, were as follows (figures for 2010 in brackets): Germany
18.7% (16.4%), Finland 11.5% (11.9%), USA 11.0% (11.3%), Sweden 10.5% (10.6%),
Spain 4.8% (5.3%), Norway 4.6% (5.0%), Denmark 4.6% (4.7%), the Netherlands
4.4% (4.4%), Italy 4.2% (4.9%) and Canada 4.1% (4.0%).
Net sales for Building Solutions - Europe grew moderately, mainly supported by
the healthy German economy which fostered a robust construction market.
Development was also positive in some of Germany's neighbouring countries. The
Nordic market situation continued to be relatively stable, driven by the
strongly performing Nordic economies. However, these were somewhat affected by
concerns about international economic development and its impact on export
industries. Despite the tough market in South West Europe, Uponor was able to
maintain net sales close to the previous year's level, improving its market
share in Iberia and increasing net sales in other markets, such as France and
the UK. In North America, Building Solutions net sales growth mainly originated
in the intense focus on commercial opportunities, such as driving installer and
builder conversion from competing materials towards Uponor systems. Another
positive factor was the successful development of geographical markets,
previously marked by low market share. In international markets, Uponor
strengthened its position in East Europe, especially Russia, and established a
stronger presence in International Sales markets, for instance in the Middle
East.
In Infrastructure Solutions, the business has been rather stable overall, but
Uponor was able to grow slightly while gaining market share, thanks to recent
new product launches, more intensified segmentation of customers, as well as
fine-tuning of the supply chain structure.
Within Building Solutions, the Indoor Climate business group developed
favourably, driven by increasing customer demand for sustainable, highly
energy-efficient systems able to use a variety of energy sources for heating
and cooling. Uponor's efforts were directed at creating a complete system
offering and increasing competitiveness, for instance, through new installation
and control product launches.
The Plumbing Solutions business group saw particularly strong growth in North
America, driven by the unique innovations launched in 2011. These included the
new Quick&Easy (ProPEX in North America) expansion tool, which played a key
role in converting new customers to using Uponor PEX solutions.
Both of the Building Solutions business groups were able to benefit from the
unified marketing campaigns developed for key launches, as well as from
continued product harmonisation efforts that are leading to more sales
generated by fewer items.
Results
Uponor's consolidated gross profit from continuing operations came to €292.9
(288.1) million, up €4.8 million year on year. The gross profit margin 36.3%
decreased by 2.1 percentage points mainly due to changes in product mix. Also
the price inflation diluted the gross margin.
Continuing operations generated an operating profit of €35.4 (52.4) million,
down 32.4% from the previous year. Also profitability declined, with the profit
margin ending up at 4.4% (7.0%) of net sales.
Operating profit was burdened by the January 2012 decision to divest the German
company Hewing GmbH, which led to an impairment write-down of €10.5 million
impacting on operating profit for continuing operations. Operating profit
without this impairment would have stood at €45.9 million and the corresponding
operating margin at 5.7%.
Other reasons for the profit decline were the impact of high raw material input
costs and overall cost inflation from energy, transportation and similar costs,
as well as weakening demand in the second half of the year. Sales and marketing
costs increased from the previous year, as a result of the active launch
programmes sustained for new products throughout the year. Additionally,
sales-related variable marketing costs increased as net sales increased.
In the autumn of 2011, Uponor initiated various cost saving measures to balance
weakening market and volume development. The biggest initiatives were related
to the closing of the Turkey office, downsizing the operations in Croatia and
the dismantling of the Business development unit. Savings were also achieved in
organisational streamlining, the added focus on inventory management, including
the reduction of product items, and utilisation of communications technology in
order to reduce travel for internal meetings.
Despite the challenging market situation, Building Solutions - North America
recorded a major improvement in operating profit, mainly due to lively plumbing
systems sales, chiefly driven by contractor and installer conversion. In
Building Solutions - Europe, operating profit dropped despite higher net sales.
In addition to those mentioned earlier, the main reasons for this were high
marketing expenses in the early part of the year, followed by weakening market
environment in some key markets, such as Southwest Europe also in the latter
half of the year. Despite higher net sales, the operating profit of
Infrastructure Solutions weakened further, due to raw material price
developments, intense price competition, as well as expenses related to new
product launches.
The impairment write-down of €10.5 million, related to the divestment of the
entire share capital of Hewing GmbH burdens the segment Other's operating
profit.
Operating profit by segment for 1 January - 31 December 2011:
M€ 1-12 1-12 Reported
2011 2010 change, %
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Building Solutions - Europe 41.7 55.7 -25.0%
Building Solutions - North-America 10.1 3.1 +223.6%
(Building Solutions - North-America (M$) 14.2 4.1 +243.8%)
Infrastructure Solutions -2.4 0.4 -692.2%
Other -14.0 -6.8
Eliminations 0.0 0.0
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Group (continuing operations) 35.4 52.4 -32.4%
There was a marked increase in financial expenses that came to €17.7 (10.7)
million, resulting from interest on delayed payments, totalling €3.2 million,
as a result of decisions made by the Finnish tax authority at the end of
December 2011, as well as an impairment of €6.0 million related to a UK vendor
note, as published in February 2012. Net currency exchange differences were
€-1.3 million.
Profit before taxes decreased by 57.8%, to €17.7 (41.7) million. At a tax rate
of 88.8% (35.3%), income taxes totalled €15.8 (14.7) million. All three
non-recurring items mentioned earlier, i.e. the impairments related to the
divestment of Hewing GmbH and to the UK vendor note and the surtaxes and
interest related to the Finnish tax decisions are non-deductible expenses for
taxation purposes.
Profit for the financial year totalled €1.6 (24.7) million, of which continuing
operations accounted for €1.9 (27.0) million.
Return on equity decreased to 0.7% (9.7%) and return on investment to 11.0%
(14.4%).
Earnings per share were €0.03 (0.34), and €0.03 (0.37) for continuing
operations. Equity per share was €2.86 (3.45). For other share-specific
information, please see the tables section.
Consolidated cash flow from operations was €58.4 (49.2) million while cash flow
before financing came to €29.3 (35.6) million. Cash flow from operations
remained strong despite weaker profitability as a result of successful net
working capital management.
Events after the period
On 24 January 2012 Uponor announced the divestment of the entire share capital
of Hewing GmbH, the non-core OEM unit based in Ochtrup, Germany. This deal,
valued at €11.9 million, led to an impairment write-down of €10.5 million for
the financial year 2011, impacting on the operating profit of continuing
operations. The deal is effective from 1 January 2012, pending certain closing
conditions, such as the approval of the competition authorities. Closure of the
deal is expected to take place in March-April 2012.
On 7 February 2012 Uponor announced its decision to impair a vendor note issued
in 2008 to the buyer of the municipal infrastructure business that Uponor
divested in the UK and Ireland. The vendor note was issued to cover a part of
the purchase price. Its total sum including capitalised interests amounted to
€6.0 million. Uponor announced on 9 May 2008 that it had divested its UK and
Irish municipal infrastructure business to the private equity company 3i and
funds managed by 3i. Net sales of the divested business came to €169.1 million
in 2007. The enterprise value of the deal amounted to £100 million, giving
Uponor a sales gain of nearly €45 million which was included in discontinued
businesses.
Near-term outlook
Optimism in the market-place has clearly deteriorated compared to a year ago.
While global financial concerns may have alleviated, those related to
developments in Europe are still making the headlines on an almost daily basis,
and there is no clear direction in the development of the geographic markets.
However, Uponor does not expect a major financial crisis to develop in Europe
in 2012.
The last few years have been difficult for the building and construction
segments of the market. For overall demand, the outlook is steady and Uponor,
like many other companies, is prepared for a lengthy period of low activity.
Looking at developments by key geographical area, sentiment in Central Europe
has deteriorated since last summer but remains strong relative to previous
years and to other European markets. The lively activity levels in Germany and
some of its neighbouring countries are expected to cool somewhat in 2012. In
the Nordic countries, construction of buildings has remained at a healthy level
across the region, while infrastructure investments have been scaled back. In
Southern Europe, where governments are continuing to scale back public building
projects and unemployment remains high, construction activity continues to be
weak. In North America, however, builder sentiment has reached a four-year
high, but until now this has failed to translate into a significant increase in
building activity.
Uponor's financial performance may be affected by several strategic,
operational, financial, and hazard risks. A detailed risk analysis is provided
in the section ‘Key risks associated with business' above and in the Financial
Statements in more detail.
The management is actively continuing its actions to sharpen the company's
focus, cost efficiency and cash flow, while speeding up organic growth in
existing and new markets by utilising advantages such as its strong range of
new product and system innovations in customer conversion.
With these assumptions, Uponor's guidance for the year 2012 is as follows:
Uponor's net sales are expected to grow organically from 2011 and operating
profit is expected to exceed €50 million. The Group's net investment into
fixed-assets is not expected to exceed depreciation.
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
DISTRIBUTION:
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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. Uponor offers its customers solutions that are
sustainable and safe and reliable to own and operate. The Group employs approx.
3,200 persons, in 30 countries. In 2011, Uponor's net sales totalled ca €800
million. Uponor Corporation is listed on NASDAQ OMX Helsinki in Finland.
http://www.uponor.com.
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