2012-10-26 07:00:00 CEST
2012-10-26 07:00:08 CEST
REGULATED INFORMATION
Uponor - Interim report (Q1 and Q3)
Q3/2012 Interim report: Growth in North America supported Uponor’s profit development
Uponor Corporation Interim report January-September 2012 26 October
2012 8.00 EET
Growth in North America supported Uponor's profit development
-- Lively demand in North America continued, Europe saw a further decline
-- Group organic growth for the quarter at 3.3%, slightly better than in
April-June
-- July-September net sales totalled €211.3 (213.6) million, a change of
-1.1%
-- July-September operating profit was €22.1 (19.7) million, an improvement of
11.9%
-- January-September net sales totalled €621.9 (609.4) million, a change of
2.1%
-- January-September operating profit was €47.5 (38.4) million, up 23.6%
-- January-September earnings per share amounted to €0.35 (0.32)
-- January-September return on investment was 18.1% (15.3%), and gearing 57.9
(53.7)
-- January-September cash flow from business operations improved to €2.1
(-4.9) million despite the disputed extra tax payment during Q1 2012 in
Finland
-- The full-year guidance remains unchanged
(This interim report has been compiled in accordance with the IAS 34 reporting
standards, and is unaudited. The figures in the report are for continuing
operations, unless otherwise stated. ‘Reporting period' refers to
January-September.)
President and CEO Jyri Luomakoski comments on Uponor's performance:
-- I am happy to report a solid performance development, despite demand for
building and construction remaining weak and, in part, still slowing in
Europe, our key geographic market. Cost containment and efforts to
proactively adjust operations are bearing fruit, while we are able to
satisfy customer requests in areas where demand is recovering.
-- In September we announced a joint venture plan concerning our
Infrastructure business. This is the biggest M&A transaction in
Uponor's history and the sector's largest ever in the Nordic countries. We
have worked hard and long to achieve this deal, particularly in the third
quarter, and look forward to developing the business further, pending
official approvals.
-- Despite poor visibility into future market developments, we are building platforms for growth step-by-step, by focussing on key business
opportunities, pushing value-adding products and systems onto the market,
and working hard to win share in markets in which we want to grow our
presence.
Information on the January - September 2012 interim report bulletin
This document is a condensed version of Uponor's January-September 2012 interim
report 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 presentation material
Upon the release of this report, the presentation material for the interim
report will be available at www.uponor.com > Investors > News & downloads.
A webcast on interim results will be broadcast in English at 10:00 EEST on
Friday, 26 October 2012. Connection details are available at www.uponor.com >
Investors. Questions for the webcast can be sent in advance to ir@uponor.com.
The completed webcast will be available for viewing at www.uponor.com >
Investors > News & downloads shortly after the financial information is
published.
Uponor Corporation will release its financial results for 2012 on Tuesday, 12
February 2013. During the silent period from 1 January to 11 February 2013,
Uponor will not comment on market prospects or factors affecting business and
performance, nor will the company engage in the discussion of events or trends
related to the reporting period or the current fiscal period.
Markets
The market trends prevalent in Uponor's key national markets in the second
quarter of 2012 have mainly continued. In the European markets, which have been
and are being influenced by the prolonged political and financial crisis,
demand has mostly continued at its existing, weak levels, but has deteriorated
a little further in some markets, particularly in southwest Europe. A marked
downward shift in the second quarter was also noticed in Denmark and to a
lesser extent in the UK. Demand in Finland and Sweden remained soft, as in the
second quarter, whereas in Norway the building and construction markets
remained lively. The German economy, which showed signs of weakening sentiment
in the second quarter, has continued in the same manner in the third quarter.
However, the country's building markets maintained satisfactory activity levels
in the third quarter, much helped by consumer confidence in the value of
investments in home building or refurbishments. In Eastern Europe too, earlier
trends continued, with Russian demand still vigorous.
In North America, in spite of signs of a slowing economy, the U.S. residential
construction industry remained lively, although the commercial market was still
fairly flat. In Canada, the vigorous growth of the first half began to ebb in
the third quarter.
Development of infrastructure-related demand in Northern Europe ranged from
moderate growth to modest decline, depending on the country. Market growth was
recorded in Norway and the Baltic countries, while the rest of Scandinavia and
the Finnish market remained subdued, being heavily influenced by the slowdown
in the residential markets.
Net sales
A negative trend in the reported net sales continued in the third quarter,
versus the year before, reflecting the gradually weakening market conditions
compared to the robust start to the year. July-September net sales totalled
€211.3 (213.6) million, down by 1.1 per cent year on year. Organically, net
sales growth was 3.3 per cent, calculated with the exclusion of Hewing GmbH,
divested in the first quarter of 2012.
Building Solutions - Europe reported negative growth of net sales at -7.7%,
mainly due to weak building market demand in several large European markets,
including the impact of the divestment of Hewing GmbH in the first quarter of
2012. In comparable terms, the segment's growth remained 1.4% in the negative.
Sales development of plumbing products was stronger than that of indoor climate
products, partly due to a steeper fall in new build versus renovation. The new
marketing concepts for the renovation market supported this segment's sales in
Finland, in particular.
Building Solutions - North America continued its solid growth, supported by the
lively residential building markets in the U.S. and, to some extent, in Canada.
Infrastructure Solutions' net sales declined after the livelier first half of
the year, mainly due to declining construction markets and austerity measures
taken by national governments, which are curbing infrastructure-related
investments.
Net sales by segment (July-September):
M€ 7-9/2012 7-9/2011 Change
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Building Solutions - Europe 129.9 140.9 -7.7%
Building Solutions - North America 43.1 33.2 29.5%
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(Building Solutions - North America, $ 54.5 46.8 16.4%)
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Infrastructure Solutions 40.3 42.1 -4.2%
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Eliminations -2.0 -2.6
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Total 211.3 213.6 -1.1%
Uponor's January - September, net sales reached €621.9 (609.4) million, an
increase of 2.1%. The impact of currency fluctuations was a positive €15.4
million, or 2.5 per cent, year on year. This development was driven primarily
by the USD, with all the other main currencies, i.e. SEK, CAD, GBP and NOK,
also having a positive impact. Organically, net sales growth was 4.4 per cent,
calculated with the exclusion of Zent‑Frenger GmbH, acquired in the second
quarter of 2011, for the first quarter of 2012 and the divested Hewing GmbH for
both years, as in the January - June interim report.
Net sales by segment (January-September):
M€ 1-9/2012 1-9/2011 Change
------------------------------------------------------------------
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Building Solutions - Europe 396.1 411.0 -3.6%
Building Solutions - North America 113.0 89.4 26.3%
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(Building Solutions - North America, $ 145.6 126.9 14.8%)
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Infrastructure Solutions 117.6 115.4 1.9%
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Eliminations -4.8 -6.4
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Total 621.9 609.4 2.1%
Results and profitability
The gross margin in the third quarter improved from the previous year,
supported by the sales price increases implemented throughout the year.
Uponor's operating profit in the third quarter totalled €22.1 (19.7) million,
up by 11.9 per cent in year-on-year terms. Profitability measured by the
operating profit margin improved to 10.4 per cent, from the 9.2 per cent
reported a year ago. This positive performance development was mainly driven by
the better gross margin. Active management of spending and overhead costs was
continued, but their development at Group level was adverse due to increased
costs in M&A activity and higher overheads, mainly in North America, in support
of business growth.
The competitive environment in Europe remained tough, putting pressure on
margins both in Building Solutions - Europe and in Infrastructure Solutions.
This was due to an increased number of competitors pushing their offerings at a
low price in subdued markets.
In addition to the above mentioned factors, the favourable performance
development in Infrastructure Solution was influenced by a better product mix
in sales. Despite higher overheads, Building Solutions - North America's
operating profit improved markedly on account of higher volumes, reasonable
margin development and effective management of manufacturing efficiency.
Operating profit by segment (July-September):
M€ 7-9/2012 7-9/2011 Change
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Building Solutions - Europe 13.9 13.4 3.6%
Building Solutions - North America 7.5 4.9 51.9%
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(Building Solutions - North America, $ 9.6 7.0 37.1%)
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Infrastructure Solutions 2.3 1.4 75.6%
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Others -1.4 0.1
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Eliminations -0.2 -0.1
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Total 22.1 19.7 11.9%
Profit before taxes for July-September totalled €19.5 (18.4) million. The
effect of taxes on profits was €7.1 million, while the amount of taxes in the
comparison period was €6.1 million. Profit for the third quarter came to €12.4
(12.3) million.
January-September operating profit was €47.5 (38.4) million, up 23.6 per cent
from the comparison period. Profitability, or the operating profit margin, was
7.6 per cent, with the year-on-year figure being 6.3 per cent. The translation
impact of exchange rates on January - September operating profit was €1.5m
positive.
Operating profit by segment (January-September):
M€ 1-9/2012 1-9/2011 Change
------------------------------------------------------------------
------------------------------------------------------------------
Building Solutions - Europe 37.8 33.9 11.5%
Building Solutions - North America 14.3 8.3 72.2%
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(Building Solutions - North America, $ 18.4 11.8 56.5%)
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Infrastructure Solutions 2.6 -0.9 391.3%
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Others -6.4 -3.6 76.9%
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Eliminations -0.8 0.7
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Total 47.5 38.4 23.6%
Earnings per share for January-September totalled €0.35 (0.32), both basic and
diluted. Equity per share was €2.78 (3.18), basic and diluted.
Investments and financing
In North America, Uponor launched manufacturing expansion investment on its
current premises, in order to meet growth in demand. The programme will be
executed by the year end. Other than this, investments during the reporting
period were mainly targeted at maintenance and development. Uponor divested its
German OEM unit, Hewing GmbH, at the end of the first quarter 2012. The closing
sales price was €11.9 million, which was received on 2 April 2012.
Gross investments in fixed assets in January-September reached €12.3 million,
almost at the previous year's level of 12.8 million. However, this was clearly
below depreciation, which amounted to €21.2 (20.8) million.
Cash flow from business operations in January-September came to €2.1 million,
from -€4.9 million, despite the payment in the first quarter of €15.0 million
in taxes, surtaxes and interest, with respect to the taxation decisions by the
Finnish tax authorities at the end of 2011. Uponor has filed an appeal against
the decisions and a request for rectification to the Board of Adjustment.
In order to mitigate risks related to the difficult business environment,
Uponor places a special focus on reducing credit risk related to trade
receivables. Further, Uponor aims to keep its own liquidity at a high level,
while minimising refinancing risks. The company's available committed bilateral
credit facilities amount to €190 million. None of this amount was in use at the
end of the reporting period. At end of period, €15.5 million in commercial
papers had been issued under the €150 million domestic commercial paper
programme.
The Group's solvency ratio declined to 37.8 (41.9) per cent. Interest-bearing
liabilities amounted to €117.7 (126.8) million. The period-end cash balance
totalled €8.7 (9.9) million. Gearing increased to 57.9 (53.7) per cent.
Key events
On 21 September, Uponor Corporation and KWH Group Ltd, also of Finland,
announced a plan which involves the merger of both companies' infrastructure
pipe businesses into a new joint venture company. The new company, to be named
Uponor Infra Oy and jointly owned by Uponor (55.3%) and KWH Group (44.7%), will
focus on providing infrastructure pipe systems in northern Europe and
elsewhere. The deal is subject to certain closing conditions, including
approval by the Competition Authorities. Further to this deal, Uponor will
acquire the PEX pipe related production and business of KWH Pipe as a business
transfer. Uponor Group's net debt is expected to increase by approximately €35
million upon the completion of the transaction. This deal should have no
material impact on Uponor's gearing or solvency ratio. The management expects
to achieve significant cost synergies in relation to the value of the
businesses, but this is subject to detailed planning and execution by the
management of the joint venture. Uponor anticipates a decision by the
authorities within four months of the deal's announcement.
A new distribution centre building that will serve Uponor's building solutions
business in the Nordic countries has been erected in Västerås, Sweden.
Preparations are ongoing to begin operations there in January 2013.
Uponor has continued to develop its project organisation. In Central Europe,
the Zent-Frenger business concept is now established in the Swiss market and
the first steps have been taken in Austria.
The promotion of new products and systems introduced earlier have been
continued and extended to new countries. The pan-European customer loyalty
programme, whose development started last year, has now been introduced in five
European markets.
Earlier in the year, Uponor reported that, on 12 March, it had acquired the
remaining 49.7% of shares in the German company Zent-Frenger Gesellschaft für
Gebäudetechnik mbH, and now holds 100% of its share capital. On 17 February,
with reference to the December 2011 taxation decisions by the Finnish tax
authorities, Uponor notified that it had filed an appeal against the decisions
and a request for rectification to the Board of Adjustment. At the end of the
first quarter, Uponor closed the divestment of its German OEM unit, Hewing
GmbH, as first announced in January 2012.
Human resources and administration
For the January-September period, the number of Group employees (full
time-equivalent) in continuing operations averaged 3,112 (3,300), showing a
decrease of 188 employees from the equivalent period in 2011. At the end of the
period, the Group had 3,043 (3,292) employees, a decrease of 249 from the end
of the comparison period. In North America, Uponor has added personnel to
service higher demand, while in Europe the opposite development has occurred.
Furthermore, the divestment of Hewing, closed at the end of the first quarter,
reduced the headcount by 211.
Uponor has started initiatives in Building Solutions - Europe and
Infrastructure Solutions, in order to further adjust operations to the weak
business climate. These initiatives are expected to lead to modest headcount
reductions on different organisation levels Europe-wide, as well as to various
other savings in personnel costs.
Share capital and shares
Uponor Corporation's share capital amounts to €146,446,888, and the number of
shares totals 73,206,944. There were no changes in the share capital or shares
during the reporting period.
The number of Uponor shares traded on the NASDAQ OMX Exchange in Helsinki in
the third quarter was 4.5 (12.8) million, with the value of trading totalling
€36.4 (98.3) million. The market value of the share capital at the end of the
period was €0.6 (0.5) billion and the number of shareholders was 18,370
(20,445).
In September, The Capital Group Companies, Inc. notified of a change in the
reporting of their ownership in Uponor. In the future, holdings under
management will be reported in aggregate by The Capital Group Companies Inc.,
the group's parent company. According to the notification, the total holding
and voting power of The Capital Group Companies Inc. in Uponor Corporation
amounted to 8.8508% on 3 September 2012.
At period end, Uponor held 140,378 of its own shares, acquired in the final
quarter of 2008 for use in the company's share-based incentive programmes. In
April 2012, Uponor transferred 19,622 of its own shares to the company's
management under the long-term incentive scheme for 2007-2011, as authorised by
the Annual General Meeting of March 2012.
The AGM held on 15 March 2012 authorised the Board to resolve to buy back, at a
maximum, 3.5 million of the company's own shares, equating to 4.8 per cent of
the total number of shares of the company. These shares may be bought back from
unrestricted equity, by means of distributable earnings. The authorisation is
valid until the end of the next Annual General Meeting and for no longer than
18 months. The AGM also authorised the Board to resolve to issue a maximum of
7.2 million new shares or to transfer the company's own shares. The maximum
number of shares to be issued is 9.8 per cent of the total number of shares in
the company. The Board of Directors is authorised to set the conditions for the
share issue by a resolution. Such an authorisation would be valid for three
years. The general meeting further resolved to establish a permanent Nomination
Board comprising shareholders, or representatives thereof, to prepare proposals
each year for the election and remuneration of members of the Board of
Directors. In the view of the Board of Directors, it is in the interests of the
company and its shareholders that the biggest shareholders in the company
participate in preparations for the election and remuneration of Board members.
The Board of Directors did not exercise any of the above-mentioned
authorisations during the reporting period. The Board of Directors has no other
valid authorisations from the AGM.
On the basis of a decision by the AGM, the company distributed dividends of
€0.35 per share for the 2011 financial year, in March 2012.
Events after the reporting period
There have been no significant events to report since the reporting period.
Short-term outlook
The European Union remains affected by a complex and inefficient web of
political and financial arrangements, with no rapid solutions in sight to the
continent's prolonged economic problems. Reliably forecasting any lines of
development in this environment remains challenging.
The need to start new residential building projects is being curbed by tight
financing opportunities, as well as unwillingness amongst individuals and
organisations to commit to longer-term investment plans. Austerity measures
being taken by national governments continue, slowing demand and affecting the
prospects of a recovery in the building, construction and civil engineering
markets.
Development in the United States has been positive. Although the Canadian
market seems to be softening, these markets are expected to remain reasonably
strong in the near term. Despite signs of a slowing economy, the North American
construction industry continues to post moderate gains.
Uponor remains prepared for a lengthy period at current low activity levels,
with limited expectations of market growth. The main factors supporting stable
business growth are lively renovation activity, longer-term trends in
sustainability and low-energy building, and increased preparation for extreme
weather conditions, all of which favour Uponor's indoor climate, plumbing and
infrastructure solutions. In terms of the company's operative structure,
organisational setup and the products and services it offers, Uponor is well
positioned to take advantage of current growth opportunities, or to scale up
operations should the need arise.
The management is keeping a sharp eye on the company's focus, cost-efficiency,
and cash flow, in order to secure a solid financial position in the longer
term. Further action to cut overheads and other costs may become necessary in
selected markets, if the outlook remains weak. At the same time, Uponor is
maintaining support for its various growth initiatives, in order to benefit
from its strong range of new product and system innovation, while utilising the
tailwind that its sustainable product portfolio enjoys in the markets.
Uponor reiterates its guidance for 2012, announced on 10 February 2012:
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 in fixed
assets is not expected to exceed depreciation.
Uponor's financial performance may be affected by a range of strategic,
operational, financial and hazard risks. A more detailed risk analysis is
provided in the ‘Key risks associated with business' section of the Financial
Statements 2011.
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. Uponor offers its customers solutions that are
sustainable and safe and reliable to own and operate. The Group employs approx.
3,100 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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