2017-02-13 07:00:01 CET
2017-02-13 07:00:01 CET
REGLAMENTUOJAMA INFORMACIJA
Uponor - Financial Statement Release
Financial statements bulletin 2016: Transformation drives comparable operating profit improvement in Europe in 2016
Uponor Corporation Financial statements bulletin 1-12/2016 13 Feb
2017 8.00EET
Transformation drives comparable operating profit improvement in Europe in 2016
-- Savings from the transformation and earlier streamlining programmes helped
to improve comparable operating profit in Building Solutions – Europe and
Uponor Infra in 2016; operating profit in Building Solutions – North
America remained strong but stayed slightly behind last year
-- Oct-Dec net sales at €268.9 (2015: 262.0) million; Oct-Dec comparable
operating profit at 16.1 (16.5) million
-- Net sales Jan-Dec: €1,099.4m (1,050.8m), up 4.6%; organic growth at 2.0%
-- Operating profit Jan-Dec: €71.0m (71.4m); down 0.7%
-- Comparable operating profit at €90.7m (75.8m), up 19.7%
-- Earnings per share at €0.58 (0.51)
-- Guidance for the year 2017: the Group’s net sales and comparable operating
profit are expected to improve from 2016
-- The Board’s dividend proposal is €0.46 (0.44) per share
President and CEO Jyri Luomakoski comments on developments
during the reporting period:
-- Building Solutions – Europe progressed well in its transformation. The
segment’s new setup, based on a stronger and leaner management structure
close to growth centres, together with an efficient manufacturing network,
will provide it with a firm foothold to be able to benefit from an
anticipated recovery in the European building market.
-- Performance in Building Solutions – North America continued healthy,
although operating profit did not grow compared to the strong comparison
period in 2015. The outlook for North America remains solid.
-- Uponor Infra’s comparable profitability developed well in 2016, showing
that the transformation programme and the streamlining initiatives from
previous years are bearing fruit. Now that the change is well underway, the
team will focus efforts on promoting Uponor’s value-adding offering and
generating growth in net sales.
-- Throughout our almost 100-year history, Uponor has continuously focused on
renewal and innovation. In 2016, our R&D expenditure exceeded €20
million for the first time. Growth was driven by digital transformation in
our plumbing business, including such recent endeavours as the joint
venture company Phyn that develops smart water solutions, or the online
measurement offering by our subsidiary company UWater. In both of the
above, field tests are running according plan.
The Board’s dividend proposal
The Board proposes to the Annual General Meeting a dividend of €0.46 (0.44) per
share. When making the proposal, the Board considered the solvency of the
company, the company’s dividend policy and the business outlook, recognising
the high availability of external funding for the company’s growth plans.
Key financial figures
Consolidated income statement 2016 2015 2014 2013 2012
(continuing operations), M€
--------------------------------------------------------------------------
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Net sales 1,099.4 1,050.8 1,023.9 906.0 811.5
Operating expenses 991.0 942.7 926.4 823.6 726.5
Depreciation and impairments 41.6 39.1 36.5 33.0 28.2
Other operating income 4.2 2.4 2.4 0.8 0.9
Operating profit 71.0 71.4 63.4 50.2 57.7
Comparable operating profit 90.7 75.8 67.7 55.2 57.7
Financial income and expenses -10.0 -8.9 -7.4 -7.1 -8.6
Profit before taxes 60.4 62.8 56.3 43.2 49.4
Result from continuing operations 41.5 37.1 36.3 27.1 32.9
Profit for the period 41.9 36.9 36.0 26.8 32.8
Earnings per share 0.58 0.51 0.50 0.38 0.45
Information on the financial statements bulletin
This release is a condensed version of Uponor’s 2016 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 of
the previous year. Unless otherwise stated, figures refer to continuing
operations. Any change percentages were calculated from the exact figures and
not the rounded figures published here.
Webcast and presentation
A webcast of the results briefing in English will be broadcast on 13 February
at 10.00 EET. Connection details are available at http://investors.uponor.com.
Questions can be sent in advance to ir@uponor.com. The recorded webcast can be
viewed at http://investors.uponor.com shortly after its publication. The
presentation document will be available at http://investors.uponor.com > News &
downloads.
Next interim results
Uponor Corporation will publish its Q1 interim results on 3 May 2017. During
the silent period from 1 April to 3 May, Uponor will not comment on market
prospects or factors affecting business and performance.
Interim results October – December 2016
Markets
Most of Uponor’s core European building solutions markets improved during the
fourth quarter, compared to 2015, with construction activity and builder
sentiment rising. In North America, demand for building solutions was assisted
by marginal increases in U.S. construction, with growth probably being tempered
by increasing mortgage rates and some labour shortages. In Canada, the
residential market continued to be resilient.
Civil engineering markets remained stable overall, but demand for
infrastructure solutions continued to decline in Canada and Poland. The energy
price increases witnessed during recent months have not translated into new oil
production related investments, but stimulus spending on civil engineering
projects has helped to spur demand in other market segments.
Net sales
Uponor reported net sales of €268.9 (262.0) million for the fourth quarter,
which brings growth in reported numbers to 2.6%. In comparable terms, i.e.
excluding the acquisitions in Germany in January 2016, growth was 0.2%. The
currency impact came to €0.9 million, whereby the fourth quarter’s comparable
growth in constant currency came to 0.5%.
Building Solutions – Europe reported an increase of 10.0% from the comparison
period, with net sales coming to 125.8 (114.3) million. Just over half of this
growth is due to German acquisitions made in January 2016, while the rest is
from organic advances in markets, mainly in southwestern and northern Europe.
In Building Solutions – North America, net sales reached €77.2 (74.0)
million. At 4.5%, the growth pace was slightly lower than in some recent
quarters. This trend is partly due to the fact that while demand in the U.S.
remains on a growth track, year-over-year growth of the market was stabilising
in the second half of 2016. Secondly, in 2016, growth was curbed by volatility
in sales originating in the plastic fittings resin shortage that began in late
2015. Judging from sales mix development, distributors who increased their
fittings inventories in the first half of 2016, due to announced constraints in
supply, began to assume normal buying patterns during the course of the fourth
quarter.
Uponor Infra’s net sales amounted to €67.2 (75.0) million, representing a
decline of 10.4%. While sales picked up encouragingly in northern Europe, the
subdued markets of Eastern Europe and Canada influenced the segment’s sales in
a negative way.
Breakdown of net sales by segment, October–December:
M€ 10-12 10-12 Reported change
2016 2015
----------------------------------------------------------------------
Building Solutions – Europe 125.8 114.3 10.0%
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Building Solutions – North-America 77.2 74.0 4.5%
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(Building Solutions – North-America, M$ 82.7 80.2 3.2%)
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Uponor Infra 67.2 75.0 -10.4%
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Eliminations -1.3 -1.3
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Total 268.9 262.0 2.6%
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Profits and profitability
Uponor’s comparable gross profit in the final quarter of 2016 totalled €91.5
(91.7) million. Comparable gross profit margin came to 34.1% (35.0%). All
segments reported a slight decline in comparable gross profit margin.
Consolidated operating profit for the fourth quarter came to €7.5 (14.0)
million, down by 46.5%. The operating profit margin came to 2.8% (5.3%).
Comparable operating profit, i.e. excluding any items affecting comparability
(IAC), came to 16.1 (16.5) million in the quarter under review, with comparable
operating profit margin reaching 6.0% (6.3%). IAC, which were connected to the
European transformation programmes, and included also the streamlining
programme in Uponor Infra’s Canadian operations, totalled €8.6 (2.5) million in
the fourth quarter, of which Uponor Infra accounted for €3.0 (0.7) million and
Building Solutions – Europe €5.6 (1.8) million.
Building Solutions – Europe’s reported operating profit declined sharply as a
result of the initiatives related to the transformation programme. These
included, among other things, the costs related to the announced transfer of
PEX pipe production from Spain to Sweden and the relocation of the UK office,
as well as personnel reductions in some countries. Adjusting for IAC, Building
Solutions – Europe’s comparable operating profit came to €7.2 (5.1) million, up
40.4%. Furthermore, the price pressure caused by weak market trends over
several years continued, affecting core product categories. The trend was
somewhat offset by savings in overhead spend.
Building Solutions – North America’s operating profit did not quite reach the
strong 2015 figure but profitability or the operating profit margin remained
high, at 15.4% (16.3%). Profit development was mainly due to costs associated
with managing the consequences of a shortage of a key resin for plastic
fittings, as reported earlier. Uponor substituted brass fittings, which had a
higher unit cost, for the fittings unavailable due to the shortage. By the end
of the quarter, Uponor was able to offer a full range of plastic fittings made
of the new, more expensive material. Volatility due to managing this issue
markedly increased costs in securing the supply of fittings for customers.
Uponor Infra, too, reported a decline in operating profit driven by the costs
related to its transformation. Furthermore, the 2015 figures included a gain
from the divestment of the Omega-Liner® pipeline renovation business in
December 2015. Comparable operating profit, without IAC, came to €-2.0 (€-0.5)
million. The negative trend in performance was mainly a result of weak sales
development in North America and in Eastern Europe, while business activities
in Northern Europe developed more favourably. In stark contrast to 2015, the
development in resin prices was rather stable, contributing to a more stable
performance overall. In 2015, infrastructure solutions sales were curbed by
resin shortages and pricing issues in the second and third quarters, which
resulted in higher demand in the fourth quarter once the situation had settled
down.
Reported operating profit by segment, October–December:
M€ 10-12 10-12 Reported change
2016 2015
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Building Solutions – Europe 1.6 3.3 -53.9%
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Building Solutions – North-America 11.9 12.2 -1.6%
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(Building Solutions – North-America, M$ 12.7 13.1 -2.7%)
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Uponor Infra -5.0 -1.2 -334.7%
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Others -0.3 -0.9
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Eliminations -0.7 0.6
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Total 7.5 14.0 -46.5%
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Comparable operating profit by segment, October–December:
M€ 10-12 10-12 Comparable change
2016 2015
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Building Solutions – Europe 7.2 5.1 40.4%
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Building Solutions – North-America 11.9 12.2 -1.6%
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(Building Solutions – North-America, M$ 12.7 13.1 -2.7%)
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Uponor Infra -2.0 -0.5 -370.8%
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Others -0.3 -0.9
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Eliminations -0.7 0.6
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Total 16.1 16.5 -2.3%
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Uponor Corporation Financial statements January – December 2016
Markets
On the whole, construction activity in European markets strengthened during the
year, albeit from a modest base. In North America, construction activity
remained healthy in general, but the substantial year-over-year gains witnessed
during previous years exhibited signs of waning.
In Central Europe, Germany continued to benefit from consumer-driven expansion
in the economy. A strong labour market and low mortgage rates translated into
increased demand for residential buildings, leading to a significant increase
in residential building projects and several, all-time-high builder confidence
readings. However, the much larger residential renovation segment remained
flat. The non-residential segment was healthy but, in some cases, external
political and economic uncertainties made businesses hesitant to initiate new
projects. In the Netherlands, construction activity continued to grow, but at a
reduced rate.
In Southwest Europe, construction market demand in Spain and France picked up
modestly from rather low levels, while the Italian market continued to be soft.
In the UK, the fallout from the “Brexit” referendum was muted, with both the
residential and non-residential segments remaining steady.
Within the Nordic countries, construction activity trended upwards. Sweden’s
residential boom endured, with housing starts clearly up from the previous year
and reaching their highest level since the early 1990s. In Finland, after
several years of slowdown, both residential and non-residential construction
spending rose from 2015. Non-residential spending in Norway remained at the
previous year’s level, while residential spending picked up slightly. Denmark
remained flat.
In Eastern Europe, continued uncertainty took a toll on the residential and
non-residential building segments. In East-Central European countries such as
the Czech Republic, Hungary and Poland, residential investments rose, but
non-residential investments fell from 2015. Construction spending in the Baltic
countries was flat overall.
In North America, residential and non-residential construction remained largely
healthy, but no signs could be seen of the substantial year-over-year gains
witnessed since the recovery began. While home builder sentiment is near an
all-time-high and consumer confidence remains strong, activity has probably
been tempered by increased mortgage rates and labour shortages in some areas.
Major volatility in leading construction indicators was witnessed during the
latter half of 2016, which may have influenced purchasing behaviour patterns in
the distribution chain. In Canada, the residential market experienced some
softness in comparison to the previous year.
With regard to Uponor’s infrastructure solutions, demand in the Nordic markets
was stable on the whole, with Sweden and Norway improving somewhat. The markets
in Poland and other central-eastern Europe countries remained subdued, while
spending fell significantly in the Baltic countries. Depressed energy prices
continued to restrain oil-related investments in Canada, negatively influencing
the infrastructure business in other market segments as well.
Net sales
Uponor's 2016 consolidated net sales amounted to €1,099.4 (2015: €1,050.8)
million, up 4.6% year-on-year. In comparable terms, i.e. excluding the 2015
divestments by Uponor Infra and the 2016 acquisitions in Germany by Building
Solutions – Europe, Uponor's consolidated net sales grew by 2.0%. The currency
impact totalled €-10.3 million, bringing 2016’s full-year comparable growth in
constant currency to 3.0%. The negative currency effect was mainly due to the
GBP, CAD, SEK, and RUB, and was therefore mostly affected Building Solutions –
Europe and Uponor Infra.
Building Solutions – Europe’s net sales grew by 9.4%, or 2.6% organically. This
positive trend is a reflection of sales picking up in several European markets,
mainly south-west Europe and the Nordic countries, as well as acquisitions in
Germany in January 2016. In Europe, sales in local currency grew in nine out of
the ten largest countries. The biggest advances were made in Sweden, Spain, the
UK and Austria. In Germany, growth came entirely from acquisitions. Offset by
growth in the commercial project business, local systems sales in Germany
declined as a result of competitive sales price pressure.
With a net sales growth of 10.7% in local currency, the year 2016 was twofold
for Building Solutions – North America. In the USA, the first half of the year
continued to see robust growth in sales, while during the second half, growth
of sales stabilised, reflecting the general trends in the building and
construction market. Additionally, challenges were posed by a shortage in the
plastic fittings resin supply, which forced Uponor to offer a complementary
brass fitting line for an interim period. This led to sales volatility and
supply chain issues and impacted on pipe and fittings system sales growth
throughout most of the year 2016. Despite this, Uponor’s PEX plumbing offering
sales grew well in 2016 in the U.S. and also in Canada.
Uponor Infra’s net sales for 2016 declined by 7.7%. The decline was mainly
driven by continued weak development in Poland and North America, offsetting
the budding increase in demand in northern Europe.
Within the business groups, the share of Plumbing Solutions represented 49%
(45%), Indoor Climate Solutions 25% (25%), while Infrastructure Solutions
represented 26% (30%) of Group net sales.
Net sales by segment for 1 January – 31 December 2016:
M€ 1–12 1–12 Reported change
2016 2015
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Building Solutions – Europe 511.0 467.1 9.4%
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Building Solutions – North America 305.6 275.8 10.8%
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(Building Solutions – North America (M$) 337.2 304.6 10.7%)
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Uponor Infra 287.9 312.0 -7.7%
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Eliminations -5.1 -4.1
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Total 1,099.4 1,050.8 4.6%
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Measured in terms of reported net sales, and their respective share of Group
net sales, the 10 largest countries were as follows (2015 figures in brackets):
the USA 25.1% (23.9%), Germany 14.7% (13.0%), Finland 11.2% (11.8%), Sweden
9.1% (8.9%), Canada 7.3% (7.9%), Denmark 4.4% (4.5%), the Netherlands 3.6%
(3.5%), Spain 3.2% (2.8%), the United Kingdom 2.9% (3.4%), and Norway 2.7%
(2.9%).
Results
The consolidated full-year gross profit ended at €376.0 (370.2) million, a
change of €5.8 million. The gross profit margin came to 34.2% (35.2%).
Comparable gross profit came to 383.9 (371.0) million, or 34.9% (35.3%). The
gross profit was burdened by price competition and product mix issues in
Building Solutions – Europe as well as plastic fittings challenges in Building
Solutions – North America, offset to a large extent by operational efficiency
improvements in all segments.
Consolidated operating profit came to €71.0 (71.4) million, which is close to
the level of the previous year. The operating profit margin ended at 6.5%
(6.8%) of net sales. Currency exchange rates did not have a material impact on
the full-year operating profit.
Comparable operating profit, i.e. excluding any items affecting comparability,
reached €90.7 (75.8) million, an increase of 19.7%. Comparable operating profit
in Building Solutions – Europe came to €38.0 (27.6) million and €6.4 (0.9)
million in Uponor Infra. The net total amount for items affecting comparability
was €19.7 (4.3) million, of which €12.4 (3.6) million was reported in Building
Solutions – Europe and €7.2 (0.7) million in Uponor Infra, all of the above
being related to the transformation programmes in the respective segment.
Overall, market conditions in Europe improved slightly in 2016, contributing to
the positive trend in operating profit in Building Solutions - Europe, in
particular. Another factor, mainly influencing Uponor Infra, was the more
stable cost environment and availability of plastic resins, in stark contrast
to the comparison period.
Building Solutions – Europe reported an improvement in full-year operating
profit, albeit at a low level in a longer-term comparison. This growth was a
result of higher net sales and lower expenditure enabled by the savings due to
the transformation programme. The initiatives carried out included the closure
of a total of 10 offices, including one relocation, as well as the reduction of
office space in three locations during 2016. The net reduction in personnel
totalled 164 persons in 2016, in line with the original plan. Profitability was
burdened by increasing competition in both indoor climate and plumbing
solutions, mainly from private label and other competing offerings using lower
price technologies, as well as tighter competition within the distribution
channel.
Building Solutions – North America reported continued strong profits, although
the profit margin weakened against the strong comparison period in 2015.
Operating profit fell in the third quarter in particular, due to extra costs
associated with managing the shortage of a key resin for plastic fittings.
Uponor substituted brass fittings, which had a higher unit cost, for the
fittings that were unavailable due to the shortage. By the end of the fourth
quarter, Uponor was able to offer a full range of plastic fittings made of a
new, more expensive material. In addition, the volatility involved in managing
this transition markedly increased the costs of ensuring the supply for
customers.
Burdened by IAC costs related to the transformation programme in Europe and the
cost reduction programme started in Canada in the fourth quarter 2016, Uponor
Infra reported a decline in operating profit. Comparable operating profit
without IAC improved and came to €6.4 (€0.9) million. The improvement mainly
resulted from reduced cost level thanks to earlier streamlining programmes and
improving performance in most of the Nordic countries, despite the negative
profit trend in North America and Eastern Europe. In addition, performance was
affected by temporary challenges encountered in Denmark. In stark contrast to
2015, the resin price development in 2016 was rather stable, contributing to a
more stable input cost environment and gross profit.
Other operating income includes funds received in royalties and compensation
for patent infringement as part of a settlement in Canada in 2016.
Reported operating profit by segment for 1 January – 31 December 2016:
M€ 1-12/ 1-12/ Reported change
2016 2015
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Building Solutions – Europe 25.6 24.0 6.4%
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Building Solutions – North-America 50.0 51.0 -1.8%
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(Building Solutions – North-America (M$) 55.2 56.3 -1.9%)
-----------------------------------------------------------------------
Uponor Infra -0.8 0.2 -484.2%
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Others -2.2 -3.8
-----------------------------------------------------------------------
Eliminations -1.6 0.0
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Total 71.0 71.4 -0.7%
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Comparable operating profit by segment for 1 January – 31 December 2016:
M€ 1-12 1-12 Comparable change
2016 2015
----------------------------------------------------------------------
Building Solutions – Europe 38.0 27.6 37.6%
----------------------------------------------------------------------
Building Solutions – North-America 50.0 51.0 -1.8%
----------------------------------------------------------------------
(Building Solutions – North-America, M$ 55.2 56.3 -1.9%)
----------------------------------------------------------------------
Uponor Infra 6.4 0.9 573.0%
----------------------------------------------------------------------
Others -2.1 -3.8
----------------------------------------------------------------------
Eliminations -1.6 0.0
----------------------------------------------------------------------
Total 90.7 75.8 19.7%
----------------------------------------------------------------------
Uponor’s net financial expenses came to €10.0 (€8.9) million. Net currency
exchange differences in 2016 totalled €-3.9 (-3.4) million.
Share of result in associated companies, €-0.6 (0.3) million, includes the
product development and other start-up costs related to the establishment of
Phyn, the joint venture company with Belkin International, Inc.
Profit before taxes was €60.4 (62.8) million. The effective tax rate came to
31.3% (40.9%), which is below the anticipated longer-term level but does
include one-time R&D tax credits in the USA, granted to Uponor retrospectively.
Income taxes, including the tax credits, totalled €18.9 (25.7) million. The
2015 income taxes included €1.6 million in taxes paid in Estonia due to
dividends distributed, as well as an additional €0.5 million deferred tax
liability related to remaining retained earnings in the Estonian subsidiaries,
corresponding to a one-time effective tax rate increase of 3.3 percentage
points.
Profit for the period totalled €41.9 (36.9) million.
Return on equity reached 13.1% (12.1%). Return on investment declined to 14.1%
(15.5%). Return on investment, adjusted for items affecting comparability, came
to 18.3% (16.5%).
Earnings per share were €0.58 (0.51). Equity per share was €3.60 (3.39). For
other share-specific information, please see the Tables section.
Consolidated cash flow from operations amounted to €59.9 (58.2) million, while
cash flow before financing came to €-31.9 (16.5) million due to the German
acquisitions in January 2016 and the $15 million investment in the joint
venture company Phyn in July 2016.
Key figures are reported for a five-year period in the key financial figures
section.
Investment, research and development, and financing
In terms of capital expenditure, Uponor aims to maintain a balance between
targeting resources at the most viable opportunities, while keeping overall
investment levels tight.
In 2016, such funds were allocated to new production technology in Building
Solutions – Europe, capacity expansion in Building Solutions – North America,
as well as production enhancement projects in Uponor Infra. In China, the new
factory in Taicang (Shanghai) was equipped with production lines and production
commenced in December 2016. A high proportion of the funds spent are being
directed towards selected productivity improvements and maintenance.
In 2016, gross investment in fixed assets totalled €50.7 (50.1) million,
clearly below the anticipated level due to delays in projects. Net investments
totalled €48.4 (49.2) million.
Further investments in shares were made in January 2016, when Uponor Holding
GmbH acquired the companies KaMo Group and Delta Systemtechnik GmbH, in
Germany, and in July, when Uponor Corporation signed the joint venture
agreement on the establishment of a new business, Phyn, with Belkin
International, Inc.
Research and development costs grew to €21.4 (18.5) million, or 1.9% (1.8%) of
net sales. The main reasons for the increase were setting up the new Group
Technology function with added personnel, increased investment in
digitalisation initiatives, and direct project costs related to new product and
application development, as well as materials development.
The main existing funding programme on 31 December 2016 was an €80 million bond
maturing in June 2018. In addition to the outstanding bond, Uponor took out
5-year loans of €50 million in January 2016 and €20 million in July 2016, in
order to fund M&A and joint venture activities.
Four committed bilateral revolving credit facilities, which will mature in
2019–2021, totalled €200 million; none of these back-up facilities were used
during the year.
For short-term funding needs, Uponor’s main source of funding is its domestic
commercial paper programme, totalling €150 million, none of which was
outstanding on the balance sheet date. At the end of the year, Uponor had €16.3
(49.2) million in cash and cash equivalents.
Accounts receivable and credit risks received special attention throughout the
year. Accounts receivable increased due to changes in the management of key
accounts in North America.
Consolidated net interest-bearing liabilities rose to €159.5 (91.3) million,
driven mainly by the German acquisitions and the establishment of the joint
venture Phyn. Also accounts receivable grew in North America and inventories
were increased to serve as buffers in connection with production transfers in
both Building Solutions – Europe and in Uponor Infra. The solvency ratio was
42.8% (44.3%) and gearing came to 48.8% (29.3%). Average quarterly gearing was
56.7 (40.4), in line with the range of 30–70 set in the company's financial
targets.
Events during the period
On 4 January, Uponor Holding GmbH completed the acquisition of all of the
shares in the German companies KaMo Group and Delta Systemtechnik GmbH. In
2014, KaMo and Delta combined generated a total turnover of €32.8 million and
employed 119 employees. On 7 January, Uponor Corporation announced the
acquisition of the entire shareholding in a Finnish start-up company
specialising in online water quality monitoring. The company, renamed to UWater
Oy, has developed a unique and revolutionary technology for the online
measurement of water quality. The above acquisitions strengthened Uponor’s
competencies in assuring water quality and hygiene, both of which are of
growing importance in modern-day water services, whether such services involve
municipal, industrial or residential water supply applications.
In January, Uponor’s Finnish subsidiaries Uponor Infra Oy and Uponor Suomi Oy
concluded co-determination negotiations in Finland, resulting in the
termination of 126 jobs. The negotiations were related to the European
transformation programmes announced in the autumn of 2015. Uponor Infra also
decided to relocate pressure pipe and standard chamber manufacturing operations
from Vaasa to Nastola, Finland.
On 13 July, Uponor Corporation and Belkin International, Inc. formed a joint
venture company in the United States and Europe for the development and
commercialisation of intelligent water technology. The new joint venture, named
Phyn, develops water sensing and conservation technology for both consumers and
the building industry. As a minority-owned business, the joint venture company
was consolidated into Uponor’s financial accounts using the equity method.
Uponor initially invested $15 million in exchange for a 37.5% shareholding in
the companies. The parties also agreed on a time frame within which Uponor has
an option to invest an additional $10 million and increase its shareholding in
Phyn to 50%. Uponor regards the partnership as an important step in its growth
strategy, particularly in the emerging Internet of Things (IoT) market and a
major development in digitalisation, which is perfectly aligned with the
company’s commitment to creating safe and sustainable buildings and
infrastructures.
On 10 October, 2016 employees moved into Uponor’s new office in Taicang, China,
the latest addition to Uponor’s family of manufacturing units and the first in
Asia. Production and deliveries began according to plan in steps by December.
Additional lines will be introduced in 2017. The factory's overall floor space
is 10,000m².
On 23 November, Uponor announced a plan to close PEX pipe production in
Mostoles, Spain and concentrate it to Virsbo, Sweden. The final decision was
made in December. As a result, a maximum of 50 job positions will be terminated
most of them by the end of February 2017. Uponor will continue to have its
logistics centre and the sales & marketing organisation in Spain. The
initiative was part of Uponor’s European transformation programme, launched in
autumn 2015, targeting the rationalisation of manufacturing and reduction of
costs in the supply chain and production operations.
Other initiatives related to Building Solutions – Europe’s transformation
programme included closing a total of 10 offices across Europe, as well as the
relocation of the UK office to a location close to London. The net reduction in
personnel, relating to the transformation programme, was 164 persons in 2016.
Uponor Infra continued to streamline manufacturing by centralising production
in fewer locations in Finland and Denmark. A total of 75 job positions were
terminated in Uponor Infra as part of the transformation programme during 2016.
On 12 December, Uponor’s Board of Directors resolved to continue the key
management Performance Share Plan mechanism decided on by the Board in 2014.
Targeting roughly 30 managers, the new plan covers the years 2017—2019 and
offers participants the opportunity to earn Uponor shares as a reward for
achieving targets. The potential reward will be paid in 2020. The purpose of
the plan is to continue aligning the objectives of the management and Uponor
shareholders in order to increase the value of the company, boost profitable
growth and retain the services of participants over the longer term.
During 2016, Uponor introduced a range of new products on the market. These
included, for instance, the new Uponor Smatrix Aqua that helps improve drinking
water safety and hygiene. In North America, alongside Milwaukee, Uponor
co-developed a unique new-generation tool, Milwaukee Force Logic, which makes
fitting large-diameter PEX pipes easier and much more competitive than with
traditional tools. In Europe, Uponor launched 75mm Q&E fittings and a new
Milwaukee expansion tool extending the offering range from 63 mm/6 bar pipes
all the way up to 75 mm and 10 bar pipes, for use in tap water riser
installations and local heat distribution (LHD) installations. Uponor Infra
launched Uponor Decibel, a modern silent soil & waste pipe system that combines
an aesthetic visual appearance with the product’s inner mineral layer, which
helps to eliminate noise. Another Uponor Infra novelty was Uponor Barrier PLUS,
the first 100% plastic potable water pipe for use in water transport in areas
with contaminated soil. The new Uponor Barrier PLUS is based on a non-permeable
polymer in place of the aluminium layer, resulting in a durable but
fully-recyclable pipe system.
Short-term outlook
Overall, the market outlook for Uponor’s core businesses and core geographical
markets remains rather stable and positive although, based on negative
scenarios, there are certain risks that may materialise and influence the
development of the business going forward.
Until very recently, many European construction markets had not begun a
meaningful recovery from the global financial crisis that shocked economies
almost a decade ago. Following the emerging signals of a pick-up that
materialised in Europe in the second half of 2016, the gradual recovery of
European building and construction markets is anticipated to continue
throughout 2017. This trend is supported by the fact that housing permit
development is reasonably strong in most European countries and market trends
are positive in some countries, such as Germany, the Netherlands, France, as
well as some Nordic countries. The recovery thus seems broad-based and is
supported by improving confidence, attractive credit terms, immigration and,
naturally, pent up demand over the longer term. Another factor adding to the
credibility of the recovery is the fact that governments in several countries
are beginning to emphasise infrastructure projects as part of their near-term
investment plans.
The North American economy is expected to remain on a growth path, although the
pace of growth may begin to decelerate. This trend was already in evidence in
late 2016, when housing start growth in the U.S. temporarily slowed although
several key fundamentals, such as mortgage rates, unsold inventory of homes,
and job growth in the construction industry, remained fairly favourable.
Furthermore, the new presidential administration in the U.S. has discussed
providing support to boost infrastructure and manufacturing investments, which,
once they materialise, should act as an economic stimulus, particularly in the
longer-term.
The above market scenarios are not without risk, even if such risks are
unlikely to materialise. The year 2017 will see elections in several large
European economies and surprises may occur. Some major issues may re-emerge:
the progress and impact of the UK’s EU referendum; the debt crisis within the
EU; political issues within the EU, in Eastern Europe, and now perhaps in the
global arena. Any or all of these could derail economic development from its
expected heading in Europe, North America and in other markets in which Uponor
does business.
Uponor has invested a considerable amount of human and monetary resources into
making the company stronger. In the autumn of 2015, Uponor announced extensive
transformation programmes in its European businesses, involving both Building
Solutions – Europe and Uponor Infra. Both of these programmes have been carried
out diligently, with most of the planned initiatives completed on plan by the
end of 2016, and more or less with expected results. The organisations are
leaner, the decision-making is more agile, and performance is improving. Both
segments now have an up-to-date production network from the production
technology perspective, as well as regional spread.
Assuming that economic development in Uponor's key geographies otherwise
continues undisturbed, Uponor issues the following, full-year guidance: the
Group’s net sales and comparable operating profit are expected to improve from
2016.
The Group's capital expenditure, excluding any investment in shares, is
expected to be in the range of €50-60 million. Funds will be directed towards
new product and offering development, such as strategically significant hygiene
solutions, and the expansion of business in Asia, among other activities.
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
Annual Report 2016.
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:
Nasdaq Helsinki
Media
www.uponor.com
Uponor is a leading international systems and solutions provider for safe
drinking water delivery, energy-efficient radiant heating and cooling and
reliable infrastructure. The company serves a variety of building markets
including residential, commercial, industrial and civil engineering. Uponor
employs about 3,900 employees in 30 countries, mainly in Europe and North
America. In 2016, Uponor's net sales totalled €1.1 billion. Uponor is based in
Finland and listed on Nasdaq Helsinki. www.uponor.com
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