2011-08-10 07:00:00 CEST
2011-08-10 07:00:12 CEST
REGULATED INFORMATION
Uponor - Interim report (Q1 and Q3)
Q2/2011 interim report: Uponor's strong organic growth continues
Uponor Corporation Interim report January-June 2011 10 August
2011 8.00 EET
Uponor's strong organic growth continues
-- Growth in key market areas softened, except in Germany
-- Higher input prices affected both building and infrastructure solutions
business
-- Net sales in April-June totalled €222.6 (204.6) million; a change of 8.8%
-- Operating profit for April-June totalled €15.5 (18.8) million; a change of
€-3.3 million
-- Net sales in January-June totalled €395.8 (362.0) million; a change of 9.4%
-- Operating profit for January-June totalled €18.7 (20.3) million; a change
of €-1.6 million
-- January-June earnings per share amounted to €0.15 (0.12)
-- January-June return on investment was 10.6% (9.0%), and gearing 67.7 (54.3)
-- January-June cash flow from business operations reduced to €-32.4 (-19.0)
million
-- Full-year guidance remains unchanged
(This interim report has been compiled in accordance with the IAS 34 reporting
standards and it is unaudited. Figures in the report are for continuing
operations unless otherwise stated. The ‘report period' refers to the period
January-June.)
President and CEO Jyri Luomakoski comments on Uponor's performance:
-- In North America, we achieved a visible profit improvement from the
previous year despite the sluggish market environment, thanks to our
targeted sales focus. In Germany, supported by the healthy market activity,
we also recorded markedly better organic growth than anticipated.
-- Uponor's financial performance in the second quarter was unsatisfactory.
This was mainly due to the effects of sales price increases lagging behind
the rapidly elevated material costs.
-- Future macroeconomic uncertainties, together with the fact that our
financial performance fell short of the targets in the first half of this
year has resulted in the need for further initiatives to boost efficiencies
and to adjust expenses to secure the Group's profitable growth. We shall
return to these plans and measures later in the year.
Webcast and presentation material:
Following 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 on Wednesday, 10
August 2011 at 10:00 EET. Questions for the webcast can be sent in advance to
ir@uponor.com. The webcast can also be viewed at www.uponor.com > Investors >
News & downloads shortly after the financial information is published.
Uponor Corporation will release its Interim Report for January-September 2011
on 26 October 2011. During a quiet period from 1 October to 26 October, Uponor
will not comment on market prospects or factors affecting business and
performance, nor will the company engage in discussions on events or trends
related to the reporting period or the current fiscal period.
Markets
The optimism of the first quarter has been replaced in several markets with
caution and reserve in the second quarter. The severe financial crisis in some
European countries, the prolonged recovery of the U.S. economy and the mounting
challenges in the rapidly growing markets of the developing countries have
engaged the attention of consumers and businesses alike. Investments in
building and construction have been cut back or delayed in an attempt to secure
one's own operations in preparation for the possible scenario that the global
economy will take a downward turn. Challenges in the financing of investments
are also becoming more evident. The public sector has not been able to offer
relief as those investment resources have been widely used in warding off the
recession in the past few years.
In countries where Uponor operates, construction and demand for building
solutions have mainly mirrored the overall economic development. However, the
German-speaking countries of Europe together with the Benelux countries provide
an exception - their economies saw lively development during the second
quarter, with the building markets following suit. In the Nordic countries, the
strong growth experienced in the first quarter levelled out but in most cases
it remained at a good level. As expected, development in Southern and Western
Europe was modest, and, with the exception of France and the UK, even
declining. In North America, demand in the building markets declined slightly
from the first quarter, and in the USA in particular, there was a visible
difference from the strong second quarter of the previous year. In Eastern
Europe, differences between the markets were notable. In Russia and the Baltic
States, a clear increase in market activity could be seen against last year,
while in other countries the growth of demand came to a halt and, in some, took
a downward turn. In infrastructure solutions, the spring season kicked off an
increase in demand, as anticipated, and the markets appeared livelier than a
year ago.
Net sales
Despite the challenging market environment, Uponor managed to increase the net
sales of its main product groups in several markets. This is mainly due to the
recent successful launches of new solutions involving active and extensive
sales promotion and the new customer segmentation approach implemented over the
last couple years, which are now applied effectively in various marketing and
customer services. In the building industry, energy efficiency, offering
solutions that can be flexibly used for various applications, as well as
sustainability of the business and its products, are gaining ground as
important selection criteria. This created a beneficial atmosphere that Uponor
was able to benefit from in the sales and marketing of it products and
solutions in all of its markets.
Uponor's net sales in the second quarter were €222.6 (204.6) million, up by 8.8
per cent year-on-year. The Group's organic growth in net sales was at 5.7 per
cent. In Building Solutions - Europe, net sales in Central Europe increased
particularly due to the buoyant sales in Germany. In Germany, net sales were
further increased by the acquisition of a majority shareholding in
Zent-Frenger, effective since the beginning of the second quarter. In the
Nordic countries, the growth in Building Solutions improved from the first
quarter, but with clear differences between the countries. Net sales in
Southern and Western Europe remained unchanged while the building markets in
this area remained stable or saw a decline. In Eastern Europe, net sales
increased in almost all markets, although variation between different countries
was significant. In North America, where the building market continued to
decline, net sales clearly increased in Canada but decreased in the USA, as
measured in local currency. Net sales for infrastructure solutions increased,
mainly due to the increased sales in Sweden and Denmark.
Price increases implemented to cover the increased costs positively affected
the net sales by a growth of €5.0 million compared to the previous year. The
Group announced price increases during the second quarter, affecting mainly the
Building Solutions business. They will be giving results mostly during the last
two quarters of the year.
The impact of currency fluctuations on January -June net sales was €0.8 million
positive year-on-year, and was primarily caused by the positive impact of
Swedish krona and the negative impact of US dollar.
Net sales by segment (April-June):
M€ 4-6/2011 4-6/2010 Change
--------------------------------------------------------------------
Building Solutions - Europe 147.8 130.9 13.0%
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Building Solutions - North America 29.5 33.5 -11.8%
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(Building Solutions - North America, US$ 42.8 42.5 0.8%)
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Infrastructure Solutions 47.3 42.6 11.0%
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Eliminations -2.0 -2.4
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Total 222.6 204.6 8.8%
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January - June net sales amounted to €395.8 (362.0) million, up 9.4% from the
comparison period. A part of the growth stems from the acquisition in Germany
in the second quarter.
Net sales by segment (January-June):
M€ 1-6/2011 1-6/2010 Change
--------------------------------------------------------------------
Building Solutions - Europe 270.1 242.9 11.3%
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Building Solutions - North America 56.2 58.0 -3.1%
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(Building Solutions - North America, US$ 80.0 76.1 5.2%)
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Infrastructure Solutions 73.3 64.5 13.7%
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Eliminations -3.8 -3.4
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Total 395.8 362.0 9.4%
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Results and profitability
Consolidated operating profit in the second quarter totalled €15.5 (18.8)
million, down by €3.3 million year-on-year. Profitability or the operating
profit margin declined to 7.0 per cent from the 9.2 per cent reported a year
ago.
Despite the price increases, the increases in raw material costs could not be
recovered from customers in full due to the challenging market environment.
This had a negative impact on the operating profit for Infrastructure
Solutions, in particular. The higher cost level not only in plastic raw
materials, but also in metal, components, energy and logistics compared to a
year ago had an impact on all business groups. Following the trend of the first
quarter, large investments in marketing measures, especially in Building
Solutions - Europe, negatively affected profitability in the second quarter.
Furthermore, some minor expenses related to the safeguarding of the quality
image in the Building Solutions - Europe's operations and products fell due
during the reporting period. Accurately targeted cost savings had a positive
impact on the operating profit of the North American business.
Operating profit by segment (April-June):
M€ 4-6/2011 4-6/2010 Change
-------------------------------------------------------------------
Building Solutions, Europe 13.9 16.4 -14.7%
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Building Solutions, North America 2.7 2.0 30.0%
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(Building Solutions, North America, US$ 3.8 2.7 40.7%)
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Infrastructure Solutions 1.7 3.1 -45.2%
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Other -2.6 -2.7 6.8%
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Eliminations -0.2 0.0
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Total 15.5 18.8 -17.4%
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Profit before taxes for April-June totalled €13.5 (15.5) million. The influence
of taxes on profits was at €4.5 million while the amount of taxes in the
comparison period was €4.7 million. Profit for the second quarter amounted to
€9.0 (10.8) million.
January-June operating profit was €18.7 (20.3) million, down €1.6 million from
the comparison period. Profitability, or operating margin, was 4.7 per cent, as
against 5.6 per cent year-on-year. January-June earnings per share totalled
€0.15 (0.12), both basic and diluted. Equity per share was €3.00 (3.30), basic
and diluted.
Operating profit by segment (January-June):
M€ 1-6/2011 1-6/2010 Change
----------------------------------------------------------------------
Building Solutions - Europe 20.5 25.4 -19.3%
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Building Solutions - North America 3.4 0.2 +2,039%
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(Building Solutions - North America, US$ 4.8 0.2 +2,188%)
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Infrastructure Solutions -2.3 -0.9 -143.0%
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Other -3.7 -4.6 21.2%
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Eliminations 0.8 0.2
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Total 18.7 20.3 -7.8%
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Investments and financing
During the reporting period, investment targets mainly included maintenance and
improvement operations. The largest single investment was the acquisition of a
50.3 per cent majority stake in the German company Zent-Frenger Gesellschaft
für Gebäudetechnik mbH. The deal was finalised on 11 April. Integrating
Zent-Frenger into Uponor has proceeded well.
Gross investment in January - June came to €9.2 (5.4) million. This was less
than depreciation which amounted to €14.0 (15.0) million. Following the regular
seasonal fluctuations, cash flow from business operations decreased to €-32.4
(-19.0) million.
As markets remain unstable, special attention is being focused on safeguarding
liquidity at a good level. Follow-up of accounts receivable and other actions
to avoid credit risk realisations are being actively continued.
The Group's funding structure was reformed when two convertible bonds totalling
€100 million were issued in June. The amount of the five-year floating-rate
loan totals €20 million and the amount of the seven-year floating-rate loan
totals €80 million. The purpose of the reform was to extend the financing base
and to prolong maturity. Investors comprised domestic institutions.
Furthermore, an interest rate swap was concluded to transform part of the
floating-rate loan into a fixed-rate loan for four years. Interest rate hedging
was included in hedge accounting starting from the interest rate swap date.
In June, Uponor paid back the €80 million pension contribution borrowed back
from a Finnish pension insurance company. At the time of the payment, €40
million remained. Available bilateral credit limits amounted to €190 million,
none of which was in use at the end of the reporting period. At period end,
€74.5 million was in use of the €150 million from the domestic commercial paper
programme.
The Group's interest-bearing liabilities increased to €150.9 (130.8) million.
The period-end cash and cash equivalents totalled €36.2 (6.8) million. Gearing
rose to 67.7 per cent (54.3 per cent), and remains aligned with the long-term
financial targets.
Key events
The marketing of new products and systems introduced at trade fairs in the
early part of the year were continued. The most important new innovations in
the Building Solutions business included the unique RTM fittings technology. It
has attracted wide customer interest and wholesaler advance orders have
exceeded expectations. The RTM technology represents a completely new type of
compression joint eliminating the need for tools. Another major innovation in
Building Solutions is the PEX installation tool developed in cooperation with a
leading tools manufacturer to facilitate easier handling and faster
installation of Quick & Easy fittings. Both products have contributed to
Uponor's strengthened position as an industry leader and the winning of new
sales channels.
During the second quarter, new products were introduced into Uponor's control
systems portfolio. The most remarkable achievement is a novel control unit for
indoor climate systems enabling efficient and energy saving heating and cooling
control through just the one device. The unit is fully compatible with Uponor's
Dynamic Energy Management (DEM) which was launched last year. The DEM system
was complemented with a wired wall thermostat offered as an alternative to the
wireless model launched last year.
In North America, a pre-assembled technical unit to facilitate a faster
installation of underfloor heating systems was introduced. All necessary
components, excluding the pipes and thermostat, are pre-installed into the unit
at the factory. It not only accelerates the installation process in the
technical room, but also helps to improve installation quality. A new
installation panel accelerating the installation of underfloor heating pipe
loops was also introduced.
The infrastructure solutions offering was also modernised. Uponor's IQ storm
drain pipes introduced in Sweden last winter were successfully introduced in
the Danish markets. New chamber solutions were also launched.
Measures to implement the new customer segmentation model in all
marketing-related activities continued. During the report period, business
group development and marketing organisations were reorganised.
In June, Uponor signed ENCORD's Sustainable Development Charter together with
other industry leaders. ENCORD is the European Network of Construction
Companies for Research and Development and the charter is aimed at promoting
sustainable building and construction in Europe.
Uponor reported its 2010 environmental performance figures as part of the
Investor CDP 2011 survey. Uponor participated in the survey for the first time
last year. In connection with this, the drafting of group-level long-term
sustainability targets to develop operations further was initiated.
In early April, a new distribution centre was officially opened in Móstoles,
Spain. The same building houses a training centre and the headquarters of the
Southern and Western European area. The building is heated and cooled with
Uponor solutions utilising renewable energy sources.
In May, Uponor established a joint venture called Uponor Middle East SAL in
Lebanon to improve sales in the area. In the same month, the Romanian Rep
Office was turned into a subsidiary.
Short-term outlook
2011 started out with careful optimism, but in the second quarter,
uncertainties have re-emerged in the macroeconomic development of Europe, the
USA and Asia. This has had an impact on the investment moods of both consumers
and businesses, slowing down the recovery of housing construction markets that
are otherwise on solid ground. The effects vary between different market areas.
The positive signs observed in the German-speaking countries in the spring
continue to exist, and business development has been favourable. This trend is,
however, expected to slightly slow down towards the end of the year. In the
Nordic countries, demand for building solutions has decreased since the first
quarter, but is expected to remain stable for the next few months. Demand for
infrastructure solutions is also expected to remain at current levels in
Northern Europe. The positive signs observed earlier in Southern and Western
Europe have not been sufficiently strong to stimulate the markets. Furthermore,
with certain countries facing severe financial problems, increases in demand
are not expected. According to construction statistics, a flat development is
anticipated in North America, and the markets are expected to remain close to
the current levels.
The future development of housing and construction markets depends on the
development of the global economy, which might cause significant changes in the
operational preconditions of the company and its customers. Currently,
forecasting any overall lines of development for the economy or world politics
is extremely challenging. Furthermore, Uponor's financial performance may be
affected by several strategic, operational, financial, and hazard risks. A
detailed risk analysis is provided in the company's Annual Report.
The international financial crisis of the past few days may expand and affect
Uponor's business environment and the preconditions of business. Based on the
present situation, the company maintains its full-year guidance:
Organic growth in Uponor's net sales is expected to accelerate from the 2010
level, and operating profit is expected to improve on last year's reported
result. The Group's fixed-asset investments are not expected to exceed
depreciation, and efficient net working capital management measures will help
to retain a good cash flow level.
Uponor Corporation
Board of Directors
For further information, please contact:
Jyri Luomakoski, President and CEO, tel. 020 129 2824
Riitta Palomäki, CFO, tel. 020 129 2822
Tarmo Anttila
Vice President, Communications
Tel. 020 129 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
technically advanced, ecologically sustainable, and safe and reliable to own
and operate. The Group employs approx. 3,200 persons, in 30 countries. In 2010,
Uponor's net sales totalled 750 million euros. Uponor Corporation is listed on
NASDAQ OMX Helsinki in Finland. http://www.uponor.com
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