Uponor - Interim report (Q1 and Q3)

CORRECTION: Interim report Q1/2015: Uponor’s steady progress continues despite weak European trends

CORRECTION: This is a resend of January-March 2015 interim report due to
original file being corrupted. 



Uponor Corporation     Interim report January-March 2015     28 April 2015  
08.00 EET 



Uponor's steady progress continues despite weak European trends

  -- Net sales in January - March totalled €237.1 (230.9) million; up by 2.7% or
     -0.7% excluding non-recurring items and currency translation impact
  -- Operating profit came to €11.3 (4.8) million, a change of 132.9% or 31.1%
     on a like-for-like basis excluding a non-recurring cost of €3.8 million in
     2014
  -- Earnings per share were €0.06 (0.04) Return on investment was 7.2% (3.5%),
     and gearing 46.7% (56.9%)
  -- Cash flow from business operations came to €-22.4 (-18.4) million
  -- Uponor repeats its full-year guidance announced on 12 Feb 2015: The Group's
     net sales and operating profit (excluding any non-recurring items) are
     expected to improve from 2014

(This interim report has been compiled in accordance with the IAS 34 reporting
standards and is unaudited. Figures in the report are for continuing
operations, unless otherwise stated.) 



President and CEO Jyri Luomakoski comments on developments during the reporting
period: 

  -- I am happy to report yet another successful quarter in Building Solutions -
     North America. We have been able to sustain the brisk growth, thanks to
     continued buoyancy in the U.S. residential housing market and our success
     in customer conversion both amongst residential and commercial contractors.
  -- We carried out a strategic review of the total portfolio of Uponor Infra in
     order to define the best synergic fit. As a result, we took the initiative
     and executed two non-core divestments in a timely manner. We have also
     completed the streamlining initiated last year and the results are visible
     in our numbers. With already two improving quarters behind us, the
     management can now focus on developing the core business further.
  -- In contrast to North America, our European business landscape with only a
     few bright spots offers little consolation. In Germany, Europe's largest
     building market, the construction sector remains solid but it has flattened
     or even slowed a bit and has, at least temporarily, decoupled from the
     larger economy, which is doing well and has rebounded from the autumn
     slowdown.


Information on the January - March 2015 interim report bulletin
This document is a condensed version of Uponor's January - March 2015 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 the rounded figures published here. 

Webcast of the results briefing and the presentation
A webcast in English will be broadcast on 28 April at 10:00 a.m. EET.
Connection details are available at http://investors.uponor.com. Questions can
be sent to ir@uponor.com. The recorded webcast can be viewed at
http://investors.uponor.com shortly after publication. The presentation
document will be available at http://investors.uponor.com > News & downloads. 

Next interim results
Uponor Corporation will publish its Q2 interim results on 21 July 2015. During
the silent period from 1 to 21 July, Uponor will not comment on market
prospects or factors affecting business and performance. 



Markets

In the first quarter of 2015 economic development in Uponor's core geographical
markets was characterised by continued weakness in Europe and sustained healthy
development in North America, the U.S. in particular. International concerns,
such as the geopolitical crisis in Ukraine and the economic challenges in the
Euro area, continued to disturb market conditions in many parts of Europe. In
addition, the dynamics around the lower price of oil had a negative influence
on the progress of several economies, in particular Canada, Norway and Russia,
to name a few. 

There were fewer weather-related influencers than in the first quarter of 2014.
While North America did suffer from a lengthy period of severe cold in the
first two months of the year, resulting in business slowing down, the European
countries faced a rather normal winter. 

In the Nordic countries, construction activity in Sweden sustained much of its
earlier liveliness. Meanwhile, the Norwegian market, influenced by declining
oil revenue, showed a weakening development, which was also the case with
Finland. Contradicting the general trend, Denmark made some gains, although
from a very low base. 

In Central Europe, the German building market that had lost some of its
strength in the latter half of 2014 continued like that in the first quarter
too, in stark contrast to the booming general economic environment in the
country. The building activity was mostly driven by new residential building.
The renovation market continued to be subdued as it was lacking drivers in the
form of high energy costs or public incentives. Starting at a low level after
the lengthy decline, activity in the Netherlands was developing positively
while Austria and Switzerland continued to be rather soft. 

The Eastern European markets were affected by the geopolitical tension in the
region. The biggest impact was felt in Russia, where demand started to slow
down clearly in the first quarter. Ignoring the general trend, demand in the
Baltic countries continued to grow briskly. 

Amongst the South European markets, construction in the UK was slowing, with
the exception of the non-residential segments of the market. Most other
national markets in the region have stabilised at low levels. A notable
exception is France, where the market deteriorated further. 

In North America, the gradual, broad-based recovery continued in the U.S.
despite another cold start to the year, which had an adverse impact on housing
starts in both countries. The Canadian residential segment remained reasonably
healthy, while the non-residential segment has been softening. 

In terms of infrastructure solutions demand, the markets were very much as in
the first quarter of last year. In the Nordic countries, demand in Sweden
remained positive, while Denmark and Norway were more hesitant. A clear
contrast was Finland, whose market deteriorated even further from the weak
comparable period. The largest international market, Canada, was positive
overall as last year. 


Net sales

The Group's consolidated net sales reached €237.1 (230.9) million, up 2.7%. In
comparable terms, adjusted for the divestment of the Thai infrastructure
business and currency rate impact, the development was flat at -0.7%. 

The translation impact of currencies on net sales, compared to the first
quarter of 2014, and mainly related to the USD, was considerable, boosting net
sales by €9.9 million, or 4.4%. The impact makes a notable variance in Building
Solutions - North America's reported Euro-based net sales. 

Thus, Building Solutions - North America reported a growth of 40.6% in euro.
Growth in local currency also stayed robust at 13.9%, reflecting the continued
favourable business environment, especially in the U.S., while the business in
Canada declined. The fact that Uponor offers products for the growing
renovation and remodelling market supported growth. 

Building Solutions - Europe continued to face headwinds in the European markets
and its net sales declined. This trend was mainly driven by weaker demand in
certain key markets, such as in the Nordic countries and Germany, and also in
Russia where the construction market clearly started to decline towards the end
of the quarter. In Germany, much of the drop from prior year was attributable
to order shipments being delayed till April on account of the transition of the
warehousing operations to the new distribution centre in March. 

Similarly, Uponor Infra faced headwinds in its European markets, and net sales
for the quarter declined despite the robust growth in North American
operations. The drop in reported net sales compares to the divestment of the
Thai business effective on 1 March 2015. 

Breakdown of net sales by segment (January - March):

M€                                         1-3/   1-3/  Change
                                           2015   2014        
--------------------------------------------------------------
--------------------------------------------------------------
Building Solutions - Europe               112.6  120.9   -6.8%
Building Solutions - North America         56.9   40.5   40.6%
(Building Solutions - North America (M$)   63.2   55.5  13.9%)
Uponor Infra                               68.3   70.8   -3.6%
Eliminations                               -0.7   -1.3        
--------------------------------------------------------------
--------------------------------------------------------------
Total                                     237.1  230.9    2.7%



Results and profitability

The positive trend in gross profit was supported by a favourable input cost
environment in the first two months of the quarter, influencing the
infrastructure business in particular. The trend, however, turned rapidly in
March driven by a sudden shortage in certain plastic raw materials. 

Uponor's consolidated operating profit for continuing operations in the first
quarter of 2015 came to €11.3 (4.8) million, representing a change of 132.9%
year-on-year. On a like-for-like basis, excluding any non-recurring items,
operating profit was €11.3 (8.6) million, up 31.1%. The first quarter 2014
included a non-recurring item of €3.8 million as a provision for the central
European distribution centre relocation. Profitability, as measured by
operating profit margin, more than doubled to 4.8% from the 2.1% reported a
year ago. 

Building Solutions - Europe's reported operating profit grew modestly but,
excluding the non-recurring item in the first quarter 2014, there was a drop in
profit. This was largely driven by plummeting net sales in key markets. The
negative trend was most apparent in Germany, where increasing competition,
commoditisation of certain product groups as well as increasing share of
project business reduced margins. The decline in sales evidenced in Russia
became even more prominent due to currency translation, influencing numbers
reported on segment level. 

Despite the adverse impact of the Canadian currency, Building Solutions - North
America's operating profit continued to grow steadily, supported by efficiency
improvement measures and tight cost management. Although carefully managed,
expenses grew somewhat in pace with business volume growth. 

Uponor Infra's operating profit improved clearly as a result of the
restructuring measures and favourable input cost influence, but remained
negative on account of low volumes. Performance improved in the North American
operations, in particular, on account of higher sales but, due to the
weaker-margin product mix over there, it was not enough to compensate for the
drop in the Nordic countries. 

Expenses at €74.6 (73.5) million increased by €1.1 million. Dispatching and
warehousing costs remained on prior year level excluding the non-recurring cost
of €3.0 million in the first quarter last year. Sales and marketing costs
increased by €3.2 million, mostly driven by Building Solutions - North America
whose influence was inflated by the dollar-to-euro translation. 

Profit before taxes for January - March totalled €6.3 (2.7) million. The effect
of taxes on profits was €2.3 million, compared to €0.9 million in the first
quarter of 2014. The estimated tax rate for the full year is 37.0%, compared to
35.5% at year-end, the increase coming from Estonian income tax arising from
dividends to the parent company in 2015. 

Profit for the first quarter of 2015 amounted to €4.0 (1.8) million.

Breakdown of operating profit by segment (January - March):

M€                                        1-3/  1-3/  Change
                                          2015  2014        
------------------------------------------------------------
------------------------------------------------------------
Building Solutions - Europe                6.1   5.7    7.6%
Building Solutions - North America         8.1   4.4   80.8%
(Building Solutions - North America (M$)   8.9   6.1  46.4%)
Uponor Infra                              -1.3  -4.2   68.1%
Others                                    -1.3  -0.8        
Eliminations                              -0.3  -0.3        
------------------------------------------------------------
------------------------------------------------------------
Total                                     11.3   4.8  132.9%



Key events

A new distribution centre in Hassfurt, southern Germany, close to the main
manufacturing operations, was opened for business in March. The distribution
operations in Wettringen, north-western Germany, were shut down at the same
time. Due to optimised logistics and more flexible human resourcing
arrangements, Uponor expects to achieve €2 million savings annually from the
second quarter 2015 onwards. 

On 23 February, Uponor announced that its U.S. subsidiary, Uponor, Inc. is
expanding its manufacturing facility in Apple Valley, Minnesota with completion
expected by December 2015. The €16 million investment will be mostly used
toward expansion of an additional 8,175 m2 of manufacturing and office space,
including manufacturing equipment that is required for capacity needs in the
near-term. 

On 25 February, Uponor announced that its majority-held subsidiary Uponor Infra
Oy sold its majority shareholding of 65.99% of the shares in Wiik & Hoeglund
PLC, a company listed on the stock exchange of Thailand. Uponor Infra also
signed a license agreement with the buyers whereby Wiik & Hoeglund PLC was
granted a license for Uponor Infra's proprietary Weholite technology. The net
sales of the divested business amounted to €23 million in 2014, and it employed
210 staff. Uponor Infra Oy made a decision to withdraw from the business in
accordance with its strategy to focus on markets where it can command a strong
market position and achieve operational synergies. 

Furthermore, on 30 March it was announced that Uponor Infra Oy, for the same
reasons, divested its fully owned Finnish subsidiary, Extron Engineering Oy, a
specialist in the business of designing and manufacturing machinery for the
plastic products industry. The net sales of the divested business in 2014
amounted to €5.6 million, and it employed 19 staff. Uponor Infra will also in
the future continue to license and sell certain technologies relevant to the
infrastructure business. 

On 25 March, Uponor established a captive insurance company, Uponor Insurance
Ltd, a fully-owned subsidiary of Uponor Corporation. With the new company,
Uponor aims to improve its management of Uponor Group's global liability
programmes and gain access to comprehensive insurance coverage under favourable
terms. The domicile of Uponor Insurance Ltd is Guernsey, which has a tax treaty
in force with Finland. The company thus pays its taxes to Finland, in
accordance with domestic Finnish taxation regulations. 



Short-term outlook

The near-term economic outlook in Uponor's core geographical markets does not
contain any noteworthy changes comparing to the outlook given in February. The
scenario of the North American economies developing healthily and Europe,
overall, continuing rather flat remains more or less unchanged. 

Customer demand in the building and construction markets is expected to follow
the general economic trends. In Europe, the demand drivers in building and
construction remain weak, while in North America growth is likely to continue,
although at a somewhat slower pace than in the past few quarters. 

The supply chain environment in the plastic products industries, in Europe in
particular, is somewhat disturbed by an acute shortage of certain key raw
materials, which is putting pressure on input prices and affecting the
industry's ability to serve customer orders. This trend is expected to continue
into the foreseeable future, thus curbing business at the start of the high
season. Uponor is actively managing the situation to alleviate any customer
concerns but this unforeseen trend may still impact Uponor's infrastructure
solution business, in particular. 

Uponor repeats its guidance for the year 2015, announced on 12 February 2015:  
The Group's net sales and operating profit (excluding any non-recurring items)
are expected to improve from 2014. 

Uponor's financial performance may be affected by a range of strategic,
operational, financial, legal, political and hazard risks. A more detailed risk
analysis is provided in the section ‘Key risks associated with business' in the
Financial Statements 2014. 



Uponor Corporation
Board of Directors



For further information, please contact:
Jyri Luomakoski, President and CEO, tel. +358 20 129 2824
Riitta Palomäki, CFO, tel. +358 20 129 2822





Tarmo Anttila
Vice President, Communications
Tel. +358 20 129 2852



DISTRIBUTION:
NASDAQ Helsinki
Media
www.uponor.com



Uponor is a leading international provider of plumbing and indoor climate
solutions for residential and commercial building markets across Europe and
North America. In Northern Europe, Uponor is also a prominent supplier of
infrastructure pipe systems. The Group employs approx. 3,800 persons, in 30
countries. In 2014, Uponor's net sales exceeded €1 billion. Uponor Corporation
is listed on NASDAQ Helsinki in Finland. www.uponor.com

Attachments:

Uponor_interim_results_Q1_2015.pdf