2013-10-25 07:00:00 CEST
2013-10-25 07:00:03 CEST
REGULATED INFORMATION
Uponor - Interim report (Q1 and Q3)
Interim report Q3/2013: Uponor’s Q3 net sales grows driven by new infrastructure joint-venture and continued U.S. growth
Uponor Corporation Interim report Jan - Sept 2013 25 October
2013 08.00 EET
Interim report Q3/2013: Uponor's Q3 net sales grows driven by new
infrastructure joint-venture and continued U.S. growth
• Demand in North America remained healthy, mixed developments in Europe
• The joint-venture company Uponor Infra included in reporting for the first
time
• Group organic growth for the quarter at 2.3%, up from April-June
• Group organic operating profit growth for the quarter at 16.6%
• July-September reported net sales totalled €279.3 (211.3) million, a change
of 32.2%
• July-September reported operating profit was €28.2 (22.1) million, up by 27.5
%, burdened by €1.1 million Uponor Infra -related integration costs
• January-September reported net sales totalled €668.4 (621.9) million, a
change of 7.5%
• January-September reported operating profit was €54.0 (47.5) million, up 13.6%
• January-September earnings per share amounted to €0.41 (0.35)
• January-September return on investment was 17.9% (18.2%), and gearing 45.8
(58.3)
• January-September cash flow from business operations came to €41.5 (2.1)
million
• Uponor cancelled its full year guidance on 1 July and plans to issue new
guidance in February 2014
(This interim report has been compiled in accordance with the IAS 34 reporting
standard, and is unaudited. The figures in the report apply to continuing
operations unless otherwise stated. ‘Reporting period' refers to
January-September.)
President and CEO Jyri Luomakoski comments on developments during the reporting
period:
• Uponor Infra's integration is proceeding well and I am delighted with the
motivation our personnel are showing in finding new ways to move the business
forward. I firmly believe that Uponor Infra will become a key asset in
Uponor's future development.
• We have continued to enjoy a good business environment in North America. In
the third quarter, some other key markets such as Germany and Russia showed
promising development.
• In Europe, despite flat net sales development, our focus on value-adding
activities enabled us to improve our operating profit year-on-year. In North
America, we are witnessing steady growth in the U.S. as more and more
residential and commercial building projects utilise Uponor's advanced and
sustainable technologies. Our ongoing capacity expansion investment shows our
commitment to satisfy growing demand there.
Information on the January - September 2013 interim report bulletin
This document is a condensed version of Uponor's January-September 2013 interim
report bulletin, which is attached to this release. It is also available on the
company website.
Until 30 June 2013, Uponor's infrastructure business was consolidated in Uponor
Corporation as a separate segment, Infrastructure Solutions. From 1 July 2013
onwards, the segment is called Uponor Infra.
The figures in brackets are the reference figures for the equivalent period in
the previous year. Figures refer to continuing operations, unless otherwise
stated. Any change percentages were calculated from the exact figures and not
from the rounded figures published here.
Webcast and the presentation
A webcast, in English, of the results briefing will be broadcast on 25 Oct at
10:00 a.m. EET. Connection details are available at www.uponor.com > Investors.
Questions can be sent in advance to ir@uponor.com. The recorded webcast can be
viewed at www.uponor.com > Investors shortly after publishing. The presentation
document will be available at www.uponor.com > Investors > News & downloads.
Next results report
Uponor Corporation will publish its financial results for 2013 on 14 February
2014. During the silent period from 1 January to 14 February, Uponor will not
comment on market prospects or factors affecting business and performance, nor
will the company engage in any discussion of events or trends related to the
reporting period or the current fiscal period.
Markets
Development of the market environment in Uponor's key geographic regions i.e.
Europe and North America showed a mixed trend in the third quarter of 2013
compared to the second quarter while showing a mainly improving trend in
comparison to the third quarter in 2012.
In Europe, building and construction market sentiment stabilised in several
countries after the weaker trends witnessed in the spring. The main reason for
this was growing confidence in the recovery of the European economies. It
stimulated building investments in some of the larger economies, in particular.
Despite these positive developments, several markets have yet to get back on
track.
With a view to specific market segments, commercial and public building
remained flat or even weakened in practically all countries throughout Europe,
whereas residential building benefited from improved consumer sentiment, due to
gradually reviving confidence in the economy.
In Central Europe, German building solutions demand developed steadily in the
third quarter in clear contrast to the weaker sentiments characterising the
first and second quarters of 2013, and offsetting doubts in the strength of the
German economy. Other Central European markets showed less strength, with the
Benelux building markets, in particular, remaining subdued. The Central
European region is still affected by the long winter period, which will
negatively impact on annual building and construction output for 2013. In the
Nordic region, Finland and, to some extent, Sweden declined somewhat compared
to the previous year. The Danish market remained subdued while Norway continued
to show a more lively activity. In Southwest Europe, a positive pick-up in the
overall building market was witnessed in the UK, although this was not yet
visible in Uponor's application areas. The other large markets, France, Spain
and Italy, continued to be soft. In Eastern Europe, demand in the bigger
markets of Russia, Poland and also the Baltic countries remained rather stable
but several other markets lost their impetus.
The overall competitive environment in the European building solutions markets
was characterised by overcapacity, increasing price competition, more private
labels attempting to capture market share as well as several smaller brands
increasingly fighting for survival.
North American demand for building solutions continued to be brisk. Although
growth in the housing market remained healthy in the U.S., it has slowed
somewhat from the previous quarters due to higher mortgage interest rates and
overall concerns about the country's economy. The softening of the Canadian
housing market continued as expected, largely for demographic reasons and due
to a reduction in earlier pent-up demand.
The infrastructure solutions markets followed a similar pattern to previous
quarters, with demand remaining at a rather low level. The weak positive
signals noted in Sweden, Denmark and Canada in comparison to the previous year
were more or less counterbalanced by overcapacity, rising imports and the
resulting fierce competition.
Net sales
Uponor's continuing operations reported net sales of €279.3 (211.3) million,
showing a growth of 32.2 per cent, mainly from the inclusion of the new Uponor
Infra businesses since July 2013 and from the continued growth of business in
the U.S. Adjusting for the establishment of Uponor Infra, organic growth was
2.3 per cent against the third quarter of the previous year.
Building Solutions - Europe reported modestly negative net sales development at
-0.5 per cent. Mainly driven by weak markets in Central and Southwest Europe,
this hides the fact that a number of national markets, including Germany,
Russia and Denmark, showed a rebound in net sales in the third quarter, while
there was a decline in some others, such as Norway, the UK and Spain.
Building Solutions - North America continued on its growth path, driven by the
pick-up in residential building demand in the U.S. and due to Uponor's
increased penetration in selected segments of the commercial market. Net sales
in Canada declined somewhat, reflecting market developments.
Uponor Infra reported net sales of €105.1 million, up by €64.8 million from the
pre-merger numbers due to the merged infrastructure solutions businesses.
However, net sales was slightly behind the combined net sales of the businesses
in 2012, in a predominantly stagnant market.
Breakdown of net sales by segment (July-September):
M€ 7-9/ 7-9/ Change
2013 2012
--------------------------------------------------------------
--------------------------------------------------------------
Building Solutions - Europe 129.3 129.9 -0.5%
Building Solutions - North America 46.9 43.1 8.8%
(Building Solutions - North America (M$) 62.4 54.5 14.5%)
Uponor Infra 105.1 40.3 160.8%
Eliminations -2.0 -2.0
--------------------------------------------------------------
--------------------------------------------------------------
Total 279.3 211.3 32.2%
Uponor's January - September net sales reached €668.4 (621.9) million, an
increase of 7.5 per cent, or -1.4 per cent in organic terms, as a result of the
weaker first and second quarters in the current year. When adjusted for the
currency effect, the Group's organic growth in the January-September period
would have been -0.4 per cent.
Breakdown of net sales by segment (January-September):
M€ 1-9/ 1-9/ Change
2013 2012
--------------------------------------------------------------
--------------------------------------------------------------
Building Solutions - Europe 367.5 396.1 -7.2%
Building Solutions - North America 127.9 113.0 13.2%
(Building Solutions - North America (M$) 168.6 145.6 15.8%)
Uponor Infra 177.7 117.6 51.2%
Eliminations -4.7 -4.8
--------------------------------------------------------------
--------------------------------------------------------------
Total 668.4 621.9 7.5%
Results and profitability
Uponor's operating profit in the third quarter totalled €28.2 (22.1) million,
up by 27.5 per cent in year-on-year terms, mainly reflecting the inclusion of
the new infrastructure solutions businesses. Organically, excluding the the new
Uponor Infra businesses, growth came to 16.6 per cent. Profitability measured
in terms of the operating profit margin reached 10.1 per cent, or organically
11.9 per cent, from the 10.4 per cent reported a year ago.
This positive performance development was driven by a stable input cost
environment, efficient cost and overhead management, and the leverage effect of
increased volumes. All segments reported improving figures, despite a tough
competitive environment, particularly in Europe.
Uponor Infra's operating profit for the current quarter includes the impact of
the joint-venture company's establishment on 1 July 2013. The segment's
operating profit is burdened by €1.1 million coming from the consolidation in
progress of the Swedish and Danish operations. However, the business was able
to reduce expenses and improve profit margins as a result of an improved
product portfolio in a stable raw material price environment.
Breakdown of operating profit by segment (July-September):
M€ 7-9/ 7-9/ Change
2013 2012
------------------------------------------------------------
------------------------------------------------------------
Building Solutions - Europe 14.6 13.9 5.2%
Building Solutions - North America 7.7 7.5 3.1%
(Building Solutions - North America (M$) 10.2 9.6 7.4%)
Uponor Infra 6.1 2.4 159.5%
Others 0.2 -1.4
Eliminations -0.4 -0.3
------------------------------------------------------------
------------------------------------------------------------
Total 28.2 22.1 27.5%
Profit before taxes for July-September totalled €26.4 (19.5) million. The
effect of taxes on profits was €8.7million, while the amount of taxes in the
comparison period was €7.1 million. Profit for the third quarter came to €17.7
(12.4) million.
Operating profit for January-September was €54.0 (47.5) million, up 13.6 per
cent from the comparison period, mainly due to the inclusion of the new
infrastructure business in the Group from the third quarter onwards. In organic
terms, operating profit rose by 7.4 per cent. Profitability, or the operating
profit margin, reported was 8.1 per cent, with the year-on-year figure coming
to 7.6 per cent. Exchange rates had only a marginal translation impact on the
operating profit for January - September.
Breakdown of operating profit by segment (January-September):
M€ 1-9/ 1-9/ Change
2013 2012
------------------------------------------------------------
------------------------------------------------------------
Building Solutions - Europe 32.4 37.8 -14.1%
Building Solutions - North America 18.9 14.3 32.4%
(Building Solutions - North America (M$) 24.9 18.4 35.5%)
Uponor Infra 6.7 2.6 152.1%
Others -2.9 -6.4
Eliminations -1.1 -0.8
------------------------------------------------------------
------------------------------------------------------------
Total 54.0 47.5 13.6%
Earnings per share for January-September totalled €0.41 (0.35), both basic and
diluted. Equity per share was €3.06 (2.76), basic and diluted.
Investments and financing
The largest ongoing investment is the capacity expansion in the Apple Valley,
Minnesota facility in North America, which is planned to be inaugurated by the
end of 2013. Other investments during the reporting period were mainly targeted
at maintenance and development.
Gross investments in fixed assets in January-September reached €19.1 million,
exceeding the previous year's level of 12.3 million, the increase coming mainly
from Building Solutions - North America. However, this was below depreciation,
which amounted to €23.9 (21.2) million.
Cash flow from business operations in January-September came to €41.5 million,
from €2.1 million in 2012. The 2012 cash flow was burdened by the payment 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. Further
improvements in 2013 came from higher profit and positive cash flow from
financial items.
In order to manage risks related to the difficult business environment, Uponor
is placing a special focus on reducing credit risk related to trade
receivables. Uponor also aims to keep its own liquidity at a high level, while
minimising refinancing risks. The main existing funding programmes on 30
September 2013 included an €80 million bond maturing in 2018 and a €20 million
bond maturing in 2016. Committed bilateral revolving credit facilities,
maturing in 2015, totalled €190 million; none of these back-up facilities were
in use during the period under review. At the period end, €3.0 million of
commercial papers were issued under the €150 million domestic commercial paper
programme.
The Group's solvency ratio improved to 41.2 (37.5) per cent. Interest-bearing
liabilities amounted to €135.2 (117.7) million. The period-end cash balance
totalled €25.0 (8.7) million. Gearing decreased to 45.8 (58.3) per cent.
Short-term outlook
The global macro-economic outlook continues to be challenging after several
years of uncertainty. Uponor is looking towards the future with cautious
optimism and forecasts the markets to develop in a rather stable manner for the
near-term.
Building markets within the European region are slowly beginning to recover
from the economic crises. More recent trends have been somewhat mixed, with the
largest and most dynamic economies taking the lead while several other markets
continue to suffer. Uponor estimates that this trend will continue, influencing
demand for both building and infrastructure solutions.
In North America, the building markets have already recovered a great deal of
ground. Demand, particularly in the residential building sector, is expected to
remain rather healthy, although there are risks related to the strength of the
U.S. economic recovery. The Canadian building and infrastructure markets are
expected to remain fairly stable in the short term.
With the introduction and implementation of the new European organisation and
the establishment on 1 July 2013 of the new joint-venture company, Uponor
Infra, Uponor is actively taking advantage of the related momentum to develop
its operations. In this, it aims are greater agility, improved efficiency, and
enhanced customer satisfaction. Uponor will continue to develop its offering
and promote key value propositions in order to grasp existing opportunities,
even in subdued markets, wherever such opportunities arise in renovation and
refurbishment, sustainable low-energy building, and in communities preparing
for extreme weather conditions.
With respect to the economic and business environment, Uponor remains prepared
for a lengthy protraction of the current low-to-moderate activity levels, with
limited expectations of market growth.
The company's management continues to focus on its core businesses,
cost-efficiency and operating leverage, and cash flow. Further actions to
reduce overheads and other costs may become necessary in selected markets, if
the economic outlook remains weak.
Uponor cancelled its guidance on 1 July 2013 due to structural changes arising
from the launch of the new joint venture company, Uponor Infra. New guidance is
to be expected in February 2014, upon the publication of the 2013 Financial
Statements.
As always, 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
2012 Financial Statements.
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. On 1 July 2013, Uponor and KWH Group merged their infrastructure
businesses into a jointly owned company, Uponor Infra, which is a leading
supplier of infrastructure pipe systems in Northern Europe, with wide
operations internationally. In 2012, the Uponor Group employed approx. 3,000
persons in 30 countries and its net sales exceeded €810 million. Uponor
Corporation is listed on NASDAQ OMX Helsinki in Finland. http://www.uponor.com.
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