2014-10-29 07:00:01 CET
2014-10-29 07:00:04 CET
REGULATED INFORMATION
Uponor - Interim report (Q1 and Q3)
Interim report Q3/2014: Uponor reports steady performance, continues to grow in North America
Uponor Corporation Interim report January-September 2014 29 October
2014 08.00 EET
Interim report Q3/2014: Uponor reports steady performance, continues to grow in
North America
• July-September net sales totalled €277.0 (279.3) million, representing a
change of -0.9%
• July-September operating profit, at €29.2 (28.2) million, up by 3.8%
• January-September's net sales came to €772.4 (668.4) million, for a change of
15.6%
• January-September operating profit, at €51.6 (54.0) million, down by 4.4%,
burdened by €3.4 million in non-recurring items
• Earnings per share in January-September amounted to €0.38 (0.41)
• January-September return on investment was 14.8% (17.9%) and gearing 41.7
(45.8)
• For January-September, cash flow from business operations was €19.3 (41.5)
million
• Uponor repeats its guidance for the year 2014 announced on 14 February 2014:
the Group's net sales and operating profit (excluding any non recurring items)
are expected to improve from 2013
(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 quarter:
• Our largest segment, Building Solutions - Europe, reported stable performance
despite lower net sales, thereby proving a good example of determined execution
in a soft and volatile market. This shows that the cost savings and efficiency
measures, some of which are still being implemented, are bearing fruit.
• The development in Building Solutions - North America continues to be highly
favourable, and I am very happy with the fact that we have been able to meet
the growing demand successfully while simultaneously adding to our
manufacturing capacity. A key target in our planning for the future is to
secure capacity that responds to future growth in demand.
• Uponor Infra completed the collaborative negotiations with personnel in
Finland, the segment's single largest market, and announced a plan for
adjusting operations to meet the challenge of the contracting market and
implementing savings to bring profitability back to an acceptable level.
Information on the January-September 2014 interim report bulletin
This document is a condensed version of Uponor's January-September 2014 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 have been calculated from the exact figures and
not from the rounded figures published here.
Webcast and presentation
A webcast, in English, of the results briefing will be broadcast on 29 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.
The next results report
Uponor Corporation will publish its financial results for the full year 2014 on
12 February 2015. During the silent period from 1 January to 12 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
The overall demand situation in the building and construction markets in the
third quarter - with the exception of the U.S. - was subdued and much in line
with the developments in the second quarter. The U.S. building market continued
its steady growth, although uncertainties related to the strength of the
nation's economic improve¬ment did not fully disappear. In Europe, a slower
than anticipated economic recovery prevailed in most markets, in clear contrast
to the early part of the year, in particular.
In Europe, demand in Building Solutions - Europe's markets remained flat or
showing modest revival, much as in the previous quarter. In Central Europe, the
German market faced an unexpectedly weak summer, which has been attributed
partly to the taking of winter holidays that had been postponed during the
lively spring period, partly to diminishing domestic and export demand. Despite
increasing customer demand toward the end of the quarter, the strength of the
German economy abated from that of the first half of the year. South-west
European markets remained weak, although positive signals were noted in Italy
and Spain. The U.K. market maintained a satisfactory level of demand. As for
the Nordic region, a positive demand pattern prevailed in Sweden, while demand
weakened in Norway and in Finland and stayed on a low level in Denmark. In
Eastern Europe, the lively demand that had prevailed in Russia until the end of
the second quarter started to weaken in keeping with the region's troubled
political and economic environment during the third quarter. The repercussions
were felt in other Eastern and Central European markets.
In North America, indicators reflecting the strength of the economic recovery
in the U.S. have remained somewhat volatile yet clearly indicating that the
nation's growth remains on a firm track. The reviving economy has supported
home sales, thereby fuelling growth in the building and construction markets.
The trends in Canadian building markets have stayed rather more flat.
Demand for infrastructure solutions has mirrored general economic development
in all of Uponor's key infrastructure markets - i.e., the markets in Northern
Europe and Canada. Accordingly, demand has stayed rather flat in most markets,
with the declining Finnish market standing out as an exception to the general
trend.
Net sales
Uponor's continuing operations reported net sales of €277.0 (279.3) million for
the third quarter, thus reporting a decline of 0.9%. Excluding the impact of
currency changes, the change was a modestly positive 0.4%.
Building Solutions - Europe reported weakening year-on-year development of net
sales from 2013 figures, affected mainly by the slower than anticipated
economic recovery in Europe. Apart from the brisk growth in net sales in the
Netherlands and Russia, and to some extent also in Spain, flat or declining
trend lines characterised most other markets in comparison to the third quarter
of 2013. In particular, sales in France continued to suffer from the loss of
business in the final quarter of 2013 as a result of a temporary cancellation
of a product approval simultaneously with the market declining rapidly.
In Building Solutions - North America, year-on-year growth of net sales
remained strong - in fact, slightly stronger than that from 2012 to 2013, in
local currency. Most of this growth is due to the advances made in the U.S.,
especially in the country's Southeast and West regions, but business in Canada
grew too, even if only modestly. In both countries, a key driver for growth was
plumbing solutions, the large-dimension offering in particular.
Uponor Infra reported a drop in net sales, influenced mainly by weak European
business, particularly in Finland and Poland. The markets outside Europe,
mainly in North America, posted growth.
Breakdown of net sales by segment (July-September):
M€ 7-9/ 7-9/ Change
2014 2013
--------------------------------------------------------------
--------------------------------------------------------------
Building Solutions - Europe 123.5 129.3 -4.5%
Building Solutions - North America 54.7 46.9 16.7%
(Building Solutions - North America (M$) 71.8 62.4 15.1%)
Uponor Infra 100.3 105.1 -4.6%
Eliminations -1.5 -2.0
--------------------------------------------------------------
--------------------------------------------------------------
Total 277.0 279.3 -0.9%
Uponor's January-September net sales reached €772.4 (668.4) million, for growth
of 15.6%, the increase coming for the most part from the establishment of the
joint-venture company Uponor Infra, which started operations on 1 July 2013.
The growth was also driven by the sustained double-digit-percentage growth in
North America in 2014. In comparison to 2013, including the combined historic
figures for Uponor Infra, the growth was 0.8%, or 3.3% when adjusted for
currency changes. The currency impact on year to-date net sales, totalling
-€19.2 million, was mainly from the CAD, SEK, USD and RUB.
Breakdown of net sales by segment (January-September):
M€ 1-9/ 1-9/ Change
2014 2013
--------------------------------------------------------------
--------------------------------------------------------------
Building Solutions - Europe 366.4 367.5 -0.3%
Building Solutions - North America 144.7 127.9 13.2%
(Building Solutions - North America (M$) 195.2 168.6 15.8%)
Uponor Infra 266.4 177.7 49.9%
Eliminations -5.1 -4.7
--------------------------------------------------------------
--------------------------------------------------------------
Total 772.4 668.4 15.6%
Results and profitability
Uponor's operating profit in the third quarter came to €29.2 (28.2) million,
for a year-on-year increase of 3.8%. Profitability measured in terms of the
operating profit margin reached 10.5%, from the 10.1% reported a year ago.
Operating profit excluding any non-recurring items rose from €29.2 to €29.3
million in the quarter under review.
The positive development was driven by a performance improvement in Building
Solutions - North America and a modest gain also in Building Solutions -
Europe, the two of which, when combined, offset the weaker performance of
Uponor Infra.
Building Solutions - Europe's operating profit was supported, in particular, by
improving performance in the Eastern European and export markets, alongside
performance in the Nordic countries, while continental European markets, for
the most part, stayed close to the previous year's performance levels.
Building Solutions - North America's performance developed favourably, thanks
to higher net sales, and was supported by efficient overhead management. The
operating profit was adversely affected by the weakening of Canadian currency
and higher plastic resin prices.
Uponor Infra's operating profit was hit severely by weak volume development in
several markets. Cost savings from the restructuring measures initiated in
autumn 2013 are proceeding according to plan but they were not enough to bridge
the gap in operating profit. The net impact of all non-recurring items for the
third quarter, related to the 2014 Finnish restructuring initiatives as well as
machinery relocation and reassembly expenses, including the proceeds from the
divestment of the Ulvila premises, was a cost of €0.1 million.
Breakdown of operating profit by segment (July-September):
M€ 7-9/ 7-9/ Change
2014 2013
------------------------------------------------------------
------------------------------------------------------------
Building Solutions - Europe 15.0 14.6 2.4%
Building Solutions - North America 9.2 7.7 19.1%
(Building Solutions - North America (M$) 12.1 10.2 18.0%)
Uponor Infra 4.2 6.1 -30.3%
Others 0.5 0.2
Eliminations 0.3 -0.4
------------------------------------------------------------
------------------------------------------------------------
Total 29.2 28.2 3.8%
Profit before taxes for July-September totalled €27.8 (26.4) million. The
effect of taxes on profits was €11.0 million, while the amount of taxes in the
comparison period was €8.7 million. Profit for the third quarter came to €16.8
(17.7) million.
Operating profit for January-September was €51.6 (54.0) million, down 4.4% from
the comparison period. When non-recurring items are excluded, the operating
profit was €55.0 (55.1) million, a decrease of 0.2%. The operating profit
margin reached 6.7%, while the equivalent figure for 2013 was 8.1%. Currency
exchange rates had a €1.7 million translation impact on the operating profit
for January-September.
Breakdown of operating profit by segment (January-September):
M€ 1-9/ 1-9/ Change
2014 2013
------------------------------------------------------------
------------------------------------------------------------
Building Solutions - Europe 30.3 32.4 -6.8%
Building Solutions - North America 22.2 18.9 17.4%
(Building Solutions - North America (M$) 29.9 24.9 20.1%)
Uponor Infra 0.4 6.7 -93.8%
Others -1.0 -2.9
Eliminations -0.3 -1.1
------------------------------------------------------------
------------------------------------------------------------
Total 51.6 54.0 -4.4%
Earnings per share for January-September totalled €0.38 (0.41), both basic and
diluted. Equity per share was €3.10 (3.06), and diluted €3.09 (3.06).
Investments and financing
During the reporting period, Uponor continued to carry out smaller-scale
technology investments to support its growth strategies. Among these were
new-generation seamless aluminium composite pipe and PEX pipe extrusion lines,
both due to contribute to capacity increases in Europe from early 2015 onward.
In the U.S., the announced investments to increase manufacturing capacity were
completed. In addition, investments mainly targeted at maintenance and
development were made group-wide.
Gross investments in fixed assets in January-September came to €21.4 million,
exceeding the previous year's level of 19.1 million. This was below
depreciation, which amounted to €27.0 (23.9) million.
The cash flow from business operations in January-September came to €19.3
million, from €41.5 million in 2013. The difference is mainly due to the lower
result and higher seasonality of net working capital influenced by the
consolidation of Uponor Infra after its establishment on 1 July 2013.
Uponor continues to take care to keep liquidity at a healthy level. The risk of
bad debt has grown in Europe, due in particular to the protracted economic
slowdown. To manage this risk, Uponor is actively following up on trade
receivables, among other elements.
In 2014, Uponor has renewed its funding programmes, with a €50 million
revolving credit facility agreement signed in April as the final step in this
process. The main funding programmes in place on 30 September 2014 included an
€80 million bond maturing in 2018 and a €20 million bond maturing in 2016.
Uponor's available committed bilateral credit facilities totalled €200 million,
with none of this amount in use at the end of the reporting period. The amount
of commercial papers issued under the €150 million domestic commercial-paper
programme was zero at period-end.
The Group's solvency ratio improved to 42.4% (41.2%). Net interest-bearing
liabilities declined to €122.9 (135.2) million. The period-end cash balance
totalled €21.2 (25.0) million. Gearing fell to 41.7% (45.8%).
Short-term outlook
Demand in the building market has become increasingly volatile in its
month-to-month developments, and visibility of the future remains exceptionally
low. Reliably forecasting developments is, therefore, particularly challenging.
Uponor does not expect any major changes to the business environment going
forward. Demand in European building solutions markets, which represent very
differing development trends, is expected to remain flat or modestly growing
overall, thus mirroring developments in the second and third quarter, although
with normal seasonal fluctuations. The biggest concern is related to the
strength of the German building and construction markets, whose downside risks
have been growing recently, influenced mainly by general European trends and
the geopolitical turbulence in the eastern part of Europe especially. In North
America, healthy recovery of the markets is expected to continue, both in the
U.S. and in Canada. In terms of infra¬structure solutions, the market in
Finland is anticipated to remain challenging, while the outlook in other
markets is more positive.
Accordingly, Uponor remains prepared for extensive protraction of the current
low to moderate activity levels, with limited expectations of market growth.
Uponor repeats its guidance for the year 2014, announced on 14 February 2014:
The Group's net sales and operating profit (excluding any non-recurring items)
are expected to improve from 2013.
Uponor's financial performance may be affected by various strategic,
operational, financial, legal, political, and hazard risks. A more detailed
risk analysis is provided in the ‘Key risks associated with business' section
of the 2013 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
DISTRIBUTION:
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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. The Group employs approx. 4,100 persons, in 30
countries. In 2013, Uponor's net sales exceeded €900 million. Uponor
Corporation is listed on NASDAQ OMX Helsinki in Finland. http://www.uponor.com.
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