Uponor financial statements bulletin January-December 2010: Uponor boosts performance in Europe
Uponor Corporation Financial statements bulletin January-December 2010 10 February 2011 8.00 EET
Uponor boosts performance in Europe
- Net sales improved but operating profit declined in October-December year-on-year
- Full-year operating profit reached a major improvement from European building solutions
- Net sales 1-12: €749.2 million (2009: €734.1m), change +2.0%
- Operating profit 1-12: €52.4 million (€41.2m), change +27.0%
- Earning per share at €0.34 (€0.16)
- In 2011, net sales growth is expected to accelerate and operating profit to improve
- The Board’s dividend proposal, €0.55 per share is based on the company’s strong operative cash flow and balance sheet position
President and CEO Jyri Luomakoski comments on the reporting period:
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I am delighted with our improved performance in the European Building Solutions business, which reflects livelier demand in the Nordic countries and, more importantly, the positive results of our business integration and organisational development.
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The biggest disappointments have been subdued demand for building solutions in North America and the development of Infrastructure Solutions, which – in addition to intense competition – was affected by rising raw material prices that could not be fully passed onto sales prices.
- Plastic and metal price trends have been a cause for concern recently, since they can have an impact on both our building solutions and infrastructure solutions businesses. In the current year, we are planning sales price increases, in addition to those already announced or implemented, to compensate for higher material costs.
Information on the financial statements bulletin
This document is a condensed version of Uponor’s 2010 financial statements bulletin, which is attached to this release. It is also available on the company website. We will apply a similar communications procedure in connection with future interim reports.
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 from the results briefing will be broadcast on 10 February at 10:00 am 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 interim results
Uponor Corporation will publish its Q1 interim results on 28 April 2011. During the silent period from 1 April to 27 April, Uponor will not comment on market prospects or factors affecting business and performance.
Interim results October – December 2010
The market situation under the last quarter of 2010 continued much like in the third quarter. The early winter and the cold weather somewhat disturbed building activities particularly in Northern and Central Europe. In spite of that, building solutions demand remained lively, especially in Northern Europe. In North America, building solutions demand remained at a subdued level. No big changes in market demand were recorded in other areas as well.
Net sales
Net sales growth continued brisk in the largest segment, Building Solutions – Europe, largely supported by the lively demand in the Nordic countries. In North America, the trends weakened from the autumn and net sales declined both in euros and in dollar terms. Despite the early onset of winter in the Nordic countries, Infrastructure Solutions managed to record a growth in net sales.
The impact of major currencies on the last quarter net sales was €6.5 million positive.
Breakdown of net sales, October - December:
| M€ | 10-12/2010 | 10-12/2009 | Change |
| Building Solutions – Europe | 123.6 | 115.8 | +6.7% |
| Building Solutions – North America | 26.7 | 28.1 | -5.1% |
| (Building Solutions – North America, M$ | 35.8 | 41.2 | -13.1%) |
| Infrastructure Solutions | 33.4 | 31.6 | +6.1% |
| Eliminations | -2.0 | -1.1 | |
| Group (continuing operations) | 181.7 | 174.4 | +4.1% |
Profits and profitability
The Group’s consolidated operating profit development turned out to be weaker than in the last quarter of 2009, when, among other things, the raw material price development was more stable. This had a particular impact on Infrastructure Solutions, which was also hit by the decline in net sales due to the hard winter and harsh competition.
The operating profit of Building Solutions – Europe was burdened by higher marketing expenses than in the last quarter of 2009. In North America, notable changes in machinery write-downs had an effect.
Breakdown of operating profit, October - December:
| M€ | 10-12/2010 | 10-12/2009 | Change |
| Building Solutions – Europe | 8.8 | 10.2 | -13.4% |
| Building Solutions – North America | 1.0 | 3.2 | -67.5% |
| (Building Solutions – North America, M$ | 1.4 | 4.5 | -69.0%) |
| Infrastructure Solutions | -0.9 | 1.8 | -153.3% |
| Other | -0.5 | -2.8 | |
| Eliminations | 0.2 | -0.1 | |
| Group (continuing operations) | 8.6 | 12.3 | -30.4% |
Financial statements January – December 2010
Markets
In 2010, a clear change was seen in demand in the building construction market, year on year, and in some markets, including large parts of the Nordic region, demand took a strong upward turn. Slight buoyancy was reported in Central Europe – in the German-speaking markets, in particular – while development in the Netherlands, for example, trended downwards. In south-west Europe, total demand continued its decrease – especially so in Spain - while in other large market areas, such as the UK, Italy, and France, the decline in demand seemed to reach its turning point in the year 2010. Despite the high hopes, no increase in demand was detected in North America. This was mainly due to the weak economic situation in the US financing sector, and also a result of consumer uncertainty.
For Uponor's building solutions, the development of the new residential building market in 2010 reflected the overall development of the construction market described above. The same is true for commercial and public building, whose current cycle is following residential building with a slight delay. On a more positive note, renovation and modernisation projects remained at a relatively healthy level in many markets.
Demand for infrastructure solutions was affected by the severe winter conditions in early 2010 and toward the end of the year, and the lack of funding in the public sector, the largest end-customer sector for this segment, further contributed to this situation.
After the restructuring and cuts implemented during the recession, Uponor initiated various projects to promote the growth programmes specified in Uponor's strategy, and the company continued to develop its supply chain and enhance its operational excellence.
Net sales
In 2010, Uponor's net sales from continuing operations reached €749.2 (2009: 734.1) million, up 2.0% year on year. Building Solutions - Europe achieved substantial growth in net sales in Northern Europe while Central Europe declined. In other areas, net sales remained at the previous year's level or improved slightly. Net sales in North America improved when measured in euros but fell slightly when measured in US dollars. Net sales for Infrastructure Solutions decreased because of the severe winter, and as a result of the intense competition.
Fluctuations in foreign currencies, mainly the Swedish krona, the US and Canadian dollars, and the Norwegian krona, increased 2010 net sales by €23.3 million. Without the impact of currencies, net sales would have decreased by 1.0% from 2009.
Net sales by segment for 1 Jan. – 31 Dec. 2010:
| M€ |
1–12 2010 |
1–12 2009 |
Reported change, % |
| Building Solutions -- Europe | 504.4 | 482.2 | +4.6% |
| Building Solutions -- North America | 114.6 | 109.0 | +5.1% |
| (Building Solutions -- North America (M$) | 151.1 | 151.8 | -0.5%) |
| Infrastructure Solutions | 138.3 | 148.1 | -6.5% |
| Eliminations | -8.1 | -5.2 | |
| Group (continuing operations) | 749.2 | 734.1 | +2.0% |
In terms of net sales, the top 10 countries and their respective shares of consolidated net sales were as follows (figures for 2009 in brackets): Germany 16.4% (17.5%), Finland 11.9% (12.1%), USA 11.3% (11.4%), Sweden 10.6% (9.7%), Spain 5.3% (6.0%), Norway 5.0% (4.2%), Italy 4.9% (5.3%), Denmark 4.7% (5.4%), the Netherlands 4.4% (5.2%), and Canada 4.0% (3.5%).
Results
Uponor's consolidated gross profit from continuing operations came to €288.1 (271.1) million, up €17.0 million year on year. Thanks to operational leverage as a result of higher net sales, the gross profit margin improved by 1.5 percentage points, despite higher raw material input costs.
Continuing operations generated an operating profit of €52.4 (€41.2) million, up 27.0% (-19.4%) from the previous year’s level. Profitability improved as the profit margin rose to 7.0% (5.6%) of net sales.
In Building Solutions - Europe, the operating profit rose markedly alongside the growth in net sales. Operating profit improved most significantly in Northern Europe, although units in south‑west Europe and Eastern Europe as well as the International Sales unit also improved their results. Better supply chain efficiency had a positive effect on Uponor's operating profit. As measured in both euros and US dollars, the operating profit for Building Solutions - North America decreased amid the challenging market situation. Following a lively spring season in the U.S., increased investment in marketing initiatives, which proved premature when the markets weakened again during the summer and autumn, was one reason for the decline. For Infrastructure Solutions, operating profit took a sharp downward turn, remaining just barely positive, as a result of declining net sales and intense price competition. In comparison to the previous year, the unfavourable development of raw material prices further affected the profitability of the infrastructure business.
Operating profit by segment for 1 Jan. – 31 Dec. 2010:
| M€ |
1–12 2010 |
1–12 2009 |
Reported change, % |
| Building Solutions – Europe | 55.7 | 32.6 | +70.4% |
| Building solutions -- North America | 3.1 | 3.9 | -20.1% |
| (Building solutions -- North America (M$) | 4.1 | 5.5 | -24.4%) |
| Infrastructure Solutions | 0.4 | 14.2 | -97.2% |
| Other | -6.8 | -9.3 | |
| Eliminations | -0.0 | -0.2 | |
| Group (continuing operations) | 52.4 | 41.2 | +27.0% |
Expenses from discontinued operations include unanticipated costs due to soil clean-up measures associated with the factory property for sale in Ireland. This soil clean-up work was completed in summer 2010.
Profit before taxes rose by 46.4%, to €41.7 (28.5) million. Net financial expenses fell to €10.7 (12.7) million, of which €4.5 (6.3) million as a result of currency translation differences.
At a tax rate of 35.2% (39.6%), income taxes totalled €14.7 (11.3) million. The lower tax rate is primarily attributable to the occurrence of taxable income in 2009, in countries with relatively higher tax rates. Additionally, the relative amount of non-deductible expenses decreased, year on year. Profit for the financial year totalled €24.7 (11.5) million, of which continuing operations accounted for €27.0 (17.2) million.
Return on equity rose to 9.7% (4.1%) and return on investment to 14.4% (8.1%), while the long-term target is a minimum of 30%.
Earnings per share were €0.34 (0.16), and €0.37 (0.24) for continuing operations. Equity per share was €3.45 (3.53). For other share-specific information, please see the tables section.
To maintain a solid financial position, the company paid particular attention to cash flow management over the last year. Efficient net working capital management measures were continued but cash flow before financing declined from the comparison period, largely as a result of an increase in inventories and sales receivables in 2010, compared to a declining trend in 2009.
Consolidated cash flow from operations was €49.2 (78.8) million while cash flow before financing came to €35.6 (60.6) million.
Near-term outlook
The recovery from the downturn has started, although regional differences remain significant. Taking at of all the markets together, the positive development is expected to continue in 2011. There are, however, several risks and uncertainties associated with the global economy, and these could significantly hinder the recovery process if they materialise.
Demand for building solutions is expected to remain positive and at the current level in the Nordic countries. In Central Europe, demand is expected to continue its slow but steady growth. Growth is anticipated in the larger markets of south-west Europe, excluding Spain and Italy. Markets are expected to continue to recover in Eastern Europe as well. In North America, significant changes in demand are not expected in the short term.
Infrastructure Solutions’ outlook is being overshadowed by the severe winter weather, weak end-user demand in 2011, as well as higher raw material prices, the effects of which will be counter-acted by active sales price increases.
Uponor's reorganisation and development programmes have to a large extent been completed, and measures to boost growth have been launched. These measures involve innovating Uponor's product offering, launching new and new kinds of partnerships, and expanding operations to new geographical areas, such as Asia. It is generally believed that the recession in construction has now passed and growth in the residential and commercial building markets will be strong in the long and short term, depending on geographical location. Uponor is fully prepared to meet customer demand.
Organic growth in Uponor's net sales in 2011 is expected to accelerate from the 2010 level, and operating profit is expected to improve on last year's reported operating profit. 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 for the Group.
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 the 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 ca 3,100 persons in 30 countries. In 2010, Uponor's net sales totalled 750 million euros. Uponor Corporation is listed on the NASDAQ OMX Helsinki Ltd., Finland. http://www.uponor.com